Northgate PLC AGM Statement (0238B)

TIDMNTG

RNS Number : 0238B

Northgate PLC

18 September 2018

NORTHGATE PLC

First Quarter and AGM Trading Update

"Continuing strong VOH growth in the UK and Spain; margins in line with expectations"

Ahead of its Annual General Meeting to be held later today, Northgate plc ("Northgate", the "Company" or the "Group"), the leading specialist in light commercial vehicle hire in the UK, Spain and Ireland, provides a trading update for the period from 1 May 2018 to 31 August 2018, and Vehicle-on-Hire data for the three months ended 31 July 2018.

Group

During the period the Group performed in line with management's expectations, and growth in Vehicles on Hire (VOH) and rental margins in both the UK & Ireland and Spain remain on track to meet guidance for the full-year.

 
 Average Vehicles     FY'18    FY'18    FY'18   FY'18   FY'19 
  on Hire (VOH)          Q1       Q2       Q3      Q4      Q1 
------------------  -------  -------  -------  ------  ------ 
 UK & Ireland 
  ('000)               42.9     42.5     44.3    44.2    48.0 
 y-o-y % growth      (6.1%)   (5.8%)   (2.2%)    2.6%   12.0% 
 Spain ('000)          38.7     40.2     41.0    41.5    44.2 
 y-o-y % growth        8.1%    11.5%    14.2%   14.1%   14.3% 
 Group ('000)          81.6     82.7     85.3    85.7    92.2 
 y-o-y % growth        0.2%     1.9%     5.0%    7.8%   13.1% 
------------------  -------  -------  -------  ------  ------ 
 

UK & Ireland

VOH growth accelerated sharply during the period, with the momentum in the UK in the second half of last year continuing into the current year, reinforced by the VOH impact of the ex-TOM vehicles acquired just before the start of the year. Flat VOH in Ireland had a small negative impact on the total UK&I growth rate.

Closing VOH at the end of the first quarter was 48,400, 2,000 higher than at the start of the quarter and indicative of Northgate's continuing strength in the market. Closing VOH included 1,600 former TOM vehicles, slightly lower than previously guided, due to agreement not being reached with several ex-TOM customers regarding their transition to Northgate tariffs, and their vehicles consequently coming off hire. The majority of the remaining ex-TOM vehicles acquired were sold during the period, realising an attractive profit per vehicle.

VOH growth is expected to remain strong but the rate of growth year-on-year is expected to moderate gradually during the course of the year, reflecting the stronger growth in the second half of last year, driven in particular by the success of the minimum term product in the UK during that period. Ireland is expected to remain a slight drag on VOH growth. Full year average VOH growth expectations for the UK & Ireland remain high single-digit %, as previously guided.

Rental margins remained subdued during the period, as expected, with the positive impact of lower depreciation rates and the price rise across the majority of the flexible rental base at the start of the period offset by OEM price inflation, the higher proportion of minimum term customers in the VOH base, along with lower utilisation and some one-off costs in the period both caused by the integration of the ex-TOM vehicles into the rental fleet. Margins in Ireland were lower than the UK, as in the prior year.

Rental margins are expected to increase gradually during the course of the rest of the year, as the integration of the ex-TOM vehicles is completed, opportunities to increase minimum term hire rates are realised, utilisation improves in both the UK and Ireland, and increasing UK scale delivers operational leverage. Full year expectations are for the rental margin in the UK & Ireland to be broadly flat year-on-year, as previously guided.

Spain

The strong VOH growth seen during the second half of last year was sustained into the current period, driven by the continued success of Northgate's full range of flexible, minimum-term and bundled rental solutions. Closing VOH at the end of the quarter was 44,800, 2,100 higher than at the start of the quarter. Full year average VOH growth expectations for Spain remain double-digit %, as previously guided.

Rental margins stepped up in the period, as expected, mainly due to the impact of the depreciation rate change at the start of the year. Margins also reflected the operational leverage of higher VOH, offset by OEM price inflation and higher fixed costs due to the expansion of the business. These trends are in line with previous guidance, and expectations for significant expansion of full year rental margins in Spain, mainly due to the lower depreciation rates, remain unchanged.

Debt facilities

Shortly after the end of the quarter the Group agreed a GBP50 million extension of its Revolving Credit Facility, to increase financial headroom.

Next results

Northgate will announce its Interim Results for the six months ended 31 October 2018 on Tuesday 4 December 2018.

Contact details

For further information please contact:

Northgate plc [phone]

Kevin Bradshaw, Chief Executive Officer

Philip Vincent, Chief Financial Officer

David Boyd, Investor Relations [phone]

MHP [phone]

Andrew Jaques, Barnaby Fry

Simon Hockridge, Ollie Hoare

Notes to Editors:

Northgate plc is the leading light commercial hire business in the UK, Spain and Ireland 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.

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

www.northgateplc.com

ENDS

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END

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September 18, 2018 02:00 ET (06:00 GMT)