Redde Northgate Share Discussion Threads

[bearraider] 21/6/2008 00:01

Allowance for bad debts
..........UK.............Spain
2006......£2.786m........£1.469m
2007......£2.883m........£2.308m

Total debtors finals 2007 = £177m increased to £197m at interim stage on an increase in revenue in the region of £15m.

Considering increase in Spanish fleet size in H1 the growth in revenue is a little dissapointing. All and more of the increase went to debtors. NTG has taken out insurance against credit default in Spain so bad debts will be partially or fully recovered but NTG needs to increase cashflow not just revenue. No point selling to bad payers!! Let us hope it has improved in the 2H - we will see on the 1st July.

[bearraider] 20/6/2008 23:49

Edit posted this before but used wrong debtor days (from another company i was working on)

So to correct debtor days from my previous post have reposted below:

Queeny raised a post about the issue of bad debts in Spain.

The AR states that the credit default risk in Spain because it is concentrated in a number of large contracts has been insured against (2007 stood at 149 days credit). The credit risk in the UK is seen as minimal (51days - we have a different payment culture in the UK )and is spread across a wide diversity of companies and sectors.

"The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers in the UK.
The credit risk associated with trade receivables in Spain is more concentrated in larger customers than the UK and, consequently, the Group has put a credit insurance policy in place to mitigate this risk."

It also states that the press speculation in April 2007 that the downturn in residential construction would affect NTG - Lower rental income, increased bad debts is misplaced - it has limited exposure to the villas/costas and has in fact increased it's fleet by 12% since in 2008

[bearraider] 20/6/2008 23:46

If EPS for 2007/8 grows by less than 5% no share/option incentive schemes give any shares.

If EPS grows 11% or more several schemes pay out maximum.

If EPS grows 5% + RPI the main execs scheme starts to pay out
if EPS grows 11%+ RPI the main execs scheme pays out maximum (= double basic salary in shares)

If they meet some of these targets they GET MORE SHARES THE LOWER THE SHARE PRICE GOES - should be a great incentive to get the company to recover from it's share price slump after the prelims (or maybe accept a nicely priced takeover).

Scheme share price is calculated on share price at close on day prelims are announced.

[simonsaid] 20/6/2008 23:05

to me its obvious that dave and steve are 2 different investors, as dave can spell. lol

[bearraider] 20/6/2008 20:57

If EPS for 2007/8 grows by less than 5% no share/option incentive schemes give any shares.

If EPS grows 11% or more several schemes pay out maximum.

If EPS grows 5% + RPI the main execs scheme starts to pay out
if EPS grows 11%+ RPI the main execs scheme pays out maximum (= double basic salary in shares)

If they meet some of these targets they GET MORE SHARES THE LOWER THE SHARE PRICE GOES - should be a great incentive to get the company to recover from it's share price slump after the prelims (or maybe accept a nicely priced takeover).

Scheme share price is calculated on share price at close on day prelims are announced.

[bearraider] 20/6/2008 16:58

If it's a tank - shouldn't it be heavy shelling!!

[gohunk] 20/6/2008 16:39

when you say tank, you mean tommy tank do you ?

[zimzoot] 20/6/2008 14:54

Workspace group WKP another one to tank...heavy selling

[bearraider] 20/6/2008 14:23

The fall over the last few days seems to have slowed a little and we are near to entering what I have always highlighted as an interesting zone 350-390p which has various highs and lows from as far back as 1996.

The start of the great uptrend in NTG in 2003 started from just around 370-375p, where it had double bottomed after the previous fall from 550p in June 2002 (a certain 'expert' on NTG who has pulled all his posts was deramping NTG then as well). NTG went on to recover 550p within a year tracked sideways for another 6 months then went up to over £12 in the next few years. Before the recent collapse in the Sp due to the various worries there are about the market Ntg operates in.

Sadly all graph data for Jan 97 - Oct 99 is missing on Advfn

[gohunk] 20/6/2008 13:53

has it breached the 4 squid mark yet ? i see from the graphs its pretty bloody close...

[bearraider] 20/6/2008 10:31

Utilisation rates

The last figures available give a rate of 91% up from prior figures of 90%
With a fleet of 130,000 vehicles 9% unused means that on avg 11,700 vehicles are not on hire on any one day with around 120 hire sites around the UK & Spain this equates to an average of around 100 vehicles per site which are either on the site, in service, repair, preparation or to and from hire, Integrated IT systems, scale of operation seem to be allowing this to improve - however it could also revert to 87-90% level of previous years or lower.

Suggestion that a 67% utilisation rate is the 'TRUE' sector rate that should be applied to NTG (I couldn't stop laughing when I read that), if you included allowing for vehicles sent to disposal sites. With NTG this would mean that 42,900 were unused on avg every day, or 31,200 vehicles were on the 14 disposal sites = 2,290 per site in addition to the 9% on rental sites.

With an avg 30 month cycle of replacement 50,000 are replaced per annum, the 42,900 which are supposed to be off the hire books and in disposal would equate to a time per vehicle on a disposal site of 10 months during which time they would have depreciated 20% in value.

[bearraider] 19/6/2008 23:30

Queeny raised a post about the issue of bad debts in Spain.

The AR states that the credit default risk in Spain because it is concentrated in a number of large contracts has been insured against (2007 stood at 149 days credit). The credit risk in the UK is seen as minimal (51days - we have a different payment culture in the UK )and is spread across a wide diversity of companies and sectors.

"The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers in the UK.
The credit risk associated with trade receivables in Spain is more concentrated in larger customers than the UK and, consequently, the Group has put a credit insurance policy in place to mitigate this risk."

It also states that the press speculation in April 2007 that the downturn in residential construction would affect NTG - Lower rental income, increased bad debts is misplaced - it has limited exposure to the villas/costas and has in fact increased it's fleet by 12% since in 2008

[bearraider] 19/6/2008 23:19

From full year accounts for 2007 showing EBITDA of £304.9m

(At this level interest was covered over 9 times) this is before purchase and sale of vehicles - NTG has always said it has flexibility to defer/cancel purchase of new vehicles and defer/cancel sales of vehicles and age the fleet if necessary, measures that could preserve what ever level of EBITDA is necessary to cover interest payments.

"Gross cash generation as reflected by EBITDA* increased to #304.9m (2006
- #210.0m). The Group had net capital expenditure on its fleet of #249.4m
representing the purchase of 26,000 new vehicles in the UK and 20,200 new
vehicles in Spain for a total cash outflow of #437.9m and the sale of 24,700 UK
vehicles and 12,200 vehicles in Spain that generated a cash inflow of #188.5m.

*EBITDA - Earnings before interest, taxation, depreciation and amortisation.

[queeny2] 19/6/2008 17:09

"
Please provide official source for
" certainly taking them thru 1.75 interest cover covenant"
"
very peremptory, bear? surely not suggesting i have invented a covenant! no idea where analyst got it from, or whether he is right btw.

[queeny2] 19/6/2008 17:05

No question of foreclosure, quite agree, madness.

My point about covenants is that the stock market gets windy if they are approached. Re the numbers, I use analyst estimate for y/e 4/09 of interest payments £46m, and same analyst reports EBIT/IC covenant as being minimum 1.75x. So an EBIT of £80 is 1.75x, and I can see them at or below £80m EBIT, but as I said I'm still wrestling with the maths, and how an ageing affects EBIT.

all imho, and still working on it. dyor. no advice intended. no idea how likely any of it is.

[bearraider] 19/6/2008 16:17

Institutions do not sell shares a few hundred at a time which the majority of sales are.

The biggest Institution last issued an INCREASED shareholding notice and sits just above a threshold as do several other institutional holders, There have been no holdings disposed of RNS's for months which would have been triggered if they were "dumping the stock"

[bearraider] 19/6/2008 16:12

Please provide official source for
" certainly taking them thru 1.75 interest cover covenant"

Nor is it rocket science to work out there are a handful of variables that can impact profits

Fall in rental rates - happened in 2006/early 2007 - profits still healthy
Fall in residuals (In LCV these are often linked to new vehicle availability and pricing so residual falls may be offset by new vehicle purchase price falls.)
NTG has already stated that if residuals prove uneconomic it is happy to age the fleet. Cash still flows from rental, rather than residual but offset by not needing to buy new vehicle.
Utilisation this can be managed on a short time scale simply by canceling purchases.

Whilst banks may increase conditions around loan if interest is not covered, they are hardly likely to foreclose on a fleet of 130.000 vehicles which would sit for months before disposal and then at very depreciated rates - rather than to allow the company to trade and receive a rental revenue stream

[bearraider] 19/6/2008 15:49

Where is the the bounce of 2.5% predicted for today that has failed to appear! we have a 2.5% fall instead or 5% out on prediction!

Anyone can see a real downtrend, where the bottom is(if there is one)will be the clever thing to find. It is also obvious that we have now entered a range where possible support exists and turn around is possible if this share is just oversold and the company is not in real trouble.

In my recent contact with IR at NTG after the normal ' we can't tell one shareholder what we don't tell everyone' I was reminded of several points.

1)The key one being that the market has to be informed of any significant change that affects the business.

2)To refer to the most recent statement (19th March) of current guidance to which point 1 above would apply - NONE has been given.

3) NTG share price was subject to market but was clearly not alone in being subject to a prolonged share price fall - with no need for point 1 above.

[zimzoot] 19/6/2008 15:44

One thing for sure...institutions dumping the stock :)

[queeny2] 19/6/2008 15:41

I said that. made no money out of it myself dammit. i still think the key is wondering under what circs it can go under, to start with, and then working backwards from there. steve's argument is that the profit can be expressed as the excess over depreciated value, where the depreciation matches the +ve cash flow over 2 1/2 years of ownership. he says residuals falling sharply, hitting profit directly, and utilisation and hire rates also must weaken, raising the depreciated price necessary to break even. I can see those two moves wiping out profits, crudely, certainly taking them thru 1.75 interest cover covenant, but still wrestling with the maths.

[gohunk] 19/6/2008 15:13

who is right ?
Your trusted source was also very right, was it you or wolt who said they had a trusted source who called this right down ?? have a feeling it was fairly well known it was gonna drop to be honest, sheeeet, even i got out well in advance, which makes a nice change, the key now is calling when to get back in i'd say....

[queeny2] 19/6/2008 14:56

he's right so far on the share price!

[bearraider] 19/6/2008 00:11

NTG will report on Ist July, the forward looking statement inc details of the last two months will also be eagerly appreciated. Confirmation the company met MKT expectations would also be well received,