FleetPartners Group Limited

Thank you for standing by and welcome to the Fleet Partners FY25 full year results. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Damien Beryl, CEO. Please go ahead.

Thank you very much and good morning to everyone. It's good to be with you today to present Fleet Partners 2025 Financial Results. I'm pleased to be here today with our Chief Financial Officer, James Hullins. Before we begin, I would like to acknowledge the traditional custodians of the land and waterways across Australia and pay my respects to Elders past and present. 2025 has been a pivotal year for Fleet Partners, a year of genuine transformation. As a result, we take great pride in what Fleet Partners has become today. Xcelerate is now complete and we have seen early signs of its benefit, demonstrated by some of the KPIs James will present shortly. We delivered solid financial results this year with growth in UMOS and MHA pre-EOL despite an uncertain macroeconomic environment which has led to a cautious approach amongst our customers. While new business guidance is down against a regular F524, our customer value proposition is resonating with fleet managers, which led to a pleasing run of tender wins during the year. We've also generated high cash flow and strong capital returns. The continued strength of our balance sheet and cash flow generation has supported the board's decision to increase our capital payout ratio range to 60% to 70% of MPAT A. Today we announced an acquisition of Remunerator which will significantly strengthen our salary packaging capabilities. Let's explore these points in more detail starting with slide 6 with the 2025 financial performance highlights. Two key messages emerged from today's results. First, Fleet Partners remains a defensive investment underpinned by consistent performance. Despite some due business confidence this year, We continue to grow assets and call income thanks to the strength of our products and services. Second, our operations generate substantial positive cash flow, enabling strategic investments while maintaining disciplined capital management and shareholder returns. New business writing is acquiring 16% year-on-year, reflecting the exceptional pipeline outlined in FY24. Excluding this, New business drawings are down 6%, driven partly by subdued business confidence. Nevertheless, through life grew to $2.3 billion, up 2% to 3%, underscoring the resilience of our business model. Core income reached $169 million, growing at 6%. Core income being what we previously referred to as NOI-free EOL and provisions. MPAD A3 EOL was $41 million, up 9%, a strong result driven by disciplined expense management and the continued growth in UMOS and core income. Finally, end-of-week income was $61 million, with EOL per unit at $5,880, and vehicles sold down 10%. A critical point to highlight is that at the current product per unit levels, our portfolio has an illustrative embedded EOL income of approximately $250 million. Earnings per share rose 3% to $37.5, supported by our on-market share buy-back program. Organic cash flow was $93 million, reinforcing Fleet Partners' high cash flow business. This provides strength for investing in growth while maintaining disciplined capital management. I'll talk to you in more detail later, but today we are announcing two changes to our capital management framework. First is the increase in our capital payout ratio range to 60% to 70% of MPAT aid. Second, notwithstanding the success of our multi-year buyback program, the Board, after careful consideration of both market factors and the group's strong capital position, has concluded to end the buyback program and return capital via an unfranked dividend. In this context, today we announce a $29 million unframed dividend at $0.136 per share, representing the midpoint of our payout ratio range. Finally, and significantly, the dividend represents an 8.9% annualised yield. Let's turn it by seven. As announced earlier today, I'm delighted to share that Fleet Partners have entered into an agreement to acquire Revenue Generator. Revenue Generator is a highly respected business with over 30 years of experience in salary packaging and novated leasing. Their deep expertise and strong customer relationships make them an ideal partner for Fleet Partners. These activities have strengthened our product offering, enabling us to deliver even more value to our existing customers. It also opens new growth channels for our innovative business, giving us access to segments of the market that were previously beyond reach without remunerated capabilities. In addition to these strategic benefits, the transaction is expected to deliver low single-digit EPS accretion on a pre-synergy basis, with the deal completion anticipated in the first half of FY26. We see this as an exciting step forward for fleet partners. one that positions us to continue growth by enhancing the breadth and quality of services we provide to our customers. Let's turn to slide eight and the opportunity ahead for fleet partners. Fleet partners operate in three significant, under-penetrated, high-returning target markets of large fleets, small fleets and novellas. Each market benefits from distinct tailings. In the current phase of the cycle, companies are increasingly turning to cost reduction to deliver earnings growth. The outsizing of fleet management is a popular option in that context. In the mid to long term, the transition to EVs calls for expertise which fleet management companies are uniquely positioned to provide. To the smaller fleets, we offer simplicity in a bundled pay-as-you-go product. a product that facilitates the shift away from vehicle ownership and into vehicle usage, a trend we see well established in other parts of the world like Europe. Finally, Novato, a compelling turbo cost of ownership proposition for individuals that continues to grow in public consciousness thanks to the benefits of the electric car discount bill. Let's turn to slide nine about our strategic focus. Our strategic focus is simple. Attract, retain, grow and profit. Attract new customers through focused industry targeting and an omni-channel distribution strategy, all propelled by strong commercial intensity. In 2025, we achieved several successful outcomes around this, including the launching of our Small Sleeve Online Calculator, enhancing our automated credit scorecards, and teaming up much closer with several OEMs. We retain existing customers with industry-leading service and by cultivating deep, multilayered relationships. We are committed to continually raising our net promoter score with no upper limit on our ambition. In the second half of 2025, we focused on strengthening our innovative relationships. Part of this effort included the recent upgrade to our innovative customer visual portal. another tangible benefit from Accelerate. We grew Shiro Wallet by delivering a comprehensive suite of market-leading fleet products that support our customers' goals of productivity, safety and sustainability. Solid progress was made around this in FY25, evidenced by the core margin expansion in both Fleet New Zealand and Novato. And finally, we've optimised profit by continuing to maximise our operational leverage on the back of Project Accelerate. Looking forward to FY26, we have an extensive pipeline of initiatives to drive these priorities forward, which I select you listed on the slide. That's 7 slide 10 on our ESG highlights. Before I hand over to James for the financial results. Police Partners is deeply committed to ESG responsibilities. We continue to help our customers reduce their impact on the environment, along with demonstrating leadership in this space, as evidenced by three achievements in particular. 60% of the available leases written in 2025 were electric vehicles. Our team conducted 126 customer sustainability reviews in FY24, and we delivered a 42% reduction in our scope 1 to a vision in FY22. We also advanced our social impact through volunteer work and fundraising. And finally, although we have much work to do, we have increased our representation of women in senior roles, a goal which is at the centre of our commitment to diverse leadership. I'll now pass across to James for the financial results. Thank you, Damien, and good morning, everyone. Let me begin with slide 12. As anticipated in our September trading update, new business writing was reduced by 16% in FY25. This outcome was in line with our expectations and reflects the exceptionally strong performance in FY24, which benefited from the unwind of elevated order backlogs as new vehicle supply normalised. Excluding the pipeline unwind, new business writing was down just 6%. The results of due business confidence across Australia and New Zealand and the temporary impacts of the Accelerate system cut over, challenges we have now fully resolved. Despite the low new business ratings, BoomMoss continued its upward trajectory, growing 3% excluding FX impacts, and up 6% on an average basis. This demonstrates the underlying strengths in durability of our business model. With the innovative funding transition now largely complete, balance sheet funding represented 80% of BoomMoss at September 25. further enhancing the quality of our earnings. Setting for slide 13. The growth in average room off translated into 6% increase in core income, with core margin remaining stable. The anticipated margin reduction in Fleet Australia was offset by margin expansion in Novatis and Fleet New Zealand. As expected, Fleet Australia margins will continue to normalise, with highly profitable and replaced by new business writings at typical margins. Ended lease income remained robust at $60.7 million. While EOL per unit was 4% lower than the prior corresponding period, profit per unit excluding EOL charges was up 2% on 1-25. This reflects the ongoing stability in used car pricing. The number of vehicles disposed is 10% lower consistent with the low new business writings which had a $7 million impact on EOL in FY25. Provisions increased primarily due to the growth in balance sheet funding for basic leases and a temporary rise in re-list linked to the accelerated system cutover. Overall, NOI was $223.9 million, just 1% lower than the prior year. Operating expenses were $91.5 million, up 3% and right at the midpoint of our expectations for affecting disciplined cost management and the benefits of ExxonRab, alongside targeted investments to support future growth. Bringing these elements together, EBITDA was $132.4 million, down 4%. Unfortunately, EBITDA pre-EOL was $41.3 million, up 9%, underscoring the strong online performance of the business. Turning to slide 14, used car pricing remains strong and stable, as evidenced by the chart benchmarking average used vehicle prices to September 23. Demonstrating resilience of used vehicle pricing that we have mentioned, EOL per unit for FY25 reduced by 4% compared to PCP, but 2x25 profit per unit excluding EOL charges increased by 2% compared to 1x25. Overall EOL income is down 14% due to a 10% production unit sold as previously discussed. If the current stability in used car pricing persists, we expect EOL profit per unit to remain at these levels in the medium term. This is equivalent to embedded EOL income in the portfolio of approximately $250 million which is expected to be realised over the next five years. While we anticipate a return to historical average levels over the longer term, this will be driven by new leases written to reflect current used car pricing, with those leases not expected to reach end of term for at least three years. Crucially, the extended timeframe for EOL normalisation provides fleet partners with an opportunity to continue growing in loss and core income offsetting the longer term normalisation of EOL. Our portfolio continues to demonstrate strong credit quality. For corporate customers, the vehicles we lease are business-critical, revenue-generating assets, and for Novated customers, lease payments are made directly by employers, driving consistently strong credit performance even through challenging cycles. Underlying arrears were 45 basis points at September, slightly above the long-term average, with an additional 15 basis points due to temporary administrative impacts in Novated. We expect arrears to return to long-term average levels over 1H26 as the new system and processes are embedded. Despite these temporary factors, we remain highly confident in the composition and performance of our portfolio. Turning to slide 16, Clean Partners continues to deliver outstanding organic cash generation, returning the business to a net cash position of $28 million. at September 25. Organic cash generation was 93 million, representing a cash conversion ratio of 106%, a clear demonstration of our discipline in capital management. Moving to slide 17, our diversified funding platform remains a core competitive advantage, limiting our exposure to interest rate movements. For P&A funded leases, we have no interest rate exposure. For warehouse and ADS funded leases, hedge-based rates at inception and funding margins are locked in for the life of an ADS deal or reset annually for warehouses. Our successful $400 million Australian ADS deal in July and the warehouse extensions in September have further improved our cost of funds. With $515 million of under-worn warehouse capacity at September 25, we're exceptionally well positioned for growth. Our balance sheet is robust and with a net tax position of $27.9 million and $65 million of undrawn revolver capacity. In summary, despite the challenging year, Fleet Partners has delivered a strong set of underlying results in FY25. With the Accelerate program now fully implemented, we're exceptionally well positioned for the future, ready to capture new opportunities and deliver sustainable value for our shareholders. I'll now hand back to Damian to discuss our investment case and outlook. Thanks James. Turning to slide 19, fleet partner business case is defined by clear growth opportunities, predictability, defensiveness and strong cash flows. As you have seen through the presentation, there is much to like about the opportunity in fleet partners, but allow me to nominate five key areas. First, we continue to invest the growth in large, under-penetrated addressable markets that offer attractive returns and feature high barriers to entry. Second, our confidence in growing and penetrating our tan is underpinned by the compelling nature of our product proposition. We are market leaders in reducing the cost of vehicle ownership and are a business-critical supplier for our customers, which span virtually all industry sectors. 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 30.9 years. In addition, approximately 80% of leases remain on book from the start to the end of the year, with those rolling off being replaced with new leases 90% of the time. And finally, we are a high-yielding business because of our strong cash flow generation, with an implied dividend yield of 8.9%. It is these five fundamentals that ensure the group delivers consistent returns to shareholders, which brings us to slide 20. Since FY23, EPS has grown at a K-down of 6%, largely driven by our share-buy-back program. Ignoring the impact from EOL, the underlying DPS based on M&A pre-EOL has grown at 15%. Our strategy is clear. Gain market share in high-returning, under-penetrated segments of large fleets, small fleets and novators. Expand core margins by investing in products and services. And maintain strict cost discipline and leverage scale efficiencies post-accelerate. Let's turn to slide 22. As mentioned at the top of the meeting, in a clear sign of the confidence in the group's strong capital position, the board has increased our capital payout ratio range to 60% to 70%. In recent years, the group has consistently returned earnings to shareholders in the form of an on-market share buyback. Today's announcement, however, sees the group reverting to dividends for the first time since 2019. or at 13.6 cents per share, the dividend represents 65% of 2H25 NPAD A's being the midpoint of our increased payout range. Finally, whilst today's dividend is unfranked, the board expects to frank future dividends after September 2026. Let's turn to slide 22 to look at the outlook before opening the line for questions. The operating environment remains subdued, with the group looking to 2H26 for momentum to build. Customers remain cautious, holding vehicles for longer, which impacts new business writings and to a lesser extent, boom-offs. We continue to see strong interest in Nevada, supported by the electric car discount. As a macro-thematic, the transition to zero-emission fleets continues to present a significant opportunity for the industry. Core margins are expected to remain stable. We anticipate some headwinds as portfolio expenses levels return to historical norms. However, we also see opportunities arising from maintaining our disciplined pricing approach and introduction of new innovative products. The group has a strong track record around cost management, and that will continue. Offices are expected to be between $95 million to $96 million. $1.5 million relating to a reclass from share-based payments expense, with the remaining 2% to 3% increase driven by higher activity levels, investment in growth and cost inflation, all of which is expected to be partially offset by the four-year impact of accelerated benefits. Finally, we expect fleet partners to continue to generate high cash flows, supporting consistent shareholder distribution. In closing, our resilient business model and strong cash generation has ensured a consistent shareholder return over the last several years, an important strength to possess in the current macroeconomic environment. We are united by a clear, anecdotic strategy that motivates our entire team to chase opportunities with confidence and ambition. And above all, management's focus is firmly fixed on executing the strategy and delivering sustained value for our shareholders. So with that, I'll now hand back to the operator to open the line for questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Phil Chippendale with Ordmanet. Please go ahead.

Hi gentlemen, thanks for your time. A couple of questions from me. Just firstly on the acquisition, can you talk to the rationale around the salary packaging capability of Remunerator and how you think you can benefit on the back of that list?

Okay, so on that one again, there's probably a few key aspects to the logic behind that in terms of the strategic fit. So what Remunerator brings to us is a full suite of salary packaging capability and so We see that in an event, and then we're able to sell that to our existing customer portfolio. But also, it gives us access to parts of the innovative market that previously were out of reach for us, given the fact that a lot of the prerequisites to sort of go after that part of the market was to have that full suite of, say, packaging. So for us, you know, those strategic benefits mean that we're having a lot of sort of new growth channels for us in the innovative space.

Okay, thanks. In your materials, I think you mentioned it earlier when you were talking, Damien, just around some potential extra products or new products that you're expecting to bring through on the novated line. Can you just unpack that for us?

Yeah, sure. Historically, at three partners in the novated business, we haven't offered the same level of aftermarket products that our major competitors have, and hardly that's been because that we had here and it wasn't worth introducing those given we were going to do the Telluride project. But now that we've done that and it's behind us, there's a number of sort of

Okay, thanks. And then the last one from me, just on your outbook, you may have spoken to sort of some macro uncertainty for the customer side of things. Is that something that you're currently seeing in terms of volumes, or is this more sort of leading indicators of sort of driven by commentary?

Yeah, we see prestigious cautious behaviour with our corporate customers in Australia and New Zealand, and that just leads to sort of delayed decision-making. They tend to just extend their leases rather than take out new leases. We saw that through FY25, and that's sort of the sentiment that we see exiting FY25 and going into FY26. So we expect that cautiousness That's the sort of year-to-year outlook. But in the long term, I'm really confident in terms of how we set up for the department, so it's the same growth.

Okay, thanks a lot, Roger. Thank you. Thanks, Phil.

The next question comes from Jenny Wang with Morgan Stanley. Please go ahead.

Oh, good morning, guys. Thanks for taking my questions. Maybe just the first one in terms of seasonality on your business writings. I'm just kind of interested in what fourth quarter seasonality, I guess, typically looks like. The last few years those seem to be a bit skewed by where new vehicle supply has been but in more normal environments and on a go forward basis what does seasonality typically look like and where does fourth quarter usually rank?

In a normal environment, we're typically impacted by the quietest months of the year for us being December and January. So all else being equal, you would expect to see a weighting towards the second half normally. I think as Dan's outlined, particularly given the macro that we're seeing and what we're seeing in OVACI particularly at the moment in terms of some big financial institutions, which is our customer base is skewed to that sector anyway, with redundancies and restructuring that's happening there, that is impacting demand at the moment. So when you put those things together, it does probably see more schemes in the second half this year than typical.

Got it. And maybe just honing in on that fourth quarter, I guess where I was trying to come at is, you know, in the fourth quarter, on my numbers, if I've got the maths correct, you guys did about $212 million of new business writing. I mean, you know, can we kind of annualize that into FY26? Or is there, I guess, that seasonality piece? And obviously, you know, you guys kind of did call out the macro piece as well. But just wondering, you know, how good of a run rate that fourth quarter of 25 actually is?

Yeah, look, I think that 4Q run rate isn't a bad indication in terms of the full year, but I think we'll definitely see that kind of dip down in the first half and then bounce back in the second half is probably the way to think about that.

Got it. And then just one last one. Just on that core income, you know, you guys finished a year at 6% growth. in core income and I think when you guys gave that third quarter yesterday update, it was about 5%. So fourth quarter saw a bit of acceleration there. I guess what drove that fourth quarter acceleration and how should we think about core income margins into FY26?

Yeah, thanks, Jenny. So I think in terms of that fourth quarter, there are a few things that are kind of playing through that. Some slightly better insurance commissions than we expected. And also just post-go-life, there were a few things where we were being relatively conservative. But once we did kind of find reps for the year, there were a few different things that we trued up, and it just gave us a little bit extra there. But I think in the grand scheme of things, not picking too early for the full year.

Got it. Thanks, Isaac.

Once again, if you wish to ask a question, please press star 1 on your telephone. We'll pause a short moment for any final questions to register. Thank you. There are no further questions at this time. I'll now hand back to Mr. Beryl for closing remarks.

Thanks, Ashley. Once again, thanks to everyone for joining the call this morning. We look forward to catching up with some of you over the coming days and I hope you enjoy the rest of your day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.