RNS Number : 4882D
Northgate PLC
16 September 2008

16 September 2008




Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain's leading specialist in light commercial vehicle hire, publishes its Interim Management Statement covering the period 1 May 2008 to 15 September 2008.


As a result of the deteriorating economic environment the used vehicle market has experienced a sharp decline, with reductions in residual values of between 5% and 10%. This will be reflected in a higher depreciation charge compared to the prior year. 

The first four months of the new financial year have also seen a continued high level of "churn" with customers utilising the flexibility of our product with more frequent rental returns. Although the impact has been partly compensated by additional business gains from both new and existing customers, we have needed to trim our fleet to maintain utilisation close to our targeted level of 90%. However, despite these pressures we have maintained hire rates throughout the period.


The difficulties being experienced in the Spanish economy have impacted the used vehicle market, where residual values have declined since the year-end by up to 10%. The development of an export capability to reduce our dependency on the internal market remains a core objective. In the year to date exports represent 23% of our total disposals compared to 4% in the last financial year. We need to increase export volumes further in the coming months.

Although there has been some modest growth in the fleet, the level of "churn" remains high, particularly from smaller companies, making it more difficult to maintain utilisation in the short term. We will remain focused on returning utilisation to our targeted level and, as a consequence, may not achieve further fleet growth in the coming months.

Banking facilities

We are pleased to announce that we have successfully renewed and re-profiled the majority of our banking facilities. Prior to the renewal £769m of our total facilities matured by December 2009; now only £79m of our facilities mature by this date. The Group's aggregate committed facilities now total £1,044m, compared to net debt of £894m at 30 April 2008, giving us headroom of £150m.  

The Group's committed facilities have the following maturity profile:


January - April 2009


December 2009


December 2010


September 2011


September - November 2012


September - December 2013


December 2016 - January 2017




* Excludes £10m overdraft facility.

Following the refinancing our overall borrowing cost has increased by c.0.6%. At April 2008 debt levels this would give an increased interest cost of £5.4m in a full financial year.

There have been no changes to the financial covenants in the new facilities.


The trading outlook for the current year is lower than the Board's previous expectations.

Our belief is that the economic environment we are operating in is similar to that last seen in the UK in 1990/91. At that time, after an initial challenging trading environment, the recession took hold and capital became increasingly constrained, causing companies to look at rental as an option for acquiring their fleets. This had a longer-term structural benefit in growing the rental market and, as a direct result, Northgate entered a period of sustained growth.

We believe that, at some stage in the year ahead, we will see this transition in our markets in the UK and Spain. Until that point, we will remain focused on managing our fleet as efficiently as possible, along with targeted cost reductions. These actions will not only minimise the impact of external factors on our profitability but also produce increased cash generation and a subsequent reduction in debt.

For further information, please contact:

Northgate plc                                     01325 467558

Steve Smith, Chief Executive            

Bob Contreras, 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 UKRepublic of Ireland and Spain. Its NORFLEX® product gives businesses access to a flexible method to acquire as many commercial vehicles as they need, without tying up capital or entering a fixed term contract.

Further information regarding Northgate plc can be found on the Company's website:


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