TIDMREDD
RNS Number : 3766E
Redde Northgate PLC
07 July 2021
REDDE NORTHGATE PLC
("Redde Northgate" or the "Group" or the "Company")
PRELIMINARY AUDITED RESULTS FOR THE 12 MONTHSED 30 APRIL
2021
Synergy target delivered with strategic revenue synergy wins,
strong cash flow with ROCE improved and increased final
dividend
Adjusted results
Year ended 30 April 2021 2020 Change
GBPm GBPm %
--------------------------------- -------- ------ -------
Revenue (excluding vehicle
sales) 879.7 585.6 50.2%
Underlying (1) EBIT 109.8 74.8 46.8%
Underlying(1) Profit before
Tax 93.2 59.0 58.0%
Underlying(1) Earnings per
Share 31.0p 30.8p 0.6%
--------------------------------- -------- ------ -------
Statutory results
Total revenue 1,109.5 779.3 42.4%
EBIT 83.8 29.9 180%
Profit before Tax 67.2 13.5 398%
Earnings per Share 26.6p 5.0p 432%
--------------------------------- -------- ------ -------
Other measures
--------------------------------- -------- ------ -------
Net debt 530.3 575.9 7.9%
Group net debt (exc IFRS
16 leases) (2) 437.9 512.9 14.6%
Steady state cash generation(1) 140.1 75.4 85.7%
Free cash flow(1) 97.8 10.1 870%
ROCE(1) 9.5% 7.0% 2.5ppt
Dividend per Share 15.4p 13.1p 17.6%
--------------------------------- -------- ------ -------
Key highlights
-- Performance for the year was ahead of Board expectations
notwithstanding COVID-19, including strong momentum in H2 and into
FY2022.
-- Revenue (excluding vehicle sales) increased 50.2% to
GBP879.7m (2020: GBP585.6m), due to the inclusion of Redde for a
full year and with the vehicle rental businesses performing better
than expected.
-- Underlying EBIT, underlying PBT and underlying EPS were all
ahead of expectations at GBP109.8m (2020: GBP74.8m), GBP93.2m
(2020: GBP59.0m) and 31.0p (2020: 30.8p) respectively, driven by
successful strategic execution in the year.
-- FY2022 merger integration savings target of GBP15m, already
increased at Interims from GBP10m, was fully achieved as at the end
of June 2021, ten months ahead of schedule. A further GBP5.5m of
permanent annualised cost savings were also achieved, giving a
total of GBP20.5m of annual run rate savings.
-- Revenue synergies gathered momentum, including the October
2020 Accident and Incident management product launch, several new
product initiatives in Spain, and strong new wins activity.
-- Integration of FMG RS, following the acquisition of
Nationwide on 4 September 2020, is progressing well.
-- The purchase of c2,000 vehicles, most with existing customer
contracts, from a Scottish vehicle rental business was completed
post year-end in June 2021.
-- ROCE improved to 9.5% (2020: 7.0%), reflecting the EBIT
performance as well as initiatives to improve capital employed
including working capital management and contract hire vehicle
funding.
-- Final dividend proposed of 12.0p per share (2020: 6.8p),
taking the total dividend payable for the year to 15.4p per share
(2020: 13.1p).
(1) Refer to GAAP reconciliation and Glossary of terms note.
Underlying excludes exceptional costs and amortisation of acquired
intangible assets.
2 Excluding IFRS 16 (leases) as defined in the Glossary
Martin Ward, CEO of Redde Northgate, commented:
"This year has been a challenging year but also one of
exceptional progress against our Focus, Drive and Broaden strategic
framework, and I am proud of our people and the way they responded
to the pandemic.
"Last year we focused on the integration of the businesses
following the Merger. That work is largely complete, ahead of time,
with GBP20.5m of cost savings secured. Our next strategic priority
is to grow revenue under our Drive phase and to utilise the
services and infrastructure platform we have built to extend our
market reach.
"Cash generation was strong, providing headroom to finance
future growth. All our core KPIs have improved and the return on
our capital employed is growing.
"There is significant sustainable compounding growth and quality
earnings potential in the combined business. The actions and
measures we are taking are already creating value which will be
further enhanced as we deliver on our priorities. Recent trading
has been strong and we enter FY2022 from a position of
strength."
Full year results summary
-- Group trading was ahead of Board expectations for the year.
-- Revenue (excluding vehicle sales) was 50.2% higher than the
prior year, with the increase mainly due to the inclusion of Redde
for a full year. Northgate UK&I and Northgate Spain revenue
(excluding vehicle sales)(1) was broadly flat at GBP311.6m (2020:
GBP314.0m) and GBP205.5m (2020: GBP204.2m) respectively and
included the impact of GBP3.4m of COVID-19 customer support
packages in H1 2021 (GBP3.8m H2 2020). Redde revenue(1) was
GBP371.7m (2020: GBP67.4m), reflecting the short period post-Merger
in prior year and including the impact of reduced traffic and
thereby accident volumes due to COVID-19.
-- Total Group revenue, including vehicle sales, was 42.4%
higher. Vehicle sales revenues were 18.6% higher, mainly due to
higher UK&I sales prices, which were driven by both reduced
supply from OEMs and increased demand for used vehicles since
re-opening post the first lockdown.
-- Underlying PBT of GBP93.2m (2020: GBP59.0m) was ahead of
Board expectations driven by both improving UK&I margins, which
include the impact of higher merger integration savings, and higher
disposals profits, offset by lower volumes and profits in Redde due
to COVID-19.
-- Underlying EPS was 31.0p (2020: 30.8p), 0.6% higher than
prior year, including the impact of COVID-19 on Redde.
-- Statutory EBIT of GBP83.8m and statutory PBT of GBP67.2m were
180% and 398% higher respectively than prior year. Statutory
measures include GBP8.0m of exceptional items (2020: GBP41.8m and
GBP42.3m respectively), GBP1.5m gain on acquisition (2020: GBPnil)
and GBP19.5m of amortisation on acquired intangibles (2020:
GBP3.2m). Exceptional costs in the current year relates to
restructuring costs, mainly to deliver cost synergies and the
restructure of FMG RS post acquisition.
-- There was continued strong net cash inflows with free cash
flow of GBP97.8m (2020: GBP10.1m) benefitting from lower total net
capex (including lease principal payments) of GBP143.1m (2020:
GBP225.2m) driven mainly by higher disposal sales prices and some
fleet ageing. Steady state cash generation also remained strong at
GBP140.1m (2020: GBP75.4m). Net debt closed at GBP530.3m including
IFRS 16, or GBP437.9m excluding IFRS 16 (leases), resulting in
increased headroom to bank facilities of GBP304.9m (2020:
GBP234.1m). Year-end leverage remained stable at 1.5x (2020:
1.6x).
Focus, Drive and Broaden strategic progress
-- The Group continues to make excellent progress on its
strategic framework of Focus, Drive and Broaden, and has achieved
its already increased Merger integration savings target of GBP15m
ten months ahead of schedule. The Merger integration synergies and
additional permanent cost savings achieved are now GBP15.0m and
GBP5.5m annualised run rates respectively, to give total savings of
GBP20.5m. Whilst some further cost synergies and savings are still
in train, the Group is now including the integration activities
within BAU change activities and as such will not be reporting
further on Merger integration cost synergy targets.
-- In addition to these savings, the Group has also improved
utilisation over the year from 89% to 90% primarily due to the UK
where improvements have been driven from centralising the fleet
management and combining this with the national branch
rationalisation.
-- The Group has also developed contract hire as a source of
vehicle funding in order to reduce exposure to residual values,
expanding to LCVs in the fleet, and at year-end GBP17m of credit
lines (2020: GBPnil) had been utilised on 1,600 commercial
vehicles.
-- On the revenue side, the Group has secured new wins in the
second half and post year-end that further underline the value of
the Merger. The roll-out of the new accident and incident
management product to Northgate customers, following its launch in
October, is progressing well and has seen good take-up with several
thousand vehicles signed up to date. The Group also completed
several important renewals in the period and extended the contract
length of some long-standing partner relationships.
-- As part of developing the Company's products and services and
its channels to communicate with its customers, Redde Northgate has
also made progress in the year in several digitalisation projects.
These include the UK and Spain digital eAuction platform, which
have been further developed alongside our 'click and collect'
capabilities and saw over ten thousand vehicles sold via the
platforms in the year, an increase of 67% year-on-year. Elsewhere
in the business we have created a new small claims system called
Pilot to manage claims post accident whiplash reforms, a new
traffic officer app to support Highways Agency traffic officers at
the roadside and a new online claims portal to enable more
efficient processing of claims.
(1) Including intersegment revenue
COVID-19 and trading
-- Alongside delivering the strategy, the COVID-19 pandemic has
been the factor that has impacted the business most during
FY2021.
-- From the start of the pandemic the Board took decisive
actions to put measures in place to protect the welfare of
employees and customers and to mitigate the financial impact of the
pandemic on the Group.
-- All of the Group businesses were impacted by the pandemic in
different ways. After a challenging first couple of months of the
year, the main performance indicators across the Group started to
improve and by the end of H1 were fully recovered or substantially
improved. Over H2, volumes of activity in some parts of the
business initially reduced as COVID-19 case numbers increased but
the Group responded quickly to changing levels of demand and the
impact was, in aggregate, less severe than in H1. In more detail
the path of the main performance indicators were:
-- Customer support packages, which were a core part of measures
to support customers during the first national lockdowns and
totalled GBP3.4m in H1, reduced to nil monthly cost at the end of
September and there have not been further customer support packages
for subsequent lockdowns.
-- In vehicle rental, VOH, which started the year 7% lower due
to the first lockdown, recovered by the end of H1 to 2% above
pre-COVID levels and over H2 grew by a further 2% across the Group,
with no discernible impact of the pandemic over the winter, and
with strong demand in several key sectors, particularly in the
UK.
-- In vehicle sales, channels re-opened over the course of May
such that they were fully operational from June and whilst in
November the UK&I retail sites had to close again, vehicles
continued to be sold via our digital channels. Once UK&I
markets re-opened in June residual values on LCVs strengthened
quickly to approximately 15% higher than prior year driven by
strong market pricing across all channels, and pricing has remained
strong during H2 2021. Residual values in Spain were not as
impacted but were slightly higher than prior year.
-- Accident and incident volumes have moved broadly with the
levels of traffic volumes on the road. Post the first national
lockdown, accident and incident volumes started to increase as
traffic volumes picked up. They remained below expectations
approximately 20-30% below pre-COVID levels in September to October
and then reduced to approximately 30-50% below pre-COVID levels in
November to April, mainly due to the third lockdown, only starting
to materially recover again post year-end. With volumes varying
through the year the cost base was kept continuously under
review.
Acquisition and asset purchase
-- The integration of FMG RS, following the acquisition of
Nationwide on 4 September 2020, progressed well in the second half
of the year, including the appointment of a new management team.
This acquisition significantly extends the Group's capabilities in
repairs. The business has continued to be impacted by lower repair
volumes during COVID-19 lockdowns and was loss-making through
FY2021, but the Board remains confident that the acquisition will
be earnings enhancing in FY2022, the first full financial year of
ownership.
-- On 11 June 2021 the Group completed the purchase of c.2,000
vehicles, many with existing customers, from a Scottish vehicle
rental business, for approximately GBP25m. This purchase will
strengthen our offering in Scotland and bring significant benefits
from the ongoing customer relationships, which we would hope to
further strengthen through our expanded Group offerings.
Delivering value for all our stakeholders
-- The Group has endeavoured to deliver value for all
stakeholders in the year, including starting to develop more detail
around its ESG plans. These include:
-- Customers - as referred to above, the Group provided customer
support packages by way of waiver, discount or deferral to
customers assessed on need, which reduced revenue by GBP3.4m in
current year in addition to the GBP3.8m provided in March and April
in FY2020. In addition, the Group has improved its products and
services and this can be seen in improved customer scores and
ratings as detailed further in the ESG and stakeholder sections of
our Annual Report.
-- Employees - our colleagues are at the heart of everything we
do and to respond to the uncertainty of the pandemic the Group
increased the level of communications across the business. The
Company also put in place a new home working policy, a new mental
health initiative including workshops, guidance and champions,
all-employee access to an Employee Assistance Programme, as well as
commencing a review of all employees' benefits to widen provision
across the Group, including new SAYE, life assurance and cycle2work
schemes. The Group also continued with its apprenticeship
programmes in many of the businesses, including technical
apprenticeships, such as motor vehicle technicians.
-- Environment - the Merger presented the Group with the
opportunity to reset the environmental agenda and enhance and
formalise the Group's environmental strategy for the future. The
Group takes its environmental responsibilities seriously and has
initiated a project focussed on the transition to EV as well as
other initiatives to improve its operations and reduce carbon
emissions and impact.
-- The Group provides further detail on ESG initiatives and the
impact on different stakeholder groups within the ESG section of
the Annual Report.
Outlook
-- Over the first two months of FY2022 we have continued to see
strong momentum building in the Group including the delivery of the
cost synergy target and significant run-rate revenue synergies.
-- In the vehicle rental businesses, VOH has continued to grow
and margins remain strong, including H2 Spain margin holding.
-- In the vehicle sales businesses, LCV used vehicle prices in
UK&I have continued to be strong, with the dislocation of new
supply improving the margin on used vehicle sales. Digital
e-auction sales are increasing and the sales business is
well-positioned as more trade and retail buyers find the ease and
convenience of using the digital sales platform hassle free.
-- In the Redde businesses, as the UK government has reduced
COVID-19 restrictions, traffic volumes, and subsequent accident and
incident volumes have rebounded strongly, and faster than we
expected. May/June volumes have been around 10-20% below pre-COVID
levels with significant potential when volumes revert back to
historic norms.
-- Given this context the Board is confident that the strategy
set out at the time of the Merger will deliver the value it
envisaged and that it is positioned well for further growth in
FY2022.
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 certain one-off
items such as those arising from restructuring activities and
recurring non-operational items including amortisation of acquired
intangible assets. 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.
Interim Results
The Group will provide an interim result update for the six
months to 31 October 2021 in early December 2021.
Analyst Briefing
There will be a 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 via a link on the
Company's web-site 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
vehicles and over 600,000 managed vehicles in 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
CHIEF EXECUTIVE REVIEW
FY2021 has been a year dominated by two major factors -
delivering on our strategy of Focus, Drive and Broaden and
COVID-19. Our approach throughout has been to make sure we balance
these two factors appropriately, responding to different levels of
activity and demand, and endeavouring to deliver value for all our
stakeholders.
COVID-19 and trading
Having completed the Merger on 21 February 2020 and started on
integration activities, our world was almost immediately impacted
by the global pandemic and the beginning of national lockdowns.
The Board took decisive actions to put measures in place to
protect the welfare of our employees and customers and to mitigate
the financial impact of the pandemic on the Group.
Initially these proactive measures included new guidelines and
controls to enable social distancing and safe working environments,
furloughing employees, limiting new fleet capex, voluntary pay
reductions across the Board and senior leadership positions and
cost control measures, including a freeze on recruitment and pay
reviews, and limiting all non-essential spend and capital
expenditure projects.
Over the year we have been able to reduce or remove some of
these measures, but we have also kept many of the controls in place
to ensure that we maintain strong disciplines and we are adapting
to the different levels of demand on the business quickly and
efficiently. For example, the new fleet capex controls have
remained in place but we started to replace the fleet again from
June 2020 and over the year returned to a normal pattern of
purchasing vehicles.
All of the Group's businesses were impacted by the pandemic in
different ways. After a challenging first couple of months of the
year, the main performance indicators across the businesses started
to improve and by the end of H1 were fully recovered or
substantially improved. Over H2 volumes of activity in some parts
of the business initially reduced as COVID-19 case numbers
increased but the business responded quickly to changing levels of
demand and the impact was, in aggregate, less severe than in H1. In
more detail the path of the main performance indicators were as
follows:
-- Customer support packages, which were a core part of measures
to support customers during the first national lockdowns and
totalled GBP3.4m in H1, reduced to GBPnil monthly cost at the end
of September and there were no customer support packages for
subsequent lockdowns.
-- In vehicle rental, VOH, which started the year 7% lower due
to the first lockdown, recovered by the end of H1 to 2% above
pre-COVID levels and over H2 grew by a further 2% across the Group,
with no discernible impact of the pandemic over the winter, and
with strong demand in several key sectors, particularly in the
UK.
-- In vehicle sales, channels reopened over the course of May
such that they were fully operational from June and, whilst in
November the UK&I retail sites had to close again, vehicles
continued to be sold via our digital channels. Once UK&I
markets reopened in June residual values on LCVs strengthened
quickly to approximately 15% higher than prior year driven by
strong market pricing across all channels, and pricing has remained
strong during H2 2021. Residual values in Spain were only slightly
higher than prior year.
-- Accident and incident volumes have moved broadly with the
levels of traffic volumes on the road. Post the first national
lockdown, accident and incident volumes started to increase as
traffic volumes picked up. They remained below expectations,
approximately 20-30% below pre-COVID levels in September to
October, and then reduced to approximately 30-50% below pre-COVID
levels in November to April due to the third lockdown, only
starting to materially recover again post year-end. With volumes
varying through the year the cost base was kept continuously under
review.
More generally, the impact of COVID-19 has accelerated the use
of home delivery with many independent businesses adapting to
online trading. Infrastructure and construction industries are also
seeing a strong upturn and we are well represented in these
sectors. Demand for commercial vehicles is high and we are seeing
that across a number of sectors.
The global fallout from COVID-19 is still playing a factor in
new commercial vehicle supply with social distancing and factory
closures disrupting global supply chains. The automotive industry
is also experiencing a shortage of semiconductors which is
impacting normal supply patterns which comes with some challenges.
This supply/demand effect is net positive for the Group, given we
control a fleet of over 110,000 vehicles and can benefit from
higher used vehicle prices and increased demand for vehicles.
In the Redde businesses we always believed there would be a
reversion to the mean post COVID-19 lockdowns, and early
indications are that these volumes have rebounded strongly.
Focus, Drive and Broaden
We set out our vision at the time of the Merger to be the
leading supplier of mobility solutions to a wide range of
businesses and customers, accompanied by our strategy to achieve
that vision, through the framework of Focus, Drive and Broaden.
Each phase of the strategy is expected to last approximately one
year, although they are not completely sequential - Drive and
Broaden actions have also been taken in the first year, FY2021, and
some Focus actions will also be completed in FY2022 and FY2023.
In the Focus phase, the key phase for FY2021, we have been
concentrating on the integration of the two businesses, the
development of the enlarged Group's products and services,
optimisation of the capital funding model, and on starting to
leverage the platform to enable revenue synergy growth based on the
broader offering. Stepping through these:
1. Successfully execute the integration and implement cost synergies and savings
The Group has now successfully completed the main elements of
the integration and achieved our Merger integration savings target
of GBP15m, already increased at the Interim results announcement
from the original target of GBP10m, ten months ahead of
schedule.
Synergies were achieved broadly in the areas originally
expected, although with greater value and more quickly. Having
confirmed the new Board and quickly appointed a new leadership team
we then achieved cost synergies from reduced dual listing costs,
combined procurement, branch rationalisation and removal of
duplication in key support functions including Fleet, HR, IT and
Finance. Implementation costs for the GBP15m cost synergies were
limited to GBP2.6m.
We also sought further permanent annual cost savings(1) across
the Group, and achieved GBP5.5m savings from different initiatives,
such that the total annual run rate of cost synergies and permanent
cost savings achieved was GBP20.5m at the end of June.
(1) Permanent annual cost 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
In addition to these savings, the Group has also seen improved
utilisation(1) over the year from 89% to 90% primarily due to the
UK where improvements have been driven from centralising the fleet
management and combining this with the national branch
rationalisation.
We have also continued to develop contract hire as a source of
vehicle funding expanding to LCVs in the fleet and at year-end
GBP17m of credit lines had been utilised on 1,600 vehicles.
Contract hire reduces the cash payment for a vehicle up front and
leaves the residual value risk with the funder. It is therefore a
useful additional source of funding where the pricing is
appropriate.
[1] Utilisation drives depreciation cost savings but these are
not included as cost synergies or cost savings as these categories
are both at EBITDA level, to be consistent with the Merger
Quantified Financial Benefits Statement (QFBS) process.
2. Finesse products and services and leverage the mobility solutions platform
The Group's products and services span the vehicle lifecycle and
much of the work completed in the year was to improve these where
required and launch them across the wider Group. In October we
launched the accident and incident management products to Northgate
customers using all of the know-how and processes from Redde. This
product offers customers end-to-end management of all their
accidents and incidents on all of their vehicles, not just their
Northgate hire vehicles, thus widening the Group's scope of
service. We have been pleased with the early progress on
cross-selling accident and incident management services into the
Northgate customer base and leading with this service with new
prospects we have also benefitted from stimulating orders for
additional rental product. Overall, we have gained several thousand
fleet under management following the launch of this service and
enabled a broader dialogue with customers and prospects.
We strengthened our EV proposition and brought further EVs and
alternative fuel vehicles onto the fleet in FY2021, with over 2,300
electric, LPG and hybrid vehicles at year-end. EV charging
capabilities were installed in a first wave of three branches in
UK&I and five branches in Spain and we are continuing with
further branches in FY2022. Our wider strategic aim is to ensure we
are at the forefront of this transition which will grow over time.
We now have over 300 fully trained technicians within the Group who
are certified to work on EVs, with the majority of the wider team
also trained on EV awareness, and we will be enhancing our workshop
and bodyshop capacity in this area over time.
The Group has invested in several digitalisation projects over
the year, further enhancing our products and services. Amongst
these projects we have created a new small claims system to manage
claims post accident whiplash reforms, a new traffic officer app to
support Highways Agency traffic officers at the roadside and a new
online claims portal to enable more efficient processing of claims.
The UK Van Monster eAuction platform and Spain's equivalent
eAuction platform enabling trade sales has also been further
improved and volume increased substantially in the year to ten
thousand vehicles sold digitally, as online purchasing became ever
more normal.
In Spain, our management team has developed several new
initiatives, including a flexible B2C car rental proposition
through an app which targets customers looking to rent a vehicle
over a number of months, an automated damage assessment image tool
which uses machine learning and AI to make damage cost assessments
and a robotic sanding arm which can reduce the resource time to
prepare panels for painting. Some of these developments are at
pilot stage but have the potential to have a wider rollout across
the Group.
The Group has also developed more marketing and sales collateral
to explain our combined services to customers across vehicle
rental, vehicle data, accident and incident management, vehicle
repair, fleet management, service and maintenance, vehicle
ancillary services and vehicle sales.
A real highlight for the combined businesses was in the last few
months to progress to an advanced stage some significant tenders
from leading insurance brands which were borne out of the ability
to offer a wider mobility platform as a result of the Merger, which
energises the strategy we set out. If successful, these will come
online in H2 FY2022.
3. FMG RS acquisition and integration
Whilst Nationwide (now called FMG RS) had been in the sights of
the Group for several years, its acquisition, which was an example
of a Broaden initiative, did not come with the easiest timing given
COVID-19 and the evolution of the strategy. However, being the UK's
largest wholly owned repair network and the largest independent
accident repair company in Europe, the Board chose to pursue the
acquisition and it completed on 4 September 2020, bringing
approximately 70 new bodyshop sites into the Group and the capacity
and capability of a strong team of skilled technicians.
The integration of FMG RS into the Group was a key focus over
the remaining eight months of the year, both in terms of securing
the supply chain and managing volumes between external insurer
customers and internal work referred from other Redde
businesses.
Volumes have been lower than originally envisaged, mainly due to
COVID-19 and the continuation of lockdowns across the UK, and the
business made a loss of GBP6.5m in the eight months, but in the
final quarter that loss was reduced to GBP0.5m for the quarter and
the business remains confident that the acquisition will be
earnings enhancing in the first full financial year of ownership.
With the post lockdown bounce back in volumes it is foreseeable
that the business can get to full capacity over a short period and,
coupled with our extended independent network of bodyshops, we have
several options to increase overall capacity. This asset purchase,
together with the trained people we secured at the time of
acquisition is proving to be a "king maker" in our wider platform
of services.
4. Asset purchase post year-end
On 11 June 2021 the Group completed the purchase of c2,000
vehicles, most with existing customer contracts, from a Scottish
vehicle rental business, for approximately GBP25m subject to final
mileage and condition checks. This will strengthen our offering in
Scotland and bring significant benefits from the ongoing customer
relationships, which we would hope to further strengthen through
our expanded Group offerings.
Delivering value for all our stakeholders
As set out at the top of this review we have endeavoured to
deliver value for all our stakeholders in the year, across
customers and partners, suppliers, employees, investors and the
community, and also to start to develop more detail around the
Group's ESG plans. In more detail these include the following:
-- Customers - as referred to above, the Group provided customer
support packages by way of waiver, discount or deferral to
customers assessed on need, which reduced revenue by GBP3.4m in the
current year in addition to the GBP3.8m provided in March and April
in FY2020. The Group has improved its products and services and
this can be seen in improved customer scores and ratings as
detailed further in the ESG section of our Annual Report.
-- Employees - our colleagues are at the heart of everything we
do and to respond to the uncertainty of the pandemic the Group
increased the level of communications across the business. The
Group also put in place a new home working policy, a new mental
health initiative including workshops, guidance and champions, all
employee access to an Employee Assistance Programme, as well as
commencing a review of all employees' benefits to widen provision
across the Group, including new SAYE, life assurance and cycle2work
schemes. The Group also continued with its apprenticeship
programmes in many of the businesses, including technical
apprenticeships, such as motor vehicle technicians.
-- Environment - the Merger presented the Group with the
opportunity to reset the environmental agenda and enhance and
formalise the strategy for the future. The Group takes its
environmental responsibilities seriously and has initiated a
project focussed on the transition to EVs as well as other
initiatives to improve its operations and reduce carbon emissions
and impact.
The Group provides further detail on ESG initiatives and the
impact on different stakeholder groups within the ESG section of
the Annual Report. Our aim is to drive continued incremental
improvements across our businesses to reduce carbon emissions. The
Board has engaged with experienced advisers to support our aims in
delivering climate change initiatives and making a positive
contribution to our environment, and we intend to set out more
fully the detailed plans and KPIs that we will measure to report on
progress in our next reporting period.
Group performance
Against a backdrop of COVID-19, Group performance was ahead of
Board expectations for the year.
Revenue (excluding vehicle sales) was 50.2% higher than the
prior year, with the increase mainly due to the inclusion of Redde
for a full year. Northgate UK&I and Northgate Spain revenue
(excluding vehicle sales)(1) was broadly flat at GBP311.6m (2020:
GBP314.0m) and GBP205.5m (2020: GBP204.2m) respectively and
included the impact of COVID-19 customer support packages. Redde
revenue(1) was GBP371.7m (2020: GBP67.4m), reflecting the short
period post-Merger in prior year, and including the impact of
reduced traffic and thereby accident volumes due to COVID-19.
Total Group revenue, including vehicle sales, was 42.4% higher.
Vehicle sales revenues were 18.6% higher, mainly due to higher
UK&I sales prices, which were driven by both reduced supply
from OEMs and increased demand for used vehicles since the first
lockdown.
Underlying PBT of GBP93.2m (2020: GBP59.0m) was ahead of
expectations driven mainly by improving UK&I margins, including
the impact of higher merger integration savings, and higher
disposals profits, offset by a slower recovery in Redde than
originally expected.
Underlying EPS was 31.0p (2020: 30.8p), 0.6% higher than prior
year, including the impact of COVID-19 on Redde. Statutory EPS was
26.6p (2020: 5.0p).
Statutory EBIT of GBP83.8m and statutory PBT of GBP67.2m were
180% and 398% higher than prior year respectively. Statutory
measures include exceptional items of GBP8.0m (2020: GBP41.8m and
GBP42.3m respectively), GBP1.5m gain on acquisition (2020: GBPnil)
and amortisation on acquired intangibles of GBP19.5m (2020:
GBP3.2m). Exceptional costs in the current year relates to
restructuring costs, mainly to deliver cost synergies and the
restructure of FMG RS post acquisition.
There was continued strong net cash inflows with free cash flow
of GBP97.8m (2020: GBP10.1m) benefitting from lower total net capex
including lease principal payments of GBP143.1m (2020: GBP225.2m)
driven mainly by higher disposal sales prices and some fleet
ageing. Steady state cash generation also remained strong at
GBP140.1m (2020: GBP75.4m).
Net debt closed at GBP530.3m including IFRS 16 (leases), or
GBP437.9m excluding IFRS 16 (leases), resulting in headroom to bank
facilities of GBP304.9m (2020: GBP234.1m). Year-end leverage
remained stable at 1.5x (2020: 1.6x).
The Board has considered the importance of dividends to its
shareholders and, after careful consideration of the factors
impacting this decision, has concluded to maintain a final
dividend. For the year ended 30 April 2021, the Board is proposing
a final dividend of 12.0p (2020: 6.8p) which, together with the
interim dividend of 3.4p (2020: 6.3p), gives a full year dividend
of 15.4p (2020: 13.1p), an increase of 2.3p or 17.6% on 2020. If
approved by shareholders, the final dividend will be paid on 24
September 2021 to shareholders on the register on 3 September
2021.
(1) Including intersegment revenue
People
I have always remained of the view that to deliver good results
you need good people, sufficiently motivated with the right
attitude and skills to get the job done. We were fortunate with the
Merger that the culture of the Redde and Northgate businesses were
very similar and these attributes were clearly evident. FMG RS was
added to the Group and that culture is also evident. The management
team that supports the Board and their managers have shown strong
leadership and worked relentlessly to smooth the bumps, keep our
people engaged and produced some game changing outcomes that have
created value. There is more to be done but I am extremely grateful
to all the members of our team, who have persevered during what
seemed the darkest times we may see in a generation and to support
each other, our customers, communities and wider stakeholders this
year. Thank you all.
OUR FY2021 PERFORMANCE
Northgate UK&I
Year ended 30 April 2021 2020 Change
KPI ('000) ('000) %
---------------------------- ------- ------- -------
Average VOH 47.3 46.9 0.9%
Closing VOH 49.2 43.5 13.1%
Average utilisation % 92% 88% 3ppt
Year ended 30 April 2021 2020 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------- ------- ------- -------
Revenue - Vehicle hire(1) 311.6 314.0 (0.8%)
Revenue - Vehicle sales 161.4 137.1 17.7%
Total revenue 473.0 451.1 4.9%
Rental profit 39.5 31.2 26.8%
Rental margin % 12.7% 9.9% 2.8ppt
Disposal profit 37.3 6.7 453%
EBIT 76.8 37.9 103%
EBIT margin % (2) 16.2% 8.4% 7.8ppt
ROCE % 13.4% 6.6% 6.8ppt
---------------------------- ------- ------- -------
(1) Including intersegment revenue
(2) Calculated as underlying EBIT divided by total revenue
Northgate UK&I had a very strong year with underlying EBIT
of GBP76.8m (2020: GBP37.9m) driven by both a strong rental
business performance, with rental margin improving from 9.9% in
2020 to 10.3% in H1 2021 (both periods impacted by COVID-19
customer support packages) to 15.1% in H2 2021, and a very strong
disposal business performance with higher sales prices driving very
strong profit per unit (PPU).
Rental business
Hire revenue in the Northgate UK&I business declined 0.8%
compared with the prior year to GBP311.6m (2020: GBP314.0m). This
decline was driven principally by lower average hire rate, with
average VOH increasing 0.9%. The average hire rate was lower due to
customer and vehicle mix, and the impact of COVID-19 support in H1
of GBP2.4m (2020: GBP1.9m) offset by an annual rate increase.
Closing VOH was 13% higher at 49,200, although it should be
noted the comparator included a reduction of 6% from the first
COVID-19 lockdown, such that closing VOH was 7% above pre-COVID
levels.
At the year end, Northgate's minimum term proposition accounted
for around 35% (2020: 33%) of closing VOH. The average term of
these contracts is approximately three years, providing both
improved visibility of future rental revenue and earnings, and
lower transactional costs.
The rental margin has continued to grow ever since H2 2018,
increasing from 6.0% in H2 2018, to 7.8% in 2019, to 9.9% in 2020
to 10.3% in H1 2021 to 15.1% in H2 2021. This improvement between
H1 and H2 reflects the absence of COVID-19 support in H2, which
equates to approximately 1.5% of rental margin, as well as the
execution of the strategic priorities including cost synergies.
The net impact of the lower hire revenue and higher rental
margin was a 27% increase in Northgate UK&I rental profits to
GBP39.5m (2020: GBP31.2m).
Management of fleet and vehicle sales
The total Northgate UK&I year-end rental fleet size of
54,000 vehicles increased from 51,400 in the prior year. The
increase of 5% reflects the increase in closing VOH of 13% but is
lower than 13% due to the substantial improvement in utilisation in
the year from 88% to 92% driven by the revised post-Merger approach
to fleet management and supply shortages. 12,500 vehicles were
purchased during the year (2020: 14,600), 1,600 were acquired under
contract hire and approximately 11,500 vehicles were de-fleeted.
The average age of the fleet at the end of the year was three
months higher than at the same time last year, due to conserving
cash over the initial COVID-19 period and the ongoing impact of the
fleet optimisation policy, with more vehicles now evaluated as
having a longer optimal holding period.
A total of 15,800 vehicles were sold in Northgate UK&I
during the year, 8% lower than prior year. Whilst volumes were
initially impacted in the first COVID-19 lockdown, sale volumes
normalised subsequently as buyers made use of our online
platforms.
Disposal profits of GBP37.3m (2020: GBP6.7m) increased 453%
versus the prior year, as a result of a 504% increase in the
average PPU on disposals to GBP2,360 (2020: GBP391). To put this in
context, the average disposal price net of costs increased
approximately GBP2,100 due primarily to the strong market pricing
in the period which has been approximately 15% above expected
levels, plus the GBP1.4m unwind of depreciation rate changes, which
equates to approximately GBP80 of PPU reduction.
EBIT and ROCE
Underlying EBIT of GBP76.8m grew 103% over the prior year (2020:
GBP37.9m) driven by both higher rental profits and higher disposal
profits as explained above.
The ROCE in Northgate UK&I also improved substantially to
13.4% (2020: 6.6%) reflecting the increase in EBIT but also a
reduction in capital employed driven by lower working capital with
stock levels reduced and strong cash collection.
Capex and cash flow
Year ended 30 April 2021 2020 Change
GBPm GBPm GBPm
------------------------------ ------- -------- -------
Underlying EBITDA 164.2 158.1 6.1
Net replacement capex (66.2) (129.8) 63.6
Lease principal repayments (5.4) (4.0) (1.4)
Steady state cash generation 92.6 24.2 68.3
Growth capex 18.8 0.8 18.0
------------------------------ ------- -------- -------
Underlying EBITDA improved by GBP6.1m to GBP164.2m (2020:
GBP158.1m) mainly due to the drivers of increased rental
profit.
Net replacement capex(1) in the year was GBP66.2m, GBP63.6m
lower than in 2020, driven by higher sales prices, conserving cash
over the initial COVID-19 period and fleet optimisation which led
to less frequent replacement of the fleet. Steady state cash
generation increased by GBP68.3m to GBP92.6m (2020: GBP24.2m)
reflecting the higher EBITDA and lower net replacement capex.
Growth capex was a contraction of GBP18.8m, relating to the
reduction in fleet of 2,400 owned vehicles, as stock levels, which
were higher in April 2020 due to COVID-19 closures, were normalised
by April 2021, 1,600 contract hire vehicles were transitioned from
ownership in the year and utilisation was improved to 92% during
the year.
Northgate Spain
Year ended 30 April 2021 2020 Change
KPI ('000) ('000) %
---------------------------- ------- ------- ---------
Average VOH 46.0 46.4 (0.9%)
Closing VOH 46.8 43.1 8.6%
Average utilisation % 92% 91% 1ppt
Year ended 30 April 2021 2020 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------- ------- ------- ---------
Revenue - Vehicle hire 205.5 204.2 0.6%
Revenue - Vehicle sales 68.4 56.7 20.7%
Total revenue 273.9 260.9 5.0%
Rental profit 30.8 36.4 (15.5%)
Rental margin % 15.0% 17.8% (2.8ppt)
Disposal profit 2.9 3.3 (11.2%)
EBIT 33.7 39.7 (15.2%)
EBIT margin % (2) 12.3% 15.2% (2.9ppt)
ROCE % 7.5% 8.8% (1.3ppt)
---------------------------- ------- ------- ---------
Northgate Spain EBIT decreased 15.2% to GBP33.7m (2020:
GBP39.7m) driven by a decline in rental profit driven mainly from a
reduction in rental margin which decreased from 17.8% in 2020 to
14.4% in H1 2021 (both periods impacted by COVID-19 support) to
15.6% in H2 2021, with the disposal business performance delivering
similar disposal profit to prior year at GBP2.9m (2020:
GBP3.3m).
Rental business
Hire revenue in Northgate Spain grew 0.6% to GBP205.5m (2020:
GBP204.2m), but removing the impact of foreign exchange, reduced by
1.2%. Average VOH declined 0.9% due mainly to the impact of
COVID-19 in the early months of the year, and hire rate was broadly
flat including the impact of COVID-19 support in H1 of GBP1.0m
(2020: GBP1.9m), with additional income from other initiatives
including the recent launch of the workshop commercialisation
product. This product provides service and maintenance to customers
on non-Northgate vehicles using our existing workshops.
Closing VOH was 9% higher at 46,800, although it should be noted
the comparator included a reduction of 7% from the first COVID-19
lockdown, such that closing VOH was 2% above pre-COVID levels, with
a continuing positive recovery trend post year-end.
At the year end, Northgate's minimum term proposition accounted
for around 36% (2020: 37%) of closing 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 FY2021 rental margin of 15.0% (2020: 17.8%) declined
year-on-year including the new initiatives launch costs and Q1
FY2021 COVID-19 costs, which was partially offset by cost and
pricing actions in H2 2021 such that the H2 2021 rental margin was
higher than H1 (from 14.4% to 15.6%).
The net impact of the increased hire revenue and lower rental
margin was a 15.5% decline in Northgate Spain rental profits to
GBP30.8m (2020: GBP36.4m). Rental profits declined 17% at constant
exchange rates. This decline was mainly due to H1 performance,
adversely affected by COVID-19, with the business stabilising
margins in H2 and into FY2022.
[1] 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
2 Calculated as underlying EBIT divided by total revenue
Management of fleet and vehicle sales
The total rental fleet size in Northgate Spain increased by 0.6%
to 51,800 vehicles, driven by the growth in VOH in the period
offset by a 0.7% improvement in utilisation in the year to 92%.
11,500 vehicles were purchased during the year and approximately
11,200 vehicles were de-fleeted. The average age of the fleet at
the end of the year was three months higher than at the same time
last year, mainly due to the ongoing impact of the fleet
optimisation policy where more vehicles are now evaluated as having
a longer optimal holding period.
A total of 11,600 vehicles were sold by Northgate Spain during
the year, 17% higher than in the previous year mainly from the
delayed sales due to COVID-19 in the prior year. Increasingly sales
are completed via Spain's eAuction platform, which saw a 103%
increase in volume in the year.
Disposal profits of GBP2.9m (2020: GBP3.3m) declined 11.2%
versus the prior year, driven by a 24% reduction in the average PPU
on disposals to GBP254 (2020: GBP334) due to the GBP4.0m unwind of
previous depreciation rate changes (approximately GBP400 of PPU
reduction) offset by stronger pricing in the market, but to a
lesser extent than in UK&I. Vehicle sales performance has been
higher since January 2021, both in terms of vehicles sold and
average PPU.
EBIT and ROCE
The decline in both rental profit and disposal profit explained
above led to a decline in EBIT of 15.2% to GBP33.7m (2020:
GBP39.7m). At constant exchange rates, operating profits in
Northgate Spain declined 16.7%.
The ROCE in Northgate Spain was 7.5% (2020: 8.8%) reflecting
primarily the decline in EBIT.
Capex and cash flow
Year ended 30 April 2021 2020 Change
GBPm GBPm GBPm
------------------------------ ------- ------- -------
Underlying EBITDA 121.6 125.6 (4.0)
Net replacement capex (73.8) (69.6) (4.1)
Lease principal repayments (2.8) (2.6) (0.2)
Steady state cash generation 45.0 53.4 (8.4)
Growth capex 0.3 (17.5) 17.9
------------------------------ ------- ------- -------
Underlying EBITDA decreased by GBP4.0m to GBP121.6m (2020:
GBP125.6m) and net replacement capex1 was GBP73.8m, GBP4.1m higher
than in 2020, driven by OEM price inflation which was approximately
2%. Steady state cash generation decreased by GBP8.4m to GBP45.0m
(2020: GBP53.4m) reflecting the lower EBITDA and higher net
replacement capex. Growth capex was a contraction of GBP0.3m, with
the rental fleet growing 300 vehicles, offset by stock reducing 400
vehicles.
Redde
The Merger completed on 21 February 2020, therefore the tables
below relate to financial performance since that date.
Year ended 30 April 2021 2020 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------------- ------ ------ ---------
Revenue - Claims and services(2) 371.7 67.4 452%
Gross profit 70.2 10.0 600%
Gross margin % 18.9% 14.9% 4.0ppt
Operating profit 3.4 2.4 42.8%
Income from associates 4.4 1.0 358%
EBIT 7.7 3.3 134%
EBIT margin % (3) 2.1% 4.9% (2.8ppt)
ROCE % 6.0% - -
---------------------------------- ------ ------ ---------
Redde was the business in the Group most impacted by COVID-19.
The material reduction in traffic volumes and thereby incidents and
accidents led to reduced revenues and profits across the year.
Accident and incident volumes moved broadly with the levels of
traffic volumes on the road. Post the first national lockdown,
accident and incident volumes started to increase as traffic
volumes picked up. They remained below expectations, approximately
20-30% below pre-COVID levels in September to October, and then
reduced to approximately 30-50% below pre-COVID levels in November
to April due to the third lockdown, only starting to materially
recover again post year-end. With different volume levels the cost
base was kept continuously under review, but the margin reduced due
to lack of operational leverage, although this is reversing as
volumes return.
2021 also includes the result from FMG RS, acquired at the
beginning of September 2020. FMG RS was particularly impacted by
reduced volumes in the year, and made a loss of GBP3.3m in the two
months of H1 2021 and a loss of GBP3.2m in the six months of H2
2021 to give a loss of GBP6.5m for the year. In the final quarter
the loss reduced to GBP0.5m, providing confidence that as volumes
return in 2022 the business will soon become earnings
enhancing.
[1] 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
2 Including intersegment revenue
3 Calculated as underlying EBIT divided by total revenue
Revenue and profit
Revenue was GBP371.7m, gross profit was GBP70.2m and the gross
margin was 18.9%. FMG RS contributed revenues (external only) of
GBP37.0m with approximately 60% of the work completed being
internal.
EBIT was GBP7.7m, made up of operating profit of GBP3.4m and
income from associates of GBP4.4m, with an EBIT margin of 2.1%.
Excluding FMG RS's loss of GBP6.5m, Redde EBIT was GBP14.2m with a
margin of 3.8% but this was still materially below pre- COVID
levels of profit. 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 size in Redde closed the year at 6,500 vehicles,
reduced from 9,000 vehicles in prior year as the fleet was managed
to address the lower volumes of incidents and accidents.
The average fleet age was 14 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
Year ended 30 April 2021 2020 Change
GBPm GBPm GBPm
------------------------------ ------- ------ -------
Underlying EBITDA 25.0 6.3 18.7
Net replacement capex 32.5 2.5 30.0
Lease principal repayments (46.6) (4.9) (41.7)
Steady state cash generation 10.9 3.9 7.0
Statutory debtor days 179 123 56
------------------------------ ------- ------ -------
Underlying EBITDA was GBP25.0m for the year and steady state
cash generation was GBP10.9m. Net replacement capex includes the
sale proceeds from hire purchase vehicles and lease principal
payments includes both the monthly principal payments on both hire
purchase and contract hire vehicles together with the bullet
repayment at the end of a hire purchase agreement, as well as the
monthly principal payments on property and other leases captured
under IFRS 16.
Debtor days were 179 days at 30 April 2021, 56 days higher than
in the prior year due to the reduction in revenue in the last 12
months due to COVID-19 as well as lower cash collection in the
period. 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.
Martin Ward, Chief Executive Officer
FINANCIAL REVIEW
Group revenue and EBIT
Year ended 30 April 2021 2020 Change Change
GBPm GBPm GBPm %
------------------------------ -------- ----- ------ -------
Revenue - Vehicle hire 515.6 518.2 (2.6) (0.5%)
Revenue - Vehicle sales 229.8 193.8 36.0 18.6%
Revenue - Claims and services 364.1 67.4 296.7 440%
-------- ----- ------ -------
Total revenue 1,109.5 779.3 330.2 42.4%
Rental profit 70.3 67.6 2.7 4.0%
Disposal profit 40.2 10.0 30.2 301%
Claims and services profit 3.4 2.4 1.0 42.8%
Corporate costs (8.4) (6.1) (2.3) (37.5%)
-------- ----- ------ -------
Underlying operating profit 105.5 73.9 31.6 42.8%
Income from associates 4.4 1.0 3.4 358%
-------- ----- ------ -------
Underlying EBIT 109.8 74.8 35.0 46.8%
Underlying EBIT margin 9.9% 9.6% 0.3ppt
Statutory EBIT 83.8 29.9 53.9 180%
------------------------------ -------- ----- ------ -------
Revenue
Total Group revenue, including vehicle sales, of GBP1,109.5m was
42.4% higher than prior year (41.7% at constant exchange rates).
Revenue excluding vehicle sales of GBP879.7m was 50.2% higher
(49.5% at constant exchange rates) than the prior period with the
increase attributable to a full year of claims and services
revenue.
Hire revenues were broadly flat and include the impact of
customer support packages issued during COVID-19 and change in mix
of customers and fleet.
Group vehicle sales revenue increased by 18.6%, with the number
of vehicles sold consistent with prior year but reflecting higher
sales prices achieved driven by both reduced supply from OEMs and
increased demand for used vehicles during COVID-19.
Claims and services revenue has increased by 440% to GBP364m
(2020: GBP67.4m), reflecting the short period post Merger in prior
year, and including the impact of reduced traffic and thereby
accident volumes due to COVID-19.
EBIT
Underlying EBIT of GBP109.8m was 46.8% higher, reflecting the
strong performance in the Northgate UK&I business, a resilient
performance in the Northgate Spain business and a full year of the
profits from the Redde business. Staff costs include credits for
furlough grants received in the year of GBP17.2m (2020: GBP1.8m) to
protect jobs.
Statutory EBIT of GBP83.8m was 180% higher, reflecting higher
underlying EBIT offset by GBP19.5m of amortisation of acquisition
intangibles, GBP1.5m credit in relation to the gain on the
acquisition of Nationwide and GBP8.0m of exceptional items, of
which GBP2.8m related to post Merger restructuring, GBP6.8m related
to the Nationwide acquisition set up and integration and an
exceptional credit of GBP1.5m in relation to a legal
settlement.
Group PBT and EPS
2021 2020 Change Change
Year ended 30 April GBPm GBPm GBPm %
---------------------------------- ------ ------ ------ --------
Underlying EBIT 109.8 74.8 35.0 46.8%
Net finance costs (16.6) (15.8) (0.8) 4.9%
------ ------ ------ --------
Underlying profit before taxation 93.2 59.0 34.2 58.0%
Statutory profit before taxation 67.2 13.5 53.7 398%
Underlying effective tax rate 18.2% 19.5% - (1.3ppt)
Underlying EPS 31.0 30.8 0.2 0.6%
Statutory EPS 26.6 5.0 21.6 432%
---------------------------------- ------ ------ ------ --------
Profit before taxation
Underlying PBT was 58.0% higher than prior year, reflecting the
higher EBIT and higher finance costs, which were 4.9% higher.
Statutory PBT was 398% higher, mainly due to the GBP42.3m of
exceptional costs in the prior year, primarily in relation to the
Merger, in comparison to exceptional costs of GBP8.0m during the
current year. The movement also reflects the higher underlying PBT
offset by GBP19.5m (2020: GBP3.2m) of amortisation of acquisition
intangibles and GBP1.5m (2020: GBPnil) in relation to gain on
bargain purchase on the Nationwide acquisition.
Taxation
The Group's underlying tax charge was GBP17.0m (2020: GBP11.5m)
and the underlying effective tax rate was 18% (2020: 19%). The
statutory effective tax rate was 2% (2020: 43%), impacted by a
GBP10.0m exceptional release of uncertain tax provisions following
resolution of a previous tax position. The FY2020 rate was impacted
by non-deductible Merger expenses.
Earnings per share
Underlying EPS of 31.0p was consistent with prior year,
reflecting improving Group rental margins and higher disposals
profits offset by lower profits from the Redde business in the
period driven primarily by lower volumes due to COVID-19.
Statutory EPS of 26.6p was 432% higher, reflecting the movement
in underlying EPS and the impact of exceptional costs and
amortisation of acquisition intangibles mentioned above.
Business combinations
The Group acquired certain businesses and certain assets of
Nationwide on 4 September 2020 by way of a purchase from
administrators, for a cash consideration of up to GBP11.0m, plus a
deferred consideration of up to GBP5.0m conditional on retention of
certain trade business on satisfactory terms.
The provisional fair value of consideration is estimated to be
GBP11.1m. 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 GBP9.0m, resulting in a gain on bargain purchase of GBP1.5m
which has been recognised in the income statement in the
period.
Depreciation rate changes
The accounting requirements to adjust depreciation rates due to
changes in expectations of future residual values of used vehicles
make it more difficult to identify the underlying profit trends in
the business. When a vehicle is acquired it is recognised as a
fixed asset at its cost net of any discount or rebate receivable.
The cost is then depreciated evenly over its rental life, matching
its pattern of usage.
Matching of future market values to net book value (NBV) on the
disposal date requires significant judgement for the following key
reasons:
-- Used vehicle prices are subject to short term volatility
which makes it challenging to estimate future residual values.
-- The exact disposal age is not known at the point at which
rates are set and therefore the book value at disposal date is not
certain.
-- Mileage and condition are the key factors in influencing the
market value of a vehicle. This can vary significantly through a
vehicle's life depending upon how the vehicle is used.
Due to the above uncertainties, a difference normally arises
between the net book value of a vehicle and its actual market value
at the date of disposal. Where those differences are within an
acceptable range these are adjusted against the depreciation charge
in the income statement. Where these differences are outside of the
acceptable range, changes are made to depreciation rate estimates
to better reflect market conditions and the usage of vehicles.
In FY2021 the impact of previous rate changes is a GBP5.4m year
on year reduction in disposal profits arising due to disposed
vehicles having a higher NBV as result of the lower depreciation
rates.
The impacts of previous rate changes on FY2021 operating profit,
and the estimated impact on future years of the previous changes,
is set out below:
Cumulative
impact Year on year impact
--------------- ---------- -----------------------
Group Group UK&I Spain
Year: GBPm GBPm GBPm GBPm
--------------- ---------- ------- ------ ------
30 April 2013 5.3 5.3 5.3 -
30 April 2014 4.3 (1.0) (1.0) -
30 April 2015 15.7 11.4 8.4 3.0
30 April 2016 12.0 (3.7) (5.9) 2.2
30 April 2017 6.3 (5.7) (4.1) (1.6)
30 April 2018 2.1 (4.2) (2.7) (1.5)
30 April 2019 17.4 15.3 4.1 11.2
30 April 2020 12.0 (5.4) (1.4) (4.0)
30 April 2021 6.6 (5.4) (1.4) (4.0)
30 April 2022* 1.2 (5.4) (1.4) (4.0)
30 April 2023* - (1.2) - (1.2)
--------------- ---------- ------- ------ ------
*These are management estimates based on indicative fleet size
and assuming an equalised level of defleeting in each year .
Interest
Net underlying finance charges increased by 4.9% to GBP16.6m
(2020: GBP15.8m). The net cash interest charge for the year was
GBP15.0m (2020: GBP14.5m) representing decreased borrowing offset
by inclusion of lease interest for the full year following
completion of the Merger. Non-cash interest was GBP1.6m (2020:
GBP1.3m).
Exceptional items
During the year the Group incurred exceptional costs of GBP6.5m
(2020: GBP42.3m) in relation to restructuring expenses of GBP2.8m
(2020: GBP8.6m), acquisition expenses of GBP1.1m (2020: GBP18.3m),
FMG RS set up and integration costs of GBP5.7m (2020: GBPnil), a
legal settlement credit of GBP1.6m (2020: GBPnil) and the gain on
bargain purchase credit of GBP1.5m (2020: GBPnil) in relation to
the acquisition of Nationwide. In the prior year there were further
exceptional costs in relation to an impairment of intangible assets
of GBP14.9m and GBP0.6m in relation to exceptional refinancing
expenses. Further detail on exceptional items is included in note 6
to the financial statements.
Dividend and capital allocation
Subject to approval, the final dividend proposed of 12.0p per
share (2020: 6.8p) will be paid on 24 September 2021 to
shareholders on the register as at close of business on 3 September
2021.
Including the interim dividend paid of 3.4p (2020: 6.3p), the
total dividend relating to the year would be 15.4p (2020: 13.1p).
The dividend is covered 2.0x by underlying earnings.
The Group's objective is to employ a disciplined approach to
investment, returns and capital efficiency to deliver sustainable
compounding growth. Capital will be allocated within the business
in accordance with the framework outlined below:
-- Dividend: appropriate dividend distribution.
-- Core business growth: organic capital investment to grow the
core business at returns substantially ahead of WACC.
-- Disposal: potential disposal of non-core assets where
investment returns can be maximised through sale.
-- Inorganic: bolt-on acquisitions into product or geographic
adjacencies at returns substantially ahead of WACC.
The Group plans to maintain a balance sheet within a target
leverage range of 1.0x to 2.0x net debt to EBITDA, and during
periods of significant growth net debt would be expected to be
towards the higher end of this range. This is consistent with the
Group's objective of maintaining a balance sheet that is efficient
in terms of providing long term returns to shareholders and
safeguards the Group's financial position through economic
cycles.
Group cash flow
Steady state cash generation
Year ended 30 April 2021 2020 Change
GBPm GBPm GBPm
------------------------------ ------- ------- -------
Underlying EBIT 109.8 74.8 35.0
Depreciation and amortisation 192.5 209.0 (16.5)
Underlying EBITDA 302.3 283.8 18.5
Net replacement capex (107.5) (196.9) 89.5
Lease principal payments(1) (54.8) (11.5) (43.3)
Steady state cash generation 140.1 75.4 64.7
------------------------------ ------- ------- -------
-- Steady state cash generation remained strong at GBP140.1m
(2020: GBP75.4m), driven by strong EBIT and lower net replacement
capex.
-- Underlying EBITDA was GBP18.5m higher, driven by higher
underlying EBIT partially offset by lower depreciation due to
reduced rental fleet size.
-- Net replacement capex was GBP89.5m lower, reflecting lower
cycling of the fleet, the strong used vehicle prices achieved in
the period and also includes the impact of contract hire
purchases.
Free cash flow
Year ended 30 April 2021 2020 Change
GBPm GBPm GBPm
-------------------------------------- ------- ------ ------
Steady state cash generation 140.1 75.4 64.7
Exceptional costs (excluding non-cash
items) (5.0) (25.6) 20.6
Working capital and non-cash items (16.9) 6.1 (23.0)
Growth capex 19.1 (16.8) 35.9
Taxation (12.7) (10.2) (2.5)
------- ------ ------
Net operating cash 124.6 29.0 95.6
Distributions from associates 4.3 0.6 3.7
Interest and other financing (20.4) (19.5) (0.8)
Acquisition of business (10.8) - (10.8)
------- ------ ------
Free cash flow 97.8 10.1 87.7
Dividends paid (24.9) (24.3) (0.6)
Lease principal payments (2) 54.8 11.5 43.3
------- ------ ------
Net cash generated (consumed) 127.6 (2.7) 130.4
-------------------------------------- ------- ------ ------
-- Free cash flow increased by GBP87.7m to GBP97.8m (2020:
GBP10.1m) reflecting higher steady state cash generation and growth
capex inflow of GBP19.1m due to a net reduction in owned fleet over
the period of 2,500 vehicles.
-- Exceptional costs (excluding non-cash items) of GBP5.0m were
GBP20.6m lower than prior year due to Merger related costs in prior
year.
-- Working capital outflow and non-cash items of GBP16.9m which
included GBP4.4m associate income (2020: GBP1.0m), GBP4.6m relating
to release of provisions (2020: GBPnil) and GBP5.2m relating to FMG
RS working capital.
-- Acquisition of business of GBP10.8m represents the initial
cash paid for the acquisition of the trade and assets of
Nationwide.
-- If the impact of growth capex in the period is removed from
free cash flow, the underlying free cash flow of the Group was
GBP78.7m (2020: GBP26.9m).
[1] Lease principal payments are included so that steady state
cash generation includes all maintenance capex irrespective of
funding method.
2 Lease principal payments are added back to reflect the
movement on net debt.
Net debt
Net debt reconciles as follows:
Year ended 30 April 2021 2020
GBPm GBPm
------------------------------ ------- -----
Opening net debt 575.9 436.9
Net cash (generated) consumed (127.6) 2.7
Other non-cash items 80.3 1.8
Exchange differences 1.8 1.8
IFRS 16 transition - 48.5
Net debt acquired in Merger - 84.1
------------------------------ ------- -----
Closing net debt 530.3 575.9
------------------------------ ------- -----
Closing net debt was GBP530.3m, GBP45.5m lower than opening net
debt, driven by net cash generation of GBP127.6m partially offset
by new leases acquired of GBP79.3m included within other non-cash
items.
During the year the Group has established new contract hire
arrangements for the Northgate commercial fleet in addition to the
leasing arrangements already in place in the Redde business. New
leases of GBP79.3m were entered into during the year including
GBP32.8m HP (leases), GBP25.3m contract hire and GBP21.2m property
leases.
Borrowing facilities
As at 30 April 2021 the Group had headroom on facilities of
GBP305m, with GBP406m drawn (net of available cash balances)
against total facilities of GBP711m as detailed below:
Facility Drawn Headroom Borrowing
GBPm GBPm GBPm Maturity cost
------------------- -------- ----- -------- -------- ---------
UK bank facilities 610 311 299 Nov-23 1.9%
Loan notes 87 87 - Aug-22 2.4%
Other loans 14 8 6 Nov-21 2.5%
------------------- -------- ----- -------- -------- ---------
711 406 305 2.1%
------------------- -------- ----- -------- -------- ---------
The other loans consist of GBP7.5m 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 406
Unamortised finance fees (4)
Leases arising following adoption
of IFRS 16 92
Leases arising under HP obligations 36
Net debt 530
------------------------------------- -----
The overall cost of borrowings at 30 April 2021 is 2.0% (2020:
2.3%).
The margin charged on bank debt is dependent upon the Group's
net debt to EBITDA ratio, ranging from a minimum of 1.35% to a
maximum of 3.1%. The net debt to EBITDA ratio at 30 April 2021
corresponds to a margin of 1.85% (2020: 1.85%).
There were no Interest rate swap contracts at 30 April 2021.
During the prior year contracts were in place that fixed a
proportion of bank debt at 2.4%.
The split of net debt by currency is as follows:
Year ended 30 April 2021 2020
GBPm GBPm
---------------------------------------------------- ----- -----
Euro 367 370
Sterling 167 211
---------------------------------------------------- ----- -----
Borrowings and lease obligations before unamortised
arrangement fees 534 581
Unamortised finance fees (4) (5)
---------------------------------------------------- ----- -----
Net Debt 530 576
---------------------------------------------------- ----- -----
There are three financial covenants under the Group's facilities
as follows:
Threshold April 2021 Headroom April 2020
--------------- ---------- ---------- ---------------- ----------
Interest cover 3x 8.2x GBP67m (EBIT) 5.3x
GBP315m (Net
Loan to value 70% 41% debt) 48%
Debt leverage 2.75x 1.5x GBP125m (EBITDA) 1.6x
--------------- ---------- ---------- ---------------- ----------
The covenant calculations have been prepared in accordance with
the requirements of the facilities that they relate to.
Balance sheet
Net assets at 30 April 2021 were GBP908.1m (2020: GBP871.6m),
equivalent to net assets per share of 369p (2020: 354p). Net
tangible assets at 30 April 2021 were GBP622.8m (2020: GBP569.8m),
equivalent to a net tangible asset value of 253p per share (2020:
232p per share).
Gearing at 30 April 2021 was 85.2% (2020: 101.1%) and ROCE was
9.5% (2020: 7.0%).
Treasury
The function of Group Treasury is to mitigate financial risk, to
ensure sufficient liquidity is available to meet foreseeable
requirements, to secure finance at minimum cost and to invest cash
assets securely and profitably. Treasury operations manage the
Group's funding, liquidity and exposure to interest rate risks
within a framework of policies and guidelines authorised by the
Board of Directors.
The Group uses derivative financial instruments for risk
management purposes only. Consistent with Group policy, Group
Treasury does not engage in speculative activity and it is Group
policy to avoid using more complex financial instruments.
Credit risk
The policy followed in managing credit risk permits only minimal
exposures with banks and other institutions meeting required
standards as assessed normally by reference to major credit
agencies. Group credit exposure for material deposits is limited to
banks which maintain an A rating. Individual aggregate credit
exposures are also limited accordingly.
Liquidity and funding
The Group has sufficient funding facilities to meet its normal
funding requirements in the medium term as discussed above.
Covenants attached to those facilities as outlined above are not
restrictive to the Group's operations.
Capital management
The Group's objective is to maintain a balance sheet structure
that is efficient in terms of providing long term returns to
shareholders and safeguards the Group's financial position through
economic cycles.
Operating subsidiaries are financed by a combination of retained
earnings and borrowings.
The Group can choose to adjust its capital structure by varying
the amount of dividends paid to shareholders, by issuing new shares
or by adjusting the level of capital expenditure.
Interest rate management
The Group's bank facilities, other loan agreements and lease
obligations incorporate variable interest rates. The Group seeks to
ensure that the exposure to future changes in interest rates is
managed to an acceptable level by having in place an appropriate
balance of fixed rate and floating rate financial instruments at
any time. The proportion of gross borrowings (including leases
arising under HP obligations) hedged into fixed rates was 28% at 30
April 2021 (2020: 60%).
Foreign exchange risk
The Group's reporting currency is Sterling and 73% of its
revenue is generated in Sterling during the year (2020: 63%). The
Group's principal currency translation exposure is to the Euro, as
the results of operations, assets and liabilities of its Spanish
and Irish businesses must be translated into Sterling to produce
the Group's consolidated financial statements.
The average and year end exchange rates used to translate the
Group's overseas operations were as follows:
2021 2020
GBP : EUR GBP : EUR
--------- ---------- ----------
Average 1.12 1.14
Year end 1.15 1.15
--------- ---------- ----------
The Group manages its exposure to currency fluctuations on
retranslation of the balance sheets of those subsidiaries whose
functional currency is in Euros by maintaining a proportion of its
borrowings in the same currency. The exchange differences arising
on these borrowings have been recognised directly within equity
along with the exchange differences on retranslation of the net
assets of the Euro subsidiaries. At 30 April 2021, 75% of Euro net
assets were hedged against Euro borrowings (2020: 71%).
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 detailed
further in Note 8 to the financial statements), the Directors have
concluded that it is appropriate to prepare the Group financial
statements on a going concern basis.
Philip Vincent
Chief Financial Officer
GAAP Reconciliation
A reconciliation of GAAP to non-GAAP underlying measures is as
follows:
Group Group
2021 2020
GBP000 GBP000
------------------------------------------- ------- -------
Operating profit 77,922 28,916
Income from associates 4,364 952
Gain on bargain purchase 1,489 -
------------------------------------------- ------- -------
EBIT 83,775 29,868
------------------------------------------- ------- -------
Add back:
Exceptional operating expenses 8,017 41,775
Amortisation on acquired intangible assets 19,513 3,178
Gain on bargain purchase (1,489) -
Underlying EBIT 109,816 74,821
------------------------------------------- ------- -------
Group Group
2021 2020
GBP000 GBP000
------------------------------------------- ------- -------
Profit before tax 67,179 13,479
Add back:
Exceptional operating expenses 8,017 41,775
Amortisation on acquired intangible assets 19,513 3,178
Gain on bargain purchase (1,489) -
Exceptional finance costs - 566
Underlying profit before tax 93,220 58,998
------------------------------------------- ------- -------
Group Group
2021 2020
GBP000 GBP000
--------------------------------------------------- ----------- -----------
Profit for the year 65,566 7,676
Add back:
Exceptional operating expenses 8,017 41,775
Amortisation on acquired intangible assets 19,513 3,178
Gain on bargain purchase (1,489) -
Exceptional finance costs - 566
Tax on exceptional items, brand royalty charges
and intangible amortisation (5,369) (5,676)
Tax credit in relation to the release of uncertain
tax provisions (10,008) -
--------------------------------------------------- ----------- -----------
Underlying profit for the year 76,230 47,519
--------------------------------------------------- ----------- -----------
Weighted average number of Ordinary shares 246,091,423 154,509,197
--------------------------------------------------- ----------- -----------
Underlying basic earnings per share 31.0p 30.8p
--------------------------------------------------- ----------- -----------
Group Group
2021 2020
GBP000 GBP000
----------------------------------------------- --------- ---------
Underlying EBIT 109,816 74,821
Add back:
Depreciation: vehicles for hire and vehicles
for credit hire 173,145 194,856
Other depreciation 18,464 13,219
Loss on disposal of assets 226 144
Intangible amortisation included in underlying
operating profit 685 809
----------------------------------------------- --------- ---------
Underlying EBITDA 302,336 283,849
----------------------------------------------- --------- ---------
Net replacement capex (107,454) (196,904)
Lease principal payments (54,808) (11,524)
----------------------------------------------- --------- ---------
Steady state cash generation 140,074 75,421
----------------------------------------------- --------- ---------
Northgate Northgate Group
UK&I Spain Sub-total
2021 2021 2021
GBP000 GBP000 GBP000
-------------------------------- --------- ---------- -----------
Underlying operating profit 76,800 33,700 110,500
Exclude:
Adjustments to depreciation
charge in relation to vehicles
sold in the period (37,285) (2,929) (40,214)
--------------------------------- --------- ---------- -----------
Rental profit 39,515 30,771 70,286
--------------------------------- --------- ---------- -----------
Divided by: Revenue: hire of
vehicles 310,066 205,500 515,566
--------------------------------- --------- ---------- -----------
Rental margin 12.7% 15.0% 13.6%
--------------------------------- --------- ---------- -----------
Northgate Northgate Group
UK&I Spain Sub-total
2020 2020 2020
GBP000 GBP000 GBP000
-------------------------------- --------- ---------- -----------
Underlying operating profit 37,899 39,731 77,630
Exclude:
Adjustments to depreciation
charge in relation to vehicles
sold in the period (6,742) (3,297) (10,039)
--------------------------------- --------- ---------- -----------
Rental profit 31,157 36,434 67,591
--------------------------------- --------- ---------- -----------
Divided by: Revenue: hire of
vehicles 313,922 204,235 518,157
--------------------------------- --------- ---------- -----------
Rental margin 9.9% 17.8% 13.0%
--------------------------------- --------- ---------- -----------
Group Group
2021 2020
GBP000 GBP000
----------------------------------------------------- --------- ---------
Net replacement capex 107,454 196,904
Growth capex (19,134) 16,753
----------------------------------------------------- --------- ---------
Total net capex 88,320 213,657
----------------------------------------------------- --------- ---------
Lease principal payments 54,808 11,524
Total net capex (including lease principal payments) 143,128 225,181
----------------------------------------------------- --------- ---------
Purchases of vehicles for hire 303,537 362,011
Proceeds from disposal of vehicles for hire (188,592) (156,290)
Proceeds from disposal of vehicles for credit
hire and other property, plant and equipment (35,919) (3,823)
Purchases of other property, plant and equipment 7,460 5,250
Purchases of intangible assets 1,834 6,509
Lease principal payments 54,808 11,524
----------------------------------------------------- --------- ---------
Total net capex (including lease principal payments) 143,128 225,181
----------------------------------------------------- --------- ---------
GLOSSARY OF TERMS
The following defined terms have been used throughout this
document:
Term Definition
Contract hire IFRS 16 (leases) relating to vehicles where
the funder retains the residual value risk
----------------------------------------------------
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 Earnings per share. Underlying unless otherwise
stated
----------------------------------------------------
ESG Environmental, Social, and Corporate Governance
----------------------------------------------------
EV Electric vehicle
----------------------------------------------------
Facility headroom Calculated as facilities of GBP711m less net
borrowings of GBP406m. Net borrowings represent
net debt of GBP530m excluding lease liabilities
of GBP128m and unamortised arrangement fees
of GBP4m and are stated after the deduction
of GBP7m of net cash and overdraft balances
which are available to offset against borrowings
----------------------------------------------------
FMG RS The trading part of the Redde business that
was acquired from Nationwide
----------------------------------------------------
Free cash flow Net cash generated after principal lease payments
(included this year, comparative updated) and
before the payment of dividends
----------------------------------------------------
FY2020 The year ended 30 April 2020
----------------------------------------------------
FY2021 The year ended 30 April 2021
----------------------------------------------------
FY2022 The year ending 30 April 2022
----------------------------------------------------
GAAP Generally Accepted Accounting Practice: meaning
compliance with IFRS
----------------------------------------------------
Gearing Calculated as net debt divided by net tangible
assets
----------------------------------------------------
Growth capex Growth capex represents the cash consumed in
order to grow the total owned rental fleet
or the cash generated if the fleet size is
reduced in periods of contraction
----------------------------------------------------
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. Underlying unless otherwise
stated
----------------------------------------------------
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 (included this
year, comparative updated)
----------------------------------------------------
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
----------------------------------------------------
Principal risks and uncertainties
Economic environment
Principal risk
The demand for our products and services could be affected by a
change in economic activity in the countries the Group operates
including the impact of the UK leaving the EU.
Risk description
Adverse changes in economic conditions including COVID-19 could
result in declines and changes in the business activity of
customers. Changes to driving patterns and vehicle usage could
result in lower numbers of accidents and therefore reduced credit
hire business, credit repair volumes, and demand for our legal
services
An adverse change in macro-economic conditions including
COVID-19 could also increase the risk of customer failure,
increasing the risk of none recovery of receivables.
Controls and mitigating activities
-- The business model supports high levels of utilisation and
vehicles returned from customers are redeployed within the
fleet
-- Flexibility over asset management means that in the event of
a downturn the Group can generate cash and reduce debt by reducing
vehicle purchases and increasing disposals
-- The cost base related to management of insurance claims and
services is flexible and can be scaled back in response to a
downturn in revenue
-- The group maintains close relationships with key suppliers to
ensure continuity of supply including any potential impact of
Brexit. In the event of short term supply interruption, the fleet
can be aged out
-- Transactional foreign exchange exposure is minimised though
sourcing supplies in the same currency as the revenue is
generated.
Developments in the year
-- COVID-19 has reduced economic activity levels across the UK, Spain and Ireland.
-- The group's business customer base in not exposed to industry
sectors that have been most affected by COVID-19 and additional
revenue has been generated from customers who have increased
activity throughout this period.
-- Revenue from claims and insurance services continues to be
affected by reduced volumes due to continuation of COVID-19
lockdown measures in the UK
-- There has been no significant business interruption or
increased cost of supply following the UK's exit from the EU in
January 2021
Market risk
Principal risk
The loss of a major customer or key insurance referral partner
would adversely impact the Group's revenues. Without any adjustment
to pricing, service or cost base, this will result in lower
returns.
There is a risk that demand for the group's products could
materially diminish if it fails to respond to behavioural,
structural or technological changes in the markets in which it
operates.
Risk description
The markets in which the Group operates are fragmented, with low
barriers to entry, meaning that price competition is high. The
Group could fail to attract and retain customers if pricing is
uncompetitive or it fails to adequately differentiate its service
offer. Significant increases in the commission rates paid to
insurance referral partners could threaten the viability of the
returns model of that part of the group.
Loss of a major existing customer or insurance referral partner
could materially diminish returns if the cost base is not managed
appropriately.
Changes to usage of fleet such as regulations around operation
of diesel vehicles and low emission zones will change the demand
for existing products and services. Other structural changes to the
rental and insurance markets could eliminate the viability of the
business model.
Controls and mitigating activities
-- Minimising the concentration of business customers
-- Maintaining contracts and long term relationships with insurance partners
-- Continual benchmarking of pricing and service offer with competitors
-- Pricing controls over target levels of returns and discount authorities
-- Diversification of service offering to customers
-- Evolution of the fleet towards EV with supporting infrastructure
Developments in the year
-- Continued development of customer proposition, providing an integrated mobility solution
-- Our competitive position in the flexible rental solution and
complementary service markets has continued to improve during
COVID-19, leading to increased VOH and rental margins across the
rental businesses.
-- Establishment of a project team to manage transition of the fleet towards EV.
Vehicle holding costs
Principal risk
An increase in holding costs, if not recovered through hire rate
increases or operational efficiencies, would adversely affect
profitability, shareholder returns and cash generation.
Risk description
The holding cost of vehicles is dependent upon the purchase
price negotiated with OEMs either directly or through lease
financing and the expected residual value at the date of disposal
if purchased outright. The operational cost of fleet is dependent
upon efficient fleet management and maintenance of the fleet.
COVID-19 has increased the volatility of used vehicle pricing
with some interruption to supply in used vehicle markets.
Controls and mitigating activities
-- Negotiating pricing directly with manufacturers on an annual basis
-- Managing the number and mix of suppliers to optimise buying
terms and to efficiently maintain the fleet in-life
-- Holding a proportion of the fleet on a leasing basis with no exposure to residual values
-- Optimising the holding period of vehicles to minimise overall holding costs
-- Balancing high levels of utilisation with availability of fleet for customers
-- Using in-house workshops to efficiently manage in-life maintenance and total holding cost
-- Diversification of sales channels in order to maximise
residual value including in-house retail operations
-- Ageing out of the fleet if necessary, to mitigate short term
pricing disruption in used vehicle markets
Although the Group is exposed to fluctuations in the used
vehicle market, we aim to optimise the sales route for each
vehicle. Should the market experience a short term decline in
residual values, we can age our existing fleet until the market
improves.
Developments in the year
-- The risk of short term reductions to residual values due to
COVID-19 has alleviated throughout the year as used vehicle markets
re-opened and demand for used vehicles remained strong, partly
supported by a reduction in supply of new vehicles
-- Despite the closure of our retail sales sites during
lockdowns, we were able to continue to sell used vehicles through
digital solutions (click and collect) and strengthening of our
online remarketing platform
-- We have not experienced any supply disruption as a result of
Brexit and continue to maintain close relationships with key
suppliers to ensure continuity.
The employee environment
Principal risk
Failure to safeguard employees and retain, develop and motivate
the right talent will impede the successful operation of the
business model and delivery of the group's strategic objectives
Risk description
Not safeguarding employee's health and welfare and failure
invest in our workforce will lead to high levels of staff turnover,
which will affect customer service, operational efficiency and
overall delivery of the Group's strategy.
The COVID-19 pandemic has disrupted normal working practices and
created an uncertain environment across the world.
The Merger has increased the complexity of the group's
operations and geographies and the successful integration of the
combined group requires effective collaboration of all our
colleagues.
Controls and mitigating activities
-- Ongoing benchmarking of reward and benefits against the market
-- Regular performance reviews including personal development place and tailored training
-- Regular communication across the business of progress against
merger integration and group strategy
-- Regular engagement with employees and access to health and well-being initiatives
-- Group health and safety initiatives to promote an ongoing safe working environment
Developments in the year
-- Increased engagement with employees throughout the COVID-19
period through regular business updates
-- Establishing safe working practices for employees at our
sites including provision of protective equipment and
implementation of social distancing measures
-- Establishment of the new Employee Engagement Forum (EEF) made
up of representatives from across the business giving all employees
a voice into the executive leadership team and the Board.
-- Progression towards harmonisation of Group wide HR policies
and standardisation of terms and conditions
-- Supporting flexible working, giving employees more
flexibility to work from home, whilst balancing the needs of the
business
-- Roll out of group wide SAYE in order for employees to share
in the future success of the group
Legal and Compliance
Principal risk
Certain activities and arrangements within the Group are
regulated therefore on-going compliance with regulations is
required to ensure continuity of business.
Historical legal cases relating to the provision of credit hire
and insurance related services have provided a precedent framework
which has remained broadly stable for several years. Legal
challenges or changes in legislation could undermine this framework
with consequences for the markets in which the Group operates.
Risk description
Inadequate operation of systems to monitor and ensure compliance
with regulation could expose the Group to fines and penalties or
operating licences could be suspended. Failure to comply with laws
and regulations would put the reputation of the business at risk,
adversely impacting our ability to attract customers and maintain
productive and sustainable relationships with our partners and
suppliers.
Changes to the legislation underlying one or more of the Group's
core markets could impact revenue and profitability, particularly
within the credit hire, insurance and legal services businesses of
the Group.
Controls and mitigating activities
-- In-house legal and compliance team continuously monitoring regulatory and legal compliance
-- horizon scanning and monitoring of legal and regulatory developments
-- policies and procedures and compliance monitoring programmes
-- training in relation to relevant legislation, regulatory
responsibilities and Company policies and procedures
-- external advisors are retained where necessary.
Developments in the year
-- No significant changes to laws and regulations impacting operations in the year
-- No significant instances of non-compliance or legal issues across the Group during the year
IT systems
Principal risk
Failure of existing systems, or a lack of development in new
systems, could result in a loss of commercial agility and or harm
the efficiency and continuity of our operations.
Incorrectly handling of data, or unsuccessfully defending
against data theft, cyber-attacks and the like, would cause
significant reputational harm and affect relationships with all
stakeholders negatively.
Risk description
The Group's business is dependent on the safe and efficient
processing of a large number of complex transactions and
interactions. The effective performance and availability of core
systems is central to the operation of the business.
IT systems can be at risk from failed processes, systems or
infrastructure and from error, fraud or cyber-crime.
The Merger has increased the complexity and diversity of
operations, IT systems and infrastructure.
Controls and mitigating activities
-- Ongoing monitoring of the continuity of IT systems with access to support where required
-- Back-up and recovery procedures for key systems including disaster recovery plans
-- Operation of information security and data protection
protocols to ensure that data is held securely, and is adequately
protected from cyber-attacks or other unauthorised access
-- Changes to key IT systems are considered as part of wider
group change programmes and are implemented in phases where
possible with appropriate governance structures put in place to
oversee progress against project objectives
Developments in the year
-- Progress made over the integration of core IT systems of the group following the Merger
Recovery of contract assets
Principal risk
Our credit hire and repair business involves the provision of
goods and services on credit. The Group receives payment for the
goods and services it has provided after a claim has been pursued
against the party at fault (and the relevant third party insurer).
This can mean that the Group can endure a long period before some
payments are received.
Risk description
While a significant level of claims are subject to protocol
arrangements resulting in prompt settlement of claims there is a
risk that the Group will not be able to improve or maintain the
pace of settlement of claims. In addition, third party insurers may
seek to delay payments in an attempt to achieve more favourable
settlement terms for outstanding claims or, ultimately, to force
the Group and other credit hire providers out of the market.
If the Group is unable to maintain existing settlement periods,
if there are further delays in the receipt of payments or if
settlement terms with insurers worsen, its business, financial
condition and operating results could be adversely impacted.
Controls and mitigating activities
The Group manages this risk by standardising terms (protocol
agreements) where possible, ensuring that services are only
provided to customers after a full risk assessment process and
agreement to an appropriate contract. In addition, any payment
delays are monitored and appropriate action taken to facilitate
prompt settlement.
Developments in the year
-- As a result of COVID-19 the courts have been operating at
much reduced capacity, increasing the expected time for
settlement.
It is expected that following the removal of the Government
COVID-19 support schemes that business insolvencies will increase
increasing the bad debt.
Access to capital
Principal risk
The group needs access to sufficient capital to maintain and
grow the fleet and fund short term working capital
requirements.
Risk description
Failure to maintain or extend access to credit and fleet finance
facilities or non-compliance with debt covenants could affect the
Group's ability to achieve its strategic objectives or continue as
a going concern.
COVID-19 has created some disruption to banking and credit
markets.
Controls and mitigating activities
-- Bank, loan note and fleet funding facilities are in place
which provide adequate headroom and maturities in order to support
the strategy of the group
-- Facilities are diversified across a range of lenders and
close relationships are maintained with key funders of the group to
ensure continuity of funding
-- The group continually monitors cash flow forecasts to ensure
adequate headroom on facilities and ongoing compliance with debt
covenants
-- The group maintains leverage within stated policy and the
business model allows cash to be generated through economic
cycles
Developments in the year
-- Actions have been taken throughout the COVID-19 period to
conserve cash, and therefore net cash has been generated over the
period and facility headroom has increased
-- Banking facilities inherited with the Merger have been
integrated into the group banking facility
-- Further contract hire credit lines have been negotiated which
has further diversified the funding base
CONSOLIDATED INCOME STATEMENT
----
FOR THE YEARED 30 APRIL 2021
------------------------------------------------------------------ --------------------------------------------------
Underlying Statutory Underlying Statutory
2021 2021 2020 2020
Note GBP000 GBP000 GBP000 GBP000
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Revenue: hire of vehicles 515,566 515,566 518,157 518,157
Revenue: sale of vehicles 229,809 229,809 193,795 193,795
Revenue: claims and services 364,124 364,124 67,397 67,397
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Total revenue 1 1,109,499 1,109,499 779,349 779,349
Cost of sales (856,955) (856,955) (621,446) (621,446)
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Gross profit 252,544 252,544 157,903 157,903
Administrative expenses (excluding exceptional items and
amortisation on acquired intangible
assets) (147,092) (147,092) (84,034) (84,034)
Exceptional administrative expenses: Net (impairment) of property,
plant and equipment 6 - (4,341) - (1,304)
Exceptional administrative expenses: reversal of previous
impairment of property, plant and
equipment 6 - 1,304 - -
Exceptional administrative expenses: impairment of intangible
assets 6 - - - (14,910)
Exceptional administrative expenses: other costs 6 - (4,980) - (25,561)
Amortisation on acquired intangible assets - (19,513) - (3,178)
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Total administrative expenses (147,092) (174,622) (84,034) (128,987)
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Operating profit 105,452 77,922 73,869 28,916
Income from associates 4,364 4,364 952 952
Gain on bargain purchase - 1,489 - -
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
EBIT 1 109,816 83,775 74,821 29,868
Interest income 164 164 122 122
Finance costs (excluding exceptional items) (16,760) (16,760) (15,945) (15,945)
Exceptional finance costs 6 - - - (566)
Profit before taxation 93,220 67,179 58,998 13,479
Taxation (16,990) (1,613) (11,479) (5,803)
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Profit for the year 76,230 65,566 47,519 7,676
------------------------------------------------------------------ ---- ---------- --------- ---------- ---------
Profit for the year is wholly attributable to owners of the
Parent Company. All results arise from continuing operations.
Underlying profit for the year excludes exceptional items as set
out in Note 6, as well as amortisation on acquired intangible
assets and the taxation thereon and exceptional tax credits, in
order to provide a better indication of the Group's underlying
business performance.
Earnings per share
Basic 231.0p 26.6p 30.8p 5.0p
------------------- ----- ----- ----- ----
Diluted 230.5p 26.2p 30.5p 4.9p
------------------- ----- ----- ----- ----
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 APRIL 2021
----------------------------------------------------------------------------------------- ------- -------
2021 2020
GBP000 GBP000
----------------------------------------------------------------------------------------- ------- -------
Amounts attributable to owners of the Parent Company
Profit attributable to the owners 65,566 7,676
Other comprehensive income (expense)
Foreign exchange differences on retranslation of net assets of subsidiary undertakings 338 3,998
Net foreign exchange differences on long term borrowings held as hedges (2,019) (1,682)
Foreign exchange difference on revaluation reserve (1) 9
Net fair value gains on cash flow hedges 184 807
Deferred tax charge recognised directly in equity relating to cash flow hedges (35) (153)
------------------------------------------------------------------------------------------ ------- -------
Total other comprehensive (expense) income (1,533) 2,979
Total comprehensive income for the year 64,033 10,655
========================================================================================== ======= =======
All items will subsequently be reclassified to the consolidated
income statement. Profit attributable to the owners of the Parent
Company includes amortisation of intangible assets.
CONSOLIDATED BALANCE SHEET 2021 2020
AS AT 30 APRIL 2021 GBP000 GBP000
-------------------------------------------------------- --------- ---------
Non-current assets
Goodwill 114,503 116,105
Other intangible assets 170,830 185,710
Property, plant and equipment: vehicles for hire 893,342 884,711
Property, plant and equipment: vehicles for credit hire 43,998 51,040
Other property, plant and equipment 146,580 126,009
Total property, plant and equipment 1,083,920 1,061,760
---------------------------------------------------------- --------- ---------
Deferred tax assets 4,826 10,133
Interest in associates 6,047 6,008
Total non-current assets 1,380,126 1,379,716
---------------------------------------------------------- --------- ---------
Current assets
Inventories 21,545 48,762
Receivables and contract assets 302,349 295,765
Cash and bank balances 11,169 67,843
Total current assets 335,063 412,370
---------------------------------------------------------- --------- ---------
Total assets 1,715,189 1,792,086
---------------------------------------------------------- --------- ---------
Current liabilities
Trade and other payables 229,666 222,342
Provisions - 3,369
Derivative financial instrument liabilities - 184
Current tax liabilities 562 12,393
Lease liabilities 32,375 33,691
Short term borrowings 12,159 54,684
---------------------------------------------------------- --------- ---------
Total c urrent liabilities 274,762 326,663
---------------------------------------------------------- --------- ---------
Net current assets 60,301 85,707
---------------------------------------------------------- --------- ---------
Non-current liabilities
Provisions - 1,208
Trade and other payables 3,848 -
Lease liabilities 96,093 70,261
Long term borrowings 400,885 485,073
Deferred tax liabilities 31,472 37,314
---------------------------------------------------------- --------- ---------
Total non-current liabilities 532,298 593,856
---------------------------------------------------------- --------- ---------
Total liabilities 807,060 920,519
---------------------------------------------------------- --------- ---------
NET ASSETS 908,129 871,567
---------------------------------------------------------- --------- ---------
EQUITY
Share capital 123,046 123,046
Share premium account 113,510 113,510
Own shares reserve (6,460) (3,090)
Hedging reserve - (149)
Translation reserve (4,190) (2,509)
Other reserves 330,476 330,477
Retained earnings 351,747 310,282
TOTAL EQUITY 908,129 871,567
---------------------------------------------------------- --------- ---------
Total equity is wholly attributable to owners of the Parent
Company.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2021
------------------------------------------------------------------------------------------ ---- --------- ---------
2021 2020
Note GBP000 GBP000
------------------------------------------------------------------------------------------ ---- --------- ---------
Net cash generated from operations 4 137,878 33,699
Investing activities
Interest received 164 122
Distributions from associates 4,325 590
Acquisition of business (10,823) -
Cash acquired on acquisition - 8,036
Proceeds from disposal of vehicles for credit hire and other property, plant and equipment 35,919 3,823
Purchases of other property, plant and equipment (7,460) (5,250)
Purchases of intangible assets (1,834) (6,509)
Net cash generated from investing activities 20,291 812
------------------------------------------------------------------------------------------ ---- --------- ---------
Financing activities
Issue of shares - 2
Dividends paid (24,928) (24,333)
Receipt of bank loans and other borrowings 27,195 137,257
Repayments of bank loans and other borrowings (109,712) (114,289)
Debt issue costs paid (520) (4,878)
Principal element of lease payments under IFRS 16 (16,994) (8,034)
Principal element of lease payments under HP obligations (37,814) (3,490)
Net payments to acquire own shares for share schemes (5,073) -
Net cash used in financing activities (167,846) (17,765)
Net (decrease) increase in cash and cash equivalents (9,677) 16,746
Cash and cash equivalents at 1 May 16,780 805
Effect of foreign exchange movements (282) (771)
Cash and cash equivalents at 30 April 6,821 16,780
------------------------------------------------------------------------------------------ ---- --------- ---------
Cash and cash equivalents comprise:
Cash and bank balances 11,169 67,843
Bank overdrafts (4,348) (51,063)
Cash and cash equivalents 6,821 16,780
------------------------------------- ------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 APRIL 2021
Share
capital
and share Own shares Hedging Translation Other Retained
premium reserve 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 - - - - - 4,203 4,203
Share options exercised - - - - - 19 19
Dividends paid - - - - - (24,333) (24,333)
Issue of share capital 56,432 - - - 261,831 - 318,263
Transfer of shares
on vesting of share
options - 269 - - - - 269
Deferred tax on share
based payments recognised
in equity - - - - - (1,125) (1,125)
Total comprehensive
income - - 654 2,316 9 7,676 10,655
---------------------------- ----------- ----------- --------- ------------ ---------- ---------- ---------
Total equity at 1
May 2020 236,556 (3,090) (149) (2,509) 330,477 310,282 871,567
---------------------------- ----------- ----------- --------- ------------ ---------- ---------- ---------
Share options fair
value charge - - - - - 2,518 2,518
Share options exercised - - - - - (1,703) (1,703)
Dividends paid - - - - - (24,928) (24,928)
Net purchase of shares - (5,073) - - - - (5,073)
Transfer of shares
on vesting of share
options - 1,703 - - - - 1,703
Deferred tax on share
based payments recognised
in equity - - - - - 12 12
Total comprehensive
income (expense) - - 149 (1,681) (1) 65,566 64,033
---------------------------- ----------- ----------- --------- ------------ ---------- ---------- ---------
Total equity at 30
April 2021 236,556 (6,460) - (4,190) 330,476 351,747 908,129
---------------------------- ----------- ----------- --------- ------------ ---------- ---------- ---------
Other reserves comprise the other reserve, capital redemption
reserve, revaluation reserve and merger reserve.
NOTES TO THE ACCOUNTS
FOR THE YEARED 30 APRIL 2021
1. SEGMENTAL ANALYSIS
Northgate Northgate
UK&I Spain Redde Corporate Eliminations Total
2021 2021 2021 2021 2021 2021
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Revenue: hire of
vehicles 310,066 205,500 - - - 515,566
Revenue: sale of
vehicles 161,417 68,392 - - - 229,809
Revenue: claims
and services - - 364,124 - - 364,124
------------------------ ---------- ---------- -------- ---------- ------------- ----------
External revenue 471,483 273,892 364,124 - - 1,109,499
Intersegment revenue 1,530 - 7,604 - (9,134) -
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Total revenue 473,013 273,892 371,728 (9,134) 1,109,499
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Timing of revenue
recognition:
At a point in time 161,417 68,392 140,266 - - 370,075
Over time 310,066 205,500 223,858 - - 739,424
------------------------ ---------- ---------- -------- ---------- ------------- ----------
External revenue 471,483 273,892 364,124 - - 1,109,499
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Underlying operating
profit (loss) 76,800 33,700 3,358 (8,406) - 105,452
Income from associates - - 4,364 - - 4,364
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Underlying EBIT* 76,800 33,700 7,722 (8,406) - 109,816
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Exceptional items
(Note 6) (8,017)
Amortisation on
acquired intangible
assets (19,513)
Gain on bargain
purchase 1,489
------------------------ ---------- ---------- -------- ---------- ------------- ----------
EBIT 83,775
Interest income 164
Finance costs (16,760)
Profit before taxation 67,179
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Northgate
NorthgateUK&I Spain Redde Corporate Eliminations Total
2020 2020 2020 2020 2020 2020
GBP000 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
-------------------------- -------------- ---------- -------- ---------- ------------- ---------
External revenue 451,046 260,906 67,397 - - 779,349
Intersegment revenue 60 - - - (60) -
-------------------------- -------------- ---------- -------- ---------- ------------- ---------
Total revenue 451,106 260,906 67,397 - (60) 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
-------------------------- -------------- ---------- -------- ---------- ------------- ---------
External revenue 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 6) (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 (566)
Profit before taxation 13,479
-------------------------- -------------- ---------- -------- ---------- ------------- ---------
*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.
2. EARNINGS PER SHARE
Underlying Statutory Underlying Statutory
2021 2021 2020 2020
GBP000 GBP000 GBP000 GBP000
----------------------------------------- ------------ ------------ ------------ ------------
Basic and diluted earnings per
share
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 for the year attributable
to the owners of the Parent Company 76,230 65,566 47,519 7,676
----------------------------------------- ------------ ------------ ------------ ------------
Number of shares
Weighted average number of Ordinary
shares for the purposes of basic
earnings per share 246,091,423 246,091,423 154,509,197 154,509,197
Effect of dilutive potential Ordinary
shares: - share options 4,081,514 4,081,514 1,048,391 1,048,391
----------------------------------------- ------------ ------------ ------------ ------------
Weighted average number of Ordinary
shares for the purposes of diluted
earnings per share 250,172,937 250,172,937 155,557,588 155,557,588
----------------------------------------- ------------ ------------ ------------ ------------
Basic earnings per share 31.0p 26.6p 30.8p 5.0p
----------------------------------------- ------------ ------------ ------------ ------------
Diluted earnings per share 30.5p 26.2p 30.5p 4.9p
----------------------------------------- ------------ ------------ ------------ ------------
3. DIVIDS
Dividends paid in the year were GBP24,928,000 (2020 -
GBP24,333,000).
An interim dividend of 3.4p per Ordinary share was paid in
January 2021 (2020: 6.3p). The Directors propose a final dividend
for the year ended 30 April 2021 of 12.0p per Ordinary share (2020:
6.8p) which is subject to approval at the annual general meeting
and has not been included as a liability as at 30 April 2021. Based
upon the shares in issue at 30 April 2021, this equates to a final
dividend payment of GBP29.5m (2020: GBP16.7m). No dividends have
been paid between 30 April 2021 and the date of signing the
financial statements.
4. NOTES TO THE CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2021
2021 2020
Net cash generated from operations GBP000 GBP000
---------------------------------------------------------------------------------------------- --------- ---------
Operating profit 77,922 28,916
Adjustments for:
Depreciation of property, plant and equipment 191,609 208,075
Net impairment of property, plant and equipment 3,037 1,304
Amortisation of intangible assets 20,198 3,987
Impairment of intangible assets - 14,910
Loss on disposal of vehicles for credit hire and other property, plant and equipment 195 135
Loss on disposal of intangible assets 31 9
Share options fair value charge 2,518 4,203
---------------------------------------------------------------------------------------------- --------- ---------
Operating cash flows before movements in working capital 295,510 261,539
Increase in non-vehicle inventories (1,407) (36)
(Increase) decrease in receivables (69) 4,250
Decrease in payables (9,011) (1,355)
Decrease in provisions (4,577) (39)
---------------------------------------------------------------------------------------------- --------- ---------
Cash generated from operations 280,446 264,359
Income taxes paid, net (12,678) (10,165)
Interest paid (14,945) (14,774)
---------------------------------------------------------------------------------------------- --------- ---------
Net cash generated from operations before purchases of and proceeds from disposal of vehicles
for hire 252,823 239,420
Purchases of vehicles for hire (303,537) (362,011)
Proceeds from disposals of vehicles for hire 188,592 156,290
---------------------------------------------------------------------------------------------- --------- ---------
Net cash generated from operations 137,878 33,699
---------------------------------------------------------------------------------------------- --------- ---------
5. ANALYSIS OF CONSOLIDATED NET DEBT
---------------------------------------------------------------------------------------------- --------- ---------
2021 2020
GBP000 GBP000
---------------------------------------------------------------------------------------------- --------- ---------
Cash and bank balances (11,169) (67,843)
Bank overdrafts 4,348 51,063
Bank loans 320,991 400,847
Loan notes 86,817 86,868
Leases arising following adoption of IFRS 16 92,469 62,999
Leases arising under HP obligations 35,999 40,953
Cumulative preference shares 500 500
Confirming facilities 388 479
---------------------------------------------------------------------------------------------- --------- ---------
Consolidated net debt 530,343 575,866
---------------------------------------------------------------------------------------------- --------- ---------
6. EXCEPTIONAL ITEMS
Details of exceptional items recognised in the income statement
are as follows:
2021 2020
GBP000 GBP000
----------------------------------------------------------------- --------- ---------
Impairment of property, plant and equipment 4,341 1,304
Reversal of previous impairment of property, plant and equipment (1,304) -
Other costs 4,980 25,561
Intangible impairment - 14,910
----------------------------------------------------------------- --------- ---------
Exceptional administrative expenses 8,017 41,775
Restructuring expenses 2,754 8,609
Acquisition expenses 1,088 18,256
FMG RS set up and integration costs 5,728 -
Legal settlement (1,553) -
Intangible impairment - 14,910
----------------------------------------------------------------- --------- ---------
Exceptional administrative expenses 8,017 41,775
Refinancing expenses - 566
----------------------------------------------------------------- --------- ---------
Exceptional finance costs - 566
Gain on bargain purchase (Note 4) (1,489) -
----------------------------------------------------------------- --------- ---------
Total pre-tax exceptional items 6,528 42,341
Tax credits relating to exceptional items (1,286) (4,661)
----------------------------------------------------------------- --------- ---------
Details of exceptional items recognised in the income statement
are as follows:
Restructuring expenses
The Group incurred total exceptional restructuring costs of
GBP2,754,000 (2020: GBP8,609,000) of which GBP2,151,000 arose in
Redde (2020: GBPnil), a GBP169,000 credit in Northgate UK&I
(2020: GBP4,701,000 charge), GBP772,000 in Northgate Spain (2020:
GBP1,531,000) and GBPnil in Corporate (2020: GBP2,377,000). 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.
The restructuring expenses incurred during the year related to
costs associated with reduction in headcount totalling GBP2,734,000
and net costs incurred in relation to the closure and
reorganisation of sites of GBP20,000, including net impairments of
property, plant and equipment
Net impairment of property
Included within the GBP20,000 of costs in relation to the
closure and reorganisation of sites, are expenses incurred by the
Group during the year of GBP1,560,000, provisions release credits
in relation to properties of GBP4,577,000, impairments of property
plant and equipment of GBP4,341,000 and credits for the reversal of
previous impairments of GBP1,304,000.
Acquisition expenses
The Group incurred acquisition expenses of GBP1,088,000 (2020:
GBP18,256,000). These related to professional services expenses
directly attributable to the acquisition of the trade and assets of
Nationwide of GBP1,078,000 (2020: GBPnil) and GBP10,000 (2020:
GBP18,256,000) in relation to the Merger.
FMGRS set up and integration costs
The Group incurred costs of GBP5,728,000 (2020: GBPnil) in
relation to the set up of FMG RS and integration of the business,
including redundancies.
Legal settlement
During the year the Group settled a legal dispute in relation
with a provider of certain IT and software development services to
the Group. This resulted in a credit of GBP1,553,000 (2020: GBPnil)
relating to expected costs no longer payable.
Intangible impairment
During the prior year the Group impaired certain IT and software
development services in relation to the Northgate IT system in
development. The Group incurred exceptional costs in relation to
this impairment of GBP14,910,000.
Refinancing expenses
During the prior year the Group incurred exceptional finance
costs of GBP566,000 relating to debt partially extinguished as part
of the refinancing of Group bank facilities.
7. EVENTS AFTER THE REPORTING PERIOD
On 11 June 2021 the Group purchased approximately 2,000
vehicles, most with existing customer contracts, from a Scottish
vehicle rental business, for an initial consideration of
GBP25m.
8. BASIS OF PREPARATION
The results for the year ended 30 April 2021, including
comparative financial information, have been prepared in accordance
with International Accounting Standards in conformity with the
requirements of the Companies Act 2006 (IFRS) and the applicable
legal requirements of the Companies Act 2006. In addition to
complying with international accounting standards in conformity
with the requirements of the Companies Act 2006, the financial
statements also comply with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
Redde Northgate plc ("the Company") has adopted all IFRS in
issue and effective for the year.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of IFRS, this announcement does not itself
contain sufficient information to comply with IFRS. The Company
expects to publish full financial statements that comply with IFRS
in July 2021.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 April 2021 or
2020 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies and those
for 2021 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts: their
reports were unqualified, did not draw attention to any matters by
way of emphasis and did not contain statements under s498 (2) or
(3) of the Companies Act 2006.
The financial information presented in respect of the year ended
30 April 2021 has been prepared on a basis consistent with that
presented in the annual report for the year ended 30 April
2020.
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, the Directors
have concluded that it is appropriate to prepare the Group
financial statements on a going concern basis as explained further
below.
Assessment of prospects
The successful integration of the group following the Merger and
the acquisition of Nationwide in the year has allowed the Group to
further increase its service offering, rationalise the cost based
and provide a platform for future growth.
The Combined Group is well established within the markets it
operates and has demonstrated resilience through the COVID-19
period as explained further below and also throughout previous
economic cycles.
The Group's prospects are assessed through its strategic
planning process. This process includes an annual review of the
ongoing strategic plan, led by the CEO, together with the
involvement of business functions in all territories. The Board
engages closely with executive management throughout this process
and challenges delivery of the strategic plan during regular Board
meetings. Part of the Board's role is to challenge the plan to
ensure it is robust and makes due consideration of the appropriate
external environment.
Impact of COVID-19
The COVID-19 pandemic has created a great deal of disruption
across all areas of the Group. This has required changes in working
practices in order to provide a safe working environment for
employees, customers and suppliers.
Volumes of insurance claims handled has remained below pre-COVID
levels as a result of reduced traffic volumes on the roads.
However, the cost base of the business has been addressed in order
to minimise the impact of this reduction in trading resulting.
Overall vehicles on hire numbers have increased throughout the
year as our customers have accessed our products in order to
provide support for essential supplies or to restart their
businesses following disruptions from lockdowns. Temporary closures
of vehicle sales sites have been mitigated through an increase in
online sales and a short term boost to used vehicle prices has
supported profitability and cash generation.
Significant actions were also taken in order to conserve cash
and manage the liquidity of the Group throughout this period. This
included but was not limited to deferral of capital expenditure and
re-negotiation of certain payment terms with creditors. Overall,
this resulted in an increase of headroom against banking facilities
of GBP71m from GBP234m at 30 April 2020 to GBP305m at April 2021.
Headroom against related debt covenants also remained adequate as
outlined on page 27 which included GBP64m 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.
The three year strategic plan (the Plan), has been updated
during the year, taking into account the impact of COVID-19
experienced to date and the expected impact throughout FY2022, with
financial forecasts also prepared for the three year period to 30
April 2024. The first year of the financial forecast forms the
Group's operating budget which has therefore been risk adjusted for
COVID-19 and will be continuously reviewed throughout the financial
year. Subsequent years are forecast from the base year, based on
historical experience and expected measures within the overall
strategic plan.
Assessment of going concern
The strategy and associated principal risks underpin the Group's
three year strategic planning process, 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 also encompasses the projected cash flows, dividend
cover assuming operation of stated policy 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 banking facilities at 30 April 2021 was GBP305m.
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.
As outlined above, the Plan takes into account the impact of
COVID-19 experienced to date and the expected impact on subsequent
trading. The Plan was separately stress tested for a slower post
COVID-19 recovery in insurance claims volumes than expected, a
reduction in vehicles on hire and a larger reduction in residual
values and a further slowdown in the collection of historical
insurance claims. After taking into account the above variables,
sufficient headroom remained against available debt facilities and
the covenants attached to those facilities.
In addition to the above scenario, the Directors have further
considered the resilience of the Group, considering its current
position and the principal risks facing the business. The Plan was
stress tested for severe but reasonable scenarios over the planned
period as follows:
-- No further growth in vehicles on hire with rental customers;
-- No further increase in pricing of rental hire rates;
-- A 2% increase in the purchase cost of vehicles and other
operating expenses not passed on to customers;
-- A 12.5% reduction in the residual value of used vehicles;
-- A 25% volume reduction in insurance claims and services
revenue in aggregate, either through lower demand or through ending
the commercial relationship with an group of key insurance
partners; and
-- A slow down of 50 days in the time taken to settle outstanding claims with insurers.
The above scenarios, 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 out of the vehicle
fleet, both of which would generate cash 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 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.
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END
FR UPURUMUPGPPQ
(END) Dow Jones Newswires
July 07, 2021 02:00 ET (06:00 GMT)
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