Northgate Plc Drives Up Profit And Earnings

The share price of Northgate (LSE: NTG) — the County Durham-based light-commercial vehicle hire company that operates in the UK and Spain — is up 4.1% in trading so far today, following publication of the company’s interim results for the half year to 31 October 2014.

Northgate has reported a 70% increase in pre-tax profit, up to £46.7m, with a 49% increase in underlying pre-tax profit, up to £47.8m.  Basic earnings per share (EP) grew 78%, to 27.9p, with a 56% increase in underlying basic EPS.

The company’s net debt has increased by 15%, rising to £397m, which it says was expected, in order to support growth in both countries in which it operates. Gearing also increased, from 91% in April 2014 to 100% at the end of the first half of this year. But return on capital employed has also risen, from 91% back in April to 11.4% at the end of the half.

Northgate says that there’s been vehicles-on-hire growth of 1,800 in the UK  and 1,300 in Spain during the first half. Both represent a decline in vehicles-on-hire growth compared with the corresponding period in 2013, when the figures were 2,800 in the UK and 1,300 in Spain. Average utilization, compared with the same period in 2013,  is marginally up in the UK — 89% versus 88% — but marginally down in Spain — 92% versus 93%.

Northgate’s board is recommending a 34% increase in interim dividend, which will bring it to 4.3p per share.

Commenting on the results,  chairman Bob Mackenzie said:

“We are pleased by the growth delivered by the Group in the first six months of the year. This reflects the work done in recent years, in particular, supporting the continued investment being made in our people, systems and infrastructure. Our plans to open new sites in the UK are on track and trading from these new sites is exceeding our initial plans.

“The Board remains confident that we are well positioned to deliver further growth and attractive returns to shareholders. The Group is currently trading slightly ahead of our expectations.”    

With this morning’s rise, Northgate’s share price is now up 18.7% on this time last year, trouncing the FTSE All-Share’s 2.2% gain.  And the story is similar over the past five years, too, with Northgate’s share price rising 127% compared with a 34% increase in the FTSE All-Share index.