RNS Number : 0782Q
Redde PLC
25 February 2016
 

News Release

Redde plc

("Redde" or "Group")

 

Issue Date: 25 February 2016

 

Interim Results for the six months ended 31 December 2015

 

Continued Growth

Financial headlines

·      Turnover £165.2m (2014: £122.0m) - Increase of 35%

·      Adjusted* EBIT of £17.1m (2014: £11.2m) - Increase of 53%

·      Adjusted* profit before tax of £17.3m (2014: £11.5m) - Increase of 51%

·      Net operating cash flow to EBITDA 91% (2014: 114%)

·      Debtor days 95 days (2014: 108 days)

·      Total cash balances £31.6m (2014: £22.2m adjusted for £41.0m cash spent on acquisition)

·      Net debt of £9.1m (2014: £2.9m adjusted for £41.0m cash spent on acquisition)

·      Adjusted* basic EPS 4.89 pence (2014: 4.30 pence) - Increase of 13.7%

·      Statutory basic EPS 4.49 pence (2014: 4.14 pence) - Increase of 8.45%

·      Interim dividend 4.50 pence (2014: 4.00 pence) - Increase of 12.5%

 

Operational headlines

·      8.8% like for like growth in number of credit hire cases

·      Total number of hire days increased by 16.4%

·      101.7% increase in number of all repair cases (including FMG)

·      Revenue generating fleet utilisation increased to 82.5% (2014: 81.0%)

·      Increase in number of contracts and range of services

·      FMG acquisition performing to expectations and integration underway

 

* Adjusted measures exclude the impact of the items described as exceptional and the amortisation of intangibles in Note 5 of the Interim Report and Accounts.

 

Commenting on the Group's results and prospects, Martin Ward, Chief Executive Officer said:

 

"The Group has again delivered significant growth in revenue, earnings and dividend. The start of the second half has been strong and we continue to see new growth opportunities from within our markets. The Group is increasingly being seen as a leading partner of choice within our industry. Our protocol arrangements with insurers, which deliver early payments without frictional cost, have continued to grow and release value. We have extended our service offering with existing insurer Partners during the year and the outlook for the full financial year is positive."

 

 

 

For further information, contact:

 

 

Redde plc

Tel: 01225 321134

Martin Ward, Chief Executive Officer


Stephen Oakley, Chief Financial Officer




Cenkos Securities plc (Nominated Adviser and Joint Broker)

Tel: 020 7397 8900

Ian Soanes


Elizabeth Bowman




N 1 Singer Capital Markets Limited (Joint Broker)

Tel: 0207 496 3000

Nic Hellyer






Square1 Consulting

Tel: 020 7929 5599

David Bick

Brian Alexander




 

Notes for editors

 

 

About Redde plc:

 

Founded in 1992 and working predominantly with insurance companies, insurance brokers and prestige motor dealerships, the Group provides a range of accident management and legal services. The Group also deals directly with large national fleets providing incident management and mobility continuity and the Group's activities also encompass a range of legal services designed to assist claimant parties in partnership with leading insurance companies, brokers and other bodies.

 

The Group is one of the market leaders in its fields of business; it delivers accident management solutions to motorists ensuring that they remain mobile until their own vehicles are repaired or until they are put in a position to obtain a replacement and it provides legal services ensuring that they are properly compensated for their injuries and losses. Legal services also include wills and probate, family law and employment law advice.

 

The name Redde is associated, in Latin, with the concept of restoration.



 

Chairman's Statement

 

I am pleased to be able to report to shareholders that the Group achieved an adjusted profit before taxation for the six months to 31 December 2015 of £17.3 million compared to £11.5 million in the corresponding period last year; an increase of 51%.

 

Results

 

Revenues were £165.2m (2014: £122.0m), an increase of £43.2m (35.4%). Sales growth in our accident management businesses was 28.5% reflecting a 8.8% Like For Like ("LFL") growth in the number of credit hires and a 101.7% increase in the total number of repairs undertaken against the corresponding period last year. Revenues include an amount of £14.9m in respect of the FMG group of companies ("FMG") which was acquired on 27 October 2015.

 

The adjusted earnings before interest and taxation ("EBIT") for the period were £17.1m (2014: £11.2m) which includes an amount of £1.0m in respect of FMG. Adjusted operating margin was 10.0% (2014: 9.1%) with operating margin in our accident management businesses improving from 7.1% to 9.7%, reflecting the increased sales mentioned above and associated contribution as well as changes in the mix of business handled, improvements in our supply chain and a close control of costs.

 

There was a net adjusted interest credit in the period of £0.2m (2014:  £0.2m).

 

Adjusted profit before tax for the period was therefore £17.3m, an increase of 50.8% over the £11.5m achieved in the corresponding period last year.

 

A charge of £0.4m in respect of amortisation of intangible assets (acquired by virtue of the purchase of FMG), was incurred. In addition there was a pre-tax exceptional net charge of £0.9m (2014: £0.5m) in the period reflecting a £0.2m cost (2014: £0.3m) recorded under IFRS2 in respect of the charge under share based payments on incentive share schemes and a charge of £0.1m (2014: £0.2m) in respect of the unwind of discount charges on certain provisions. In addition, acquisition costs of £0.6m were incurred and charged as an expense as required by IFRS2.

 

After the amortisation of intangible assets and exceptional items above, statutory profit before tax was £16.0m (2014: £11.0m) an increase of 45.8%. There was a net tax charge of £3.1m. In 2014 there was a net credit of £0.6m principally in respect of the further recognition of a deferred tax asset relating to prior years' losses and unused allowances. The statutory profit after tax is £13.0m (2014: £11.6m).

 

Earnings Per Share

 

Statutory basic EPS is 4.49p (2014: 4.14p). Statutory diluted EPS is 4.31p (2014: 3.84p).

 

The adjusted EPS is 4.89p (2014: 4.30p). The adjusted diluted EPS is 4.70p (2014: 3.99p).

 

The adjusted figures exclude the impact of the amortisation of intangible assets and those items described as exceptional (Note 5).

 

Dividends

 

The Board has pleasure in declaring an interim dividend of 4.50 pence per share payable on 24 March 2016 to those shareholders on the register on 04 March 2016 (2014: 4.00 pence). The ex-dividend date is 03 March 2016.

 



 

 

Outlook

 

The second half of the year has already started well with volumes maintaining the rate of growth seen in the first half whilst the planned integration of FMG with the rest of our business is showing good progress. The impact of strategic acquisitions, along with continued delivery of organic growth and the benefits of further improvements in operational efficiency from our GPS strategy, give the Board great encouragement for the future.

 

Our people

 

 

Our people have been instrumental in winning and integrating new business during the period whilst at the same time maintaining the high standards of customer service for which the Group is increasingly known. Once again we thank our employees for their support, hard work and dedication during the year and say to them "well done".

 

 

 

 

Avril Palmer-Baunack

 

Chairman                                             

24 February 2016

Operational and Financial Review

 

Operational review

 

The Group has remained focussed on the pursuit of sustainable, profitable, cash generative business and the acquisition of businesses that meet this criteria and provide cross fertilisation of business opportunities within the sectors in which the Group operates.

 

The period has therefore seen the Group expand into new but complementary markets with the acquisition in October 2015 of FMG, which has added related but diversified revenue streams. The potential to grow and develop more vehicle incident and accident management services to both business and insurance customers supports the Group's position as a leader in vehicle mobility, rapid roadside recovery, repair, legal and other support services. This broader reach enables the Group to expand its proposals to existing as well as new customers so the opportunity exists for further organic growth.

 

The majority of the Group's non-fault accident management operations are now subject to bilateral protocol arrangements and this has contributed to the reduction in debtor days seen over recent periods. Agreeing protocol arrangements with insurers is an effective way to help them reduce their combined operating ratio which is a key performance measure for them. As a direct consequence of this successful business model, the proportion of business conducted purely within the GTA process reduced significantly and therefore the Group took the decision to withdraw from the ABI GTA with effect from 15 August 2015. Since then, and since we last reported, there has been an increase in the number of insurers wishing to explore entering into bilateral protocol arrangements with the Group and a number of new protocol agreements have been concluded.

 

The Group has increased its focus on providing a complete customer journey during the period and as a result the Group's delivery of outstanding customer service was recognised at the prestigious North East Contact Centre Awards 2015 where, against strong competition and a formidable shortlist including Axa Insurance, Virgin Money and Virgin Media, it won the Customer Experience Champion Award.

 

The Group is increasingly a leading partner of choice within our industry. This is due in large part to the improvements achieved in both operational efficiency and the customer journey experienced whilst using the Group's services as well as the Group's use of telematics and web-based portals accessible by our partners and our customers. This has led to a number of benefits for the Group in the period; it secured new hire and repair contracts; it extended the scope of existing hire and repair contracts; there was increased interest from potential new partners and additionally existing partners wanted to explore expanding the existing services the Group already supplies to them so as to provide them with a complete mobility solution.

 

The Group strategy of Growth, Profit and Sustainability has been instrumental in helping to maintain focus as we develop the Group. The Group is particularly focussed on sustainability and how to adapt and develop its services by thinking ahead on how the market will shape, and planning to meet its Partners' future requirements without losing sight of the growing near-term demand for its services. The Group continues to build its market penetration and presence within its distribution channels as well as seeking new relationships based on emerging technologies.

 

Vehicle fleet

 

The Group continues to operate highly effective fleet services through a hybrid solution of ownership, contract hire and, during peak periods, cross-hiring from daily rental companies. This combination gives the Group flexibility to dispose of excess fleet in the lower volume summer months or in the event of a downturn and to maximise fleet, without incurring ownership costs, in short peak periods.

 

Our efforts to balance the mix of the fleet to meet changes in the mix of demand and a 16.4% increase in total hire days were assisted by attractive funding and procurement programmes. The average number of vehicles held during the period was increased by 11.8% from 5,750 for the six months ending 31 December 2014 to 6,426 for the six months to 31 December 2015. The average age of the fleet has at the same time been maintained at between 9 and 12 months across a broad spread of manufacturers and models. Fleet utilisation was therefore maintained above our 80% target and supply and operational efficiencies enabled this to be increased to 82.5% which compares to 81.0% for the same period last year. Our fleet comprised 7,263 vehicles at 31 December 2015 compared to 6,421 at 31 December 2014 and 6,041 at 30 June 2015.

 

Legal Services

 

NewLaw has continued to build its range of services and pursue the additional opportunities available to it as the Group expands its reach into the marketplace. During the period to date NewLaw has been successful in pursuing applications to set up further ABS structures with additional Partners. The most recent of these is in partnership with The Royal College of Nursing which will be effective from 1 April 2016. This is in addition to the ABS arrangements entered into with the British Medical Association shortly before the last year end. NewLaw continues to pursue other opportunities for partnerships with insurers and other related brands via ABS structures. Following the acquisition of FMG, one of NewLaw's ABS structures, namely FMG Legal LLP, has become 100% controlled by the Group.

 

Principia Law, our other legal services business, has continued to build its business making an increased contribution to the Group as well as attracting new corporate clients whilst also continuing to provide the Group with expertise in relation to credit hire recoveries, particularly those cases requiring more specialist attention.

 

Acquisitions

 

On 27 October 2015 in support of its strategy of widening its range of services, the Group completed the acquisition of FMG, a leading fleet accident management group.  The results for the period to 31 December 2015 include turnover of £14.9m and an EBIT of £1.0m for the period since acquisition.

 

FMG was acquired for a consideration of £22.5 million and the settlement of loan notes of £23.5m at completion. The consideration for the acquisition of all the shares and other vendor interests in FMG was accordingly £46.0 million and comprised a number of elements, the effect of which was the payment at completion of approximately £41.0 million in cash and the issue of 3,048,220 new Redde shares with a total value of £5.0 million.

 

The new Redde Shares do not have any entitlement to any dividends with a record date during the 12 months following completion including the interim dividend for the year ended 30 June 2016 that has been announced today. The new Redde Shares will be subject to a 24 month lock in (subject to the customary exemptions) followed by an orderly market arrangement.

 

Plans for the consequential integration of our existing fleet and accident management business (Total Accident Management) with FMG is well advanced. We expect this process to be completed by the year end with the associated benefits of the integration to be more fully reflected in the next financial year.   

 

Financial review

 

Certain items have been reported and disclosed as exceptional on the face of the Income Statement and these items are commented on separately as appropriate in this Financial Review. The Income Statement captions excluding these exceptional items more properly reflect the comparable operating performance of the business and for ease of reference are referred to as 'adjusted'.

 

For the six months ended 31 December 2015, the Group recorded an adjusted EBIT of £17.1m (2014: £11.2m),  an adjusted profit before tax of £17.3m (2014: £11.5m) and a statutory profit before tax of £16.0m (2014: £11.0m).



 

A summary of the key performance indicators is set out in the table below.

 


6 months ended

6 months ended

12 months ended

31 December 2015

31 December 2014

30 June 2015





Financial KPIs




Revenue (£'000)

165,182

121,984

248,671

Gross profit (£'000)

45,955

38,024

76,588

Gross margin

27.8%

31.2%

30.8%

Adjusted profit before taxation* (£'000)

17,284

11,459

22,727

Adjusted EBIT* (£'000)

17,098

11,236

22,286

Adjusted EBIT* margin

10.4%

9.2%

9.0%

Adjusted operating* margin

10.0%

9.1%

8.8%

EBITDA

20,495

14,283

31,585

Operating cash flow/EBITDA

90.9%

113.7%

115.9%

Statutory Debtor days

95

108

100

 

* Adjusted measures exclude the impact of the amortisation of intangibles and the items described as exceptional in Note 5.

 

Revenues

 

Revenues were £165.2m (2014: £122.0m), an increase of £43.2m (35.4%). Revenues include an amount of £14.9m in respect of the FMG which was acquired on 27 October 2015. Excluding FMG like for like revenue growth in our accident management business was 28.5% which includes a 24.5% growth in credit hire related revenues and a 32.2% increase in repair related revenues.

 

The total number of LFL hire cases was 6.3% higher than the corresponding period last year with LFL hires in respect of our core credit hire operations increasing by 8.8% whilst hires in relation to lower margin direct hires reduced by 16.7% reflecting our policy of managed reductions in this short hire and low margin area. There was also a 101.7% increase in the volume of business undertaken for repairs against the corresponding period last year mainly as a result of contract wins including a 26.8% increase in the number of credit repairs. Excluding FMG the increase in the total number of repairs was 58.2%.

 

Gross profit, adjusted operating profit and adjusted EBIT

 

Gross profit was £7.9m higher than the corresponding period last year and gross margin was 27.8% (2014: 31.2%) reflecting the increase in the volume of repairs which attract lower margins than hires and also the inclusion of  FMG. Excluding FMG, gross margin was 28.3%.

 

Adjusted operating profit margin was 10.0% (2014: 9.1%) and EBITDA was £20.5m (2014: £14.3m).

 

Adjusted EBIT for the period was £17.1m (2014: £11.2m) which includes an amount of £1.0m in respect of FMG which was acquired on 27 October 2015. Adjusted EBIT margin was 10.3% (2014: 9.2%) and was 10.7% excluding FMG, reflecting the increased sales mentioned above as well as changes in the mix of business handled, improved returns from our ABS partnerships, improvements in our supply chain and overall overheads being contained to an increase of just 0.5%.

 



 

Adjusted EBIT is reconciled to the Income Statement as follows:

 


Unaudited

Unaudited

Audited


6 months ended

6 months ended

12 months ended


31 December 2015

31 December 2014

30 June 2015


£m

£m

£m

Adjusted EBIT - continuing operations

17.1

11.2

22.3

Adjustments




Autofocus settlements

-

-

2.9

Acquisition costs and abortive acquisition costs

(0.6)

-

(0.4)

Share based payments

(0.2)

(0.3))

(0.4)

Amortisation of acquired intangible assets

(0.4)

-

-

Statutory EBIT

15.9

10.9

24.4

 

 

Net finance income

 

There was an adjusted net interest credit in the period of £0.2m (2014: £0.2m). Including exceptional net finance charges in relation to the unwind of discounts held against provisions of £0.1m (2014: £0.1m) the net interest credit for the period was £0.1m (2014:£0.1m).

 

Adjusted profit before tax

 

Adjusted profit before tax for the period was £17.3m, an increase of 50.8% over the £11.5m achieved in the corresponding period last year.

 

Amortisation of Intangibles and Exceptional items

 

A pre-tax charge of £0.4m in respect of amortisation of intangible assets (deemed to be acquired under the terms of IFRS3) by virtue of the acquisition of FMG was incurred during the period (2014: £nil). 

 

Excluding the above charge of £0.4m in respect of intangibles, a pre-tax exceptional net charge of £0.9m (2014: £0.5m) was recorded in the period. This charge reflects a £0.2m cost (2014: £0.3m) recorded under IFRS2 in respect of the charge under share based payments on incentive share schemes; a charge of £0.1m (2014: £0.2m) in respect of the unwind of discount charges on certain provisions and in addition acquisition costs of £0.6m charged as an expense as required by IFRS2.

 

Statutory profit before and after taxation

 

After the amortisation of intangibles and exceptional items, the statutory profit before tax was £16.0m (2014: £11.0m) an increase of 45.8%. There was a net tax charge of £3.1m (2014: credit of £0.6m principally as a result of the further recognition of a deferred tax asset relating to prior years' losses and unused allowances). The statutory profit after tax is £13.0m (2014: £11.6m).

 

Earnings per share

 

Statutory basic EPS is 4.49p (2014: 4.14p). Statutory diluted EPS is 4.31p (2014: 3.84p)

 

The adjusted EPS is 4.89p (2014: 4.30p). The adjusted diluted EPS is 4.70p (2014: 3.99p)

 

The adjusted figures exclude the impact of amortisation of intangibles and those items described as exceptional

( Note 5).

 

Dividends

 

The Board has declared an interim dividend of 4.50 pence per share payable on 24 March 2016 to those shareholders on the register on 04 March 2016 (2014: 4.00 pence). The ex-dividend date is 03 March 2016.

 

Balance sheet

 

Statutory debtor days now stand at 95 days (2014: 108 days) and compare to 100 days at 30 June 2015. Revenue generated  debtors at 31 December 2015 were £96.9m (including £6.4m in respect of FMG) and compare to £68.4m at 30 June 2015 and £68.5m at 31 December 2014. Excluding FMG these both represent an increase of 32%

 

Creditors increased to £102.1m (including £19.0m in respect of FMG) compared to £65.0m at 30 June 2015 and £61.3m at 31 December 2014. Excluding FMG these represent increases of 27.8% and 35.6% respectively.

 

The increase in LFL debtors and creditors are mainly due to the 28.5% increase in LFL revenues in the period under review.

 

The Group also increased its investment in fleet numbers in response to both seasonality and underlying increased demand and this together with a greater use of HP vehicle leasing finance arrangements which have been available at attractive rates during the period resulted in an increase of £12.6m in the net value of vehicles held as fixed assets under finance leases compared to 30 June 2015.

 

Net assets at 31 December 2015 were £160.7m (2014: £149.3m).

 

Net debt, cash and financing

 

Actual net debt at 31 December 2015 was £9.1m and compares with equivalent net debt of £2.9m at 31 December 2014 and equivalent net debt of £1.4m at 30 June 2015 (the latter two dates adjusted for the £41.0m subsequently expended in relation to the acquisition of FMG). Actual cash balances were £31.6m at 31 December 2014 and compare to equivalent cash balances of £27.6m at 30 June 2015 and £22.2m at 31 December 2014 (the latter two dates again adjusted for the £41.0m subsequently expended in relation to the acquisition of FMG).

 

As outlined above during the period the total number of vehicles on the fleet was increased to service the much increased volumes of hire days and a greater mix of HP funding verses contract hire was used in financing these vehicles. As a consequence Fleet finance debt was £40.5m at 31 December 2015 an increase of £11.7m compared to £28.8m at 30 June 2015.

 

The net debt and cash position can be summarised as follows:

 


Unaudited

Unaudited

Audited


6 months ended

6 months ended

12 months ended


31 December 2015

31 December 2014

30 June 2015


£m

£m

£m

Fleet finance leases

(40.5)

(24.4)

(28.8)

Other leases and borrowings

(0.2)

(0.7)

(0.2)

Total debt

(40.7)

(25.1)

(29.0)





Working capital cash balances

31.6

22.2

27.6

Working capital Net Debt

(9.1)

(2.9)

(1.4)

Cash balances subsequently used on acquisitions

-

41.0

41.0

 Net (debt) / cash

(9.1)

38.1

39.6





Total cash balances

31.6

63.2

68.6

 

 

 

Principal risks and uncertainties

 

Principal risks and uncertainties are detailed in Note 21 to this announcement.

 

 

Related party transactions

 

There were no related party transactions during the period that require disclosure.

 

 

 

 

 

 

 

Martin Ward                                                                             Stephen Oakley

Chief Executive Officer                                                            Chief Financial Officer

24 February 2016                                                                     24 February 2016

 

The full Interim report will be made available shortly at http://www.redde.com. Printed copies will not be available.


 

Condensed Consolidated Income Statement
For the six months ended 31 December 2015

 

 



6 months

ended

31 December

2015

Adjusted*

 

6 months

ended

31 December

2015

Adjustment

items*

6 months
ended

31 December

2015

 

6 months

ended

31 December

2014

Adjusted *

 

6 months
ended

31 December

2014

Adjustment items*

6 months

ended

31 December

2014

 

 

Unaudited  

Note

£'000

£'000

£'000

£'000

£'000

£'000

 

 








 

Total Revenue

3

165,182

-

165,182

121,984

-

121,984

 

 








 

Cost of sales


(119,227)

-

(119,227)

(83,960)

-

(83,960)

 

 

 







 

Gross profit

 

45,955

-

45,955

38,024

-

38,024

 

 

 







 

Administrative expenses

5

(29,480)

(1,187)

(30,667)

(26,869)

(299)

(27,168)

 

 

 







 

Operating profit - continuing operations

 

16,475

(1,187)

15,288

11,155

(299)

10,856

 

 

 







 

Income from associates

 

623

-

623

81

-

81

 

 

 







 

EBIT

 

17,098

(1,187)

15,911

11,236

(299)

10,937

 

 

 







 

Net finance income /(costs)

6

186

(66)

120

223

(162)

61

 

Profit before taxation

 

17,284

(1,253)

16,031

11,459

(461)

10,998

 

 

 







 

Taxation

7

(3,129)

80

(3,049)

574

-

574

 

Profit for the period

 

14,155

(1,173)

12,982

12,033

(461)

11,572

 

 

 







 

Profit for the period attributable to:







 

Equity holders of the Company

 

14,105

(1,173)

12,932

12,008

(461)

11,547

 

 

 







 

Non Controlling Interests

 

50

-

50

25

-

25

 

 

 







 

Profit for the period

 

14,155

(1,173)

12,982

12,033

(461)

11,572

 

 

 







 

Earnings per share (p)

 







 

Basic

8

4.89

(0.40)

4.49

4.30

(0.16)

4.14

 

Diluted

8

4.70

(0.39)

4.31

3.99

(0.14)

3.84

 

 

* Adjusted profit excludes the impact of the amortisation of intangible assets and those items described as exceptional as set out in Note 5.

 

 

 

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 31 December 2015

 




6 months to

 31 December 2015

6 months to   31 December 2014

Unaudited


£'000

£'000

Profit for the period



12,982

11,572






Other comprehensive income





     Gains arising during the period



-

-

Total comprehensive income for the period, attributable to:





     Equity holders of the Company



12,932

11,547

     Non-controlling interests



50

25

Total comprehensive income for the period



12,982

11,572

 

Condensed Consolidated Statement of Changes in Equity


 

 

Share

capital

Share premium account

Shares to be issued

Retained earnings

Total
Non-

Controlling

interests

Total

Six months ended 31 December 2015 

Note

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Balance at 1 July 2015


296

65,103

3,439

88,615

157,453

(7)

157,446

 









Profit for the period


-

-

-

12,932

12,932

50

12,982

Total comprehensive income for the period


-

-

-

12,932

12,932

50

12,982

 









Issue of Ordinary Shares

17

8

8,642

(3,439)

-

5,211

-

5,211

 









Credit to equity for equity settled share-based payments


-

-

-

151

151

-

151

 









Dividends paid


-

-

-

(15,047)

(15,047)

-

(15,047)

 









Balance at 31 December 2015


304

73,745

-

86,651

160,700

43

160,743

 

 

 

 

 

 

 

 

 

 

 



Share

capital

Share premium account

Shares to be issued

Retained earnings

Total
Non-

Controlling

interests

Total

Six months ended 31 December 2014 

Note

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Balance at 1 July 2014


283

57,804

-

84,076

142,163

(69)

142,094

 









Profit for the period


-

-

-

11,547

11,547

 25

11,572

Total comprehensive income for the period


-

-

-

11,547

11,547

25

11,572

 









Issue of Ordinary Shares


9

5.197

-

-

5,206

-

5,206

 









Credit to equity for equity settled share-based payments


-

-

-

275

275

-

275

 









Dividends paid


-

-

-

(9,838)

(9,838)

-

(9,838)

 









Balance at 31 December 2014


292

63,001

-

86,060

149,353

(44)

149,309

 









For the six months ended 31 December 2015

 



 

Condensed Consolidated Statement of Financial Position

As at 31 December 2015

 




Unaudited

31 December 2015

Unaudited

31 December 2014

Audited

30 June

2015



Note 

£'000

£'000

£'000







Non-current assets






Goodwill


10

86,269

59,231

59,231

Intangible assets


11

22,502

-

-

Property, plant and equipment (including vehicles)


12

46,636

27,194

31,682

Interests in associates


13

466

65

232

Deferred tax asset



8,858

10,137

10,850




164,731

96,627

101,995

 

Current assets






Trade and other receivables


14

114,813

84,435

84,331

Cash and cash equivalents



31,594

63,263

68,626




146,407

147,698

152,957

 

Total assets



311,138

244,325

254,952







Current liabilities






Trade and other payables


15

(102,116)

(61,258)

(65,025)

Obligations under finance leases


16

(20,475)

(9,830)

(14,663)

Short-term borrowings


16

-

(350)

-

Deferred consideration



-

(4,837)

-

Provisions



(1,862)

(2,132)

(1,689)




(124,453)

(78,407)

(81,377)

 

Net current assets



21,954

69,291

71,580







Non-current liabilities






Obligations under finance leases


16

(20,234)

(14,945)

(14,288)

Deferred tax liability



(5,708)

(680)

(1,022)

Long-term provisions



-

(984)

(819)




(25,942)

(16,609)

(16,129)

 

Total liabilities



(150,395)

(95,016)

(97,506)







Net assets



160,743

149,309

157,446







Equity






Share capital


17

304

292

296

Share premium account



73,745

63,001

65,103

Shares to be issued



-

-

3,439

Retained earnings



86,651

86,060

88,615

Equity attributable to owners of the Company



160,700

149,353

157,453

Non-controlling interests



43

(44)

(7)

Total equity



160,743

149,309

157,446








 

Company Registration Number: 03120010



 

 

Condensed Consolidated Statement of Cash Flows

For the six months ended 31 December 2015

 




 

 

Unaudited

6 months ended

31 December 2015

 


Unaudited

6 months ended

31 December 2014

 



Note

£'000 

£'000

£'000

£'000 

Cash flows from operating activities






Profit for the period


12,982


11,572


Tax charge / (credit)

7

3,049


(574)


Income from associates

13

(623)


(81)


Net finance income

6

(186)


(223)


Fleet finance lease interest

6

664


469


Depreciation


3,850


2,627


Amortisation of intangible assets

11

398


-


Loss on sale of tangible fixed assets


210


218


Share-based payment charges

5

151


275


EBITDA


20,495


14,283


Increase in receivables


(20,677)


(2,070)


Increase in payables


19,937


4,591


Decrease in provisions


(645)


(559)


Cash generated from operating activities



19,110


16,245

 






Bank interest received

6

194


244


Bank and loan interest paid


-


(9)


Fleet finance lease interest

6

(664)


(469)


Interest element of finance lease rentals

6

(8)


(12)





(478)


(246)

Taxation (paid) / received



-


241

Net cash from operating activities



18,632


16,240

        






Cash flows from investing activities






Acquisitions of business combinations net of cash acquired


(13,108)


-


Distributions from associates







389


74


Purchase of property, plant and equipment







(646)


(583)


Proceeds from sale of property, plant and equipment


2,856


3,266


Net cash from investing activities



(10,509)


2,757







Cash flows from financing activities






Proceeds from issues of share capital


211


74


Expenses of share issues


-


-


Dividends paid

9

(15,047)


(9,838)


Repayment of borrowings

18

(23,505)


-


Finance lease principal repayments


(6,814)


(4,308)


Net cash (outflow) / inflow from financing activities



                          (45,155)


                          (14,072)

Net (decrease) / increase in cash and cash equivalents



                              (37,032)


                              4,925







Cash and cash equivalents at the beginning of the period



                                   68,626


                                   58,338

Cash and cash equivalents at the end of the period



                              31,594


                              63,263







Cash and cash equivalents consisted of:

 



                              


                              

Cash at bank and in hand



    31,594


63,263



 

 

Notes to the Interim Statements

 

1              Basis of preparation

 

The condensed consolidated financial statements are prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard ('IAS') 34, 'Interim Financial Reporting'.

 

The information for the year ended 30 June 2015 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on these accounts was not qualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

 

The condensed consolidated financial statements have been prepared under the going concern assumption.

 

The directors have assessed the future funding requirement of the Group and the Company, and have compared them to the levels of available cash and funding resources. The assessment included a review of current financial projections to June 2016. Recognising the potential uncertainties surrounding financial projections in the current economic environment, in particular with regard to the demand for the Group's services and the cash collection profiles from insurers, the directors have considered a number of scenarios and the mitigating actions the Group could take to limit any adverse consequences.

 

Having undertaken this work, the Directors are of the opinion that the Group has adequate resources to finance its operations for the foreseeable future and accordingly, continue to adopt the going concern basis in preparing the Interim Report.

 

2              Significant accounting policies

 

The condensed consolidated financial statements have been prepared under the historical cost convention. The same accounting policies, presentation and methods of computation have been applied in these condensed consolidated financial statements as were applied in the Group's financial statements for the year ended 30 June 2015.

 

In the application of the Group's accounting policies the Directors are required to make judgements, estimates and assumptions about the carrying value of the assets and liabilities that are not readily apparent from the other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

The critical judgements affecting the Group's interim financial statements are the valuation of the receivables (see Note 3), depreciation of the vehicle fleet (see Note 12), impairment of intangible assets (See note 11) and goodwill impairment (see Note 10).

 

3              Revenue

 


Unaudited

6 months ended

31 December

2015

Unaudited

6 months ended

31 December

2014


£'000

£'000




Revenue

165,182

121,984

 

 

As fully disclosed within Note 14 to the consolidated financial statements for the year ended 30 June 2015, the estimation of the expected adjustment arising on the settlement of claims is revised, where necessary, at each balance sheet date to reflect the Group's most recent estimation of amounts ultimately recoverable. Although in principle this is determined by reference to individual cases, in practice the homogenous nature of most claims means that the level of adjustment is calculated by reference to specific categories of claims. Adjustments arising from subsequent revision of the Group's expected adjustment arising on settlement of claims, including amounts received by way of late payment charges, are recorded in revenue in the Income Statement.

 

4              Business segments

 

The condensed consolidated financial statements are in respect of the Group's activities solely conducted in the United Kingdom. The activities of the Group are managed by the executive board which is deemed to be the Chief Operating Decision Maker as a single operating platform. The entities within the Group contribute as part of the whole operation of the Group to provide services for the core business. The Board of Redde plc considers the performance of the business by reference to contributions from all activities of the Group as a whole, and reviews requirements of the total Group when determining allocations of resources. IFRS8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board in order to allocate resources to the segment and to assess its performance. The Group has identified two operating segments within the main reportable segment. These are aggregated into one reportable segment as permitted under IFRS8 for reporting purposes as the nature of services and their customer base is similar. (See Note 2 to the Annual Report and Accounts for the year to 30 June 2015).

 

 



 

5              Amortisation of Intangibles and Exceptional items

 

Exceptional items are items which due to their size, incidence or non recurring nature have been classified separately in order to draw them to the attention of the reader of the accounts. These items together with the amortisation of intangible assets have been separately classified in this report in order to, in the opinion of the Board, show more accurately the underlying results of the Group. The aggregate of such items have accordingly been disclosed separately on the face of the consolidated income statement.

 

Adjusted profit

 

As discussed in the Operational and Financial Review, in order to provide a comparable view of the underlying performance of the Group, the adjusted profit has been presented in the condensed consolidated income statement. Adjusted profit excludes the impact of amortisation of intangible assets and those items described as exceptional, as discussed in more detail below.

 

 




Unaudited

6 months ended 
31 December

2015

Unaudited

6 months ended

31 December

2014




£'000

£'000

Administration costs - Amortisation of acquired intangible assets:





a) Amortisation of acquired intangible assets



(398)

-

Total amortisation of acquired intangible assets



(398)

-






Exceptional items comprise the following:





b) Share based payments



(151)

(275)

c) Acquisition costs



(638)

(24)

Impact on operating profit for the period



(789)

(299)

d) Finance costs - unwind of discount on provisions and deferred consideration



(66)

(162)

Total exceptional items



(855)

(461)






Total adjustments to profits



(1,253)

(461)

Tax effect of the above



80

-

Impact on profit after tax for the period



(1,173)

(461)

 

 

a) Amortisation of acquired intangible assets

 

The Group recognised the value of customer relationships and acquired software amounting to £22.9m in total (note 11) as a result of the acquisition of FMG (note 18) and these assets are being amortised over 10 and 5 years respectively. The charge for the period amounts to £0.4m (note 11)  and the tax effect was a credit of £0.08m.

 

b) Share based payments

 

The Group has a number of share incentive schemes. In accordance with IFRS2 the calculated charge in respect of options issued and outstanding amounts to £0.2m for the period (2014: £0.3m). The tax effect of this item is £nil (2014: £nil).

 

c) Acquisition Costs

 

During the period costs of £0.6m were incurred in relation to the purchase of certain subsidiaries and have been expensed in accordance with the requirements of IFRS2.

 

d) Finance costs

 

The carrying amount of deferred consideration and provisions against properties are included in the balance sheet net of the appropriate discount reflecting the cost of relevant capital or funding. The charge represents the unwinding of this discount during the period. 

 



 

6              Finance income and finance costs




Unaudited

6 months ended

31 December

2015

Unaudited

6 months ended

31 December

2014




£'000

£'000

a) Finance income





Interest receivable



194

244






b) Finance costs





Interest on bank overdrafts and loans



-

(9)

Interest on obligations under finance leases



(672)

(482)

Bank facility fees and costs charged in the period



-

-




(672)

(491)

Transfer of interest on obligations under finance leases and fleet facilities to cost of sales



664

470

Total finance costs payable before exceptional costs



(8)

(21)






Finance income less net finance costs



186

223






c) Exceptional finance costs





Unwind of discount on provisions and deferred consideration



(66)

(162)






Total Net finance income / (expense)



120

61

 

 

7              Tax charge

 

The tax (charge)/credit comprises the following:

 


Unaudited

6 months ended

31 December

2015

Unaudited

6 months ended

31 December

2014


£'000

£'000

Current tax (charge) /credit

(771)

13

Deferred tax (charge) / credit

(2,278)

561

Total tax (charge) / credit

(3,049)

574

 

The effective rate of the tax charge of 19% (2014: credit of 5.8%) for the period does not significantly differ from the effective standard rate of UK corporation tax charge of 20% (2014: 20.75%).The difference in effective rate compared to 2014 is principally due to the use of prior year tax losses with the resultant reversal of associated deferred tax assets previously set up in this respect.

 

 

8              Earnings per ordinary share

 

 

The calculation of the basic and diluted earnings per share is based on the following share volume information:

 





Unaudited

6 months ended

31 December 2015

Unaudited

6 months ended

31 December 2014

 Number of shares




Number

Number

288,225,298

279,571,418







Effect of 2013 share options scheme shares in issue




276,761

2,909,601

Effect of B shares in issue




10,410,279

10,396,348

Deferred consideration shares to be issued




-

7,193,675

Effect of 2014 SAYE share option scheme shares in issue




1,066,228

1,480,773

Effect of 2015 SAYE share option scheme shares in issue




301,390

-







Weighted average number of ordinary shares for the purposes of diluted earnings per share

300,279,956

301,551,815

 

There were 293,284,482 ordinary shares of 0.1p each in issue as at 31 December 2015 (note 17).



 

9              Dividends

 

The Board has announced an interim dividend for the year to 30 June 2016 of 4.50 pence per ordinary share and amounting to £13.1m (net of dividends waived by the vendors of FMG) payable on Thursday 24 March 2016 to those shareholders on the register at the close of business on Friday 04 March 2016. The shares will be ex-dividend on Thursday 03 March 2016.

 

Ordinary share dividends paid in the period to 31 December 2015 can be summarised as follows:




Unaudited

6 months ended

31 December

2015

£'000

Unaudited

6 months ended 31 December

2014

£'000

Special dividend in respect of Autofocus of 1.00 pence paid 30 July 2015



2,854

-

Final dividend for 2015 of 4.25 pence paid 5 November 2015 (2014: 3.50 pence)

12,193

9,838

Total dividends paid in the period



15,047

9,838

 

 

10            Goodwill


£'000

Cost


At 01 July 2014, 31 December 2014 and 01 July 2015,

113,549

Additions on acquisitions of business combinations (note 18)

27,038

At 31 December 2015

140,587

Accumulated impairment losses


At 01 July 2014, 31 December 2014,  01 July 2015 and 31 December 2015

(54,318)‌‌

Net book value


At 31 December 2015

86,269

At 31 December 2014

59,231

 

The Directors last reviewed the carrying value of Goodwill on 30 June 2015 and the key elements of this review are contained in Note 11 to the Annual Report and Accounts for the year to 30 June 2015. The Directors have undertaken a further review of the carrying value of Goodwill including that relating to FMG as at 31 December 2015 on substantially the same basis and have concluded that no adjustment is necessary. There was therefore no movement in goodwill impairment in the six months ended 31 December 2015 (2014: £nil).

 

The allocation of Goodwill to the Group's CGU's is as follows:


30 December 2015


30 December 2014


30 June 2015


£'000


£'000


£'000

Redde Group (excluding NewLaw and FMG groups of companies)

18,950


18,950


18,950

NewLaw group of companies

40,281


40,281


40,281

FMG group of companies

27,038


-


-


86,269


59,231


59,231

 

11            Intangible fixed assets


Customer Relationships

£'000


Computer

Software

£'000

Other

Assets

£'000

Total

£'000

Cost






At 01 July 2015

-


-

-

-

Additions on acquisitions of business combinations (note 18)

21,900


1,000

-

22,900

At 31 December 2015

21,900


1,000

-

22,900

Amortisation






Charge for period

(365)‌‌


(33)‌‌

-

(398)

At 31 December 2015

(365)


(33)‌‌

-

(398)

Net book value






At 31 December 2015

21,535


967

-

22,502

 

 

The fair values of intangible assets resulting from the acquisition of FMG is considered to be provisional given the time that FMG has been part of the Group and is expected to be presented as final as part of the Group's 2016 annual financial statements.

12            Property, plant and equipment (including vehicles)

 

 

 


 

Freehold property

£'000

 

Leasehold improvements

£'000

 

Vehicle hire

fleet

£'000

 

Fixtures and equipment

£'000

 

 

Total

£'000

Cost

At 01 July 2015


438

780

35,803

14,095

51,116

Additions


-

33

18,670

469

19,172

Disposals


-

                     -

(5,023)

-

(5,023)

On acquisitions of business combinations


2,287

                     -

                   -

736

3,023

At 31 December 2015


2,725

813

49,450

15,300

68,288


Accumulated depreciation and impairment

 

At 01 July 2015


(71)

(445)

(5,963)

(12,955)

(19,434)

Charge for the period


(13)

(32)

(3,446)

(359)

(3,850)

Disposals


-

-

1,632

-

1,632

On acquisitions of business combinations


-

-

-

-

-

At 31 December 2015


(84)

(477)

(7,777)

(13,314)

(21,652)


Carrying amounts

 

                                                                                

At 31 December 2015


2,641

336

41,673

1,986

46,636


Leased assets included above:

 

At 30 December 2015


-

-

41,506

183

41,689

 

 

 

 


 

Freehold property

£'000

 

Leasehold improvements

£'000

 

Vehicle hire

fleet

£'000

 

Fixtures and equipment

£'000

 

 

Total

£'000

Cost

At 01 July 2014


438

3,123

21,806

13,599

38,966

Additions


-

43

12,877

314

13,234

Disposals


                     -

(37)

(4,821)

-

(4,858)

On acquisitions of business combinations


                     -

-

-

-

-

At 31 December 2014


438

3,129

29,862

13,913

47,342


Accumulated depreciation and impairment

 

At 01 July 2014


(62)

(2,734)

(3,870)

(12,225)

(18,891)

Charge for the period


  (4)

(29)

(2,188)

(387)

(2,608)

Disposals


-

9

1,342

-

1,351

On acquisitions of business combinations


-

-

-

-

-

At 31 December 2014


(66)

(2,754)

(4,716)

(12,612)

(20,148)


Carryingamounts

 

                                                                                    

At 31 December 2014


372

375

25,146

1,301

27,194


Leased assets included above:

 

At 30 December 2014


-

-

24,285

218

24,503

 

 

 

 



 

13            Associates

 

The Group's interest in associates comprises of minority participations in three Limited Liability Partnerships ("LLP'") registered and situated in the United Kingdom. All of the LLPs are engaged in the processing of legal claims and are regulated by the Solicitors Regulation Authority. The LLPs are businesses over which the Group is deemed to have significant influence but does not control.

                               

Unaudited

6 months ended

31 December

2015

£'000

Unaudited

6 months ended 31 December

2014

£'000

Carrying amount of interests in associates

466

65

 

Group's share of:



Profit from continuing operations

623

81

Other Comprehensive income

-

-

Total profits

623

81

 

 

14            Trade and other receivables

 

Net trade receivables comprise claims due from insurance companies and self insuring organisations and amounts invoices for the provision of services to customers. The Group's debtor days at 31 December 2015 were 95 days (31 December 2014: 108 days). This measure is based upon net trade receivables, other receivables and accrued income as a proportion of the related underlying sales revenue for the past 12 months multiplied by 365 days.



31 December

2015

£'000

31 December

2014

£'000

30 June

2015

£'000

Net trade receivables


93,049

67,321

67,229

Other receivables


71

211

144

Accrued income


3,805

978

1,047

Total receivables for debtor day calculation purposes


96,925

68,510

68,420

Disbursements recoverable in legal businesses


11,406

11,691

10,924

Amount due from associates


13

13

13

Taxation recoverable


-

-

13

Assets held for sale


10

-

-

Prepayments


6,459

4,221

4,961



114,813

84,435

84,331

 

 

15            Trade and other payables


31 December

2015

£'000

31 December

2014

£'000

30 June

2015

£'000

Trade payables

50,826

22,479

24,938

Corporation tax payable

996

-

-

Other taxation and social security

4,035

1,811

3,164

Accruals and deferred income

34,505

26,165

27,297

Disbursements payable in legal businesses

8,174

9,171

7,926

Other creditors

3,580

1,632

1,700


102,116

61,258

65,025

 

 



 

16            Finance leases and other debt

 

During the period the Group entered into new finance leases with a principal value of £18.3m and made principal repayments of existing finance leases of £6.8m. Finance leases outstanding at 31 December 2015 amounted to £40.7m and compares to £29.0m at 30 June 2015 and £24.8m at 31 December 2014. Finance leases are secured upon the underlying vehicles. The Group has considerable facilities available to it for the provision of its motor fleet both by way of finance leases and contract hire which are considered in aggregate sufficient for its present growth plans.

 

Other loans at 31 December 2014 related to a trading relationship acquired with the NewLaw group of companies and has since been repaid.

 

The Group also has a 5 year £35m unsecured revolving credit facility with HSBC expiring in December 2020 as well as an unsecured overdraft facility of £5m with the same bank. There have been no drawings under either facility since inception but the facility is available to fund growth in the business should the present considerable cash balances currently held for this purpose be used for other corporate purposes such as further acquisitions. If and when drawn, related covenants surround a net debt to EBITDA ratio ( < 3:1) and the ratio of trade receivables to amounts drawn under the HSBC facility (> 1.5:1).  The Group also currently has secured overdraft facilities with other banks amounting to £4m (which were acquired as part of acquisitions), but these facilities have never been utilised since acquisition and these facilities are in the process of being terminated by the Group and the associated security released.

 

 

 

17            Share capital and share premium account

 

Changes in the share capital or share premium account during the year are summarised in the Consolidated Statement of Changes in net Equity and reflect:

 

Date

 

Reason

 

Number

 

Average

price

 

Total

£'000

Share

Capital

£'000

Share

Premium

£'000








31 July 2015

NewLaw 2nd tranche deferred consideration

480,924

118.99p

572

-

572

31 August 2015

NewLaw 2nd tranche deferred consideration

480,924

118.99p

573

1

572

30 September 2015

NewLaw 2nd tranche deferred consideration

480,924

118.99p

572

-

572

31 October 2015

NewLaw 2nd tranche deferred consideration

480,923

118.99p

573

1

572

30 November 2015

NewLaw 2nd tranche deferred consideration

480,923

118.99p

572

-

572

31 December 2015

NewLaw 2nd tranche deferred consideration

485,256

118.99p

577

1

576


Total 2nd tranche deferred consideration

2,889,874


3,439

3

3,436








27 October 2015

Issued for acquisition of FMG

3,048,220

164.03p

5,000

3

4,997








04 August 2015

Exercise of Executive Share Options

63,656

15.74p

10

-

10

07 August 2015

Exercise of SAYE Options

6,832

48.30p

3

-

3

02 November 2015

Exercise of Executive Share Options

254,630

11.49p

29

-

29

06 November 2015

Exercise of Executive Share Options

567,998

11.34p

65

1

64

10 November 2015

Exercise of Executive Share Options

524,346

  7.76p

42

1

41

16 November 2015

Exercise of Executive Share Options

95,489

11.49p

11

-

11

09 December 2015

Exercise of Executive Share Options

190,973

11.49p

22

-

22

17 December 2015

Exercise of Executive Share Options

124,917

11.16p

14

-

14

22 December 2015

Exercise of Executive Share Options

127,318

11.49p

15

-

15


   Total shares issued for cash

1,956,159


211

2

209









   Total shares issued

7,894,253


8,650

8

8,642

 

 

As at 31 December 2015 the issued share capital of the Company comprised the following:

 


Ordinary shares of 0.1p each

B shares of 0.1p each


Number

Number

£'000

In issue at 30 June 2015

285,390,229

286

10,410,910

10

Issued for deferred consideration

2,889,874

3

-

-

Issued for acquisitions

3,048,220

3

-

-

Exercise of executive share options

1,956,159

2

-

-

In issue at 31 December 2015 fully paid

293,284,482

 294

10,410,910

10

 

 

Deferred share consideration was created per note 24 in the June 2015 financial statements on the acquisition of New Law. The remainder at 30 June 2015 was transferred to the share premium account and has been subsequently issued. No further deferred share consideration is to be issued regarding the New Law acquisition.



 

18            Acquisition of FMG

 

 FMG was acquired on 27 October 2015 for £22.5 million in aggregate on a debt-free basis and assuming a normalised level of working capital. Loan notes of £23.5m were also settled at completion. The total consideration for the acquisition of all the shares and other vendor interests in FMG was therefore £46.0 million and comprised a number of elements, satisfied by the payment at completion of approximately £41.0 million in cash and also the issue of 3,048,220 new ordinary Redde shares with a total value of £5.0 million in respect of the FMG shares and loan notes. Included in the above cash payment was a cash payment of £2.5 million in respect of additional working capital balances on completion.

 



Fair

 Value

£'000

Tangible fixed assets


3,019

Intangible assets - Customer relationships


21,900

Intangible assets - Software


1,000

Deferred tax asset


173

Trade and other receivables


9,866

Cash and cash equivalents


4,470

Trade and other payables


(16,797)

Loan notes


(23,505)

Finance leases


(129)

Deferred tax liability


(4,580)

Net assets acquired


(4,583)

Consideration:



Cash paid on completion


17,455

Consideration paid in shares


5,000

Net consideration


22,455

Goodwill arising from the acquisition


27,038

 

 

The fair values of the assets and liabilities are stated as at 31 October 2015 being the nearest practical date to completion and are considered to be provisional given the time that FMG has been part of the Group and is expected to be presented as final as part of the Group's 2016 annual financial statements. Goodwill has arisen on the acquisition due to the value of the assembled workforce, the value associated with any new software which is yet to be developed and the value associated with new customer contracts and relationships to be generated in the future that are not capable of being individually identified and/or separately recognised under the terms of IFRS 3(R). The value of customer relationships and acquired software that have been recognised will be amortised over 10 and 5 years respectively.

 

 

 



 

19            Cash flow information

 



Audited

30 June

2015

£'000

 

 

Acquisition

£'000

 

Cash

 flow

£'000

Other

non-cash changes

£'000

Decrease/

(increase) in net debt

£'000

Unaudited

31 December

2015

£'000

Analysis and reconciliation of net debt














Net cash and cash equivalents

68,626

4,470

(41,502)

-

(37,032)

31,594








Debt due within one year

-

-

-

-

-

-

Debt due after more than one year

-

(23,505)

23,505

-

-

-


-

(23,505)

23,505

-

-

-

Finance leases

(28,951)

(129)

6,814

(18,443)

(11,758)

(40,709)


(28,951)

(23,634)

30,319

(18,443)

(11,758)

(40,709)








Net cash / (debt)

39,675

(19,164)

(11,183)

(18,443)

(48,790)

(9,115)

 

 



Audited

30 June

2014

£'000

 

 

Acquisition

£'000

 

Cash

flow

£'000

Other

non-cash

changes

£'000

Decrease/

(increase) in net debt

£'000

Unaudited

31 December

2014

£'000

Analysis and reconciliation of net debt














Net cash and cash equivalents

58,338

-

4,925

-

4,925

63,263









Debt due within one year


(350)

-

-

-

-

(350)

Debt due after more than one year


-

-

-

-

-

-



(350)

-

-

-

-

(350)

Finance leases


(16,431)

-

4,308

(12,652)

(8,344)

(24,775)



(16,781)

-

4,308

(12,652)

(8,344)

(25,125)









Net cash/(debt)


41,557

-

9,233

(12,652)

(3,419)

38,138



 


2015

£'000

2014

£'000

(Decrease)/increase in cash and cash equivalents in the period

(41,502)

4,925

Cash inflow from decrease in borrowings and lease financing

30,319

4,308

Change in net cash / debt resulting from cash flows

(11,183)

9,233

New finance leases

(18,443)

(12,652)

Debt on acquisitions

(19,164)

-

Movement in net cash / debt in the period

(48,790)

(3,419)

Net cash at start of the period

39,675

41,557

Net (debt) / cash at end of the period

(9,115)

38,138

 

 

 

20            Approval of Interim Financial Statements

 

The Interim Financial Statements were approved by the Board of Directors on 24 February 2016.

 

 



 

21            Principal Risks and Uncertainties

 

The Group faces a range of risks and uncertainties. The processes that the Board has established to safeguard both shareholder value and the assets of the Group are described more fully in the Directors' Report in the Annual Report and Accounts. Set out here are those specific risks and uncertainties that the directors believe could have the most significant adverse impact on the Group's business. The risks and uncertainties described below are not intended to be an exhaustive list.

 

Economic conditions

The Group's operating and financial performance is affected by the economic conditions in the United Kingdom. Adverse changes in economic conditions in 

the United Kingdom and globally and the volatility of international markets could result in changes to driving patterns, car usage and ownership and this may 

result in lower miles driven and lower numbers of accidents and therefore reduced  business volumes. Any such adverse effects on the Group's business 

might affect its relationships and/or terms of business with, and ultimately even the loss of, some key business partners. Economic uncertainty might also 

affect its key business partners and referrers and/or generally have an adverse impact on the insurance or other industries in which the Group's key 

trading partners operate. This in turn could lead to more onerous terms of business or the inability of the Group's debtors to pay monies due. Economic 

uncertainty may also have an adverse effect on the banking industry generally which may affect the Group's ability to obtain or maintain finance on 

suitable terms when needed.

 

Competition

Barriers to entry into the general credit hire and credit repair markets at a local level are low. Although barriers to establishing a national or specialist business in this sector are higher, there is no certainty that these barriers will remain or will deter new entrants or existing competitors. In addition, there is the potential for local operators to overcome these barriers and establish national networks by forming alliances. Furthermore, competition could be intensified due to the activity of the Group's competitors or if insurance companies, brokers and/or providers of services to motorists or other consumer groups entered the market, either alone or in collaboration with existing providers. Increased competitive pressures such as these could result in a fall in the Group's revenues, margins and/or market share which could cause an adverse impact on its business, financial condition and operating results.

 

Customer and referrer relationships

Business is referred to the Group from a number of sources including insurance companies, insurance brokers, dealerships and body shops. The Group has agreements in place with many of these referrers which govern the flow of credit hire cases and the terms and commissions on which such cases are introduced. These agreements are subject to periodic review, and once out of initial term can be terminated with short notice periods of typically 3 to 6 months. In the past, commission rates for new credit hire business have risen sharply increasing the costs of acquiring such new business. Commission increases could adversely affect the Group's business and operating results. A significant proportion of the Group's business is referred from insurance companies. If insurance companies were to withhold business from the Group or credit hire providers generally or increase their credit hire referral commissions, whether alone or on a concerted basis, the operating results, business and prospects of the Group could be adversely impacted. Based upon profit contribution analysis, the Group may decide that renewal terms for certain existing contracts are uneconomic for the Group and consequently gross revenues may decline.

 

Insurance industry protocols

The Group was a subscriber to the voluntary agreement developed by accident management companies and the ABI known as the General Terms of Agreement (GTA) but withdrew from this agreement with effect from 15 August 2015. This decision was taken due to the considerable number of bi-lateral protocol arrangements that the Group has with insurers and the residual element of business still conducted under the GTA was considered to be less significant.

 

There is no guarantee that non-protocol insurers will continue to conduct their business with the Group on terms (including payment terms) similar to those pertaining to the GTA and they may also seek alternative strategies to dealing with claims submitted.

 

Regulation

Certain of the Group's activities and arrangements are subject to regulation. Whilst the Group seeks to conduct its business in compliance with all applicable regulations, there remains a residual risk that regulators will find that the Group has not complied fully with all such regulations. Failure by the Group to comply with regulations may adversely affect its reputation (which could in turn lead to fewer referrals), may result in the imposition of fines or an obligation to pay compensation or may prevent the Group from carrying on a part of its business and could have a materially adverse effect on the Group's business, financial condition and operating results.

 

Legal

In the past, legal challenges have been brought on various grounds (mainly by insurance companies) seeking weaknesses in the legality of credit hire agreements and the hire rates and the periods of hire that can be recovered by credit hire companies. A number of historical legal cases relating to the provision of credit hire and related services have provided a precedent framework which has remained broadly stable for several years. The majority of the Group's claims are now initially pursued under the terms of bilateral protocols with individual insurers and the Group believes that it operates its business within the parameters laid down by the reported decisions of the courts such that its credit hire and repair arrangements are enforceable. However fresh challenges to the legality of credit hire and repair arrangements or the rates payable continue to be brought.

 

The government continues to look at the overall costs of litigation. It may bring in legislation or amend or create new rules of court which further reduce the costs recoverable in certain types of actions and/or changing the criteria for litigation to fall within the small claims track (where legal costs (except the most basic) are not generally recoverable) which might have an impact on the profit costs of the Group's legal businesses and/or increase the cost of recovering credit charges.

 

Recovery of receivables

The business of credit hire involves the provision of goods and services on credit. The Group generally 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 payment is received. Whilst significant progress has been made recently in obtaining prompt settlement of claims there is a risk that the Group will not be able to improve or maintain the pace of settlement of claims. In addition, third party insurers may seek to delay payments further in an attempt to achieve more favourable settlement terms for outstanding claims or, ultimately, to force the Group and other credit-hire providers out of the market. If the Group is unable to maintain existing settlement periods, if there are further delays in the receipt of payments or if settlement terms with insurers worsen, its business, financial condition and operating results could be adversely impacted.

 

Fleet costs and residual values

The cost to the Group of holding vehicles for hire is dependent upon a number of factors, including the availability of vehicle finance, the purchase price of those vehicles, the level of discounts available from dealers and manufacturers, financing costs (represented by LIBOR and applicable margins) and the expected residual value at the date of disposal. There is a risk that changes in any of these factors could mean that the Group's fleet costs are increased.

 

Operational risks and systems

Operational risks are present in all of the Group's businesses, including the risk of direct and/or indirect loss resulting from inadequate or failed internal and external processes, systems, or infrastructure from fraud or human error or from external events. The Group's business is dependent on processing a large number of claims and vehicle hires. There could be a failure, weakness in, or security breach of, the Group's systems, processes or business continuity arrangements.

 

Liquidity and Financial

The Group manages its existing cash balances and operational cash flow surpluses to provide working capital headroom but also has committed but unutilised working capital facilities available to it if required. The Group is also dependent upon the continued availability of both committed and uncommitted fleet finance facilities to finance replacement vehicle purchases. In addition the principal financial risks and uncertainties include capital risk, interest rate risk and credit risk.

 

Going concern

The Group's business activities, analysis of its financial performance and position, and factors likely to affect its future development, are set out in the Operational and Financial Review above. The financial resources available to the Group are also discussed in detail in the Operational and Financial Review above. The forward risks faced by the Group are also discussed in the section on principal risks and uncertainties above.

 

The directors have assessed the future funding requirement of the Group and the Company, and have compared them to the sources and levels of committed working capital resources available to it including cash balances. The assessment included a review of current financial projections to June 2017, and a review of the financial resources available by way of cash balances, committed and uncommitted facilities and any applicable covenants. Recognising the inherent uncertainty surrounding financial projections and any possible variations with regard to the demand for the Group's services and the cash collection profiles from insurers, the directors considered a number of scenarios and the mitigating actions the Group could take to limit any adverse consequences.

 

Having undertaken this work, the directors are of the opinion that the Group has access to adequate resources to fund its operations for the foreseeable future and so determine that it is appropriate for the financial statements to be prepared on a going concern basis.

 

 

 

 

 

Martin Ward                                                                                       Stephen Oakley

Chief Executive Officer                                                                   Chief Financial Officer

 

Independent Review Report to Redde plc

 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2015 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules.

 

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules.

 

 

 

 

 

Robert Fitzpatrick

For and on behalf of KPMG LLP

 

Chartered Accountants

100 Temple Street, Bristol, BS1 6AG, United Kingdom

24 February 2016

 

 


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