Depreciation Rate Change Announcement

RNS Number : 5328I

Northgate PLC

22 March 2018

 



22 March 2018

NORTHGATE PLC

DEPRECIATION RATE CHANGE ANNOUNCEMENT

Northgate plc ("Northgate", the "Company" or the "Group"), the UK, Spain and Ireland's leading specialist in light commercial vehicle hire, announces a change to depreciation rates applicable from 1 May 2018.

On 22 February 2018 the Group published its Q3 trading statement and announced a new fleet optimisation strategy. This strategy optimises the holding periods of all vehicles across the Group with a focus on maximising shareholder returns.

This fleet optimisation strategy will deliver a more efficient capital base for the business as net book values are allowed to reduce with more moderate capital expenditure and funding requirements in the short term supporting targeted increases in ROCE. As previously announced the impact of this change in fleet strategy will increase cash returns and improve the leverage profile. The decision to extend holding periods, combined with continued progress in increasing the volume of disposals through the retail channel, will result in higher profits on disposal¹ going forwards on the basis of current depreciation rates.

Following the 22 February 2018 announcement, the Board has reviewed depreciation rates in line with accounting standards and has made a decision to reduce depreciation rates by 3% in Spain and Ireland and by 0.5% in the UK.

Indicative Adjustment

The reduction in depreciation rates will be applied prospectively from 1 May 2018. Based on an indicative fleet size² and assuming an equalised level of defleeting in each of the four years (as set out in the appendix), the above changes will increase reported operating profit by £17.4m in the year ending 30 April 2019. Applying the same methodology, the earlier recognition of accounting profit will be unwound over the forthcoming years (as set out in the appendix).

¹Profits on disposal - 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).

2UK c48,000, Spain c47,000 and Ireland c4,000

For further information, please contact:

Northgate plc                                                    01325 467558

Kevin Bradshaw, Chief Executive Officer David Tilston, Interim Chief Financial Officer

MHP Communications                                  020 3128 8100

Andrew Jaques

Barnaby Fry

Simon Hockridge Ollie Hoare

Notes to Editors:

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

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

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

www.northgateplc.com

Appendix - Indicative impact

The table below shows the indicative impact of the new depreciation policy based on the indicative fleet size and assuming an equalised level of defleeting in each of the four years.

£m profit increase (decrease)	FY19	FY20	FY21	FY22	FY23
Spain
Fleet depreciation	15.4	15.4	15.4	15.4	15.4
Profit on disposal	(2.1)	(6.1)	(10.1)	(14.1)	(15.4)
Operating profit	13.3	9.3	5.3	1.3	-
Year-on-year	13.3	(4.0)	(4.0)	(4.0)	(1.3)
UK
Fleet depreciation	2.9	2.9	2.9	2.9	2.9
Profit on disposal	(0.4)	(1.3)	(2.1)	(2.9)	(2.9)
Operating profit	2.5	1.6	0.8	-	-
Year-on-year	2.5	(0.9)	(0.8)	(0.8)	-
Ireland
Fleet depreciation	1.9	1.9	1.9	1.9	1.9
Profit on disposal	(0.3)	(0.8)	(1.4)	(1.9)	(1.9)
Operating profit	1.6	1.1	0.5	-	-
Year-on-year	1.6	(0.5)	(0.6)	(0.5)	-
Group
Fleet depreciation	20.2	20.2	20.2	20.2	20.2
Profit on disposal	(2.8)	(8.2)	(13.6)	(18.9)	(20.2)
Operating profit	17.4	12.0	6.6	1.3	-
Year-on-year	17.4	(5.4)	(5.4)	(5.3)	(1.3)

 

END

 

 

MSCJBMJTMBJTTIP