Numis stays at 'add' on Northgate with 600p target price

Weak UK trading during the second half of the company's fiscal year offset stronger performances in Spain and Ireland, leading analysts Julian Cater, Steve Woolf and James Beard to slash their earnings per share estimates for the company in fiscal years 2018 and 2019 by 10% and 11% to 46.6p and 48.5p, respectively.

However, management had identified medium-term opportunities to leverage its infrastructure deliver on growth and increase its return on capital employed.

Vehicle-on-hire trends in the UK over the back half of the year had been weak, but management had responded by making a number of new hires, including new managing, sales and interim marketing directors in the UK.

As well, strong growth in the Spanish market over the last six months of the year was expected to strengthen further after the government in Madrid managed to pass a budget.

Numis also highlighted Northgate executives' confidence in their ability to boost ROCE to between 30% to 50% by accelerating the shift towards renting light commercial vehicles and materially increasing its slice of the market.

Northgate's addressable market in the UK, Spain and Ireland was £15.5bn and approximately 8.0m vehicles.