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