MotorCycle Holdings Limited (MTO) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the half year results teleconference. [Operator Instructions] I will now hand the call over to our presenter for today, Bob Donovan. Please go ahead, Bob.

Hello, actually it's not Bob Donovan. It's David Ahmet here, the Managing Director of MotorCycle Holdings. I'd like to welcome you all to the interim results for MotorCycle Holdings through December 2020. This morning, I'll run through a few of the highlights of the last 6 months. I'll drill then into the financial results. We can look at them. We'll drill into the operational performance and you'll look at the various businesses and categories. And I'll explain where we've been focused over the last half and where we think things are going and what the outlook will be. So first of all, some of the highlights for the half. Our strategy, our growth strategy, has been delivering sustainable results. The growth strategy deployed over the last 6 to 12 months really has been the addition of new products into existing dealerships without increasing the cost base, so this has worked particularly well for us. And we've added a range of new products and we've been very aggressive on expenses for the business. The strong results have been underpinned by a permanent operational improvement across the whole group. So from the dealerships to the wholesale distribution, every department, we've looked very hard at in the last 12 months and made significant reductions in the overheads. We've taken a very disciplined approach to any where we spent money. And we're focused very much so on increasing margins. Of course, we acquired 2 dealerships in late 2019. So this half is the first time that we've had a full contribution for both of them. I was very excited about these businesses when we purchased back then because I felt was that they had a good capacity to contribute, and they have. Both dealerships have exceeded my expectations and have delivered significantly during the half. MotorCycle Holdings does continue to outperform the market. The market has been very strong over the last 6 months. Finally, we've seen the turnaround there after 3 years of decline. So the market was up significantly, but even more so, MotorCycle Holdings. We managed to beat the market considerably. So if I talk about the financial highlights for a second. Revenue was up 23% to $218 million. Net profit after tax increased 258% to $17.2 million. So that's a significant improvement on the same period last year. Obviously, a few reasons for that, which I'll go into soon. Gross profit margin was 29.6%. That was an increase. Although, we were closed for 3 months in Victoria, we still managed to lift our margin there. Of significance, I think, the debt for the company is being reduced to 0. We've got absolutely no company debt now. We've got $7.4 million cash in the bank. And -- but we have maintained a facility with the bank of $20 million, which is undrawn. So we can put our hands on cash really quickly if we need to for acquisitions or the like. We're in a great position balance sheet-wise. We look out to declare a dividend of $0.10 per share. And we expect that, that looks like it should be ongoing from this point on. The underlying EBITDA of the business was up 168% to $26.8 million. Operational highlights now. Demand across all business segments has been strong. Every part of our business has improved in the last 6 months. Having said that, used bike stock supply is extremely tight, and volume was actually down for the half. However, we've been able to improve the margins there significantly, and gross profit is actually up for used bikes. I think we've managed that challenge particularly well. We went into the half with good stock levels. It has been depleted to a large degree in May and June. So it's been a challenge to acquire enough bikes to keep those profit levels up there, but we've worked very hard at used bikes, and that is obviously part of our strategy. Of significance was our Harley-Davidson dealerships. You might remember that this time last year, I was disappointed in some of the dealerships. They were underperforming. We've managed to get them right. So we've brought all of our Harley dealerships performing above expectations and delivering considerable profit to the group. Over the period, we introduced a new line of motorcycles, Indian Motorcycles, which is of significance. Indian and Polaris are both distributed by a company called Polaris. So we've managed to get 6 Indian Motorcycles dealerships and Polaris as well. And they were, for the first time, contributing to the group's bottom line. We have an improved exchange rate, but we haven't seen the full benefits of that at this stage. We'll start to see more of that from this half on. We were locked into some lower rates for the previous half. So whilst there's been an improvement there, we've yet to see the real benefits flow through to our accessories. We've been improving our investment in the online platform, and we've had a significant increase in sales there to the tune of 75%. Obviously, we've sped up our investment in that platform and with considerable sums going into, improving both our business-to-business and our business-to-customer platform. So we expect that to continue to consider being the future as well. To have a look at closer at the financial results for the half. It's -- we're pretty proud of the story there. The numbers all stack up quite well. So we saw revenue increase to the tune of 22.6%. That's without JobKeeper, of course. Gross profit, excluding JobKeeper, was $64.7 million, up 25.9%. The margin increased to 29.6% for gross profit. So all up, including JobKeeper, we had $70.5 million gross profit, which was up 37.2% on the previous half. Underlying EBITDA was up 168% to $26.8 million, but what makes this really work is we've had an increase in sales with increase -- a better increase in gross, but our operating expenses were well contained. So even though we had 2 additional dealerships for the full 6 months, we sold considerably more products, which meant to paid more in wages and commissions. And overall, operating expenses were only up 5% compared to the gross profit, which was 37%. So that's obviously how we've been able to achieve the much better net profit before tax. So $17.2 million net profit after tax, 258% increase. So significant improvement there. And it's come from a range of areas across different departments, across different businesses and certainly, operational improvement. Balance sheet, as I mentioned before, is looking a heck of a lot healthier. A year ago, people were concerned about our debt levels. I have to say that I never was. I was very confident in our balance sheet and our cash position. Nonetheless, we've been able to accumulate quite a bit of cash over the last 6 to 12 months. And we've seen this as an opportunity to reduce our debt level. So we paid off a $47-odd-million worth of debt. So it's down to 0. We've got cash in the bank. As I mentioned before, we still have a facility of $20 million for acquisitions. The inventory level is lower than it was by about $20 million. We certainly won't go back up to where we were immediately. Used bikes is probably the one area that I think we do need more stock, but we've been gradually building that over the last 6 months, but it's still down to the tune of about $4 million from where it was a year ago. So given the reduction in availability of used bikes, and a reduction in stock levels that makes our performance look even better, I think, in that department. Cassons' stock was also reduced as the wholesale business distributing accessories. It's steadily rebuilding its position. But again, it's been a great opportunity for us to shift the aged stock and keep moving the sale -- keep the sales going up. And of course, we're in position to pay a dividend, so we will, $0.10 per share, which will be paid in April. If we talk about our revenue for the half, up 23%. So a good healthy increase, not that dissimilar to our history. Over the last 5 years, we've steadily increased our revenue each year. But if we look at the net profit after tax, that's where we've really made some gains, both in the last 6 months and the previous half to that as well for the last 12 months. So net profit after tax is $17.2 million compared to last year of the same period of $4.8 million, so a tripling of the net profit after tax essentially. And we expect that this will continue a very strong result to the end of the financial year. So really happy with how we're traveling at the moment. I'd like to talk about the operational performance of the group now and drill down into the various business segments. So if we look at the new bike unit, first of all. New bike unit sales for the half and the industry were up 20%. That is significant because at the previous 3 years, we saw a decline in new bike sales each year. So we were coming from a fairly low base. We were expecting the market to turn before this half, and it did start to around May of last year. So certainly, there was a lot of pent-up interest in buying motorcycles because the sales really took off Australia-wide in May, June and continued on right through to December. So the unit sales remain strong over that whole period. And it does go to show that there was certainly a large grand swell of interest in motorcycles. And that the customers were just looking for a reason to purchase. People don't wake up 1 day and say, okay, I'm going to buy a motorcycle, if they're not being a motorcyclist. So these people that bought these bikes obviously had an interest in motorcycles, and we needed a catalyst to get them into the dealerships and buying. So I think COVID certainly helped provide that catalyst. If we look at how MotorCycle Holdings has performed in comparison, our sales were up 30%. So we've beaten the market quite considerably as we would normally expect to do. That's driven by, obviously, those 2 new dealerships. And the additional product that we've added over that 6-month to 12-month period, so they're starting to really come home and deliver more volume. So a good healthy increase there, well above the market. If we look at our sales, we're at 6,770 new bike sales for the half, up from 5,200 the year before. So we've had steady increase there over the last 5 years in new bike sales, and quite a significant increase this year. If we look back to the new bike sales of the industry, we're still not back to the levels of 2017. So even though we've had this significant increase, we're still below 2017 and '16. And both of those years were below '08 and '09. So the industry is coming from a low point. So these sales are really, really in line with our long-term averages and where we would expect the industry to be. Used bikes have been a real challenge for the group. The used bike stock availability in the Australian market has shrunk by about 50%. Used bikes, like new bikes, have sold exceptionally well. However, it's been very difficult for us to buy these used bikes. So our actual unit sales were down by 6% for the half, which I'm actually pretty happy with. I think it could have been down by a lot more given how much of our stock had been reduced for the whole time. Gross profit, however, was up by 30%. And that's a clear indicator that we're making the most of the units that we do have. We're increasing our margins. And we've been able to really perform in that area. It will be sometime, I think, before it will correct itself back to good stock availability. It's as difficult now to acquire used bikes as it was 6 months ago. There's been no reduction in our margins whatsoever. And we're going to try very hard to hang on to these increased margins. And at this stage, it looks like that's infinitely possible. The stock availability is still tight, but we're able to buy enough to do about the same numbers that we were doing last year, but certainly with that increased margin. So can't see that changing anytime soon. And I think that current market -- or that tight market will be with us for a while. I think, at least, until June 30, and possibly, well into the next financial year towards December this year. So I expect used bikes to be strong for the rest of this calendar year. Diversified revenues. So where our money came from as a group. I'd like to just have a look at sales increase and the gross profit increases. If we look at new bikes started with -- our revenue was actually up 40%. So our volume, 30%, the revenue up 40%. This has led to a gross profit increase to the tune of 80%. So again, a reflection of availability and demand. Margins have been able to be increased. New products being added. And the product that we've added has also been higher margin. The likes of Indian Motorcycles at high-margin as any product that we sell. Polaris, 4 wheelers, ATVs, they've also been very high-margin for us. You have Royal Enfield Motorcycles. So the units that we've been adding to the group, increasing the sales have also contributed substantially to the gross profit increase. So that's working very well for us. Used bikes. Actual sales revenue was up about 6%. Gross profit, as I said, 30%. So probably a reflection there of increased values of used bikes, that have gone up to the tune of about 15% in value over the last 6 or so months. So we're seeing an increase in the average sale per unit. Certainly the gross profit is going nicely there. Parts and accessories, a good reflection of the broader market, up 20% in revenue, up 20% in gross. That's an indicator of where the broader market is at. Service departments have done well. We've been adding service departments to the new dealerships. That's the motorcycle accessory supermarket stores where we've been adding new products and installing workshops. So you can see we've increased the turnover yet to get them to optimum efficiency and productivity. Nonetheless, it's still an increase in the gross profit to the tune of about 10%. We'll see that both of those areas gradually improve over the next 6 to 12 months. As we sell more bikes, we'll be servicing more through those dealerships and the gross profit, we'll get those efficiencies and management right going forward. Retail finance is an area, that's one area that hasn't performed as well as the other departments. It's been a real challenge in the F&I department in the last 6 months or so. We think that this will improve as our supply of new bikes gets better in the future. The situation has been a lot of our customers have had to wait for the arrival of their new bike. So they would order a bike today, and they might get it next month or the month after or even the month after. That leaves a large lead time from when they decide to buy the bike and when they take delivery. And unfortunately, that time gives them an opportunity to go shopping around for their finance needs. And we've seen some leakage there out to other financial institutions. Normally, we would have that stock available immediately, so they would buy the bike. We'd offer them the finance the same day, and we'd get them on it in the next day or 2. But when it's a month or 2, it changes the dynamics. Over the short- to medium-term, we expect that will improve. Not so much this financial year, but next financial year, I would think that we'll get back to more normal stock levels, faster delivery times. And I think we'll go back to more traditional F&I sort of performance. So we see that as an area that we should be able to lift our earnings going forward. Wholesale accessories has been probably one of the biggest success stories of the half. This time last year, I was disappointed with Cassons results, our wholesale business. Our revenue was up, their sales were up but our operating overheads had eaten into the net profit way too much. So I made a promise that I will fix that. And we have. We've made structural changes to our cost structure in that business. We've taken middle management out of the position. All of this was done prior to any COVID coming along. This is done essentially this time last year, January, February, March. So we made significant changes to that business and pulled the overheads back aggressively. I'm happy to say that those reduction overheads have remained, and we're still -- even though we're trading at 20 -- over 20% revenue up and 30% gross profit up, our overheads are still lower than they were last year. So the swing in that profit for that business has been really quite substantial and a good contributor to our overall result. So very happy with the progress we made there. Look at the retail business for the group. As I mentioned, our new bike industry was up 20%. Supply managed to allow for us to sell 30% more. But the demand was higher than that, and we could have sold more if we'd had the bikes. But that tightening of supply meant that our margins were able to increase. So it worked nicely for us. We increased our sales, as I mentioned earlier, by 30%. That's based on a lot of new product, Indian Motorcycles in 6 locations, Polaris in 2 locations, other brands like Royal Enfield went into 4 locations, Peugeot scooters, Husqvarna motorcycles has gone in just recently into a dealership. So we've really added a lot of additional product across the group, and that's helping us. Outside of that, we would have performed about the new bike level -- industry level of about 20%. So it's the additional product that certainly helped us there. As I mentioned, used bike sales is our forte, and that's one area that MotorCycle Holdings is always focused on. We've always been well known for it. Volume down 6%. Stock levels down, initially, were down 50%. They're probably still down to the tune of 40%. So we're operating and getting these results in a much lower stock level. Gross profit still remains very high. Our margins still remain at all-time highs. Another great contributor to the group is the Harley-Davidson dealerships. We've gone to 7 dealerships now with the seventh being added in November last year or year before last. We relocated that business not long after buying it in Melbourne. It's a new location, which opened in June 30 last year. So our second month in July, we had to shut for 3 months because Victoria was in lockdown. So that business got off to a very slow start, but I'm happy to say that it's performing as well as our other dealerships now. So once we were able to reopen the doors there, it's fallen right into line where we expected it to be. Instead of having 3 of the Harley dealerships working really well, we've now got 7 out of 7. And that has been a substantial contributor to the bottom line for that half. Harley-Davidson sales for the group didn't increase like-for-like, it was about the same. So there's no massive market increase in Harley-Davidson sales. And the additional sales we got there were from the new dealership. So we've been able to really lift the bottom line, the profit across those dealerships without any increase in sales. Certainly, margins will increase. Overheads were reduced. Management was approved. Operationally, we got better at them and the focus did go into them as well, but a significant contributor to our increase was getting those 7 dealerships all performing. So again, without any increase in sales at all. Online accessory sales increased 75%, which is great. Those numbers are starting to build, but we think that there's a lot more in the online sales for the group and we're investing significantly to improve our e-commerce systems, both as a business-to-business platform, and certainly in a business-to-customer and how we go marketing to those people. That project is underway, and we'll start seeing -- introducing some of those new products this half. Certainly we would look to see a much better result there in the next financial year. So that's a growth department for the group. Obviously, we're investing in the digitalization of the business, different marketing systems, different league management systems, so a significant focus for the group is, hopefully, an improvement in the longer term. Wholesale business, as I said before, was -- sales increased 23%. So that's selling accessories across the dealer network across Australia. Gross profit increased by 30%. So we've been able to improve the margins there. Yet there's more to come there, I think, as we expect those margins to benefit from a lower U.S. dollar. Again, we haven't seen a lot of that benefit factored in yet. We'll see a little bit more this half, for sure, and certainly next year will be better again. Again, the sales have not decreased at all in Cassons. We're still trading very strongly, well up on last year. Overheads, lower than last year. So that business is certainly in the sweet spot and trending nicely. Stock supply has been very difficult for Cassons. Getting containers is difficult if you can get the stock manufactured out of China. So there have been all sorts of delays, delays in getting the product built, getting the product into a container, getting the ships into ports in Australia have been difficult. But nonetheless, we've still been able to significantly increase both our sales and our bottom line. The stock supply is improving. We're starting to see quite reasonable stocks arrive in December and January, again in February. So we expect that, that strong position should maintain at least to June 30. And the general broad interest of the momentum in the industry looks very sustainable. So ongoing from here, we'll certainly keep that disciplined approach to the cost management that has generated significant lift in profit, and we think that should keep us in the right position with an increase in sales and low overheads, we think our growth will be sustainable. I'm pleased to say that our wholesale joint venture with Allied Credit has started to produce some significant results now. Our finance company joint venture delivered $410,000 net profit after tax for our share, for our half of the group. We expect that to be closer to $1 million by the full year by June 30, traveling exactly how we would have hoped, slightly above budget now. We've made some good changes, operational changes, over the course of the year. Special provision for COVID-19 losses are in place, but we haven't had to use them to date. We expect that we probably will do some. But at some stage, that will get returned once we get past COVID-19. The losses for the business peaked in April of last year. And since then, we've been able to get them trending down every month. So we've gradually reduced that loss ratio every single month since April, and that's been due to more focus on debt collections. We've improved how we've gone about that. We've taken a fairly conservative approach to lending because we didn't want to create more bad accounts. So those 2 things together, lowering that loss ratio, reduction of our funds, obviously, as interest rates have got lower has helped us keep a strong margin, so it's performing nicely. And we expect $1 million out of it this year just as predicted from the very early stages. Next year will be even better, of course, as that book matures. So no reason why that trend certainly won't just keep traveling the way it has. So the improvements there are permanent. They're not related to COVID at all. If anything, COVID would probably be a negative for that business. We've provided for it, and we've made the changes necessary. So our focus for financial year '21, we want to maintain these strong margins. We don't want to give them up. We've worked very hard to achieve them. We're not going to let them go easy. A significant contributor to our results over the last 6 months has been a reduction in the overheads. We've restructured businesses. We've removed the middle management. We've tightened the spending in every area that you could imagine. Of course, our interest bill is lower from the bank because we had no debt. Our floor plan interest bill will reduce significantly. We essentially don't use floor plan now. We pay up the [ bike ] as soon as they start acquiring interest. So lots of areas are much lower. We're going to continue with our strategy of adding product to existing sites to increase the gross profit without increasing the cost base. We've been able to do that during the half as well, so not only did we get those 6 Indian dealerships operating, Polaris and the others, we've added -- or we're in the process of adding right now 2 more, GASGAS franchises to the group. GASGAS is the Spanish brand that has been purchased by KTM motorcycles. It's one of the largest motorcycle manufacturers in the world. So we don't expect them to be huge volume to begin with, but I think it will grow over time. So we've got GASGAS coming in this half, 2 locations. We've installed Husqvarna Mowers and Power Equipment into Ipswich dealership. So we'd like to still change our businesses that we've added 6 months ago. So we're looking through any other additional products that can produce incremental income without us increasing our cost base. Of course, we haven't bought a dealership now for close to 18 months. We haven't needed to. We've had plenty to do with all this additional product. However, it's time, I think, for us to start looking for the right opportunity. The target will be the same sort of businesses that we bought last time, Canberra Motorcycle and Harley-Davidson dealership in Melbourne. Both were great acquisitions. Both have delivered every bit as well as we would have hoped. So I'm looking for more of that type of business. We're ready to -- we've got the skill set ready and the group management team ready to go. So we'll be looking closer now at the broader market that you're seeing what's out there for us. But we'll be discerning in what we buy. We want to make sure it's the right business that can deliver earnings growth. We're going to continue with the update with the IT systems that I've mentioned a minute ago with the focus on online sales and business-to-business ordering and tying that in with our CRM, or customer relationship management, and marketing. So we think that there's some efficiencies there and productivity gains to be made through the digitalization of our systems. Looking forward, the motorcycle industry continues to perform really well. New bike sales are still well up on last year as we entered this half. The trading conditions remain strong. I feel confident that this half will certainly be better than the same period last year. Used bikes will be the challenge. It's difficult to buy them. But the rest of the market is looking really good. I don't think we'll see significant improvements to the finance performance and insurance performance until next financial year. But certainly, we're working very hard on that, getting back to the sort of levels that we were in the past. So I think this half will -- we should reflect the fact that it's -- the first half is always better than the second half. And I certainly expect that to be the case this year. There's no reason why it wouldn't be. We had a very strong half. A lot of improvements that we've made are permanent -- cost reductions, additional product, management at Harley-Davidson dealerships. Certainly don't underestimate Indian Motorcycles. They've delivered a significant amount of profit in that 6-month period. So these things we see as permanent fixtures. Certainly, we had an increase in overall sales and gross profit. A lot of it has come from what we've been doing internally. So we're certainly in a position to return to our policy with dividends and return of 50% to 70% of net profit after tax. So we would expect that we'll continue to keep paying the dividends when appropriate with still allowing for any acquisitions as we go. So that gives you a summary of where we're at. That's pretty much me. I'm happy to take any questions from anyone who listening.

[Operator Instructions] Our first question is from Jo Little from Morgans.

Congratulations on a on a big 6 months, got to be happy with that. Just a couple of questions. Just, Dave, you've done a lot of work on reducing that cost base. Just I think I know the answer, but just confirming that's structural and we shouldn't see any layering back in of cost? And that way your expense was up, but I'm guessing that's just commissions on strong volumes?

Yes. Well, the strong volumes and strong growth and a lot of the staff get paid on gross profit. So we fully expected that the wages would increase as they went up, but we were making structural changes to the businesses. We've taken some positions out. But it's not just wages. We looked at every single cost center that we had and made significant savings across the board. As I mentioned, Cassons, it's still below last year's expenses with a 30% increase in growth. So that makes a real difference to the bottom line. So that's current right up until now. There's no way that we will want to go back to where we were. So I can't see that happening. So no, they're permanent changes. There's no reason why it shouldn't continue through this half.

Yes. And Dave, you touched on M&A. I think you said kind of last time that you aren't keen on the turnaround anymore. And sorry, I'm getting a bit of feedback here, but you just want to look at good businesses at the right price. How active are you and how are vendor expectations at the moment?

I'm here to stay, Jo. Make no mistake, I'm looking for the next Canberra Motorcycles or Harley dealership. What is of significance, though, is we've been able to establish these MCA shops that are big-box retailers or accessories. When we add used bikes to them, now we've added new bikes and workshops. They can be every bit as profitable as a Harley-Davidson dealership. In fact, we've got 3 or 4 of them currently running at the same level as any Harley dealership. So that's all been coming to fruition as we've added the Indian and Polaris products to those sites. So now they've got workshops contributing. They've got new bikes, high-margin new bikes, like Indian contributing. They've got large accessory sales with no real increase in our overhead for those businesses, only minor for the salespeople. So we've added a lot of growth to the MCA group at the same time. So if we can't buy the right dealership, if the blue-chip ones aren't out there or can't be purchased for the right money, we will just establish more MCA sites and do exactly what we've done over the last 12 or 18 months. We'll fill them up with accessories. We'll add used bikes. And we'll, in time, pick up the right new bike franchise to add in there as well. But we've got them -- we've got 1, 2, 3, 4 of them operating at the same level of our Harley dealerships, of good Harley-Davidson dealerships. So that's turned -- that strategy is working really well for us. And there's no reason in the world why that won't continue. In fact, I expect it to get better over time because we're in our infancy with motorcycles in those sites. So Indians, less than 6 months or 7 months old across the group. So we haven't hit our straps there. There's more for us to do with that brand in those locations. So give us time, we'll improve the performance in those dealerships, but we'll add additional ones if we can't buy the right ones or we'll do both.

Yes. Well, that sounds like the sensible strategy rolling out more of those MCAs. But how many do you think could be a target?

Well, now that we've got them performing so well, I think we could probably add more than what I was originally thinking. Originally, I was focused on accessories and maybe adding used bikes. But now that we've seen that we can get them to generate considerable profit with the -- I think now there could be another 5 or 6 or 7 or 8 across Australia. We're not in South Australia. We're not in Perth. There's still opportunity for us to have more of those sites without being 100% dependent just on accessory sales. So it takes time. You've got to find a location. You've got to fill it up with staff and stock and what have you, and it takes time to get the new bike franchise. It took us a couple of years before we got the right opportunity with new bike cycle. I could have put new bikes into MCA sooner, but I didn't think that was the right opportunity. So fortunately, they paid off really well, and we're able to tie up Indian for up to 70% of their [ fair ] market in Australia. So that's worked really well. So yes, it will take time, but certainly, it's infinitely achievable to have another half a dozen over time or more.

And just lastly, just on the trading update, to the extent you're willing to comment. Would you say the start of the second half has been in a similar kind of trajectory to the first half? Obviously, we don't have JobKeeper anymore, but underlying trading conditions?

Yes, very strong and very close. Not quite as strong. This second half is always the quieter of the 2 halves. But if we look at how much we're beating last year, we see it's by -- it's by about the same margin. Generally it was slightly better than I expected. So at the rate we're going, there's still a lot of pent-up demand for new bikes that haven't been delivered. So as those bikes have come through and supplies got better in January and February, that's underpinning the new bike results as I thought they would. So we're still fulfilling back orders from last year. So the sales are still very strong. The real challenge is used bikes. That's where we can't just put our hands on the stock. It work there and it's hard work. And we're throwing resources at it. We're kind of just hanging on to or close to last year's volume, which was pretty strong actually with used bikes. Again, the margins are up. Yes, look, it really is still performing much better than it was last year. So we're expecting a strong year, obviously.

Our next question comes from the line of James Ferrier from Wilsons Advisory.

First question is on the gross margins. And I'm looking at Slide 15, for the new bikes and the used bikes there and the difference between the revenue growth and gross profit growth. It looks like you've got something in the order of about a 300 basis point increase in your gross margin percentage there. Does that sound about right?

Sound right, Bob?

I would think we're up by some 50% on our margins.

But for used. But more than that for new.

Yes.

New is certainly better than that. New would be up close to 80%, and we'd like to increase the margin on new bikes. And used, overall, probably more like 30% to 40% for that for the period.

Okay. And so -- but clearly, in percentage terms, at a group level, there was only about an 80 basis point increase in the gross margin, but I suspect that's more driven by the mix, the change in the mix of your sales because those numbers you just quoted there would suggest there was quite significant expansion in the gross margin percentage for those 2 segments of the results?

Yes. And the product that we added, like Indians, for example, has really strong margins there. The best margins that we've seen out of any products has come from those Indian motorcycles, which we didn't have previously. So fairly significant. And Harley-Davidson, we lifted margins there significantly. Close to 100% improvement in Harley-Davidson margins. So big increase there for the same numbers, for the same sales with Harley.

I think what you're saying is that our overall margin isn't moving by that. The new and used bikes, the margin is actually under the 30% that we average across all of the group. So you don't get an increase in the total group margin anything like what you'd expect because you -- every new bike you sell actually lowers the total margin for the group.

Yes. No, it makes sense. Second question, and you sort of just touched on it there for a moment, Dave, the like-for-like sales growth. If you strip out those 2 acquired dealerships, what was the like-for-like sales growth in the...?