Company Announcements

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

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

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

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

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

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.

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

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

·    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

·    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

·    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

·    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:

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.