Please be advised that today's conference is being recorded. I would now like to hand the call over to the first speaker today, Mr. Grant Webster, CEO. Thank you. Please go ahead.
Thank you, Desmond. Thank you, everybody. Good afternoon. I appreciate everybody attending at short notice, and it's obviously a very challenging change in expectations for THL. Well, look, I will start by just noting that this isn't like a COVID-19 period. It's not a GFC. We're not at a trading loss. Our balance sheet and position in the market is still strong, and we believe we've got a positive outlook in front of us. Nevertheless, we feel the pain of the disappointment of this change in expectations as much as everybody else will. We have had a very challenging start to quarter four and a dramatic change in our expectations. I reiterate the long-term objectives and state of the business from our perspective remain very positive.
It's a short presentation today, but we have provided more detail than what we normally would for something like this, so that you can have a really good understanding of what has occurred and the timeline around it. So let's just jump into it, turning first to the summary slide. So as you well know, we've downgraded our expectations for FY 2024 from around NZD 75 million to between NZD 50 million and NZD 53 million net profit after tax. It reflects the weakening in the economy, which has impacted most regions in some way or another, but vehicle sales have been the major factor globally and in particular in the Australian market. Over 50% of the shortfall that we're looking at from an EBIT perspective is attributable to the Australian Retail Dealership division.
We will talk about the ex-fleet sales, in particular, the proportion of those that were sitting in that quarter four and the extremely high margin that relates to those vehicles. Rental yields have generally met our expectations in most markets, but we have seen, with the slowing in the economy, the domestic markets in New Zealand and Australia decline in late booking trend, and we'll talk about that in a little bit more detail overall as well. When we think about the core part of the business, the rentals business, it does remain healthy. The rental yields have generally met our expectations, and our outlook for the coming high season remains positive, which again, we will cover as we move through things. It's important to note that THL is forecasting to remain compliant with its banking covenants at the June 30 quarter end and beyond.
But we will engage with the banks to make sure that we've got greater tolerance in case it is required, and we'll talk more about that later on, including talking about potential impairment considerations. While we fully understand that there may not be the same sense of credibility with the NZD 100 million net profit after tax goal for 2026, we have reiterated that that is our goal, and we have provided more detail on the assumptions that sit behind that, to provide you with an understanding of why our confidence remains that we can hit that target. Just turning to the waterfall slide. This does demonstrate, in simple terms, what we've just talked about, that the Australian segment is the majority of the issue in this downgrade. Although, as you can see, U.S.A. and New Zealand have also had declines, as has the U.K./Ireland business.
In fact, the U.K./ Ireland business, on a percentage basis of their profitability, is actually the largest decline. Turning to the slide on the market deterioration and the conditions around it. So the fundamental question that you'll be asking yourselves, and obviously we've challenged ourselves on as well, is: How could this have deteriorated so quickly, and how come you only knew about it now? As evidenced, like I said, we were ahead at the end of January. Going into February, when we released the half year results, we had a short, small shortfall in February, but manageable, and we had rectification and plans for that shortage from February and March and a number of other upsides that we were considering. We knew that we had to keep a close eye on what was happening, and the trends in the business weren't necessarily favorable but manageable within our forecasts.
As the rental income for April came to fruition, and we saw that drop in domestic and Australia and New Zealand from the Easter period and school holidays, we did end up below our domestic expectations in rentals. But far more importantly, what we saw in April was a significant shortfall against our expectations for vehicle sales. We had promotional activity in place that focused on our ex-fleet across both markets. We had priced the product appropriately. We had a secondhand vehicle that was a lower price and more attractive to the market, in our view, but demand dropped across the board and those sales simply did not occur.
We've reviewed that situation at the middle of last week, and as those final results came, expectations came through from the businesses on Wednesday night through to Thursday morning. That's when we went into a trading halt, because we could see a material decline in expectations for May and June. So we have taken that trend in April and flowed it through to May and June. Some may say that that's a conservative approach. We think it is realistic based on the leads that we have, based on the deals that we have on the books, and the deals that we expect to do over the coming weeks. We will talk a little bit more about that vehicle sales issue as we move forward.
Moving to the next slide, this is where we want to just reiterate the positive outlook from a rentals perspective. For the future, key rental periods are not expected to be significantly impacted by that domestic change that we've seen recently. We are more an international business, particularly in New Zealand, Canada, the U.K., and Australia. In general, that international business remains strong and positive, with yields in line with our expectations. Now, we did expect and plan for yields to decline somewhat. We have been clear about that for some time, but yields have not declined any further than what we expected. So we do see the impacts at the moment to be reflective of the current economic conditions, and we do expect those conditions to improve over time.
Importantly, we don't see any structural change in either the demand for purchasing RVs or on an international basis for renting RVs. It's an important point here to also just note that the manufacturing and tourism businesses are generally tracking in line with our expectations. The New Zealand tourism business is slightly down in quarter four with that movement in domestic activity, but it's outperformed in quarter three. So let's just move to the outlook. As indicated, we have retained that goal for NZD 100 million NPAT, and we've considered the underlying assumptions behind that goal very carefully, and we've considered those against the current trading performance, and we'll talk about those on the next slide. But the movement in FY 2024 clearly does mean that FY 2025 is also gonna start poorly. Quarter four isn't just going to end, and on July 1, everything turned rosy.
So we do expect that quarter one, probably going into quarter two of FY 2025, will start more poorly than we expected, and we do therefore expect FY 2025 to be lower than the current, materially lower than the current analysts' consensus expectations. Those current numbers are around NZD 87 million for FY 2025, and we've indicated that we think we will be below the FY 2023 pro forma result of NZD 77 million net profit after tax. So let's just have a look at the FY 2026 assumptions. So just want to reinforce at the outset that we think these assumptions are reflective of the ongoing expectation of growth in tourism, which we are seeing, and we see nothing at the moment that means that international tourism is expected to decline.
If you look at airline capacity, if you look at airline yields, and if you look at hotel capacity starting to grow again around the world, it all certainly supports that long-haul and international tourism is expected to grow over the coming years. They do reflect a recovery in vehicle sales, and the RV sales market, we would note, has seen these kind of drops historically and globally and recovers in reasonable time frames, particularly as interest rates drop. What's important in here is to really acknowledge that we have allowed for rental yields to drop from FY 2024 to FY 2025, and then in most markets, some small growth in FY 2026. Hire days are expected to reach pre-COVID levels in the core markets of Australia and the U.K., but we note that New Zealand and the U.S. remain under pre-COVID levels.
But we expect our utilization to be broadly in line with historical numbers, and we expect the synergies in fleet to flow through, which means some jurisdictions, Australia and New Zealand in particular, will have higher than historical utilizations. We expect for that FY 2026 number, that ex-fleet sales volumes will be broadly in line with the pre-COVID levels. Margins, importantly, also in line with the pre-COVID levels. U.S.A. and Canada should achieve slight growth over those margins, given the synergies that we expect and from a fleet perspective between those markets. The full realization of the synergies that we've indicated previously, whilst noting that costs do, are going up and are expected to go up in line with what you're seeing in other industries and other businesses.
The Australian retail dealership, it is important to note that we have allowed for continued softness in this division for some time. We do not expect it to hit the boom periods that it hit on a margin and volume basis during COVID, and we see that as an opportunity for where we've been conservative and an opportunity for growth. In general, tourism numbers we expect to align with general growth. So from our perspective, those assumptions are realistic. We do again understand that the market may take a different view on those, but we think they are based on sound assumptions that align with where the market is more generally from a tourism perspective and vehicle sales perspective. Just turning to other implications. So just on the financing point. So we have been asked already this morning to release our covenants.
We don't release what our covenants are, and we'll continue to consider that, but at this point in time, we don't release those. What I'm very happy to say is we, no surprise, we have a leverage ratio and equity ratio. We have a debt servicing covenant as well. So just a reminder that we are forecasting to be in compliance with those covenants. Question has been raised around equity and whether we need to be raising equity. There is nothing we see today in our balance sheet forecasting or the debt servicing capability of the business or the profit outlook for the business that indicates that we would need to consider any kind of equity raise.
I will remind everybody very clearly, that even during the COVID-19 pandemic, when we were in a loss situation, and Apollo was in a loss situation, we did not raise equity. We have a large number of fleet. We can manage our debt levels very effectively, and we will do what is required on that basis. Just quickly talk about asset impairments. We will have done a very quick review of a number of different areas based on this reforecast, and we have noted that we will be considering the U.K and Ireland business in particular, and it's probable that there will be an impairment in relation to that business, which we will review as part of our business planning and year-end processes.
The value of any potential impairment has not been allowed for in these forecasts, and we can't give an indication of what that value may be, because clearly we haven't done the work yet, so we just can't put the cart before the horse on that one. So quickly, just going to the divisional review, and this flips us through to slide twelve, with the expectation for fewer ex-fleet sales. This is a really important point with this change. I really want to talk about this ex-fleet and the expectation that we are gonna have fewer ex-fleet sales across Australia and New Zealand in particular, and the material impact that has in the short term on our outlook and position. As you can see, there is a significant margin on these ex-fleet vehicles, and it is the way that we account for it.
You need to think of the retail margin. You need to think of the essentially wholesale margin or the rental-to-retail margin and indeed the manufacturing margin that is all linked and associated with these vehicles. Internally, it works through a group elimination process, where the profit is eliminated internally and only realized when the vehicles are actually sold. So these are very high-margin vehicles. They are the vehicles, most noticeably, that have not sold in the way that we expected them to, although clearly we've seen a drop in vehicle sales overall in both the New Zealand and Australian markets. We do believe that our expectations were realistic.
When you look at our previous sales periods, when you look at the pricing activity that we put into place, when you look at the marketing activity, and when you look at what was selling effectively relative to the higher priced new vehicles, it's these used ex-fleet vehicles which were the vehicles to get behind and push for the last quarter of the year and in fact, right through back from February. The reality is, we have found that market has declined and indeed through April, has been well below expectations. We will continue to drive those vehicle sales, and importantly, those vehicles are there to sell and that margin is there to be achieved. It is not like a rental stay that you can't recover once it's lost. Those vehicles are there, and we will move them through. Just moving to the next slide on vehicle sales.
The detail is there, and I think you can go through it. What we have seen in the last few months is the U.S. achieved lower margins on vehicle sales than we expected. There is a product called the NADA Book, which is an external third party business that values vehicles for financing and for manufacturers within the U.S. industry. That had been identifying the used product from 2022 and 2023 as declining in value over recent times. But importantly, the latest update that came out just at the end of last week indicated that those 2022, 2023 vehicles are actually seen as increasing in value by 3%-4%. So that gives us some confidence that the margin drops have actually concluded, and in fact, we may start to see some upside in those older vehicles.
Canada saw a margin drop as planned, but we did have a change in retail strategy and retail pricing strategy and changed our campaigns. And in that market, actually, those campaigns actually worked, and we're outperforming our expectations. Just quickly moving over to rentals. The rentals commentary, I think, is reasonably clear in those bullet points, and again, the detail we've covered earlier in the presentation. So let me summarize, I guess, where we are at. When you think of all of that, there are some that could say that we've been conservative in our reaction and our approach. This is how we see it today.
We have intended to continue to be open with the market, to make sure obviously that we're complying with our continuous disclosure obligations, but challenge ourselves consistently on what we're expecting, why we're expecting it, and being honest with the market. We will continue to drive ourselves and look to do better and do more, but this is where we see this sudden trend and move in April and flowing through to May and June. April's been poor. The trend is not our friend. The rental shortfall in April and New Zealand, as I said before, you can't make up. But those vehicle sales shortfalls can be made up, and at some point, those ex-fleets vehicles will be sold and be sold at good margins.
So it's a very poor quarter four, and it does mean, as I said before, that quarter one of FY 2025 is gonna be challenging as well, and that's why we've indicated the numbers that we have or the broader reduction in expectations for FY 2025. But we remain positive that the core of this business and rentals, and the outlook on a global basis is positive. We're positive about those assumptions through to FY 2026 of NZD 100 million NPAT, and we're positive about the core structure and approach of the business. We will, however, out of this, continue to challenge ourselves on what we could be doing differently from a forecasting perspective, how we might assess the market differently through these challenging economic periods, and we will react as appropriate.
Finally, I'll just reinforce that we know how to manage this business in these challenging times. We understand that the balance sheet and management of debt and fleet is critical, and we are still making a substantive profit this year. It is not a loss-making situation. It is different to COVID, and we believe that this is a, a big hiccup that we are very, very concerned about and unimpressed with our performance. But it does not change the structural performance of this business or the industry and the strong balance sheet position that we have. So we do thank you again for your attendance. Look forward to the Q&A, and Desmond, we'll hand back over to you to open that up.
Certainly. As a reminder, to ask a question, you need to press star one one on your telephone. Please stand by while we compile the Q&A roster. One moment for the first question. Our first question comes from Kieran Carling from Craigs Investment Partners. Please go ahead.
Morning, Grant. Thanks for the presentation. First question from me is just on your fleet target for FY 2025, which has been walked back from 9,500 to 9,000 vehicles. Can you comment on what your current fleet CapEx commitments are for FY 2025, and what is factored into that fleet guidance in terms of your future commitment to THL's ability to sell vehicles?
Kieran, I sincerely apologize. You broke up during that question. I'm not sure if that was at our end or your end. Could you repeat the question from the point where you said that our FY 2025 vehicles fleet expectations are down by about 500?
Yeah, sure. So with the fleet target now under 9,000 vehicles versus 9,500 previously, can you comment on what your current fleet CapEx commitments are for FY 2025, and what is factored into that guidance in terms of your fleet commitments versus THL's ability to sell vehicles in FY 2025?
Yeah. So, Kieran, I won't give any specific details of exactly what the numbers are. Clearly, you'll be able to work out with a lower sales number this quarter, our net fleet CapEx goes up significantly because we've obviously got less sales for this year. So you will see the FY 2024 number is a lot higher than what we indicated previously, and that obviously flows through to debt being higher, not that we gave a debt number at the half year. So, we're not, at this point in time, remember, this is not a year-end presentation. This is an update on guidance. We're not providing guidance into FY 2025 on net fleet CapEx at this point in time or debt numbers. You know that we will manage that accordingly to the market and the market conditions.
And what the indicator is around that fleet coming down is that we're gonna run things tight. We're gonna keep utilization really tight, and obviously, with the sales market being a little bit more volatile, we can play between fleet numbers and sales numbers if we need to a little bit more. So we've got a little bit of ability to adjust between that.
Okay. Thank you. Considering the sharp decline in expectations through Q4, and your FY 2025 guidance for NPAT to be below NZD 77.1 million, should we be interpreting guidance as being in the ballpark of NZD 50 million, similar to FY 2024, or in between NZD 50 million and NZD 77.1 million? Or is there just too much uncertainty to say at this stage?
No. So somewhere in between would be the number. I'm not gonna provide a number today. We've got a lot more detailed assumptions and actions that we need to consider as a result of this as we work through our numbers for the next year. You've got to remember, we've done a high level assessment of all the numbers and the indications based on all our revenue numbers. We've got to look at all the other parts of the business. We've got to continue to look at our CapEx, the cost structure, so forth and so on. So it's way too soon for us to be providing a number. But it's clear, based on where quarter one will be from a vehicle sales perspective, that any previous expectations the market had are just too high.
Cool. Thank you. And then final one is, if we look at the shortfall of ex-rental vehicle sales in Aussie, and the NZD 13.5 million gross profit impact, you know, of that impact, you sort of talk about it being more of a timing issue. You've still got the vehicles there, to sell in future periods. But, of that NZD 13.5 million, what are you confident that you can, you know, realize in future periods?
Well, it's one of those ones where. Look, it's not it's that point is, it's not the sort of the fresh food nature that a rentals day is. But you also can't we can't be just saying that sales will continue to sort of fall short and compound at some point into the future. I think that these vehicles in particular, that have particularly high margins in them, we will realize that over the coming period. And what that period is, it's gonna be months, but we will realize that over those months. So that shortfall we will achieve over a period of time. but it's probably in some ways at the expense of some new sales and those sorts of things. We'll get that higher margin, but on a total volume basis, you know, the market is down.
Okay. Thanks, Grant. That's all from me.
Thanks, Kieran.
Thank you for the questions. Our next question comes from the line of Andy Bowley from Forsyth Barr. Please go ahead.
Thanks, operator, and good afternoon, Grant. So a couple of questions from me. The first of which revolves around your NZD 100 million NPAT goal in FY 2026. I recognize there's a fair few changes that are in place and with regards to the immediate outlook here, and reduced FY 2025 fleet expectations at year-end there. So, a reasonably material decline in fleet expectations at the beginning of FY 2026. Now, how has that impacted the assumptions leading into FY 2026 that you've outlined here, relative to where you were, you know, this time last week? You know, clearly, there's a fair few moving parts here, and I recognize the NZD 100 million is only an aspirational goal, but there's a number of clearly detailed assumptions that go behind it.
Yeah. So, it's, Andy, I'll try and keep the answer simple, while it's actually a bit quite complex. In terms of that 500 and where you end up, so, we look at fleet on a month-by-month basis. It's right through that period, and obviously you've got the seasonal adjustments between the different countries and what we expect to sell. So we'll change the sale profile over the next two years. So when you pull all that together, and really try and tighten everything up, that's where you get that ability to pull down that fleet number, knowing that we've got what we've got in terms of sales and purchases coming through the next 12 months. So basically sort of going, "Look, you might sell some more, hold a little bit on rent.
So you're playing around being more fleet efficient. What you'll also see in general terms is some of the flow-through of the demand in New Zealand actually being stronger for the next couple of years, even though it still remains behind pre-COVID levels. So New Zealand is still performing particularly well. And when you look at a few of the synergies and cost lines flowing those through.
Okay, I think I get that. In terms of confidence levels, you know, it to be able to put that number in your release, it. You know, clearly, you are still reasonably confident that that is achievable. I guess that's not really a question, it's a statement, but if you'd like to comment at all, Grant?
Something, carrying line or not...
I'm not sure if other journalists are having the same problem as me, but I'm struggling to hear you here, Grant.
Yeah, we'll just hop on there. Desmond, are you there?
Yes, please go ahead.
Hey, Andy, can you hear, can you hear us now?
Loud and clear, Grant.
Okay, all right.
I'm not sure if you picked up my question/statement with regards to-
Yeah.
effectively confidence levels around your NZD 100 million of NPAT in FY 2026.
Yeah. Yeah, so we believe that there's enough tolerance there for us to have that goal. Clearly, it's a much bigger step from 2025 to 2026, there's no doubt about that. And it is predicated on a recovery in the vehicle sales market, which we do confidently believe will occur. It is one of those cyclical areas. And that's where it comes up, right? If you look at those core assumptions, and that's the big thing that's changed to the down, you put that back to the positive, and recognize that we've had a bit of domestic issues and rentals over a winter period. It's not hard to get back there.
And then maybe lastly, in relation to that NZD 100 million, can you give us an idea of how big your gain on sale for used vehicles is within that number? To at least, you know, provide some level of confidence that, one, it's achievable, but two, it's realistic relative to where vehicle sales have been historically.
So the two assumptions that we've indicated are, one, that ex-fleet sales will be in line with pre-COVID levels or slightly above where we've got, you know, changes like new sites in New Zealand and so forth, nothing significant. And two, that margins are in line with pre-COVID, allowing for where there are synergies, for example, North America. So in essence, the value of vehicle sales won't be significantly different to pre-COVID levels.
Albeit, you know, pre-COVID was a little bit muddied by the North American, you know, challenges in terms of that slowing used vehicle market and new vehicle market. You know, I don't know if you can, you know, clarify that answer in any sense with regards to those changing dynamics in the pre-COVID era?
Oh, look, so, the U.S. North American fleet numbers that we have in there for sales, we would consider have a definitely numbers that have been achieved pre-COVID, but weren't achieved, you're right, in the worst of those years when we had the ex-fleet situation in the market. But they're not out of the norm.
Yeah. Okay.
They're not like-
Thanks, Grant.
Yeah. Okay.
Thank you for the questions. One moment for the next question. Our next question comes from the line of Grant Lowe from Jarden. Please go ahead.
Oh, hi, team. Can you hear me okay?
Yes, thank you. Sorry, I think the issue was at our end.
Yeah, yeah, that's all good. Just to pursue the NZD 100 million bit further. So yeah, just building on Andy's question around the lower starting point.
Mm-hmm.
So, how much of the, you know, you still held the NZD 100 million with a lower starting point. So how much of this reflects conservatism and the original forecasts relative to where we are, now? And how much of it, are there any sort of subsequent changes to when you put out that NZD 100 million target that, that might have lifted things slightly as an offset to the-
Uh, yes
lower starting point?
Well, that's a really good question. Clearly, as I said, there is a different assumption in terms of where vehicle sales needs to get to from where we are today. Clearly, we've got a down point now. So if you're gonna say, is there a change in conservatism? It's in the leap that you make from FY 2024 to FY 2026 is clearly different. But the 2026 assumptions aren't all that different. And what I'd say, the other thing around that nine and a half to below nine , that's also a point in time. So again, that's what I was trying to infer when I was saying, answering Andy's questions.
We do this on a month-by-month basis, and when you run that through, it actually, it all sort of works out very effectively. So the short answer is, it's not a big change in conservatism. It wasn't like there was a massive amount of tolerance, and now there's none. It's actually very, very similar numbers. It's just that leap from 2024 to 2026 is clearly much larger. So it's this assumption around vehicle sales recovery.
Right. Right. So if I, if I sort of interpret correctly, whilst the year-end in 2025 might be a lower point, I mean, you've got some various assumptions in there for higher days and stuff for a couple years. But basically what you're saying is that probably the, on the very end of the higher days across the North American season, and then, you know, obviously you require some higher vehicle numbers through the first half of 2026 and generate higher sort of,
That's right
average, average vehicles, vehicles in the ANZ region.
Yeah.
Okay, and just in terms of the current status of, obviously, you've got very high margins in those ANZ vehicles, as you've mentioned. How much opportunity is there to stimulate demand through pricing at the moment? You know, lowering those margins to the volume, price volume trade-off. Or is it simply the case that you're not, just simply not getting the people walking onto the shop floor to buy these vehicles at the same rate you would normally expect?
We're not getting the people on the shop floor or obviously online to buy the vehicles, that we were seeing previously. So we had put price activity in place. There's a question whether you, you know, how far do you go? There's always a question, right? So we had priced and done specials to a degree. Everyone in New Zealand hopefully would have heard some of the marketing activity for the campaign in New Zealand, and likewise in Australia. So we believe we were where we needed to be. Maybe there's a bit of stimulation at a slightly different price point, I don't know. But the reality is the leads and numbers coming in the front door haven't been where they were expected to be at all.
Okay, thank you. That's all for me.
Thank you for the questions. As a reminder, to ask a question, please press star one one. One moment for the next question. Next question comes from the line of Ben Wilson from Wilsons Advisory. Please go ahead.
Thank you. Good morning team
Just my first question, Grant. Well, you said that the lowered EBIT guidance in Australia is overwhelmingly skewed towards ex-rental sales. Can you give a sort of rough breakdown of the split between ex-rentals and new RV sales? And I guess just as part of that, given that the new RV retail sales are skewed more towards towables, are you seeing less of an impact there, just given they do typically have a lower price point?
I won't give the exact skew, Ben. We'll just have a look at whether that's something that we want to release. We've obviously given the total number for Australia in the waterfall, and we've given the number for the ex-fleet sales in that table of NZD 13.5 million that was across Australia and New Zealand. So you can make an assumption about how that might split. You are right, Ben, the towables in Australia are not down as much as what we expected. Sorry, as the expectations for the ex-fleet, and there is margin pressure at that end, but we've seen that margin pressure for a little bit of time and have allowed for that accordingly.
Thank you. And can you remind me what the seasonality is like in sales volumes in Australia, New Zealand? I had thought that they were more typically skewed towards the summer high season, but it sounds, it sounds as though you do sell vehicles sort of in volume right throughout the year, just given the, I guess, the contribution to this, this earnings downgrade.
Yeah, correct. We sell right throughout the year. There's,It's in Australia, it's show season, so WA, Sydney, Victoria and Brisbane have all had their major shows. Well, Brisbane's got its major show coming up, but have all had shows in just the recent six weeks, and likewise, New Zealand, in the last six weeks as well. So it is sort of show season, that end of summer season sale period that occurs every year.
Thanks, Grant. Just last question on the, on the sales side of things. Just wondering, is there any potential to, to put some of those ex-fleet vehicles that you haven't sold yet back into the rental fleet to earn income on, or is that just not practical or feasible?
Uh, it, it-
Rebranded some of them already, so.
Yeah. Look, over this winter period, it's not worth doing that at all. We've got plenty of fleet availability in both countries right at the moment. So it's not feasible from that perspective, no, but you're right. In general terms, if you're in the middle. If it was a different time of year, you would absolutely consider moving vehicles from sales back onto rent, depending on the vehicle type and so forth and so on. But it's just not the right time of year to do that.
Thanks, Grant. Actually, is there one more question on the sales side of things before I go to my final question? I guess just with the outlook for interest rates certainly in Australia and the U.S. to be higher for longer now. Is a decline in rates you know quite important to your assumptions as an increase in demand and a sort of recovery in sales volumes?
Yeah, look, the short answer is most likely yes. I mean, we don't sit here as core economists, but certainly what we've seen in demand and leads as sentiment has moved around interest rates would say that the gut feel is that there's a reasonable correlation there. Certainly what we've seen in the U.S., there definitely is in North America, there's no doubt about that.
Thanks, Grant, and just my last question on the rental side of things. You've said that you're still seeing good performance in the tourism business. The most recent inbound tourist arrival numbers out of New Zealand and Australia, I think, are as at February still. But they still show, you know, significant increases year-over-year, and you know, a lowering of the gap towards 2019 peaks. So are you still seeing sort of strong international tourist demand for rentals in Australia and New Zealand? It's really more a sales issue, obviously, that's driven all this, all this rebasing.
Yeah, Ben, you're absolutely right. You're completely onto it. April, May, June just aren't international months from a rental perspective. They're much more domestic months, especially April, with that Easter and school holiday period that was well down on expectations. We did say at the half year that when people were sort of asking the question: what's your rentals outlook? It should be reasonably well booked. We made the point that with Easter being at the start of April, that was a real question mark for us in this market, not quite knowing exactly what would happen, and we did see that post-March, that Easter and school holidays period below our expectations. But that is a domestic point, not an international one.
Great. Thanks very much, Grant. That's all my questions.
Thanks, Ben.
Thank you for the questions. As a reminder, if you'd like to ask question, please press star one one. At this time, there are no further questions from the line. Allow me to hand the call back to management for closing.
Thanks, Desmond. Appreciate it. Thank you, everybody, for your. Well, it looks like in the Q&A queue, Desmond, we might have Belinda might have just jumped in there. Is that correct? Am I reading that correctly?
Certainly. Allow me to open the lines.
Yeah. Hi, Grant.
Yes, go ahead, please, Belinda.
Grant, do you mind just talking about, you know, you're talking about this, this different mix between international and domestic bookings and the impact it has on yields. Can you give us some flavor there? And also, now, I suspect, given you couldn't sell it, your fleet at year-end will be sort of, maybe a bit higher than what you were thinking. And then now you've lowered your 2025. I mean, does that impact your synergies? I thought you always had to have a certain fleet size to get your synergies. And even if you can give us a range, you know, can you tell us where you're sort of roughly seeing net debt at year-end now for 2024, please?
Sure. Look, we, we international versus... Just your first question on international versus domestic. So it's the U.S. has that differential. So domestic's actually a high yield, and that's where that mix is slightly different. New Zealand, Australia actually isn't all that different on a daily yield basis. Then you're talking about is the vehicle sales shortfall create a high debt position? Absolutely, it does. We haven't given a debt number, so we'll just have to have a look and see whether we put that out there.
I think if you take the broad number of vehicle sales, or the shortfall that we've got, how much we're attributing to vehicle sales, flow that back, you should get a reasonable sort of number, take off the profitability shortfall, and you should sort of see where debt goes up versus where people at as a previous number. But, we haven't given that number out at this point.
With a lower fleet, how that may impact your synergy target?
Well, sorry. Sorry, Belinda, you did ask that. So look, the synergy on that front is basically, and that's one of the points of bringing the fleet down, right? It's a utilization synergy and not having to run as much fleet. They were all variable from that perspective, they were variable savings, and indeed, if you have lower fleet, then it's less vehicles that you've achieved the bill of materials. But overall, that will still all the fixed synergies and the proportionate amount of variable synergies flows through. So nothing that significantly impacts synergy number, no.
Thank you.
That's great. Thanks, Belinda, appreciate it.
Thank you for the questions. Back to the management for closing.
All right. Thank you, thank you, Desmond, for managing us through. Thanks, everybody, for your time, and we look forward to getting some runs back on the board and rebuilding some confidence and expectations around THL, because we certainly have that confidence in the future. So, we'll have to deliver the results to get you on side, and we will do so. Thank you all very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.