Greyinvestor
22 Feb 2018
EPS P.s management seems to be saying that maximum EPS next year will be 56p, less further impacts from change in policy. Hence me thinking maybe 40p.
Greyinvestor
22 Feb 2018
Profits warning - why I think that the profits warning was weighed down by far too many words. This business has always been impacted by a) declining vehicle sale profits and b) declining rental margins. The profit warning is basically saying that both of these are happening now and that a new strategy is called for to arrest the decline. The rest is just obfuscation tagged onto the warning.Rental businesses are always prone to falling off a cliff if residuals decline, or if margins are squeezed.So we are now looking at future EPS of maybe 40p. Someone has quite sensibly said that hanging onto the vehicles for longer will make the company more money (or more likely reduce the rate of decline in profitability). But this will take a while to have a positive effect, other than maybe by improving depreciation charges. Even the latter is uncertain because an older vehicle will have a lower residual value, and competitors may offer similar rates for shorter term rentals.In summary, this is a lowish quality business with low barriers to entry. It could be a target for a takeover by a van manufacturer (or could equally be undercut by them). I take some heart from an activist investor being involved.A cheap Hold, but only just. Needs a recovery in the UK (abandon Brexit?!).
NewPygar
22 Feb 2018
Re: unexplained one off adjustment I think the reason sf that they sell the vans at a profit after booking three years depreciation, now they are keeping them for four years a lot less vans will be sold and hence less sales profit booked. They still have the vans and presumably will sell them at a bigger profit next year!
mildmouth
22 Feb 2018
Re: unexplained one off adjustment I absolutely agree that the shares should be good value backed by a 5% yield (divi also reassured by the statement) and NAV which is similar to the share price. I noted previously some tinkering with the depreciation policy which, of course, is an easy way to manipulate profits in the short term. There have been, as you point out staff changes and let us hope that it really is a one off recognition of a mistake. All I would add is that, if it is and if they had only explained it more clearly and directly, it would have gone down a lot better with....... well, me for one!
Self made hedge operator
22 Feb 2018
Re: unexplained one off adjustment I hear what you are saying.The main issue is a better shareholder return. It looks like they have been selling the vehicles off too early which means they get a better price but then just have to replace the vehicals new in the fleet.This way they get more out of the vehicles. As you allude to - this seems to have helped the accounting return but was not what generated best actual value. Any change like this always has an effect on the accounting results and, tbh, would prefer that it is actually recognised than not.Why it has taken this long to suss this out, I don't know. I suspect that in getting to the bottom of the underperformance in the UK, this kind of thing comes out. They did make some senior personnel changes during last year as I recall.Will have to read the presentation transcript but am re-assured but the progressive dividend policy.Not the best email I have received at 7am, mind you.
mildmouth
22 Feb 2018
Re: unexplained one off adjustment ..but surely that would mean a lower rate of monthly depreciation not a higher one.They are saying that a longer holding period produces a better return, which MUST mean that actual monthly depreciation is less.If they do have a one off depreciation write off (given that keeping these same vehicles longer gives a lower depreciation rate) that must mean that they simply failed to depreciate adequately at all. Their new policy statement appears like an attempt to cover that up.
Self made hedge operator
22 Feb 2018
Re: unexplained one off adjustment That is my take. If they are going to hold them for longer, they will have to keep depreciating these vehicles for the increased holding period.doing the write-off, you take that effect into one year.In some ways it gives them the right incentive to do the correct thing - ie protect shareholder value.The good news is that they must have a LOT of confidence in the Spanish business, hence the impending investor trip (assuming it is not just a jolly on the Costas or Madrid).The bad news is that the UK is slowing down, which is not just an issue for Northgate but also implies something about the current UK economy.
mildmouth
22 Feb 2018
Re: unexplained one off adjustment ...but if they are changing policy towards keeping their vehicles longer in order to improve returns, why would that involve a one off depreciation hit? The statement focused on making more profit per unit on disposal by keeping vehicles longer, but that does not imply the need for an increased depreciation due to that policy , if anything the contrary....
TX2
22 Feb 2018
Re: unexplained one off adjustment Possibly from depreciation of retained vans.
mildmouth
22 Feb 2018
unexplained one off adjustment I have read the statement and it is possible to take a positive view. However, what I do not understand is why their new policy of extending vehicle holding periods would create a large "one off" hit. I understand why fewer disposal might affect ongoing profits a touch (before the fewer but more profitable disposals start to kick in), but I can see no obvious explanation for a one off adjustment. As far as I can see, the statement dos not make the reason clear.I hope I am wrong but it sounds a little like a profit hit dressed up as an accounting change. Does anyone have more information? perhaps from the 8am briefing?
Greyinvestor
22 Feb 2018
Profits warning Profits warning today, but I’m still holding, this is one for the long haul, I’ll just have to hope for a recovery.....
Boop
20 Sep 2017
Times Tempus recommend BUY Tucked a few thousand away this morning on back of Times Tempus buy recommendation, solid pe & divi!
Greyinvestor
05 Sep 2017
First purchase Made a modestly sized first purchase of these @ £4.02. Well into value territory in my view......
Meanbugger
22 Aug 2017
Cheap or broken business model? Northgate could be a very cheap share. On the other hand the business model which has served it well in the past may have run its course. Most of its vehicles have diesel engines. Structural changes seem to be taking place in the van leasing market. Yet it has a big market share in Spain and the north of England. It is massively exposed to residual values for ex-lease vans. However it is protected to some extent by its ownership of Van Monster which is advertising heavily on Talksport radio at the moment.The shares are at an attractive entry point and there is decent two-way business at the moment. I can understand why people are selling but on the other hand the shares might be cheap at this level. Surely one of the big vehicle manufacturers like Fiat, Renault or Citroen might be interested given NTG's big position in the market. I've bought a few at under 410p. Maybe the business model is broken. I don't know but it might just be a good buying opportunity.
II Editor
19 Jul 2017
NEW ARTICLE: Here's where Northgate shares should rebound "Northgate (LSE:NTG)Few things are more frustrating than evenings, sitting in the garden surrounded by mountains, watching a bunch of sailing boats pretending to race on a flat calm sea, while sipping alcohol-free cider and realising nothing ..."[link]
