* Full-year pretax profit falls 17 pct
* UK hire revenue rises 1 percent
* Shares fall 3 pct
By Richa Naidu
June 25 (Reuters) - Van rental company Northgate Plc said it expects its core UK business to stabilise over the nextyear, growing for the first time in eight years, propped up bythe opening of new hiring locations.
Northgate, which rents out vans to engineering, distributionand retail companies in Spain, Britain and the Republic ofIreland, on Tuesday reported a decline in full-year profit aslacklustre consumer spending in Britain and economic turmoil inSpain took a toll on demand.
"(The UK business) will see stabilisation in the first halfand we'll look to increase growth through the second half as thebenefit of new sites comes through," Chief Executive BobContreras told Reuters.
Over the next three years the company plans to open 20 newUK outlets, half of which will be in London.
Consumer spending in Britain has remained under pressureafter years of below-inflation wage growth and belt tighteningby the government have squeezed discretionary incomes.
Northgate said full-year hire revenue in the UK rose 1percent despite its exposure to gloomy consumer spending inBritain and Ireland, which together account for almosttwo-thirds of total revenue.
Hire revenue in Spain fell 2 percent.
Amid dire business sentiment, shrinking consumer demand andbanks that are reluctant to lend, Spain hit its second recessionin 2011 and is widely expected to keep contracting into nextyear. April marked Spain's 24th straight month of shrinkingmanufacturing activity.
While Northgate's Spanish business will still see somedecline in the current year, its rate of decline is going toreduce significantly, Chief Executive Contreras said. The unitunderwent cost cuts and debt-management last year.
DEBT REFINANCING
Northgate said in April that it had refinanced its debt tocut interest payments, helping its struggling Spanish business.
The main benefit of the debt refinancing was that interestcosts for the next year would likely reduce by about 65 percentto close to 13 million pounds, Contreras said.
The Darlington-based company said it had reduced net debt by2 percent to 362.7 million pounds, after cutting its fleet andselling vehicles over the year.
Numis analyst Mike Murphy upgraded his rating on the stockto "add", saying he saw a gradual improvement in outlook asNorthgate continues to manage the capital employed in itsSpanish business and the initiatives in the UK drive growth inthe second half.
Northgate, which also helps customers manage vehicle fleets,said underlying pretax profit fell 17 percent to 49.5 millionpounds ($76.22 million) in the year ended April. Revenuedecreased 14 percent to 609.9 million pounds.
Northgate's shares, which have gained 17 percent since itsprofit warning in March, were trading down 3 percent at 342pence at 0911 GMT on Tuesday on the London Stock Exchange.
