Positive margins for Northgate
“CHALLENGING economic conditions” have slowed growth at vehicle rental firm Northgate, which announced annual results today.
The Darlington-based vehicle rental firm said pre-tax profits were up 5% to £79.5m in the year to April 30 - a marked slowdown on the “exceptional” 34% rise the previous year - while revenues increased by 10% to £578.5m.
It said that although significantly higher borrowing costs (an increase £31.7m to £38.7m) had squeezed margins, the robustness of its business model would maintain positive margins during the coming year.
Chief executive Steve Smith said: “There is no problem in banks’ willingness to lend to us. The problem is, it just costs more.
“Last year was exceptional and this year we are not far off our targets. Next year it would be a reasonable performance if we could maintain profitability somewhere near to this year’s level.”
He said he was concerned that the recent slump in the Spanish housing market could impact on revenues next year. This year Northgate’s Spanish operation accounted for around 39% of the group’s profit from operations.
Mr Smith said: “There will be pluses and minuses next year. The market is more fragile in Spain than in the UK.
“The Spanish residential market is such a big part of GDP (gross domestic product) that it impacts on the growth of the Spanish economy in general.”
The company said hire rates had remained stable throughout the year due to its ability to retain hire business without discounting prices heavily.
Its UK fleet grew by 5% to 68,600 vehicles, including 1,600 arising from the acquisition of Hampsons and 270 from the buy-out of Abington last year.
It remained bullish about future prospects and said in the medium term, low rental penetration level throughout Europe offered an opportunity for further expansion.
