Member Article

Profits hit by ‘weakening Euro’ at Darlington’s Northgate

Vehicle hire company, Northgate has reported a pre-tax profit of £42.8m, for the six months ended 31 October 2015, a dip from the previous year’s £46.7m as the ‘weakening Euro’ continues to impact the firm’s operations.

Along with difficult market conditions in Europe, the Darlington-headquartered firm said the profit drop was caused by “higher vehicle running and holding costs” in the UK.

In the UK, Northgate reported average vehicles on hire at 0.6 per cent lower than in the same period in the prior year. However, the group saw average revenue per vehicle increase of 3 per cent compared to the same period in the prior year.

The company’s homegrown fleet also took a hit, reducing from 56,100 in April 2015 to 55,200 with an average utilisation of 88 per cent, down from 89 for the previous period.

During the six month period, the company, which operates in the UK and Spain, announced a refinancing of its debt facilities. The group issued a €100m, 2.38 per cent seven year debt private placement to an institutional investor. As a result, Northgate’s banking facility was reduced from £499m to £424.

Northgate, which is the largest flexible rental operator in both the UK and Spain, plans to target ‘profitable growth’ with SMEs at home, while continuing to build upon ‘existing network’ in Spain.

Bob Contreras, chief executive, said Northgate’s strong performance in Spain offset ‘weakness’ in the UK market: “In all territories, we have continued to target small and medium sized enterprises (SMEs), where we see the most opportunities for profitable growth and attractive returns.

“The Group continues to strengthen the UK management team and has appointed a Managing Director for the UK business as well as a new Sales Director and a Marketing Director. We are well positioned to maximise future growth opportunities.

“Our Spanish business continues to execute its market strategy well; leading to improved profitability and returns. We anticipate this continuing against the backdrop of an improving Spanish economy.

“There are opportunities for growth in the countries in which we operate and the Group remains well positioned to deliver attractive returns to shareholders. There is no change in our expectations for the full year.”

This was posted in Bdaily's Members' News section by Ellen Forster .