Good morning, ladies and gentlemen, welcome to the Eagers Automotive Full Year 2022 Results Briefing. All callers are in listen-only mode for the presentation. After the presentation, we'll open up the call for Q&A.
I'll now hand the conference over to Eagers Automotive CEO, Keith Thornton, to commence the presentation. Please go ahead.
Thank you for joining us today to discuss the Eagers Automotive results for the full year ended 31 December 2022. With me today is Sophie Moore, our Chief Financial Officer. Our results pack, including the slides for the presentation, have been launched with the ASX and should be visible via the webcast. As outlined on slide 2 of the presentation, Sophie and I will provide an overview of the results, update you on both our operational focus and strategic progress, and finally, provide the company's outlook for 2023 and beyond. We will then open up the line for questions.
Let's now turn to an overview of the 2022 financial results. 2022 was a record underlying result for Eagers Automotive of AUD 405.2 million, eclipsing our previous mark set in 2021. On a statutory basis, the profit before tax was AUD 442.2 million. Our Return on Sales margin, a key industry metric, was also at its highest ever full-year level at 4.7%. Our balance sheet is exceptionally strong, with AUD 631 million of available liquidity and a property portfolio of more than AUD 607 million. This strong 2022 result, when combined with our confidence in the outlook for 2023 and beyond, underpins a record ordinary final dividend of AUD 0.49 per share. This takes the full-year dividend paid in relation to the 2022 financial year to AUD 0.71 per share, an increase of AUD 0.085 or 13.6% on the ordinary dividend paid in 2021.
Note, the prior year included a special dividend of AUD 0.084 per share associated with the divestment of the non-core truck Daimler business. Before we get into the financial results in a little more detail, I wanted to touch on the key achievements for 2022 and look forward to 2023 to outline some of the opportunities we'll cover in more detail today. The 2022 record underlying financial performance was underpinned by a strong industry dynamic and the specific progress Eagers Automotive has made against our strategy. Demand for new and used vehicles remains buoyant, while supply has not returned to the pre-COVID dynamic of free supply for most OEMs. This imbalance between demand and supply has supported further margin strength. While our disciplined cost out program and continued execution of our strategy provided the platform for our strong performance.
The strength of our balance sheet and the foundations for growth to be more fully delivered during 2023 underpins our confidence in the outlook. This confidence is evidenced by our record dividend and the announcement in 2022 of a share buyback program of up to 10% of issued share capital. We are very positive about 2023. The growth initiatives put in place during 2022 will provide revenue this year expected to be more than AUD 1 billion. We have a robust operating platform built over many years of disciplined execution of our strategy, which supports a sustainable, strong Return on Sales, particularly when compared to pre-COVID's historic performance. Our record order book continues to grow into 2023 and provides both an opportunity to outperform as well as a buffer with a multi-year run-off period at a minimum with strong embedded gross profit.
We are uniquely and best placed to lead the industry transition towards new energy vehicles, including battery electric vehicles, plug-in hybrid electric vehicles, along with existing hybrid and future hydrogen variants. We will continue to leverage and grow strategic partnerships with a view to creating a distinct and difficult to replicate market advantage. Of course, we continue to review accretive acquisition opportunities consistent with our Next100 strategy.
I'm gonna hand over to Sophie now to take us through the financials in some more detail.
Thanks, Keith. For the full year, I'll go back just to the slide before. For the full year ended 31 December 2022, the group has delivered on a statutory basis net profit before tax from continuing operations of AUD 442.2 million. The statutory result included significant items totaling AUD 37 million net income before tax, which predominantly related to the gain on the sale of the Bill Buckle Auto Group. Underlying operating profit for the period was a record at AUD 405.2 million.
Revenue on a reported basis declined by 1.4% to AUD 8.54 billion, which was impacted by the Bill Buckle Auto Group divestment in the first half of 2022, and the continued supply constraints on new vehicle deliveries, which was partially also offset by the ACT and South Australian business acquisitions in late 2022. Underlying Return on Sales increased marginally to 4.7%, its highest level for a full year. The margin uplift in the context of a higher inflationary environment reflects continued favorable market dynamics and the benefit from an ongoing productivity and cost out programs. In slide 32 in the appendix includes a reconciliation of the statutory to underlying EBITDAI and PBT.
Despite a reduction in turnover linked to these ongoing supply constraints, the underlying performance of the business remains strong, benefiting from a buoyant market where demand for new vehicles continues to materially exceed supply, resulting in the company's record order book increasing of more than 74% on December 2021. I said before, Eagers is in a very strong financial position, underpinned by the substantial property portfolio and asset base, together with AUD 631.1 million of available liquidity at the end of December. This liquidity position includes available cash and undrawn commitments under our corporate debt facilities. We entered the period with corporate debt of AUD 253.4 million net of cash on hand.
During the period, we executed on disciplined and prudent allocation of capital to finance strategic business and property acquisitions that I talked about before in the ACT, in the South Australian markets, and also the share buyback. The company's significant liquidity buffer, again, provides us with the flexibility and the capacity to invest in organic growth, technology enablers, restructuring and acquisition opportunities. Following the announcement in July 2022 of the on-market share buyback of up to 10% of issued capital, we bought back 1.5 million shares at the end of December. The buyback reflects the board's focus on active capital management and is a testament to the company's strong balance sheet and continued optionality in capital management strategies.
Let me hand back to Keith to provide some further context to the record full-year dividend for 2022.
Thank you, Sophie. As we've already highlighted, in 2022, we delivered a record final and full-year dividend for our shareholders. Importantly, this highlights our long-term consistent track record of growing the returns for our shareholders. Over the past 10 years, we have delivered more than 13% compound annual growth in dividends and underlying EPS. We've delivered this growth in a disciplined manner, establishing a fortified balance sheet, which has provided the opportunity to execute on capital management initiatives, including the recent share buyback. This focus on rewarding shareholders while remaining well-positioned to capitalize on growth opportunities is fundamental to our company's long-term outlook.
Okay. Turning now to our operational update. Let's start with the new car market. In 2022, the total new car deliveries into Australia improved by 3% on the prior year, but remained heavily impacted by supply chain disruption, which restricted the total delivery number. Despite the increase on 2021, the new vehicle market over the last three years remains significantly below the average market from 2012 to 2019. 2022 was the third year running that supply has been limited relative to the demand in the Australian market. If you reference the right box, towards the top right-hand part of the slide in front of you will see that the average delivered cars into the Australian market between 2012 and 2019 was 1,137,000 per annum.
Now, from 2020 to 2022, it has fallen to 1,016,000. This has created a 363,000 car hole in vehicle deliveries into the Australian marketplace. Another way to look at this from a pure supply perspective is that the market would need to rise to 1,258,000 units per annum, which is higher than we have ever seen in Australia, for the next three years to simply catch up to the 2012 to 2019 average and bridge the hole created by supply constraints. This is before taking into account any element of elevated demand that has been widely spoken of in the last three years. This analysis is critical.
It demonstrates that it's highly unlikely that any cliff event will eventuate, and the structural dynamic of an order bank, maybe not to the extent we see today, but still material, being likely to become a new norm for the industry. This compares to the sell and deliver from stock conditions that existed pre-COVID. Eagers Automotive occupies a unique position in the automotive new car market, with circa 10% of the industry. This market-leading position extends across all parts of our business. The automotive industry we operate in and the total addressable market is exceptionally large, remains highly fragmented and extends well beyond the new car market. The markets highlighted at the bottom of this slide demonstrate the resilience and opportunity within the economic model, while also demonstrating the opportunities that exist inside our core business as automotive retail continues to evolve.
It also demonstrates the opportunity to drive further consolidation, rationalization, and evolution is exceptionally large and provides material opportunities to Eagers Automotive throughout the next decade and beyond. Let's drill into the demand dynamic into more detail. In 2022, order right not only remained strong, it actually improved further on 2021. Although new vehicle supply improved marginally on 2021, the gap between orders and deliveries expanded further in 2022, driving order bank growth throughout the year. Looking forward into 2023, demand is expected to remain resilient despite economic headwinds, supported by a generational transition to new energy vehicles. This shift is notable for including a unique combination of organic shifts in consumer demand, compelling government incentives, and ESG-driven mandates across large fleets.
This is a perfect storm of demand drivers that is expected to last for numerous years and help offset any cyclical downturns in broader economic conditions. While there is some easing of industry-wide supply constraints, it's still highly brand and model specific, and the vast majority of high demand models remain in tight supply situations. It's expected this supply dynamic will continue throughout 2023. Turning to our order bank. Our order bank has grown by 74% since December 2021. Cancellation rates remain immaterial at sub 5% across our total portfolio, with some variability on a brand-by-brand basis for models impacted by the longest wait times between order and delivery. It's worth noting that this cancellation rate is a gross statistic.
It does not measure the net impact of customers who have canceled an order and then replaced it with an alternate order, bought a pre-owned car, or taken delivery of a new vehicle available from stock immediately. Anecdotally, these alternative options appear to form the majority of cancellation outcomes. To further illustrate the re-resilience of the order bank, we've applied a sensitivity analysis using an all-time record supply number, which in Australia is 1,189,000, and an all-time record low demand environment, which was 916,000. In this extremely unlikely scenario, record supply, record high supply and record low demand, our current order bank would take more than two years to be fully unwound.
Whilst conditions remain supportive, it is our strategy that continues to deliver incremental profit performance irrespective of external market conditions. The current gross profit margin percentage indicates the strength of the environment and the strong supply and demand dynamics. The key profitability metric for our industry is the measurement of Return on Sales. The 2022 Return on Sales level of 4.7% at an underlying level demonstrates the step change that has occurred in the industry, and Eagers more specifically, when compared to pre-COVID and pre-merger levels of circa 3% on an underlying basis.
Eagers achieved its step change through the integration of AHG, which has subsequently been further supported by technology-enabled productivity improvements and our disciplined execution of our strategy. This has given the business a robust platform, which when combined with a structural long-term improvement in industry margins, will see the company deliver a sustainable, strong Return on Sales over the long term, and specifically when compared to pre-COVID levels.
Eagers is positioned uniquely in our industry. We continue to be the largest player in the well-established and highly resilient automotive retail sector. It's worth noting that circa 60% of new cars sold in Australia are either dual cab utility vehicles or larger SUVs. While not totally unique to the Australian market, there is no doubt the Australian consumer demands models that are not as ubiquitous in other large global markets. It's also worth noting that we are a minority right-hand drive market, and that EV powertrains are yet to be offered in these segments in any meaningful way. It's also worth remembering the number of cars transacted in Australia was not simply the million-odd new cars. It was actually 4 million, which includes a pre-owned market estimated at 3 million units per annum.
Of this total market, it's estimated that 99% of vehicles transacted in 2022 were combustion or existing hybrid models, and Eagers remains the scale leader in both new and pre-owned markets in Australia. All this is to say, there is still a long way to go before the combustion engine or existing hybrid models are no longer a compelling material economic opportunity. Having said this, there is no doubt the transition to a lower emission future is happening now, and in fact, gathering significant pace.
As a forward-looking company with significant future ambitions, our strategy is called the Next100, after all, it's probably no surprise we have uniquely positioned ourselves to be the leader in facilitating this generational market shift as a partner to existing players and major new entrants, while also leveraging key strategic partnerships which will enable and add to the economics benefiting from the market shift. Being able to straddle both opportunities in a unique and market-leading manner, while continuing to deliver against our strategy, is a compelling position for the company.
Let's move on to our strategic priorities and provide an update on our progress against the company's specific components of our Next100 strategy. Before we talk through our strategic progress, it's important to take stock and ensure that our strategy is appropriately aligned with the industry in which we operate, and the dynamics and opportunities at play. The automotive retail industry is experiencing a generational evolution. The addressable market opportunity remains exceptionally large and highly fragmented, while consumers are changing behaviors and demand for how they shop and how they consume mobility. Our long-established business model is evolving by design and by necessity.
Winners will be those that are able to use proprietary technology that innovate and have access to data to break away from the rest, which in turn will accelerate and crystallize consolidation and rationalization in the industry. All this leads to significant and profitable growth opportunities. Notably, this is occurring when we're on the cusp of a once in a century change in product technology. It's a very exciting industry to be part of, and we are uniquely best placed to materially grow in this environment.
Looking at our Next100 strategy, which you'll see on the slide in front of you, I'm hoping most of you on the call today are familiar with this strategy. We are very proud of the company to have a clear, consistent, and well communicated strategy, and we hold ourselves accountable to it every time we report. It's pleasing to review our strategy against the industry opportunities I've just highlighted and feel confident that it is appropriate both now and into the foreseeable future as a template to grow shareholder value in a way that is not dependent on market cycles.
Let's now turn to an update on a number of our key strategic initiatives. Let's start with a look at our property activity in 2022 and our plans for 2023. We continue to use our property portfolio to deliver both innovation and consolidation of our retail footprint, focusing on a more customer-centric experience on a sustainably lower cost base. We expect to deliver significant productivity benefits over the next decade as we continue to execute against a reduced and reimagined retail footprint. At year-end 2022, our property portfolio was valued at more than AUD 607 million, an increase of AUD 159.3 million on 2021.
We continue to rebalance our portfolio of owned first lease property with a total of 22 leases exited during the period through a combination of footprint consolidation and business divestments, which in turn increased our total loan ratio to 21.4%. This continued disciplined e-execution will help mitigate the inflationary pressures on our property cost base with limited capital loan exposure to the rising interest rate market, achieved through the prudent use of long-term fixed rate capital loans established in 2020 and 2021 with an average tenor of 6.3 years. Moving to technology and how we are planning to redesign our workforce. Technology remains a fundamental enabler for reaping higher and better productivity performance within the business over the long term. However, the development of proprietary technology is only a value where it meets specific customer needs or the criteria of the business.
Our focus is to develop technology that delivers a combination of improved customer experience, equal or greater income opportunities, while also generating productivity gains leading to a sustainably lower cost base. In 2020 and 2021, we identified key customer, staff, and economic pain points in our business and developed technology solutions for pilot sites for proof of concept. In 2022 and into 2023, we now focus on applying proven tech to operations across the wider business and extracting the benefits identified. Highlighted on the right-hand side, sorry, of the slide for your reference, is a number of key statistics against technology we've developed that provides real evidence of progress and helps demonstrate the materiality of these benefits that these initiatives will provide.
Moving to financial services. Our financial services division maintained its strong relevance despite challenging dynamics at play associated with long lead times for new cars and a rising rate environment. We've previously highlighted our new and used finance penetration rates, which continue to outperform industry benchmarks. In addition, we've also included, so it's a like-to-like comparison, the top 30% of Eagers performers who have delivered approximately 19 percentage points higher share on new vehicles and 15.7% higher share on, in easyauto123 relative to used car industry benchmarks. This highlights the opportunity within our control as the auto finance conditions normalize. Despite the flat overall finance share result, Eagers was able to grow per retail vehicle income underwritten by disciplined margin control and accelerating ancillary revenues, including motor vehicle insurance and mechanical and cosmetic protection plans.
Our proprietary financial services business, via a JV with [Taurus], continued to perform well throughout the year, writing more than 4,600 contracts. While our car care business, Perfection Automotive Technologies, produced record results and increased profit per vehicle by 35.3% since the merger. Has become a more relevant and material contributor. Our disciplined investment in growth initiatives have provided a platform for material top-line revenue growth in 2023 and beyond. In 2022, we invested in greenfield opportunities by new market representations with existing partners and material partnerships with new entrants into the Australian market. While introducing new innovative retail formats that provide accretive earnings opportunities. Targeted and strategic acquisitions have secured a national footprint following the acquisition of the ACT dealership group, representing more than 30% of the ACT market.
In addition to further accretive expansion in our South Australian business. These acquisitions, combined with growth with our existing partner portfolio, with brands such as Ford, MG, and Volvo in greenfield points, retail partnerships with new entrants such as CUPRA, Chery, and our exclusive JV retail partnership with BYD, is expected to underwrite more than AUD 1 billion in revenue growth in 2023 compared to 2022. Further incremental growth is expected as we continue to sensibly scale our easyauto123 pre-owned business. Looking at our Automall West initiative, which is a key pillar in our internal Automall strategy, and aimed at leading the transformation and evolution of automotive retail, providing better customer experience on a sustainably lower cost base.
The facility opened in April 2022. The response from key stakeholders, including our customers, our staff, and our OEM partners, has far exceeded expectations. Average daily unique footfall visiting the store exceeds 2,000 people per day, with the average dwell time for customers in the store of approximately 16 minutes. The performance of the business continues to gain significant momentum, with monthly order write increasing more than 175% from April-December 2022. Monthly service repair orders from our service department located in the shopping center, increasing more than 38% over the same period. In the second half of 2022, we expanded our footprint with an additional four OEMs and continue to discuss opportunities with further brands. Automall West itself is a globally unique initiative. However, it also provides a template for future retail redesign under our Automall strategy.
Moving on to the NEV story or the new energy vehicle story. The automotive retail industry is at the forefront of an inflection point for the entire industry. Without doubt, the next decade will see a rapid and meaningful transition to new lower emission powertrains. Collectively, the OEM partners we represent are spending hundreds of billions of dollars in development of new technology to respond to these emission challenges. While there is investment across the range of CASE, which represents connected, autonomous, shared, and electric technologies, the immediate opportunity presents in the low and zero-emission drivetrain segment. The global trend towards NEV, which stands for new energy vehicles and covers battery electric vehicles and plug-in hybrid electric vehicles, is the most prominent in terms of uptake. Australia has been a laggard in adoption of vehicles in this segment.
However, a combination of state and federal incentives combined with ESG-driven mandates provide significant stimulus to the consumer-driven desire to explore transitioning to newer, low or zero-emission technology. Access to abundant supply at the more affordable end of the NEV price segmentation, taking NEV or electric vehicles to the mass market, in other words, is a unique and highly valuable opportunity for the company. Finally, we turn to our national fixed price, independent pre-owned business, easyauto123, which is supported by our JV and Carlins Auctions. Our independent used car strategy is still a key growth opportunity for the company.
2022 was a challenging year for used cars in general, with supply materially limited via our most productive channel, which is trade-ins on new cars, due primarily to long lead times. This dynamic, combined with great interest in the pre-owned market from start-ups in the first half of 2022, led to greater competition for the right stock and therefore compression in margins, putting our total profit under pressure. This competition for supply, focused on external sources such as the private market and auctions, impacted our ability to achieve both volume and profit ambitions for the year. Despite this, we still managed to grow our revenue by 25% and our volume by more than 20%, while remaining profitable over the course of the year. A somewhat rare boast in the independent car segment during 2022.
We expect 2023 to benefit from internal structural changes made to our unique sourcing channels, combined with our investment in unique technology and added to our profitable, well-established existing scale. Finally, turning to our outlook. Eagers Automotive are uniquely placed to play a leading role in the transformation and consolidation of the automotive retail industry in both the franchised automotive operations and independent used. Which will drive organic growth and provide further accretive acquisition opportunities. We have a clear strategy and a track record of disciplined execution. As a result of the building blocks laid in 2022, this year we expect to see material revenue growth and sustained strong Return on Sales performance and underpinned by our record order bank.
We are uniquely placed to be a leader in the transition to new energy vehicles while growing partnerships with existing and new entrants to the marketplace. This gives us the opportunity to continue to outperform the broader market. We'll continue to invest in easyauto123 with the ambition to build the most recognized and well-regarded independent pre-owned business in Australia, built on a sustainably profitable platform. We continue to review accretive opportunities that meet our strategic mandate and create further shareholder value.
Like 2022, we will balance delivering results for our stakeholders in the short term with investment in delivering longer term growth. To this end, we view the future with great optimism, with a plan to be able to deliver consistent revenue growth at a sustainable, strong Return on Sales. On behalf of Eagers Automotive, I would like to take this opportunity to thank you for your interest in today's results.
We would now like to open up the line for questions.
Thank you. As a reminder to ask a question, simply press star one- one on your telephone and wait for your name to be announced. To withdraw your question, please press star one- one again. Please stand by while we compile the Q&A roster. One moment for our first question. It comes from the line of Tim Piper with UBS. Please proceed.
Morning. Thanks for taking the question. Just quick one on your expectations around supply in the context of the AUD 9.5 billion to AUD 10 billion 2023 sales figure. What are you expecting in terms of new car supply within that sort of figure?
Sorry, Tim. Was that question just about supply? I just missed a little bit before that. Was there something specific about supply?
Sorry. Just what are you expecting in terms of calendar year 2023 uplifting, new vehicle supply in terms of that AUD 9.5 billion-AUD 10 billion of sales in 2023?
Our increase in revenue is not purposed on the market materially increasing. That's the first thing. There is not, that is, an uplift in revenue that we have, created through the building blocks, as I say, of things that we've done in 2022. We're not factoring in a market uplift of 3%, 5% or 10%. To be honest, it's a totally a crystal ball. Our sense is that it should marginally improve on 2022 of 1,081,000. December and January have seen sort of double-digit lifts on prior periods. We've still got some major brands, reporting very tight supply, and particularly tight supply on high demand models. Two parts of that answer. We're not prefacing that uplift in, our revenue for 2023 on a larger market.
In fact, we've done it based on all things remaining equal and our performance in a sort of a static or stable marketplace. We do think there'll be more cars delivered this year. We don't think it'll be a massive uplift.
Thanks, Keith. That's pretty positive. Just second question on back end revenue. What are you thinking, I mean, in terms of the trajectory of back end revenue, still seeing capacity headwinds there? Has that freed up completely? I'm just thinking about the growth trajectory of that back end revenue, particularly in servicing revenue heading into 2023. Is this maybe looked a tad on the soft side?
Yeah. I probably think there was just a little bit of upside in the back end. It's not gonna be material, but it's gonna be better than 2022. The biggest issue in 2022 was COVID absenteeism in workshops. Simple as that. That's moderated largely, and this year we're not seeing that in any material way. We're probably much closer to what it was pre-COVID. There's no doubt that it impacted our ability to maximize the amount of cars we could service, which then flows on to the amount of parts we can sell on those services. It impacts both parts of the back end. We haven't put a number on uplift in the back end. We've got no expectations it will go backwards.
It should actually grow this year for all the reasons I've just said. It's not a massive increase in terms of the total revenue story.
Great. Got it. Maybe just one more on finance costs and balance financing. I mean, how much of the RBA rate increase effectively have you seen in that number through the second half of calendar year 2022? Secondly, looks like new car inventory's kind of picked up a bit more than sort of what revenue has slowed a little bit, and we sort of need to feed that into some balance financing. Do we expect that to pick up a little bit more heading into calendar year 2023?
It's a really good question, Tim. I'll get Sophie to give you some detail in a moment. The first thing I'll point out on inventory, our day supply at the year end was actually lower than what it was at year end 2021. Our day supply in new cars was down at 49.2 days. We were 51.4. In terms of our order ride and the amount of cars we've got available to deliver, it's actually dropped a little bit. The inventory story we're not concerned about at all. It's actually quite steady with where it was in 2021. The second thing I'll make a comment about, there is no doubt that costs of floor plan interest rate charges on floor plan are going up. We can't stop those. That's obvious.
However, it is important to remember that inventory costs make up about 2% of our cost base. It's not a huge component. As much as we've got a lot of stock and interest rates are rising, it's not a massively material impact on our cost base, and we can talk cost base later.
I'll let Sophie make some comments around bailment costs.
Yeah. Tim, look, since the base rate started rising in May, it has impacted bailment. It's probably around AUD 10 million, as Keith said, when you've got a AUD 1.2 billion cost base, it's, you know, a relatively small number. I guess what's important to note is across the board, when you look at our debt portfolio, 72% of that debt, corporate debt is fixed, we're reasonably resilient from that perspective. The only exposure we've got is around our syndicate debt, which is around AUD 100 million at the moment. Those bailment costs will flow through for a full year basis, again, relatively small compared to the, you know, entire cost base.
Sorry, Tim, I'll just add one last piece to this 'cause it's such an important part of the business. Our total cost base went up by AUD 17 million in 2022, which again, is where it's probably one of the statistics we're most proud of given the environment. AUD 17 million in isolation sounds like a lot. It's minuscule. It's less than 1% if you take out investments in deliberate technology. We've costed all of the, of our tech initiatives, if that includes M&A costs on our ACCC transactions, and it includes a AUD 10 million increase in inventory. What that all leads to is a story that across people, across property, across advertising, across everything that we can control, we've taken structural cost out.
Our cost base story is actually something that we're most proud of, and it's really where we're pointing to, you know, the sustainability of our Return on Sales. Margins will be solid. Our cost base story is continuing to be really well controlled.
That's great. Thanks, Keith and Sophie.
Thank you. One moment for our next question, please. It comes from the line of Scott Murdoch with Morgans. Please go ahead.
Morning, Keith, Sophie. Thanks for the presentation. I might just start with that revenue uplift target, if we can just delve into that a little bit more. Maybe a multi-part question. Can you just, I guess, give us a little bit more color on the composition? The BYD impact flowing through, just interested if that's a full revenue of the JV flowing through, and also the composition, I guess, composition of the revenue coming through from previous acquisitions.
Yeah, no problem, Scott. There is, in terms of the makeup of that, without going into chapter and verse or giving you every single number, there's about 40% of it is linked to acquisitions. There is around, you know, sub- 100 in terms of organic things like a full year of Autom all. We do consolidate total revenue on BYD in that retail joint venture. I mean, you can probably back calculate the sort of volume numbers that would be factored in on BYD. It is 100% of the JV that goes through the consolidation, but it's on a reasonably conservative volume outlook.
Okay. Thank you. No, we can work with that. Just again, just on the financial stuff. On the GP coming through on that slide, we can see that there has been a second half uplift. Just interested in, I guess, the agency impact, high level, if you can kind of help us split that out and your insight into the stickiness of that GP margin. I know that's slightly obvious given the order book, but how you see that GP margin flowing through in the years ahead.
First off, agency, I'll deal with that one first, if you don't mind, Scott. The agency is fairly immaterial inside Eagers. You know, Mercedes-Benz volumes are sub 2.5% or circa 2.5%. Honda's much, much less again. In terms of agency having an impact on that, margin story or even our Return on Sales performance, it's very minor across our business. You know, totally immaterial. We could probably split it out, but it'd be, you know, totally immaterial. Effectively, what we've seen in 2022 was that margins strengthened across new cars, across franchised used cars, service, parts, finance per vehicle retailed, across new and used. The only area, the only part of our business where margins actually went slightly back was in our easyauto123 business.
That margin evolution improvement was across the entire business, not just new cars. There's two things I just wanna add to that. One, how sustainable is it? Certainly the new car margin, we think it's, you know, there is a high likelihood that it's gonna remain strong. We've got such a large order bank that is gonna wind off over the coming years. I can't even tell you at what rate it'll wind off because it's still growing as we sit here today. That two-year unwind that I mentioned in the presentation, that would be with record high supply and record low demand environment. It's basically a worst case scenario.
We believe the record order bank, which is embedded with really strong growth that will reflect what we achieve in the second half of 2022, is likely to underwrite the margin performance, certainly in the new cars. But then ultimately, what really matters, Scott, is less the gross margin and the Return on Sales, which impacts, Sorry, which is our net profit number, which involves both the growth story and our cost base story. And as I just said to Tim, our cost base story has been, we're really proud of this year because we've made structural costs out in a high inflationary environment for you know, sort of a circa 1.4% increase in our cost base, which I think is really commendable.
Okay. Thank you. I'll just ask one more, given there'll be lots of analysts in the queue. Just on the, on the order book, I think you've actually answered this in your in your statement just there before in terms of it's still growing. A couple of your peers gave some insight into trading calendar year to date. Just interested in what you see in calendar year to date in terms of the demand dynamic and, you know, the order book growth for the first, whatever it is, six weeks of this year.
Oh, for the first six weeks. Okay. I'll give you a--
Just in the number of years in current conditions.
Yeah. Well, for the second half of 2022, we grew by 29%. That's the first number. The gap between orders and delivery. Here's some interesting numbers. In 2021, the gap between order and supply was 25%. That lifted to 34% in 2022. It tightened, if more recent history. It tightened to 24%, I think, in quarter four, and then it's jumped out to 34% in January. 34% more orders were taken than vehicles delivered. The order book is still growing at a pretty strong rate.
Okay. Thank you, Keith. Plenty more, I'll let others have a go. Thank you.
Thanks, Scott.
Thank you. One moment for our next question, please. It comes from the line of Sarah Mann with Moelis Australia. Please go ahead.
Morning, guys. Just wanted to ask firstly on the trading environment, have you seen any change in the mix of, I guess, customer types, whether that's, you know, fleet coming back relative to retail? Are you still seeing kind of the fleet guys be undersupplied because the retail demand is still really strong?
No, Sarah, it's a good question. There is an element of the fleets coming back. I mean, a number of the FMOs and, you know, the novated companies have released and made statements to the market in the last day or so. You know, what they're saying is what we're seeing as well. There is no doubt that one of the things that will offset any retail softening linked to a high inflationary environment or rising interest rates is the return of fleets and this novated story that's going to have a fair bit of fuel tipped on it. Both those segments particularly are really going to, you know, help offset the demand story. We're seeing it. If you--
The anecdotal story is if you walked into a showroom today versus 12 months or even 18 months ago, it will feel less busy, but the order writers still are up 6% in 2022 on 2021. That is because there has been an element of the fleets coming back, the novated story starting to gain some momentum, particularly in, in EV going forward. There has been a slight change in the mix. It's a really interesting dynamic. You know, when has there ever been something where there's a carrot and a stick? The carrot is these huge incentives on going to low emission cars with the FBT exemption. You've also got this, you know, stick, if you like, which is the mandate on fleets to green their fleets.
That's gonna have an interesting impact over the coming years, and it's not a temporary thing. This isn't over the next couple of months. This is over the coming years. Large fleets, if they can't get access to greener cars in material numbers, may actually de-fleet and put more of their drivers into car allowances, novated leases, et cetera. This dynamic's got a long way to play out. All of those things may not increase the total number of cars sold into Australia, but they drive transactions. We've always said, you know, our business is built on transactions, not on how big the market is.
Got it. Just to clarify as well, like historically, fleet sales have been lower margin than retail sales, clearly supply is still constrained, right? Just under the scenario you just described, like how do you expect margins on those sales to kind of move relative to history?
I think if you read some of the notes from some of those Fleet Management Organisations, they're talking about supply. They're not talking about discount rates. They need to get supply. You know, in the past they've obviously made money out of the financing arrangements and, you know, to be honest, just rebates from us on low margin cars. At the end of the day, they're all chasing supply at the moment. It would be fair to say that it's a blend because there are models, there are brands where supply is actually freeing up or freed up over 2022. It's not across the board that margins are incredibly strong and then it's a no discount environment. It's a blend.
This is why we sort of make the comment going forward that if the order bank in Australia prior to COVID was about 15 days supply, 15 days supply order bank, and it's now north of 180 days supply. Looking forward, it feels like it's not gonna be 180 days forever, but it's certainly not going back to 15 days. When we talk about a structural change to this order bank dynamic, which trucks have had for decades, you know, does it land at 60, 90, or 100 days supply or order bank going forward? Now, if you've got an order bank at that level, it's going to have a higher embedded gross than a sell from stock, high pressure push environment that the industry's had before.
We just cannot see how it's gonna go back to that based on all the conversations we have with OEMs. What that does will shift, you know, it'll make a structural change in margin across the cars we deliver to both FMOs and the cars we put in order banks. That's a long answer to your question, Sarah, but at the end of the day, we, there is a blend of we're still doing fleet deals at fleet pricing on some products, but the real name of the game is getting access to supply, and there's plenty of fleet vehicles or novated cars that are being sold at full retail.
Right. The other question I have is just on the cost. You've obviously outlined a bunch of cost-saving strategies. You know, you've executed on some already. There's more to go. Like in a market where GPs are still good, like how hard is it to implement some of these changes? How should we be thinking about, I guess, the productivity gains and the cost savings in terms of how that flows through from a timeline perspective?
Hard to answer that, Sarah, only because it's just a daily proposition. What we achieved in 2022 was literally, you know, nose to the grindstone every day on costs. Most of the conversations in this business that aren't strategic are about daily cost control. They're not about margin, which is probably, you know, would be obvious. How do they flow out? Well, like for like in 2022, we reduced headcount by 83 people. That's an AUD 7 million savings. It wasn't reduced in our workshops or fixed operations. We just have just scratched the surface. On the technology slide in our pack, which I won't turn to now because we've got a lot there, but you'll see a number of the benefits that the technology that we've developed in terms of productivity outline.
What we haven't extracted yet and what we're sort of pointing to is that we've developed the technology, we've rolled out the technology, we've proved out the efficiency gain, but we haven't necessarily changed our business in terms of people resourcing. Remember, 55% of our expense base is people, so the name of the game is productivity. Linked to that is property and redesigning our property footprints so that we can consolidate more business on a smaller footprint. That's great from a property standpoint, but it actually is also the catalyst to redesign your workforce. Tech and property leads to lower people costs.
Again, hard to be specific, Sarah, or give you know, how you think about it, but this is just something. We've got to take structural cost out over the next whatever, 6, 12, 18 months while there is higher external costs coming to us that we can't control.
Makes sense. Excellent. Thanks a lot.
Thank you. One moment for our last question in queue. It comes from the line of Andrew Hodge with Credit Suisse. Please proceed.
Morning, Keith and Sophie. Thanks for taking my questions. Just, Keith, just on the analysis you've used with the order bank, You've used demand continuing at the same level through that COVID period. Anecdotally, it would appear that the demand in that period was higher. I think just from what you're observing, whilst you're talking about sort of 350,000 cars, if you took the demand through that time, is it more like 400,000 or 450,000 cars that you think the actual gap may be?
Oh, yeah. Sorry. Okay. Yeah. No, you're right, Andrew. I was sort of thinking. I was trying to follow where you were going on that one, but I understand exactly what you're saying. Yeah, that gap is based on if the demand had only stayed at 2020, 2012 to 2019 levels of 1,000,137. You're exactly right. That gap, that 363,000 car gap would only be keeping demand. The reality is, you know, the anecdotal comments that the order bank in the industry is north of 500,000 is probably not wrong because, you know, there is no doubt, we know it from our order rates, that over second half of 2021 and 2022, order rates have run at, well, north of 1.3%.
Great. Thank you. Just second question around commission rates, particularly with the two largest financiers having changed ownership, just whether you're seeing any change to commission rates at this point in time and whether with that new ownership at some point you expect commission rates to change in any way.
The simple answer is at the moment, you know, a change in ownership, so with Ally taking Macquarie and Angle taking St. George, sorry, I got the wrong way around then. There's no doubt there's a more competitive environment. Whenever there's a change like that, there is pressure on them to build their book to make sure that they manage their point of sale channels, which is us, the dealers, and we're critical to that going forward. The, the short answer is it's been a really competitive environment for the last 12 months. That has helped us, and that's offset what is a challenging environment for writing auto finance at the moment.
Long lead times, rising interest rates where auto loans are, you know, run ahead in terms of a costing and a rate than, say, a mortgage redraw. Things like that make it a very tough environment. Again, one of the, one of the results that, you know, doesn't necessarily look like it shook the lights out is our finance results, but it's probably one of the things we're most proud of to hold that will actually extend the gap between us and the industry. Again, back to your question, Andrew, it is competitive out there. There's no doubt that, what we're earning out of our relationships, is good at the moment. You know, will it change over time? It always does. It evolves. At the moment, it's competitive, which is good.
Thank you.
Thank you. This concludes Q&A session. I will turn it back to management for any final remarks.
Thank you very much. I just wanted to take the opportunity while anyone was listening to thank all of the Eagers Automotive employees. Our staff are incredible. They, we're very proud of our result in 2022. That comes down to our great staff. Any staff listening, thank you for your support. In 2022, the result is yours. Also like to thank our customers and our business partners while we have this opportunity and of course our shareholders. We're very confident about 2023. We're very excited about where the industry is going. We look forward to growing the company in the future.
Thank you for the opportunity to give you this results update to everyone that's dialed in. We'll talk to a number of you in more detail over the coming weeks.
Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.