Tourism Holdings Limited (THL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Tourism Holdings Limited 2024 Annual Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Grant Webster, CEO and Managing Director. Please go ahead.

Thanks, [ Kaylee ], really appreciate that. Thank you everybody for your time. And welcome to the FY '24 annual results presentation for thl. I've just been introduced, so Grant Webster, CEO of thl. I am here today with Cameron Matthewson, our new CFO; Steven Hall, our Deputy CFO; and Amir Ansari is here as well in his role of leader of IR. I'm going to move through the presentation, as always, at a reasonable pace today. We'll skip several slides, making sure that we leave plenty of time for Q&A towards the end of the meeting. So let's go straight through to Slide 4, the executive summary. It is well understood, our underlying profit after tax was within the guidance range of $51.8 million. Statutory net profit of $39.4 million included the well-flagged $12.4 million impairment, so the goodwill attributable to the U.K. and Ireland divisions. Pleasingly, we had record EBIT results for New Zealand Rentals & Sales, Action Manufacturing and the New Zealand Tourism businesses. We're very pleased as well as we continue to have strong confidence in our balance sheet and accordingly, we have declared a final dividend of $0.05 per share, taking us to $0.095 for the full year. We continue to grow our fleets and have expectations for growth in the coming year. We note we very clearly that our returns on funds employed declined, but that was reflective of the economic situation. Despite the operating conditions for the coming period, as I've just mentioned, we do expect to see an increase in our underlying impact for FY '25 compared to FY '24. But I would note that it is too soon to say exactly what that number will be. And we will continue to review when we are likely to provide any particular guidance. Given the prevailing economic conditions, it's also clear that to achieve the $100 million net profit after tax goal in FY '26 is unlikely. And so we've removed that timing, but we remain absolutely steadfast in the belief that we have the necessary components and will advance towards this goal as Tourism rebounds further, and the general economy improves. We'll skip through to Slide 7 on return on funds employed. We know this is a critical metric for our business. We remain focused on delivering a higher than 15% return on funds employed for several periods to account for these lower periods, making sure that we are delivering an average above WACC return over the long term. When you look at the slide, it is easy to ask the question, can we really see a 50% improvement in the group result moving forward? My answer is, absolutely yes. When you look at the New Zealand Rentals & Sales division achieving 22%, and you look at the Action Manufacturing and Tourism numbers also achieving outstanding results, you can see that we do have the core ingredients for success, and we know how to make this happen in this business and industry. We take similar lessons into the other markets that we operate, and we make the changes that we know we need to make. At global systems, our accountability to people to hold them to achieve the results and our product knowledge will ensure that those changes we make deliver to our future goals. I'm now, early in the piece, going to pass over to Cameron to talk through the capital situation, our banking and depreciation rates. Welcome, Cameron.

Thank you, Grant. We are pleased to have recently refinanced our banking facility with ASB and Royal Bank of Canada joining our long-term partners, Westpac and ANZ in the syndicate, which has increased from $250 million to $475 million as we look to further optimize our funding between uncommitted asset financing and bank debt. Our process was well received and was oversubscribed both in terms of participants and volume. This level of engagement resulted not only in greater capacity, but also better covenants, improved pricing and extended security with tranches extending out to 4 years. With this facility effective from 15 August, we've already started to draw down on it. Moving forward to capital management. thl has given -- has demonstrated ability to manage capital. Being able to avoid a raise during COVID is one such example. thl has risen over the course of the year [Technical Difficulty] continue to regrow our rental fleet, and we also have higher retail sales inventory. Referring to my initial point, this growth has been carried out in a controlled manner that has maintained appropriate leverage ratios, particularly in the current macroeconomic environment. thl will continue to manage its capital in a dynamic manner as we balance growth within whatever prevailing conditions require. Looking forward at CapEx, gross CapEx has increased marginally in FY '24 as we continue to regrow fleet. And pleasingly, proceeds from ex-fleet were higher than prior year. In response to overall economic conditions, moving forward into FY '25, we expect fleet CapEx to be lower than each of the past 2 years, as we respond to excess retail inventory levels and in return firm up utilization on existing fleet. On to dividend. As Grant mentioned earlier, we are pleased to be able to declare a final dividend of $0.05 per share, takes our full FY '24 dividend to $0.095 per share. This represents a 5.3% cash yield for New Zealand shareholders or 7.4% when taking into account imputation. With Australia currently in a position of tax losses, there is no franking credits for AU shareholders. The dividend reinvestment plan continues to apply for the 2% discount available. Next, moving on to depreciation. Real depreciation rates or RDRs, are a key metric for thl, as they represent how well we recover the purchase cost of a vehicle upon sale and thus remove complexity as the vehicle moves through rentals and then to sales. RDRs have been excessively low in recent years as motorhomes have achieved abnormally high sales margins and as such, we have not been reporting them. However, as conditions normalize, we have resumed this reporting. Looking forward, we expect RDRs for New Zealand and Australia to be below historical norms due to a greater portion of ex-fleet vehicles being sold through our own retail dealerships and the ongoing realization of manufacturing synergies. We review our accounting depreciation rates annually to ensure earnings are appropriately apportioned between rentals and sales. And at a total thl level, we expect depreciation cost to increase in FY '25. It's important to note that these annual depreciation rate changes do not affect the lifetime earnings of a vehicle. And as such, we encourage investors to use RDRs when assessing our efficiency and purchasing and selling fleet. Back to you, Grant.

That's great. Thanks, Cameron. Now I'd like to talk through the merger synergies and cost efficiencies. It's very clear to us that we still have a strong definable advantage in thl through these cost efficiencies and merger synergies, despite the challenging economic conditions. We are performing above our targets. We're not immune to the inflationary pressures over the last 3 years, but we're certainly in a position where we can positively absorb them relative to others in the market. Fleet costs has certainly continued to be an area of focus for the business and pleasingly, fleet costs going into FY '25 are decreasing, which clearly benefits to a small degree FY '25. But more importantly, it provides a good foundation for reduced costs into future years depreciation and interest. What is clear is that it's become more and more challenging for us to assess and determine what exactly is the synergy and what's a standard cost-out high from this purely through the course of time. When you think about our modeling for the synergies being completed in 2022, FY '23, there's lots of things have changed across the business. So we're now focused on a cost-out opportunity, which we think puts us in a far better position. We've got the benefit of the synergy models that we did, the direction that they provided us, but we're more able to more accurately assess our current day performance against costs in the current economic environment. So the key focal point for us in terms of this new cost-out approach will be fleet and fleet cost, procurement, everything from living equipment through to electricity, duplication across the business, which still exists, and we're moving out through technology, insurance and a whole lot of other operating costs in the rentals divisions, a simple example being relocations as we look at more fleet efficiencies and bringing the systems closer and closer together across the business. Moving on to the divisional reviews. It's great to see the New Zealand Rentals & Sales had a record result. We have got a strong rentals return in terms of the total number of hire days. We still have growth available. We've noted though that, that growth rate is slowing into calendar '25. To be fair, the winter business domestically has been slower than expected, as have the Australian Trans-Tasman visitor numbers. But overall, the New Zealand business has managed well in this economic environment. We do see growth in vehicle sales moving forward with the 2 additional sites that we have in Palmerston North and in Hamilton. And some time, probably later quarter 3 of this financial year, we will move to the new Waitomokia site near the Auckland Airport. It's a really exciting opportunity for us. We'll have group support with operations together, which has been a long-held desire finally fulfilled, we'll have an incredible customer offering for rentals, for sales and for service. And on top of that, we've got a great opportunity for us to connect with local iwi, Te Kawerau, Te Akitai Waiohua and Ngati Te Ata Waiohua. These new locations all make our direct sales business in New Zealand much stronger and reinforces our leadership position in the market. Our belief in New Zealand is strong. We'll continue to invest as the conditions warranted. Moving to Australia. The rental revenue Australia is flat primarily due to the non-tourism revenue that existed in the prior corresponding period. Non-tourism does continue to be a focal point. We do see that there will be more opportunities in the future, but it is cyclical with events. We're growing our relationships and we're growing our position in this market for those future opportunities. We would note, as we've mentioned in May that domestically, rentals wasn't as strong as what we expected and the international shoulder season wasn't what we expected post summer. Forward bookings are positive. But again, the growth rate isn't at the same rate as it has been over the last couple of years. The retail business in Australia was tough, we know that, and it will continue to be tough in FY '25. We're doing reasonably well with used motorized ex-rental fleet, but have seen margins in all categories squeezed. So our key focal points for this area of the business, we need to adjust our stock levels and bring those down and that is in training and working effectively. We want to see systems alignment across the business and we have a single dealer management system entering into the business in this financial year in Australia. That's going to give us much more timely transparency and influence over exactly what we're doing with stock and pricing right across the group. We are updating our product range, we're adjusting our product range from a cost perspective, and we're ensuring that we've got really strong leadership in every one of our locations. Manufacturing in Australia has also had some significant improvements in what I consider a very short period of time. Action Manufacturing have joined the business. We're aligning our people, our systems and our processes. What we've seen is quality improvement, speed of build improving, we're seeing greater efficiency through new investments and equipment, and we've seen inventory reductions as well. Now this will all flow through to an improvement in our RDR for Australia moving forward for rentals and a reduction in warranty cost for retail and improvement in our brand position across the market. Moving on to the USA. There's no doubt that the result is disappointing and quite frankly, unacceptable. It's fair to say that it has been a very tough market, and that's well evidenced by commentary from other publicly listed operators in the RV sector. However, we need to continue to change. We've taken a number of actions starting from January this year. We have refocused the business on domestic revenue more and are achieving some real success in that space. We're investing in alternative revenue streams, non-tourism opportunities and again, winning and refocusing the business in that direction. And we've got a rejuvenated retail sales team, and they are performing in what is a challenging, challenging market. There's more still to do. Both the USA and Canadian businesses have clearly had some very high-priced vehicles over the last 2 years, and we are clearing those particularly high-priced model year '23 units, which have seen excessively depressed sales margins. From a rentals perspective, this high season has improved on the previous year, but sales still remains concerning. But we're starting to see the mid-market priced vehicles starting to stabilize. Again, like we've seen in some other markets, we're starting to see some price reductions in fleet available for manufacturers, and that will ultimately flow through better rentals returns and better retail opportunities. We're very pleased to see Kate Meldrum take up the role of North American Chief Operating Officer. And I'd have to say in visiting the market a couple of times recently, the business is building very positively, and it's in a good place for recovery. We've got strong expectations for a significantly improved result in FY '25. However, it's going to be at least FY '26 before we deliver our ROFE expectation -- a ROFE result above our 15% expectations. Canada. The Canadian business has a return on funds of 8.3%. However, if you take into account the acquisition accounting adjustment, it would be just over 10%, but clearly still below our expectations. The sales has again been a struggle in Canada, below our expectations, albeit an increase in RV sales on the prior year. FY '25 will still be a struggling year for the Canadian business, again, as we transition our fleet from the higher-priced vehicles to lower-priced vehicles, also change out our core fleet management system, but we do have confidence in the future. The North American synergies appear very real, and they will be realized and continue to grow over the coming years. Inherently, Canada has strong demand from a rental perspective, and it is going to be one of the true beneficiaries of the global efficiencies from our global system development. The opportunities here are very real. Once we see a full fleet rotation, we will see a significant improvement in return on funds employed. And it should be noted that this is the one jurisdiction, which has had an increase in depreciation rates, which were particularly low historically. Going through the hard stuff, U.K. and Ireland, another concerning result, impairment is clearly disappointing, particularly given the investment to acquire the remaining 51% of the Just go business just before the merger was Apollo in late 2022. A post-investment review is being completed. But through that process, we would note that the largest change in the valuation was actually in the cost of capital, which moved from just over 8% to just over 11% through that time. It seems in some ways that it's been a bit of a perfect storm for the U.K. business. Vehicle supply remained an issue with again around 200 vehicles not arriving in time for the high season, significant increase in insurance costs, some legacy vehicles, which had excess of R&M and low sales value and an increase in overhead costs. There is a path to a better future, and we are working through the execution of that at this time. Action Manufacturing had a great result. We are definitely seeing the benefit of the acquisitions over the recent period of time, and we're seeing the linkages with Brisbane as we talked about before. We've got a new product that the business is launching. We've got new suppliers that have been very effective, new technology, and we're clearly taking more market share in the heavy transport space. We'd note, however, that, that heavy transport part of the business is going through a tough patch as we see long-haul transport operators in New Zealand pull back on capital expenditure for new fleet. We expect, based on our historical lessons going back right through to the GFC, that this period of pullback in capital expenditure from customers will be no longer than 12 months, they need to renew fleet and will be back on the order books. There are parts of this industry, the long-haul transport sector that are saying to us that the current conditions are worse than the GFC and expected to last into -- well into calendar year 2025. Obviously, we're adjusting costs in our approach appropriately. The Tourism business had a record profit result. Waitomo still isn't at pre-COVID levels from a visitor number, but we are getting a bit of profit result, obviously. So we're doing more with less. We see growth in Tourism in the coming year, clearly at a slower rate than we've had over the last 2 years. GSS costs, look, there is a decent movement there. There are transaction costs, some changes in recharges, which skewed the result, but there was some inflation increases in there as well. Let's quickly move on to the outlook. So just reiterating what we said before, despite the operating conditions in the coming periods still being uncertain, we do expect an increase in underlying profit after tax in FY '25 when compared to the prior year. Our current rental forward bookings demonstrate year-on-year growth in hire days within our key markets, New Zealand, Australia and North America. The booking intakes in recent weeks indicate that the recovery is slowing, but potentially impact in the rentals calendar year [Technical Difficulty] for the calendar year 2025, clearly indicates that it may take longer than initially expected to return to pre-COVID levels. That clearly aligns with broader industry feedback we see and that broader sentiment. Fleet purchases and production for 2025 have been adjusted accordingly with lower capital expenditure planned. It's important for us to reiterate that these headwinds we see is very much cyclical and associated with the wider economic downturn rather than any structural change for the RV industry. We've got a positive long-term outlook, and we believe we're well positioned. We are the global leader in RV rentals. We've got opportunities, synergies, cost reduction, supported by a balance sheet that is strong and strong capital management disciplines. We continue to be focused on return on funds employed. We recognize that the returns from the USA, U.K., Ireland and Canada divisions in FY '24 are unacceptable. Addressing the Northern Hemisphere is a key focus for management. And while we expect return on funds employed in '25 of these divisions to remain below our 15% target, the changes we've implemented should lead to future improvements, particularly in the way that we bring those North American businesses more closely together. Our future NPAT goal has been covered, and as previously noted, it's a case if not now, but we have confidence that we will achieve this goal. The assumptions that we detailed earlier in May, still stand true. So the summary for the thl today from my perspective. As I said, we're a strong business, continued focus on managing capital and balance sheet position. We've had excess fleet in FY '24, which impacted the result because we didn't achieve our rentals and sales expectations, but it provides us with an opportunity to be more capital efficient moving forward. And we should not underestimate the future benefits, synergies and cost-out from our global systems approach. Real simple example to leave you on with that. Canada is the last destination for our Motek system to be implemented. From here, all our enhancements are global. If we beta test something in one region rather than benefiting, say, 300,000 or 400,000 hire days, it can be applied across 5 jurisdictions getting 5x the benefit. We've got great crew and the vast, vast majority of them are moving forward at an enormous speed dealing with change and accepting the challenges. As I said in the Integrated Annual Report, throughout my tenure, I continue to be amazed at how thl responds to challenges and changes in a way that creates more opportunities for growth, growth for crew, for customers, for our footprint for financial returns and our global position in this industry. We've come off a record high, and we are enduring a decent fall, but we've adapted, and we are responding with passion and energy and a commitment to deliver. We are in a positive place. We're shortly going to open up for questions. However, with Cameron having joined the business a few months ago, I thought it was a really good opportunity for him to provide just his initial insights and views on the business. So Cameron, I'll pass over to you, and then Kaylee will come back to you for Q&A.

Thanks very much, Grant. Across the 100 days or so I've been on board, the thing I notice every day is that thl is a business that never settles. It's constantly evolving, whether it be the implementation of common digital platforms that Grant has referred to throughout this meeting or the dynamic capital management that business is always pushing forward. Underlying this is a culture of merged thl, which stitches together common behavior such as teamwork and speed to outcome. Across the business, there are crew members with substantial tenure and deep operational knowledge that translates the complexity of thl's vertically integrated business model into a competitive advantage. As I mentioned earlier, the discipline of capital management on a large scale is a core strength of thl with our ROFE measure part of the everyday vocabulary of the business. Managing through COVID without a capital raise and also the support of the banks through our recent refinancing are examples of the skill that thl has in this discipline. From my perspective, as a new starter, there are a few signs of -- there are a few signs that has been affecting us as a result of the merger of 2 established businesses, which were bought together with pace and during a very difficult time. The synergies generated from this merger are evident, as are the further opportunities not yet captured, as we continue the likes of our North American plan and our ways of working efficiency initiatives. The downgrade in May was disappointing, but it's obvious that thl is an organization that is quick to front foot issues, and thl demonstrated this when we were one of the first to disclose the impact on our expectations caused largely by the sudden fall in consumer confidence. As I look forward, we are further building and refining our planning mindset and tools across the short, medium and long term, particularly in relation to the interplay between medium-term fleet decisions and the more short-term market and economic dynamics such as those we face today. Thank you, Grant.

Thanks, Cameron. Kaylee, we'll hand over to you for questions from those on the call.

[Operator Instructions] Your first question comes from Andrew Bowley with Forsyth Barr.

A few questions from me. The first of which is around the near-term outlook, and I recognize Grant, you provided some commentary on a market-by-market basis and some of those comments around forward bookings. But can you give us a sense of how you see the RevPARV outlook on or in each market for FY '25 at this stage, please?

Look, to be fair, Andy. I think we've given the best commentary that we can at this point in time. We considered what was right to release to the total market, and we've put that out there. So probably nothing further to add on that right at this point in time.

Not even on a kind of a broader group basis in terms of how you see broader RevPARV aggregate across the group for the year ahead?

All right. So the way to interpret the commentary that we've put out there is that, we've still got hire days growth. And we've talked about the facts -- back in May, we talked about the fact that peak season yields are still coming back. So the net of those, we still see RevPARV growth into FY '25. And what we're saying is, calendar '25 is just that growth rate has -- certainly looks like it's slowing. I don't expect it to go backwards. And when you think about the scope that we've still got to get back to pre-COVID levels, I think the market will still absorb quite a bit more growth yet. So that's probably a slightly different way of wording the information we provided over this release in the previous one.

Maybe one for Cameron around the depreciation changes. You referenced in the presentation that you are making some changes in FY '25 now. Historically, we've had quite a gap between the RDRs and actual depreciation rates. I just wonder if you could give us a sense of how the changes will impact the difference between RDRs and actual depreciate rates over time relative to what you've reported historically and forgetting the last few years in light of the inflationary impacts?

I think I've sort of stated, Andy, that we're looking at efficiencies and how we procure and manufacture and also a better return from our retail network. And as such, that should improve historic rates that we've seen. So we're positive in terms of continuing to push forward in that space. And from a broader perspective, as Grant mentioned, we still see opportunity in the business to capture more efficiency synergy as we continue to implement our various strategies.

Yes. The thing I'd just probably add to that because, obviously, I've been here a little bit longer than Cameron. So, Andy, those differences when you go back pre-COVID, so depreciation -- and real depreciation rates are probably going to be closer than they were then, acknowledging Cameron's point that we don't currently expect to get back to the height of those previous RDRs because we are seeing inherent efficiencies as he talked about in our build and the retail percentage.

So I guess, actual depreciation rates are going to be coming down faster than RDRs relative to pre-COVID, is that a fair summation? I guess what I'm getting at here is, are we closing the gap between net realizable value of fleet and net book value?

Yes. The simple answer is yes.

So maybe last question from me. Grant, you talked about the full fleet rotation in Canada providing some benefits and similar commentary in the U.S. Just to clarify what you mean there. Are we talking about that's just the higher-priced 2023 vehicles? Or is it related to vehicle type with suboptimal product mix in the broader North American market?

So really good question. Thank you for that. So A, it's the high-priced vehicles in the middle of '23, absolutely. I would reword -- I don't think it was necessarily suboptimal purchasing before. It's relative to -- as we've talked about for the last 12 months, the detail that we've gone into in creating an essentially combined North American fleet, it's not entirely combined, but just working through every single vehicle type across both jurisdictions, looking at exactly what the build price has been from different manufacturers, what the content has been in those vehicles, whether we get return on that content and maximizing that. So -- but it ends up being substantial.

And the realization of that is over a number of years, I'd imagine?

Correct, over 3 years.

Your next question comes from Grant Lowe with Jarden.

Just around the refinancing side, I think just starting with that. So you called out at the May update that there was -- I think, June 2024 was sort of a pinch point, if we want to call it that, but then improving from there. You've obviously been through a refinancing now. Can you just sort of update us as to where things sit relative to covenants, whether those have changed otherwise?

So we've got -- we've said that we've got more funds. We've got better terms, which you can take as a more favorable governance and better pricing. And that doesn't change the point that our metrics are still improving anyway. So a really good job by Cameron, Steve and Bruce.

And in terms of -- obviously, you haven't given net CapEx guidance this year. I appreciate the sales environment is difficult to sort of assess this early stage of the year. Do you have -- what are the -- you can say around the gross CapEx side of things, expectations? Obviously, you haven't called out this as far as I've seen the -- you have mentioned the 9,000 vehicles at the end of FY '25 or at least than 9,000. How should we think about that, the gross CapEx side of things for the year?

So similarly to the net -- it's the same sort of reason. So you would see if you look in the financial statements that we talk about the committed CapEx and that's around $160 million around that, Amir?

$106 million.

$106 million, not $160 million. I got the 1 and the 6, right. $106 million. That obviously is way low, and we've got the North American fleet to come in. So you can generally expect gross CapEx to be less than last year, but we haven't given any indications of what that will be. In terms of the exact fleet numbers, I mean, that's a deliberate choice for us not to release those numbers at this point in time. And in lines with the fact that if we want to look at fleet that we still see growth, we just see that growth softening. We also have noted the fact that we think our fleet has been inefficient in the last 12 months because we didn't achieve quite the volumes of sales that we wanted. So you can see some efficiency coming in there as well. So basically, overall utilization of the fleet should be improving. So we just don't need to buy quite as much as we would have originally planned.

And in terms of the closing net debt at $466 million, I think it was at halfway there was some timing difference between the spend and obviously, delivery of vehicles if I'm getting my dates right. Is there anything to call out at this stage across the balance date in terms of timing or otherwise?

No, no, there or thereabout. And so out of all of that when you take earnings and everything into account, net CapEx, the whole thing, it will move a bit upwards, but it's not going to be a substantial move. Certainly nothing like the last 12 months, obviously. That won't move dramatically in FY '25.

And just last one for me around the May expectations that you sort of set. You did touch on some of this in the various geography segments. But just coming back to that, you had a couple of usual slides in that pack in May. How would you sort of characterize the overall performance relative to your expectations? And I guess, specifically around the ANZ, you had a slide on that with, I think it was -- from memory a $13 million impact on lower sales volumes primarily.

Yes. So we were broadly in line with our expectations for that last quarter. Yes. If I started getting in detail, it's minor. It's not material movement. It's broadly in line, yes.

Your next question comes from Ben Wilson with Wilsons Advisory.

Just touching further on the Australian sales environment, just given that was sort of a major part of the May update. Firstly, maybe on the retail sales volumes, in particular. Your GP margins did fall, but you actually managed to increase your sales volumes there. Just wondering if you can give an update on how you're seeing retail sales demand unfolding in Australia?

So by the numbers that we see, we think we have picked up some market share. But margins and pricing in the market continue to squeeze and continue to come down. So I think that summarizes sort of quarter 4. Going into the next period, we've clearly indicated that we think it's still a very tough market. But you've also gotten that sales volume, just remembering that we've got CamperAgent in those numbers. So sort of on a same-store basis, we were down -- CamperAgent was [ debris ]. So we'll start to roll that over next half.

And then just moving to the ex-rental sales side of things in Australia, your gross profit margin actually increased on last year. So is it a stronger sort of demand environment for the ex-rental sort of more motorized vehicles?

No, it becomes a bit of a mix issue with that, Ben. So we've obviously -- one of the things we said in May is that we will continue to push that ex-rental motorized fleet really hard. And a reminder, we said that we are confident that we will sell it at some point in time. And we're on track. We're selling it. We continue to selling it. We're continuing for it to move in July and August. Again, some margin pressure on that to keep those vehicles moving, but we're still delivering those good margins out of it.

And then just last one for me. Just switching to the U.S., I saw Camping World in their second quarter update mentioned that they're ramping up their used vehicle stocking levels. So just wondering if you're seeing some stronger signs for ex-rental sales volumes off the back of that?

So if you dive into the detail of what those dealers, including Camping World are buying, they're looking at anything from a 2010 through to sort of 2016, 2017 as being the primary price points that they're after. So on a motorized basis, they're tagging anything from a U.S. $39,999 up to $49,999 unit. So it's not exactly where we're playing. We're obviously paying sort of $20,000 above that. We're at the model year '22, '23, '24s. So at those really low-price points, towables, they're up there at $19,999 to $29,999. That's where the market is paying at the moment. As interest rates come down, as the overall sort of pricing comes down, that will probably change back again. So we are seeing some improvement. June was a good month. But as we talked about May, it's very, very wavy. So June was a good month. July not as good. We've got to see how August closes out.

Our next question comes from John O'Shea with Ord Minnett.

A couple for me. Obviously, the excess fleet and the weakness in used vehicle sales, am I -- is it a fair comment to say that the U.S. we're seeing certainly light at the end of the tunnel there. And in contrast to that, in Australia, would it be fair to say that we've got a fair way to go, just sort of clear that excess inventory, I guess, that's the first question. Do you think that's a fair summary?

I think you're probably up to the minute in terms of that commentary because there's definitely -- there's some data that came out of the U.S. today that sort of indicates that towable up there has started to recover, and motorized the indicators you could definitely take are probably at the bottom there or thereabouts. So I think you could make that comment based on industry data for the U.S. And I think your commentary for Australia is correct. I think there's still some pain to come. We have seen a number of small manufacturers going through liquidation in Australia and some small dealerships go into liquidation and some major larger manufacturers change ownership structures and merged with other entities in the last 3 months. So you can definitely see that it's impacting the industry.

Now at the same time, you mentioned you're starting to see a few signs of lower purchase costs from the manufacturing side. Do you think that that's kind of -- do you think there will be further declines? Or would you -- given that the U.S. has kind of turned the corner or turning the corner, in my view. Is there a situation here where you've got -- you still got all the negative impact of the used vehicles flowing through, but not necessarily any benefit or relief from the purchase side. Do you think those declines you've seen in the prices of buying the vehicles are better temporary? Or do you think you'll see further reductions? Or do you think -- and what do you think about the purchase cost side?

So the purchase cost side, just to put it in context, certainly from third-party manufacturers, its small single digit, so 2%, 3%, 4% kind of savings. You're seeing the chassis manufacturers' sort of hold price will go up 1 or 2. So it's small. I think that what -- no one that I've talked to in the industry from a manufacturing perspective sees that there's been -- if there is any real benefit in discounting significantly to try and increase volume. They don't think it's going to raise the pie. They want to wait to see interest rates drop and order demand grow. So they're not going to get any overhead leverage by dropping price. So there's no value in them doing that. So they are passing through what I would consider as structural changes in price. So steel prices coming back down, aluminum, fiberglass, so forth, all those componentry elements coming back down for them. So that's what's been passed through that sort of small digit perspective. So I think they will hold. And I think there will be a little bit more to come into next year, but not -- nothing like the magnitude that went up. I think the pricing generally is here to stay.

So you're kind of getting hammered both ways, right? You're having to pay more, but you're not getting anywhere near the prices on the used vehicles?

Yes. That's just the swing back from where we were getting the arbitrage the other way. So we had all the vehicles.

And look, the final thing from me was maybe slightly bit of a comment rather than a question. But on the rental side here, we're seeing a slowing from the peak in terms of domestic travel. And so that's really a cyclical factor. Do you agree with that? Obviously, the international travel side, it will be a reflection of a whole range of things inbounding into Australia. But the domestic side, whether it's be Australia and New Zealand, is purely a reflection of a moderation in that travel as we've come out of the pandemic. In other words, the levels that they reached in terms of the domestic travel were unsustainable and was always going to slow. Do you think that's a reflection of that? Or is it more in international demand being softer than you thought?

I think it's -- well, international growth rate is slowing, but domestically completely agreed that it's cyclical. And what the research that we've seen and there's some of the big advisers out there have done some interesting tourism reports recently which reinforced the fact that those paying rent, those with mortgages are just hit that next point of pain where tourism is being put on the back burner as well as the buying of vehicles and refurbishing homes, so forth and so on.

[Operator Instructions] Your next question comes from Kieran Carling with Craigs Investment Partners.

Can you provide some more color around the China procurement project for Action Manufacturing? And what sort of EBIT uplift that might be able to provide the division? And maybe also touch on what we can expect from the cost-out program that you've mentioned for FY '21 and FY '26?

Incredibly fair questions, incredibly appropriate questions. I'm not going to dive into the detail on them. But really, really, really good questions. So the cost-out program, we've given some indication of the areas that we'll focus on. We'll consider with what the right sort of information is around that as we get to the annual meeting and see whether that's an appropriate point to release something or not. From a China perspective, again, going to be careful around not giving away any competitive advantage or items. But we have spent quite a bit of time up there over the last 12 months and have been working with a large number of different suppliers and have a number of different projects underway in products that we're already putting into the market very shortly, which I think are great quality, really good quality, much lower cost, really efficient from a lead time perspective and inventory management perspective. So we see them providing really good benefit which is not indicating on an actual dollar value of that.

And I appreciate you've already given a bit of a steer on CapEx for FY '25. But can you just tell us what you've assumed in terms of your vehicle sales, particularly in Australasia for the year ahead relative to what you've achieved in FY '24?

So again, you'd be wary of not giving too much information, particularly that we haven't provided the market. I think we've said that it's still -- you got to look at it by market. We see that it's still a tough market. New Zealand, we've indicated that we should see growth in New Zealand, particularly with Palmerston North, Hamilton and Waitomokia. So we expect that growth, and we think we're in a strong position there. Australia, we've said it's going to be tough and will remain tough. And North America is still a tough market. But depending on how that goes, we should see growth, should certainly see growth in the U.S.A.

And then I guess just a high-level one on your outlook statement to finish. Vehicle sales are still obviously very challenging. You've indicated there's going to be some growth in hire days, but yields are probably starting to slow. And we're going to see some fairly limited fleet growth based on your CapEx guidance. So is it fair to say that the key drivers for your NPAT improvement year-on-year are just going to be around the cost-out and slightly higher rental fleet with yields kind of slightly up? Is that the right way to be thinking about it? Or are there other kind of factors that play also?

So the nuance that I'd probably add to that is Andy's question around RevPARV. So we do see an improvement in that in FY '25. In fact, all jurisdictions should see an improvement in that. United States, in particular, should see a really good improvement in that. Australia should see an improvement. So you've got to look at the utilization, the yield and then you've got to add the fleet numbers on top of it. So we do expect fleet growth, just not at the rate that we've been seeing over the last 2 years. So yes, some fleet growth, some utilization improvement. Those 2 things coming together offset any yield and then use this cost-out opportunity on top of that as well.

And then just a quick follow-on to that question. Would you see that at a high level, again, kind of weighted towards the second half? Are you able to provide any sort of steer on how we should be thinking about NPAT in the first half of '25 versus the first half of '24?

I don't think there'd be any surprise, given the results in H2 the growth in FY '25 is weighted to the second half.

Your next question comes from Vignesh Nair with UBS.

Just a couple of clarifications more than anything. Just following on from the previous question, on RevPARV growth, are you able to just dissect that across utilization and yield? You mentioned sort of growth year-on-year. So can you maybe just give a guide on what the quantum of utilization growth would be versus the yield contraction?

Amir Ansari will shoot me if I give that [ number ] because he's pushed so hard for us to give the RevPARV numbers, which I think makes a lot of sense in work for us from several different perspectives. So if I break it down, then we're just back to yield neutral. Happy to give the general guidance as is just that we see a decent utilization opportunity in the business, and that comes from as I said before. We ended up being less efficient than we should have in fleet in most jurisdictions in FY '24 as a result of primarily vehicle sales not being at the levels that we thought, harder to adjust your purchases immediately, and the growth rate in rentals not being quite what we expected. So more to the utilization improvement than yield within net RevPARV. I hope that helps.

So is it fair to say that you're not currently discounting all that much to keep utilization up if yields aren't contracting all that much or -- provided that's the best case assumption?

Look, it's slightly different by period of the year and by jurisdiction. We indicated in May that yields -- we gave an indication of where yields were generally hitting by market, and there isn't any substantive change to that commentary at this point in time.

And the second point, on each of the regional slides you've given kind of what the total RV sales would be under normal operating conditions. But based on your sort of view over the next sort of 1 to 2 years, firstly, when do you get normal operating conditions? And kind of is the $100 million NPAT target, I suppose, contingent on those volumes of RV sales?

Yes, the $100 million target is definitely includes those kind of volumes within it. Those volumes are -- again, if you look at them, they're not ridiculous numbers, but you would be asking me to say exactly what the GDP growth will be in each of our jurisdictions, what the interest rate will be in each of our jurisdictions and blah, blah, blah. So I can't give an indication of exactly when because we are definitely seeing that it's the slowdown so closely related to the economic uncertainty.

So it's fair to say, internally, you're thinking that's beyond FY '26 given that's when you think you'll get to $100 million?

I don't know. Well, no, because there's a number of factors. I mean, the biggest difference to FY '26 is obviously the total fleet number. We're not going to be at the previous total fleet number in FY '26 that we were previously. So that's the biggest change there. We could achieve all these numbers in FY '26. That's possible.

And I suppose the final question, just on the mix between ex-fleet and retail, specifically in Australia. Is it 2,200, I suppose, sales kind of a reasonable level into '25? Or is -- would you expect growth on that number? Or just kind of trying to get a steer on what an appropriate kind of retail sales numbers given that's jumped around a little bit?

Look, given that we've seen that it's still a tough market, I think we're really seeing sort of flat to some growth.

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

All I want to say is thank you very much, everybody, for your time. We look forward to catching up with as many people as we can over the coming week. We've got lots of catch-up. So thank you, Kaylee, for hosting us, and we'll talk to everybody shortly. Thanks.

That does conclude our conference for today. Thank you for participating. You may now disconnect.