Zigup (LSE:ZIG) — Investor Presentation

0:00 Good afternoon, and welcome to the ZIGUP PLC investor update. Throughout this recorded update, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time by the Q and A tab situated in the right corner of your screens. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can view all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Ross Woolley. Good afternoon to you, sir.

0:29 Oh, thank you very much, Alessandra, and and welcome, everybody. So, Elizabeth, this is ZIGUP's FY twenty five results, which we announced last middle of last week, and we are currently on the roadshow. And so I'm I'm here with Martin Ward, chief executive, and Richard Clay, who's our interim CFO at at the moment. So welcome to you both. We've done this a number of times before as a fireside chat, and it seems to have format which works quite well. And what that does mean is that we're very encouraging of questions, which will come up. My laptop is here so I can see all all all the questions coming through, and I'll try and weave those in so we don't have just kind of the conversation and then try to follow-up questions. So please do ask questions, and we'll try and get as many of those done as possible. So I think with that, I think, really, it's want to just kind of kick off by saying, Martin, maybe I'll give some context to the overview to the results, maybe using the first couple of slides of the presentation, and then we'll just kind of take it from there. Okay, Ross. And good afternoon, everyone.

1:32 Yes. So, look, just just first thing, stepping back, we beat market expectations with this set of results. We had a very strong sort of second half, which, you know, sort of improved our position from what we reported in in h one. So that's the first sort of takeaway. I started the presentation for for the analysts and our investors with a a, operational slide this year, which is very unusual. Yep. I wanted to do that simply because I think it captures sort of what really has been the heavy lifting in the business this year with a number of things on the go. So to give a little bit of context to that, you know, we had the new brand with ZIGUP, so that was introduced into the business, and the strategic narrative that sort of fitted around that.

2:17 Big one for me was the organizational restructure and the formation of a single management team in The UK and I. You know, when we brought the businesses together previously in the merger 2020, we did some organizational restructuring then to to see how we wanted to face off to the markets. And then as our business has learned up each of our customer profiles and understanding of the products and services we offer against the on in the integrated mobility platform, then it made sense for us to have a sort of a a one touch or one road or one sort of way to market where all of our team were well versed in what we were offering out to our customers. And that's worked really, really well since we've done that sort of organizational change. Also, from the sort of a customer side, simplifying that journey that's important to us. So, you know, we talk about the platform of services, but how easy is it to access those platform of services, and what response do we give as an organization when that cuts across our sort of businesses, across the group.

3:18 So we've simplified that to make sure that we've some easy touch points using technology as well to enable that. And clearly, we had a lot of customer wins and contract renewals this year as well. So it's been a year where we solidified, extended, our position in the market, not only with our existing customers, but also with our with new customers. So that's been great. And then what does that all look like? Well, we grew our fleet, so we've been investing quite heavily in that sort of profitable growth. We grew our fleet just over sort of 2%, you know, demonstrably more in Spain than in The UK. We'll come on to the details on that. You know, it was good to be recognized as well for, the King's Award for Enterprise for the investment in people. I mean, you know, we're a mobility business. We provide a lot of on the ground service services.

4:07 And the thing that we were recognized here for is our mainly our apprenticeship scheme and social mobility. So we have over 400 apprenticeships in the group and, you know, a good retention rate when we put those apprentices through their training course. And, you know, that's been that's been really successful for us as a business in terms of where we get our future stars to, to do our services. And then also in our facilities, you know, we've been expanding our facilities and renewing facilities. And by facilities, that'd be property. I mean, our sort of infrastructure on the ground. You know, providing services into, you know, facilities that are what I call fit and proper for a FTSE two fifty business, getting the right size types of premises that we wanna operate from, getting the right sort of workflow and productivity out of those, premises, and having a really good work environment for our colleagues.

4:59 And that has that has proved that we can increase productivity, capacity, and efficiency. So I think that there's kind of words at the top which we put a year of operational heavy lifting. That that really was actually, I think, when we kind of talked about that together. That that was really quite a good characterization of the year. It is. It's it's a it's it's a phrase I use a lot when you have to do a lot in the business. Don't get me wrong. You know, the outputs and results, the financial measures, and all the KPIs have been fantastic, but it's not by accident. As I say, we have to put a lot of work in to get there to make sure that we're sort of future proof for what we see further down the line and how we set ourselves up for success. You know, we're expecting growth, and we'll come on to talk about that as well in terms of where that's emanating from. But you have to do the the the hard yards to make sure that you are fit and proper for the next phase of your delivery.

5:49 So, yes, heavy lifting is what I call it. And, ultimately, you know, investors on this call, our shareholders, say, okay. What does that all mean? What does it all mean? Well, I suppose the financial outputs and the KPIs are the outputs from that. So, I mean, if I can just give a brief summary on that, I think that'd be helpful. Richard will go into detail. But I'll take it. Investors have seen our slides. They can sort of see the numbers. But firstly, just some context to these numbers. As I said, we beat market expectations. Yet when you look at the results on on page one, it looks like we've gone backwards. Mhmm. So the context of that is clearly I've talked about this. You know, post pandemic, we've had some tailwinds which have benefited the business, things like residual values on our fleet. So as we've been sort of defleeting, the price that we've been able to achieve when we're selling our vehicles into the market has been elevated.

6:40 We've signaled that. We've talked about that a lot. It's not a main feature of our business, but if you hold those assets and they're worth more, of course, we're gonna benefit from that. And the second thing was in our claims and services division. You know, we saw that when supply chains were constrained for repairing vehicles and getting parts through, you know, it took longer to repair vehicles. And consequently, we had some high longer lengths, which benefit the p and l. So those have now come off in this year, but they were a feature of the past. So when you look at those tailwinds

7:14 going away, effectively, get what what I call the underlying performance of a normalized business. I think that's what we've seen mainly in this year's results. So as I said, contextualizing that against why we've got so many things in brackets that go backwards in in some ways. So in many ways, of tailwinds, headwinds, which we've been impacted by, we're almost feeling that actually when we look forward, which I think we'll come on to shortly, is something

7:37 whereby actually, things are much more stable and actually there's a clearer line of sight there as well. Indeed. Look, the biggie is the investment in the fleet. So, you know, we've been putting a lot of CapEx into the fleet this year to replenish the fleet to support the growth. The new vehicles that we've been buying have been a lot more expensive than the vehicles that we used to buy, so we have to take that into account in terms of how we price that out and how we maintain our margins or grow our margins as the case may be. So a lot of investment doing that this year, and which will come on to to a slide that talks about what the shape of that looks like.

8:13 So so, yeah, so quite a lot ongoing, but when that all sort of moderates and you get your fleet to where you want it to be, bear in mind, we've got quite a young fleet now, then and there's not much further to go, then, obviously, everything just normalizes, and you get a sort of steady picture of where the business is going and how that sort of underlying growth is coming through. Yeah. And and maybe just before we move on to the next slide, 1,500,000,000 of fleet assets, that's a that's a substantial fleet. That's a

8:40 lot of tangible asset value, is that? It is. I mean, we've grown our net book value of our fleet by over 200,000,000 this year. We haven't increased the debt by that much, so obviously, the assets are are are growing. Just a reminder to everybody, you know, we bring assets on board that we rent out on the rates that we we talked about, and we get the benefit of that over the life cycle of that asset. So if we if we buy a car or a van and we keep it on the on the books for three or four years, we're getting the future cash flows, future profitability

9:12 from renting that asset over time. So when you've done a lot of lift a lot of investing and growing the fleet, as I said, it releases the benefits. And that sort of is why our confidence is underpinned in terms of where we see the growth going forward. And maybe just a final slide if we if we can on on on this part. I think one of the things which people noted was a real sense of confidence, I think, in terms of the statement, in terms of the outlook and how we talked it around the market. Actually, that's been a notable view with that kind of line of sight. Do want to just kind of summarize that,

9:45 your your kind of feelings on that? Yes. Look. I mean, we've we've given a lot more detail in our presentation this year. We we take feedback from the market. We take feedback from investors, what they like to see. We don't want to overload people. It's it's it should be a fairly simple story in terms of what we do. And I think the last five years, we've come to to great pains to make sure that our sort of investment case is understood. But, you know, when we look through that model and we look forward, we can see where those touch points are, where the delivery is, where that extra growth comes from, what our profile looks like, and what we can basically bake into our to our position. And I think when having done this now for some time, you know, we we are very confident in terms of what we've been able to put out there in terms of guidance. I think it's it is the first time where we've given some Yes. Real guidance on sort of where we expect EBIT growth and all the rest of it.

10:36 But that confidence is underpinned by what we can see in the investments that we've made in the business and all the actions that we've taken over the last few years, and that is supported now in terms of what we're seeing. Yeah. And and I think

10:49 at the analyst presentation, we had Jorge and Harvey there as well. And when I know it's an intention of yours to allow people to have a little bit more insight into kind of how the businesses were working, but equally, how kind of the market environment was in both of those. Maybe if you just kind of drill down a a little bit. Can we start with Spain? Because, I mean, it's a it's a lovely one to talk about. Indeed. Yes. I mean, look, you say, we had Jorge. I brought him across to to present the Spanish numbers. It was a fantastic set of numbers.

11:16 You know, Spain has has has achieved a lot in the last five years. You know, the Spanish team have outgrown the market in terms. If you think about the market has grown 5% for flexible rental in Spain, and we grew 11%. Yeah. It's more than double what the market grows there. And then if I look at sort of how we're executing on the ground there, you know, we have grown our margin. So though we've grown our our fleet, we've grown our customer base, we've grown our profits, We've done that on a differentiated business model. It's not a price driven strategic position to buy market share. We've done it whilst improving our margins. And if you think of the Spanish market as a whole, there's only 3% penetration in the rent of rental in in the market. Compare that to The UK, there's 12% penetration.

12:03 So it's still quite an immature market. There's a lot to go for. And we're very well positioned with the the services and the products that we have in Spain, and customers are polarizing to what we offer. So, again, that gives us the confidence to talk, you know, about where we see Spain going and what that can deliver for the group. Absolutely. And then may maybe just thinking about The UK. I know we don't like sort of dividing it up into business. It's actually we've done an awful lot of work this year to bring the two capabilities together. But having talked about the Spanish rental market, just your thoughts on how The UK, we've said, you know, the most you know, that the highest in terms of new business wins this year, very strong retention, etcetera. Clearly, doing all the right things here as well. Indeed. Yes. And as I said, you know, that sort of organizational structure change was mainly about The UK in terms of how we bring our products and services and our management team together to look at that sort of singular proposition across the integrated mobility platform and how we can have those conversations with our customers. And that is bearing fruit. That's the strategy that we laid down, and that is bearing fruit because we're getting multiple sales into a customer who's taking different parts of our services across the platform, and they can do that through a single point of contact with our accounts and development team.

13:19 So it has been a really good year because, obviously, when you when you're doing that with a customer and you're drilling down and sort of looking at all those products and services you're providing,

13:27 what it's showing to us through our sort of feedback and our data is is that we've got some very sticky propositions here that customers like. That for me, that plays to quality of your earnings. It's not a case of it's a business that you just rent an asset. It's a piece of metal. It's a race to the bottom, and it's a short term transaction. We've got customers who have been with us a long time. Yeah. A large majority of customers been with us a long time. And the fact that they're taking more products and services from us just solidifies for me the

13:56 strength of the relationship, strength of the service offering, and as I said, that overall quality of earnings. You know? And there's more aspects to The UK than either just rental, of course, or the claims and services. Yeah. You know? And that's the business that has been, you know, growing its position in terms of taking on new customers. Yes. It's gonna manifest itself through on a normalized basis seeing that sort of EBIT growth and everything else, and we expect to see that as Richard will come on But, to talk you know, we're a major provider of services for insurance companies and brokers, automotive dealerships, these codes. So, you know, when you look at the trajectory of what those companies want, they want to outsource their back office functions and claims and services and replacement vehicles and repairs. And we're a national operator with good infrastructure on the ground, good technical skills, good people, and more importantly, fantastic NPS and trust pilot feedback.

14:52 So we're getting it right more times than

14:54 we're not. So all of that bodes well for me in terms of the investments that we've made and what we're seeing. So as I said, so what? It all translated to something which we will call growth. Yeah. And and just before I hand over to Richard, and I'll talk to a bit about the q and a,

15:09 The UK market environment, we always timed our results the time when when the government came out with sort of more infrastructure spend, etcetera. And we've got a lot of our end markets really with critical infrastructure, critical end markets, etcetera. And we we are very thoughtful about where we place our vehicles as well, aren't we? We are. I mean, it's important that we get the right returns for our assets. So I said, you know, we came out with results on Wednesday, July 9. There was the government announced on Tuesday, July 8, a reconfirmation of a 92,000,000,000 infrastructure spend. So Yeah. Was agreed last year. It went on pause for the spending review. It's been through the spending review, and it's reaffirmed. So we'll see sort of major infrastructure upgrades, things like the A 66 Scots Corner to Lake District, M 54, M 6 Links. So we've got you're right. We've got customers in those segments that we are we support and are well supported, and we've seen that sort of confidence on the basis that they're gonna need to be well equipped to do those projects and where we can support them with our sort of mobility platform.

16:13 So, look, you know, there's there's a lot of good things there that give us confidence then about choosing the sectors, choosing the customers and the markets that we that we will invest in. And, equally, as you say, being selective about the ones that we don't invest in because it's about getting the right returns for our assets and growing sensibly, not just growing for the sake of growing. That's important, and I think that's a differentiator probably to where the business was in the distant past. Yeah. It is about quality of growth. So I'm gonna take a pause there and and bring Richard in. I think we should talk about fleets a little bit later. Mhmm. That was just something else I wanna do. But just, Richard, maybe a bit more of a context or rather talk us through some of the financial metrics, maybe the profit bridge as well, just to kind of give a little bit more more views on that. And I'm worried that I'm slightly out of view here, I'm gonna do not have a look to that.

17:03 Also sorry. Yes. Please just just carry on with that while I'm looking to see if I can encourage people to ask some questions. Great. So I'm gonna start on on slide eight of the the presentation. So the first key point is that our results were ahead of expectations, and Martin talked to to that earlier. But just to bring that out in the numbers on this slide. So first of all, revenue was 2.3% ahead of prior year at 1,555,000,000.

17:34 Profit before tax was at $1.06 6,900,000. That was 3% ahead of consensus, and that was the main driver of our of our statement around ahead of expectations. And then within that, you can see also the growth in the cash profits of EBITDA up 18,200,000, and also the confidence of the board in these results and the growth in the dividend per share going up 2.3% as well to 26.4 p for the year.

18:05 What I also then talk to just before I move on to the next slide would be net debt and leverage. So our net debt was up 95,000,000. Leverage closed at 1.8 times as we'd signaled many times to to the market. And importantly, that 95,000,000 of increase in net debt, what does that fund?

18:24 Well, the the fixed assets, the network value of the fleet went up by 211,000,000. So that's an important stat to link those two numbers together to see how well funded the the the the group is. Yeah. Talking then to the the profit bridge, which was slide 10, so two on, you can see a bit more about where did the the growth come from, but why did the underlying numbers go go backwards year on year. And the first key point I'd point out on this slide is rental profits were up 10,000,000 year on year. That's a really strong performance, and that's not only margin growth, but also volume growth. So you can see the splits on that slide. Then disposal profits came down year on year, but as ZIG, we've signaled that they're normalizing the residual values that went up during COVID are coming off.

19:19 They're now largely normalized. H two was stable,

19:24 And so that's a key component to the walk. And then two elements in claims and services. So one, the cyber incident that we talked about in h one, and then some other claims and services dynamics, which there's a slide on on later, but basically come down to another normalizing factor that Martin referenced, which was higher durations.

19:44 So our vehicles, replacement vehicles out with customers being being repaired quicker year on year, and that led to a reduction in profits year on year. But the good news there is that they've stabilized. Absolutely. And so across h two, we saw no further degradation. We feel this is the position that for the future, and actually from here, we can see growth. So into next year, hopefully, we won't have another cyber incident, and we'll see growth in the across the other parts of claims and services business. Perfect. So that would be my key points on on that. Okay. Good. And and I'm almost keeping with you. Thank you very much. I can see a good number of questions. So if I'm kind of leading off screen, it wasn't meant to be off screen, because I'm pairing up my q and a, and I will bring some in in in a moment.

20:34 But, originally, if we move on to the the margin slide, in terms of the medium term view, there's been a couple of questions sort of our margins peaking or otherwise, maybe both of you to handle that. But, actually, in terms of our medium term view, that was a again, you Martin, you said something new for us to kinda get more to that market. In the first instance, I'm gonna risk saying, Richard, you just want to give a couple couple of of comments comments on that slide and then maybe mark a bit of an overview. Yes. So Maybe the same one way around first, was it? First of all, absolutely not peaking. So and what we did here on the medium term views slide is really give a lot more detail than we've done before. So we used to say rental margins of 15% plus. Here, we're saying 15 to 16 in The UK and I and 17 and a half to 19 and a half in in Spain.

21:22 So a lot more clarity on on the next few years of rental margins. And, yes, they're higher than they were previously. In claims and services, the the margin of 5% plus compares to this year's margin of 4.3 when you add back the cyber incident, you get into the high fours showing our confidence. We're showing that we expect 5% plus. The reason that that's moved around over the last five years is actually is the change of of mix of business with between

21:53 higher margin styles of business, like credit hire and credit repair, and lower margin styles of business like direct hire and direct repair. And then we gave more detail also on disposal profits, but I think your question was mainly about margin. Yeah. It was. And and I think thank you very much on that. And, obviously, we'll come through because there's some more questions on this. But,

22:14 actually, claims and services. I wanna talk about fleet claims and services. A couple of questions coming in. You sort of indicated earlier, quite positive about that business, but also there is this element of business mix change. It isn't there, and the margin is actually not reflecting that the business is is it's more reflecting that there's a change in the kind of business we're doing with those major Yeah. Insurance companies, isn't it? Yeah. I think that's an important thing. Again, look, know, I I appreciate investors see 200 companies a year and all the rest of it. But what we gotta contextualize is is that where claims and services came from, it was more pure play with credit hire, credit repair, which is sort of a higher margin type of product. And then when we merged, we said that we're gonna use this was part of the reasons for the merger. We're use that operational leverage you know, Northgate and Ready, you know, merge their branches that give you a bigger footprint infrastructure wise.

23:08 The consequence of that is is that you had a a a lot closer reach to customers and, you know, through your branch network and all and and and and so on. So what that gave us is operational leverage, as I say, to to enter into what I

23:21 call direct hires. So where we're providing services across that platform, mobility, for insurers, we can get to customers quicker. Therefore, we can price in different products and different services, which enable us to grow our sort of position. So, look, in absolute terms, you know, we want to be a, you know, main provider of mobility services in the markets that we serve and, you know, being selective around sort of doing the direct hires, the credit hires, and all rest of it, all forms of replacement vehicle, yes, the margin will change because, you know, you've got you've got that different mix. You've got the different characteristics.

23:57 And we're comfortable with that. That's something that if we win a big contract and we say, okay. This contract is is a direct hire type contract. Yes. It could look like it's diluted on the margin. Actually, Richard goes on to tell you, you know, the ROCE is on yeah. The ROCE and the capital investment from from that is actually very strong. It's sometimes in excess of 20%, so it's a good place to be. And we've got and we want to use that leverage. We want to use that operational leverage to do that. So, yeah, we shouldn't get too hung up on the actual

24:25 EBIT margin itself. It's what does the overall look like when you stand back. So the competitive environment, there's lots of questions. I I've got a feeling I know who Richard L is in this because we talked about it now and again. The the competitive environment within the change in services space is actually very much kind of moving in our favor in terms of the structural trends, but also technology so that there is profitable growth there in in this contract. Indeed. Look. I mean, you know, if for for those of you that are not familiar, mean, claims and services is working in the arena with the large

24:54 insurance companies that I mentioned earlier, leasing companies and so forth. And, you know, we've seen, you know, some consolidation in that sort of personal motor space very recently with two listed businesses. And as I said, if you have a I haven't said it yet, but if you've a pound of investment in your insurance company, do you wanna spend that on your marketing and your brand, or do you wanna spend that building building your administrative capability? Well, the answer is actually, you know, you wanna spend it on your brand, and you want to work with a partner that is very efficient, that can, you know, use the tools necessary to to to, you know, to be able to process transactions and customers through through an event. And that's what we specialize in. So, you know, this trend to outsourcing, you know, with 20, just low 20% of the market in terms of our market share Yep. When we measure all of the markets.

25:42 And, therefore, there's a lot further to go in terms of what we can do. And we're we're a national provider of scale with good credibility. We've talked about the NPS scores, Trustpilot scores.

25:51 Excellent credibility, I should say, not good. And, you know, we're a trusted partner that can deliver those services. So there's more to go for. So that's that's where we see growth. Okay. And I'm going to jump to something I thought I'd talk about later, but technology investment actually is something particularly in claims and services. Let's focus on that first of all. Where, really, it's our scale and our ability to link into the insurance companies, which is providing efficiencies

26:16 for both parties, isn't it? Indeed. Look, there's a high number of transactions that we undertake in the business at any one time. You know? So, you know, the boards, we signed off recently on a 10,000,000 plus AI investment in our contact center technology. I guess we we don't shout a lot about the tech because we just we just go ahead and do the things that we need to. We we OpEx a lot of the cost that's involved, you know, only only go to the balance sheet if it's servers, etcetera, etcetera. But, you know, we spent and invested, you know, quite considerably in building these tech stacks and and AI for for the business. And what does that give us? Well, it will give us efficiency because when we analyze the calls coming into our contact centers, we can see very clearly where they fall.

27:01 And sometimes these are queries with just updates on where my repair is. You know, when do I have to give my replacement vehicle back? And there are queries that could be answered very efficiently without without human intervention. Where you do need human intervention is when someone's had an incident and they're stuck at the side of the road with a broken down car. They've been involved in an incident of some sort. And they need that reassurance, and that's what our insurance partners look to us for to be able to provide, you know, a a human voice, a pickup call that can put everybody where they need to be, put them at rest, that things will be taken care of, and move on with that. But the mundane stuff can be dealt with by, you know, virtual assistance and using that tech. So, again, look out for that as we report our results next year to keep moving forward. We'll give a bit more visibility on what productivity and efficiency gains we're getting from that investment. Yeah. Exactly.

27:53 As an example, that is, by the way. Okay. And I was gonna say, Peter, hopefully, you were asking questions about innovation and how important that is. I think it's the technology side, which actually is is where we're seeing some of that really coming through to profitability in the bottom line. Indeed.

28:09 Can we just touch on fleet? And then I want to ask Richard to to go through some some some CapEx fees. But residual values stabilized fleet availability, good. Yes? Yes. Yes. That's the case. So I don't think we need to spend too much longer than that. So markets are open. You can purchase whatever vehicles you need these days. So there's no shortage of supply both in The UK and Ireland or Spain.

28:33 Residual value has been stable since about October last year. So, you know, we we we called it. We said that they you know, we expect to see them sort of continue to decline, which is which is great. We're not we're not looking to to make a big profit on disposal effectively. You got your depreciation right, you land in the right place. But, yeah, residual values have stabilized, as I said, since October last year. And our view is is that whilst they still come off a little bit, you know, they're they're still, you know, stable. They're stable. Yeah. Very, very definitely. Right. Said a lot. Richard, just before we go in, so we've done some refinancing. It's a question here on Jack. So just, you know, refinancing this year has put us into very strong position, slightly different kinds of financing, some asset financing, I think, was the question here as as well. But but broadly, we've got a group of banks who are very happy to lend us in a range of different ways. So I'll just Yeah. So we went through a lot of refinancing during the last twelve months, a, to renew our revolving credit facility, but also looking at any other forms of financing that would make sense.

29:44 And we added an asset financing facility based on on rates and efficiency to the cost of debt of of having that and successful program across the across the board. So both through the private placements, the the RCF, and the asset financing facilities, and the smaller facilities, we now have a broad cross section of of financing arrangements,

30:10 which derisks any any approach that could come at us. So we we we end the year with 412,000,000 of headroom. That's a very strong place to be in. There's nothing really coming up now for for a while. Got a lot of long dated financing arrangements, so that gives us a lot of certainty about about the future. Okay. And banks are very keen to lend to us as a Banks are very keen to lend to us. They look at our 1,510,000,000 of assets and say, well, that's very easy to lend against. And they give us three covenants, but they are very normal in in the market. We we have a private rating.

30:57 It is a very strong rating. Yeah. So so overall, in a very good place and and really does show the banks are fully supportive of the Fantastic. So I'm just gonna take a slight pause and just go. So in in in the presentation, people have been used have seen a number of slides from us familiar with through this. And then you

31:17 included a a couple more this year where we're trying to dig in partly some of the investor, partly analysts. I wanted to understand a bit more, particularly on sort of the the CapEx and the cash flow profile. I wouldn't want this to be a session where we're going to go into the the weeds of that because I don't think that's I think the transcript of the presentation, which you went through in quite a of detail, is available on the website, so I'd encourage anybody to go and look that. But if we just type kind of upper level and and just kind of maybe you've got some takeaways

31:48 from those slides and actually what what we're saying because we talked, Martin, about the business model. It's not changed. We've used debt to buy fleet. Mhmm. We're into we're a CapEx business, but we care about Rokis. Rich, take over from me and and and give some Yeah. So I I put in a a couple of extra slides, one to explain the CapEx cycle and the other to to show our approach to capital allocation just to remind everyone of our relentless approach to this and to explain a little bit more why steady state cash was lower this year and what people should therefore expect into the future. And I suppose the key points that come out of that slide, one, EBITDA is growing. The cash profits generated by this business consistently go up year and year out, whether there's a pandemic or any disaster you throw could throw at it. EBITDA goes up.

32:47 And why is that? Because we continue to have great opportunities out there in the market to be able to grow our fleet. Yep. And that therefore comes through as cash profits because people pay for these vehicles year in, year out. We've seen over the last five years many tests to that theory that have given us great confidence about the business model. So EBITDA goes up. Steady state cash flow falls when net replacement CapEx goes up. But net replacement CapEx going up is again a good thing because that means you're buying more fleet and you're de aging your fleet and giving a better customer service to your customers, which will provide future growth of revenue, profit, and returns in the future.

33:36 So lot of that slide was designed to to give those messages to to the market. And then the second slide on ROCE and capital allocation. I suppose the the two points on on this slide. One is that as you grow, you buy a vehicle at the beginning and you sell it at the end. And over that lifetime, the capital employed reduces because you're gradually depreciating that asset. Okay. But, actually, what happens with your higher rate and your costs is they tend to go up and your margin tends to improve during during the life as well. And therefore, you get this returns profile, which which actually increases over time. So the more you put in of cohorts of of younger fleet, it pulls down temporarily the the return of the business, and that's not a bad thing. That's just something people have to understand. Investment in the fleet made lower in early years that ROCE, but actually when we look at it over that time, it's I think you put some figures on the slide in terms of teens, double digits, sort of brokers in the rental business. Yeah.

34:45 Absolutely. So what does it what does it mean in terms of returns? So we take a a relentless approach to to Rocky and returns, and it's very disciplined. Martin and I have a weekly meeting where we look at the returns on every single piece of business that's coming into the into the into the group. And what can we see through that? We can see that the rental businesses return double digit percentages, and we would never consider something lower than that. Mhmm. And then claims and services, we typically overall see 20% plus returns. So very strong returns in on that side of the business and arguably the first pound you would put into claims and services. But, actually, all of the all of these three these three businesses, these three segments have growth opportunities. So we're we're putting growth in into all areas.

35:39 And funding organic growth there is, therefore, is fundamental to the future of this business, and that's where we focused a lot in this heavy lifting year. Yeah. I see. Well, I don't know if you wanted to add anything to that. And there've been a couple of questions just about shareholder returns in this, maybe talk about the dividend and, you know, how you think about that capital allocation. I don't think there's much to add to it. I think Richard covered very, very well, actually. But that is the profile of the business. It's as simple. We try and keep it very simple, Ross, in the sense of what we're doing. We want investors to understand how the business works. You know, you there's a lot of detail in there, of course, but the simplicity of it is you're buying assets, which we're renting out, which you get future cash flows and profits from. And the key thing is when you're doing that and you've got all that investment upfront, you've gotta sort of take that into account in terms of how then is your future return supported.

36:30 You know, we we you know, when we talk about our dividend increasing and so forth, well, you know, the board looks at that and says, okay. The profile of the business is x. Very comfortable support in that. And as I said, it's the type of business model that we operate. So I think you've said it all, Richard. I think the extra two slides, some people say, well, there's a lot of detail there, but, actually, it explains it in very simple terms what the shape of the business is and therefore what to expect. And if people understand it, they can invest in it. And and, obviously, that was the analyst presentation where we clearly got some work to do with the analyst to help them understand some of that as well. But I I always want to bring this conscious on on time. There there been a few other questions. And if if people feel there's some which are quite detailed, I'm very happy to engage afterwards and and provide some responses to those.

37:17 But I think I just want to kind of maybe, Martin, I was going to ask you to kind of round up in terms of talking about people and technology. I think we talked about the technology side of it. You you touched on the King's award, but actually, investment in our people, people strategy, age of technicians, etcetera. Actually, that's all been part of the heavy lifting and trying to think about that sustainable Yeah. Future. Yeah. Look. It's it's a it's a feel good factor about investing in your people and getting your future talent through the business and so forth. And, you know, but on the ground operationally, it is important. I mean, a good example, I talked about it, is, you know, we've brought the average age of our body shop technician down thirteen years. You know? And that's quite not using any repair body shop filler, backed you by having the apprenticeships come in and supplement and know and, you know, get fully trained within two years. So it just means you've got your future generation of technicians coming through to support your workflows.

38:14 You know, we've seen others struggle in the market about attracting talent. And when you've the automotive industry and it hasn't attracted all that new talent, it is an achievement, and that's what the King's Award did. So so that warm good feel factor, but it pays dividends further down the line, and we'll continue to invest in that and continue to invest in our colleagues. Okay. And then maybe just if we put up the outlook slide, slightly out of order, but I I I think it's it's relevant just in terms of this is where, you know, the confidence in the business. Just to really summarize, are there any final comments which you might have? Look, I mean I think for me, as I said, we've I think we've talked about some of that confidence there in terms of our market opportunities, robust demand in terms of what we're seeing, a good fleet, as I said, that's been brought down in age, a good position with the integrated mobility platform. So look, you know, we've we've put that out there in terms of an outlook statement. Rich has talked about that sort of guidance for mid to to high single digit sort of EBIT growth, disposal profits aside, which we can't control.

39:16 So, you know, I think that's the strongest position you can get. And for me, it's, you know, reasons to invest in this business. Well, I look at it. I look I look at it from this perspective. I think, you know, we're a good solid business with a strong balance sheet. You know? So it's a good defensive business in many, many ways. Yeah. If I just you know, people talk about you know, last year, we got comments. Why would you even contemplate growing The UK when there could be a possible recession or a downturn and so forth? And I said, well, we can be selective about how we grow. We can be selective where we put our fleet and when we put our investments, and We do it that responsibly, and we do it within the policies that we set, and that's what we've done this year. We can continue to do that, but we've got those growth opportunities. As I said, strong balance sheet. You know? And, also, what does that growth look like, you know, from all of the group? Talked about Spain outgrowing the market more than double the times.

40:06 So I think there's strong reasons to invest from a sort of go forward best position in terms of that growth, strong reasons to invest in terms of that sort of strength of the balance sheet and also the dividend that we pay. Yep. And also yeah. Look. There's a lot of cheap stocks out there. I'm not gonna go there with us and so forth, but quality of our earnings, the strength and sustainability of what we do day in, day out, That man is manifested through, you know, contracts that are on a multiyear basis with blue chip companies. So this as I said, there are strong reasons to invest in this business. Fantastic. Well, look. Thank you, both of you. I think that that really wraps things up. As I say, there've been a few more questions coming through. Very happy to try and answer those. I'll do a little bit of an advert for our website because we've got a lot of information on there. We produce an investor update as well, so there's often an FAQ questions and answers on there. So do please look there if you feel there are more answers you're you're looking for. But with that, I think, Alessandra, I'm gonna hand it back over to you and say thank you very much for everybody participating this afternoon. And thank you, Martin. Thank you, Richard. Thank you. Thank you, operator. That's great. Well, thank you very much for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback and all the management team can better understand your views and expectations.

41:19 On behalf of management team of ZIGUP PLC, we'd like to thank you for attending today's meeting, and good afternoon to you all.