Turners Automotive Group Limited (TRA) Earnings Call Transcript & Summary

Okay. Good morning, everyone. Welcome to the half year results presentation. Thanks, everyone, for taking the time to join the call today. With me is Aaron Saunders, our Group CFO. So 2 of us will go through the presentation this morning and then open up at the end for Q&A. [Operator Instructions] So yes, usual sort of agenda, we'll give a quick overview of the half. Aaron will take us through the financial performance. I'm going to go through the segment results and end a few comments around our outlook. So yes, just starting with some highlights. So we're very pleased with the 6 months just completed. It's another record result for the business. So continuing to grow earnings despite the macro challenges, particularly impacting our Finance division. 3 out of the 4 businesses, so Auto Retail, Insurance and Credit Management, are all well ahead of prior year profit contributions. And I think the Auto Retail division is clearly a standout performance, growing new volume and market share in the used car segment. Finance continues to be impacted by rising interest rates, but these interest rates will become a tailwind for us once their easing cycle starts kicking in. But we're pleased to see the interest rates have stabilized as well as our margins. The wider New Zealand used car market is up 6% year-to-date. So the graph here shows you the April to September, 6-month period. So you can see we've just popped up over the bottom of last year. But it's fair to say that the number of transactions has been skewed somewhat by quite a large number of pre-registrations of used imports in June, which was in advance of the changes to the Clean Car Discount program. I think the dominant trend that we are seeing, though, is that demand for high-value cars continues to moderate and strengthen at those lower-price-point segments. We'll sort of touch on that a bit later on. The Turners brand continues to grow from strength to strength. And shown this graph before, we need to dedicate the source of this to our mates at Forsyth Barr, actually. The Google searches for Turners cars continues to outpace searches for used cars. So that gives us a good sense of how sort of mind share and ownership of the used car category. The combined effect of branch expansion, improved customer experience, digital marketing, brand investment are certainly doing the job for us in Auto Retail. And you can see registered dealer numbers have plateaued sort of down around that sort of 2,900 level. On the sort of fleet transition, at the end of September, EV is made up around 2% of the total New Zealand vehicle fleet. So it was just over 90,000 battery EVs or plug-in hybrid EVs. And whilst it's growing strongly, there is still a long way to go in this fleet transition that is clear. From our own sales side of things, we're seeing good growth in our own sales of lower-emitting vehicles. So in September '23, we had just under 10% of our total sales being an EV or a hybrid vehicle. Results-wise, yes, really pleased with the 6 months. And we've seen strong growth in revenues, EBIT and pretax profit. EPS, up 7%. And off the back of that 6 months, our directors have declared a fully imputed Q2 dividend of $0.06 per share, so up $0.01 on the same period for last year. In Q3, we've seen volumes and margins holding up well in car sales. And our damaged vehicle volumes have still been at very strong levels, which is good to see. In Finance, yes, it feels like the economic environment is certainly reducing SME's cash buffer for -- to sort of sustain themselves from [ shock of it ]. And our expectation will be that if unemployment continues to lift, there will have to be some flow-through impact into arrears. And insurance claims continue to track below expectations. And obviously, the flip side to the interest rate impact and finances that we get some benefit through the insurance business through our investment returns. And in the Credit Management business, corporate debt load has been recovering slower than we expected it to. But SME debt load is increasing quite quickly at the moment as the New Zealand credit metrics continue to deteriorate. Okay. I'll hand over to Aaron now to take us through our financial results in a bit more detail.

Thanks, Todd, and good morning, everyone. So a pretty pleasing jump in revenue and EBIT over the first 6 months of the year, up 16% on prior. And there's a little bit of an element of a recovery from, it's a long time ago now, but the suppression the effect of Omicron on the first half of the last financial year. So our net profit after tax up 9.5% and NPAT up 8%. That reflects a slightly lower effective tax rate in the last financial year. In terms of revenue growth, obviously, the standout is auto, and that's a function of a 6% increase in total car units sold over the period, that's both owned and consigned units in total, and a 31% increase in damaged and end-of-life vehicles sold. In Finance, revenue growth reflects our efforts in repricing the loan book over the last 18 months, offset by a slight reduction in total receivables at 30 September. Insurance revenue gains are coming from higher levels of policy sales and our kind of repricing efforts in that portfolio. And Credit Management revenue, as Todd alluded to, is increasing off higher levels of debt loaded. How that translates into profit before tax? Obviously, Auto Retail result underpinned by growth in car units sold, a slight tick up in margin as well as an improved Finance attach rate in the first half. And we also sold high numbers of damaged vehicle units. We expect that market share gains and new branch growth will lock these improvements, and Finance as we've well signaled has been impacted by rising interest rates and that slight drop in total receivables. The insurance result reflects an improvement in investment returns and continued efficiencies in our claims handling performance. And credit performance improvement from increasing levels of debt load as parts of the economy go under increasing pressure. And corporate costs are up off the back of higher interest rates. And this slide clearly highlights that super growth in auto and -- which now in that first half made up 56% of group profits. It does also highlight the mix of annuity and activity profit streams, which we feel provides earnings diversification as well as stability during difficult times. And it is worth repeating that the Finance division is still really operating with one hand tied behind its back. We expect the headwind of rising interest rates to turn into a tailwind at some stage over the next 12 to 18 months. Pleased to note, we've been growing dividends for almost a decade in Turners, and the dividend reinvestment plan gives shareholders the option of converting the dividend to shares at a discount of 2%. And we are currently predicting that our full year dividends will be at least $0.24 a share. And based on a share price of around $4.25, we feel this gives a very attractive gross dividend yield running at just under 8%. In terms of the balance sheet, as we're calling out that inventory levels -- despite higher sales, inventory levels are down, and that's a reflection on faster stock turn and a deliberate strategy to buy less expensive units really to reflect where demand is strongest in the market. Finance receivables are down slightly from the September '22 high watermark, and that's a reflection of our deliberate strategy to prioritize quality and margin over loan book growth. Property, plant and equipment have increased due to the acquisition and development of new sites in Timaru and Napier and also the expansion of our Christchurch footprint. And our borrowings have largely [ merit ] the reduction in finance receivables. Some further color on our funding mix. The key change in the funding mix as introduced -- introduction of another party to our securitization facilities. This provides the company with further diversification and funding sources, which we are certainly pleased with. And we also received a very positive rating from Fitch as part of this process with a AAA rating achieved on the pool of oxalate receivables we sold into the new warehouse. We're still very comfortable with debt levels and debt capacity in the business. We have capacity to support Oxford lending for around the next 12 months and to complete the committed property projects that we have underway. Back to you, Todd.

Great. Thanks, Aaron. Okay. We'll just work through the segments now. Yes, so Auto Retail revenue up 20%, reflecting sort of increase in both consignment and owned units across the year. Total car sales were up 6% over the last half year and also reflects growth in our damaged and end-of-life vehicle units. So the mentioned segment profit is up 62% for the 6 months, which is just an outstanding result from our team operating that business. As you can see from the graph, retail market share has continued to improve with a couple of dips between the Clean Car Discount, preregistrations flow through market. So you can see that we've just called out those little dips yet. But the -- clearly, the overarching trend is our market share continues to improve. Our damaged and end-of-life vehicle unit sales were up 31% from the tail of the weather events purely this year and also just the continued growth of units that are uneconomic to [ appear ] been reflecting the aged vehicle fleet. We're really pleased with continued growth in our sourcing capability and improvement in our sourcing capability. So that continues to improve through the investment we're making in lead generation, the pricing tools that we're using in pricing strategies that we're implementing. And we continue to position our stock acquisition for where the demand in the market is strongest through the use of our data analytics. So almost 9 out of 10 cars in our inventory is now less than 15,000 in price point. And that's probably -- well, the comparison would probably be more like 7 or 8 this time last year. The damaged and end-of-life vehicle volumes continue to track up. Excellent damaged vehicles and older vehicles are getting more expensive to repair through parts and labor inflation. And vehicles are more technical, which means insurers are writing off more vehicles as uneconomic to appear, and we are a beneficiary of that. And clearly, weather events also leading to more cars being written off by insurers as well. So that trend, we would expect to continue. Our pipeline branch expansion project is growing nicely. We now have Timaru open and trading very well. So we've been open for just around a week or so and can say that we've sold 20 cars in Timaru so far and bought, I think, close to 50 cars out of the local region. So yes, really pleased with the early response from customers in that region. Our new large Napier site is on track to open in January. So we're getting close. We've had a few sort of slight delays there with [ counsel down in the air ] and consenting. I think they have had a fair bit on their plate. So it's probably not that surprising that we've had a few delays. And we're certainly seeing more property opportunity come to market as interest rates and holding costs impact landholders. And I think our ability to act quickly is really helping to convert a number of these into own sites, and a number of these quite huge properties have been able to buy have been very good examples of those. We do have strong conviction that owning key strategic sites is very important to the long-term value creation for all shareholders, both through protecting the locations that we operate in and creating value through land prices appreciating over time. That's just a photo of our Timaru branch. So you can see Timaru on the digital sign board there. And yes, the place is looking fantastic. So that's on State Highway 1 approaching from north of Timaru, a super location here, very, very visible. And this is a shot from just at the end of last week of our Napier site. So you can see building is basically completed, the internal fit-outs going on at the moment and a bit of work still to do on the yard. But again, we'll have a really highly visible site double the size of our current operation in Napier. So yes, we're expecting good things from that investment. In Finance, pleased to say that we're now starting to see growth in the loan book again. So we sort of bottomed out there in June. But since then, we've seen a good -- a small amount of growth. But we're back in growth mode, which is great, just off the back of stronger premium consumer lending. What we are pleased about, though, is our best-performing lending from a margin and arrears measure perspective as Turners -- the loans we originate out of Turners in our direct channel, which is up 24% year-on-year. We've also continued to adjust our credit policy through these first 6 months. That has been the right thing to do. So we're certainly being conservative and we're certainly keeping an eye on what we think is coming at us. And also pleased that we still retain the economic provision buffer. So the $2 million overlay that we had said at March '23 remains at $2 million at the end of September. Yes, interest expense has grown at an incredible pace over the last 2 years. And clearly, this has had a material impact on our net interest margin. I think the good news, though, is that the impact of the rising OCR is starting to slow down. We've seen net interest margin stabilize, and we're expecting expansion sort of in the second half to occur. And that will get a pace as the OCR easing cycle kicks in, whenever that may be. But we know that there is a tailwind coming back for Oxford Finance, which is good. And as we've been consistently talking about, our focus on quality has seen our credit metrics continue to improve. So you can see on the left-hand side there, we're now into our fourth year of new business being written at above the average credit score for the New Zealand auto loan portfolio. So that puts us in a very good position to weather any increase in the New Zealand unemployment rate. And kind of no surprise that with our focus on bringing better quality borrowers into the loan book, our arrears level has continued to outperform the broader market. So very pleased that we're tracking sort of around half of what the total auto loan portfolio is in terms of arrears. Also hardship numbers in the books running at very low levels, so right on 50 at the 30th of September. And just to put that in perspective, we have over 28,000 customers in Oxford. So to have 50 in hardship is again a good reflection of the quality of their book. In insurance, we've seen revenue growth of 5% and profits up 14% in the first half, yes, continuing market share gains, which is delivering good robust policy sales despite some challenging market conditions and growth in the [ near-term ] premium combined with the investment returns all help deliver positive profit growth. And you can see here, we've just added a graph just highlighting this sort of a peak that we're seeing around claims cost inflation. That is a real thing in this business, but being offset by the frequency of claims reducing. And we think that is just due to people driving a bit less with working from home as it is a phenomenon and also just with the cost-of-living pressures and the price of fuel and things. And Credit Management certainly turned a corner, which is good to see, revenue being up 8% and profit is up 29% for the half. Debt really loaded up and debt collected is up off the back of that and an increasing number of customer defaults. Again, probably hasn't been as strong the debt load, particularly from corporates and banks in particular. But I suppose the thing that we do reflect on here is that CENTRIX are reporting that current New Zealand wide arrears levels are now tracking above 2018 after coming off those historic lows through the pandemic. And that trend, we're expecting to continue to worsen over coming months. Many see credit as very well positioned to help those corporate [ and vis-a-vis ] clients with their hard-to-collect debt. You've heard me talk about this sort of basic formula before. I just wanted to sort of mention that we talk a lot internally about this. We're really pleased with the high levels of engagement that we have across the business. So our simple formula is that if we provide a great employee experience, then our team have the best chance to create a great customer experience, and the combination of those 2 things should deliver a great shareholder experience. We are absolute believers in the benefits of a high-performing and strong culture and there is definitely, in our view, a strong correlation to business performance. So we continue to invest as a team in building and maintaining that strong culture. And another sort of layer on that is our employee share scheme uptake, which is now 50% across the team. So we have sort of 1 and 2 of our team both highly engaged in owners of shares in this business, which we think just kind of makes a very, very powerful combination in terms of helping us execute our plans. Okay. Let me just wrap up with a few things around outlook. So yes, we've used this table over the last 3 reporting periods just to help highlight to shareholders and investors how we see the risks and what we're doing to mitigate those risks. And that's given us now an opportunity to sort of track the impact of these risks as well. So pleased to say that 2 of the risks we feel are now off the table. So supply chain and recruitment and retention of people, both those things really aren't factoring on in terms of our -- what occupies our minds. I would say the regulatory risk has probably shift to low. There are some likely changes if -- assuming the national government say will do what they say they will do around reviewing the CCCFA and potentially removing the Clean Car Discount. But both of those things, we're not worried about. And obviously, the interest rate risk, we've shifted to low as well because we are now at the -- it would seem at the top of that cycle, and easing cycle is likely to be the next move. We do think recession and sort of the overall impact on demand and loan defaults, we would still call out at a medium risk level, in our view. We're comfortable that we are doing the right things to mitigate those risks, but we want to call it out and make sure that shareholders understand how we think about that. On the trading outlook, we expect to see upside from our new branches in Q4 for Auto Retail. Timaru is open, trading well. And obviously, we have Napier coming onstream. We're continuing to target our sourcing in those high-demand segments, and we think that is clearly critical to maintaining our momentum. In Finance, quality metrics still remain a key priority for us, particularly as economic conditions sort of feel like they're likely to impact arrears more acutely. And margins, we expect to expand in the near term, although there is still some sensitivity to the OCR track if it were to move up. In insurance, we expect the claims ratios to be stable. A net drop in frequency offsets any claim and further claims inflation and policy sales should be robust. In Credit Management, we're already seeing the kind of offset of the economic conditions and their performance and the result of debt -- lift and debt loads from corporate and SME clients. So we are well positioned to take advantage of that next stage of the credit cycle. Yes, we're just reaffirming our October guidance. Probably no surprises there that given it wasn't that long ago that we updated the market. So yes, reaffirming guidance at FY '24 result will be ahead of the record FY '24 -- '23 result. Yes, in terms of what's next for us, I think the Turners business is continuing to show great resilience in the face of pretty challenging market conditions. We still feel like there is a lot of opportunity in the used car space. I would just like to remind people about the 20% of cars, 1 in 5 that are 20 years old that we benefit from that replacement demand, but also flow on supply into our damaged and end-of-life vehicle division. So we get 2 bites at that cherry. And also that strong Auto Retail business is having a very good halo effect into Oxford and into Autosure insurance. So -- and we know as interest rates start coming off, that will be a tailwind for our Finance business. And as we grow the Auto Retail network, we are certainly keeping a keen eye on the increasing number of good property acquisition opportunities and key strategic locations. And we're seeing that we are getting very close to the NZX50. So we're looking forward to the announcement early December to hopefully confirm that move, which would be, I think, a good endorsement and reflection of the great work that a large team of people to put on over the last sort of 5 or 6 years to really grow this business. Okay. Well, we'll pause here and just see if we can open up for some Q&A.

So let's start with Grant. So just bear with me for a second here, guys. Okay. Grant, we've opened you up.

Guys, can you hear me okay?

Yes, we can.

Yes. I'll just turn you up so I can -- we can hear you. Okay?

Okay. Excellent. Great result, guys. Just 3 or 4 for me. Just in terms of the margin, so you've got on the Auto Retail slide there around margins being up 66% on owned vehicles. Obviously, that's a great result. Can you just remind us what the dollar figure is and then what the breakdown of that 66% growth is in broad terms?

Yes. Yes, I can do that. I anticipated you might ask a question about that, Grant. So yes, I mean, essentially, the margin increase reflects our increasing efforts to source locally because we're then buying and selling on the same market and a consequent reduction in used import volumes. But broadly speaking, the [ GP ] after fees. So we treat ourselves from a management reporting perspective in the same way we treat a third-party vendor. And then as we charge it -- ensure that we charge ourselves fees and our buyer fees are charged on those sales. So that number is running at -- internally is running at just over $1,000 a unit now, which is significantly up on the first half of last year. And I think, again, it's kind of a testament to the fact that we are in more places and we provide a very good service and solution to people who are looking to move their car on and also that we've pivoted really to where the demand is strongest in the market, which is in that sort of sub-$15,000 space where demand is really robust.

I think it's probably fair to say as well that sort of lease and ports has ironed out a bit of volatility in those margin numbers as well, yes.

Got it. Okay. That's great. In terms of the -- so it looks like interest rates have sort of settled down and the latest curve suggesting a comeback, as you've sort of noted. And it looks like just looking at some of the credit sort of metrics that you provide that credit quality has sort of stabilized, at least half-on-half in terms of credit scores or percentage of new premium lending. How are you thinking about -- with NIM and credit quality sort of stabilize, how are you thinking about growth in the receivables book going forward? Should we expect to see some growth in that? Would those 2 dynamics sort of settled down now? Or is it -- are you waiting to see how the economic cycle plays out?

No. We've had a small [ backwards ] growth, Grant. So in that last sort of 3 months, we saw some leisure growth. And I'd expect that, that would continue. Generally, in terms of the cycle, it's a good time to grow when your credit policy is at its tightest, which is I'd describe as around about now. So we feel that the new business we're originating now is going to stand up pretty well, notwithstanding it would seem that unemployment rates are going to rise over the next sort of 6 to 12 months.

Yes. Okay. That's great. And then in terms of the NIM, yes, it looks like it's ticked down very modestly in the half. I appreciate it's probably done better in the second quarter. Where do you see that sort of stabilizing it on the current loan quality settings? I'm thinking sort of 9%, including commissions that you posted for FY '23 is the full year. Where do you see that as a sort of a long run for where we are now?

Yes, it's a good question. I mean I would say that I would expect over the next couple of years that, that will expand again to buy now the sort of 100 to 200 basis points. It won't obviously go back to the levels it was at when we were lending on a slightly high-risk basis. But yes, there is 100 to 200 basis points over the next couple of years as kind of the OCR returns to a more neutral rate.

Yes. Okay. Great. Just last one for me. And so the -- so you've held the guidance of effectively 45.5-plus after delivering 25.7. So obviously, that implies some conservatism around the second half. How are you thinking about the second half at the moment? I appreciate these damaged vehicles got -- was a bit of a bump in the first half and then a few other things. How are you thinking about the second half dynamic?

Yes, yes. So there was that bump in terms of flood write-offs. I would say there is some seasonality in our result. Second half is always a bit weaker than the first half in pure dollar terms because of the kind of December-January effect, where you almost lose a month over the Christmas period. Yes, I mean the other sort of single point to call out is the timing of Easter is quite different this year. So at kind of Easter is right over that last sort of week into March, which we're anticipating will having -- have some impact on the March result. So yes, I would say that it would be a surprise if the first half was as much above -- sorry, if the second half was as far above the comparative as we've seen in this half. And I wouldn't be surprised if the result was closer to flat on the second half of last year just in particular with that kind of Easter effect kicking in.

Thanks, Grant. James Lindsay, we'll hand over to you. You can...

Yes. Again, congratulations or maybe more so to Tina for the great result.

We can pull her over, if you want.

Exactly. A few from us as well if we can. Maybe just talk about the success just across the country, sort of Auckland versus the rest of the country first.

Yes. I mean the regions have been pretty strong for us over the first half. I mean not that the main centers haven't, but I think they probably -- they typically outperform, say, Auckland just on a kind of comparative market share basis, James.

Yes. I think also Auckland, where people are probably more highly leveraged, seen the most with the biggest sort of cost-of-living impact. And similarly starting to notice a few cold winds blow in Wellington, reflecting the sort of impending change in government.

Yes, good color. And then obviously, just with the success of owned cars, is it how far through you think that sort of transition of being able to move stuff to having yourself owning it versus auction?

Well, we -- yes, so that's a sort of wholesale to retail shift change you're talking about?

Yes.

Yes. We've made some good progress with the lease companies in the first half. Yes, it's a slow burn, but we're certainly getting traction around the logic that supports that shift. Sometimes it's a little more difficult just to get the actual behavior to change. And they have their own pressures as well around funding and large fleets of the same vehicle coming through. So often that auction wholesale channel will be the optimal channel for them to sell the product through. But we're pleased with the traction that we're getting.

And just in terms of sort of capacity as far as having retail versus auction, has there been any issues with regard to that? Or is it just very easy for people to have one or the other?

Yes, there's no issues around capacity. Although what we have seen is quite a significant lift in consignment vehicles from those lease companies coming through the net first half. I think as the sort of supply chain around new cars has eased up and, I think, particularly consumer demand just drift off, the sort of back orders and things for those lease companies that started to kick in. So our lease volumes are up kind of 15% year-on-year from -- as a result of that.

You called out sort of Finance and attach rates. Just with regard to sort of the opportunity there and a transition over the next few years about what could be the potential of getting higher attach rates?

Yes. Well, it's always a case of getting everyone performing at sort of the highest level. I mean we had branches in the network that would have north of 40% consistently in terms of their attach rates. Overall, we're at -- what are we at? 33%, isn't it? 34%? So we still see this opportunity here, for sure.

And then last one for me. Just with regard to what Aaron was talking about, the margin on those owned cars and just the sustainability of that. You're comfortable that you were able to sort of continue to achieve that 1,000? Or do you think the dynamics of relatively low import cars over this time period with a sort of Clean Car Discount stuff has actually helped it out to be -- to a greater extent?

Good question, James. I mean, I think whilst import has -- imports have kind of been a sort of a marginal impact and the really -- the big driver for the increases that we're not bidding as many wrong. And if or when we do get it wrong because you always get some wrong, there's snowflakes, basically, the losses aren't as significant. So it doesn't take as many good units to make up for the bad ones. So I'm pretty confident that margins feel sustainable. And people have been asking us now for 3 or 4 years when margins are going to drop back, and they haven't. So I think, obviously, the proof will be in the pudding. But I'm pretty confident there's resilience there.

Yes, I agree with Aaron's comments, James, unsurprisingly. But the way I sort of think about it is sourcing much more of that stock locally now. It's turning faster compared to an import -- used import, which takes us anywhere up to kind of 2 to 3 months to get it here, plus some refurb, plus you've got exchange rate risk. There's just a lot more variables kind of going on in that space. And I think it's -- we're getting, as Aaron said, better at buying locally and kind of we've just taken a bunch of volatility out of the mix of those cars that we sell with fewer imports. So yes, I think it's a very fair assumption to say that we can be consistently delivering at that level.

And then maybe just next etch on that is sort of how -- from a systems sort of IT perspective, as far as doing that pricing, how much of an advantage is sort of a nationwide sourcing and being able to see what's selling where and things of that as an advantage versus sort of more localized agent or car sales guys.

Well, I think it's a massive advantage basically. The fact that we're selling 40,000 cars a year and we've got all the pricing data on those cars, I think, is a huge advantage. Plus, you'd start layering in to the web analytics that we're getting now for where people are looking at the price points, it is giving us a better view of kind of where demand is tracking to. And I think we're doing a better job of kind of communicating amongst those [ they're ] buying team and not just buying in the moment, but having a forward view of what is going on in the market and where are the shifts likely to occur. So yes, I mean, it's like anything -- there's a whole bunch of little things which kind of combine to driving these improvements and these results. So yes, but I think that data is a massive advantage for us.

Right. That's it from us. And look forward to getting invited to the 10% share party as well.

Sounds good. Cheers. [ Kieran ], we'll go to you. I know you had typed a few messages in there, but it's probably easier to ask them, isn't it?

Yes. Congratulations on a great result. Just a couple from me. First of all, just with the registered dealer numbers, they seem to have stabilized a little bit in recent months. Just interested to get your view on that and whether you think there's any more consolidation in the market to come and perhaps that will -- how that will link through to your market share gains from this point.

Yes. I mean that's been a little bit of a surprise to us, [ Kieran ], that the numbers haven't continued to track back. I think there's a pretty strong relationship to the strength of the [ Kiwi yen] and the relative attractiveness of the used car market for importers, in particular, which is where the swing volume comes from. So the [ Kiwi yen ] up at 89, I think that there's people who are if not coming back to market and certainly not considering leaving at the moment. So long term, I think we're still over dealer as a country. We've got 25% more dealers per head than Australia and North America. And it feels like that over the long term, there will be further kind of consolidation or aggregation. But you're right, it has hit a pause.

And then just looking at your commission and sales revenue. In 1H '24, it was $45.3 million, up from $36.1 million in the first half of last year. Can you just provide some further detail there and perhaps break down what was a one-off impact due to those weather events?

Yes, that's a good question. I would -- and the first half of the year, just off the top of my head, I would put that weather impact at least $1 million -- somewhere between $1 million and $1.5 million. We've also had -- we've made some pricing movements. So we've looked to sort of push through CPI increases across cars damaged vehicles and our trucks and machinery business. So that's been another impact, if you like. So yes, combination of volume both in cars and damaged vehicles and trucks and machinery for that matter and price rises.

Cool. And then last one, just around your hedging profile in Oxford. So you've put it up to 74%. What's the plan in that respect kind of as we come into an environment where interest rates are either holding flat or sort of coming down into next year? How are you thinking about your hedging profile?

Well, we've kind of -- I mean, I think we've -- it's probably increased. I'm comfortable with where we're sitting now given that the expectation is that interest rates have started to fall back towards a more neutral rate over the next 12, 18 or 24 months. Yes, I think that we will probably take this sort of position somewhere between sort of 65% and 80% going forward just because of the size of the finance book means that we want to remove the volatility that we've seen over the last sort of 2 or 3 years.

Okay. David, you should be able to speak now.

Okay. Great. I just have one question, if I may. Could you just remind me the sort of nuance in your auction commission and other revenue line, the difference between auction commissions at a point in time and commission and other revenue over time? It seems to me that, that latter over time number has gone up materially in the first half relative to the pcp. And I just can't remember what the sort of differences between that and point-in-time sales. And if there's anything worth calling out there?

Good question, David. So the point-in-time is that the revenue that we received from both buyers and sellers when we sell units or a car unit or a damaged vehicle or a truck. Over time, there's probably a bit of proxy for the work that we're doing on vehicles. So best way to explain that is if you think about it, if we groom a retail vehicle. So as we shift more cars into retail, we do more grooming. And because you do grooming, you earn some revenue from that, but you really on -- you kind of earn the revenue when you sell the unit, not when you necessarily perform the work. So that's the distinction between a point-in-time and over time, if you like, in those categories. And we did see an increase in pass-through costs for things like storage as a function of that jump in damaged car vehicle volumes. So there's a bunch of sort of moving parts. But largely speaking, the more cars retail, the more we do on those cars for our vendors, in particular the lease companies, and the more of those costs that we recover.

You just reminded me, is there's some kind of cost offset number somewhere in your P&L as well as that reflects those grooming costs, et cetera?

Yes. So we eliminated the costs on the units that we own ourselves because essentially, it's an internal charge. So they get eliminated at a consolidated level. So what you're more seeing is a reflection of increasing spend to refurbish third-party vendors' vehicles.

Okay. I'll just check if there's no questions on the Q&A. It looks like just from [ Kieran ], so covered those off. So here's your last chance. [Operator Instructions] Or we could give people a couple of moments, if there is anything. Okay. Well, it looks like we've set aside everyone's questions for now. Thanks very much for your interest and your attendance this morning. And if you have any other questions, would like to talk to Aaron and I about anything, please feel free to get in touch with us directly as well. So have a great morning, everyone, and we'll catch up soon.

Thanks, everyone.

See you later.