19 May 2020
REDDE NORTHGATE
PLC
(“Redde Northgate” or the “Group” or
the “Company”)
Pre-close Trading
Update
Redde Northgate plc (LSE:REDD), the integrated mobility
solutions provider, today announces its pre-close trading update
for the year ended 30 April 2020.
Group trading
As stated in our announcement of 24 March
2020, up until the end of February, trading for the Group
was in line with market expectations for the financial year.
However, as previously announced, there was an impact from Covid-19
on trading in March and April, and the Group has suspended all
forward guidance until the impacts of Covid-19 on the business
become clearer.
Based on unaudited results, Redde Northgate can report that
revenues from the Northgate business were 4% lower than the prior
year, including the impact of Covid-19 in March and April.
Total Group revenues were 5% higher than the prior year, with the
increase year on year attributable to Redde’s performance, which is
included in Group trading following completion of the merger on 21
February 2020.
Further, up until the end of February, underlying Group PBT
margin was in line with Board expectations. However, in March and
April underlying Group PBT margin was lower, affected by the
aggregate impact of reductions in trading volumes, flexible support
schemes provided to customers (detailed below) and cost actions
implemented.
Covid-19 update
As announced on 24 March 2020, the
Board took decisive actions to put measures in place to protect the
welfare of our employees and to mitigate the financial impact of
Covid-19 on the Group.
In detail, these actions included implementing new guidelines
and controls to enable employees to work with social distancing in
branches and offices; furloughing employees across all areas of the
business as necessary; limiting capital expenditure on new fleet
purchasing for essential requirements only; using nearly new
vehicles to stand in for new purchases where suitable; voluntary
pay reductions across the Board, senior leadership team and
managers; other cost control measures, including a freeze on
recruitment and pay reviews, and limiting of all non-essential
spend and capital expenditure projects.
The Group also announced on 24 March, that it was providing
flexibility to its rental customers to support them through these
difficult times. Our Covid-19 package of support, assessed on
an individual basis, has helped many customers retain rental
vehicles during the current Covid-19 uncertainty on terms that meet
their needs. Whilst in place, the impact of this scheme
on Group rental revenue is approximately £3-4m per month.
Further, a proportion of the Redde fleet of cars has been
deployed to support an NHS and key worker replacement vehicle
scheme launched by a long-standing insurer partner. These support
measures are our way of contributing to the national effort and of
strengthening our bond with customers and business partners at a
time when most needed, and we look forward to continuing to support
them in the future.
However, not all customers could justify continuing with all
their rental vehicles and have naturally made some returns in these
circumstances. The impact of this was reduced as the
Northgate businesses also provided a number of additional vehicles
to support supermarkets, pharmaceutical companies and other
essential businesses to deal with their increased demand. The net
number of vehicles returned to branches from lockdown up until the
end of April was 6% in UK&I and 7% in Spain. These have
been processed and largely held on the fleet pending a final
decision as to whether any fleet is excess to future rental demand
and should be disposed of. The disposal market has mainly
been closed during lockdown, which has reduced revenue from vehicle
sales and disposal profits. Disposal channels are starting to
re-open as lockdown restrictions are eased.
Within the Redde businesses, revenues also reduced, as lockdown
resulted in accident and incident volumes declining steeply as a
consequence of fewer vehicles on the roads and a reduction in road
miles driven. Volumes of accidents and incidents have remained low
during April, but we would expect these to increase as traffic
volumes increase.
Net debt and headroom
Since the announcement on 24 March, the Group has generated
further headroom to its bank facilities, as a result of the cash
and cost measures put in place, increasing the available headroom
from £200m at the end of February to £234m as at the end of April.
The Group continues to operate with considerable flexibility
within its banking covenants.
It is still too early to make any precise assessment as to the
ongoing revenue, earnings and cash impacts Covid-19 will have on
the Group. However, we have undertaken detailed modelling of
various scenarios and are using a base case and downside set of
assumptions to scenario plan outcomes which are evolving and
updated regularly. The current base case assumptions include
lockdown continuing during May and a slow easing of restrictions
over the following two months, then a gradual return to a more
normalised trading environment by the end of the financial year,
whilst the current downside assumptions include two more months of
lockdown to end of July and a slow easing of restrictions over the
following three months, then a gradual return to a more normalised
trading environment over a longer period. Based on the
analysis of the base case and downside case scenarios, we do not
anticipate having to secure any additional funding requirements for
Covid-19 purposes.
Integration
As stated on 24 March, integration plans have started well.
Despite Covid-19, excellent progress has been made in integrating
the businesses, and we have had a very positive start to the
delivery of the run rate cost synergy targets as per the Circular
dated 12 December 2019, as well as
identifying new synergies and cost savings. The Group looks
forward to providing an update on the run rate of savings in its
preliminary results announcement.
In delivering these synergy benefits, the organisational
structure of the Company has been re-shaped to make it more
effective as an enlarged business. A new Group management team has
been appointed for the UK & Ireland business and the experienced Northgate
Spain leadership team has been retained. Support functions
such as HR, IT, fleet and finance are now successfully combined
across the Group in UK&I with enhanced representation on the
management board.
Results and dividend
The Group is planning to announce its preliminary results on
16 September 2020 and publish its
Annual Financial Report shortly thereafter. The Group sees this
delay from its normal reporting timetable as a prudent and
practical measure which is in line with the Temporary Relief
Statement announced by the FCA on 26 March
2020, to allow sufficient preparation time following the
disruption caused by Covid-19.
The Board is aware of the importance of dividends to its
shareholders and, after careful consideration of the factors
impacting this decision, will provide a further update at the time
of the preliminary announcement of results.
Commenting on the trading update, Martin
Ward, CEO Redde Northgate said:
“I continue to be impressed by the effort of our colleagues who
are committed to doing what is necessary, without fuss, in these
difficult times. They have shown a sense of community and
togetherness in supporting our customer and partner organisations
with their mobility requirements during the extended lockdown
period, with many making personal sacrifices to support the Group’s
efforts.
Our liquidity position has grown over the last two months and
the business model has proven to be resilient during these times.
Inevitably, there is going to be an impact from Covid-19 on
revenues and earnings and considerable uncertainty remains.
However, it should not detract from the purpose that we have to
build on our integrated mobility proposition as an enlarged group
and drive opportunities wherever possible. For now, we are doing
what is necessary to preserve cash, protect our financial position
and to secure a long-term future for all our
stakeholders.”
For further information contact:
Buchanan
David Rydell/Jamie Hooper/Tilly
Abraham
+44 (0) 207 466 5000
Notes to Editors:
Redde Northgate plc is a leading integrated mobility solutions
platform formed in February 2020
following the all-share merger of light commercial hire business
Northgate plc and Redde plc, the provider of incident and accident
management, legal and other mobility-related services.
The Group provides mobility solutions and automotive services to
a wide range of businesses and customers spanning the vehicle life
cycle across vehicle supply, service, maintenance, repair,
recovery, accident and incident management and disposal through
sale or salvage.
With an extensive network and diversified fleet of over 110,000
owned vehicles and over 400,000 managed vehicles in more than 100
branches across the UK, Ireland
and Spain, the Group aims to
utilise its scale, reach and comprehensive suite of integrated
services to offer a market-leading customer proposition and drive
enhanced returns for shareholders.
Further information regarding Redde Northgate plc can be found
on the Company’s website:
www.reddenorthgate.co.uk