Eagers Automotive Limited (APE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome. My name is Tim Crommelin, and I Chair Eagers Automotive [Audio Gap] to today's General Meeting of Shareholders. It is 10 a.m. here in Brisbane, and the company's Secretary, Denis Stark, has advised that a quorum is present. I, therefore, declare this meeting open. This meeting is being held as a hybrid meeting with shareholders attending either in person or online. I would now like to introduce my fellow directors and senior management. Our directors Dan Ryan, Michelle Prater, Marcus Birrell, Greg Duncan and Sophie Moore have joined the meeting. However, Nick Politis, and David Blackhall are unable to be here and have given their apologies. Both are overseas on prearranged business. Also here today, Keith Thornton, our Chief Executive Officer; Denis Stark, the company's Secretary; Paul Warburton, Executive General Manager, Financial Services; Amanda Ellison, Head of Legal; and James Couper, Senior Executive of Operations. The secretary has advised that apologies have also been received from our former Chairmen, Ben Macdonald and Dr. Alan Porter. Just on process. Given this is a hybrid meeting, I need to run through a few procedural matters, so please bear with me. Only shareholders, their representatives and attorneys and proxy holders attending in person and holding a blue admission card and those attending online are entitled to ask questions and vote today. [Operator Instructions] Online attendees can also ask verbal questions by following the online instructions. Although online questions can be submitted at any time, I will address them only at the relevant time during the meeting. If multiple or similar questions are received, we will try to group them together. And I will ask James Couper, our Senior Executive of Operations, to read out the questions at the appropriate time. Just on voting process. Voting today will be conducted by a poll, and I will open voting shortly. For attendees present in person, your blue admission card is your voting paper. You will need to follow the instructions on the card and mark the box to indicate how you wish to vote and lodge it in the ballot box before voting closes. Proxy holders here in person have attached to their blue admission cards a summary of their proxy votes and their voting instructions. By completing the voting paper, you will be deemed to have voted in accordance with those instructions. For attendees online, a polling icon will appear on your device when voting opens. Clicking the icon will present your voting options. Simply select one of the options to cast your vote. You may change your vote at any time up until I declare voting is closed. All attendees, whether online or in person, may submit votes at any time from when voting opens until I declare that voting has closed. Lewis Brimelow of Computershare Investor Services joins us here this morning. He will be the returning officer to conduct the poll for this meeting. I now declare voting open. Before we proceed with today's formal business, I will ask Keith Thornton, our Chief Executive Officer, to comment on the proposed business in the Australian Capital Territory and our recent ASX market announcements. Over to you, Keith.

Thank you, Mr. Chairman. And to all shareholders, thank you for your interest today and for the opportunity to update you on a number of key areas of progress at Eagers Automotive. Now the purpose of today's meeting, as we all know, is to give shareholders the opportunity to have their say and ultimately provide approval for the acquisition of a portfolio of dealerships and associated properties in the ACT. Now I'll talk to this in a moment. But before I do, I wanted to provide an update on our market announcement, which was released to the ASX earlier this week. As is customary to the company, as soon as our trading results are available for a reporting period, we often provide an update to inform the market of our expected yet unaudited results. On the screen, you'll see a summary of these results that were articulated in the release on the 12th of July earlier this week, and they relate to the half year finished at June 30, 2022. So starting with the statutory result. At a statutory level, we expect a net profit before tax of approximately $246 million for the half year. Now that compares to our May 16, 2022, guidance range of $225 million to $240 million. On an underlying basis, we expect to report a profit of $195 million again for the half year, and this compares to the range that we provided on May 16 of $183 to $189 million. Pleasingly, our cash position when we finished June 30 was a record level with $326 million of cash available, which led to total liquidity of $843 million and net debt of only -- corporate net debt of only $13 million, which compared to $128 million as at 31 December 2021. I think you'll agree, the balance sheet is in a very healthy state. Our underlying net profit before tax was achieved despite material headwinds to new vehicle supply in Australia, which has been well documented. The total number of new cars delivered in Australia in the first half was down 5.2% compared to the first half last year. This is reflecting the long lead times between order and delivery experienced by some of the largest brands represented in Australia. It also highlights the success of newer market entrants who have gained market share in an environment where demand continues to materially outstrip supply. And as such, supply in itself becomes a competitive advantage. Now it's within this context that we believe the strength of our underlying business is most evident. In addition, this dynamic means our record order bank continues to grow month-on-month and is now 32% up on a like-for-like basis on our 2021 year-end position. So that means that since we finished the year, we have grown our record order bank by another 32%. The great thing about this is it gives the company a line of sight into the second half of '22 and beyond when many of these orders will be delivered and at which point, the profit is realized. In parallel to the strong performance of franchised automotive new car business, the company continues to invest in scaling our easyauto123 independent used car business with revenue up 44% and vehicle volumes increasing 34% in the first 6 months of this year. Critically, the company continues to maintain an extremely disciplined approach to cost management, underwritten by a company-wide cost-out focus and further investment in technology and utilizing scale to drive further productivity improvements. Supporting our underlying result, the statutory net profit before tax benefited from the strategic divestment of the Bill Buckle Auto Group. The transaction settled on June 30, as expected, and delivered $88 million in cash proceeds. These proceeds represent a $48 million profit before tax across dealership and property assets. It's important to note, this property is recognized in our statutory net profit before tax, which is the $246 million number. It is not in our underlying net profit, the $195 million. Now turning to the specific purpose of today's meeting, the proposed acquisition of a portfolio of dealerships and associated property in the ACT. The reason for shareholder approval is that these assets are part of the WFM Group, which is majority owned and controlled by Nick Politis. As shareholders are aware, Mr. Politis has been the largest shareholder in Eagers Automotive since the year 2000, and he's also a director of the company. Nick Politis and Dan Ryan, one of our other directors and also a Director and Chief Executive Officer of WFM, have been excluded from all Board discussions and decisions in relation to this transaction. Mr. Politis, Mr. Ryan and their associates cannot vote their shares here today. So to the acquisition. The acquisition of this group, the ACT group, represents a unique, high-quality and highly sought-after asset within the Australian automotive retail landscape. The group has a broad brand portfolio, including 5 of the top 10 selling brands in Australia and 9 brands in total. So if I just go off the script for a moment and turn your attention to those brand logos in the top left-hand corner of that screen. There is no other way to describe that portfolio than as a blue-chip portfolio of OEM brands. It has the market leader in Toyota, which is probably the most desired brand to represent for any automotive retailer in Australia. It has a number of top 10 brands in Ford, Volkswagen, Subaru and Mitsubishi, who is now #3 in the marketplace. It has prestige and luxury brand through -- representation through Lexus and Volvo, and it has highly profitable niche opportunities through the GMSV, which is heavy trucks, the Silverado, the Corvette and also the GM brand. It's an incredibly valuable portfolio, and it's worth noting that these sort of portfolios are not easily put together. Nick Politis first bought into the Canberra market in 1988. He bought the Toyota business from York Motors. And it's taken 34 years to build a portfolio of brands like this. So the opportunity to simply walk into our market and pick up a portfolio of brands like this is rare, unique and highly valuable. The balanced portfolio provides a scale business with a turnover of approximately $450 million, and that's in a supply-constrained environment, per annum. So $450 million per annum is a scale business. It's very material. And those brands and this business sell more -- sell and deliver more than 30% of all new vehicles in the ACT. I think in the last 12 months, it was close to 34%. The other point I will make is that we have the opportunity at Eagers through our relationships and through [ most of ] our portfolio -- sorry, if we could just go back to the previous slide, to take further brands into the ACT market. One notable one is our recently announced national retailer appointment for the BYD, all-electric vehicle brand. And it's worth noting that the ACT market is seriously overindexed as compared to the rest of Australia in terms of EV and alternative [ auto tech ]. The national EV market share penetration is about 1.8%. It's about 5% in the ACT market. We expect that trend to continue. So the ability for us to take an all-EV brand like BYD and possibly some others in the future is incredibly compelling and very valuable as well. In addition to the dealership operations, the transaction includes prime and strategic property holdings to be acquired by Eagers, allowing us to continue the rollout of the property component of our Next100 strategy. The ownership of property involved in the business is both compelling financially as well as giving us the flexibility to drive further growth, consolidation and rationalization of our operations in the future. This serves all shareholders as both a way to extract greater shareholder value over the long term as well as a hedge, reducing the risk profile of the business in the face of industry evolution. Importantly, the acquisition will include approximately 400 highly capable employees that Eagers Automotive is excited to be able to work and grow with into the future. The ACT dealership provides an immediate and material footprint in a region where we have no current representation with the opportunity to expand both our franchised automotive new car business and our easyauto123 independent used car business. [Audio Gap] viewed as a stand-alone business and independent of our consistently articulated Next100 strategy, is very well priced and provides immediate earnings per share accretion to the benefit of all shareholders. However, when combined with the clear strategic benefits that we've articulated, we see this as a truly compelling opportunity that will create long-term sustainable value for the company and all shareholders. There truly is very few acquisitions that tick as many boxes as this one. Now on the screen, you'll see in front of you at the moment and the previous slide as well some images of this great asset. You'll see the quality of the businesses and the franchises that have been built over a long period of time by the WFM Group. I think in total, there is almost 57,000 square meters of property across 10 sites that we'll be able to acquire as part of this transaction. Moving on. And finally, before I pass back to our Chairman, I'd like to briefly touch on our recently announced share buyback. The company announced on the 16th of June that we intended to undertake a share buyback. This announcement in conjunction with the strength of our balance sheet and positive trading results, provides great flexibility to acquire on-market shares in our company should value be present, subject to market -- prevailing market conditions and, of course, taking into consideration alternative options for the use of capital. As continued volatility in the equity market persists, we see this as both a valuable and prudent tool for the company to have available. So finally, before I pass back to our Chairman, I did want to thank all shareholders for your attendance, your interest and your voting. I think based on the proxies received so far, it's very obvious that shareholders share our excitement and confidence in this acquisition. The management and Board are very excited about this opportunity, and we look forward to creating lasting shareholder value through acquisitions like this and others in the future. Thank you, Mr. Chairman.

Thank you, Keith, and I trust shareholders that gives a good rundown on why we're here today and the quality of -- as we see it of what we're acquiring in the ACT. I would now like to move to the formal business of the meeting. A Notice of the Meeting was made available to all shareholders on the 14th of June and will be taken as read. There is only one formal item of business today, and that is to ask for shareholder approval of our proposed acquisition of the automotive dealerships and properties in the ACT from entities associated with our directors, Mr. Nick Politis and Mr. Dan Ryan. An independent expert, PwC, PricewaterhouseCoopers, has examined the transaction to assist shareholders assess its merits. The independent expert has concluded that the transaction is both fair and reasonable to shareholders who are not associated with the vendors. If the resolution is passed, we will work towards completing the transaction as soon as reasonably possible, which we anticipate will occur by the 31st of August this year. Further information on the motion can be found in the Notice of Meeting. You'll now see on your screen details of the proxy and direct votes received prior to this meeting. It is showing on the screen. These do not include any votes from Nick Politis or Dan Ryan. And as Keith mentioned, due to their interest in the transaction, they are not permitted to lodge any votes. Interestingly, there are, maybe up there, but more than approximately 1,100 shareholders voted. The size of the vote was about 135 million shares in total, of which 133 million were in favor. And that meant that 97% plus of all those eligible and who, in fact, voted were in favor of the transaction. So that's a big turnout and certainly a good measure of support. All other directors of Eagers have voted their shares in favor of the resolution, and directors recommend that all shareholders do the same. I will now take any questions on this item of business. And -- but any general questions don't relate to the item will be addressed later in the meeting. So I'm very happy -- we're very happy to give shareholders a chance to ask questions after we've dealt with the motion that's in front of shareholders. Do any -- firstly, I'll deal with shareholders who may be here in the room. Do any shareholders attending here have any questions on this item of business? If you do, please raise your hand and clearly state your name into the microphone.

Thank you. [ George Bomber ], Director of [ Faircase Pty Ltd ]. Just looking at your graph in automotive industry in Australia with the calculations of the increase over the next several years, it looks for me as though we're not expecting an increase in volume of sales because the increase there is in dollars. So it would look as though the number of sales you expect to be the same as what we have at the moment, to see increase just with the inflationary cost of cars. My question mainly is regard with the -- this purchase -- is the P/E that is being paid to the business, the return on equity that is being realized with the transaction. So that none of these things are discussed in the information that we've been given as to what the quality is, what the return on the amount of money that you're paying to the business is. There's a lot of money there that's going in for goodwill. So what is the expected return on the expenditure? And what's the P/E that's expected from the investment?

Thank you. There's a number of points you raised in your question. But of the $193 million, in excess of $100 million of that is property, $83 million for goodwill. Sophie Moore is our Finance Director and Board member of Eagers. And Sophie, you might want to comment specifically around any multiples that relate to the purchase of the business.

I guess first and foremost, as Keith mentioned in his speech, the deal is EPS accretive to the shareholders of Eagers Automotive. In terms of looking at the price that we paid for the dealership group, we have priced that deal as a $75 million goodwill plus operating assets of $8.1 million. We have based it on a maintainable earnings of $15.6 million at a multiple of 4.8x. When you look at the maintainable profit before tax of $15.6 million and the capital that we have to outlay, that's almost a 19% return on funds. If we look at the property portfolio, we're paying $110 million for 10 properties, which is the majority of the footprint that is utilized by that dealership group in the ACT. We're buying those properties on a yield of around 6%. That has been -- those values have been independently verified by JLL, and that has been incorporated into the independent expert's report. And whilst the yield or the return on those funds employed to buy those properties is around sort of 4%, I guess the properties are a key critical part of our Next100 Strategy, which will enable us to consolidate and rationalize that portfolio but also, as Keith said, the opportunity to bring additional businesses to generate further growth over the coming years.

Can I just add to that, Mr. Chairman? As Sophie mentioned, that multiple of 4.8x on the maintainable profit, 2 key components to that. One is how maintainable is the profit. First off, we assess the profit slightly higher on our independent assessment than the vendor. Second thing is that the return on sales, the amount of profit this business is generating, is actually materially below Eagers, which is upside. And it means that the business is not overearning. Because if you pay a multiple, whether it's high or low, it does relate to how sustainable is the profit. So first off, we see the profit is highly sustainable with upside. When you move to the multiple and talk about -- look at the 4.8x, we compare that to our long term, and when I say our long term, every acquisition that Eagers Automotive have done since 2007, and our long-term average is 4.9. This multiple is 4.8. The other thing to note on that is 4.9 includes the multiple we pay for a single stand-alone dealership in a small market, all the way up to scale acquisitions. Obviously, the bigger your -- the business is, the bigger the brand portfolio, the more stable. Usually, they carry a premium. So for us to pay below our long-term average, we feel, is a fantastic deal for shareholders.

Does that cover off your...

[indiscernible]

Okay. Thank you. Are there any other questions from shareholders here in the room? If there's no further questions from shareholders here in -- attending the meeting, I'd ask James Couper if there are any questions online or via the audio call on our item of business. I'd also ask James to read out the shareholder's name with their question. So over to you, James.

Thank you, Mr. Chairman. And we have a number of online questions that have been submitted. The first question comes from Stephen Mayne. "Thank you for disclosing the proxies with the formal announcements to the ASX 66 minutes before the commencement of today's meeting. Well done on achieving such strong support with 97% of proxies in favor. Which of the proxy advisers recommended a vote in favor? And do you know roughly how many shareholders voted by proxy? When disclosing the outcome of the poll to the ASX, could you also include data on how many of our 11,000 shareholders went to the trouble of voting? Was it just the big shareholders who delivered this outcome? Or did thousands of small shareholders also support the deal?

Thanks, James, and thank you, Stephen, for your question. As I said, in excess of 1,000 shareholders voted, which we think is a very significant number. And a lot of shares were voted. So we had a lot of larger shareholders and a lot of smaller shareholders who voted, and we're very pleased with that outcome. In relation to the proxy houses, all the proxy houses that were able to cast a vote, all but one voted in favor of the resolution. And I think the one that suggested to shareholders they may consider voting in favor was Ownership Matters. The bulk of their discussions were with Keith and Sophie Moore. And Keith or Sophie, you may wish to comment on what their particular [indiscernible] issue.

Sure. As Tim mentioned, 4 proxy houses provided recommendations. They're Ownership Matters, ACSI, ISS and CGI Glass. Three, of course, supported the deal. In our conversations with Ownership Matters, they had queries around the timing of the deal and around the structure of the deal. They were the 2 key issues that they wanted to discuss. They did qualify their report and their recommendation to say that shareholders may see strategic value in this deal and, therefore, vote for it. So they were their 2 concerns. In terms of how our large shareholders respond to different proxies, I think most people are probably aware that large funds, large institutions subscribe and take advice from usually more than one proxy house. And they are also not always -- depending on the mandate of the particular fund, not always bound to a proxy advice. They take it into consideration. The fund and their compliance people quite often have a discretion to cast their own vote. And it was in that context that the support, as we see it, is overwhelmingly positive. So we're very pleased with -- to get that endorsement from our shareholders.

Thank you. And again, it was 97% voted in favor. And certainly, a majority of our large shareholders all voted, and a lot of smaller shareholders voted. So that was a good -- in our view, a very good turnout and endorsement of the proposition that we're putting to shareholders today. Can I ask for further questions, if there are, James?

Yes. Mr. Chairman, the next question comes from Stephen Mayne. "It is a little disappointing that Director Nick Politis wasn't able to dial in from overseas and be available to answer questions at today's meeting, given that he is receiving $193 million of company cash as a result of this deal. Therefore, could his other representative on the Board, Dan Ryan, please address the question as to why now for this deal? Also, once this deal completes, what is left of the private business of Mr. Politis? And is there any prospect of further similar deals like this being done?"

Thank you, Stephen. As I mentioned when I introduced all directors, David Blackhall and Nick Politis were unable to attend this meeting, being a prearranged precommitment to being overseas, and that's where they are. I think there's a number of things that you raised in that question, Stephen, that any of the directors here certainly couldn't comment on. So I might just -- if I can put you in the hot seat, Dan, Dan Ryan, you may be able to address some of the matters raised by Stephen Mayne. Are you there, Dan? Can we pick you up online? Are you on mute, Dan?

Can you hear me, Tim?

We can hear you, yes. Thank you, Dan.

Okay. So thank you for the question. If I could just answer it in a few ways. First of all, it's not the first time our dealership group has sold some dealerships. We tend to buy more than we sell, which is fair. But going back a few years, we sold a few dealerships. Back in the late 2000s, we sold Chatswood Toyota, Melbourne City Toyota and Lexus. We got out of Toyota, Nissan, Hyundai in the valley and Gippsland in Melbourne. And as a matter of fact, at that point, when we sold those dealerships, we had no more representation in Victoria. So we have got out of markets in the past, but we don't do it that often. I think the question was, why are we doing this now? I think why we're doing it is we understand the strategy that A.P. Eagers has in terms of wanting to have a presence in the ACT. We not only understand it, we support it. And I would imagine most shareholders would agree it's a sensible strategy to take. It's an important market in Australia to be part of. And as Keith quite rightly turned out earlier, it is a market that is going to appeal to hybrid electric cars as they grow more so than some other markets around Australia. So we support the decision. Over a number of years, both Martin Ward and Keith have asked the question about whether we would sell Canberra and any of our dealerships. Our dealerships in Canberra were not on the market at the time we had a conversation with Keith over the last few months, and we made the decision, though, after the discussion that we should sell the Canberra business. It made sense from Eagers' point of view. And to be quite honest, if we hadn't have sold them, I don't know how we just would quickly get into the Canberra market and have a presence there. It's a highly -- quite tightly held market in a few families in Canberra. As Keith referred to earlier, we have a presence there, but it's taken us over 30 years to build that presence. So we're realistic and understand that if Eagers want to have a presence, probably the easiest way in with a good presence is the businesses we have. And just Keith referred to the properties, the people we've got, et cetera, et cetera. And we talked about the goodwill. But really, you've got to remember that goodwill, it relates to the customers that we have, the database, the customers, the customer retention that we've built up over 30 years in some cases. So we have a very good reputation in the market in Canberra. We have a good relationship with the business community, and we have a very strong retail presence in Canberra. It's a very good market. It's a steady market. It doesn't fluctuate up and down too much at any point in time. And yes, from an electric car point of view, it has an advantage over others. The ACT government has already given generous incentives to get people to convert and finance applications, et cetera, to electric cars. So that's really part of the answer. The second part of the question, are we about to get out of other businesses? Not really. The ACT is important, but it's a small fraction of our total group. We have a range of dealerships in Sydney and Melbourne and Queensland, to a lesser extent. We have no further plans at this stage to make any other sales of our dealerships. And I hope that answers the majority of the question. If I missed something, please let me know.

Thank you, Dan, very thorough. Certainly, it should cover your questions, Stephen. Can I ask for shareholders, are there any shareholders out there who got further questions, please?

Mr. Chairman, the next question also comes from Stephen Mayne. For Dan Ryan and the Chair, please address the question as to why this deal was done with 100% cash rather than having a scrip element, given Mr. Politis already owns almost 28% of the company worth approximately $800 million. Doesn't this all-cash option create a perception that Mr. Politis may also seek to cash out of some or all of his core Eagers shareholding, given that he has clearly chosen not to increase his shareholding as part of this deal?

Can I just ask, James, was the first part of the question Dan to address the cash element?

Dan and the Chair.

Okay. Thank you. Simply, the Board of Eagers, without Dan and Nick, discussion and that -- in relation to the cash element, the Board deemed that use of our balance sheet, and Keith referred to the strength of that and the performance of the company in the last year or so and the strong cash position we're in, it would be in the best interests of all shareholders to buy the business if we were able to buy it for cash. Issuing shares as a company, as many of you would know, it is often quite dilutive. It's not a process that Eagers really enjoys undertaking or does very, very little of other than in exceptional circumstances. And without question, we felt it was the best use of shareholders' funds that we had and in the best interests of all shareholders. Dan, you're -- please you're welcome, there's other parts of that question that you may want to address. Please do so if you can.

Yes. Look, I think the first part, Tim, you've covered. Just to reiterate, neither Nick Politis or myself had any influence on the Board's decision. We weren't in any of the discussions with the Board. We never made a decision on the way that the purchase would be made. So we're really not the people to ask that particular question. In terms of why we'd -- in terms of the cash issue rather than shares, I won't comment on the decision the Board made to buy. I think shareholders would know if they just watched the announcements in the last couple of days. Nick Politis is again purchasing shares in A.P. Eagers. He's on the market buying shares. We'll probably be on the market for a while buying shares because we still think A.P. Eagers shares are attractive. We still want to maintain our position in terms of our shareholding, and we're confident in the executive team and the way that the direction of the company is going. So we have no issue in terms of shareholding and buying further into Eagers.

Other question, we haven't seen Nick ever sell any Eagers shares. To the contrary, as you, Dan, you had mentioned, he buys them. Keith or Sophie, you may wish to comment on Stephen Mayne's question?

Yes. One final comment. Everything that he said is absolutely correct. The comment that equity is more expensive to issue than using our cash and debt is something that all shareholders should be aware of and need to be aware of. I would actually turn that question around. And if we had done this transaction with a large issue of scrip to Nick, they may well be deemed to have not done the best deal structure for all shareholders because it's more accretive to use our cash and debt, and we are focused on getting the best result for all shareholders. And that is something that I hope all shareholders will hear from us going forward. It doesn't mean that scrip isn't used selectively in transactions, and we'll assess every transaction on its merits. And from time to time, scrip may be the right way or maybe the only way to do a deal. And if we see value, we would entertain that.

And that was the situation with Automotive Holdings Group, the company that's similar sized to Eagers, transformational deal. There was no way that Eagers could have done that deal with Automotive Holdings Group without, in effect, swapping shares. Whether we had the cash or not, there are a number of shareholders in that company that weren't going to take cash.

Absolutely.

Okay. Any other questions, please? Can I invite them either from the room or online?

A few more online questions, Mr. Chairman. Next question also comes from Stephen Mayne. "The March 30 announcement quoted a figure of $205 million, which was later reduced to $193 million when binding contracts were exchanged. What caused this change? Also, the announcement mentioned that 400 staff will be coming across with the sale, but later announcements mentioned the ACT business has 450 staff. How many staff are exiting the business as part of this transaction? And who is funding their exit payments, Eagers or Mr. Politis?"

First part of that question around the numbers, we might start with you, Sophie, and then move to Keith.

Thanks, Mr. Chairman. As -- in your question, yes, absolutely, the initial announcement did include that the purchase consideration was expected to be approximately $205 million. The reduction of this purchase consideration has resulted from a more detailed review of the operating assets to be transferred and adjustment to the estimated value of those assets. The assessed value of the goodwill being the $75 million has not changed. The reduction between $205 million and $193 million is just the value of those operating assets, which we now have in more detail.

Thank you. Keith, there's some questions around the operations of the business going forward.

Just to add to Sophie's comment, the general way automotive dealerships are transacted is a goodwill figure and net or operating assets at written down value for a more transparent way to get an independent valuation. That's what we've done in this case. We've adopted an independent valuation of those operating assets rather than simply taking whatever was written down on the balance sheet inside WFM. So that was one thing I just did want to notice. So that is a consistent thing that occurs. In almost every acquisition, we will estimate net assets on the day we would sign a heads of agreement, and that would usually vary by the time we finalize those. It's not material to the transaction in terms of getting a result.

And one more thing, Keith. Yes, the final amount that we do pay will be based on the 30 June balance sheet plus that independent valuation of those net assets. So we will work through that over the coming weeks so that when we complete the deal, which is expected on the 31st of August, that's when we will determine the final number.

In terms of staff, again, this is more a course of business. There is no structured decision to exit any staff. There is no payments being paid by Mr. Politis, WFM Group or Eagers around a reduction in staff. At the moment, the industry, as it always does, has a combination of attrition. There's also an element of a bit of a war on talent out there at the moment. So the fact that the number of employees has reduced over the period of time is simply business as usual. We're very excited about taking on all the staff that the WFM business has, which is approximately 400. I think it's 402 on our last count. So we want all of those employees, and we'll probably employ more if -- or once we settle in the business.

Thanks, Keith. Thank you, Sophie. Again, I'll ask for further questions before we...

Next question, Mr. Chairman, comes from Stephen Mayne. "After this transaction, Eagers is now the dominant physical independent auto retailer in Australia. Can you think of another top 20 country where there is a single auto retailer with such a large market share? And in what remaining states or territories do you think Eagers could expand further by acquisition without running into ACCC concerns?"

I might put you in the hot seat there, Keith, if you can comment on some of those questions.

Yes. Thank you, Mr. Chairman. Thank you for the question. Mr. Mayne. Yes, absolutely, Eagers are -- Eagers Automotive is a unique, lead positioned automotive retail group. We do occupy a very strong position in terms of market share in the new car automotive retail space in Australia. This transaction doesn't materially move the needle in terms of our total share of the new car market. Post AHG or when AHG and A.P. Eagers were first merged, we were more than 11% of the new car market in Australia. We have done some selective divestments, some strategic divestments, including Bill Buckle most recently. The net difference after Bill Buckle is divested and ACT is picked up is almost negligible in terms of our current market share. In terms of our future, we have got headroom to grow in a number of areas of Australia. Melbourne is one that is -- springs to mind where we're probably underindexed. But we see opportunities in all markets. There is -- at the moment, we would not raise any issues around growth in the regions that we are already in. And in terms of the future we have, we do believe that automotive retail around the world will evolve further. The way that it has been the distribution model through dealers and the limits that dealers have been able to have in the past may well evolve. They may well change. They may well increase. A good example of that is 2 brands that we talked to. We have recently been given the retail. We've been appointed as the retail dealer for BYD, which is 100% of Australia. We've recently been appointed the retail partner for 30% of Australia with CUPRA. So new entrants such as brands like this, and there will be more in the future, I think the way they come to market may well evolve from what they've done traditionally. And that's going to give Eagers further opportunity to grow in the new car space. And I shouldn't miss the opportunity to say parallel to that, we have got almost an uncapped opportunity to grow our used car business through our easyauto123 business. So we certainly are not running out of or concerned about any opportunity to grow in the future.

And it may be worth also mentioning the time of the AHG merger, ACCC spent some months in a tortuous process going all over the market and understanding the market to have a look at Eagers' 10%, 11%, 12% of the market. And given the extensive number of operators across the market in total around Australia, they had no problem with our market share.

Absolutely.

Thank you, Mr. Mayne. Are we near the end?

We have a final question also for Mr. Mayne.

All right. Thank you.

"Who does A.P. Eagers propose to be the Canberra-based senior executive running the operation? And how many minority shareholders in the various entities being purchased are exiting the business as part of the move by Mr. Politis to buy out all the minority shareholders in his Canberra operation?"

Keith?

No problem. I'll take that one. There is no plan for any of the equity partners that the WFM business have had down there. In the WFM business, Nick and Dan have adopted an approach where they have had equity partners who are usually the key operators in those businesses. We are taking on all those operators. There's 3 key operators down there that, between the 3 of them, run the whole ACT business. We're very fortunate. They're high-quality individuals. They're very highly regarded by the OEM, and they will come across to the Eagers business. The arrangements between WFM and those individuals and their equity is something that is private to them. However, they are all, as we said, coming across and will continue to run those operations. And that's a key advantage for us to be able to, again, take a blue-chip asset, great strategic property. But finally, both those things aren't as valuable as they can be when you've got great operators as well. And again, over 34 years and longer than that, I think Nick's -- one of his greatest strengths is picking highly talented people and growing them inside these businesses. So we're very lucky there.

Thank you. If you signal the end there, James? Is that...

No further questions, Mr. Chairman.

Thank you. Sorry, we have a question from the room.

Thank you, Mr. Chairman. Just from the conversation that you had there where you said the market share was going to be similar with the sale that you had and the purchase that you had. But your sale, I believe, was $85 million, and you're purchasing something for $193 million, yet your participation in the market remains at about 11%. Is that correct from the figures that you just quoted?

Yes. The comment I made was broadly the same. Our market is 1.1 million units of cars. So you could increase or decrease -- the difference between one acquisition and the other one could be thousands of units, and it's not going to materially increase or decrease our total market share. Our total market share oscillates between 10% and 11% of the new car market as we sit here today. So it's not a material amount in the scope of that total new car market in Australia is what I'm saying.

Thank you. Yet you're saying that you're paying another $100 million and not increasing your sales volume from the figures that you've quoted.

Yes. I think it's possibly not really a fair comparison to say $100 million is not materially moving our market share. The other comment that I did make before that is that when we brought the 2 businesses together, AHG and A.P. Eagers, we're about 11.2%. Now we've divested out of a number of businesses before we sold the Bill Buckle one. I added that into it, so there's been a number of divestments and then a recent ACT acquisition. So what I'm saying is over a period of time, we haven't materially moved our total market share from 10% to 15% or anything like that. There is -- it is a big industry. There's a lot of new cars sold. And for us to move from even 10% to 20% of this market, we'd have to double our volume. At the moment, we sell about 115,000 new cars. Obviously, to double that, we'd have sell 230,000 cars out of a new -- well, probably 1.050 million new car market every year.

Thank you. I think we're at the end. That's...

No further questions.

No further questions from the room here. Thank you. Shareholders, as there are no further questions, I will close voting soon. But first, I will pause the meeting to give shareholders a final opportunity to cast your votes. Just to run through it quickly again, any shareholders attending online, please submit your votes through the online platform. In-person attendees need to complete, as we mentioned before, and lodge your blue voting card in the ballot box. I'll now pause the meeting for approximately a minute so you may finalize your votes. [Voting]

A little bit, another 30 seconds. I think we've collected everything here in the room. So any online shareholders, please move quickly. I will now close voting. All voting is now closed. Thank you, ladies and gentlemen. The results will be tallied immediately following this meeting and released to the stock exchange later today. Denis?

As quickly after the meeting as possible, it will be tallied and released.

Before the close of markets today, right?

That's right.

Okay. Thank you. Ladies and gentlemen, today's formal business is now concluded. However, before I close the meeting, if there are any general questions from shareholders, we're happy to -- our directors would be happy to and management would be happy to have a go at dealing with those questions. So just firstly, any further questions here from the room? Yes, we do have a question. Thank you.

[Audio Gap] Compared to $267 million for the 6 months last year.

Thank you. If there's no further questions from shareholders here in the room in person at this meeting, I'll just ask James, do we have anything online or via the audio call?

No further questions, Mr. Chairman.

Thank you very much, James. As there are no further questions, shareholders, that brings the meeting to a close. I'd like to thank all shareholders for your participation and particularly your support here today. I now declare the meeting closed. Thank you.