LONDON (ShareCast) - (ShareCast News) - Northgate, specialist in light commercial vehicle hire in the UK, Spain and Ireland, has reported a 11.9% fall in profits due to lower opening vehicles on hire in the UK.
Chief executive Bob Contreras, however, said that the company is still on track to achieve its full year expectations.

"We are pleased to see some early signs of progress from our renewed strategic focus which has led to a stabilisation of the UK business in the first half of the year," he said.

"Spain continues to develop well and Ireland has grown steadily in the period. A more stable political environment in Spain will provide impetus for growth amongst our larger customer accounts," said Contreras.

The group's revenue from vehicle hires rose 1.8% to £229.6m in the six months ended 31 October 2016 but revenue from vehicle sales fell 0.4% to £87.1m.

The group has signed contracts for 1,500 vehicles with 1,000 vehicles on hire as at the end of October. The proportion of UK vehicles sold through retail channels increased to 41% from 31% in 2015.

Underlying profit before tax was down to £40.4m from £45.9m in 2015, impacted by £2.5m adverse impact from previous changes in vehicle depreciation rates and £2.9m positive effect of the strengthened euro.

In the UK, closing vehicles on hire grew by 900 in the first six months, compared to a converse decline of 900 cars in the same period last year.

In Spain, closing vehicles on hire increased by 600 since April 2016, despite the planned return of 900 vehicles from expiring legacy contracts, compared to a 100 vehicle increase in 2015.

In Ireland, closing vehicles on hire increased by 200 vehicles since April 2016.

Underlying basic earnings per share was down 25.8p from 27.1p. 12% increase in interim dividend to 5.7p per share.

Net debt rose to £355m from £309.9m, including £38.3m adverse effect of the strengthened Euro. Return on capital employed fell 1.1% to 10.9%.

Looking ahead, Contreras said: "We move into the second half with good momentum in all countries and continue to build a solid platform which will drive the medium and long term performance of the business.

"We expect the full year results to be more weighted towards the second half as the changes implemented continue to gain traction and therefore we continue to expect to see full year results in line with expectations."

The share price rose 7.93% to 469.50p at 1439 GMT on Tuesday.

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