FleetPartners Group Limited

Thank you for standing by and welcome to the Fleet Partners Group Limited 2026 Harpy results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Damien Burrell, Chief Executive Officer, to begin the conference. Damien.

Thank you and good morning. It's great to be with you today to present Fleet Heart's FY26 first half results. I'm joined today by our Chief Financial Officer, James Owens. Before we begin, I would like to acknowledge the traditional custodians of the lands and waterways across Australia and pay my respects to Elders past and present. 1H26 saw a positive start to the year for the group. We delivered NHA growth and our seventh consecutive month of two-month growth. Momentum in new business varieties is building on the back of a clear strategy and disciplined execution. Strong cash generation continues, enabling a fully franked interim dividend at a gross staff yield of 13%. And finally, The business's proven resilience positions us well to navigate ongoing macroeconomic and geopolitical uncertainty. Let me shortly point in more detail, starting on slide 6, with our first half 26 financial performance highlights. There are two key messages that stand out from today's financial results. First, Fleet Partners continues to present a defensive investment, underpinned by consistent performance. Despite flat new business writings, we again grew room off and core income and delivered a return to MPAD A growth in 1H26. Second, our operating model continues to generate substantial positive cash flow, which supports disciplined capital management and strong shareholder returns. New business writings were $357 million down 1%, or broadly flat on a constant currency basis. Boomlock reached $2.4 billion and grew 6%, while funded boomlock grew 3%. Court income was $85 million, up 4%. This tracked average boomlock growth, which meant core margins remained stable through the period. NHA free EOL was $19 million, up 7%, a strong outcome driven by higher court income and prudent expense management. End of lead income was $29 million, with an increase in vehicles sold off-step by profit per unit down to $5,840. A critical point to highlight is that at the current profit per unit levels, our portfolio has an illustrative embedded end of lead income of approximately $240 million. Most importantly, MHA returned to growth up 2%. Earnings per share rose 9% to 18.5 cents. And in a clear demonstration of the board's confidence in the group's balance sheet strength and future cash generation, two recent capital management return announcements have been made. In March, the board announced an on-market share buyback of up to $20 million. And today, the board announced a 40-franc dividend of $26 million. marking the group's return to frame dividends for the first time in seven and a half years, and another important milestone in today's results. This dividend equates to 11.9 cents per share and represents a gross start yield of approximately 13%. Let's turn to slide 7 on our earnings trajectory. The group had saluted constant EPS growth at a 6% CAGAS in February 23, despite declining end-of-life income over the same period. In January 26, this was driven by a 7% growth in MLA pre-EOL, outpacing the normalisation of elevated end-of-life income, which was down 3% for the period. A key focus for the business has been to grow through lot and therefore empathise through EOL at a rate that outpaces the headwind from the anticipated decline in EOL. Achieving that objective in today's result is encouraging and reinforces our confidence in the strategy that we have in place. I'll now turn to slide 8, which explains how we're deploying capital to generate returns for shareholders. Fleet Partners has announced $356 million of capital returns to shareholders since FY21. To emphasise the significance of this, it equates to more than 50% of our current market capitalisation. This represents a strong record of both the quality of our earnings and our disciplined approach to capital management. Over the last 12 months alone, we have supplied $109 million of capital to drive returns. That includes dividends, our high-back program, debt management and the remunerator acquisition, all funded from strong cash flows this business generates. Taking a look at the workforce, you can see the breadth of our capital deployment. We paid $29 million as a final dividend for Headway 25 and a further $26 million to our high-back program. both delivered in line with our 60% to 70% M&A payout ratio. The board has declared a $26 million fully frank interest-insurance dividend for FY26, and as I have highlighted on an annualised basis, our gross start yield sits at approximately 13%. This underscores the board's confidence in the balance sheet's strength and the future cash generation of this business. The message here is clear. We are generating strong, sustainable cash flows and we are committed to deploying capital to maximise returns for shareholders. Let's turn to slide 9. Fleet Partner Strategies is focused on three significant, under-penetrated and high-returning segments. Large fleets, small fleets and innovators, presenting clear growth opportunities. Our three segments are strategically aligned, enabling the group to leverage share capabilities at scale. We are investing across each segment, and as the next slide demonstrates, this is translating into momentum. Our path to further penetrate these markets is centered around four strategic pillars. Attract, retain, grow, and profit. Attract new customers through established, fit-for-purpose solutions and leading capability across the full vehicle ownership lifecycle. Retain existing customers through genuine customer value creation and market-leading service proposition. Grow share of loss through add-on product penetration that creates incremental value for our customers and incremental income for fleet partners. And finally, optimise profit to enhance process efficiency and strong financial discipline. Our strategy is delivering clear and measurable progress across the businesses, which you'll see reflected in the segment updates that follow, starting with large fleets on slide 10. Strategic action is driving momentum in large fleets. Our value proposition is resonating with customers and we are investing in digital, data and efficiency to strengthen our proposition further. Our confidence in the continued growth in this segment is supported by several positive lead indicators. First, we have approximately $25 million of family leaseback opportunities in the second half of FY26. Our business development team is performing ahead of expectations, validating our competitive positioning and service offering in the market. And third, our new business release pipeline is growing. April is now tracking 15% above the average for 1H26, which gives us confidence in the trajectory of heading into the second half. Turning to slide 11. In small fleets, our omni-channel strategy is producing double-digit growth in both Australia and New Zealand, which is a great result and confirms the approach we have been taking. Our direct channel is seeing the strongest results. Our expectation is that over time, the success we're building in direct will enable us to unlock larger-scale distribution opportunities. So it is delivering growth today while also building the platform for future distribution scale. In terms of where we're investing, our focus is centred on three areas. Accelerating growth through digital optimisation, advancing automation across our credit capabilities to eliminate friction, and expanding our partnerships over new channels and accessing new customers. Let's turn to the final segment, which is Nevada on the next slide. In Nevada, We are benefiting from investment and deliberate cash flow actions that are supporting lead generation along with higher market demand for electric vehicles. At the end of April, our New Business Rides pipeline excluding Renumerator was 90% above the average for 1H26. In the same period, the Renumerator integration made good progress and performed in line with expectations. Our immediate focus for the second half of the year is centred on leveraging the current strong EV demand, driving MTS growth, optimising lead generation, increasing conversion and retention rates, and expanding our eligible employee base through new client wings. Beyond this, we are invested in digital capability and operational improvement to deepen our value proposition. All of this to support what is a significant long-term growth opportunity in the Nevada segment. Let's turn them by 13 on the 1H26 Strategy Outcomes. This half, we've made strong progress delivering several outcomes aligned to our strategic framework. Under Attract, we deliver new life growth and a seeing momentum return for new business writing. We continued to execute against a strong pipeline of high-condition tender opportunities and completed the acquisition of Reumerator. Under Retain, we delivered several operational improvements supporting strong customer MTS and saw strong customer retention, including the key contracts on Reumerator as part of their integration. Under Grow, we focused our efforts on introducing new and enhanced products across large fleets and they're vated and uplifted our capabilities in heavy commercial vehicles. Finally, under Profit Optimization, we are in a state of continuous improvement. This half, we continue deploying targeted AI initiatives to enhance the customer experience, productivity and growth, including AI-enabled telephony system optimisation, AI-supported legal documentation capability, and AI-generated content integration. Looking forward to 2H26 and beyond, we are confident in our strategy and how our pipeline of initiatives will drive these priorities forward. And turn to slide 14. Fleet partners remain deeply committed to our energy responsibilities, evidenced by our progress across the three pillars you see on this slide. On the environment front, we continue to support our customers' transition to cleaner fleets. We offer an end-to-end fleet electrification solution, TRM, our proprietary in-house emissions modelling, our whole-of-life costs and emissions optimisation, and our policy-embedded EV charging solutions. Our expertise in this area has never been more important than it is in the current environment. In terms of managing our own environmental footprint, we are proud to have achieved TOITU net carbon zero certification for the fifth consecutive year across our New Zealand operations, a milestone that underscores the consistency of our commitment to sustainability. Turning to our people and communities, We received two important recognitions in the first half. Work 180 named Fleet Partners as one of the top 101 workplaces for women in Australia for the third consecutive year. And we were re-accredited as an employer of choice for gender equality by Goodyear. These recognitions reflect our ongoing focus on building a diverse and inclusive workplace. And while there is always more work to do, we are making meaningful progress. I'll now pass to James for the financial results.

Thank you, Damian, and good morning, everyone. Starting first, the new business writing from slide 16. During the first half, new business writing was flat on PCP, excluding FX, a significant improvement on the 13% decline you saw in the first quarter. Leap Australia delivered new business writing's grade for 6%, supported by increased customer ordering activity through the second quarter. In contrast, ClickDV installed new business writing to climb 8%, excluding FX. Across both segments, the macroeconomic environment continues to be challenging, with delayed customer decision-making resulting in higher extensions and inertia, which continue to weigh on new business writings. Involuntarily, though, this dynamic supports earning stability and cash generation. In Feet in Australia specifically, Momentum is benefiting from new customer wins flowing into the order pipeline, a double-digit growth in small feets. Novacid did business writings with 2% below PCP, a substantial improvement on the 17% decline in the first quarter. There were a number of contributing factors, but encouragingly February and March were the strongest new business writings months at the heart for Novacid, and in March we saw outperformance at all vehicle types. momentum is clearly building as we move into the second half, with the outlook for the full year being marginal growth in new business writings. Turning to UMOC on slide 17. Closing UMOC was up 6% on VCP, with average UMOC up 4%, reflecting the 7th consecutive half of UMOC raise for the group. Our sheep-funded leaf is represented 78% of UMOF, consistent with March last year, with the modest reduction compared to September, reflecting the fact that Remunerator is 100% PLA-funded. Excluding Remunerator, and on a constant currency basis, UMOF grew 2% organically, underscoring that earnings and portfolio growth can be delivered even during periods where new business writing is subdued, reflecting the defensive and resilience nature of the business model. Turning to the income statement, NPAT Aid 3DML and NPAT Aid grew 7% and 2% respectively, driven by a 4% increase in average earn loss and core income. End and base income declined 3%, driven by a 4% lower EOL per unit, partially offset by a 1% increase in units sold. Provisionals reduced following elevated fleet provisioning in the prior period, relating to the subset of electric vehicles. Off-rating expenses were $48 million, in line with expectations, reflecting cost discipline, the inclusion of remunerator from December, and the reclassification of a portion of remuneration costs from share-based payments for off-rating expenses. The 1H26 result, together with the buyback, drove a 9% increase in cash ECS. Moving to end of lease income. EOL income per unit remained broadly stable at $5,840 for the half, around 4% lower than VCP, but slightly higher than the second half of FY25. Unit sold increased 1%, broadly consistent with complete New Business Hygiene activity. Damien will speak to the broader macroeconomic outlook and its impact on the used car market shortly. Importantly, I want to note that while more recently we saw some softening in demand for ICE vehicles, our average daily prices in April remain consistent with 1S26 levels. Turning to credit quality on SPY20. The underlying portfolio is performing strongly. However, we note 90-plus day arrears were temporarily elevated due to year-end seasonal effects compounded by resourcing changes. but remain low in absolute terms at 85 basis points. There are no indications of structural deterioration in the online portfolio, and progress has already been made in bringing arrears back towards longer-term averages, with a reduction in arrears during April. Further supporting the strength of the portfolio, we note all financing exposures are secured against vehicles. Exposure to higher-risk sectors remains limited, and 72% of exposure to our top 20 customers is investment grade. Overall, we remain very comfortable with the credit quality of the portfolio. Moving to funding and balance sheet strengths on slide 21. We remain well-positioned with diversified funding structures that support growth while limiting interest rate exposure. As of March, we had $343 million of undrawn warehouse capacity. warehouse margins are set through to September, and base rates are hedged at least in section, insulating the portfolio from rate volatility. The group typically holds $250 to $300 million of cash, generating interest income for offset movements in corporate debt costs. Illustratively, a $25 basic point increase in cash rates would result in half a million dollar increase to annualized profit before tax. At direct end, we had net cash of $4.5 million, no corporate debt maturities until October 28, and ample liquidity to fund growth and capital management. Turning to cash on slide 22. The business generated $46.8 million of organic cash flow in the half, with cash conversion of 113%. This reflects strong operating cash flows and the benefit of tax timing associated with temporary fund expenses. We returned $30.2 million to shareholders during the half through the buyback and final FY25 dividend. As Australian cash tax payments recommence in the second half, cash conversion will moderate and is expected to be below 100% for the full year. Importantly, this is not expected to impact our target dividend payout range of 60% to 70%. Finally, capital allocation. Our framework remains unchanged. Fund new business writing to grow sufficiently, invest organically in returns above the cost of capital, preserve balance sheet strength, and return excess capital to shareholders. Since FY21, we've returned $356 million to shareholders. through dividends and buybacks, while continuing to invest for growth and completing the remunerator acquisition. The Board has declared a fully frank interim dividend of $25.7 million, and previously announced a buyback of up to $20 million, reflecting confidence in the balance sheet and future cash generation. With Australian cash tax payments recommencing in the second half, we remain disciplined and flexible, but fully committed to delivering consistent, sustainable shareholder returns within our target dividend payout ratio range of 50% to 70% of MPA. In summary, the first half demonstrates the resilience of the three-part business model. We're seeing growing momentum in pipelines and new business writings, and continued oomph growth, which is translating into core income growth and strong cash generation, all supported by a very solid balance sheet. That conditions as well as continuing investing for growth while maintaining consistent cash flow returns to shareholders. I'll now hand back to Damien to step through the investment case and outlook.

Thanks James. I think part of the business case is defined by clear growth opportunities, predictability, effectiveness and strong cash flows. As you have seen throughout 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 for growth in large, under-penetrated, addressable segments that offer attractive returns and feature high barriers to entry. Second, our confidence in growing and penetrating our team is underpinned by the compelling nature of our product proposition. We are market leaders in reducing the cost of vehicle ownership and our products and services are systemically important for customers across most sectors of the economy. Third, our product proposition is supplemented by market leading capabilities built from over four decades of experience. We are best in class at fleet management, funding, credit, vehicle maintenance and residual value underwriting. Fourth, our business model delivers stable, predictable and recurring earnings. 95% of core income is annuity like in nature, embedded in every lease for an average term of 3.9 years. In addition, approximately 8% 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 13%. It is these five fundamentals that ensure the group delivers consistent returns for shareholders. Let's turn to slide 26. While the geopolitical environment is highly unpredictable, we are actively managing the situation and are confident in our outlook. In relation to fuel supply and running prices, the group has no direct exposure. On business confidence, we have been operating in a subdued environment since high, and while this dynamic weighs on new business writings, the impact on UMON is far less pronounced, enabling continued core income growth. I would also like to reiterate that we have delivered strong pipeline growth despite this backdrop. As it relates to the used car market, we are seeing increased demand for EVs and slower demand for ICE vehicles. We expect this to be pinnacry with impacts mitigated for several reasons. First, there is limited to no EV start-up issues available for the fleet farmers' portfolio of vehicles. Second, 30% of EOL email relates to charges which have no exposure to used vehicle price movements. And third, given we maintain low used vehicle stock levels, we have the capacity to be selective around the timing of selling vehicles. Validating these points, the average sale price per unit in April was consistent with our 1H26 levels. On funding and interest rates, funding availability and liquidity remained strong, And on credit, the portfolio remains sound, consistent with what James stepped through earlier. Overall, we are confident in the outlook of the business, irrespective of the geopolitical and macroeconomic environment. That brings me to the outlook on SPI 27 before opening the line for questions. Police partners remain resilient with momentum expected to continue building through 2H26 as we target marginal new business writing growth for FY26. Supportive of this is the update from the central government as it relates to the electric car discount bill. On Tuesday night it was announced that there would be no change to the policy until April 2027, at which point a modest adjustment would be implemented. While still subject to parliamentary approval, we see the approach is sensible and supportive of continued strong demand for novatus leaky. Core margin is expected to remain stable against blue block growth. ELL outcomes are currently stable and as discussed, there are several mitigating factors which support the outlook. The group has a strong track record of cost management and that focus will continue. Our office expectations are unchanged. Finally, fleet partners will continue generating strong cash flows, supporting disciplined and consistent shareholder distributions. In closing, the Group's 1H26 result instills confidence in the outlook. There are four key points to leave you with. First, MPAT A returned to growth, with ETS growing 9%. Second, umlaut grew for the seventh consecutive period. Third, our strategy is resonating, evidenced by the expansion of our order pipeline and the 2026 full-year growth expectations for year business writing. And fourth, strong cash generation continues to support the creation of shareholder value. With that, I'll now hand back to the operator to open the line for questions.

Thank you, Damien. And as mentioned, we will now begin the Q&A session. A reminder, if you are listening by phone and would like to ask a question, please press star followed by one on your telephone keypad to raise your hand and join the queue. And to withdraw your question, press the star one again. When called upon to ask your questions, please use your device handset and ensure you are not on mute. And your first question comes from the line of Bill Chippendale of Ordmanet. Please go ahead.

Hi, gentlemen. Thanks for your time. First question, just on new business writings overall. I mean, you've given your guides for the year that you're expecting marginal growth, but clearly, you know, the first half was a tale of two quarters. I mean, new business writings in the first quarter was down around 13%. You ended the period only down slightly, I think, 1% before FX. Clearly, that second quarter momentum has been really quite strong, and yet... you know, I would expect that the EV impact has only been sort of towards the back end of that quarter. So long story of trying to get to what do you think right on the field at the moment? Clearly, I would expect that new business rise is continuing, you know, April and into early May.

Yeah, thanks, Bill. Yeah, so in terms of, I guess, just looking at the second quarter performance that we saw, what we saw was just our... value proposition really started to resonate with customers. When I talked about it in the presentation, our pillars for growth being sort of attract and retain, that's what really started to come to the fore for us. So our value proposition, our leading capabilities, we did a great job in terms of retaining customers through just generating value for our customers, but also industry-leading service levels. And so we saw that across the corporate side, and innovated, We just had a lot more capability in the first half of FY26 than we did last year, given the technology change. And so we increased our commercial intensity around Novated, whether that was more marketing, more on-site visits, more webinars. We also dropped a new Novated portal in, which resonated really well with our customers, and we saw that through the NPS. So just a confluence of more activity on our side has driven that into the And as you see in the presentation, we saw that come out as a really elevated pipeline that also crossed both large fleets and invaded.

Okay, thanks. Just turning to New Zealand, clearly, you know, a more challenging sort of environment there from a new business writing standpoint. What does that sort of look like for the next six months in the context of your overall guidance on that new business figure?

Yeah, so New Zealand has been tougher. The pipeline in New Zealand is up to a lesser degree than what we sort of see in Australia. With that said, the April orders and others was the highest we've seen for over 12 months. But I expect that in New Zealand, sort of, probably marginal growth there as well is what we expect for New Zealand into the second half.

OK, and then just pivoting to the Australian fleet business then on that second half sort of outlook. And I guess part of my question is sort of, you know, you've obviously got a little bit of uncertainty on the macro side of things, interest rates and whatnot. So what are you seeing there at the moment in terms of that impacting your new business writing levels?

Yeah, so just in terms of the macro backdrop, we're sort of talking about the fact that we feel like we're really resilient in most of geopolitical macroeconomic conditions our products and services to our customers, their revenue generating assets, their tools of trade. What we're... We're not seeing any sort of impact at the moment in terms of customer demand on the corporate side. I sort of told you about the pipeline that's up 15%. But in addition to that, we called out $25 million worth of sale and resale opportunities that, if they come off, will drop in the second half of 26 for us. And so that also gives us confidence in terms of that growth.

OK, thanks. That's all from me. I'll jump back in here, Kip.

Thanks, Paul. And before we move on to the next question, a reminder, if you would like to join the queue, to press star 1 now. And your next question is from the line of Teddy Wang of Morgan Stanley. Please go ahead.

Yeah, morning, guys. Thanks for taking my question. Can I just pick at the new business writing guidance for FY26 of marginal growth? I think maybe some of this has come out in Phil's questions, but if I could just hone in a bit more, you know, that guide was given at a time when you didn't have the visibility on the significant Novato tailwinds that we're seeing today. So, you know, that piece of the pie has clearly gotten much better since, you know, when you initially issued that guide. So I'm just wondering if there are any moving parts that's maybe gotten a bit worse, in your view, or we're just, you know, staying conservative on that FY26 guide for the time being?

Hey, Shetty, thank you for the question. I think it really is just the increased uncertainty in the macro environment that we see today.

You know, from an internal perspective, we're still sort of very confident, but, yeah, obviously just being sensitively conservative given the external factors that have certainly increased over the last couple of months.

Got it. And then maybe just on that and some of the data points you gave around April pipelines in Fleet Innovated, maybe just some comments on what conversion rates have looked like. I can kind of imagine with the system cut over last year, that would have impacted your conversion. But how should we kind of think about those conversion rates? on a go-forward basis. Maybe some comment on that relative to the first half of 26 as well?

So I guess just to clarify, so the pipelines that we're talking about, they're confirmed orders, so there's no kind of conversion requirement on those. They're just orders waiting to be delivered and converted into new business writing.

So that, given the supply of vehicles, is largely pretty good. We've obviously got a few itemised EVs that are taking a little bit longer to come through, but but not significantly so.

So that's really just a measure of the activity that hadn't just quite yet made it through to new business writings.

Oh, right. So it's just basically a timing mismatch when you say pipeline. So, yeah, but being clear, if all those vehicles were delivered, that's effectively new business writings? Correct. Yeah, OK.

And to reiterate David's point, it doesn't include the sale and leaseback opportunity. Those are all reported in the pipeline.

Got it. And then maybe just one last one. How should we think about core margins with that new business writing acceleration? You know, maybe there are some assumptions in terms of whether the strength continues or not. But yeah, you know, does that acceleration initially put some headwinds on your NOI pre-EOL margins? I think in the past when you've had that, we've kind of seen those margins compress a little bit, especially as extensions ease. So, yeah, just some kind of colour on how we should think about those margins into second half.

Yeah, look, as we think about the second half, we've said that we think the margins will be pretty stable through the second half. You are right, Shane, that when we see significant turnover of extended leases into new business writings, we get a bit of a headwind due to just the depreciation profile of the leases. but I don't think they'll have material impact into 2H potentially into 27.

Got it. Thanks, guys.

Thanks.

And your next question is from the line of Shane Bannon of PAC Partners. Your line is open.

Thank you. Good morning, guys. Just a small technical question. When we add back to you having your reconciliation between NPAT-A and the statutory profits, this amortisation of software. Could you just inform us just for the nature of that? In other words, is that a valid charge? Are you investing in buying that software category?

Yeah, so that ADVAC for amortisation includes, yeah, any amortisation of internally generated assets and acquired assets. So all the amortisation is added back in MPAI. So obviously, what we could pay for that would have been the capital cost of accelerating

Right, so basically you're still investing behind the category, presumably. Sorry, I didn't catch that. You're still investing behind the category.

Yeah, I mean, we have ongoing CapEx of around about $6 million a year is kind of what we're talking about for ongoing CapEx. Right. Thanks very much. Thank you.

And that concludes our Q&A session for this time. I will turn the call back over to Damien for closing remarks.

Thanks, Paulie, and thanks again to everyone for joining us here today. Damien and I look forward to catching up with most of you in the coming days. Have a great day.

This concludes today's conference call. Thank you all for joining us. You may now disconnect.