TIDMREDD
RNS Number : 4377R
Redde Northgate PLC
06 July 2022
6 July 2022
REDDE NORTHGATE PLC
("Redde Northgate" or the "Group" or the "Company")
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEARED 30 APRIL
2022
Strong margins and new business wins support 62% increase in
underlying PBT
Redde Northgate (LSE:REDD), the leading integrated mobility
solutions platform providing services across the vehicle lifecycle,
is pleased to announce its full year results for the year ended 30
April 2022.
Full Year results Reported Underlying(1)
Year ended 30 April 2022 2021 Change 2022 2021 Change
GBPm GBPm % GBPm GBPm %
------------------------ --------- --------- -------- --------- ------ -------
Revenue 1,243.6 1,109.5 12% 1,093.6 879.7 24%
EBIT 150.8 83.8 80% 167.9 109.8 53%
Profit before Tax 132.7 67.2 98% 151.3 93.2 62%
Earnings per Share 41.3p 26.6p 55% 50.8p 31.0p 64%
------------------------ --------- --------- -------- --------- ------ -------
(1) excludes vehicle sales revenue, exceptional items and amortisation
of acquired intangible assets. See GAAP reconciliation.
Other measures GBPm GBPm %
-------------------------------------------------------- --------- ------ -------
Net debt 582.5 530.3 9.8%
Group net debt (excl. IFRS 16 leases) (2) 452.1 437.9 3.2%
Steady state cash generation 216.4 140.1 54%
Free cash flow 12.3 97.8 (87%)
ROCE 13.9% 9.5% 4.4ppt
Dividend per Share 21.0p 15.4p 36%
-------------------------------------------------------- --------- ------ -------
(2) excludes leases that would not have been recognised on
the balance sheet prior to adoption of IFRS 16.
Key financial highlights
-- Group revenue including vehicle sales grew 12%, reflecting
strong customer demand, recovery post-COVID in business volumes and
traffic activity, and lower de-fleeting disposal activity
-- Underlying revenue (excluding vehicle sales) grew 24%, due to
increased customer activity across all business units supporting
both volume growth and price improvements, plus new customer
wins
-- EBIT rose 80% through higher revenues and margin improvement,
helped by underlying strength in rental margins, post-COVID-19
activity recovery, realisation of merger synergies and leaner cost
base
-- Underlying PBT up 62% to GBP151.3m supported by margin growth and disposal profits
-- Steady state cash generation improved 54% to GBP216.4m; free
cashflow lower, with an inflow of GBP12.3m (FY2021: GBP97.8m) due
to incremental fleet investment to meet demand
-- ROCE increased 4.4ppt to 13.9% due to higher profitability in
the Group, strong disposal values and a leaner cost base
-- Refinancing in Nov 2021: GBP792m of largely fixed-rate
funding facilities and reduced cost of borrowing
-- Group net debt, excluding IFRS 16 leases, increased to
GBP452.1m; 1.4x net debt to EBITDA (FY2021: 1.5x) well within
target leverage range of 1.0x to 2.0x
-- Final dividend of 15.0p, bringing total dividend to 21.0p
(FY2021: 15.4p) reflecting the Board's confidence in Group
outlook
-- GBP30m share buyback programme underway since March, GBP20.6m purchased by 30 June 2022
Business highlights
-- Progress on Group strategy roadmap delivering increased
platform scale and full-service offering, enhancing appeal to a
broadening blue-chip customer base
-- Significant new multi-year contract wins, including Tesco,
Admiral in H1 and Acromas Insurance (Saga) in H2, reflecting
strength of new platform offering, revenue contributions
principally from FY2023
-- Internal progress: launch of new Group purpose & values; new employee 'Benefits HUB'
-- FY2022 acquisitions: 2,000 vehicle rental fleet (Jun 2021),
ChargedEV (Sep 2021) and GRG Resources, emergency services
specialist (Mar 2022) providing breadth and scale of product
capability
-- Enhanced EV infrastructure and services capability; launch of
Drive to Zero customer solution; EVs and hybrids on our fleet
reflect profile of UK car parc
-- High rental demand and reduced vehicle supply positively
impacted both residual values and lengthened hire durations; macro
supply chain challenges expected to continue throughout FY2023
-- Increased branch co-locations driving revenue and cost
synergies; continued integration of FMG RS
-- Investment programme of site enhancements underway across
Group, including EV charging, LED lighting, waste-water recycling
and solar panels; IT systems consolidation/upgrade planned for H1
FY2023
Depreciation rate change (from FY2023)
-- Carrying book value of earlier purchased cohorts of fleet
vehicles have depreciated below current strong resale values;
action taken to stop or reduce depreciation from FY2023 on these
cohorts until disposal
-- No impact on FY2022 or future underlying results. This change
will re-phase statutory PBT until vehicles are sold. Non-cash
impact only and no overall income change over the remaining life of
vehicles
Martin Ward, CEO of Redde Northgate, commented:
"We began FY2022 with good momentum and this continued through
the period with strong performance across the business and our key
financial metrics were strongly positive for the year. Rental
margins improved in both Northgate UK&I and Northgate Spain,
and the Redde business contribution grew substantially as it found
a new normal for volumes at approximately 90% of pre-COVID-19
levels together with support from new business wins.
"We have made good progress with our ESG strategy and its
reporting and have an important role to play with our expertise and
fleet in assisting our customers meet their own carbon reduction
ambitions as well as delivering our own net zero strategy.
"Our unique mobility solutions platform is now yielding
significant new multi-year business wins which I am confident will
continue. The Group has already managed a number of macro-economic
challenges since the Merger and with our enhanced offering we are
well placed to deliver on our strategy and navigate the current
economic backdrop."
Outlook
The business has traded well across a challenging and volatile
economic backdrop in recent years, supported by the structural
growth in outsourcing by an increasingly broad customer base. We
are enjoying the benefit of an enhanced mobility solutions platform
and continue to proactively manage inflation, resource availability
and supply chain constraints.
Demand remains high for the Group's rental offering and as a
result, the business expects to retain more of its van fleet this
year whilst limiting disposals, with the car fleet growing in line
with the business strategy.
The new financial year has started well and the business is well
positioned in its addressable markets. Further revenue benefits are
expected from new long term contract wins already secured but yet
to commence. While the Board is mindful of the economic uncertainty
it remains confident that it has the right strategy to deliver long
term sustainable value.
Analyst Briefing
A hybrid presentation for sell-side analysts and institutional
investors will be held at 9.30am today, 6 July 2022. If you are
interested in attending, please email Buchanan on
reddenorthgate@buchanan.uk.com to request the joining details. This
presentation will also be made available via a link on the
Company's website www.reddenorthgate.com .
For further information contact:
Ross Hawley, Head of Investor Relations +44 (0) 204 466 7090
Buchanan
David Rydell/Jamie Hooper/Hannah Ratcliff/ Verity Parker +44 (0)
207 466 5000
Notes to Editors:
Redde Northgate is the leading integrated mobility solutions
platform providing services across the vehicle lifecycle. The
Company offers integrated mobility solutions to businesses, fleet
operators, insurers, OEMs and other customers across the following
key areas: vehicle rental, vehicle data, accident management,
vehicle repairs, fleet management, service and maintenance, vehicle
ancillary services and vehicle sales.
The Company's core purpose is to keep its customers mobile,
whether through meeting their regular mobility needs or by
servicing and supporting them when unforeseen events occur. With
its considerable scale and reach, Redde Northgate's mission is to
offer a market-leading customer proposition and drive enhanced
returns for shareholders by creating value through sustainable
compounding growth. The Group aims to achieve this through the
delivery of its strategic framework of Focus, Drive and
Broaden.
Redde Northgate services its customers through a network and
diversified fleet of over 126,000 owned and leased vehicles,
supporting over 600,000 managed vehicles, with around 175 branches
across the UK, Ireland and Spain and a specialist team of over
6,700 employees.
Further information regarding Redde Northgate plc can be found
on the Company's website:
www.reddenorthgate.com
GAAP reconciliation, use of alternative performance measures 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 year without the effects of one-off or
non-operational items. Underlying measures exclude intangible
amortisation from acquisitions and certain one-off items such as
those arising from restructuring activities and the tax impact
thereon. 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 financial
performance is outlined below. A further explanation of alternative
performance measures and a glossary of terms used in this document
are outlined below the Financial Review.
Appendix: GAAP reconciliation tables
Income statement reconciliation
Statutory Adjustments Underlying Statutory Adjustments Underlying
Year ended 30 April Footnote 2022 2022 2022 2021 2021 2021
(below) GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------- ---------- ------------ ----------- ---------- ------------ -----------
Revenue (a) 1,243.6 (149.9) 1,093.6 1,109.5 (229.8) 879.7
Cost of sales (a) (897.3) 149.9 (747.4) (857.0) 229.8 (627.2)
---------- ------------ ----------- ---------- ------------ -----------
Gross profit 346.2 - 364.2 252.5 - 252.5
Administrative expenses (b) (199.7) 17.5 (182.2) (174.6) 27.5 (147.1)
---------- ------------ ----------- ---------- ------------ -----------
Operating profit 146.5 17.5 164.0 77.9 27.5 105.5
Income from associates 3.9 - 3.9 4.4 - 4.4
Gain on bargain
purchase (c) 0.4 (0.4) - 1.5 (1.5) -
---------- ------------ ----------- ---------- ------------ -----------
EBIT 150.8 17.1 167.9 83.8 26.0 109.8
Interest income - - - 0.2 - 0.2
Finance costs (d) (18.1) 1.5 (16.6) (16.8) - (16.8)
---------- ------------ ----------- ---------- ------------ -----------
Profit before taxation 132.7 18.6 151.3 67.2 26.0 93.2
Taxation (e) (31.1) 4.9 (26.3) (1.6) (15.4) (17.0)
---------- ------------ ----------- ---------- ------------ -----------
Profit for the
year 101.5 23.5 125.0 65.6 10.6 76.2
---------- ------------ ----------- ---------- ------------ -----------
Shares for EPS calculation 246.0m 246.0m 246.1m 246.1m
Basic EPS 41.3p 50.8p 26.6p 31.0p
---------------------------------------- ---------- ------------ ----------- ---------- ------------ -----------
Footnotes
Adjustments comprise:
Revenue: sale of
vehicles (a) (149.9) (229.8)
Cost of sales: revenue
sale of vehicles
net down (a) 149.9 229.8
------------ ------------
Gross profit - -
Exceptional items
(Note 6) (2.3) 8.0
Amortisation of
acquired intangible
assets (Note 6) 19.8 19.5
------------ ------------
Administrative expenses (b) 17.5 27.5
Gain on bargain
purchase (c) (0.4) (1.5)
------------ ------------
Adjustments to
EBIT 17.1 26.0
Exceptional finance
costs (Note 6) (d) 1.5 -
------------ ------------
Adjustments to
PBT 18.6 26.0
Tax on exceptional
items (Note 6) 0.2 (1.3)
Tax on brand royalty
charges and amortisation
of acquired intangible
assets and tax rate
change on acquired
intangible assets 4.7 (4.1)
Tax credit in relation
to the release of
uncertain tax provisions - (10.0)
------------ ------------
Tax adjustments (e) 4.9 (15.4)
------------ ------------
Adjustments to
profit 23.5 10.6
------------ ------------
OPERATING REVIEW
Group
The forming of the Group's unique mobility solutions platform is
bringing significant value to the combined Group through both
revenue and cost synergies, and the development of a large-scale
platform offering a broad range of services to an increasingly
diverse range of blue-chip customers.
Focus, Drive and Broaden strategic progress
The business has focused on continued delivery against the three
pillars of its strategy and proactive management of complex
macro-economic dynamics impacting all elements of the automotive
supply chain. Despite significant headwinds, particularly in
vehicle and parts supply, the business has made substantial
progress in its strategic goals, and reinforced its position as the
provider of choice for a growing number of customers looking for a
range of mobility solutions, fleet services and accident
management.
FOCUS: Operational progress
The business successfully achieved annualised savings of more
than double the original merger synergies GBP10m target and by June
2021, significantly earlier than forecast. This reflected the
immense efforts within the business to deliver operational
efficiencies and improvements; including the integration of both
services and branches within the combined Group. Over two thirds of
Auxillis branches now co-locate with Northgate operations, bringing
benefits from greater operational flexibility, with more planned
integrations between group businesses as existing leases
expire.
The business is now also operating with a greater number of
centralised functions, including a single fleet management team in
each territory which brings both improved buying power and greater
flexibility within the fleet. This includes the ability to manage
demand spikes through the network more efficiently, increased
utilisation rates and faster responsiveness to customer needs. As
part of this improvement programme, we are upgrading a number of
technology solutions in the coming year, which will deliver a
common operating platform and a greater ability to digitalise more
of our operating processes. The online eAuction platforms for Van
Monster in the UK and Northgate Ocasión in Spain have transformed
the vehicle disposal process, rapidly becoming major
e-marketplaces; in the UK accounting for over 60% of Northgate vans
disposed of in FY2022.
DRIVE: Customer focus
A core rationale for the Merger was the development of a unique
mobility solutions platform, able to capitalise on key macro trends
such as the move to greater outsourcing, as businesses seek to move
away from ownership to utilisation models for their mobility needs,
and a preference for managed solutions from significant market
providers. Within the accident management and repair sector,
national coverage and in-house repair capabilities are significant
selling points as insurers look for improved cost management,
responsiveness and customer experience.
In the first half of the year, the platform capabilities enabled
the Group to sign contracts with three major brands including Tesco
and Admiral (for additional services). These were joined in the
second half by a contract with Acromas Insurance which will
incorporate policies from AA, RAC and Saga. Winning these contracts
was a direct result of the Group's increased platform scale and
full-service offering and will generate significant value from
FY2023 onwards, with contracts won in H2 adding a further estimated
GBP100m of incremental lifetime contract revenues in addition to
the GBP200m previously announced.
The benefits of scale and enhanced service offering has also
been apparent across the rental businesses, with managers of large
corporate fleets valuing our geographic coverage and in-house
capabilities and expertise. A third of our customers with fleets
above 25 vehicles now take more than one service from us,
representing around half of our UK vehicle fleet, typically
supported from multiple locations. In Spain, our significant market
presence and unique offering of both rental and in-house service
capability is a powerful platform from which to drive incremental
B2B and B2C offerings, including higher margin digital
channels.
Customers greatly value our multi-site, multi-service expertise
in many aspects of fleet management, and increasingly with a focus
on long term planning for the move away from ICE vehicles. Our
workshop technicians in the UK are certified to IMI Level 3 to work
on EVs, and a programme of installing charging stations is being
rolled out across our locations. Customer satisfaction is the
cornerstone of our business success and the 'excellent'
satisfaction scores achieved across our businesses from Trustpilot
alongside 2022 awards including 'Rental Company of the Year' (Fleet
News), and 'Best Fleet Management' & 'Best Long-Term Rental'
(Business Van), reflects our focus on delivering value-added
mobility solutions across our customer base.
BROADEN: Acquisitions
Growth through acquisition is an important part of our overall
strategy, allowing us to expand our products, services, reach and
skillset to enhance and broaden our customer offering. We took a
significant strategic step in our EV transition through the
acquisition in July 2021 of ChargedEV, a specialist in the supply
and installation of EV charging equipment across the UK. This
enabled the Group to rapidly enhance its own EV capabilities and in
November 2021 we launched our Drive to Zero customer offering,
supporting customers with fleet consulting and other technical
services as they plan their transition away from ICE. For many
customers, vehicle range and charging infrastructure requirements
makes this a complex challenge and they look to us for analytics
and expert advice.
We continue to review a strong pipeline of bolt-on
opportunities, and will acquire businesses which will complement
and enhance our value-added service offering, or add vehicle and
customer assets at scale to the business. In FY2022, these included
the acquisition of a 2,000 vehicle fleet and customers from a
Scottish rental business; and of GRG Resources, the specialist call
handling and roadside services to 'blue light' customers.
The acquisition of the Nationwide repair business in the prior
year brought a significant in-house accident repair capability, now
with 65 body shops across the UK. Rebranded to FMG RS, the business
has been integrating the service offering which has significant
revenue synergy potential with other Group businesses. We are
continuing an investment programme, with a planned programme of
site improvements and further alignment of FMG RS with group
standards and policies.
Our People
The Group now has over 6,700 employees with some 175 service
locations. We have placed significant emphasis within the business
on enhancing our employee engagement and a shared understanding of
Group strategy. We launched a new set of values and clearly
communicated these, and the 74% engagement score for our annual
employee survey reflects the significant efforts we have made to
bring all businesses and people together, with strong progress on
key issues as well as opportunities for further improvement.
In the year we also enhanced our Human Resources capabilities
and technology to ensure our recruitment and retention is as
effective as possible in an industry which competes for
increasingly scarce skills. We have invested in additional
apprenticeship places and in our training academies, both technical
workshop and online learning. We launched a major new employee
benefit platform as well as significant well-being and mental
health support services. Together with our SAYE scheme to promote
the benefits of employee ownership, these efforts have helped build
a business which we truly believe offers its people a strong
culture and a great place to work.
EV transition & ESG strategy
Managing the transition away from ICE vehicles is a key
strategic task for the business, critical for ourselves and our
customers. We have multiple programmes underway to enhance our
capabilities and expertise in order to support customer transition
strategies, including our Drive to Zero programme launched in
November 2021. This included installing over 6,000 charging points
in the year. This transition also forms a key part of our net zero
planning, as Scope 3 emissions are estimated to account for over
95% of our total carbon footprint.
Across the business we have energy saving and recycling
programmes, and have enhanced our data gathering capabilities to
better understand the opportunities to reduce our footprint
further. We have progressed with our Group ESG strategy and will be
publishing our first sustainability report this summer, including
our TCFD roadmap. In FY2023 we intend to set net zero and broader
ESG targets.
Trading Performance
Revenue (excluding vehicle sales) was 24.3% higher than the
prior year. Northgate UK&I and Northgate Spain revenue
(excluding vehicle sales and including intersegment revenue) was
GBP346.6m (2021: GBP311.6m) and GBP220.6m (2021: GBP205.5m)
respectively. Redde revenue was GBP543.7m (2021: GBP371.7m)
reflecting recovery of volumes of accidents and incidents having
stabilised at around 90% of pre COVID-19 levels within Q4; but
included a contribution from only one of the new customer wins
announced in the year, which went live in January 2022.
Total Group revenue, including vehicle sales, was 12.1% higher.
Vehicle sales revenues were 34.8% lower reflecting the post
lockdown sale of a large number of FY2020 year end stock of
vehicles last year and the reduced volumes available this year due
to restrictions in new vehicle supply. The acquisition of 2,000
vehicles as part of an asset purchase early in the year helped with
vehicle supply, with purchases totalling 23,600 in the year
compared to 24,000 in the prior year. The leased fleet also
increased by 7,000 vehicles.
Total disposal profits for the year were GBP50.1m, 24.6% higher
than the prior year with the restriction in vehicle supply
continuing to support high residual values. These high residual
values are more than offsetting the lower volumes of vehicles being
disposed, which at 16,600 is 39.5 % lower than the prior year
(2021: 27,400). As a result, the fleet average age across the Group
increased by 2.8 months.
Within Northgate, the financial performance from both Northgate
UK&I and Northgate Spain has continued to improve, reflecting
the benefits of cost saving programmes, strong utilisation and
tight controls over customer pricing whilst a constrained supply
chain for new LCVs continues to operate. Northgate UK&I rental
margins improved to 15.3% (2021: 12.7%). Rental margins in
Northgate Spain have improved to 17.5% (2021: 15.0%). Redde
benefitted from volume recovery and greater activity across its
product offerings and a first full year profit contribution from
FMG RS; helping the business achieve a 4.5ppt improvement in EBIT
margin.
Underlying PBT of GBP151.3m (2021: GBP93.2m) reflects the EBIT
performance outlined above. Statutory EBIT of GBP150.8m and
statutory PBT of GBP132.7m were 80% and 98% higher than prior year
respectively.
Underlying EPS was 50.8p (2021: 31.0p), 63.9% higher than prior
year with an average share count of 246.0m (2021: 246.1m).
Statutory EPS was 41.3p (2021: 26.6p).
Free cashflow of GBP12.3m was lower than the prior year (2021:
GBP97.8m) as capex was significantly reduced in 2021 during the
COVID-19 period, whereas in the current year there has been
GBP108.6m investment in the fleet (growth capex) to meet rental
demand.
Group ROCE was 13.9% compared to 9.5% in the prior year,
reflecting the improved performance and including the impact of
disposal profits.
Debt & refinancing
In November 2021, the Group completed a comprehensive
refinancing of its debt arrangements, to optimise its debt
portfolio. The refinancing resulted in a c. 50bps reduction in the
drawn interest rate as at the date of the refinancing to 1.5%; a
significant lengthening of our maturities and a greater
diversification of our sources of debt. This creates flexibility
and a solid financing platform to allow the Group to invest in the
business as well as take advantage of opportunities in the market
as they arise for inorganic growth. At the year end 76% of the
Group's borrowings were held as fixed rate instruments limiting
exposure to movements in future interest rates.
The Group has continued to develop contract hire as a source of
fleet funding across the UK business. Whilst the successful
refinancing in November 2021 reduced the Group's cost of borrowing
making it harder for contract hire to compete on interest rate
cost, total credit lines of GBP155m have been utilised as at 30
April 2022 (2021: GBP104m) funding 10,800 vehicles (2021:
5,500).
Net debt closed at GBP582.5m including IFRS 16, or GBP452.1m
excluding IFRS 16, resulting in headroom to bank facilities of
GBP382m at the year end. Leverage was 1.4x, lower than the prior
year (1.5x) reflecting the benefit of the enlarged Group and
improvement in profitability.
Dividend and share buyback
In light of the strong trading performance and the Board's
confidence in the Group's outlook, the Board has declared a final
dividend of 15.0p making a total of 21.0p for the full year,
(FY2021: Final 12.0p, total for year 15.4p), to be paid on 30
September 2022 to shareholders on the register on 2 September
2022.
The Group announced a share buyback programme in March 2022 with
a maximum aggregate consideration of GBP30m or 24 million shares.
As at the end of the financial year 1.83 million shares had been
repurchased at a total cost of GBP7.5m (end June: GBP20.6m cost),
with the repurchased shares being held in treasury. The programme
is expected to be completed by September 2022.
Divisional Commentary: Northgate UK&I
Year ended 30 April 2022 2021 Change
KPI ('000) ('000) %
---------------------------- ------- ------- --------
Average VOH 50.2 47.3 6.1%
Closing VOH 49.2 49.2 -
Average utilisation % 92% 92% 0ppt
Year ended 30 April 2022 2021 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------- ------- ------- --------
Revenue - Vehicle hire
[1] 346.6 311.6 11.2%
Revenue - Vehicle sales 111.8 161.4 (30.7%)
Total revenue 458.4 473.0 (3.1%)
Rental profit 53.1 39.5 34.3%
Rental margin % 15.3% 12.7% 2.6ppt
Disposal profit 44.8 37.3 20.3%
EBIT 98.0 76.8 27.5%
EBIT margin % [2] 21.4% 16.2% 5.2ppt
ROCE % 17.5% 13.4% 4.1ppt
---------------------------- ------- ------- --------
Northgate UK&I performance for the year reflected the
challenges faced across the industry through the scarce supply of
vehicles and other supply chain constraints. With restricted fleet
options, the business responded with a disciplined focus on
supporting its key fleet customer base, targeting higher value
industry sectors with long term growth prospects, as well as
addressing cost inflation through carefully managed and well
understood pricing increases.
Utilisation levels remained strong and the greater flexibility
afforded by a larger group network and footprint allowed for more
efficient fleet management, and ability to capitalise on
opportunities such as the 2,000 vehicle acquisition at the start of
the year from a Scottish rental business.
Vehicle supply constraints drove residual values higher and the
business made a conscious decision to extend out its fleet age in
many business segments, with quality returned vehicles retained in
order to support key customer needs. Although this brought with it
greater servicing requirements for some of the fleet, the demand
for vehicle rental helped to deliver strong margin growth. The year
end fleet size of 54,200 resulted from 34% lower vehicle disposals
at 10,400 but strong residual values meant disposal profits were
20% higher than the prior year.
Incremental revenue and margin opportunities also came through
growth in interest in value-added fleet products supporting
existing customers, particularly those with mid-sized fleets. This
included products such as telematics, accident management and a
range of driver compliance services, and increasingly the access to
the Group's in-house workshop and vehicle repair capabilities. We
saw nearly 30% growth in fleet customers taking additional
services, including a 2.5x increase in our accident management
services, now covering around 6,000 Northgate vehicles, reflecting
the growing interest in the broader services platform offered by
the business, and the value offered to customers, from telematics
and efficient fleet service scheduling to long term EV fleet
planning.
Financial Overview
Northgate UK&I performance has continued to improve year on
year with underlying EBIT of GBP98.0m (2021: GBP76.8m) driven by a
strong rental business performance with rental profits growing
GBP13.6m to GBP53.1m and rental margins improving 2.6ppt to 15.3%.
Disposal profits increased GBP7.5m to GBP44.8m reflecting continued
strong residual values.
Rental business
Hire revenue in the Northgate UK&I business increased 11.2%
compared to the prior year to GBP346.6m (2021: GBP311.6m), driven
by average VOH which increased 6.2%, and the impact of customer
support packages in the prior year which were GBP2.4m. Rate
increases were applied in FY2022 across our full range of rental
products and continued to be well planned, communicated and
executed.
Closing VOH was flat year on year at 49,200 (2021: 49,200) with
a greater focus on higher margin rentals driving better
returns.
Northgate UK&I's minimum term proposition accounted for 36%
(2021: 33%) of average VOH. The average term of these contracts is
approximately three years, providing both improved visibility of
future rental revenue and earnings, as well as lower transactional
costs.
Rental margin for the year was 15.3% compared to 12.7% in the
prior year. The business has benefited from the cost savings
arising from integration of the businesses post-merger alongside
tight control over rental pricing in the year.
The net impact of the growth in hire revenue and higher rental
margin was a 34.4% increase in rental profits to GBP53.1m (2021:
GBP39.5m).
Management of fleet and vehicle sales
The closing Northgate UK&I rental fleet was 54,200 compared
to 54,000 at year end FY2021. During the year 10,000 vehicles were
purchased (2021: 12,500) and 10,400 vehicles were de-fleeted (2021:
11,400). The leased fleet increased by 600 vehicles. The average
age of the fleet at the end of the year was 4.4 months higher than
at the end of FY2021 . This was due to managing the fleet to
mitigate impacts of the restricted market supply reducing
purchases.
A total of 10,400 vehicles were sold in Northgate UK&I
during the year, 34% lower than the prior year (2021: 15,700
vehicles). The lower number of vehicles sold reflects the fact that
the prior year period benefited from additional used vehicle stock
due to the impact of the COVID-19 lockdown at the end of FY2020 and
the restricted market supply of new vehicles in the year.
Disposal profits of GBP44.8m (2021: GBP37.3m) increased 20%
versus the prior year. The reduction in the number of vehicles sold
was offset by the significant increases in sales values resulting
in an 82% improvement in the average profit per unit (PPU) on
disposals to GBP4,300 (2021: GBP2,360).
EBIT and ROCE
Underlying EBIT of GBP98.0m grew 28% over the prior year (2021:
GBP76.8m) driven by both higher rental and disposal profits as
explained above.
The ROCE in Northgate UK&I was 17.5% (2021: 13.4%)
reflecting the increase in EBIT.
Capex and cash flow
Year ended 30 April 2022 2021 Change
GBPm GBPm GBPm
------------------------------ ------- ------- -------
Underlying EBITDA 180.6 164.2 16.4
Net replacement capex (64.9) (66.2) 1.3
Lease principal repayments (8.6) (5.4) (3.2)
------- ------- -------
Steady state cash generation 107.1 92.6 14.5
Growth capex (1.9) 18.8 (20.7)
------------------------------ ------- ------- -------
Underlying EBITDA increased 10.0% to GBP180.6m (2021:
GBP164.2m).
Net replacement capex [3] was GBP64.9m, GBP1.3m lower than the
prior year as a result of a reduction in vehicle sales as explained
above.
Steady state cash generation increased by GBP14.5m to GBP107.1m
(2021: GBP92.6m) reflecting the higher underlying EBITDA and the
lower net replacement capex. Growth capex(3) was GBP1.9m reflecting
that growth in the owned fleet was restricted due to the vehicle
supply constraints experienced throughout the year.
Divisional Commentary: Northgate Spain
Year ended 30 April 2022 2021 Change
KPI ('000) ('000) %
---------------------------- ------- ------- --------
Average VOH 50.4 46.0 9.7%
Closing VOH 52.2 46.8 11.4%
Average utilisation % 92% 92% 0ppt
Year ended 30 April 2022 2021 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
---------------------------- ------- ------- --------
Revenue - Vehicle hire 220.6 205.5 7.3%
Revenue - Vehicle sales 38.1 68.4 (44.2%)
Total revenue 258.7 273.9 (5.5%)
Rental profit 38.6 30.8 25.5%
Rental margin % 17.5% 15.0% 2.5ppt
Disposal profit 5.3 2.9 79.8%
EBIT 43.9 33.7 30.2%
EBIT margin % [4] 17.0% 12.3% 4.7ppt
ROCE % 10.0% 7.5% 2.5ppt
---------------------------- ------- ------- --------
Northgate Spain delivered a strong performance for the year,
with both recovery in demand post-COVID and supply chain
constraints requiring careful management of fleet opportunities.
The business was able to maintain its market share in flexible
contracts, and focused on targeting higher value customers and
pass-through of cost increases, reflecting its substantial market
position. Additionally, the business was able to extend its
flexi-hire offering to B2C customers, which represents a growth
platform for the future.
The fleet customer base is diverse, with the top 10 fleets
accounting for around 15% of revenues, and an average fleet size of
just below 1,000 vehicles, with the construction, support services
and retail sectors accounting for 64% of VOH.
Strong demand drove high vehicle utilisation and allowed for
careful management of pricing improvements across both minimum and
flex contract offerings. There was also a focus on reducing
exposure to lower margin opportunities and poorer credit customers.
Fleet totalled 57,600 at the end of the year, and a reduction of
disposal volumes enabled greater fleet rotation to high margin
opportunities and was supported by continued strength in residual
values.
Northgate Spain's in-house network of 28 workshops (with 13
incorporating bodyshops), is unique in the market and delivered
significant benefits to customers given the dislocation in the
automotive supply chain impacting service scheduling, together with
growing take up of value-added services. Alongside improvements to
workshop efficiency and productivity, and investment in energy
efficiency such as 750KW of solar panels, the business expanded its
Northgate Open Workshop offering, leveraging its existing assets,
and broadening the potential customer base to third parties.
Financial overview
Northgate Spain had a strong year with EBIT increasing GBP10.2m
or 30.2% driven by strong rental margins of 17.5% with carefully
managed rental pricing over the year.
Rental business
Hire revenue in the Northgate Spain business increased 7.3%
(12.8 % in local currency) compared to the prior year to GBP220.6m
(2021: GBP205.5m), driven by average VOH which increased 9.7%.
Closing VOH increased 11.4% to 52,200.
Northgate Spain's minimum term proposition accounted for around
35% (2021: 35%) of average VOH. The average term of these contracts
is approximately three years, providing both improved visibility of
future rental revenue and earnings.
The rental margin was 2.5ppt higher at 17.5% from pricing
increases, higher utilisation, fewer repairs and fewer bad debts
and with no COVID-19 customer support costs in the year (2021:
GBP1.0m).
The impact of the higher hire revenue and rental margin was a
25.5% increase in rental profits to GBP38.6m (2021: GBP30.8m).
Management of fleet and vehicle sales
The closing Northgate Spain rental fleet amounted to 57,600
compared to 51,800 vehicles at the prior year end. During the year
10,900 vehicles were purchased (2021: 11,500) and 5,100 vehicles
were de-fleeted (2021: 11,200 vehicles). The average age of the
fleet at the end of the year was 4.6 months higher than at the same
time last year. This was due to managing the fleet to mitigate
impacts of the restricted market supply reducing purchases.
A total of 6,100 vehicles were sold in Northgate Spain during
the year, 47.4% lower than prior year reflecting the restricted
market supply of new vehicles in the year.
Disposal profits of GBP5.3m (2021: GBP2.9m) increased 79.8%
including a GBP4.0m headwind relating to previous depreciation rate
changes. The reduction in the number of vehicles sold was offset by
the significant increases in sales values resulting in a more than
threefold improvement in the average profit per unit (PPU) on
disposals to GBP870 (2021: GBP 254).
EBIT and ROCE
Underlying EBIT of GBP43.9m increased 30.2% over the prior year
(2021: GBP33.7m) driven by both higher rental and disposal profits
as explained above. The ROCE in Northgate Spain was 10.0% (2021:
7.5%) reflecting the increase in EBIT.
Capex and cash flow
Year ended 30 April 2022 2021 Change
GBPm GBPm GBPm
------------------------------ ------- ------- -------
Underlying EBITDA 133.1 121.6 11.5
Net replacement capex (42.7) (73.8) 31.1
Lease principal repayments (2.5) (2.8) 0.3
------- ------- -------
Steady state cash generation 87.9 45.0 42.9
Growth capex (59.0) 0.3 (59.3)
------------------------------ ------- ------- -------
Underlying EBITDA increased GBP11.5m to GBP133.1m (2021:
GBP121.6m).
Net replacement capex [5] in the year was GBP42.7m, GBP31.1m
lower than the prior year, as a result of the ageing of the fleet
in response to the shortage of new vehicle supply .
Steady state cash generation increased by GBP42.9m to GBP87.9m
(2021: GBP45.0m) reflecting higher EBITDA and lower net replacement
capex in the year. Growth capex(5) was GBP59.0m reflecting
investment in the fleet to meet demand.
Divisional Commentary: Redde
Year ended 30 April 2022 2021 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
------------------------------- ------ ------ --------
Revenue - Claims and services
[6] 543.7 371.7 46.3%
Gross profit 127.7 70.2 81.8%
Gross margin % 23.5% 18.9% 4.6ppt
Operating profit 31.8 3.4 846.0%
Income from associates 3.9 4.4 (11.4%)
EBIT 35.6 7.7 361.5%
EBIT margin % [7] 6.6% 2.1% 4.5ppt
ROCE % 16.6% 6.0% 10.6ppt
------------------------------- ------ ------ --------
The Redde group of businesses delivered a strong divisional
performance, helped by a post-COVID recovery in traffic volumes,
growth in demand for our vehicle repair services, and supported by
multiple new insurer customer wins which are due to come on stream
in FY2023, including broader mobility solutions covering both
non-fault and first party hire.
Traffic levels grew throughout the year, returning to near
pre-pandemic levels by Q4, but structural changes in commuting
patterns suggest that activity levels have stabilised, with future
growth generated by additional volume, product and contract wins.
The Redde fleet totalled 14,500 vehicles at year end, of which over
11% were EV or hybrid cars.
The business added additional major contracts to the three
customer wins announced in the first half of the year, with Acromas
Insurance (Saga) signing a multi-year contract for vehicle repair
solutions to support their claims services and policyholders; these
contracts will increasingly contribute to group revenues through
FY2023. We have long term contract relationships with insurers who
in total represent over 50% of UK registered vehicles, equating to
over 20 million policy holders.
A growing number of customers utilised the benefits from the 65
in-house facilities of FMG Repair Services (FMG RS), which
undertook repairs on over 85,000 vehicles in the year, around 60%
of the total repairs managed by the Group. This capability is being
increasingly integrated into insurer and other solutions, with
customers attracted to the greater operational efficiency and
visibility it offers at a time when there has been significant
variability in workshop responsiveness from the independent sector
with considerable delays in parts supply.
Divisional investment in the year included enhancements to
body-shop and workshop capabilities, integration of further
Auxillis locations with Northgate teams, and a focus on employee
recruitment and training. This included growing the number of EV
qualified technicians and body shop team training to ensure
compliance with Group policies. The FMG RS training academy had 27
apprentices join during the year, and expects more in FY2023.
Financial overview
During the year volumes increased and settled around 90% of
pre-COVID 19 levels in H2. The full year EBIT has increased more
than fourfold over the prior year to GBP35.6m, reflecting the
operational gearing within the business.
Revenue and profit
Revenue for the year increased 46.3% to GBP543.7m (2021:
GBP371.7m). The main drivers of revenue, traffic volumes and
thereby road traffic accidents, have been increasing since April
2021 and have now reached approximately 90% of pre-COVID-19 levels
and have now stabilised around these levels. The hire length
extended in the year due to the impact of macro challenges in
supply chains for parts.
Gross margin of 23.5% has improved 4.6ppt (2021: 18.9%) as
volumes have increased and the utilisation of the fleet has
improved to more normal levels.
EBIT for the year increased 361.5% to GBP35.6m (2021: GBP7.7m).
The prior year included an operating loss in FMG RS and in this
year FMG RS contributed a small profit.
Management of fleet
The total fleet in Redde closed the year at 14,500 vehicles,
from 6,500 at 30 April 2021 with the latter reflecting a lower
fleet size due to the impact of COVID-19.
The average fleet age was 11 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 operates 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 2022 2021 Change
GBPm GBPm GBPm
------------------------------ ------- ------- -------
Underlying EBITDA 62.6 25.0 37.6
Net replacement capex 1.0 32.5 (31.5)
Lease principal repayments (32.6) (46.6) 14.0
------- ------- -------
Steady state cash generation 31.0 10.9 20.1
Growth capex (47.6) - (47.6)
Statutory debtor days 159 179 (20)
------------------------------ ------- ------- -------
Underlying EBITDA increased GBP37.6m to GBP62.6m (2021:
GBP25.0m) reflecting the recovery of traffic volumes.
Net replacement capex [8] was a net inflow of GBP1.0m in the
year (2021: GBP32.5m inflow) with the prior year being affected by
the disposal proceeds of vehicles funded by HP (leases) compared to
the timing of lease principal payments.
Steady state cash generation increased GBP20.1m to GBP31.0m
(2021: GBP10.9m).
Growth capex(8) increased to GBP47.6m (2021: GBPnil) reflecting
a growth in the fleet to meet the increase in demand for our
services and the change from hire purchase to ownership for a
proportion of the fleet.
Debtor days were 159 days at the end of the year, a decrease
from 179 days at the end of 2021. 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.
FINANCIAL REVIEW
Group Revenue and EBIT
Year ended 30 April 2022 2021 Change Change
GBPm GBPm GBPm %
------------------------------- -------- --------- ------- --------
Revenue - Vehicle hire 563.3 515.6 47.7 9.3%
Revenue - Vehicle sales 149.9 229.8 (79.9) (34.8%)
Revenue - Claims and services 530.3 364.1 166.2 45.6%
-------- --------- ------- --------
Total revenue 1,243.6 1,109.5 134.1 12.1%
Rental profit 91.7 70.3 21.5 30.5%
Disposal profit 50.1 40.2 9.9 24.6%
Claims and services profit 31.8 3.4 28.4 846.1%
Corporate costs (9.6) (8.4) (1.2) (14.3%)
-------- --------- ------- --------
Underlying operating profit 164.0 105.5 58.6 55.5%
Income from associates 3.9 4.4 (0.5) (11.4%)
-------- --------- ------- --------
Underlying EBIT 167.9 109.8 58.1 52.9%
Underlying EBIT margin 13.5% 9.9% 3.6ppt
Statutory EBIT 150.8 83.8 67.0 80.0%
------------------------------- -------- --------- ------- --------
Revenue
Total Group revenue, including vehicle sales, of GBP1,243.6m was
12.1% higher than prior year (13.4% at constant exchange rates).
Revenue excluding vehicle sales of GBP1,093.6m (2021: GBP879.7m)
was 24.3% higher (25.7% at constant exchange rates) than prior year
reflecting a 9.3% increase in vehicle hire revenue and a 45.6%
increase in claims and services revenue.
Hire revenues increased due to higher VOH and pricing across the
Group. Claims and services revenue has increased by 45.6%
reflecting a recovery in volumes coming out of the COVID-19
period.
Group vehicle sales revenue decreased by 34.8% due to a 39.5%
reduction in number of vehicles sold being partially offset by
stronger residual values.
EBIT
Underlying EBIT of GBP167.9m was 52.9% higher, reflecting strong
performance in rental, recovery in Redde post COVID-19 and ongoing
strength of residual values in vehicle disposals.
Statutory EBIT of GBP150.8m was 80.0% higher, reflecting higher
underlying EBIT as well as a GBP8.9m reduction in exceptional items
and amortisation of acquired intangibles. The GBP8.9m reduction in
these items included a reversal in the year of a previous
impairment and lower costs from restructuring and integration
activity which were incurred in the prior year following the Merger
and acquisition of Nationwide.
Group PBT and EPS
Year ended 30 April 2022 2021 Change Change
GBPm GBPm GBPm %
------------------------------- ------- ------- ------- ---------
Underlying EBIT 167.9 109.8 58.1 52.9%
Net underlying finance costs (16.6) (16.6) - 0.0%
------- ------- ------- ---------
Underlying Profit before Tax 151.3 93.2 58.1 62.3%
Statutory Profit before Tax 132.7 67.2 65.5 97.5%
Underlying effective tax rate 17.4% 18.2% (0.8ppt)
Underlying EPS (p) 50.8 31.0 19.8 64.0%
Statutory EPS (p) 41.3 26.6 14.7 54.9%
------------------------------- ------- ------- ------- ---------
Profit before taxation
Underlying PBT was 62.3% higher than prior year and statutory
PBT was 97.5% higher, reflecting the higher EBIT across the
Group.
Taxation
The Group's underlying tax charge was GBP26.3m (2021: GBP17.0m)
and the underlying effective tax rate was 17.4% (2021: 18.2%). The
statutory effective tax rate was 23.5% (2021: 2.4%), with the prior
year rate benefitting from a GBP10.0m exceptional release of
uncertain tax provisions following resolution of a previous tax
position.
Earnings per share
Underlying EPS of 50.8p was 19.8p higher than prior year,
reflecting increased profits in the year.
Statutory EPS of 41.3p was 54.9% higher, reflecting the movement
in underlying EPS and the impact of higher exceptional costs in the
prior year.
Business combinations
In the current year GBP0.1m was recognised as a gain on bargain
purchase in the income statement in relation to the acquisition of
GRG Public Resources Limited in March 2022. A further GBP0.3m has
been recognised as a gain on bargain purchase in respect to the
previous Nationwide acquisition reflecting the write back of
contingent consideration that was not payable.
Depreciation rate changes
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 down to the expected future residual value at the point at
which the vehicle is expected to be sold net of directly
attributable selling costs.
Accounting standards require a review of residual values during
a vehicle's useful economic life at least annually, with changes to
depreciation rates being required if the expectation of future
values changes significantly.
Matching of future market values to net book value (NBV) on the
estimated disposal date requires significant judgement for the
following 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; and
-- 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 NBV 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 must be made to depreciation rate
estimates to better reflect market conditions and the usage of
vehicles.
The full year-on-year impact of previous depreciation rate
changes in FY2022 EBIT is a headwind of GBP4.0m in Northgate Spain
and GBP1.4m in Northgate UK&I as previously outlined.
Residual values have increased significantly over the previous
two financial years due to the disruption of new vehicle supply
which has increased demand for used vehicles. Up to this point, no
changes have been made to depreciation rates on existing fleet
vehicles as the extent and longevity of this buoyancy in residual
values has been uncertain. However, it has continued for longer
than anticipated and uncertainty remains over how long it will take
for supply of new and used vehicles to return to a more normal
level.
For this reason, there are a number of vehicles on our fleet
where the depreciated book value is below or very close to the
expected residual value at disposal. In line with the requirements
of accounting standards, a decision has been made to reduce
depreciation rates from 1 May 2022 on certain vehicles remaining on
the fleet which were purchased before FY2021.
The impact on the statutory income statement over the remaining
holding period of those vehicles is expected to be as follows:
GBPm FY2023 FY2024 FY2025 FY2026 FY2027 Total
Reduced depreciation 54.6 30.9 8.2 0.3 - 94.1
Reduced disposal
profits (7.8) (40.4) (38.0) (7.0) (0.9) (94.1)
Impact on statutory
EBIT 46.8 (9.4) (29.8) (6.7) (0.9) -
---------------------- ------- ------- ------- ------- ------- -------
The impact of the changing depreciation rates on this component
of the fleet will re-phase statutory EBIT over the next 5 years but
will have no impact on underlying results and no overall impact on
statutory profit over the life of the fleet. The changes are
non-cash items.
The actual phasing of the adjustment may change if these
vehicles are held for a longer or shorter period than anticipated
in the above analysis.
The disposal profits of vehicles purchased in FY2021 and FY2022
are expected to be broadly in line with original expectations.
Depreciation rates on vehicles purchased in FY2023 will be set
based on management's best estimates of future residual values when
those vehicles are sold, with holding periods ranging from 12 to 60
months.
Interest
Net underlying finance charges remained static at GBP16.6m
(2021: GBP16.6m). The net cash interest charge for the year was
GBP14.7m (2021: GBP15.0m) representing decreased borrowing.
Non-cash interest was GBP1.9m (2021: GBP1.6m).
Exceptional items
During the year EBIT included exceptional credits of GBP2.7m
(2021: GBP6.5m costs) with a GBP3.5m credit arising from
restructuring expenses (2021: GBP2.8m cost) and the gain on bargain
purchase credit of GBP0.4m (2021: GBP1.5m) offset by FMG RS set up
and integration costs of GBP1.2m (2021: GBP5.7m). The prior year
also included acquisition expenses of GBP1.1m and a legal
settlement credit of GBP1.6m.
Finance costs included GBP1.5m (2021: GBPnil) of costs in
relation to cancelling loan notes as part of the refinancing of
facilities during the year.
A total of GBP2.1m (2021: GBP9.6m) of the above exceptional
items were cash costs and GBP3.3m (2021: GBP3.0m) of credits were
non-cash.
Further detail on exceptional items is included in Note 6.
Amortisation of acquired intangibles is not an exceptional item
as it is recurred. However, it is excluded from underlying results
in order to provide a better comparison of performance of the
Group. The total charge for the year was GBP19.8m (2021:
GBP19.5m).
Dividend and capital allocation
Subject to approval, a final dividend proposed of 15.0p per
share (2021:12.0p) will be paid on 30 September 2022 to
shareholders on the register as at close of business on 3 September
2022.
Including the interim dividend paid of 6.0p (2021: 3.4p), the
total dividend relating to the year would be 21.0p (2021: 15.4p).
The dividend is covered 2.4x 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.
Share buyback programme
The Group continues to see exciting opportunities to deploy
capital organically and has a good M&A pipeline. Even after
taking into consideration capital to fund organic growth, payment
of dividends in line with the Company's dividend policy and
acquisitions within the M&A pipeline, the Company has
substantial headroom under its facilities and target leverage of
1-2x.
As a result, during March 2022 the Group commenced a share
buyback programme of the Company's ordinary shares for up to a
maximum aggregate consideration of GBP30 million. As at 30 April
2022, 1,825,991 shares were purchased for a total consideration of
GBP7.5m.
Group cash flow
Steady state cash generation
Year ended 30 April 2022 2021 Change
GBPm GBPm GBPm
-------------------------------- -------- -------- -------
Underlying EBIT 167.9 109.8 58.1
Depreciation and amortisation 198.8 192.5 6.3
-------- -------- -------
Underlying EBITDA 366.7 302.3 64.4
Net replacement capex (106.7) (107.5) 0.8
Lease principal payments ([9]) (43.7) (54.8) 11.1
-------- -------- -------
Steady state cash generation 216.4 140.1 76.3
-------------------------------- -------- -------- -------
Steady state cash generation remained strong at GBP216.4m (2021:
GBP140.1m), driven by underlying EBIT performance.
Free cash flow
Year ended 30 April 2022 2021 Change
GBPm GBPm GBPm
--------------------------------------- -------- ------- --------
Steady state cash generation 216.4 140.1 76.3
Exceptional costs (excluding non-cash
items) (0.7) (5.0) 4.3
Working capital and non-cash items (33.5) (16.9) (16.6)
Growth capex (108.6) 19.1 (127.7)
Taxation (27.4) (12.7) (14.7)
-------- ------- --------
Net operating cash 46.2 124.6 (78.4)
Distributions from associates 4.1 4.3 (0.2)
Interest and other financing (37.5) (20.4) (17.1)
Acquisition of business (0.5) (10.8) 10.3
-------- ------- --------
Free cash flow 12.3 97.8 (85.5)
Dividends paid (43.9) (24.9) (19.0)
Lease principal payments ([10]) 43.7 54.8 (11.1)
-------- ------- --------
Net cash generated 12.0 127.6 (115.6)
--------------------------------------- -------- ------- --------
-- Free cash flow decreased by GBP85.5m to GBP12.3m (2021:
GBP97.8m) driven by growth capex compared to a contraction that
resulted in an inflow of GBP19.1m in prior year. Growth capex of
GBP108.6m reflects a net increase in owned fleet (excluding
transfers from leasing) of 7,600 since prior year.
-- If the impact of growth capex in the year is removed from
free cash flow, the underlying free cash flow of the Group was
GBP120.9m (2021: GBP78.7m).
Net debt
Net debt reconciles as follows:
Year ended 30 April 2022 2021
GBPm GBPm
--------------------- ------ -------
Opening net debt 530.3 575.9
Net cash (generated) (12.0) (127.6)
Other non-cash items 76.8 80.3
Exchange differences (12.6) 1.8
--------------------- ------ -------
Closing net debt 582.5 530.3
--------------------- ------ -------
Closing net debt increased by GBP52.2m in the year. Net cash
generation of GBP12.0m was offset by non-cash items and exchange
differences which increased debt by GBP64.2m. Other non-cash items
consist of GBP80.1m of new leases acquired being offset by GBP3.3m
of other items. Foreign exchange differences reduced net debt by
GBP12.6m.
Borrowing facilities
As at 30 April 2022 the Group had headroom on facilities of
GBP382m, with GBP426m drawn (net of available cash balances)
against total facilities of GBP808m as detailed below:
Facility Drawn Headroom Maturity Borrowing
GBPm GBPm GBPm Cost
--------------------- -------- ----- -------- ------------ ---------
UK bank facilities 480 99 381 Nov-25 2.5%
Nov 27 - Nov
Loan notes 315 315 - 31 1.3%
Other loans 13 12 1 Nov 22 2.6%
--------------------- -------- ----- -------- ------------ ---------
808 426 382 1.9%
--------------------- -------- ----- -------- ------------ ---------
The other loans drawn consist of GBP12m of local borrowings in
Spain which were renewed for a further year in November 2021 and
GBP0.5m of preference shares.
In November 2021, the Group completed a refinancing, repaying
the existing loan notes and replacing them with EUR375m of new loan
notes with maturities spread across 6, 8 and 10 years. The UK bank
facilities were replaced with new facilities maturing in November
2025. The combined impact of these changes resulted in an overall
increase of GBP104m in committed facilities at that date.
The above drawn amounts reconcile to net debt as follows:
Drawn
GBPm
-------------------------------------- -----
Borrowing facilities 426.2
Unamortised finance fees (7.9)
Leases arising following adoption
of IFRS 16 130.4
Leases arising under HP obligations 33.8
--------------------------------------- -----
Net debt 582.5
--------------------------------------- -----
The overall cost of borrowings at 30 April 2022 is 1.9% (2021:
2.0%).
The margin charged on bank debt is dependent upon the Group's
net debt to EBITDA ratio, ranging from a minimum of 1.45% to a
maximum of 3.25%. The net debt to EBITDA ratio at 30 April 2022
corresponded to a margin of 1.95% (2021: 1.85%).
The split of net debt by currency is as follows:
Year ended 30 April 2022 2021
GBPm GBPm
------------------------------------------------------ ----- ------
Euro 374 367
Sterling 217 167
----- ------
Borrowings and lease obligations before unamortised
arrangement fees 591 534
Unamortised finance fees (8) (4)
------------------------------------------------------ ----- ------
Net Debt 583 530
------------------------------------------------------ ----- ------
There are three financial covenants under the Group's facilities
as follows:
Threshold April Headroom April 2021
2022
----------------- ---------- --------- ---------------- ----------
Interest cover 3x 14.4x GBP130m (EBIT) 8.2x
GBP323m (Net
Loan to value 70% 41% debt) 41%
Debt leverage 3x 1.4x GBP185m (EBITDA) 1.5x
----------------- ---------- --------- ---------------- ----------
The covenant calculations have been prepared in accordance with
the requirements of the facilities to which they relate.
Following the refinancing in November 2021, the debt leverage
covenant improved to 3.0x, increasing headroom by a further GBP14m.
The other covenants remained unchanged.
Balance sheet
Net assets at 30 April 2022 were GBP946.8m (2021: GBP908.1m),
equivalent to net assets per share of 388p (2021: 369p). Net
tangible assets at 30 April 2022 were GBP680.5m (2021: GBP622.8m),
equivalent to a net tangible asset value of 279p per share (2021:
253p per share).
The calculations above are based on the number of shares in
issue at 30 April 2022 of 246,091,423 (2021: 246,091,423) less
treasury shares of 1,825,991 (2021: nil).
Gearing at 30 April 2022 was 85.6% (2021: 85.2%) and ROCE was
13.9% (2021: 9.5%).
Treasury
The function of the Group's treasury operations 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 76% at 30
April 2022 (2021: 28%).
Foreign exchange risk
The Group's reporting currency is Sterling and 77% of its
revenue is generated in Sterling during the year (2021: 73%). 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:
April 2022 April 2021
GBP : EUR GBP : EUR
----------- ----------- ----------
Average 1.18 1.12
Year end 1.19 1.15
----------- ----------- ----------
Going concern
Having considered the Group's current trading, cash flow
generation and debt maturity including severe but plausible stress
testing scenarios, explained further in Note 8 of the financial
statements, the Directors have concluded that it is appropriate to
prepare the Group financial statements on a going concern
basis.
Alternative performance measures and glossary of terms
A reconciliation of statutory to underlying Group performance is
outlined at the front of this document. A reconciliation of
underlying cash flow measures and additional alternative
performance measures used to assess performance of the Group is
shown below.
Year ended 30 April 2022 2021
GBPm GBPm
------------------------------------------------------------- -------- --------
Underlying EBIT 167.9 109.8
Add back:
Depreciation of property, plant and equipment 197.2 191.6
Loss (gain) on disposal of assets 0.6 0.2
Intangible amortisation included in underlying operating
profit (Note 6) 1.0 0.7
-------- --------
Underlying EBITDA 366.7 302.3
Net replacement capex (106.7) (107.5)
Lease principal payments (under IFRS 16 and HP) (43.7) (54.8)
-------- --------
Steady state cash generation 216.4 140.1
Exceptional items (excluding non-cash items) (Note
6) (0.7) (5.0)
Working capital and non-cash items (33.5) (16.9)
Growth capex (108.6) 19.1
Taxation (27.4) (12.7)
-------- --------
Net operating cash 46.2 124.6
Distributions from associates 4.1 4.3
Interest and other financing costs (37.5) (20.4)
Acquisition of business net of cash acquired (0.5) (10.8)
-------- --------
Free cash flow 12.3 97.8
Dividends paid (43.9) (24.9)
Lease principal payments 43.7 54.8
-------- --------
Net cash generated 12.0 127.6
-------- --------
Reconciliation to cash flow statement:
Net increase (decrease) in cash and cash equivalents 8.8 (9.7)
Add back:
Receipt of bank loans and other borrowings (318.1) (27.2)
Repayments of bank loans and other borrowings 277.6 109.7
Principal element of lease payments under IFRS 16 28.0 17.0
Principal element of lease payments under HP obligations 15.7 37.8
-------- --------
Net cash generated 12.0 127.6
-------- --------
Reconciliation of capital expenditure
Purchases of vehicles for hire 292.9 303.5
Proceeds from disposals of vehicles for hire (128.8) (188.6)
Proceeds from disposal of vehicles for credit hire
and other property, plant and equipment (2.7) (35.9)
Purchases of other property plant and equipment 52.4 7.5
Purchases of intangible assets 1.4 1.8
-------- --------
Net capital expenditure 215.2 88.3
-------- --------
Net replacement capex(1) 106.7 107.5
Growth capex(2) 108.6 (19.1)
-------- --------
Net capital expenditure 215.2 88.3
-------- --------
(1) Net capital expenditure other than that defined as growth capex
(2) Growth capex represents the cash consumed in order to grow the
total owned fleet or the cash generated if the owned fleet size is reduced
in periods of contraction
Northgate Northgate Group
UK&I Spain Sub-total
2022 2022 2022
GBP000 GBP000 GBP000
------------------------------------------ ----------------- ------------------- -----------
Underlying operating profit(1) 97,957 43,888 141,845
Exclude:
Adjustments to depreciation charge
in relation to vehicles sold in
the year (44,841) (5,267) (50,108)
----------------- ------------------- -----------
Rental profit 53,116 38,621 91,737
Divided by: Revenue: hire of vehicles(2) 342,733 220,555 563,288
Rental margin 15.3% 17.5% 16.3%
Northgate Northgate Group
UK&I Spain Sub-total
2021 2021 2021
GBP000 GBP000 GBP000
------------------------------------------ ----------------- ------------------- -----------
Underlying operating profit(1) 76,800 33,700 110,500
Exclude:
Adjustments to depreciation charge
in relation to vehicles sold in
the year (37,285) (2,929) (40,214)
----------------- ------------------- -----------
Rental profit 39,515 30,771 70,286
Divided by: Revenue: hire of vehicles(2) 310,066 205,500 515,566
Rental margin 12.7% 15.0% 13.6%
(1) See Note 1 to the financial statements for reconciliation of
segment underlying operating profit to Group underlying operating
profit.
(2) Revenue: hire of vehicles including intersegment revenue
(see Note 1 to the financial statements).
The following defined terms have been used throughout this
document:
Term Definition
Auxillis A business within the Redde operating segment
providing fault and non-fault accident management
assistance and related services
-------------------------------------------------------
Average capital A two point average of capital employed at
employed last day of the current and previous financial
years
-------------------------------------------------------
B2B Business to business
-------------------------------------------------------
B2C Business to consumer
-------------------------------------------------------
Capex Capital expenditure
-------------------------------------------------------
Capital employed Net assets excluding net debt and acquired
goodwill and acquired intangible assets
-------------------------------------------------------
Car parc Refers to the number of cars and other vehicles
registered for use in a particular country
-------------------------------------------------------
ChargedEV Charged Electric Vehicles Limited, a business
within the Group providing EV charging infrastructure
and solutions
-------------------------------------------------------
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)
-------------------------------------------------------
eAuction The part of the Group which generates vehicles
sales revenue through the Group's online sales
platforms
-------------------------------------------------------
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(s) Electric vehicle(s)
-------------------------------------------------------
Facility headroom Calculated as facilities of GBP808m less net
borrowings of GBP426m. Net borrowings represent
net debt of GBP583m excluding lease liabilities
of GBP164m and unamortised arrangement fees
of GBP8m and are stated after the deduction
of GBP16m of cash and cash equivalents 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 ended 30 April 2022
-------------------------------------------------------
FY2023 The year ending 30 April 2023
-------------------------------------------------------
GAAP Generally Accepted Accounting Practice: meaning
compliance with IFRS
-------------------------------------------------------
Gearing Calculated as net debt divided by net tangible
assets
-------------------------------------------------------
GRG Resources GRG Public Resources Limited and its subsidiary
undertaking
-------------------------------------------------------
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
-------------------------------------------------------
ICE vehicles Vehicles powered by an internal combustion
engine
-------------------------------------------------------
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
-------------------------------------------------------
Income from associates The Group's share of net profit of associates
accounted for using the equity method
-------------------------------------------------------
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 Limited
trade and certain 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
-------------------------------------------------------
Net zero As defined under The Paris Agreement, a legally
binding international treaty on climate change
-------------------------------------------------------
NewLaw A business within the Redde operating segment
providing legal services
-------------------------------------------------------
Non-GAAP A financial metric used which is not defined
under GAAP
-------------------------------------------------------
Non-ICE vehicles Vehicles not powered by an internal combustion
engine
-------------------------------------------------------
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 located
in Spain and providing commercial vehicle hire
and ancillary services
-------------------------------------------------------
Northgate UK&I The Northgate UK&I operating segment located
in the United Kingdom and the Republic of Ireland
providing commercial vehicle hire and ancillary
services
-------------------------------------------------------
OEM(s) Original Equipment Manufacturer(s): a reference
to our vehicle suppliers
-------------------------------------------------------
Owned fleet The vehicle fleet which is not held under a
leasing contract
-------------------------------------------------------
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
-------------------------------------------------------
Q4 Referring to the final three months of the
financial year
-------------------------------------------------------
Redde The Redde operating segment providing a range
of mobility solutions or the Redde plc company
and its subsidiaries prior to the Merger
-------------------------------------------------------
Rental margin Calculated as rental profit divided by revenue
(excluding vehicle sales)
-------------------------------------------------------
Rental profits EBIT excluding disposal profits
-------------------------------------------------------
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
-------------------------------------------------------
SAYE The Company's all employee share saving scheme
-------------------------------------------------------
Steady state Underlying EBITDA less net replacement capex
cash generation and lease principal payments (included this
year, comparative updated)
-------------------------------------------------------
TCFD Taskforce on Climate-Related Financial Disclosures
-------------------------------------------------------
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
-------------------------------------------------------
WACC Weighted average cost of capital calculated
using the capital asset pricing model
-------------------------------------------------------
Principal risks and uncertainties
Economic environment
The demand for our products and services could be affected by a
change in economic activity in the countries the Group operates
including the post COVID-19 recovery period, global conflicts in
Russia and Ukraine including impacts on supply chains, and global
inflationary pressures.
Risk description
Adverse changes in economic conditions 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 could also
increase the risk of customer failure, increasing the risk of non
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.
-- 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, such as negotiations considering the
global restriction of vehicle availability and has diversified
supplier base in order to further mitigate this. In the event of
short term supply interruption the fleet can be aged.
-- Pricing structures remain under review in context of cost inflation.
-- Credit risk of new and existing customers is continually
assessed and actions taken where necessary. The Group has a
diversified customer base without over-reliance on an individual or
group of customers across any sector.
-- Transactional foreign exchange exposure is minimised through
sourcing supplies in the same currency as the revenue is
generated.
Developments in the year
-- Shortages of vehicle availability has constrained growth but
we have aged out the fleet in order to protect existing revenue
streams. Used vehicle markets continue to experience buoyant
residual values due to shortages of new vehicles.
-- COVID-19 restrictions have eased in the year across all businesses.
-- Volumes of insurance claims and services have grown to near
pre-COVID 19 towards the end of the year as restrictions eased in
the UK.
-- The balance outstanding in relation to contract assets has
increased in the year due to volume from COVID recovery. However,
the overall statutory debtor days in relation to this balance
reduced by 20 days.
-- Inflation increases during the year affects our supply chain in various ways.
-- The conflict in Ukraine has not had a direct impact on our
business as no customers or suppliers are located in that region
but it has had an impact on global markets which has fed though to
general inflation and supply chain issues mentioned above.
Market 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, legal 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 ICE 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.
-- Comprehensive suite of products and services decreases risk
of competition and increases barriers to compete.
-- 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.
-- Continued evolution of the fleet towards non-ICE vehicles
with supporting infrastructure.
Developments in the year
-- Continued development of customer proposition, providing an
integrated mobility solution.
-- Significant new contract wins with lifetime revenues of over GBP300 million.
-- Our competitive position in the flexible rental solution and
complementary service markets has continued to support VOH and
rental margins.
-- Acquisition of ChargedEV in the year supports EV transition
and widens customer proposition.
-- Our ESG strategy supports transition of the fleet to Non-ICE
vehicles to meet the changing demand of the markets in which we
operate.
Vehicle holding costs
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 and the expected residual value at the date of
disposal. The operational cost of fleet is dependent upon efficient
fleet management and maintenance of the fleet.
Global supply chain constraints have continued to support high
used vehicle prices throughout the year but present risks around
future volatility in pricing of new and used vehicles.
Controls and mitigating activities
-- Maintaining strong relationships with suppliers and
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. Increasing the
sources of supply beyond traditional direct OEM relationships.
-- Holding a proportion of the fleet on a leasing basis with
fixed implicit residual values.
-- Optimising the holding period of vehicles to minimise overall
holding costs, to the extent that this is possible in a period of
short vehicle supply.
-- 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 eAuction sales.
-- Ageing of the fleet if necessary, to mitigate short term
pricing disruption in used vehicle markets or short term pricing
pressure in new vehicle markets as a result of constrained supply.
Although the Group is exposed to fluctuations in the used vehicle
market, we aim to optimise the value of our fleet. Our fleet can
act flexibly and responsively to market instabilities. Should the
market experience a short term decline in residual values, we can
age our existing fleet until the market improves, or in the light
of vehicle supply restrictions, age our fleet to extend rental
availability.
Developments in the year
-- Shortages of vehicle availability have been experienced in
the year due to global supply chain issues.
-- Residual values in the used vehicle market continue to remain
high due to shortage in supply of new vehicles.
-- We have slowed down our normal vehicle replacement cycle in
response to this shortage of new vehicles in order to maximise
rental availability. Fleet ageing continues to be carefully
monitored to ensure that we are able to operate efficiently and
continue to deliver the same levels of customer service.
-- Establishing supply from alternative vehicle sales outlets to facilitate additional availability.
The employee environment
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 employees' health and welfare and failure to
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.
Management needs to effectively integrate and harmonise one set
of vision and values as the Group continues to grow organically and
inorganically so that everyone is aligned to the strategic goals of
the Group.
Despite mitigations reducing the risk in recent months, the
constraint of the labour market is at the forefront of management
discussion as inability to access talent puts pressure on the
Group's operating model and commercial proposition.
Controls and mitigating activities
-- Employee engagement with Group management through the
Employee Engagement Forum and employee surveys.
-- Internal communications establish vision and values which are
aligned to Group strategy and undertake regular communication of
strategic progress through various platforms.
-- Ongoing benchmarking of reward and benefits against the comparable market.
-- Regular performance reviews including personal development and tailored training.
-- Regular engagement with employees and access to health and wellbeing initiatives.
-- Group health and safety initiatives to promote an ongoing safe working environment.
Developments in the year
-- Access to people resource with the appropriate skill set for
the Group has been an increasing challenge throughout the year.
-- First full year of the Employee Engagement Forum established
post-merger, giving all employees a voice into the executive
leadership team and the Board.
-- Roll out of Focus, Drive and Broaden initiatives across the Group.
-- Northgate Spain rated within top 10% of largest job search portal.
-- New UK reward hub and benefit platform launched.
-- Growth of in-house recruitment team, dedicated to engaging
talent who share the same values as the Group.
-- Extension of Academy hub to wider Group providing a common
platform to facilitate training.
-- Continuing to support flexible working post COVID-19, giving
employees more flexibility to work from home whilst balancing the
needs of the business.
Legal and Compliance
Certain activities and arrangements within the Group are
regulated, therefore ongoing 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.
-- Development and approval of the Group's ESG strategy provides
resilience to our operations and, in particular, sets out our path
to fight climate-related issues, an area where legislation is
deemed likely to increase.
IT systems
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 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 and subsequent acquisitions have 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 and replacement of core IT
infrastructure and systems of the Group following the Merger.
-- Further investments in core systems are planned in order to
support growth of the Group.
Recovery of contract assets
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
Whilst 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 COVID-19 restrictions eased during the year, court
capacities have consequently improved leading to more cases being
settled. Insurers have also re-established resource to settle
existing claims.
-- The balance outstanding in relation to contract assets has
increased in the year due to volume from COVID recovery. However,
the overall statutory debtor days in relation to this balance
reduced by 20 days.
Access to capital
The Group needs access to sufficient capital to maintain and
grow the fleet and fund short term working capital
requirements.
Investors increasingly require businesses to demonstrate that
they act in a responsible and sustainable manner prior to granting
access to financing facilities.
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.
Controls and mitigating activities
-- Bank, loan note and fleet funding facilities are in place
across a range of funding sources 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
-- Comprehensive refinancing of debt arrangement optimising the Group's debt portfolio.
-- Significant lengthening of maturities spread up to 10 years.
-- Greater diversification in terms of sources of debt and
access to new pools of liquidity.
-- New debt achieved at highly competitive interest rates.
-- Further contract hire credit lines have been negotiated.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 APRIL 2022
------------------------------------------------------------------------------------------ ---- --------- ---------
2022 2021
Note GBP000 GBP000
------------------------------------------------------------------------------------------ ---- --------- ---------
Revenue: hire of vehicles 563,288 515,566
Revenue: sale of vehicles 149,939 229,809
Revenue: claims and services 530,330 364,124
------------------------------------------------------------------------------------------ ---- --------- ---------
Total revenue 1 1,243,557 1,109,499
Cost of sales (897,349) (856,955)
------------------------------------------------------------------------------------------ ---- --------- ---------
Gross profit 346,208 252,544
Administrative expenses (excluding exceptional items and amortisation on acquired
intangible
assets) (182,204) (147,092)
Exceptional administrative expenses: impairment of property, plant and equipment 6 - (4,341)
Exceptional administrative expenses: reversal of previous impairment of property, plant
and
equipment 6 2,998 1,304
Exceptional administrative expenses: other costs 6 (690) (4,980)
Amortisation on acquired intangible assets (19,778) (19,513)
------------------------------------------------------------------------------------------ ---- --------- ---------
Total administrative expenses (199,674) (174,622)
------------------------------------------------------------------------------------------ ---- --------- ---------
Operating profit 146,534 77,922
Income from associates 3,866 4,364
Gain on bargain purchase 355 1,489
------------------------------------------------------------------------------------------ ---- --------- ---------
EBIT 1 150,755 83,775
Interest income 34 164
Finance costs (18,100) (16,760)
------------------------------------------------------------------------------------------ ---- --------- ---------
Profit before taxation 132,689 67,179
Taxation (31,144) (1,613)
Profit for the year 101,545 65,566
------------------------------------------------------------------------------------------ ---- --------- ---------
Profit for the year is wholly attributable to owners of the
Parent Company. All results arise from continuing operations.
Earnings per share
Basic 241.3p 26.6p
------------------- ----- -----
Diluted 240.4p 26.2p
------------------- ----- -----
See GAAP reconciliation at the front of this report for a
reconciliation between reported results as shown above and
underlying measures used to explain performance throughout this
report.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 APRIL 2022
----------------------------------------------------------------------------------------- -------- -------
2022 2021
GBP000 GBP000
----------------------------------------------------------------------------------------- -------- -------
Amounts attributable to owners of the Parent Company
Profit attributable to the owners 101,545 65,566
Other comprehensive expense
Foreign exchange differences on retranslation of net assets of subsidiary undertakings (16,347) 338
Net foreign exchange differences on long term borrowings held as hedges 11,904 (2,019)
Foreign exchange difference on revaluation reserve (41) (1)
Net fair value gains on cash flow hedges - 184
Deferred tax charge recognised directly in equity relating to cash flow hedges - (35)
------------------------------------------------------------------------------------------ -------- -------
Total other comprehensive expense (4,484) (1,533)
------------------------------------------------------------------------------------------ -------- -------
Total comprehensive income for the year 97,061 64,033
------------------------------------------------------------------------------------------ -------- -------
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 2022 2021
AS AT 30 APRIL 2022 GBP000 GBP000
-------------------------------- --------- ---------
Non-current assets
Goodwill 114,926 114,503
Other intangible assets 151,312 170,830
Property, plant and equipment 1,161,915 1,083,920
Deferred tax assets 3,175 4,826
Interest in associates 5,843 6,047
Total non-current assets 1,437,171 1,380,126
---------------------------------- --------- ---------
Current assets
Inventories 18,696 21,545
Receivables and contract assets 359,053 302,349
Current tax assets 7,432 -
Cash and bank balances 24,561 11,169
Total current assets 409,742 335,063
---------------------------------- --------- ---------
Total assets 1,846,913 1,715,189
---------------------------------- --------- ---------
Current liabilities
Trade and other payables 246,833 229,666
Current tax liabilities 3,327 562
Lease liabilities 52,524 32,375
Short term borrowings 21,007 12,159
---------------------------------- --------- ---------
Total c urrent liabilities 323,691 274,762
---------------------------------- --------- ---------
Net current assets 86,051 60,301
---------------------------------- --------- ---------
Non-current liabilities
Trade and other payables 4,509 3,848
Lease liabilities 111,755 96,093
Long term borrowings 421,822 400,885
Deferred tax liabilities 38,375 31,472
---------------------------------- --------- ---------
Total non-current liabilities 576,461 532,298
---------------------------------- --------- ---------
Total liabilities 900,152 807,060
---------------------------------- --------- ---------
NET ASSETS 946,761 908,129
---------------------------------- --------- ---------
EQUITY
Share capital 123,046 123,046
Share premium account 113,510 113,510
Own shares reserve (16,439) (6,460)
Treasury shares reserve (7,493) -
Translation reserve (8,633) (4,190)
Other reserves 330,435 330,476
Retained earnings 412,335 351,747
TOTAL EQUITY 946,761 908,129
---------------------------------- --------- ---------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2022
------------------------------------------------------------------------------------------ ---- --------- ---------
2022 2021
Note GBP000 GBP000
------------------------------------------------------------------------------------------ ---- --------- ---------
Net cash generated from operations 4 127,643 137,878
Investing activities
Interest received 34 164
Distributions from associates 4,070 4,325
Acquisition of business (853) (10,823)
Cash acquired on acquisition 371 -
Proceeds from disposal of vehicles for credit hire and other property, plant and equipment 2,683 35,919
Purchases of other property, plant and equipment (52,369) (7,460)
Purchases of intangible assets (1,373) (1,834)
Net cash generated from investing activities (47,437) 20,291
------------------------------------------------------------------------------------------ ---- --------- ---------
Financing activities
Dividends paid (43,897) (24,928)
Receipt of bank loans and other borrowings 318,056 27,195
Repayments of bank loans and other borrowings (277,617) (109,712)
Debt issue costs paid (5,428) (520)
Exceptional finance costs (1,435) -
Principal element of lease payments under IFRS 16 (27,959) (16,994)
Principal element of lease payments under HP obligations (15,700) (37,814)
Payments to acquire treasury shares (7,493) -
Net payments to acquire own shares for share schemes (9,933) (5,073)
Net cash used in financing activities (71,406) (167,846)
Net (decrease) increase in cash and cash equivalents 8,800 (9,677)
Cash and cash equivalents at 1 May 6,821 16,780
Effect of foreign exchange movements 148 (282)
Cash and cash equivalents at 30 April 15,769 6,821
------------------------------------------------------------------------------------------ ---- --------- ---------
Cash and cash equivalents comprise:
Cash and bank balances 24,561 11,169
Bank overdrafts (8,792) (4,348)
Cash and cash equivalents 15,769 6,821
------------------------------------------------------------------------------------------ ---- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 APRIL 2022
Share Treasury
capital shares
and share Own shares reserve Hedging Translation Other Retained
premium reserve GBP000 reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ----------- ----------- --------- --------- ------------ ---------- ---------- ---------
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
--------------------- ----------- ----------- --------- --------- ------------ ---------- ---------- ---------
Share options
fair value
charge - - - - - - 3,695 3,695
Share options
exercised - - - - - - (588) (588)
Dividends paid - - - - - - (43,897) (43,897)
Net purchase
of shares - (10,567) (7,493) - - - - (18,060)
Transfer of
shares on vesting
of share options - 588 - - - - - 588
Deferred tax
on share based
payments recognised
in equity - - - - - - (167) (167)
Total comprehensive
income (expense) - - - - (4,443) (41) 101,545 97,061
--------------------- ----------- ----------- --------- --------- ------------ ---------- ---------- ---------
Total equity
at 30 April
2022 236,556 (16,439) (7,493) - (8,633) 330,435 412,335 946,761
--------------------- ----------- ----------- --------- --------- ------------ ---------- ---------- ---------
Other reserves comprise the other reserve, capital redemption
reserve, revaluation reserve and merger reserve.
NOTES TO THE ACCOUNTS
FOR THE YEARED 30 APRIL 2022
1. SEGMENTAL ANALYSIS
Northgate Northgate
UK&I Spain Redde Corporate Eliminations Total
2022 2022 2022 2022 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Revenue: hire of
vehicles 342,733 220,555 - - - 563,288
Revenue: sale of
vehicles 111,802 38,137 - - - 149,939
Revenue: claims
and services - - 530,330 - - 530,330
------------------------ ---------- ---------- -------- ---------- ------------- ----------
External revenue 454,535 258,692 530,330 - - 1,243,557
Intersegment revenue 3,886 - 13,354 - (17,240) -
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Total revenue 458,421 258,692 543,684 - (17,240) 1,243,557
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Timing of revenue
recognition:
At a point in time 111,802 38,137 178,896 - - 328,835
Over time 342,733 220,555 351,434 - - 914,722
------------------------ ---------- ---------- -------- ---------- ------------- ----------
External revenue 454,535 258,692 530,330 - - 1,243,557
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Underlying operating
profit (loss) 97,957 43,888 31,769 (9,610) - 164,004
Income from associates - - 3,866 - - 3,866
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Underlying EBIT* 97,957 43,888 35,635 (9,610) - 167,870
------------------------ ---------- ---------- -------- ---------- ------------- ----------
Exceptional items
(Note 6) 2,308
Amortisation on
acquired intangible
assets (19,778)
Gain on bargain
purchase 355
------------------------ ---------- ---------- -------- ---------- ------------- ----------
EBIT 150,755
Interest income 34
Finance costs (16,637)
Exceptional finance
costs (1,463)
Profit before taxation 132,689
------------------------ ---------- ---------- -------- ---------- ------------- ----------
1. SEGMENTAL ANALYSIS (Continued)
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)
Exceptional finance
costs -
Profit before taxation 67,179
------------------------ ---------- ---------- -------- ---------- ------------- ----------
*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
2022 2021
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 101,545 65,566
--------------------------------------------------- ------------ ------------
Number of shares
Weighted average number of Ordinary shares for
the purposes of basic earnings per share 245,997,303 246,091,423
Effect of dilutive potential Ordinary shares:
- share options 5,242,307 4,081,514
--------------------------------------------------- ------------ ------------
Weighted average number of Ordinary shares for
the purposes of diluted earnings per share 251,239,610 250,172,937
--------------------------------------------------- ------------ ------------
Basic earnings per share 41.3p 26.6p
--------------------------------------------------- ------------ ------------
Diluted earnings per share 40.4p 26.2p
--------------------------------------------------- ------------ ------------
The calculated weighted average number of Ordinary shares for
the purposes of basic earnings per share includes a reduction of
94,120 shares (2021: nil) relating to treasury shares acquired
during the year.
3. DIVIDS
Dividends paid in the year were GBP43,897,000 (2021:
GBP24,928,000).
An interim dividend of 6.0p per Ordinary share was paid in
January 2022 (2021: 3.4p). The Directors propose a final dividend
for the year ended 30 April 2022 of 15.0p per Ordinary share (2021:
12.0p) which is subject to approval at the annual general meeting
and has not been included as a liability as at 30 April 2022. Based
upon the shares in issue at 30 April 2022 and excluding treasury
shares, this equates to a final dividend payment of GBP37m (2021:
GBP29.5m). No dividends have been paid between 30 April 2022 and
the date of signing the financial statements.
4. NOTES TO THE CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2022
2022 2021
Net cash generated from operations GBP000 GBP000
---------------------------------------------------------------------------------------------- --------- ---------
Operating profit 146,534 77,922
Adjustments for:
Depreciation of property, plant and equipment 197,162 191,609
Net impairment of property, plant and equipment (2,998) 3,037
Amortisation of intangible assets 20,771 20,198
Loss on disposal of vehicles for credit hire and other property, plant and equipment 581 195
Loss on disposal of intangible assets 34 31
Share options fair value charge 3,695 2,518
---------------------------------------------------------------------------------------------- --------- ---------
Operating cash flows before movements in working capital 365,779 295,510
Increase in non-vehicle inventories (1,169) (1,407)
Increase in receivables (54,400) (69)
Increase (decrease) in payables 22,253 (9,011)
Decrease in provisions - (4,577)
---------------------------------------------------------------------------------------------- --------- ---------
Cash generated from operations 332,463 280,446
Income taxes paid, net (27,382) (12,678)
Interest paid (13,275) (14,945)
---------------------------------------------------------------------------------------------- --------- ---------
Net cash generated from operations before purchases of and proceeds from disposal of vehicles
for hire 291,806 252,823
Purchases of vehicles for hire (292,935) (303,537)
Proceeds from disposals of vehicles for hire 128,772 188,592
---------------------------------------------------------------------------------------------- --------- ---------
Net cash generated from operations 127,643 137,878
---------------------------------------------------------------------------------------------- --------- ---------
5. ANALYSIS OF CONSOLIDATED NET DEBT
---------------------------------------------------------------------------------------------- --------- ---------
2022 2021
GBP000 GBP000
---------------------------------------------------------------------------------------------- --------- ---------
Cash and bank balances (24,561) (11,169)
Bank overdrafts 8,792 4,348
Bank loans 118,573 320,991
Loan notes 314,264 86,817
Leases arising following adoption of IFRS 16 130,444 92,469
Leases arising under HP obligations 33,835 35,999
Cumulative preference shares 500 500
Confirming facilities 700 388
---------------------------------------------------------------------------------------------- --------- ---------
Consolidated net debt 582,547 530,343
---------------------------------------------------------------------------------------------- --------- ---------
6. EXCEPTIONAL ITEMS
Details of exceptional items recognised in the income statement
are as follows:
2022 2021
GBP000 GBP000
----------------------------------------------------------------- --------- ---------
Impairment of property, plant and equipment - 4,341
Reversal of previous impairment of property, plant and equipment (2,998) (1,304)
Other costs 690 4,980
----------------------------------------------------------------- --------- ---------
Exceptional administrative expenses (2,308) 8,017
Restructuring expenses (3,545) 2,754
Acquisition expenses - 1,088
FMG RS set up and integration costs 1,237 5,728
Legal settlement - (1,553)
----------------------------------------------------------------- --------- ---------
Exceptional administrative expenses (2,308) 8,017
Gain on bargain purchase (355) (1,489)
----------------------------------------------------------------- --------- ---------
Total exceptional items included within EBIT (2,663) 6,528
Exceptional finance costs - refinancing expenses 1,463 -
----------------------------------------------------------------- --------- ---------
Total pre-tax exceptional items (1,200) 6,528
Tax charge (credits) relating to exceptional items 228 (1,286)
----------------------------------------------------------------- --------- ---------
Cash expenses 2,125 9,557
Non-cash (credits) expenses (3,325) (3,029)
----------------------------------------------------------------- --------- ---------
Total pre-tax exceptional items (1,200) 6,528
----------------------------------------------------------------- --------- ---------
Details of exceptional items recognised in the income statement
are as follows:
Restructuring expenses
The Group recognised a credit in respect to total exceptional
restructuring costs of GBP3,545,000 (2021: GBP2,754,000 cost) of
which a credit of GBP3,280,000 arose in Redde (2021: GBP2,151,000),
credit of GBP265,000 in Northgate UK&I (2021: GBP169,000
credit) and GBPnil in Northgate Spain (2021: GBP772,000). These
amounts related to restructuring activities that were undertaken
during the year as part of the integration and reorganisation of
the combined Group.
The restructuring expenses in the year largely related to
credits relating to reorganisation of sites of GBP3,653,000 offset
by costs GBP108,000 associated with reductions in headcount. In the
prior year, there were 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.
Closure and reorganisation of sites
Included within the GBP3,653,000 credits (2021: GBP20,000 cost)
in relation to the closure and reorganisation of sites, are credits
for the reversal of previous impairments of GBP2,998,000 (2021:
GBP1,304,000), other credits of GBP685,000 (2021: GBPnil),
provisions release credits in relation to properties of GBPnil
(2021: GBP4,577,000), expenses incurred by the Group during the
year of GBPnil (2021: GBP1,560,000) and impairments of property
plant and equipment of GBPnil (2021: GBP4,341,000).
Acquisition expenses
During the prior year, the Group incurred acquisition expenses
of GBP1,088,000. These related to professional services expenses
directly attributable to the acquisition of the trade and assets of
Nationwide of GBP1,078,000 and GBP10,000 in relation to the
Merger.
FMG RS set up and integration costs
The Group incurred costs of GBP1,237,000 (2021: GBP5,728,000) in
relation to the set up of FMG RS and integration of the business,
including redundancies.
Legal settlement
During the prior 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
relating to expected costs no longer payable.
Gain on bargain purchase
A gain on bargain purchase of GBP355,000 (2021: GBP1,489,000)
has been recognised to the extent that the fair value of net assets
acquired from acquisitions were lower than the fair value of
consideration.
Refinancing expenses
During the year, the Group incurred exceptional financing costs
of GBP1,463,000 (2021: GBPnil) attributable to costs for
termination of loan notes and write off of arrangement fees as a
result of the refinancing which took place in November 2021.
Amortisation on acquired intangible assets
Amortisation on acquired intangible assets of GBP19,778,000
(2021: GBP19,513,000) is not classified as an exceptional item as
it is recurring. However, it is excluded from underlying results in
order to provide a better comparison of results between periods as
the Group grows through a combination of organic and in-organic
growth. The revenue and operating costs of these acquisitions are
included within underlying results. Amortisation of intangible
assets of GBP993,000 (2021: GBP685,000) which does not relate to
acquisitions is included within underlying profit.
7. EVENTS AFTER THE REPORTING PERIOD
On 2 July 2022 the Group acquired 100% of the equity capital of
Blakedale Limited for an initial consideration of GBP11m.
8. BASIS OF PREPARATION
On 31 December 2020, IFRS as adopted by the European Union at
that date were brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK endorsement Board. Redde Northgate
plc transitioned to the UK-adopted International Accounting
Standards in its Company financial statements on 1 May 2021. This
change constitutes a change in accounting framework. However, there
is no impact recognition, measurement or disclosure in the period
reported as a result of the change in framework. The financial
statements of Redde Northgate plc have been prepared in accordance
with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 applicable to companies
reporting under those standards.
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 2022.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 April 2022 or
2021 but is derived from those accounts. Statutory accounts for
2021 have been delivered to the Registrar of Companies and those
for 2022 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 2022 has been prepared on a basis consistent with that
presented in the annual report for the year ended 30 April
2021.
Having considered the Group's current trading, cash flow
generation and debt maturity including severe but plausible stress
testing scenarios, 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 Group's current overall strategy has been in place for
several years, subject to the ongoing monitoring and development
described below. The combined Group is well established within the
markets it operates and has proven resilience through difficult
economic conditions in recent years including the impact of
COVID-19 and strong momentum has continued throughout the year
ended 30 April 2022.
The Board continues to take a measured approach to strategic
risk, as the Group continues to progress through the 'Focus',
'Drive' and 'Broaden' elements of its strategy securing significant
contract wins through our enhanced commercial offering, and
diversifying the service such as through the acquisition of
ChargedEV whilst exploring further market and geographic growth
opportunities intended to add long-term value to the Group. The
Board continually assesses the changes in the risk profile and
emerging risks to the Group. The Group pursues only those
activities which are acceptable in the context of the risk profile
of the Group as a whole.
Assessment of viability and going concern
To assess the Group's viability, the three year strategic plan
was stress tested against various scenarios and other
sensitivities.
Sensitivity analysis of our strategy
A detailed three year strategic review was conducted which
considers the Group's cash flows, dividend cover assuming operation
of stated policy and headroom against borrowing facilities and
financial covenants under the Group's existing facilities. These
metrics were subjected to sensitivity analysis to assess the
Group's ability to deliver its strategic objectives.
Strengthened financial position
In November 2021, the Group secured GBP792m of facilities in the
form of GBP475m bank Revolving Credit and EUR375m of new loan
notes. The Group's principal banking facility has a maturity date
of November 2025 and the Private placement provides significant
lengthening of maturities spread across 6, 8 and 10 years. Headroom
against the Group's existing banking facilities at 30 April 2022
was GBP382m. This compares to headroom of GBP305m at 30 April 2021.
Given the financial strength of the Group we do not anticipate any
material deterioration in credit status of the Group or access to
credit markets that would contradict this assumption.
Taking this into account, the Group's facilities provide
sufficient headroom to fund the capital expenditure and working
capital requirements during the planned period.
Stress testing our risk resilience
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
plausible 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 10% 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 a group of key insurance
partners.
-- A slow down of 50 days in the time taken to settle outstanding claims with insurers.
Revenues from insurance claims and services are closely linked
to the volume and density of traffic on the roads which in recent
years has been materially impacted by COVID-19 lockdowns. Despite
additional restrictions over the final quarter of the 2021 calendar
year, February 2022 saw the UK government lift all remaining
COVID-19 restrictions and trading in the final quarter of the year
saw volumes returning to 90% of pre-COVID levels including normal
seasonality.
Over the COVID period in 2020 and 2021, overall profitability
and cash generation of the Group increased due to the resilience of
the business model. A separate COVID type scenario has therefore
not been included as a downside case.
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 of the vehicle fleet,
both of which would generate cash and reduce debt.
Conclusions relating to viability and going concern
After considering the above sensitivities and reasonable
mitigating actions, sufficient headroom remained against available
debt facilities and the covenants attached to those facilities. The
Directors have a reasonable expectation that the Group will
continue to be meet its obligations as they fall due and continue
to be viable over the period to 30 April 2025. The directors also
considered it appropriate to prepare the financial statements on
the going concern basis.
[1] Including intersegment revenue (see note 1 to the financial
statements)
[2] Calculated as underlying EBIT divided by total revenue
[3] 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.
[4] Calculated as underlying EBIT divided by total revenue
[5] 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.
[6] Including intersegment revenue (see note 1 to the financial
statements)
[7] Calculated as underlying EBIT divided by total revenue
[8] Net replacement capex is total capex less growth capex.
Growth capex represents the cash consumed in order to grow the
fleet or the cash generated if the fleet size is reduced in periods
of contraction
[9] Lease principal payments are included so that steady state
cash generation includes all maintenance capex irrespective of
funding method.
[10] Lease principal payments are added back to reflect the
movement on net debt.
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END
FR EAFXSELAAEAA
(END) Dow Jones Newswires
July 06, 2022 02:08 ET (06:08 GMT)
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