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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