Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue reached a record EUR2.5 billion, reflecting a 19.4% growth year-over-year.
- Strong cash generation with $112.6 million in cash from operations.
- Healthy financial position with low net debt and strong property assets valued at $226 million.
- Final dividend of $0.06 per share fully franked, bringing the full-year dividend to $0.145 per share.
- Successful integration of recent acquisitions, including MacArthur and Toyota dealerships, contributing to revenue growth.
Negative Points
- Gross profit reduction in existing business due to falling new car margins.
- Increased interest costs by $10 million, partly due to rising interest rates and higher inventories.
- Operating expenses increased by $8.9 million despite cost control efforts.
- New car margins continue to be under pressure due to increased vehicle supply and competition.
- Order bank has reduced by over a third from previous years, indicating potential future revenue challenges.
Q & A Highlights
Q: Hi, Paul, Victor, thanks for your time. First question, just on the inventory management. Can you talk to one or two of the key drivers of your strong performance in inventory management over 2024? And given this achievement, does it make it harder to maintain similar levels in the next 6-12 months?
A: I'll kick this off. We implemented several measures, including holding stock back from coming in, moving inventory between dealerships, and incentivizing our DPs and managers. These steps ensured alignment in achieving our targets. We expect to continue achieving results in inventory management over the next 12 months.
Q: On the OpEx reduction, you've reduced OpEx as a percent of revenue to 11.5%. Do you think this percentage can continue to trend downwards over FY 25?
A: There is always more to achieve in cost reduction. We will continue to pursue opportunities across the organization. While we don't give formal guidance, we hope to see further improvements over the next six months.
Q: On Slide 10, you mentioned finance and insurance performance. Can you unpack the dynamic over the last six months, especially with shorter delivery lead times?
A: Shorter delivery lead times mean customers have less time to shop around for alternatives. This availability helps us put customers in cars quicker, improving our finance and insurance performance.
Q: Morning, and thank you for taking my questions. On inventory levels, you mentioned trying to bring them back to December levels last year. How long do you think it will take to achieve this?
A: We achieved our target by the end of June, with inventory levels like-for-like the same as December 31, 2023. We aim to maintain or improve these levels as we move into the new financial year.
Q: Are you able to give us a steer on how much margin compression we should anticipate for new car margins?
A: New car margins will continue to be under pressure, with possible further deterioration. Our second-half margin for FY 24 was 16.3%, and we expect FY 25 to be more in line with this run rate.
Q: Given the challenges in the market, do you see opportunities to acquire smaller dealers under pressure?
A: We see smaller dealers considering their future due to market pressures. We will make acquisitions if they offer compelling value and fit our criteria, but we remain cautious and focused on shareholder value.
Q: On the order book, are you seeing an increase in cancellation rates?
A: Yes, there has been an increase in cancellations, partly due to customers placing multiple orders during COVID. This, combined with acquisitions, has impacted our order book.
Q: With new vehicle efficiency standards commencing next year, how comfortable are you with your existing brand portfolio? Are there any new brands you'd like to add?
A: We have a broad range of brands, which positions us well. However, we don't yet fully understand OEM strategies under the new standards. We remain cautious and will consider new opportunities carefully.
Q: Can you comment on sales momentum post end of financial year?
A: Post 30th June, our order intake has been broadly consistent with previous quarters. We haven't seen a significant change in retail business volume.
Q: On M&A, could you talk about your funding capacity given the current balance sheet?
A: We have significant debt capacity with a low LTV and strong financier partnerships. We can quickly secure additional facilities if needed for the right acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
