RNS Number : 4716X
Northgate PLC
07 December 2010
 



7 December 2010

 

NORTHGATE PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2010

 

Northgate plc ("Northgate", the "Company" or the "Group"), the leading light commercial vehicle rental business in the UK and Spain by fleet size, announces its interim results for the half-year ended 31 October 2010.

 

Underlying Financial Highlights

 

·     Group operating profit(1) increased by 30% to £53.5m (2009 - £41.3m);

 

·     Profit before tax(2) increased by 24% to £27.2m (2009 - £22.0m);

 

·     Basic earnings per share(3) 15.3p (2009 - 20.1p), based on shares of 133 million (2009 - 78 million);

 

·     Net debt(4) reduced by £18.7m to £579.6m (April 2010 - £598.3m); and

 

·     Return on capital employed(1) (4) improved to 10.0% (April 2010 - 8.4%).

 

Operational Highlights

 

·     Average utilisation over the period of 92% in the UK (2009 - 91%) and 90% in Spain

(2009 - 88%);

 

·     Pricing improvement of 2% in the UK since April 2010, and 1% underlying improvement in Spain;

 

·     Continued strength of the used vehicle markets in both the UK and Spain;

 

·     Closing fleet of 60,700 in the UK (April 2010 - 60,900) and 45,900 in Spain (April 2010 - 48,900), in line with stated strategy; and

 

·     Reorganisation of both the UK and Spanish businesses on track.

 

Statutory Financial Highlights

 

·     Profit from operations of £37.5m after exceptional items of £13.6m, of which £7.6m are non-cash items (2009 - £37.6m after exceptional items of £1.1m);

 

·     Profit before taxation increased to £11.2m (2009 - £5.7m); and

 

·     Basic earnings per share increased to 10.5p (2009 - 5.1p).

 

(1)Stated before intangible amortisation of £2.4m (2009 - £2.6m), exceptional administrative expenses of £7.7m (2009 - £1.1m), and exceptional write down of intangible assets of £5.9m (2009 - £Nil).

(2)Stated before intangible amortisation of £2.4m (2009 - £2.6m), exceptional administrative expenses of £7.7m (2009 - £1.1m), exceptional write down of intangible assets of £5.9m (2009 - £Nil) and exceptional finance costs of £Nil (2009 - £12.5m).

(3)Stated before intangible amortisation of £2.4m (2009 - £2.6m), exceptional administrative expenses of £7.7m (2009 - £1.1m), exceptional write down of intangible assets of £5.9m (2009 - £Nil), exceptional finance costs of £Nil (2009 - £12.5m) and taxation thereon.

 (4) Net debt taking into account the fixed swapped exchange rates for US loan notes.

 

Bob Mackenzie, Chairman, commented:

 

"Results for the first half of the year are in line with our expectations and we are making good progress with the reorganisation of both the UK and Spanish businesses.  Our focus remains on improving returns and we expect to make further progress as planned in the second half of the year, through hire rate improvement, efficient fleet management, further cost reductions and cash generation."

 

Full statement and results attached.

 

There will be a presentation to analysts at 9.30am today at MHP Communications, 60 Great Portland Street, London W1W 7RT.

 

For further information, please contact:

 

 

 

Notes to Editors:

 

Northgate plc rents light commercial vehicles and sells a range of fleet products to businesses via a network of hire companies in the UK, Republic of Ireland and Spain.  Their NORFLEX product gives businesses access to a flexible method to obtain as many commercial vehicles as they require. 

 

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

www.northgateplc.com

 

Chairman's Statement

 

As previously reported, the focus of the Group will be to maintain utilisation in excess of 90%, improve operating efficiency to reduce costs and concentrate on increasing the Return on Capital Employed ("ROCE") above levels previously achieved.

 

Our performance in the six months to 31 October 2010 is in line with these objectives and we have made progress.

 

The Group's financial results for the six months to 31 October 2010 are summarised as follows:

 

·     Underlying profit before tax(2) increased by 24% to £27.2m (2009 - £22.0m);

·     Underlying basic earnings per share(3) of 15.3p (2009 - 20.1p), based on shares of 133 million (2009 - 78 million);

·     ROCE(1) (4)  10.0% (April 2010 - 8.4%); and

·     Statutory profit before tax increased to £11.2m (2009 - £5.7m).

 

UK

 

Our underlying rental operating margin(5) increased to 23.9% in the period (2009 - 16.5%) and utilisation rates have improved to 92% (2009 - 91%).  The increase in operating margin has been achieved through our actions aimed at improving operating efficiency and increasing rates and the continued strength in the residual prices for used vehicles.

 

We have progressed the restructuring of the UK business.  The model of 20 separate companies with their own brands has been replaced with 12 business areas operating under one Northgate Vehicle Hire brand.

 

The new IT system has been successfully implemented in five of the business areas and the roll-out is planned to be complete by May 2011. 

 

Alongside these actions there are a number of significant initiatives which include:

 

·     Improving the operational efficiency and productivity of our 53 workshops;

·     Driver logistics management - planning and control of the collection and delivery of vehicles for customers;

·     Simplifying and reducing the costs of internal administration and finance;

·     Restructuring our commercial sales organisation to improve both our national and SME sales; and

·     Increasing staff training and development across the whole organisation.

 

This fundamental reorganisation of the UK business will provide significant operating efficiencies which, together with the enhanced information about our activities, will allow us to improve our offering to customers and increase our operating margin.

 

As stated in July 2010, the actions taken to date will result in annualised cost savings of over £10m from April 2011.  A number of the initiatives noted above should allow us to achieve further cost savings through the next financial year.

 

Spain

 

Against a continuing difficult economic environment, our underlying rental operating margin(6) increased to 16.4% in the period (2009 - 14.0%).  We have maintained our focus on effective fleet management, with average utilisation rates increasing to 90% for the period (2009 - 88%).  The investment made in our used vehicle disposal capability meant we were able to dispose of 9,500 vehicles at increasing residual values.

 

Given the economic situation, debtor management continues to be an area of focus.  In the six month period the bad debt charge was €2.4m, in line with our internal plans, compared to €5.8m in the same period in 2009, and €10.3m for the 12 months ended 30 April 2010.

 

As previously announced we are currently implementing a merger of the two trading brands, Fualsa and Record, which will result in our business trading under the Northgate brand from 1 January 2011.  This will strengthen our position with customers and provide annualised cost savings of approximately €4m on an ongoing basis from that date.  One-off cash costs associated with this merger totalling €4m, to be incurred in the second half of the year, have all been provided for at the balance sheet date. Further non-cash write downs of non-current assets of €9m have also been recognised in the current period.  These comprise €7m write down of certain intangible assets created on acquisition and €2m of property write downs.

 

Balance sheet

 

In the first half of the year we generated net cash of £27m and net debt reduced by £18.7m to £579.6m.  ROCE improved to 10.0% from 8.4% at 30 April 2010.

 

At 31 October 2010 we had £171m headroom on our committed debt facilities of £773m.  Net debt to EBITDA was 2.0 (2009 - 2.2) and all covenant measures improved over the period.

 

Our committed facilities expire in September 2012 and we are reviewing these facilities ahead of their maturity date.

 

Dividend

 

The Board has concluded it is still too early to reinstate a dividend.  Economic conditions remain uncertain in our operating territories and it is unclear what the impact of government spending cutbacks will be on our business.  Given this backdrop we continue to focus on conserving cash and repaying debt whilst increasing return on capital.

 

Current trading and outlook

 

Results for the first half of the year are in line with our expectations and we are making good progress with the reorganisation of both the UK and Spanish businesses.  Our focus remains on improving returns and we expect to make further progress as planned in the second half of the year through hire rate improvement, efficient fleet management, further cost reductions and cash generation.

 

Operational Review

 

United Kingdom

 

Continued effective management of the fleet ensured that average utilisation of 92% was achieved in the period.  Combined with improvements achieved in pricing, operational efficiencies and increases in used vehicle residual values, this has led to an increase in operating margin(5) from 16.5% to 23.9% 

 

Vehicle fleet

 

The UK fleet size was stable at 60,700 vehicles (April 2010 - 60,900 vehicles) with vehicles on hire broadly at prior year levels.

 

During the period we purchased 10,500 vehicles and the average age of our fleet has remained at 20.8 months (April 2010 - 20.8 months).

 

Hire rates

 

Average hire revenue per vehicle in the period was 2% higher than in the prior year period.  Hire rate improvement continues to be a focus with strict controls over new business pricing and actions to improve customer profitability.  We anticipate improved progress in this area in the second half of the year.

 

Restructuring

 

As mentioned earlier, the first half of the year has seen the transition to a single brand, Northgate Vehicle Hire, operating as 12 business areas with 62 depots, as opposed to 20 separately branded operating companies.

 

We will have achieved ongoing full year equivalent cost savings of some £10m by April 2011 with total remaining implementation costs of c.£2m.

 

Of the £10m full year equivalent cost savings by April 2011, £7m have been achieved to date, which will be included in the full year results for the year ending 30 April 2011.  Of this £7m saving, £2m is included in the first half of the financial year.

 

Used vehicle sales

 

Improvements in the resale values achieved for used vehicles in the last financial year have been maintained into the first half of this financial year.  During the period a total of 10,700 vehicles (2009 - 12,400 vehicles) were sold with the higher margin retail and semi-retail channels accounting for 21% (2009 - 18%) of those disposals.

 

The improvement in the values achieved for the vehicles disposed, above our expectations, has resulted in a decrease of £8.4m (2009 - £0.6m increase) in the depreciation charge.

 

IT

 

The UK will complete the roll-out of the Group-wide Enterprise Resource Planning ("ERP") system by May 2011 as part of the restructuring of that business.  The ERP system covers operations, asset management and finance and will be used as a basis to improve customer service and reduce costs through further operational efficiencies.

 

Fleet Technique

 

Fleet Technique manages fleets on behalf of our non-rental customers (some 12,000 vehicles) and some of our customers that own their own vehicles.  In the period it increased its level of operating profit to £0.7m (2009 - £0.6m).  The Fleet Technique business continues to add value to the Group as a whole as we leverage its systems capability to coordinate the management of our rental fleet.

 

Going forward we plan to expand Fleet Technique's external business as we believe that the combination of its fleet management experience and the Northgate rental and workshop capability will be an attractive proposition for customers.

 

Spain

 

Improved fleet management, together with significant improvements in our used vehicle disposal capability, has led to current fleet utilisation in excess of 90% and better residual values achieved for used vehicles when sold.  Alongside this, ongoing operational efficiency and hire rate improvements, as well as a reduced incidence of bad debts, have offset the reduction in vehicles on hire to increase the operating margin(6) to 16.4% (2009 - 14.0%).

 

Vehicle fleet and utilisation

 

In line with our expectations, the fleet size reduced from 48,900 vehicles at 30 April 2010 to 45,900 at 31 October 2010 and vehicles on hire reduced by a similar number.  Utilisation rates at the end of the prior financial year exceeded 90% and we have maintained an average utilisation rate for the period of 90% (2009 - 88%), which has continued into November.

 

During the period we purchased 7,400 vehicles (2009 - 3,200) and the average age of the fleet reduced from 27.2 months at 30 April 2010 to 26.2 months at 31 October 2010.

 

Hire rates

 

Average hire revenue per rented vehicle in the period was 3% higher than the prior year period.  This was mostly due to a reduction in the number of vehicles rented to the holiday rental companies (down from 3,100, in the prior year period, to 800) and the increased rental rates obtained from these customers.  Additionally, rate increases of c.1% have been achieved on the rest of the fleet since April 2010.

 

Restructuring

 

As mentioned earlier, from January 2011 we will trade in Spain under the Northgate brand, removing the two current brands of Fualsa and Record.  Operating under one brand should strengthen our position with customers and provide annualised savings of c.€4m from that date.

 

Used vehicle sales

 

There have continued to be improvements in the resale values achieved for used vehicles.  During the period a total of 9,500 vehicles (2009 - 8,400 vehicles) were sold.  The improvement in resale values achieved has resulted in an increase in the depreciation charge of €0.5m compared to €3.9m in the prior year period.

 

Bad debts

 

The bad debt charge was €2.4m in the period compared to €5.8m in the prior year period and €4.5m in the six months to 30 April 2010.  Debtor days at 31 October 2010 were 108 compared to 109 at 30 April 2010.

 

Financial Review

 

Financial reporting

 

Group

 

A summary of the Group's underlying financial performance for the six months to 31 October 2010, with a comparison to the prior year comparative period, is shown below:

 


2010

2009


£m

£m

Revenue

367.9

374.3

Profit from operations(1)

53.5

41.3

Net interest expense(7)

(26.3)

(19.3)

Profit before tax(2)

27.2

22.0

Profit after tax(3)

20.4

15.7

Basic earnings per share(3)

15.3p

20.1p

 

 

Group revenue in the six months to 31 October 2010 decreased by 1.7% to £367.9m, (2009 - £374.3m) or 0.1% at constant exchange rates.

 

Net underlying cash generation(8) was £27.4m (2009 - £75.7m) after net capital expenditure of £107.1m (2009 - £55.2m), resulting in closing net debt (with fixed swapped exchange rates for US loan notes) of £579.6m (April 2010 - £598.3m).

 

On a statutory basis, profit from operations has marginally decreased to £37.5m (2009 - £37.6m) with profit before tax increasing to £11.2m (2009 - £5.7m).  Basic earnings per share increased to 10.5p (2009 -5.1p).  Net cash from operations, including net capital expenditure on vehicles for hire, decreased by £49.4m to £28.2m (2009 - £77.6m), with net debt falling by £28.6m from £615.1m at 30 April 2010 to £586.5m at 31 October 2010.

 

UK

 

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

 


2010

2009


£m

£m

Revenue



Vehicle rental

158.1

157.3

Fleet Technique

8.1

8.0

Vehicle sales

60.0

56.4


226.2

221.7

Profit from operations(9)



Vehicle rental

37.8

26.0

Fleet Technique

0.7

0.6


38.5

26.6

 

 

Rental revenue has increased by 0.5% to £158.1m (2009 - £157.3m) despite a 0.9% fall in the average number of vehicles on hire.

 

The revenue impact of the decrease in vehicles on hire was more than offset by a 2% improvement in hire rates, reflecting a more focused strategy on removing low margin business.

 

The recovery in residual values of used vehicles contributed £8.4m of the profit from operations which is reflected as a reduction in the depreciation charge for the period (2009 - £0.6m increase in depreciation charge).

 

Operating margins (excluding intangible amortisation and exceptional items, and vehicle sales revenue) were as follows:

 


2010

2009




UK overall

23.2%

16.1%

Vehicle rental

23.9%

16.5%

Fleet Technique

8.9%

8.0%

 

The UK vehicle rental operating profit margin(5) has increased to 23.9% (2009 - 16.5%).  This is due to increased utilisation achieved through more efficient fleet management, improved hire rates as mentioned above, targeted cost savings and increases in used vehicle residual values.

 

Spain

 

The revenue and profit from operations generated by our Spanish operations are set out below:

 


2010

2009


£m

£m

Revenue



Vehicle rental

104.4

123.3

Vehicle sales

37.3

29.3


141.7

152.6

Profit from operations(10)



Vehicle rental

17.1

17.3

 

The reduction in average vehicles on hire of 14% contributed to a decrease in rental revenue of 15% (12% at constant exchange rates).

 

Residual value improvement and an improved used vehicle sales capability with 9,500 vehicles sold (2009 - 8,400), resulted in an increased depreciation charge of £0.4m compared to £3.4m in the prior year period.

 

The Spanish operating margin (excluding intangible amortisation, exceptional items and vehicle sales revenue) was as follows:

 


2010

2009




Operating margin

16.4%

14.0%

 

Vehicle rental revenue and profit from operations in 2010, expressed at constant exchange rates, would have been higher than reported by £4.4m and £0.7m respectively.

 

Vehicle hire rates were higher in the period, primarily due to a reduction in the number of vehicles rented to holiday rental companies at lower than average rates. 

 

The incidence of bad debts in Spain had an adverse impact on operating margins with a charge of €2.4m (2009 - €5.8m), equivalent to 1.9% of operating margin (2009 - 4.1%).  This represents an improving trend compared to both the comparative prior year period and the six months ended 30 April 2010.

 

Return on capital employed

 

Group return on capital employed, calculated as Group profit from operations (excluding intangible amortisation and exceptional items) divided by average capital employed (being shareholders' funds plus net debt(4)) was 10.0% (April 2010 - 8.4%).  This represents an improvement on the prior year, and underlines the Group's continuing success in applying its current strategy of maximising returns in the medium term through more efficient fleet management and improving hire rates.

 

Group return on equity, calculated as profit after tax (excluding intangible amortisation and exceptional items) divided by average shareholders' funds, was 10.7% (2009 - 6.5%). 

 

Exceptional items

 

Exceptional items in the period amounted to £13.6m.  This comprised £2.0m in the UK and Group Head Office, covering both the restructuring of the organisation and rebranding exercise, and £11.6m in Spain.  The Spanish costs primarily related to the merger of Fualsa and Record under the Northgate brand, including £7.6m non-cash write downs of certain intangible assets and property.

 

Interest

 

Net finance charges(7) for the six months to 31 October 2010 were £26.3m (2009 - £19.3m), a significant increase compared to the prior year period as a result of the Group refinancing in September 2009. 

 

The charge includes £4.6m of non-cash interest from borrowing fees amortised in the period (2009 - £1.4m).

 

Net cash interest increased by £3.8m to £21.7m compared to the prior year period, mainly as a result of the increase in borrowing costs, partially offset by the reduction in average net debt.

 

Taxation

 

The Group's effective tax charge for its UK and overseas operations was (25)% (2009 - 30%), including the impact of exceptional items referred to above, and the recognition of £4.9m previously unrecognised deferred tax assets (2009 - £Nil).

 

Excluding the impact of exceptional items, deferred tax asset re-recognition and intangible amortisation, the Group effective tax rate was 25% (2009 - 29%).  This was lower than the prior year, primarily as a result of a £1.2m tax credit in respect of prior years.  Excluding this impact the underlying Group effective tax rate was 30% (2009 - 28%).

 

Earnings per share

 

Basic earnings per share, before amortisation and exceptional items, were 15.3p (2009 - 20.1p).  Basic statutory earnings per share were 10.5p (2009 - 5.1p). 

 

The weighted average number of Ordinary shares for the purposes of basic earnings per share was 133.0 million (2009 - 78.4 million).

 

Dividend

 

The Directors are not recommending the payment of a dividend in relation to the Ordinary shares for the six months ended 31 October 2010 (2009 - Nil). 

 

Balance sheet

 

Net tangible assets at 31 October 2010 were £308.4m (2009 - £264.0m), equivalent to a tangible net asset value of 232.0p per share (2009 - 199.1p per share). 

 

Gearing at 31 October 2010 was 188% (30 April 2010 - 213%), which demonstrates that the capital structure is in a position to be able to meet the Group's medium term goals.

 

Risks and uncertainties

 

The Board and the Group's management have a 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 2010 were set out in detail on pages 16 and 17 of the 2010 Annual Report, a copy of which is available at www.northgateplc.com, and were identified as:

 

·     Customers and reduction in demand;

·     Vehicle holding costs;

·     Competition and hire rates;

·     Access to capital;

·     IT systems.

 

Going concern is considered separately on page 15 of the 2010 Annual Report.

 

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.

 

(1)Stated before intangible amortisation of £2.4m (2009 - £2.6m), exceptional administrative expenses of £7.7m (2009 - £1.1m), and exceptional write down of intangible assets of £5.9m (2009 - £Nil).

(2)Stated before intangible amortisation of £2.4m (2009 - £2.6m), exceptional administrative expenses of £7.7m (2009 - £1.1m), exceptional write down of intangible assets of £5.9m (2009 - £Nil) and exceptional finance costs of £Nil (2009 - £12.5m).

(3)Stated before intangible amortisation of £2.4m (2009 - £2.6m), exceptional administrative expenses of £7.7m (2009 - £1.1m), exceptional write down of intangible assets of £5.9m (2009 - £Nil), exceptional finance costs of £Nil (2009 - £12.5m) and taxation thereon.

 (4) Net debt taking into account the fixed swapped exchange rates for US loan notes.

(5) Calculated as operating profit before intangible amortisation of £1.1m (2009 - £1.1m) and exceptional administrative expenses of £1.5m (2009 - £1.1m),divided by revenue of £158.1m (2009 - £157.3m), excluding vehicle sales.

(6) Calculated as operating profit before intangible amortisation of £1.0m (2009 - £1.2m), exceptional administrative expenses of £5.7m (2009 - £Nil) and exceptional write down of intangible assets of £5.9m (2009 - £Nil), divided by revenue of £104.4m (2009 - £123.3m), excluding vehicle sales.

(7) Stated before exceptional items of £Nil (2009 - £12.5m).

(8) Net increase in cash and cash equivalents before financing activities.

(9) Excluding amortisation of intangible assets of £1.4m (2009 - £1.5m) and exceptional administrative expenses of £1.5m (2009 - £1.1m).

(10) Excluding amortisation of intangible assets of £1.0m (2009 - £1.2m), exceptional administrative expenses of £5.7m (2009 - £Nil) and exceptional write down of intangible assets of £5.9m (2009 - £Nil) .

 

 

 

 



 

Condensed Consolidated Income Statement







 

for the six months ended 31 October 2010












 




Six months
to 31.10.10 (Unaudited)

Underlying


Six months
to 31.10.10 (Unaudited) Statutory


Six months
to 31.10.09 (Unaudited)

Underlying

(As restated)


Six months
to 31.10.09 (Unaudited)

Statutory

(As restated)


Year to
30.4.10
(Audited)

Statutory

 













 


Notes


£000


£000


£000


£000


£000

 













 

Revenue: hire of vehicles and fleet management

2


270,623


270,623


288,605


288,605


563,698

 

Revenue: sale of vehicles

2


97,246


97,246


85,672


85,672


185,875

 













 

Total revenue

2


367,869


367,869


374,277


374,277


749,573

 













 

Cost of sales



(285,407)


(285,407)


(300,094)


(300,094)


(599,045)

 













 

Gross profit



82,462


82,462


74,183


74,183


150,528

 













 

Administrative expenses (excluding intangible amortisation and exceptional items)



(28,947)


(28,947)


(32,870)


(32,870)


(67,709)

 

Exceptional administrative expenses

7


-


(7,690)


-


(1,110)


(6,720)

 

Intangible amortisation



-


(2,420)


-


(2,648)


(4,990)

 

Exceptional write down of intangible assets

7


-


(5,892)


-


-


-

 

Total administrative expenses



(28,947)


(44,949)


(32,870)


(36,628)


(79,419)

 










 

 


 

 

 










 

Profit from operations

2


53,515


37,513


41,313


37,555


71,109

 













 

Interest income



377


377


308


308


770

 

Finance costs



(26,691)


(26,691)


(19,614)


(19,614)


(47,048)

 

Exceptional finance costs

7


-


-


-


(12,525)


(15,216)

 

Total finance costs



(26,691)


(26,691)


(19,614)


(32,139)


(62,264)

 













 

Profit before taxation



27,201


11,199


22,007


5,724


9,615

 













 

Taxation

3


(6,793)


2,818


(6,273)


(1,691)


14,741

 













 

Profit for the period



20,408


14,017


15,734


4,033


24,356

 













 













 


Profit for the period is wholly attributable to equity holders of the parent Company. All results arise from continuing operations.

 

Underlying profit excludes exceptional items and impairment of assets as set out in Note 7 as well as intangible amortisation and the taxation thereon in order to provide a better indication of the Group's underlying business performance.

 

Earnings per share

 

Basic

4


15.3p


10.5p


20.1p


5.1p


23.1p

 

 

Diluted

4


15.1p


10.3p


19.7p


5.0p


22.8p

 













 



 

 

Condensed Consolidated Statement of Comprehensive Income





for the six months ended 31 October 2010











Six months
to 31.10.10 (Unaudited)


Six months
to 31.10.09 (Unaudited)


Year to
30.4.10
(Audited)




£000


£000


£000

Amounts attributable to equity holders of the Parent Company
















Profit attributable to equity holders



14,017


4,033


24,356









Other comprehensive income
















Foreign exchange differences on retranslation of net assets of subsidiary undertakings prior to  change in level of net investment hedging relationship



-


(2,182)


-

















Net foreign exchange differences on long term borrowings held as hedges prior to change in level of net investment hedging relationship



-


2,182


-









Foreign exchange differences on retranslation of net assets of subsidiary undertakings after subsequent change in level of net investment hedging relationship



(136)


2,514


(3,929)









Net foreign exchange differences on long term borrowings held as hedges after subsequent change in level of net investment hedging relationship



136


(1,262)


3,929

Foreign exchange differences on revaluation reserve



(3)


1


(35)

Net fair value gains (losses) on cash flow hedges



6,867


(8,749)


(14,681)

Actuarial losses on defined benefit pension scheme



(274)


(397)


(221)

Net deferred tax (charge) credit recognised directly in equity



(1,769)


2,496


4,102

Total other comprehensive income



4,821


(5,397)


(10,835)









Total comprehensive income for the period



18,838


(1,364)


13,521



 

Condensed Consolidated Balance Sheet








31 October 2010











31.10.10 (Unaudited)


31.10.09 (Unaudited)


30.4.10
(Audited)






(As restated)


(As restated)




£000


£000


£000

Non-current assets








Goodwill



3,589


3,589


3,589

Other intangible assets



12,689


21,975


20,449

Property, plant and equipment: vehicles for hire



734,982


786,769


741,543

Other property, plant and equipment



82,959


89,350


86,512

Total property, plant and equipment



817,941


876,119


828,055

Financial instrument assets



10,202


567


14,622

Deferred tax assets



9,050


1,426


7,749




853,471


903,676


874,464

Current assets








Inventories: vehicles held for resale



21,844


16,443


18,406

Inventories: other



4,610


3,997


4,527

Trade and other receivables



139,028


198,178


142,175

Current tax asset



-


4,074


-

Cash and cash equivalents



24,123


31,819


85,343




189,605


254,511


250,451

TOTAL ASSETS



1,043,076


1,158,187


1,124,915









Current liabilities








Trade and other payables



79,422


89,024


86,687

Current tax liabilities



19,071


2,427


16,439

Short term borrowings



50,983


73,184


153,349




149,476


164,635


256,475

Non-current liabilities








Financial instrument liabilities



6,270


6,439


8,794

Long term borrowings



559,656


664,073


547,061

Deferred tax liabilities



2,498


32,657


6,940

Retirement benefit obligation



466


789


539




568,890


703,958


563,334

TOTAL LIABILITIES



718,366


868,593


819,809









NET ASSETS



324,710


289,594


305,106









Equity








Share capital



66,475


66,301


66,475

Share premium account



113,269


112,890


113,269

Capital redemption reserve



40


40


40

Revaluation reserve



1,327


1,366


1,330

Merger reserve



67,463


67,463


67,463

Own shares



(513)


(1,083)


(891)

Hedging reserve



(698)


(1,458)


(5,720)

Translation reserve



(5,656)


(4,348)


(5,656)

Retained earnings



83,003


48,423


68,796









TOTAL EQUITY



324,710


289,594


305,106







 

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

 

Condensed Consolidated Cash Flow Statement

for the six months ended 31 October 2010











Six months
to 31.10.10 (Unaudited)


Six months
to 31.10.09 (Unaudited)


Year to
30.4.10
(Audited)






(As restated)




Notes


£000


£000


£000









Cash generated from operations including net capital expenditure on vehicles for hire

5(a)


28,162


77,632


188,525









Investing activities








Interest received



377


308


770

Proceeds from disposal of other property, plant and equipment



1,386


543


1,805

Purchases of other property, plant and equipment



(1,763)


(2,006)


(4,617)

Purchases of intangible assets



(787)


(765)


(1,849)









Net cash used in investing activities



(787)


(1,920)


(3,891)









Financing activities








Repayments of obligations under finance leases



-


(12)


(37)

Repayments of bank loans and other borrowings



(88,476)


(200,272)


(255,422)

Debt issue costs paid



-


(31,314)


(31,358)

Proceeds from issue of share capital



-


107,692


108,245

Payments to acquire own shares for share schemes



(93)


-


(674)









Net cash used in financing activities



(88,569)


(123,906)


(179,246)









Net (decrease) increase in cash and cash equivalents



(61,194)


(48,194)


5,388









Cash and cash equivalents at the beginning of the period



85,343


80,036


80,036









Effect of foreign exchange movements



(26)


(23)


(81)









Cash and cash equivalents at the end of the period

5(b)


24,123


31,819


85,343









The above cash generated from operations is stated after the following net capital expenditure on vehicles for hire:

 












Six months
to 31.10.10 (Unaudited)


Six months
to 31.10.09 (Unaudited)


Year to
30.4.10
(Audited)






(As restated)






£000


£000


£000









Purchases of vehicles



(194,813)


(138,287)


(299,144)

Proceeds from disposal of vehicles



88,873


85,363


189,409




(105,940)


(52,924)


(109,735)

Cash generated from operations excluding net capital expenditure on vehicles for hire



134,102


130,556


298,260



 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 October 2010



 


Share capital and share premium

Own

shares

Hedging reserve

Translation reserve

Other reserves

Retained earnings

Total


£000

£000

£000

£000

£000

£000

£000

Total equity at 1 May 2009

              71,499

(2,302)

                4,851

                (5,656)

              68,868

           45,499

           182,759

Share options fair value charge

                         -

                         -

                         -

                         -

                         -

                    404

                    404

Share options exercised

                         -

                         1,116

                         -

                         -

                         -

                    (1,116)

                    -

Issue of ordinary share capital (net of expenses)

                         107,692

                         -

                         -

                         -

                         -

                    -

                    107,692

Profit attributable to equity holders

                         -

                         -

                         -

                         -

                         -

                    4,033

                    4,033

Sale of own shares

                         -

                         103

                         -

                         -

                         -

                    -

                    103

Other comprehensive income

                         -

                         -

                         (6,253)

                         1,252

                         1

                    (397)

                    (5,397)

Transfers between equity reserves

                         -

                         -

                         (56)

                         56

                         -

                    -

                    -

Total equity at 31 October 2009

179,191

(1,083)

(1,458)

(4,348)

68,869

48,423

289,594

Share options fair value charge

                         -

                         -

                         -

                         -

                         -

                    750

                    750

Share options exercised

                         -

                         (1,116)

                         -

                         -

                         -

                    (868)

                    (1,984)

Issue of ordinary share capital (net of expenses)

                         553

                         -

                         -

                         -

                         -

                    -

                    553

Profit attributable to equity holders

                         -

                         -

                         -

                         -

                         -

                    20,323

                    20,323

Purchase of own shares

                         -

                         (674)

                         -

                         -

                         -

                    -

                    (674)

Sale of own shares

                         -

                         1,982

                         -

                         -

                         -

                    -

                    1,982

Other comprehensive income

                         -

                         -

                         (3,349)

                         (2,221)

                         (36)

                    168

                    (5,438)

Transfers between equity reserves

-

-

(913)

913

-

-

-

Total equity at 30 April 2010

179,744

(891)

(5,720)

(5,656)

68,833

68,796

305,106

Share options fair value charge

                         -

                         -

                    859

                    859

Share options exercised

                         -

                         471

                         -

                         -

                         -

                    (471)

                    -

Profit attributable to equity holders

                         -

                         -

                         -

                         -

                         -

                    14,017

                    14,017

Purchase of own shares

                         -

                         (93)

                         -

                         -

                         -

                    -

                    (93)

Other comprehensive income

                         -

                         -

                         5,277

                         (255)

                         (3)

                    (198)

                    4,821

Transfers between equity reserves

                         -

                         -

                         (255)

                         255

                         -

                    -

                    -

Total equity at 31 October 2010

             179,744

(513)

(698)

(5,656)

              68,830

           83,003

           324,710

 

 

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 6 December 2010. 

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 2010, 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 (Interim Financial Reporting), as issued by the International Accounting Standards Board and adopted by the European Union.

 
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may subsequently differ from those estimates.

 

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 2010.

In accordance with IAS 12 (Income Taxes), certain deferred tax amounts have been reclassified.  As a result, deferred tax assets are reduced by £10,660,000 as at 30 April 2010 and by £15,387,000 as at 31 October 2009, and deferred tax liabilities have reduced by the same amounts.

The results of the Group for the year ended 30 April 2010 included certain changes in accounting policy as explained on page 41 of the 2010 Annual Report.  To the extent that those changes were not already reflected in the results of the Group for the six months ended 31 October 2009, those results have been restated.

As a result of these changes, property plant and equipment is increased and inventories are reduced by £5,012,000, as at 31 October 2009.  All other changes are considered immaterial to the Group results.

 

Going concern assumption

The Group manages its cash requirements through a combination of operating cash flows and long term borrowings.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current lending facilities.

Consequently, after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.

 

Information extracted from 2010 Annual Report

The financial figures for the year ended 30 April 2010, 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 2010 were prepared under IFRS and have been delivered to the Registrar of Companies. The auditors reported on those accounts.  Their 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 segment based upon the information provided to the executive 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 three main operating divisions, UK Hire, Spain Hire and Fleet Technique.  The UK Hire division includes operations in the Republic of Ireland.  The principal activities of these divisions are set out in the Operational and Financial Reviews.

 





UK Hire

 

Six months
to 31.10.10 (Unaudited)


Spain Hire

 

Six months
to 31.10.10 (Unaudited)

 


Fleet Technique

Six months
to 31.10.10 (Unaudited)

 


Corporate

 

Six months
to 31.10.10 (Unaudited)

 


Total

 

Six months
to 31.10.10 (Unaudited)

 

 




£000


£000


£000


£000


£000

 













 

Revenue: hire of vehicles and fleet management



158,078


104,443


 

10,425


-


272,946

 

Revenue: sale of vehicles



59,984


37,262


-


-


97,246

 

Total Revenue



218,062


141,705


10,425


-


370,192

 

Intersegment revenue



-


-


(2,323)


-


(2,323)

 













 

Revenue from external customers



218,062


141,705


8,102


-


367,869

 













 

Operating profit (loss)*



37,791


17,082


723


(2,081)


53,515

 

Exceptional administrative expenses



(1,466)


(5,688)


-


(536)


(7,690)

 

Intangible amortisation



(1,081)


(987)


(352)


-


(2,420)

 

Exceptional write down of intangible assets



-


(5,892)


-


-


(5,892)

 













 

Profit (loss) from operations



35,244


4,515


371


(2,617)


37,513

 

Interest income











377

 

Finance costs











(26,691)

 













 

Profit before taxation











11,199

 













 

 

* operating profit (loss) stated before amortisation and exceptional items is the measure used by the executive Board of Directors to assess segment performance.

 




UK Hire

 

Six months
to 31.10.09 (Unaudited)


Spain Hire

 

Six months
to 31.10.09 (Unaudited)

 


Fleet Technique

Six months
to 31.10.09 (Unaudited)

 


Corporate

 

Six months
to 31.10.09 (Unaudited)

 


Total

 

Six months
to 31.10.09 (Unaudited)

 




£000


£000


£000


£000


£000













Revenue: hire of vehicles and fleet management



157,307


123,327


 

9,587


-


290,221

Revenue: sale of vehicles



56,423


29,249


-


-


85,672

Total Revenue



213,730


152,576


9,587


-


375,893

Intersegment revenue



-


-


 

(1,616)


-


(1,616)













Revenue from external customers



213,730


152,576


7,971


-


374,277













Operating profit (loss)*



26,019


17,307


 

639


(2,652)


41,313

Exceptional items



(1,122)


12


-


-


(1,110)

Intangible amortisation



(1,143)


(1,153)


(352)


-


(2,648)













Profit (loss) from operations



23,754


16,166


287


(2,652)


37,555

Interest income











308

Finance costs (excluding exceptional items)











(19,614)

Exceptional finance costs











(12,525)













Profit before taxation











5,724

 

 




UK Hire

 

Year to
to 30.4.10 (Audited)


Spain Hire

 

Year to
to 30.4.10 (Audited)

 


Fleet Technique

Year to
to 30.4.10 (Audited)

 


Corporate


Year to
to 30.4.10 (Audited)

 


Total


Year to
to 30.4.10 (Audited)

 




£000


£000


£000


£000


£000













Revenue: hire of vehicles and fleet management



311,992


235,500


 

19,625


-


567,117

Revenue: sale of vehicles



114,321


71,554


-


-


185,875

Total Revenue



426,313


307,054


19,625


-


752,992

Intersegment revenue



-


-


 

(3,419)


-


(3,419)













Revenue from external customers



426,313


307,054


 

16,206


-


749,573













Operating profit (loss)*



57,704


29,983


 

1,266


(6,134)


82,819

Exceptional items



(5,779)


127


-


(1,068)


(6,720)

Intangible amortisation



(2,272)


(2,013)


(705)


-


(4,990)













Profit (loss) from operations



49,653


28,097


 

561


(7,202)


71,109

Interest income











770

Finance costs (excluding exceptional items)











(47,048)

Exceptional finance costs











(15,216)













Profit before taxation











9,615

 

3. Taxation




















The charge for taxation for the six months to 31 October 2010 is based on the estimated effective rate for the year.

 

The current tax creditor of £19,071,000 at 31 October 2010 (30 April 2010 - £16,439,000) includes a total amount of £17,529,000 (30 April 2010 - £13,422,000) that is considered unlikely to give rise to a cash outflow within 12 months of the balance sheet date but is shown in the balance sheet as a current liability in order to satisfy the requirements of IAS 1 (Presentation of Financial Statements). 

 

The expected cash outflow in respect of corporate tax in the 12 months following 31 October 2010 is therefore £1,542,000.



 



 

 

4. Earnings per share










 




Six months
to 31.10.10 (Unaudited)

Underlying


Six months
to 31.10.10 (Unaudited) Statutory


Six months
to 31.10.09 (Unaudited)

Underlying

(As restated)


Six months
to 31.10.09 (Unaudited)

Statutory

 


Year to
30.4.10
(Audited)

Underlying


Year to
30.4.10
(Audited)

Statutory




£000


£000


£000


£000


£000


£000















Earnings for the purposes of basic and diluted earnings per share, being net profit attributable to equity holders of the parent



20,408


14,017


15,734


4,033


28,246


24,356


















Number


Number


Number


Number


Number


Number

Number of shares














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



132,949,433


132,949,433


78,400,710


78,400,710


105,374,935


105,374,935















Effect of dilutive potential Ordinary shares:














- share options



2,496,063


2,496,063


1,640,429


1,640,429


1,605,626


1,605,626















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



135,445,496


135,445,496


80,041,139


80,041,139


106,980,561


106,980,561















Basic earnings per share



15.3p


10.5p


20.1p


5.1p


26.8p


23.1p















Diluted earnings per share



15.1p


10.3p


19.7p


5.0p


26.4p


22.8p

























 




 











 

 

5. Notes to the condensed consolidated cash flow statement









(a) Cash generated from operations including net capital expenditure on vehicles for hire











Six months
to 31.10.10
(Unaudited)


Six months
to 31.10.09 (Unaudited)

(As restated)


Year to
30.4.10
(Audited)

 




£000


£000


£000









Profit  from operations



37,513


37,555


71,109









Adjustments for:








Depreciation of property, plant and equipment



109,104


127,862


229,752

Exchange differences



-


30


58

Amortisation of intangible assets



2,420


2,648


4,990

Exceptional write down of intangible assets



5,892


-


-

Gain on disposal of property, plant and equipment



(231)


(272)


(491)

Share options fair value charge



859


404


1,154









Operating cash flows before movements in working capital and net capital expenditure on vehicles for hire



155,557


168,227


306,572









Decrease in other inventories



5


1,397


832

Decrease (increase) in receivables



3,169


(20,919)


         31,826 

(Decrease) increase in payables



(775)


8,326


6,511









Cash generated from operations before net capital expenditure on vehicles for hire



157,956


157,031


345,741









Income taxes paid



(1,855)


(3,367)


835

Interest paid



(21,999)


(23,108)


(48,316)









Net cash from operating activities before net capital expenditure on vehicles for hire



134,102


130,556


298,260






 

(138,287)


(299,144)

Purchases of vehicles



(194,813)



Proceeds from disposal of vehicles



88,873


85,363


189,409

 

Cash generated from operations including net capital expenditure on vehicles for hire



28,162


77,632


188,525









(b) Cash and cash equivalents








 

Cash and cash equivalents consist of cash in hand and at bank.

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












31.10.10 (Unaudited)


31.10.09 (Unaudited)


30.4.10
(Audited)




£000


£000


£000









Cash in hand and at bank



24,123


31,819


85,343

Net cash and cash equivalents



24,123


31,819


85,343









 

6. Analysis of consolidated net debt



















31.10.10 (Unaudited)


31.10.09 (Unaudited)


30.4.10
(Audited)




£000


£000


£000









Cash at bank and in hand



24,123


31,819


85,343

Bank loans



(414,991)


(522,650)


(473,367)

Loan notes



(192,639)


(210,008)


(223,324)

Cumulative preference shares



(500)


(500)


(500)

Property loans and other borrowings



(2,509)


(4,099)


(3,219)




(586,516)


(705,438)


(615,067)









Net borrowings at 31 October 2010, taking into account the fixed swapped exchange rates for the US loan notes, are £579,630,000
(31 October 2009 - £705,687,000; 30 April 2010 - £598,291,000).

 

7. Exceptional items








 

The Group has recognised pre-tax exceptional items in the income statement as follows:



 




 




Six months

to 31.10.10 (Unaudited)


Six months

to 31.10.09 (Unaudited)


Year to

to 30.4.10
(Audited)




£000


£000


£000









Restructuring costs



6,166


1,382


6,324

Write down of Spanish property assets to recoverable amount



1,755


-


-

Net property (profit) loss



(231)


(272)


396

Exceptional administrative expenses



7,690


1,110


6,720









Write down of Spanish intangible assets to recoverable amount



5,892


-


-

Exceptional write down of intangible assets



5,892


-


-









Covenant deferral fees



-


2,199


2,199

Make-whole premium on US loan notes



-


6,151


8,842

Write off of unamortised fees relating to bilateral debt facilities



-


3,751


3,751

Other financing fees



-


424


424

Exceptional finance costs



-


12,525


15,216

 



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

 

 

                                                                                                               

 

R L Contreras

Chief Executive Officer

6 December 2010

 



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 2010 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of comprehensive income, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity 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 (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" 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 2010 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 Statutory Auditors

Leeds, United Kingdom

6 December 2010


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