Thank you for standing by, and welcome to FleetPartners Group Limited 2026 half-year results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press the star zero. And finally, I would like to advice all participants that his call is being recorded. Thank you. I'd now like to welcome Damien Berrell, Chief Executive Officer, to begin the conference. Damien.
Thank you and good morning. It's great to be with you today to present FleetPartners FY 2026 first half results. I'm joined today by our Chief Financial Officer, James Owens. Before we begin, I would like to acknowledge the traditional custodians of the lands and waterways across Australia, and pay my respects to Elders, past and present. 1H 2026 saw a positive start to the year for the group. We delivered NPATA growth and our seventh consecutive half of UMOF growth. Momentum in New Business Writings is building on the back of a clear strategy and disciplined execution. Strong cash generation continued, enabling a fully franked interim dividend at a gross profit yield of 13%. Finally, the business' proven resilience positions us well to navigate ongoing macroeconomic and geopolitical uncertainty.
Let's explore these points in more detail, starting on slide six with our first half 2026 financial performance highlights. There are two key messages that stand out from today's financial results. First, FleetPartners continues to present a defensive investment underpinned by consistent performance. Despite flat New Business Writings, we again grew UMOF and core income and delivered a return to NPATA growth in 1H 2026. Second, our operating model continues to generate substantial positive cash flow, which supports disciplined capital management and strong shareholder returns. New Business Writings were AUD 367 million, down 1%, or broadly flat on a constant currency basis. UMOF reached AUD 2.4 billion and grew 6%, while funded UMOF grew 3%. Core income was AUD 85 million, up 4%. This tracked average UMOF growth, which meant core margins remained stable through the period.
NPAT A pre-EOL was AUD 19 million, up 7%, a strong outcome driven by higher core income and prudent expense management. End-of-lease income was AUD 29 million, with an increase in vehicles sold offset by profit per unit down to AUD 5,840. A critical point to highlight is that at the current profits per unit levels, our portfolio has an illustrative embedded end-of-lease income of approximately AUD 240 million. Most importantly, NPAT A returned to growth, up 2%. Earnings per share rose 9% to AUD 0.185. In a clear demonstration of the board's confidence in the group's balance sheet strength and future cash generation, two recent capital management return announcements have been made. In March, the board announced an on-market share buyback of up to AUD 20 million.
Today, the board announced a fully franked dividend of AUD 26 million, marking the Group's return to franked dividends for the first time in 7.5 years, and another important milestone in today's results. This dividend equates to AUD 0.119 per share and represents a grossed up yield of approximately 13%. Let's turn to slide seven on our earnings trajectory. The Group has delivered constant EPS growth at a 6% CAGR since FY 2023, despite declining end-of-lease income over the same period. In 1H 2026, this was driven by a 7% growth in NPATA pre-EOL, outpacing the normalization of elevated end-of-lease income, which was down 3% for the period. Our key focus for the business has been to grow AUMOF and therefore NPATA pre-EOL at a rate that outpaces the headwind from the anticipated decline in EOL.
Achieving that objective in today's result is encouraging and reinforces our confidence in the strategy that we have in place. I now turn to slide eight, which explains how we are deploying capital to generate returns for shareholders. FleetPartners announced AUD 356 million of capital returns to shareholders since FY 2021. To emphasize the significance of this, it equates to more than 50% of our current market capitalization. This represents a strong record of both the quality of our earnings and our disciplined approach to capital management. Over the last 12 months alone, we have deployed AUD 109 million of capital to drive returns. That includes dividends, our buyback program, debt management, and the Remunerator acquisition, all funded from strong cash flows this business generates. Taking a look at the waterfall, you can see the breadth of our capital deployment.
We paid AUD 29 million as a final dividend for FY 2025 and a further AUD 26 million through our buyback program, both delivered in line with our 60%-70% NPATA payout ratio. The board has declared a AUD 26 million fully franking interim dividend for FY 2026. As I have highlighted on an annualized basis, our grossed up yield sits at approximately 13%. This underscores the board's confidence in the balance sheet strength and the future cash generation of this business. The message here is clear. We are generating strong, sustainable cash flows, and we are committed to deploying capital to maximize returns for shareholders. Let's turn to slide nine. FleetPartners' strategy is focused on three significant under-penetrated and high-returning segments: large fleets, small fleets, and Novated, presenting clear growth opportunities. Our three segments are strategically aligned, enabling the group to leverage capabilities at scale.
We are investing across each segment, and as the next slide demonstrates, this is translating into momentum. Our path to further penetrate these markets is centered around four strategic pillars: attract, retain, grow, and profit. Attract new customers through established fit-for-purpose solutions and leading capability across the full vehicle ownership lifecycle. Retain existing customers through genuine customer value creation and market-leading service proposition. Grow share of wallet through add-on product penetration that creates incremental value for our customers and incremental income for FleetPartners. Finally, optimize profit to enhance process efficiency and strong financial discipline. Our strategy is delivering clear and measurable progress across the businesses, which you'll see reflected in the segment updates that follow. Starting with large fleets on slide 10. Strategic action is driving momentum in large fleets.
Our value proposition is resonating with customers, and we are investing in digital, data, and efficiency to strengthen our proposition further. Our confidence in the continued growth in this segment is supported by several positive lead indicators. First, we have approximately AUD 25 million of sale and leaseback opportunity in the second half of FY 2026. Second, our business development team is performing ahead of expectations, validating our competitive positioning and service offering in the market. Third, our New Business Writings pipeline is growing. April is now tracking 15% above the average for 1H 2026, which gives us confidence in the trajectory of heading into the second half. Turning to slide 11. In small fleets, our omni-channel strategy is producing double-digit growth in both Australia and New Zealand, which is a great result and confirms the approach we've been taking.
Our direct channel is seeing the strongest results. Our expectation is that over time, the success we're building in direct will enable us to unlock larger scale distribution opportunities. It is delivering growth today while also building the platform for future distribution scale. In terms of where we're investing, our focus is centered on three areas. Accelerating growth through digital optimization, advancing automation across our credit capabilities to eliminate friction, and expanding our partnerships to open new channels and access new customers. Let's turn to the final segment, which is Novated on the next slide. In Novated, we are benefiting from investment and deliberate capital actions that are supporting lead generation along with higher market demand for electric vehicles. At the end of April, our New Business Writings pipeline, excluding Remunerator, was 90% above the average for 1H 2026.
In the same period, the Remunerator integration made good progress and performed in line with expectations. Our immediate focus for the second half of the year is centered on leveraging the current strong EV demand, driving NPS growth, optimizing lead generation, increasing conversion and retention rates, and expanding our eligible employee base through new client wins. Beyond this, we are investing in digital capability and operational improvement to deepen our value proposition. All of this to support what is a significant long-term growth opportunity in the novated segment. Let's turn to slide 13 on the 1H 2026 strategy outcomes. This half we made strong progress delivering several outcomes aligned to our strategic framework. Under Attract, we delivered strong growth and are seeing momentum return to New Business Writings. We continue to execute against a strong pipeline of high conviction tender opportunities and completed the acquisition of Remunerator.
Under Retain, we delivered several operational improvements supporting strong customer NPS and saw strong customer retention, including the key contracts from Remunerator as part of their integration. Under Grow, we focused our efforts on introducing new and enhanced products across large fleets and novated and uplifted our capabilities in heavy commercial vehicles. Finally, under profit optimization, we are in a state of continuous improvement. This half, we continue deploying targeted AI initiatives to enhance the customer experience, profitability, and growth, including AI-enabled telemetry system optimization, AI-supported legal documentation capability, and AI-generated content integration. Looking forward to 2H 2026 and beyond, we are confident in our strategy and how our pipeline of initiatives will drive these priorities forward. Let's turn to slide 14. FleetPartners remain deeply committed to our ESG responsibilities, evidenced by our progress across the three pillars you see on this slide.
On the environment front, we continue to support our customers' transition to cleaner fleets. We offer an end-to-end fleet electrification solution through our proprietary in-house emissions modeling, our whole of life cost and emissions optimization, and our policy-embedded EV charging solutions. Our expertise in this area has never been more important than it is in the current environment. In terms of managing our own environmental footprint, we are proud to have achieved Toitū Net Carbon Zero certification for the fifth consecutive year across our New Zealand operations, a milestone that underscores the consistency of our commitment to sustainability. Turning to our people and communities, we received two important recognitions in the first half. WORK180 named FleetPartners as one of the top 101 workplaces for women in Australia for the third consecutive year.
We were re-accredited as an employer of choice for gender equality by WGEA. These recognitions reflect our ongoing focus on building a diverse and inclusive workplace, and while there is always more work to do, we are making meaningful progress. I'll now pass to James for the financial results.
Thank you, Damien, and good morning, everyone. Turning first to New Business Writings on slide 16. During the first half, New Business Writings was flat on PCP, excluding FX, a significant improvement on the 13% decline we saw in the first quarter. Fleet Australia delivered New Business Writings growth of 6%, supported by increased customer ordering activity through the second quarter. In contrast, Fleet New Zealand saw New Business Writings decline 8% excluding FX. Across both segments, the macroeconomic environment continues to be challenging, with delayed customer decision-making resulting in higher extensions and inertia, which continue to weigh on New Business Writings. In course, indeed, though, this dynamic supports earnings stability and cash generation. In Fleet Australia specifically, momentum is benefiting from new customer wins flowing into the order pipeline and double-digit growth in small fleets.
Novated New Business Writings with 2% below PCP, a substantial improvement on the 17% decline in the first quarter. Encouragingly, February and March were the strongest New Business Writings months of the half for novated. In March, we saw outperformance across all vehicle types. Momentum is clearly building as we move into the second half, with the outlook for the full year being marginal growth in New Business Writings. Turning to UMOF on slide 17. Closing UMOF was up 6% on PCP with average UMOF up 4%, reflecting the seventh consecutive half of UMOF growth for the Group. Balance sheet funded leases represented 78% of UMOF, consistent with March last year, with the modest reduction compared to September reflecting the fact that Remunerator is 100% P&A funded.
Excluding Remunerator and on a constant currency basis, UMOF grew 2% organically, underscoring that earnings and portfolio growth can be delivered even during periods where new business writing is subdued, reflecting the defensive and resilient nature of the business model. Turning to the income statement. NPAT A pre-BML and NPAT A grew 7% and 2% respectively, driven by a 4% increase in average UMOF and core income. End of lease income declined 3%, driven by 4% lower EOL per unit, partially offset by a 1% increase in units sold. Provisions reduced following elevated fleet provisioning in the prior period relating to a subset of electric vehicles. Operating expenses were AUD 48 million, in line with expectations, reflecting cost discipline, the inclusion of Remunerator from December, and the reclassification of a portion of remuneration costs from share-based payments to operating expenses.
The 1H 2026 result, together with the buyback, drove a 9% increase in cash EPS. Moving to end of lease income. EOL income per unit remained broadly stable at AUD 5,840 for the half, around 4% lower than PCP, but slightly higher than the second half of FY 2025. Units sold increased 1%, broadly consistent with fleet New Business Writings activity. Damien will speak to the broader macroeconomic outlook and its impact on the used car market shortly. Importantly, I want to note that while more recently we saw some softening in demand for ICE vehicles, our average selling prices in April remained consistent with 1H 2026 levels. Turning to credit quality on slide 20. The underlying portfolio is performing strongly.
However, we note 90+ day arrears were temporarily elevated due to year-end seasonal effects compounded by resourcing changes, but remain low in absolute terms at 85 basis points. There are no indications of structural deterioration in the underlying portfolio and progress has already been made in bringing arrears back towards longer-term averages with a reduction in arrears during April. Further supporting the strength of the portfolio, we note all financing exposures are secured against vehicles. Exposure to higher risk sectors remains limited and 72% of exposure to our top 20 customers is investment grade. Overall, we remain very comfortable with the credit quality of the portfolio. Moving to funding and balance sheet strengths on slide 21. We remain well positioned with diversified funding structures that support growth while limiting interest rate exposure. As at March, we had AUD 343 million of undrawn warehouse capacity.
Warehouse margins are set through to September and base rates are hedged at lease inception, insulating the portfolio from rate volatility. The group typically holds AUD 250 million to AUD 300 million of cash, generating interest income that offsets movements in corporate debt costs. Illustratively, a 25 basis points increase in cash rates would result in half a million dollar increase to annualized profit before tax. At year end, we had net cash of AUD 4.5 million, no corporate debt maturities until October 2028, and ample liquidity to fund growth and capital management. Turning to cash on slide 22. The business generated AUD 46.8 million of organic cash flow in the half, with cash conversion of 113%. This reflects strong operating cash flows and the benefit of tax timing associated with temporary full expensing.
We returned AUD 30.2 million to shareholders during the half through the buyback and final FY 2025 dividend. As Australian cash tax payments recommence in the second half, cash conversion will moderate and is expected to be below 100% for the full year. Importantly, this is not expected to impact our target dividend payout range of 60%-70%. Finally, capital allocation. Our framework remains unchanged. Fund New Business Writings growth efficiently, invest organically that returns above the cost of capital, preserve balance sheet strength, and return excess capital to shareholders. Since FY 2021, we have returned AUD 356 million to shareholders through dividends and buybacks while continuing to invest for growth and completing the Remunerator acquisition.
The board has declared a fully franked interim dividend of AUD 25.7 million, and previously announced a buyback of up to AUD 20 million, reflecting confidence in the balance sheet and future cash generation. With Australian cash tax payments recommencing in the second half, we remain disciplined and flexible, but fully committed to delivering consistent, sustainable shareholder returns within our target dividend payout ratio range of 60%-70% of NPAT. In summary, the first half demonstrates the resilience of the FleetPartners business model. We're seeing growing momentum in pipelines and New Business Writings and continued UOS growth, which is translating into core income growth and strong cash generation, all supported by a very solid balance sheet. That positions us well to continue investing for growth while maintaining consistent capital returns to shareholders. I'll now hand back to Damien to take through the investment case and outlook.
Thanks, James. FleetPartners business case is defined by clear growth opportunities, predictability, defensiveness, and strong cash flows. As you have seen throughout the presentation, there is much to like about the opportunity in FleetPartners, but allow me to nominate five key areas. First, we continue to invest for growth in large, under-penetrated, addressable segments that offer attractive returns and feature high barriers to entry. Second, our confidence in growing and penetrating our TAM is underpinned by the compelling nature of our product proposition. We are market leaders in reducing the cost of vehicle ownership, and our products and services are systemically important to customers across most sectors of the economy. Third, our product proposition is supplemented by market-leading capabilities built from over four decades of experience. We are best in class at fleet management, funding, credit, vehicle maintenance, and residual value underwriting.
Fourth, our business model delivers stable, predictable, and recurring earnings. 95% of core income is annuity-like in nature, embedded in every lease for an average term of 3.9 years. In addition, approximately 80% of leases remain on books from the start to the end of the year, with those rolling offs being replaced with new leases 90% of the time. Finally, we are a high-yielding business because of our strong cash flow generation, with an implied dividend yield of 13%. It is these five fundamentals that ensure the group delivers consistent returns for shareholders. Let's turn to slide 26. While the geopolitical environment is highly unpredictable, we are actively managing the situation and are confident in our outlook. In relation to fuel supply and rising prices, the group has no direct exposure.
On business confidence, we have been operating in a subdued environment for some time, and while this dynamic weighs on New Business Writings, the impact on UMOF is far less pronounced, enabling continued core income growth. I would also like to reiterate that we have delivered strong pipeline growth despite this backdrop. As it relates to the used car market, we are seeing increased demand for EVs and slower demand for ICE vehicles. We expect this to be temporary with impact mitigated for several reasons. First, there is limited to no EV stock pursuits available for the FleetPartners portfolio of vehicles. Second, 30% of EOL income relates to charges which have no exposure to used vehicle price movements. Third, given we maintain low used vehicle stock levels, we have the capacity to be selective around the timing of selling vehicles.
Validating these points, the average sale price per unit in April was consistent with our 1H 2026 levels. On funding and interest rates, funding availability and liquidity remains strong, and on credit, the portfolio remains sound, consistent with what James stepped through earlier. Overall, we are confident in the outlook of the business, irrespective of the geopolitical and macroeconomic environment. That brings me to the outlook on slide 27 before opening the line to questions. FleetPartners remains resilient with momentum expected to continue building through 2H 2026 as we target marginal New Business Writings growth for FY 2026. Supportive of this is the update from the federal government as it relates to the Electric Car Discount Bill. On Tuesday night, it was announced that there would be no change to the policy until April 2027, at which point a modest adjustment would be implemented.
While still subject to parliamentary approval, we see the approach as sensible and supportive of continued strong demand for novated leasing. Core margin is expected to remain stable against UMOF growth. EOL outcomes are currently stable, and as discussed, there are several mitigating factors which support the outlook. The group has a strong track record of cost management, and that focus will continue. Our OpEx expectations are unchanged. FleetPartners will continue generating strong cash flows, supporting discipline and consistent shareholder distributions. In closing, the group's 1H 2026 result instills confidence in the outlook. There are four key points to leave you with. First, NPAT A returned to growth, with EPS growing 9%. Second, UMOF grew for the seventh consecutive period. Third, our strategy is resonating, evidenced by the expansion of our order pipeline and the 2026 full-year growth expectations for New Business Writings.
Fourth, strong cash generation continues to support the creation of shareholder value. With that, I'll now hand back to the operator to open the line for questions.
Thank you, Damien, and as mentioned, we will now begin the Q&A session. A reminder, if you are listening by phone and would like to ask a question, please press star followed by one on your telephone keypad to raise your hand and join the queue. And to withdraw your question, press the star one again. When called upon to ask your questions, please use your device handset and ensure you are not on mute. And your first question comes from the line of Phil Chippendale of Ord Minnett. Please go ahead.
Hi, gentlemen. Thanks for your time. First question, just on New Business Writings overall. I mean, you've given, you know, your guides for the year that you're expecting marginal growth, but clearly, you know, the first half was a tale of two quarters. I mean, New Business Writings in the first quarter was down around 13%. You ended the period only down slightly, I think 1% before FX. Clearly that second quarter momentum has been really quite strong and yet, you know, I would expect that the EV impact has only been sort of towards the back end of that quarter. Long story, trying to get to, what are you seeing right on the field at the moment?
You know, clearly, I would expect that New Business Writings is continuing, you know, in April and into early May.
Yeah. Thanks, Phil. I guess just looking at the second quarter performance that we saw, what we saw was just our value proposition really started resonating with customers. When I talked about the presentation around our pillars for growth being sort of attract and retain, that's what really started to come to the fore for us. Our value proposition, our leading capabilities, we did a great job in terms of retaining customers through, you know, just generating value for our customers, but also, you know, industry-leading service levels. We saw that across the corporate side, and then in novated, we just had a lot more capability in the first half of FY 2026 than we did last year, given the technology change.
We increased our commercial intensity around novated, on whether that was more marketing, more on-site visits, more webinars. We also dropped a new novated portal in, which resonated really well sort of with our customers. We saw that through the NBW. Just a confluence of more sort of activity on our side has sort of driven that into the 2Q. As you see in the presentation, we saw that come out with really elevated pipeline levels across both large fleets and Novated.
Okay, thanks. Just turning to New Zealand, clearly, you know, a more challenging sort of environment there from a new business writing standpoint. What does that sort of look like for the next six months in the context of your overall guidance on that new business figure?
New Zealand has been tougher. The pipeline in New Zealand is up to a lesser degree than what we sort of see in Australia. With that said, the April orders numbers was the highest we've seen for about 12 months. I expect that in New Zealand to sort of probably marginal growth there as well, is what we expect for New Zealand into the second half.
Okay. Then just pivoting to the Australian Fleet business then on that second half sort of outlook. I guess part of my question is sort of, you know, you've obviously got a little bit of uncertainty on the macro side of things, interest rates and whatnot. What are you seeing there at the moment in terms of that impacting your New Business Writing levels?
Yeah. Just in terms of the macro backdrop, we sort of spoke about the fact that we feel like we're really resilient in most sort of, geopolitical macroeconomic conditions. That's just because of the systemic importance of our products and services to our customers, their revenue generating assets, their tools of trade. We're not seeing any sort of impact at the moment in terms of customer demand on corporate side. I sort of spoke about the pipelines are up 15%. In addition to that, we called out AUD 25 million worth of sale and leaseback opportunities that if they come off, will drop in the second half of 2026 for us. That also gives us confidence in terms of that growth.
Okay, thanks. That's all from me. I'll jump back in the queue.
Thanks, Phil.
Before we move on to the next question, a reminder, if you would like to join the queue, to press star one now. Your next question is from the line of Chenny Wang of Morgan Stanley. Please go ahead.
Yeah. Morning, guys. Thanks for taking my question. Can I just pick at the New Business Writings guidance for FY 2026 of marginal growth? I think maybe some of this has come out in Phil's questions, but if I could just hone in a bit more. You know, that guide was given at a time when you didn't have the visibility on the significant novated tailwinds that we're seeing today. You know, that piece of the pie has clearly gotten much better since, you know, when you initially issued that guide.
I'm just wondering if there are any moving parts that's maybe got a bit worse in your view, or are we just, you know, staying conservative on that FY 2026 guide for the time being?
Hey, Chenny, thanks for the question. Look, I think it really is just the increased uncertainty in the macro environment that we see today. You know, from an internal perspective, we're still very confident. Yeah, obviously just being suitably conservative given the external factors that have certainly increased over the last couple of months.
Got it. Maybe just on that and, you know, some of the data points you gave around, you know, April pipelines in fleet and Novated. Maybe just some comments on what conversion rates have looked like. You know, I can kind of imagine, you know, with the system cut over last year, you know, that would have impacted your conversion. How should we kind of think about those conversion rates on a go-forward basis? Maybe some color on that relative to the first half of 2026 as well.
I guess just to clarify, so the pipelines that we're talking about, they're confirmed orders, so there's no kind of conversion requirement on those. They're just orders waiting to be delivered and converted into New Business Writings. Given the supply of vehicles is largely pretty good. We've obviously got a few high demand EVs that are taking a little bit longer to come through, but not significantly so. That's really just a measure of the activity that hasn't quite yet made it through to New Business Writings.
Right. It's just basically a timing mismatch, when you say pipeline. Being clear, if all those vehicles were delivered, that's effectively New Business Writings.
Correct.
Yeah. Okay.
Just to reiterate Damien's point, it doesn't include the sale and leaseback opportunity. It's all included in the pipeline.
Got it. Maybe just one last one. How should we think about core margins with that New Business Writings acceleration? You know, and maybe there are some assumptions in terms of whether the strength continues or not. You know, does that acceleration initially put some headwinds on your NOI pre-EOL margins? I think in the past when you've had that, we've kind of seen those margins compress a little bit, especially as extensions ease. Just some kind of color on how should, how we should think about those margins into second half.
Yeah, look, as we think about the second half, we've stated that we think the margins will be pretty stable through the second half. You are right, Chenny, that when we see significant turnover of extending leases into New Business Writings, we get a bit of a headwind due to just the depreciation profile of the leases. I don't think that'll have material impact into 2H, potentially into 2027.
Got it. Thanks, guys.
Thanks.
Your next question is from the line of Shane Bannan of PAC Partners. Your line is open.
Thank you. Morning, guys. Just a small technical question. One of the add backs you have in your reconciliation between NPATA and the statutory profit, is this amortization of software. Can you just inform us as to the nature of that? In other words, is that a valid charge you're investing in buying that software category?
Yeah. That add back for amortization includes any amortization of internally generated assets and acquired assets. It's all the amortization is added back in NPATA. Obviously, a big component of that would have been the capital cost of Accelerate.
Right. Basically, you're still investing behind the category, presumably.
Sorry, Shane, I didn't catch that.
You're still investing behind the category. Software.
Yeah. I mean, we have ongoing CapEx of around AUD 6 million a year is kind of what we're targeting at the moment for ongoing CapEx.
Right. Thanks very much.
Thank you.
Thanks, Shane.
That concludes our Q&A session for this time. I will turn the call back over to Damien for closing remarks.
Thanks, Paulie, and thanks again to everyone for joining us here today. I look forward to catching up with most of you in the coming days. Have a great day.
This concludes today's conference call. Thank you all for joining us. You may now disconnect.