Executive Summary
Northgate is the market leader in light commercial vehicle hire in the UK and in Spain, with a fleet focused on vans (particularly in the UK). It hires vehicles to a wide variety of customers in different industries, competing almost exclusively in the business to business market (consumers account for only 2 percent of its business)[1] .Recent results have shown the impact of the economic downturn, and Northgate is cutting back its spend on new vehicles, allowing the fleet to age but enabling the business to generate cash despite lower volumes of trading.
Company History
1981 - business is started
1987 - bought by Goode Durrant, a conglomerate
1997 - renamed Northgate plc, after decision to concentrate on the vehicle hire business.
2002 - acquisition of 40% stake in Fualsa, a Spanish hire business
2004 - purchase of remaining stake in Fualsa
2005 - purchase of Record Rent, a second Spanish hire business.
Current Events
Northgate's recent rights issue has been 97.5% subscribed, raising £ 115m.
Business Model
Northgate buys, rents out and eventually sells light commercial vehicles - it fleet consists mainly of vans, and also includes some cars, trucks and HGVs. It holds the average vehicle for 30 months before selling them on. The purchasing of new vehicles and sale of old ones is handled centrally, while rentals are handled by a network of local offices using a number of brands, as well as by a central 'OneCall' national telesales centre, which is responsible for 14% of total business.
Northgate used to source most of its fleet requirements from Ford, but has diversified its fleet and is now a significant customer of Ford, Peugeot, Vauxhall, and Mercedes in the UK.
The mix of the fleet in the UK is about 80 percent vans, with a further 15% cars. Heavier vehicles are a small minority. Car rental does not compete with consumer rental services such as Avis or Hertz, but is intended as an ancillary service for companies which use the LCV service and wish to rent cars for their executives from the same company. (It is however a profitable business in itself.[2]) The average rental period is 4-6 months.
Profitability depends on two main factors. First, the yield on rentals; that is, the utilisation rate on the fleet, which has generally stood around an average 90%, and average rental…
