Spain is the UK’s favourite tourist destination. Almost 300,000 Brits have upped sticks permanently and thousands more flit between here and there.
These second homeowners will spend anything between a couple of weeks and a few months in their sun-soaked piece of paradise.
Some choose to keep a car permanently on site. Others would prefer more flexibility. Darlington-based Zigup offers just the thing for these hither-and-thither travellers – keenly priced, long-term car rental.
Profit route: Zigup provides keenly priced, long-term car rental
As holiday homes become increasingly popular, the business is in the right place at the right time and demand is growing fast.
Zigup was known as Redde Northgate before a name change earlier this year. While the rebrand may not be everyone’s cup of tea, there are no quibbles about the business itself.
As a top player in the UK rental market, Zigup leases vans and cars to businesses from major firms to one-man operations.
It also has a thriving division in Spain, and in the past three years has offered cars directly to consumers, as chief executive Martin Ward seeks out new avenues of growth and profits. His quest is delivering results.
Sales rose 14 per cent to £1.5billion for the year to 30 April. Profits rose almost 9 per cent to £181million and the dividend went up 7.5 per cent to 25.8p.
With Zigup shares at £3.90, the stock is on an attractive yield of more than 6.5 per cent, with every chance of more to come.
Traditionally, firms would own their own fleet of cars or vans. Today, leasing is increasingly popular.
Upfront costs are lower and Zigup offers a range of ancillary benefits, from servicing and maintenance to replacement vehicles in case of accidents. Demand is growing here and in Spain and prospects are bright.
Zigup has a thriving insurance-related business, too, helping motorists after an accident – picking up cars that cannot be driven, fixing them and providing new ones while damaged motors are off the road.
Customers include Admiral, Saga and Tesco, the division grew almost 20 per cent last year and it provides accident support for 20million motorists – around half the UK driving market.
That is expected to increase in the next three years, as the group gains new insurance customers.
Brokers are looking for continued growth in sales and underlying profits, with an expected increase in the dividend to 27p this financial year and more than 28p by 2026.
MIDAS VERDICT: Midas recommended Zigup last October, since when the shares have risen 26 per cent.
Performance has been strong but the stock is cheap compared to peers, the dividend is attractive and there should be more to go. Existing holders should stick with the business. New investors might also choose to buy a few at £3.90 a share.
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