Peter Warren Automotive Holdings Limited recently announced its financial result for the half year ended December 31, 2024, with underlying profit before tax (PBT) of $7.1m in line with previous market guidance.
“The first half saw market conditions for new cars become increasingly challenging. The industry over-supply impacted our margins and profitability, although we partially offset this by driving growth in our other service lines,” Peter Warren chief executive Andrew Doyle says.
“As a management team, we have deep experience in actively managing through these cycles. This includes managing our inventory, lowering our costs, driving performance and delivering on the opportunities,” he says.
Sales revenue was up 2.2%, reflecting growth from acquisitions (down 4.3% on a like-for-like basis). Customer demand for new vehicles was down on the prior period and reflected both previous highs and current customer sentiment. In other service lines, the Group successfully grew like-for-like revenue across used cars (+7.5%), service (+10.2%) and parts (+4.3%).
Gross margin % declined 1.5ppts to 16.1% (H1 FY24: 17.6%) and was 0.2ppts below H2 FY24 (16.3%). This reflects a reduction in new car margins with broadly favourable margins in used cars, service, parts and finance.
New vehicle inventory was reduced during the half as a result of an inventory management program. Like-for-like new car inventory was $366.3m on December 31, 2024 (June 30, 2024: $382.8m).
Operating expenses increased due to dealership acquisitions but on a like-for-like basis were down on the previous period, despite the inflationary environment. This reduction was due to cost-out initiatives implemented in 2024. In 2025, the Group aims to further optimise costs and deliver savings.
Interest costs increased by $4.8m on the prior period with $2.8m of that arising from acquisitions. The balance was caused by low inventory levels at the start of the prior corresponding period. Run-rate floorplan interest costs are currently reducing as a result of an inventory management program.
Property holdings on the balance sheet are considerable and valued at $225m, with a net debt LTV of 37%. The Board considers that these assets provide good funding optionality for the future.
Market conditions
Australia continues to experience an increased supply of vehicles and greater competition between brands as new OEMs enter the market. Customer demand has been weaker than in previous years and lower than supply levels for some brands and models (e.g. electric vehicles).
In those brands and models, margins remain under significant pressure as OEMs seek to re-balance supply to better match demand. Customer demand for different fuel types also continues to change with increased demand for hybrid and PHEV models in H1 FY25 and moderating demand for BEV models. In 2025, the new vehicle efficiency standard (NVES) will further impact the market.
To mitigate these new car margin pressures, Peter Warren is focused on strong inventory
management, achieving further cost reductions and growing revenues in other service lines. Some of these benefits have been realised in H1 FY25 with further benefits to come in H2 FY25 and beyond.
Outlook
In the short-term, the Group expects current market conditions to continue with increased levels of supply, more OEMs entering the market and strong competition between brands. Margins on new cars are expected to remain under pressure. However, in H2 FY25 Peter Warren expects any further deterioration to be offset by management initiatives.
“Our near-term focus is on actively managing the business through the cycle, and we see opportunities to drive further improvements across costs, inventory and our various revenue streams,” Doyle says.
“At our core, we are still focused on growth over the medium term as we see opportunity in further industry consolidation, accretive M&A and leveraging our scale. With strong property backing and a good balance sheet, we are well placed for the future,” he says.
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