Redde's (REDD) 'growth, profitability and sustainability' strategy achieved its goal of winning over customers in the first half. During the period, the accident management specialist invested more in telephony, IT systems and developing its online portals, all with the aim of increasing accessibility and enhancing user experience.
Thanks to these efforts, Redde was able to both renew existing contracts and reel in new customers. Revenues in the period surged (see table), with 22 per cent generated by FMG, the claims management specialist it acquired in October 2015. Redde bought FMG to widen its appeal to owners of large vehicle fleets requiring accident management and legal services. Based on these results, that strategy appears to have worked out well.
Unfortunately, FMG's growing role also had negative implications. Due to a higher number of roadside repairs, which attract lower margins than providing motorists involved in accidents with replacement vehicle hires, the group's adjusted operating margin tightened by 1.6 percentage points to 8.4 per cent.
House broker N+1 Singer upgraded its forecasts for the year to June 2017. It now expects adjusted pre-tax profit of £39.5m and EPS of 10.5p (from £34.7m and 9.3p in FY2016).
REDDE (REDD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 177p | MARKET VALUE: | £529m | |
| TOUCH: | 173-174p | 12-MONTH HIGH: | 210p | LOW: 137p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 53p* | NET DEBT: | 8% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 165 | 16.0 | 4.49 | 4.5 |
| 2016 | 227 | 17.5 | 4.58 | 5.0 |
| % change | +38 | +9 | +2 | +11 |
Ex-div:b9 Mar Payment:b30 Mar *Includes intangible assets of £106m, or 35p a share | ||||
