Northgate talks with bank precautionary

Feb 26 2009 by Graeme King, The Journal

Chief executive Steve Smith said: “We are looking at asset impairment, like housebuilders have seen. Our assets are now over stated so we have to deal with that. This (action to revalue the assets) will deal with the problem, but we have had an impairment charge of £146m and are now left with assets of £230m.

“The issue with the share price is as a consequence of the asset impairment and our general levels of trading. We feel it’s better to have discussions with the bank in advance of a potential breach. We have not breached, but before April it could be close so it’s better to start discussions now. The market is now uncertain at to the outcome of those discussions.

“We are confident the banks will continue to be supportive but we will have to pay a higher amount than currently.”

Northgate said profits would now be “significantly lower than market expectations.”

Andrew Miller of Barclays Wealth in Newcastle said: “Northgate are obviously not in a great space at the moment, along with the motor traders and anyone to do with that area.

“Times are tough. It will come down to the talks with the bankers.”

Mike Allen, analyst at Panmure Gordon in London, said: “What looks like a severe profit warning from Northgate indicates that trading has deteriorated further since its last update, with further pressure on covenants likely in April and large write-downs taking place.

“The key issue now, of course, is whether the banks accept new covenants for the company and how much it will cost them.”