RNS Number : 5806R
Northgate PLC
30 June 2015
 



30 June 2015                          

 

NORTHGATE PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2015

 

Strong results, continued growth in both the UK and Spain and significant increase in dividend

 

Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain's leading specialist in light commercial vehicle hire, announces its preliminary results for the year ended 30 April 2015.

 

Financial Highlights

 

·     Increase in underlying profit before tax(1) to £85.0m (2014 - £60.3m):

£11.4m benefit from the change in vehicle depreciation rates;

£2.6m adverse effect of the weakening Euro;

 

·     Increase in profit before tax to £83.0m (2014 - £51.2m);

 

·     Increase in underlying basic earnings per share(2) to 51.0p (2014 - 35.1p);

 

·     Increase in basic earnings per share to 50.1p (2014 - 29.9p);

 

·     Net debt decreased to £337.8m (April 2014 - £346.1m), benefitting from the weakening Euro rate;

 

·     Return on capital employed(3) increased to 13.0% (April 2014 - 9.9%);

 

·     45% increase in dividend per share to 14.5p (2014 - 10.0p):

Final dividend 10.2p (2014 - 6.8p).

 

 

Operational Highlights

 

·     Vehicles on hire growth of 1,000 in the UK since 30 April 2014 (2014 - 4,500);

 

·     Vehicles on hire growth of 900 in Spain since 30 April 2014 (2014 - 2,600);

 

·     Eight new sites opened in the UK since 30 April 2014;

 

·     Average utilisation over the period of 88% in the UK (2014 - 88%) and 91% in Spain (2014 - 92%);

 

·     Closing fleet of 56,100 in the UK (April 2014 - 53,900) and 39,400 in Spain (April 2014 - 37,800);

 

·     Improved customer satisfaction in both the UK and Spain as measured by an increase in Net Promoter Score.

 

Bob Contreras, Chief Executive, commented:

 

"It's been another year of progress across the Group and it's pleasing to see this translate into a strong set of results. We remain particularly focused on targeting growth with small and medium sized customers across the UK and Spain and there have been encouraging increases in the number of vehicles on hire in both countries. 

 

In the UK we have opened a further eight new sites which are trading in line with initial plans and we have also continued to develop and improve our vehicle sales channels, including Van Monster, which has helped to improve returns.

 

Finally I would like to thank Bob Mackenzie as he retires from the Chairman role. Under his leadership since 2010 the Group has more than doubled profits, greatly reduced debt and reintroduced a dividend. His guidance will be missed, but we are fortunate to be having someone of Andrew Page's calibre stepping into the role and we look forward to delivering further returns to shareholders as we move into the next chapter for the Group."

 

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

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

 

 

Chairman's statement

 

I am pleased to report continued progress made against our strategy for growth in the UK and Spain, which has supported a strong underlying performance in the year as follows:

 

·     Operating profit(1) of £97.8m (2014 - £72.6m);

·     Profit before tax(1) of £85.0m (2014 - £60.3m);

·     Basic earnings per share(2) of 51.0p (2014 - 35.1p);

·     Return on capital employed(3) of 13.0% (April 2014 - 9.9%).

 

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

 

Our strategy remains as follows:

 

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

·     In Spain, now we have reached an acceptable level of return, we are targeting growth through our existing network, with the potential to add one or two new sites.

 

We are particularly targeting growth with small and medium sized enterprises in both our main territories.  Our focus on delivering attractive returns to shareholders has increased our efforts on this profitable market segment.

 

The Group's profit before tax(1) for the year ended 30 April 2015 was adversely impacted by the weakening Euro.  On a constant currency basis the profit before tax would have been £2.6m 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 sales channels, which has helped both to reduce the holding costs and improve returns.  Following the ongoing strength of residual values of the vehicle hire fleet, our depreciation rates were reduced on 1 May 2012 and 1 May 2014 in the UK and on 1 May 2014 in Spain.  The impact of these changes on Group operating profit for the year is an increase of £11.4m, being £8.4m in the UK and £3.0m in Spain.

 

The current year Return on Capital Employed (ROCE) has also been impacted by the costs of opening and operating 15 new sites in the UK since February 2013.  These sites were opened to provide better coverage to both our existing and new customers.  The impact of these new sites in the year was an increase in operating profit of £0.2m (2014 - £2.3m loss) and a 0.6% (2014 - 0.5%) reduction in ROCE.

 

Group net debt reduced to £337.8m during the year, benefitting from the weakening Euro rate. Gearing(4) reduced to 81% (April 2014 - 91%).

 

 

UK

 

Our operating margin(5) increased to 22.2% (2014 - 17.4%) and ROCE to 14.1% (April 2014 - 11.2%).

 

The average number of vehicles on hire for the full year was 48,700, an 8% increase on the 45,300 achieved in the prior year.

 

Vehicles on hire increased from 47,600 at 30 April 2014 to 48,600 at 30 April 2015, an increase of 1,000 compared to an increase of 4,500 in the prior year.  Vehicles on hire with regional customers (primarily SMEs) increased 1,600 (5%), with our national customer business (primarily large companies) reducing by 600 (4%).

 

As noted previously, we have identified large areas of the country where significant numbers of potential customers are not presently serviced by an accessible Northgate site.  To address this, we commenced our branch expansion plans.

 

Seven new sites had been opened by 30 April 2014 and a further eight sites were opened in the year ended 30 April 2015. As a whole, the sites are trading in line with initial expectations.  We still expect each new site to operate with an average fleet of approximately 600 vehicles by the end of year three.

 

Based on experience to date these new sites become profitable on a trading to date basis after two years and we expect ROCE to exceed 16% in year four as the sites reach maturity.  We anticipate opening a further 14 sites over the next two to three years.

 

Spain

 

The continued focus on improving returns increased ROCE in our Spanish business to 12.8% (April 2014 - 9.2%), with operating margin(6) increasing to 22.9% (2014 - 17.1%).

 

The average number of vehicles on hire for the full year was 35,500, an 8% increase on the 33,000 achieved in the prior year.

 

Vehicles on hire increased from 34,700 at 30 April 2014 to 35,600 at 30 April 2015, an increase of 900 compared to an increase of 2,600 in the prior year. Whilst overall growth was less than achieved in the prior year, due mainly to the reduction in national customer business noted below, the ongoing targeting of higher margin SME business continues to be successful and has resulted in improved returns.

 

Vehicles on hire with regional customers increased by 1,400 (8%), with our national customer business reducing by 500 (3%).

 

Dividend

 

The Board recognises the importance of the dividend to investors and sets its policy after taking into account the desire to have a progressive dividend, with the intention to keep cover in the range of 3.75x to 2.50x. 

 

The Board considers the current policy to be appropriate given the strength of the balance sheet whilst ensuring the Group has sufficient resources to pursue future opportunities to invest to deliver growth.

 

The Board is proposing a final dividend of 10.2p (2014 - 6.8p). Including the interim dividend paid of 4.3p (2014 - 3.2p), the total dividend relating to the year would be 14.5p (2014 - 10.0p).  This represents a 45% increase in the year and maintains a 3.5x cover on underlying earnings(2).

 

Board changes

 

This will be my final report as Chairman of the Group following my decision to retire at the AGM in September.  Since joining in February 2010 significant progress has been made in restructuring the Group, with a primary focus on doing the simple things well and improving our ROCE.  Key financial highlights over the past five years have been as follows:

 

·     Profit before tax of £85.0m(1) compared to £36.5m(7) in the year ended 30 April 2010;

·     ROCE of 13.0%(3) from 8.4%(8) in the year ended 30 April 2010;

·     Net debt of £337.8m, reduced from £598.3m(9) at 30 April 2010; and

·     The re-introduction of a dividend.

 

Andrew Page joined the Group on 2 December 2014 and subject to re-election will take over as Chairman following the AGM.  I am delighted that Andrew agreed to join Northgate.  He brings a wealth of financial and management experience in businesses making regular major capital investment decisions. Having worked with Andrew over the past seven months the Board is convinced he will contribute enormously to the future development of Northgate.

 

Jan Astrand will also retire from the Group at the AGM in September following 14 years of service. I would like to thank Jan for his tremendous efforts and wise counsel over this period. He has made a considerable contribution to the Group and our Spanish business.

 

We are currently in the process of recruiting a new non-executive Director.

 

Current trading and outlook

 

We are pleased by the continued growth delivered by the Group in the year ended 30 April 2015. In particular, the continued investment in our people, systems and infrastructure is producing results, as is our focus on seeking profitable growth.  Encouragingly, trading from the new sites in the UK is in line with initial plans and we have made significant progress in our vehicle sales channels.  

 

The Board remains confident that we are well positioned to deliver further growth and attractive returns to shareholders and the Group is currently trading in line with our expectations.

 

 

Operational review

 

Group

 

The Group continues to build upon its solid financial and operational foundation. We are targeting increasing returns by growing the business with customers who have a flexible vehicle hire requirement.

 

Flexible rental

 

Our view is that, for many businesses, the flexible rental of light commercial vehicles ("LCV") continues to be the best sourcing method. It allows them to flex their requirements, both in terms of volume and type of vehicles, in line with their business needs. In both countries in which we operate, we aim to be the first choice for LCV rental, fulfilling all our customers' vehicle needs and allowing them to concentrate on better service to their customers.  To achieve this, we have three simple areas of focus:

 

·     100% vehicle availability, allowing our customers to have the right vehicle in the right place at the right time;

·     Keeping our customers on the road for longer, whether this is via our own national service networks or by partnering with national operators; and

·     Being hassle free, dealing with unforeseen events quickly and professionally.

 

This focus on customer service will help the business maintain its market leading position and is key to our strategy for growth.

 

Strategy for growth

 

Despite our strength compared to our nearest competitors, the market remains fragmented.  This provides good opportunities for growth from our core product offering of flexible vehicle hire. The businesses in both the UK and Spain are focused on:

 

·     Quality of our service offering, including gaining feedback from our customers;

·     Understanding why we win and lose business;

·     Identifying the key markets where our offering is best suited; and

·     Ensuring the business is properly structured to service our customers.

 

The Group regularly measures customer satisfaction, with the help of specialist partners who obtain feedback from our customers.  The Net Promoter Score is calculated for both the UK and Spanish businesses and progress was made in both countries during the year.

 

The Group is focused on finding new growth opportunities through three simple drivers:

 

Customer numbers: attracting and retaining customers is a key area of focus, with specific programmes being implemented to improve customer retention and increase new customers working with the Group.  Progress to date has been pleasing with the total number of customers increasing by 1,600 (14%) since 30 April 2014.

 

Increasing share of customer spend: improved account management has identified that a number of our customers use more than one solution provider for their flexible hire needs.  This is often driven by customers having to source vehicles from more than one partner due to vehicle availability or network reach issues.

 

Pricing efficiently: improved access to information allows the Group to make informed pricing decisions, taking into account whole life vehicle running costs. This ensures that customers are charged appropriately for their vehicle usage.

 

Employee engagement

 

The Group has always been fortunate in having extremely dedicated and passionate employees and their retention and development is key to our continued success. To secure this we are delivering an employee engagement strategy to ensure that all of our employees understand the strategy of the business, their role in delivering it and motivating them to do so. This is underpinned with enhanced communication and recognition processes to both support and drive its success.

 

 

Review of the year

 

UK

 

We are pleased to report that our operating margin(5) increased to 22.2% (2014 - 17.4%) and ROCE increased to 14.1% (April 2014 - 11.2%).  This was mainly driven by the 8% increase in average vehicles on hire, improved asset management and a reduction in vehicle depreciation rates.

 

The changes in vehicle deprecation rates on 1 May 2012 and 1 May 2014 increased the current year operating profit by £8.4m.  The new sites opened since February 2013 increased operating profit by £0.2m.

 

Adjusting for the depreciation changes and the new sites opened since February 2013 would reduce the current year operating margin to 20.7%.

 

Vehicles on hire and hire rates

 

As we have stated previously we are particularly targeting growth through small and medium sized customers.  This strategy has been successful to date with customer numbers increasing by over 29% over the past two years.

 

Looking at our business split over the past year shows the following:

 

Closing vehicles on hire

30 April 2015

30 April 2014

Change

Regional


33,800

32,200

1,600

National


14,800

15,400

(600)



48,600

47,600

1,000

 

During the year we have experienced higher than planned levels of staff turnover within our sales force which meant that achievement against targets has been impacted. We have responded by implementing a number of changes, strengthening management of the sales team, which we anticipate will improve retention rates and further support our growth as we move forward.

 

Average hire revenue per vehicle has been stable when compared to the same period last year.

 

Whilst revenue per vehicle has remained stable, improved customer profiling has reduced vehicle holding and maintenance costs.  One of the main drivers of these reduced costs is the number of miles being driven by customers.  Comparing end of vehicle rental life mileages shows the average miles being driven has fallen 8% when compared to the prior year. 

 

After adjusting for damage recharged to customers, maintenance costs for the year ended 30 April 2015 are 2% higher than in the prior year, compared to an 8% increase in average fleet size.

 

Network

 

We previously 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.

 

Eight more sites have been opened in the year ended 30 April 2015, bringing the total branch network to 76.  On average we anticipate these sites become profitable on a trading to date basis after two years and we expect ROCE to exceed 16% in year four as the sites reach maturity.

 

We estimate that each new site will, on average, operate a fleet of 600 vehicles by the end of year three, with vehicles on hire being 240 after 12 months, 410 after 24 months and 540 at the end of year three.   Trading to date shows the following as at 30 April 2015:

 



No. of sites

Ave. age (months)

Ave. on hire

0-6 months


4

2

110

7-12 months


4

10

240

13-18 months


2

15

200

19-24 months


3

21

380

25 months


2

25

500

 

The 15 sites opened since February 2013 now have 3,900 vehicles on hire, of which 1,900 have been generated in the year ended 30 April 2015.

 

The impact of the 15 sites opened since February 2013 was an operating profit of £0.2m (2014 - £2.3m loss). 

 

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 14 locations across the remainder of the UK which would support a site at our required level of return.  This would take the network up to 90 branches and we expect to reach this level in the next two to three years. 

 

Asset Management

 

Utilisation for the period was 88% (2014 - 88%). Whilst utilisation remains a priority, we are also focused on ensuring that each branch has the right range of vehicles available for customers at all times to support the growth opportunities available. The fleet size increased from 53,900 at 30 April 2014 to 56,100 at 30 April 2015. 

 

Following the decision to age the vehicle fleet in the prior year, purchases returned to expected levels and totalled 19,800 in the year ended 30 April 2015 compared to 17,000 in the same period in the prior year. The average age of the rental fleet is 21.1 months at 30 April 2015, compared to 22.3 months at 30 April 2014.

 

A total of 17,600 vehicles were sold compared to 14,000 in the year ended 30 April 2014.

 

With vehicle holding costs (depreciation) being the largest cost to the business, 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: retail, trade sales and auction. Retail sales (sold directly to end users) 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 2010 to 13 at 30 April 2015;

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

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

·     Customer profiling of rental customers who 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 2010, the percentage sold via the more profitable retail channel has increased from 19% to 31% in the year ended 30 April 2015. In the same period last year 27% were sold via this retail channel.  In absolute terms the number sold via the retail channel has increased from 3,800 last year to 5,500 in the year ended 30 April 2015, an increase of 45%.

 

New LCV registrations were 322,000 in the 12 months ended 31 December 2014, this compares to the pre-recession peak seen in 2007 of 338,000.  The impact of increased registrations will mean greater supply to the second hand market over the coming years and this increased supply is likely to put downward pressure on the residual values of vehicles. Our strategy of maximising sales via the more profitable retail sales channel aims to manage this market dynamic.

 

The improved resale values achieved, coupled with the increased number of vehicles being disposed of, resulted in a reduction in the depreciation charge of £27.8m, compared to a reduction of £20.0m in the prior year.

 

Spain

 

The Spanish economy continues to show signs of improvement and our Spanish business is well positioned to take advantage of this. We believe our product proposition is particularly suited to address the requirements of small and medium sized customers who struggle to obtain bank financing and appreciate the flexibility and service we provide. Growth, coupled with improved asset management, operational efficiency and the reduction in vehicle depreciation rates, led to an  operating margin(6) increase to 22.9% (2014 - 17.1%) and ROCE increased to 12.8% (April 2014 - 9.2%).

 

The change in vehicle deprecation rates on 1 May 2014 increased the current year operating profit in Spain by £3.0m.  Adjusting for the impact of the depreciation change would reduce the current year operating margin to 20.8%.

 

Vehicles on hire and hire rates

 

Vehicles on hire at 30 April 2015 were 35,600, an increase of 900 in the year, compared to an increase of 2,600 in the same period last year. It is pleasing to see that the continued efforts in the commercial area of the business have led to sustained profitable growth.

 

Overall growth has been more modest this year as our Spanish business is targeting growth with higher margin SME customers (Regional) and being selective about renewing or defending larger business (National) as we continue to focus on improving returns.  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 improved marketing focus.

 

Looking at our business split over the past year shows the following:

 

Closing vehicles on hire

30 April 2015

30 April 2014

Change

Regional


19,900

18,500

1,400

National


15,700

16,200

(500)



35,600

34,700

900

 

Customer numbers continue to increase, growing by 1,200 (22%) since 30 April 2014, compared to an increase of 900 in the prior year.

 

After adjusting for fleet mix, average hire revenue per 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 are only 2% higher for the year ended 30 April 2015 compared to the prior year, despite the average fleet size being 8% higher.

 

Asset Management 

 

Utilisation for the period was 91% (2014 - 92%). The fleet size in our Spanish operation increased from 37,800 at 30 April 2014 to 39,400 at 30 April 2015. In the year ended 30 April 2015, 12,400 vehicles have been purchased compared to 10,700 in the same period last year.

 

The average age of the rental fleet is 23.7 months at 30 April 2015, compared to 24.3 months at 30 April 2014.

 

A total of 10,300 vehicles were sold compared to 8,300 in the same period last year.

 

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: retail sales, trade sales, auction and exports.  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 2010 to eight at 30 April 2015;

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

·     Customer profiling to attract rental customers who 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 disposal expertise is available at all sites.


Looking at progress since the year ended April 2010, the percentage sold via the more profitable retail channel has increased from 2% to 16% in the year ended 30 April 2015, the same percentage as that sold in the prior year.  In absolute terms the number sold via the retail channel has increased from 1,300 last year to 1,600 in the year ended 30 April 2015.

 

The improved resale values achieved, coupled with the increased number of vehicles being disposed of, resulted in a reduction in the depreciation charge of €16.0m, compared to a reduction of €6.8m in the prior year.

 

Given the continuing strength of used vehicle residual values, Spanish depreciation rates on the vehicle fleet have been reduced by 1.0%, taking effect from 1 May 2015.  Based on the composition of the fleet as at 30 April 2015, this is expected to reduce the depreciation charge by £3.0m in the year ending 30 April 2016, which will reverse over the next five years as the current fleet is sold.

 

 

Financial review

Financial reporting

 

Group

 

A summary of the Group's underlying financial performance for 2015, with a comparison to 2014, is shown below:

 


2015

2014


£m

£m

Revenue

614.3

571.5

Operating profit(1)

97.8

72.6

Profit before tax(1)

85.0

60.3

Profit after tax(2)

67.9

46.8

Basic earnings per share(2)

51.0p

35.1p

Return on capital employed(3)

13.0%

9.9%

 

Group revenue in 2015 increased by 7% to £614.3m (2014 - £571.5m) or 11% at constant exchange rates. Hire revenue was £456.8m (2014 - £442.3m) including a £14.0m adverse impact of exchange rates.

 

The impact of the depreciation changes increased profit before tax by £11.4m.

 

Profit before tax(1) and operating profit(1) for the year ended 30 April 2015 was adversely impacted by the weakening Euro.  On a constant currency basis the profit before tax(1)  would have been £2.6m higher and operating profit(1) £3.2m higher.

 

Net underlying cash generation(10) was £4.4m (2014 - £25.4m) after net capital expenditure of £218.4m (2014 - £194.4m) and a favourable exchange rate impact of £28.8m (2014 - £5.6m), resulting in closing net debt of £337.8m (2014 - £346.1m). Gearing(4) improved to 81% (2014 - 91%).

 

On a statutory basis, operating profit was £95.8m (2014 - £63.5m) and profit before tax was £83.0m (2014 - £51.2m). Basic earnings per share were 50.1p (2014 - 29.9p).  Net cash from operations, including net capital expenditure on vehicles for hire, was £8.5m (2014 - £30.7m).

 

Return on capital employed

 

Group return on capital employed(3) was 13.0% compared to 9.9% in the prior year. 

 

Group return on equity, calculated as profit after tax (excluding intangible amortisation and exceptional items) divided by average shareholders' funds, was 16.6% (2014 - 12.4%). 

 

Borrowing facilities

 

During the year the Group successfully increased, amended and extended its existing multi bank facility.  The increased facility includes a reduction in pricing.

 

Taken together with other loans of the Group, £339.4m was drawn against total committed facilities of £524.3m as at 30 April 2015, giving headroom(11) of £184.9m as detailed below:

 


Facility

Drawn

Headroom

Maturity


£m

£m

£m


UK bank facility

506.0

326.8

179.2

June-18

Other loans

18.3

12.6

5.7

Up to Nov-15


524.3

339.4

184.9


 

The margin charged on bank debt is dependent upon the Group's net debt to EBITDA ratio, ranging from a maximum of 2.55% to a minimum of 1.80%. The net debt to EBITDA ratio at 30 April 2015 corresponds to a bank margin of 2.05%.

 

Interest rate swap contracts have been taken out which fix a proportion of bank debt at 3.0%, giving an overall cost of the Group's borrowings at 30 April 2015 of 2.8%. This compares to an overall rate of 3.0% at 30 April 2014.

 

The Group made net borrowing drawdowns of £14.3m in the year. Scheduled total bank repayments on the amended bank facilities of £22.8m commencing in November 2016 are due before they mature in June 2018.

 

There are three financial covenants 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 biannually on a rolling historic 12 month basis.  The covenant to be exceeded is 3.0x.

 

Interest cover at 30 April 2015 was 7.75x (2014 - 5.6x) with EBIT headroom, all else being equal, of £59m.

 

2.   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 biannually.  The covenant ratio which must not be exceeded is 70%. 

 

Loan to value at 30 April 2015 was 44% (2014 - 46%) giving net debt headroom, all else being equal, of £208m.

 

3.   Debt leverage cover ratio

 

A maximum ratio of net debt to EBITDA, tested biannually on a rolling historic 12 month basis.  The covenant ratio which must not be exceeded is 2.0x.

 

Debt leverage cover at 30 April 2015 was 1.4x (2014 - 1.5x) with EBITDA headroom, all else being equal, of £71m.

 

Dividend

 

The Directors recommend the payment of a final dividend of 10.2p per share in relation to the Ordinary shares for the year ended 30 April 2015 (2014 - 6.8p).  Subject to approval by shareholders, the dividend will be paid on 22 September 2015 to ordinary shareholders on the register as at close of business on 21 August 2015.

 

Including the interim dividend paid of 4.3p (2014 - 3.2p), the total dividend relating to the year would be 14.5p (2014 - 10.0p). The dividend is covered 3.5 times by underlying earnings(2).

 

UK

 

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

 


2015

2014


£m

£m

Revenue



Vehicle hire

311.3

292.4

Vehicle sales

115.0

90.7


426.3

383.1




Operating profit(12)

69.0

51.0




Operating margin(5)

22.2%

17.4%

 

An increase in hire revenue of 6.5% (6.9% increase at constant exchange rates) was mainly driven by an increase in the average number of vehicles on hire of 7.7%, being partially offset by a 0.7% decrease in revenue per vehicle (including fleet management).  Excluding fleet management, revenue per vehicle increased 0.4%.

 

Following the ongoing strength of the residual values of the vehicle hire fleet, the depreciation rates in the UK were reduced on 1 May 2012 and subsequently on 1 May 2014.

 

The net impact of these changes on the year ended 30 April 2015 operating profit is a benefit of £8.4m as follows:

 


£m

Operating profit(12)

69.0

Favourable impact of depreciation rate changes

(8.4)

Operating profit before change in depreciation rates

60.6

Year ended April 2014 operating profit(12)

51.0

 

The above £8.4m favourable rate impact includes a benefit of £10.8m relating to the 1 May 2014 change, being partially offset by a £2.4m adverse impact relating to the change made on 1 May 2012.

 

The benefit of each reduction in depreciation rates reverses over the rental life of the vehicles, with the net book value at disposal increasing over time, reducing the required end of life adjustment to depreciation.   Assuming the UK sells the same number of vehicles as it sold in the current year the following table estimates the profit impact on future periods:

 


Net book value

Operating profit


increase per vehicle

impact


£

£m

FY16

338

(5.9)

FY17

586

(10.3)

FY18

737

(13.0)

 

The FY18 operating profit impact of £13.0m comprises an unwind of the £10.8m benefit from the 1 May 2014 change plus a remaining £2.2m unwind in relation to the 1 May 2012 change.

 

An improvement in residual values was augmented by an increase in the volume of used vehicles sold, which contributed to £7.8m of the increase in operating profit.

 

Days sales outstanding remain constant at 39 days.

 

 

Spain

 

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

 


2015

2014


£m

£m

Revenue



Vehicle hire

145.5

149.9

Vehicle sales

42.4

38.5


187.9

188.4




Operating profit(13)

33.3

25.6




Operating margin(6)

22.9%

17.1%

 

A decrease in hire revenue of 2.9% (5.7% increase at constant exchange rates) was due to a 7.6% increase in average vehicles on hire and a 1.8% reduction in average hire revenue per vehicle.  After adjusting for changes to vehicle mix the reduction in average revenue per vehicle is 1.0%.

 

Vehicle hire revenue and operating profit(13) in 2015, expressed at constant exchange rates, would have been higher than reported by £12.8m and £2.9m respectively.

 

As disclosed in the 2014 Annual Report, following the ongoing strength of the residual values of the vehicle hire fleet, the depreciation rates were reduced on 1 May 2014.  The net impact of this change on the year ended 30 April 2015 operating profit is a benefit of £3.0m or €3.9m as follows:

 


€m

Operating profit(13)

43.0

Favourable impact of depreciation rate change

(3.9)

Operating profit before change in depreciation rates

39.1

Year ended April 2014 operating profit(13)

30.4

 

Used vehicle residual values continued to improve and contributed £12.3m (2014 - £5.7m) to operating profit in the year with 10,300 vehicles sold (2014 - 8,300).

 

Following our review and due to the ongoing strength of the residual values, the Board has decided to further reduce depreciation rates prospectively by 1.0% from 1 May 2015.  We estimate this change will have a similar impact on the FY16 operating profit as the depreciation rate change made on 1 May 2014.

 

The benefit of the 1 May 2014 and 1 May 2015 reductions in vehicle depreciation rates reverses over the life of the rental vehicles, with the net book value at disposal increasing over time, reducing the required end of life adjustment to depreciation.   Assuming Spain has an average vehicle holding period of 42 months, the following table estimates the impact on future periods:

 


Net book value

Operating profit


increase per vehicle

impact


€m

FY16

150

(1.7)

FY17

371

(4.2)

FY18

586

(6.6)

FY19

715

(8.0)

 

Days sales outstanding continued to reduce from 54 days at 30 April 2014 to 44 days at 30 April 2015, due to the continued improvements in controls, processes and customer mix.

 

Corporate

 

Corporate costs(14) were £4.5m compared to £3.9m in the prior year.

 

Exceptional items

 

During the year no exceptional costs were incurred (2014 - £6.2m).

 

Interest

 

Net finance charges for the year were £12.8m (2014 - £12.4m). 

 

The net cash interest charge was the same as the prior year at £12.4m.  The charge was impacted by the increased levels of debt (£0.6m) and an increase in non-utilisation fees (£0.5m) as a result of the expanded facility.  However, this was offset by the reduced rate on the new facilities (£0.7m) coupled with a favourable exchange impact (£0.4m).

 

Non-cash interest was £0.4m (2014 - £Nil) relating to the arrangement fees on the Group bank facility which was revised in the year.

 

Taxation

 

The Group's underlying effective tax charge for its UK and overseas operations was 20% (2014 - 22%). 

 

The underlying tax charge excludes the tax on exceptional items, brand royalty charges and intangible amortisation. 

 

Including these items the Group's statutory effective tax charge was 19% (2014 - 22%).

 

Earnings per share

 

Underlying basic earnings per share ("EPS")(2), were 51.0p (2014 - 35.1p).  Statutory basic earnings per share were 50.1p (2014 - 29.9p). 

 

Underlying earnings for the purposes of calculating EPS(2) were £67.9m (2014 - £46.8m).  The weighted average number of shares for the purposes of calculating EPS was 133.2m, in line with the previous year.

 

Balance sheet

 

Net tangible assets at 30 April 2015 were £418.4m (2014 - £381.7m), equivalent to a net tangible asset value of 314.0p per share (2014 - 286.5p per share). 

 

Gearing(4) at 30 April 2015 was 81% (2014 - 91%) reflecting an £8.3m reduction in net debt.

 

Cash flow

 

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

 


2015

2014

 


£m

£m

Underlying operational cash generation

251.6

235.4

Net capital expenditure

(218.4)

(194.4)

Net taxation and interest payments

(28.8)

(15.6)

Net underlying cash generation(10)

4.4

25.4

Dividends

(14.6)

(12.2)

Share purchases and debt issue costs

(12.2)

(2.8)

Net cash (outflow)/generated

(22.4)

10.4

 



Opening net debt

346.1

362.7

Net cash outflow (generated)

22.4

(10.4)

Other non-cash items

(1.9)

(0.6)

Exchange differences

(28.8)

(5.6)

Closing net debt

337.8

346.1

 

Underlying cash generation(10) was £4.4m compared to £25.4m in the previous year.

 

A total of £350.1m was invested in new vehicles in order to replace fleet compared to £301.4m in the prior year.  The Group's new vehicle outlay was partially funded by £135.9m of cash generated from the sale of used vehicles. Other net capital expenditure amounted to £4.2m.

 

After capital expenditure, payments of interest and tax of £28.8m, dividends of £14.6m and other items of £12.2m, net cash outflow (as defined in the table above) was £22.4m, compared to a £10.4m inflow in the previous year.

 

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 and bank borrowings.

 

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.  Gearing(4) at 30 April 2015 was 81% compared to 91% at 30 April 2014.

 

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 73% at 30 April 2015 (2014 - 76%).

 

Foreign exchange risk

 

The Group's reporting currency is, and the majority of its revenue (67%) 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:

 


2015

2014


£ : €

£ : €

Average

1.29

1.19

Year end

1.38

1.22

 

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.  The exchange differences arising on these borrowings have been recognised directly within equity along with the exchange differences on retranslation of the net assets of the Euro subsidiaries.

 

Going concern 

 

In determining whether the Group's 2015 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 2015 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

The demand for our products and services could be affected by a downturn in 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 variability in profits.  An adverse change in macro-economic conditions could also increase the risk of customer failure and therefore incidences of bad debts.

 

Should there be a significant economic downturn the flexible nature of the Group's business model allows any vehicles returned to be placed with different customers.  Alternatively, utilisation can be maintained through purchasing fewer vehicles, increasing disposals or a combination of the two.  Although this may affect short term profitability it generates cash and reduces debt.

 

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.

 

Economic conditions in Spain have improved and the business has successfully diversified its customer base, particularly away from the construction sector, which was particularly badly affected by the recession.

 

An increasing proportion of customers in Spain are now signed up to direct debit payments or advanced payments, further reducing the risk of customer failure. 

 

Competition and hire rates

The markets in which the Group operates are fragmented and competitive, with competitors often pursuing aggressive pricing strategies to increase market share.  This leads to a risk of the Group being forced to reduce hire rates to retain current business or attract new customers. 

 

There is a risk that lack of understanding of the Group's product offering and low brand awareness could lead to the Group not taking full advantage of the opportunities open to it.

 

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

 

As the Group continues to focus on return on capital all hire rates offered to customers must exceed certain hurdle rates.

 

Our current pricing strategy is focussed on ensuring that we charge an appropriate price for the product and ancillary services provided which reflects the benefits provided to our customers. 

 

Although flexible rental is not necessarily the cheapest option it will attract customers for whom it is the best option and protect the Group from solely price led competition.

 

The Board is currently reviewing the Group's route to market, which will include a review of our marketing strategy and reinforcing the benefits of our product offering through training of commercial teams.

 

Vehicle holding costs

The profitability of the Group is dependant upon minimising vehicle holding costs, which are affected by the pricing levels of new vehicles purchased and the disposal value of vehicles sold.

 

An increase in holding costs, if not recovered through hire rate increases, would adversely affect profitability, shareholder returns and cash generation.

 

Pricing is negotiated with manufacturers on an annual basis in advance of purchases being made.  Variable supply terms allow us flexibility to make purchases as required throughout the year.

 

Whilst the Group is exposed to fluctuations in the used vehicle market we have sought to increase the level of sales made through our more profitable retail channel.  Should the market experience a short term decline in residual values, we can age our existing fleet until such time as the market improves.

 

Employees and the working environment

Failure to attract, develop and retain individuals with the appropriate skills will inhibit the successful delivery of our strategy.

 

Inadequate maintenance of our vehicles and a working environment where individuals do not receive appropriate training and support could place employees and customers' employees at risk from failures in health and safety.

 

Failure to invest in our workforce and high levels of staff turnover will impact upon customer service and delivery of the Group's strategic objectives.

 

Failures in health and safety would put the reputation of the business at risk, both in terms of attracting and retaining talent and maintaining customer relationships.

 

Our recruitment processes seek to attract individuals who will exemplify our core values of professionalism, team work and can do attitude.  Each new joiner receives an introduction to the company's culture as well as our processes.

 

Personal development plans and tailored training are conducted for all employees.  Salaries are benchmarked against the market and a range of incentives are provided to attract and retain staff.  Succession plans are in place for executive positions.

 

Regular communication and engagement with everyone across the business is vital to our success.

 

The Group Health and Safety and Internal Audit functions are responsible for delivering health and safety best practice and reporting any non-compliance to the Board.

 

Our scheduling and compliance department is overseen by Internal Audit and ensures that vehicles are maintained to required standards.

 

IT systems

The Group's business involves a high number of operational and financial transactions across numerous sites which rely on the continuous operation of our IT systems.

 

Should IT systems fail, whether the cause is accidental or malicious, this could have an adverse impact on both the ongoing operations of the Group and the recording and processing of financial information.

 

The Group has an appropriate business continuity plan in the event of disruption arising from an IT systems failure.

 

Before any material system changes are implemented a project plan is approved by the Board.  A member of the executive team will then lead the project and an ongoing implementation review will be performed by either Internal Audit or external consultants where appropriate.  The objective is always to minimise the risk of business disruption that could result from changes.

 

Access to capital

The Group requires capital to replace vehicles at the end of their rental life and for any growth in the fleet.

 

The Group therefore requires continued access to adequate credit facilities to remain in compliance with its financial covenants.

 

Failure to maintain or extend access to credit facilities could impact on the Group's abilities to continue as a going concern.

 

The Group's existing facilities mature in June 2018 and the Group believes that these facilities provide adequate resources for present requirements.

 

The Group reviews its compliance with covenants on a monthly basis in conjunction with cash flow forecasts to ensure ongoing compliance.

 

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

 

 

 

 

 

(1)       Stated before intangible amortisation of £2.0m (2014 - £2.9m) and exceptional administrative expenses of £Nil (2014 - £6.2m).

 (2)         Stated before intangible amortisation of £2.0m (2014 - £2.9m), exceptional administrative expenses of £Nil (2014 - £6.2m) and tax on brand royalty charges, intangible amortisation and exceptional items of £0.9m (2014 - £2.2m).

 (3)         Calculated as operating profit(1) divided by average capital employed, being shareholders' funds plus net debt.

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

 (5)         Calculated as operating profit(12) divided by revenue of £311.3m (2014 - £292.4m), excluding vehicle sales.

(6)       Calculated as operating profit(13) divided by revenue of £145.5m (2014 - £149.9m), excluding vehicle sales.

(7)          Stated before intangible amortisation of £5.0m, exceptional administrative expenses of £6.7m and exceptional finance costs of £15.2m.

(8)          Calculated as operating profit(15) divided by average capital employed, being shareholders' funds plus net debt.

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

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

(11)        Headroom calculated as facilities of £524.3m less net borrowings of £339.4m.  Net borrowings represent net debt of £337.8m less unamortised arrangement fees of £1.6m and stated after the deduction of £9.7m of cash balances, which are available to offset against borrowings.

(12)     Stated before intangible amortisation of £1.9m (2014 - £2.3m), exceptional administrative expenses of £Nil (2014 - £5.5m) and brand royalty charge of £0.4m (2014 - £Nil).

(13)     Stated before intangible amortisation of £0.1m (2014 - £0.6m), exceptional administrative expenses of £Nil (2014 - £0.1m) and brand royalty charge of £4.9m (2014 - £5.0m).

(14)     Stated before exceptional administrative expenses of £Nil (2014 - £0.1m) and brand royalty credits of £5.3m (2014 - £5.0m).

(15)        Stated before intangible amortisation of £5.0m and exceptional administrative expenses of £6.7m.

 

 

 

 

 



 

CONSOLIDATED INCOME STATEMENT





 

FOR THE YEAR ENDED 30 APRIL 2015








Underlying

Statutory

Underlying

Statutory

 



2015

2015

2014

2014

 


Note

£000

£000

£000

£000

 

Revenue: hire of vehicles


456,818

456,818

442,271

442,271

 

Revenue: sale of vehicles


157,442

157,442

129,207

129,207

 

Total revenue

1

614,260

614,260

571,478

571,478

 

Cost of sales


(445,221)

(445,221)

(434,777)

(434,777)

 

Gross profit


169,039

169,039

136,701

136,701

 

Administrative expenses (excluding exceptional items and intangible amortisation)


 

(71,267)

 

(71,267)

 

(64,065)

 

(64,065)

 

Exceptional administrative expenses

6

-

-

-

(6,197)

 

Intangible amortisation


-

(2,010)

-

(2,900)

 

Total administrative expenses


(71,267)

(73,277)

(64,065)

(73,162)

 

Operating profit

1

97,772

95,762

72,636

63,539

 

Interest income


9

9

24

24

 

Finance costs


(12,808)

(12,808)

(12,386)

(12,386)

 

Profit before taxation


84,973

82,963

60,274

51,177

 

Taxation


(17,029)

(16,161)

(13,456)

(11,294)

 

Profit for the year


67,944

66,802

46,818

39,883

 

Profit for the year 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 6, as well as brand royalty charges, intangible amortisation and the taxation thereon, in order to provide a better indication of the Group's underlying business performance.

Earnings per share






Basic

2

51.0p

50.1p

35.1p

29.9p

Diluted

2

50.0p

49.2p

34.3p

29.3p

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME





FOR THE YEAR ENDED 30 APRIL 2015






2015

2014



£000

£000

Amounts attributable to owners of the Parent Company




Profit attributable to the owners


66,802

39,883

 

Other comprehensive (expense) income

Foreign exchange differences on retranslation of net assets of subsidiary undertakings


 

 

(28,526)

 

 

(3,589)

Net foreign exchange differences on long term borrowings and derivatives held as hedges


21,885

1,772


(126)

(32)

Net fair value (losses) gains on cash flow hedges


 (1,772)

48

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


355

(10)

Actuarial losses/derecognition of assets on defined benefit pension scheme *


-

(199)

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


-

42

Total other comprehensive expense for the year


(8,184)

(1,968)

Total comprehensive income for the year


58,618

37,915

 

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

 

 

 

CONSOLIDATED BALANCE SHEET





AS AT 30 APRIL 2015








2015

2014




£000

£000

Non-current assets





Goodwill



3,589

3,589

Other intangible assets



4,341

5,467






Property, plant and equipment: vehicles for hire



660,160

614,927

Other property, plant and equipment



66,248

73,575

Total property, plant and equipment



726,408

688,502

Derivative financial instrument assets



57

712

Deferred tax assets



14,784

9,396

Total non-current assets



749,179

707,666

Current assets





Inventories



21,673

19,076

Trade and other receivables



71,817

78,861

Cash and bank balances



9,676

19,056

Total current assets



103,166

116,993

Total assets



852,345

824,659

Current liabilities





Trade and other payables



62,273

58,931

Current tax liabilities



9,956

6,320

Short term borrowings



12,081

7,465

Total current liabilities



84,310

72,716

Net current assets



18,856

44,277

Non-current liabilities





Derivative financial instrument liabilities



1,780

664

Long term borrowings



335,375

357,668

Deferred tax liabilities



4,524

2,878

Total non-current liabilities



341,679

361,210

Total liabilities



425,989

433,926

NET ASSETS



426,356

390,733






Equity





Share capital



66,616

66,616

Share premium account



113,508

113,508

Revaluation reserve



956

1,082

Own shares reserve



(8,812)

(653)

Merger reserve



67,463

67,463

Hedging reserve



(2,028)

(611)

Translation reserve



(13,828)

(7,187)

Capital redemption reserve



40

40

Retained earnings



202,441

150,475

TOTAL EQUITY



426,356

390,733

 

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

 

 

 





 

CONSOLIDATED CASH FLOW STATEMENT



 

FOR THE YEAR ENDED 30 APRIL 2015




 



2015

2014

 


 Note

£000

£000

 

Net cash generated from operations

4

8,532

30,723

 

Investing activities




 

Interest received


9

24

 

Proceeds from disposal of other property, plant and equipment

2,371

1,182


Purchases of other property, plant and equipment

(5,659)

(5,509)


Purchases of intangible assets


(889)

(945)

 

Net cash used in investing activities


(4,168)

(5,248)

 

Financing activities




 

Dividends paid

(14,607)

(12,234)


Receipt of bank loans


14,317

1,140

 

Repayments of bank loans and other borrowings

                              -

(7,469)


Debt issue costs paid


(2,042)

-

 

Net payments to acquire own shares for share schemes

(10,068)

(2,803)


Net cash used in financing activities


(12,400)

(21,366)

 

Net (decrease) increase in cash and cash equivalents


(8,036)

4,109

 

Cash and cash equivalents at 1 May


19,056

14,962

 

Effect of foreign exchange movements


(1,344)

(15)

 

Cash and cash equivalents at 30 April


9,676

19,056

 

 

Cash and cash equivalents comprise cash and bank balances.

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 APRIL 2015


Share capital  and share premium

 

 

Own shares reserve

Hedging reserve

Translation reserve

Other reserves

Retained earnings

Total


£000

£000

£000

£000

£000

£000

£000

Total equity at 1 May 2013

180,124

(303)

(649)

(5,370)

68,738

124,112

366,652

Share options fair value charge

-

-

-

-

-

1,203

1,203

Share options exercised

-

-

-

-

-

(2,453)

(2,453)

Profit attributable to owners of the Parent Company

-

-

-

-

-

39,883

39,883

Dividends paid

-

-

-

-

-

(12,234)

(12,234)

Net purchase of own shares

-

(2,803)

-

-

-

-

(2,803)

Transfer of shares on vesting of share options

-

2,453

-

-

-

-

2,453

Other comprehensive income (expense)

-

-

38

(1,817)

(32)

(157)

(1,968)

Transfers from revaluation reserve

-

-

-

-

(121)

121

-

Total equity at 1 May 2014

180,124

(653)

(611)

(7,187)

68,585

150,475

390,733

Share options fair value charge

-

-

-

-

-

1,680

1,680

Share options exercised

-

-

-

-

-

(1,909)

(1,909)

Profit attributable to owners of the Parent Company

-

-

-

-

-

66,802

66,802

Dividends paid

-

-

-

-

-

(14,607)

(14,607)

Net purchase of own shares

-

(10,068)

-

-

-

-

(10,068)

Transfer of shares on vesting of share options

-

1,909

-

-

-

-

1,909

Other comprehensive expense

-

-

(1,417)

(6,641)

(126)

-

(8,184)

Total equity at 30 April 2015

180,124

(8,812)

(2,028)

(13,828)

68,459

202,441

426,356

 

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

 

 

 

 

 

NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2015

1. SEGMENTAL ANALYSIS



UK

Spain

Corporate

Total



2015

2015

2015

2015



£000

£000

£000

£000

Revenue: hire of vehicles


311,282

145,536

-

456,818

Revenue: sale of vehicles


115,058

42,384

-

157,442

Total revenue


426,340

187,920

-

614,260







Underlying operating profit (loss) *


69,032

33,260

(4,520)

97,772

Brand royalty charges


(442)

(4,881)

5,323

-

Intangible amortisation


(1,928)

(51)

(31)

(2,010)

Operating profit


66,662

28,328

772

95,762

 



UK

Spain

Corporate

Total



2014

2014

2014

2014



£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

* Underlying operating profit (loss) stated before amortisation, intra-group brand royalty charges 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

2015

£000

2015

£000

2014

£000

2014

£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 profit for the year attributable to owners of the Parent Company

67,944

66,802

46,818

39,883




 


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

133,232,518

133,232,518

Effect of dilutive potential Ordinary shares:





- share options

2,649,060

2,649,060

3,072,264

3,072,264

Weighted average number of Ordinary shares for the purposes





of diluted earnings per share

135,881,578

135,881,578

136,304,782

136,304,782

Basic earnings per share

51.0p

50.1p

35.1p

29.9p

Diluted earnings per share

50.0p

49.2p

34.3p

29.3p

3. DIVIDENDS

Dividends paid in the year were £14,607,000 (2014 - £12,234,000).

An interim dividend of 4.3p per Ordinary share was paid in January 2015 (2014 - 3.2p). The Directors propose a final dividend of 10.2p per share for the year ended 30 April 2015 (2014 - 6.8p), which is subject to approval at the Annual General Meeting and has not been included as a liability as at 30 April 2015.



 

4. NOTES TO THE CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 APRIL 2015 




2015

2014

Net cash generated from operations

£000

£000

Operating profit

95,762

63,539

Adjustments for:



Depreciation of property, plant and equipment

144,455

165,327

Impairment of property, plant and equipment

-

1,916

Exchange differences

-

7

Amortisation of intangible assets

2,010

2,900

Loss on disposal of property, plant and equipment

50

51

Share options fair value charge

1,680

1,203

Operating cash flows before movements in working capital

243,957

234,943

Decrease (increase) in non-vehicle inventories

   105

(1,637)

Decrease (increase) in receivables

            2,833

(1,172)

Increase in payables

4,672

3,315

Cash generated from operations

251,567

235,449

Income taxes paid

(16,524)

(4,338)

Interest paid

(12,302)

(11,302)

Net cash generated from operations

222,741

219,809

Purchase of vehicles

(350,085)

(301,365)

Proceeds from disposal of vehicles

135,876

112,279

Net cash generated from operations

8,532

30,723

 

 

 

5. ANALYSIS OF CONSOLIDATED NET DEBT

 




2015

2014


£000

£000

Cash at bank and in hand

(9,676)

(19,056)

Bank loans

346,415

363,819

Cumulative preference shares

500

500

Confirming facilities

541

814

Consolidated net debt

337,780

346,077

 



 

6. EXCEPTIONAL ITEMS




 


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

 




2015

2014

 



£000

£000

 

Restructuring costs


-

1,826

 

Impairment of property


-

1,916

 

Net property losses


-

51

 

Defined benefit pension scheme buyout


-

2,404

 

Exceptional administrative expenses


-

6,197

 

 




 

Exceptional tax credit


-

(1,458)

 

 

7. BASIS OF PREPARATION 

The results for the year ended 30 April 2015, 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, with the exception of IFRS 13, 'Fair value measurement', which has not been applied as the impact is not considered to be material.

 

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 2015.

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 April 2015 or 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 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 2015 has been prepared on a basis consistent with that presented in the annual report for the year ended 30 April 2014.

 

 

 


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