Northgate hits numbers as growth drivers return

25th Jun 2014 07:41

- Results in line, as UK slightly behind and Spain ahead- Good momentum going into new financial year- Progressive dividend policy affirmed- Depreciation policy to change, benefiting profitsCommercial vehicle hire group Northgate turned a corner back into the black after underlying business returned to growth in the UK and Spain.The FTSE-250 company increased the number of vehicles on hire over the year, partly driven by the opening of seven new sites in the UK, but saw top line revenue down 6.2% to £571.5m due to a reduced volume of sales of used vehicles.The dip in the top line was a positive, as management took the decision to sell fewer used vehicles because of the more positive trading environment. UK vehicles on hire grew 4,500, or 10.4%, in the year, including 1,800 from the new sites opened since February 2013, after a major fall in UK vehicles on hire the previous year. Customer numbers increased 21% in the year.Likewise in Spain, after a reduction the previous year, there were vehicles on hire growth of 2,600, or 8.1%, along with a 20% increase in customer numbers.Average utilisation remained steady at 88% in the UK, while improving from 90% to 92% in Spain. This helped statutory profits swing from losses back to profit, with underlying pre-tax profits accelerating 22% to £60.3m and underlying basic earnings per share up 20.2% to 35.1p, ahead of a 33.51p consensus analyst forecast.Chairman Bob Mackenzie said current trading benefited from "good momentum" in both UK and Spanish businesses as a result of investment and changes to the commercial and operational teams.The dividend was increased 37% to 10.0p per share and Mackenzie said not only were management committed to investing in future growth, but they also aimed to continue the progressive dividend policy."The group continues to trade in line with our expectations and the board remains confident that the business is well positioned to maximise further opportunities for continued growth."Broker N+1Singer said results were slightly ahead in Spain and slightly behind in the UK, which it attributed to the impact of the ongoing investment in new UK branches.The group's auditors insistence on a less aggressive depreciation rate should lead to a £10m benefit to current year profit which will unwind over the following three years as vehicles are sold.Shares in Northgate were up 1.99% to 511.5p at 08:35 on Wednesday.OH