TIDMNTG
RNS Number : 5237S
Northgate PLC
26 June 2018
NORTHGATE PLC
PRELIMINARY RESULTS FOR THE 12 MONTHSED 30 APRIL 2018
Good progress in delivery of strategic initiatives - growth
accelerating across the Group
Year ended 30 April 2018 2017 Change
GBPm GBPm %
----------------------------- -------- -------- --------
Revenue - vehicle hire 471.2 456.1 +3.3%
Revenue - vehicle sales 230.5 211.3 +9.1%
Underlying(1) EBITDA 251.0 241.3 +4.0%
Underlying(1) Operating
Profit 68.3 84.6 (19.2%)
Underlying(1) Profit before
Tax 57.0 75.0 (24.0%)
Underlying(1) Earnings
per Share 34.8p 47.3p (26.4%)
Dividend per Share 17.7p 17.3p 2.3%
----------------------------- -------- -------- --------
Profit before Tax 52.7 72.2 (27.0%)
Earnings per Share 32.4 45.7 (29.0%)
----------------------------- -------- -------- --------
Net Replacement Capex(1) (185.8) (172.9) 7.5%
EBITDA less Net Replacement
Capex 65.2 68.4 (4.7%)
Growth Capex(1) (incl.
acquisition) (125.2) (1.2) -
Net Debt (439.3) (309.9) (41.8%)
Return on Capital Employed
% 7.5% 10.5% -
----------------------------- -------- -------- --------
Full year Highlights
New strategy implemented during the year created strong momentum
in our markets:
-- UK vehicles on hire (VOH) returned to growth, with organic year-end closing VOH 6.9% higher.
-- 3,400 further vehicles now acquired in the UK following a
competitor entering administration.
-- Relaunched minimum term rental proposition, delivering strong growth in both Spain and UK
-- Step up in VOH in Spain drove 14.8% growth in rental revenue.
-- New fleet optimisation strategy implemented during final
quarter, to improve future cash returns.
-- Refinancing agreed to extend majority of the Group's
Revolving Credit Facility for one year and to increase the leverage
covenant.
-- Final dividend 11.6p per share proposed (2017 11.6p) taking
the total dividend payable for the year to 17.7p per share, an
increase of 2.3% (2017: 17.3p).
(1) Refer to GAAP Reconciliation and Glossary of terms note.
Kevin Bradshaw, Chief Executive of Northgate, commented:
"During the year we comprehensively overhauled Northgate's
rental strategy to address the compelling growth opportunity in our
markets, and we have made good progress implementing this, ending
the year with real momentum in both our main territories.
Our self-help turnaround programme in the UK started to deliver
tangible results, with more competitive pricing, commercial agility
and competitive new propositions reversing the previous decline in
VOH, which ended the year 6.9% higher on a like-for-like basis than
at the same time last year. We have now acquired more than 3,400
vehicles following a competitor's entry into administration,
reinforcing our momentum in the market.
In Spain, our rate of growth stepped up substantially as we used
our leadership in flexible hire to launch new propositions into a
wider range of target markets. This drove strong growth in VOH and
rental revenue, and our market leading operations ensured that
rental margins were maintained, as we deployed substantial
additional capital to grow our fleet.
In both Spain and the UK our profits from disposals were
significantly lower, due to a range of legacy commercial and
financial factors. We have now implemented a new fleet optimisation
strategy across the group, that will extend vehicle holding
periods, create a more efficient capital base and maximise
shareholder value.
In October 2017 we set out targets for our businesses, and we
are now evolving these further, to reflect the material
developments over the past six months, and to relate our targets
more closely to our key financial indicators, including rental
profit and cashflow. Our overarching medium-term objectives have
not changed, which are to deliver strong revenue growth, expanded
margins and attractive returns for shareholders, and we are
encouraged by progress made to date."
Outlook & Guidance
UK
The VOH growth delivered during the second half of FY2018 has
continued into early FY2019, providing an encouraging start to the
year. The market remains competitive and although there are
indications of price pressure easing, significant cost pressures
remain, including OEM price increases as well as investments to
drive growth and improve our operating efficiency.
In line with previous guidance, we expect mid-high single-digit
organic VOH growth in FY2019 and, with the addition of the VOH
impact of the vehicles we acquired, this is expected to drive
strong rental revenue growth. Our continuing focus on driving
growth, and the costs of our business transformation programme, are
expected to lead to rental margins being broadly flat in
FY2019.
Rental profits are expected to grow significantly beyond FY2019,
with VOH expected to continue to grow in line with previous
guidance, and margins expanding due to operational leverage and
efficiencies being delivered as a result of our transformation
programme.
From FY 2019 Ireland will be reported as part of the UK and this
guidance includes Ireland.
Spain
The VOH growth delivered during the second half of FY2018 has
continued into early FY2019, demonstrating the continuing momentum
in the business. We are seeing some increasing price competition in
the flex rental market, as well as continuing cost pressures
including the cost of network expansion.
In line with previous guidance, we expect double-digit VOH
growth in FY2019, driving continuing strong rental revenue growth.
Rental margins in FY2019 are expected to expand due to the positive
impact of depreciation rate change previously guided.
Beyond FY2019 further rental profit growth is expected, driven
primarily by previously guided growth in VOH and operating
leverage.
Group
Group operating profits in FY2019 will be impacted positively by
the change in depreciation rates implemented with effect from 1 May
2018, partially offset by the remaining negative impact of previous
rate changes, in line with previous guidance.
Group rental profit is expected to grow strongly, driven by
continuing VOH growth and expanding margins in Spain.
As previously guided, due to the new fleet optimisation strategy
introduced in the final quarter of FY2018, which will extend
vehicle holding periods by 3-9 months, vehicle disposal profits
across the Group in FY2019 are expected to be significantly lower
than in FY2018.
The interest charge in FY2019 will be higher due to the higher
net debt and the higher margin charge this incurs.
Beyond FY2019 we expect further rental profit growth, and higher
disposal profits, as the process of fleet aging is completed and
disposal volumes increase.
ROCE in FY2019 will be impacted by the reduction in disposal
profits, as the fleet is aged, and by strong growth in VOH, with
capital employed increasing ahead of the profit from the growth
vehicles.
Capex and cash Flow
The reduction in vehicle disposal volumes in FY 2019 due to the
implementation of the fleet optimisation strategy will be reflected
in Group net replacement capex, which is expected to be 25-35%
lower than in FY2018. This will deliver an increase in EBITDA less
net replacement capex in FY2019 of GBP50-GBP70 million.
Organic growth capex in FY2019 is expected to be in the range
GBP90-120 million, and to generate marginal returns substantially
ahead of WACC. Beyond FY2019 growth capex will reflect the
continuing strong VOH growth anticipated.
Net Debt
We plan to maintain our balance sheet within a target leverage
range of 1.5 to 2.5 times net debt to EBITDA, and during periods of
significant growth we would expect leverage to be towards the
higher end of this range. This is consistent with our objective of
maintaining a balance sheet that enables us to finance our growth
plans, is efficient in terms of providing long term returns to
shareholders, and safeguards the Group's financial position through
economic cycles. This updates our previous the leverage guidance of
1.25 to 1.85 times net debt to EBITDA.
GAAP reconciliation and glossary of terms
Throughout this document we refer to underlying results and
measures; the underlying measures allow management and other
stakeholders to better compare the performance of the group between
the current and prior period without the effects of one-off or
non-operational items. Underlying measures exclude certain one-off
items such as those arising from restructuring activities and
recurring non-operational items. Specifically we refer to disposal
profit. This is a non-GAAP measure used to describe the adjustment
in depreciation charge made in the year for vehicles sold at an
amount different to their net book value at the date of sale (net
of attributable selling costs).
A reconciliation of GAAP to Non-GAAP underlying measures and a
glossary of terms used in this document are outlined below the
financial review.
Next Results
Northgate will provide a First Quarter Trading Update on the day
of its Annual General Meeting on 18 September.
Contact details
There will be a presentation for investors and analysts at 9.00
a.m. today at Numis, 5(th) Floor, London Stock Exchange Building,
10 Paternoster Square, London EC4M 7LT. If you have not already
registered to attend, please contact MHP Communications on the
number below.
A live webcast of this presentation will be available via a link
on the Company's web-site www.northgateplc.com.
There will also be a listen-only dial-in facility on 0800 358
6377 (toll-free) or 0330 336 9126 (local)
Confirmation code 9977392.
For further information please contact:
Northgate plc +44 1325 467558
Kevin Bradshaw, Chief Executive
Officer
David Tilston, Interim Chief
Financial Officer
David Boyd, Investor Relations +44 7841 629823
MHP +44 203 128 8100
Andrew Jaques, Barnaby Fry
Simon Hockridge, Ollie Hoare
Notes to Editors:
Northgate plc is the leading light commercial hire business in
the UK, Spain and Ireland by fleet size and has been operating in
the sector since 1981.
Northgate's core business is the hire of light commercial
vehicles to businesses on a flexible or term basis, giving
customers the ability to manage their vehicle fleet requirements in
a way which can adapt to changing business needs without the
requirement to enter into a long-term arrangement.
CHAIRMAN'S STATEMENT
During 2018 much work has been undertaken to position the Group
to deliver sustainable long-term growth in revenues, profits and
shareholder returns. Our work has involved bringing in new senior
management and supporting and encouraging the Executive team
through the development and implementation of a long-term strategy
focused on delivering shareholder value. New and, we believe,
higher quality revenue streams have been developed and actions have
been taken to better manage our businesses on a day to day basis.
The impact of some of these actions has dampened short-term
earnings but the Board is confident that the changes which have
been made position Northgate well to deliver good progress going
forwards.
During the year a comprehensive strategic review was undertaken
together with a thorough analysis of how returns from our
investment in vehicles can be maximised. From this work our revised
strategy evolved and this strategy will, we believe, deliver
improved performance and is more closely aligned with delivering
good returns for all of our shareholders. Further details of this
are contained in the CEO's report.
Performance
Revenues grew by 5% to GBP702m (2017: GBP667m), Group underlying
operating profit was GBP68.3m (2017: GBP84.6m) and underlying
earnings per share were 34.8p, (2017: 47.3p). The decline in Group
operating profit resulted from a number of factors, principally a
lower level of rental profit in the UK and Ireland together with
significantly lower levels of profit on disposal of used vehicles
across the Group. A further impact was felt from new vehicle and
other cost inflation.
Against this backdrop it is noteworthy that our Spanish business
continued its excellent performance with rising VOH and increased
rental profits. Furthermore, it is encouraging to see the early
signs of an improved performance in the UK, with the fourth quarter
delivering growth in VOH to yield a year-end VOH volume almost 7%
ahead of the previous year. This improving trend together with some
upward revisions in hire rates should help to deliver improved UK
rental profit performance in 2019.
The impact of lower profit from used vehicles negatively
impacted the profits in both Spain and the UK. This is principally
a reflection of the sale of younger vehicles in previous years.
Going forward, under the Group's Fleet Optimisation programme, we
expect to age our fleet more and this should lead to improved
returns.
On a "steady-state" basis Northgate tends to generate high
levels of free cash flow. However, as the Group develops its
business, with increasing VOH, the capital investment required for
this expansion will absorb a significant proportion of free cash
flow. We believe that, with its current capital structure, targeted
leverage at 1.5-2.5x and the progressive dividend policy with a
cover range of 2.0x - 3.0x the Group is well-placed to continue to
develop its business, grow VOH and deliver increased profits and
returns.
Dividend
The Group is in a strong financial position with the current
bank facilities recently re-negotiated to give a longer duration
and more flexible leverage covenants. For the year ended 30 April
2018, we are proposing a final dividend of 11.6p (2017: 11.6p)
which, together with the interim dividend of 6.1p (2017: 5.7p),
gives a full year dividend of 17.7p (2017:17.3p) representing an
increase of 0.4p on 2017. If approved by Shareholders, the final
dividend will be paid on 21 September 2018 to Shareholders on the
register on 10 August 2018.
Board Changes
During the year the previous CFO, Paddy Gallagher, left the
business. Since September 2017 David Tilston has served as the
Company's Interim CFO. I am pleased to report that Phillip Vincent
has been appointed as Group CFO with effect from 16 July 2018.
David Tilston will remain in the business for a short period in
order to facilitate an effective handover.
Philip was most recently at SABMiller plc where he was Regional
Finance Director, Asia Pacific and previously Director of Group
Finance and Control. Prior to this Philip was for three years CFO
of BBC Worldwide, which was the main commercial arm of the BBC,
following a range of senior financial roles there.
I am delighted to welcome Philip Vincent to the Board of
Northgate. He brings a wealth of relevant financial and commercial
experience gained in a wide range of senior roles, in the UK and
internationally, which will enable him to make a significant
contribution to Northgate's future success. I would like to thank
David Tilston for undertaking the role of CFO on an interim
basis.
The Way Forward
Our core objective is to grow shareholder value and we will do
this by developing a business capable of delivering long-term,
sustainable and growing cash flows, achieved through a disciplined
approach to deployment of capital and a rigorous focus on
execution. Our touchstones will be cash flow and returns on
investment.
As set out in our CEO's report, the potential market for
Northgate's product and services is significant and we are
determined to develop and grow our business to access more of this
landscape. The strategic review, which was conducted by our
Executive team with input from external consultants, demonstrated
the potential for Northgate to grow. It is pleasing to see the
growth in our minimum term hire business in both Spain and the UK.
The quality of earnings from this product is more predictable and
represents an enhancement. We believe that there is significant
opportunity to grow this segment alongside our traditional flexible
rental business.
Our People
I would like to record the Board's thanks to all of our 3,000
team members throughout Northgate. They are the people who, day in
and day out, make sure that our customers receive a superb service
and we are most grateful to them.
Outlook
Much work has been done at Northgate over the past twelve months
to position the business for further profitable growth and
development. We now have strong Executive teams in both the UK and
Spain, our Irish business has been incorporated under the UK
Executive team and we have a clear strategy to grow our revenues,
profits and returns.
We ended 2018 with good momentum and 2019 has started well. I am
confident that a fully focused Northgate team can continue the
progress and deliver improving performance for the benefit of all
of our Shareholders.
Andrew Page, Chairman
CHIEF EXECUTIVE REVIEW
Our opportunity
There are more than 8 million Light Commercial Vehicles (LCV) on
the roads in Northgate's three territories. These vehicles are
either purchased, rented for a committed term, or rented for a
flexible period, and LCV transactions generate total annual
revenues of approximately GBP15 billion. Growth in the LCV minimum
term and flexible rental markets is particularly strong, driven by
three factors:
-- Cultural change - customers no longer feel that they need to own vehicles outright;
-- Cash-flow - customers see the attraction of a low initial
deposit followed by the certainty in ongoing cash flows that is
afforded by minimum term rental models; versus the high initial
cash outlay coupled with uncertainty about the residual value
associated with outright purchase;
-- Whole-life costs - customers recognise that third party
provision and management of vehicles results in lower total costs
over the life of the vehicle than if it is owned.
We believe strongly that these three factors are driving a major
structural shift in the LCV market, away from vehicle ownership,
and that this will underpin continuing strong growth in both the
minimum term and flexible rental sectors in the coming years.
Our strategy
Rental
The flexible and minimum term rental and second-hand vehicle
trading segments in which Northgate participates represent around
70% of the total LCV market by value. Our aim is to build on our
strong market positions and exploit our relative competitive
advantages in these segments to deliver strong growth and
attractive returns. The strategy is built around four market
objectives:
1. Defend and grow our share of flexible rental markets
2. Gain share in minimum term markets
3. Convert vehicle ownership to minimum term rental
4. Consolidate the fragmented UK used LCV resale market
Northgate has a range of competitive strengths that we are now
reinforcing and deploying to deliver on these strategic market
objectives, including:
-- Our strong brand, reputation and relationships in the LCV market;
-- The breadth and depth of our operational experience and expertise;
-- Our nation-wide network of rental depots, service workshops
and sales forecourts across all our territories - delivering both
national coverage capability as well as a presence in local
markets;
-- Our purchasing scale and strong relationships with vehicle manufacturers;
-- Our strong balance sheet and cashflows and our disciplined approach to capital deployment.
We are now further enhancing our capabilities and bringing these
competitive advantages to bear on the market, focusing rigorously
on execution in pursuit of the clear growth opportunities
identified.
In the year ended 30 April 2018 we started to see the first
tangible results from this rental strategy in both our main
markets, with the results to date described in detail below.
Management of the vehicle fleet
Following an extensive review of vehicle economics in all
territories, it was concluded that holding vehicles for longer
periods would improve cash returns, and this policy was applied
during the fourth quarter. This will extend average vehicle holding
periods by between 3 and 9 months, unless constrained by
operational factors such as mileage or the condition of the
vehicle.
Implementing this policy will lead initially to a reduction in
vehicle sales, with a corresponding reduction in replacement
vehicle purchases, so that for the period over which the fleet is
aged, the revenue and profits from disposals, net replacement
capex, and net debt levels will all be lower than they would have
been under the previous policy. There will be no impact on EBITDA
or operating cashflow.
Over the longer term this strategy will deliver a more efficient
capital base, as the like-for-like average net book value of
vehicles in the fleet falls, and this should support higher ROCE
and cash returns. Depreciation rates will be adjusted prospectively
from 1 May 2018.
OUR 2018 PERFORMANCE
UK
Year ended 30 April 2018 2017 Change
KPI ('000) ('000) %
--------------------------- ------- ------- --------
Average VOH 40.2 41.4 (2.9%)
Closing VOH (organic) 42.2 39.5 +6.9%
Vehicles purchased (incl.
acquired) 22.3 15.4 +44.8%
Vehicles sold 19.8 20.4 (2.9%)
Profit per Unit (PPU)
GBP 384 703 (45.4%)
Closing fleet size (incl.
acquired) 52.9 46.4 +14.0%
Average utilisation %
(organic) 87% 88% (1 ppt)
Average fleet age at
year-end (mo.) 21 22 (1 mo.)
--------------------------- ------- ------- --------
Year ended 30 April 2018 2017 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------- ------ ------ ----------
Revenue - Vehicle hire 263.8 272.2 (3.1%)
Revenue - Vehicle sales 149.1 144.0 +3.5%
Total Revenue 412.9 416.2 (0.8%)
Rental profit 23.0 29.5 (22.2%)
Rental Margin % 8.7% 10.9% (2.2 ppt)
Disposals profit 7.6 14.3 (47.0%)
Operating profit 30.6 43.9 (30.3%)
ROCE % 6.4% 9.4% (3.0 ppt)
---------------------------- ------ ------ ----------
Rental business
Average VOH in the UK in 2018 declined by 2.9% compared to 2017,
which resulted in a 3.1% year-on-year fall in rental revenue to
GBP263.8 million (2017: GBP272.2 million). The year-on-year VOH
trend improved substantially through the course of the year,
however, from a decline of 6.5% in the first quarter to organic
growth of 3.2% in the fourth quarter, and this momentum was
reflected in organic VOH of 42,200 at the end of the year, 6.9%
higher than at the same time in the previous year.
This turnaround in UK VOH from decline to growth was driven by
the new rental strategy, extensive senior management changes, and
the self-help actions that resulted from the strategy, in
particular in marketing and sales. The marketing function was
restructured to focus on lead generation, and new digital marketing
and telesales capabilities were developed. In the sales function
there was an enhanced focus on lead conversion and simplification
of customer acquisition processes.
Northgate also made more use of tactical price flexibility, to
compete more effectively and defend and grow share in the flexible
rental market, resulting in a return to growth in flexible rental
in the fourth quarter after a period of decline previously.
In the minimum term market, a compelling new proposition was
launched in September 2017, built around Northgate's main
competitive strengths, and this gained strong traction in the
market through the second half. At the end of the year minimum term
hire contracts accounted for around 11% of total UK VOH, compared
to around 1% at the start of the year. The average term of these
contracts is three years, representing a significant improvement in
the visibility of rental revenue and earnings.
The more competitive price positioning and acquisition of new
minimum term contract customers also contributed to lower margins
in the UK, with the rental margin in 2018 reducing by 2.2 ppts to
8.7%, compared to 10.9% during 2017.
The rental margin was also impacted negatively by higher vehicle
purchase and other costs which were not passed on to customers
during 2017 and 2018. On 1 May 2018 prices were therefore raised by
4.8% for UK flexible rental customers, passing on the cumulative
impact of new vehicle and other cost inflation. Initial indications
from the market are that competitors' prices are also increasing,
and there has been no material increase in Northgate customer
churn.
The net impact of the lower average VOH and lower rental margins
was a 22.2% reduction in UK rental profits to GBP23.0 million
(2017: GBP29.5 million).
Northgate ended the year with real momentum in both the flexible
and minimum term rental markets in the UK, and the strong organic
VOH growth that accelerated through the course of the year was then
reinforced by the acquisition of 3,400 additional vehicles around
the year end.
Transaction to acquire additional vehicles
During the fourth quarter a competitor entered administration
and in April Northgate acquired approximately 3,200 vehicles from
certain of the funders to whom ownership of the vehicles had
reverted. Shortly after the end of the year a further 200 vehicles
net were added. The total consideration is expected to be
approximately GBP36 million net, of which GBP13 million was
incurred before 30 April.
A process was initiated to determine the optimal commercial
solution for each acquired vehicle, including potential conversion
of the previous competitor's customers onto Northgate agreements
and tariffs, or integration of the vehicle into the existing rental
fleet, or sale of the vehicle. Around 2,000 of the vehicles
acquired are expected to have become Northgate VOH by the end of
the first quarter of 2019, with the remainder either sold or
awaiting redeployment into the rental fleet.
Management of fleet and vehicle sales
The total UK fleet size increased by 14.0% to 52,900 vehicles,
driven by growth in closing VOH and the acquisition of 3,200
vehicles at the end of the year. As well as this acquisition, the
increase comprised 19,100 vehicles purchased for the fleet less
approximately 15,800 de-fleeted vehicles. The average age of the
fleet at the end of the year was around one month lower compared to
the same time last year, reflecting the growth in VOH towards the
end of the year.
A total of 19,800 vehicles were sold in the UK during the year,
including third-party vehicles purchased for resale and sales from
stock. Total sales were 2.9% lower than in the previous year. Sales
through Van Monster channels accounted or 48% of total sales in the
year, compared to 36% in 2017.
The average UK profit per unit (PPU) on disposals fell by more
than 45% in 2018 to GBP384 (2017: GBP703). This reflected the
previous policy of selling younger vehicles with higher book
values, as well as the (GBP136) impact on PPU of the unwind of
previous depreciation rate changes. Primarily as a result of the
lower PPU, disposal profits in the UK almost halved to GBP7.6
million, from GBP14.3 million in 2017.
Operating profit and ROCE
The reductions in rental profit and profit from disposals both
contributed almost equally to the decrease of GBP13.3 million in UK
operating profit, to GBP30.6 million (2017: GBP43.9 million).
The return on capital employed in the UK was 6.4% (2017: 9.4%)
reflecting both the fall in operating profit and the increase in
capital employed resulting from the growth in the fleet and the
higher replacement costs incurred under the previous fleet
management policy. The new strategy to age the fleet should reduce
the capital employed per vehicle and improve the efficiency of the
capital base.
Capex and cashflow
Year ended 30 April 2018 2017 Change
GBP million GBPm GBPm %
-------------------------------- ------- ------- --------
Depreciation (96.8) (90.1) (7.4%)
EBITDA 128.1 134.2 (4.8%)
Net Replacement Capex (91.0) (89.1) (2.1%)
EBITDA less Net Replacement
Capex 37.1 45.1 (17.7%)
Growth Capex (incl. inorganic) (54.1) 22.2 -
-------------------------------- ------- ------- --------
EBITDA reduced by 4.8% to GBP128.1 million (2017: GBP134.2
million) due to the lower rental revenue. Total UK operating costs
excluding depreciation were flat year-on-year, with the lower
direct costs resulting from the reduction in average VOH in the
year offset by a small increase in indirect costs.
Net replacement capex in the year was GBP91.0 million, 2.1%
higher than in 2017, mainly due to new vehicle price inflation.
EBITDA less net replacement capex reduced by 17.7% in 2018 to
GBP37.1 million (2017: GBP45.1 million) reflecting the lower EBITDA
and higher replacement capex in the year. Investment to grow the
fleet was GBP54.1 million, including approximately GBP13 million
partial cost of the acquired vehicles, compared to disinvestment of
GBP22.2 million in 2017, when the fleet contracted.
SPAIN
Year ended 30 April 2018 2017 Change
KPI ('000) ('000) %
----------------------- ------- ------- --------
Average VOH 40.3 36.0 +11.9%
Closing VOH 42.7 37.7 +13.3%
Vehicles purchased 18.9 15.5 +21.9%
Vehicles sold 13.0 12.7 +2.4%
PPU EUR 871 1,589 (45.2%)
Closing fleet size 48.0 41.8 +14.8%
Average utilisation % 91% 91% -
Average fleet age at
year-end (mo.) 19 20 (1 mo.)
----------------------- ------- ------- --------
Year ended 30 April 2018 2017 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------- ------ ------ ----------
Revenue - Vehicle hire 187.6 163.4 +14.8%
Revenue - Vehicle sales 73.5 63.2 +16.3%
Total Revenue 261.2 226.7 +15.2%
Rental profit 29.0 25.5 +13.6%
Rental margin % 15.4% 15.6% (0.2 ppt)
Disposals profit 10.0 17.1 (41.6%)
Operating Profit 39.0 42.6 (8.6%)
ROCE % 10.0% 14.2% (4.2 ppt)
---------------------------- ------ ------ ----------
Rental business
Average VOH in Spain grew by 11.9% in 2018 and this was the
major driver of the 14.8% growth in rental revenue to GBP261.2
million (2017: GBP226.7 million). The reported growth in rental
revenue benefitted from weaker sterling, with rental revenue
growing by 10.0% at constant exchange rates.
Year-on-year VOH growth accelerated through the course of the
year, building from 8.1% in the first quarter up to 14.1% in the
fourth quarter, and closing VOH of 42,700 at the end of the year
was 13.3% higher than at the same time in the previous year.
Northgate's rapid growth is underpinned by the growth in the
Spanish market, driven by favourable macro-economic conditions, a
thriving service sector, and the structural shift away from
outright vehicle ownership and into minimum term hire in
particular. Northgate's VOH growth is above the market rate of
growth, driven by effective execution of the company's
strategy.
The step up in the pace of VOH and rental revenue growth was
mainly driven by leveraging Northgate's leading position in the
flexible rental market to push hard into minimum term hire market
with a range of compelling new propositions. As well as exploiting
opportunities for cross-selling created by the company's deep
relationships across the LCV market, the strategy includes bundling
of minimum term and flexible products, and this approach gained
significant traction with larger customers in particular. At the
end of the year around 23% of VOH were being supplied on minimum
term contracts.
Other factors that contributed to the strong VOH growth included
targeting of fast growing market segments such as refrigerated
vehicles for food distribution, companies participating in Spain's
major infrastructure investment programme, and electric vehicles
for municipal authorities.
The 2018 rental margin was broadly flat at 15.4% (2017: 15.6%)
as the operational leverage of the higher revenue base and
improvements in operational efficiency more than offset the impact
of more minimum term customers in the VOH mix and vehicle price
inflation. Vehicle utilisation in the year remained above 91%.
Rental profits in 2018 grew 13.6% to GBP29.0 million (2017:
GBP25.5 million) driven by the growth of VOH. Rental profits grew
by 8.8% at constant exchange rates.
Management of fleet and vehicle sales
The total fleet size in Spain increased by 14.8% to 48,000
vehicles, driven by the rapid growth in VOH during the year. This
net increase of 6,200 vehicles comprised 18,900 vehicles purchased
for the fleet less approximately 12,700 de-fleeted vehicles. The
average age of the fleet at the end of the year was around one
month lower than at the same time last year, mainly reflecting the
strong growth in VOH and resulting expansion of the fleet during
the second half of the year.
A total of 13,000 vehicles were sold in the Spain during the
year, 2.4% more than in the previous year. The average profit per
unit (PPU) on disposals in Spain fell by more than 45% to EUR871
(2017: EUR1,589), reflecting the previous policy of selling
increasingly younger vehicles with higher book values, as well as
the (EUR131) impact on PPU of the unwind of previous depreciation
rate changes. As a result of the lower PPU, profits from vehicle
sales fell by 41.6% to GBP10.0 million (2017: GBP17.1 million).
Operating profit and ROCE
The growth of rental profit of GBP3.5 million was more than
offset by the GBP7.1 million fall in disposal profits, with total
operating profit declining by GBP3.6 million (8.6%) to GBP39.0
million (2017: GBP42.6 million). Profits reported by the Spanish
business benefitted from weaker sterling, and operating profit at
constant currency decreased by 12.4%.
The return on capital employed in Spain was 10.0% (2017: 14.2%)
reflecting both the fall in operating profit and the increase in
capital employed that was driven by the growth and mix of the
fleet.
Capex and cashflow
Year ended 30 April 2018 2017 Change
CASHFLOW GBPm GBPm %
----------------------------- ------- ------- --------
Depreciation (76.7) (56.0) (36.9%)
EBITDA 115.7 98.6 +17.3%
Net Replacement Capex (80.5) (77.3) (4.1%)
EBITDA less Net Replacement
Capex 35.2 21.3 +65.1%
Growth Capex (72.0) (20.0) nm
----------------------------- ------- ------- --------
EBITDA increased by 17.3% to GBP115.7 million (2017: GBP98.6
million) reflecting operational leverage resulting from the growth
of the business, with 70% of the increase in rental revenue in the
year falling straight to EBITDA. Fixed costs in Spain were slightly
higher year-on-year, mainly due to the expansion of some rented
depot facilities and higher marketing costs.
Net replacement capex in Spain in the year was GBP80.5 million,
4.1% higher than in 2017, mainly due to new vehicle price
inflation. EBITDA less net replacement capex grew by 65.1%, to
GBP35.2 million (2017: GBP21.3 million), reflecting the operational
leverage. Growth capex was GBP72 million, GBP52 million higher than
in 2017, due to the rapid VOH growth and expansion of the fleet
IRELAND
Year ended 30 April 2018 2017 Change
KPI ('000) ('000) %
------- ------- --------
Average VOH 3.3 3.4 (2.9%)
Closing fleet size 3.8 3.9 (2.6%)
Utilisation % 87% 89% (2 ppt)
--------------------- ------- ------- --------
Year ended 30 April 2018 2017 Change
GBP million GBPm GBPm %
------------------------- ------- ------ --------
PROFIT & LOSS
Revenue - Vehicle hire 20.6 21.5 (4.2%)
Revenue - Vehicle sales 7.8 4.0 +93.8%
Total Revenue 28.4 25.6 +11.2%
Operating Profit 2.5 3.2 (21.3%)
------------------------- ------- ------ --------
CASHFLOW
EBITDA 11.0 13.2 (16.8%)
Net Capex (13.4) (9.9) (35.5%)
------------------------- ------- ------ --------
Average VOH in Ireland declined by 2.9% in 2018, reflecting some
market uncertainty towards the end of the year, and a loss of
commercial focus by the company in reacting to these conditions,
reflected in lower utilisation rates. Rental revenue fell by 4.2%
to GBP20.6 million (2017: GBP21.5 million) and EBITDA declined by
16.8% to GBP11.0 million (2017: GBP13.2 million) as a result of the
negative operating leverage.
Revenue from vehicle disposals grew strongly to GBP7.8 million
(2017: GBP4.0 million) due to the de-fleeting and sale of
increasingly younger vehicles. The impact of the increase in sales
volumes in the year was greater than the effect of the reduction in
PPU that also resulted from the sale of younger vehicles.
Net capex of GBP13.4 million was 36% higher than in 2017 due to
the more rapid replacement of the fleet, and EBITDA less total net
capex swung from GBP3.3 million in 2017 to negative GBP2.4 million
in 2018.
The Irish business is now being re-integrated into the UK
business, with the functional heads in Ireland now reporting to
their UK counterparts, and a plan launched to turn around the
performance of the business, by returning VOH to growth and
addressing a wide range of operational issues.
Kevin Bradshaw, Chief Executive Officer
FINANCIAL REVIEW
Group summary
A summary of the Group's financial performance as follows:
Year ended 30 April 2018 2017 Change Change
GBPm GBPm GBPm %
-------------------------- -------- ------ -------- --------
Revenue 701.7 667.4 34.2 +5.1%
Underlying operating
profit 68.3 84.6 (16.3) (19.2%)
Underlying profit before
tax 57.0 75.0 (18.0) (24.0%)
Underlying EPS 34.8 p 47.3p (12.5p) (26.4%)
Dividend per share 17.7 p 17.3p 0.4p 2.3%
Underlying free cash
flow 29.2 44.2 (15.0) (33.9%)
-------------------------- -------- ------ -------- --------
On a statutory basis, Group operating profit was GBP64.1 million
(2017: GBP81.5 million) and profit before tax was GBP52.7 million
(2017: GBP72.2 million). The statutory effective tax rate was 18.0%
(2017: 16.0%). Basic earnings per share were 32.4p (2016:
45.7p).
Revenue
Group revenue increased by 5.1% to GBP701.7 million. Revenue
grew by 3.4% at constant exchange rates, reflecting sterling
weakness in 2018 compared to 2017.
Group revenue comprised:
Year ended 30 April 2018 2017 Change Change
GBPm GBPm GBPm %
--------------------- ------- ------ ------- -------
Vehicle Hire 471.2 456.1 15.1 3.3%
Vehicle Sales 230.5 211.3 19.2 9.1%
--------------------- ------- ------ ------- -------
Vehicle rental revenue grew to GBP471.2 million from GBP456.1
million in 2017, mainly driven by the 3.7% increase in Group
average VOH.
Group vehicle sales volumes remained broadly flat, with sales
revenue growth being primarily driven by the 8.0% growth in average
proceeds per vehicle, mainly due to younger vehicles being sold and
the higher proportion of vehicles being sold through retail
channels in the UK.
Underlying operating profit
Underlying Group operating profit reduced by 19.2% to GBP68.3
million. Underlying operating profit was supported by GBP1.7
million of foreign exchange benefit.
Underlying Group operating profit comprised:
Year ended 30 April 2018 2017 Change Change
GBPm GBPm GBPm %
--------------------- ------ ------ ------- --------
Rental Profit 52.5 56.7 (4.2) (7.5%)
Disposals Profit 19.6 33.0 (13.4) (40.6%)
Corporate Costs (3.7) (5.1) 1.4 27.1%
--------------------- ------ ------ ------- --------
Total 68.3 84.6 (16.3) (19.3%)
--------------------- ------ ------ ------- --------
The decline in Group vehicle rental profit reflected the growth
in Spain, driven by strong growth of VOH and stable rental margins,
being more than offset by the decline in the UK due to the decline
in average VOH and lower rental margins.
The reduction in Group disposals profits resulted primarily from
the higher net book value per vehicle sold, reflected in previous
changes to depreciation rates (-GBP4.2 million) and the age profile
of vehicles being sold (-GBP10.0 million). This was slightly offset
by the impact of increased sales volumes (+GBP1.1 million).
Underlying corporate costs reduced to GBP3.7 million (2017:
GBP5.1 million ).
Depreciation rate changes
The accounting requirements to adjust depreciation rates due to
changes in expectations of future residual values of used vehicles
make it more difficult to identify the underlying profit trends in
the business. When a vehicle is acquired it is recognised as a
fixed asset at its cost net of any discount or rebate receivable.
The cost is then depreciated evenly over its rental life, matching
its pattern of usage.
Matching of future market values to net book value on the
disposal date requires significant judgement for the following key
reasons:
1. Used vehicle prices are subject to short term volatility
which makes it challenging to estimate future residual values;
2. The exact disposal age is not known at the point at which
rates are set and therefore the book value at disposal date is not
certain;
3. Mileage and condition are the key factors in influencing the
market value of a vehicle. This can vary significantly through a
vehicle's life depending upon how the vehicle is used.
Inevitably, a difference arises between the net book value of a
vehicle and its market value at the date of disposal. Where
differences arising are within an acceptable range these are
adjusted against depreciation. Where these differences are outside
of the range Northgate changes the depreciation rate estimate to
better reflect the pattern of usage of the vehicle.
The impact of previous rate changes on 2018 operating profit,
and the estimated impact on future years of the previous changes,
is set out below:
Cumulative
impact Year-on-year impact
--------------- -------------------------
Group Group UK & Spain
Ireland
Year: GBPm GBPm GBPm GBPm
--------------- ----------- ------ --------- ------
30 April 2013 5.3 5.3 5.3 -
30 April 2014 4.3 (1.0) (1.0) -
30 April 2015 15.7 11.4 8.4 3.0
30 April 2016 12.0 (3.7) (5.9) 2.2
30 April 2017 6.3 (5.7) (4.1) (1.6)
30 April 2018 2.1 (4.2) (2.7) (1.5)
30 April 2019 2.1 (2.1) - (2.1)
--------------- ----------- ------ --------- ------
In February 2018 the Group announced a new fleet optimisation
strategy. This strategy optimises the holding periods of all
vehicles across the Group with a focus on maximising shareholder
returns.
This fleet optimisation strategy will deliver a more efficient
capital base for the business as net book values are allowed to
reduce, with more moderate capital expenditure and funding
requirements in the short term supporting targeted increases in
ROCE. The decision to extend holding periods, combined with
continued progress in increasing the volume of disposals through
the retail channel, would have resulted in higher profits on
disposal going forwards on the basis of the depreciation rates in
use before the change in fleet strategy.
The Board therefore reviewed depreciation rates in line with
accounting standards and in March 2018 made the decision to reduce
depreciation rates by 3% in Spain and Ireland and by 0.5% in the
UK, with effect from 1 May 2018. The estimated impact on future
years of these changes is set out below:
Cumulative
impact Year-on-year impact
---------------- -------------------------
Group Group UK & Spain
Ireland
Year: GBPm GBPm GBPm GBPm
---------------- ----------- ------ --------- ------
30 April 2019* 17.4 17.4 4.1 13.3
30 April 2020* 12.0 (5.4) (1.4) (4.0)
30 April 2021* 6.6 (5.4) (1.4) (4.0)
30 April 2022* 1.3 (5.3) (1.4) (4.0)
30 April 2023* - (1.3) - (1.3)
---------------- ----------- ------ --------- ------
* These are management estimates based on indicative fleet size
and assuming an equalised level of de-fleeting in each of the four
years.
Interest
Net underlying finance charges for the year increased by 18.1%
to GBP11.3 million (2017: GBP9.6 million) as a result of higher net
debt. The net cash interest charge for the year was GBP10.7 million
(2017: GBP9.0 million) as a result of higher borrowings and a
GBP0.3 million adverse foreign exchange impact. Non-cash interest
was GBP0.6 million (2017: GBP0.6 million).
Underlying profit before tax
Excluding the impact of foreign exchange, underlying profit
before tax was GBP57.0 million, GBP18.0 million lower than in 2017
(2017: GBP75.0 million). Weaker sterling during the year increased
profit before tax by GBP1.5 million compared to the prior year.
Taxation
The Group's tax underlying tax charge was GBP10.7 million (2017:
GBP12.0 million) and the underlying effective tax rate was 18.7%
(2017: 16.0%). The statutory effective tax rate was 18% (2017:
16%).
Earnings per share
Underlying EPS was 34.8p compared to 47.3p in the prior year.
Statutory earnings per share was 32.4p compared to 45.7p in the
prior year.
Underlying earnings for the purpose of calculating EPS were
GBP46.4 million (2017: GBP63.0 million). The weighted average
number of shares for the purposes of calculating EPS was 133.2m, in
line with the prior year
Exceptional items
During the year GBP2.5 million of exceptional net costs were
incurred (2017: GBP1.5 million) which mainly related to
restructuring costs incurred in the UK as part of the strategic
turnaround initiatives.
Dividend and capital allocation
In December 2017 the Board updated the Group's dividend policy,
such that the underlying basic earnings per share will cover the
total annual dividend within a range of 2.0x to 3.0x.
Subject to approval, the final dividend proposed of 11.6p per
share (2016: 11.6p) will be paid on 21 September 2018 to
shareholders on the register as at close of business on 10 August
2018.
Including the interim dividend paid of 6.1p (2017: 5.7p), the
total dividend relating to the year would be 17.7p (2017: 17.3p).
The dividend is covered 2.0x by underlying earnings, in line with
stated policy.
The Group's objective is to build shareholder value by
generating returns above the cost of capital. Capital will be
allocated within the business in accordance with the framework
outlined below, with the first priority being to allocate capital
to support the Group's growth ambitions:
1. Investment for growth
2. Provide regular returns to shareholders
3. Acquisitions
4. Return of surplus cash
The Group plans to maintain a balance sheet within a target
leverage range of 1.5 to 2.5 times net debt to EBITDA, and during
periods of significant growth net debt would be expected to be
towards the higher end of this range. This is consistent with the
Group's objective of maintaining a balance sheet that is efficient
in terms of providing long term returns to shareholders and
safeguards the Group's financial position through economic
cycles.
This policy represents an update to previous leverage guidance
of 1.25 to 1.85 times net debt to EBITDA, reflecting the Group's
current balance sheet position, growth aspirations and banking
restrictions at that time.
Cash flow
A summary of the Group's cash is as follows:
Year ended 30 April 2018 2017
GBPm GBPm
--------------------------------------- ------- -------
Underlying operational cash generation 240.5 238.3
Net capital expenditure (311.0) (174.1)
Net taxation and interest payments (22.2) (21.2)
Share purchases and refinancing costs (3.3) (0.1)
Free cash flow (96.0) 42.9
Dividends (23.4) (21.9)
Net cash (consumed)/generated (119.4) 21.0
--------------------------------------- ------- -------
A total of GBP486.9 million was invested in new vehicles
compared to GBP346.3 million in the prior year. The Group's new
vehicle capital expenditure was partially funded by GBP186.9
million generated from the sale of used vehicles (2017: GBP177.0
million). Other net capital expenditure amounted to GBP11.0 million
(2017: GBP4.8 million).
All vehicles required for the Group's operations are paid for in
cash up-front. The cash flow generation of the Group in any year is
therefore influenced by the capital expenditure to grow the
business or cash generated by adjusting the fleet size downwards if
vehicles on hire reduce. If the impact of increasing or reducing
the fleet size in the year is removed from net capital expenditure,
the underlying free cash generation of the Group was as
follows:
Year ended 30 April 2018 2017
GBPm GBPm
-------------------------- ------- ----
Free cash flow (96.0) 42.9
Add back: Growth capex 125.2 1.2
Underlying free cash flow 29.2 44.2
-------------------------- ------- ----
Net debt reconciles as follows:
Year ended 30 April 2018 2017
GBPm GBPm
------------------------------ ----- ------
Opening net debt 309.9 309.9
Net cash consumed/(generated) 119.4 (21.0)
Other non-cash items (0.8) 0.5
Exchange differences 10.8 20.5
Closing net debt 439.3 309.9
------------------------------ ----- ------
Free cash flow was GBP96.0m (2017: GBP42.9 million) after net
capital expenditure of GBP311.0 million (2017 GBP(174.1) million).
If the impact of growth capex in the year is removed from net
capital expenditure in each year, the underlying free cash flow of
the Group was GBP29.2 million (2017: GBP44.2 million).
Net cash consumption was GBP(119.4) million (2017: GBP21.0
million generated). After an adverse exchange rate impact of
GBP10.8 million (2017: GBP20.5 million), closing net debt was
GBP439.3 million (2017: GBP309.9 million) and gearing was 82%
(2017: 61%).
Borrowing facilities
The group successfully refinanced its core bank facilities in
the year, extending the final maturity date by one year. As at 30
April 2018 the Group had GBP442 million drawn against total
committed facilities of GBP568 million, giving headroom of GBP126
million, as detailed below:
Borrowing
Facility Drawn Headroom Maturity Cost
---------
GBPm GBPm GBPm
----------------- -------- ----- -------- -------- ---------
UK bank facility 457 343 114 Jul-21 2.38%
Loan notes 88 88 - Aug-22 2.38%
Other loans 23 11 12 Nov-18 0.94%
----------------- -------- ----- -------- -------- ---------
568 442 126 2.27%
----------------- -------- ----- -------- -------- ---------
The overall cost of borrowings at 30 April 2018 is 2.27% (2017:
2.17%).
The margin charged on bank debt is dependent upon the Group's
net debt to EBITDA ratio, ranging from a minimum of 1.50% to a
maximum of 3.00%. The net debt to EBITDA ratio at 30 April 2018
corresponds to a margin of 2.25% (2017: 1.75%).
Interest rate swap contracts have been taken out which fix a
proportion of bank debt at 2.40% (2017: 2.16%) giving an overall
cost of bank borrowings (gross of cash balances) at 30 April 2018
of 2.28% (2017: 2.16%).
The other loans consist of GBP10.5m of local borrowings in Spain
and GBP0.5m of preference shares.
The split of borrowings (gross of cash balances and excluding
overdrafts) by currency is as follows:
2018 2017
GBPm GBPm
----------------------------------------------- ---- ----
Euro 328 256
Sterling 128 76
------------------------------------------------- ---- ----
Borrowings before unamortised arrangement fees 456 332
Unamortised arrangement fees (3) (2)
Borrowings (excluding cash and overdrafts) 453 330
------------------------------------------------- ---- ----
There are three financial covenants under the Group's facilities
as follows:
April
Threshold 2018 Headroom April 2017
--------------- ---------- ----- ------------------ ----------
Interest cover 3x 6.22 GBP34m (EBIT) 9.23x
Loan to value 70% 43% GBP277m (Net debt) 37%
Debt leverage 2x 1.76x GBP31m (EBITDA) 1.31x
--------------- ---------- ----- ------------------ ----------
The covenant restriction on leverage was increased to 2.75x on
refinancing of facilities in April 2018, to be applied from the
next testing date. Had this applied to the April 2018 testing date
the EBITDA headroom would have been GBP91 million.
Balance sheet
Net tangible assets at 30 April 2018 were GBP530.3 million
(2017: GBP509.7 million), equivalent to a net tangible asset value
of 398p per share (2017: 383p per share).
Gearing at 30 April 2018 was 82.8% (2017: 61.0%).
Return on capital employed was 7.5% (2017: 10.5%).
Treasury
The function of Group Treasury is to mitigate financial risk, to
ensure sufficient liquidity is available to meet foreseeable
requirements, to secure finance at minimum cost and to invest cash
assets securely and profitably. Treasury operations manage the
Group's funding, liquidity and exposure to interest rate risks
within a framework of policies and guidelines authorised by the
Board of Directors.
The Group uses derivative financial instruments for risk
management purposes only. Consistent with Group policy, Group
Treasury does not engage in speculative activity and it is Group
policy to avoid using more complex financial instruments.
Credit risk
The policy followed in managing credit risk permits only minimal
exposures, with banks and other institutions meeting required
standards as assessed normally by reference to major credit
agencies. Group credit exposure for material deposits is limited to
banks which maintain an A rating. Individual aggregate credit
exposures are also limited accordingly.
Liquidity and funding
The Group has sufficient funding facilities to meet its normal
funding requirements in the medium term as discussed above.
Covenants attached to those facilities as outlined above are not
restrictive to the Group's operations.
Capital management
The Group's objective is to maintain a balance sheet structure
that is efficient in terms of providing long term returns to
shareholders and safeguards the Group's financial position through
economic cycles.
Operating subsidiaries are financed by a combination of retained
earnings and borrowings.
The Group can choose to adjust its capital structure by varying
the amount of dividends paid to shareholders, by issuing new shares
or by adjusting the level of capital expenditure.
Interest rate management
The Group's bank facilities and other loan agreements
incorporate variable interest rates. The Group seeks to manage the
risks associated with fluctuating interest rates by having in place
a number of financial instruments covering at least 50% of its
borrowings at any time. The proportion of gross borrowings hedged
into fixed rates was 73% at 30 April 2018 (2017: 97%).
Foreign exchange risk
The Group's reporting currency is, and 59% of its revenue is
generated in Sterling (2017: 62%). The Group's principal currency
translation exposure is to the Euro, as the results of operations,
assets and liabilities of its Spanish and Irish businesses must be
translated into Sterling to produce the Group's consolidated
financial statements.
The average and year end exchange rates used to translate the
Group's overseas operations were as follows:
2018 2017
GBP : EUR GBP : EUR
--------- --------- ---------
Average 1.13 1.18
Year end 1.14 1.18
--------- --------- ---------
The Group manages its exposure to currency fluctuations on
retranslation of the balance sheets of those subsidiaries whose
functional currency is in Euro by maintaining a proportion of its
borrowings in the same currency. The exchange differences arising
on these borrowings have been recognised directly within equity
along with the exchange differences on retranslation of the net
assets of the Euro subsidiaries. At 30 April 2018 71% of Euro net
assets were hedged against Euro borrowings (2017: 70%).
Going concern
Having considered the Group's current trading, cash flow
generation and debt maturity including severe but plausible stress
testing scenarios, the Directors have concluded that it is
appropriate to prepare the Group financial statements on a going
concern basis.
David Tilston, Interim Chief Financial Officer
Principal Risks and Uncertainties
Economic environment
The demand for our products and services could be affected by a
downturn in economic activity in the countries in which the Group
operates.
Economic activity in the territories we operate could be
adversely impacted by the UK decision to leave the EU or the
ongoing uncertainty created by the current political situation in
Spain.
The economic environment is pervasive across our business model
as changes in the environment will impact our resources, offering
and activities. However, demand for our flexible products could
also be higher in periods of uncertainty.
The high level of operational gearing in our business model
means that changes in demand can lead to higher levels of
variability in profits.
An adverse change in macroeconomic conditions in times of
political uncertainty or otherwise could also increase the risk of
customer failure and therefore incidences of bad debts.
Flexibility is ingrained in the Group's business model and
allows any vehicles returned to be placed with different customers.
Alternatively, the group can generate cash and reduce debt by
reducing purchases and increasing vehicle disposals.
The Group is not materially exposed to a single customer sector
and no individual customer contributes more than 5% of total
revenue generated.
The Group's current hedging arrangements protect it from
material foreign exchange risks.
The impact of the UK's decision to leave the EU is still
uncertain, as is the current Spanish political situation. However,
there have been no material impacts on the group to date.
Market risk
The markets in which the Group operates are fragmented with low
barriers to entry meaning that price competition is high.
There is a risk that the Group fails to attract and retain
customers based on pricing. This could either be because of pricing
too highly or failing to successfully communicate the inherent
value of our offering.
There is also a risk that demand for our existing products could
materially diminish due to other structural changes in the
market.
Competition influences how we create value for our customers and
investors, either by enhancing our service offering or investing in
pricing.
If our pricing is perceived to be higher than our competition
for the same level of service, then we will either lose market
share or be forced to reduce prices to remain competitive. Without
any adjustment to the cost base, this will result in lower
returns.
Core pricing is based upon target levels of return with discount
authority levels allowing flexibility to ensure that we remain
competitive on pricing.
Investment has been made in pricing in the year in order to
generate demand. Focus around margins will continue into the
subsequent year to ensure that returns are not eroded in the long
term.
Investment has continued in marketing to ensure that the value
proposition underpinning pricing is well communicated and
received.
Vehicle Holding Costs
The profitability of the Group is dependent upon minimising
vehicle holding costs, which are affected by the pricing levels of
new vehicles purchased and the disposal value of vehicles sold.
Vehicle holding costs directly impact our key resources and
activities.
An increase in holding costs, if not recovered through hire rate
increases or other operational efficiencies, would adversely affect
profitability, shareholder returns and cash generation.
Pricing is negotiated with manufacturers on an annual basis in
advance of purchases being made. The number and mix of suppliers
and model variants is controlled in order to optimise buying
terms.
The holding period of vehicles is continuously reviewed to
ensure that disposals are made at the optimal time in a vehicle's
life cycle thereby ensuring we recycle capital in the most
efficient way. Whilst the Group is exposed to fluctuations in the
used vehicle market, we seek to optimise the sales route for each
vehicle. Should the market experience a short-term decline in
residual values, we can age our existing fleet until the market
improves.
Legal compliance and the employee environment
Non-compliance with regulations, inadequate maintenance of our
vehicles and a working environment where individuals do not receive
appropriate training and support could harm relationships with
stakeholders and place employees and customers' employees at risk
of harm.
Failure to attract, develop and retain individuals with the
appropriate skills will inhibit the successful delivery of our
strategy.
Material non-compliance with regulations would affect our
relationships with customers and suppliers.
Our relationship with employees is a key resource which enables
the effective delivery of our key activities.
Failure to comply with laws and regulations would put the
reputation of the business at risk, both in terms of attracting
fines and penalties and maintaining good customer and supplier
relationships.
Failure to invest in our workforce and high levels of staff
turnover will impact upon customer service and delivery of the
Group's strategic objectives.
Compliance with Laws and regulations is ultimately the
responsibility of the Board. Management of compliance is delegated
to the relevant business unit leaders. Group Internal Audit
monitors and reports on non-compliance to the Board.
Salaries are benchmarked against the market and a range of
incentives are provided to attract and retain staff. Personal
development plans and tailored training are conducted for all
employees. Succession plans are in place for senior positions.
Regular communication and engagement with everyone across the
business is vital to our success.
IT Systems
IT systems are integral to the operations of the Group. Failure
to appropriately invest in the Group's systems and the security and
continuity of systems could result in loss of commercial agility,
loss or theft of sensitive data and an inability to effectively
carry out the business activities of the group.
Systems underpin our competitive advantage by enabling us to
effectively deliver the business model.
A lack of investment in new systems or failure of existing
systems or could inhibit the commercial agility of business and the
efficient continuity of all aspects of our operations.
Failure of existing systems or a lack of investment in new
systems could inhibit the commercial agility of the business and
the efficient continuity of our operations. Incorrectly handling
sensitive data or unsuccessfully defending against malicious
cyber-attacks would cause significant reputational harm and
negatively impact the relationship with all stakeholders.
The UK business is currently undertaking a material systems
change and has implemented an appropriate governance structure to
ensure that the project is successfully delivered.
The Group has an appropriate business continuity plan in the
event of disruption arising from an IT systems failure.
The appropriate level of investment is made into ensuring that
sensitive data is securely held and is adequately protected from
cyber-attacks or other breaches.
Access to Capital
The group operates a capital intensive business model and
requires sufficient access to capital in order to maintain and grow
the fleet.
As such, an inefficient capital cycle or failure to access or
service credit represents a significant risk to the delivery of
strategy and continuation of the business.
Capital is one of our key resources and therefore impacts how
efficiently we fund the business and subsequently deliver value for
our stakeholders.
Failure to maintain or extend access to credit facilities could
impact on the Group's ability to deliver its strategic objectives
or continue as a going concern.
The Group's main facilities mature in 2021 and 2022 and the
Group believes that these facilities provide adequate resources for
present requirements.
The Group reports against covenants on a semi-annual basis and
continually monitors cash flow forecasts to ensure ongoing covenant
compliance and headroom against facilities.
GLOSSARY OF TERMS
The following defined terms have been used throughout this
document:
Term Definition
Disposals profits This is a non-GAAP measure used to describe
the adjustment in the depreciation charge made
in the year for vehicles sold at an amount
different to their net book value at the date
of sale (net of attributable selling costs)
-------------------------------------------------------
EPS Underlying basic earnings per share
-------------------------------------------------------
Facility headroom Calculated as facilities of GBP568m less net
borrowings of GBP442m. Net borrowings represent
net debt of GBP439m excluding unamortised arrangement
fees of GBP3m and are stated after the deduction
of GBP21m of cash balances which are available
to offset against borrowings
-------------------------------------------------------
GAAP Generally Accepted Accounting Practice: meaning
compliance with International Financial Reporting
Standards
-------------------------------------------------------
Gearing Calculated as net debt divided by net tangible
assets (as defined below)
-------------------------------------------------------
Growth Capex Growth capex represents the cash consumed in
order to grow the fleet or the cash generated
if the fleet size is reduced in periods of
contraction.
-------------------------------------------------------
LCV Light commercial vehicle: the official term
used within the European Union for a commercial
carrier vehicle with a gross vehicle weight
of not more than 3.5 tonnes
-------------------------------------------------------
Net tangible assets Net assets less goodwill and other intangible
assets
-------------------------------------------------------
PBT Underlying profit before tax
-------------------------------------------------------
PPU Profit per unit/loss per unit - this is a non-GAAP
measure used to describe disposals profits
(as defined), divided by the number of vehicles
sold
-------------------------------------------------------
GAAP RECONCILIATION
A reconciliation of GAAP to non-GAAP underlying measures is as
follows:
Group Group
2018 2017
GBP000 GBP000
Profit before tax 52,738 72,222
Add back:
Restructuring costs 2,499 2,189
Certain intangible amortisation 1,767 1,830
Spain tax settlement - (1,235)
Underlying profit before tax 57,004 75,006
--------------------------------- --------- ---------
Group Group
2018 2017
GBP000 GBP000
------------------------------------- ------------ ------------
Profit for the year 43,232 60,901
Add back:
Restructuring costs 2,499 2,189
Certain intangible amortisation 1,767 1,830
Spain tax settlement - (1,235)
Refinancing costs - -
Tax on exceptional items
and intangible amortisation (1,145) (686)
---------------------------------------- ------------ ------------
Underlying profit for
the year 46,353 62,999
---------------------------------------- ------------ ------------
Weighted average number of Ordinary
shares 133,232,518 133,232,518
-------------------------------------- ------------ ------------
Underlying basic earnings
per share 34.8p 47.3p
---------------------------------------- ------------ ------------
Group Group
2018 2017
GBP000 GBP000
----------------------------------------------- -------- --------
Operating profit 64,077 81,482
Add back:
Restructuring costs 2,499 2,189
Certain intangible amortisation 1,767 1,830
Spain tax settlement - (896)
----------------------------------------------- -------- --------
Underlying operating profit 68,343 84,605
Add Back
Fleet Depreciation 176,600 149,742
Other Depreciation 5,585 6,549
Net Impairment (380) 131
Loss on disposal of assets 415 199
Intangible amortisation included in operating
profit 404 61
----------------------------------------------- -------- --------
Underlying EBITDA 250,967 241,287
----------------------------------------------- -------- --------
UK Spain Ireland Corporate Eliminations Group
2018 2018 2018 2018 2018 2018
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- -------- --------- -------- ---------- ------------- ---------
Underlying operating
profit (loss) 30,571 38,960 2,543 (3,731) - 68,343
Exclude
Adjustments to depreciation
charge in relation
to vehicles sold
in the period (7,598) (10,002) (2,010) - - (19,610)
Corporate costs - - - 3,731 - 3,731
----------------------------- -------- --------- -------- ---------- ------------- ---------
Rental Profit 22,973 28,958 533 - - 52,464
----------------------------- -------- --------- -------- ---------- ------------- ---------
Divided by: Revenue:
hire of vehicles 263,780 187,644 20,623 - (860) 471,187
Rental margin 8.7% 15.4% 2.6% - - 11.1%
----------------------------- -------- --------- -------- ---------- ------------- ---------
UK Spain Ireland Corporate Eliminations Group
2017 2017 2017 2017 2017 2017
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- --------- --------- -------- ---------- ------------- ---------
Underlying operating
profit (loss) 43,886 42,607 3,233 (5,121) - 84,605
Exclude
Adjustments to depreciation
charge in relation
to vehicles sold
in the period (14,348) (17,114) (1,545) - (33,007)
Corporate costs - - - 5,121 - 5,121
----------------------------- --------- --------- -------- ---------- ------------- ---------
Rental Profit 29,538 25,493 1,688 - - 56,719
Divided by: Revenue:
hire of vehicles 272,168 163,419 21,528 - (995) 456,120
Rental margin 10.9% 15.6% 7.8% - - 12.4%
----------------------------- --------- --------- -------- ---------- ------------- ---------
Group Group
2018 2017
GBP000 GBP000
---------------------------------------- ---------- --------
Net decrease increase in cash and cash
equivalents (5,507) (327)
Add back:
Receipt of bank loans
and other borrowings (113,902) -
Repayments of bank loans and
other borrowings - 21,369
----------------------------------------- ---------- --------
Net cash (consumed) generated (119,409) 21,042
------------------------------------------- ---------- --------
Add back: Dividends paid 23,365 21,875
------------------------------------------- ---------- --------
Free cash flow (96,044) 42,917
------------------------------------------- ---------- --------
Add back: growth capex 125,145 1,127
------------------------------------------- ---------- --------
Underlying free cash
flow 29,101 44,044
------------------------------------------- ---------- --------
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 APRIL 2018
---------------------------------------------- ---- ---------- ---------- ------------------------
Underlying Statutory Underlying Statutory
2018 2018 2017 2017
Note GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Revenue: hire of vehicles 471,187 471,187 456,120 456,120
Revenue: sale of vehicles 230,485 230,485 211,309 211,309
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Total revenue 1 701,672 701,672 667,429 667,429
Cost of sales (563,232) (563,232) (514,446) (514,446)
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Gross profit 138,440 138,440 152,983 152,983
Administrative expenses (excluding exceptional
items and certain intangible amortisation) (70,097) (70,097) (68,378) (68,378)
Exceptional administrative expenses 6 - (2,499) - (1,293)
Certain intangible amortisation - (1,767) - (1,830)
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Total administrative expenses (70,097) (74,363) (68,378) (71,501)
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Operating profit 1 68,343 64,077 84,605 81,482
Interest income 1 1 2 2
Finance costs (excluding exceptional items) (11,340) (11,340) (9,601) (9,601)
Exceptional finance credit 6 - - - 339
Profit before taxation 57,004 52,738 75,006 72,222
Taxation (10,651) (9,506) (12,007) (11,321)
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Profit for the year 46,353 43,232 62,999 60,901
---------------------------------------------- ---- ---------- ---------- ---------- ----------
Profit for the year is wholly attributable to owners of the
Parent Company. All results arise from continuing operations.
Underlying profit excludes exceptional items as set out in Note
6, as well as certain intangible amortisation and the taxation
thereon, in order to provide a better indication of the Group's
underlying business performance.
Earnings per share
Basic 234.8p 32.4p 47.3p 45.7p
------------------- ----- ----- ----- -----
Diluted 234.3p 32.0p 46.7p 45.1p
------------------- ----- ----- ----- -----
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 APRIL 2018
----------------------------------------------------------------------------------------- -------- --------
2018 2017
GBP000 GBP000
----------------------------------------------------------------------------------------- -------- --------
Amounts attributable to owners of the Parent Company
Profit attributable to the owners 43,232 60,901
Other comprehensive income (expense)
Foreign exchange differences on retranslation of net assets of subsidiary undertakings 15,488 25,952
Net foreign exchange differences on long term borrowings held as hedges (11,393) (21,793)
Foreign exchange difference on revaluation reserve 46 85
Net fair value gains on cash flow hedges 1,105 659
Deferred tax charge recognised directly in equity relating to cash flow hedges (210) (157)
Total other comprehensive income 5,036 4,746
------------------------------------------------------------------------------------------ -------- --------
Total comprehensive income for the year 48,268 65,647
------------------------------------------------------------------------------------------ -------- --------
All items will subsequently be reclassified to the consolidated
income statement.
CONSOLIDATED BALANCE SHEET
AS AT 30 APRIL 2018
2018 2017
GBP000 GBP000
------------------------------------------------- ---------- -------
Non-current assets
Goodwill 3,589 3,589
Other intangible assets 5,205 3,309
Property, plant and equipment: vehicles for hire 897,323 731,657
Other property, plant and equipment 67,979 65,262
Total property, plant and equipment 965,302 796,919
--------------------------------------------------- ---------- -------
Deferred tax assets 10,791 13,730
--------------------------------------------------- ---------- -------
Total non-current assets 984,887 817,547
--------------------------------------------------- ---------- -------
Current assets
Inventories 31,828 33,666
Trade and other receivables 76,091 62,656
Derivative financial instrument assets - 213
Current tax assets 4,745 -
Cash and bank balances 21,382 41,166
Total current assets 134,046 137,701
--------------------------------------------------- ---------- -------
Total assets 1,118,933 955,248
--------------------------------------------------- ---------- -------
Current liabilities
Trade and other payables 97,671 64,913
Derivative financial instrument liabilities 112 -
Current tax liabilities 15,246 18,568
Short term borrowings 17,952 32,585
--------------------------------------------------- ---------- -------
Total current liabilities 130,981 116,066
--------------------------------------------------- ---------- -------
Net current assets 3,065 21,635
--------------------------------------------------- ---------- -------
Non-current liabilities
Derivative financial instrument liabilities 1,277 2,706
Long term borrowings 442,751 318,439
Deferred tax liabilities 4,796 1,420
--------------------------------------------------- ---------- -------
Total non-current liabilities 448,824 322,565
--------------------------------------------------- ---------- -------
Total liabilities 579,805 438,631
--------------------------------------------------- ---------- -------
NET ASSETS 539,128 516,617
--------------------------------------------------- ---------- -------
Equity
Share capital 66,616 66,616
Share premium account 113,508 113,508
Own shares reserve (3,238) (1,659)
Hedging reserve (1,125) (2,020)
Translation reserve (1,146) (5,241)
Other reserves 68,660 68,614
Retained earnings 295,853 276,799
TOTAL EQUITY 539,128 516,617
--------------------------------------------------- ---------- -------
Total equity is wholly attributable to owners of the Parent
Company.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2018
--------------------------------------------------------- ------ -------- --------
2018 2017
Note GBP000 GBP000
Net cash (used in) generated from operations 4 (81,797) 47,818
--------------------------------------------------------- ------ -------- --------
Investing activities
Interest received 1 2
Proceeds from disposal of other property, plant and equipment 2,374 1,222
Purchases of other property, plant and equipment (9,292) (4,878)
Purchases of intangible assets (4,073) (1,133)
--------------------------------------------------------- ------ -------- --------
Net cash used in investing activities (10,990) (4,787)
--------------------------------------------------------- ------ -------- --------
Financing activities
Dividends paid (23,365) (21,875)
Receipts of bank loans and other borrowings 113,902 -
Repayments of bank loans and other borrowings - (21,369)
Net payments to acquire own shares for share schemes (3,257) (114)
Net cash generated from (used in) financing activities 87,280 (43,358)
--------------------------------------------------------- ------ -------- --------
Net decrease in cash and cash equivalents (5,507) (327)
Cash and cash equivalents at 1 May 19,637 18,748
Effect of foreign exchange movements (3) 1,216
--------------------------------------------------------- ------ -------- --------
Cash and cash equivalents at 30 April 14,127 19,637
Cash and cash equivalents comprise:
Cash and bank balances 21,382 41,166
Bank overdrafts (7,255) (21,529)
--------------------------------------------------------- ------ -------- --------
14,127 19,637
---------------------------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 APRIL 2018
Share
capital
and share Own shares Hedging Translation Other Retained
premium reserve reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ----------- ------------- --------- ------------ ---------- ---------- ---------
Total equity at 1
May 2016 180,124 (8,157) (2,522) (9,400) 68,529 242,451 471,025
Share options fair
value charge - - - - - 1,934 1,934
Share options exercised - - - - - (6,612) (6,612)
Profit attributable
to owners of the Parent
Company - - - - - 60,901 60,901
Dividends paid - - - - - (21,875) (21,875)
Net purchase of own
shares - (114) - - - - (114)
Transfer of shares
on vesting of share
options - 6,612 - - - - 6,612
Other comprehensive
income - - 502 4,159 85 - 4,746
Total equity at 1
May 2017 180,124 (1,659) (2,020) (5,241) 68,614 276,799 516,617
Share options fair
value charge - - - - - 865 865
Share options exercised - - - - - (1,678) (1,678)
Profit attributable
to owners of the Parent
Company - - - - - 43,232 43,232
Dividends paid - - - - - (23,365) (23,365)
Net purchase of own
shares - (3,257) - - - - (3,257)
Transfer of shares
on vesting of share
options - 1,678 - - - - 1,678
Other comprehensive
income - - 895 4,095 46 - 5,036
Total equity at 30
April 2018 180,124 (3,238) (1,125) (1,146) 68,660 295,853 539,128
-------------------------- ----------- ------------- --------- ------------ ---------- ---------- ---------
Other reserves comprise the capital redemption reserve,
revaluation reserve and merger reserve.
NOTES TO THE ACCOUNTS
FOR THE YEARED 30 APRIL 2018
1. SEGMENTAL ANALYSIS
UK Spain Ireland Corporate Eliminations Total
2018 2018 2018 2018 2018 2018
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue: hire of vehicles 263,780 187,644 20,623 - (860) 471,187
Revenue: sale of vehicles 149,139 73,548 7,798 - - 230,485
Total revenue 412,919 261,192 28,421 - (860) 701,672
Underlying operating profit (loss) * 30,571 38,960 2,543 (3,731) - 68,343
Restructuring costs (2,499)
Certain intangible amortisation (1,767)
Operating profit 64,077
-------------------------------------- ------- ------- ------- --------- ------------ -------
UK Spain Ireland Corporate Eliminations Total
2017 2017 2017 2017 2017 2017
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue: hire of vehicles 272,168 163,419 21,528 - (995) 456,120
Revenue: sale of vehicles 144,043 63,241 4,025 - - 211,309
Total revenue 416,211 226,660 25,553 - (995) 667,429
Underlying operating profit (loss) * 43,886 42,607 3,233 (5,121) - 84,605
Restructuring costs (2,189)
Spain tax settlement 896
Certain intangible amortisation (1,830)
Operating profit 81,482
-------------------------------------- ------- ------- ------- --------- ------------ -------
* Underlying operating profit (loss) stated before certain
intangible amortisation and exceptional items is the measure used
by the Board of Directors to assess segment performance.
2. EARNINGS PER SHARE
Underlying Statutory Underlying Statutory
2018 2018 2017 2017
Basic and diluted earnings per share GBP000 GBP000 GBP000 GBP000
------------------------------------------------------------------ ----------- ----------- ----------- -----------
The calculation of basic and diluted earnings per share is based
on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share,
being profit for the year attributable to owners of the Parent
Company 46,353 43,232 62,999 60,901
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Number Number Number Number
Number of shares
Weighted average number of Ordinary shares
for the purposes of basic earnings per share 133,232,518 133,232,518 133,232,518 133,232,518
Effect of dilutive potential Ordinary shares:
- share options 2,077,803 2,077,803 1,700,849 1,700,849
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Weighted average number of Ordinary shares for the purposes
of diluted earnings per share 135,310,321 135,310,321 134,933,367 134,933,367
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Basic earnings per share 34.8p 32.4p 47.3p 45.7p
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Diluted earnings per share 34.3p 32.0p 46.7p 45.1p
------------------------------------------------------------------ ----------- ----------- ----------- -----------
3. DIVIDS
Dividends paid in the year were GBP23,365,000 (2017 -
GBP21,875,000).
An interim dividend of 6.1p per Ordinary share was paid in
January 2018 (2017- 5.7p). The Directors propose a final dividend
of 11.6p per share for the year ended 30 April 2018 (2017 - 11.6p),
which is subject to approval at the Annual General Meeting and has
not been included as a liability as at 30 April 2018.
4. NOTES TO THE CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2018
2018 2017
Net cash (used in) generated from operations GBP000 GBP000
--------------------------------------------------------- --------- ---------
Operating profit 64,077 81,482
Adjustments for:
Net impairment (380) 131
Depreciation of property, plant and equipment 182,185 156,291
Amortisation of intangible assets 2,171 1,891
Loss on disposal of property, plant and equipment 390 199
Loss on disposal of intangible assets 25 -
Share options fair value charge 865 1,934
--------------------------------------------------------- --------- ---------
Operating cash flows before movements in working capital 249,333 241,928
(Increase) decrease in non-vehicle inventories (1,190) 525
(Increase) decrease in receivables (14,641) 4,801
Increase (decrease) in payables 6,899 (8,952)
--------------------------------------------------------- --------- ---------
Cash generated from operations 240,401 238,302
Income taxes paid, net (11,451) (12,602)
Interest paid (10,707) (8,552)
--------------------------------------------------------- --------- ---------
Net cash generated from operations 218,243 217,148
Purchase of vehicles (486,943) (346,305)
Proceeds from disposal of vehicles 186,903 176,975
--------------------------------------------------------- --------- ---------
Net cash (used in) generated from operations (81,797) 47,818
--------------------------------------------------------- --------- ---------
5. ANALYSIS OF CONSOLIDATED NET DEBT
-------------------------------------- -------- --------
2018 2017
GBP000 GBP000
-------------------------------------- -------- --------
Cash and bank balances (21,382) (41,166)
Bank overdrafts 7,255 21,529
Bank loans 364,750 244,236
Loan notes 87,890 84,393
Cumulative preference shares 500 500
Confirming facilities 308 366
-------------------------------------- -------- --------
Consolidated net debt 439,321 309,858
-------------------------------------- -------- --------
6. EXCEPTIONAL ITEMS
During the year, the Group recognised exceptional items in the income statement made up as
follows:
2018 2017
GBP000 GBP000
------------------------------------------------------ --------- ---------
Restructuring costs 2,499 2,189
Spain tax settlement - (896)
Exceptional administrative expenses 2,499 1,293
------------------------------------------------------- --------- ---------
Interest refunded in relation to Spain tax settlement - (339)
Exceptional finance credit costs - (339)
------------------------------------------------------- --------- ---------
Total pre-tax exceptional items 2,499 954
Tax credit relating to exceptional items (471) (95)
------------------------------------------------------- --------- ---------
Exceptional administrative expenses
All of the restructuring costs incurred in the year arose in the
UK and Ireland. All restructuring costs relate to programmes which
commenced and were completed in the year. UK restructuring
programmes related to turnaround initiatives including senior
management changes, site closures, and establishment of a
commercial hub.
7. BASIS OF PREPARATION
The results for the year ended 30 April 2018, including
comparative financial information, have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), and
their interpretations adopted by the European Union.
Northgate plc ("the Company") has adopted all IFRS in issue and
effective for the year.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of IFRS, this announcement does not itself
contain sufficient information to comply with IFRS. The Company
expects to publish full financial statements that comply with IFRS
in July 2018.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 April 2018 or
2017, but is derived from those accounts. Statutory accounts for
2017 have been delivered to the Registrar of Companies and those
for 2018 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts: their
reports were unqualified, did not draw attention to any matters by
way of emphasis and did not contain statements under s498 (2) or
(3) of the Companies Act 2006.
The financial information presented in respect of the year ended
30 April 2018 has been prepared on a basis consistent with that
presented in the annual report for the year ended 30 April
2017.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BRGDLRBDBGIU
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