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.
• Revenue up 41% to £526.5m (2006 - £372.6m)
• Underlying profit before tax* up 29% to £79.3m (2006 - £61.3m)
• Profit before tax up 34% to £75.4m (2006 - £56.1m)
• Adjusted earnings per share* increased by 24% to 81.6p (2006 - 65.7p)
• Total dividend increased by 11% to 25.5p (2006 - 23.0p)
• UK fleet increased to 65,300 vehicles (2006 - 64,000 vehicles)
• Spanish fleet increased by 17% to 55,000 vehicles (2006 - 47,000 vehicles)
• Utilisation rate in UK increased to 91% (2006 - 90%) and in Spain to
90% (2006 - 89%)
• Hire rates stable in both the UK and Spain
• Residual market in UK improved over prior year
*Stated before intangible amortisation of £3.9m (2006 - £1.2m), exceptional
restructuring costs of £nil (2006 - £2.6m) and a share of associate taxation
charge of £nil (2006 - £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.
• Group revenue increased by 41% to £526.5m (2006 - £372.6m)
• Underlying profit before tax for the year increased by 29% to £79.3m
(2006 - £61.3m)
• 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
• An increase in the fleet size, both by acquisition and organic growth
• The introduction of a fleet management product
• A reorganisation of the business to create a more streamlined hire
company network and to implement a functional, rather than geographic,
management structure.
Spain
• Acquisition of the remaining 51% of the equity of Record
• Continued double-digit organic fleet growth
• 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 £71.7m (2006 - £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 £8.5m (2006 - £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 £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 £1.9m (2006
- £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 £526.5m (2006 - £372.6m). UK revenue increased
by 17% to £351.1m (2006 - £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 £175.4m (2006 - £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
£000 £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 £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 £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
£000 £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
£3.9m (2006 - £1.2m) and exceptional restructuring costs of £nil (2006 - £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 £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
£35m (2006 - £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 £49.8m and the debt of £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 £745m under a series of unsecured, revolving, bilateral agreements and
later in 2006 these facilities were extended to £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 £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 £977m compared to net debt of £755m giving adequate funding
for our expected growth. As described above, the core of these arrangements
relate to the £755m unsecured bank loan facilities and £169m of unsecured US
loan notes which combined have the following maturity:
Amount
Maturing £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 £755.3m (2006 - £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 (£49.8m), the acquisition of
Record's existing debt (£146m), and funding of fleet growth particularly in
Spain. Gross cash generation as reflected by EBITDA* increased to £304.9m (2006
- £210.0m). The Group had net capital expenditure on its fleet of £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 £437.9m and the sale of 24,700 UK
vehicles and 12,200 vehicles in Spain that generated a cash inflow of £188.5m.
*EBITDA - Earnings before interest, taxation, depreciation and amortisation.
Interest Costs
The Group's net interest costs have increased by 58% to £31.7m (2006 - £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 £000 £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
£000 £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
£000 £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 £000 £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
£000 £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
£000 £000 £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
£000 £000 £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 £000 £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 £000 £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 €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 £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 €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:
£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 £50,316,000, including goodwill of £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 £3,699,000 to the vendor, under the
terms of the sale and purchase agreement, and further fair value adjustments
were made, totalling £4,028,000, such that the revised detail relating to the fair
value of net assets of AVR acquired is as follows:
£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
£000 £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
£000 £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
£000 £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
Monday, 20th May 2024
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