LONDON (Alliance News) - FTSE 250-listed commercial light vehicle rental company Northgate PLC on Tuesday said pretax profit surged in its 2015 financial year as revenue rose across both hire and sale business, prompting the company to hike its dividend payout by nearly half.
Northgate said its pretax profit in the year to April 30 was GBP83 million, up from GBP51.2 million a year earlier. Total revenue for the company rose to GBP614.3 million from GBP571.5 million, as vehicle hire revenue rose to GBP456.8 million from GBP442.3 million, and vehicle sale revenue rose to GBP157.4 million from GBP129.2 million.
The results prompted the company to raise its final dividend to 10.2 pence per share from 6.8 pence a year earlier, meaning its total dividend payout rises by 45% to 14.5 pence from 10.0 pence.
On a constant currency basis, however, the company said revenue increased by 11%, compared to a reported 7% rise. N+1 Singer, the broker, cited this as an external factor which drives its cautious stance on Northgate shares. "The 2015 outperformance and a positive outlook statement argues for upgrades to 2016 and 2017, but we remain mindful of currency headwinds and depreciation unwind. These mean that we expect the overall changes to be limited despite expectations of further strong underlying growth," N+1 says.
Concerns about currency translation impacts on Northgate's results appear to have driven its share price performance on Tuesday, as shares in the company were down 6.2% to 579.44 pence, the worst performer in the FTSE 250, by early afternoon, despite the higher profit, revenue and hiked dividend.
"It's been another year of progress across the group, and it's pleasing to see this translate into a strong set of results. We remain particularly focused on targeting growth with small and medium sized customers across the UK and Spain and there have been encouraging increases in the number of vehicles on hire in both countries," said Bob Contreras, Northgate's chief executive.
In a separate statement on Tuesday, Northgate announced Chairman Bob Mackenzie will retire from his role following the company's annual general meeting in September. He will be replaced by Andrew Page, who joined Northgate as senior independent director in December 2014.
The group said its vehicle-on-hire volumes grew in both the UK and Spain, its two main markets, while its average fleet utilisation over the course of the year was 88% in the UK, flat year-on-year, and 91% in Spain, down from 92%. The group closed the year with a fleet of 56,100 in the UK, up from 53,900, and 39,400 in Spain, up from 37,800.
In both the UK and Spain, Northgate is targeting higher-margin SME customers, which boosted customer numbers in its UK arm, but the strategy has resulted in subdued growth in Spain, as the company is more selective about the larger accounts it takes on.
Northgate said its operating margin in the UK increased to 22.2% in the year from 17.4%, while its return on capital employed increased to 14.1% from 11.2%. This was primarily driven by an 8% increase in average vehicles on hire, improved asset management, and lower vehicle depreciation rates, the company said. Average hire revenue per vehicle in the year was stable, it said.
The company said, however, that it saw a higher-than-expected staff turnover in the UK business over the year, which meant some of its sales targets were missed. It has taken actions to remedy the issue since and expects retention rates to improve going forward.
In Spain, the company said the domestic economy is showing continued signs of improvement and believes it is well positioned to benefit from this. Margins and return on capital employed both improved in Spain too.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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