Autosports Group Limited (ASG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to Autosports Group FY '20 Full Year Results Conference call. [Operator Instructions] I would now like to hand the conference over to Mr. Nick Pagent, CEO. Please go ahead.

Thank you, everyone, for joining this morning, and welcome to the 2020 full year financial -- our full financial year investor presentation for Autosports Group. My name is Nick Pagent, and I'm the CEO of Autosports Group. Joining me today on the call is Aaron Murray, the CFO of Autosports Group. This morning, we'll start with a short presentation on the financial and strategic performance of Autosports Group over the last 12 months, and it will include the impacts on our business and the responses to the COVID-19 pandemic. Following the presentation, I'll open up the line to any questions. As we move through the presentation, I will, where possible, note the relevant slide numbers for those of you who are following the investor pack, which we lodged this morning with the ASX. If I start on Slide 4, and preface the slide by saying, over the course of the 2020 financial year, it has been the most difficult and most volatile car market that I have seen in my 25 years of being a car dealer. The principal reason for this has been the impact of COVID -- the COVID-19 pandemic and the related shutdowns and the reductions in the movement of people. Over the course of the financial year, the total new car -- over the course of the financial year, let me be clear, the total new vehicle market has contracted by 14%, 20% was the contraction in the period January through to June. The contraction peaked in April, where the market recorded a decline of 48.5%, which was the biggest decline ever recorded in the history of the VFACTS industry data. Within that framework, the 2020 financial year highlights for Autosports Group a statutory revenue that was actually up on 2019 by 1% to $1.7 billion; a statutory loss in the business at $102.4 million, which was impacted by noncash impairments to goodwill, the recognition of the AASB 16 leasing standards and the impact of acquisition amortization. On a normalized basis, the business recorded an EBITDA profit of $44.3 million and a net profit before tax on a normalized basis of $23.1 million. The business generated strong operating cash flow through the year of $55.2 million, normalized, of course, for the AASB leasing impact. Throughout the year, Autosports Group's Luxury & Prestige brand focus and East Coast strategy has remained focused and relevant, as the luxury market outperformed. We executed high-quality acquisitions at Mercedes-Benz at the Hornsby and the Trivett Alexandria business. These acquisitions were on strategy, well priced and are performing well. The business remains COVID-prepared, but, importantly, well positioned for future consolidation opportunities as we move through the crisis and out the other side. If I move now to Slide #5 and talk about the financial results briefly. Firstly, the normalizations, the noncash adjustments include the impairment of $109 million for the full year. That incorporates the previously announced in February impairment of $53.8 million at the half year and an additional impairment for the full year of $55.4 million. These impairments principally relate to a change in the weighted average of capital rate and the effects of uncertainty related to the COVID-19 pandemic. The full details of the impairment are in this pack on Slide 32, with our ASX announcement on the matter, and also can be found in our full financial pack. The adoption of the AASB 16 leasing accounting standards is also outlined on Slide 29 in the appendix of the pack, but the basic impact to the financials was a negative impact of $5.2 million at the profit before tax line and a positive impact of $33.9 million of the EBITDA line. Acquisition costs of $0.6 million through the year are relating to the acquisitions of Mercedes-Benz Hornsby, Sydney City Prestige and Trivett Alexandria; and $1 million from the discontinued Fiat and Alfa Romeo franchise that we concluded during the year. Acquisition and amortization relating primarily to our pre-IPO acquisition amortization was $4.8 million on a pretax basis for the year. On a normalized result, the revenue of $1.7 million was particularly pleasing given the COVID interruptions to the year. It was driven primarily, of course, by the quality acquisitions, which contributed $141 million of the revenue for the year. The group's gross profit of -- at $265 million for the year was $8.8 million lower than last year, predominantly on slower trading through the March, April and May period; a slight change in the back end revenue mix; and some appropriate higher vehicle provisioning. The acquisitions delivered us 18 -- $19 million in additional OpEx. When I -- when you look on a like-for-like basis, however, OpEx was substantially down for the year. There was a $23 million reduction in the year -- in the second half of 2020 in like-for-like operating expenses. We'll talk a little bit later about the makeup of that, but it does include the support of the government in the JobKeeper program. Importantly, as well for the year, we were able to, with tight inventory management, reduced our total stock levels by $61 million in the second half of the year, which drove down our interest costs by $2.4 million through the year. We turn to Slide 6. I'll try and give you a feel for the volatility of the 2020 financial year and some of the outtakes and learnings that we have taken through the year and we'll take into 2021. In the first half of 2020 financial year, the new car market was down to its lowest level since 2011 on what was then 22 months of consecutive falls. But for ASG, the luxury market has started to return to growth from the -- and was growing from July through to September, and our business was up on the prior corresponding period at the half year in terms of revenue, in terms of gross profit generation, in terms of net profit before and net profit after tax. We were pleased to have made key acquisitions in the Sydney market, Mercedes-Benz Hornsby and Trivett Alexandria. The brands were 100% luxury-focused, well-priced and strong businesses. As we turned into the second half of 2020 financial year, the January and February market tracked on target, and our order write was good. The impact of COVID-19 started in March and hit the business hard around the 20th of March. Revenue, sales inquiry, service bookings and parts sales were all impacted. Revenues were down during the start of COVID by over 50%, with some weeks hitting as far down as 70% on the previous week from the previous year. Indeed, the total market for new vehicles was down substantially. The market was down 17.9% in March. It was down 48% in April, as I said earlier, and 35.3% in May. However, from May, we started to see elements of the health crisis abating, and we saw the business rebound strongly. Late May improved, and June exceeded expectations. Indeed, so has July, and August is tracking well for us at the moment. So what did we learn during the period? What we learned, which was comforting, was presented with huge volatility. Our business is incredibly resilient. We were able to run through the period and increase our total revenue and hold our gross profit up to a very strong level. Our strategy of being with OEM financiers is a correct strategy. It's paid off during the period with liquidity support from our financiers and an alignment of purpose. Our decision to act early and in a decisive manner when the COVID-19 started, to stand down 30% of our workforce worked. It allowed us to drive down our expenses, whilst retaining the key asset of our business, which was our high-quality and experienced workforce. By June, as demand was recovering, we were able to return approximately 17% of the workforce, more than half of the people that have been stood down. That return of the high-quality people that were inside our business helped drive the business to a growth in revenue through the 2020 financial year and have us incredibly well positioned as we come through the crisis. We have retained, of course, the strongest asset that we have, which is our people. We were helped undoubtedly during the period by the impact of JobKeeper. It worked, as it supported the nearly 500 staff that was stood down and allowed them to get paid and allowed us to have a good recovery when the market reopened. But for the impacted JobKeeper, many of our staff would have continued to be stood down for longer, or worse may have had to be made redundant, hurting our opportunity to rebound strongly in June and July. As we enter 2021, we're well placed with key staff in place, revenue and gross profit returning and order write running strongly. We're also helped during the period by the strength of the luxury brands in the luxury market, which outperformed the rest of the market. We were helped by having a diverse geographical footprint. Queensland outperformed during the period. New South Wales was strong, and Victoria has had a tough period. But if we have a look at the V-shaped recovery we have seen in the market, we have got strong hopes for how Victoria will come through the difficult period they're in now. All of these things drove down our expense base, a good portion of which will carry forward into 2021 in the form of lower overall OpEx ratios for the business. During the period, operating cash flow and liquidity remains strong. Finally, we're relieved to see the V-shaped recovery in the new car market. Customer inquiry and vehicle demand remained solid during the period, even when we weren't able to deal with our customers because we were closed. I'd like now to go and ask Aaron to spend some time going through the detail of the 2020 financials, the trends, margins, cash flows and balance sheet. And then I'll talk a little bit more about the strategy and the expense reductions that we undertook during the year. Aaron?

Thanks, Nick, and good morning to everybody on the call. If we move to Slide 8, financial trends. In what was a strong growth period in the new vehicle market over the FY '15 to FY '18 period, ASG, through a mix of organic and acquired revenue, has shown consistent revenue growth. Despite a falling market through FY '18 to FY '20, ASG has maintained its revenue through strategic acquisitions. ASG's current portfolio is well positioned for any future market growth. Historical EBITDA through FY '15 to FY '18 has also experienced strong historical growth in what was a buoyant new car market in that period. Over the FY '18 to FY '20 period, ASG's EBITDA has been impacted by a combination of acquired OpEx, a declining new car market and a number of one-off events, such as WLTP, quarantine issues and COVID-19. Over the FY '18 to FY '20 period, ASG has added an additional $119 million of OpEx through acquisitions. And through the FY '20 period, we have managed cost reductions of $23 million, putting ASG in a good position to restore EBITDA margins. If you move to Slide 9, our revenue bridge. ASG's FY '20 revenue has been maintained through strategic acquisitions, providing $149 million of additional revenue. This, along with $11 million of additional revenue coming through prior year acquisitions in greenfield sites, have offset a decline of $153 million in like-for-like revenue. If we move to Slide 10, margin overview. ASG EBITDA and PBT margin has been consistent through FY '14 through FY '18, with the FY '20 margin impacted by lower stock turn in H2 driven by COVID-19 lockdowns and management's decision to reduce stockholding through the uncertainty of COVID-19. ASG's gross margin continues to track at reasonable levels of 15.61% for the full year, but down to 14.7% for H2 2020. Additional inventory provisioning of $6.4 million in half year 2020 has negatively impacted the full year gross profit margin, along with a revenue mix decline in higher-margin collision and parts divisions due to fewer vehicles being driven, resulting in less deliveries. Parts revenue is down $9.9 million on prior corresponding period, negatively impacted due to the wholesale customers being closed through the COVID lockdown. Slide 10, our cash flow. Strong operating cash of $55.2 million, which has been normalized for AASB 16 impact, has been driven by operating profits; $32 million of ATO deferrals; OEM financier support with capital repayment holidays of $3.5 million; the cancellation of a $3.8 million interim dividend. The company increased its borrowings by $13.4 million predominantly to fund the real estate acquisition of Mercedes-Benz Hornsby, the establishment of a greenfield collision repair business at Silverwater, along with a number of showroom upgrades and workshop expansions. With outgoing payments over the FY '19 final dividend of $6 million, payment of $7.8 million in acquisitions and payment of $27.2 million in PP&E resulting in a closing cash position of $38.8 million, up $27.5 million from December '19. In FY '21, there will be no final FY '20 dividend declared for payment, and we expect to spend around $7 million for essential showroom fit-outs and workshop expansions. Slide 12 and 13, liquidity and balance sheet. ASG's liquidity strengthened by an increase in cash of $24.7 million on December '19 and supported by an improved bailment to stock ratio, creating $20 million of extra cash available. ASG secured -- increased bailment facilities of $60.8 million and additional new working capital facilities of $14 million throughout the period, leaving the group with a total of $223 million undrawn finance facilities. 97% of Autosports Group's corporate debt and 100% of the bailment debt is funded through our OEM financiers who have been extremely supportive throughout the COVID period. Corporate debt has increased by $27.8 million over the last few years to fund a number of property additions. Net debt has decreased by $18.3 million due to strong cash management, deferred ATO debt and supportive OEM financiers and lending laws. Corporate debt has increased $27.8 million over the last few years to fund a number of property additions. Real estate property of $32 million now underpinned the increase in corporate debt. ASG has improved its balance sheet position to ensure its future rate, whether it be defense of future COVID-19 outbreaks or to take advantage of consolidation opportunities. I'll hand back to Nick to go through the rest of the deck.

Thanks, Aaron. I just want to turn to Slide #15 to talk just briefly about expense management because expense management relates to a couple of things. On a defensive basis, of course, during the COVID-19 period, we wanted to have the lowest expense as possible. But on a future basis, we wanted to make sure that any expense reductions that we made did not impact on our ability to grow in the future and did not damage the business. So through the period, in the first half of the year, like-for-like expenses were flat, up by just $2 million on the prior corresponding period. Our expense reductions have largely been in the second half of the year, which were down by $23 million, as I indicated earlier. The expense management was largely a reduction of variable expenses in people. As I said earlier, approximately 30% of our staff was stood down on March. At that time, prior to JobKeeper, when we took that decision, we expected a monthly saving through that period of $2.7 million. We decided at that time to stand down people and bring them back to work as the crisis went through because of the asset that the people were to our business. Our business is in luxury goods and luxury brands. Long-term, high-quality people are essential for our business, and retaining them was a high priority. The introduction of JobKeeper, which was very -- which helped us enormously in April, generated through the period $13.3 million in support for those -- for the 494 people who were stood down, but also the people who were able to stay in work, working essentially to bring the 400 people back. As of today, we have 8% of our workforce stood down that's primarily in Melbourne. We have 5% permanent headcount reduction in the business, and that's likely to carry on into the future. Issues that have supported the expense reductions, like small reductions to the key management personnel, salaries and contributions from the Board; rent abatements during the first half of the year, some of which will continue on through the second half of the year. And indeed, rental negotiations that are long term in terms of reduction have all combined to produce other expense cuts of around $5 million, which we expect will continue throughout 2021. The full year -- of course, JobKeeper continues in the business until September for Autosports Group. If I move to Slide #16 to look at our performance versus market. Whilst we recognize delivery -- revenue only on the delivery of a car, vehicle order write remains a key bellwether to the future health of our business. The chart on Slide 16 shows the total market performance on a month-by-month basis through the period from January through to July. It then show -- overlays the luxury market, which we can see is outperforming the total market over the period, and the red line is the Autosports Group order write versus prior corresponding period. The key outtakes are, firstly, the V-shaped nature of the graph. The market dipped badly in April, and the recovery has been strong. And the recovery has been stronger in order write than in deliveries, and the recovery has been stronger in the luxury market than the broader market. These things are positive signs for our business. In June, the total luxury market was 30% up on the previous market just. For that month of June, it was a strong number. As we go through a level 4 lockdown in Melbourne, the V-shaped effect of this bounce back gives us some confidence that we will experience that effect in Melbourne. And what we've seen so far through August is that overperformance in our Queensland and New South Wales businesses is offsetting difficulties in Melbourne. If I move to our strategic review on -- overview on Slide 17. This slide is to show how well Autosports Group strategy is positioning it to come through the COVID period. Firstly, and the first graph looks to the new vehicle revenue split by brand. This has been a heavy focus area for us over the last 5 years. It's been a focus that we've talked about quite often, with East Coast cities and luxury brands. Over the course of the last couple of years, we've talked often that 83% of our total new car revenue comes from luxury brands. And since 2016, we've improved the mix by adding important brands like BMW/MINI, Land Rover and Jaguar; having super luxury brands like Rolls-Royce, Bentley, Aston Martin, McLaren and Lamborghini; and deepening our relationships with Mercedes-Benz. These things have given us resilience and exposure to the right part of the market. On geography, as you can see from the second chart, 21% of our revenue is generated in Victoria, which is currently in level 4 lockdown for another couple of weeks, and 79% that comes from the markets of New South Wales and Victoria. By asset over the period, as Aaron mentioned earlier, over the last couple of years, we've added $32 million in property assets to strengthen our balance sheet. The Melbourne lockdown, which is going on at the moment, has led to declines in sales inside the business of up to 50 -- of over 50%. We are open for sales and for some servicing within the guidelines of the Victorian government. We are running better than we did at the start of April because of the learnings that we've had in contactless sales processes, and I don't mean by buying online, but I mean inquiries online and quality service from luxury experienced staff talking to people and doing it early with combination of online and over the phone. I'll move to Slide #18, just to give you a quick overview of the market. The slide shows pretty clearly the luxury market and the outperformance of the luxury market over the financial year. Total market, as I said at the start of the presentation, 13.7% down; luxury market only down 1% during the year. During the COVID period from April through to July, the total market has been down 24%. Luxury has been down only 8%. Indeed, over that period, the brand of Audi has been up by 16%; BMW, almost flat, just 1% down; and Mercedes-Benz at 11% down during the period. The key acquisitions during the period, Mercedes-Benz Hornsby and Trivett Alexandria, are outlined below in terms of cost and the revenue they contributed during the short period post settlement. If I move now to Slide #19 to give you a short update on other key revenue drivers for our business. One of the key things in our business is we're not just a new car business. We are a business which has diverse revenue streams, and those revenue streams continue to bring us resilience. The used car market has been strong as we've come out of the COVID period. We've grown 2.4% during the year in used car revenue, despite the COVID interruptions. Over the last couple of months, what we've seen in shortage of supply, and that shortage of supply has driven up prices. That has driven up gross margins inside the business, and demand continues to outweigh supply at the moment. We believe we've got a critical advantage in sorting used cars, and that critical advantage is the strength of our new car business, which generates the trade-ins. In service and parts, we grew 3% through the year in service. Service revenues were impacted as well as new car revenues during the April to May period, and sites individually were impacted between 10% and 25%. However, despite those challenges in revenue, the gross profit margins continue to be resilient, and service rep volumes rebounded strongly in June. Parts revenue, as Aaron noted earlier, was down, impacted by trade customers being closed during April and May. Panel was affected during the year, and our collision repair business declined by 5%, almost entirely driven by the lockdowns in April and May. All our sites remain profitable, and we've opened our new Audi, Lamborghini and Bentley approved facility in Silverwater, and we expect these sites to bounce back strongly post COVID-19. We have 2 sites in Melbourne, which are currently affected by lockdown in our panel business. If I move now to a recap before we open for some questions. Firstly, on Slide 21, the business delivered revenue, EBITDA and net profit after tax, which was optimized in a challenging new car environment. We were supported by strong operating cash flow of $55.2 million. We saw operating expenses drop off the back of a $23 million reduction in H2 2020 financial year expenses. May and June trading recovered strongly as level 3 restrictions relaxed. The luxury market is outperforming. The acquisitions of Mercedes-Benz Hornsby and Alexandria were on strategy and well-priced. We remain well prepared and well positioned. To move to our focus areas for 2021 are: continue to be the focus on the health of our staff and our customers during the pandemic as we run through that; to maintain the good work that we've done in strong cash preservation and liquidity disciplines; to maximize revenue opportunities and take advantages of any improvement in retail conditions as COVID-19 restrictions ease; to develop further synergies and cost-out initiatives to drive improvements in our OpEx ratio; and to position the Melbourne business for a strong rebound when level 4 restrictions are lifted. The outlook for the year. It remains too uncertain to give firm guidance for the year, but what we can say is that July and August tradings has been above expectation, particularly in New South Wales and Victoria, and that has offset the impact of the Melbourne level 4 lockdown, so far. We expect demand for vehicles to remain strong, with sales bouncing back strongly as restrictions are lifted. We can't impact when restrictions are going to come on and what the response to COVID is going to be on a wider basis, but we feel confident that demand will be there for vehicles. We expect the luxury vehicle market to continue to outperform the total vehicle market in 2021 financial year. And all of this, we'll continue to have a consolidation environment that will be well conducive to world-class acquisition opportunities. If I now throw the call open to any questions that anyone may have.

[Operator Instructions] Your first question comes from Tom Godfrey from UBS.

Can you hear me okay?

Yes, we can, Tom.

So maybe just first question. Can we just start with what you're seeing in terms of the current operating conditions? Can you talk us through what you're seeing in maybe just New South Wales and Queensland through July and August? And that sort of 25% order write you saw in July, what -- just I'd be interested in your thoughts in it. What continues to drive that strength?

So a lot of it has been -- as you can see from the graph that we showed you on order write, order write has continued above delivery rate. So our order bank has some -- has been growing during the period. So we both had good solid inquiry coming through. A good sales write, but the sales write has probably exceeded the delivery write as well. So we're building up a reasonable size of order bank through our Queensland and New South Wales businesses. It's been tough in August in Melbourne, undoubtedly, and for good reason, but we've been pleased with the incredible performance of our staff during this period and their capacity to continue to write vehicle orders during the lockdown. We won't be able to deliver them in the month of August, but there'll be some demand coming through in the final quarter of this calendar year and some deliveries coming through on the basis of the good work they're doing now, Tom.

Got it. And how much, if any, is the sort of disruptions to the global supply chain impacting your ability to fulfill orders at the moment, Nick?

Yes. It's certainly not fulfilled -- not interrupting our ability to fulfill orders. Just the timing of it is impacted. And you can really see that -- see it on the slide that we -- on the -- that we showed, you can see the July market and the July deliveries was well below the order write uptake. So there was some weakness in a couple of luxury brands' ability to supply in the months of July and a little bit into August, but the order write behind it is strong enough for us to feel pretty confident through the period.

Got it. Okay. Next question just around the OEM rebates. Clearly, that $13 million unwind in fiscal '20 was a big impediment to sort of profitability and earnings growth. Can you just sort of step us through how you're seeing targets set for fiscal '21? And should we expect you to be able to sort of maintain that $54 million you recorded in fiscal '20? Is that a reasonable sort of starting point?

I think it is. Two main drivers on that, we'll take -- having discussions in the last -- in the next 12 months. Our OEMs have been incredibly supportive during the time. And the second half -- we missed some takes in the first half. The second half out unwind was predominantly driven by the huge stock reduction that we undertook during the period. We bought nearly $61 million less cars than we delivered, and so there was less money for the OEMs to pay out because they didn't sell us as many cars, unfortunately, during the period. It was a prudent thing for us to do to look after our balance sheet and to look after the business and set ourselves up well through 2021. And as we start restocking the business, those numbers will start to look a little bit better on the OEM KPIs.

Okay. That's clear. Maybe just next question just around the cost base. Obviously, there's a lot of moving pieces in the second half. Can you just sort of give us a guide about how we should be thinking of that into fiscal '21, the case of the moving pieces, just that $5 million permanent reduction you've called out in OpEx and then also a similar sort of JobKeeper contribution?

Yes. So JobKeeper should be similar, although you can see from what we've said here that there's a 5% reduction in staff, and that's -- in total staff for the business, so you can expect the JobKeeper number that could be going down by around that. And I think that's the main driver from that side in the first 3 months of the year.

Got it. And just to clarify, that $5 million term reduction in OpEx you called out, is that an annualized figure?

Yes, yes. That's an annualized figure.

Okay. Got it. That helps. Maybe just last one for me. Can you talk a bit about your F&I penetration? In the second half, you did sort of early access circle and a few of these other sort of stimulus tailwinds impact that. Just what you're seeing around your financing.

Well, Thomas, if I just direct you really quickly to Slide 28 in the appendix. Finance was good for us in the last year. Our new car revenue was 1.1% up. Our finance and insurance revenue was 12.7% up. The OEM financiers were fantastic during the year in having proper call for action to being less volatile in their buying criteria and supporting their customers very well during the time. And having the support of our OEM financiers allowed us to increase our penetration slightly during the period.

Can I just add to that, Nick? Like-for-like sales were down. Like-for-like finance revenue was 6% actually.

Your next question comes from Anna Guan from Wilsons.

And firstly, obviously, well done on a resilient result in quite a challenging environment. A couple of questions. So firstly, if I can start with the GP margin in the year. So your comment earlier around OEM rebates, obviously, partly explains the GP margin decline. But what degree has April and May trading been a drag in terms of GP margin? I guess, your focus back then would have been turning over inventory instead of sort of retaining margins.

Yes. It hasn't really been a drag at all, and that's where the drag has come from is the mix of revenue during the period. And you'll be able to dig that out by going -- looking at first half revenue mix between our departments and second half revenue mix. Service and parts were down during the second half of the year because we weren't able to sell the hours, as we were locked down. It bounced back strongly afterwards, and service and parts have a much higher gross profit mix. So that impacted us, a mix of revenue. We were impacted, as well, as I said earlier, by deciding to take on some additional provisioning during the period, which has been prudent, and we've called that out. That was a movement of $6.4 million in additional vehicle provisioning during the 6-month period. And of course, yes, we did have lower purchases from our OEMs, which did drive down our KPI bonuses to some extent.

Yes. Okay. That's helpful. It was good to know, actually. And then just a clarification in terms of the $5 million annualized savings that Aaron mentioned. Is that -- does that include the 5% permanent employee reduction? Or is that in addition to that?

No, it's excludes -- it's on semi-fixed and fixed expenses. It's predominantly marketing costs and some real estate costs.

Yes. Okay. That makes sense. And then maybe lastly for me, so other people can ask some questions, too. I thought, in the outlook commentary, you sounded quite upbeat in terms of the acquisition environment, which probably makes sense, I guess, in the current environment. How are you thinking in terms of the funding of it, I guess, considering the uncertainties or the volatilities in the next 6 months?

Yes. So it's a couple of drivers on that. And firstly, we feel pretty good with our cash production at the moment, and that's been good. And if we're on track, that will be good. It's one of the reasons that we have suspended or canceled the second half dividend -- or not issued the second half dividend. We wanted to make sure that we have cash on balance sheet for any issues that arise with COVID, but also to have kind of a little bit of cash there if we don't need it to go and use for this sort of growth opportunity. So that's one of the reasons that we've done that, to preserve capital for growth. We think the OEM funders will be supportive if they're the right things, and we think well priced means the type of acquisitions that we've done this year. And this year, we've been able to do them with cash.

[Operator Instructions] Your next question comes from Matt Johnston from Macquarie.

Can I just start with the second point in the outlook slide with the July and August trailing behind expectation in New South Wales program? Can I just clarify, is that a full offset? Or is it helping somewhat offset Melbourne?

So in July, more than a full offset. And August is not finished yet, but I expect at least an offset in August.

Okay. Great. And is that just on the volumes?

That's -- it's the whole way through from -- volume is probably the weakest one in it. The gross profit has been solid and strong through the period, and that runs all the way through the P&L.

Okay. Great. That's helpful. And then maybe if you could, just maybe some comments around, I guess, how ASG is tracking with the luxury VFACTS, if there's any color you can provide there.

I haven't done exactly the split-up of it. That would need to be down to brand, Matt, but generally in line will be my comment.

Okay. And then maybe just -- I know you don't have a crystal ball, but we're sort of getting close to the end of Q3 this calendar year and stimulus rolls off in Australia. Just trying to understand if you had any sort of pre-conversations with the OEMs, landlords around what could be done to extend, I guess, the support that they've given you already.

So yes, I'll agree, I don't have a crystal ball. Some of the landlords are related parties, and if they -- if it's required that they support, they're very, very supportive people. So -- and that's disclosed all through the financials, and I think there might be even a note in the investor pack. So I can say yes there. But what we have had, which has been tremendous during the period now, is our OEM financiers have deferred capital repayments as things got tighter. We are planning to resume and continue our capital repayment paydown strategy, which is quite aggressive. But we feel that we're in good hands with our financiers if anything tightens up again in a relation -- in relation to COVID.

Okay. Great. And then I guess, maybe just some of the commentary for some of Tom's questions around demand and orders. Do you feel like that's -- it's probably unlikely going into the fourth quarter for this calendar year?

Look, it's really hard to go and see out that far forward, Matt. But if I could, I would have given you better guidance than I'm giving you. I'm sort of looking month by month at the moment, and the inquiry that we're seeing is sufficient to go and write the orders that we have cars for.

Okay. Great. Yes, I completely understand. And maybe just last one. The ATO deferred payment, about $32 million, is there any sort of clarity or guidance on when that gets paid?

Not as yet. It's deferred until September at the moment, so we'll open discussions with the ATO within the next week or 2 to try and look out how long and how we will repay that debt.

Your next question comes from Sarah Mann from Moelis Australia.

Just wanted to ask a question around kind of government stimulus, early super withdrawals, et cetera. Do you have a feel for how that kind of impacted your trading in June and then, also, I guess, across July, August at all?

Sarah, I can't quantify it. I wish that I could. But almost from the day that JobKeeper payments started rolling through to the wider community, not just to our business, but to the wider community, and the superannuation redraw and, indeed, the investment write-off, those 3 things certainly supported the business during the period. And we did have -- and the overall VFACTS numbers show a big spike in an area that we only have a small sliver of, which was the market for light utility vehicles or LUVs, and that sort of says that the super redraw and the investment write-off would be contributor certainly in that sector of the market. And the super redraw may have been an -- and investment write-off may have worked as well in the luxury market. So I'm sorry, I can't quantify it more than that, but it was certainly a factor. And we're pleased that the super redraws were still made available in the second half of the year. We're pleased that they've extended the investment write-off, and we think those things support the start of 2021 financial year.

Okay. Great. And then in terms of, I guess, how you're thinking about costs when JobKeeper kind of comes off in September given that that was, I guess, part of the driver of your sales. I mean, are there incremental areas outside of what you've already kind of highlighted that you're thinking about where you can pull cost down?

Look, we're working on it hard at the moment, Sarah. I don't want to quantify it too much more than what we've done. But we're always working on -- one thing that I will say, though, is that, whilst we will trim and continue to trim down our personnel costs, our -- in luxury brands, the quality of your people matters a lot.

Sure. That makes sense. All right. And then just in terms of Victoria. So you flagged that you're kind of expecting a V-shaped recovery, similar to what you saw first time around. I mean, has there been any indication that like confidence in Victoria has kind of been hit worse than the first round of lockdown? Or what are you kind of seeing that's giving you confidence to sort of expect just as strong of a rebound?

Yes. What I'm seeing that gives me confidence is that our staff and our people inside the business are being able -- better able to explain and handle issues like contactless sales processes. This is the second time that we've had to go and do this with people. The first time, it took us a while to put processes and procedures in place to get it right. The second time around, we're a lot sharper, and our customers are much more open to it. And it is likely that this development is a development that will be ongoing. And Sarah, it may provide -- part of the answer to your previous question, it may provide some of the cost out into the future. We're learning how to do things in a more efficient basis.

Your next question is a follow-up question from Tom Godfrey from UBS.

Just a very quick one. You commented on the sort of significant impacts to the back end of your business through the sort of heavy restrictions in lockdown periods. I'm just wondering how that's recovered sort of through June, July and August.

We recovered straight to normal operating levels. The issue, Tom, was not so much -- is not so much one of demand. It was one of -- in the service side, we actually sell the hours that our mechanics can work during the day. And if we reduce the hours that they're available, our revenue has to come down. In the car sales areas, we can move up and down with sales numbers. It's not so much the hours that people worked. It's their efficiency in selling cars. So you lose those hours, and they're gone forever if they're taken out of a week. And during April and May, they were gone. They can't be recovered. But once we're able to sell -- open up a full suite of hours available to our customers, the demand is certainly there for that service business. And it's one of the reasons that I'm particularly happy with maintaining our revenue through this year because it sets up future years servicing and parts revenue for the business.

Got it, Nick. So your expectation is that the revenue mix normalizes in fiscal '21. And therefore, there should be a pretty significant gross margin benefit.

Depending on lockdowns. At the moment, it's down in Victoria on the same basis. But whilst we're -- when we're open, the demand is there to sell the hours available in service.

Got it. And then last one for me, maybe one for Aaron. I'm just sort of wondering if you could give us any guidance around the sort of expectations around an inventory build in first half '21 just given the unwind you saw in July 2020.

I'll do that. There's a chance of inventory build during the period, and if I could find a little bit more stock in a few brands, I'd be looking pretty quickly to go and buy it at the moment. So it's unlikely to go down materially from here, and it is likely to drift up a little bit during the period, maybe not the whole way to where it was at the end of last December, but somewhere in between the numbers.

Your next question comes from Adam Dellaverde from Taylor Collison.

Just a quick question on capital allocation. Some of the OEMs have been offering really attractive financing to do certain things with property. Just wondering how you weigh up those opportunities relative to some of the other M&A opportunities or other uses of capital with greenfields.

Yes. No, it's a really relevant issue at the moment. There is the opportunity to look at some property assets, but during the year... [Audio Gap]