There are an estimated 2.6 million road accidents every year in the UK. Most are relatively minor. Some are life-changing.
Virtually all need support, from roadside recovery to repair work to replacement vehicles. Redde Northgateprovides all these services and more.
With customers including insurers, leasing firms and big companies, it is contracted to handle accident claims for 20 million UK drivers, about half the country’s motorists.
Support system: Redde Northgate provides services such as roadside recovery and temporary cars
The group also owns more than 130,000 vans and corporate cars here and in Spain, making it one of the biggest operators in the field, with customers ranging from Tesco to local contractors and delivery drivers.
The business was formed in February 2020, when accident services firm Redde merged with van leasing specialist Northgate.
The idea behind the deal was to create a company that could make life easier – and cheaper – for anyone involved in driving, leasing or insuring cars and vans.
So it has proved. The business has gained customers, delivered rising profits and paid generous dividends to shareholders.
Yet Redde Northgate shares have lost a quarter of their value this year, trading at just £3.17. The decline is undeserved and should reverse, as chief executive Martin Ward proves his mettle.
Before the merger, Northgate had a patchy track record, chided for pursuing growth over profit and relying too heavily on certain sectors, such as construction.
Ward came from Redde, a smaller business but one that seemed better able to withstand economic ups and downs. While many tie-ups fail, this one has delivered everything it promised and more.
Both businesses had fleets of vehicles. The combination meant they had more to offer and could appeal to larger customers. The merger also created a significant increase in car and van depots and body shops for repairs.
That means replacement vehicles can be provided faster and accidents fixed more quickly, enhancing the group’s appeal to both insurers and fleet owners. Scale also allows Redde Northgate to offer better rental and repair deals than smaller operators, a feature that is particularly attractive in today’s inflationary environment.
The combined size has given Ward access to more vehicles too, helpful at a time when new car and van production remains constrained, particularly in the UK.
Buoyed by these advantages, Redde Northgate has cut costs, increased profit margins, added new customers and offered more services to existing clients.
The firm has expanded its fleet as well and made some canny acquisitions, such as Fridge Express, which provides temperature-controlled vans to food businesses and drug firms, and ChargedEV, which provides electric vehicle charging points for homes and businesses.
The group helps to remove vehicles after motorway accidents too, it is contracted by the police and National Highways to arrive on site and clear roads quickly and safely.
The range of businesses and activities bear witness to Ward’s determination to make Redde Northgate a diverse and resilient business, able to develop and grow even in tough economic climates.
Recent results bode well, with sales up 22 per cent to £1.5 billion, profits up 10 per cent to £166 million and a 14 per cent rise in the dividend to 24p in the year to April 30, 2023.
A trading statement last month was optimistic, with Ward drawing confidence from growing momentum across the group and a rich pipeline of new business.
Brokers are upbeat too, even though they believe profits could remain static for a while.
Redde Northgate sells vans when leases come up for renewal. A shortage of new vehicles has artificially inflated prices and this source of earnings is expected to fall as supplies return to normal.
But annual group sales are set to exceed £1.8 billion by 2026, with the dividend climbing to 25p next year and rising steadily thereafter.
Ward is ambitious too, hoping to achieve turnover of £5 billion over the next five years, as the company grows here and in Spain.
More acquisitions are on the cards as Ward and finance director Philip Vincent seek to make Redde Northgate a one-stop shop for businesses and insurance firms.
Midas verdict: Ward and Vincent spent £260,000 of their own money buying shares last month. Their decision makes sense. At £3.17, Redde Northgate shares trade more like a stock in trouble than a business in growth mode. That is undeserved and should change as Ward takes the firm forward and investors gain confidence in his ability to deliver. In the meantime, Redde Northgate is offering a dividend yield of more than 7 per cent. Time to buy.
Traded on: Main market Ticker: REDD Contact: reddenorthgate.com or 01325 467558
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