Autosports Group Limited (ASG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Autosports Group Limited First Half 2020 Financial Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Nick Pagent, CEO. Please go ahead.

Thanks, John, and thank you, and good morning. Welcome to the investor presentation for the financial results for this quarter for the first half of 2022 financial year. My name is Nick Pagent, and I am 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 the presentation on Autosports Group. We'll start with the group model and growth strategy for 2022 H1 financial results and the trends that underpin those results. I'll look at the group's focus areas and the outlook for the company through the balance of the 2022 [ through ] the year. Following the presentation, we'll open up the call for any questions that any investors may have. As we move through the presentation launched this morning on the ASX and also on Autosports Group's and investor site, I will, where possible, note the relevant slide numbers to whom one is following the presentation. We'll start now on Slide 3. Firstly, it is pleasing to report to investors that despite the challenges presented by COVID-19 and the new vehicle supply restrictions, the automotive retail industry is performing well. Not only is it performing well today, but these supportive dynamics are providing the basis for an extended period of growth for Autosports Group. Across our business, and the industry, the market has been supported by demand exceeding supply, record order banks extending well into the future and growing margins that also spend well into the future. Autosports Group has used these dynamics well. Our strong balance sheet has placed us in a stronger position than we have ever been before to unlock our growth strategy. This growth strategy remains clear: to grow by consolidating the highly fragmented but large automotive retail industry; to use scale and maturity to further grow our margin profile. In pursuing this simple growth strategy, Autosports Group can also point to clear evidence that we have the capability to execute and that, that strategy works. We have a proven record of delivering growth in outlets, growth in brand representation, growth in revenue, and importantly, for shareholders, growth in earnings per share and dividends per share. Margins have increased and operating leverage has been unlocked. The growing maturity of the business is also unlocking an enhanced platform that delivers more consistent returns. Our diverse revenue streams across all facets of the automotive ownership cycle give us multiple focus areas that can drive growth, resilience and profit through the cycle. And standard brand portfolio, locations and our property strategy broaden our footprint and accelerate our growth runway. If I move to Slide #4. Before we take on the detail of the first half's trading result, I'd like to focus briefly on Autosports broader performance since listing. When we listed in 2016 in November, we said there was an opportunity to consolidate a fragmented market. We said that Autosports have the capability to grow in branded locations. We said that margins would improve with maturity and that scale would deliver operating leverage. Since then, we've almost doubled our growing portfolio. We've grown revenues by over 30% since the 2017 calendar year. Net profit before tax has grown at 105% during that period. Gross margins have expanded by 16.9%, and as you'll see in a moment, are still expanding. The net profit before tax margins are up 58% during the period. For shareholders since the 2017 calendar year, earnings per share are up $0.67, dividends per share are up 59%. In Slide 5. This growth in shareholder returns is being driven primarily by focused execution of our growth strategy. Since listing, Autosports Group has completed 10 separate acquisitions, with our 11th acquisition, the acquisition of the Suttons Subaru and Suttons Kia businesses in Rosebery, due to complete this half. We have also been appointed by our OEM partners to 4 greenfield sites with a further 2 greenfield sites due to open within the next 12 months. The effect of this [ rate ] has been to broaden our future growth runway. Today, that run rate is deeper and wider with brand relationships. We have access to more locations. We have coverage across almost all of the prestige and luxury brand achievements, and we have untapped growth opportunities in quality volume brands. All of these factors support our opportunity for growth. Today, Autosports Group accounts for approximately 2% of the new car market in Australia. That accounts for approximately 14% of the East Coast luxury market. It accounts for 2% of the East Coast prestige market. And the pathway is clear for us to grow. Our checklist for growth is to look for future ready brands, brands with high gross margin potential, businesses capable of improvement and businesses that unlock future synergies for us. All of this flows through to Slide 6, which is our enhanced platform for growth. The ground [indiscernible] since its listing in 2016 has enhanced the platform, improved balance sheet and here to grow, standard brand and location, deeper revenue streams, margin and capacity. Important to note, we've also got an increased depth of senior management. This depth in senior management increases our capacity to take advantage of the support of the industry dynamics that we see and add to volume [indiscernible] that is likely to change from a post-COVID trading environment. Which brings me to a summary of the 2022 first half results, if you move to Slide #8. In the first half of the year, statutory revenue grew to $910 million, up 0.8%. Normalized net profit before tax grew 35% to $39.2 million. Our new vehicle orderbank has grown in the period February '21 to today, over about 100%. Like-for-like operating expenses fell by 5%. Our acquisition-led growth continues with the same [indiscernible] Alexandria Mazda during the period and the agreement to purchase the Suttons Subaru and Suttons Kia businesses in Rosebery in Sydney. The property portfolio continues to grow and post the settlement of the Alexandria property on O’Riordan Street, the portfolio will grow to $99.3 million. And we're pleased today to declare an interim dividend of $0.07 per share. I move to Slide 9, to have a look at the normalized results quickly. During the first half of the 2022 financial year, the business continued to feel impacts from the COVID-19 pandemic. And these [ NSW ] and Victorian businesses faced 114 days of COVID-19-related restrictions between the months of July and November. Worldwide shortages of semiconductors limited new vehicle production and the speed of customer deliveries. The impact of the semiconductor supply constraints can be seen in our growing orderbank and the first half 2022 financial year GAAP of 22% between customer orders received and customer deliveries. Despite these headwinds, revenue grew at 0.8%. This growth was quite right with settlements or acquisitions of Brighton Jaguar Land Rover and Alexandria Mazda, contributing to that growth. Gross margins grew again to 19.2%, which is the highest gross margins that we have recorded to date. This gross margin growth has been supported during the period by an 8.9% growth in service revenue and a 12.8% growth in parts revenue. Our OpEx was well-controlled, 5% -- $5 million down in like-for-like and $7.7 million in increase coming from acquired OpEx. Gross profit was up by 15.8% on gross margin growth. The normalized net profit before tax was up, as I've said, 35% on improved operating margins of 4.3% at net profit before tax and 5.3% of EBITDA. To move through the statutory result. Statutory EBITDA of $66.4 million was up 18%. The impact between the normalized results and the statutory result, as you can see there, was a $19.6 million impact coming from the AASB16 recognition and acquisition terms for the period at $1.8 million. For the analysts on the call, our IPO acquisition amortization finished in November of 2021, leaving the second half of the 2022 financial year acquisition amortization number at approximately $1.2 million. Interest expenses fell on lower inventory. The net profit before tax and amortization finished up 22.6% for the period and $0.07 dividend since well within our 60% to 70% payout ratio of net profit after tax. I'd now like to ask Aaron to share some more detail on our financial trends, expense management, cash and balance sheet stream. Aaron?

Thanks, Nick. If we move to Slide 12, historical revenue. Historically, ASG has shown consistent revenue growth through a mix of organic and acquired revenue. Over the FY '16 to FY '21 period, ASG has achieved a compound annual growth rate of 10%. Pleasingly, over the same period, new revenue at a compound annual growth rate of 12%, which has created a future depth of revenue growth in the high-margin back-end service parts and full year repair departments. In the first half of FY 2022, ASG had revenue of $911 million, up by $7 million on PCP. This has been supported by $44 million of additional revenue coming from acquisitions, with like-for-like revenue heavily impacted by new vehicle supply constraints and down $36 million on PCP. ASG's resilient business model and our position strategy has allowed revenue growth that has outperformed the market growth. If we move to Slide 13, our gross profit margin overview. ASG gross profit margin continues to improve. Gross margin has been supported by historical acquisitions of assets that presented high-margin opportunities, maturing greenfield sites and favorable new and used market conditions. Margin has improved from FY '16 of 14.5% to 19.2% in the first half of FY 2022. GP margins continued to improve in every revenue stream through the first half of the 2022 period. The strong depth of our new orderbank will prolong current margin conditions. We move to Slide 14, expense management. Historically, ASG has implemented disciplined expense reduction strategies through focused site rationalization by property acquisition and dealership consolidation to reduce occupancy costs. We've employed a significant focus on driving the group's existing sales [indiscernible] and synergies through our acquired businesses. ASG FY '21 operating expense had a decrease due to the receipt of government wage support subsidies. ASG's first half FY 2022 like-for-like operating expense has reduced by $5 million on PCP. As a result of the improved operating leverage, these strategies have created ASG EBITDA margin, has improved by 0.6% since June '21. [ Management ] continues to review operating structure to ensure the business is in line with the market. Slide 15, margin overview. Historical EBITDA and PBT margins have been impacted by acquisitions that were running at higher OpEx margin in the wide [indiscernible]. The OpEx improvements in acquired sites has benefited the group's EBITDA and GP margins. In the first half FY '22, EBITDA and PBT margins have continued to improve to 5.3% and 4.3%, respectively. Margins have been impacted positively by favorable market conditions, improved site utilization, improved property portfolio, lowering occupancy costs and a strong capital management program reducing interest. Slide 16, cash flows. ASG had normalized operating cash of $18.9 million for the first half of FY '22. ASG opened FY 2022 with strong cash reserves of $96.8 million. As a result of the strong opening cash position, the decision was taken to reduce interest costs by improving inventory equity. This, along with the prepayment of the ATO debt, has had an impact of reducing the operating cash published. During the first half, ASG drew down $21.3 million of debt largely to fund with property acquisitions. We had an aggressive corporate debt paydown of $11.8 million, PPE expenditure of $29.7 million, of which $9.5 million is real estate. We spent $10.8 million on the acquisition of Alexandria and Mazda and continued strong cash flows allowed a $14.1 million final dividend payment for FY '21. This left a strong first half FY 2022 closing cash balance of $70.6 million. In the second half of 2022, a major capital expenditure is forecast to include $10 million for the acquisitions of Suttons Subaru and Suttons Kia. We've also had the acquisition of the 98 O'Riordan Street property at $23.7 million, which we debt funded at around 80%. If we move to Slide 17 and 18, liquidity and balance sheet. Prudently managed balance sheet has resulted in ASG's net liquidity available just under $330 million. ASG has a strong closing cash position of $70.6 million, an undrawn balance facility of $337 million. ASG's strong cash flows have enabled it to restore dividend repayments to be in line with the policy published in the prospectus. ASG continues to have support in OEM financiers with 96% of ASG's corporate debt and 100% of bailment clients funded by OEM financiers. ASG's net debt, excluding all fund flows of $34.2 million and total corporate debt of $104.8 million with $41.8 million relating to goodwill, PPE and insurance premium funding, and the remaining $63 million relating to $75 million of real estate. This increase in owned property has resulted in improved profit margins and cash flows. ASG's inventory reduced by $29.2 million on PCP, driving continued reductions in interest holding -- interest in holding costs through the first half of FY 2023. ASG's balance sheet leaves us well-placed to take advantage of any future consolidation opportunities. Thanks. Nick?

Thanks, Aaron. So the combination of supporting industry dynamics, the strong -- the business is strong in financial position. The enhanced platform, the growth and a strengthened balance sheet leaves the business very well-positioned going into the second half of this year. In order to maximize this growth opportunity, we continue to focus on the ways, profit, the key revenue drivers moving the business forward. These growth areas -- these growth focus areas that I'd like to concentrate on before I move to the outlook and open the call for questions. If I move to Slide #20. Just to touch on new vehicle growth. Since 2017, our new vehicle revenue growth has been driven primarily by acquisition. In this year, we're being assisted by the full year cycling of the Brighton Land Rover Jaguar acquisition and the Alexandria Mazda acquisition in July of this year. Those acquisitions will [indiscernible] the cycle full year and support new car revenue growth during the period. We'll be further supported by the growth that will come from the acquisition of the Suttons Subaru and Suttons Kia business in Rosebery. After that, there is a large amount of organic growth that is coming. The semiconductor supply constraints will unwind, and with it, organic revenue growth should change. Order [indiscernible] during the period has exceeded supply by 22% during the first half of the 2022 financial year. We think this is a strong indicator of where underlying demand source. We now sit for an order bank, which is over 100% larger than it was in February last year. And we think, given the size of that orderbank and the size of the underlying demand, it is unlikely these dynamics will unwind within the period of the 2022 financial year. Indeed, it will extend well into the 2023 financial year. If we move to used car growth. The used car business continues to be an opportunity for growth for Autosports Group. Australia of the market is well understood at approximately 3x the size of the new car market. Currently, 20% of Autosports Group's revenue comes from used cars. This revenue stream was impacted during the September quarter when lockdowns affected in New South Wales and Victorian Autosports Group dealerships. During that period, Autosports Group saw an 11.5% reduction in used car sales versus PCP. The second half -- the December quarter post lockdown saw that grow back to 11.7%, which was consistent with the growth that we saw in the second half of the 2021 financial year, which saw used car revenues grow by 9%. Order we anticipate that the underlying growth in used cars is around set. We're also pleased to report that our current footprint to sustain last [ 30% ] growth without further investment in facility expansion. The advantages to the Autosports Group has largely come from the combination of using the franchise outlets and our prestige used -- Prestige Auto Traders used car hubs. The Prestige Auto Trader hubs allow us to compete with large fix-scale used car assets run by our listed peers, but also by independents. The franchise hubs give us, I think, a unique sourcing opportunity through tradings, maturing finance contracts, passive [ income from ] customers and, of course, the OEM's direct fleet sales to us. This gives us buying advantages and it gives us a strong multichannel used car approach. Service and parts, on Slide 22. Service and parts continues to have strong underlying growth, high margin revenue, and it is an area for business that will bounce back from lockdowns. Again, we believe this area of the business has approximately 10% natural underlying growth. To further unlock that growth, we are looking to invest in future capacity. We did that at the start of our listing in 2016 when we expanded service departments in Mosman, service departments in Parramatta, service departments in Five Dock. We're now looking to expand -- we're currently investing in service facilities in Melbourne CBD, Ringwood, Alexandria and Canterbury. Growth in service departments will also be supported by higher traffic on the roads post lockdowns as many people were returning to work. If I move now to Slide 23, take a quick look at the property portfolio growth. But this is a very simple strategy. If we grow our property portfolio, we control the strategically important sites that we have. We improve the capacity to manage our retail locations. We use our OEM finances' preserved capital for our dealership acquisition strategy. The property improves our balance sheet. It reduces our OpEx. Currently, we have $75.8 million in property, and post the settlement of our O'Riordan Street property in Alexandria, we will move to just $100 million in property. We do expect, as we move forward to grow this property portfolio, given the constraints of our cash flows, but also [indiscernible] instance of our dealership acquisition strategy. If I move now to have a look at the results recap and the outlook. To recap the first half of the 2022 financial year results. Revenue grew 0.8% to $910 million. Normalized net profit before tax grew to $39.2 million. Our orderbank continues to grow and multiple revenue and margins into the future. Expenses were well-controlled with like-for-like operating expenses falling 5%. The acquisition strategy continues with accelerating capacity and accelerating opportunity moving forward. The property portfolio continues to grow. And the cash flows are strong so we're able to declare a dividend of $0.07. I move to the outlook before opening the call to questions. It's true that there are still some uncertainties that surround vehicle delivery volumes. In the new vehicle area of the business, we do expect underlying demand to continue to exceed supply throughout the course of the whole 2022 calendar year. New vehicle supply is expected to improve as semiconductor-related production constraints unwind during the 2022 calendar year. Our used vehicle service and pass revenue streams should maintain underlying growth rates of between $0.06 to $0.07 -- $0.06 to $0.09 versus the prior corresponding period throughout the 2020 calendar year. And the order sports book balance sheet provides our acquisition-led growth during the period should the opportunity arise. I'd now like to open the call for any questions that you may have.

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

Congratulations on the results. First question is around the OpEx benefit, just to recap the sort of $5 million reduction on PCP on a like-for-like basis. How much of that benefit came from the acquisition of the freehold properties and the associated rent savings that you booked since?

That's -- James, I'll answer the question. I'll sort of break that whole piece up into about 3 chains for you. The OpEx reduction came -- about $400,000 came from the rent reduction at [ O'Riordan ] when we settled that property during the period. As you remember, that property did have a lease of about $1.6 million per annum, and we settled that in the late August time lead. The second piece of reductions as we cycled through some leases, and that reduced our expenses. And I would say of the expenses, $205 million of the like-for-like expense reduction, you can say, are permanent reductions. About $2.5 million of it probably came during that third quarter, but we didn't have quite the revenue that we thought we were going to have in used cars and service, which were impacted by lockdowns. And we think those expenses will come back and they'll largely come back in the area of individual employee conditions during the second half of the year. So we think probably 2.5% of debt reduction is long-term reductions and structural. We think 2.5% as a result of the lockdowns holding some revenue difficulties.

And so that $2.5 billion of long term, just to be clear, that's essentially renegotiating like-for-like leases at lower rates?

[indiscernible]. Principally, James, moving out of our [indiscernible] lease in [indiscernible] Street in Brisbane and merging that site with the 42 value cycle that we had, again, part of the strategy of the business to optimize the footprint. And if we get the opportunity to do that, and that saved us about $600,000 just in that action, and we've cycled out of some of the leases that we were excess to requirements.

Got it. Okay. Yes, that makes sense. Second question is around the used car business. You made the point there on Slide 21 that the retail capacity of the business is underutilized by about 30%. Can you achieve that just on your own? Or do you need the supply, the trading market to activate strongly for the business to achieve that upside?

Yes. There's some answers to the question, but I'll give you the answer that underlines how we're going to grow in the strategy. James, I want to go and have our growth driven by where we're going to get the highest margin opportunity. And that is through sourcing them, through our own network, through trades, through the maturing finance, contracts through past customers. Simply, we have a lower acquisition cost on our used sales here, and we also don't have to pay buyers [indiscernible] by those cars. So we had a deeper margin profile there. And we think the underlying growth there allows us to grow that 10% quite a constrained basis. We also think that -- we actually have an excellent used car business in terms of net profit production, in terms of gross profit production. And indeed, when you're looking across the composites, at 20% of our revenue, we're actually a really good contributor in terms of revenue stream in used cars. Through the 6-month period, we were flat in used car revenue. And I think most of the others were down on used car revenue during the period. So I think we're pretty happy with how it went. And we think the growth that we're citing today is somewhere between 6% to 9%, and it's in high-growth areas.

Yes. Great. Last question on new vehicle sales then. I guess 2 parts. In the results still for the half, new vehicle sales or new vehicle revenue flat, but OEM rebates are up 20%. Can you just shed a bit of color on that? And then as we look forward, in terms of the gross margin you're achieving on the new vehicles. Do you think it picks up again with what's in your order book? Or has it reached a level now where it sort of is similar to what was achieved in that first half '22 results?

Can we just get you to repeat the second part of that question again, James? Because I lost it.

Yes. So second part is really -- obviously, it's very favorable trading conditions with the outstripping supply here. And there is a certain contribution to the gross profit of the group from the new vehicle sales in the period. And I'm keen with some color from you as to how that looks relative to where your order book is? And would you expect gross margins on new vehicle sales to expand further in the period ahead? Or would it be more similar to what you just achieved in this half?

Yes. So the answer to that is not so straightforward, but I'm going to try and give you the answer to the best I can. Our base has materially higher margins than we're achieving today. It is because those cars are more sought after and it's because the cars in our orderbank are at a materially higher value than the average cost of sale that we have. Across the range of cars that we have, there are some cars and some brands where you can get supply relatively simply at the moment, and you can go and deliver them quickly. I think what will happen is that if demand stays flattish, if supply stays flattish compared to last year, and we -- and all the industry data shows that new car supplier should increase by around 4% this year, if it stays around that level, we'll maintain our margins and we continue to have long, deep orderbanks on the way through. If the order bank unwinds and we get a larger proportion of cars on our order bank hitting the revenue streams in the next 6 to 12 months, well then, our gross profits will go up. So it depends on which cars land, the order base has a higher gross profit profile, which is why I'm confident when I say the forward-looking position is strong for prolonged maintenance of the higher margins that we've been enjoying for the last 2 years.

That's helpful. And sorry, just the first part of that question, OEM rebates up 20% versus new car revenue flat. What was the driver there?

Yes. James, this is finite 5%, which is where it usually runs. It runs somewhere between [ 4 ] and I think 7.5% historically. It's a tricky number because it's related on what you believe and also what stock comes in, in the period. And also the mix of what was -- the mix of what was selling now [indiscernible] than what it was when we initially listed, which almost every single model and vehicle line that we had come with a volume bonus. So it's typical, so it's running in the midpoint of where it has run historically.

The next question comes from Brendan Carrig with Macquarie.

Just follow -- actually, I'll ask a few good questions. So I'll just ask the last couple of questions and then I'll add. So the first is just on the service and parts. Actually, the revenue there seems to be holding up reasonably well despite the lockdown you saw last half. So basically, the revenue brought it slight half-on-half. Where could we expect that to sort of rebound to? Or at least do you have an idea for what the impact of the lockdowns in New South Wales and Victoria had on those revenues in the last half?

Yes. It's an overtake for us to look through, Brendan. I believe the go-forward number is [ 26.9% ] organic growth in this area. During the half, of course, we grew at 10% across the Service and Parts area. However, I would say in the 2021 financial year first half, we were impacted heavily by a Victorian lockdown that was more severe than the one that came through this year. This year, that was balanced by having locked down for 114 days for both our New South Wales business and our Victoria business. So what I think you're actually seeing in the result is the impacts of the New South Wales and Victoria lockdown this year equalizing out the more Victorian lockdown from the year before. And what you're seeing is a real underlying growth of about that 10% in the business. However, when you roll through to the 2023 calendar -- financial year in the first half, hopefully we're not going to have any lockdowns. And hopefully, you will see the impact of this coming out, having no lockdowns and an underlying growth. And I'm hoping that the impact of increased service capacity coming through from Melbourne, Ringwood, Alexandria and Canterbury will also increase our capacity to take on demand in the Service and Parts area. So we're pretty positive about this. We think the second half of the year is going to be solid. We think the first half of the '23 financial year might be even better.

Yes. That's all very clear, Nick. Just maybe looking -- I'll ask you in a different way then. If I look back at the calendar '19 year where you had $250 million of revenue. So that's obviously ahead of the 2 COVID-impacted years that we've just experienced, and you've got more sites and your business has grown sort of today versus where it was in 2019. So is it fair to say that 2019 as a base, plus there would have been some organic growth over the last -- or sorry, organic and inorganic growth over the last couple of years? And so therefore, in a normal uninterrupted year, you should be running ahead of where you were back in calendar year '19?

That's a great point, looking at it.

Okay. Excellent.

That's exactly the way to look at it, I think, Brendan.

Excellent. No, that's really helpful. Just on the brand strategy, actually. So just the more recent acquisitions do seem to be moving a little bit more away from sort of the high-end, [ luxury ], in prestige and a little bit more towards mass markets, so Kia, Subaru, Mazda as 3 more recent examples. Can you just sort of elaborate on the strategy and how the brands might start to evolve over time?

Sure. So first of all, it's not a move away from luxury brands. We continue to go and execute on luxury brand acquisitions when they come through. Only 14% share across the East Coast market, we think we've got quite a big runway there. We did [indiscernible] has always been a brand that we've had -- it's been tightly held brand as well, Brendan, and opportunities have come slowly on that brand for us. We'd like to go expand with Mazda, it's a great profitable brand. But it sits within that prestige segment that we've always identified. The Subaru business that we're purchasing in the first half of this year, that is the largest Prestige segment brand that we are not operating new. And that is indeed the largest Subaru volume site in New South Wales. So we're exceptionally excited about bringing that business on. We are expanding our -- when we're looking at that the Kia acquisition. And I tried to go through our acquisition criteria during -- at the start of the presentation. Really what -- we really like the Kia brand. And what we like about the Kia brand is its premium approach to product, it's premium approach to doing business. It's got quality volume aspirations moving forward. And where we see that business, we see a business that fits well with the Autosports Group's DNA. And we see a business that can contribute well into the future. We'd like to do that well and have the opportunity in the future with that Kia branch to expand further. We do see some other volume brands as exhibiting those same qualities. And as the opportunities come up, we'll look at those individually, acquisition targets. And if they work for us and they hit that acquisition criteria, we'll expand further.

Okay. That's helpful. And then the last one just for now. So gross profit you covered off on or at least the gross profit margins. But then maybe the other factor that is sort of getting still getting a benefit given the current environment is just the interest cost side of things. So it sounds like it's probably going to stay depressed for at least the next half potentially a little further. But is that sort of the right way to be thinking about the interest piece of about $4.7 million or so that you incurred this half?

Yes. Yes, it is. I'd actually like that expense to be higher. If that expense was higher, Brendan, then it means that I was getting quicker stock turn into the business and more stock coming through. And that would mean that my revenue line will be going up. So I'm actually -- the compressed interest line, while saving me a little bit of money, is actually shown that I was under stocked during the period as well. I'd actually like that winding up a little bit.

Yes. No, that's fair. And sorry, and just one final question. I think it towards the end of last year, you mentioned that there was a reasonably -- a reasonable-sized shipment of cars that you had sort of on the way that we're expected to arrive sort of around now or maybe into March. Has there been any reason to suggest that, that is not going to happen sort of since then to now?

March will be our strongest delivery month in 5 months.

Okay. Excellent. And do you have any other sort of foresight into other months based off what's sort of on its way on ships at the moment?

Well, look, on a very good pace, and we start becoming more [indiscernible] after the August summer holidays in Europe. But arrivals in March and April, a good [ ROI ] is a little bit weaker in May arrival, that will be in June, July and August. And then our OEMs we expect to turn post the August holidays that they'll be able to ramp up production. So whilst they don't have a great line of sight post August, up until then, I'm pretty happy with what's coming through. And I'd like a little bit more. I'd like them to go and build some of the [indiscernible] cars for me on the way through. But what I'm getting is right in line with what I've been expecting in the last 12 months.

The next question comes from Sarah Mann with Moelis Australia.

First question for me is just around the property strategy. So you've been purchasing more and kind of consolidating some of your brands like the Lamborghini you mentioned in Brisbane. Can you talk to kind of your long-term strategy around the acquisition? Like looking at your portfolio now, what are kind of your aspirations of the other sites that you want to own and maybe also a bit around, I guess, consolidating brands on some of the sites that you might purchase?

So there's a couple of things there, Sarah. I'll start with consolidating brands on the same site. We -- there's clearly synergies available if you utilize the same site. And we've been growing -- and particularly recently, we've been growing our site at Alexandria where [indiscernible] now -- it would soon have Subaru and Kia here. It's at Land Rover and Jaguar, and it's got the 5 super luxury brands that we operate in the same city. There's no doubt that, that drives synergies there. However, the type of brands that we operate with and the quality brands that we have, we believe that they should be individually represented. So the front of house and the presentation of the brand should be separate. The people that work in the brand should be separate. So it's likely not an open platform, but it is one that drives synergies in the back. In terms of the ownership of the real estate, we're not -- it makes strategic and financial sense so long as our balance sheet can cope with it, to own as much of the property as we can. It's simply an interest to want arbitrage there, if that makes sense. And it doesn't draw the cash flows away because the cash piles are supported by the rent already paid. But we're concentrating through the period on sites that are, in our mind, strategically important long term into the future. So predominantly, we're looking at retail sites, which are brand-specific, that we think have a long-term footprint. So it's sort of 3 answers in this area. We want to strategically bought -- much significant flexibility, gives us a strong control of the distribution of the brand or the great distribution. But we don't want to go in. We want to build the set behind in the balance sheet. We want to be cash flow-neutral, but we also recognize that we can grow at a certain pace with the balance sheet. That is accelerating, obviously. And we've been growing at about $20 million in property for a 6-month period. And I think that's sort of like is about right with our current profit.

Excellent. No, that makes a lot of sense. So then the other question is just around the distribution model. Obviously, been some other agency. I guess other changes, at least maybe from Europe, some of the OEMs are saying with the EVs and micro direct, we still have with, I guess, the [indiscernible]. Just interested in how you see the distribution model, I guess, potentially changing in the future. And also, any color you can give around the Mercedes-Benz transition to agency from an economic standpoint as well, would be excellent.

I think it's good and proper that everybody looks at different distribution strategies and looks at making sure that they have a distribution strategy, which is right for today and limits the opportunity for anyone to disrupt the business model that we will enjoy. So I don't have any particular issues with them changing their business models. And I don't have a particular issue with people changing to the agency model. And what I do want is to have a strong and sensible compensation package for it and a sensible margin structure from later on. That is really something that I think is important on the way through for the OEMs to think about and ensure they get right. We think the property strategy that we were talking about earlier actually dovetails nicely into this because we think that the distribution sites are going to be very important of the [ long-term ]. We think that the cost of distribution is going to be important and only new sites reduces the cost of distribution and make it more likely, but the business models will work for us into the long term. If I look at the Mercedes-Benz change to agency, I think we won't have a clear idea until the second half of the year on how that is going. The reason is that for the last 6 to 12 months, we've been going and would have been from the way up. And a large part of the care that we're delivering today, whilst the agency model is in place, vehicles that are sold under the old dealership franchise model. So the revenues that we're seeing today probably don't reflect a full-time agency outlook. The supply that we've got on agency at the moment is quite constrained because a lot of the cars are pretty slow. So I don't really think we've got a great view of it today's era. But I can say the second half of the year, we can -- maybe the revenue line is impacted by about $70 million to $80 million from our side. But that's just accounting -- an accounting treatment. The growth will go into the gross, the [ growth ] will probably triple a bit as a consequence in margins that we'll lose in that timeline revenue.

Okay. That's great. And then the used car components. So you mentioned that's an opportunity for growth for you. There's a bunch of competition in the market or new competition that's coming to the market. Just interested -- yes, with lots of capital, right? So just interested in your comments that you can make around what the increased competition means for your business and I guess how you're going to differentiate/protect from that competition?

The way I look at it, Sarah, is you want to go and stick to where you've got a critical advantage. And where we've got a critical advantage is where we're trading the car, where we've got an OEM source of the car, where we've got a contracted source with the car by fleet companies. And that -- in those areas, we've got a built-in advantage coming from new car -- coming from the new car franchise point of view. And that gives us a lower acquisition costs. And it gives us -- and we don't have to go and have buying teams out in our marketplace. When the only barrier to entry is capital, you want to go and play where you've got advantages. And orders what's got multiply a little bit for advantages, not where the flying field is dealt with people that just want capital for [ new build ]. So we think that area is a good area for us to grow. We think that growth area is about -- that growth amount is between about $0.06 to $0.10 per annum. And we think that growth is good, solid growth within the business, and that's what we're forecasting to grow [indiscernible] of the business in the next couple of years.

Great. And last question for me, the M&A landscape. Clearly conditions are buoyant at the moment. Then the expectation is reasonable. And can you maybe talk to, I guess, the quantity of opportunities out there in the market at the moment?

Yes. Look, can I continue to say, Sarah, I've said this probably consistently for the last 2 to 3 investor meetings. There's more opportunities now than we can reasonably execute. It is, as I always say, a really, really fragmented market. And there's lots of opportunities that come to us, and I'm sure there's lots of opportunities that come to the other listed [ sites ] in the marketplace. So we don't have any particular issues with supply of opportunities coming through to us. In terms of vendor expectations, we think that given that there is a playing field for the next couple of years, that we think we'll be pretty strong. We think the vendor expectations have up until now been pretty reasonable. When we look at acquisitions now, we do look at who, what is the brand, what is the future product lineup. And also at the moment, we're looking at what is the order range of that dealership because you're, at times, buying an extremely large orderbank with above-trend net profit in the new vehicle side of it. So that supports some valuations on the way through. And so we expect to be able to continue to make acquisitions over the next -- through the '22 calendar year, and we expect that those lines will be good for us long term.

The next question is a follow-up from James Ferrier with Wilsons.

Sarah asked my questions, so thanks.

No worries. Thanks, James.

We have no further questions. This concludes our question-and-answer session. I'll turn the conference back over to Mr. Pagent for closing remarks.

Thank you, Tom. Thank you, everyone, for dialing in to the call. I hope it was of use to you. If anybody has got any further follow-up questions, Aaron and I will be available to take them over these couple of days. I'd also like to take the opportunity to thank our Autosports staff and customers during the last 6 months. We've had a great period financially, but also I've got to acknowledge that during the lockdown has been very, very difficult for individual staff members. And we thank for what they have done during the last 6-month period. Also like to thank our OEM partners to give you the opportunity to represent their brands, and we look forward to bringing you a great result in the second half of the year. Thank you very much for your time.

This concludes our conference for today. Thank you for participating. You may now disconnect.