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Operator: Thank you for standing by, and welcome to the Amotiv Limited FY '26 H1 Results Call. [Operator Instructions]. I would now like to hand the conference over to Mr. Graeme Whickman, CEO. Please go ahead.
Graeme Whickman: Thank you, and welcome to the earnings call of Amotiv results for the half year ended 31st December. I'm Graeme Whickman, CEO and the Managing Director. And I'm here with Aaron Canning, the company's Chief Financial Officer. As per 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 it 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. So let's turn to Slide 3. I believe we've delivered a solid result in what is a challenging operating environment. I think it reflected disciplined execution and the benefits of a multiyear diversification strategy in terms of where we got around revenue. Amotiv Unified continues to deliver incremental benefits with ongoing costs, 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 FY '26 guidance remains unchanged. Group revenue growth is expected with underlying EBITA growth of circa $195 million. Now turning to Slide 4, 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 investments and a high contribution from offshore markets. This provided an offset to some of the headwinds in 4-wheel drive and LPE, while our Powertrain division continues to outstrip what is a resilient system growth. Underlying EBITA of $98.3 million, up marginally on the PCP. It was impacted a little bit by lower 4-wheel drive margins due to domestic inflationary pressures and the ramp-up of South African plant, by the way, a market that we remain excited about in terms of future prospects. And then we got some select pricing implemented in Q2, and that's expected to support the 4-wheel drive margins in the second half. The Amotiv Unified initiatives across the group delivered meaningful cost benefits, 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 was just over 8%. At the same time, leverage was maintained comfortably within the target range. And circa sort of $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 TRIFR, 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 5, we outline the progress made on our strategic imperatives, which represent the key areas of shareholder value creation. If you look from left to right, as mentioned earlier, we're pleased to see the momentum in cost realizations from Amotiv Unified programs, which we 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 3 of our divisions, all 3, 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-utilized existing adjacent facilities up in Thailand. And this low-cost jurisdiction positions us well to win business in Europe and the U.K. 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 Amotiv'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 4-wheel drive Keysborough plant. As a result of some of the unified warehouse consolidation initiatives, Powertrain & Undercar saw an increase in DIFOT, post the latest phase of the Truganina 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 EPSA. Now moving to Slide 6. We touch on Amotiv2030 Strategic Plan to the group unveiled at the last AGM. Now as you can see from the slide, we've reduced and simplified our strategic priorities from the prior GUD2025 Strategy aligning with our divisions. And this calls for us to optimize our Powertrain & Undercar portfolio while adding 1 or 2 adjacent non-ICE categories. Solidify and defend our Australian and New Zealand Lighting, Power and Electrical business, while still growing a global niche Lighting and Power business from our established basis, both in the U.S. and Europe. Building a leading integrated 4-wheel drive Accessories & Trailering 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 via Amotiv Unified to make us more efficient and effective. Now my point of view, Amotiv 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 group is led by experienced management team focused on improving shareholder returns, through disciplined investment as 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 with 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, I think, by clear set of attractive investment thematics. Now let me turn my attention to some divisional updates. Right, starting with 4-wheel drive. Well, revenue was up 5.5%, driven by new business, including a full period of South African revenues that weren't present in the PCP. And this was also complemented by some continued Aussie towbar wins. I think this is a credible performance against a highly challenging backdrop. Pickups were flat in the half, net of Shark in Australia, 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 5 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, you are generating revenue in the half, even though those vehicles have been sold in January. And if we looked at the performance in January, 6 of the top 10 pickups were down actually even more pronounced between 14% and 38%, so a little bit softer than what we're expecting. Cruisemaster. 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 and prospective offshore revenue pipeline. Underlying EBITA 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 $1 million. And with that similar approach, the actual EBITA margins were down 290 basis points. Now the key driver which was delayed price realization relative to domestic cost inflation, and we signaled this to market previously. At that same time, when we're 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, margin is expected to improve from H2. There's also been a country mix impact as we consolidate South Africa after the full first period. Now this new facility has 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 stood up on the basis of 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 FY '25 full year results, South Africa is below the margin of a mature 4-wheel operation. Within the 4-wheel drive, Amotiv 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 higher volumes, such as Hilux in H2 and Navara in FY '27. 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 and wanted to understand a little bit more about the Chinese situation. Well, 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 towbars. But the balance of the Chinese OEM, which represents 72% as you can see on the chart of units in CY '25 have outsourced this function, and we are already pending already our customers of the 4-wheel drive business, which means we're well positioned for any OEM mix change within the Australian car parc. As mentioned earlier, capacity also has been added to our Thai facility. The 4-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 towbar 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 FY '27. 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., the export volumes in Thailand continue to build with growing U-Haul demand expected to support volumes into FY '27. So I'll stop there and perhaps now move to Slide 9 and 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 Amotiv Unified and increasing offshore revenue diversification, which provided a meaningful offset. Revenue reflects volume growth in the U.S. and Europe, which mitigated some of the soft reseller demand in ANZ. By category, lighting delivered growth of 1%, well done to the Vision X team in the U.S. and Europe. And that offset muted Australian reseller demand. Power Management revenue increased 3%, reflecting ongoing investment in product innovation and continued growth in the U.S. 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 EBITA increased nearly 9.5% with margin expansion of 210 bps, largely driven by those Unified benefits. I turn my attention to looking ahead, while the ANZ reseller dynamics are expected to persist in the second half, while Europe and the U.S. are expected to continue to grow. The full benefit of the Q2 U.S. 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 EBITA in H2 to be marginally softer in H1, but slightly above certainly the PCP. Now let's turn to the final division, Powertrain & Undercar. This is a really pleasing result, well done to the Powertrain & Undercar division that reflects the continued resilience of the where repair market, supported by some really strong brand 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 our performance. And when I say our performance, 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 an underlying EBIT growth of 6.7%, 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 breakeven by the end of FY '27 on a run rate basis. Looking ahead, further Unified initiatives will be implemented through the second half as the business continues to consolidate site operation and improved returns. This also includes the consolidation of Infiniti operations into the IMG group. Operating cost benefits flowing from the first half headcount reductions, the rationalization of the ACS warehouse into Truganina and the commencement of the 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.
Aaron Canning: Thank you, Graeme and good morning, everyone. My name is Aaron Canning, I'm the Amotiv CFO, and I'll take you through the first half financial results in more detail. On Slide 12, we highlight our group financials. As Graeme has touched on, revenue grew 3.3%. Importantly, that was all organic growth. The full-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, Graeme has touched on was marginally down driven to a softer ANZ reseller demand offset by continued growth in both Europe and the U.S. 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 backorders at pricing 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 lower by over 2%, more than offsetting inflationary increases, largely due to disciplined cost management and the benefits from our Amotiv Unified program flowing through. Depreciation and amortization were broadly consistent period-on-period. And our underlying EBITA 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 totaled $8.3 million and largely related to restructuring activities linked to executing Amotiv Unified initiatives. In the half, a further 50 employees part of the business, predominantly across our Powertrain & Undercar for 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 1 year into our 3-year Amotiv 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 noncash 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 in line with the current levels around 29%. Our statutory net PAT at $46 million represents 39.4% growth on the PCP, with the prior year impacted by higher significant items, including a $10.4 million noncash 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 has approved an interim dividend of $0.20 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 as a percentage of revenue improved 1 percentage point to 28.7%. Improved collections partially offset inventory -- 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 division. 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 U.S. and Europe post-U.S. tariff changes. In Australia, we have sought to rebalance our inventory holdings commensurate with reseller demand. This is still 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. 4-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 & Undercar division also saw some increases as we continued our work on consolidating our logistics and warehousing footprint as part of Amotiv 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 rationalize our warehousing operations for our Clutch and EV businesses. We expect the current inventory levels to unwind in this division through the balance of the year. Our payables were 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 this period versus the PCP in December 2024 and again in June 2025. Pleasingly, our cash conversion remains strong at 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 & Undercar results. and also supporting future wins in 4-wheel drive. We expect similar levels of investment through the second half of this year. Our CapEx has moderated and down 22% versus PCP, largely in 4-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 framework metrics and ensure as 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 FY 2027. If there continues to be any further AUD strength above current levels, this will mostly be an H2 '27 impact for Amotiv. In terms of our offshore earnings, it continues to provide a natural hedge to FX exposure, particularly as we increase our U.S. dollar and Asia currency earnings. U.S. dollar earnings grew 41% versus PCP, building our natural hedge in the period. Combined U.S. dollar and non-AM earnings now represent 32% of our total post-tax earnings in the half. And we see growth in offshore earnings continuing to be 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 a strong position with gearing at 1.95x, increasing by 0.2 turns since December 2024. It remains well within our capital allocation framework target range of 1.5x to 2.25x. 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 delever through H2. Our debt profile remains long dated with nearly 2/3 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 aligning the 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 program. 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 are unhappy with our current performance in that area. And we continue and will continue to measure ourselves on a pre-APG impairment metric. On a reported basis, you can see the results 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 Amotiv Unified program on exit of this financial year. And on that particular topic, I will now cover off the amount of 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 Amotiv Unified. This is a 3-year program made up of a number of projects with execution staggered into 3 ways. Exiting FY '25, we delivered $15 million in gross annualized benefits with $5 million reinvested into marketing, product development and new roles. This net $10 million of benefits is included in our FY '26 guidance. We are announcing today an incremental -- in addition to that, an incremental $10 million annualized gross benefits to be realized on exit of FY '26. 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 EBITA benefit in FY '26, highlighted in the table on the bottom right of the page. These benefits are helping offset revised modest pricing increases expected in the second half. These combined net benefits of the $1 million using today and the $10 million that we previously announced are included in our FY '26 guidance. I'll now hand you back to Graeme to discuss this guidance and trading update in more detail.
Graeme Whickman: Thanks, Aaron. I appreciate the detail, as I'm sure listeners did as well. As you say, let's get into the trading update and outlook. So after the 4 weeks of January, if you just take January in isolation, ANZ pickups were down 7% net of BYD. And as mentioned, in Australia, 6 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, Power & Electrical, the AU resellers and the 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 U.S. and 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 1 to 2 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 holding point of view around the revenue growth. It's expected to grow in FY '26 and the underlying EBITA of circa $195 million. As I said, it still remains a challenging environment. Four-wheel drive new vehicle sales are trending slightly softer, but to H2 margins within this division are expected to improve due to the H1 pricing actions. LPE, the headwinds in ANZ are expected to persist. The H2 underlying EBITA is expected to be marginally softer than H1. Powertrain, the wear and repair categories are expected to remain resilient. As outlined in the Amotiv Unified slide, the incremental FY '26 net benefit of $1 million is included in our $195 million guidance. That's provided a bit of an offset to revised pricing approach to account for more modest price increases in H2. The H1 and H2 EBITA SKU expected to be broadly balanced. Cash conversion expected to be in line with capital allocation. The balance sheet strength to be maintained, and we expect to delever in H2. And as Aaron just mentioned, we got incremental $10 million of annualized gross benefits as we exit FY '26. So 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 Amotiv 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. I know some of them actually listen to this call 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.
Operator: [Operator Instructions] Your first question on the phone today is from Mitch Sonogan with Macquarie.
Mitchell Sonogan: Just the first one, just on the FY '26 guidance, I'm just trying to understand a little bit the moving parts, pretty specific on the LPE guidance. But on 4-wheel drive, you've talked to new vehicle sales being slightly softer. We expect better margins in the second half. Do you mind just giving some color on your expectations and what you've got in terms of forward visibility at this point in time?
Graeme Whickman: 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 and 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 D-Max was sort of 14%, Triton was up, Navara down about 35%. That revenue obviously has already been recognized 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 full visibility that sort of sits behind our point of view around the guidance across the group is generally between 2 and 3 months in terms of -- I'm talking about new vehicle sales, and I think your question specifically around probably 4 will drive more than anything method 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 the discounting over the last 2 or 3 months, whereas Toyota and Ford and others have set a little bit on the sidelines but starting to come back. And 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?
Aaron Canning: Yes, I agree. Hi, Mitch. Look, just in terms of second half of 4-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 will all bite in the second half. We do expect to take some more pricing in the second half around aftermarket. We obviously got the highlights -- new highlights coming into the second half as well. And we've obviously got some Amotiv Unified benefits into the second half, some quite meaningful benefits, particularly in 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 strong.
Mitchell Sonogan: Yes. Very clear. Just a second one on that. Just in terms of the Powertrain & Undercar, you've talked about first half, second half EBITA expected to be broadly balanced. Yes, again, Graeme, just maybe a little bit of color there. Any reasons why we shouldn't expect a little bit of improvement half-on-half given it has been pretty steady in resilient and a good outcome in the first half?
Graeme Whickman: Yes. So the broadly balanced comments more of 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 the half. We mentioned LP&E and obviously, we mentioned 4-wheel drives therefore, the deduction you can do it 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 Truganina consolidation. We've also got benefits of putting the IMG and the Infinitev businesses together. So we do expect a decent performance out of Powertrain in the second half.
Mitchell Sonogan: Yes. And just probably more thinking about just run rate into FY '27. But just -- yes, I guess, in terms of any quick commentary on corporate costs, should we expect a similar run rate into the second half in FY '27 and Aaron talked to the $10 million gross benefits for the Amotiv Unified. Just wondering what costs will be required in '27 to achieve those ones as well.
Aaron Canning: Why don't I help you out, Mitch. You're obviously looking to have a bit more color around divisional second half performance. So let me just -- I'll expand and answer to your question. So 4-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. They're 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, well, 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 finalized our reinvestment levels for 2027. But I would say that, that $10 million is providing -- will provide some buffer to further headwinds around cost and inflation to '27 to support continued growth into '27.
Mitchell Sonogan: Okay. And just one super quick one. You talked to the EV investment still having a loss in '26. Can you maybe just tell us what that loss is, given you're guiding to a breakeven in FY '27, and I'll jump off.
Aaron Canning: Yes. Look, we guide to it being breakeven on a run rate basis exiting '27. So the '27 year won't be breakeven, but we'll exit the year being breakeven. Look, 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. Graeme touched on moderated investment in that space, and we're just being very cautious in relation to the changing dynamics of the car parc. But over the long term, it's a business that we see huge potential in and we're going to balance that investment with the revenue growth we're getting out from that business. So on exit, on a run rate basis, Mitch, profitable in FY '27, not profitable, though, but I've given you sort of some trend lines there for the quantum.
Operator: Your next question comes from Andrew Hodge with Canaccord Genuity.
Andrew Hodge: Look, a couple of my questions have been answered here. So I'll just ask around the currency. Just in terms of Aaron, you mentioned second half '26 improvement from the sequentially but down on the PCP. So can you just remind us where you were hedged in second half '25?
Aaron Canning: Yes. Why don't I just give you a more definitive answer. It's less than $1 million, the impact, Andrew. So it's pretty marginal. I'm talking second half on second half, right? I think is your question.
Andrew Hodge: Yes. 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 to the level that you're hedging at the moment?
Aaron Canning: Second part of your question, yes. And we are so covered out to the beginning of November.
Andrew Hodge: Great. And I just want to ask one question on the 4-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 not a repeat of the bad debt?
Graeme Whickman: Well, obviously, 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 parc. 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 will sit there. In terms of the volumes, I mean, yes, there is a downside risk clearly. Although we have 2 to 3 months' worth of visibility already, Andrew, as you would expect in terms of Ford. So some of that is already, I would call that pseudo-hedged in our minds. We're watching it closely. And 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 downside risk, but we do have some other leaders 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 FY '26 and go into '27, we still haven't even spoken about the actual delay of Navara. That's actually a full year impact of Navara, which is fantastic. U-Haul starts to increase. Kia comes in. So we're not reliant so much on -- as reliant on the ANZ market, and we think it will also pick up some other European towbar business. So we're trying to offset the ANZ cyclicality as we speak, and some of that shows up and will be showing up in the first half of FY '27. So sorry, it's a bit more of an answer than what you asked for, but I just wanted to give you more color.
Operator: Your next question is from Sam Teeger with Citi.
Sam Teeger: I was just keen to understand the dynamics driving a different performance between PTU and LPE in Australia, given they share a number of customers. Are you seeing retailers focus more on private label in electrical and accessories?
Graeme Whickman: Well, look, I think when you separate out across the 3 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 and electrical, we speak about lighting being up, power management being up but 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 just won the globe business in one of those big 3 resellers with a Navara brand. So house brands come and go and the performance can ebb and flow. But in times of tight economic circumstance, people -- 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 arranging in other areas, we're doing better and some of the independents were into Bunnings and a couple of other areas like Autopro and Auto One. So we always look to offset and reduce the customer concentration. But that's how I sort of characterize it.
Sam Teeger: Yes, that's good. And then on that slide, which of the LPE brands are showing most of the weakness, is it KT Cable, BOAB Offroad, National Luna or another one. And are you thinking about any potential divestments to help improve your return on capital employed?
Graeme Whickman: We're doing that day by day by day in terms of ROCE. 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 brands we've just spoken of, they are very, very low investment and if not little at all, whereas we're concentrating, frankly, on the NARVA, Projecta and also KT. Obviously, that provides a midrange electrical accessory range compared to the NARVA. We're also in the process of taking some of those brands online. We just launched projecta.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 NARVA, Projecta and KT. The other ones are less of a distraction as we're going through a brand rationalization effort as part of Unified, not just in LP&E but across the other brands as well to ensure that we're spending the right dollars on the right brands.
Sam Teeger: Okay. Great. And what should we expect for significant items in the second half to unlock that $10 million in incremental Amotiv Unified benefits?
Aaron Canning: 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 will be in and around the same number, possibly slightly lower.
Sam Teeger: Okay. Great. And I think you've touched on it a little bit, but just wanted to clarify the second half guidance, what's the assumption around the macro and interest rates?
Graeme Whickman: 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, Aaron, I mean, the payback in terms of the dollars being spent, I think compelling. What would you say about that?
Aaron Canning: Yes, look, very compelling. And I sort of noted it in my speaker notes that we're very aware of one-off costs. We're not -- we're trying 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. So the clear examples of it are in the first half. Unfortunately, we say goodbye to 50 people in the first half. We didn't replace those people, the payback on that is less than a year. So it has a very strong correlation with our payback metrics.
Graeme Whickman: A lot of those significant items paybacks are less than a year. I mean the likes of some of the warehousing and tech stack just what Aaron's referring to, have paybacks within the sort of 1- to 3-year period, but we're determined to make sure when we're rolling out Unified that our investors can see a real playing correlation, a clear correlation of a return quickly. I just wanted to make that point before we get into. In terms of the assumptions around the full year guidance, linked to the second half, I mean look, we had expected a muted maybe slightly better year-over-year in terms of NVS 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 NVS. We're not expecting -- if you think about other OEM and OES business, which might translate between both 4-wheel drive and LP&E. We're not expecting the RV or caravan market for something spurt back. We do expect a little bit of market share gain or whether it be Cruisemaster or indeed LP&E. LP&E have just launched 48-volt systems in the projector range. The biggest caravan manufacturer is very excited about that and already taken that. We've pushed that into Crusader. We've got MDC taking that. So Caravan Show has gone very well. We're just launching our 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 and watching with some interest around where the interest rates are ahead and 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 parc and some information in the latter part of the deck, the latest promotion shows that the car parc is approaching 12 years. And if 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, there are assumptions around some of the things that are less in our control, whether it be exchange or interest rates and other bits and bobs. We've kind of got some of that covered and the rest of it, we'll see how we go. So hopefully, that gives you a flavor of the assumptions that sit behind second half and importantly, the full year.
Operator: [Operator Instructions]Your next question is a webcast question from Tim Plum with UBS. This reads, January ANZ pickup sales, excluding BYD, down 7%. Some OEM models are 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?
Graeme Whickman: 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. I looked at the first half Ranger down 3%, D-Max down 11%, BT sort of 4-ish sort of was in that space, and that was more pronounced clearly in January. The same models, Ranger down 20%, Hilux 15% and D-Max 14%. I think it's actually a mix of both. I think people had a bit of pause through January. We saw January really quite a -- I won't say peculiar, but quite a variable month across all of our businesses, some strong, some a bit weaker. It seemed like workshops are coming back a bit later. People weren't necessarily spending in some of the retail-centric areas of some of our resellers and indeed, were necessarily buying vehicles on mass. I think it's a bit of -- so it's a bit of both. I think December was a strong 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 6 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%. If 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 have 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. And recently, Toyota, no, 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 soft -- slightly softer second half. We're watching carefully. We know we'll get a bit more business with Hilux because that's started to launch. And we obviously have the sports bar in addition to the towbar and we'll watch closely. But we also are sucking more revenue out of a few more Australian towbar contracts. And in the background, we expect right at the back end of the half, Tim, that we might see just a little bit of that offshore revenue coming, just a little bit of it, and we'll see also what happens with the U-Haul business. So kind of balancing a little bit of that.
Operator: Your next question is a webcast question from Adam Dellaverde with Taylor Collison. This reads, can you discuss relative utilization levels for Thai and Australian plants at TriMotive? Is it still patchy? How does throughput today compare to when you acquired APG and what things can be done to improve margins, independent of securing higher order volumes?
Graeme Whickman: Yes, sure. And thanks for the question. Look, the Thai plant's utilization is very high. Hence, why we just commissioned the third plant or in the process of commissioning that. That's useful given that we've just won some European contract and we're pitching for more European contracts. So that plant actually will be less utilized. But we're bursting at the seams and that's before, Adam, you think about a full year of Hilux sports bar you had before, and then you start to take the Navara, and we haven't spoken much about the Navara. But Navara will go from currently or in the past cycle, we used to literally deliver parts of a towbar to a domestic operation. We're now delivering the towbar, the sports bar, the nudge bar and that comes in, in FY '27. So naturally, the utilization will creep. In terms of Australia, that's still patchy. But we run a one-ship operation there anyway. It's not in the 40s, 50s, 60s, but it might be in the sort of 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 7 or 8 batch sizes, and that supports also -- 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 book value, we were down $4.5 million, half over half or $1 million of that was Zone caravans and then probably about $3 million worth of pricing annualized with the pricing we've got to put in place. So you'd get back that pretty quickly. That's not discounting the fact that we're paying workforce another 4%. Our electricity bill quite higher. So you think about utilities and also the rent of that. So that pricing sort of that's the last seven tenths. So 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 2, increasing U-Haul and the EV business -- sorry, the Kia business in Europe. And I reckon we'll win some more. Then you got Unified benefits. Freight is decent and contract labor, that's to come and then a bit of margin improvement because the Thai plant has been a bit brutal for a while. We picked up a little bit there. So there's plenty of reasons to see this business return to not just FY '25 but FY '24 type margins at a minimum as we expand.
Operator: Your next question comes from Ralph Katz, private investor. This reads, how will the switch to electric vehicles impact Amotiv performance?
Graeme Whickman: 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 Ford, they wrote-off 20-something million, Stellantis $32 billion -- sorry, I'm talking billions, 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 U.S. government's point of view around CAFE and a few other bits and pieces. I'm not making a judgment on whether an EV is right, wrong or different. 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 EVs has slowed quite dramatically, Ralph. What you are still seeing is a strong Chinese level of investment, although there's 100 brands or so in China, that will go 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, 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 likes of electrified pickups whether it be Ford's electrified, Toyota and the like, we've been able to engineer towbars 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.
Operator: There are no further questions at this time. I'll now hand back to Mr. Whickman for closing remarks.
Graeme Whickman: 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. The balance sheet is in a great place. And as you tick through many of the financial metrics, whether an allocation framework or due to the broad financial metrics, 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 ROCE. As I said earlier on, the prospects for each of the divisions still remains 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 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.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.