White van man leaves Northgate in the garage

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Northgate, the UK's largest renter of light commercial vehicles, has seen profits collapse so far this year.

The company specialises in hiring out vans to the building trade and independent retailers.

It makes money from both renting out the vehicles but also crucially from then selling on the vans into the wider motor market before they get too old. Both markets are sick.

"It has been a difficult six months," said chief executive Steve Smith.

"Utilisation levels have been impacted. The existing customer base has been less busy and they are returning vehicles earlier and more often than they have in the past," Smith said.

"At the same time we have not been able to sell on the vehicles like we have in the past and residual prices have fallen by as much as 15% in the UK and as much as 20% in our business in Spain. These falls in residuals are the biggest we have ever seen."

To make matters worse, although cash generation has reduced Northgate's debt pile to £864 million, one-third of that is on floating notes and the interest payments have leapt in line with the inter-bank lending rates seen in London and on the Continent during the autumn.

That sent Northgate's pre-tax profits tumbling by 46% in the six months to the end of October to £23.9 million and saw the group peg back the interim dividend to last year's payout of 11.5p.

Northgate shares plunged to new lows today, off 24¼p to 110p. The stock has crashed 85% over the past year -from a high of 769p at the start of the year.

Three years ago the board turned down an offer of about £12 a share from Guy Hands' Terra Firma.