TIDMNTG
RNS Number : 2647D
Northgate PLC
25 June 2019
NORTHGATE PLC
PRELIMINARY RESULTS FOR THE 12 MONTHSED 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
GBPm GBPm %
----------------------------------------- -------- -------- --------
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
GBPm GBPm %
----------------------------------------- -------- -------- --------
Rental profit 64.3 52.5 +22.6%
EBITDA 268.4 248.5 +8.0%
Underlying(1) Operating
Profit 76.2 68.3 +11.5%
Underlying(1) Profit before
Tax 61.1 57.0 +7.2%
Underlying(1) Earnings
per Share 38.7p 34.8p +11.2%
----------------------------------------- -------- -------- --------
Total net capex(1) (243.9) (311.0) +21.6%
Net Replacement Capex(1) (201.3) (185.9) (8.3%)
Growth Capex(1) (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 growth(3) driven by double digit vehicles on hire (VOH(2) ) growth(3) ;
-- Rental profit of GBP64.3m grew(2) 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 growth(3) benefit of GBP20.2m following
the depreciation rate changes effective 1 May 2018;
-- Underlying(1) profit before tax of GBP61.1m benefitted
GBP15.3m 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 GBP20.4m benefitted from significantly
lower total net capex of GBP243.9m (2018: GBP311.0m) driven by
lower fleet growth and the fleet optimisation policy. Steady state
cash generation(5) remained strong at GBP67.1m (2018:
GBP62.6m);
-- Net debt of GBP436.9m gave year end leverage of 1.64x, within the 1.5 - 2.5x target range.
Outlook for FY 2020 and the medium-term(4)
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 grow(3) low to mid
single-digit %, driven by low single digit VOH(2) growth(3) in the
UK & Ireland, and low to mid single digit VOH(2) growth(3) 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-term(4) , 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 VOH(2) growth(3) driven by selective expansion of our
minimum-term product, we delivered both rental income and average
VOH growth(3) 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".
(1) Refer 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, 5(th) 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 +44 (0)118 207 3535
Kirsty Law, Investor Relations +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 GBP745.5m (2018: GBP701.7m) driven
by our selective penetration into the rental markets through our
attractive minimum-term proposition. Group statutory operating
profit of GBP75.5m grew 17.8%, with underlying operating profit
growth of 11.5% to GBP76.2m (2018: GBP68.3m), 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 GBP15.3m benefit following
the changes to depreciation rates at the start of the year, being a
GBP20.2m benefit in rental profit offset by a GBP4.9m 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 generation(1) grew 7.3% to
GBP67.1m, reflecting improved cash generation from our rental
operations alongside investment in attractive minimum-term growth
opportunities. Year end net debt of GBP436.9m 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 VOH(2) , 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 VOH(1) 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 grow(2) by low to
mid single digit % in FY 2020, driven by low single digit VOH(1)
growth(2) in the UK & Ireland, and low to mid single digit
VOH(1) growth(2) in Spain.
The Group rental profit margin is expected to increase by
approximately 50 basis points in FY 2020, driven by VOH(1) 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 VOH(1) 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 VOH(1) 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 GBP5m 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
generation(3) is expected to grow in FY 2020, as ageing benefits
from fleet optimisation drive lower net replacement capex(4) . 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-term(5) , 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 GBP220 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)
GBP 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) GBPm GBPm %
---------------------------- ------ ------ ----------
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 GBP315.6m (2018: GBP283.5m), 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 VOH(1) 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 GBP4.8m 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 VOH(1) and lower rental margins was
a 4.8% increase in UK & Ireland rental profits to GBP24.6m
(2018: GBP23.5m).
(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 GBP10.8m (FY 2018: GBP9.6m) increased 12.0%
over the prior year, driven by a c.12% increase in the average
profit per unit (PPU) on disposals to GBP512 (2018: GBP457).
Disposal profits were reduced by approximately GBP0.7m relating to
the unwind of the depreciation rate changes.
Operating profit and ROCE
Underlying operating profit of GBP35.4m grew 6.9% over the prior
year (2018: GBP33.1m) including a GBP4.1m 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
GBPm GBPm %
-------------------------------- -------- -------- --------
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 GBP151.8m (2018: GBP135.8m) due to
higher rental and disposal profits.
Net replacement capex(2) in the year was GBP122.8m, 16.5% higher
than in 2018, driven by OEM price inflation, strong VOH(1) growth
and expansion of our minimum-term product, offset by the benefit of
vehicle ageing.
EBITDA less net replacement capex(2) reduced by 4.5% in 2019 to
GBP29.0m (2018: GBP30.4 million) reflecting higher EBITDA more than
offsetting higher replacement capex in the year. Investment to grow
the fleet was GBP21.0m, including approximately GBP1.6m 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 EUR 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) GBPm GBPm %
---------------------------- ------ ------ ----------
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 GBP202.1m (2018: GBP187.6m)
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 VOH(1) 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.
VOH(1) 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 GBP39.7m (2018: GBP29.0m) including a
GBP15.4m 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 EUR626
(2018: EUR871), 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 GBP6.4m (2018: GBP10.0m).
Operating profit and ROCE
The growth of rental profit of GBP10.7m was partially offset by
the GBP3.6m fall in disposal profits, with total operating profit
increasing by GBP7.1m (18.3%) to GBP46.1m (2018: GBP39.0m). 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 GBPm GBPm %
----------------------------- ------- ------- -------
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 GBP115.1m (2018: GBP109.4m)
reflecting higher rental profits partially offset by lower disposal
profits.
Net replacement capex(2) in Spain in the year was GBP78.5m, 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 GBP36.6m (2018: GBP28.9m),
reflecting the benefit of ageing. Growth capex was GBP21.7m,
GBP50.3m 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.
FINANCIAL REVIEW
Group summary
A summary of the Group's financial performance is as
follows:
Year ended 30 April 2019 2018 Change Change
GBPm GBPm GBPm %
----------------------------- ----- ------ ------ ------
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 GBP745.5m, 6.4% at constant
exchange rates.
Group revenue comprised:
Year ended 30 April 2019 2018 Change Change
GBPm GBPm GBPm %
-------------------- ----- ----- ------ ------
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 GBP517.6m from GBP471.2m 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 GBP76.2m and is stated before certain
intangible amortisation (GBP0.7m).
Underlying Group operating profit comprised:
2019 2018 Change Change
Year ended 30 April GBPm GBPm GBPm %
-------------------- ----- ----- ------ -------
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 GBP11.8m 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 (-GBP1.0m) and the impact of previous changes
to depreciation rates (-GBP4.9m). This was partially offset by
other impacts including sales channel optimisation and the impact
of vehicle ageing (+GBP3.4m)
Underlying corporate costs increased to GBP5.3m (2018: GBP3.7m)
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:
Cumulative
impact Year on year impact
--------------- ---------- -----------------------
UK &
Group Group Ireland Spain
Year: GBPm GBPm GBPm GBPm
--------------- ---------- ------ -------- -----
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 GBP15.1m (2018: GBP11.3m) as a result of higher net debt. The
net cash interest charge for the year was GBP14.1m (2018: GBP10.7m)
as a result of higher borrowings. Non-cash interest was GBP1.0m
(2018: GBP0.6m).
Underlying profit before tax
Underlying profit before tax was GBP61.1m (GBP61.3m at constant
exchange rates), GBP4.1m higher than in 2018 (2018: GBP57.0m).
Taxation
The Group's underlying tax charge was GBP9.5m (2018: GBP10.7m)
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
GBP51.6m (2018: GBP46.4m). 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:
GBP2.5m).
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 2018
GBPm GBPm
--------------------------------------- ------- -------
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 GBP403.5m was invested in new vehicles compared to
GBP486.9m in the prior year. The Group's new vehicle capital
expenditure was partially funded by GBP174.5m generated from the
sale of used vehicles (2018: GBP186.9m). Other net capital
expenditure amounted to GBP14.9m (2018: GBP11.0m).
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 2018
GBPm GBPm
-------------------------- ----- ------
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 2018
GBPm GBPm
--------------------- ----- -----
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 GBP20.4m (2018: GBP96.0m outflow) after net
capital expenditure of GBP243.9m (2018 GBP311.0m). 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 GBP63.1m
(2018: GBP29.2m).
Net cash consumption was GBP3.0m (2018: GBP119.4m). After an
adverse exchange rate impact of GBP6.0m (2018: GBP10.8m
favourable), closing net debt was GBP436.9m (2018: GBP439.3m).
Borrowing facilities
As at 30 April 2019 the Group had GBP439m drawn against total
committed facilities of GBP604m, giving headroom of GBP165m, as
detailed below:
Facility Drawn Headroom Borrowing
GBPm GBPm GBPm Maturity 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 GBP50m.
The other loans consist of GBP13.5m of local borrowings in Spain
and GBP0.5m of preference shares.
The split of borrowings (gross of cash balances and excluding
overdrafts) by currency is as follows:
2019 2018
----------------------------------------------- ---- ----
GBPm GBPm
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 3× 5.34× GBP33m (EBIT) 6.22×
GBP284m (Net
Loan to value 70% 43% debt) 43%
Debt leverage 2.75× 1.64× GBP108m (EBITDA) 1.76×
--------------- ---------- ---------- ---------------- ----------
Balance sheet
Net tangible assets at 30 April 2019 were GBP548.5m (2018:
GBP530.3m), 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
GBP : EUR GBP : EUR
--------- ---------- ----------
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 GBP604m less net
borrowings of GBP439m. Net borrowings represent
net debt of GBP437m excluding unamortised arrangement
fees of GBP2m and are stated after the deduction
of GBP1m 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 Net capital expenditure other than that defined
capex 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 EBITDA less net replacement capex
generation
-------------------------------------------------------
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 Group
2019 2018
GBP000 GBP000
-------------------------------- ------- -------
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 Group
2019 2018
GBP000 GBP000
-------------------------------- ------- -------
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 Group
2019 2018
GBP000 GBP000
------------------------------------------------ ----------- -----------
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 Group
2019 2018
GBP000 GBP000
----------------------------- --------- ---------
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 Spain Corporate Group
2019 2019 2019 2019
GBP000 GBP000 GBP000 GBP000
-------------------------------------- -------- ------- --------- --------
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 Spain Corporate Group
2018 2018 2018 2018
GBP000 GBP000 GBP000 GBP000
-------------------------------------- ------- -------- --------- --------
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 Group
2019 2018
GBP000 GBP000
---------------------------------------------- -------- ---------
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 YEARED 30 APRIL 2019
------------------------------------------------ ------------ ------------ ----------- -------------------
Underlying Statutory Underlying Statutory
2019 2019 2018 2018
Note GBP000 GBP000 GBP000 GBP000
------------------------------------------------ ---- ------------ ----------- ------------ -----------
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 238.7p 38.6p 34.8p 32.4p
------------------- ----- ----- ----- -----
Diluted 238.0p 37.8p 34.3p 32.0p
------------------- ----- ----- ----- -----
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 APRIL 2019
----------------------------------------------------------------------------------------- --------- --------
2019 2018
GBP000 GBP000
----------------------------------------------------------------------------------------- --------- --------
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
GBP000 GBP000
------------------------------------------------- --------- ----------
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 YEARED 30 APRIL 2019
-------------------------------------------------------- ------ -------- --------
2019 2018
Note GBP000 GBP000
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 YEARED 30 APRIL 2019
Share
capital
and share Own shares Hedging Translation Other Retained
premium reserve reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ----------- ------------- --------- ------------ ---------- ---------- ---------
Total equity at 1
May 2017 180,124 (1,659) (2,020) (5,241) 68,614 276,799 516,617
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 YEARED 30 APRIL 2019
1. SEGMENTAL ANALYSIS
UK&I Spain Corporate Total
2019 2019 2019 2019
GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- ---------- ---------
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 Spain Corporate Total
2018 2018 2018 2018
GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- ---------- ---------
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
2019 2019 2018 2018
Basic and diluted earnings per share GBP000 GBP000 GBP000 GBP000
------------------------------------------------------- ------------- ------------- ------------- -------------
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 GBP23,431,000 (2018 -
GBP21,875,000).
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 GBP000 GBP000
----------------------------------------------------------- --------- ---------
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
GBP000 GBP000
--------------------------------------------------- ------------------ ---------
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
GBP000 GBP000
---------------------------------------------------------------------- -------------- ---------
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DGGDLGSDBGCS
(END) Dow Jones Newswires
June 25, 2019 02:01 ET (06:01 GMT)
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