Profits soar as Northgate targets SME market

Van hire firm Northgate continues to expand rapidly, aiming to open an average of eight to 10 new sites every year

Northgate Vehicle Hire
Northgate Vehicle Hire

The Darlington-headquartered vehicle hire company, Northgate plc, has reported a major surge in profits on the back of a continued focus on the SME market, while opening new sites throughout the country.

The group, which employs just under 2,000 people in the UK and around 900 in its other territory of Spain, saw a 49% increase in underlying profit before tax during the six months ended October 31, 2014, the figure soaring from £32m last year to £47.8m. Revenue, meanwhile, rose from £288.8m to £305m.

After setting expansion plans in motion in early 2013, Northgate had opened seven new sites by April 30 of this year. In the half-year to October 31, there were four further site openings - South Dublin, Enfield, Watford and Southall - before the launch of a Dartford branch in November, taking the total network to 73.

The company says profit levels in the new areas have exceeded initial plans and now it aims to open an average of eight to 10 new sites every year.

Chief executive Bob Contreras, however, said it was also reaping the benefits of concentrating on the regional SME market, which posed its own difficulties.

“Our biggest challenge is getting the Northgate name known in both our territories,” he said.

“That takes quite a lot of effort as the majority of SMEs own their own vehicles.

“They perhaps perceive rental as an expensive choice, while we would argue Northgate can be a better, cost-effective alternative, which can provide them with flexibility.

“They don’t need to worry about vans being off the road, for example, or being repaired.”

Established in 1981 in the North East, Northgate, which supplies light commercial vehicles, has been a major success story for the region, acquiring many sites and businesses throughout the country and going on to grow rapidly. Although hit by the recession, restructuring combined with a consolidation of around 20 different brands into one has allowed it to weather the storm of economic uncertainty.

By the end of the half-year, during the which the company performed slightly ahead of expectations, its UK vehicle fleet was 57,000 strong, compared to 53,900 in April. In Spain, meanwhile, vehicle numbers rose from 37,800 to 40,000.

During the period, net debt increased by 15% to £397m. However, this was expected and was the result of supporting growth in both countries.

Northgate 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.”

Northgate’s interim dividend has been increased by 34%, from 3.2p per share in 2013 to 4.3p.

The group has also announced the appointment of Andrew Page, who has held senior positions in the leisure and hospitality industry, as a non-executive director and senior independent director.

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