RNS Number : 0220R
Northgate PLC
06 December 2016
 



 

6 December 2016                              

NORTHGATE PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2016

Full year trading in line with expectations, increase in dividend and good momentum into the second half of the year

Northgate plc ("Northgate", the "Company" or the "Group"), the UK, Spain and Ireland's leading specialist in light commercial vehicle hire, announces its interim results for the half year ended 31 October 2016.

 

Financial highlights

 

As expected, profitability was held back in the first half of the year, largely due to the lower opening vehicles on hire in the UK.

 

The UK business has now stabilised and has grown closing vehicles on hire in the period.  This, alongside a  more settled political environment in Spain, provides momentum going into the second half of the year, meaning that full year results remain in line with expectations.

 

·    Underlying profit before tax £40.4m (2015 - £45.9m), impacted by:

£2.5m adverse impact from previous changes in vehicle depreciation rates;

£2.9m positive effect of the strengthened Euro;

 

·    Profit before tax £40.0m (2015 - £42.8m);

 

·    Underlying basic earnings per share 25.8p (2015 - 27.1p);

 

·    Basic earnings per share 25.5p (2015 - 25.4p);

 

·    12% increase in interim dividend to 5.7p per share (2015 - 5.1p);

 

·    Net debt £355.0m (April 2016 - £309.9m), including £38.3m adverse effect of the strengthened Euro.

 

Strategic progress

 

The Group has made good progress across the renewed areas of strategic focus which were outlined in our full year results in June:

 

Optimise the core business

·    Group closing vehicles on hire grew by 900 in the first six months of the year, compared to a decline of 900 in the same period last year.

 

Closing vehicles on hire (reduction) growth

Q1

Q2

Total

Year ending 30 April 2017

(100)

1,000

900

Year ended 30 April 2016

(500)

(400)

(900)

·    After strengthening of the UK management team vehicles on hire have stabilised, with growth of 100 in closing vehicles on hire in the six month period compared to a 1,200 reduction in the same period last year;

·    Spain closing vehicles on hire increased by 600 since April 2016, despite the planned return of 900 vehicles from expiring legacy contracts. This compared to a 100 vehicle increase in the same period last year; and

·    Ireland closing vehicles on hire increased by 200 vehicles since April 2016. 

 

Expand addressable markets

·    Successful trial from June of fixed term product in Spain, expanding our business into an adjacent addressable market.  Contracts for 1,500 vehicles have been signed, with 1,000 vehicles on hire as at the end of October; and

·    Following the success in Spain, the trial has been extended to the UK and Ireland in November.

 

Maximising end of life value

·    Proportion of UK vehicles sold through retail channels increased to 41% (2015 - 31%); and

·    Successful pilot of vehicle sales purchased from third parties in order to extend the range of vehicles sold in Van Monster.

 

Bob Contreras, Chief Executive, commented:

 

"As indicated previously, profitability in the first half of the year has been impacted by the reduction in vehicles on hire experienced in the UK throughout the previous financial year.

 

We are pleased to see some early signs of progress from our renewed strategic focus which has led to a stabilisation of the UK business in the first half of the year.  Spain continues to develop well and Ireland has grown steadily in the period. A more stable political environment in Spain will provide impetus for growth amongst our larger customer accounts.  

 

Our fundamental strategy of expanding our addressable markets is progressing well. The key is using our existing strengths to provide a compelling proposition.

 

We move into the second half with good momentum in all countries and continue to build a solid platform which will drive the medium and long term performance of the business. We expect the full year results to be more weighted towards the second half as the changes implemented continue to gain traction and therefore we continue to expect to see full year results in line with expectations."  

 

There will be a presentation to analysts at 10.30am 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.  A live webcast of the presentation will be available to view via a link on the Company's website: www.northgateplc.com

 

 

For further information, please contact:

 

Northgate plc                                                    01325 467558

Bob Contreras, Chief Executive

Paddy Gallagher, Group Finance Director

 

MHP Communications                                  020 3128 8100

Andrew Jaques

Barnaby Fry

Simon Hockridge

Ollie Hoare

 

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 or term 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

 

 

GAAP reconciliation and glossary of terms

 

Throughout this report we refer to underlying results and measures.  The underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period, without the effects of one-off or non-operational items.

 

Underlying measures exclude certain one-off items such as those arising from restructuring activities and recurring non-operational items, namely intangible amortisation. A reconciliation of GAAP to non-GAAP underlying measures and a glossary of terms used in this document is outlined beneath the Financial review.

 



 

Business review

 

Overview

 

During the period we have made good progress across a number of areas, including commencing work on our renewed areas of strategic focus, discussed in more detail below. 

 

Underlying profit before tax was £40.4m compared to £45.9m and underlying earnings per share were 25.8p compared to 27.1p in the prior period.  As expected, profitability was impacted by the lower starting position of vehicles on hire in the UK. However, encouragingly, closing vehicles on hire have grown by 900 in the period compared to a reduction of 900 in the same period last year, with good momentum in all territories which gives us confidence going into the second half.  

 

The effects of previous depreciation rate changes impacted profit before tax adversely by £2.5m but this was offset by foreign currency gains of £2.9m.

 

The Group continues to be cash generative, with free cash flow in the half year of £7.6m (2015 - £8.1m). Debt levels since the year end were impacted by a £38.3m foreign currency revaluation.  However, Euro assets shelter the balance sheet against this movement and debt covenants continue to show healthy headroom.

 

Dividend and capital allocation

 

An interim dividend of 5.7p will be paid which reflects our ongoing commitment to maintaining a progressive dividend policy, with dividend cover in the range of 3.75 to 2.5 times earnings.

 

The interim dividend will be paid on 16 January 2017 to shareholders on the register at the close of business on 16 December 2016.

 

Our objective is to build shareholder value by generating returns above our cost of capital. We will allocate capital within our business in accordance with the framework outlined below, with our first priority being to allocate capital to support our growth ambitions:

 

1.      Investment for growth in existing network

2.      Investment in new sites

3.      Provide regular returns to shareholders

4.      Acquisitions

5.      Return of surplus cash

We will continue to maintain our balance sheet within the target leverage range of 1.25 to 1.85 times net debt to EBITDA, although we are prepared to move temporarily outside of this range if circumstances warrant it. This is consistent with our objective of maintaining a balance sheet that is efficient in terms of providing long term returns to shareholders and safeguards the Group's financial position through economic cycles.

 

Board changes

 

As separately announced today, Bob Contreras will be standing down as Chief Executive of Northgate and will be succeeded by Kevin Bradshaw. Bob will step down as Chief Executive and from the Board on 11 January 2017.  Kevin will join the Board as CEO on 11 January 2017.

 

Outlook

 

As indicated previously, profitability in the first half of the year has been impacted by the reduction in vehicles on hire experienced in the UK throughout the previous financial year.

 

We are pleased to see some early signs of progress from our renewed strategic focus which has led to a stabilisation of the UK business in the first half of the year.  Spain continues to develop well and Ireland has grown steadily in the period. A more stable political environment in Spain will provide impetus for growth amongst our larger customer accounts.  

 

Our fundamental strategy of expanding our addressable markets is progressing well. The key is using our existing strengths to provide a compelling proposition.

 

We move into the second half with good momentum in all countries and continue to build a solid platform which will drive the medium and long term performance of the business. We expect the full year results to be more weighted towards the second half as the changes implemented continue to gain traction and therefore we continue to expect to see full year results in line with expectations.

 

 

Strategic review

 

At our full year results in June we announced our renewed areas of strategic focus, namely:

 

·     To optimise our core business;

·     To expand our addressable markets; and

·     To maximise end of life value.

 

Optimise core business

 

Group closing vehicles on hire grew by 900 in the first six months of the year, compared to a reduction of 900 in the same period last year as follows:

 

Closing vehicles on hire (reduction) growth

Q1

Q2

Total

Year ending 30 April 2017

(100)

1,000

900

Year ended 30 April 2016

(500)

(400)

(900)

 

Focussing mainly on the UK business, we appointed a new senior team at the start of the calendar year and their priority has centred on sales and marketing activity.

 

We have delivered greater clarity around how we sell flexible rental within our existing markets, supported by refreshed national marketing campaigns.

 

Customers have been re-segmented as follows:

 

Micro SME

·     Generally sub-five vehicle requirement

·     Managed through telesales team

SME

·     Large SME accounts

·     Managed through regionally based sales teams

Large accounts

·     Customers with national vehicle requirements

·     Generally with fleet sizes greater than 100 vehicles

·     Managed through a specialised team

 

Using telesales is a more efficient way of interacting with smaller customers as they can now have instant access to an account manager.  Inbound leads from marketing campaigns are also dealt with more effectively.

 

Regionally based sales teams are now entirely focussed on exploring larger opportunities without the time commitment of managing small accounts. 

 

We now also have a specialised team in place to address the need for a more consultative approach towards large accounts and who are capable of tailoring a bespoke offering which also covers our extended product offering outlined below. This approach has succeeded in delivering a significant national account win which will alone contribute up to 500 additional vehicles on hire over the next 12 months.

 

Expanding our addressable markets

 

As discussed in June, our core flexible rental product accounts for only 5% of the LCV market.  It is our intention to offer a wider range of products and services which can meet all of the needs of existing customers and will enable us to access new customers not currently using flexible rental. 

 

The first stage of this strategy is to provide a range of fixed term offerings from 12 to 48 months, accompanied by the same service level that is delivered through flexible rental. We believe that this is an area not adequately covered by existing providers.

 

This offering has been successfully trialled in Spain in the period, with full training of sales teams.  Contracts have been signed for 1,500 vehicles and 1,000 incremental vehicles on hire have been delivered as at the end of October 2016.

 

Following the success in Spain, the trial has been extended to the UK and Ireland in November 2016.

 

We will also continue to investigate widening our vehicle product range where there is commercial and financial opportunity to do so.  This includes exploring refrigerated transport and electric and utility specification vehicles, particularly in Spain.

 

Maximising end of life value

 

A key part of our business model is our ability to maximise the end of rental life vehicle proceeds through Van Monster, our retail sales channel.

 

In the UK we continue to progress with our objective of increasing the proportion of vehicles sold through this more profitable retail channel with 41% sold through this route in the period compared to 31% in the same period last year.

 

The trialling of the sale of third party sourced vehicles has progressed with 260 sold in the period.  This has helped to widen the product range and footfall to Van Monster sites.

 

In Spain we took the decision to de-prioritise Van Monster. The reason was that strong trade pricing currently erodes the benefit of retail sales given the refurbishment costs we bear if selling through retail. We expect this to persist for the next year or so and anticipate that retail will grow when the market normalises.

 

 

 

Financial review

 

Group

 

A summary of the Group's underlying financial performance for the six months to 31 October 2016 with a comparison to the prior period is shown below:

 


6 months to

6 months to



31 Oct 2016

31 Oct 2015

Change

£m

£m


Revenue: hire of vehicles

229.6

225.7

1.8%

Revenue: sale of vehicles

87.1

87.5

-0.4%

Operating profit

45.0

51.6

-12.8%

Net interest expense

(4.6)

(5.7)

-19.7%

Profit before tax

40.4

45.9

-11.9%

Profit after tax

34.3

36.1

-4.8%

Basic earnings per share

25.8p

27.1p

-4.8%

Return on capital employed

10.9%

12.0%

-1.1%

 

At constant exchange rates revenue from the hire of vehicles was 4.1% lower than the prior period.

 

Profit before tax benefitted by £2.9m due to the impact of foreign exchange gains.  The impact of previous changes to depreciation rates adversely affected profit before tax by £2.5m.

 

UK

 

The underlying results of the UK business were as follows:

 


6 months to

6 months to



31 Oct 2016

31 Oct 2015

Change

£m

£m


Revenue: hire of vehicles

138.4

149.8

-7.7%

Revenue: sale of vehicles

59.0

62.8

-6.0%

Operating profit

23.9

31.8

-25.0%

Operating margin

17.3%

21.2%

-3.9%





Average vehicles on hire

42,000

44,800

-6.3%

Average utilisation

87.7%

87.7%

-

Vehicle disposal units

9,000

10,400

-13.5%





The UK has gone through a period of stabilisation with a growth in closing vehicles on hire of 100 in the six months to October 2016, compared to a 1,200 reduction in the same period last year.  The starting position in the year was 3,300 vehicles lower than at the same point in the previous year, which has led to a 6.3% lower average vehicles on hire across the period.

 

Underlying operating profit was £8.0m lower than the previous year of which £4.5m related to rental profit impacted by lower vehicles on hire starting position. A total of £1.7m related to the unwind of previous depreciation rate changes and the remaining £1.8m was the impact of selling fewer vehicles than in the previous period.

 

Including the impact of depreciation rate changes, vehicle disposals led to a reduction in the depreciation charge in the period of £6.6m (2015 - £10.1m). This equates to a PPU of £738 compared to £977 in the prior period.

 

Spain

 

The underlying results in Spain were as follows:

 


6 months to

6 months to



31 Oct 2016

31 Oct 2015

Change

£m

£m


Revenue: hire of vehicles

81.2

68.6

18.4%

Revenue: sale of vehicles

26.1

22.9

13.7%

Operating profit

21.3

20.3

4.7%

Operating margin

26.2%

29.6%

-3.4%





Average vehicles on hire

35,900

35,700

0.6%

Average utilisation

90.6%

90.8%

-0.2%

Vehicle disposal units

5,700

5,300

7.5%





 

Adjusting for the impacts of foreign currency gains, hire revenue was 1.4% higher than in the prior period and underlying operating profit was £2.1m lower (10.3%). Foreign currency gains favourably impacted underlying operating profit by £3.1m.

 

On a constant currency basis, the impact of previous depreciation rate changes adversely impacted underlying operating profit in the period by £0.7m.  Of the remaining reduction, £1.1m was due to rental operations and £0.3m related to vehicle disposals.

 

Including the impact of foreign currency gains and depreciation rate changes, vehicle disposals led to an £8.7m reduction in the depreciation charge (2015 - £8.5m).  In Euros, this equates to a PPU of €1,815 compared to €2,211 in the prior period.

 

Closing vehicles on hire increased by 600 in the period compared to an increase of 100 in the prior period.  A planned return of 900 vehicles from the run out of legacy contracts means that the underlying growth was 1,500 vehicles.  This included 1,000 vehicles under the new fixed term product offering. Government related business has also been hampered by the difficulties in forming a coalition over the last year. Now that a government has been formed, we expect to see vehicles on hire increase as new budgets are approved.

 

Ireland

 

The underlying results in Ireland are as follows:

 


6 months to

6 months to



31 Oct 2016

31 Oct 2015

Change

£m

£m


Revenue: hire of vehicles

10.5

7.8

35.2%

Revenue: sale of vehicles

2.0

1.8

13.4%

Operating profit

1.7

1.6

6.6%

Operating margin

15.7%

20.0%

-4.3%





Average vehicles on hire

3,400

3,000

13.3%

Average utilisation

89.3%

90.3%

-1.0%

Vehicle disposal units

400

300

33.3%





After adjusting for the impact of foreign currency, hire revenue was 15.8% higher than in the same period last year and operating profit was £0.1m lower.

 

Ireland has grown closing vehicles on hire by 10% in the period.  Profitability was held back due to a significant amount of demand originating in the south of the country which is less well serviced by Northgate workshop facilities. Going forward we will invest in the network infrastructure in order to facilitate more internal work throughout the southern region.

 

Interest and taxation

 

Net underlying finance charges for the six months to 31 October 2016 were £4.6m (2015 - £5.7m). 

 

The impact of foreign currency adversely affected net finance charges by £0.3m. Excluding the effects of foreign currency, a decrease in lower average debt and favourable pricing compared to the prior period has reduced net finance charges by £0.8m. An interest refund of £0.6m was also received in the period in relation to an historical tax claim in Spain that was settled in favour of the Group.

 

The Group's underlying effective tax rate was 15% (2015 - 21%). This was impacted in the year by the £1.7m release of a provision in relation to a previously disputed tax position.

 

After taking account of intangible amortisation and exceptional items, the effective tax rate was also 15% (2015 - 21%).

 

Exceptional items

 

During the period £0.7m of exceptional operating costs were incurred relating to restructuring costs in the UK.  A net refund of £0.9m was received in relation to an historical tax claim in Spain which was settled in favour of the Group.

 

The exceptional finance credit of £0.3m was received in relation to the above mentioned tax settlement in Spain.

 

Cash flow and net debt

 

Net cash outflow was £6.7m (2015 - £5.3m) after net capital expenditure of £95.5m (2015 - £92.7m). Before taking account of the payment of dividends, free cash flow generation was £7.6m compared to £8.1m in the same period last year.

 

Closing net debt of £355.0m increased by £45.1m since April 2016, which included a £38.3m increase in debt due to the impact of changes in foreign currency rates.  This increase reflects the fact that 81% of the Group's debt is denominated in Euros.  However, this debt is held against Euro assets of the Group, sheltering the balance sheet from exchange rate movements.

 

Debt leverage cover at 31 October 2016 was 1.49 times net debt to EBITDA with comfortable levels of headroom remaining against all of our debt covenant ratios.

 

Facility headroom at 31 October 2016 was £231.9m.

 

Balance sheet

 

Group return on capital employed was 10.9% compared to 12.0% in the same period last year and 12.2% in the year ended 30 April 2016.

 

Net tangible assets at 31 October 2016 were £493.5m (April 2016 - £463.4m), equivalent to a tangible net asset value of 370p per share (April 2016 - 348p per share). 

 

Gearing at 31 October 2016 was 72% (April 2016 - 67%).

 

Foreign exchange

 

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


October 2016

October 2015


£ : €

£ : €

Average

1.19

1.39

Closing

1.11

1.39

 

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 2016 were set out in detail on pages 40 and 41 of the 2016 annual report, a copy of which is available at www.northgateplc.com, and were identified as:

 

·     Economic environment;

·     Competition and hire rates;

·     Vehicle holding costs;

·     Employees and the working environment;

·     IT systems; and

·     Access to capital.

 

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 interim financial statements for the six months ended 31 October 2016.

 

Glossary of terms

 

The following defined terms have been used throughout this document:

 

Term

Definition

Facility headroom

Calculated as facilities of £589.2m less net borrowings of £357.3m. Net borrowings represent net debt of £355.0m excluding unamortised arrangement fees of £2.3m and are stated after the deduction of £7.6m of cash balances which are available to offset against borrowings.

Gearing

Calculated as net debt divided by net tangible assets (as defined below)

LCV

Light commercial vehicle: the official term used within the European Union for a commercial vehicle with a gross vehicle weight of not more than 3.5 tonnes

Net tangible assets

Net assets less goodwill and other intangible assets

PPU

Profit per unit/loss per unit - this is a non-GAAP measure used to describe the adjustment in the depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs), divided by the number of vehicles sold

SME

Small and medium sized enterprise

 

 

Reconciliation of GAAP to non-GAAP measures

 

A reconciliation of GAAP to non-GAAP underlying measures is as follows:


Six months

to 31.10.16

£000

Six months

to 31.10.15

£000




Profit before tax

39,997

42,832

Add back:



Exceptional operating (credit) expenses

(198)

493

Intangible amortisation

948

1,003

Exceptional finance (credit) costs

(336)

1,561

Underlying profit before tax

40,411

45,889




 







Profit for the year




34,020

33,865

Add back:






Exceptional operating (credit) expenses




(198)

493

Intangible amortisation




948

1,003

Exceptional finance (credit) costs




(336)

1,561

Tax on exceptional items, brand royalty charges and intangible amortisation




(99)

(845)

Underlying profit for the year




34,335

36,077

Weighted average number of Ordinary shares



133,232,518

133,232,518

Underlying basic earnings per share




25.8p

27.1p







Net decrease in cash and cash equivalents


(12,554)

(6,348)

Add back:




Receipt of bank loans and other borrowings




-

(70,410)

Repayments of bank loans and other borrowings



5,837

71,448

Net cash outflow




(6,717)

(5,310)

Add back: Dividends paid




14,347

13,389

Free cash flow




7,630

8,079

 



 

 


UK

Six months

to 31.10.16£000

Spain

Six months to 31.10.16

£000

Ireland

Six months to 31.10.16

£000

Corporate

Six months to 31.10.16

£000

Eliminations

Six months to 31.10.16

£000

Group

Six months to 31.10.16

£000

Operating profit

22,275

19,411

1,305

1,224

-

44,215

 

Add back:







 

Restructuring costs

688

-

-

-

-

688

 

Spain tax settlement

-

(886)

-

-

-

(886)

 

Brand royalty charges

-

2,725

352

(3,077)

-

-

 

Intangible amortisation

912

36

-

-

-

948

 

Underlying operating profit (loss)

23,875

21,286

1,657

(1,853)

-

44,965

 








 

Underlying operating profit (loss)

23,875

21,286

1,657

(1,853)

-

44,965

 

Divided by: Revenue: hire of vehicles

138,372

81,223

10,524

-

(480)

229,639

 

Underlying operating margin

17.3%

26.2%

15.7%



19.6%

 

 

 


UK

Six months

to  31.10.15£000

Spain

Six months to 31.10.15

£000

Ireland

Six months to 31.10.15

£000

Corporate

Six months to 31.10.15

£000

Eliminations

Six months to 31.10.15

£000

Group

Six months to 31.10.15

£000

Operating profit

30,389

17,998

1,295

380

-

50,062

 

Add back:







 

Restructuring costs

493

-

-

-

-

493

 

Brand royalty charges

-

2,306

261

(2,567)

-

-

 

Intangible amortisation

958

30

-

15

-

1,003

 

Underlying operating profit (loss)

31,840

20,334

1,556

(2,172)

-

51,558

 








 

Underlying operating profit (loss)

31,840

20,334

1,556

(2,172)

-

51,558

 

Divided by: Revenue: hire of vehicles

149,843

68,624

7,782

-

(561)

225,688

 

Underlying operating margin

21.2%

29.6%

20.0%



22.8%

 

 

 



 

Condensed consolidated income statement 





for the six months ended 31 October 2016 




 



Six months

Six months

Six months

Six months

Year to

Year to



to 31.10.16

to 31.10.16

to 31.10.15

to 31.10.15

30.04.16

30.04.16



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

(Audited)



Underlying

Statutory

Underlying

Statutory

Underlying

Statutory


Note

£000

£000

£000

£000

£000

£000

Revenue: hire of vehicles

2

229,639

229,639

225,688

225,688

447,134

447,134

Revenue: sale of vehicles

2

87,077

87,077

87,459

87,459

171,154

171,154

Total revenue

2

316,716

316,716

313,147

313,147

618,288

618,288

Cost of sales


(237,726)

(237,726)

(230,637)

(230,637)

(459,286)

(459,286)

Gross profit


78,990

78,990

82,510

82,510

159,002

159,002

Administrative expenses (excluding exceptional items and intangible amortisation)


(34,025)

(34,025)

(30,952)

(30,952)

(64,683)

(64,683)

Exceptional administrative credit (expenses)

8

-

198

-

(493)

-

(1,777)

Intangible amortisation


-

(948)

-

(1,003)

-

(1,979)

Total administrative expenses


(34,025)

(34,775)

(30,952)

(32,448)

(64,683)

(68,439)

Operating profit

2

44,965

44,215

51,558

50,062

94,319

90,563

Interest income


1

1

1

1

3

3

Finance costs (excluding exceptional items)


(4,555)

(4,555)

(5,670)

(5,670)

(11,373)

(11,373)

Exceptional finance credit (costs)

8

-

336

-

(1,561)

-

(1,561)

Profit before taxation


40,411

39,997

45,889

42,832

82,949

77,632

Taxation

3

(6,076)

(5,977)

(9,812)

(8,967)

(17,599)

(16,153)

Profit for the period


34,335

34,020

36,077

33,865

65,350

61,479









 

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 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

4

25.8p

25.5p

27.1p

25.4p

49.0p

46.1p

Diluted

4

25.4p

25.1p

26.7p

25.0p

48.3p

45.5p

 

 

 

 



 

Condensed consolidated statement of comprehensive income





for the six months ended 31 October 2016







Six months

Six months

Year to



to 31.10.16

to 31.10.15

30.04.16



(Unaudited)

(Unaudited)

 (Audited)



£000

£000

£000

Amounts attributable to owners of the Parent Company





Profit attributable to owners


34,020

33,865

61,479

 

Other comprehensive income (expense)

Foreign exchange differences on retranslation of net assets of subsidiary undertakings


50,171

(3,353)

22,775

Net foreign exchange differences on long term borrowings held as hedges


(40,326)

2,943

(18,347)

Foreign exchange difference on revaluation reserve


157

(11)

70

Recycling of hedging reserve items


-

-

649

Net fair value (losses) gains on cash flow hedges


(795)

1,399

(1,428)

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


159

(297)

285

Total other comprehensive income for the period


9,366

681

4,004

Total comprehensive income for the period


43,386

34,546

65,483

 

All items will subsequently be reclassified to the consolidated income statement.



 

 

Condensed consolidated balance sheet






31 October 2016









31.10.16

 

31.10.15

Restated

30.04.16

Restated




(Unaudited)

(Unaudited)

(Audited)



Note

£000

£000

£000

Non-current assets






Goodwill



3,589

3,589

3,589

Other intangible assets



3,250

4,985

4,054







Property, plant and equipment: vehicles for hire



756,648

676,461

684,499

Other property, plant and equipment



68,998

64,711

65,765

Total property, plant and equipment



825,646

741,172

750,264

Deferred tax assets



16,381

14,042

15,256

Total non-current assets



848,866

763,788

773,163

Current assets






Inventories



26,904

22,306

23,109

Trade and other receivables



68,049

71,515

63,499

Cash and bank balances



42,829

31,907

55,248

Total current assets



137,782

125,728

141,856

Total assets



986,648

889,516

915,019

Current liabilities






Trade and other payables



60,971

52,323

53,183

Current tax liabilities



22,016

16,727

19,350

Short term borrowings



41,000

40,950

46,515

Total current liabilities



123,987

110,000

119,048

Net current assets



13,795

15,728

22,808

Non-current liabilities






Derivative financial instrument liabilities


9

3,947

325

3,152

Long term borrowings



356,807

329,641

318,610

Deferred tax liabilities



1,585

4,011

3,184

Total non-current liabilities



362,339

333,977

324,946

Total liabilities



486,326

443,977

443,994

NET ASSETS



500,322

445,539

471,025







Equity






Share capital



66,616

66,616

66,616

Share premium account



113,508

113,508

113,508

Revaluation reserve



1,183

945

1,026

Own shares



(6,087)

(9,568)

(8,157)

Merger reserve



67,463

67,463

67,463

Hedging reserve



(3,157)

(926)

(2,522)

Translation reserve



444

(14,238)

(9,400)

Capital redemption reserve



40

40

40

Retained earnings



260,312

221,699

242,451

TOTAL EQUITY



500,322

445,539

471,025

 

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



 






Condensed consolidated cash flow statement




for the six months ended 31 October 2016







Six months

Six months

Year to



to 31.10.16

to 31.10.15

30.04.16



(Unaudited)

(Unaudited)

(Audited)


 Note

£000

£000

£000

Net cash generated from operations

6

10,027

17,721

73,726

Investing activities





Interest received


1

1

3

Proceeds from disposal of other property, plant and equipment

284

307

1,001

Purchases of other property, plant and equipment

(1,938)

(2,241)

(4,503)

Purchases of intangible assets


(127)

(1,648)

(1,682)

Net cash used in investing activities


(1,780)

(3,581)

(5,181)

Financing activities





Receipt of bank loans and other borrowings

-

70,410

70,410

Repayments of bank loans and other borrowings

(5,837)

(71,448)

(107,653)

Debt issue costs paid


-

(1,675)

(1,675)

Dividend paid

(14,347)

(13,389)

(20,114)

Net payments to acquire own shares for share schemes


(617)

(2,825)

(2,366)

Termination of financial instruments


-

(1,561)

(1,561)

Net cash used in financing activities


(20,801)

(20,488)

(62,959)

Net (decrease) increase in cash and cash equivalents


(12,554)

(6,348)

5,586

Cash and cash equivalents at beginning of the period


18,748

               9,676

9,676

Effect of foreign exchange movements


1,362

(343)

3,486

Cash and cash equivalents at the end of the period


7,556

               2,985

18,748

 

Cash and cash equivalents consist of:





Cash and bank balances


42,829

31,907

55,248

Bank overdrafts


(35,273)

(28,922)

(36,500)



7,556

2,985

18,748



 

Condensed consolidated statement of changes in equity

for the six months ended 31 October 2016



Share capital  and share premium

 

 

Own shares

Hedging reserve

Translation reserve

Other reserves

Retained earnings

Total


£000

£000

£000

£000

£000

£000

£000

Total equity at 1 May 2015

180,124

(8,812)

(2,028)

(13,828)

68,459

202,441

426,356

Share options fair value charge

-

-

-

-

-

851

851

Share options exercised

-

-

-

-

-

(2,069)

(2,069)

Profit attributable to owners of the Parent Company

-

-

-

-

-

33,865

33,865

Dividend paid

-

-

-

-

-

(13,389)

(13,389)

Net purchase of own shares

-

(2,825)

-

-

-

-

(2,825)

Transfer of shares on vesting of share options

-

2,069

-

-

-

-

2,069

Other comprehensive income (expense)

-

-

1,102

(410)

(11)

               -

681

Total equity at 1 November 2015

180,124

(9,568)

(926)

(14,238)

68,448

221,699

445,539

Share options fair value charge

-

-

-

-

-

815

815

Share options exercised

-

-

-

-

-

(952)

(952)

Profit attributable to owners of the Parent Company

-

-

-

-

-

27,614

27,614

Dividend paid

-

-

-

-

-

(6,725)

(6,725)

Net purchase of own shares

-

459

-

-

-

-

459

Transfer of shares on vesting of share options

-

952

-

-

-

-

952

Other comprehensive (expense) income

-

-

(1,596)

4,838

81

-

3,323

Total equity at 1 May 2016

180,124

(8,157)

(2,522)

(9,400)

68,529

242,451

471,025

Share options fair value charge

-

-

-

-

-

875

875

Share options exercised

-

            -

-

-

-

(2,687)

(2,687)

Profit attributable to owners of the Parent Company

-

-

-

-

-

34,020

34,020

Dividend paid

-

-

-

-

-

(14,347)

(14,347)

Net purchase of own shares

-

(617)

-

-

-

-

(617)

Transfer of shares on vesting of share options

-

2,687

-

-

-

-

2,687

Other comprehensive (expense) income  

-

-

(635)

9,844

157

-

9,366

Total equity at 31 October 2016

180,124

(6,087)

(3,157)

444

68,686

260,312

500,322









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 5 December 2016.


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 2016, including comparative financial information, has been prepared on the basis of the accounting policies set out in the last annual report and accounts, except for income taxes, which are accrued using the tax rate that is expected to be applicable for the full year, and in accordance with IAS 34 'Interim Financial Reporting', as issued by the International Accounting Standards Board and adopted by the European Union.

 

Various new accounting standards and amendments came into force and others were issued during the period, none of which are expected to have any significant impact on the Group and effects will principally relate to amendment and extension of current disclosures.  As a result of the clarification of an accounting standard, cash and cash equivalents and bank overdrafts are now shown gross, even where accounts have a right of offset within the same banking facility.  The comparatives as at 30 April 2016 have been restated by £36,500,000 and comparatives as at 31 October 2015 have been restated by £28,922,000.

 

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 2016.

 

Going concern assumption

Having reassessed the principal risks and the other matters discussed in connection with the viability statement in the 2016 annual report and accounts the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial statements.

 

Information extracted from 2016 annual report

The financial figures for the year ended 30 April 2016, 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 2016 were prepared under IFRS and have been delivered to the Registrar of Companies. The audit 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

 



UK

Spain

Ireland

Corporate

Eliminations

Total



Six months

Six months

Six months

Six months

Six months

Six months



to 31.10.16

to 31.10.16

to 31.10.16

to 31.10.16

to 31.10.16

to 31.10.16



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)



£000

£000

£000

£000

£000

£000

Revenue: hire of vehicles


138,372

81,223

10,524

-

(480)

229,639

Revenue: sale of vehicles


59,020

26,071

1,986

-

-

87,077

Total revenue


197,392

107,294

12,510

-

(480)

316,716









Underlying operating profit (loss) *


23,875

21,286

1,657

(1,853)

-

44,965

Exceptional administrative expenses







198

Intangible amortisation







(948)

Operating profit







44,215

Interest income







1

Finance costs (excluding exceptional items)







(4,555)

Exceptional finance credit







336

Profit before taxation







39,997

 



UK

Spain

Ireland

Corporate

Eliminations

Total



Six months

Six months

Six months

Six months

Six months

Six months



to 31.10.15

to 31.10.15

to 31.10.15

to 31.10.15

to 31.10.15

to 31.10.15



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)



£000

£000

£000

£000

£000

£000

Revenue: hire of vehicles


149,843

68,624

7,782

-

(561)

225,688

Revenue: sale of vehicles


62,783

22,925

1,751

-

-

87,459

Total revenue


212,626

91,549

9,533

-

(561)

313,147









Underlying operating profit (loss) *


31,840

20,334

1,555

(2,171)

-

51,558

Exceptional administrative expenses







(493)

Intangible amortisation







(1,003)

Operating profit







50,062

Interest income







1

Finance costs (excluding exceptional items)







(5,670)

Exceptional finance costs







(1,561)

Profit before taxation







42,832

 

2. Segmental analysis (continued)

 



UK

Spain

Ireland

Corporate

Eliminations

  Total



Year to

Year to

Year to

Year to

Year to

  Year to



30.04.16

30.04.16

30.04.16

30.04.16

30.04.16

  30.04.16



(Audited)

(Audited)

(Audited)

(Audited)

(Audited)

  (Audited)



£000

£000

£000

£000

£000

  £000

Revenue: hire of vehicles


290,714

140,781

16,691

-

(1,052)

447,134

Revenue: sale of vehicles


123,401

44,110

3,643

-

-

171,154

Total revenue


414,115

184,891

20,334

-

(1,052)

618,288









Underlying operating profit (loss) *


55,392

41,267

2,759

(5,099)

-

94,319

Restructuring costs







(1,777)

Intangible amortisation







(1,979)

Operating profit







90,563

Interest income







3

Finance costs (excluding exceptional items)







(11,373)

Exceptional finance costs







(1,561)

Profit before taxation







77,632

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

3. Taxation

 

4. Earnings per share

 








Six months

Six months

Six months

Six months

Year to

Year to


to 31.10.16

to 31.10.16

to 31.10.15

to 31.10.15

30.04.16

30.04.16


(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 profit attributable to owners of the Parent Company

34,335

34,020

36,077

33,865

65,350

61,479






 

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

2,195,780

2,195,780

2,066,430

2,066,430

1,990,249

1,990,249

Weighted average number of Ordinary shares for the purpose







of diluted earnings per share

135,428,298

135,428,298

135,298,948

135,298,948

135,222,767

135,222,767

Basic earnings per share

25.8p

25.5p

27.1p

25.4p

49.0p

46.1p

Diluted earnings per share

25.4p

25.1p

26.7p

25.0p

48.3p

45.5p






 

5. Dividends

In the six months to 31 October 2016, a dividend of £14,347,000 was paid (2015 - £13,389,000). The Directors have declared a dividend of 5.7p per share for the six months ended 31 October 2016 (2015 - 5.1p).

6. Notes to the cash flow statement






Six months

Six months

Year to


to 31.10.16

to 31.10.15

30.04.16


(Unaudited)

(Unaudited)

(Audited)

Net cash generated from operations

£000

£000

£000

Operating profit

44,215

50,062

90,563

Adjustments for:




Depreciation of property, plant and equipment

77,708

69,781

144,272

Amortisation of intangible assets

955

1,003

1,979

Loss on disposal of property, plant and equipment

70

35

122

Share options fair value charge

875

851

1,666

Operating cash flows before movements in working capital

123,823

121,732

238,602

Decrease in non-vehicle inventories

281

              523

866

Decrease in receivables

1,430

           1,271

10,157

Decrease in payables

(11,953)

(9,021)

(6,825)

Cash generated from operations

113,581

114,505

242,800

Income taxes paid

(6,054)

(2,315)

(8,259)

Interest paid

(3,782)

(5,381)

(10,527)

Net cash generated from operations

103,745

106,809

224,014

Purchases of vehicles

(168,155)

(164,464)

(296,165)

Proceeds from disposal of vehicles

74,437

75,376

145,877

Net cash generated from operations

10,027

17,721

73,726

 

7. Analysis of consolidated net debt

 






31.10.16

31.10.15

30.04.16

 


(Unaudited)

(Unaudited)

(Audited)

 


£000

£000

£000

 

Cash and bank balances

(42,829)

(31,907)

(55,248)

 

Bank overdrafts

35,273

28,922

36,500

 

Bank loans

271,761

269,101

249,742

 

Loan notes

89,963

71,718

77,930

 

Cumulative preference shares

500

500

500

 

Confirming facilities

310

350

453

 


354,978

338,684

309,877

 

 

 

8. Exceptional items





 



During the period the Group recognised exceptional items in the income statement as follows:






Six months

Six months

Year to

 



to 31.10.16

to 31.10.15

30.04.16

 



(Unaudited)

(Unaudited)

(Audited)

 



£000

£000

£000

 

Restructuring costs


688

493

1,777

 

Spain tax settlement


(886)

-

-

 

Exceptional administrative (credit) expenses


(198)

493

1,777

 






 

Termination of interest rate swaps


-

1,561

1,561

 

Interest refunded in relation to Spain tax settlement


(336)

-

-

 

Exceptional finance (credit) costs


(336)

1,561

1,561

 

 

Total pre-tax exceptional items


(534)

2,054

3,338

 






 

Tax (charge) credit on exceptional items


(92)

641

668

 

Exceptional administrative expenses

All of the restructuring costs arose in the UK.  The Spain tax settlement followed the resolution of an historic tax case with the Spanish tax authorities.

Exceptional finance credit

This relates to interest refunded by the Spanish tax authorities on the settlement of the case disclosed above.

9. Derivative financial instruments





 



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






31.10.16

31.10.15

30.04.16

 



(Unaudited)

(Unaudited)

(Audited)

 



£000

£000

£000

 

Non-current derivative financial instrument liabilities


3,947

325

3,152

 

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

 

 

                                                                                                               

 

Paddy Gallagher

Group Finance Director

5 December 2016

 



Independent review report to Northgate plc

Report on the consolidated interim financial statements

Our conclusion


We have reviewed Northgate plc's consolidated interim financial statements (the 'interim financial statements') in the half-yearly report of Northgate plc for the 6 month period ended 31 October 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

What we have reviewed


The interim financial statements comprise:

·      the condensed consolidated balance sheet as at 31 October 2016;

·      the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;

·      the condensed consolidated cash flow statement for the period then ended;

·      the condensed consolidated statement of changes in equity for the period then ended; and

·      the unaudited explanatory notes to the interim financial statements.

 

The interim financial statements included in the half-yearly report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in Note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.

 

Responsibilities for the interim financial statements and the review

 

Our responsibilities and those of the Directors

 

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

Our responsibility is to express a conclusion on the interim financial statements in the half-yearly report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

What a review of interim financial statements involves


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 enquiries, 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.

We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Leeds

5 December 2016

 

 


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