Zigup Plc

Okay, good morning everyone. Thanks for making the effort to come this morning. Just for the purposes of the webcast, I'm Martin Ward, CEO of Ready Northgate, and joining me on the presentation is Philip Vincent, CFO of Ready Northgate. So we're introducing our half-year results, H1 results for this morning. And as you can see from the headlines today, this has been a very strong performance. Trading momentum has continued from the last reporting period. and is delivering robust double-digit growth across the P&L metrics. Our strategic position of offering an integrated mobility solution is delivering results and continues to attract a strong pipeline of opportunities, some of which have converted in the period and others which are in process. The capital investments we are making in the business, whether that be in fleet, onboarding new partners, or developing our IT capabilities, are generating a good level of return. And we are particularly pleased to see Roki now stands at nearly 15%. And leverage has been kept stable at 1.6 times. And this is after investments in fleet, new leases, shared buybacks, and a further 38 million of dividend since we last reported. We have seen good levels. of cash collection continuing to support our capital allocation model and with a strong balance sheet, we are well positioned to leverage growth. Given the continued positive momentum in the business, the board is pleased to declare a 10% increase in the interim dividend. And it's also worth noting that the net book value of the fleet asset now stands at 1.2 billion, which provides a lot of substance to value. We turn to the next slide. Our claims and repair services continue to grow from existing accounts including previously announced account wins which are reach and run rate as well as new account wins in the period which are yet to mature and will continue to support further growth. Spain has performed exceptionally well with the business model driving double digit organic growth. It's a business that is well positioned in this market and strong demand for services continues to drive momentum. Our rental margins have slightly improved through careful management of costs and through pricing actions taken to reflect inflationary pressures. We continue to win more work from existing customers, with mutual benefits being delivered from our integrated services. With one existing large motor insurer customer, we secured a new multi-year repair contract for motability repairs in the period which has already gone live. Our claims and services business is truly operating with scale, market expertise and integrated capabilities and is well positioned to capture more market share in a number of sectors. This is a development from historical revenue mix and over time this will change the mix of revenues and profits. The key point here is that we have the opportunity to build market share in verticals that have the potential to broaden out over time across the platform. Disposal of our fleet is a key strength of our Van Monster brand in the UK and Ocasion in Spain and this supports getting the best value for our used fleet. VanMonster in the UK is the market leader for used vans and has a strong customer base. We've also developed the capability to sell our UK car fleet through this brand. And as we refresh the fleet, disposal profits have been strong, representing 35% of our overall PBT, up from 30% in the prior year. The strategy that we set out in 2020 to present an integrated mobility service combining the scale of our assets and resources is delivering and our capabilities through selective acquisitions has grown our addressable markets and reach. We are seeing a growing interest in EV transition which follows a number of open days we have held around our branch network to demonstrate products and in Spain we secured a 1.4 million euro funding support to help our customers with their transition. Growth is driving further investment in opening new branch and body shop premises. We have nine locations planned, opened or underway which will create new capacity and broaden our reach. Double shift patterns have been trialled across a number of sites to generate more workshop and body shop capacity and this will be rolled out at larger sites if proved successful. And supporting our expansion plans, we now have 303 apprenticeships currently in progress across the businesses with the majority of our trainees in repair and workshop technical roles. So overall, I would sum up the position as a period of strong trading with continuing momentum supported by a diverse customer base and multi-year service contracts. We have a strong balance sheet with sufficient capital headroom to continue to support growth and generate good levels of return.

Okay, I'm going to hand you to Philip. Thank you, Martin, and good morning, everyone. So if we turn to page eight, we have a strong set of results for H1 to share with you as we continue to see the benefits and growth of our business model. We saw good growth across our KPIs, including profit before tax, which increased 18.3%. EPS grew 18.9% to 33.4p in line with increased PVT. And EBITDA has increased 10.7% and strong cash flow was used to support investment in fleet, working capital, acquisitions and shareholder returns while maintaining leverage in line with H1 last year. And return on capital employed continued to improve at 14.8% from growing underlying profitability and disposal profits. The dividend per share is 8.3 pence in line with our policy of paying 50% of the prior year full dividend. And I'll just mention statutory PBT, which is lower year on year due to the depreciation rate change unlined I talked about last year. The impact on the statutory profit in the half year is a reduction of 7.6 million. Remember, this does not impact cash, only statutory profit, and all the underlying numbers exclude this adjustment at a like-for-like. And I can run through this afterwards if anyone would like to. So if we turn to page 9, we'll look at revenue. So the business continues to demonstrate its benefits to customers, with growing revenues driven by both our existing and new contract wins. In the UK and I, we have seen positive investment in vehicle supply in H1, and have continued to actively manage customers and reduce credit exposure. New vehicles have been used to replace rather than grow the fleet. And we grew rental revenues 4.4% without growing VOH through careful pricing actions. We have successfully grown revenues of our most recent acquisitions of Blake Dow and Fridge Express and grown ancillary revenues such as Telematics. Better access to vehicles in Spain helped grow average vehicles on hire, which alongside careful pricing grew rental revenues by 10.2% of £12.5 million. We saw very strong growth in claims and services revenue which increased 25.7% or £86 million and this came from both increased volumes of existing business as well as the contribution of contract wins in the past 18 months which account for £66 million of this increase. The platform is attracting more customers and a good pipeline of new opportunities exists. Turning to vehicle disposals, total vehicle sales have increased £108.8 million with UK&I vehicle sales up 82 million. Spain vehicle sales increased 26 million, with 7,200 vehicles sold, more than double the prior year, as more fleet has been acquired. We've extended the capability of VanMonster to sell cars, and ReadyFleet is now passed to VanMonster to sell through our own retail sites, our e-auction platform and third-party auction houses, reducing our disposal costs. Of the UK and I-82 million increase, cars and other non-fleet vehicles account for 72.1 million and 4,900 out of the 11,600 vehicles sold. As we anticipated, the 6,700 LCV fleet sold had an average PPU of £3,500, a softening from the historic highs we have seen. Spanish PPUs increased £200 to £2,300, reflecting both mix and a strong market. And the number of LCVs sold has increased as supply has started to improve and car disposal volumes in H1 reflect Ready's normal seasonal defleeting of vehicles after the winter months as the number of incidents and accidents decreases. Now we do not normally expect to make a profit or a loss on car sales as they are held for shorter periods than LCVs and are depreciated to market value month for month. We use our disposal channels to maximise the cash we receive as we dispose of our fleet and they continue to perform strongly across both e-auction platforms and physical retail sites. Now if we turn to slide 10, we'll look at profit. So operating profits, both including and excluding disposals, have continued to increase, demonstrating the continued growth in the underlying business. Strong demand supported the growth in vehicles on hire, which increased profits by 3.9 million. Careful management of pricing in both UK and I and Spain, along with extension of ancillary products and services and cost management in areas such as workshop spend, resulted in UK&I's rental margin of 16.3%, increasing 0.7 percentage points year-on-year, and Spain's margin increased 0.4 percentage points to 20.8%. Rental margins should be slightly lower in the second half. In H2, we expect to see higher repair costs as more fleet passes through the workshop. UK&I's full year margin is expected to be in line with 15% guidance, and Spain is expected to be slightly above the 15% for longer. Disposal profits increased 10 million. In UK and I, they decreased 0.6 million with softening residual values, but still strong and above pre-COVID levels. And in Spain, disposal profits increased 10.6 million with increased vehicle supply and higher PPUs due to mix of vehicles sold. Ready's volumes continue to grow and the business delivered an additional 5.9 million of profit, an increase of 28.7%. Interest costs increased six and a half million due to a higher interest rate and a higher level of debt used to support growth across the group. And taking the whole period from the merger, our underlying rental and accident and incident management services are delivering year-on-year sustainable growth. Now if we turn to page 11, we'll look at cash flow. So the business continues to produce a good level of cash. and we choose to spend that cash and utilise borrowings in line with our capital allocation model. And we apply this allocation model whilst managing our leverage within a stated range. The investment we have made in replacing our fleet, principally through borrowings, has nearly doubled this year as supply continues to improve and we have started to reduce the average fleet age in Spain and UK and Ireland has peaked. We've also continued to invest in acquisitions such as Fridge Express and share buybacks, and we've done all this whilst maintaining our leverage year-on-year. When we look at the right-hand side of the slide, we can see that the business generated EBITDA of 220 million. We invested 138.6 million in replacement fleet, which was principally funded by our bank, private placement facilities and leasing arrangements. This investment has increased 61 million year-on-year. We then fund working capital movements, which have increased year on year due to growth and timing of payments in Ready. And we fund taxation and interest, which reflects higher corporation tax rates this year in the UK and rising interest rates and slightly higher levels of debt. We paid dividends of 37.3 million and finally we invested 1.3 million in what we view as growth capex. This is 67.4 million lower than the prior year with improved vehicle supply in Spain primarily being used to replace fleet rather than grow and the UK and Ireland ready fleet size reducing since the year end. So overall, 122 million of cash generated was used to fund working capital tax and interest and dividends. and an additional 152 million was invested in fleet, M&A and share buyback, with these part funded with debt, which increased 94 million. So to explain these dynamics in a little bit more detail, in H1, about 25 million was spent on reducing the fleet age, and we will continue to invest in fleet as the average age reduces. The market is now operating with an older fleet age than pre-COVID, and we will maintain our fleet age in line with market demand, replacing our oldest vehicles as supply improves. There will not be a sudden outflow of cash to fund this, and reducing the age will be gradual and entirely under our control. We'll manage our spend and net debt within our leverage guidance of one to two times, and our net debt currently at £755 million is backed by our fleet of vehicles, which have a net book value in excess of £1.2 billion. This is all part of our discipline model, where we purchase vehicles to meet our forecast demand, direct from OEMs, we then service and maintain them and dispose of through our own disposal channels. The returns we generate from these assets are delivered over a number of years and managed within our control. And the returns are strong, as demonstrated by our margins and return on capital employed and are above our WACC. And both within the rental business and ready, a significant proportion of our revenues arise from long-term and multi-year contracts, providing visibility of demand, cash flows and returns. Now let's move on to page 12. So the chart here bridges our debt from April to October 23rd. We continue to have a significant portion of our debt sheltered from high interest rates with 56% fixed and most of that is at 1.3% and our average borrowing cost is 3.5%. We manage the business through our leverage and to reiterate we operate within a very prudent range and leverage of 1.6 times at the half year is unmoved from H1 last year. we have 236 million of headroom on our committed facilities and the business is very well financed for future growth with a strong balance sheet supported by vehicle assets so what are my key takeaways from h1 well firstly we've delivered very good growth in revenues and profits second The business has delivered good cash generation and that has been both returned to shareholders and invested for future growth. And thirdly, good double digit return on capital employed and growth in EPS. So thank you and I'll now hand you back over to Martin for the business update.

Thank you, Philip. I think that was very, very clear. So if we turn to the next slide and just ask what have we seen in the current environment? So we've got strong demand for vehicle rental in all our geographies, high utilisation rates allowing for headroom in the fleet for service maintenance and repair and standby vehicles. In claims and services, this is where we have seen a lot of growth through supply chain interest and where consolidation of services into a single supplier is proving attractive. This very much leads into our integrated services platform, which reduces handoffs and leakage, generates additional commercial value and delivers a better customer experience to the end user. Repair capacity, which is a key enabler to many of the services, has improved more generally in the market over the last few months. And with a market of 4.2 million repairs per annum, the demand has been strong. The biggest procurers of repairs in the market are insurance companies, many of whom are consolidating their supply chains into larger regional or national players for quality and sustainability reasons. Other contract services like mobility and vehicle recovery generally follow repair work in an integrated approach, so it is a key capability to own to unlock other services. Fleet supply overall has been improving in recent months with visibility of supply volumes in the UK and I for 2024 showing good upside. Acquisition costs of vehicles has gone up and rental rates have followed. Residual values for cars have fallen more rapidly in recent months with the used van values in comparison reducing on a more gradual basis for market highs. The mix of used stock, van stock in the market, will produce different residual value results so it depends on what is offered into the market and through which channels. Overall, new van registrations are still lagging what is normal. The trend to normal will possibly take another 12 to 18 months based on likely new let registrations and of course continued demand. Our customer mix across the group remains diverse with large multi-year service contracts, such as the Lex auto lease win, going live in the period, and more recently, a large contract win with the motor insurer to manage specialist repairs under the Motability brand. We have proactively managed some sectors where there is potential credit risk exposure, such as last mile delivery, reducing over 1,000 rentals from this sector in the last 12 months alone. Despite the recent government change in the date for the purchase of combustion engines, now set for 2035, our focus on EV transitioning has seen interest levels increasing. We have held open days through our network to allow commercial customers to evaluate different EV van products and to undertake demonstration drives. We secured our first large 100 plus EV van order from Octopus Energy and have a number of others in the pipeline. With newer van products with extended capabilities forming part of the new product lineup, we should expect to see more take up of EV vans over time. Return to the next slide, please. So if we drill down a bit further on the fleet supply dynamics, So 2023 registrations of vans in Spain are estimated to be 140,000, which is up 20 units or 18% on the prior year. But on a wider basis in Spain, when looking at all registrations across the car and van, the normalised run rate is closer to 1.5 million. And in 2023, that is estimated to be 1.1 million, so 400,000 units shy. This supports a view that new pricing and RV levels could remain higher for longer, subject to demand due to this shortfall. In the past, our Spanish business typically concentrated on three brands of van in the fleet, but has broadened this to a larger number of OEMs, which has helped drive growth and overall availability, as well as creating some competition for volumes. Given the level of rotation, fleet agent in Spain has reversed on the prior year and we expect that to continue to improve with planned new purchases through 2024. In the UK and I, visibility on supply continues to improve and new terms with OEMs for 2024 have been agreed. The previous disruption factors to supply are easing, leading to a more confident outlook for van registrations. The Society for Motor Manufacturers and Traders forecast that 2023 is expected to be 16% higher than the prior year. It's worth pointing out that in a constrained supply market, OEMs mainly focused available van stock into retail distribution, which produces a higher gross margin on sales. With more supply anticipated, distribution to the rental market will increase as we anticipate in the 2024 deals. However, there is still a shortfall to the long-term registrations average. So normal, as in Spain, might take another 12 to 18 months from here, depending on demand. Cars have been a lot easier to secure as production has ramped up. And then if we look at the new zero emission vehicle sales mandate, which will come into force in 2024, which means 22% of all new car registrations and 10% of vans will need to be alternatively fuelled vehicles. The fines for missing these targets for OEMs are not insignificant. Therefore, the interplay between new and used stock will be determined by demand. And if we turn to the next slide. So looking at the quality of our earnings. So Ready Northgate has an underpin to its trade. The claims and services business is generally contracted on a mid to long term basis. Renewals of these contracts tend to happen in term, meaning a greater proportion of the revenues are reoccurring. In current terms, 80% of revenues are contracted beyond 12 months, which provides confidence when looking ahead. And our rental revenues have proven to be robust. We saw that in 2020 during COVID, when only 6-7% of our vehicles were returned by our customers, despite having the flexibility to do so. And that proves the attachment to retain and hold on to mobility, especially as a business tool. Notwithstanding that, the underpin for 12-month plus contracts on revenues are 40% in the UK and 30% in Spain. which reflects the flexibility of the rental model mixed with long and short term contracts. We go to the next slide. I mentioned earlier the nine new operational sites we have planned or opened or are underway. So there's seven in the presentation, but as I say, we've got nine in total. So here's just some pictures just to provide a flavour of what they look like. The strategic aim on the property estate is to create a mix of larger sites that can generate more capacity for our growing services with a work environment that is appealing and provides the right experience for our customers. And also, as we are doing in Spain, we're creating some smaller service point sites that allow us to service customers that have a regional requirement outside the larger cities. So this scale present wins and secures business and is a standout differential in the market. New larger sites in Bristol and Hoddesdon have also been taken on for our body shop business FMGRS, which will create more internal capacity for accident repairs. Our expanding property network and investment in modern equipment, which have been planned to take a growing number of EV repairs, also delivers workflow efficiencies and enables us to be more productive. So this growing estate supports our growing capacity needs as we take on more work volume, attract new talent to join our technical workforce and provide expertise, scale and a quality experience to our customers and partners. And then finally, to sum up and cover our outlook, this has been an excellent trading period with underlying returns continuing to grow. The strategy we set out is delivering and the scale of the business is set to grow further. Our platform of services is appealing and we receive positive feedback from stakeholders on our service delivery. We're well positioned to leverage further growth and with a strong pipeline of opportunities, we are confident in the strategy continuing to deliver. So looking at the current momentum, we believe that the full year results will be modestly ahead of current market expectations as the run rates on our services and overreturns have been strong. Our underlying revenues, which excludes disposal proceeds, and underlying profitability is growing, and there's yet further run rate maturity for the balance of the year, which supports earnings growth. Based on this, the board is confident on delivering a strong finish to this financial year. Okay, so that's the end of the set piece. We're happy to, hopefully that was very, very clear. We're happy to take questions now on the presentation. David.