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

Thank you for standing by, and welcome to the Peter Warren Automotive Holdings Full Year 2023 Results. [Operator Instructions] I would now like to turn the conference over to Mr. Mark Weaver, CEO. Please go ahead.

Thank you, Scott, and good morning, everyone, and thank you for joining us to discuss Peter Warren Automotive Holdings' financial results for the year ended 30 June 2023. My name, as Scott said, is Mark Weaver, your Chief Executive Officer. And joining me today is our Chief Financial Officer, Victor Cuthell, who will assist me in presenting our results. Good morning, Victor. This presentation, along with the financial statements have been lodged with the ASX for your information and can be found on our website at www.pwah.com.au. On Slide 2 of today's pack, you will find our agenda. I will shortly provide you with an overview of our FY '23 results with a brief snapshot of our expectations of the period ahead, together with some key initiatives we have undertaken during this year. Victor will then provide further detail on our profit and loss performance, our cash flow and our capital management position. We will then close with a look forward on our progress against our longer-term strategy and a more detailed look at our outlook for FY '24. We will be delighted to take any questions you may have at the conclusion of our presentation today. Let's move then to the FY '23 results highlights. On Slide 4, presented is a summary overview of our FY '23 financial highlights, and I'll best describe this period as one, which demonstrates the diversity of our revenue streams delivering a solid result. Our total revenue came in at $2.07 billion for the year. This number equates to a 21% growth on the prior period. Remembering this incorporates the added performance of the Penfold acquisition, which was acquired in the comparative period. There are many initiatives [ along ] this number, and I will elaborate on these in a few slides. Underlying EBITDA grew by over $10 million or 8%, representing a solid outcome in the period in which we saw a modest contraction in gross margin and the largely absorbed impact of cost inflation during the year. Moving on to the top row, our profit before tax or PBT, was marginally ahead of our expectations for the period at $81.9 million. This was down around 7% on the prior year comparative, as we, like many of our peers, we're faced with rising interest costs, but we are pleased with this overall outcome. On the top right, you can see our statutory net profit after tax remained consistent with the results from the prior year. This equates to a statutory earnings per share of [ $0.328 ], and I'm delighted to share that our Boards have approved the payment of [ $0.11 ] per share fully franked dividend for the period. This brings our FY '23 total dividend for the year to $0.22. This is consistent with the prior period and is testament to our focus on delivering strong returns for our shareholders. Victor will cover the details of that dividend later in our presentation. Finally, on this page, we remain focused on our ability to deliver on our consolidated objectives with the capacity to act. Here you can see our net debt to property value, a key measure of our ability to acquire businesses at 4% is in a strong position, and our net debt to EBITDA is a positive signal of a strong capital management strategy. We will hear more on that from Victor later also. I'll turn now to Slide 5, which lays out the work we have been doing to execute on our strategic objectives during the year and a summary FY '24 outlook. Starting at the left with our FY '23 highlights, the first 2 best sum up our performance. Overall, we are pleased with this annual result. Whilst we are certainly not immune to the impact of inflation, we are focused on a proactive and disciplined approach to cost management and recovery and have driven revenue growth across our business with success. Our order bank continues to be a strength, and we saw this grow year-on-year. We anticipate a steady unwind to its natural position over the coming months, as supply improves further, but we expect this order bank to remain strong in FY '24 with secured gross margins. We have executed on a number of strategic initiatives in FY '23, which are aligned to our 3 primary growth pillars and consider ourselves well positioned for further consolidation, noting the successful completion of the Toyota and Volkswagen dealerships just after year-end following a lot of preparatory work during the year. Moving then to the right with our FY '24 outlook. We anticipate revenue growth in FY '24 underpinned by our strong order book. We've experienced improvement in vehicle supply in some OEM brands, however, consistency in supply remains a challenge. Our supply improves, there is a potential for limited margin contraction in new vehicles. We consider our diversity of brands, though, and importantly, our mix of revenue streams will continue to support our growth. We are focused on strong inventory and cost management to somewhat offset cost inflation. FY '24 result would, of course, benefit from a full year contribution of the recently completed dealership acquisitions, and our net debt to property value indicates considerable debt capacity and places us in a strong financial position to continue to act as a consolidator. We will revisit these points again in more detail later in the presentation. Let's move now to a deeper dive into the results with the FY '23 results overview. Moving to Slide 7, I'd like to provide some context on the shift in the underlying profit before tax outcomes for FY '23 in the form of a profit bridge. Moving from left to right, the first point of interest is the contribution of the Penfold acquisition for the full year. Remember, we acquired this business on the 1st of December 2021, and so this first bar represents the additional contribution of that business, which continues to perform ahead of our expectations. Moving right, our existing operations experienced strong revenue growth, which largely absorbed the cost increases experienced in the year, with the overall position contracting marginally. This includes the impact of transitioning to agency models, which have not delivered the outcomes expected despite the floorplan release expected in these arrangements. We have restructured these businesses throughout this period and expect this to be one-off in nature. The 2 bars to the right reflect the changing interest rate environment. The first represents a combination of increased floorplan rates and rising inventories, as supply has improved. The second reflects the full year addition of the capital loan secured against our property portfolio, which was used to partly fund the Penfold acquisition, as well as the impact of rising rates. We were disciplined and proactive in our cost management during the year and focused on cost recovery measures. We also [ startled ] off a strong FY '22 period, and while the overall result was down, as I said before, it was ahead of our expectations. Let's turn to Slide 8 to take a look at the market conditions. The left-hand side chart implies a steady growth in vehicle supply through the period in the form of VFacts volumes, which represent national deliveries, noting this data is not orders taken. By brand, the position varies with patchy arrivals of stock heavily impacted by poor congestion. Consistency of the challenge in product mix leads to holding inventory for some models alongside scarcity of availability for others. Overall, though, our value of volumes grew 18% in new cars with a notable spike in May and June. I note the July position returned to the trend line. On the right-hand side, you can clearly see the gap that has been generated by supply issues from the average experienced in the market pre-COVID. This pent-up demand is partly recorded in our order book, but also represents vehicle demand not yet on order. This number ignores the compound growth the industry has experienced naturally over the last 2 decades. We share this with you, as a visual demonstration of not only the opportunity in new cars, but the flow-on effect of availability of used cars and upside in parts and service departments, as the greater car parc ages. Turning to Page 9, you can see demand continues to exceed supply with our order book remaining at record levels. On the left-hand side, our order book is strong, still consistent with the prior period despite the 18% growth in deliveries and despite the spike in activity in June of 2023. We expect a steady unwind to a normalized position, as volatility in supply continues. We also draw investors' attention to the advantages achieved in our recent acquisition, adding approximately 40% growth in orders. On the right-hand side, you can see how the order bank has grown with orders outpacing deliveries in each period since COVID began. June 2023 saw that pattern reverse for the first time, and we had the order back -- order book contract marginally. I would point out though that this was short-lived, as July saw the gap reopened, and our order book grew again, noting the post year-end acquisition is not included in this chart. Turning back to Slide -- turning to Slide 10 and back to the numbers. Slide 10 offers a deeper analysis into the performance of our business in the year. As you can see from the table on the top left, our revenues grew by 21.1% overall. For ease of reference, we have shown this position without the full year impact achieved from Penfold. The variance excluding Penfolds indicate double-digit growth in the key parts of our business, and importantly, reflects the growth we have driven in higher-margin areas, such as parts up [ 22.9% ] and service up 23.4%. No, I'm going to correct those numbers, part was up 21.9%, and service up 13.5% [ forgive me ]. This growth has come back -- come on the back of investments in our processes and technologies to ensure we can maximize our throughput on a per order basis, as well as efficiencies achieved, as we scale our operations. Going forward, we see a number of opportunities arising from key revenue streams that are not impacted in the same way is the new vehicle supply chain. In used cars, for example, we have restructured the profile of our inventory, established better process for pricing strategies and improving our pipeline, which will allow for growth going forward. This has impacted our gross margin in the current period, and Victor will talk to that shortly. But we consider this a one-off activity and expect gross margin in used cars to recover to normal levels in FY '24. We also continue to develop our digital offering, which I'll touch on later, with an example here being our strategic investment partnership with Taurus, our proprietary financier, who cover our online application process. This has grown through FY '23 and builds on our digital capability, [ out of dealership ] allowing our assets to work for us, while the physical sites are closed. Turning to Slide 11, I wanted to touch on some of our ESG initiatives. We have made good progress in FY '23 across our responsible business pillars, having completed our first carbon footprint review in the year. We have coupled this work with a series of energy audits and shown development plans to incorporate energy conservation measures that have begun to roll out in FY '23 and are set to continue in FY '24. From a people perspective, our GIFT principles continue to drive our team and consumer engagement standards. Our culture is strong, and our midyear engagement survey of our 2,000-plus people reinforce that position with both strong participation and above-average results. We continue to focus on our safety culture and demonstrating a pathway of continuous improvement. As some of you would be aware, we had a major safety incident in Queensland in the first half of the year, which resulted in serious injuries for some of our team, and regrettably, one of our team members lost their lives. We remain committed to provide safe facilities for our teams and customers, and our sympathies and continued support for those impacted by this tragic incident. Lastly, on this page, a focus on addressing the future workforce needs of our business has been driven by embracing useful employment opportunities, as we continue to develop our apprenticeship and traineeship programs through strategic partnerships. For the third consecutive year, we've been nominated in the New South Wales Training Awards for a Large Employer of the Year to be determined later in 2023. And most reasonably is our nomination to the National Innovation Award for Training. We take the future workforce needs of our business very seriously, and we are delighted to be recognized by the Australian government for the work we are undertaking. Good luck to our teams for these finals towards the end of 2023. I'd like to take a moment to discuss the transition to new energy vehicles. In the last 6 months, sales of battery electric and plug-in hybrid electric vehicles have increased to 8%. We consider the EV market is poised to go through a considerable change, as the next wave of NEV models hits the market. Our focus is on supporting our OEM partners, as these models are supplied. And as indicated in the chart at the bottom right, we have a vast range of new energy vehicles in our current model lineup with a 90% increase expected in the coming period. This will see our offering extend to over [ 19 ] models, and I'd like to emphasize the diversity across the segments with strong representation in each of the volume, prestige and luxury markets. Peter Warren is well positioned here for the second wave, and we expect the early market leaders will be naturally diluted, as the supply lag improves across a wider group of OEMs. We continue our work on extending our EV capability at our locations with charging networks established across our sites and opportunities arising from complementary consumer products and adoption of new revenue streams through strategic partnerships linked to this growth. Before I hand to Victor, I want to briefly touch on work undertaken this year to clearly map both our digital and bricks and mortar customer journeys. Our goal is to provide a consistent customer experience through all of our sales channels, in person, online, self-serve, call center and chat capabilities, all driven by our desire to provide customer choice. We have developed our offering with investment in technology to enhance our current revenues and provide our customers with 24/7 access to our products and services. This provides us with cost efficiencies going forward and greater centralization, another important feature of scale, as we continue to consolidate this fragmented industry. Okay. That's it for me for now. I will hand over to Victor, [ who ] can talk us through in some more detail our FY '23 financial summary. Thanks, Victor.

Thanks, Mark. Turning first to Page 15. You can see that we've achieved growth in all of our metrics during the year. Our revenue is up $362 million to $2,073 million, and it would have been up further if our Mercedes-Benz deliveries added to revenue recognition. Following the introduction of the Mercedes agency model on 1 January 2022, we now record the commission earned on these vehicle sales, and we no longer record the price of the vehicle in revenue. Our figures also include the benefit of our Penfolds acquisition on 1 December 2021, and the step-up from including a full year of Penfolds revenue was approximately $150 million. We benefited from increasing supply of new vehicles by OEMs, but stable supply of the light vehicles will take quite some time to achieve. Even with the recent increase in supply, our order bank has remained very strong, and this puts us in a great position for the year ahead. The third chart shows statutory EBITDA growing by 13.9%, which includes firstly our acquisition; and secondly, it reflects revenue growth in each of our 6 departments. We have to control our costs and margins very carefully to achieve the flow-through to EBITDA. Our PBT was $81.1 million, which was the same, as last year on a statutory basis and down on an underlying basis. Turning to Page 16, we have our P&L. All of these figures in the table are statutory figures other than the acquisition costs and the [ plus ] costs. Our revenue growth of 21.1% reflects growth in every department, plus our Penfold acquisition. Outside of growth in vehicle sales, we benefited from more kilometers being driven by Australians and more servicing and parts as a result. The gross profit percentage reduced from 20.0% to 18.9%, and I'll dissect that on my next slide. The combination of revenue growth, GP percentage movements and the acquisition delivered us $50 million extra in gross profit. Our operating expenses also increased due to the acquisition, and that represented $16.9 million of the $39.6 million increase in OpEx. I'll talk about our cost control in a moment, as this has been a big focus for us. We have a significant part of our cost base that is fixed rather than variable. By leveraging and tightly controlling our costs, we've seen the volume growth [ flow down ] through the P&L and generate an 8% increase in EBITDA. We are not immune to rising interest rates, however, and this has been the largest factor causing our interest expense to increase by $12.3 million. We continue to focus on our interest expense and on our inventory levels. Looking forward to FY '24, we would expect the revenue growth to continue, not just in new cars, but in service and parts and in other areas. We expect that interest costs may increase, but we don't believe that the rate of increase in FY '24 will be as high as that seen over the last year. Moving on to Slide 17, this slide shows our movement in gross margin percentage. Our overall margin for the year was 18.9%, which compares with 20.0% in FY '22 and 18.6% in FY '21. I will take a few moments to dissect the factors shown on the bridge below. Firstly, the accounting for the agency model actually caused our margin to increase by 0.9% from last year to this year, that's because we no longer count the price of the car, as our revenue, and said, we only count our commission, which was formerly gross profit. Next, the agency model involves the OEM giving us a lower GP percentage, as they take on some of the costs themselves. For example, interest on floorplan, marketing and other items. The reduction from that was 0.7 projected points. Our used car margins were lower, and this contributed minus 0.5%. As Mark mentioned earlier, we identified a change in the used car market during the year, and we responded by reviewing our profile of inventory carried. Our used car inventory is [ $10 ] million lower at 30th of June versus the prior year, and this means, we are well positioned for FY '24. The revenue mix contribution of minus 0.2% reflects that we sold more new and used cars during the year, as a proportion of the total agency adjusted revenue. These vehicle revenues are lower margin than service and parts. We obviously earned more dollars, but we diluted the GP percentage. We received less Apprentice Booster government grant income, and this accounted for minus 0.3%, as the program winds down. However, we have benefited from the growth in service personnel, as a result, and we did see a revenue growth in service by 13.6%. This program has been a success for us as, again, we've got more dollars even though the GP percentage reduced. So in some respects, these GP percentage changes reflect that we are comparing to a COVID impacted trading period in FY '22. In other respects, you can see that we earned more GP dollars from our volumes, even though the GP percentage itself went down. This all appears in the P&L, where our GP dollars increased considerably on an ex-acquisition basis. Our OpEx expenses, for the next part of our P&L story, so I'll turn to Page 18. This shows our operating expenses, where there has been a lot of activity during the year. We have encountered same inflationary pressures, as any other retailer. So we have also had the complications of the Penfolds acquisition, which added $16.9 million and extra staffing to service the volume increases, which added $5.4 million. Outside of those factors, we have been tackling cost inflation with a cost control program, which incorporates these wage and salary increases below inflation, cost recovery initiatives in service and parts, procurement reviews and other initiatives. The bridge shows the various steps in our operating expenses over the year. At the end of the year, we were very pleased to achieve a good level of P&L leverage with a 0.8% drop in OpEx, as a percentage of sales after adjusting the revenue for the agency effect. Going into FY '24, we are continuing our cost control program. We expect a more modest level of cost increases in FY '24 and continued growth in our revenues. Turning to Page 19. This shows our operating cash flow conversion for the year, which was very high at 88%. This was consistent with last year's 91% and reflects that we have a strong cash-generating business. Our cash flows also reflect a disciplined approach to CapEx. On the back of our cash flows, I'm pleased that our directors have declared a fully franked final dividend of $0.11 per share. This brings the full year dividend to $0.22 per share, which is in line with last year. This represents a full year payout ratio of 67% of net profit after tax. Payment for this will be the 3rd of October 2023. On Slide 20, we'll turn to that slide, and you can see our cash and debt position. Our floorplan financing grew by $97 million, as OEM supply improves and inventory moved up from a very low base. Our property value grew by $25 million. Our net debt fell to only $8 million, although, we added $45 million to that after the event when we completed our acquisition of the Toyota and VW dealerships. As you can see, at the end of the period, we had very modest leverage. And after that acquisition, we still have a lot of debt capacity to fund future acquisition opportunities. I'll now hand back to Mark to discuss our acquisition strategy, our wider strategy and the outlook for our business.

Thanks, Victor. Now let's move on now, as Victor said to our strategy and outlook segment of our presentation. On Slide 22, you will recall our long-term strategic focus remains anchored to our 3 primary pillars, which prioritize organic growth, evaluation of suitable acquisition opportunities and leveraging our property portfolio. Our Group is well positioned with diversity and scale to keep growing in this market, and our network of infrastructure puts us in a strong position. Through the localized delivery of our suite of offerings and leveraging our GIFT values of growth, integrity, focus and teamwork, we will continue to deliver our workplace culture and core values. On Slide 23, we highlight the journey we have been on since listing through those 3 primary pillars. The top bar shows the growth path that we have undertaken in recent years, having added $700 million in revenue in just 3 years, increasing our activities by over 50%. We continue to demonstrate our ability to deliver sustainable growth through a combination of organic and inorganic means. Our acquisition activity has increased our number of franchises to over 80. And in the most recent year, we have seen the addition of Isuzu UTE at our Penfold operations in Burwood, Hyundai, as we pushed the market share north of the Gold Coast towards Brisbane, and of course, the more recent acquisitions of Toyota and Volkswagen settled in the days just after year-end. As we turn to Slide 24, as a stated consolidator, there is a large cohort of dealers with smaller rooftop holdings that naturally become likely targets for growth. With under 25% of dealer rooftops owned by the top 11 groups, clearly, our position is strong, and the addressable market is substantial. While we remain active in assessing new opportunities, we are disciplined to focus our attention on the right assets is a clear strategy and has worked for us and one that we will utilize again, as we go forward. We have repeated the revenue growth story in the bottom right, this time emphasizing the 14.7% compound annual growth we have experienced in recent years. Acquisitions are a key element of that growth, as we look forward. And as I said before, Peter Warren is well placed with the features listed on the left-hand side. Supported by a substantial property portfolio, we consider our business is well placed and poised for this growth. On to our outlook then on Slide 25. Starting in the left-hand box, our market through the period has continued to see new vehicle demand exceeding supply. With the Group order book remaining at record levels, we have experienced some improvements in supply, but the latest challenges of shipping delays and biosecurity hurdles means this remains inconsistent and patchy across the various brands we represent. Product mix remains an issue and getting the right cars into Australia to meet those demands will be an ongoing challenge in the short term. The macroeconomic environment and consumer sentiment are evolving, and while FY '24 will be affected by the elevated interest rates and increased inventory levels experienced in FY '23, we continue to adapt our business accordingly. From a trading outlook perspective in the middle bar, we are focused on disciplined inventory and cost management and on driving growth across our diversified revenue from service, parts, finance, and used cars to somewhat offset cost increases. We anticipate improving supply and continued volume growth in FY '24, underpinned by our strong order book. This comes with the potential of limited margin contraction in new vehicles, as we have commented on previously. Of course, our FY '24 result will benefit from the recently acquired Toyota and Volkswagen operations at [ Warwick Farm ] and Bathurst. And moving to the far right, with our strategic priorities now well established, we will continue to execute those plans with a focus on diversity of revenue streams, technology-based solutions, consumer-focused initiatives and cost recovery measures. Our Group is well placed to take advantage of this market and continue to act as the consolidator, and we have the capital management capability to execute when required. Okay. That concludes our presentation for today. As a reminder, there is more material in the appendices to this presentation deck, including our balance sheet, a number of P&L reconciliations and a summary of our franchises by location for your reference. I would like to take this opportunity to thank our team for their resilience and determination to deliver this outcome. Congratulations all. I consider this period to be one of success, and I'll offer much gratitude to our continuing business partners for their support during the period. And finally, today to our investors, thank you for your continued support throughout this period and ongoing, we very much appreciate your time today. Victor and I would be delighted now to take any questions you may have. And Scott, I will pass back to you.

[Operator Instructions] Our first question comes from [indiscernible].

The first one is just on the gross margin, and the -- also bridge that you included in your slide deck. In terms of just the timing [ impact of ] some of those factors and going into '24, how should we think about gross margins going into '24, and how some of those blocks in your bridge might impact the margin?

Thank you, Elizabeth. I'll just talk about that slide and that bridge. So maybe we could put the bridge on the screen, and maybe, if that's okay. So looking at that particular page, Page 17, the block #1, which is agency accounting will not be a factor in FY '24. We have a consistent method of -- we have a consistent business model in place now that the agency introduction ruled out of the comparative period. Block 2 will -- there will be no further reduction in FY '24. I expect in relation to Item 2 because, again, the agency -- the pre-agency situation will disappear from a comparative period. Item 3 is the reduction in used car margins. And the largest -- almost all of that relates to the reset of our used car inventory, and so, we would expect our used car margins to probably improve a little bit during FY '24. Our revenue mix could be a factor in FY '24, depending on the volume of vehicles that we sell. But as you can see, it's a smaller part of the bridge. Apprentice booster, there could be a very small reduction in FY '24 compared to FY '23, but that, again, would be significantly lower than the 0.3 percentage points there. Does that answer your question, Elizabeth?

Yes. That was absolutely very clear. And then just also on the cost control that you guys achieved through FY '23, again, as some of those initiatives that you sort of implemented through '23 sort of partway through and therefore, you might still get some benefit from a cost side going into '24?

Yes. I would say yes to that. And of course, we continue to manage our costs very carefully. So -- so true in both regards.

Our next question comes from Phil Chippindale from Ord Minnett.

Appreciate your time. Just first question. Victor, you mentioned this used car inventory was reset during the year, this might be a really basic question, but can you just expand on that? What are you referring to here?

Yes.

Mark, do you want to take that?

Yes. I might jump in there. Phil, good morning. So there was a fair focus around the sort of term of the half year. We were looking forward at that time and seeing what we consider to be a possible correction in used car prices occurring in the first few months of the second half. We got largely ahead of that curve and started looking at our inventory profile and determining that we simply have to meet market on some of these vehicles to not get exposed. On top of that, we had quite a strategic initiative running through most of the year to actually revisit our used car growth potential, and that included things like looking at the full process of where we were sourcing cars from the centralization of things [ like ] reconditioning, our pricing strategy, where we would and would not utilize our own website and third-party lead providers. So we have had quite a focus on restructuring our used car department for retail growth. In FY '23, I'd probably describe that as a focus on the pipeline, and that included us addressing the profile of our inventory, which Victor's referred to. As we go forward, our focus is very much on growing that retail number, and we believe, we're in a very strong position, as we turn into 1st July 2024 with a much corrected [ energy ] profile and much better processes in place to take us forward to the next period.

Okay. I'm Just turning to sort of cost pressures and your efforts to the cost control. On Slide 18, you've outlined that $4.4 million increase in wage rates over the course of the last 12 months, which is, it's a little over 2% of the base. Obviously, at a headline number, that's a very controlled figure. Have you got a sense of what sort of cost inflation you're expecting on a similar basis going forward? Will it be in that sort of 2% to 3% range?

I'll certainly -- I'm certainly not able to quote the number, and I'm not being smart there. But that number, you're probably referring to is our wage cost in our P&L. That, of course, includes a fairly significant proportion related to commissions. So of our fixed retainers, yes, we are -- we have the lion's share of our workforce [ that are pegged ] to awards, and those awards have moved again in this period. That adjustment has been made on the 1st July. There will be no further adjustment through the rest of this period. But it's at a similar [indiscernible] that it was last year. And I'm sure you could look at the award changes in your own profile, but it is diluted in part by commissions. The commissions are after our benefit, where we get to tweak commission structures to drive the things that we want to drive, and largely, do not move to the same extent. So when you dilute the 2, I would expect the same sort of impact in [ FY '23 ].

Our next question comes from Jack Dunn from Citi.

Just a quick one. Can you just touch on the current order write levels you've seen in the past couple of months? And maybe are they compared to the same period last year?

Yes. Good morning, Jack. Thanks for the question. Yes, I certainly can. In part, I guess, it depends on what you're comparing to. Firstly, I'd say our order bank is very stable. As you can see from the presentation deck, our orders are very consistent with how we left FY '22, and they are strong in terms of the makeup of that order bank and the gross margin captured in there. In terms of order write, it has been a little contracted on the prior year. Previously, we've spoken about numbers of a sort of -- there was a few months up, few months down. I think we've had a consistent pattern of it being marginally down on the prior year through the last 6 months. But I would probably comment on that, that we are cycling a very strong period this time last year, not only the second half FY '22, but the first couple of months of FY '23 were strong on order write. This information is in the slide deck we've actually produced for you our order writes, and you can go and get a broad snapshot. But on historical levels, we're still running well. And of course, we do pick up the benefit of the order bank that's been acquired, as part of the Toyota and Volkswagen acquisition, which, of course, this order write has been written through a period, where we don't own the business, but nonetheless, we get the benefit of delivering on that. So there is certainly some upside.

All right. Perfect. And then just your comments around volume growth in FY '24. [ Can you just ] able to clarify those, including your recent acquisitions or you're expecting like-for-like volume growth in '24?

We would expect like-for-like volume growth in FY '24 and the current trajectory of new car sales, which you would see in VFacts, the current -- the increasing supply of vehicles by OEMs are one -- are a couple of factors. But in addition to that, we would expect our service and parts businesses to see increasing organic growth -- like-for-like growth, as a consequence of the increased number of kilometers people are driving and the increasing car parc. And we do think these high-margin parts of our business are important to -- [ want to ] keep in mind because we are in a business of diverse revenue streams and some of these have significantly higher margins in these areas. So yes, we do expect like-for-like revenue growth.

Yes. I'll answer as well from the previous question, we're obviously at the behest of award movements in labor rates, but we are running some very labor intensive businesses as well. So our opportunity to recover those costs will obviously have top line growth in that regard, too. So we are expecting to have growth across every segment of our business in FY '24.

All right. Perfect. And just one more for me. Just on the order bank, you mentioned [ that they ] would unwind over the coming months. Do you have any indication of [indiscernible] we probably won't get answers, but indication how long it will take to unwind? Is it -- do you think it would unwind over the course of the next 12 months? Or do you think it take a bit longer?

Yes. Jack, that's a really interesting question because I've been asked that for the last 2 years. And every time I've said what -- once there's a little bit of reorganized supply to the market, we would expect that order bank to plateau. I've been proven wrong on that a couple of times already. So it would be remiss of me not to put that out there as a potential. So far, as you've seen from FY '22 to FY '23, that hasn't happened. But in my view, yes, we've still got an order bank that sits in that sort of 4 months to 5 months. In fact, it's probably inflated a little bit post year-end, as a result of the Toyota acquisition, and it is a very [indiscernible] indeed. I mean, I can see our order banks being just a strong come the turn of our half year. And by this time next year, I suspect, we're still talking about the strength of that order bank. So it is a very long and orderly unwind, and we will be talking, yes, well past 12 months in more detail.

[Operator Instructions] Our next question comes from Sarah Mann from Moelis Australia.

Just another question on GP margin. You've given some good detail around, I guess, some of the anticipated movement going forward. But just interested, I guess, given the Toyota acquisition, given that it's got a really strong order bank and probably industry-leading margins, like as that stock kind of comes back and you can kind of deliver into that order bank, can you give us a feel for, I guess, how much of, I guess, the benefit you get from that might offset some of the pressures in the rest of the business from a GP perspective?

Yes, certainly. I'll going to draw the distinction here between GP dollars and GP margins. We have -- yes, in the material that we've put out, which is quite detailed in relation to that Toyota acquisition, I'm sure you would have spotted in there that given the focus and concentration on new vehicles and particularly importantly, is the acquisition of a significant fleet business, the margins that are actually achieved at a percentage level in Toyota are considerably lower than [indiscernible] Group. So at a GP margin perspective, I would actually expect our margin to probably contract, as a result of absorbing that business into ours. And as you can see from the chart that Victor presented before, there are a lot of moving pieces in GP margin, and it's important for us to explain what they are. But nonetheless, they don't actually impact on gross dollars. Back to your question on the dollar side, yes, I do think, as we have acquired a significant order bank, we will have an upside in our volumes and our revenue and through our gross margins and the gross margins in Toyota are strong on a dollar basis that they are not as strong as the combination of the rest of our business at a GP percentage basis. Vic, I don't know if you want to add anything further to that?

Just that I would add that although the Toyota GP percentage will be lower, clearly, the GP dollars will increase significantly, as a part of that, and we'll be very pleased to see it occur.

Right. That's very helpful. And then the other question was just on F&I. So just wondering, are you seeing any signs of kind of finance is tightening the lending conditions at all? And is that flowing through the penetration?

Yes. Good -- great question. There were no particular signals around that. The issue, I guess, is we face at the moment is still long delays, and so people are essentially having to apply twice, once on the order and then revisit their circumstances again on delivery. On occasions, people circumstances change, their mortgage has gone up, their cost of living has gone up, and if their wages have not adjusted, then clearly, their capacity to service that debt changes. I don't think that's a change in lending criteria, I think that's a change in people circumstances, and we're seeing a little bit of that. And our penetration has softened a little bit, as you probably would have expected in an inflationary period. It's not notable, though, and compared to our industry, I'd still be confident that we would be up there against the benchmarks that are produced by people like Deloitte. We bought ourselves on our F&I penetration, and we've done a really good job through this year, and we'll continue that journey in the used car environment, which has improved dramatically. So I'm not sure, I would link that back to anyone tightening their belt on the financial side, I think that's more individuals capacity to be able to service the debt.

Makes sense. Last question for me is just a broader one, I guess, around your portfolio strategy, and with EVs as well. You kind of mentioned your brands that you currently support bringing in a whole lot of new products, and that should eventually kind of take some market share. Firstly, like what percent of your new car deliveries in the period were new energy vehicles relative to kind of the 15% to 16% on the industry level? And then secondly, like when you look at your portfolio, are there any brands that you think are particularly strong awake in EVs? And would there be any particular brands you'd like to add to your portfolio that you think could maybe strengthen your offering there?

Yes. So -- and answer the first question, I'm not going to get into details of what our percentage is, if that's okay, Sarah. But we -- I mean the arrival of electric vehicles from what I would call the mainstream brands has been limited through the course of FY '23, and you've only got to look at VFacts numbers and compare the electric vehicles to some of the big players in that space like Tesla. I mean, Tesla make up 60% of all EVs in Australia. So clearly, they've got a large share. The comment I'm making is it's -- it has been a supplier lag, which has been the issue. The other OEMs, those traditional OEMs that have been around for many decades, have been busy out there developing their own EV strategies. And we are very delighted to be partnering with them, in fact, piloting in a lot of cases, their EV strategy to market. And we see those cars coming through in the current climate, that will extend our range to about [ 19 ] models. And when you compare that, let's say, theoretically to [ Tesla's 2 ], that's going to give consumers out there a huge amount of choice, and we consider ourselves very well placed to take advantage of that. In terms of the individual brands, there are some that are being able to deliver vehicles into market. Volvo is a good example of that, that they projected their strategy of EV by 2025. They're already delivering a lot of vehicles into the market, and we are -- we have a strong representation in Volvo. I actually see some good benefits and advantages coming in the luxury end as well. Perhaps those people that previously have been drawn into the concept of an EV, and now everyone in the neighborhood is [ driving ] a similar EV, they might look to different markets, I see that as a good opportunity. But as it says on the slide, we've got a pretty diverse representation, and we are pushing hard to make sure the OEMs see ourselves a leading ambassador for their brands, and they're pushing to market.

There are no further questions at this time. I'll now hand it back to Mr. Weaver for closing remarks.

Okay. Thank you, Scott. And I just want to say a big thanks for taking the time out this morning to listen in and indeed for your questions. We certainly appreciate the continued support of the network out there, and importantly, our investors, and a big thank you, again, to our teams for your dedication and resilience to deliver on a successful result this year. Enjoy the rest of your day ahead, and thanks, again for your time.

That concludes our conference for today. Thank you for your participation, and you may now disconnect.