Portfolio

Northgate sees full year in line with guidance

By Michele Maatouk

Date: Tuesday 14 May 2019

Northgate sees full year in line with guidance

(Sharecast News) - Commercial vehicle hire company Northgate posted a rise in vehicles on hire on Tuesday as it said results for the year should be in line with guidance.
In a pre-close trading update for the year to 30 April, the company said fourth-quarter growth in vehicles on hire (VOH) was 8%, giving 11.1% growth for the full year, in line with guidance.

In the UK & Ireland, Northgate saw full-year VOH growth of 11.3%, in line with the guidance for low double-digit growth given in December 2018 and primarily driven by increasing demand for the company's minimum-term proposition. In the fourth quarter, VOH growth moderated to 7.5%, as expected, reflecting both strong growth in the prior year and some softening in the conversion of its pipeline from Brexit uncertainty in the market. Nevertheless, Northgate said the pipeline remains "strong".

"We expect the business to report a full year rental margin of 7.5%-8.0%, in line with guidance. Disposal profits continue to be supported by firm residual values and high sales prices achieved through our Van Monster retail channel," it said.

In Spain, meanwhile, VOH growth came in at 10.9%, driven by increased market penetration of the minimum-term product. Fourth-quarter VOH growth of 8.6%, which has continued to slow sequentially during the year, reflects a strong prior year performance and increasing customer selectivity in response to greater competition across both flexible and minimum-term products.

The company said it continues to expect the full year rental margin in Spain to be "significantly" higher than the previous year due to the depreciation rate change, as previously guided.

"Behind this we have seen a sequential weakening in the rental margin from the first to the second half of the year, primarily driven by increasing price competition. Disposal profits are expected to be lower, in line with guidance, reflecting lower disposal volumes as we transition to longer vehicle holding periods."

At 1000 BST, the shares were down 0.1% at 352.50p.

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