Okay. Well, welcome to the earnings call of GUD results for the 12 months ended 30th June 2022. I'm Graeme Whickman, GUD CEO and Managing Director, and I'm here with Martin Fraser, the company's Chief Financial Officer. As a matter of housekeeping, we'll have time at the end of the call for questions and discussion, so please hold your questions till then. A recording of this call, along with the presentation material, will be available later today on GUD's website. We'll start by Martin and I running through the key messages and group financial overview. I'll speak to our evolving view of the portfolio vision and our ESG efforts, followed by commentary on our segments of automotive, APG and water businesses.
I'll hand back to Martin to cover the financial results in more detail, and then we'll conclude with the trading updates and outlook for FY2023 before we go to Q&A. Let's turn to Slide 3. You know, we've experienced strong end user demand reflecting the resilience of the auto aftermarket. We also detail our non-discretionary management estimate of revenue later in the pack, and that's circa around 80%, which is a very important number. Throughout the results, there was a positive margin expansion in our legacy BUs in the aftermarket, which we flagged as our expectation, even though a pretty strong backdrop of supply chain pressures and inflationary challenges.
Now, we did revise down our guidance in June due to the impact of the well-documented new vehicle supply constraints which has impacted APG's revenue, even as the demand for vehicles has hit record levels of backlog. We announced and subsequently completed those two important acquisitions. One I just mentioned, being APG, but also one in Vision X, in the auto lighting power management, ELEC category. These two are supportive of that business transformation we've been planning in terms of customer and product and geographic and powertrain diversification, all part of the momentum building in our portfolio right now.
Now, as part of the portfolio, we are nearing the completion of the Davey strategic process, which did include a non-cash impairment, and we'll get into that in a few minutes. Then finally, we're focusing on ensuring our balance sheet is strong and our previously discussed de-leveraging target of two times remains the same aspiration. Okay, Martin, I'll ask you to cover the next slide in terms of the general financial overview.
Thanks very much, Graeme. You can see on Slide 4 that we delivered revenue growth up over 50%. Within that, organic growth of circa 8%, taking our group revenue to AUD 835 million. Clearly, when the acquisitions achieve a full year, we'll be well in excess of AUD 1 billion. Our underlying EBITDA was up 46% to AUD 175 million. Although that was down 50- basis points in the prior year, the organic auto margin grew, which we'll see later. Therefore, the decline reflects the influence of the new acquisitions. Margin management was well executed by the auto business, although Davey did decline in some margin as they had some change costs to absorb within their result, which we'll touch on later.
Underlying EBIT grew by 46% to AUD 147.8, in line with revised guidance. In fact, a little ahead. I'll speak later on in the deck around the definition of underlying EBIT as well as underlying EBITDA when we get to Slide 28. Cash conversion was within our expected range, and we'll see later that this really reflects a step up in inventory to address supply chain disruptions. We'll go into that further in the deck, but I just wanna stress that we see that as being transitory and being represented by inventory with good velocity of turnover, and we don't think that represents a longer-term risk to inventory impairment. These are largely non-discretionary consumables and are at low risk of obsolescence due to fashion, trade changes, and color preference, and all those sorts of things you might see in another business.
Although the underlying EPS was up nearly 6%, the final dividend of AUD 0.22 per share was down on last year's AUD 0.31 and reflects a clearly stated desire to reduce our gearing level to circa 2x underlying EBITDA. I'll speak to that again when we get further into the deck. Back to you, Graeme.
Well, thanks, Martin. Well, on Slide 5, we reflect on our recently released portfolio vision. Importantly, you should see a strong alignment in the portfolio vision to the FY2022 acquisitions. It helps build context as to the way we're plotting the future with the underpinning of some critical business foundations. I feel we really are on a transformative journey with great prospects and a strategic path with clear messages and measures of success in 2025 and beyond. On Slide 6, we update our shareholders on our ESG progress. Back in FY2021, we showed for the very first time a glimpse of how the ESG journey is broadening at GUD. We do pride ourselves on some of the metrics we achieve in the areas of employee satisfaction and safety.
You know, we strive to operate as a top quartile company, punch above our weight, basically. These two areas, we certainly do that. We've been working hard to improve in the areas of diversity and ethical sourcing. You know, we just released our Modern Slavery Statement. You would've seen that. The business reliance on non-ICE revenues, all of which have improved since that point back in FY2021. Now, the board and the executive team have got some pretty big ambitions to broaden our view and ultimate vision on the sustainability of our business and also the impact we have on the world around us. We kicked off a multi-year effort to build a better foundation for that. The first phase was completed with materiality assessments, including a lot of external stakeholders.
Obviously, that helped shape our own point of view, and we've shaped six key impact areas which are shown on the slide. The next stage is to actually revise our baselines given the acquisitions over the course of the year, and then the third phase is obviously the ongoing measurement of what we're trying to achieve. I should also mention that we haven't sat still in terms of the existing ESG-related performance efforts as it pertains to exec compensation, and that's actually been reflected in a number of the important measures in terms of STI and LTI, in terms of non-financial metrics around the ESG aspirations, in terms of ICE revenue, safety and engagement. Now, moving over to the first segment, Automotive, excluding APG that is.
Taking a closer look at our Automotive segment result shows the revenue was just up over 29% or so, reaching AUD 575 million, which is a record for GUD. Net of acquisitions, the organic revenue rose 6.5%, which is excellent, keeping in mind the impact of the lockdowns, if you cast your mind back to Q1 earlier in the year, and therefore it has accelerated a little into H2, which is great. The Auto underlying EBIT was a record also for GUD, whether you look at it at total or just organic levels. The underlying EBIT margin was a little off, as Martin's mentioned, just a little bit.
However, the important bellwether of the organic margin ex-JK, a measure we put into our decks the last couple of years, was a positive story, lifting 50- basis points over prior year to tip in at 25%. You know, we were able to price appropriately through the year, and this was able to overcome the higher supply chain, freight, and domestic inflation costs. Now, on that note, we do expect future cost inflation FY2023, and additional pricing will be in place to protect the margins. In FY2022, the supply chain logistics and challenges I've just mentioned, they did actually escalate further, and we did need a good buffer of fast-moving stock. Martin's just actually touched on that.
We think that in FY23, we might be able to moderate that a tiny bit if those supply chains do stabilize. If you cast your mind through the China eradication period, we had to make sure we actually had good continuity of stock, hence the increase in inventory, but of the fast moving As and Bs. Now turning to Slide 9. Well, the size of the prize continues to be strong. The car park, that is, being the prize, is steadily growing. It sits at just over 19 million units, up 1.5% or so, and this growth is forecast to continue.
At the same time, we've seen an aging of the car park to nearly an average fleet age of on average about 11 years, which of course is naturally very positive for our wear, tear, and replacement business units. On Slide 10, we detail some other critical car park data. As the car park's growing, it's becoming more complex, actually quite complex. We at GUD love car park complexity. In fact, the segmentation continues to shift in the favor of SUVs and pickups, and even the small amount of EV, EVs being sold are actually predominantly HEVs, which also have a nice powertrain, so you get the best of both worlds in terms of tapping into that.
The car park complexity is supported by our products and services, which you can see on the slide there. We estimate to be circa 80% made up of non-discretionary products and services when you look at our revenue profile. Now, given the record Automotive ex APG results, you'd expect to see some auto highlights, some snapshots. On the next three slides, we touch briefly to give you a feel for the Automotive business units. Now, we've broken it down to some key categories. Auto elec, lighting and power management, electric vehicles, powertrain, four-wheel drive, trailering, and finally undercar. On Slide 11, we speak to the powertrain category. We ended up with strong revenue growth for both Ryco and Wesfil.
The service and wear parts were impacted as we spoke about at H1, but as we expected it improved into H2. Congrats also to the Ryco team who were awarded second place in the AFR Innovation Category Awards with a pretty cool N99 MicroShield filter. Even more impressive was their placing in the AFR's top places to work. Congrats there. Now, both IMG, so Innovative Mechatronics Group, and AAG delivered strong growth. AAG continued to bolster its performance. They were part of a profit improvement plan, which has come to fruition and we're very happy with the traction there. IMG's repair activity and engine management products they continued to fly from the first half into the second half. Really positive.
We grew IMG's repair network into New Zealand and soon over into WA. For good measure, also we started an early effort, sort of a nascent effort to enter into the industrial service repair market. That's completely non-automotive in nature. On Slide 12, we touch on ECB and a number of the G4 businesses. ECB's revenue from OEMs, such as the light trucks, so your customers like Hino, was consistent through the year, but the broader aftermarket demand was more muted due to the vehicle supply, similar situation to APG. In some parts the manufacturing constraints impacted our revenue due to staffing shortages in the polishing part of their manufacturing process.
They do have decent back orders and have just commissioned automation in the plant finally and actually secured incremental visa workers to alleviate the capacity bottlenecks. Fully Equipped in NZ had modest revenue growth. It was a mixture of choppy car supply. If you think about Australia's situation with vehicles supply, then NZ is actually even more choppy. At times it was difficult to support given the lockdowns impacting on the manufacturing capacity due to staffing primarily. Importantly, they have a strong order bank, and more recently have been able to actually increase their manufacturing throughput. That's a good sign. In undercar, both DBA and ACS performed strongly. Now, DBA had a good mix of domestic and export sales.
The rise in sales was in part due to the product launch of DBA's first entry into disc pads and calipers. We're actually just about to launch hydraulics as well. ACS has come along really nicely since the acquisition and certainly above our expectations. The two companies are actually now looking at a shared export set of resources to drive opportunities over the next few years, part of that sort of good balance of sovereignty, but also strength in terms of, you know, the cost base. Now I'm gonna talk about the other acquisitions of VX and APG, given I just mentioned ACS, but before I do that, let's round out the auto snapshots on Slide 13, where we finish with Auto Elec lighting and power management.
Now this is a great story. Starting in Australia with the BWI team who really did well in FY2022 with strong revenue growth across the year. It came from many of the 20-plus channels, but pleasingly a good portion from new customers and new products, and that's a reflection of the work over the last couple of years. The team have good pricing power and have managed the margins well, having to combat the large and complex supply base. They're one of the businesses that actually had the most proliferated supply base, and so cost inflation rolling through there, but they've actually managed it exceptionally well. Now Projecta, the brand within BWI, one of the key brands, was a strong performer in FY2022 with its power management products.
This year overall, they had over 7% of their revenue from new products, and that's a categorization we use with 12 months or less. It's a pretty stringent view. Not only do they win awards for the Projecta products, but we started the process of greenfielding in Europe and USA, and we're pretty excited about what we're gonna put forward at the SEMA shows in November this year. Now our EV aspirations continue to evolve with IMG and BWI stepping into the market with product and service offerings. We actually did buy a small company called Hybrid Battery Rebuild in H2. Although not large, it does combine with IMG to be one of the strongest competitors in Australia and sets us up very nicely for the future.
I mentioned Vision X earlier. Let's turn to Slide 14. We're delighted with Vision X's performance in the first seven months of ownership. Ahead of expectations, the financial performance is going well, and actually so is the integration. Now the next slide gives you a bit of a snapshot of what's going on. The team are already planning on the first tranche of revenue synergy opportunities with specific products which actually work both ways. We also purchased a small company called Twisted Throttle. It's largely an online U.S. business that deals in motorcycles and specifically motorcycle lighting.
It's got a lighting brand called Denali, which is very interesting, and that'll be part of the small opportunities we can fold into both Vision X and BWI to expand the distribution of Denali and the reach of the respective brands. Now, the U.S. market has been going well for Vision X, but we did recognize in H2 the European market started to slow down for, I think, some fairly obvious macro issues. Okay. On Slide 18, I turn to APG. Now we announced and subsequently completed in the year on actually January the fourth the acquisition of APG.
The acquisition summary shown later on the deck articulates that APG is a game changer and a clear ingredient in our portfolio ambition of becoming a leader in the four-wheel drive accessories and trailering market in Australia and New Zealand. It's a well-established, well-facilitated, and well-managed business. APG is a dominant force in the domestic market with its traditional tow bar products. It's got a proven capacity in recent times to win new business, particularly in the growing categories of functional accessories like nudge bars, bull bars, and sports bars. On Slide 18, we speak to the first six months performance, which was lower than expectation and led us to revise guidance back in June.
The issues spoken about in June were about, you know, new vehicle volumes being severely impacted by supply constraints, but also the mix of certain important vehicles to APG, like the Ranger and a small cost inflation piece that rolled through. Now, we experienced month-on-month declines in vehicle sales in April, May, and June. With that, pickups going from being about 8% up year to date March, and that's calendar year, of course, to being in June year to date down 2%. That's a very big swing. That makes it tougher for APG when you think about the performance of the Ford Ranger, a great revenue earner for APG. Now, the well-documented launch of the new Ranger is very exciting for APG. Let's be clear.
However, the months of April, May, and June were tough on the supply of both the run out and the launch models. The Ranger finished, you know, calendar year-to-date for June down a massive 20%. That's significant. Like I say, it's exciting at the same time because the flip of the coin is that it will start to come through. I've mentioned the vehicle supply issues a few times, and on Slide 19, you can see the impact on the wait times.
Now, the graph shows the volatility experienced in the average wait times this year. If you take the sort of the top three pickups and SUVs, you can see a massive increase versus prior years, and importantly, started to come down a tiny bit in Q1 calendar year 2023, only to see it spike pretty viciously as we entered into Q2 calendar year. Now, that context of wait time is then framed in the next slides as we show vehicle sales. If you go to S lide 20, the story here is simple. Unit sales are off 4.5%. This is off last year, by the way, that wasn't at any historic level. In fact, it hadn't even come back to the trend line. Now, you can see the pickup sales started to tumble from April onwards.
Behind this was a pretty tough monthly instability of the OEM customer orders and production schedules, and they were moving around quite significantly, quite unprecedented for the APG team to deal with. Again, the graph on the right also illustrates the volume change of the top three pickups, and simply put, just tracks the supply of vehicles available, not demand. On the next Slide, 21, we refer to demand, and we are convinced that the demand is being deferred, a view that many different voices in the automotive industry share. The structural need for new vehicles is clear. Scrappage of over 800,000 or so vehicles per annum continues, and the unmet demand over recent years from the likes of small, medium, and large fleet is waiting to be fulfilled.
Now we see Q4 FY2022 as a trough in terms of own earnings and expect FY2023 to improve with the benefit of pricing, the rollout of the new Ford Ranger. Overall, though, we do note that the supply constraints are remaining, and we expect to start to see them moderate in later FY2023 and into FY2024. Now there have been some notable APG achievements since the acquisition and Slide 22 details some of these. APG have won more new business since we purchased over 40 new business awards, which about 80% of it is new revenue. The Ranger launch, when fully in swing, represents a terrific opportunity because we have actually greater towbar penetration on this new Ranger because of the lower Ranger models actually get factory fit packs being offered for the first time.
The new Ranger Sport model, it's actually called the Ranger Sport, is fitted with some of our products, and that model didn't exist before. Now, the APG team are hungry, and they've secured the volume starting in late H1 of their largest towing competitor, Dometic, who has decided to exit this market. This same hunger is also extended into winning some small caravan trailer and chassis business, and that'll be supported by our automotive tier one manufacturing facility in Thailand. Now, I've already touched on Slide 23, so I might just dwell on Slide 24. As the graphic is such a compelling story, you know, we can see how GUD's portfolio covers the front to the back, the inside and out of what is on the page, a typical pickup and the trailer.
It's truly amazing the product coverage by our strong brands. Before I hand back to Martin to cover off the financials in a little bit more detail, let me just advance to Slide 26 to quickly cover off Davey. As mentioned earlier on, Davey's underlying EBIT was down marginally from prior year. However, the non-cash impairment to it in H2 of just over AUD 37 million was an addition to the IMG write-off in H1. These were part of a set of financial fitness actions to reset the balance sheet, driven by the new leadership who are delivering operational fitness steps to prove out the underlying and all part of a checklist in completing the strategic process for Davey. The strong sales growth from Davey is noteworthy, and this relates to the inventory position and the DIFOT levels improving after our H1 actions. Okay.
Oh, well, let's cover off the key financial information. Martin, over to you.
Thank you very much, Graeme. Ladies and gentlemen, I'll start you on Page 29, which contains the financial summary. We'll do a walk through the P&L, starting with revenue, where we can really see that 50% growth that I spoke to earlier. On the right were the exact numbers I spoke to earlier, so I'm not gonna read them out. Importantly, we saw that pull through to a healthy 46% uplift in EBITDA. As I said before, automotive margins remaining robust, acquisitions contributing nicely, and Davey being unable to fully achieve their EBITDA leverage from the sales for the reasons Graeme mentioned. With APG and Vision X coming on board, the amortization of customer intangibles will be an additional AUD 20 million per annum, and we've seen approximately AUD 10 million of that in the half.
We'll increasingly speak to EBITDA results going forward, starting with this very slide, where we see the EBITDA stepping forward 47%. Given that recurrent level of amortization in the results following this one, EBITDA will become our primary measure that we will be reporting to. That said, when we called out the revised guidance for FY2022, when we made the APG acquisition and the subsequent update, we did so using GUD's existing business portfolio underlying EBIT, plus the Vision X and APG EBITDA as a final attribution to the purchase price accounting, and the amortization for those businesses was not fully worked through and signed off by the audit committee and the board at that time. We had a guidance which was somewhat of a hybrid.
On this Slide 28, we've called out a line underlying EBIT to very much pinpoint how we finished against the guidance we gave through the year. I apologize if there is some confusion for people between underlying EBITDA and underlying EBIT. But we've really called that out to try and make your jobs a little bit easier. Okay, moving down to EBIT, we can really see the amortization of the customer intangibles we spoke to. We also can see a non-cash inventory value step up for Vision X and APG required under international accounting standards. To most people, it's a load of bunk, but unfortunately, you have to work out your inventory value as if it had been sold, including the profit each stage of production and so forth.
We've called out that influence, and there's still AUD 2 million to cycle through for APG. That stock that's still in our possession that we haven't sold through, you know, come through in a future period. Yeah, we've also called out the inventory impairment taken by Davey at the half year and the year-end impairment of Davey intangibles, as well as the third-party transaction cost for the acquisition. I'm not gonna call out all the lines on the page, but I will speak to interest cost, which has risen to AUD 18 million on the back of the acquisitions. All pretty logical, and I'll touch on that a little bit more when we get to Slide 33, so you can get some insight into what to consider in, as you build up your view of our results for FY 2023.
Before leaving this page, I also wanted to speak to underlying net profit after tax, where we've excluded all non-cash items I mentioned before on a post-tax balance date, as well as the transaction costs that we incurred on the post-tax balance date. Here, we can see the underlying NPAT on that definition is just on AUD 89 million, which is up nearly 39%, which is pleasing, given that's part-year contribution of, from Vision X of seven months and APG of six. Those constraints that we're getting through end-user demand at APG because of the disruptions in OEM supply chains. Going on to Page 29, we've really pulled out the one-off items. We've spoken to those before. I'm not gonna dwell on them other than to just.
We do highlight how they pull through to the segments, and I really wanna just reiterate that almost all of those are non-cash and take us on to Slide 30, where we talk to working capital. Here, we provide some additional analysis to better understand the step up in net working capital without the distortion of the acquired net working capital. The slide highlights that the organic and the post-acquisition movement in net working capital is being driven by inventory, which mostly involved the Australian automotive businesses and Davey. As Graeme said, should supply chains and shipment point-to-point time start to improve and become more reliable, this will be a distinct opportunity item, and we'll be looking to act where we can in a pretty short time. But we just need to make sure that we don't jump too quickly and disappoint our customers.
Our performance during the COVID time and being a reliable supplier to our resellers has been a standout, and we've just got to make sure that we get the right balance between working capital reductions and not falling at the last hurdle. Meanwhile, the nature of the higher inventory I spoke to before, it's all a story around inventory. Ordinarily, we've got a little bit more relief from the creditors, but because you've got more time on the sea, you get less creditor relief than, if you like, a pre-COVID type environment. So, it's all around the inventory. Interestingly, debtors, we didn't really step up, and you might say, "Well, why is that?" There was a degree of offset.
Yes, debt has grew to support our organic growth, but we do get a little bit of debtor relief from APG, given the quiet Q4 sales and the extremely short cash cycle, which gave us some relief there. Just a moment. All right. Now, moving on to Slide 31 on cash conversion. We landed just short of 80%. That's broadly in line with where we wanted to be. Again, it just really reflects that issue around inventory. Not an issue, just a reality around the inventory and those extended supply chains. We're not feeling at all uncomfortable with that. As I said earlier, we don't see there being a risk of being caught out with inventory, which is technically obsolete or a fashion item but with the wrong color and so forth.
We're feeling very comfortable with that. The improvement of cash conversion will just be when we can reduce those safety stock levels. I'd like to move us now on to Slide 32, which speaks to the balance sheet and capital management. It outlines both gross cash and net debt balances for the full year and really reflects the acquisition of Vision X and APG. You know, our closing net debt position represents about 2.36 times lease-adjusted EBITDA. We also outlined what it would be on our banking covenant ratio, 2.46, where we include the extended payment terms for the Vision X acquisition. We'll see later on we retain healthy headroom against the banking covenant ratios and have AUD 150 million of committed borrowing facilities available, and that's also within our covenant capacity.
In short, we're really well-positioned, and at this stage, other capital management actions are not being contemplated. I should also stress that our covenants are on a pre-lease accounting basis, and I've noticed that several analyst reports have included lease debt in their reports. They tell me that's really dictated by their corporate compliance officers, and that's led to a little bit of confusion in the last six months around whether our net debt to EBITDA is in the mid-threes, and therefore whether we're in a position where we've asked and sought covenant relief from our banks. I really want to highlight that that is absolutely not the case. That's why we're making very clear about our borrowing headroom, both within our covenants and our actual firm banking facilities.
For those of you who want to understand that a bit better and understand what the banking covenant calculations look like in more detail, the math is outlined on Slide 40. Moving on to Slide 33 of the debt profile, and this will be my final slide before I hand back to Graeme, who's a much better orator than me, so better get back to him quick smart. To the right of the slide, we've really mapped out the debt maturity profile, which has a, you know, I think, a very compelling mixture of tenors. All the private debt, which is in the green, is fixed in duration and interest rate and is starting to look really compelling in our current interest rate environment. It also shows the efforts we've made to diversify our funding base.
We've noted an all-in funding cost, including the unused line fees, swaps and so forth, later on in the deck. Page 42 gives that color and will help you sort of triangulate back to your interest rate assumption for the coming year. I'll now hand back to Graeme, who will finish with the trading update and the outlook.
Well, thanks, Martin. On Slide 35, we've split the trading update into the three segments. Albeit actually Martin and I haven't completed the monthly business reviews for the month of July with our business units. That actually happens after this period. We can give you some color. Starting with Automotive ex APG, we've seen sales start positively in most BUs. To be completely honest, a couple of our BUs were comping their biggest ever month on record in the history of their companies in the same month prior year, but they still haven't done too bad. Broadly, the sales have started positively. The end user demand feedback is encouraging, with workshops reporting decent inquiry and bookings.
You know, depending on which state you look at, bookings between 1.5 and three weeks. On average, I'd probably say 2-ish or so weeks, which is consistent with what we're hearing from our resellers as well. APG is still seeing the broader OEM orders at muted levels as supply constraints remain. With some slight improvement expected over the full quarter and then into Q2. We are seeing some positive improvement in the new Ford Ranger rollout, and of course, we have to be very careful about speaking about any particular customer. We're also seeing the trailing part of our business seeing some good demand in the first six weeks of the year. Finally, the demand for Davey appears to have remained from the prior year quarter, and that started positively.
In both Auto and Water segments, we're putting in price raises to manage the emerging cost inflation, something already completed at the beginning of July for APG. Okay. We'll now finish on our FY2023 outlook, starting with APG on Slide 36. We remain, and let's be clear, we remain very positive in APG's ability to deliver their business case targets as OEM supply normalizes. That said, H1 FY2023 vehicle sales are expected to remain subdued. Of course, these backlogs will continue to grow. They're at record levels. The recovery to the long-term trend, we believe, on balance, will be over FY2023 and FY2024. Now, the graph on the right of the slide I think is quite informative.
It helps the reader understand the differing views of what the industry sales size might be, this year and going forward. There's a number of forecasts there. We also show you what I think is more telling, is the sales trough due to supply constraints. That represents a significant delta of unmet demand. We think as that supply constraints start to normalize, we'll get what I call our unfair share of that backlog, given the challenges of some of our competitors and what they're facing at the moment. Now, finally, on Slide 37, our outlook for Auto, Water, and the group is covered. Now, we're of a firm view that our Automotive BUs will benefit from the ongoing and robust car parc.
Add in our brand strength, our product development tempo, and frankly, we're delighted with our prospects. We're expecting Davey's performance to improve in FY2023. At a group level, we're concentrating on margin management as we did in FY2022, recognizing some more cost inflation is expected. Of course, as a progressive company, we will be looking to reinvest in product development and our geographic efforts to grow while acknowledging the bigger scale of our company will require corporate costs to increase in FY2023 for items such as D&O insurance and group and professional services. Working capital will remain at elevated levels, but I'm hoping to be able to moderate some of that if the supply chain starts to stabilize. You'll recognize, you know, through February and June, there was a difficult time in China.
If that doesn't repeat, then I'm expecting that supply chain to stabilize. As we've said a few times already today, we are committed to delivering our net debt to EBITDA position and reaffirm our target of two times, which we believe can be delivered by June 2023. Now, as you might expect, we're not providing guidance right now. There are so many moving parts, as it stands. We do expect to update our shareholders in the October AGM. Okay. Well, that concludes the presentation results. I'll now hand you over to the moderator who will coordinate any questions you may have. Over to you, Dean. Thank you.
Thank you, Graeme. Your first question, gentlemen, comes from a caller. I can see that the number ends in 7022. That's all that I have. If you could unmute yourself, and please go ahead.
Hi, Graeme and Martin. James Ferrier from Wilsons speaking. Thanks for your time this morning. Can I start on Vision X and just confirm there with that EBIT number at $10 million for FY2022. Given the small contribution in the first half, that would effectively have the business annualizing its EBIT contribution at about $18 million now. Is that the correct interpretation?
I think that broadly is pretty indicative of where we think it is. We're very, you know, very bullish about some of the growth prospects there. I think for the moment, that's probably pretty good annualization, James.
Thanks, Martin.
The only thing I'd add there.
Go on, Graeme.
The only thing I'd add there, James, is we're obviously watching closely the European situation. I mentioned that obviously when I was chatting earlier on. The European distributors of Vision X, we actually are really quite in admiration of. They do a fantastic job. They are struggling a little bit in terms of not just the broader economic environment in Europe, but also physically getting shipping in and out. One of our main suppliers, sorry, distributors is actually in Sweden. I think Martin's right to say that run rate is a pretty decent representation of what we think they can do, but it might get a little bit choppy up and down, depending on the European situation.
Thanks, Graeme. Have you achieved any material cost or probably more revenue synergies, more applicably here in that period? Are those opportunities still ahead of you, and really that earnings performance is sort of the business largely untouched?
It's pretty much that, James. You'll add a comment. The revenue synergies we're looking for. It's not so much about a cost synergy story for Vision X. It's much more around the revenue synergy. That's what we spoke to when we announced the acquisition. I've just mentioned earlier on SEMA, so that's the Specialty Equipment Market Association. It's the biggest sort of aftermarket show and tuning show in the world. We'll for the first time have the brand Projecta on the Vision X stand. We'll be launching a few other things I can't quite talk about right now, but it'll be all through the Vision X stand. That's when the rubber starts to hit the road. We have got people seconded into that business from a product category point of view.
Not only are we looking at what we think to be a series of side and rear lighting opportunities, including emergency, by the way, fire, we're also looking at potential resourcing in some instances to the Korean facility as well in terms of manufacturing. There's more to come, we think.
Okay, thanks. That's very encouraging. Second topic I wanted to ask about was AutoPacific Group . I'm referencing Slide 18 here. The sales line at AUD 133 million. Obviously, we can appreciate where the EBIT ended up relative to original expectations. Can you give us a sense around what the revenue delta was compared to the original expectation?
James, it's Martin. I'm sitting here. I don't have that number right in front of me right now, so I'm not gonna have a stab at it. I'll come back to you on that.
Yeah, sure. I can see on that page, I'd say, eighteen again, so the depreciation was AUD 5.6 million. Looking at the documentation at the time of the acquisition, the depreciation in calendar 2021 was about a similar amount, AUD 5.6 million, but obviously for a full 12-month period. I'm just wondering what drove the near doubling in depreciation given it was only a 6-month contribution in FY22 or perhaps I'm not looking at the right numbers there.
Yeah, I think you're not looking at the right numbers. I'll come back to you on that.
Yeah. Okay. We can take it offline. Thanks for your time.
Thanks.
Okay. Your next question comes from Tom Godfrey. Tom, please unmute yourself and go ahead.
Oh, good morning, Graeme and Martin. Thanks for taking my questions. Can you hear me okay?
Yes.
Yeah.
Can I just start with APG and just maybe if you could give us any comments around sort of the EBIT run rate or exit rate from FY22? You sort of speak to a robust third quarter broadly in line with expectations. Is there any sort of color you can give us around how that business has sort of exited '22 and what we can sort of assume in one H'23?
Where we talked about the robust, I mean, obviously the first three months of the calendar year, the market was actually up and up by, I think, four or five points. Then that, you know, by the time you race forward to now, it's down by 4.5. Equally, the same sort of change in terms of pickups. In fact, it's more accentuated, where we find ourselves down, I think, pickups, two, where we're up eight. That's the swing I spoke about earlier on. That represents actually the comment around the robustness of the first three months. We were there or thereabouts in terms of our expectations, and then obviously started really moving around in terms of the OEM demand, and importantly the OEM production schedules reliability.
We talk, Tom, in the deck around Q4 being a trough. We are seeing as we come out of Q4, some slight improvement. I wanna choose my words carefully here because even in July the market was pretty much flat. Actually, within that, pickups were down 5% within that number. The forward orders we're seeing, we generally get about two to three months depending on the manufacturer. The forward orders are still muted, and that's a comment we made earlier on, Tom. We will see the benefit though of the emerging Ranger launch. Now that's, I mean, Ranger was down as an example in the month of July by nearly 30%.
It's not come in yet, but we're starting to see the orders come in a little bit more robustly for that particular model. Again, have to be very, very careful what we say about our customers. That's the comment we made in the pack, Tom, around an expectation of slight improvement as we get into Q1. We expect to see that pick up a little bit more on Q2 and then Q3, Q4, we're expecting to see a broader supply chain moderation which should assist us.
Thanks, Graeme. Just in terms of, I suppose, trying to sort of back out Q3 versus Q4 in FY2022, can we take Q3 as broadly in line with you if we sort of, yeah, split it based on the initial business case estimates and then back out a fourth quarter contribution on that basis? Is that fair?
Well, even Q1, Tom, I mean January was below expectations but that was nothing about demand because that was far more around Omicron, right? Absenteeism in that plant was running at 30%. Not dissimilar to what's happening in some of our other manufacturing plants. We were behind Q4 in January but then February and March started to bounce back, and we were within, you know, AUD 100,000 or so of our expectation in terms of budget. What we were expecting though through the course of the calendar year, Tom, to see an increase in the overall market start to taper up. That was our budgeting thinking and expectation certainly as we sat back in November and December of the prior year before obviously the Russian situation and the Chinese lockdown.
I don't think it's, you know, Q1. Sorry, I should say Q3. I'm thinking of calendar years here. Q3 financial year again probably isn't quite the normal velocity you would expect because that was still muted anyway and you can sort of see that in the numbers. Yes, Q4 was definitely a trough.
Okay, thanks. I'll leave that there. Maybe just one more question. Obviously, you referenced Russia and sort of Shanghai lockdowns and the various things that have been impacting the global supply chain. Just any comments on the European energy crisis and maybe just remind us of your sort of supply chain exposure to Europe?
We haven't got a huge exposure to Europe in terms of a manufacturing or supply thing, piece as a direct supply base. Obviously, the OEMs have some significant exposure, hence what's happening with semiconductors and, you know, it's widely reported at the moment that somewhere between 30%-40% of all the neon gas used in the production of semiconductors comes from Ukraine. A bit like the wheat story so to speak. That's been, you know, a big issue for the OEMs and you would've seen in the last two weeks, you know, U.S. Senate passed a $2.5 billion package to essentially almost nationalize by incentives the semiconductor approach in the U.S. and similarly in other parts of Europe. That will normalize over time.
It's more an indirect supply chain issue there, Tom, as opposed to direct for us. If anything, Europe presents more challenge, not significant but still more challenge in terms of the revenue that we achieve in Europe through DBA, ACS, and Vision X. The macro situation there we're keeping an eye on. While it's not, you know, super material it's still, you know, decent revenue. That's kind of how the European situation plays out for us.
Great. That's helpful. Thanks guys, appreciate the time.
Look, just before we take the next question I want to just revert to James' second question. I wasn't perhaps quick enough on the uptake there. I do have the answer to that. James is right. During the acquisition we called out depreciation of circa AUD 5 million. The number we've got reported here for depreciation includes that fixed asset depreciation but also the depreciation required under AASB 16 which is why, James, you sort of did a back solve and said well it should be AUD 2.5 million is a profoundly higher number there. The difference is at least accounting. We finished the first half at around about an annualized AUD 4 million, a little bit less. We took a very careful view in appraising the fixed asset values we took forward on the purchase price accounting process.
I'd expect that would be stepping up to 4.5%-5% over the next year or so. We're about to commission the last of the
The lasers and so forth are CapEx that was committed by the previous owners, which we deducted from the purchase price. As they come online, you'll see a little bit of step up in depreciation. I hope that closes out James' question. Dean, I think we're ready to take the next questions, please.
Thank you, Martin. Okay, your next question comes from Russell Gill from J.P. Morgan. Russell, please unmute yourself and go ahead.
Hey, guys, can you hear me?
Yes. Yes.
Great. Just firstly, just an admin question. The acquisition dynamics relating to the inventory step up obviously makes the numbers a little bit clouded. Can you just tell me why that wasn't included in, you know, capitalized through the acquisition accounting process?
Well, it was, and that's the issue. When you-
It shouldn't be goodwill. It's not booked as goodwill on acquisition.
No, goodwill is the remainder. Well, firstly, you go through and identify all your tangible assets and the difference between the tangible and what you pay is intangibles, and then you go through a process of determining how much relates to brand and how much relates to customer. Things which don't belong anywhere else drop out as a result in goodwill. Had we not been forced to do that by accounting standards, our goodwill number would have been higher. I don't know if that addresses your question, Russell.
Yeah, it does. That's my expectation, that you sort of revalue the inventory on acquisition and the goodwill is the difference, basically.
Yeah.
This was done after the fact, the revaluation of the inventory.
Yeah. It's not something we elected to do. I would love not to do it because it just creates background noise in the accounts. You've got to go through an independent purchase price allocation, and it's kind of ridiculous. You have to work out what profit there is embedded in something you've half made, or you've made and got in your warehouse and haven't sold and reflect that. Then you have to cycle out as you think you consume that stock. Now, in the case of the Vision X, because what they make is largely made to order, you know, that cycled through in the six months. On APG, we saw that amount cycle through, AUD 5 odd million, and we still got AUD 2 million to go. I'd expect that'll close out in FY 2023.
I apologize for that background noise. It's just there are some clever, smarter academic accountants than me that put this upon us.
Okay. Graeme, just on APG pricing. Look, we understand the dynamic of the sale, the delivery dynamic. Can you just talk through what happens regarding pricing? If you've or the OEM, the dealer has sold a product of your months ago, but now you're delivering it, you know, in the future, your cost base has moved over time in APG. What happens on the pricing of this? Are you able to reprice that product to the OEM, to the dealership, et cetera, given the big timing difference between, you know, I guess, sale and delivery?
It really depends on OEM to OEM. As an example, there's one OEM, and again, Russell, I'll always be careful about what I say about individual customers. There's one OEM as an example, who's gone through a launch process and, post that launch process, we have agreed a reflection of the cost escalations that goes back to job one, so the original volume. In some instances like that actually works that way. The other parts of the business in terms of the aftermarket is very different. Obviously, that's just getting priced and that's in the moment. It's a bit of a mix, Russell, but there's certainly, in some instances, a bit of a lag.
The price increases we spoke about that are effective July first, obviously a reflection of some of the cost impacts we were seeing coming through in April, May and June. That's been put to bed and there's a bit of retroactive element to that.
Just to add to that, Russell, APG does secure some forward commitments on their steel pricing, which creates a bit of a buffer of three to four months between, you know, what we would have physically in the three months ahead commitment we get. We can ride out some near-term rises and falls, particularly in steel.
Okay. I mean, I get that, but what you're saying, Graeme, is that if this stuff comes through at the moment, have you priced further ahead for new things to ensure that the margin will hit prior numbers? Or if the deliveries come through now, given some of that, you know, step up in cost base, but potentially using historical pricing for some OEMs, you might get a little bit of margin slippage until you get back to a normal run rate.
There is the potential for the latter there, Russell, but largely I think we're insulated from that in terms of the relationship we have. The example I gave around the one particular large customer, we were actually able to negotiate a retroactive price increase from job one is a good example. That was, you know, a month and a half ago, almost two months ago, in terms of the retroactive nature of that. We do have, in some instances, a dynamic ability to renegotiate, and that's been proven out actually through a little bit of COVID and also this last six months. There's a little bit of a lag, but it's not going to be too material in its impact.
Right. Just a final question. You called out earlier that the organic growth in the automotive business, ex APG, I think was 6.5%.
Yes.
There's obviously a lot of inflation in the market at the moment. You've put through a lot of price rises. Can you possibly, at a very high level, break down that 6.5% between what was price and what was volume? I guess, give us a feel for what your expectations are on market share gains, given those dynamics around price and volume.
Yeah, look, I'll give you sort of a broad flavor. If I look at the EBIT that's been generated year over year, I'll just use the EBIT number. Probably if you think about the chunks, the pricing has been able to offset the price increases that we've received just a little bit more. We've had a small benefit of FX. You know, if I look to the absolute dollars that we've gone up, it would be somewhere in the region of maybe 10-ish% is sitting in FX. We've had some benefit of the volume and mix, and the volume mix is probably in the region of probably a third or so to 40% of the improvement in the EBIT dollars.
If the nature of the question, Russell, is it's not been on the back of tailwinds from FX. In fact, that's pretty negligible. It's been around the pricing and the volume and that's been sticking on the way through.
I was not the FX. It's more around, you know, whether the pricing, you know 6.5% looks quite good, but if your cost base is going up by a similar amount with no volume growth or I guess market share losses, that was more the
Yeah.
direction of the question.
We're certainly.
You're basically saying about a third of the growth.
Yeah.
A third of the growth is volume gains.
Yeah. I mean, look, we're somewhere in that region. I mean, I don't wanna call it out specifically. What I can tell you is.
Sure
that we have gained market share, and we've had, in real terms, volume growth.
Great. Thanks, Graeme.
Thank you.
Okay, gentlemen, your next question comes from Sam Teeger. Sam, would you please unmute and go ahead?
Thanks. Hi, Graeme. Hi, Martin. Thanks for the presentation this morning. First question on APG. Look, appreciate you've only acquired the business recently, but can you talk to us about how APG has performed historically, if you have the data, in periods of weaker consumer demand? Right now, are you seeing any signs that distributors are keen to hold less inventory right now given the increased uncertainty around the consumer outlook?
Look, let's start with the question at the end. The distributors aren't really holding any less stock. They don't have a lot of stock, right? 'Cause we make to order, particularly in the domestic operation. If you think about the dealerships domestically, they're supplied by the OEM parts and accessories divisions, the P&A divisions. Look, they generally are not holding a lot of stock. You know, you think about the tow bar, it's quite big, quite voluminous, and they'd be lucky to be holding somewhere in the region of half a month to a month, maybe a month sort of supply. Depends on each of the manufacturers, obviously. Again, they're relying on us to be able to continue to supply when they place that order and get it to them pretty quickly.
You know, up in Thailand where we do the factory fit, I mean, clearly, they're holding basically zero stock because we are receiving, you know, weekly production schedules. It's a JIT operation. I hope that gives you a bit of flavor around the inventory position. We're not sitting on, you know, crazy inflated inventory. We've got more than the typical run rate. You know, if you looked at two years ago or something like that. But that's been moderating and we'll see still some moderation, I think there anyway. In terms of the first part of the question, the historic data, but I don't have that sitting there.
You know, if you were to think, if you were to ask me how did this business perform in the GFC, as an example, I don't have that to hand. I can tell you know, at the end of the day, the fitment rates of their products don't change generally because of an economic downturn, if that's the nature of your question. What will happen is if vehicle sales dropped in an economic downturn. The fitment rates, you know, on average are somewhere in the region of 90-ish% on a pickup, 50-ish% on an SUV, and only 10-ish% on a passenger vehicle. Those don't really change at all.
The difficulty in trying to comp it for us, not that I have the data in front of me, Sam, but the difficulty in trying to comp it is in the past, in those economic downturns, APG's share of wallet was also different. The volume of products applied to vehicles outside of tow bars, but still factory fit in most cases, was lower because they didn't have the same penetration. That's the beauty of APG. It's been able to capture more and more products on vehicles through that time. But at the end of the day, and not putting too fine a point on it, you know, a tow bar, as an example, is seen almost as a grudge purchase. It's a necessity. It sort of fits in that sort of category.
Makes sense. Given the fixed costs you have in APG, well, what type of variability do you expect in APG's margins in first half 2023 on lower volumes?
Well, you can see on the slide in the deck, I think Slide 18, we call out the margins, which are approaching 20%, which, you know, in a normal run of events, that's a pretty good margin, right? It's a little bit lower than what we're expecting given the leverage. We see Q4 financial year as a trough. By dint of that, we'd expect margins maybe to improve a tiny bit. Sam, I've gotta be careful there, right? Because we are captive in this instance to the supply constraints, and so that's why I've been very careful to use the word slight improvement in Q1.
On the margin, like, if you look at FY2022 as maybe a something we can look to think about FY2023, what's the margin variability in third quarter versus fourth quarter?
Martin, do you have that to hand?
No. Look, we're not gonna get by default into quarterly reporting, Sam. We're just not gonna get there. I'm just not gonna answer that because it's a slippery slope. Look, the other thing while I've got the mic, I just wanna come back to your last question around what happened before during cycles. Because Graeme was answering the question specifically in regard to revenue. I don't wanna give the impression that we didn't look during the DD of what actually happens in a downward cycle to this sort of business. We did look at that closely. What tends to happen is perhaps what doesn't immediately come to mind, is that when you go through an economic downturn, you actually see quite a contraction in commodity and input prices.
The businesses tend to then do well. You get quite a bit of, if you like, cost relief through that. That sort of recalibrates the cost level. When you come out of that period as well, you generally find the commodities take some quite some time before they step up from that recalibrated level. We're quietly confident that if there is, you know, a harder economic environment, that there may well be some moderation of costs. During, you know, the past cases, the customers haven't come with hands out to readjust the prices. They're all pretty
Either they're small individual tow bar assembly installers, they don't have that wisdom and even the OEMs. They understand that they need viable suppliers, and there are cost movements, and if they just squeeze down on each and every cost, they won't have a supplier there to service them. They've never had that level of dialogue. You know, we think that this is a business well-positioned to get through a downswing in an economic cycle.
Sure. What's the magnitude of price rises that you're planning in the automotive business in first quarter and second quarter, and also APG in July? From the first part of that question, how are you thinking about EBIT margins in that legacy auto business in 2023 versus 2022?
If I sort of unpack that, you know, the quantum of pricing across our legacy businesses, and I've said this in the past, by the way, you know, there's not one number that sits across all the businesses. They price relative to the competitive set and the situation and the product cycle and the life cycle. But we kinda give you an aggregate, and that would be probably in the region of between 4%-6%, depending on the business. Remembering that obviously we priced not that long ago, but we are seeing some of those cost inputs come through in terms of, you know, again, strangely enough, another year of increased freight as an example. We have, obviously, domestic cost inflations rolling through. That's the auto businesses.
The water business in a similar space, probably in the 6%-ish mark. Then, APG, the price rises again are varied because we've got aftermarket and dealer fit and OEM fit, and that sort of ranges between sort of 6% and 10% depending on the situation. In terms of the margins for the legacy businesses, I think we've proven for quite some time now that we can manage the margins. We're in a unique position. We have a defensive moat. We don't take that for granted. The product development effort in the last two years has been immense, and we're seeing benefits of that come through. The inventory we've been holding has been very useful 'cause we haven't let down any customers.
Our DIFOT levels have remained pretty bloody solid, even through that tougher sort of March, April, May period with China lockdown. That's put us in good stead, and I think the relationship with our customers has been really solid and they've been reminded of the value we play in the relationship. Again, when asked about those margins, I always sort of say around the 24%-25% sort of mark, up or down some 10 or so basis points depending on the cycle, but that's the expectation.
Okay. There is one more. Excuse me. There is one more caller in the queue, so if there are any more questions, please use the Raise Hand icon. But for the moment, it's over to Tim Piper. Please unmute and go ahead, Tim.
Good morning, Graeme and Martin. Thanks for taking the questions. Just a quick one on cash flow. Obviously, the conversion looks to have bounced back pretty strongly in the second half. Quick, how do we think about a normalized level of working capital? Is the seasonality expected to skew the second half in financial 2023 as well?
Yeah, thanks, Tim. Good to hear. There's obviously a few interesting moving parts. I mean, typically due to seasonality, we normally have some seasonality of inventory around Chinese New Year, and you've got to sort of these days bank that China will go into slowdown, or near stop for three to four weeks. You have to take a view as to how much safety stock you get in for that. I mean, conversely this year, if we see supply chains, you know, becoming more reliable as we lean into Chinese New Year. That might be a good opportunity to bring through some recalibrations. It's harder than normal to sort of call out that one. Typically, there's seasonality around the sourcing of inventory there.
You know, we would like to think that we've got a good ability to pull through 85%. That's largely because we do still aspire to growth. I mean, domestically, Graeme's talked about that we're gonna be greenfielding into the USA. That's the launch we're seeing later this year. There's obviously a commitment around launch inventory and launch debtors there. You know, that could easily take, you know, circa AUD 5 million, if it goes well, AUD 10 million more of working capital. You know, if you just thought business as usual and not aspiring to do anything significant, you should be able to do more than 85%.
I think given that we are very excited around some of the opportunities in front of us, Graeme's talked about caravan chassis manufacture, those sorts of things, you know, we're thinking, well, we are ambitious and see that runway, that 85 would be the benchmark. It will cycle, you know, around that depending on how quickly some of that organic growth in the greenfield goes and the extent to which we might be able to moderate some of that inventory. You know, we're still up, Graeme, you know, if you sort of look back and strip back the inventory for volume growth and pre-COVID levels, we're still, what, a good at least 20% over.
Yeah. I think probably between 20%-25%, maybe with a really harsh net working capital to sales ratio, maybe even upwards of 30%. Thank you for the question, Tim. I'm actually quite quietly satisfied with our performance when you think about the half-over-half. We reported at 63%, I think it was in the half. We said we would improve, and we finished the full year at just smidge under 80%. That's on the back of having to actually take on a lot more stock to try to work our way through that China lockdown, which was pretty painful through that period. You know, there's a bit of backorder actually still.
I said the fault levels are pretty high, but there's still a bit of backorder even in businesses like Ryco, which is a well-oiled machine, and yet they were still struggling a tiny bit. The profile of the inventory is good. We'd work through that. I'm a little bit loath to take the foot off there in terms of inventory, 'cause I'm worried about what might be happening in China. It's one of those things. I think it's like the $64,000 question at the moment. What's the inflection point where you can confidently start to pare it back? That's something that sits in our minds and we watch every month.
Just to round that out, there is one other variable in the mix. Graeme talked before about, you know, the OEMs bringing supply back on a more normalized basis. You know, with some of the record backlogs, and we're not gonna quote the figures from the OEMs 'cause we don't like to talk about our customers' business. You saw it on the graphs, some pretty stunning backorder levels. If the OEMs decide to deliver more than fair share to Australia, we could have a period of really heightened supply, which would be terrific in profit sense, but would certainly drive a lot more debtors out of APG in the near term while we cycle through that tsunami of demand.
I think the point is, you know, get back to what I said, you know, we aspire to grow consistently organically. You know, 85% gives us room to do that. We might be better if we can bring down safety stock. We might be worse if APG goes through a period of well above trend line production demand from OEM, and wouldn't that be great? Back to you.
Yeah. Great. Thanks. You touched on probably my second question there, and that is in the APG businesses, there may be a way you can characterize the backlog in terms of number of months of revenue or something like that. Just thinking about if, you know, demand does happen to fall off or supply does start to come back quicker than anticipated, you know, how many, either on your original calendar year, sort of 2022 numbers revenue-wise, is there a number of months of backlog you can talk to?
A difficult question to answer, Tim, in terms of the sensitivity around our customers. I mean, what might be useful is perhaps if I cast our mind to some of the more publicly reported information. As an example, the Ford Ranger on their pre-launch announced, I think, 20,000 pre-orders. At that point, that's probably a month ago now. I would assume that's grown. That represents somewhere in the region of four to five months just backorders, which by the way, as an ex-Ford guy, if I was sitting on five-ish months of backorders on launch, I'd be high-fiving because generally you've probably got one to two months. It's quite a quantum compared to what it normally is.
The feedback, again, carefully said from some of our other bigger customers, that they are anywhere between 6 and 12 months worth of orders minimum they're sitting on. That trough we put into the deck, Tim, is actually pretty representative. You could take that number, and the trough of sales relative to demand is illustratively quite sound in what we're hearing from many of our customers.
That's all good. Thanks.
Okay. Folks, this is your last chance for questions. If you do have any, please use the Raise Hand icon, or if you're on the phone, press star nine to raise your hand. I'll just give you a couple of seconds, but I think that might be. Oh, here we go. One small. Sam Teeger, please unmute yourself and go ahead.
Yeah. Hi guys, just a quick follow-up. Just following the impairment and the review you've done around the Davey business. How are you thinking about long run EBIT margins in that business? Is 7%-8% kind of a reasonable assumption for us?
Well, Sam, long term, it is. We've, you know, we made it clear that we've still got a little bit more work to do to fully embed the change program going on. That work's yet to complete in FY2024, and then coming out at the end of that, over time, 7%-8% was probably pretty sensible growth.
I think you mean FY2023, Martin.
Oh, sorry, FY2023.
Yeah.
Okay.
Thank you.
Okay, there are no further questions at this time, so Graeme, I'll hand it back to you to close out. Thank you.
Well, thanks Dean, and thank you everybody for taking the time to come and listen. As I started out, very happy with the resilience of the auto aftermarket. Very happy with the real volume and the demonstration of pricing power and ultimately the margin expansion there. Acknowledging that, you know, demand for new vehicles is just a complete backlog at unprecedented levels, and we are in a supply-led new vehicle sales market, of which when that abates, APG is super well positioned to take that on. Like I said earlier on, use the words take unfair share as that goes through. We're concentrating on a number of key things, one of those being margin management, also the balance sheet.
You know, we haven't moved away from our point of view around the leverage outcomes we're looking for. You know, some of the recent acquisitions, parking APG for one second in terms of ACS and Vision X, continue to meet and go beyond our expectations. It's an exciting time for GUD and ourselves as those acquisitions and APG come together and really start that transformation of the portfolio vision that I spoke about earlier on. A terrific time for us. But I appreciate your attention. I know that there was a lot of information in the pack, and it's a complex result for lots of different reasons, but there are some very key encouraging parts to the presentation. I was pleased, and Martin were pleased to be able to present to you.
With that, we'll finish the call. We look forward to seeing and speaking to our investors over our roadshow. Our next formal engagement, so to speak, in terms of updates, will be the AGM, where we'll give our investors a little more information on our point of view three months henceforth. Thank you everybody, and have a good day.