Eagers Automotive Limited (APE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the 64th Annual General Meeting of Eagers Automotive Limited as a listed ASX company. My name is Tim Crommelin, and I'm Chairman of your company. It's 9 a.m. here in Brisbane. And the company Secretary, Denis Stark, has advised that a quorum is present. I, therefore, declare this meeting open. I would now like to introduce my fellow directors, all of whom are in attendance today. They'll be up on your screen. Marcus Birrell and David Blackhall join us from Melbourne. Nick Politis, our major shareholder; Dan Ryan, David Cowper and Greg Duncan are in Sydney. Michelle Prater is in Perth. And with me here in Brisbane are Sophie Moore, our Finance Director; and Keith Thornton, our recently appointed Chief Executive Officer; and our company Secretary, Denis Stark. I would also like to introduce Nathan Furness, representing our auditor, Deloitte. Nathan will be available later in the meeting to answer any questions in relation to audit matters. Apologies, the Secretary has advised that Dennis Hull, the former company secretary of A.P. Eagers, is unable to join us today and has given his apologies. There are no other apologies. Are they, Denis?

That's correct, Chairman.

Thank you. Today's meeting is being held online as a virtual meeting. All shareholders and proxy holders can listen to this live webcast and watch our presentation. They can also ask questions, make comments and submit votes all online. To ask a question, shareholders would need to have clicked on to the, it's on your screen, I am a shareholder proxy. That's a bubble, and that is when you join the meeting. Questions can be submitted at any time. To ask a question, you will need to press on the speech bubble icon on your device. This will open a new screen. At the bottom of that screen, there is a section for you to type your question, then hit the arrow symbol to submit the question. Although you can submit questions from now on, I will not address them until the relevant time during the meeting. If we receive multiple similar questions on any topic, we will group them together, and I will ask our senior executive of operations, James Couper, to read out the questions at the appropriate time. Voting. Voting today will be conducted by way of a poll on all items of business, and I will open voting shortly. If you are eligible to vote, a new polling icon will appear on your device when voting opens. Selecting this icon will bring up a list of resolutions and present you with voting options. Cast your vote, you simply select one of the options. There is no need to hit a Submit or Enter button as the vote is automatically recorded. You may change your vote at any time up until I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear on your device. Please submit your votes at any time. I will notify you before I declare voting close. [Voting]

Before we proceed with the formal business of this meeting, I will present my report on 2020. After which, Keith Thornton will provide his operational report and comment on the current year. I now move to my address. Thank you, shareholders, and again, welcome to the Annual General Meeting for Eagers Automotive. This annual general meeting marks the first full year of trading for Eagers Automotive following the transformative merger of A.P. Eagers with Automotive Holdings group. Following my address, our new Chief Executive, Keith Thornton, will provide an overview of the operating and financial performance for the financial year 2020, and Keith will also comment on how we're trading in the current year. What a year 2020 was. Reflecting on the past, the pandemic posed significant challenges for the automotive retail industry, including ongoing changes to consumer behavior and economic uncertainty to both the demand and supply chain aspects of our business. When the COVID-19 pandemic hit in February/March 2020, car dealerships across the industry were already experiencing the most sustained drop in demand for new vehicles in our company's 108-year history. The initial stages of the pandemic then saw an immediate and unprecedented reduction in new vehicle sales. The severe declines experienced in April and May of 2020 were some of the worst market conditions on record. The company's response to the pandemic was swift but measured, and all stakeholders share that burden. We acted to rightsize operations, preserve cash and optimize liquidity; and more importantly, to protect our people, our customers and our local communities by keeping operations running safely and smoothly around government-mandated restrictions. In March 2020, we took the prudent step of across-the-board reduction in remuneration for directors and senior executives and halving the final year 2019 dividend. Your nonexecutive directors agreed to forgo their full Board fees. And our outgoing CEO, Martin Ward, and the entire executive team voluntarily have their own remuneration to help the company. Our access to the government's JobKeeper stimulus package was directly responsible for saving the jobs of over 1/4 of our workforce. JobKeeper eliminated the need for further savage company-wide restructuring, and this government initiative assisted in positive outcomes for all Eagers' stakeholders as spending in the economy recovered. Overall, we are proud of what we have been able to achieve in a very challenging market. The full year 2020 financial performance is testament to the leadership of Martin Ward and the entire team. Our key financial metrics for 2020 reflected the enlarged business following the merger with Automotive Holdings Group. Eagers recorded a net profit after tax of $156.2 million, while underlying profit before tax from continuing operations of $209.4 million on total group revenue of $8.7 billion. While we have paid a dividend to shareholders every year since listing on the ASX in 1957, the Board elected not to declare an interim dividend in 2020 in response to COVID-19. Final full year dividend based on 2020 earnings was $0.25 per share. That was fully franked, and that was paid to shareholders on the 20th of April this year. This dividend reflects the payout ratio that is lower than historic ratios as the Board believes the most prudent course of action was to preserve cash until there is a greater clarity around the broader economic outlook. In February 2020, we welcomed Michelle Prater as a Director, and the Board has already benefited from her extensive expertise in automotive retail and property development over the course of the last year. Michelle is a resident of Western Australia, where Eagers Automotive has significant presence. On August -- in August 2020, Greg Duncan, one of our directors, was appointed Chair of the Remuneration and Nomination Committee and a member of the Audit and Risk Committee, and we are grateful for his extensive industry knowledge and experience. Mr. Duncan has led a comprehensive review of the executive remuneration framework in response to the first strike that we received at last year's annual general meeting, and that was in relation to the year 2019. Although Eagers produced a year of solid operational financial and share price performance in financial year 2020, no long-term incentive performance awards were granted to any key management personnel in 2020, and no short-term incentive awards were paid to any key management personnel other than contractual entitlements. The Board has engaged with shareholders, proxy advisers and other stakeholders to better understand their concerns, which gave rise to the first strike and has also obtained independent external advice on our remuneration framework. As a result, significant changes have been made to the remuneration framework for the financial year 2021 to better align it with the ASX 200 market practice while maintaining a strong pay-for-performance culture aligned to shareholder interests. For the many shareholders who've lodged proxy votes, it is pleasing to see a very positive support for the structural changes undertaken. As we look to 2021, while some uncertainty remains in the external environment, we believe we have now navigated the worst of the global pandemic in Australia, and we are focused on delivering improved performance and earnings per share growth. I'd like to take this opportunity to acknowledge the ongoing support of all our stakeholders and especially our people, without whom, Eagers Automotive would be incapable of functioning to the high level it does. As I've said before, a company is only as good as the people who work for it, and I can say without hesitation that Eagers Automotive has the best automotive retail management team in the business. The strength of our people speaks to the proud 100-year history of the company and galvanizes us to pursue our Next100 strategy. I want to take this opportunity to acknowledge the leadership of our new CEO, Keith Thornton, who has been with the company since 2002. In Keith, we have a proven leader with an unrivaled understanding of the business, its strategy and a clear vision for the future. I would also like to thank our executive team and indeed our entire workforce who come to work every day and strive to deliver a superior customer experience and a better business. We are very confident we have the right team to build the foundation for the next 100 years of Eagers Automotive. I would like to sincerely thank Martin Ward, who handed over the reins to Keith in February. Under his exemplary leadership, the company grew into a true powerhouse of the -- in -- of automotive retail. During Martin's tenure as Chief Executive, profit before tax grew from $19 million in 2005 to $209 million in 2020, with the company's market capitalization in that time growing $166 million in 2005. And at the end of 2005, it was $166 million, and it grew to $3.4 billion at the time Martin passed over the reins to Keith. We thank him, Martin, for his outstanding contribution and the formidable position the company is now in. Martin continues in his new role as adviser to the Board and to Chief Executive Officer, Keith. And Martin has responsibility for Eagers' extensive property portfolio, so he's going to be very busy going forward. I would also like to thank my fellow directors for their continued dedication and contributions. Their experience, guidance and invaluable industry knowledge have been a welcome constant in what has been a period of unprecedented uncertainty, and I thank them for their efforts. And finally, a vote of thanks to you, our shareholders. We have listened to your feedback and hope our actions and performance over the past year warrant your continued support and investment in our company. It is disappointing we have to hold our AGM as a virtual meeting, and let's hope we can meet in person at next year's annual general meeting. I'd now like to hand over to Keith Thornton. And following Keith's address, we will deal with the formal business of the meeting. Keith?

Thank you, Chairman. Good morning, shareholders, and thank you for your interest in Eagers Automotive's annual general meeting. Today's AGM is an important milestone in our journey, our first under our new identity of Eagers Automotive Limited. Today also marks my first AGM after being appointed to the role of Chief Executive Officer in February this year, so please bear with me. I'm pleased to report that Martin Ward, our previous CEO since 2005, is with us here today, and he continues to add valuable counsel and support to the Board and myself. Today, I will address the financial year 2020 performance, which ended in December, as that is the formal reason for the AGM. I'd then like to update you on the company's progress on our key strategic priorities, including the impact of the COVID-19 pandemic and how it impacted our Next100 strategy and implementation time frames. Finally, I'll provide a comment on our current outlook. But first to 2020. Like for so many, 2020 was a year where we faced enormous challenges. I won't go over all the issues already highlighted by our Chairman, but at the start of 2020, your company was faced with: one, a new car market experiencing its longest continuous period on record of year-on-year monthly declines; two, the complex integration of the larger, more complex and underperforming AHG business; three, the challenge of managing to completion the divestment of the Refrigerated Logistics business; and four, the unexpected decision by General Motors to retire the Holden brand, affecting 19 of our Holden dealerships across Australia and New Zealand. All these challenges were faced by the company in the first quarter of 2020 and preceded the all-encompassing disruption triggered by the global pandemic of COVID-19. Our overarching response to the impacts of the COVID-19 pandemic reflected the ethos this company has so fiercely embraced over its history of optimizing outcomes for all our key stakeholders, whether they are our employees, our customers, our business partners, the community or, of course, our shareholders. I'm proud to report that by adopting a balanced approach to sharing the burden across all stakeholders, we were able to weather the onset of the pandemic, the government-imposed lockdowns and associated shutdowns to business and emerge to successfully participate in the recovery during the second half of 2020. All stakeholders played significant roles in our response. As our Chairman mentioned, the response we took was measured but decisive. In the spirit of setting an example for all stakeholders, the leadership of your company, the directors and executive management, began with immediate suspension of Board fees and cuts to executive remuneration. We set about resizing our workforce and distributing available work fairly across the remaining full-time employees. Our valued business partners, including our OEM suppliers, banks and finance companies and landlords, both large and small, were overwhelmingly supportive. We made the difficult but prudent decision to halve the final dividend of 2019 paid in April 2020 and then fully suspend dividend payments for the remainder of the year. We remain focused on our customers and the communities we operate in, knowing that others were being equally challenged at the same time, albeit in different ways. It's also important to acknowledge the highly effective role the government played in the response to the pandemic, a combination of tax deferrals, stimulus measures and the provision of JobKeeper. These measures ensure no further structural redundancies were required, saved approximately 2,000 jobs allowed us to continue to pay staff in the multiple subsequent snap lockdowns and effectively helped stabilize the business to allow to successfully participate and drive the recovery. It was a combination of these external support measures, decisive and urgent action by the company and the loyal support of our valued stakeholders that underpinned our 2020 result. As the Chairman already pointed out, consolidated revenue from continuing operations in 2020 was $8.7 billion, demonstrating our enhanced scale post the acquisition of AHG. We recorded underlying operating profit before tax of $209.4 million. This position reflects the trading profit for the period, excluding one-off items, such as the government wage subsidy and asset impairments. We reported a statutory profit after tax for 2020 of $156.2 million. Statutory line was impacted by a net $90.7 million noncash impairment to assets from continuing operations. This mostly was associated with the impact of the Holden exit, restructuring activities and the revaluation of property assets. In light of the impacts of COVID-19 and the challenges faced by the business, we believe this was a highly credible result in our first full year as Eagers Automotive and are exceptionally proud of the efforts of our many great members of our team. I don't intend to cover the financial year '20 performance in any further detail. However, I will be more than happy to take questions at the conclusion. I'll now turn to providing an update to shareholders on how the business has executed against our key strategic priorities in light of the impacts of COVID-19. In 2020, we all had to learn to live in the shadow of a global pandemic. The impacts of COVID-19 drove unprecedented fluctuations in the demand and supply of new vehicles. Consumer demand for new vehicles initially saw severe declines in April and May sales with some of the worst market conditions ever recorded. Global supply was immediately and materially reduced, with offshore production impacted by a combination of significant intended production cuts, factory closes and stoppages and disruptions to the global supply chain, all combining to cause a sustained reduction in supply and inventory levels that's continued into 2020. It was following the introduction of government stimulus measures and the lifting of nationwide lockdown restrictions that we saw consumer demand return, with a rebound in the last quarter of 2020, finally breaking the trend of what ended up as 31 consecutive months of year-on-year decline in new vehicle sales. The impact of the pandemic also changed our market environment. The behavior of our customers evolved as society adjusted to new work/life patterns, closed international borders and the ongoing threat of snap lockdowns. These changes are both forced and enabled us to accelerate our strategic initiatives already communicated through our Next100 strategy. I turn your attention to the screen, where you'll see our previously communicated Next100 strategy. Our Next100 plan remains consistent from premerger, and it continues to provide a road map for our response to both the evolving automotive retail landscape and the impacts resulting from COVID-19. This strategy was developed to ensure our relevance, our growth and sustainable success over the next century and focus on 5 key initiatives, combining to ensure that: A, we provide an enhanced customer experience from a lower cost base; and B, we evolve to be a critical player in the global distribution of mobility solutions, regardless of product changes, consumption trends or distribution models. This strategy has been further endorsed by the changes our industry and our business experienced during 2020, and I'm pleased to report our progress in all key areas accelerated well ahead of initial time frames. I will start with our Engage our Customers Everywhere pillar, which as you look at the strategy on the left, and this refers to our property and omnichannel strategy. In 2020, we continue to rebalance our property portfolio, acquiring several of our strategic externally leased sites, a key step in affording us greater flexibility to more actively manage our automotive retail footprint. In 2020, we acquired $116 million of property to finish 2020 with a property portfolio valued at $356 million. We have since added another $109 million worth of property in 2021 so far while divesting a small number of nonstrategic properties. In parallel, in 2020, we exited 34 external leases as we restructured our business operations with more efficient and sustainable property clusters. Effective property restructuring is a key enabler for our next pillar, as you move towards the right, which is to Redefine our Workforce, which is basically our people resource strategy. The changes to the supply and demand environment, a necessary restructure of our cost base and changing consumer buying habits, all combined to drive material changes to our workforce size, its design and our productivity output. This has been further enabled by technology investment into a combination of customer-facing and business process tools that improve customer experience while driving productivity. Optimization across people and property have delivered significant permanent cost reductions of approximately $100 million in annualized savings while also providing an enhanced customer experience. Moving to our finance strategy. We continued executing our plans to leverage our unique scale and deliver optimized finance solutions at the point-of-sale for our customers. While COVID-19 created significant headwinds for the industry in terms of finance penetration, we continue to outperform the overall market. Business process improvement, technology investment and the anticipated relaxation of lending laws, along with the moderation of the unusual business environment seen in mid-2020, are expected to provide growth in this area during '21 and beyond. Innovation, the fourth pillar of our strategy, remains a major focus, and we've accelerated our investment in our dedicated independent used car strategy through our easyauto123 platform, supported by our National Carlins auction business. Our fixed price, pre-owned vehicle business, easyauto123, is on a strong trajectory, benefiting from the scale of the merger, full integration into the wider business, investment in online offerings and a disciplined approach to cost management. 2020 saw easyauto123 moved to being consistently profitable with growth continuing into '21. As Australia's only national scale used -- sorry, fixed price used car model with an integrated auction business and a presence in New Zealand, we clearly have a unique first-mover advantage that we are very focused on aggressively driving further profitable growth. Finally, our Reinvest with Discipline pillar refers to active portfolio management focused on both on complementary acquisitions and selected divestments. Following the completion of the sale of the AHG Refrigerated Logistics business in the first half of 2020, we also agreed to the divestment of our Daimler Truck operations and associated Milperra property with Velocity Vehicle Group for $108 million. Divestment of the Daimler operations completed last month, and the Milperra property sale is on track to complete in this current half. Overall, the transaction will deliver an estimated net gain before tax of between $32 million and $36 million, subject to adjustments on completion and allows us to focus on our core automotive retailing business going forward. Post these divestments, the company remains extremely well capitalized and active in reviewing multiple acquisitions that support our strategic priorities. The opportunity exists to add further scale to our business, particularly in the 2 largest markets of Sydney and Melbourne, in which we remain underweight, and this will provide balance to our geographic footprint. Despite the challenges of 2020, I hope you, our shareholders, can see that your company remained incredibly active in 2020 to take advantage of the changes brought on by COVID-19 and leverage the unique scale and position Eagers has. Finally, let me provide an outlook for the first half of financial year '21. Eagers Automotive is now in a very strong financial position. Our balance sheet remains robust with $507 million of available liquidity at 31st of March 2020, together with a substantial asset base and a property portfolio valued at $436 million in March '21, underpinning the company's financial position. Improved market conditions have continued into 2021. And as announced in April, we expect underlying operating profit from continuing operations of approximately $98 million for the quarter ended 31 March. On a statutory basis, the net profit before tax for continuing operations for the 3 months is expected to be $105 million. By way of further update, we expect year-to-date underlying operating profit from continuing operations through to the 30th of April '21 of approximately $127 million. On a statutory basis, the net profit before tax from continuing operations for this period is expected to be $170 million, which reflects the expected profit on the sale of the Daimler Trucks business but excludes the profit from the Milperra property due to settle before June 30. These results are subject to external audit review, which will be conducted following the completion of half year ending 30 June '21. Unusually strong market dynamics characterized by demand continuing to materially outstrip supply, combined with the ongoing benefits of our $100 million cost-out program completed over the last 12 months, have underpinned our performance. The extension of the instant asset write-off now referred to as temporary full expensing through until June 30, 2023 will further underpin strong sustained market demand. The Board is confident our strong balance sheet and fortified liquidity position, our scale, our geographic diversity, our unrivaled OEM partner portfolio and, of course, our great people will provide an optimal platform to pursue further growth. We remain focused on providing optimized stakeholder outcomes through EPS growth underpinned by disciplined leadership of operations and successful execution of our strategic initiatives. The further simplification of our business to focus on our core automotive retail operations also puts us in a strong position to capitalize on favorable market dynamics without distraction. So in closing, on behalf of the company, I would like to recognize and thank all stakeholders for their support in 2020. The company does not take it for granted. And together, we look forward to now supporting and rewarding partner stakeholders as we benefit from the current market conditions and look to continue successful growth into the future. Personally, I would like to extend my sincere thanks to the Board for their valuable guidance, counsel and support as I commence my new role. I would especially like to thank Martin Ward for his leadership, and on a personal note, his guidance, support and mentoring over the past 16 years, and I look forward to working with him in his new capacity and especially to continue to unlock value for shareholders within the Eagers' property portfolio and other strategic opportunities. Thank you to our entire management team for their leadership and commitment. I'm excited to have the opportunity to work alongside what I firmly believe is the best team in the industry. Very importantly, to all our people across Australia and New Zealand, our successful navigation of the challenges of 2020 would not have been possible without the efforts of each and every one of the great team at Eagers Automotive. Our business does not succeed without your efforts. Thank you to the entire team. And finally, a big thank you to our many loyal shareholders for your ongoing support. We look forward to continuing to engage with our people, our partners, our stakeholders, and of course, you, our shareholders, on this very exciting journey. Thank you.

Thank you, Keith. And shareholders, we now move to the formal business of today's meeting. Our 2020 annual report and notice of annual general meeting were made available to all shareholders on the 16th of April 2021 and will be taken as read. For a motion, as detailed in the notice that is put to shareholders, I will address any questions or comments from shareholders on that particular motion. General questions and comments will be addressed later in the meeting. First item in the notice of meeting is to receive and consider our financial reports for 2020, which are included in the annual report. The Corporations Act requires the financial reports to be put to the meeting each year. If there are any questions or comments from shareholders on the financial reports, I will address them now. Now is also the appropriate time for our auditor to address any questions about the audit, the auditor's report, our accounting policies and auditor independence. James, are there any questions from shareholders?

[indiscernible]

Thank you. As there are no questions from shareholders, we now move on to the next item of business. That is item #2, on today's agenda, and it is for the reelection of Nick Politis as a director. In accordance with our constitution, Nick retires by rotation at this meeting, and being eligible, offers himself for reelection. Nick is Eagers' largest shareholder, and the Eagers Board and our company derives significant benefit from Nick's experience and expertise in the automotive industry. Further information about Nick can be found in the 2020 annual report and in the notice of meeting and on your screens now. Our directors recommend the reelection of Nick Politis. I would now ask James. Are there any questions regarding item 2, Nick's reelection?

No questions, Mr. Chairman.

Thank you, James, I think the next slide on your screen will show the proxy votes on this item, at this stage, without shareholders who may not have all voted. Those who have voted and/or by proxy is 97.7% in favor of Nick's reelection. So so far, so good looking. Very good, Nick. I will now move -- as I mentioned earlier, voting today is being conducted by way of poll, and you may cast your vote on all items now. I'll move to the next item, and it is item 3. And today, we are seeking shareholder approval of our 2020 remuneration report, which is set out in our annual report. Although the vote on this motion is advisory only, the Board is looking for shareholder support for our policy on remuneration matters. Last year, we received the first strike on this item of business. Since then, we've engaged with shareholders to understand your concerns. We have, as I mentioned in my address, established a dedicated remuneration and nomination Board committee. And that's headed by Director Greg Duncan, and that Board -- that committee has undertaken a comprehensive review of our remuneration framework with the assistance of external advisers. Taking shareholder feedback into account, we've implemented changes to our remuneration structures and improved the transparency and overall disclosure in our remuneration for this year 2020. I now ask James, if there are -- are there any questions, James, in relation to the remuneration report?

Mr. Chairman, we have one comment in relation to the remuneration report, and the comment has been submitted from [ Peter McInally ] on behalf of the Australian Shareholders' Association. Congratulations, this year's report is clearer with the remuneration procedure better explained. New framework with detailed disclosures to be provided in the 2021 remuneration report will reflect an approach more aligned with ASX 200 market practice. As a general rule, ASA opposes bills as it is a dramatic step to take. So we will support the remuneration report and not vote in favor of this bill motion.

Thank you. Is that a question or a statement?

It's a comment.

A comment. No, thank you very much, Peter. We appreciate your support in that area and the Australian Shareholders' Association. We could move to Slide 13. That's the number of proxy votes on this item running at 96.8%. So that's currently very good support from shareholders. There's no further questions, the proxy and direct votes are there. To point out that these votes do not include any votes by directors or key management personnel as they are not permitted to vote on this item. Very soon, I will close the voting on this item 3 and also item 2. But before I do so, I will pause the meeting to give shareholders one final opportunity to cast votes, your votes, on these items, that is item 2 and item 3. I now pause the meeting for 1 minute, so you may finalize your votes. [Voting]

Thank you, shareholders and ladies and gentlemen. Voting on items 2 and 3 is now closed. The final votes are being counted, and this will take any votes that have occurred in the last short while added to proxies, and that will take approximately a couple of minutes. Computershare is doing that for us. So I will again pause the meeting while we wait for the counting to be finalized. [Break]

Ladies and gentlemen, shareholders, we're back, and thank you for your patience. Voting results for both resolutions should now be showing on your screen. All votes have been lodged and counted. And the results, as you can see, overwhelmingly in favor of item 2, Nick Politis' reelection; and item 3, our remuneration report. I think it was 97.9% in favor of Nick's reelection. Congratulations, Nick. And 97.16% in favor of our remuneration report. Shareholders, on behalf of the Board, shareholders, I thank you for your overwhelming support on both resolutions. I would also like to point out that with your support, resolution 4 will not be put to this meeting. Ladies and gentlemen, that concludes today's formal business. And before we close the meeting, I would ask James if there are any general questions or comments from shareholders. And if so, we will attempt to address them now.

Mr. Chairman, the first question comes from [ Peter McInally ] at the Australian Shareholders' Association. Congratulations on achieving a successful financial result in difficult circumstances caused by the pandemic. Shareholders want to understand the reason for the replacement of the CEO at the time of the annual report was released. Not appear to be any explanation of it. Would you please comment now?

Thank you, Peter. Martin stepped down at the time of our -- as you've pointed out, our result in February. And Keith, as I mentioned, was a very good replacement for Martin, having been with the company for 2002, certainly endorsed by the Board and certainly endorsed by Martin. Keith had been in charge of operations at A.P. Eagers for many years. And Martin thought it was time to give Keith the reins, and that was certainly supported by the Board. As you would know, for a couple of years leading up to February 2020 at the time of Martin stepping sidewise and Keith taking over the range, there'd been a transformative merger, APE gets AHG. That was an enormous exercise, and there was a lot of restructuring involved in all of that during that time. Keith oversaw the operations of our business very credibly. And in addition to the transformative merger, COVID hit, and it was all hands to the pump. People kept doing what they were doing and doing it well. And given that there was a bit of light at the end of the tunnel and a bit of a break by February 2020, that was the appropriate time for Keith in the view of the Board and totally supported by Martin to take over the reins. Is that all of the questions? Or...

Mr. Chairman, there are a number of other questions. The next question also comes from [ Peter McInally ] of the Australian Shareholders' Association. There are 10 Board members, 5 of whom are considered independent. ASA prefers Boards to be composed of a majority of independent directors, and we urge the company to consider this during Board renewal process. Value to improve on this important metric may see votes against reelection of nonindependent directors in the future.

Thank you, Peter. It's Tim again. I'll -- Tim to address that. The Board is very conscious of independence. I should point out that we have 9 Board members and 5 are independent, so that is the majority. But as I -- thank you for your support. But can I just reiterate? The Board is very conscious of independence, and of course, that will be in our thinking as we move forward.

Question also comes from [ Peter McInally ] from the Australian Shareholders' Association. We see clarity on the reason for receiving and retaining government COVID-19 financial assistance when the financial results were an outstanding success compared to the prior year. We note all key management personnel and Board members agree to remuneration reduction.

Thank you, Peter. Certainly, I touched on government assistance during my address, and as did Keith, and maybe both of us will have a go at trying to cover the minefield of that area. But we should point out that when COVID hit, it -- and in my address, I said we had 2 of the worst months in the history of the company, which was April, May. Any profits or contribution that have been made before that, January, February, March, were completely wiped out. They had 5 months of losses. We had any number of lockdowns being proposed. Revenue collapsed. And I should point out, to be eligible for JobKeeper, you have to have in excess of 50% reduction of revenue for a company our size of thousands of employees. Holden had left the country. And we're -- quite frankly, the company was faced with savage restructuring. JobKeeper, to which you refer, was a government initiative, and it had many aspects. But simply, it was there to keep people in jobs, retain jobs. And I think I said in my address, and Keith referred, that some thousands of employees, 1/4 of our workforce would have been restructured. That means they would have gone from the company, and they would have left most likely the industry. Can I just make a quick comment? I think Peter mentioned something about our result. But I'd just point out, it was a credible result. It was the first year of that -- of the merger, the transformative merger, where A.P. Eagers and Automotive had come together, and that had been 18 months in the making. So it was the first full year of those results. So it's in effect double the size of the company. Turnover of the company increased something like $4 billion to $8 billion. So in terms of the result, yes, it was credible, but it was a very, very tough year. There's lots of things, I guess, I could say about lockdown, but I'm not about lockdowns and JobKeeper, but I might ask Keith to add some flavor around what it really meant for our company.

Yes. Thank you, Chairman. And Peter, I appreciate the question. I think our Chairman has covered it fairly well there, and we both did refer to it in our speeches. But probably some context around exactly the size of your company or Eagers Automotive as we went into COVID is relevant. As Tim pointed out, the comment there about it being an outstanding result is probably a little bit misleading. We talk about it being a credible result. We tripled the number of employees, and we more than doubled the size of the company. So the result is not a fair comparison to the prior year being 2019. It was a credible result and a credible recovery from what our Chairman described. Appropriately, it's devastating losses when COVID hit. To give you some magnitude, JobKeeper was designed for organizations just like Eagers Automotive. And by that, I mean large Australian employers who were materially, and Tim pointed out, greater than 50% impacted by COVID. Going in at the end of February last year, we had 11,300 full-time employees. Eagers Automotive is one of Australia's largest employers. We had a wage bill at the end of February, pro rata of over $1 billion. That is a significant responsibility that this company takes on. It's a significant obligation, but also those people that we pay and that money we pay those employees is recycled through our economy and supported our economy both in difficult times, but also in the recovery. The amount we received [ close ] to 6 weeks worth to the time we were in a national lockdown where the government through, we think, prudent direction closed our businesses. The JobKeeper we received, we passed on to 6,500 eligible employees. So we do think that we, first off, were exactly the type of organization that needed it. We targeted with it. And we think we used it appropriately to, A, survive the hit of a COVID, which our Chairman described as devastating; and to allow us to stabilize and be able to participate as this Australian economy recovers.

Thank you, Keith.

Chairman, we have a number of questions from a shareholder on behalf of the Kelly Super Fund. The first question is, what is your volume forecast for the new car market in Australia?

I might take that, Chairman, if you don't mind. We don't usually go into forecasting market sizes. At the end of the day, we're a retailer, we don't bring the cars into Australia. However, from what we're seeing, VFACTS at the end of April, and I will point out that the April VFACTS number of 93,000-odd units was a record ever April. So there is a lot of talk about type supply and supply shortages. However, the number of cars delivered and recorded by VFACTS, which is the industry journal in new car deliveries, was a record for April. It's got the industry on a run rate of about 1,050,000 units for the year. We think that's a reasonable number. It may come in as -- come in a little more towards 1.1 million or a little less depending on how supply is impacted over the course of this year. The point I would make is it will be a strong delivery result this year irrespective of the short supply relative to the very strong demand.

The next question from the Kelly Super fund, does Eagers believe more OEMs will go to the agency model?

As you've got the floor, Keith, I think you should keep going.

Sure, Chairman. We do want to point out for those listening that there are only -- there is only one OEM that has confirmed, absolutely they are going to the agency, which is Honda. It's been well publicized. It's also well-known that Mercedes-Benz is working towards an agency model. At this stage, they are the only OEMs who have communicated they are going to agency. In fact, we have had the market leader, the largest OEM in Australia, which is Toyota, come out publicly and state that agency is absolutely not something they will consider appropriate for the Australian market. So the reality is we think that these first 2 OEMs and Honda circumstances is very different. They are -- they've effectively restructured their network. They have reduced their number of dealers by circa 50%, and they are predicting lower volumes in the future. So their agency model is in response to their own challenges in importing the Honda brand into Australia and to making sure that they're viable and they're here for the long term. We think there are some challenges around agency that still need to be worked through. We still think that what we bring to the table as a retailer is critical, and we will watch with interest how the first 2 go, but we do not believe there will be a mass uptake of agency. However, we sit here and irrespective of what occurs in the future, any changes to distribution is a catalyst for consolidation. So if there are changes, we will have a seat at the table. We're a very large, supportive partner for all our OEMs. And if there is consolidation, hopefully, we'll be invited to participate in it.

And the final question from the Kelly Super Fund, does Eagers believe the Australian or state governments will bring tax registration increases for diesel or high-emission vehicles? If so, will this result in a decrease in sales of diesel vehicles and result in less gross profit generation opportunities?

Chairman, I'll take that one again. We don't know. The irony is, at the moment, the most recent tax -- day tax that received at publicity was a road usage tax on electric vehicles, which is totally counter to what that question refers to. We can't really foreshadow or predict what the government is going to do in terms of taxes. Again, we'll reiterate that it does not really matter what engine propels occur. We will still sell them. We will still service them. If there is additional taxes on diesel, for instance, and that moves people back into petrol, into hybrid, into other alternate propelled cars, it really is only a catalyst for transaction, which we'll participate in. So we're not concerned at all about any changes to taxing on certain variants of vehicles as they go forward. And we're certainly looking at how any further increase in even in EV, which was about 0.7% of 1 -- 0.7% or 1% market share last year comes to market, it doesn't really matter. We will still be playing a critical role in the distribution of these products for a long time to come.

Okay. Shareholders, it is your last chance to ask any questions. So it would be my intention that we close the meeting shortly. So if you have a question, we might let it run for a minute and just see if there's anything to come.

Two further questions at this stage, Mr. Chairman. And the next question comes from [ Mrs. Orchimer ]. Question is, I noticed that our current assets were less than our current liabilities and that we survived with government COVID health.

Thank you, Ms. Orchimer. I might hand that question or the chance to answer that question over to Sophie Moore, our Finance Director.

Thanks, Tim. So certainly, that is addressed in our annual report if you look on Page 40 in the note disclosures. The balance sheet does, in fact, reflect a net current liability position of $102.8 million, but this is impacted by the application of the new lease standard, which results in the recognition of a net current lease liability of $152 million at December 31, which reflects the property rental charges for the next 12 months. This commitment was previously recorded off balance sheet under the previous accounting standard. Removing the impact of this new lease standard results in a net current asset position for the group. And certainly, the group expects to continue to generate significant cash inflows from operating activities to fund its obligations and also have significant liquidity available.

Chairman, the final question comes from Dr. Porter. I'd like to thank Martin and the Board for the planned and orderly transition to Keith as CEO. An excellent choice. As you know, I have been concerned about the massive amount of leased, owned and proposed new real estate in APE, especially after the merger, gives me considerable comfort to learn Martin will overview the property empire. Property strategy that has underpinned Eagers' business for the best part of a century has been a great source of financial security and a catalyst for growth as you have recycled property assets. Planned BAC Brisbane airport investment and the Auto Mall in Indooroopilly Shopping Centre seem to be 2 examples of a possible new future approach. Looking forward, I'm interested in your commentary around how you see your property strategy evolving in a way that will continue to deliver in the way property ownership has in the past. I'm sure any detail you are willing to share specifically around the BAC development would be valuable to all shareholders.

I will take that Chairman. So thank you, Dr. Porter, for your question. And also, while I've got the opportunity, thank you for your long-term support as a large shareholder in our company. I'd also like to say thank you for your kind words and say that I wholeheartedly agree that keeping Martin's services to overlook the property portfolio is something that's going to be valuable for all our shareholders. So it's great to have Martin sitting in the room with us and overseeing that part of our business. As you noted, in the past, under A.P. Eagers, property played a significant role in our long-term security and also our long-term success. We particularly look to own strategic properties, properties that we needed to hold to secure tenure for our OEM partners to sell cars from, which is what we do; or properties -- and/or properties that we saw considerable strategic value in the future, whether that was capital gain or opportunities for further redevelopment. That was a fundamental tenant right back from Alan Piper's days reinforced by Nick Politis when he joined the company, and it's been something that has been very important to the A.P. Eagers side of the business. AHG had a totally different approach. Basically, at the time of the merger, as you point out, Dr. Porter, they leased all property. Everything was an external lease, and we believe that it is in shareholders' benefits as we go forward, particularly the time where the industry is evolving and changing. The balance between owned and leased is the right thing for shareholders. But it's also the right thing for our OEM partners, our finances and our customers. We want to provide security of tenure. We want to control our destiny, and we want to change the way we retail in the future because it will change. As we pointed out, both Tim and myself, I think, pointed this out in our speeches, since the merger, we acquired $116 million of property in 2020. And Martin led the charge on most of those negotiations, and we've acquired another $109 million in 2021. We've also divested or recycled some noncore property. As we sit here today, we have a property portfolio at $436 million, which historically is as high as it's ever been effectively, but as it should be because we're as big a company as we've ever been. Now I made the comment about recycling property. What we mean there is at different times as our business change, we do sell property. If you look out the window from where we're having this meeting right now, you'll see a very, very large Bunnings building that sits on a site that used to be a Peugeot, Subaru and Mitsubishi dealership. That's an example of when we recycle a property that perhaps doesn't fit our longer-term operating strategy. So before we go on, just at a macro level, to answer your question, Dr. Porter, how do we see our total land and building footprint in the future? As we sit here today, we use about $2.5 billion worth of land and buildings, $2.5 billion. That's not uncommon given our size relative to the rest of the industry. Over the next decade, we think that $2.5 billion will reduce down to perhaps $1.5 billion, and we may own as much as 50% of that $1.5 billion. Now what will drive that reduction in property is our omni-channel strategy, which we've talked to and I'll touch on in a moment, the way OEMs manage their logistics in the future, whether they hold cars centrally and distribute them in a different way in the future, as we drive our easyauto strategy, and we don't need anywhere from 20 to 200 used cars parked out the front of a glass box, as Martin would refer to them. These things will drive a smaller footprint, a more consolidated footprint and a footprint that we think is going to anticipate the way our customers are going to want to interact both now and in the future. I'll just touch on funding before we go on because it's critical. The funding for our properties that we bought over the last 2 years were through a combination of captive finances. And when I say captive, I talk about Toyota finance or Volkswagen finance. We've got access to incredibly competitive 5- and 10-year fixed term funding. And the point that I wanted to raise there is that it's a great vote of confidence in our business that our captive financiers, who are wholly owned by Toyota and Volkswagen, are looking to fund property over the next 10 years on fixed terms. That means that they see us being a part of their distribution network for a long time to come. So finally, just to the question you asked, Dr. Porter, around the airport and how our strategy is going to come to life. So how do we go from $2.5 billion to $1.5 billion? Our Auto Mall strategy in Brisbane is probably the best way to explain that, and there's 4 components to it. Obviously, we have the Brisbane Auto Mall, which is located out near the domestic and international airport. That is effectively what we would call a lighthouse development. It's going to be around a racetrack, it's got a skid pan, a full drive track, a kick plate, an ice driving center. And we are building -- we've got 12 brands with expressions of interest from up to another half dozen who want to be part of this. We are building a consolidated one development. And underneath them, as our architects described it, we are building shrines to the brand. So our OEM partners are very excited by that. And we drive incredible efficiencies in our people and economies of scale by building this new type of property solution for the future. It will also be a massive destination. It will be highly convenient, and it'll be an experience like no other for our customers. It will be a place where people will go even when they're not in market for a car and even when they don't need their car serviced. Now to help -- or sorry, to further support that investment, which is obviously quite a large investment, we are evolving the whole network. So we have Auto Mall west, which is an Auto Mall inside the Indooroopilly Shopping Centre out in the west of Brisbane. Now this is 2,400 square meters inside a shopping center with 8 brands. Service is on Level 5 or 6, I think, so we'll be able to provide service and sales inside the shopping center. Why is that so great? It's a much smaller property cost for 8 brands. It's a much better and more efficient people solution. And even more important, it's where our customers go naturally. It's not a place they need to get into and go once every 3.5 years to buy a car. They are going there once a week for groceries, once a fortnight to buy a T-shirt and once a month to drop the kids off for a movie. It is part of their lives already. The third part of the Auto Mall strategy is Auto Mall service. What we've done here is we've actually bought the old Bunnings site. They moved their Bunnings and built on our dealership. We bought their old site. In Albion, which is very close to the CBD here in Brisbane, and that is a multi-branded service center. So we can, again, provide the convenience of service for customers in a city regardless of whether they buy their car at the airport or in the west in the shopping center or at one our boutique or one of our traditional dealerships. We provide this service solution as well. The final piece to the Auto Mall strategy is Auto Mall Online. In the future, people want to be able to seamlessly go from their catch to the showroom and transact at any part of that journey. They want to do 80% at home and pick up the car in the dealership and do the last 20% there. If they want to do 80% in the showroom and finish it in home in the land room, we will facilitate that. We will wrap those -- that omnichannel physical presence with a technology solution that is based on better customer experience. The last comment. I know it's a long answer, Dr. Porter, but it's a big question. The last comment I'll make is, even in the future, if we have $1.5 billion and perhaps we own 50%, that 50% of property we do not own, we still see material changes occurring. We're under confidentiality, but we have a great landlord partner in one of the capital cities in the state who is working with us now to -- and understands that our industry is going to change. They want Eagers as a tenant for the next decade. So they are working with this on a totally innovative strategy in terms of helping us and facilitating our consolidation, bringing to life our easyauto strategy in a way that is highly cost-effective for us, gives security of tenure for them and allows them as the landlord and us as a tenant to work together and share in any upside in the future. So I hope, Dr. Porter, what comes across there is not only the directors of this company, not only is Martin. I think you'll see that all of us are very passionate about property, and we are because we understand how important it is to our future. So hopefully, Dr. Porter, that answers the question, and I'm happy to take it off-line anytime.

Thank you, Keith, very thorough. James, any final questions?

No further questions, Mr. Chairman.

Thank you. As there are no further questions, I'd like to thank shareholders for your participation today, and certainly, your support of the Board and your company. I now declare this meeting closed. Thank you very much.