MotorCycle Holdings Limited (MTO) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to MotorCycle Holdings FY '24 Results Briefing. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Managing Director and Chief Executive Officer, David Ahmet. Please go ahead.

Thanks very much, Maggie. Good morning, everybody. David Ahmet here. And I'd like to bring new MotorCycle Holdings financial results for the financial year '24. I don't think there's any doubt that '24 was a challenging year for our industry. It's very much a discretionary spend. And it was the year that we expected to have after COVID once things normalize from the COVID influence. And certainly, we expected to change, and it came along in '24. I'd like to move in now to our financial summary, give you some ideal, overall. Despite a lessening of demand and despite certainly quite a marketplace, our sales were still up 1% to $582 million. On a like-for-like basis, we were down 4%. And to be honest, I expected that to be more, that's a better performance than I thought. Gross profit was only down 2%. It's $149 million, so, all very stable. Underlying EBITDA was down 18% to $45 million. The profit after tax was down 39% to $14 million for the year. Net assets rose 1% to $200 million. The Board has declared a final dividend of $0.07 per share, fully franked, of course. And combined with the interim dividend of $0.03, we'll pay a total dividend for 2024 of $0.10 per share. Financial year '24 saw a full-year contribution from the Mojo acquisition. That certainly has helped us to maintain the revenues for this year. The previous year, it was 8 months' worth of Mojo compared to 12 obviously '24. We've been able to grow during the year despite the difficult conditions. And I think that demonstrates that the industry leadership and the strength of MTO's business model. We believe the business model is still correct. It's still the right one. There's certainly plenty of challenges and plenty of work to do. These challenging economic conditions are expected to continue into '23. Our indication is that the Federation Chamber of automotive industries indicates that it's very widespread in the motorcycle market. That's across states. So, we've performed ever the total market without doubt, but it is down. Our like-for-like operating expenses were up 3%, and I think that was a fairly good result given the huge demand that we've had to pay increases in particular, rents have all gone up. And basically, every expense the business has increased during the course of the year, and we've opened young new dealerships. But to keep it at 3%, I'm not disappointed with that. Wasn't easy though. Operation summary. During the year, we made a one-off investment in a new warehouse management system forecasted our wholesale accessory business. Basically, even though the times were demanding, we have to think about the future. And so, this is a big investment in the future. It's a new operating system, a new business-to-business system and a new house [ WAN ] management system, all designed to improve efficiency, to get a better return to allow more volumes in the future. So, we bit the bullet and we took our medicine last year in that business. And so far, the signs are having completed that are looking really positive. So, I think it's given us the platform to continue the growth of that business. Even though things were tight, we opened 2 new dealerships. During the course of the year, we had the opportunity to acquire our Harley-Davidson dealership in Sydney in the heart of Sydney. And that's not an opportunity that I'll be prepared to miss those business is usually very good. So, we secured that business and opened the doors in March, so, just a few months ago. So, early days, but really good asset long term. Harley dealerships are our best performance all the time. So, good to put my foot on one of them. Also, in order to help promote the CFMOTO brand, which is our [indiscernible] new bike brand, we opened a new flagship store in Springwood and Brisbane to help promote and showcase the brand. So, again, investing in the future, investing in other aspects of the business through our retail business. Also, one of the highlights of the year, I think is, we've finally got our accessory online sales happening. We've had a massive increase in online sales during the year. We've got expert advice, and it's working for us, and we expect that to keep growing quite rapidly something like 200% growth for the year, which is coming from, I guess, a relatively low base, but becoming meaningful to the business now. Let's see. We had overheads with the name of the game to the half. The expenses were really difficult. We kept them to a minimum. Our wages, we've kept tight. They we're stable or lower. But we had things like bank interest well up. We've had for planned interest much higher, insurance, every expense you can imagine, has had a significant increase. And for us to keep the increase to such a low figure, 3%, I think is doing quite well. So, we're lean. We've got the business leaning for 2025. So, we tackle this year with having removed any excess. So, hopefully, that will help underpin a better result for this year. So, let's talk about our profit result. As I mentioned, the total sales remain quite stable for the year. We had a full 12-month contribution from Mojo compared to 8 months. Our gross profit also remained very stable with a small decrease of just 3% to $433 million and an operating gross profit figure margin of 25.6% as compared to the previous year of 26.3%. Net profit, as I mentioned, was down 39% to $14 million. I believe our performance was resilient, acknowledging that profit numbers are lower than 2023. It's a clear indication of a difficult economic environment in which we are operating in, and it reflects the broader economic uncertainties, both within Australia and [indiscernible]. But certainly, we're seeing similar declines in the MotorCycle market in Europe and U.S. On a like-for-like basis, which tells you how we're going with the existing business. Now, like-for-like if you take out the Mojo importing business, we've taken out TeamMoto Townsville, which is a new acquisition, CFMOTO Springwood and, of course, the Morgan & Wacker Harley-Davidson in Sydney. So, if we take the [indiscernible] announced to come back to a gross operating profit down 7% to $120 million, operating margin of 26%. Underlying profit EBITDA was 0.7% compared to 9.5%. Again, these numbers reiterate the stability of the declines that have flow as a result of the operating environment with an increased cost of doing business. We expect the full benefits of this cost management to flow further into 2025. If I reflect on 2024 for a second, our profit was a taxable every avenue. #1 sales were down. People were buying the product as much as they were with previous years. That increased competition [indiscernible]has got more desperate, they started discounting more to keep the machine going. So, our margins got squeezed. And, of course, we had a tremendous increase in operating expenses. So, the bottom line was attacked on 3 angles, and we had to approach all 3 angles to try and get the business going in the right direction, which I think we have. Balance sheet-wise, our balance sheet is very stable. Total assets sit at $394 million; Liability is $194 million. I think they were up 1% so $200 million balance sheet up 1%. Market value-wise, our basic earnings per share for 2024 was $19.2. We've paid a dividend of $0.15 over the past 12 months, giving a yield of 15%, and price to earnings ratio of 5.2% at June 30. They're pretty interesting numbers, I think. Revenue growth. Our revenue has increased at a compound annual rate of 12% over 5 years, just looking at the past and trying to get a bigger picture of the business. Over a 5-year period, the compound growth is 12%. The trajectory has always been the same, probably been some for 30 years. Every year, the revenue just keeps going up and the business gets bigger and stronger. EBITDA decreased to $44.8 million from $55.3 million. If you're looking at the graph there underlying EBITDA, again, we've got 4 years there. And if you look at that, you think well, previous years were stronger. But, of course, there was some assistance from job keeper in '22 and '21. And if you take those figures out, '24 would be in front of those years. So, we're still performing quite strongly. The business is still changing a lot and selling as much as it was before, that we've not more. Net profit wise, again, '21 and '22 influenced by that Job Keeper figure, which was $6 million of systems in those 2 years. So, whilst we're disappointed with '24, we believe the business is better than that but certainly, haven't fallen off a clear or break disaster. We've handled the change this year, the change in the marketplace and now we're looking for how to grow from here. And we believe that's a very positive things to come. This is an interesting money a diversified-earnings. So, that's a net profit, $14.9 million, very disappointing. Diversified earnings, profit by department, these are the silos of where the money comes from essentially. And they're actually, all very quiet different business within a business. New vehicles are very different to use, for example. But if we look at new vehicles to retail to begin with, our volume was actually up for the year. But you can see that our gross profit was down by 11%, that's a direct symptom of this increased competition and lowering demand. So, it's harder to sell it fuel people buying them. So, we give them more inducements to purchase. So, that's a direct response to competing in a very competitive marketplace. New vehicles wholesale. Now, this is a really good figure, 23%. That's really exciting, particularly when you think about what we sell in Nemak wholesale is mainly agricultural product spending the 4-wheelers from the farms. And that particular segment of the industry had a very tough 23years down somewhere between 10% and 15%. However, our gross profit is up 23%. So, our sales were down as well with the agricultural product. But what this reflects the introduction of motorcycles to CFMOTO. And some of you might remember, we be talking about some new models coming with CFMOTO well, 1 or 2 of them have arrived and have a tremendous impact on the business. It's listed in our volumes; it's listed in our gross profit. So, of course, there's the 8 months and the 12-month comparison as well. But besides that, CFMOTO has now launched itself into motorcycles. And that's very exciting. They're good buyers and they're virtually #1 in Australia for the latest model. So, very exciting to see such a good product. Used vehicles 1% down for the year is pretty good given the demand is so soft. We felt a lot of working to use over the course of the year, but our margins did hold up quite well. So, that's not a bad result at all. And certainly, the second half, we're performing better than the first half, certainly in the last quarter quite well. So, big numbers, probably the best numbers for the year were done in major. So, if we look at parts accessories, now it's down 7%, and I think for a different reason. In the retail world, we've got more competition than what we had before. So, that 7% decline. Although disappointing, the business is out there. It's just that we've got some serious competitors there that we've got to share the business with. So, I think given the circumstances, that's quite a good performance. So, that's a matter of us rolling up our sleeves and competing harder and doing a better job in the future. But not too bad. Parts accessories wholesale down 7% also coincidence, they're not related. Really, there are 2 different issues there. The wholesale business had major disruption during the course of the year. And we instigated those changes. We bought 2 small wholesale businesses where we had to go and pick up their stock and locate it into our warehouse. And, of course, we did the complete business investment here, a major investment in software with the warehouse management and operating system, a full stock take of $30 million worth of stock. A lot of disruption to that business during the course of the year. And if I look at the months where the profit was lower compared to average, that's exactly when we impacted it with this new innovation that we put in. However, it's complete and the business is clean and sharp and we are working much more efficiently than it was. And I certainly expect that figure to change for this year, and it has already. We've seen some really positive shoots since we completed that project. We've got some additional products there from these other smaller businesses we bought. So, there's a more range of better range of product, and we've picked up a good helmet brand out of Europe, which is substantial. So, we don't expect to see that 7% decline again. If the market were to remain similar in 2025, we would see a much better result, I believe. Service and repair are always consistent, down a little bit by 2%. And I think that we got caught out there. We've had wage increases there, substantially wage technical tests getting higher pay. Mining industry is trying to poach them from us. So, we had to pay our tax more money. And we want quick enough to pass on that retail hourly rate. So, we've done that now, of course, and that figure would look very difficult. If you looked at the last quarter, I believe we're up and not down. But fully 7% down on gross profit, and that certainly the wage increase had the biggest impact. It's down 2%. It's not as its 2%, not 7%, but very stable always is we booked up the workshop full booked 52 weeks of the year. So, it was just the margin at the issue. Finance and Insurance Commission, I'm a bit disappointed with a 2% decline. And so, I think we will come into a particularly high base, we need to do better. That's a performance within our business issue there. We're selling the motorcycles. There were 25,000 opportunities last year as we sold bikes. So, our penetration is stable, but we need it to creep up. We need to get that higher. It's usually in the early to mid-20s I'm disappointed there. I think there is more profit in finance and insurance. We have to perform better. So, there's more focus on that for this year. So, if I look at our operational performance now and we look at new motorcycles. That's the industry to the left. And you can see that the industries had a fairly 2 years ago. In the last 12 months, it's gone down a little further. So, they're not particularly exciting numbers. I have seen these not as much higher in the past. But to be honest, I thought the decrease was going to be more than 3%, but the last quarter kind of stage of the industry that picked up. So, it was down up to 10% early in the year. Having said that, we increased our volume by 5.4% for the year. So, again, we keep outperforming the market. We've grown our market share now to I think it's 15.5% of the national market. So, each year, we seem to keep increasing our market share. And that's because we're chasing that volume. It might be harder. We're working harder. We would not cost us bitten margin, but we want to kick that volume happening because there are so many benefits from selling a new motorcycle. So, it's the engine room or for the retail business really. So, it's important to keep those things turning even if you have to sacrifice some margin or invest further into marketing. But I believe that's the right direction. And so, there's quite a difference between 5.5% up and 3% down. So, we're doing a better job, I think, than the others. And everyone will be suffering from the margin compression. Used life cycle units, again, if we look at right up there with the very best of our years, under 10,000 units, we've had once sold more than that which was 2 years ago when used white everything is in huge demand. So, I think that's a good figure. I think and particularly in the second half, you can see it's well up over the second half last year. So, that's a great sign. So, use bots going the right way, margin compression has been only moderate what we've used by so it's certainly better than they were pre-COVID not as good as they were in the middle of COVID, but somewhere between the 2. So, quite a reasonable margin, and we've got the volume happening. I'll talk a bit further about the retail business. Our retail dealership showed solid sales performance despite weaker consumer discretionary spending. As I've mentioned, new unit sales were up by 5%, total retail sales up 4% combined. Retail parts accessory sales declined 6%, which was offset in part by growth in online parts and accessories, which is obviously increasing that online business. During the franking year, we opened 2 new retail dealerships, so we're continuing to increase the size of our footprint. The 12-month performance of the flagship incorporated CFMOTO store exceeded expectations and see by CEO and Morgan & Wacker Harley-Davidson, was acquired in January opened to stores and in March. Demand weakened from November '23 as a result of the impacts of the increased interest rates, inflation and cost of living. But did start to see a recovery by about April, May. So, the last quarter of the year, we had a change in the trend rather than a trend of business going south. It's ended north. So, really encouraging. Have we hit the bottom? I hope so. It might be a bit early to call that given that there's still challenges to come. But certainly, we saw a change in our business and turnover from about May. Mojo Group has integrated effectively into our business to deliver a successful outcome in its first full year. Great business. It's every bit as good as we'd ever hoped. And we're able to help promote that wholesale business in those brands through our retail network, opening the new shop. What we do a lot of marketing for it at a retail level, which helps at a wholesale level as well. But a great product there. We've looked at a couple of products, but the anchor is CFMOTO, really important brand during the course of the year. I've been to China and visited the factory and the management there. And is the most motorcycle factory I see. These people are very serious about taking on the motorcycle market and burgeoning all over the world. Their sales are increasing U.S. tremendously Europe everywhere. So, we really have made the right decision by getting involved with Mojo to begin with and CFMOTO particularly. It's the move. You get on the block, but very serious players, very good to work with. We've got a tremendous relationship with them, thanks to Michael, who's known for so long, but they love us, and we've got them and they give us long-term agreements. So, we know that we can be part of their future, and they just keep coming up with new models. It's an exciting brand. We've had some models that have variant last few months that have sold exceptionally well. So, new agricultural products, just about to be released. We've got huge forward orders for sale, exciting times for Mojo motorcycles. We also added another electric motorcycle brand called Surron, which is a cross between a motorcycle and a bicycle like mountain bike, but it's electric and you can ride them on the road and [indiscernible]. It's an exciting kind of bike that people like and we're retailing them as well as wholesaling them. We wholesale across Australia. So, that's just an additional profit center for Mojo. And, of course, the CFMOTO has been a more electric bikes in the future, too. So, we're kind of pinned to the future with CFMOTO. The product is price competitive. It's manufactured in Japan. That's already in China, of course. And they pack them with each with tech. They're the most Tech-Savvy products on the market. Things that you only get the expensive European motorcycle at the entry-level in the CFMOTO. So, they appeal to the consumer, particularly the young consumer. They have all the gadgets to bolt-ons that you've been hopeful at a better price. I think they've shown a really serious warning to the Japanese market, in particular. This brand is here to stay in there to take market share. Unfortunately, we'll be part of it. Accessories wholesale, I touched on that a little bit earlier, but it did have a major disruption during the course of the year, the ERP, B2B and the warehouse management system, a whole rearrangement of the warehouse had to happen. So, we should start take and then a strategic positioning of all your products. And that was part of the warehouse management, is to modernize that business, we solely needed it. So, it was a lot of work, and it slows down in cost of sales. It cost us profit. It was frustrating to a lot of our customers, but it's complete. And now, we hope to exceed everybody's expectations. And fortunately, we've been able to win some new brands to which all underpin the future. So, I believe Cassons has a good future in wholesale and certainly our Mojo Motorcycles as well. Finance JV. It's really only a small component of our business really. It's not a massive contributor to profit, but it was down during the course of the year, mainly because of our cost of funds increased. So, to buy the money from the various institutions costs obviously, more as if rates went up, our costs were not. And we weren't able to pass that all on to our consumer at the end. So, our retail park rates are still quite high. We did pass on some of it, but I think we had something like a 4% increase across the year in cost of funds as in percentage point increase, and we couldn't increase our retail. So, that's squeezed it. But there's other aspects to look at there are certainly areas and delinquent accounts, but we found that a bad accounts improved over the course of the year. So, that's tight, it's higher than perhaps we would like it to be, but it's okay. The bad debts are really not too bad. It's really the cost of funds that's in that business, but not a significant amount of our profit in any case. So, if I just have a cut on the outlook now. Looking ahead, we anticipate the cost-of-living pressures to remain. That's going to continue for a bit longer, obviously. But now we've stabilized our cost of doing business. We've got our overheads down, which was not easy. It's difficult and painful to reduce expenses if you turnover is still the same. So, we're still doing the same amount of work, if not more, but we're trying to do it with some less capital. Organic growth is expected in our business. There are opportunities within the retail network to increase profit. There are some dealerships there that have underperformed that should have performed better, given the current environment. Some businesses went really well during this period, too, I should add. We've got some real deal sets that increased the profit for the year. So, it's a mixed bag really. And the improvement in our business there comes from within regardless of the economy and the discretionary we spend, the improvements that we could make. The increase organically will come from us, and that will be a better bet per management essentially in the dealerships. We've got some that is just underperforming. There's been a real challenge to maintain quality staff in the last couple of years. I think every business in Australia has suffered from that. And we're no different to them. Certainly, it's been a big part of our business of recruiting, trying to get the right person in the right job. And in some cases, it's cost us. But we've got some success stories there. I can think of a few dealerships that were really a problem for us a year ago, and we're scratching heads as to how affect them. We were able to put change to the management, a different person in the same business model, same script, but a different person, and we were able to get much better results. So, we know that we're on the right track. We know that training our people is what we need to do. It's difficult to bring them in. You can't just lash them and bring them in. We have to create these people, and it takes time. And we keep adding retail businesses in the midst of 4 to 5, I think or something like that. So, we've always got demand for good poly site managers. So, we've got to just keep investing and training and couch the ones that stand out. And that's what we're doing. It takes time, but it does work in the long run without a doubt. So really, I think retail has really got room for improvement with the market conditions remaining the same. We're starting to make better progress into New Zealand. We're very much at our infancy levels with New Zealand with the Mojo product. We've got the accessory business over there on forms, which has had steady growth over the last 2 years since we've owned it even though New Zealand is doing it quite tough. Mojo didn't have an office or a warehouse or workshop support in New Zealand. It does now. We combine those 2 businesses into a new warehouse that covers all of the accessory products and all of the new byproduct we've put on every manager over there. So, we're giving the Mojo every opportunity now to become a more legitimate brand in New Zealand, and I'm sure that will pay dividends. And, of course, there are efficiencies running the spare parts accessories for Mojo, for major CFMOTO brands out of our warehouse and our accessories warehouse. So, there's efficiency there. We've got the additional space that we need now to increase our brand and we've got a lot more brand present. So, certainly expect growth in the young Mojo product in New Zealand, and we're already getting that out of the accessories business Forbes and Davies. There are other products out there in the motorcycle market that would have been offered already as in wholesale distribution. It's what certainly one thing that's become apparent since we've acquired the Mojo business and started talking to different people across the world, our large retail footprint and our capability in wholesale accessories and now motorcycles have made us a unique uniform basically in the motorcycle industry. Not many companies worldwide can do what we do. And certainly, nobody else in Australia doesn't. So, we've got a competitive advantage against other people wanting to import and wholesale because we've got a guaranteed retail footprint that nobody else can offer. And it's a large footprint to spread across the trade and it keeps getting bigger every year in the last 35 years. So, people overseas are noticing our company more that when they think about bringing new products into Australia, we're on their list on everybody's shopping with the bit accessories or new bikes. But Michael and myself have had conversations with a number of wholesale manufacturers looking for distributors in Australia. And we are getting opportunities. We're picking the right ones. We don't want ones that will distract us or not deliver. So, certainly, the Surron brand that I mentioned earlier, that there is a great product, and they're selling well. So, we expect the CFMOTO business to continue to grow as they bring in more and better models, more motorcycles. So, we still got the offer ad products are going really well. Our market share is still very high. Now, we've got additional products to sell with Mojo. So, the growth is almost underpinned in the wholesale business, and that's without adding any other brands. So, as that time goes on them, we'll sell more and more motorcycle. Our motorcycle sales last year were up tremendously, and we expect another year of strong increase. So, it's a more diversified business model there now. Okay. I think that's pretty much it. That's our future. I think we've got to run these dealerships slightly better, and we'll get a better return. There's pent-up profit in retail. There's a potential profit there in Cassons without having the distractions. And Mojo has got tremendous product to sell going forward. So, we can see how we're going to grow the business in '25. I certainly expect it to be a better year than '24. If the market would stay about the same time, we will definitely be a better bottom line than what we've seen. I'd be nice to reduce some of that debt. Our intention is to reduce corporate debt. We're paying a dividend in September, but we've decided to also retire corporate debt, so over 6 to 12 months, which we've got capital to do. So, we're in a good position where the cash is fine, cash position is fine. So, we will put cash now into reducing corporate debt going forward. So, yes, we'll have reduced some of the next 6 months. Okay. Thanks very much. I think that's all I've got to say. Any questions from anybody?

[Operator Instructions] Hi David, I see we have the questions coming up now. Our first question comes from Lachlan Scott from Moses Australia.

Just on the accessories wholesale segment. Could you quantify the structuring cause from implementing the ERP system in the year, such as if there are any sort of one-off costs? And then also for your expectations for growth and margin improvements from here in that segment?

Sure. So, our increase in software costs for the year for the total business was $1.2 million, but that's the whole business. A lot of it belongs to Cassons, or Cassons could file the exact figure that more than half of that. So, we've had a big investment in software management costs there. With additional products will help castings, which we only acquired towards the end of the financial year. And that other brands, better brand of tires, over additional brand of tires, oils, various products there, which all will just give us incremental increases over the course of the year. And it took some time to bring that stock into the warehouse. We have to find locations for it. So, we really didn't get much benefit from that product during the course of the year. So, this year, now that's all in the warehouse and we've been located, we can start promoting those brands. So, we expect to increase in turnover from increased brands. And, of course, I think I mentioned the helmet brand that we secured when I was in Italy last year. We approached the company that we wanted to distribute their lands. And we found a way to convince them to do business with us. And that will be a substantial product and millions of dollars. I'm talking of increase in turnover. So, we've got more products but we've got efficiency more to the point. And how this is going to improve. And then part of this is that margin that you mentioned as well. The last 12 months is very much been an internal focus on the issues that we had in the warehouse issues that we had with stock control, moving meeting these new systems in, and a lot of IT, a lot of disruption. There were lots of periods there where we weren't dispatching and we've got quite behind our orders in that during the course of the year. At some point, we were 2 and 3 weeks behind dispatching words because we still have plenty of sales, still have people wanting to buy our product, but we couldn't dispatch it fast enough. So, you just say hire more warehouse staff, it's just not that simple. We did hire as many as we could, but they still have to be trained. They still have the loan now to do it. So, we have a whole bunch of efficiency problems in 2024 and probably '23 as well. But adding this new product, having a warehouse super busy, they're making too many areas because their operating system is to close and let them make errors. So, we had internal problems there, which I believe we've fixed. So, they increase their improvement in the warehouse now has happened. So, we can patent our focus now to sales. And we haven't focused on sales, particularly at Cassons in the last year or so. We were flat-out dealing with the volume that we had, which means now we can turn our attention away from the logistics of the business, which is important. But now, we could turn it into the sales department, and that's our focus now for 2025 is what do we have to do to do more business with our existing customers and what do we have to do to increase the sales to them. And the answer to that to me is there's a lot we can do. I come from a sales background. And I believe that there's a lot of room for improvement with Cassons with sales focus because that's what we do essentially got 20-odd reps out there every day selling to these dealers. And there's lots that can be done with better management of those reps, better incentivizing those reps, better marketing to the consumer. We've got the product they want. We know the products are good. We've got to come up with the offers and make it attractive to them. So, I think that will be a fundamental change for Cassons this year, and that's where we will focus more on retaining that gross margin. I mean, we're obviously trying to buy the prices as cheap as we can all of the time. So, I'm not sure we can do anything differently there. But we can sell more, we can definitely sell more. And the bigger our volume, the more rebate we could get for the manufacturer. But certainly, we need, I think, more margins in product when we sell it to the wholesaler. So, we've got a plan for that. That's how I think we're going to achieve it.

And any changes to the competitive landscape for Cassons as well? Obviously, GPC rolling out new retail stores.

Yes. That competition is at a retail level, not a wholesale one. So, wholesale existed for 30, 40 years under different names. So, they've always been halted. There's no change to that. Look, where the change is, is in the retail footprint in Australia. The GCase come along and open over 30 outlets now, which they didn't exist 4, 5 years ago. And these 3 updates you can bet that every single one is next door to a [indiscernible] shop. I mean we're not in this target. We were doing the majority of the business. We were the leader. So, if you're going to get into that business, we would be where you go. So, they come and open up right next to a big shop. They are big volume ones in Sydney and Melbourne, they're right next door to us. It's quite okay, we're not afraid of the competitions. Our sales aren't down by that much, only down 7%, I think it was. So, given that they're coming in and running store, that's pretty serious by competition when your competitors next door with a big shop, we're signing new products. So, we've responded and we've got to be more competitive. We've got to be able to compete with these guys. And that is part of the margin. We give our own shops an extra discount so that we can be cheaper with product than everybody else at a retail level. So, maybe I shouldn't have said that, but anyway. So, yes, it's a retail, but not a wholesale problem for us.

And just shifting to Mojo. Obviously, Mojo has a large exposure to the agricultural sector. Any expectations you can share around the demand outlook from those customers going forward? Any feedback from the rating --?

That one surprised me. This time last year, all have seen the prices of Mojo because it's agricultural product and it's not motorcycle. It's not discretionary spend. So, we expect it to fare better in the future. Well, it hasn't. I got it wrong here. The aver-cultural ATV market is down more than any motorcycle segment. And the end, Mojo's around a couple of percent and the ad price was down at least 10% and 11%. So, it actually suffered the biggest decline. So, that was a bit confronting. But, however, I guess, farms are people, too, and they borrow money and their interest rates have gone up, and they've got cost of living and farm expenses. So, I guess at the end of the day, it's no different, really. They're balancing their income and overheads like everybody else. But in another reason, I think, for that reason, that, that part of the market to be subdued is, it hasn't had some in burn. If we look at 2, 3, 4 years ago, that part of the market exploded and did exceptionally well, and the growth was considerable. And that's not different to how it's been in previous years. If I look at that market, particularly, it's cyclical. It goes through this kind of ups and downs and boom and bust type sales results over the long term. The one that for sure is it always remains and over the long time, it grows, it's got steady growth if you take a 5-year period. But if you look at any 1 year, you'll see spectacular growth or decline. So, I think we've onboarded a lot of these products 2, 3 years ago in the farms did stock up. They were actually stockpiling in some cases because the 4-wheeler, the ATV has been coming off the market and Elon's bringing a minute except us. So, fans have been worrying. So, they started stockpiling that product. I think they're still working their way through. Fortunately, funds are really hard on vehicles, and they tend to wear amount in 3 years and buy a new one. So, I think as those excess purchasing fades off, we'll see that market come back so long as it's ranging reasonably buoyant funding conditions. So, luckily, CFMOTO came to the rescue with tremendous robots. The brought us 2 models. One of them has just sold exceptionally well far beyond right expectation. I knew it would be good. I flagged it in the past. I said we've got some new motorcycle malls coming, which we've not really had with CFMOTO. It's all been about the 4-wheeler market in the past. Most cycles run an adjunct. Well, that's changed, and having one thing and seeing what they're doing, I understand they're bringing out a full range of motorcycles now full range robots and they're high tech and they're competitive, and they're cheaper and they've got features. And you just can't ignore what they're doing. And the quality now is really impressive. I would pick the [indiscernible] Chinese factory now is equal to Japanese quality what we've seen there. New Japanese quality is good. And now I can't pick the difference to be right on these bikes the whole year. So, using the not failing, they're proving to be reliable. We've got a Chinese brand stigma, to tackle, to overcome, but the product will overcome. It is good enough to overcome it. And that's exciting, too. So, yes, the motorcycle partners where we're going to see tremendous growth, I think, it's in the part of the future. I know further models coming, which we don't have yet, which will be next year. And I'll just keep adding to it. So, even though the 18-market math come off motorcycles is absolutely charging it.

And just finally for me on CFMOTO. So, what kind of levels, stock levels are your CFMOTO dealers holding? And sort of how does that compare to stock levels across the industry and your competitors?

Well, in the past, if we took a recent past, profit was hard to get. So, they would stockpile but they were very aggressive in their ordering. If they needed 1 or 2 of a particular model might have bought 5 to 6 because they know they're going to sell them quickly. So, the market slowed down. So, they're willing to reduce their inventory as you'd expect. But on the floor, they have, they've used they should carry as much of our brand as any other. But that's about the quality of the dealership and how well capitalized they are. We've made some recent appointments in the dealer and to new dealers that are what I would consider to be A-class dealerships. In other words, they're as good as anybody else, well-positioned marketing well and good profile. In the past, Mojo has had to take whatever it could when it comes to dealerships, so being great dealers that that's changed us becoming a dealer the success they're having in the marketplace has changed. And now, we've got dealers that's wanting that product. And so, now we can impose high standards, better dealers that can afford to stop the product. So, they're not overstocked by a mile. They've got the right amount of stock. I don't think there's any stock problems at all in that Mojo are well from dealers. We're not like we have with some of the other brands. At a retail level, we've had some stock issues for sure, with stocks being forced down the art by the manufacturer that we've dealt with that. If we look at our overall inventory of our business, it's exactly the same as it was 6 months ago. It's like a year ago, we have $155 million inventory. We went down $200,000 for the year in our inventory. So, it's stable. We're finding that our stock business is where we need it to be, both wholesale and retail accessories and motorcycles. So, I think we've got it right. And the fact that it's not increasing is always a good thing because we've had lots of pressure to buy. That's for sure. So, we've managed that, I think quite well.

Next, we have Jared Gelsomino from Morgans.

Just a couple of questions from me. Just interested on the planned reduction in the cost base in '25, I think I saw in the accounts, just mentioned further expense reduction '25. So, I just wanted to know, it's great cost outcome this year, but I wanted to understand what you target in terms of that cost base for the year ahead?

Yes. There's not much we haven't targeted to be honest. But there's a couple of areas that will reduce our overheads further. And that is, we've got 3 sites were on reducing the rental footprint. So, one in Brisbane, one in Melbourne and 1 in Canberra, where we literally had too much floor space. We increased those businesses, although we're bigger during the COVID boom. And I think we're probably a little too optimistic there. We thought that we could maintain exceptionally high sales figures, but we haven't. And so, we can reduce a dealership in Melbourne, lose that renders that $500,000 a year or thereabouts, Canberra, about the same. We can operate on a small space there. The thing is with the digital floor space, you'll use it if you have it, but you can usually get away with less if you have to. And that's what we're doing. So, there're those 2 and that 6 months ago a flat that we closed one of our retail spaces in Brisbane, and we've moved that product into other dealerships. So, there're 3 up there. Now, we've got to re-rent themselves of an out of those sites, but we've got to release them. So, there will be a bit of cost associated with that. So, I won't say that we're going to say all of that. But also, by condensing these dealerships or consolidating them, you make the business more efficient. When you've got big spread out there, flowrate space, you have to have more staff to cater for it because they're going to be somewhere near the customer. So, the consolidation actually makes the business more efficient. So, we lose a couple of wages in a couple of them. But look really other than a more efficient business and less rent, I think that's pretty much it. I think we've done everything we can on a [indiscernible] basis. There's always more you can do. But I don't expect anything significant in cost reduction other than those 2 areas there. So, most of its [indiscernible].

Just so I'm clear, are you talking sort of to stabilize the cost base for that? Or do you expect you can [indiscernible]

No, I think if we stabilize it, it would be good. There's so much pressure on wages, so much pressure on overheads going up with significant increases in insurance and workers compensation and things like that. You can't do anything about. You've got that increase; you can't manage your way less other than having fuel staff in some case. But we did have a big investment in IT last year as well, which we won't have this year. And by that, I mean the increased software cost by 1.2%, just softwood, so, we're always upgrading the computer fleet, but we will invest less in IT this year. And we will invest less in rent in some ranges. But if we can maintain it, I think we've done well, I still expect a slight increase. We won't be reducing by 5% or 10% or anything like that. I think that's impossible.

And maybe just, I'm trying to understand a little bit of the moving parts in Mojo, particularly that fourth quarter. I understand there was a new model in there, potentially a big sort of a few preorder bikes that would have come into that quarter. I just wanted to sort of understand how significant the fourth quarter was to Mojo in the context of the half. And I guess, how do we look at that quarter in terms of seasonality?

It was certainly benefited by the release of 450, this model, which is, like you said, it's so exceptionally well. That's going to continue to sale for that for the rest of the year, but calendar year, I think it will be strong for 12 months. But there are other models coming. But, yes, it did help, but the ag market was off. So how significant Mojo probably had its best month in the last quarter, but then so did retail. Yes, it was a man above average, but not like millions of dollars or anything like that, but it performed well all year really, but they're certainly better in that last quarter. The last quarter was a stronger quarter. And that gives us a good sign to see that wholesale and retail is seeing signs of an increase in business in that last quarter, and that's continued on into July and I think August as well. So, that we had a very good July. I think it's Mojo's best month ever since we've owned for unit sales. I never sold so many units as it did in July. June, the market fall was the second-best month. So, that's an indicator and that's driven by motorcycle. But essential thing in retail as well. In Cassons and Cassons sales best sales month in July, and we sold our -- I think July was our best month for retail sales of new and used bikes for over 12 months. So, there's some really strong indicators there that the last quarter and now the beginning of FY '25 is signed positive signs.

And maybe just in terms of that performance through July, August, I think it was sort of similar commentary this time last year about exiting the second half well and then starting the first half strongly. I understand a lot of the weakness this year came in the back half of calendar year '23. But I guess, just how do we look at the start of this July, August versus the PCP?

Yes. Well, I think that yes, last July was pretty good as well. So, it could be that time of year, I suppose I might know that, I don't think July was a strong July last year, but it was close. It was certainly one of our best months across over the last 12 months. I'm not quite sure of your question there, what exactly are you willing to know?

I'm just trying to understand if you could maybe give a color on like a percent basis on what it was up versus July, August last year.

I don't know off the top of my head. I think I have to just pull that figure again; I said I don't have it in front of me, I'm sorry. But I think July last year was good. I think it was a very strong month, and it was a very strong month this year, too.

Maybe just one final one on the planned debt reduction as well. You obviously called that out. I'm just trying to understand, just thinking in terms of reducing that debt out of existing cash flow or whether you look potentially other sort of capital management and dividend --

Well, if you look at the last financial year and particularly in the last 6 or 8 months, we had the $10 million payout to Mojo to complete that sale. And we paid a dividend in some dividend, and we're paying another dividend now. And plenty of hedge space their cash-wise. So, we think we'll pay some debt down that makes sense for us to start reducing that corporate debt. We thought of people paying no dividend, but we thought we've got the money there. It belongs to the shareholders; they should get something. So, happily paid another dividend. But we will start paying them. We haven't got an exact figure that in 6 months ago, $5 million, take another $5 million 12 months, maybe $10 million. That we might as well start knocking it off, I think. And, no, we've done lots of investing. It's not stopping a lot by another dealership or investing in new systems and software, big investment in software for the year and modernizing Cassons. So, we keep investing in the business as well. But we'd like to see the corporate level less, and it doesn't keep me awake at night, but we've got the cash there. We should pump it into that debt, I think.

Next, we have Declan Carroll from Wilsons.

David, would you just talk about some color on D&A going forward for FY '25 and FY '26, if possible, please?

In what regard?

Where do you see that sort of trending directionally going forward? Because I noticed, yes, if we just sort of look it's been sort of double digits, do you expect that to continue?

Can you explain to me what you mean what D&A?

Depreciation and amortization.

Of course, sorry, it's going to be the same. I think it's tiny continue exactly as it has. It is a high cost to the business without a doubt. But there's no change to that. I don't think it's very similar last year to the year before. And I think we budgeted this year to be very similar again, maybe a slight reduction. But we're not investing in a lot of capital. We did 2 dealership renovations last year, both hardly dealerships did cost us a bit with that. So, we've kept investing in sites, which is a requirement really. But there's no big demand for capital equipment, but the amortization, I think, will stay the same figure. The depreciation will be very similar. It won't change much from year-to-year.

I see no further questions at this time. I will now pass back to David.

Okay. Thanks very much, Maggie. Thank you very much for your interest in MotorCycle Holdings. If you're a shareholder, I appreciate your patience, and we will certainly do better in financial year '25. Okay. Thanks, everybody. Goodbye.

This concludes today's conference call. Thank you all for participating. You may now disconnect.