Commercial vehicle rental giant Northgate made a pre-tax loss of £195.6m last year - a decline of 346% in just 12 months from the £79.5 million profit it made the preceding year.

The rental company, which has a fleet of 62,900 vehicles in the UK and Ireland (and a further 60,400 in Spain), revealed the impact of the recession on its business and the full extent of its cost-cutting programme in its latest set of preliminary reports.

Over £217 million of its losses were exceptional items, such as reducing the residual value of its vehicles, which cost it £415 per vehicle in the UK and £1,000 per vehicle in Spain.

This residual write down cost it some £180 million.

As was reported in Fleet News in February -www.fleetnews.co.uk/news/story/?nID=49513 - the company struggled with a massive drop in demand at the same time as residual values collapsed.

Fleet News reported that the company had issued a severe profits warning, telling its shareholders that it expects that its profits for the remainder of the financial year to be “significantly lower than market expectations”.

Now its preliminary full year results, which have just been published, show the extent of the problems the company faced and the actions it has taken.

The company had enjoyed considerable growth in its two main markets – the UK and Spain for the nine years up to 2008.

However, autumn 2008 saw an “aggressive decrease” in demand for rental vehicles, with utilisation falling below 90%.

This was coupled with an “unprecedented decrease in demand in the used vehicle market”, which caused disposal proceeds per vehicle to drop “considerably”.

The company stopped acquiring new vehicles and disposed of almost 8,000 vehicles in the UK and a further 4,400 in Spain.

It also laid-off 359 staff, resulting in a savings of £6.5 million in wage costs.

The group has also restructured its finances, resulting in new debts of £880m of which some £670m will not mature until September 2012.

This refinancing was conditional on completion of a share issue to raise at least £108m.

The company also began a strategic plan, with a key focus on maintaining targeted level of utilisation of at least 90% and a target of 91%.

The UK operations have already achieved this, although Spain is still hovering below 85% utilisation.

Northgate’s commitments to manufacturers have been reduced with it saying it will now concentrate on acquiring profitable makes and models.

It also plans to sell at least 30% of its end-of-life vehicles direct to retail customers.

The strategic plan, stressed the report, does not assume an economic recovery.

“Northgate remains a successful and cash-generative business,” said the preliminary report.

“The establishment of a stronger and more resilient capital structure will enable the group to focus on implementing long-term operational improvements.”