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Redde PLC Rises On Significantly Increased Expectations

The share price of Redde (LSE: REDD) is currently up 7.2%, following publication of a trading update this morning in which the company says that its trading profit for the six months to the end of 2014 will be “materially ahead” of its previous expectations, and “significantly ahead” of the same period last year.

Redde — which provides bespoke claims management, legal and specialist accident management services to the motor insurance sector — says that the strong start to the current financial year that it reported in September and October has continued into December, allowing it to revise its expectations significantly upwards.

The company says that cash generation continues to be strong, with total cash balances standing at £60.9m as of 30 November 2014, compared with £58.3m at 30 June 2014, which, adjusting for the £9.8m final dividend payment, represents an increase of 21.3% (£12.4m) over the five months. 

Based on the group’s performance to date, Redde’s board says that it anticipates declaring an interim dividend of at least 3.5p per share, which would be an increase of 4.5% over last year’s total interims of 3.35p per share (which was paid in three installments).

Commenting on update, CEO Martin Ward, said:

The benefits of our strategy for growth, sustainable profits and cash are being demonstrated in our strong trading results. This goes to support a significant dividend return to our shareholders. We see further opportunity to grow the business both organically and through M&A investment. Based on current trading we remain confident about our outlook.

More recent investors will be very happy with the 48% rise in Redde’s share since this time last year — by comparison the FTSE All-Share index has fallen almost 4%.

However, longer-term shareholders,  from back in the company’s previous existence as Helphire, are hurting badly from a share price collapse of 84% over the past five years, during which time the FTSE All-Share has gained 25%. 

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Jon Wallis has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.