Final Results
Northgate PLC
06 July 2004
6th July 2004
NORTHGATE PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2004
Northgate plc (the 'Company', the 'Group'), the UK's leading specialist in light
commercial vehicle hire, announces its preliminary results for the year ended 30
April 2004.
• Turnover up 5.3% to £355.6m (2003 - £337.9m)
• Operating profit (including share of Fualsa joint venture) up by
18.1% to £60.1m (2003 - £50.9m)
• Pre-tax profit up 22.1% to £44.7m (2003 - £36.6m)
• Earnings per share up 22.9% to 50.9p (2003 - 41.4p)
• Total dividend increased by 10% to 17.6p (2003 - 16.0p)
• UK fleet increased by 5.3% to 47,400 (2003 - 45,000)
• Continued excellent performance by Fualsa, the Group's Spanish
rental business
- £3.3m contribution to pre-tax profit (2003 - £1.9m)
- 25% increase in fleet size over the year to 15,000 (2003 - 12,000)
- Currently operating from 12 locations
• Option to purchase remaining 60% of Fualsa exercised on 3 May 2004
Michael Waring, Chairman, commented:
'I am pleased to report an excellent start to the first year of our three year
Strategy for Growth. We responded well to some challenging operating conditions
in the first half, which temporarily impacted our fleet growth. The second half
of the year saw a return to more normal growth in fleet and network locations,
producing strong financial results for the full year.
'Although the UK remains our core market, it is particularly pleasing that our
first venture into Continental Europe, the acquisition of Fualsa in Spain, has
proved to be such a success. Fualsa is now making a significant contribution to
Group profits and, since the year end, we have completed the acquisition of the
remaining 60% of the equity in the business.
'We are confident that the Group's over-riding goal, namely to achieve annual
double-digit earnings growth throughout the period of our plan, remains
achievable.'
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
Tom Leatherbarrow
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CHAIRMAN'S STATEMENT
This financial year is the first year of our Strategy for Growth announced in
July 2003 and covering the period to April 2006. I am pleased to report an
excellent start, particularly in respect of the increase in earnings per share
of 22.9% to 50.9p (2003- - 41.4p ). Progress against the other specific targets
in the plan is set out in the Operational Review by the Chief Executive which
follows my statement.
Based on these results and the Board's view of future prospects, the Board has
decided to recommend to shareholders a final dividend of 10.6p per share. This
will make the total dividend for the year 17.6p - an increase of 10% on last
year, covered 2.8 times. The dividend will be payable on 10 September 2004 to
those shareholders on the register on 6 August 2004.
Our UK business faced challenging trading conditions in the summer of 2003 due
to short term competitor pricing pressure. However, as a result of the actions
taken by management, the business has not only produced a good set of results
but also emerged stronger for the experience.
Looking to the future, the UK business will continue to form the core of the
Group's trading operations and we remain confident of our ability to expand our
market share and business here. Our position as the leading van rental company
in the UK leaves us well placed to take advantage of opportunities that will
arise to expand our fleet and network either via acquisition or the
establishment of new greenfield locations. The strengths of the business which
brought us to this position and in particular our product Norflex, our unique
structure and the commitment and dedication of our employees, will be as valid
to our future as they were to our past. As a management we will remain focused
on the key measures of our business such as utilisation and will look for the
many small improvements that will ensure that we remain ahead of the
competition.
The continued excellent performance of Fualsa, our Spanish rental business,
resulted in the exercise of our option to purchase a further 40% of the equity
on 3 May 2004. As anticipated the consideration was €22.3m - the maximum
payable under the terms of the purchase contract. In addition, we reached
agreement to effect the early exercise of the option for the remaining 20%,
which also took place on 3 May 2004. The consideration for this final 20%
remains payable in 2006 and will be determined using a multiple of 8.5 times the
average profits after tax for calendar years 2004 and 2005, subject to the
maximum consideration payable being €14.9m.
We believe that the dynamics of the vehicle rental market in Spain offer the
Group an exceptional opportunity to build on its initial success. We intend to
build a substantial business in the Spanish market using Fualsa as a platform
for expansion. How large a business we can develop is the question we are
currently addressing in order to establish the framework for our strategy beyond
April 2006.
Our underlying philosophy will continue to be the prudent management of the
Company's assets in order to deliver long term sustainable growth.
In May, I advised the Company that it was my wish to stand down as Chairman no
later than the AGM in 2005, but sooner if the Board had settled on a suitable
candidate as my successor. I have been either Chairman or Chief Executive of the
Group for nearly 20 years. With the help and support of my colleagues, most of
whom today fill the top positions in the Company, I have seen the Company's
market capitalisation and earnings increase some twenty fold over this period.
Shareholders have seen the dedication and drive that the management have brought
to the Company in the delivery of our previous five year Strategy for Growth,
which saw earnings double during the period 1999 - 2003, and in the results for
this year, the first year of our new three year Strategy for Growth. I have no
doubt that this commitment to shareholders will continue for the future.
Finally, I want to thank all the men and women who work so hard to make
Northgate such an outstanding company. Their commitment to serve the interests
of customers, often under difficult circumstances, is a large measure of the
Group's success.
Michael Waring
Chairman
OPERATIONAL REVIEW
Three Year Strategy for Growth
In July 2003, we announced a new three year Strategy for Growth based on
achieving the following targets by April 2006:
• Fleet size of 60,000 in the UK and 18,000 in Spain;
• Network of 100 locations in the UK and 20 in Spain;
• 100% ownership of Fualsa;
• An established portfolio of non-rental products.
Through the successful implementation of the plan we are seeking to achieve
annual double-digit earnings per share growth. An increase in earnings per
share of 22.9% in the year under review represents a good start.
Review of Current Year
The Interim Statement in January detailed the challenging trading conditions
experienced in the first half of the financial year as a result of short term
competitor pricing pressure. As a consequence management took a prudent
approach to the purchase of new vehicles and the opening of new locations with
the result that fleet growth was limited. Despite these conditions, pre-tax
profits and earnings per share for the six months to 31 October 2003 saw good
improvements due to tight cost control and increased operational efficiency.
The second half of the year has been much more positive, with growth in both the
network and the fleet being more in line with our expectations.
Depot Network
We currently operate from 36 primary and 39 branch locations. We have opened new
locations in Aldershot, Crawley, Droitwich, Glasgow and Newport during the
financial year and Wakefield since the year-end. All of these locations are
branches operating as satellites of existing hire companies.
We continue to look at consolidating businesses where we feel this will lead to
efficiencies without detracting from customer choice and service. During the
year our businesses in Plymouth and Bristol were merged to trade under the new
style - Bristol and West Vehicle Hire Limited.
Of the 75 sites in the Group, 18 have been open for less than two years and, in
our terms, are not yet mature, thereby offering greater growth potential than
for more mature locations. We will continue to expand the network through
greenfield sites (in the main, satellites) and, where appropriate, selective
acquisitions.
Vehicle Fleet
Despite a difficult first half to the financial year, the fleet grew by 2,400
vehicles in the year to close at 47,400 vehicles (2003 - 45,000 vehicles). In
what is traditionally for us a quieter second half, fleet growth was 1,700
vehicles.
Two small acquisitions were made towards the end of the financial year and
contributed 1,000 vehicles to the increase in fleet size. In March we bought
the assets of Aim Hire Limited based in Peterborough and on 30 April we
purchased the equity of F Herriman & Sons Limited trading as Daman Vehicle
Rental based in Runcorn in Cheshire. The assets of Aim Hire have been merged
into our East Anglian business and Daman currently remains a stand-alone
business. Excluding the effects of these acquisitions, fleet growth for the
year was just over 3%.
The new financial year has started well with fleet growth in the first two
months, all from existing locations, being in line with our plan for the year
ahead.
Hire Rates
Once again hire rates have remained relatively stable over the year, in part as
a result of our decision not to discount aggressively to match quotes from
contract hire companies last summer.
As we outlined last July, our three year Strategy for Growth does not envisage
any material improvement in hire rates, with increased profitability being
driven in the main by growth in the fleet and cost efficiencies.
Whilst low inflation and low interest rates create an environment where the
opportunities to increase prices are limited, they do, of course, also impact
positively on our costs and margins. However, if interest rates increase, it
may be possible to improve our hire rates but it is more likely that we can
achieve additional fleet growth on the back of competitors and, in particular,
contract hire companies being forced to increase their prices.
Utilisation
Utilisation, which averaged just over 89% for the year, remains the key
management tool within the business.
The overall percentage masks a variation between utilisation in established
(i.e. greater than two years old) and new (i.e. less than two years old)
locations of 89.3% and 85.3% respectively.
Consequently there remains an opportunity to improve utilisation as the network
matures.
Used Vehicle Sales
The used vehicle market had another relatively stable year, enabling us to
continue to achieve profits from this area of our business throughout the year.
The average profit per vehicle was at a similar level to that of the prior year.
We sold 18,700 units, up from 18,000 the previous year. The opening of our
remarketing centre in Carnaby (near Bridlington) in November 2003 expanded our
channels to market which now cover the full spectrum of trade, semi-retail and
retail. We are looking to open a further remarketing centre in the West
Midlands in the medium term. In addition to our Carnaby remarketing centre we
sell vehicles from three other dedicated sales locations in the UK - Darlington,
Snodland in Kent and Banbury, as well as direct from selected hire locations.
Last year saw 6% of our disposals go through a refurbishment process into the
semi-retail or retail channel: our aim remains to increase this percentage over
the next couple of years to around 15% of the Group's UK disposals.
Northgate Vehicle Solutions
The third leg of our Strategy for Growth is based on growing our non-rental but
vehicle-related products through a new division called Northgate Vehicle
Solutions.
The business was relocated to Darlington last summer significantly improving the
service levels we offer customers.
Our vehicle monitoring product, branded as Insight, continues to be of value to
an ever-growing number of our customers and is now fitted to 1,400 of our
vehicles, up from 750 on 1 May 2003.
Fualsa (Spain)
The year saw further expansion of the network with sites rolled out in North
Madrid, Santander and La Coruna. Since the year-end, we have opened in Murcia,
which brings our total number of locations to 12. There remains much scope for
further greenfield development and infill and we remain confident of achieving
our target of 20 locations by April 2006.
The fleet closed at 15,000 on 30 April 2004, an increase of 25% over the prior
year and 50% since our initial investment in July 2002.
As in the UK, the overall utilisation rate of 88% is held back slightly by the
lower rates of utilisation as the network continues to expand. Of the 12 depots
operated by Fualsa, six have been opened during the last two years.
Hire rates have seen modest increases of 1% over the last 12 months. This
increase is similar to that achieved in the period from July 2002 to April 2003.
As a result of the healthy fleet growth and good utilisation, Fualsa delivered a
contribution (before goodwill amortisation) of £3.3m (2003 - £1.9m) to our
pre-tax profits.
Current Trading and Outlook
Trading for the Group since the year-end has been in line with our expectations.
As mentioned in the Chairman's Statement, in the UK we cannot become
complacent and need to remain focused on those areas where we can drive through
further efficiencies and thereby improve our business further. The challenges
in Spain come in growing the fleet, whilst diversifying from the current bias
towards the construction sector, together with the further development of people
and processes to create a structure for sustainable long term growth.
It is likely that the Group will achieve a higher profit per unit through
operational gearing effects than was first envisaged at the start of the three
year Strategy for Growth but may fall short of the original target of 60,000
vehicles in the UK by April 2006. However, the vehicle fleet in Spain is likely
to exceed our target of 18,000 vehicles given the rate of growth that is
currently being experienced. We are confident that the overriding goal of our
plan, namely to achieve annual double-digit earnings per share growth, remains
achievable.
FINANCIAL REVIEW
Financial Reporting
Sales, Margins and Return on Capital
Turnover increased by 5.3% to £355.6m (2003 - £337.9m) excluding turnover from
the Fualsa joint venture. This increase in turnover is in line with the modest
increase in fleet size achieved during the financial year.
The composition of the Group's UK turnover and operating profit as between hire
company activities and vehicle sales is set out below:
2004 2003
£000 £000
Turnover
Hire company sales 250,747 243,627
Sale of vehicles 104,877 94,248
355,624 337,875
Operating profit
Hire company sales 52,213 44,926
Sale of vehicles 3,533 3,353
UK Operating profit 55,746 48,279
The Group's reported operating margin has increased to 15.7% (2003 - 14.3%).
This improvement in the overall margin is as a result of the Group's underlying
margin in its hire companies improving to 20.8% (2003 - 18.4%). As highlighted
in last year's Financial Review, the Group's hire company operating margin in
2003 was diluted by incurring a number of non-recurring costs and further
investment costs associated with the continued development of the Group's
network. The increasing number of depots reaching maturity has started to
reverse the margin dilution experienced last year. In addition to tight cost
controls, the Group has also benefited from economies in purchasing being
reflected in lower capital costs feeding through to reduced depreciation.
The profit generated from used vehicle sales has increased in line with vehicle
sales turnover at a similar margin of 3.4% (2003 - 3.6%). This represents an
operating profit per vehicle sold of £189 (2003 - £186).
The Group's share of Fualsa's profit before tax and goodwill amortisation for
the year increased to £3.3m (2003 - £1.9m). This continues the strong
performance of Fualsa, achieved primarily through fleet growth of 25%.
Fualsa's operating margin of 18.5% (2003 - 18.1%) has been enhanced by
non-recurring profits on vehicle disposals of which the Group's share is
estimated to be £0.7m for the year. These profits arose on the disposal of
vehicles acquired prior to 1 January 2001 to which historically excessive
depreciation rates had been applied. Depreciation rates complying with revised
fiscal legislation have been applied to all vehicles acquired since 1 January
2001 and have resulted in levels of profit per unit on disposal closer to those
generated in the UK.
Group return on capital employed, calculated as Group operating profit divided
by average capital employed (being shareholders' funds plus net debt), is 13.9%
(2003 - 12.9%).
Group return on equity, calculated as profit after tax divided by average
shareholders' funds, is 18.3% (2003 - 17.3%).
Taxation
The Group's UK operations have a total tax charge of 31% (2003 - 31%) which is
slightly higher than the standard rate of 30% due to disallowable expenditure
incurred within the business.
The Fualsa joint venture tax rate of 12% (2003 - 25%) is below the standard
Spanish tax rate of 35% because of tax concessions based on vehicle purchase
reliefs that are available to the business. Given the significant growth in the
Fualsa fleet, the relief available has reduced the Fualsa tax charge to this
lower level. As long as these tax concessions remain available it is likely
that the tax rate for Fualsa will remain below the standard rate, although it is
anticipated that in future years the tax rate will be more in the range of 20%
to 30% of profit before tax rather than the current very low rate.
Dividend
The Directors recommend a final dividend of 10.6p per share (2003 - 11.1p)
giving a total for the year of 17.6p (2003 - 16.0p) - an increase of 10%. The
dividend is 2.8 times covered (2003 - 2.6 times). The Board's intention is that
annual dividend payments should in the future be spread as to approximately 40%
in the interim and 60% in the final.
Earnings per Share
Earnings per share increased by 22.9% to 50.9p (2003 - 41.4p).
Basic earnings per share have been calculated in accordance with FRS14. The
weighted average number of shares in issue during the year has been amended to
exclude those Ordinary shares held by the Employee Benefit Trust in Guernsey for
the Company's various share schemes until such time as they rank for dividend.
Investments
On 16 July 2002 the Company acquired 40% of the equity of Fualsa in Spain for a
consideration of £10.2m. This investment has been treated as a joint venture
within the Group's accounts to reflect that the Company has joint management
control of Fualsa. It is disclosed in the consolidated balance sheet as '
Investment in joint venture'.
The Company's option to acquire the remaining 60% of the equity of Fualsa was
exercised in full after the Group's financial year-end on 3 May 2004 as detailed
in the Chairman's Statement.
On 30 April 2004 the Group acquired 100% of F Herriman & Sons Limited trading as
Daman Vehicle Rental, a UK vehicle hire operation in the North West of England
for a total cash consideration (including the bank overdraft acquired) of £1.1m.
Ordinary shares of the Company have been acquired in the open market by
Kleinwort Benson (Guernsey) 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 as investments.
Goodwill
The Group amortises goodwill acquired over its useful life up to a maximum of 20
years. The goodwill that has been paid for the initial 40% equity in Fualsa is
being amortised over 20 years. This gives rise to a goodwill amortisation
charge in the year of £0.2m relating to Fualsa. Following the acquisition of
the remaining 60% of Fualsa's equity on 3 May 2004, the ongoing goodwill
amortisation charge relating to Fualsa is estimated to be £0.7m per annum.
Further goodwill amortisation of £0.07m was charged to the profit and loss
account relating to UK businesses acquired. Following the business acquisitions
during the year ended 30 April 2004 the ongoing goodwill amortisation charge
relating to UK businesses is estimated to be £0.2m per annum.
Capital Structure
The Company issued 3,040,000 Ordinary shares on 14 January 2004 via a 5% Placing
at 545p per share raising £16m (net of expenses) in order to fund future
acquisitions in the UK and Europe. Partly as a result of these additional funds
the Group's total gearing (excluding Fualsa which was not a subsidiary
undertaking at 30 April 2004) decreased to 132% (2003 - 175%). The gearing
ratio is calculated after taking into account net cash balances of £46.2m (2003
- £31.5m).
As at 30 April 2004 the Fualsa joint venture had £25m of shareholders' funds and
£86.7m of net debt. If it were assumed that the Group's option to acquire the
remaining 60% of Fualsa's share capital had been exercised on 30 April 2004 at
the maximum consideration payable, the resulting consolidated balance sheet of
the Group would have had gearing of 190% on a pro forma basis.
Treasury
Cash Flows
The Group's net debt, excluding the debt contained in the Fualsa balance sheet,
decreased to £249.8m (2003 - £268.4m) reflecting the Placing of Ordinary shares
in January 2004 and the underlying strong cash flow. Gross cash generation as
reflected by EBITDA* increased to £154m (2003 - £148m).
*EBITDA - Earnings before interest, taxation, depreciation and amortisation.
Interest Costs
The Group's net interest costs increased by 2.2% to £15.4m (2003 - £15.0m).
This increase is solely due to the Group's share of interest costs in the Fualsa
joint venture increasing to £1.3m (2003 - £0.8m) as a result of Fualsa's fleet
growing by 25% during the financial year.
The underlying interest costs in the UK decreased to £14.1m (2003 - £14.2m)
primarily as a result of proceeds received from the 5% Placing of Ordinary
shares, lower interest rates in the early part of the financial year and the
strong cash flow referred to above.
Strategy
The Group's financing strategy has been approved by the Board. This strategy is
to use medium and long term debt to finance the Group's vehicle fleet, other
capital expenditure and acquisitions. 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 funding arrangements of the Group (excluding Fualsa) with asset
finance companies and banks are negotiated and monitored centrally. The funding
arrangements for Fualsa will be brought under the central treasury management
function in the near future. All funds generated by the Group's operations are
controlled by a central treasury function.
Liquidity
The Group's aggregate finance facilities, excluding the Fualsa joint venture,
total £446m compared to net debt of £250m. These facilities have been comprised
historically of up to 80% of hire purchase funding with the balance of the
facilities being revolving loans and overdraft. In order to secure longer term
funding and improve efficiency, some of the hire purchase funding was replaced
as a result of the Group entering into a five year £100m medium term loan with
The Royal Bank of Scotland plc and Barclays Bank plc in April 2004. This loan
is subject to similar covenants to the existing revolving loans: the main
covenant of interest cover is comfortably achieved.
Interest Rate Management
The Group has variable rate interest agreements for all of its UK borrowings.
Historically, it has sought to manage this risk by having in place a number of
financial instruments covering 30% to 40% of its borrowings. Some of the
earlier financial instruments are at levels 2% to 4% above prevailing base rates
and as a consequence the Group increased this coverage to 76% of gross
borrowings by entering into additional interest rate derivatives in May and June
2003. Five year swaps to cover £45m of debt at an average rate of 3.97% were
contracted for as were five year interest rate collars covering £55m of debt
with a range of 3.15% to 5.5%.
Based on the UK's closing net debt position of £250m at 30 April 2004 and LIBOR
at that date, a 1% increase in LIBOR would generate an additional £2.5m per
annum of interest costs if financial instruments were not in place. The table
below indicates the additional annual funding costs to the Group at this level
of debt following increases in LIBOR for a range between 1% to 3% after applying
the benefits of the Group's existing financial instruments:
Increase in Additional UK
LIBOR Interest costs
1% £1.5m
2% £2.5m
3% £3.3m
Consolidated Profit and Loss Account
for the year ended 30 April 2004
Before Goodwill Total Total
goodwill amortisation
amortisation
Notes 2004 2004 2004 2003
£000 £000 £000 £000
Turnover
Continuing operations 355,624 - 355,624 337,875
Joint venture 23,461 - 23,461 14,514
Turnover : Group and share of joint venture 379,085 - 379,085 352,389
Less : share of joint venture's turnover (23,461) - (23,461) (14,514)
Group turnover 355,624 - 355,624 337,875
Cost of sales (261,255) - (261,255) (250,213)
Gross profit 94,369 - 94,369 87,662
Administrative expenses
- general administrative expenses (38,552) - (38,552) (38,999)
- goodwill amortisation - (71) (71) (384)
Total administrative expenses (38,552) (71) (38,623) (39,383)
Group operating profit - continuing operations 55,817 (71) 55,746 48,279
Share of joint venture's operating profit 4,578 (236) 4,342 2,620
60,395 (307) 60,088 50,899
Profit on disposal of property - - - 736
Interest payable, net (15,355) - (15,355) (15,032)
Profit on ordinary activities
before taxation 45,040 (307) 44,733 36,603
Tax on profit on ordinary activities (13,303) (11,497)
Profit for the financial year 31,430 25,106
Dividends (11,064) (9,736)
Profit transferred to reserves 20,366 15,370
Earnings per Ordinary share - basic 1 50.9p 41.4p
Diluted earnings per Ordinary share 1 50.8p 41.2p
Dividends per Ordinary share 17.6p 16.0p
Consolidated Balance Sheet
30 April 2004
Notes 2004 2003
£000 £000
Fixed assets
Intangible assets 1,981 1,382
Tangible assets
Vehicles for hire 379,346 366,976
Other fixed assets 23,342 21,574
Investments 1,330 409
405,999 390,341
Investment in joint venture:
Share of gross assets 50,389 38,450
Share of gross liabilities (40,215) (30,898)
Goodwill on investment less amortisation 4,293 4,529
14,467 12,081
Total fixed assets 420,466 402,422
Current assets
Stocks 15,285 10,328
Debtors 56,382 57,270
Cash at bank and in hand 46,160 31,545
117,827 99,143
Creditors: amounts falling due within one year 133,756 185,758
Net current liabilities (15,929) (86,615)
Total assets less current liabilities 404,537 315,807
Creditors: amounts falling due after more than
one year 208,079 155,592
Provisions for liabilities and charges 6,821 7,005
189,637 153,210
Capital and reserves
Called up share capital 3,702 3,545
Share premium account 61,829 45,635
Revaluation reserve 23 23
Merger reserve 4,721 4,721
Profit and loss account 119,362 99,286
Shareholders' funds 3 189,637 153,210
Attributable to equity shareholders 189,137 152,710
Attributable to non-equity shareholders 500 500
189,637 153,210
Consolidated Cash Flow Statement
for the year ended 30 April 2004
Notes 2004 2003
£000 £000
Cash inflow from operating activities (i) 157,203 150,896
Returns on investments and servicing of (14,679) (13,847)
finance
Taxation (11,279) (11,869)
Capital expenditure and financial investment
Purchase of vehicles for hire (215,129) (216,858)
Sale of vehicles for hire 106,771 95,341
Other items, net (5,414) (3,457)
Net cash outflow from capital expenditure
and financial investment (113,772) (124,974)
Acquisitions (ii) (1,092) (14,672)
Equity dividends paid (11,005) (9,240)
Cash inflow (outflow) before use of liquid resources
and financing 5,376 (23,706)
Management of liquid resources
Cash placed on deposit (205) (191)
Financing
Issue of Ordinary shares (net of expenses) 16,351 167
Increase (decrease) in borrowings 93,833 (7,226)
Capital element of vehicle related hire purchase (263,310) (170,458)
payments
Cash inflow from new vehicle related hire purchase 169,577 199,254
agreements
Net cash inflow from financing 16,451 21,737
Increase (decrease) in cash for the year 21,622 (2,160)
Notes to the Consolidated Cash Flow Statement
(i) Reconciliation of operating profit to net cash inflow from operating
activities
2004 2003
£000 £000
Group operating profit 55,746 48,279
Depreciation 98,547 99,691
Amortisation of goodwill 71 384
(Profit) loss on sale of equipment and other (63) 3
fixed assets
Increase in stocks (4,922) (2,124)
Decrease (increase) in debtors 1,450 (1,557)
Increase in creditors 6,374 6,220
Net cash inflow from operating activities 157,203 150,896
(ii) Acquisitions
Investment in joint venture - 10,170
Acquisition of subsidiary undertakings (see 1,092 4,502
Note 2)
1,092 14,672
Statement of Total Recognised Gains and Losses
for the year ended 30 April 2004
2004 2003
£000 £000
Profit for the financial year 31,430 25,106
Foreign exchange differences (290) 626
31,140 25,732
Notes
1. Earnings per Ordinary share
The calculation of basic earnings per Ordinary share in respect of the year to
30 April 2004 is based on the profit attributable to equity shareholders of
£31,405,000 (2003 - £25,081,000) and the weighted average of 61,647,279 (2003 -
60,646,882) Ordinary shares in issue (excluding those shares held by an employee
trust in connection with the Group's various share schemes).
Diluted earnings per Ordinary share have been calculated on the basis of
earnings described above and assume that nil shares (2003 - 102,000) remaining
exercisable under the Goode Durrant Share Option Scheme had been fully exercised
at the commencement of the relevant period, such that the weighted average
number of shares is 61,817,783 (2003 - 60,893,447) (including 170,504 shares
held by an employee trust in connection with the Group's various share schemes).
2. Acquisitions
Subsidiary undertakings
F Herriman & Sons Limited
On 30 April 2004 the Group acquired the entire issued share capital of F
Herriman & Sons Limited trading as Daman Vehicle Rental ('Daman') for a cash
consideration of £960,000 including goodwill of £670,000. The goodwill on the
acquisition of Daman is capitalised and written off over a period of five years
being its estimated useful economic life. The transaction has been accounted for
in accordance with acquisition accounting principles.
£000
Fair value of net assets acquired 290
Goodwill 670
Acquisition cost (including expenses) 960
Satisfied by cash 960
Cash equivalents in subsidiary undertaking acquired 132
Cash outflow on acquisition 1,092
The provisional fair values equate to the book values and represent the
Directors' current estimates of the net assets acquired. However, in accordance
with FRS 7, the values attributed may be revised as further information becomes
available.
3. Reconciliation of movements in shareholders' funds for the year ended 30 April 2004
2004 2003
£000 £000
Profit for the financial year 31,430 25,106
Dividends (11,064) (9,736)
Profit transferred to reserves 20,366 15,370
Issue of Ordinary share capital (net of 16,351 167
expenses)
Foreign exchange differences (290) 626
Net increase in shareholders' funds 36,427 16,163
Opening shareholders' funds 153,210 137,047
Closing shareholders' funds 189,637 153,210
4. Basis of preparation
The results have been prepared on the basis of the accounting policies set out
in the last annual report and accounts. The results for the years to 30 April
2004 and 30 April 2003 and the balance sheets at those dates are abridged. Full
accounts for these periods have been prepared on which the Auditors of the
Company have made unqualified reports and which did not include a statement
under Section 237 (2) or (3) of the Companies Act 1985. The Accounts for the
year ended 30 April 2003 have been delivered to the Registrar of Companies.
The Report and Accounts for the year ended 30 April 2004 will be mailed to
shareholders not later than 15 July 2004.
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