500.75p1.79%

Interim results for the six months ended 31 October 2016

 

Full year trading in line with expectations, increase in dividend and good momentum into the second half of the year

 

Northgate plc (“Northgate”, the “Company” or the “Group”), the UK, Spain and Ireland’s leading specialist in light commercial vehicle hire, announces its interim results for the half year ended 31 October 2016.

Financial highlights

As expected, profitability was held back in the first half of the year, largely due to the lower opening vehicles on hire in the UK.

The UK business has now stabilised and has grown closing vehicles on hire in the period.  This, alongside a  more settled political environment in Spain, provides momentum going into the second half of the year, meaning that full year results remain in line with expectations.

  • Underlying profit before tax £40.4m (2015 – £45.9m), impacted by:
    • £2.5m adverse impact from previous changes in vehicle depreciation rates;
    • £2.9m positive effect of the strengthened Euro; 
  • Profit before tax £40.0m (2015 – £42.8m); 
  • Underlying basic earnings per share 25.8p (2015 – 27.1p); 
  • Basic earnings per share 25.5p (2015 – 25.4p); 
  • 12% increase in interim dividend to 5.7p per share (2015 – 5.1p); 
  • Net debt £355.0m (April 2016 – £309.9m), including £38.3m adverse effect of the strengthened Euro.

 

Strategic progress

The Group has made good progress across the renewed areas of strategic focus which were outlined in our full year results in June:

Optimise the core business

  • Group closing vehicles on hire grew by 900 in the first six months of the year, compared to a decline of 900 in the same period last year.

 

Closing vehicles on hire (reduction) growth

Q1

Q2

Total

Year ending 30 April 2017

(100)

1,000

900

Year ended 30 April 2016

(500)

(400)

(900)

  • After strengthening of the UK management team vehicles on hire have stabilised, with growth of 100 in closing vehicles on hire in the six month period compared to a 1,200 reduction in the same period last year;
  • Spain closing vehicles on hire increased by 600 since April 2016, despite the planned return of 900 vehicles from expiring legacy contracts. This compared to a 100 vehicle increase in the same period last year; and
  • Ireland closing vehicles on hire increased by 200 vehicles since April 2016. 

 Expand addressable markets

  • Successful trial from June of fixed term product in Spain, expanding our business into an adjacent addressable market.  Contracts for 1,500 vehicles have been signed, with 1,000 vehicles on hire as at the end of October; and
  • Following the success in Spain, the trial has been extended to the UK and Ireland in November. 

Maximising end of life value

  • Proportion of UK vehicles sold through retail channels increased to 41% (2015 – 31%); and
  • Successful pilot of vehicle sales purchased from third parties in order to extend the range of vehicles sold in Van Monster.

Bob Contreras, Chief Executive, commented:

“As indicated previously, profitability in the first half of the year has been impacted by the reduction in vehicles on hire experienced in the UK throughout the previous financial year.

We are pleased to see some early signs of progress from our renewed strategic focus which has led to a stabilisation of the UK business in the first half of the year.  Spain continues to develop well and Ireland has grown steadily in the period. A more stable political environment in Spain will provide impetus for growth amongst our larger customer accounts.  

Our fundamental strategy of expanding our addressable markets is progressing well. The key is using our existing strengths to provide a compelling proposition.

We move into the second half with good momentum in all countries and continue to build a solid platform which will drive the medium and long term performance of the business. We expect the full year results to be more weighted towards the second half as the changes implemented continue to gain traction and therefore we continue to expect to see full year results in line with expectations.”    

See full statement and results.