A Solid Foundation for Growth
ZIGUP PLC’s latest results tell a story of resilience and strategic execution that’s frankly rather impressive. While headline figures show some year-on-year dips, the underlying performance reveals a business firing on all cylinders operationally – and setting itself up beautifully for what looks like a very promising FY2026.
Decoding the Headlines vs. Reality
At first glance, the stats might seem mixed:
- Reported revenue dipped 1.1% to £1.81bn
- Reported EBIT fell 30% to £136.5m
- Reported EPS down 35.5% to 35.6p
But here’s where it gets interesting. Strip out the noise – vehicle sales revenue, one-off items, and accounting adjustments (that depreciation rate unwind is a doozy at £26.5m!) – and the underlying picture is robust:
- Underlying revenue grew 2.3% to £1.56bn
- Core vehicle hire revenue surged 5.2% (Spain up a stellar 9.5%)
- Underlying EBITDA rose 4.1% to £464.5m
- Dividend increased 2.3% to 26.4p per share
This isn’t financial sleight of hand; it’s the core rental and services engine delivering. The reported/profit disconnect largely stems from normalising used vehicle residuals (after the crazy post-pandemic highs) and one-off costs like the cyber incident and strategic withdrawal from the personal injury market.
Operational Wins: Where the Magic Happened
CEO Martin Ward isn’t just spinning a positive tale – the operational metrics back him up:
Fleet & Customer Mastery
- Spain crushed it: 9.4% average VOH growth, rental profit up 16.2%, margin expansion to 19.3%. Their branch expansion and minimum-term contract focus paid dividends.
- UK&I held firm: Despite a slight VOH dip, clever pricing actions drove rental revenue up 2.0% and rental profit up 3.2%. Fleet age reduced by 5.5 months – a big operational efficiency win.
- Claims & Services navigated headwinds: Renewed all major insurance contracts (DLG, QBE, Tesco), added six new partners. The H1 cyber incident (£4.2m impact) and normalising hire lengths hit profits, but visibility looks strong now.
Strategic Leaps Forward
- Customer obsession paying off: Record Trustpilot/NPS scores. The ‘Customer First’ programme and self-service portals are driving efficiency and loyalty.
- Tech & Digital Acceleration: New Spanish e-auction platform, UK&I rental platform trials, RPA automation, ADAS/plastic welding in workshops. This isn’t just tinkering – it’s fundamental capability building.
- Future-proofing the fleet: EVs on hire up 80%, ChargedEV securing major partnerships (Hive, British Gas, Scottish Power). Drive to Zero consultancy launching – smart move as corporates scramble for EV transition help.
- Talent transformation: King’s Award for Enterprise 2025! Technician average age down from 54 to 41 in three years via apprenticeships. Fixing the industry’s skills gap is a major competitive advantage.
Balance Sheet: Fuelled for Action
Yes, net debt rose to £836.7m (leverage 1.8x), but context is king:
- Prudent financing: Refinanced debt extending maturities to 2034, £412m facility headroom. Cost of debt a manageable 3.1%.
- Asset-backed strength: £1.51bn fleet assets supporting that debt. Leverage remains comfortably within the 1-2x target range.
- Investment focused: That debt increase funded vital fleet renewal (reducing age significantly) and growth capex (especially in Spain). This is debt working hard, not financial distress.
- Shareholder returns intact: Progressive dividend policy upheld with a 2.3% increase. Buybacks remain a tool in the box, though disciplined capex comes first currently.
The Outlook: Confidence Well-Placed?
Management isn’t being shy about FY2026, projecting mid/upper single-digit underlying EBIT growth for the operating divisions (pre-disposal profits). This confidence stems from:
- Robust demand signals: Strong pipelines in UK&I, continued growth in Spain, stable insurance partner base in Claims.
- Headwinds easing: Vehicle supply normalised, residual values and hire lengths stable since Autumn 2024.
- Strategic initiatives maturing: Benefits from simplified customer journeys, digitalisation, new facilities (six opened in FY25, more planned), and EV/charging solutions scaling up.
- Operational leverage: As fleet investments bed in and utilisation remains high, incremental revenue should drop more to the bottom line.
It’s a forecast grounded in tangible operational progress, not just hope.
The Verdict: Compounding Momentum
ZIGUP’s FY2025 is a classic case of looking beyond the statutory noise. The core business – renting vehicles and keeping customers mobile – performed strongly despite sector challenges. Management has tackled fleet supply issues head-on, invested shrewdly in tech and facilities, navigated insurance market dynamics, and crucially, positioned the company squarely for the mobility transition.
The 2.3% dividend hike signals confidence, while the 1.8x leverage provides dry powder for organic growth and potential M&A. With structural outsourcing trends intact and a clear focus on operational excellence, ZIGUP’s “Enable, Deliver, Grow” strategy looks set to deliver that promised sustainable compounding growth. FY2026 could be the year the operational heavy lifting truly translates into unambiguously positive headline numbers. One to watch closely.
