Full year results for the period ending 31 March 2020.
In the year to 31 March 2020 Zenith Automotive Holdings Limited consolidated accounts reported an EBITDA (operating profit before amortisation of goodwill, depreciation of tangible and intangible assets and exceptional items) of £56.1m.
We are pleased to report that excluding ZenAuto, the core group has returned to year-on-year growth in profits, from EBITDA of £58.2m to £58.3m. This is particularly pleasing given the challenging environment in the year; including Brexit, changes to emission standards (WLTP) and more recently COVID-19, which adversely impacted the final weeks of trading. This is testament to the underlying strength of our business model and dedication of our team.
ZenAuto, our direct-to-consumer brand, has continued to grow across the year. With continued investment in our people, IT and marketing within this new business area, ZenAuto contributed a loss of £2.2m to EBITDA (£2.1m previous year), which was broadly in line with our expectations as we invest in the early stages of materially scaling this business.
The Group balance sheet shows total assets of £1,545m including cash balances of £74m.
OPERATIONAL HIGHLIGHTS
There were a number of headwinds outside the control of Zenith which impacted the business in the year:
- The new CO2 emissions testing regime (Worldwide Harmonized Light Vehicle Testing Procedure or ‘WLTP’) has continued to affect car policy making and quoting through the year. This reduced both order take and delivery of new vehicles
- A knock-on impact of this uncertainty was that a significant number of leases, which ended their primary term in the period, were extended. This meant that the number of end-of-lease vehicles which we sold were reduced and profits from their sale were pushed into later periods
- Political and economic uncertainty, from Brexit, and later in the year COVID-19, caused an increased level of caution in our customer base when placing orders. With the latter also causing disruption to deliveries and collections, whilst we were in the period of lockdown.
The business has continued to enhance its reputation as a high quality service provider which meets, in an innovative and imaginative way, the requirements of the market and its customers in particular.
We have been focused on enhancing this during the difficult trading period.
- This financial year was a year of significant progress and achievement across all areas of new business
- The total funded and managed fleet size has increased from 138,000 to 143,000 vehicles
- ZenAuto has continued to grow rapidly across the year, as we have continued to expand our distribution with existing and new partners
- Our outsourced business services operations have continued to grow profitably
- The short-term rental division has also continued to add additional profits to the Group
- We have continued to invest in our HGV leasing and management business, from both a people and system perspective, and we are confident that we have an excellent platform for growth
- We started to see the benefit of our group proposition, through which we serve all of our customers’ HGV, van and car requirements under one roof, from one day rentals through to eight year+ leasing and management
- We have seen cost savings in the year due to initiatives which were implemented in the previous year
- Our customer retention statistics continue to be exceptionally good
- Electric vehicles (EVs) have been very positive for salary sacrifice schemes and we are starting to see the early signs of cash takers re-joining company car schemes for EVs.
We are increasingly able to differentiate our service proposition helping us secure high quality new business and the directors are confident that the Group can continue this going forward.
Our headquarters at Kirkstall Forge, Leeds and the continued adoption of flexible and agile working practices, assist in our ability to attract the highest quality talent to our business and retain the best people.
This coming year is possibly the most challenging environment we have operated in, but we are confident that our services and vehicle mobility will be centric to everybody’s lives going forward, with expected reductions in flight and travel on public transport.
Our view is the fundamental growth drivers of the market remain highly positive, being:
i) increasing outsourcing of the management of corporate fleets, and
ii) increasing leasing, as opposed to buying, of vehicles by consumers, whether directly or via salary sacrifice schemes.
We are stable and well organised to capture market share across both corporate and consumer markets. We have some of the best connected technology available and a highly experienced, agile, engaged team that is committed to continuing Zenith’s future success and will allow us to adopt our services to fit the new ‘post-COVID-19 norm’.
COVID-19
On 23 March 2020 a lockdown was imposed in the UK, banning all non-essential travel and closing all but non-essential businesses, including the closure of car showrooms and auction houses due to the COVID-19 pandemic.
The professional and diligent approach of our managers across a period of years has resulted in excellent and robust business continuity plans. This has helped us to enable our workforce to work efficiently from home during this period, keeping our employees safe whilst also providing a seamlessly high level of service to our customers. Whilst the country was in lockdown we experienced a decrease in our call volumes and resultant work load, post year end this meant that we utilised the government’s furlough scheme to claim back support for employees we did not require during this period. We continued to pay all our employees 100% of their salary during this time.
Due to the nature of our business model, which is predominately long-term leases of between three to five years to large corporate customers, the degree of visibility over our future earnings and profitability is high. As a result, Zenith is well positioned to navigate this intense period of disruption caused by the COVID-19 pandemic.
OUTLOOK
Over the last three decades, the Zenith Group has grown to become the UK’s largest independent vehicle asset manager, with over 143,000 vehicles across all asset types including HGVs, vans and cars. Whilst the 143,000 fleet is significant, it is small in the context of the 40 million vehicles on the UK’s road today, the majority of which are driven by consumers.
Historically the Group has focused on the fleet sector, but during the last three years, significant investment has been made into personal contract hire (PCH) in the consumer market. Currently Zenith is the only UK operator to go direct-to-consumer with a full digital PCH solution, all significant competitors go via intermediaries from car dealerships to brokers. This positioning opens up a huge opportunity for Zenith as it owns the customer channel, has the best low cost to serve technology, vehicle funding and residual value risk capacity, material scale and three decades of auto experience.
With the emergence of new electric vehicles against a strong backdrop of climate change, there is opportunity for new subscription models and a faster replacement cycle of the UK vehicle parc. Zenith, with corporate to consumer capabilities, has a strong base on which to grow in this new world and to play a key role in reducing carbon emissions and other pollution, helping to reduce the impacts of climate change.
In this new decade we will continue to develop and grow, as we look to cement our positioning as a key player in the UK motor fleet and consumer auto eco system.