Interim Results
Northgate PLC
11 December 2007
11 December 2007
NORTHGATE PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED
31 OCTOBER 2007
Northgate plc ('Northgate', the 'Company' or the 'Group'), the UK and Spain's
leading specialist in light commercial vehicle hire, announces its interim
results for the half-year ended 31 October 2007.
Highlights:
•Group revenue up by 6.4% to £278.9m (2006 - £262.1m).
•Profit before tax up 16% to £43.9m (2006 - £37.8m).
•Underlying profit before tax* up by 13% to £44.2m (2006 - £39.1m).
•Basic earnings per share up by 27% to 47.3p (2006 - 37.1p).
•Interim dividend increased by 15% to 11.5p (2006 - 10p).
•Fleet size of 65,800 vehicles (2006 - 65,300) in the UK and 59,500
vehicles (2006 - 51,000) in Spain.
•Operating margin* increased to 22.6% (2006 - 21.2%) in the UK and to
22.9% (2006 - 21.2%) in Spain.
•Utilisation of 91% in the UK and 90% in Spain.
•New bank facility and further issuance of unsecured loan notes provides
significant headroom for further expansion.
* Stated before intangible amortisation of £1.8m (2006 - £1.9m) and
non-recurring property profits of £1.5m (2006 - £0.6m).
Philip Rogerson, Chairman, commented on current trading and profits:
'Trading in both the UK and Spain is in line with our expectations and the Board
remains confident of a satisfactory outcome for the full financial year.'
Full statement and results attached.
For further information, please contact:
Northgate plc 01325 467558
Steve Smith, Chief Executive
Gerard Murray, Finance Director
Hogarth Partnership Limited 020 7357 9477
Andrew Jaques
Barnaby Fry
Anthony Arthur
Notes to Editors:
Northgate plc rents light commercial vehicles and sells a range of fleet
products to businesses via a network of hire companies. Their NORFLEX product
gives businesses access to a flexible method to acquire as many commercial
vehicles as they require.
Further information regarding Northgate plc can be found on the Company's
website:
http://www.northgateplc.com
Chairman's Statement
We are now half way through the first three years of the rolling strategic plan
announced in January 2006, the overall aim of which is to continue to deliver
annual double-digit earnings growth. This continues to be achieved with earnings
per share growth of 27% for the six months, following a 24% increase in the last
financial year. This increase reflects growth in profit before tax of 16% and a
reduction in the Group's effective rate of corporation tax to 23% (2006 - 30%).
In the UK, we have seen the benefits of the restructuring of the business
carried out in the last financial year, along with a continued good level of
utilisation, a stable hire rate environment and a buoyant used vehicle market.
The combination of these factors has enabled us to improve our UK rental
operating margin to 22.6% (2006 - 21.2%).
The purchase of 100% of the equity of Hampsons (Self Drive Hire) Limited
('Hampsons') on 1 November 2007 for an estimated consideration of £9.8m plus
acquired debt of £7.7m, is in line with our strategy of growth through selective
acquisitions. Hampsons is based in Newark and operates a fleet of 1,600 vehicles
from nine locations. The Hampsons business is well managed with a good
reputation for service and will be retained as a separate brand within our
enlarged network.
In Spain, the benefits of further fleet growth coupled with the economies of
scale, particularly in purchasing have improved the operating margin to 22.9%
(2006 - 21.2%). On 18 July 2007, we made our first bolt-on acquisition in Spain
with the purchase of the trade and assets of Alquiservicios SA, a business based
in Orense with a fleet of 700 vehicles. The acquisition, which has been absorbed
into Record, gives us improved representation in the north-west of Spain along
with one new location. It also helps to diversify the customer base.
The Group's financial results for the six months to 31 October 2007 are
summarised as follows:
o Vehicle rental and associated revenue up by 6% to £278.9m (2006 -
£262.1m).
o Underlying profit before tax* up by 13% to £44.2m (2006 - £39.1m).
o Basic earnings per share up by 27% to 47.3p (2006 - 37.1p) reflecting
the growth in profit before tax and a reduced tax rate.
*Stated before intangible amortisation of £1.8m (2006 - £1.9m) and non-
recurring property profits of £1.5m (2006 - £0.6m).
Looking to the future the Group has renewed and extended its banking facilities
and issued further unsecured loan notes in the Private Placement market in the
USA. The Group's facilities now total £1,080m and provide significant headroom
to fund the Group's growth in the medium term. The cost of the new bank
facilities has been secured at a margin that is not materially different from
existing debt facilities despite the current difficulties in the credit markets.
On 26 September 2007, Andrew Allner joined the Board of the Company as a
Non-executive Director. Andrew has a strong financial background and has assumed
the chairmanship of the Audit Committee from the date of his appointment.
On 31 December 2007, Gerard Murray will leave the Company to take up the
position of Finance Director with The Vardy Group of Companies. The Board wishes
him well in his new role and thanks him for his significant contribution to the
continued growth and development of the Group during the last five years. The
search for his replacement is well advanced and we hope to be able to announce
his successor soon.
The Board has declared a 15% increase in the interim dividend to 11.5p per share
(2006 - 10p), in line with its policy of progressive increases and signifying
continued confidence in the Group's future prospects. This dividend is payable
on 31 January 2008 to shareholders on the register at the close of business on
21 December 2007.
Current outlook
Trading in both the UK and Spain is in line with our expectations and the Board
remains confident of a satisfactory outcome for the full financial year.
Results
Revenue from the UK during the six months to 31 October 2007 was broadly flat on
the comparable period last year due to the average fleet size, utilisation
levels and hire rates remaining in line with those of the prior period. As
explained in the operational review below, the fleet size at the end of November
2007 is back in line with expectations and therefore revenues in the second half
are expected to grow accordingly. The UK Rental operating margin has improved to
22.6% (2006 - 21.2%) due to the benefits arising from last year's business
restructuring and the better residual values being achieved.
Revenue from Spain during the period has increased by 20% reflecting fleet
growth of 17% and some modest hire rate increases. The Spanish rental margin has
improved to 22.9% (2006 - 21.2%) reflecting the economies of scale, particularly
in purchasing, which have more than offset a slight reduction in residual
values.
2007 2006
£'000 £'000
Revenue
UK Rental 170,170 170,609
UK Fleet Management 7,323 6,799
Spain Rental 101,469 84,714
--------- ---------
278,962 262,122
--------- ---------
Profit from operations
UK Rental 38,435 36,194
UK Fleet Management 305 370
Spain Rental 23,276 17,944
Non-recurring property profit 1,498 606
Intangible amortisation (1,807) (1,969)
--------- ---------
61,707 53,145
Operating margins
(excluding intangible amortisation and
non-recurring property profits)
UK Rental 22.6% 21.2%
UK Fleet Management 4.2% 5.4%
Spain Rental 22.9% 21.2%
There have been property disposals in both the UK and Spain that gave rise to
profits of £1.5m (2006 - £0.6m) which have been classified as non-recurring.
The Group's profit before tax has been affected by the increasing cost of debt
finance, particularly in respect of the Euro debt, with the European Central
Bank base rate increasing by 0.75% over the prior period. The impact on Sterling
debt is not material as substantially all of our UK borrowings have been hedged
effectively since December 2006. Despite the increase in the cost of debt
finance, interest cover remains healthy at 3.5 times (2006 - 3.5 times).
We have increased the proportion of net debt at fixed rates from 53% on 1 May
2007 to 66% at 31 October 2007. Sterling debt, which represents 28% of the
total, is 100% fixed with an average fixed rate term of six years while the
remaining debt, denominated in Euros, has 52% of its value fixed with an average
fixed rate term of two years.
In order to ensure that we have sufficient funding to achieve both the
anticipated growth levels in our existing business and to expand into new
territories, we issued, on 20 November 2007, a further $62m of unsecured loan
notes in the Private Placement market in the USA. In addition on 10 December
2007, we increased our bank facilities by entering into a series of three-year
bilateral facilities totalling £130m with our existing banks.
Including these new bank facilities and the recent loan note issue, the Group's
aggregate borrowing facilities now total £1,080m compared to net debt of £784m
at 31 October 2007. The debt facilities have the following maturity profile:
Maturing: Amount
£m
2009 151
2010 604
2011 130
2012 30
2013 61
2016 104
----------
1,080
----------
The Group's effective tax rate for the financial year is estimated to be 23% and
this has been applied to the six month period ended 31 October 2007. The
reduction of 7% in the tax rate compared to 31 October 2006 is substantially due
to a combination of deferred taxation adjustments in the UK, the standard
corporation tax rate applicable to the Spanish business being reduced to 32.5%
(2006 - 35%) and the Spanish business continuing to benefit from specific tax
concessions based on vehicle purchase reliefs.
Going forward, whilst the deferred taxation adjustments in the UK are not
expected to recur, the UK corporation tax rate will reduce from 30% to 28% on 1
April 2008. In Spain, the main vehicle purchase relief will be phased out
between now and 2011 but will be compensated in part by a further reduction in
the standard corporation tax rate to 30% in the next financial year.
As a result of the above we anticipate our tax rate for future periods will be
slightly higher than the 23% effective rate for this financial year.
During the period the Company acquired and cancelled 800,000 of its own Ordinary
shares following volatility in the equity markets. The Board believe that these
opportunistic share buy backs will not affect the Group's ability to fund its
future expansion and they are earnings enhancing for remaining shareholders.
Operational Review
UK
Following the successful integration of the Arriva Vehicle Rental ('AVR')
acquisition and the restructuring of the UK business during 2006, the focus of
the strategic plan moved to utilising the capacity of the Group's network and
introducing fleet management products. The objectives are to increase the fleet,
both organically and by selective acquisitions, while improving margins through
further efficiencies.
By 31 October 2007, the UK fleet had increased to 65,800, from 65,300 vehicles
on 1 May 2007. While this is below our targeted level of 5% annual growth, the
shortfall arose between 1 May and the middle of August, since when we have
achieved levels of growth in line with our expectations. By 30 November, the
fleet had reached 68,500 vehicles, including 1,600 vehicles relating to the
acquisition of Hampsons.
Currently, the Group has 21 hire companies operating from a network of 89
locations spread across the UK. The increase in locations since the start of the
financial year is entirely due to the Hampsons acquisition. The only other
property changes were in Manchester where we closed one location and relocated
another to larger premises.
We have achieved an average utilisation rate of 91% (2006 - 91%) for the six
months, maintaining the improvement achieved in the previous financial year.
Hire rates have remained stable throughout the period.
In the six months under review, we disposed of 13,800 vehicles (2006 - 11,400)
from a network of nine locations. We have also continued the development of our
retail and semi-retail channels to market, a process that has been assisted by
the supply of good quality, clean vehicles generated by the AVR business. The
proportion of vehicles being disposed of through these channels in the period
increased to 19% (2006 - 16%), against our medium term target of 20%.
The used vehicle market has remained buoyant, primarily driven by the continued
limited availability of new vehicles restricting supply into the used market. As
a result, the higher profits on vehicle disposals are expected to continue in
the short term. In accordance with our accounting policies we continue to review
anticipated net book values and changes in the expected disposal values.
The combination of our improved vehicle sales performance and strong residual
values gave rise to a reduction in the depreciation charge of £6.9m (2006 -
£2.4m).
Our UK fleet management business, Fleet Technique Limited, has achieved an
operating profit of £0.3m (2006 - £0.4m), in line with expectations. In
addition, through Fleet Technique we have been able to perform service work on
customers' own vehicles through our network of workshops, thereby helping to
improve net operating costs. With the aim of improving our operating margin by
reducing our repair costs, on 31 August 2007 we acquired a bodyshop business,
GPS, located in Warwick. While we have previously carried out body repairs to
our vehicles from a select number of hire companies, this is the first time we
have owned a stand-alone centre, which will significantly increase our capacity.
Subject to this move being successful we intend to extend our capability in this
area in the medium term.
Spain
We continue to experience fleet growth in Spain in line with our expectations at
8.2% for the six months to reach a fleet of 59,500 vehicles as at 31 October
2007. Included in the growth of 4,500 vehicles are 700 arising from the
acquisition of Alquiservicios SA referred to above.
Utilisation levels are in line with the previous year at 90% (2006 - 90%) and we
continue to achieve a modest improvement in hire rates of between 1% and 2%.
During the period under review, we have disposed of 6,600 vehicles (2006 -
6,300). As the used vehicle market has remained relatively stable, we have
continued to achieve profits on disposal which, in accordance with our
accounting policies, have been adjusted against vehicle depreciation. The
reduction in the depreciation charge for the period was £0.18m (2006 - £0.96m).
The ability to continue to dispose of our used vehicles efficiently becomes
increasingly important as the fleet continues to grow. We are therefore in the
process of putting in place a new structure for used vehicle disposals, with the
aim of replicating our capability in the UK in the medium term.
With the exception of the Alquiservicios SA location, the number of branches has
not changed in the period. We have, however, extended the facilities at some
branches in order to allow for further expansion of their fleets.
Included in the improvement in operating margins are the full benefits derived
from combining the purchasing power of the two businesses. The remaining
integration synergies will become available when the common IT platform is
achieved at the end of this financial year.
Since our first investment in Spain in July 2002 we have recognised the need to
reduce our dependency on the construction sector and have actively pursued
business in other sectors. The proportion of our customer base engaged in
construction at 31 October 2007 is the same as at 30 April 2007 at 47% - the
vast majority of which is related to infrastructure projects. Some of the larger
construction companies are also engaged in other non-construction activities
such as facilities management.
Other territories
Our strategic plan envisaged expansion into a new territory by the end of
calendar year 2008. We continue to hold discussions with a number of target
companies and potential partners and remain optimistic that we will be in a
position to move forward with one of these opportunities before the end of the
current financial year.
The businesses currently being targeted are from both the more mature European
markets as well as from countries new to the European Union. As previously
indicated, we expect the size of any transaction to be smaller than our initial
investment in Spain.
Risks and Uncertainties
The operation of a public company involves a number of risks and uncertainties
across a range of commercial, operational and financial areas. The principal
risks and uncertainties that have been identified as being capable of impacting
the Group's performance over the next six months of this financial year are set
out below:
Vehicle Holding Costs
We aim to minimise the whole life holding cost of the vehicles in our fleet. An
increase in new pricing or a reduction in the disposal values of vehicles being
sold would increase our holding cost. Were we not able to recover any such
increases from our customers, this would impact on our profitability. We manage
the risk on new pricing by using our significant purchasing power to negotiate,
before the end of the calendar year, fixed supply terms for the year ahead. As
regards disposal values our business model allows us flexibility over the period
we hold a vehicle, and therefore, in the event of a decline in residual values,
we would mitigate the impact by ageing out our fleet.
Customers
The Spanish business generates 47% of its revenues from customers participating
in construction. Whilst the vast majority of these customers are focused on
infrastructure projects funded by central government and EU funds with
reasonable forward visibility, if there was a significant downturn in demand,
vehicles could be returned. Our initial response to such an event would be to
seek to place these vehicles with customers in other sectors. Were the downturn
to be more widespread, we would look to maintain utilisation at 90% through a
combination of a decrease, or cessation, of vehicle purchases and an increase in
vehicle disposals.
Hire Rates
The business model is operationally geared and any increase or decrease in hire
rates will impact in full on the profit being achieved.
In the UK the business has previously experienced pressure on hire rates
particularly during 2005. Since the beginning of 2006 hire rates in the UK have
been stable.
Spanish hire rates have reflected a moderate increase year on year for the past
few years, reflecting the inflationary nature of the Spanish economy.
Condensed Consolidated Income Statement
for the six months ended 31 October 2007
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
Notes £000 £000 £000
Revenue 2 278,962 262,122 526,465
Cost of sales (186,428) (177,102) (345,450)
---------- ---------- ----------
Gross profit 92,534 85,020 181,015
---------- ---------- ----------
Administrative expenses (excluding amortisation) (29,020) (29,906) (70,037)
Amortisation (1,807) (1,969) (3,922)
---------- ---------- ----------
Total administrative expenses (30,827) (31,875) (73,959)
---------- ---------- ----------
Profit from
operations 2 61,707 53,145 107,056
Investment income 2,079 1,072 3,764
Finance costs (19,923) (16,443) (35,452)
---------- ---------- ----------
Profit before taxation 43,863 37,774 75,368
Taxation 3 (10,045) (11,200) (20,885)
---------- ---------- ----------
Profit for the period 33,818 26,574 54,483
---------- ---------- ----------
Profit for the period is wholly attributable to equity holders of the parent Company.
All results arise from continuing operations.
Basic earnings per Ordinary share 4 47.3p 37.1p 76.1p
Diluted earnings per Ordinary share 4 47.1p 37.0p 75.8p
Condensed Consolidated Statement of Recognised Income and Expense for the six
months ended 31 October 2007
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Amounts attributable to equity holders of the parent Company
Foreign exchange differences on retranslation of net assets
of subsidiary undertakings 4,115 (2,281) (1,756)
Foreign exchange differences on revaluation reserve 24 (11) (11)
Net foreign exchange differences on long term borrowings
held as hedges (3,985) 1,875 1,425
Other foreign exchange differences recognised directly in equity - - 628
Net fair value (losses) gains on cash flow hedges (1,001) 435 4,471
Share options fair value amount credited (charged)directly to
equity 159 (202) (75)
Net current tax credit recognised directly in equity - - 1,084
Net deferred tax credit (charge) recognised directly in equity 300 (159) (2,616)
Actuarial gains (losses) on defined benefit pension scheme 1 (112) 445
---------- ---------- ----------
Net (expense) income recognised directly in equity (387) (455) 3,595
Profit attributable to equity holders 33,818 26,574 54,483
---------- ---------- ----------
Total recognised income and expense for the period 33,431 26,119 58,078
---------- ---------- ----------
Condensed Consolidated Balance Sheet
31 October 2007
31.10.07 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Non-current assets
Goodwill 76,647 72,247 75,120
Other intangible assets 26,361 28,288 26,804
---------- ---------- ----------
Property, plant and equipment: vehicles for hire 903,454 812,753 860,052
Other property, plant and equipment 70,635 65,039 68,160
---------- ---------- ----------
Total property, plant and equipment 974,089 877,792 928,212
---------- ---------- ----------
1,077,097 978,327 1,030,136
---------- ---------- ----------
Current assets
Inventories 9,369 8,065 8,709
Trade and other receivables 197,723 164,144 176,760
Cash and cash equivalents 46,627 12,231 35,039
---------- ---------- ----------
253,719 184,440 220,508
---------- ---------- ----------
Non-current assets held for sale 25,694 18,110 21,941
---------- ---------- ----------
TOTAL ASSETS 1,356,510 1,180,877 1,272,585
---------- ---------- ----------
Current liabilities
Trade and other payables 98,217 53,869 68,570
Tax liabilities 11,684 21,324 11,973
Short term borrowings 45,474 131,829 20,340
---------- ---------- ----------
155,375 207,022 100,883
---------- ---------- ----------
Non-current liabilities
Long term borrowings 785,679 606,496 770,022
Deferred tax liabilities 41,583 28,034 38,694
Retirement benefit obligation 452 1,429 555
---------- ---------- ----------
827,714 635,959 809,271
---------- ---------- ----------
TOTAL LIABILITIES 983,089 842,981 910,154
---------- ---------- ----------
NET ASSETS 373,421 337,896 362,431
---------- ---------- ----------
Equity
Share capital 3,525 3,555 3,560
Share premium account 67,744 66,746 67,230
Capital redemption reserve 40 - -
Revaluation reserve 1,067 1,043 1,043
Merger reserve 67,463 67,463 67,463
Own shares reserve (8,294) (3,755) (4,572)
Hedging reserve 4,498 3,391 5,199
Translation reserve 2,054 1,221 1,924
Retained earnings 235,324 198,232 220,584
---------- ---------- ----------
TOTAL EQUITY 373,421 337,896 362,431
---------- ---------- ----------
Total equity is wholly attributable to equity holders of the parent Company.
Condensed Consolidated Cash Flow Statement for the six months ended 31 October 2007
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
Notes £000 £000 £000
Net cash from operating activities 6(a) 129,380 104,582 224,765
---------- ---------- ----------
Investing activities
Interest received 2,112 744 3,145
Proceeds from disposal of vehicles for hire 100,318 91,591 188,512
Purchases of vehicles for hire (221,553) (205,433) (437,947)
Proceeds from disposal of other property,
plant and equipment 1,865 1,523 3,283
Purchases of other property, plant and equipment (4,925) (5,348) (11,126)
Purchases of intangible assets (525) (741) (1,281)
Payment of deferred consideration - (10,290) (10,290)
Payments in respect of business combinations 6(c) (5,413) (49,540) (49,340)
---------- ---------- ----------
Net cash used in investing activities (128,121) (177,494) (315,044)
---------- ---------- ----------
Financing activities
Dividends paid (11,019) (9,848) (16,946)
Repayments of obligations under finance leases (12,456) (38,828) (63,740)
Repayments of bank loans and other borrowings - - (175,579)
Increase in bank loans and other borrowings 45,531 105,753 359,891
Proceeds from issue of share capital 518 1,765 2,254
Proceeds from sale of own shares 350 23 62
Payments to acquire own shares (4,073) (447) (1,303)
Payments to acquire own shares for cancellation (8,166) - -
---------- ---------- ----------
Net cash from financing activities 10,685 58,418 104,639
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 11,944 (14,494) 14,360
Cash and cash equivalents at the beginning
of the period 34,467 20,259 20,259
Effect of foreign exchange movements 154 (227) (152)
---------- ---------- ----------
Cash and cash equivalents at the end of the
period 6(b) 46,565 5,538 34,467
---------- ---------- ----------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 October 2007
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Amounts attributable to equity holders of the parent
Company
Foreign exchange differences on retranslation of
net assets of subsidiary undertakings 4,115 (2,281) (1,756)
Foreign exchange differences on revaluation reserve 24 (11) (11)
Net foreign exchange differences on long term
borrowings held as hedges (3,985) 1,875 1,425
Other foreign exchange differences recognised
directly in equity - - 628
Net fair value (losses) gains on cash flow hedges (1,001) 435 4,471
Share options fair value amount credited(charged)
directly to equity 159 (202) (75)
Actuarial gains (losses) on defined benefit
pension scheme 1 (112) 445
Net current tax credit recognised directly in equity - - 1,084
Net deferred tax credit (charge)recognised
directly in equity 300 (159) (2,616)
---------- ---------- ----------
Net (expense) income recognised directly in equity (387) (455) 3,595
Profit attributable to equity holders 33,818 26,574 54,483
---------- ---------- ----------
Total recognised income and expense for the period 33,431 26,119 58,078
Dividends (11,072) (9,853) (16,949)
Issue of
Ordinary share capital (net of expenses) 519 1,765 2,254
Cancellation of Ordinary share capital (8,166) - -
Net increase in own shares held (3,722) (424) (1,241)
---------- ---------- ----------
Net changes in total equity 10,990 17,607 42,142
---------- ---------- ----------
Opening total equity 362,431 320,289 320,289
---------- ---------- ----------
Closing total equity 373,421 337,896 362,431
---------- ---------- ----------
Unaudited Notes
1. Basis of preparation and accounting policies
The interim financial information for the six months ended 31 October 2007,
including comparative financial information, has been prepared on the basis of
the accounting policies set out in the last annual report and accounts and in
accordance with International Financial Reporting Standards ('IFRS'), including
IAS 34, as issued by the International Accounting Standards Board and adopted by
the European Union.
The condensed financial statements are unaudited and were approved by the Board
of Directors on 10 December 2007.
The condensed financial statements have been reviewed by the auditors and the
independent review report is set out in this document.
The financial figures for the year ended 30 April 2007, as set out in this
report, do not constitute statutory accounts for the purposes of Section 240 of
the Companies Act 1985 but are derived from the statutory accounts for that
financial year.
The statutory accounts for the year ended 30 April 2007 were prepared under IFRS
and have been filed with the Registrar of Companies. They contained an
unqualified audit report and did not include a statement under Section 237 (2)
or (3) of the Companies Act 1985.
2. Segmental analysis
Business segments
For management purposes, the Group currently has two material business segments,
which are the hire of vehicles and fleet management.
As such, the Directors consider that these are the two business segments on
which the Group should report.
Geographical segments
The Group's operations are located in the United Kingdom, Republic of Ireland
and Spain.
The Directors consider the United Kingdom and Republic of Ireland to be a single
geographical segment on the grounds that the results and net assets of
operations in the Republic of Ireland are immaterial to the Group as a whole.
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
UK Hire of vehicles 170,170 170,609 337,370
UK Fleet management 7,323 6,799 13,738
----------- ----------- -----------
UK Revenue 177,493 177,408 351,108
Spain Hire of
vehicles 101,469 84,714 175,357
----------- ----------- -----------
Total Revenue 278,962 262,122 526,465
----------- ----------- -----------
UK Hire of vehicles 38,892 36,450 71,137
UK Fleet management 305 370 576
UK Amortisation (815) (1,029) (2,035)
----------- ----------- -----------
UK Profit from operations 38,382 35,791 69,678
----------- ----------- -----------
Spain Hire of vehicles 24,317 18,294 39,265
Spain Amortisation (992) (940) (1,887)
----------- ----------- -----------
Spain Profit from operations 23,325 17,354 37,378
----------- ----------- -----------
Total Profit from operations 61,707 53,145 107,056
----------- ----------- -----------
3. Taxation
The charge for taxation for the six months to 31 October 2007 is based on the
estimated effective rate for the year.
4. Earnings per share
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
(a) Basic and diluted earnings per share
The calculation of basic and diluted earnings per share is
based on the following data:
Earnings £000 £000 £000
Earnings for the purposes of basic and diluted earnings
per share, being net profit attributable to equity
holders of the parent Company 33,818 26,574 54,483
----------- ----------- -----------
Number of shares Number Number Number
Weighted average number of Ordinary shares
for the purposes of basic earnings per share 71,442,468 71,631,826 71,584,744
Effect of dilutive potential Ordinary shares:
- share options 396,185 242,103 250,032
----------- ----------- -----------
Weighted average number of Ordinary shares
for the purposes of diluted earnings per share 71,838,653 71,873,929 71,834,776
----------- ----------- -----------
Basic earnings per share 47.3p 37.1p 76.1p
Diluted earnings
per share 47.1p 37.0p 75.8p
(b) Earnings per share before amortisation £000 £000 £000
Earnings for the purposes of basic and
diluted earnings per share (above) 33,818 26,574 54,483
Amortisation 1,807 1,427 3,922
----------- ----------- -----------
Earnings for the purposes of basic and
diluted earnings per share before amortisation 35,625 28,001 58,405
----------- ----------- -----------
Basic earnings per share before amortisation 49.9p 39.1p 81.6p
Diluted earnings per share before amortisation 49.6p 39.0p 81.3p
5. Dividends
The proposed interim dividend of 11.5p per Ordinary share was approved by the
Board of Directors on 10 December 2007 and has not been included as a liability
as at 31 October 2007.
6. Notes to the consolidated cash flow statement
(a) Net cash from operating activities
Six months Six months Year to
to 31.10.07 to 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Profit from operations 61,707 53,145 107,056
Adjustments for:
Depreciation of property, plant and equipment 101,475 98,022 193,885
Exchange differences - - 366
Amortisation of intangible assets 1,807 1,969 3,922
Gain on disposal of property, plant and equipment (1,545) (695) (356)
Defined benefit pension charge(credit) 4 (236) 8
Share options fair value amount (charged)
credited directly to equity 159 (202) (75)
----------- ----------- -----------
Operating cash flows before movements in working capital 163,607 152,003 304,806
(Increase)decrease in inventories (434) 3,592 460
Increase in receivables (14,887) (10,401) (16,810)
Increase (decrease) in payables 6,891 (13,093) (5,838)
----------- ----------- -----------
Cash generated by operations 155,177 132,101 282,618
Income taxes paid (5,948) (11,282) (22,446)
Interest paid (19,849) (16,237) (35,407)
----------- ----------- -----------
Net cash from operating activities 129,380 104,582 224,765
----------- ----------- -----------
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash in hand and at bank, investments in
money market instruments and bank overdrafts.
Bank overdrafts are included within cash equivalents on the grounds that they
are repayable on demand and form an integral part of the Group's cash management.
Cash and cash equivalents, as described above, included in the cash flow
statement comprise the following balance sheet amounts:
31.10.07 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Cash in hand and at bank 14,817 10,348 14,384
Short term investments 31,810 1,883 20,655
----------- ----------- -----------
Gross cash and cash equivalents as reported 46,627 12,231 35,039
Bank overdrafts (62) (6,693) (572)
----------- ----------- -----------
Net cash and cash equivalents 46,565 5,538 34,467
----------- ----------- -----------
(c) Business combinations
On 18 July 2007, the Group purchased the trade and fixed assets of Alquiservicios
SA for a cash consideration of €7,755,000.
On 31 August 2007, the Group acquired the entire issued share capital of GPS Body
Repairs Limited for a total consideration of £288,000, including deferred
consideration of £93,000. Included in the fair value of the net assets acquired
was £15,000 of cash balances.
7. Analysis of consolidated net debt
31.10.07 31.10.06 30.4.07
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Cash at bank and in hand 14,817 10,348 14,384
Short term investments 31,810 1,883 20,655
Bank overdrafts (62) (6,693) (572)
------- ------- -------
46,565 5,538 34,467
Bank loans (658,274) (685,759) (601,326)
Loan notes (163,975) - (168,628)
Vehicle related finance lease obligations (3,835) (40,539) (16,104)
Deferred consideration (93) - -
Preference shares (500) (500) (500)
Property loans and other borrowings (4,414) (4,834) (3,232)
------- ------- -------
(784,526) (726,094) (755,323)
------- ------- -------
Interim announcement - Statement of the Directors
We confirm that to the best of our knowledge:
•the condensed set of financial statements has been prepared in accordance
with IAS 34;
•the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the
remaining six months of the year); and
•the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
S J Smith G T Murray
Chief Executive Officer Finance Director
10 December 2007
INDEPENDENT REVIEW REPORT TO NORTHGATE PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
October 2007, which comprise the condensed consolidated income statement, the
condensed consolidated balance sheet, the condensed consolidated statements of
changes in equity/recognised income and expense, the condensed consolidated cash
flow statement and related Unaudited Notes 1 to 7. We have read the other
information contained in the half-yearly financial report and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the Company those matters we
are required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the Group are
prepared in accordance with IFRS as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial report has
been prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 October 2007 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
10 December 2007
Leeds, United Kingdom
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