Zigup Plc (ZIG) Earnings Call Transcript & Summary

Good afternoon, and welcome to the ZIGUP plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to Ross Hawley, Head of Investor Relations. Good afternoon to you.

Thank you very much. Good afternoon, everybody, and welcome to another of ZIGUP's post results fireside chat. Today, we're in the Investor Meet studio in London, which is where we recorded our full year results video, which we published last week. And I do hope that actually everybody has the chance to watch that video, which we put on to our website. It's got a number of new features, if I can put it that way. We had some B-roll and some films in there about our facilities and also an interview with one of our larger rental customers in the U.K. As I said, this is structured as a sort of informal fireside chat where I look to raise a number of the topics which investors have had when we've been going around on roadshow, which has happened last week. And then also we've got a full week this week as well. And I'll try and blend in any questions which people are asking. If you see me peering around the place, that's usual, but it's really me going to be looking at the Q&A. So do please put any there, and we'll endeavor to answer those at the appropriate points in the discussion.

So I think with that, let's start off. Martin, should we start -- maybe you'd like to give an overview of our performance for the year, maybe using just a couple of the slides at the start of the full year deck.

Okay, Ross. You said informal, but this is formal as well, okay.

This is the most formal part of the year.

Absolutely. Welcome, everybody. Thank you for tuning in. Just first of all, standing back, looking at this year's delivery, I mean it's a strong set of results. We've delivered on an operational basis and the financial basis. We've seen on an underlying basis, we've seen revenue up over 5%. And also, we've grown our fleet now to nearly 140,000 vehicles. So that's phenomenal growth. Underlying results in terms of EBIT, up nearly 10%. So again, when you strip back the disposal revenue, disposal profits, that underlying growth is very strong, something we called out the last time we spoke. This year, Spain has been a standout performer for us. We know the markets are growing strong there. We've got a very commanding position in terms of what we do. So seeing the metrics there with over 16% revenue growth, it's a clear, as I say, standout performer. We've also had good momentum to the UK&I business as well. We'll come on to talk about our simplification program because it's delivering benefits on a number of fronts. But we're seeing that momentum now in the business as well. So we're seeing growth coming through the UK&I in the way that we planned previously. And very importantly, investors have talked to us about cash. Rachel will give some more detail on that shortly, but our steady state cash now up to nearly GBP 96 million, GBP 97 million. So clearly, that's better than I think the market had expected. So we're very pleased to be reporting on that basis. And we're on track to deliver, I guess, all the things that we talked about not only at the half year, the full year, but we're on track to deliver that and some more. So very good set of results, very pleased with sort of what's been delivered and the clarity around what's been delivered as well. We're very clear about what we're executing.

Right. And before we kind of move on to the next slide, almost, it's sort of what we said we were doing on the tin, isn't it that kind of phrase. It may not be the most exciting, I mean there's some great results there, but it is what people have been looking for meets what we've said we would do.

It is. I feel like, are we boring? Because we do what's on the tin and a little bit more, I would say, I would say, and a little bit more. Every time we touch the market, we've made progress. We've made strong progress. So there's nothing wrong with delivering, saying, delivering, saying, delivering. I think that's very, very key. So I think for investors that have followed the story, been with us for a while, they'll see from the management team, that's what we're about. We try and tell it as clear as it is as people understand the investment proposition, understand what the business is doing and then deliver on that and some.

In IR terms, I'm going to call that exciting and reassuring. I think that's the...

I'll take that.

Yes. Great. Maybe if we come on to the next slide, just about what's been achieved in 2026. And really, it's a really good platform, isn't it? There's been some great progress across the business. Do you want to just pick out a few thoughts?

Yes. Just I won't sort of cover all the slide. People can see the material. I mean the fleet growth I've called out. We've seen that fleet now, as I say, nearly 140,000 vehicles. So as we're investing in the fleet and replacing the fleet, that's the other good thing is that we've brought the fleet now to where we want it to be age-wise. It's a modern fleet. So that sort of inflection, if you like, of our replacement cycle in the fleet has now sort of moved on. So size is important because that scale gives us benefits in the market in terms of how we're operating. We've also built our capacity in terms of -- we've broadened our footprint in terms of what we can do. And Spain was a good example. I talked about that, but we've opened up delivery hubs in Spain. So that's freed capacity from our branch network to be able to do more of what we do. So we're thinking smart about how do we create that additional capacity without increasing operational leverage too much. So we're actually getting some good wins in terms of the customers that -- from the markets that we're facing into, and we're able to support that by growing our footprint, both in Spain and the UK&I. We also talk about our customer service. It's important. There's no lip service here. These results from Trustpilot and our NPS and our customer stats feedback are very, very strong. Any investor wants to go on to Northgate Mobility now on Trustpilot, they'll see a 4.9 rating of thousands of reviews, rate is excellent. And that's because we do put the customer at the heart of what we do. So we don't force it. This comes natural into the business, but getting it right for the customer and that customer service feedback is very, very important for us. So I think across all the things that we're doing, we're making very strong progress at delivering all the points that we've touched on previously.

Yes. I think that customer service really matters. I'm quite close to my local branch. When I go in there, they actually have a board there with all their Trustpilot scores. And it really does come down to naming the people on the front desk or the guys who've helped them out and how much that really matters for our customers.

Yes. I mean we're not a faceless organization. We are entrusted by a lot of our partners to be the face of their organization when there's touch points at the branches, when we're handing over vehicles and dealing with lots of people. So it's important that we get it right. And our people want to get it right. That's the key thing. They want to get it right. Yes, they are motivated to do that. And as you say, that feedback is continuous. Something goes wrong and inevitably it will, you've got to put it right very quickly. As I said, if you get it right for the customer, you'll get it right for the rest of the organization.

Absolutely. Just before I come to Rachel, just, fleet investment, I think it's one of the things which we talked about on this slide, that capacity growth. So there's -- over the past few years, there's been the issue about the replacement cycle, et cetera. And now we're starting to see clearly Spain growth over the past couple of years, the UK&I also coming back into that growth side. That must be very exciting and also real underpinning the business.

Yes, absolutely. I mean, look, we know that sort of post the pandemic, there was a supply shortage. We've talked about that a lot. But as we've gone through the period now, supply has completely normalized. So we can get hold of vehicles in Spain, U.K. and Ireland, no problem at all. And as I said, we've gone to that point of inflection where we've replaced the fleet now to a point that we're comfortable with. And as you say, growth on top of that, we had GBP 130 million of growth capital that we invested in the period that we're reporting. GBP 90 million of that went into Spain. That market is growing quicker. But across the board, we are seeing growth. Last year, in the UK&I, we did consolidate that. We said it wasn't that all about sort of headline numbers of VOH. It was about sort of profitability, strong margins, strong returns. So we've done the work that we wanted to do to shape that. We're investing in the markets and the sectors that we want to be invested in, and we're working with customers who are in growth mode. And what we're seeing and what we'll see coming through is that reflected now in that sort of the go-forward position. So yes, the eager-eyed people who sort of saw the closing VOH will see for the UK&I that that's gone up as well as in Spain. But it is positioning us very well for that further progress.

Fantastic. So doing what we said we would do on the tin, great platform. But do you want to just put this year, FY '26, in the financial context? We've probably got a couple of slides, which if you want to use them, but just give us some thoughts.

So I think the slides demonstrate what Martin's shared both in terms of -- we've got revenue growth. We've got profit, excluding disposals that have been growing 9.7%. And then you can see what's happening in terms of the net book value of our fleet and that investment, not just in terms of growing the fleet, but the replacing our fleet assets. So you can actually see that how that's gone up by a significant amount year-on-year, all whilst we're keeping within our leverage guidance of 1 to 2x. The one thing I would call out also on this slide is what we disclosed around dividend. So continuing our sustainable progressive dividend. So we've increased the dividend by 2.3% to 27p. So as Martin said, that continuous doing what we said and continuing to progress, I think, is reflected in the financials.

Yes, fantastic. And then just in terms of -- you've come into something where there's this business model, which is working well, isn't it? And that debt and that leverage dynamic, we understand how to use that. It makes the business work. Do you want to just give a little bit of color around some of that as well?

Yes. So as I said, we've guided 1 to 2x. We're keen to stay within that guidance range. We do have headroom within that guidance range. So we certainly have a very supportive banking group, and we've got facilities that are beyond that level. And our average rate is 3.3%. We don't have any urgent need for refinancing. So our first tranche of refinancing is not until the next full financial year. That's a smaller piece. And actually, our average maturities are out to 2030. So we've got a really good set of financing arrangements at a good rate to support the investments that we're wanting to make in the fleet to drive growth going forward.

Perfect. I'll come back to things like the steady state cash, I think, a little later, but just maybe bouncing back. Should we just sort of run through some of the markets, some of the growth prospects. So let's go back to Spain. Clearly, strong delivery this year. There's more to come.

Yes, there's more to come, Ross. So this year, I mean, we pulled out a couple of examples this year. ADIF, the national Spanish rail operator. We've delivered more than 800 vehicles into that contract. They started only in February this year, so it's yet to mature through the book. But that's a sort of an important, if you like, customer in a municipal win, if you like, to have. It demonstrates our capability. It demonstrates our scale and our national presence. So being able to support a customer like ADIF was a standout for us in Spain. And I talked about the hub network, just to be clear in terms of what I'm talking about here. Across all of our branches, 26 branches across Spain. Customized new vehicles are delivered to those branches, customers come and collect them. There's a lot of activity. And equally, we're doing all our daily stuff as well. What we've done is we've pulled that sort of aspect of new vehicle delivery out into centralized hubs. So in Madrid, for example, we've got a huge footprint where we have our new vehicles delivered. This last year alone, I think it was 19,000 vehicles. In Spain alone, we did a delivery and collection format. So that frees up capacity to continue to grow. So yes, we're making the space to grow. We're seeing the market being ripe to continue to grow in terms of flexible rental. So all the elements are strong for us. The 2 drivers, one being the market itself, second one being the economy. The economy is a smaller part of the driver because the economy doesn't sort of -- it's not the key element of why we are growing. It is because the market itself for flexible rental is growing, and we're well positioned to service that.

Yes. And I think when I hear those statistics like 19,000 vehicles, you then go per month, that is 1,500 vehicles. And so actually, the scale of turning through, and that is us replacing older vehicles and putting new ones onto the fleet. That's now a very slick operation there. They always think about that operational efficiency, don't they, within the business.

Yes, absolutely. I mean the management team have done a great job in Spain. As you say, they're looking at that operational leverage all the time. They're looking for ways of creating that capacity. We know we're going to grow. As I said, we've put our sort of investments into that growth, and we expect that to continue.

Yes. So really fruits of strong efficiency there, top market position, really nice secular growth, et cetera. And as you say, the economy is still doing well, but that's really just a supporting factor to it. And then in the UK&I, when we're sitting here -- not here, but when we're sitting, talking about those, we were talking about 8 large customers, significant orders in the U.K. and that was reflecting how the U.K. was actually starting to really focus on the core elements and growth there. That's come through really, hasn't it?

It has. I mean our proposition is about being integrated, having a platform of mobility and services that are integrated. So our strength is in owning what we do and be able to deliver on that. And where we see to great effect that come to life is when a customer -- an existing customer takes more product off that platform, and we join up the services. So effectively, they're not having to engage with multiple companies providing services in the silo. So the more that we can do where it's joined up because the way that we view life is, is that if you're providing a service that is interlinked, why not have the same provider that provides that service. It takes away frictional costs. It adds efficiency to what you're doing. Commercially, it's better and just a better outcome for the customer, the end user. So those things are coming to fruition. And we're gaining some market share as well. So another standout for me was the National Highways contract. It felt like a new contract win. They've been a customer of ours for a long time. So 10-year plus on a government-procured scheme, well competed for. So our ability to retain and extend that now for another 10 years is an excellent outcome for us. And it demonstrates our capability from our sort of secure contact center up in the north through deploying all the sort of roadside recovery and the network of operators that we work with that provide that fantastic service for us and for National Highways. And that also leads into other things that we can do where that scale and that capability attracts other customers and partners to our platform.

Yes. And this is probably the last time we're going to use the word claims and services because as we move through, et cetera, those words are kind of that statement on that division. But absolutely, as you say, the National Highways, which can tap into all the gantries and do the core recovery, statutory recovery, police force on the back of that is actually having the infrastructure on which we can then grow a range of services from that.

Indeed.

I think we can talk a lot about all the great things. We also have to make difficult decisions as well, don't we, and about businesses which may not have actually delivered all. In truth, the market has changed a little bit. I'm just...

Yes. So I think you're referring to the 2 businesses, so NewLaw and ChargedEV. So you're right. I mean the Board took a very disciplined decision around sort of what we should do with the business. I think we called out NewLaw last year and said it wasn't core to what we do. Great set of people that sort of have operated in that business, but is dealing with personal injury claims, medical claims. And we've moved away from that as our sort of it's not part of our core purpose. So the view was that we're going to run that off over a series of years. But in truth, I think being able to achieve that and give great service to the clients at the end of that, we decided we needed to accelerate our position and put that into a good place working with a third party to achieve that. So drawn a line under our activities in that space and took the charge this year, and that's sort of out of our system, so to speak. ChargedEV, yes, some investors have said, okay, that's an interesting one. ChargedEV, where we're installing charging points for customers. We worked with some big customers on the third-party basis as well as supporting our own internal requirements. But as you said, one reason or another, we acquired that business -- it's a small amount of money. I don't think we pushed at that time, but it's under a GBP 1 million. But we made that a national operation because we needed national scale. We needed fitters, installers and to be able to do that on, as I say, on a national basis. But with all the sort of the changes in terms of attitude towards taking EV, not taking EV, dates and times, everything sort of changed or moved around, we couldn't get to an optimal level of service there. And it was dragging on results in terms of margins, in terms of absolute profitability. On the day of the results, Rachel called out when we stand back from those 2 businesses now, there was an add-back of GBP 7 million of value from FY '28 onwards. So it's bringing that discipline to say, what are we going to stop doing that's not adding value to the equation.

And I think that's a perfect sort of -- I was asking you about that in part because it leads into about the simplification and actually decision-making and what the business has done and how you've led that to think about how to actually take the UK&I businesses on a bit. We announced it at the interims and said, watch this space. And I think the space has actually really achieved a lot. Do you want to just talk maybe in the first instance about the simplifying of the brands and the customer journey? And then Rachel, I'll probably come to you to think about some of the financial side of that.

Yes. So look, how we face off to the market's important to us. Since the main merger in 2020, as I said, we did 6 acquisitions. So we bought 6 different brands, additional brands into the equation. And that's all well and good. But when you're talking to the market about the products and services that you have, we want to be joined up. So whilst we've absorbed the experience and the knowledge of all the brands that we operate with, we've now simply put that into 2 divisions. So in the UK&I, we now operate under 2 brands. So you've got Northgate Mobility and FMG. So we've simplified how we face off into the market and make it easier for customers to interact back. We have one account manager that can go in and have a conversation about the products and services that we offer as opposed to having lots of account managers go in and do that. And that simplification has added clarity about what we can do and how we can do it. Feedback from customers are early stages, but the feedback is very positive. And we can see where customers do take multiple products across the different brands, but it's all joined up. And it's also good for our colleagues. This makes it simple for them to be able to say, you know what, I can sell these products and services. I can see how it all works, and I can sell the vision, and this is a simplified sort of process. Yes, and it comes with benefits. It wasn't the primary driver for doing the simplification. It comes with financial benefits. But that's over and above what we the -- primary driver for the simplification is.

Great. And I'm going to do a quick shout out for the videos which are coming out with our annual report, but we're starting to use them within our social media as well. So we've done one on the National Highways, but also one on how the -- as was Blakedale, but has moved through to our Highways and how that simplification has really helped them drive their business. So I hope people enjoy looking at those when they come out, but I think it really sort of highlights that. [ Matt H. ], thank you. We have a question, very grateful. You continue to win major contracts such as Highways, Tesco Insurance, et cetera. What do you think differentiates ZIGUP from competitors when bidding for these long-term contracts?

Yes, it's a good question. It's the integrated proposition of being able to join up those services and just make it easy for a customer to go through that journey. And that adds value to the equation. So when you're not working with multiple brands, multiple handoffs, multiple services, but you can deliver best-in-class and join that up, you're creating value because you're removing some of the frictional costs, you're removing some of the delay by bringing it all together. And that's a standout position in terms of being able to offer that into the market and fairly unique. Other businesses can put these pieces of the jigsaw together and use third parties to supply it all. But when you're doing that and you're controlling that delivery of that service as well, it gets back to us with the feedback that we get in terms of customer satisfaction. But as I said, it also brings commerciality to the table. So that gives us some leverage as well.

Brilliant. I'm going to let you take a break or whatever. My eye turns to Rachel. Some of the key themes which investors have asked us to cover. Let's stick with the simplification, the slide, which I think people have got to got some interesting cost saving figures. We've talked a bit about what we thought we would be able to achieve, to want to say where we are and confidence going forward.

Yes. Thanks, Ross. So we shared at the interims a view around where we thought the cost savings would be in terms of GBP 10 million savings for this financial year coming and then into GBP 20 million for FY '28. And that would be annualized going forward. And that's very much the focus around what Martin shared around how we're thinking about these savings is that they are sustainable savings. We are doing things to ensure that we achieve those savings going forward. So -- we've done a lot of work. We've got much more confidence now in those numbers and so we've been able to reconfirm those. They are -- it's an ambitious plan, but we are well on the way to achieving that. And I think one of the things that Martin said last week was about where we are in the supplier savings and over 1/3 of those savings are now in the bag. Of course, we want to do better. We'll always look to over deliver where we can, but we're focused right now on delivering that number in the GBP 20 million.