TIDMREDD
RNS Number : 9808E
Redde Northgate PLC
05 July 2023
5 July 2023
REDDE NORTHGATE PLC
("Redde Northgate" or the "Group" or the "Company")
ANNOUNCEMENT OF RESULTS FOR THE FULL YEARED 30 APRIL 2023
Record financial performance driven by strong demand and major
contracts
Redde Northgate (LSE:REDD), the leading integrated mobility
solutions platform providing services across the vehicle lifecycle,
is pleased to announce its results for the full year ended 30 April
2023.
Full Year results Reported Underlying(1)
12 months ended 30 FY 2023 FY 2022 Change FY 2023 FY Change
April 2022
GBPm GBPm % GBPm GBPm %
--------- -------- ------- -------- -------- --------
Revenue 1,489.7 1,243.6 19.8% 1,336.9 1,093.6 22.2%
--------- -------- ------- -------- -------- --------
EBIT 202.0 150.8 34.0% 189.2 167.9 12.7%
--------- -------- ------- -------- -------- --------
Profit before Tax 178.7 132.7 34.7% 165.9 151.3 9.7%
--------- -------- ------- -------- -------- --------
Earnings per Share 60.3p 41.3p 46.2% 55.6p 50.8p 9.5%
--------- -------- ------- -------- -------- --------
(1) excludes vehicle sales revenue, exceptional items, amortisation
of acquired intangible assets and adjustments to underlying
depreciation. See GAAP reconciliation.
Other measures FY
FY 2023 2022 Change
GBPm GBPm GBPm
-------- -------- --------
Net debt 694.4 582.5 111.9
-------- -------- --------
Steady state cash generation 191.5 216.4 (24.9)
-------- -------- --------
Free cash flow 4.5 19.8 (15.3)
-------- -------- --------
ROCE 14.1% 13.9% +0.2ppt
-------- -------- --------
Dividend per Share 24.0p 21.0p 3.0p
-------- -------- --------
Martin Ward, CEO of Redde Northgate, commented:
"This is an excellent set of results and we are proud of what
the Group and all our colleagues have achieved this year,
delivering record revenue and profits and strong levels of cash
generation. Our integrated mobility platform has helped to drive
growth and offers significant efficiencies for ourselves and
customers. Vehicle supply is improving but remains below the high
levels of customer demand; our financial strength provides an
ability to react quickly to supply opportunities as they arise.
Our acquisitions of two specialist vehicle providers since the
start of FY2023 have taken us into new areas and broadened our UK
rental customer base and we continue to review other exciting
growth opportunities. The Group fleet is over 130,000 vehicles and
multi-year insurer contracts are now at full run-rate. Together
with our strong pipeline of new business including an additional
large leasing company multi-service contract due to go live in the
autumn, we are confident in continuing to deliver further
stakeholder value."
Key financial highlights
-- Group revenue growth of c.20%; with growth in Redde activity
from existing and new contracts, alongside a managed increase in
average hire rates; revenues ex-vehicle sales up 22%
-- Reported PBT of GBP178.7m; benefitted from GBP46.5m
depreciation adjustment, offset by NewLaw impairment of GBP13.5m
reflecting strategy prioritisation; no impact on underlying results
or cash
-- Underlying PBT up over 9% to GBP165.9m due to strong
operational performance and volume growth, partially offset by
higher interest costs
-- Steady state cash generation strong at GBP191.5m; free
cashflow reflects investments in fleet and working capital to
support new multi-year contracts, and investment in Blakedale
-- Healthy balance sheet, over GBP290m of facility headroom;
bank facility extended out to 2026; 1.5x leverage at midpoint of
stated target 1-2x range; FY23: 62% fixed, including private
placement at 1.3%
-- ROCE improved by 0.2ppt to 14.1%; reflecting focus on
maintaining strong cost control, disposal profits and disciplined
capital allocation
-- Shareholder returns: 10.0% increase in final dividend to
16.5p bringing full year dividend to 24.0p, reflecting Board's
confidence in the outlook; GBP60m share buyback completed in
December acquiring 7% of ordinary share capital
Business highlights
-- Group fleet up 3% to over 130,000 vehicles, driven by growth
in Spain and replacement vehicles for insurance contracts; LCV
scarcity continuing, supporting residual values
-- Two large insurance contracts went live in H1, high demand
for FMG RS repair solutions and three notable corporate contracts
for Spanish repairs
-- Strong pipeline of new business reflecting growing appeal of
the platform; new leasing company multi-service outsourcing
contract signed post-year end and scheduled go-live in Q2
-- Continued progress in value - added services, now over 10,000
telematics units (up 10%); cross platform - Northgate UK&I
accident management services customer revenues up 150%
-- Divisional rental margins maintained in line or above
mid-term range through careful pricing actions to manage cost
inflation
-- Launch of bundled e-LCV vehicle and charging solutions to
help fleet transitions; Iberdrola partnership for Spanish
EV-charging product partnership; development of UK solar/battery
charging products
-- Acquisitions of Blakedale (July 22) and FridgeXpress (May 23)
delivering on strategic goals: Blakedale customers up 28% and fleet
up over 30% since acquisition
Outlook
We continue to enjoy robust demand as we start FY2024 and our
recent signing of a further multi-service outsourcing contract for
Redde reflects our healthy new business pipeline. With exciting
opportunities across the platform, we expect to continue to make
strategic progress; together with good momentum in the business we
are confident and are well-placed to continue to create long-term
value for shareholders.
Analyst Briefing
A hybrid presentation for sell-side analysts and institutional
investors will be held at 9.30am today, 5 July 2023. 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 .
Presentation via Investor Meet Company
The Company will also provide a presentation via the Investor
Meet Company platform on Thursday 13 July 2023 at 2.15pm. Click
here to register :
https://www.investormeetcompany.com/redde-northgate-plc/register-investor
For further information contact:
Ross Hawley, Head of Investor Relations +44 (0) 204 566 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 130,000 owned and leased vehicles,
supporting over 700,000 managed vehicles, with over 170 branches
across the UK, Ireland and Spain and a specialist team of over
7,000 employees.
Further information regarding Redde Northgate plc can be found
on the Company's website www.reddenorthgate.com .
GAAP reconciliation and glossary of terms
Throughout this document we refer to underlying results and
measures; the underlying measures allow management and other
stakeholders to better compare the performance of the Group between
the current and prior year without the effects of one-off or
non-operational items. Underlying measures exclude intangible
amortisation from acquisitions, certain adjustments to depreciation
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 (reported) to non-GAAP (underlying)
measures is included below and at the end of the Finance Review
with a glossary of terms used in this report.
Appendix: GAAP reconciliation
Consolidated income statement reconciliation
Statutory Adjustments Underlying Statutory Adjustments Underlying
Footnote 2023 2023 2023 2022 2022 2022
Year ended 30 April (below) GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------------- --------- ----------- ---------- --------- ----------- ----------
Revenue (a) 1,489.7 (152.8) 1,336.9 1,243.6 (149.9) 1,093.6
Cost of sales (b) (1,054.1) 106.3 (947.8) (897.3) 149.9 (747.4)
--------- ----------- ---------- --------- ----------- ----------
Gross profit 435.6 (46.5) 389.1 346.2 - 346.2
Administrative expenses (c) (236.1) 33.7 (202.4) (199.7) 17.5 (182.2)
--------- ----------- ---------- --------- ----------- ----------
Operating profit 199.5 (12.8) 186.7 146.5 17.5 164.0
Income from associates 2.5 - 2.5 3.9 - 3.9
Gain on bargain purchase (d) - - - 0.4 (0.4) -
--------- ----------- ---------- --------- ----------- ----------
EBIT 202.0 (12.8) 189.2 150.8 17.1 167.9
Finance income 0.1 - 0.1 - - -
Finance costs (e) (23.4) - (23.4) (18.1) 1.5 (16.6)
--------- ----------- ---------- --------- ----------- ----------
Profit before taxation 178.7 (12.8) 165.9 132.7 18.6 151.3
Taxation (f) (39.5) 1.9 (37.6) (31.1) 4.9 (26.3)
Profit for the year 139.2 (10.9) 128.3 101.5 23.5 125.0
Shares for EPS calculation 230.8m 230.8m 246.0m 246.0m
Basic EPS 60.3p 55.6p 41.3p 50.8p
Adjustments comprise: Footnotes
Revenue: sale of vehicles (a) (152.8) (149.9)
----------- -----------
Cost of sales: revenue sale
of vehicles net down (a) 152.8 149.9
Depreciation adjustment (Note 6) (46.5) -
----------- -----------
Cost of sales (b) 106.3 149.9
----------- -----------
Gross profit (a)+(b) (46.5) -
Exceptional items (Note 6) 13.5 (2.3)
Amortisation of acquired intangible assets
(Note 6) 20.2 19.8
----------- -----------
Administrative expenses (c) 33.7 17.5
Gain on bargain purchase (d) - (0.4)
----------- -----------
Adjustments to EBIT (12.8) 17.1
Exceptional finance costs
(Note 6) (e) - 1.5
----------- -----------
Adjustments to PBT (12.8) 18.6
Tax on exceptional items (Note 6) (2.1) 0.2
Other tax adjustments 4.0 4.7
----------- -----------
Tax adjustments (f) 1.9 4.9
----------- -----------
Adjustments to profit (10.9) 23.5
----------- -----------
OPERATING REVIEW
Group overview
The Group has delivered stand-out operational performances
across many areas with significant volume growth in our accident
management business and rental revenue growth in both UK&I and
Spain reflecting continued strong demand across our
geographies.
Our focus has been on satisfying strong customer demand through
the management of fleet acquisition and disposals, and the
successful onboarding of all the significant multi-year insurer
contracts, announced previously, which went live in the first half
of the year. Alongside growth in value added services and the
introduction of new products and services, careful pricing
increases to offset cost inflation have helped to maintain
operating margins across the business units; together these have
enabled us to achieve record results for both revenue and
profit.
Our integrated mobility platform has demonstrated its potential
and more customers than ever are seeing the benefits of taking
multiple services from us and enjoying the cost efficiencies this
growing platform affords them, and this also helps support greater
customer retention. With acquisitions of specialist traffic
management vehicle providers Blakedale in July 2022 and
temperature-controlled vehicle specialists FridgeXpress in May
2023, we have also extended our fleet customer proposition,
bringing an even broader range of customer revenue streams onto the
platform.
Growth drivers
Claims and services revenue growth of 37% was achieved through
increased traffic volumes and the ramp-up of the multi-year insurer
contracts; these contracts have reached their forecast activity
levels. We are confident that the pipeline of potential new
contracts and enhanced service provision on existing contracts will
deliver further volume growth, including the scheduled onboarding
of a new leasing company contract in Q2.
Our outsourcing proposition continues to attract both insurer
and leasing provider interest as they look to benefit from the cost
and efficiency benefits that our platform can offer at a time of
significant claims inflation. Insurers under protocol arrangements
with us grew to over 60% of our long-term contracts in the year,
reflecting the trust and efficiencies such arrangements afford both
parties, while actions such as energy cost levies have been
carefully managed.
Throughout the year demand for LCV rental continued to outstrip
supply across our geographies, alongside increased demand for
additional services and products such as telematics, where over
10,000 units are now in service, up 10%, as customers increasingly
look to monitor driver behaviours. A 50% growth in customers
covered by accident management services in Northgate UK&I in
the year helped support rental margins and customer retention, as
customers see benefits and efficiencies from leveraging our broader
fleet expertise. We also installed over 6,700 EV charging points,
including at an increasing number of commercial locations.
In Spain, the economy has performed well with strong activity
from telecom and tourism sectors. The opening up of our Spanish
workshops to third parties has been very successful, with three
notable contracts signed in the year, increasing workshop revenues
by 60%. Pricing increases in both Northgate Spain and Northgate
UK&I have been implemented in discussion with customers, with
average UK rental rates rising close to inflation in the year.
Customer diversity remains broadly spread across sectors, and
the business continues to actively manage customer and sector
exposures. In Northgate UK&I, no sector accounts for more than
15% of LCV rental VOH, and eight sectors each represent over 7% of
VOH. In Spain the largest sectors remain construction and support
services.
Fleet availability
Fleet growth of 4,400 vehicles to 130,700 over the past year
reflects the success we have had in accessing supply, particularly
for cars, to support our businesses and customer needs. In
Northgate Spain a broader range of manufacturers supported fleet
renewal and growth, with the number of vehicles on the fleet
increasing 6% in the year; while in the UK, whilst the number of
vehicles on the fleet decreased 6%, our OEM relationships mean that
we have early visibility of supply and have had the financial
capacity to quickly respond to supply opportunities as they have
come available.
We maintained our approach of limiting disposals and optimising
fleet recycling when vehicles come off hire, as well as seeking new
sources of supply. Both Van Monster and the Spanish e-Auction
online disposal portals accounted for over 90% of fleet disposal
activities in their geographies and are increasingly significant
players in the online marketplace. They offer a highly
cost-efficient route for defleeting vehicles, and a real-time
understanding of the used vehicle market.
We are starting to see a modest easing of vehicle supply and
parts constraints but are still a way off "normal" supply levels,
particularly in the UK&I, and the cumulative undersupply of new
vehicles since 2020 is expected to keep residual values high in the
medium term.
Strategic focus
Our strategic priorities continue to be centred around enhancing
the strong mobility platform we have developed and the potential
this offers us for growth in the business and to integrate new
products and acquisitions. We always have customer service at the
heart of our offering, and a focus on delivering to our customer
needs and requirements remains core to our business model.
Operationally this has included opening our new branch in Inverness
and enhancing our digital capabilities and ability to offer greater
commercial insights to customers.
We are also recognising how important an enabler we can be for
our customers; both in terms of helping their efficiency programmes
through being a trusted outsourcing partner, and also more
fundamentally with regards to energy transition and the move to
EVs. This is gathering pace for passenger vehicles but remains in
its infancy for the commercial LCV sector, particularly for those
requiring higher payloads or travelling long distances.
The acquisitions of Blakedale and FridgeXpress have provided
incremental specialist vehicle capabilities that we can build on
through fleet investment and broadening customer bases. Blakedale,
which specialises in traffic management vehicles, achieved a 28%
increase in the number of customers and over 30% growth in the
vehicle fleet since acquisition. The acquisition of FridgeXpress, a
provider of temperature-controlled vehicles and trailers in the UK,
was completed shortly after the year-end and offers a similar
potential for cross platform growth.
Together these acquisitions have added over 1,000 new specialist
vehicles to the UK&I fleet and the potential to provide both
existing and new customers with a broader product offering. We
continue to explore inorganic opportunities across territories to
grow both our fleet and range of services and remain alert to new
technologies and new suppliers looking to enter our markets.
The growing scale of our mobility platform means that we are an
increasingly attractive partner for OEMs and other providers, such
as for the Spanish utility operator Iberdrola, where we have a new
partnership to jointly provide a complete EV solution comprising
vehicle, charging infrastructure and green energy supply.
Supporting sustainability
For customers, our Drive to Zero programme supports fleet owners
in identifying the right strategy and first steps in utilising EVs,
or improving their fleet management and driver behaviour to reduce
emissions. This will rise in importance in the coming years with
the increase in the number of low emission zones, alongside growing
requirements of governmental contracts for the use of EV vehicles;
and greater accountability on progress towards net zero targets. We
are adding products such as solar (UK&I) and bundled green
energy (Spain) to our charging and e-rental offerings, along with
advisory services to help customers negotiate what remains an
uncertain regulatory and infrastructure-reliant environment.
Within our business, our key people engagement metric scored
highly at 74%, and we saw improvements in key underlying areas,
such as those seeing the business as providing encouragement for
their personal development, and a 91% score for employees feeling
they work in a great team. This reflects the efforts made to
support our people throughout their career with us, from learning
and development opportunities to enhanced employee benefits and
wellbeing support.
We know these are key elements in maximising retention in what
is a challenging labour market and have significantly increased the
numbers (up over 150%) on our apprenticeship scheme and expanded
our recruitment and outreach programmes. We also supported cost of
living pressures with two targeted payments since December, each to
over 4,500 colleagues. We have continued to invest in various
communication channels for the greater sharing of Group news,
values and culture, and our new corporate and recruitment websites
have also increased the profile and accessibility of information
about the Group to external stakeholders.
A new group sustainability committee was set up in the year,
chaired by the CFO, together with separate working groups focused
on key aspects such as facilities, mobility and data, and social
impact. Our work this year has enabled us to gain a better
understanding of our environmental footprint, set Scope 1 and Scope
2 targets and enhance our TCFD reporting. These targets, which
comprise 100% renewable electricity and a 10% reduction in our
directly controlled emissions by 2027, sit alongside our existing
commitments to reduce waste to landfill and efforts to increase
reuse and repair rather than replacement and recycling across the
Group.
Financial strength
Our strong cashflows and balance sheet supports business growth,
a progressive dividend as well as share buybacks. These support
agility and responsiveness both in our fleet acquisition strategies
and ability to execute non-organic expansion. With a strong fixed
asset profile and resilient cashflows, we offer an attractive
profile to lenders. We extended our bank facility by an additional
12 months to 2026 in October, which gave further flexibility and
duration to our borrowings, where 62% of our total facilities are
fixed, with maturities up to 2031.
The Group has a conservative approach to capital allocation
which has served us well, and leverage has remained well within our
1-2x target range, at 1.5x at the year end. Subject to shareholder
approval, the Board has proposed a final dividend of 16.5p per
share (2022: 15.0p) to be paid on 29 September 2023 to shareholders
on the register as at close of business on 1 September 2023,
bringing the total dividend to 24.0p (2022: 21.0p), a 14.3%
increase on the prior year.
During the year we extended the share buyback programme
announced in March 2022 from the initial GBP30m to GBP60m. This
programme was completed in December 2022 having acquired 16.9m
shares equating to 7% of ordinary share capital, a risk-free
enhancement of shareholder returns. Presently, we are seeing many
opportunities to grow value for the long term, although we continue
to view buybacks as a useful element within our capital allocation
framework alongside a progressive dividend and it will be kept
under review.
Financial review
Group revenue and EBIT
2023 2022 Change Change
Year ended 30 April GBPm GBPm GBPm %
------------------------------ ------- ------- ------ --------
Revenue - Vehicle hire 610.5 563.3 47.2 8.4%
------------------------------ ------- ------- ------ --------
Revenue - Vehicle sales 152.9 149.9 3.0 2.0%
------------------------------ ------- ------- ------ --------
Revenue - Claims and services 726.3 530.3 196.0 37.0%
------------------------------ ------- ------- ------ --------
Total revenue 1,489.7 1,243.6 246.1 19.8%
------------------------------ ------- ------- ------ --------
Rental profit 102.3 91.7 10.6 11.6%
------------------------------ ------- ------- ------ --------
Disposal profit 51.5 50.1 1.4 2.7%
------------------------------ ------- ------- ------ --------
Claims and services profit 44.5 31.8 12.7 40.1%
------------------------------ ------- ------- ------ --------
Corporate costs (11.6) (9.6) (2.0) 21.4%
------------------------------ ------- ------- ------ --------
Underlying operating profit 186.7 164.0 22.7 13.8%
------------------------------ ------- ------- ------ --------
Income from associates 2.5 3.9 (1.4) (34.8%)
------------------------------ ------- ------- ------ --------
Underlying EBIT 189.2 167.9 21.3 12.7%
------------------------------ ------- ------- ------ --------
Underlying EBIT margin[1] 14.2% 15.4% (1.2ppt)
------------------------------ ------- ------- ------ --------
Statutory EBIT 202.0 150.8 51.2 34.0%
------------------------------ ------- ------- ------ --------
Revenue
Total Group revenue, including vehicle sales, of GBP1,489.7m was
19.8% higher than prior year while revenue excluding vehicle sales
of GBP1,336.9m (2022: GBP1,093.6m), was 22.2% higher than the prior
year.
Hire revenues increased 8.4% mainly due to higher VOH and
pricing actions to address cost inflation; Group VOH was 1.8%
higher than the prior year, with continued supply challenges
constraining Northgate UK&I, while Northgate Spain was able to
grow, reflecting greater availability of new vehicles. Claims and
services revenue growth of 37.0% reflected higher activity
including increased volumes from new business wins which have
launched in the past 12 months, and an industry-wide rise in
chargeable costs reflecting inflation across the supply chain.
Group vehicle sales revenue increased by 2.0% due to a 9.6%
increase in the number of vehicles sold being partially offset by a
change in mix of vehicles sold and softening residual values in the
UK. The total fleet increased 3.4% in the year, up over 4,000
vehicles, including those acquired through leasing, with outright
fleet purchases of 23,100 (2022: 23,600).
EBIT
Statutory EBIT was up 34.0%, while underlying EBIT of GBP189.2m
grew 12.7% compared to the prior year; reflecting strong rental
performance and higher volumes in Redde. The statutory EBIT
includes a GBP46.5m credit (2022: GBPnil) for adjustments to
depreciation rates, amortisation on acquired intangible assets of
GBP20.2m (2022: GBP19.8m) and other exceptional items of GBP13.5m
(2022: GBP2.7m credits including GBP0.4m credit for gain on bargain
purchase).
Rental profit increased GBP10.6m to GBP102.3m (2022: GBP91.7m)
with a GBP2.5m increase in Northgate UK&I and an GBP8.1m
increase in Northgate Spain. Redde saw volume growth across its
product offerings, resulting in an GBP11.4m increase in underlying
EBIT, including income from associates to GBP47.0m (2022:
GBP35.6m).
Total disposal profits for the year of GBP51.5m were 2.7% higher
than the prior year with 18,200 vehicles sold (2022: 16,600) with
residual values remaining higher than historical pre-COVID-19
levels.
Northgate UK&I
Year ended 30 April 2023 2022 Change
KPI ('000) ('000) %
--------------------------- ------ ------ --------
Average VOH 48.9 50.2 (2.6%)
Closing VOH 46.5 49.2 (5.5%)
Average utilisation % 93% 92% 1ppt
Year ended 30 April 2023 2022 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
--------------------------- ------ ------ --------
Revenue - Vehicle hire[2] 367.7 346.6 6.1%
Revenue - Vehicle sales 104.9 111.8 (6.1%)
------ ------ --------
Total revenue 472.6 458.4 3.1%
Rental profit 55.6 53.1 4.7%
Rental margin % 15.1% 15.3% (0.2ppt)
Disposal profit 37.8 44.8 (15.8%)
Underlying EBIT 93.4 98.0 (4.7%)
EBIT margin %[3] 25.4% 28.3% (2.9ppt)
ROCE % 16.3% 17.5% (1.2ppt)
--------------------------- ------ ------ --------
Highlights
Rental revenue grew 6.1% in the year and was achieved through
optimised utilisation and active management of available fleet with
a continued focus on selected market segments and key clients; this
was also supported by carefully targeted and communicated rate
increases to address cost inflation. This enabled average revenue
per vehicle to increase 9% on the prior year and maintain rental
margin above the long-term target rate of 15%.
Managed ageing of the fleet also allowed greater support for
strong customer demand throughout the year when vehicles remained
in short supply and average VOH of 48,900 was 2.6% lower than the
prior year. This was echoed across the industry, with UK LCV
registrations being over 20% lower than FY2022, and touching levels
last seen in 2014. This lack of supply continues to support
residual values however, which although softening in the year, are
likely to remain above pre-COVID-19 levels in the medium term.
The business continues to increase income from its range of
value-added services. During the year vehicles under fleet and
accident management increased by over 150% and our telematics
offering increased by 10%, exceeding 10,000 chargeable units for
the first time. We have succeeded in expanding cross platform
products and services across the customer base and have also
expanded our range of services in Ireland.
We have grown our EVs on hire by 36%, and supported customers
embarking on their transition to electric vehicles through a range
of services. These include consultancy on EV suitability for
specific purposes and routes using sophisticated modelling, driver
training services, installation of charging points and a series of
EV Open Days around the country inviting customers to drive a range
of electric vans and to consult with our experts on how to manage
the transition.
Our ChargedEV business installed over 6,700 charging points in
the year and was impacted by the slowdown in the delivery of
electric vehicles to customers seeking charging solutions, this
situation is now easing. The business has won a number of new
referral partners and supply contracts, as well as moving to
broaden its propositions and reach, including supporting a
Northgate bundled EV and charging solution. This includes moving
into commercial installations and preparing to add solar
installations for consumers and commercial clients to its product
range.
Our specialist traffic management vehicle provider, Blakedale
has been successfully integrated into the Group. We have increased
fleet volumes by over 30% since acquisition in July 2022 and
secured additional chassis supply and production capability to take
advantage of the strong vehicle demand.
EBIT
Northgate UK&I underlying EBIT of GBP93.4m was 4.7% lower
than the prior year (2022: GBP98.0m). Rental profit increased
GBP2.5m to GBP55.6m. Disposal profits decreased GBP7.0m to GBP37.8m
reflecting a 2.6% reduction in the number of vehicle sales.
ROCE was 16.3% (2022: 17.5%) reflecting the decrease in EBIT
mainly as a result of lower disposals.
Rental
Compared to the prior year, hire revenue in Northgate UK&I
increased 6.1% to GBP367.7m (2022: GBP346.6m), with the reduction
in average VOH being offset by an 9.0% increase in average revenue
per vehicle. Rate increases were applied across our full range of
rental products.
Closing VOH of 46,500 was 2,700 lower than the prior year (2022:
49,200) with the shortage in supply of new vehicles holding back
growth in the year.
Northgate UK&I's minimum term proposition accounted for 37%
of average VOH (2022: 36%). 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 15.1% compared to 15.3% in the
prior year. This is in line with medium term guidance and was
supported by pricing increases, partially offset by cost inflation
and investment to grow ChargedEV.
The overall impact of the reduction in VOH and greater rental
revenue per vehicle was a 4.7% increase in rental profits to
GBP55.6m (2022: GBP53.1m).
Management of fleet and vehicle sales
The closing Northgate UK&I rental fleet was 50,800 compared
to 54,200 at 30 April 2022. During the year, 4,800 vehicles were
purchased (2022: 10,000) and 8,600 vehicles were defleeted (2022:
10,400). The leased fleet increased by 400 vehicles.
The average age of the fleet was 36 months at the end of the
year which was six months higher than at 30 April 2022. This was
due to managing the fleet to mitigate impacts of the restricted
market supply reducing both purchases and vehicles sold.
A total of 10,200 vehicles were sold in Northgate UK&I
during the year, 2.6% lower than the prior year (2022: 10,400
vehicles). Disposal profits of GBP37.8m (2022: GBP44.8m) decreased
15.8% versus the prior year, reflecting the reduction in the number
of vehicles sold and softening residual values. Average profit per
unit (PPU) on disposals decreased 13.6% to GBP3,700 (2022:
GBP4,300).
Northgate Spain
Year ended 30 April 2023 2022 Change
KPI ('000) ('000) %
--------------------------- ------ ------ ------
Average VOH 53.6 50.4 6.2%
Closing VOH 54.7 52.2 4.9%
Average utilisation % 92% 92% -
Year ended 30 April 2023 2022 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
--------------------------- ------ ------ ------
Revenue - Vehicle hire 252.7 220.6 14.6%
Revenue - Vehicle sales 47.3 38.1 24.0%
------ ------ ------
Total revenue 300.0 258.7 16.0%
Rental profit 46.7 38.6 20.9%
Rental margin % 18.5% 17.5% 1.0ppt
Disposal profit 13.7 5.3 160.7%
Underlying EBIT 60.4 43.9 37.7%
EBIT margin % [4] 23.9% 19.9% 4.0ppt
ROCE % 12.9% 10.0% 2.9ppt
--------------------------- ------ ------ ------
Highlights
Rental revenue rose 14.6% (11.9% in constant currency), achieved
through both a significant increase in VOH, up 6.2% to 53,600,
together with pricing actions implemented for flexible and term
rental products. With continued positive Spanish GDP growth, demand
remained strong throughout the year and the main priority was
sourcing vehicles to satisfy customers orders, notably within fast
growing sectors including infrastructure and support services.
Northgate expanded its portfolio of vehicle suppliers alongside
strong relationships with existing suppliers, helping gain access
to more new vehicles than in the prior year. De-fleets were
carefully managed, to allow necessary fleet renewal, but also to
support VOH growth to satisfy demand.
The rental margin of 18.5% was supported by the early
implementation of price increases, partially offset by inflation
driven costs building through the year and especially in the second
half. Expectations remain that the margin will over time trend
towards our medium-term guidance of c.15% as the fleet is renewed
but will continue to be supported through strong demand.
Northgate increasingly offered workshop-based repair services to
third parties, utilising spare capacity, and achieved 60% revenue
growth. These revenues were supported by new repair contracts
signed with insurance companies and large fleet owners, including a
referral from a major UK insurance customer, and these
workshop-based repair services have the potential to become a
meaningful multi-year revenue stream. A new agreement was signed
with the utility group, Iberdrola, to support a joint EV and
charging initiative, to help fleet and retail customers migrate to
lower emission vehicles.
Vehicles were predominantly sold through our e-Auction platform,
which provided the most efficient disposal route. Given the
shortfalls in vehicle supply and solid Spanish economic growth,
demand for used vehicles remained strong throughout the entire year
and was reflected in PPUs being double the prior year. Disposal
profits increased to GBP13.7m (2022: GBP5.3m), through both higher
PPUs and increased disposal volumes (up 30%) as the business took
advantage of better sourcing to refresh portions of the fleet.
Alongside investment in the fleet and workshop capability, the
business completed a second phase of solar panels installation,
with over 1.5 MW total generating capacity now installed to date
and delivering over an estimated 20% of annual energy
consumption.
EBIT
Northgate Spain's strong year resulted in underlying EBIT
increasing GBP16.5m, a 37.7% increase compared to the prior year
driven by VOH growth of 6.2% and strong rental margins of 18.5%
compared to 17.5% in the prior year.
The ROCE in Northgate Spain was 12.9% (2022: 10.0%) reflecting
the increase in rental margin, disposal profits and an older
fleet.
Rental business
Hire revenue in Northgate Spain increased 14.6% to GBP252.7m
(2022: GBP220.6m), driven by the increase in average VOH. Closing
VOH increased 4.9% to 54,700.
Northgate Spain's minimum term proposition accounted for around
35% (2022: 35%) of average VOH. The average term of these contracts
is approximately three years, providing visibility of future rental
revenue and earnings.
The rental margin was 1.0ppt higher than the prior year at 18.5%
from pricing increases with some cost inflation offsetting
this.
The impact of increase in hire revenue and rental margin was a
20.9% increase in rental profits to GBP46.7m (2022: GBP38.6m).
Management of fleet and vehicle sales
The closing Northgate Spain rental fleet was 61,400 compared to
57,600 vehicles at 30 April 2022. During the year 13,200 vehicles
were purchased (2022: 10,900) and 9,400 vehicles were de-fleeted
(2022: 5,100 vehicles). The average age of the fleet at the end of
the year was 33 months, two months older 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 7,900 vehicles were sold in Northgate Spain during
the year, 30% higher than the prior year reflecting the sale of
aged fleet following an increase in new fleet purchases.
Disposal profits of GBP13.7m (2022: GBP5.3m) increased 160.7%
due to the increased number of vehicles sold and continued strength
in sales values, resulting in an increase in average profit per
unit (PPU) on disposals to GBP1,700 (2022: GBP900).
Redde
Year ended 30 April 2023 2022 Change
PROFIT & LOSS (Underlying) GBPm GBPm %
--------------------------------- ----- ----- --------
Revenue - Claims and services[5] 738.9 543.7 35.9%
Revenue - Vehicle sales[6] 31.0 - n/a
----- ----- --------
Total revenue 769.8 543.7 41.6%
Gross profit 151.5 127.7 18.7%
Gross margin %(7) 20.5% 23.5% (3ppt)
Operating profit 44.5 31.8 40.1%
Income from associates 2.5 3.9 (34.8%)
Underlying EBIT 47.0 35.6 32.0%
EBIT margin %[7] 6.4% 6.6% (0.2ppt)
ROCE % 15.9% 16.6% (0.7ppt)
--------------------------------- ----- ----- --------
Highlights
Claims and services revenues for the Redde businesses rose 35.9%
in the year; and total revenues grew 41.6% when vehicle sales are
included. This was due to increased volumes and claims activity,
through a near-full return to pre-pandemic traffic volumes, and
from a number of new insurer contracts which went live in the year.
Vehicles sales volumes this year reflected the replacement of fleet
that was deferred last year due to allocating all purchases for
growth.
The multi-year insurer contracts announced in FY2022 all went
live during the first half of the year and will therefore deliver a
full annual contribution next year. The significant resource and
investment in systems, vehicles, people and technology, required to
scale these multi-year contracts have also helped deliver a
differentiated integrated claims proposition, covering the
lifecycle of an accident claim within the Redde businesses. The
recent live contracts represented a mix of direct hire and credit
hire and repair; each with different margin profiles, delivering
significant volume growth for the business.
Redde offers an attractive proposition to insurers and fleets
who are considering partial or full outsource of their accident or
claims management, offering a unique blend of centres of excellence
for claims and a network of physical assets in terms of mobility
and vehicle repair. The increasing scale offers more potential for
operational and system efficiencies to help mitigate inflationary
increases in operational overheads, which were partially shared in
the year with customers and partners through charges such as energy
levies.
Our FMG RS owned repair sites are now an integral part of our
overall market proposition, working alongside our existing
independent network. This integrated approach in the UK provides
insurers with a comprehensive, UK wide solution.
There is a strong focus on growing repair and workshop
technician capacity through our industry-leading apprentice scheme
and internal skills and development programmes alongside other
investments in the business and its network.
EBIT
Revenue for the year (excluding vehicle sales) increased 35.9%
to GBP738.9m (2022: GBP543.7m) reflecting the increase in traffic
volumes seen in the prior year and a continuing extension in hire
length during the year due to the impact of macro challenges in
supply chains for parts and labour.
Gross margin of 20.5% decreased 3ppt (2022: 23.5%) due to volume
mix within the business.
During the year underlying EBIT has increased by 32.0% over the
prior year to GBP47.0m, with the growth in volumes seen last year
continuing throughout the year. The EBIT margin of 6.4% was 0.2ppt
lower than the prior year, and principally reflects the change in
product mix and new contract investment.
Management of fleet
The total fleet in Redde was 18,500 vehicles at the end of the
year, compared to 14,500 at 30 April 2022 with the fleet growth
supporting the increase in the volume of credit hires.
The average fleet age was 15 months (2022: 11 months) reflecting
the lower fleet holding period than in the Northgate businesses due
to the different usage of vehicles and the optimal holding period
of this vehicle mix.
Group PBT and EPS
2023 2022 Change Change
Year ended 30 April GBPm GBPm GBPm %
---------------------------------- ------ ------ ------ ------
Underlying EBIT 189.2 167.9 21.3 12.7%
---------------------------------- ------ ------ ------ ------
Net underlying finance costs (23.3) (16.6) (6.7) 40.4%
---------------------------------- ------ ------ ------ ------
Underlying profit before taxation 165.9 151.3 14.6 9.7%
---------------------------------- ------ ------ ------ ------
Statutory profit before taxation 178.7 132.7 46.0 34.7%
---------------------------------- ------ ------ ------ ------
Underlying effective tax rate 22.6% 17.4% 5.2ppt
---------------------------------- ------ ------ ------ ------
Underlying EPS (p) 55.6 50.8 4.8 9.5%
---------------------------------- ------ ------ ------ ------
Statutory EPS (p) 60.3 41.3 19.0 46.2%
---------------------------------- ------ ------ ------ ------
Profit before taxation
Underlying PBT was 9.7% higher than prior year reflecting the
higher EBIT across the Group. Statutory PBT was 34.7% higher
including a GBP46.5m credit relating to adjustments to depreciation
rates on the older fleet as explained last year and further
below.
Exceptional items
Exceptional costs of GBP13.5m (2022: GBP2.7m credits including
GBP0.4m credit for gain on bargain purchase) were incurred in the
year, with a GBP13.5m charge arising from the impairment of
goodwill, and other intangibles of NewLaw following a strategic
review of the Group.
Further detail on exceptional items is included in the notes to
the financial statements.
Amortisation of acquired intangibles is not an exceptional item
as it is recurring. 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 GBP20.2m (2022: GBP19.8m).
Total credits of GBP46.5m (2022: GBPnil) have been excluded from
underlying results in relation to depreciation rate adjustments on
vehicles purchased before FY2021 in order to better compare results
over time as explained further below.
Depreciation rate changes
When a vehicle is acquired, it is recognised as a fixed asset at
its cost net of any discount or rebate received. 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 of vehicles 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. These 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 these differences are within an acceptable
range they 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.
Residual values have increased significantly over the previous
two financial years due to the disruption of new vehicle supply
that 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 and as previously disclosed, a decision was
made to reduce depreciation rates from 1 May 2022 on certain
vehicles remaining on the fleet which were purchased before
FY2021.
The actual phasing of the adjustment will change if these
vehicles are held for a longer or shorter period than anticipated.
The depreciation rate change is expected to impact the statutory
income statement over the remaining holding period of those
vehicles as follows:
GBPm FY2023 FY2024 FY2025 FY2026 FY2027 Total
--------------------------------------------- ------ ------ ------ ------ ------ -------
Reduced depreciation 55.1 46.7 22.3 5.4 0.1 129.6
--------------------------------------------- ------ ------ ------ ------ ------ -------
Reduced disposal profits (8.6) (34.0) (50.6) (31.8) (4.6) (129.6)
--------------------------------------------- ------ ------ ------ ------ ------ -------
Updated expected impact on statutory EBIT 46.5 12.7 (28.3) (26.4) (4.5) -
--------------------------------------------- ------ ------ ------ ------ ------ -------
Previously expected impact on statutory EBIT 46.8 (9.4) (29.8) (6.7) (0.9) -
--------------------------------------------- ------ ------ ------ ------ ------ -------
No further depreciation rate changes have been made on the
existing fleet since the impact on EBIT was outlined last year. The
updated phasing of the adjustment relates entirely to an updated
expectation to hold the older vehicles in the fleet for longer than
originally envisaged.
The impact of the changing depreciation rates on this component
of the fleet will re-phase statutory EBIT over this five-year
period but will have no impact on underlying results, no overall
impact on statutory profit over the life of the fleet and does not
impact cash.
The disposal profits of vehicles purchased since FY2021 are
expected to be broadly in line with original expectations.
Depreciation rates on vehicles purchased in FY2024 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 increased to GBP23.3m (2022:
GBP16.6m) due to higher average debt and the increase in floating
interest rates over the year. The increase in interest rates was
largely sheltered due to holding 62% of borrowing as fixed rate
debt.
Taxation
The Group's underlying tax charge was GBP37.6m (2022: GBP26.3m)
and the underlying effective tax rate was 22.6% (2022: 17.4%). The
statutory effective tax rate was 22.1% (2022: 23.5%).
Earnings per share
Underlying EPS of 55.6p was 4.8p higher than prior year,
reflecting increased profits in the year and a 2.7p impact of the
share buyback programme.
Statutory EPS of 60.3p was 19.0p higher, reflecting the movement
in underlying EPS and the impact of exceptional items and
adjustments to deprecation rates which are not included within the
underlying results.
Business combinations
In July 2022 the Group acquired 100% of the equity capital of
Blakedale Limited for provisional consideration of GBP10.1m. The
provisional fair value of net assets acquired was GBP6.1m resulting
in the recognition of GBP4.0m of goodwill.
Share buyback programme
The Group completed its share buyback programme in December
2022. The Group purchased, and holds in treasury, 16,877,571
ordinary shares (2022: 1,825,991) for a total consideration of
GBP60.5m including GBP7.5m acquired in the prior year. The shares
held in treasury are of par value 50p each, representing 7% of the
Company's issued ordinary share capital.
Group balance sheet
Net assets at 30 April 2023 were GBP994.6m (2022: GBP946.8m),
equivalent to net assets per share of 434p (2022: 388p). Net
tangible assets at 30 April 2023 were GBP752.9m (2022: GBP680.5m),
equivalent to a net tangible asset value of 328p per share (2022:
279p per share).
The calculations above are based on the number of shares in
issue at 30 April 2023 of 246,091,423 (2022: 246,091,423) less
treasury shares of 16,877,571 (2022: 1,825,991).
Gearing at 30 April 2023 was 92.2% (2022: 85.6%) and ROCE was
14.1% (2022: 13.9%).
Group cash flow
Steady state cash generation and free cash flow
2023 2022 Change
Year ended 30 April GBPm GBPm GBPm
--------------------------------------------- ------- ------- ------
Underlying EBIT 189.2 167.9 21.3
--------------------------------------------- ------- ------- ------
Depreciation and amortisation[8] 223.0 198.8 24.2
--------------------------------------------- ------- ------- ------
Underlying EBITDA 412.2 366.7 45.5
--------------------------------------------- ------- ------- ------
Net replacement capex[9] (155.6) (106.7) (48.9)
--------------------------------------------- ------- ------- ------
Lease principal payments[10] (65.1) (43.7) (21.4)
--------------------------------------------- ------- ------- ------
Steady state cash generation 191.5 216.4 (24.9)
--------------------------------------------- ------- ------- ------
Exceptional costs (excluding non-cash items) - (0.7) 0.7
--------------------------------------------- ------- ------- ------
Working capital and non-cash items (0.3) (33.5) 33.2
--------------------------------------------- ------- ------- ------
Growth capex(9) (122.6) (108.6) (14.0)
--------------------------------------------- ------- ------- ------
Taxation (36.6) (27.4) (9.2)
--------------------------------------------- ------- ------- ------
Net operating cash 32.0 46.2 (14.2)
--------------------------------------------- ------- ------- ------
Distributions from associates 3.1 4.1 (1.0)
--------------------------------------------- ------- ------- ------
Interest and other financing (20.6) (30.0) 9.4
--------------------------------------------- ------- ------- ------
Acquisition of business (10.0) (0.5) (9.5)
--------------------------------------------- ------- ------- ------
Free cash flow 4.5 19.8 (15.3)
--------------------------------------------- ------- ------- ------
Dividends paid (52.2) (43.9) (8.3)
--------------------------------------------- ------- ------- ------
Payments to acquire treasury shares (53.0) (7.5) (45.5)
--------------------------------------------- ------- ------- ------
Lease principal payments[11] 65.1 43.7 21.4
--------------------------------------------- ------- ------- ------
Net cash (consumed) generated (35.6) 12.0 (47.6)
--------------------------------------------- ------- ------- ------
Steady state cash generation
Steady state cash generation remained strong at GBP191.5m (2022:
GBP216.4m), driven by underlying EBIT performance, offset by an
increase in net replacement capex.
Net capital expenditure
Net capital expenditure increased by GBP62.9m to GBP278.2m
(2022: GBP215.3m) due to a GBP48.9m increase in net replacement
capex(9) and a GBP14.0m increase in growth capex(9) .
Net replacement capex was GBP155.6m (2022: GBP106.7m), GBP48.9m
higher than the prior year with an increase in the average
replacement cost due to a change in mix of vehicles replaced and a
higher replacement cost due to price inflation.
The net replacement capex outflow was GBP21.8m higher in Spain,
GBP11.8m higher in Redde and GBP15.3m higher in UK&I.
Lease principal payments of GBP65.1m (2022: GBP43.7m) increased
GBP21.4m due to a larger leased fleet size and final payments on
legacy hire purchase contracts.
Free cash flow
Free cash flow decreased by GBP15.3m to GBP4.5m (2022: GBP19.8m)
driven by an increase in net capex as explained above and also
GBP10.0m cash consideration for the Blakedale acquisition.
Removing the impact of growth capex in the year, the underlying
free cash flow of the Group was GBP127.1m compared to GBP128.4m in
the previous year.
Net cash generation
Net cash consumed of GBP35.6m (2022: GBP12.0m generated)
includes GBP52.2m of dividends paid (2022: GBP43.9m) and GBP53.0m
(2022: GBP7.5m) for treasury shares purchased as part of the
previously announced buyback programme.
Net debt
Net debt reconciles as follows:
2023 2022
As at 30 April GBPm GBPm
------------------------------ ----- ------
Opening net debt 582.5 530.3
------------------------------ ----- ------
Net cash consumed (generated) 35.6 (12.0)
------------------------------ ----- ------
Other non-cash items 57.8 76.8
------------------------------ ----- ------
Exchange differences 18.5 (12.6)
------------------------------ ----- ------
Closing net debt 694.4 582.5
------------------------------ ----- ------
Closing net debt increased by GBP111.9m in the year driven by
net cash consumed, non-cash items and exchange differences. Other
non-cash items consist of GBP56.8m of new leases acquired and
GBP1.0m of other items. Foreign exchange movements increased net
debt by GBP18.5m.
Borrowing facilities
As at 30 April 2023 the Group had headroom on facilities of
GBP290m, with GBP544m drawn (net of available cash balances)
against total facilities of GBP834m as detailed below:
Facility Drawn Headroom Borrowing
GBPm GBPm GBPm Maturity cost
------------------- -------- ----- -------- --------------- ---------
UK bank facilities 490 202 288 Nov 26 6.0%
------------------- -------- ----- -------- --------------- ---------
Loan notes 330 330 - Nov 27 - Nov 31 1.3%
------------------- -------- ----- -------- --------------- ---------
Other loans 14 12 2 Nov 23 2.8%
------------------- -------- ----- -------- --------------- ---------
834 544 290 3.1%
------------------- -------- ----- -------- --------------- ---------
The other loans drawn consist of GBP11m of local borrowings in
Spain which were renewed for a further year in November 2022 and
GBP0.5m of preference shares.
The above drawn amounts reconcile to net debt as follows:
Drawn
GBPm
------------------------- -----
Borrowing facilities 544
------------------------- -----
Unamortised finance fees (7)
------------------------- -----
Leases 157
------------------------- -----
Net debt 694
------------------------- -----
The overall cost of borrowings at 30 April 2023 is 3.1% (2022:
1.9%).
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 2023
corresponded to a margin of 1.95% (2022: 1.95%).
The split of net debt by currency was as follows:
2023 2022
As at 30 April GBPm GBPm
--------------------------------------------------------------------- ----- -----
Euro 388.0 373.6
--------------------------------------------------------------------- ----- -----
Sterling 313.2 216.8
--------------------------------------------------------------------- ----- -----
Borrowings and lease obligations before unamortised arrangement fees 701.2 590.4
--------------------------------------------------------------------- ----- -----
Unamortised finance fees (6.8) (7.9)
--------------------------------------------------------------------- ----- -----
Net debt 694.4 582.5
--------------------------------------------------------------------- ----- -----
There are three financial covenants under the Group's facilities
as follows:
As at 30 April Threshold 2023 Headroom 2022
--------------- --------- ----- ------------------ -----
Interest cover 3x 10.6x GBP133m (EBIT) 14.4x
--------------- --------- ----- ------------------ -----
Loan to value 70% 42% GBP371m (Net debt) 41%
--------------- --------- ----- ------------------ -----
Debt leverage 3x 1.5x GBP186m (EBITDA) 1.4x
--------------- --------- ----- ------------------ -----
The covenant calculations have been prepared in accordance with
the requirements of the facilities to which they relate.
Dividend and capital allocation
Subject to approval, the final dividend proposed of 16.5p per
share (2022: 15.0p) will be paid on 29 September 2023 to
shareholders on the register as at close of business on 1 September
2023.
Including the interim dividend paid of 7.5p (2022: 6.0p), the
total dividend relating to the year would be 24.0p (2022: 21.0p).
The dividend is covered 2.3x 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:
-- Funding organic growth
-- Sustainable and growing dividend
-- Inorganic growth
-- Returning excess cash to shareholders
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.
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 outlined in the
borrowing facilities section 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) held in fixed rates was 62% at 30
April 2023 (2022: 76%).
Foreign exchange risk
The Group's reporting currency is Sterling and 78% of its
revenue was generated in Sterling during the year (2022: 77%). 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 are 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:
2023 2022
GBP:EUR GBP:EUR
--------- -------- --------
Average 1.15 1.18
--------- -------- --------
Year end 1.14 1.19
--------- -------- --------
Going concern
Having considered the Group's current trading, cash flow
generation and debt maturity including severe but plausible stress
testing scenarios (as detailed further in the notes to the
financial statements) the Directors have concluded that it is
appropriate to prepare the Group financial statements on a going
concern basis.
Philip Vincent
Chief Financial Officer
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.
Cash Flow Reconciliation 2023 2022
Year ended 30 April GBPm GBPm
------------------------------------------------------------------------- ------- -------
Underlying EBIT 189.2 167.9
Add back:
Depreciation of property, plant and equipment 175.1 197.2
Depreciation adjustment not included in underlying EBIT 46.5 -
Loss on disposal of assets 0.2 0.6
Intangible amortisation included in underlying operating profit (Note 6) 1.2 1.0
------- -------
Underlying EBITDA 412.2 366.7
Net replacement capex (155.6) (106.7)
Lease principal payments (65.1) (43.7)
------- -------
Steady state cash generation 191.5 216.4
Exceptional items (excluding non-cash items) - (0.7)
Working capital and non-cash items (0.3) (33.5)
Growth capex (122.6) (108.6)
Taxation (36.6) (27.4)
------- -------
Net operating cash 32.0 46.2
Distributions from associates 3.1 4.1
Interest and other financing costs (20.6) (30.0)
Acquisition of business net of cash acquired (10.0) (0.5)
------- -------
Free cash flow 4.5 19.8
Dividends paid (52.2) (43.9)
Purchase of treasury shares for share buyback program (53.0) (7.5)
Lease principal payments 65.1 43.7
------- -------
Net cash (consumed) generated (35.6) 12.0
------- -------
Reconciliation to cash flow statement:
Net (decrease) increase in cash and cash equivalents (3.9) 8.8
Add back:
Receipt of bank loans and other borrowings (96.8) (318.1)
Repayments of bank loans and other borrowings - 277.6
Principal element of lease payments 65.1 43.7
------- -------
Net cash (consumed) generated (35.6) 12.0
------- -------
Cash Flow Reconciliation 2023 2022
Year ended 30 April GBPm GBPm
-------------------------------------------------------------- ------- -------
Reconciliation of capital expenditure
Purchases of vehicles for hire 398.2 292.9
Proceeds from disposals of vehicles for hire (128.4) (128.8)
Proceeds from disposal of other property, plant and equipment (0.7) (2.7)
Purchases of other property, plant and equipment 7.4 52.4
Purchases of intangible assets 1.8 1.4
------- -------
Net capital expenditure 278.2 215.2
------- -------
Net replacement capex(9) 155.6 106.7
Growth capex(9) 122.6 108.6
------- -------
Net capital expenditure 278.2 215.2
------- -------
Northgate Northgate Group
UK&I Spain sub-total
2023 2023 2023
GBP000 GBP000 GBP000
------------------------------------------ ---------------- ------------------- ----------
Underlying operating profit(11) 93,382 60,440 153,822
Exclude:
Vehicle disposal profits (37,746) (13,730) (51,476)
---------------- ------------------- ----------
Rental profit 55,636 46,710 102,346
Divided by: Revenue: hire of vehicles(12) 367,694 252,691 620,385
Rental margin 15.1% 18.5% 16.5%
------------------------------------------ ---------------- ------------------- ----------
Northgate Northgate Group
UK&I Spain sub-total
2022 2022 2022
GBP000 GBP000 GBP000
------------------------------------------ --------- --------- ----------
Underlying operating profit(12) 97,957 43,888 141,845
Exclude :
Vehicle disposal profits (44,841) (5,267) (50,108)
--------- --------- ----------
Rental profit 53,116 38,621 91,737
Divided by: Revenue: hire of vehicles(12) 346,619 220,555 567,174
Rental margin 15.3% 17.5% 16.2%
------------------------------------------ --------- --------- ----------
(12) See Note 1 of the financial statements for reconciliation
of segment underlying operating profit to Group underlying
operating profit.
(13) Revenue: hire of vehicles including intersegment revenue
(see Note 1 of the financial statements).
The following defined terms have been used throughout this
document:
Term Definition
Average capital A two point average of capital employed at last
employed day of the current and previous financial years
-------------------------------------------------------
A business within the Northgate UK&I operating
segment providing specialist traffic management
Blakedale services.
-------------------------------------------------------
Capex Capital expenditure
-------------------------------------------------------
Net assets excluding net debt and acquired goodwill
Capital employed and acquired intangible assets
-------------------------------------------------------
CEO Chief Executive Officer
-------------------------------------------------------
CFO Chief Financial Officer
-------------------------------------------------------
A business within the Northgate UK&I operating
segment providing EV charging and solar infrastructure
ChargedEV and solutions
-------------------------------------------------------
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
Disposal profit(s) of attributable selling costs)
-------------------------------------------------------
The part of the Group which generates vehicles
sales revenue through the Group's online sales
e-Auction platforms
-------------------------------------------------------
EBIT Earnings before interest and taxation
-------------------------------------------------------
Earnings before interest, taxation, depreciation
EBITDA and amortisation
-------------------------------------------------------
Earnings per share. Underlying unless otherwise
EPS stated
-------------------------------------------------------
EV(s) Electric vehicle(s)
-------------------------------------------------------
Calculated as facilities of GBP834m less net
borrowings of GBP544m. Net borrowings represent
net debt of GBP694m excluding lease liabilities
of GBP157m and unamortised arrangement fees of
GBP7m and are stated after the deduction of GBP12m
of cash and cash equivalents which are available
Facility headroom to offset against borrowings
-------------------------------------------------------
A business within the Redde operating segment
FMG RS providing vehicle repair services
-------------------------------------------------------
Net cash generated after principal lease payments
and before the payment of dividends and payments
Free cash flow to acquire treasury shares (comparative updated)
-------------------------------------------------------
A business within the Northgate UK&I operating
segment providing specialised temperature controlled
FridgeXpress vehicle services
-------------------------------------------------------
FY2020 The year ended 30 April 2020
-------------------------------------------------------
FY2021 The year ended 30 April 2021
-------------------------------------------------------
FY2022 The year ended 30 April 2022
-------------------------------------------------------
FY2023 The year ended 30 April 2023
-------------------------------------------------------
FY2024 The year ending 30 April 2024
-------------------------------------------------------
Generally Accepted Accounting Practice: meaning
GAAP compliance with IFRS
-------------------------------------------------------
Calculated as net debt divided by net tangible
Gearing assets
-------------------------------------------------------
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
Growth capex in periods of contraction
-------------------------------------------------------
Half year period. H1 being the first half and
H1/H2 H2 being the second half of the financial year
-------------------------------------------------------
Leases recognised on the balance sheet that would
previously have been classified as finance leases
HP (leases) prior to the adoption of IFRS 16
-------------------------------------------------------
ICE vehicles Vehicles powered by an internal combustion engine
-------------------------------------------------------
IFRS International Financial Reporting Standards
-------------------------------------------------------
Leases recognised on the balance sheet that would
previously have been classified as operating
IFRS 16 (leases) leases prior to the adoption of IFRS 16
-------------------------------------------------------
The Group's share of net profit of associates
Income from associates accounted for using the equity method
-------------------------------------------------------
Light commercial vehicle: the official term used
within the European Union for a commercial carrier
vehicle with a gross vehicle weight of not more
LCV than 3.5 tonnes
-------------------------------------------------------
Includes the total principal payment on leases
Lease principal including those recognised before and after adoption
payments of IFRS 16
-------------------------------------------------------
Net replacement Net capital expenditure other than that defined
capex as growth capex and lease principal payments.
-------------------------------------------------------
Net assets less goodwill and other intangible
Net tangible assets assets
-------------------------------------------------------
As defined under The Paris Agreement, a legally
Net zero binding international treaty on climate change
-------------------------------------------------------
A business within the Redde operating segment
NewLaw providing legal services
-------------------------------------------------------
A financial metric used which is not defined
Non-GAAP under GAAP
-------------------------------------------------------
Vehicles not powered by an internal combustion
Non-ICE vehicles engine
-------------------------------------------------------
The Company and its subsidiaries prior to the
Merger or that part of the business following
Northgate the Merger
-------------------------------------------------------
The Northgate Spain operating segment located
in Spain and providing commercial vehicle hire
Northgate Spain and ancillary services
-------------------------------------------------------
The Northgate UK&I operating segment located
in the United Kingdom and the Republic of Ireland
providing commercial vehicle hire and ancillary
Northgate UK&I services
-------------------------------------------------------
Original Equipment Manufacturer(s): a reference
OEM(s) to our vehicle suppliers
-------------------------------------------------------
The vehicle fleet which is not held under a leasing
Owned fleet contract
-------------------------------------------------------
Profit before taxation. Underlying unless otherwise
PBT stated
-------------------------------------------------------
Profit per unit/loss per unit - this is a non-GAAP
measure used to describe disposal profit (as
PPU defined), divided by the number of vehicles sold
-------------------------------------------------------
Referring to the second quarter (the fourth to
Q2 sixth months) of the financial year
-------------------------------------------------------
The Redde operating segment providing a range
of mobility solutions or the Redde plc company
Redde and its subsidiaries prior to the Merger
-------------------------------------------------------
Calculated as rental profit divided by revenue
Rental margin (excluding vehicle sales)
-------------------------------------------------------
Rental profits EBIT excluding disposal profits
-------------------------------------------------------
Underlying return on capital employed: calculated
as underlying EBIT (see non-GAAP reconciliation)
divided by average capital employed excluding
ROCE acquired goodwill and intangible assets
-------------------------------------------------------
Spain Referring to the Northgate Spain operating segment
-------------------------------------------------------
Underlying EBITDA less net replacement capex
Steady state cash and lease principal payments (included this year,
generation comparative updated)
-------------------------------------------------------
TCFD Taskforce on Climate-Related Financial Disclosures
-------------------------------------------------------
The Company and its subsidiaries following the
Merger and acquisition of the trade and assets
The combined Group of Nationwide
-------------------------------------------------------
The Company Redde Northgate plc
-------------------------------------------------------
The Group The Company and its subsidiaries
-------------------------------------------------------
The Merger/the The acquisition by the Company of 100% of the
merger share capital of Redde plc on 21 February 2020
-------------------------------------------------------
UK&I Referring to the Northgate UK&I operating segment
-------------------------------------------------------
Underlying free
cash flow Free cash flow excluding growth capex
-------------------------------------------------------
Calculated as the average number of vehicles
on hire divided by average rentable fleet in
Utilisation any period
-------------------------------------------------------
VOH Vehicles on hire. Average unless otherwise stated
-------------------------------------------------------
Principal risks and uncertainties
Risk description
A change in economic activity in the countries that the Group
operates or are linked through the supply chain could affect the
demand for our products and services, increase risk of customer
failure, interrupt supply chains or increase the cost base of the
business.
Influencing factors
-- Changes in economic conditions including economic growth forecasts and inflationary pressures
-- Influences of conflicts between countries on global supply chains
-- Changes to driving patterns and vehicle usage could influence
demand for insurance related services
Controls and mitigating activities
-- Flexibility over asset management means that in the event of
a downturn the Group can generate cash and reduce debt by reducing
vehicle purchases or accelerating disposals
-- The business model supports high levels of utilisation and
vehicles returned from customers are redeployed within the
fleet
-- 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 in order to protect margins
-- Credit risk of new and existing customers is continually
assessed and actions taken where necessary. The Group has a
diversified customer base without overreliance 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
Market risk
Risk description
The loss of a major customer or key insurance referral partner
could 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.
Influencing factors
-- Level of competition across vehicle rental and leasing
sectors is broad with low barriers to entry
-- Price competition could impact the Group's ability to attract
and retain customers at appropriate rates of return
-- Increases in insurance referral rates or inability to pass on
cost increases through claims could impact viability of returns
-- Loss of a major customer or insurance referral partner could
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
-- Structural changes to the rental and insurance and legal
services markets such as consolidation, digitalisation or vertical
integration could impact on the viability of the business model
Controls and mitigating activities
-- Comprehensive suite of products and services improves
retention of existing customers and attractiveness to new customers
by differentiating our offer from other providers
-- Minimising the concentration of business customers
-- Maintaining contracts and long term relationships with insurance partners
-- Continual benchmarking of pricing and service offer compared
to competitors and other market participants
-- Pricing controls over target levels of returns and discount authorities
-- Continued evolution of the fleet towards non-ICE vehicles
with development of supplier relationships and investments in
supporting infrastructure
-- Pricing structures remain under review in context of cost
inflation in order to protect margins
-- Credit risk of new and existing customers is continually
assessed and actions taken where necessary. The Group has a
diversified customer base without overreliance 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
Vehicle supply
Risk description
Failure to secure sufficient access to new vehicles at
appropriate pricing would impact on ability to grow, operational
and customer service delivery, and overall returns.
An increase in holding costs either through higher new vehicle
pricing or lower residual values, if not recovered through hire
rate increases or operational efficiencies, would adversely affect
returns.
Influencing factors
-- Challenges around global vehicle supply as a result of
COVID-19 and global conflict in Ukraine have impacted new vehicle
supply and put pressure on new vehicle pricing
-- Residual values remain uncertain during this period of vehicle supply and are also influenced
by economic conditions
Controls and mitigating activities
-- Flexibility over asset management means that in the event of
a downturn the Group can generate cash and reduce debt by reducing
vehicle purchases or accelerating disposals
-- The business model supports high levels of utilisation and
vehicles returned from customers are redeployed within the
fleet
-- 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 the
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 in order to protect margins
-- Transactional foreign exchange exposure is minimised through
sourcing supplies in the same currency as the revenue is
generated
The employee environment
Risk description
Failure to attract, retain, develop and motivate the right
talent will impede the successful operation of the business model
and delivery of the Group's strategic objectives.
Failure to keep employees safe through health and safety risk
management will impact trust with our employees and reputation
across all stakeholders.
Influencing factors
-- External pressures in the labour market creates issues in
attracting and retaining talent and therefore delivery of the
operating model and commercial proposition
-- The diverse operations of a Group growing organically and
inorganically across a wide geographical area increases the
challenge of fostering a shared culture in line with strategic
objectives
-- 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
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 we undertake regular communication of
the 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
-- Widening of rewards and benefits including share ownership,
cost-of-living support and improved annual and family leave
-- Group health and safety team develops policy and processes to
ensure safe working practices and monitors compliance with those
policies
-- Continual development of Group health and safety initiatives
to promote an ongoing safeworking environment
Legal and Compliance
Risk description
Certain activities and arrangements within the Group are
regulated, therefore ongoing compliance with regulations is
required to ensure continuity of business.
Legal cases relating to the provision of credit hire and
insurance related services have provided a precedent framework
which has remained stable for several years. Legal challenges or
changes in legislation could undermine this framework with
consequences for the markets in which the Group operates.
Influencing factors
-- 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
-- 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 and also
adversely impact our reputation across all stakeholder groups
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
IT systems
Risk description
Failure of existing systems, lack of development in new systems
or poor integration of 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 or cyber-attacks, would cause significant reputational
harm across all stakeholders.
Influencing factors
-- The Group's business is dependent on the safe and efficient
processing of a large number of complex transactions and
stakeholder interactions. The effective performance and
availability of core systems is central to the operation of the
business
-- Inadequate IT systems can be at risk from failed processes,
systems or infrastructure and from error, fraud or cyber-crime
-- Growth through inorganic acquisitions increases the
complexity and diversity of operations, IT systems and
infrastructure
Controls and mitigating activities
-- Investments in key IT platforms and systems to ensure
continued operational performance and delivery
-- 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
Recovery of contract assets
Risk description
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.
Influencing factors
-- Recovery of insurance claims requires the orderly running of
insurance markets with claims being settled on commonly agreed
terms
-- Due to the relative strength of insurance companies, they
could influence the speed of settlement of claims in order to
secure better terms
-- Settlement of claims is normally reached through mutual
agreement. Settlement through court arbitrations can be lengthy and
relies on efficient operation of the court process
Controls and mitigating activities
-- Services are only provided to customers after a full risk
assessment process to ensure that the claim will be legally
recoverable from a third party
-- The Group manages collection risk by standardising terms with
third party insurers (protocol agreements) where possible, ensuring
that in addition, any payment delays are monitored and appropriate
action taken to facilitate prompt settlement
Access to capital
Risk description
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.
Influencing factors
-- Debt markets can be volatile in terms of liquidity and pricing
-- 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
-- Debt facilities are diversified across a range of lenders and
close relationships are maintained with key funders of the Group to
ensure continuity of funding
-- Debt facilities have been put in place to provide adequate
headroom and maturities in order to support the strategy of the
Group
-- 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
-- The impact of access to capital on the Group's viability is
considered in the viability statement
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 APRIL 2023
---------------------------------------------------------------------------------------- ---- ----------- ---------
2023 2022
GBP000
Note GBP000 Restated
---------------------------------------------------------------------------------------- ---- ----------- ---------
Revenue: hire of vehicles 1 610,502 563,288
Revenue: sale of vehicles 1 152,894 149,939
Revenue: claims and services 1 726,350 530,330
---------------------------------------------------------------------------------------- ---- ----------- ---------
Total revenue 1 1,489,746 1,243,557
Cost of sales (1,054,173) (897,349)
---------------------------------------------------------------------------------------- ---- ----------- ---------
Gross profit 435,573 346,208
Administrative expenses (excluding exceptional items) (213,658) (193,727)
Net impairment of trade receivables (8,902) (8,255)
Exceptional administrative expenses: impairment of goodwill 6 (5,009) -
Exceptional administrative expenses: impairment of other intangibles 6 (8,482) -
Exceptional administrative expenses: reversal of previous impairment of property, plant
and
equipment 6 - 2,998
Exceptional administrative expenses: other costs 6 - (690)
---------------------------------------------------------------------------------------- ---- ----------- ---------
Total administrative expenses (236,051) (199,674)
---------------------------------------------------------------------------------------- ---- ----------- ---------
Operating profit 199,522 146,534
Share of net profit of associates accounted for using the equity method 2,520 3,866
Gain on bargain purchase 6 - 355
---------------------------------------------------------------------------------------- ---- ----------- ---------
EBIT 1 202,042 150,755
Finance income 90 34
Finance costs (23,405) (18,100)
---------------------------------------------------------------------------------------- ---- ----------- ---------
Profit before taxation 178,727 132,689
Taxation (39,489) (31,144)
Profit for the year 139,238 101,545
---------------------------------------------------------------------------------------- ---- ----------- ---------
Profit for the year is wholly attributable to owners of the
Parent Company. All results arise from continuing operations.
Earnings per share
Basic 260.3p 41.3p
------------------- ----- -----
Diluted 258.7p 40.4p
------------------- ----- -----
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.
The prior year income statement has been restated in order to
separately disclose GBP8,255,000 net impairment of trade
receivables. There was no adjustment to reported profit in the
prior year. The prior year income statement has also been restated
to present GBP19,778,000 of amortisation on acquired intangible
assets within administrative expenses, as this item is not
exceptional as it is recurring.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 APRIL 2023
----------------------------------------------------------------------------------------- -------- --------
2023 2022
GBP000 GBP000
----------------------------------------------------------------------------------------- -------- --------
Amounts attributable to owners of the Parent Company
Profit attributable to the owners 139,238 101,545
Other comprehensive income (expense)
Foreign exchange differences on retranslation of net assets of subsidiary undertakings 23,689 (16,347)
Net foreign exchange differences on long term borrowings held as hedges (17,741) 11,904
Foreign exchange difference on revaluation reserve 54 (41)
Total other comprehensive income (expense) 6,002 (4,484)
------------------------------------------------------------------------------------------ -------- --------
Total comprehensive income for the year 145,240 97,061
------------------------------------------------------------------------------------------ -------- --------
All items will subsequently be reclassified to the consolidated
income statement.
CONSOLIDATED BALANCE SHEET 2023 2022
AS AT 30 APRIL 2023 GBP000 GBP000
-------------------------------- --------- ---------
Non-current assets
Goodwill 113,873 114,926
Other intangible assets 127,828 151,312
Property, plant and equipment 1,332,923 1,161,915
Deferred tax assets 2,061 3,175
Interest in associates 5,207 5,843
Total non-current assets 1,581,892 1,437,171
---------------------------------- --------- ---------
Current assets
Inventories 54,537 18,696
Receivables and contract assets 441,277 359,053
Current tax assets 14,951 7,432
Cash and bank balances 14,122 24,561
Total current assets 524,887 409,742
---------------------------------- --------- ---------
Total assets 2,106,779 1,846,913
---------------------------------- --------- ---------
Current liabilities
Trade and other payables 344,867 246,833
Provisions 822 -
Current tax liabilities 20 3,327
Lease liabilities 49,493 52,524
Borrowings 14,079 21,007
---------------------------------- --------- ---------
Total current liabilities 409,281 323,691
---------------------------------- --------- ---------
Net current assets 115,606 86,051
---------------------------------- --------- ---------
Non-current liabilities
Trade and other payables - 4,509
Provisions 6,609 -
Lease liabilities 107,272 111,755
Borrowings 537,712 421,822
Deferred tax liabilities 51,310 38,375
---------------------------------- --------- ---------
Total non-current liabilities 702,903 576,461
---------------------------------- --------- ---------
Total liabilities 1,112,184 900,152
---------------------------------- --------- ---------
Net assets 994,595 946,761
---------------------------------- --------- ---------
Equity
Share capital 123,046 123,046
Share premium account 113,510 113,510
Treasury shares reserve (60,420) (7,493)
Own shares reserve (9,615) (16,439)
Translation reserve (2,685) (8,633)
Other reserves 330,489 330,435
Retained earnings 500,270 412,335
Total equity 994,595 946,761
---------------------------------- --------- ---------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2023
-------------------------------------------------------------- ---- -------- ---------
2023 2022
Note GBP000 GBP000
-------------------------------------------------------------- ---- -------- ---------
Net cash generated from operations 4 84,322 127,643
Investing activities
Interest received 90 34
Distributions from associates 3,156 4,070
Payment for acquisition of subsidiary, net of cash acquired (10,004) (482)
Proceeds from disposal of other property, plant and equipment 678 2,683
Purchases of other property, plant and equipment (7,362) (52,369)
Purchases of intangible assets (1,765) (1,373)
Net cash used in investing activities (15,207) (47,437)
-------------------------------------------------------------- ---- -------- ---------
Financing activities
Dividends paid (52,220) (43,897)
Receipt of bank loans and other borrowings 96,807 318,056
Repayments of bank loans and other borrowings - (277,617)
Debt issue costs paid (950) (5,428)
Exceptional finance costs - (1,435)
Principal element of lease payments (65,110) (43,659)
Payments to acquire treasury shares (52,927) (7,493)
Proceeds from sale of own shares 1,414 -
Payments to acquire own shares for share schemes - (9,933)
Net cash used in financing activities (72,986) (71,406)
Net (decrease) increase in cash and cash equivalents (3,871) 8,800
-------------------------------------------------------------- ---- -------- ---------
Cash and cash equivalents at 1 May 15,769 6,821
Effect of foreign exchange movements (217) 148
Cash and cash equivalents at 30 April (a) 11,681 15,769
-------------------------------------------------------------- ---- -------- ---------
(a) Cash and cash equivalents comprise:
Cash and bank balances 14,122 24,561
Bank overdrafts (2,441) (8,792)
Cash and cash equivalents 11,681 15,769
-------------------------------------------------------------- ---- -------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 APRIL 2023
Share capital Treasury
and share shares Own shares Translation Other Retained
premium reserve reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ------------- -------- ---------- ----------- --------- --------- --------
Total equity
at 1 May 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 - (7,493) (10,567) - - - (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
and 1 May 2022 236,556 (7,493) (16,439) (8,633) 330,435 412,335 946,761
Share options
fair value charge - - - - - 4,647 4,647
Share options
exercised - - - - - (5,410) (5,410)
Dividends paid - - - - - (52,220) (52,220)
Net purchase
of shares - (52,927) 1,414 - - - (51,513)
Transfer of shares
on vesting of
share options - - 5,410 - - - 5,410
Deferred tax
on share based
payments recognised
in equity - - - - - 1,680 1,680
Total comprehensive
income - - - 5,948 54 139,238 145,240
--------------------- ------------- -------- ---------- ----------- --------- --------- --------
Total equity
at 30 April 2023 236,556 (60,420) (9,615) (2,685) 330,489 500,270 994,595
--------------------- ------------- -------- ---------- ----------- --------- --------- --------
Other reserves comprise the other reserve, capital redemption
reserve, revaluation reserve and merger reserve.
NOTES TO THE ACCOUNTS
FOR THE YEARED 30 APRIL 2023
1. SEGMENTAL ANALYSIS
Northgate Northgate
UK&I Spain Redde Corporate Eliminations Total
2023 2023 2023 2023 2023 2023
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------- --------- ------- --------- ------------ ---------
Revenue: hire of vehicles 357,811 252,691 - - - 610,502
Revenue: sale of vehicles 104,945 47,280 669 - - 152,894
Revenue: claims and
services - - 726,350 - - 726,350
-------------------------- --------- --------- ------- --------- ------------ ---------
External revenue 462,756 299,971 727,019 - - 1,489,746
Intersegment revenue 9,883 - 42,793 - (52,676) -
-------------------------- --------- --------- ------- --------- ------------ ---------
Total revenue 472,639 299,971 769,812 - (52,676) 1,489,746
-------------------------- --------- --------- ------- --------- ------------ ---------
Timing of revenue
recognition:
At a point in time 104,945 47,280 291,996 - - 444,221
Over time 357,811 252,691 435,023 - - 1,045,525
-------------------------- --------- --------- ------- --------- ------------ ---------
External revenue 462,756 299,971 727,019 - - 1,489,746
-------------------------- --------- --------- ------- --------- ------------ ---------
Underlying operating
profit (loss) 93,382 60,440 44,521 (11,670) - 186,673
-------------------------- --------- --------- ------- --------- ------------ ---------
Share of net profit
of associates accounted
for using the equity
method - - 2,520 - - 2,520
-------------------------- --------- --------- ------- --------- ------------ ---------
Underlying EBIT* 93,382 60,440 47,041 (11,670) - 189,193
-------------------------- --------- --------- ------- --------- ------------ ---------
Exceptional items
(Note 6) (13,491)
Amortisation on acquired
intangible assets (20,206)
Depreciation adjustment
(Note 6) 46,546
-------------------------- --------- --------- ------- --------- ------------ ---------
EBIT 202,042
Finance income 90
Finance costs (23,405)
Profit before taxation 178,727
-------------------------- --------- --------- ------- --------- ------------ ---------
1. SEGMENTAL ANALYSIS (Continued)
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
-------------------------- --------- --------- ------- --------- ------------ ---------
Share of net profit
of associates accounted
for using the equity
method - - 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
(Note 6) 355
-------------------------- --------- --------- ------- --------- ------------ ---------
EBIT 150,755
Finance income 34
Finance costs (18,100)
Profit before taxation 132,689
-------------------------- --------- --------- ------- --------- ------------ ---------
*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
2023 2022
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 139,238 101,545
-------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares for
the purposes of basic earnings per share 230,778,502 245,997,303
Effect of dilutive potential ordinary shares
- share options 6,290,275 5,242,307
-------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 237,068,777 251,239,610
-------------------------------------------------- ----------- -----------
Basic earnings per share 60.3p 41.3p
-------------------------------------------------- ----------- -----------
Diluted earnings per share 58.7p 40.4p
-------------------------------------------------- ----------- -----------
The calculated weighted average number of ordinary shares for
the purposes of basic earnings per share includes a reduction of
15,312,921 shares (2022: 94,120) relating to treasury shares
acquired during the year and a reduction of 3,411,660 shares (2022:
nil) for shares held in employee trusts.
3. DIVIDS
An interim dividend of 7.5p per ordinary share was paid in
January 2023 (2022: 6.0p). The Directors propose a final dividend
for the year ended 30 April 2023 of 16.5p per ordinary share (2022:
15.0p), which is subject to approval at the Annual General Meeting
and has not been included as a liability as at 30 April 2023. Based
upon the shares in issue at 30 April 2023 and excluding treasury
shares and shares in employee trust where dividends are waived,
this equates to a final dividend payment of GBP37m (2022: GBP35m).
No dividends have been paid between 30 April 2023 and the date of
signing the financial statements.
4. NOTES TO THE CASH FLOW STATEMENT
FOR THE YEARED 30 APRIL 2023
2023 2022
Net cash generated from operations GBP000 GBP000
---------------------------------------------------------------------------------------------- --------- ---------
Operating profit 199,522 146,534
Adjustments for:
Depreciation of property, plant and equipment 175,066 197,162
Net reversal of previous impairment of property, plant and equipment - (2,998)
Net impairment of goodwill 5,009 -
Net impairment of other intangibles 8,482 -
Amortisation of intangible assets 21,408 20,771
Loss on disposal of other property, plant and equipment 218 581
Loss on disposal of intangible assets - 34
Share options fair value charge 4,647 3,695
---------------------------------------------------------------------------------------------- --------- ---------
Operating cash flows before movements in working capital 414,352 365,779
Decrease (increase) in non-vehicle inventories 273 (1,169)
Increase in receivables (81,981) (54,400)
Increase in payables 71,810 22,253
Increase in provisions 7,431 -
---------------------------------------------------------------------------------------------- --------- ---------
Cash generated from operations 411,885 332,463
Income taxes paid, net (36,640) (27,382)
Interest paid (21,150) (13,275)
---------------------------------------------------------------------------------------------- --------- ---------
Net cash generated from operations before purchases of and proceeds from disposal of vehicles
for hire 354,095 291,806
Purchases of vehicles for hire (398,187) (292,935)
Proceeds from disposals of vehicles for hire 128,414 128,772
---------------------------------------------------------------------------------------------- --------- ---------
Net cash generated from operations 84,322 127,643
---------------------------------------------------------------------------------------------- --------- ---------
5. ANALYSIS OF CONSOLIDATED NET DEBT
---------------------------------------------------------------------------------------------- --------- ---------
2023 2022
GBP000 GBP000
---------------------------------------------------------------------------------------------- --------- ---------
Cash and bank balances (14,122) (24,561)
Bank overdrafts 2,441 8,792
Bank loans 218,403 118,573
Loan notes 329,854 314,264
Lease liabilities 156,765 164,279
Cumulative preference shares 500 500
Confirming facilities 593 700
---------------------------------------------------------------------------------------------- --------- ---------
Consolidated net debt 694,434 582,547
---------------------------------------------------------------------------------------------- --------- ---------
6. EXCEPTIONAL ITEMS
Details of exceptional items recognised in the income statement
are as follows:
2023 2022
GBP000 GBP000
----------------------------------------------------------------- --------- ---------
Impairment of goodwill 5,009 -
Impairment of other intangibles 8,482 -
Reversal of previous impairment of property, plant and equipment - (2,998)
Other costs - 690
Exceptional administrative expenses (credits) 13,491 (2,308)
2023 2022
GBP000 GBP000
----------------------------------------------------------------- --------- ---------
Impairment of NewLaw intangibles 13,491 -
Restructuring credits - (3,545)
FMG RS set up and integration costs - 1,237
----------------------------------------------------------------- --------- ---------
Total exceptional administrative expenses (credits) 13,491 (2,308)
Gain on bargain purchase - (355)
----------------------------------------------------------------- --------- ---------
Total exceptional items included within EBIT 13,491 (2,663)
Exceptional finance costs - refinancing expenses - 1,463
----------------------------------------------------------------- --------- ---------
Total pre-tax exceptional items 13,491 (1,200)
Tax charge (credits) relating to exceptional items (2,065) 228
----------------------------------------------------------------- --------- ---------
Cash expenses - 2,125
Non-cash (credits) expenses 13,491 (3,325)
----------------------------------------------------------------- --------- ---------
Total pre-tax exceptional items 13,491 (1,200)
----------------------------------------------------------------- --------- ---------
Details of exceptional items recognised in the income statement
are as follows:
Impairment of the NewLaw business
Following a strategic business review, the carrying amount of
assets relating to the NewLaw CGU was considered to be below its
recoverable amount and therefore an impairment charge of
GBP5,009,000 (2022: GBPnil) and GBP8,482,000 (2022: GBPnil), for
goodwill and other intangibles respectively, was recognised as an
exceptional item in the income statement. The Group also reassessed
the useful lives of property, plant and equipment relating to the
NewLaw CGU and determined that no change in the useful lives is
required.
Amortisation on acquired intangible assets
Amortisation on acquired intangible assets of GBP20,206,000
(2022: GBP19,778,000) 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 inorganic
growth. The revenue and operating costs of these acquisitions are
included within underlying results. Amortisation of intangible
assets of GBP1,202,000 (2022: GBP993,000) which does not relate to
acquisitions is included within underlying profit.
Depreciation rate changes
The Group has adjusted the depreciation rates from 1 May 2022 on
vehicles remaining on the fleet which were purchased before FY2021.
This adjustment is explained further in the Finance Review. The
depreciation adjustment is a credit to the income statement of
GBP46,546,000 (2022: GBPnil), it is not classified as an
exceptional item. However, it is excluded from underlying results
in order to provide a better comparison of results between
periods.
Prior year exceptional items
Restructuring credits
In 2022 the Group recognised exceptional restructuring credits
of GBP3,545,000 of which a credit of GBP3,280,000 arose in Redde
and a credit of GBP265,000 in Northgate UK&I. These costs were
incurred in relation to restructuring activities that were
undertaken during the year as part of the integration and
reorganisation of the combined Group.
FMG RS set up and integration costs
In 2022 the Group incurred costs of GBP1,237,000 in relation to
the set up of FMG RS and integration of the business, including
redundancies.
Gain on bargain purchase
In 2022 a gain on bargain purchase of GBP355,000 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
In 2022 the Group incurred exceptional financing costs of
GBP1,463,000 attributable costs incurred on termination of loan
notes and amortisation of arrangement fees as a result of the
refinancing which took place in November 2021.
7. EVENTS AFTER THE REPORTING PERIOD
On 2 May 2023, the Group acquired 100% of the equity interests
of FridgeXpress (UK) Limited for an initial consideration of
GBP5.0m.
8. BASIS OF PREPARATION
These financial statements have been prepared in accordance with
United Kingdom adopted International Financial Reporting Standards
('IFRS') and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS.
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 2023.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 April 2023 or
2022 but is derived from those accounts. Statutory accounts for
2022 have been delivered to the Registrar of Companies and those
for 2023 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 2023 has been prepared on a basis consistent with that
presented in the annual report for the year ended 30 April
2022.
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 and strong momentum has
continued throughout the year ended 30 April 2023.
The Board continues to take a measured approach to strategic
risk, as the Group has matured through the 'Focus', 'Drive' and
'Broaden' elements of its strategy and building a platform for the
next phase our strategy, consolidating significant contract wins
through our enhanced commercial offering, and diversifying the
service such as through the acquisition of Blakedale, 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.
Strong financial position
The maturity of the Group's GBP475m principal banking facility
was extended during the year and has a maturity date of November
2026. Private placement loan notes of EUR375m give a longer profile
of maturities spread across 6, 8 and 10 years. Headroom against the
Group's existing banking facilities at 30 April 2023 was GBP290m.
This compares with headroom of GBP382m at 30 April 2022 and
reflects the ongoing investment in fleet for growth. Given the
financial strength of the Group, we do not anticipate any material
deterioration in the 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
-- A 2% reduction in pricing of rental hire rates
-- A 2% increase above plan assumptions in the purchase cost of
vehicles and other operating expenses not passed on to
customers
-- A 5% reduction to assumptions in the plan for the residual value of used vehicles
-- A 10% 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 1% increase in floating interest rates above what was included within the plan
-- 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 was impacted by COVID-19 lockdowns. Volumes have now
recovered to a normalised level. Over the COVID period overall
profitability and cash generation of the Group increased due to the
resilience of the business model. The strategic plan therefore does
not assume further lockdowns will occur. The resilience of the
Group shown through previous lockdowns gives us confidence that we
would be well prepared should this eventuality occur again.
The above scenarios took into account the effectiveness of
mitigating actions that would be reasonably taken, such as reducing
variable costs that are directly related to revenue, but did not
take into account further management actions that would likely be
taken, such as a change to the indirect cost base of the Group or a
reduction in capital expenditure and ageing out of the vehicle
fleet, both of which would generate cash and reduce debt.
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 2026. The directors also
considered it appropriate to prepare the financial statements on
the going concern basis.
([1]) Calculated as underlying EBIT divided by revenue
(excluding vehicle sales)
[2] Including intersegment revenue of GBP9.9m (2022:
GBP3.9m)
[3] Calculated as underlying EBIT divided by revenue (excluding
vehicle sales)
[4] Calculated as underlying EBIT divided by revenue (excluding
vehicle sales)
[5] Including intersegment revenue of GBP12.5m (2022:
GBP13.4m)
[6] Including intersegment revenue of GBP30.3m (2022:
GBPnil)
[7] Gross profit margin calculated as underlying gross profit
divided by total revenue. EBIT margin calculated as underlying EBIT
divided by total revenue excluding vehicle sales
[8] Depreciation and amortisation excludes GBP46.5m (2022:
GBPnil) of depreciation adjustment credits and GBP20.2m (2022:
GBP19.8m) of amortisation of acquired intangibles both excluded
from underlying results
[9] Net replacement capex is total capex less growth capex.
Growth capex represents the cash consumed in order to grow the
fleet or the cash that is generated if the fleet size is reduced in
periods of contraction (excluding leased fleet)
[10] Lease principal payments are included so that steady state
cash generation includes all maintenance capex irrespective of
funding method
[11] Lease principal payments are added back to reflect the
movement on net debt
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END
FR UPUPWMUPWPUC
(END) Dow Jones Newswires
July 05, 2023 02:00 ET (06:00 GMT)
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