Bapcor Limited (BAP) Earnings Call Transcript & Summary

Good day, and welcome to the Bapcor 2024 Half-Year Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Stefan Camphausen. Please go ahead.

Thank you, Justin, and a warm welcome to everybody who has dialled into today's call. My name is Stefan Camphausen. I'm the CFO of Bapcor. I'm joined today by Mark Bernhard, Bapcor's Interim CEO and Managing Director, along with members of Bapcor's executive team. Mark and I will present Bapcor's 1H '24 results followed by a Q&A session. I would like to remind everybody that you will only be able to participate in the Q&A if you have joined via the conference call dial-in, not via the webcast. It is now my pleasure to hand over to Mark.

Thanks, Stefan, and good morning to everyone on the call. I'd like to start today by acknowledging the traditional custodians of country throughout Australia and pay our respects to elders, past and present. We recognize the continuing connection of First Nations people with country across Australia and beyond. And in particular, the Wurundjeri people of the Kulin Nation from where this call is taking place today. In terms of the agenda, I'll be talking to the highlights of the first half '24 before passing back to Stefan for a more detailed discussion on Bapcor's financial performance. I'll then come back and wrap it up with the outlook for the business. Before getting into the results though, I'd like to talk briefly about Bapcor's recent announcement regarding the retirement of Noel Meehan and the appointment of Paul Dumbrell as CEO and Managing Director. Paul will commence in that role from the 1st of May. Until that date, I'll be serving as Interim CEO and Managing Director. I'd like to thank Noel for his significant contribution to the company over the past almost 4 years, leading Bapcor through a period of significant change and laying a solid platform for Bapcor's future growth through the Better-than-Before program. I also look forward to welcoming Paul. He's most recently been the CEO of Total Tools, where he successfully managed the growth of that business with sales almost doubling during his tenure. For those of you who don't know, Paul is very familiar with the aftermarket auto parts sector and also the Bapcor business. Previously, he was CEO of Automotive Brands Group or Metcash Automotive when it was acquired by Bapcor back in 2015. Following the acquisition, Paul served as Bapcor's Chief Operating Officer, Specialist Wholesale division, a role he held for over 3 years before leaving to join Total Tools. And finally, we also announced that our CFO Stefan Camphausen has resigned to pursue other external opportunities. These executive changes are for their own personal reasons, which we respect. And we're looking forward to the new team taking Bapcor into the future. Moving on to the Bapcor business now. On Slide 5, as most of you would know, we're the leading provider of vehicle parts, accessories, equipment, and services in the Asia Pacific region. And you can see our vertically integrated specialist businesses at the bottom of the slide. This takes us to the group highlights on Slide 6. The first half of the financial year 2024 was marked by solid performance across our Trade and Wholesale businesses in Australia and New Zealand, offset by headwinds in Retail segment and an increase in financing costs mainly due to higher interest rates. As highlighted in our recent trading update, the Trade and Wholesale segments achieved revenue growth, EBITDA growth and margin expansion. Pleasingly, this has seen us further solidify our market position in the Trade segment. However, macroeconomic headwinds and a decline in consumer confidence negatively impacted the Retail segment. All in all, group revenue rose 2% year-on-year to a record high of more than $1 billion, while pro forma net profit after tax was 13% down year-on-year to $54.2 million. In light of market conditions and the need to operate as efficiently as possible, a number of improvement actions were implemented during the half, which will have further P&L benefits in the second half of financial year 2024. On the back of an already improving performance towards the end of the first half of 2024, we have made a solid start into the second half with revenues increasing around 4% in the first 6 weeks compared to the same period a year ago. In terms of our balance sheet, net debt and inventory have been largely held flat relative to the first half '23 levels. Operationally, we have successfully integrated our trade operations into our new state-of-the-art distribution center in Queensland, which provides us with confidence in achieving our targeted steady-state benefits once all operations are consolidated. Finally, we've expanded our network across the business with the addition of 11 new stores. Turning to Better than Before. Program progressed further during the half and generated a gross EBIT benefit of $7.6 million. The program will result in significant improvements to our business and deliver value to our shareholders. I'm confident in achieving our target of a further $7 million to $10 million NPAT following from the Better than Before benefits in the second half of FY '24. We need to perform today and transform for tomorrow. The program itself is continually evolving. And we will naturally be reassessing the timing and priorities around the delivery of the program's longer term goals once our new CEO, Paul Dumbrell, joins us in May. Alongside the Better than Before program, we also continue to invest in team members during the first half, which is reflected in continued improvements in safety levels year-on-year and also further build-out of our transformation and procurement capability. Turning to Slide 7. As mentioned earlier, we reported a record first half revenue, exceeding $1 billion and 2% higher than last year. EBITDA margins in our Trade and Wholesale businesses further improved year-on-year. However, macroeconomic weakness in the retail sector, combined with a $7 million year-on-year increase in finance costs drove a lower overall pro forma NPAT result. Our return on invested capital of 9.6% is reflected -- is reflective of this lower pro forma NPAT. In terms of the dividend, we're announcing a fully franked dividend of $0.095 per share, which equates to a first half '24 payout ratio of 59.5%, at the upper end of a dividend policy of between 50% and 60%. With regards to cash, our cash conversion of 65% was on a similar level to the first half of '23 and therefore, resulted in net debt and net leverage also being largely in line with last year. In summary, we've maintained a robust balance sheet and are well funded to continue investing in our growth, support our Better than Before and other improvement programs, and pursue acquisition activities as they may arise. Turning to Slide 8, the individual segment highlights. On this slide, we've grouped together the Trade, New Zealand and Specialist Wholesale segments under the Do-It-For-Me banner and Retail sitting under Do-It-Yourself. Here, you can see the resilient performance across the majority of the business with revenue, EBITDA and margins rising across all of the Do-It-For-Me segments. This top line performance has been driven by an increase in general part volumes across the board, the recovery in repair volumes in New Zealand and continued strong growth in the truck segment. EBITDA margins have benefited from proactive activities and cost discipline. We continue to see results from our One Bapcor initiatives across the group to maximize revenue and remained focused on our Hero brand penetration. Worthwhile to spend another minute on the performance of our New Zealand business, notably the increase in margins. Central Bank in New Zealand began increasing its cash rate roughly half a year before a similar action in Australia, causing a reduction in demand for servicing and nonessential repairs due to the cost of living and inflation pressures. We're now seeing demand returning as car owners are attending to both their servicing and repair needs, which should bode well for the Australian market in comparison, which appears a little later in the cycle. As mentioned earlier, our Retail business has been impacted by macroeconomic headwinds, which takes us to Slide 9. For reference on the left-hand side of this chart, the vast majority of our revenue continues to be generated by nondiscretionary and therefore, resilient product categories. The proportion of nondiscretionary revenue has increased slightly to more than 90%. The chart on the right then shows how the shift in volumes and product mix has affected Retail segment earnings. Pleasingly, gross profit from our nondiscretionary products were stable compared to the prior period. However, we had a reduction in higher-margin discretionary revenue. And together with the cost of doing business inflation, this has led to a lower EBITDA in our Retail segment. We're addressing this challenge with a mix of revenue and cost initiatives, which would be further assisted by improving macroeconomic conditions. I'll now hand over to Stefan, who will provide us with some further detail on Bapcor's financial performance during the period.

Thank you, Mark. And starting with financials with the income statement on Slide 11. We already highlighted the robust top line performance. So moving through the P&L, I would like to spend a bit of time on Bapcor's gross margin and cost of doing business. Gross margin across most categories was reasonably stable in 1H '24, showing the resilience of the business and our ability to pass supplier cost increases through to our customers albeit sometimes with a bit of a timing difference. The overall gross margin stood at 46.4%. And while the movement of 18 basis points means it is on a somewhat similar level to 1H '23, the shift in volume and product mix in retail has, of course, impacted this a bit. With regards to cost of doing business, from an overall group perspective, we were mostly able to offset general cost inflation with the improvement plans we implemented in 1H '24. However, cost of doing business increased by a total of 31 basis points year-on-year to 32.3% as we were not able to compensate for additional levies such as higher payroll taxes, without which our cost of doing business percentage would actually has been almost flat. Lastly, our finance costs have increased by $7.3 million year-on-year as higher interest rates have cycled through into our finance costs, while our net debt is largely flat compared to 1H '23. From an overall bottom line perspective, this has provided us with a half year pro forma NPAT of $54.2 million, in line with our trading update earlier in January. And once again, we are showing the details of Bapcor's pro forma adjustments comprising of DC consolidation costs, Better than Before one-off costs and restructuring costs, which are in line with and how we have communicated previously. Turning to the cash flow on Slide 12. The 1H '24 cash flow of $93.6 million and the cash conversion of 65%, both were on a similar level compared to 1H '23. With cash conversion impacted by first half inventory build-up, while debtor and creditor days were largely stable. In terms of capital expenditure, we maintained a disciplined approach in line with our capital allocation framework. On the one hand, this resulted in a reduction of growth capital expenditure, i.e. acquisitions and network expansions. But on the other hand, we continued our targeted investments into sustaining CapEx with the increase mainly due to capital expenditure into business intelligence systems and customer integration. As you can see at the bottom of the cash flow slide, the 1H '24 net cash movement resulted in a net debt position of $332.7 million, which, as already mentioned, is on a similar level compared to a year ago. This takes me to our balance sheet, as shown on Slide 13. We've already spoken about most of its components. And that we have had stability in most balance sheet provisions year-on-year. One more notable exception to this is the increase in both lease assets and liabilities, mainly due to the practical completion of our new distribution center in Queensland, which Mark referred to earlier. In summary, the sound financial position of our balance sheet continues to provide us with financial flexibility to implement initiatives, pursue opportunities and invest into growth. Moving to Slide 14. We wanted to further illustrate the development of our capital and inventory during the last couple of reporting periods. As you can see, both for net debt and inventory, which is the main component of working capital for Bapcor, stabilized in 1H '24 compared to a year ago. This stable outcome compared to the previous 12-month period where there was a significant build-up of inventory and hence a deteriorating net debt number. For reference, we've also included the same chart for the full year. And while the full year numbers are usually lower than the half year, you can observe a similar and stabilized year-on-year trend there as well, which we reported on 6 months ago. Finally, I would like to conclude the financial section with the overview of our dividends. For 1H '24, an interim dividend of $0.095 per share fully franked has been declared which, as Mark mentioned, represents a payout ratio of 59.5% at the upper end of our dividend policy. Overall, this is a reflection of our robust balance sheet and confidence in our markets and performance. I will now hand back to Mark.

Thank you, Stefan. Turning to Slide 17 for an update on the Better than Before program. Just as a reminder, this is an overall transformation program to integrate our businesses and leverage the benefits of running as One Bapcor. Those benefits are largely coming from pricing, procurement, supply chain and property. The execution of the Better than Before program will allow us to improve our business efficiency around our top line and go-to-market strategy, our COGS through smarter procurement, and our cost of doing business, in summary optimizing our brands and driving together. During 1H '24, we continue to make solid progress, realizing a $7.6 million gross EBIT benefit. The majority of the benefits generated to date have been achieved through our pilot procurement initiatives that are leading to a lower cost of goods sold. The early success of these pilot initiatives is proving up our strategy of deeper, more strategic relationships with a more concentrated number of suppliers, which results in more volumes for our supplier partners at a lower cost -- a lower unit cost for Bapcor. Given the progress on the program, I'm confident in achieving our targeted benefit of a further $7 million to $10 million NPAT in the second half of FY '24. As I said earlier, we need to perform today and transform for tomorrow. This program is continually evolving and we'll naturally be reassessing the timing and priorities around the delivery of the program's longer term goals once our new CEO, Paul Dumbrell, joins us in May. Turning now to Slide 18. As we have discussed through today's presentation, operationally we reported a solid resilient performance in our Trade and Wholesale segments, which was offset by declines in the Retail segment due to lower consumer confidence impacting discretionary spending. In light of the prevailing macroeconomic challenges and cost of doing business inflation, we're implementing additional profit initiatives in second half '24 while maintaining best-in-class customer service. Longer term, we remain positive on the outlook in the automotive aftermarket, particularly the continued growth in the Trade and Wholesale businesses, together with the targeted benefits from both our improvement actions and our transformation program. This is providing us with confidence going forward. Second half '24 and subject to general market conditions, we expect pro forma NPAT to further benefit from the Better than Before program of the $7 million to $10 million and around $2 million of run rate benefits from our first half improvement plans. We have a great business and a great team. I'd like to extend my thanks to everyone at Bapcor for their tremendous efforts throughout the first half. I'll now hand back to Stefan.

Thank you, Mark. And this marks the end of the presentation, which leads us to our Q&A session. I would like to hand back to Justin to share the instructions for the Q&A.

[Operator Instructions] And our first question will come from Craig Woolford with MST Marquee.

Just firstly, just to clarify what your emphasis here is on the Better than Before program. Is it expected that the program as outlined back in 2021 when Paul starts? Or is there opportunity to refine the program? And I mean that in terms of quantification of the outcomes.

Yes. Thanks, Craig. Look, I understand the question and the concern. I guess, starting off I'd say we're really confident with where we are, probably going to end up for this half around the program, that $7 million to $10 million NPAT benefit that I mentioned. The other thing is I'd say it's only fair that we give Paul as the new CFO an opportunity to review the program when he starts. But Noel has left us with an overall transformation program around those categories, procurement, pricing, supply chain and property. And the program integrates our businesses, leverages One Bapcor and allows us to drive together. So it's more a nuance that I think it's only fair that the new CEO has an opportunity to go through, review the program and prioritize where he sees the emphasis needs to be.

That's clear. And the other question, Stefan, can I clarify, obviously, inventory has stabilized. Would you expect that the inventory dollars -- and I prefer to look at inventory days. But do you expect inventory turnover to improve over the next 12, 24 months that call?

That's a good question. I think we'll see a little bit of targeted investment into inventory. We did call out that we are driving the Hero brand penetration. So that is about own brands or private labels. That normally does come with higher inventory because of minimum order quantities. So you will see that and that will be a good outcome for Bapcor overall. But we are also, of course, always looking to then be more efficient across our capital utilization as well. And we're not guiding on what the outcome is going to be overall. But if I just take you to one of the KPIs that we've got in the slide deck, which is inventory as a percent of revenue, you can see that we have made progress compared to the prior comparable period. And that's something that we would always aspire to.

And we'll take our next question from Tim Piper with UBS.

Just first one, a high-level question on sort of business as usual versus BTB. I guess when you introduced the program, Noel sort of described it as thinking about it in 2 buckets, the business as usual and then the Better than Before benefit. You've kind of outlined what looks like an underlying $5 million BTB benefit in the first half on $95 million of EBIT. So is the right way to think about it BAU in the business at the moment is run rating, call it, $100 million -- $180 million annualized at the EBIT line and then we build our BTB assumption on top of that, well, $180 million plus the cost out run rate in the second half as well. Is that sort of the high-level right way to think about it?

Thanks, Tim, for the question. I think I would refer you to Slide 17, which obviously we've outlined how the Better than Before benefits are captured in the P&L, which I think from a numerical question does answer your point. If I rewind the clock just 12 months, I think what we've always said is the targets that come out of Better than Before are a discrete contribution that come out of the program. And I think when we've differentiated between BAU and BTB, what we've said is BAU will do what it will do in a high inflation, high interest environment. BAU is likely to be somewhat different to a low interest and low inflation environment. So we were I think quite explicit in saying we're not giving guidance for FY '25 when we started this a good 1.5 years ago. But what we were saying is Better than Before will leave us in a better space than where we would be without Better than Before. And the targets we had formulated were the discrete contribution coming out of that program.

That 1H '24 BAU is $90 million of EBIT. Is that right?

Yes, I think that would be a fair statement. If you look at the Better than Before slide on 17, as we've broadened down the EBIT into their buckets, a lot is in procurement. And as you would expect, those procurement benefits, normally the early procurement benefits, would come out of the initiatives that are a bit easier to implement because if they are easier, then they can also be expedited a bit quicker. And what that means is that most of those benefits would actually be in procurement activities that only refer to a single segment, because if you need to have an initiative implemented a single segment, that's easier than coordinating across a number of channels. And hence, from that perspective, quite some of those procurement benefits that we are outlining there would be in our Retail segment given that that's where we've got a couple of categories which are single segment categories compared to the other activities that we're working on.

Just on the gross margin for the first half, only down sort of marginally year-on-year and half-on-half. You called out the $5.3 million of COGS benefit you've had in the first half. Is the right way to think about that that $5.3 million back in sort of the business-as-usual gross margin is actually sort of sub 46% as well? And what's sort of driving the decline in underlying gross margin at the moment?

I think in general terms and what I tried to refer to when I was talking about the gross margin is that particularly for Trade and Wholesale, we do have the opportunity to pass on supplier cost increases into the market as well. That is not always exactly in a back-to-back session from a timing perspective. So there can be a bit of a lag between receiving a price increase from our suppliers versus passing that on to our customers. And that timing difference is one that you can see in our gross margin. And [indiscernible] the gross margin will always go up or down a little bit depending on where we are in that cycle. What I would say though, and we think referred to that before, is we continue to see the market behaving in a very rational fashion. People are [indiscernible] into competition, I think. We are all managing to a margin outcome more than kind of a rate to the bottom and that hasn't changed, notwithstanding that the gross margin could always go up or down a little bit in any given reporting period.

Just one last quick one on the CapEx, that sustaining capital expenditure of $28 million in the first half, that's just an underlying CapEx number, nothing to do with sort of the CapEx you called out in BTB. And is that sort of a go-forward run rate for that sustaining CapEx from here? Or how long will it run at that kind of level?

As I said, the CapEx does include some business improvement initiatives. And some of them are in a -- for what we are then doing in Better than Before. So if I look at, for example, the customer integration, which is one of the areas that we'd call out, integrating with our key accounts, particularly from a trade perspective, is an initiative that we are working on. We've had plenty of feedback from our key accounts that said you are the best people in the market to deal with. We love what you're doing. But you have it complicated and a bit hard from a back-of-house perspective. So if you can upgrade your systems, if you can create interfaces with us to automate the back of house, this is something that will enable us to trade more with you. So that's the kind of an investment that we're looking at that we have invested in, in 1H '24. And similarly, and again I think we called it out before, but think about business intelligence. We got a range of ERP systems in the business. We are putting things like data lake in place, so that we can manage our data better and then use it from business intelligence perspective to, again, service the customer better and create better financial outcomes. We're always assessing those initiatives on their own merit. They do have to provide us with the returns that we are looking at in terms of capital allocation. So they will continue. But the quantum might go up or down going forward but more generally.

And our next question comes from Mitch Sonogan with Macquarie.

Just a quick one, just on the summary on the outlook. I guess, the solid start into second half '24, revenue is up around 4%. Can you maybe just give a little bit of color on that, on the Do It For Me versus Do It Yourself? Is it pretty similar trends to what you saw through first half?

Yes. Thanks, Mitch. I guess really what we're seeing is just a continuation of where we ended the first half. The general market conditions are probably uncertain. But we're obviously happy with where we've got to in the first 6 weeks. But will be hard to say without a real lot of data. But certainly, what we're seeing is trading conditions have sort of continued on from the back end of the first half.

Yes. And did you see a bit of a slowdown sort of in the typical slowdown period? Like was it any softer or longer post-Christmas that was a bit slower in the first few weeks of January, it's accelerated a bit more? Have you just sort of seen it pretty steady?

I would say it's a little bit edgy. We've had some areas and probably those ones which have been a bit more affected by -- or are more effective from a cost of living perspective, where we've had our customers being on somewhat extended leave. Then we've had other areas where actually both in Trade and Retail where we've had sales which have been much stronger than last year. So I think it is a bit edgy. And you've got a kind of multi-speed economy across Australia and New Zealand at this point in time.

And so just a quick one. Just on that, I guess looking forward to the second half, you've talked about the $7 million to $10 million benefits from Better than Before. Can you just sort of step us through how we should think about the second half just in terms of the $54 million NPAT first half? I'm not trying to stick you to any specific number here, but just say things stayed flat in the core businesses and you replicated that doing another $54 million. You've talked about the $2 million run rate benefits in the second quarter and also additional initiatives. So yes, can you maybe just provide what incremental benefit should we be expecting between the net of all those different programs you put through, assuming that the second half is flattish on the first half in the core business?

Thank you, Mitch. Happy to provide a bit of color on that. We didn't actually say that the second half was up or down or flattish. And I think what -- one of the reasons why we didn't say it is that, go back to what I said just a minute ago, it is edgy out there. And we have, as I said, a [ divided ] economy. I think we've tried to -- and Mark referred to that as well. As the market conditions are a bit uncertain and they are volatile. So from that perspective, the second half for the BAU is subject to all of that. What we have said though in terms of the controllables is that Better than Before is something that we are targeting additional incremental benefits of $7 million to $10 million from NPAT point of view. And on the back of the improvement plans that we implemented during the first half of which we, of course, only got a benefit of a couple of weeks in the first half, we will get the full 6 months benefit in the second half. And that is going to provide us with approximately $2 million of benefits incremental in the second half versus a couple of weeks that we've had in the first half.

Okay, great. And just a final one. Obviously, wrapped in with those cost improvement plans you put through. Can you just talk to what additional price rise you put through would be effective in the second half and maybe just a broader comment on how they've been received in the marketplace? And have you seen similar initiatives from your competitors.

Being a bit more agile on pricing is something that we've improved on as a business and I think across the board. Should we rewind the clock a couple of years, we would have been reasonably religious in, for example, doing a cost of business at the company price-wise all ways and only on the 1st of Jan or 1st of December. We are now more agile in that is part of the technology enablement program that we've implemented and work on since the start-up Better than Before as well. What that means is that we've done some price increase, particularly in Trade and Wholesale earlier in the year. And we continue to monitor the market to see what else and what other opportunities there will be in the coming months. And if I look at it from an overall market perspective and without commenting on competitors, what we have heard that in the retail space, some of them are referring to less promotional activities. And we do also hear from a trade perspective that again, people continue to manage to a margin, which in my mind, me, says that they are taking a similar strategy to what we do. And all of what that does, I think, is emphasized an underlying the rational nature of the market in which we operate in, which I see as a positive.

And we'll go ahead and take our next question from John Campbell with Jefferies.

Stefan, just in the revenue for the first 6 weeks into the second half, up 4%, can you just sort of talk through that, how that's split between trade and retail?

Yes, I would reiterate what Mark has said a little earlier, which basically said in the first 6 weeks, the trend is not too similar to what we've seen in 1H '24. So if you look at the numbers for 1H '24 and in the appendix to the results presentation, we have provided kind of more details on everything about the segment as well. So it's kind of in nontechnical terms, I would refer to more of the same rather than anything that's particularly different.

Okay. So just on the Melbourne DC, Stefan, how advanced are you in moving the other business lines into the DC? And how is the DC performing in terms of delivery on time, et cetera, et cetera?

So in Melbourne, we are basically finished. But I assume you were potentially referring to Queensland more than to Victoria.

Well, so -- but are all the business lines now being operated out of the Melbourne DC?

It hasn't yet. We still have 2 smaller offsite locations, but that is BAU, where you have a bit of overflow temporarily. And you then reintegrated that at any point in time. Whenever you will do an acquisition, there is another small external warehouse that you then need to integrate as well. But all of that is BAU in my mind.

And then update on Queensland, would be great.

Queensland is working well. We have moved the trade business, which is probably the first real litmus test into Queensland in mid-November. Since inception, the emergency order and also overall supply rate has been at the targeted level. And that sounds like a reasonably super statement. But for those that were around when we commissioned DCV a couple of years ago, we had significant and major teething issues in DCV a couple of years ago. We've said before that we had taken all the lessons learned. And that we've implemented those when we commissioned our DC in Queensland. And the proof in the pudding of course, is that the emergency rates and supply rates are on the target level and have been since the inception or integration of the trade business in mid-November. So that is working well. More recently which is not a 1H '24 event, but 2H '24. We've moved retail in as well. That is still very, very early days, and I'm literally talking days, not weeks. And so far, that is also performing at the target level. So on the back of a lot of hard work and quite a bit of whole searching that we've done post DCV, I think we are absolutely on the right track for DCQ.

Last question for me, Stefan. In Trade, do you think market share-wise, the last 6 months, do you think you've been holding your own?

I think we've said for quite some time that we don't see necessarily a lot of shift in market share for a little bit of the cycle between the Tier 1s. There can be some changes on those kinds of fringes with regards to some independence here and there at some point in time. I think from an external perspective, we've had a bit of a negative feedback at times. I know 3 months ago. It might be -- maybe we might be losing our market share. I think more recently, we've had a little bit less than may be we might be winning market share. I would stand by the view we've had throughout the whole period that we've solidified our market position. And it's not necessarily significantly up or down between the Tier 1s. And the market continues to offer good prospects. We are growing in the market. We are expanding the network. And one of those network expansion opportunities, for example, that today, we are opening a new store in Portland, which will increase the first network by 1. And we're looking at further expansion as we move through the second half of '24.

[Operator Instructions] And our next question will come from James Bales with Morgan Stanley.

Firstly, I'd just like to get your thoughts on interest cost for FY '24. Have the first half numbers fully captured the increase in rates that you've seen?

Thanks, James. And that's what changed a little bit more to cycle through. But it's not going to be another $7 million increase kind of first half on second half. But from just purely interest rate perspective, the tiny a little bit more that is coming through.

And then, maybe on the Better than Before timing, originally you guys were aiming for the full benefits in FY '25. Is that timeline still intact? And are you still aiming for the full $100 million?

Yes, James, let me respond to that one. I think, as I said, we're confident with what we're expecting to come through in half 2 here. Beyond that, I think it's only appropriate that we give Paul an opportunity to interrogate the program and work out what his priorities and timings are. So we're certainly not going to give guidance on where we see FY '25 heading. What I would say is that we're progressing really well on the key aspects of the program, particularly around the procurement side, but also those other aspects, which I mentioned before.

And that does conclude the question-and-answer session. I'll now turn the conference back over to Stefan Camphausen.

Thank you, Justin. I would like to thank all the participants on today's call for your continued interest and support of Bapcor and are looking forward to engaging with you over the next days and with many of you in person. Thanks, everyone, and stay safe.

Well, thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.