Commercial vehicle hire group Northgate (NTG) saw its turnover dip in the first half of its 2020 financial year, with a modest 2.5 per cent increase in hire revenue being more than offset by a 20 per cent decline in vehicle sales. With last year benefitting from the sale of around 1,800 vehicles acquired from TOM Vehicle Rental, disposal profits during the period plunged by over a quarter to £5.1m.
Whilst the structural trend from ownership to usership is underpinning growth in minimum term hires, Brexit uncertainty and pricing pressures in Spain have triggered a reduction in flexible hire volumes. Investment in the hire fleet was trimmed due to softer domestic demand, although the 17 per cent reduction in net capital expenditure helped boost underlying free cash flow by 8 per cent to £37.6m. With subdued economic conditions across both markets expected to continue, the group is guiding to low-to-mid single-digit growth in hire revenue for the full year, versus 9.9 per cent in 2019.
Northgate is also recommending shareholders approve a merger with accident management specialist Redde (REDD). The deal will see Redde shareholders receive 0.3669 new Northgate shares for each Redde share and Northgate shareholders will own 54 per cent of the combined entity.
Bloomberg consensus forecasts place cash profits (Ebitda) at £278m and EPS at 39.5p for the full year, up from £268m and 37.8p in FY2019.
| NORTHGATE (NTG) | ||||
| ORD PRICE: | 331p | MARKET VALUE: | £ 441m | |
| TOUCH: | 330-331p | 12-MONTH HIGH: | 413p | LOW: 300p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 429p | NET DEBT: | 80%* | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 374 | 28.7 | 18.4 | 6.2 |
| 2019 | 358 | 24.8 | 16.1 | 6.3 |
| % change | -4 | -14 | -13 | +2 |
| Ex-div: | 12 Dec | |||
| Payment: | 24 Jan | |||
| *Excludes £45.3m in lease liabilities | ||||
