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

Thank you for standing by, and welcome to the Peter Warren Automotive Holdings Limited Fiscal Year 2026 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Doyle, Chief Executive Officer. Please go ahead, sir.

Thank you, Chuck. Good morning, everyone, and thank you for joining Peter Warren Automotive Holdings for our FY '26 full year results presentation. I am Andrew Doyle, Chief Executive Officer, and I'm joined by our Chief Financial Officer, Anna Bail. Today is about more than reporting a set of numbers. It is about explaining how Peter Warren has responded to a changing automotive market, the decisions we have made to strengthen the business and why we believe the company enters FY '27 with a stronger portfolio and improved position to support future earnings quality and clear operating priorities. FY '26 tested the sector. New vehicle margins remained under pressure, particularly in H2, as customers became more value conscious, cost pressures persisted and new entrants continued to change the competitive landscape. We responded with discipline, improving business mix, repositioning the brand portfolio, investing in capability where it supports our growth and maintaining balance sheet flexibility. The key message for investors is simple. The market is changing, and that creates pressure, but it also creates opportunities. Peter Warren has the scale, relationships, property base, operating capability and leverage to participate selectively and convert that opportunity into more resilient earnings over time. Turning to the agenda. I will start with the executive summary and the key themes from FY '26. I will then move through the results overview, the market dynamics that are reshaping the industry and how we are executing the Peter Warren Strategy in that environment to our benefit. Anna will then take you through the FY '26 financial summary, including the profit and loss, gross profit, the operating cost bridge, cash flow and dividends. I will return to close out with the outlook for FY '27 and our key earnings recovery drivers before we open for questions. The appendices contain the supporting reconciliation definitions and additional financial detail. The presentation and financial statements have been lodged with the ASX and are also available on our website. Let me begin with the executive summary. This section steps back from the individual numbers and focuses on what FY '26 tells us strategically. The automotive market is going through a significant reset. Customers are making different choices, brands are competing more intensely, and dealer groups are being tested on discipline, agility and execution. FY '26 made those realities very clear. For Peter Warren, the response has been deliberate. We focused on the levers within our control, improving our position to support future quality of earnings, strengthening the brand portfolio towards where customer demand is moving, managing inventory and interest costs, investing in future capability, and protecting the balance sheet. So while FY '26 was challenging, it was also a year in which we strengthened the foundation of the business and positioned Peter Warren to benefit as the market continues to evolve. Slide 4 captures the center of today's presentation. FY '26 tested the business through new vehicle margin pressure, particularly across H2, changing customer demand and inflationary cost pressure and market disruption. Our response was not reactive. It was strategic, disciplined and focused on positioning the company for future growth. First, new vehicle margins were under pressure, particularly in the second half. We responded through inventory management and improved mix of business towards higher-margin segments, and brand execution focused on demand-led opportunities and a keen review of underperforming businesses. That is how we protect margin quality in a tougher market. Second, consumers are shifting towards value, technology and new energy vehicles. We have significantly repositioned the brand portfolio and expanded exposure to growth brands and customer segments, particularly where demand is moving fastest. Third, the macroeconomic inflationary environment presented challenges across our industry. We invested in key capability leadership roles, business modernization and strategic dealership expansion and will benefit in FY '27 from cost optimization opportunities as those teams and programs become fully operational. Finally, market disruption is creating consolidation opportunities. We've preserved low net debt and balance sheet flexibility and continue opportunistic acquisition review and portfolio optimization. The outcome is important. Peter Warren enters FY '27 with a stronger portfolio, higher-quality earnings and a balance sheet capacity to act on market opportunities, all of which positions ourselves for improved future earnings quality. I will now move on to the FY '26 results overview. And the next 2 slides summarize the key financial and operating outcomes for the year. The headline is that revenue and overall gross margin held firm in a difficult market, while profit before tax was impacted by new vehicle GPU pressure and operating cost inflation. At the same time, the operating indicators that matter for future earnings improved meaningfully: record used vehicle volumes, record service and parts revenue, improved inventory aging, a stronger order bank, continued portfolio repositioning, and a disciplined balance sheet. That combination is central to the FY '27 entry point. The reported profit result reflects a tougher market, but the underlying operating base has been strengthened. Turning to Slide 6. Revenue was $2.489 billion, broadly stable on FY '26, up $6.7 million. In the context of a weaker and more competitive new vehicle market, our stability matters. It reflects the breadth of our revenue base and the contribution from used car service, parts, finance and insurance. Gross profit margin improved to 16.3%, up 0.2 percentage points. That is a key indicator of improved business mix and earnings quality. New vehicle margins were under pressure, but higher margin and more resilient revenue streams that -- more than offset that pressure. Underlying profit before tax was at the higher end of our guidance at $14.5 million, yet down on prior year. And that decline mainly reflects new vehicle GPU pressure in the second half and operating cost inflation. The Board has declared a final dividend of $0.06 per share fully franked, bringing the total dividend for the year to $0.036 per share, which is at the higher end of our typical dividend payout ratio of 60% to 70% of underlying net profit after tax. Importantly, as you can see on the second line, despite new brands and higher volumes associated with those new brands, interest costs, funding our average stock level of $371 million, was $43.8 million, $5.3 million lower than the prior year. The balance sheet remains a major strength. Leverage is low at 0.83x net debt to EBITDA on a pre-AASB 16 basis. And our owned property base is strong at $243.7 million. This is an LTV of just 19.5% and an NTA of $1.48. The message is discipline. We protected the balance sheet and maintained flexibility to pursue growth, while continuing to reposition the portfolio in this transformational market. Slide 7 shows where the quality in the FY '26 outcome becomes clearer. New units were 31,390, up 148 units in a competitive market, which delivered for our OEM partners, delivered our KPI bonuses and continue to build the Peter Warren car park of customers into our ecosystem to allow further maximization of finance and insurance, service and parts opportunities. Most importantly, the order bank increased to 6,349 units, up 1,319 units or almost 30% year-on-year, giving us a solid revenue base for our FY '27. Used vehicle performance was a standout with a record result of 10,578 units, up 876 units or almost 10% year-on-year. Service and parts revenue also reached a record $442 million, up $19.9 million or a solid 5% growth. These are important earnings trends because they are higher margin and more resilient than new vehicle gross profit alone. Inventory aged over 120 days improved to 26.1%, down 3.4 percentage points, demonstrating solid stock management. The mixed business ratio improved also to 60.4%, and this measure is a balance of our business, and it's how reliant we are on the new car growth. Our gross -- a healthy business has a strong back end, meaning we are utilizing our customer base for recurring revenues of service and parts. It builds a more resilient business, less reliance on new car growth fluctuations. So increasing this to 60.4% reflects an increase in gross profit contribution from those higher-margin parts, service, finance and insurance, and other back-end margins. We also added 9 new dealerships during the year, all within an overall reduced leasehold footprint, but more on that later. Our people productivity was stable at $1.1 million revenue per employee, which is pleasing in a lower growth period. And this will be -- continue to be a focus for management across FY '27. I will now turn to the market dynamics and how Peter Warren's strategy positions us to deliver in this context. This section explains both the pressure that we have seen and the opportunity that we are positioning for. The Australian automotive market is changing rapidly. Customers are more value conscious, brand loyalty is shifting, technology expectations are rising, and new entrants are changing the economics of competition. Our Peter Warren Strategy is built around responding to those changes earlier and more decisively than the market. The objective is not simply to withstand disruption. It is to use it to strengthen our portfolio, improve our mix and position the business for more resilient growth. In this context, consistency across delivery of the Peter Warren Strategy is critical. Slide 9 shows how the macroeconomic pressure is accelerating a structural shift in vehicle demand. Australian consumers are facing higher interest rates and inflation, fuel price pressure, global instability and sudden cost of living pressures. These forces have reduced confidence and made customers more savvy and value conscious. The customer response is clear, a greater focus on affordability, increased value-seeking behavior, high demand for fuel efficiency, and an expectation of quality and technology at more competitive price points for certain models. At the same time, customers are demonstrating lower loyalty and greater acceptance of new brands. The market outcome is clear. Australia now has 67 brands competing, up from 59 in 2025, and industry forecast suggests at least 75 brands by 2031. Indeed, there is no more competitive market in this measure across the globe than Australia. Chinese brands now represent a materially large share of the market and are intensifying competition. Our view is that this is not simply a short-term fluctuation. It is a structural change in demand. It favors both value-orientated, technology-led and new energy vehicle brands, and it rewards dealer groups that can move quickly, represent the right OEM partners and execute consistently at the local level. In times of structural change, agility is important, but so too is a disciplined execution of strategy. Slide 14 sets out the Peter Warren Strategy. Our vision is to be the most valued automotive group, exceeding the expectations of our customers, employees, brand partners and investors. The strategy is built around 4 key pillars. Acquisition is about opportunistic acquisitions and portfolio optimization, delivering scale and EPS-accretive growth. Customer is about fostering a customer-centric culture that delivers increased retention, service revenue and lifetime customer value. Organic is about best-in-class performance, delivering improved mix and margin resilience through used vehicle service and parts. And finally, innovation is about driving productivity and efficiency, which delivers higher conversion and scalable growth through more and more sophisticated use of our clean data, automation benefits and AI scalability. Underpinning all of this are, of course, the Peter Warren values of growth, integrity, focus and teamwork. And this is not an abstract framework. It's an operating system that we measure monthly to ensure we are using strategic direction to build a more resilient, higher-quality and a more valuable business going forward. Turning to acquisitions. The Australian market remains primed for consolidation. The Wakeling acquisition remains pending ACCC clearance. And more broadly, we are continuing to assess opportunities through a disciplined capital allocation lens. In a fragmented market with disruption increasing, stronger groups have the opportunity to consolidate. Peter Warren has the balance sheet, the property base, the OEM relationships and operating capability to participate selectively and opportunistically. We remain selective and opportunistic in reviewing potential targets. Chinese brands have increased materially the share of the Australian market. Various motoring industry experts view Chinese brands growing to around 50% of the Australian marketplace before too long. For the full financial year of 2026, as the chart shows, Chinese brands controlled 22.5% of the market. In the first 6 months of this calendar year, they controlled 27%. And in the last 3 months to July, they've controlled 30%. It is moving fast. The speed of acceptance by Australian consumers is impressive. Peter Warren's number of Chinese brand dealerships has grown from 0 in June 2023 to 17 in June 2026, with the portfolio expected to grow further across FY '27 to represent more than 30% of our total brand portfolio. Importantly, overall, we're adding 9 dealerships within the existing footprint. In fact, we actually reduced our leaseholds, which demonstrates the ability to expand the property -- the portfolio, while sweating the existing property base and maintaining discipline on our fixed commitments. Slide 12 shows the breadth of our Peter Warren Chinese brand strategy. Peter Warren is partnering with a diversified range of major Chinese automotive groups, including Geely Holding Group, SAIC Motor Group, Chery Group, GWM Group, GAC Group and other partners. Since January 2025, we have added, on average, 1 new Chinese brand dealership to the portfolio almost every 6 weeks. We also have approximately 10 additional Chinese brand dealerships approved and in the pipeline. And this is not growth for growth's sake. This is demand-led portfolio repositioning ready for the near term. Customers are increasingly accepting value, technology and new energy brands, and we are aligning the portfolio with that movement. Crucially, the strategy is being executed within an overall reduced leased property portfolio. That combination of growth exposure and footprint discipline is central to the Peter Warren Strategy. Slide 13 highlights the Geely brand, which is one of the clearest examples of why the portfolio shift matters. Geely is home to the EX2, identified on the slide as the best-selling car model across all brands in the segment in China in 2025 with more than 460,000 units sold with that 1 model. It is also the best-selling small EV on our planet. Geely Group has sold more than 3 million vehicles in China in 2025 and has clear ambitions to grow further. The brand is still early in its Australian journey. It has operated with only 2 models to date. And the recent launch of the EX2 precedes a significant model pipeline with at least 8 new models expected over the next 12 months. For Peter Warren, the important point is our exposure. We are Geely's largest partner nationally with the highest sales and largest footprint of any dealer group in Australia. That creates both near-term volume opportunity and medium-term strategic upside for Peter Warren as consumer acceptance of Chinese brands increases and the market rewards value, technology and new energy vehicle capability across multiple new model launches. Slide 14 turns to Zeekr, Geely's premium luxury mobility brand. Zeekr brings together technology, sleek design and innovation, and gives Peter Warren exposure to the premium end of the growth brand opportunity. Zeekr is the fastest-growing premium brand in Australia. The brand has already overtaken multiple established premium brands year-to-date despite operating in Australia for less than 2 years. Importantly, more than 90% of Zeekr's year-to-date volume has come from 1 model, the 7X. With the 7GT, 8X and 9X expected in early 2027, the brand remains early in its product life cycles. For Peter Warren, the Zeekr partnership strengthens the portfolio, expands our premium market exposure and provides a platform for future growth and value creation. The Peter Warren Zeekr Gold Coast grand opening is a strong example of our ability to bring a new growth brand to market quickly and professionally within our existing property footprint, and we're excited to further expand our partnership with Zeekr in the near future. Slide 15 focuses on the customer pillar of the Peter Warren Strategy. The objective is simple, to turn customer insight into care and care into loyalty, retention, recurring revenue and lifetime value. We measure through our internal customer review platform, CX360, but also through OEM scorecards and meaningful service-level agreements with our customer care team. And these tools provide clear data visibility on customer feedback and customer satisfaction performance, allowing us then to turn insights into clear actions and consistent standards across the network. We improve ourselves through training such as our Peter Warren Apprentice Program and our D.R.I.V.E framework. We recognize great performance through OEM awards and Peter Warren awards and Staff GIFT Garage. And finally, we scale capability through national development education and leadership summits. And the proof points on the right hand of the slide are important. More than 220 young apprentices are developed in our company. We've achieved a 7 percentage point improvement in OEM customer satisfaction index measure and an 8 percentage point increase in service retention. And the financial relevance here is clear. In a market where customers have more choice than ever, service consistency, responsiveness and trust become real differentiators. Customer retention is not just a service metric, it is a recurring revenue and lifetime value driver. Slide 16 shows the organic performance that supports the margin resilience I talked about earlier. New vehicle units were broadly stable at 31,390 units, up 150-odd units year-on-year. Used vehicle units reached a record 10,578 units, or up almost 10%. Service and parts revenue also reached a record $442 million, up $20 million or 5%. We're building strength in our used vehicle service and parts, which are important contributors to margin stability, recurring revenue and customer lifetime value. The internal and OEM brand combined balanced scorecards helped drive transparency and consistent execution across our network, while our property strategy remains disciplined with a focus on sweating our owned property and reducing our lease exposure. The organic message is, therefore, one of disciplined and balanced operating performance, stable new vehicle volume, record used volume, record service and parts revenue, improved retention, and a more resilient earnings mix that helps stabilize that overall gross margin, which, as you can see, was up 0.2 percentage points in the year to 16.3%. And finally, in my section, turning to Slide 17. And this is actually one of the most important slides in our results update because it really demonstrates that our innovation pillar is already delivering measurable outcomes. We are leveraging enterprise-wide data and insights, process automation, digital journeys and disciplined investment in AI-powered engagement to enhance customer experience, to drive productivity and generate scalable revenue growth. This is not just theoretical. In FY '26, our piloted sites that we utilized, 44% of online leads appointment capture occurred after hours through AI when customers were ready. Maybe they were parents on the couch at home at night, yet dealerships were closed, and appointments otherwise might have been lost. We generated approximately $44 million of revenue from converted service opportunities, up 56% year-on-year. And we also achieved a 2.9x improvement in service customer win-back conversion rates. The power of this capability is then the breadth of scope and then scaling and scalability across our business. Once the data foundation and process automation are in place, the incremental benefit can be deployed across more dealerships with greater consistency. This is how innovation supports operating leverage, higher conversion, stronger customer engagement, better retention, improved productivity, and ultimately, earnings growth. I'll now hand over to Anna, who will take you through our FY '26 financial summary in more detail. Anna will cover the profit and loss, gross profit and operating cost bridge, cash flow and dividends. These slides explain the movements behind the headline results and the actions we're taking as we move into FY '27. Anna?

Thank you, Andrew, and good morning, everyone. Turning to the FY '26 profit and loss. Revenue increased by 0.3% to $2.489 billion. This reflected a lower new vehicle average selling price, influenced by cost of living pressures and the emergence of a wider range of high-quality, lower-priced Chinese brands. This was more than offset by higher year-on-year volumes and record used, service and parts revenues as the business executed several strategic initiatives focused on driving performance across the back end of the business. Gross profit increased by 1.6% to $406 million, with gross margin improving to 16.3%, up from 16.1% in FY '25. I will unpack the gross profit movement in more detail on the next slide. Underlying operating expenses increased by $18.7 million or 6.5% to $308.4 million. This reflected an uplift in costs associated with the business transition through adding new brands and dealerships, increased organic performance, as well as inflationary pressures. Interest costs reduced by $5.3 million or 10.8%, reflecting lower average inventory and an improved aging profile despite several cash rate increases during the year and the additional stock holding due to new brands and dealerships. Underlying PBT was $14.5 million, down $7.8 million or 35% on FY '25. Statutory PBT was $11.5 million after one-off acquisition and restructure costs of $3 million. Slide 20 provides more detail on gross profit. Gross profit margin increased to 16.3%, up 0.2 percentage points from 16.1% in FY '25. The increase reflects 2 key drivers. Lower new vehicle margins in the second half reduced margin by 0.3 percentage points, while favorable used, service and parts mix added 0.5 percentage points. The decline in new car margins reflects external market challenges and legacy brand discounting against new entrants. This is the market pressure that Andrew referred to earlier, and it remains a feature of the broader environment. Importantly, margins remain favorable in other service lines that are growing in contribution. Service optimization, productivity efficiencies, parts efficiencies and the benefits of scale, all supported the margin outcome, and these will continue to be a focus for management across FY '27. This highlights the back-end performance is helping support the business through new vehicle margin pressure. Management remains focused on rationalizing underperforming dealerships, broadening service and parts optimization, and maximizing finance and insurance and car care opportunities into FY '27. Turning to the operating cost bridge. FY '26 underlying operating costs increased by $18.7 million, taking our operating costs as a percentage of revenue to 12.4%, up from 11.7% in FY '25. The bridge separates the increase into 2 distinct categories. The first is intentional spend focused on transitioning the business to support future growth, which contributed $12.3 million. This includes cost uplift associated with new brands and dealerships such as head count, advertising and other variable operating expenses; increased activity to drive organic performance in new, used, service and parts; targeted key appointments to uplift our capabilities; and remuneration increases to drive retention and performance, as well as statutory award and superannuation guarantee increases. While these have been incurred in FY '26 to drive growth, management is focused on improving the operating leverage of these costs across FY '27. The second category is associated with the inflationary macroeconomic environment, which contributed $6.4 million. Management is responding through cost optimization initiatives, including the use of technology to drive productivity, realignment of support functions, leveraging our scale with suppliers, further optimization of our property footprint and lease portfolio, and rationalization of underperforming dealerships in order to neutralize this impact across FY '27. The cost message is therefore balanced. We have invested to support new brands, drive organic growth and enhance capability, all of which position Peter Warren for future growth, while also identifying clear areas of focus where management actions will deliver benefits through FY '27. Slide 22 covers cash flow and dividends. The business remains cash generative with operating cash flow after floorplan interest of $67.3 million. This represented a 71.1% cash conversion, reflecting solid underlying cash generation despite ongoing investment in working capital to support the business operations and growth initiatives. Net cash generated was $17.7 million after lease payments, interest on loans and tax. Cash was used across 3 main areas: investment in dealership capital expenditure, returns to shareholders through regular dividends and repayment of loans. Net debt ended at $47.4 million, impacted by a lower cash balance at 30 June 2026 versus 30 June 2025. And net debt to EBITDA after floorplan interest was 0.7x. This reinforces the balance sheet discipline that Andrew referred to earlier. The Board has declared a final dividend of $0.006 per share fully franked with total dividends for the year of $0.036 per share, at the upper end of our typical dividend payout ratio of 60% to 70% of underlying net profit after tax. Our balance sheet remains disciplined and flexible. Low net debt and a strong tangible property base provide optionality as the business considers growth, capital allocation and maximizing shareholder returns. I'll now hand over to Andrew.

Thank you, Anna. I will now close with the outlook for Peter Warren. And this is where the FY '26 narrative comes together. The year was challenging, but it was also a year of strategic repositioning. We strengthened earnings mix, expanded exposure to growth brands, invested in future operating capability and preserved balance sheet flexibility. As FY '27 begins, our focus is on converting the strategic repositioning into improved earnings performance. The key drivers are higher-quality earnings, portfolio-led growth, operating optimization and disciplined capital deployment. And finally, Slide 24 summarizes our FY '27 focus. FY '26 delivered important foundations, record results in service, parts and used vehicles, a firm review and rebalance of the brand portfolio towards customer demand and growth brands, and a disciplined transition phase, focusing on maximizing scale, improving property utilization and optimizing costs. FY '27 is about positioning for earnings recovery. The first driver is higher-quality earnings, moving mix further towards the higher-margin service, parts and used vehicle performance, maintaining margin resilience through improved mix, and continuing inventory and cost optimization. The second driver is brand portfolio-led growth. We will continue selective expansion with high-growth brand partners, supported by increased penetration in growth segments and a portfolio increasingly aligned to customer demand. And the third driver is disciplined capital deployment. We have maintained the balance sheet flexibility and capacity to pursue EPS-accretive opportunities as the market continues to consolidate. Our firm view is that Peter Warren is building a stronger business today to support higher-quality earnings growth tomorrow. Thank you for your time and your continued interest in Peter Warren Automotive Holdings. In summary, FY '26 was a challenging year, but it was also a year in which Peter Warren strengthened its strategic position. We improved the quality of our earnings, accelerated exposure to growth brands, delivered record outcomes and invested in future capability and maintained balance sheet flexibility. And our focus for FY '27 is clear, to convert into -- this strategic positioning into earnings recovery through high-quality earnings portfolio-led growth, optimizing our operating base and disciplined capital deployment. So Anna and I would now be very happy to take your questions. Thank you.

[Operator Instructions] And today's first question will come from Phil Chippindale with Ord Minnett.

First question, I just wanted to talk to Slide 21 because that was a larger increase in the OpEx base than I had expected. Can you just explain the difference? Sorry, I don't quite understand the second category of the $6 million versus the $12 million. You're talking about navigating the inflationary macro environment. Is this sort of strategic decisions that you made? Is that what's going on there?

Phil, thanks for the question. So we've set up [indiscernible] to give a little bit of an indication of [indiscernible] FY '27. So the $12.3 million there, that reflects what we've invested in the business and used to sort of drive both the organic performance that we saw in FY '26, but also set ourselves up with that transition of new brands and new dealerships into FY '27. We do expect some benefits from that category. We will get some efficiencies as both chains and new dealerships get fully up and running for the full 12 months. Second bucket there is, we'll stay focused on what we call pure inflationary pressures. So that's where we said there that management is really focused on neutralizing that effect into FY '27 through the various cost optimization initiatives that we've put there.

I think we've summarized it, Phil, by saying, we think there's some optimization in the $12.3 million and significant optimization in $6.4 million.

Okay. I understand. So the $6.4 million, did you not necessarily see much benefit in that -- in the FY '26 result then?

Look, that was really those cost pressures coming through in H2, in particular, after the sort of war in Iran and the inflationary impact that, that had through fuel prices and things like that. And so, I think that's really where we're focusing on neutralizing that through FY '27 and minimizing the impact going forward to the operating cost base.

Okay. So my follow-on question then is, how do you intend to neutralize that impact in '27?

Yes. So that's through some of those initiatives that we put through there. So we understand that inflation is stubborn at the moment, and it's not going to go down immediately. And so, we're trying to be proactive around taking -- or releasing that pressure through other areas of the business through those initiatives that we've listed there, driving productivity through our actions, optimizing the support functions and those other items.

Okay. I might touch with that a little bit further offline. Just shifting to Slide 17. Andrew, you mentioned the piloted sites that you've set up over the year in terms of some automation and operations outside of hours, et cetera. Can you talk to like what proportion of your sites has that enabled? And then, what's the intention to try and roll that out over FY '27, perhaps to drive a little bit more revenue generation?

[ We've looked at ] sites overall. We've rolled out [indiscernible] around about 20 sites. So, [indiscernible] a couple of those partners, automation partners or AI partners, we're selecting still. So we might have piloted 1 or 2 to test which one works better. We've made those decisions now which way we'll go for both sales AI and/or service AI and roll that out over the course of FY '27. So we expect to have that rolled out through the course of this year.

The next question will come from John Campbell with Jefferies.

A couple of questions. Firstly, I presume the biggest driver -- potential driver of getting PBT margins back to where you want them to be is effectively reorientating the brand mix and getting the right mix of high-growth brands that you talk about in the [ presso ]. How far down that journey would you say you are? Like you've obviously reorientated a lot in the last 2 years towards Chinese brands, for instance. But how far to sort of -- if you ever complete it, but how far to get near that sort of completed phase where you're happy with what you've got?

Thanks, John. Look, it is a busy activity we've had over the last -- well, 2 years, but especially, the last 12 months. And the market is changing, as I mentioned, very, very aggressively. So we're seeing brands that would have represented sort of 10% to 15% of the mix before, now up into the mid-20s, as I showed in that chart before. And also, the order intake is well over -- or getting over the 30% mark now. So therefore, it's about maximizing the portfolio to fit that in and to go with the brands that we believe are right. I think it's important to state there, as I think I've said in my words, we haven't picked any brands. We'll pick what we thank are solid strong groups that will be attractive to the consumer. So that's the back [indiscernible]. And we'll progressively [ roll them across ] each of our sites, and importantly into existing property portfolio. So we haven't added any leases at all. We've usually maximized the property we've got. But to answer your question more directly, we have at least, as I say, another 10 Chinese dealerships in the pipeline that will be delivered in the -- yes, I would say, in the course of FY '27.

Okay. Just on that subject of adding leases, with a partner like Geely and looking at what Eagers has achieved with BYD, is there an opportunity for you to go beyond your current footprint and really get aggressive with rolling out greenfield sites, potentially even in states where Peter Warren isn't represented?

I think that potential is always there, John. We're not linked just to the sites we're in. If the business case makes sense, we are certainly willing to look at any opportunity for expansion.

Okay. And Geely, I presume you would say, would be, say, potentially up there with BYD as a brand that could really grab large share in Australia?

Absolutely. It's the second best-selling car group in China. It's probably right up there -- or it is right up there with the BYD Group, selling more than 3 million vehicles in China. It's a very strong group, and it has a big broad portfolio. As I showed in that chart, there's at least 8 models coming in the next 12 months. I've seen those models, and they are extremely impressive. So I think it's got a great future, the Geely group.

Yes. Sorry, just last question for me, Andrew. So reorientating towards EV-heavy China brands who won't have much in the way of parts and service and used revenue, how are you ensuring you get sufficient GPU to compensate for the sort of lack of back-end revenue that's from these new brands?

Right. Well, it's a good question. There's quite a bit to that question. The first level is improving what we already have. We have a huge car park already, and it's about penetrating that car park with the right customer care. As I mentioned, our service retention is up 8 percentage points. So we're penetrating more into the existing car park, and we can do a lot better there. There's a long tail of service opportunity in our existing car park. The second thing is, with the future of, let's say, NEV vehicles, new energy vehicles, yes, there are potentially less moving parts and less opportunity in the traditional business. But there's also opportunity in the new business. Battery electric technology means that we can be stand-alone and actually have a USP when it comes to our opportunity to have high-voltage technicians that I talked about through our apprentice program and actually capture more of that market going forward, which I think is an opportunity for us. But the bigger opportunity in the short term, certainly, is penetration of our existing car park of service customers.

Okay. We won't see -- am I right in thinking that there will be -- we won't see -- we won't see gross profit degradation from this reorientation, gross profit margin?

Sorry, John.

Gross profit margin, we won't see that being degradated with the reorientation?

John, our focus has to be on improving the balance of our business, as I mentioned earlier. So I talked earlier on in the slides about how we are moving to what I would define as a more better balanced business, a better absorbed business. We have a mixed business ratio that's grown above 60% now. So whilst the new vehicles themselves might have an average lower price point, the margin percent model is similar, but the price point is lower. That's for sure. Our mix of business is moving more and more to what we see is even more in our control, being used cars, parts and service, and finance and insurance. So we can balance the business a lot stronger towards the back end as well, which is more in our control.

The next question will come from Chenny Wang with Morgan Stanley.

Can I just have another stab at the cost question? So when you say neutralize and mitigate costs, particularly in that $6.4 million bucket, when you use the word neutralize in FY '27, are we effectively talking about 0% growth from that or more around decreasing as a percentage of sales?

Yes, more around decreasing as a percentage of sales, Chenny. So I did say we've gone from 11.7% OpEx percentage of revenue to 12.4%. We won't stay at 12.4%. We will come back down towards that 11.7%, but yes, that's going to be progressive across the year.

Got it. Cool. And then, maybe just in terms of the order bank, I just want to touch on that. I presume it's a little elevated, given your new units actually sold were pretty flat year-on-year, I guess, on both FY and second half basis. So just wondering how that supply picture is now? And does that 13,000, give or take, incremental get realized in the first half of FY '27?

Thanks, Chenny. Yes, the new car deliveries were relatively flat. The order intake was up more than 16%, and our order bank is up more than 26%, so quite a strong order bank. 20% of that -- at least 20% of that order bank is of the Chinese brands, which will be deliverable in the shorter term. 80% of that bank is of other brands, which are more deliverable as it comes into the second half. So progressively, I would say more of that is deliverable in the second half. But depending on which brand it is and the bank and demand behind that, we can certainly get more availability and quicker delivery, if you like, from the Chinese brands. But it is a solid order bank to go into the year with, which will be progressively rolled out over the late part of this calendar year and into the early new year.