Zigup (LSE:ZIG) — Full Year Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the ZIGUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to

0:32 submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to Head of Investor Relations, Ross Hawley. Ross, good afternoon, sir. Good afternoon, and welcome everybody to this online presentation. So with me this afternoon, I have Martin Ward, our chief executive, and Philip Vincent, our chief financial officer. For those who have seen our previous versions of this, you know that we try and run this more as a fireside chat than rather running through a presentation. But, obviously, the presentation is available to you on our website along with our transcript. But we will use some of the slides for that. As ever, this is much easier as a dialogue if people ask questions, So do please use the the the chat function and sorry, the q and a function, and we'll have a look and to see what we can answer as we run through a number of different themes and topics.

1:24 But I think in the first instance, I'd like to hand over to Martin to really use the first couple of slides from our

1:29 presentation, which we gave last week, to really talk about in overview terms our full year results for 2024. And with that, Martin, over to you. Thank you, Ross, and good afternoon, everyone. Look, this has been a fantastic set of results this year. I'm gonna talk to the underlying numbers because that's easier to to reconcile for the business. So revenues have progressed, up nearly 14% at 1,500,000,000. You can see also that's flowing through to EBIT, over 213, up 13%, and through to our record PBT, nearly a 181,000,000. So, you know, we've continued to deliver on the strategy that we set out for this business back in 2020. I think every time we've provided an update to the market, it has been a story of growth and good sort of metric delivery.

2:23 All of this sort of flows through to to be able to support a good rookie return. We're up at four percentage points there, point four percentage points to 14.5. And we've also been able to increase our dividend or propose to increase our dividends, which we put to shareholders for this year, taking the full year to 25.8% at 8p, up 7.5%. So overall, that's been achieved whilst being able to maintain a debt leverage, which is unchallenging at 1.5 times. So we've invested a lot in the business this year. We've been operationally. We've been very busy, and we've made some great investments in our in our fleet. The value of the fleet now on our balance sheet is 1,300,000,000. So as we make those investments, you see the corresponding value come across in the balance sheet.

3:13 And then if I just look on a nonfinancial basis and look at the operational performance, I mean, it has been very busy. The business has cemented a leading differentiated proposition in the market with a platform of services appealing to a wide number of customers. And it has been an exceptional year for that operational progress. We've added to our rental capability the broad range of new products and value added services in both The UK and I and Spain. And one good example to bring this to life is the acquisition of Blakedale. Blakedale has been a standout performer in the traffic management space, and we have supported growth with investment in their fleet, which is up 35%, new customers up 18%, and operating profit up over a 100%.

4:03 We also support their customers with additional services, including the specialist fit out of key customers, their own vehicles, who trust their expertise in the specialist area. Similarly, claims and services, which formerly known as the ready side of the business has grown its specialist capabilities and broadened this offering, including a new out of hours first notification of loss and accident vehicle recovery service for insurers, which has seen growing demand. And our scale has allowed us to do more for our existing partners, including contract expansions and new outsourcing customers such as Lex and Abakai Insurance, which went live in the year. We also won a new contract to support a long standing group customer, Royal Mail, with repair capacity and have more opportunities in the pipeline.

4:55 Investments in automating and digitalizing our systems and processes is a long term program that bring immediate benefits. For example, we launched a self-service portal for a direct insurance rental customer where around 75% of monthly activity is now going through online with no manual intervention. We plan to roll this out more widely this year to other partners. An investment in our integrated repair facilities and independent network, now numbering over 600, is increasing our repair capacity, which remains a scarce commodity. When I think about our broader initiatives, our customer first program, for example, has reenergized the team after what has been a difficult period where supply constraint and parts delays have caused real challenges for those on the front line.

5:47 And looking at the structural trends towards EV take up in the LCV market, there is positive momentum in The UK and I. The fleet compared to last year is at now up over 140%. In Spain, the pace is a little bit slower, albeit with a 16% increase. We've also responded to a changing EV infrastructure market by developing new partnerships with energy providers. These are increasingly the best routes to those looking to install home and workplace chargers. So overall, the progress in financial year '24 was significant and positions us very well for the opportunities ahead. Okay. So look. That's that's my overview. I'm sure we'll go into a lot more detail, Ross. So thank you for that, and thank you. I can see some questions already coming in.

6:40 The way which we're going to do this is to look at certain kinds of themes. So if I haven't if I haven't asked your question straight up, it means because we're likely to talk about things such as dividend and the capital allocation a little bit later on in in the program. But I I think, Martin, just to touch on on one thing, just in terms of feedback scores and how important are they to the business and how have you seen those sort develop and then your feeling about those. Yeah. Look, customer is key. That is a key focus for this business, and we've made sure that everybody sort of understands that. You know, things that we put in place, you know, feedback from customer engagement surveys, NPS scores, Trustpilot. All of these things give us very, very quick feedback around how we're performing as a business. If we get it right for the customers and our partners, you tend to have a very happy business.

7:27 You know, a good example would be at our branches. I mean, you're familiar with our branch setup. If you walk into one of our branches now, you can see a q code on the the wall. You can instantly scan that q code, and you can give us feedback on the spot in the branch to tell us whether we're getting it right or wrong so we can see that instant feedback. So we've been able to develop that across our sort of branch network, across our customer contact centers so we can see where we're getting it right. And it's important to us. As I say, if get we it right for the

7:58 customers and our partners. We'll get it right all the time. And it's something which partners do look at themselves, don't they? It's increasingly important. You know, when you're providing the services that we have across that platform, there's multiple touch points with the with the partners, with their customers. So they are relying on you to make sure that you are delivering on all the things that you've either promised or the customer would expect. So it is something, you know, that feedback, that NPS scores, the SLAs, the Trustpilot scores, that raw customer feedback is important. So it's something which we think stands us apart from the rest of the market. And I think as we know, they're slightly significantly higher than the rest of the sector terms of things like the Trustpilot scores versus our peers. Indeed. Yeah. Look. We can always do it better. But if I look at if I look at our Trustpilot in our rental sector, for example, we reported 4.7, which is an excellent rating for Trustpilot for a company. I think that's even gone up to 4.8 more recently.

8:57 But it does it lets everybody know that, you know, we are on display for our customer service. We want to get it right. Sometimes we get it wrong. Don't don't get me wrong. You will see one star reviews where we got it wrong if you search for them. We want to get it right, and that's the sort of the at the heart of what we do, where we put the customer first in terms of our delivery. Fantastic. So I think, Philip, if we turn to you to just sort of give an overview of the of the performance in the year, we'll we'll come to cash flows and everything a bit later on, but maybe just talk through some of the slides which you're familiar with in terms of that overview on the financial. Yes, sure. Thanks, Ross, and good afternoon, everyone. I think I'll actually skip this slide. I think we've covered all of the headline numbers, which overall are very positive, which Martin talked to. And I'll go to the group revenue waterfall on Page eight. And what we can see here is that we continue to see the benefits of our platform that we've developed. It's continuing to attract customers across all of our businesses. And we had group rental revenue growing at 6.4% across the group for the year. Now within that, The U. K. And Ireland average VOH actually reduced by 7.7% year on year due to the limited access of vehicles during the year, although it did improve significantly in H2.

10:11 And the rental revenue within The UK still grew at 4.6% through both product extension but also carefully managing our pricing to customers. Now in Spain, the access to vehicles has returned to normal, and average vehicles on hire grew 4.1%. And with careful pricing with customers in Spain, rental revenue grew 8.4%. The claims and services revenue grew 19.4%, and that's benefiting from the full year impact of the new contract wins, we announced last year as well as growth from our existing contracts and customers extending their products and services requests from our platform. And then in terms of vehicle sales revenue, that was GBP $312,000,000, just under GBP 160,000,000 higher than the prior year as the new vehicle supply improved in U. K. And Ireland and continued to be strong in Spain.

11:11 Now I'll just talk through kind of the headlines on the profits. If we turn to the next slide on the profit waterfall. So this is obviously bridging our underlying profit from last year to the current year of GBP 180,700,000. And we can see here that group rental volumes in UK and Ireland and Spain contributed an additional 6,700,000 profit before tax. And our procurement activity continues to develop in both UK and Spain, and that's alongside careful pricing,

11:39 then that we manage cost inflation across the businesses and also then alongside extending products and services to our customers and a continued focus on customer profitability as well. We've seen Spain rental margin of 18.2%, which was higher than we expected in the year. And over time, we do expect that will return to our medium term guidance of 15%, but it's likely to be higher for longer still. And in UK and I, that was in line with our expectations. So it went up 40 basis points and was at 15.5%. Our disposal profits decreased at GBP 3,800,000 in UK and Ireland as we're selling older vehicles with lower residual values and lower profit per unit, but increased GBP 14,100,000 in Spain, where access to new vehicles has returned to normal.

12:32 Now residual values have fallen in The UK and Ireland and in Spain, That's partly reflecting the older vehicles that are now being sold into the market. But overall, they do remain high compared to what we have seen versus historic levels. And then the increase in claims and services volumes from existing and new contracts contributed an additional $8,800,000 in profit. And claims and services earnings before interest and tax margin at 6% reflects the mix effect of the business,

13:04 all of which contribute to the profits of the business as well as high return on capital employed. And then the final block there, can see interest costs increased 9,700,000 due to a higher average level of debt and the full year of higher interest rates. And that was offset by a reduction in our corporate costs of 1,100,000. I think the final point I'd to make importantly is that if we exclude all disposal profits from our underlying profits, and underlying EBIT increased 10% year on year. So that continues to demonstrate the underlying growth of the business.

13:41 Fantastic. So just looking at some of the questions. So William has been asking about the claims and services side, in part just about seeing the growth there. Maybe talk through a little bit of that, Martin. But then also just in terms of the financial disclosure from that, I think just from my perspective, William, if you went to our website, you'll see we did a teaching in January, which gave a lot more detail to try and explain that the claims and services business.

14:05 So there's more information there, but I'll I'll ask Philip to comment on that in a moment. But, Martin, it's a strong growth prospects, a really good year from claims and services. Absolutely. I mean you can see, I mean, the revenue there from claims and services has grown year on year. It's heading towards £1,000,000,000 of revenue. So it's obviously becoming a big part of our portfolio. Now the key thing here is, I said it last year, and I'll repeat it, what we're seeing is we're seeing procurement teams in the market from the insurance companies and some of the lease costs, etcetera, where they are consolidating their supply chains. So previously, insurers would rely on a sort of a larger part of the market.

14:48 In repairs, you could be a sort of mar and par type businesses where you get repairs undertaken. Sort of today, that is a more much more consolidated position. Insurers are looking in their supply chain for quality businesses that can operate on a national and regional basis, have the right credentials from an ESG perspective, the right credentials, that customer feedback in terms of how you handle them, but also importantly, how you're investing in your platform as well. For example, keeping with repairs, you know, the technology that you're using to do repairs. If you're not using the latest technology, you're not seen as an efficient supplier. Now there's new techniques out to the market, like plastic welding, aluminum welding, ADAS, where you put in that sort of radar into the the screens and so forth, being able to do that in house as well. So there's a lot of areas where it's important that you get this right.

15:40 And where you get it right, then obviously, you're you stand a good chance

15:44 of sort of winning more contracts in the market. Now I've said in our outlook, I talked about our pipeline. Pipeline is very, very strong. We have a lot of tenders on the go at the minute with large, medium sized insurers and lease codes, etcetera. And we've got a good sort of conversion rate. So, you know, we're quite optimistic about our sort of future. And that claims and services side, we expect that to continue to grow. Fantastic. And then, Philip, just any comments on the margin? Someone is asking about that as well. Yes. So we've commented on the margin in the past. And for claims and services, you can see the margin is around 6%.

16:19 And that reflects a mix of businesses. If you were to go back to premerger days, the we often ask what is should will it go back up to the 8.5%, 9% the Ready used to operate at?

16:32 And that all depends on the mix of the business. What we've seen is we've seen quite a lot of the growth coming from the accident incident side of the business, which is operating at a lower margin but a very high return on capital employed. So that's a pure mix effect coming through there in the margin on claims and services. But it's all very profitable and all very good return on capital employed for us and generates a lot of cash. Fantastic.

16:56 Just wanna touch on Spain before we move to The UK and talk about the the rental business there. Spain keeps on delivering. Well, no pun intended today. Was saying no. Indeed. But we'll then answer that. That aside, yeah, no. Spain

17:22 good advantage of the supply and the demand. As Philip mentioned, you know, rental rates margin have been sort of stronger, so it stayed higher for longer, and the team there are are excelling. So we're very pleased with what we're seeing coming out of Spain, and it looks like the economy economy definitely is strong. Inflation is still high in Spain, by the way. It's up at, 3%. But nonetheless, the economy is strong and doing well. So our outlook on Spain is very, very positive. Yeah. Very much so. Okay.

17:56 For I a question which I'll just say, is there any significance in the name change? I think you'd say, yes. There is. Absolutely. There is. Look. I mean, I I've made no secret of it when the businesses merged back in 2020. Know, You you had two identities in Reddy and Northgate. You know, there's seven and a half thousand people in the group. It was important that we retain some identity. So we put the the name together. It doesn't sort of flow off the tongue, but it was always the

18:21 intention at the time to to to undertake a name change and to try and reflect services that we put together, the proposition, the platform that we have. It's a little bit longer than we planned. I mean, of course, we went into a pandemic three weeks after the merger. But having got there now, it's been in the oven for some time. Having got there, you know, we've done a lot of work on this to to get it right. It's not gonna be everybody's cup of tea, but really positive feedback. Mean, we took this out to a 3,000 strong focus group. They didn't know who we were, what we did, and we asked for feedback on the names. So we sort of went to that selection process about what we could secure IP on, what we thought was fresh and modern, what was easy to remember, what kept it simple, how do we wanna portray ourselves. The feedback we got was super, super strong in terms of the emotions and how people sort of thought about the the name, where it resonated, and we've been delighted with it. We the pictures that we got up there on the slide, we launched that to our leadership conference fairly, you know, fairly recently just before we

19:24 we we took the name up per se, and the feedback was very, very positive. So it takes a moment just to sort of understand it, but it invoked all the right feelings and emotions and color, look, feel, modernization, and it moves us away from that conversation about tell us about the Northgate business. Tell us about the ready business.

19:44 People now say, tell us about the ZIGUP platform. So that's where we wanted the conversation to go. That's how we see that in the market, and partners and our customers have responded very positively as well. Yeah. Very, very much so. And I I certainly this is obvious this presentation is in the new slide. Sorry. In the new format. And the annual report coming out at the end of the month, I think, looks absolutely fantastic. But in in terms of this year, the the name change was almost a culmination of a number of other actions as well, particularly about the the the one road strategy and and the elements we're trying to simplify some of the organizational side. Indeed. I mean, yeah, one of the things that we we we did at the same time is that we unify the management teams in The UK and I. So we did have a ready management team and a Northgate management team. We brought them together.

20:31 They have a chief operating officer now that sits across all The UK and I and delivers our p and l. And what I say enabled us to do is have that focus on the platform where we can sort of cross sell, share information, share the leads, you know, deal with the customers as one team. That's very, very important. So that's resonated very, very well. It also enabled us to sunset our previous strategic framework of focus, drive, and broaden, which has served us very well for the last four years. That's the framework that we used to deliver all the points around the merger, synergies, and get the business in sort of good shape. So we've sunset that strategic framework that we've been introduced, enable, deliver, and grow, and that resonates

21:16 really well with our sort of refreshed position in terms of delivering the services across the platform. And then so we'll be able to do that at the same time as the as the brand launch with the strategic pillars and the management team. So the three things that come together very neatly. Yeah. Very much so. I think if we go back a slide, I think you you mentioned something, which is the ZIGUP platform. And I think this is really a reflection of what has been achieved over the over the past four years. And there's a question here just about customer retention. And I think maybe if you just talk a little bit about what this platform delivers and actually how

21:48 you see that customer retention, the length of contracts, etcetera, being a real strong point for us. Okay. Now good question. Yeah. Look. I mean, the the platform is more than just sort of wanna move away from commoditized services. So speaking about it in the simplest terms, it's easy to talk about rental. You know, in the old days of rental, rental was a piece of metal. And anybody with a checkbook could go out there, buy a thousand vehicles, open up a shed, and rent vehicles. And that pretty much was a race to the bottom on a commoditized service.

22:17 The world has changed, and we've definitely moved a lot further forward in terms of how that proposition goes forward. So we talk about sort of a life cycle of events that happens when you when you undertake mobility, whether you run a fleet, operate a fleet, drive the vehicle itself, whether you're a policyholder with insurer or the leasing company or a deal to a dealership. So we talk about the life cycle of events, all the things that could occur from the start to the finish. We provide a service into that life cycle. So we'll have a touch point. Either it's integrated. We own the service. We own the service delivery app capability, and we can deliver that. Or we manage it. So but together, we put that on the platform, and we can deliver a service to any type of mobility user.

23:03 And we've been extending the services even since we merged in 2020, added new products and services into that platform, developing the multiple touch points that we have with customers. So to the question, how does that then play out in terms of retention? Well, I think everybody knows that if you've got more than one service proposition into a customer,

23:22 tends to get a stickier proposition. If you have three, it's even stickier and so on and so on. So we've been embedding technology. We've been embedding our processes. We've been developing the services across the customer reach. And therefore, the propositions get stronger and stronger and stickier and stickier. You know? And we deliver value back to our to end users in terms of the services that we provide. And as a consequence,

23:48 back to your point earlier about customer service and then, we get that right. We get the value proposition right, and we have all the service and product right, and you've got a a good set of ingredients there to make sort of longevity key and retention key in your contracts. That's what we're aiming for. I I think that's very true. I think maybe if we just had a look at the enable slide because I think one of the couple of questions here about technology, whether it's telematics or whether it's in terms of what we're doing with some of the customers here. So, Gary, when you're asking about how the digital apps and telematics being received by the market, etcetera, I think it's something which we've been very pleased and sort of seeing quite how many people are embracing that both on the rental side and within claims and services. Absolutely. I mean, you know, we use enable very much about sort of how do we deliver our services into a market. And we've got to move forward in terms of how how customers want to interact with us, how we want to interact with them. So there's a lot of sort of platforms and portals that we've developed the year and continue to develop.

24:47 We sort of expense these as we go along. There's no one big digitization program. We've got a sort of a plan of work. We're delivering these in sort of bite sized formats. But the more we can make it easier to use our services through Enable, if you like I mean, we talk about I'll give you one example. You know, I mentioned it, but it's a portal that we use for Direct Hire. So, you know, when a a customer wants to rent a vehicle from us via their insurance company predominantly, you know, prior to to putting the portal up there, we would manually do all of those hires. So we'd have to sort of contact customer center with the with the with the end user, deal with all the sort of the logistics, arrange everything, set it all up, and therefore, their time, consuming our time. Well, actually, that was one product that was right for self administration.

25:37 So customer now can come on to the portal. They can undertake all of that themselves and put everything that they want. They know what vehicle they're getting, when they're getting it, and so on. And it's self administered. So 75% of all those hires now go through on a on a digital basis. Clearly, it's an efficiency saving, and, clearly, customers want to use that portal, and we've been rolling that out across other partners as well. And there's other things as well, you know, robotics that we've been using in the business. So this year alone, I mean, we've embedded 20 claims processes, core claims processes on robotics. So that means that we've saved hundreds of hours per month per process where the robot is getting near 100% accuracy be able to complete what I would call mundane tasks, repetitive mundane tasks, freeing up our

26:25 staff to do sort of more value added stuff. So across the pieces, a lot of examples here, Ross. There's a lot of examples that we can talk about in terms of that sort of enablement, but that's, you know, that's an ongoing program. Yeah. Thank you. And I think, hopefully, that answers another question just in terms of that digitalization side of it.

26:44 I think, Philip, I'm gonna come to you in a moment to just talk about that leverage and that cash flow side. But maybe just to tee that up, then, Martin, just we we have a supply and demand slide. And I think it's it's an it's not a tipping point, but actually, I think you've identified that certainly in The UK, supply has started to come back in a number of different ways. Absolutely. I mean, we've talked about vehicle constraints in The UK for the last couple of years. Post pandemic, supply chains are disrupted, very difficult to get a hold of new stock. We said last year, the second half of last year, definitely visibility had been growing, and, yeah, we can see that now. So in The UK, supply has come back very strongly now, so we can see where this sort of product is coming from. And we've got the demand for that product.

27:31 We've got customers that are waiting to either replenish their fleet or take on new fleet. So demand and supply is starting to come back into balance. In Spain, we said that vehicle supply normalized a little while back. So we've had the benefit of being able to take on that new

27:50 supply and meet the demand that we've got. And hence, you saw the sort of growth in the VOH, growth in the fleet, growth in the top line. Yeah. And so one question I think Dean was asking about, just a bit of color around sort of the bundling of electric and traditional vehicles. And we talked about really in the context of the ZEV mandate and OEMs who do have a bit of a challenge as they look forward in terms of what UK regulation is at the moment. Yeah. That's

28:16 a very important point. I mean, for those that are not familiar with the ZEV mandate, zero emission vehicle targets. So The UK has adopted a position where any registered vehicles, so the LCVs, vans, if you wanna call them that. So if they're combustion, 10% of all registrations have to be alternatively fueled on vans and 22% on cars. Now this is a UK position only. So it's know, you and the penalty is charged to the manufacturer if they've missed those targets, and those targets are gonna go up every year. Now where we can help is is that, you know, we have a mixed fleet of vans. We have cars as well, both in Spain and in The UK. So we can take a a good share of electric vehicles and hybrids into into our mix. So we can help when we're securing orders for combustion vehicles because we can take, support also quotas.

29:08 And that's very useful for manufacturers that are obviously having to meet these targets and avoid paying the penalties. And from an EV perspective, Ross, you know, I mean, our fleet is

29:18 ahead of The UK car park, both on vans and cars in terms of what we have on our fleet. We just run ahead of it because, obviously, if we lean into the demand that we see, we'll speculate. We just lean into the demand that we see, we make sure our fleet is appropriate. Okay. Stephen's sort of expressing, if EVs really take off, is there a risk? And I either of want to answer it. Just in terms of the residual value profile is not one I've I've heard many people query about, but might there be a real drop off in the diesel residual value market or the secondhand market because EVs come on on that. Do you what's your view on residual values?

29:55 Yeah. Go on. I'll I'll take it. Look. I mean, you know, we've seen residual values stay elevated for longer. Is there a is there a risk they drop off if EVs are up? Now we've got a fleet team that's got a hundred and twenty years experience between them. And, you know, when we look when we when we are asked this question ourselves, our view is is that combustion in vehicles in a way become more valuable Because certainly from an LCV perspective, there isn't that product there today that can undertake the, you know, the work effort needed on a national basis. Now we're we are supporting a road to zero. We're supporting customers with their transition. We're holding open days for our customers in terms of EVs that can test products, take for a drive, do all of that.

30:45 But the products are not there yet for a national workforce type vehicle. Yeah. So what you're seeing is is that fleets are wanting to to hold on to that sort of diesel, you know, engines for longer because they can't see a road road map yet for a vehicle that can undertake all that work. Now in time, it will come.

31:06 So, no, I don't think there's a I don't I personally and our fleet team do not think there's a residual value issue there in terms of combustion engines. We think that, actually, they'll stay strong for longer because of the fact that there's in the product there to replace them in the time frames that we're talking to. Think that's alright. So, Philip, I think two two parts to this. I think, first of could you just remind us about the capital allocation waterfall? And then as part of that, just talk about the role of the dividend, why we chose the growth which we pushed in the dividend. And then we often get a question about the share buyback and what's the intentions going forward. So maybe first, just on that capital allocation waterfall with those. Yes, sure. We've got the capital allocation model, which we've laid out previously, where essentially initially, we will invest organically in the business in terms of growing and maintaining our fleet.

31:53 We ensure we've got a growing and sustainable dividend for our shareholders. We will then look for opportunities

32:01 to invest inorganically through acquisitions, of which we have executed six since the merger. And then finally, we use share buyback to return cash back to shareholders as well. And in terms of share buyback, well, we've got to. We've been running our third tranche of $30,000,000 during FY 2024, which we completed in the first two months of this year. It remains within our capital allocation model, and we'll keep that under review. And in terms of the dividend, the 7.5% increase this year, look, it's in line with

32:37 our policy, and it just represents the confidence which we've got in the future growth and trajectory of cash which we see coming out of the business from investments we have been making. And that policy, I think, one of things which, obviously, we often talk about is that it's an expectation for a progressive dividend policy, which we have. Correct. That is correct. Okay. I think sticking with you, a bit of a breather, just talking through the cash flow. We've had a lot of questions,

33:02 not just here, but when we've been talking with meetings. Can we talk a little bit more about the cash flow profile and really looking forward a bit? Sure. Can you talk through? Yes. Why don't I just summarize FY 2024, and then I can talk through where our cash flow can head going forward. So in the year, the ongoing performance of the business improved our EBITDA by GBP 34,000,000. So we took the opportunity to invest with the increased vehicle supply coming through at GBP $280,000,000 on net replacement CapEx. So that's where we are replacing our CapEx to maintain the fleet size, but also to reduce that average fleet age as well. So The UK came down at one point seven months to thirty four months, and Spain's average fleet age decreased two point six months to thirty months.

33:50 So we had steady state cash generation after that increase of a 125 and a net replacement CapEx year on year of still over a 100,000,000. We then paid dividends out to our shareholders of 56,000,000 in the year. And we had very little growth CapEx this year. We did have growth CapEx in Spain this year. But as we said, that the fleet shrunk slightly in The UK. So net net, we had hardly any CapEx, just under 2,000,000 versus the 122,000,000 last year. So if you look at what we spend in total, total net CapEx, both net replacement and growth, we haven't really moved. It's the same amount year on year. Okay? Our our fleet value on our balance sheet now is 1,300,000,000, and our leverage hasn't moved year on year.

34:35 So our fleet value has gone up over a 100,000,000, and our leverage is at 1.5 times. So right in the middle of our leverage range, which we say we'll operate in with one to two times. And if you were to compare to some of our rental peers, for example, you'll see we're right at the bottom end. Even if we're at the top end of our leverage range, we'd still be at the bottom end of where peers are operating. And then on top of that, you can see the the share buyback of just under 25,000,000 plus 4,000,000 acquisitions during the year as well. Now what does that mean going forward? Well, we see an opportunity now to accelerate our fleet investment plans. We've I mentioned already that we're seeing fleet supply returning to normal from OEMs in Spain, And we've seen it in the final quarter of last year, I. E, calendar q '1 this year. We've seen it open up substantially, and we're seeing discounts start to return as well from which we can say. In other words, a like for like vehicle starting to get cheaper, you know, because those discounts are are returning.

35:32 Well, with with that, a better access to supply, we can see that our total CapEx spend, so that's both in replacement and growth CapEx, probably gonna grow around a third next year. And that does depend on what's available to us, how much we deflate, etcetera, but in those kind of broad parameters around onethree. Now in doing so, that will enable us to continue to bring that fleet age down, and it could come down to around about twenty eight months at the end of next year. There's not a specific target we're going for, but you could see spending around onethree more could bring that fleet age down. Now so we'll see higher spend next year. In FY 2026, we will see that level of CapEx spend starting to reduce and the steady state cash flow starting to increase or mid GBP 100,000,000 and growing close to GBP 200,000,000. And then once you get to FY 2027, you really see the benefit of all those investments coming through, and you'll see our steady state cash flow growing rapidly above GBP 200,000,000, which then gives us an opportunity with that cash to look at our capital allocation model and say, okay, where do we want to continue to invest in the business for more growth? Where do we want to return funds to shareholders?

36:44 Fantastic. You mentioned the word growth in there, and then it's obviously something which we think about lot. So probably a couple of questions on this, which have come up. There's one about Spain might go to in terms of adjacencies. But maybe before Quite a few new locations in FY 'twenty four and then some more in FY 'twenty five. I think we've got some nice pictures of those if you go into go a little bit further on. But just Martin? Yes. No, I mean, we've been investing in our property estate. So nine new locations or new sites opened up in the period that we're talking about. And post year end, we've opened up further three sites. So look, what we're trying to achieve here is we are increasing the capacity. So when we're looking at there's a couple of things we look at. So if we're relocating from an existing geography or territory, You know? And we're looking for a new site. We're looking to grow our footprint.

37:45 So we'll be investing in insights that will give us a bigger footprint in the locality, or we are looking for completely new localities where we find it's a good hotspot. We've got plenty of demand, and we can fill that. We've So had a mixture of both, you know, on the body shop side of things, on the rental side of things as well, and and in The UK and in Spain as well. So we've put some pictures up there in the presentation. You can see these sort of environments are, you know, very modern. So we're equipping them with the latest tooling because as I said earlier, it's very important that we're able to do that for our partners and use the latest technology to to do our repairs. It also enables us to improve productivity and efficiency. Because when you open a new site, you set the workflow exactly as you would like to see it. And that does have a big impact in terms of the throughput that you can put through those sites and as well as increasing the capacity.

38:37 And, also, it's a great environment for our workforce and for our customers as well because these are very well lit, very modern buildings, very friend you know, friendly. You know, they're not sort of under the arch type repairs and all the rest of it. So this is the type of environment that you'd expect from a foot two two fifty, and that's part of our property strategy as we look forward in terms of renewal of leases and new locations. So it gives us the confidence when we're investing not only in our properties, but the people and the training that goes with that, that we're setting up a a really sustainable platform. And keeping on Spain, having looked at some of those pictures and just the question here in terms of the the Spanish operations where it might grow to. There's obviously adjacencies there. Valuations are quite high as well, aren't they?

39:22 They are, yes. I mean, look, Spain, as I said earlier, is doing remarkably well, and we're very pleased with the performance of the team out there. Yes. Valuations are quite high. So, you know, we've we've looked at opportunities to to grow. We look at projects in Spain and adjacent territories. But, you know, yeah, in Spain, I mean, you you you see the multiples on businesses, private businesses that are owned there anywhere between twelve and fifteen times EBIT and sometimes more. So very different to The UK. So they do value businesses more, I would say, fully in in terms of the Spanish operations. And, of course, you know, we've got a business in Spain that's growing. I think this year, the numbers on top of my head in in euro in sterling was about 80,000,000 EBIT.

40:09 It's top of my head. It's my level of correct me in here. But yeah. So when you look at that valuation metric for a business that we own as part of the group and you look at our market cap today, I think there's some lessons to be learned there in terms of true value of businesses. And then I think the nice thing is whether it's inorganic or organic, Spain is just doing extremely well. There's a lot more to go for within the country. There is. I mean, they've expanded their products and services. It's not exactly the same as The UK platform because it's a different set of services as well, but they have expanded their products and services. You know, we are undertaking what we call open workshops so we can undertake service maintenance repair on a non Northgate fleet. We're doing repairs with insurers where we've got the capacity to do that. We have a digital platform for a b to c rental, so you can come on, like, sort of airline pricing, dynamic pricing.

40:59 So you can use it digitally only where you can do a rental for a three, six, nine month period on our on our cars. So there's a lot of things developing in Spain, and it's a it's as I said, it's a great platform that we're very pleased with. Okay. Okay. Sorry. I just saying something wrong. Fantastic. I'm just having a quick check to see how we're doing. If anybody's got some more questions there, there are certain ones which I think are, I can say, slightly technical ones, which I will come back to in in terms of rental income versus average fleet values, etcetera, which we want to just just have a look, but we will endeavor to respond on on those. So I think unless anybody else wants to come and ask any more broader questions, I'd almost like to turn to Martin with sort of with the outlook slide and just say, let's just think about going forward. We've obviously heard from Philip in terms of the growth opportunities through the CapEx side. But strength of pipeline, I think, is something which you've noticed has been really continuing strength and across the group.

42:11 Indeed. Yes. I mean I mean, one of the examples I've given, and I'll I'll I'll give it here as well. You know, we've seen a record number on the rental side, particularly, we've seen a record number of companies looking for requests for pricing information, and this is typically in a sort of two to 400 fleet. Now you think what happened then? So these are these are prospects that own their fleet. So this supports our view about that sort of outsourcing trend, but they've held on to the vehicles longer than they'd anticipated post pandemic simply because supply hasn't been there. And it's crunch time now. It's time to relieve that fleet. And when they're looking in the market about writing a very large check to to purchase vehicles versus outsourcing and using the services like ours, clearly, there's a very compelling proposition that we have there. So we're seeing a record number of prospects in our pipeline for that. On the claims and services, which has bigger impact very quickly, you know, we continue to see good sized tenders, medium, large insurance companies, dealerships, sort of East Coast.

43:12 So, you know, that's given us sort of confidence for the future. We've got a very good conversion rate. And what tends to happen in the market if a customer moves, we tend to win the business. So if a customer or a prospect moves, we tend to win the business. If we haven't won it, it's because they've stayed put, generally speaking. So with the with the amount of tenders that we've got on the go at the minute, I said, I'm very confident about our ability to secure some of those tenders for not only for next year, but for the years to come. Fantastic. So a a question here just about sort of market shares, and it's not something that we can it's very hard to actually judge. But I think if I turn the question around and say, is there more to go for in each parts of business? Are we taking it off others in the industry, or is it more a outsourcing profile? What's what's the market share dynamic, would you say? I can say it's all of the above.

44:03 Certainly, I mean, you know, give one dynamic. As you say, it's very difficult because different sectors, different segments, different markets to sort of give a a single answer. But if I look at the repair side of things, there's 4,200,000 repairs in The UK alone. Over 2,000,000 of those repairs are insurance related repairs, and insurance companies are the biggest procurers of mobility and repair services in the market. You know, we're undertaking just over 200,000 repairs. So we're sort of 5% of that overall market. And, you know, touched on it earlier about supply chains consolidating. Know? You So we're in a great position to be able to capitalize on that in terms of that sort of growth position. You know? And then looking at other services, you know, there's there is lots to go for. I mean, we are we're we're a market leader on flexible rental for sure, But, you know, we're still relatively small in the scope of things, so there's plenty to call for. And across the platform and all the segments that we're working in, we see plenty of opportunities to organically grow. And we and that's what we've proven over the last four years as well.

45:09 Fantastic. I think we're doing very well in terms of the questions which wouldn't get into, I think, look at the P and L balance sheet thing. So I think from my perspective, Martin, I've heard you talk when we were just launching the the ZIGUP that you're very excited about the new brand. I think you can say you're very excited about the new brand and the new year. There's an awful lot to go for. There is. I think, as I said, bringing the conversation around us for platform and services, the conversations we're having in the market, the way our sort of people are lined up to address that market and what we're seeing, it does fill us with confidence because, as I say, it's it's just not a single product conversation. It's about those services, as I say, on the platform. And it is it's a differentiated position. You know? And, you know, we're in a very strong position to take advantage of it.

45:56 So, yes, I look forward to this year with, with a great deal of confidence. Fantastic. So look. Thank you. Steve and Ted, I will respond to your questions on certain things a little bit later on. But thank you very much for coming and joining another of our investor meet elements. Since I'm heavily involved in the website, I would say do please go and look at the website. We work very hard to provide some fact sheets to provide some more information on the company. There'll be some more videos going on up there. So hope it's a very useful source of information for you on that, but always do feel free to reach out and give us some feedback as well. So I think with that, Jacob, I can hand back to you to close down this this session with your final comments. Perfect. Absolutely. Ross, Martin, Philip, thank you once again for updating investors, this afternoon.

46:43 Could I please ask investors not to close this session as you'll now be automatically redirected, for the opportunity to provide your feedback in order that the management team can really better understand your views, and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of ZIGUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.