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Redde Northgate accepts furlough aid, keeps dividend

Trading at the vehicle leasing group is reportedly back to normal, though several pinch points remain
September 16, 2020

Landing nearly five months after its April year-end, results for the commercial vehicle lease group Redde Northgate (REDD) tell only half a story. After completing its merger on 21 February, Covid-19 had a material initial impact on trading, though chief executive Martin Ward said demand and trading had returned to pre-pandemic levels.

IC TIP: Hold at 220p

With so many moving parts, it is hard to know what a ‘normal’ benchmark looks like. But the combined effect of merger and lockdown was a three-fold jump in trade and other payables to £222m, while receivables rocketed from £71.8m to £296m. A rise in deferred tax liabilities, together with a reclassification of operating leases as lease liabilities, also meant total liabilities rose at a faster clip than net assets.

There were some positives. The group hit a £10m target for merger-related cost synergies 18 months early, and now thinks it can cut combined overheads by an extra £5m by April 2022. A further £3.8m of fat-trimming was found elsewhere.

One area that might have been cut back is the 6.8p-a-share final dividend, which was signed off despite the receipt of state support to furlough employees. Mr Ward said applying for government help was only done to protect jobs, but that any economic benefit to the company would not be repaid.

Analysts at broker Numis upgraded their forecasts to adjusted earnings of 26.3p per share for the year to April 2021, rising to 35.7p for FY2022.

REDDE NORTHGATE (REDD)  
ORD PRICE:220pMARKET VALUE:£541m
TOUCH:220-222p12-MONTH HIGH:355pLOW: 108p
DIVIDEND YIELD:6.0%PE RATIO:44
NET ASSET VALUE:354p*NET DEBT:66%
Year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201661877.646.116.0
201766772.245.717.3
201870252.732.417.7
201974560.438.618.3
202077913.55.013.1
% change+5-78-87-28
Ex-div:24 Sep   
Payment:03 Nov   
*Includes intangible assets of £302m, or 123p per share.