RNS Number : 2112G
Northgate PLC
27 June 2012
 



27 June 2012

 

NORTHGATE PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2012

 

Results in line with the Board's expectations, strong improvement in ROCE, restructuring exercise substantially completed, significant reduction in net debt and re-introduction of a dividend.

 

Northgate plc ("Northgate", the "Company" or the "Group") announces its preliminary results for the year ended 30 April 2012.

 

Financial Highlights

 

·     Return on capital employed(1)  improved to 13.1% (2011 - 11.9%);

 

·     Underlying profit before taxation(2)  increased by 10.9% to £59.7m (2011 - £53.8m);

 

·     Profit before taxation increased to £46.0m (2011 - £26.5m);

 

·     Underlying basic earnings per share(3) increased by 8.6% to 31.5p (2011 - 29.0p);

 

·     Basic earnings per share increased to 30.4p (2011 - 22.1p);

 

·     Net debt(4) reduced by £158.6m to £371.3m (2011 - £529.9m):

Gearing(5) improved to 105% (2011 - 163%)

 

·     Re-introduction of a dividend of 3.0p per share in respect of the full year.

 

Operational Highlights

 

·     Underlying pricing improvement of 4% in the UK and stable pricing in Spain since April 2011;

 

·     Average utilisation of 89% in the UK (2011 - 90%) and 90% in Spain (2011 - 91%);

 

·     Closing fleet of 52,900 in the UK (2011 - 61,200) and 38,400 in Spain (2011 - 43,500);

 

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

 

·     Restructuring of businesses in the UK and Spain substantially completed.

 

Bob Mackenzie, Chairman, commented:

 

"The Group retains its strong, market leading position in both the UK and Spain.  With the majority of the restructuring completed the Group will continue its strong disciplines of asset management, cash generation and cost control whilst at the same time maximising profitable growth where the appropriate return exists.

 

Whilst this will be challenging in the awful economic situation Europe finds itself, the Board is confident that the dedication and hard work shown by all our employees over the past two years provides the Group with a strong platform upon which to build.

 

The Group has begun the new financial year in line with the Board's expectations, and the Board is confident the Group is well placed to deliver significant value to shareholders."

 

 

Full statement and results attached.

 

There will be a presentation to analysts at 9.30am today at Jefferies Offices, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ. 

 

For further information, please contact:

 

Northgate plc                                                    01325 467558

Bob Contreras, Chief Executive

Chris Muir, Group Finance Director

 

MHP Communications                                  020 3128 8753

Andrew Jaques

Barnaby Fry

Simon Hockridge

 

 

 

Notes to Editors:

 

Northgate plc rents light commercial vehicles and sells a range of fleet products to businesses via a network of locations 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

 

I am pleased to report that despite a continuing background of economic uncertainty in the countries in which we operate, the Group has maintained its market leading position and substantially completed the restructuring of our UK and Spanish operations which commenced in summer 2010. We now operate under the Northgate brand in both the UK and Spain and are concentrating on increasing the awareness of our brand in both countries.

 

The focus of the Group in the year has been to maintain industry leading levels of utilisation, improve operating efficiency to reduce costs and concentrate on increasing the Return on Capital Employed ("ROCE").  Against all of these measures we have performed well with ROCE(1) increasing to 13.1% in the year (2011 - 11.9%).

 

Our management team has done an excellent job in moving to one brand, rationalising depots and operations, installing new IT systems in the UK, generating cash and strengthening the balance sheet.  We now have a solid base from which both our UK and Spanish operations can focus on maximising profitable business opportunities going forward.

 

The balance sheet of the Group continues to strengthen with net debt(4) reducing by £158.6m in the year from £529.9m to £371.3m.  At 30 April 2012 we had £276m of headroom(6) on our committed debt facilities of £668m.  Net debt to EBITDA(7) has reduced to 1.3x (2011 - 1.7x) and all covenant measures improved over the year as a result of £138m of underlying cash generation(8).  The Group's profitability and cash generation has reduced gearing(5) to 105% from 571% in 2009. As a result we are pleased to announce that the Group is returning to the payment of a dividend.

 

Our management teams in the UK and Spain have strengthened each business and are working effectively to maximise returns for shareholders and realise the objectives of the Group's strategy.

 

UK

 

Our operating margin(9) increased to 23.2% in the year, compared to 22.0% in 2011.  This increase has been achieved through actions aimed at improving operating efficiency, increasing hire rates and the continued strength in the residual values of used vehicles.

 

Our previous model of 20 separate companies was further reduced to five regions in March 2012.  In addition, the implementation of the new IT system has enabled the UK to establish a centralised Customer Support Centre and a Financial Shared Services Centre based in Darlington. This will provide the platform for a consistent and improved customer service and further operational efficiencies going forward.

 

During the year the Commercial area of the business was also restructured, and a number of improvement programmes were initiated in the final quarter of the financial year, the main focus being to increase the skills, resource and support within the sales team.  The success of these initiatives is central to the objective of returning the business to growth at appropriate levels of return.

 

Spain

 

As widely publicised the Spanish economy continues to be an extremely difficult environment in which to operate. Despite this our operating margin(10) increased to 19.1% in the year (2011 - 18.0%) and utilisation was maintained above 90%. It is testament to the strength and commitment of our Spanish management team that despite hire revenue falling by £20.5m, the underlying operating profit fall was limited to £1.7m.

 

Given the dire economic situation in Spain, which has been exacerbated by the Euro crisis, we have continued to concentrate on cash generation.  Over the last four years capital employed in Spain has been reduced from €829m to €388m with net debt falling from €556m to €172m.

 

We have successfully replaced the former Fualsa and Record brands and now trade as Northgate, which is enjoying growing brand awareness. Our business in Spain has implemented a new commercial structure which is targeting increased new business wins across a range of sectors to offset declines historically seen in its traditional markets, whilst maintaining its concentration on cash generation.

 

Employees

 

The improvements delivered and our confidence in the future performance of the Group would not be possible without the people we have working with us.  The Group has experienced two years of considerable change and this would not have been possible without their dedication, hard work and loyalty.  I would like to thank them on behalf of the Board.

 

Dividend

 

The Group has reduced net debt(4) by £532m over the past four years.  In recognition of the higher returns within the business, the sustained improvement in performance and our confidence in the long term future of the Group, the Board recommends the re-introduction of a dividend for the current financial year of 3.0p. This would represent a cash outflow to the Group of £4m and is in respect of the full year. 

 

It is the Board's intention to maintain a sustainable dividend policy with the aim of increasing returns to shareholders over time, whilst taking into account both the underlying profitability, cash generation and cash requirements of the Group. Going forward we would expect to pay one-third of the total dividend at the interim stage and two-thirds as a final dividend.

 

Current trading and outlook

 

The Group retains its strong, market leading position in both the UK and Spain.  With the majority of the restructuring completed the Group will continue its strong disciplines of asset management, cash generation and cost control whilst at the same time maximising profitable growth where the appropriate return exists.

 

Whilst this will be challenging in the awful economic situation Europe finds itself, the Board is confident that the dedication and hard work shown by all our employees over the past two years provides the Group with a strong platform upon which to build.

 

The Group has begun the new financial year in line with the Board's expectations, and the Board is confident the Group is well placed to deliver significant value to shareholders.

 

 

Operational Review

 

Group

 

The key to the performance improvements noted over the past two years has been in creating a business that does the simple things well and has optimal operating efficiency.  The Group has moved away from targeting vehicle growth via aggressive pricing and is now focused on pursuing markets and customers where the flexible rental offering is right for them.

 

With the ongoing difficulties in the economies in which we operate the primary focus of the Group has been to improve returns on capital employed and to strengthen the Group's balance sheet.

 

Over the two years the Group has seen progress in the following key areas:

 

·     Fleet management;

·     Pricing increases;

·     Cost reduction; and

·     Improvement in vehicle disposal capabilities.

 

As a result of this, an improved return on capital employed(1) of 13.1% (2011 - 11.9%) has been achieved for the year ended 30 April 2012.

 

Going forward, the success of the Group is dependent upon a return to growth of our businesses in both the UK and Spain where profitable opportunities exist.  Whilst this will not be easy within the economic environment in which the Group operates, we are confident that the Group is well positioned, both operationally and financially to achieve this. 

 

The reasons why flexible renting provides an attractive business proposal for our customers are still as relevant as they have always been, namely:

 

·     Avoiding the risk of operational interruption, flexible rental provides a business tool that minimises the cost of downtime and limits exposure if trading conditions change either in the short, medium or long term; and

·     Avoiding the capital outlay of purchasing assets, coupled with the lack of flexibility, commitment and risk that outright purchase or contract hire creates.

 

Our customers benefit from an unrivalled network footprint, specialist knowledge, insight and fleet management capabilities that arise due to the Group's scale and the wealth of knowledge that it contains.

 

UK

 

Improvements achieved in pricing, operational efficiencies and used vehicle residuals have led to an increase in operating margin(9) from 22.0% to 23.2%.

 

Vehicle fleet and utilisation

 

In the year the UK fleet size reduced by 8,300 to 52,900 vehicles (2011 - 61,200 vehicles).  Despite this fall, our asset management strength ensured that average utilisation rates for the year ended 30 April 2012 fell by only 1% to 89% (2011 - 90%).

 

In response to the reduction in the vehicle fleet the UK reduced vehicle purchases by 2,400 to 16,500 in the year ended 30 April 2012 (2011 - 18,900). 

 

With improved fleet profiling the UK saw a reduction in its average fleet age from 22.1 months at 30 April 2011 to 21.4 months at 30 April 2012, reflecting the Group's commitment to running a fleet with a suitable ageing profile, efficiency and reliability.

 

Hire rates and vehicles on hire

 

Average hire revenue per vehicle closed 3% higher than in the prior year.  As experienced in the year ended 30 April 2011 this has been impacted by consumer demand moving towards smaller vehicles to reduce their operational costs.  Adjusting for this mix impact the underlying hire rate increase was 4% as targeted.

 

Year on year closing vehicles on hire fell by 7,400 (2011 - 1,000).  The reduction in vehicles on hire has been caused by a number of factors:

 

·     Customer demand has been impacted as a direct consequence of the economic conditions;

·     We have seen returns from specific industries, in particular businesses impacted by the reduction in energy tariffs and grants; and

·     The increase in pricing achieved has resulted in some customers who were previously attracted to unsustainably low flexible rental rates revising their fleet mix towards fixed contract rental, whilst ignoring the benefits that a flexible solution provides.

 

During the year a restructuring of the commercial operations in the UK has been undertaken.  This has led to the implementation of a number of key initiatives that are targeted at improving the skills, resources and support that contributes to the commercial offering and delivery.  Given the challenging trading conditions it is clear that the UK business needs to continue to identify and deliver any business opportunities where flexible rental is the most appropriate solution for the customer.

 

Restructuring and operational improvement

 

April 2012 saw the UK business reach an important milestone.  The restructuring, which commenced in summer 2010, is now substantially complete.  In March 2012 the previous 20 hire companies the Group operated under were further reduced to five regions.  All now operate under the single brand of Northgate Vehicle Hire. 

 

During the year a number of key initiatives were implemented which has driven operational efficiency and will help improve customer service. These comprised:

 

·    Improved IT capability and systems, which allows greater visibility and planning of our 53 workshops, leading to increased efficiency and utilisation;

·    Further development around driver logistics management, which provides the UK with opportunities for increasing delivery efficiency;

·    Improved sales and operational planning, which reduces vehicle holding costs and increases sales opportunities; and

·    Centralised customer support and finance which will enhance our customer service offering.

 

The above operational improvements have delivered £7m of full year equivalent cost savings at April 2012.  The savings exceeded the original target by £2m.  The year ended 30 April 2012 benefitted from £4m of these savings, with the year ending 30 April 2013 seeing the remaining £3m benefit.

 

Since the year end all of these initiatives have become embedded and are now part of the day to day business for the UK.  Continued efficiencies will be targeted. The UK now has a solid foundation on which to grow efficiently and provide improved customer service.

 

Used vehicle sales

 

In response to the reduced vehicles on hire the UK maximised cash flow generation by reducing purchases and disposing of fleet until the desired utilisation level was achieved.

 

A total of 25,200 vehicles (2011 - 18,900 vehicles) were sold during the year.  Higher margin retail and semi retail channels accounted for 19% (2011 - 22%) of disposals.  Whilst the overall percentage has reduced, the absolute number of vehicles sold through these channels has increased by 17%, showing good progress in this area.  This has been achieved mainly as a result of the improvements in the asset management and maintenance regimes of vehicles.

 

The strong resale values for used vehicles observed in the last financial year continued in the year ended 30 April 2012.  The improvement in the values achieved and the increase in number of vehicles disposed resulted in a decrease of £22.5m (2011 - £14.2m) in the depreciation charge.

 

Depot network

 

In line with the operational improvement programme existing sites continue to be reviewed for:

 

·     Suitability, including location, size and functionality; and

·     Condition and efficiency.

 

In the current year four smaller sites have been closed, facilitated by the opening of two new larger sites.  The larger sites allow for greater customer service and operational efficiencies.  Ireland has also seen two new sites open, driven by an increase in demand outside of the Dublin area.  The number of hire locations at April 2012 was 62.

 

The UK continues to roll out the site refurbishment programme to existing locations, with eight sites completed in the year.  This investment focuses largely on workshop improvement and early indications are that efficiency in the sites has improved following the refurbishments.  This programme will continue over the next 12 months.

 

The Group will continue to look for further opportunities to invest in the network where there is an economic benefit in doing so.  This will include opportunities to establish a presence in areas of the country where we do not currently operate.

 

Spain

 

Our Spanish business has experienced another difficult year with no notable improvement in trading conditions. In this challenging economic environment strong asset management remains critical and we are pleased to report that vehicle utilisation for the year ended 30 April 2012 was 90% (2011 - 91%).

 

Continued strong fleet management, cost control, debtor management and improved used vehicle values have offset some of the fall in revenue, helping to improve the operating margin(10)to 19.1% (2011 - 18.0%).

 

Vehicle fleet and utilisation

 

The fleet size reduced from 43,500 vehicles at 30 April 2011 to 38,400 at 30 April 2012.  The average utilisation for the year was 90% (2011 - 91%).

 

During the year we purchased 11,900 vehicles (2011 - 13,400) and the average age of the fleet reduced from 25.0 months at 30 April 2011 to 21.8 months at 30 April 2012.

 

Hire rates and vehicles on hire

 

Average hire revenue per rented vehicle in the year was 1% lower than the prior year.  As in the UK the mix of vehicles on hire in Spain is being impacted by customer demand moving towards smaller vehicles. Excluding this mix impact the revenue per rented vehicle is in line with the prior year.

 

Vehicles on hire fell 5,400 in the year ended 30 April 2012, from 39,400 vehicles at 30 April 2011.  With further improvements to the vehicle disposal infrastructure and strong operational controls, Spain was able to reduce the fleet appropriately and maintain strong vehicle utilisations.

 

Depot network

 

The network infrastructure continued to be reviewed throughout the year with two sites being closed in order to tighten operational efficiency without the loss of geographical coverage, leaving the closing number of sites at 23.

 

Sector focus

 

Spain continues to diversify away from customers operating in the construction industry, with this sector's vehicles on hire accounting for 34% of vehicles on hire at 30 April 2012 compared to 37% at 30 April 2011.

 

Used vehicle sales

 

Over the past two years significant progress has been made in Spain regarding the vehicle sales capability and routes to market.  This has been complemented by the change in customer sector concentration coupled with an improved vehicle maintenance regime.

 

During the year Spain disposed of 16,800 vehicles (2011 - 19,000 vehicles). The continued improvement in resale values achieved has resulted in a reduction in the depreciation charge of €4.9m compared to a €0.2m reduction in the prior year.

 

Bad debts

 

The improvement noted last year in debtor management continued during the year.  The incidence of bad debt in Spain in the year ended 30 April 2012 was €3.2m, a €1.1m reduction on the charge in the year ended 30 April 2011 of €4.3m and €7.1m less than the charge noted in the year ended 30 April 2010.

 

Days' sales outstanding also continue to reduce due to improvements in customer profiling, controls and processes, falling from 94 days as at 30 April 2011 to 71 days at 30 April 2012.

 

 

Financial Review

 

Financial reporting

 

Group

 

A summary of the Group's underlying financial performance for 2012, with a comparison to 2011, is shown below:

 


2012

2011


£m

£m

Revenue

706.7

715.5

Operating profit(11)

105.2

105.6

Net interest expense(12)

(45.4)

(51.8)

Profit before tax(2)

59.7

53.8

Profit after tax(3)

41.9

38.5

Basic earnings per share(3)

31.5p

29.0p

Return on capital employed(1)

13.1%

11.9%

 

Group revenue in 2012 decreased by 1.2% to £706.7m (2011 - £715.5m) or 1.4% at constant exchange rates.

 

Net underlying cash generation(8) was £138.2m (2011 - £99.4m) after net capital expenditure of £133.8m (2011 - £186.1m) resulting in closing net debt(4)  of £371.3m (2011 - £529.9m). Gearing(5) improved to 105% (2011 - 163%).

 

On a statutory basis, operating profit has increased to £94.5m (2011 - £82.6m) with profit before tax increasing to £46.0m (2011 - £26.5m). Basic earnings per share increased to 30.4p (2011 - 22.1p).  Net cash from operations, including net capital expenditure on vehicles for hire, increased by £43.5m to £145.8m (2011 - £102.3m), with net debt falling by 27.2% from £529.1m at 30 April 2011 to £385.3m at 30 April 2012.  Gearing improved to 109% (2011 - 163%).

 

UK

 

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

 


2012

2011


£m

£m

Revenue



Vehicle hire

320.8

333.9

Vehicle sales

136.3

103.0


457.1

436.9




Operating profit(13)

74.4

73.6

 

Hire revenue reduced by 4% to £320.8m (2011 - £333.9m) driven by a 7% reduction in the average number of vehicles on hire, partially offset by a 3% increase in hire rates. 

 

An improvement in residual values and increased volume of used vehicles sales contributed £8.3m of the increase in operating profit.

 

The UK operating margin was as follows:

 


2012

2011




Operating margin(9)

23.2%

22.0%

 

The UK operating profit margin(9) has increased to 23.2% (2011 - 22.0%). This is due to an improvement in hire rates and used vehicle contribution as mentioned above, coupled with cost savings achieved through the restructuring of the UK business.

 

Given the continuing strength of used vehicle residual values, UK depreciation rates on vehicles for hire have been reduced by 1%, taking effect from 1 May 2012.  Based on the composition of the fleet as at 30 April 2012 this is expected to reduce the depreciation charge by £5m in the year ending 30 April 2013, which will reverse over four years as the current fleet is sold.

 

Spain

 

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

 


2012

2011


£m

£m

Revenue



Vehicle hire

182.9

203.3

Vehicle sales

66.7

75.3


249.6

278.6







Operating profit(14)

35.0

36.6

 

Hire revenue reduced by 10% due to the reduction in average vehicles on hire (10.5% at constant exchange rates).

 

An improvement in used vehicle residual values has contributed £4.2m to operating profit in the year with 16,800 vehicles sold (2011 - 19,000).

 

The Spanish operating margin was as follows:

 


2012

2011




Operating margin(10)

19.1%

18.0%

 

 

Vehicle hire revenue and operating profit(14) in 2012, expressed at constant exchange rates, would have been lower than reported by £0.9m and £0.2m respectively.

 

Adjusting for the change in mix of the fleet, revenue per rented vehicle remained stable, which demonstrates good pricing discipline in a difficult trading environment.

 

The incidence of bad debt in Spain has reduced by £1.0m to £2.7m (2011 - £3.7m), equivalent to 1.5% of rental revenue (2011 - 1.8%) despite no significant improvement in the economic environment, which demonstrates an ongoing improvement in debtor management.

 

Corporate

 

Corporate costs(15) were £4.2m compared to £4.6m in the prior year.

 

Return on capital employed

 

Group return on capital employed(1) was 13.1% compared to 11.9% in the prior year and 8.4% in 2010.  This represents a substantial improvement over the previous two years and underlines the Group's success in applying its strategy of maximising returns through strong fleet management and operational efficiency.

 

Group return on equity, calculated as profit after tax (excluding intangible amortisation, impairment of intangible assets and exceptional items) divided by average shareholders' funds, was 11.9% (2011 - 12.0%).

 

Exceptional items

 

During the year £7.0m of restructuring costs were incurred, of which £5.4m related to the UK, £1.5m related to Spain and £0.1m related to corporate costs. Other exceptional items totalled £(0.3)m.

 

During the year £3.0m of financing costs were incurred in relation to interest rate swap contracts which were cancelled.

 

Interest

 

Net finance charges for the year before exceptional items were £45.4m (2011 - £51.8m). 

 

The charge includes £6.6m of non-cash interest, primarily from borrowing fees amortised in the year (2011 - £9.4m).

 

The net cash interest charge has reduced by £3.6m to £38.8m, with a £7.5m saving as a result of the reduction in average net debt throughout the year being partially offset by a £3.8m increased cost as a consequence of higher borrowing rates for the Group in the year and a £0.1m increase due to the impact of exchange rates.

 

Taxation

 

The Group's underlying effective tax charge for its UK and overseas operations is 30% (2011 - 28%).

 

The underlying tax charge excludes the tax on intangible amortisation and exceptional items.

 

Also excluded from the underlying tax charge in the year is a £11.5m credit following settlement with the UK tax authorities on an outstanding tax matter and a charge of £2.9m to reflect the change in UK tax rates.

 

Including these items the Group's statutory effective tax charge is 12% (2011 - (11)%).

 

Earnings per share

 

Basic earnings per share ("EPS")(3), were 9% higher than the previous year at 31.5p (2011 - 29.0p).  Basic statutory earnings per share were 30.4p (2011 - 22.1p).

 

Underlying earnings for the purposes of calculating EPS(3) of £41.9m were £3.4m (9%) higher than the previous year (2011 - £38.5m).  The weighted average number of shares for the purposes of calculating EPS was 133.2m, 0.2m higher than the previous year.

 

Dividend

 

The Directors recommend the payment of a dividend of 3.0p per share in relation to the Ordinary shares for the year ended 30 April 2012 (2011 - £Nil). Subject to approval by shareholders, the dividend will be paid on 21 September 2012 to ordinary shareholders on the register as at 17 August 2012. The dividend is covered 10 times.

 

Balance sheet

 

Net tangible assets at 30 April 2012 were £353.0m (2011 - £324.4m), equivalent to a tangible net asset value of 264.9p per share (2011 - 243.5p per share). 

 

Gearing(5) at 30 April 2012 was 105% (2011 - 163%) reflecting a £159m reduction in net debt(4). This demonstrates significant progress in strengthening the balance sheet from a gearing level of 571% at 30 April 2009 and 213% at 30 April 2010.

 

Cash flow

 

A summary of the Group's cash flows is shown below:

 


2011


£m

Underlying operational cash generation

312.9

331.4

Net capital expenditure

(133.8)

(186.1)

Net taxation and interest payments

(40.9)

(45.9)

Net underlying cash generation(8)

138.2

99.4

Proceeds from issue of share capital

-

0.4

Refinancing fees

(0.1)

(10.3)

Other

(2.6)

(2.6)

Net cash generated

86.9




Opening net debt(4)

529.9

598.3

Net cash generated

(135.5)

(86.9)

Financing fees paid and amortised

4.5

6.4

Other non-cash items

2.3

3.4

Exchange differences

(29.9)

8.7

Closing net debt(4)

529.9

 

Underlying operational cash generation (as outlined in the table above) of £312.9m, coupled with tight control over capital expenditure of £133.8m have contributed to a £158.6m reduction in net debt(4) to a closing position of £371.3m.

 

A total of £306.3m was invested in new vehicles in order to replace fleet compared to £343.6m in the prior year.  The Group's new vehicle outlay was partially funded by £180.3m of cash generated from the sale of used vehicles. Other net capital expenditure amounted to £7.8m.

 

After capital expenditure, and payments of interest and tax of £40.9m, net underlying cash generation(8) was £138.2m, compared to £99.4m in the previous year.

 

Borrowing facilities

 

The Group's financing arrangements comprise committed secured facilities of £668.3m as detailed below.  As at 30 April 2012 £392.6m debt gross of £21.3m of unamortised arrangement fees was drawn against these facilities giving headroom of £275.7m(6).

 

The Group's facilities and their maturities are shown below:

 


Facility

Drawn

Headroom

Maturity


£m

£m

£m


Bank

386.5

114.7

271.8

Sept-14

US loan notes

163.1

163.1

-

Nov-12 to Dec-16

M&G loan

92.1

92.1

-

Oct-17 to Apr-19

Other loans

26.6

22.7

3.9

Up to Nov-12


668.3

392.6

275.7


 

US loan notes bear fixed interest of 8.8%.  M&G loan interest is charged at LIBOR 4.25%.  This has been swapped into fixed rate debt at a rate of 8.2%.  A proportion of bank debt is fixed at 5.1% giving an overall rate of 7.3% on our fixed rate debt.  Including floating rate debt, the overall cost of the Group's borrowings is 7.1%.

 

The margin charged on bank debt is dependent upon the Group's net debt to EBITDA ratio, and ranges from a maximum of 3.25% to a minimum of 2.25%. The net debt to EBITDA ratio at 30 April 2012 corresponds to a bank margin of 2.50%.

 

The Group made total borrowing repayments of £223m in the year.  Scheduled bank repayments of £68m are due in November 2012 before the facilities mature in September 2014.

 

US note repayments and maturities of £45m are due in November 2012, with £43m maturing in December 2013 and £75m in December 2016.

 

The M&G loan is repayable in three equal instalments in October 2017, April 2018 and April 2019.

 

There are four financial covenants(7) under the Group's facilities as follows:

 

1.  Interest cover ratio

 

A minimum ratio of earnings before interest and taxation ("EBIT") to net interest costs tested quarterly on a rolling historic 12-month basis.  The covenant ratio to be exceeded ranges between 2.00x and 2.25x.

 

Interest cover at 30 April 2012 was 2.4x (2011 - 2.1x) with EBIT headroom, all else being equal, of £17m.

 

2.  Minimum tangible net worth

 

A minimum tangible net worth (net assets excluding goodwill and intangibles), tested quarterly. This covenant has been set at 80% of the net tangible assets at 30 April 2010 as adjusted for 80% of budgeted cumulative retained profits planned at the time of refinancing.

 

Headroom at 30 April 2012 was £99m (2011 - £85m).

 

3.  Loan to value

 

A maximum ratio of total consolidated net borrowings to the book value of vehicles for hire, vehicles held for resale, trade receivables and freehold property, tested quarterly.  The covenant ratio which must not be exceeded is 70%.

 

Loan to value at 30 April 2012 was 53% (2011 - 63%) giving net debt headroom, all else being equal, of £132m.

 

4.  Debt leverage cover ratio

 

A maximum ratio of net debt to earnings before interest, tax, depreciation and amortisation ("EBITDA"), tested quarterly on a rolling historic 12-month basis.  The covenant ratio which must not be exceeded is 2.00x.

 

Debt leverage cover at 30 April 2012 was 1.3x (2011 - 1.7x) with EBITDA headroom, all else being equal, of £97m.

 

Treasury

 

The function of Group Treasury is to mitigate financial risk, to ensure sufficient liquidity is available to meet foreseeable requirements, to secure finance at minimum cost and to invest cash assets securely and profitably.  Treasury operations manage the Group's funding, liquidity and exposure to interest rate risks within a framework of policies and guidelines authorised by the Board of Directors.

 

The Group uses derivative financial instruments for risk management purposes only.  Consistent with Group policy, Group Treasury does not engage in speculative activity and it is policy to avoid using more complex financial instruments.

 

Credit risk

 

The policy followed in managing credit risk permits only minimal exposures, with banks and other institutions meeting required standards as assessed normally by reference to major credit agencies.  Our credit exposure is limited to banks which maintain an A rating.  Individual aggregate credit exposures are also limited accordingly.

 

Liquidity and funding

 

The Group has sufficient funding facilities to meet its normal funding requirements in the medium term as discussed above.  Covenants attached to those facilities as discussed above are not restrictive to the Group's operations.

 

Capital management

 

The Group's objective is to maintain a balance sheet structure that is efficient in terms of providing long term returns to shareholders and safeguards the Group's financial position through economic cycles.

 

Operating subsidiary undertakings are financed by a combination of retained earnings, loan notes, other loans and bank borrowings, including medium term bank loans.

 

The Group can choose to adjust its capital structure by varying the amount of dividends paid to shareholders, by issuing new shares or by adjusting the level of capital expenditure.  As discussed above, gearing(5) at 30 April 2012 was 105% compared to 163% at 30 April 2011.

 

Interest rate management

 

The Group's bank facilities and other loan agreements incorporate variable interest rates.  The Group seeks to manage the risks associated with fluctuating interest rates by having in place a number of financial instruments covering at least 50% of its borrowings at any time.  The proportion of gross borrowings hedged into fixed rates was 96% at 30 April 2012 (2011 - 71%).

 

Foreign exchange risk

 

The Group's reporting currency is, and the majority of its revenue (64%) is generated in pounds sterling.  The Group's principal currency translation exposure is to the Euro, as the results of operations, assets and liabilities of its Spanish and Irish businesses must be translated into Sterling to produce the Group's consolidated financial statements.

 

The average and year end exchange rates used to translate the Group's overseas operations were as follows:

 


2012

2011


£ : €

£ : €

Average

1.17

1.17

Year end

1.23

1.12

 

 

The Group manages its exposure to currency fluctuations on retranslation of the balance sheets of those subsidiary undertakings whose functional currency is in Euro by maintaining a proportion of its borrowings in the same currency.  In addition, the Group has entered into a number of GBP/EUR cross-currency swaps which are designated as net investment hedges.  The hedging objective is to reduce the risk of spot retranslation of the Euro subsidiaries from Euro to Sterling at each reporting date.  The hedges are considered highly effective in the current and prior year and the exchange differences arising on the borrowings and net investment hedges have been recognised directly within equity along with the exchange differences on retranslation of the net assets of the Euro subsidiaries.

 

The Group has in issue US dollar-denominated loan notes which bear fixed rate interest in US dollars.  The payment of this interest and the capital repayment of the loan notes at scheduled repayment dates and maturity expose the Group to foreign exchange risk.  To mitigate this risk, the Group has entered into a series of Sterling/US dollar cross-currency swaps.  The effective start dates and termination dates of these contracts are the same as the loan notes against which hedging relationships are designated.  The Group will have interest cash outflows in pounds sterling and interest cash inflows in US dollars over the life of the contracts.  On the termination date of each of the contracts, the Group will pay a principal amount in pounds sterling and receive a principal amount in US dollars.

 

Going concern 

 

In determining whether the Group's 2012 accounts should be prepared on a going concern basis the Directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowings facilities and the risks and uncertainties relating to its business activities in the current economic climate.

 

The principal risks and uncertainties of the Group are outlined below.  Measures taken by the Directors in order to mitigate those risks are also outlined.

 

The Directors have reviewed trading and cash flow forecasts as part of their going concern assessment, including reasonably possible downside sensitivities, which take into account the uncertainties in the current operating environment.

 

The Group has sufficient headroom compared to its committed borrowing facilities and against all covenants as detailed in this report.

 

Having considered all the factors above impacting the Group's businesses, including reasonably possible downside sensitivities, the Directors are satisfied that the Group will be able to operate within the terms and conditions of the Group's financing facilities for the foreseeable future.

 

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the Group's 2012 accounts.

 

Principal risks and uncertainties

 

The operation of a public company involves a number of risks and uncertainties across a full 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 financial year are set out below.

 

Economic environment

 

There is a link in our business between the demand for our products and services and the levels of economic activity in the countries in which the Group operates.  The high level of operational gearing in our business model means that changes in demand can lead to higher levels of variation in profitability.

 

The Group operates in Spain, where austerity measures have been implemented. These measures could impact on future trading volumes. The underlying macro-economic conditions have also increased the risk of customer failure, particularly in Spain, which may lead to the occurrence of increased bad debt charges.

 

The construction industry in Spain and other key markets of the Group have been particularly sensitive to the downturn in the economic climate which has led to a decline in the number of vehicles rented in recent years.

 

The Spanish business generates a large proportion of revenue from customers in the construction industry but is seeking to diversify its customer base across a range of market segments.

 

Should there be a further significant economic downturn the flexible nature of the Group's business model enables vehicles to be placed with other customers.  Alternatively, utilisation can be maintained through a combination of a decrease in vehicle purchases and increase in disposals, which although affecting short-term profitability, generates cash and reduces debt levels.

 

An economic downturn also presents opportunities to increase rentals to customers wishing to benefit from the Group's flexible renting solutions, either due to a lack of available finance or an unwillingness to commit to long term rental or outright purchase.

 

No individual customer contributes more than five per cent of total revenue generated, and ongoing credit analysis is performed on new and existing customers to assess credit risk.

 

Eurozone

 

The Group operates in and generates 35% of its revenue in Spain, where the functional currency is the euro. The risks of trading in this country are assessed in the "Economic Environment" risk.  Of the Group's net assets, £294m (2011 - £366m) are located in Spain, against which the Group holds £240m (2011 - £356m) of euro denominated borrowings providing a net investment hedge.

 

There is a possibility that Spain may leave the euro. If this occurred and Spain were to reintroduce its own national currency, the Group could be materially affected by a weakening of this currency and higher volatility on trading results when translated into sterling. Local net assets could depreciate while the Group's euro debt located in the UK could appreciate.

 

The Board has conducted a detailed review of the impact of possible scenarios that may arise from the Eurozone crisis and the risks are being continually monitored. In order to minimise the Group's net exposure to the Spanish currency, regular dividend payments of cash flow generated from the Spanish business have been implemented, and consideration is being given to increasing the level of funding to the Spanish business from locally denominated borrowings.

 

Vehicle holding costs

 

The overall holding cost of a vehicle is affected by the pricing levels of new vehicles and the disposal value of vehicles sold.

 

The Group purchases substantially all of its fleet from suppliers with no agreement for the repurchase of a vehicle at the end of its hire life cycle.  The Group is therefore exposed to fluctuations in residual values in the used vehicle market.

 

An increase in the holding cost of vehicles, if not recovered through hire rate increases, would affect profitability, shareholder returns and cash generation.

 

Risk is managed on new pricing by negotiating fixed pricing terms with manufacturers a year in advance.  Flexibility is maintained to make purchases throughout the year under variable supply terms.

 

Flexibility in our business model allows us to determine the period over which we hold a vehicle and therefore in the event of a decline in residual values we would attempt to mitigate the impact by ageing out our existing fleet.

 

Competition and hire rates

 

The Group operates in highly competitive markets with competitors often pursuing aggressive pricing actions to increase hire volumes.  The market is also fragmented with numerous competitors at a local and national level.

 

As our business is highly operationally geared, any increase or decrease in hire rates will impact profit and shareholder returns to a greater effect.

 

As the Group is focused on maximising return on capital, all hire rates must exceed certain hurdle rates.

 

Our current pricing strategy is focused on charging the correct price for the service provided and all ancillary services offered which will attract customers for whom flexible rental is the most appropriate solution but not necessarily the cheapest.  This means that the Group will be better positioned against solely price led competition going forward.

 

Access to capital

 

The Group requires capital to both replace vehicles that have reached the end of their useful life and for growth in the fleet.  Additionally, due to the level of the Group's indebtedness, a significant proportion of the Group's cash flow is required to service its debt obligations.  In order to continue to access its credit facilities the Group needs to remain in compliance with its financial covenants throughout the term of its facilities.  Current bank facilities are due to mature in September 2014 with other facilities having varying maturity dates up to April 2019.  There is a risk that the Group cannot successfully extend its facilities past this date.  Failure to access sufficient financing or meet financial covenants could potentially adversely affect the prospects of the Group.

 

Financial covenants are reviewed on a monthly basis in conjunction with cash flow forecasts to ensure on-going compliance.  If there is a shortfall in cash generated from operations and/or available under its credit facilities the Group would reduce its capital requirements.

 

The Group believes that its existing facilities provide adequate resources for present requirements.

 

The impact of access to capital on the wider risk of going concern is considered above.

 

IT systems

 

The Group's business involves a high volume of transactions and the need to track assets which are located at numerous sites. 

 

Reliance is placed upon the proper functioning of IT systems for the effective running of operations.  Any interruption to the Group's IT systems could have a materially adverse affect on its business.

 

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.

 

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

 

Change management

 

The UK and Spain businesses have undertaken restructuring programmes to improve the operational efficiency of the Group.

 

Following the successful execution of the programmes, the new processes and procedures need to be embedded into the business and applied consistently, otherwise the Group will not be in a position to achieve its objectives, and profitability and shareholder returns could be impacted.

 

The Board and its advisors conducted detailed reviews of the restructuring strategy before it commenced, and the results of each project continue to be monitored at Board level. The new processes and procedures have been communicated to all employees and risks arising are continually monitored and mitigating actions are taken when required.

 

 

(1)

Calculated as operating profit(11) divided by average capital employed, being shareholders funds plus net debt(4).

(2)

Stated before intangible amortisation of £4.0m (2011 - £4.7m), exceptional administrative expenses of £6.7m (2011 - £12.5m), impairment of intangible assets of £Nil (2011 - £5.9m) and exceptional finance costs of £3.0m (2011 - £4.2m).

(3)

Stated before intangible amortisation of £4.0m (2011 - £4.7m), exceptional administrative expenses of £6.7m (2011 - £12.5m), impairment of intangible assets of £Nil (2011 - £5.9m), exceptional finance costs of £3.0m (2011 - £4.2m) and tax on intangible amortisation, exceptional items and exceptional tax credit of £12.3m (2011 - £18.2m).

(4)

Net debt taking into account swapped exchange rates for US loan notes and M&G loan swapped into Euro being retranslated to Sterling at closing exchange rates.

(5)

Calculated as net debt(4) divided by tangible net assets with tangible net assets being net assets less goodwill and other intangible assets.

(6)

Headroom calculated as facilities of £668m less net borrowings of £392m.  Facilities and net borrowings stated taking into account the fixed swapped exchange rates for US loan notes and M&G loan swapped into Euro being retranslated to Sterling at closing exchange rates.  Net borrowings represent net debt(4) of £371m gross of £21m of unamortised arrangement fees and are stated after the deduction of £10m of cash balances, which are available to offset against borrowings.

(7)

Calculated in accordance with covenant requirements of the Group's financing arrangements.

(8)

Net increase in cash and cash equivalents before financing activities and partial recovery of acquisition cost of subsidiary undertaking. 

(9)

Calculated as operating profit(13) divided by revenue of £320.8m (2011- £333.9m), excluding vehicle sales.

(10)

Calculated as operating profit(14) divided by revenue of £182.9m (2011 -  £203.3m), excluding vehicle sales.

(11)

Stated before intangible amortisation of £4.0m (2011 - £4.7m), exceptional administrative expenses of £6.7m (2011 - £12.5m) and impairment of intangible assets of £Nil (2011 - £5.9m).

(12)

Stated before exceptional finance costs of £3.0m (2011 - £4.2m).

(13)

Excluding amortisation of intangible assets of £3.1m (2011 - £3.2m) and exceptional administrative expenses of £5.7m (2011 - £2.4m).

(14)

Excluding amortisation of intangible assets of £0.9m (2011 - £1.4m), exceptional administrative expenses of £1.7m (2011 - £9.4m) and impairment of intangible assets of £Nil (2011 - £5.9m).

(15)

Excluding exceptional administrative expenses of £(0.7)m (2011 - £0.6m).

 

CONSOLIDATED INCOME STATEMENT





 

FOR THE YEAR ENDED 30 APRIL 2012






 



Underlying

Statutory

Underlying

Statutory



2012

2012

2011

2011


Note

£000

£000

£000

£000

Revenue: hire of vehicles


503,659

503,659

537,285

537,285

Revenue: sale of vehicles


203,039

203,039

178,217

178,217

Total revenue

1

706,698

706,698

715,502

715,502

Cost of sales


(540,915)

(540,915)

(553,083)

(553,083)

Gross profit


165,783

165,783

162,419

162,419

Administrative expenses (excluding exceptional items, impairment of intangible assets and intangible amortisation)


(60,607)

(60,607)

(56,772)

(56,772)

Exceptional administrative expenses

6

-

(6,702)

-

(12,499)

Impairment of intangible assets

6

-

-

-

(5,892)

Intangible amortisation


-

(3,996)

-

(4,681)

Total administrative expenses


(60,607)

(71,305)

(56,772)

(79,844)

Operating profit

1

105,176

94,478

105,647

82,575

Interest income


165

165

848

848







Finance costs (excluding exceptional items)


(45,610)

(45,610)

(52,649)

(52,649)

Exceptional finance costs

6

-

(3,046)

-

(4,234)

Total finance costs


(45,610)

(48,656)

(52,649)

(56,883)

Profit before taxation


59,731

45,987

53,846

26,540

Taxation


(17,803)

(5,519)

(15,305)

2,853

Profit for the year


41,928

40,468

38,541

29,393

 

Profit for the year is wholly attributable to owners of the Parent Company. All results arise from continuing operations.

Underlying profit excludes exceptional items and impairment of intangible assets as set out in Note 6, 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






 



Underlying

Statutory

Underlying

Statutory


Note

2012

2012

2011

2011

Basic

2

31.5p

30.4p

29.0p

22.1p

Diluted

2

30.8p

29.7p

28.5p

21.7p

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME





 

FOR THE YEAR ENDED 30 APRIL 2012




 



2012

2011



£000

£000

Amounts attributable to owners of the Parent Company




Profit attributable to owners


40,468

29,393

 

Other comprehensive income

Foreign exchange differences on retranslation of net assets of subsidiary undertakings


(16,711)

4,645

Net foreign exchange differences on long term borrowings held as hedges


13,486

(3,727)

Deferred taxation on disposal of revalued property


5

-

Foreign exchange difference on revaluation reserve


(120)

33

Net fair value (losses) gains on cash flow hedges


(16,188)

5,386

Deferred tax credit (charge) recognised directly in equity relating to cash flow hedges


3,834

(1,559)

Actuarial losses on defined benefit pension scheme


(227)

(169)

Deferred tax credit recognised directly in equity relating to defined benefit pension scheme


60

50

Total other comprehensive income for the year


(15,861)

4,659

Total comprehensive income for the year


24,607

34,052

 

 

 

 

CONSOLIDATED BALANCE SHEET





AS AT 30 APRIL 2012








2012

2011




£000

£000

Non-current assets





Goodwill



3,589

3,589

Other intangible assets



9,591

11,809






Property, plant and equipment: vehicles for hire



623,103

714,042

Other property, plant and equipment



74,452

77,308

Total property, plant and equipment



697,555

791,350

Derivative financial instrument assets



11,249

2,155

Deferred tax assets



1,691

10,179

Total non-current assets



723,675

819,082

Current assets





Inventories



22,213

21,371

Trade and other receivables



97,278

124,623

Cash and cash equivalents



9,707

96,885

Total current assets



129,198

242,879

Total assets



852,873

1,061,961

Current liabilities





Trade and other payables



63,188

67,419

Derivative financial instrument liabilities



1,046

-

Current tax liabilities



4,150

16,712



135,558

13,578



203,942

97,709



(74,744)

145,170

Non-current liabilities





Derivative financial instrument liabilities



15,951

7,684

Long term borrowings



259,487

612,434

Deferred tax liabilities



7,357

4,233



-

142



282,795

624,493



486,737

722,202



366,136

339,759






Equity





Share capital



66,616

66,616

Share premium account



113,508

113,508

Revaluation reserve



1,189

1,363

Own shares



(685)

(1,630)

Merger reserve



67,463

67,463

Hedging reserve



(14,247)

(1,893)

Translation reserve



(7,963)

(4,738)

Capital redemption reserve



40

40



140,215

99,030



366,136

339,759

 

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

 

 

 





CONSOLIDATED CASH FLOW STATEMENT



FOR THE YEAR ENDED 30 APRIL 2012






2012

2011


Note

£000

£000

Net cash from operations

4

145,826

102,260

Investing activities




Interest received


165

848

Partial recovery of acquisition cost of subsidiary undertaking

775

-

Proceeds from disposal of other property, plant and equipment

1,876

3,295

Purchases of other property, plant and equipment

(7,705)

(4,972)

Purchases of intangible assets


(1,982)

(2,027)

Net cash used in investing activities


(6,871)

(2,856)

Financing activities




Repayments of bank loans and other borrowings

(222,592)

(175,464)

Debt issue costs paid


(86)

(10,309)

Receipt of other loan


-

100,000

Proceeds from issue of share capital


-

380

Payments to acquire own shares for share schemes

(293)

(1,676)

Termination of financial instruments


(3,046)

(896)

Net cash used in financing activities


(226,017)

(87,965)

Net (decrease) increase in cash and cash equivalents


(87,062)

11,439

Cash and cash equivalents at 1 May


96,885

85,343

Effect of foreign exchange movements


(116)

103

Cash and cash equivalents at 30 April


9,707

96,885

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 APRIL 2012


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 2010

179,744

(891)

(5,720)

(5,656)

68,833

68,796

305,106

Share options fair value charge

-

-

-

-

-

1,897

1,897

Share options exercised

-

-

-

-

-

(937)

(937)

Issue of Ordinary share capital

380

-

-

-

-

-

380

Profit attributable to owners of the Parent Company

-

-

-

-

-

29,393

29,393

Purchase of own shares

-

(1,676)

-

-

-

-

(1,676)

Transfer of shares on vesting of share options

-

937

-

-

-

-

937

Other comprehensive income

-

-

2,616

2,129

33

(119)

4,659

Transfers between equity reserves

-

-

1,211

(1,211)

-

-

-

Total equity at 1 May 2011

180,124

(1,630)

(1,893)

(4,738)

68,866

99,030

339,759

Share options fair value charge

-

-

-

-

-

2,063

2,063

Share options exercised

-

-

-

-

-

(1,238)

(1,238)

Transfer on disposal of revalued property

-

-

-

-

(54)

54

-

Profit attributable to owners of the Parent Company

-

-

-

-

-

40,468

40,468

Purchase of own shares

-

(293)

-

-

-

-

(293)

Transfer of shares on vesting of share options

-

1,238

-

-

-

-

1,238

Other comprehensive income

-

-

(1,478)

(14,101)

(120)

(162)

(15,861)

Transfers between equity reserves

-

-

(10,876)

10,876

-

-

-

Total equity at 30 April 2012

180,124

(685)

(14,247)

(7,963)

68,692

140,215

366,136









 Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.


 

 

 

 

NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2012

 

1. SEGMENTAL ANALYSIS



UK

Spain

Corporate

Total



2012

2012

2012

2012



£000

£000

£000

£000

Revenue: hire of vehicles


320,772

182,887

-

503,659

Revenue: sale of vehicles


136,312

66,727

-

203,039

Total revenue


457,084

249,614

-

706,698







Underlying operating profit (loss) *


74,402

34,989

(4,215)

105,176

Exceptional administrative expenses


(5,670)

(1,724)

692

(6,702)

Intangible amortisation


(3,135)

(861)

-

(3,996)

Operating profit (loss)


65,597

32,404

(3,523)

94,478

 



UK

Spain

Corporate

Total



2011

2011

2011

2011



£000

£000

£000

£000

Revenue: hire of vehicles


333,935

203,350

-

537,285

Revenue: sale of vehicles


102,964

75,253

-

178,217

Total revenue


436,899

278,603

-

715,502







Underlying operating profit (loss) *


73,617

36,649

(4,619)

105,647

Exceptional administrative expenses


(2,433)

(9,434)

(632)

(12,499)

Impairment of intangible assets


-

(5,892)

-

(5,892)

Intangible amortisation


(3,234)

(1,447)

-

(4,681)

Operating profit (loss)


67,950

19,876

(5,251)

82,575

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

 

2. EARNINGS PER SHARE





 


Underlying

Statutory

Underlying

Statutory

Basic and diluted earnings per share

2012

£000

2012

£000

2011

£000

2011

£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 owners of the Parent Company

41,928

40,468

38,541

29,393




 


Number

Number

Number

Number

Number of shares





Weighted average number of Ordinary shares





for the purposes of basic earnings per share

133,232,518

133,232,518

133,029,317

133,029,317

Effect of dilutive potential Ordinary shares:





- share options

3,074,242

3,074,242

2,306,309

2,306,309

Weighted average number of Ordinary shares for the purposes





of diluted earnings per share

136,306,760

136,306,760

135,335,626

135,335,626

Basic earnings per share

31.5p

30.4p

29.0p

22.1p

Diluted earnings per share

30.8p

29.7p

28.5p

21.7p




 

 

3. DIVIDENDS

No dividends were paid in the year (2011 - £Nil). The Directors propose a dividend of 3.0p per share for the year ended 30 April 2012 (2011 - £Nil), which is subject to approval at the Annual General Meeting and has not been included as a liability as at 30 April 2012.

 

4. NOTES TO THE CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 APRIL 2012 



 


2012

2011


£000

£000

Net cash from operations



Operating profit

94,478

82,575

Adjustments for:



Depreciation of property, plant and equipment

192,729

215,867

Impairment of intangible assets

-

5,892

Impairment of other property, plant and equipment

-

6,868

Exchange differences

25

69

Amortisation of intangible assets

3,997

4,681

Loss on disposal of property, plant and equipment

443

48

Share options fair value charge

2,063

1,897

Operating cash flows before movements in working capital

293,735

317,897

Decrease (increase) in non-vehicle inventories

229

(619)

Decrease in receivables

22,456

18,836

Decrease in payables

(3,539)

(4,729)

Cash generated from operations

312,881

331,385

Income taxes paid

(2,582)

(3,292)

Interest paid

(38,487)

(43,445)

Net cash generated from operations

271,812

284,648

Purchases of vehicles

(306,311)

(343,620)

Proceeds from disposal of vehicles

180,325

161,232

Net cash from operations

145,826

102,260

 

5. ANALYSIS OF CONSOLIDATED NET DEBT

 





2012

2011

 


£000

£000

 

Cash at bank and in hand

(9,707)

(96,885)

 

Bank loans

129,282

360,974

 

Loan notes

161,002

161,718

 

Other loan

97,752

97,506

 

Cumulative preference shares

500

500

 

Property loans and other borrowings

6,509

5,314

 


385,338

529,127

 

 

Net borrowings at 30 April 2012, taking into account the fixed swapped exchange rates for the loan notes and the proportion of the other loan swapped into Euro being retranslated to Sterling at closing exchange rates, are as follows:

 


2012

2011


£000

£000

Cash at bank and in hand

(9,707)

(96,885)

Bank loans

129,282

360,974

Loan notes

154,902

161,738

Other loan

89,815

98,213

Cumulative preference shares

500

500

Property loans and other borrowings

6,509

5,314


371,301

529,854

 

6. EXCEPTIONAL ITEMS




 


During the year, the Group recognised exceptional items in the income statement made up as follows:





2012

2011

 



£000

£000

 

Restructuring costs


7,034

5,583

 

Partial recovery of acquisition cost of subsidiary undertaking


(775)

-

 

Impairment of Spanish property assets


-

6,868

 

Net property losses


443

48

 

Exceptional administrative expenses


6,702

12,499

 

 




 

Impairment of Spanish intangible assets


-

5,892

 

Exceptional impairment of intangible assets


-

5,892

 





 

Termination of Euro interest rate swaps


3,046

473

 

Financing fees written off on extinguishment of debt


-

2,728

 

De-designation of Sterling interest rate swaps


-

610

 

Termination of cross-currency swaps


-

423

 

Exceptional finance costs


3,046

4,234

 

 

Total pre-tax exceptional items


9,748

22,625

 

 




 

Tax credit on exceptional items


(2,591)

(6,653)

 

Exceptional tax credit relating to prior year items


(11,505)

(4,237)

 

Exceptional tax charge to recognise change in UK tax rate


2,880

-

 

Net recognition of deferred tax assets


-

(5,928)

 

Exceptional tax credit


(11,216)

(16,818)

 

 

7. BASIS OF PREPARATION 

The results for the year ended 30 April 2012, including comparative financial information, have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and their interpretations adopted by the European Union.

 

Northgate plc ("the Company") has adopted all IFRS in issue and effective for the year.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in July 2012.

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 April 2012 or 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006.

 

The financial information presented in respect of the year ended 30 April 2012 has been prepared on a basis consistent with that presented in the annual report for the year ended 30 April 2011.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR BIGDLUDDBGDL