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RNS
Northgate PLC  -  NTG   

Half-year Report

Released 07:00 04-Dec-2018

RNS Number : 3015J
Northgate PLC
04 December 2018
 

NORTHGATE PLC

INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 OCTOBER 2018

"Further strong revenue growth - full-year VOH target raised in UK."

 

H1 2019

H1 2018

Change

 

 FY 2018

£m

£m

%

 

£m

Average VOH ('000)

92.8

82.1

12.9%

 

83.8

Revenue - vehicle hire

259.5

234.5

10.7%

 

471.2

Revenue - vehicle sales

114.5

115.2

(0.6%)

 

230.5

Underlying (1) EBITDA

133.5

127.3

4.9%

 

251.0

Underlying (1) Operating Profit

36.7

39.1

(6.2%)

 

68.3

Underlying (1) Profit before Tax

29.2

33.8

(13.6%)

 

57.0

Underlying (1) Earnings per Share (p)

18.5p

20.7p

(10.6%)

 

34.8p

Dividend per Share (p)

6.2p

6.1p

1.6%

 

17.7p

Total Revenue

374.0

349.7

6.9%

 

701.7

Profit before Tax

28.7

31.0

(7.4%)

 

52.7

Earnings per Share (p)

18.4p

19.1p

(3.7%)

 

32.4p

Total Net Capex (incl. inorganic) (1)

(149.5)

(178.8)

(16.4%)

 

(311.1)

Net Debt

(479.8)

(421.0)

(14.0%)

 

439.3

Return on Capital Employed %

6.7%

8.7%

(2.0ppt)

 

7.6%

(1)   Refer to Reconciliation of GAAP to non- GAAP measures and Glossary of terms. 

First Half Highlights:

·     Continuing strong VOH growth delivered in UK&I (+12.7%) and Spain (+13.2%)

·     UK&I rental margin improved sequentially to 7.1% (H2 2018: 6.0%) despite one-off costs

·     Further margin expansion initiatives being implemented in Spain and UK&I

·     Reduction in capex delivered by fleet optimisation policy

·     Statutory profit before tax 7.4% lower at £28.7 million (H1 2018: £31.0 million)

Benefitted from £7.7 million impact of depreciation rate change

FY 2019 full-year outlook:

·     UK&I.         :  VOH growth target increased to double-digit (from high single-digit)

Rental margin target now 7.5% - 8.0% (from broadly flat vs. 8.3% in FY 2018)

Net impact neutral for rental profit - expectations unchanged

·     Spain         : No change to expectations - in line with previous guidance

 

Kevin Bradshaw, CEO of Northgate, commented:

"Our reported performance in the first half reflected the difficult strategic decisions we took in the second half last year. Consequently, despite strong revenue growth, our margins, profits and ROCE are lower, as expected, compared to the first half of last year. We remain confident, however, about the positive trajectory of the business going forward, and we are on track to meet our full year expectations. 

The turnaround in our UK&I business is starting to show through, with double-digit revenue growth, and rental margins ahead sequentially versus the second half last year.  We are confident that we can maintain this growth and increase margins going forward. The one-off costs of TOM integration are behind us, the impact of rate increases is now delivering positive rate growth compared to the prior year, and we are implementing a broad range of margin improvement opportunities.

Our Spanish business can maintain its momentum, focusing on profitable SME growth segments, benefitting from new facilities brought into operation in the first half and implementing its own set of margin improvement initiatives.

The high rate of volume growth in both the UK&I and Spain has depressed ROCE, due to the substantial investment in new vehicles as well as lower disposal profits as the fleet is aged. We are maintaining strong discipline in the deployment of capital and are confident that ROCE will grow moving forwards through a combination of margin improvement and fleet optimisation actions.  

 

Dividend

The Board has declared an Interim Dividend of 6.2 pence per share (2018: 6.1 pence/share) which will be paid on Friday 25 January 2019 to Shareholders on the register on Friday 14 December 2018.

 

Contact details

There will be a presentation for investors and analysts at 9.30 a.m. today at Numis, 5th Floor, London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT.  If you have not already registered to attend, please contact MHP Communications on the number below. 

A live webcast of this presentation will be available via a link on the Company's web-site www.northgateplc.com       

For further information please contact:

Northgate plc

+44 1325 467558

Kevin Bradshaw, Chief Executive Officer

Philip Vincent, Chief Financial Officer

 

David Boyd, Investor Relations

 

+44 7841 629823

 

MHP

+44 203 128 8100

Andrew Jaques, Simon Hockridge, Ollie Hoare

 

 

Notes to Editors:

Northgate plc is the leading light commercial hire business in the UK & Ireland and Spain by fleet size and has been operating in the sector since 1981.

Northgate's core business is the hire of light commercial vehicles to businesses on a flexible or term basis, giving customers the ability to manage their vehicle fleet requirements in a way which can adapt to changing business needs without the requirement to enter into a long-term arrangement.

Reconciliation of GAAP to non-GAAP measures and Glossary of terms

Throughout this document we refer to underlying results and measures; the underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period without the effects of one-off or non-operational items.  Underlying measures exclude certain one-off items such as those arising from restructuring activities and recurring non-operational items. Specifically, we refer to disposal profit. This is a non-GAAP measure used to describe the adjustment in depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs).

A reconciliation of GAAP to Non-GAAP underlying measures and a glossary of terms used in this document are outlined below the financial review.

 

CHIEF EXECUTIVE REVIEW

Strategic summary

During the first half Northgate's strategy delivered double-digit VOH growth, successfully exploiting the continuing structural shift in the LCV market from ownership to "usership".  The company's competitive advantages, including its nationwide networks of rental depots and service workshops, buying power, and strong brand and reputation enable Northgate to offer a compelling range of LCV rental propositions, which gained strong traction with business customers across all territories served.

The ability to bundle together a range of minimum-term and flexible rental products is proving to be an attractive proposition for many customers in both Spain and the UK, and a substantial proportion of new business is generated by cross-selling additional rental products to existing customers.

Competition in the LCV rental market remains robust in all three territories, but is rational, with structural cost increases faced by the industry generally being passed through to the end user.  LCV rental is not purely a price-driven decision for customers, and other factors such as service levels, geographic presence and long-term relationships play a major role.  In all its markets, Northgate seeks to differentiate in particular through its service offering, aiming to minimise vehicle downtime for customers and to be the best possible partner. 

Moving forward, the company will drive to maintain momentum in VOH, also seeking to focus further on the most attractive growth segments, in both minimum-term and flexible rental, where its competitive strengths can deliver the highest margins and returns.  This will help to accelerate the conversion of Northgate's rental revenue growth into strong, sustainable growth in profit and ROCE.

Outlook & Guidance

UK & Ireland - changes

VOH growth of 12.7% in the first half has been stronger than expected, with Northgate's range of minimum term and flexible rental solutions gaining good traction in the market.  We expect this growth to continue through the remainder of the year, including strong seasonal peak VOH demand in the third quarter, and now expect to deliver double-digit average VOH growth for the full year.

As a result of this faster VOH growth, and some one-off items in the first half (including processing the 3,400 ex-TOM vehicles acquired), we now expect the rental margin for the full year to be in the range 7.5%-8.0%, versus previous guidance of broadly flat (FY 2018: 8.3%). 

The net impact of the stronger VOH and lower rental margin is that rental profit for the full year is expected to be in line with our original expectations, and higher than in FY 2018.  

Spain - no change

We expect the good performance in the first half to continue through the rest of the year, and the business to deliver full year results in line with previous guidance.

Group

The stronger VOH growth we expect in the UK will result in full year group capex £10-20 million higher than previously expected.  The definitions of Growth and Net Replacement Capex are currently being reviewed in order to more closely align these metrics to our fleet management policy.

ROCE will remain structurally lower as the company continues to experience rapid VOH growth. This is due to capital being deployed now to purchase a vehicle which will deliver a return over the 3-4 years that it is in the fleet and when it is sold at the end of this period.

 

UK & IRELAND

 

H1 2019

H1 2018

Change

 

FY 2018

KPI

('000)

('000)

%

 

('000)

Average VOH

48.2

42.7

12.7%

 

43.5

Closing VOH

49.2

44.0

11.9%

 

46.4

Vehicles purchased

9.4

10.5

(9.7%)

 

23.4

Vehicles de-fleeted

8.8

9.9

(11.3%)

 

17.0

Vehicles sold (incl. 3rd party)

10.8

11.4

(4.7%)

 

21.0

Profit per Unit (PPU) £

465

390

19.2%

 

457

Closing fleet size

57.3

50.9

12.6%

 

56.7

Average utilisation %

86%

87%

(1 ppt)

 

87%

Average fleet age (mo.)

21

22

(1 mo.)

 

21

 

 

H1 2019

H1 2018

Change

 

FY 2018

Profit & Loss (Underlying)

£m

£m

%

 

£m

Revenue - Vehicle hire

157.4

141.6

11.1%

 

283.5

Revenue - Vehicle sales

88.3

80.2

10.1%

 

156.9

Total Revenue

245.7

221.8

10.7%

 

440.4

Rental profit

11.2

15.0

(25.4%)

 

23.5

Rental Margin %

7.1%

10.6%

(3.5ppt)

 

8.3%

Disposals profit

5.0

4.4

12.9%

 

9.6

Operating profit

16.2

19.4

(16.7%)

 

33.1

ROCE %

5.4%

7.8%

(2.4ppt)

 

6.3%

 

Rental business - VOH and rental revenue

Average VOH in the first half grew by 12.7% year-on-year to 48,200.  This included the addition to VOH during the period of approximately 1,600 former TOM vehicles. VOH growth demonstrated the strong market traction gained by Northgate's range of compelling rental propositions, and the increasing effectiveness of the self-help actions implemented across the UK business over the past 12 months. 

The increase in average VOH in the first half drove 11.1% rental revenue growth to £157.4 million (H1 2018: £141.6 million).

Closing VOH at the end of the first half was 49,200, 8.1% higher than at the start of the period (which excluded ex-TOM vehicles). Minimum-term contracts remained the primary driver of this growth, representing almost 19% of total VOH at the end of the first half compared to 4% at the same time last year.  The average term of these contracts remained around three years. 

Flexible rental prices were increased by 4.8% for a significant proportion of the flexible rental fleet at the start of the year, to reflect the cumulative impact of structural cost increases that the business had faced over previous periods without corresponding hire rate increases.  The increase was accompanied by effective communication with customers, and did not result in any noticeable increase in customer churn.  Market research and customer feedback indicated that this price rise was in line with wider market pricing trends.

Northgate's UK customer base continues to be drawn from a wide range of industry sectors and regions, with approximately 25% of VOH deployed directly in the construction sector, and around 20% in businesses carrying out general administrative and support services.  The three largest individual customers comprise just under 10% of total VOH.  Geographically, northern England and Scotland together are home to approximately 30% of UK VOH, with another 20% of vehicles based in London and the South-East of England.    

A key driver of the company's VOH growth is its ability to offer a full range of flexible and minimum-term products, from short-term flexible up to four-year minimum-term.  Northgate's sales teams aim to engage with the customer beyond the transaction, creating a relationship and a rental narrative that delivers the best possible all-round proposition for the customer.  The result is that a substantial proportion of VOH growth comes from existing customers, in particular new minimum-term sales coming from existing flexible rental customers, who will often add to their flexible VOH at the same time. 

Rental profit and margin

As previously reported, returning the UK business to strong VOH growth, including driving new minimum-term propositions, led to a significant dilution of the rental margin during the second half of last year.  There is now a major focus on rebuilding margins, while at the same time maintaining strong VOH growth.  The initial success of this was demonstrated by the sequential increase in rental margin in the first half to 7.1%, compared to 6.0% in the second half of last year (H1 2018: 10.6%) and the business exited the first half with margins continuing to strengthen.

Rental profit in the first half of £11.2 million was 25.4% lower than the same period last year (H1 2018: £15.0 million), but 31.8% higher than the £8.5 million rental profit reported in the second half of 2018.

First half rental profit was adversely impacted by one-off costs and a short-term dip in utilisation incurred as a result of the integration of the ex-TOM vehicles into Northgate.  This acquisition involved processing an additional 3,400 vehicles in a short space of time, requiring a significant increase in operational resources.  Rental profit was also held back by further one-off costs associated with the transformation process being implemented across the business, including further organisation restructuring, and other operational changes.  These one-off costs totalled around £1.2 million during the period. 

These rental profit headwinds were offset by the approximately £2.4 million benefit from the change in depreciation rates implemented at the start to the period.

The company is implementing a number of further initiatives aimed at delivering sustainable increases in rental margin.  These include ensuring that contracts include provision for annual hire rate increases, excess mileage charges in contracts are billed fully, and vehicle damage charged for appropriately.  There will also be enhanced focus on the market segments where Northgate is most competitive and able to achieve higher rates without compromising the drive for VOH growth.

The business in Ireland, which accounts for just under 7% of VOH, did not perform well in the first half, delivering broadly flat VOH and disposals profits, and a lower rental margin.  Extensive changes have been made to management, and a plan implemented to return the business to profitable growth.

Management of fleet and vehicle sales

The fleet at the end of the first half comprised 57,300 vehicles, 6,400 higher than at the same time last year, reflecting the rapid growth in VOH and the acquisition of 3,400 ex-TOM vehicles at the end of last year, around half of which were subsequently converted to VOH.    

In line with the Group-wide fleet optimisation policy, the average age at which vehicles were de-fleeted increased, resulting in lower volumes of vehicles both sold and purchased compared to the same period last year.  The 10,800 vehicles sold during the first half included approximately 1,800 ex-TOM vehicles, and 2,000 third-party vehicles purchased for re-sale.  42% of total sales were through the Van Monster retail channel, broadly the same as in the same period last year.

Strong residual values generally, and the sale of ex-TOM vehicles, resulted in PPU of £465, nearly 20% above the level achieved last year and significantly higher than previously expected.  This resulted in a disposals profit of £5.0 million compared to £4.4 million in the first half last year.   

Operating profit and ROCE

The reduction in rental profit, partially offset by the higher disposals profit, resulted in first half operating profit of £16.2 million, 16.7% lower than the first half of last year (H1 2018: £19.4 million).  The return on capital employed was 5.4% compared to 7.8% in the same period last year, reflecting the lower operating profit and the higher net book value of the vehicle fleet, due to its rapid growth.

Capex and cash flow

6 months ended 31 October

H1 2019

H1 2018

Change

 

FY 2018

Cash flow

£m

£m

%

 

£m

Underlying EBITDA

73.9

71.1

3.9%

 

138.3

Total Net Capex (incl. inorganic)

(84.9)

(74.8)

(13.5%)

 

(158.5)

EBITDA less Total Net Capex

(11.0)

(3.7)

-

 

(20.2)

 

Underlying EBITDA in the first half grew by 3.9% to £73.9 million (H1 2018: £71.1 million) reflecting rental revenue growth partly offset by higher operating costs during the period, including one-off costs.    

Total net capex of £84.9 million was £10.1 million higher than in the same period last year, and included approximately £23 million of the consideration paid to acquire the ex-TOM vehicles.  Organic capex was therefore approximately £13 million lower than in the first half of last year, reflecting the impact of the fleet optimisation policy, partly offset by higher investment to grow the fleet.  

 

SPAIN

 

H1 2019

H1 2018

Change

 

FY 2018

KPI

('000)

('000)

%

 

('000)

Average VOH

44.6

39.4

13.2%

 

40.3

Closing VOH

45.4

41.2

10.4%

 

42.7

Vehicles purchased

7.4

11.1

(34.8%)

 

18.9

Vehicles de-fleeted

4.3

6.6

(35.3%)

 

12.7

Vehicles sold

4.7

6.1

(24.0%)

 

12.8

Profit per Unit (PPU) €

484

1,109

(56.3%)

 

871

Closing fleet size

51.1

46.3

10.4%

 

48.0

Average utilisation %

91%

92%

(1 ppt)

 

91%

Average fleet age at year-end (mo.)

20

19

1 mo.

 

19

 

 

H1 2019

H1 2018

Change

 

FY 2018

Profit & Loss (Underlying)

£m

£m

%

 

£m

Revenue - Vehicle hire

102.1

92.9

10.0%

 

187.6

Revenue - Vehicle sales

26.2

35.0

(25.2%)

 

73.5

Total Revenue

128.3

127.9

0.4%

 

261.1

Rental profit

21.1

15.2

38.5%

 

29.0

Rental Margin %

20.6%

16.4%

4.2ppt

 

15.4%

Disposals profit

2.0

6.1

(66.6%)

 

10.0

Operating profit

23.1

21.3

8.4%

 

39.0

ROCE %

9.3%

11.3%

(2.0ppt)

 

10.0%

 

Rental business - VOH and rental revenue

Average VOH in the first half grew by 13.2% to 44,600, maintaining the strong momentum built up in the market over the previous year.  VOH growth drove 10.0% rental revenue growth to £102.1 million (H1 2018: £92.9 million).  Rental revenue growth was also 10.0% at constant exchange rates.

Closing VOH was 45,400, around 4,200 higher than at the same time last year, demonstrating the continuing traction which Northgate's range of products have gained across a wide range of customers.  Growth was again driven by minimum-term products, which represented 28% of closing VOH at the end of the first half, up from 23% at the start of the period and around 17% at the end of the first half last year. 

Northgate continues to have a well diversified customer base, in terms of both industry sector and location.  The construction sector accounts for around 26% of VOH, with a further 24% of VOH deployed in the support services sector.  Retail and wholesale distribution and telecoms are also both industries accounting for just over 10% of VOH.  Geographically, Madrid with just under 20% of VOH and Barcelona with just under 15% of VOH are the most important centres of activity for the Company, with the remaining two-thirds of VOH spread fairly evenly across the rest of the country.  Northgate's fleet comprises 30% passenger vehicles, used by customers primarily for business purposes.

Bundling minimum-term and flexible rental products together for large customers has been a key driver of VOH and revenue growth, and these bundled propositions are also now gaining increasing traction in the SME segment.  The ability to offer bundles drawn from the widest portfolio of rental products available in the market, based out of the most extensive depot network in Spain and complemented by a market-leading service offer, are what continues to differentiate Northgate.  

Rental profit and margin

Rental profit grew by 38.5% to £21.1 million (H1 2018: £15.2 million) with the increase reflecting the £7.7 million positive impact of the change in the depreciation rate at the start of the period.  The benefits of greater scale were broadly offset by higher operating costs, which included the impact of opening a major new flagship facility in Madrid, incorporating a rental depot, workshops and vehicle sales facilities. 

Rental margin increased to 20.6%, from 16.4% in the first half of last year, mainly reflecting the depreciation rate change, as well as the higher costs of the expanded network and the impact of more minimum term customers in the VOH mix. 

The company is focusing on a number of margin improvement initiatives, including higher pricing for customers whose vehicles routinely incur substantially above average damage (the costs of which in the Spanish market are borne by the rental company and not passed through to customers). 

Management of fleet and vehicle sales

The fleet at the end of the first half comprised 51,100 vehicles, 4,800 higher than at the same time last year, reflecting the rapid growth in VOH during the past 12 months.     

In line with the group-wide fleet optimisation policy, the average age at which vehicles were de-fleeted and sold increased, resulting in substantially lower volumes of vehicles both sold and purchased, compared to the same period last year.  During the first half a total of 7,400 vehicles were purchased, 4,300 de-fleeted, and 4,700 sold, of which 16% were sold through the Northgate Occasion retail channel (H1 2018: 14%)

Although residual values were stable, PPU in the first half was €484, less than half the level reported for the same period last year, as expected, mainly reflecting the depreciation rate change

Lower PPUs, combined with the reduction in the number of vehicles sold, resulted in disposals profit of £2.0 million, down from £6.1 million in first half last year. The adverse impact of the previous depreciation change was approximately £2.1 million.

Operating profit and ROCE

Operating profit in the first half was £23.1 million, 8.4% higher than in the first half last year (H1 2018: £21.3 million), reflecting the combined impact of the higher rental profit and lower disposals profit in the period. The net effect of the depreciation rate changes was to increase first half operating profit by £5.6 million.  Operating profit also grew by 8.4% at constant exchange rates.

The return on capital employed was 9.3% compared to 11.3% in the same period last year, with the higher net book value of the vehicle fleet, due to its rapid growth, more than offsetting the increase in operating profit.

 

Capex and cash flow

6 months ended 31 October

H1 2019

H1 2018

Change

 

FY 2018

Cash flow

£m

£m

%

 

£m

Underlying EBITDA

61.9

57.6

7.5%

 

115.7

Total Net Capex

(64.7)

(103.9)

37.7%

 

(152.5)

EBITDA less Total Net Capex

(2.8)

(46.3)

-

 

(36.8)

 

Underlying EBITDA in the first half grew by 7.5% to £61.9 million (H1 2018: £57.6 million) reflecting rental revenue growth, partly offset by higher operating costs.   

Total net capex of £64.7 million was £39.2 million lower than in the same period last year, reflecting both the substantial impact of the fleet aging process and longer vehicle replacement cycle, as well as the significantly lower level of vehicle purchases to grow the fleet compared to the previous year.

 

Business resilience

Northgate is well positioned to manage the range of challenges that could potentially result from external factors.  These include:

Brexit 

The Company has undertaken a review of the potential impact on its business of the UK leaving the European Union.  The most significant potential threat would be if the import of vehicles and vehicle components into the UK from the EU were disrupted, or if additional import costs were imposed.  Around 90% of vehicles purchased by Northgate UK from UK OEMs are imported from the EU, valued at approximately £220 million annually.  Assurances have been sought from these OEMs, who are confident that there will be no material long-term disruption.  Northgate itself can mitigate the impact of potential short-term supply disruption by slowing the rate of vehicle de-fleets in order to maintain vehicle availability for customers.  Additionally, components for vehicles manufactured in the UK are imported from the EU, but normal OEM stock levels are judged to be sufficient to address any potential short-term supply issues. 

The Company believes that whilst any increase in import costs could potentially create some margin pressure in the short-term, in the longer term it will be able to pass through to end-users any significant additional costs that might be imposed on imported vehicles.  A potential upside for Northgate in the event of any new vehicle supply shortages, or higher purchase costs, would be the likely increase in rental demand and residual values that would result.

Less than 5% of Northgate's UK employees do not possess a UK passport, so any change to the status of EU citizens in the UK will not have a material effect on the company's operations.     

No material impacts on Northgate's business in Ireland have been identified. 

Economic downturn

The Company is well placed to weather adverse economic conditions which could arise either as part of the general business cycle or linked to Brexit.  Importantly, the business generates strong cash flow when it is not investing to grow the vehicle fleet.  If VOH growth turns negative in a downturn, vehicle purchases can be slowed, and even if there were to be some decline in the residual value of de-fleeted vehicles, the company can continue to generate significant cashflow, protecting its balance sheet and its ability to service debt and dividend payments.  Currency risks are mitigated by the Group's matching of the currency profiles of its revenues and costs and its debt and net assets. 

Vehicle emission regulations

Regulations to reduce vehicle emissions are continually evolving, and the focus is now shifting to vehicles that meet only Euro 4 standards. Northgate's fleet has almost no Euro 4 vehicles remaining, comprising over 70% Euro 6 vehicles, with all diesel vehicle purchases now Euro 6 standard.  Vehicles in this category produce one-third lower CO2 emissions and one-third better fuel consumption than equivalent petrol engines.  

Northgate has increased the number of electric and hybrid vehicles in its fleet, particularly in Spain, in response to specific customer requirements, but these still comprise less than 1% of the total Northgate fleet, and very limited supply options are available currently from OEMs.  As regulations evolve and customer demand for electric and hybrid vehicles increases, Northgate's fleet and propositions will also evolve to meet this demand, with the company's close relationships with suppliers ensuring that is has access to any commercially viable supply options as soon as these become available.  In the short-term however, due to the lack of electric and hybrid alternatives, customer LCV demand and Northgate LCV purchases are likely to remain dominated by diesel vehicles.

 

FINANCIAL REVIEW

Underlying financial summary(1)

H1 2019

H1 2018

Change

Change

£m

£m

£m

%

Revenue

374.0

349.7

24.3

6.9%

Operating profit

36.7

39.1

(2.4)

(6.2%)

Statutory operating profit

36.2

36.3

(0.1)

(0.3%)

Net finance charge

(7.4)

(5.3)

(2.1)

(41.4%)

Profit before tax

29.2

33.8

(4.6)

(13.6%)

Statutory profit before tax

28.7

31.0

(2.3)

(7.4%)

Net tax charge

(4.6)

(6.2)

1.6

26.7%

Profit after tax

24.7

27.6

(2.9)

(10.7%)

Earnings per share (pence)

18.5

20.7

(2.2)

(10.6%)

Dividend per share (pence)

6.2p

6.1p

0.1p

1.6%

(1)   All figures disclosed are underlying unless stated otherwise. Refer to Reconciliation of GAAP to non-GAAP measures and Glossary of terms for further information.

Revenue

Total underlying Group revenue increased by 6.9% to £374.0 million.

Group revenue comprised:

 

H1 2019

H1 2018

Change

Change

 

£m

£m

£m

%

Vehicle hire

259.5

234.5

25.0

10.7%

Vehicle sales

114.5

115.2

(0.7)

(0.6%)

Total

374.0

349.7

24.3

6.9%

Vehicle hire revenue was driven by growth in average VOH of 12.9% (£30.3m), partially offset by lower average hire rate which declined 2.0% (£5.3m).   Vehicle sales revenue was broadly flat, with a £13.6m reduction in revenue from lower sales volumes being offset by a 12.7% increase in proceeds per vehicle (£12.9m).

Underlying operating profit

Total underlying Group operating profit decreased by 6.2% to £36.7 million and is stated before certain intangible amortisation of £0.5m (2018 - Exceptional costs and certain intangible amortisation £2.8m) 

Group underlying operating profit comprised:

 

H1 2019

H1 2018

Change

Change

 

£m

£m

£m

%

Rental Profit

32.3

30.2

2.1

6.8%

Disposals Profit

7.0

10.5

(3.5)

(33.2%)

Corporate Costs

(2.6)

(1.6)

(1.0)

(58.8%)

Total

36.7

39.1

(2.4)

(6.2%)

Rental profit increase of £2.1m is driven by growth in Spain of £5.9m offset by UK&I decline of £3.8m. The Group result is inclusive of a net benefit of £10.1m owing to changes in depreciation rates.

Disposal profits decreased by £3.5m as a result of unwind of previous depreciation rate changes (£2.5m) and a 13.4% decline in disposal volumes.

Corporate costs have increased by £1.0m to £2.6m.

Interest

Net finance charges for the first half increased by £2.1 million to £7.4 million, as a result of both higher borrowings (£1.3m) and a higher cost of borrowing (£0.8m).

Taxation

The underlying effective tax rate reduced to 15.6% (2018: 18.4%) due to the resolution of certain tax positions in relation to prior year giving rise to an underlying tax charge in the first half of £4.6 million (2018: £6.2 million).

After taking account of certain intangible amortisation the effective tax rate was 14.9% (H1 2018 17.8% after certain intangible amortisation and exceptional costs).

Cash flow and net debt

Total net capex for the period declined £29.3m to £149.5m (2018 - £178.8m) as a result of lower net purchases (£32.0m) offset by an increase in other net capex (£2.7m).

 

Net debt including unamortised arrangement fees increased from 30 April 2018 to £479.8m from £439.3m due to investment to grow the vehicle fleet.  The Net Debt to EBITDA leverage ratio at the end of the period was 1.87x, in line with the Group's stated target range of 1.5x to 2.5x EBITDA.  The group maintains comfortable levels of headroom against all of our debt covenant ratios.

Facility headroom at 31 October 2018 was £138.4m.

Balance sheet 

Group return on capital employed was 6.7% compared to 8.7% in the same period last year and 7.6% in the year ended 30 April 2018.

Net tangible assets at 31 October 2018 were £537.5m (30 April 2018 - £530.3m), equivalent to net tangible assets per share of 403p (30 April 2018 - 398p).

Gearing at 31 October 2018 was 89.3% (30 April 2018 - 82.8%).

Foreign exchange

The average and period end exchange rates used to translate the Group's overseas operations were as follows:

 

October 2018

October 2017

April 2018

 

£ : €

£ : €

£ : €

Average

1.13

1.13

1.13

Closing

1.13

1.14

1.14

 

Risks and uncertainties

The Board and the Group's management have clearly defined responsibility for identifying the major business risks facing the Group and for developing systems to mitigate and manage those risks.

The principal risks and uncertainties facing the Group at 30 April 2018 were set out in detail on pages 36 to 39 of the 2018 annual report, a copy of which is available at www.northgateplc.com, and were identified as:

·     economic environment;

·     market risk;

·     vehicle holding costs;

·     legal compliance and the employee environment;

·     IT systems; and

·     access to capital.

These principal risks have not changed since the last annual report and continue to be those that could impact the Group during the second half of the current financial year.

In addition to the risks outlined above, the going concern assumption is considered in Note 1 to the condensed interim financial statements for the six months ended 31 October 2018.

Glossary of terms

The following defined terms have been used throughout this document:

Term

Definition

Disposals Profit

This is a non-GAAP measure used to describe the adjustment in the depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs).

EBITDA

Earnings before interest, taxation, depreciation and amortisation.

Facility headroom

Calculated as facilities of £620.9m less net borrowings of £482.5m. Net borrowings represent net debt of £479.8m excluding unamortised arrangement fees of £2.7m and are stated after the deduction of £10.7m of net cash balances which are available to offset against borrowings.

Gearing

Calculated as net debt divided by net tangible assets (as defined below).

LCV

Light commercial vehicle: the official term used within the European Union for a commercial vehicle with a gross vehicle weight of not more than 3.5 tonnes.

Net tangible assets

Net assets less goodwill and other intangible assets.

OEM

Original equipment manufacturer.

PPU

Profit per unit/loss per unit - this is a non-GAAP measure used to describe the disposals profit (as defined), divided by the number of vehicles sold.

ROCE

Return on capital employed: calculated as trailing 12 month underlying operating profit divided by average capital employed. Capital employed being net assets excluding net debt.

UK & I

The UK and Ireland operating segment.

VOH

Vehicles on hire with customers

 

Reconciliation of GAAP to non-GAAP measures

Throughout this report we refer to underlying results and measures. The underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period without the effects of one-off or non-operational items.

In particular we refer to disposals profit. This is a non-GAAP measure used to describe the adjustment in depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs).

A reconciliation of GAAP to non-GAAP underlying measures is as follows:


Six months

to 31.10.18

£000

Six months

to 31.10.17

£000




Profit before tax

28,743

31,026

Add back:



Exceptional operating expenses (credit)

-

1,926

Certain Intangible amortisation

494

896

Underlying profit before tax

29,237

33,848






Profit for the period



24,448

25,492

Add back:





Exceptional operating expenses (credit)



-

1,926

Certain Intangible amortisation



494

896

Tax on exceptional items, brand royalty charges and intangible amortisation



(278)

(702)

Underlying profit for the year



24,664

27,612

Weighted average number of Ordinary shares


133,232,518

133,232,518

Underlying basic earnings per share



18.5p

20.7p


Six months

to 31.10.18

£000

Six months

to 31.10.17

£000




Operating profit

36,181

36,286

Add back:



Restructuring costs

-

1,926

Certain intangible amortisation

494

896

Underlying operating profit

36,675

39,108

Add Back



Fleet Depreciation

93,742

85,234

Other Depreciation

2,716

2,644

Loss on disposal of assets

114

143

Intangible amortisation included in underlying operating profit

297

138

Underlying EBITDA

133,544

127,267

 

 

 


UK and Ireland

Spain

Corporate

Group


6 months to

6 months to

6 months to

6 months to


October 2018

October 2018

October 2018

October 2018


£000

£000

£000

£000






Underlying operating profit (loss)

16,193

23,120

(2,638)

36,675

Exclude





Adjustments to depreciation charge in relation to vehicles sold in the period

(4,993)

(2,043)

-

(7,036)

Corporate costs

-

-

2,638

2,638

Rental Profit

11,200

21,077

-

32,277

Divided by: Revenue: hire of vehicles

157,358

102,135

-

259,493

Rental margin

7.1%

20.6%


12.4%






UK and Ireland

Spain

Corporate

Group

6 months to

6 months to

6 months to

6 months to

October 2017

October 2017

October 2017

October 2017


£000

£000

£000

£000






Underlying operating profit (loss)

19,441

21,328

(1,661)

39,108

Exclude





Adjustments to depreciation charge in relation to vehicles sold in the period

(4,423)

(6,111)

-

(10,534)

Corporate costs

-

-

1,661

1,661

Rental Profit

15,018

15,217

-

30,235

Divided by: Revenue: hire of vehicles

141,640

92,869

-

234,509

Rental margin

10.6%

16.4%

-

12.9%

 

 

Condensed consolidated income statement 





for the six months ended 31 October 2018 







Six months

Six months

Six months

Six months

Year to

Year to



to 31.10.18

to 31.10.18

to 31.10.17

to 31.10.17

30.04.18

30.04.18



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

(Audited)



Underlying

Statutory

Underlying

Statutory

Underlying

Statutory


Note

£000

£000

£000

£000

£000

£000

Revenue: hire of vehicles

2

259,493

259,493

234,509

234,509

471,187

471,187

Revenue: sale of vehicles

2

114,478

114,478

115,169

115,169

230,485

230,485

Total revenue

2

373,971

373,971

349,678

349,678

701,672

701,672

Cost of sales


(298,969)

(298,969)

(277,610)

(277,610)

(563,232)

(563,232)

Gross profit


75,002

75,002

72,068

72,068

138,440

138,440

Administrative expenses (excluding exceptional items and intangible amortisation)


(38,327)

(38,327)

(32,960)

(32,960)

(70,097)

(70,097)

Exceptional administrative expenses

9

-

-

-

(1,926)

-

(2,499)

Intangible amortisation


-

(494)

-

(896)

-

(1,767)

Total administrative expenses


(38,327)

(38,821)

(32,960)

(35,782)

(70,097)

(74,363)

Operating profit

2

36,675

36,181

39,108

36,286

68,343

64,077

Interest income


-

-

1

1

1

1

Finance costs


(7,438)

(7,438)

(5,261)

(5,261)

(11,340)

(11,340)

Profit before taxation


29,237

28,743

33,848

31,026

57,004

52,738

Taxation

3

(4,573)

(4,295)

(6,236)

(5,534)

(10,651)

(9,506)

Profit for the period


24,664

24,448

27,612

25,492

46,353

43,232

Profit for the period is wholly attributable to owners of the Parent Company. All results arise from continuing operations.

Underlying profit excludes exceptional items as set out in Note 9, as well as brand royalty charges, certain intangible amortisation and the taxation thereon, in order to provide a better indication of the Group's underlying business performance.

Earnings per share








Basic

4

18.5p

18.4p

20.7p

19.1p

34.8p

32.4p

Diluted

4

18.1p

18.0p

20.5p

18.9p

34.3p

32.0p

 

Condensed consolidated statement of comprehensive income





for the six months ended 31 October 2018







Six months

Six months

Year to



to 31.10.18

to 31.10.17

30.04.18



(Unaudited)

(Unaudited)

 (Audited)



£000

£000

£000

Amounts attributable to owners of the Parent Company





Profit attributable to owners


24,448

25,492

43,232

 

Other comprehensive income (expense)

Foreign exchange differences on retranslation of net assets of subsidiary undertakings


4,762

14,964

15,488

Net foreign exchange differences on long term borrowings held as hedges


(3,197)

(11,006)

(11,393)

Foreign exchange difference on revaluation reserve


12

44

46

Net fair value gains on cash flow hedges


259

537

1,105

Deferred tax charge recognised directly in equity relating to cash flow hedges


(49)

(102)

(210)

Total other comprehensive income for the period


1,787

4,437

5,036

Total comprehensive income for the period


26,235

29,929

48,268

 

All items will subsequently be reclassified to the consolidated income statement.

 

 

 

Condensed consolidated balance sheet




31 October 2018









31.10.18

31.10.17

30.04.18




(Unaudited)

(Unaudited)

(Audited)



Note

£000

£000

£000

Non-current assets






Goodwill



3,589

3,589

3,589

Other intangible assets



7,816

3,325

5,205







Property, plant and equipment: vehicles for hire


6

946,386

829,503

897,323

Other property, plant and equipment


6

68,195

66,034

67,979

Total property, plant and equipment


6

1,014,581

895,537

965,302

Deferred tax assets



9,150

16,381

10,791

Total non-current assets



1,035,136

918,832

984,887

Current assets






Inventories



25,333

37,952

31,828

Trade and other receivables



84,763

79,702

76,091

Current tax assets



-

-

4,745

Cash and bank balances


8

47,862

28,024

21,382

Total current assets



157,958

145,678

134,046

Total assets



1,193,094

1,064,510

1,118,933

Current liabilities






Trade and other payables



100,855

62,700

97,671

Derivative financial instrument liabilities


10

86

-

112

Current tax liabilities



9,933

17,208

15,246

Short-term borrowings



47,239

28,415

17,952

Total current liabilities



158,113

108,323

130,981

Net current (liabilities) assets



(155)

37,355

3,065

Non-current liabilities






Derivative financial instrument liabilities


10

1,045

1,957

1,277

Long term borrowings



480,445

420,626

442,751

Deferred tax liabilities



4,597

3,559

4,796

Total non-current liabilities



486,087

426,142

448,824

Total liabilities



644,200

534,465

579,805

NET ASSETS



548,894

530,045

539,128







Equity






Share capital



66,616

66,616

66,616

Share premium account



113,508

113,508

113,508

Own shares reserve



(4,722)

(3,427)

(3,238)

Hedging reserve



(915)

(1,585)

(1,125)

Translation reserve



419

(1,283)

(1,146)

Other reserves



68,672

68,658

68,660

Retained earnings



305,316

287,558

295,853

TOTAL EQUITY



548,894

530,045

539,128

 

Total equity is wholly attributable to owners of the Parent Company.

 

 

Condensed consolidated cash flow statement




for the six months ended 31 October 2018







Six months

Six months

Year to



to 31.10.18

to 31.10.17

30.04.18



(Unaudited)

(Unaudited)

(Audited)


 Note

£000

£000

£000

Net cash used in operations

7

(12,214)

(80,141)

(81,797)

Investing activities





Interest received


-

1

1

Proceeds from disposal of other property, plant and equipment

932

2,215

2,374

Purchases of other property, plant and equipment

(3,493)

(4,432)

(9,292)

Purchases of intangible assets


(3,388)

(1,059)

(4,073)

Net cash used in investing activities


(5,949)

(3,275)

(10,990)

Financing activities





Receipt of bank loans and other borrowings

33,394

89,246

113,902

Debt issue costs paid

(1,737)

-

-

Dividend paid

(15,268)

(15,326)

(23,365)

Net payments to acquire own shares for share schemes


(1,881)

(1,959)

(3,257)

Net cash generated from financing activities


14,508

71,961

87,280

Net decrease in cash and cash equivalents


(3,655)

(11,455)

(5,507)

Cash and cash equivalents at beginning of the period


14,127

19,637

19,637

Effect of foreign exchange movements


214

254

(3)

Cash and cash equivalents at the end of the period


10,686

8,436

14,127

 

Cash and cash equivalents consist of:





Cash and bank balances

8

47,862

28,024

21,382

Bank overdrafts

8

(37,176)

(19,588)

(7,255)



10,686

8,436

14,127

 

 

Condensed consolidated statement of changes in equity

for the six months ended 31 October 2018



Share capital and share premium

 

 

Own shares

Hedging reserve

Translation reserve

Other reserves

Retained earnings

Total


£000

£000

£000

£000

£000

£000

£000

Total equity at 1 May 2017

180,124

(1,659)

(2,020)

(5,241)

68,614

276,799

516,617

Share options fair value charge

-

-

-

-

-

784

784

Share options exercised

-


-

-

-

(191)

(191)

Profit attributable to owners of the Parent Company

-

-

-

-

-

25,492

25,492

Dividend paid

-

-

-

-

-

(15,326)

(15,326)

Net purchase of own shares

-

(1,959)

-

-

-

-

(1,959)

Transfer of shares on vesting of share options

-

191

-

-

-

-

191

Other comprehensive income

-

-

435

3,958

44

-

4,437

Total equity at 1 November 2017

180,124

(3,427)

(1,585)

(1,283)

68,658

287,558

530,045

Share options fair value charge

-

-

-

-

-

81

81

Share options exercised

-

-

-

-

-

(1,487)

(1,487)

Profit attributable to owners of the Parent Company

-

-

-

-

-

17,740

17,740

Dividend paid

-

-

-

-

-

(8,039)

(8,039)

Net purchase of own shares

-

(1,298)

-

-

-

-

(1,298)

Transfer of shares on vesting of share options

-

1,487

-

-

-

-

1,487

Other comprehensive income

-

-

460

137

2

-

599

Total equity at 1 May 2018

180,124

(3,238)

(1,125)

(1,146)

68,660

295,853

539,128

Share options fair value charge

-

-

-

-

-

680

680

Share options exercised

-

-

-

-

-

(397)

(397)

Profit attributable to owners of the Parent Company

-

-

-

-

-

24,448

24,448

Dividend paid

-

-

-

-

-

(15,268)

(15,268)

Net purchase of own shares

-

(1,881)

-

-

-

-

(1,881)

Transfer of shares on vesting of share options

-

397

-

-

-

-

397

Other comprehensive income

-

-

210

1,565

12

-

1,787

Total equity at 31 October 2018

180,124

(4,722)

(915)

419

68,672

305,316

548,894









Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.


 

Unaudited Notes

1. Basis of preparation and accounting policies

Northgate plc is a Company incorporated in England and Wales under the Companies Act 2006.

The condensed financial statements are unaudited and were approved by the Board of Directors on 28 November 2018.

The condensed financial statements have been reviewed by the auditors and the independent review report is set out in this document.

The interim financial information for the six months ended 31 October 2018, including comparative financial information, has been prepared on the basis of the accounting policies set out in the last annual report and accounts, except for: income taxes, which are accrued using the tax rate that is expected to be applicable for the full year, and in accordance with IAS 34 'Interim Financial Reporting', as issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU); revenue which is recognised in accordance with IFRS 15 'Revenue from Contracts with Customers'  as issued by the IASB and adopted by the EU and; financial instruments which are recognised in accordance with IFRS 9 'Financial Instruments'  as issued by the IASB and adopted by the EU.

IFRS 9 'Financial Instruments' replaces IAS 39 'Financial Instruments: Recognition and Measurement' and is applicable to financial assets and financial liabilities. During the period ended 31 October 2018, the Group assessed in detail the impact of the new standard on the consolidated financial statements and concluded the impact on transition was immaterial. Accordingly, in the condensed consolidated interim financial statements the Group has not restated comparatives and no adjustment to the opening balance sheet at 1 May 2018 has been recognised.

IFRS 15 'Revenue from Contracts with Customers' replaces IAS 18 'Revenue', IAS 11 'Construction contracts' and related interpretations. The standard requires that revenue should only be recognised when a customer obtains control of goods or services and has the ability to direct the use and obtain the benefits from the goods or services. During the 6 months ended 31 October 2018, the Group assessed in detail the impact of the new standard and concluded that the adoption of IFRS 15 had an immaterial impact on the consolidated financial statements. Accordingly, in the condensed consolidated interim financial statements the Group has not restated comparatives and no adjustment to the opening balance sheet at 1 May 2018 has been recognised.

IFRS 16 'Leases' was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. It will therefore be adopted by the Group from the accounting period beginning 1 May 2019 and is expected to have a material impact on property plant and equipment and borrowings (based on our current lease commitments).

In preparing the interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same, in all material respects, as those applied to the consolidated financial statements for the year ended 30 April 2018.

Going concern assumption

Having reassessed the principal risks and the other matters discussed in connection with the viability statement in the 2018 annual report and accounts the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial statements.

Information extracted from 2018 annual report

The financial figures for the year ended 30 April 2018, as set out in this report, do not constitute statutory accounts but are derived from the statutory accounts for that financial year.

The statutory accounts for the year ended 30 April 2018 were prepared under IFRS and were delivered to the Registrar of Companies on 24 August 2018. The audit report was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.

 

2. Segmental analysis

Management has determined the operating segments based upon the information provided to the Board of Directors, which is considered to be the chief operating decision maker. The Group is managed, and reports internally, on a basis consistent with its two main operating divisions, UK and Ireland, and Spain. As outlined in the 2018 annual report and accounts, the UK and Ireland segments are now reported as a single segment. The comparatives have been restated accordingly. The principal activities of these divisions are set out in the Chief Executive review and Financial review.



UK and Ireland

Spain

Corporate

Group



Six months

Six months

Six months

Six months



to 31.10.18

to 31.10.18

to 31.10.18

to 31.10.18



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)



£000

£000

£000

£000

Revenue: hire of vehicles


157,358

102,135

-

259,493

Revenue: sale of vehicles


88,301

26,177

-

114,478

Total revenue


245,659

128,312

-

373,971







Underlying operating profit (loss) *


16,193

23,120

(2,638)

36,675

Intangible amortisation





(494)

Operating profit





36,181

Finance costs





(7,438)

Profit before taxation





28,743

 



UK and Ireland

Spain

Corporate

Group



Six months

Six months

Six months

Six months



to 31.10.17

to 31.10.17

to 31.10.17

to 31.10.17



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)



£000

£000

£000

£000

Revenue: hire of vehicles


141,640

92,869

-

234,509

Revenue: sale of vehicles


80,196

34,973

-

115,169

Total revenue


221,836

127,842

-

349,678







Underlying operating profit (loss) *


19,441

21,328

(1,661)

39,108

Exceptional administrative expenses





(1,926)

Intangible amortisation





(896)

Operating profit





36,286

Interest income





1

Finance costs





(5,261)

Profit before taxation





31,026

 



UK and Ireland Year to 30.04.18

Spain

 Year to 30.04.18

Corporate Year to 30.04.18

Group

 Year to 30.04.18



(audited)

(audited)

(audited)

(audited)



£000

£000

£000

£000

Revenue: hire of vehicles


283,543

187,644

-

471,187

Revenue: sale of vehicles


156,937

73,548

-  

230,485

Total revenue


440,480

261,192

-

701,672







Underlying operating profit (loss) *


33,114

38,960

(3,731)

68,343

Exceptional administrative expenses





(2,499)

Intangible amortisation





(1,767)

Operating profit





64,077

Interest income





1

Finance costs





(11,340)

Profit before taxation





52,738

*Underlying operating profit (loss) stated before royalty charges, certain intangible amortisation and exceptional items is the measure used by the Board of Directors to assess segment performance.

3. Taxation

The charge for taxation for the six months to 31 October 2018 is based on the estimated effective rate for the year ending 30 April 2019 of 14.9% (October 2017 - 17.8%).

 

4. Earnings per share

 








Six months

Six months

Six months

Six months

Year to

Year to


to 31.10.18

to 31.10.18

to 31.10.17

to 31.10.17

30.04.18

30.04.18


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

(Audited)


Underlying

Statutory

Underlying

Statutory

Underlying

Statutory

Basic and diluted earnings per share

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000








The calculation of basic and diluted earnings per share is based on the following data:







Earnings







Earnings for the purposes of basic and diluted earnings per share,







being profit attributable to owners of the Parent Company

24,664

24,448

27,612

25,492

46,353

43,232






 

Number of shares

Number

Number

Number

Number

Number

Number

Weighted average number of Ordinary shares for the purpose







of basic earnings per share

133,232,518

133,232,518

133,232,518

133,232,518

133,232,518

133,232,518

Effect of dilutive potential Ordinary shares:







- share options

2,726,990

2,726,990

1,422,769

1,422,769

2,077,803

2,077,803

Weighted average number of Ordinary shares for the purpose







of diluted earnings per share

135,959,508

135,959,508

134,655,287

134,655,287

135,310,321

135,310,321

Basic earnings per share

18.5p

18.4p

20.7p

19.1p

34.8p

32.4p

Diluted earnings per share

18.1p

18.0p

20.5p

18.9p

34.3p

32.0p

5. Dividends

In the six months to 31 October 2018, a dividend of £15,268,000 was paid (2017 - £15,326,000). The Directors have declared a dividend of 6.2p per share for the six months ended 31 October 2018 (2017 - 6.1p).

6. Property Plant and Equipment

Net Book Value


Vehicles for hire

Other property, plant & equipment

Total

At 1 May 2017


731,657

65,262

796,919

Additions


265,780

4,432

270,212

Disposals


(95,279)

(2,334)

(97,613)

Depreciation


(85,234)

(2,644)

(87,878)

Exchange differences


12,579

1,318

13,897

At 1 November 2017


829,503

66,034

895,537

Additions


244,745

4,860

249,605

Disposals


(86,152)

(424)

(86,576)

Depreciation


(91,366)

(2,561)

(93,927)

Exchange differences


593

70

663

At 1 May 2018


897,323

67,979

965,302

Additions


220,365

3,493

223,857

Disposals


(81,778)

(1,046)

(82,824)

Depreciation


(93,742)

(2,716)

(96,458)

Exchange differences


4,218

485

4,704

At 31 October 2018


946,386

68,195

1,014,581

7. Notes to the cash flow statement


Six months

Six months

Year to

 


to 31.10.18

to 31.10.17

30.04.18

 


(Unaudited)

(Unaudited)

(Audited)

 

Net cash used in operations

£000

£000

£000

 

Operating profit

36,181

36,286

64,077

 

Adjustments for:




 

Depreciation of property, plant and equipment

96,458

87,878

182,185

 

Net impairment of property, plant and equipment

-

-

(380)

 

Amortisation of intangible assets

791

1,034

2,171

 

Loss on disposal of other property, plant and equipment

114

143

390

 

Loss on disposal of intangible assets

-

-

25

 

Share options fair value charge

680

784

865

 

Operating cash flows before movements in working capital

134,224

126,125

249,333

 

Decrease (increase) in non-vehicle inventories

810

(512)

(1,190)

 

Increase in receivables

(2,900)

(10,895)

(14,641)

 

Increase (decrease) in payables

9,580

(6,952)

6,899

 

Cash generated from operations

141,714

107,766

240,401

 

Income taxes paid, net

(3,444)

(7,499)

(11,451)

 

Interest paid

(6,909)

(4,929)

(10,707)

 

Net cash generated from operations before net capex

131,361

95,338

218,243

 

Purchases of vehicles

(229,670)

(268,352)

(486,943)

 

Proceeds from disposal of vehicles

86,095

92,873

186,903

 

Net cash used in operations

(12,214)

(80,141)

(81,797)

 

8. Analysis of consolidated net debt

 






31.10.18

31.10.17

30.04.18

 


(Unaudited)

(Unaudited)

(Audited)

 


£000

£000

£000

 

Cash and bank balances

(47,862)

(28,024)

(21,382)

 

Bank overdrafts

37,176

19,588

7,255

 

Bank loans

400,854

340,910

364,750

 

Loan notes

88,811

87,781

87,890

 

Cumulative preference shares

500

500

500

 

Confirming facilities

343

262

308

 


479,822

421,017

439,321

 





 

9. Exceptional items





 

During the period the Group recognised exceptional items in the income statement as follows:


 



Six months

Six months

Year to

 



to 31.10.18

to 31.10.17

30.04.18

 



(Unaudited)

(Unaudited)

(Audited)

 



£000

£000


 

Restructuring costs


-

1,926

2,499

 

Exceptional administrative expenses


-

1,926

2,499

 

Total pre-tax exceptional items


-

1,926

2,499

 

Tax charge on exceptional items


-

(383)

(471)

 

10. Derivative financial instruments





 

At the balance sheet date, the Group held the following financial instruments at fair value:


 



 



31.10.18

31.10.17

30.04.18

 



(Unaudited)

(Unaudited)

(Audited)

 



£000

£000

£000

 

Interest rate derivatives


(1,131)

(1,957)

(1,389)

 



(1,131)

(1,957)

(1,389)

 

The derivative financial instruments above all have fair values which are calculated by reference to observable inputs (i.e. classified as level 2 in the fair value hierarchy). They are valued using the discounted cash flow technique with an appropriate adjustment for counterparty credit risk. The valuations incorporate the following inputs:

·      interest rates and yield curves observable at commonly quoted intervals;

·      commonly quoted spot and forward foreign exchange rates; and

·      observable credit spreads.

The carrying value of financial assets and liabilities recorded at amortised cost in the financial statements are approximately equal to their fair value.

 

 

Interim announcement - Statement of the Directors

We confirm that to the best of our knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS 34;

·      the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

·      the interim management report includes a fair review of the information required by DTR 4.2.8 (disclosure of related party transactions and changes therein).

 

By order of the Board

Philip Vincent

Chief Financial Officer

4 December 2018

 

Independent review report to Northgate plc

Report on the consolidated interim financial statements

Our conclusion

We have reviewed Northgate plc's consolidated interim financial statements (the "interim financial statements") in the interim results of Northgate plc for the 6 month period ended 31 October 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·      the condensed consolidated balance sheet as at 31 October 2018;

·      the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;

·      the condensed consolidated cash flow statement for the period then ended;

·      the condensed consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim results, including the interim financial statements, are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Newcastle upon Tyne

4 December 2018

 

 


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