On the surface, there is much to suggest Redde (REDD) is trading well. Although margins fell in the year to June, the vehicle replacement specialist saw a 9.4 per cent rise in credit hire cases, a decent utilisation rate for its expanding fleet, and increased demand.
Look beneath the bonnet, however, and the gremlins that contributed to the sell-off in the group’s shares earlier this year are still there. For one, the working capital strain has worsened, as debtor days climbed to 116, up from an average of 109 in the first half of the year and just 91 in the year to June 2017.
And while current assets rose from 112 to 116 per cent of current liabilities, trade and other receivables continued to climb, from £181m in the prior year to £220m at the end of June. Given the group often already discounts claims in return for a supposedly more efficient and faster settlement process, it should be of little surprise that management is now taking a firmer line with insurers who take the discount and then defer payments at their leisure.
“If the group has to sacrifice some debtor days to preserve value, then it will do so,” is Redde’s new position. The decision of one insurer to return to its protocols after life on the outside has, apparently, only added to that conviction.
Consensus forecasts are for earnings of 13.5p per share for the 12 months to June 2020.
| REDDE (REDD) | ||||
| ORD PRICE: | 112p | MARKET VALUE: | £ 342m | |
| TOUCH: | 111.2-112p | 12-MONTH HIGH: | 200p | LOW: 82.3p |
| DIVIDEND YIELD: | 10.4% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 52.5p* | NET DEBT: | 22% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 249 | 24.3 | 9.0 | 8.3 |
| 2016 | 379 | 31.3 | 8.7 | 9.7 |
| 2017 | 472 | 31.8 | 8.9 | 10.6 |
| 2018 | 527 | 38.8 | 11.4 | 11.65 |
| 2019 | 590 | 41.7 | 11.3 | 11.65 |
| % change | +12 | +7 | -1 | - |
| Ex-div: | 03 Oct | |||
| Payment: | 07 Nov | |||
| *Includes intangible assets of £99.2m, or 32.3p a share. | ||||
