I would now like to hand the conference over to Mr. Andrew Doyle, CEO. Please go ahead.
Thank you, Ashley. Good morning, everyone, and thank you for joining us to discuss Peter Warren Automotive Holdings' 2026 interim financial results. My name is Andrew Doyle, Chief Executive Officer, and I'm pleased to present our results for the first half as we continue to consistently deliver on our Peter Warren strategy. I'm joined today by our Chief Financial Officer, Victor Cuthell, who will assist me in presenting our results. Before we get started, as you'll be aware, Victor will retire officially in June this year before taking on an advisor role for the company, and as such, this will be his final set of results with Peter Warren. I speak on behalf of the board when I sincerely thank him for his incredible contribution to the company over the last few years.
As you'll see from today's results, he leaves us in very good stead as the benefits of our strategy continue to emerge. I would also like to take this opportunity to welcome our incoming CFO, Anna Bale. Anna is an accomplished finance director with strong experience, 10 years with Intercape here in Australia. Anna joined us early this month and is with us for today's call. Please note this presentation, along with the financial statements, have been lodged with the ASX for your information and can also be found on our website. So without further ado, please turn to slide two of today's pack, where you'll find today's agenda. I will start with a summary of our results and update you on the strong progress we're making against our strategy.
I'll then hand over to Victor, who will take a more detailed look at our financials before I wrap up with some comments on our outlook before taking questions. Let's take a look at those results highlights for the period. Turning to slide four, our H1 performance highlights the direct output of rigorous operational discipline and a strong performance culture of Peter Warren, growing all our key metrics over the period. Headline revenue growth for the period came in at AUD 1.27 billion, growing by AUD 39 million on the prior corresponding period. Our well-balanced brand portfolio assisted our performance, while our focused strategy drove strong growth in used cars, as well as service parts, finance and insurance, and aftermarket.
We're also pleased to see growth in gross margins at 16.2%, up from 16.1% in FY 2025, continuing the stable margins that we saw through FY 2025. To AUD 12.5 million, up AUD 5.4 million, which was a solid outcome, albeit off a low base, with our PBT up to 1%. As you can see, our continued strong focus on maximizing stock turns and reducing stock holdings and associated costs, saw our inventory reduce again this half, with new vehicle inventory down AUD 19 million to AUD 332 million. Additionally, we kept costs on track with operating expenses down to 11.9% of revenue for the half. We were able to lift our interim dividend by more than 80% versus the same period last year to AUD 0.03 per share.
And finally, our owned property remains very healthy and increasingly utilized with a value of AUD 227 million, with net debt to property value of just 27%. Next, as we look at this magnificent aerial of our Warwick Farm owned property in Sydney, I'd like to spend a little time demonstrating how our fits into our team's unwavering focus on our strategic North Star, and I'll highlight our clear focus areas in the next few slides. On slide 6, you'll see a recap of our vision and ambition to be Australia's most valued automotive group, benchmarked against our peers. Across all metrics, we want to consistently exceed the expectations of our customers, our employees, our brand partners, and of course, our investors.
To execute this vision, we're constantly driving our four clear fields of action, which are focused on innovation by driving our business forward with AI-powered omni-channel operating model to deliver exceptional customer outcomes and maximum efficiency. Customer obsession and focusing all we do around customer care and retention. Organic growth through a driven performance culture and opportunistic growth paths, and a strong acquisition appetite to expand our business across Australia in both an opportunistic and disciplined manner. We are pleased to expand on our success here. Before I move into the respective fields of action of each pillar, a brief comment on our Peter Warren management team for the future.
With more than 30 years of automotive industry experience across Australia, North America, and Europe, I have the benefit of benchmarking my experience leading the Peter Warren team against what I've seen with the world's best retail groups. And with hindsight of one year experience now in my role, well considered, I firmly believe the changes I've now implemented in our management team, in terms of our new CTO, Ken, our new CFO, Anna, to replace Victor in March, and announcing today our newly promoted National COO, Paul, all of which can be seen in our appendix, will set us up for success as we cross the AUD 3 billion turnover mark and prepare for even greater heights. At Peter Warren, we have a strong team in place, and we are ready....
Moving to slide seven, we have outlined the developments in both our innovation and customer strategy pillars, which go hand in hand. We are building our innovation framework to have an omni-channel operating model that is removing many friction points in the customer journey, delivering a more seamless experience that customers demand and rightly expect. Happier, more friction-free interaction with our customers lead to higher average cost of doing business and higher average retention. This is a clear directional path for Peter Warren. One of the key strategic actions taken during this period has been the appointment of Ken Quach as our new Chief Technology Officer.
We're very pleased to have recruited Ken in late, late last year, in the end of 2025, along to the company of Peter Warren, as he brings outstanding experience in tech leadership, in data, in automation, and AI-driven operations from various senior CTO roles, most notably in his 13 years at Qantas. Now, since joining, Ken has already assisted us in driving further automation and AI adoption and learning experiences for us in the management team, whilst building out our broader AI and data strategy for the company. We are piloting AI chat across our sales leads and automated service bookings and communications.
Text engagement with service customers, as you can see in the examples below, allows open channel communication, greater transparency on service progress throughout the day, and the costs that are incurred, less administration from our service advisors, which allows them to dedicate their time more effectively to face-to-face customer interactions. Enhancing this ease of doing business also unlocks meaningful advantages for our business. One of my favorite examples of this is our service channel payment link. With the aforementioned transparency on service progress, and with clear explanations for the costs incurred, we build trust. When we mix openness with digital tools, we get business benefits. Just via this pilot alone, over the last year, we've had over 25,000 online payments, representing more than AUD 30 million in value.
They've been made, and each of those payments have actually been paid in under two minutes from the payment link being received, all without human interaction on the Peter Warren side. It's really fantastic and a glimpse into the business benefits that lie ahead for our company. We are also utilizing intelligent, data-driven campaigns with lapsed customers to drive lost business back into the doors of Peter Warren. For us, AI is not just about efficiency, it's about consistency, ensuring that every interaction with a customer, whether it's online or in a dealership, delivers the same clarity, responsiveness, and customer ease of doing business with Peter Warren. Customers have always been at the heart of everything we do, and we are now increasing our fostering of this as part of our customer obsession culture to ensure this remains our central priority.
Turning to slide eight, key to strong organic growth is a performance culture that recognizes and rewards positive behaviors from the team. We're delighted to see so much green across this slide, with our first half numbers looking strong, both in absolute and percentage terms. On the left-hand side of the chart, you can see the positive developments in all departments. Although vehicle gross profit margins remained under pressure due to higher volumes, especially in new cars, these held up well, and we have grown our business in all other departments, focusing on high-margin revenue streams, service, parts, and finance and insurance. And as you can see on the right-hand side, we show our positive trends across the board. New vehicle units sold have grown steadily since H1, FY 2022.
More than 50% cumulatively, and another 2% growth H1 2026 and H2 H1 2025 used cars are a key growth area for us, up over 80% over the period of this chart, and up another 14%, as you can see in this half, on the prior corresponding period. Our relentless focus on stock management, both stock value and age, continues to drive efficiency benefits. Despite multiple new brands and new car volume increases, we are more than AUD 50 million lighter in our inventory total holdings than we were in June 2024, just 18 months ago. This is resulting in significant... Meanwhile, our high-margin service and parts business continues to drive growth, with increased revenue to AUD 221 million first half of 2025. What I'd really like to highlight or underline is our disciplined and pragmatic approach.
Our focus on mitigating ongoing industry-wide pressures by growing higher-margin revenue streams and managing inventory tightly, is a good demonstration of our performance culture really bearing fruit. And this is testament to the hard work of the entire Peter Warren team. Here, where I'd like to announce another key initiative to drive our Peter Warren management team and performance culture growth. I am also thrilled to announce the promotion of our current COO of New South Wales, Paul Hughes, to the position of COO nationally for Peter Warren, effective 1st March 2026. Paul has been with Peter Warren for 20 years and held many senior leadership positions across the company, each time demonstrating strong leadership and consistently delivered targets.
Responsible for the end-to-end performance of our national sales and after-sales performance and operations, Paul's leadership of our executive general, general management team will accelerate our next phase of growth through our Drive to 2030 strategy. Congratulations, Paul, I know you're itching to get into it. Turning to slide nine, a key pillar of the Peter Warren strategy is our acquisition strategy and our appetite for opportunistic expansion. Indeed, our revenue through such acquisitions has doubled since IPO to more than AUD 3 billion. We were delighted to have agreed the acquisition of Wakeling Automotive during the period, dollars of pro forma revenue or a 20% uplift to our total business. Alongside 16 well-established brands and 30 dealerships located in Western Sydney, one of the fastest-growing automotive catchments in the country. Importantly, this is not simply a scale play.
Wakeling is a high-quality operator, culturally aligned with our values-driven approach, and presents clear operational synergies across property, people, systems, and customer processes. The business builds and brings strong local market share positions, long-term leases, and experienced management team. All of these factors will contribute positively to our performance as we complete integration over the coming months. This acquisition, which will be immediately EPS accretive, also reflects how we think about M&A. We remain disciplined, strategic, and always focused on value creation. We remain active in a large but normalized, and where many operators are more willing to engage, given the shifts in industry dynamics. Our team has deep M&A experience and experience in finding synergies across the companies. The strength of our balance sheet and property portfolio continues to give us attractive optionality to participate in consolidation in a way that supports long-term shareholder returns.
We expect to remain very active in this key area of our strategy over the coming months. Turning finally to slide 10. The Australian market has undergone a significant shift over the last several years. Chinese OEMs now account for almost 17% of the national market. Is widely expected to elevate towards 50% over the next few years. This is a clear structural change driven by competitively priced, well-equipped vehicles arriving in substantial volumes and appealing to increasingly value-conscious customers, especially as they grow in brand value. This is a trend that has been on our radar for a long time, and we've been angling to build a strong market position through representation by the most attractive and progressive new arrivals. We believe we are very well positioned to capitalize on this growth trend, with 15 Chinese brand dealerships as at year-end and growing quickly.
Indeed, the Wakeling acquisition will take us to 22 such dealerships. Importantly, we also represent seven of the eight largest-selling Chinese brands in Australia, with several more expected to come online in the second half of FY 2026. When looking to partner with any OEM partner, Peter Warren looks for a strong and broad product offering aligned with customer market demand, scale of planned volume growth, along with a genuine partnership approach focused on dealer profitability. Our ability to integrate these brands quickly using existing property and infrastructure with minimal capital expenditure and zero goodwill payments, gives us meaningful competitive advantages relative to our peers. Our early positioning in this segment is already delivering both margin stability and strong customer momentum.
Now, at the same time, we are equally focused on growing the representation of the top-selling brands that have been our foundation partners for many of the +65 years we've been established. Indeed, these brands represent around 80% of our brand portfolio mix and expand further with the recent Wakeling's acquisition brands such as Hyundai or the further expansion of our Mercedes-Benz representation across Sydney, now covering Chatswood, Mosman, Warwick Farm, Campbelltown, and now further south to Wollongong. Portfolio is now a strategic advantage, and we have a strong balance sheet, which positions us well to continue this expansion. I'll now hand over to Victor, who will walk you through the financial results in more detail, including our underlying performance, margin profile, cost management initiatives, cash flow, and balance sheet strength. Victor?
Thanks, Andrew, and thanks also for your nice words earlier in the call. Turning now to the profit and loss statement. As Andrew mentioned, revenue for the first half was AUD 1.27 billion, an increase of AUD 39 million, at 3.2% on the prior corresponding period. This was driven by good contributions from used vehicles, service, parts, and F&I, and a steady performance in new cars in a competitive environment.... Gross profit increased by AUD 6.6 million as we increased revenues in those high-margin service lines. Our gross profit percentage was very stable at 16.2%, and I'll talk more about that in a moment. Operating expenses increased by AUD 3.6 million, or 2.4%, a below-inflation increase.
This reflected some OpEx investment in higher-margin departments, but a good offset from our cost control actions, which I'll cover shortly. We've delivered a reduction in our OpEx as a percentage of revenue to... Our net interest expense reduced by AUD 3.2 million. This reflected the achievements in driving down inventory and also a lower interest rate environment in the period to December 2025. These movements resulted in underlying PBT of AUD 12.5 million. That's an increase of AUD 5.4 million on a lower base, and we're pleased to deliver this step-up. It's a like-for-like comparison with no acquisitions in that particular period, and is really from our growth in revenue and our very strong discipline on our costs and on our inventory. Turning to Slide 13, which shows our gross margin performance for the period, in our business.
As you can see in the graph at the bottom of the page, we have had a series of results around 16.1%-16.2%. Across each of the departments, you can see from our table that we've had very steady results in gross margin. The new car market continues to be extremely competitive, with margins varying by brand. We focused on maximizing our margins by managing our inventory, by working with OEMs, and by making sure we earn the OEM KPI income. Our table also shows the higher-margin service lines of parts, service, finance, insurance, and aftermarket. We have focused on driving up gross profit in those areas and have had good success. As 2026 progresses, we'll continue our focus on improving margins. Slide 14 provides more detail on operating costs. Our OpEx increased by AUD 3.6 million.
We had an award increase of 3.5%, and we also invested OpEx into growing our revenues with advertising spend, used car staffing, and other items. To offset those increases, we had actions to reduce our costs in other areas, and this delivered results. We reduced our inventory holding costs. We tended some of our supplies. We were very careful with our remuneration costs. As a percentage of revenue reduced to 11.9%, slightly down from the 12.0% in the prior corresponding period. For seasonal reasons, our H1 OpEx percentage is always higher than our H2 OpEx percentage, as you can see in the graph at the bottom of the slide. Going forward, we'll continue our cost control initiatives, and we expect a lower H2 OpEx percentage than in H1. Lastly, on Slide 15, are our cash flows.
Our operating cash flow for the period included an unwind of working capital following the peak June trading period. This unwind was higher than in previous years, but is expected to reverse in the second half in the normal manner. Our non-operating cash flows included lower outflows on tax, CapEx, and interest. The result of this was a reduction in the net debt from AUD 83.8 million in December 2024 to AUD 61.5 million in December 2025. Excluding the effect of acquisitions, we would expect that to improve by 30th June 2026, due to those working capital patterns. The board has declared an interim dividend of AUD 0.03...0.04 on last year. This dividend reflects our confidence in the business, its momentum, and also our ongoing commitment to shareholder returns. Now I'll hand back to Andrew, who will talk you through the outlook.
Thank you, Victor. Looking ahead to our outlook and starting first on the left-hand side with the broader automotive industry observations. We continue to operate in a highly competitive environment, with Chinese brands rapidly expanding their presence and reshaping the brand landscape. At the same time, new car supply remains mixed, with a wide range of new product availability, but ongoing risk of inventory pressures that requires disciplined management. In the industry, we expect to see a continuation of a greater proportion of earnings from higher-margin areas such as used cars, service parts, and F&I. Meanwhile, technology adoption and AI is accelerating at pace and will continue to be a key differentiator in setting apart the industry leaders who have a clear digital strategy. Dealerships are becoming more digital and more data-enabled, and we see significant opportunities ahead as this continues.
Finally, the market remains large and fragmented, with increasing M&A and selling activity. Against this backdrop, on the right-hand side, I firmly believe Peter Warren is exceptionally well-positioned for our valued shareholders.... Our customer-centric culture remains a core differentiator, supported by our significantly strengthened leadership team that I've outlined today, and a performance culture focused squarely on results. We are benefiting from an excellent balanced exposure to fast-growing Chinese brands, which will continue to gain, gain, traction within the Australian consumer marketplace. Operationally, we are driving growth in high-margin results, consistently show maintaining disciplined management of both inventory and costs. We continue to innovate to improve the customer experience, supported by investments in digitization and AI, which are improving efficiency and helping us personalize the customer journey.
Our recent Wakeling's acquisition is immediately EPS accretive, and with good balance sheet flexibility and low net debt, we continue to evaluate further M&A opportunities in what is still a highly fragmented market. And so, taken together, these strengths provide us with continued confidence in our ability to grow earnings over the time. Thank you for your time today. I'll now hand back to Ashley to open us up for questions. Thank you, Ashley.
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 today comes from Phil Chippendale with Ord Minnett. Please go ahead.
Hi, team. Thanks for your time, and congratulations on your first half results. I just wanna turn to slide 8, just a couple of sort of elements of that. I just wanna talk a little bit about Andrew, you know, you spoke about your efforts to try and drive more effort into, you know, higher margin business, you know, used cars, service and parts, and F&I. Just on, you know, that used vehicle performance, you know, clearly you've been growing this business really well over the last few halves in particular. Just going forward, can you sort of unpack the strategies, how you, how you anticipate, you know, continuing to grow that?
Absolutely. Thanks, Phil, for the question. Yes, it's a big opportunity for us. If we look at our used-to-new ratio, we see that there's a good performance uplift that we can experience across our dealerships. And so the focus really is on driving that business performance in the departments, and that starts with very, very strong and selective sourcing of this area for us, and probably something that we haven't done in a great level of of detail before. So we see big opportunity there to lift that, just through a more disciplined approach to sourcing and ensuring we take every opportunity in used cars.
Okay, thanks. Just on service and parts, I mean, in the past, you know, there have been periods where, you know, the industry, I guess, generally, and you guys have mentioned this in some previous calls about, you know, the challenges of personnel and getting the right people in to really drive that service and parts component. How is that sort of shaping up at the moment as you see it, and is there any sort of bottlenecks in terms of those expectations going forward?
Finding the right level of staff and the right level of technicians has always been a challenge, as it is across our industry. Therefore, we choose to grow our own in a big way. So we have a very strong Peter Warren Apprenticeship Program that is a great teams, and their longevity with the company is much greater that way. So that is a beta, but it takes time, and therefore, what we're trying to build is a... We have consistency there, but we don't see any bottlenecks going forward. In fact, we see more opportunity going forward in that area.
As you can see on that, on that chart that you refer to in slide eight, our service and parts revenue has consistently grown, and we see that the use of the right team with the right processes is one part. But also, as I mentioned before, using digitalization to go after what is potentially lapsed service customers is also a big opportunity for us.
Last question from me. Just on the inventory, again, a really strong performance and continuing to see that number come down half on half. I just want to understand the dynamics around, you know, the shift in your brand mix. You know, as the Chinese brands continue to, you know, partner with grow, is there—is that, is that to your benefit from an inventory perspective, or is it?
Yeah, look, I think when you bring on a new brand, there's obviously a startup in terms of adding new cars, new demos, so that is an uplift in stock. But what we've done is really had a consolidated view of first of all, looking at our existing stock and our age of stock and our movement of age stock, but also having a great relationship with our OEMs to make sure that we take the right level of stock. I talked about sourcing used cars before. One of the big focus areas is actually how we source, if you wanna use the same word, our new car stock. And we do that much more scientifically now in terms of making sure we get the right level of stock coming into our showrooms that matches our customer profile.
Yes, I think it's... Well, we're very proud of that result, actually, overall, to reduce that by another AUD 20 million in the last period on prior corresponding period. It's a key focus area of our management, and they're realizing now that we can operate at those much more efficient levels, which is giving us great floor plan interest benefits.
Well done. Great result. I'll jump back in the queue.
Thanks, Phil.
Your next question comes from John Campbell with Jefferies. Please go ahead.
Hi, guys. Thanks, thanks for this. Just sort of following on from this minor questioning of Phil's, just particularly honing in on F&I. That doesn't, F&I doesn't appear over the last sort of four years or so to have really penetrated too much in terms of as a share of revenues. And maybe that, maybe that is a bad measure to look at as F&I's share of total revenue. But can you give us a view on how you think you're performing in terms of F&I and the opportunity, I guess, over the next three years to really increase that sort of penetration?
Thanks, thanks, John. So, our F&I penetration has grown a bit over the last couple of years. You'll see our revenue in our half-year accounts is up from AUD 17.3 million to AUD 19.4 million for the period to December. That represents a bit of an uptick in penetration. See plenty of opportunity in relation to F&I. It's an area that we've focused on. We've got high-performing locations, and we've got some locations that can continue to do better, and that's an area that we are particularly focused on this time. So we think that we will continue to see that penetration level go up. And of course, that rate margin accretion, some GP percentage accretion, as that occurs due to the favorable mix effect.
Yeah. And then how do you feel in terms of versus sort of that you're, you're probably ahead of industry averages, but in terms of the top-performing, say, Eagers, as an example, do you feel that, you know, there's a, there's a gap there?
So I think we are slightly above the industry average, but we see lots of opportunity. Back in the old days, you would see penetration heading for 60% and 70% levels, whereas the industry numbers are more like 30% or high 20% penetration. A lot of it varies by brand, and so if you have a brand that is predisposed to a higher level of penetration, a brand, for example, where the customers are more inclined to finance the product, then that assists your penetration level and does distort comparisons between different dealership groups. But for us, we see opportunity, loads of opportunity. I'm sure that other listed businesses would also say the same thing, and wherever your performance is, there's always opportunity in this space.
Absolutely. Yeah, okay. Thanks for that. And just last question from me. Your comment, again, Victor, you know, you talked about the OpEx seasonality. Second half has a lower percentage to revenue. And if you look back historically, generally, it's been sort of 60 or 70 basis points difference between first half and second half. Do you expect similar for FY 2026?
That's a great question. I think, if I interpret that, John, you're saying, "Victor, would you like to, as you walk out the door, put out a bit of guidance, a bit of a number for us?
Something like that, yeah.
I think, I think that directionally, I would say that we would expect to see an improvement in the H2 percentage compared to the H1. I think that will be low tens of basis points. I don't think that will be high tens of basis points. And so we wouldn't give actual guidance on that, but we, we do expect it to improve on 11.9%.
Okay. Thanks for that.
Thanks, John. Thank you.
Your next question comes from Chenni Wang with Morgan Stanley. Please go ahead.
Hey, morning, guys. Thanks for taking my questions. Maybe just firstly, on that gross margin line, it was nice to obviously see it tick up a bit, but, you know, it sounds like you aren't really content with margin stabilization, and obviously, you called out some margin improvement programs as well, and what these programs are. And maybe to be a bit more targeted, you know, what are, let's say, the top three initiatives that could really move the needle on gross margins going forward? Thanks.
Sure. I'll cover that in two bits, what our initiatives are and what will have the biggest impact in moving the needle. So we have obviously inventory management is top of the list. That's why we're so laser-focused on that. That does have an impact on your quite an impact on your margin. Second one is achieving the capped forms for our brand partners. That flows into that area as well. There's also driving the high-margin departments. Obviously, increasing your view will drive up your overall GP percentage due to the revenue mix element, I guess. And we've got lots of, there are always lots of opportunities, as you would know, in retail with a large portfolio of sites. There's comparisons, there's benchmarks.
Our appointment of Paul Hughes as a national leader to help really drive these areas in a stronger way is something that we're particularly focused on. The item that influences margins the most, and the items that will also move the needle, is how our products perform. There are some brands with higher margins and some brands with lower margins, and that varies according to where the brand is in the cycle of the new models coming out. They'll have higher margins when new models are out and lower margins towards the end of the model life cycle. That is an item, and the performance of individual brands across the country, across all dealers, is something that moves the needle a bit.
But we focus on what we can control, and the IT initiatives that I've mentioned are the things that we think are good for driving our margins in the months ahead. Andrew, did you have anything to add?
Yeah, I'll just expand a little bit on the performance culture, piece, Chenni. You know, that is something that I think we, you know, there's small margins that can make big differences. And, what we're really highlighting within our business now with performance culture is really the transparency of performance. Victor mentioned Paul, Paul Hughes coming on board. That's gonna make a big difference in terms of our national performance. But really, you know, shining a spotlight on our, if you like, scorecard performance, how we're doing with our OEM partners, how we're doing in each of the areas.
Obviously, we measure them individually, but really having a much broader and more transparent review of our rankings across our business, and really not being satisfied with anything lower than, you know, driving our performance up and up. That's something that has always been part of Peter Warren, but I think it's something we can focus on more now with clearer data and better reporting. That's happening as we speak.
Got it. Thanks, guys. And just a quick follow-up on that. So you mentioned one of the margin drivers is how you perform with brand partners, and I guess how those brand performs. Obviously, over the last year, last two years, there has been that portfolio mix that you've been taking both. Kind of fair to say that, you know, as that continues to take shape, all else equal, you know, naturally, that should be a bit of a tailwind for your growth margins?
Could you just expand a little bit on that, Chenni? Book up slowly.
Yeah, sorry. So I, I guess just touching on what you mentioned on the gross margin drivers and, and in particular, you know, how, you know, how you perform with your brand partners and how those brands perform. Obviously, Peter Warren, over the last few years, has been undertaking a little bit of, a portfolio mix with the brands you, you represent.
Yeah.
I guess, all else equal, on a go-forward basis, should that, you know, continue for your gross margins? Is it kind of fair to think that naturally, you know, you know, that should, improve?
Yeah, absolutely, Jenny. So yeah, as I outlined on slide 10, you know, we have pivoted our brand mix according to customer demand and market demand in a progressive manner. When I talk about bringing on board some key Chinese brands that are really showing a lot of favor with our Australian consumers, so that is helping a lot. But as I mentioned, you know, we have a strong portfolio still of existing brands that we've had for, you know, 65+ years in our business. And so that balance, I think, is exactly right.
You know, what we're able to do with our business and what is attractive to us is, or to the brands rather, especially the new ability, is our property portfolio and is our professionalism. And so, when new brands that do make sense to us, and I said, you know, they have to be the right brands with the right attitude and the right partnership approach, come on board, we're actively able to bring them into our business very quickly, into usually existing properties and/or showrooms, and get up and running, in a fast manner. So I believe we're moving in the right direction in that area, and that gives us good tailwind. I think it's the right approach.
Got it. And just one last one. Just on used volumes, obviously, that new to... Sorry, that used-to-new ratio has lifted quite a bit in the first half. And, you know, you kind of talked to the opportunity there. But can I just be maybe a bit more nuanced here? Maybe I should already know this, but that uplift you're seeing at Group is that driven across the board, or is that driven by select locations where, for example, you know, you've had pilot programs in these dealerships and, you know, it's a matter of, you know, rolling that out more broadly?
Yeah. So no change strategy, and we're rolling it out as fast as we possibly can. You know, I mentioned property in the last question, the last answer, rather. We have property, and we need to sweat that property even harder in terms of our locations and our frankly, our pitches, I would say, in the UK, our location of space. And I see every space that we have in our property portfolio as being an asset we can use. And so we are, as far as now, the right used cars for the right markets, but it's not piloted in one or two areas. It's being rolled out across our entire 80+ sites and locations up and down the east coast of Australia for sure.
Got it. Thanks, guys.
Thanks, Jenny.
Your next question comes from Sarah Mann with Moelis Australia. Please go ahead.
Hi. Morning, guys. Thanks for taking my questions. Just a follow-up question on GP margin. The industry seems to be pretty competitive at the moment, and there's commentary that there's lots of oversupply, so obviously that's weighing on industry-wide margins. You've kind of highlighted before the key areas where you guys can drive margin improvement. In the current environment, just curious, can you give us, I guess, a rough guide around what, I guess, your medium to long-term or through the cycle are?
Yeah, thanks, Sarah. So first off, and to confirm our earlier point, we do see gross margins going up, and we see the one of the main. There's two drivers of that. One is the things we control, and one is how the network for each brand is performing individually. And we do see the second category moving improving for us as some of the larger brands that we partner with move through the model cycle and see improvements in margin. In terms of giving guidance as to a number, and we don't give hard guidance as to what that 16.2% could become. But as an order of magnitude, we do see it moving up by quite a bit from 16.1% over time.
By quite a bit, we're not talking, you know, 30 or 40 bits, and we're not talking 250 bits. We're talking in the, you know, it maybe in the, in the 100, in the 100 plus category, maybe up to have in mind. So I know that's a very wide directional number, and I know that, that probably doesn't help the models very much, but that's the, that's the order of magnitude that we're thinking of.
No, that's excellent. Just, I guess, thinking about it through the cycle, so that's helpful. And then, just the other question on the competitive environment. So there's all these new OEMs still coming in. What are you seeing the incumbent OEMs doing, I guess, in response to this? And yeah, I mean, is there increased support? Are you seeing increased support to the dealers? Or just curious what the incumbent OEMs are saying in the context of this competitive environment.
... Yeah, I think, Sarah, the all OEMs and all brands are fighting for a share of a flat market. That's the reality. So, there's a lot of competitive campaigns out there. There's a lot of good reasons to buy a motor vehicle from a number of brands. And, you know, the so-called established brands that have been in this market for a long time, I think are putting out strong campaigns to fight for their share.
Clearly, mathematically, as and when other new brands come in and take share, those shares might change, but there's still enough there for, I think, the right brands or the right model mix and the right level of supply and demand, and indeed, a business model for us. And that is exactly the discussions we're having, and indeed, the campaigns that are being run. And you can see them in the traffic or in the above-the-line campaigns that are in market. So yes, I think it's a good time to buy a car. It's a good time, and good offers in the marketplace.
And I think it's, you know, coming back to the earlier question about brand mix. I think we've got a very, very strong, balanced brand mix, which is consistent with sort of the market demand and where it's heading.
Great, thank you. Then last question from me, like, again, given kind of the competitive environment, just communities and vendor expectations.
Sure. Yeah, as I mentioned, quite clearly, it's, you know, it's absolutely one of the key pillars, great opportunity for us in that space, in terms of our... The strength of our balance sheet, the strength of our representation, of our management, and our ability to integrate businesses into the Peter Warren way, if you like. And the market, as I mentioned in my speech, is also still relatively large and fragmented. So I think there is a greater appetite from sellers, as I mentioned, willing sellers, and prices are probably more realistic in terms of the runway going forward for those that perhaps aren't as committed to long-term retail as clearly we are.
So yeah, we see big opportunity for us in terms of our growth path. As I said, there's lots of activity out there and we're actively in that marketplace.
Great. Thanks very much.
Once again, if you wait on your telephone and wait for your name to be announced. Your next question comes from Tim Piper with Jarden. Please go ahead.
Morning, team. Just two questions. Result relatively flattish and recognize the market as a whole is obviously not seeing a whole lot of volume growth right now. How do you view that result in the context of your OEM mix? And you're sort of actively working down your new car and demo inventory quite successfully. So has that actually been a headwind to revenue? And effectively, when that new car inventory kind of normalizes, you'd expect some better sales results or normalization from that headwind coming through those numbers?
Thanks, Tim. There is a nuance in our numbers that I should flag: our volumes are actually up, as you would have seen on one of our slides in new cars. Our revenue is not up, and that actually reflects that some of the volume growth that we've had is in the agency brands that we represent. Our performance in new cars has been better than the revenue indicates because of that little nuance that's in there. And so that's probably the more performance across the different brands, and we're quite satisfied with how we're going. We represent all of the brands, you know, the whole of the automotive sector from the very bottom to the very top.
We think we've got very good spread of brands in there. So we're pretty happy with our performance, and we do see continued opportunity.
Yes. Okay. So, but the sort of the wind down in inventory, has that, has that-
There's no headwind at all related-
Ah.
to wind down of inventory. The wind down of inventory by us is not, is not really shortage of inventory. The wind down of inventory by us is, Andrew and I driving the business.
Okay.
-to get our costs down, to get our interest down, to get our holding costs down. And when a customer needs a car, the odd months here and there accepted, when a customer needs a car, we'll get that car out as, you know-
Yeah
... as fast as we can, despite our very, very efficient inventory.
To be clear, Victor talked before about that which is in our control. That is in our control, even though we have OEM partners. Relationships with OEM partners means we can have mature conversations, and that is meaning that we can be much more nimble in terms of our efficiency, stock depth, and therefore, interest costs.
Yeah, understood. You sort of answered my second question in your first comment. I was just gonna ask about the volume versus revenue trend in new vehicles and sort of the implied revenue per vehicle being down a little bit. You sort of said that's agency mix. I was just curious around whether that was reflective of mix in your portfolio or accounting potentially associated with what you're referring to as a competitive environment compared to twelve months ago?
So let me tackle discounting, and so it's a very competitive market, and there's plenty of customers looking for a deal, and so there is a normal level of discounting. But I wouldn't say that it is, you know, crazy discounting or anything like that that's going on. So I don't think, I don't think that's a factor that I would call out in particular. So I do apologize. I missed it. Could you just tell me again the first part of your question about our brand portfolio?
No, just the pricing, whether it was being— you sort of said it's not promotional, so it's obviously agency, primarily agency-driven, in the mix of revenue.
Yeah. So, just to expand on that point a little bit, our total volume of vehicles went up, as shown on slide eieght, went up from 15,000, roughly 15,000- 8. So that's an increase of 230, 240 vehicles. And that's because there was a more than 300 vehicle increase in brands, which are agency brands. Mercedes-Benz and Honda are the two main agency brands that we represent. So that increase of, I think around about 300 vehicles in those brands, does not translate into increased revenue of any significance, 'cause we only take the agency commission for the value of the vehicle into our revenue.
So our actual—if we didn't have agency brands, then or we didn't have an agency system in those brands, our revenue would be up more in line with our new vehicle volumes, so our revenue would be up some 2% or something like that.
Yeah, that's clear.
Okay.
There are no further questions at this time. I'll now hand back to Mr. Doyle for closing remarks.
Thank you very much, Ashley. Ladies and gentlemen, thank you very much for your time today. We very much appreciate your interest in, in Peter Warren. I would like to close by thanking our customers for their trust in Peter Warren across our representation of, of more than 30 brands across 80 franchise locations. And without your support... I also want to say a big thank you to my incredible team at Peter Warren for your hard work to create those customer moments that really result in what we can deliver today. And also our OEM partners, as we've touched on some of the questions there, for the relationship we have, the trust and partnership and support. Finally, I'd like to thank our investors for your belief in, in what we have created and, and certainly what we believe we can create at Peter Warren Group.
Thank you very much, and have a great day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.