IC report17 Sep 2015 23:21
From ADVFN
This was taken from a report by Ian Smith for Investors Chronicle on the 4/09/2015
Redde for the road
Cheap motor insurance premiums, the ready availability of car finance and lower petrol prices are all buoying accident services provider Redde
(REDD). More cars are on the road, being driven for longer. As accidents mount, it is not difficult to see why there is such demand for Redde's replacement cars and repairs. Case numbers for the latter were up 12 per cent for the year, while total hire days increased by 4 per cent.
If a road user is involved in a car accident through no fault of their own, Redde provides a 'credit hire' vehicle and repairs, the costs of which it will recoup from the guilty party or their insurance company. This is an alternative to the typical 'direct hire' Redde would provide to a driver who has the services as a condition of their policy. For Redde, credit hire is higher-margin business than direct, and 5.4 per cent growth in the former helped to buoy its profitability.
Add to this its acquisitions: NewLaw, a very profitable provider of legal services to commercial partners ranging from motorcycle insurers to the British Medical Association, lifted Redde's net operating margin from 5.9 per cent to 8.8 per cent. The pending acquisition of FMG is similarly intended to bulk up its business offering fleet management and related services to commercial customers.
Analysts at N+1 Singer expect adjusted EPS of 8.8p for the 2015-16 financial year, from 7.9p in 2014-15
IC VIEW:
Redde shares trade on a fairly demanding 18 times expected 2016 earnings. But given the increased dividend and the growth profile, we are happy to back this transformed business. Buy
I hope this helps all shareholders and none share holders alike
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