Zigup Plc · LSE:ZIG
Zigup — Northgate — FY2019 Earnings Presentation
32 slides from Zigup's earnings presentation, Jun 25, 2019
Slide 1: Financial Year 2019 Results
Financial Year 2019 Results 25 June 2019
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) has been prepared by Northgate Plc (the “Company” and, together with its subsidiaries, the “Group”). For the purposes of this notice, “Presentation” means this document, its contents or any part of it, any oral presentation, any question or answer se
Slide 3: Agenda
Agenda 1. Overview Kevin Bradshaw 2. Financial Review Philip Vincent 3. Business Review Kevin Bradshaw 4. Q&A 3
Slide 4: 1. Overview
1. Overview Kevin Bradshaw, CEO 25 June 2019 4
Slide 5: Overview
Overview FY 2019 financial performance in line with guidance: • Double digit VOH1 growth; UK & Ireland 11.3%, Spain 10.9% • UK & Ireland rental margin 7.8%, Spain rental margin 19.7% • Free cash flow of £20.4m, an increase of £116.4m, driven by lower capex from fleet optimisation • Final dividend pr
Slide 6: 2. Financial Review
2. Financial Review Philip Vincent, CFO 25 June 2019 6
Slide 7: FY 2019 results in line with guidance
FY 2019 results in line with guidance FY 2019 FY 2018 % change Total Revenue 745.5 701.7 +6.2% • Double digit VOH2 growth • 9.9% growth in hire revenue Rental profit 64.3 52.5 +22.6% • Disposal revenue -1.1%, Rental margin % 12.4% 11.1% +130bps impacted by fleet ageing EBITDA 268.4 248.5 +8.0% Under
Slide 8: Rental profit and margin expansion
Rental profit and margin expansion Group rental margin % FY 2018 FY 2019 • Rental profits +22.6% YoY rental profit rental profit £52.5m £64.3m ➢ includes £20.2m benefit from revised depreciation rate3 changes 12.4% • Other headwinds as expected: Rental margin % ➢ Vehicle holding costs reflects OEM i
Slide 9: Improved free cash flow and lower capex
Improved free cash flow and lower capex FY 2019 FY 2018 Change £m £m £m EBITDA 268.4 248.5 19.9 Working capital 14.8 (8.0) 22.8 FY 2019 FY 2018 Net replacement capex2 201.3 185.9 Operating cash generation 283.2 240.5 42.7 Growth capex 42.6 125.1 Total net Capex (243.9) (311.0) 67.1 Total net capex 2
Slide 10: Clear cash benefits of fleet optimisation
Clear cash benefits of fleet optimisation Cash benefits of ageing Comparable ROCE of minimum-term • Fleet optimisation has delivered c.£60m of savings Illustrative small van – comparable ROCE in UK in net replacement capex 25% 20% 15% 10% Uses of cash Average Average 12 months 24 months 36 months 48
Slide 11: Bank facilities provide room for growth
Bank facilities provide room for growth Facility Drawn Headroom Maturity Borrowing £m £m £m Cost UK Bank 504 343 161 July 2021 2.6% • Borrowing cost 0.2% higher than FY Facility 2018, driven by higher leverage in Loan Notes 86 86 - Aug. 2022 2.4% prior year Other Loans 14 10 4 Nov. 2019 1.0% Total 6
Slide 12: Outlook & guidance FY 2020
Outlook & guidance FY 2020 GROUP HIRE REVENUE GROWTH: GROUP RENTAL PROFIT MARGIN: Low to mid single digit Approximately 50 basis points year-on-year growth % improvement year-on-year Guidance assumptions UK & Ireland UK & Ireland • Low single digit VOH1 growth • Strong opportunity driven by the appl
Slide 13: Outlook & guidance FY 2020 – Capex
Outlook & guidance FY 2020 – Capex TOTAL NET CAPEX: Other guidance information 15% - 20% higher in FY 2020 • Group disposal profits broadly flat YoY • Driven by growth capex, with closing fleet ➢ Adversely impacted by £5m depreciation higher than opening fleet unwind, offset by ➢ Strong PPUs • OEM p
Slide 14: 3. Business Review
3. Business Review Kevin Bradshaw, CEO 25 June 2019 14
Slide 15: Substantial progress since fleet optimisation strategy
Substantial progress since fleet optimisation strategy UK self-help is delivering Strong performance in Spain Minimum-term growth • Turnaround is well underway • Profitability remains strong • An essential part of a full rental proposition • Rental margins are increasing • Greater customer selectivi
Slide 16: Improved pricing and margin recovery in UK & Ireland
Improved pricing and margin recovery in UK & Ireland….. VOH1 and weekly hire rate Rental margin Weekly hire rate YoY growth % VOH1 +11.3% YoY 50 TOM 4% 12% 10.6% 10% 40 2% 8.5% 8% 7.1% VOH1 ‘000 30 0% 6.0% 0.4% 6% -0.4% -0.4% 20 -2% -1.5% 4% -2.4% -2.2% 10 -3.1% -4% 2% -3.7% 0 -6% 0% Q1'18 Q2'18 Q3'
Slide 17: …delivers strong momentum for FY 2020
…delivers strong momentum for FY 2020 FY 2019 FY 2018 Strong momentum going into FY 2020 % change £m £m • Strong margin opportunity, driven by technology Rental profit2 24.6 23.5 +4.8% transformation and ongoing self-help Disposal profit 10.8 9.6 +12.0% • Rental revenue underpinned by ownership Oper
Slide 18: Strong rental margins continue in Spain
Strong rental margins continue in Spain….. VOH1 and monthly hire rate Rental margin Monthly hire rate YoY growth % VOH1 +10.9% YoY 0% 20.6% 40 20% 18.6% -1% 16.6% 16.4% VOH ‘000 14.6% 14.5% 30 -1.5% -1.6% -2% -1.8% -2.0% 20 -2.2% 10% -2.7% -3% -3.1% 10 -3.3% -4% 0 -5% 0% Q1'18 Q2'18 Q3'18 Q4'18 Q1'1
Slide 19: …driving operating profit growth despite lower disposal profits
…driving operating profit growth despite lower disposal profits FY 2019 FY 2018 Strong momentum going into FY 2020 % change £m £m • Rental revenues underpinned by strong Rental profit2 39.7 29.0 +37.1% ownership conversion Disposal profit 6.4 10.0 -36.3% • Ongoing customer and product selectivity to
Slide 20: Northgate ROCE opportunity versus flexible and term-hire market
While Northgate has the opportunity to increase ROCE, the flexible and term-hire market operates at mid single digit returns Flexible and term-hire competitor1 ROCE% A • Northgate’s ROCE opportunities in NTG Northgate Group our core business: B C ➢ UK rental margin expansion D ➢ Maturity of fleet op
Slide 21: Consequently, our strategy is evolving
Consequently, our strategy is evolving….. 4. Optimise and 2. Selectively gain 3. Broaden our 1. Defend and grow increase participation share in minimum- provision of ‘capital- share in flexible hire in the disposals term hire light’ fleet solutions market • Focus on UK market share • Capture structu
Slide 22: Increased focus on 'capital-light' service solutions
…. with an increased focus on ‘capital-light’ service solutions Start of life In life End of life Core Rental 1. Sales: Used Vehicles Business Term Rental 20% 2. Fleet Management1 10% Key services & 3. Accident Management & Related Solutions 25% solutions: 4. Service, Maintenance & Repair Solutions
Slide 23: Our capital allocation priorities are clear
Our capital allocation priorities are clear Cash flow Approach Maximise profitability and capital Steady efficiency Core state cash 1 business Maximise EBITDA less net replacement capex generation Deploy organic growth capex Underpinned by efficient Dividend paid £’m 23.4 24.0 management Maintain 20
Slide 24: We remain focused on maximising shareholder value
We remain focused on maximising shareholder value • UK & Ireland ➢ strong opportunity for rental margin expansion ➢ attractive minimum-term growth • Spain ➢ selective minimum-term growth to complement strong flexible hire proposition • Maximise steady state cash flow to support progressive dividend
Slide 25: We remain focused on maximising shareholder value
We remain focused on maximising shareholder value • Current share price trades at a significant discount to net asset value • Board and management focused on addressing significant valuation discount • New Chairman, as you would expect, will focus on this as a priority alongside Board and management
Slide 26: Northgate
N@RTHGATE
Slide 27: Appendix
APPENDIX 27
Slide 28: Average Vehicles on Hire
Average Vehicles on Hire Average Vehicles on Hire (‘000) Year on year growth % FY 2018 FY 2019 FY 2018 FY 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 UK & 42.9 42.5 44.3 44.2 48.01 48.3 49.8 47.5 (6.5) (5.8) (2.2) 2.6 12.01 13.5 12.5 7.5 Ireland Spain 38.7 40.2 41.0 41.5 44.2 45.0 44.7 45.0
Slide 29: Country rental profit and margin expansion
Country rental profit and margin expansion UK & Ireland rental profit and margin % Spain rental profit and margin % FY 2018 FY 2019 FY 2018 FY 2019 rental profit rental profit rental profit rental profit £23.5m £24.6m £29.0m £39.7m 7.8% 19.7% 1. Depreciation rates reduced by 3% in Spain and Ireland,
Slide 30: Adjusted to reported reconciliation
Adjusted to reported reconciliation FY 2019 reconciliation Total revenue Operating profit Interest Profit before tax Taxation Profit after tax Underlying FY 2019 745.5 76.2 (15.1) 61.1 (9.5) 51.6 Intangible asset amortisation1 (0.7) (0.7) (0.7) Taxation credits2 0.5 0.5 Statutory FY 2019 745.5 75.5
Slide 31: Technical guidance and accounting changes
Technical guidance and accounting changes Tax The long-term effective tax rate is expected to be 18 - 20% The Group is exposed to movements in the exchange rate between Euro and Sterling. To illustrate, a Foreign €0.20 movement in the rate in either direction would have resulted in the following dif
Slide 32: Depreciation Rate Changes
Depreciation Rate Changes Previous Rate Changes: Rate Changes with effect from 1 May 2018: Cumulative Cumulative Year-on-year impact Year-on-year impact impact impact Group Group UK & Ire. Spain Group Group UK & Ire. Spain Year: Year: £m £m £m £m £m £m £m £m 30 April 2013 5.3 5.3 5.3 – 30 April 2019