16 September 2009
INTERIM MANAGEMENT STATEMENT
Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain's leading specialist in light commercial vehicle hire, publishes today its Interim Management Statement covering the period 1 May 2009 to 15 September 2009.
Utilisation rates have continued to improve and averaged 91% for the first four months, an improvement on the 88% average achieved for the year ended 30 April 2009. Since the beginning of the financial year the UK fleet has reduced from 62,900 to 60,100 as at 31 August 2009. This reduction has been made to counter the expected fall in the number of vehicles on rent (c.1,650 vehicles) and to further improve utilisation as noted above.
Hire rates have also continued to improve with rates increasing c.1.8% since their low point in March this year.
The used vehicle market has stabilised and the improvement in residual values we are achieving, combined with the vehicle fleet values following the write down in February 2009, has resulted in us achieving the break even position we aim for on the disposal of our used vehicles.
Against a difficult general economic environment our bad debt charge in the first four months of the year was £0.7m compared to a plan of £0.8m.
The fleet size in Spain has reduced from 60,400 vehicles to 57,100 at the end of August 2009. In line with our plan this will fall further once the "vacational rentals" are returned in October. Utilisation has improved from 81.2% at the start of the financial year to 89.4% at the end of August 2009. As anticipated, this will reduce towards the end of the calendar year whilst we dispose of the vehicles returned from the vacational rentals, but we expect to be back to our targeted 90% level in early 2010.
Underlying hire rates in Spain, excluding the impact of the vacational rentals, remain stable and are in line with our plan.
We disposed of 5,100 used vehicles in the first four months of the financial year, broadly in line with our target levels, and up 57% on the prior year. The residual values being achieved are slightly better than planned.
As we indicated at the time of our preliminary results in July 2009, the incidence of bad debt has increased in Spain. In the first four months of the year the bad debt charge was €3.4m which was some €1.6m above our plan for that period and represented 3.5% of hire turnover. Whilst we do not expect the incidence of bad debt to continue at this rate, managing our debtor book will remain a key area of focus for the Group in the remainder of the year.
Following the successful completion of the rights issue in August 2009 and the satisfaction of a number of conditions precedent, the new borrowing facilities came into effect on 11 September 2009.
The reduction in size and continued ageing of the vehicle fleet combined with the steps taken to rationalise the cost base have, as expected, generated further cash. In addition, in August we received net funds from the rights issue of c.£108m. Overall, therefore, net debt has reduced by £205m from £886m at 30 April 2009 to £681m as at 31 August 2009; using 30 April 2009 exchange rates the reduction would have been £197m. In September 2009 some £26m has been paid in refinancing fees. As a consequence of the debt reduction the financial position of the Group has strengthened.
Now that the refinancing has been completed we have reviewed our interest rate hedging policy. As a result we have entered into transactions that have resulted in c.80% of total net debt being at fixed rates for between two and three years.
Phil Moorhouse, who has been with the Group since 1991, has decided to retire from the business and the Board in December 2010 and develop a portfolio of non-executive roles. To make the best use of Phil's vast experience in the business, both as a previous Finance Director and UK Managing Director, he will focus on delivery of the IT project, the programme of "Driving Change" and certain other operational responsibilities until he leaves the Group. Paul Tallentire has now assumed operational control of the UK business.
As expected the macroeconomic conditions continue to adversely affect the Group's markets. Following the initiatives taken in the previous financial year, coupled with the ongoing focus on maximising fleet revenues and further operational efficiencies we have achieved a recovery in margins compared to those being achieved in the early part of this calendar year.
Although the need to be cautious remains, we are pleased with the performance of the business in the first four months and continue to view the outlook with confidence.
For further information, please contact:
Steve Smith, Chief Executive
Bob Contreras, Finance Director
Paul Tallentire, Deputy Chief Executive
Hogarth Partnership Limited
020 7357 9477
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. 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: