MotorCycle Holdings Limited (MTO) Earnings Call Transcript & Summary

Good day, and welcome to the Motorcycle Holdings Limited FY '25 Results Briefing Call. My name is Anne, and I will be your Evercall coordinator. [Operator Instructions] With us today are the team from Motorcycle Holdings, Matthew Wiesner, CEO; Nicole Spink, CFO; and Michael Poynton, COO. At this time, I will turn the call over to Matthew Wiesner. You may now begin.

Thank you. Good afternoon, everybody, and thanks for joining us for the MTO FY '25 investor presentation. To get things going, I would like to head straight to Slide 4 of the presentation, which is the summary of our FY '25 financial results. So as you can -- as you will see, the Group has delivered a really strong set of numbers in FY '25 and keeping in mind also that this is -- this year-on-year growth and performance was entirely organic. When you look at the revenue growth of over 11%, NPAT growth of over 27%, our new vehicle market share grew over 1% in FY '25 to 16.6%. We reduced our net debt by over 76% and delivered a full year dividend growth of 30% and all on the back of also reducing our overall inventory by about 4% or over 4% in conjunction with that strong revenue growth, which as we discussed in the half year announcement was a commitment and a continued commitment to be really focused on improving our stock turns, aging inventory to ensure we continue to drive a much stronger focus on invested capital in and across the organization. Now to talk to the next 2 or 3 slides, I'd like to run through the key financial metrics. I'll hand over to Nicole to take us through them. Nick?

Yes. Thank you, Matthew. Good morning or afternoon, everybody. And as Matthew has said, the financials this year, we've included as an appendix at the back of the deck, Slide 21. I'm not going to walk through that line by line because that's just very clearly boring use of everyone's time, but they're there for you to refer to or ask questions in the Q&A section later on the presentation. FY '25, 11.6% increase in our revenue, which is organic growth. No new -- none of the new acquisitions are included in that number. So that's a like-for-like basis. 25% increase in the wholesale segment and a 7% increase in the retail segment, which is pretty good. Profit after tax, uplift of 27.7%. And our EBITDA grew 12.8%. So the reason for the difference there is because, obviously, while our performance was better, depreciation and amortization remained constant year-on-year, that sort of moderates that increase a little bit. Balance sheet metrics. Even with our 11.6% growth in our revenue, we brought our inventory levels back by 4%, which is really a focus on capital management and improving our stock turns, which is what we're aiming to convey. The cash generating capability of the business meant that we were able to reduce our net bank debt, which is debt offset by cash at bank by 76.3%, which we aim to do that at the start of the year. And I think we've delivered fairly well on that, strengthened the balance sheet. We've repaid AUD 10 million from the bond to the bank facility. We did hold some cash, obviously, in the bank at the end of the year because we had the Peter Stevens that settled in the first 30 days, which is why there's some additional cash there. And we've also increased our dividend for the full year, up 30% to AUD 0.13 full year dividend. So returning some -- rewarding our shareholders on that. In terms of metrics, return on invested capital improved by 34%. That's driven firstly by obviously, the increase in NPAT, but we did actually bring our working capital down by about 6% from 30th of June, and that's where we're working towards doing some more in that in FY '26. So I hope that number increases again. Return on equity of 22.5%, obviously, in line with earnings and same EPS, 27% increase in our EPS. We're really focusing on where we're putting our capital and best use of capital for -- we got a start on it last year, but I think it's a bit more in FY '26. That's the numbers, and I'll now hand back to Matthew. Thank you.

Thanks, Nick. So Slide 8, effectively a summary of some of the operational highlights of the year. As we said, strong growth in new and used volumes. And also from a retail point of view, on the distribution side, wonderful performance from our -- from the CFMOTO brand and also its expansion into motorbikes, introduction of some EV product in the side-by-side 4-wheel space. So Mike will talk more to that shortly, which therefore, related to a wonderful growth in our collective wholesale distribution businesses across the P&A and vehicle space in Australia and New Zealand. We are working on improving efficiencies. And I spoke to this in the half year announcements with some of the things that we identified there and we continue to do so across retail and especially in retail, where obviously, most of our people and overheads are, and we will continue to drive those outcomes. I'll talk more to that in a minute. Inventory, obviously, key, especially not just in the amount, but more in regards to disciplined management of aging, and we'll talk to that also. Gross profit growth of 9%, margins remaining pretty steady across the board. Again, good growth in e-com, and we've barely touched that. We've got a lot more to do there. And overall, our retail revenue growth of 7% in a relatively flat market was good. And that's a reflection of our market share growth across the new and pre-owned used vehicle space through the year. So overall, again, a reflection of the numbers that Nick just took you through. But on top of that, it is -- it's a good year, great improvement across the board. However, as far as we're concerned, we still have much to do. We -- I look at that and knowing full well with some of the things we spoke about in the mid-year in regards to the restructuring work we were talking to and the areas of focus. Those bits of work have only recently been completed and with some of the restructuring we did in our retail business, reorganizing of management and focus, especially in the areas of pre-owned and used bikes and setting up structure around that. We're now already starting to see some green shoots popping out of that given it's only August. We're also about to kick off some significant focus in L&D, learning and development, with a program we're about to start next week actually in regards to further developing our retail leaders, dealer principles in regards to a more intensive business management process. So very focused on driving much better outcomes and productivity and efficiency out of our operations. So we're looking forward very much to what that will bring to the Group as we head through FY '26. So to talk more about the FY '25 operational performance, I'd like to hand over to Michael to run us through some of the key metrics there. Michael?

Great. Thanks, Matt. Good afternoon, everyone, and thank you for joining today's investor call. My name is Michael Poynton, and I'm the Chief Operating Officer at Motorcycle Holdings. Today, I'll be speaking to our strong FY '25 operational performance. So we'll kick off on Slide #11, track record of consistent revenue growth. A record revenue result of AUD 650 million was achieved in FY '25, up 11.6% on FY '24. And I'm pleased to report all business units posted revenue growth. Our retail business recorded revenue growth of 7%. And I would like to point out again that this was organic growth with no stores opened or acquired in FY '25. Our 3 wholesale businesses, Mojo, Cassons and Forbes and Davies in New Zealand, recorded total revenue of AUD 243 million, achieving an impressive growth rate of 25%. All 3 of these businesses fired in FY '25. Cassons benefited from the addition of new brands and also greater operational efficiencies as a result of IT investments made in FY '24. Mojo and Forbes and Davies continue to ride the growth wave with CFMOTO with the brand continuing to go from strength to strength, also starting FY '26 very strongly. CFMOTO's recent entry into the 2-wheel motorcycle segment continues to exceed our expectations. Our FY '25 revenue growth in Australia from this segment was 93%, establishing CFMOTO very quickly as a major player. We'll now go to Slide #12, record market share and new vehicle unit sales. A record new vehicle sales of 15,637 units was achieved, representing growth of 7.9%. This growth was achieved in a flat market, increasing our market share to a record high of 16.6%. With the Peter Stevens and Harley-Heaven acquisition now complete, we anticipate our market share in FY '26 to increase to over 20%. It is also worth calling out our new vehicle unit sales and the market share shown on these slides do not take into consideration the units that are wholesale through Mojo. When these units are taken into consideration, our slice of the Australian motorcycle market is even greater. Slide #13, record used vehicle unit sales. A total of 10,565 used vehicles were sold in FY '25, representing growth of 4.4% over FY '24. With a greater gross margin per unit versus new, used bikes continues to be an area of focus for the Group. Our used to new ratio in FY '25 was 0.67 and with recent changes to our used bike structure and our laser focus in this area, we are confident this ratio will further lift in FY '26. I will now hand back over to Matt to talk further on our FY '26 outlook. Thank you.

Thanks, Mike. So yes, Slide 15 is just a few points regarding our outlook for FY '26. And -- as Mike pointed out and as you picked up through the numbers previously, we certainly see some strengthening across some key areas through the second half of the year. We are keen to drive, as mentioned previously, a higher ratio between new and used. We want to be doing and driving a greater volume of pre-owned bikes, whilst we continue to grow market share with our new vehicle performance also. So -- and as a matter of fact, the second half of FY '25, our new market share in the second half was actually over 17%, but the average was 16.6%. So the team are doing a wonderful job and we're seeing the -- as I said before, the green shoots of that reorganization of structure in our retail -- Motorcycle Holdings retail business starting to bear fruit, which is wonderful. In addition to that, a few of the areas we highlighted in our service business are starting to flow through. Also, we grew gross profit in our service business in FY '25 by 11%, and that was really by just highlighting some of the areas that we need to be more efficient in, especially around overtime. And yet there are still some areas there that we see we can improve on to deliver a higher GP as a percentage. And that will flow especially into the full year FY '26. We're going to continue to maintain a significant emphasis on our -- on driving and identifying better efficiencies across the organization. We've just as discussed and as we pointed out, we really need to develop this business into a far more digital and data-led organization. And we've spent a few months searching for the right person for that role. And I'm happy to report that our new Executive General Manager of Digital and Data Transformation commenced with the Group yesterday. And she has a long list of wonderful opportunities. And we are now in the process of planning where and what we'll be prioritizing as we head through FY '26. But certainly, there are a number of wonderful opportunities as we dig into the volume of data we have to drive this business in a more efficient manner and also develop our CX, so our customer experience, our employee experience through our digital capabilities, and obviously, driving and developing our e-commerce capabilities to ensure that we are always looking to drive better revenue outcomes through every channel that we have across the organization. We're looking forward also to further growth in our distribution world, especially in -- well, absolutely in the vehicle space as well as our parts and accessories space. Favorable conditions in the agricultural space across the country hopefully mean that we'll continue to see strong performance in that area as CFMOTO especially continue to deliver some wonderful product in the 4-wheel and 2-wheel space. We are obviously going to manage debt levels in the organization. And that's a combination also of our wholesale bailment as we continue to focus on inventory levels and ensure that we are improving our return on invested capital in that space. And of course, with the recent acquisition of the Peter Stevens assets that we acquired, they will -- we look forward also to unlocking the opportunity that sits within those businesses that we've brought on board as we head through the remainder of FY '26. And that's pretty exciting now as we head to Slide 16, what that opportunity can start to deliver, not only with the businesses that we specifically require, but now when you look at the footprint on Slide 16 that we have, we now have a truly national footprint from a retail perspective. And obviously, a great opportunity to work even harder in our distribution businesses as we look to take advantage of that increased footprint. And having a stake in the ground in South Australia and Western Australia, which we haven't had before, becomes a wonderful opportunity to grow around and look at what other opportunities that will exist as we head through the year and beyond. And it's a pretty decent house of brands that we have now. We -- across our wholesale distribution brands of Cassons, Mojo and our various retail motorbike and vehicle brands with Team Moto, Ultimate, Morgan & Wacker coming together with Peter Stevens, Harley-Heaven and Savage over in the West. Forbes and Davies is our distribution business in New Zealand, doing great things, had a very strong FY '25, as we said, and looking forward to an even better '26. And MCA, which is our parts and accessories retail brand, we have commenced the separation of it from our retail bike business to now give it the focus back within the -- our Cassons operations for it to become a strong retail channel within our Cassons parts and distribution business to really drive and build a wonderful omnichannel, digitally-led organization and retail channel to really drive better and more efficiently and grow our retail parts and accessories business as we work through FY '26 and beyond. Slide 17 gives you an idea of, obviously, the strong brand partners, wonderful brands that we have within the Group, which has grown again given our acquisition of the Peter Stevens Group brands that we have done and bringing the likes of CanAm and Sea-Doo into the Group will just further strengthen the business and further diversify the business as we head into watercraft, which will also bring other opportunities with it as customers look to -- look at other opportunities that they have in their leisure product and vehicle world. Slide 18, I'd like to hand to Michael to talk more about Peter Stevens as we head through the year as an update there. And given we've set Peter Stevens up and Harley-Heven up as a separate division within our organization, Michael is very close to it to ensure that we get that momentum up and running. So Michael, over to you.

Thanks, Matt. As previously communicated to the market, we have now successfully settled on all 7 Peter Stevens and Harley-Heaven sites, and these 7 sites had pro forma revenue of AUD 144 million in FY '24. This was a once-in-a-lifetime opportunity for our company, allowing us to cherry-pick strategic assets of our biggest competitor who at the time was under a voluntary administration. We will continue trading under the Peter Stevens, Harley-Heaven and Savage Motorcycles names, taking over 2 sites in New South Wales, in Victoria, 2 in SA and 2 in WA. Both WA and SA are new geographical retail locations for Motorcycle Holdings. As a result of this transaction, we have increased our total number of Harley-Davidson dealerships from 8 to 12 and also established relationships with new OEMs, including Sea-Doo. As I mentioned previously, with this acquisition now complete, we anticipate our FY '26 market share to increase to over 20%. This transaction is expected to increase our retail revenue by 20% to 30% and will also deliver other Group benefits, including further growth to our retail finance and wholesale businesses. We are confident this transaction represents exceptional value to our shareholders, and we look forward to providing a trading update at our half year results. I'll hand back now to Matthew for his concluding summary before we open for some questions.

Thanks, Mike. So before we head to the Q&A piece, I'd just like to thank all MTO staff and management for their wonderful efforts in FY '25. And also at the same time, welcoming the 200-plus people from within the Peter Stevens and Harley-Heaven businesses that we acquired recently. And we're really excited about having them on board and to be part of what's going to be an exciting future over the time to come, years to come. Also thank the Board for their support through the year. It's just been a fascinating year and looking forward to the one ahead. And of course, to all of our shareholders for their support and focus and interest in the organization and looking forward to that, obviously continuing as we head into FY '26. So thank you for that. And I'll hand back over for the Q&A session.

[Operator Instructions] Our first question is a live question from Jared with Morgans Financial.

Congratulations on a really improved result in FY '25. Just one question for me. I mean you've given a lot of qualitative outlook commentary going into '26, but just interested in what you can sort of share in terms of sales growth through the first 7 or 8 weeks of FY '26, given we've seen quite a few positive updates from peers in the market recently.

Jared, yes, thanks for that. We have -- I mean, it'd be fair to say, we've had a good start. I mentioned earlier, we've seen some green shoots from our retail business already on the MCH side, a combination of the restructure and the areas of focus that we are very much focused on. So good start there. And across our wholesale and distribution businesses, it's been a very positive start. So happy with where we are, given it's 2 months in, a long road to go yet. So again, I'm looking at a conservatively positive period ahead. Obviously, we've got a lot of work to do on the Peter Stevens and assets that we're bringing -- we brought on board to get them back to the momentum that we need them trading at, getting them out of monetary administration only a few weeks ago. But happy where we are now. They are at different -- slightly different stages, I guess, because of the slightly different timings across the various businesses for when they settle. So once some got going earlier than others, and we -- and you can see that in -- at what stage, I guess, and how they're trading from a momentum point of view. But we're in the first 4 months. Everybody is pushing hard. It's promising for then I think what we're seeing in orders and so forth that are building up for September. And remembering, once we sort of get into September and October, then we're heading into our key seasonal buying period. And so I guess from that perspective, timing is pretty good because that's certainly going to help get those brands back up running fast to get that momentum going. So in summary, pretty happy where we've kicked off. Lots of work to do on the new stuff, the new acquisitions. But what we're seeing there is pretty promising and plenty of enthusiasm around those.

Great. And maybe just a follow-up. I mean, just Peter Stevens, I think on the network on the announcement, the -- you touched on some the synergies expected from the acquisition. I mean, could you sort of give a sense on if you expect to be in a position to quantify some of the synergies of that acquisition in this first half or potentially at the AGM?

Sure. There's a number of them. And Mike, do you want to -- I mean, you're working closely on those. There's a number of them that we've identified. Mike, do you want to expand on that a little bit?

Yes, sure. Yes, so we can definitely quantify more towards the end of the year. The strategy with it, as we did touch on with the investor call initially is to run it somewhat in isolation to the rest of the Group, just to stabilize the business. So we’ve retained management and have a separate structure overseeing the Group. And as Matt touched on, this is our first full month, August with all 7 sites under our control. They're where we expected them to be at this point in time. Some only settled at the very end of July. So we have noticed that post settlement, there's been some roadblocks that we've had to overcome just with franchise agreements and the ability to do registrations and new dealer licenses that were required in SA and also WA. But we have seen solid performance as we've overcome those roadblocks and trading very quickly resume. Look, some quick wins for the Group that we're trying to tap into now is the Cassons business, for example, or the consumables that would go through Peter Stevens and Harley-Heaven to have them purchase those items through Cassons. So that process has already started. Likewise, with the finance business, it should increase our net amount finance to the Group between 20% to 30% over the course of 12 months when they're up and running. And obviously, with that, look, we can negotiate better rates with our suppliers, volume bonuses and so on. So yes, that's sort of where we are at this point in time, but we can further quantify some of those figures later this year.

Perfect. That was really helpful. And maybe while you have the mic, you may just touch on Sea-Doo. I mean it's certainly a brand you guys have spoken too much in the past, but got a few mentions in the pack. I'm just interested if this represents an incremental channel to the broader ATV network. I guess, sort of how meaningful is it sort of, if at all?

Yes. So with BRP, there's 2 brands that we've taken on as part of this acquisition, one being Can-Am, which is their 4-wheel brand and the other one being Sea-Doo. So it's a new relationship for Motorcycle Holdings. Sea-Doo are the market leader in the PWC, the personal watercraft market. And I do believe that it's a significant opportunity in particular, in Dandenong. So the sites where we've now got a Sea-Doo franchise include Dandenong and also Adelaide. As a result of the Peter Stevens administration, there were 2 other stores in Victoria that closed down, one being Ringwood and one being Geelong. And at this point in time, Sea-Doo have agreed not to seek out replacement dealers in those PMAs. So it does represent a significant opportunity for Dandenong. Fairly conservatively, looking at what Dandenong sold last year with Ringwood no longer being there. Ringwood was the biggest competitor for the Dandenong dealership, the Sea-Doo franchise. Fairly conservatively, we think the numbers for Dandenong should grow between 60% to 80% with that brand just simply due to there not being a dealer in Ringwood anymore. Look, it's a premium brand. There's jets skis in the range of sort of AUD 35,000, closer to UD 40,000, so quite a high average selling price. There's a very good opportunity with service. We've got some very, very good techs within the Peter Stevens business that are well experienced with the product. Good opportunity with accessories as well. So trailers and life jackets and things like that. So we're very excited about it. We think it's a very good opportunity for the Group. And hopefully, look, as we've proven with other OEMs, we can further strengthen the relationship and seek out other opportunities around Australia once we're up and running.

Our next question is a written question from Steve with Forager Funds. The question is, could you discuss the impact, if any, of the Peter Stevens receivership on margins and profitability in the MTO business in the second half of 2025?

Thank you, Steve. No impact for us on the second half of '25. Everything settled post year-end. So no impact to '25.

Sorry, just further to that as well, I might just point out that when they were under administration, which was FY '25, it was quite an orderly process. So in terms of the Motorcycle Holdings retail business, we didn't really see any impact at all. We were watching it closely just in terms of bikes potentially being discounted, but it was quite an orderly process managed through the administrator. And also one thing that we did early on in the piece was the Motorcycle Holdings retail business, we acquired a lot of the used bike stock out of Peter Stevens and Harley-Heaven to provide some additional liquidity and also to get those used bikes out and allow us to retail them through our other stores. So yes, through the administration process in FY '25, the impact on the Motorcycle Holdings retail business was very minimal, if at all.

[Operator Instructions] Our next question is a verbal question from [ Yan ] of Motorcycle Holdings.

Was debt actually cash paid at the end of June 2025?

Sorry, Yan, what was that?

The debt was paid down to AUD 9 million end of June. Assuming that was paid by cash end of June 2025?

Yan, we paid AUD 10 million of cash off of the facility during FY 2025. So we paid AUD 5 million in the first half and we paid another AUD 5 million in the second half. The net reduction in debt is because we report debt of the actual total debt offset by cash. And as you know, we held quite a bit of cash in the bank at 30th of June, preparing to settle for Peter Stevens and Harley-Heaven, which is why the actual cash repayment is AUD 10 million and the total reduction of AUD 76.3 million because it's net. Does that answer your question?

[Operator Instructions] It appears there are currently no further questions. Handing it back to Matthew Wiesner for any final remarks.

Okay. Thanks, Anne. Thank you, again, everybody, for your time. And we look forward to catching up with a number of you over the next couple of weeks to discuss further what's happening in the business and last year's, and of course, where we're headed through FY '26. So again, thank you very much, and have a good day.

This concludes today's Evercall. A replay will be made available shortly after today's call. Thank you, and have a great day.