RNS Number : 7582J
Northgate PLC
09 December 2008
 



9 December 2008


NORTHGATE PLC


INTERIM RESULTS FOR THE SIX MONTHS ENDED

31 OCTOBER 2008


Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain's leading specialist in light commercial vehicle hire, announces its interim results for the half-year ended 31 October 2008.


Highlights:


  • Group revenue up 11% to £309.6m (2007 - £279.0m).

  • Profit before tax down 46% to £23.9m (2007 - £43.9m).

  • Underlying profit before tax (1) down 40% to £26.5m (2007 - £44.2m).

  • Basic earnings per share down 45% to 26.1p (2007 - 47.3p).

  • Interim dividend maintained at 11.5p (2007 - 11.5p).

  • Fleet size of 69,100 vehicles in the UK (2007 - 65,800) and 64,800 vehicles in Spain (2007 - 59,500). 

  • Rental operating margin (1) reduced to 15.7% (2007 - 22.6%) in the UK and to 15.5% (2007 - 22.9%) in Spain.

  • Utilisation of 88.8% in the UK and 86.5% in Spain.

  • Actions in place to realise £8m of annualised staff cost savings.

  • Successful renewal of bank facilities in September 2008.

  • Net debt (2) of £864m (April 2008 - £903m).


(1) Excluding amortisation of intangible assets and property profits.

(2)After adjusting for the fair value of cross currency derivatives in relation to US dollar senior notes.


 

Philip Rogerson, Chairman, commented:  


"The deteriorating economic conditions in both the UK and Spain have impacted significantly on the results for the period, particularly in relation to the values achieved in disposing of used vehicles. However, we successfully renewed and re-profiled our banking facilities in September, which removed uncertainty around the financing of the business. We remain focused on efficient fleet management which, when coupled with targeted cost reductions, will reduce the effect of external factors on our profitability and also increase cash generation."

Full statement and results attached.


For further information, please contact:


Northgate plc 

01325 467558

Steve Smith, Chief Executive    
Bob Contreras, Finance Director




Hogarth Partnership Limited

020 7357 9477

Andrew Jaques

Barnaby Fry

Anthony Arthur




Notes to Editors:


Northgate plc rents light commercial vehicles and sells a range of fleet products to businesses via a network of hire companies. Their NORFLEX product gives businesses access to a flexible method to acquire as many commercial vehicles as they require.  


Further information regarding Northgate plc can be found on the Company's website:


http://www.northgateplc.com


Chairman's Statement


The Group's financial results for the six months to 31 October 2008 are summarised as follows:

  • underlying profit before tax (3) down by 40% to £26.5m (2007 - £44.2m) mainly as a result of significantly reduced residual values, lower utilisation and increased interest costs;

  • basic earnings per share down 45% to 26.1p (2007 - 47.3p). 

The deteriorating economic conditions in both the UK and Spain have impacted significantly on the results for the period, particularly in relation to the values achieved in disposing of used vehicles. However, we successfully renewed and re-profiled our banking facilities in September, which removed uncertainty around the financing of the business. We remain focused on efficient fleet management which, when coupled with targeted cost reductions, will reduce the effect of external factors on our profitability and also increase cash generation.


The impact on our business in the UK and Spain has been in two main areas: a sharp decline in vehicle residual values and a reduction in the number of vehicles hired by existing rental customers, the latter impacting our utilisation rate. In both territories our response has been to commence ageing the fleet in order to reduce new vehicle purchases, and to seek to gain additional rental business from both existing and new customers. Average utilisation levels of 88.8% in the UK and 86.5% in Spain are testament to the difficulties we have experienced in the period. However, despite the difficult residual market, we have been able to dispose of 11,700 vehicles in the UK and 5,700 in Spain during the six months, resulting in a reduction of 1,400 vehicles in used vehicle stocks since 1 May 2008.


In September, the Group successfully refinanced its banking facilities which included a significant re-profiling of the debt maturity. The Group now has aggregate committed facilities of £1,050m, compared to net debt at 31 October 2008 of £864m(4), giving headroom of £186m. Of the facilities, £23m mature in 2009, with a further £191m maturing in 2010 (of which £131m matures in December 2010).

 

(3)Excluding amortisation of intangible assets and property profits.

(4)After adjusting for the fair value of cross currency derivatives in relation to US dollar senior notes.

 

The successful refinancing has removed uncertainty around the financing of the business. It is, however, unlikely that the difficulties currently faced by the business will disappear in the short term due to the economic environment and we have therefore put in place a number of measures to address them.


These measures include the extension of the vehicle age profile and a consequent reduction in vehicle purchases, development of our vehicle disposal channels in Spain, further rationalisation of our UK structure and the acceleration of the integration process between our two operating companies, Fualsa and Record, in Spain. Across the Group, headcount will have reduced by c.380 by the end of the financial year compared to the start of the year; a reduction of some 11%, mainly through redundancies but also by non-replacement of leavers. The resultant staff cost savings from the rationalisation and integration process are expected to be less than £2.5m in the current financial year, but will amount to c.£8m on an annualised basis. Reorganisation costs amounting to approximately £3m will be charged against profits in the current year. As a result of these actions, and in particular the reduced vehicle purchases, it is expected that net debt will fall by a further c.£50m on a constant currency basis by the end of the financial year.


On 31 October 2008, Paul Tallentire joined the company as Deputy Chief Executive. It is planned that he will take over from Steve Smith as Chief Executive on 1 August 2009 after the publication of the Group's results for the year to 30 April 2009, at which time Steve will take up the role of Deputy Chairman for a further 12 months to the end of July 2010. Paul was previously President of two major operating divisions of Premier Farnell, firstly North America and, more recently, the Farnell Electronics business.


The Board has decided to maintain the interim dividend at 11.5p per share. This dividend, which is covered 2.3 times, is payable on 16 January 2009 to shareholders on the register at the close of business on 19 December 2008.  

 Current outlook

Trading conditions in the UK and Spain remain difficult and uncertain, particularly in the used vehicle market. We therefore expect to see a further decline in performance in the second half. As a result, underlying profit before tax for the full year is expected to be around half the level reported for the year ended 30 April 2008.

 

 

Results

The composition of the Group's revenue and profit from operations is set out below:



2008

£'000


2007

£'000





Revenue




UK Rental

175,243


170,170

UK Fleet Management

8,586


7,323

Spain Rental

125,726


101,469


309,555


278,962

Profit from Operations




UK Rental

27,492


38,435

UK Fleet Management

352


305

Spain Rental

19,521


23,276

Property Profits

-


1,498

Intangible Amortisation

(2,560)


(1,807)


44,805


61,707

Operating Margins

(excluding intangible amortisation and property profits)








UK Rental

15.7%


22.6%

UK Fleet Management

4.1%


4.2%

Spain Rental

15.5%


22.9%





Operating Margins

(excluding adjustment to depreciation)








UK Rental

16.8%


18.5%

UK Fleet Management

4.1%


4.2%

Spain Rental

21.9%


22.8%





UK

UK rental revenue for the six months to 31 October 2008 was some 3% above the comparable period last year; a higher average fleet size was offset by lower utilisation. Rental operating profits, excluding the adjustment to depreciation in each period, have decreased by £2m.


Spain

Revenue from Spain during the period was some 24% above the comparable period last year; 7% at constant exchange rates. Operating profits benefited by some £2.6m from the strengthening of the Euro compared to the prior year. The average fleet size is ahead of the prior year; however, this has been partly offset by the lower utilisation with hire rates remaining stable. The difficult economic environment for used vehicle disposals has resulted in a significant reduction in realised residual values, particularly in the last three months of the period.


The economic turbulence in both the UK and Spain has led to a significant reduction in residual values within a relatively short period. There are a number of factors which may influence residual values in the second half of the year including:


  • demand and supply of new vehicles;

  • the effect of our reduced stockholding on prices realised;

  • development of improved disposal channels in our Spanish business.


We will continue to monitor the situation over the second half of the year prior to deciding whether to make any adjustment in our depreciation rates.


Group

Group return on capital employed, calculated as Group profit from operations divided by average capital employed (being shareholders' funds plus net debt), is 7% (2007 - 11%).


Group return on equity, calculated as profit after tax divided by average shareholders' funds, is 9% (2007 - 18%).


The Group's net interest costs have increased by £3.1m (17%) to £20.9m (2007 - £17.8m). £1.0m results from an increase in average net debt of 16%, £5.2m from an increase in average borrowing costs of 0.5% and a decrease from a net £3.1m currency adjustment mostly relating to the retranslation of borrowings.


 Taxation

The Group's effective tax rate for the financial year is estimated to be 23% and this has been applied to the six month period ended 31 October 2008. This is the same rate that was applied in the prior year.


Treasury

In September 2008 we successfully renewed and re-profiled the majority of our banking facilities. Prior to the renewal, £769m of our facilities matured by January 2010; now £83m of our facilities mature by that date. The Group's aggregate committed facilities total £1,050m, compared to net debt of £864m(5) at 31 October 2008, giving us headroom of £186m.


The Group's committed facilities have the following maturity profile:



£m



September 2009

23

January 2010

60

December 2010

131

September 2011

256

September - November 2012

216

September - November 2013

253

December 2016 - January 2017

111


1,050*

* Excludes £10m overdraft facility.


The Group's committed borrowing facilities contain four financial covenants, three of which are measured quarterly based upon the preceding twelve month period. The net assets covenant is measured monthly. The current difficult trading conditions create uncertainty and therefore heighten the risk of non-compliance with these covenants. The covenant which is most affected by a reduction in profitability is the interest cover covenant which is set at 1.75 times and based upon the preceding twelve months. The Group, however, will take action, including cost reduction and cash generation, in order to maintain compliance with these covenants.


(5)After adjusting for the fair value of cross currency derivatives in relation to US dollar senior notes.


During the period the Group has reduced its capital expenditure by ageing its vehicle fleet with a consequential reduction in purchases. These measures will continue throughout the second half of the year. As a result the Group generated cash in the period and, although the interest cover (i.e. operating profit to net interest costs) has reduced to 2.1 times for the six months (2007 ­- 3.5 times), EBITDA to net interest cost cover remains a healthy 8.7 times (2007 ­- 9.2 times). For the 12 months to 31 October 2008 (the last time the covenant was tested), interest cover was 2.4 times.


As at 31 October 2008, 69% of net debt(6) was at fixed interest rates (2007 - 66%). Only £79m of the financial instruments utilised to hedge this debt expire before 2012. The total effective interest rate cost of this fixed rate debt was 5.5%. Of our fixed rate debt £374m (63%) is denominated in Euros.


Of the £331m floating rate gross debt, £256m is denominated in Euros and £75m is denominated in Sterling. Taking into account cash balances, a 1% reduction in both EURIBOR and LIBOR would reduce our borrowing costs by £2.7m per annum.  



(6)After adjusting for the fair value of cross currency derivatives in relation to US dollar senior notes.

  

Operational Review


UK

Since the start of the financial year, we have seen a reduction in volume from our existing customers, putting unprecedented pressure on utilisation. As a consequence, we have achieved an average utilisation rate of 88.8% (2007 - 91%) for the six months. This has been the main contributor to the reduction in revenue per vehicle in the period.


This high level of churn has, to some extent, been compensated by winning business from new customers. In the period the vehicle fleet has risen modestly, from 68,600 vehicles at 1 May to 69,100 vehicles at 31 October 2008.


As at 31 October, the Group had 21 hire companies operating through a network of 82 locations. The decrease in locations from 86 at the start of the year is due to the closure of branches in Hunslet, Luton, Nottingham and Rochester


Hire rates have remained broadly stable throughout the period. We are, however, currently being slightly more aggressive on pricing but only in respect of short-term deals on otherwise unutilised vehicles.


The used vehicle market has seen a marked deterioration since the start of the calendar year. While values obtained on disposals have fallen, we have achieved our targeted volumes. In the six months under review, we disposed of 11,700 vehicles (2007 - 13,800). We have also maintained progress in developing our retail and semi-retail channels to market, with 20% (2007 - 19%) of disposals being through these channels. In accordance with our accounting policies, the lower than expected residual values have been reflected in an increase in the depreciation charge of £2.0m (2007 - reduction of £6.9m).


Fleet Technique Limited ("FTL"), our fleet management subsidiary, continued to make progress, increasing the number of jobs carried out in the period to over 40,000 (2007 - 34,400). FTL now manages the vast majority of external maintenance spend for the UK business, along with managing warranty support when provided for vehicles sold through the Group's retail channel, thereby helping to control net operating costs. An increase in turnover of 17% produced an operating profit of £0.4m (2007 - £0.3m) and an operating margin of 4.1% (2007 - 4.2%).


Spain

The issues facing the Spanish business are broadly the same as those in the UK, but intensified by a more difficult economic environment.  


While the fleet has grown by 3% to 64,800 vehicles since 1 May 2008, utilisation rates have been under pressure averaging 86.5% (2007 - 90%) for the period.


The pressure on utilisation has come from a reduction in volume from existing customers, compounded by a more difficult used vehicle sales market than that of the UK, and has slowed our ability to reduce the fleet and improve utilisation. During the period under review, we sold 5,700 vehicles (2007 - 6,600) at residual values lower than expected which, in accordance with our accounting policies, has been reflected through an increase in the depreciation charge of £8.0m (2007 - reduction of £0.2m). While the proportion of these disposals through retail channels remained low at 5%, we have significantly increased our export capability such that 28% of our total disposals were exports. The network of dedicated used vehicle locations was completed in October with the opening of Barcelona which is now fully operational. This will give us better control of our used vehicle stocks and should enable us to increase retail sales.


Hire rates have remained relatively stable during the period. As in the UK, some modest discounting is currently being applied to try to rent otherwise unutilised stock and to encourage customers to extend hires on vehicles beyond our normal age profile.


We have continued the process of integrating the two businesses to obtain the synergies which are available. Since 1 May we have merged common support services in areas such as IT, HR, purchasing and fleet administration. As part of this process we have recently appointed a new Managing Director of our Spanish operations.


Current initiatives

The successful refinancing of the Group's debt significantly strengthened our balance sheet and competitive position in a market where capital will be scarce over the medium term. We are therefore well placed to take advantage of those opportunities which will arise as companies which previously did not rent look to rental as an option for acquiring their vehicle fleets.


However, we are currently in the initial challenging trading environment of the recession and have therefore put in place detailed actions to improve operational performance. 


The most important target is to return to a utilisation rate of 90% as soon as possible. This will be achieved by a combination of measures to increase vehicles on rent, increase disposal volumes in Spain and reduce vehicle purchases. Each 1% improvement in utilisation will increase profits by c.£3.9m in the UK and c.£2.9m in Spain in a full year.


Specific plans to drive an increase in rentals include additional investment into marketing our Sale & Rentback product and modest discounting of hire rates to encourage customers to extend contracts and take existing stock. To date, we have been able to extend the majority of the hire contracts in Spain.


The increase in disposal volumes in Spain will come from utilising the recently completed network of dedicated vehicle sales sites, the continued development of our export capability and internet sales through a website similar to Van Monster in the UK. We are targeting disposals of not less than 8,000 vehicles in the next six months.


The reduction of vehicle purchases, particularly in respect of replacements, will reduce the number of vehicles requiring disposal in order to tighten utilisation.


We also intend to improve our vehicle sales performance. While we have no control over market prices, ageing the fleet, reducing our stock levels in Spain and further developing our channels to market will help mitigate the impact of any further fall in residuals.


Although some progress has already been made in cost reduction, we will introduce further measures to take account of the market deterioration. In particular, we intend to further rationalise our UK structure, accelerate the integration process in Spain and continue to reduce supply costs. The expected impact of these measures will be a reduction in costs of less than £2.5m in the current financial year but will amount to c.£8m on an annualised basis.


All of the above measures will assist in generating cash and reducing debt. In particular, the ageing of the fleet and the consequent reduction in vehicle purchases should ensure we reduce Group debt by c.£50m by the end of the financial year on a constant currency basis.


While implementing these necessary measures, we must however protect the value-creating aspects of the business which have been built over many years. In particular, we need to maintain the core of the business which has brought us our success to date by continuing to invest in people and technology and to continue to improve customer service.


Other territories

In previous statements, we had indicated our intention to expand into a new territory in the current calendar year. Given the significant changes which have taken place within the financial markets and the worsening outlook for the global economy, these plans have been put on hold. We will aim to keep abreast of developments in these markets until such time as it is appropriate to reconsider entering them.


Risks and Uncertainties

The operation of a public company involves a number of risks and uncertainties across a range of commercial, operational and financial areas. The principal risks and uncertainties that have been identified as being capable of impacting the Group's performance over the next six months of this financial year are set out below.


  • Vehicle Holding Costs

We aim to minimise the whole life holding cost of the vehicles in our fleet. An increase in new pricing or a reduction in the disposal values of vehicles being sold would increase our holding cost. Were we not able to recover any such increases from our customers, this would impact on our profitability. We manage the risk on new pricing by using our significant purchasing power to negotiate, before the end of the calendar year, fixed supply terms for the year ahead. As regards disposal values, our business model allows us flexibility over the period we hold a vehicle and therefore, in the event of a decline in residual values, we would mitigate the impact by ageing out our fleet. These actions have been taken and we will continue to monitor the impact of any further deterioration in used vehicle values on our business.


  • Customers and Reduction in Demand

The business offers its customers a flexible rental model which, by its very nature, gives customers the ability to return vehicles in a downturn. The more extreme the reduction in economic activity, the more likely these returns will be significant. Our initial response to such an event would be to seek to place these vehicles with customers in other sectors. Were the downturn to be more widespread, we would look to maintain utilisation at 90% through a combination of a decrease, or cessation, of vehicle purchases and an increase in vehicle disposals which, although affecting short-term profitability, should generate cash and reduce debt levels. Given the high level of returns we have been experiencing since the summer, these actions have been, and continue to be, implemented. While the business is not normally unduly affected by seasonality the current economic uncertainty could adversely affect our ability to put back on hire in January vehicles off-hired during the Christmas period. Should such a situation arise, a further increase in disposals and reduction in vehicle purchases would be necessary.


  • Hire Rates

The business model is operationally geared and any increase or decrease in hire rates will impact profit directly.


In the UK the business has previously experienced pressure on hire rates, particularly during 2005. Since the beginning of 2006, hire rates in the UK have been stable.  


Spanish hire rates have experienced a moderate increase year on year for the past few years, mainly reflecting the inflationary nature of the Spanish economy and the increase in the capital cost of vehicles.


  • Access to capital

The Group requires capital both to replace vehicles that have reached the end of their estimated useful life and for growth in the size of the existing vehicle fleet, either organically or through acquisition.  


If cash generated from operations and/or available under its credit facilities is not sufficient to fund its capital requirements, additional debt and/or equity financing will be required. If such financing were not available then this could potentially adversely affect the prospects of the Group.


The Group has sufficient banking facilities to support its plans. During the year we have been able to successfully renew and re-profile the majority of our banking facilities.  


The availability of these facilities is dependent upon ongoing compliance with the financial covenants contained in the main facility agreements. In the event of a potential breach, the company would seek to agree suitable amendments with its lenders.  


  • Information technology systems

The Group is dependent upon its IT systems for the effective running of its operations. Prior to any material systems changes being implemented, the Board approves a project plan. The project is then led by a member of the executive team with an ongoing implementation review being carried out by internal audit and external consultants where appropriate. The objective is always to minimise the risk that business interruption could occur as a result of the system changes. In Spain we successfully transferred the Fualsa operations onto the Record IT systems in May 2008 without any material business interruption. We also commenced changing the IT systems platform for the UK business and this process will continue until the end of 2009.


Additionally, the Group has appropriate business continuity plans in the event of business interruption arising from an IT systems failure.  

  

Condensed Consolidated Income Statement








for the six months ended 31 October 2008











Six months 
to 31.10.08 (Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)


Notes


£000


£000


£000









Revenue

2


309,555


278,962


578,462

Cost of sales



(233,227)


(186,428)


(400,668)






 


 









Gross profit



76,328


92,534


177,794






















Administrative expenses (excluding amortisation)



(28,963)


(29,020)


(54,895)

Amortisation



(2,560)


(1,807)


(4,693)

Total administrative expenses



(31,523)


(30,827)


(59,588)




 


 


 






Profit from operations

2


44,805


61,707


118,206









Investment income



2,068


2,079


3,139

Finance costs



(22,955)


(19,923)


(41,853)






 


 

Profit before taxation



23,918


43,863


79,492









Taxation

3


(5,499)


(10,045)


(18,158)






 


 









Profit for the period



18,419


33,818


61,334




 


 


 









Profit for the period is wholly attributable to equity holders of the parent Company.





All results arise from continuing operations.
















Basic earnings per Ordinary share

4


26.1p


47.3p


86.7p









Diluted earnings per Ordinary share

4


25.7p


47.1p


85.8p

























  

Condensed Consolidated Statement of Recognised Income and Expense





for the six months ended 31 October 2008











Six months 
to 31.10.08 (Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)




£000


£000


£000

Amounts attributable to equity holders of the parent Company








Foreign exchange differences on retranslation of net assets of subsidiary undertakings prior to inception of net investment hedging relationship



(4,954)


-


-

Foreign exchange differences on retranslation of net assets of subsidiary undertakings after inception of net investment hedging relationship



4,002


4,115


29,221

Foreign exchange differences on revaluation reserve



(4)


24


164

Net foreign exchange differences on long term borrowings held as hedges



(2,918)


(3,985)


(34,349)

Net fair value losses on cash flow hedges



(11,817)


(1,001)


(1,721)

Share options fair value amount credited directly to equity



354


159


3,340

Actuarial (losses) gains on defined benefit pension scheme



(449)


1


(208)

Deferred tax on net investment hedges



-


-


11,192

Net deferred tax credit (charge) recognised directly in equity



3,263


300


(2,018)

Net (expense) income recognised directly in equity



(12,523)


(387)


5,621

Profit attributable to equity holders



18,419


33,818


61,334









Total recognised income and expense for the period



5,896


33,431


66,955

  

Condensed Consolidated Balance Sheet








31 October 2008











31.10.08 (Unaudited)


31.10.07 (Unaudited)


30.4.08
(Audited)




£000


£000


£000

Non-current assets








Goodwill



82,957


76,647


83,152

Other intangible assets



26,178


26,361


28,475

Property, plant and equipment: vehicles for hire



975,841


903,454


1,006,792

Other property, plant and equipment



83,588


70,635


81,960

Total property, plant and equipment



1,059,429


974,089


1,088,752





1,077,097


1,200,379




1,168,564



Current assets








Inventories



11,258


9,369


12,073

Trade and other receivables



223,017


197,723


193,088

Cash and cash equivalents



60,831


46,627


48,763




295,106


253,719


253,924

Non-current assets classified as held for sale



33,547


25,694


30,566

TOTAL ASSETS



1,497,217


1,356,510


1,484,869






 


 

Current liabilities








Trade and other payables



103,753


98,217


90,182

Tax liabilities



16,685


11,684


15,728

Short term borrowings



31,091


45,474


8,414




151,529


155,375


114,324

Non-current liabilities








Long term borrowings



921,706


785,679


934,357

Deferred tax liabilities



33,120


41,583


37,082

Retirement benefit obligation



910


452


553






 


 




955,736


827,714


971,992









TOTAL LIABILITIES



1,107,265


983,089


1,086,316




 


 


 

NET ASSETS



389,952


373,421


398,553









Equity








Share capital



3,527


3,525


3,527

Share premium account



67,972


67,744


67,972

Capital redemption reserve



40


40


40

Revaluation reserve



1,203


1,067


1,207

Merger reserve



67,463


67,463


67,463

Own shares 



(12,070)


(8,294)


(9,006)

Hedging reserve



(956)


4,498


7,110

Translation reserve



(667)


2,054


3,817

Retained earnings



263,440


235,324


256,423









TOTAL EQUITY



389,952


373,421


398,553


Total equity is wholly attributable to equity holders of the parent Company.










Condensed Consolidated Cash Flow Statement








for the six months ended 31 October 2008











Six months 
to 31.10.08 (Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)


Notes


£000


£000


£000









Net cash from operating activities

6(a)


173,922


129,380


285,932









Investing activities








Interest received



2,741


2,112


2,453

Proceeds from disposal of vehicles for hire



87,478


100,318


196,113

Purchases of vehicles for hire



(199,949)


(221,553)


(469,438)

Proceeds from disposal of other property, plant and equipment


3,554


1,865


3,475

Purchases of other property, plant and equipment



(7,298)


(4,925)


(13,520)

Purchases of intangible assets



(314)


(525)


(260)

Payment of deferred consideration



(519)


-


-

Business combinations



-


(5,413)


(15,260)









Net cash used in investing activities



(114,307)


(128,121)


(296,437)









Financing activities








Dividends paid



(11,246)


(11,019)


(18,933)

Repayments of obligations under finance leases



(262)


(12,456)


(25,082)

Repayments of bank loans and other borrowings



(23,319)


-


(30,244)

Increase in bank loans and other borrowings



-


45,531


113,210

Proceeds from issue of share capital



-


518


749

Proceeds from sale of own shares



393


350


981

Payments to acquire own shares for share schemes



(3,457)


(4,073)


(5,415)

Payments to acquire own shares for cancellation



-


(8,166)


(8,166)

Settlement of financial instruments



(9,646)


-


(3,198)






 



Net cash (used in) from financing activities



(47,537)


10,685


23,902









Net increase in cash and cash equivalents



12,078


11,944


13,397









Cash and cash equivalents at the beginning of the period



48,763


34,467


34,467









Effect of foreign exchange movements



(10)


154


899









Cash and cash equivalents at the end of the period

6(b)


60,831


46,565


48,763









  

Condensed Consolidated Statement of Changes in Equity








for the six months ended 31 October 2008











Six months 
to 31.10.08 (Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)




£000


£000


£000

Amounts attributable to equity holders of the parent Company








Foreign exchange differences on retranslation of net assets of subsidiary undertakings prior to inception of net investment hedging relationship



(4,954)


-


-

Foreign exchange differences on retranslation of net assets of subsidiary undertakings after inception of net investment hedging relationship



4,002


4,115


29,221

Foreign exchange differences on revaluation reserve



(4)


24


164

Net foreign exchange differences on long term borrowings held as hedges



(2,918)


(3,985)


(34,349)

Net fair value losses on cash flow hedges



(11,817)


(1,001)


(1,721)

Share options fair value amount credited directly to equity



354


159


3,340

Actuarial (losses) gains on defined benefit pension scheme



(449)


1


(208)

Deferred tax on net investment hedges



-


-


11,192

Net deferred tax credit (charge) recognised directly in equity



3,263


300


(2,018)

Net (expense) income recognised directly in equity



(12,523)


(387)


5,621

Profit attributable to equity holders



18,419


33,818


61,334

Total recognised income and expense for the period



5,896


33,431


66,955

Dividends paid



(11,433)


(11,072)


(18,982)

Issue of Ordinary share capital (net of expenses)



-


519


749

Cost of shares purchased for cancellation 



-


(8,166)


(8,166)

Net increase in own shares held



(3,064)


(3,722)


  (4,434)

Net changes in total equity



(8,601)


10,990


36,122









Opening total equity



398,553


362,431


362,431






 


 

Closing total equity



389,952


373,421


398,553

  

Unaudited Notes







1. Basis of preparation and accounting policies







The interim financial information for the six months ended 31 October 2008, including comparative financial information, has been prepared on the basis of the accounting policies set out in the last annual report and accounts and in accordance with International Financial Reporting Standards ("IFRS"), including IAS 34, as issued by the International Accounting Standards Board and adopted by the European Union. 


The condensed financial statements are unaudited and were approved by the Board of Directors on 8 December 2008.  


The condensed financial statements have been reviewed by the auditors and the independent review report is set out in this document.


The financial figures for the year ended 30 April 2008, as set out in this report, do not constitute statutory accounts for the purposes of Section 240 of the Companies Act 1985 but are derived from the statutory accounts for that financial year.


The statutory accounts for the year ended 30 April 2008 were prepared under IFRS and have been filed with the Registrar of Companies. They contained an unqualified audit report and did not include a statement under Section 237 (2) or (3) of the Companies Act 1985. 









2. Segmental analysis
















Business segments








For management purposes, the Group currently has two material business segments, which are the hire of vehicles and fleet management.









As such, the Directors consider that these are the two business segments on which the Group should report.










Geographical segments








The Group's operations are located in the United KingdomRepublic of Ireland and Spain.











The Directors consider the United Kingdom and Republic of Ireland to be a single geographical segment on the grounds that the results and net assets of operations in the Republic of Ireland are immaterial to the Group as a whole.












Six months 
to 31.10.08 (Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)




£000


£000


£000









UK Hire of vehicles



175,243


170,170


345,227

UK Fleet management



8,586


7,323


15,525

UK Revenue



183,829


177,493


360,752

Spain Hire of vehicles



125,726


101,469


217,710









Total Revenue



309,555


278,962


578,462






 


 









UK Hire of vehicles



27,492


38,892


73,627

UK Fleet management



352


305


770

UK Amortisation



(1,542)


(815)


(2,569)

UK Profit from operations



26,302


38,382


71,828

Spain Hire of vehicles



19,521


24,317


48,502

Spain Amortisation



(1,018)


(992)


(2,124)

Spain Profit from operations



18,503


23,325


46,378









Total Profit from operations 



44,805


61,707


118,206




 


 


 

  









3. Taxation
















The charge for taxation for the six months to 31 October 2008 is based on the estimated effective rate for the year.









4. Earnings per share



















Six months 
to 31.10.08

(Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)

(a) Basic and diluted earnings per share



£000


£000


£000

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 net profit attributable to equity holders of the parent



18,419


33,818


61,334









Number of shares



Number


Number


Number

Weighted average number of Ordinary shares for the purposes of basic earnings per share



70,548,045


71,442,468


70,756,672









Effect of dilutive potential Ordinary shares:








 - share options



1,199,899


396,185


737,756









Weighted average number of Ordinary shares for the purposes of diluted earnings per share



71,747,944


71,838,653


71,494,428









Basic earnings per share



26.1p


47.3p


86.7p

Diluted earnings per share



25.7p


47.1p


85.8p









(b) Earnings per share before amortisation and 

non-recurring items



£000


£000


£000

Earnings for the purposes of basic and diluted earnings per share (above)



18,419


33,818


61,334

Amortisation



2,560


1,807


4,693

Non-recurring property profit



-


(1,041)


(1,098)

Earnings for the purposes of basic and diluted earnings per share before amortisation and non-recurring items (as restated)



20,979


34,584


64,929









Basic earnings per share before amortisation and 

non-recurring items (as restated)



29.7p


48.4p


91.8p

Diluted earnings per share before amortisation and 

non-recurring items (as restated)



29.2p


48.1p


90.8p

















5. Dividends
















The proposed interim dividend of 11.5p per Ordinary share was approved by the Board of Directors on 8 December 2008 and has not been included as a liability as at 31 October 2008.









  

6. Notes to the condensed consolidated cash flow statement














(a) Net cash from operating activities











Six months 
to 31.10.08

(Unaudited)


Six months 
to 31.10.07 (Unaudited)


Year to 
30.4.08

(Audited)




£000


£000


£000









Profit from operations



44,805


61,707


118,206









Adjustments for:








Depreciation of property, plant and equipment



134,881


101,475


216,736

Exchange differences



47


-


(337)

Amortisation of intangible assets



2,560


1,807


4,693

Gain on disposal of property, plant and equipment



(251)


(1,545)


(1,540)

Defined benefit pension charge



4


4


9

Share options fair value amount credited directly to equity



354


159


3,340









Operating cash flows before movements in working capital


182,400


163,607


341,107









Decrease (increase) in inventories



809


(434)


(2,408)

Decrease (increase) in receivables



420


(14,887)


  12,078  

Increase (decrease) in payables



20,919


6,891


  (15,478)









Cash generated from operations



204,548


155,177


335,299









Income taxes paid



(5,189)


(5,948)


(13,447)

Interest paid



(25,437)


(19,849)


(35,920)









Net cash from operating activities



173,922


129,380


285,932









(b) Cash and cash equivalents
















Cash and cash equivalents consist of cash in hand and at bank, investments in money market instruments and bank overdrafts.


Bank overdrafts are included within cash equivalents on the grounds that they are repayable on demand and form an integral part of the Group's cash management.


Cash and cash equivalents, as described above, included in the cash flow statement comprise the following balance sheet amounts:












31.10.08 (Unaudited)


31.10.07 (Unaudited)


30.4.08
(Audited)




£000


£000


£000









Cash in hand and at bank



12,351


14,817


11,372

Short term investments



48,480


31,810


37,391

Gross cash and cash equivalents as reported



60,831


46,627


48,763

Bank overdrafts



-


(62)


  -

Net cash and cash equivalents



60,831


46,565


48,763









  

7. Analysis of consolidated net debt



















31.10.08 (Unaudited)


31.10.07 (Unaudited)


30.4.08
(Audited)




£000


£000


£000









Cash at bank and in hand



12,351


14,817


11,372

Short term investments



48,480


31,810


37,391

Bank overdrafts 



  - 


(62)


  -




60,831


46,565


48,763









Bank loans



(700,495)


(658,274)


(735,970)

Loan notes



(237,728)


(163,975)


(201,142)

Vehicle related finance lease obligations



(94)


(3,835)


  (356) 

Deferred consideration



  -  


(93)


(519)

Cumulative preference shares



(500)


(500)


(500)

Property loans and other borrowings



(13,980)


(4,414)


(4,284)




(891,966)


(784,526)


(894,008)
























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 4.2.7R (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 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board


S J Smith

R L Contreras

Chief Executive Officer

Finance Director


8 December 2008


 INDEPENDENT REVIEW REPORT TO NORTHGATE PLC 


We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2008 which comprises the condensed consolidated income statement, the condensed consolidated statement of recognised income and expense, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related Notes 1 to 7.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.


This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.


Directors' responsibilities


The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union. 


Our responsibility


Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.


Scope of Review 


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 inquiries, 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 Ireland) 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.


Conclusion


Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


Deloitte LLP

Chartered Accountants and Registered Auditor

8 December 2008

LeedsUnited Kingdom    





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