Interim Results

RNS Number : 8408H

Redde Northgate PLC

08 December 2020

REDDE NORTHGATE PLC

("Redde Northgate" or the "Group" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2020

Encouraging momentum in the Group

Adjusted results
Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	%
Revenue (excluding vehicle sales)	429.0	265.9	61.3%
Underlying[1] EBIT	48.7	35.1	38.7%
Underlying¹ Profit before Tax	40.6	27.6	47.2%
Underlying¹ Earnings per Share	13.4p	17.6p	(24.1%)
Statutory results
Total revenue	556.0	357.8	55.4%
EBIT	34.0	32.9	3.3%
Profit before Tax	25.9	24.8	4.3%
Earnings per Share	8.6p	16.1p	(46.8%)
Other measures
Net debt[2]	530.9	504.6	(5.2%)
Steady state cash generation¹	80.4	59.2	35.7%
Free cash flow¹	58.6	(12.8)	557%
ROCE¹	8.1%	7.1%	100bps
Dividend per Share	3.4p	6.3p	(46.0%)

Key highlights

· Encouraging momentum in the Group. Against the backdrop of COVID-19, Northgate UK&I and Northgate Spain performed ahead of expectations in the first half of FY2021, with a full recovery in VOH to slightly above pre-COVID levels and with strong used vehicle prices and disposal profits above expectations, whilst Redde was impacted by a slower recovery in volumes due to continuing regional and national lockdowns.

· Continued excellent progress under the strategic framework of Focus, Drive and Broaden, with a further increase in Merger integration synergies and additional permanent cost savings achieved to £11.7m and £4.2m annualised run rates respectively, in context of the original year 2 Merger integration synergy target of £10m, giving a total of £15.9m of run rate savings to date. Further progress in revenue synergies with the launch of a new accident and incident management product to Northgate customers in October.

· Accelerated integration of FMG Repair Services ("FMG RS"), the trading name for the Nationwide Accident Repair Services business and assets acquired on 4 September 2020, including the securing of external and internal repair volumes and supply chains.

· Continued development of contract hire as a source of vehicle funding with substantial new contract hire credit lines approved by several lenders in the period thus expanding provision to LCVs in the Northgate fleet. £6m of these credit lines has already been utilised.

· The November lockdown in the UK did not have a discernible impact on UK VOH and VOH in both UK&I and Spain are ahead of expectations but Redde volumes were lower than October.

· Overall, the Board is pleased with the performance in the first half of the year and, whilst significant uncertainties remain given the current economic environment and the risk of future more severe lockdowns, the Board is confident of the vision and strategy of the Group and the opportunities created by the Merger and remains confident in meeting market expectations for FY2021.

· An interim dividend of 3.4p per share (2020: 6.3p) has been declared, in line with dividend policy, as stated at the time of the Merger, to pay an interim dividend that is half of the prior final dividend.

Martin Ward, CEO of Redde Northgate, commented:

"Since our preliminary year end results announcement on 16 September 2020 we have continued to make excellent progress in delivering on our strategy to become the leading integrated mobility solutions provider. Our integration plan has now delivered synergies and permanent cost savings of £15.9m run rate savings to date and we fully expect to reach the increased targets we set out of £19m in year 2.

"We have also commenced the integration of FMG RS which broadens our service proposition and capabilities in repairs and, in October, building on Redde's expertise, we launched our accident and incident management product to Northgate customers. We have had a good early response to this and are confident it will be a source of revenue growth for the Group.

"I have been immensely proud of the way the team has stepped up to ensure we can operate as effectively as possible and deliver our services during these difficult times. COVID-19 continues to impact us all and we remain primarily focussed on ensuring a safe and effective work environment for our employees and safe contact with our customers who require our services. We can clearly see the impact of COVID-19 in this set of results, particularly in Redde where accident volumes were depressed in the first quarter. However, these have significant potential to increase when road traffic volumes and incidents revert back closer to historic norms. Meanwhile, the buoyancy in used vehicle markets, particularly in the UK, has led to higher disposal profits, and the Northgate businesses have also both benefitted from an increase in VOH since year-end such that VOH is now above pre-COVID levels. Recent regional lockdowns and the second national lockdown in the UK have highlighted the need for agility and we continue to keep cost and cash controls in place in order to monitor and manage the business closely. We currently do not expect the impact of these new lockdowns to be as severe as the original national lockdowns in April and May. We are confident on performance in FY2021 and our views on FY2022 will be determined by the exit run rate we see at the end of FY2021.

"Our cash position has remained strong in the first half with continued good steady state cash generation and free cash flow. We have made good progress with our new capital model for funding vehicles and now have over five hundred vans on contract hire, with substantial LCV contract hire credit lines agreed with lenders and now in place.

"I am confident that the actions and measures we are taking are already creating value which will be further enhanced as we continue to deliver on our strategic priorities."

Half year results summary

· Total revenue was 55.4% higher than the prior period, including £181.3m of revenues from Redde. Revenue from the Northgate businesses was £376.5m, 5.2% higher than H1 2020, and comprised hire revenues which were 6.2% lower due to the impact of both off-hires and customer support packages during the first lockdowns and vehicle sales revenues which were 38.2% higher due to higher volumes (mainly from reducing stock impacted by April lockdown) and strong market pricing in the UK.

· Revenue (excluding vehicle sales) was 61.3% higher than the prior period with the increase attributable to Redde, which is included in revenue following the Merger on 21 February 2020.

· Underlying EBIT and underlying PBT were 38.7% and 47.2% higher respectively, reflecting the strong performance in the Northgate UK&I business, a resilient performance in the Northgate Spain business and the profits from the Redde business.

· Statutory EBIT and statutory PBT are stated after £9.6m of amortisation of acquisition intangibles[3] and £5.4m of exceptional costs, of which £2.6m related to restructuring and £2.6m related to FMG RS.

· Underlying EPS of 13.4p was 24.1% lower, reflecting the lower profits from the Redde business in the period driven primarily by lower volumes due to COVID-19, particularly in the first quarter.

· Statutory EPS of 8.6p was 46.8% lower, reflecting the trading of the Redde business and the impact of amortisation and exceptional items.

· There were strong net cash inflows with free cash inflow of £58.6m (2020: £12.8m outflow) benefitting from lower total net capex[4] of £48.8m (2020: £127.0m) driven by lower purchases and higher disposal proceeds. Steady state cash generation also remained strong at £80.4m (2020: £59.2m).

· Net debt (inc. IFRS 16) closed at £530.9m, 5.2% higher than H1 2020 due to the net debt acquired from Redde in H2 2020 of £84.1m, partially offset by the cash generated in the year.

Trading and COVID-19 impact

· The Board and management continued with decisive actions put in place at the end of FY2020 to protect employees and customers and to mitigate the financial impact of COVID-19 on the Group. These proactive measures included new guidelines and controls to enable social distancing, furloughing employees, limiting new fleet capex, voluntary pay reductions across Board and senior leadership positions and cost control measures including freezing of recruitment and pay reviews.

· In the first six months of FY2021 performance indicators across the Group have fully recovered or substantially improved, including:

· Customer support packages, which were a core part of measures to support customers during the first national lockdowns and totalled £3.4m in the period, reduced to nil monthly cost at the end of September. We are currently not expecting to need to provide material customer support packages for subsequent lockdowns;

· VOH has now recovered to above pre-COVID levels with closing VOH at the end of October 2020 9% higher than April 2020 in both Northgate UK&I and Northgate Spain. There has been no discernible impact of the November lockdown on VOH in the UK;

· Vehicle disposal channels re-opened over the course of May such that they were fully operational from June, with significant improvement in residual values compared to prior year in the UK driven by strong market pricing, which has been approximately 15% above expected levels. Retail disposal channels closed again in November in the UK but vehicles have continued to be sold via other channels such that this impact of the November lockdown has been managed. We expect the strength of market pricing to reduce over H2 2021;

· Post the first national lockdown accident and incident volumes started to increase as traffic volumes picked up but remained below expectations and as a result there exists significant opportunity for Redde profits to rise back to historic levels in the future. Having recovered to approximately 20% below normal volumes in September, the volumes in October were approximately 30% below normal volumes and in November were lower than this due to the lockdown and we continue to review our cost base accordingly.

Focus, Drive and Broaden strategy

· To achieve the Group's vision, the Board and management team, who together have a proven track record of delivering strategic initiatives, plan to evolve the strategy of the enlarged Group through three phases: Focus, Drive and Broaden.

· In the Focus phase, during FY2021, the Group is completing:

· the Merger integration alongside initiation of the delivery of the anticipated cost synergies, as detailed further below;

· developing the enlarged Group's products and services, as exemplified by the new accident and incident management product detailed further below; and

· starting to leverage the platform to enable revenue growth based on the broader offering, for which we have had good traction with our customers and will update on further in due course.

Merger integration and synergies

· Excellent progress continues to be made in integrating Redde and Northgate and annual run rate cost synergies achieved to date have increased to £11.7m, with implementation costs of £3.9m. Our synergy targets remain at £12m by end of FY2021 and £15m by end of FY2022, an increase from the original targets at the time of the Merger of £7m and £10m respectively.

· Together with £4.2m of permanent annual costs savings[5], £0.4m higher than previously announced, a total annual run rate of £15.9m of cost synergies and permanent cost savings have been achieved to the end of October since the Merger in February.

· The Group has also continued to make good progress in developing its plans for the enlarged Group's products and services, which have included Northgate recently launching a new accident and incident management product, which has already had several customers sign up with several hundred managed vehicles, and a good pipeline of several thousand more managed vehicles.

FMG RS integration

· The integration of FMG RS into Redde and the Group was a key focus in the last two months of the period following the acquisition of Nationwide Accident Repair Services at the beginning of September, both in terms of securing the supply chain and in managing volumes between external insurer customers and internal work referred from other Redde businesses and the Board is pleased with progress to date.

· Initial trading has, as expected, been loss-making whilst the integration is completed and the 90 day plan executed. We have now secured over 95% of the supply chain and are continuing discussions with many prior and future customers to maximise external revenues.

· The Group remains confident that the acquisition will be earnings enhancing in the first full financial year of ownership.

ESG

· Following the Merger, the Group has been developing its ESG positioning, and enhancing and formalising its strategy for the future.

· From an environmental perspective the Group has already outlined the main measures it uses to assess its environmental impact and is in the process of developing its wider carbon strategy as well as its EV strategy. It is progressively aligning its fleet policy with changing market dynamics to be at the forefront of electric vehicles.

· From a social perspective, during COVID-19 the Group has supported employees and stakeholders in a variety of different ways which included increased flexible working, customer support packages (waivers, discounts and deferrals) and other initiatives including an NHS and key worker replacement vehicle scheme and the provision of vehicles to the Red Cross in Spain and British Heart Foundation in the UK at significant discounts.

· The Group will update further on its detailed ESG plans and targets in the next reporting period.

GAAP reconciliation and glossary of terms

Throughout this document we refer to underlying results and measures; the underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period without the effects of one-off or non-operational items. Underlying measures exclude intangible amortisation from acquisitions and certain one-off items such as those arising from restructuring activities. Specifically, we refer to disposal profit(s). This is a non-GAAP measure used to describe the adjustment in depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs).

A reconciliation of GAAP to Non-GAAP underlying measures and a glossary of terms used in this document are outlined below the financial review.

Analyst Briefing

There will be a remote presentation for sell-side analysts at 9.30 a.m. today. If you are interested in attending, please email Buchanan on reddenorthgate@buchanan.uk.com.

This presentation will also be made available later today via a link on the Company's website www.reddenorthgate.com

For further information contact:

Buchanan

David Rydell/Jamie Hooper/Tilly Abraham +44 (0) 207 466 5000

Notes to Editors:

Redde Northgate plc is a leading integrated mobility solutions platform formed in February 2020 following the all-share Merger of light commercial hire business Northgate plc and Redde plc, the provider of incident and accident management, legal and other mobility-related services.

The Group provides mobility solutions and automotive services to a wide range of businesses and customers spanning the vehicle life cycle across vehicle supply, service, maintenance, repair, recovery, accident and incident management and disposal through sale or salvage.

With an extensive network and diversified fleet of over 110,000 owned vehicles and over 500,000 managed vehicles supported by more than 170 branches across the UK, Ireland and Spain, the Group aims to utilise its scale, reach and comprehensive suite of integrated services to offer a market-leading customer proposition and drive enhanced returns for shareholders.

Further information regarding Redde Northgate plc can be found on the Company's website:

www.reddenorthgate.com

OPERATING REVIEW

Northgate UK&I

Six months ended 31 October	H1 2021	H1 2020	Change
KPI	('000)	('000)	%
Average VOH	45.2	46.9	(3.6%)
Closing VOH	47.4	47.2	0.4%
Average utilisation %	90%	89%	1ppt
Six months ended 31 October	H1 2021	H1 2020	Change
PROFIT & LOSS (Underlying)	£m	£m	%
Revenue - Vehicle hire	147.0	158.9	(7.5%)
Revenue - Vehicle sales	94.1	68.9	36.7%
Total Revenue	241.1	227.7	5.9%
Rental profit	15.1	15.6	(3.4%)
Rental Margin %	10.3%	9.8%	0.5ppt
Disposal profit	17.0	3.8	350.9%
EBIT	32.1	19.4	65.4%
EBIT Margin %[6]	13.3%	8.5%	4.8ppt
ROCE %	8.8%	6.6%	2.2ppt

Rental business

Hire revenue in the Northgate UK&I business declined 7.5% compared to the prior period to £147.0m (2020: £158.9m), driven by average VOH which declined 3.6%, the impact of customer support packages which were £2.4m (equivalent to 1.5%) and the impact of vehicle and product mix, partially offset by the impact of pricing increases achieved. Regular rate increases were introduced in FY2019 and rates were again increased in FY2020 and FY2021 across our full range of rental products and continued to be well planned, communicated and executed.

Closing VOH increased 0.4% to 47,400 and was 9% above year-end FY2020 and 2% above pre-COVID levels.

At the half year, Northgate's minimum term proposition accounted for around 33% (2020: 28%) of average VOH. The average term of these contracts is approximately three years, providing both improved visibility of future rental revenue and earnings, as well as lower transactional costs.

The rental margin has continued to grow since H2 2018 with steady improvements now for the past five half year periods, increasing from 6.0% in H2 2018, to 7.1% in H1 2019 to 8.5% in H2 2019, to 9.8% in H1 2020, 10.0% in H2 2020 and 10.3% in H1 2021. This continued improvement reflects the execution of the strategic priorities and cost synergies and savings, despite the impact of COVID-19.

The net impact of the lower hire revenue and higher rental margin was a 3.4% reduction in rental profits to £15.1m (2020: £15.6m).

Management of fleet and vehicle sales

The total Northgate UK&I period end rental fleet of 51,900 vehicles increased from 51,400 at year-end FY2020. 5,700 vehicles were purchased during the period (2020: 8,100 vehicles) and 5,200 vehicles were de-fleeted. The average age of the fleet at the end of the period was three months higher than at the same time last year. This was partly due to the impact of the fleet optimisation policy and partly due to managing the fleet to mitigate impacts of COVID-19 by reducing purchases, particularly in the first quarter of the year.

A total of 9,500 vehicles were sold in Northgate UK&I during the period, 5% higher than the prior period. The sales in May were impacted by COVID-19 and the temporary closure of disposal markets but sales in subsequent months were higher due to the sale of those vehicles held since lockdown and from reducing stock levels to a substantially lower level.

Disposal profits of £17.0m (2020: £3.8m) increased 351% versus the prior period, driven by the increased sales volumes and, more significantly, a 330% improvement in the average profit per unit (PPU) on disposals to £1,794 (2020: £417) due to strong market pricing in the period, which has been approximately 15% above expected levels, together with cost savings taken in the disposals cost base, despite the continuing impact of the unwind of depreciation rate changes. No changes to depreciation rates have been made in the period, and this will remain under review as the longer term impact on residual values becomes clearer.

EBIT and ROCE

Underlying EBIT of £32.1m grew 65.4% over the prior period (2020: £19.4m) driven by higher disposal profits, partially offset by lower rental profits as explained above.

The ROCE in Northgate UK&I was 8.8% (2020: 6.6%) reflecting the increase in EBIT together with lower capital employed resulting from lower rental fleet.

Capex and cash flow

Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	£m
Underlying EBITDA	75.3	78.7	(3.4)
Net Replacement Capex⁸	(25.9)	(54.3)	28.4
Lease principal payments[7]	(2.1)	(1.6)	(0.5)
Steady state cash generation	47.4	22.8	24.6
Growth Capex (incl. inorganic)⁸	28.4	(10.6)	38.9

Underlying EBITDA remained strong at £75.3m (2020: £78.7m)

Net replacement capex[8] in the period was £25.9m, £28.4m lower than prior period, driven mainly by higher disposal prices and a lower volume of fleet rotation during the period due to COVID-19.

Steady state cash generation increased by £24.6m to £47.4m (2020: £22.8m) reflecting lower net replacement capex in the year. Growth capex was a contraction of £28.4m, relating to the reduction in total fleet of 3,200 vehicles in the period, driven by lower stock levels.

Northgate Spain

Six months ended 31 October	H1 2021	H1 2020	Change
KPI	('000)	('000)	%
Average VOH	45.5	47.1	(3.4%)
Closing VOH	47.1	47.4	(0.6%)
Average utilisation %	91%	92%	(1ppt)
Six months ended 31 October	H1 2021	H1 2020	Change
PROFIT & LOSS (Underlying)	£m	£m	%
Revenue - Vehicle hire	102.4	107.0	(4.3%)
Revenue - Vehicle sales	32.9	23.0	42.8%
Total Revenue	135.3	130.1	4.1%
Rental profit	14.7	18.1	(18.9%)
Rental Margin %	14.4%	16.9%	(2.5ppt)
Disposal profit	1.3	1.4	(5.8%)
EBIT	16.0	19.5	(17.9%)
EBIT Margin %[9]	11.8%	15.0%	(3.2ppt)
ROCE %	7.7%	9.1%	(1.4ppt)

Rental business

Hire revenue in the Northgate Spain business declined 4.3% compared to the prior period to £102.4m (2020: £107.0m), driven by average VOH which declined 3.4% due to COVID-19 and the impact of customer support packages which were £1.0m (equivalent to 0.9%). Price increases put through in the period were offset by lower excess mileage charges due to COVID-19 and vehicle product mix.

Closing VOH decreased 0.6% to 47,100 and was 9% above year-end FY2020 and 2% above pre-COVID levels.

At the half year, Northgate's minimum term proposition accounted for around 35% (2020: 33%) of average VOH. The average term of these contracts is approximately three years, providing both improved visibility of future rental revenue and earnings.

The rental margin was 2.5ppt lower at 14.4% including the impact of customer support on hire rate of 0.9%, and the impact of higher costs in the period, of which 1.0% relates to higher bad debts.

The impact of the lower hire revenue and lower rental margin was a 18.9% reduction in rental profits to £14.7m (2020: £18.1m).

Management of fleet and vehicle sales

The total Northgate Spain period end rental fleet of 52,700 vehicles increased from 51,500 at year-end FY2020. 6,000 vehicles were purchased during the period (2020: 6,900) and 4,800 vehicles were de-fleeted. The average age of the fleet at the end of the period was four months higher than at the same time last year. This was partly due to the impact of the fleet optimisation policy and partly due to managing the fleet to mitigate impacts of COVID-19 by reducing purchases, particularly in the first quarter of the year.

A total of 5,600 vehicles were sold in Northgate Spain during the period, 45% higher than prior period. The sales in May were impacted by COVID-19 and the temporary closure of disposal markets but sales in subsequent months were higher and stock levels have now been reduced to a lower level.

Disposal profits of £1.3m (2020: £1.4m) reduced 5.8% versus the prior year, as a result of the increased sales volumes offset by a 35% reduction in the average profit per unit (PPU) on disposals to £227 (2020: £350) due to the continuing impact of the unwind of depreciation rate changes, offset by some higher market pricing, some mix impacts and some improvements in the operations implemented in the year.

EBIT and ROCE

Underlying EBIT of £16.0m reduced 17.9% over the prior period (2020: £19.5m) driven by lower rental profits including impacts of COVID-19 as explained above.

The ROCE in Northgate Spain was 7.7% (2020: 9.1%) reflecting the reduction in EBIT.

Capex and cash flow

Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	£m
Underlying EBITDA	60.2	63.7	(3.5)
Net Replacement Capex¹¹	(25.9)	(22.2)	(3.7)
Lease principal payments[10]	(1.4)	(1.3)	(0.1)
Steady state cash generation	32.9	40.2	(7.3)
Growth Capex (incl. inorganic)¹¹	(3.3)	(37.0)	33.7

Underlying EBITDA remained strong at £60.2m (2020: £63.7m)

Net replacement capex[11] in the period was £25.9m, £3.7m higher than prior period, driven mainly by a higher volume of fleet replacements compared to the prior period due to timing of the fleet rotation cycle.

Steady state cash generation decreased by £7.3m to £32.9m (2020: £40.2m) reflecting lower EBITDA and higher net replacement capex in the period. Growth capex¹¹ was £3.3m, relating to the fleet growth of 300 vehicles.

Redde

The Merger completed on 21 February 2020 therefore the tables below have no prior period comparators.

Six months ended 31 October	H1 2021
PROFIT & LOSS (Underlying)	£m
Revenue - Claims and Services	181.3
Gross profit	25.9
Gross margin %	14.3%
Operating profit	1.7
Income from associates	2.4
EBIT	4.1
EBIT margin %^{^[12]}	2.3%
ROCE %[13]	7.9%

Revenue and profit

Revenue for the period was £181.3m, of which £18.2m related to FMG RS external revenues. The main drivers of revenue, traffic volumes and thereby road traffic accidents, were materially reduced in the period. Initially the volume reduction was significant versus pre-COVID levels[14] as the first lockdown, with schools and many workplaces closed, led to a material reduction in traffic, and then, with sequential monthly improvements volume increased in the second quarter to approximately 20%-30% below pre COVID-19 levels. Lower volumes particularly impacted credit hire and credit repair revenues, but also to a lesser extent fleet management and legal services revenues.

Gross margin remained broadly in line with expectations at 14.3%, although it was impacted by COVID-19 from reduced fleet utilisation particularly in the first quarter, and thus gross profit was £25.9m. Gross profit was below expectations due primarily to the slower recovery in volumes above.

EBIT for the period was £4.1m. This was made up of an operating loss in FMG RS of £3.0m, in line with Board expectations, an operating profit in the other Redde businesses of £4.7m, and income from associates of £2.4m.

The £7.1m of EBIT in the other Redde businesses was below expectations mainly due to the slower recovery in volumes, and whilst the cost base was closely managed and reduced where possible, most overheads are fixed or semi-variable, thus reducing EBIT margins to 2.3%. A normalised EBIT margin of this business is substantially higher and would deliver a materially higher profit and ROCE than in the current period.

Management of fleet

The total fleet in Redde closed the period at 6,500 vehicles, reduced from the level at 30 April 2020 of 9,000 vehicles due to the impact of COVID-19 as fleet size was reduced to reflect reduced volumes.

The average fleet age was 18 months reflecting the lower fleet holding period than in the Northgate businesses due to the different usage of the vehicles and business economics.

The Redde fleet continues to operate through a hybrid solution of ownership, contract hire and, during peak periods, cross-hiring from daily rental companies.

Capex and cash flow

Six months ended 31 October	H1 2021
	£m
Underlying EBITDA	11.9
Net replacement capex[15]	5.2
Lease principal payments[16]	(13.4)
Steady state cash generation	3.7
Growth capex	(10.3)
Debtor days	144 days

Underlying EBITDA was £11.9m in the period, which was below expectations mainly due to the slower recovery in volumes.

Net replacement capex was a net inflow of £5.2m in the period due to the disposal proceeds of vehicles funded by HP compared to the timing of lease principal payments.

Steady state cash generation was £3.7m and included lease principal payments of £13.4m.

Growth capex was £10.3m and reflects payments for the FMG RS fixed assets acquired.

Debtor days were 144 days at 31 October 2020. This measure is based upon net trade receivables and contract assets, other receivables and accrued income as a proportion of the related underlying sales revenue for the past 12 months multiplied by 365 days. Debtor days increased from 123 days at year-end FY2020 due to the significant drop in revenues in the last eight months.

FINANCIAL REVIEW

Group Revenue and EBIT

Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	%
Revenue - Vehicle hire	249.0	265.9	(6.4%)
Revenue - Vehicle sales	127.1	91.9	38.2%
Revenue - Claims and services	180.0	-	n/a
Total revenue	556.0	357.8	55.4%

Rental profit	29.8	33.8	(11.7%)
Disposal profit	18.3	5.1	255.2%
Claims and services profit	1.7	-	n/a
Underlying operating profit	46.3	35.1	31.9%
Income from associates	2.4	-	n/a
Underlying EBIT	48.7	35.1	38.7%
Underlying EBIT margin	8.8%	9.8%	(1.0ppt)
Statutory EBIT	34.0	32.9	3.3%

· Total Group revenue, including vehicle sales, of £556.0m was 55.4% higher (54.8% at constant exchange rates). Hire revenues were 6.4% lower due to the impact of both off-hires and customer support packages during the first lockdowns and vehicle sales revenues were 38.2% higher due to higher volumes (mainly from reducing stock impacted by April lockdown) and strong market pricing in the UK.

· Revenue (excluding vehicle sales) of £429.0m was 61.3% higher (60.8% at constant exchange rates) than the prior period with the increase attributable to Redde, which is included in revenue following the Merger on 21 February 2020.

· Underlying EBIT of £48.7m was 38.7% higher, reflecting the strong performance in the Northgate UK&I business, a resilient performance in the Northgate Spain business and the profits from the Redde business.

· Statutory EBIT of £34.0m was 3.3% higher, reflecting higher underlying EBIT offset by £9.6m of amortisation of acquisition intangibles[17] and £5.4m of exceptional costs, of which £2.6m related to restructuring and £2.6m related to FMG RS.

Group PBT and EPS

Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	%
Underlying EBIT	48.7	35.1	38.7%
Net finance costs	(8.1)	(7.5)	(7.6%)
Underlying Profit before Tax	40.6	27.6	47.2%
Statutory Profit before Tax	25.9	24.8	4.3%

Underlying effective tax rate	18.8%	14.7%	4.1ppt
Underlying EPS	13.4p	17.6p	(24.1%)
Statutory EPS	8.6p	16.1p	(46.8%)

· Underlying PBT was 47.2% higher, reflecting the higher EBIT and higher finance costs, which were 7.6% higher including Redde finance costs.

· Statutory PBT was 4.3% higher, reflecting the higher underlying PBT offset by £9.6m of amortisation of acquisition intangibles[18] and £5.4m of exceptional costs, of which £2.6m related to restructuring and £2.6m related to FMG RS.

· The underlying effective tax rate was 18.8%, which was 4.1ppt higher than prior year due primarily to one-offs in H1 FY2020, as highlighted at the time, from settlement of prior year tax positions.

· Underlying EPS of 13.4p was 24.1% lower, reflecting the lower profits from the Redde business in the period driven primarily by lower volumes due to COVID-19, particularly in the first quarter, as well as the higher tax rate.

· Statutory EPS of 8.6p was 46.8% lower, reflecting the movement in underlying EPS and the impact of exceptional costs and amortisation of acquisition intangibles¹.

Business combinations

The Group acquired certain businesses and certain assets of Nationwide Accident Repair Services on 4 September 2020 by way of a purchase from administrators, for an initial cash consideration of £10.6m, plus a deferred consideration of up to £5m conditional on retention of certain trade business on satisfactory terms. The provisional fair value of consideration is estimated to be £10.9m. A provisional purchase price allocation exercise has been undertaken in order to identify and recognise intangible assets with finite useful lives amounting to £3.6m and other net assets of £7.6m, resulting in negative goodwill of £0.3m which has been recognised in the income statement in the period.

Depreciation rate changes

Vehicle depreciation rates are regularly reviewed and changes are made, if expectations of future residual values change. Residual values have increased in the period due to the short term closure and re-opening of used vehicle markets as a result of COVID-19. This disruption is not anticipated to continue into the medium term, therefore there have been no changes to depreciation rate estimates in the period. The full year-on-year impact of previous depreciation rate changes in FY2021 EBIT is expected to be £4.0m in Spain and £1.4m in UK&I as previously outlined.

Dividend

The Board has declared an interim dividend of 3.4p per share (2020: 6.3p) and will be paid on 29 January 2021 to shareholders on the register as at close of business on 18 December 2020.

Group cash flow

Steady state cash generation

Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	£m
Underlying EBIT	48.7	35.1	13.6
Depreciation and amortisation	95.3	103.5	(8.3)
Underlying EBITDA	144.0	138.7	5.3
Net replacement capex	(46.7)	(76.6)	29.9
Lease principal payments[19]	(16.9)	(2.9)	(14.1)
Steady state cash generation	80.4	59.2	21.2

· Steady state cash generation remained strong at £80.4m and was £21.2m higher than H1 2020, driven by strong EBIT and lower net replacement capex.

· Underlying EBITDA was £5.3m higher driven by higher underlying EBIT partially offset by lower depreciation due to reduced rental fleet size.

· Net replacement capex was £29.9m lower reflecting lower purchases including the impact of contract hire purchases and the higher number of disposals and strong used vehicle prices in the period.

Free cash flow

Six months ended 31 October	H1 2021	H1 2020	Change
	£m	£m	£m
Steady state cash generation	80.4	59.2	21.2
Exceptional costs	(5.4)	(2.2)	(3.1)
Working capital and non-cash items	(20.7)	(6.0)	(14.6)
Growth capex	14.8	(47.5)	62.3
Tax	(5.6)	(4.7)	(0.9)
Net operating cash	63.5	(1.2)	64.8
Distributions from associates	2.6	-	2.6
Interest and other financing	(7.5)	(11.5)	4.0
Free cash flow	58.6	(12.8)	71.4
Dividends paid	-	(16.0)	16.0
Lease principal payments[20]	16.9	2.9	14.1
Net cash generated (consumed)	75.5	(25.9)	101.5

· Free cash flow remained strong at £58.6m driven by strong net operating cash, distributions from associates and lower interest and other financing costs than H1 2020.

· Exceptional costs were £5.4m and included £2.6m restructuring costs to delivery synergies and cost savings, and £2.6m costs relating to FMG RS.

· Working capital outflow of £20.7m included £9m relating to timing differences of payments and receipts over the COVID-19 period, and £7m relating to FMG RS as initial working capital positions were built.

· Growth capex of £14.8m inflow reflects a net reduction in fleet over the period of 3,000 vehicles.

· If the impact of growth capex in the period is removed from free cash flow, the underlying free cash flow of the Group was £43.8m (2020: £34.7m).

· No dividends were paid in the period as the final dividend of £16.7m was paid in November, later than the normal financial calendar due to the timing of the preliminary results announcement.

Net debt

Net debt reconciles as follows:

Six months ended 31 October	H1 2021 £m	H1 2020 £m
Opening net debt	575.9	436.9
IFRS 16 transition	-	48.5
Net cash (generated) consumed	(75.5)	26.0
Non-cash movement on leases	16.4	-
Other non-cash items	-	(3.6)
Exchange differences	14.1	(3.2)
Closing net debt	530.9	504.6

Closing net debt was £45.0m lower than opening net debt, driven by net cash generation of £75.5m. New leases acquired were £16.4m, and the overall foreign exchange impact on net debt was £14.1m.

Borrowing facilities

As at 31 October 2020 the Group had headroom on facilities of £281m, with £432m drawn (net of available cash balances) against total committed facilities of £713m as detailed below:

	Facility £m	Drawn £m	Headroom £m	Maturity	Borrowing Cost
UK bank facilities	608	334	274	Nov-23	2.0%
Loan notes	90	90	-	Aug-22	2.4%
Other loans	15	8	7	Nov-21	1.0%
	713	432	281		2.1%

The other loans consist of £7m of local borrowings in Spain and £0.5m of preference shares.

During the period, the previous Redde £50m bank facility was cancelled and at the same time the existing bank facility commitment was increased by the same amount, thus simplifying the bank financing structure.

The above drawn amounts reconcile to net debt as follows:

		Drawn £m
Borrowing facilities		432
Unamortised finance fees		(5)
Leases arising following adoption of IFRS 16		70
Leases arising under HP obligations		34
Net debt		531

The overall cost of borrowings at 31 October 2020 is 2.1% (2020: 2.5%). There are three financial covenants under the Group's facilities as follows:

	Threshold	H1 2021	Headroom	H1 2020
Interest cover	3x	5.6x	£34m (EBIT)	5.5x
Loan to value	70%	42%	£305m (Net debt)	44%
Debt leverage	2.75x	1.6x	£126m (EBITDA)	1.7x

The covenant calculations have been prepared in accordance with the requirements of the facilities that they relate to.

Balance sheet

Net assets at 31 October 2020 were £882.1m (2020: £571.7m), equivalent to net assets per share of 358p (2020: 429p). Net tangible assets at 31 October 2020 were £585.9m (2020: £551.5m), equivalent to a net tangible asset value of 238p per share (2020: 414p per share).

On acquisition of Redde, net assets of £318.4m were recognised on the balance sheet, including £112.5m of goodwill, £186.6m other intangible assets and £19.3m of other net tangible assets.

Foreign exchange risk

The average and period end exchange rates used to translate the Group's overseas operations were as follows:

October 2020

£ : €

October 2019

£ : €

April 2020

£ : €

Average

1.11

1.12

1.14

Period end

1.11

1.16

1.15

Going concern

Having considered the Group's current trading, cash flow generation and debt maturity including severe but plausible stress testing scenarios including the impacts of COVID-19 (as explained further in note 1 of the unaudited condensed financial statements), the Directors have concluded that it is appropriate to prepare the Group financial statements on a going concern basis.

Risks and uncertainties

The Board and the Group's management have clearly defined responsibility for identifying the major business risks facing the Group and for developing systems to mitigate and manage those risks.

The principal risks and uncertainties facing the Group at 30 April 2020 were set out in detail on pages 33 to 36 of the 2020 annual report, a copy of which is available at www.reddenorthgate.com, and were identified as:

· economic environment;

· market risk;

· vehicle holding costs;

· the employee environment;

· legal and compliance;

· IT systems;

· access to capital;

· COVID-19 pandemic; and

· recovery of contracts assets.

These principal risks have not changed since the last annual report and continue to be those that could impact the Group during the second half of the current financial year.

Impact of the UK leaving the European Union without a new free trade agreement

The Group has planned for the potential impact on its business of the UK leaving the European Union without a new free trade agreement in place. The greatest risks identified would be a disruption to the supply of new vehicles and vehicle components imported into the UK from the EU, including additional import costs which may be imposed:

o Around 90% of vehicles purchased or leased by the Group from UK OEMs are imported from the EU. Assurances have been sought from these OEMs, who are confident that there will be no material long-term disruption. Any potential short-term supply disruption can also be mitigated by the Group itself, by slowing the rate of vehicle de-fleets in order to maintain vehicle availability for customers as has been seen in the response to COVID-19.

o Components for vehicles manufactured in the UK are also imported from the EU. However, normal OEM stock levels are considered to be sufficient to address any potential short-term supply issues and we are in active discussions with FMG RS suppliers to ensure continuing supply.

o The introduction of import costs could potentially create some margin pressure in the short-term. However, the Company believes that in the medium-term, it will be able to pass through to end-users any significant additional costs that might be imposed on imported vehicles.

A potential upside for Northgate in the event of supply disruptions or higher purchase costs, would be the likely increase in rental demand and stronger residual values that could result.

Glossary of terms

The following defined terms have been used throughout this document:

Term	Definition
Disposal profit(s)	This is a non-GAAP measure used to describe the adjustment in the depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs)
EBIT	Earnings before interest and taxation
EBITDA	Earnings before interest, taxation, depreciation and amortisation
EPS	Basic earnings per share
Facility headroom	Calculated as facilities of £713m less net borrowings of £432m. Net borrowings represent net debt of £531m excluding lease liabilities of £104m and unamortised arrangement fees of £5m and are stated after the deduction of £28m of net cash and overdraft balances which are available to offset against borrowings
Free cash flow	Net cash generated after principal lease payments and before the payment of dividends
FY2020	The year ended 30 April 2020
FY2021	The year ending 30 April 2021
FY2022	The year ending 30 April 2022
GAAP	Generally Accepted Accounting Practice: meaning compliance with IFRS
Growth capex	Growth capex represents the cash consumed in order to grow the total rental fleet or the cash generated if the fleet size is reduced in periods of contraction and includes fixed assets acquired as part of the Nationwide acquisition
H1/H2	Half year period: H1 being the first half and H2 being the second half of the financial year
HP (leases)	Leases recognised on the balance sheet that would previously have been classified as finance leases prior to the adoption of IFRS 16
IFRS	International Financial Reporting Standards
IFRS 16 (leases)	Leases recognised on the balance sheet that would previously have been classified as operating leases prior to the adoption of IFRS 16
LCV	Light commercial vehicle: the official term used within the European Union for a commercial carrier vehicle with a gross vehicle weight of not more than 3.5 tonnes
Lease principal payments	Includes the total principal payment on leases including those recognised before and after adoption of IFRS 16
Nationwide	Nationwide Accident Repair Services trade and assets acquired by the Group on 4 September 2020
Net replacement capex	Net capital expenditure other than that defined as growth capex and lease principal payments.
Net tangible assets	Net assets less goodwill and other intangible assets
Northgate	The Company and its subsidiaries prior to the Merger or that part of the business following the Merger
Northgate Spain	The Northgate Spain operating segment representing the commercial vehicle hire part of the Group located in Spain
Northgate UK&I	The Northgate UK&I operating segment representing the commercial vehicle hire part of the Group located in the United Kingdom and the Republic of Ireland
OEM	Original Equipment Manufacturer: a reference to our vehicle suppliers
PBT	Profit before taxation
PPU	Profit per unit/loss per unit - this is a non-GAAP measure used to describe disposal profit (as defined), divided by the number of vehicles sold
Redde	The Redde operating segment representing the insurance claims and services part of the group or the Redde plc company and its subsidiaries prior to the Merger
ROCE	Underlying return on capital employed: calculated as underlying EBIT (see non-GAAP reconciliation) divided by average capital employed excluding acquired goodwill and intangible assets
Steady state cash generation	Underlying EBITDA less net replacement capex and lease principal payments
The Combined Group	The Company and its subsidiaries following the Merger and acquisition of the trade and assets of Nationwide
The Company	Redde Northgate plc
The Group	The Company and its subsidiaries
The Merger	The acquisition by the Company of 100% of the share capital of Redde plc on 21 February 2020
Underlying free cash flow	Free cash flow excluding growth capex
Utilisation	Calculated as the average number of vehicles on hire divided by average rentable fleet in any period
VOH	Vehicles on hire. Average unless otherwise stated

Reconciliation of GAAP to non-GAAP measures

Throughout this report we refer to underlying results and measures. The underlying measures allow management and other stakeholders to better compare the performance of the Group between the current and prior period without the effects of one-off or non-operational items.

In particular we refer to disposals profit. This is a non-GAAP measure used to describe the adjustment in depreciation charge made in the year for vehicles sold at an amount different to their net book value at the date of sale (net of attributable selling costs). A reconciliation of GAAP to non-GAAP underlying measures is as follows:

	Six months to 31.10.20 £000	Six months to 31.10.19 £000
Operating profit	31,310	32,890
Income from associates	2,400	-
Gain on bargain purchase	258	-
EBIT	33,968	32,890
Add back:
Gain on bargain purchase	(258)	-
Restructuring costs	5,364	2,221
Amortisation on acquired intangible assets	9,639	6
Underlying EBIT	48,713	35,117

Profit before tax	25,853	24,785
Add back:
Exceptional operating expenses	5,364	2,221
Amortisation on acquired intangible assets	9,639	6
Gain on bargain purchase	(258)	-
Exceptional finance costs	-	565
Underlying profit before tax	40,598	27,577

Profit for the period	21,121	21,490
Add back:
Exceptional operating expenses	5,364	2,221
Amortisation on acquired intangible assets	9,639	6
Gain on bargain purchase	(258)	-
Exceptional finance costs	-	565
Tax on exceptional items, brand royalty charges and intangible amortisation	(2,883)	(772)
Underlying profit for the year	32,983	23,510
Weighted average number of Ordinary shares	246,091,423	133,232,518
Underlying basic earnings per share	13.4p	17.6p

	Six months to 31.10.20 £000	Six months to 31.10.19 £000
Underlying EBIT	48,713	35,117
Add Back
Depreciation: vehicles for hire and vehicles for credit hire	86,378	96,773
Other depreciation	8,666	6,265
(Gain) loss on disposal of assets	(112)	97
Intangible amortisation included in underlying operating profit	349	413
Underlying EBITDA	143,994	138,665
Net replacement capex	(46,651)	(76,552)
Lease principal payments	(16,936)	(2,876)
Steady state cash generation	80,407	59,237

	Northgate UK&I 6 months to 31.10.20 £000	Northgate Spain 6 months to 31.10.20 £000	Group Sub-total 6 months to 31.10.20 £000

Underlying operating profit	32,097	16,000	48,097
Exclude:
Adjustments to depreciation charge in relation to vehicles sold in the period	(16,978)	(1,301)	(18,279)
Rental profit	15,119	14,699	29,818
Divided by: Revenue: hire of vehicles	146,545	102,426	248,971
Rental margin	10.3%	14.4%	12.0%

	Northgate UK&I 6 months to 31.10.19 £000	Northgate Spain 6 months to 31.10.19 £000	Group Sub-total 6 months to 31.10.19 £000

Underlying operating profit	19,409	19,500	38,909
Exclude:
Adjustments to depreciation charge in relation to vehicles sold in the period	(3,765)	(1,381)	(5,146)
Rental profit	15,644	18,119	33,763
Divided by: Revenue: hire of vehicles	158,870	107,006	265,876
Rental margin	9.8%	16.9%	12.7%

	Six months	Six months
	to 31.10.20	To 31.10.19
	(Unaudited)	(Unaudited)
	£'000	£'000
Net replacement capex	46,651	76,552
Lease principal payments	16,936	2,876
Growth capex	(14,791)	47,543
Total net capex	48,796	126,971
Purchase of vehicles	137,859	185,539
Proceeds from disposal of vehicles	(112,767)	(68,758)
Other property, plant and equipment expenditure net of disposal proceeds	6,768	7,314
Lease principal payments	16,936	2,876
Total net capex	48,796	126,971

Condensed consolidated income statement
for the six months ended 31 October 2020
		Six months	Six months	Six months	Six months	Year to	Year to
		to 31.10.20	to 31.10.20	to 31.10.19	to 31.10.19	30.04.20	30.04.20
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Audited)	(Audited)
		Underlying	Statutory	Underlying	Statutory	Underlying	Statutory
	Note	£000	£000	£000	£000	£000	£000
Revenue: hire of vehicles	2	248,971	248,971	265,876	265,876	518,157	518,157
Revenue: sale of vehicles	2	127,054	127,054	91,910	91,910	193,795	193,795
Revenue: claims and services	2	179,983	179,983	-	-	67,397	67,397
Total revenue	2	556,008	556,008	357,786	357,786	779,349	779,349
Cost of sales		(446,424)	(446,424)	(280,082)	(280,082)	(621,446)	(621,446)
Gross profit		109,584	109,584	77,704	77,704	157,903	157,903
Administrative expenses (excluding exceptional items and amortisation on acquired intangible assets)		(63,271)	(63,271)	(42,587)	(42,587)	(84,034)	(84,034)
Exceptional administrative expenses	13	-	(5,364)	-	(2,221)	-	(41,775)
Amortisation on acquired intangible assets		-	(9,639)	-	(6)	-	(3,178)
Total administrative expenses		(63,271)	(78,274)	(42,587)	(44,814)	(84,034)	(128,987)
Operating profit	2	46,313	31,310	35,117	32,890	73,869	28,916
Income from associates	8	2,400	2,400	-	-	952	952
Gain on bargain purchase	14	-	258	-	-	-	-
EBIT		48,713	33,968	35,117	32,890	74,821	29,868
Interest income		15	15	42	42	122	122
Finance costs (excluding exceptional items)		(8,130)	(8,130)	(7,582)	(7,582)	(15,945)	(15,945)
Exceptional finance costs	13	-	-	-	(565)	-	(566)
Profit before taxation		40,598	25,853	27,577	24,785	58,998	13,479
Taxation	3	(7,615)	(4,732)	(4,067)	(3,295)	(11,479)	(5,803)
Profit for the period		32,983	21,121	23,510	21,490	47,519	7,676

Profit for the period is wholly attributable to owners of the Company. All results arise from continuing operations.

Underlying profit excludes exceptional items as set out in Note 13 as well as brand royalty charges, amortisation on acquired intangible assets and the taxation thereon, in order to provide a better indication of the Group's underlying business performance.

Earnings per share
Basic	4	13.4p	8.6p	17.6p	16.1p	30.8p	5.0p
Diluted	4	13.2p	8.4p	17.2p	15.7p	30.5p	4.9p

Condensed consolidated statement of comprehensive income
for the six months ended 31 October 2020
	Six months	Six months	Year to
	to 31.10.20	to 31.10.19	30.04.20
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Amounts attributable to owners of the Company
Profit attributable to owners	21,121	21,490	7,676
Other comprehensive income (expense) Foreign exchange differences on retranslation of net assets of subsidiary undertakings	18,634	(1,222)	3,998
Net foreign exchange differences on long term borrowings held as hedges	(13,432)	2,278	(1,682)
Foreign exchange difference on revaluation reserve	44	(1)	9
Net fair value gains on cash flow hedges	184	335	807
Deferred tax charge recognised directly in equity relating to cash flow hedges	(35)	(64)	(153)
Total other comprehensive income for the period	5,395	1,326	2,979
Total comprehensive income for the period	26,516	22,816	10,655

All items will subsequently be reclassified to the consolidated income statement. Profit attributable to the owners of the Company includes amortisation of intangible assets.

Condensed consolidated balance sheet
31 October 2020
		31.10.20	31.10.19	30.04.20
		(Unaudited)	(Unaudited)	(Audited)
	Note	£000	£000	£000
Non-current assets
Goodwill	6	116,105	3,589	116,105
Other intangible assets	6	180,068	16,661	185,710

Property, plant and equipment: vehicles for hire	7	908,507	939,671	884,711
Property, plant and equipment: vehicles for credit hire	7	42,179	-	51,040
Other property, plant and equipment	7	135,682	112,376	126,009
Total property, plant and equipment	7	1,086,368	1,052,047	1,061,760
Deferred tax assets		10,350	5,589	10,133
Interest in associates	8	5,834	-	6,008
Total non-current assets		1,398,725	1,077,886	1,379,716
Current assets
Inventories		16,397	33,820	48,762
Receivables and contract assets		328,903	75,833	295,765
Cash and bank balances	9	62,592	46,632	67,843
Total current assets		407,892	156,285	412,370
Total assets		1,806,617	1,234,171	1,792,086
Current liabilities
Trade and other payables		281,415	94,361	222,342
Provisions	10	49	-	3,369
Derivative financial instrument liabilities	11	-	656	184
Current tax liabilities		12,442	10,884	12,393
Lease liabilities		41,925	6,333	33,691
Short-term borrowings		41,537	44,424	54,684
Total current liabilities		377,368	156,658	326,663
Net current assets (liabilities)		30,524	(373)	85,707
Non-current liabilities
Provisions	10	296	-	1,208
Lease liabilities		62,292	38,969	70,261
Long term borrowings		447,777	461,509	485,073
Deferred tax liabilities		36,814	5,306	37,314
Totalnon-current liabilities		547,179	505,784	593,856
Total liabilities		924,547	662,442	920,519
NET ASSETS		882,070	571,729	871,567
Equity
Share capital		123,046	66,616	123,046
Share premium account		113,510	113,508	113,510
Own shares reserve		(2,519)	(2,273)	(3,090)
Hedging reserve		-	(532)	(149)
Translation reserve		2,693	(3,769)	(2,509)
Other reserves		330,521	68,636	330,477
Retained earnings		314,819	329,543	310,282
TOTAL EQUITY		882,070	571,729	871,567

Total equity is wholly attributable to owners of the Company.

Condensed consolidated cash flow statement
for the six months ended 31 October 2020
		Six months	Six months	Year to
		to 31.10.20	to 31.10.19	30.04.20
		(Unaudited)	(Unaudited)	(Audited)
	Note	£000	£000	£000
Net cash generated from operations	12	79,718	1,827	33,699
Investing activities
Interest received		15	42	122
Distributions from associates	8	2,574	-	590
Cash acquired on acquisition		-	-	8,036
Proceeds from disposal of vehicles for credit hire and other property, plant and equipment		7,954	772	3,823
Purchases of other property, plant and equipment		(10,408)	(2,496)	(5,250)
Purchases of intangible assets		(4,314)	(5,590)	(6,509)
Net cash (used in) generated from investing activities		(4,179)	(7,272)	812
Financing activities
Issue of shares		-	-	2
Dividends paid		-	(15,997)	(24,333)
Receipt of bank loans and other borrowings		27,195	150,246	137,257
Repayments of bank loans and other borrowings		(74,371)	(110,289)	(114,289)
Debt issue costs		(34)	(4,509)	(4,878)
Principal element of lease payments under IFRS 16		(7,147)	(2,876)	(8,034)
Principal element of HP payments		(9,789)	-	(3,490)
Net payments to acquire own shares for share schemes		-	4	-
Net cash (used in) generated from financing activities		(64,146)	16,579	(17,765)
Net increase in cash and cash equivalents		11,393	11,134	16,746
Cash and cash equivalents at beginning of the period		16,780	805	805
Effect of foreign exchange movements		157	(281)	(771)
Cash and cash equivalents at the end of the period		28,330	11,658	16,780

Cash and cash equivalents consist of:
Cash and bank balances	9	62,592	46,632	67,843
Bank overdrafts	9	(34,262)	(34,974)	(51,063)
		28,330	11,658	16,780

Condensed consolidated statement of changes in equity for the six months ended 31 October 2020
	Share capital and share premium	Own shares	Hedging reserve	Translation reserve	Other reserves	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Total equity at 1 May 2019	180,124	(3,359)	(803)	(4,825)	68,637	323,842	563,616
Share options fair value charge	-	-	-	-	-	1,290	1,290
Share options exercised	-	-	-	-	-	(1,082)	(1,082)
Profit attributable to owners of the Company	-	-	-	-	-	21,490	21,490
Dividends paid	-	-	-	-	-	(15,997)	(15,997)
Net purchase of own shares	-	4	-	-	-	-	4
Transfer of shares on vesting of share options	-	1,082	-	-	-	-	1,082
Other comprehensive income (expense)	-	-	271	1,056	(1)	-	1,326
Total equity at 1 November 2019	180,124	(2,273)	(532)	(3,769)	68,636	329,543	571,729
Share options fair value charge	-	-	-	-	-	2,913	2,913
Share options exercised	-	-	-	-	-	1,101	1,101
Loss attributable to owners of the Company	-	-	-	-	-	(13,814)	(13,814)
Dividends paid	-	-	-	-	-	(8,336)	(8,336)
Issue of share capital	56,432	-	-	-	261,831	-	318,263
Transfer of shares on vesting of share options	-	(817)	-	-	-	-	(817)
Deferred tax on share based payments recognised in equity	-	-	-	-	-	(1,125)	(1,125)
Other comprehensive income	-	-	383	1,260	10	-	1,653
Total equity at 1 May 2020	236,556	(3,090)	(149)	(2,509)	330,477	310,282	871,567
Share options fair value charge	-	-	-	-	-	689	689
Share options exercised	-	-	-	-	-	(571)	(571)
Profit attributable to owners of the Company	-	-	-	-	-	21,121	21,121
Dividends payable	-	-	-	-	-	(16,702)	(16,702)
Transfer of shares on vesting of share options	-	571	-	-	-	-	571
Other comprehensive income	-	-	149	5,202	44	-	5,395
Total equity at 31 October 2020	236,556	(2,519)	-	2,693	330,521	314,819	882,070

Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.

Unaudited notes

1. Basis of preparation and accounting policies

Redde Northgate plc is a Company incorporated in England and Wales under the Companies Act 2006.

The condensed consolidated interim financial report for the half-year reporting period ended 31 October 2020 has been prepared in accordance with Accounting Standard IAS 34 'Interim Financial Reporting'. The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 April 2020 and any public announcements made by the Group during the interim reporting period.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax (see note 3).

The condensed financial statements are unaudited and were approved by the Board of Directors on 8 December 2020. The condensed financial statements have been reviewed by the auditors and the independent review report is set out in this document.

The interim financial information for the six months ended 31 October 2020, including comparative financial information, has been prepared on the basis of the accounting policies set out in the last annual report and accounts. There are no new accounting standards have been adopted in the period.

In preparing the interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same, in all material respects, as those applied to the consolidated financial statements for the year ended 30 April 2020.

In particular, the expected adjustment for settlement of claims due from insurance companies and self-insuring organisations remains a critical area of accounting judgement and estimation uncertainty. The approach taken in the period remains consistent with that outlined in the accounting policies for the year ended 30 April 2020. The carrying value of contract assets for claims from insurance companies at 31 October 2020 was £157,137,000 (30 April 2020 £162,271,000). A 3% difference between the carrying amount of claims in the balance sheet and the amounts finally settled would lead to a £4.7m charge or credit to the income statement in subsequent periods.

Significant changes in the current reporting period

The financial position and performance of the group was particularly affected by the following events and transactions during the six months to 31 October 2020:

· On 4 September 2020 the Group acquired certain businesses and assets of Nationwide Accident Repair Services ("Nationwide") by way of a purchase from administrators. Further details are included in Note 14.

· Exceptional operating costs of £5,364,000 were incurred in the period as explained in Note 13.

Going concern assumption

The Directors have taken into account the following matters in concluding whether or not it is appropriate to prepare the interim financial statements on a going concern basis:

Assessment of prospects

The Merger has allowed the Group to further increase the service offering and widen our customer base. The Northgate business continues to maintain its position as a market leader in its core market of flexible commercial vehicle hire and has distinct competitive advantages in the minimum term rental and used vehicle sales markets. The Redde business is a leading provider of incident and accident management, legal and other mobility-related services. The integration of both businesses will deliver cost synergies and provide a platform for new revenue opportunities as the commercial proposition matures. The Combined Group is well established within the markets it operates and has demonstrated resilience through previous economic cycles.

Impact of the UK leaving the European Union without a new free trade agreement

A potential upside for Northgate in the event of supply disruptions or higher purchase costs, would be the likely increase in rental demand and stronger residual values that could result.

Given that the short term impact of the UK leaving the EU can be reasonably mitigated through management actions, no matters have been identified which would lead the Directors to conclude that the Group would not continue to be a going concern for at least 12 months from the date of this report in relation to this situation.

Impact of COVID-19

The COVID-19 pandemic and ensuing government counter measures have significantly reduced business activity across all areas of the Group, impacting trading in the period. A decrease in revenue has resulted from a reduction in vehicles on hire, temporary closure of vehicle sales operations within the rental business of the Group and a lower volume of accidents and incidents handled through the insurance claims and services business of the Group. Since the first lockdown in March-April 2020, most of the key operational performance indicators have recovered or substantially improved, including removal of customer support packages, increases in vehicles on hire, the re-opening of vehicle sales operations and an increase in volumes of accidents and incidents managed through the Redde business.

Significant actions were also taken by management in order to conserve cash and manage the liquidity of the Group throughout the COVID-19 period. Overall, this resulted in an increase of headroom against committed facilities of £81m from £200m at 29 February 2020 to £281m at 31 October 2020. Headroom against related debt covenants also remained adequate as outlined in the Financial Review which included £39m EBIT headroom against the interest cover covenant. This demonstrates the resilience of the Group's balance sheet and business model, and its ability to preserve liquidity throughout periods of uncertainty.

Assessment of going concern

The strategy and associated principal risks underpin the Group's three year strategic planning process (the Plan), which is updated annually. This process considers the current and prospective macro-economic conditions in the countries in which we operate and the competitive tension that exists within the markets that we trade in. The Plan was risk adjusted for the expected impact of COVID-19.

The Plan also encompasses the projected cash flows, dividend cover assuming operation of stated policy at the time of the Merger and headroom against borrowing facilities and financial covenants under the Group's existing facilities and the reasonable expectation of similar facilities being replaced if required throughout the planned period. The Plan makes certain assumptions about the normal level of capital recycling likely to occur and therefore considers whether additional financing will be required. Headroom against the Group's existing facilities at 31 October 2020 was £281m as detailed in the Financial Review. This compares to headroom of £234m at 30 April 2020. All of the Group's principal borrowing facilities have maturity dates outside of the period under review, therefore the Group's facilities provide sufficient headroom to fund the capital expenditure and working capital requirements for at least 12 months following the date of this report.

The Plan has been subsequently adjusted to include the impact of the acquisition of the trade and assets of Nationwide Repair Services and has been stress tested based on the trading performance in the current period, and by factoring in a severe but plausible downside scenario which assumes that government restrictions relating to COVID-19 will be more prolonged than envisaged in the Plan or that macro-economic conditions will be adversely affected following the end of restrictions.

The downside scenario includes the revenue impact of a reduction in vehicles on hire, closure of vehicle sales operations, and a prolonged reduction in insurance related accident and repair claims handled. Costs were assumed to be mitigated to the extent that they are directly related to revenue, with an assumption being made that there would be no further reduction in the indirect cost base of the Group and no further government support schemes would be available to access. Capital expenditure was only deferred to the extent of the reduction in demand and a working capital impact of reduced insurance claims collections was also included.

The downside scenario took into account the effectiveness of mitigating actions that would be reasonably taken, such as reducing variable costs that are directly related to revenue, but did not take into account further management actions that would likely be taken, such as a change to the indirect cost base of the Group or a reduction in capital expenditure and ageing of the vehicle fleet, both of which would improve cash generation and reduce debt.

After taking into account the above sensitivities and reasonable mitigating actions, sufficient headroom remained against available debt facilities and the covenants attached to those and the Directors have a reasonable expectation that the Group will continue to be meet its obligations as they fall due for at least 12 months from the date of this report.

Information extracted from 2020 annual report

The financial figures for the year ended 30 April 2020, as set out in this report, do not constitute statutory accounts but are derived from the statutory accounts for that financial year.

The statutory accounts for the year ended 30 April 2020 were prepared under IFRS and were delivered to the Registrar of Companies on 5 November 2020. The audit report was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.

2. Segmental analysis

Management has determined the operating segments based upon the information provided to the Board of Directors, which is considered to be the chief operating decision maker. The Group is managed, and reports internally, on a basis consistent with its three main operating divisions, Northgate UK&I, Northgate Spain and Redde. The principal activities of these divisions are set out in the Chief Executive review.

	Northgate UK&I Six months to 31.10.20 (Unaudited) £000	Northgate Spain Six months to 31.10.20 (Unaudited) £000	Redde Six months to 31.10.20 (Unaudited) £000	Corporate Six months to 31.10.20 (Unaudited) £000	Group eliminations Six months to 31.10.20 (Unaudited) £000	Group Total Six months to 31.10.20 (Unaudited) £000
Revenue: hire of vehicles	146,545	102,426	-	-	-	248,971
Revenue: sale of vehicles	94,134	32,920	-	-	-	127,054
Revenue: claims and services	-	-	179,983	-	-	179,983
External revenue	240,679	135,346	179,983	-	-	556,008
Intersegment revenue	432	-	1,297	-	(1,729)	-
Total revenue	241,111	135,346	181,280	-	(1,729)	556,008

Timing of revenue recognition:
At a point in time	94,134	32,920	49,997	-	-	177,051
Over time	146,977	102,426	131,283	-	(1,729)	378,957
	241,111	135,346	181,280	-	(1,729)	556,008
Underlying operating profit (loss)	32,097	16,000	1,719	(3,503)	-	46,313
Income from associates	-	-	2,400	-	-	2,400
Underlying EBIT*	32,097	16,000	4,119	(3,503)	-	48,713
Exceptional items (Note 13)						(5,364)
Amortisation on acquired intangible assets						(9,639)
Gain on bargain purchase (Note 14)						258
EBIT						33,968
Interest income						15
Finance costs						(8,130)
Profit before taxation						25,853

* Underlying EBIT stated before amortisation on acquired intangible assets and exceptional items is the measure used by the Board of Directors to assess segment performance.

	Northgate UK&I	Northgate Spain	Corporate	Group Total
	Six months	Six months	Six months	Six months
	to 31.10.19	to 31.10.19	to 31.10.19	to 31.10.19
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	£000	£000	£000	£000
Revenue: hire of vehicles	158,870	107,006	-	265,876
Revenue: sale of vehicles	68,864	23,046	-	91,910
Total revenue	227,734	130,052	-	357,786
Timing of revenue recognition:
At a point in time	68,864	23,046	-	91,910
Over time	158,870	107,006	-	265,876
	227,734	130,052	-	357,786
Underlying operating profit (loss)/EBIT *	19,409	19,500	(3,792)	35,117
Exceptional costs (Note 13)				(2,221)
Amortisation on acquired intangible assets				(6)
EBIT				32,890
Interest income				42
Finance costs (excluding exceptional items)				(7,582)
Exceptional finance costs (Note 13)				(565)
Profit before taxation				24,785

	Northgate UK&I Year to 30.04.20 (Audited) £000	Northgate Spain Year to 30.04.20 (Audited) £000	Redde Year to 30.04.20 (Audited) £000	Corporate Year to 30.04.20 (Audited) £000	Total Year to 30.04.20 (Audited) £000
Revenue: hire of vehicles	313,922	204,235	-	-	518,157
Revenue: sale of vehicles	137,124	56,671	-	-	193,795
Revenue: claims and services	-	-	67,397	-	67,397
Total revenue	451,046	260,906	67,397	-	779,349
Timing of revenue recognition:
At a point in time	137,124	56,671	14,379	-	208,174
Over time	313,922	204,235	53,018	-	571,175
	451,046	260,906	67,397	-	779,349
Underlying operating profit (loss)	37,899	39,731	2,352	(6,113)	73,869
Income from associates	-	-	952	-	952
Underlying EBIT*	37,899	39,731	3,304	(6,113)	74,821
Exceptional items (Note 13)					(41,775)
Amortisation on acquired intangible assets					(3,178)
EBIT					29,868
Interest income					122
Finance costs (excluding exceptional items)					(15,945)
Exceptional finance costs (Note 13)					(566)
Profit before taxation					13,479

3. Taxation

The charge for taxation for the six months to 31 October 2020 is based on the estimated effective rate for the year ending 30 April 2021 of 18.3% (October 2019 - 13.1% and April 2020 - 43.1%). The April 2020 full year tax rate was impacted by one off non-deductible expenses relating to the Merger.

4. Earnings per share
	Six months	Six months	Six months	Six months	Year to	Year to
	to 31.10.20	to 31.10.20	to 31.10.19	to 31.10.19	30.04.20	30.04.20
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Audited)	(Audited)
	Underlying	Statutory	Underlying	Statutory	Underlying	Statutory
Basic and diluted earnings per share	£000	£000	£000	£000	£000	£000
The calculation of basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share, being profit attributable to owners of the Company	32,983	21,121	23,510	21,490	47,519	7,676
Number of shares
Weighted average number of Ordinary shares for the purpose of basic earnings per share	246,091,423	246,091,423	133,232,518	133,232,518	154,509,197	154,509,197
Effect of dilutive potential Ordinary shares - share options	3,998,211	3,998,211	3,733,760	3,733,760	1,048,391	1,048,391
Weighted average number of Ordinary shares for the purpose of diluted earnings per share	250,089,634	250,089,634	136,966,278	136,966,278	155,557,588	155,557,588
Basic earnings per share	13.4p	8.6p	17.6p	16.1p	30.8p	5.0p
Diluted earnings per share	13.2p	8.4p	17.2p	15.7p	30.5p	4.9p

5. Dividends

In the six months to 31 October 2020, a dividend of £nil was paid (2019 - £15,997,000). The Directors have declared a dividend of 3.4p per share for the six months ended 31 October 2020 (2019 - 6.3p).

Trade and other payables at 31 October 2020 include £16,702,000 (2019 - £nil) in relation to the final dividend of 6.8p for the year ended 30 April 2020 that was approved in October 2020. The dividend was paid in November 2020.

6. Intangible assets

Net book value	Goodwill	Customer relationships	Brand names	Other software	Total
	£000	£000	£000	£000	£000
At 1 May 2019	3,589	6	-	11,489	15,084
Additions	-	-	-	5,590	5,590
Disposals	-	-	-	-	-
Amortisation	-	-	-	(419)	(419)
Exchange differences	-	-	-	(5)	(5)
At 1 November 2019	3,589	6	-	16,655	20,250
Acquisition	112,516	169,600	12,800	4,200	299,116
Additions	-	-	-	919	919
Disposals	-	(6)	-	(3)	(9)
Amortisation	-	(2,884)	(154)	(530)	(3,568)
Impairment	-	-	-	(14,910)	(14,910)
Exchange differences	-	-	-	17	17
At 1 May 2020	116,105	166,716	12,646	6,348	301,815
Asset acquisition (Note 14)	-	1,000	450	2,100	3,550
Additions	-	-	-	764	764
Disposals	-	-	-	(31)	(31)
Transfers	-	-	-	-	-
Amortisation	-	(8,662)	(445)	(881)	(9,988)
Exchange differences	-	-	-	63	63
At 31 October 2020	116,105	159,054	12,651	8,363	296,173

At 31 October 2020
Cost or fair value	116,105	170,600	13,250	38,682	338,637
Accumulated amortisation and impairment	-	(11,546)	(599)	(30,319)	(42,464)
Net book value	116,105	159,054	12,651	8,363	296,173

Amortisation was included within the income statement as follows:

	31.10.20	31.10.19	30.04.20
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Included within underlying operating profit as administrative expenses	349	6	809
Excluded from underlying operating profit*	9,639	413	3,178
	9,988	419	3,987

* Amortisation excluded from underlying operating profit relates to intangible assets acquired on acquisitions.

7. Property, plant and equipment

Net book value	Vehicles for hire	Vehicles for credit hire	Other property, plant & equipment	Total
	£000	£000	£000	£000
At 1 May 2019	900,335	-	68,843	969,178
Recognised on transition to IFRS 16	-	-	47,845	47,845
Additions	208,338	-	2,969	211,307
Disposals	(70,896)	-	(869)	(71,765)
Transfers	(47)	-	47	-
Depreciation	(96,773)	-	(6,265)	(103,038)
Exchange differences	(1,286)	-	(194)	(1,480)
At 1 November 2019	939,671	-	112,376	1,052,047
Acquisition	-	52,475	17,515	69,990
Additions	137,608	3,718	4,844	146,170
Disposals	(101,456)	(2,758)	(1,241)	(105,455)
Transfers	(80)	-	80	-
Depreciation	(95,688)	(2,395)	(6,954)	(105,037)
Impairment	-	-	(1,304)	(1,304)
Exchange differences	4,656	-	693	5,349
At 1 May 2020	884,711	51,040	126,009	1,061,760
Asset acquisition (Note 14)	-	-	8,618	8,618
Additions	167,895	4,006	13,106	185,007
Disposals	(79,627)	(7,419)	(1,232)	(88,278)
Transfers	152	-	(152)	-
Depreciation	(80,930)	(5,448)	(8,666)	(95,044)
Impairment (Note 13)	-	-	(4,341)	(4,341)
Exchange differences	16,306	-	2,340	18,646
At 31 October 2020	908,507	42,179	135,682	1,086,368

At 31 October 2020
Cost or fair value	1,323,287	45,671	213,745	1,582,703
Accumulated depreciation	(414,780)	(3,492)	(78,063)	(496,335)
Net book value	908,507	42,179	135,682	1,086,368

Included within property, plant and equipment above, are right of use assets under HP and IFRS16 with net book value of £101,008,000 (30 April 20: £105,298,000).

8. Interest in associates

	£000
At 31 October 2019	-
Acquisition	5,646
Group's share of:
Profit from continuing operations	952
Distributions from associates	(590)
At 30 April 2020	6,008
Group's share of:
Profit from continuing operations	2,400
Distributions from associates	(2,574)
At 31 October 2020	5,834

9. Analysis of consolidated net debt

	(Unaudited)	(Unaudited)	(Audited)
	to 31.10.20	to 31.10.19	to 30.04.20
	£000	£000	£000
Cash and bank balances	(62,592)	(46,632)	(67,843)
Bank overdrafts	34,262	34,974	51,063
Bank loans	364,173	384,242	400,847
Loan notes	90,143	86,088	86,868
Leases arising following adoption of IFRS 16	69,927	45,302	62,999
Leases arising under HP obligations	34,290	-	40,953
Cumulative preference shares	500	500	500
Confirming facilities	236	129	479
Consolidated net debt	530,939	504,603	575,866

10. Provisions

	Onerous contracts £000
At 31 October 2019	-
Acquisition	4,616
Provisions made	369
Provisions utilised	(408)
At 30 April 2020	4,577
Provisions made	-
Provisions utilised (Note 13)	(4,232)
At 31 October 2020	345

11. Derivative financial instruments

At the balance sheet date, the Group held the following financial instruments at fair value:

	31.10.20	31.10.19	30.04.20
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Interest rate derivatives	-	(656)	(184)
	-	(656)	(184)

The derivative financial instruments above all have fair values which are calculated by reference to observable inputs (i.e. classified as level 2 in the fair value hierarchy). They are valued using the discounted cash flow technique with an appropriate adjustment for counterparty credit risk. The valuations incorporate the following inputs:

· interest rates and yield curves observable at commonly quoted intervals;

· commonly quoted spot and forward foreign exchange rates; and

· observable credit spreads.

The carrying value of financial assets and liabilities recorded at amortised cost in the financial statements are approximately equal to their fair value.

12. Notes to the cash flow statement

	Six months	Six months	Year to
	to 31.10.20	to 31.10.19	30.04.20
	(Unaudited)	(Unaudited)	(Audited)
Net cash generated from operations	£000	£000	£000
Operating profit	31,310	32,890	28,916
Adjustments for:
Depreciation of property, plant and equipment	95,044	103,038	208,075
Impairment of property, plant and equipment	4,341	-	1,304
Amortisation of intangible assets	9,988	419	3,987
Impairment of intangible assets	-	-	14,910
(Gain) loss on disposal of property, plant and equipment	(143)	97	135
Loss on disposal of intangible assets	31	-	9
Share options fair value charge	689	1,290	4,203
Operating cash flows before movements in working capital	141,260	137,734	261,539
Decrease (increase) in non-vehicle inventories	157	50	(36)
(Increase) decrease in receivables	(28,739)	(6,428)	4,250
Increase (decrease) in payables	9,491	(960)	(1,355)
Decrease in provisions	(4,233)	-	(39)
Cash generated from operations	117,936	130,396	264,359
Income taxes paid, net	(5,606)	(4,718)	(10,165)
Interest paid	(7,520)	(7,070)	(14,774)
Net cash generated from operations before net capex	104,810	118,608	239,420
Purchases of vehicles for hire	(137,859)	(185,539)	(362,011)
Proceeds from disposal of vehicles for hire	112,767	68,758	156,290
Net cash generated from operations	79,718	1,827	33,699

13. Exceptional items

During the period the Group recognised exceptional items in the income statement as follows:
	Six months to 31.10.20	Six months to 31.10.19	Year to 30.04.20
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Restructuring costs	2,645	2,221	8,609
Acquisition expenses	710	-	18,256
FMG RS set up and integration costs	1,900	-	-
Property - provisions utilised	(4,232)	-	-
Property - impairment	4,341	-	-
Intangible impairment	-	-	14,910
Exceptional administrative expenses	5,364	2,221	41,775
Finance costs	-	565	566
Exceptional finance costs	-	565	566
Total pre-tax exceptional items	5,364	2,786	42,341
Tax charge on exceptional items	(1,179)	(769)	(4,661)

Restructuring costs

The Group incurred total exceptional restructuring costs of £2,645,000 of which £1,057,000 arose in Redde, £1,261,000 arose in Northgate UK&I, £304,000 in Northgate Spain and £23,000 Corporate. These costs were incurred in relation to restructuring activities that were undertaken during the period as part of the integration and reorganisation of the Combined Group. These costs primarily related to expenses associated with reduction in headcount totalling £1,338,000 and costs incurred in relation to the closure and reorganisation of sites of £1,284,000.

Acquisition expenses

The Group incurred acquisition expenses of £710,000. These related to professional services expenses directly attributable to the acquisition of the trade and assets of Nationwide.

FMG RS set up and integration costs

The Group incurred costs of £1,900,000 in relation to the set up of FMG RS and integration of the business.

Property

Following the acquisition of Redde the Group acquired onerous contracts in relation to properties no longer occupied. During the period £4,232,000 relating to these provisions has been utilised and at the same time a property impairment of £3,260,000 has been recognised in relation to the same assets to which they relate. A further impairment of £1,081,000 has been recognised during the period for certain IFRS 16 land and building assets in relation to the closure and reorganisation of sites following the Merger.

14. Business combinations

14(a) Current period

On 4 September 2020 the Group acquired certain businesses and assets of Nationwide Accident Repair Services ("Nationwide") by way of a purchase from administrators. The acquisition is in line with Group strategy and vision to become the leading integrated mobility solutions provider. The acquisition has been included within the Redde segment. A provisional purchase price allocation exercise has been undertaken in accordance with IFRS 3 'Business Combinations'.

Details of this provisional purchase consideration, the net assets acquired and goodwill are as follows:

Purchase consideration	£000
Cash payable	10,600
Contingent consideration	290
Total purchase consideration	10,890

The provisional assets and liabilities recognised as a result of the acquisition are as follows:

	£000
Customer relationships (Note 6)	1,000
Brand (Note 6)	450
Other software (Note 6)	2,100
Property, plant and equipment (Note 7)	8,618
Stock and work in progress	4,163
Other payables	(4,993)
Deferred tax	(190)
Net identified assets acquired	11,148

Gain on bargain purchase recognised in the income statement	258

Acquisition costs

Acquisition related costs in relation to Nationwide of £710,000 have been charged to the income statement as exceptional administrative expenses (Note 13).

Contingent consideration

The contingent consideration arrangement requires the Group to pay the former owners of Nationwide either £nil, £2.5m or £5m dependant on volumes of repair cases with a former customer of Nationwide, in the year from date of acquisition.

The fair value of the contingent consideration arrangement of £290,000 was estimated using the scenario-based method. The estimates are based on probability adjusted likelihood of certain repair case volumes being achieved. The liability is presented within trade and other payables in the balance sheet.

Nationwide's contribution to the group results

Nationwide's contribution to underlying operating profit was a £3,000,000 loss for the period from 4 September 2020 to 31 October 2020. Revenue during this period was £18,200,000.

14(b) Prior period

On 21 February 2020, the Group acquired 100% of the equity interests of Redde plc, thereby obtaining control. The acquisition was made to enhance the Group's position in the market and create a leading integrated mobility solutions platform. Details of this business combination were disclosed in note 4 of the Group's annual financial statements for the year ended 30 April 2020. No hindsight adjustments have been required in the period in relation to the fair values of assets acquired.

15. Contingent liabilities

The Group is currently in legal dispute with a provider of certain IT and software development services over the failure to deliver agreed software and services to the Group. Both parties are claiming against each other. However, the Group has disclaimed liability and is defending the action. No provision in relation to the claim has been recognised in the financial statements as legal advice indicates that on the balance of probabilities significant liability will not arise.

Interim announcement - Statement of the Directors

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34;

· the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

· the interim management report includes a fair review of the information required by DTR 4.2.8 (disclosure of related party transactions and changes therein).

By order of the Board

Philip Vincent

Chief Financial Officer

8 December 2020

Independent review report of Redde Northgate plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Redde Northgate plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results of Redde Northgate plc for the 6 month period ended 31 October 2020 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the condensed consolidated balance sheet as at 31 October 2020;

· the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;

· the condensed consolidated cash flow statement for the period then ended;

· the condensed consolidated statement of changes in equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results of Redde Northgate plc have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Newcastle upon Tyne

8 December 2020

[1] Refer to GAAP reconciliation and Glossary of terms note. Underlying excludes exceptional costs and amortisation on acquired intangible assets.

[2] Net debt includes £69.9m (2020: £45.0m) of IFRS 16 liabilities and is higher than H1 2020 due to the net debt acquired from Redde in H2 2020 of £84.1m, partially offset by the cash generated in the year.

[3] Acquisition intangibles include customer relationships, brand names and other software and are estimated to have useful lives ranging from five to fifteen years.

[4] Total net capex includes net replacement capex, lease principal payments and growth capex.

[5] Permanent annual costs savings are not classed as synergies because they are not contingent on the Merger having happened and could have been achieved independently and include the closure of six Van Monster sites.

[6] Calculated as underlying EBIT divided by total revenue

[7] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.

[8] Net replacement capex is total capex less growth capex. Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction.

[9] Calculated as underlying EBIT divided by total revenue.

[10] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.

[11] Net replacement capex is total capex less growth capex. Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction.

[12] Calculated as underlying EBIT divided by total revenue.

[13] Redde's ROCE calculated using a 12 month pro rata of the eight months of EBIT since acquisition, divided by the average of the acquired opening and period end closing capital employed excluding goodwill and acquired intangibles.

[14] Pre-COVID levels calculated as the normalised volumes of hires and repairs from the month prior to COVID-19.

[15] Redde net replacement capex is total capex less growth capex. Redde growth capex represents the Nationwide assets acquired only.

[16] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.

[17] Acquisition intangibles include customer relationships, brand names and other software and are estimated to have useful lives ranging from five to fifteen years.

[18] Acquisition intangibles include customer relationships, brand names and other software and are estimated to have useful lives ranging from five to fifteen years.

[19] Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method.

[20] Lease principal payments are added back to reflect the movement on net debt.

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