Release Date: February 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 26% above the December 2023 outcome, driven by a resilient market for prestige and luxury cars.
- Gross profit increased by 20% to $264.8 million, maintaining stable gross margins in a normalized supply market.
- EBITDA rose by 20.1% to $107.8 million, reflecting strong operational performance.
- Interim dividend increased by 11.1% to $0.10 per share, fully franked, demonstrating strong shareholder returns.
- Consistent growth strategy with a clear line of sight on acquisition opportunities, targeting $250 million per annum in acquisition-led growth.
Negative Points
- Net profit before tax and net profit after tax were impacted by higher interest rates and AASB 16 lease impacts.
- Inflationary pressures and higher interest costs affected PBT growth for the period.
- Order bank volume is down, although gross profit per order is up, indicating potential revenue challenges.
- Used car revenue growth, while strong, is expected to normalize, potentially reducing future growth rates.
- Inventory levels at 70 days stock depth, slightly higher than the ideal range, indicating potential inefficiencies.
Q & A Highlights
Q: Could we talk about gross margins? I'm keen for more color on your comments that new vehicle margins have normalized. Is this reflected in the first half result, or is it more of a forward-looking expectation?
A: Supply returned to the market in the June '23 quarter, and trading conditions normalized. Margins are now within the range we can expect going forward, and this has been the case for about nine months. (Nicholas Pagent, CEO)
Q: Looking at the luxury and prestige market, vehicle sales are still well off all-time highs. Is this due to structural shifts or supply issues?
A: The luxury segment, including Tesla, is close to all-time highs. We have an opportunity to compete for Tesla's market share as our brands bring in quality EVs. (Nicholas Pagent, CEO)
Q: With higher interest rates, how are you seeing competition in the finance segment?
A: Finance retention rates are improving due to high-quality lead finance rates from OEM financiers. This has been an area of strength and is expected to continue. (Aaron Murray, CFO)
Q: Can you give us a flavor of how the consumer is developing in the NEV market?
A: We now have cars arriving that can compete under the FBT level, providing a viable alternative to Tesla. The absence of CO2 legislation has been an inhibitor, but any move in that direction will improve our business mix. (Nicholas Pagent, CEO)
Q: Can you provide a sense of your new car inventory as of December? Has it fully normalized?
A: Inventory will only rise if revenue rises. We have 70 days of stock depth, which is about right. We are comfortable with this level. (Nicholas Pagent, CEO)
Q: The used car part of the business bounced back nicely. Is this growth sustainable?
A: The growth is due to the return of trade-ins. It has some legs in the second half but will normalize to 5%-10% growth rates long term. (Nicholas Pagent, CEO)
Q: Can you provide more color on the M&A pipeline to achieve the goal of $260 million per annum?
A: Acquisition multiples have declined, making it easier to make acquisitions in a normalized trading environment. We are close to acquisitions and hope to bring one to market before the end of this financial year. (Nicholas Pagent, CEO)
Q: Are there further synergies to come from completed acquisitions?
A: Yes, particularly from the BMW business in New Zealand and the Motorline business in South Queensland. These acquisitions have brought high-margin opportunities and increased our share with key brands. (Nicholas Pagent, CEO)
Q: What are your expectations for back-end revenue for the remainder of the year?
A: We expect at least double-digit growth on a like-for-like basis, supplemented by acquisition-led growth. (Nicholas Pagent, CEO)
Q: Your comment around the order book indicates lower volume but higher gross profit. Can you unpack that?
A: The cars in the order bank are more expensive, leading to higher revenue per car and resilient margins. This drives the outlook for stable like-for-like revenue growth. (Nicholas Pagent, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
