RNS Number : 5425Y
Northgate PLC
02 December 2014
 



2 December 2014                              

 

NORTHGATE PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2014

Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain's leading specialist in light commercial vehicle hire, announces its interim results for the half year ended 31 October 2014.

 

Financial Highlights

 

·     49% increase in underlying profit before tax(1) to £47.8m (2013 - £32.0m);

 

·     70% increase in profit before tax to £46.7m (2013 - £27.4m);

 

·     56% increase in underlying basic earnings per share(2) to 28.6p (2013 - 18.3p);

 

·     78% increase in basic earnings per share to 27.9p (2013 - 15.7p);

 

·     As expected, net debt increased by 15% to £397.0m (April 2014 - £346.1m), supporting growth in both countries:

Gearing(3) increased to 100% (April 2014 - 91%);

 

·     Return on capital employed(4) increased to 11.4% (April 2014 - 9.9%);

 

·     34% increase in interim dividend to 4.3p per share (2013 - 3.2p).

 

Operational Highlights

 

·     Vehicles on hire growth of 1,800 in the UK since 30 April 2014, including 1,100 from new sites opened since February 2013 (2013 - growth of 2,800);

 

·     Vehicles on hire growth of 1,300 in Spain since 30 April 2014 (2013 - growth of 1,200);

 

·     Four new sites opened in the UK in the half year, another opened since 31 October and three more planned by 30 April 2015;

 

·     Average utilisation over the period of 89% in the UK (2013 - 88%) and 92% in Spain (2013 - 93%);

 

·      Closing fleet of 57,000 in the UK (April 2014 - 53,900) and 40,000 in Spain (April 2014 - 37,800).

 

 

Bob Mackenzie, Chairman, commented:

 

"We are pleased by the growth delivered by the Group in the first six months of the year. This reflects the work done in recent years, in particular, supporting the continued investment being made in our people, systems and infrastructure. Our plans to open new sites in the UK are on track and trading from these new sites is exceeding our initial plans.

 

The Board remains confident that we are well positioned to deliver further growth and attractive returns to shareholders. The Group is currently trading slightly ahead of our expectations."    

 

Full statement and results attached.

 

There will be a presentation to analysts at 9.30am today at Numis, 5th floor, London Stock Exchange building, 10 Paternoster Square, London EC4M 7LT. If you have not already registered for attendance then please contact MHP Communications on the number below.

 

For further information, please contact:

 

Northgate plc                                                    01325 467558

Bob Contreras, Chief Executive

Chris Muir, Group Finance Director

 

MHP Communications                                  020 3128 8100

Andrew Jaques

Barnaby Fry

Simon Hockridge

Jack Holden

 

 

Notes to Editors:

 

Northgate plc is the leading light commercial vehicle hire business in the UK, Ireland and Spain by fleet size and has been operating in the sector since 1981.

 

Northgate's core business is the hire of light commercial vehicles to businesses on a flexible basis, giving customers the ability to manage their vehicle fleet requirements in a way which can adapt to changing business needs without the requirement to enter into a long term commitment.

 

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

www.northgateplc.com

 

 

Business Review

 

Overview


The Group had a strong first half and progress continues to be made against our strategy, which is as follows:

 

·     In the UK, the primary focus is on growing the business through our existing network and by adding new sites; and 

·     In Spain, we continue to target improved returns through operational efficiency coupled with growth.

 

The underlying performance of the first six months of the year is slightly ahead of our expectations with both vehicles on hire growth and improved margins being achieved in both the UK and Spain, with Group results as follows:

 

·     Revenue of £305.0m (2013 - £288.8m);

·     Operating profit(1) of £54.1m (2013 - £38.1m);

·     Profit before tax(1) of £47.8m (2013 - £32.0m);

·     Basic earnings per share(2) of 28.6p (2013 - 18.3p);

·     Return on capital employed(4) of 11.4% (April 2014 - 9.9%).

 

The Group's profit before tax for the six months to 31 October 2014 was adversely impacted by the weakening Euro. On a constant currency basis the profit before tax would have been £1.2m higher.

 

The largest cost to the business is the holding cost of the vehicle rental fleet. This is the difference between the purchase price and the residual value achieved at the end of the vehicle's rental life. Over the past five years the Group has developed and improved its vehicle end of rental life sales channels, which has helped both to reduce the holding costs and improve returns. As disclosed in the 2014 Annual Report, following the ongoing strength of the residual values of the vehicle hire fleet, the depreciation rates in both the UK and Spain were reduced on 1 May 2014. The impact of this change on Group operating profit for the period is an increase of £6.6m, being £4.9m in the UK and £1.7m in Spain.

 

As expected, the growth achieved in both countries led to an increase in the Group's net debt of 15% to £397.0m. Gearing(3) at 31 October 2014 was 100% (91% at 30 April 2014) and the balance sheet remains strong.  Debt leverage cover at 31 October 2014 was 1.64x, in line with our stated intention of cover between 1.25x and 2.00x.


As previously stated, Northgate recognises the importance of the dividend to investors and sets its annual dividend after taking into account the desire to have a progressive dividend, with the intention  to keep dividend cover in the range of 3.75x - 2.50x.

 

Following the 10.0p dividend for the year ended 30 April 2014, the Board has decided to pay a 4.3p (2013 - 3.2p) interim dividend in recognition of our confidence in the long term prospects of the Group. As previously proposed we would expect to pay approximately one-third of the total dividend at the interim stage and two-thirds as a final dividend.  

 

The Board remains committed to seek ways to drive growth where an appropriate level of return exists, as we believe this is key to delivering significant returns to shareholders.


UK

 

We are pleased to report that our operating margin(5) increased to 25.2% (2013 - 18.7%) and return on capital employed(4) increased to 12.7% (April 2014 - 11.2%).

 

Vehicles on hire and hire rates

 

Vehicles on hire increased from 47,600 at 30 April 2014 to 49,400 at 31 October 2014, an increase of 1,800 compared to an increase of 2,800 in the same period last year. The growth experienced in the six months to 31 October 2014 was all derived from our regional customers. 

 

The average number of vehicles on hire for the half year was 48,000, a 9% increase on the 44,000 achieved during the same period in the prior year.

 

As previously outlined, a number of improvement programmes in the commercial area of the business were implemented in the previous two years, focusing on increasing the skills, resource and support within the sales team. The initial focus of these programmes was within our regional business, which represents two-thirds of our vehicles on hire, followed by our national business.

 

There has been a 1% reduction in the average hire revenue per rented vehicle when compared to the same period last year. This has been driven by the impact of the weakening Euro (in relation to our Irish business) and by a change in our customers' behaviour, leading to less damage and therefore a decrease in workshop income per vehicle. Adjusting for these two factors, the revenue per vehicle is in line with the same period last year. 

 

Partly as a result of the reduced vehicle damage, maintenance costs were 1% lower for the six months ended 31 October 2014 compared to the same period in the prior year, despite the average fleet size being 9% higher.

 

Compared to the year ended 30 April 2014, the average revenue per vehicle in the six months to 31 October 2014 has seen a 1% increase.

 

Network

 

We identified large areas of the country where significant numbers of potential customers were not effectively serviced by an accessible Northgate site. We commenced our expansion plans in the final quarter of the year ended 30 April 2013 and opened seven sites by 30 April 2014.

 

Four more sites have been opened in the period to 31 October 2014 (South Dublin, Enfield, Watford and Southall). In addition, a further site was opened in Dartford in November 2014, bringing the total branch network to 73.

 

Progress with the new sites is encouraging with the profit levels exceeding our initial plans. The 11 sites opened since February 2013 now have 3,100 vehicles on hire, of which 1,100 have been generated in the six months to 31 October 2014.

 

The impact of the 11 sites opened since February 2013 (including the new sites project team costs) was an operating profit of £0.7m (2013 - operating loss of £1.3m). It is estimated that each of these new sites will become profitable on a trading to date basis after two years with ROCE exceeding 16% in year four as the sites reach maturity.

 

Our first focus was on establishing an enhanced branch network within the London area which provides the largest commercial opportunity. With the London footprint largely complete, we will continue the network expansion and have identified a further 17 locations across the remainder of the UK which would support a site at our required level of return.

 

We are aiming to open an average of eight to ten sites per year.  This will take the branch network to approximately 90 by 31 December 2016.

 

The existing sites achieved 1.3% growth and we believe that there is opportunity to develop this further.

 

Asset Management

 

Utilisation for the period was 89% (2013 - 88%). The fleet size in our UK business increased from 53,900 at 30 April 2014 to 57,000 at 31 October 2014. 

 

Following the decision to age the vehicle fleet in the prior year, purchases returned to expected levels and totalled 11,700 in the six months to 31 October 2014 compared to 9,400 in the same period in the prior year. The average age of the rental fleet is 20.9 months at 31 October 2014, compared to 22.3 months at 30 April 2014.

 

A total of 8,600 vehicles were sold compared to 7,600 in the six months to 31 October 2013.

 

With vehicle holding costs (depreciation) being the largest cost in the UK, the disposal of vehicles is an area where significant progress and investment has been made over the past five years.


There are three main disposal channels that are utilised in the UK: auction, trade sales and retail sales. Retail sales are where we sell our end of rental life fleet via our own Van Monster brand. Residuals are at a premium where the vehicle is sold via this channel.


In order to increase the number and percentage of vehicles being sold via this channel we have implemented the following initiatives over the past five years:

 

·     Increased Van Monster retail outlets from seven in April 2009 to 11 at 31 October 2014;

·     Increased brand and customer reach through investment in online marketing;

·     The introduction of seven centres across the UK, where all defleeted rental vehicles are sent and their disposal channel selection is  made by experienced vehicles sales professionals; and

·     Customer profiling and pricing to attract rental customers who ultimately use the vehicle in such a way that the whole life holding costs are minimised and returns maximised.


Looking at progress since the year ended April 2009, the percentage sold via the more profitable retail channel has increased from 18% to 29% in the six months to October 2014. In the same period last year 24% were sold via this channel.

 

The UK has also aged the rental fleet from an average age of 19.4 months at 30 April 2009 to 20.9 months at 31 October 2014. With the fall in residual value being steeper at the earlier stages of a vehicle's life, ageing of the fleet over the past five years has reduced the average monthly holding cost.


Spain

 

The Spanish economy has started to show small signs of improvement and our Spanish business is well positioned to take advantage of this if it continues. Notwithstanding this we believe our product proposition is well suited to SMEs who struggle to obtain bank financing and appreciate the flexibility and service we provide. Growth, coupled with improved asset management and operational efficiency, led to an  operating margin(6) increase to 22.9% (2013 - 16.6%) and return on capital employed(4) to 10.6% (April 2014 - 9.2%).

 

Vehicles on hire and hire rates

 

Vehicles on hire have increased by 1,300 in the six months to 31 October 2014 compared to an increase of 1,200 in the same period last year. Whilst we do experience seasonality in our Spanish business it is pleasing to see that the continued efforts in the commercial area of the business have led to sustained growth. This has been achieved by a focus on the SME sector where we have seen a wider recognition and acceptance of our product proposition, and through an increased sales force and marketing spend. This has also resulted in customer numbers continuing to increase, growing by 12% since 30 April 2014.

 

The average number of vehicles on hire for the half year was 36,200, a 9% increase on the 33,100 achieved during the same period in the prior year.

 

After adjusting for fleet mix, average hire revenue per rented vehicle has fallen by 1% compared to the same period last year. This reduction has been mitigated by an increasing proportion of customers operating our fleet in such a way that running costs are reduced and residual values are increased.

 

As a result of a change in our customer profile and productivity improvements our vehicle maintenance costs were 3% lower for the six months ended 31 October 2014 compared to the same period in the prior year, despite the average fleet size being 10% higher.

 

Asset Management 

 

Utilisation for the period was 92% (2013 - 93%). The fleet size in our Spanish operation increased from 37,800 at 30 April 2014 to 40,000 at 31 October 2014. In the six months to 31 October 2014, 7,100 vehicles have been purchased compared to 5,100 in the same period last year. The average age of the rental fleet is 23.7 months at 31 October 2014, compared to 24.3 months at 30 April 2014.

 

A total of 4,100 vehicles were sold compared to 3,700 in the six months to 31 October 2013.

 

As with the UK business the vehicle holding cost (depreciation) is the largest cost in Spain. There are four main disposal channels that are open to Spain: auction, trade sales, export and retail sales.  As in the UK, retail sales are made via our Van Monster brand and attract higher residual values.


In order to increase the number and percentage of vehicles being sold via this channel the following has occurred over the past five years:

 

·     Increased Van Monster retail outlets from one in April 2009 to eight at 31 October 2014;

·     Increased brand and customer reach via investment in online marketing; and

·     Customer profiling and pricing to attract rental customers who ultimately use the vehicle in such a way that the whole life holding costs are minimised.


Due to the lower number and concentration of vehicle hire sites in Spain, we do not require the defleet centres that the UK operates as the relevant expertise is available at all sites.


Looking at progress since the year ended April 2009, the percentage sold via the more profitable retail channel has increased from 4% to 17% in the six months to October 2014. In the same period last year 17% were sold via the retail channel.

 

Current trading and outlook

 

We are pleased by the growth delivered by the Group in the first six months of the year. This reflects the work done in recent years, in particular, supporting the continued investment being made in our people, systems and infrastructure. Our plans to open new sites in the UK are on track and trading from these new sites is exceeding our initial plans.

 

The Board remains confident that we are well positioned to deliver further growth and attractive returns to shareholders. The Group is currently trading slightly ahead of our expectations.

 

 

Financial Review

 

Group

 

A summary of the Group's underlying financial performance for the six months to 31 October 2014 with a comparison to the prior year period is shown below:

 


6 months to

6 months to


31 Oct 2014

31 Oct 2013


£m

£m

Revenue

305.0

288.8

Operating profit(1)

54.1

38.1

Net interest expense

(6.3)

(6.1)

Profit before tax(1)

47.8

32.0

Profit after tax(2)

38.1

24.4

Basic earnings per share(2)

28.6p

18.3p

Return on capital employed(4)

11.4%

10.5%

Net cash (used)/generated(7)

(40.3)

3.9

 

Group revenue in the six months to 31 October 2014 increased by 5.6% to £305.0m (2013 - £288.8m) or 8.2% at constant exchange rates.

 

Due to the growth in fleet since 30 April 2014, there was a net cash outflow(7) of £40.3m (2013 - £3.9m inflow) after net capital expenditure of £142.7m (2013 - £102.4m) resulting in closing net debt of £397.0m (April 2014 - £346.1m).

 

On a statutory basis, operating profit, stated after intangible amortisation and exceptional items, has increased to £53.0m (2013 - £33.5m) with profit before tax increasing to £46.7m (2013 - £27.4m). Basic earnings per share increased to 27.9p (2013 - 15.7p). Net cash from operations, including net capital expenditure on vehicles for hire, was an outflow of £39.6m (2013 - £6.8m inflow).

 

As noted in the 2014 Annual Report and Accounts, in line with International Accounting Standards the residual value and useful life of an asset should be reviewed at least each financial year end and, if expectations differ from previous estimates, the changes should be accounted for as a change in an accounting estimate.

 

When this review was performed at year end the strength of the residual values being achieved in both segments over the past five years led to a change in the vehicle depreciation rate. This was primarily as a result of improvements in our management of vehicle disposal channels.  The impact of this change on Group operating profit for the period is an increase of £6.6m, being £4.9m in the UK and £1.7m in Spain.

 

UK

 


6 months to

6 months to


31 Oct 2014

31 Oct 2013


£m

£m

Revenue



Vehicle hire

154.0

145.1

Vehicle sales

57.7

48.6


211.7

193.7




Operating profit(8)

38.7

27.2




Operating margin(5)

25.2%

18.7%

 

An increase in total hire revenue of 6.1% (6.5% increase at constant exchange rates) was mainly driven by an increase in the average number of vehicles on hire of 9.1%, being partially offset by a 2.5% decrease in revenue per vehicle. 1.9% of this decrease in revenue per vehicle was driven by a reduction in fleet management income, with the remainder being due to a reduction in damage income.

 

As disclosed in the 2014 Annual Report, following the ongoing strength of the residual values of the vehicle hire fleet, the depreciation rates in the UK were reduced on 1 May 2014. The impact of this change on the UK operating profit for the period is an increase of £4.9m.

 

The increased volumes sold, coupled with the continuation of strong resale values, led to a £14.1m reduction in the depreciation charge (2013 - £10.2m).

 

The bad debt charge for the period was £1.1m, in line with the prior year. Days sales outstanding were 39 days, in line with that at 30 April 2014.  As a percentage of revenue the bad debt charge for the period was 0.7%.

 

Spain

 


6 months to

6 months to


31 Oct 2014

31 Oct 2013


£m

£m

Revenue



Vehicle hire

76.0

76.9

Vehicle sales

17.3

18.2


93.3

95.1




Operating profit(9)

17.4

12.8

Operating margin(6)

22.9%

16.6%




 

 

A decrease in hire revenue of 1.1% (6.3% increase at constant exchange rates) was due to a 9.4% increase in average vehicles on hire and a 2.9% reduction in average hire revenue per vehicle. After adjusting for changes to vehicle mix the reduction in average revenue per vehicle was 1.5%.

 

Vehicle hire revenue and profit from operations in the period have suffered from a movement in exchange rates compared to the same period last year, by £5.7m and £1.3m respectively.

 

As disclosed in the 2014 Annual Report, following the ongoing strength of the residual values of the vehicle hire fleet, the depreciation rates in Spain were reduced on 1 May 2014. The impact of this change on the Spain operating profit for the period is an increase of £1.7m.

 

An improvement in used vehicle residual values together with the increased number of vehicles sold resulted in a decrease of £4.9m to the depreciation charge (2013 - £2.4m).

 

The bad debt charge in the period was £0.2m, compared to a charge of £0.6m in the same period last year. Days sales outstanding continue to reduce, falling from 54 days at 30 April 2014 to 51 days at 31 October 2014.

 

Corporate

 

Corporate costs(10) were £2.0m in the six months to 31 October 2014 compared to £1.8m in the same period last year.

 

Interest

 

Net finance charges for the six months to 31 October 2014 were £6.3m (2013 - £6.1m). 

 

The charge has increased due to increased levels of debt, increased non-utilisation fees as a result of the size of the expanded facility and non-cash interest in relation to the arrangement fees on the revised facility. However, this has been largely offset by a reduction in rate on the new facilities coupled with a favourable exchange rate.

 

Taxation

 

The Group's underlying effective tax charge for its UK and overseas operations is 20% (2013 - 24%).

 

The underlying tax charge excludes the tax on intangible amortisation and exceptional items of £0.2m (2013 - £1.1m). Including these items does not produce a change in the Group's effective tax rate.

 

Earnings per share

 

Basic earnings per share (EPS)(2), were 56% higher than the previous period at 28.6p (2013 - 18.3p).  Basic statutory earnings per share were 27.9p (2013 - 15.7p). 

 

The weighted average number of shares for the purposes of EPS was 133m (2013 - 133m).

 

Dividend

 

The Directors have decided to pay an interim dividend of 4.3p per share in relation to the Ordinary shares for the six months ended 31 October 2014 (2013 - 3.2p). This represents a cash outflow to the Group of £5.7m. The interim dividend will be paid on 12 January 2015 to shareholders on the register at the close of business on 12 December 2014.

 

Cash flow and net debt

 

Net cash used(7) was £40.3m (2013 - £3.9m generated) after net capital expenditure of £142.7m (2013 - £102.4m), resulting in closing net debt of £397.0m (April 2014 - £346.1m).

 

Net capital expenditure included purchases of vehicles of £206.1m (2013 - £158.1m) and proceeds from sales of vehicles of £64.1m (2013 - £58.6m). 

 

In addition, £9.0m of dividend payments (2013 -£8.0m) and £10.6m of payments to acquire own shares for share option schemes (2013 - £2.1m) were made. The impact of exchange rate movements since 30 April 2014 reduced net debt by £10.8m.

 

Debt leverage cover at 31 October 2014 was 1.64x, in line with our stated intention of cover between 1.25x and 2.00x.  At 31 October 2014 there was headroom(11) of £139.6m against committed facilities of £538.4m.

 

Balance sheet

 

Net tangible assets at 31 October 2014 were £396.7m (April 2014 - £381.7m), equivalent to a tangible net asset value of 297.7p per share (April 2014 - 286.5p per share). 

 

Gearing(3) at 31 October 2014 was 100% (April 2014 - 91%).

 

Return on capital employed

 

Group return on capital employed(4) was 11.4% compared to 10.5% in the equivalent six months last year and 9.9% in the year ended 30 April 2014.

 

Group return on equity, calculated as profit after tax (excluding intangible amortisation, exceptional administrative expenses and taxation thereon) divided by average shareholders' funds, was 15.4% (April 2014 - 12.4%).

 

Risks and uncertainties

 

The Board and the Group's management have clearly defined responsibility for identifying the major business risks facing the Group and for developing systems to mitigate and manage those risks.

 

The principal risks and uncertainties facing the Group at 30 April 2014 were set out in detail on pages 28 and 29 of the 2014 Annual Report, a copy of which is available at www.northgateplc.com, and were identified as:

 

·     Economic environment;

·     Vehicle holding costs;

·     Competition and hire rates;

·     Access to capital; and

·     IT systems.

 

These principal risks have not changed since the last Annual Report and continue to be those that could impact the Group during the second half of the current financial year.

 

In addition to the risks outlined above, the going concern assumption is considered in Note 1 to the condensed financial statements for the six months ended 31 October 2014.

 

 

 (1)     Stated before intangible amortisation of £1.1m (2013 - £1.5m) and exceptional administrative expenses of £Nil(2013 - £3.1m).

(2)      Stated before intangible amortisation of £1.1m (2013 - £1.5m), exceptional administrative expenses of £Nil(2013 - £3.1m) and tax credit on intangible amortisation of £0.2m (2013 - £1.1m).

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

 (4)     Calculated as rolling 12 month operating profit (excluding intangible amortisation and exceptional administrative expenses) divided by average capital employed, being shareholders' funds plus net debt.

 (5)   Calculated as operating profit(8) divided by revenue of £154.0m (2013 - £145.1m), excluding vehicle sales.

(6)    Calculated as operating profit(9) divided by revenue of £76.0m (2013 - £76.9m), excluding vehicle sales.

(7)    Net (decrease)/increase in cash and cash equivalents before financing activities. 

(8)    Excluding intangible amortisation of £1.0m (2013 - £1.2m) and exceptional administrative expenses of £Nil (2013 - £2.9m). 

(9)    Excluding intangible amortisation of £0.0m (2013 - £0.3m), exceptional administrative expenses of £Nil (2013 - £0.2m) and a brand royalty charge of £2.5m (2013 - £Nil). 

(10)  Excluding a brand royalty credit of £2.5m (2013 - £Nil).

(11)    Headroom calculated as facilities of £538.4m less net borrowings of £398.8m. Net borrowings represent net debt of £397.0m gross of £1.8m of unamortised arrangement fees and are stated after the deduction of £32.6m of cash balances which are available to offset against borrowings.

 

 

 

 

 

 

 



 

 

Condensed consolidated income statement 





for the six months ended 31 October 2014 






Six months

Six months

Six months

Six months

Year to

Year to



to 31.10.14

to 31.10.14

to 31.10.13

to 31.10.13

30.04.14

30.04.14



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

(Audited)



Underlying

Statutory

Underlying

Statutory

Underlying

Statutory


Note

£000

£000

£000

£000

£000

£000

Revenue: hire of vehicles

2

229,996

229,996

221,979

221,979

442,271

442,271

Revenue: sale of vehicles

2

74,956

74,956

66,801

66,801

129,207

129,207

Total revenue

2

304,952

304,952

288,780

288,780

571,478

571,478

Cost of sales


(218,185)

(218,185)

(219,107)

(219,107)

(434,777)

(434,777)

Gross profit


86,767

86,767

69,673

69,673

136,701

136,701

Administrative expenses (excluding exceptional items and intangible amortisation)


(32,668)

(32,668)

(31,570)

(31,570)

(64,065)

(64,065)

Exceptional administrative expenses

8

-

          -

-

(3,097)

-

(6,197)

Intangible amortisation


-

(1,059)

-

(1,492)

-

(2,900)

Total administrative expenses


(32,668)

(33,727)

(31,570)

(36,159)

(64,065)

(73,162)

Operating profit

2

54,099

53,040

38,103

33,514

72,636

63,539

Interest income


1

1

1

1

24

24

Finance costs


(6,348)

(6,348)

(6,074)

(6,074)

(12,386)

(12,386)

Profit before taxation


47,752

46,693

32,030

27,441

60,274

51,177

Taxation

3

(9,695)

(9,471)

(7,667)

(6,584)

(13,456)

(11,294)

Profit for the period


38,057

37,222

24,363

20,857

46,818

39,883

 

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

Underlying profit excludes exceptional items as set out in Note 8, 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

28.6p

27.9p

18.3p

15.7p

35.1p

29.9p

Diluted

4

28.0p

27.4p

18.0p

15.4p

34.3p

29.3p

 

 

 

Condensed consolidated statement of comprehensive income






for the six months ended 31 October 2014







Six months

Six months

Year to



to 31.10.14

to 31.10.13

30.04.14



(Unaudited)

(Unaudited)

 (Audited)



£000

£000

£000

Amounts attributable to owners of the Parent Company





Profit attributable to owners


37,222

20,857

    39,883

 

Other comprehensive (expense) income

Foreign exchange differences on retranslation of net assets of subsidiary undertakings


(6,427)

1,168

     (3,589)

Net foreign exchange differences on long term borrowings held as hedges


 3,449

(818)

     1,772

Foreign exchange difference on revaluation reserve


(51)

8

     (32)

Net fair value (losses) gains on cash flow hedges


(1,417)

481

      48

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


298

(110)

       (10)

Actuarial losses on defined benefit pension scheme *


             -

(161)

    (199)

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


            -

37

     42

Total other comprehensive (expense) income for the period


(4,148)

605

  (1,968)

Total comprehensive income for the period


33,074

21,462

    37,915

 

* These items will not be reclassified subsequently to the consolidated income statement.

 

 

 

Condensed consolidated balance sheet




31 October 2014









31.10.14

31.10.13

30.04.14




(Unaudited)

(Unaudited)

(Audited)



Note

£000

£000

£000

Non-current assets






Goodwill



3,589

3,589

3,589

Other intangible assets



4,774

6,315

5,467







Property, plant and equipment: vehicles for hire



673,229

617,834

614,927

Other property, plant and equipment



68,921

78,256

73,575

Total property, plant and equipment



742,150

696,090

688,502

Derivative financial instrument assets


9

325

547

712

Deferred tax assets



5,922

6,879

9,396

Total non-current assets



756,760

713,420

707,666

Current assets






Inventories



22,018

15,000

19,076

Trade and other receivables



83,986

82,933

78,861

Cash and cash equivalents



32,623

7,155

19,056

Total current assets



138,627

105,088

116,993

Total assets



895,387

818,508

824,659

Current liabilities






Trade and other payables



52,566

51,067

58,931

Current tax liabilities



6,513

9,573

6,320

Short term borrowings



10,045

6,252

7,465

Total current liabilities



69,124

66,892

72,716

Net current assets



69,503

38,196

44,277

Non-current liabilities






Derivative financial instrument liabilities


9

1,694

66

664

Long term borrowings



419,532

371,309

357,668

Deferred tax liabilities



       -

1,551

2,878

Total non-current liabilities



421,226

372,926

361,210

Total liabilities



490,350

439,818

433,926

NET ASSETS



405,037

378,690

390,733







Equity






Share capital



66,616

66,616

66,616

Share premium account



113,508

113,508

113,508

Revaluation reserve



1,031

1,243

1,082

Own shares



(10,017)

(462)

(653)

Merger reserve



67,463

67,463

67,463

Hedging reserve



(1,730)

(278)

(611)

Translation reserve



(10,165)

(5,020)

(7,187)

Capital redemption reserve



40

40

40

Retained earnings



178,291

135,580

150,475

TOTAL EQUITY



405,037

378,690

390,733

 

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

 

 

 






Condensed consolidated cash flow statement




for the six months ended 31 October 2014







Six months

Six months

Year to



to 31.10.14

to 31.10.13

30.04.14



(Unaudited)

(Unaudited)

(Audited)


 Note

£000

£000

£000

Net cash (used in) generated from operations

6

(39,647)

6,807

30,723

Investing activities





Interest received


1

1

24

Proceeds from disposal of other property, plant and equipment

1,897

-

1,182

Purchases of other property, plant and equipment

(2,195)

(2,522)

(5,509)

Purchases of intangible assets


(366)

(382)

(945)

Net cash used in investing activities


(663)

(2,903)

(5,248)

Financing activities





Receipt of bank loans

87,547

-

1,140

Repayments of bank loans and other borrowings

   (12,058)

(1,642)

(7,469)

Debt issue costs paid


(2,043)

-

-

Dividend paid

(8,968)

(7,977)

(12,234)

Payments to acquire own shares for share schemes


(10,573)

(2,096)

(2,803)

Net cash generated from (used in) financing activities


      53,905

(11,715)

(21,366)

Net increase (decrease) in cash and cash equivalents


   13,595

   (7,811)

4,109

Cash and cash equivalents at beginning of the period


     19,056

14,962

14,962

Effect of foreign exchange movements


(28)

             4

(15)

Cash and cash equivalents at the end of the period


32,623

7,155

19,056

 

 

 

Condensed consolidated statement of changes in equity

for the six months ended 31 October 2014


Share capital  and share premium

 

 

Own shares

Hedging reserve

Translation reserve

Other reserves

Retained earnings

Total


£000

£000

£000

£000

£000

£000

£000

180,124

(303)

(649)

(5,370)

68,738

124,112

366,652

Share options fair value charge

-

-

-

-

-

649

649

Share options exercised

-

-

-

-

-

(1,937)

(1,937)

Profit attributable to owners of the Parent Company

-

-

-

-

-

20,857

20,857

Dividend paid

-

-

-

-

-

(7,977)

(7,977)

Purchase of own shares

-

(2,096)

-

-

-

-

(2,096)

Transfer of shares on vesting of share options

-

1,937

-

-

-

-

1,937

Other comprehensive income (expense)

-

-

371

350

8

(124)

605

Total equity at 1 November 2013

180,124

(462)

(278)

(5,020)

68,746

135,580

378,690

Share options fair value charge

-

-

-

-

-

554

554

Share options exercised

-

-

-

-

-

(516)

(516)

Profit attributable to owners of the Parent Company

-

-

-

-

-

19,026

19,026

Dividend paid

-

-

-

-

-

(4,257)

(4,257)

Purchase of own shares

-

(707)

-

-

-

-

(707)

Transfer of shares on vesting of share options

-

516

-

-

-

-

516

Other comprehensive expense

-

-

(333)

(2,167)

(40)

(33)

(2,573)

Transfers between equity reserves

-

-

-

-

(121)

121

-

180,124

(653)

(611)

(7,187)

68,585

150,475

390,733

Share options fair value charge

-

-

-

-

-

771

771

Share options exercised

-

          -

-

-

-

(1,209)

(1,209)

Profit attributable to owners of the Parent Company

-

-

-

-

-

37,222

37,222

Dividend paid

-

-

-

-

-

(8,968)

(8,968)

Purchase of own shares

-

(10,573)

-

-

-

-

(10,573)

Transfer of shares on vesting of share options

-

1,209

-

-

-

-

1,209

Other comprehensive expense

-

-

(1,119)

(2,978)

(51)

       -

  (4,148)

Total equity at 31 October 2014

180,124

(10,017)

(1,730)

  (10,165)

68,534

178,291

405,037









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 1 December 2014.


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

 

The interim financial information for the six months ended 31 October 2014, 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 IAS 34 (Interim Financial Reporting), as issued by the International Accounting Standards Board and adopted by the European Union.

 

In the current financial period, the Group has adopted the amendments to IAS 32 "Financial Instruments: Presentation", IAS 36 "Impairment of assets" and IAS 39 "Financial Instruments: Recognition and Measurement".

 

The amendments to IAS 32 seek to clarify the diversity in application of the requirements on offsetting financial assets and financial liabilities.

 

The amendments to IAS 36 reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed and affect presentation only.

 

The amendments to IAS 39 make it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided that certain criteria are met.

 

The adoption of the above amendments has not had a material impact on the condensed financial statements of the Group.

 

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 2014.

 

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 including the uncertainty in the economic environment in the UK and Spain, 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 2014 Annual Report

The financial figures for the year ended 30 April 2014, 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 2014 were prepared under IFRS and have been delivered to the Registrar of Companies. The auditor reported on those accounts.  The report was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.

 

 


 

 

2. Segmental analysis

Management has determined the operating segments based upon the information provided to the 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 two main operating divisions, UK and Spain. The UK division includes operations in the Republic of Ireland. The principal activities of these divisions are set out in the Business Review and Financial Review.

 



UK

Spain

Corporate

Total



Six months

Six months

Six months

Six months



to 31.10.14

to 31.10.14

to 31.10.14

to 31.10.14



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)



£000

£000

£000

£000

Revenue: hire of vehicles


154,012

75,984

-

229,996

Revenue: sale of vehicles


57,690

17,266

-

74,956

Total revenue


211,702

93,250

-

304,952







Underlying operating profit (loss) *


38,742

17,370

(2,013)

54,099

Brand royalty charge


-

(2,548)

2,548

                   -

Intangible amortisation


(1,022)

(22)

(15)

(1,059)

Operating profit


37,720

14,800

520

53,040

Interest income





1

Finance costs





(6,348)

Profit before taxation





46,693

 



UK

Spain

Corporate

Total



Six months

Six months

Six months

Six months



to 31.10.13

to 31.10.13

to 31.10.13

to 31.10.13



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)



£000

£000

£000

£000

Revenue: hire of vehicles


145,122

76,857

-

221,979

Revenue: sale of vehicles


48,600

18,201

-

66,801

Total revenue


193,722

95,058

-

288,780







Underlying operating profit (loss) *


27,170

12,782

(1,849)

38,103

Exceptional administrative expenses


(2,942)

(155)

-

(3,097)

Intangible amortisation


(1,182)

(295)

(15)

(1,492)

Operating profit (loss)


23,046

12,332

(1,864)

33,514

Interest income





1

Finance costs





(6,074)

Profit before taxation





27,441

 

 



UK

Spain

Corporate

Total



Year to

Year to

Year to

Year to



30.04.14

30.04.14

30.04.14

30.04.14



(Audited)

(Audited)

(Audited)

(Audited)



£000

£000

£000

£000

Revenue: hire of vehicles


292,393

149,878

-

442,271

Revenue: sale of vehicles


90,660

38,547

-

129,207

Total revenue


383,053

188,425

-

571,478







Underlying operating profit (loss) *


51,007

25,555

(3,926)

72,636

Exceptional administrative expenses


(5,450)

(626)

(121)

(6,197)

Brand royalty charge


                   -

(5,029)

5,029

           -

Intangible amortisation


(2,284)

(586)

(30)

(2,900)

Operating profit


43,273

19,314

      952

63,539

Interest income





24

Finance costs





(12,386)

Profit before taxation





51,177

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

3. Taxation

The charge for taxation for the six months to 31 October 2014 is based on the estimated effective rate for the year ending 30 April 2015.

 

 

4. Earnings per share

 








Six months

Six months

Six months

Six months

Year to

Year to


to 31.10.14

to 31.10.14

to 31.10.13

to 31.10.13

30.04.14

30.04.14


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

(Audited)


Underlying

Statutory

Underlying

Statutory

Underlying

Statutory

Basic and diluted earnings per share

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000








The calculation of basic and diluted earnings per share is based on the following data:







Earnings







Earnings for the purposes of basic and diluted earnings per share,







being net profit attributable to owners of the Parent Company

38,057

37,222

24,363

20,857

46,818

39,883






 

Number of shares

Number

Number

Number

Number

Number

Number

Weighted average number of Ordinary shares for the purpose







of basic earnings per share

133,232,518

133,232,518

133,232,518

133,232,518

133,232,518

133,232,518

Effect of dilutive potential Ordinary shares:







- share options

2,808,474

2,808,474

2,421,510

2,421,510

3,072,264

3,072,264

Weighted average number of Ordinary shares for the purpose







of diluted earnings per share

136,040,992

136,040,992

135,654,028

135,654,028

136,304,782

136,304,782

Basic earnings per share

28.6p

27.9p

18.3p

15.7p

35.1p

29.9p

Diluted earnings per share

28.0p

27.4p

18.0p

15.4p

34.3p

29.3p






 

5. Dividends

In the six months to 31 October 2014, a dividend of £8,968,000 was paid (2013 - £7,977,000). The Directors have declared a dividend of 4.3p per share for the six months ended 31 October 2014 (2013 - 3.2p).

6. Notes to the cash flow statement






Six months

Six months

Year to


to 31.10.14

to 31.10.13

30.04.14


(Unaudited)

(Unaudited)

(Audited)

Net cash (used in) generated from operations

£000

£000

£000

Operating profit

53,040

33,514

63,539

Adjustments for:




Depreciation of property, plant and equipment

72,777

81,243

165,327

Impairment of property, plant and equipment

-

-

1,916

Exchange differences

(50)

(1)

           7

Amortisation of intangible assets

1,059

1,495

2,900

Loss on disposal of property, plant and equipment

-

-

51

Share options fair value charge

771

649

1,203

Operating cash flows before movements in working capital

127,597

116,900

234,943

Increase in non-vehicle inventories

(240)

(516)

(1,637)

Increase in receivables

(5,863)

(4,120)

(1,172)

(Decrease) increase in payables

(4,609)

(5,496)

       3,315

Cash generated from operations

116,885

106,768

235,449

Income taxes (paid) refunded, net

(8,400)

4,437

(4,338)

Interest paid

(6,123)

(4,946)

(11,302)

Net cash generated from operations

102,362

106,259

219,809

Purchases of vehicles

(206,095)

(158,096)

(301,365)

Proceeds from disposal of vehicles

64,086

58,644

112,279

Net cash (used in) generated from operations

(39,647)

6,807

30,723

 

 

 

7. Analysis of consolidated net debt

 






31.10.14

31.10.13

30.04.14

 


(Unaudited)

(Unaudited)

(Audited)

 


£000

£000

£000

 

Cash at bank and in hand

(32,623)

(7,155)

(19,056)

 

Bank loans

426,629

375,692

363,819

 

Cumulative preference shares

500

500

500

 

Property loans and other borrowings

2,448

1,369

814

 


396,954

370,406

346,077

 

 

 

8. Exceptional items





 



During the period no exceptional items were recognised:






Six months

Six months

Year to

 



to 31.10.14

to 31.10.13

30.04.14

 



(Unaudited)

(Unaudited)

(Audited)

 



£000

£000

£000

 

Restructuring costs


-

841

1,826

 

Impairment of property


-

-

1,916

 

Defined benefit pension scheme buyout


-

2,256

2,404

 

Net property losses


-

-

51

 

Exceptional administrative expenses


-

3,097

6,197

 

 

Total pre-tax exceptional items


-

3,097

6,197

 






 

Tax credit on exceptional items


                      -

(722)

(1,458)

 

 

 

9. Derivative financial instruments





 



At the balance sheet date, the Group held the following financial instruments at fair value:






31.10.14

31.10.13

30.04.14

 



(Unaudited)

(Unaudited)

(Audited)

 



£000

£000

£000

 

Non-current derivative financial instrument assets


325

547

712

 

Non-current derivative financial instrument liabilities


(1,694)

      (66)

(664)

 



(1,369)

481

48

 

The derivative financial instruments above all have fair values which are calculated by reference to observable inputs (i.e. classified as level 2 in the fair value hierarchy). They are valued using the discounted cash flow technique with an appropriate adjustment for counterparty credit risk. The valuations incorporate the following inputs:

·      interest rates and yield curves observable at commonly quoted intervals;

·      commonly quoted spot and forward foreign exchange rates; and

·      observable credit spreads.

The carrying value of financial assets and liabilities recorded at amortised cost in the financial statements are approximately equal to their fair value.

 

 

Interim announcement - Statement of the Directors

 

We confirm that to the best of our knowledge:

 

·      the condensed set of financial statements has been prepared in accordance with IAS 34;

·      the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

·      the interim management report includes a fair review of the information required by DTR 4.2.8 (disclosure of related party transactions and changes therein).

 

By order of the Board

 

 

                                                                                                               

 

C J R Muir

Group Finance Director

1 December 2014

 

 

 

 

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 2014 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 equityand related Notes 1 to 9.  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 Conduct 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 2014 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 Conduct Authority.

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

Leeds, United Kingdom

1 December 2014


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