Pre-Close Trading Update

RNS Number : 0334O

Northgate PLC

15 May 2018

 

NORTHGATE PLC

Pre-close Trading Update

"Vehicles on Hire returned to growth in the UK, with continued strong growth in Spain"

Northgate plc ("Northgate", the "Company" or the "Group"), the leading specialist in light commercial vehicle hire in the UK, Spain and Ireland, today provides a trading update for the period from 1 February 2018 to 30 April 2018.

Group

During the period the Group performed in line with management's expectations, with further strong growth in Vehicles on Hire (VOH), and rental margins lower, mainly reflecting the focus on faster volume growth.   The Group therefore expects to report Profit Before Tax for the full year ended 30 April 2018 in line with previous guidance.

Average Vehicles on Hire (VOH)	FY'17 Q4	FY'18 Q1	FY'18 Q2	FY'18 Q3	FY'18 Q4
UK ('000)	39.7	39.6	39.3	40.9	40.9
y-o-y % growth	(7.4%)	(6.5%)	(5.9%)	(2.0%)	3.2%
Spain ('000)	36.4	38.7	40.2	41.0	41.5
y-o-y % growth	3.1%	8.1%	11.5%	14.2%	14.1%
Group ('000)	79.4	81.6	82.7	85.3	85.7
y-o-y % growth	(2.3%)	0.2%	1.9%	5.0%	7.9%

UK

During the fourth quarter VOH returned to positive growth, with average VOH in the period increasing by 3.2% year-on-year to 40,900.  This was ahead of the previous guidance of "broadly flat" VOH in the period, driven by stronger demand in both the flexible and minimum term hire markets.  Closing VOH at the end of the period was 42,200, 6.9% higher than at the same time last year.  Margins in the fourth quarter were below those in the third quarter, in line with previous guidance, and significantly below the fourth quarter last year, mainly reflecting Northgate's more aggressive competitive positioning in the market to drive volume growth.  Competition remains robust although there are some initial signs that the pricing environment in the market is strengthening.

During the quarter a competitor entered administration and the Group acquired approximately 3,200 vehicles from certain of the funders to whom ownership of the competitor's vehicles had reverted. The vehicles are currently being integrated into the Northgate fleet and the Company is actively engaging with the previous competitor's customers, aiming to convert many of them onto Northgate agreements and tariffs.  None of the vehicles acquired are included in the reported fourth quarter VOH.  Further information about the transactions and their likely business impact will be provided with the Preliminary results in June.       

Spain

The strong growth seen during the year continued into the fourth quarter, with average VOH in the period growing by 14.1% year-on-year to 41,500, compared to previous guidance of growth over 10%.  Closing VOH at the end of the period was 42,700, 13.5% higher than at the same time last year.  Minimum term hire growth was particularly strong, reflecting the continuing success of Northgate's cross-selling and bundled propositions.  Margins were broadly flat quarter-on-quarter, reflecting the higher VOH in the period, offset by some price competition and business mix.

Ireland

Average VOH was somewhat lower than expected in the fourth quarter, reflecting some uncertainty in the market and a resulting decline in utilisation rates, particularly at the start of the period.

Financing

Net debt at the end of the fourth quarter was £439 million, compared to £421 million at the end of October 2017.

During the period the Group agreed a one-year extension for the majority of its Revolving Credit Facility (RCF) commitment, and an increase in the leverage covenant on this facility to Net Debt/EBITDA of 2.75 times.  The leverage covenant on the private placement loan notes has similarly been increased to 2.75x but with a limitation that it cannot exceed 2.5x for three consecutive six-monthly testing dates (effectively an 18-month period).

Next results

Northgate will announce its Preliminary Results for the full year ended 30 April 2018 on Tuesday 26 June 2018.

Contact details

For further information please contact:

Northgate plc                                                                                  [phone]

Kevin Bradshaw, Chief Executive Officer                             

David Tilston, Interim Chief Financial Officer

David Boyd, Investor Relations                                                [phone]

MHP                                                                                                    [phone]

Andrew Jaques, Barnaby Fry

Simon Hockridge, Ollie Hoare

Notes to Editors:

Northgate plc is the leading light commercial 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 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 arrangement.

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

www.northgateplc.com                                              

ENDS

 

END

 

 

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