CAR Group Limited (CAR) Earnings Call Transcript & Summary

Thank you all for joining us for this virtual meeting today. My name is Pat O'Sullivan, and I'm the Chair of the company and Chair of this meeting. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. You are watching a live webcast of the meeting, and shareholders and proxies have the ability to ask questions and submit votes on this platform. I have been advised that a quorum is present, and I now formally declare the meeting open. As the notice of meeting has been circulated to all shareholders, I propose that the notice of meeting be taken as read. Questions today can be submitted online at any time. [Operator Instructions] Shareholders are also able to ask questions verbally at today's meeting. To do so, please follow the instructions on the home screen, which contains the telephone number and meeting ID you will need to dial in. [Operator Instructions] We also ask that you state your name and the shareholder you are representing before asking your question. Please note that while you may submit questions from now on, I will not address them until the relevant time in the meeting. I will be checking with our Company Secretary, Nicole, throughout the meeting for your questions or comments. So for those of you dialing in to ask verbal questions, please do so at the appropriate time. Please also note that your questions may be moderated or we receive multiple questions on one topic amalgamated together. Finally, due to time constraints, we may run out of time to answer all your questions, albeit we will endeavor to answer them all. But if this does happen, we will answer them in due course via e-mail or posting responses on our website. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare that the voting is closed. As always, the results of all resolutions will be announced to the ASX following the meeting and placed on the carsales investor website. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time. I will give you a warning before I move to close the voting. Before I introduce my fellow directors, I would like to take the opportunity to thank our Board; our Chief Executive, Cameron McIntyre; and everyone who works at carsales around the world for their efforts over what has been another highly unusual and challenging year. Our company continued to adapt and thrive, working to support our customers and industry. Many of the locations in which our company operates continue to be significantly impacted by COVID in the past year, including during lengthy lockdowns. Our Board and executive team have continued to focus on the well-being of our people across the globe as our first priority, enabling our people to support our other stakeholders and provide value to our shareholders. The Board is very grateful for the dedication and innovation shown by each and every member of the carsales team. Comprising the Board are Cameron McIntyre, our Managing Director and Chief Executive Officer, appointed to that position in March 2017. Cameron has been with the company for 14 years and will shortly give a presentation on the business performance. Wal Pisciotta has been a member of the Board since carsales' inception and led the company as Chair for 18 years. He is currently a member of the Remuneration and Nomination Committee. Kim Anderson has been a member of the Board since 2010, is the Chair of the Remuneration and Nomination Committee and a member of the Audit Committee. Edwina Gilbert was appointed as a Director of the company in 2016. Edwina is the Chair of the company's Risk Management Committee and a member of the company's Remuneration and Nomination and Audit Committees. Kee Wong was appointed as a Director of the company in July 2018 and is a member of the company's Remuneration and Nomination and Risk Management Committee. David Wiadrowski was appointed as a Director of the company last year and is the Chair of the company's Audit Committee and a member of the Risk Management Committee. I would also like to introduce Steve Kloss, who is Wal Pisciotta's Alternate Director; and Nicole Birman, who is our Company Secretary and General Counsel. Additionally, in virtual attendance are Lisa Harker, representing our auditors, PricewaterhouseCoopers; Jonathan Wenig, representing our lawyers Arnold Bloch Leibler; Scott Hudson, the returning officer representing our share registry, Computershare. The formal business of this morning's meeting will be conducted in 2 parts. First, our Chief Executive, Cameron McIntyre, will present to the meeting, and there will be an opportunity to ask Cameron questions about his presentation. We will then move to the formal business of the meeting, where we have a number of resolutions to put to shareholders. There will be further opportunities during this part of the meeting for shareholders to raise questions pertaining to each resolution. I will shortly invite Cameron, carsales' CEO, to deliver his presentation on the progress of the company over the last financial year. If you have any questions on that presentation or operational matters, please use the question facility or call in. We will pose the questions to Cameron at the conclusion of his presentation.

Well, thanks, Pat, and good morning, everyone, and welcome to the carsales 2021 Annual General Meeting. As was the case last year, this clearly isn't the way we thought we'd be presenting the company this year but -- once again to shareholders. But like many things over the last 18 months, we find ourselves adapting to the new environment we're in. And as you'll see in here, we've once again had another remarkable year of great achievements so despite the ongoing pandemic. The other thing we always like to do before we do the formal presentation is to play the video that we presented at the Australian Automotive Dealer Association's annual conference. But unfortunately, like most things this year, that was canceled. So we look forward to presenting that once again to shareholders next year. But anyway, let's jump into the presentation. So just looking at the first slide here, as a Managing Director and as a shareholder of carsales, it's always a good place to start. And as you can see here, we've continued to perform very well over the last 12 months, delivering strong total shareholder value and total shareholder returns with the gap between the performance of the company being the blue line and the broader market continue to widen being the gray line significantly, which is pleasing. It's also good to be reporting to shareholders that the financial performance of the company in FY '21 landed at the top end of market guidance. And once again, we've seen the resilience that we have in trading through economic cycles and the important role diversification continues to play in driving our growth as an organization. We're also very happy with how the teams managed the significant disruption and volatility caused by COVID-19, while at the same time, staying absolutely focused on driving our strategy. With adjusted revenue up 4% year-on-year to $438 million, adjusted EBITDA up 10% to $254 million and adjusted NPAT up 11% to $153 million, we're pleased with our overall financial performance outcomes. As many shareholders would have observed, the automotive markets continue to trade strongly with used car prices rising significantly over the past year. This is largely driven by movement of people back into car ownership and new car supply shortages, as trends have played out well for us over the past 12 months, and the metrics on this slide reflect the ongoing development of our market-leading position and strength in demand conditions around the world. Clear examples of this being the 35% increase in global lead volumes, the 17% growth in global traffic and a 28% reduction in the time it takes to sell a car here in Australia. Looking at our group financial performance, it's clear the evolution of our business strategy is paying dividends as we continue to build shareholder value through sustained growth across adjusted revenue, EBITDA and NPAT. And we continue to be well positioned as we move into FY '22. We're also really pleased to see the steady growth and significant contribution to the group our offshore businesses and what they're making in terms of delivering 24% look-through revenue growth and 19% look-through EBITDA growth with 18% and 20% growth across revenue and EBITDA for the year. And that's been an excellent outcome in a COVID environment. We've got a lot to look forward to when it comes to our international investments and are an important part of our business growth strategy. With the acquisition of 49% of Trader Interactive in the United States, this economic view of revenue and earnings will be even more important for us moving forward, given we won't be consolidating Trader Interactive from an accounting perspective. We'll also go into a little bit more detail on this. Just look at the summary of revenue and EBITDA later in the deck. But a few things to call out on this slide, and overall, this slide really reflects the diversity and the strength of the business as we've cycled highly variable increases and decreases in performance in different segments of the business since March last year. Starting with our revenue segments, and overall, we're pleased with the revenue growth we've achieved, up 4%. 10% adjusted EBITDA growth to $254 million was a good overall outcome and at the top of the guidance range, as we mentioned earlier. The 9% growth in online advertising EBITDA reflects the resilience of our revenue performance and strong cost discipline and in our operating leverage that we have, while international businesses in Asia and Latin America had both made excellent contributions to earnings growth overall. As we saw last year, we've continued to see very good overall EBITDA margin performance with nearly all parts of the business showing good margin expansion. The near 1% growth in domestic margins to 66% reflects the ability of our company to maintain strong cost discipline and exercise the operating leverage that we have by growth from high-margin products such as private seller. In other domestic investments, RedBook Inspect and tyresales overall margin impact was also positive, up 2.1%, which was again through good cost management and continued focus on profitable performance for tyresales. In Asia, margins were lower by close to 1%, as we invested in marketing for Dealer Direct, which is our C2B business in South Korea with Encar, along with the continued rollout of branch operations within the Encar business as well. Without that one-off marketing spend, margins would have actually expanded by 1%. In Latin America, the focus was on reducing costs while countries were locked down, particularly over the past 6 months, which has had a positive impact on overall margins as well. Adjusted net profit after tax, just a summary here and looking at some of the movements below EBITDA. Our depreciation increased by 13% year-on-year, which reflects the ongoing investment in further developing our global platform to leverage our value across our markets where applicable and supporting our growth-generating initiatives. Net financing costs were down slightly for the full year and down 16% in half 2, reflecting the reductions in interest rates and debt reduction achieved in the half. Profit from associates was down 7%, reflecting an unfavorable exchange rate impact of the Brazilian real at Webmotors, but we saw very strong growth in local currency there. Finally, the Board declared and paid recently, actually, a final dividend of $0.225. Then that reflected an 82% payout ratio of earnings for the year and incorporates the additional shares on issue from the recent entitlement offer that we completed for the acquisition of Trader Interactive. Just looking at cash flow. So the data on this slide does exclude the Trader Interactive acquisition impact and the associated capital raise as we haven't completed the transaction before 30 June. But starting at the top left, and we know we have a highly cash-accretive business, and it's great to see cash conversion step up once again this year to 105% of reported EBITDA. The team's done an excellent job here over the last 12 months in managing our cash flow and working capital, which is really reflected well in that chart. The 11% increase in CapEx reflects our continued investment in technology and support to support our international markets and the domestic product development opportunities that we have. Our leverage has continued to improve and has dropped to 1.4x debt-to-EBITDA. And at these levels, it's the lowest it's been since FY '17. And in relation to Trader Interactive and in conjunction with our new partners there, we renegotiated a debt facility that we anticipate will provide us with a pro forma net debt-to-EBITDA leverage ratio of around 2.1x going forward now that we've completed that transaction in September this year. Just looking at our domestic revenue, and a reminder that the difference between adjusted and reported revenue in these charts reflects the rebates provided to our dealer customers in half 1 by $11 million customer support package that we provided them with. So with dealer and media revenue, like most of the domestic business living through various lockdowns, it's been a year of 2 halves. Dealer revenue growth of 6% was solid in what's continued to be a good car market, with demand for new and used cars remaining robust throughout half but cycling exceptionally strong lead volumes, particularly in June last year. The revenue growth of 6% came from good growth in traffic to carsales and our nonautomotive websites, which flowed through to new and used cars and non-car lead volumes, and that represented around 3% of the 6% growth that we saw. We did do a price rise in February this year, which flowed through into half 2, and that represented 3% of the 6% growth that we achieved as well, while depth product was in line with this time last year, and that really reflected the decent results given the buoyancy of consumer demand and reduced time to sell. Looking at the right-hand side of this slide and at media performance. And it was also a year of 2 halves, where half 1 saw weaker new car sales conditions and reductions in OEM spends, while in half 2 revenue was up 13% year-on-year with growth in new cars, improving media advertising conditions and, I guess, as a business, pushing harder into nonautomotive finance and insurance making really quite positive contributions. Just looking at our private revenue, and private had an excellent finish to the year. Half 2 has been particularly strong, and the market shifted significantly as sellers were attracted by high used car prices and our Instant Offer product continue to perform well, which all supported the confidence that we had in pushing through a price rise recently. The 26% core private revenue growth, excluding tyresales and RedBook Inspect, was the strongest growth that we've actually seen here in many years. With tyresales, we continued focusing on profitability, while RedBook Inspect revenue was impacted by COVID lockdowns, particularly in Victoria in half 1. But we did see things improve in half 2 with flat revenue growth year-on-year for RedBook Inspect. Just looking at data and research and services revenue, and that was similar to last year with both H1 and H2. We see selling some low-margin warranty products. So the underlying revenue was probably closer to 2% growth year-on-year. We also continue to see good demand from our proprietary data and research products, particularly RedBook. In terms of just some of the overall market observations, and there's just a few things to mention on this slide. But firstly, inventory continues to remain tight. But published inventory is growing again, up around 16% since the start of the year, which is driven by higher sale prices attracting private sales to the market, improving new car sales volumes supporting trade-ins and stabilizing time for sale, which is still at very low levels but not continuing to decline any further at the moment. As mentioned earlier, we are seeing new car sales volumes improving, and you can see that VFACTS data that comes through on a monthly basis with sales up 28% in half 2. We also have seen strong demand from consumers with our new car listing products as well. Other upside here has been the impact that it's had on our media advertising, which is, as I mentioned earlier, was positive in the second half of the year. With tighter inventory and consumer demand, this is flowing through to our dealer customers and reflected in strong average gross margin improvement that they've seen as well. Looking at our market leadership position over the last 12 months, we've once again continued to build our audience and engagement, and that's reflected well here in what you see in our Australian market leadership. Sessions and unique audience is a reflection of the size of our audience coming into the carsales site growing 21% and 15%, respectively, year-on-year. The output of that growth in traffic is a huge gap between ourselves and others in sessions and page views and ultimately leads to more inquiries and customers buying and selling more cars in a shorter space of time than anyone else can deliver. Just looking at some of the domestic broader strategy focus areas and how we've gone over the past 12 months. Probably the first thing to say or acknowledge is that we have achieved a lot in the last year, particularly given the need for remote working. And I don't think we've missed a beat as a result of having to do that. I won't talk to the ticks, but there are a few areas, a few things that aren't finished at the moment. So home delivery is going well for us in South Korea as a platform to build our digital retailing capability there. However, here in Australia, we want to work harder in providing dealers with the ability to deliver an online car buying experience for consumers in Australia, and this is an ongoing area of focus. And it's something that I'll address a little bit further into the slide deck. Private seller dynamic pricing, we're only really turning that on now. We're very happy with how that's been going. But we're just really scratching the surface of that on the potential that it's got, and there's also a slide coming up on that, too. Also I don't think we've achieved the feature experience we're looking for yet with logged-on members, and we'll be working hard over the coming 12 months on that. Just looking at the United States and Trader Interactive, and we thought we'd give you an update on just how Trader is going since we completed that transaction on the 1st of September, and we are, as an organization, very pleased with how that's tracking so far. So as you can see, over the first 6 months of the calendar year, clearly, the company has performed very well, both financially and in operational performance. Revenue growth of 12%, EBITDA growth of 25% and an increase in EBITDA margins to 55% reflects the favorable market conditions in the United States and the ability the business has to exercise operating leverage achieved through a price rise in the 1st of April. Similar to all other markets, we've seen good growth in key operating metrics such as traffic leads and customer acquisition. And like everywhere, inventory remains a real challenge at the moment. So just looking at Asia and Encar. And in summary, it's been a really strong performance across our largest international operations over the last 6 months, and there's a number of great highlights to mention coming up. Starting with South Korea, though, we're very pleased with the consistently strong revenue performance of Encar over the past year with 21% revenue growth and 12% EBITDA growth. Our key operational metrics continue to grow. As we flagged in February, we invested AUD 3.7 million in building consumer awareness of our Dealer Direct product. Without this investment, EBITDA would have grown 22% year-on-year. The growth in the popularity of our premium products, such as guaranteed inspection, combined with the opening of 5 new branches during the year continued to play a really important role in driving organic revenue growth. Dealer Direct and home delivery services also played a significant role throughout the year and for the business there with some great milestones that we achieved. Dealer Direct grew -- actually grew by over 100% in transaction volumes, while home delivery has now got about 10,000 cars on offer to consumers on behalf of dealers, and that's an important component of our Korean e-commerce strategy. Home delivery revenue grew over the past 12 months materially, and we're encouraged by the opportunity that we have here as well. Just looking at Latin America and Webmotors, and we're really pleased to watch the business performance here continuing to build on the resilient half 1 that we had, finishing the year with revenue growth of 16% and EBITDA growth of 25%. And it's one of the countries that was worst affected by COVID-19 over the past 18 months or so. Now margins expanded there 3% to 44% as the business managed to -- managed its cost exceptionally well. Our CRM revenue nearly doubled, and we added around 1,500 new customers. We also added additional 2,000 new regional dealers and are at record levels there with customer numbers now exceeding comfortably over 16,000. Our revenue -- our finance revenue actually continues to become a more material part of the business, and that was up 21% year-on-year. And we also saw strong growth from operating metrics such as lead volume and traffic up 45% and 15%, respectively. I'm just looking at Latin America. It's been a challenging 12 months for the countries across Latin America dealing with COVID, but the teams in each of the countries have done a really great job in terms of working together and keeping costs well and truly under control. And at the same time, we've continued deploying new product into each of these markets and we're well positioned, particularly, I think, in Chile, as we come out of lockdowns and move into the next 12 months. Some of the market observations just reflecting on our major international markets and starting with South Korea, the vehicle trading environment there has actually stood up well over the past financial year or more. And as much as new car supply issues have been a challenge in many international markets, the supply of locally built Korean cars in the hands of Korean consumers have been more protected from supply chain issues with new car sales volumes returning to near record levels in FY '21. Now in the United States, conditions for powersports, equipment and RVs have been strong as people have modified their domestic tourism and recreational behavior due to COVID. As mentioned earlier, supply in some of our verticals, particularly powersports, has been challenging but good for dealer gross margin. Over the past 12 months, as inventory levels have begun to -- or will begin to return to normal, this is going to benefit Trader and their business model because their business model is a listings-based model at the moment. In Brazil, despite the challenging COVID environment, automotive sales had been recovering really strongly. And the new and used vehicle sales were up 32% in the second half, which is also backed up by Webmotors' strong operating metrics in half 2 and hopefully sets us up for a really strong FY '22 as well. Just looking at our market leadership position in our international markets and backing up some of those market comments with some more specific data points. And we're really -- we've really mentioned the strength already of Encar, but again, you can see here the business continues to back up its strong financial performance with continuous growth in traffic and clear market leadership against our nearest competitors. Trader interactive has the leading digital marketplaces for buyers and selling RVs, motorcycles, ATVs and PWCs in motorsports. With trucks, the market's contestable, and we have more inventory than our nearest competitor, and we're closing the gap there in terms of traffic. When it comes to commercial and agricultural equipment, where we're building our position here, and the market has a lot of potential for growth. In Brazil, when it comes to looking at our vertical competitors, we have extended our lead over our nearest competitors in traffic over the last financial year, which really reflects the strength and innovation of the Webmotors business. Just looking at our international key focus areas and turning to the broader strategy there and how we've gone against our focus areas. Like the domestic part of the business, we're really pleased with what we've achieved over the last 12 months in these markets, which is really reflected in the performance that we've just discussed. Again, I won't talk through the ticks, but there are plenty of areas that we haven't finished with yet. The first of these is in Brazil being the regional push that we have, and that was interrupted by COVID-19. And as much as we started that process, we pulled back because of the operating environment that we're living through. But this will again be a focus in FY '22. The other area is the financial partnership we have with Santander. And this could have been a tick as these agreements -- we have signed some agreements with Santander, but lockdown conditions really didn't help us. And I think there's a lot more to come with that partnership over the coming 12 months. Just looking at the carsales' strategy, and as we've done so over the past couple of years in this section, we'll provide you with some insights on some of the areas that we're focused on this year across our domestic and international markets. The overall business strategy, that hasn't changed. And in the interest of time, I'll just keep moving forward. So looking at our Australian focus areas moving into FY '22, and rather than refer to each bullet point, I'll just talk about the broader areas of change. But with dealer, we have started monetizing dealer finance in FY '21, and it's getting there, but we'd like to see some increases in penetration. At June 30, we had around 10,000 listings with a dealer finance offer. We haven't changed the objective around digital car buying, but we're moving into the first stage of that journey with the launch of a buying experience that we'll discuss further in this presentation. Now with private seller, we'll continue to push Instant Offer as we've seen, and we do continue to see considerable upside for the consumer and the dealer with that product. With dynamic pricing now getting there, this is a great opportunity for us to generate some yield uplift and to better target markets we're chasing. So we'll progressively roll out new features here over the coming year. We also do believe in the long-term opportunity that we have with tires. But as we've discussed, it needs to be more profitable, which we're working on, and there's an update further on the deck around that, too. Media, we continue to push hard advancing our product offering to consumers there, and there's some technology changes that we're making here with customer demand and self-serve platforms. Data, there's quite a focus on enriching the experience of logged-in members, as I mentioned earlier, and to keep people engaged and offer more of a tailored user experience as they move through their buying journey with carsales or indeed selling. So just talking about dynamic pricing, and over the last 5 years, we've been able to evolve our pricing strategy for private sellers from a simple fixed price model to a value-based or tiered pricing model, which has given us good steady growth in yield over the past number of years actually since FY '16. Dynamic pricing will enable us to evolve our capability even further based on factors such as location demand for car or time of the year with the cars being sold, for instance. We see dynamic pricing as an opportunity to continue to build yield, but there's better targeting of desired outcomes, we also think, and that should provide us with some, I guess, additional volume benefit we can hopefully achieve over time, too. I'm just talking about digital car retailing, and I mentioned this earlier, one of the key strategic priorities for this year is to launch the first steps in a differentiated digital product experience. It's going to support the market moving into more of a digital retailing position over time. On the dealer side, we want to make sure that our carsales dealers have an online platform to compete against the emergence of digital used car retailers, such as Carvana or Cazoo or Autohero or Vroom that are coming out of the United States or Europe. And these sorts of digital car retailers are coming to Australia, and we want to ensure that the industry is prepared for that when it does happen. And with our capability that we have being the biggest car-buying audience in the country, we think we're very well placed to support our dealers, facilitating the digital car-buying experience that people are beginning to look for. And in fact, our research tells us that 37% of consumers are willing to purchase a used car online, but only a small percentage of those consumers are currently completing transactions online today globally. We also know from our research that the most critical components of an online car-buying experience consumers are looking for to be more confident in transacting online and what they actually look like. The opportunity for the consumer here is a better buying experience. The opportunity for the dealers is to continue to become more efficient by having more of the car-buying journey online, and the opportunity for carsales is to move from an advertising platform to an advertising and transactional platform over time. This opportunity, we do think is meaningful for our customers and for ourselves over the long term, and we're starting from a strong position of being the largest, most trusted and engaged automotive marketplace in the country. So I'll just continue the digital car retailing and what we're doing there. And you can see here, there are 5 major features of the SELECT promise, which address the larger barriers for a consumer in considering transacting online at the moment. These include a pre-negotiated price where we're using our pricing technology to ensure a carsales SELECT cars price is highly competitive to remove the need to negotiate and ensure that the consumer is actually getting a very fair deal. With certified inspection reports powered by our RedBook Inspect business, a CarFacts report images of imperfections, and the dealer can communicate the quality of the car to the consumer through this product as well; instantly reserving the car online, with the deposit ensures that the dealer has a committed buyer and the buyer has a car that's locked in for them to complete their purchase. A 7-day money-back guarantee post purchase instills additional confidence in the buyer. It sort of replicates for the buyer that test drive experience as well. We'll also feature the 3 months statutory warranty that the consumers get. These features will -- or they will exist in the first phase of the SELECT product, and the product is in market now, and we have commenced onboarding dealers to the program. The program is now live. The next phase, we'll be working with on incorporated trade-ins. We know how important that is for the dealers. And in the long term, we'll see this being more automated using some of our existing capability that we have. Upfront, we'll facilitate taking deposits, but we'll also be working on integrating our dealers finance products as well. And longer term, we'll also be looking to provide a delivery capability. But we know from our research, this isn't the biggest barrier to buying online. So aside from market research, and that's what we're observing elsewhere in the world, we can also see what we've achieved with a similar product being our Encar home delivery service in South Korea. We've had that in market since mid-2019. Our carsales SELECT effectively replicates many of those features that we have within our home delivery. And then on the Encar side, there's now about 10,000 cars that are available for home delivery, and transaction volumes have been steadily increasing here since inception. And particularly since the beginning of the global pandemic, we've seen 2.5x growth in that product over the past 12 months, which has been excellent. I'm just looking at some of our FY '22 key focus areas in international. And there are some areas that are familiar to shareholders, I'm sure here, such as continue to expand our guaranteed inspection, building Dealer Direct awareness and user experience there, expanding home delivery, accelerating our regional expansion into Brazil and so on. New here is Trader Interactive in the United States, and I expect those focus areas may evolve over the coming 12 months as we get time to work closely with the team over there. Just looking at sustainability, and the business is -- this is a very important part of the business. And we're always looking to improve across our 6 sustainability pillars being people, customers, community innovation, government and the environment. Over the past 12 months, we have achieved a great deal as a business in many of these areas and anticipate a number of new achievements to come over the next 12 months or so. Just I mentioned earlier around tires, and I just want to bring this to people's attention. So as mentioned earlier, we did talk about one of our focus areas in FY '22 being to enhance the size and profitability of our tire business. So we think we can scale this business here in Australia. The tire industry remains a particularly attractive market, and it is relatively digitally immature. So tyresales does have a market-leading position in the digital retailing environment, but by adding a market-leading capability in tire wholesaling, it puts us in a much stronger position and more than doubles our sales volume and improves our pricing and incentive position with key suppliers. So during Q1 of this year, we have acquired 100% of a business called TyreConnect for $19 million. We anticipate this acquisition will be marginally EPS accretive in FY '22 and will deliver incremental or additional EPS upside in FY '23. So just on the outlook statement, and again, I won't run through all the individual trading observations by each segment. But we'll say that while recent lockdowns and retail closures have had an impact on leads and private ad volumes, if our experience is consistent with prior lockdowns, the business is well positioned to recover all or most of the declines that we've seen as retail reopens. On this basis, we do expect to deliver solid revenue -- adjusted revenue growth, solid adjusted EBITDA and adjusted NPAT in FY '22, excluding the recent acquisitions. Including recent acquisitions, we would expect to deliver strong growth in adjusted revenue, solid growth in adjusted EBITDA and strong growth in adjusted NPAT due to the extended lockdowns in the first half. Financial year performance, this is likely to skew more heavily into the second half more so than usual. So with that, that's my presentation. Thank you once again to all our shareholders. Thank you to the carsales team for a great 12 months. And I'll hand it back to you, Pat.

Thank you for that presentation, Cameron. Hopefully, our shareholders and other attendees today have found that insightful as always. We're happy to take questions now in relation to our presentation. Nicole, are there any questions?

Thanks, Pat. We do have a couple of questions, if we can. So the first question is from Mr. [ John ] and Mrs. [ Anna Silvia Satenberg ], and the question is, "Are you expecting the agency model being implemented by Honda and Mercedes to be expanded in the market? And what impact would that have on your digital car retailing feature?"

Thanks, Nikki. Thanks for the question. I guess it's very early days. Talking to other peers in other jurisdictions around the world, the agency model is something that's spoken about. But I actually think we're probably more advanced than many other countries are around the world in terms of moving to these sorts of models as such. In terms of how it plays out longer term, I guess that we'll all be able to see that with the test of time. The impact on carsales, we don't have a large new car business anyway. Our business tends to skew to used cars quite heavily. So I don't anticipate any significant impact at all at this stage. But again, we'll monitor the situation over time.

Great. The next question is from Henry Stephens from the Australian Shareholders' Association. Henry has a question about our modern slavery report. And he asks, "I'm wondering what sort of due diligence you do to make sure your suppliers comply with Slavery Act. This is especially an issue in the tire, cleaning and computing industries, where underpayment has been right in the past and incidents of modern slavery are high."

Thanks, Nikki, for the question. Well, I guess, the answer would be in 3 parts. The first part would be any new suppliers that become carsales suppliers, they do have to complete a survey or a questionnaire, particularly pertaining to areas around modern slavery. That's the first element. The second element is in all of our supplier contracts, we do have provisions that pertain to the Modern Slavery Act to ensure that we are transacting with people that understand what the requirements are and are meeting those requirements. And then the third layer is we are conducting reviews with all of our existing suppliers, particularly those at the big end of town to ensure that they're all complying with modern slavery provisions.

That's it for the operational questions, and we don't have any audio questions on Cameron's presentation. Thanks.

Thanks, Nikki. And Cameron, thank you again for that presentation. I will now proceed to discussion and Q&A around the formal business of the meeting, where we have a number of resolutions to put to shareholders. As I mentioned earlier, voting for all resolutions are open, and you may submit your votes at any time. The proxy votes received for each resolution will be visible on screen. I will also give you a warning before I move to close the voting. Item 1, the financial report. I now table the June 2021 annual report containing the financial report, which includes the directors' declaration, the related directors' report and auditor's report. Copies of the 2021 annual report were made available on the company's website, or if you elected to receive a hard copy, a hard copy has been sent to you. So I don't intend to read out the directors' report to the meeting. The Corporation Act requires the financial report to be laid before the meeting. There is no requirement in the Corporations Act or the company's constitution for shareholders to vote on, approve or adopt these reports. To date, the company has not received any questions for our auditors, PricewaterhouseCoopers, so the matter is now open for discussion by shareholders. Nicole, are there any questions or comments? [Audio Gap] in the report nor their closely related parties. I will only be voting proxies for unrelated parties. Nikki, are there any questions or comments on this item for discussion?

There are. Thanks, Pat. The first question comes from Henry Stephens from the Australian Shareholders' Association. And he says, "The Australian Shareholders' Association is very concerned about the trend to virtual-only meetings that reduced transparency and engagement of meetings. Shareholders do not want to lose their rights to eyeball and scrutinize company directors on their 1 day of the year. Can you please assure shareholders that the company will return to a physical AGM setting as soon as possible and continue to use the physical approaches as a standard setting for all future meetings?"

Thanks, Nikki, and thank you for the question, Henry. And yes, I can reassure you very much part of the carsales' culture is being together, and we very much will look forward to, in 2022, being back in the physical environment, if we can.

And we have one more question from Henry from the ASA stating, "For FY '22, the CEO may receive an STI equal to 165.5% of fixed remuneration and an LTI equal to 121.3% of fixed remuneration. Can you explain to the meeting how do you come up with these percentages and why they are both higher than the previous year?"

Thanks, Nikki. And again, thank you, Henry. I'm going to get Kim Anderson, the Chair of our Remuneration Committee, to respond to that question.

Thanks, Pat, and thanks, Henry, for your questions. As you know, each year, we carefully consider the CEO's remuneration, and we do so take into account 3 components. First of all, the remuneration structure, which is outlined in our remuneration report, which basically has 1/3 fixed rem, 1/3 STI and 1/3 LTI. We also externally benchmarked the CEO's remuneration using third parties, and we do so based on peer group and market capitalization. And fourthly, we also set the remuneration based on alignment with shareholder outcomes. So this year, you will have seen Cameron has had an increase in his LTI but not his fixed rem, and that is because since 2019, the company has doubled its market cap, and the benchmarking that we did indicated that, that needed to be increased. So I hope that answers your question.

Pat, we have one more question come through just on the -- in relation to future AGMs from Mrs. [ Sally Louise Vishni ], "Is it possible to continue virtual meeting facilities alongside in-person AGMs?"

Yes. No, we will take everything into consideration, obviously, depending upon the circumstances at the time. So our preference is for a physical meeting, but absolutely understand the request, and we will absolutely take that on board to make the right decision for all our shareholders for next year.

Great. That's all for the questions at the moment. Thanks.

Excellent. Thank you, Nikki. So I will now put the motion that the remuneration report for the financial year ended 30 June 2021 be adopted. If you haven't already done so, please vote on the resolution to adopt the remuneration report now. [Voting]

The next items of business being Items 3(a) and 3(b) relate to the reelection of directors. Item 3(a) relates to the reelection of Kee Wong. As is our customer, each director up for reelection will make a brief address. I now invite Kee to address the meeting.

Thank you, Chair. Firstly, thank you very much for the opportunity on the carsales Board. It's a real privilege for me both personally and professionally. I've been on the Board now for just over 3 years and have enjoyed my time on the Board, both learning from the business and also contributing to it. And in my time on the Board, I've seen the success of the business growing both in scale as well as in adjacent businesses and also expanding geographically. I've seen the value of the business double in the time that I've been on the Board despite the impact of COVID and especially highlighted by COVID, the need for innovation and digital transformation is now ever more present. And there are trends ahead of us with the advent of electric vehicles, the more popular growth in sharing of rides and cars, the change in the value chain of dealership models, people's preference of ownership of vehicles and the COVID impact on people's choice of mobility. All this adds to the need for the business to continue to innovate and transform. I believe my experience in business, expertise and knowledge and technology, my entrepreneurial investment skills and my network in countries like the U.S. and Asia, Brazil region will continue to add to the strength of the carsales Board. carsales Board is a very diverse Board with a balance of complementary skills. I enjoyed my time on the Board and the company of my fellow directors, and I'm excited about what I can continue to contribute to the carsales Board and the business. And I'm particularly proud to continue to be involved in a very successful global Australian digital technology company, and I'll be delighted to continue to serve on the Board of carsales. Thank you.

Thank you, Kee. Nicole, are there any questions on this item of business?

None.

Thank you, Nikki. I now put the motion to the meeting that Mr. Kee Wong being a Director of the company who retires by rotation in accordance with Rule 17.1 of the company's constitution and being eligible, offers himself for reelection, be reelected as a Director of the company. I and the rest of the Board unanimously support Kee's reelection and are very grateful to receive the benefit of his experience. If you haven't already done so, please vote on this resolution now. [Voting]

Moving to Item 3(b) which relates to the reelection of Edwina Gilbert. I invite Edwina to address the meeting.

Thanks very much, Pat. I've had the privilege of working with carsales now since 2016 in my capacity of Non-Executive Director. And the spirit of the carsales people is infectious. They have so much passion to continue to innovate, grow, care for their colleagues and workforce and foster really sincere partnerships with their business suppliers and dealer partners. With our CEO, Cameron, and our Board chaired by Pat, we continue to have excellent insight and input into the governance, strategy and oversight with incredible support and engagement from every level of management within carsales.com. In the past 2 years, we have developed the Risk Management Committee independently of Audit, which I've chaired. Given the [indiscernible], the impact of COVID, the challenge of disruption from new entrants and the threat of cybersecurity, to name a few, having a separate lens on our risk and focus on mitigation has been essential. This year, the Board and executive continues to evolve, and it was incredibly rewarding to have carsales.com secure 49% of Trader Interactive through our successful paid share equity raise. I'm proud to work with one of Australia's original disruptors and be part of their journey. I'd like to thank the Board, CEO, executive and shareholders for their continued engagement and support me as a Non-Executive Director. Thanks very much, Pat.

Thank you, Edwina. Nicole, are there any questions on this item of business?

Nothing for Edwina. Thanks.

I now put the motion to the meeting that Ms. Edwina Gilbert being a Director of the company who retires by rotation in accordance with Rule 17.1 of the company's constitution and being eligible, offers herself for reelection, be reelected as a Director of the company. I and the rest of the Board unanimously support Edwina's reelection. We greatly value her insights and contribution to the company. Again, if you haven't already done so, please vote on this resolution now. [Voting]

The next items of business, Items 4(a) and 4(b), deal with the grant of rights to the Managing Director and Chief Executive Officer, Cameron McIntyre. Listing Rule 10.14 requires shareholder approval for the grant of securities to Cameron McIntyre, the Managing Director and Chief Executive of the company. As a Board, we continue to be very pleased with Cameron's performance as CEO. The Board believes the grant of these rights, as set out in the notice of meeting, is consistent with the company's remuneration policies and objectives, reflects good market practice in remuneration and effectively aligns the interest of Cameron with those of the company. For the notice of meeting, there are 2 items that will be put to shareholders separately. Item 4(a) pertains to the grant of rights in respect of the deferred component of the FY '21 short-term incentive. Item 4(b) pertains to the grant of performance rights in the form of a long-term incentive for FY '22 to FY '24. The key terms of the rights and details of both plans are set out in the notice of meeting. The matter is now open for discussion by shareholders. Nicole, are there any questions or comments on either Item 4(a) or 4(b)?

Nothing at this point, Pat.

Thanks, Nikki. I now put the motion that approval be given to the grant of up to 21,164 rights over shares in the company to Cameron McIntyre in respect of the FY '21 short-term incentive award in accordance with the terms of the company's option plan and as set out in Item 4(a) of the notice of meeting. If you haven't already done so, please vote on this item now. [Voting]

I now put the motion that approval will be given to the grant of up to 93,095 performance rights over shares in the company to Cameron McIntyre in respect of the FY '22 to FY '24 long-term incentive award in accordance with the company's option plan and as described in Item 4(b) of the notice of meeting. If you haven't already done so, please vote on this item now. [Voting]

Item 5 seeks shareholder approval for an increase in the fee pool for non-executive directors to $2 million. The fee pool for the company has not changed since 2015 when the last increase was approved by shareholders at the AGM. As set out in the notice of meeting, since that time, the company has undergone significant changes, and it is vital that we remain in a position to pay market competitive fees to non-executive directors to continue to attract and retain directors of the requisite caliber for the Board. The matter is now up for discussion by shareholders. Nicole, do we have any questions or comments on Item 5?

We don't, Pat.

Thanks, Nikki. I now put the motion to the meeting that approval will be given to increase the maximum aggregate remuneration payable to non-executive directors of the company by $500,000 from $1.5 million to $2 million per annum. If you haven't already done so, please vote on this item now. [Voting]

That concludes our discussion on the items of business. In a couple of moments, I will close the meeting. The voting system will remain open for 5 minutes after the close of the meeting. Please ensure that you have cast your vote on all resolutions. As mentioned earlier, the results of all resolutions will be announced to the ASX following the meeting and placed on the carsales investor website. I would like to thank all shareholders for your ongoing support, and thank you all again for your attendance and attention today. It is much appreciated. Keep well. Thank you.