Thank you for standing by, and welcome to the FleetPartners Fiscal Year 2024 Half-Year Results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Damien Berrell, CEO. Please go ahead.
Thank you, Operator. Good morning, and thank you for joining FleetPartners' 2024 Half-Year Results Presentation. I'm joined here this morning by James Owens, our CFO. Before we commence this morning, it is my absolute pleasure to acknowledge the traditional custodians of the land and waterways throughout Australia and pay my respects to elders past and present. I'll start with the performance highlights on slide six. In short, the group's performance has been very strong. First, Strategic Pathways delivered strong growth. Secondly, once again, we saw the defensive nature of FleetPartners' business model. And thirdly, the group continued to deliver very attractive shareholder returns. The single metric that best illustrates the success of Strategic Pathways is the 39% of new business writings growth. This performance surpassed our own expectations. It's indicative of the commercial intensity of our operations.
Despite high new business writings, our order pipeline remains elevated at 2.5x pre-COVID-19 levels. This means demand for new orders in the first half is strong. It also means the pipeline at these levels helps underwrite future AUMOF growth. AUMOF is the foundation for driving sustainable annuity-like income and grew at 10% compared to PCP. On this point, 95% of net operating income pre-EOL provisions in the first half was annuity-like in nature. This underscores the defensive characteristics of FleetPartners' revenue model. FleetPartners' cash conversion was 106%, and arrears were 42 basis points. The Accelerate project is tracking to time. Once completed later this year, we will have a modern, simplified technology stack that will facilitate our operating leverage going forward. NPATA was AUD 42 million for the first six months of 2024, driven by AUMOF growth and the continuation of elevated annuities income.
Finally, all of these outcomes allowed the board to declare a share buyback of AUD 27 million, or 65% of NPATA, which is at the upper end of our capital payout ratio range. FleetPartners' business model is clearly performing well. The company's growth is underpinned by strong customer demand, sustainable annuity-like revenue, lower arrears, and high cash generation. Our EPS strategy underpins these results, so let's take a look at that on slide seven. We are executing a clear, well-defined EPS growth strategy across three distinct drivers that you see on this slide. Since 2019, earnings per share has grown at an average annual rate of 18%, and this is based upon an adjusted NPATA that ignores the elevated annuities income we have been achieving since 2020. Let's turn to slide eight to look at the first driver, Strategic Pathways, in more detail. This is our go-to-market strategy.
It's designed to drive growth in three under-penetrated, high-returning target markets of corporate, small fleets, and novated. The corporate segment offers strong returns and high barriers to entry. We see high customer retention rates, and relative to overseas markets like the UK, the corporate segment in Australia and New Zealand is still under-penetrated. The electrification of corporate fleets is really just beginning. FleetPartners is well-positioned to benefit from this by embedding ourselves deeper with existing customers and attracting new customers with our expertise and experience around the EV transition. Small fleets is a 1.5 million vehicle segment and traditionally unserved by fleet industry in Australia. For this reason, it presents an attractive opportunity for FleetPartners as we use a digital origination platform across three distribution channels of online, in-dealership showrooms, and via third-party brokers. Finally, the novated product complements the corporate and small fleets offering.
It is a segment that is currently benefiting from product policy-driven demand for EVs, demand that has shown no sign of slowing in our markets. Let's turn to slide nine for the 1H 2024 highlights for Strategic Pathways. Suffice to say, we are extremely pleased with the success of Strategic Pathways during the first half of 2024. It exceeded our expectations. There has been a ton of activity leading to strong results across the entire group. The impressive new business writings growth rates across all three business units are undoubtedly a clear indicator of this. Our corporate business has outperformed, delivering 19% new business writings growth. We saw a healthy level of tender activity and were successful in securing several new fleets across a variety of sectors from civil construction, manufacturing, to healthcare.
The business continues to position itself as a thought leader in the sustainable fleet transition by collaborating with our customers on this topic. We also hosted several EV-focused events in partnership with OEMs and industry bodies. Finally, our commitment to having an industry-leading customer service offering was recognized in New Zealand by winning an award for the best business support service. It is this customer-centric mindset that maintains our high customer retention rate. Equally pleasing was the performance of small fleets. New business writings grew at 83% in Australia. Small fleets represented 13% of total tool-of-trade new business writings in Australia. We continue to expand our distribution footprint, adding a major Australian dealership group during the first half, which operates 34 dealerships across 14 different OEM brands. We now have over 178 introducers across Australia and New Zealand signed up to our small fleet digital platform.
We also launched the Love to Lease campaign. This marketing drive is aimed at increasing the awareness and understanding of the benefits of leasing with small fleet owners. Finally, the business is making great progress developing the next innovation for our small fleet origination strategy. Due to be released within the next six months, existing and new small fleet customers will soon be able to apply for new leases and get approval within a matter of minutes directly through the FleetPartners website. The novated business set another record for new business writings during the first half of AUD 167 million, delivering 81% growth compared to PCP. The novated business is successfully executing a plan which capitalizes on the strong demand for EVs and the profile of its customer base being weighted towards white-collar corporate employees.
EVs, as a percentage of total novated leases, hit a new six-month high of 51% during the first half of 2024 and a new monthly peak of 63% in March. Novated is expanding its total addressable market by winning several customer tenders across government, technology, energy, and banking sectors. One of the highlights of the novated tender activity during the first half was being retained on the Queensland State Government panel. In summary, the performance of Strategic Pathways in the first half of 2024 has been extremely pleasing. The business made demonstrable and tangible progress towards the delivery of this strategy. We produced growth rates for new business writings that surpassed our expectations. Strategic Pathways is building a reliable platform for AUMOF growth, recurring revenue, and ultimately higher EPS. Let's turn to slide 10 for the second EPS growth driver, the Accelerate program.
Accelerate is a business transformation program that consolidates the group's brands, systems, and processes. In doing so, Accelerate will allow FleetPartners to maximize the profitability of growth from Strategic Pathways to greater economies of scale and operating leverage. The project has three key deliverables. Number one, a simplified technology stack. Deploying a modern operating system will facilitate faster digital innovation at a lower cost. It will also reduce ongoing technology maintenance spend and provide better insights for our customers and data-driven decisioning. Number two, standardized operating processes. Standardized processes will allow for greater economies of scale, a superior customer service experience, reduced operating risk, and higher team engagement. And number three, one brand. Consolidating the group's brand for FleetPartners allows for clearer brand messaging and a high return on the group's marketing spend.
We have made great progress over the last 18 months, and as we stand here today, are on track to go live as planned later this year. The benefits realization will follow once the new system is bedded down. Our latest project spend is expected to land at AUD 26 million, up by AUD 1 million from what we originally planned over 18 months ago in September 2022. Turning to slide 11 on the third and final EPS growth driver, our ongoing share buyback program. The further AUD 27 million share buyback announced this morning represents the upper end of our capital payout range of 55%-65% of NPATA. In lieu of the capacity to pay franked dividends, we have been really pleased with our buyback program as a mechanism to return capital to shareholders.
From the program's inception in May 2021 up to today's announcement, we will have bought back AUD 223 million of shares, or approximately 29% of shares on issue. Before I hand over to James to cover the group's financial performance, I would like to highlight some of our ESG achievements during the last six months. Punctuated by several firsts over the last six months, the entire team at FleetPartners that drives our ESG agenda has a lot to be proud of. We published our inaugural gender pay gap statement. This underpins our commitment to fostering a workplace where everyone feels valued and included regardless of gender. We also launched our FleetPartners Green Bond Framework, another significant milestone towards our stated objective of leading the industry in thought leadership for the decarbonization of fleets.
Finally, FleetPartners was endorsed by Work 180 as one of the top five employers to pay time off, with our paid leave days per annum now at 27. These highlights are but a few of the total achievements across the group's ESG landscape during the first half of 2024. As an organization, we are pleased with our progress. Most importantly, I am proud of the contribution our amazing team at FleetPartners makes to a more sustainable world and their commitment to supporting our local communities. I'll now pass across to James to walk through the financial results.
Thank you, Damien, and good morning, everyone. Let's start with slide 14. New business writings grew 39% in 1H 2024. In addition to the success of Strategic Pathways, new business writings were supported by considerable improvement in new vehicle supply during the period, allowing us to start delivering on pent-up demand.
Novated, in particular, was a standout, growing new business writings by 81%. As Damien observed earlier, demand for EVs continued to provide a strong tailwind in 1H 2024 due to the benefits of the electric car discount and also as a greater variety of EVs entered the market. Fleet new business writings grew 22%. This was driven by growth in Australia of 31%, including 83% growth in small fleets, supported by continued improvement in supply of key vehicle variants. While the significant new business writings growth across the business saw a slight drawdown in the pipeline, it remained well above pre-COVID levels at 2.5x . Moving to AUM OF on slide 15. As a result of the strong new business writings performance in the first half, AUM OF grew by 10% compared to March 2023.
In line with the strategy we set out at our 2023 full-year results, more new business writings have been directed into our warehouse funding structures and away from P&A. Balance sheet funded AUM OF is up 22%. In the short term, this means we'll earn lower funding commissions from P&A financiers, but over time, this will be replaced with net interest margin on balance sheet funded leases, which earn a higher yield. Balance sheet funded AUM OF reached AUD 1.5 billion at March 2024, up from AUD 1.3 billion at March 2023, and we expect that trend to continue. Moving to our income statement on slide 16. As we've highlighted previously, the results reflect the unwinding of a number of COVID-related tailwinds.
While average AUMOF grew by 9%, this was partially offset by the expected normalization of lease yields and the impact of accelerated growth in new business writings, which I'll talk about further on the following slide. As a result, NOI pre-EOL provisions were AUD 76.1 million, up 1%. EOL remained strong at AUD 35.9 million. Profit per unit was AUD 6,291, 18% down on PCP as elevated used car pricing reduced in line with expectations. However, growth in the number of vehicles disposed offset this as more vehicles were replaced. Provisions increased due to growth in balance sheet funded AUMOF, particularly for novated, and slightly higher arrears. So overall, NOI was AUD 110.2 million, slightly higher than PCP. OpEx was AUD 44.1 million, up 6%, driven by cost inflation and increased business activity to support growth in new business writings in AUMOF, particularly in novated.
Putting all those components together, EBITDA was AUD 66.1 million, down 3%, and NPATA was AUD 41.8 million, down 4%, again in line with expectations. Let's take a look at NOI pre-EOL and provisions margins on slide 17. As we've highlighted in previous presentations, NOI pre-EOL and provisions margin has been higher than normal due to the benefits of a number of COVID tailwinds, and we always expected these to dissipate over time. Furthermore, with the shift in funding mix towards more balance sheet funding, there is a temporary impact associated with reduction in upfront funding commissions, which will in time be replaced with higher NIM. In addition to these expected impacts, the accelerated growth in new business writings that has been delivered has had two further impacts on margins.
The first of these is a result of the mix shift towards novated leasing, which generates lower margins than the fleet businesses, but of course represents a significant growth opportunity. We expect this to continue while novated leasing growth outpaces fleet. As shown in the bottom chart, for every percentage point increase in novated leasing mix, blended margins reduced by around three basis points. While novated leasing represented 25% of average AUMOF during the 12 months to March 2024, by the end of March, it represented 27%.
The second impact relates to the timing of profit recognition on operating leases. Profits are lower for leases earlier in their term compared to those approaching the end of their term. When the seasoning of the operating lease portfolio reduces, such as in periods of significant portfolio growth or replacement cycles, as we've seen in 1H 2024, this acts as a drag on margins.
As a result, NOI pre-EOL and provisions margin for the 12 months to March 2024 was 7.49%. Looking forward, management fees will continue to normalize as the replacement cycle continues, supported by improved supply of new vehicles. The mix shift to novated is expected to continue, which will dilute margins on a blended basis. However, novated margins should continue to improve as the funding transition progresses and NIM builds. Turning to slide 18, an end of lease performance. Used car pricing remains above pre-COVID levels, but it clearly peaked in February 2022 and is gradually reducing, though trends vary considerably by vehicle segment. For example, passenger vehicle pricings have shown an upward trend in recent months, which could be due to buyers substituting purchases of new vehicles with used vehicles as the economy softens. Conversely, used light commercial vehicles prices are almost back to pre-COVID levels.
EOL per unit remained elevated in 1H24 at AUD 6,291, though 18% lower than PCP as used vehicle pricing reduced. The reduction in EOL per unit was more than offset by an increase in the number of units sold. As new vehicle supply improved, more end-of-lease vehicles could be replaced, increasing the volume of vehicles returned. As a result, units disposed were up 23%. As used car pricing continues to reduce, we expect EOL per unit to return to around 2,200-2,500. However, predicting the timing of when used car pricing returns to normal remains challenging, and we don't expect the normalization to be linear or consistent across vehicle segments. Now let's take a look at portfolio credit quality on page 19. We provide business-critical revenue-generating assets for our corporate customers. For our Novated customers, lease payments are made directly by the employer.
This drives strong credit performance even through tougher economic cycles. The portfolio continues to perform strongly with 90-day arrears at 42 basis points, reducing to 38 basis points in April, broadly in line with our longer-term average of 36 basis points. And as an external comparison, the average for Aussie fine mortgages and other high-quality asset class was 48 basis points. Our portfolio composition remains robust, with 81% of the exposure to our top 20 customers being investment grade. And our exposure to industries such as building, construction, food services, and retail remains limited. Putting all these factors together, we remain pleased with the composition of the portfolio and its continuing strong performance. Moving to funding and liquidity on slide 20. There are three key points to take away from this slide. First, our funding margins are locked in until September 2024.
This means no interest rate exposure on our portfolio until then. Secondly, we have sufficient funding capacity to meet our requirements, with further benefits to flow from our recently priced AUD 400 million ABS deal, which included an inaugural green bond tranche, the first of its kind in Australia. Thirdly, we remain in a net cash position with undrawn corporate debt securities providing standby liquidity and balance sheet flexibility. Stepping into the detail, our longstanding and diversified funding platform remains a key differentiator, providing access to private warehouses, public ABS markets, and P&A funding. Exposure to interest rate movements for our portfolio is limited. For P&A funded leases, there is no interest rate exposure. For warehouse and ABS funded leases, the base rates are hedged at lease inception. For ABS, funding margins are locked in for the life of a deal, whereas for our warehouse, funding margins are reset annually.
Following the warehouse extension in September 2023, funding margins are set until the next extension in September this year. As a result, changes in interest rates don't impact the backbooks, and new business is priced to reflect prevailing interest rates and funding margins. In terms of other interest rate exposures, AUD 32.5 million of our corporate debt is exposed to variable rates, but our cash balance of around AUD 230 million-AUD 250 million also earns interest at a variable rate. Therefore, any increase in rates is a net positive. For every 25 basis point increase in rates, there is an annualized AUD 500,000 benefit to PBT. In terms of liquidity, we successfully priced a AUD 400 million Australian ABS deal in May 2024. That's due to settle this week. This ABS deal provides a benefit to our cost of funds in Australia compared to our current warehouse rates.
As a result, we have sufficient capacity to meet our funding needs. Together with our net cash position of AUD 10.8 million, undrawn AUD 86.5 million revolver, and no corporate debt maturities until July 25, our balance sheet is in a very strong position. That means we're well placed as we approach our next warehouse extension in September this year. Now turning to slide 21, we'll take a look at cash generation.
The net cash flow for the year was nil due to items such as CapEx for the Accelerate program, repayment of corporate debt, and the buyback. After adjusting for these items, organic cash generated by the business increases to AUD 46.3 million. Comparing that against an adjusted NPATA of AUD 43.6 million, the cash conversion for the year was 106%. The main driver for cash conversion being higher than 100% is the tax shield driven by temporary full expensing of lease assets.
This is expected to provide a cash flow benefit to the business until tax losses are exhausted, with tax payments in Australia not expected to resume until FY 2026 at the earliest. So wrapping up the financials, FleetPartners has achieved a strong set of underlying results in 1H 2024, even as a number of COVID tailwinds dissipated as we expected they would.
The business is very well positioned for the future. Moving to the operating segments now, I'll briefly take you through what we're seeing in terms of new business writings, our order pipeline, and asset growth. Let's start with Fleet Australia on slide 23. The delays we've seen in new vehicle supply started to ease in the second half of FY 2023 and continue to improve through 1H 2024. As a result, new business writings grew 31%. This growth saw a small drawdown in our order pipeline, which reduced to 2.3x .
So that remains significantly above pre-COVID levels. AUMOF increased 5% compared to March 2023. However, balance sheet funded AUMOF increased 13% as new customers are typically balance sheet funded. Turning to slide 24, Fleet New Zealand delivered new business writings growth of 7% compared to 1H2023. However, new business writings was lower than second half FY2023 due to the sluggish economy, some business and consumer uncertainty regarding the New Zealand election, and the changes to government policy that followed. As a result, the order pipeline reduced to 2.9x at the end of 1H2024 as new business writings outpaced order intake. Fleet New Zealand AUMOF was up 9% and balance sheet funded AUMOF was up 13%. A strong result for the business. Turning to slide 25, Novated has had another standout half, with new business writings reaching another high of AUD 167 million, up 81% on 1H2023.
Growth has been supported by the electric car discount legislation, which was passed in December 2022 and has stimulated strong demand for EVs under novated leases. Availability of EVs has been good. We are seeing a wider range of EVs entering the market and therefore greater mix in our EV leases. EVs have grown to represent 51% of new business writings and reached 63% in the month of March 2024. Given the level of new business writings delivered, the pipeline saw a reduction from the highs of last year but remains elevated at 3.8x . AUMOF increased by 26% compared to March 2023, and balance sheet funded AUMOF increased by 52%. The mix of AUMOF will continue to shift towards balance sheet funding, as previously discussed. So in summary, we have seen exceptional growth across a number of key business metrics during the half.
While supply improvements have seen order pipelines reduce from the all-time highs of last year, they remain well stocked. This means our pipelines are expected to support future asset and revenue growth as the supply chain continues to normalize. I'll now hand back to Damien to take you through the outlook.
Great. Thanks, James. To wrap up today's presentation before taking your questions, I'd like to reconfirm our expectations for FY 2024 and then provide an update on the training environment. Let's turn to slide 27 on the FY 2024 expectations. As always, we do not provide specific guidance for NOI. NOI pre-EOL provisions is expected to grow during the second half of 2024 in line with the growth of average AUMOF.
As we saw during the first half, this will be partially offset by the normalization of management fees and the impact on funding commissions from directing more funding to our balance sheet. A positive impact for NOI in the second half will be the commissions received on the annual insurance renewal process. End-of-lease income per vehicle is expected to remain elevated, albeit continuing to normalize down from the peak in 2022. The number of vehicles sold is expected to remain strong, driven by the improved car supply. Provisions are expected to increase from last year as the balance sheet funded portfolio also increases. We have updated our OpEx expectations by AUD 1 million to a range of AUD 89 million-AUD 90 million. This is driven by the activity levels that have far exceeded our expectations, as well as persistent inflationary pressure.
Over the last several years, the group has proven its disciplined approach to cost management, and this will continue. The expectations relating to the remaining items below the EBITDA line are unchanged from our last results presentation. Turning to slide 28. At the group level, the operating environment remains a net positive, led by strong demand in Fleet Australia and novated. At the same time, we know there is a noticeable softening of demand in New Zealand. This appears to be driven by a combination of recent EV policy changes and economic conditions. Nevertheless, the long-term tailwinds of thematic for the electrification of fleets is expected to continue in our markets. We are really only at the start of this transition for corporates. In the short term, end-of-lease income is expected to remain elevated, and the supply of new cars is expected to improve even further.
When it comes to strategic priorities, Strategic Pathways is a well-defined strategy for growth, and we have a driven focus to achieving it. The Accelerate program is tracking for time. On the other side of this project, the business will have a simplified technology stack enabling greater operating leverage. The buyback program is continuing. 26% of shares on issue have been bought back to date, with approximately another 3% to come during the second half. At FleetPartners, how we do things is just as important as what we do. For that reason, ESG will continue to play a central role in our strategy and core values. To close, I'd like to emphasize there is a lot to be excited about when it comes to FleetPartners today. The company has a clearly defined and well-established EPS growth strategy, which is working.
We have a defensive business model of predictable annuity-like income with high cash generation. The portfolio enjoys a high credit quality, and the balance sheet is sound. We have a proven track record in cost management and a proven funding model. Finally, we have a team of 500 talented, passionate, and experienced people who are delivering. Today's results demonstrate this, and we will continue to deliver for our shareholders into the future. So with that, I'd now like to hand over to the operator to open the line for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Tim Lawson with Macquarie. Please go ahead.
Hey, guys. Just two quick questions. Just in terms of the shift towards balance sheet funding, can you sort of quantify sort of how much the drag is over the next couple of halves and when you think that'll become a net positive? And then just whether you ever called out the materiality on that, the insurance renewal seasonality.
Morning, Tim. Thank you. So just on the first comment there around this shift to balance sheet funding, obviously, that's well underway from a novated perspective. And in the half, we did around 92% of our new business writings via the balance sheet. In the half, there's only AUD 0.5 million of funding commissions from novated remaining. So compared to PCP, that's about AUD 1.5 million lower on the novated side.
And obviously, we've got a bit of NIM coming through, which contrasts that, but we're not obviously up to the run rate where we've got full replacement yet. It's probably going to take a couple of years to fully replace that. But obviously, as we go through Accelerate and we complete that, we'll be moving more of the FleetPlus customers over to balance sheet funding as well to get closer to that 100%. But as I said, there's only AUD 0.5 million of funding commissions remaining in the half anyway, so a smaller headwind going forward.
And the second part of the question, sorry. [crosstalk]
Then just on the insurance commissions piece, yeah, so we receive those in the second half of the year each year. We expect that to be around AUD 2 million-AUD 2.5 million.
Okay. That's clear. Thank you.
Thanks, Tim.
Your next question comes from Jack Dunn with Citi. Please go ahead.
Morning, Jack.
Morning, guys. Thanks for taking my question. Just the first one, just following up on that NOI margin. So you've put out what looks to be a couple of different impacts being novated and then also the portion of operating leases in the first 24 months on book. What are your expectations for that margin over the next 12-24 months, and when do you sort of see it going back to that normalized range?
Thanks, Jack. Yeah. Look, I think as we have highlighted in the presentation, there are a number of factors that are playing into the margin at the moment. And obviously, those new factors that we've called out, which really are a result of that new business writings, probably running a bit faster than we'd expect in terms of the growth.
How that plays out over the next kind of 12, 24 months is a little difficult to assess at the moment. We've called out the sensitivity there for the novated piece, which we do expect will continue to increase in weighting in the AUMOF. So at the end of March, we were at 27% of AUMOF relating to novated, which would see us based on the margins at a segment level for the 12 months to March at around a 7.43% margin overall blended. But as I said, that trend is likely to continue, so we may see a continued headwind there. What we've seen on the operating lease side through this big replacement cycle is a temporary phenomenon where the depreciation margin acts as a bit of a headwind, kind of new business strain, if you like, for those operating leases coming on.
That will really depend on the strength of growth that we see over the next period of time. As Damien's mentioned and I mentioned in the presentation, we are seeing New Zealand starting to soften a little bit. The new business writings have remained strong, but on the order side, it definitely has softened. And so depending on what we see come through that side of the business over the next 6, 12 months will determine how that depreciation margin phenomenon plays out.
Okay, James. Thanks for that. Just next one, on sort of order activity at the moment.
I noticed you haven't quite called out in the presentation today, but if anybody gives us a sense across the different segments - and I know you've just called out New Zealand, but maybe Fleet Australia and novated - how you're seeing order activity or orders taken in the first half versus, say, first half 2019 levels or even second half 2023 levels?
Yeah, sure, Jack. I might just start with novated. So that's continued to grow. You can see the strength of new business writings and the orders sort of matching that. So when we look at the orders in the first half of this year versus last year, they're obviously up, sort of double digit. And a similar sort of story for Fleet Australia. So we continue to see orders grow year on year in that portfolio as well.
And that's the reason why, although new business writings were high, we were able to replenish the pipeline as much as we did. And then as James mentioned in New Zealand, the demand there is softening. So we have seen orders sort of down year-on-year, largely driven by policy change but also just the economy there getting a bit slower.
Okay. Perfect. Thank you. And just last one, just on the end-of-lease income, obviously, it remains quite elevated. There's a couple of different factors going on in the economy at the moment, particularly EVs. What are your expectations going forward? Do you now consider this end-of-lease income to remain high for longer, or do you still expect a shorter return to normalized level?
Yeah. When we look at used car prices, Jack, they do seem to be staying more elevated for longer than what we thought.
In the presentation this time around, I think it's page 18, the chart that we've provided there shows vehicles which are 4-5 years old. So that's basically indicative of our portfolio when we sell the cars. And we broke it down by different asset class between light commercial, passenger, and SUV. And what you can see there is passenger has actually turned, and it's starting to go back up. It's almost back to the peak of 2022. And so what's driving that is the substitution effect. When the economies start to slow down, what you typically see is people start to swing out of new cars, and they swing into used cars. And that's what's driving that. So because of that, yeah, our expectation is end-of-lease income, it'll continue to come down per unit, but probably at a slower rate than what we were anticipating.
And then the other factor is, obviously, the number of cars that we sell. We expect that to remain robust because the availability of new cars coming onshore is also almost back to pre-COVID levels.
Okay. Perfect. Thanks for taking my question, guys. Cheers.
Thanks, Jack. Your next question comes from Chenny Wang with Morgan Stanley. Please go ahead.
Morning, Chenny.
Hey. Good morning. Thanks for taking my questions. Maybe just first one in terms of those NOI margins or NOI pre-EOL margins again. And obviously, noting that the warehouse shift represents initial headwind. But maybe if we kind of fast-forward to when that transition does normalize and does complete, how should we think about that relative to that 7.5-7.75 range you guys have talked about in the past? Does that potentially put, I guess, upside risk to that all else equal?
Morning, Chenny. Yeah. Look, so I think, as I touched on before, there are a fair few moving parts in here. But when we kind of complete that transition, and we've spoken about before, we do expect that those leases funded via balance sheet will be more profitable than had we funded them via P&A. There's obviously a better time for that to play through. And there'll also be the operating lease side that will transition gradually through once we've completed Accelerate as well. At the moment, a high 30% of new business writings in FleetAU is still P&A funded. So there's a reasonable transition to come there. And on the fleet side, there's about AUD 1.7 million of funding commissions in the first half 2024. So there is still a fair bit to play out.
And given the profile of earnings on an operating lease rather than novated lease, it will take a few more years for that transition to fully play through. We've also then got the impact of where the mix ends up in terms of the proportion of novated. But it's hard to kind of make long-term estimates. But yeah, we'll probably end up somewhere in that kind of long-term rate that we called out previously. But there are some moving parts in there.
Yeah. I think just to add to what James said, Chenny, when we're on page 17, we sort of call out some of the drivers. The two ones which we haven't called out in the past is obviously the mix shift and novated, but also the timing or seasonality of operating leases. Of those two, novated's probably the only permanent one.
And that's on this page, you can see it's worth 5 basis points. So to the extent that we continue to grow novated faster than the operating leases, that'll remain. The impact around the seasonality of operating leases being less profitable at the start and then most profitable at the end, that's a timing impact.
Got it. And maybe just on that, when you guys talk about growing novated, I think if I kind of backtrack a number of years, you guys have always kind of said that you saw structural growth within your novated business just in terms of kind of the under-penetration and call it the historical non-focus on that segment, if I kind of put it that way. As you guys are seeing that novated ramp, and I appreciate that there's obviously a number of tailwinds behind this business at the moment in terms of EVs.
But as much as you can, how much would you kind of point to actually growing that novated business maybe from a structural perspective, maybe from a share gains perspective? Yeah, any color on that you guys could share or see?
Yeah. Yeah. Sure. It's hard to quantify, Chenny. But what I will say is what we've called out in the past is just where we think this upside is just increasing our ability to penetrate our existing customer base in terms of growth there. I would say we probably haven't moved the needle on that, if I'm honest. But that will come post-Accelerate. At the moment, the huge growth we're seeing is just through market expansion and largely driven by electric vehicles. So as we've called out, 61% of the novated leases we did in March were EVs.
So the growth we're getting is the huge tailwind from the demand for EVs at the moment. Post-Accelerate, it's up to us to sort of increase the penetration of that larger market.
Got it. And then maybe just one last one from me. You guys kind of talked to the demand profile, at least in Australia or in Australia, but kind of interested just in that tender pipeline as it kind of compares to last year and also some color on first-time outsourcing and what you're seeing there. I think you guys mentioned the underpenetration versus the U.K. before. So yeah, any color there would be helpful.
I missed a little bit of that, Chenny. Could you just sort of summarise that one again? Sorry. Yeah. Sorry.
I guess I was just kind of interested in what you're seeing from a tender pipeline perspective as it compares to last year and then just some color within that on first-time outsourcing. You guys called out the under-penetration versus the U.K. earlier on this call. So yeah, just kind of interested on that first-time component as well.
Yeah. Sure. Yeah. So tender activity's still pretty good, which we called out. We had a number of wins throughout the half across some sectors that we called out. So I'd say tender activity versus this time last year is probably about the same. And last year, we sort of said it was pretty robust. In terms of the outsourcing for fleets being driven by the move to EVs, in the corporate space, we're really just at the beginning. So we haven't seen anywhere near the demand that we see on novated. But we still expect that to come.
Got it. Thanks, guys.
Thanks, Chenny.
Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Scott Hudson with MST. Please go ahead.
Yeah. Morning, gentlemen. A couple of quick questions. James, could I just understand what's happening with AUMOF? If I look at sort of the vehicle numbers, specifically in the fleet, it seems to be down half over half. So I mean, are we just seeing growth in AUMOF as a result of vehicle pricing?
Yeah. That is a large contributor. Obviously, vehicle pricing is driving a lot of that. But also within AUMOF, in total AUMOF, we've obviously stated in the past that we're looking to no longer participate in the unfunded management of vehicles. So we don't see that as profitable.
So when we look at the total AUMOF being down 2%, a lot of that's just driven by us not participating in those unfunded leases anymore.
Okay. Thanks. And then just in terms of the Accelerate program, can you remind me what the benefits will be in 2025 from a, I guess, cost or efficiency perspective?
Yep. Sure. So as we've called out, by March 2025, we expect the run rate benefits to be AUD 6 million. In terms of sort of seeing that play out in the P&L, the way we think about it is we'll look at whatever we end up with at the end of this year. We've called out AUD 88-89 million, sorry, AUD 89-90 million in terms of OPEX. There'll be inflation, which then takes that into 2025 and then minus probably AUD 3 million in total in 2025 and then another AUD 3 million in 2026.
Okay. So it slows your cost inflation down in 2025 and a bit in 2026 now?
Correct. Yeah. Because we're shooting to have the run rate savings by March 2025, so halfway through the year.
Okay. And then lastly, just on fuel efficiency standard, could you give us a sense of what your expectation is from, I guess, the impact on ICE vehicle pricing?
Yeah. So yeah, we've got a so we've got a page on that on page 31. So we expect ICE vehicles to increase. We've run the numbers just internally when we look at our portfolio mix in terms of the standard and penalties involved. So what we see is actually in the first year, it'll probably be a net credit for most of the manufacturers. But that'll quickly turn to a net penalty in 2026.
And so when the manufacturers are sort of thinking about what that looks like over the next couple of years, our anticipation is it'll increase the price of ICE vehicles in order for them to pass on those penalties. And then obviously, it should also have an inflationary impact on used car prices as well.
Understood. Thank you very much.
Thanks, Scott.
Your next question comes from Richard Amland with CLSA. Please go ahead.
Morning, Rich.
Hi. Good morning, guys. Just wanted to inquire a little bit more about New Zealand. As you noted in the presentation, they removed the Clean Car Discount. And just wanted to check in if there is language that that's going to come back in any form and what that would look like in terms of impact upon the NZ business to offset the economic weakness.
Yeah. Sure, Rich. Yeah. No. So we certainly haven't heard anything in terms of that being brought back in. Obviously, it was only recently repealed. You can see on page 31 the impact of that. So the chart on that page here is EV registrations. But our portfolio saw something similar. So a full flood of demand or leases for electric vehicles and then a big drop away come January. And then obviously, the same thing. Fortunately for us, obviously, we had that huge pipeline there. So that drove the new business writings growth in New Zealand. But as I said before, the orders are certainly down from that. So no offset to any first-half aggression in terms of the changes to this policy.
Okay. And so just going into the NZ again then, so the remaining pipeline, is it safe to say that's predominantly ICE vehicles and sort of the core part of the business over there and that the EV is just that's what's dropped away pretty much, and that's done?
Yeah. That's right, Rich. I think most of the pipeline that we're holding there now is ICE vehicles. Yeah. And some hybrids as well. Yeah. Petrol hybrids.
Okay. All right. Thanks, guys. That's all from me.
There are no further questions at this time. I'll now hand back to Mr. Berrell for closin g remarks.
Thanks, Ashley. Yeah. Thanks again, everyone, for joining us this morning. James and I look forward to catching up with everyone over the coming days. And we hope you have a great rest of your day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.