Financial News

Northgate, Britain's biggest van rental company, is raising a net £108m through a fully-underwritten placing and 10-for-1 rights issue to reduce its debt levels and pay refinancing fees, as it revealed had fallen to a full year pre-tax loss of £195.6m.

The loss for the year to April 30, after exceptional items of £217.9m, compared with a pre-tax profit of £79.5m the previous year. Losses per share were 263.2p, compared with earnings of 86.7p last year.

In conjunction with the placing - raising £30m at 60p a share - and rights issue, Northgate said it had reached agreement with its banks on new committed lending facilities of £880m, including amended US loan notes.

The rights issue is priced at 7p a share, a 41 per cent discount to the theoretical ex-rights price as calculated by the placing price of 60p a share.

Net debt at April 30 stood at £886m, down from £903m last year, the group said on Friday. Net assets, excluding goodwill and other intangibles, stood at £155.3m (£286.9m), equivalent to 220p a share (407p).

During the year, Northgate's revenue rose 5 per cent to £609.6m, but underlying pre-tax profit before exceptionals dropped 67 per cent to £27.5m.

The group said it had decided not to pay a final dividend, in order to preserve. Last year it paid a final dividend of 16.5p a share.

Shares in Northgate were ¾p lower at 68p in afternoon London trading.

Steve Smith, who had intended to step down as chief executive on August 1, has agreed to stay in the post until June 30 2010, after which he will become deputy chairman for nine months.

Paul Tallentire, the deputy chief executive responsible for day-to-day operations, will succeed Mr Smith as chief executive on July 1 2010.

Northgate, which also has significant operations in Spain, said the second half of 2008 saw its markets start to deteriorate rapidly. The "speed and severity of the current economic downturn" resulted in a sudden and prolonged period of reduced vehicle use, coupled with a significant decline in the residual value of used vehicles.

The company believes the placing and rights issue will better position it to deal with any further decline in its core markets and take advantage of any improvement in market conditions.

However, Philip Rogerson, chairman, said he was cautious about the outlook given uncertain conditions in Northgate's markets.