Northgate warns of further cost cutting

Mar 17 2010 By Karen Dent, The Journal

COMMERCIAL van rental group Northgate warned of further cost cutting and efficiencies ahead because of  continued difficult market conditions.

The Darlington-baed group, which hires and sells commercial vehicles in the UK, Ireland and Spain, shed around 360 jobs last year, reduced its depot numbers from 80 to 72 and slashed its fleet by almost 12,500 to 61,00.

The number of vehicles were reduced by a further 1,000 since the start of November and it has 500 fewer available for hire customers in the UK.

Northgate said today that in the four months to the end of February, 91% of its vehicles were being utiltised, up 5% on the same period a year earlier and hire revenue improved by 3% in the same period. It expects the used vehicle market the UK to remain strong.

Fleet numbers were also slashed in Spain from 55,200 to 49,700 and it is aiming to reduce the number to around 48,000 this year. The company also said its bad debts in Spain increased during the six months to the end of October.

The over all company debt stood at £706m at the end of October but Northgate said it was on target to reduce this to below £650m by the end of April - £236m lower than the same period last year.

Northgate said: “As expected, the macro-economic conditions continue to adversely affect the group's markets with the outlook for the UK remaining uncertain and Spain continuing to be very difficult.

“Our focus therefore remains on hire rate improvement, efficient fleet management, further cost reductions and cash generation.”