29th Aug 2007 07:01
Northgate PLC29 August 2007 29 August 2007 NORTHGATE PLC INTERIM MANAGEMENT STATEMENT Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain'sleading specialist in light commercial vehicle hire, publishes its first InterimManagement Statement covering the period 1 May 2007 to 28 August 2007. Trading is in line with expectations and the Group is on track to achieve itsfinancial objectives for the current year. Philip Rogerson, Chairman, said: "We have made a good start to the new financial year and our business units inthe UK and Spain continue to progress with the execution of their strategicplans." UK Good utilisation levels, an improved hire rate environment and a strong usedvehicle market have more than compensated for fleet growth that is below ourtarget level. We are also realising the benefits of the restructuring of thebusiness carried out in the last financial year. The combination of these factors has resulted in a further improvement in thevehicle rental operating margin in the UK. Looking forward, we expect the economic climate to be favourable to our rentalproduct as owners of fleets incur higher interest costs and, as a result, mayconsider other methods of operating and financing their fleets. We expect the current limited supply of new vehicles into the market willcontinue to restrict supply into the used vehicle market and, consequently, webelieve that residual values will remain strong for at least the remainder ofthis calendar year. Spain The fleet in Spain continues to grow in line with our strategic plan. The otherkey performance indicators including hire rates, utilisation and residual valuesare also in line with our objectives. Current fleet growth is being achieved without increasing the number oflocations, although where appropriate we continue to increase the size ofpremises to accommodate future growth. We are starting to enjoy the full benefits of scale from combined Spanishpurchasing, which commenced part way through last year. These benefits, togetherwith the operational gearing effects of fleet growth, have improved theoperating margin over the prior year. On 18 July 2007, we made our first bolt-on acquisition in Spain with thepurchase of the trade and assets of Alquiservicios S.A. a business based inOrense with a fleet of 700 vehicles. The acquisition, which has already beenabsorbed into Record, gives us improved representation in the north west ofSpain along with one new location. In addition it will assist in thediversification of our customer base. New territories We continue to talk to a number of target companies and, in line with ourtimetable, aim to be in a position to move forward with an acquisition duringthe current financial year. We are, however, not yet in a position to giveguidance on the territory and we expect that the scale of any acquisition willbe smaller than our first entry into Spain. Treasury The Group's net debt has not changed materially from the year-end and thegearing ratio (defined as net debt as a percentage of shareholders' funds afterthe deduction of intangible assets) has fallen to 273% as at 31 July 2007.Although base rates in the UK have increased by 50 bps since 1 May 2007, as aconsequence of our sterling debt being almost entirely fixed, we have not had tobear additional interest on our sterling borrowings. The fixed rate proportionof the Group's net debt has been increased to 63% since 30 April 2007 when itwas 57%. Share buy backs In recent weeks the Company has acquired for cancellation 600,000 of its ownOrdinary shares. These opportunistic share buy backs follow the volatility inthe equity markets that has led to significant decline in the market price ofthe Company's shares. The Board believe that the buy backs will not affect theGroup's ability to fund its future expansion and they are earnings enhancing forremaining shareholders. Appointment of non-executive director Our search for an additional non-executive director has progressed well and weexpect to announce an appointment in the near future. Outlook We are confident of a good outcome for the current year and continue to believethe longer-term prospects for the business remain very encouraging. For further information, please contact: Northgate plc 01325 467558Steve Smith, Chief ExecutiveGerard Murray, Finance Director Hogarth Partnership Limited 020 7357 9477Andrew JaquesBarnaby FryAnthony Arthur Notes to Editors: Northgate plc rents light commercial vehicles and sells a range of fleetproducts to businesses via a network of hire companies in the UK, Republic ofIreland and Spain. Its NORFLEX(R) product gives businesses access to a flexiblemethod to acquire as many commercial vehicles as they need, without tying upcapital or entering a fixed term contract. Further information regarding Northgate plc can be found on the Company'swebsite: http://www.northgateplc.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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