MotorCycle Holdings Limited (MTO) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to MotorCycle Holdings Half Year 2024 Results Briefing. [Operator Instructions] Please note that today's conference is being recorded. Now it's my pleasure to pass the call over to the Chief Executive Officer, David Ahmet.

Good morning, everybody. David Ahmet here, MotorCycle Holdings CEO and Managing Director. For most of the 35 years, the Motorcycle Holdings has existed, it's been a dealership operator, a retailer, if you like. But more recently, we've moved more so into importing and wholesale distribution and even more so in the last 18 months with the introduction of MotorCycle. We're still a retailer, of course, and it's an important part of our business. But it's hard to move the dial. Once you're 42 or 43 dealerships another 1 or 2 dealerships in a year, doesn't move the dial very much. So if we want faster growth than that, we've got to look for new markets and importing motorcycles and eating accessories gives us that opportunity for the future. We believe that there's much faster growth coming from the wholesale division of our business. In fact, over 50% of our profit now comes from the importing and distribution of accessories and motorcycles. It's not to say that we won't keep focusing on retail. We will. It's still an important part of their business. It provides a great foundation for the wholesale business. But we don't feel the need that we need to bolt on a lot more dealerships there at the time and energy and investment is probably better spend somewhere else. Having said that, we have just purchased another Harley Davidson dealership in the center of Sydney. The one was just too good to knock back. In any case, I'd like to now talk about today, we'll bring you the half year itself, some summary highlights, financial results. We'll talk about operational performance and where we see the future for the rest of this year and beyond. So the financial highlights start. So statutory revenue, our turnover was up 6% for the half to $293 million. On a like-for-like basis, which backs out TeamMoto Townsville, TeamMoto CFMOTO Springwood and the Mojo Group, which is the importing of motorcycle. In fact that allow a 7% decline for the rest of the business. Overall, as private was up 2% to $76 million. Underlying EBITDA was down 12% to $21.8 million, giving us a net PAT of $6.6 million for the half. Net assets went down 1% to $195 million. And the directors of the Board have decided that they want to declare a fully franked dividend of $0.03 for the half I'll talk about some of the highlights or some of the main issues that we felt that we dealt with during the year. Revenue growth for the full period was up on the contribution of Mojo Motorcycles. We increased our national market share of new motorcycle market. We're now 15% of the total new motorcycle market. So it's been a challenging period for the most local market without a doubt, particularly the last quarter of the half. The national market dropped slightly, I think, 0.5%, it was for the half. We had growth in new motorcycles of approximately 8%. So that's pushed our market share a little bit further. I'll talk a little bit more about that. July to October, our performance was in line with our forecast and very much where we expect it to be. But the last 2 months in November and December, we did notice a significant drop in the inquiry right across the board in all markets. So we feel certain that that's due to the impact of the rising interest rates and the cost of living pressures. And it's impacted our results without a doubt. And the cost of doing business has also played a role too. Having said that, we have seen a bounce back in January and February. So things are looking a little more optimistic than they were, say, in December. Financial results. Our profit results for the half. Total income, as I mentioned, was $294 million, up 6%. Cost of sales was up 8%, then saw a gross profit of $76 million, $76.3 million, which is up 2% on last year. Gross profit margin fairly steady at 26%, down 1% from 27% last year. Employee benefits expense, which is wages mainly was steady across the group. That's driven by some reductions in wages in the retail business. So 35.7% identical for both halves. Rents are a big problem for us. They keep going up quite rapidly at the moment. We've seen a steep decline in rents that we've seen for a very long time. And of course, there's some additional businesses there as well. So the occupant expense is $1.9 million, up from $1.5 million last year. Other expense is up 23%. There's nothing going down at the moment very much. And our floorplan interest is up 1.4% from $642 and that does encapsulate wholesale and retail floor plan interest. So operating expenses were up 8% for the half at $54.5 million, giving us an underlying EBITDA of $21.8 million, down 12%. Underlying EBITDA margin is 7%, down from 9%, 17% down. Depreciation and interest on right-of-use assets was $7.6 million, up from $6.7 million giving us an underlying EBITDA as reported last year of 14.2%. So this year, the way we reported it last year, the pre-SSBK, 14.2% last year was 18%, so down 21% on a like-for-like basis there. Depreciation and amortization was $9.4 million. That was up from $7.2 million and net bank interest, $1.4 million, up 116% from $675,000. Net profit before tax of $9.5 million, down from $14.8 million and net profit after tax of $6.5 million, down from $10.4 million. On a like-for-like basis, so excluding Mojo and a couple of other dealerships. Total income was still $231 million compared to $247 million last year. Given the last 2 months have dropped off quite a bit, it's not too different. New bike sales, as I mentioned, were up for the half. Our cost of sales went up 5%. The gross profit $61 million as opposed to $68 million last year, down 11%. Gross profit margin, 27% as opposed to 28% last year, 1% lower. Employee benefits down a couple of million dollars, but $2.5 million, so $32.5 million last year, 34.9%. That's a result of us taking a fairly aggressive approach to cost cutting during the half, and wages is a big expense, and that's where most of it came from. Occupancy expense, $1.7 million, up from $1.4 million, very difficult to evolve that one. Other expenses remained fairly steady 11.3%, up from 10.6%. Bailment interest for the -- which is essentially the retail group was 877, up from 470. So reasonable increase is the new bikes the order book is dried up and the new stock inventories available everywhere. Everyone's got plenty of stock at the moment. So underlying EBITDA of $14.8 million plus debt $21.3 million, 30% decline. And the margin for the underlying EBITDA was 6% last year, 9%. Depreciation interest on the return of use asset $7.3 million, up from $6.6 million giving us an underlying EBITDA as reported last year of $7.5 million and last year, $14.6 million. The balance sheet. We have used quite a bit of cash over the last 6 months. Our cash position is $6.6 million, down from 24.7%. So in November, we paid the earn-out figure to the major earners owners, which is about $10 million. So $10 million of cash went out in November. And since then, we've purchased the Harley-Davidson dealership in Sydney, which will be a total cost of about $5 million. I don't think we paid for that until January. So that won't be in these figures. Trade and other receivables, $11.3 million, down from $12.1 million. Inventories have gone up slightly. Looking at pulling that back now. There's some areas where we think we're probably overstocked. So we'll just start trimming that as we see fit 162, up from 155 leases or right-of-use assets, 46.4% last year, 40.8%. Plant and equipment, very steady, about $13.7 million. Goodwill and our intangible is $145 million down $2 million. Investments was steady at 6.7%. That's our investment in the MotorCycle Finance company. Tax assets there, 1.8 million other assets. So total assets $397 million. If we look at the liabilities, the no significant changes there, but down $10 million, total equity at $195 million, down from $197 million, that fairly steady. Market value. So for the period. So net profit after tax was $6.5 million, down 37%. Share price was $2, down 16%. Securities on issue, a slight increase there of about 500,000, $73.8 million shares. Dividends paid last year was $0.20 as it was year before for the last 12 months. Basic earnings per share was $26 million per share for the last 12 months down from $32 million. Price-earnings ratio for the last 12 months was $7.7 million prior to that $7.4 million. Dividend yield was 10%. The year before that was 8.4%. So good paying dividend last year. Revenue growth, we tend to grow the business every year one way or another, we find ways to keep growing it, and that's been the story for as long as I can remember. So we look at recent years, there's 13% compound growth over the last few years. We expect that to continue. There will be further growth in the second half this year. And we've got things happening to make sure it keeps happening beyond the next couple of years. Underlying EBITDA and margin. So if you look at back draft there, you can see that '21 and '22 were particularly strong. They were assisted with job keeper. We also dealt with the COVID restrictions. But last year's best year that we've ever had of $55.3 million, very strong trading. And so we're struggling to replicate that at this stage. But I think in the near future, we will. So we're down a few million there for the first half. It's a very strong second half last year that will be hard to replicate. But given that the market is definitely quieter. But having said that, early signs for January, February are very encouraging. Our large underlying EBITDA margin, 7.4%, so artificially inflated, I think, in '21, '22 at 12.6% and 10.6%. '23 is probably closer to where it should be and onto pretty good year with strong margins. Margins have come off a bit this year. So we're seeing a bit of contraction there, probably close to a long-term average, I would think. Net profit after tax. You can see we've been fairly steady. But this year, we've come off a little, but certainly, there are reasons why that should improve going forward. I'll talk to that soon. So we've got a number of various channels of income nowadays. It's retail and it's wholesale. So I'll just go through that line by line. If we look at the first section, it's new bikes, new retail motorcycles that is. So up 8% in volume, but down 14% in gross profit this graph. So that obviously tells you that margins have contracted during the period. It's important that we keep that volume there to make sure that we get our volume bonuses from the manufacturers. So there's a lot of focus on maintaining the volume or reaching those targets, and that does affect your margin from time to time in a market where it's sales are declining, dealers get more competitive. So we've be to see more discounting. Our margins are down probably $200 to $300 a bike on new bikes, and that's representing that drop there. it hasn't continued to drop. It's maintained that level. So I don't think it's going to decrease further. But I think we're back to a new normal on our new bike margin. So that will be steady as you go. We'll try and grow the volume from there. With new vehicles wholesale, the graph here is comparing 2 months to 6 months. So it's obviously going to be much better than the last 6 months. But as you can see, it's a significant income producer for us. And particularly when you allow for the fact that the wholesale business is very light on overheads or operating expenses when compared to the retail business. So the gross profit there is going to result in a much better net profit as well. Used motorcycles, we're coming off the best half that we've ever had for used motorcycles last year. We've got a great result there. We're down 8% in volume, down a total of 16% in growth. So margins have come off slightly with used but not a huge amount more or closer to $100 a bike from $1,700 to $1,600. So not significant, but the volume has come off in that hurts. Now having said that, we have for the last 2 months, January and February, actually caught up and turned that around. So whilst we're falling short every month for the last half, we've now actually for the first time this financial year exceeded last year's sales with used bikes. It's been a focus for us, and we've been working hard at it, and we've got back to that point. We've maintained certainly better margins than before COVID. We're quite good margin there. So now we've got to build on that with some volume. And hopefully, that can help drive a better result in this half. So going in the right direction there for sure. Parts and accessories, again, that is retail, and it's in line with the other departments, but it's costly for the group. The challenges with accessories is very fierce competition in the marketplace, more so now than ever before. We see that the answer for us to maintain sales is to focus more on the online accessory sales they're at a fairly small percentage of the business, only 5% of our accessory sales are online. Having said that, it's up from 400 barrels in a year, 2 years ago to $1.1 million last year to $3.3 million this year. So we've got the system sorted now. And we've got a business model there that can get that grow. So we expect those online accessory sales to grow quite rapidly over the next few years. And hopefully, we'll stop some of this retail decline. At a wholesale level, surprisingly, only down 3% for the half. I thought it could have been worse than that, given the disruption that, that business has had, really, it's a testament to just how well the guys have done in that business in the last 6 months. It's been terribly disrupted from a different -- a couple of different areas, more the most significant being the introduction of a new warehouse management system introduction of a new operation system and a new business to business, all happened in October, and it locked the business around considerably disrupted. Now to make matters worse, we had a couple of opportunities come along at exactly the same time to buy other smaller wholesale businesses just for their stock value that gave us access to their brands or their products for Australia. So there's 2 of them. We bought both of them within a month or so right in the middle of this. We couldn't help that. It had to be done at the same time. But again, that further disrupted the Cassons business and pushed it well behind up to 3 weeks behind in deliveries, which is way too long, upset some customers and the debt ropes of some sales. The good news is we've finally completed that this month, we've embedded in all of that extra stock that had to come in. We've embedded in most of the IT program made massive fixware our business-to-business website. So the 90% of the hardware is done. And now we can from this point on get some of the benefits from it, one of them being much better efficiency in our warehouse. If we look at the last 6 months, we've had warehouse literally working 7 days a week that we've been paying overtime on Saturdays and Sundays to keep up, which is an expensive way to for people, of course. So we'll be able to start dropping that from here on, reducing our operating expense. The IT will bring in a lot more efficiency in the operations of the business as well, it reduces the number of things like mispicks having returns, things set out that are incorrect. That's critical in the success of the wholesale business not to have things returned destroys your profit essentially. So now all of our stock gets scanned in and scanned out, and that virtually eliminates any chance of sending their own stock. So there are efficiencies like that, that leads in the overtime that will make a considerable difference. And now we can focus more on the sales department of that business. We've left it alone because really we couldn't sell anymore. The warehouse was absolutely to capacity. So we are to make the situation worse. We held off and now our focus won't go back on to the sales, which we believe we can develop fairly easily and quickly. So there are lots of reasons why we should get a much better result out of the Cassons wholesale business, not just this half, but for the future. These are long-term measures that build a better business long term. So the next 3 to 5 years, you'd see some significant returns on that. If we look at services that is workshop services, selling our labor of our tech. Well, we've been able to do the increase the amount of work the retail labor dollars, but the cost of sales has grown considerably with our tech. Keeping staff has been really difficult in this part of the business. And the mining company, in particular, has targeted our tech and offering to pay a lot more money than we've had. So we've seen a significant increase in our cost of sales with workshop labor. So a decline of only 1% is pretty good. I think we're probably going to have to look at increasing our rates again just to make sure we're getting the best return possible. And finance and insurance income is the other channel. So fairly significant $7.9 million for the half. It's down slightly, a couple of hundred thousand dollars, and that will be that used bike volume down 8%. That's probably responsible for that. So really, the performance there is pretty consistent. So move on to the operational performance retail part of the business. I don't think there's any doubt that the Reserve Bank's intention is starting to head home. People are spending less rising interest rates and cost of living pressures have dampened discretionary spending, particularly from November on November, December, we noticed a significant reduction. It certainly wasn't the December that we were hoping for. moose sales for us for our group rose 8% across the group. But profit fell 14%, as I mentioned. Obviously, that's the margins. The market dropped 0.5% so we're getting the business to people choosing to deal with us. It's just that they're keeping this honest and choppiness and they can buy them cheaper elsewhere. So we've got no option but to meet the prices. used motorcycle sales fell 8% and gross profit fell 16%, as I mentioned previously. We've seen that turn just in the last 30, 60 days. So all year, I've been trying to catch up to last year is used by volume. I finally got there. And so I'm hoping that in this half, we can exceed last year's on a turnaround from that result. Retail accessories we talked about, the sales only fell 6%, but the gross profit fell 14%. A couple of different factors working there. It's not just margin contraction. It's only slight in this case. That, of course, we write down the stock as it ages, and we came into half with a high stock position. We can sell as much we 6% flow in sales. So that means some stock rate, so it gets written back aggressively. So there's quite a substantial robot there. So the stock is at , but that contributed to that 14% decline New motorcycle unit sales, there's a picture of the market. So you can see the market was down 51,100 to 50,900, whereas we put on about 600 units. So we're certainly outperforming the market there. I think we can always do a bit better. I think we've got some dealerships that are underperforming. So that's an area that we'll be focusing on in regard to the dealerships and performance levels. I think that there's more profit growth for us organically in the retail division, then there is some acquisitions. So our focus will not be looking for more acquisitions at this stage. There's too much lost opportunity in the group now that so the focus will be on training and putting systems in place with the existing retail network. There's still substantial organic growth line there, which we tend to pick up. If we look at the new items, we were up 8% yet. Used bike unit sales again down on last year, which was the best half that I think I've ever seen at 5,480 units. That's a very good result. We're not that far off it. And certainly, if we can turn things down for the second half, we might be able to close that up for the full year. That's still an important part of our business. Stock levels are back to normal. That took a little while to get there. We created a lot of stock last year. So a very close eye on the aging of that stock, and we'll just keep marketing strongly with used bikes. The Mojo Group is part of the business that imports motorcycles and distribute them across Australia and New Zealand. this year, we had a 6-month contribution compared to 2 months last year. There were 2 of the strongest months that our business has ever had than previous year. And this half has had 4 very strong months and 2 weaker months. And we look at that are still reasons why it was coming off a very high base. Interest rates affect farmers as well, of course, it affects their bottom line. But prior to -- they were talking very much about an El Nino effect from the weather. Farmers like rain. And at that stage, it was getting very good across Australia. And we think that, that played a role in some of that ag market sales coming off for a couple of months. Having said that, the business has bounced right back, and I expect a very strong finish to the year. June has a good result. [ July ] looks like an even better result. May, June are usually the best 2 months because that's to get the tax deduction but independent of that, today with some senior management from CFMOTO, our Chinese partners, and we ran to the new motorcycle models that we're releasing for the rest of the sheen beyond. And there's a fantastic product coming there, which really help our sales. I say yes because I'm not sure if the ag market is off for the rest of this half, we're confident there's some motorcycle models that will backfill any decline there. The some models at the right on point, and we've got strong forward orders of already. So last year, I think we had 40% growth in the motorcycle sales at Mojo, coming from a low base. And this year, we would expect at least 50% growth in motorcycle sales. So that's a strong growth area of that business is motorcycles, which is traditionally has been very strong in agricultural product. Third will continue. The motorcycle will help there. I think I mentioned in the introduction, this part of the business is where I see our growth over the next 5 to 10 years in particular. This the engineering of our growth. There's new product out there. The market is changing. There's certainly opportunities there that we're looking very closely at. We have picked up an electric motorcycle brand, which we started distribution of the next month. It's an off-road e-dirt bike. We've been retailing them for probably 18 months or so, a very popular product, very keen to get our hands on it. And we've just fill the national distribution for that brand for Australia. So we expect that to be pretty exciting over the next 12 months. So in different markets, it's electric, it's off-road. It can be registered on the road as well. It looks more like a mountain bike that's electric than a motorcycle, but it has really impressive specifications. So we expect that that's a high level of interest in that product, and we expect that to go really well for us in the first 12 months. And of course, we've spoken to other motorcycle manufacturers in China and the U.S. product is being offered to us now. We are certainly well on truly in that importing distribution business now. The opportunities are coming along, and we've been discerning. We're not just jumping on everything. We have knocked back a couple of brands that have showed interest in us just distributing the product because we didn't think they were right. We are talking to others. So there's certainly a scope there for us to do more in the future, particularly as electric bikes coming to the market more and more and more manufacturers coming to the market. So yes, so I think the motorcycle part of that business is where we'll see really substantial growth in the next 6 months, 12 months, 5 years. We will put more seat CFM product into our dealerships. I think we're just about to put a detour eighth dealership. So now that we're selling it across 8 stores, and that helps underpin it. The brand is getting more and more acceptance in the market all of the time. So I think the future looks really good for that part of our business. wholesale necessities. Well, I've spoken to that to a large degree about the changes of the [ headache ] volts in acquiring those other businesses and the IT very much behind us. It did affect our bottom line last year and it shouldn't do from here on. So we're looking for improvements there. Our finance joint venture is steady as she goes. The volumes have remained steady. The profit is challenged on the cost of funds. We've had our interest rates go up, of course, we haven't been able to pass them all on. So that has trimmed down our EBITDA to some degree. But importantly, the key measures are within budget losses in particular, have gone up a little bit over Christmas. We'll keep a close eye on it, but they're certainly well below our limits. So we would need interest rates to drop to see that business improve its profitability, I believe. So hopefully, that will not too far I'd like to talk about where I see us going in the future. And this is important. I look at what we've done over the last 6 months. And virtually everything that we're working on for the short to medium term and not the next 90 to has or 60 days. So I understand that nobody likes to see a short-term result that's not polite, but we're working on a 5-year plan or a 10-year plan. And the things that we are doing there are building, I think, a much better business. And I think you'll see significant growth over the next 5 years. We're Fords and Davies wholesale distribution in New Zealand is currently moving warehouse. That's almost complete. And then we'll have a base CFMOTO product over there as well. We'll have a management team and infrastructure. So we're putting all the bones in place or the infrastructure in place to allow for this growth. That business is out of space, if we fit accessories, it's grown rapidly over the 2 years that we've had it input any more stock into the building at all. So we needed bigger space, and it's just great that there's an efficiency with the consolidation with Mojo. So I mean, everything is set there to keep going well. Its profit is up for the year. So I think we've got good potential there. Motorcycles are exciting for us at a wholesale level in Australia. Retail, we've got organic growth there by fixing some of the underperformers. And by that, I mean, probably consolidation of some dealerships. I think time in is right now, and we need a bit of a decline in the market to be able to do this. I think I can push through some of the shutting of the site and taking that product and putting it elsewhere. Spreading it out into other dealerships, the way we came on to the gross profit of the business, but we'd lose the overhead of the business. There's a couple of opportunities there for us to do that. So I look to gain that as we speak. That should make quite a difference. New Harley-Davidson dealership in Sydney opens its doors a soft opening in March. So we should be in full swing by 1st of April. So we won't get any contribution this year. But next year, we should see something of the [ how ] dealerships by far, the most profitable dealerships. So this will be #8. So good for the future next year. We won't be looking for a lot more acquisitions than that at this stage. It would have to be a standout opportunity for me to do that. That's far more profit to be gained by focusing on existing sites. So that's what we're going to do. Our ongoing projects are focusing on the operating costs of the retail in particular, but also wholesale wages keep them tight. We have got the businesses fairly tried, but there's always a bit more there. We will look to consolidate some sites. I think that makes good sense. And I think we'll be able to do that now. We'll have a contribution from Harley-Davidson at additional site. Our online accessory side is growing very rapidly, up from 1.1 last year to 33% this year. That will continue to grow at that rate. We've had a lot to learn there about logistics and how to fulfill. We've learned a lot there, and we know exactly what we need to do to make that profitable in the future. So we'll keep tacking on that part of accessories. Wholesale accessories, I've talked about really what we're doing about the IT projects and the new products there and lease warehouse space in New Zealand. So there's lots of reasons there why that should be a better, more efficient business. I think the business is there. I think we can gain market share and really got a very good result given that our retail exceptions were down 6%, that should affect the wholesale business to about the same level, but they're only down 3%, which means the vested market, even though we've been slow to supply of stuff with us. So I think with the time is right there to really grow more market share and new motorcycles well. We've got [ Sion ], which is a new brand with New Zealand. We haven't really put a lot of effort into yet. We're waiting for the warehouse to be complete, and then we'll get more feet on the ground there. And we've got a very exciting range in inmate cycles coming. There's at least 5 models coming this year and 1 or 2 of them were spectacular for volume. So we expect a significant increase in wholesale of those cycles to June of another 50%. So I think we think whilst the result was not as exciting as we would have liked. We've got plenty play for the future. We think that the wholesale distribution, importing part of our business will drive the profit more so than the retail. We won't look for any more acquisitions in the short term. I think we've got too much work to do to get those dealerships performing to the level that we'd like them that. But we are making progress. We have turned around some dealerships there that needed some work. So lots there to work on what's there to deliver for the future. And so I'm happy to take any calls.

[Operator Instructions] Sarah Mann with Moelis Australia.

Just a question on, I guess, the comment about like market share gain and trying to square that with the like-for-like revenue going backwards. So I know you alluded to the fact that part of that was discounting but just wondering if there's any mix changes as well in terms of, I guess, the higher or lower margin on revenue brand, just given that the ASP per bike has also fallen away quite...

Yes. In December, we had a really tough month with Harley-Davidson. The volume dropped tremendously, and that cost us a lot of profit in December. So that really added to it. But other than that, it's been pretty steady as you go. I don't think there's been a significant shift in the mix of bikes rather than that particular month. It's generally, the margins overall have all come off across the board, hardly a very high margin, so they probably had a bit further to fall. So they have come off. And I think a fair bit of it would company margin. We have been able to maintain the volume bonus though that was actually up $300,000 for the half. So that doing an 8% increase there has been really good for hanging on to that. And it's worth about $3 million for the half. So it's significant. But I think it's overall the margin on the new but is off about $300 a bike across the board. And hardly would represent a big chunk of that.

Got you. And for Harley-Davidson was just the consumer bank type, it wasn't the supply issues or anything?

No, it wasn't a supply issue. They had those issues earlier in the year. But most we had the bikes, assembly was a really tough month for retail. I guess it wasn't just hard but that's where we noticed it the most. I think that's where the most profit was gross profit was missing. But we didn't sell accesses that we expected to. It really felt like the brake had been put on in December. And is normally a strong month, December for accessories and both sales and what have you. But this year is different accessory sales have been brought forward into Black Friday sales, I think, in November. So we had quite a reasonable modem for accessories, but surprisingly, they're tough in December. Okay in January, like sales, strong and genuinely new bike up used bikes up first time I've seen news by this year. So that's a good time. We've got the stock. We're focusing on it. That's for sure.

Got you. So just comment about new news by sales being up in Jan and set. But is this in line with -- and I know there's some seasonality, of course, but this is back in line with the July or October demand that you said was broadly in line with expectations? Or is it still lagging and it's just only marginally?

I think our new bike volume ingenuity is fine. That's good. Used bike is up a few percent. It's pretty close to where we'd like it to be. I would still like another 50-odd units there. But compared to last year, second half last year did come off. So those numbers are -- we're not cycling the same numbers that we were in the first half. The first half that the retail sales were quite strong last year, and the second half came off a bit. So we are cycling softer figures to be fair. But it's certainly going in the right direction, that's for sure. No mistake, it's still at a retail level, it's a really tough market. But wholesale, it seems to be very different. It seems to be quite more robust.

Got it. And GP is not going work?

No, it's a new bike increased slightly. In January, it increased slightly, down $200 million or $300 million. So the average being about 300. So the trend is leveled out now very much so. So we're not seeing it fall away any further than what it has on average. I think it's just inquiry is down at a retail level. We're doing a pretty good job with inquiry we've got. We've obviously improved our efficiency there because our inquiry is down considerably, but we sold more new bikes in the last half. So I think we're focusing on it, and we're getting quite a reasonable result there, pulling back wages quite a bit at the retail level. That's made it everybody on their toes. That's for sure. The operating expenses are a big problem for us with rents up so much work as comp up so much electricity and fuel, those things cost of doing business has risen dramatically. But so I can pull the levers on wages, which I have, but some things more difficult.

That makes sense. And demand for more sales across onset for Mojo. So I understand there was like some destocking at the dealer level across November.

Yes. Look, we've had a much better January, much better February again. So February would have thought would be a quieter time of the year for that product that bounced back up well, much better than November and December. I think we might panic a little bit in December. We had a couple of quiet months there of some exceptional months of the year before I might add. But really, that business is in good shape. It's already bounced back, and we've got yet to get the exciting motorcycle models which start arriving March, April, May. And then we have made June the strongest 2 months of the year normally for the agricultural product. So I really believe, Mojo, will just keep going from strength to strength. We keep selling more of that product at a retail level as well. We're certainly underpinning the result there. We sold 850 bikes last half. So over of the retail outlets, which goes straight to more than $1 million gross profit for Mojo so we don't run these businesses in isolation. Obviously, retail is there to support the wholesale and buyers that more motorcycles come in is really good for our retail outlets. We're not traditionally, you had like a retailer. That's very few country dealerships. The robot product that's coming is right up our alley. And we're just putting CFMOTO in on now, which will be our eighth site. So we'll be able to help in those motorcycle results going forward. But really, it's the whole market that I think will like these bikes. We've seen some strong orders on some new models coming.

Got you. And the last question is just around some of the work that you called out around fixing some of the underperforming dealerships in your network, 5 consolidation. Can you give us a bit of a feel for looking at your dealer network now, like what percent do you think are underperforming? And how many can you reasonably consolidate?

Yes. Okay. So we've got 2 that unhappy with the results about for the half, and they would combined would have lost $0.5 million, say. And one of those sites are going to close down. I've managed to talk the manufacturers into letting me keep the product at other sites. So there's 2 brands there. One will go to one side and the other way brand will go to another site in the area. So hopefully, that means we don't lease the sales. We won't lose the gross profit, but we can get out of the overhead. Now I only make that decision because it's only a 2-year-old greenfield site that one. I didn't believe we would be able to get it to breakeven in the next near future. So there's no point hanging on to it. Manufacturers are more willing to listen to this sort of thing a because they know it's a much tougher market. They're hearing the dealers try about it. So they, in this case, I had to get Honda, Volaris and CFMOTO, which is pretty straightforward. Everyone agreed to [ Cassons ] another brand that we've moved. It worked. So really good move. The other one is a dealership that we've expanded a lot in its sales are really pretty good, but our overheads are too high. We've made the site too big, and it's just got too much in over really for the gross profit. So I think we go back to where we were. We scale that one back. We lose some rent and we consolidate that business. I think we'll have a very good business there. And again, I'm looking for a $500,000 turnaround in that business. Beyond that, I've got another dealer that is underperforming in the last half, but has performed much better previously. I think it's just a management issue. I just think the is not focused enough or motivated. And that's training. So I've got someone that can go in there and train and motivate and get that one back on feel. And that's probably worth in a turnaround case. It's probably $300,000. There's another one like that. And that's probably about it. There's 4 there that are significant. I think as of 42-odd sites. Harley has been such a great performer for us for such a long period of time. And in November, December, it came off a bit bounced back in January. So I mean it's not a long-term trend, but just had 2 shockers. And Harley deals deliver a lot of profit on a monthly basis. They were down something like $700-odd for the month, but has bounced back in January back to normal. And across the board, November, December and January, we saw all motorcycle dealerships that we had a decline in profit other than some of the other ones that needed to be turned around, which were going really poorly in the past, which were going better. Some dealerships actually improved their performance for the half. But by and large, most of them suffered from a decline in inquiry and demand. And so it's hit a more -- But there's pretty 4 there that really hurt us too much in the middle of tackling that now.

All right, sir. I don't see any further questions in the queue. I will turn it back to David for final comments. Oh, I'm sorry, there's 2 that just popped up, sir. And we have a question from Declan Carroll with Wilsons.

So costs stayed flat like PCP. You talked about cleaning employee costs later. Could you just provide some little color on what you've done around that?

Those operating expenses, all those latches like [indiscernible] that's with additional businesses, it stayed flat from a like-for-like basis, it was about $2.5 million lower. So we have pulled the wages back quite a bit. But when you had in Mojo and a couple of those dealerships remained level at $35 million. Look, that's the big one. That's where the savings can be made. That's by far our biggest expense and very difficult to do much about the rents other than get out of the site, like I just mentioned, consolidation and subletting that one and moving on. There's 2 that I'd be looking to do that with. So to reduce the rent that way. But as far as trying to negotiate a lower rent, that's pretty tough at the moment. Rents are going up, commercial values have gone up and rents have gone up accordingly. So we're seeing some pretty hefty increases there over the last 12 months. So other than getting out of sites, there's not much there. And the rest is pretty fixed, to be honest. Advertising isn't up. We've got that tight wages down effectively. So there's bits and pieces, but it's wages is the big one. That's where we can really make a difference to the bottom line.

Yes. And just on working capital. So your inventories increased over the period and with the drop in your payables. What are you thinking about working capital going forward?

We certainly have enough for the time being. We don't have millions of dollars of our sleeve. I thought there's another $10 million in overdraft available to us if we needed it. I've got a bit of equity in the new bikes that I'm going to pull out. We were paying new bikes out last year at one stage when we had 2 lunch cash and didn't like paying their interest rate. We haven't turned all of those votes back into cash here. So we've got $7 million in new bike equity there and at least half of it could come out pretty quickly. So I'll do that used by stock levels at the highest they've been for 12 months. So I pulled them back during the course of the year. And I've let them run up again in chasing volume to used bikes and we're starting to get there, but there's probably 1 million in used bikes that needs to come out. Our inventory when sales drop, your inventory is older. So I think both retail, we've got some inventory that's starting to age. We need to -- it's costliness in write-down, so we need to shift that. And so we'll have launching a large used bike and accessory sale across the rig this peak. So we'll turn some of that into cash Cassons has got plenty of stock. Mojo's got plan stock. We want to carry plenty stock with Mojo for the rest of this half was it will be stronger, I believe. So we want to be ready for the demand in May, June. Cassons got some aging stock that I really want to turn into cash. That's more as a result of the bicycle industry are slowing up tremendously. [ Bansal ], as you know, had a boom during COVID. It's really crashed quite difficult, quite hard in the last 12 months. So we've got a bit too much inventory there. So we're very keen to offload that. So if anything, we'll probably see the inventory come down a little, I think, over the next 6 months.

It comes from the line of Jared Gelsomino with Morgans.

Just a couple. So just if I'm talking at the Mojo business now, I think you've said in comments, Dave, that there's going to be a struggle to replicate in the second half. But if I'm just looking at Mojo reference to the group, but more isolation, I mean, you started out a strong start of the year by the antenna that in Feb, new models coming in as well in the fourth quarter of the year season stronger as well. We're starting to get a little bit better or improving, at least and -- sorry, not realistically is that business, the Mojo business is not on track for growth in the second half of '20, I guess, second half.

Well, I think so. I think it will be a good half for Mojo. It'll be good to make myself clear before. I think we saw a hit at the end of December, but we bounced back from that quite considerably and the products coming, we're really underdoing the results. So it would have been a strong half last year for Mojo, I think, without a doubt, but we'd be looking to at least replicate that. I think January is off to a good start. February is off to a better start. So no, I think the main concern is the retail division, certainly not the wholesale division. It's retail with where the profit is missing.

And the margins in that margin as well as talking to outlook, in the wholesale new vehicle sales. So the GP sales and reasonably strong, not getting better half on I guess those margins.

Yes. So far, we have, yes. So far, it is getting more competitive in that space. We are seeing other manufacturers wanting that volume back that they've lost. So they're starting to throw money at it. But at this stage, we've held down and held our margin. So we're not seeing a big hit there. Look, overall, full wheelers are more profitable than motorcycles. They generate more dollars, profit more margin profit. So selling more motorcycles might reduce that percentage, but it puts money in the bank. So margins might drop a little bit over the next 3 or 4 months, but that's because of the increase in volume in those levels. But the full wheel part of it is still is good. We're not seeing margins come off there not yet.

Great. And maybe just broader one in terms of industry volumes. I think the last 10 years of those being probably relatively a story of 2 halves just in terms of road bikes. And clearly, there's a bit of a gap between volume fryers reasons over the last 5 years where we were between 2014 to '18. I guess just interested in whether are we knowing the trough of a subdued [ robust ] partially coming a corner or do you think there's maybe a structural element where we'd like to see longer road locales lower form?

To be honest, I really think it's just to do with the high interest rates and the cost of living pressures. I mean, there's a lot of cash that's come out of the economy there that motorcycle is a discretionary spend. So I don't think we're going to see that side of the business improved dramatically or motorcycle sales improves dramatically until interest rates come down. So if that's later this year, that will give people confidence and they'll start spending again. In the meantime, what we have to do is get the efficiency right and get our operations in Czech. We don't really need to sell any more than what we are. We just need to make sure that we've got those overheads balance for each particular business. And that's where we've got a bit of work to do. And that's where I see the organic growth coming from. So I mean, I said that the volumes are where they are now. I'm not expecting them to improve dramatically, maybe used bikes I'd like to see improved, but not new bikes. I think it's really just about management and setting up our businesses so that they can optimize the opportunity.

Thank you. And with that, I will conclude the Q&A session and turn it back to David for final comments.

Thank you very much. Thank you, everyone, for your interest in Motorcycle Holdings. I'm sure that the future is looking better than the last half. We have taken lots of steps to build a better long-term business. It's frustrating when you don't see those results straight away, but it's critical for the next 5 years.

And with that, we thank you all for joining, and you may now disconnect. Goodbye.