Final Results

• News Release •

Redde plc

("Redde" or "Group")

Issue Date: 5 September 2019

Results for the year ended 30 June 2019

 Improved revenue and profits in a challenging year

Redde, a leading provider of mobility, incident management solutions and legal services to motorists, car dealerships, fleet owners and the insurance industry announces full year results:

Financial headlines

A summary of the key financial performance indicators is set out in the table below:

** Calculation of EBITDA and operating cash flow is analysed in the consolidated statement of cash flows

*** Calculation of debtor days is as outlined in note 14.

**** subject to shareholder approval of the recommended final dividend of 6.15p per share

Operational headlines

·; 9.4% growth in credit hire cases

·; Total number of hire days increased by 10.7%

·; 5.2% increase in number of repair cases

·; Year end fleet up 10% to 10,711 (2018: 9,741) - reflecting increased demand

·; Revenue generating fleet utilisation maintained above 80.0% at 81.5%

Commenting on the Group's results and prospects, Martin Ward, Chief Executive Officer, said:

"The ongoing strategy of the Group is sustainable and profitable growth. This year we have seen record revenues and further underlying growth in adjusted profit before tax. We have broadened the reach of the Group and, through the continuing benefits of past acquisitions, diversified our income streams. We continue to seek further opportunities to build scale and diversify into related markets where the returns and investment case are attractive.

"The Board is pleased to be proposing a continued substantial dividend pay-out with an aggregate proposed amount of 11.65p in line with last year. Going forward, the Board intends to at least maintain the absolute dividend amount. The Group is well funded and has substantial unutilised funding lines to support its trading and future growth.

"We have already reported the loss of an insurer account ending in November and a renewal, on a long-term basis, with one of our large insurers. The Group has also won several new business contracts which will come on line in the current financial year. We have a great team of motivated people to support the Group's aims and believe there is ample opportunity to further develop the Group's services."

IFRS reconciliation

Management is required to exercise its judgment in the classification of certain items as exceptional and outside of the Group's underlying results. The determination of whether an item should be separately disclosed as an exceptional item or some other adjustment requires judgment on its nature and incidence, as well as whether it provides clarity on the Group's underlying trading performance.

Throughout this report reference is therefore made to adjusted results and measures. The directors believe that the selected adjusted measures allow management and other stakeholders to better compare the normalised performance of the Group between the current and prior year, without the effects of one-off or non-operational items and, given the Group's full distribution dividend policy, better reflects the normalised underlying cash earnings achieved in the year under review to which the directors have regard in determining the amount of any dividend. In exercising this judgment, the directors have taken appropriate regard of IAS 1 "Presentation of financial statements" as well as guidance issued by the European Securities and Markets Authority on the reporting of non-adjusted results.

As these Alternative performance measures ("APMs") are not defined by IFRS, they may not be directly comparable to other companies' APMs. They are not intended to be a substitute for, or superior to, IFRS measurements and the Directors recommend that the IFRS measures should also be used when readers of this document assess the performance of the Group.

Adjusted measures exclude the impact of the amortisation of intangibles, share based payments and exceptional items ("adjustment items") described in Note 6. A reconciliation of IFRS to non-IFRS underlying measures is also outlined in the Financial Review and is summarised in a column of the Condensed Consolidated Income Statement.

Notes for editors:

About Redde plc:

Founded in 1992 and working predominantly with insurance companies, insurance brokers, prestige motor dealerships, and large national fleet owners the Group provides a range of accident management, incident management and legal services.

The Group is one of the market leaders in its fields of business; it delivers accident management solutions to motorists ensuring that they remain mobile until their own vehicles are repaired or until they are put in a position to obtain a replacement and it provides legal services ensuring that they are properly compensated for their injuries and losses. Legal services also include wills and probate, family law, clinical negligence and employer and public liability law advice.

The name Redde is associated, in Latin, with the concept of restoration.

Chairman's statement

This is my first Chairman's statement since I was appointed to the role of interim chairman on 1 August 2019 and I am pleased to be able to report to shareholders that the Group achieved an adjusted profit before taxation of £49.3m compared to £46.0m last year, an increase of 7.1%.

Results

Revenues were £589.7m (2018: £527.0m), an increase of £62.7m (11.9%). Sales growth principally reflects a 9.4% growth in the number of credit hires together with a 5.2% increase in the total number of repairs undertaken and higher activity within the Group's fleet and incident management businesses.

The adjusted earnings before interest and taxation ("EBIT") for the year were £49.6m, an increase of 7.3% over the £46.2m achieved last year.

There was a net interest charge of £0.3m (2018: £0.2m) mostly reflecting non-utilisation fees incurred during the year on the Group's bank revolving working capital facility.

Adjusted profit before tax for the year was therefore £49.3m (2018: £46.0m), an increase of 7.1%.

A charge of £2.4m (2018: £2.4m) in respect of amortisation of intangible assets (acquired by virtue of the purchase of FMG) and a £1.1m cost (2018: £1.8m) recorded under IFRS2 in respect of the charge under share based payments on incentive share schemes were incurred in the year.

This year also saw a pre-tax exceptional charge of £4.2m (2018: £3.0m) in respect of restructuring charges arising from changes in the footprint of the Group's operations initiated last year involving the consolidation of some of the Group's operations from three main locations to two, including a lease on new larger premises to accommodate anticipated growth. In addition certain other parts of the Group underwent operational restructuring during the year giving rise to redundancy and termination costs and a charge for goodwill impairment. The net charge includes:

·; provisions of £2.8m relating to the Group's plans to mitigate against the holding costs between now and the end date for those leasehold premises that are no longer being occupied by the Group including plans to refurbish a major property for subletting (2018: £2.0m relating to properties vacated in prior years);

·; a profit of £0.2m on sale of a freehold property vacated during the year (2018: impairment charge of £0.4m);

·; reorganisation costs including associated redundancy and other staff associated costs of £0.7m (2018: £0.6m); and

·; as detailed in note 10, following the annual impairment review by the Directors it has been determined that an impairment in the value of goodwill in relation to NewLaw is appropriate and the resultant non cash impairment charge of £0.9m has been included above in exceptional items for the current year.

After the amortisation of intangible assets and the charge for share based payments together with the exceptional items above, statutory profit before tax was £41.6m (2018: £38.8m) an increase of 7.3%.

There was a net tax charge of £7.1m (2018: £4.3m) and therefore the statutory profit after tax was £34.5m (2018: £34.5m).

Earnings per share ("EPS")

Statutory basic EPS is 11.28p (2018: 11.36p). Statutory diluted EPS is 11.08p (2018: 11.19p).

The adjusted basic EPS is 13.44p (2018: 13.27p). The adjusted diluted EPS is 13.21p (2018: 13.07p).

The adjusted figures exclude the impact of amortisation of intangibles, share based payments and exceptional items ('adjustment items') described in Note 6.

Dividends

The Board is pleased to propose an unchanged final dividend of 6.15p per share, which if approved at the Annual General Meeting to be held on Wednesday 30 October 2019 will be paid on Thursday 7 November 2019 to those shareholders on the register at the close of business on Friday 4 October 2019. The shares will become ex-dividend on Thursday 3 October 2019.

An interim dividend of 5.50p per share was paid on 28 March 2019 and, including this, the total dividend for the year is 11.65p compared to a total of 11.65p for the interim and final dividends last year.

Outlook

As announced by the Company on 8 March 2019, following an extensive period of contract tendering, the Group was informed that, after 10 years of partnership and several prior successful renewals, it had not secured the renewal of a hire and repair contract with a large insurer.

The original contract was due to expire at the end of July 2019. However, following the announcement of 8 March an agreement was reached with the insurer concerned in respect of an orderly run-off of the services provided. This agreement involves the continuation of the higher-margin, non-fault hire and non-fault repair services through to November 2019. The lower margin work ceased on 31 July 2019. As a result, the positive effect on working capital is now expected to gain traction later in the 2020 financial year to accommodate this extension.

The Group is also pleased to report that a large insurer which had previously participated in a protocol agreement, which the Group terminated, has now agreed to take up a protocol agreement again after the Group was able to demonstrate the higher costs of not being in a protocol. The Group is pleased that the benefits delivered via protocols are valued by insurers who recognise the lower costs of settling claims under these agreements.

In addition, since the 8 March announcement we have won a number of new contracts in other areas of the Group as well as a contract renewal with a major insurer, all of which have contributed to the Board's confidence in its expectations for the financial year ended 30 June 2020.

Trading for the first two months since the year end has been in line with management expectations.

Directorate and our people

As previously announced on 1 May 2019, Avril Palmer-Baunack gave notice of her intention to step down as non-executive chairman and subsequently retired from the Board on 31 July 2019. I was appointed interim Chairman on 01 August 2019 and I look forward to working with the Board in the further development and delivery of the Group's strategic goals.

The Board would like to take this opportunity to thank Avril who was instrumental in reshaping the Group's business and has been a very supportive Chairman over the last 8 years. The Board has much admired and appreciated her determination at getting things done as well as the wise counsel and market experience that she brought to the Board. The Board wishes Avril all the best with her future plans.

Mark Chessman was appointed to the Board as an executive director of the Group on 27 November 2018. Mark joined FMG as Chief Operating Officer in December 2014, becoming first managing director in April 2015 and then, following FMG's acquisition by Redde, its Chief Executive Officer in October 2015. Mark is a member of the Chartered Institute of Management Accountants and, prior to his role at FMG, spent twelve years with Lex Autolease, initially in 2002 as Finance Director of Lloyds TSB Autolease and latterly as corporate sales director. In July 2018 Mark was appointed as Redde's Chief Operating Officer and he continues in this role.

The enthusiasm, energy and commitment of our people has been instrumental in delivering high standards of service and customer satisfaction, as demonstrated by the customer feedback we receive. We would like to congratulate and thank all of our colleagues for their contribution to the business.

Annual General Meeting

The Group's Annual General Meeting will be held on Wednesday 30 October 2019.

John Davies

Chairman

4 September 2019 

Operating and financial review

Operational review

Accident Management

The year again saw a continued increase in volumes in the Group's accident management business as a result of growth in market share both in the Group's own business and also in the businesses of those partners that the Group serves. This growth was also influenced in the early part of the year by the residual knock-on effect of the prolonged 2017/18 winter period (referred to in the media as "the Beast from the East"). This resulted in repairer capacity being squeezed and the availability of parts being affected by the higher levels of claims working their way through the repair supply chain, increasing demand for replacement vehicles. The relatively benign weather in the second half has however seen an easing in repairer workload and improved capacity with hire lengths returning to more normal levels as a result. 

It is noted that during the year members of the ABI commented that the cost of repairs has increased due to increased repair costs of bumper safety sensors and the cost of realigning them. At the same time the delay in availability of some spare parts sourced from overseas and the increasing complexity of repairs has also increased repair times and, as a consequence, average hire days.

On 8 March 2019 the Group announced that the Company was not successful in securing the renewal of a hire and repair contract with a large insurer.

The original contract was due to expire at the end of July 2019. However since making the original announcement an agreement was reached with the insurer concerned in respect of an orderly run off of the services provided. This agreement involves the continuation of the higher margin, non-fault hire and non-fault repair services through to November 2019. The lower margin work ceased on 31 July 2019. As a result of this the positive effect on working capital is now expected to gain traction later in the financial year 2020 to accommodate this extension.

The Group is pleased to report that a large insurer which had previously participated in a protocol agreement, which the Group terminated, has now agreed to take up a protocol agreement again after the Group was able to prove out to the insurer the higher costs of not being in a protocol. The Group is pleased that the benefits delivered via protocol agreements are valued by insurers who recognise the lower costs of settling claims under these agreements.

In addition, since the 8 March announcement there have been a number of new contract wins in other parts of the Group as well as a contract renewal with a major insurer.

In connection with the above the Group's wide service offering has seen increased levels of interest from the market and during the year the Group participated in pilots with a number of insurers (including the provision of "fault" claims intervention services and "fault" repairs) which helped those insurers to manage and reduce their own indemnity spends and contracts have been secured for delivery in the new financial year with both new and existing partners. At the same time extensions in the coverage and scope of "not-at-fault" services have also been achieved with other existing partners. These developments support the Group's one-stop shop approach which provides the potential to further grow and develop more vehicle incident and accident management services for both business and insurance partners. This will in turn support the Group's position as a leading provider for vehicle mobility, rapid roadside recovery, repair, legal and other support services.

Protocols and Insurer Claims Portal

A main activity of the Group's operating model is to deliver credit hire and repair services on a B2C basis. This has a natural lag for receivables collections which under an insurance claim process can be lengthy. The Group has shortened this cycle considerably over the years through protocol arrangements with insurers. This generally involves discounting a claim in return for non-frictional and a more efficient, faster settlement process. It is within the Group's gift to operate this model and the Group always seeks to find a balance to the level of discount and the timing of cash. Where insurers don't make settlement in line with those timings the Group has the right to remove those discounts and operate to recover the full amount of a claim.

As a large stakeholder in the motor claims market the Group has good relationships with many insurers and makes efforts to maintain those relationships. However, going forwards, the Group intends to be more robust on collections to ensure the value of protocols is preserved for those that meet the terms and to remove non performing protocols so that fuller recoveries are made. Some insurers choose to take the discount under protocol but then defer payments at their leisure which is not equitable. If the Group has to sacrifice some debtor days to preserve value, then it will do so. The strength and quality of the Group's claims are unquestionable and the Group is very confident that its protocol offering provides the most cost effective and efficient settlement offering to insurers. This has been proven out with more than one insurer returning to protocols having experienced the costs outside these arrangements. Therefore, in order to improve debtor days beyond what has already been achieved, the Group will make tough decisions to create better, longer-term outcomes.

Rising accident costs for insurers has resulted in most insurers looking to reduce operational costs and in many instances this has manifested itself in the insurers providing less resource to the processing of claims leading to longer claims settlement times. During the year the Group launched a bespoke, digital, protocol portal link which enables further claim processing efficiencies for both protocol insurers and the Group and the provision of real-time claim settlement status. The year saw an increase in the number of protocol insurers linking-in directly to the Group's protocol portal which will over time reduce claims processing times for those insurers although the roll out of this is dependent upon the availability of insurer internal IT resources.

Fleet and Incident management

The Group's fleet and incident management business made further progress in growing its customer base, including the on-boarding of a number of insurer and large commercial broker clients for the provision of third party claims intervention services, reducing their cost of claims. The pipeline of potential business is encouraging with a number of new accounts being on-boarded for full implementation in the new financial year. In order to service the additional business and to provide the infrastructure for anticipated future growth, FMG's fleet and incident management operations were moved to larger premises in Huddersfield (comprising 43,000 square feet of operational space) from two existing premises in Huddersfield (comprising together 29,000 square feet) in September 2018 and the costs of this relocation are included in exceptional items.

Legal Services

The Group's latest ABS named 'Your Law' (which was launched last year by National Accident Helpline and supported by the Group's NewLaw legal firm) has showed encouraging progress and has continued to build its case load and consequently its levels of settlements to provide an increased contribution from this source which supplies a greater proportion of non-RTA cases under management. Whilst these cases together with the growth in NewLaw's employers' liability and medical negligence practice (supported by increased marketing) take longer to settle than road traffic accident claims and require greater cash investment as they progress, they are not affected by government announced reforms of RTA soft tissue injury compensation levels that are presently scheduled to come into effect in April 2020. The Group is investing in IT systems to provide a customer portal that will integrate with the proposed MoJ portals and provide efficiencies to deal with low-value claims after the reforms take effect. During the year the consolidation of substantially all of NewLaw's operations into NewLaw's existing building in Cardiff was completed and the relocation and other costs of this restructuring are included in exceptional items.

Technology Initiatives

The year saw the continuation of the investment in technology that commenced last year, to support the Group's strategic objectives, including further integration of common Group services, productivity improvements within the Group's operational centres, and enhancements to existing supply chain integration.

The year saw mobile device optimisation and an upgrade of Auxillis's Digital Customer Portal being implemented, enabling a clearer and faster data transfer between customers and our operational systems.  In addition the Group delivered an upgrade to its Repair Tracker solution enabling network repairers to provide job status information in a more simplified and timely fashion via the portal, enabling automated updates to be provided to customers via our digital platforms. Direct data integration with a leading bodyshop management system has also been implemented, targeting further efficiencies to the capture of repair status information, and reducing administrative overheads for repairers.

A major upgrade to Auxillis's core operational claims management system was successfully completed in October 2018, providing enhanced platform capability which will support further operating efficiencies and customer service improvements. Work also commenced on the development of a digital self-service claims-capturing platform which will further enhance efficiencies in claims management, with greater visual tracking of claims progress by claimants.

During the year the Group has further developed its use of Robotics Processing Automation in the processing of claims information and documentation including "back office" operational and finance systems. Applications live to date have proved cost effective and their use will be expanded across the Group where appropriate providing potential opportunities for future efficiencies.

The significant investment in the software and infrastructure services supporting the Group's legal businesses to meet anticipated changes in working practices, deliver process efficiencies, and support expanding demand for services has now come to fruition with the first phase of the project to replace one of NewLaw's core operating systems and associated reporting warehouse going live during the year. The second phase of this project is scheduled to go live shortly and the Group is actively involved in further system development to support its work processing cases as and when the planned government reforms to the conduct and outcomes of RTA soft tissue cases are implemented.

The Group has continued on its strategy of investing in core IT infrastructure, and is currently in the process of delivering enhanced network security controls across all operating sites. 

Relationships and customer service

Customer service delivery has continued to be a strong focus for the Group and this has translated into net promoter scores above industry norms for the appropriate service. Performance feedback on the Group's operational service delivery and customer satisfaction rates is of increasing importance with existing and potential new business partners who share the Group's vision for the customer journey.

Recognition of Auxillis for providing outstanding customer service was yet again evident at the prestigious North East Contact Centre Awards in February 2019 where Auxillis was honoured by being awarded the accolade of Contact Centre of the Year (in the over 250 seats category) having been runner up for this award in past years.

Vehicle fleet

The Group continues to operate highly effective fleet services through a hybrid solution of ownership, contract hire and, during peak periods, cross-hiring from daily rental companies. This combination gives the Group flexibility to dispose of excess fleet in the event of a downturn, balance the total number and the mix of the fleet in response to changes in mix of the insurer car parc and at the same time to maximise fleet, without incurring ownership costs, in both the short term and in peak periods.

The year saw a 10.7% increase in total number of hire days driven by a 9.4% increase in credit hire case volumes compared to last year. The average number of vehicles held during the year was increased by 20.0% from 9,312 to 11,173 as a result of the need to meet increases in demand seen during the year.

Fleet utilisation was maintained above our 80% target and was 81.6% compared to 82.9% last year with the fall being influenced by the implementation of an expanded contract for services being delayed by the insurer from 1 January to mid-March 2019. The average age of the fleet during the year was reduced to little over 10 months compared to 11 months last year.

The number of vehicles held at 30 June 2019 increased by 10.0% to 10,711 vehicles as a result of the increased demand during the year as well as providing more capacity to reduce the use of more expensive cross-hires and this compares to 9,741 at 30 June 2018.

Head Office Infrastructure

The Group has for the past 20 years occupied premises in Bath as a head office. Following a review of future requirements and options available the Group has advanced new plans to refurbish and sub-let such parts of these premises that are considered surplus to requirements as a head office. This work is expected to complete by the end of the new financial year at a capital cost of approximately £2 - £3 million.

Financial Review

Management is required to exercise its judgment in the classification of certain items such as exceptional items and those other items considered to be outside of the Group's underlying results. The determination of whether an item should be separately disclosed as an exceptional item or other adjustment requires judgment on its nature and incidence, as well as whether it provides clarity on the Group's underlying trading performance.

Throughout this report reference is therefore made to adjusted results and measures. The directors believe that the selected adjusted measures allow management and other stakeholders to better compare the normalised performance of the Group between the current and prior year, without the effects of one-off or non-operational items and, given the Group's dividend policy, better reflects the normalised underlying cash earnings earned in the year under review to which the directors have regard in determining the amount of any dividend.

As these Alternative performance measures ("APMs") are not defined by IFRS, they may not be directly comparable to other companies' APMs. They are not intended to be a substitute for, or superior to, IFRS measurements and the Directors recommend that the IFRS measures should also be used when readers of this document assess the performance of the Group.

In exercising this judgment, the directors have taken appropriate regard of IAS 1 "Presentation of financial statements" as well as guidance issued by the European Securities and Markets Authority on the reporting of non-adjusted results. For the reasons stated above, adjusted measures exclude the impact of the amortisation of intangibles, share based payments and exceptional items ("adjustment items") and are analysed on the face of the Consolidated Income Statement and in note 6 as well as in this report.

Results and performance

For the year, the Group recorded an adjusted EBIT of £49.6m (2018: £46.2m). The adjusted profit before tax was £49.3m (2018: £46.0m) and the statutory profit before tax was £41.6m (2018: £38.8m).

A summary of the key financial performance indicators is set out in the table below:

** Calculation of EBITDA and operating cash flow is analysed in the consolidated statement of cash flows

Calculation of debtor days is as outlined in note 14.

Revenue

Revenues were £589.7m (2018: £527.0m), an increase of £62.7m (11.9%):

Sales growth principally reflects a 9.4% growth in the number of credit hire cases and an 11.4% increase in credit hire days. There was also a 5.2% increase in the total number of repairs undertaken against the corresponding period last year as well as continued momentum within the Group's fleet and incident management business.

Gross profit and adjusted EBIT

Gross profit was £9.9m higher than the corresponding period last year and gross margin was 23.3% (2018: 24.2%). The fall in gross margin was in line with the Board's expectations and for the year as a whole was influenced by an increased mix of lower margin activities and higher levels of commission payments to our referral partners. The Group expects gross margin percentage to improve following the termination of low margin business as a result of the exit from the large insurer contract mentioned in the operating review.

Adjusted administrative expenses were £93.4m (2018: £83.8m), an increase of 11.4% over last year reflecting increased investment in underlying infrastructure as well as increased marketing and operational costs supporting the increased volumes. Adjusted administrative expenses as a percentage of sales was however reduced to 15.8% (2018: 15.9%).

Income from associates represents the Group's share of the profits in relation to NewLaw's membership of several Limited Liability Partnerships providing legal services in association with certain business partners (subject to regulation by the Solicitors Regulation Authority) and amounted to £5.3m (2018: £2.2m). The increase reflects growth in the number of cases processed in Your Law LLP (in which NAHL plc is the majority partner) which commenced as a start-up venture in July 2017.

The adjusted EBIT was £49.6m (2018: £46.2m) and adjusted EBIT margin was 8.4% (2018: 8.8%)

Adjusted EBIT is reconciled to the Income Statement as follows:

Net finance income

There was a net interest charge of £0.3m (2018: £0.2m) mostly comprising non-utilisation fees on the Group's revolving working capital facilities with HSBC.

Adjusted profit before tax

Adjusted profit before tax of £49.3m (2018: £46.0m) is an increase of £3.3m (7.1%) over last year.

Amortisation of intangibles, share based payments and exceptional items

A charge of £2.4m (2018: £2.4m) in respect of amortisation of intangible assets (acquired by virtue of the purchase of FMG) and a £1.1m cost (2018: £1.8m) recorded under IFRS2 in respect of the charge under share based payments on incentive share schemes were incurred in the year.

This year also saw a pre-tax exceptional charge of £4.2m (2018: £3.0m) in respect of restructuring charges arising from changes in the footprint of the Group's operations initiated last year involving the consolidation of some of the Group's operations from three main locations to two, including a lease on new larger premises to accommodate anticipated growth and a charge for goodwill impairment. The net charge includes:

·; provisions of £2.8m relating to the Group's plans to mitigate against the holding costs between now and the end date for those leasehold premises that are no longer being occupied by the Group (2018: £2.0m relating to properties vacated in prior years);

·; a profit of £0.2m on sale of a freehold property vacated during the year (2018: impairment charge of £0.4m);

·; reorganisation costs including associated redundancy and other staff associated costs of £0.7m (2018: £0.6m); and

·; as detailed in note 10, following the annual impairment review by the Directors it has been determined that an impairment in the value of goodwill in relation to NewLaw is appropriate and the resultant non cash impairment charge of £0.9m (2018: £nil) has been included in exceptional items for the current year.

The tax effect of all of the above was a credit of £1.0m (2018: credit of £1.4m).

Statutory profit before and after taxation

After the amortisation of intangible assets, a charge for share based payments and the year's charge for exceptional items above, the statutory profit before tax was £41.6m (2018: £38.8m).

There was a net tax charge of £7.1m (2018: £4.3m) and therefore the statutory profit after tax is £34.5m (2018: £34.5m).

Earnings per share - basic and diluted

Statutory basic EPS is 11.28p (2018: 11.36p). Statutory diluted EPS is 11.08p (2018: 11.19p).

The adjusted basic EPS is 13.44p (2018: 13.27p). The adjusted diluted EPS is 13.21p (2018: 13.07p).

The adjusted figures exclude the effect of the amortisation of intangibles, share based payments and exceptional items ('adjustment items') described in note 6.

Dividends

An interim dividend of 5.50p per share was paid on 28 March 2019 (2018: 5.50p).

A final dividend of 6.15p per share has been recommended by the Board (2018: 6.15p). This dividend, if approved at the Annual General Meeting to be held on Wednesday 30 October 2019, will be paid on Thursday 7 November 2019 to those shareholders on the Register at the close of business on Friday 4 October 2019 making a total dividend for the year of 11.65p compared to a total of 11.65p for the interim and final dividends last year.

Working Capital

The high demand for the Group's services continues and as a consequence the Group is investing in the appropriate working capital to support this demand including fleet. This follows an increase in the volume of work undertaken and investment in new IT digitisation projects and infrastructure to support this growth.

At the year end three (non-partner) insurers writing UK business from outside the UK were in administration/liquidation resulting in a hiatus on the settlement of claims whilst the relevant regulators oversee the responsibility of settling claims liabilities under their jurisdictional obligations. Whilst recoverability of these claims continues under the relevant legislation, it is clear that this is proving to be a slow process and accounts for approximately 3 debtor days.

More recently, collection of claims against one large (non-partner) Third Party Insurer has been challenging in the period as they reacted against the higher levels of claims seen in the market as a result of the "Beast from the East" and technology-led repair cost inflation by seeking to challenge some aspects of the claim. Based upon the run rate of past payments, the consequent reductions in payments amount to approximately £16m of the increase in working capital and account for approximately 9 debtor days. Such actions only serve to defer settlement of claims which are demonstrably proven and enforceable. The Group's track record shows that insurers who delay settling liabilities leads to an elongated outcome which adds unnecessary cost to the insurer by making recoveries through a litigated process. Consequently, and until the cost burden point is made, the Group expects a lag on an element of the normal cash collection recovery time with this insurer but with a higher margin return as a result.

The Group can also report that since the year end a previously announced terminated protocol agreement with a large insurer has been reinstated after the Group had proved out the higher costs of not being in a protocol. This demonstrates that the benefits delivered via protocol agreements are valued by insurers who recognise the lower costs of settling claims under these agreements and the Group will continue to work in supporting these aims.

As a result of the extension of the run off period to November 2019 for the contract with the large insurer mentioned in the Operating Review the positive effect on working capital arising from the run off is now expected to gain traction in the second half of the financial year ending 30 June 2020 to accommodate this extension.

As a result of the above and the increase in sales volumes, debtor days at 30 June 2019 were 116 days and compare to 105 days at 30 June 2018. This measure is based upon net trade receivables, other receivables and accrued income as a proportion of the related underlying sales revenue for the past 12 months multiplied by 365 days.

Revenue generated debtors at 30 June 2019 were £187.0m and compare to £151.7m at 30 June 2018, an increase of £35.3m (23.3%). Trade creditors decreased to £87.8m compared to £89.3m at 30 June 2018 a decrease of 1.7%.

Net Assets

Net assets at 30 June 2019 were £161.1m (2018: £160.2m).

Cash generated from operating activities was £20.9m (2018: £46.5m). After other net outflows in respect of interest and taxation net cash flow from operating activities was £12.0m (2018: £39.7m).

Net debt, cash and financing

Cash balances were £11.9m at 30 June 2019 (2018: £30.7m). The decrease in cash balances is mostly the result of the increased investment in net working capital, and in particular receivables, funding the growth in sales including investment in an expanded fleet and an increasing amount of corporation tax paid following use of losses and allowances from previous years.

In order to fund the greater investment in working capital mentioned previously much of the increase was funded out of cash balances although shortly before the year end use was also made of the hitherto unutilised revolving facility in place with HSBC UK Bank plc with drawings of £9m being made. On 7 August 2019 the Group extended the maturity date of the HSBC revolving credit facility from December 2020 to August 2024 in the new amount of £50m and details of this are in Note 20 of this statement. The Group also has a £5m overdraft facility with the same bank. These facilities will provide support for future expansion of business by the Group.

As outlined in the operating review during the year the total average number of vehicles on the fleet during the year was increased by 20.0% over last year to service the increased volumes of hire days and also to reduce the levels of more expensive cross hire vehicles utilised in previous periods. A greater proportion of these new vehicles were funded by finance lease arrangements compared to last year. The number of vehicles funded by finance leases increased to 35.7% at 30 June 2019 compared with 32.2% at 30 June 2018. Despite this and an increase in the higher number of fleet vehicles to meet demand, fleet financing lease debt was reduced to £37.6m at 30 June 2019, a reduction of £1.6m compared to £39.2m at 30 June 2018 reflecting the funding of a greater mix of lower cost per unit small domestic vehicles.

Net debt at 30 June 2019 was therefore £34.7m and compares to £8.5m at 30 June 2018. The net debt and cash position can be summarised as follows:

A graphical reconciliation of the movements in net debt can be viewed at:

 https://www.redde.com/wp-content/uploads/2019/09/ResultsGraphDLLink.html

The Group's ratio of net operating cash flow to EBITDA was therefore reduced as a result of the above factors and EBITDA/Operating Cash Flow conversion for the year to 30 June 2019 was 21.9% (2018: 71.6%).

Principal risks and uncertainties

The principal risks and uncertainties facing the Group are set out in note 22 to this announcement.

Martin Ward Stephen Oakley

Chief Executive Officer Chief Financial Officer

4 September 2019 4 September 2019

Consolidated income statement

For the year ended 30 June 2019

Condensed consolidated statement of comprehensive income

For the year ended 30 June 2019

Consolidated statement of changes in equity

For the year ended 30 June 2019

Consolidated statement of financial position

as at 30 June 2019

Consolidated statement of cash flows

for the year ended 30 June 2019

Notes to the financial information

1 Earnings per share

The calculation of the basic and diluted earnings per ordinary share is based on the following share volume information:

There were 306,706,045 ordinary shares of 0.1p each in issue as at 30 June 2019.

2 Segmental information

The activities of the Group are managed by the Executive Board, "the Board", which is deemed to be the Chief Operating Decision Maker, as a single operating platform. The entities within the Group contribute as part of the whole operation of the Group to provide services for the core business. The Board of Redde plc considers the performance of the business by reference to contributions from all activities of the Group as a whole, and reviews requirements of the total Group when determining allocations of resources. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board in order to allocate resources to the segment and to assess its performance. The Group has identified two operating segments.

The directors consider that these operating segments meet the aggregation criteria under IFRS 8 for aggregation into one reportable operating segment. The directors have considered a number of economic indicators in forming their assessment that the two operating segments share similar economic characteristics, including long-term average gross margins. A significant part of the business of both operating segments involves vehicle incident and accident management as well as associated rectification, and performance is influenced by the growth or reduction in the number of vehicles on UK roads, the associated accident and incident rates and the growth in vehicles insured or managed by the segments customers. Their activities carried out in generating revenue are not independent of each other, and their customer bases are similar in type.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

4 Basis of preparation

The financial statements have been prepared on the historical cost basis in accordance with International Financial Reporting Standards (IFRSs) adopted in compliance with Article 4 of the EU IAS Regulation. The presentational currency is sterling. All amounts in the financial statements have been rounded to the nearest £'000.

Two new accounting standards, IFRS 15 (Revenue from contracts with customers) and IFRS 9 (financial Instruments), have come into force for the current financial year and have now been adopted. The Group has assessed the impacts of these standards and they have not resulted in any material measurement differences. Consequently the two methods of adoption, being the fully retrospective method or the modified retrospective method, are not applicable to the Group.

The following standards have not been applied in preparing these consolidated Financial Statements:

·; IFRS 16 - Leases.

The Group will report its financial statements under IFRS 16 for the first time from the first half of 2019/20. The Group presently expects to adopt IFRS 16 on a modified retrospective basis in its 2019/20 financial statements. Accordingly prior year comparatives will not be restated for the effect of IFRS 16 but instead the Group's 1 July 2019 opening reserves will be restated for the full cumulative impact of adopting this standard.

The standard requires lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less, or the underlying asset is of low value. The following indicative impacts are anticipated:

·; there is expected to be an increase in total assets, as leased assets which are currently accounted for off balance sheet (i.e. classified as operating leases under IAS 17) will be recognised on balance sheet and valued in accordance with the principles of IFRS 16. The biggest asset categories impacted for the Group are expected to be land and buildings and motor vehicles currently supplied under contract hire arrangements.

·; there is expected to be an increase in debt, as liabilities relating to existing operating leases are recognised

·; operating lease expenditure will be reclassified and split between depreciation and finance costs. Therefore EBITDA will increase. Future depreciation and finance costs are also expected to increase as a result of increased assets and liabilities

·; there is an expected temporary but immaterial reduction in profit after tax. This is expected to be driven by an increase in finance costs as a result of the new leases. These finance costs will have an accelerated profile which will reduce over a lease term

·; there may be a corresponding effect on tax balances in relation to all of the above impacts.

This standard will require the Group to make key accounting judgments in particular around the likelihood of lease renewals. Details of the Group's existing operating lease commitments at 30 June 2019 are set out in note 19 of this statement.

On transition, the Group intends to apply the practical expedient allowing the exclusion of leases with a remaining life of less than 1 year. As a result, on 1 July 2019 right of use assets will increase by £18.6m, lease liabilities will increase by £19.1m, and there will be a one-off reduction to opening reserves of £0.5m. If applied for the financial year just ended then operating profit would have increased by 0.6m, interest charges would have increased by 0.3m and profit before taxation would have increased by £0.3m, EBITDA would have increased by £20.9m.

5 Going concern

The Group's business activities, analysis of its financial performance and position, and factors likely to affect its future development, are set out in the Operational and Financial Review above. The financial resources available to the Group are also discussed in detail in the Operational and Financial Review above. The forward risks faced by the Group are also discussed in the section on principal risks and uncertainties above.

The directors have assessed the future funding requirement of the Group and the Company, and have compared them to the sources and levels of working capital resources available including cash balances and the current committed £55m bank revolving credit and overdraft facilities as well as the numerous fleet financing lines provided by various parties. The assessment included a review of current financial projections to June 2021 and any applicable covenants under the bank facilities. Recognising the inherent uncertainty in making financial projections, in particular with regard to the demand for the Group's services and the cash collection profiles from insurers, the directors considered a number of scenarios and the mitigating actions the Group could take to limit any adverse consequences.

Having undertaken this work, the directors are of the opinion that the Group continues to have access to adequate resources to fund its operations for the foreseeable future and so determine that it is appropriate for the financial statements to be prepared on a going concern basis.

6 Amortisation of intangibles, share based payments and exceptional items

Management is required to exercise its judgment in the classification of certain items such as exceptional and those other items considered to be outside of the Group's underlying results. The determination of whether an item should be separately disclosed as an exceptional item or other adjustment requires judgment on its nature and incidence, as well as whether it provides clarity on the Group's underlying trading performance.

Throughout this report reference is therefore made to adjusted results and measures. The directors believe that the selected adjusted measures allow management and other stakeholders to better compare the performance of the Group between the current and prior year, without the effects of one-off or non-operational items and, given the Group's full distribution dividend policy, better reflects the normalised underlying cash earnings earned in the year under review to which the directors have regard in determining the amount of any dividend.

As these Alternative performance measures ("APMs") are not defined by IFRS, they may not be directly comparable to other companies' APMs. They are not intended to be a substitute for, or superior to, IFRS measurements and the Directors recommend that the IFRS measures should also be used when readers of this document assess the performance of the Group.

In exercising this judgment, the directors have taken appropriate regard of IAS 1 "Presentation of financial statements" as well as guidance issued by the European Securities and Markets Authority on the reporting of non-adjusted results. Adjusted measures exclude the impact of the amortisation of intangibles, share based payments and exceptional items ("adjustment items") as shown below. A reconciliation of IFRS to non-IFRS underlying measures is also outlined in the Financial Review and the Consolidated Income Statement.

a) Amortisation of acquired intangible assets

The Group recognised the value of customer relationships and acquired software amounting to £22.9m in total (Note 11) as a result of the acquisition of FMG in 2015 and these assets are being amortised over 10 and 5 years respectively. Such amortisation is included in adjustment items as it is related to the acquisitions of businesses and does not involve ongoing cash expenditure in the normal operations of the Group. The charge for the year amounts to £2.4m (2018: £2.4m) (Note 11), and the tax effect was a credit of £0.4m (2018: credit of £0.9m).

b) Share-based payments

The Group has a number of share incentive schemes. In accordance with IFRS 2 the calculated charge in respect of options issued and outstanding amounts to £1.1m for the year (2018: £1.8m). Such charges are included in adjustment items as they do not represent a cash cost of operations, have no effect on the net assets of the Group and given that unissued options are already included in the statutory diluted earnings per share calculations these costs are removed to avoid double counting in arriving at such diluted earnings per share.

c) Leasehold property provisions

The Group has restructured its operations by the moving of its operations from three existing locations to two locations one of which involving new premises with greater capacity to accommodate anticipated growth. Provisions made include provisions for the Group's plans to mitigate against the holding costs between now and the end date of any liabilities for the resultant empty properties for those premises that will be no longer occupied by the Group. In addition the Group presently is subject to a number of onerous long term leases of certain properties vacated in prior years and no longer occupied by the Group. Provisions made reflect the net holding cost of all of these empty properties between now and the end date of the relevant obligations for those properties taking into account the Group's plans for mitigation of these costs (which includes refurbishment and subletting) and a pre-tax exceptional charge of £2.8m (2018: £2.0m) has been made in this respect. The tax effect was a credit of £0.5m (2018: £0.4m).

d) Freehold property sale (2018: Impairment)

In connection with the restructuring its operations mentioned above the Group made the decision to vacate a freehold property and move its operations to new larger leasehold premises. As a consequence the empty property was sold at a profit of £0.2m. The impairment provision last year reflects an anticipated change in the valuation from an 'in use' basis to one that reflected vacant possession and amounted to £0.4m.

e) Reorganisation and redundancy costs

As stated above the Group has restructured its operations by moving its operations from three existing locations to two locations including one completely new premises. This restructuring has also, in the case of the closure of NewLaw's main Bristol office, given rise to redundancy costs in respect of those staff who were unable or unwilling to relocate to NewLaw's existing head office premises in Cardiff or whose roles would be duplicated as a result of the merger of operations. In addition certain of the Groups other operations were also restructured during the year giving rise to redundancy and termination payments. These restructurings did not represent the normal operations of the Group. The total costs of this and other costs associated with the restructuring total £0.7m (2018: £0.7m) for the year and the tax effect was a credit of £0.1m (2018: £0.1m).

f) Impairment of goodwill

As detailed in note 10, following the annual impairment review by the Directors it has been determined that an impairment in the value of goodwill in relation to NewLaw is appropriate and the resultant non cash impairment charge of £0.9m (2018: £nil) has been included above in exceptional items for the current year.

7 Finance income and finance costs

8 Tax

The effective rate of the tax charge of 16.8% (2018: 11.0%) for the year is lower than the effective standard rate of UK corporation tax of 19.00% (2018: 19.00%) due to the increase in recognition of deferred tax assets consequent upon further assessment and recognition of the amount and anticipated timing of the future usage of potential tax allowances.

9 Dividends

Ordinary share dividends paid in the year to 30 June 2019 can be summarised as follows:

The above does not include the recommended final dividend of 6.15p per share for 2019 which if approved at the AGM to be held on 30 October 2019 will be paid on 07 November 2019.

10 Goodwill

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business acquisition. The Group tests goodwill annually for impairment or more frequently if there are indications that the goodwill might be impaired. The recoverable amounts of CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates and growth rates during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the Group.

For the purposes of testing the value of goodwill of all CGUs for impairment the Group has prepared forecasts, for periods of 5 years which have looked at short to medium term factors relevant to the CGUs in the Group, including appropriate macro economic issues, anticipated industry growth forecasts, changes to selling prices and direct costs. Due to the economic and political factors affecting the industry in which the Group operates, the forecast has assumed a growth rate in cash from operating activities averaging 1.0% per annum over the forecast period.

The forecasts have been used as the basis for the value in use calculation since these forecasts are considered to be sufficiently detailed and represent the best available information. As required by IAS36, a terminal value has been added to the forecasts with a very conservative 0% growth assumed for the future years. The allocation of Goodwill to the Group's CGUs, pre-tax rates used to discount the forecasts, headroom values when compared to the carrying values of the CGUs (which exclude cash and borrowings) and headroom sensitivities to changes in discount rates, is shown in the table below:

In undertaking the annual impairment review, the directors are required to perform certain calculations strictly in terms of the formulaic approach outlined in IAS36. In doing this they have considered both external and internal sources of information and any observable indications that may suggest that the carrying value of goodwill may be impaired.

In connection with the goodwill attributable to NewLaw it has been observed that there may be uncertainties, both positive and negative, with regard to the effects of the implementation of the Civil Liability Act (the "Act") which is presently scheduled to come into force on 1 April 2020. The main effects of the Act are to restrict the amount of damages payable for soft tissue injuries suffered by victims of (principally) road traffic accidents and the amount of fees recoverable from negligent third parties. As a consequence NewLaw, like the rest of the market, is in the process of adapting business models and processes in order to continue to handle such claims more efficiently so as to remain profitable albeit with lower levels of return than has been the case historically. At the same time as reducing cash generated from soft tissue injury cases these changes will require some investment in marketing and IT systems.

The recoverable amounts of NewLaw's goodwill has therefore, as required under IAS36, been determined based upon a value in use calculation. The value in use calculation is most sensitive to the key assumptions (prescribed in IAS36) in respect of cash flows, long term growth rate and discount rates. Discount rates are themselves the result of numerous judgemental inputs for which many differing views are held by separate independent experts.

These assumptions are subject to a considerable range of possible variations and judgments whilst being constrained by the requirement under IAS36 to have regard to general market comparators (rather than those specific to the Group) as well as certain stress scenarios in relation to the cash flows.

As a result of these changes and the resultant possible uncertainty over the levels of soft tissue injury claims that will be available in the market after 1 April 2020, IAS36 requires the Board to take a prudent view on the future cash flows and discount rates applicable to NewLaw (notwithstanding its confidence in the future prospects for the business following its restructure of operations during last year) and this has resulted in the Board's decision to recognise a non-cash impairment of NewLaw's goodwill in the amount of £0.9m as an exceptional item as disclosed in note 6).

After review of the results of these tests, the directors consider that there has been no impairment to any of the other CGUs during the year (2018: £nil). Any increase in the discount rate to 47.8% (Auxillis) and 46.5% (FMG) respectively would create a potential impairment indicator, however such levels are not deemed to be appropriate or reasonable by management.

The timing and amount of future cash flows are estimates which depend upon the outcome of future events, especially so where cash inflows and outflows arise in different reporting periods or where there is assumed growth in the business, and may need to be revised as circumstances change. Judgment is required in calculating an appropriate CGU specific discount rate.

12 Interests in associates

The Group's interest in associates comprises of minority participations in five (2018: five) Limited Liability Partnerships ("LLP'") registered and situated in the United Kingdom. All of the LLPs are engaged in the processing of legal claims and are regulated by the Solicitors Regulation Authority. The LLPs are businesses over which the Group is deemed to have significant influence but does not control.

The accounting period ends of the associated companies consolidated in these financial statements range from 30 November to 31 December. The accounting period end dates of the associates are different from the Group as they are more aligned to the accounting reference dates of the majority partners. The above Information has been obtained from the management accounts of the entities concerned as at 30 June 2019. 

13 Property, plant and equipment (including vehicles)

14 Receivables and contract assets

Net trade receivables and contract assets comprise claims due from insurance companies and self-insuring organisations as well as amounts invoiced for the provision of services to customers. The Group's debtor days at 30 June 2019 were 116 days (2018: 105 days). This measure is based on net trade receivables, other receivables and accrued income as a proportion of the related underlying revenue multiplied by 365 days.

15 Trade and other payables

Trade payables represent amounts payable for goods and services. The directors consider that the carrying amount of trade payables approximates to their fair value.

16 Provisions

The Group presently is subject to a number of onerous long term leases of certain properties no longer occupied by the Group. The above provision reflects the directors' estimate of the net holding cost of these leases between now and the end date of those leases discounted to their present value at an appropriate risk free interest rate for the period, taking into account the group's present intended plans for mitigation of these lease costs, including refurbishment plans. Last year the Group has also restructured its operations by moving its operations from three existing locations to alternative locations including one completely new premises. A further restructuring in certain parts of the Groups other operations took place in the year. These restructurings also gave rise to redundancy and termination costs.

 17 Deferred tax

Deferred tax charge is calculated in full on temporary differences under the liability method as at 31 December 2018, 30 June 2018 and 31 December 2017 using the tax rates enacted at the balance sheet date.

At the balance sheet date the Group has temporary differences, principally arising from capital allowances on fleet vehicles of £39.2m (2018: £41.9m) which will be available for offset against future trading profits. A deferred tax asset has been recognised in respect of £38.2m (2018: £32.6m) of this amount to reflect the forecast utilisation of capital allowances carried forward. No deferred tax was recognised on the remaining £1.0m (2018: £9.3m).

Deferred tax asset/(liability) not provided in full on temporary differences under the liability method using a tax rate of 17% (2018: 19%):

18 Share capital and share premium account

Changes in the share capital or share premium account during the year are summarised in the Consolidated Statement of Changes in net Equity and reflect:

19 Operating lease arrangements

At the balance sheet date the Group had outstanding commitments for future minimum lease payments under non- cancellable operating leases, which fall due as follows:

Operating lease payments represent rentals payable by the Group for certain of its motor vehicles, plant and equipment and properties. Leases have a weighted average term of 2.55 years (2018: 2.92 years). The lease payments subject to the onerous lease provision of £5.4m (2018: £4.5m) (note 16) have been included within the above amounts.

20 Cash flow information

a) Analysis and reconciliation of net debt

A more detailed (non IFRS) reconciliation of the movement in net debt is as follows: