9 September 2010
INTERIM MANAGEMENT STATEMENT
Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain's leading specialist in light commercial vehicle hire, today publishes its Interim Management Statement covering the period 1 May 2010 to 8 September 2010.
Utilisation rates have continued to be our focus and we have achieved an average rate of 92% for the four months to the end of August, a 1% improvement on the 91% average achieved for the "equivalent" period last year. Due mainly to reduced demand over the summer period, we have taken the opportunity to further decrease the fleet from 60,900 at 30 April 2010 to 58,800 at the end of August 2010, with the average number of vehicles on hire down by c.500 compared to the comparable period last year. We expect the number of vehicles on hire to increase in the quarter to Christmas, in line with prior years' trends.
Hire revenue per rented vehicle has continued to improve, an increase of c.1% since the start of the financial year. We continue to target further progress in this area.
In vehicle disposals we have maintained the improvement in residual values that we achieved in the second half of the prior financial year. There was some pricing volatility over July and August but in the medium term we believe that the supply shortage of used commercial vehicles will support strong residual prices being obtained.
The restructuring of the UK business and the movement to a single Northgate brand is progressing in line with our expectations.
In Spain utilisation rates averaged in excess of 90% for the four months to 31 August 2010, a 4% improvement on the 86% average achieved for the same period last year. We expect to maintain this level throughout the remainder of the financial year. As planned, the fleet has decreased from 48,900 at 30 April 2010 to 47,600 at the end of August 2010, with the number of vehicles on hire in line with our plans.
Underlying hire revenue per rented vehicle in Spain has remained stable for the four months to 31 August 2010.
The used vehicle market continues to show the improvement in residual values that we achieved in the second half of the prior financial year. We expect these market conditions to continue for the remainder of our financial year. The residual values being achieved are better than planned.
Bad debts in Spain have continued to be a key area of focus and the four month period to 31 August 2010 shows a bad debt charge of €2.0m, a €1.4m improvement compared to €3.4m for the same period last year and in line with our planned levels.
As part of our development of the Spanish business we have decided to merge the two brands in Spain, Fualsa and Record, and trade under the Northgate brand, from 1 January 2011. This will better position our business with customers and provide annualised cost savings of c.€4.0m on an ongoing basis from that date. One-off costs associated with the implementation of the single brand strategy in Spain are anticipated to be in the region of €2-3m.
Deborah Stevenson was appointed Chief Financial Officer, as previously announced, and joined on 19 July 2010. Deborah will lead the debt refinancing discussions at the appropriate time. After this has been concluded we will undertake a search for a permanent Group Finance Director and consider both internal and external candidates.
Overall we are trading in line with our plans despite macroeconomic conditions continuing to adversely affect the Group's markets, with the outlook for the UK and Spanish economies remaining uncertain. Our focus therefore remains on hire rate improvement, efficient fleet management, further cost reductions and cash generation.
For further information, please contact:
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Bob Mackenzie, Chairman
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Bob Contreras, Chief Executive
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020 7357 9477
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Notes to Editors:
Northgate plc hires 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: