Northgate (NTG) is hiring out fewer vans, so half-year profits fell sharply. But the company is selling more vehicles, generating lots of cash and cutting debt fast. Given difficult markets in both the UK and Spain, it's a trend that's likely to continue in the short term.
A smaller fleet meant underlying operating profit fell 15 per cent to £47.6m. A handful of big customers switching to cheaper contract hire meant UK rentals fell by 1,400, knocking hire revenue by a tenth and profits by 8 per cent to £36.4m. Northgate hopes beefing up its sales team by half will fill some big regional gaps. It's still difficult in Spain, though, where 1,300 fewer vehicles were hired and average revenue per vehicle fell, too. Hire revenue slumped 24 per cent and profits fell by a third to £12.7m, while the return on capital of 8.5 per cent is still uncomfortably low. Still, the decline in revenue was smaller than last year, largely because Northgate is cracking down on charging for damage, while ageing the fleet will cut costs and should improve returns. Selling vans and trucks to plumbers and builders for an average profit of about €468 (£380) in Spain and £950 in the UK cut net debt by another £28m.