Redde (REDD) chief executive Martin Ward might have seen half-year numbers as "another set of good results", but investors clearly thought otherwise. The shares fell sharply on sight of a thinning gross profit margin and comments that the coming months face a tough comparison, thanks to the favourable conditions created for the vehicle accident management group by the extreme weather in early 2018.
So far this year, there’s little sign of a drop-off in demand. In the six months to December 2018, the number of credit hire cases grew by 14.9 per cent and credit hire days increased by 27.8 per cent. However, debtor days also rose once again to 109, meaning clients now take 20 per cent longer to pay Redde than they did 18 months ago. To address this, the company is pumping money into its IT systems and claim portal to reduce processing times and mitigate rising operational costs for insurers.
All of this has placed a strain on working capital. Trade and receivables are now at £200m, 25 per cent up in a year. A similar rise in payables, and an associated drawdown on cash and equivalents, has reduced net current assets by almost a fifth to £17.8m.
Consensus forecasts are for earnings per share of 13.7p in the financial year to June, rising to 14.5p in FY2020.
| REDDE (REDD) | ||||
| ORD PRICE: | 162p | MARKET VALUE: | £498m | |
| TOUCH: | 162-163p | 12-MONTH HIGH: | 200p | LOW: 157p |
| DIVIDEND YIELD: | 7.2% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 52p* | NET DEBT: | 26% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 253 | 19.9 | 5.65 | 5.5 |
| 2018 | 291 | 21.3 | 5.83 | 5.5 |
| % change | +15 | +7 | +3 | - |
| Ex-div: | 07 Mar | |||
| Payment: | 28 Mar | |||
| *Includes intangible assets of £101m, or 33p a share. | ||||
