The Share Centre reviews Northgate recommendation

The Share Centre has reviewed its Northgate recommendation as the economy remains difficult.

It said that Northgate's ongoing restructuring is going to plan but the UK and Spanish economies remain difficult. Therefore the Share Centre recommends that investors watch from the side lines for now.

Graham Spooner, investment adviser at The Share Centre, said: "Northgate’s reported trading for the four months to 31 August was in line with expectations, and the ongoing restructuring of the UK business is continuing to develop. The company has enhanced IT systems and reduced its fleet size by 4700 to 56500 in an effort to improve both operational efficiency and commercial sales organisation.

"Investors will be reassured to see the company's trading levels are stable. The underlying UK revenue per vehicle saw a small increase of 1% since the beginning of the financial year and over the last four months this remained unchanged in Spain.

"Vehicle utilisation figures were also promising. The UK averaged 90% for the four month period and Spain averaged 91% - a 1% improvement on the same period last year.

"Our original ‘buy' recommendation came with a long term view on the prospect that there would be sustainable growth in Northgate's two main regions Spain and the UK. However, these economies remain challenging and although the group appears to be reacting to the difficulties, we are reviewing the stock.

“We would recommend investors to ‘hold' for now and new investors watch from the side lines until we see clearer growth prospects in the UK and Spanish economies."