MotorCycle Holdings Limited (MTO) Earnings Call Transcript & Summary

Good morning, everybody. It's David Ahmet here from MotorCycle Holdings. I'm happy to talk about our full year results for the financial year '21 this morning. Apologies for any technical problems we've had first up. Something went wrong with the dial-in number. But hopefully, we've got most people online now. So okay, I'll launch into what we're going to talk about today. I'll touch on the highlights of the year, what went particularly right for us. I'll get you to the financial results. We'll drill into some numbers there. We'll look at the performance, the operational performance of the group, and we'll have a look at the outlook for the financial year '22. I think there's no doubt that the MotorCycle Industry, like many other industries, has benefited from the renewed interest in leisure activities and that's resulted in a fairly strong consumer demand over the year. This, combined with a number of initiatives undertaken by MotorCycle Holdings management, has led to a record revenue and record profit for the financial year. Some of the highlights over the year include the Harley-Davidson dealerships in particular, performed very well with the 7 Harley dealerships in the group, the introduction of Indian Motorcycles to the group was beneficial to the bottom line. The 2 Polaris dealerships were added and a couple of other minor brands as well and some other products. With 0 net debt, which is a good position to be in. We paid all the bank debt. There's some floor plan debt there, but no bank debt. All divisions improved across the board. So every department went forward and contributed to an overall gross profit improvement. And MotorCycle Holdings continue to outperform the market due to the introduction of the new product ranges and strong margins and strong dealership performance that certainly added to the bottom line. So revenue increased 19% to $433.9 million for the year. Gross profit increased 26% to $128.5 million. Our margin -- our gross profit margin was 29.6%, up slightly on previous years. So we had our best EBITDA results ever, increased 61% to $44.5 million. And net profit after tax increased 86% to $28.3 million. So let's put the company in a position where we're comfortable paying a final dividend of $0.10 per share, making a $0.20 per share fully franked for the year. We'll drill into the profit results a little bit and have a look at where they came from. So as I mentioned, the revenue was $433 million. Gross margin is up from 28.1% to 29.6%. So we had a good increase in margin there. We did receive $5.8 million worth of JobKeeper to offset the downturn in the Melbourne market in particular. So we had an overall gross profit uptick of 24% for the company. But we managed to maintain the increase in overheads to a more modest 12%. So that certainly put us in a better position for the financial year. Underlying EBITDA margin was 10.3% for the year, well up from 7.6% the previous year. Net bank interest is down to 0.4 -- $400,000, obviously down from $1.5 million as we've reduced that debt down to 0. So net profit before tax of $40.3 million, up from $21.9 million, an 84% increase. And net profit after tax, $28.3 million compared to $15.2 million before impairment last year. So a good healthy increase in the net profit. Balance sheet. The key points in the balance sheet are obviously we've got a cash position and 0 net debt. The inventory -- inventory level is a key number on this sheet here. So inventories are up $86.2 million from $74.4 million, which was quite depleted last year, and it's the ability to increase that inventory that's really paying dividends now to really set the business up to achieve great results. So a lot of work has gone into getting that inventory back to where it needs to be, particularly with used bikes, which we're really seeing is delivering to the group. So basically, total assets $252.5 million, down slightly. The net assets about $144 million, which is obviously up about $20 million. We've still got a facility with the Commonwealth Bank. So we've got drawn $5 million with a $15 million unused and a further $20 million available, if needed. So basically, we're in a really good position to take advantage of any acquisitions that might come along and several of them perhaps. Market value ratios. We've got 61.7 million shares out there. At June 30, the share price was $2.77, paying a dividend of $0.20 for the year, gives us a yield of 7.2%. It's probably changed a little bit now. I think we're just over $3 now. But we've got earnings per share of $0.45 per share, and we'll be paying $0.20 out for the dividend. So dividend yield 7.2% fully franked, of course. So I'd like to talk about our revenue growth. It was up 19% for the year. We had steady growth in the revenue each year, year-on-year. Our underlying EBITDA, as I mentioned, is $44.5 million, up 61% for the year. The EBITDA margin increased by 36% to 10.3%. Strong NPAT. NPAT was $28.3 million, up 86% with significant lift over last year in the previous 3 years. Obviously, the years from '17, '18 and '19, the industry declined quite a bit. So there were difficult years to get growth. But we still managed to increase the turnover and gross profit. Gross profit has steadily increased each year, a big lift in the last financial year from $102 million to $128 million, driven by those strong margins and diversification. Our profit growth has come from right across the sectors of the business. The sector that probably had the biggest growth was the parts and accessories, retail parts and accessories. They grew by 51% in gross profit, up to $32.4 million. New bike sales actually grew a little bit faster percentage-wise, up to $20.6 million, which is a 69% increase in gross profit on [ used bikes ]. So that increase has come off a 20% increase in volume of bikes, 33% increase in revenue, delivered a 69% increase in gross profit. Probably the department that I'm most proud of over the year was in used bike department. Used bikes were a real challenge. Basically, if we go back 12 months to May, June, July of last year and used bikes stopped but decimated in virtually 90 days. That's due to the sudden surge of this COVID-related surge. So the peak of our retailing was really that 3 months of last year, May, June, July and into August. After that, it settled down quite a bit, and we just got into a fairly steady sort of figures. But that 3- or 4-month period saw a huge increase in sales. And basically, we couldn't keep up with the used bikes and our stock was depleted by 50% by the time we got to July -- July, August, so down about 1,000 units in stockholding. So it took us virtually all year to get back to a normal sort of stockholding. Lot of resources went into it, extra people put into it, and we set far and wide to acquire more used bikes. So basically put us in a much better position towards the end of the year, and we're getting much stronger results out of used bikes. So even with used bikes having a decline in volume for the year of 7%, it was looking much worse than that in the first half, some months were down 15% and 20% in volume. So we finished about 7% down in volume, but 27% up in gross profit which obviously represents the very strong margins that we're achieving. And it's no accident that we focused on the part of the market that was particularly profitable. The large capacity increases the Harley-Davidson, the Indians, BMWs, those type of bikes where we really put the effort into buying. We're able to achieve remarkable margins there, and that's continued on. Parts and accessories, a very good increase in gross profit, 51%. I'm very happy with that. Wholesale division, Cassons, gross profit increase of 30%. So they're certainly tracking in the right direction and probably the part of the business that's challenged the most with acquiring stock, getting product out of China, and that's ongoing, that battle. But virtually all year, our shipments were delayed [ and the fitting is on ]. That doesn't appear to have got a heck of a lot better yet. Some months were particularly tough, but certainly demand is very strong. And of course, if we could have got more product, we would have sold more like many businesses. The service department did well. The gross profit there was up 13%, notwithstanding that for several months we're in lockdown in Victoria, particularly, to a lesser extent, in South Wales and Queensland last year. The finance and insurance department is probably the 1 area that, I think, has the most potential for further growth. We're only up 5% for the year at $14.3 million. I think there's certainly a lot more there if we're able to get back to the sort of performance that we had prior to COVID coming along. So if I talk about the retail business a little bit now. And Harley-Davidson dealerships were on fire. Basically, they produced a record results across the group. All of them firing and achieving a very good result. That's despite the negative press that Harley-Davidson might receive in the U.S. about them losing market share. We find it's a very different story for us in Australia, and it's certainly very different story for MotorCycle Holdings. Harley dealerships do stock a lot of used [ tailings ] and the margins there have certainly been superior to anything else. So all 7 of our Harley dealerships really performing well to an exceptional level. We've got a full year contribution from 2 new dealerships, 1 of them being the Harley dealership in Melbourne and the one Canberra Motorcycles. Both dealerships have been really positive for earnings. So '21 was the first full year, basically, of those 2 Harley we relocated to a new site. It's performing really well. It's about a $1.5 million a year EBITDA business, and Canberra about a $1 million. So they're delivering about $2.5 million a year in EBITDA. And I think that costs less than that in the first place initially. So they've been great acquisitions for us and certainly a reason why our profit is up this year. We introduced Indian Motorcycles to the group. We won the franchise for 16 new dealerships across Australia, and we put them into existing sites. So it costs us nothing to get the right to selling them. [ We've been very able to run ] on CapEx or stock. We were able to put them on floor plan into existing sites, use the existing operating expenses. And so what we sold there was able that the gross profit was being able to be converted to net profit fairly easily. Likewise, with Polaris [ as is a 4-wheeler ] agricultural product, which has gone very well in the last 12 months. We introduced that to an additional 2 sites. So we've got 4 of them now, but 2 of them panning for very little cost and no expense. So they've come into the dealerships across the board during the course of the year. So that's obviously contributed to how our performance on new bikes and gross profit. We have revenue growth in new bikes and used bikes across the board, strong demand there, underpinning that tight supply has kept the margins high. Retail accessories and parts accessories retail (sic) [ retail accessories and parts ] revenue increased by 14% to $86.3 million. New motorcycle sales. So if I look at the revenue growth, it's up to $170.9 million for the year, 32% up on the previous year, driven off a 20% increase in volume. So we're selling obviously a bit of mix of motorcycles, Harley-Davidson, the Indians that sort of thing will be contributing to that. So it's not just that we're selling more motorcycles. It's the mix of motorcycles that we're selling, that's contributed to the result. If you look at '17, '18, '19, the industry went back double digit there for 3 years, we're still able to increase revenue over that period, albeit not as profitably as we would have liked. But the last 2 years, we've had 16% and 32% increase in revenue. So certainly packing a lot better now than it did prior. Industry new sales for the last 5 years. The last peak of the market was 2017 when we did about 110,000 units for the motorcycle industry. So 2021 has seen the market come back up to the same sort of level. So at the same level as 2017, at 110,000, 111,000 units. So -- well, if that's the case of the industry, it's a very different story for MotorCycle Holdings. We've been able to grow the whole time from '17 to '21. So we went from 9,000 units back in 2017 to just over 13,200 units in '21 with a steady increase each year, but a more significant increase in the last 2 years. So essentially, we've kept outperforming the market in volume and that's come from acquisitions or dealerships. So that '17, '18, '19 period, we will be building the platform for the future, acquiring dealerships, bringing them on forward and getting them ready for hopefully more boring times, which is what we've had in the last couple of years. So really, we're reaping the reward for the work that we've done over the last few years in building a bigger footprint. Used motorcycles is a different story. Used motorcycle revenue is well up. It's 8% up for the year, which is pretty remarkable given the -- how scarce stock levels, how short we were on stock and how our volume was down slightly. But again, the mix of the product there and a real focus on those premium-end motorcycles, which have really delivered probably the best margins that I've seen. And interesting enough, they've continued to get better. So stock supply has become a little bit easier to obtain now. And for the first 9 months, we will be scratching trying to get back up to 2,000 units in stock. So we've got there eventually. And from that point on, we've really outperformed the market there. So our volume of motorcycle -- of used motorcycle sales is now well up on last year, but the market has rationalized about May of this year. We found that the market dropped down a little as far as 2019 levels, but less than the really heady numbers of 2020. The peak in the market is this time last year. So it's come off market-wise but MotorCycle Holdings hasn't. We've been able to increase our volume at the same time as the markets come off. So that's come from the real huge surge or effort we've put into acquiring used bikes. So the demand is still there, not as strong as it was, but still a strong demand for us is we've got the stock. So it really is helping to underpin our results now even though the market has normalized to some degree. So used bikes, as always, has been a very important profit center for MotorCycle Holdings, and it continues to be the case going forward. So brand-wise, I think we represent just about every motorcycle brand that there's ever been. We've got newest dealerships at 9, Yamaha; 7, Kawasaki, what have you. So no matter where the market is moving, we can move with it. We've introduced other new products during the course of the year. We've introduced another jet ski dealership. We introduced a brand called STACYC, which is an American electric balance bike, which is distributed by Cassons, their wholesale business. So it's a kid's bike that's electric. Retail is for about $1,000. We've got the rights to the product in Australia. So we started importing them and that's been a huge success. We've only gotten into the financial year by 1 month into June was able to release with instant successes. First 3 container loads were presold. So we expect that product to contribute strongly to financial year '22, if it happens. We've also introduced a STIHL Power Equipment. So STIHL lawn mowers, chainsaw, that sort of thing, Husqvarna lawn mowers as well. So we've diversified the product offering a little bit, particularly in provincial towns country areas. But basically, anything that can be related to a motorcycle dealership in some shape or form. So Wholesale division happens. As I've mentioned, it's got the STACYC brand. We've had with a clothing brand, out of France, called Ixon. We're waiting on the first shipment of that product to arrive due next month -- end of September. And we've got really strong preorders for that product. So we think that will be well received in the marketplace as well. Our own brands, [ that's only on motocross clothing ] is going exceptionally well, really well received in the market. It seems to be flavor of the month. So very strong growth for those internal brands. And of course, they carry a higher retained margin [indiscernible], red textile and leather jacket brand, again, event. 12 months ago, redesigned, the reason being received very well in the marketplace, of course, aided by strong consumer demand as well. So our gross profit for the Cassons business external sales, business outside of our group, increased by 16% to $40.4 million. Internal sales increased 32% to $25 million. So collectively, the gross profit is up 30% to $24.1 million. So a significant step up there. Basically, as soon as the products came in, we were turning around and shipping it out. So very high turnover. Stock level reduced considerably. It happens over the course of the year. And of course, we would like more stock with delays being an issue there. Supply chains have just clogged across China, in particular, but ports everywhere. China ports are very difficult to get in and out of. Containers very expensive. And it looks like that's going to continue to be a problem. We've paddled with that all year and continues to be an issue, I think, for at least another 6 months. I think maybe even longer. Worldwide demand for motorcycles has gone really strong, the accessories that go with them. U.S. is very strong purchasing a lot as is Europe. So essentially, the manufacturers really are struggling to keep up with this high level of demand and the slow shipping times. And we're obviously looking to add new products to the Cassons running all the time but 2 very good brands secured at this financial year. In our finance joint venture. So outside of our retail finance and insurance commission, we run a wholesale finance company which provides the retail finance to our dealer network and that it gets on sold to the consumer. So it's a joint venture with Allied Credit. This is the first year that it's turned to profit for 3 years. It wasn't really expected to make a profit before now. But so now, but it's into that profit stage of the business. It's maybe $0.9 million after tax. And that's fair to run with that as the book matures even more over the next year or 2 as the number of accounts keep increasing. We expect that to increase, maintaining similar or slightly better volume than what we're getting at now. It's -- our profit is working really well. We've reduced the cost of funds as the interest rates, obviously, were very low during the course of the year. We were able to leverage that down a bit. And we -- even though we expect it to have credit issues with our consumers over the course of the year due to perhaps hardship, we've been able to reduce the credit losses. So we focus on collections and staying close to the customer, we actually reduced our -- we improved their credit performance over the course of the year. So losses were reduced considerably. However, having said that, we've still made a fairly large provision for COVID-related bad debts going forward. So if it were to take it on to the worst next year or this year, we've got extra money allocated or provided to handle those losses. So in a really good position, performing every month, very reliable, very consistent. We think it would probably go to something like $1.5 million NPAT this year is somewhat in the range of that, obviously. So contribution, and we'll get better over time. So for financial year '22, where is the focus? We'll be ready to expand. I've made no secret about it. We're out there talking to vendors now. We retired the debt. The business is going well. The demand is still strong. We've got the whole group working nicely. It makes perfect sense for us to increase our footprint and look to do more. We're looking to do more product diversification. As I mentioned before, that the electric bicycles, Husqvarna Mowers coming in and their Power Equipment, additional ranges in the wholesale business and the retail business. So the program of rolling out the new brands or new franchises to existing sites, it really helps the group last year. We were able to expand in what was fairly uncertain times. Firstly, for the first 6 months or so, we're able to have a larger range of product offering and that's contributed without us having to invest in a major significant amounts of capital. So we'll do that as much as we can, and we'll make sure that we pick up every brand or every product that we can that is [Audio Gap] what we think will be the best [ common site ] in Australia from motorcycle accessories, ongoing project that just keeps requiring development and marketing. We've improved our used bike stock level on just in the last 90 days or 120 days, we've got it back to where we'd like it to be, and it's really delivering results. So we're seeing the best used bike results in the last other 120 days, even better than a year ago, where we were getting very good volume of demand. Now we're getting the volume and margin. So it's really -- we get a purple patch there with used bikes, and it's really underpinning the results across the whole group. So very happy with that. We'll certainly keep pushing in that direction. And of course, there's always dealerships that are underperforming. I think we've got 37 dealerships across Australia. There's always a handful that are underperforming, in my opinion, and then should and can deliver better result. So that's got to be a focus for our management team. And it's very much a management issue rather than market conditions. We know that demand is strong. Inquiry is really still very strong. It's been consistent now for almost 12 months. But with a peak in May, June, July last year was a real surge. And since then, demand has been very steady each month. and it looks like it's going to continue. There's no reason why we can't keep doing existing sort of numbers, I think, well into the financial year '22. So we need to improve those dealerships, and that can help us a bit of organic results out of the group. So [ for the '22 considerations for the year ], obviously, New South Wales and Victoria are concerned. Our dealerships, all the shops there. Yes, there were shops are operational. Yes, you do click and collect. [indiscernible] above up really well surprisingly. We're still delivering close to the same number of bikes before New South Wales cutdown than we are now. But retail accessories have been affected. There's no doubt about that. But the demand is still there. So we're actually selling more than I would have thought, given that the doors are shut in those 2 states. Fortunately, most of [ that was shipped out from Queensland ], in Queensland has not seen any slowdown whatsoever. So Queensland is performing really strongly. And the Cassons business is performing better than the retail outlets in particular. Victoria performing better than the New South Wales. New South Wales seems to be the market that's hit the most, in particular, the Greater Sydney region, where there's most of the lockdown are. But no doubt once those restrictions are lifted in the next couple of months, I'm sure we'll see a bounce there in those businesses. But overall, I'm not disappointed with the results given that we're very restricted in some of our dealerships. Cassons are still performing to a high level. It will be probably not quite at its peak. A lot of it driven by stock supply. When the stock comes in is when we do really well at Cassons. So demand has stabilized at certainly higher levels in 2019, not as high as the peak of 2020, but certainly a very strong still. Used bikes supply we've sorted. Demand remains strong. Elevated profit margins have continued. We haven't -- if anything, we've seen margins gradually increase over the course of the financial year. But that stopped growing now. but we're still at the peak, still performing quite well. Cassons has improved its gross profit margin over the course of the year by a few percentage points. A few things helping there. Obviously, the exchange rate helps to some degree, but just that strong demand. That means less specials and less offerings or discounting to the deal market. So we're more than happy to return to our dividend policy of 50% to 70% NPAT, which at this stage puts us around that $0.20 per share level. So that's about what I have for the moment. I'm happy to take any questions, if you've got more to ask them.

[Operator Instructions] Our first question comes from the line of Joe Little from Morgans.

Just want to start just on the acquisitions. Obviously, a bit exciting that you're announcing there, and you mentioned the work kind of aggressive. I guess can you give us a bit of a feel of what markets you're focused on multiples they're kind of talking versus historical and what you're willing to take that leverage to this time?

Yes. We probably don't want to get a leverage as we were previously. I think the market now was a little bit negative on that, but still we -- good opportunity to provide with dealerships. [indiscernible] dealerships [indiscernible] strong management in place, well, in a particular market. Multiple-wise, at the upper end like to pay, I'm kind of conditioned to buying them as cheap as possible, but everyone's had a better year. So vendor expectations are higher this year than they have been in previous years. We're talking to numerous parties, but we're looking in the vicinity of 4 or 5x EBITDA. That sort of level, which is the most that I would want to pay.

Yes. So from a leverage perspective, what are you saying kind of normal than 1x or...

[indiscernible] is a broad rough target. I think we go a little bit further than that sort of right business if there was a good opportunity. And certainly, we're getting a look at a few different businesses, all sorts actually coming out of the woodwork and ongoing negotiations with a number of them. And if we've got something to announce, we will in due course, of course. But it's getting for the right money, that is the challenge. I don't want to overpay at the peak of the market. So I just want to keep a cool head there and got good assets for the money.

Yes. Perfect. And just trying to pace your outlook comments today. So effectively, you're kind of saying margins as you see it are going to sustain for another 12 months. Used is going to be a step-up because you've now got the supply coming back to the market. So are you kind of -- yes. And then we've got, obviously, the lockdown, I suppose. So are you kind of telling people that this year the earnings are sustainable into next year?

Technically, [indiscernible] used both volume and margin helps offset in normalization of the market. The real ongoing factor is lockdowns and how long they'll last. New South Wales is starting to hurt. With the first month until we got from the 2 months pay, but there is paying there. It is taking the edge of our results. There's no doubt about that. So very hard to say exactly where we'll end up at the end of the year, but I would think the second half is looking likely to be a better result than the first, having said they're only 1 month in. And our result was, given that the close to half of Australia was closed the last month, Brisbane, Sydney, the whole time in Melbourne, the whole time in Brisbane for part of it, I think we've got a very good result, but we would have got a better result had the doors been open really. So I don't know if there's enough there to necessarily get us the same result this year. This year, we don't have any job keeper assistance for the lockdown. So we're very much on our own at this time. So I think you've got to take that into consideration. But the demand is there. And I think given the opportunity to open the doors, I think it's looking very much like we can continue to perform at the same level.

And just lastly, obviously, over the last 24 months, you stripped a lot of costs out of the business. Do you feel like you need to invest a bit back into the cost base just given how the business has surged and potential for more acquisitions?

Yes. It's good question. I probably already done that with the dealers, so we've already -- to get the used bikes to get that extra stock, I had to employ more people to chase the stock. So we've kind of -- we've got that extra human resource embedded in the dealerships, patents we've been able to pull the overheads back, and we've kept them there. So I don't think there'll be any significant increase in Cassons overheads, maybe a small amount. We're running it very lean. But so far, we're able to hold it quite in. So no, there's nothing additional, I don't think, going forward. As far as operating expenses, that's already built into the model now.

Our next telephone question comes from the line of Peter Drew from Carter Bar Securities.

Just a few questions. I guess following on from Joe's questions. I guess there's a lot of moving parts this -- for the financial year-to-date, so July and through August. I'm just wondering, can you give us a bit more guidance on how the group's performed sort of year-to-date from a sales and EBITDA perspective? Just given that there are a lot of moving parts?

So you mean for July, having this financial year?

Yes, yes. That's right.

Yes. Look, their doors were open really strongly with strong demand. In New South Wales and Victoria bike sales, new and used bikes, which are not a significant part of that -- of the MCA stores. But still nonetheless, it's a couple of hundred units a month. That's held up time. We've been able to deliver bikes to people as a business. So retail accessories is where we've seen the biggest hit. Obviously, we've pulled back the wages as much as possible in those retail outlets to offset the decline. So it's -- without giving exact figures, we're still posting what I consider to be a pretty good result. It could have been an exceptional result had we been open, but it's not a results of I'm too disappointing because bikes are still there. The workshops to perform, finance to perform across the group. Cassons still performed quite well last month. So a lot of the fundamentals are still there. It's just the hedges taken off in those 2 states. And dealerships in Victoria as the traditional [indiscernible] dealerships, they all get okay. Actually, they dropped a bit in accessory sales, but they were picking it up with bikes. But we think it's trending down. We think August will be a bit tougher. Bob will tell you that even in September would be the toughest month. So we're expecting a bit more pain over the next month or two. But whether we can pick that up in the second half of the year or the second quarter of this year remains to be seen, but the demand is strong. So I think this will come back pretty strongly. And I would expect that once we get past this lockdown, I think we'll post very good results. And the feeling is we're trading at the same sort of level as last year, the same sort of performance that we got last year.

Yes. We got slightly off. Yes. Okay, that's helpful. Dave, and just maybe if you could provide a little bit more detail on how the MCA stores traded, I mean, when they're open and then just whether you've got any sort of more appetite to open any more stores.

Yes, we do -- And if we can't buy something, I've got a few negotiations happening. At the moment, I can't buy something. So if we can't set a longer deal with them, we will do a greenfield, and we're certainly looking at sites now. We introduced Indian and Polaris to the MCA sites mainly, so new showrooms and new product. So essentially, they've all been converted now to fully fledged dealerships. So they didn't have a full workshop in parts facilities before or a new MotorCycle franchise before. That's all happened in the last 12 months. So very much in its infancy in the lifetime of the dealership and at the first year of potentially starting a greenfield. So definitely retailing accessory sales were up across the board, so they did well there that contributed significantly to accessory growth. But I expect those deals to mature over the next couple of years. We've delivered more earnings growth just organically by some longevity with those products at those locations. And more importantly, the staff being used to it too. So we had to put 6 guys in there that had to deal with new and used motorcycles with limited experience. So there's a learning curve for the management team there, so they do principles across the group. So there's some pent-up improvement, I think, as those dealerships going to start to mature. So there should be another couple of years of growth and then all things being considered equal.

Yes. Okay. And the last question, I guess, it looks like you've got a fair bit of equity in the inventory. And I'm just wondering, is the strategy of the group to use its cash to put into inventory and then use its corporate facilities for acquisitions?

We reduced it. We did have quite a bit of cash tied up in new bikes rather than pay the floor plan interest rates. But we've pulled that back down to more traditional sort of levels. That's the only place that we put any extra equity during the course of the year. We only use bikes. We don't run a floor plan facilities, and we own the rest of the stock. But the main thing was getting the stock level back to an acceptable point that we can maximize the opportunity. But no, we've got no intention of putting load to capital into new bikes. We certainly did while we had excess capital. We did for a while, but I think we would use that to fund -- like we went from $7 million to $14 million in used bikes over the course of the year, and it's all happened right at the very last quarter. So the stock was down by $7 million. We've rebuilt it. It took a long time, but we rebuilt it and it's paying dividends. So that was a very well adjusted $7 million. And the stock levels have to increase passengers because we've been short with all the fast-moving stuff. So that's creeping up by a few million dollars as we speak. So that's probably the equity that you're referring to, probably less on new bikes. New bikes, they're really $3 million or $4 million in there as oppose $10 million you might have had there 6 months ago.

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