McMillan Shakespeare Limited (MMS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the McMillan Shakespeare Limited Half Year Results FY '26. [Operator Instructions] I would now like to hand the conference over to Mr. Rob De Luca, MD and CEO. Please go ahead.

Thank you, Alison. Good morning, everyone, and thank you for joining us today for the McMillan Shakespeare FY '26 First Half Results Presentation. My name is Rob De Luca, and I'm the Chief Executive Officer and Managing Director of MMS. I'm joined today by our Chief Financial Officer, Paul Varro. At the conclusion of the presentation, both Paul and I will be happy to take any questions you may have. I would like to start by acknowledging the traditional owners of the lands on which we meet today and pay our respects to elders past and present. As we move through our presentation, we will be referring to the slides that were released with our results this morning. We will commence this morning's presentation with an overview of some highlights from the period before we move to a more in-depth summary of each of our segments. Turning now to Slide 5, which provides an overview of our 1 half FY '26 highlights. Importantly, I'd like to note that our 1 half FY '26 results are no longer normalized following the successful transition period and scaling of onboard finance. For ease in this half, we will compare 1 half FY '26 results to previously reported normalized financials. This will be the last period we will compare results to previously reported normalized results. Starting with our financials, we delivered growth across key performance metrics in the period. Revenue increased 11.2% to $297.4 million. Operating income was up 4.4% to $210.1 million after accounting for cost of sales. EBITDA increased 4.8% to $84.7 million and UNPATA grew 1.4% to $50.3 million. Growth in financial performance was supported by an increase across all key customer metrics. Salary packages increased to 387,500. Novated leases grew 7% to 82,100. Fleet units increased 4.4% to 15,400 and PSS customers grew to 43,000, up 16.1% on the prior period. We are seeing clear benefits from the strategic investments we've made over recent years. Oly continues to scale, comprising 5.2% of group novated lease sales, which is up 220 basis points. The launch of our new GRS apps has increased customer digital engagement to 83% of service interactions, improving the customer experience and in turn, reducing cost to serve. Customers per FTE increased by 14.1%, reflecting productivity gains flowing through the business. Against this backdrop, we continue to deliver attractive returns for shareholders. Earnings per share increased 1.4% to $0.723. ROCE remained strong at 62.8%, up 110 basis points, and we declared a fully franked interim dividend of $0.62, equating to a dividend yield of approximately 7.2%. We have also announced an on-market share buyback of up to $10 million over the next 12 months. This, combined with the first half dividend reflects total capital returns of up to $53.2 million, up 7.6% on 1 half FY '25. Overall, our first half demonstrates the progress we are making on our strategy to deliver growth, productivity and returns to shareholders. Turning to Slide 6 to provide more detail on our financial performance. For ease of comparison, we have included both 1 half FY '25 and 1 half FY '25 normalized results. As mentioned, I will compare 1 half FY '26 results to previously reported 1 half '25 normalized results. Starting with revenue and operating income, we saw growth across all segments. Revenue was up 11.2% in the period to $297.4 million. Cost of sales increased in line with business growth and the inclusion of Onboard Finance, which saw operating income up 4.4% to $210.1 million. Turning to operating expenses. Productivity gains offset inflationary pressures with cost-to-income ratio improving. Operating expenses increased by 4.1%. Once accounting for $3.4 million in Onboard Finance costs not included in 1 half FY '25 normalized results, operating expenses were up just 1.3%, reflecting disciplined cost management and the productivity benefits of investments in technology, automation and process simplification. EBITDA increased 4.8% to $84.7 million, with operating margins maintained at approximately 40%, slightly up from the normalized prior period. UNPATA increased 1.4% to $50.3 million after allowing for expected increases in amortization, which was up $3 million following the conclusion of Simply Stronger investments in 2 half FY '25 and the inclusion of Onboard Finance, while statutory NPAT grew 9.7% to $49.6 million. Turning to Slide 7 and the progress we're making in delivering on our strategic investments. During the half, we continued to execute on our 3 strategic priorities: excelling in customer experience; driving simplicity and technology enablement; and delivering valued solutions for our customers and partners to deliver on our vision of being the trusted partner providing solutions made simple. As part of our agenda, our strategic investments are delivering measurable outcomes across the business. Starting with our new superior GRS digital apps, which have resulted in improved customer self-service with 510 basis point improvement to 83% of service interactions completed digitally. AI is being utilized to improve customer experience and operational efficiency. An example of this is in our GRS customer care area, where combining AI capability with our telephony platform enables ingestion and analysis of approximately 40,000 inbound customer calls a month, assisting our agents in real time with their customer conversations and efficiently wrapping up calls with automating call reasoning and customer notes. This capability has reduced our after-call work time by 16%. Similarly, our use of AI and automation are continuing to streamline our processes and strengthen fraud detection in PSS with 57 percentage point increase in the number of invoices processed digitally. In AMS, our digitized trade-in process with access to multiple data sources to improve valuation for our GRS novated customers has seen a 23% increase in sales. And finally, as part of our ongoing partner and market expansion focus, we have continued to enhance our Oly platform, which has seen SME clients increase to 1,038, up 233% on the prior year. These investments have translated into positive outcomes for shareholders: strong Net Promoter Scores across all segments; a high ROCE of 62.8%; strong operating margin of 40.3%; EPS growth of 1.4%; and continued recognition that MMS is an employer of choice from Great Place to Work. Now turning to Slide 8 and our digital investments within GRS. During the period, we continued to see an increased uptake of our superior digital apps designed to simplify salary packaging and empower customers with real-time information and greater control. Salary packaging has generally been perceived as complex. New and enhanced features to our apps are changing that perception with a simpler experience, enabling customers to manage their benefits more confidently through improved budget and cap management, seamless invoice claiming, integrated digital wallet functionality and enhanced security. Customer response has been positive, reflected in strong app ratings and NPS outcomes. Just as importantly, these enhancements are delivering productivity benefits with increased customer digital interactions and continuing growth in customers per FTE. This is a clear example of how our technology investments are improving both customer experience and operational efficiency. I will now step through the performance of each of our segments. We begin with our Group Remuneration Services segment on Slide 10. GRS delivered strong performance in the first half with financial uplift driven by customer growth, productivity improvements and the inclusion of Onboard Finance. Revenue increased 16.6% on a normalized basis to $167.6 million, underpinned by customer growth and inclusion of Onboard Finance lease interest income. Operating income after factoring in Onboard Finance cost of funds of $15.9 million increased 5.5% on a PCP basis. Operating costs were managed well in the period, up 1%. When accounting for $3.4 million of Onboard Finance operating costs in 1 half FY '25 not included in the normalized results, operating costs were actually down 2.8% on a like-for-like basis. As a result, EBITDA saw strong growth of 12.8% to $62.5 million. UNPATA increased 7.7% to $36.9 million after allowing for the inclusion of Onboard Finance and the expected increase in amortization, up $3.2 million following the conclusion of Simply Stronger investments in 2 half FY '25. Customer metrics performed well with salary packages growing to 387,500. Novated leasing customers increased 7% to 82,100 and Onboard Finance receivables scaled to $539 million. Novated leases sales grew in both terms of units, up 0.4% and yield up 1.6%. Performance reflected a continued shift to new customers and longer term leases, seeing lower residual leases and new cars, including EVs price points. In respect to strategic investments in the segment, $4.4 million of prior year Simply Stronger non-recurring costs were removed. Additionally, prior year investments yielded productivity improvements of $2.9 million in cost reduction. We invested further in scaling Oly with $2.7 million in sales and marketing to support future growth as we enhance our position in the SME market. Overall, productivity continued to improve and reflects prior investments in the Simply Stronger program with customers per FTE increasing 17.8% to $694. Now turning to Slide 11 and our novated leasing performance. Novated continues to benefit from a strong value proposition, new customers and an expanding market opportunity. Our serviceable addressable market comprises approximately 7.9 million employees with the emerging opportunity of 3.8 million SME employees and 2 million corporate employees. Over the period, we have continued to expand our actual employee reach within this corporate and SME market. We now have access to approximately 546,100 potential employees, which has grown by 15.9% on a CAGR basis since 1 half FY '23 and now represents approximately 9% of the corporate and SME market. This strategic focus is reflected in our sales mix. Corporate and SME novated sales now accounts for 30% of total sales, up from 21% in 1 half FY '23, effectively diversifying our customer base while growing our reach and portfolio. We continue to outperform the broader new car sales market. In 1 half FY '26, GRS new novated sales increased 3.7%, ahead of the new car sales market growth of 2.7%. As previously stated, our novated leasing customers increased 7% to 82,100. This growth is underpinned by 3 key levers: improved retention of customers at end of lease entering another lease, up 120 basis points; new novated customers up 430 basis points and increasing penetration, which is now at 21% of our total salary packaging base. Looking ahead, our foundations for growth and momentum are supported by new client wins in the period and the prior period yet to commence, ongoing expansion of our Oly SME brand and a network of growing partnerships creating referral opportunities. Turning to Slide 12 and the performance of our Asset Management Services segment. As a specialist fleet provider, AMS grew revenue by 6.9% to $98.6 million. Operating income was up 4.3% after factoring cost of sales of $71.4 million, which increased $5.2 million. UNPATA was up 3.2% to $9.9 million. Written down value increased 5.7% to $389.4 million, underpinned by unit growth. Overall fleet units increased 4.4% to 15,400, driven by both growth in financed and managed-only units. Managed-only units grew faster at approximately 21%, reflecting growth from new client wins over recent periods. In terms of remarketing profits, improved yields were supported by a higher mix of early terminations, which attracted higher margins from exit fees. Remarketing units were down in the half as clients continued to retain assets for longer. AMS continued its productivity focus, investing $500,000 in the period to establish a business process outsourcing arrangement for some back-office functions to drive future efficiencies and create capacities for the team to remain customer and business development focused. We secured 20 net new clients this half, benefiting from recent investments made in business development, which will benefit future periods. Another key highlight for the period was our AutoGuru partnership, which is now delivering digitized vehicle maintenance solutions to our Interleasing clients for a better client experience and creating operational efficiency opportunities. Turning now to Slide 13 and our Plan and Support Services segment. PSS delivered top line growth during the half, supported by continued organic customer growth and the inclusion of My Plan Support. Revenue increased 5.4% to $29.3 million. Total customers increased 16.1% to 43,000, with 3,800 from the MPS acquisition and 2,100 from organic growth. As expected, profitability was impacted during the period by the removal of setup fees by the NDIA, as previously announced. This represented approximately $2.3 million impacting EBITDA, which was down $1.7 million to $6.4 million. The segment is well positioned to support future growth and enhanced NDIS regulation. Whilst the government targets lower scheme cost growth to ensure a sustainable NDIS, participant numbers have continued to grow, up 9.9% on PCP. Participants to continue to prefer plan managers as a method to managing plans, which is up 300 basis points to 68%. The acquisition of My Plan Support contributed $1.8 million of costs in the 1 half FY '26 segment results, which is inclusive of corporate allocations now that the business is integrated into MMS Enterprise Systems. PSS continued to focus on supporting the sustainability and integrity of the scheme, investing $600,000 in enhanced fraud detection and verification capabilities. While these investments impacted margins in the period, they are essential to support payment integrity and the role PSS plays as a leading plan manager. Notwithstanding these investments, AI and automation remains a focus with the segment assessing and processing approximately 2 million invoices in the period. This focus is reflected in the ongoing productivity improvements with customers per FTE increasing 25.3% to 277. I will now pass to Paul Varro, who will cover the financial section of today's presentation.

Thanks, Rob. If you turn to Page 15, what we thought we'd do is lay out some of the financial outcomes for the first half of FY '26 in more detail. As noted by Rob earlier, our results are no longer reported on a normalized basis. Onboard Finance continues to perform in line with expectations with its results reported in the GRS business segment. Comparatives in this half will be based on 1 half FY '25 normalized results as these were the previously reported numbers. This will be the last period in which we compare to normalized results. On the left-hand side of Page 15, you'll see the P&L. For ease, we've included the results compared to both the non-normalized and normalized comparatives. As you can see, versus first half FY '25 normalized, revenue grew year-on-year by $30 million or 11.2% for the half, with growth across all business segments and the introduction of Onboard Finance lease interest. Cost of sales grew $21.2 million due to AMS remarketing sales at higher written down values and the introduction of Onboard Finance cost of funds contributing $15.9 million. There is a table at the bottom left of Page 15 with the cost of sales breakdown. Operating income after factoring in the Onboard results was up $8.9 million or 4.4%. Operating expenses grew 4.1%, noting the inclusion of Onboard costs of $3.4 million. On a like-for-like basis, our expenses grew just 1.3%, highlighting our focus on cost containment and productivity. Depreciation and amortization increased $3 million as Simply Stronger program concluded in 2025. UNPATA for the half finished at $50.3 million, up on both the normalized view by 1.4% and a like-for-like basis by 11%. On the right-hand side of the page, we have our operating expense summary. The first bar shows 1 half FY '25 normalized costs, then the inclusion of Onboard Financeoperating expenses to establish a like-for-like comparative of $123.8 million. As you move from left to right, the first bar shows our cost increases due to wage and vendor inflation of $3.6 million, offset by savings from non-recurring costs of $4.4 million, primarily due to the conclusion of Simply Stronger investments in FY '25. We continue to invest in growth, in particular, with investments in Oly, up $2.7 million and of course, the inclusion of My Plan Support costs of $1.6 million. These are partially offset by our productivity initiatives across all businesses, which have delivered net savings of $2.7 million. During the year, we embarked on a business process outsourcing initiative, as Rob mentioned earlier. This had implementation costs of $800,000 for the half. All up, like-for-like operating expenses grew just 1.3% for the half, a testament to our focused and disciplined cost management. Turning to Page 16. The balance sheet remained strong with net assets consistent in the half. Our key covenant metrics on the top right-hand side all remain below threshold levels, allowing us flexibility to move forward. On the bottom right, following the successful extension of Onboard Finance warehouse in August '25, we have no maturities due over the next 12 months. If we turn to Page 17, our strong and flexible balance sheet positions us well to manage our capital efficiently and to ensure long-term growth while maintaining a prudent balance sheet and balancing returns for our shareholders. On the left-hand side, as a reminder, our net cash, covenant headroom and strong underlying cash generation remain, and we continue to return fully franked dividends to shareholders in accordance with our payout ratio of 70% to 100% of UNPATA. Following the conclusion of normalization at the end of FY '25, we've taken the opportunity to optimize the mix of distributions to shareholders. In this half, the Board has declared a fully franked dividend at 85% of UNPATA or $0.62 per share, the midpoint of our payout range, along with announcing an on-market buyback of up to $10 million over the next 12 months. In aggregate, these announced capital returns to shareholders totaled $53.2 million declared in the half, up 7.6% versus last half. These distributions balance returns to shareholders with a dividend yield at an attractive 7.2%, along with the buyback creating the opportunity for EPS accretion. Our capital returns also allow us to invest in the business and manage capital in accordance with our framework, which is noted on the right-hand side of Page 17. Moving now to Page 18. Our cash generation remained strong with underlying cash conversion of 88%, noting the elevated tax installment paid in the half as the benefits of the temporary full expensing program partially reverted in the period. Overall, it's been a strong performance in the half with all businesses growing revenue, disciplined cost control and a strong balance sheet position to enter second half FY '26 with plenty of flexibility to grow. With that, I'll hand it back to Rob, who will take you through our outlook.

Thank you, Paul. Now turning to Slide 20 and our second half FY '26 outlook. Looking ahead, we expect UNPATA in the second half to benefit from continued customer growth across all segments from business momentum, increased Onboard Finance receivables and the ongoing realization of efficiency benefits from our prior strategic investments. There are also several external developments that we continue to monitor closely. The federal government's review of the Electric Car Discount scheme is underway, while within PSS, we expect further clarity from the annual NDIS price review. Today, we have also announced an on-market share buyback of up to $10 million to be executed over the next 12 months. Finally, across the group, we will continue to take a disciplined approach to investing in and executing on our strategic priorities, excelling in customer experience, driving simplicity and technology enablement and delivering valued solutions to our customers and partners. In closing, MMS remains well positioned to deliver long-term sustainable growth, supported by a large and diversified customer base, strong and flexible balance sheet and disciplined approach to capital allocation. We take this opportunity to thank our people for their commitment, our customers for their trust and our shareholders for their ongoing support. Thank you for your time this morning. Paul and I will now be happy to answer questions you may have. I will now pass back to Alison to facilitate questions.

[Operator Instructions] Your first question comes from Tim Lawson of Macquarie.

Just in terms of the result, you obviously talk a lot about productivity throughout the pack. But obviously, there's been like a small improvement in margins or cost-to-income ratio in reverse. Can you just sort of talk through maybe the impact of the price increase on margins versus what you've been able to do organically throughout the other divisions?

Yes. Look, thanks, Tim. Yes, I mean, obviously, a big focus of our strategy over a number of years has been productivity. We've continued to look at how we can simplify our processes, use technology and automation to enable that. In the period, if you look at, obviously, each of our businesses, GRS benefited from some margin uplift probably contributed by both factors. One, we had some yield improvement in our novated sales. And then the second was obviously through the benefits coming through from our previous investments in Simply Stronger, both in terms of customer self-service and the use of AI and automation in our call center. So reducing the number of people we need in terms of supporting customer calls coming through. You can see in terms of our cost walk, which is on...

Page 15.

Page 15 at the FTE numbers obviously represent that reduction over the periods. So in terms of 1 half FY '26 versus second half '25, we're down 75 FTE. That's largely in our GRS business. PSS, if you think about the business, we acquired My Plan Support, brought on about 30 resources through productivity benefits across the group, we were able to reduce that down by 26. So we had a net increase of only 4 after buying My Plan Support. So we saw good productivity improvement in PSS as well, notwithstanding it was offset by the setup fee reduction, and we also continue to invest in the platform, improving our fraud detection and verification processes with technology. So I think what we've seen really has been a combination of some yield improvement and largely margin improvement driven by productivity benefits. Paul, is there anything else you want to add?

Yes. I might add a bit more to that. So if you look at the margin relative, obviously, to the normalized result, last year, say operating margin goes 40.1% to 40.3%. Cost-to-income 59.9%, down to 59.7%. Really what's driving that to be relatively flat, just a slight improvement is obviously the inclusion of Onboard costs. If you look at it from a like-for-like basis, which really shows how we're managing sort of year-to-year and half-to-half, you can see there 1 half '25 non-normalized operating margin improving 37.8% to 43% and cost-of-income reducing 62.6% to 59.7%. So it's just sometimes when you're comparing as we exit these normalized results that it looks relatively flat, but the underlying business, I think, the initiatives are proving out.

Yes. Can I -- just a second question in terms of the My Plan Support versus a setup fee reduction. Can you talk more about that? Because obviously, the setup fee reduction happens sort of instantaneously, but you've obviously called out the fact that in that previous answer that headcount only went up by sort of a net 4. What's the sort of exit rate sort of, if I think about it that way for PSS?

Yes. I mean, obviously, as you can see in the walk there, the $2.3 million reduction in setup fees, like if you added that back in terms of where the EBITDA was, EBITDA at $6.4 million, you added the $2.3 million, you'd be at $8.7 million, we would have been actually up about 6% or $600,000 odd in terms of EBITDA. As we finished the second half of -- sorry, the first half of '26, obviously, we started to see the reduction in the FTE. That should play benefit in terms of the second half margins. So we'll have a better margin in the second half versus the first half. It takes time, obviously, to catch that huge reduction in terms of revenue. The second factor, though, is we have invested in technology and fraud detection improvements and verification. So they should start to see some improvements also in terms of the second half. So we have a better kind of exit run in terms of FTE numbers and obviously, margin than we would have at the start of the year. It will just depend a little bit on kind of where the government ends up getting and the agency gets up on kind of the annual price review.

Yes. Okay. And just a couple of other quick questions. So the client trust funds were up like about 20%. Like just what's happened there?

Yes. That was just a little bit of timing on one of our big client partners. Essentially, they remitted funds into our trust account just pre-Christmas, and they were paid out just after Christmas. So it's just a little bit of timing. It's not as dramatic. If you look at, say, January, it's back to sort of $457 million. So it's just a bit of timing, Tim.

Yes. And a few other sort of housekeeping. Just you're calling out GRS novated trades in -- within the AMS segment. Why are you doing that?

They are customers that we have within our GRS business that are referred to our Interleasing business and AMS business to then take those cars and sell them through our Just Honk platform. So the income ends up sitting in our AMS business versus our GRS business.

Is that particularly -- in terms of materiality, it's not, I imagine, particularly large?

In terms of magnitude from an AMS, no, but it is increasing a very small base in the last couple of years. It's not included in our remarketing yields that you have there on the slide. So it's incremental to that, but starting to become a nice bit of income earner for us in our AMS business.

Okay. So the revenue growth in that AMS segment is more organic than from that factor?

Yes. I mean if you think about the total revenue in AMS, a large portion of that is obviously the yield improvement on the remarketing, which excludes the trade-in. But the trade-in off a very small base is now starting to become meaningful.

Yes. Okay. So then just on that -- if that yield improvements on the trade-in is around that sort of $6-odd million, just why is it not getting through the EBITDA line?

So firstly, I think there's a bit of mixture of what happened during the period. So we get the early termination fees, which comes through in the remarketing yield. We lose a bit of income, though, if that customer base would have otherwise been there with the book in terms of our principal and interest, then there is cost associated with selling those units that comes through in our cost base.

Our next question will come from Phil Chippindale of Ord Minnett.

Firstly, just on Oly, it's obviously continuing to grow. I think you said it's over 5% novated sales in the first half. Clearly, new client wins is probably a big driver of this improvement. But can you just talk to us about penetration? I know it's relatively early days, but what are you seeing from a penetration perspective into that SME on a per customer basis?

Yes. So look, obviously, the -- in the period, Oly continued to grow in line with what we expected, which is great to see. In terms of penetration within the customer base, so our Oly customer base is largely what we call small to medium. It's not at the larger end of the SME market. We have about 70% of our clients sitting there somewhere between 500 and 200 employees. We're still seeing quite a large of get one customer first and then focus on starting to get cross-sell within that client base. That takes a little bit longer. It's a little bit different to our core business where you integrate initially with the client, when the client win and then you market to all the employees, it takes a bit longer. We've got now just shy of 15% within that customer base, have got multiple employees now with Oly. That's off a base of which was 100% only single customers 12 months ago. So we're starting to see a bit of uptake in improving penetration with that employee base, but it takes a little bit longer in our experience so far versus our core business.

I understand. Just touching on the OpEx, you called out the $3.4 million of Onboard Finance one-offs in the prior period. So what does this look like in terms of the second half for us?

Yes. So it's kind of not one-offs. The $3.4 million was previously removed by normalization. So as we completed normalization, Onboard comes in. There will be a modest increase in those costs. I think that the operating expense base that we have for Onboard now in the numbers is there or thereabouts. But obviously, there will be a little -- certain amount of that cost is variable cost that grows with the receivable size, the amount of originations we've got and obviously, the number of active customers.

Okay. And then just the last one for me. You've referenced this $800,000 of incremental cost in the period for -- I think it was an outsourcing program. Can you just talk to, again, will that be a net drag in the second half as well of a similar quantum? Or I guess, perhaps you'll start to see some benefits and perhaps that net cost comes down?

Yes. Fundamentally, it's been a net drag in this half because we've invested in BPO in the half. We've had some dual running costs, for example, in AMS, which answers Tim's question as well. In the second half, we expect to yield some of those benefits. So we don't expect it to be a net cost in the second half of this year.

The next question will come from Chenny Wang of Morgan Stanley.

Maybe just first one, honing in on GRS and the $151.7 million operating income. I know you guys aren't giving normalized numbers anymore, but I was kind of interested in what that would have looked like in the first half of '26, just because I think it's pretty clear for first half of '25 and also second half of '25 that with the funding warehouse that it was operating income drags. I think on my calc, minus $1.6 million in the first half of '25 and minus $0.8 million. So just curious what that actually looked like for the first half of '26?

Yes. So we're not going to disclose normalization adjustments in this half. But Chenny, what we've tried to do on Page 24, 25 and 26 is actually give you much more information on the normalization adjustments previously. If you look at the overall increase in GRS from a normalized perspective, it's up -- we've got here -- it's up $24-odd million. And on Page 27, we've laid it out in a little bit more detail for you. So overall, the core growth for GRS is up $14 million at a revenue level. That's predominantly Onboard Finance growing, but there's also income growth there from the traditional P&A model plus commission. When you're looking at it versus normalized though, you have to remember that in '25, we also had a $9.8 million normalization adjustment, which obviously then gets you to $23.9 million variance that you see year-on-year. Then you've got your cost of funds coming in. And so obviously, $15.9 million comes in versus normalized, but if you had assumed that it wasn't normalized, that growth would have been $5 million. That again is on Page 24 and 25 to help you out a little bit. But we're not going to disclose normalized results in this half, given we want to move away from them going forward.

Got it. And then maybe just to keep it super simple then and just kind of talk directionally. Obviously, Onboard Finance was an EBITDA drag in previous halves. Was that still an EBITDA drag in the first half of '26? I appreciate you won't give numbers, but just directionally, just to help us out to understand, I guess, some of the underlying results?

Yes, great question. It was a fairly marginal drag. And as we've disclosed before, we expect it to be neutral across the course of this year. That's why we're removing normalization.

Got it. Okay. So just with the last comment, just to be super clear, so you're still expecting all else equal, that to be, yes, neutral over the year. If that is the case, that obviously implies that the second half, again, all else equal, should be higher than the first half. Can we think about then the second half base into -- sorry, the second half as a base into FY '27? So again, all else equal, can we just multiply the second half by 2 and that's kind of our base to work from into FY '27?

Yes, you wouldn't be that far off. But by doing that, as we've disclosed before, we expect as Onboard grows and gets to scale, it starts to be slightly accretive in the outer years, obviously, subject to the amount that we're originating through that portfolio.

[Operator Instructions] Our next question will come from Richard Amland of CLSA.

Just a couple of questions, mostly numerical. I think there was an amortization of expenses that were associated with the Simply Stronger of $3.8 million. Can you confirm that? Have I got that right? Or is that incorrect?

I think the net amortization increase is $3 million, Richard, which predominantly is essentially Simply Stronger finishing or capitalizing in FY '25 and a small contribution. Again, as we remove normalization, Onboard has a small amount of amortization coming in as well from the initial build costs. So again, in the detailed P&Ls in the appendix, you can see the amortization versus normalized is up $3 million on Page 25.

Okay. That's probably where I was sourcing it from. My eyes are already glazing over. How long will that $3 millio4n stay in, in terms of how long is the amortization term on that?

Yes. So on average, sort of with software assets, it's anywhere from 2 to 5 years. So we wouldn't expect D&A to start coming down anytime soon. It will be relatively flat. Obviously, if we embark on new software investments and they add to capitalization, that will increase D&A. I would say, though, looking forward, as we build more software assets on SaaS-based data or tech platforms, we'll have more OpEx as a proportion of our investment relative to CapEx going forward.

Okay. But we should probably run that half year D&A forward at that pace for the next couple of periods at least?

Correct. Yes.

Second, going through the disclosure, it looks like Onboard Finance, the interest costs associated with that were about $20.6 million. Is that correct?

The interest cost, if you -- easiest one to go through is back to Page 25. And you can see the GRS and didn't have any cost of funds in it in the prior period. So that $15.9 million that comes in for this half is 100% Onboard cost of funds.

So on the 4D, we've got a finance cost of $23.2 million.

Yes.

Here, we've got an interest cost of $22.6 million. I'm trying to reconcile the 2.

Yes. Remember, we've also got cost of funds in AMS as well, because that's group. We're looking you're looking at a group number in the 4D. I'm just referring to GRS.

Okay. So the $15.9 million is the cost of funds for the Onboard Finance?

Yes. And then you can see the $21 million for the variance there for the group on [ '25 ].

Okay. Then again, trying to reconcile to the balance sheet, it looks like the current and non-current finance lease receivables are pretty close to the Onboard Finance book in terms of numbers. So are those aligned? Is it that easy? Or is there other stuff?

Yes. No, there's other stuff in there. So the vast majority of that is novated and finance lease receivables. But in there, there's also AMS on balance sheet funded assets and a little bit of inventory in there as well. But essentially, the biggest driver period-to-period is in novated and finance leases. And essentially, Richard, actually, this might help you. We've disclosed what Onboard Finance receivables are in the investor presentation, as we've said before, $539 million. That gives you a sense of the $777 million, roughly, not exactly that because there's other finance leases that we've got to the tune of about $9 million, the finance and novated leases. But that then gives you a sense of what that $77 million (sic) [ $77 million ], how much of that is Onboard.

The direction of the question is trying to reconcile what part of the on balance sheet book relates to Onboard and then what the cost of -- the debt cost associated with that is? But okay, that's fine. Final question is just around dividends. So you've called out that dividend payment ratios pulled back to 85%, 86%. Is that a go forward? You've been paying 100% for a couple of years. So should we be winding up our expectations back on dividends to 85%, 86% going forward?

Yes. Obviously, we'll make that decision with the facts and circumstances of the next half. We thought this was a really good opportunity in this half post normalization to optimize the mix of our distributions back to shareholders. And for us, it makes sense to keep the divvy, obviously, it's still really strong at 85% and a 7.2% yield. But clearly, we also see value in a buyback of up to $10 million as well, given the potential accretive benefits for EPS and obviously, our confidence that we've got relative to where we see our share price.

This will conclude the question-and-answer session and concludes our conference for today. Thank you for participating in today's conference, and you may now disconnect.