The Eagers Automotive Results for the Half Year ended 30 June 2022. With me today is Sophie Moore, our Chief Financial Officer. Our results pack, including the slides for the presentation, have been lodged with the ASX and should be visible via the webcast. Sophie and I will provide an overview of the result, update you on both our operational focus and strategic progress, as well as the company's outlook, and then open up the line for questions. Let's now turn to an overview of the first half 2022 highlights. Eagers Automotive has continued to deliver consistent strong financial Performance, underpinned by buoyant demand, continued margin strength, disciplined cost out, and the continued execution of our Next100 strategy. Our results for the first half of 2022 were delivered despite the headwinds of the ongoing COVID-related new car supply constraints and labor and logistics interruptions.
The company recorded a statutory profit before tax of AUD 246.5 million and an underlying operating profit before tax of AUD 195.1 million for the half year. Our balance sheet is stronger than ever. We have a substantial asset base, including AUD 444.2 million of property, AUD 842.8 million of available liquidity, and only AUD 12.6 million net debt as at 30 June 2022. The outlook remains positive. Strong demand continues to outstrip supply, with our record order bank continuing to grow month-on-month, providing the company with a confident outlook through the remainder of 2022 and beyond. Our strategy remains both consistent and clearly articulated, and we continue to be Relentless and Disciplined in our execution against it.
Eagers Automotive is uniquely positioned. We are confident the company will continue to play a leading role in the transformation and consolidation of the automotive retail industry, benefiting from organic growth, complementary consolidation, as well as likely rationalization. In parallel, the industry will continue to evolve with new entrants and business models providing opportunity for growth in both the franchised automotive and independent pre-owned market segments. Now, for those of you following via phone only, we have just reached slide three, which sets out the agenda for today's update. I'm gonna hand over to Sophie now to take us through the financials in more detail.
Thanks, Keith. For the half year ended 30 June 2022, the group has delivered on a statutory basis net profit before tax from continuing operations of AUD 246.5 million. Underlying operating profit for the period was AUD 195.1 million. Underlying return on sales decreased marginally to 4.6% in the first half of 2022, compared to 4.7% in the first half of 2021, as the company continues to benefit from ongoing productivity and cost out programs. Despite a reduction in turnover linked to the ongoing supply constraints and COVID-related disruptions to logistics and labor, the underlying Performance of the business remains strong, benefiting from a buoyant market where the demand for new vehicles continues to materially exceed supply.
This has resulted in an increase in the company's record order book of more than 32% on a like-for-like basis since December 2021. As Keith mentioned, our balance sheet is stronger than ever. We ended the period with corporate debt of AUD 12.6 million net of cash on hand. The board has approved a payment of a record ordinary interim dividend of AUD 0.22 per share, fully franked for the half year, up 10% on the first half 2021 ordinary interim dividend. This record interim dividend underscores the board's confidence in the strength of Eagers Automotive business and our future strategy, while providing capacity and flexibility to continue to invest in restructuring and growth initiatives. Now I'll just refer to slide six.
Revenue on a reported basis declined by 10.3% to AUD 4.2 billion, with the first half revenue impacted by a combination of the Daimler Truck divestment in 2021, along with continued supply constraints on new vehicle deliveries and COVID-related disruptions to labor and logistics. Underlying operating profit before tax was AUD 195.1 million. Slide 31 in the appendix includes a reconciliation of this statutory result to the underlying EBITDAR and PBT. On a statutory basis, the company recorded a net profit before tax of AUD 246.5 million. The statutory result includes significant items totaling AUD 51.4 million net income before tax. This predominantly relates to the gain on sale of the Bill Buckle Auto Group, totaling AUD 47.7 million. Slide seven.
Eagers Automotive is in a very strong financial position, underpinned by a substantial property portfolio and asset base, together with AUD 842.8 million of available liquidity at 30 June 2022, a record level. This liquidity position includes available cash and undrawn commitments under corporate debt facilities. The company's significant liquidity buffer provides the flexibility and capacity to invest in organic growth, technology enablers, restructuring, and acquisition opportunities. Furthermore, recent announcement to commence an on-market share buyback of up to 10% of issued capital reflects the board's focus on active capital management and is a testament to the company's strong balance sheet and record available liquidity. Let me hand back to Keith to provide an operational update, including the current market dynamics and the focus on the execution of our strategy, which has underpinned our results. Thanks, Keith.
Great. Thank you, Sophie. Before I take you through some of the strategic highlights of the first half, I wanted to provide some context on the external environment and how Eagers Automotive occupies a unique position in the market, not only due to our scale in the new car segment, but also the scale and opportunity that exists across all parts of our business. Let's look at the new vehicle market to start with. The Australian market was down 5.2% for the first half 2022, as reported by VFACTS, which continues to be defined as a report on vehicle deliveries rather than underlying demand. Now, this is historically atypical, and it does not represent the continued delta existing between supply and demand.
Within the Australian new vehicle market, it is important to note that Eagers Automotive has traditionally over-indexed in representation of the top ten brands by volume, which have, on a consolidated and relative basis, been most impacted by recent supply challenges. This has created an opportunity. The opportunity is for us to grow in new and emerging brands in which Eagers Automotive has either no or underweight representation. It's something the company has been focused on through both greenfield markets and acquisitive growth. It will see Eagers further expand and balance our new car franchise portfolio. Now the new vehicle market is a key part of our business. However, it is important to highlight there are other parts of our business which materially contribute to our overall economic model.
On the right-hand side of this slide, you will notice the considerable scale of the addressable and highly fragmented markets we participate in beyond just new vehicle sales. While we have consistently highlighted the opportunity within the pre-owned market being a factor of three times the new car market, the size of the other components of the total addressable markets are also significant. The Finance & Insurance market provides approximately AUD 25 billion of dealer retail finance per annum. The service market supports an Australian car park of approximately 20.1 million vehicles, and the parts market continues to grow, with total forecast revenue of AUD 5.9 billion in 2022. These markets highlight the resilience and the opportunity within our economic model, able to withstand singular changes in new car demand, while also demonstrating the opportunities that exist inside our core business as automotive retail continues to evolve.
Turning back to the new car market. As alluded to already, demand for new vehicles, as reflected by our monthly order write rather than reported new vehicle deliveries, continues to run materially above supply. During 2021 and into the first half of 2022, we have grown our order bank by approximately 330% on a baseline of December 2020. This dynamic is expected to continue into the second half of 2022, providing a confident outlook that margins will remain consistent. While the materiality of the existing order book, combined with its further growth, will provide a midterm hedge at an absolute minimum against any cooling in macroeconomic conditions. On the next slide. Our strategy continues to deliver incremental Performance irrespective of external market conditions, something Eagers has long been focused on.
The current gross profit margin percentage, while strong, does not exceed previous levels achieved. This indicates the strength of the business, but equally, that is not perhaps utopia, with the environment still adversely impacted by COVID disruptions. Most pleasingly, our cost base is at a record low as a percentage of sales. The biggest influence on this cost base is the deliberate action taken by the company in line with our Next100 strategy that saw a step change in 2021 versus pre-COVID levels, with additional improvements achieved yet again in the first half of 2022. Further, and ongoing cost base improvements are expected over the midterm as we leverage our scale and utilize property and the tech-enabled redesign of our operations to drive sustainable higher productivity.
Finally, we again highlight the fact that regardless of the external environment and the headwinds or tailwinds that exist at any point in a cycle, the automotive retail business model is resilient with multiple moving parts. These moving parts go much further than simply how many new vehicles are delivered and how strong is the new car margin. They include multiple income and expense levers that can be utilized to fuel growth or act as a hedge in times of changing market dynamics. Effective and deliberate management of these levers provides a platform for growth and helps to steer strategic decisions, including around acquisition and rationalization opportunities. Now, let's move to an update on our progress against the company's Next100 strategy. On slide 14, you'll see a quote.
It is quite unusual for the company to reference a specific external piece of commentary, but we have done so to provide third-party context to our own well-communicated and well-progressed company strategy. The quote on the slide that you'll see in front of you is that we're going to refer to is from the U.S. Auto Equity research desk of JP Morgan North America, and was part of a report issued on the 19th of July, 2022, following analysis of the listed auto retail sector company updates for the first 2 quarters of 2022 in the U.S. It reads, "We continue to believe the ultimate impact on profitability of large dealerships as a result of the potential disruption associated with electric vehicles and direct-to-consumer models is likely to be minimal.
This is due to the opportunity from omni-channel initiatives, consolidation, limitless used car market penetration, captive finance operations, productivity gains/leaner workforce." Now bearing that quote in mind, it's worth comparing it to Eagers Automotive's Next 100 strategy. Many of you will be well familiar with it by now. What is most interesting is how closely our strategy, which was publicly articulated in 2019, but in place internally for much longer, is aligned to the summary of the previous quote. Omni-channel initiatives, consolidation, limitless used car market opportunity, finance Performance, productivity gained through a redesigned and leaner workforce. What should be most encouraging for shareholders is that Eagers Automotive have been working on these strategic initiatives for an extended period, not simply as a response to COVID, with the benefits becoming more evident every year across our organic growth, greenfield opportunities and targeted acquisitions. Let's start with property.
We continue to use property to deliver both innovation and consolidation of our retail footprint, focusing on a more customer-centric experience on a sustainably lower cost base. In the first half 2022, we opened our much anticipated AutoMall West at Indooroopilly Shopping Center in Brisbane, and I'll specifically talk to this shortly. Property portfolio management continued to feature as a core element of our strategy, with property sales of AUD 44.3 million, delivering AUD 17 million in profit in our first half in our statutory profit number. In addition, we acquired two more strategic properties for AUD 21 million during the period. We continue to rebalance our portfolio of owned versus leased property with a total of 11 leases exited during the period through a combination of footprint consolidation and business divestments.
We progressed the fit-out of our dedicated reconditioning, pre-delivery and storage facility at Viola Place at the Brisbane Airport Precinct to support our continued easyauto123 growth plans. Finally, we expect to settle on the acquisition of 11 further properties, totaling approximately AUD 120 million in the second half of 2022. Moving on to technology. Technology remains a fundamental enabler for reaping higher and better productivity Performance within the business over the long term. In the first half of 2022, we moved from development to test and learn, and now rollout of four key proven proprietary technology initiatives. These initiatives cover multiple parts of the business, including sales, operations, service, administration, and developing a better omni-channel customer experience.
Highlighted on the slide for your reference, is a number of key statistics that provide real evidence of progress and demonstrate the materiality of the benefits these initiatives will provide. We'll continue to roll these out, these proprietary technology initiatives across our business, driving productivity improvements and an enhanced customer experience. Moving on to financial services. The first half of financial services was characterized by continued strong operating Performance across all regions, relative to a very challenging environment for finance. Long lead times continue to be a material headwind to our penetration ambitions. Despite this, we managed to maintain our finance share relevance, significantly outperforming the broader market and increasing gross profit per retail unit delivered, something we're very proud of. Our relentless focus on maximizing the customer Finance & Insurance experience has seen our share of ancillary products increase to new highs.
We have also seen our proprietary businesses, including our Taurus Motor Finance joint venture and Simplr, our subscription business, deliver record results. In addition, we have leveraged a competitive marketplace characterized by a number of aggressive new dealer auto finance companies focused on utilizing the dealer channel to grow their respective books and gain market share. The Finance & Insurance segment of our business continues to be a key strategic pillar for further margin growth and is a driver for accretive earnings. Turning to greenfield growth. In the first half of 2022, the company has made considerable progress in greenfield opportunities by new market representations with existing partners, accretive and material partnerships with new entrants into the Australian market, and innovative new retail formats that provide accretive earnings opportunities.
Eagers continues to strive to be a partner of choice for all OEMs we represent, and our property strategy provides a unique opportunity to deliver accretive partnerships for key OEMs in markets they are not currently represented. You will see some of the leading brands I referred to on the left-hand section of the slide, covering some of the best known, fastest growing and aspirational brands. Moving to new entrants. The Australian market continues to attract new entrants. Eagers Automotive, given our unique scale and geographic reach, has been well positioned to partner with some of these exciting new market players through innovative and significant partnerships. Finally, our AutoMall West initiative has been a prime example of innovation in retail that provides a unique customer experience and accretive growth for the company.
Our AutoMall West initiative has been a key pillar in our internal AutoMall strategy, aimed at leading transformation evolution of automotive retail, focused on better customer experiences at a lower sustainable cost base. Now, the initial response from key stakeholders, including our customers and OEM partners, has far exceeded expectations. The average daily unique footfall visiting the store in the Indooroopilly Shopping Centre exceeds 2,000 People, with the average dwell time, the amount of time spent in store, in excess of 15 minutes. The level six rooftop multi-branded service factory has quickly grown to more than 60% capacity. While orders written on new vehicles have eclipsed traditional format sales achieved in the area on a like-for-like and prior period basis. In addition, we have also achieved material incremental sales from new brands that were previously not represented within the area.
We are currently expanding our footprint with an additional four brands already confirmed and discussion with others. Finally, and most importantly, customers have told us the format works. Our customer satisfaction for the OEMs represented is, on a consolidated basis, a benchmark for our group. Turning now to acquisitions. It's important to again remind our shareholders that the company remains very deliberate in our decisions to acquire businesses. We are not looking to simply buy earnings in the sector. Our investment mandate must be complementary to our Next100 strategy and deliver earnings accretive growth above and beyond the initial purchase metrics. In late 2021, we completed the acquisition of the Kelly Trotter and Heritage Motor Group in Cardiff and Maitland in New South Wales. This acquisition included options to acquire more than 25,000 square meters of key Strategic Property across both locations.
These properties will be instrumental in the future consolidation of the total businesses, which we already ran in both these markets. Independently of this future property rationalization benefit, we have materially transformed the businesses since acquisition, utilizing our existing scale, structure, and internal Performance metrics. This includes a 14.4% increase in revenue on an annualized run rate basis, a 48.5% increase in sales per employee, and a lift in the return on sales of 3.1% return on sales over and above what we bought the business at. It's a fantastic result. Turning to our M&A pipeline for the second half of 2022. On the 15th of July 2022, we received 97.9% shareholder approval for the acquisition of the group of dealerships controlled by the Nick Politis-owned WFM Motors in the ACT.
This is a compelling opportunity for the company. It provides immediate scale of approximately 30% of the new cars sold in the ACT, a market Eagers Automotive had no current representation in. Includes nine key OEM partners, as well as approximately 56,800 square meters of land and buildings that will be acquired as part of the transaction. With opportunities for immediate incremental growth already in place, we expect this acquisition to generate immediate shareholder value. In addition, we are pleased to now announce the recent acquisition of the Newspot Group in South Australia. Newspot is a business representing a fast-growing portfolio of leading brands, including two MG dealerships, Kia, Jeep, Suzuki, LDV, Ram, and SsangYong. In addition, the acquisition includes a key strategic property to provide flexibility as we integrate the Newspot business into our substantial existing South Australian footprint.
This business is subject to a number of customary conditions, including final OEM approval, and is expected to complete on the 30th of September 2022. The combined turnover from these two acquisitions will be in the order of AUD 550 million for the full year 2023. The company remains very active in reviewing further complementary acquisitions that meet our strict investment mandates. The final strategic item for today is an update on our easyauto123 and Carlins independent pre-owned vehicle business, which operates nationally and also in New Zealand. This strategic pillar remains both a material incremental growth opportunity as well as a significant hedge during times of evolution and transition in the franchised automotive sector. Our focus for our independent pre-owned business in 2022 has been driving sustainable scaling of the business through disciplined investment.
The business has grown by 50.7% in total revenue and 57.4% in volume from January 2021 to June 2022. We've continued our footprint rollout into key identified markets with three new locations opening in 2022, while carefully investing in the infrastructure to provide sustainable scaling of the business. This infrastructure includes dedicated reconditioning, standardized buying teams, and the rollout of our proprietary technology to support our omni-channel model and productivity ambitions. We will continue to grow easyauto123 business by sustainably leveraging the unique advantage available through our unrivaled new car franchise network and better integration of the Carlins National Auction business. Turning finally to our outlook. Eagers Automotive are uniquely placed to play a leading role in the transformation and consolidation of the automotive retail industry. We have a clear strategy and a track record of discipline execution.
We've never had a stronger or more flexible balance sheet to invest in transformation, organic growth, technology enablers, and M&A as we accelerate execution of our company strategy. In the second half of 2022 specifically, we will focus on maintaining and optimizing operational Performance, continuing the rollout of our tech-enabled productivity and omni-channel initiatives, integrating our franchise automotive acquisitions in the ACT and South Australia. Delivering on sustainable growth in our independent pre-owned business. Delivering sustainable and material earnings from our significant greenfield opportunities, and maintaining disciplined view of strategic and accretive acquisition opportunities. While we remain cautious around continued COVID-related supply constraints, any interference to general operations, as well as a changing macroeconomic environment, we are very confident that Eagers Automotive is extremely well-positioned to grow our business over the medium and long term.
On behalf of the entire team at Eagers Automotive, I would like to take this opportunity to thank you for your interest in today's financial and strategic update, and would now like to open up for questions.
Thank you. Ladies and gentlemen, to ask a question, you will need to press star one one on your telephone. Once again, to ask a question, please press star one one. Our first question comes from the line of Tom Godfrey with MST.
Good morning, Keith and Sophie. Thanks for taking my questions. Can you hear me okay?
Sure can, Tom.
Great. Maybe if I can just start with one on the demand environment you're seeing in July and August, just given the macro backdrop. How should we be thinking about maybe your order write growth versus PCP? And as a second part, have you started to see any pockets of weakness emerging in terms of the order bank and in terms of customers actually taking deliveries, or is that still a bit early?
Tom, it's a great question. There's gonna be a lot of interest around this and us trying to give a guide on it. The short answer is absolutely not. Now, I will put a caveat on that in that we are cycling a period this time last year where there was some lockdown interference, particularly in LGAs in Sydney and Melbourne. As we sit here today, we have an order write up north of 25% on this time last year. The demand is, in a word, unrelenting at the moment. It is very strong, so we are not seeing any weakness.
The delta between demand and supply has actually increased compared to this time last year. I say those things, Tom. They are factual. They are what we're seeing. It doesn't mean that we're not totally conscious of all the potential issues and macroeconomic conditions out there. At the moment, the demand continues to be very strong.
Got it. No, that's helpful. Thanks for sharing those stats. Maybe just next one, just in terms of the Newspot acquisition. How should we be thinking about that business's return on sales profile versus your base business? Just if there's any sort of commentary you can give us around multiples or valuation?
Still to settle, Tom, so probably unfair to talk around multiples or valuation at this stage. We're happy to disclose a little bit more once we settle post-30 September. We think this is a great acquisition. It's a business that is a very fast-growing business. A really good dealer in South Australia who's well-known to our business and has had a long-term relationship with our business. Our team down in South Australia, our Australian team , has grown this business very successfully from a very small business to quite a substantial business over the last few years. The business, the Newspot business has got a great portfolio of brands. It's benefited on the, you know, the rapid growth of brands like Kia or MG. It is operating from a very attractive low cost base. It is certainly not performing at a level below our group-wide return on sales.
Got it. That's helpful. Thank you. Then maybe just the last one from me. I'm just interested in terms of what you're seeing from your key OEM groups in terms of price, just given some of the cost inflation they're seeing across their businesses. Does that sort of have the potential to change your gross margin profile in the next 12 months?
Price won't change our gross margin profile, to be frank, at this stage. It's price increases or any future price increases may have an impact on demand. At the moment, they're certainly not. We don't expect price increases to be so material that they suddenly stop People wanting or needing to buy a car. Remember, People want or need to buy a car. If the price of their preferred model goes up, they don't suddenly stop the want or need to buy a car. They buy a different car. Because Eagers represent every brand and we represent cars from AUD 500 to AUD 500,000, it just means the transaction moves to a different part of our portfolio. That's the first thing. If prices go up, our margin is a percentage of list price or retail price in most cases.
Theoretically, there's an opportunity for slightly more margin. I wouldn't be modeling that in. From a finance point of view, if the prices of cars move up, as they have in used cars materially over the last couple of years, the amount of net amount financed through our finance business increases. We have a return which is based on a percentage of net amount financed, so that can increase as well. Generally speaking, increases in price through the vehicle space, we're pretty well positioned that People are you know, it's becoming more and more evident that People are gonna continue to want or need to buy cars. The census data that just came out for 2021 has been quite staggering in terms of Australians' demand for cars and their love affair with cars.
We're well positioned that People just move around that price spectrum up and down, and they can move from new to used. Over the whole Eagers portfolio, we think we're fairly well insulated from it.
Got it. No, that's clear. Thanks for taking my questions, guys. Appreciate the time.
Thanks, Tom.
Thank you. Our next question comes from the line of Scott Murdoch with Morgans.
Thanks, guys. Assuming that's me. I didn't hear my name called out. Just morning, Keith and Sophie. Just interested on a bit of detail around, I guess, your views on EV. Obviously, that's garnering a bit more focus with some labor policies likely to be introduced. I guess a couple of parts to this. Interested in an update on the BYD demand and delivery profile. Just how you're positioned. You called out a few other brands there, but I see the likes of, sort of MG increasing sales rates. And any just insight into your experience in New Zealand with the incentives and disincentives that are in place. Thanks.
Thanks, Scott. A couple of questions in there, so I'll try and cover them all. I guess first comments around the transition to more low emission type vehicles. I'll probably try and capture all low emission type vehicles because that is certainly gonna fuel a number of transactions over not just the next six to 12 months, but over the coming five years. It's something that I think everyone is probably underestimating at the moment, that there is going to be you know, additional fuel to the new car market in Australia because of this transition to lower emission vehicles, which will be supported by the current government. The reality is that there's a lot of focus around EVs.
I think we, as Eagers, are probably best positioned to ensure that we participate in any EV take-up. Certainly the BYD position as their national retail partner. You called out MG. MG are also got a really significant position in affordable EVs. You can see we've taken some deliberate action through our acquisitions and some greenfield opportunities with MG. It's not just EV. I think, Scott, what will happen is that as much as everyone EV gets all the focus, the reality is there is gonna be a push to low emission vehicles. It has to be done in a way that's affordable, so it doesn't leave the population behind. It has to provide enough choice.
The reality is a lot of Australians drive mid-size utilities, and there's not a mid-size utility that's available as an EV or a mid-size four-wheel drive, as in a larger four-wheel drive. It's gotta have a choice and availability of models that the Australians will want to buy. Finally, we need the infrastructure in place. There is no doubt there's a while to go on this, but the transition to a low emissions future has already begun, and that is a great catalyst for People to transact. Eagers is a business that benefits out of transactions, not necessarily picking one car over another.
We're actually quite excited about what that means for our business over the next three to 10 years, and that's quite a broad period of time, but that's how long this will take. This is not an overnight transition. There's 20 million cars on the road in Australia. There's a long way to go on this, but it's an exciting time, and I think we're well-positioned. The New Zealand example is hard to pick. The way New Zealand went about it was, you know, incentives on the EV side and almost disincentives on the ICE side. Again, in isolation, that's challenging because it's not like customers have free availability. Again, I'll use that ute example.
If you're a tradesman and you need a ute, and the legislation or the incentives or the lack of infrastructure is in place, but you cannot buy a car fit for purpose that meets those incentives or that infrastructure or that legislation, it's. You're not going to be able to respond to it. It can have disincentives, and it can slightly dislocate the market for periods of time and make it look a little bit bumpy. At the end of the day, I think my comments around us being incredibly well-positioned no matter which direction this takes is the most relevant one.
Okay. Thanks, Keith. Just interested in some further commentary on easyauto123, if we can. You've given some numbers there versus January 2021, but just interested in more, I guess, what happened over the half in terms of like-for-like growth, just some insight into the profitability and your confidence to be able to expand the rollout and any intentions past 2022 to really accelerate the rollout.
Yeah, Scott, if you look at a half-on-half, we gave some numbers in there, which I referenced, which was growth since January 2021. If you looked at just period on period, we grew volumes by circa 33% half-on-half. Revenues were more like 43% up half-on-half. We have continued to scale this business. It is a challenging environment at the moment because of the continued new car supply constraints and the excessive lead times between order and delivery in the new car market. There is no doubt that the number of trades coming through the normal new car franchise network system are less than normal. What that means is that not just easyauto123, but all a large majority of dealers are trying to buy cars in the same private market or auction channels, et cetera.
The competition for used car stock at the moment outside of your trade channels is actually quite high. That's put a little bit of pressure on our margins in the first half. Our margins have come back a little bit in the first half, not dramatically, but enough to slow down some of the profitability growth. At the same time, we deliberately have invested in the first half. We've added cost to our reconditioning facilities, our buying teams, our tech rollout. Now they are investments in scaling the business. They're very deliberate, and they're not, we've lost control of our cost base. They are deliberate investments to sustain the growth.
Your final question is how confident are we to continue to roll it out into the second half and beyond? Very confident. easyauto123 having an independent used cars business linked to our national auction being Carland in both Australia and New Zealand is a fundamental pillar of our strategy going forward. We're really confident that we can grow this business considerably.
What we won't do is, and there's been some challenging results in used car space overseas in some of these independent used car businesses. We won't try and scale at the expense of sustainable profit going forward.
Okay. Thanks, Keith. You've got plenty of Analysts, so I'll give others a chance. Cheers.
Thanks, Scott.
Thank you. Our next question comes from the line of Russell Gill with JP Morgan.
Hey, Keith. Just a question coming back to the earlier discussion around which is obviously a big focus at the moment is consumer demand. I was wondering if you can give any further insights in what you're seeing, you know, in the order write last couple of months in maybe price point of vehicle, brand of vehicle, but also in, you know, in your secondhand market, but also around financing and access to financing. I know the U.S. consumer is different, but they're seeing, you know, significant deterioration in sort of the sub-$20,000 secondhand vehicle category. Do you have any insights you're seeing regarding those, I guess, demographic trends in Australia?
Russell, that's a really good question. It's probably a little bit more granular than I can give you know, specific data on today, starting with the first part of your question. General order write, as I mentioned earlier, I think to Tom, is still very strong. You know, the gap as I keep saying between our demand and supply being the orders written and the vehicles delivered is wider now than it was this time last year. The order bank is just continuing to grow month- on- month. That's the overall. As the question you've asked is a lot more specific, and I'll talk to the finance piece.
We're really proud. I called out in the presentation that our Performance is circa 10%-12% above where the industry sits at the moment in both new and used. It's still only sitting at sort of mid-30s% in both categories. To hold it there while the industry has come back to probably call it mid-20s% is a really, really good result because you've rightly pointed out that a lot of People have made a lot of overseas retailers and the comment you made about People are seeing these headwinds to financing. For us to hold mid-30s% has been, you know, one of the things we're most proud of as a company. What we're seeing, though, is that it's a mixed bag and the lead time.
If you've ordered a car a long time ago and you're now about to take delivery, the challenge is you might have been quoted three, six, 12 months ago on your indicative rate, and we're requoting that now at the point of delivery. The challenge there is that customers are going, "Oh, well, that rate has moved since you've first spoken to me. I might wanna go shopping." Equally, if you're ordering a car today for delivery in three, six or 12 months, it's hard to lock in a rate or pin down the finance at the moment of order. What we are finding, though, is two really positive things. One, we are still selling a number of cars where we order and deliver inside 60 days. Our penetration in that short window is as good as it's ever been.
We are really having a lot of great results out of that short window between order and delivery. What we're also learning as this, you know, ongoing long lead time environment goes is we're learning the lessons. What we've been, and this is some data that we've picked up from our major finance partners, is that there is a sweet spot on when you re-quote to a customer leading up to delivery of the car.
There's a stat going around of just say approximately 60 days out from delivery is the sweet spot to go and re-engage with the customer and re-quote on their finance to take them out of the market and confirm that Finance Penetration . It's a mixed bag. There's no doubt it is a challenging environment. It's why we called out our results. You know, I think generally speaking, you know, we'll continue to put a lot of focus on maintaining where we are and growing going forward.
Thanks, Keith. Just two more questions. Just can you give, I guess, maybe some insights on your expectations on the cadence of new vehicle deliveries? You know, Toyota came in, I guess, with a bit more of a rush in the last couple of months than probably was expected. I guess not just the absolute timing for your new vehicle deliveries, but more how you play your easyauto123 business and I guess the risk around second-hand vehicle pricing, given that cadence of new vehicles coming to Australia and how you think strategically about, I guess, inventory in that business as that dynamic progresses.
Yeah. It's because Easy Auto, Russell, is running at, you know, let's say circa 20,000 units a year, how much stock or how little stock we have is not influenced by the overall new car market deliveries. Us trying to manage our stock up or down based on new car deliveries into the marketplace would be too scientific for it to actually translate into, you know, a genuine, genuinely good outcome. We've got, as we said in here, sort of such massive opportunity to grow Easy Auto, irrespective of what the new car market is. We're not trying to link our Easy Auto inventory levels around new cars coming. From a pricing point of view, we're not concerned either. You know, we buy and sell used cars inside 60 days in the business.
Inside those 60 days, prices are not collapsing or not rising so dramatically. We're buying cars and selling cars in the same environment, and that's a discipline we're absolutely focused on. Just coming back to new car supply and just a comment around that. It wasn't specifically your question, but it's interesting, you know. Everything we're seeing is that structurally we still don't see supply materially improving over the next couple of years. One of the leading Korean brands, one of the leading Japanese brands, both reconfirmed to their network the other day that this is gonna continue for another couple of years, tight supply that is. On a more cyclical basis, we're fairly encouraged.
Our pipeline reports at the moment are showing that over the next quarter and through even till the end of the year, we're seeing some green shoots in terms of supply, particularly compared to 2021 levels. It's gonna be a period where it's gonna sort of have strong periods by brand, by model, gonna have weaker periods by brand, by model. It's incredibly hard to forecast.
Thanks, Keith, just the final question, just focused on your back end. You called out six months ago, you know, struggle for labor and access to labor, and I think you were off trying to bring some workers in from overseas to manage that. Your back end, I guess, has declined further than what your front end, your new vehicle sales rate has. So the question is: What's your outlook for that business? Obviously it's impacted by the timing of deliveries as well, but has the attachment rate deteriorated. Is the dynamic of a pent-up demand that's caused by COVID lockdowns, but also the attachment rate may deteriorate because of the lack of labor supply and lack of new vehicles. Can you just possibly talk through how you're thinking about the back end over the next six to 12 months?
Yeah. It might've been one of the other listed looking for staff overseas, Russell. We haven't particularly gone overseas looking for staff. There's no doubt that there is a challenge to get skilled labor. The bigger issue for us has been more absenteeism around COVID. If we've got, as we constantly say, our workshops run at pretty much. We're booked out to more than capacity every single day, and there's generally a lead time. What that means is every single day, every single workshop is generally run to capacity. The profitability is then linked to how well you run your business to capacity and how efficient it is.
What has been a bigger issue in the first half has been anywhere from 5%-12% at different times in different areas, absenteeism of labor with technicians off with COVID. That has been a bigger issue. Our first half is more around that missing or absent labor because of COVID, which just means you cannot sell that labor. The biggest component of our workshop is labor sold. When you don't have the labor to sell, you can't sell it. You're actually operating that workshop at a reduced capacity. We don't believe that's an attachment level. There is a risk. You rightly point out a risk that theoretically People might become less attached because of issues.
What generally happens is the cars arrive and they may, you know, in the worst case, we don't like to say this, there might be a slightly longer lead time or it might take a little bit longer to get the car turned around. People don't necessarily just go and leave the business or leave our, you know, the brand because of that. There's no doubt it has impacted the first half. You're right in pointing that out. Parts much less so.
I'm sorry, maybe I'd frame it a little bit better. What's the, I guess, the order write, or what's the waiting time to book a car, and how does that compare today relative to maybe six months ago?
Russell, it just varies so much by brand, by location. It could be anything. We, I mean, literally some brands we could probably squeeze you in today. Others might be 5, 7, 10 days. We don't try and roll it up and get a consolidated number because it actually doesn't add any value. I'm sorry, I don't know that number. It just, it's so variable.
Great. Thanks, mate. Cheers.
Thanks, Russell.
Thank you. Our next question comes from the line of Phillip Chippindale with Ord Minnett.
Good morning, team. Thanks for your time. I just want to follow up on that order book question earlier. Keith, you were referencing PCP numbers in your commentary earlier. I just wanna understand that gap between demand and supply, perhaps, over the last couple of months versus the June half. Has that gap sort of been maintained in the last couple of months? Is that a fair comment, do you think?
It's absolutely been maintained. It might have got bigger. Well, Sophie's nodding. It has got bigger.
Okay, great. Just want to turn quickly to easyauto123. I'm just wondering about how we should be thinking about this business, you know, in the event that there is a bit of a downturn perhaps into next year and beyond. I guess how are you gonna maintain profitability in that business? You know, clearly, you've spoken about the volume challenges at the moment in used cars, which is fair enough. But clearly, you know, margins can be pretty reasonable during this period. In a downturn, do we see perhaps a crimping of margin that is the offsetting factor there that, you know, your volumes pick up?
It's an interesting way to look at it. The one thing I will constantly, you know, repeat is that we have not our positive profit results and even and any headwinds to our profit results in easyauto123 are not prefaced on rising used car prices. Because when we buy cars and sell cars in a 60-day cycle, you're buying inside the same price band. If the market is strong, you have to pay more to get the car, and then you sell at a higher price. Equally, if all the prices move down, you could buy a car or acquire a car cheaper and sell it at a cheaper price. It's that differential between acquisition cost and sale price.
We don't actually look at this business as a business that can make more or less in a rising used car environment or a decreasing used car environment. What we look at is scaling the lowest cost national single-branded independent used car business. What we wanna provide is a great experience with a really big range of cars, and we wanna drive massive productivity so it is the lowest cost operator. The cost to sell a used car off a franchised used car lot is considerably more expensive than doing it on a scale basis. That's what underwrites the profit of this business going forward.
It's the reason that we constantly focus on scaling the business rather than sitting here and saying, "Oh, the business is going very well because the environment's good and the margins are strong." You'll find most of the commentary that Eagers ever gives is focused on what we control rather than the margin environment that exists. We can call it out and we can leverage that margin environment if it's strong, but at the end of the day, we have to do things that survive a positive or negative environment out there.
The short answer to your question is that we believe we can scale Easy Auto irrespective by focusing on getting higher and higher volumes out of our existing footprint, higher and higher productivity out of our existing headcount, and a better and more convenient experience for customers.
Thanks. Just following up on that. Clearly the finance attachment's also a part of that as well, and you would expect that would improve, you know, once new car supply and supply more generally comes back to more normal levels. You reference on slide 18 an ongoing showroom F&I transformation. Can you just unpack that for what you're referring to there?
Basically what we've... There's a couple of components to that. There is the less sophisticated piece, which is actually integrating the selling of finance into the redesign of People's roles. Basically there's also... You can't do these in isolation. If you look at the technology slide as well, there's a reference in there to a ten-minute sales app. A ten-minute sales app is a technology enabler that allows one of our employees to sell a car, which is sell the car, sell a used car, or sorry, trade in their old car, sell accessories, sell finance, sell insurance inside ten minutes on an app, and it's basically follow the bouncing ball for want of a better phrase.
Now, what that means is that if we are able to train and utilize that technology, we can suddenly have one individual doing all those tasks that traditionally might involve four or five different individuals. If we support that individual with the right level of expertise that handle a lot more transactions in the background, and by that I mean, you know, our business managers that are focused on providing credit expertise and putting up applications and massaging deals in the background rather than the customer-facing selling roles, we fundamentally shift the productivity of our workforce. The issue with automotive retail is that we have got too many People to sell a car, trade in an old car, sell finance, and sell accessories and car care.
The whole plan that we have around higher productivity is to use technology to provide a better customer experience, but to have one person, as best as possible, handle all those parts of the transaction. Now, what we've done is we have tested this for 18 months now. This has been developed, refined, tested. We've learned from it. We've evolved. The last thing you want to do is to change and redesign our workforce and get higher productivity but much lower margin. What we're finding is we're maintaining margin and we're getting higher productivity. That's what we're referring to. That's the best example when you talk about redesigning our workforce and redesigning our showroom process around finance. It's not just isolated to finance.
Okay. Thanks, Keith. That's really useful. Appreciate the color. That's all from me.
Thank you. Our next question comes from the line of James Ferrier with Wilsons Advisory.
Morning, Keith and Sophie. Thanks for your time. First question, just on supply. One of your peers recently talked about a view that, maybe in the year ahead, the European OEMs were likely to see, a bit stronger supply coming online, coming to market, relative to the Asian OEMs that are probably gonna see tighter supply. What's your view on that observation?
James, I honestly don't know. I think it's fraught with danger trying to pick supply at the moment because no one's got it right since COVID hit. You know, we've been constantly talking about supply is gonna bounce back. It's a rubber band, et cetera, et cetera. The sheer complexity of the supply chain network in parts, logistics, freight, COVID labor involvement, it's just incredibly hard to tell. Anecdotally, we are hearing mixed reports. One of the things that is going to be a, I'll answer this probably a different way because the short answer is I wouldn't really pick Europeans are gonna be better than Asian or Korean or Japanese product. I can't see that. I don't say it's wrong, but I can't see it.
I don't have that good a crystal ball. What I do see or what we see is a bit more of a longer-term challenge in terms of the type of products that are actually able to be brought to Australia. Now Australia and the reason I point this out is Australia is a right-hand drive market. Australia have an appetite for different types of products compared to the vast majority of the rest of the world. I talked about utilities, mid-size four-wheel drives, et cetera. This transition, this is a once in the industry's time, it may happen again in the future sometime another hundred years.
This transition from a, you know, almost a static state where there was an ICE, it could be petrol or it could be diesel, to this low emissions future is going to mean that all our OEM partners are gonna make very deliberate and very strategic decisions around what sort of products they develop, because they've got to do this on a global scale. They've got emission challenges globally. What sort of products they're gonna develop and spend money developing from an R&D basis. What products they're gonna produce in a right-hand drive way, and then where they're going to import them once they get free availability.
If you think about all those dynamics and you think about the challenges that OEMs have in terms of investing at this time, it is not simply just refining or updating a model that's been in the market for 20 years, every three years with a new spec. They are absolutely transforming their businesses, and they're investing money in R&D. You know, Toyota flagged AUD 15 billion on battery investment between now and 2030. There's talks of vertical integration. You know, there is so much going on at the moment that I think you will see that Australia will be a reasonably tight supply market for quite a while. That's what we're expecting.
At the moment, the gap between demand and supply is so material that there is so far that supply would have to move up and so far that demand would have to cool down before you reach parity. We may have just this longer term imbalance as a more fundamental part of the Australian market. It's just a thought. Certainly it's what we're seeing. Doesn't necessarily answer your question, but it's probably a bigger and longer-term theme that we think may occur.
No, that's good, Keith. That's a very interesting observation. Just to finish off, two for Sophie, if I may. The first is the gain on asset sales. In the presentation, slide 31, it says PBT impact was AUD 50 million or a bit over. The segment notes in the account say AUD 54 million. Can you explain the difference there?
I have to.. Let me have a look at that, James.
We can take it offline if you'd like.
Yeah. Let me take that offline and have a look.
Yeah. That's all good. The last one, can you just give us a feel for what sort of agency sales, or what sort of impact there was from agency on the sales revenue line, in this half?
Yeah, in the first half, James, it was about AUD 90 million. We've called out before, we expect on a full year basis, it could be AUD 220 million from revenue impact.
Yeah. Was there any in calendar 2021, just to remind us?
Marginally. It was a tiny bit of Honda.
Yeah. Yeah.
Immaterial in terms of our overall turnover.
Yeah. Excellent. Thank you, Tom.
No problem. Thank you.
Thank you. Our next question comes from the line of Sarah Mann with Moelis.
Morning, guys. First question from me is just on, I guess, EVs. So it feels like it's not necessarily the traditional OEMs that are currently your partners that are, maybe gonna be the winners in the EV market. Specifically, I guess I'm referring to the fact that the Chinese manufacturers are, you know, trying to go really hard and win in this space. Obviously you've got the, BYD, distribution agreement already, but just interested in how you think about, your strategy around EVs in the future and, you know, choosing who you partner with, in terms of potential new partners.
Sarah, that's an interesting question. You know, I would answer this in the most appropriate way that all our OEMs are very focused, as I said, on this low emission solution for the future. Each OEM has got a different strategy on how they're going to market. Your observation around EVs at the moment and the Chinese market seeming to have taken a bit of a head start on affordable EVs, it's a fair comment. There's no doubt that certainly, you know, MG originally with their EV, affordable EV at a sort of mid-45 price range. Now BYD coming into the market. There's no doubt. There's others also. There's no doubt that China has led the way in affordable EVs.
As I said before, I don't know whether EV is the singular solution. I think it'll be more nuanced over the next decade. It'll be a low emissions. I heard about some technology yesterday of retrofitting ICE engines with hydrogen fuel so that they only emit water vapor. There is a whole heap of technology being developed out there. If you think about all of the governments around the world and their mandates on EV take-up, because most governments take a singular solution to this. It has to be EV. That, you know, they don't look at. The enemy is not an ICE engine, the enemy is carbon. If every government mandate on EV take-up was met around the world, there's no way.
Well, sorry, there's no way it could be met because the production of EV cars is not going to be able to meet them. At the moment, I think it's a really complex way. Eagers have always taken the approach, Sarah, that, you know, we see all our OEMs as incredibly valuable. They all have times where they are able to benefit because of models they develop or technology they introduce. And we're just gonna continue to be focused on providing a solution for all our customers. And I will say that, you know, whether we're selling a, you know, a petrol, a diesel, a hybrid or an EV, or whether it's new or used, the most.
I know this is a bit of a motherhood statement, but, you know, the reality is if we cover from AUD 500 cars up to AUD 500,000 cars, we're going to be able to ride out whatever the market looks like over the next decade.
Great. Okay. In terms of used cars, I mean, you've talked a little bit about the trading environment, but maybe can you talk a bit about the competitive landscape? I mean, I think last year or the year before, there was some, I guess, really well-capitalized groups that have, you know, tried to come in and make a dent. I mean, I presume there's less money for those kind of loss-making ventures at the moment. Have you seen any change in the competitive landscape as a result?
It's an interesting comment, Sarah. We actually see perhaps some of the overinflated valuations that were in this space as a massive benefit for us because you're exactly right. What happens is when any sort of segment gets, you know, particularly strong valuations, there is the ability to raise capital on those valuations. And unfortunately, that capital gets raised, and it gets spent in a disruptive way. They either market heavily or they acquire stock and pay too much for it because they're desperate to drive their revenue number. Because as you know, the capital is raised based on revenue growth rather than profit. That's highly disruptive to a business like us that is delivering year-on-year for 109 years to our shareholders, and we're not gonna stop doing that. Equally, we see the opportunity to grow.
The short answer to your question and your observation is that it's actually good for us that some of that, you know, capital seemed to be easy to raise last year and then create disruptive behavior in the market has gone. It's still competitive though, but it's less competitive from the sort of startup aggregators, whatever you wanna call them. It's more competitive that auto dealers in general are looking to supplement tighter new car supply with used cars in general. Not everyone, but a lot of dealers are out there playing in the private market. It just means it's a little bit more competitive than it has been. Generally speaking, your observation's a really interesting one, and we've had the same thought that it's good to take out some of that disruptive behavior.
Right. Last question from me is just on the property rationalization strategy. You continue to make progress around that. Can you just remind us, I guess, what kind of your long-term goals are around, I guess, property ownership and property use and kind of the timeline around that as well?
Sarah, we haven't set a definitive number in terms of dollar value of land and buildings in use. If on a static basis, everything staying the same, we currently use around AUD 2.35 billion of land and buildings as a total portfolio, including owned property, which is about, call it AUD 450 million to be an easy number. And the rest is on valuation of leased property. We certainly believe that should be sub AUD 2 billion going forward, even with the business growing. If we're circa 10% of the new car market at the moment and that was to grow in the future, we still believe we can do that off a property portfolio of certainly sub AUD 2 billion. Our ownership might be 50% of that in the future.
Great. All right. Thanks, guys.
Thanks, Sarah.
Thank you. The line of Tim Piper with UBS.
Good morning, Pete and Sophie. Just ask a couple of questions. Just circling back on the F&I penetration chart, and I take your comments around the lead times of ordering and repricing of insurance, et cetera. I mean, you know, the supply-demand imbalance has been there for a while. It's just interesting to see that industry rate drop off, you know, correlating with interest rate increases in the market. Is there not a degree of, you know, cost of finance and demand that's playing out within that industry line? Taking the point that, you know, you guys have done very well in terms of sustaining your penetration rate.
Sorry, I just missed that. It just sort of dropped out a little bit, the last part of your question there.
I was just saying that your penetration rate for Eagers has remained quite constant. Just looking at the industry rate there, it has dropped off. The degree to which demand and cost of financing is playing into that as opposed to timing of deliveries.
Tim, we've spoken with our finance company partners on this, and the reality is it has been immaterial. We were actually only talking to one of our major ones yesterday to get some stats on, you know, what sort of fall over. We're not seeing it. The cost, I mean, the cost is always relative to the market. Again, People have ordered a car, so they're still buying a car. What it's creating is the long lead time is creating a more competitive environment. People are looking to, you know, maybe shop what we've initially offered, but again, this is where we're a little bit uniquely placed.
We've got this extensive panel, including our own proprietary business, we're our own finance company, we've got our own JV, and we've got a panel of lenders second to none, so we can be competitive. The reality is, it's not the material reason why People have dropped off. It's more that People have more time to look at alternatives. They might think that they're gonna redraw a mortgage. They might go out to the marketplace and shop around because they've got time to. The point-of-sale advantage for us as a dealer automotive finance writer is best inside that 60-day order to delivery time.
Okay, got it. Just a sort of follow-up to that, the slide ten with the chart on the left. What proportion, roughly speaking, of your cars on new order write to delivered, sort of call it within 30 or 60 days?
Good question, Tim. I don't know off the top of my head. We don't measure it that way. It's a very good question, and I'm happy to try and find out and come back to you. I don't know how easily it would be to do. It's just not something that's sort of measured through the order to delivery. We'd have to actually go back and sort of write some additional reports to find. It's a great question, though.
I don't wanna add incremental work on you. I just looking at that chart, I mean, the supply delivery imbalance has obviously been in place and pretty consistent for pretty much this whole calendar year. It's just interesting how closely correlated those two lines are within the chart.
Yeah, that is, yeah. Well.
That's more of a statement than a question.
Well, well, to be honest, Tim, I'm just having a look at the chart now, so that I'm answering it. Remember that just because supply and demand has been disrupted, it doesn't mean that there's still not an element of seasonality in People's behavior and seasonality in the OEMs ordering cycles. The OEMs still order to a cycle. June's the strongest month of the year. April's the worst because of Easter and People are away, and things sort of move around around that. When they're placing orders on the factory, they are still placing some level of seasonality. Consumers still behave based on that seasonality to a certain extent. In April, as I said, in Easter time, there's almost two weeks of the month is lost because People are off on school holidays, having Easter holidays. It's traditionally a very hard month.
June is still traditionally our best month, and we're still seeing that on our order write, even in this current environment. There's still an element of seasonality, irrespective of the supply chain disruption at the moment. That probably explains why they correlate to a certain degree.
Understand. Thanks. I'll just squeeze one last one if I could. Just on the gross margin, half on half, it's come down a little bit. Obviously, your front-end growth has outpaced your back end, so that sort of explains that. Possible to break down, just roughly speaking, what the gross margin trends in the back end versus the front end has kinda looked like half on half? I assume probably the front end has picked up a bit more compared to the back end.
No, it's pretty much static with what it was last year. We haven't seen that. Margins, ironically, are slightly up in both service and parts, even though there has been a reduction with that labor that we've been missing. There hasn't been a material movement. Sophie's just having a look at it now to see if there's been-
Yeah. No, we've maintained our margins in both service and parts across the board.
The overall mix between.
Yeah.
The front end and the back end hasn't moved dramatically at all, Tim.
Yeah, hasn't moved at all.
Okay, great. Thanks for taking the question.
Thank you. Our final question comes from the line of Jack Dunn with Citi.
Hi, Keith and Sophie. Sorry, my question's been answered. I thought I dropped back out there, but, thanks anyway. Cheers.
Thanks, Jack.
Thank you. I'll now turn the call back over to CEO, Keith Thornton, for any closing remarks.
Thank you for that. I do wanna thank everyone again for your time. I really appreciate the questions you've asked. I hope we've been able to answer them in a reasonable manner. I think the final comment from us here and the team is that the first half has been very strong. It's been constrained by some supply challenge, but the fundamentals of the business are in exceptionally good shape, and we are very conscious of all the macroeconomic noises out there and the environment that we're operating in. However, the actual evidence of what's going on in the business is incredibly strong, and our outlook for the second half is very confident sights.
Ladies and gentlemen.
In more detail over the coming days. Thanks again, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.