Northgate PLC Depreciation Rate Change Announcement (5328I)
22 March 2018 - 6:01PM
UK Regulatory
TIDMNTG
RNS Number : 5328I
Northgate PLC
22 March 2018
22 March 2018
NORTHGATE PLC
DEPRECIATION RATE CHANGE ANNOUNCEMENT
Northgate plc ("Northgate", the "Company" or the "Group"), the
UK, Spain and Ireland's leading specialist in light commercial
vehicle hire, announces a change to depreciation rates applicable
from 1 May 2018.
On 22 February 2018 the Group published its Q3 trading statement
and announced a new fleet optimisation strategy. This strategy
optimises the holding periods of all vehicles across the Group with
a focus on maximising shareholder returns.
This fleet optimisation strategy will deliver a more efficient
capital base for the business as net book values are allowed to
reduce with more moderate capital expenditure and funding
requirements in the short term supporting targeted increases in
ROCE. As previously announced the impact of this change in fleet
strategy will increase cash returns and improve the leverage
profile. The decision to extend holding periods, combined with
continued progress in increasing the volume of disposals through
the retail channel, will result in higher profits on disposal(1)
going forwards on the basis of current depreciation rates.
Following the 22 February 2018 announcement, the Board has
reviewed depreciation rates in line with accounting standards and
has made a decision to reduce depreciation rates by 3% in Spain and
Ireland and by 0.5% in the UK.
Indicative Adjustment
The reduction in depreciation rates will be applied
prospectively from 1 May 2018. Based on an indicative fleet size(2)
and assuming an equalised level of defleeting in each of the four
years (as set out in the appendix), the above changes will increase
reported operating profit by GBP17.4m in the year ending 30 April
2019. Applying the same methodology, the earlier recognition of
accounting profit will be unwound over the forthcoming years (as
set out in the appendix).
(1) Profits on disposal - This is a Non-GAAP measure used to
describe the adjustment in depreciation charge made in the year for
vehicles sold at an amount different to their net book value at the
date of sale (net of attributable selling costs).
2UK c48,000, Spain c47,000 and Ireland c4,000
For further information, please contact:
Northgate plc 01325 467558
Kevin Bradshaw, Chief Executive Officer
David Tilston, Interim Chief Financial Officer
MHP Communications 020 3128 8100
Andrew Jaques
Barnaby Fry
Simon Hockridge
Ollie Hoare
Notes to Editors:
Northgate plc is the leading light commercial vehicle hire
business in the UK, Ireland and Spain 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 commitment.
Further information regarding Northgate plc can be found on the
Company's website:
www.northgateplc.com
Appendix - Indicative impact
The table below shows the indicative impact of the new
depreciation policy based on the indicative fleet size and assuming
an equalised level of defleeting in each of the four years.
GBPm profit increase FY19 FY20 FY21 FY22 FY23
(decrease)
Spain
------ ------ ------- ------- -------
Fleet depreciation 15.4 15.4 15.4 15.4 15.4
------ ------ ------- ------- -------
Profit on disposal (2.1) (6.1) (10.1) (14.1) (15.4)
------ ------ ------- ------- -------
Operating profit 13.3 9.3 5.3 1.3 -
------ ------ ------- ------- -------
Year-on-year 13.3 (4.0) (4.0) (4.0) (1.3)
------ ------ ------- ------- -------
UK
------ ------ ------- ------- -------
Fleet depreciation 2.9 2.9 2.9 2.9 2.9
------ ------ ------- ------- -------
Profit on disposal (0.4) (1.3) (2.1) (2.9) (2.9)
------ ------ ------- ------- -------
Operating profit 2.5 1.6 0.8 - -
------ ------ ------- ------- -------
Year-on-year 2.5 (0.9) (0.8) (0.8) -
------ ------ ------- ------- -------
Ireland
------ ------ ------- ------- -------
Fleet depreciation 1.9 1.9 1.9 1.9 1.9
------ ------ ------- ------- -------
Profit on disposal (0.3) (0.8) (1.4) (1.9) (1.9)
------ ------ ------- ------- -------
Operating profit 1.6 1.1 0.5 - -
------ ------ ------- ------- -------
Year-on-year 1.6 (0.5) (0.6) (0.5) -
------ ------ ------- ------- -------
Group
------ ------ ------- ------- -------
Fleet depreciation 20.2 20.2 20.2 20.2 20.2
------ ------ ------- ------- -------
Profit on disposal (2.8) (8.2) (13.6) (18.9) (20.2)
------ ------ ------- ------- -------
Operating profit 17.4 12.0 6.6 1.3 -
------ ------ ------- ------- -------
Year-on-year 17.4 (5.4) (5.4) (5.3) (1.3)
------ ------ ------- ------- -------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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