Amotiv Ltd.

Thank you for standing by and welcome to the Emotive Limited FY26 H1 results call. 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 via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please enter it into the ask a question box and click submit. I would now like to hand the conference over to Mr. Graham Wickman, CEO. Please go ahead.

Thank you and welcome to the earnings call of the mode of results for the half year ended 31st December. I'm Graeme Wickman, CEO and Director, and I'm here with Aaron Canningby, Company's Chief Financial Officer. As normal, the recording of this call, along with the material, will be available later today on the website. So I'll start the call by touching on the key messages and the group performance, a review of the operating divisions, then I'll turn over to Aaron to cover off the financial section in more detail, and then we'll conclude with a short trading update and outlook before conducting the Q&A. Let's turn to slide three. I believe we've delivered a solid result in what is a challenging operating environment. I think it reflects the discipline execution and the benefits of a multi-year diversification strategy in terms of where we garner our revenue. Our mode of Unify continues to deliver incremental benefits with ongoing cost, a margin, and operational initiatives, mitigating segment-level macro pressures through a more streamlined and efficient operating model. We had strong cash conversion and coupled with disciplined capital management that supported reinvestment in the business while returning capital to shareholders. Against all that backdrop, the FY26 guidance remains unchanged. Group revenue growth is expected with underlying EBITDA growth of circa 195 million. Turning to slide four, where we detail some group performance. Well, the revenue diversification has been a core pillar of our strategy, so it's pleasing to see the revenue growth of just over 3%, underpinned by new business wins, ongoing product investment, and a high contribution from offshore markets. This provided an offset to some of the headwinds in four-wheel drive and LPE, while our powertrain diversion continues to outstrip what is a resilient system growth. Underlying EBITDA of 98.3 million, up marginally on the PCP. It was impacted a little bit by lower four-wheel drive margins due to domestic inflationary pressures and the ramp up to South African plant. By the way, a market that we remain excited about in terms of future prospects. And then we've got some select pricing implemented in Q2, and that's expected to support the four-wheel drive margins in the second half. The emotive unified initiatives across the group delivered meaningful cost benefits and and these partially mitigated the margin pressure from domestic cost inflation. This program has got really good momentum, and further incremental benefits have been identified and expected to support H2 a little bit there, and then certainly into future earnings. A great cash flow, very strong. Capital management drove EPSA up 5%, and dividend growth of just over 8%. At the same time, leverage was maintained comfortably within the target range, and Circa 48 million was returned to shareholders in the period, inclusive of both dividends and buyback. Safety, always a pride point for the group, and therefore it's pleasing to see continued improvement in the tripper, which has trended down to just down to 9.7-ish. And as an aside, our work on reducing emissions also delivered tangible benefits in the period. Now turning to slide five, we outline the progress made on our strategic imperatives, which represent the key areas of shareholder confidence. value creation. If you look from left to right, as mentioned earlier, we're pleased to see the momentum and cost realisations from emotive unified programmes, which were first announced to the market back in May at our Thailand site visit. Now, we'll cover this in a bit more detail later on, Aaron will, but these activities garnered benefits across three of our divisions, all three, as well as also our corporate head office costs. I'm actually really excited that the commissioning of the third Thailand plant is underway, adding capacity to the already well-utilised existing adjacent facilities up in Thailand, and this low-cost jurisdiction positions as well to win business in Europe and the UK, and we touched a little bit on that at the full year, and I'm going to talk a bit more about that later on. As discussed earlier, revenue diversification has been an important driver of this result, with ongoing penetration of offshore markets resulting in a 14% growth in revenue outside of Emotiv's ANZ domestic market. Our operational excellence efforts were well rewarded in the half, safety improved. Headway was made on reducing emissions with circa 850 kilowatts of solar energy commissioned at our four-wheel drive Keesborough Park. As a result of some of the unified warehouse consolidation initiatives, Powertrain and Antacar saw an increase in dipoct post the latest phase of the Trug and Energy DC consolidation. So very happy with the way that's coming together. And then finally, in terms of capital management, the buyback we announced in October 24 was completed in the half. At the same time, we increased the dividend at a higher rate than the EPSA. Moving to slide six, we touched on a mode of 2030 strategic plan for the group unveiled at the last AGM. As you can see from the slide, we've reduced and simplified our strategic priorities from the prior GUD 2025 strategy, aligning the divisions, This calls for us to optimize our powertrain and undercar portfolio while adding one or two adjacent non-ice categories. Solidify and defend our Australia and New Zealand lighting, power and electrical business while still growing a global niche lighting and power business from our established bases both in the US and Europe. Building a leading integrated four-wheel drive and accessories and training business in Australia while leveraging key expertise to build a focused global business. And I would term that as sweating the assets, both from an engineering and also manufacturing point of view. And then finally, simplify and improve fire and motor unified to make us more efficient and effective. Now, my point of view, motor remains an attractive pure play. All centered around automotive, as you know. Servicing large and resilient addressable markets, supported by market-leading brands of largely ice agnostic products. which in turn is supported by some really strong new product development credentials, both in terms of investment and also strong market positions, something we don't take for granted. The groups led by experience management team focus on improving shadow returns through disciplined investment is backed by a strong and, I think, resilient balance sheet. Having said all that, there's lots of work to do, but we're all excited at the prospect. 2030, from a strategy point of view, is designed to create a clear path to leveraging our automotive pure play to grow and create value for shareholders, underpinned by, I think, a clear set of attractive investment thematics. Now, let me turn my attention to some divisional updates. Right, starting with forward drive. Well, revenue was up 5.5%, driven by new business, including a full period of South African revenues that weren't so present in the PCP, and this was also complemented by some continued Oz tow bar wins. I think this is a credible performance against a highly challenging backdrop. Pickups for flats in the half, net of shark in Australia and New Zealand, and down 7% net of shark in January alone in ANZ. So January was an interesting month. The mix also of OEMs was challenging in Australia, as an example, in the half, with five of the top 10 pickups down in the half between 3% and 37%. And then you sort of cast your eye to January, because remember, we are generating revenue in the half, even though those vehicles were being sold in January. And if I looked at the performance in January, six of the top 10 pickups were down, actually even more pronounced, between 14% and 38%. So a little bit softer than what we were expecting. Cruise masters, so if I turn my attention to caravans, continue to gain share, which positions us nicely for what is a weak caravan RV market when that eventually turns. I think overall the result reflects a cyclical and the inflation headwinds that the team are facing. It also reflects the ability of this division to win global business, and this has been leading us to invest in the growing perspective offshore revenue quite wide. Underlying EBITDA was down just over 15%. Down 12% if you were to back out the impact of a double debt provision for an RV customer, that was around a million. And with that similar approach, the actual EBITDA margins were down 290 basis points. Now, the key driver of which was delayed price realisation relative to domestic cost inflation, and we signalled this to the market previously. At that same time when we were talking to you, we spoke about out-of-cycle OEM pricing, and that was secured in the end of Q2 to address a period of heightened inflationary pressure within the domestic manufacturing operations. As a result, margins expected to improve from H2. There's also been a country mix impact as we consolidate South Africa for the fall first period. Now, this new facility has the excess capacity, again, not new news to our investors, as it's in the early stage of ramp-up. You'll be reminded it's been stood up on the basis of two SKUs. But we remain confident in the ability to win business in that jurisdiction and improve utilization of margins. And, of course, while it's profitable, as detailed in our FY25 four-year results, South Africa is below the margins of a mature four-wheel drive operation. Within the four-wheel drive, the motive unified also positively contributed to earnings through the right-sizing of the New Zealand operations, which are now profitable. So if I start to look forward, we expect the combined impact of pricing actions and high volumes, such as Hilux and H2 and Navara and FY27, and particularly from offshore, the likes of U-Haul and some European business, coupled with the unified efforts to improve margins from H2 and specifically beyond. Interestingly, we had some comments from our shareholders in the past, Wanted to understand a little bit more about the Chinese situation. Will the depth and breadth of our relationships with Chinese OEMs continue to improve through the half? You can see on the chart on the slide that the Chinese OEMs are becoming a larger part of the addressable market in Australia and New Zealand. Much has been made of the successful launch of the BYD Shark. Unlike some of the other Chinese OEMs, BYD has taken the approach of self-supplying tow bars. But the balance of the Chinese OEM, which represents 72%, as you can see on the chart, of units in CY25, that's CY25, have outsourced this function and we are already pending, already are customers of the four-wheel drive business, which means we're well positioned for any OEM mix change within the Australian car park. As mentioned earlier, capacity also has been added to our tyre facility. The four-wheel drive team have a really strong track record of winning and retaining business and is focused on scaling these offshore operations to drive revenue growth and recover fixed cost investments, supporting that margin improvement I mentioned over time. As evidence of this, I'm really pleased to announce that we secured our first European Tobar contract. That's being supplied out of Thailand, so it's utilizing and sweating that asset based on the engineering capability we already have. And that's our first material, when I say material, I mean in terms of an OEM contract that we've been able to secure. And that volume will be expected to come in FY27, and we expect to perhaps get some more European contracts. And that's market share gains. That's taking business off the likes of First Brands and Westfalia. In the U.S., export volumes from Thailand continue to build, with growing U-Haul demand expected to support volumes into FY27. So I'll stop there and perhaps now move to slide 9 in the LP&E division. Now, the ANZ market conditions remain challenging for LP&E, particularly across the reseller channels. Against this backdrop, the group benefited from continued execution of the emotive unified and increasing offshore revenue diversification, which provided a meaningful offset. Revenue reflects volume growth in the US and Europe, which mitigated some of the soft reseller demand in ANZ. By category, lighting delivered growth of 1%, well done to the VisionX team in the US and Europe. and that offset the muted Australian reseller demand. Power management revenue increased 3%, reflecting ongoing investment in product innovation and continued growth in the US market. And then electrical accessory revenue decreased 4%, impacted by softer Australian reseller demand, some ranging changes, but really some emerging signs of flights to value. The unified benefits were delivered through a leaner Australian operating model with total operating costs down circa 12% compared to PCP, and as a result, Underlying EBITDA increased nearly 9.5%, with margin expansion of 210 bps, largely driven by those unified benefits. But turn my attention to looking ahead. Well, the ANZ reseller dynamics are expected to persist in the second half, while Europe and the US are expected to continue to grow. The full benefit of the Q2 US tariff-related price increases expected to flow through into H2, with modest price increases anticipated from Q4. The net result is that we expect underlying EBITDA R&H to be marginally softer than H1, but slightly above, certainly, the PCP. Now let's turn to the final division, powertrain and undercar. This is a really pleasing result. Well done to the powertrain and undercar division. It reflects the continued resilience of the wear and repair market, supported by some really strong ground strength and ongoing efforts to diversify revenue. That revenue grew by almost 5%. It was driven by volume and the annualization of pricing actions. across select product categories. A broadening product portfolio, increased PD investment, drove outperformance. And when I say outperformance, I'm thinking about that relative to system growth. Interestingly, the New Zealand revenue grew by 12%, and that was driven by enhanced distribution and ranging outcomes. Efficiency and margins were supported by ongoing unified consolidation benefits and reduced EV investment. And this resulted in underlying EVIC growth of 6.7%, so nearly 7%. EV investment was further moderated through the first half, in line with the changing market dynamics, and we've spoken about what we were going to do at an early stage. With that, business on track to reach break-even by the end of FY27 on a runway basis. Looking ahead, further unified initiatives will be implemented through the second half as the business continues to consolidate site operation and prove returns. This also includes the consolidation of infinitive operations into the IMG group. operating cost benefits flowing from the first half, headcount reductions, the rationalisation of the ACS warehouse at the Traganina, and the commencement of group procurement benefits, including freight. So that sort of wraps up the divisions. Perhaps I'll now ask Aaron and hand over to Aaron to give a bit more detail to some of the finances in the back. Aaron.

Thank you, Graeme, and good morning, everyone. My name's Aaron Canning. I'm the emotive CFO, and I'll take you through the first half financial results in more detail. On slide 12, we highlight our group financials. As Graham has touched on, revenue grew 3.3%. Importantly, that was all organic growth. The four-wheel drive business benefited from new business wins as well as the inclusion of South Africa for the first full half, growing 5.5%. The powertrain and undercar business grew 4.9%, really driven by a broad range of categories from filtration, brakes and gaskets, which was pleasing to see. The LP&E division, as Graeme has touched on, was marginally down, driven to a softer ANZ reseller demand, offset by continued growth in both Europe and the US. Gross profit declined by 0.5%, with margins lower due to the inflationary increases in full drive, which have been yet to be offset by the OE price increases that were announced in Q2. These will show up in the second half. U.S. tariffs also impacted the LP&E margins as our double-digit price increases announced in May 2025 post-tariff updates did not come into effect until midway through Q2 as we honored customer back orders at pre-tariff pricing. We expect all of that margin to flow through to the second half and we continue to monitor the U.S. tariff environment and are prepared to make any further pricing changes, if required, to protect our margins. Operating costs pleasingly were lowered by over 2%, more than offsetting inflationary increases, largely due to disciplined cost management and the benefits from our emotive unifier program flowing through. Depreciation and amortization were broadly consistent period on period. Under underlying EBITDA at 98.3 million is marginally ahead of the PCP by 1.3%. And importantly, it keeps us on track for an unchanged full year 2026 earnings guidance, which Graeme will speak to in more detail later. Significant items total 8.3 million and largely relate to restructuring activities linked to executing on a mode of unified initiatives. In the half, a further 50 employees departed the business, predominantly across our powertrain and undercar and lighting power and electrical divisions, as we continue to simplify and optimize the operating model in these divisions. A more detailed breakdown of significant items are provided in the appendix on slide 26. We remain disciplined when it comes to managing significant items, and it's worth noting we are one year into our three-year emotive unified journey. Although we do expect further one-off costs in the future, we see this as moderating over the medium term. There were no non-cash impairments in the half and we remain comfortable with the carrying value of our core brands and intangibles. In terms of tax, we had an effective tax rate of 29.1% in the half, marginally up on the PCP with some minor movements in the period. A further breakdown of these movements is provided in the appendix on slide 27. We expect the full year effective tax rate to be broadly aligned with the current levels around 29%. Our statutory net pad at $46 million represents 39.4% growth on the PCP, with the prior year impacted by high significant items, including a $10.4 million non-cash impairment. Underlying EPSA grew 5.3%, largely due to earnings growth, and lower shares on issue on completion of our buyback in the half. The Board have approved an interim dividend of 20 cents per share, representing over 8% growth or a 52% payout ratio. As Graeme has touched on, pleasingly we've been able to return over $48 million to our shareholders in the period, with a combination of over $18 million invested to complete the 5% buyback program. and nearly $30 million in dividends paid in September 2025. Directing your attention to slide 13, net working capital. Net working capital percentage of revenue improved one percentage point to 28.7%. Improved collections partially offset growth and inventory balances for the period, with total working capital growing at 3.1%. I'll unpack this in a little bit more detail by divisions. And inventory increased just under 19 million since June, or 8%. It's predominantly driven by the LP&E division, which has carried higher inventory levels for our Vision X business in the US and Europe post-US tariff changes. In Australia, we have sought to rebalance our inventory holdings commensurate with reseller demand. This is still a work in progress. And Australia represents an opportunity for us to improve our inventory position through the second half as we build our sales and operational planning capability. Four-wheel drive saw marginal increases. It's important to note in that division, the majority of finished goods inventory is made to order in that business. And it also includes the inclusion of South Africa for the period and some timing of inventory purchases. The powertrain and undercar division also saw some increases as we continued our work on consolidating our logistics and warehousing footprint as part of the motive unified. As such, we have built inventory through the first half to manage this transition as we expect to make some further changes in Q3 as we rationalise our warehousing operations for our clutch and EV businesses. We expect the current inventory levels to unwind in this division through the balance of year. Our payables are broadly aligned with PCP and pleasingly our receivables have decreased by 4% or over $8 million. against the reported revenue growth of over 3%, largely due to better compliance and a concerted effort around collections. Compared to the PCP, we do not have the one-off collection issue repeat in this period. And importantly, we see further opportunities to improve our collections through the balance of this financial year. For transparency, we executed similar levels of debt factoring, around $16 million in in this period versus the PCP in December 2024 and again in June 2025. Pleasingly, our cash conversion remains strong. It's just under 92% and ahead of our guidance. Directing your attention to the chart on the bottom right-hand side of the slide, you can see the strength and the resilience of the business across a number of periods and regardless of the cycle and broader macro environment. As we look to the full year, we do not see this changing, and we expect our cash conversion to be at line and or ahead of our cash allocation target of 75% or more. As we turn to slide 14, capital investment, our investment in product development has ticked up in the period to 3.8%. It's been a key driver in underpinning our performance in our powertrain and undercar results. and also supporting future wins in four-wheel drive. We expect similar levels of investment through the second half of this year. Our capex is moderated and down 22% versus PCP, largely in four-wheel drive, which in the prior period included investments in South Africa and Thailand. As previously advised, we expect the full-year capex investment to be up to 10% lower than last year. In terms of our capex split between growth and maintenance, it is broadly balanced. It's in line with our capital allocation frame metrics and ensures we balance investment in maintaining what we have today with investment initiatives to generate future growth. On slide 15, our foreign exchange exposure was well managed. The first half was impacted by a stronger USD versus the PCP. However, this was well managed within a volatile spot market. For the remainder of this financial year, we are now effectively fully hedged with further hedging being executed in January. We also have taken the opportunity in the last few weeks in particular to take advantage of the AUD strength and we've locked in meaningful coverage for the first half of FY2027. If there continues to be any further AUD strength above current levels, this will mostly be an H227 impact for a motive. In terms of our offshore earnings, it continues to provide a natural head to FX exposure, particularly as we increase our US dollar and Asia currency earnings. US dollar earnings grew 41% versus PCP, building our natural hedge in the periods. Combined US dollar and non-ANZ earnings now represent 32% of our total post-tax earnings in the half and we see growth in offshore earnings continuing to be more meaningful through the second half and beyond. On to slide 16, our balance sheet remains in great shape. The group's balance sheet remains in strong position with gearing at 1.95 times, increasing by 0.2 turns since December 2024. It remains well within our capital allocation framework target range of 1.5 to 2.25 times. Our leverage increased marginally since June, largely due to the completion of the buyback program. I said earlier we invested a little over $18 million in completing that in the period and some further investments in new jurisdictions in the form of working capital and operating expenses. The business continues to deliver stable and predictable cash flow earnings, as I noted earlier. Our leverage guidance remains unchanged with the expectation the business will deliver through H2. Our debt profile remains long-dated with nearly two-thirds of it fixed at market-leading rates. As such, recent and any future changes in the Australian domestic interest rate environment will have a relatively low impact on our cost of funds. As a guide, 25 basis point increase or decrease will have a 0.3 impact on a full year result for us. We remain strong support from our ender group and strong appetite for further support should we need it. In terms of our cost of funds on the right-hand side, it's reduced marginally in the period by 11 basis points, largely reflecting the domestic interest rate environment. On to slide 17, in terms of our capital allocation framework, we performed strongly against the majority of these metrics. In February of last year, we announced this framework. The framework provides visibility on how we will deploy capital against, as you can see, a set of return metrics, both for organic and inorganic investments. Importantly, these metrics, in particular return on capital employed, now form part of management's long-term incentive programs. For the first half, we performed in line or ahead of all metrics with the exception of returning capital employed. This remains a key area of focus for us and we're unhappy with our current performance in that area. We continue and will continue to measure ourselves on a pre-APG impairment metric. On a reported basis, you can see the result provided in the footnotes to the slide. Furthermore, today we are announcing we expect to generate an incremental 10 million annualized gross benefits from the Emotive Unified program on exit of this financial year. And on that particular topic, I will now cover off the Emotive Unified update as part of a broader update on our outlook. I'll now direct you to slide 19. In February 2025, we announced our transformation program called Emotive Unified. This is a three-year program made up of a number of projects with execution staggered into three ways. Exiting FY25, we delivered $15 million in gross analysed benefits with $5 million reinvested into marketing, product development and new roles. This net $10 million of benefits is included in in our FY26 guidance. We are announcing today an incremental, in addition to that, an incremental 10 million annualised gross benefits to be realised on exit of FY26. These further benefits will support 5 million investment into simplifying our IT platforms, further warehouse consolidations and program management resourcing through the second half of this year. The timing of these benefits at an additional net 1 million EBITDA benefit in FY26 highlighted in the table on the bottom right of the page. These benefits are helping offset a revised modest pricing increases expected in the second half. These combined net benefits of the million announcing today and the 10 million that we previously announced are included in our FY26 guidance. I'll now hand you back to Graham to discuss this guidance and trading update in more detail.

Thanks, Aaron. Appreciate the detail, as I'm sure the listeners did as well. As you say, let's get into the trading update and outlook. So after the four weeks of January, if you just take January in isolation, ANZ pickups were down 7% net of BYD. And as mentioned, in Australia, six of the 10 pickups were down This outcome is slightly below our expectations. And I guess that's important to note, only because obviously we're collecting revenue from the January performance ahead of that, given we supply ahead of a sale, so to speak. Light and power and electrical, the AU resellers and OE channels remain subdued. So whether it's a reseller or indeed the truck or the bus or the RV market, not a lot has changed there. But pleasingly, we are seeing continued momentum in the US and in EU. And then from a powertrain point of view, the wear and repair remains resilient. With the forward workshop bookings, they're stable at sort of one to two weeks, nothing changing there, which is great. From an outlook point of view, our guidance is unchanged. Regardless of some headwinds and some tailwinds, we're still holding our point of view around the revenue growth that's expected to grow in FY26 and the underlying EBITDA of circa 195. As I said, it still remains a challenging environment. Four-wheel drive, New vehicle sales are trending slightly softer, but the H2 margins within this division are expected to improve due to the H1 pricing actions. LP&E, the headwinds in ANZ are expected to persist. The H2 underlying EBITDA is expected to be marginally softer than H1. Powertrain, the wear and repair categories are expected to remain resilient. As outlined in the Emotive Unified slide, the incremental FY26 net benefit $1 million is included in our $195 guidance. That's provided a bit of an offset to revise pricing approach to account for more modest price increases in H2. The H1 and H2 EBITDA skew expect to be broadly balanced. Cash conversion expect to be in line with capital allocation. The balance sheet strength will be maintained and we expect to deliver an H2 balance sheet As Aaron just mentioned, we've got an incremental 10 million of annualized gross benefits as we exit FY26. That's really the outlook and also the trading update completed. Of course, it would be rude of me not to finish the presentation though by not thanking the emotive team who worked so hard through that first half. And so from a board point of view, from Aaron and I, I just wanted to thank those people, and I know some of them actually listened to the school because they have great interest in our results, as you would expect. So with that, now I'll hand over to the moderator, who will coordinate the questions that we have online. Thank you.

Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. Your first question on the phones today is from Mitch Sonegan with Macquarie. Please go ahead.

Good morning, Graeme and Aaron. Thanks for taking the questions. Just the first one, just on the FY26 guidance, I'm just trying to understand a little bit of the moving parts. They're pretty specific on the LPE guidance. But on four-wheel drive, you've talked to new vehicle sales being slightly softer, but expect better margins in the second half. Do you mind just giving some colour on your expectations and what you've got in terms of forward visibility at this point in time? Thanks.

I'll answer the forward visibility, and I'll just hand over to Aaron in terms of the composition of the second part of the question. And I guess it links to perhaps other questions that no doubt will be asked around, say, the January performance in terms of new vehicle sales. So when you look at new vehicle sales in January, as I mentioned briefly, they were down net of BYD 7% in ANZ, but then you sort of peel that back a little bit. Ranger was down 20%, Hilux 15%, I think DMAX was sort of 14%. Triton was up, Navarro down about 35, and that revenue obviously has already been recognised in most of that context. We did expect January to be slightly softer anyway, December was relatively strong, and January can always be a bit of a funny month in terms of vehicle sales. The forward visibility that sort of sits behind our point of view around the guidance across the group, is generally between two and three months in terms of, I'm talking about new vehicle sales, and I think your question specifically is around probably four-wheel drive more than anything mentioned in that regard. So we have forward visibility of those sorts of sales. It's interesting that, and perhaps others will ask around interest rates, it's interesting that the likes of Triton has actually been on a bit of a tear, and they've actually been perhaps a bit more aggressive in terms of their discounting over the last two or three months, whereas Toyota and Ford and others have sat a little bit on the sidelines but are starting to come back in, so I expect that to happen a little bit more. Aaron, from a guidance point of view, did you just want to cover off the composition?

Yeah, I will do. Hi, Mitch. Just in terms of the second half of the four-wheel drive, we've obviously got a couple of tailwinds into the second half. We announced the pricing around out-of-cycle OE pricing, so that'll all bite in the second half. We do expect to take some more pricing in the second half around aftermarket, We've obviously got the Hilux, new Hilux coming into the second half as well. And we've also got some emotive unified benefits into the second half, some quite meaningful benefits, particularly around things like freight that are going to come into the second half. So sort of bundling all those up together, we are expecting a better margin performance in H2. I would say that's not going to fully offset the margin erosion we saw in the first half versus PCP, but it's going to be materially stronger.

Yeah, very clear. Thanks, guys. Just a second one on that. Just in terms of the powertrain undercar, you've talked about first half, second half, either they expect to be broadly balanced. Yeah, again, Graeme, just maybe a little bit of colour there. Any reasons why we shouldn't expect a little bit of improvement half and half, even though it has been pretty steady and resilient and a good outcome in the first half?

Yeah, so the broadly balanced comments more the group is what I was referring to in terms of the outlook. I didn't speak to the powertrain half on half. You can probably get there by deduction of sorts anyway. We expect powertrain to continue to be resilient. We're not calling out specifically anything around powertrain in terms of half on half. We've mentioned LP&E and obviously we've mentioned forward rise, therefore the deduction you can do for yourself. for the reasons that we've been speaking about. And I touched on earlier on when I was chatting and reviewing this slide, we've got further benefits that have come through in terms of drug and unit consolidation. We've also got benefits of putting the IMG and the infinite presences together. So we do expect decent performance out of Powertrain in the second half.

Yeah, thanks. There's probably more things about this run rate into FY27. But just, yeah, I guess in terms of any quick commentary on corporate costs, should we expect a similar run rate into the second half and FY27? And Aaron talked to the 10 million gross benefits for the emotive unified. Just wondering what costs will be required in 27 to achieve those ones as well.

Why don't I help you out, Mitch? You're obviously looking to have a bit more colour around divisional second half performance. So let me just... I'll expand an answer to your question. So four-wheel drive we've touched on, better margins in second half. LP&E, a little softer in the second half. Powertrain, as Graeme said, we've got a few things in the second half that are going to support that business. In corporate, we are going to put some more costs in the second half. You heard me touch on things like resourcing around program management, really to support our unified program. So I expect our corporate costs will go up in the second half versus the first half. And then into 27, yes, we've obviously, with the further benefits we've announced on unified today, that's largely going to be a 27 story. as only 1 million net of those are turning up this year. So we haven't finalised our reinvestment levels for 2027, but I would say that that $10 million will provide some buffer to further headwinds around costs and inflation into 2027 to support continued growth into 2027.

We talked to the EV investment still having a loss in 26. Can you maybe just tell us what that loss is given you died into a breakeven in FY27 and I'll jump off. Thank you very much.

We died to it being breakeven on a run rate basis exiting 27. So the 27 year one might be breakeven but we'll exit the year being breakeven. It's less than $2 million and it's more than $1 million. So it's pretty close in terms of where it's currently tracking. We're very happy with the EV business. Revenue growth is strong. We're making further changes around our operating footprint in terms of warehouse consolidation. That's going to happen in the second half. Graham touched on moderated investment in that space and we're just being very cautious in relation to the changing dynamics of the car park. But over the long term, it's a business that we see huge potential in, and we're just going to balance that investment with the revenue growth we're getting out from that business. So, yeah, on exit, on a run rate basis, MEDGE, profitable. In FY27, not profitable, though, but I've given you sort of some train lines there for the quantums.

Thank you. Your next question comes from Andrew Hodge with Canaccord Genuity. Please go ahead.

Morning, Graeme. Morning, Aaron. Thanks for the presentation. Look, a couple of my questions have been answered there, so I'll just ask around the currency. Just in terms of, Aaron, you mentioned second half 26 improvement sequentially, but down on the PCP. So can you just remind us where you were hedged in second half 25?

Yeah, why don't I just give you a more definitive answer? It's Less than a million dollars. Okay. Andrew, so it's pretty marginal. I'm talking second half on second half, right? I think it's your question.

Yes. Yeah. And then into 27, have you started hedging first half 27 yet? And should we be thinking about, I mean, subject to how far hedged are you? And is what a reasonable expectation of the level that you're hedging at at the moment?

Second part of your question, yes. And we are covered out to beginning of November.

Great. Thank you. And I just want to ask one question on the four-wheel drive margins. I know you've talked about the process, the OEM price rise in order to bridge some of that gap. How much of risk is the lower than expected volume? So January was lower than your expectations. If that trend continued and you lost... some of the volume that you were otherwise expecting? How much of a risk is the operating leverage to that margin, even in the face of some price increases and, you know, not a repeat of the bad debt?

Well, the bad debt goes away. We're not trying to hurdle that. But, look, we've also got aftermarket pricing that sits to the general car park. We've also got some unified benefits coming through, a little bit of an exchange in the last part of the second half And the likes of Hilux, we'll get the full half of that. So those are some of the tailwinds that sit there. In terms of the volumes, I mean, yes, there is a downside risk, clearly. Although we have two to three months' worth of visibility already, Andrew, as you would expect in terms of forward. So some of that's already, I would call that pseudo-hedged in our minds. We're watching it closely. In January, I don't think necessarily is a good barometer of either good or bad. December was a pretty strong month. Sometimes you have a bit of supply. And the other thing is that, as I said earlier on, that some of those OEMs are still not that active in the market in terms of discounting. So we're watching it closely. And naturally, there's a little bit of a downside risk, but we do have some other levers to pull. And we are expecting some of that margin improvement.

And then if you

Not that you've asked this, but when you then start to reflect on how does that exit FY26 and go to FY27, we still haven't even spoken about the actual delay of Navarra. That's actually a four-year impact of Navarra, which is fantastic. U-Haul starts to increase. Kia comes in. So we're not as reliant on the ANZ market, and we think we'll also pick up some other European tow bar business. So we're trying to offset that ANZ cyclicality as we speak, and some of that will be showing up in the first half of FY27. So it's a bit more of an answer than what you asked for, but I just wanted to give you more colour.

That's great. Thank you. Thanks very much.

Your next question is from Sam Teager with Citi. Please go ahead.

Hi, Graham. Hi, Aaron. I was just keen to understand the dynamics behind driving the different performance between PTU and LP in Australia, given they share a number of customers. Are you seeing retailers focus more on private label in electrical and accessories?

Oh, look, I think when you separate out across the three areas that we speak about on the LP&E slide, and if you went to that slide, you'd see that we sort of break out lighting, power management, electrical. We speak about lighting being up, power management being up, electrical accessories being down, and that's a reflection of the reseller demand that we see at the moment. There's a mix of home brand performance that sits behind that, Sam, but at the same time, without disclosing a particular customer, we've just won the globe business in one of those big three resellers with a Nava brand. House brands come and go, and the performance can ebb and flow, but in times of tight economic circumstance, there is a bit of flight to value. We do call it out, Sam, so I think there's a bit of a mixture there. Having said that, though we are now ranging in other areas, we're doing better in some of the independents. We're into Bunnings and a couple of other areas like Auto Pro and Auto One. So we always look to offset and reduce the customer concentration. But that's how I sort of characterize it.

Yeah, that's good. Thanks. And then on that slide, which of the LP brands are showing most of the weaknesses? Is it KT Cables, Boab, Offroad, National Lunar or another one? And are you thinking about any potential investments to help improve your return on capital employed?

Oh, look, we're doing that day by day by day in terms of OCHI. We have a point of view around what we want to achieve. And that includes brand rationalization. That includes marketing dollars being spent on particular brands where we want to put our energy. And so the likes of National Luna, BOAB, and the grant you've just spoken of, they are very, very low investment, if not little at all. Whereas we're concentrating, frankly, on the NAVA projector. And also KT, obviously that provides a mid-range electrical accessory range compared to the Nava. We're also in the process of taking some of those brands online. We've just launched projector.com. So you can now buy directly from us on certain products through that, and we're doing that internationally. So really we're concentrating hard on Nava, projector, and KT. The other ones are less of a distraction. We're going through a brand rationalization effort as part of Unified, not just in LV&E, but across the other brands as well to ensure that we're spending the right dollars on the right brands.

Okay, great. And what should we expect for significant items in this second half to unlock that $10 million in incremental emotive Unified benefits?

Sam, broadly similar to H1 levels, perhaps marginally lower. Most of it's going to be around work we're doing around our technology platforms in terms of simplifying ERP platforms and a little bit around warehouse consolidations. So it won't be any higher, but it'll be in and around the same number, possibly slightly lower.

Okay, great. And I think you've touched on that a little bit, but I just wanted to clarify that. The second half guidance, what's the assumption around the macro and interest rates?

If I just go back to the first question or that last question before we go to the assumptions, I think the other thing when you talk about significant items there, I mean, the payback in terms of the dollars being spent, I think, are pretty compelling. What would you say about that?

Yeah, look, very compelling. And I sort of noted it in my speaker notes that we're very aware of We're going to run the business and improve the business at the same time and we've got a very strong lens on improving shareholder returns. You can see that in our capital allocation framework. We're unhappy with where our return on capital sits. In order to make some meaningful changes, there are some costs we have to put into the business on a one-off basis. But clear examples of it are in the first half. Unfortunately, we seek to buy to 50 people in the first half. We didn't replace those people. The payback on that's less than a year. So it has a very strong correlation with our payback metrics.

A lot of those significant items that get paybacks are less than a year. I mean, the likes of some of the warehousing and tech stack, which is what Aaron's referring to, have paybacks within the sort of one to three year period. But You know, we're determined to make sure when we're rolling out Unified that our investors can see a real plain correlation, a clear correlation of a return quickly. Anyway, I just wanted to make that point before we go. In terms of the assumptions around the four-year guidance linked to the second half, I mean, look, we had expected a muted, maybe slightly better year-over-year in terms of MBS and pickups in the total year. Obviously, the second half started out a bit weaker, but with the forward visibility we have, we're sort of expecting it to be sort of there or thereabouts year over year in terms of MVS. We're not expecting, if you think about other OEM and OES business, which might translate between both forward drive and LP&E, we're not expecting the RV or caravan market to suddenly spurt back. We do expect a little bit of market share gain, though, whether it be CruiseMaster or indeed LP&E. LP&E have just launched 48-volt systems In the projector range, you know, the biggest caravan manufacturer is very excited about that and already taken it. We've pushed that into Crusader. We've got MDC taking that. So caravan show has gone very well. We've just launched, you know, body control modules in the caravan market. So whilst the caravan markets, we're not expecting to come back, we're still expecting a little bit of market share there. Truck and bus, we're certainly not expecting to see that. That's quite low. The cyclicality is, I would say, at a really low trough, so we're not expecting that to come back. In terms of the resellers, Sam, we're not expecting that to spurt. I think the economic situation, the macro in ANZ is still very muted, as you would know, so we're not expecting that to bounce back. We're watching with some interest around where the interest rates are ahead. Then we're expecting people to continue to service vehicles in terms of the wear and repair, and that's not abating. If anything, as you know, the car park, and there's some information in the later part of the deck, the latest information shows that the car park's approaching 12 years, and that there was a bit of deferral because of cost of living pressures over the last 12 to 18 months. That will have to show up at some point, so we're not expecting that to drop away, and our assumptions, therefore, are relatively buoyant. And then you've heard from Aaron that our assumptions around some of the things are less in our control, whether it be exchange or interest rates and other bits and bobs. You know, we've kind of got some of that covered and the rest of it, we'll see how it goes. So hopefully that gives you a flavour of the assumptions that sit behind second half and importantly, the full year.

Yeah, that's helpful. Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone or type your question into the ask a question box. Your next question is a webcast question from Tim Plume with UBS. This reads, January ANZ pickup sales excluding BYD down 7%. Some OEM models are a fair bit worse than that. Ford Ranger, Toyota, Hilux, Prado, RAV4. What are your thoughts on this? Is this Australian consumer demand coming off? Or is this OEM supply driven? How are you thinking about the remainder of the year from a volume perspective? And does this change, i.e. worsen, if RBA announces further interest rate hikes? Or have you incorporated this into your thinking for second half 26?

Thanks for the question, Tim. So you're quite right, and I think I have already articulated the nuance of some of the OEM brands within the January performance. I mean, obviously, the first half was flat, net of BYD. But it's at the first half, range down 3, DMAX down 11, BT sort of 4-ish. So it sort of was in that sort of space, and that was more pronounced clearly in January. You know, those same models, range down 20 and Hilux 15 and DMAX 14. I think it's actually a mix of both. I think people had a bit of pause through January. And we saw January really quite a, I wouldn't say peculiar, but quite a variable month across all of our businesses, some strong, some a bit weaker. It seemed like workshops were coming back a bit later. People weren't necessarily spending in some of the retail-centric areas of some of our resellers and, indeed, weren't necessarily buying vehicles en masse. I think it's a bit of both. I think December was a stronger month, and therefore a little bit of supply, perhaps constraint, not massive, and then a little bit of demand off. I think the interest rates, I mean, we've been much higher than where we have, obviously, with the deceleration of the rates. And if we return another 25 basis points or 50 basis points, I don't think we'll be facing anything different than what we were six and 12 months ago. I do expect, and if you were to look on the pages of Ford, Indeed, Triton and others, they're just starting to spurt the market. Interestingly, Triton, if you look at where they came in for the half, they were actually up 11%. You look in January, they bucked the trend again. They're up 36%. Now, in part, that's because, again, my personal point of view, in part because they've got more supply, in part, they're actually quite aggressive in the market. They are drawing customers out of the market with some reasonably aggressive driveway prices. Ford have just put some driveway prices in recently, Toyota have not. I can't remember now exactly piece by piece. So I think we'll start to see more progressive incentivization of the market. And, of course, the other thing with Hilux is there's not been a huge supply of them as they start to launch. So our assumptions are built on a slightly softer market. Second half, we're watching carefully. We know we'll get a bit more business with Hilux because that's starting to launch, and we obviously have the sports bar in addition to the tow bar. And we'll watch closely. But we also are sucking more revenue out of a few more Australian tow bar contracts. And in the background, we expect right at the back end of the half term that we might see just a little bit of that offshore revenue come in, just a little bit of it, and we'll see also what happens with the year-haul business. kind of balancing a little bit of that.

Thank you. Your next question is a webcast question from Adam Dellaverde with Taylor Collision. This reads, can you discuss relative utilization levels for Thai and Australian plants at Trimotive? Is it still patchy? How does throughout today compared to when you acquired APG and what things can be done to improve margins independent of securing higher order volumes?

Yeah, sure, and thanks for the question. Look, the Thai plant's utilization is very high, hence why we just commissioned the third plant. We're in the process of commissioning that. That's useful given that we've just won some European contracts and we're pitching for more European contracts. So that third plant naturally will be less utilized, but we're bursting at the seams And that's before, Adam, you think about a full year of high-lux sports bars, which we didn't have before, and then you start to take the Navara, and we haven't spoken much about the Navara, but the Navara will go from currently, or in the past cycle, we used to literally deliver parts of a tow bar to a domestic operation, this is an operation, we're now delivering the tow bar, the sports bar, the nudge bar, and that comes in in FY27. So naturally, the utilization will creep In terms of Australia, that's still a bit patchy. We run a one-ship operation there anyway. It's not in the 40s, 50s, 60s, but it might be in the 70s and 80s, depending on which month we're looking at, because it does ebb and flow. The average batch sizes there are a lot lower. We're at seven or eight batch sizes, and that also supports the aftermarket. So it's a little bit more patchy there, Adam. In terms of the margin, Look, if you were to take it to a dollar value as opposed to a bit value, we were down $4.5 million, half over half, or a million of that was zone caravans, and then probably about $3 million worth of pricing annualised with the pricing we're about to put in place. So you'd get back that pretty quickly. That's not discounting the fact that we're paying our workforce another 4%, our electricity bill quite higher, so you think about utilities and also the rents of that So that pricing sort of, that's the last seven tenths. That pricing fixes the majority of that. Then you go and start thinking about AM pricing that we've spoken briefly about outside of the OEM pricing. The new business wins that are concrete in nature, Hilux and Navara, just to name two. Increasing U-Haul and the Kia business in Europe. And I reckon we'll win some more. Then you've got unified benefits. Freight is decent in contract labour. That's to come. And then a bit of margin improvement, because the type art's been a bit brutal for a while. We've picked up a little bit there. So there's plenty of reasons to see this business return to not just FY25, but FY24-type margins at a minimum as we expand.

Thank you. Your next question comes from Ralph Katz, a private investor. This reads, how will the switch to electric vehicles impact a mode of performance?

Thanks, Ralph. I don't know what you've been reading or what you've been following, but the EV investment around the world is crashing at the moment. You can look at four. They run off 20-something millions. The land is 32 billion. Sorry, I'm talking billions here, not millions. Everybody is pulling out of EV investment quicker than they can, and that's just because the payback is just brutal. They were all primarily compliance plays linked to particularly the US government's point of view around CAFE and a few other bits and pieces. Now, I'm not making a judgment on whether an EV is right, wrong, or indifferent. We as a business are committed to reducing our emissions and have done so, and actually at Scope 1 and 2, we're actually carbon neutral, so just as an aside. But the onslaught of VBs has slowed quite dramatically. What you are still seeing is a strong Chinese level of investment, although there's 100 brands or so in China that were going through massive consolidation. BYD recently just had a very tough period. So ultimately, at the end of the day, we're going to see not as strong as predicted ICE adoption in this particular market. We've already moved, though. Our revenue, as it stands now, is roughly 75% non-ICE. So it's ICE agnostic. So we're well positioned in that regard. The adoption isn't quite as high. And where those vehicles are coming through are in small vehicles, passenger vehicles and small SUVs, which is less important to us. And where we've got pickups and the like, sort of electrified pickups, whether it be Ford, electrified Toyota and the like, we've been able to engineer tow bars that are lightweight and actually support them. So I think we're well positioned I don't see that as any threat, but we've already moved to a strong non-ICE position anyway. Hopefully that answers your question in a broader context.

There are no further questions at this time. I'll now hand back to Mr Wickman for closing remarks.

Well, thank you. Firstly, thank you for your attention. I appreciate the questions. As I said earlier on, we feel we've delivered a really solid result in a challenging environment. You know, the balance sheet's in a great place. And as you tick through many of the financial metrics, whether an allocation framework or indeed the broad financial metrics, you know, we're seeing a lot of green ticks. It doesn't mean that we don't have more work to do. We're always anxious and ambitious. With the 2030 strategy, we're keen to see the business grow, but grow in a way that's done in a quality fashion. And I'm not just talking about revenue. I'm talking about the EBIT with clear roadshed. As I said earlier on, the prospects for each of the divisions still remain strong. Reiterating guidance I think is very positive and some exit rates around the work on Unified I think also demonstrates that we're not sitting still in what is an insipid market. We remain committed and active in managing the business in a way that I think we can be pleased with. So with that, I'm sure we'll be meeting with many of you through the course of the week, and whether it's at a broker lunch, dinner, or breakfast, and then our individual shareholders. So we look forward to those conversations, both Aaron and I, and we'll see you through the course of the week. Thank you. Thank you, everybody.

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