Northgate vehicles on hire jump 13% in first quarter

Van hire company Northgate reported double-digit growth in average vehicles on hire for the first quarter on Tuesday ahead of its annual general meeting.

In an update for the period from 1 May to 31 August, the company said the number of average vehicles on hire (VOH) rose 13.1% overall to 92,200, 12% in the UK & Ireland to 48,000 and 14.3% in Spain to 44,200.

Northgate said vehicle on hire growth accelerated sharply during the period, with the momentum in the UK in the second half of last year continuing into the current year, reinforced by the VOH impact of the ex-TOM Rental Hire vehicles acquired just before the start of the year. Northgate bought parts of the fleet of TOM Vehicle Rental after it went into administration in March.

Closing VOH included 1,600 former TOM vehicles, which was slightly lower than previously guided due to agreement not being reached with several ex-TOM customers regarding their transition to Northgate tariffs, and their vehicles consequently coming off hire.

Northgate said rental margins are expected to increase gradually over the rest of the year, as the integration of the ex-TOM vehicles is completed, opportunities to increase minimum term hire rates are realised, utilisation improves in both the UK and Ireland, and increasing UK scale delivers operational leverage.

Full-year expectations are for the rental margin in the UK & Ireland to be broadly flat year-on-year, as previously guided.

Numis said the update provides encouraging evidence that management's strategy is delivering the anticipated results. The brokerage left its forecasts unchanged but upped its price target on the buy-rated stock to 510p from 450p.

At 1300 BST, the shares were up 1.4% to 423p.