Commercial vehicle hire company Northgate has warned investors that the tough economic conditions continue to affect both its UK and Spanish markets, and as such the business is currently trading towards the lower end of market expectations.

In an interim management statement the group said UK vehicle utilisation in the four months ended February 28th averaged 88%, in line with levels seen in the corresponding period the previous year.

Vehicles on hire fell from 45,000 at the end of October to 44,200 at the end of February, compared to a decline of 3,900 in the same period the previous year.

"In response to this fall we have managed down the fleet by 1,100 since October 31st," the firm said.

"Through the changes implemented in the commercial area of our business and the expansion of our network, we plan to return the UK business to growth. The used vehicle market continues to remain strong, with residual values in line with those experienced in the year ended April 30th 2012."

The company pointed out that underling hire revenue per rented vehicle has been stable since the end of October and said it has begun to increase the regional reach of the business with the opening of a new branch in Luton. Further branches in Brent Cross and Huddersfield are scheduled to open by the end of April.

In Spain vehicle utilisation in the four months to February averaged 89%, compared to 88% in the same period last year. The group returned to its target level of 90% utilisation in February.

Vehicles on hire at the end of February fell to 31,900 from 32,700 at the end of October, a decrease of 800 compared to a fall of 5,200 in the same period last year.

The fleet has reduced by 2,200 since the end of October.

In a statement the company said: "The tough economic conditions continue to affect both our UK and Spanish markets. As a result the business is currently trading towards the lower end of the range of market expectations.

"Net debt and gearing continue to fall, and we remain focused on asset management, cash generation and cost control whilst seeking to maximise profitable growth where the appropriate return exists."

The share price fell 10.57% to 313p by 14:00.

NR

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