Revenues rose 10% to £578.5m for the year to 30 April. The UK and Spanish used car markets remained relatively strong for much of the year, but are beginning to show weakness. Underlying pre-tax profits rose 5% to £79.5m. The group will pay a dividend of 28p, a rise of 10% on last year.
In the UK, the group made two acquisitions during the year, Hampsons Self Drive Hire and the vehicle fleet of Abington Vehicle Rentals. This added 1,870 vehicles to the fleet, bringing the total to 68,600.
In Spain the fleet grew by 14%, including 700 vehicles acquired with the purchase of Alquiservicios in July 2007. Utilisation levels dropped slightly from 90% to 89%. The group said economies of scale in the larger Spanish business have partly compensated for the effect of the weaker vehicle residual market.
Chairman Philip Rogerson said: “In the current year conditions in the used vehicle market are weaker than last year, with the result that profits overall are expected to be at similar levels to last year. If economic conditions were to deteriorate, we believe our business model has the proven flexibility to enable us to defleet rapidly in order to leave us in a strong financial position when markets improve. Additionally, we believe that the group's flexible rental model is attractive to customers when capital is constrained and they are unwilling to commit to long-term financing arrangements.”
The market was not convinced and shares dropped 22.75p to 330.25p. The market is pricing in a grim future for Northgate as the shares trade on just 3.81x earnings. The dividend yield is now a generous 8.7%. The group still has a lot of debt and while interest cover is reasonable at 3.1x, it has fallen from last year’s figure of 3.4x and indebted companies are out of favour at the moment. There is no sign of this situation changing in the near future.
