Amotiv Limited (AOV) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the GUD Holdings Half Year 2024 Results Earnings Call. [Operator Instructions] I would now like to hand the conference over to Mr. Graeme Whickman, CEO and Managing Director. Please go ahead.

Well, welcome to the earnings call of GUD's results for the 6 months ended 31 December 2023. I am Graeme Whickman, GUD's CEO and Managing Director. And I'm here with Martin Fraser, the company's CFO. As a matter of housekeeping, we'll have time at the end of the call for questions and discussions. So if you could hold your questions till then. And then there will be a recording of the call and presentation material up on the site later on. We'll start the call by Martin and I running through the key messages, the financial overview, and then I'll speak to our segment results, and then I'll hand back to Martin to cover the financial results in a lot more detail, and then we'll conclude with a quick trading update and outlook before the Q&A. So let's turn to Slide 4. Pleasingly, the results are very much in line with our expectations, and it sort of reflects the broadening earnings drivers, which we've been cultivating for a while and the group's ongoing focus on margin management. APG achieved a strong level of growth, largely reflecting the improvements in the vehicle supply and also the associated fixed cost leverage from those higher volumes. And our manufacturing footprint continues to be optimized, though we're leveraging APG's Melbourne and Thai facilities, and that drove a meaningful increase in Cruisemaster's capacity and improvements in cost. The automotive result, once again, demonstrates the resilience and the quality of those businesses, fantastic result. Cash flow was actually ahead of expectations, which Martin will cover later, and our leverage ratio is well within our target range. This strong position has flowed through to the increased investment and the likes of product development, the offshore greenfield initiatives, selective CapEx and some bolt-ons, and we'll talk about that in a second or 2. Adding further to the APG plant capacity and efficiency remains an ongoing part of our strategy and part of that investment, certainly to support the medium-term growth. Today, we announced another acquisition of Caravan Electrical Supplies or I'll call that CES, which together with the Rindab acquisition, the Vision X Sweden acquisition announced in October, both are reflective of our global aspirations and also that diversification strategy we've spoken about in the past. The fundamentals across both automotive and APG businesses remain strong, and these businesses continue to execute very well. In line with its strategy, APG continues to win OEM share of wallet excitingly. And by the Infinitev business, we continue to position ourselves for that leadership position in the NZ aftermarket for the EVs. Ultimately, the group strategy is focused on building that diversification, that resilience all centered around an automotive pure play and it has the support of a strong balance sheet to fund both organic growth and further compelling bolt-on acquisitions. So let's skip over to the next slide in terms of group. I'll ask Martin to cover that, and then I'll come back in a few minutes. Martin?

Thank you, Graeme, and good morning, one and all. Slide 5 provides the Group financial overview for the half year and focuses wherever practical on continuing operations by excluding Davey and CSM from half year results and prior comparable period. On that basis, the group delivered 8.6% revenue growth and 11.6% underlying EBITDA growth. As Graeme mentioned, APG experienced strong top line growth as OEMs either experienced or positioned for improvements in vehicle supply. The operating leverage from high volumes drove a 28.5% increase in APG EBITDA to $32.3 million. The core automotive business once again delivered a solid result, reflecting strong execution and the robust end markets that we serve. The acquired Automated business was down a modest $500,000, or largely reflecting business improvement actions and investment for midterm growth. Pleasingly, we continue to observe a broadening of revenue drivers across the group as we continue to invest and diversify. We'll unpack the Automotive and APG segments in greater depth later in the presentation. Investment efforts also reflect in higher corporate costs reflecting the increased scale of our business in terms of size and geographical spread. Underlying NPATA grew 10.5% over the PCP, reflecting a normalization of the tax rate following some one-off tailwinds in the prior year. As Graeme mentioned, the balance sheet is strong. Deleveraging continued in the half and reflected net debt to underlying EBITDA ratio of 1.7x, which is now well within our stated long-term debt leverage levels. All in all, a strong financial result in a volatile environment. And finally, an interim dividend of $0.185 per share was declared, up 8.8% compared to the PCP. I'm going to hand back to Graeme, and he will start to speak to Slide 6 and strategic imperatives.

Thanks, Martin. Well, today, kind of marks our inaugural result as an automotive pure play, given that the sale of Davey completed officially in H1. And this is really an important inflection point for us. Moving from being an industrial conglomerate to a dedicated automotive company. So a pivotable -- sorry, pivotal and yet energizing time for all of us, particularly me. We have 6 key strategic imperatives organized around 4 key areas of business. So the 4-wheel drive accessories and trailering, the Auto Elec and power management and lighting, the Powertrain, both ICE and EV, and in Undercar. And each of these 4 areas will play an important part in the next stage of GUD's ambition. Importantly, we have strong expectations of growth in our four-wheel drive and our Auto Elect businesses. And you'll see later in the presentation a more detail on the acquisition of 2 businesses, which support these 2 areas. It will, therefore, not be a surprise that further acquisitions along with disciplined greenfield growth opportunities, which I'll speak about a little more later, will be where the general allocation of our capital will reside. It will be aligned to these imperatives. In terms of sustainability, on Slide 7, we talk about the sustainability of our business and the impact we have on the world around us. It's articulated in 6 key impact areas. And importantly, there are some details of some of our outcomes achieved recently and what's currently in progress. Since we have the opportunity to speak to you in late August, we released our '23 modern slavery statement, amongst other, especially noteworthy events is the completion of our first solar installation commitment of scale on the roof of BWI, and we're studying other sites for potential expansion of soft generated power. Other key initiatives are currently underway or development include development and rollout of a group-wide paid parental lead policy and also pivoting to a different side of the establishment of our China-based Asian sourcing office, which we've just established. The latter will bring in-house work previously outsourced by APG or completed on a FIFO basis by the other auto businesses, and it gives us the opportunity to improve and vet the performance verification of suppliers through a team of locally based China staff. It also actually might expand our reach into China-based customers, who are seeking world-class components for products that are exported to markets where our products in commonplace. And that might be of interest to both BWI and I know it will be the Cruisemaster. Okay. Well, let's move from sustainability and I'll start to unpack some of the results. Let's get to automotive. Starting on Slide 9. So revenue increased just as much at over 5.5%. Particularly, the core auto businesses grew just under 7%, driven by both volume and price. Encouragingly, this continued to come from both new and existing customers and some geographies and channels, which is very pleasing. Acquired automotive revenue growth was more muted, supported by a couple of months of contribution from VX Sweden. Both VX U.S. and ECB delivered revenue growth, but the organic revenue outcome reflects our product line rationalization of Barden/Uneek from the prior year. So that's why it's more muted. The underlying EBIT margin of our core auto BUs was slightly up year-over-year, which is an ongoing positive story as these businesses continue to execute well in the face of macro volatility. Price rises that were due to be implemented at the end of Q2 or the start of Q3 were actioned and they've held, which is fantastic. The margin for the acquired businesses reflects a higher overhead and support of business improvement actions and some growth aspirations, and this investment is expected to drive future growth. I mentioned [ acquisition-related ] inventory. But if you look at it from an automotive point of view, it was stable versus June 30, and there's sort of now approximating normalized levels, which I think Martin and I have been watching very carefully and communicated as to when we felt that, that was the appropriate time and that's now rolling through. So that's, again, something in line with our expectations. I'll turn to the acquisitions in more detail, but we completed the Rindab, the Vision X Sweden in the half and coupled with today's announcement of the CES acquisition. I'm delighted with the way in which our diversification strategy is playing out as our lighting and power management categories now have a European beach head and now greater penetration of the RV market in Australia. I guess this also provides an appropriate segue to provide you an update on some of our greenfield growth initiatives with a different lens around investment. So on Slide 10, the global ambitions of the lighting and power management businesses are clearly aligned in the slide with early stages of the entrees underway in the U.S., U.K., Europe and a little bit in actually Southeast Asia, you'd probably see that for the first time. Our approach will continue to be targeted and measured as we leverage the product, complementation of BWI and Vision X, which will obviously give us new customer and new geography capability. Finally, the quiet -- I'll call it quiet, those were not beating our chest, but the quiet momentum of the Infinitev team's hover battery program in Australia and New Zealand is encouraging as we continue to position the business to capture a leadership position in the EV aftermarket. And again, just a reminder, for the full year FY '24, the investment in those initiatives in terms of OpEx and CapEx is certainly outlined. There's no new news there in that regard. So let's unpack the acquisitions just a little bit more. I'm sure we'll have some questions over the course of the road show. But I'm really pleased, obviously, with the acquisition of, Rindab, it's a Vision X Sweden. It's clearly aligned with our desire to build a global leadership position in specialist automotive lighting. The slide sort of brings to life where Rindab focuses, which is overwhelmingly and specialist automotive lighting. Rindab is the distributor of VX products in Northern Europe. They sell a catalog of VX lighting products. And again, we'll be the beneficiary of the product complementation approach, which is in play and VX USA using that base Narva lighting products, products that are designed for 1 of the sort of 4 or 5 dark lighting markets in the world being Australia and expanding that out the notion of product complementation. Rindab also expands our reach into truck OEMs, which is pretty cool, where we've traditionally been less well represented in ANZ. It also provides a potentially interesting access to some of the significant European car dealership groups. So that transaction completed on schedule, and the integration activities are on or actually ahead of schedule. Now to the acquisition we just announced today, that's on Slide 12. And it takes us to the acquisition of CES, which I'm delighted to announce today and certainly at a compelling multiple. Again, another proof point and how we're rolling out our strategy and deploying capital in a meaningful manner. CES will significantly improve BWS customer reach in the Caravan and RV segment, not just in Australia, actually have a bit of presence outside of Australia. But also our ability to sell complete power management solutions to assemblers from end to end, including premade looms rather than just elements or components as we do today. In terms of diversification, quite compelling is that there's a significant new customer base that is new to BWI and new to GUD. And the share of wallet opportunities are strong. And finally, we're also very pleased that the management team will stay on with us and we've incentivized over the midterm to make sure that we continue to see that growth in the business. So that's automotive. It's a couple of acquisitions, which I'm really quite delighted about. Let's now move to APG. So Slide 14, APG's results, certainly in line with our expectations, a pleasing outcome given the supply and manufacturing challenges. I think I've said plenty of times before. I don't think that these will bake through FY '24. So we are dealing with an interesting and quite challenging position and yet they've come forward and delivered a good result. Revenue grew by just over 15.5%, and that largely reflects the improving new vehicle volumes in Australia. Underlying EBITA grew by 28.5% to just over $34 million pre-group and just over $32 million post the allocation of the GD allocations. Higher new vehicle supply in Australia drove the better higher plant overhead recovery in both Thailand and Australia. But the opposite actually occurred in New Zealand, again, not any surprises. We've been talking about this, where new vehicle volumes declined significantly in the anticipation of the repeal of what was turned to [ U tech ]. This resulted in significant New Zealand factory inefficiency at the half, particularly Q2, and I'm sure you were following that. The impact of this evidenced a slightly softer half-over-half margins capacity was maintained ahead of the expected recovery in the volumes in H2 and ANZ, noting that repeal was effective on vehicles registered from 1st of January. Now while the broad OEM production volumes have improved, they still haven't stabilized, which again probably isn't a surprise. And this is evident when we walk through the industry data on the following 2 slides. You also got a bit of current port congestion and availability of our roll-on roll-off ships, adding to a bit of a complexity and it's extending a little into that post-production logistics area. Importantly, though -- and very important, I should say, really, the independent forecast of new vehicle demand are supportive of the continued strength. Notably, the corporate fleet renewals are still running behind natural renewal time, and that gives you another sort of fill up in terms of the support for the demand outlook. So look around the numbers, but the data and sort of unpack it a tiny bit, Slide 15. You can see that new vehicle registrations have increased markedly in Australia over the past 6 months with increases in pickups and SUVs in particular. However, when you reflect on the same data for New Zealand is a marked difference, right? It's quite a stark reduction in New Zealand. Importantly, and we've done this for the first time for our investor certification kind of look at a blended view of Australia and New Zealand, being the markets we sell into. The blended numbers show a more muted increase with pickups at a blended level across the 2 markets up by 7% and SUVs up by 8%. And then the top 20 for APG, up just over 12%, was not far to move from our overall revenue, half-on-half increase of about 10.5%. Going to the next slide, and you can see that APG top 20 detail. It reinforces the volatility on the model-to-model basis. As I mentioned, the blended ANZ top 20 was up 12%. The differentiating -- so a little bit more information for our investors this time around as well. The differentiating color also highlights where we supply both functional accessories and towbars based on the profile. So you can sort of see a bit of a distinction and get a sense of the biggest share of wallet versus the others and the ups and downs in that regard. Look, at the end of the day, the slide simply reflects the continued brand volatility in terms of performance. My view remains unchanged that it will be more stabilized, more normalized as we get into FY '25 and beyond. Encouragingly, on Slide 17, and we've shown this quite consistently is the wins. This company knows how to lend in terms of what it's trying to achieve, and I'm super pleased just to take you through some of those wins in the half. About $20 million or so incrementally -- sorry, $20 million worth of wins, which is fantastic. Most notable was the 1 of the next-generation highlights, which is due 2025, where we'll supply the sports bars, fantastic. Additionally, we managed to grow further share of wallet in the half, not for the first time, by the way, where we've seen another competitor for by the wayside. In this case, a bulbar business, and we've been able to pick up all of that OEM business and take it from that company that was going out of the business. And then finally, with some satisfaction, the slide mentions that we've received an award and what we're terming a strategic new geography. Now I'll apologize here for being so cryptic. From a customer sensitivity point of view, we can actually outline what that is but it is part of that $20 million and all of it is incremental, which is fantastic. So we will be setting up operations in a new geography. It is very much in line with the strategy we've been deploying. That will come online in FY '25. It's included in that latest dollar tally on the slide. And as I said, due to customer sensitivity, we will cover that in a bit more detail in our Investor Day, by the way, which we're seeing that will happen in Q4. So pleasingly, I can say it's part of our four-wheel drive strategy centered on future international markets. And what I say internally is sweating our engineering assets. So sorry for the guttural phraseology, but it is basically utilizing what we do at the core in terms of engineering and then spreading that to different geographies. So it's a terrific outcome. On Slide 18, we talk about APG's other strategic growth pillars. So in the half, we completed the expansion of the Thai capacity for training products, which support an expansion for the Cruisemaster market share and softening caravan. We're now focused also on the new round of integration, including the lifting the ECB productivity and capacity to address unmet demand through the Thai facility as well actually as potentially more common sales and marketing resources and actually product development cooperation. There's a lot happened in the half from an APG point of view in terms of the continuation of the wins and the continuation of the momentum. Slide 19, the slide we showed previously, demonstrates the vast product suite which supports the four-wheel drive and trailering. Addressable market, truly superior, certainly in my opinion, I might be biased, of course. And the acquisition of CES will mean we'll have further addition to this slide, and we'll make that in the next round of reporting. So I'll pause for financials there, a lot of information and part of you there, a lot of exciting information. I'll give you the mic, Martin, back to you, so you can cover off more of the financials in more detail.

Terrific. Thanks, Graeme. And I'll start us off on Slide 21, which walks us through the profit and loss. As I've spoken much of that earlier, I'll not take you through that line by line, which would be mature, but to really -- I'd like to highlight a few key points. The first is our cash operating costs grew slower than the revenue demonstrating the growth leverage, which you'd expect from a high level of self-manufacture in APG. Secondly, leverage is further evident with depreciation growing fast, slower than revenue growth. Our significant items were minor and they're mostly related to the sale of Davey, and we're truly modest given the size of the Davey transaction. Our overall financing costs are down. That reflects that we have yet to fully redeploy the Davey proceeds in new acquisitions. So that's very encouraging. As mentioned before, the tax rate is back to a more normal level, given the benefits of TCP has unwound. It also reflects the dividends received from abroad and particularly Asia are subject to withholding tax and we are streaming dividends out of Thailand because we have a very profitable business there. And by all measures, the results grew pleasingly either an EPSA or an EPSA level. On Slide 22, we outlined the net working capital position. And as I mentioned and Graeme spoke of earlier, inventories and now what we would call the sort of normalized run rate level. The level of debt factoring decreased in the half by $6.5 million, and we expect further reductions in H2 towards the more traditional levels which you've seen in years before 2023. With normalized inventory levels, we've also seen a normalization of credit levels and that's consistent with what we flagged to you previously. That also all helps to translate through the cash conversion on Slide 23, where we can see that inventory normalization has really allowed the profits to flow through in cash terms, although the unwind of some of that debt factoring has provided a slight offset. We achieved cash conversion of 93.5%. And that's as well up from the 85% we flagged as some debtor collections were collected ahead of our usual midyear levels, and that's expected to reverse in the second half. We, therefore, still expect a full year cash conversion of circa 85%, and this assumes no safety stock levels to offset potential elongated supply chains from Red Sea and Suez Canal disruptions taking -- effectively taking either containers or shipping capacity out of the market, but just increasing the cycle times for freight and effectively creating a shorter supply. CapEx is up 20% to $8.6 million, but this still is below what we flagged recently of our full year expectation of about $20 million. Graeme talked about all the exciting things we've been doing in the last 6 months. And from that, we see very many compelling CapEx investment opportunities, particularly across BWI and APG. So we may see that level of $20 million be sustained or slightly increased into FY '25 and maybe '26. On Slide 24, you can see our cash -- gross cash and debt balances at the half year. And you can see that on a net basis, the net debt is down $58.2 million on June, reflecting the sale of Davey offset by -- principally, the sale of Davey offset by the acquisition of Rindab, as well as the growth in net working capital to support our organic growth. Net debt of $344 million represents, as I said before, a ratio of 1.7x EBITDA. And again, well within that stated long-term range of 1.6x to 1.9x pre-lease accounting. I'll now take us to Slide 25, where we can speak a little bit about our debt profile. Where you can see that we have really a heavy skew towards long-dated debt, primarily seeks interest rate funding at what is in today's market extremely compelling interest rates compared to market rates. We also have an element of swapped interest and a relatively small percentage of variable interest rates. To the right of the slide, we've mapped out our debt facility profile, not the utilization of the facility. And you can see we've got a mixture of tenors and lenders. And there's no real change to what you've seen last time other than we've seen some facilities reduced. You can also see that we've got significant unused debt facilities, which positions us exceptionally well to support both organic and acquired growth. We have noted our all-in funding cost, which includes unused line fees and interest swaps. It's fallen over the last 6 months, although we have a relatively low floating debt, we have a higher level of unused debt facilities, which have been included. We're currently reviewing whether we hand back some of our borrowing facilities a little bit earlier than the maturity in December 2024, given the level of unused debt facility costs. And we'll make a decision on that, I expect in the next month. I'll now hand you back to Graeme, who will finish with both the trading update and outlook before we pass across to Q&A. Back to you, Graeme.

Yes. Thanks, Martin. So trading update. So the automotive business has seen a strong start to the second half. Garages remain busy, lead times, more akin to pre-COVID. Some garages are reporting a bit of a shift towards regular service other than major repairs, but not universal. And we're certainly pleased with the carryover momentum as it stands for the first part of the second half. APG had weaker revenues in January compared to PCP. We've got some closure of factories by Toyota driving lower replenishment sales. We see that as a deferral. You might have seen in the news around some of the concerns around irregularities in their testing. We're just working to establish the shape and timing of the potential normalization, but that will just be a move to the right. Our Cruisemaster sales, slightly weaker compared to prior January, but it was very clear the assemblers took a longer shutdown versus prior year. In terms of the outlook, I move to Slide 28. So I'll speak to the outlook probably in 3 parts. At APG positively, the OEM demand backlogs remain elevated. Although increased suppliers helping reduce the backlog, but the supply remains volatile across the makes and models. This has been elevated with the disruption to Toyota's production and consequently -- we're expecting EBITDA to be slightly below H1 before returning to a more normal shape as the temper of supply moves into FY '25. Pleasingly, the functional accessory wins and the geographic diversification I mentioned earlier on is supportive of the revenue growth into FY '25 and beyond. So that's very positive and quite excited about that. Turning to automotive. The market is expected to remain robust through the year, and the car parc absolutely continues to age in the background. We expect our investment in product development will support further sales growth. Meanwhile, we'll continue to invest in our greenfield activities, although we don't expect contributions ahead of FY '25. Across the group, we've largely hedged our FX requirement for the remainder of this financial year and price increases are expected to moderate inflationary and spot FX pressures to support margin management in H2. We expect cash conversion to track to previously flagged levels and expect to sustain a compelling balance sheet and funding position, really to support both organic and bolt-on acquisition growth. We're basically open for business for sure. Martin and I are looking forward to providing a further update as I've just mentioned earlier in our Q4 Investor Day date to be specifically pushed out yet. As you might expect, though, we're not providing guidance today given that many of the material moving parts are outside of our control. They continue to prevail. However, we will provide a trading update at that Investor Day later in the financial year. Okay. Well, that concludes the presentation of the results. I do note that in the appendices we've also provided some additional material including some automotive snapshots for your perusal. You'll see some very positive outcomes in that first half across many of our divisions and businesses, so congratulations to them. But before we go back to the moderator, I wanted to once again take the time to call out to the leadership team and worked really hard on the 2 key themes we've had in the half: Managing the macro and driving our automotive pure-play. And then to each of our employees across the varying geographies, so we wouldn't have been able to deliver such a consistently good result without their diligence commitment and efforts. So thanks to all of you, the Board, Martin and I certainly do truly appreciate your support. So I'll hand now back to the moderator, and they will coordinate the questions you have. So back to you.

[Operator Instructions] The first question comes from James Ferrier with Wilsons.

Could I firstly ask you about APG? And thanks for the color there on the various disruptions to the cadence of the ordering patterns and replenishment orders, et cetera. Could you take that 1 step further and give us some insights into how that's working through each of the different channels, whether it's the factory fitted orders up into Thailand or the dealer-fitted stuff here or even the aftermarket? Is there a particular channel that's most pronounced in terms of that impact?

Well, it's actually quite varied, James, because the way we serve each customer can be slightly different. So you might find 1 customer has got a significant factory fit and therefore, the reliance on the Thai plant is very different than, say, the Australian plant, whereas we've got some other customers who actually do quite a lot and finish at our Australian plant and ship to their parts and accessories warehouse. So there's not really a universal answer to that. What I would tell you is that what we've seen for the first 6 months, we've seen some great utilization in both our Australian and Thai plants, for sure. New Zealand has been tough, right? We know that the pickups are down more than 50%. That plant has been in its head off. As I look forward, we're seeing a bit of a mixed bag. We're also seeing port logistics play a little bit of havoc with us in more recent times, and that affects more our Australian plant. So it is a bit of a mixed bag, James. In terms of what we think we'll see going forward, it's probably a little bit more our Australian facility that will see an impact, particularly when you've got replenishment orders from 1 of our biggest customers a little bit different than what we normally would see given their issues around some of their production stops at their factories to solve their testing regime around emissions. So I think it's probably a little bit more Australia than anywhere else that we'll see in the short term. But yes, definitely, New Zealand has been the biggest one in the first half.

And I'll just follow up on that. So I'm looking at Slide 14 here. APG got revenue growth year-on-year in excess of what the top 20 new vehicle sales data would suggest in terms of volumes. So that's a good outcome. But when you look half-on-half, APG delivered 10% revenue growth, first half '24 versus second half '23, but the EBITA margin went backwards. Can you explain why that happened?

Well, primarily, it's a New Zealand situation, right? So -- and particularly, we saw a real impact and more in the Q2 period, right, where people really sat on their hands in ANZ, and that's why you saw the vehicle sales plummet because the election period came in, there was a lot of I guess, ambiguity as to [ Luxon ] was elected first and for much you always get a bit of paralysis. But more importantly, they had made an election pledge that they're going to repeal the clean car approach. And so when they got in -- they said, in 100 days, we're going to do it. And so everybody stopped at that point because they knew it was going to be repealed. And why would you spend $6,000 or $7,000 more for a vehicle that we wait. So that's why you saw the margin degradation in the half over half of particular attention in Q2.

I might just add to that, James, that the capacity utilization in New Zealand has been well under single shift capacity. And we've had a choice. If we moderated the costs anymore, we wouldn't be able to respond to a bounce in supply. So we've really had not only that sort of recovery gap in and of itself in terms of overhead, but that flexibility on the people cost -- in fixed-overhead recovery gap that we have effectively carried some people through. So we'd be able to bounce out the other side, and that's clearly less than a number taken from COVID. And we took our tactical decision to be other than we feel that's the right thing to do. Time will tell where that enables us to increased market share in New Zealand, if others haven't sustained their organizations.

And the second topic I wanted to ask about was the acquired automotive portion of the business. So earnings down modestly on PCP. And what I'd like to hear is just a little bit more color around whether that's purely a function of the reinvestment for future growth, which you elaborate on in the future slides or whether there is underlying softness in some of those businesses, whether it's in VX, whether it's in some of those G4 businesses?

No, no, it's largely around cost issue or pretty much all around that sort of cost of the future. You'll also see that our revenue was down by a bigger percent, and that's largely because we work through in Uneek/Barden and a number of things where we were getting very little or no profit. And once in an environment, a very tight blue collar resources have phased out a number of those products so we can use those resources elsewhere. So a large amount of revenue has gone out compared to the PCP. But that revenue wasn't sort of generating, it was pretty much close to generating 0 anyway. So that's the number then.

Yes. I mean giving you a practical example as a good example, let's take that to say on VX, right, in the half we've installed a finance leader, a higher-level sales leader. We've put 2 BDMs on for mining. So we're really leaning into the opportunities. And we have a good agreement with the founder that, that won't impact those earn out because we actually see this growth opportunity. We're not going to slow that down. So you've got practical examples of that nature. And then as Martin said, you've also got some other costs that are driving through in some of those other businesses.

We've also expanded the team in Vision X Korea to drive our Asian growth into Korea more fully into -- sorry, Asian growth of Vision X right across Asia Pacific. It's being responded to customer inquiries, and we've really sort of turbocharge that.

And just one final one to clarify there. Last year it had a very significant second half skew to earnings that bucket of other automotive. Is that likely to reoccur this year, a large second half SKU?

Look, I think the largest part of that will depend. I think we got some benefits last year from the timing of some of our customer direct initiatives. So we -- some -- particularly some of our larger customers in Australia, we do some deliveries by the multiple containers of time of class movers and last year's timing was pretty strong in December. So it may depend on just whether -- sorry, yes, in December. So we'll -- and June. So June will feel some leave. So we'll have to just wait and see where that sort of customer and direct business goes in June. To answer that question -- too early to predict.

The next question comes from Russell Gill with JPMorgan.

Handful of questions. I appreciate the New Zealand headwind, not just in APG, but across the overall business, which you called out at the AGM. Presumably, you're starting to see some recovery in this month and into the next month around the policy change. Can you possibly call out what you'd estimate that headwind? I guess, at the EBITA line you saw just from -- because most of its generally deferral volume. What you saw is the EBITDA headwind in the first half, just drilling in New Zealand?

Well, you can sort of see the margin impact anyway, it's something we've got in the pack. If you take it back to [ PBT ] tax in terms of the volumes, so you've seen it bounce back, that's absolutely accurate, which is very encouraging. In the month of January, the sales lost, they're actually not been analyzed properly yet. It will probably come in as the -- probably will certainly be the largest January for youth in the history of New Zealand. It might come in like the third or fourth largest month in the history. But that's all stock that's sitting there, right? It's been sitting there for a while because the OEMs have been putting it to the fence, so to speak. So what's more important to us is actually new stock arriving into now with the confidence levels that the OEMs might have. So when that new stock comes in, that's when we get to activate the plant per se in terms of the accessories. And so we're waiting to see that because we haven't seen that in January. We have yet to see that in February either. It's more about the replenishment coming through. And so I would anticipate a better outcome, but it's reliant on that stock coming through, Russell. So that's how I sort of characterize it. We actually haven't separated out the relative revenue or indeed EBIT contribution that the New Zealand has for APG. And we won't call it out for competitive reasons, Russell. It's not necessarily -- it's not -- we're not talking 50% here, but it's not 3% and 4%. So it is important to us, as you would expect, and it has a particularly disproportionate impact given the margin comment I made when you're operating a plant at essentially full capacity at static -- sorry, static capacity with that actually the throughput going on.

So I guess what you're saying is that even though the policy has changed today you're not getting the fractionalization of the factory overhead just yet even though the policy [ changed ]. So it could be a month or 2 away before that fully recovers.

Hard to say exactly, but I think that logic holds order, and that's kind of what we think will happen, but we've yet to see it.

Great. And then just continue on APG. I appreciate there's a lot of moving parts with the timing of deliveries and you're still calling out the remain on path sort of getting, I guess, the business case for the business. You've also called out, I guess, a lot of contract wins, a lot of competitors going out of business. Is it possible to maybe give a ballpark view on what revenue basically sits in front of APG today relative to when you bought it? Is it 105%? Is it 120% in terms of the opportunity on the revenue side, albeit the timing still uncertain just based on structurally what's occurred over the last couple of years?

It's a hard question to answer, Russell, because so much has transpired since we purchased it, right? You've got revenue from pricing that's been driven by our cost positions, and we've had to reflect that, particularly domestic cost inflation since we bought it priced. At the same time, we've also then had contract wins. Some of those contract wins come now, some of them come in the future. So it's hard to sort of divvy that up. And what we haven't done is we haven't scored up all of the business contracts when and said, in 2 years' time we think it's this because, again, it's going to move around. I think suffice to say, the revenue line though is moving in the right direction relative to our expectations. It is reflective of not just simply pricing for margin maintenance in terms of the cost base, it's actually moving because they are genuine incremental wins. And so it's hard for me to say versus the original business case where it will come out. But I think we'll certainly be approaching the original thoughts around the revenue range of [ $313 million to sort of $320 million ] as we move into the back end of this year in terms of run rates and into FY '25.

Maybe another way of asking it, Martin, you said you -- CapEx around $20 million, and maybe a little bit more in '25-'26. How much of that would be APG? And what was APG's CapEx run rate in a couple of years prior running into your ownership?

So quite a bit of that is actually round them up roughly. So we have -- we've been spending pretty similar to what we called out in APG in terms of CapEx. We've got some exciting prospects around potentially expanding the Thai facility. So that's what's behind, and 1 of the things behind that comment. Graeme talked about the new geography, that would be an incremental CapEx, but albeit establishment relatively modest in terms of value. But it's not all about APG. It's a broader set than that and we could pick that up a little bit more on the Investor Day.

Certainly, our investment -- that's an APG question, is actually relatively modest relative to the revenue opportunity. So the new geography we're speaking about, that's going to be single-digit millions in terms of CapEx to set up a manufacturing operation as an example. And even the Thai capacity would be, again, low single-digit millions. And we will have to front up to that, Russell, because we've won enough business and we're on the cusp of winning some more that will need more capacity in Thailand. Bearing in mind, we're also as we're working hard to try ECB, like a fully equipped to start to drive actually capacity and the Thai plant to support those businesses, which means that we reduced reliance on some of the domestic operations. So it's inevitable, and it's going to be a good return as well in terms of the investment.

Final question. I can't remember GUD result where we haven't talked FX and gross margin. From memory, you rolled off the half at -- hedged at $0.69, and we're running pretty new into the second half, spots around 64%, 65%. Can you just talk through, Martin, where the hedge position for the book currently is at the moment? What you're seeing, I guess, on fleet and things rolling off and the benefits you'll get there around there? And then how you're thinking about pricing, I guess, over the last -- past couple of months, but pricing going forward to maintain those gross margins?

Yes. Thanks, Russell. I think the hedges we did -- you talked to 69%, we're probably close to 68.5%. We've got pretty close to 90% of this remaining financial years. U.S. exposure, I just mentioned at 66%, and 20% of -- well, 40% of H1 FY '25 at sort of similar rates and we've got renminbi sort of hedged out of 47.5%, sort of consistent with that. We've got a pretty high Thai Baht hedge position, again, at a favorable exchange rate. So they're all looking pretty good and they very much fit comfortably within the assumptions we embedded in the price rises that we implemented either at the end of Q2 or at the start of Q3. So in terms of that position, we're well set. So we've got a view of currency. We've tended to do pretty well at saying these sort of prices will buy in 66%. We did that, again -- once again, we picked at the moment of Aussie dollar's strength. So I've got a view of when we jump in again. I don't think we'll jump in at these sorts of levels. I don't think we jump in again until 66% or north. Our P&L is protected for the rest of this year, partly into next year, which would -- if we have to reprice at that time, we would. So margin management feeling quite comfortable and...

We got difficult effective margin management [ that we maintain ].

Let's -- let others judge that, Graeme, but we're very comfortable with what we've done. Moving on to freight. So just to remind everyone, we have container contract in place that runs through to June '25. The cost of that has been taken into our pricing as well. We've got a high percentage of containers coming through on the contracted rates. You're starting to see spot rates move up because of what's happening in the Suez canal and Red Sea. People might say, "Help me understand that. I'm a financial person, how can that impact you?" Just to remind everyone, every ship that doesn't come through the Suez Canal from Europe to Asia, adds 2 weeks there and 2 weeks back. So that's 1/12 of the capacity of that line or that corridor that effectively comes out in terms of annual throughput and 1/12 less container availability as well. So they're starting to see impacts there. At this point, that's not encouraging for us to renew. And we'll start to negotiate our contracts, we'll pick that up as we get a bit closer to June. So if there's a significant step change there, it won't come through FY '25. And if there is a significant step change, it's going to be pervasive across the economy just because of the import reliance and home brands proportionately impacted higher than us. So I don't wish to sound snub or arrogant, but if we have to respond to that through pricing, well, I think we've got the scope to address that in FY '25 at the appropriate juncture. Our major concern on this point, Russell, at the moment is that if you take that 1/12 of shipping and container capacity out of Europe to Asia, what does that mean in terms of global capacity? What does that mean in terms of shipping reliability? Do we get more -- do we start to see the rate that canceled sailings sneak up? And therefore, do we need to assume on average, a longer lead time to procure an important goods. And therefore, do we have to effectively increase our cash commitment between order and purchase and purchase to the point of being able to sell it, which is effectively seeing inventory sneak up. So we're cognizant of that risk. It's not at this point become overly evident. And I think the other thing we see around shipping to just complete that, round it out a little bit more, is containers are remaining tight globally. So you're seeing some ships come down to Australia just to empty, to load up an empty containers and take them elsewhere. So -- and that's why Graeme said, many things are going to continue to remain volatile.

So just a [indiscernible], can you give us the back end of 2Q and then the front end of 3Q, what sort of weighted average price you put through because you've got a lot of moving parts around freight and FX, what sort of weighted average price you put through to maintain the margin?

By and large, 3%.

Russell, obviously, that profile of pricing changes from customer to customer and business to business. So it's probably 3.3%, 3.2%, 3.3%, something that's...

Sure. Sure. If it's not a high single digit, you only needed 3% to maintain the margin. That was the question.

The next question comes from Tim Piper with UBS.

Just a follow-up on APG. Sorry to keep harping on the New Zealand part. Just looking at the volume decline as we had a lot of operating leverage, maybe can you tell us to make positive EBITA through the half?

We're essentially almost breakeven in that sort of space. I don't have that number specific on hand, but that's a sort of air it would be. When you're down so dramatically and it increased actually, as the half went through, and as Martin said, we held the complete workforce, right, because we know it's a temporary phenomenon. So we're not going to find ourselves like others where they've actually made people redundant and then it can't actually come back from the lull. So yes, that sort of sort of space it was in terms of its financial impact to us. And we're still holding that, by the way. So we're still holding that workforce. And as I said, January, whilst it was a very big sales month, we've yet to see the actual throughput coming at a new level into the country where we actually get the activation of the factory.

We also -- do you make some -- partially make some tow bars for New Zealand out of Thailand, so you get a little less recovery there. And some particular brands in New Zealand source their tow bars from our Australian operations. So a little bit of sort of cross pay across Australia and Thailand as well.

And just a follow-up. If we're looking at sort of vehicle volumes over there in New Zealand, would there sort of be typical sort of lag between volumes and revenue timing differentials in the APG business in Australia?

Not quite as pronounced in terms of the configuration, meaning that you think about Australia, there's a good volume of those vehicles being sold in Australia on that -- on day 1 registration. Some of that has obviously come from our pipeline because they're our factory, but ends a little bit different. We still have more exposure domestically to that operation. But as Martin said, there is some tie and there's a little bit of Australian manufacturing that's supporting the NZ operation. So it's a very hard question to answer, probably a little bit more immediate in terms of revenue recognition and say some of the Australian registrations depending on the brand.

But we do expect a lag because deal has been sitting on stock because no one not paying additional $9,000, $10,000 to register them. So the vehicles have already been -- that you see registered in New Zealand in January, have gone through the predelivery last year and including the installation of accessories and so on. So we will see a bit more lag than we normally would do because those vehicles have been in country for some time.

And just your outlook commentary of APG EBITA being slightly lower in the second half than first half. When you look at that slightly lower figure, I mean, how material could Toyota be in the second half? And what kind of assumptions have you made around Toyota volumes coming through?

Well, the assumptions are frankly, hard to get to on the basis of -- they're not actually in a position clearly yet to decide when their production halts might finish. They're working through at an OEM level how they're handling some of their diesel powertrains out of Japan, then obviously into some of their Thai plants and other parts around the world. So I can't answer that on behalf of one of our bigger customers. We are seeing in the January period in some of the [ Board ] orders, that there was a significantly lower volume from that particular customer, and so we just reacted to that. What we don't know is we don't know the shape of that in the latter part of the half. We generally have 2 to 3 months depending on the customer. So in this case, it might be 2 months' worth of future view that might develop differently than what we thought. It's just too hard to make that assumption -- an assumption at this point. What we do know is standing here today is on the back of January and what we see in forward orders. That's why we're saying on the back of Toyota, we'll see slightly lower. Toyota are important to us. They're a great customer, first and foremost, but they are important to us because they're a high-volume customer. They don't necessarily have, as you know, the share of punctual accessories. So other customers such as a Board will obviously be more meaningful to us in terms of its share of wallet. But no, by far, a very important customer. If you think about Hilux, Hilux is one of the best-selling vehicles in the country.

Just 1 on the CES acquisition. Customer crossover or lack of customer crossover between that and the caravan businesses that we have within APG. Maybe can you just outline a couple of the key either customer cross-sell or new customer acquisitions you could get to the APG and maybe Cruisemaster business from the CES acquisition.

Well, it's kind of a 2-step here. Tim, it's a good question, by the way. It's the -- you kind of get the customer acquisition for BWI. So meaning that we're going to double, as we say in the slide -- we've doubled BWI's RV customers in 1 password. So that told you straight away access to people who are not getting. And BWI and the team, George and [indiscernible], the team there, they've taken the RV caravan channel of PWI from low single digits to multi tens of millions in terms of the channel revenue. And this just opens it up just again. And also, at the same time, it's a business that doesn't actually take some of our own products, meaning CES. So there's a lot of interest in terms of how we get that first stage of customer acquisition and crossover. And then secondarily, I'm quite pleased because whilst we're working with separate divisions in terms of we have an affordable drive activity. And over here, we have Auto Electrical, Lighting and Power activity, there are cross-divisional opportunities. So as an example, we are working and actually have 1 recently light bars, integrated light bars on functional accessories that APG has won with the OEM. And we've been able to actually win the light bar within the concession, what I'm talking about there is nudgebars and forward lighting. So if I take it back to your original question, we've got quite a number of caravan customers at APG, but it's off the low base. We're a supplier to some of the bigger ones. There's about 130 customers that were slightly working. And I mentioned, I think, in the last result that we actually got some BDM resource on ground in North Melbourne to start capturing some of those customers because we're now freeing up the capacity to the modular chassis in addition to what we do with Cruisemaster, which is obviously independent suspensions. So you could imagine the modular chassis that actually came pre-wide as an example, which is what CES do, could be a very interest to caravan manufacturers. It might be that sort of space that you start to see a step into. But that's not the immediate first prize. First prize is actually the BWI new customer acquisition and taking what our power management position in this market, which is really strong and making it stronger again by accessing another doubling of customers that are new to us.

That's great. I just switch 1 more really quick in Vision X within that acquired auto segment, obviously, a pretty decent chunk in an exciting global growth opportunity. Can you maybe give us a sense of revenue growth rate in Vision X at the moment? And the second question, obviously, there's been some reinvestment there. So how much of that margin, some dilution within the acquired or those part is being on the reinvestment side of Vision X specifically?

So firstly, from a revenue point of view, the ECB and VX grew in the acquired group, I'm talking top line now. The top line growth slowed a little bit, but that was more about timing than anything else in terms of customer orders. You might remember that there's a good portion of their business. It's a very discrete in terms of customer solutions. And so they're ordering patterns, sometimes can move us around so it can be but choppy in that regard. But we're seeing great strength in terms of mining. And as Vision X in Europe starts to spit because they were actually a little bit slow because of some of the challenges in Europe over time, we're starting to see orders pull through there as well. So I feel confident in terms of the revenue there. In terms of the reinvestment, I don't have a number to mind. I have a quantity of FTEs and things like that, that sit in the back of my mind. And OpEx cost in terms of exhibitions and stuff like that. So we've increased the workforce that are revenue generating ultimately in time by 5, 6 individuals. And on top of that, we're reinvesting in some of the shows we're going to because we have to actually get out there and demonstrate the product complementation opportunity on the way through. So I'm not talking obviously CapEx there because that's a different conversation. And we've got that -- and by the way that's what we're seeing open light bars being launched at the International Fire Show. So it's hard to give you a specific basis point number in terms of the reinvestment, but it's relatively material. It's not around the edges.

Are there any sort of small businesses in there that would be considered for divestment still?

No, no. If you think about the -- you might have heard me talk about 2 thematics this financial year, 1 is managing the macro and 1 is driving the auto pure play. If I raise back last year, the 2 thematics were manage and macro and delivering our portfolio vision, meaning that we wanted to get our portfolio in the shape that we felt was strategically sound and also aligned to where we see our future. Part of that was becoming an automated pure play. We sold Davey. Part of that was exiting CSM. So what we've got left now is what we want. And now our job with a high degree of confidence is start grow those businesses. Some of those have been manufacturing hampered in terms of capacity or issues of labor. Some of those are around product investment. Some of that's about geography. So long answer to your question, what we have as it stands today, all represent opportunities for us to grow.

The next question comes from Sam Teeger with Citi.

First question, given the APG outlook might imply it may take a little bit longer than expected for earnings to return to the business case. Just keen to understand how that impacts your thinking around the right time to make transformative acquisitions, especially now given your balance sheet is in pretty good shape.

Look, I mean, the situation where maybe a slightly lower H2 is related directly to replenishment orders, right? So that's not a drag on an investment case per se if you think about it at a high level. We just need to react to some lower orders because of another issue sitting with 1 of the very customers that will just push maybe a little bit out. And maybe it starts to come back in a normal replenishment order cycle in the back half, but it really depends, very hard to predict at the moment. In terms of -- I'm not worried about that, certainly not determined around our investment case either, Sam, given just how much we're winning as well. In terms of how that relates to future transformative, look, we have been clear around our need to demonstrate that we can deliver that even if it was at the run rate. If something came that was strategically compelling, made a lot of sense and our shareholders were supportive, then that's something we would consider. Does that mean we're going to wait until we print an $18 million number at the end of the financial year and is a strategic opportunity? We debate that, but we wouldn't debate that unless we felt that the run rate was where it needed to be. That's probably the distinction there.

I just want to add, too, Sam. Sam, it's Martin. Just 2 things to add. In terms of managerial bandwidth, APG, fully integrated. Yes, we've got some short-term operational challenges. They don't meet Graeme and I and our key tenants to roll up the sleeve. So we've got bandwidth for further acquisitions, whether that's bolt-on or transformative. And on your second point, one of the great things about a road shows, it gives us an opportunity to get some feedback from shareholders. So we're very much going to listen to shareholders as we go around in the next week and get feedback from them at their point of view of whether they think, "Hey, guys, you prove you do acquisitions as well. We're comfortable with the balance sheet. Don't get head up about publishing a certain number or a certain run rate get on with it. So we'll be very much listening to that feedback from our shareholders over the next week.

Excellent. That's clear. And do you mind please helping us understand just when you say you're seeing a bit of a shift from service to major repairs. Just what you mean when you say major repairs, what you're referring to? And I guess as that kind of shift plays out, how should we expect that impacts sales and margins going forward?

Look, I mean, we just made that comment because that's some of the anecdotal feedback. I mean, a major appear like a complete engine real overhaul as opposed to a normal service in terms of wear and tear. So -- and it's around the edges, Sam. So I'm not really sitting there too concerned about that as it stands today. You might see some of our businesses like maybe AA Gaskets that perhaps in the past have been a recipient of an engine block replacement, so you've got Gaskets to top on that. But really, the number of our businesses, as you know, are very much in that service and that wear and tear space. And as you know, heavily nondiscretionary. So as I said in the outlook, I'm feeling very comfortable with the automotive businesses and I wouldn't say anything different. So feeling positive.

Excellent. And then last question, just in terms of the geographic expansion for APG supply that you mentioned on Slide 17. Just keen to explore this a little bit more. How much of this is a function that Thailand is running at capacity? Or how much is a function that you want to move closer to the end consumer? And then as you're starting up in the new geography, what impact would that likely have on margins and overhead recovery for the broader APG business? And do you have customer commitments in whatever region you want to go into already? Or is it more you build a plant and then you try and get the customers?

We have some customer commitments, but we have to be very sensitive around that. This is something that's right from the outset of the business I've been very keen to investigate. And it's very straight bang in the middle of the warehouse around what we said around taking future international opportunities. That guttural term I mentioned earlier on around sweating the assets, we are engineering products for global programs. And often, Australia and New Zealand are often some of the first launch markets in terms of the plants. And therefore we have a sequential advantage versus other competitors around the world because we've actually designed and engineered the product and set these reports in these other markets. So to my mind, it's basically sweating those existing assets, in this case, engineering and we're putting the plant in place in a different geography where we already have secured a customer contract. And that will then become a springboard for actually replicating what we do in Thailand and in another geography where we have other major customers there that we may be able to capture some business. So it's an exciting opportunity. I know we're being a bit huge being bit cryptic, but it is something that's quite important in terms of what the way we see the business going forward. And then in terms of margins. Look, the startup CapEx is not horrible. So that's obviously not a margin comment, but I just want to get that out there. And in terms of the general margins, there should be no reason as the business kicks into gear. By remembering the first part that the margin shouldn't be in a similar sort of space. We just need to make sure that the productivity and the throughput is at a level we're satisfied. That first little period, obviously, it will be a bit lower. That's understandable, but then I think we'll get more productivity there anyway. So all in all, quite compelling from a strategic point of view.

It won't take any volume out of our Thai plant or Australian plant. This is incremental volume, and therefore, no impacts on overhead recovery elsewhere globally.

And should we be thinking about it as you will be locating yourself in a lower cost developing country adjacent to a developed market?

Look, if we answer that, as we said before, we're not in a position to talk about the customer. If we started to answer that, you're smart enough to probably get it down to 2 or 3 scenarios. So unfortunately, we're not going to do that, but it's certainly not going to be in a country with Australian type labor cost for direct staff, that much, I would say.

The next question comes from the webcast. Alex McLean asked how material is the NZ market to the APG business under normal trading conditions?

Look, that obviously was a question asked a little bit earlier, and we haven't broken out in the past that direct contribution that NZ provides and we won't. But I can give you some sort of context. If you looked into our accounts in the past, you could see that the NZ revenue in an automotive context was generally between 7% and 11%, 7% and 12%. That's an automotive context. The New Zealand contribution for APG probably perhaps in those bounds of its contribution. But obviously when the plant -- so at a top line -- and if you think about the bottom line though, if a plant is operating at deeply poor recovery, then you know that it's got an over-indexing situation as the recoveries push through or don't push through, so to speak. And so that 7% to 12%, obviously, will be amplified at a revenue level down to the bottom line. So that's probably about as comfortable as I want to get in terms of the direct contribution, but hopefully, it gives you a sense of its impact.

There are no further questions at this time. I'll now hand the call back to Mr. Whickman for closing remarks.

I'd like thank you for the questions. I look forward to the Road Show in sharing in more detail some of the good results from the first half, particularly some of the strengthening fundamentals and also some of those wins we've spoken about because this augurs very well for the business going forward. I'm really satisfied in our efforts in terms of margin management, some of the growth in the core automotive, the way we've been able to respond to so many of the macro challenges and yet we still keep our heads above water in terms of management versus effectively and at the same time, not diverting away from our strategic initiatives and strategic imperatives, and you can see evidence of that in some of our acquisitions. We spoke about acquisitions, clearly, we'll be deliberate and we'll be very cautious around our acquisitions. Bolt-ons are definitely on the table, and we will deliberate about anything transformative because we need to make sure we honor our commitments in a way that we feel that we walk away with credibility. At the same time, the product development activity yields results, and we're seeing benefits in terms of some of those new customers through product development. So I'm very satisfied with the way the first half has gone. Yes, we have movements up and down, which we have to sort of bolster against. But fundamentally the business is in good shape. And fundamentally, the business is pointed in the right direction. Fundamentally, I see everything, but at all but upside as we go forward. So with that, thank you for taking the time to listen, and we'll chat with you on the way through in the next week or so. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.