Zenith has announced third-quarter financial results for the period ended 31 December 2022, with strong income growth despite a challenging economic environment.

Zenith CEO Tim Buchan

The leasing and fleet management business posted a 28% increase in turnover for the quarter, up £35.6m to £163.9m, while gross profit of £37.4m was up 12.8% year on year.

Profit growth was driven by both Corporate and Consumer business, relating to continued high residual value profits, a growing fleet size and increased rental activity.

Zenith said that while supply chain challenges remain, lead times are beginning to shorten from the peaks of spring and summer 2022. The third quarter saw record delivery numbers compared to recent years.

Total fleet size remained at 168,000 units, though the funded fleet, which generally carries higher margins, increased by around 2,500 units to 74,000 units. The fleet size for its ZenAuto personal car leasing division now sits at just under 11,000 units.

Despite an improved supply of vehicles, lower than expected numbers of deliveries led to fewer end-of-contract terminations as customers were less able to replace their vehicles. Termination volumes in Corporate were down 26% year on year and down 6% on Q1, but up 10% on Q2 – seen by Zenith as a deferral of activity and income to later periods, not a permanent change.

Order intake was slightly lower in Q3 compared to the prior quarter. ZenAuto and the salary sacrifice segment of Corporate saw lower orders as a result of shifts in consumer confidence, although this was mitigated in salary sacrifice to a large extent by the continuing, favourable Benefit-in-Kind taxation environment for battery electric vehicles (BEVs) as confirmed in the 2023 Autumn Statement.

BEVs now represent more than a quarter (27%) of Zenith’s Corporate fleet and approximately 56% of its order intake in Q3.

CEO Tim Buchan commented on the Q3 results, saying they showed the group’s “strategy of concentrating on long-term and profitable contracts with credit-worthy customers continues to deliver predictable and stable earnings against the difficult economic backdrop”.

He added: “I was delighted to see our funded fleet size increase across all three divisions; these fleets deliver the long-term high-quality earnings around which we have built our business. It was great to see supply chains start to free up following the Covid pandemic, semiconductor shortages, and the impact of the war in Ukraine on manufacturer supply chains. Encouragingly, we saw high volumes of deliveries of new vehicles and leases to customers, with record highs in November and December, normally seasonally quiet months.”

Buchan also said that while resale prices for second-hand electric vehicles had been in the news of late, he was reassured by the “blend of traditional fuel types that will form the majority of our vehicle disposals over the next two years”.

“I am also confident that the BEV markets will reach equilibrium. This change will be assisted by a growing understanding of the lower costs of maintaining and fuelling electric vehicles, alongside what we hope will be falling electricity prices and much greater investment in charging infrastructure across the UK. Indeed, we are already seeing an early return of buyers for these second-hand BEVs.”