Zigup Plc

Welcome to the Ready Northgate results for FY22. I'm Martin Ward, Chief Executive, and joining me today is Philip Vincent, our CFO. I'll run through the agenda. So first of all, I'll just give a general overview on the results. Philip's then going to cover the financial review in detail. He'll come back to me then for a business update before we have a Q&A. After the Q&A, we intend to have a 10-minute break, and then Philip's going to run a depreciation workshop for those that want to stay behind. Okay, so starting with slide five, please. This is an overview of our achievements. So this year has been a strong operational performance. against the backdrop of ongoing constraints in supply chains and recovery in activity from COVID-related lows. Our actions have seen rental margins improve in Spain and in the UK and I, driven by a combination of cost and deficiency gains, targeting preferred growth sectors and tightly managing inflationary pressures. And it's been a year in which we have seen more take up of our broad integrated mobility platform services by new and existing customers with a number of contracts won with major insurance brands and other new partners. To meet these new business wins and grow capacity, we have been forward investing in people, growing our car fleet and developing our technology which embeds our service delivery. And there's been a lot of good work within the business functions to maximise the benefits from our central services, such as HR, IT and finance. And as an example, we have just commenced our Connect project in the group, which is the foundation of our digitalisation plans, with Phase 1 aiming to join up all the businesses on one common communication platform. and we are taking a disciplined investment approach to our work locations in terms of improving our energy efficiency, waste management and work environment, and at the same time finding ways to reduce our carbon footprint. And the ongoing efforts from our colleagues are impressive in terms of the recognition and awards achieved this year, such as the Fleet News Rental Company of the Year winner, which is the first time any of our businesses has won this award. And two 2022 awards from business fans, winner for fleet management and best long-term rental provider. And although we don't always get it right, we are consistently rated excellent by our customers through Trustpilot. We have also made good progress with our strategic mobility platform across the vehicle lifecycle that appeals to both existing and new customers, and the substantial multi-year revenue synergy wins secured so far mark this strategy out as a clear success. We have been selective and disciplined in our M&A activities, either taking bolt on growth opportunities to broaden our reach in existing markets, or to extend the overall capabilities of the group. We have focused on maximising these opportunities, and since the merger in February 2020, we have now added five businesses or asset purchasers to the group. And my last point on this slide is the launch of our group purpose and values, which were formed post the merger, which was significant in our goal to ensure we are working as one team. We have sought to communicate our purpose and values clearly together with our strategic narrative and this connected with one of our highest scoring ratings on our recent employee customer feedback. Turn to the next slide. So the results of these efforts was a very strong financial performance for the year. As you can see, key underlying metrics have seen strong progress across the board. And the early visibility we had on trading allowed us to raise market expectations to over 150 million PBT for the period. Underlying revenues were up 24% to over a billion pounds and PBT was up 62% to over 151 million. which starts to reflect some of the success from our integrated platform, combined with our focus on cost control and managing inflation. Roki has continued to improve, with a 4.4 percentage point increase at 13.9%, as we make better returns from the assets we own. Based on this performance, the Board has recommended a final dividend of 15p, making the total dividend for the year of 21p up 36% on the previous year. We have also made good progress on our share buyback announced in March this year, with circa 20 million delivered to shareholders through this route as at the end of June. We view both dividends and buybacks as appropriate routes to deliver shareholder returns, taking into account our capital allocation priorities. Next slide, please. So before handing over to Philip, I'll just touch on some of our achievements since the merger just over two years ago. The delivery and execution of the merger has been successful and this should be the last reporting period we specifically reference merger-related benefits. Going forward, we see the benefits of the merger being measured in the form of group operational efficiencies and customer wins on the integrated platform. But it is worthy to note that the business has delivered on all the elements set out in late 2019 when discussing the strategic rationale of the merger. We now have a platform which delivers a broad suite of mobility solutions, which is attracting strong interest from a wide range of blue chip and other customers. Our integrated platform offers a compelling proposition with 300 million of lifetime contract value already signed with five major insurance brands. And we have seen a significant uptake in customers taking up accident management services. We have delivered cost synergies of over 20 million, which was twice the original target. And we have seen the benefit of the integrated platform deliver incremental revenues from existing customers who have deep and long-standing trusted relationships with Ready Nordgate. This year's results highlight some of the significant achievements both within the business operations and with our customers, which is testament to the hard work of all our colleagues in Spain, Ireland and the UK over the past year. And I express my and the board's thanks for their tremendous efforts which have delivered these results. These results also show that the combined business has built stronger resilience through a broad market offer, very different to the past. and with a substantially diverse customer base. Thank you. I'll now hand you over to Philip to cover the financial review.

Thank you, Martin, and good morning, everyone. So if we turn to page nine, I will start with an overview of the full year results. Martin, could you click over? Thank you. So the second half of the year followed the strength we'd seen in the first half and revenue excluding vehicle sales grew to just under £1.1 billion, 24% higher than the prior year, driven by the recovery of Ready post-COVID. Total revenue, including vehicle sales, was £1.24 billion, growing 12% year-on-year. And vehicle sales revenue of £149.9 million was 35% lower, as the continued restriction in new vehicle supply and strong rental demand have reduced the used vehicles available for sale. The volume of vehicles sold was 16,600, a 40% reduction on the prior year, which has been offset by high sales prices. Claims and services revenue was £530.3 million, a 46% increase, with volumes exiting the year at approximately 90% of pre-COVID levels. And disposal profits were £50.1 million, that's an increase of 25%, with PPUs increasing 106% as a result of the increasing sales price of used vehicles. Underlying profit before tax of £151 million increased £58 million, or 62%. And whilst we continue to benefit from the very strong used vehicle market, if we exclude all disposal profits from both periods, underlying profit before tax increased 91%, demonstrating the improvement in the underlying business. Underlying earnings per share was 50.8%. That's a 64% increase over the prior year in line with the increase in PBT. And return on capital employed increased 4.4 percentage points to 13.9% as a result of the strong growth in profits. And the increase in the disposal profits accounted for 0.8% of this increase. And steady-state cash generation before growth capex was 216.4 million, increasing 54%, benefiting from the tight control over cash spend and the underlying performance of the business. An investment in the own Northgate and Ready fleets to meet demand increased 128 million and resulted in free cash flow reducing to 12.3 million. And net debt excluding IFRS 16 of 452.1 million increased 3.2%. Now if we turn to page 10, so this year I've included a waterfall chart which shows the growth of underlying PBT from 93.2 million in FY21 to 151.3 million this year. Now last year's underlying profit included 40.2 million of disposals profit and FY22 includes 50.1 million. And you can see the £9.9 million increase in disposal profits in the centre, with the lower volumes at a higher sales price. And importantly, you can see that rental volume and rental margin combined contribute £21.5 million increase in profits in the year, and the ready volume and margin contribute £27.9 million increase in the profits in the year. So the improved underlying performance of the business in Northgate and Ready, not including disposals, is driving 85% of the increase in profits. Now I'll talk through the headlines of the three operating segments. So let's start with Northgate UK and Ireland on page 11. So Northgate UK and Ireland had a good year with vehicle hire revenue of 346.6 million going 11.2% year on year. And closing VOH was flat year on year at 49,200 and average VOH was 6.1% higher than prior year. The average hire rate was 3.7% higher than prior year, with price increases applied carefully across the year. And minimum term contracts account for around 36% of VOH compared to 33% last year. The rental margin for the year was 15.3% and this represents a 2.6 percentage points increase compared to the prior year. And the higher rental revenue and margin increased rental profit by 34% to 53.1 million. Vehicle sales volumes of 10,400 were 34% lower than the prior year. And this reflects the fact that the prior year period benefited from additional used vehicle stock due to the impact of the COVID-19 lockdown at the end of FY20 and the restricted market supply of the new vehicles in the current period. And 60% of our sales were through our e-auction platform. Residual values for vehicles have continued to be high, with the average profit per unit of 4,300 increasing over 80% in the year. And the increase in the sales value more than offset the reduction in the number of vehicles disposed, with disposal profits of 44.8 million increasing just over 20%. The higher rental and disposal profit resulted in underlying EBIT of 98 million, a 28% increase over the prior year. And as we enter FY23, we have continued to see strong rental margin and utilisation has remained high as have disposal PPUs. So now if we move on to page 12 to look at Northgate, Spain, where underlying EBIT of 43.9 million increased 30%. Higher revenues increased 7.3% to 220.6 million, and our constant exchange rates increased 12.8%. The average hire rate has increased 2.4% in local currency compared to last year, with price increases on new contracts applied in the period. And the percentage of minimum term contracts at the end of the period was 36% in line with the prior year. Rental margins increased 2.5 percentage points to 17.5%, with the prior reflecting costs of customer support during COVID. The higher rental revenue and margin resulted in rental profit of £38.6 million, an increase of 25.5%. And a total of 6,100 vehicles were sold in the period, 47.4% lower than prior year due to the restricted market supply of new vehicles. and sales through our digital e-auction platform were 39% compared to 24% in the prior year. And the disposal market in Spain has also continued at strength, with a profit per unit increasing over 200% since last year, and disposal profits of 5.3 million increasing from 2.9 million. EBIT of 43.9 million was 30.2% higher. As we enter FY23, we've continued to see strong rental margin and utilisation and disposal PPUs remain high. So now if we turn to page 13, we can look at ready. So volumes have steadily increased, reaching around 90% to pre-COVID levels. And we'll stop making comparison to pre-COVID volumes in FY23 as other factors such as the new contract wins become more significant. Revenue was £543.7 million, which was a 46% increase on the prior year due to the volumes of traffic increasing. And higher length has also extended during the year due to the impact of macro challenges in the supply chain for parts. EBIT for the year was £35.6 million, a substantial increase on the prior year, reflecting the higher traffic volumes and, as expected, FMGRS now profit-enhancing. Ready also made investment into processes and systems for the new contract wins that will benefit future periods from FY23. And data days were at 159 at the end of the period, that's 20 days lower than prior year. And we expect Ready's contribution to grow in FY23 due to a full year of normalised run rate of traffic volumes as well as the new business wins. So now if we turn to slide 14 and have a look at cash flow and capex. So steady state cash generation of 216.4 million was strong and 76.3 million higher than the prior year, driven by the growth in the underlying performance of the business. EBITDA of 366.7 million was 64.4 million higher than the prior year, with good growth in each business. A net replacement capex of £106.7 million was in line with the prior year and continues to benefit from tight controls over the acquisition of new vehicles and high residual values. Working capital, including non-cash items, was a £33.5 million outflow due to the reversal of Covid payment deferrals and the impact of increasing ready volumes. And growth capex of 108.6 million reflects the growth in the fleet to meet rental demand, predominantly in Spain and growing the ready fleet to meet the increasing volumes, and was 127.7 million higher than prior year. And free cash flow was 12.3 million, an 85.5 million reduction on the prior year, inflecting the investment for growth, as well as 7.5 billion shares purchased as part of our buyback programme. Now, if we turn to slide 15... As we enter FY23, the business has a strong financial platform on which to grow. We continue to operate with very comfortable headroom in all of our covenants, and year-end leverage was 1.4 times compared to 1.5 last year, with our policy remaining to manage our leverage within the one to two times range. And I updated you about a very successful refinancing of our borrowing facilities at the half year. But as a reminder, we raised 792 million of facilities that increased our headroom by 104 million. This included a new private placement loan notes of 375 million euros with six, eight and ten year terms at a weighted average fixed coupon of 1.32%. That's a 106 basis points reduction compared to the previous coupon. In addition, we renewed our RCF facility for four years at £475 million. So not only did the refinancing increase the overall facilities and reduce overall costs of drawn debt by 50 basis points, it also significantly lengthened the maturities and provided greater diversification of the sources and of our lenders. And our drawn borrowing facilities at the year end were £426 million, with £382 million of headroom against our facilities at a borrowing cost of 1.9%. Now, the increase in the amount of fixed-rate loan notes means that the total proportion of our group borrowings at the year end in fixed-rate instruments was 76%. That's up from 28% at the prior year end. This is obviously very helpful when we're operating in an environment of rising interest rates. The refinancing and the resulting lower costs of borrowings makes it harder for contract hire to compete on interest costs, but it has continued to develop as a source of additional funding in the UK, with 10,800 vehicles on contract hire across the whole fleet, almost double that of last year, and utilising 155 million of credit lines. Our objective is to employ a disciplined approach to investment to deliver some sustainable compounding growth. And we've continued to invest in organic growth with investment in growth capex, charging infrastructure and investment in our branches. And we continue to pay a sustainable growing dividend in line with our policy. And we've made three acquisitions during the year and another after the year end. Having completed the above, and with adequate headroom on our facilities, the Board launched a £30 million buyback programme in February of this year, as we believe it represents a good use of funds and generates a strong return for our stakeholders. As at the end of June, we had purchased 5.4 million shares for a total consideration of £20.6 million. And at the end of this programme, the Board will keep buybacks under review. And the board is proposing a final dividend of 15p, which will result in a full year dividend of 21p, 36% growth on the prior year. Now if we turn to page 16, I'll update you on our fleet depreciation rates. So we've been operating in unprecedented times since the merger. We've witnessed a global pandemic that disrupted supply chains and production around the world, alongside a global chip shortage and most recently the war in Ukraine. All of these factors combined have resulted in a significant impact on the supply of new vehicles across Europe. As a consequence of this, residual values of vehicles have increased substantially through the year. Whilst residual values have now stopped increasing, they're not expected to revert to normal levels for the next couple of years. The consequences of this are that the vehicles in our fleet today that were purchased earliest are now over-depreciated. They have depreciated book values that are close to or below the expected sales value at disposal. And accounting standards require that depreciation rates are reviewed at least annually and are set so that neither profit or loss is made on disposal of an asset. And after discussions with our auditors, we've concluded that in line with accounting standards, we will reduce depreciation rates from May 22. And this will only affect vehicles on the fleet purchased in FY20 or earlier. This depreciation rate does not impact cash. It only impacts the timing of statutory profits in relation to these vehicles over the remaining holding period and does not impact the total profit of these vehicles over this period. Now, to ensure the performance of the business is transparent to all our stakeholders, we will be reporting the impact of the rate change outside of our underlying results, and it will only impact statutory results. So there's going to be no impact on underlying PBT, and there'll be no impact on cash. Now, the reduced depreciation cost resulting from lower depreciation rates on FY20 and earlier vehicles delivers an increase to the statutory PBT. Now, the estimated impact on FY23 is 46.8 million. There's no impact on FY22 as the adjustment is only being made from May of this year. As a result of the change in the depreciation rate, the statutory depreciation charge in the next four years is going to be lower by a cumulative 94 million. And consequently, the profits of these vehicles over the next five years will be lower by 94 million. Now, these calculations are based on the estimated fleet plan and will vary based on when vehicles are sold, which is partly dependent on when we receive new vehicles. Now, for those of you wanting to understand this depreciation rate change in more detail, after a 10-minute break of the first part of the presentation, I'll talk you through a worked example and explain how we arrived at our depreciation rates, and I'll also go through the disclosure of the impact on our FY23 numbers and what that will look like. So thank you, and I'll now hand back to Martin for the business update.

Thank you, Philip. Thank you for that. Okay, let's take a look at the market. Let's have an overview of the market. So what are we seeing? Market commentators are forecasting a tougher economic environment over the coming period, which will undoubtedly bring potential challenges to many businesses. Fundamentally, our market proposition is the mobility of people and goods, which is the oldest principle of trade. No matter what the economic climate, this principle holds true. And our role in the market is to make sure our partners and customers can do this with flexibility when they need their mobility. The shift from ownership to rental provides this flexibility, and in tough times, even more so. I believe we have put ourselves in the best position to support customers doing any probable economic downturn, delivering mobility products and services in a flexible and efficient way. I am confident that the depth and experience of the management team that also navigated through a tough COVID period and produced significant cash growth will be very relevant in any period of economic stress. And as Philip highlighted, we completed our refinancing and extended our maturities and lowered our financing costs with circa 76% of our borrowing on fixed terms. And we have carefully managed inflationary pricing improvements over the past year and would expect to continue to manage these responsibly as we go forward. Our customers recognise the inflationary challenges the market pose. And whilst no one welcomes high inflation and what that means, we have strong relationships with our customers, which have supported price movements as the costs of goods and services have increased. And as we look at traffic on the roads, we anticipated last year that overall traffic levels in the period were likely to be lower than in 2019, mainly due to homeworking and changing work patterns. And this has been the case. However, in absolute terms, our new customer contracts, present and yet to commence, will deliver volume growth through the financial year. We have now added more than £300 million in lifetime contract revenue in the past 12 months alone, with a good pipeline of new opportunities ahead. The UK vehicle supply outlook has continued to present challenges, which means demand for vehicles is high. If you look at the chart on the top right, the Society of Motor Manufacturers and Traders forecast a shortfall of 1.7 million vehicles through to December 2022, which in turn creates increased demand for used vehicles. We should anticipate there will be a softening in the wider economy through consumer cutbacks on large ticket items like car purchases, taking into account pre-existing orders yet to be filled, which might bring some relief to supply in 2023. But this will still be dependent on semiconductor and car parts supply chains recovering. If we look at the chart on the bottom right from BCA, we can see used vehicle pricing has been strong through the period, but has come off from the peak seen during the early part of the calendar year and from the peak period in autumn for cars. And although we have seen some softening in vehicle values, current used pricing remains relatively strong compared to historic values. We have anticipated values will gradually fall as the year progresses, but this is likely to be moderated by reduced used vehicle availability. And as we have said before, we anticipate a lower volume of defleets in this current period due to strong rental demand. Across the UK, Ireland and Spain, we are currently securing new supply at around 40-50% of what we would typically see, which makes retaining fleet to service demand a priority to support our customer base. And finally, on this slide, within the business, we are very focused on managing and mitigating our own inflationary pressures, whilst also recognising the cost of living increases and the highest impact this has for our lower paid colleagues. This year, we structured our pay awards so that our lowest paid colleagues received the highest percentage increases across the workforce, which materially stepped up their incomes. And to attract new recruits, we increased the minimum starting salaries at the entry level. This has had a very positive impact on those within the business, as well as increasing new application rates. If we turn to the next slide. So this should be a familiar slide to you all, but it's a useful reminder of how many services and customer touchpoints we have across the vehicle lifecycle. Each of them can work independently of the others, as the services are vertically provided by our business units. But an increasing number of customers and partners are seeing the benefit of taking a fuller suite of services for cost and operational efficiency, which supports the customer journey. So let me be clear on this point. This platform is unique in its product and service combination. There is no other provider offering all of the solutions in one place or with the ability to integrate these services along the vehicle lifecycle. It's this platform which is driving customer wins and upselling services to existing customers. And it's this platform which is transformative in addressing our markets. We are planning to digitize all elements of this platform over time, albeit we have already developed and embedded some of the new platform technology in our customer systems. This represents strong and resilient position that should lead to long-term relationships, and supporting this is a strong level of win conversions, which we are seeing, which is very exciting. Okay, next slide, please. Thank you. We look at our customers and we have a broad range of customers and partners, many with long-standing relationships built on trust and delivering valued services. These customers and partners are drawn from a variety of organisations which amplifies the diverse nature of our revenues. This includes government and local authorities, leading motor insurers and brokers, dealerships, large fleet operators, lease companies and SMEs. And this growing customer base brings with it demand for services and rental supply. As I mentioned earlier, we are seeing a reasonable proportion of new supply coming through and we can continue to grow that as fleet becomes available. Currently, anything coming off rent in the fleet, for whatever reason, is quickly snapped up by a customer or sold. Given this dynamic, we are encouraged that our depth and breadth of market cover gives us significant flexibility and good potential to thrive in difficult times. Okay, if we look at slide 21. So our platform, why do customers choose our platform? Well, there's a multitude of reasons, but mainly they find benefit in joining up the services they need from one provider who handles all the mobility for them. This reduces cost, improves efficiency, and more importantly, it is joined up. We added a further service to this platform this year with EV consulting expertise and advice. Our Drive to Zero programme offers help and practical support on owning and running an EV or a hybrid fleet. And where required, we are providing EV charging point installation through our own charged EV business, which can offer a broad range of options not tied to any manufacturer. And as I highlighted earlier, we are increasingly bringing our newest product suite to the market digitally. Our FMG Connect portal and Northgate fleet management app are examples of how we connect with customers with real-time reporting for governance, risk and audit checks, to live claims, incident handling, record keeping, data capture, fleet reporting and training. All of which reduces the operational cost and friction which comes with having multiple service providers across all the touchpoints, offering the benefits normally reserved for large fleets to all fleets. And if we turn the page, we can look at some case studies. So the market driver for our mobility platform are best expressed through understanding two recent customer wins. On the left side is a leading insurance brand who historically had a single product service with Ready many years ago before going to Arrival. They returned to us after the merger as the benefits of working on the mobility platform were very clear. This partner has taken a wider suite of products across the platform, delivered through a newly built technology system which is embedded into their own systems. This integrates the customer journey as they move across the platform with limited touch points and handoffs, ensuring a seamless effort on service delivery. This is a significant customer development, which has not been system integrated at this level previously and has the scope to develop even further. The launches go in live shortly, with revenue benefits commencing in the coming months. And on the right-hand side, a new Northgate fleet customer, which is becoming a typical story. Currently with a fleet of 30 vehicles provided by 10-plus different suppliers and looking to expand to 70 vehicles. The attraction of consolidation, bringing lower costs, support across all vehicle marks, with full service maintenance, repair and replacement, together with accident management, was a compelling choice. We also added consulting support for their EV transition plan with new EV vehicle supply options, EV charging installation delivered through our charged EV business and green energy sourcing options. This package of support and service proposition is unique and compelling. We are not a one-touch renter of vehicles. This shows how we can help businesses easily manage their fleet end-to-end with flexibility and choice and support their transition to EV. It's this one-stop service which makes this a strong proposition, and our account teams are buoyed by the strength and depth of these services, which is supporting increased conversions. Okay, next slide. So on acquisitions, So acquisitions have and will continue to play an important role in our growth strategy under our broadened pillar. We are a consolidator in our markets and our balance sheet strength means we are one of the first calls people make when looking to dispose of a business in our sectors. We have a disciplined approach to reviewing M&A and look for the right opportunities that either have strategic benefits, extend our capabilities or consolidate for growth. Given our wide platform and increasing appeal to grow services in addressable markets, there are a number of motivations for judging M&A opportunities. The three actions we took in 2022 are good examples of the different rationale. So early in the financial year, we acquired a parcel of 2,000 vehicles and related customer contracts, which at the time of severe supply constraint was a useful addition to our fleet. And although of a different scale to the nationwide acquisition of the previous year, the purchase of charged EV was also strategically significant as it helped accelerate our position and capabilities in the supply and installation of EV charging points. A growing marketplace which supports not only our own transition, but the wider EV market. And in March this year, we acquired a very interesting specialist business called GRG, which provides call handling and vehicle recovery services to a number of police authorities. This acquisition was highly complementary to our FMG business with several long-term contracts with local police authorities in place. And in the last few days, too late to make the cut for these slides, we completed the acquisition of Blakedale, which is a leader in the supply of specialist traffic management vehicles to highway contractors, which added circa 320 traffic management vehicles to the fleet, and we welcomed 65 new colleagues to the group. This acquisition extends our reaching capabilities with highways, infrastructure build and maintenance operators who are set to benefit from long-term government spending commitments. Slide 24. So our EV transition. So the transition to electric vehicles or non-ice solutions is set to be a fundamental structural shift for many customers with their fleet over the next decade. In some instances, we are working with newer OEMs to suitably scope EV vehicles, which would be more widely accepted by customers. We are also working with our trade body to ensure that government clearly understand the requirements of supporting EV fleets, particularly vans and the different usage requirements they have. We have also invested and continue to invest in rolling out EV charging stations across our entire branch network, which will support the growing take-up of EVs that we handle through the business. EV and hybrid cars have been a part of the fleet for many years and have continued to reflect the car park. Our EV and hybrid stock now represents 11% of our car fleet and this is expected to grow in line with demand. We have also ensured our workshops and trained technicians are well positioned to cope with the growth in EV-related work as the training programme to accredited standards continues to be rolled out across the technical workforce. For Ready Northgate, it's a great opportunity to work with our customers and support them in this transition. It's not just about supplying the vehicle itself. There are many considerations and our account teams and service professionals are well placed to support our customers with in-house skills and expertise. Presently, product technology and the lack of national charging infrastructure investment are major impediments to being able to make meaningful progress on the mainstream take-up of EV vehicles for van fleets. And this is likely to take time to change over the medium term. However, we are supporting change now with those customers that want to move forward and we are well positioned to continue to support this change over time. Our charge DV business has now installed over 6,000 charging stations for our customers and will continue to support demand in line with customer take-up. Meanwhile, interest from our fleet customers... on using our consulting advice and guidance as to how to best position the approach to EVs over the coming three to five years is growing. And as I highlighted in the case study, our drive to zero support and advice for customers looking to reduce their carbon emissions in their fleet is yet another example of value-added services from our platform. And if we look at our sustainability journey on the next slide, the move to non-ice vehicles is also part of our own net zero journey. Our scope three emissions, so those from our customers, are estimated to make up over 95% of our total carbon footprint. But we think of this transition as a strategic imperative and one which will define our own net zero trajectory and interim targets. Technology and regulatory developments will shape the timetable of much of our own progress and the roadmap for vans shows there needs to be a significant shift in battery technology to support commercial usage to become mainstream. However, We know that billions is being spent in battery technology and over time this will improve the capabilities and range suitable for commercial use. The question for the UK is will this be in time to make a difference before 2030? We have therefore been very focused on what we can directly affect now within our business and within our people and communities. Over the past year, we've been growing a deeper understanding of our material ESG issues to address, combining this with a clearer view of our carbon footprint. We are now in a position to set realistic targets that can be measured and reported upon, encouraging behaviours investment to help reduce the resources we consume. It's carved in all our management objectives and we seek to show good progress on this. And equally important, focus on how we support our people through the ESG strategy and attract and retain the skills and talent we need for the future. Alongside this, we are very focused on ensuring our benefits and career development is well aligned with our purpose and values and we have ensured that these are made part of the colleague discussion from day one. We are building a business which is centred on being trusted by our customers and partners and to manage their everyday mobility services and to make this easy. We are also building a business and culture which is trusted by our colleagues to behave responsibly and to be a great place to work. If we look at the next slide, I just want to cover a bit on resilience in our business model. I said it earlier, the combination that Ready Northgate provides is unique and transformative. Our mobility platform is supporting a new level of resilience. Our position is strong. But we are realistic enough to know we're not going to win everything we touch. However, the structural drivers supporting our position are favourable. Rental over ownership and a new wave of outsourcing is a positive. We have a unique position, which is winning blue chip customers and long-term contracts. As I said, our customer base is diverse and resilient. Not just the large customers, but those who rely on their vehicles every day to support making a living. They are resilient. Our pipeline of future organic opportunities is good, and with strong conversion rates, we should expect more progress on customer wins. And our view on inorganic growth, with a strong balance sheet and financial strength, drives further ambition. So there is confidence in the team that our resilience for our business model on this platform is stronger than either business standalone. Okay, and finally before Q&As, just our view on the outlook. So the new financial year has started very well with good levels of volumes and activity across the group. Some of the new pipeline is coming from businesses that have not outsourced previously, now looking to move out of house, which is encouraging us that there is more opportunity to pursue in this economic climate. The integrated mobility platform is winning deals and embedded technology being part of it offers long-term integration benefits and resilience with customers and partners. The challenges of supply constraints are being managed well. Our fleet team have strong relationships in the market and are securing deals when these become available. And inflation costs are being managed with customers as we are proactive on this. We are mindful of the economic uncertainty and that that's at the forefront of people's minds and the uncertainty that brings. I'm sure it will bring challenges, but I am confident that Ready Northgate can deliver long-term sustainable value. So thank you for listening. I hope the points were clear and we'll now take questions. Is the microphone going to come around? So I saw David's hand up first, so I'll go with David. David.