Northgate Regulatory News (NTG)

9 Jan 2007 07:00

Northgate PLC09 January 2007 9 January 2007 NORTHGATE PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2006 Northgate plc ("Northgate", the "Company" or the "Group"), the UK and Spain'sleading specialist in light commercial vehicle hire, announces its interimresults for the half-year ended 31 October 2006. Highlights: •Group revenue increased by 48% to £262.1m (2005 - £176.9m). •Profit before tax up by 34% to £37.8m (2005 - £28.3m). •Underlying profit before tax* up by 38% to £39.7m (2005 - £28.7m). •Adjusted earnings per share* up by 25% to 39.1p (2005 - 31.3p). •Interim dividend increased by 11% to 10.0p (2005 - 9.0p). •Excellent contributions from recent acquisitions - Arriva Vehicle Rental in the UK and Record Rent in Spain. •Successful restructuring of the UK business. •Fleet size of 65,300 vehicles in the UK and 51,000 vehicles in Spain. •Utilisation of 91% in UK and 90% in Spain. *Stated before amortisation of intangible assets Philip Rogerson, Chairman, commented: "Trading in both the UK and Spain is inline with expectations and the Board remains confident of a satisfactory outcomefor the full financial year. Northgate continues to retain its leading positionsin commercial vehicle rental in both the UK and Spain and as a result isconfident of maintaining growing returns for shareholders." Full statement and results attached. For further information, please contact: Northgate plc 01325 467558Steve Smith, Chief ExecutiveGerard Murray, Finance Director Hogarth Partnership Limited 020 7357 9477Andrew JaquesBarnaby FryCharlie Field Notes to Editors: Northgate plc rents light commercial vehicles and sells a range of fleetproducts to businesses via a network of hire companies in the UK, Republic ofIreland and Spain. Its flexible vehicle products offer businesses a one stopsolution for all of their commercial vehicle requirements. Further information regarding Northgate plc can be found on the Company'swebsite: http://www.northgateplc.com Chairman's Statement In the six months to 31 October 2006, the Group continued to execute the keyelements of its three year Strategic Plan, announced in January 2006, and aimedat maintaining annual double-digit earnings growth. In the UK the Strategic Plan envisaged utilising the capacity in the Group'snetwork to increase the fleet by both selective acquisitions, in what is still afragmented market, and through organic growth. At the same time the introductionof fleet management products was aimed at enhancing returns. The acquisition of Arriva Vehicle Rental ("AVR") on 3 February 2006 was in linewith this stated strategy. The integration of AVR was completed at the beginningof this financial year enabling a restructuring of the UK business to commence.This restructuring, which is now complete, has created a functional, rather thangeographic, management structure for the business. As well as improvingproductivity, as evidenced by higher utilisation in the period, it leaves usbetter able to deliver improved and consistent customer service. In May 2006 the Group successfully concluded the purchase of the remaining 51%of Record Rent a Car S.A. ("Record" or "Record Rent") thus strengthening itsleading position in the growing Spanish vehicle rental market. Demand for ourproduct in Spain continues to be strong and we remain confident of achieving the15% annual fleet growth targeted in our Strategic Plan. Having now appointed asingle management team we expect to make further progress in integrating theoperations of our two Spanish businesses in the second half of the financialyear. The Group's financial results for the six months to 31 October 2006 aresummarised as follows: • Vehicle rental and associated revenue up by 48% to £262.1m (2005 - £176.9m); • Underlying profit before tax* up by 38% to £39.7m (2005 - £28.7m); and • Adjusted earnings per share* up by 25% to 39.1p (2005 - 31.3p). *Stated before amortisation of intangible assets. The Board has declared an 11% increase in the interim dividend to 10p per share(2005 - 9p) indicating its confidence in the Group's future prospects. Thisdividend is payable on 8 February 2007 to shareholders on the register at theclose of business on 19 January 2007. As announced on 14 November 2006, Martin Ballinger retired from the Board due toill health. His personal contribution to the success of the business wassignificant and my colleagues and I wish to express our warmest thanks to him. Ihave assumed the Chairmanship of the Group on a temporary basis until such timeas a successor is appointed. Results UK revenue increased by 23.9% reflecting the strategic acquisitions of FleetTechnique Limited ("FTL") and AVR coupled with organic growth represented by anincrease of 3.4% in vehicles on hire. The UK fleet size, as at 31 October 2006,was 65,300 vehicles (2005 - 52,400). Margins have improved as a consequence ofobtaining operational gearing benefits from integrating the AVR fleet, achievingutilisation of 91% and as a result of residual values being better than theprior period. These benefits have been offset to some extent by a lower averagehire rate and by costs associated with implementing the restructuring of the UKbusiness. From now onwards, the Spanish operations will be reported on as one enlargedbusiness. The current period's results therefore represent both Fualsa andRecord Rent, whereas the prior period financial results represent Fualsa only.The Group's share of profit after tax from its investment in Record for theprior period is shown in the consolidated income statement as 'Share of profitof associate'. Spain's revenue has increased by 151% as a result of theacquisition of the remaining 51% of Record Rent in May 2006 and further organicfleet growth in both Record Rent and Fualsa, the Group's original Spanishsubsidiary. The fleet size of the enlarged Spanish business was 51,000 vehiclesat 31 October 2006. The blended operating margin for the enlarged Spanishbusiness is 21.6% (2005 - 22.9%). The composition of Group revenue and profit from operations is set out below: 2006 2005 £000 £000RevenueUK Rental 170,609 143,218UK Fleet management 6,799 -Spain Rental 84,714 33,772 ----------- ----------- 262,122 176,990 ----------- -----------Profit from operationsUK Rental 36,450 29,850UK Fleet management 370 -Spain Rental 18,294 7,723Intangible amortisation (1,969) (374) ----------- ----------- 53,145 37,199 ----------- -----------Operating margins (excluding intangible amortisation)UK Rental 21.4% 20.8%UK Fleet management 5.4% -Spain Rental 21.6% 22.9% The Group's results have been impacted by the increasing costs of debt financefor both Sterling and Euros with Euribor increasing by 0.75% and Sterling Liborby 0.5% since the start of the financial year. In December 2006 the Groupconcluded a Private Placement in the United States of America by issuing aseries of unsecured loan notes with maturity periods of between seven and tenyears in order to raise $335m of new finance. All of this new finance wasimmediately converted to a Sterling equivalent debt of £175m and the Groupentered into a series of financial instruments to fix the rate of interest at aneffective rate of 5.78% p.a. for the period of the loan notes. This exercise hasdiversified the Group's source of debt finance and also increased the length ofthe overall term of its debt repayment profile. If these loan notes had been inissue at 31 October 2006 the proportion of the Group's net debt covered by fixedrate loans on a pro forma basis would have been 50%. Operational Review United Kingdom and Republic of Ireland In the six months to 31 October 2006, the Group has benefited from the synergiesarising out of the acquisition and integration of AVR and from restructuring thenetwork in order to produce further efficiencies. The acquisition of AVR became unconditional on 3 February 2006 and in the threemonths to 30 April 2006 the acquired business was integrated into the core UKoperation. This involved a net reduction of some 21 locations and 400 employeesacquired with the AVR business. Customer retention since the acquisition, boththrough the transitional phase and subsequently, has been excellent. Theportfolio of non-utilised properties that arose from the integration process hassteadily been reduced such that by 31 December 2006 there remained only sevenleasehold properties to be disposed. In June 2006 the Group announced a restructuring of its UK business. Thisrestructuring has streamlined the number of hire companies from 35 to 20 to givefewer, but larger, business units, whilst retaining the existing geographicnetwork of locations. The restructuring was complete by the end of the calendaryear 2006. The costs associated with the streamlining changes effected by 31October 2006 and recognised in the income statement were £0.5m. The Boardexpects a number of efficiencies to accrue in future periods as a result of thisrestructuring, the most important being an overall improvement in fleetutilisation. The current period saw some improvement with an average fleetutilisation in the UK of 91% (2005 - 90%). The average number of vehicles on hire has increased by 3.4% since the beginningof the financial period broadly in line with the assumption in the Group'sStrategic Plan of 5% per annum growth in the UK. The growth is made up of acombination of the improvement in the utilisation rate and growth in the vehiclefleet. Vehicles on hire in the UK have continued to grow throughout November andDecember 2006 in line with our expectations. Competitive pressures on hire rates have always existed in the UK market placebut were particularly evident in the prior financial year when the averagerevenue per vehicle decreased by 3%. Whilst the situation improved from February2006 with the decline in hire rates abating, some of the reduction in rates inthe prior financial year automatically fed through to this period. In additionto this effect, the acquired AVR business had lower average hire rates than thecore Northgate business because of its different mix of fleet and customers.Consequently it was expected that the assimilation of this business would lowerthe overall hire rate being achieved in the UK. The combined effect of these twoissues is that hire rates are, as expected, on average 3% lower than in theprior period. We sold 11,400 vehicles (2005 - 11,300) in the six months under review. TheGroup has continued to concentrate on developing its retail and semi-retailchannels to market in order to maximise the residual values that it can achieveon disposal. The proportion of vehicle disposals that were made through thesechannels increased to 16% (2005 - 11%) exceeding the Group's medium termobjective of 15%. The market for used light commercial vehicles has beenfavourably influenced by the shortage of new product in some sectors of themarket. This is as a consequence of the majority of manufacturers delaying theintroduction of their new vehicle models in order to introduce Euro IV compliantengines with regard to fuel emissions. The new models were introduced towardsthe end of the period being reported. As a result, fleet operators retained moreof their existing fleet than normal in order to acquire the Euro IV compliantmodels when they became available. The combined effect of favourable marketconditions created by the short supply of used product and the Company'sachievement in increasing the proportion of retail and semi-retail sales, gaverise to a profit of £2.4m (2005 - loss of £0.4m) which under IAS 16 was adjustedagainst the vehicle depreciation charge for the period. This is the first six month period that the Group has included the results fromFleet Technique Limited ("FTL"), a fleet management company acquired in January2006. The initial priority for this business was the relocation of itsoperations to more suitable premises, which was completed in August 2006.Consequently, further actions to achieve some of the planned synergies betweenthe Group's UK rental operations and FTL were deferred until after thisrelocation was complete. Nevertheless the £0.4m profit from operations of FTLwas in line with the Board's expectations for the business and we remainconfident of a more significant contribution in the future. Continental Europe The Group acquired the remaining 51% of the share capital of Record Rent on 11May 2006 for a consideration of €72.7m (£49.8m) to add to the initial 49% of theshare capital that had been acquired on 5 August 2005. The total considerationpaid for Record Rent was, therefore, €128.1m (£88.7m). This acquisitionstrengthened the Group's position as the leader in the growing Spanish vehiclerental market with a combined fleet size for Fualsa and Record of 47,000vehicles at that time. Following the acquisition of Record Rent, a process was begun to consider bothinternal and external candidates for the position of CEO of the enlarged Spanishbusiness. In September 2006 Fernando Pemartin, formerly Managing Director ofRecord Rent, was appointed as CEO for Spain. Subsequent to his appointment hehas structured a management team to take the business forward. Certain vehiclepurchasing and disposal synergies are currently being achieved but some of themore substantial efficiencies will only be realised when Fualsa and Recordoperate on common IT platforms. This is expected to be achieved in the secondhalf of the calendar year 2007. Since May 2006 the fleet size has increased by 8.5% to 51,000 vehicles in linewith the Board's expectations of 15% per annum organic growth. At the same timefleet utilisation has averaged over 90% (2005 - 88%). Hire rates are notexperiencing the same competitive pressures as the UK since the market in Spainis growing at a much faster rate. The residual value market remains steady andin line with the levels experienced at the end of the last financial year. Thedisposal proceeds for the 6,300 vehicles sold (2005 - 2,200) were therefore inline with our expectations and gave rise to a profit on disposal of £0.96m (2005- £0.98m) which has been adjusted against vehicle depreciation in accordancewith IAS 16. Whilst there have been no locations added to the network in the period, we haverelocated our branches in Cadiz and Malaga to larger premises and have furtherrelocations planned to accommodate future growth. Current Trading and Outlook Trading in both the UK and Spain is in line with expectations and the Boardremains confident of a satisfactory outcome for the full financial year. Consolidated Income Statementfor the six months ended 31 October 2006 Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) Notes £000 £000 £000 Revenue 2 262,122 176,990 372,609Cost of sales (177,102) (116,326) (248,051) --------- --------- --------- Gross profit 85,020 60,664 124,558 --------- --------- ---------Administrative expenses(excluding amortisation) (29,906) (23,091) (50,733)Amortisation (1,969) (374) (1,227) --------- --------- ---------Total administrative expenses (31,875) (23,465) (51,960) --------- --------- --------- --------- --------- --------- Profit from operations 2 53,145 37,199 72,598 Investment income 1,072 1,009 2,047Finance costs (16,443) (11,108) (22,125) --------- --------- ---------Share of profit beforetaxation of associate - 1,702 4,964Share of taxation of associate - (511) (1,422) --------- --------- ---------Share of profit of associate - 1,191 3,542 --------- --------- --------- --------- --------- ---------Profit before taxation 37,774 28,291 56,062 Taxation 3 (11,200) (8,345) (15,468) --------- --------- --------- Profit for the period 26,574 19,946 40,594 --------- --------- --------- Profit for the period is wholly attributable to equity holders of the parent Company. All results arise from continuing operations. Basic earnings per Ordinaryshare 4 37.1p 30.7p 61.1p Diluted earnings per Ordinaryshare 4 37.0p 30.5p 60.6p Consolidated Statement of Recognised Income and Expensefor the six months ended 31 October 2006 Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Foreign exchange differences on retranslation ofnet assets of subsidiary undertakings (2,281) 365 1,303Foreign exchange differences on retranslation ofinterest in associate - (237) 413Foreign exchange differences on revaluation reserve (11) - -Net foreign exchange differences on long termborrowings held as hedges 1,875 (91) (1,571)Net fair value gains on cash flow hedges 435 1,027 2,956Share options fair value amount (charged) crediteddirectly to equity (202) 63 20Net deferred tax (charge) credit recogniseddirectly in equity (159) 807 882Actuarial (losses) gains on defined benefit pensionscheme (112) - 356 -------- -------- --------- Net (expense) income recognised directly in equity (455) 1,934 4,359 Profit attributable to equity holders 26,574 19,946 40,594 -------- -------- ---------Total recognised income and expense for the period 26,119 21,880 44,953 -------- -------- --------- Consolidated Balance Sheet31 October 2006 31.10.06 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Non-current assetsGoodwill 72,247 12,599 44,582Other intangible assets 28,288 4,533 18,208 -------- -------- ---------Property, plant and equipment:vehicles for hire 812,753 545,517 643,824Other property, plant and equipment 65,039 40,080 50,236 -------- -------- ---------Total property, plant and equipment 877,792 585,597 694,060 -------- -------- ---------Interest in associate - 38,915 41,927 -------- -------- --------- 978,327 641,644 798,777 -------- -------- ---------Current assetsInventories 8,065 8,443 8,918Trade and other receivables 164,144 99,728 116,939Cash and cash equivalents 12,231 7,288 24,048 -------- -------- --------- 184,440 115,459 149,905 -------- -------- --------- Non-current assets held for sale 18,110 10,588 14,705 -------- -------- --------- TOTAL ASSETS 1,180,877 767,691 963,387 -------- -------- --------- Total current liabilities 207,022 77,023 107,323 Non-current liabilitiesLong term borrowings 606,496 441,716 518,485Deferred tax liabilities 28,034 9,270 15,846Retirement benefit obligation 1,429 - 1,444 -------- -------- --------- 635,959 450,986 535,775 -------- -------- --------- TOTAL LIABILITIES 842,981 528,009 643,098 -------- -------- --------- NET ASSETS 337,896 239,682 320,289 -------- -------- --------- EquityShare capital 3,555 3,223 3,538Share premium account 66,746 63,980 64,998Revaluation reserve 1,043 1,054 1,054Merger reserve 67,463 4,721 67,463Own shares reserve (3,755) (2,582) (3,331)Hedging reserve 3,391 1,027 2,956Translation reserve 1,221 1,519 1,627Retained earnings 198,232 166,740 181,984 -------- -------- --------- TOTAL EQUITY 337,896 239,682 320,289 -------- -------- --------- Total equity is wholly attributable to equity holders of the parent Company. Consolidated Cash Flow Statementfor the six months ended 31 October 2006 Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) Notes £000 £000 £000 Net cash from operating activities 6(a) 104,582 72,250 172,178 -------- -------- --------- Investing activitiesInterest received 744 1,046 1,931Proceeds from disposal of vehicles forhire 91,591 69,795 150,849Purchases of vehicles for hire (205,433) (151,023) (306,273)Proceeds from disposal of otherproperty, plant and equipment 1,523 218 3,307Purchases of other property, plant andequipment (5,348) (3,804) (12,208)Purchases of intangible assets (741) (41) (927)Payment of Fualsa deferredconsideration (10,290) - -Acquisition of subsidiary undertakings,including net cash and bank overdraftbalances acquired 7 (49,540) - (130,047)Purchase of interest in associate - (37,961) (37,972) -------- -------- --------- Net cash used in investing activities (177,494) (121,770) (331,340) -------- -------- --------- Financing activitiesDividends paid (9,848) (7,665) (13,459)Repayments of obligations under financeleases (38,828) (21,260) (36,994)Repayments of bank loans and otherborrowings - (48,660) -Increase in bank loans and otherborrowings 105,753 94,258 130,988Proceeds from issue of share capital 1,765 1,450 65,525Proceeds from sale of own shares 23 - 511Payments to acquire own shares (447) (111) (1,371) -------- -------- --------- Net cash from financing activities 58,418 18,012 145,200 -------- -------- --------- Net decrease in cash and cashequivalents (14,494) (31,508) (13,962) Cash and cash equivalents at thebeginning of the period 20,259 34,057 34,057 Effect of foreign exchange movements (227) 46 164 -------- -------- --------- Cash and cash equivalents at the end ofthe period 6(b) 5,538 2,595 20,259 -------- -------- --------- Consolidated Statement of Changes in Equityfor the six months ended 31 October 2006 Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) £000 £000 £000Amounts attributable to equity holdersof the parent CompanyForeign exchange differences onretranslation of net assets ofsubsidiary undertakings (2,281) 365 1,303Foreign exchange differences onretranslation of interest in associate - (237) 413Foreign exchange differences onrevaluation reserve (11) - -Net foreign exchange differences onlong term borrowings held as hedges 1,875 (91) (1,571)Net fair value gains on cash flow hedges 435 1,027 2,956Share options fair value amount (charged) credited directly to equity (202) 63 20Actuarial (losses) gains on definedbenefit pension scheme (112) - 356Net deferred tax (charge) creditrecognised directly in equity (159) 807 882 -------- -------- ---------Net (expense) income recogniseddirectly in equity (455) 1,934 4,359Profit attributable to equity holders 26,574 19,946 40,594 -------- -------- ---------Total recognised income and expensefor the period 26,119 21,880 44,953Dividends (9,853) (7,645) (13,437)Issue of Ordinary share capital (netof expenses) 1,765 1,450 65,525Net increase in own shares held (424) (111) (860) -------- -------- ---------Net changes in total equity 17,607 15,574 96,181 -------- -------- --------- Opening total equity 320,289 225,031 225,031Transitional adjustment on adoptionof IAS 32 & IAS 39 - (923) (923) -------- -------- ---------Opening total equity after adoptionof IAS 32 & IAS 39 320,289 224,108 224,108 -------- -------- --------- -------- -------- ---------Closing total equity 337,896 239,682 320,289 -------- -------- --------- Unaudited Notes 1. Basis of preparation and accounting policies The interim financial information for the six months ended 31 October 2006,including comparative financial information, has been prepared on the basis ofthe accounting policies set out in the last annual report and accounts, and inaccordance with International Financial Reporting Standards ("IFRS"), as issuedby the International Accounting Standards Board, that are endorsed, or areexpected to be endorsed, by the European Commission. Northgate plc ("the Group") has adopted all IFRS in issue, with the exception ofIAS 34 (Interim Financial Reporting) which is not mandatory for UK groups. The accounts for the year ended 30 April 2006 were prepared under IFRS and havebeen filed with the Registrar of Companies. They contained an unqualified auditreport and did not include a statement under Section 237 (2) or (3) of theCompanies Act 1985. 2. Segmental analysis Business segments For management purposes, the Group currently has one material business segment, which is the hire of vehicles. As such, the Directors consider that this is the only business segment on which the Group should report. Geographical segments The Group's operations are located in the United Kingdom, Republic of Ireland and Spain. The Directors consider the United Kingdom and Republic of Ireland to be a singlegeographical segment on the grounds that the results and net assets ofoperations in the Republic of Ireland are immaterial to the Group as a whole. Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) £000 £000 £000 United Kingdom and Republic of Ireland 177,408 143,218 300,771Spain 84,714 33,772 71,838 -------- -------- ---------Total revenue 262,122 176,990 372,609 -------- -------- --------- United Kingdom and Republic of Ireland 35,791 29,744 58,149Spain 17,354 7,455 14,449 -------- -------- ---------Total profit from operations 53,145 37,199 72,598 -------- -------- --------- 3. Taxation The charge for taxation for the six months to 31 October 2006 is basedon the estimated effective rate for the year. 4. Earnings per share Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) (a) Basic and diluted earnings per share The calculation of basic and diluted earnings per share isbased on the following data: Earnings £000 £000 £000 Earnings for the purposes of basic and diluted earnings per share, being net profit attributable to equity holdersof the parent Company 26,574 19,946 40,594 -------- --------- --------- Number of shares Number Number Number Weighted average number of Ordinary shares for the purposes of basic earnings per share 71,631,826 64,981,565 66,481,499 Effect of dilutive potential Ordinary shares:- share options 242,103 489,231 464,060 -------- --------- ---------Weighted average number of Ordinary shares for the purposes of diluted earnings per share 71,873,929 65,470,796 66,945,559 -------- --------- --------- Basic earnings per share 37.1p 30.7p 61.1pDiluted earnings per share 37.0p 30.5p 60.6p (b) Earnings per share before amortisation and non-recurring restructuring costs £000 £000 £000 Earnings for the purpose of basic anddiluted earnings per share (above) 26,574 19,946 40,594Amortisation (net of tax) 1,427 374 1,227Non-recurring restructuring costs (netof UK corporation tax at 30%) - - 1,825 -------- --------- ---------Earnings for the purposes of basic anddiluted earnings per share before 28,001 20,320 43,646amortisation and non-recurring restructuring costs -------- --------- ---------Basic earnings per share before amortisation and non-recurring restructuring costs 39.1p 31.3p 65.7p Diluted earnings per share before amortisation and non-recurring restructuring costs 39.0p 31.0p 65.2p 5. Dividends The proposed interim dividend of 10p per Ordinary share was approved bythe Board of Directors on 8 January 2007 and has not been included as aliability as at 31 October 2006. 6. Notes to the consolidated cash flow statement (a) Net cash from operating activities Six months Six months Year to to 31.10.06 to 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Profit from operations 53,145 37,199 72,598 Adjustments for:Depreciation of property, plant and equipment 98,022 65,674 136,209Exchange differences - - (16)Amortisation of intangible assets 1,969 374 1,227Gain on disposal of property, plant and equipment (695) (2) (209)Defined benefit pension credit (236) - (386)Share options fair value amount (charged) credited directly to equity (202) 63 20 ------- -------- --------- Operating cash flows before movements inworking capital 152,003 103,308 209,443 (Increase) decrease in inventories 3,592 (1,725) (2,191)Increase in receivables (10,401) (6,195) (1,131)(Decrease) increase in payables (13,093) (3,948) 3,139 ------- -------- --------- Cash generated by operations 132,101 91,440 209,260 Income taxes paid (11,282) (8,658) (15,156)Interest paid (16,237) (10,532) (21,926) ------- -------- --------- Net cash from operating activities 104,582 72,250 172,178 ------- -------- --------- (b) Cash and cash equivalents Cash and cash equivalents consist of cash in hand and at bank, investments in money market instruments and bank overdrafts. Bank overdrafts are included within cash equivalents on the grounds that they are repayable on demand and form an integral part of the Group's cash management. Cash and cash equivalents, as described above, included in the cash flow statement comprise the following balance sheet amounts: 31.10.06 31.10.05 30.4.06 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Cash in hand and at bank 10,348 5,500 22,201Short term investments 1,883 1,788 1,847 -------- -------- ---------Gross cash and cash equivalents as reported 12,231 7,288 24,048Bank overdrafts (6,693) (4,693) (3,789) -------- -------- ---------Net cash and cash equivalents 5,538 2,595 20,259 -------- -------- --------- 7. Acquisitions of subsidiary undertakings (a)Record Rent a Car S.A. On 5 August 2005, the Group acquired a 49% share in Record Rent a Car S.A.("Record"), a Company registered in Spain, for a cash consideration, payable tothe vendors, of €54,800,000. In accordance with IAS 28, this investment,including associated costs, was accounted for as an associate under the equitymethod of accounting. On 11 May 2006, the Group acquired the remaining 51% of the issued share capitalof Record for a consideration of €72,700,000, payable to the vendors, under theshare purchase agreement. The transaction has been accounted for under thepurchase method of accounting in the six months ended 31 October 2006. The detail relating to the 100% share of Record is shown below: (Unaudited) £000 Fair value of net assets acquired 59,106Goodwill 29,584 --------Acquisition cost (including expenses) 88,690 -------- Fair value of consideration:Cash payment for 100% share of Record (including expenses) 88,690Net cash with subsidiary undertaking acquired (299)Purchase of investment in associate as at 30 April 2006 (38,385) --------Cash outflow in the period on acquisition of Record 50,006 -------- (b) Northgate (AVR) Limited On 3 February 2006, the Group acquired the entire issued share capital ofNorthgate (AVR) Limited (formerly Arriva Vehicle Rental Limited) ("AVR") for anoriginal cash consideration of £50,316,000, including goodwill of £28,055,000.The transaction was accounted for in accordance with the purchase method ofaccounting in the year ended 30 April 2006. In the six months ended 31 October 2006, the Group paid a further £3,699,000 tothe vendor, under the terms of the sale and purchase agreement, and further fairvalue adjustments were made, totalling £4,028,000, as follows: (Unaudited) £000 Fair value of net assets acquired as originally stated in2006 Annual Report 22,261Further fair value adjustments made 4,028 ---------Fair value of net assets acquired 26,289 --------- Acquisition cost (including expenses) as originally statedin 2006 Annual Report 50,316Net consideration adjustments with the vendor in the period 3,699 ---------Acquisition cost (including expenses) 54,015 --------- Goodwill as originally stated in 2006 Annual Report 28,055 --------- Goodwill as at 31 October 2006 27,726 --------- Proceeds from disposal of intangible assets to the vendor 4,165Consideration adjustment offset against disposal proceeds ofintangible assets (3,699) ---------Net cash inflow in the period relating to the acquisition ofAVR 466 --------- In both of the above acquisitions, the fair values represent the Directors' current estimates of the net assets acquired. In accordance with IFRS 3, the values attributed may be revised as further information becomes available. This information is provided by RNS The company news service from the London Stock Exchange