Delivering Integrated Mobility Solutions
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Delivering integrated mobility solutions Annual Report and Accounts 2021 Redde Northgate plc Strategic Report Strategic Report Our purpose 2 Our business at a glance 4 Equity proposition To keep customers mobile, whether 5 Chair’s statement meeting their regular needs or 6 Chief Executive’s review servicing and supporting them 15 Our markets when unforeseen events occur. 18 Our business model 20 Our strategy Underpinned by our employee culture, 24 Key performance indicators delivering for all our stakeholders. 26 Financial review 33 Identifying and managing risk 35 Principal risks and uncertainties Our vision 39 Viability statement 41 Our ESG Journey To be the leading supplier of 44 Stakeholder engagement mobility solutions and automotive 46 Our environment services to a wide range of 48 Our people businesses and customers. 50 Our stakeholders 52 UN Sustainable Development Goals (SDGs) 53 Non-financial information statement About our non-GAAP measures 54 Section 172 Statement and why we use them Corporate Governance Throughout this report we refer to underlying 57 Chairman’s introduction to governance results and measures. The underlying measures 60 Board of Directors allow management and other stakeholders to 62 Corporate governance better compare the performance of the Group 66 Report of the Nominations Committee between the current and prior period without 67 Report of the Audit and Risk Committee the effects of one off or non-operational items. 71 Remuneration Report 84 Report of the Directors In particular we refer to disposal(s) profit. This is a non-GAAP measure used to describe the 87 Statement of Directors’ responsibilities in respect of the financial statements adjustment in depreciation charge made in the year for vehicles sold at an amount different to 88 Independent auditors’ report to the members of Redde Northgate plc their net book value at the date of sale (net of attributable selling costs). Underlying measures Financial Statements exclude certain one-off items such as those 99 Consolidated income statement arising due to restructuring activities and recurring non-operational items, including 100 Statements of comprehensive income amortisation of acquired intangible assets. 101 Balance sheets 102 Cash flow statements Exceptional items are explained in the Notes 103 Notes to the cash flow statements to the financial statements and a reconciliation 104 Statements of changes in equity of GAAP to non-GAAP measures is included 105 Notes to the financial statements on pages 31 and 32. Shareholder Information 142 Glossary 144 Shareholder information Redde Northgate plc 1 Annual Report and Accounts 2021 Strategic Report Strategic This year has been a challenging year but also one of exceptional progress, Corporate Governance Corporate and we have endeavoured to deliver value for all our stakeholder groups. Martin Ward CEO Financial Statements Financial This year has been a challenging year but also Underlying profit one of exceptional progress against our Focus, before tax £m Drive and Broaden strategic framework, and I am proud of our people and the way they responded to the pandemic. £93.2m Information Shareholder 2020: £59.0m Last year we focused on the integration of the businesses following the Merger. That work is Underlying EPS (p) largely complete, ahead of time, with £20.5m of cost savings secured. Our next strategic priority is to grow revenue under our Drive phase 31.0p and to utilise the services and infrastructure 2020: 30.8p platform we have built to extend our market reach. Cash generation was strong, providing headroom Revenue £m to finance future growth. All our core KPIs have improved and the return on our capital employed is growing. £1.1bn 2020: £779.3m There is significant sustainable compounding growth and quality earnings potential in the combined business. The actions and measures we ROCE % are taking are already creating value which will be further enhanced as we deliver on our priorities. Recent trading has been strong and we enter 9.5% FY2022 from a position of strength. 2020: 7.0% Martin Ward Chief Executive Officer 2 Our business at a glance Strategic Report Redde Northgate is a leading integrated mobility solutions provider Vehicle hire Redde Vehicle Northgate Customer's rental rental vehicle Key metrics Vehicles owned Vehicles managed Sites Employees 110,000 600,000 170 6,000 Fleet management, service and maintenance Our reenue 6 Vehicle repairs 3 4 £1.1bn 1 Vehicle ancillary 2 services 5 1. Nor 42% 2 North 25% 3. Redde 33% 4. Hir o vehicles 46% Legal services 5. Sa o vehicles 21% Vehicle inspection app 6. Claim an services 33% Electric vehicle charging Fuel cards Read more about our markets on page 15 Redde Northgate plc 3 Annual Report and Accounts 2021 We service our customers through a network and diversified fleet of over Report Strategic 110,000 owned and leased vehicles, supporting over 600,000 managed vehicles, with more than 170 workshop, body shop and rental locations across the UK, Ireland and Spain and a specialist team of over 6,000 automotive services professionals. Vehicle Accident Governance Corporate Telematics including dash cams data management Driver risk management Assessment and training Call centre Financial Statements Financial Credit repair FNOL Managed repair Vehicle Information Shareholder repair Recovery Liability assessment Billing Non-fault solutions Vehicle Repair Repair Replacement Uninsured loss recovery return assessment vehicle hire Bodyshop network Vehicle Vehicle sales sales & eAuctions SOLD eAuction digital sales We Buy You Rent Ex-rental sales 4 Equity proposition Strategic Report Our compelling investment case Our highly disciplined approach to investment, returns and capital efficiency underpins our compelling investment case made up of these key attributes: Delivering growth Purpose driven, responsible business • Operating in growing markets and well positioned to • Our purpose is to keep customers mobile, whether through benefit from longer term market dynamics meeting their regular mobility needs or by servicing and – Our mobility solutions are aligned to changing market supporting them when unforeseen events occur. dynamics including the shift from vehicle ownership • We are a responsible business which aims to embrace to usership, convergence of mobility solutions, the change, for example the transition to EVs. need for improved customer interfaces, big data • We aim to have a positive impact on the communities in automotive services and the transition to electric in which we operate and strive to maintain the highest and alternative fuel vehicles. standards of conduct in everything we do. • Strategy set to deliver growth • We are building out our ESG strategy and are committed – Focus, Drive and Broaden is delivering strategic initiatives to the journey we are embarking on. designed to achieve sustainable compounding growth. – Strong potential for further organic and acquisition-led growth including growth into adjacent product and Disciplined approach to capital allocation geographic markets. • We are disciplined in our approach to drive increasing returns. • We actively seek out investment opportunities aimed at Experienced team delivering returns substantially ahead of WACC. • We remain open to disposal opportunities where • Team with deep technical expertise across the investment returns can be maximised through a sale. vehicle lifecycle. • Appropriate dividend distribution. • Management’s acquisition and integration expertise enabling cost synergies and savings, alongside planned revenue synergies. Strong financial profile • Commitment to drive cultural change helping achieve growth objectives. • We maintain a strong financial position through our focus across cost and margin optimisation and returns through scale and efficiency. Trusted partner and market leading • Diversified revenue streams from products and services customer offering across the vehicle lifecycle. • Prudent leverage targeted at net debt/EBITDA of 1-2x • We are well known and trusted in our markets. in the near term. • We have a unique proposition through our integrated mobility solutions – our integrated service offering adds value to customers and delivers a broad range of mobility solutions. Redde Northgate plc 5 Annual Report and Accounts 2021 our digital capabilities with a traffic officer App for Highways Report Strategic Chairman’s Statement England to support roadside recovery and a legal claims portal to support our insurance related work. The Group’s performance was ahead of the Board’s expectations for the year and this combined with strong cash delivery has enabled the business to benefit from strategic acquisitions including in September 2020 the Avril Palmer-Baunack purchase of assets from Nationwide forming FMG RS, Committee Chairman our bodyshop repair network of 70 sites and the acquisition Governance Corporate of 2,000 vehicles along with customers in June 2021 from a Scottish rental company, extending our geographical presence and customer reach. During the year the Board has agreed upon a strategy with respect to migrating our customers towards electric vehicles and supporting them through this transition. This provides an exciting opportunity for the business to extend its products and services further, utilising the extensive platform that it now Statements Financial The Group has managed exceptionally well operates and fits directly with the strategy for our growing ESG through COVID-19 whilst at the same time agenda. The Merger has