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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Redde Northgate Plc | LSE:NTG | London | Ordinary Share | GB00B41H7391 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 250.00 | 249.00 | 250.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMREDD
RNS Number : 8408H
Redde Northgate PLC
08 December 2020
REDDE NORTHGATE PLC
("Redde Northgate" or the "Group" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHSED 31 OCTOBER 2020
Encouraging momentum in the Group
Hot Features
Premium
Adjusted results
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm %
--------------------------------- -------- -------- --------
Revenue (excluding vehicle
sales) 429.0 265.9 61.3%
Underlying [1] EBIT 48.7 35.1 38.7%
Underlying(1) Profit
before Tax 40.6 27.6 47.2%
Underlying(1) Earnings
per Share 13.4p 17.6p (24.1%)
--------------------------------- -------- -------- --------
Statutory results
Total revenue 556.0 357.8 55.4%
EBIT 34.0 32.9 3.3%
Profit before Tax 25.9 24.8 4.3%
Earnings per Share 8.6p 16.1p (46.8%)
--------------------------------- -------- -------- --------
Other measures
--------------------------------- -------- -------- --------
Net debt [2] 530.9 504.6 (5.2%)
Steady state cash generation(1) 80.4 59.2 35.7%
Free cash flow(1) 58.6 (12.8) 557%
ROCE(1) 8.1% 7.1% 100bps
Dividend per Share 3.4p 6.3p (46.0%)
--------------------------------- -------- -------- --------
Key highlights
-- Encouraging momentum in the Group. Against the backdrop of COVID-19, Northgate UK&I and Northgate Spain performed ahead of expectations in the first half of FY2021, with a full recovery in VOH to slightly above pre-COVID levels and with strong used vehicle prices and disposal profits above expectations, whilst Redde was impacted by a slower recovery in volumes due to continuing regional and national lockdowns.
-- Continued excellent progress under the strategic framework of Focus, Drive and Broaden, with a further increase in Merger integration synergies and additional permanent cost savings achieved to GBP11.7m and GBP4.2m annualised run rates respectively, in context of the original year 2 Merger integration synergy target of GBP10m, giving a total of GBP15.9m of run rate savings to date. Further progress in revenue synergies with the launch of a new accident and incident management product to Northgate customers in October.
-- Accelerated integration of FMG Repair Services ("FMG RS"), the trading name for the Nationwide Accident Repair Services business and assets acquired on 4 September 2020, including the securing of external and internal repair volumes and supply chains.
-- Continued development of contract hire as a source of vehicle funding with substantial new contract hire credit lines approved by several lenders in the period thus expanding provision to LCVs in the Northgate fleet. GBP6m of these credit lines has already been utilised.
-- The November lockdown in the UK did not have a discernible impact on UK VOH and VOH in both UK&I and Spain are ahead of expectations but Redde volumes were lower than October.
-- Overall, the Board is pleased with the performance in the first half of the year and, whilst significant uncertainties remain given the current economic environment and the risk of future more severe lockdowns, the Board is confident of the vision and strategy of the Group and the opportunities created by the Merger and remains confident in meeting market expectations for FY2021.
-- An interim dividend of 3.4p per share (2020: 6.3p) has been declared, in line with dividend policy, as stated at the time of the Merger, to pay an interim dividend that is half of the prior final dividend.
Martin Ward, CEO of Redde Northgate, commented:
"Since our preliminary year end results announcement on 16 September 2020 we have continued to make excellent progress in delivering on our strategy to become the leading integrated mobility solutions provider. Our integration plan has now delivered synergies and permanent cost savings of GBP15.9m run rate savings to date and we fully expect to reach the increased targets we set out of GBP19m in year 2.
"We have also commenced the integration of FMG RS which broadens our service proposition and capabilities in repairs and, in October, building on Redde's expertise, we launched our accident and incident management product to Northgate customers. We have had a good early response to this and are confident it will be a source of revenue growth for the Group.
"I have been immensely proud of the way the team has stepped up to ensure we can operate as effectively as possible and deliver our services during these difficult times. COVID-19 continues to impact us all and we remain primarily focussed on ensuring a safe and effective work environment for our employees and safe contact with our customers who require our services. We can clearly see the impact of COVID-19 in this set of results, particularly in Redde where accident volumes were depressed in the first quarter. However, these have significant potential to increase when road traffic volumes and incidents revert back closer to historic norms. Meanwhile, the buoyancy in used vehicle markets, particularly in the UK, has led to higher disposal profits, and the Northgate businesses have also both benefitted from an increase in VOH since year-end such that VOH is now above pre-COVID levels. Recent regional lockdowns and the second national lockdown in the UK have highlighted the need for agility and we continue to keep cost and cash controls in place in order to monitor and manage the business closely. We currently do not expect the impact of these new lockdowns to be as severe as the original national lockdowns in April and May. We are confident on performance in FY2021 and our views on FY2022 will be determined by the exit run rate we see at the end of FY2021.
"Our cash position has remained strong in the first half with continued good steady state cash generation and free cash flow. We have made good progress with our new capital model for funding vehicles and now have over five hundred vans on contract hire, with substantial LCV contract hire credit lines agreed with lenders and now in place.
"I am confident that the actions and measures we are taking are already creating value which will be further enhanced as we continue to deliver on our strategic priorities."
Half year results summary
-- Total revenue was 55.4% higher than the prior period, including GBP181.3m of revenues from Redde. Revenue from the Northgate businesses was GBP376.5m, 5.2% higher than H1 2020, and comprised hire revenues which were 6.2% lower due to the impact of both off-hires and customer support packages during the first lockdowns and vehicle sales revenues which were 38.2% higher due to higher volumes (mainly from reducing stock impacted by April lockdown) and strong market pricing in the UK.
-- Revenue (excluding vehicle sales) was 61.3% higher than the prior period with the increase attributable to Redde, which is included in revenue following the Merger on 21 February 2020.
-- Underlying EBIT and underlying PBT were 38.7% and 47.2% higher respectively, reflecting the strong performance in the Northgate UK&I business, a resilient performance in the Northgate Spain business and the profits from the Redde business.
-- Statutory EBIT and statutory PBT are stated after GBP9.6m of amortisation of acquisition intangibles [3] and GBP5.4m of exceptional costs, of which GBP2.6m related to restructuring and GBP2.6m related to FMG RS.
-- Underlying EPS of 13.4p was 24.1% lower, reflecting the lower profits from the Redde business in the period driven primarily by lower volumes due to COVID-19, particularly in the first quarter.
-- Statutory EPS of 8.6p was 46.8% lower, reflecting the trading of the Redde business and the impact of amortisation and exceptional items.
-- There were strong net cash inflows with free cash inflow of GBP58.6m (2020: GBP12.8m outflow) benefitting from lower total net capex [4] of GBP48.8m (2020: GBP127.0m) driven by lower purchases and higher disposal proceeds. Steady state cash generation also remained strong at GBP80.4m (2020: GBP59.2m).
-- Net debt (inc. IFRS 16) closed at GBP530.9m, 5.2% higher than H1 2020 due to the net debt acquired from Redde in H2 2020 of GBP84.1m, partially offset by the cash generated in the year.
Trading and COVID-19 impact
-- The Board and management continued with decisive actions put in place at the end of FY2020 to protect employees and customers and to mitigate the financial impact of COVID-19 on the Group. These proactive measures included new guidelines and controls to enable social distancing, furloughing employees, limiting new fleet capex, voluntary pay reductions across Board and senior leadership positions and cost control measures including freezing of recruitment and pay reviews.
-- In the first six months of FY2021 performance indicators across the Group have fully recovered or substantially improved, including:
-- Customer support packages, which were a core part of measures to support customers during the first national lockdowns and totalled GBP3.4m in the period, reduced to nil monthly cost at the end of September. We are currently not expecting to need to provide material customer support packages for subsequent lockdowns;
-- VOH has now recovered to above pre-COVID levels with closing VOH at the end of October 2020 9% higher than April 2020 in both Northgate UK&I and Northgate Spain. There has been no discernible impact of the November lockdown on VOH in the UK;
-- Vehicle disposal channels re-opened over the course of May such that they were fully operational from June, with significant improvement in residual values compared to prior year in the UK driven by strong market pricing, which has been approximately 15% above expected levels. Retail disposal channels closed again in November in the UK but vehicles have continued to be sold via other channels such that this impact of the November lockdown has been managed. We expect the strength of market pricing to reduce over H2 2021;
-- Post the first national lockdown accident and incident volumes started to increase as traffic volumes picked up but remained below expectations and as a result there exists significant opportunity for Redde profits to rise back to historic levels in the future. Having recovered to approximately 20% below normal volumes in September, the volumes in October were approximately 30% below normal volumes and in November were lower than this due to the lockdown and we continue to review our cost base accordingly.
Focus, Drive and Broaden strategy
-- To achieve the Group's vision, the Board and management team, who together have a proven track record of delivering strategic initiatives, plan to evolve the strategy of the enlarged Group through three phases: Focus, Drive and Broaden.
-- In the Focus phase, during FY2021, the Group is completing:
-- the Merger integration alongside initiation of the delivery of the anticipated cost synergies, as detailed further below;
-- developing the enlarged Group's products and services, as exemplified by the new accident and incident management product detailed further below; and
-- starting to leverage the platform to enable revenue growth based on the broader offering, for which we have had good traction with our customers and will update on further in due course.
Merger integration and synergies
-- Excellent progress continues to be made in integrating Redde and Northgate and annual run rate cost synergies achieved to date have increased to GBP11.7m, with implementation costs of GBP3.9m. Our synergy targets remain at GBP12m by end of FY2021 and GBP15m by end of FY2022, an increase from the original targets at the time of the Merger of GBP7m and GBP10m respectively.
-- Together with GBP4.2m of permanent annual costs savings [5] , GBP0.4m higher than previously announced, a total annual run rate of GBP15.9m of cost synergies and permanent cost savings have been achieved to the end of October since the Merger in February.
-- The Group has also continued to make good progress in developing its plans for the enlarged Group's products and services, which have included Northgate recently launching a new accident and incident management product, which has already had several customers sign up with several hundred managed vehicles, and a good pipeline of several thousand more managed vehicles.
FMG RS integration
-- The integration of FMG RS into Redde and the Group was a key focus in the last two months of the period following the acquisition of Nationwide Accident Repair Services at the beginning of September, both in terms of securing the supply chain and in managing volumes between external insurer customers and internal work referred from other Redde businesses and the Board is pleased with progress to date.
-- Initial trading has, as expected, been loss-making whilst the integration is completed and the 90 day plan executed. We have now secured over 95% of the supply chain and are continuing discussions with many prior and future customers to maximise external revenues.
-- The Group remains confident that the acquisition will be earnings enhancing in the first full financial year of ownership.
ESG
-- Following the Merger, the Group has been developing its ESG positioning, and enhancing and formalising its strategy for the future.
-- From an environmental perspective the Group has already outlined the main measures it uses to assess its environmental impact and is in the process of developing its wider carbon strategy as well as its EV strategy. It is progressively aligning its fleet policy with changing market dynamics to be at the forefront of electric vehicles.
-- From a social perspective, during COVID-19 the Group has supported employees and stakeholders in a variety of different ways which included increased flexible working, customer support packages (waivers, discounts and deferrals) and other initiatives including an NHS and key worker replacement vehicle scheme and the provision of vehicles to the Red Cross in Spain and British Heart Foundation in the UK at significant discounts.
-- The Group will update further on its detailed ESG plans and targets in the next reporting period.
GAAP reconciliation and glossary of terms
Throughout this document we refer to underlying results and measures; the underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period without the effects of one-off or non-operational items. Underlying measures exclude intangible amortisation from acquisitions and certain one-off items such as those arising from restructuring activities. Specifically, we refer to disposal profit(s). This is a non-GAAP measure used to describe the adjustment in depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs).
A reconciliation of GAAP to Non-GAAP underlying measures and a glossary of terms used in this document are outlined below the financial review.
Analyst Briefing
There will be a remote presentation for sell-side analysts at 9.30 a.m. today. If you are interested in attending, please email Buchanan on reddenorthgate@buchanan.uk.com.
This presentation will also be made available later today via a link on the Company's website www.reddenorthgate.com
For further information contact:
Buchanan
David Rydell/Jamie Hooper/Tilly Abraham +44 (0) 207 466 5000
Notes to Editors:
Redde Northgate plc is a leading integrated mobility solutions platform formed in February 2020 following the all-share Merger of light commercial hire business Northgate plc and Redde plc, the provider of incident and accident management, legal and other mobility-related services.
The Group provides mobility solutions and automotive services to a wide range of businesses and customers spanning the vehicle life cycle across vehicle supply, service, maintenance, repair, recovery, accident and incident management and disposal through sale or salvage.
With an extensive network and diversified fleet of over 110,000 owned vehicles and over 500,000 managed vehicles supported by more than 170 branches across the UK, Ireland and Spain, the Group aims to utilise its scale, reach and comprehensive suite of integrated services to offer a market-leading customer proposition and drive enhanced returns for shareholders.
Further information regarding Redde Northgate plc can be found on the Company's website:
www.reddenorthgate.com
OPERATING REVIEW
Northgate UK&I
Six months ended 31 October H1 2021 H1 2020 Change
KPI ('000) ('000) %
----------------------------- -------- -------- -------
Average VOH 45.2 46.9 (3.6%)
Closing VOH 47.4 47.2 0.4%
Average utilisation % 90% 89% 1ppt
Six months ended 31 October H1 2021 H1 2020 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
----------------------------- -------- -------- -------
Revenue - Vehicle hire 147.0 158.9 (7.5%)
Revenue - Vehicle sales 94.1 68.9 36.7%
Total Revenue 241.1 227.7 5.9%
Rental profit 15.1 15.6 (3.4%)
Rental Margin % 10.3% 9.8% 0.5ppt
Disposal profit 17.0 3.8 350.9%
EBIT 32.1 19.4 65.4%
EBIT Margin % [6] 13.3% 8.5% 4.8ppt
ROCE % 8.8% 6.6% 2.2ppt
----------------------------- -------- -------- -------
Rental business
Hire revenue in the Northgate UK&I business declined 7.5% compared to the prior period to GBP147.0m (2020: GBP158.9m), driven by average VOH which declined 3.6%, the impact of customer support packages which were GBP2.4m (equivalent to 1.5%) and the impact of vehicle and product mix, partially offset by the impact of pricing increases achieved. Regular rate increases were introduced in FY2019 and rates were again increased in FY2020 and FY2021 across our full range of rental products and continued to be well planned, communicated and executed.
Closing VOH increased 0.4% to 47,400 and was 9% above year-end FY2020 and 2% above pre-COVID levels.
At the half year, Northgate's minimum term proposition accounted for around 33% (2020: 28%) of average VOH. The average term of these contracts is approximately three years, providing both improved visibility of future rental revenue and earnings, as well as lower transactional costs.
The rental margin has continued to grow since H2 2018 with steady improvements now for the past five half year periods, increasing from 6.0% in H2 2018, to 7.1% in H1 2019 to 8.5% in H2 2019, to 9.8% in H1 2020, 10.0% in H2 2020 and 10.3% in H1 2021. This continued improvement reflects the execution of the strategic priorities and cost synergies and savings, despite the impact of COVID-19.
The net impact of the lower hire revenue and higher rental margin was a 3.4% reduction in rental profits to GBP15.1m (2020: GBP15.6m).
Management of fleet and vehicle sales
The total Northgate UK&I period end rental fleet of 51,900 vehicles increased from 51,400 at year-end FY2020. 5,700 vehicles were purchased during the period (2020: 8,100 vehicles) and 5,200 vehicles were de-fleeted. The average age of the fleet at the end of the period was three months higher than at the same time last year. This was partly due to the impact of the fleet optimisation policy and partly due to managing the fleet to mitigate impacts of COVID-19 by reducing purchases, particularly in the first quarter of the year.
A total of 9,500 vehicles were sold in Northgate UK&I during the period, 5% higher than the prior period. The sales in May were impacted by COVID-19 and the temporary closure of disposal markets but sales in subsequent months were higher due to the sale of those vehicles held since lockdown and from reducing stock levels to a substantially lower level.
Disposal profits of GBP17.0m (2020: GBP3.8m) increased 351% versus the prior period, driven by the increased sales volumes and, more significantly, a 330% improvement in the average profit per unit (PPU) on disposals to GBP1,794 (2020: GBP417) due to strong market pricing in the period, which has been approximately 15% above expected levels, together with cost savings taken in the disposals cost base, despite the continuing impact of the unwind of depreciation rate changes. No changes to depreciation rates have been made in the period, and this will remain under review as the longer term impact on residual values becomes clearer.
EBIT and ROCE
Underlying EBIT of GBP32.1m grew 65.4% over the prior period (2020: GBP19.4m) driven by higher disposal profits, partially offset by lower rental profits as explained above.
The ROCE in Northgate UK&I was 8.8% (2020: 6.6%) reflecting the increase in EBIT together with lower capital employed resulting from lower rental fleet.
Capex and cash flow
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm GBPm
----------------------------------- -------- -------- -------
Underlying EBITDA 75.3 78.7 (3.4)
Net Replacement Capex(8) (25.9) (54.3) 28.4
Lease principal payments
[7] (2.1) (1.6) (0.5)
Steady state cash generation 47.4 22.8 24.6
Growth Capex (incl. inorganic)(8) 28.4 (10.6) 38.9
----------------------------------- -------- -------- -------
Underlying EBITDA remained strong at GBP75.3m (2020: GBP78.7m)
Net replacement capex [8] in the period was GBP25.9m, GBP28.4m lower than prior period, driven mainly by higher disposal prices and a lower volume of fleet rotation during the period due to COVID-19.
Steady state cash generation increased by GBP24.6m to GBP47.4m (2020: GBP22.8m) reflecting lower net replacement capex in the year. Growth capex was a contraction of GBP28.4m, relating to the reduction in total fleet of 3,200 vehicles in the period, driven by lower stock levels.
Northgate Spain
Six months ended 31 October H1 2021 H1 2020 Change
KPI ('000) ('000) %
----------------------------- -------- -------- ---------
Average VOH 45.5 47.1 (3.4%)
Closing VOH 47.1 47.4 (0.6%)
Average utilisation % 91% 92% (1ppt)
Six months ended 31 October H1 2021 H1 2020 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
----------------------------- -------- -------- ---------
Revenue - Vehicle hire 102.4 107.0 (4.3%)
Revenue - Vehicle sales 32.9 23.0 42.8%
Total Revenue 135.3 130.1 4.1%
Rental profit 14.7 18.1 (18.9%)
Rental Margin % 14.4% 16.9% (2.5ppt)
Disposal profit 1.3 1.4 (5.8%)
EBIT 16.0 19.5 (17.9%)
EBIT Margin % [9] 11.8% 15.0% (3.2ppt)
ROCE % 7.7% 9.1% (1.4ppt)
----------------------------- -------- -------- ---------
Rental business
Hire revenue in the Northgate Spain business declined 4.3% compared to the prior period to GBP102.4m (2020: GBP107.0m), driven by average VOH which declined 3.4% due to COVID-19 and the impact of customer support packages which were GBP1.0m (equivalent to 0.9%). Price increases put through in the period were offset by lower excess mileage charges due to COVID-19 and vehicle product mix.
Closing VOH decreased 0.6% to 47,100 and was 9% above year-end FY2020 and 2% above pre-COVID levels.
At the half year, Northgate's minimum term proposition accounted for around 35% (2020: 33%) of average VOH. The average term of these contracts is approximately three years, providing both improved visibility of future rental revenue and earnings.
The rental margin was 2.5ppt lower at 14.4% including the impact of customer support on hire rate of 0.9%, and the impact of higher costs in the period, of which 1.0% relates to higher bad debts.
The impact of the lower hire revenue and lower rental margin was a 18.9% reduction in rental profits to GBP14.7m (2020: GBP18.1m).
Management of fleet and vehicle sales
The total Northgate Spain period end rental fleet of 52,700 vehicles increased from 51,500 at year-end FY2020. 6,000 vehicles were purchased during the period (2020: 6,900) and 4,800 vehicles were de-fleeted. The average age of the fleet at the end of the period was four months higher than at the same time last year. This was partly due to the impact of the fleet optimisation policy and partly due to managing the fleet to mitigate impacts of COVID-19 by reducing purchases, particularly in the first quarter of the year.
A total of 5,600 vehicles were sold in Northgate Spain during the period, 45% higher than prior period. The sales in May were impacted by COVID-19 and the temporary closure of disposal markets but sales in subsequent months were higher and stock levels have now been reduced to a lower level.
Disposal profits of GBP1.3m (2020: GBP1.4m) reduced 5.8% versus the prior year, as a result of the increased sales volumes offset by a 35% reduction in the average profit per unit (PPU) on disposals to GBP227 (2020: GBP350) due to the continuing impact of the unwind of depreciation rate changes, offset by some higher market pricing, some mix impacts and some improvements in the operations implemented in the year.
EBIT and ROCE
Underlying EBIT of GBP16.0m reduced 17.9% over the prior period (2020: GBP19.5m) driven by lower rental profits including impacts of COVID-19 as explained above.
The ROCE in Northgate Spain was 7.7% (2020: 9.1%) reflecting the reduction in EBIT.
Capex and cash flow
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm GBPm
------------------------------------ -------- -------- -------
Underlying EBITDA 60.2 63.7 (3.5)
Net Replacement Capex(11) (25.9) (22.2) (3.7)
Lease principal payments
[10] (1.4) (1.3) (0.1)
Steady state cash generation 32.9 40.2 (7.3)
Growth Capex (incl. inorganic)(11) (3.3) (37.0) 33.7
------------------------------------ -------- -------- -------
Underlying EBITDA remained strong at GBP60.2m (2020: GBP63.7m)
Net replacement capex [11] in the period was GBP25.9m, GBP3.7m higher than prior period, driven mainly by a higher volume of fleet replacements compared to the prior period due to timing of the fleet rotation cycle.
Steady state cash generation decreased by GBP7.3m to GBP32.9m (2020: GBP40.2m) reflecting lower EBITDA and higher net replacement capex in the period. Growth capex(11) was GBP3.3m, relating to the fleet growth of 300 vehicles.
Redde
The Merger completed on 21 February 2020 therefore the tables below have no prior period comparators.
Six months ended 31 October H1 2021 PROFIT & LOSS (Underlying) GBPm ------------------------------- -------- Revenue - Claims and Services 181.3 Gross profit 25.9 Gross margin % 14.3% Operating profit 1.7 Income from associates 2.4 EBIT 4.1 EBIT margin % ([12]) 2.3% ROCE % [13] 7.9% ------------------------------- --------
Revenue and profit
Revenue for the period was GBP181.3m, of which GBP18.2m related to FMG RS external revenues. The main drivers of revenue, traffic volumes and thereby road traffic accidents, were materially reduced in the period. Initially the volume reduction was significant versus pre-COVID levels [14] as the first lockdown, with schools and many workplaces closed, led to a material reduction in traffic, and then, with sequential monthly improvements volume increased in the second quarter to approximately 20%-30% below pre COVID-19 levels. Lower volumes particularly impacted credit hire and credit repair revenues, but also to a lesser extent fleet management and legal services revenues.
Gross margin remained broadly in line with expectations at 14.3%, although it was impacted by COVID-19 from reduced fleet utilisation particularly in the first quarter, and thus gross profit was GBP25.9m. Gross profit was below expectations due primarily to the slower recovery in volumes above.
EBIT for the period was GBP4.1m. This was made up of an operating loss in FMG RS of GBP3.0m, in line with Board expectations, an operating profit in the other Redde businesses of GBP4.7m, and income from associates of GBP2.4m.
The GBP7.1m of EBIT in the other Redde businesses was below expectations mainly due to the slower recovery in volumes, and whilst the cost base was closely managed and reduced where possible, most overheads are fixed or semi-variable, thus reducing EBIT margins to 2.3%. A normalised EBIT margin of this business is substantially higher and would deliver a materially higher profit and ROCE than in the current period.
Management of fleet
The total fleet in Redde closed the period at 6,500 vehicles, reduced from the level at 30 April 2020 of 9,000 vehicles due to the impact of COVID-19 as fleet size was reduced to reflect reduced volumes.
The average fleet age was 18 months reflecting the lower fleet holding period than in the Northgate businesses due to the different usage of the vehicles and business economics.
The Redde fleet continues to operate through a hybrid solution of ownership, contract hire and, during peak periods, cross-hiring from daily rental companies.
Capex and cash flow
Six months ended 31 October H1 2021
GBPm
------------------------------- ---------
Underlying EBITDA 11.9
Net replacement capex [15] 5.2
Lease principal payments [16] (13.4)
Steady state cash generation 3.7
Growth capex (10.3)
Debtor days 144 days
------------------------------- ---------
Underlying EBITDA was GBP11.9m in the period, which was below expectations mainly due to the slower recovery in volumes.
Net replacement capex was a net inflow of GBP5.2m in the period due to the disposal proceeds of vehicles funded by HP compared to the timing of lease principal payments.
Steady state cash generation was GBP3.7m and included lease principal payments of GBP13.4m.
Growth capex was GBP10.3m and reflects payments for the FMG RS fixed assets acquired.
Debtor days were 144 days at 31 October 2020. This measure is based upon net trade receivables and contract assets, other receivables and accrued income as a proportion of the related underlying sales revenue for the past 12 months multiplied by 365 days. Debtor days increased from 123 days at year-end FY2020 due to the significant drop in revenues in the last eight months.
FINANCIAL REVIEW
Group Revenue and EBIT
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm %
------------------------------- -------- -------- ---------
Revenue - Vehicle hire 249.0 265.9 (6.4%)
Revenue - Vehicle sales 127.1 91.9 38.2%
Revenue - Claims and services 180.0 - n/a
-------- -------- ---------
Total revenue 556.0 357.8 55.4%
Rental profit 29.8 33.8 (11.7%)
Disposal profit 18.3 5.1 255.2%
Claims and services profit 1.7 - n/a
-------- -------- ---------
Underlying operating profit 46.3 35.1 31.9%
Income from associates 2.4 - n/a
-------- -------- ---------
Underlying EBIT 48.7 35.1 38.7%
Underlying EBIT margin 8.8% 9.8% (1.0ppt)
Statutory EBIT 34.0 32.9 3.3%
------------------------------- -------- -------- ---------
-- Total Group revenue, including vehicle sales, of GBP556.0m was 55.4% higher (54.8% at constant exchange rates). Hire revenues were 6.4% lower due to the impact of both off-hires and customer support packages during the first lockdowns and vehicle sales revenues were 38.2% higher due to higher volumes (mainly from reducing stock impacted by April lockdown) and strong market pricing in the UK.
-- Revenue (excluding vehicle sales) of GBP429.0m was 61.3% higher (60.8% at constant exchange rates) than the prior period with the increase attributable to Redde, which is included in revenue following the Merger on 21 February 2020.
-- Underlying EBIT of GBP48.7m was 38.7% higher, reflecting the strong performance in the Northgate UK&I business, a resilient performance in the Northgate Spain business and the profits from the Redde business.
-- Statutory EBIT of GBP34.0m was 3.3% higher, reflecting higher underlying EBIT offset by GBP9.6m of amortisation of acquisition intangibles [17] and GBP5.4m of exceptional costs, of which GBP2.6m related to restructuring and GBP2.6m related to FMG RS.
Group PBT and EPS
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm %
----------------------------- -------- -------- --------
Underlying EBIT 48.7 35.1 38.7%
Net finance costs (8.1) (7.5) (7.6%)
-------- -------- --------
Underlying Profit before
Tax 40.6 27.6 47.2%
Statutory Profit before
Tax 25.9 24.8 4.3%
Underlying effective tax
rate 18.8% 14.7% 4.1ppt
Underlying EPS 13.4p 17.6p (24.1%)
Statutory EPS 8.6p 16.1p (46.8%)
----------------------------- -------- -------- --------
-- Underlying PBT was 47.2% higher, reflecting the higher EBIT and higher finance costs, which were 7.6% higher including Redde finance costs.
-- Statutory PBT was 4.3% higher, reflecting the higher underlying PBT offset by GBP9.6m of amortisation of acquisition intangibles [18] and GBP5.4m of exceptional costs, of which GBP2.6m related to restructuring and GBP2.6m related to FMG RS.
-- The underlying effective tax rate was 18.8%, which was 4.1ppt higher than prior year due primarily to one-offs in H1 FY2020, as highlighted at the time, from settlement of prior year tax positions.
-- Underlying EPS of 13.4p was 24.1% lower, reflecting the lower profits from the Redde business in the period driven primarily by lower volumes due to COVID-19, particularly in the first quarter, as well as the higher tax rate.
-- Statutory EPS of 8.6p was 46.8% lower, reflecting the movement in underlying EPS and the impact of exceptional costs and amortisation of acquisition intangibles(1) .
Business combinations
The Group acquired certain businesses and certain assets of Nationwide Accident Repair Services on 4 September 2020 by way of a purchase from administrators, for an initial cash consideration of GBP10.6m, plus a deferred consideration of up to GBP5m conditional on retention of certain trade business on satisfactory terms. The provisional fair value of consideration is estimated to be GBP10.9m. A provisional purchase price allocation exercise has been undertaken in order to identify and recognise intangible assets with finite useful lives amounting to GBP3.6m and other net assets of GBP7.6m, resulting in negative goodwill of GBP0.3m which has been recognised in the income statement in the period.
Depreciation rate changes
Vehicle depreciation rates are regularly reviewed and changes are made, if expectations of future residual values change. Residual values have increased in the period due to the short term closure and re-opening of used vehicle markets as a result of COVID-19. This disruption is not anticipated to continue into the medium term, therefore there have been no changes to depreciation rate estimates in the period. The full year-on-year impact of previous depreciation rate changes in FY2021 EBIT is expected to be GBP4.0m in Spain and GBP1.4m in UK&I as previously outlined.
Dividend
The Board has declared an interim dividend of 3.4p per share (2020: 6.3p) and will be paid on 29 January 2021 to shareholders on the register as at close of business on 18 December 2020.
Group cash flow
Steady state cash generation
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm GBPm
------------------------------- -------- -------- -------
Underlying EBIT 48.7 35.1 13.6
Depreciation and amortisation 95.3 103.5 (8.3)
Underlying EBITDA 144.0 138.7 5.3
Net replacement capex (46.7) (76.6) 29.9
Lease principal payments
[19] (16.9) (2.9) (14.1)
-------- -------- -------
Steady state cash generation 80.4 59.2 21.2
------------------------------- -------- -------- -------
-- Steady state cash generation remained strong at GBP80.4m and was GBP21.2m higher than H1 2020, driven by strong EBIT and lower net replacement capex.
-- Underlying EBITDA was GBP5.3m higher driven by higher underlying EBIT partially offset by lower depreciation due to reduced rental fleet size.
-- Net replacement capex was GBP29.9m lower reflecting lower purchases including the impact of contract hire purchases and the higher number of disposals and strong used vehicle prices in the period.
Free cash flow
Six months ended 31 October H1 2021 H1 2020 Change
GBPm GBPm GBPm
------------------------------- -------- -------- -------
Steady state cash generation 80.4 59.2 21.2
Exceptional costs (5.4) (2.2) (3.1)
Working capital and non-cash
items (20.7) (6.0) (14.6)
Growth capex 14.8 (47.5) 62.3
Tax (5.6) (4.7) (0.9)
-------- -------- -------
Net operating cash 63.5 (1.2) 64.8
Distributions from associates 2.6 - 2.6
Interest and other financing (7.5) (11.5) 4.0
-------- -------- -------
Free cash flow 58.6 (12.8) 71.4
Dividends paid - (16.0) 16.0
Lease principal payments
[20] 16.9 2.9 14.1
-------- -------- -------
Net cash generated (consumed) 75.5 (25.9) 101.5
------------------------------- -------- -------- -------
-- Free cash flow remained strong at GBP58.6m driven by strong net operating cash, distributions from associates and lower interest and other financing costs than H1 2020.
-- Exceptional costs were GBP5.4m and included GBP2.6m restructuring costs to delivery synergies and cost savings, and GBP2.6m costs relating to FMG RS.
-- Working capital outflow of GBP20.7m included GBP9m relating to timing differences of payments and receipts over the COVID-19 period, and GBP7m relating to FMG RS as initial working capital positions were built.
-- Growth capex of GBP14.8m inflow reflects a net reduction in fleet over the period of 3,000 vehicles.
-- If the impact of growth capex in the period is removed from free cash flow, the underlying free cash flow of the Group was GBP43.8m (2020: GBP34.7m).
-- No dividends were paid in the period as the final dividend of GBP16.7m was paid in November, later than the normal financial calendar due to the timing of the preliminary results announcement.
Net debt
Net debt reconciles as follows:
Six months ended 31 October H1 2021 H1 2020
GBPm GBPm
------------------------------ ------- -------
Opening net debt 575.9 436.9
IFRS 16 transition - 48.5
Net cash (generated) consumed (75.5) 26.0
Non-cash movement on leases 16.4 -
Other non-cash items - (3.6)
Exchange differences 14.1 (3.2)
------------------------------ ------- -------
Closing net debt 530.9 504.6
------------------------------ ------- -------
Closing net debt was GBP45.0m lower than opening net debt, driven by net cash generation of GBP75.5m. New leases acquired were GBP16.4m, and the overall foreign exchange impact on net debt was GBP14.1m.
Borrowing facilities
As at 31 October 2020 the Group had headroom on facilities of GBP281m, with GBP432m drawn (net of available cash balances) against total committed facilities of GBP713m as detailed below:
Facility Drawn Headroom Borrowing
GBPm GBPm GBPm Maturity Cost
------------------- -------- ----- -------- -------- ---------
UK bank facilities 608 334 274 Nov-23 2.0%
Loan notes 90 90 - Aug-22 2.4%
Other loans 15 8 7 Nov-21 1.0%
713 432 281 2.1%
------------------- -------- ----- -------- -------- ---------
The other loans consist of GBP7m of local borrowings in Spain and GBP0.5m of preference shares.
During the period, the previous Redde GBP50m bank facility was cancelled and at the same time the existing bank facility commitment was increased by the same amount, thus simplifying the bank financing structure.
The above drawn amounts reconcile to net debt as follows:
Drawn
GBPm
------------------------------------ -----
Borrowing facilities 432
Unamortised finance fees (5)
Leases arising following adoption
of IFRS 16 70
Leases arising under HP obligations 34
Net debt 531
------------------------------------- -----
The overall cost of borrowings at 31 October 2020 is 2.1% (2020: 2.5%). There are three financial covenants under the Group's facilities as follows:
Threshold H1 2021 Headroom H1 2020
--------------- ---------- ------- ---------------- -------
Interest cover 3x 5.6x GBP34m (EBIT) 5.5x
GBP305m (Net
Loan to value 70% 42% debt) 44%
Debt leverage 2.75x 1.6x GBP126m (EBITDA) 1.7x
--------------- ---------- ------- ---------------- -------
The covenant calculations have been prepared in accordance with the requirements of the facilities that they relate to.
Balance sheet
Net assets at 31 October 2020 were GBP882.1m (2020: GBP571.7m), equivalent to net assets per share of 358p (2020: 429p). Net tangible assets at 31 October 2020 were GBP585.9m (2020: GBP551.5m), equivalent to a net tangible asset value of 238p per share (2020: 414p per share).
On acquisition of Redde, net assets of GBP318.4m were recognised on the balance sheet, including GBP112.5m of goodwill, GBP186.6m other intangible assets and GBP19.3m of other net tangible assets.
Foreign exchange risk
The average and period end exchange rates used to translate the Group's overseas operations were as follows:
October 2020 October 2019 April 2020
GBP : EUR GBP : EUR GBP : EUR
----------- ------------- ------------ ----------
Average 1.11 1.12 1.14
Period end 1.11 1.16 1.15
----------- ------------- ------------ ----------
Going concern
Having considered the Group's current trading, cash flow generation and debt maturity including severe but plausible stress testing scenarios including the impacts of COVID-19 (as explained further in note 1 of the unaudited condensed financial statements), the Directors have concluded that it is appropriate to prepare the Group financial statements on a going concern basis.
Risks and uncertainties
The Board and the Group's management have clearly defined responsibility for identifying the major business risks facing the Group and for developing systems to mitigate and manage those risks.
The principal risks and uncertainties facing the Group at 30 April 2020 were set out in detail on pages 33 to 36 of the 2020 annual report, a copy of which is available at www.reddenorthgate.com, and were identified as:
-- economic environment; -- market risk; -- vehicle holding costs; -- the employee environment; -- legal and compliance; -- IT systems; -- access to capital; -- COVID-19 pandemic; and -- recovery of contracts assets.
These principal risks have not changed since the last annual report and continue to be those that could impact the Group during the second half of the current financial year.
Impact of the UK leaving the European Union without a new free trade agreement
The Group has planned for the potential impact on its business of the UK leaving the European Union without a new free trade agreement in place. The greatest risks identified would be a disruption to the supply of new vehicles and vehicle components imported into the UK from the EU, including additional import costs which may be imposed:
o Around 90% of vehicles purchased or leased by the Group from UK OEMs are imported from the EU. Assurances have been sought from these OEMs, who are confident that there will be no material long-term disruption. Any potential short-term supply disruption can also be mitigated by the Group itself, by slowing the rate of vehicle de-fleets in order to maintain vehicle availability for customers as has been seen in the response to COVID-19.
o Components for vehicles manufactured in the UK are also imported from the EU. However, normal OEM stock levels are considered to be sufficient to address any potential short-term supply issues and we are in active discussions with FMG RS suppliers to ensure continuing supply.
o The introduction of import costs could potentially create some margin pressure in the short-term. However, the Company believes that in the medium-term, it will be able to pass through to end-users any significant additional costs that might be imposed on imported vehicles.
A potential upside for Northgate in the event of supply disruptions or higher purchase costs, would be the likely increase in rental demand and stronger residual values that could result.
Glossary of terms
The following defined terms have been used throughout this document:
Term Definition
Disposal profit(s) This is a non-GAAP measure used to describe
the adjustment in the depreciation charge made
in the year for vehicles sold at an amount
different to their net book value at the date
of sale (net of attributable selling costs)
-------------------------------------------------------
EBIT Earnings before interest and taxation
-------------------------------------------------------
EBITDA Earnings before interest, taxation, depreciation
and amortisation
-------------------------------------------------------
EPS Basic earnings per share
-------------------------------------------------------
Facility headroom Calculated as facilities of GBP713m less net
borrowings of GBP432m. Net borrowings represent
net debt of GBP531m excluding lease liabilities
of GBP104m and unamortised arrangement fees
of GBP5m and are stated after the deduction
of GBP28m of net cash and overdraft balances
which are available to offset against borrowings
-------------------------------------------------------
Free cash flow Net cash generated after principal lease payments
and before the payment of dividends
-------------------------------------------------------
FY2020 The year ended 30 April 2020
-------------------------------------------------------
FY2021 The year ending 30 April 2021
-------------------------------------------------------
FY2022 The year ending 30 April 2022
-------------------------------------------------------
GAAP Generally Accepted Accounting Practice: meaning
compliance with IFRS
-------------------------------------------------------
Growth capex Growth capex represents the cash consumed in
order to grow the total rental fleet or the
cash generated if the fleet size is reduced
in periods of contraction and includes fixed
assets acquired as part of the Nationwide acquisition
-------------------------------------------------------
H1/H2 Half year period: H1 being the first half and
H2 being the second half of the financial year
-------------------------------------------------------
HP (leases) Leases recognised on the balance sheet that
would previously have been classified as finance
leases prior to the adoption of IFRS 16
-------------------------------------------------------
IFRS International Financial Reporting Standards
-------------------------------------------------------
IFRS 16 (leases) Leases recognised on the balance sheet that
would previously have been classified as operating
leases prior to the adoption of IFRS 16
-------------------------------------------------------
LCV Light commercial vehicle: the official term
used within the European Union for a commercial
carrier vehicle with a gross vehicle weight
of not more than 3.5 tonnes
-------------------------------------------------------
Lease principal Includes the total principal payment on leases
payments including those recognised before and after
adoption of IFRS 16
-------------------------------------------------------
Nationwide Nationwide Accident Repair Services trade and
assets acquired by the Group on 4 September
2020
-------------------------------------------------------
Net replacement Net capital expenditure other than that defined
capex as growth capex and lease principal payments.
-------------------------------------------------------
Net tangible Net assets less goodwill and other intangible
assets assets
-------------------------------------------------------
Northgate The Company and its subsidiaries prior to the
Merger or that part of the business following
the Merger
-------------------------------------------------------
Northgate Spain The Northgate Spain operating segment representing
the commercial vehicle hire part of the Group
located in Spain
-------------------------------------------------------
Northgate UK&I The Northgate UK&I operating segment representing
the commercial vehicle hire part of the Group
located in the United Kingdom and the Republic
of Ireland
-------------------------------------------------------
OEM Original Equipment Manufacturer: a reference
to our vehicle suppliers
-------------------------------------------------------
PBT Profit before taxation
-------------------------------------------------------
PPU Profit per unit/loss per unit - this is a non-GAAP
measure used to describe disposal profit (as
defined), divided by the number of vehicles
sold
-------------------------------------------------------
Redde The Redde operating segment representing the
insurance claims and services part of the group
or the Redde plc company and its subsidiaries
prior to the Merger
-------------------------------------------------------
ROCE Underlying return on capital employed: calculated
as underlying EBIT (see non-GAAP reconciliation)
divided by average capital employed excluding
acquired goodwill and intangible assets
-------------------------------------------------------
Steady state Underlying EBITDA less net replacement capex
cash generation and lease principal payments
-------------------------------------------------------
The Combined The Company and its subsidiaries following
Group the Merger and acquisition of the trade and
assets of Nationwide
-------------------------------------------------------
The Company Redde Northgate plc
-------------------------------------------------------
The Group The Company and its subsidiaries
-------------------------------------------------------
The Merger The acquisition by the Company of 100% of the
share capital of Redde plc on 21 February 2020
-------------------------------------------------------
Underlying free Free cash flow excluding growth capex
cash flow
-------------------------------------------------------
Utilisation Calculated as the average number of vehicles
on hire divided by average rentable fleet in
any period
-------------------------------------------------------
VOH Vehicles on hire. Average unless otherwise
stated
-------------------------------------------------------
Reconciliation of GAAP to non-GAAP measures
Throughout this report we refer to underlying results and measures. The underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period without the effects of one-off or non-operational items.
In particular we refer to disposals profit. This is a non-GAAP measure used to describe the adjustment in depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs). A reconciliation of GAAP to non-GAAP underlying measures is as follows:
Six months Six months
to 31.10.20 to 31.10.19
GBP000 GBP000
Operating profit 31,310 32,890
Income from associates 2,400 -
Gain on bargain purchase 258 -
EBIT 33,968 32,890
Add back:
Gain on bargain purchase (258) -
Restructuring costs 5,364 2,221
Amortisation on acquired intangible assets 9,639 6
------------------------------------------------- ------------- -------------
Underlying EBIT 48,713 35,117
------------------------------------------------- ------------- -------------
Profit before tax 25,853 24,785
Add back:
Exceptional operating expenses 5,364 2,221
Amortisation on acquired intangible assets 9,639 6
Gain on bargain purchase (258) -
Exceptional finance costs - 565
Underlying profit before tax 40,598 27,577
------------------------------------------------- ------------- -------------
Profit for the period 21,121 21,490
Add back:
Exceptional operating expenses 5,364 2,221
Amortisation on acquired intangible assets 9,639 6
Gain on bargain purchase (258) -
Exceptional finance costs - 565
Tax on exceptional items, brand royalty charges
and intangible amortisation (2,883) (772)
------------------------------------------------- ------------- -------------
Underlying profit for the year 32,983 23,510
------------------------------------------------- ------------- -------------
Weighted average number of Ordinary shares 246,091,423 133,232,518
------------------------------------------------- ------------- -------------
Underlying basic earnings per share 13.4p 17.6p
------------------------------------------------- ------------- -------------
Six months Six months
to 31.10.20 to 31.10.19
GBP000 GBP000
------------------------------------------------- ------------- -------------
Underlying EBIT 48,713 35,117
Add Back
Depreciation: vehicles for hire and vehicles
for credit hire 86,378 96,773
Other depreciation 8,666 6,265
(Gain) loss on disposal of assets (112) 97
Intangible amortisation included in underlying
operating profit 349 413
------------------------------------------------- ------------- -------------
Underlying EBITDA 143,994 138,665
Net replacement capex (46,651) (76,552)
Lease principal payments (16,936) (2,876)
------------------------------------------------- ------------- -------------
Steady state cash generation 80,407 59,237
------------------------------------------------- ------------- -------------
Northgate Northgate Group
UK&I Spain Sub-total
6 months 6 months 6 months
to 31.10.20 to 31.10.20 to 31.10.20
GBP000 GBP000 GBP000
--------------------------------------- ------------- ------------- -------------
Underlying operating profit 32,097 16,000 48,097
Exclude:
Adjustments to depreciation charge
in relation to vehicles sold in
the period (16,978) (1,301) (18,279)
Rental profit 15,119 14,699 29,818
--------------------------------------- ------------- ------------- -------------
Divided by: Revenue: hire of vehicles 146,545 102,426 248,971
--------------------------------------- ------------- ------------- -------------
Rental margin 10.3% 14.4% 12.0%
--------------------------------------- ------------- ------------- -------------
Northgate Northgate Group
UK&I Spain Sub-total
6 months 6 months 6 months
to 31.10.19 to 31.10.19 to 31.10.19
GBP000 GBP000 GBP000
--------------------------------------- ------------- ------------- -------------
Underlying operating profit 19,409 19,500 38,909
Exclude:
Adjustments to depreciation charge
in relation to vehicles sold in
the period (3,765) (1,381) (5,146)
Rental profit 15,644 18,119 33,763
--------------------------------------- ------------- ------------- -------------
Divided by: Revenue: hire of vehicles 158,870 107,006 265,876
--------------------------------------- ------------- ------------- -------------
Rental margin 9.8% 16.9% 12.7%
--------------------------------------- ------------- ------------- -------------
Six months Six months
to 31.10.20 To 31.10.19
(Unaudited) (Unaudited)
GBP'000 GBP'000
------------------------------------------------- ------------ ------------
Net replacement capex 46,651 76,552
Lease principal payments 16,936 2,876
Growth capex (14,791) 47,543
------------------------------------------------- ------------ ------------
Total net capex 48,796 126,971
------------------------------------------------- ------------ ------------
Purchase of vehicles 137,859 185,539
Proceeds from disposal of vehicles (112,767) (68,758)
Other property, plant and equipment expenditure
net of disposal proceeds 6,768 7,314
Lease principal payments 16,936 2,876
------------------------------------------------- ------------ ------------
Total net capex 48,796 126,971
------------------------------------------------- ------------ ------------
Condensed consolidated income statement
for the six months ended 31 October 2020
----------------------------------------------------------------------------------------------------------------------
Six months Six months Six months Six months Year to Year to
to 31.10.20 to 31.10.20 to 31.10.19 to 31.10.19 30.04.20 30.04.20
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
Underlying Statutory Underlying Statutory Underlying Statutory
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- ---------
Revenue: hire of vehicles 2 248,971 248,971 265,876 265,876 518,157 518,157
Revenue: sale of vehicles 2 127,054 127,054 91,910 91,910 193,795 193,795
Revenue: claims and services 2 179,983 179,983 - - 67,397 67,397
------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- ---------
Total revenue 2 556,008 556,008 357,786 357,786 779,349 779,349
Cost of sales (446,424) (446,424) (280,082) (280,082) (621,446) (621,446)
------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- ---------
Gross profit 109,584 109,584 77,704 77,704 157,903 157,903
Administrative expenses (excluding
exceptional items and amortisation
on acquired intangible
assets) (63,271) (63,271) (42,587) (42,587) (84,034) (84,034)
Exceptional administrative expenses 13 - (5,364) - (2,221) - (41,775)
Amortisation on acquired intangible
assets - (9,639) - (6) - (3,178)
------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- ---------
Total administrative expenses (63,271) (78,274) (42,587) (44,814) (84,034) (128,987)
------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- ---------
Operating profit 2 46,313 31,310 35,117 32,890 73,869 28,916
Income from associates 8 2,400 2,400 - - 952 952 Gain on bargain purchase 14 - 258 - - - - EBIT 48,713 33,968 35,117 32,890 74,821 29,868 Interest income 15 15 42 42 122 122 Finance costs (excluding exceptional items) (8,130) (8,130) (7,582) (7,582) (15,945) (15,945) Exceptional finance costs 13 - - - (565) - (566) Profit before taxation 40,598 25,853 27,577 24,785 58,998 13,479 ------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- --------- Taxation 3 (7,615) (4,732) (4,067) (3,295) (11,479) (5,803) ------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- --------- Profit for the period 32,983 21,121 23,510 21,490 47,519 7,676 ------------------------------------- ---- ----------- ----------- ----------- ----------- ---------- ---------
Profit for the period is wholly attributable to owners of the Company. All results arise from continuing operations.
Underlying profit excludes exceptional items as set out in Note 13 as well as brand royalty charges, amortisation on acquired intangible assets and the taxation thereon, in order to provide a better indication of the Group's underlying business performance.
Earnings per share
Basic 413.4p 8.6p 17.6p 16.1p 30.8p 5.0p
------------------- ----- ---- ----- ----- ----- ----
Diluted 413.2p 8.4p 17.2p 15.7p 30.5p 4.9p
------------------- ----- ---- ----- ----- ----- ----
Condensed consolidated statement of comprehensive income
for the six months ended 31 October 2020
----------------------------------------------------------------------------- ----------- ----------- ----------
Six months Six months Year to
to 31.10.20 to 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
----------------------------------------------------------------------------- ----------- ----------- ----------
Amounts attributable to owners of the Company
Profit attributable to owners 21,121 21,490 7,676
Other comprehensive income (expense)
Foreign exchange differences on retranslation of net assets of subsidiary
undertakings 18,634 (1,222) 3,998
Net foreign exchange differences on long term borrowings held as hedges (13,432) 2,278 (1,682)
Foreign exchange difference on revaluation reserve 44 (1) 9
Net fair value gains on cash flow hedges 184 335 807
Deferred tax charge recognised directly in equity relating to cash flow hedges (35) (64) (153)
Total other comprehensive income for the period 5,395 1,326 2,979
------------------------------------------------------------------------------ ----------- ----------- ----------
Total comprehensive income for the period 26,516 22,816 10,655
------------------------------------------------------------------------------ ----------- ----------- ----------
All items will subsequently be reclassified to the consolidated income statement. Profit attributable to the owners of the Company includes amortisation of intangible assets.
Condensed consolidated balance sheet
31 October 2020
31.10.20 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
-------------------------------------------------------- ---- ----------- ----------- ---------
Non-current assets
Goodwill 6 116,105 3,589 116,105
Other intangible assets 6 180,068 16,661 185,710
Property, plant and equipment: vehicles for hire 7 908,507 939,671 884,711
Property, plant and equipment: vehicles for credit hire 7 42,179 - 51,040
Other property, plant and equipment 7 135,682 112,376 126,009
Total property, plant and equipment 7 1,086,368 1,052,047 1,061,760
--------------------------------------------------------- ---- ----------- ----------- ---------
Deferred tax assets 10,350 5,589 10,133
Interest in associates 8 5,834 - 6,008
Total non-current assets 1,398,725 1,077,886 1,379,716
--------------------------------------------------------- ---- ----------- ----------- ---------
Current assets
Inventories 16,397 33,820 48,762
Receivables and contract assets 328,903 75,833 295,765
Cash and bank balances 9 62,592 46,632 67,843
--------------------------------------------------------- ---- ----------- ----------- ---------
Total current assets 407,892 156,285 412,370
--------------------------------------------------------- ---- ----------- ----------- ---------
Total assets 1,806,617 1,234,171 1,792,086
--------------------------------------------------------- ---- ----------- ----------- ---------
Current liabilities
Trade and other payables 281,415 94,361 222,342
Provisions 10 49 - 3,369
Derivative financial instrument liabilities 11 - 656 184
Current tax liabilities 12,442 10,884 12,393
Lease liabilities 41,925 6,333 33,691
Short-term borrowings 41,537 44,424 54,684
--------------------------------------------------------- ---- ----------- ----------- ---------
Total current liabilities 377,368 156,658 326,663
--------------------------------------------------------- ---- ----------- ----------- ---------
Net current assets (liabilities) 30,524 (373) 85,707
--------------------------------------------------------- ---- ----------- ----------- ---------
Non-current liabilities
Provisions 10 296 - 1,208
Lease liabilities 62,292 38,969 70,261
Long term borrowings 447,777 461,509 485,073
Deferred tax liabilities 36,814 5,306 37,314
Total non-current liabilities 547,179 505,784 593,856
--------------------------------------------------------- ---- ----------- ----------- ---------
Total liabilities 924,547 662,442 920,519
--------------------------------------------------------- ---- ----------- ----------- ---------
NET ASSETS 882,070 571,729 871,567
--------------------------------------------------------- ---- ----------- ----------- ---------
Equity
Share capital 123,046 66,616 123,046
Share premium account 113,510 113,508 113,510
Own shares reserve (2,519) (2,273) (3,090)
Hedging reserve - (532) (149)
Translation reserve 2,693 (3,769) (2,509)
Other reserves 330,521 68,636 330,477
Retained earnings 314,819 329,543 310,282
--------------------------------------------------------- ---- ----------- ----------- ---------
TOTAL EQUITY 882,070 571,729 871,567
--------------------------------------------------------- ---- ----------- ----------- ---------
Total equity is wholly attributable to owners of the Company.
Condensed consolidated cash flow statement
for the six months ended 31 October 2020
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Six months Six months Year to
to 31.10.20 to 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Net cash generated from operations 12 79,718 1,827 33,699
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Investing activities
Interest received 15 42 122
Distributions from associates 8 2,574 - 590
Cash acquired on acquisition - - 8,036
Proceeds from disposal of vehicles for credit hire and other property, plant and
equipment 7,954 772 3,823
Purchases of other property, plant and equipment (10,408) (2,496) (5,250)
Purchases of intangible assets (4,314) (5,590) (6,509)
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Net cash (used in) generated from investing activities (4,179) (7,272) 812
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Financing activities
Issue of shares - - 2
Dividends paid - (15,997) (24,333)
Receipt of bank loans and other borrowings 27,195 150,246 137,257
Repayments of bank loans and other borrowings (74,371) (110,289) (114,289)
Debt issue costs (34) (4,509) (4,878)
Principal element of lease payments under IFRS 16 (7,147) (2,876) (8,034)
Principal element of HP payments (9,789) - (3,490)
Net payments to acquire own shares for share schemes - 4 -
Net cash (used in) generated from financing activities (64,146) 16,579 (17,765)
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Net increase in cash and cash equivalents 11,393 11,134 16,746
Cash and cash equivalents at beginning of the period 16,780 805 805
Effect of foreign exchange movements 157 (281) (771)
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Cash and cash equivalents at the end of the period 28,330 11,658 16,780
------------------------------------------------------------------------ ------- ----------- ----------- ---------
Cash and cash equivalents consist of:
Cash and bank balances 9 62,592 46,632 67,843
Bank overdrafts 9(34,262) (34,974) (51,063)
-------------------------------------- -------- -------- --------
28,330 11,658 16,780
-------------------------------------- -------- -------- --------
Condensed consolidated statement of changes in equity
for the six months ended 31 October 2020
Share
capital
and share Hedging Translation Other Retained
premium Own shares reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ----------- ------------- --------- ------------ ---------- ---------- ---------
Total equity at 1
May 2019 180,124 (3,359) (803) (4,825) 68,637 323,842 563,616
Share options fair
value charge - - - - - 1,290 1,290
Share options exercised - - - - - (1,082) (1,082)
Profit attributable
to owners of the
Company - - - - - 21,490 21,490
Dividends paid - - - - - (15,997) (15,997)
Net purchase of own
shares - 4 - - - - 4
Transfer of shares
on vesting of share
options - 1,082 - - - - 1,082
Other comprehensive
income (expense) - - 271 1,056 (1) - 1,326
Total equity at 1
November 2019 180,124 (2,273) (532) (3,769) 68,636 329,543 571,729
Share options fair
value charge - - - - - 2,913 2,913
Share options exercised - - - - - 1,101 1,101
Loss attributable
to owners of the
Company - - - - - (13,814) (13,814)
Dividends paid - - - - - (8,336) (8,336)
Issue of share capital 56,432 - - - 261,831 - 318,263
Transfer of shares
on vesting of share
options - (817) - - - - (817)
Deferred tax on share
based payments recognised
in equity - - - - - (1,125) (1,125)
Other comprehensive
income - - 383 1,260 10 - 1,653
Total equity at 1
May 2020 236,556 (3,090) (149) (2,509) 330,477 310,282 871,567
Share options fair
value charge - - - - - 689 689
Share options exercised - - - - - (571) (571)
Profit attributable
to owners of the
Company - - - - - 21,121 21,121
Dividends payable - - - - - (16,702) (16,702)
Transfer of shares
on vesting of share
options - 571 - - - - 571
Other comprehensive
income - - 149 5,202 44 - 5,395
Total equity at 31
October 2020 236,556 (2,519) - 2,693 330,521 314,819 882,070
Other reserves comprise the capital redemption reserve, revaluation
reserve and merger reserve.
Unaudited notes
1. Basis of preparation and accounting policies
Redde Northgate plc is a Company incorporated in England and Wales
under the Companies Act 2006.
The condensed consolidated interim financial report for the half-year
reporting period ended 31 October 2020 has been prepared in accordance
with Accounting Standard IAS 34 'Interim Financial Reporting'. The
interim report does not include all the notes of the type normally
included in an annual financial report. Accordingly, this report
is to be read in conjunction with the annual report for the year
ended 30 April 2020 and any public announcements made by the Group
during the interim reporting period.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the estimation of income tax (see note 3).
The condensed financial statements are unaudited and were approved
by the Board of Directors on 8 December 2020. The condensed financial
statements have been reviewed by the auditors and the independent
review report is set out in this document.
The interim financial information for the six months ended 31 October
2020, including comparative financial information, has been prepared
on the basis of the accounting policies set out in the last annual
report and accounts. There are no new accounting standards have been
adopted in the period.
In preparing the interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and
key sources of estimation uncertainty were the same, in all material
respects, as those applied to the consolidated financial statements
for the year ended 30 April 2020.
In particular, the expected adjustment for settlement of claims due
from insurance companies and self-insuring organisations remains
a critical area of accounting judgement and estimation uncertainty.
The approach taken in the period remains consistent with that outlined
in the accounting policies for the year ended 30 April 2020. The
carrying value of contract assets for claims from insurance companies
at 31 October 2020 was GBP157,137,000 (30 April 2020 GBP162,271,000).
A 3% difference between the carrying amount of claims in the balance
sheet and the amounts finally settled would lead to a GBP4.7m charge
or credit to the income statement in subsequent periods.
Significant changes in the current reporting period
The financial position and performance of the group was particularly
affected by the following events and transactions during the six
months to 31 October 2020:
* On 4 September 2020 the Group acquired certain
businesses and assets of Nationwide Accident Repair
Services ("Nationwide") by way of a purchase from
administrators. Further details are included in Note
14.
* Exceptional operating costs of GBP5,364,000 were
incurred in the period as explained in Note 13.
Going concern assumption
The Directors have taken into account the following matters in concluding
whether or not it is appropriate to prepare the interim financial
statements on a going concern basis:
Assessment of prospects
The Merger has allowed the Group to further increase the service
offering and widen our customer base. The Northgate business continues
to maintain its position as a market leader in its core market of
flexible commercial vehicle hire and has distinct competitive advantages
in the minimum term rental and used vehicle sales markets. The Redde
business is a leading provider of incident and accident management,
legal and other mobility-related services. The integration of both
businesses will deliver cost synergies and provide a platform for
new revenue opportunities as the commercial proposition matures.
The Combined Group is well established within the markets it operates
and has demonstrated resilience through previous economic cycles.
Impact of the UK leaving the European Union without a new free trade
agreement
The Group has planned for the potential impact on its business of
the UK leaving the European Union without a new free trade agreement
in place. The greatest risks identified would be a disruption to
the supply of new vehicles and vehicle components imported into the
UK from the EU , including additional import costs which may be imposed:
o Around 90% of vehicles purchased or leased by the Group from UK
OEMs are imported from the EU. Assurances have been sought from these
OEMs, who are confident that there will be no material long-term
disruption. Any potential short-term supply disruption can also be
mitigated by the Group itself, by slowing the rate of vehicle de-fleets
in order to maintain vehicle availability for customers as has been
seen in the response to COVID-19.
o Components for vehicles manufactured in the UK are also imported
from the EU. However, normal OEM stock levels are considered to be
sufficient to address any potential short-term supply issues and
we are in active discussions with FMG RS suppliers to ensure continuing
supply.
o The introduction of import costs could potentially create some
margin pressure in the short-term. However, the Company believes
that in the medium-term, it will be able to pass through to end-users
any significant additional costs that might be imposed on imported
vehicles.
A potential upside for Northgate in the event of supply disruptions
or higher purchase costs, would be the likely increase in rental
demand and stronger residual values that could result.
Given that the short term impact of the UK leaving the EU can be
reasonably mitigated through management actions, no matters have
been identified which would lead the Directors to conclude that the
Group would not continue to be a going concern for at least 12 months
from the date of this report in relation to this situation.
Impact of COVID-19
The COVID-19 pandemic and ensuing government counter measures have
significantly reduced business activity across all areas of the Group,
impacting trading in the period. A decrease in revenue has resulted
from a reduction in vehicles on hire, temporary closure of vehicle
sales operations within the rental business of the Group and a lower
volume of accidents and incidents handled through the insurance claims
and services business of the Group. Since the first lockdown in March-April
2020, most of the key operational performance indicators have recovered
or substantially improved, including removal of customer support
packages, increases in vehicles on hire, the re-opening of vehicle
sales operations and an increase in volumes of accidents and incidents
managed through the Redde business.
Significant actions were also taken by management in order to conserve
cash and manage the liquidity of the Group throughout the COVID-19
period. Overall, this resulted in an increase of headroom against
committed facilities of GBP81m from GBP200m at 29 February 2020 to
GBP281m at 31 October 2020. Headroom against related debt covenants
also remained adequate as outlined in the Financial Review which
included GBP39m EBIT headroom against the interest cover covenant.
This demonstrates the resilience of the Group's balance sheet and
business model, and its ability to preserve liquidity throughout
periods of uncertainty.
Assessment of going concern
The strategy and associated principal risks underpin the Group's
three year strategic planning process (the Plan), which is updated
annually. This process considers the current and prospective macro-economic
conditions in the countries in which we operate and the competitive
tension that exists within the markets that we trade in. The Plan
was risk adjusted for the expected impact of COVID-19.
The Plan also encompasses the projected cash flows, dividend cover
assuming operation of stated policy at the time of the Merger and
headroom against borrowing facilities and financial covenants under
the Group's existing facilities and the reasonable expectation of
similar facilities being replaced if required throughout the planned
period. The Plan makes certain assumptions about the normal level
of capital recycling likely to occur and therefore considers whether
additional financing will be required. Headroom against the Group's
existing facilities at 31 October 2020 was GBP281m as detailed in
the Financial Review. This compares to headroom of GBP234m at 30
April 2020. All of the Group's principal borrowing facilities have
maturity dates outside of the period under review, therefore the
Group's facilities provide sufficient headroom to fund the capital
expenditure and working capital requirements for at least 12 months
following the date of this report.
The Plan has been subsequently adjusted to include the impact of
the acquisition of the trade and assets of Nationwide Repair Services
and has been stress tested based on the trading performance in the
current period, and by factoring in a severe but plausible downside
scenario which assumes that government restrictions relating to COVID-19
will be more prolonged than envisaged in the Plan or that macro-economic
conditions will be adversely affected following the end of restrictions.
The downside scenario includes the revenue impact of a reduction
in vehicles on hire, closure of vehicle sales operations, and a prolonged
reduction in insurance related accident and repair claims handled.
Costs were assumed to be mitigated to the extent that they are directly
related to revenue, with an assumption being made that there would
be no further reduction in the indirect cost base of the Group and
no further government support schemes would be available to access.
Capital expenditure was only deferred to the extent of the reduction
in demand and a working capital impact of reduced insurance claims
collections was also included.
The downside scenario took into account the effectiveness of mitigating
actions that would be reasonably taken, such as reducing variable
costs that are directly related to revenue, but did not take into
account further management actions that would likely be taken, such
as a change to the indirect cost base of the Group or a reduction
in capital expenditure and ageing of the vehicle fleet, both of which
would improve cash generation and reduce debt.
After taking into account the above sensitivities and reasonable
mitigating actions, sufficient headroom remained against available
debt facilities and the covenants attached to those and the Directors
have a reasonable expectation that the Group will continue to be
meet its obligations as they fall due for at least 12 months from
the date of this report.
Information extracted from 2020 annual report
The financial figures for the year ended 30 April 2020, as set out
in this report, do not constitute statutory accounts but are derived
from the statutory accounts for that financial year.
The statutory accounts for the year ended 30 April 2020 were prepared
under IFRS and were delivered to the Registrar of Companies on 5
November 2020. The audit report was unqualified, did not draw attention
to any matters by way of emphasis and did not include a statement
under Section 498(2) or 498(3) of the Companies Act 2006.
2. Segmental analysis
Management has determined the operating segments based upon the information provided to the Board of Directors, which is considered to be the chief operating decision maker. The Group is managed, and reports internally, on a basis consistent with its three main operating divisions, Northgate UK&I, Northgate Spain and Redde. The principal activities of these divisions are set out in the Chief Executive review.
Northgate Northgate Group Group
UK&I Spain Redde Corporate eliminations Total
Six months Six months Six months Six months Six months Six months
to 31.10.20 to 31.10.20 to 31.10.20 to 31.10.20 to 31.10.20 to 31.10.20
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------- ------------- ------------- ------------- -------------- --------------
Revenue: hire of
vehicles 146,545 102,426 - - - 248,971
Revenue: sale of
vehicles 94,134 32,920 - - - 127,054
Revenue: claims
and services - - 179,983 - - 179,983
------------------------ ------------- ------------- ------------- ------------- -------------- --------------
External revenue 240,679 135,346 179,983 - - 556,008
Intersegment revenue 432 - 1,297 - (1,729) -
Total revenue 241,111 135,346 181,280 - (1,729) 556,008
Timing of revenue
recognition:
At a point in time 94,134 32,920 49,997 - - 177,051
Over time 146,977 102,426 131,283 - (1,729) 378,957
241,111 135,346 181,280 - (1,729) 556,008
------------------------ ------------- ------------- ------------- ------------- -------------- --------------
Underlying operating
profit (loss) 32,097 16,000 1,719 (3,503) - 46,313
Income from associates - - 2,400 - - 2,400
------------------------ ------------- ------------- ------------- ------------- -------------- --------------
Underlying EBIT* 32,097 16,000 4,119 (3,503) - 48,713
Exceptional items
(Note 13) (5,364)
Amortisation on
acquired
intangible assets (9,639)
Gain on bargain
purchase
(Note 14) 258
EBIT 33,968
Interest income 15
Finance costs (8,130)
Profit before taxation 25,853
------------------------ ------------- ------------- ------------- ------------- -------------- --------------
* Underlying EBIT stated before amortisation on acquired intangible assets and exceptional items is the measure used by the Board of Directors to assess segment performance.
Northgate Northgate Group
UK&I Spain Corporate Total
Six months Six months Six months Six months
to 31.10.19 to 31.10.19 to 31.10.19 to 31.10.19
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP000 GBP000 GBP000 GBP000
Revenue: hire of vehicles 158,870 107,006 - 265,876
Revenue: sale of vehicles 68,864 23,046 - 91,910
Total revenue 227,734 130,052 - 357,786
Timing of revenue recognition:
At a point in time 68,864 23,046 - 91,910
Over time 158,870 107,006 - 265,876
227,734 130,052 - 357,786
Underlying operating profit (loss)/EBIT * 19,409 19,500 (3,792) 35,117
Exceptional costs (Note 13) (2,221)
Amortisation on acquired intangible assets (6)
EBIT 32,890
Interest income 42
Finance costs (excluding exceptional items) (7,582)
Exceptional finance costs (Note 13) (565)
Profit before taxation 24,785
--------------------------------------------- ----------- ----------- ----------- -----------
Northgate Northgate
UK&I Spain Redde Corporate Total
Year to Year to Year to Year to Year to
30.04.20 30.04.20 30.04.20 30.04.20 30.04.20
(Audited) (Audited) (Audited) (Audited) (Audited)
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ----------- ----------- ----------- ----------- -----------
Revenue: hire of vehicles 313,922 204,235 - - 518,157
Revenue: sale of vehicles 137,124 56,671 - - 193,795
Revenue: claims and services - - 67,397 - 67,397
-------------------------------- ----------- ----------- ----------- ----------- -----------
Total revenue 451,046 260,906 67,397 - 779,349
Timing of revenue recognition:
At a point in time 137,124 56,671 14,379 - 208,174
Over time 313,922 204,235 53,018 - 571,175
451,046 260,906 67,397 - 779,349
-------------------------------- ----------- ----------- ----------- ----------- -----------
Underlying operating profit
(loss) 37,899 39,731 2,352 (6,113) 73,869
Income from associates - - 952 - 952
Underlying EBIT* 37,899 39,731 3,304 (6,113) 74,821
Exceptional items (Note
13) (41,775)
Amortisation on acquired
intangible assets (3,178)
EBIT 29,868
Interest income 122
Finance costs (excluding
exceptional items) (15,945) Exceptional finance costs (Note 13) (566) Profit before taxation 13,479 -------------------------------- ----------- ----------- ----------- ----------- -----------
3. Taxation
The charge for taxation for the six months to 31 October 2020 is based on the estimated effective rate for the year ending 30 April 2021 of 18.3% (October 2019 - 13.1% and April 2020 - 43.1%). The April 2020 full year tax rate was impacted by one off non-deductible expenses relating to the Merger.
4. Earnings per share
Six months Six months Six months Six months Year to Year to
to 31.10.20 to 31.10.20 to 31.10.19 to 31.10.19 30.04.20 30.04.20
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
Underlying Statutory Underlying Statutory Underlying Statutory
Basic and diluted earnings per share
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
The calculation of basic and diluted
earnings per share is based on the
following data:
Earnings
Earnings for the purposes of basic and
diluted earnings per share, being
profit attributable
to owners of the Company 32,983 21,121 23,510 21,490 47,519 7,676
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Number of shares
Weighted average number of Ordinary
shares for the purpose of basic
earnings per share 246,091,423 246,091,423 133,232,518 133,232,518 154,509,197 154,509,197
Effect of dilutive potential Ordinary
shares - share options 3,998,211 3,998,211 3,733,760 3,733,760 1,048,391 1,048,391
Weighted average number of Ordinary
shares for the purpose of diluted
earnings per share 250,089,634 250,089,634 136,966,278 136,966,278 155,557,588 155,557,588
Basic earnings per share 13.4p 8.6p 17.6p 16.1p 30.8p 5.0p
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Diluted earnings per share 13.2p 8.4p 17.2p 15.7p 30.5p 4.9p
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
5. Dividends
In the six months to 31 October 2020, a dividend of GBPnil was paid (2019 - GBP15,997,000). The Directors have declared a dividend of 3.4p per share for the six months ended 31 October 2020 (2019 - 6.3p).
Trade and other payables at 31 October 2020 include GBP16,702,000 (2019 - GBPnil) in relation to the final dividend of 6.8p for the year ended 30 April 2020 that was approved in October 2020. The dividend was paid in November 2020.
6. Intangible assets
Net book value
Customer Brand Other
Goodwill relationships names software Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ---------- ---------------- ------ ---------- ---------
At 1 May 2019 3,589 6 - 11,489 15,084
Additions - - - 5,590 5,590
Disposals - - - - -
Amortisation - - - (419) (419)
Exchange differences - - - (5) (5)
---------------------- ---------- ---------------- ------ ---------- ---------
At 1 November 2019 3,589 6 - 16,655 20,250
Acquisition 112,516 169,600 12,800 4,200 299,116
Additions - - - 919 919
Disposals - (6) - (3) (9)
Amortisation - (2,884) (154) (530) (3,568)
Impairment - - - (14,910) (14,910)
Exchange differences - - - 17 17
---------------------- ---------- ---------------- ------ ---------- ---------
At 1 May 2020 116,105 166,716 12,646 6,348 301,815
Asset acquisition
(Note 14) - 1,000 450 2,100 3,550
Additions - - - 764 764
Disposals - - - (31) (31)
Transfers - - - - -
Amortisation - (8,662) (445) (881) (9,988)
Exchange differences - - - 63 63
At 31 October 2020 116,105 159,054 12,651 8,363 296,173
---------------------- ---------- ---------------- ------ ---------- ---------
At 31 October 2020
Cost or fair value 116,105 170,600 13,250 38,682 338,637
Accumulated amortisation
and impairment - (11,546) (599) (30,319) (42,464)
Net book value 116,105 159,054 12,651 8,363 296,173
-------------------------- ------- --------- ------ --------- ---------
Amortisation was included within the income statement as follows:
31.10.20 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
----------------------------------------------------------------------- ----------- ----------- ---------
Included within underlying operating profit as administrative expenses 349 6 809
Excluded from underlying operating profit* 9,639 413 3,178
9,988 419 3,987
----------------------------------------------------------------------- ----------- ----------- ---------
* Amortisation excluded from underlying operating profit relates to intangible assets acquired on acquisitions.
7. Property, plant and equipment
Other
Vehicles Vehicles property, Total
for hire for credit plant
Net book value hire & equipment
GBP000 GBP000 GBP000 GBP000
----------------------------- ----------- ------------ ------------- ----------
At 1 May 2019 900,335 - 68,843 969,178
Recognised on transition to
IFRS 16 - - 47,845 47,845
Additions 208,338 - 2,969 211,307
Disposals (70,896) - (869) (71,765)
Transfers (47) - 47 -
Depreciation (96,773) - (6,265) (103,038)
Exchange differences (1,286) - (194) (1,480)
----------------------------- ----------- ------------ ------------- ----------
At 1 November 2019 939,671 - 112,376 1,052,047
Acquisition - 52,475 17,515 69,990
Additions 137,608 3,718 4,844 146,170
Disposals (101,456) (2,758) (1,241) (105,455)
Transfers (80) - 80 -
Depreciation (95,688) (2,395) (6,954) (105,037)
Impairment - - (1,304) (1,304)
Exchange differences 4,656 - 693 5,349
----------------------------- ----------- ------------ ------------- ----------
At 1 May 2020 884,711 51,040 126,009 1,061,760
Asset acquisition (Note 14) - - 8,618 8,618
Additions 167,895 4,006 13,106 185,007
Disposals (79,627) (7,419) (1,232) (88,278)
Transfers 152 - (152) -
Depreciation (80,930) (5,448) (8,666) (95,044)
Impairment (Note 13) - - (4,341) (4,341)
Exchange differences 16,306 - 2,340 18,646
At 31 October 2020 908,507 42,179 135,682 1,086,368
----------------------------- ----------- ------------ ------------- ----------
At 31 October 2020
Cost or fair value 1,323,287 45,671 213,745 1,582,703
Accumulated depreciation (414,780) (3,492) (78,063) (496,335) Net book value 908,507 42,179 135,682 1,086,368 -------------------------- ---------- ------- --------- ----------
Included within property, plant and equipment above, are right of use assets under HP and IFRS16 with net book value of GBP101,008,000 (30 April 20: GBP105,298,000).
8. Interest in associates
GBP000
----------------------------------- --------
At 31 October 2019 -
Acquisition 5,646
Group's share of:
Profit from continuing operations 952
Distributions from associates (590)
----------------------------------- --------
At 30 April 2020 6,008
Group's share of:
Profit from continuing operations 2,400
Distributions from associates (2,574)
----------------------------------- --------
At 31 October 2020 5,834
----------------------------------- --------
9. Analysis of consolidated net debt
(Unaudited) (Unaudited) (Audited)
to 31.10.20 to 31.10.19 to 30.04.20
GBP000 GBP000 GBP000
Cash and bank balances (62,592) (46,632) (67,843)
Bank overdrafts 34,262 34,974 51,063
Bank loans 364,173 384,242 400,847
Loan notes 90,143 86,088 86,868
Leases arising following adoption
of IFRS 16 69,927 45,302 62,999
Leases arising under HP obligations 34,290 - 40,953
Cumulative preference shares 500 500 500
Confirming facilities 236 129 479
Consolidated net debt 530,939 504,603 575,866
------------------------------------ ----------- ----------- -----------
10. Provisions
Onerous
contracts
GBP000
------------------------------- -----------
At 31 October 2019 -
Acquisition 4,616
Provisions made 369
Provisions utilised (408)
------------------------------- -----------
At 30 April 2020 4,577
Provisions made -
Provisions utilised (Note 13) (4,232)
------------------------------- -----------
At 31 October 2020 345
------------------------------- -----------
11. Derivative financial instruments
At the balance sheet date, the Group held the following financial instruments at fair value:
31.10.20 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
-------------------------- ----------- ----------- ---------
Interest rate derivatives - (656) (184)
- (656) (184)
-------------------------- ----------- ----------- ---------
The derivative financial instruments above all have fair values which are calculated by reference to observable inputs (i.e. classified as level 2 in the fair value hierarchy). They are valued using the discounted cash flow technique with an appropriate adjustment for counterparty credit risk. The valuations incorporate the following inputs:
-- interest rates and yield curves observable at commonly quoted intervals; -- commonly quoted spot and forward foreign exchange rates; and -- observable credit spreads.
The carrying value of financial assets and liabilities recorded at amortised cost in the financial statements are approximately equal to their fair value.
12. Notes to the cash flow statement
Six months Six months Year to
to 31.10.20 to 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
Net cash generated from operations GBP000 GBP000 GBP000
--------------------------------------------------------- ----------- ----------- -----------
Operating profit 31,310 32,890 28,916
Adjustments for:
Depreciation of property, plant and equipment 95,044 103,038 208,075
Impairment of property, plant and equipment 4,341 - 1,304
Amortisation of intangible assets 9,988 419 3,987
Impairment of intangible assets - - 14,910
(Gain) loss on disposal of property, plant and equipment (143) 97 135
Loss on disposal of intangible assets 31 - 9
Share options fair value charge 689 1,290 4,203
--------------------------------------------------------- ----------- ----------- -----------
Operating cash flows before movements in working capital 141,260 137,734 261,539
Decrease (increase) in non-vehicle inventories 157 50 (36)
(Increase) decrease in receivables (28,739) (6,428) 4,250
Increase (decrease) in payables 9,491 (960) (1,355)
Decrease in provisions (4,233) - (39)
--------------------------------------------------------- ----------- ----------- -----------
Cash generated from operations 117,936 130,396 264,359
Income taxes paid, net (5,606) (4,718) (10,165)
Interest paid (7,520) (7,070) (14,774)
--------------------------------------------------------- ----------- ----------- -----------
Net cash generated from operations before net capex 104,810 118,608 239,420
Purchases of vehicles for hire (137,859) (185,539) (362,011)
Proceeds from disposal of vehicles for hire 112,767 68,758 156,290
--------------------------------------------------------- ----------- ----------- -----------
Net cash generated from operations 79,718 1,827 33,699
--------------------------------------------------------- ----------- ----------- -----------
13. Exceptional items
During the period the Group recognised exceptional items in
the income statement as follows:
Six months Six months Year to
to 31.10.20 to 31.10.19 30.04.20
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
------------------------------------ ------------ ------------ ---------
Restructuring costs 2,645 2,221 8,609
Acquisition expenses 710 - 18,256
FMG RS set up and integration
costs 1,900 - -
Property - provisions utilised (4,232) - -
Property - impairment 4,341 - -
Intangible impairment - - 14,910
Exceptional administrative expenses 5,364 2,221 41,775
Finance costs - 565 566
Exceptional finance costs - 565 566
Total pre-tax exceptional items 5,364 2,786 42,341
Tax charge on exceptional items (1,179) (769) (4,661)
------------------------------------ ------------ ------------ ---------
Restructuring costs
The Group incurred total exceptional restructuring costs of GBP2,645,000 of which GBP1,057,000 arose in Redde, GBP1,261,000 arose in Northgate UK&I, GBP304,000 in Northgate Spain and GBP23,000 Corporate. These costs were incurred in relation to restructuring activities that were undertaken during the period as part of the integration and reorganisation of the Combined Group. These costs primarily related to expenses associated with reduction in headcount totalling GBP1,338,000 and costs incurred in relation to the closure and reorganisation of sites of GBP1,284,000.
Acquisition expenses
The Group incurred acquisition expenses of GBP710,000. These related to professional services expenses directly attributable to the acquisition of the trade and assets of Nationwide.
FMG RS set up and integration costs
The Group incurred costs of GBP1,900,000 in relation to the set up of FMG RS and integration of the business.
Property
Following the acquisition of Redde the Group acquired onerous contracts in relation to properties no longer occupied. During the period GBP4,232,000 relating to these provisions has been utilised and at the same time a property impairment of GBP3,260,000 has been recognised in relation to the same assets to which they relate. A further impairment of GBP1,081,000 has been recognised during the period for certain IFRS 16 land and building assets in relation to the closure and reorganisation of sites following the Merger.
14. Business combinations
14(a) Current period
On 4 September 2020 the Group acquired certain businesses and assets of Nationwide Accident Repair Services ("Nationwide") by way of a purchase from administrators. The acquisition is in line with Group strategy and vision to become the leading integrated mobility solutions provider. The acquisition has been included within the Redde segment. A provisional purchase price allocation exercise has been undertaken in accordance with IFRS 3 'Business Combinations'.
Details of this provisional purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration GBP000 ------------------------------ -------- Cash payable 10,600 Contingent consideration 290 Total purchase consideration 10,890 ------------------------------ --------
The provisional assets and liabilities recognised as a result of the acquisition are as follows:
GBP000
--------------------------------------------------- --------
Customer relationships (Note 6) 1,000
Brand (Note 6) 450
Other software (Note 6) 2,100
Property, plant and equipment (Note 7) 8,618
Stock and work in progress 4,163
Other payables (4,993)
Deferred tax (190)
Net identified assets acquired 11,148
--------------------------------------------------- --------
Gain on bargain purchase recognised in the income
statement 258
--------------------------------------------------- --------
Acquisition costs
Acquisition related costs in relation to Nationwide of GBP710,000 have been charged to the income statement as exceptional administrative expenses (Note 13).
Contingent consideration
The contingent consideration arrangement requires the Group to pay the former owners of Nationwide either GBPnil, GBP2.5m or GBP5m dependant on volumes of repair cases with a former customer of Nationwide, in the year from date of acquisition.
The fair value of the contingent consideration arrangement of GBP290,000 was estimated using the scenario-based method. The estimates are based on probability adjusted likelihood of certain repair case volumes being achieved. The liability is presented within trade and other payables in the balance sheet.
Nationwide's contribution to the group results
Nationwide's contribution to underlying operating profit was a GBP3,000,000 loss for the period from 4 September 2020 to 31 October 2020. Revenue during this period was GBP18,200,000.
14(b) Prior period
On 21 February 2020, the Group acquired 100% of the equity interests of Redde plc, thereby obtaining control. The acquisition was made to enhance the Group's position in the market and create a leading integrated mobility solutions platform. Details of this business combination were disclosed in note 4 of the Group's annual financial statements for the year ended 30 April 2020. No hindsight adjustments have been required in the period in relation to the fair values of assets acquired.
15. Contingent liabilities
The Group is currently in legal dispute with a provider of certain IT and software development services over the failure to deliver agreed software and services to the Group. Both parties are claiming against each other. However, the Group has disclaimed liability and is defending the action. No provision in relation to the claim has been recognised in the financial statements as legal advice indicates that on the balance of probabilities significant liability will not arise.
Interim announcement - Statement of the Directors
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34;
-- the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
-- the interim management report includes a fair review of the information required by DTR 4.2.8 (disclosure of related party transactions and changes therein).
By order of the Board
Philip Vincent
Chief Financial Officer
8 December 2020
Independent review report of Redde Northgate plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Redde Northgate plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results of Redde Northgate plc for the 6 month period ended 31 October 2020 (the "period").
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 31 October 2020;
-- the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;
-- the condensed consolidated cash flow statement for the period then ended; -- the condensed consolidated statement of changes in equity for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results of Redde Northgate plc have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Newcastle upon Tyne
8 December 2020
[1] Refer to GAAP reconciliation and Glossary of terms note. Underlying excludes exceptional costs and amortisation on acquired intangible assets.
[2] Net debt includes GBP69.9m (2020: GBP45.0m) of IFRS 16 liabilities and is higher than H1 2020 due to the net debt acquired from Redde in H2 2020 of GBP84.1m, partially offset by the cash generated in the year.
[3] Acquisition intangibles include customer relationships, brand names and other software and are estimated to have useful lives ranging from five to fifteen years.
[4] Total net capex includes net replacement capex, lease principal payments and growth capex.
[5] Permanent annual costs savings are not classed as synergies because they are not contingent on the Merger having happened and could have been achieved independently and include the closure of six Van Monster sites.
[6] Calculated as underlying EBIT divided by total revenue
[7] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.
[8] Net replacement capex is total capex less growth capex. Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction.
[9] Calculated as underlying EBIT divided by total revenue.
[10] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.
[11] Net replacement capex is total capex less growth capex. Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction.
[12] Calculated as underlying EBIT divided by total revenue.
[13] Redde's ROCE calculated using a 12 month pro rata of the eight months of EBIT since acquisition, divided by the average of the acquired opening and period end closing capital employed excluding goodwill and acquired intangibles.
[14] Pre-COVID levels calculated as the normalised volumes of hires and repairs from the month prior to COVID-19.
[15] Redde net replacement capex is total capex less growth capex. Redde growth capex represents the Nationwide assets acquired only.
[16] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.
[17] Acquisition intangibles include customer relationships, brand names and other software and are estimated to have useful lives ranging from five to fifteen years.
[18] Acquisition intangibles include customer relationships, brand names and other software and are estimated to have useful lives ranging from five to fifteen years.
[19] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.
[20] Lease principal payments are added back to reflect the movement on net debt.
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END
IR FFFELFALDIII
(END) Dow Jones Newswires
December 08, 2020 02:00 ET (07:00 GMT)
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