Northgate up sharply after restarting dividend

Commercial vehicle hiring firm Northgate has beaten both revenue and profit expectations, while making enough money in the 12 months to the end of April to reintroduce a dividend.

Northgate, which has major operations in both the UK and Spain, saw revenues for the year of £706.7m, down 1.2% on the previous year but ahead of the consensus forecast of £702.75m.

Profit before tax increased 10.9% over 2010/2011 to hit £59.7m, again this was better than the £57.45m the market had been expecting.

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The resumption of a dividend will also be a surprise to many; the firm says it will pay 3p per share for the full year, costing around £4m.

In any leasing business, return on capital employed (ROCE) is an important metric, Northgate's ROCE improved to 13.1% compared to 11.9% in 2011.

The firm admits economic conditions in Spain have been challenging, with revenues down £20.5m but the drop in turnover was partly compensated for by the margin improving from 18% to 19.1%, leaving operating profits down just £1.7m.

The Chairman, Bob Mackenzie, said: "The group retains its strong, market leading position in both the UK and Spain. With the majority of the restructuring completed the group will continue its strong disciplines of asset management, cash generation and cost control whilst at the same time maximising profitable growth where the appropriate return exists."

Shortly after the open Northgate's shares had risen 6.4%.

BS