Group Overview

Differentiated business model

Our business model centres on delivering a differentiated product offering for customers who are attracted to the breadth and scale of services provided through tailored, integrated solutions. We deliver smarter mobility including a broad range of value-added services and increasingly self-service customer analytics.  These support the mobility needs of a diverse and growing range of customers who value our significant asset base and industry-leading expertise, with customers increasingly on multi-year contracts.

We acquire vehicles supporting both rental and incident management service solutions, utilising prudent levels of leverage, well below that of vehicle rental peers. Our owned fleet provides significant asset backing for our borrowings, with fleet assets of £1.43bn compared to net debt of £782m at the half year. We deploy cash when in a growth phase, investing in tangible assets on which we seek to achieve a return significantly above our cost of capital, whilst maintaining leverage within our 1-2x target range. 

Our rebrand to ZIGUP plc took place in May 2024, aligned to our new strategic pillars and now with the UK&I businesses all working under one combined structure. These have helped consolidate the business focus around activities for customer service excellence and driving growth. 

Market environment

Rental demand in both Spain and UK&I has remained extremely robust with new UK business at its strongest since pre-Covid.  In Spain, both minimum term and flex offerings continue to attract strong interest. This has been through a combination of market share gains and growing the rental market at the expense of owned/leased alternatives. The UK budget focused on infrastructure and public sector investment and targets sectors where we have a strong presence. 

Our Claims & Services businesses have entered their traditional higher activity season, after what was a quieter summer, with lower partner referrals and fluid insurance market dynamics.  We have focused on delivering high levels of customer service, reflected in outstanding Trustpilot and strong NPS scores. With bodyshop capacity improving, customer repair durations shortened, which also reduced replacement vehicle hire lengths.

Vehicle supply dynamics

Vehicle supply constraints eased very considerably over 2024 with most OEMs now able to offer good visibility combined with improved support for those with meaningful order volumes in calendar 2025. This provides greater confidence in fleet growth and management of defleeting in both UK&I and Spain.

ZIGUP's scale, financial capacity and breadth of fleet options is a significant advantage in these discussions, alongside our end-to-end EV capability.  This is set to be increasingly important as the UK ZEV mandate starts to influence OEM production strategies. We continue to monitor both automotive technology developments and potential regulatory changes to best position ourselves in what is likely to be a significant influence on both new and used vehicle markets from 2025-26.

Residual values for LCVs in the UK followed a similar pattern to that of cars in the previous calendar year, with softening values through the summer and autumn levelling off towards the end of the year. In Spain, there has been continued strength in used prices which shows only limited signs of moderating.

With strong rental demand, the constraint on average vehicles on hire has been almost entirely supply-side; the prior year comparator reflects the higher fleet starting point in April 2023 and the activities over the past 18 months in fleet replacement. With easing vehicle supply we see good potential for fleet growth in FY 2025 combined with further reduction in fleet ages, with the benefits of this principally felt in the reduction in average service time and cost.

Strategy progress

The refreshed strategic framework of Enable, Deliver, Grow launched at the start of the period, reflects the business focus and ambitions. It has helped to articulate the opportunities identified both within the business and within our marketplaces. The framework is being used throughout our operations to focus the competitive advantages that our integrated mobility platform offers, delivering both share growth and expanding into new markets.  Progress within the period includes:

Enable: Our One Road programme is making a meaningful difference in simplifying customer engagement, cross-selling and converting into new orders. These are supported by programmes increasing digitalisation and self-service portals and analytics, delivering smarter solutions such as the EV suitability portal has encouraged more fleets to assess their potential and delivered new orders.

Deliver: The Customer First programme has helped focus on the customer experience at individual branch level with channels for immediate feedback increasingly used and allowing for greater responsiveness.  Investment in our employee proposition and in workshops and bodyshops have delivered greater efficiencies and grown productivity, improving service responsiveness.

Grow:  We added three new locations in under-represented geographic areas in the period and expanded our car-focused rental offering in both Spain (B2C) and the UK (Corporate), which together now have 1,350 vehicles on hire through these new channels. ChargedEV has added new referral channels with large utilities who are becoming a major force in domestic EV charger uptake.

Supporting sustainability

The extreme weather and floods in Valencia during November 2024 substantially impacted our Valencia branch building, but all colleagues were unharmed, and through the immense efforts of our team were able to return to operational strength within a couple of days and support customers in the major clear-up efforts now underway.

Our Drive to Zero programme is supporting a growing number of customers looking to adopt EVs as part of their fleet strategy. We offer suitability analysis through a new online portal, EV open days and end-to-end support from fleet planning through to workplace charging installation, resulting in a growth in EVs being rented, up 75%.  Awards recognising our leadership in this area included 'Sustainability Mobility Solution' (Spain) and Business Cars 'Best Eco initiative' (Northgate UK).

Within our business we have enhanced our employee value proposition with investment in the breadth of rewards and benefits, including our third year of awarding free shares to all eligible employees and broadening our engagement forum programme. We have also commenced work on a double materiality assessment as part of our CSRD preparedness which will inform our ESG programme focus and reporting.

Strong financial capacity

In October, we secured further long-term funding, raising €190m (£160m) through 7 and 10-year loan notes, fixed at 4.4%. This delivered a 70bp reduction in our drawn debt financing costs. The average funding cost on our borrowing facilities is now 3.2% and our headroom on committed facilities was £347m at the period end. 

We continue to explore a diverse range of funding options to support our business model, with our target leverage remaining within our 1-2x range. At the end of October the leverage was 1.6x (H1 2024 1.6x). We would expect this to rise as we take advantage of improved vehicle supply to both replace and grow capex across our vehicle fleets given the strength of demand in both UK&I and Spain.

The Board has declared an interim dividend of 8.8p per share (H1 2024: 8.3p) to be paid on 10 January 2025 to shareholders on the register as at close of business on 13 December 2024. The interim dividend represents 50% of the final dividend for the year ended 30 April 2024 in line with previous guidance. 

FINANCIAL REVIEW

Group Revenue and EBIT

Revenue

Total Group revenue, including vehicle sales, of £903.6m was 0.8% lower than prior period while revenue excluding vehicle sales of £775.0m (H1 2024: £733.8m), was 5.6% higher than the prior period.

Hire revenues increased 4.7% due to VOH growth in Spain and pricing actions in the UK&I. Claims and services revenue increased by 6.3% reflecting growth in fleet management services and repair services partially offset by lower credit hire volumes and length.

Group vehicle sales revenue reduced by 27.5% with 1,600 fewer vehicles sold in the period and at an older age as the fleet is refreshed.

EBIT

Statutory EBIT decreased 35.4%, while underlying EBIT of £99.1m reduced by 13.8% compared to the prior period; reflecting a decrease in disposal profits and lower Claims and services profits. The statutory EBIT includes a £13.9m cost (H1 2024: £7.6m credit) for adjustments to depreciation rates, £9.2m (H1 2024: £9.3m) amortisation on acquired intangible assets and £2.8m exceptional administrative expenses (H1 2024: £nil).

Rental profit decreased 0.8% to £59.1m (H1 2024: £59.6m) including a £0.6m decrease in UK&I Rental.

Total disposal profits for the period of £25.8m were 25.5% lower than the prior period with 17,200 vehicles sold (H1 2024: 18,800). This includes 2,700 sales of ex-Auxillis fleet cars and other non-fleet vehicles through the UK&I Rental sales channels (H1 2024: 4,900).

3 Calculated as underlying EBIT divided by total revenue (excluding vehicle sales)

UK&I Rental

Rental revenue rose 1.7% compared to the prior period, with underlying demand strong across all rental product areas.  Lower average VOH at the start of the period through limited LCV supply provided a headwind but started to ease through the autumn. Revenue growth was achieved through carefully managed pricing actions together with a focus on maximising availability and ensuring high fleet utilisation.  

The One Road programme to deliver more unified customer relationship management and a simplified sales process has seen immediate benefits, with over 750 new vehicle rentals from cross-referrals between the specialist and core product teams. Blakedale and FridgeXpress together saw 11% fleet growth in the period; and ancillary revenues grew 13% as customers recognised the benefit of our range of value-added services.  

Customer end-markets of infrastructure and public sector saw a number of large orders for completion through 2025 and are set to benefit from the new UK government's focus on investment announced in the budget. EVs on hire grew 75% to over 1,650, with a combination of EV open days and online analysis tools allowing customers to properly understand the opportunity for their particular fleet requirements. Our ChargedEV business signed partnerships with British Gas and Scottish Power, and with City of Durham to replace their public charging infrastructure.

New business enquiries and wins have trended positively and are now at the highest levels for five years, a combination of market share gains and greater outsourcing by large fleets. A growing number of these have seen additional services requested as part of the rental order, from vehicle fit-outs ('semi-cap') and fleet management support to EV solutions.

Rental margin at 15.7% remains in line with our long-term target and reflects the focus on efficiency within the branches and improving parts supply chains allowing utilisation rates to be kept close to peak operational levels, at 91% for the period. The Customer First programme and increasing digitalisation has allowed for greater customer self-service and analysis, including branch-level feedback. 

LCV residual values continued to normalise through the period, reflecting a large tranche of older vehicles placed on the market, as increased new vehicle supply allowed more owners to refresh their ageing fleets. Disposal profits of £13.6m were 25% lower than the prior year, reflecting both lower PPUs and reduced volumes, after the higher defleets in H2 2024.

4 Including intersegment revenue of £4.2m (H1 2024: £4.6m)

5 Calculated as underlying EBIT divided by total revenue (excluding vehicle sales)

Rental business

Vehicle hire revenue in UK&I Rental was £195.6m (H1 2024: £192.3m), an increase of 1.7%. A 6.6% increase in average revenue per vehicle reflected mix of vehicle, product and hire length as well as applied rate increases, partially offset by a 4.6% reduction in average VOH. Rental profits were £30.8m compared to £31.4m in the prior period.

Average VOH of 43,800 was 2,100 lower than the prior period (H1 2024: 45,900) with closing VOH of 44,600 showing steady growth compared to 43,800 close for FY 2024 with the supply of new vehicles continuing to filter through in the period.

UK&I Rental's minimum term proposition accounted for 41% of average VOH (H1 2024: 41%). The average term of these contracts is approximately three years, providing both improved visibility of future rental revenue and earnings, as well as lower transactional costs.

Management of fleet and vehicle sales

The closing UK&I Rental fleet was 47,900 compared to 46,600 at 30 April 2024. During the period, 8,100 vehicles were purchased (H1 2024: 4,800 purchased and acquired) and 7,200 vehicles were de-fleeted (H1 2024: 7,200). The leased fleet increased by 400 vehicles.

The average age of the fleet at the end of the period was c.4 months lower than at 30 April 2024 and c.2 months lower than at 31 October 2023. The fleet composition continues to be monitored in response to VOH demand as well as easing market supply conditions.

A total of 10,800 vehicles were sold in UK&I Rental during the period, 7.4% lower than the prior period (H1 2024: 11,600 vehicles) including 2,200 fewer cars and other non-fleet vehicles sold via Van Monster which had been defleeted from the Claims & Services fleet. Disposal profits of £13.6m (H1 2024: £18.2m) were 25.0% lower than prior period due to a decrease in volumes coupled with a reduction in the underlying LCV PPU (£1,600 compared to £3,500 in the prior period) reflecting a reduction in residual values which had been temporarily higher due to market supply restrictions which subsequently started to ease in H2 2024.   

Spain Rental

Rental revenue growth of 8.6% (up 11% in constant currency) came through increased VOH (up 7.4%), together with pricing increases reflecting recent cost inflation. Constructive market dynamics continued, with more customers moving to rental solutions as part of a broader trend to greater outsourcing. Our differentiated flexible rental offering combined with value-added customer service continues to be very attractive. It allowed us to grow at above market rates, especially in our core LCV product, from a broad range of end market sectors and a mix of smaller customers and large corporate fleets.

Vehicle supply continued to improve, helped by the broadening of our OEM supply base over the past 3 years.   This allowed us to achieve strong VOH growth alongside reducing the average fleet age by 2.1 months from the prior H1 period, and at 28.8 months was 1.3 months lower than at the year end. With improved vehicle supply we were able to better support our B2C digital offering, where VOH increased over 200%.  Our focus on differentiated value-added products was also reflected in our telematics service with over 14,000 vehicles now installed, up 40% on the prior period.

Disposal profits of £12.2m (H1 2024: £16.5m) reflected reduced disposal volumes (11% decrease from H1 2024), as we balanced defleeting with meeting customer demand. PPUs are normalising from their peak in November 2023 but remain at elevated levels, with used vehicle demand particularly strong for our vehicle categories. Disposals have predominantly been through our digital eAuctions platform where a fully refreshed and enhanced platform will be launched in H2 2025.

Rental margin at 19.3% was slightly lower than the prior period, mainly due to higher depreciation costs from fleet growth and vehicle renewal. This was mitigated by our continued focus on cost management including reuse of parts and efficiency programmes. Our Northgate workshops and bodyshops were very busy throughout the period, with capacity helped by the rapid ramp-up of repair operations at three new branches to support increased demand, with further capacity planned for H2 2025. Revenues from third party servicing rose 23% with growth from insurance companies and key corporate accounts.

The recent floods in Valencia heavily impacted our branch and our customer base in that region. The team worked tirelessly to restore operational capability in order to support customers with their clean-up activities and have diverted more resources and replacement vehicles to the region.

6 Calculated as underlying EBIT divided by total revenue (excluding vehicle sales)

Rental business

Vehicle hire revenue in Spain Rental was £146.8m (H1 2024: £135.2m), an increase of 8.6% (11.1% in local currency). Average VOH increased 7.4% and closing VOH increased 9.3% to 61,000.

Spain Rental's minimum term proposition accounted for 37% (H1 2024: 35%) of average VOH. The average term of these contracts is approximately three years, providing visibility of future rental revenue and earnings.

Rental profit increased marginally by 0.7% in the year (3.0% in constant currency) to £28.3m (H1 2024: £28.1m). This resulted in a rental margin of 19.3%, 1.5ppt lower than the prior period, due to increases in depreciation as we replace and grow our fleet with vehicles at a higher purchase value as well as higher repair costs due to lower defleeting activity.

Management of fleet and vehicle sales

The closing Spain Rental fleet amounted to 69,600 compared to 65,100 vehicles at 30 April 2024. During the period 10,700 vehicles were purchased (H1 2024: 9,500) and 6,200 vehicles were de-fleeted (H1 2024: 7,600 vehicles). The average age of the fleet at the end of the period was c.2 months lower than at the same time last year. This was due to replacement of older vehicles with improved market supply in H2 of FY 2024 continuing into H1 of FY 2025.

Disposal profits of £12.2m (H1 2024: £16.5m) decreased 26.2% with total vehicle sales of 6,400, 11% lower than prior period due to lower defleeting activity in order to satisfy VOH growth coupled with a decrease in LCV PPUs to £1,900 (H1 2024: £2,300) with residual values starting to normalise as new supply becomes increasingly available.

Claims & Services

Claims & Services revenue growth of 6.1% was supported by higher repair activity. Vehicle sales were 53.9% lower, reflecting the significant defleeting which had taken place in H1 2024 as well as lower car residual values. 1,800 vehicles from the car fleet (H1 2024: 3,600) were transferred to Van Monster for disposal or use in our corporate rental car proposition.  The fleet closed the period at 15,000 vehicles with an average age of 16 months.

FMG and FMG Repair Services performed strongly, achieving their operational targets and high NPS and Trustpilot scores from partners and policyholders. With no major migrations underway, the core focus was on operational efficiencies and improving customer experience through streamlining our processes, as well as opening our 67th bodyshop, in Dundee, bringing the business closer to its Scottish customers.

Reflecting the broader market, Auxillis experienced a quieter summer for partner referrals up to September, although recent momentum is improving in line with historic seasonal norms.  This impacted replacement hire days which continued to normalise, as repair capacity and parts supply improved allowing for shorter key-to-key repair durations.  Hire days are now at levels we believe will be maintained through the busier winter period.

In early May we experienced a cyber incident and we immediately isolated our infrastructure in UK & Ireland to contain and eliminate the threat.  While the majority of Group businesses experienced limited impact and rapidly returned to operational capacity, NewLaw was impacted and required significant support before it could restart processing its case load and Auxillis paused on new business origination for one week. 

Exceptional costs attributable to the incident amounted to £2.8m along with a reduction in EBIT estimated at £4.2m within Claims & Services profits in the period. The combination of the quieter summer for our higher margin credit hire operations and impact of the cyber incident were the drivers of the reduction in EBIT margin for this period to 4.0%, we believe these were principally one-off in nature.

The business continues to invest in its people and systems to enhance technical capabilities, increasing automation and other efficiencies across the operations. Our apprentice scheme is scaling up its bodyshop technician cohort and we have been recognised both for the quality of this scheme and also a number of individual apprentice and mentor awards at national level.  

7 Including intersegment revenue of £5.3m (H1 2024: £5.6m)

8 Including intersegment revenue of £26.6m (H1 2024: £58.4m)

9 Gross profit margin calculated as underlying gross profit divided by total revenue (excluding vehicle sales). EBIT margin calculated as underlying EBIT divided by total revenue (excluding vehicle sales)

Additional RPA processes were launched improving our claims processing capacity and after a successful pilot of the self-service direct hire portal this will now be offered out to more partners. c.50% of bodyshops had ADAS testing equipment and certification capabilities installed, improving repair productivity, with the remainder scheduled for H2 2025.

Revenue and profit

Revenue for the period (excluding vehicle sales) increased 6.1% to £442.1m (H1 2024: £416.6m) due to increased volumes in repair services and fleet management services. These favourable variances were offset by a reduction in credit hire volumes and hire durations in comparison to the prior period.

Gross margin of 18.0% declined 1.7ppt (H1 2024: 19.7%) due to margin being adversely impacted by the IT incident.

EBIT for the period decreased 33.1% to £17.6m (H1 2024: £26.3m) reflecting decreases in credit hire durations and lower than planned volumes as well as an estimated £4.2m trading impact of the cyber incident. This has then been partially offset by growth in the FMG RS business due to technician efficiencies and higher paints and parts margins, as well as marginal increases in FMG due to growth in managed fleet and external repair volumes.

Management of fleet

The total fleet in Claims & Services closed the period at 15,000 vehicles, down from 16,500 at 30 April 2024 with the lower fleet reflecting reduced credit hire lengths and volumes. 

The average fleet age at the end of the period was 17 months compared to 16 months as at 30 April 2024, reflecting the lower fleet holding period than in the UK&I and Spain rental businesses due to the different composition of the fleet and usage of those vehicles.

The Claims & Services fleet operates a hybrid financing approach including ownership, leasing and, during peak periods, cross-hiring when needed. 

Group PBT and EPS

Profit before taxation

Underlying profit before taxation was 17.2% lower than prior period reflecting the lower EBIT across the Group. Statutory PBT was 42.4% lower including £2.8m (H1 2024: £nil) exceptional administrative expenses, amortisation of acquired intangibles of £9.2m (H1 2024: £9.3m) and a £13.9m cost (H1 2024: £7.6m credit) relating to adjustments to depreciation rates on certain fleet.

Exceptional items

As explained earlier (on page 12), the Group experienced a cyber incident at the start of the period which was quickly contained. The costs associated with managing the incident of £2.8m have been recognised in exceptional items in the period.

Amortisation of acquired intangibles and depreciation rate changes

Amortisation of acquired intangibles and adjustments to underlying depreciation charges are not exceptional items as they are recurring.  However, these items are excluded from underlying results in order to provide a better comparison of performance of the Group. The total amortisation of acquired intangibles charged in the period was £9.2m (H1 2024: £9.3m).

As previously reported, and in line with the requirements of accounting standards, a decision was made to reduce depreciation rates from 1 May 2022 on certain vehicles remaining on the fleet which were purchased before FY 2021. This was due to the prolonged strength of residual values over recent years which could not have been envisaged at the time that those vehicles were purchased.

The total adjustment made to underlying depreciation in the period was a cost of £13.9m (H1 2024: £7.6m credit) comprising £7.6m reduced depreciation (H1 2024: £23.6m) offset by £21.5m reduced disposal profits (H1 2024: £15.9m). As the cohort of fleet which was selected for a rate change is sold, the credit to depreciation reduces and the adjustment to disposal profits increases.  This has resulted in a £21.5m higher charge to the income statement compared to the prior period. The net adjustment is materially in line with expectations set out in the FY 2024 Annual Report.

Interest

Net finance charges increased to £17.1m (H1 2024: £15.9m) due to higher average debt compared to the prior period. Interest rates are significantly sheltered due to holding 82.5% of borrowing as fixed rate debt.

Dividend

The Board has declared an interim dividend of 8.8p per share (H1 2024: 8.3p) to be paid on 10 January 2025 to shareholders on the register as at close of business on 13 December 2024.

The interim dividend represents 50% of the final dividend for the year ended 30 April 2024 in line with previous guidance.

Share buyback programme

During the period to 31 October 2024 the Group completed its previously announced £30m share buyback programme, purchasing 1,271,112 shares for a total consideration of £5.3m (H1 2024: 2,537,500 shares were purchased for a total consideration of £8.2m). 

Group cash flow

Steady state cash generation

Steady state cash generation decreased to £20.3m (H1 2024: £81.4m), with strong underlying EBITDA partially offset by an increase in net replacement capex as improvements in vehicle supply enabled replacement of the fleet, reducing average fleet age.

Working capital and non-cash items

Working capital and non-cash items reduced by £87.3m to a cash inflow of £38.5m (H1 2024: cash outflow £48.8m) mainly within Claims & Services. In the prior period, there was a working capital outflow as the business invested in growth through new contract wins.  In the current year cash generation has improved as more claims have moved under protocol terms, alongside timing of payments at the end of each reporting period. 

¹⁰ Net replacement capex is total net capex less growth capex. Growth capex represents the cash consumed in order to grow the fleet or the cash generated if the fleet size is reduced in periods of contraction

¹¹ Lease principal payments are included so that steady state cash generation includes all maintenance capex irrespective of funding method

¹² Lease principal payments are added back to reflect the movement on net debt

Net capital expenditure

Net capital expenditure increased by £127.6m to £232.4m (H1 2024: £104.8m) due to a £75.4m increase in net replacement capex¹⁰ and a £52.2m increase in growth capex¹⁰.

Net replacement capex¹⁰ was £178.9m (H1 2024: £103.5m), £75.4m higher than the prior period resulting in a reduction in fleet age, comprising a £50.4m increase in UK&I, a £32.4m increase in Claims & Services and a £7.4m reduction in Spain.

Growth capex¹⁰ of £53.5m (H1 2024: £1.3m) included £65.3m in Spain and £3.8m in UK&I Rental to grow the fleet size, partially offset by an inflow of £15.6m in Claims & Services where the fleet size was contracted due to reduced credit hire days.

Lease principal payments of £29.4m (H1 2024: £35.1m) decreased by £5.7m as legacy hire purchase contracts from acquisitions were run off.   

Free cash flow

Free cash flow decreased by £13.2m to an outflow of £20.5m (H1 2024: £7.3m outflow).

Free cash flow is stated after taking account of investments that have been made in the year which will return future cash flow at a sustainable rate of return ahead of our cost of capital. This includes investment in net replacement capex of £178.9m, capex lease payments of £29.4m and growth capex of £53.5m. 

Net cash consumed

Net cash consumed of £35.7m (H1 2024: £17.7m), excluding principal lease payments of £29.4m (H1 2024: £35.1m), comprises free cash outflow of £20.5m (as above), £39.3m of dividends paid (H1 2024: £37.3m) and £5.3m (H1 2024: £8.2m) for purchase of treasury shares. Leverage has been maintained at 1.6x (H1 2024: 1.6x).

Net debt

Net debt reconciles as follows:

Closing net debt was £40.3m higher than net debt at 30 April 2024, driven by net cash consumption of £35.7m and other non-cash items of £15.4m including the recognition of new leases. The foreign exchange impact on net debt was a £10.8m decrease.  The net book value of fleet on the balance sheet at 31 October 2024 was £1.43bn (H1 2024: £1.23bn).