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.

Hi, it's David Brockton from Deutsche Numis. Can I ask two questions, please? Firstly, in respect of the de-aging of the fleet process that you're going through now. Clearly, you said out there that there's only 25 million outlay to start that de-aging process. Thinking more broadly over the long term, Is it your view that this market trends back towards sort of the average age of fleet that you were pre-COVID? Or do you think there's been any sort of underlying change in the market during this period? That's the first question. And the second question, just in terms of the consolidation of activity within claims services, it's clearly been a material driver to growth. I just wonder if you, as you look through your contract book that you have within the business, How many existing contracts do you have where there could be further consolidation of services aside from sort of new wins? Thanks.

OK, thanks, David. So, look, on the de-aging of the fleet, I think, you know, we sort of made the point in the presentation that the market is not likely to move anytime soon back to a sort of a pre-COVID position. And that's two factors. One, The supply is not there to get there. And two, I think the market has learned that it doesn't need a sort of two-year-old vehicle or an 18-month-old vehicle. It can work with what it's got. So we believe, and that's based on feedback from our customers as well, that they will hold vehicles for longer. And that supports that sort of gradual de-aging of the fleet as we have set out. And that's why we believe where we are is a supportable position in terms of de-aging the fleet. That's point one. On two, on the consolidation of services. So I make this point around in the claims and services business. Previously, procurers of these services would look for best-in-class verticals across that supply chain. The issue with that is fine, but the issue with that is you have a lot of handoffs in that process. So if you think of a customer journey, the end user, if you're dealing with multiple organizations, there's a chance for leakage, there's data leakage, there's loss of value when you don't convert, and it could be a very confusing picture. So procurement teams now are looking for a best in class, more joined up integrated supply. Now we have seen very strong conversion from our existing book. I talked about the mortability contract coming through from a large insurer, existing customer. We won that because of our market position and our ability, technical experience to deal with that account. The pipeline is a mix of new, new work. and also some of the existing customers with other things that they're looking at in terms of what they can do. I made the point in the presentation, David, around repairs being quite pivotal in this. When you tend to win a repair contract, other services, mobility services, tend to follow because of that joined-upness that you get from providing that service. And that's why the mix, as we scale up, the mix of our revenues will change. It will change the margin as a result. But in absolute terms, we will get market share and the ability to sell in the cross-services on the platform. And that's where we're looking to position ourselves.

Thank you. Andrew Nussie from Peel Hunt. Again, a couple of questions. First of all, we look at the Spanish margin, obviously remaining above sort of 20%. I picked up a comment that you're being very careful with pricing. I'm just conscious, obviously, we will expect some form of... reducing back to norm, but just kind of the timeline that you think that that might occur. And secondly, one for Philip, can you just remind us how the fixed debt unwinds over the next two to three years, please?

Okay, thanks, Andrew. So on the first one on the Spanish margin, I mean, I guess... you know, we price the book based on the start of the year to take into account sort of that inflationary pressures that we see. Now, you know, when we go across to Spain and we sort of see what's going on on the ground there, it's a very industrious place. There's a lot of demand for the services that we deliver in Spain. And there isn't that sort of The market for the services, I wouldn't say that we've cornered it, but it's a very strong proposition that we offer. If the supply isn't there for the more general market, then I would say that the margins may stay higher for longer. But as supply comes back, you'd expect that to move towards our longer-term or medium-term guidance of that 15% margin. Length of time? I don't know. I don't think it's going to be sudden. I think there's going to be a gradual sort of position. And of course, the management will undertake actions to make sure they do cover inflationary costs. But equally, we have to remain competitive in the market. So I think that boils down to supply. Philip, on the fixed debt?

Yes, on the fixed debt. So just to remind you, we've got 330 million facility, which is fully drawn on our private placement that's fixed. Average of 1.3. That's in three tranches. The first tranche expires in November 27. The next tranche is in November 29. And the next one is in November 31. There's still a reasonable amount of time for that to run.

morning james remember from barclays two questions as well please um the first just kind of keeping on the topic of um supply and how it's impacting your margins if you could talk about the differences in the uk and spain and some of those things you were mentioning such as the ability to reduce credit exposure sales channel mix and also pricing so you know rent per vehicle was slightly up slightly more in the uk than spain what drove that and then i guess A related one would be OEM discounts. I think they were slightly lower when you reported the full year than pre-pandemic. Where are those trending and how that works for the P&L? Are you offsetting that by high pricing or how do we think about it? Thank you.

Okay, James. So I'll deal with the second question first, sort of on OEM discounts and trending. So as supply comes back into the market, there will be competition within the OEMs for us to take up that supply. And obviously, if there's competition, it helps with the sort of negotiations. We've settled on terms for 2024 in the UK business. So we have that sort of good visibility of what it would look like. Pricing is higher. So in effect, in our world, that means discounts are less. and as I said we do pass that sort of cost on through the rental because of the demand there and the market can absorb that So in Spain, as I said earlier, there's been a lot more supply. We have broadened the OEMs that we deal with, and therefore there's more choice. Suppliers come on a lot quicker, so left-hand vehicles come on back very, very quickly. And we've seen the business benefit from being able to secure that supply and put that out into the strong demand, so that sort of growth that we're seeing. You know, the same probably would have happened in the UK had supply been there. You know, seeing that demand absorbing because we see that through the sort of the turndowns that we can't sort of fulfill. So I think I think it's it's the margins, as I was saying earlier, will probably stay higher for longer. But we do expect the supply comes on that that sort of will will move down. And then on the first question, supply, UK, Spain, I think I probably answered some of that, but was there anything more specific?

Do you want me to pick up on rates as well? So in terms of rates, differential between UK and I and Spain, I mean, UK and I has an absolutely higher rate, always has done, kind of market-driven. If you remember, if you roll back a couple of years, Spain didn't used to put annual price increases through. We started doing that, you know, after COVID, learning from what we've done in the UK. So both have had a disciplined approach as to how we put pricing into the market to help manage inflation. There's a slight differential still in the UK and Spain, though. So in the UK and I, we do have more ancillary products, which we sell, which obviously help that rental rate, for example, telematics, accident incident management, etc., And that's more mature in the UK market, but Spain has also started to add additional ancillary services around just pure rental as well. So, for example, it now opens up some of its workshops, its larger workshops, to third parties who don't rent our own fleet, and we will provide service maintenance repair to their vehicles. So they're on a similar journey, just at a different stage of it at the moment.

So just to follow up, Philip, you were mentioning your remarks about things like managing credit exposure. I guess that helps margin. And then I guess when we're talking about a higher Spain margin for longer and maybe UK, is that one of those factors which maybe comes back or is that an operational?

Yeah, so on the credit exposure part of your question, James, I mean, in the UK, it was very evident to us. So we were proactive there. in terms of looking at the sectors, where the growth sectors were coming from, and we mentioned that at the sort of full year results, and where we saw some potential weakness. So we've been proactive in managing credit exposure, and as I said, we took over 1,000 rentals out of the sort of the last mile delivery. In Spain, less so. I think the customer base and the sort of exposure was... We didn't have to proactively do anything there. It's a slightly more robust position. But just that sort of one sector in the UK where we took a step back from providing supply and either rotated or sold off the fleet that came out of that sort of sector. Thank you.

Good morning, Andy Smith from Pamule. A quick question on the weighting between the first half and the second half, in that the first half you've made PBT of 100 million, consensus is around about 170, so it looks as if you're going to be making 70 in the second half, so is it possible just to give us a bit more colour on why there's such a variety between the first and second half?

Yep, Andy, good question. And our results are not symmetrical, H1 to H2, always and normally. In H2, there's two main factors. One is uncertainty around vehicle supply and how that may impact our ability to dispose of vehicles and therefore can impact disposal profits. That's still an unknown. We still have limited visibility even six months forward on vehicle supply, although it's improving. So hard to gauge that precisely. And secondly, as we move into H2, if you look back at history, and what we would expect to see in H2 is margins are generally a little bit lower. So, for example, in Spain, we have a number of vehicles coming back into the workshops at the end of the summer months as we move into H2 before they go back out again. So we see the vehicles, touch the vehicles, and we'll do maintenance and repair on them when we see them again. We haven't seen them all the summer months, so our repair costs tend to be slightly higher in the second half, and we forecast that into our expectations. But that does impact margin and does mean we're not precisely the same H1 to H2.

You get one less trading day in February. It's a leap year this year, isn't it?

Yes, we normally get two.

We normally get two, but you get one less. That was always an excuse that the business could also say.

I think that's true. I'm just not sure how many bank holidays we had in H1 this year, given various celebrations.

It is a seasonality rating across the two businesses. It is how the businesses have traded.

Thank you. Can you talk a little bit about working capital? Because obviously there was a big outflow on that in the first half. How do you see that developing for the second half? And then I guess also on M&A, can you just talk a little bit about – it's obviously one of the areas of the capital allocation – Can you just talk a little bit about what it is you're looking for in terms of M&A going forward? Thanks.

I'll take the first question and let Martin pick up the second. So yeah, working capital, I'd like it to go down in the second half would be the answer, Joe, but why is it higher in the first half? It's predominantly in the ready business and it's just timing of payments. When we do take on new contracts, we often do get a working capital build at the beginning until they start to mature and then we start to collect the cash. And it just depends on the mix of what those types of contracts are. But there's nothing in particular that's a standout in the business that has driven that increase over half a year. It will just be comparisons half on half more than anything else, Joe. So I wouldn't read or predict or use that to say what it's going to do in the second half.

Okay. And on M&A, what are we looking for? Well, you know, we provide services into the lifecycle on mobility. So I think scale is important in terms of what we do. I think being able to offer further scale. Areas that we can develop into, where we can provide into other channels and the market channels. So whether that's doing repairs, whether that's doing whole life on a sort of wider scale on a business to a B2C basis. So we look, you know, our strategy is broad in providing these sort of integrated mobility services. But we're looking at providing those touch points on a scaled basis. And if we can go into other areas, as we have done with the acquisitions that we've made. So, you know, Blakedale was traffic management. So where we're supplying in a different type of product into a fleet customer, that would take more services across the platform. So from big crash workforce, crash protection units, the 18-tonners, down to welfare units, to the dropside 3.5-tonners, through to having fleet management, accident management, recovery services. So, and then we had Fridge Express with the temperature control vehicles. So again, reaching out to a broader new market sector there on temperature control, pharmaceuticals, food distribution. again where there's a wider fleet and further services that we can provide. So we look for those areas where we feel that we can extend capability, add scale and get across and across the platform.

Thank you. I guess one of the other things that the business has been doing over time on the Northgate side is kind of shifting the customer mix. Can you give us a sense of what that customer mix now looks like having gone through that period of adjustment.

Yes, Jerry, I mean, we've got in the appendices to the presentation, we've got that sort of split to the customer mix. What's the page number, Ross?

Page 7 in the appendices.

On the appendices, yeah. So in the UK, you know, there's obviously a lot of blue chip customers, government bodies, local authorities, large organizations. So in the UK, I think the only change in dynamic that we talk about was that sort of logistics sector in terms of that sort of last mile where we've decelerated in that sort of area from a risk exposure. But other than that, we have seen continuity and consistency across the customer base. Larger customers, certainly in the UK, the larger customers seem to have a very strong demand. So whether that's infrastructure, construction, we all follow what the markets do and the economies do more generally. But we're seeing our larger customers still with that strong demand. Okay. Okay, do we have any other questions before we close the presentation?

Thank you.

Okay, well thank you all.