RNS Number : 2647D
Northgate PLC
25 June 2019
 

NORTHGATE PLC

PRELIMINARY RESULTS FOR THE 12 MONTHS ENDED 30 APRIL 2019

Financial performance in line with guidance, continuing progress in the delivery of operational and strategic initiatives across the Group

Reported results




Year ended 30 April

2019

2018

Change


£m

£m

%

Revenue - vehicle hire

517.6

471.2

9.9%

Revenue - vehicle sales

227.8

230.5

(1.1%)

Total revenue

745.5

701.7

6.2%

Operating Profit

75.5

64.1

17.8%

Profit before Tax

60.4

52.7

14.5%

Earnings per Share

38.6p

32.4p

19.1%

Dividend per Share

18.3p

17.7p

3.4%





Adjusted results

 

 

 

Year ended 30 April

2019

2018

Growth


£m

£m

%

Rental profit

64.3

52.5

22.6%

EBITDA

268.4

248.5

8.0%

Underlying1 Operating Profit

76.2

68.3

11.5%

Underlying1 Profit before Tax

61.1

57.0

7.2%

Underlying1 Earnings per Share

38.7p

34.8p

11.2%

Total net capex1

(243.9)

(311.0)

21.6%

                Net Replacement Capex1

(201.3)

(185.9)

(8.3%)

                Growth Capex1 (incl. acquisition)

(42.6)

(125.1)

65.9%

EBITDA less Net Replacement Capex

67.1

62.6

7.3%

Free cash flow / (outflow)

20.4

(96.0)


Net Debt

436.9

439.3

0.6%

Return on Capital Employed %

7.7%

7.5%

20 bps

 

Highlights:

·    Hire revenue growth3 driven by double digit vehicles on hire (VOH2) growth3;

·    Rental profit of £64.3m grew2 22.6%, delivering a Group rental margin of 12.4% (2018: 11.1%);

·    UK & Ireland rental margin of 7.8% grew steadily throughout the year, reflecting the strong momentum from our self-help agenda;

·    Rental margin in Spain increased significantly to 19.7%, as we took steps to protect our strong market position in response to increasing pricing competition in the market;

·    Group rental profit growth3 benefit of £20.2m following the depreciation rate changes effective 1 May 2018;

·    Underlying1 profit before tax of £61.1m benefitted £15.3m from the net impact of depreciation rate changes, offset by the unwind of disposals;

·    Final dividend proposed of 12.1p per share (2018: 11.6p), taking the total dividend payable for the year to 18.3p per share, an increase of 3.4% (2018: 17.7p);

·    Free cash inflow of £20.4m benefitted from significantly lower total net capex of £243.9m (2018: £311.0m) driven by lower fleet growth and the fleet optimisation policy. Steady state cash generation5 remained strong at £67.1m (2018: £62.6m);

·    Net debt of £436.9m gave year end leverage of 1.64x, within the 1.5 - 2.5x target range.

Outlook for FY 2020 and the medium-term4

The Group exited FY 2019 with good operational momentum and clear execution plans to continue the delivery of profitable growth and strong cash generation in the coming year. Guidance for FY 2020 is as follows: 

·    Group rental revenue expected to grow3 low to mid single-digit %, driven by low single digit VOH2 growth3 in the UK & Ireland, and low to mid single digit VOH2 growth3 in Spain;

·    Group rental profit margin to be approximately 50 basis points above FY 2019 rental margin of 12.4%;

·    Group disposal profits will remain broadly flat with FY 2019;

·    Total capex is expected to increase 15-20%, driven by growth capex.

In the medium-term4, the Group expects to deliver a rental profit margin of at least 15%, supported by the substantial margin opportunity ahead for the UK & Ireland, and a continued strong margin in Spain.

Kevin Bradshaw, Chief Executive of Northgate, commented:

"We continue to make good progress executing our rental strategy to address the compelling growth opportunity in our markets.

"In the UK, our self-help turnaround programme is delivering. We have successfully introduced regular price increases during the year, and applied greater commercial focus to increase the efficiency of our operations. We turned a pricing corner in the second half of the year with our average hire rates returning to year-on-year growth after a three-year period of decline. Combined with our VOH2 growth3 driven by selective expansion of our minimum-term product, we delivered both rental income and average VOH growth3 of 11.3% in 2019. Our disposal channel has also performed well, achieving firm sales prices for the vehicles we sell.

"In Spain we continue to leverage the strength of our flexible hire business to provide a comprehensive range of fleet hire solutions to our customers. We are pursuing minimum-term growth opportunities with increasing selectivity as we take steps to protect the strong and attractive returns of the business against increasing price competition in the market. Lower disposal profits primarily reflect lower disposal volumes driven by the transition to longer holding periods following the previously announced strategic decision to increase the ageing of our fleet.

"Steady state cash generation for the Group remains strong, and has enabled us to increase the dividend and fund attractive minimum-term growth opportunities. Our progressive dividend reflects the confidence of the Board in the future prospects of the Group. Through continued performance improvement in our core rental business and extending our penetration into complementary services to broaden the fleet solutions we provide, I am confident that our strategy will deliver our medium-term objectives of further profitable growth, strong cash generation and attractive returns for shareholders.

"We are disappointed with the share price performance and remain focussed on addressing the undervaluation of the Group. The search for our new Chairman is well advanced with an exceptionally strong shortlist. The Board and management look forward to working alongside a new Chair appointment to maximise value for shareholders".

 

1Refer to GAAP reconciliation and Glossary of terms note

2 Vehicles on Hire is average unless otherwise stated

3 Growth is year-on-year unless otherwise stated

4 Medium-term is 3-5 years

5 Steady state cash generation is EBITDA less net replacement capex



 

GAAP reconciliation and glossary of terms

Throughout this document 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. Specifically we refer to disposal profit. This is a non-GAAP measure used to describe the adjustment in 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).

A reconciliation of GAAP to Non-GAAP underlying measures and a glossary of terms used in this document are outlined below the financial review.

Next Results

Northgate will provide a First Quarter Trading Update on the day of its Annual General Meeting on 23 September 2019.

Contact details

There will be a presentation for investors and analysts at 9.00 a.m. today at Numis, 5th Floor, London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT.  If you have not already registered to attend, please contact MHP Communications on the number below. 

 

A live webcast of this presentation will be available via a link on the Company's web-site www.northgateplc.com            

 

There will also be a listen-only dial-in facility on 44 (0)330 336 9411, confirmation code 6599335.

                               

For further information please contact:

Northgate plc

Kirsty Law, Investor Relations

44 (0)118 207 3535

44 (0)7808 212 964

 

MHP

Andrew Jaques, Simon Hockridge, Ollie Hoare

 

44 (0)203 128 8771

 

Notes to Editors:

Northgate plc is the leading light commercial vehicle hire business in the UK, Spain and Ireland 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 minimum-term basis, giving customers the ability to manage their fleet requirements in a way which can adapt best to changing business needs.

Further information regarding Northgate plc can be found on the Company's website www.northgateplc.com                                 

 



 

CHIEF EXECUTIVE REVIEW

MARKET AND OPPORTUNITIES

There are approximately 8 million Light Commercial Vehicles (LCVs) on the roads in Northgate's two territories. The rental and term hire segments present the greatest opportunities for future growth within the LCV sector, driven by the major structural shift in the market from vehicle ownership to 'usership'.

Customers are increasingly attracted to a rental proposition that avoids the high initial capital outlay of vehicle ownership and brings them certainty of future cash outflows. In addition, the benefit of third party vehicle supply and management delivers lower total ownership costs to customers versus direct ownership.

Northgate is evolving its fleet solutions to offer customers a comprehensive range of complementary services including fleet management, telematics and accident management. This evolution increases the attractiveness of LCV rental solutions to our customers, and in return will allow Northgate to participate in the higher returns these technology-led services offer.   

GROUP PERFORMANCE

During 2019 we continued to strengthen the Group's foundations and execute on our strategy to deliver long-term sustainable growth in revenues, profits and shareholder returns. 

Total revenues grew 6.2% to £745.5m (2018: £701.7m) driven by our selective penetration into the rental markets through our attractive minimum-term proposition. Group statutory operating profit of £75.5m grew 17.8%, with underlying operating profit growth of 11.5% to £76.2m (2018: £68.3m), driven by growth in rental profits partially offset by lower disposal profits reflecting the transition to longer vehicle holding periods following implementation of the fleet optimisation policy. Operating profit growth included a net £15.3m benefit following the changes to depreciation rates at the start of the year, being a £20.2m benefit in rental profit offset by a £4.9m unwind through disposal profits. Underlying earnings per share grew 11.2% to 38.7p (2018: 34.8p), with the net benefit of the depreciation changes representing 9.7p of the earnings per share increase. Statutory earning per share of 38.6p increased from 32.4p in the prior year.

Free cash flow improvement was delivered from growth in the business and significantly lower total capex, reflecting lower growth in our fleet alongside the benefits of our fleet optimisation policy. Steady state cash generation1 grew 7.3% to £67.1m, reflecting improved cash generation from our rental operations alongside investment in attractive minimum-term growth opportunities. Year end net debt of £436.9m is flat versus the prior year, giving leverage of 1.64x at the year end, within our target range of 1.5 - 2.5x.

ROCE in FY 2019 improved 20 bps to 7.7%, reflecting the strategic progress made during the year and was impacted by reduced disposal profits following the transition to a more aged fleet, by strong minimum-term growth in VOH2, and from capital employed increasing ahead of the profit from those growth vehicles.

For the year ended 30 April 2019, we are proposing a final dividend of 12.1p (2018: 11.6p) which, together with the interim dividend of 6.2p (2018: 6.1p), gives a full year dividend of 18.3p (2018:17.7p), an increase of 0.6p or 3.4% on 2018.  If approved by Shareholders, the final dividend will be paid on 27 September 2019 to Shareholders on the register on 16 August 2019. The proposed dividend increase reflects the strong performance of FY 2019 and the Board's confidence in the strategy initiatives in place to deliver increasing profits and distributions to shareholders going forward.

Our capital management framework remains consistent, delivering attractive returns to shareholders via our progressive dividend policy whilst maintaining a dividend cover of 2.0x - 3.0x. We continue to invest in the business and explore core bolt-ons, supported by established facilities and free cash flow. All of this done whilst maintaining balance sheet leverage within our stated range of 1.5x - 2.5x.

1 Defined as EBITDA less Net replacement capex. Steady state cash generation is stated before cash flows for interest, taxation and other financing costs.

2 Vehicles on Hire is average unless otherwise stated

FOUR PART STRATEGY

Northgate exists to provide expert, easy and responsible vehicle rental. Behind this purpose are four principal market objectives through which we will leverage our strong market positions and competitive advantages to deliver strong growth and attractive returns:

1.    Defend and grow our share of flexible rental markets;

2.    Selectively gain share in minimum-term markets;

3.    Broaden our provision of capital-light fleet solutions;

4.    Optimise and increase participation in the disposals market.

The strategy above has evolved to include the broadening of Northgate's provision of fleet solutions through the development of capital-light services in attractive and complementary markets. Northgate already provides a number of complementary services in the wider B2B vehicle rental landscape such as fleet and accident management solutions, and we expect to grow our participation in these attractive areas to support and drive future growth in our core business operations.  

Delivery of the above market objectives draws on Northgate's many competitive strengths, which include:

·    Our strong brand, reputation and relationships in the LCV market; 

·    The breadth and depth of our operational experience and expertise;

·    Our strong coverage capability in both territories, we offer national coverage capability as well as a presence in local markets through our nation-wide network of rental depots, service workshops and sales;

·    Our purchasing scale and strong relationships with vehicle manufacturers;

·    Our strong balance sheet and cashflows and our disciplined approach to capital deployment.

Management of the vehicle fleet

In the prior year we made the decision to increase vehicle holding periods in all territories, to give a more efficient capital base and drive stronger cash returns and higher ROCE. The transition to this fleet optimisation policy continued during this year, which led to a lower number of vehicle sales with a corresponding reduction in replacement vehicles purchased. Consequently, the revenue and profits from disposals, capex, and net debt levels were all lower than they would have been under the previous policy whilst the fleet was transitioning to this older ageing.

 

Attractive growth in minimum-term

Average VOH1 growth in the year was driven by growth in our minimum-term product across both our markets, this will provide increasing visibility of our rental revenue and earnings. We have applied increased selectivity to minimum-term growth as the year progressed, seeing good opportunities for attractive growth in the UK & Ireland, and strong benefits of providing a bundled fleet solution to our customers in Spain.

GROUP OUTLOOK AND GUIDANCE

We have done much work in the past year to further strengthen the foundations of the Group. We have a clear strategy to grow our revenues, profits and returns, supported by clear execution plans. We will continue to enhance our capabilities and leverage our competitive advantages, to deliver the growth opportunities identified. 

We expect Group revenue from vehicle hire to grow2 by low to mid single digit % in FY 2020, driven by low single digit VOH1 growth2 in the UK & Ireland, and low to mid single digit VOH1 growth2 in Spain.

The Group rental profit margin is expected to increase by approximately 50 basis points in FY 2020, driven by VOH1 growth and the opportunity for rental margin expansion in the UK & Ireland, together with our efforts to protect our strong market position in Spain through selective VOH1 growth. 

·    In the UK & Ireland, despite uncertainty in the market driven by Brexit, we remain confident in the strength of our proposition and our ability to win business. Rental revenues will continue to be supported by our established price discipline, and we expect operational efficiency improvements driven by our self-help agenda and the application of technology, to support a growing rental profit margin in FY 2020 and beyond.

 

·    In Spain, whilst the market is increasingly competitive, particularly from a pricing perspective, we have a strategy in place to protect our strong market position and to continue to deliver attractive returns. This will be delivered through selective VOH1 growth, further market segmentation, a continued focus on innovating our operating model and customer propositions, and the execution of a cost management programme.

Group disposal profits will remain broadly flat with FY 2019, and will be adversely impacted by approximately £5m depreciation unwind, offset by strong profit per unit.

Total net capex for the Group is expected to increase by 15% - 20% in FY 2020, driven by growth capex. Steady state cash generation3 is expected to grow in FY 2020, as ageing benefits from fleet optimisation drive lower net replacement capex4. We have flexibility in our balance sheet to enable us to finance our growth plans, provide long-term returns to shareholders, and safeguards the Group's financial position through economic cycles. In the event of an economic downturn, our robust cash generation will benefit from reduced new vehicle purchases. We will continue to target a leverage range of 1.5 to 2.5 times net debt to EBITDA.

In the medium-term5, the Group expects to deliver a rental margin of at least 15%, supported by the substantial margin opportunity ahead for the UK & Ireland, and by a continued strong margin in Spain in the context of a highly competitive landscape. I am confident we will continue to progress and deliver improved performance for the benefit of all our shareholders.

1 Vehicles on Hire is average unless otherwise stated

2 Growth is year-on-year unless otherwise stated

3 Defined as EBITDA less Net replacement capex. Steady state cash generation is stated before cash flows for interest, taxation and other financing costs.

4 Net replacement capex is total capex less growth capex.

5 Medium-term is 3-5 years.

People

As announced previously, Fernando Cogollos Ubeda will retire from his role as the General Manager of Northgate Spain in August 2019 and upon retirement is expected to join the main Board of Northgate plc as a Non-Executive Director.

Jorge Alarcon will join Northgate as the new General Manager in Northgate Spain effective 22 August 2019. Jorge is a proven and strong leader who brings with him a wealth of experience of the industrials and services markets in Spain. Jorge joins us from GAM where he has held the position of Managing Director since July 2016.

Impact of the UK leaving the European Union

The Company has undertaken a thorough review of the potential impact on its business of the UK leaving the European Union. The greatest risks identified would be a disruption to the supply of new vehicles and vehicle components imported into the UK from the EU, including additional import costs which may be imposed:

·    Around 90% of vehicles purchased by Northgate UK from UK OEMs are imported from the EU, valued at approximately £220 million per annum. Assurances have been sought from these OEMs, who are confident that there will be no material long-term disruption.  Any potential short-term supply disruption can also be mitigated by Northgate itself, by slowing the rate of vehicle de-fleets in order to maintain vehicle availability for customers. 

·    Components for vehicles manufactured in the UK are also imported from the EU. However,  normal OEM stock levels are considered to be sufficient to address any potential short-term supply issues.

·    The introduction of import costs could potentially create some margin pressure in the short-term. However, the Company believes that in the longer-term, it will be able to pass through to end-users any significant additional costs that might be imposed on imported vehicles. 

A potential upside for Northgate in the event of supply disruptions or higher purchase costs, would be the likely increase in rental demand and stronger residual values that would result.

Less than 5% of Northgate's UK employees do not possess a UK passport, so any change to the status of EU citizens in the UK will not have a material effect on the company's operations.

No material impacts on Northgate's business in Ireland have been identified.

 

 



OUR 2019 PERFORMANCE

UK & Ireland

Year ended 30 April

2019

2018

Change

KPI

('000)

('000)

%

Average VOH

48.4

43.5

11.3%

Closing VOH

47.1

45.5

3.4%

Vehicles purchased (incl. acquired)

15.7

23.4

(32.9%)

Vehicles sold

21.0

21.0

-

Profit per Unit (PPU) £

512

457

12.0%

Closing fleet size (incl. acquired)

54.6

56.7

(3.7%)

Average utilisation %

88%

87%

1 ppt

Average fleet age at year-end (mo.)

21

21

-

 

Year ended 30 April

2019

2018

Change

PROFIT & LOSS (Underlying)

£m

£m

%

Revenue - Vehicle hire

315.6

283.5

11.3%

Revenue - Vehicle sales

166.5

156.9

6.1%

Total Revenue

482.0

440.5

9.4%

Rental profit

24.6

23.5

4.8%

Rental Margin %

7.8%

8.3%

(0.5 ppt)

Disposals profit

10.8

9.6

12.0%

Operating profit

35.4

33.1

6.9%

ROCE %

6.4%

6.4%

-

 

Rental business

Rental revenue in the UK & Ireland in 2019 increased by 11.3% over the prior year to £315.6m (2018: £283.5m), driven by average VOH growth of 11.3%. Following the return to growth of year-on-year VOH in late 2018, momentum has remained strong throughout 2019, resulting in VOH of 47,100 at the end of the year, 3.4% higher than the prior year.

This strength in UK & Ireland rental revenues was driven by successful execution of the rental strategy, supported by the self-help actions identified through our strategic review. Lead generation from our marketing function has increased substantially during the year, particularly from our telesales capabilities and new digital marketing programme. In addition, Northgate successfully integrated 1,600 ex-TOM vehicles into VOH1 during the first quarter of 2019.

Price rises introduced to certain flexible hire products at the beginning of the year paved the way for further regular rate increases across our full range of rental products. These price adjustments have been very well planned, communicated and executed, and we have not seen an apparent adverse customer churn resulting from these changes. Year-on-year average hire rates returned to growth in the final quarter of the year, following a more proactive approach to managing revenues during the year. We are confident we will be able to continue to reflect the structural cost increases faced by the business through regular adjustments to our hire rates going forward.

At the year end, Northgate's compelling minimum-term proposition accounted for around 24% of average VOH, compared to 11% at the start of the year. The average term of these contracts is approximately three years, representing a significant improvement in the visibility of rental revenue and earnings, as well as lower transactional costs.

The 2019 UK & Ireland rental margin benefitted by approximately £4.8m from the changes in depreciation rates introduced on 1 May 2018. The rental margin has delivered sequential improvement for the past three half year periods, increasing from 6.0% in H2 2018, to 7.1% in H1 2019 and 8.5% in H2 2019. This improvement reflects the more competitive pricing introduced to the market as well as the execution of our strategic priorities. The overall 2019 rental margin of 7.8% decreased by 0.5 ppts versus the prior year.

The net impact of the higher VOH1 and lower rental margins was a 4.8% increase in UK & Ireland rental profits to £24.6m (2018: £23.5m).

1 Vehicles on Hire is average unless otherwise stated

Management of fleet and vehicle sales

The total UK & Ireland year end fleet size of 54,600 vehicles decreased from 56,700 in the prior year. 15,700 vehicles were purchased during the year and approximately 17,800 vehicles were de-fleeted, including 1,800 ex-TOM vehicles.

A total of 21,000 vehicles were sold in UK & Ireland during the year, including third-party vehicles purchased for resale and sales from stock.  Our Van Monster operations achieved strong sales, especially in the retail channel, in addition to robust residual values in the market. 

Disposal profits of £10.8m (FY 2018: £9.6m) increased 12.0% over the prior year, driven by a c.12% increase in the average profit per unit (PPU) on disposals to £512 (2018: £457). Disposal profits were reduced by approximately £0.7m relating to the unwind of the depreciation rate changes.

Operating profit and ROCE

Underlying operating profit of £35.4m grew 6.9% over the prior year (2018: £33.1m) including a £4.1m net benefit from lower depreciation and the associated unwind through disposal profits.

The return on capital employed in the UK & Ireland was 6.4% (2018: 6.4%) reflecting both the increase in operating profit and the increase in capital employed resulting from attractive growth in minimum-term VOH. 

 

Capex and cashflow

Year ended 30 April

2019

2018

Change

 

£m

£m

%

EBITDA

151.8

135.8

11.8%

Net Replacement Capex

(122.8)

(105.4)

(16.5%)

EBITDA less Net Replacement Capex

29.0

30.4

(4.5%)

Growth Capex (incl. inorganic)

(21.0)

(53.1)

(60.5%)

 

EBITDA increased by 11.8% to £151.8m (2018: £135.8m) due to higher rental and disposal profits.

Net replacement capex2 in the year was £122.8m, 16.5% higher than in 2018, driven by OEM price inflation, strong VOH1 growth and expansion of our minimum-term product, offset by the benefit of vehicle ageing.

EBITDA less net replacement capex2 reduced by 4.5% in 2019 to £29.0m (2018: £30.4 million) reflecting higher EBITDA more than offsetting higher replacement capex in the year.  Investment to grow the fleet was £21.0m, including approximately £1.6m partial cost of the TOM acquired vehicles.

1 Vehicles on Hire is average unless otherwise stated

2 Net replacement capex is total capex less growth capex. Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction.

 



SPAIN

Year ended 30 April

2019

2018

Change

KPI

('000)

('000)

%

Average VOH

44.8

40.3

10.9%

Closing VOH

46.0

42.7

7.5%

Vehicles purchased

13.9

18.9

(26.5%)

Vehicles sold

11.6

13.0

(10.8%)

PPU €

626

871

(28.1%)

Closing fleet size

51.1

48.0

6.5%

Average utilisation %

91%

91%

-

Average fleet age at year-end (mo.)

20

19

1 mo.

 

Year ended 30 April

2019

2018

Change

PROFIT & LOSS (Underlying)

£m

£m

%

Revenue - Vehicle hire

202.1

187.6

7.7%

Revenue - Vehicle sales

61.4

73.5

(16.6%)

Total Revenue

263.4

261.2

0.9%

Rental profit

39.7

29.0

37.1%

Rental margin %

19.7%

15.4%

4.3 ppts

Disposals profit

6.4

10.0

(36.3%)

Operating Profit

46.1

39.0

18.3%

ROCE %

10.7%

10.0%

70 bps

 

Rental business

Rental revenue in Spain grew 7.7% to £202.1m (2018: £187.6m) driven by average VOH growth of 10.9% in FY 2019.  At constant exchange rates, removing the headwind of foreign exchange, the reported growth in rental revenue was 7.9%.

Strong VOH1 growth throughout the year was underpinned by stable macro-economic conditions, strong growth in the Spanish rental fleet and the continuing structural shift away from LCV ownership to 'usership', most notably into minimum-term hire. Northgate leveraged its leading position in the flexible rental market to support ongoing expansion into minimum-term during the year. Customers have welcomed Northgate's successful bundling of minimum-term and flexible products and cross-selling achievements have been strong.

VOH growth was also supported by ongoing vehicle diversification of flexible hire vehicles allowing us to serve new markets, with niche vehicles including refrigerated vehicles for food distribution now representing c.1.5% of Northgate's fleet. In addition, we have also increased our base of green vehicles in response to increasing anti-pollution measures and trends in sustainable mobility. 

VOH1 growth softened in the final quarter to 8.6%, principally reflecting the strong VOH growth in the prior year. This led to closing VOH of 46,000 at the end of the year, 7.5% higher year-on-year. At the end of the year around 31% of average VOH were being supplied on minimum-term contracts.

The 2019 rental margin of 19.7% (2018: 15.4%) increased significantly year-on-year driven primarily by the 3% reduction in depreciation rates in Spain, effective 1 May 2018. Rental profits in 2019 grew 37.1% to £39.7m (2018: £29.0m) including a £15.4m benefit from the changes in depreciation rates. Alongside the depreciation benefit, the delivery of operational leverage and efficiency improvements more than offset the impacts of vehicle price inflation and the greater proportion of minimum-term contracts.  Vehicle utilisation in the year remained consistent with the prior year at 91%.

Rental profits grew by 37.7% at constant exchange rates.

Management of fleet and vehicle sales

The total fleet size in Spain increased by 6.5% to 51,100 vehicles, driven by the strong growth in VOH during the year.  This net increase of 3,100 vehicles comprised 13,900 vehicles purchased for the fleet less approximately 10,800 de-fleeted vehicles.  The average age of the fleet at the end of the year was around one month higher than at the same time last year.

A total of 11,600 vehicles were sold in the Spain during the year, 10.8% less than in the previous year. The average profit per unit (PPU) on disposals in Spain fell by more than 28% to €626 (2018: €871), reflecting the impacts of the fleet optimisation policy. As a result of the lower disposal volumes and PPU, profits from vehicle sales fell by 36.3% to £6.4m (2018: £10.0m).       

Operating profit and ROCE

The growth of rental profit of £10.7m was partially offset by the £3.6m fall in disposal profits, with total operating profit increasing by £7.1m (18.3%) to £46.1m (2018: £39.0m). At constant currencies, operating profits in Spain grew 18.8%. 

The return on capital employed in Spain was 10.7% (2018: 10.0%) reflecting improved operating profit and the increase in capital employed driven by the growth and mix of the fleet. 

Capex and cashflow

Year ended 30 April

2019

2018

Change

CASHFLOW

£m

£m

%

EBITDA

115.1

109.4

5.2%

Net Replacement Capex

(78.5)

(80.5)

2.5%

EBITDA less Net Replacement Capex

36.6

28.9

26.6%

Growth Capex

(21.7)

(72.0)

69.9%

 

EBITDA increased by 5.2% to £115.1m (2018: £109.4m) reflecting higher rental profits partially offset by lower disposal profits.

Net replacement capex2 in Spain in the year was £78.5m, 2.5% lower than in 2018, mainly due to OEM price inflation, with growth in minimum-term being offset by vehicle ageing.  EBITDA less net replacement capex grew by 26.6%, to £36.6m (2018: £28.9m), reflecting the benefit of ageing.  Growth capex was £21.7m, £50.3m lower than the prior year due to lower growth in the fleet.

 

Kevin Bradshaw, Chief Executive Officer

1 Vehicles on Hire is average unless otherwise stated

2 Net replacement capex is total capex less growth capex.

Group summary

A summary of the Group's financial performance is as follows:

Year ended 30 April

2019

£m

2018

£m

Change

£m

Change

%

Revenue

745.5

701.7

43.8

6.2%

Operating Profit

75.5

64.1

11.4

17.8%

Profit before tax

60.4

52.7

7.7

14.5%

EPS

38.6

32.4

6.2

19.1%

Underlying operating profit

76.2

 68.3

7.9

11.5%

Underlying profit before tax

61.1

 57.0

4.1

7.2%

Underlying EPS

38.7p

 34.8p

3.9p

11.2%

Dividend per share

18.3p

 17.7p

0.6p

3.4%

Underlying free cash flow

63.1

29.1

34.0

116.9%

Revenue

Group revenue increased by 6.2% to £745.5m, 6.4% at constant exchange rates.

Group revenue comprised:

Year ended 30 April

2019

£m

2018

£m

Change

£m

Change

%

Vehicle hire

517.6

471.2

46.4

9.9%

Vehicle sales

227.8

230.5

(2.7)

(1.1%)

Vehicle hire revenue grew to £517.6m from £471.2m in 2018, mainly driven by the 11.1% increase in Group average VOH.

Group vehicle sales revenue declined by 1.1% reflecting vehicle ageing due to the fleet optimisation strategy and slowing of the disposals cycle. This decline was partly offset by Group-wide sales channel optimisation in particular by improved retail penetration in the UK & Ireland resulting higher average proceeds per vehicle.

Underlying operating profit 

Underlying Group operating profit increased 11.5% (11.7% at constant exchange rates) to £76.2m and is stated before certain intangible amortisation (£0.7m).



 

Underlying Group operating profit comprised:

Year ended 30 April

2019

£m

2018

£m

Change

£m

Change

%

Rental profit

64.3

52.5

11.8

22.6%

Disposals profit

17.1

19.6

(2.5)

(12.6%)

Corporate costs

(5.3)

(3.7)

(1.6)

(41.6%)

Total

76.2

68.3

7.9

11.6%

Group vehicle rental profit increased £11.8m including the impact of depreciation rate changes and reflecting strong VOH growth in the UK & Ireland and Spain.

The reduction in Group disposals profits resulted primarily from fewer vehicle sales (-£1.0m) and the impact of previous changes to depreciation rates (-£4.9m). This was partially offset by other impacts including sales channel optimisation and the impact of vehicle ageing ( £3.4m)

Underlying corporate costs increased to £5.3m (2018: £3.7m) with 2018 benefiting from certain one-off reversals in costs.

Depreciation rate changes

The accounting requirements to adjust depreciation rates due to changes in expectations of future residual values of used vehicles make it more difficult to identify the underlying profit trends in the business. When a vehicle is acquired it is recognised as a fixed asset at its cost net of any discount or rebate receivable. The cost is then depreciated evenly over its rental life, matching its pattern of usage.

Matching of future market values to net book value on the disposal date requires significant judgement for the following key reasons:

1.   Used vehicle prices are subject to short term volatility which makes it challenging to estimate future residual values;

2.   The exact disposal age is not known at the point at which rates are set and therefore the book value at disposal date is not certain; and

3.   Mileage and condition are the key factors in influencing the market value of a vehicle. This can vary significantly through a vehicle's life depending upon how the vehicle is used.

Inevitably, a difference arises between the net book value of a vehicle and its market value at the date of disposal. Where differences arising are within an acceptable range these are adjusted against depreciation. Where these differences are outside of the range Northgate changes the depreciation rate estimate to better reflect the pattern of usage of the vehicle.



 

The impact of previous rate changes on 2019 operating profit, and the estimated impact on future years of the previous changes, is set out below:

Year:

Cumulative impact

Year on year impact

Group

£m

Group

£m

UK & Ireland

£m

Spain

£m

30 April 2013

5.3

5.3

5.3

-

30 April 2014

4.3

(1.0)

(1.0)

-

30 April 2015

15.7

11.4

8.4

3.0

30 April 2016

12.0

(3.7)

(5.9)

2.2

30 April 2017

6.3

(5.7)

(4.1)

(1.6)

30 April 2018

2.1

(4.2)

(2.7)

(1.5)

30 April 2019

17.4

15.3

4.1

11.2

30 April 2020*

12.0

(5.4)

(1.4)

(4.0)

30 April 2021*

6.6

(5.4)

(1.4)

(4.0)

30 April 2022*

1.2

(5.4)

(1.4)

(4.0)

30 April 2023*

-

(1.2)

-

(1.2)

 

 

 

 

 

*These are management estimates based on indicative fleet size and assuming an equalised level of defleeting in each year.

Interest

Net underlying finance charges for the year increased by 33.0% to £15.1m (2018: £11.3m) as a result of higher net debt. The net cash interest charge for the year was £14.1m (2018: £10.7m) as a result of higher borrowings. Non-cash interest was £1.0m (2018: £0.6m).

Underlying profit before tax

Underlying profit before tax was £61.1m (£61.3m at constant exchange rates), £4.1m higher than in 2018 (2018: £57.0m).

Taxation

The Group's underlying tax charge was £9.5m (2018: £10.7m) and the underlying effective tax rate was 16% (2018: 19%). The statutory effective tax rate was 15% (2018: 18%).

Earnings per share

Underlying EPS was 38.7p compared to 34.8p in the prior year. Statutory earnings per share was 38.6p compared to 32.4p in the prior year.

Underlying earnings for the purpose of calculating EPS were £51.6m (2018: £46.4m). The weighted average number of shares for the purposes of calculating EPS was 133.2m, in line with the prior year.

Exceptional items

During the year there were no exceptional costs incurred (2018: £2.5m).

Dividend and capital allocation

The Group's dividend policy is to ensure that the underlying basic earnings per share will cover the total annual dividend within a range of 2.0× to 3.0×.

Subject to approval, the final dividend proposed of 12.1p per share (2018: 11.6p) will be paid on 27 September 2019 to shareholders on the register as at close of business on 16 August 2019.

Including the interim dividend paid of 6.2p (2018: 6.1p), the total dividend relating to the year would be 18.3p (2018: 17.7p). The dividend is covered 2.1× by underlying earnings, in line with stated policy.

The Group's objective is to build shareholder value by generating returns above the cost of capital. Capital will be allocated within the business in accordance with the framework outlined below, with the first priority being to allocate capital to support the Group's growth ambitions:

1.   Core business: maximise profitability and capital efficiency, organic growth opportunities

2.   Dividend: maintain progressive dividend policy

3.   Growth: Core bolt-ons, capital light opportunities, diversification into service solutions.

The Group plans to maintain a balance sheet within a target leverage range of 1.5× to 2.5× net debt to EBITDA, and during periods of significant growth net debt would be expected to be towards the higher end of this range. This is consistent with the Group's 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.

Cash flow

A summary of the Group's cash is as follows:

Year ended 30 April

2019

£m

2018

£m

Underlying operational cash generation

283.2

240.5

Net capital expenditure

(243.9)

(311.0)

Net taxation and interest payments

(15.7)

(22.2)

Share purchases and refinancing costs

(3.2)

(3.3)

Free cash flow

20.4

(96.0)

Dividends

(23.4)

(23.4)

Net cash consumed

(3.0)

(119.4)

A total of £403.5m was invested in new vehicles compared to £486.9m in the prior year. The Group's new vehicle capital expenditure was partially funded by £174.5m generated from the sale of used vehicles (2018: £186.9m). Other net capital expenditure amounted to £14.9m (2018: £11.0m).

All vehicles required for the Group's operations are paid for in cash upfront. The cash flow generation of the Group in any year is therefore influenced by the capital expenditure to grow the business or cash generated by adjusting the fleet size downwards if VOH reduce. If the impact of increasing or reducing the fleet size in the year is removed from net capital expenditure, the underlying free cash generation of the Group was as follows:

Year ended 30 April

2019

£m

2018

£m

Free cash flow

20.4

(96.0)

Add back: Growth capex

42.6

125.2

Underlying free cash flow

63.1

29.2

Net debt reconciles as follows:

Year ended 30 April

2019

£m

2018

£m

Opening net debt

439.3

309.9

Net cash consumed

3.0

119.4

Other non-cash items

0.6

(0.8)

Exchange differences

(6.0)

10.8

Closing net debt

436.9

439.3

Free cash inflow was £20.4m (2018: £96.0m outflow) after net capital expenditure of £243.9m (2018 £311.0m). If the impact of growth capex in the year is removed from net capital expenditure in each year, the underlying free cash flow of the Group was £63.1m (2018: £29.2m).

Net cash consumption was £3.0m (2018: £119.4m). After an adverse exchange rate impact of £6.0m (2018: £10.8m favourable), closing net debt was £436.9m (2018: £439.3m).

Borrowing facilities

As at 30 April 2019 the Group had £439m drawn against total committed facilities of £604m, giving headroom of £165m, as detailed below:

 

Facility

£m

Drawn

£m

Headroom

£m

Maturity

 

Borrowing

Cost

UK bank facility

504

343

161

July 2021

2.6%

Loan notes

86

86

-

Aug 2022

2.4%

Other loans

14

10

4

Nov 2019

1.0%

 

604

439

165

 

2.5%

The overall cost of borrowings at 30 April 2019 is 2.5% (2018: 2.3%).

The margin charged on bank debt is dependent upon the Group's net debt to EBITDA ratio, ranging from a minimum of 1.5% to a maximum of 3%. The net debt to EBITDA ratio at 30 April 2019 corresponds to a margin of 2% (2018: 2.25%).

Interest rate swap contracts have been taken out which fix a proportion of bank debt at 2.6% (2018: 2.4%) giving an overall cost of borrowings (gross of cash balances) at 30 April 2019 of 2.6% (2018: 2.3%).

During the year UK bank facilities were increased by £50m.

The other loans consist of £13.5m of local borrowings in Spain and £0.5m of preference shares.

The split of borrowings (gross of cash balances and excluding overdrafts) by currency is as follows:

 

2019

2018

 

£m

£m

Euro

297

328

Sterling

143

128

Borrowings before unamortised arrangement fees

440

456

Unamortised arrangement fees

(2)

(3)

Borrowings (excluding cash and overdrafts)

438

453

There are three financial covenants under the Group's facilities as follows:

 

 Threshold

April 2019

Headroom

April 2018

Interest cover

5.34×

£33m (EBIT)

6.22×

Loan to value

70%

43%

£284m (Net debt)

43%

Debt leverage

2.75×

1.64×

£108m (EBITDA)

1.76×

Balance sheet

Net tangible assets at 30 April 2019 were £548.5m (2018: £530.3m), equivalent to a net tangible asset value of 412p per share (2018: 398p per share).

Gearing at 30 April 2019 was 79.6% (2018: 82.8%).

Return on capital employed was 7.7% (2018: 7.5%).

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 Group 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. Group credit exposure for material deposits 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 outlined 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 subsidiaries are financed by a combination of retained earnings and 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.

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 68% at 30 April 2019 (2018: 73%).

Foreign exchange risk

The Group's reporting currency is, and 65% of its revenue is generated in, Sterling (2018: 59%). 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:

 

2019

£ : €

2018

£ : €

Average

1.14

1.13

Year end

1.16

1.14

The Group manages its exposure to currency fluctuations on retranslation of the balance sheets of those subsidiaries whose functional currency is in Euros 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. At 30 April 2019 62% of Euro net assets were hedged against Euro borrowings (2018: 71%).

Going concern

Having considered the Group's current trading, cash flow generation and debt maturity including severe but plausible stress testing scenarios, the Directors have concluded that it is appropriate to prepare the Group financial statements on a going concern basis.

Philip Vincent

Chief Financial Officer



 

Principal Risks and Uncertainties

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.

Economic activity in the territories we operate could be adversely impacted by the UK decision to leave the EU.

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 macroeconomic conditions could also increase the risk of customer failure and therefore incidences of bad debts.

Flexibility is ingrained in the Group's business model and allows any vehicles returned to be placed with different customers. Alternatively, the group can generate cash and reduce debt by reducing purchases and increasing vehicle disposals.

The Group is not materially exposed to a single customer sector and no individual customer contributes more than 5% of total revenue generated.

The Group's current hedging arrangements protect it from material foreign exchange risks on retranslation of results. Transactional FX exposure is minimised through sourcing supplies in the same currency as revenue is generated.

The impact of the UK's decision to leave the EU is still uncertain, as is the current Spanish political situation. However, there have been no material impacts on the group to date.

Market risk

The markets in which the Group operates are fragmented with low barriers to entry meaning that price competition is high.

There is a risk that the Group fails to attract and retain customers based on pricing. This could either be because of uncompetitive pricing or failing to communicate the inherent value of our offering successfully.

There is also a risk that demand for our products could materially diminish due to other structural or technical changes in the market that are not responded to.

Competition influences how we create value for our customers and investors, either by enhancing our service offering or investing in pricing.

If our pricing is perceived to be higher than our competitors for the same level of service, then we will lose market share or be forced to reduce prices to remain competitive. Without any adjustment to the cost base, this will result in lower returns.

Our pricing is based upon target levels of return, with discount authority levels allowing flexibility to ensure that we remain competitive on pricing.

Focus on margins will continue into the subsequent year, to ensure returns are not eroded in the long-term.

We have continued to invest in marketing to ensure we communicate the value proposition underpinning pricing.

Northgate continues to expand its service offering to maintain its competitive advantage in the market.

Vehicle Holding Costs

The Group's profitability depends 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 or other operational efficiencies, would adversely affect profitability, shareholder returns and cash generation.

Pricing is negotiated with manufacturers on an annual basis in advance of purchases being made. We manage the number and mix of suppliers and model variants, to optimise buying terms. We review the holding period of vehicles continuously, to ensure we make disposals at the optimal time in a vehicle's life cycle, so ensuring we recycle capital in the most efficient way.

While the Group is exposed to fluctuations in the used vehicle market, we seek to optimise the sales route for each vehicle. Should the market experience a short-term decline in residual values, we can age our existing fleet until the market improves.

The employee environment

Inadequate maintenance of a working environment where individuals do not receive appropriate training and support could harm relationships with stakeholders.

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

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.

We compare salaries to the market and provide a range of incentives to attract and retain staff. We conduct personal development plans and tailored training for all employees. Succession plans are in place for senior positions.

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

Legal compliance

Failure to comply with laws and regulations would put the reputation of the business at risk, both attracting fines and penalties, and in maintaining good customer and supplier relationships.

If our systems to monitor compliance are not adequate the Group could be exposed to material fines and penalties.

Complying with Laws and regulations is ultimately the responsibility of the Board. Management of compliance is delegated to the relevant business unit leaders. Group Internal Audit monitors and reports on non-compliance to the Board.

IT Systems

IT systems are integral to the Group's operations. Failure to appropriately invest in the Group's systems appropriately, and the security and continuity of systems, could result in loss of commercial agility, loss or theft of sensitive data, and an inability to effectively carry out the Group's business activities effectively.

Failure of existing systems or a lack of investment in new systems could inhibit the commercial agility of the business and the efficient continuity of our operations.

Incorrectly handling sensitive data or unsuccessfully defending against malicious cyber-attacks would cause significant reputational harm and affect relationships with all stakeholders negatively.

The UK business is currently undertaking a material systems change, and has implemented an appropriate governance structure to ensure the project is completed successfully.

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

We make the appropriate level of investment in ensuring sensitive data is held securely and is adequately protected from cyber-attacks or other breaches.

Access to Capital

The group operates a capital-intensive business model and requires sufficient access to capital in order to maintain and grow the fleet.

As such, an inefficient capital cycle or failure to access or service credit represents a significant risk to the delivery of strategy and continuation of the business.

Failure to maintain or extend access to credit facilities could impact on the Group's ability to deliver its strategic objectives or continue as a going concern.

The Group's main facilities mature in 2021 and 2022 and the Group believes that these facilities provide adequate resources for present requirements.

The Group reports against covenants twice a year and monitors cash flow forecasts continually, to ensure it complies with covenants and there is headroom in the facilities.



 

GLOSSARY OF TERMS

The following defined terms have been used throughout this document:

Term

Definition

B2B

Business to business

Disposals profits

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)

EBIT

Earnings before interest and taxation

EBITDA

Earnings before interest, taxation, depreciation and amortisation

EU

European Union

EPS

Underlying basic earnings per share

Facility headroom

Calculated as facilities of £604m less net borrowings of £439m. Net borrowings represent net debt of £437m excluding unamortised arrangement fees of £2m and are stated after the deduction of £1m of net cash and overdraft balances which are available to offset against borrowings

FY 2018

The year ended 30 April 2018

FY 2019

The year ended 30 April 2019

GAAP

Generally Accepted Accounting Practice: meaning compliance with International Financial Reporting Standards

Gearing

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

Growth Capex

Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction

LCV

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

Net replacement capex

Net capital expenditure other than that defined as growth capex

Net tangible assets

Net assets less goodwill and other intangible assets

OEM

Original Equipment Manufacturer: a reference to our vehicle suppliers

PPU

Profit per unit/loss per unit - this is a non-GAAP measure used to describe disposals profits (as defined), divided by the number of vehicles sold

ROCE

Underlying return on capital employed: calculated as underlying operating profit (see non-GAAP reconciliation) divided by average capital employed

Steady state cash generation

EBITDA less net replacement capex

The Company

Northgate plc

The Group

The Company and its subsidiaries

 

 



 

GAAP Reconciliation

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

 

Group

2019

£000

Group

2018

£000

Operating profit

75,491

64,077

Add back:

 

 

Restructuring costs

-

2,499

Certain intangible amortisation

709

1,767

Underlying operating profit

76,200

68,343

 

 

Group

2019

£000

Group

2018

£000

Profit before tax

60,406

52,738

Add back:

 

 

Restructuring costs

-

2,499

Certain intangible amortisation

709

1,767

Underlying profit before tax

61,115

57,004

 

 

Group

2019

£000

Group

2018

£000

Profit for the year

51,418

43,232

Add back:

 

 

Restructuring costs

-

2,499

Certain intangible amortisation

709

1,767

Tax on exceptional items and certain intangible amortisation

(545)

(1,145)

Underlying profit for the year

51,582

46,353

Weighted average number of Ordinary shares

133,232,518

133,232,518

Underlying basic earnings per share

38.7p

34.8p

 

 

Group

2019

£000

Group

2018

£000

Operating profit

75,491

64,077

Add back:

 

 

Fleet depreciation

185,794

176,600

Other depreciation

5,522

5,585

Net impairment

-

(380)

Loss on disposal of assets

274

415

Intangible amortisation

1,366

2,171

EBITDA

268,447

248,468

Net replacement capex

(201,304)

(185,886)

Steady state cash generation

67,143

62,582

 

 

 

UK&I

2019

£000

Spain

2019

£000

Corporate

2019

£000

Group

2019

£000

Underlying operating profit (loss)

35,396

46,086

(5,282)

76,200

Exclude:

 

 

 

 

Adjustments to depreciation charge in relation to vehicles sold in the period

(10,762)

(6,374)

-

(17,136)

Corporate costs

-

-

5,282

5,282

Rental profit

24,634

39,712

-

64,346

Divided by: Revenue: hire of vehicles

315,559

202,065

-

517,624

Rental margin

7.8%

19.7%

-

12.4%

 

 

UK&I

2018

£000

Spain

2018

£000

Corporate

2018

£000

Group

2018

£000

Underlying operating profit (loss)

33,114

38,960

(3,731)

68,343

Exclude:

 

 

 

 

Adjustments to depreciation charge in relation to vehicles sold in the period

(9,608)

(10,002)

-

(19,610)

Corporate costs

-

-

3,731

3,731

Rental profit

23,506

28,958

-

52,464

Divided by: Revenue: hire of vehicles

283,543

 187,644

-

471,187

Rental margin

8.3%

15.4%

-

11.1%

 

 

Group

2019

£000

Group

2018

£000

Net decrease in cash and cash equivalents

(13,616)

(5,507)

Add back:

 

 

Receipt of bank loans and other borrowings

-

(113,902)

Repayments of bank loans and other borrowings

10,651

-

Net cash generated

(2,965)

(119,409)

Add back: Dividends paid

23,431

23,365

Free cash flow

20,466

(96,044)

Add back: Growth capex

42,641

125,145

Underlying free cash flow

63,107

29,101

 



 

CONSOLIDATED INCOME STATEMENT





 

FOR THE YEAR ENDED 30 APRIL 2019








Underlying

Statutory

Underlying

Statutory

 



2019

2019

2018

2018

 


Note

£000

£000

£000

£000

 

Revenue: hire of vehicles


517,624

517,624

471,187

471,187

 

Revenue: sale of vehicles


227,846

227,846

230,485

230,485

 

Total revenue

1

745,470

745,470

701,672

701,672

 

Cost of sales


(592,598)

(592,598)

(563,232)

(563,232)

 

Gross profit


152,872

152,872

138,440

138,440

 

Administrative expenses (excluding exceptional items and certain intangible amortisation)


(76,672)

(76,672)

(70,097)

(70,097)

 

Exceptional administrative expenses

6

-

-

-

(2,499)

 

Certain intangible amortisation


-

(709)

-

(1,767)

 

Total administrative expenses


(76,672)

(77,381)

(70,097)

(74,363)

 

Operating profit

1

76,200

75,491

68,343

64,077

 

Interest income


39

39

1

1

 

Finance costs


(15,124)

(15,124)

(11,340)

(11,340)

 

Profit before taxation


61,115

60,406

57,004

52,738

 

Taxation


(9,533)

(8,988)

(10,651)

(9,506)

 

Profit for the year


51,582

51,418

46,353

43,232

 

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 certain 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

38.7p

38.6p

34.8p

32.4p

Diluted

2

38.0p

37.8p

34.3p

32.0p

 

 



 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 APRIL 2019






2019

2018



£000

£000

Amounts attributable to owners of the Parent Company




Profit attributable to the owners


51,418

43,232

 

Other comprehensive (expense) income

Foreign exchange differences on retranslation of net assets of subsidiary undertakings


 

 

(9,366)

 

 

15,488

Net foreign exchange differences on long term borrowings held as hedges


5,687

(11,393)

Foreign exchange difference on revaluation reserve


(23)

46

Net fair value gains on cash flow hedges


398

1,105

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


(76)

(210)

Total other comprehensive (expense) income


(3,380)

5,036

Total comprehensive income for the year


48,038

48,268

 

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

 



 

CONSOLIDATED BALANCE SHEET





AS AT 30 APRIL 2019








2019

2018




£000

£000

Non-current assets





Goodwill



3,589

3,589

Other intangible assets



11,495

5,205






Property, plant and equipment: vehicles for hire



900,335

897,323

Other property, plant and equipment



68,843

67,979

Total property, plant and equipment



969,178

965,302

Deferred tax assets



6,620

10,791

Total non-current assets



990,882

984,887

Current assets





Inventories



29,826

31,828

Trade and other receivables



71,802

76,091

Current tax assets



116

4,745

Cash and bank balances



35,742

21,382

Total current assets



137,486

 134,046

Total assets



1,128,368

 1,118,933  

Current liabilities





Trade and other payables



72,487

97,671

Derivative financial instrument liabilities



77

112

Current tax liabilities



13,425

15,246

Short term borrowings



44,190

17,952

Total current liabilities



130,179

130,981

Net current assets



7,307

 3,065

Non-current liabilities





Derivative financial instrument liabilities



914

1,277

Long term borrowings



428,409

442,751

Deferred tax liabilities



5,250

4,796

Total non-current liabilities



434,573

448,824

Total liabilities



564,752

579,805

NET ASSETS



563,616

539,128






Equity





Share capital



66,616

66,616

Share premium account



113,508

113,508

Own shares reserve



(3,359)

(3,238)

Hedging reserve



(803)

(1,125)

Translation reserve



(4,825)

(1,146)

Other reserves



68,637

68,660

Retained earnings



323,842

295,853

TOTAL EQUITY



563,616

539,128

 

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

CONSOLIDATED CASH FLOW STATEMENT



FOR THE YEAR ENDED 30 APRIL 2019









  Note

2019

£000

2018

£000

Net cash generated from (used in) operations

4

38,528

(81,797)

Investing activities




Interest received


39

1

Proceeds from disposal of other property, plant and equipment

1,128

 2,374

Purchases of other property, plant and equipment

(8,370)

(9,292)

Purchases of intangible assets


(7,684)

(4,073)

Net cash used in investing activities


(14,887)

(10,990)

Financing activities




Dividends paid

(23,431)

(23,365)

Receipts of bank loans and other borrowings


-

113,902

Repayments of bank loans and other borrowings

(10,651)

-

Debt issue costs

(1,737)

-

Net payments to acquire own shares for share schemes

(1,438)

(3,257)

Net cash (used in) generated from financing activities


(37,257)

87,280

Net decrease in cash and cash equivalents


(13,616)

(5,507)

Cash and cash equivalents at 1 May


14,127

19,637

Effect of foreign exchange movements


294

(3)

Cash and cash equivalents at 30 April


805

14,127

 

Cash and cash equivalents comprise:




Cash and bank balances


35,742

21,382

Bank overdrafts


(34,937)

(7,255)



805

14,127



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 APRIL 2019


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 2017

180,124

(5,241)

516,617

Share options fair value charge

-

-

-

-

-

865

865

Share options exercised

-

-

-

-

-

(1,678)

(1,678)

Profit attributable to owners of the Parent Company

-

-

-

-

-

43,232

43,232

Dividends paid

-

-

-

-

-

(23,365)

(23,365)

Net purchase of own shares

-

(3,257)

-

-

-

-

(3,257)

Transfer of shares on vesting of share options

-

1,678

-

-

-

-

1,678

Other comprehensive income

-

-

895

4,095

46

-

5,036

Total equity at 1 May 2018

180,124

(3,238)

(1,125)

(1,146)

68,660

295,853

539,128

Share options fair value charge

-

-

-

-

-

1,249

1,249

Share options exercised

-

-

-

-

-

(1,317)

(1,317)

Profit attributable to owners of the Parent Company

-

-

-

-

-

51,418

51,418

Dividends paid

-

-

-

-

-

(23,431)

(23,431)

Net purchase of own shares

-

(1,438)

-

-

-

-

(1,438)

Transfer of shares on vesting of share options

-

1,317

-

-

-

-

1,317

Deferred tax on share based payments recognised in equity

-

-

-

-

-

70

70

Other comprehensive income (expense)

-

-

322

(3,679)

(23)

-

(3,380)

Total equity at 30 April 2019

180,124

(3,359)

(803)

(4,825)

68,637

323,842

563,616

 

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



 

NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2019

1. SEGMENTAL ANALYSIS


UK&I

2019

£000

Spain

2019

£000

Corporate

2019

£000

Total

2019

£000

Revenue: hire of vehicles

315,559

202,065

-

517,624

Revenue: sale of vehicles

166,488

61,358

-

227,846

Total revenue

482,047

263,423

-

745,470






Underlying operating profit (loss)*

35,396

46,086

(5,282)

76,200

Certain intangible amortisation




(709)

Operating profit




75,491

Interest income




39

Finance costs




(15,124)

Profit before taxation




60,406

 


UK&I

2018

£000

Spain

2018

£000

Corporate

2018

£000

Total

2018

£000

Revenue: hire of vehicles

283,543

187,644

-

471,187

Revenue: sale of vehicles

156,937

73,548

-

230,485

Total revenue

440,480

261,192

-

701,672






Underlying operating profit (loss)*

33,114

38,960

(3,731)

68,343

Exceptional Items




(2,499)

Certain intangible amortisation




(1,767)

Operating profit




64,077

Interest income




1

Finance costs




(11,340)

Profit before taxation




52,738

 

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



 

2. EARNINGS PER SHARE






Underlying

Statutory

Underlying

Statutory

 

Basic and diluted earnings per share

2019

£000

2019

£000

2018

£000

2018

£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

51,582

51,418

46,353

43,232

 




 


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

2,660,697

2,660,697

2,077,803

2,077,803

 

Weighted average number of Ordinary shares for the purposes





 

of diluted earnings per share

135,893,215

135,893,215

135,310,321

135,310,321

 

Basic earnings per share

38.7p

38.6p

34.8p

32.4p

 

Diluted earnings per share

38.0p

37.8p

34.3p

32.0p

 

3. DIVIDENDS

Dividends paid in the year were £23,431,000 (2018 - £21,875,000).

An interim dividend of 6.2p per Ordinary share was paid in January 2019 (2018- 6.1p).  The Directors propose a final dividend of 12.1p per share for the year ended 30 April 2019 (2018 - 11.6p), which is subject to approval at the Annual General Meeting and has not been included as a liability as at 30 April 2019.



 

4. NOTES TO THE CASH FLOW STATEMENT

 

FOR THE YEAR ENDED 30 APRIL 2019 



 

 


2019

2018

 

 

Net cash generated from (used in) operations

£000

£000

 

 

Operating profit

75,491

64,077

 

 

Adjustments for:



 

 

Net impairment of property, plant and equipment

-

(380)

 

 

Depreciation of property, plant and equipment

191,316

182,185

 

 

Amortisation of intangible assets

1,366

2,171

 

 

Loss on disposal of property, plant and equipment

272

390

 

 

Loss on disposal of intangible assets

2

25

 

 

Share options fair value charge

1,249

865

 

 

Operating cash flows before movements in working capital

269,696

249,333

 

 

Decrease (increase) in non-vehicle inventories

841

(1,190)

 

 

Decrease (increase) in receivables

7,037

(14,641)

 

 

Increase in payables

5,722

6,899

 

 

Cash generated from operations

283,296

240,401

 

 

Income taxes paid, net

(1,586)

(11,451)

 

 

Interest paid

(14,163)

(10,707)

 

 

Net cash generated from operations

267,547

218,243

 

 

Purchase of vehicles

(403,487)

(486,943)

 

 

Proceeds from disposal of vehicles

174,468

186,903

 

 

Net cash generated from (used in) operations

38,528

(81,797)

 

 

5. ANALYSIS OF CONSOLIDATED NET DEBT

 





2019

2018

 


£000

£000

 

Cash and bank balances

(35,742)

(21,382)

 

Bank overdrafts

34,937

7,255

 

Bank loans

350,608

364,750

 

Loan notes

86,194

87,890

 

Cumulative preference shares

500

500

 

Confirming facilities

360

308

 

Consolidated net debt

436,857

439,321

 

 



 

6. EXCEPTIONAL ITEMS




 


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

 




2019

2018

 



£000

£000

 

Restructuring costs


-

2,499

 

Exceptional administrative expenses


-

2,499

 

Total pre-tax exceptional items


-

2,499

 

Tax credit relating to exceptional items


-

(471)

 

 

Exceptional administrative expenses

All of the restructuring costs incurred in the prior year arose in the UK and Ireland. All restructuring costs relate to programmes which commenced and were completed in the prior year. UK restructuring programmes related to turnaround initiatives including senior management changes, site closures, and establishment of a commercial hub.

7. BASIS OF PREPARATION 

The results for the year ended 30 April 2019, including comparative financial information, have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and their interpretations adopted by the European Union.

 

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

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in July 2018.

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 April 2019 or 2018, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 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 2019 has been prepared on a basis consistent with that presented in the annual report for the year ended 30 April 2018. With the exception of the application of the following standards: IFRS 9; and IFRS 15 which have been newly applied in the year ended 30 April 2019.

 

 

 

 

 

 


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