TIDMNTG
RNS Number : 3015J
Northgate PLC
04 December 2018
NORTHGATE PLC
INTERIM RESULTS FOR THE 6 MONTHSED 31 OCTOBER 2018
"Further strong revenue growth - full-year VOH target raised in
UK."
H1 2019 H1 2018 Change FY 2018
GBPm GBPm % GBPm
-------- -------- --------- ---------
Average VOH ('000) 92.8 82.1 12.9% 83.8
Revenue - vehicle hire 259.5 234.5 10.7% 471.2
Revenue - vehicle sales 114.5 115.2 (0.6%) 230.5
Underlying (1) EBITDA 133.5 127.3 4.9% 251.0
Underlying (1) Operating
Profit 36.7 39.1 (6.2%) 68.3
Underlying (1) Profit
before Tax 29.2 33.8 (13.6%) 57.0
Underlying (1) Earnings
per Share (p) 18.5p 20.7p (10.6%) 34.8p
Dividend per Share (p) 6.2p 6.1p 1.6% 17.7p
---------------------------- -------- -------- --------- ---------
Total Revenue 374.0 349.7 6.9% 701.7
Profit before Tax 28.7 31.0 (7.4%) 52.7
Earnings per Share (p) 18.4p 19.1p (3.7%) 32.4p
---------------------------- -------- -------- --------- ---------
Total Net Capex (incl.
inorganic) (1) (149.5) (178.8) (16.4%) (311.1)
Net Debt (479.8) (421.0) (14.0%) 439.3
Return on Capital Employed
% 6.7% 8.7% (2.0ppt) 7.6%
---------------------------- -------- -------- --------- ---------
(1) Refer to Reconciliation of GAAP to non- GAAP measures and Glossary of terms.
First Half Highlights:
-- Continuing strong VOH growth delivered in UK&I (+12.7%) and Spain (+13.2%)
-- UK&I rental margin improved sequentially to 7.1% (H2 2018: 6.0%) despite one-off costs
-- Further margin expansion initiatives being implemented in Spain and UK&I
-- Reduction in capex delivered by fleet optimisation policy
-- Statutory profit before tax 7.4% lower at GBP28.7 million (H1 2018: GBP31.0 million)
o Benefitted from GBP7.7 million impact of depreciation rate
change
FY 2019 full-year outlook:
-- UK&I. : VOH growth target increased to double-digit (from high single-digit)
Rental margin target now 7.5% - 8.0% (from broadly flat vs. 8.3%
in FY 2018)
Net impact neutral for rental profit - expectations
unchanged
-- Spain : No change to expectations - in line with previous guidance
Kevin Bradshaw, CEO of Northgate, commented:
"Our reported performance in the first half reflected the
difficult strategic decisions we took in the second half last year.
Consequently, despite strong revenue growth, our margins, profits
and ROCE are lower, as expected, compared to the first half of last
year. We remain confident, however, about the positive trajectory
of the business going forward, and we are on track to meet our full
year expectations.
The turnaround in our UK&I business is starting to show
through, with double-digit revenue growth, and rental margins ahead
sequentially versus the second half last year. We are confident
that we can maintain this growth and increase margins going
forward. The one-off costs of TOM integration are behind us, the
impact of rate increases is now delivering positive rate growth
compared to the prior year, and we are implementing a broad range
of margin improvement opportunities.
Our Spanish business can maintain its momentum, focusing on
profitable SME growth segments, benefitting from new facilities
brought into operation in the first half and implementing its own
set of margin improvement initiatives.
The high rate of volume growth in both the UK&I and Spain
has depressed ROCE, due to the substantial investment in new
vehicles as well as lower disposal profits as the fleet is aged. We
are maintaining strong discipline in the deployment of capital and
are confident that ROCE will grow moving forwards through a
combination of margin improvement and fleet optimisation
actions.
Dividend
The Board has declared an Interim Dividend of 6.2 pence per
share (2018: 6.1 pence/share) which will be paid on Friday 25
January 2019 to Shareholders on the register on Friday 14 December
2018.
Contact details
There will be a presentation for investors and analysts at 9.30
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
For further information please contact:
Northgate plc +44 1325 467558
Kevin Bradshaw, Chief Executive
Officer
Philip Vincent, Chief Financial
Officer
David Boyd, Investor Relations +44 7841 629823
MHP +44 203 128 8100
Andrew Jaques, Simon Hockridge,
Ollie Hoare
Notes to Editors:
Northgate plc is the leading light commercial hire business in
the UK & Ireland and Spain 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.
Reconciliation of GAAP to non-GAAP measures 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.
CHIEF EXECUTIVE REVIEW
Strategic summary
During the first half Northgate's strategy delivered
double-digit VOH growth, successfully exploiting the continuing
structural shift in the LCV market from ownership to "usership".
The company's competitive advantages, including its nationwide
networks of rental depots and service workshops, buying power, and
strong brand and reputation enable Northgate to offer a compelling
range of LCV rental propositions, which gained strong traction with
business customers across all territories served.
The ability to bundle together a range of minimum-term and
flexible rental products is proving to be an attractive proposition
for many customers in both Spain and the UK, and a substantial
proportion of new business is generated by cross-selling additional
rental products to existing customers.
Competition in the LCV rental market remains robust in all three
territories, but is rational, with structural cost increases faced
by the industry generally being passed through to the end user. LCV
rental is not purely a price-driven decision for customers, and
other factors such as service levels, geographic presence and
long-term relationships play a major role. In all its markets,
Northgate seeks to differentiate in particular through its service
offering, aiming to minimise vehicle downtime for customers and to
be the best possible partner.
Moving forward, the company will drive to maintain momentum in
VOH, also seeking to focus further on the most attractive growth
segments, in both minimum-term and flexible rental, where its
competitive strengths can deliver the highest margins and returns.
This will help to accelerate the conversion of Northgate's rental
revenue growth into strong, sustainable growth in profit and
ROCE.
Outlook & Guidance
UK & Ireland - changes
VOH growth of 12.7% in the first half has been stronger than
expected, with Northgate's range of minimum term and flexible
rental solutions gaining good traction in the market. We expect
this growth to continue through the remainder of the year,
including strong seasonal peak VOH demand in the third quarter, and
now expect to deliver double-digit average VOH growth for the full
year.
As a result of this faster VOH growth, and some one-off items in
the first half (including processing the 3,400 ex-TOM vehicles
acquired), we now expect the rental margin for the full year to be
in the range 7.5%-8.0%, versus previous guidance of broadly flat
(FY 2018: 8.3%).
The net impact of the stronger VOH and lower rental margin is
that rental profit for the full year is expected to be in line with
our original expectations, and higher than in FY 2018.
Spain - no change
We expect the good performance in the first half to continue
through the rest of the year, and the business to deliver full year
results in line with previous guidance.
Group
The stronger VOH growth we expect in the UK will result in full
year group capex GBP10-20 million higher than previously expected.
The definitions of Growth and Net Replacement Capex are currently
being reviewed in order to more closely align these metrics to our
fleet management policy.
ROCE will remain structurally lower as the company continues to
experience rapid VOH growth. This is due to capital being deployed
now to purchase a vehicle which will deliver a return over the 3-4
years that it is in the fleet and when it is sold at the end of
this period.
UK & IRELAND
H1 2019 H1 2018 Change FY 2018
KPI ('000) ('000) % ('000)
------------------------- -------- -------- -------- --------
Average VOH 48.2 42.7 12.7% 43.5
Closing VOH 49.2 44.0 11.9% 46.4
Vehicles purchased 9.4 10.5 (9.7%) 23.4
Vehicles de-fleeted 8.8 9.9 (11.3%) 17.0
Vehicles sold (incl.
3(rd) party) 10.8 11.4 (4.7%) 21.0
Profit per Unit (PPU)
GBP 465 390 19.2% 457
Closing fleet size 57.3 50.9 12.6% 56.7
Average utilisation % 86% 87% (1 ppt) 87%
Average fleet age (mo.) 21 22 (1 mo.) 21
------------------------- -------- -------- -------- --------
H1 2019 H1 2018 Change FY 2018
Profit & Loss (Underlying) GBPm GBPm % GBPm
---------------------------- -------- -------- --------- --------
Revenue - Vehicle hire 157.4 141.6 11.1% 283.5
Revenue - Vehicle sales 88.3 80.2 10.1% 156.9
Total Revenue 245.7 221.8 10.7% 440.4
Rental profit 11.2 15.0 (25.4%) 23.5
Rental Margin % 7.1% 10.6% (3.5ppt) 8.3%
Disposals profit 5.0 4.4 12.9% 9.6
Operating profit 16.2 19.4 (16.7%) 33.1
ROCE % 5.4% 7.8% (2.4ppt) 6.3%
---------------------------- -------- -------- --------- --------
Rental business - VOH and rental revenue
Average VOH in the first half grew by 12.7% year-on-year to
48,200. This included the addition to VOH during the period of
approximately 1,600 former TOM vehicles. VOH growth demonstrated
the strong market traction gained by Northgate's range of
compelling rental propositions, and the increasing effectiveness of
the self-help actions implemented across the UK business over the
past 12 months.
The increase in average VOH in the first half drove 11.1% rental
revenue growth to GBP157.4 million (H1 2018: GBP141.6 million).
Closing VOH at the end of the first half was 49,200, 8.1% higher
than at the start of the period (which excluded ex-TOM vehicles).
Minimum-term contracts remained the primary driver of this growth,
representing almost 19% of total VOH at the end of the first half
compared to 4% at the same time last year. The average term of
these contracts remained around three years.
Flexible rental prices were increased by 4.8% for a significant
proportion of the flexible rental fleet at the start of the year,
to reflect the cumulative impact of structural cost increases that
the business had faced over previous periods without corresponding
hire rate increases. The increase was accompanied by effective
communication with customers, and did not result in any noticeable
increase in customer churn. Market research and customer feedback
indicated that this price rise was in line with wider market
pricing trends.
Northgate's UK customer base continues to be drawn from a wide
range of industry sectors and regions, with approximately 25% of
VOH deployed directly in the construction sector, and around 20% in
businesses carrying out general administrative and support
services. The three largest individual customers comprise just
under 10% of total VOH. Geographically, northern England and
Scotland together are home to approximately 30% of UK VOH, with
another 20% of vehicles based in London and the South-East of
England.
A key driver of the company's VOH growth is its ability to offer
a full range of flexible and minimum-term products, from short-term
flexible up to four-year minimum-term. Northgate's sales teams aim
to engage with the customer beyond the transaction, creating a
relationship and a rental narrative that delivers the best possible
all-round proposition for the customer. The result is that a
substantial proportion of VOH growth comes from existing customers,
in particular new minimum-term sales coming from existing flexible
rental customers, who will often add to their flexible VOH at the
same time.
Rental profit and margin
As previously reported, returning the UK business to strong VOH
growth, including driving new minimum-term propositions, led to a
significant dilution of the rental margin during the second half of
last year. There is now a major focus on rebuilding margins, while
at the same time maintaining strong VOH growth. The initial success
of this was demonstrated by the sequential increase in rental
margin in the first half to 7.1%, compared to 6.0% in the second
half of last year (H1 2018: 10.6%) and the business exited the
first half with margins continuing to strengthen.
Rental profit in the first half of GBP11.2 million was 25.4%
lower than the same period last year (H1 2018: GBP15.0 million),
but 31.8% higher than the GBP8.5 million rental profit reported in
the second half of 2018.
First half rental profit was adversely impacted by one-off costs
and a short-term dip in utilisation incurred as a result of the
integration of the ex-TOM vehicles into Northgate. This acquisition
involved processing an additional 3,400 vehicles in a short space
of time, requiring a significant increase in operational resources.
Rental profit was also held back by further one-off costs
associated with the transformation process being implemented across
the business, including further organisation restructuring, and
other operational changes. These one-off costs totalled around
GBP1.2 million during the period.
These rental profit headwinds were offset by the approximately
GBP2.4 million benefit from the change in depreciation rates
implemented at the start to the period.
The company is implementing a number of further initiatives
aimed at delivering sustainable increases in rental margin. These
include ensuring that contracts include provision for annual hire
rate increases, excess mileage charges in contracts are billed
fully, and vehicle damage charged for appropriately. There will
also be enhanced focus on the market segments where Northgate is
most competitive and able to achieve higher rates without
compromising the drive for VOH growth.
The business in Ireland, which accounts for just under 7% of
VOH, did not perform well in the first half, delivering broadly
flat VOH and disposals profits, and a lower rental margin.
Extensive changes have been made to management, and a plan
implemented to return the business to profitable growth.
Management of fleet and vehicle sales
The fleet at the end of the first half comprised 57,300
vehicles, 6,400 higher than at the same time last year, reflecting
the rapid growth in VOH and the acquisition of 3,400 ex-TOM
vehicles at the end of last year, around half of which were
subsequently converted to VOH.
In line with the Group-wide fleet optimisation policy, the
average age at which vehicles were de-fleeted increased, resulting
in lower volumes of vehicles both sold and purchased compared to
the same period last year. The 10,800 vehicles sold during the
first half included approximately 1,800 ex-TOM vehicles, and 2,000
third-party vehicles purchased for re-sale. 42% of total sales were
through the Van Monster retail channel, broadly the same as in the
same period last year.
Strong residual values generally, and the sale of ex-TOM
vehicles, resulted in PPU of GBP465, nearly 20% above the level
achieved last year and significantly higher than previously
expected. This resulted in a disposals profit of GBP5.0 million
compared to GBP4.4 million in the first half last year.
Operating profit and ROCE
The reduction in rental profit, partially offset by the higher
disposals profit, resulted in first half operating profit of
GBP16.2 million, 16.7% lower than the first half of last year (H1
2018: GBP19.4 million). The return on capital employed was 5.4%
compared to 7.8% in the same period last year, reflecting the lower
operating profit and the higher net book value of the vehicle
fleet, due to its rapid growth.
Capex and cash flow
6 months ended 31 October H1 2019 H1 2018 Change FY 2018
Cash flow GBPm GBPm % GBPm
--------------------------- -------- -------- -------- --------
Underlying EBITDA 73.9 71.1 3.9% 138.3
Total Net Capex (incl.
inorganic) (84.9) (74.8) (13.5%) (158.5)
EBITDA less Total Net
Capex (11.0) (3.7) - (20.2)
--------------------------- -------- -------- -------- --------
Underlying EBITDA in the first half grew by 3.9% to GBP73.9
million (H1 2018: GBP71.1 million) reflecting rental revenue growth
partly offset by higher operating costs during the period,
including one-off costs.
Total net capex of GBP84.9 million was GBP10.1 million higher
than in the same period last year, and included approximately GBP23
million of the consideration paid to acquire the ex-TOM vehicles.
Organic capex was therefore approximately GBP13 million lower than
in the first half of last year, reflecting the impact of the fleet
optimisation policy, partly offset by higher investment to grow the
fleet.
SPAIN
H1 2019 H1 2018 Change FY 2018
KPI ('000) ('000) % ('000)
----------------------- -------- -------- -------- --------
Average VOH 44.6 39.4 13.2% 40.3
Closing VOH 45.4 41.2 10.4% 42.7
Vehicles purchased 7.4 11.1 (34.8%) 18.9
Vehicles de-fleeted 4.3 6.6 (35.3%) 12.7
Vehicles sold 4.7 6.1 (24.0%) 12.8
Profit per Unit (PPU)
EUR 484 1,109 (56.3%) 871
Closing fleet size 51.1 46.3 10.4% 48.0
Average utilisation % 91% 92% (1 ppt) 91%
Average fleet age at
year-end (mo.) 20 19 1 mo. 19
----------------------- -------- -------- -------- --------
H1 2019 H1 2018 Change FY 2018
Profit & Loss (Underlying) GBPm GBPm % GBPm
---------------------------- -------- -------- --------- --------
Revenue - Vehicle hire 102.1 92.9 10.0% 187.6
Revenue - Vehicle sales 26.2 35.0 (25.2%) 73.5
Total Revenue 128.3 127.9 0.4% 261.1
Rental profit 21.1 15.2 38.5% 29.0
Rental Margin % 20.6% 16.4% 4.2ppt 15.4%
Disposals profit 2.0 6.1 (66.6%) 10.0
Operating profit 23.1 21.3 8.4% 39.0
ROCE % 9.3% 11.3% (2.0ppt) 10.0%
---------------------------- -------- -------- --------- --------
Rental business - VOH and rental revenue
Average VOH in the first half grew by 13.2% to 44,600,
maintaining the strong momentum built up in the market over the
previous year. VOH growth drove 10.0% rental revenue growth to
GBP102.1 million (H1 2018: GBP92.9 million). Rental revenue growth
was also 10.0% at constant exchange rates.
Closing VOH was 45,400, around 4,200 higher than at the same
time last year, demonstrating the continuing traction which
Northgate's range of products have gained across a wide range of
customers. Growth was again driven by minimum-term products, which
represented 28% of closing VOH at the end of the first half, up
from 23% at the start of the period and around 17% at the end of
the first half last year.
Northgate continues to have a well diversified customer base, in
terms of both industry sector and location. The construction sector
accounts for around 26% of VOH, with a further 24% of VOH deployed
in the support services sector. Retail and wholesale distribution
and telecoms are also both industries accounting for just over 10%
of VOH. Geographically, Madrid with just under 20% of VOH and
Barcelona with just under 15% of VOH are the most important centres
of activity for the Company, with the remaining two-thirds of VOH
spread fairly evenly across the rest of the country. Northgate's
fleet comprises 30% passenger vehicles, used by customers primarily
for business purposes.
Bundling minimum-term and flexible rental products together for
large customers has been a key driver of VOH and revenue growth,
and these bundled propositions are also now gaining increasing
traction in the SME segment. The ability to offer bundles drawn
from the widest portfolio of rental products available in the
market, based out of the most extensive depot network in Spain and
complemented by a market-leading service offer, are what continues
to differentiate Northgate.
Rental profit and margin
Rental profit grew by 38.5% to GBP21.1 million (H1 2018: GBP15.2
million) with the increase reflecting the GBP7.7 million positive
impact of the change in the depreciation rate at the start of the
period. The benefits of greater scale were broadly offset by higher
operating costs, which included the impact of opening a major new
flagship facility in Madrid, incorporating a rental depot,
workshops and vehicle sales facilities.
Rental margin increased to 20.6%, from 16.4% in the first half
of last year, mainly reflecting the depreciation rate change, as
well as the higher costs of the expanded network and the impact of
more minimum term customers in the VOH mix.
The company is focusing on a number of margin improvement
initiatives, including higher pricing for customers whose vehicles
routinely incur substantially above average damage (the costs of
which in the Spanish market are borne by the rental company and not
passed through to customers).
Management of fleet and vehicle sales
The fleet at the end of the first half comprised 51,100
vehicles, 4,800 higher than at the same time last year, reflecting
the rapid growth in VOH during the past 12 months.
In line with the group-wide fleet optimisation policy, the
average age at which vehicles were de-fleeted and sold increased,
resulting in substantially lower volumes of vehicles both sold and
purchased, compared to the same period last year. During the first
half a total of 7,400 vehicles were purchased, 4,300 de-fleeted,
and 4,700 sold, of which 16% were sold through the Northgate
Occasion retail channel (H1 2018: 14%)
Although residual values were stable, PPU in the first half was
EUR484, less than half the level reported for the same period last
year, as expected, mainly reflecting the depreciation rate
change
Lower PPUs, combined with the reduction in the number of
vehicles sold, resulted in disposals profit of GBP2.0 million, down
from GBP6.1 million in first half last year. The adverse impact of
the previous depreciation change was approximately GBP2.1
million.
Operating profit and ROCE
Operating profit in the first half was GBP23.1 million, 8.4%
higher than in the first half last year (H1 2018: GBP21.3 million),
reflecting the combined impact of the higher rental profit and
lower disposals profit in the period. The net effect of the
depreciation rate changes was to increase first half operating
profit by GBP5.6 million. Operating profit also grew by 8.4% at
constant exchange rates.
The return on capital employed was 9.3% compared to 11.3% in the
same period last year, with the higher net book value of the
vehicle fleet, due to its rapid growth, more than offsetting the
increase in operating profit.
Capex and cash flow
6 months ended 31 October H1 2019 H1 2018 Change FY 2018
Cash flow GBPm GBPm % GBPm
--------------------------- -------- -------- ------- --------
Underlying EBITDA 61.9 57.6 7.5% 115.7
Total Net Capex (64.7) (103.9) 37.7% (152.5)
EBITDA less Total Net
Capex (2.8) (46.3) - (36.8)
--------------------------- -------- -------- ------- --------
Underlying EBITDA in the first half grew by 7.5% to GBP61.9
million (H1 2018: GBP57.6 million) reflecting rental revenue
growth, partly offset by higher operating costs.
Total net capex of GBP64.7 million was GBP39.2 million lower
than in the same period last year, reflecting both the substantial
impact of the fleet aging process and longer vehicle replacement
cycle, as well as the significantly lower level of vehicle
purchases to grow the fleet compared to the previous year.
Business resilience
Northgate is well positioned to manage the range of challenges
that could potentially result from external factors. These
include:
Brexit
The Company has undertaken a review of the potential impact on
its business of the UK leaving the European Union. The most
significant potential threat would be if the import of vehicles and
vehicle components into the UK from the EU were disrupted, or if
additional import costs were imposed. Around 90% of vehicles
purchased by Northgate UK from UK OEMs are imported from the EU,
valued at approximately GBP220 million annually. Assurances have
been sought from these OEMs, who are confident that there will be
no material long-term disruption. Northgate itself can mitigate the
impact of potential short-term supply disruption by slowing the
rate of vehicle de-fleets in order to maintain vehicle availability
for customers. Additionally, components for vehicles manufactured
in the UK are imported from the EU, but normal OEM stock levels are
judged to be sufficient to address any potential short-term supply
issues.
The Company believes that whilst any increase in import costs
could potentially create some margin pressure in the short-term, in
the longer term it will be able to pass through to end-users any
significant additional costs that might be imposed on imported
vehicles. A potential upside for Northgate in the event of any new
vehicle supply shortages, or higher purchase costs, would be the
likely increase in rental demand and residual values that would
result.
Less than 5% of Northgate's UK employees do not possess a UK
passport, so any change to the status of EU citizens in the UK will
not have a material effect on the company's operations.
No material impacts on Northgate's business in Ireland have been
identified.
Economic downturn
The Company is well placed to weather adverse economic
conditions which could arise either as part of the general business
cycle or linked to Brexit. Importantly, the business generates
strong cash flow when it is not investing to grow the vehicle
fleet. If VOH growth turns negative in a downturn, vehicle
purchases can be slowed, and even if there were to be some decline
in the residual value of de-fleeted vehicles, the company can
continue to generate significant cashflow, protecting its balance
sheet and its ability to service debt and dividend payments.
Currency risks are mitigated by the Group's matching of the
currency profiles of its revenues and costs and its debt and net
assets.
Vehicle emission regulations
Regulations to reduce vehicle emissions are continually
evolving, and the focus is now shifting to vehicles that meet only
Euro 4 standards. Northgate's fleet has almost no Euro 4 vehicles
remaining, comprising over 70% Euro 6 vehicles, with all diesel
vehicle purchases now Euro 6 standard. Vehicles in this category
produce one-third lower CO2 emissions and one-third better fuel
consumption than equivalent petrol engines.
Northgate has increased the number of electric and hybrid
vehicles in its fleet, particularly in Spain, in response to
specific customer requirements, but these still comprise less than
1% of the total Northgate fleet, and very limited supply options
are available currently from OEMs. As regulations evolve and
customer demand for electric and hybrid vehicles increases,
Northgate's fleet and propositions will also evolve to meet this
demand, with the company's close relationships with suppliers
ensuring that is has access to any commercially viable supply
options as soon as these become available. In the short-term
however, due to the lack of electric and hybrid alternatives,
customer LCV demand and Northgate LCV purchases are likely to
remain dominated by diesel vehicles.
FINANCIAL REVIEW
Underlying financial Change
summary(1) H1 2019 H1 2018 Change
GBPm GBPm GBPm %
-------- -------- ------- --------
Revenue 374.0 349.7 24.3 6.9%
Operating profit 36.7 39.1 (2.4) (6.2%)
Statutory operating profit 36.2 36.3 (0.1) (0.3%)
Net finance charge (7.4) (5.3) (2.1) (41.4%)
Profit before tax 29.2 33.8 (4.6) (13.6%)
Statutory profit before
tax 28.7 31.0 (2.3) (7.4%)
Net tax charge (4.6) (6.2) 1.6 26.7%
Profit after tax 24.7 27.6 (2.9) (10.7%)
Earnings per share (pence) 18.5 20.7 (2.2) (10.6%)
Dividend per share (pence) 6.2p 6.1p 0.1p 1.6%
---------------------------- -------- -------- ------- --------
(1) All figures disclosed are underlying unless stated
otherwise. Refer to Reconciliation of GAAP to non-GAAP measures and
Glossary of terms for further information.
Revenue
Total underlying Group revenue increased by 6.9% to GBP374.0
million.
Group revenue comprised:
H1 2019 H1 2018 Change Change
GBPm GBPm GBPm %
--------------- -------- -------- ------- -------
Vehicle hire 259.5 234.5 25.0 10.7%
Vehicle sales 114.5 115.2 (0.7) (0.6%)
--------------- -------- -------- ------- -------
Total 374.0 349.7 24.3 6.9%
--------------- -------- -------- ------- -------
Vehicle hire revenue was driven by growth in average VOH of
12.9% (GBP30.3m), partially offset by lower average hire rate which
declined 2.0% (GBP5.3m). Vehicle sales revenue was broadly flat,
with a GBP13.6m reduction in revenue from lower sales volumes being
offset by a 12.7% increase in proceeds per vehicle (GBP12.9m).
Underlying operating profit
Total underlying Group operating profit decreased by 6.2% to
GBP36.7 million and is stated before certain intangible
amortisation of GBP0.5m (2018 - Exceptional costs and certain
intangible amortisation GBP2.8m)
Group underlying operating profit comprised:
H1 2019 H1 2018 Change Change
GBPm GBPm GBPm %
------------------ -------- -------- ------- --------
Rental Profit 32.3 30.2 2.1 6.8%
Disposals Profit 7.0 10.5 (3.5) (33.2%)
Corporate Costs (2.6) (1.6) (1.0) (58.8%)
------------------ -------- -------- ------- --------
Total 36.7 39.1 (2.4) (6.2%)
------------------ -------- -------- ------- --------
Rental profit increase of GBP2.1m is driven by growth in Spain
of GBP5.9m offset by UK&I decline of GBP3.8m. The Group result
is inclusive of a net benefit of GBP10.1m owing to changes in
depreciation rates.
Disposal profits decreased by GBP3.5m as a result of unwind of
previous depreciation rate changes (GBP2.5m) and a 13.4% decline in
disposal volumes.
Corporate costs have increased by GBP1.0m to GBP2.6m.
Interest
Net finance charges for the first half increased by GBP2.1
million to GBP7.4 million, as a result of both higher borrowings
(GBP1.3m) and a higher cost of borrowing (GBP0.8m).
Taxation
The underlying effective tax rate reduced to 15.6% (2018: 18.4%)
due to the resolution of certain tax positions in relation to prior
year giving rise to an underlying tax charge in the first half of
GBP4.6 million (2018: GBP6.2 million).
After taking account of certain intangible amortisation the
effective tax rate was 14.9% (H1 2018 17.8% after certain
intangible amortisation and exceptional costs).
Cash flow and net debt
Total net capex for the period declined GBP29.3m to GBP149.5m
(2018 - GBP178.8m) as a result of lower net purchases (GBP32.0m)
offset by an increase in other net capex (GBP2.7m).
Net debt including unamortised arrangement fees increased from
30 April 2018 to GBP479.8m from GBP439.3m due to investment to grow
the vehicle fleet. The Net Debt to EBITDA leverage ratio at the end
of the period was 1.87x, in line with the Group's stated target
range of 1.5x to 2.5x EBITDA. The group maintains comfortable
levels of headroom against all of our debt covenant ratios.
Facility headroom at 31 October 2018 was GBP138.4m.
Balance sheet
Group return on capital employed was 6.7% compared to 8.7% in
the same period last year and 7.6% in the year ended 30 April
2018.
Net tangible assets at 31 October 2018 were GBP537.5m (30 April
2018 - GBP530.3m), equivalent to net tangible assets per share of
403p (30 April 2018 - 398p).
Gearing at 31 October 2018 was 89.3% (30 April 2018 -
82.8%).
Foreign exchange
The average and period end exchange rates used to translate the
Group's overseas operations were as follows:
October 2018 October 2017 April 2018
GBP : EUR GBP : EUR GBP : EUR
--------- ------------- ------------- -----------
Average 1.13 1.13 1.13
Closing 1.13 1.14 1.14
--------- ------------- ------------- -----------
Risks and uncertainties
The Board and the Group's management have clearly defined
responsibility for identifying the major business risks facing the
Group and for developing systems to mitigate and manage those
risks.
The principal risks and uncertainties facing the Group at 30
April 2018 were set out in detail on pages 36 to 39 of the 2018
annual report, a copy of which is available at
www.northgateplc.com, and were identified as:
-- economic environment;
-- market risk;
-- vehicle holding costs;
-- legal compliance and the employee environment;
-- IT systems; and
-- access to capital.
These principal risks have not changed since the last annual
report and continue to be those that could impact the Group during
the second half of the current financial year.
In addition to the risks outlined above, the going concern
assumption is considered in Note 1 to the condensed interim
financial statements for the six months ended 31 October 2018.
Glossary of terms
The following defined terms have been used throughout this
document:
Term Definition
Disposals Profit 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).
-------------------------------------------------------
EBITDA Earnings before interest, taxation, depreciation
and amortisation.
-------------------------------------------------------
Facility headroom Calculated as facilities of GBP620.9m less
net borrowings of GBP482.5m. Net borrowings
represent net debt of GBP479.8m excluding unamortised
arrangement fees of GBP2.7m and are stated
after the deduction of GBP10.7m of net cash
balances which are available to offset against
borrowings.
-------------------------------------------------------
Gearing Calculated as net debt divided by net tangible
assets (as defined below).
-------------------------------------------------------
LCV Light commercial vehicle: the official term
used within the European Union for a commercial
vehicle with a gross vehicle weight of not
more than 3.5 tonnes.
-------------------------------------------------------
Net tangible assets Net assets less goodwill and other intangible
assets.
-------------------------------------------------------
OEM Original equipment manufacturer.
-------------------------------------------------------
PPU Profit per unit/loss per unit - this is a non-GAAP
measure used to describe the disposals profit
(as defined), divided by the number of vehicles
sold.
-------------------------------------------------------
ROCE Return on capital employed: calculated as trailing
12 month underlying operating profit divided
by average capital employed. Capital employed
being net assets excluding net debt.
-------------------------------------------------------
UK & I The UK and Ireland operating segment.
-------------------------------------------------------
VOH Vehicles on hire with customers
-------------------------------------------------------
Reconciliation of GAAP to non-GAAP measures
Throughout this report 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.
In particular we refer to disposals 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 is as
follows:
Six months Six months
to 31.10.18 to 31.10.17
GBP000 GBP000
Profit before tax 28,743 31,026
Add back:
Exceptional operating expenses (credit) - 1,926
Certain Intangible amortisation 494 896
Underlying profit before tax 29,237 33,848
-------------------------------------------------- ------------- -------------
Profit for the period 24,448 25,492
Add back:
Exceptional operating
expenses (credit) - 1,926
Certain Intangible amortisation 494 896
Tax on exceptional items,
brand royalty charges
and intangible amortisation (278) (702)
-------------------------------------------------- ------------- -------------
Underlying profit for
the year 24,664 27,612
-------------------------------------------------- ------------- -------------
Weighted average number of Ordinary
shares 133,232,518 133,232,518
------------------------------------------------- ------------- -------------
Underlying basic earnings
per share 18.5p 20.7p
-------------------------------------------------- ------------- -------------
Six months Six months
to 31.10.18 to 31.10.17
GBP000 GBP000
-------------------------------------------------- ------------- -------------
Operating profit 36,181 36,286
Add back:
Restructuring costs - 1,926
Certain intangible amortisation 494 896
Underlying operating profit 36,675 39,108
Add Back
Fleet Depreciation 93,742 85,234
Other Depreciation 2,716 2,644
Loss on disposal of assets 114 143
Intangible amortisation included in underlying
operating profit 297 138
-------------------------------------------------- ------------- -------------
Underlying EBITDA 133,544 127,267
-------------------------------------------------- ------------- -------------
UK and Ireland Spain Corporate Group
6 months 6 months 6 months 6 months
to to to to
October October October October
2018 2018 2018 2018
GBP000 GBP000 GBP000 GBP000
--------------------------------- --------------- --------- ---------- ---------
Underlying operating profit
(loss) 16,193 23,120 (2,638) 36,675
Exclude
Adjustments to depreciation
charge in relation to vehicles
sold in the period (4,993) (2,043) - (7,036)
Corporate costs - - 2,638 2,638
--------------------------------- --------------- --------- ---------- ---------
Rental Profit 11,200 21,077 - 32,277
--------------------------------- --------------- --------- ---------- ---------
Divided by: Revenue: hire
of vehicles 157,358 102,135 - 259,493
--------------------------------- --------------- --------- ---------- ---------
Rental margin 7.1% 20.6% 12.4%
--------------------------------- --------------- --------- ---------- ---------
UK and Ireland Spain Corporate Group
6 months 6 months 6 months 6 months
to to to to
October October October October
2017 2017 2017 2017
GBP000 GBP000 GBP000 GBP000
--------------------------------- --------------- --------- ---------- ---------
Underlying operating profit
(loss) 19,441 21,328 (1,661) 39,108
Exclude
Adjustments to depreciation
charge in relation to vehicles
sold in the period (4,423) (6,111) - (10,534)
Corporate costs - - 1,661 1,661
--------------------------------- --------------- --------- ---------- ---------
Rental Profit 15,018 15,217 - 30,235
--------------------------------- --------------- --------- ---------- ---------
Divided by: Revenue: hire
of vehicles 141,640 92,869 - 234,509
--------------------------------- --------------- --------- ---------- ---------
Rental margin 10.6% 16.4% - 12.9%
--------------------------------- --------------- --------- ---------- ---------
Condensed consolidated income statement
for the six months ended 31 October 2018
----------------------------------------------------------------- --------- ----------- ---------- ---------
Six months Six months Six months Six months Year to Year to
to 31.10.18 to 31.10.18 to 31.10.17 to 31.10.17 30.04.18 30.04.18
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
Underlying Statutory Underlying Statutory Underlying Statutory
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Revenue: hire of vehicles 2 259,493 259,493 234,509 234,509 471,187 471,187
Revenue: sale of vehicles 2 114,478 114,478 115,169 115,169 230,485 230,485
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Total revenue 2 373,971 373,971 349,678 349,678 701,672 701,672
Cost of sales (298,969) (298,969) (277,610) (277,610) (563,232) (563,232)
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Gross profit 75,002 75,002 72,068 72,068 138,440 138,440
Administrative expenses
(excluding exceptional
items and intangible
amortisation) (38,327) (38,327) (32,960) (32,960) (70,097) (70,097)
Exceptional administrative
expenses 9 - - - (1,926) - (2,499)
Intangible amortisation - (494) - (896) - (1,767)
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Total administrative
expenses (38,327) (38,821) (32,960) (35,782) (70,097) (74,363)
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Operating profit 2 36,675 36,181 39,108 36,286 68,343 64,077
Interest income - - 1 1 1 1
Finance costs (7,438) (7,438) (5,261) (5,261) (11,340) (11,340)
Profit before taxation 29,237 28,743 33,848 31,026 57,004 52,738
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Taxation 3 (4,573) (4,295) (6,236) (5,534) (10,651) (9,506)
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Profit for the period 24,664 24,448 27,612 25,492 46,353 43,232
---------------------------- ----- ----------- ----------- ------------- ----------- ---------- ---------
Profit for the period 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
9, as well as brand royalty charges, 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 418.5p 18.4p 20.7p 19.1p 34.8p 32.4p
------------------- ----- ----- ----- ----- ----- -----
Diluted 418.1p 18.0p 20.5p 18.9p 34.3p 32.0p
------------------- ----- ----- ----- ----- ----- -----
Condensed consolidated statement of comprehensive income
for the six months ended 31 October 2018
----------------------------------------------------------------------------- ----------- ----------- ----------
Six months Six months Year to
to 31.10.18 to 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
----------------------------------------------------------------------------- ----------- ----------- ----------
Amounts attributable to owners of the Parent Company
Profit attributable to owners 24,448 25,492 43,232
Other comprehensive income (expense)
Foreign exchange differences on retranslation of net assets of subsidiary
undertakings 4,762 14,964 15,488
Net foreign exchange differences on long term borrowings held as hedges (3,197) (11,006) (11,393)
Foreign exchange difference on revaluation reserve 12 44 46
Net fair value gains on cash flow hedges 259 537 1,105
Deferred tax charge recognised directly in equity relating to cash flow hedges (49) (102) (210)
Total other comprehensive income for the period 1,787 4,437 5,036
------------------------------------------------------------------------------ ----------- ----------- ----------
Total comprehensive income for the period 26,235 29,929 48,268
------------------------------------------------------------------------------ ----------- ----------- ----------
All items will subsequently be reclassified to the consolidated
income statement.
Condensed consolidated balance sheet
31 October 2018
31.10.18 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
------------------------------------------------- -------- ----------- ----------- ---------
Non-current assets
Goodwill 3,589 3,589 3,589
Other intangible assets 7,816 3,325 5,205
Property, plant and equipment: vehicles for hire 6 946,386 829,503 897,323
Other property, plant and equipment 6 68,195 66,034 67,979
Total property, plant and equipment 6 1,014,581 895,537 965,302
-------------------------------------------------- -------- ----------- ----------- ---------
Deferred tax assets 9,150 16,381 10,791
-------------------------------------------------- -------- ----------- ----------- ---------
Total non-current assets 1,035,136 918,832 984,887
-------------------------------------------------- -------- ----------- ----------- ---------
Current assets
Inventories 25,333 37,952 31,828
Trade and other receivables 84,763 79,702 76,091
Current tax assets - - 4,745
Cash and bank balances 8 47,862 28,024 21,382
-------------------------------------------------- -------- ----------- ----------- ---------
Total current assets 157,958 145,678 134,046
-------------------------------------------------- -------- ----------- ----------- ---------
Total assets 1,193,094 1,064,510 1,118,933
-------------------------------------------------- -------- ----------- ----------- ---------
Current liabilities
Trade and other payables 100,855 62,700 97,671
Derivative financial instrument liabilities 10 86 - 112
Current tax liabilities 9,933 17,208 15,246
Short-term borrowings 47,239 28,415 17,952
-------------------------------------------------- -------- ----------- ----------- ---------
Total current liabilities 158,113 108,323 130,981
-------------------------------------------------- -------- ----------- ----------- ---------
Net current (liabilities) assets (155) 37,355 3,065
-------------------------------------------------- -------- ----------- ----------- ---------
Non-current liabilities
Derivative financial instrument liabilities 10 1,045 1,957 1,277
Long term borrowings 480,445 420,626 442,751
Deferred tax liabilities 4,597 3,559 4,796
Total non-current liabilities 486,087 426,142 448,824
-------------------------------------------------- -------- ----------- ----------- ---------
Total liabilities 644,200 534,465 579,805
-------------------------------------------------- -------- ----------- ----------- ---------
NET ASSETS 548,894 530,045 539,128
-------------------------------------------------- -------- ----------- ----------- ---------
Equity
Share capital 66,616 66,616 66,616
Share premium account 113,508 113,508 113,508
Own shares reserve (4,722) (3,427) (3,238)
Hedging reserve (915) (1,585) (1,125)
Translation reserve 419 (1,283) (1,146)
Other reserves 68,672 68,658 68,660
Retained earnings 305,316 287,558 295,853
-------------------------------------------------- -------- ----------- ----------- ---------
TOTAL EQUITY 548,894 530,045 539,128
-------------------------------------------------- -------- ----------- ----------- ---------
Total equity is wholly attributable to owners of the Parent
Company.
Condensed consolidated cash flow statement
for the six months ended 31 October 2018
--------------------------------------------------------- ------- ----------- ----------- ---------
Six months Six months Year to
to 31.10.18 to 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
--------------------------------------------------------- ------- ----------- ----------- ---------
Net cash used in operations 7 (12,214) (80,141) (81,797)
--------------------------------------------------------- ------- ----------- ----------- ---------
Investing activities
Interest received - 1 1
Proceeds from disposal of other property, plant and equipment 932 2,215 2,374
Purchases of other property, plant and equipment (3,493) (4,432) (9,292)
Purchases of intangible assets (3,388) (1,059) (4,073)
-------------------------------------------------------------- ----------- ----------- ---------
Net cash used in investing activities (5,949) (3,275) (10,990)
-------------------------------------------------------------- ----------- ----------- ---------
Financing activities
Receipt of bank loans and other borrowings 33,394 89,246 113,902
Debt issue costs paid (1,737) - -
Dividend paid (15,268) (15,326) (23,365)
Net payments to acquire own shares for share schemes (1,881) (1,959) (3,257)
Net cash generated from financing activities 14,508 71,961 87,280
-------------------------------------------------------------- ----------- ----------- ---------
Net decrease in cash and cash equivalents (3,655) (11,455) (5,507)
Cash and cash equivalents at beginning of the period 14,127 19,637 19,637
Effect of foreign exchange movements 214 254 (3)
-------------------------------------------------------------- ----------- ----------- ---------
Cash and cash equivalents at the end of the period 10,686 8,436 14,127
-------------------------------------------------------------- ----------- ----------- ---------
Cash and cash equivalents consist of:
Cash and bank balances 8 47,862 28,024 21,382
Bank overdrafts 8(37,176) (19,588) (7,255)
-------------------------------------- -------- -------- -------
10,686 8,436 14,127
-------------------------------------- -------- -------- -------
Condensed consolidated statement of changes in equity
for the six months ended 31 October 2018
Share
capital
and share Own Hedging Translation Other Retained
premium shares reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ----------- --------- --------- ------------ ---------- ---------- ---------
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 - - - - - 784 784
Share options exercised - - - - (191) (191)
Profit attributable
to owners of the Parent
Company - - - - - 25,492 25,492
Dividend paid - - - - - (15,326) (15,326)
Net purchase of own
shares - (1,959) - - - - (1,959)
Transfer of shares
on vesting of share
options - 191 - - - - 191
Other comprehensive
income - - 435 3,958 44 - 4,437
Total equity at 1
November 2017 180,124 (3,427) (1,585) (1,283) 68,658 287,558 530,045
Share options fair
value charge - - - - - 81 81
Share options exercised - - - - - (1,487) (1,487)
Profit attributable
to owners of the Parent
Company - - - - - 17,740 17,740
Dividend paid - - - - - (8,039) (8,039)
Net purchase of own
shares - (1,298) - - - - (1,298)
Transfer of shares
on vesting of share
options - 1,487 - - - - 1,487
Other comprehensive
income - - 460 137 2 - 599
Total equity at 1
May 2018 180,124 (3,238) (1,125) (1,146) 68,660 295,853 539,128
Share options fair
value charge - - - - - 680 680
Share options exercised - - - - - (397) (397)
Profit attributable
to owners of the Parent
Company - - - - - 24,448 24,448
Dividend paid - - - - - (15,268) (15,268)
Net purchase of own
shares - (1,881) - - - - (1,881)
Transfer of shares
on vesting of share
options - 397 - - - - 397
Other comprehensive
income - - 210 1,565 12 - 1,787
Total equity at 31
October 2018 180,124 (4,722) (915) 419 68,672 305,316 548,894
Other reserves comprise the capital redemption reserve, revaluation
reserve and merger reserve.
Unaudited Notes
1. Basis of preparation and accounting policies
Northgate plc is a Company incorporated in England and Wales
under the Companies Act 2006.
The condensed financial statements are unaudited and were
approved by the Board of Directors on 28 November 2018.
The condensed financial statements have been reviewed by the
auditors and the independent review report is set out in this
document.
The interim financial information for the six months ended 31
October 2018, including comparative financial information, has been
prepared on the basis of the accounting policies set out in the
last annual report and accounts, except for: income taxes, which
are accrued using the tax rate that is expected to be applicable
for the full year, and in accordance with IAS 34 'Interim Financial
Reporting', as issued by the International Accounting Standards
Board (IASB) and adopted by the European Union (EU); revenue which
is recognised in accordance with IFRS 15 'Revenue from Contracts
with Customers' as issued by the IASB and adopted by the EU and;
financial instruments which are recognised in accordance with IFRS
9 'Financial Instruments' as issued by the IASB and adopted by the
EU.
IFRS 9 'Financial Instruments' replaces IAS 39 'Financial
Instruments: Recognition and Measurement' and is applicable to
financial assets and financial liabilities. During the period ended
31 October 2018, the Group assessed in detail the impact of the new
standard on the consolidated financial statements and concluded the
impact on transition was immaterial. Accordingly, in the condensed
consolidated interim financial statements the Group has not
restated comparatives and no adjustment to the opening balance
sheet at 1 May 2018 has been recognised.
IFRS 15 'Revenue from Contracts with Customers' replaces IAS 18
'Revenue', IAS 11 'Construction contracts' and related
interpretations. The standard requires that revenue should only be
recognised when a customer obtains control of goods or services and
has the ability to direct the use and obtain the benefits from the
goods or services. During the 6 months ended 31 October 2018, the
Group assessed in detail the impact of the new standard and
concluded that the adoption of IFRS 15 had an immaterial impact on
the consolidated financial statements. Accordingly, in the
condensed consolidated interim financial statements the Group has
not restated comparatives and no adjustment to the opening balance
sheet at 1 May 2018 has been recognised.
IFRS 16 'Leases' was issued in January 2016 and applies to
annual reporting periods beginning on or after 1 January 2019. It
will therefore be adopted by the Group from the accounting period
beginning 1 May 2019 and is expected to have a material impact on
property plant and equipment and borrowings (based on our current
lease commitments).
In preparing the interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and key sources of estimation uncertainty were the same,
in all material respects, as those applied to the consolidated
financial statements for the year ended 30 April 2018.
Going concern assumption
Having reassessed the principal risks and the other matters
discussed in connection with the viability statement in the 2018
annual report and accounts the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing the
interim financial statements.
Information extracted from 2018 annual report
The financial figures for the year ended 30 April 2018, as set
out in this report, do not constitute statutory accounts but are
derived from the statutory accounts for that financial year.
The statutory accounts for the year ended 30 April 2018 were
prepared under IFRS and were delivered to the Registrar of
Companies on 24 August 2018. The audit report was unqualified, did
not draw attention to any matters by way of emphasis and did not
include a statement under Section 498(2) or 498(3) of the Companies
Act 2006.
2. Segmental analysis
Management has determined the operating segments based upon the
information provided to the Board of Directors, which is considered
to be the chief operating decision maker. The Group is managed, and
reports internally, on a basis consistent with its two main
operating divisions, UK and Ireland, and Spain. As outlined in the
2018 annual report and accounts, the UK and Ireland segments are
now reported as a single segment. The comparatives have been
restated accordingly. The principal activities of these divisions
are set out in the Chief Executive review and Financial review.
UK and Ireland Spain Corporate Group
Six months Six months Six months Six months
to 31.10.18 to 31.10.18 to 31.10.18 to 31.10.18
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP000 GBP000 GBP000 GBP000
Revenue: hire of vehicles 157,358 102,135 - 259,493
Revenue: sale of vehicles 88,301 26,177 - 114,478
Total revenue 245,659 128,312 - 373,971
Underlying operating profit (loss) * 16,193 23,120 (2,638) 36,675
Intangible amortisation (494)
Operating profit 36,181
-------------------------------------- -------------- ----------- ----------- -----------
Finance costs (7,438)
Profit before taxation 28,743
-------------------------------------- -------------- ----------- ----------- -----------
UK and Ireland Spain Corporate Group
Six months Six months Six months Six months
to 31.10.17 to 31.10.17 to 31.10.17 to 31.10.17
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP000 GBP000 GBP000 GBP000
Revenue: hire of vehicles 141,640 92,869 - 234,509
Revenue: sale of vehicles 80,196 34,973 - 115,169
Total revenue 221,836 127,842 - 349,678
Underlying operating profit (loss) * 19,441 21,328 (1,661) 39,108
Exceptional administrative expenses (1,926)
Intangible amortisation (896)
Operating profit 36,286
-------------------------------------- -------------- ----------- ----------- -----------
Interest income 1
Finance costs (5,261)
Profit before taxation 31,026
-------------------------------------- -------------- ----------- ----------- -----------
UK and Ireland Year to Spain Corporate Year to Group
30.04.18 Year to 30.04.18 30.04.18 Year to 30.04.18
(audited) (audited) (audited) (audited)
GBP000 GBP000 GBP000 GBP000
Revenue: hire of vehicles 283,543 187,644 - 471,187
Revenue: sale of vehicles 156,937 73,548 - 230,485
Total revenue 440,480 261,192 - 701,672
Underlying operating
profit (loss) * 33,114 38,960 (3,731) 68,343
Exceptional administrative
expenses (2,499)
Intangible amortisation (1,767)
Operating profit 64,077
-------------------------- ------------------------ ----------------- ------------------------ -----------------
Interest income 1
Finance costs (11,340)
Profit before taxation 52,738
-------------------------- ------------------------ ----------------- ------------------------ -----------------
*Underlying operating profit (loss) stated before royalty
charges, certain intangible amortisation and exceptional items is
the measure used by the Board of Directors to assess segment
performance.
3. Taxation
The charge for taxation for the six months to 31 October 2018 is
based on the estimated effective rate for the year ending 30 April
2019 of 14.9% (October 2017 - 17.8%).
4. Earnings per share
Six months Six months Six months Six months Year to Year to
to 31.10.18 to 31.10.18 to 31.10.17 to 31.10.17 30.04.18 30.04.18
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
Underlying Statutory Underlying Statutory Underlying Statutory
Basic and diluted earnings per share GBP000 GBP000 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 attributable to owners of
the Parent Company 24,664 24,448 27,612 25,492 46,353 43,232
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Number of shares Number Number Number Number Number Number
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average number of Ordinary
shares for the purpose
of basic earnings per share 133,232,518 133,232,518 133,232,518 133,232,518 133,232,518 133,232,518
Effect of dilutive potential Ordinary
shares:
- share options 2,726,990 2,726,990 1,422,769 1,422,769 2,077,803 2,077,803
Weighted average number of Ordinary
shares for the purpose
of diluted earnings per share 135,959,508 135,959,508 134,655,287 134,655,287 135,310,321 135,310,321
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Basic earnings per share 18.5p 18.4p 20.7p 19.1p 34.8p 32.4p
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Diluted earnings per share 18.1p 18.0p 20.5p 18.9p 34.3p 32.0p
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
5. Dividends
In the six months to 31 October 2018, a dividend of
GBP15,268,000 was paid (2017 - GBP15,326,000). The Directors have
declared a dividend of 6.2p per share for the six months ended 31
October 2018 (2017 - 6.1p).
6. Property Plant and Equipment
Net Book Value Vehicles Other Total
for hire property,
plant
& equipment
At 1 May 2017 731,657 65,262 796,919
Additions 265,780 4,432 270,212
Disposals (95,279) (2,334) (97,613)
Depreciation (85,234) (2,644) (87,878)
Exchange differences 12,579 1,318 13,897
----------------------- ---------- ------------- ----------
At 1 November
2017 829,503 66,034 895,537
----------------------- ---------- ------------- ----------
Additions 244,745 4,860 249,605
Disposals (86,152) (424) (86,576)
Depreciation (91,366) (2,561) (93,927)
Exchange differences 593 70 663
At 1 May 2018 897,323 67,979 965,302
----------------------- ---------- ------------- ----------
Additions 220,365 3,493 223,857
Disposals (81,778) (1,046) (82,824)
Depreciation (93,742) (2,716) (96,458)
Exchange differences 4,218 485 4,704
At 31 October
2018 946,386 68,195 1,014,581
----------------------- ---------- ------------- ----------
7. Notes to the cash flow statement
Six months Six months Year to
to 31.10.18 to 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
Net cash used in operations GBP000 GBP000 GBP000
-------------------------------------------- ---------------- ------------------ --------------
Operating profit 36,181 36,286 64,077
Adjustments for:
Depreciation of property, plant and
equipment 96,458 87,878 182,185
Net impairment of property, plant and
equipment - - (380)
Amortisation of intangible assets 791 1,034 2,171
Loss on disposal of other property, plant
and equipment 114 143 390
Loss on disposal of intangible assets - - 25
Share options fair value charge 680 784 865
-------------------------------------------- ---------------- ------------------ --------------
Operating cash flows before movements in
working capital 134,224 126,125 249,333
Decrease (increase) in non-vehicle
inventories 810 (512) (1,190)
Increase in receivables (2,900) (10,895) (14,641)
Increase (decrease) in payables 9,580 (6,952) 6,899
-------------------------------------------- ---------------- ------------------ --------------
Cash generated from operations 141,714 107,766 240,401
Income taxes paid, net (3,444) (7,499) (11,451)
Interest paid (6,909) (4,929) (10,707)
-------------------------------------------- ---------------- ------------------ --------------
Net cash generated from operations before
net capex 131,361 95,338 218,243
Purchases of vehicles (229,670) (268,352) (486,943)
Proceeds from disposal of vehicles 86,095 92,873 186,903
-------------------------------------------- ---------------- ------------------ --------------
Net cash used in operations (12,214) (80,141) (81,797)
-------------------------------------------- ---------------- ------------------ --------------
8. Analysis of consolidated net debt
-------------------------------------------- ---------------- ------------------ --------------
31.10.18 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
-------------------------------------------- ---------------- ------------------ --------------
Cash and bank balances (47,862) (28,024) (21,382)
Bank overdrafts 37,176 19,588 7,255
Bank loans 400,854 340,910 364,750
Loan notes 88,811 87,781 87,890
Cumulative preference shares 500 500 500
Confirming facilities 343 262 308
-------------------------------------------- ---------------- ------------------ --------------
479,822 421,017 439,321
9. Exceptional items
During the period the Group recognised exceptional items in the income statement as follows:
Six months Six months Year to
to 31.10.18 to 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000
-------------------------------------- ---- ---------------- ------------------ --------------
Restructuring costs - 1,926 2,499
Exceptional administrative expenses - 1,926 2,499
Total pre-tax exceptional items - 1,926 2,499
-------------------------------------- ---- ---------------- ------------------ --------------
Tax charge on exceptional items - (383) (471)
-------------------------------------- ---- ---------------- ------------------ --------------
10. Derivative financial instruments
At the balance sheet date, the Group held the following financial instruments at fair value:
31.10.18 31.10.17 30.04.18
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
--------------------------------------- --- ---------------- ------------------ --------------
Interest rate derivatives (1,131) (1,957) (1,389)
(1,131) (1,957) (1,389)
--------------------------------------- --- ---------------- ------------------ --------------
The derivative financial instruments above all have fair values
which are calculated by reference to observable inputs (i.e.
classified as level 2 in the fair value hierarchy). They are valued
using the discounted cash flow technique with an appropriate
adjustment for counterparty credit risk. The valuations incorporate
the following inputs:
-- interest rates and yield curves observable at commonly quoted intervals;
-- commonly quoted spot and forward foreign exchange rates; and
-- observable credit spreads.
The carrying value of financial assets and liabilities recorded
at amortised cost in the financial statements are approximately
equal to their fair value.
Interim announcement - Statement of the Directors
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34;
-- the interim management report includes a fair review of the
information required by DTR 4.2.7 (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8 (disclosure of related party
transactions and changes therein).
By order of the Board
Philip Vincent
Chief Financial Officer
4 December 2018
Independent review report to Northgate plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Northgate plc's consolidated interim financial
statements (the "interim financial statements") in the interim
results of Northgate plc for the 6 month period ended 31 October
2018. Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 31 October 2018;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
-- the condensed consolidated cash flow statement for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
are the responsibility of, and have been approved by, the
directors. The directors are responsible for preparing the interim
results in accordance with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Newcastle upon Tyne
4 December 2018
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
IR EANADEFSPFFF
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