Tourism Holdings Limited (THL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Tourism Holdings Limited Annual Results Briefing. [Operator Instructions] But I'll now hand the conference over to your speaker for today, Grant Webster. Thank you, and please go ahead.

[Foreign Language] Welcome to the THL Annual Result Release for FY '20. So here at thl, we've got myself. We've got Jen Bunbury, who's in her last few days as CFO; and we've got Nick Judd who's in his first few days as CFO; and we've got Steven Hall, who is now our deputy CFO. So we've got enough CFOs to battle our way through this result. We've also got Amir Ansari here as well. So look, we'll -- as always, I say that we'll go through at pace, in the instance, quite longer than what I thought, but we will go through. There's only a selection of the slides that we're going to go through in a little bit of detail. There's a lot -- not a lot new in this release because we've released a lot of information already but some context that we'd like to provide. And then we'll it open up to questions beyond that as well. So I think we'd leap into it. So the disclaimer, just as always, noting the U.S. situation with that. The next slide, the important notes, just those nonrecurring items, again, self-explanatory. We can go into those later on if need be. The next slide on IFRS 16 should be pretty self-explanatory. Again, we can deal with questions. In terms of the COVID-related events. Just of note, within that provision for doubtful debts, you may have seen in broadly the headlines with STA Travel going into liquidation. That was a bit of a hit for us within the NPAT covered within our provision. And from an impairment perspective, obviously, an impairment of the Kiwi Experience goodwill and no other impairments. So we have gone through, as you would expect, this year, rigorous testing in terms of impairments. And the details of those assumptions and sensitivities are in the financial statements, and we can go through those as any questions that you would like. So moving on to the summary slide. So thl as a business, obviously, our strong balance sheet, our statutory profit and underlying profit is self-explanatory. We believe we've got a very capable team. We've been very innovative in the way that we've approached things in recent times. We believe we're very well positioned competitively. We remain very focused on our net debt, and we've announced today where we are at the end of August, so that reduction further to $75 million of debt. So a significant reduction from the $188 million that we're at the 31st of March, which we obviously call that COVID turning point. So our strategy and plan is being enacted as it should be and moving on track with where we want to be. So the future focus of thl, we will talk about today. But our sustainability strategy remains as well with our Future-Fit Business Strategy remaining completely intact. So just moving on to A Year of 2 Parts, the next slide. I haven't seen too many businesses or haven't seen any that I've noted that have split in this way. When we looked at things and started to analyze the year and think of things from your perspectives as well, 8 plus 4 made most sense to us. So the 8 months through the -- when we really started to see the COVID situation, then those last 4 months of the year. And so a lot of work from the finance team. And I'd like to thank them for looking at things differently and presenting the numbers both for FY '20 and the comparatives so that you can get a really good handle on that. Broadly speaking, we believe the year was pleasing in context from a revenue perspective. Obviously, vehicle sales, the quantity was pleasing, but also margins, and we'll talk about those more later on. And the quick shift to maximizing the domestic opportunity was both bold and pleasing as well as you can see in the New Zealand domestic campaign with $20,000 of bookings. The financial highlights slide, I would say, is self-explanatory, and we've covered the nonrecurring items. The next couple of slides, in essence, from the July 31 release and give an update for historical context on the COVID situation. And then we move to the slide on the debt graph. So just reinforce at this point, this is what thl has been talking about over a number of years. This is what the Flex Fleet strategy has been about. This is what our focus on return on funds has been about. And it's not just about a reduction in debt, it's about being efficient. It's about providing us with flexibility for the decisions that we need to make moving forward. And it's about providing us the opportunity to improve our utilization and improve yield. And as we've gained control of that situation, we can recover a lot quicker as well. So we are confident with the equity position that we have as a business. We're confident with where we're sitting from a fleet perspective that both we have protected and enabling ourselves to be in the best position that we can moving forward. And we call that about being positioned to reset. So I want to talk very briefly about vehicle sales and where it sits in the business. For many years, we have focused on that core methodology of saying build-rent-sell. And we've built that out to a broader ecosystem discussion. But within that, sales has always been a growing focus. I've talked historically about the fact that, a long time ago, and it was a long time ago now, sales was called disposals in this business, and it was indeed called disposals on the P&L and treated accordingly. And that's not what it is. It is an effective, appropriate part of our industry, in fact, the largest part of our industry on a global basis and the capability that we have been growing more and more in every jurisdiction over the years. And that has come to fruition now. Albeit, in a generally hot market, we are growing the market, but we're also riding the wave in the likes of the U.S. It gives us an opportunity to increase what we're doing from a partnership perspective more broadly as well, with broader dealers and growing the dealer network in different countries, both New Zealand and Australia, and seeing some positive growth in dealer network as has the U.S., which was obviously growing our broader distribution channels, but we're maintaining margins that are appropriate and you can see in the results. The important point here as well is that we will buy some fleet for sale. And we would like that to be looked at differently and thought about differently. We make the comment here about it being more akin to working capital. And even in countries like New Zealand, where we will consider that we're currently overfleeted from a rental perspective relative to domestic demand, there are some vehicle types that we are selling really well that we need to replenish. No surprise and something that we should be doing. So we'll talk about how that fits in with debt. But I think important just to make that note, that we've got that broader sort of working capital approach to some vehicle sales purchases over the coming period. The next slide on the phases in thl's recovery. Just again, you will note, no surprise that we haven't provided a forecast. And this slide is very much as we indicated our broader framework for FY '21. It's still appropriate today to not provide a forecast and to reinforce that we are focused on, obviously, being cash flow positive broadly as a business as evidenced by the reduced debt, but to get cash flow positive in the core rentals business and, obviously, being profitable at an EBIT level and then moving to that return on funds focus that we've had for a number of years. So reinforcing on the next slide, some of those are the key points in terms of our assumptions, just getting ahead of some questions that may come. We are retaining a domestic-only assumption for FY '21. Indeed, we're saying that perhaps that's all of calendar '21. And we are reinforcing as well, but we still believe the vehicle sales market on a domestic-only basis will remain strong in all operating jurisdictions. And we've noted that excess fleet capacity, on a global basis, compared to FY '20 numbers. But clearly, as you can see by the reduction in debt that we have been well on track in terms of the loan and where we need to be. So that moves on to vehicle expenditure in FY '21. Now this is an updated slide from our previous guidance and direction. And it is suggesting that we are going to be buying more vehicles, in particular, in the U.S. So vehicle sales has continued to exceed expectations in the U.S. and be very strong. We want to maximize that, so we will be buying more vehicles. That doesn't change our fleet expectations for calendar year '21 in the U.S. So that high season we're saying at the same roughly kind of level that we've got in our previous expectations. We're just selling more, so we need to buy more. We are confident that on a domestic or international borders open basis in the U.S., that we will need, require and have the opportunity to make good profit from that kind of fleet number. And that's -- we haven't guided exactly, but it's somewhere sort of between that 1,400 to 1,700 number for the U.S. So there are essentially 3 types of vehicle purchases for us. There's that pre-committed purchases that we can't get ourselves away from. That's predominantly New Zealand and Australia. There's none of that -- there was none of that in the U.S. There's that fleet that we will buy additionally for vehicle sales, as we talked about. And then there will be this new rental fleet to operate effectively as just discussed in regards to the U.S. In terms of the next slide, the balance sheet. So clearly, the net to -- net debt-to-EBITDA and those core sort of earnings metrics aren't quite the focus today as they are normally. But they will be, again, in the future, no doubt. But we've given a clear indication of what's important today. From the banking perspective, I think we've talked about the good arrangements and the good relationship we've had with our banks over a period of time, remembering that the facility renewals we've done in April, May. So probably the worst of the situation. And we've basically ticked, double ticked, triple ticked all the boxes that we're being given by the banks in terms of the metrics and what we needed to achieve. So we're in a very, very positive position. We've given an indication here that we are in discussions regarding a further reduction in the facility limit. Look, that is about -- we'll see where that concludes, but that is just about line fee cost reduction. We can't effectively use all those facilities at the moment because we just don't need that much fleet, if we were to purchase fleet. And we are not creating the kind of losses that are going to eat into that. And indeed, the way the covenants are set up at the moment, you trip other covenants before you actually got up to those kind of facility levels anyway. So it sort of becomes a little bit of a no-brainer. Does it create any concern for us for the medium and longer term? No, not at all. A, we've got very good relationships, as we said. We've got good confidence with our banking partners. And indeed, if there was ever a hiccup there for whatever reason, we're still in a very strong position to leverage into asset financing and other forms of financing for this business, especially with our track record of what we've been able to achieve and focus on from a debt perspective. So we have confidence from that angle. There's a few slides that we've got here just relating to other activities, the Get Moving campaign and pivoting to new business activities. We just wanted to get as many clichés in there as we possibly could relating to COVID. But what I think I'd reinforce is that it does show that we've got a strong team in thl that is very knowledgeable, very experienced in this industry, very connected and ready to change and adapt. We believe and see quite clearly that we were the first to take a number of these opportunities around the world in all markets that we operate. We gained the most traction. We've got the best results. And we have positioned ourselves very, very effectively into the future for alternative sources of revenue to our traditional markets, so emergency-style revenue and other alternative uses for our kind of products. So some good business development opportunities that come off the back of that activity. The Get Moving to Get New Zealand Moving campaign was another example of our ability to adapt quickly and the capability of our team. And indeed, I'd reinforce one of our Future-Fit thinking methodologies within this as well because this is a genuine multiple capital approach. This wasn't just about gaining market share and driving an industry segment. This was about reigniting the tourism industry more broadly. This was about delivering to communities in rural New Zealand that were suffering and getting people out and traveling. And this was about saving jobs, and it did save in excess of 100 jobs. So I think it just reinforces, with the right thinking, we can achieve all the benefits for all stakeholders with the right kind of approach and thinking a little bit differently about things. And when you look in hindsight on it, you would say it's just good business more broadly. So we'll move very quickly into the divisional review. I think the divisional EBIT, that's easy to read, and we can go back and answer any questions. We probably want to get into the divisions themselves. So the New Zealand business. So we would say that the domestic campaign has grown the category in New Zealand. We gave in the IR some figures around the surveys we did of those new customers. About 80-odd percent were new customers -- sorry, 60-odd percent were new customers, 80% of them, closer to 85%, said that they would do a motorhome holiday again, and 40% of them said that they were now interested in buying a motorhome. So as well as those other benefits, we do believe we'll grow in the category. We are leading in taking advantage of the sales momentum with the Great New Zealand Motorhome Sale which has started very effectively. And certainly, at this date in September, we're exceeding our targets for the phasing that we had at this point in time. Just quickly, the fire update, we've got just a short comment in there, but it does look, at this point in time, that our insurance looks to have been appropriate. Whilst obviously, there's final confirmations to be made in fire safety reports and everything else to be finalized. But it does look like our insurance is appropriate. We do have site plans underway for alternative locations for the next period of time. And we are taking a long-term horizon with our -- view with our planning around what's next from a property perspective in Auckland. I would shout out publicly as well to our team and the fire crews that were on-site on the day of the fire. Literally, the fire crews and the way they handled things and the way they acted saved multiple millions in fleet damage. They literally moved vehicles off-site very, very quickly, and it was a great response. The outlook for New Zealand, sort of, I'd say, okay. It's still very difficult on a domestic basis. We are growing retail and servicing. We are leveraging the strength in sales and maximizing that. And we see some good opportunities coming out of Action Manufacturing in the New Zealand business. However, you can't replace international with domestic and New Zealand, if you look at months like November. In February, there are key periods that have been very strong internationally and February, in particular, with strong utilization and yields. And that just doesn't appear to be a market and domestically for that. School holidays, Christmas periods are very different, but we're very focused on how our fleets sort of supplement that in those sort of non -- or shoulder periods or previously peak international periods. So the fleet with the sale will clearly be well down, but we've also got confidence at the moment that we can ramp up quickly as well and effectively use our position and our balance sheet to get ahead of the competition. In Australia, just important to remember, it seems a long time ago, but the bushfire impacts that started this calendar year and the COVID impact was more severe because we're both coming out of the fires, but running into what is our sort of second high season in Australia with the Northern Territory international season that's a very strong yielding and strong profit point for us. So that being diminished was obviously a significant impact. Our current situation is improving and our outlook is pretty positive, given that there is no interstate travel yet. That's certainly what we're focused on, and we'll wait and see how that goes. But our sales business, again, in Australia is working very effectively, well up on where it's been. And again, we've grown our dealership network there. Margins are strong, and the yield outlook is down on international but stronger than what we were anticipating. The U.S. is our positive point and highlight. We were saying it's a lowlight a year ago, but it's our highlight today. And it is the part of the business that we believe has a strong calendar '21 outlook relative to April routes. So our sales margins are very strong at the moment, well up in those last 4 months. June, July, August were our top 3 months ever for vehicle sales volumes. And we've seen good domestic activity carry on through September, which is unusual. We obviously purchased some vehicles. We've said that around 300, but in this report, we've indicated that there's going to be a lot more. That is a sort of a sell out into new purchasing kind of approach. And we'll continue to push that through as long as we can. There are some supply issues in the U.S. that we're wary of. So whilst today, we have confidence that ordering today means we'll get our vehicles in time next year, that window will start to close because, as I say, there's some pretty significant supply constraints that exist at the moment in the U.S. The Tourism business, look, the costs associated with Kiwi Experience are minimal, and we do have confidence that Kiwi will return at some point in the future. And we've got a bit more reset work to do with Waitomo, which is currently in a loss situation even with the STAPP funding and will be for the foreseeable future. But we're going to see what else we can do domestically to drive that. On an equity investments perspective, I think that's self-explanatory. Action is very strong. We've talked about that. Just go has had a very positive start to 2021. Same reasons, the RV category is up. Vehicle sales is very strong, and domestic has rebounded very, very strongly. Group support services. Just note that, that -- there's significant cost reduction. I wouldn't necessarily take that rate as our go-forward position in terms of cost from the group support services perspective, but we'll certainly reduce cost significantly. Togo, we'll talk about a lot. We'll take these questions and one of the multiple CFOs in the room can ask the actual accounting on the Togo transaction, which is quite complicated, but has been rigorously assessed by auditors, the Board and everyone else. thl digital, brand change for what we're doing with the assets that we brought back from Togo, and we can take questions on those. And we'll talk about those through the next few pages. And they are progressing well. Triptech is the other investment inside of that. We've just got an indication of how that's going there. So let's move to outlook and summary and then -- or give an introduction from that as well. So by business, New Zealand, we've talked about. Domestic is something that we're targeting, but it does continue to be somewhat difficult. So we're focused on driving vehicle sales, driving the retail and service revenue and leveraging our cost base accordingly from that perspective. Australia, absolutely waiting for that interstate order opening but again, really focused on vehicle sales. The U.S., looking strong in calendar '21, the place where we will make a reinvestment. So in summary, it is considered in a lot of places the year of the RV. And I think the category more broadly is in a good space and will be both now and when borders open. So that's predominantly from a sales perspective, but domestic activity is well up. New Zealand and Australia just have the situation where international is what drives profitability. We will continue to focus on what else we can do domestically, but remind everyone that the length of bookings is a lot less and you had down days, essentially sort of Tuesday, Wednesday, Thursday in the week, so a lot more weekend bookings, which just means you can't have the same utilization even in the U.S. that you would if you had strong international and, generally speaking, in New Zealand and Australia, domestic has lower yield. Value per -- cost per booking can be a little bit different as well. So we are managing that balance sheet. Debt will continue to reduce over the next coming months, but then we will have this investment into the U.S. So do expect debt to come down and then rise somewhat. But again, that's going to be on the basis that, that's what we obviously need, vehicles to create earnings for the business. And we'll be doing that based on an expectation that there are positive earnings and positive cash flow for those vehicles. We currently have no plans to equity raise. It doesn't mean that we won't. But we've been clear about the fact that we have equity in our vehicles. We have a strong balance sheet, and that's what we should have been focusing on as a business. It's what we did, and we've sort of proved that up. So that is the current situation. It doesn't mean we never will, and it doesn't mean that we're not looking at growth opportunities because we'll continue to do that and see if there's anything opportunistic around the world that we should be considering but clearly with very different criteria today than what you would have in the past and continuing to consider different partnership opportunities as well. So to close out, I'd just like to thank again the finance team for putting together our results for the year in a very difficult time, in a very difficult environment. I'd like to publicly thank all the crew in thl because they've been incredibly responsive. It's been a very difficult year with other Tourism businesses as well, having to lay off so many people, so many people that have been long-standing employees of thl and very supportive of our business. So a hard and difficult year from that perspective. But a resilient culture, a culture that's open to change and that we're pushing in the right direction. I'd also just like to publicly acknowledge Jen for your work. Thank you very much indeed. Your knowledge of the capital markets, your intellect, your ability to bounce ideas off has been really, really supportive for me, and I've really, really enjoyed it as well. So thank you very much, indeed. Thank you for leading us so well through our only equity raise in thl's history as well. And obviously, incredibly prescient in your view, given that put us in a really strong position coming into COVID. So thank you again very, very much. And I will hand over to you, Nick, to just introduce yourself. A number of the people on the call know who you are, but over to you.

[Foreign Language] As Grant said, I think a number of you are familiar with my Air New Zealand days, but just a little bit of background, just started on Monday at thl. So would like to thank Grant and Jen and the team for the incredibly warm welcome I had. Really excited to be here at thl for all the reasons that Grant has just talked to, and they're outlined in the pack actually. For those of you that know me, I had 17 years at Air New Zealand, left there at the end of May. Sort of might have been the time to move out of the tourism industry into something else, but got really excited about the opportunity here with thl and the strength of their balance sheet, particularly comparatively versus the competitors and the industry in general. So looking forward to getting into it. And hopefully, going to meet many of you over the coming days. Thank you.

Brilliant. Thank you, Nick. So Miles, we'll just hand over to you to manage Q&A.

[Operator Instructions] We do have a couple of questions in queue. I'll go to Andy Bowley from Forsyth Barr, first.

I've got a couple of questions, Grant and team. And well done, Grant, for getting through so many slides in such a short time frame. Now a couple of questions. So first of which is around your comments on the U.S. outlook, Grant. You talked about the possibility of a strong calendar year '21. What about fiscal year '21 to June, in light of what you've seen already from a rentals point of view over the last couple of months, having been through the key rentals period for the U.S., even I'd imagine from a domestic only perspective?

So there are some things that we would do a little bit differently if we knew that we're running into domestic-only. So you got to remember that positioning of fleet, there are certain locations that are more internationally focused and so forth. So we wouldn't say that we did as well as what we would have liked if we had known that we were going to be domestic-only through the peak season, but we did do well. Clearly, we've done very, very well on vehicle sales and vehicle sales margin. We have had some other impacts, so we've had closures in locations due to the California fires. And we had closures for short periods of time in some locations due to COVID cases as well. So not maximized would be the, I guess, the words that I've used for the high season. Then running into now and through the other impact into the likes of August and September is the lack of events. So Burning Man, for example, is a key driver for us in August. There's a number of music festivals that have all been canceled as well. So they sort of sit on the shoulders and normally have provided a good buffer around the shoulders. And then there's always international that fills holes that domestic doesn't normally travel. So it won't be as good a result as what you would have in a normal sort of operating environment from an international perspective. But clearly, we've got vehicle sales are going well, and we're doing a lot better than what we could have. So then the big question is, what will domestic continue to do over the winter period and, more importantly, into the shoulder in next year? And it's a very, very late booking domestic market. And so we're not 100% sure what it's going to do in the shoulder seasons because we just haven't seen that yet. But we have confidence that the summer season as it was domestic-only next year would be very strong.

Great. And just in terms of year-to-date fiscal '21, can you give us a sense of how far rental income is down relative to the prior year, recognizing the last 4 months of fiscal '20, you're down 30%, which sounds pretty good in the context of growing that domestic market?

Nice try in that.

Moving on. So you talked a fair bit in the presso around purchases and CapEx for the year. Can you -- are you able to give us numbers around -- or ranges around CapEx gross, net CapEx like it has previously, Grant?

Yes. No, because -- no, sorry. Appropriate try. And the only reason that we won't do that is because it's very, very reflective of sales. And we are being very short-cycle in what we're -- in the way that we're managing it. And we are continuing to try and find other ways of making sure that we can just shorten that decision-making cycle out. So it's still very, very dependent on sales. So that's...

So then may be...

On a net CapEx basis, that then implies that if you -- we've given enough indication that sort of sees where that fleet is coming down, where fleet is coming down. And then on a net CapEx basis, you could assume that we're not going to be growing fleet size versus previous year in any jurisdiction. So net CapEx would only be the difference between, obviously, the sale price and purchase price of a particular vehicle.

So in that context, you'll be a fair bit flexible in terms of your approach to purchases through the year, subject to how sales goes over the next few months or so?

Yes, yes. I think the key point that I'm happy to make is there is no expectation, certainly at this point in time, that any of the businesses will have more total fleets than they have in the previous year.

Yes. And that gives you confidence around your net debt figure or your net debt kind of guidance through the year in terms of first half, second half and where it ends up?

Well, we haven't given any guidance. So what I would say in terms of -- yes, so expect net debt continue to decline for the next few months. And then that will -- then it will come back up as we obviously pay for those U.S. purchases and potentially a little bit more on the other people sales opportunities that we've got.

Yes, okay. And so lastly, just a kind of a follow-up on purchases. There's a -- and U.S. specifically, just looking through the presso, we talk about 950 plus current estimate in terms of purchases for the U.S. over the next year. Then we go to the U.S. divisional page and we talk about 300 committed and then another 550 that we expect to make. Are those numbers consistent? Or is there something else I should be thinking about?

No, that's clear that it was sort of circa 950 anywhere from -- so and basically, we're saying anywhere from 850, more likely 950 based on latest sort of indications. But it could be more if we sell more. So 850 to 950.

Your next question comes from Adrian Allbon from Jarden.

Grant, maybe for you. Just on Slide 42, where you sort of segment your revenue to the 8 months and 4 months. In the thl rentals or the sale of services, would you be able to kind of just give us a bit more kind of unpack on -- and maybe across both sort of time frames, what the sort of split has been between hire days versus yield per hire?

So -- well, it was obviously intentional not to disclose the detail of that. We have only ever historically disclosed hire days and yield at a group level. We know that one of our competitors goes into a little bit more detail, but we've never done that. It would be fair to say that yield has come -- it's different by market, right? But probably what you'd expect. Yield in those last 4 months has come down in New Zealand quite a lot. Australia has come down a little bit and the U.S. has been up. But hire days has been down, obviously, in those last 4 months in all markets. So if you wanted to go pre that and talk the sort of first 8 months, as evidenced by the -- I'd say that roughly, that revenue, hire days and yield were all sort of sitting around where it ended up. So no major sort of split between hire days and yield.

Okay. And as you fast forward for '21 for the rental part, would the last 4 month rebase in terms of yield, would that be sort of your starting expectation?

No. No.

As well. So it is down because of...

No, no. No, no. Because we had, obviously, the Get Moving campaign in New Zealand. So that's skewed all yields down.

Right. Okay. And that -- and when you try to...

Sorry, you go.

Sorry, just on the tax on New Zealand, I mean the at 40% is roughly 26% in yield on that campaign and 14% down on hire days, obviously, with a lockdown in there as well?

With the lockdown in the result, yes. Yes. So hard to say exactly where New Zealand yield is going to end up. It will be substantially down on historic. We're talking sort of 30-odd percent plus, could be a lot more on historic taken across the full FY '21. Could be -- could end up being more than that. We don't know what the sensitivity is going to be in peak. And December-January, looks -- will stay the same.

Okay. Australia?

Australia seems to be -- Australia is down, but we haven't seen interstate travel, and that could push us back up quite a lot. There definitely seems to be a lot of pent-up demand in Australia. In U.S., U.S. yields are up but revenue per booking isn't.

Okay. Can I -- just a couple more questions. Just in the -- as you sort of face -- if you go to that slide where you've got your, I guess, your road map to recovery or roadmap to profitability. Presumably, '21, as kind of [ you mentioned ] the cash, the accounting side will be what it is in terms of whether it presents to a loss or not. And then '22, hopefully, with orders opened, all businesses presumably track back to profitability. How important in '22 -- I know this is what "a long way out" is kind of like the vehicle sales side of the business? Because obviously, it's coming off 2 booming years at that point, [ in terms of ] your thinking?

No. It's not -- so we're basically -- going FY '21 is the boom year for vehicle sales and then you return to normality. So we don't think we're sort of pulling forward demand in any way. But we think it will sort of come back a bit. But we're definitely dealing with the fact that orders are closed, is definitely generating part of the additional sales at the moment, as well as the shortage in supply. So for example, in New Zealand, there's very little basically none, no European product coming through at the moment. So that creates an upside opportunity for us right now. So the basic answer is FY '22 core assumption would be vehicle sales returns to an essentially normal level.

Okay. And then just finally, when you think about the refocus of the whole digital set of products and investments. What's -- can you give us kind of a sense of, I guess, you're obviously saving losses and stuff like that and more appropriate -- and got a more appropriate cost structure for the current environment. But can you give us a sense of what the opportunity cost of it has been relative to your pre-COVID settings or investments being made in that suite of services?

What -- the market didn't value it as anything. So I would -- in fact, market probably valued it as a negative. So I'd say on a market basis, the opportunity cost is 0 to positive. Broadly speaking, did we -- we exited Togo still believing in the strategic direction of that opportunity in the U.S., but we just couldn't afford to match where Togo was prepared to go along the way. So I don't -- so I would -- historically, I'm on record of saying that, that business had the potential of being the same size as thl. And I still think everything indicates that it does have that potential, whether they can execute to it or not and how much it costs to get to that point, who knows. So you could argue that on what I had said publicly that, that's the opportunity cost. But I think that's time and place. But simply, the market never valued it.

[Operator Instructions] And the next question in the line comes from John O'Shea from Ord Minnett.

Well done on -- in the circumstances on the result. I think it's a great outcome, guys. And Jen, all the best. I just wanted to -- a couple of questions from me. Firstly, in relation to the vehicle sales side, I mean, I appreciate the difficulties in terms of lack of product available from Europe and so forth. Obviously, in the past, it's always been and obviously a very difficult set of circumstances -- different set of circumstances here with COVID. Does -- can the New Zealand market handle the level of vehicle sales we're talking about here? And if so, can you achieve the appropriate level of prices? In other words, are you going to have to suffer a reduction in price to move that? That's the first question, I guess. And if you could perhaps give some comments on that, and then I've got another one after that, guys.

Good. Right. So the quantum of European imports in sort of 2017, '18 and going into '19, was close to 1,000 units. And basically, they're not coming in at the moment. So in addition to that, you're getting all that broader incremental demand in the recreational vehicle categories. So if you look at what's happening on boats and so forth as well. So there is increased demand and reduced supply from competitive products. So I think we can achieve it. It is fair to say we've been very clear that it's a target. So if we get close to that, I'll be very, very pleased and impressed. I do not believe that we'll exceed it at all. So it's an ambitious target, but can it be achieved? Yes, it can. And it can be achieved without driving margins down because we've got a large dealer network that we've brought into the sale across the country. So it's not price-competitive. And what we've done from a discounting perspective is -- we've discounted on the higher-margin ancillary products. So free servicing for a year and retail accessories and so forth. And just taking a classic loss leader approach to a series of vehicles, whilst they're not loss leaders, are a lower-margin product. But the overall impact on margin, I mean, we're talking close to $70 million worth of stock. If we're clear at all, I would say the margin impacts versus -- if we dribbled that out over a number of years, would have been about $1 million. So you save that in interest anyway.

Yes. No worries. That's fine. Secondly, you made a comment about the U.S. market, given the shortages over there and the risks around being able to get that fleet. Can you perhaps give a bit more color on that in terms of the delays involved? And how much risk there is there in the sense that -- I know you have to put your orders well in advance. But how likely is it that those orders may not able to be fulfilled?

Well, we're sitting here in mid-September, and we need the vehicles by April. So -- and that puts us in a very, very -- at April at the very latest -- that puts us in a very different situation because the constraints at the moment are about dealers who need vehicles now for sale tomorrow. So what we're basically seeing and hearing is there is significant shortages on dealer lots now, a number of dealer lots with next to nothing on them. The constraints come from, obviously, just the rapid speed and ramp-up required from the manufacturing, plus some supply chain issues that are linking with that. So we understand that probably about 60% of the vehicles being produced on a day may have a product that they're waiting for, an awning or an air conditioning unit and they're getting out within a few days post that. So we expect that, A, we're really up in our booking position with slots with manufacturers that will be okay. And two, we actually think a number of those fundamental supply chain issues will sort themselves out over the winter period. So that gives us confidence.

Thank you very much, Grant, and well done again in the circumstances.