North East vehicle rental group Redde Northgate has hailed strong half year performance, as well publicised problems in the automotive sector have led to rising revenues and profit.
The Darlington business 鈥 formed last year through the merger of light commercial vehicle hire business Northgate with support services company Redde 鈥 said the new vehicle supply issues has boosted demand for its rental services.
The group also aims to capitalise on the demand, by looking to acquire other rental assets.
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In the six months ended October 31, revenue excluding vehicle sales rose 21.9% to 拢522.9m, while underlying pre-tax profit rose 94.4% to 拢78.9m. Total revenue including vehicle sales grew 10.2% to 拢612.9m. The company said trading was ahead of the board鈥檚 expectations.
The company, which has operations across the 海角视频, Ireland and Spain, declared an interim dividend of 6p a share, up from 3.4p in the same period a year ago, in light of the strong trading performance.
The firm used the results to highlight new multi-year contract wins in the period, including wins with Tesco, Admiral and another major insurer with lifetime contract revenues in excess of 拢200m. The company has also carried out a significant refinancing package, increasing its debt facilities by 拢104m, at a lower cost of borrowing.
Meanwhile its electric and hybrid vehicles in the fleet have increased 187%, to make up around 2% of the overall fleet. It has also signed a memorandum of understanding with an electric vehicle manufacturer for the supply of 5,000 electric LCVs.
In July the company acquired ChargedEV, a supplier of electric vehicle charging equipment based in Derbyshire, to provide the group with a platform to expand its offerings in the important and growing area, as both its own EV fleet and its customers鈥 EV fleets evolve.
Martin Ward, CEO, said: 鈥淲e are pleased to have delivered a strong H1 performance driven by high demand for our products and services and underlying margin gains.
鈥淭he underlying margin improvements on our rental assets, both in the 海角视频&I and Spain, look sustainable given the cost synergies extracted from the business and our focus on driving value.
鈥淕iven the well-publicised new vehicle supply constraints our vehicle assets are in demand for rental services and also through our sales network, which is driving further value. In addition to our new van supplies, over the next 12-18 months, we expect to supplement our fleet stock through the selective acquisition of existing rental assets in the market where this adds value.鈥
Mr Ward said there had been good momentum in the business and that, looking ahead, the undersupply of new vehicles would not changer overnight. The SMMT is now forecasting 1.3m units that will undersupply into the 海角视频 market through to December 2021 - an increase of 300,000 since July.
Mr Ward said: 鈥淭he consequence of that is that the cost of used car and van prices is high. I don鈥檛 think it鈥檚 going to correct itself very quickly - it could take two full year cycles for that under supply to recover, so that鈥檚 putting a lot of demand on our rental assets.
鈥淪o we鈥檝e got a high demand for our rental product, customers clearly want to keep hold of what they鈥檝e got - it does limit what we have in disposal, in terms of what we can sell.
鈥淲e acquired 2,000-plus units from a Scottish rental business and were able to grow the customer footprint and the fleet. We鈥檒l see more of that as we go forward.
鈥淪maller rental companies are finding it more difficult to operate in a market where there鈥檚 limited supply. If you think about their business models they make their cash by selling vehicles, banking some of the cash and using it to buy new vehicles. If customers aren鈥檛 giving up the vehicles they can鈥檛 sell them, can鈥檛 generate the cash so it puts a strain on them.
鈥淲e can see a bit of a consolidation in the smaller to mid-sized rental companies. Redde Northgate is in a strong position to support that and to be able to acquire fleet and support its customers. There鈥檚 always targets in the market, so we鈥檝e got a strong pipeline of targets.鈥
