Peter Warren Automotive targets Toyota, electric vehicles for growth in 2024 financial year

The automotive dealership group says Australians are buying larger cars and waiting less time for new vehicles as supply chain woes subside.

Australia’s most popular car brand, Toyota, and an expected boom in electric vehicles will underpin the outlook for Peter Warren Automotive as it expands its national footprint.

The group will seek to acquire more car dealers in the coming financial year, saying it would be a “natural consolidator in a highly fragmented market”.

Peter Warren reported a 21.1 per cent uplift in revenue to $2.07bn in the 2023 fiscal year – 5 per cent better than market forecasts. Profit was a miss, down 7.8 per cent to $56.7m, as margins fell 110 basis points to 18.9 per cent from higher costs and lower prices for used cars.

Peter Warren chief executive Mark Weaver said, after acquiring a stake in Toyota dealers for $45m, there was still have considerable debt capacity to support future growth in the group.

“Peter Warren is a natural consolidator in a highly fragmented market and will continue to pursue appropriate greenfield and acquisition opportunities,” he said.

“Toyota is the largest automotive brand in Australia and its addition to the Peter Warren business represents an important milestone and a great opportunity.”

New vehicles sold were up 18 per cent to 27,383 units for the 12 months to June 30 including the incremental contribution from the Penfold Motor Group. Growth without Penfolds was 9 per cent.

Three of the best-selling cars in the past year at Peter Warren were the Ford Ranger (also the best-selling car in Australia), Isuzu D Max and the Mazda CX-5. The deal with Toyota is expected to result in two of Australia’s top five selling cars – the Toyota HiLux and RAV4 – support growth.

Mr Weaver said that new vehicle delivery backlogs were reducing, but supply continued to be uneven. June was the first time since 2020 that deliveries exceeded orders taken. The takeover of Toyota dealers at Warwick Farm and Bathurst along with Volkswagen Bathurst has increased its order book by 40 per cent.

It was anticipated that Peter Warren would see continued volume growth in 2024, underpinned by a strong order bank and revenue from service, parts, finance and used cars.

“Improving supply will increase our operating costs, including interest, and create potential for limited margin contraction, and so we are focused on disciplined inventory and cost management to limit this impact,” he said.

Peter Warren Automotive chief Mark Weaver.

Mr Weaver said that Peter Warren was well placed for the shift to electric vehicles, including advanced charging infrastructure, development of complementary consumer products and adoption of new revenue streams and partnerships.

“Our New Energy Vehicle model line-up is strong and is expected to grow by 90 per cent as the OEM (original equipment manufacturer or car brands) supply lag improves,” he said.

“This will naturally dilute the early market leaders and present an opportunity for Peter Warren to lead the next wave of NEV models with a wide range of consumer offerings across all segments.”

Margins were hurt from incorporating the impact of the agency model, lower used vehicle margins as inventory was reset to reflect new market conditions, and a small reduction in income from the apprentice booster program.

“While a contraction in margins was expected, the magnitude of contraction in gross margins was a surprise,” Citi analysts said.

Citi said that Peter Warren appeared to have discounted heavily to avoid being stuck with inventory as the market softened. It added that the group’s order bank remained healthy and should support new car volumes in the 2024 financial year.

Shares in Peter Warren fell 2.3 per cent to $2.61 on Tuesday.