Peter Warren Automotive Holdings Limited (PWR.XA) Earnings Call Transcript & Summary

[Audio Gap] ...Annual General Meeting of Peter Warren Automotive Holdings. I am John Ingram, the Chair of the Board, and I'd like to thank you all for your attendance here today at our AGM in person. I would also like to welcome those listening to the audio webcast of this meeting. In the spirit of reconciliation, Peter Warren Automotive acknowledges the Gadigal people of the Eora Nation, the traditional custodians of this land, and I pay my respects to the elders, both past and present and extend that respect to all Aboriginals and Torres Strait Islanders people joining the meeting today. It is now 10:30, the nominated time of the meeting. I confirm there is a quorum present, and I am pleased to declare the meeting open. Joining me today at the AGM are our Nonexecutive Directors, John Eastham on the far right, Niran Peiris and Catherine West; and our Executive Director, Paul Warren. We also have with us today our CEO, Andrew Doyle; and our Company Secretary and CFO, Victor Cuthell. Julie Cleary from our auditor, KPMG, is also present and our auditors will be available to answer questions about the financial statements and to the conduct of that audit later in the meeting. The prepared addresses to the meeting from myself and the CEO have been released to the market. I will now make some brief comments about the company's performance before handing over to Andrew Doyle, CEO, who will comment on the fiscal '25 year and the '26 outlook. Shareholders will be given the opportunity to ask questions in relation to the company's business and management at the appropriate time. I will now turn to my review of fiscal '25. Fiscal year '25 year was a year of 2 distinct halves for the company. In the first half of the year, the industry saw declining new car margins and a reduction in profitability, with some brands being more heavily affected than others. The company responded with decisive action on inventory, costs, portfolio management and operational performance. Together with normal seasonal factors, these management initiatives lifted the an underlying profit before tax from $7.1 million in the first half of the year to $15.2 million in the second half. We continued our pursuit of inorganic growth by adding new brands to our existing sites and by integrating 3 acquisitions from fiscal '24. Our strong property-backed balance sheet positions us well to pursue the further M&A acquisition opportunities that deliver long-term value for the shareholders. Our results also reflected the Board's appointment of Andrew Doyle as Chief Executive Officer from the 1st of October 2024. Andrew quickly immersed himself in our business and his leadership and pursuit of several initiatives had significant impacts on our second half financial results. In a few moments, he will expand on the -- on his work in inventory, margins, costs, headcount and other customer-centric culture. His most impactful work has been driving a performance culture and managing the portfolio of brands where he has made significant changes and will continue to do so. On behalf of the Board, I thank Andrew for his contributions so far and look forward to continuing our work together as we extend our refreshed strategy -- execute our refreshed strategy. Our results could only be achieved with the support of our team of 2,100 people. We continue to foster an inclusive, high-performing culture grounded in clear objectives, full accountability, aligned incentives and strong leadership. Our heritage as a family-owned company business continues to provide a strong foundation, and we remain committed to the safety and well-being of all our people. I extend my sincere thanks to my fellow directors for their oversight contributions during the year. I also want to thank our Company Secretary and Chief Financial Officer, Victor Cuthell, for his financial leadership and industry expertise. He's advised us that he will retire in June 2026, but we are delighted that he will be act as an adviser to the company following his retirement. Finally, to our shareholders, thank you for your ongoing support and confidence in our business. Fiscal '25, we were pleased to declare -- in fiscal '25, we were pleased to declare a fully franked final dividend of $0.04 per share, reflecting the continued commitment to deliver returns. As fiscal '26 progresses and our results improve, we look forward to your continued involvement. I will now turn to Andrew to provide his view for fiscal '25 and the '26 outlook. Thank you, Andrew.

Thank you, John. I would like to add my warm welcome to this year's Annual General Meeting. At last year's meeting, I'd only been with the business for 3 weeks. And at that time, my priority was to meet the team. Within a short period, I traveled the country visiting dealerships and the various teams. And those early conversations confirmed that we have an exceptional group of loyal, capable and deeply committed professional people. And this has given me the confidence that we have the foundation to achieve extraordinary things together. With an entrepreneurial mindset, benchmarking and a culture built on integrity, humility and dynamism, we are united in our belief that our company will continue to grow and enjoy financial upside. Let me now recap the key financial highlights from financial year '25. Whilst industry new car volumes declined, we delivered total revenue just shy of $2.5 billion, ahead of 2024, and an underlying profit before tax of $22.3 million, which was in line with our guidance. Importantly, our management initiatives drove a significantly stronger second half. In fact, those initiatives, together with the normal H2 or half 2 seasonality meant that the underlying profit before tax more than doubled from H1 to H2. Now this performance was underpinned by 3 core drivers: disciplined inventory management, rigorous cost control and focused growth on our controllable revenue streams. In the second half, we reduced new vehicle inventory by over 8%, equating to more than a $30 million reduction. And that was a direct result of our disciplined approach towards stock intake and mix. Our cost-out programs also delivered tangible results with nearly $5 million in savings in half 2 compared to H1. We streamlined our headcount, operating effectively at levels 4% lower than the prior year. And at the same time, we accelerated growth in our higher-margin, more controllable revenue streams, for example, service, parts, finance, insurance and used vehicles. And in used vehicles, we're up 14% alone. These efforts resulted in us stabilizing margins that had been declining. We also reduced net debt by $14 million, bringing it down to $47 million, which is supported by a property portfolio valued at $229 million, a strategic asset that I'll return to shortly. We've introduced clear targets and incentive structures for key dealership management, fostering positive accountability, behaviors, performance and an overarching culture of excellence. In summary, the second half performance has built or did build strong momentum, and we're only just getting started. That's why we entered financial year '26 with confidence and a clear sense of purpose. Turning to our strategy, and our vision to be the most valued automotive group, exceeding the expectations of our customers, our employees, our brand partners and, of course, our investors. Our strategy is built around 4 key pillars: innovation, customer, organic growth and acquisition. These are underpinned by our core values of growth, integrity, focus and teamwork. Firstly, on innovation, we are trialing automation and AI tools in both service and sales operations. And early results are promising, and these innovations are streamlining operations and importantly, enabling our people to focus on high-value customer interactions to build conversion and further loyalty. Customer experience has long been central to our success and ultimately drives higher retention and higher revenues. I personally champion a customer-centric culture measured and rewarded in new cars, used cars, service parts, finance and aftermarket. And this same care extends to our people with clear metrics around staff engagement, safety, training and career development. Organic growth challenges us to be relentlessly focused on outstanding performance to grow our revenue. We've made progress in this area and have grown our revenue in used cars, up 14% as well as service, parts, finance and insurance. And all of these departments are growing further this year. On costs, we are continuing our work into financial year '26 with a particular focus on inventory management, headcount efficiency and property costs. We have carefully reconfigured our dealership portfolio to reflect the market dynamics and changing customer demand. Over the last 12 months alone, we added 11 new dealerships into sites that formerly occupied 6 brands. And this has led us launch new brands, including Geely, MG, GWM and Omoda Jaecoo with minimal CapEx and zero goodwill being paid. Our partnerships with emerging Chinese brands now represent around 20% of our brand mix and are performing strongly. At the same time, we maintain long-standing relationships with legacy OEMs such as Toyota, Mazda, Ford, Kia, Hyundai, Honda, Isuzu, Volkswagen, Land Rover, Audi and Mercedes-Benz. This reflects a really good balance between strong legacy brands and the new Challenger brands. Our balance sheet remains strong. With reduced net debt, as I mentioned, and a valuable property portfolio, we have flexibility to pursue strategic M&A opportunities. There is no doubt industry consolidation is accelerating, and we are actively and selectively assessing more acquisition opportunities. Operationally, our strategy is being executed in a disciplined manner. While new car competitiveness remains high, our teams are highly motivated, and they're working on driving healthy margins in service parts, finance, insurance, aftermarket and used vehicles. We are, therefore, confident in our outlook to deliver strong year-on-year earnings in growth driven by our higher-margin service lines and the strategic initiatives I referred to. So before I close, I want to sincerely thank our entire team for their dedication and their ongoing commitment to delivering outstanding customer service. And I also want to extend my gratitude to our business partners and investors for your continued support. I'd also like to acknowledge our CFO transition and thank Victor for his invaluable contribution. I'm also thrilled that Victor will act as an adviser, maintaining his connection with our company beyond 30th of June 2026. And the recruitment process is already well underway to ensure we have a very smooth transition and handover over the coming months. So in closing, our company is in a strong financial position, with a high-performance culture, significant property assets and low net debt. I am genuinely excited about the opportunities ahead for our business, for our people, our customers and our investors. Thank you. John, I'll hand back to you now.

Thank you, Andrew. On behalf of the Board, I'd like to thank you for your leadership of the business since your appointment as Chief Executive Officer. We will now move to the formal part of the meeting. The Notice of Meeting dated the 26th of September 2025 was circulated to members, and I will take the notice of meeting as read. Before moving to the various resolutions to be considered today, I'll now briefly outline the meeting and voting procedures for today. When you registered your attendance this morning, you would have been issued with an attendance card. Only those with a yellow card can vote at the meeting. All resolutions will be determined by poll, and I appoint [ Marion Perry ] of MUFG Corporate Markets to act as returning officer for the purpose of the vote today. I will put each resolution to the meeting in turn and shareholders and proxyholders will be given the opportunity to ask questions or make comments in relation to the resolution. After that, I will put each resolution to the poll. At the end of the resolutions, MUFG will collect the poll cards from you. As Chair of the meeting, I wish to advise I intend to vote all available proxies in favor of each resolution. I declare the voting open for all items of business. The first item of formal business is to receive and consider the financial statements and directors' report and the independent auditor's report for the year ending the 30th of June 2025. Copies of these were made available on the company website, the ASX platform, and they were sent to those shareholders who requested them. No vote is required on this item. However, we will be pleased to deal with any questions or comments you may have on these reports, whether for the Board or for our auditor. Are there any questions in respect to the financial statements, these reports or the conduct of the audit? If there is no further -- there's no questions, we will now move to the next item of business. Resolution 1 is for the reelection of Catherine West as a Director and is set out on the screen. Are there any questions any shareholder would like to ask? If no questions, we'll move on, and here are the proxies. Thank you. Please now complete your voting card. These will be collected at the conclusion of all the resolutions. We'll now move to Resolution 2, which is the nonbinding and advisory vote on the company's remuneration report for the year ending the 30th of June 2025 and is set out on the screen. Are there any questions? Here are the proxies. As there's no questions, please complete your voting card for this resolution. [Voting]

As that was the final resolution to be considered at the meeting, I would ask you to hand your voting cards into the MUFG representative now for collection. We will now move to the general questions. Shareholders have been given the opportunity to register questions in advance, and we have received no questions in this matter. Are there any questions from the room? As there's no questions from the room, we will move to bring the formal part of the meeting to an end. There's no questions, I declare the meeting closed. The results of the meeting to be announced -- will be announced on the ASX company's announcement platform and will be available on the company's website as soon as possible after the close of this meeting. We have the room available to us for a period of time. We invite shareholders to join us, the directors, for tea and coffee, which was now available at the front of the room. Thank you for participating in our meeting today, and we look forward to your continuing support in the coming year. Thank you.