Interim Results
Northgate PLC
17 January 2000
Contacts: Steve Smith, Managing Director
Phil Moorhouse, Finance Director
Northgate plc Tel: 020 7831 3113 (on 17.01.2000)
Tel: 01325 467558 (thereafter)
Steve Jacobs/Peter Otero
Financial Dynamics Tel: 020 7831 3113
NORTHGATE PLC
Interim Results
Northgate plc, the UK's leading specialist commercial vehicle hire group,
announces its results for the six months ended 31 October 1999.
1999 H1 1998 H1
£m £m
Turnover pre-FRS15 126.3 116.6
Adjusted turnover 123.1 109.0
EBITDA pre-FRS15 73.2 60.3
Adjusted EBITDA 73.2 60.3
Profit before tax pre-FRS15 15.4 15.1
Adjusted profit before tax 12.2 7.5
Deferred income pre-FRS15 - -
Adjusted deferred income 47.1 40.6
Net operating cashflow pre-FRS15 60.4 53.8
Adjusted net operating cashflow 60.4 53.8
Earnings per share pre-FRS15 17.8p 17.1p
Adjusted earnings per share 14.1p 8.4p
Dividend per share 4.18p 4.00p
Net assets per share pre-FRS15 234.9p 215.5p
Adjusted net assets per share 181.3p 169.1p
Chairman Michael Waring comments:
'We have surpassed our expectations particularly in respect of depot openings,
fleet growth, market share and conversion of new customers to NORFLEX. By
the end of the year we expect to be operating from 33 hire companies and 6
branches, providing us with even wider geographic coverage and a solid base
from which to continue the implementation of our strategic plan for growth.
This, coupled with our ongoing marketing and focus on customer service, allow
us to remain confident of our prospects for the full year and beyond.'
CHAIRMAN'S STATEMENT
This is the first statement made by your company under its new name of
NORTHGATE plc. It is also the first reporting period of our five year
strategy for growth which I outlined in my last Chairman's Statement. We have
surpassed our expectations particularly in respect of depot openings, fleet
growth, market share and conversion of new customers to NORFLEX.
Results
On a basis comparable with the corresponding period (pre FRS15), group
operating profit was £21.6m (1998: £21.1m) on revenues of £126.3m (1998:
£116.6m). Pre-tax profits of £15.4m (1998: £15.1m) and earnings per share at
17.8p (1998: 17.1p) are marginally ahead of our expectations. As a result of
the substantial growth in the fleet, gearing has risen to 147% compared to
129% at the year end. Net cash flow from operating activities increased to
£60.4m (1998: £53.8m). Interest cover was maintained at 3.5 times.
In the past our profits were weighted towards the first half of the year. In
my last statement I indicated that this was likely to alter as a result of the
industry change in vehicle registration dates. The view I expressed then that
'profits are likely to be more evenly balanced or even have a slight bias to
the second half of the financial year' remains unchanged. This is also likely
to apply under the new accounting policy.
We are amongst the first of companies in the rental industry to report
following the introduction during the year of FRS15 'Tangible Fixed Assets',
which applies to companies reporting for financial years ending after 23 March
2000. The change is explained under 'Accounting Policy' later in my
statement, with the financial effects being fully disclosed in Note 5. After
adjusting for FRS15, group operating profit for the period was £18.4m (1998:
£13.6m) on revenues of £123.1m (1998: £109.0m), pre-tax profit £12.2m
(1998:£7.5m) and earnings per share at 14.1p (1998: 8.4p). Net cash flow from
operating activities, which is unaffected by FRS15, increased to £60.4m (1998:
£53.8m).
Dividend
Your board is declaring an interim dividend of 4.18p (1998: 4.00p) per share,
an increase of 4.5%, payable on 18 February 2000 to shareholders on the
register at close of business on 28 January 2000.
Operational review
During the period the strong demand for the group's product, NORFLEX,
continued. We have gained not only customers new to commercial vehicle rental
but also increased our market share. This has resulted in a 12.5% increase
over the period in the vehicle hire fleet to in excess of 30,000 vehicles at
31 October 1999. The year on year increase was 30%.
In line with our five year strategy for growth, we have opened further hire
companies in Preston and Croydon and four additional smaller branches or
satellite sites, which are all performing in line with expectations. Other
properties have been acquired, or identified, to allow us to achieve our
target of opening three new primary sites and six new branches in the current
financial year.
Utilisation remains key to the success of the business and we can once again
report that we have maintained utilisation of close to 90%. Hire rates have
remained relatively unchanged throughout the six month period despite
continued competitive pressures.
The higher depreciation rates applied since 1 May 1998, the gradual extension
of the average vehicle replacement period and improved selling and management
techniques introduced within our used vehicle operations have had the expected
effect of reducing losses on the sale of used vehicles, despite the continuing
uncertainty in the market place. Subject to no significant deterioration in
the used vehicle market in the next six months, we would expect the
progressive elimination of losses to continue.
Accounting policy
As our shareholders are aware, we have always accounted for support payments
from vehicle manufacturers (known in the industry as volume related bonuses)
as a direct credit to the profit and loss account in the month in which they
were receivable.
As a result of the introduction of FRS15 and following discussions with our
auditors, we have been required to change our accounting policy in respect of
the treatment of these receipts. The effect of the change is to alter the
timing of income recognition by spreading the benefit of these receipts over a
period equal to the estimated holding period of a vehicle. While neither
vehicle holding costs nor cash flows are affected by this change, the policy
requires a transfer within the balance sheet from the profit and loss account
to a deferred income account to be released over the estimated holding period
of the vehicles. Although borrowings remain unchanged, the consequent
reduction in shareholders' funds by the creation of the deferred income
account results in gearing at the end of the period of 191% compared to 166%
at the year end.
The detailed figures which follow have been produced to comply with the new
accounting policy set out above. Note 5 to the accounts shows a full
reconciliation between the reported numbers and those figures which would have
been reported had we adopted policies consistent with previous periods.
Outlook
By the end of the year we expect to be operating from 33 hire companies and 6
branches providing us with even wider geographic coverage and a solid base
from which to continue the implementation of our strategic plan for growth.
The benefits customers derive from NORFLEX, coupled with our ongoing
marketing and focus on customer service, allow us to remain confident of our
prospects for the full year and beyond.
NORTHGATE PLC
FINANCIAL HIGHLIGHTS
New accounting policy Previous accounting policy
applied*
Six Six Six Six
months to months to months to months to
31.10.99 31.10.98 31.10.99 31.10.98
£000 £000 £000 £000
Turnover £123.1m £109.0m £126.3m £116.6m
EBITDA** £73.2m £60.3m £73.2m £60.3m
Operating profit £18.4m £13.6m £21.6m £21.1m
Profit before tax £12.2m £7.5m £15.4m £15.1m
Deferred income** £47.1m £40.6m - -
Earnings per share 14.1p 8.4p 17.8p 17.1p
Dividends per share 4.18p 4.00p 4.18p 4.00p
Net assets per share 181.3p 169.1p 234.9p 215.5p
Net cash inflow from
operating activities £60.4m £53.8m £60.4m £53.8m
To enable our shareholders to fully understand the underlying business
performance and growth trends the financial highlights are shown as reported
in the financial statements after an accounting policy change (required as a
result of the introduction of FRS 15) compared to the figures which would have
been reported on a basis consistent with accounting policies applied at 30
April 1999.
* See Chairman's Statement and note 5.
** Deferred income represents volume related bonuses already received now
being carried forward to future accounting years. Note 5 shows the full
effects of this change in policy. The movement in deferred income for the
period has been added back to EBITDA as the cash generation of the business is
not affected by this change in policy.
NORTHGATE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six Six Twelve
months to months to months to
31.10.99 31.10.98 30.4.99
Restated Restated
Notes (Unaudited) (Unaudited)
£000 £000 £000
Turnover 1 123,085 109,039 218,623
Operating profit 1 18,440 13,579 28,620
Interest payable, net (6,244) (6,049) (12,010)
Profit on ordinary
activities before taxation 12,196 7,530 16,610
Tax on profit on ordinary
activities 2 (3,682) (2,444) (5,167)
Profit attributable to
shareholders 8,514 5,086 11,443
Dividends
- non-equity preference shares (12) (9) (21)
- equity ordinary shares (2,534) (2,414) (7,540)
Profit transferred to
reserves 5,968 2,663 3,882
Earnings per ordinary share
- basic 3 14.1p 8.4p 18.9p
Diluted earnings per
ordinary share 3 14.0p 8.4p 18.8p
Adjusted earnings per
ordinary share 3 17.8p 17.1p 31.4p
Dividends per ordinary share 4.18p 4.00p 12.50p
All trading relates to continuing operations
NORTHGATE PLC
SUMMARY CONSOLIDATED BALANCE SHEET
31.10.99 31.10.98 30.4.99
Restated Restated
(Unaudited) (Unaudited)
£000 £000 £000
Fixed Assets
Vehicles for hire 319,983 258,737 286,670
Other tangible assets and
investments 10,301 9,172 9,021
330,284 267,909 295,691
Current Assets
Stocks 4,339 7,406 3,663
Debtors 60,015 61,910 54,932
Investments 15 20 15
Cash at bank and in hand 11,476 23,066 18,934
75,845 92,402 77,544
Creditors : amounts falling due
within one year 103,226 90,958 92,449
Net current (liabilities)/assets (27,381) 1,444 (14,905)
Total assets less current
liabilities 302,903 269,353 280,786
Creditors : amounts falling due
after more than one year 138,174 121,376 125,287
Provisions for liabilities and
charges 7,718 5,330 7,718
Accruals and deferred income
(note 5) 47,134 40,582 43,926
109,877 102,065 103,855
Capital and reserves 109,877 102,065 103,855
RECONCILIATION OF MOVEMENT IN
SHAREHOLDERS' FUNDS
Six Six Twelve
months to months to months to
31.10.99 31.10.98 30.4.99
Restated Restated
(Unaudited) (Unaudited)
£000 £000 £000
Profit for the period 8,514 5,086 11,443
Dividends (2,546) (2,423) (7,561)
5,968 2,663 3,882
Issue of ordinary share capital
(net of expenses) 54 38 609
Net increase in shareholders' funds 6,022 2,701 4,491
Opening shareholders' funds:
As previously reported 134,164 122,155 122,155
Prior Year Adjustment (note 5) (30,309) (22,791) (22,791)
As restated 103,855 99,364 99,364
Closing shareholders' funds 109,877 102,065 103,855
NORTHGATE PLC
CONSOLIDATED CASH FLOW STATEMENT
Six Six Twelve
months to months to months to
31.10.99 31.10.98 30.4.99
Restated Restated
(Unaudited) (Unaudited)
£000 £000 £000
Net cash inflow from operating
activities 60,390 53,773 126,273
Returns on investments and
servicing of finance (5,676) (5,699) (11,551)
Taxation 43 (1,119) (7,606)
Capital expenditure (40,785) (26,639) (86,827)
Equity dividends paid (5,092) (4,805) (7,214)
Management of liquid resources 23 (4,777) 153
Financing (27,424) (22,408) (22,207)
Decrease in cash for the period (18,521) (11,674) (8,979)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
Decrease in cash for the period (18,521) (11,674) (8,979)
Increase in borrowings (6,178) (6,216) (21,546)
Capital element of vehicle related
hire purchase payments 33,655 28,662 44,362
Cash (withdrawn from)/placed on
deposit (23) 4,777 (153)
Change in net debt resulting from
cash flows 8,933 15,549 13,684
New hire purchase obligations (45,519) (49,438) (61,290)
Movement in net debt for
the period (36,586) (33,889) (47,606)
Opening net debt (172,816) (125,210) (125,210)
Closing net debt (209,402) (159,099) (172,816)
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Operating profit before
exceptional items 18,440 13,579 28,620
Depreciation 51,566 39,183 83,950
(Increase)/decrease in working
capital (12,824) (6,541) 2,944
Exceptional and other items - - (137)
Movement in deferred income reserve 3,208 7,552 10,896
Net cash inflow from operating
activities 60,390 53,773 126,273
NORTHGATE PLC
UNAUDITED NOTES
1. Segmental Analysis
Turnover and operating profit arise exclusively from vehicle hire.
2. Tax
The charge for taxation for the six months to 31 October 1999 is based on
the estimated effective rate for the relevant year.
3.Earnings per ordinary share
The calculation of earnings per ordinary share for the six months to 31
October 1999 is based on the profit attributable to equity shareholders of
£8,502,000 (31.10.98 - £5,077,000) (30.4.99 - £11,422,000) and the weighted
average of 60,364,329 (31.10.98 - 60,108,743) (30.4.99 - 60,374,894)
ordinary shares in issue (excluding those shares held by an employee trust
in connection with the Goode Durrant Long Term Incentive Plan).
Diluted earnings per ordinary share have been calculated on the basis of
earnings described above and assume that 375,000 shares 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 60,789,290 (including those shares
held by an employee trust in connection with the Goode Durrant Long Term
Incentive Plan).
Adjusted earnings per ordinary share ignores the effect of the accounting
policy change on the profit attributable to ordinary shareholders.
Six Six Twelve
months to months to months to
31.10.99 31.10.98 30.4.99
Earnings per ordinary share
- basic 14.1p 8.4p 18.9p
Earnings deferred under new
accounting policy (note 5) 3.7p 8.7p 12.5p
Adjusted earnings per
ordinary share 17.8p 17.1p 31.4p
4.Basis of preparation
The interim results have been prepared on the basis of the accounting
policies set out in the last annual report and accounts together with any
changes arising from the Financial Reporting Standards issued to date.
Except for the effect of FRS 15 detailed in note 5, those subsequent
Accounting Standards have not resulted in any change in Accounting Policies
or estimates.
The figures for the year ended 30 April 1999 are based on the statutory
accounts for that year, adjusted as necessary to reflect the effect of the
change in accounting policy set out in note 5. The auditors' report on
these accounts was unqualified and a copy has been delivered to the
Registrar of Companies.
5.Change of Accounting Policy
The restatement represents the effect of a change in the accounting policy
for volume related bonus receipts following the issue in February 1999 of
FRS 15 Tangible Fixed Assets by the Accounting Standards Board.
The group receives volume related bonuses from vehicle manufacturers. In
the past, these receipts have been credited through turnover to the profit
and loss account in the same period as the related vehicles were purchased.
However, FRS 15 requires that these receipts be spread over the economic
lives of the vehicles purchased. Accordingly, the accounting policy has
been changed to credit the profit and loss account with volume related
bonuses received over the expected holding period of the vehicles to which
they relate on a basis consistent with the group's disposal policy. This
change in accounting policy results in part of the volume related bonuses
received that relate to vehicles purchased in a year now being carried
forward to future accounting years as deferred income.
The prior year adjustment gives rise to a cumulative debit adjustment to
shareholders' funds of £30.3 million, of which £7.5 million relates to 1999
and the balance of £22.8 million relates to 1998 and prior periods and
creates deferred income available for release in future accounting periods
of £43.9 million. The comparative figures for 1999 have been restated in
accordance with the new policy resulting in a decrease in profit before tax
of £10.9 million and a decrease in the profit attributable to shareholders
of £7.5 million. Had the new policy not been adopted in the current
period, the profit before tax and the profit attributable to shareholders
would have been £15.4 million and £10.7 million respectively. Net cash
inflow from operating activities is unaffected.
Prior year adjustment effect on shareholders' funds
31.10.99 31.10.98 30.4.99
Restated Restated
£000 £000 £000
Deferred income at 1 May 1999 43,926 - -
Prior year adjustment -
deferred income - 33,030 33,030
Current period net deferment 3,208 7,552 10,896
Deferred income at 31 October
1999 47,134 40,582 43,926
Tax deferred thereon 14,612 12,580 13,617
Net effect on shareholders'
funds 32,522 28,002 30,309
Results prior to the change in accounting policy
31.10.99 31.10.98 30.4.99
£000 £000 £000
Profit and loss
Turnover 126,293 116,591 229,519
Operating profit 21,648 21,131 39,516
Profit on ordinary activities
before taxation 15,404 15,082 27,506
Profit attributable to
shareholders 10,728 10,297 18,961
EPS 17.8p 17.1p 31.4p
Balance Sheet
Fixed assets 330,284 267,909 295,691
Net current liabilities (35,580) (11,136) (28,522)
Creditors: amounts falling due
after more than one year 144,587 121,376 125,287
Provisions for liabilities and
charges 7,718 5,330 7,718
Capital and reserves 142,399 130,067 134,164
Cashflow
Operating profit before
exceptional items 21,648 21,131 39,516
Depreciation 51,566 39,183 83,950
(Increase)/decrease in
working capital (12,824) (6,541) 2,807
Net cash inflow from operating
activities 60,390 53,773 126,273
Five Year Summary
Based on the consolidated financial statements for the 12 months ended 30
April and adjusted to reflect the effect of the change in accounting
policy.
1999 1998 1997 1996 1995
£000 £000 £000 £000 £000
Turnover 218,623 192,549 130,529 99,494 79,772
Operating profit
before exceptional
items 28,620 30,295 22,682 19,408 15,272
Associated
undertakings - - 174 202 546
Interest (12,010) (10,671) (6,657) (3,996) (2,999)
Profit before
exceptional items
and taxation 16,610 19,624 16,199 15,614 12,819
Exceptional items - 2,000 814 226 (2,139)
Profit before
taxation - restated 16,610 21,624 17,013 15,840 10,680
Profit before
taxation - as
reported 27,506 31,460 25,513 21,268 14,180
Profit before
taxation - restated
for FRS 15 16,610 21,624 17,013 15,840 10,680
Transferred to
Deferred Income 10,896 9,836 8,500 5,428 3,500
Cumulative deferred
income (note 5) 43,926 33,030 23,194 14,694 9,266*
* includes £5,766,000 relating to pre 1995
Year 2000
In the last annual report and accounts the directors reported on the Year
2000. The directors continue to monitor the situation, however, as at the
date of this report, the directors are not aware of any significant factors
which have arisen, or that may arise, which will affect the activities of
the business. Any future costs associated with this issue cannot be
quantified but are not anticipated to be significant.
NORTHGATE PLC
INDEPENDENT REVIEW REPORT TO NORTHGATE PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 2 to 6 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the London Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes,
and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists principally
of making enquiries of group management and applying analytical procedures to
the financial information and underlying financial data and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed
in accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly, we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 1999.
Deloitte & Touche
Chartered Accountants
10-12 East Parade
Leeds LS1 2AJ
14 January 2000
Tuesday, 14th May 2024
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