Zigup revenue falls in mixed first half

(Sharecast News) - Zigup reported a mixed half-year on Wednesday, with underlying revenues growing 5.6% to £775m on the back of robust performances in vehicle hire and claims services, although reported revenue slipped 0.8% to £903.6m due to weaker vehicle sales. The FTSE 250 fleet specialist, formerly known as Redde Northgate, said underlying EBIT for the six months ended 31 October fell 13.8% to £99.1m, while reported EBIT declined 35.4% to £73.2m, impacted by non-cash depreciation adjustments and a drop in disposal profits.

Underlying profit before tax was £82m, down 17.2%, with reported pre-tax profit dropping 42.4% to £56.2m.

Earnings per share followed a similar trend, with underlying earnings down 16% at 28.1p, and reported earnings decreasing 41.5% to 19.4p.

Despite the challenges, the company hiked its dividend by 6% to 8.8p per share, and completed a £30m share buyback programme.

Leverage remained steady at 1.6x, supported by a 16.1% increase in fleet assets to £1.43bn.

In vehicle hire, Spain led growth with an 8% revenue increase, bolstered by a 7.4% rise in vehicles on hire.

UK and Ireland revenue grew 1.7%, aided by strategic pricing actions, despite a 4.6% drop in rental volumes due to higher defleets.

Rental margins in Spain and the UK remained resilient, albeit slightly below the prior year.

Claims and services performance was hindered by reduced volumes in replacement vehicles and legal services, alongside a cyber incident costing £2.8m.

However, the segment saw growth in bodyshop and fleet management services.

The company said it also benefited from fleet expansion, with 132,500 vehicles under management, driven by improved supply and robust demand, particularly in Spain.

Strong rental demand in both regions included significant new orders from corporate clients and public sector mandates in the UK.

Looking ahead, Zigup said it expected continued fleet growth and robust demand in Spain and the UK, underpinned by recent vehicle supply contracts and infrastructure investments.

While a normalisation in residual values would moderate disposal profits, the company said it was confident in meeting market expectations for the full year.

"Our strategy continues to deliver, and we are well placed with our broadening position in the essential market for mobility services," said chief executive officer Martin Ward.

"We are pleased to report underlying growth in revenues, and the delivery of PBT in line with expectations, while reflecting normalising disposal profits as previously stated.

"We have seen a good supply of new vehicles coming through since the year end, reducing the fleet age and strengthening our asset base."

Ward said the fleet now exceeded £1.4bn in value, underscoring the company's "strong" market presence.

"Claims and services grew underlying revenues, and is entering its busier winter period with a pick-up in activity seen after an unusually quieter summer period with lower levels of claims made to insurers.

"Significant progress has been made in cash collection and establishing more protocols with insurers, improving processing efficiencies.

"We are also pleased to have secured new, additional long-term funding, which has successfully reduced our average borrowing costs to 3.2%."

Martin Ward said that both enhanced the firm's financial strength, and provided "substantial opportunities" to support further fleet growth.

"Our prospects are strong, and our expectations for the full year are on track.

"With our strategic initiatives yielding positive results and a strong financial footing, we are well-positioned to continue our growth trajectory and to capitalise on opportunities within the mobility services market."

At 0809 GMT, shares in Zigup were down 6.01% at 360p.

Reporting by Josh White for Sharecast.com.