The stock rose 7.8 percent to 427 pence, the highest price since October 2008, as of 12:05 p.m. in London. That was the second-biggest gain among the 252 companies on the FTSE Small Capitalisation Index, valuing Darlington, England-based Northgate at 569 million pounds ($914 million).
“We see a gradual improvement in the outlook as the initiatives in the U.K. drive some growth in the second half and the Spanish operations are no longer a drag on performance,” Mike Murphy, an analyst at Numis Securities, said in a note. “The surprising growth was in Spain,” where an increase in the fleet surpassed the analyst’s prediction for a small decline.
Northgate vehicles on hire in Spain have increased by 4 percent since the start of the fiscal year on May 1, compared with no growth a year earlier, it said today in a statement. U.K. vehicles gained 3.7 percent compared with a decline in the same period last year.
Northgate is recovering from a drop in demand amid government austerity measures in the U.K. and recession-hit Spain. The company has eliminated jobs since the 2009 fiscal year, according to data compiled by Bloomberg.
The Spanish government predicts growth will return in the second half after eight consecutive quarters of contraction. Budget Minister Cristobal Montoro said last week that the country is on track to meet its budget-deficit target of 6.5 percent of GDP in 2013, after the shortfall widened to 10.6 percent last year from 9.4 percent in 2011.
The opening of more Northgate outlets in the U.K. will also help drive a “return to modest growth,” according to Murphy. The company said it opened four sites in the U.K. since February and plans two more branches in the London area by the end of 2013.
Murphy reiterated an “add” recommendation on the shares and has a price prediction of 466 pence, implying an 18 percent gain from yesterday’s closing price.
Northgate’s share of revenue from Spain fell to 35 percent last year from 41 percent in 2010.
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