What is your vision for Northgate
Northgate operates in a market sector that is seeing strong growth, as businesses which need light commercial vehicles increasingly recognise that they do not need to own these vehicles, and that renting vans on fixed or flexible terms can be a much more cost effective solution. I believe that this structural shift in the market is set to continue, across all our territories, and my ambition is for Northgate to capture a very substantial part of that growth opportunity, providing the range and quality of light commercial vehicle rental services that will attract and retain customers. We now have the right strategy to achieve this, and the right leadership team in each territory, and I believe that we are well placed to grow profits and cash flow, and to deliver strong returns for our shareholders.
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What progress has been made in turning around the performance of the UK business
Getting the UK business back on track and performing well is a major challenge, and a huge amount of work remains to be done. However, I think we have made an encouraging start. The new leadership team is now complete and has the skills and experience to re-energise our people and drive the business forward. The sales and marketing functions have been restructured and the teams refocused on finding and capturing profitable growth opportunities, and this is reflected in the strong VOH growth we saw in the second half of the year, following several years of decline.
The next steps will focus on working more efficiently across our operations, and managing our fleet assets effectively. The first phases of our major IT transformation process are under way, and this programme will underpin our efforts to drive higher revenues through our fixed cost base, and generate higher returns on capital employed. So progress to date in the UK has been good, and I believe there is now some real momentum in the business, but there is still an enormous task ahead.
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Can the Spanish business continue to grow as quickly as it has done over the past 12 months
The Spanish business grew strongly last year, and I am confident that this will continue. The light commercial vehicle market in Spain is experiencing the same structural changes as we are seeing in the UK, shifting away from ownership and into both flexible and fixed term rental, and this underpins our growth opportunity. We have a strong leadership team, and high calibre, experienced people across our business, and this has enabled Northgate to grow faster than the market. We have successfully expanded our range of services to anticipate the way the market has evolved, such as bundling fixed term and flexible rental propositions and targeting high growth sectors, and effectively exploited the competitive advantages of our network. I am therefore confident that we can continue to deliver strong growth in Spain.
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What is the benefit to Northgate of having businesses across three separate territories
There are significant benefits in having rental businesses in more than one country, with the main advantage being the transfer of know how between countries, across all areas of our business. An example of this was seen during the scoping and initial implementation of the UK's IT transformation programme, which drew heavily on the experience of the Spanish business several years earlier. Another area of significant knowledge transfer between countries has been in operations management, including workshop scheduling and ways for speeding up cycling of vehicles through depots. There are also a number of concrete procurement synergies. Overall, I have no doubt that all three of our businesses are more efficient because they are part of a wider group and deliver better returns than they would do individually.
Does the increasing regulatory pressure on emissions from diesel vehicles pose a threat to Northgate's business model
We recognise the pressures on our customers to manage their businesses on a sustainable basis and we work with them to respond to this. Our fleet is composed entirely of modern vehicles which meet the highest levels of exhaust emissions standards and our close relationships with our suppliers ensures that this remains the case. We have increased the number of electric and hybrid vehicles in the fleet, particularly in Spain in response to some specific customer requirements. As regulations evolve, and have an impact on our customers and their demand for light commercial vehicles, so our vehicle fleet and our rental propositions will evolve to meet this demand.
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