Final Results

Northgate PLC 03 July 2007 3 July 2007 NORTHGATE PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2007 Northgate plc ('Northgate', the 'Company' or the 'Group'), the UK and Spain's leading specialist in light commercial vehicle hire, announces its preliminary results for the year ended 30 April 2007. â€¢ Revenue up 41% to Â£526.5m (2006 - Â£372.6m) â€¢ Underlying profit before tax* up 29% to Â£79.3m (2006 - Â£61.3m) â€¢ Profit before tax up 34% to Â£75.4m (2006 - Â£56.1m) â€¢ Adjusted earnings per share* increased by 24% to 81.6p (2006 - 65.7p) â€¢ Total dividend increased by 11% to 25.5p (2006 - 23.0p) â€¢ UK fleet increased to 65,300 vehicles (2006 - 64,000 vehicles) â€¢ Spanish fleet increased by 17% to 55,000 vehicles (2006 - 47,000 vehicles) â€¢ Utilisation rate in UK increased to 91% (2006 - 90%) and in Spain to 90% (2006 - 89%) â€¢ Hire rates stable in both the UK and Spain â€¢ Residual market in UK improved over prior year *Stated before intangible amortisation of Â£3.9m (2006 - Â£1.2m), exceptional restructuring costs of Â£nil (2006 - Â£2.6m) and a share of associate taxation charge of Â£nil (2006 - Â£1.4m). Philip Rogerson, Chairman, commented: 'I am pleased to announce an excellent set of results for the Group after a year of significant change. We have assimilated two major acquisitions, one in each of our markets, streamlined our UK business and we are well positioned for future growth.' 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 in the UK, Republic of Ireland and Spain. 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 This is the first year we are reporting against the targets set out in our new strategy for growth announced in January 2006. In the UK the key elements of that strategy, namely the reorganisation of the management structure, growth through a significant acquisition, and the introduction of fleet management, have all been achieved. In Spain, we have achieved continued strong organic fleet growth and have acquired the remaining 51% of the equity in Record Rent a Car S.A. ('Record'), our second commercial vehicle rental business in Spain. As a result, earnings per share increased by 24%, comfortably achieving our target of double-digit growth. Since 1999, when we announced our first strategy for growth focused solely on vehicle rental, the business has seen earnings per share grow from 19.1p to 76.1p, a compound annual growth rate of 19%. The results for the year are summarised below. â€¢ Group revenue increased by 41% to Â£526.5m (2006 - Â£372.6m) â€¢ Underlying profit before tax for the year increased by 29% to Â£79.3m (2006 - Â£61.3m) â€¢ Adjusted earnings per share increased by 24%. Based on these results, the Board has recommended to shareholders a final dividend of 15.5p per share making a total dividend for the year of 25.5p, which is covered three times and represents an increase of 11% over the prior year. The dividend will be payable on 28 September 2007 to those shareholders on the register on 24 August 2007. The UK business has seen the expected benefits flow through from the acquisition of Arriva Vehicle Rental ('AVR') in 2006, with the high level of customer retention being particularly pleasing. The streamlining of the management structure which began in May 2006 has also produced some early gains, as evidenced by the improvement in vehicle utilisation to 91% (2006 - 90%). External factors have been generally favourable with a more benign hire rate environment than the previous year and a buoyant used vehicle market. Fleet growth has been modest as a result of the internal restructuring within the business and a focus on maintaining hire rates in the face of competitive pricing. This modest growth has been supplemented by an improvement in utilisation referred to above that has assisted in increasing the average number of vehicles on hire by 3% since the start of the financial year. The overall outcome for the UK is that the rental operating margin has improved to 21.1% ( 2006 - 20.6%). In Spain, we have achieved another year of significant growth, with the fleet now exceeding 55,000 vehicles, up 17% over the prior year. Coupled with operational improvements, this has increased the operating margin to 22.4% (2006 - 20.9%). The Spanish business now produces 35% of the Group's profit from operations. Having created a unified management structure, we expect to be operating on a common IT platform in Spain during this financial year and thereafter will begin to merge those activities where further synergies can be obtained. Contrary to comment in the UK press in April 2007 we have seen no evidence of any reduction in demand from our customers in the Spanish construction sector. As explained in the Operational Review we would not expect a change in the fortunes of the real estate market to affect our business materially since we have a very low exposure to this area. We have moved forward with our search for new territories and are now confident that we will find an appropriate opportunity in line with the timescale set out in our strategic plan. Whilst it will not be of the same size as Fualsa when we made our first investment in July 2002, we would expect our flexible rental product to enable us to grow strongly, albeit from a lower base. Following his retirement in November 2006 on grounds of ill health it was with sadness that we learnt of the death of Martin Ballinger, our former Chairman, in February 2007. In his short time with us Martin made a significant contribution to Northgate's continued development. Our thoughts then, and now, are with his family. Current Trading and Outlook The new financial year has started well and the Group is performing in line with the Board's expectations. The low penetration rates of rental in both the UK and Spanish commercial vehicle parcs give us confidence that there still exists plenty of opportunity for growth. This low penetration rate also exists throughout Europe and offers us the prospect of expanding our operations into further jurisdictions, a process that we expect to commence within the coming year. Operational Review Strategy for Growth In January 2006 we announced a new three-year rolling strategic plan aimed at maintaining annual double-digit earnings growth. The key elements of that plan were: UK & Republic of Ireland â€¢ An increase in the fleet size, both by acquisition and organic growth â€¢ The introduction of a fleet management product â€¢ A reorganisation of the business to create a more streamlined hire company network and to implement a functional, rather than geographic, management structure. Spain â€¢ Acquisition of the remaining 51% of the equity of Record â€¢ Continued double-digit organic fleet growth â€¢ To obtain the synergies available from combining certain functions in our two Spanish businesses. We are delighted that these objectives have been substantially achieved this year. Although fleet growth in the UK was below our planned levels we have put additional measures in place designed to achieve our target level of growth of 5% per annum in future periods. In the year under review our UK business has enjoyed the benefits of the acquisition of AVR, the integration of which was concluded by 30 April 2006. We have also introduced a fleet management product to our customers through the acquisition of Fleet Technique Limited ('FTL'), streamlined the number of hire companies from 35 to 20 and revised the management structure. In Spain we acquired the balance of the share capital of Record on 11 May 2006, grew the fleet by 17%, created a unified management structure to take the business forward and obtained some economies of scale as a result of effectively doubling the size of our business. As a consequence of these achievements, the Group has increased profit from operations by 50% and, despite an increase in the interest charge due to interest rate increases and higher levels of net debt, achieved an increase in underlying profit before tax of 29%. The resultant increase of 24% in our adjusted earnings per share represents an excellent start for year one of our latest strategic plan. Review of Current Year United Kingdom and Republic of Ireland During the year ended 30 April 2007, fleet growth has been modest but has been compensated by improved utilisation and a more benign hire rate environment when compared to the prior year. In addition used vehicle residual values have been particularly strong, principally as a result of shortages in new product in a number of categories leading to a similar reduction in the number of vehicles entering the used market. When combined with the benefits of the AVR acquisition referred to above, this has seen UK profit from operations improve by 22% to Â£71.7m (2006 - Â£58.8m). Depot Network Following the restructuring of the business, we now operate through 20 hire companies, ranging in vehicle fleet size from 1,400 vehicles to 6,000 vehicles. In addition we have 62 branches, producing a total network of 82 locations. In the year ahead we would not expect the overall number of locations to change materially, although we do expect to relocate a number of hire companies as they outgrow their existing facilities. Vehicle Fleet and Utilisation We ended the year with a fleet size of 65,300 vehicles, representing growth of 2%. However, as a result of the improvement in utilisation referred to below, the number of vehicles on hire has increased by 3% since the beginning of the financial year. The internal restructuring of the UK business undoubtedly had a short-term adverse effect on our sales activity during the year, as did our determination to protect our hire rates and as a consequence we fell short of our growth target of 5% per annum. Going forward we now have a settled sales structure and an enlarged marketing resource to focus on the 90% of the market that owns commercial vehicles. In particular we expect to be able to utilise our fleet management business and our recently relaunched 'sale and rentback' product as a conduit to convert those users. We achieved a utilisation rate of 91% for the year, up 1% over the prior year and the highest rate we have delivered since 1997. The improvement in utilisation was one of the efficiencies expected to be delivered by the streamlining project and we are pleased to report the progress to date. Hire Rates During the prior financial year hire rates came under pressure in a very competitive environment. This situation eased in February 2006 and we can report that for the financial year ended 30 April 2007 hire rates were stable in the UK and have remained so in the early part of the current financial year. Used Vehicle Sales We have exceeded the prior year record of selling 23,000 vehicles, with total disposals for this year of 24,700 vehicles. To enable us to achieve this volume of disposals, we had increased our used vehicles sales network to nine locations in the previous financial year. Equally pleasing, we have seen the proportion of vehicles disposed of through our retail and semi-retail channels increase to 16% (2006 - 12%). This has been possible due to both the improved supply of good quality clean vehicles being generated by the AVR business and by the continued development of our retail and semi-retail brands. We have raised our medium-term target for these channels to 20% of total disposals. There continues to be a shortage of new light commercial vehicle product, which naturally leads to less supply into the used market and, as a consequence, an improvement in used vehicle residual values. We are not aware of circumstances which will change this situation in the short term and therefore expect to achieve similar disposal values in the current calendar year. The effect of the increase in the proportion of our retail and semi-retail sales, coupled with the strong used vehicle market, gave rise to a profit on disposal of Â£8.5m (2006 - Â£2.2m) which, in accordance with our accounting policies, was offset against the vehicle depreciation charge for the year. Fleet Management In its first full year of ownership, FTL, our fleet management subsidiary, produced a profit from operations in line with our expectations at Â£0.6m. Revenue from FTL was 6% higher compared to the previous 12 months trading period, although the Group did not have ownership for the whole of that prior year. We remain confident that FTL will enable us to sell a broader range of solutions to our customers and to utilise better our sizeable network of repair facilities thereby delivering a more significant contribution in future periods. Equally important is the visibility it provides into the owned market which, as mentioned above, will assist us in converting owners of commercial vehicles to renters. Spain On 11 May 2006 we acquired the remaining 51% of the share capital of Record, making us the leader in the growing Spanish vehicle rental market with a combined fleet size for Fualsa and Record, at that time, of 47,000 vehicles. Since May 2006 the fleet has grown by 17% to 55,000 vehicles, comfortably ahead of our targeted growth of 15%. At the same time improved operational procedures have enabled utilisation to improve to 90% (2006 - 89%). Whilst the customer base of our Spanish business continues to be dominated by the construction sector, which represents 58% of our total revenue, this proportion is lower than in prior years when it peaked at 65%. The reduction indicates that other sectors are growing at a faster rate than construction. As with many construction enterprises in the UK, the activities of Spanish construction companies now encompass service as well as project based business. Further analysis of our construction customer activity indicates approximately 11% of the 58% is related to service provision such as facilities management and the remaining 47% is derived from construction projects many of which are funded from central government or the EU Structural Fund. It remains our intention to reduce this dependency over the medium term. Depot Network Whilst the network of 35 locations has not increased during the year, we have relocated five branches to larger premises to accommodate the growth in the fleet. Looking forward, we do not expect to extend the network significantly as we already have good geographic coverage across Spain but we do anticipate further relocations as the fleet continues to grow. Hire Rates The slightly less competitive pricing environment in Spain has allowed us, once again, to increase hire rates modestly such that the average hire rate was up by 1% over the prior year. This benefit is partly offset by the additional depreciation arising from a similar increase in the capital cost of new vehicles. Used Vehicle Sales During the year we have disposed of 12,200 vehicles (2006 - 4,900) which gave rise to a small profit on disposal in line with our expectations of Â£1.9m (2006 - Â£2.0m). This has been offset against vehicle depreciation in accordance with our accounting policies. These disposals were achieved from a network of 11 locations, with some 5% of the total being delivered through our semi-retail and retail channels. It is our intention to develop these channels further in the year ahead in order to achieve a medium-term goal of 8% of total disposals from these routes to market. The move towards a common IT platform continues and the Record system has now completed its upgrade and is ready to roll out in Fualsa. This process is expected to complete within the current financial year, after which we will be able to secure further efficiencies in the combined business. Other Territories Our search for another jurisdiction has been stepped up a gear and we are now actively examining a number of markets for potential targets. As we have previously indicated, our success in Spain came as much from identifying the right company to acquire as it did from entering the right market. Whilst our initial research suggests that there are no rental businesses of the size of Fualsa when we acquired it, we are confident that our flexible rental product will create demand once offered and that we will be able to grow quickly, even if it is from a lower base. In line with the timetable in our strategy for growth, we would expect to move forward with an acquisition during this financial year. Financial Review Financial Reporting Sales, Margins and Return on Capital Group revenue increased by 41% to Â£526.5m (2006 - Â£372.6m). UK revenue increased by 17% to Â£351.1m (2006 - Â£300.8m) mainly as a result of full year contributions from the AVR and FTL acquisitions. The Spanish business benefited from a 144% increase in revenue reflecting the first year contribution from Record as a subsidiary undertaking and the organic fleet growth of 17% in Spain leading to revenue of Â£175.4m (2006 - Â£71.8m). United Kingdom & Republic of Ireland The composition of the Group's UK revenue and profit from operations as between vehicle rental activities and fleet management is set out below: 2007 2006 Â£000 Â£000 Revenue Vehicle rental 337,370 297,433 Fleet management 13,738 3,338 ---------- --------- 351,108 300,771 ---------- --------- Profit from operations Vehicle rental 71,137 61,329 Restructuring cost* - (2,607) Fleet management 576 119 Intangible amortisation (2,035) (692) ---------- --------- 69,678 58,149 ---------- --------- *The UK profit from operations in 2006 incurred an exceptional restructuring charge of Â£2.6m relating to AVR following its acquisition on 3 February 2006. Operating margins (excluding exceptional charge and intangible amortisation) ------------------------------------------------------------------------------ 2007 2006 UK overall 20.4% 20.4% Vehicle rental 21.1% 20.6% Fleet management 4.2% 3.6% The overall UK operating margin has remained static due to the mix of business from vehicle rental and fleet management changing. The operating margin from vehicle rental has improved to 21.1% (2006 - 20.6%) principally as a result of a 1% increase in fleet utilisation and a reduction in our depreciation charge after offsetting higher profits on vehicle disposals. The higher profits on vehicle disposals are expected to continue in the short term but it is less certain as to whether the current level of profits represents a permanent shift in the market. In accordance with our accounting policies we continue to review anticipated net book values and changes in the possible disposal values. The profit from operations is stated after absorbing costs of Â£0.8m associated with the streamlining of the hire company network. Spain Fualsa, a major commercial vehicle rental company in Spain, has been a wholly owned subsidiary since May 2004. On 5 August 2005 the Group acquired a 49% interest in the equity of Record, another leading Spanish commercial vehicle rental company and on 11 May 2006 the Group acquired the remaining 51% of Record. In the current year both businesses have been reported as subsidiary undertakings whereas in the prior year only Fualsa was a subsidiary undertaking. The revenue and profit from operations generated by Spain during the year is set out below: 2007 2006 Â£000 Â£000 Revenue Vehicle rental 175,357 71,838 --------- -------- Profit from operations Vehicle rental 39,265 14,984 Intangible amortisation (1,887) (535) --------- -------- 37,378 14,449 --------- -------- Operating margins (excluding intangible amortisation) 2007 2006 Overall 22.4% 20.9% The operating margin of the enlarged Spanish business has improved as a result of the acquired Record business having a higher operating margin than Fualsa and as a result of overall efficiency gains across the enlarged Spanish business. Group Group return on capital employed, calculated as Group profit from operations divided by average capital employed (being shareholders' funds plus net debt), is 10% (2006 - 10%). Group return on equity, calculated as profit after tax divided by average shareholders' funds, is 16% (2006 - 16%). Taxation The Group's UK operations have a total tax charge of 33% (2006 - 32%), which is slightly higher than the standard rate of 30% due to disallowable expenditure incurred within the business. The 2007 Budget Statement announced a reduction in the standard rate of UK corporation tax from 30% to 28% commencing in 2008. This change will have the effect of reducing the UK's future effective tax rate. At the same time capital allowances, which are an important component of the UK's qualifying expenditure, are scheduled to be reduced from 25% to 20% per annum. This will not impact the UK's future effective tax rate but it will result in a short-term cash outflow. The Spanish effective tax rate of 17% is below the standard Spanish tax rate of 35% because of tax concessions based on vehicle purchase reliefs that are available to the businesses. Legislation has been enacted in Spain that will reduce the standard rate of corporation tax from 35% to 30% over the next two financial years. The current year effect of this change is that a credit has accrued to the deferred tax charge to reflect the future reduction in tax rate. The legislation also includes provisions that will remove some element of the vehicle purchase reliefs that the Spanish businesses currently claim. It is therefore expected that the effective rate for our Spanish business will move towards 30% within the next couple of years. Dividend The Directors recommend a final dividend of 15.5p per share (2006 - 14p) giving a total for the year of 25.5p (2006 - 23p), an increase of 11%. The dividend is covered 3.0 times (2006 - 2.7 times). Earnings per Share Earnings per share increased by 24% to 76.1p (2006 - 61.1p), reflecting the growth in profits in both the UK and Spain. Excluding intangible amortisation of Â£3.9m (2006 - Â£1.2m) and exceptional restructuring costs of Â£nil (2006 - Â£2.6m), basic earnings per share grew by 24% to 81.6p (2006 - 65.7p). Basic earnings per share have been calculated in accordance with IAS 33. Investments On 11 May 2006 the Company acquired the remaining 51% of the share capital of Record for Â£49.8m. Ordinary shares of the Company have been acquired in the open market by Walbrook Trustees (Guernsey) Limited and Capita IRG Trustees Limited in order to satisfy the Company's obligations under its various share schemes. These shares are included within the Group's balance sheet within the own shares held reserve. Capital Structure As at 30 April 2007 the Group's total gearing measured as net debt (including cash balances) as a percentage of shareholders' funds but after the deduction of goodwill and intangible assets increased to 290% (2006 - 204%). The net cash balance taken into account in calculating the gearing ratio for this year is Â£35m (2006 - Â£24m). This level of gearing is in line with our expectations, the increase being mainly due to the cash outflows following the purchase of 51% of Record for Â£49.8m and the debt of Â£146m that was acquired with Record on the same date. Treasury Strategy The Group's financing strategy, which has been approved by the Board, is to use medium and long-term debt to finance the Group's vehicle fleet and other capital expenditure. Working capital is funded by internally generated funds and an overdraft facility. The Group's interest rate exposure is managed by a series of treasury contracts as described below. Treasury Management Each of the Group's operations is responsible for its own day-to-day cash management. The sourcing of finance for the Group and the related commercial terms is arranged and monitored through the Group's treasury function. In January 2006 the Group extended its loan facilities with its seven banks to a total of Â£745m under a series of unsecured, revolving, bilateral agreements and later in 2006 these facilities were extended to Â£755m. In December 2006 the Group concluded a Private Placement in the United States of America by issuing a series of unsecured loan notes with maturity periods of between seven and ten years in order to raise $335m of new finance. All of this new finance was immediately converted to sterling which at 30 April 2007 was equivalent to debt of Â£169m. The Group entered into a series of financial instruments to fix the rate of interest at an effective rate of 5.78% per annum for the period of the loan notes. This transaction has diversified the Group's source of debt finance and also increased the overall term of its debt repayment. All funds generated by the Group's operations are controlled by a central treasury function. Liquidity The Group's aggregate finance facilities, including existing Spanish loan facilities, total Â£977m compared to net debt of Â£755m giving adequate funding for our expected growth. As described above, the core of these arrangements relate to the Â£755m unsecured bank loan facilities and Â£169m of unsecured US loan notes which combined have the following maturity: Amount Maturing Â£m Within 1 year 151 Within 1 - 3 years 604 Within 7 years 63 Within 10 years 106 ------- Total 924 ------- Cash Flows The Group's net debt increased by 44% to Â£755.3m (2006 - Â£524.5m) including the debt in Record's balance sheet. This increase reflects cash outflows associated with the purchase of 51% of the equity of Record (Â£49.8m), the acquisition of Record's existing debt (Â£146m), and funding of fleet growth particularly in Spain. Gross cash generation as reflected by EBITDA* increased to Â£304.9m (2006 - Â£210.0m). The Group had net capital expenditure on its fleet of Â£249.4m representing the purchase of 26,000 new vehicles in the UK and 20,200 new vehicles in Spain for a total cash outflow of Â£437.9m and the sale of 24,700 UK vehicles and 12,200 vehicles in Spain that generated a cash inflow of Â£188.5m. *EBITDA - Earnings before interest, taxation, depreciation and amortisation. Interest Costs The Group's net interest costs have increased by 58% to Â£31.7m (2006 - Â£20.1m) compared to an increase in net debt of 44%. The reason for the balance of the increase in interest charges is due to LIBOR and EURIBOR both experiencing a series of rate increases over the financial year. Interest cover remained a healthy 3.4 times (2006 - 3.6 times). Interest Rate Management The Group's bilateral agreements incorporate variable interest rate clauses. Historically, it has sought to manage this risk by having in place a number of financial instruments covering 30% to 40% of its borrowings at any time but more recently has adopted a strategy to increase this coverage to a higher level of between 50% to 75%. The proportion of net debt hedged into fixed rates was 53% at 30 April 2007 and has subsequently increased to 57%. The weighting of this coverage is very much towards Sterling debt where 100% of Sterling debt is now fixed. Sterling debt represents 30% of the Group's net debt and the remaining net debt proportion of 70% is denominated in Euros. Consolidated Income Statement for the year ended 30 April 2007 2007 2006 Notes Â£000 Â£000 Revenue 1 526,465 372,609 Cost of sales 1 (345,450) (248,051) -------- -------- Gross profit 181,015 124,558 -------- -------- Administrative expenses (excluding amortisation) (70,037) (50,733) Amortisation (3,922) (1,227) -------- -------- Total administrative expenses (73,959) (51,960) -------- -------- Profit from operations 107,056 72,598 Investment income 3,764 2,047 Finance costs (35,452) (22,125) -------- -------- Share of profit before taxation of associate - 4,964 Share of taxation of associate - (1,422) -------- -------- Share of profit of associate - 3,542 -------- -------- Profit before taxation 75,368 56,062 Taxation (20,885) (15,468) -------- -------- Profit for the year 54,483 40,594 -------- -------- Profit for the year is wholly attributable to equity holders of the parent Company Earnings per share From continuing operations Basic 2 76.1p 61.1p Diluted 2 75.8p 60.6p Consolidated Statement of Recognised Income and Expense for the year ended 30 April 2007 2007 2006 Â£000 Â£000 Foreign exchange differences on retranslation of net assets of subsidiary undertakings (1,756) 1,303 Foreign exchange differences on retranslation of interest in associate - 413 Foreign exchange difference on revaluation reserve (11) - Net foreign exchange differences on long term borrowings held as hedges 1,425 (1,571) Other foreign exchange differences recognised directly in equity 628 - Net fair value gains on cash flow hedges 4,471 2,956 Share options fair value amount (charged) credited directly to equity (75) 20 Actuarial gains on defined benefit pension scheme 445 356 Net current tax credit recognised directly in equity 1,084 - Net deferred tax (charge) credit recognised directly in equity (2,616) 882 -------- -------- Net income recognised directly in equity 3,595 4,359 Profit attributable to equity holders 54,483 40,594 -------- -------- Total recognised income and expense for the year 58,078 44,953 -------- -------- Consolidated Balance Sheet as at 30 April 2007 2007 2006 Â£000 Â£000 Non-current assets Goodwill 75,120 44,582 Other intangible assets 26,804 18,208 -------- -------- Property, plant and equipment: vehicles for hire 860,052 643,824 Other property, plant and equipment 68,160 50,236 -------- -------- Total property, plant and equipment 928,212 694,060 -------- -------- Interest in associate - 41,927 -------- -------- 1,030,136 798,777 -------- -------- Current assets Inventories 8,709 8,918 Trade and other receivables 176,760 116,939 Cash and cash equivalents 35,039 24,048 -------- -------- 220,508 149,905 -------- -------- Non-current assets classified as held for sale 21,941 14,705 -------- -------- Total assets 1,272,585 963,387 -------- -------- Current liabilities Trade and other payables 68,570 57,584 Tax liabilities 11,973 19,715 Short term borrowings 20,340 30,024 -------- -------- 100,883 107,323 -------- -------- Non-current liabilities Long term borrowings 770,022 518,485 Deferred tax liabilities 38,694 15,846 Retirement benefit obligation 555 1,444 -------- -------- 809,271 535,775 -------- -------- -------- -------- Total liabilities 910,154 643,098 -------- -------- -------- -------- Net assets 362,431 320,289 -------- -------- Equity Share capital 3,560 3,538 Share premium account 67,230 64,998 Revaluation reserve 1,043 1,054 Own shares (4,572) (3,331) Merger reserve 67,463 67,463 Hedging reserve 5,199 2,956 Translation reserve 1,924 1,627 Retained earnings 220,584 181,984 -------- -------- Total equity 362,431 320,289 -------- -------- Consolidated Cash Flow Statement for the year ended 30 April 2007 2007 2006 Notes Â£000 Â£000 Net cash from operating activities 4 224,765 172,178 -------- -------- Investing activities Interest received 3,145 1,931 Proceeds from disposal of vehicles for hire 188,512 150,849 Purchases of vehicles for hire (437,947) (306,273) Proceeds from disposal of other property, plant and equipment 3,283 3,307 Purchases of other property, plant and equipment (11,126) (12,208) Purchases of intangible assets (1,281) (927) Payment of deferred consideration (10,290) - Acquisition of subsidiary undertakings, including net cash and bank overdraft balances acquired 3 (49,340) (130,047) Purchase of interest in associate - (37,972) -------- -------- Net cash used in investing activities (315,044) (331,340) -------- -------- Financing activities Dividends paid (16,946) (13,459) Repayments of obligations under finance leases (63,740) (36,994) Repayments of bank loans and other borrowings (175,579) - Increase in bank loans and other borrowings 359,891 130,988 Proceeds from issue of share capital 2,254 65,525 Proceeds from sale of own shares 62 511 Payments to acquire own shares (1,303) (1,371) -------- -------- Net cash from financing activities 104,639 145,200 -------- -------- Net increase (decrease) in cash and cash equivalents 14,360 (13,962) Cash and cash equivalents at 1 May 20,259 34,057 Effect of foreign exchange movements (152) 164 -------- -------- Cash and cash equivalents at 30 April 5 34,467 20,259 -------- -------- Consolidated Statement of Changes in Equity For the year ended 30 April 2007 2007 2006 Â£000 Â£000 Amounts attributable to equity holders of the parent Company Foreign exchange differences on retranslation of net assets of subsidiary undertakings (1,756) 1,303 Foreign exchange differences on retranslation of interest in associate - 413 Foreign exchange differences on revaluation reserve (11) - Net foreign exchange differences on long term borrowings held as hedges 1,425 (1,571) Other foreign exchange differences recognised directly in equity 628 - Net fair value gains on cash flow hedges 4,471 2,956 Share options fair value amount (charged) credited directly to equity (75) 20 Actuarial gains on defined benefit pension scheme 445 356 Net current tax credit recognised directly in equity 1,084 - Net deferred tax (charge) credit recognised directly in equity (2,616) 882 -------- -------- Net income recognised directly in equity 3,595 4,359 Profit attributable to equity holders 54,483 40,594 -------- -------- Total recognised income and expense for the year 58,078 44,953 Dividends paid (16,949) (13,437) Issue of Ordinary share capital (net of expenses) 2,254 65,525 Net increase in own shares held (1,241) (860) -------- -------- Net changes in total equity 42,142 96,181 -------- -------- Opening total equity as at 1 May 320,289 224,108 -------- -------- Closing total equity as at 30 April 362,431 320,289 -------- -------- Notes 1. Segmental analysis 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 not material to the Group as a whole. UK & Republic of Ireland Spain Total 2007 2007 2007 Â£000 Â£000 Â£000 Revenue 351,108 175,357 526,465 --------- -------- -------- Gross profit 117,638 63,377 181,015 Administrative expenses (45,925) (24,112) (70,037) Amortisation (2,035) (1,887) (3,922) --------- -------- -------- Profit from operations 69,678 37,378 107,056 --------- -------- -------- UK & Republic Spain Total of Ireland 2006 2006 2006 Â£000 Â£000 Â£000 Revenue 300,771 71,838 372,609 --------- -------- -------- Gross profit 102,724 21,834 124,558 Administrative expenses (43,883) (6,850) (50,733) Amortisation (692) (535) (1,227) --------- -------- -------- Profit from operations 58,149 14,449 72,598 --------- -------- -------- 2. Earnings per share 2007 2006 (a) Basic and diluted earnings per share The calculation of basic and diluted earnings per share is based on the following data: Earnings Â£000 Â£000 -------- --------- Earnings for the purposes of basic and diluted earnings per share, being net profit attributable to equity holders of the parent 54,483 40,594 -------- --------- Number of shares Number Number Weighted average number of Ordinary shares for the purposes of basic earnings per share 71,584,744 66,481,499 Effect of dilutive potential Ordinary shares: - share options 250,032 464,060 -------- --------- Weighted average number of Ordinary shares for the purposes of diluted earnings per share 71,834,776 66,945,559 -------- --------- Basic earnings per share 76.1p 61.1p -------- --------- Diluted earnings per share 75.8p 60.6p -------- --------- (b) Earnings per share before amortisation and exceptional restructuring costs Â£000 Â£000 Earnings for the purpose of basic earnings per share (above) 54,483 40,594 Amortisation 3,922 1,227 Non-recurring restructuring costs (net of UK corporation tax at 30%) - 1,825 -------- --------- Earnings for the purpose of basic earnings per share before amortisation and exceptional restructuring costs 58,405 43,646 -------- --------- -------- --------- Basic earnings per share before amortisation and exceptional restructuring costs 81.6p 65.7p -------- --------- 3. Acquisitions Record Rent a Car S.A. On 5 August 2005, the Group acquired a 49% share in Record Rent a Car S.A. ('Record'), a Company registered in Spain, for a cash consideration, payable to the vendors, of â‚¬54,800,000. In accordance with IAS 28, this investment, including associated costs, was accounted for as an associate under the equity method of accounting, in the year ended 30 April 2006. Had the 49% share in Record been accounted for under the purchase method of accounting, then goodwill of Â£12,236,000 would have arisen. On 11 May 2006, the Group acquired the remaining 51% of the issued share capital of Record for a consideration of â‚¬72,400,000, payable to the vendors, under the share purchase agreement. The transaction has been accounted for under the purchase method of accounting in the current year. The detail relating to the 51% share of Record is shown below: Â£000 Book value 59,512 Fair value adjustments 1,080 -------- Fair value of net assets on 11 May 2006 60,592 -------- 51% share of fair value of net assets, acquired on 11 May 2006 30,902 Goodwill 19,203 -------- Acquisition cost of 51% share in Record (including expenses) 50,105 -------- Fair value of consideration: Cash 50,105 Net cash acquired with subsidiary undertaking (299) -------- Cash outflow in the year on acquisition of Record 49,806 -------- Goodwill arising on 49% share in Record 12,236 Goodwill arising on 51% share in Record 19,203 -------- Total goodwill arising on acquisition of Record 31,439 -------- Northgate (AVR) Limited On 3 February 2006, the Group acquired the entire issued share capital of Northgate (AVR) Limited (formerly Arriva Vehicle Rental Limited) ('AVR') for an original cash consideration of Â£50,316,000, including goodwill of Â£28,055,000. The transaction was accounted for in accordance with the purchase method of accounting in the year ended 30 April 2006. In the current year, the Group paid a further Â£3,699,000 to the vendor, under the terms of the sale and purchase agreement, and further fair value adjustments were made, totalling Â£4,028,000, such that the revised detail relating to the fair value of net assets of AVR acquired is as follows: Â£000 Book value 40,668 Fair value adjustments (14,379) -------- Fair value of net assets acquired 26,289 -------- Goodwill 27,726 -------- Acquisition cost (including expenses) 54,015 -------- Fair value of consideration: Cash 54,015 Net bank overdraft acquired with subsidiary undertaking 74,056 Proceeds from disposal of intangible assets to the vendor, offset against cash flows in the current year (4,165) Cash outflow in the prior year on acquisition of AVR (124,372) -------- Net cash inflow in the current year on acquisition of AVR (466) -------- 4. Reconciliation of Group profit from operations to net cash from operating activities 2007 2006 Â£000 Â£000 Profit from operations 107,056 72,598 Adjustments for: Depreciation of property, plant and equipment 193,885 136,209 Exchange differences 366 (16) Amortisation of intangible assets 3,922 1,227 Gain on disposal of property, plant and equipment (356) (209) Defined benefit pension charge (credit) 8 (386) Share options fair value amount (charged) credited directly to equity (75) 20 -------- -------- Operating cash flows before movements in working capital 304,806 209,443 Decrease (increase) in inventories 460 (2,191) Increase in receivables (16,810) (1,131) (Decrease) increase in payables (5,838) 3,139 -------- -------- Cash generated from operations 282,618 209,260 Income taxes paid (22,446) (15,156) Interest paid (35,407) (21,926) -------- -------- Net cash from operating activities 224,765 172,178 -------- -------- 5. 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. 2007 2006 Â£000 Â£000 Cash in hand and at bank 14,384 22,201 Short term investments 20,655 1,847 -------- -------- Gross cash and cash equivalents as reported 35,039 24,048 Bank overdrafts (572) (3,789) -------- -------- Net cash and cash equivalents 34,467 20,259 -------- -------- 6. Analysis of Consolidated net debt 2007 2006 Â£000 Â£000 Cash at bank and in hand 14,384 22,201 Short term investments 20,655 1,847 Bank overdraft due within one year (572) (3,789) -------- -------- 34,467 20,259 Bank loans (601,326) (518,393) Loan notes (168,628) - Vehicle related finance lease obligations (16,104) (12,326) Deferred consideration - (10,290) Preference shares (500) (500) Property loans and other borrowings (3,232) (3,211) -------- -------- (755,323) (524,461) -------- -------- 7. Basis of preparation The results for the year ended 30 April 2007, including comparative financial information, have been prepared in accordance with International Financial Reporting Standards ('IFRS'), as issued by the International Accounting Standards Board, that are endorsed, or are expected to be endorsed, by the European Commission. Northgate plc ('the Company') has adopted all IFRS in issue. The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 April 2007 or 2006, but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies and those for 2007 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985. The Report and Accounts for the year ended 30 April 2007 will be mailed to shareholders no later than 1 August 2007. This information is provided by RNS The company news service from the London Stock Exchange

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