Zigup Plc

Morning everyone, thank you for coming. I'm Martin Ward, Chief Executive of Ready Northgate and joining me today is Philip Vincent, CFO. The agenda is shown on page three and follows a familiar format. I will start with the overview of our results. Philip will cover the financial review and I will come back and provide a business update before we close with Q&As. So turn into page five. This has been a fantastic year for the business with continued top and bottom line growth being delivered to strong demand for our services. These results reflect our position in the market where our platform delivers large scale efficiencies and price leverage that brings about cost and service benefits. In a busy year, which has included positioning for growth, The financial results have excelled and it was good to see that ROKI, which is a key measure, further improving and we have maintained a strong balance sheet with low debt leverage. The outcome of these results is that we can propose an increase in the final dividends with shareholders with a 14% uplift. If we turn to page 6 please. My first comment is to say that the business feels very different from the standalone pre-merger position. There's a lot more going on, and our services platform is gaining significant traction. The market is beginning to polarize towards firms that can offer a broader reach across the vehicle lifecycle, benefiting from single source services, leveraging efficiencies, and providing a great customer service. And what we are seeing is a lot of positives in what has been a challenging global environment. Against the backdrop of supply scarcity, we grew our fleet and maintained utilization levels. The contract wins previously announced are all live and contributing at or above run rate. And reflecting the strength of the pipeline, we have secured a new multi-year services contract with a blue chip leasing company, which commences this year. Margins have broadly been maintained, and we see this continuing based on underlying actions to manage inflation. We have seen more take-up of insurer protocol agreements this year, which means prompter cash settlement and reduced frictional costs. Our additional services across the group are starting to build scale. For example, our EV charging point installations, which number close to 7,000 this year and 12,000 since we acquired ChargeDV in July 21, is well positioned in a growing market. And if we look at our strategic progress, delivered under our Focus, Drive and Broaden pillars, the integrated mobility platform has grown in capabilities and is now delivering more volume of services. Since the merger in 2020, we have completed six acquisitions in the UK, including Fridge Express in May this year, and we continue to look for opportunities that create long-term value. We have made good progress on ESG, which is an integral part of our strategic goals. And this year, we have established a new group committee to provide guidance and support for the business to achieve our long and short-term targets, which have been set out in our announcements and reports. And under our broadened pillar, we've also sought organic growth by developing new propositions, with an example being in our Spanish business, which is delivering on the previously announced B2B contracts and building new revenue lines through open workshops. Additionally, supporting our long-term EV plans, Spain has entered into a commercial partnership with Iberdrola, which is a global leader in renewable energy, with a customer package offering EV charging points, green energy supply and fleet consulting, all included in our rental agreements. My final comment on the overview is to say thank you to all my colleagues for supporting the results this year. This has been a real achievement and as shareholders they will now benefit from their efforts. So thank you. I will hand you over to Philip.

Thank you, Martin, and good morning, everyone. And I'm pleased to be here this morning to present another set of very good results. If we turn to page eight, I will start with the headlines. So underlying revenues, excluding vehicle sales of £1.3 billion, were 22% higher than the prior year, with growth across the businesses. Earnings before interest and tax increased just under 13% to £189.2 million. And with additional interest costs, underlying profit before tax grew just under 10% to a record £165.9 million. Underlying earnings per share increased 9.5% to 55.6 pence in line with the increase in PBT and benefiting from the share buyback programme reducing share count by 7%. Return on capital employed increased 20 basis points to 14.1% benefiting from underlying profitability and disposal profits. And this year, I've moved divisional slides to the appendices, but I will cover the divisional points as we go through the next few slides. So if we can turn to page 9, we'll look at revenue. So rental revenues grew 8.4% year on year. In Spain, had better access to new vehicles, helped average vehicles on hire grow 6.2%, and pricing was carefully managed, resulting in rental revenues growing 14.6%, or 32.1 million. In the UK and Ireland, vehicle supply remained difficult and whilst we are now seeing some improvements in supply, average VOH for FY23 reduced 2.6% year-on-year. Product extension and carefully managed pricing still enabled revenues to grow 6.1% or 15.1 million. and vehicle sales revenue of 152.9 million was 3 million higher than the prior year, with growth in Spain as new vehicle supply improved, which enabled replacing of the fleet. This was offset by a reduction in the UK and Ireland as the continued restrictions in new vehicle supply and strong rental demand have reduced vehicles available for sale. And claims and services revenue grew 37% or £196 million, with the ramping up of new contract wins contributing around 40% of this growth. And you will see in the prelims that Ready now has a revenue line for vehicle sales. So since March of this year, the cars from Ready are now sold through Valmonster. And this revenue is excluded from underlying revenue and the EPIT margin calculation for Ready. If we turn to page 10... This chart bridges prior years underlying PBT of £151.3 million to £165.9 million this year. And group rental volumes across UK and Ireland and Spain contributed £9.1 million of additional PBT. We have experienced cost inflation across the businesses and this has been effectively managed by improving procurement practices and careful management of pricing and extending products and services for customers. And as a result, Spain's rental margin of 18.5% was one percentage point higher than last year, and rental margin in the UK and Ireland decreased slightly from 15.3% to 15.1%, in line with our medium-term margin expectations. Disposal profits decreased 7 million in the UK and Ireland with the continued restrictions in vehicle supply and increased 8.4 million in Spain, where access to new vehicles has improved significantly in the year. In total, we sold 18,200 vehicles in the year, which is 9.6 higher than prior year. And whilst residual values continue to decrease, they do remain very high. But remember, the relationship between residual values and PPU is not linear, as the PPU depends on a number of variables. These include the type, age and condition of the vehicle and how they differ from initial expectations when the depreciation rates are set. The increase in Ready volumes from existing and new contracts contributed an additional 12.3 million of profit, and Ready's EBIT margin at 6.4% was impacted by the mix effect of some new business wins, which continues to bring scale to the platform we've created. And the increase in interest and corporate costs reduced profit by 8.7 million, with interest costs increasing 6.7 million due to higher average level of debt and increase in rates. Now, we've been sheltered significantly by rising interest rates due to 62% of debt being fixed, mostly at 1.3%. Now, as we grow and draw more debt, this will be at a floating rate, which is currently 6.5%, reflecting the latest rise in the base rate. So our average cost of borrowing will rise in FY24 and currently would be around 3.5%. Now, if we exclude all disposal profits from both periods, underlying profit before tax increased 13%, continuing to demonstrate the underlying growth of the business. So if we turn to page 11, let's take a look at cash flow. Underlying EBITDA of 412.2 million was 45.5 million higher than prior year, driven by the underlying performance of the business. And steady state cash generation, while strong at 191.5 million, was 24.9 million lower than the prior year, as we have been replacing the fleet as vehicle supply improves. Growth capex of £122.6 million reflects the growth in the Ready and the Spanish fleets to meet demand. And we spent £10 million on acquisitions in the year, and free cash flow was £4.5 million. Now, I want to provide you with a little bit more detail on the fleet and capex spend. So, due to the disruption in the supply of new vehicles, we have been unable to rotate the fleet as quickly as we have previously. Now we have seen a significant improvement in vehicle supply in Spain in the last year and we are now starting to see some improvement in the UK and Ireland. The average age of the Northgate fleet in the UK is now 36 months, which is 10 months higher than two years ago. And in Spain, the average age is 33 months, which is seven months higher than two years ago. And as we move into FY24, we expect the vehicle supply to continue to improve, and this will enable us to rotate the fleet, and we would expect fleet ageing to decrease. We're not expecting this rotation to happen rapidly, and it will be a different pace in Spain than it is in the UK and Ireland. And we do not expect to see a huge increase in capex spend as a result of this rotation. Any capex spend is going to be subject to the availability of the supply of vehicles, but everything else being equal, I would expect our capex spend to be a single-digit percentage higher in FY24. And remember that we very tightly control this spend, which we demonstrated during COVID when we turned off CapEx and the business generated cash very quickly. And we would not expect this improved supply to significantly impact residual values in the short term, and residual values are likely to remain strong in all our markets. Now, if we turn to page 12, the business remains very well financed with a strong balance sheet to fund growth. In the year, we have extended our core bank facilities by 12 months to 2026, and 62% of our debt at the year-end was fixed, the majority at 1.3%, and our average cost of borrowing at the year-end was 3.1%. We continue to operate with very comfortable headroom on all of our covenants and year-end leverage is 1.5 times, well within our policy of 1 to 2 times. Now the chart on the bottom bridges our net debt as of April last year to April this year and our net debt closed at £694.4 million with ample headroom of £290 million on our facilities. We generated steady state cash of £256.6 million excluding lease payments. £122.6 million was invested to grow the fleets in Spain and ready to meet demand. £10 million was spent on acquisitions and we returned £105.2 million to shareholders in the form of dividends and share buyback. And you can see in the top right-hand chart that since the merger, we have now returned 121 million in dividends. We've invested 41.5 million in acquisitions, extending the products and services of our platform, and returned a further 60 million to shareholders through the share buyback. We've now completed six acquisitions since the merger. And during the year, we acquired Blakedale. And just after the year end, we completed the acquisition of Fridge Express, extending the range of products and services we offer and broadening the sectors we operate in. And finally, our funding enables us to continue to invest in our fleet and execute on acquisitions as they arise, in line with a disciplined approach to our capital allocation model. Now I'm going to hand you back to Martin for the business update.

Thank you, Philip. Okay, if we can turn to page 14, we'll just have a deeper dive into the business update. So at the interims, we focused on three key areas which defined our market environment. So I'll just touch on them first. So the market, we've said demand for our services across the market has remained resilient, particularly with larger customers. Telecoms, broadband and infrastructure sectors have remained robust. And as an overall temperature test, any rental availability in the fleet is quickly taken up. And we have seen growing interest in additional value-added services like telematics and onboard cameras where customers are seeking to gain efficiencies running their fleets. As we commented upon at the interims, the logistics sector, particularly the last mile delivery, has seen further weakness through the second half of our year, but this has stabilized more recently. Traffic volumes have plateaued in the 90 to 95% range. And this feels like a new norm when we compare to pre-COVID. Our read around the market is that businesses have tightened up on home working, albeit hybrid working is still the dominant model and doesn't feel like this is going to change in the near term. And that has a relationship with mobility in the market. And there's been a lot of wider commentary on inflation around insurance claims. We see this in terms of repair costs as capacity and supply chain challenges increase the cost of fixing a vehicle. And we don't see this materially changing in the short term. However, the leverage from our platform provides benefits for our customers from our scale and from our capacity. Well, look at the fleet. So the market for new suppliers Philip touched upon is different by geography and by vehicle type. In the UK and Ireland, visibility on forward orders for LCV has improved. Although certainty on short-term supply is still problematic, with right-hand drive vehicles considered a bespoke order for European manufacturers. Cars are generally easier to source, and we have no issue satisfying our need for these. In Spain, LCVs and cars are generally available, and that's against the backdrop of strong market demand for new supply. And there's always new pockets of supply that come up from cancelled orders or redistribution deals. And as part of our future supply, we are looking further afield as new technology brings about competitive supply. As Philip mentioned, residual values on used vehicles are still high compared to historical data, and this is also the case in Spain, despite new supply being available. We expect these to fall back as the year progresses, although, as we have commentated before, the undersupply of vehicles through 2020 and 2022 will take some time to catch up. Our EV and hybrid vehicles continue to broadly match the UK car park, which is reflective of demand. And if we look at the customers, We've got a diverse nature in the customer base across our mobility platform, and this is a clear strength. We've got broad sector exposure, and this provides high level of trading confidence and resilience. On an ongoing basis, there hasn't been any material change to our sector exposures, and we've continued to rotate any fleet returns to higher margin sectors. If we turn to page 15... So this infographic shows how our services and capabilities play out to a wide community of end users and how it caters for a differentiated customer proposition. It follows the COGS chart we showed you at the interim presentation, which illustrated the breadth and connectivity of our service offering. So we wanted to share what we see to be the strengths of the platform from the customer's perspective. As a customer, you can access our integrated mobility platform in the most appropriate way, with 24-7 digital access in many areas. For example, customers interact by voice through our contact centres, through portals, apps and web services, in our rental branches, at our network of body shops, our mobile service in vans, through dedicated account managers or digitally through live chat. A digital strategic plan is aimed at building the capability for our businesses to connect with each other so that the platform becomes an integrated service, fully digital and accessible, which will offer more processing efficiencies. Return to slide 16, please. So our customers have been very supportive in taking a broader range of products and services from the platform. We developed from a standing start our EV consulting program, which involves running open days in Spain and the UK with live demonstrations of EV vans and cars to engage customers with the technology so they can assess the capabilities of an EV fleet and plan their transition. We have made digital the standard when onboarding new customers with embedded technology-driven services forming part of how we transact. The automotive sector is clearly going through significant innovation and technology transition, whether in the vehicles themselves or how we engage with them. After all, an EV vehicle is a connected vehicle which can change the supply chain dynamics. We're also reviewing emerging innovations such as urban and micro mobility and creating new relationships with emerging supply chains in order to provide more flexibility to customers as they arise. And M&A has clearly augmented our customer base with a broader range of new customers joining the Ready Northgate group. And our focus on people has helped promote a real sense of unity across the group where we share our vision and ambitions. We are building a future talent pool by investing in our apprenticeship scheme that currently numbers over 170 apprentices in the UK. We have developed a best-in-class L&D programme to train our people in a number of areas of technical skills, and we have an accredited training facility to support new EV technologies. Working with our employee engagement forum, we get valuable feedback on what drives and motivates our people. And in what has been a difficult time for many with the cost of living pressures, we have provided two special one-off payments to our colleagues most affected. We have seen the benefits of this through strong retention levels in a changing market. And if you turn to slide 17. As Philip said, it's been a very successful year for our claims businesses, which have seen a more normalised trading period post-COVID. These contracts are delivering at or above expected run rates and they're multi-year service contracts. And as I mentioned in the overview, the business has won a multi-year service contract with a blue chip leasing company, which will support a further 100 to 150 million of contract lifetime revenue. It's one of the biggest fleets in the UK and will be going live later this year. Turn to page 18, please. We've touched on our two recent acquisitions, which have added specialist capabilities, so I will just deal with these lightly. Blakedale, which you can see a picture of one of their vehicles there on the left, we completed on last summer. It provides a range of specialist traffic management vehicles, including the 18-ton workforce protection units, which are typically seen on motorways. Since we acquired the business, we've grown the fleet by over 30% to over 450 vehicles and grown the customer base by 28%. The growth has come from a combination of cross-selling and as a result of bringing a strong balance sheet to the business. And just after the period closed in May, we acquired Fridge Express, which provides temperature-controlled vehicles to a range of customers, particularly food and pharmaceutical companies. This will add circa 600 vehicles into the fleet, and we see the potential to grow the business further, given there is a good pipeline of orders. Both these businesses were earnings-enhancing from ownership and will deliver good upside to Ready Northgate. And more generally on M&A, we continue to see many opportunities cross our desk and we pursue those that we feel have a good strategic and value fit. And we're not limited to M&A in the UK. Spain is also in a good position to capitalise on growth opportunities. Turn to page 19. Our EV transition to support customers is running at high levels for replacement cars and we offer a wide selection of models. EV vans have some way to go to be able to offer fully utilised workhorse capabilities. The open days that I touched on earlier is a great way for customers to get close up and familiar with an EV fleet and these are generally well attended with demonstrations or trials offered as part of the transition programme. And we are exploring other mobility solutions that are less mainstream, but nonetheless relevant to a changing environment, such as urban mobility, which will be required to meet more stringent rules in ULES. An example of driving other revenues is our Spanish workshops, which were opened up to cater for non-Ready Northgate customers who were looking for service, maintenance, and repair. And we have seen this revenue line grow in. Telematics and onboard cameras for commercial fleets have grown circa 10%, and we now have over 10,000 external live units in operation. And finally, if we look at the outlook on page 20... The new financial year has got off to a great start. Demand remains strong across our markets and contracted services provide a high level of certainty on revenues. The leasing contract win will provide more impetus to growth and our healthy pipeline offers more opportunity to build for outer years. So with the leverage and efficiency gains from our platform, our broad customer base and multi-year service contracts, together with a strong balance sheet, this all supports a very strong and resilient position. Thank you. We'll now take questions. There's a roaming mic there for Verity.