Media

Interim results for the six months ended 31 October 2021

1 December 2021

Strong performance across the Group; successfully leveraging our scaled platform to drive growth

Redde Northgate (LSE:REDD), the leading integrated mobility solutions platform providing services across the vehicle lifecycle, is pleased to announce its Interim Results for the six months ended 31 October 2021 (‘H1 2022’ or the ‘period’).

Financial Highlights

¹ Refer to GAAP reconciliation and Glossary of terms note. Underlying excludes exceptional items and amortisation on acquired intangible assets.
² Net debt includes £116.8m (H1 2021: £69.9m) of IFRS 16 liabilities and is higher than H1 2021 due to the leases taken on following the acquisition of certain business and assets of Nationwide in September 2020.
³ Excluding IFRS 16 (leases) as defined in the Glossary

• Trading for the first half was ahead of the Board’s expectations, with strong momentum across the Group
• Revenue (excluding vehicle sales) grew 21.9% to £522.9m (H1 2021: £429.0m)
• Total Group revenue, including vehicle sales, grew 10.2% to £612.9m (H1 2021: £556.0m)
• Underlying EBIT grew 79.2%, underlying PBT grew 94.4% and underlying EPS grew 94.7%
• ROCE increased to 12.5% (H1 2021: 8.1%) due to higher profitability in the Group, strong disposals and a leaner cost base following strategic actions as part of the Focus initiative
• Significant rental margin progression in both Northgate UK&I, 7.3 ppt increase and Northgate Spain, 2.7 ppt increase, driven by underlying strength in the rental business and a leaner cost base
• Steady state cash generation improved 15.5% to £93.5m (H1 2021: £81.0m) and free cashflow reduced £66.1m to an outflow of £7.6m (H1 2021: £58.6m) due to investment in the fleet to meet demand
• Group net debt, excluding IFRS 16 leases, stable at £470.4m, 1.5x net debt to EBITDA (H1 2021: 1.6x) well within target leverage range of 1.0x to 2.0x
• Interim dividend of 6.0p (3.4p in prior period) declared, representing 50% of prior year final dividend, reflecting the Board’s confidence in Group outlook

Business highlights

• Significant new multi-year contract wins in the period including wins with Tesco, Admiral and another major insurer with lifetime contract revenues in excess of £200m leveraging the Group’s increased platform scale and full-service offering
• Accident and incident volumes have continued to recover reaching approximately 90% of preCOVID-19 levels driving the ongoing performance of Redde
• High rental demand and reduced vehicle supply has lowered volumes of vehicles for disposal, albeit at high sales price. This trend is likely to remain for the rest of the financial year
• Electric and hybrid vehicles in the fleet have increased 187% to approximately 2% of the overall fleet and the Group has signed a memorandum of understanding with an electric vehicle manufacturer for the supply of 5,000 electric LCVs
• Operational cost inflation is being effectively managed across the Group
• The Group continues to assess bolt-on acquisitions to extend products and services and to increase supply for the fleet

Refinancing

In November 2021, the Group completed a comprehensive refinancing of its debt arrangements, to optimise its debt portfolio and to support the next phase of the Group’s strategy.

The Group signed two new sources of debt, providing it with £792m of facilities, an increase of £104m on the previous position:

• €375m of new debt Private Placements, with maturities spread across 6, 8 and 10 years. These were achieved at a highly competitive average interest rate of just 1.32%
• £475m bank Revolving Credit Facility, with a four year maturity to November 2025 and on improved terms compared with the previous facility

The refinancing results in a c. 50bps reduction in the drawn interest rate as at the date of the refinancing to 1.5%; a significant lengthening of our maturities and a greater diversification of our sources of debt. This creates great flexibility and a solid financing platform to allow the Group to invest in the business as well as take advantage of opportunities in the market as they arise for inorganic growth.

Martin Ward, CEO of Redde Northgate, commented:

“We are pleased to have delivered a strong H1 performance driven by high demand for our products and services and underlying margin gains.

“The underlying margin improvements on our rental assets, both in the UK&I and Spain, look sustainable given the cost synergies extracted from the business and our focus on driving value. ROCE continues to grow, up 4.4ppts from H1 2021, and input costs inflation is being successfully managed. Given the well-publicised new vehicle supply constraints our vehicle assets are in demand for rental services and also through our sales network, which is driving further value. In addition to our new van supplies, over the next 12-18 months, we expect to supplement our fleet stock through the selective acquisition of existing rental assets in the market where this adds value.

“Redde volumes have continued to grow having now reached approximately 90% of pre COVID-19 levels which is in line with our expectations. Overall, there is good momentum in the business as we enter H2 and our key strategic areas of Focus, Drive and Broaden are delivering meaningful results.

“Strategically, we have made significant progress leveraging the capabilities of our integrated mobility platform to secure multi-year contract wins which will increase our market share. Our combined product and services offering is unique and unrivalled in terms of scale and infrastructure capabilities.”

Outlook

The work undertaken since the Merger has built a strong platform for further growth, with increasingly large contract wins demonstrating the appeal of the integrated mobility services offering and driving continued momentum across the business. We expect underlying PBT to be at least in line with consensus for the full year. The Board continues to look forward with significant optimism for the future prospects of the Group.

Analyst Briefing

A remote presentation for sell-side analysts will be held at 9.30am today, 1 December 2021. 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.