Van hire company
In fact, the UK business improved its underlying operating margin from 23.2 to 24 per cent by cutting the fleet size by 4,300 vehicles in order to keep utilisation rates – how many vans are hired – at 90 per cent. The vehicle sales brought in an extra £16.3m of revenue on the same period last year, but reduced the fleet size to 56,900, from 61,200 previously. In Spain, conditions remain tough but utilisation levels were marginally up at 91 per cent and the business benefited from strong residual values on vehicle sales. This helped underlying operating margin rise from 16.4 to 18.7 per cent.
Net debt fell a further £48m to £482m, as the group continues to reduce its debt pile, and management confirmed it is on target to achieve £5m in cost savings in the full year. Broker Peel Hunt kept their outlook unchanged and expect full-year adjusted pre-tax profit of £60m and EPS of 31.7p (from £53.8m and 28.5p in 2010).
|ORD PRICE:||235p||MARKET VALUE:||£313m|
|TOUCH:||232-236p||12-MONTH HIGH:||349p||LOW: 210p|
|DIVIDEND YIELD:||nil||PE RATIO:||9|
|NET ASSET VALUE:||262p||NET DEBT:||138%|
|Half-year to 31 Oct||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Northgate is paying down debt and putting the business on an even keel for a lower demand environment. But with van hire already slowing and the economic outlook dire for next year, the modestly rated shares could come under further selling pressure. High enough.
Last IC view: Fairly priced, 325p, 1 Jul 2011