Zigup Plc (ZIG.L) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Zigup Plc investor presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to Ross Hawley, Head of Investor Relations. Ross, good morning, sir.

Good morning, Jake. Thank you very much for that, and good morning to everybody online. This we do as a fireside chat format. So I'm very pleased to be here with Martin Ward our CEO; and Rachel, our new CFO, [indiscernible] newest CFO. This is for our half year results, which we published on Wednesday morning. I think I would expect a number of people have actually seen those results. But I think just to kick off, really, if I just say, Martin, you described early this week as a great start to the year. Do you want to just talk to some of the highlights that you see on the results?

Okay. Thank you, Ross, and good morning, everyone. Yes, look, I think the 4 key takeaways for me in the performance that we're talking about for the half year, really, first one is the standout performance that we've seen in Spain. I mean that's been a phenomenal sort of result increasing VOH, average VOH over 6,000 vehicles in the period. So the economy is doing well in Spain. The market is still growing in terms of rental. And I think the team have done a fantastic job being able to grow our position and there's still a lot of opportunity to grow there. So performance from Spain, first point. Second one, I would say, is the PBT upgrade. So clearly, I said in the announcement, this has exceeded our expectations. The business is performing really well. And we were able to land these results with saying that our full year is expected to be at least at the top end of the then formed consensus. So in plain speak, that was at GBP 155 million PBT, and this has since obviously changed the numbers. I think that was a great sort of way of showing that momentum. The third thing is the change to the UK&I operating model. So we've been on a journey. This is an evolution. We've been on a journey since our merger in 2020 about providing mobility services in the platform. And last year in March '24, we brought the management team together, and we talked about that, having a senior management team across the UK&I business. So that evolution in terms of how we're now going to operate going forward and collapse our brands into 2 very distinct divisions in the UK&I and the Northgate Mobility and FMG will provide our services from those banners. That's another standout. That will deliver some benefits. Rachel will talk to those benefits in more detail. But clearly, that's given us some further momentum. And I think the last point I would make, there's many more, but the last point I would make is the inflection in the steady-state cash flow. So investors and shareholders have been saying to us, great, like the momentum that we're seeing. We want to see the cash flow. We generate a lot of cash in the business. So in the period, we've grown that steady-state cash. We add another GBP 20 million on top of what we had, it's GBP 43 million. And bearing in mind, after steady-state cash, we still invested GBP 73 million into growth CapEx. But we're on a trajectory of building steady-state cash simply because the net replacement CapEx, the fleet is in a place that we're comfortable with a little bit further to go. And clearly, there will be less net replacement CapEx going forward. So that steady state cash generation, I think it's proven itself out very nicely.

Fantastic. Thank you. Just for people who haven't been with us before on this, we very definitely welcome questions online. The reason my laptop is here is I get to see the questions here. And I'll try and ask as many of those which are posted as possible, but try and group those into themes just to make it a more sort of coherent conversation on that. So please do ask questions into the chat. And I think while people start to think about that, maybe if I turn to Rachel and this is your first set of results here, it's your first investor meet your first set of results here. I think you gave some thoughts on Wednesday about the first few months and what you found. Do you want to just elaborate on those a bit?

Thanks, Ross. And I'm really pleased to be here. And I shared that since I joined since August, I've had the opportunity to go and visit lots of different parts of the business and meet with different stakeholders. I've been really impressed by what I've seen both in terms of the level of expertise and the commitment and the commerciality of the team that we've got, but also the assets that Zigup holds and how we leverage those assets. And I can see the opportunity for growth, we are growing much more opportunity for us to grow and to grow efficiently. And I think we are doing that with the right level of pace and energy and the operating model change and the pace at which we're moving forward with that. I think that's evidence of that.

Yes, absolutely. And I'm sure we'll come on to each of those in due course. Is it worth just going through some of the financial headlines just as a starter?

Yes, sure. So strong set of results. As I said, [indiscernible] growth, 4.5% revenue growth and the EBIT, excluding our disposal profits grew by 11.5% in H1. And Spain standout performance over 16% revenue growth, maintaining really impressive margins of 19% margins. And then in the UK&I rental business, I think that's a great example of how we're leveraging the assets that we have. So driving over 6% revenue growth using pricing mix and the growth in our value-added services. For our claims and services business, volumes were down and so revenue was flat. So still a good performance based on sort of volumes, but we see a great path for H2 in terms of the opportunity in that business across H2 and also in raising our EBIT margin in that part of the business.

Fantastic. I think, yes, clearly, a strong start to the year. And that's, as you said, about great progress across the business. So maybe -- and thank you. I can start to see some questions coming through. And we will touch on each of these inflection in cash, the operating model, et cetera. But I think it would be remiss not to actually talk about the first half and margins in terms of some of the operational side, people still think about it in those 3 different geographic and disciplines. Where would you like to start? Should we do the UK&I first? Or should we just talk about Spain because that has been the standout performer?

Then we'll talk about it more, Ross. So here. Look, I'll start with Spain because I think that's a very strange story really in the sense of -- we've talked about the rental market size in Spain. So Spain has got a commanding position in terms of what it does. It's a differentiated proposition in terms of rental or sort of leasing where we see that sort of competitiveness. And the rental market is growing. And that's the key thing here is that it's only 5% penetrated in terms of rental over all the mobility in the Spanish market. And in the U.K., that's more like 12%, 13%. So there's a long way to go. And that sort of structural change still, we've talked about it before about companies no longer want to own a ship, they want to use a ship. We're seeing evidence of that in terms of where that growth is coming from. But over 6,000 vehicles on, and that's where we've directed our capital is coming back with good discipline and strong margins to see that level of growth. It's really pleasing. And the economy is doing well, we know economies can change in the worst of it, but let's take the wins when the wins are there. And I've said before to investors as well, you got to think about this business in a slightly different way as well. When we're growing, we consume capital because we're sweating capital. We're putting it to work. We're buying assets. We're going out on rent. We're growing our asset side of things and we're growing our services side of the business. But even in a potential downturn, what -- if we're not buying any fleet, if we're not investing capital, we just throw off a lot of cash. That's the converse of when you're growing in investing capital if you're not doing that, you throw off cash. It's got some good qualities about this business in a growth cycle where you're growing EBITDA. But in any sort of future downturn, the characteristics are throwing up a lot of cash in the business as well. So Spain is a great story. We expect that to continue from what we can see from the short to medium term, we expect that to continue and plenty of opportunity to go for.

Let's just stay on Spain a little bit longer because obviously, managing growth is a challenge if you've got this based on growth and demand. So maybe doing some great things in terms of operationally and thinking about that to cope with that scale of growth to actually allow that to continue. That's right, isn't it?

Indeed, yes. I mean there's a few things. We've been opening up some service points in Spain. Customers polarize around our branch network. So it's important when we take on a new account and we have taken out some good sized accounts. Then we just picked up the large Spanish rail operator. We'll be commencing rollout of vehicles for them in February 2026. So, not even in the numbers yet. But it is important that we have that locality to be able to service the customers. That's the way the model works. So we've been opening up service points. We had the new delivery hub in Madrid in Getafe, which enables us to take in delivery of vehicles very quickly, which we can get them out to customers very quickly. We've seen that sort of operational improvements come through in terms of how quickly we can get vehicles on the profits. We're going to repeat that in Barcelona as well. We've got a big sort of network in Barcelona. So we're going to consolidate into a delivery hub there as well. So -- and Spain needs that capacity. We need that additional capacity to be able to support what it has. At some point, we will get some leverage -- operational leverage out of that capacity in terms of what we invest in. And then besides physical footprint. We've been using technology as well to sort of support progress in Spain. We have showcased the stuff Rachel went over and we saw firsthand the e-auction platform for selling our vehicles in Spain. That's a new rollout of technology and actually what it can do with analytics, profiling and how we actually market our product just means we're maximizing the value of the sales that we can get from our disposals, another good sort of evidence point of just how we keep refining and improving our model there.

Yes. And there's more to go in Spain. I think it is one of the message that -- there's been a question here just are there other markets to expand such as Portugal, et cetera, clearly something which makes logical sense. How do you see about kind of the how much opportunity there is in the Spanish market?

Yes. Look, we talk about it all the time. The Spanish team will tell you that there's so much opportunity on their doorstep. So we can sort of drill the land that we're standing on to find more gold. So there's plenty of opportunity. There isn't a shortage of prospect pipeline is strong. There isn't a shortage of opportunities for us to explore. And it makes sense for us when we're looking at capital allocation and the discipline around that. We have a look at sort of competing projects and what the returns are. And whilst we can sort of continue to grow very strongly organically, I think that's where the capital goes. We're always open-minded to what opportunities can bring on a longer-term strategic basis. But I think the focus for Spain is to be able to maximize their organic opportunities.

And just for people, we -- on our website, we did a capital markets event in Spain in September last year, and there's some very good information and slides there. I think one thing we really drew out is the concept of the service proposition is actually quite unique for the Spanish market or it's one where absolutely people are coming to us for that. Just before we move off Spain, I think you'd reiterate that.

Absolutely. As I say, it is a differentiator. We own our own workshops and body shops. So we can do all the service and provide all the services from inside the business as an integrated model. That isn't replicated in the sort of the more wider competitive market. So it is a differentiator. And it is important. If you're running a fleet and you require your vehicles to be out on the road every day, to be able to turn those vehicles around very quickly on service maintenance repair, tires, all of that stuff is important and Spain does that really, really well. And I've kind of carried on Spain because when I look at the questions coming through, obviously, there's a lot of news flow in terms of the U.K. and what we're planning to do. But I think a lot of people said, Spain is the unsung hero at the moment, it's no longer unsung because just the strength in terms of margins, the strength in terms of the growth, et cetera. So yes, we were at the meeting yesterday with an investor and I was sort of -- slightly stopped in my tracks when one of them pointed out was, I realized Spain was now as big as the U.K. rental. And it has sort of crept up over the 5 years. And if you look at the sort of trajectory in Spain in terms of EBIT now, it's sort of on the course for EUR 100 million EBIT. Some of the forecast, that's just the sort of the run rate and the trends. And if you look at the size of the fleet, it's a record size in terms of what we're operating with, utilization is very strong. So I think credit to the team in Spain as well. I mean they've done a fantastic job that focus and that ability to support them and do what they need to do. It's a great position. And I don't know if you had questions on, I'm going to preempt and say this now, Ross, but people say, well, why don't you sell Spain then and just get the sort of the...

Not yet, surprisingly not yet.

Well, I'm going to answer it anyway to [indiscernible].

That's unscripted [indiscernible].

People do ask that question, by the way. So look, let's lean into that one. 5 years ago when these businesses merged, we had an activist shareholder on the Northgate register, I say activist, a nice activist, [ Crystal Lambart Richard. ] And Richard pointed us to sell Spain. I wasn't on the board then, by the way. But if we had done that and if Richard is listening, it would have been half the value it would have been 2 years ago, 3 years ago. The business has got a lot further to go, a lot of value still to build for us. And we do run the business. It is separate, it's not integrated with the U.K., but it's got a lot further to go in terms of what we can do. So I'm preempting that question now, Ross.

Okay. Fantastic. And I think we will come back to listeners in terms of capital allocation and where one places growth CapEx, et cetera. But let's move to the U.K. and let's stay on rental for a bit. I think clearly, a lot of large fleet orders coming through, really good demand.

There is good demand. I mean Rachel covered it. What we've seen in the UK&I, we brought the size of the fleet down modestly. But what we've done is we've increased the revenues by over 6%. We've increased the EBIT profit by 14%. So we've done more with less. And that's the discipline around saying how do we put our fleet to work, how do we get the right sustainable returns and moving away from some of the older model where we would put almost end-of-life vehicles out on this last bit of rent at a lower margin rather than dispose of them, taking the capital and reinvesting [indiscernible]. There is a discipline in the UK&I around getting good sustainable returns. But you're right, we've got some good orders, and I profiled some of them at the analyst presentation. We've had some good wins that will be coming through as well, and we can support that with the capital as well. And that's coming from large -- mainly large customers in the infrastructure side. So we've seen a rail sport company taking a large order, a water company taking in excess of GBP 10. We have a short-term excess contract with Royal Mail on 300 vans, circa 300 vans. So there's lots of things coming through, but we're doing this on the right margins and with the package of services as well. It's not just about renting the van. It's all the other things that we do for our customers as well.

Yes. And I think that's absolutely what has come through. And I remember when we took this conversation 6 months ago, the comments about infrastructure side, lots of those large orders are really from places which we see, we think about the right place to place vans and what the opportunity is for sustainable rentals.

Indeed, I mean, we profile, as you know, in the appendices of the presentation, we do give the pie chart and the sort of split of the industries. And it's fairly consistent. It hasn't changed very much over the last couple of years. And we focus, complete focus on quality, and that's the piece. So look, I think I mentioned last time on the government spending reviews, a lot of them have been allocated to the highway hills, infrastructure products -- projects. And we support a lot of customers that are sort of in that space. So yes, it is about quality. It is about sustainability. I've talked previously about some of the areas that we do less in, and that's where we're focused, say, just making sure that we bring the fleet to work in the right places.

So very broad, very diverse but an ability to make decisions, which I know you both do on the CapEx calls, et cetera, to make sure they go in the right place. Let's just finish off in terms of the claims and services side before we move, which, I will start asking some questions about CapEx, et cetera, and inflection of cash. That's clearly what a number of people are asking about. But claims and services, some renewals, some wins, Howden Insurance is in there, which is a big global broker. Lots of positives there.

A lot of positives. Rachel said sort of the revenues were flat and the margin did improve from 4% to 4.2%. But I think that for me, it's a fairly quiet summer in terms of what's coming in. I mean I'll never ask the team to do something that if the work isn't coming through in terms of accidents, obviously, you can't skin as much claims that you need to work with. But what I would say is that the business has seen some good renewals on some big contracts. We talked about the Tesco renewal, again, multiple years. Yes, Howden, you've mentioned. Howden, the insurance broker, international player, good presence in the U.K. We only onboarded them in October, by the way, so the sort of their numbers haven't come out. But we've given an indication we expect margins to track towards sort of more towards 5%. But yes, it's a strong business. And we're still only penetrated in the market around 22%, 23%. So there's further to go. And when you win contracts in that space, new contracts, they're typically 3 to 5 years. So again, it just plays to that quality of earnings and we're working with big names. When you look at the U.K. motor market, if you think of the big insurance names, these are the names we're working with. So we sit behind them providing services to policyholders. And we provide a lot of capacity on our repair front. So we've got our own network of body shops. So there's lots of things that we provide into the insurance market. And we are agnostic how you call the mobility, whether it's credit tire, direct tire replacement, courtesy cars or whatever. We provide mobility. And under the new model going forward, that will be under our Northgate Mobility banner.

Indeed. And just before we jump on to that side, we're also investing in the U.K. in terms of body shops and greater capabilities, et cetera, productivity. So there's still lots of growth there and actually, we're doing better within ourselves.

Indeed, yes. I mean, look, when people think of body shops, they think of under the arches. The world has moved on demonstrably from them. This is about sort of providing good quality, modern body shop space. We've been transforming out of sort of some of our older premises that we bought the old Nationwide business into good high-quality sort of 20,000 to 25,000 square foot of premises. And with that investment in technology in terms of the latest things that we can do, the car park and the modern fleet is moving forward. There are different techniques for repairing now. And we provide that capacity, as I said, to the sort of the insurance market and beyond. So skilled technicians, we won Apprenticeship of the Year for our body shop apprenticeship scheme. Over 90%, closer to 95% of our apprenticeships stay with us after they've been through the training. I talked previously about bringing the average age of our technicians down by 14 years with people coming into the industry. So we've got a good position in that space. The market needs to secure capacity to do these repairs. We have that capacity, not only in our own body shops, but we run a network as well. So we're able to sort of flex that capacity with what we're doing. And also, Ross as you know, we've been building our mobile technician repair capability as well. And that offers great flexibility for customers where there's a sort of a quick fix that's needed. It supports the body shops in terms of being able to increase capacity at times of need. And it's a brilliant offering to our partners, and we're delighted with that sort of flexibility that we can provide.

Yes, I was actually talking to one of the managing that and saying the ability to go to a fleet customer and say, we can actually set up in a tent in a very clean zone within there and plan and manage a lot of smaller repairs, et cetera. It's great for that customer because the bans are just quickly in and out. It's great for us because we can carry on servicing and providing that sort of support. So a real good opportunity there as well. I just wanted to touch on the residual values. And we have written markets normalizing quite a few times over the past year or so. And I think -- and you called that absolutely right. Just before I want to turn to Rachel just in terms of kind of the view on the outlook. Normalizing markets, normalized markets, disposal profits coming into range. I think you called it right.

Thank you. Yes, indeed. I say you the royal you of the team. But you're right. I mean, look, residual values in the U.K. have stabilized and they have been stable for some time. So we said it was on that sort of trajectory where it would sort of normalize and it has. I would say in Spain, slightly they've been elevated still slightly in Spain. Now we are forecasting that they will fall in time, but they have been elevated. So one thing I would leave our listeners here is just to think about it in this way. In '22 and '23, there was a shortage of supply of vehicles into the UK&I market. So people remember you couldn't get supply post COVID and so forth. So those vehicles that you would have had in those years would be the vehicles that would now be coming to market on a used basis. So there will be a global shortage -- I think not global, national shortage in terms of those vehicles coming to market in the next year and the year after. That could give rise to a view that prices actually could increase on used vehicles. We're not calling that now. We're just saying that's a better -- that will be a surprise to the upside. We're saying it's stable, but I know there will be that shortage coming into that space, and therefore, there will be demand for used vehicles. We won't have as many vehicles to dispose of in those periods because obviously, as we've said, we've pretty much got to the point of inflection in our fleet. So by the end of this financial year, we'd expect our fleet is in exactly where it is. The age of the fleet has come down quite significantly. We'd expect the fleet to be now just very normalized in terms of replacement. So there's some things to watch out for there, which, as I say, are positive, but I'm just saying that now it's on record, we might see a benefit from that.

Okay. Great. And just turning to Rachel on this. I think I want to round all the sort of section off just in terms of the building blocks before we talk about the reorganization. David, you've been very patiently waiting for this as -- to answer your question. But in terms of laying out what we see for the second half and the confidence for the outlook, Martin touched on that GBP 155 million, just give us a little bit of context before we move on.

Yes, sure. So obviously, based on what we see for the first half performance, we're really pleased with the strong set of results and what we can see in front of us. That's why we've guided to at least the top end of what consensus was around the underlying profit before tax. And we've been clear about the margin ranges within that and also specifically where we would expect claims and service margin to be in terms of the second half. So a high level of confidence in that.

Great. So Martin, should we just jump into the simplification? And I say that the camera's focus is on you at the moment because you've been talking a lot, we will move that around a little bit.

What are you saying?

I'm seeing you. Oh, talking a lot. I'm sorry. You've been going [indiscernible]. Let's jump into the UK&I simplification announced on Wednesday. And I think you called this a natural evolution and continuation strategy almost merger and there's some good building blocks. So just want to give kind of that background and then Rachel, I'll talk to you a little bit about the program.

It's very much around how do we provide our services into our markets. Now look, when we -- I'll give you a good example. When we bought the Blakedale business, which is a very well-run family business, the view at the time when we purchased it and we wanted to protect that was that very good relationships in the market. Blakedale traffic highway specialist vehicle business, very good relationships in the market with the name Blakedale, et cetera, and it was important to preserve that. And I understood that and then replicate that again with FridgeXpress, our temperature control business that we bought as well. And we did preserve that, and it was important to understand and gain the knowledge and the IP and all the things that you need to do when you acquire businesses. But guess what, people buy people, not the name above the door, they buy relationships with the people that go through the door. So we've had that time now to evolve. We've seen Blakedale customers purchasing services from Northgate and Northgate customers purchasing services from Blakedale and so on. So you get the picture. So we're in a position now where we can simplify this. We get feedback sometimes it's very noisy. You do lots of things, lots of brands. We just want to simplify that. So that's what we're doing. So from an account management perspective and a business development perspective, you can have one conversation with us, and we can just bring the service and products to one touch point, and that's important. And all of our team have built up that experience now. It's been building and building and building. I said the single management team that we put in place in March '24. So we are now ready to do that. And this is the rollout. We've been planning this for months. This is the rollout that we will continue with. We will report on -- for the full year, we are going to report on the same basis just to give investors, shareholders a chance to catch up. But they will have that new structure -- reporting structure beyond the end of this financial year when we get to that. So this will make it very simple for our customers, for our partners to work with us and make it very simple for our own team to maximize the resources and the scale that we have to deliver the products and services.

And when I go to my local branch, there is the Northgate Rental there and there's the Auxillis. They're all doing vehicle rental, vehicle replacement. So on the ground, a lot of this is absolutely there already, isn't it?

Indeed, look, if you think about it, I mean, the Auxillis business, for example, that provides replacement vehicles into [indiscernible] customers in the insurance world, more than 70% of those hires are done under a protocol agreement there. So it's process. It's process about getting mobility out there, booking and repairs and so forth. And you're absolutely right, Northgate Mobility, all of our sort of contact centers that are providing that service is about process to deliver that. So we can combine that, we can get the scale and get the efficiencies and we can get the benefits that derive from having that single entity.

Fantastic. Rachel, there was a part of a slide you had just in terms of the sort of talk about the program, its cost, its plan. Do you want to just sort of lay that out again some of your experience and certain sides of that as well.

Yes, sure. So I'm really excited about what we announced this week on that. And it is an 18-month program. But as Martin said, we've been planning that for a few months. And in terms of what we're expecting around savings, what we've said is based on what we see before us on our execution plans that we should expect GBP 20 million worth of savings in financial year 2028. And then we'll give some clearer guidance at year-end. But what I said is that what I would work with now is around sort of GBP 6 million to GBP 8 million for next financial year in terms of net savings. Now the biggest part of that -- and we shared that is that there is a large part that is linked to our supply chain. And through the work that we're doing on the operating model, that allows us to unlock some of those conversations. And this is not around our main fleet. This is around the supply chain that sits around that and how we deal with our other third-party suppliers. That's right. Exactly. And we have at the moment a very high number of transactional suppliers. And what we want to move to is a much smaller number of strategic suppliers. So that means for our suppliers, they get a bigger share of wallet and closer alignment with us. Obviously, it means for us, we get better terms, better pricing and that ability to work much more closely with the suppliers as they think about their road maps in terms of products and services that will clearly address our needs. And we'll keep that process competitive through competitive RFPs, but we've had some really good early benefits. I've run something similar in the past. The head of procurement run something similar sort of same scale and size. And so we're absolutely on the ground running that program now.

And I think what you just sort of indicated, this is tried and tested. I mean we've experienced supplier consolidation. We've been a beneficiary of that in the outsourcing from insurance companies is something which actually I think everybody understands and it's something which we're quite confident about.

Yes. I mean we've got the work to do, but we've been -- we've mobilized quickly. We've got some early results, and we've tried and tested and based on our experience and reaching out to get some also external input to make sure that the direction of travel is the right one, we're confident about what we have.

And then just going back in terms of what you were talking about, the financial implications on that. And we gave some guidance. You've sort of given some numbers around that because quite a lot of the supply chain. This takes time to come through. So therefore, it will build. And therefore, it is annualized GBP 20 million from our FY '28 in that year and will build through up to that, which is why you sort of said there was about people. I think the analysts are modeling kind of mid-single-digit benefit, GBP 6 million, GBP 7 million for next year.

Yes. And I think that that's true of most transformation and change programs that need to get the work in, but actually the benefits will come. And so the activity now is a very high level of activity and mobilization the benefits will come through...

I think clearly, we've sort of seen the share price is one element of that, but in terms of investors and analysts, very pleased the implications of that. But Martin, in terms of -- obviously, we've had conversations with some of the major customers just talking through this. They've been positive and can see the simplicity of this and the implications on the operational side are also very positive.

Yes, absolutely. I think for the customers, they can see that this provides more scale, more resources, more depth, more ability to have those single conversations as well because we talked before about customers that have taken multi-products, multi-services products from our platform. Now that we're joining it up and you can have a single conversation that makes it much more simpler and all the documentation that goes with that as well to simplify it. So they're very pleased. We haven't had just positive conversations, Ross, I guess, in terms of feedback. So now is the time is right to do it now. simply because, as I said, you have to have that experience to understand. I always say what we do is simple, how we do it isn't. And it's important that you have that experience and the depth in your management team and your leadership structure to be able to deliver this. But now that we're in that position to do it, we can see the sort of benefits that Rachel talked about that are going to be released on that. And that's creating velocity in the business as well about how we change and how we make progress.

Fantastic. So I'm going to change gears. Brian and others have been asking questions really and David, inflection in cash flow, the CapEx, et cetera. So let's move into that. But Martin, again, we talked about this before about the business model. And actually, this is a very time-tested business model through a number of cycles. Leverage is an essential -- is a natural part of our business model and start this off by reiterating that.

It is, Ross, of course. Look, we've said we'll work within a 1 to 2x leverage, and we're working at the top end of that leverage at 1.9x. But we've got those opportunities. So why wouldn't we put capital to work? Why wouldn't we expect it, as I said earlier, and get those sort of good returns that we're seeing. We're going to continue to work with inside our 1 to 2x. So let's be very clear about that. The steady-state cash that we're generating through this inflection point and as that sort of builds out, we can put that to work. As I said, it opens up options in terms of what we do. And our well-established sort of capital allocation model says we will put that to work to grow the business where we can. So -- but it is a feature. And I've said before on these calls as well, if you look at our sort of peer group and we've had some work done, the average leverage, EBITDA leverage is 3.5, 3.5x leverage. That's a mixture of private companies and public companies. We're comfortable with where we're at. We're a Plc, we understand the parameters we're comfortable where we're at, and we can fund the opportunities. We've got plenty of capital headroom in terms of facilities available to us. We've done all our refinancing for -- out to 2030. And we're in a good place in cost of our financing, I'm quoting on Rachel, 3.2% we've said before, we've got a really good position on that. So look, absolutely put capital to work, very comfortable working on the ranges that we've talked to, and we're going to generate the cash that's going to give us options going forward.

Fantastic. So Rachel, I'm going to just turn to you. You come in, CapEx meetings happen weekly. You're signing off some big numbers. There's a strong discipline around this, isn't there?

Very strong discipline. And we're making significant investments in our fleet. And so if that's appropriate. But it's not just in terms of the CapEx meeting, it's about how all of the teams who are involved in that process and across the business are really thinking about the return on the investments that we make. We've put GBP 70 million into growth CapEx in the first half. And I think that's evidence of that process working because the majority of that has gone into stay. And we can see the evidence of the benefits of that coming through the results. So we'll continue to make those decisions and look at those different factors as we decide where capital going forward.

Okay. Fantastic. Just to address one question. So Jack was just asking about in terms of the kind of ranges of finance which we have. We've got very strong in terms of our support group, different kinds of financing in there as well and kind of what I was going to say. We've got good financing.

We haven't as part of my onboarding, I met with all of our banking group, very supportive group, as Martin said, had a very successful refinancing exercise. Most of our financing right now is on private placement. I've got no concerns at all about where we are in terms of our financing.

And this is actually at the corporate level. There's very minimal asset financing related and none really related to actual vehicles but just a small pool of vehicles as well.

That's right. That's right.

And I'm kind of asking that because Jack was just asking in terms of are we starting to do asset financing. We did some as part of that to just grow and identify different pools, but it's a very small part, which we don't draw down too much on. So actually, all of it still remains within very much our kind of core lending group very committed to us.

That's right.

Fantastic. Right, inflection in steady-state cash and we're reaching an inflection point. So just tease out the reaching an inflection point, how you were thinking about that? It's something which we talked about in the full year, but you're seeing the numbers absolutely evidenced in that.

We are, and I'm pleased that we've been able to share that message as part of the results. And we have been clear about reaching, and I want to come back at the full year and give an update on that. But obviously, if you look at our doubling of steady state cash in the half year to GBP 48 million I think the trajectory is clear. And as Martin said, we're seeing stabilization in residual values also in terms of the cost of new vehicles. And our EBITDA is growing as we expected. So 7.6% growth in EBITDA. And we're moving through the replacement cycle as we had expected. And if I've done some work looking through the detailed models as we think about going forward and as those factors start to play out. And I can see the path to the GBP 200 million that was shared previously in terms of 2028.

Yes. Martin, does it feel too early to talk about what we might do in terms of cash flow? I mean in terms of -- it opens up more opportunities, I think, is probably the right way to think about it.

Yes. I mean, look, we've got a long-standing allocation policy. We've said that. And we want to support growth. Our purpose for being here is to grow the business, to grow our earnings, quality, sustainable earnings, not just sort of growth on the top line. And I think we've demonstrated to a track record that we've improved the margins on the business quite significantly over time. So it does open up options, Ross, you're right, and we have discussed this. But as I said, we do want to support growth in the business to grow EBITDA, grow the quality, and that's really what our mantra is.

Okay. And really to tie back, I was going to ask about the market opportunities a bit earlier. But I think one of the things which you're saying is there's a lot to go for in our own markets. We can see that visibly before us. We will use the CapEx for those purposes as the call.

For sure, look, I mean, I think if you've read the presentation, people will see that there's a lot of momentum in the business. And that momentum is growing. We are very busy in the business. We just came off before this call. We had nearly 200 of our leadership on. We've given feedback from these results and picking up all the points and the feedback that we get from investors and stakeholders. And the team are very, very focused, but we are very, very busy. And that's good busy. So we -- this is what's given us confidence about this. I mean we've -- I guess we've been saying this for some time about sort of the quality of that -- of this business. And I think these are just sort of good landing points to keep demonstrating sort of what the quality is here. And for me, that's important because it is about sustainable growth in terms of what we achieve, and we're just very well positioned in our markets to benefit from that.

Absolutely. I'm just looking at the question. Brendan, I will write back in terms of self-driving vehicles or the threat and opportunity. I think short answer is we don't view them as being a threat to our business. I don't think we should discuss that. And if any others come through, then clearly, I will try and respond to those. But I think really, we're just about at the end. So Martin kind of hand over to you to say, have you got any closing remarks, which you just like to say before we wrap up.

Yes. Look, I think for these results, clearly, I mean, we're pleased at least that they've resonated with the market as well. So let's take that win, first of all, because I think I sat here quite a few times on these calls and maybe be a little bit frustrated that maybe the message isn't landing or people are seeing the opportunity in the same way as we do. It's only one version of the truth, I'd say. And I think this business is a quality business. If you look, I keep pointing to those sort of multiple contracts we have with big companies, some of the big wins with large companies in the infrastructure side that support in the rental, the characteristics of this business, if there's a market downturn because we've lived with this overhang of the U.K. economy being pessimistic about the U.K. economy for the last couple of years. And we've just -- we've just plowed through all of this. So I'd just say, look at the quality of this business, look at the multitude of services that we're offering, look at the markets that we're addressing and the partners that we're working with, look at the cash build profile. I mean Rachel mentioned the route to 200. My eyes even went 5 years beyond that on that spreadsheet on the business plan. And I use the expression, my eye is watering.

Which is not an Investor Relations term. Unfortunately, the market doesn't understand that in terms of guidance.

Eyes wing in terms of sort of where this business can go. But that's the opportunity, I would say. That's the opportunity. A solid business, solid assets, great prospects, well positioned. And as I said, a good set of results to top that off.

Fantastic. Just before I hand back, I hope that was interesting and helpful to people. I'll respond back to any questions. We are just coming to the end of our first. We've done 2 days of road show. We're going -- got quite a busy week next week. We're going to the U.S. for the first time in January. So if anybody on the call is actually listening from there or whatever, we very much hope to see you in January where we'll be going around there as well. And I think really with that, I'm going to say thank you, Rachel.

Thank you.

Thank you, Martin.

Thank you, Ross.

Thank you, everybody, and I will hand back now.

Perfect, guys. That's great. And thank you very much indeed for updating investors this morning. 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 the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it 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 morning to you all.