During 2018 much work has been undertaken to position the Group to deliver sustainable long term growth.

Our core objective is to grow shareholder value and we will do this by developing a business capable of delivering long term, sustainable and growing cash flows.

Andrew Page Chairman

During 2018 much work has been undertaken to position the Group to deliver sustainable long term growth in revenues, profits and shareholder returns. Our work has involved bringing in new senior management and supporting and encouraging the executive team through the development and implementation of a long term strategy focused on delivering shareholder value. New and, we believe, higher quality revenue streams have been developed and actions have been taken to better manage our businesses on a day to day basis. The impact of some of these actions has dampened short term earnings but the Board is confident that the changes which have been made position Northgate well to deliver good progress going forwards.

During the year a comprehensive strategic review was undertaken together with a thorough analysis of how returns from our investment in vehicles can be maximised. From this work our revised strategy evolved and this strategy will, we believe, deliver improved performance and is more closely aligned with delivering good returns for all of our shareholders. Further details of this are contained in the Chief executive's review.


Revenues grew by 5% to £702m (2017: £667m), Group underlying operating profit was £68.3m (2017: £84.6m) and underlying earnings per share were 34.8p (2017: 47.3p). The decline in Group operating profit resulted from a number of factors, principally a lower level of rental profit in the UK and Ireland together with significantly lower levels of disposals profit of used vehicles across the Group. A further impact was felt from new vehicle and other cost inflation.

Against this backdrop it is noteworthy that our Spanish business continued its excellent performance with rising VOH and increased rental profits. Furthermore, it is encouraging to see the early signs of an improved performance in the UK, with the fourth quarter delivering growth in VOH to yield a year end VOH volume almost 7% ahead of the previous year. This improving trend together with some upward revisions in hire rates should help to deliver improved UK rental profit performance in 2019.

The impact of lower profit from used vehicles negatively impacted the profits in both Spain and the UK. This is principally a reflection of the sale of younger vehicles in previous years. Going forward, under the Group's fleet optimisation programme, we expect to age our fleet more and this should lead to improved returns.

On a "steady state" basis Northgate tends to generate high levels of free cash flow. However, as the Group develops its business, with increasing VOH, the capital investment required for this expansion will absorb a significant proportion of free cash flow. We believe that, with its current capital structure, targeted leverage at 1.5x – 2.5x and the progressive dividend policy with a cover range of 2.0x – 3.0x the Group is well placed to continue to develop its business, grow VOH and deliver increased profits and returns.


The Group is in a strong financial position with the current bank facilities recently renegotiated to give a longer duration and more flexible leverage covenants. For the year ended 30 April 2018, we are proposing a final dividend of 11.6p (2017: 11.6p) which, together with the interim dividend of 6.1p (2017: 5.7p), gives a full year dividend of 17.7p (2017: 17.3p) representing an increase of 0.4p on 2017. If approved by shareholders, the final dividend will be paid on 21 September 2018 to shareholders on the register on 10 August 2018.

Board changes

During the year the previous CFO, Paddy Gallagher, left the business. Since September 2017 David Tilston has served as the Group's Interim CFO. I am pleased to report that Philip Vincent has been appointed as Group CFO with effect from 16 July 2018. David Tilston will remain in the business for a short period in order to facilitate an effective handover.

Philip was most recently at SABMiller plc where he was Regional Finance Director, Asia Pacific and previously Director of Group Finance and Control. Prior to this Philip was for three years CFO of BBC Worldwide, which was the main commercial arm of the BBC, following a range of senior financial roles there.

I am delighted to welcome Philip Vincent to the Board of Northgate. He brings a wealth of relevant financial and commercial experience gained in a wide range of senior roles, in the UK and internationally, which will enable him to make a significant contribution to Northgate's future success. I would like to thank David Tilston for undertaking the role of CFO on an interim basis.

The way forward

Our core objective is to grow shareholder value and we will do this by developing a business capable of delivering long term, sustainable and growing cash flows, achieved through a disciplined approach to deployment of capital and a rigorous focus on execution. Our touchstones will be cash flow and returns on investment.

As set out in our Chief Executive's report, the potential market for Northgate's product and services is significant and we are determined to develop and grow our business to access more of this landscape. The strategic review, which was conducted by our executive team with input from external consultants, demonstrated the potential for Northgate to grow. It is pleasing to see the growth in our minimum term hire business in both Spain and the UK. The quality of earnings from this product is more predictable and represents an enhancement. We believe that there is significant opportunity to grow this segment alongside our traditional flexible rental business.

Our people

I would like to record the Board's thanks to all of our 3,000 team members throughout Northgate. They are the people who, day in and day out, make sure that our customers receive a superb service and we are most grateful to them.


Much work has been done at Northgate over the past 12 months to position the business for further profitable growth and development.

We now have strong executive teams in both the UK and Spain, our Irish business has been incorporated under the UK executive team and we have a clear strategy to grow our revenues, profits and returns.

We ended 2018 with good momentum and 2019 has started well. I am confident that a fully focused Northgate team can continue the progress and deliver improving performance for the benefit of all of our shareholders.

Andrew Page


25 June 2018