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Shares of commercial vehicle hire Northgate plc (LSE:NTG) rallied on the London Stock Exchange following the disclosure of its final results for the 2012 fiscal year that saw a rise in profit despite economic pressures in the markets where the group operates.
The British born company reported £45.9 million in pre-tax profit, a sharp rise of more than 73% from the previous year of about £26.5 million; even as the company reduced its fleet as part of the business restructuring that began in 2010.
Operation Highlights
The group’s Spanish operation, formerly trading under the brands Fualsa and Record, were hit the most with hire revenue reduced by 10% to £182.9 million, compared to the £203.3 million it achieved the previous year and vehicle sales falling from £75.3 million to £66.7 million.
Nonetheless, operating margin improved to 19.1% backed “strong asset management, cost control, debtor management, and improved used vehicle values” that offset revenue.
The UK operation, on the other hand, improved its sales of used vehicles by more than 32% from £103 million to £136.3 million, enabling the group to offset the drop in vehicle hire £13.1 million to £320.8 million at the year end.
The average utilisation rates in the UK and Spain fell by only 1% each to 89% and 90%, respectively, for the total fleet size now reduced by 13% to 91,300 vehicles.
As part of its strategy of maximising operations and efficiency and reduced capital expenditure, Northgate also reduced acquisition of new vehicles to 28,400 units, down from 32,300 units it purchased in 2011, whilst 42,000 vehicles were sold, compared with 37,900 it disposed a year ago, improving fleet age and decreasing depreciation charge on the group’s asset value.
Excellent Job
Northgate’s Chairman, Bob Mackenzie, praised the “excellent job” the group’s management achieved “despite a continuing background of economic uncertainty” in both the UK and Spain markets.
“Our management teams in the UK and Spain have strengthened each business and are working effectively to maximise returns for shareholders and realise the objectives of the Group’s strategy.”
The group’s debt now stands at £371.3 million, reduced further by £158.6 million, enabling Northgate to issue a modest dividend of 3.00 pence per share.
“Going forward we would expect to pay one-third of the total dividend at the interim stage and two-thirds as a final dividend.”
Looking ahead, Chairman Mackenzie said “whilst this will be challenging in the awful economic situation Europe finds itself, the Board is confident that the dedication and hard work shown by all our employees over the past two years provides the Group with a strong platform upon which to build.”
Northgate stocks jumped 15.8% to 206.75 pence a share at 3:30 PM GMT, trading on the Alternative Investment Market.
Company Spotlight
Established in 1981, Northgate plc is a UK-based commercial vehicle hire business with operations in the UK, Ireland, and Spain. Complimentary to its business, the group also engages in the sale of its vehicles, as part of its asset management.
