McMillan Shakespeare Stock

Thank you for standing by, and welcome to the McMillan Shakespeare Limited FY '26 Full Year Results Briefing. [Operator Instructions]

I would now like to hand the conference over to Rob De Luca, Managing Director and CEO. Please go ahead.

Thanks, Travis. Good morning, and thank you for joining us for the McMillan Shakespeare Full Year Results Presentation for the 2026 financial year. My name is Rob De Luca, and I'm the Managing Director and Chief Executive Officer of MMS. Today, I am joined by our Chief Financial Officer, Paul Varro. I'd like to start by acknowledging the traditional owners of the lands on which we joined this meeting today and pay my respect to their elders, past and present.

The presentation will commence with our FY '26 highlights, move through segment and financial performance, provide a strategy update and close with our outlook for FY '27. This morning's presentation will refer to the slides that were released with our results. At the conclusion of the presentation, both Paul and I will be happy to take any questions you have.

Moving to Slide 4. FY '26 was a year of strong organic growth, strategic execution and a relentless focus of delivering excellent experiences for our customers as their trusted partner. We are pleased to deliver a record profit in FY '26 with UNPATA and underlying EPS up 13.8%. GRS was a standout segment with UNPATA up 24.9%.

MMS performance was underpinned by customer growth across all segments, where we continue to see strong digital engagement and satisfaction. We made strong progress in executing on our strategy delivering superior customer experiences, enhanced distribution and improved our operating margin, which was up 250 basis points, reflecting the operating leverage in our platform. We delivered attractive returns for shareholders with ROCE of 62.1% and an annual fully franked dividend of $1.32 per share and a dividend yield of 6.6%.

Now moving to Slide 5 and looking at some of the financial highlights for the period, where we saw strong performance across all key group metrics. Revenue for the year was $602.1 million, up 6.8%. Operating income grew 7.2% to $435.2 million. Operating expenses were up just 2.8%, which saw EBITDA grow by 14.1% to $180.7 million. As previously mentioned, UNPATA, our measure of underlying profitability grew 13.8% to $107.9 million, while statutory NPAT grew 11.4% to $106.7 million. We continue to deliver strong returns for shareholders with ROCE of 62.1%, underlying EPS of $1.55, up 13.8% and an annual fully franked dividend of $1.32 per share, comprising of a $0.62 per share interim dividend and a $0.70 per share final dividend.

The results presented today are no longer normalized as we foreshadowed at the half year, having successfully transitioned and scaled onboard financed within the time frame set.

Moving now to our customer highlights on Slide 6. We achieved customer growth across all segments while continuing to lift digital engagement and satisfaction. In Group Remuneration Services, Salary packages grew 7.1% to 402,000 and Novated leases grew 13.5% to a record 90,000 with an NPS of plus 50, while 94% of claims are now digitally processed. These outcomes reflect the investments we've made in automation and AI-enabled processing which is translating directly into a faster, simpler experience for our customers who continue to rate our app strongly at 4.6 stars.

In Asset Management Services, fleet units grew 3.3% to approximately 16,000 with an NPS of plus 53. Our poor booking platform is enabling more customers to digitally self-serve their vehicle bookings, which was up 308%. And in Plan and Support Services, customers grew 3% to 44,000 with an NPS of plus 45, while our digital payments platform increased the invoices processed by 45 percentage points. These highlight the commitment to delivering market-leading customer experience.

Moving to Slide 7 and highlighting how our investments and strategy execution are delivering superior customer experiences, enhancing our distribution and resulting in productivity gains reflected in a 250 basis point improvement in our operating margin. Our first strategic priority is to excel in customer and partner experience. In the period, we continue to strengthen and grow our ecosystem as strategic partnerships with leading global automotive brands. Our investment in a superior and more integrated digital platform for dealers representing OEMs is making the vehicle ownership process easier and faster for customers while more efficient for dealers.

In the period, we saw a 42% increase in the number of dealers using our platform, and we're able to reduce the time from lead inquiries of settlement for customers by approximately 5 days.

Our second strategic priority is to deliver simplified and scalable solutions, which we set out to achieve for Oly, our SME Novated offering. In the period, we continue to significantly expand distribution including partnerships who have strong access to SME clients like [ NAB ]. We also continue to simplify the employer onboarding experience, a key enabler for their employees to access the benefits of Novated leasing. In the period, these initiatives contributed to a 185% increase in Oly registered SME employers and a 23 percentage point improvement in employee to lease conversion.

And our third strategic priority is to drive technology and capability enablement, where in the period we progress deploying AI and data capabilities with real-time agent monitoring which is flowing through directly to improved service and productivity outcomes. These enhanced capabilities allow our agents to have access to real-time dynamic information and tools which are helping customer inquiries be resolved faster, reflecting in a 13% reduction in average handling time in the period as well as less after core work, which was down 18%.

Now moving to Slide 8, our FY '26 sustainability strategy highlights. We're proud of the progress we continue to make in how we run the business responsibly. We were upgraded to our Morgan Stanley Capital International ESG rating of AAA in March, achieved 105.6% gender pay equity in like-for-like roles and have again been certified as a great place to work. We supported Bravery Trust, mentored young people with disabilities through the Australian Disability Network and commenced our RAP Innovate program in September last year. 100% of MMS sites now run on green power or renewable electricity, 42% of our internal [ Cathleen ] are [ BEVs ] and we funded $12.6 million of fleet EVs through green finance during the year.

I will now take you through the performance of each of our segments in more detail, starting with GRS. On Slide 10, our largest segment and a leading provider in salary packaging and Novated leasing delivered a strong result. Revenue grew 11.2% to $351 million, operating income was up 10.3% to $320.8 million, and EBITDA had a growth of 24.8% to $137.2 million taking the operating margin to 42.8%, a 498 basis points on PCP. This strong performance highlights the scalability of the GRS platform.

This financial performance was supported by strong customer growth and operating performance. Salary packages were up 7.1% in the period, supported by 14 net new client wins in the year. Novated leases were up 13.5%, underpinned by Novated sales growth of 8.4% for the full year. Pleasingly, that performance accelerated through the second half, up 19.5% half-on-half. Our Onboard Finance receivables book grew 16.6% to $587 million. While focus on productivity contributed to customers for FTE improving 17.5%, a clear sign of the investment we made in growing Novated sales capability through the year is paying off in both volume and efficiency.

Oly Novated sales growth was 77%, which validates our SME distribution strategy. Novated lease yield was down 3% on PCP, reflecting prior year plug-in hybrid surge and competitive value proposition enhancements made to support growth.

Now turning to Slide 11. Asset Management Services, which reflects our Specialist Fleet Management business. Revenue was up 1.3% to $188.4 million with fleet units up 3.3% to approximately 16,000. This was underpinned by 20 net new client wins in the period, which saw a 30% growth in managed only units. As customers continue to hold vehicles for longer and fleet replacement cycles slowed, written down value was down 1%, contributing to a 1.7% lower operating income. These dynamics also impacted end of contract unit sales, which were down 9%, while high yields benefited from a greater proportion of early terminations attracting higher exit fees.

Productivity continued to be a focus throughout the year with the leased assets per FTE up 17.2% on PCP. The business incurred one-off costs during the year to implement business process outsourcing and transition to a single retail yard. This one-off cost contributed to EBITDA being down 4.8% to $27.7 million on PCP, while operating margin remained strong at 53.6%.

Now turning to Plan and Support Services on Slide 12. PSS now manages the plans of 44,000 participants, making PSS the second largest NDIS plan measure. Revenue grew 5.9% to $59.8 million, more than offsetting the removal of NDIS setup fees from 1 July 2025, and represented a 7.9% headwind of FY '25 revenue. NDIA and NDIS quality and safeguards commission continue to strengthen compliance and payment integrity requirements across the sector, supporting improved outcomes for participants and scheme sustainability. Industry-wide compliance requirements from the NDIA resulted in 88% increase in claims subject to review during the year. Operating expenses during the period reflected the acquisition of My Plan Support May 2025, higher scene compliance costs and investments to support enhanced payment integrity technology.

These costs, combined with removal of setup fees by the NDIA, contributed to an EBITDA of $15.1 million. Our investments in automation continue to deliver productivity benefits with customers to [ FDA ] improving 14.5% on PCP. These investments also strengthened fraud detection capability to support our customers and our competitive position as a leading plan manager.

I will now hand over to Paul Varro, our CFO, who will take you through the group's financials for FY '26.

Thanks, Rob, and good morning, everyone. If you turn to Page 14, what we thought we'd do is lay out some of the key financial outcomes for FY '26 in more detail. As noted by Rob earlier, our results are no longer reported on a normalized basis. Comparatives are presented on a non-normalized basis, for consistency with the current year results.

On the left-hand side of Page 14, you'll see the P&L. As you can see versus FY '25 revenue grew year-on-year by $38 million or 6.8%, with revenue growth across all business segments, and in particular, GRS which grew revenue 11%, supported by excellent growth in Novated leasing, up 8.4% and onboard finance interest.

Onboard Finance continues to perform in line with our expectations, with receivables up 16.6% year-on-year. Onboard results are reported in the GRS business segment. Cost of sales were higher by $8.8 million, reflecting higher business activity levels, including AMS remarketing values and continued growth in Onboard Finance, as noted previously. There is a table at the bottom left of Page 14 with the cost of sales breakdown for your information. Revenue and cost of sales combined to deliver operating income growth of [ $29.5 million ] or 7.2%. Operating expenses increased by just 2.8%, reflecting strong cost management and productivity gains across the business. Our focus on productivity along with our income growth has delivered positive operating leverage for MMS in FY '26 with EBIT are up 14.1% and operating margin up 250 basis points to [ 51.5% ] 41.5%, highlighting the scalability and efficiency of the MMS platform.

Depreciation and amortization increased $3.3 million reflecting the successful completion of the Simply stronger program in FY '25. The outcome of our strong performance across a number of key P&L lines resulted in a record UNPATA of $107.9 million, up 13.8%.

On the right-hand side of Page 14, we have our operating expense profile, walking you from FY '25 to FY '26. As you move from left to right, the first bar shows our cost increases due to wage and vendor inflation of $7.1 million, offset by savings from nonrecurring costs of $6.1 million primarily due to the successful conclusion of the simply stronger program in FY '25. We continue to invest in growth in particular, with investments in Oly, up $5.9 million, which delivered a 77% growth in Oly Novated sales. In addition, we invested in sales and distribution capacity and following the acquisition of My Plan Support in May 25 included their operating costs of $2.5 billion. Our investments in productivity initiatives delivered net savings of $7.5 million across all business segments.

During the year, we also commenced a business process outsourcing initiative designed to further enhance efficiency and scalability. Implementation costs of $1.4 million were incurred in FY '26 with further benefits on top of those delivered in FY '26 expected to be realized in future periods. All up operating costs grew just 2.8%, a testament to our focused cost management.

Turning to Page 15. The balance sheet remains strong with net assets growing to $126.4 million. Our key covenant metrics on the top right-hand side all remain comfortably inside threshold levels. allowing us flexibility moving forward. On the bottom right, following the successful extension of the Onboard Finance and AMS funding facilities, we have no maturities due over the next 12 months and a well-balanced maturity profile out to 2030.

Lastly, turning to Page 16. Our cash generation remains strong with an underlying cash conversion of 111%, noting the elevated tax installment paid in FY '26 as the benefits of the temporary full expensing program partially reverted in the period. Our strong and flexible balance sheet positions us well to manage our capital efficiently and to ensure long-term growth while balancing returns to shareholders.

In this half, the Board has declared a fully franked dividend of $0.70 per share, representing 85% of UNPATA, the midpoint of our payout range of 70% to 100%. This distribution when coupled with the first half '26 dividend, takes our annual dividend to [ $0.132 ] and a dividend yield at an attractive 6.6%. Overall, it's been a strong performance for FY '26 with all businesses growing revenue, positive operating leverage, a record UNPATA and a balance sheet that is well positioned to enter FY '27 with plenty of flexibility to grow.

With that, I'll hand it back to Rob who will take you through our strategy and outlook.

Thank you, Paul. Now moving to Slide 18. As a trusted partner, we remain committed to providing solutions that make matters simple for our customers. We deliver on that through our 3 strategic priorities excelling customer and partner experience to grow trusted relationships, deliver simplified and scalable solutions to meet evolving customer needs and drive technology and capability enablement, to serve our customers more productively.

Underpinning this is our core competencies, managing B2B2C relationships, delivering simplified solutions, financing and conditional payments, leveraging pattern technology and harnessing our ecosystem partnerships. Together, they drive outcomes we've talked through today, high NPS, strong margin, high ROCE, EPS growth and being recognized as an employer of choice.

As you can see on Slide 19, we are a trusted partner with attractive financial characteristics, delivering long-term growth for shareholders. As a leading and scale provider in our markets, we have 402,000 salary packages, 106,000 mobility solutions under management, which includes 90,000 Novated leases and 16,000 fleet units and support 44,000 PSS customers. We have a reach of 2.6 million consumers and over 53,000 businesses, which gives us significant opportunities for growth.

We have built sustained relationships over time to become a trusted partner for our customers. Maxxia and Remserv carry a Net Promoter Score of plus 50, inter-leasing sits at plus 53 NPS, and PSS has a strong NPS of plus 45. While over the last 12 months, we have retained 100% of our GRS and AMS top 20 clients.

We run on a scalable technology-enabled platform, which manages approximately $8 billion in payments, $1.7 billion in finance assets and delivered 14.1% improvement in customers per FTE productivity in the period. The financial characteristics that come with all of that are attractive by any measure, a 41.5% operating margin, 62.1% ROCE, 50% recurring revenue and underlying cash conversion of 111%.

Let me now move to Slide 20 and reflect on our proven record in consistently delivering strong financial outcomes and attractive returns for shareholders since setting our strategy in 2023. Revenue has grown at 9.1% CAGR over this period, while UNPATA has grown at 17.6% CAGR over the same period, reflecting the scalable platform we've built. Our disciplined approach to delivering strong returns is reflected in ROCE, which has expanded from 35.7% to 62.1%, up 26.4 percentage points. While over the same period, our underlying EPS has grown from $0.92 to $1.55 and 18.9% CAGR.

Now turning to Slide 21 and our outlook for FY '27. As a market leader, MMS enters FY '27 from a position of strength. We expect FY '27 to be a supportive environment for business growth. Certainty of the [ EV FBT ] exemption and preferences for fuel-efficient vehicles is expected to support growth in Novated leasing and fleet management. Demand for salary packaging is expected to continue to benefit from ongoing cost of living and inflationary pressures. The current dynamics of elevated demand for EVs and softer demand for ICE used vehicles are expected to be reflected in remarketing income.

As the second largest planned management provider, we are well positioned and will continue our engagement with the government and industry on the emerging NDIS reforms. We will maintain a disciplined approach to delivering productivity gains which will support selective reinvestment in broadening our sales capability while continuing to deliver an enhanced value to customers in a competitive market. Finally, we will continue to execute on our strategic priorities: one, excelling customer and partner experience; two, deliver simplified and scalable solutions; three, drive technology and capability enablement.

Thank you for your time this morning and continued support. Paul and I would now welcome any questions you may have. I will now pass to Travis to moderate questions.

[Operator Instructions] The first question today comes from Phil Chippindale from Ord Minnett.

First question, just on Novated volumes. Rob, earlier, you mentioned that second half volume growth was around 19.5%. But clearly, over the 6 months, there was a significant variance in volume growth over the period. You then give us an update in July the volumes that month were up around 8%. Do you view that 8% number as sort of being a more normalized outcome? In other words, are we sort of through a lot of the Iran related disruptions and sort of those spikes in activity?

Yes. Look, great question, Phil, and always challenging to have a view of kind of outlook on any kind of measure or metric. Certainly, we saw a bit of volatility in terms of the last 12 months in the second half. Firstly, I think we've the market just unsure around what the government's position was going to be on the SVT exemption for EVs. And then secondly, obviously, the fuel crisis of the war.

We've certainly seen things come back to a little bit more what I would call expectations of what we probably had for the period. Obviously, July 8% sales growth is good, orders are still strong. The month of July, I think is up 18% in orders. So there's still certainly good demand there at the moment in the market. How long that lasts, what that looks like over what period of time always difficult to say where our own analysis has shown historically, the long-term growth Novated sales in our business has been about 6% CAGR over a very long period of time. That's obviously fluctuated over different periods. But certainly, where we're seeing things at the moment, it feels like it's getting back to a level we probably expected 6 months ago. But again, obviously, different external factors drive that.

Yes, I understand. Just pivoting to the yield then. You've mentioned that the yields will be used down 3%. But I think the first half was up around 1.6%. So it sort of implies the second half is down 4% or 5%. In your commentary, you did mention that you're cycling the fab numbers in the PCP. Is that a make reference there? Is it effectively you're talking about the lower average vehicle value in this period?

And then just a related sort of follow-up, what are you seeing in terms of new vehicles as a proportion of Novated sales over the last 6 months? Is that presumably, that has increased?

Yes. So look, obviously, from a yield perspective, some of the elements played out for us over the last period. I think the first is, yes, the plug-in hybrid in FY '25, the second half on the first half in '25, our yield was up 5% that reflected largely high-valued plugging hybrids at the time like the [ Shacks ] and others. So they are generally at a higher price point than what we're seeing today in our BEVs.

So that's kind of the first thing. So we like that in the second half, which we don't expect to happen in FY '27.

The second, in terms of EVs, yes, I mean our proportion of EVs in the second half was about 70% versus the first half being about 49%. And what we're seeing is the value coming down on average as new makes and models coming to the market. So our [ BV ] under 75,000 went from 80% to 84%. So we're seeing a shift of higher proportion of those BEVs, which we're financing at lower price points. So that's having a bit of an impact, and we've always expected that to happen. We think that will continue to play through in terms of FY '27.

And just to give you a bit of a sense, the year before that was 72% were less than 75%. So it's moved quite a lot in terms of the last 12, 18 months in terms of the number of Chinese make some models that have come into this marketplace at lower price points. I think for us, the third thing that had a bit of an impact in our yield on the second half was we reviewed some of our insurance products with our insurer, made some changes there to enhance customer value. So the second half on first half, that was down about 7% in terms of its impact on yield.

Overall, our second half on first half yield total was down 4% that you alluded to. It's still up about 7% on FY '23 before, obviously, the big take-up of EVs when the legislation came out and we had Tesla as the main price points. So overall, we still feel yields good but there are some pressures of moving it downward.

Okay. And then just last question for me. Just on Oly what proportion of your leases are now from that business? I think 6 months ago, you mentioned a number of around 5% of volume. Just wondering where that's up to now. Clearly, you spoke to the 77% growth, et cetera, but just maybe as a proportion of the total.

Yes, it's just around 6%. So it's up a little bit more. Obviously, we had such a strong performance across all of our brands in the second half. but really pleased with the performance of Oly. Our mixture is changing quite a lot in that so half of that is only coming through partnerships and the other half now is coming through SME relationships, which is really good. So we're starting to build a really good SME client base in that platform as well.

The next question comes from Tim Lawson from Macquarie.

Just a couple. In terms of the NDIA segment, can you talk just the growth in client numbers and whether you see there's an opportunity there to accelerate that without buying things that is organic growth and getting some operating leverage. Obviously, the policy settings are still moving around?

Yes. Thanks, Tim. Look, it's interesting, our growth was about 3% for the year. A little bit lower than what we've historically delivered. We are seeing though that the agencies removing participants from the scheme at a higher rate than they historically have. So almost 70% of our customers that we didn't have in '26 versus '25 was because their plans with [indiscernible] are no longer eligible. So it's certainly slowing down in customer growth from a participant perspective. That's kind of one factor.

I think the second is obviously a little bit of high compliance that the agency and the quality of Safeguard is imposing now. We're expecting a number of plant managers to probably exit the scheme. So there will be opportunities to pick up share as some players exit the market from the higher compliance costs.

And then thirdly is obviously with some of the reforms that are going to happen and move to a panel of high-quality plant managers, we see some opportunities. They're probably just starting to emerge in terms of opportunities, Tim, and we'll assess those on its merits, generally try and pick these up without having to pay anything from this people. [indiscernible] but there is a little bit of volatility in the market in terms of just obviously what's happening in terms of how the agency is managing it and some of the reforms.

So I didn't get you when that compliance hurdles increase? When was that happening?

It's been progressively increasing. So various factors, they brought in some back in late FY '25, early '26 with some of the black and white rules. And then as I mentioned in my early remarks, they're challenging and testing a lot more payments now of plan managers as well. So they're going through and verifying those a lot more, and that's putting a lot more scrutiny and compliance cost to operators.

Yes. Yes. Okay. Very clear. And just on the outlook comment around the remarketing yields or the EV versus the ICE. You're trying to flag -- you've cut out obviously unit decline versus the exit fees and yields, but you're trying to sort of flag that there's a little bit of a reduced remarketing yield because I don't expect there's a lot of EVs in the book and obviously will be [indiscernible] dominated?

Yes. So exactly right. Like our remarketing results in the second half were very different to the first half. First half was pretty good. We also had some benefits in our yield that I mentioned in terms of some early terminations that helped accelerate some of the income in the yield. But in terms of units, certainly down, we're down 9% for the year. We're down actually 20% for the second half on the first half. And the revenue that we kind of generated from those proceeds was down 17% second half on the first half. So we expect that to play out a little bit more in the first half of '27.

To your point in terms of EVs in our fleet business, we funded about 7.5% of our units in 26 work EVs, up from 2.9 in '25 and the month of July is about almost just shy of 10%. So we're starting to see now our fleet clients make the transition more hybrids than pure battery electric vehicles. So we start -- we'll hopefully see a bit of replacement happening, which will hopefully stimulate some growth for us in terms of units. But at the moment, they've been holding on to their cars a bit longer. That's been a cycle we've seen now for a couple of periods. And I think that combined with probably the cost of replacement has been a little bit higher than what they would have seen a few years back. That's probably just holding them back on the replacements as well.

Yes. Okay. And so in terms of sort of contribution from the AMS segment, that's sort of second half, I think it's like almost $13 million. Are you feeling that sort of a comfortable go forward? Do you still think there's sort of more normalization of that remarketing yield to come out of that number?

Yes. Look, it's a hard one, Tim, as we've spoken plenty of times. We've always had a view that we expected the elevated remarketing values to come down over time. We've seen that probably in the last 6 months more so than we've seen in the prior period. I think part of that stimulated by external factors and some of that, obviously, by how businesses are feeling.

In terms of where that is, pre-COVID, this business was kind of generating about $14 million UNPATA. So we obviously had elevated post that for a few years we probably see -- we see a little bit more downside probably on the remarketing values in the first half of '27 a bit hard to tell how long that lasts for, but they are still delivering us good profits and higher than where they were free COVID, but I certainly have come back a bit.

Yes. And can I just pick up on your comment around the 6% CAGR sort of long-term growth that gets to do with Novated -- just how you sort of feel -- obviously, you see a bit of a fuel boost. The policy certainty helps. You've talked about the sort of 84% of vehicles BEVs now coming sort of below that 70,000 hurdle that obviously is important in the policy going forward from sort of next year. Can you just talk how comfortable you are that, that sort of the right number even with these sort of policy settings moving things and fuel sort of moving things around a bit.

Yes, I'm not saying that 6% is the number to take is a forward estimate. I'm just saying our long-term average across this business has had 6% as a CAGR. Some periods higher than others, obviously, much lower during COVID period, a bit of a boom straight afterwards. We'd say at the moment, there are favorable characteristics in settings for positive growth in Novated leasing. The legislation is one of those things, the greater awareness of Novated leasing and the benefits it provides, obviously, our Oly platform and entering a new market.

So I think all of those things are positive for us in terms of we feel good about the outlook in terms of sales growth. And I just pointed out that July was 8%. It feels more like kind of where we expected things to be before the fuel crisis.

Yes, yes. Okay. And just last question for me. Just more sort of corporate structure question. With the activity we're seeing with fleet partners and with the sort of structural change in NDIS. Are you still feeling that the sort of 3 segments sort of all go-forward segments of the group?

Look, I mean, we obviously don't comment on corporate M&A activity. But we're pleased with the various contributions of each of the businesses, obviously different factors affecting each of them, as I've outlined today. At this stage, we feel comfortable about the business kind of settings, how we kind of think about the future and segmentation and how we think about the business. Obviously, we'll let the market know if we make any changes to it.

PSS as we've outlined, got some elements of reforms that it's kind of faced now over the last couple of years, and we just continue to assess those on its merits to make decisions about what that means for the business. And at this stage, we don't have enough certainty of what the panel would look like and the economics of it. Obviously, the Asset Management business have always called out that we were very cautious in terms of the elevated remarketing position of that business, and therefore, doing any M&A activity when that [indiscernible] inflate rates wouldn't be the best use of shareholder capital. We're starting to see that kind of logic play out why we've kind of made that decision. How that plays out in the future, though, we still see some really good synergies between our asset management and our GRS business in terms of procurement benefits and joint client opportunities.

The next question comes from Andrew Hodge from Canaccord Genuity.

My questions have been asked and answered. Thank you.

Thanks, Andrew.

The next question comes from Chenny Wang from Morgan Stanley.

Firstly, maybe just in terms of warehouse impact first half versus second half. Obviously, the second half you guys saw a pretty substantial tailwind on the [ Nevada ] side. So you would have obscure on the first half, second half. But I just wanted to see if there's any more color you guys can give us of that dynamic, noting, I think FY '25, first half, '26, you guys talked to the first half being lower, second half being higher on that front. So I just wanted to see whether that has played out.

Yes. Chenny, great question. And pleasing to say, yes, that has turned out that way. So first half marginally below by a couple of hundred thousand versus contribution versus the second half, it was a plus [ 1.6 ] positive contribution from the warehouse or [ OBS ]. So that was pretty much exactly in line with where we predicted it to be. Obviously, we had a good surge in our sales in the second half. So where we can, we try and keep that ratio relatively proportionate where we can, but sometimes it can get slightly out of whack when there's a number of units coming through quickly.

Got it. And then just -- I mean, in the past, you guys talked about FY '27 seeing a tailwind from the warehouse. Again, probably be harder to discern given broader tailwinds, but like that trajectory is still on track, I guess, I suppose.

Yes, still on track. I mean, if you take a step back, the contribution from onboard will start to slower than receivables growth slows. So to give you a sense of it in the first couple of years, FY '24 to '25 receivables grew 54%. This year, you saw in the financials it's 16%. Going forward, it will be high single-digit, low double-digit growth for receivables in the outlook. So therefore, that contribution or the speed of the contribution will moderate somewhat, but we still expect it to be accretive in the outer years relative to the P&A model. Obviously, it also provides a good annuity and recurring revenue for us as well.

Got it. And then I may have missed this, so my apologies, but did you guys carry a backlog exiting FY '26 on the GRS side?

Yes, yes. We did Chenny, we didn't kind of talk to it because obviously, as we kind of ended '25 when in '26 kind of the delivery times of vehicles are all within kind of the month. Delivery times, as you would know, picked up a bit in the second half off the back of the supply chain challenges. We're seeing at the moment that our order book is more like delivery times of about just over a month where previously it was about 20 days. So there's a little bit of order book in our portfolio at the moment, but it'd be kind of less than about a month's worth.

Got it. And then just in terms of GRS margins for the second half. I guess when I kind of look at margins there half-on-half over the past few years. It has kind of trended both up and down. But second half saw about 300 basis points lift half-on-half like that 44%, if I got my math correct, I may not have. But that 44%, like is that a good level going forward, especially given some of the one-off costs, so to speak, have now come out of the business?

Yes. I mean we always have a much stronger second half than first half in terms of our seasonality across our business. So MMS level, just think about it, obviously, we take wage increases from 1 July. A large proportion of our GRS and PSS business have got exposure to fair work commission that's up 4.75% for FY '27. So we start with a higher cost base and then we kind of generally deliver benefits in productivity over time.

We also have in the second half generally a little bit more positively in terms of 30 June sales innovated, [ FPT N31 ] March if those things always help our second half. So If you look over history, we kind of generally have a really good second half comes back a bit in the first half then builds up again into the second half. I've always sort of said this business is a 40% plus margin business, and that's what we try to continue to deliver on each half. Sometimes it's a little bit up or down around that depending on different factors.

Got it. And then just one last one. Any large renewals or tenders for you guys over the next year that we should be aware of?

Not in terms of major existing client renewals. I think all our largest ones we've kind of been through a bit of a cycle. So I think the next short period in FY '27, not so much. We've got quite a few opportunities we're constantly tendering for over the next period. And hopefully, we'll see some success out of those in FY '27.

[Operator Instructions] The next question comes from Hayden Nicholson from Bell Potter.

Just had one question going off on Chenny's. Just wanted to come to the operating expense walk on Slide 14. Mentioned it there, Rob, the second half implied up 4.7%. So some of those things, I guess, are offsetting the deck talks around your productivity and improvements that you're making, but it's getting offset, particularly in the second half. Like what deliverables do you have coming into FY '27. And then how do we actually get to in the outlook statement, you're talking to productivity gains? Because I kind of feel like you did good volumes in GRS and that's just waterfall down to the EBITDA line to give you a good number.

Yes. Thanks, Hayden. Look, we always got initiatives across the business on our strategy to drive productivity benefits. And I think our last few years, 3, 4 years has been proven that in terms of our results. You can see there in the productivity bar that's obviously alluded to [ 7.5 ]. The first half of that was [ 2.7 ] the second half of [ 4.8 ]. So we always get a bit more momentum in the second half as we deliver on some of the outcomes from the various initiatives.

As Paul alluded to, we implemented some changes around BPO in the period, which we expect to get some annualized benefits in FY '27, we continue to digitize all of our platforms from a payments perspective in PSS and in terms of how we manage claims in GRS, which I alluded to in my strategy update this morning, and they come through. And then obviously, as we continue to enhance the digital experience for our customers and using our these service increases, the use of AI is reducing core volumes into our team and reducing average handling times. So we've got a number of initiatives that we think that will continue to deliver ongoing productivity gains in the business.

As I mentioned, to Chenny's question, though, we always have a bit of a difference between the second half and the first half. So if you look at our last year in FY '25, we kind of finished the year in second half of '25 and then came into '26, and our underlying profit for the group was down 6%, the first half off the back of the strong second half the year before. That's not -- that's a fairly normal kind of experience for us in terms of seasonality, but we're always looking at opportunities to drive productivity benefits and deliver really good outcomes for customers.

Got it. Just as a quick follow-up, that sales bucket. I think is a new individual call out versus the first half of '26. I'm just interested is that adding heads for investment? Or is that to go along with the sales? Like does a run rate from here? I guess what I'm getting at?

Yes. I mean on that walk, you can see there, there's a $4 million increase in investment in sales capability in the organization. A large portion of that is the second half. So that will carry forward into certainly an annualized impact of that largely in the first half. That's innovated salespeople, it's industry experts and specialists investments in people supporting our broad distribution partnerships.

At this time, we're showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the McMillan Shakespeare Limited Half Year Results FY '26. [Operator Instructions]

I would now like to hand the conference over to Mr. Rob De Luca, MD and CEO. Please go ahead.

Thank you, Alison. Good morning, everyone, and thank you for joining us today for the McMillan Shakespeare FY '26 First Half Results Presentation. My name is Rob De Luca, and I'm the Chief Executive Officer and Managing Director of MMS. I'm joined today by our Chief Financial Officer, Paul Varro. At the conclusion of the presentation, both Paul and I will be happy to take any questions you may have.

I would like to start by acknowledging the traditional owners of the lands on which we meet today and pay our respects to elders past and present.

As we move through our presentation, we will be referring to the slides that were released with our results this morning. We will commence this morning's presentation with an overview of some highlights from the period before we move to a more in-depth summary of each of our segments.

Turning now to Slide 5, which provides an overview of our 1 half FY '26 highlights. Importantly, I'd like to note that our 1 half FY '26 results are no longer normalized following the successful transition period and scaling of onboard finance. For ease in this half, we will compare 1 half FY '26 results to previously reported normalized financials. This will be the last period we will compare results to previously reported normalized results.

Starting with our financials, we delivered growth across key performance metrics in the period. Revenue increased 11.2% to $297.4 million. Operating income was up 4.4% to $210.1 million after accounting for cost of sales. EBITDA increased 4.8% to $84.7 million and UNPATA grew 1.4% to $50.3 million.

Growth in financial performance was supported by an increase across all key customer metrics. Salary packages increased to 387,500. Novated leases grew 7% to 82,100. Fleet units increased 4.4% to 15,400 and PSS customers grew to 43,000, up 16.1% on the prior period. We are seeing clear benefits from the strategic investments we've made over recent years.

Oly continues to scale, comprising 5.2% of group novated lease sales, which is up 220 basis points. The launch of our new GRS apps has increased customer digital engagement to 83% of service interactions, improving the customer experience and in turn, reducing cost to serve. Customers per FTE increased by 14.1%, reflecting productivity gains flowing through the business.

Against this backdrop, we continue to deliver attractive returns for shareholders. Earnings per share increased 1.4% to $0.723. ROCE remained strong at 62.8%, up 110 basis points, and we declared a fully franked interim dividend of $0.62, equating to a dividend yield of approximately 7.2%.

We have also announced an on-market share buyback of up to $10 million over the next 12 months. This, combined with the first half dividend reflects total capital returns of up to $53.2 million, up 7.6% on 1 half FY '25.

Overall, our first half demonstrates the progress we are making on our strategy to deliver growth, productivity and returns to shareholders.

Turning to Slide 6 to provide more detail on our financial performance. For ease of comparison, we have included both 1 half FY '25 and 1 half FY '25 normalized results. As mentioned, I will compare 1 half FY '26 results to previously reported 1 half '25 normalized results.

Starting with revenue and operating income, we saw growth across all segments. Revenue was up 11.2% in the period to $297.4 million. Cost of sales increased in line with business growth and the inclusion of Onboard Finance, which saw operating income up 4.4% to $210.1 million.

Turning to operating expenses. Productivity gains offset inflationary pressures with cost-to-income ratio improving. Operating expenses increased by 4.1%. Once accounting for $3.4 million in Onboard Finance costs not included in 1 half FY '25 normalized results, operating expenses were up just 1.3%, reflecting disciplined cost management and the productivity benefits of investments in technology, automation and process simplification.

EBITDA increased 4.8% to $84.7 million, with operating margins maintained at approximately 40%, slightly up from the normalized prior period. UNPATA increased 1.4% to $50.3 million after allowing for expected increases in amortization, which was up $3 million following the conclusion of Simply Stronger investments in 2 half FY '25 and the inclusion of Onboard Finance, while statutory NPAT grew 9.7% to $49.6 million.

Turning to Slide 7 and the progress we're making in delivering on our strategic investments. During the half, we continued to execute on our 3 strategic priorities: excelling in customer experience; driving simplicity and technology enablement; and delivering valued solutions for our customers and partners to deliver on our vision of being the trusted partner providing solutions made simple.

As part of our agenda, our strategic investments are delivering measurable outcomes across the business. Starting with our new superior GRS digital apps, which have resulted in improved customer self-service with 510 basis point improvement to 83% of service interactions completed digitally. AI is being utilized to improve customer experience and operational efficiency.

An example of this is in our GRS customer care area, where combining AI capability with our telephony platform enables ingestion and analysis of approximately 40,000 inbound customer calls a month, assisting our agents in real time with their customer conversations and efficiently wrapping up calls with automating call reasoning and customer notes. This capability has reduced our after-call work time by 16%.

Similarly, our use of AI and automation are continuing to streamline our processes and strengthen fraud detection in PSS with 57 percentage point increase in the number of invoices processed digitally. In AMS, our digitized trade-in process with access to multiple data sources to improve valuation for our GRS novated customers has seen a 23% increase in sales.

And finally, as part of our ongoing partner and market expansion focus, we have continued to enhance our Oly platform, which has seen SME clients increase to 1,038, up 233% on the prior year. These investments have translated into positive outcomes for shareholders: strong Net Promoter Scores across all segments; a high ROCE of 62.8%; strong operating margin of 40.3%; EPS growth of 1.4%; and continued recognition that MMS is an employer of choice from Great Place to Work.

Now turning to Slide 8 and our digital investments within GRS. During the period, we continued to see an increased uptake of our superior digital apps designed to simplify salary packaging and empower customers with real-time information and greater control. Salary packaging has generally been perceived as complex. New and enhanced features to our apps are changing that perception with a simpler experience, enabling customers to manage their benefits more confidently through improved budget and cap management, seamless invoice claiming, integrated digital wallet functionality and enhanced security.

Customer response has been positive, reflected in strong app ratings and NPS outcomes. Just as importantly, these enhancements are delivering productivity benefits with increased customer digital interactions and continuing growth in customers per FTE. This is a clear example of how our technology investments are improving both customer experience and operational efficiency.

I will now step through the performance of each of our segments. We begin with our Group Remuneration Services segment on Slide 10. GRS delivered strong performance in the first half with financial uplift driven by customer growth, productivity improvements and the inclusion of Onboard Finance.

Revenue increased 16.6% on a normalized basis to $167.6 million, underpinned by customer growth and inclusion of Onboard Finance lease interest income. Operating income after factoring in Onboard Finance cost of funds of $15.9 million increased 5.5% on a PCP basis.

Operating costs were managed well in the period, up 1%. When accounting for $3.4 million of Onboard Finance operating costs in 1 half FY '25 not included in the normalized results, operating costs were actually down 2.8% on a like-for-like basis.

As a result, EBITDA saw strong growth of 12.8% to $62.5 million. UNPATA increased 7.7% to $36.9 million after allowing for the inclusion of Onboard Finance and the expected increase in amortization, up $3.2 million following the conclusion of Simply Stronger investments in 2 half FY '25. Customer metrics performed well with salary packages growing to 387,500.

Novated leasing customers increased 7% to 82,100 and Onboard Finance receivables scaled to $539 million. Novated leases sales grew in both terms of units, up 0.4% and yield up 1.6%. Performance reflected a continued shift to new customers and longer term leases, seeing lower residual leases and new cars, including EVs price points.

In respect to strategic investments in the segment, $4.4 million of prior year Simply Stronger non-recurring costs were removed. Additionally, prior year investments yielded productivity improvements of $2.9 million in cost reduction. We invested further in scaling Oly with $2.7 million in sales and marketing to support future growth as we enhance our position in the SME market. Overall, productivity continued to improve and reflects prior investments in the Simply Stronger program with customers per FTE increasing 17.8% to $694.

Now turning to Slide 11 and our novated leasing performance. Novated continues to benefit from a strong value proposition, new customers and an expanding market opportunity. Our serviceable addressable market comprises approximately 7.9 million employees with the emerging opportunity of 3.8 million SME employees and 2 million corporate employees. Over the period, we have continued to expand our actual employee reach within this corporate and SME market.

We now have access to approximately 546,100 potential employees, which has grown by 15.9% on a CAGR basis since 1 half FY '23 and now represents approximately 9% of the corporate and SME market. This strategic focus is reflected in our sales mix. Corporate and SME novated sales now accounts for 30% of total sales, up from 21% in 1 half FY '23, effectively diversifying our customer base while growing our reach and portfolio.

We continue to outperform the broader new car sales market. In 1 half FY '26, GRS new novated sales increased 3.7%, ahead of the new car sales market growth of 2.7%. As previously stated, our novated leasing customers increased 7% to 82,100. This growth is underpinned by 3 key levers: improved retention of customers at end of lease entering another lease, up 120 basis points; new novated customers up 430 basis points and increasing penetration, which is now at 21% of our total salary packaging base.

Looking ahead, our foundations for growth and momentum are supported by new client wins in the period and the prior period yet to commence, ongoing expansion of our Oly SME brand and a network of growing partnerships creating referral opportunities.

Turning to Slide 12 and the performance of our Asset Management Services segment. As a specialist fleet provider, AMS grew revenue by 6.9% to $98.6 million. Operating income was up 4.3% after factoring cost of sales of $71.4 million, which increased $5.2 million.

UNPATA was up 3.2% to $9.9 million. Written down value increased 5.7% to $389.4 million, underpinned by unit growth. Overall fleet units increased 4.4% to 15,400, driven by both growth in financed and managed-only units. Managed-only units grew faster at approximately 21%, reflecting growth from new client wins over recent periods.

In terms of remarketing profits, improved yields were supported by a higher mix of early terminations, which attracted higher margins from exit fees. Remarketing units were down in the half as clients continued to retain assets for longer.

AMS continued its productivity focus, investing $500,000 in the period to establish a business process outsourcing arrangement for some back-office functions to drive future efficiencies and create capacities for the team to remain customer and business development focused. We secured 20 net new clients this half, benefiting from recent investments made in business development, which will benefit future periods.

Another key highlight for the period was our AutoGuru partnership, which is now delivering digitized vehicle maintenance solutions to our Interleasing clients for a better client experience and creating operational efficiency opportunities.

Turning now to Slide 13 and our Plan and Support Services segment. PSS delivered top line growth during the half, supported by continued organic customer growth and the inclusion of My Plan Support. Revenue increased 5.4% to $29.3 million. Total customers increased 16.1% to 43,000, with 3,800 from the MPS acquisition and 2,100 from organic growth.

As expected, profitability was impacted during the period by the removal of setup fees by the NDIA, as previously announced. This represented approximately $2.3 million impacting EBITDA, which was down $1.7 million to $6.4 million. The segment is well positioned to support future growth and enhanced NDIS regulation.

Whilst the government targets lower scheme cost growth to ensure a sustainable NDIS, participant numbers have continued to grow, up 9.9% on PCP. Participants to continue to prefer plan managers as a method to managing plans, which is up 300 basis points to 68%.

The acquisition of My Plan Support contributed $1.8 million of costs in the 1 half FY '26 segment results, which is inclusive of corporate allocations now that the business is integrated into MMS Enterprise Systems. PSS continued to focus on supporting the sustainability and integrity of the scheme, investing $600,000 in enhanced fraud detection and verification capabilities.

While these investments impacted margins in the period, they are essential to support payment integrity and the role PSS plays as a leading plan manager. Notwithstanding these investments, AI and automation remains a focus with the segment assessing and processing approximately 2 million invoices in the period. This focus is reflected in the ongoing productivity improvements with customers per FTE increasing 25.3% to 277.

I will now pass to Paul Varro, who will cover the financial section of today's presentation.

Thanks, Rob. If you turn to Page 15, what we thought we'd do is lay out some of the financial outcomes for the first half of FY '26 in more detail. As noted by Rob earlier, our results are no longer reported on a normalized basis.

Onboard Finance continues to perform in line with expectations with its results reported in the GRS business segment. Comparatives in this half will be based on 1 half FY '25 normalized results as these were the previously reported numbers. This will be the last period in which we compare to normalized results.

On the left-hand side of Page 15, you'll see the P&L. For ease, we've included the results compared to both the non-normalized and normalized comparatives. As you can see, versus first half FY '25 normalized, revenue grew year-on-year by $30 million or 11.2% for the half, with growth across all business segments and the introduction of Onboard Finance lease interest. Cost of sales grew $21.2 million due to AMS remarketing sales at higher written down values and the introduction of Onboard Finance cost of funds contributing $15.9 million.

There is a table at the bottom left of Page 15 with the cost of sales breakdown. Operating income after factoring in the Onboard results was up $8.9 million or 4.4%. Operating expenses grew 4.1%, noting the inclusion of Onboard costs of $3.4 million. On a like-for-like basis, our expenses grew just 1.3%, highlighting our focus on cost containment and productivity.

Depreciation and amortization increased $3 million as Simply Stronger program concluded in 2025. UNPATA for the half finished at $50.3 million, up on both the normalized view by 1.4% and a like-for-like basis by 11%.

On the right-hand side of the page, we have our operating expense summary. The first bar shows 1 half FY '25 normalized costs, then the inclusion of Onboard Financeoperating expenses to establish a like-for-like comparative of $123.8 million.

As you move from left to right, the first bar shows our cost increases due to wage and vendor inflation of $3.6 million, offset by savings from non-recurring costs of $4.4 million, primarily due to the conclusion of Simply Stronger investments in FY '25.

We continue to invest in growth, in particular, with investments in Oly, up $2.7 million and of course, the inclusion of My Plan Support costs of $1.6 million. These are partially offset by our productivity initiatives across all businesses, which have delivered net savings of $2.7 million.

During the year, we embarked on a business process outsourcing initiative, as Rob mentioned earlier. This had implementation costs of $800,000 for the half. All up, like-for-like operating expenses grew just 1.3% for the half, a testament to our focused and disciplined cost management.

Turning to Page 16. The balance sheet remained strong with net assets consistent in the half. Our key covenant metrics on the top right-hand side all remain below threshold levels, allowing us flexibility to move forward. On the bottom right, following the successful extension of Onboard Finance warehouse in August '25, we have no maturities due over the next 12 months.

If we turn to Page 17, our strong and flexible balance sheet positions us well to manage our capital efficiently and to ensure long-term growth while maintaining a prudent balance sheet and balancing returns for our shareholders.

On the left-hand side, as a reminder, our net cash, covenant headroom and strong underlying cash generation remain, and we continue to return fully franked dividends to shareholders in accordance with our payout ratio of 70% to 100% of UNPATA. Following the conclusion of normalization at the end of FY '25, we've taken the opportunity to optimize the mix of distributions to shareholders.

In this half, the Board has declared a fully franked dividend at 85% of UNPATA or $0.62 per share, the midpoint of our payout range, along with announcing an on-market buyback of up to $10 million over the next 12 months.

In aggregate, these announced capital returns to shareholders totaled $53.2 million declared in the half, up 7.6% versus last half. These distributions balance returns to shareholders with a dividend yield at an attractive 7.2%, along with the buyback creating the opportunity for EPS accretion.

Our capital returns also allow us to invest in the business and manage capital in accordance with our framework, which is noted on the right-hand side of Page 17.

Moving now to Page 18. Our cash generation remained strong with underlying cash conversion of 88%, noting the elevated tax installment paid in the half as the benefits of the temporary full expensing program partially reverted in the period. Overall, it's been a strong performance in the half with all businesses growing revenue, disciplined cost control and a strong balance sheet position to enter second half FY '26 with plenty of flexibility to grow.

With that, I'll hand it back to Rob, who will take you through our outlook.

Thank you, Paul. Now turning to Slide 20 and our second half FY '26 outlook. Looking ahead, we expect UNPATA in the second half to benefit from continued customer growth across all segments from business momentum, increased Onboard Finance receivables and the ongoing realization of efficiency benefits from our prior strategic investments.

There are also several external developments that we continue to monitor closely. The federal government's review of the Electric Car Discount scheme is underway, while within PSS, we expect further clarity from the annual NDIS price review. Today, we have also announced an on-market share buyback of up to $10 million to be executed over the next 12 months.

Finally, across the group, we will continue to take a disciplined approach to investing in and executing on our strategic priorities, excelling in customer experience, driving simplicity and technology enablement and delivering valued solutions to our customers and partners.

In closing, MMS remains well positioned to deliver long-term sustainable growth, supported by a large and diversified customer base, strong and flexible balance sheet and disciplined approach to capital allocation. We take this opportunity to thank our people for their commitment, our customers for their trust and our shareholders for their ongoing support.

Thank you for your time this morning. Paul and I will now be happy to answer questions you may have. I will now pass back to Alison to facilitate questions.

[Operator Instructions] Your first question comes from Tim Lawson of Macquarie.

Just in terms of the result, you obviously talk a lot about productivity throughout the pack. But obviously, there's been like a small improvement in margins or cost-to-income ratio in reverse. Can you just sort of talk through maybe the impact of the price increase on margins versus what you've been able to do organically throughout the other divisions?

Yes. Look, thanks, Tim. Yes, I mean, obviously, a big focus of our strategy over a number of years has been productivity. We've continued to look at how we can simplify our processes, use technology and automation to enable that. In the period, if you look at, obviously, each of our businesses, GRS benefited from some margin uplift probably contributed by both factors. One, we had some yield improvement in our novated sales. And then the second was obviously through the benefits coming through from our previous investments in Simply Stronger, both in terms of customer self-service and the use of AI and automation in our call center. So reducing the number of people we need in terms of supporting customer calls coming through. You can see in terms of our cost walk, which is on...

Page 15.

Page 15 at the FTE numbers obviously represent that reduction over the periods. So in terms of 1 half FY '26 versus second half '25, we're down 75 FTE. That's largely in our GRS business. PSS, if you think about the business, we acquired My Plan Support, brought on about 30 resources through productivity benefits across the group, we were able to reduce that down by 26. So we had a net increase of only 4 after buying My Plan Support.

So we saw good productivity improvement in PSS as well, notwithstanding it was offset by the setup fee reduction, and we also continue to invest in the platform, improving our fraud detection and verification processes with technology. So I think what we've seen really has been a combination of some yield improvement and largely margin improvement driven by productivity benefits. Paul, is there anything else you want to add?

Yes. I might add a bit more to that. So if you look at the margin relative, obviously, to the normalized result, last year, say operating margin goes 40.1% to 40.3%. Cost-to-income 59.9%, down to 59.7%. Really what's driving that to be relatively flat, just a slight improvement is obviously the inclusion of Onboard costs.

If you look at it from a like-for-like basis, which really shows how we're managing sort of year-to-year and half-to-half, you can see there 1 half '25 non-normalized operating margin improving 37.8% to 43% and cost-of-income reducing 62.6% to 59.7%. So it's just sometimes when you're comparing as we exit these normalized results that it looks relatively flat, but the underlying business, I think, the initiatives are proving out.

Yes. Can I -- just a second question in terms of the My Plan Support versus a setup fee reduction. Can you talk more about that? Because obviously, the setup fee reduction happens sort of instantaneously, but you've obviously called out the fact that in that previous answer that headcount only went up by sort of a net 4. What's the sort of exit rate sort of, if I think about it that way for PSS?

Yes. I mean, obviously, as you can see in the walk there, the $2.3 million reduction in setup fees, like if you added that back in terms of where the EBITDA was, EBITDA at $6.4 million, you added the $2.3 million, you'd be at $8.7 million, we would have been actually up about 6% or $600,000 odd in terms of EBITDA.

As we finished the second half of -- sorry, the first half of '26, obviously, we started to see the reduction in the FTE. That should play benefit in terms of the second half margins. So we'll have a better margin in the second half versus the first half. It takes time, obviously, to catch that huge reduction in terms of revenue.

The second factor, though, is we have invested in technology and fraud detection improvements and verification. So they should start to see some improvements also in terms of the second half. So we have a better kind of exit run in terms of FTE numbers and obviously, margin than we would have at the start of the year. It will just depend a little bit on kind of where the government ends up getting and the agency gets up on kind of the annual price review.

Yes. Okay. And just a couple of other quick questions. So the client trust funds were up like about 20%. Like just what's happened there?

Yes. That was just a little bit of timing on one of our big client partners. Essentially, they remitted funds into our trust account just pre-Christmas, and they were paid out just after Christmas. So it's just a little bit of timing. It's not as dramatic. If you look at, say, January, it's back to sort of $457 million. So it's just a bit of timing, Tim.

Yes. And a few other sort of housekeeping. Just you're calling out GRS novated trades in -- within the AMS segment. Why are you doing that?

They are customers that we have within our GRS business that are referred to our Interleasing business and AMS business to then take those cars and sell them through our Just Honk platform. So the income ends up sitting in our AMS business versus our GRS business.

Is that particularly -- in terms of materiality, it's not, I imagine, particularly large?

In terms of magnitude from an AMS, no, but it is increasing a very small base in the last couple of years. It's not included in our remarketing yields that you have there on the slide. So it's incremental to that, but starting to become a nice bit of income earner for us in our AMS business.

Okay. So the revenue growth in that AMS segment is more organic than from that factor?

Yes. I mean if you think about the total revenue in AMS, a large portion of that is obviously the yield improvement on the remarketing, which excludes the trade-in. But the trade-in off a very small base is now starting to become meaningful.

Yes. Okay. So then just on that -- if that yield improvements on the trade-in is around that sort of $6-odd million, just why is it not getting through the EBITDA line?

So firstly, I think there's a bit of mixture of what happened during the period. So we get the early termination fees, which comes through in the remarketing yield. We lose a bit of income, though, if that customer base would have otherwise been there with the book in terms of our principal and interest, then there is cost associated with selling those units that comes through in our cost base.

Our next question will come from Phil Chippindale of Ord Minnett.

Firstly, just on Oly, it's obviously continuing to grow. I think you said it's over 5% novated sales in the first half. Clearly, new client wins is probably a big driver of this improvement. But can you just talk to us about penetration? I know it's relatively early days, but what are you seeing from a penetration perspective into that SME on a per customer basis?

Yes. So look, obviously, the -- in the period, Oly continued to grow in line with what we expected, which is great to see. In terms of penetration within the customer base, so our Oly customer base is largely what we call small to medium. It's not at the larger end of the SME market. We have about 70% of our clients sitting there somewhere between 500 and 200 employees.

We're still seeing quite a large of get one customer first and then focus on starting to get cross-sell within that client base. That takes a little bit longer. It's a little bit different to our core business where you integrate initially with the client, when the client win and then you market to all the employees, it takes a bit longer.

We've got now just shy of 15% within that customer base, have got multiple employees now with Oly. That's off a base of which was 100% only single customers 12 months ago. So we're starting to see a bit of uptake in improving penetration with that employee base, but it takes a little bit longer in our experience so far versus our core business.

I understand. Just touching on the OpEx, you called out the $3.4 million of Onboard Finance one-offs in the prior period. So what does this look like in terms of the second half for us?

Yes. So it's kind of not one-offs. The $3.4 million was previously removed by normalization. So as we completed normalization, Onboard comes in. There will be a modest increase in those costs. I think that the operating expense base that we have for Onboard now in the numbers is there or thereabouts. But obviously, there will be a little -- certain amount of that cost is variable cost that grows with the receivable size, the amount of originations we've got and obviously, the number of active customers.

Okay. And then just the last one for me. You've referenced this $800,000 of incremental cost in the period for -- I think it was an outsourcing program. Can you just talk to, again, will that be a net drag in the second half as well of a similar quantum? Or I guess, perhaps you'll start to see some benefits and perhaps that net cost comes down?

Yes. Fundamentally, it's been a net drag in this half because we've invested in BPO in the half. We've had some dual running costs, for example, in AMS, which answers Tim's question as well. In the second half, we expect to yield some of those benefits. So we don't expect it to be a net cost in the second half of this year.

The next question will come from Chenny Wang of Morgan Stanley.

Maybe just first one, honing in on GRS and the $151.7 million operating income. I know you guys aren't giving normalized numbers anymore, but I was kind of interested in what that would have looked like in the first half of '26, just because I think it's pretty clear for first half of '25 and also second half of '25 that with the funding warehouse that it was operating income drags. I think on my calc, minus $1.6 million in the first half of '25 and minus $0.8 million. So just curious what that actually looked like for the first half of '26?

Yes. So we're not going to disclose normalization adjustments in this half. But Chenny, what we've tried to do on Page 24, 25 and 26 is actually give you much more information on the normalization adjustments previously. If you look at the overall increase in GRS from a normalized perspective, it's up -- we've got here -- it's up $24-odd million. And on Page 27, we've laid it out in a little bit more detail for you. So overall, the core growth for GRS is up $14 million at a revenue level.

That's predominantly Onboard Finance growing, but there's also income growth there from the traditional P&A model plus commission. When you're looking at it versus normalized though, you have to remember that in '25, we also had a $9.8 million normalization adjustment, which obviously then gets you to $23.9 million variance that you see year-on-year. Then you've got your cost of funds coming in.

And so obviously, $15.9 million comes in versus normalized, but if you had assumed that it wasn't normalized, that growth would have been $5 million. That again is on Page 24 and 25 to help you out a little bit. But we're not going to disclose normalized results in this half, given we want to move away from them going forward.

Got it. And then maybe just to keep it super simple then and just kind of talk directionally. Obviously, Onboard Finance was an EBITDA drag in previous halves. Was that still an EBITDA drag in the first half of '26? I appreciate you won't give numbers, but just directionally, just to help us out to understand, I guess, some of the underlying results?

Yes, great question. It was a fairly marginal drag. And as we've disclosed before, we expect it to be neutral across the course of this year. That's why we're removing normalization.

Got it. Okay. So just with the last comment, just to be super clear, so you're still expecting all else equal, that to be, yes, neutral over the year. If that is the case, that obviously implies that the second half, again, all else equal, should be higher than the first half. Can we think about then the second half base into -- sorry, the second half as a base into FY '27? So again, all else equal, can we just multiply the second half by 2 and that's kind of our base to work from into FY '27?

Yes, you wouldn't be that far off. But by doing that, as we've disclosed before, we expect as Onboard grows and gets to scale, it starts to be slightly accretive in the outer years, obviously, subject to the amount that we're originating through that portfolio.

[Operator Instructions] Our next question will come from Richard Amland of CLSA.

Just a couple of questions, mostly numerical. I think there was an amortization of expenses that were associated with the Simply Stronger of $3.8 million. Can you confirm that? Have I got that right? Or is that incorrect?

I think the net amortization increase is $3 million, Richard, which predominantly is essentially Simply Stronger finishing or capitalizing in FY '25 and a small contribution. Again, as we remove normalization, Onboard has a small amount of amortization coming in as well from the initial build costs. So again, in the detailed P&Ls in the appendix, you can see the amortization versus normalized is up $3 million on Page 25.

Okay. That's probably where I was sourcing it from. My eyes are already glazing over. How long will that $3 millio4n stay in, in terms of how long is the amortization term on that?

Yes. So on average, sort of with software assets, it's anywhere from 2 to 5 years. So we wouldn't expect D&A to start coming down anytime soon. It will be relatively flat. Obviously, if we embark on new software investments and they add to capitalization, that will increase D&A. I would say, though, looking forward, as we build more software assets on SaaS-based data or tech platforms, we'll have more OpEx as a proportion of our investment relative to CapEx going forward.

Okay. But we should probably run that half year D&A forward at that pace for the next couple of periods at least?

Correct. Yes.

Second, going through the disclosure, it looks like Onboard Finance, the interest costs associated with that were about $20.6 million. Is that correct?

The interest cost, if you -- easiest one to go through is back to Page 25. And you can see the GRS and didn't have any cost of funds in it in the prior period. So that $15.9 million that comes in for this half is 100% Onboard cost of funds.

So on the 4D, we've got a finance cost of $23.2 million.

Yes.

Here, we've got an interest cost of $22.6 million. I'm trying to reconcile the 2.

Yes. Remember, we've also got cost of funds in AMS as well, because that's group. We're looking you're looking at a group number in the 4D. I'm just referring to GRS.

Okay. So the $15.9 million is the cost of funds for the Onboard Finance?

Yes. And then you can see the $21 million for the variance there for the group on [ '25 ].

Okay. Then again, trying to reconcile to the balance sheet, it looks like the current and non-current finance lease receivables are pretty close to the Onboard Finance book in terms of numbers. So are those aligned? Is it that easy? Or is there other stuff?

Yes. No, there's other stuff in there. So the vast majority of that is novated and finance lease receivables. But in there, there's also AMS on balance sheet funded assets and a little bit of inventory in there as well. But essentially, the biggest driver period-to-period is in novated and finance leases.

And essentially, Richard, actually, this might help you. We've disclosed what Onboard Finance receivables are in the investor presentation, as we've said before, $539 million. That gives you a sense of the $777 million, roughly, not exactly that because there's other finance leases that we've got to the tune of about $9 million, the finance and novated leases. But that then gives you a sense of what that $77 million (sic) [ $77 million ], how much of that is Onboard.

The direction of the question is trying to reconcile what part of the on balance sheet book relates to Onboard and then what the cost of -- the debt cost associated with that is? But okay, that's fine.

Final question is just around dividends. So you've called out that dividend payment ratios pulled back to 85%, 86%. Is that a go forward? You've been paying 100% for a couple of years. So should we be winding up our expectations back on dividends to 85%, 86% going forward?

Yes. Obviously, we'll make that decision with the facts and circumstances of the next half. We thought this was a really good opportunity in this half post normalization to optimize the mix of our distributions back to shareholders. And for us, it makes sense to keep the divvy, obviously, it's still really strong at 85% and a 7.2% yield. But clearly, we also see value in a buyback of up to $10 million as well, given the potential accretive benefits for EPS and obviously, our confidence that we've got relative to where we see our share price.

This will conclude the question-and-answer session and concludes our conference for today. Thank you for participating in today's conference, and you may now disconnect.

Thank you for standing by, and welcome to the McMillan Shakespeare Limited Full Year Results FY '25. [Operator Instructions]

I would now like to hand the conference over to Mr. Rob De Luca, MD and CEO. Please go ahead.

Thank you, Drew. Good morning, and thank you for joining us for the MMS full year results presentation for the 2025 financial year. My name is Rob De Luca, and I'm the Managing Director and Chief Executive Officer of MMS. I am joined this morning by Paul Varro, our Chief Financial Officer. I would like to start by acknowledging the traditional custodians of the lands on which we meet and pay my respect to their elders past and present.

The presentation will commence with an overview of the group performance during FY '25, including the progress we've made on our strategy and the Simply Stronger program. We'll then provide more detail on the performance of each of our segments before expanding on our financials and balance sheet. We will conclude with our outlook for FY '26. This morning's presentation will refer to the slides that we released with our results. And at the conclusion, Paul and I will be happy to take any questions you have.

Moving to Slide 5. I'd like to touch on 5 highlights that stand out. First, we saw revenue growth across all 3 segments with group normalized revenue up 3% and normalized UNPATA of $103.2 million. Importantly, momentum built as the year progressed with the second half normalized UNPATA up 8% on the first half.

Second, we saw strong customer growth. Our Group Remuneration Services segment performed well during the period with novated lease sales growing by 4.1%. Asset Management Services written down value increased 6.4%. And Plan and Support Services customers grew 21.5% including the acquisition of My Plan Support or 10.5% excluding the acquisition. To support growth and productivity, we invested $6.1 million in nonrecurring costs, of which $4.4 million was in 1 half FY '25. In the second half, we saw a 230 basis point improvement in our cost-to-income ratio compared with the first half.

Third, our digital and technology investments are delivering for our customers. Our superior digital solutions for customers and partners have been well received. These include: MyMaxxia, which has an app rating of 4.5 stars; the Oly employer portal, which has enhanced our novated leasing proposition to the SME segment, reducing time to onboard an employer; and our digitized trade-in process in AMS, which has translated into growing opportunities from novated customers, deepening customer engagement across the group.

Fourth, Onboard Finance has now scaled with receivables, which at the end of the financial year are approximately $503 million. During the period, we successfully executed a $300 million private placement with strong support from global financiers, enhancing our investor diversity and lowering our funding costs. FY '25 was the last year we normalized our results being $8.4 million in the year.

Finally, shareholder returns remained consistent. Our payout ratio was 100% of normalized UNPATA with a dividend yield of 8.3%. Normalized return on capital employment was 63.4%.

Turning to our strategy slide on 6. Across the group, our vision remains clear to be the trusted partner providing solutions in making matters simple. Whether it's managing employee benefit solutions through our GRS segment or managing assets and mobility solutions in our AMS segment or managing and administrating NDIS plans in our PSS segment, this guiding ethos underpins everything we do. We strive to deliver on our vision via our 3 strategic priorities: excel in customer experience to grow trusted relationships, drive simplicity and technology enablement to serve customers more productively and deliver valued solutions to meet broader customer needs.

We have 5 key investment areas to drive our strategy forward. Firstly, our focus on digital and service excellence is enabling us to create superior solutions and tools for our clients and customers. This is underpinned by our people who are empowered to deliver better customer experience.

Secondly, data-driven insights are at the core of how we understand our customers' needs and shape the value we deliver. Thirdly, our investments in AI and automation is underpinned by our data and is becoming pervasive in our business to support a more insightful customer experience and a more productive organization. Fourthly, we are, at the same time, continuing to simplify our processes and systems, making life easier for our customers and our people. Finally, we are continuing to invest in broadening our ecosystem of partners and expand the opportunity and market for our valued solutions.

Together, these investments are helping us make matters simple for our customers while strengthening our capabilities as an organization and creating opportunities for long-term sustainable growth. As a values-led business, it is our people who underpin all we do and bring our vision to life delivering on our strategy.

Now moving on to Slide 7. Over the past 12 months, we have made strong progress on our strategy and are delivering results from our strategic investments. This includes superior digital solutions for our customers, technology-enabled productivity and accessing new markets. Our new MyMaxxia app is already rated 4.5 stars since launching earlier in the year. We've seen strong digital adoption, which in turn is driving productivity, with customers per FTE up 15% year-on-year in July.

In GRS, we have been using AI and data tools with our telephony platform to now label and analyze every customer interaction in real time, providing insights to help improve the customer experience while reducing after call work for agents. While early in application, we expect to see after call work time across our agents reduced by 23% by December this year.

In PSS, our use of AI and robotics are streamlining our processing and strengthening fraud detection with 56 point increase on the number of invoices now processed digitally. In AMS, our digitized trade-in process has led to a 19% increase in sales from [ Oly ] GRS novated customers half-on-half, demonstrating the benefit of our complementary and trusted businesses.

In Oly, the introduction of our end-to-end digital platform has streamlined employer interactions, reporting and compliance in one centralized solution. It has empowered employers with customized dashboards, self-service reporting and on-demand insights. For our new SME customers, the Oly platform has opened up novated leasing and accounted for 4.7% of all novated sales in June. These are clear tangible outcomes from the investments we've made, and they provide a strong foundation on which we can continue to deliver excellence in customer experience, growth and improved productivity.

Let me now turn to the group's financial performance on Slide 8. Revenue was up 3% on the prior year to $541.6 million. In FY '25, we invested $20.8 million in growth and productivity, of which $6.1 million was nonrecurring costs. Much of this was directed to our Simply Stronger program, which is now complete and already starting to deliver stronger customer experiences and productivity gains.

Despite these investments, we maintained strong margins. Group EBITDA was 31.2%. Normalized UNPATA was $103.2 million, down 4.1% on the previous year, reflecting our investments in growth and productivity. Statutory net profit after tax was $95.8 million, up 6.4%, while normalized return on capital employed increased to 63.4%, and normalized EPS was $1.482.

Let me now turn to Slide 9 and the progress we're making on our sustainability strategy, supporting our customers' transition to a low-carbon economy and making a social impact as a responsible business. In supporting the transition to a low-carbon economy, our on-the-go EV charge card is now accepted at more than 300 locations. And 100% of quotes for GRS and AMS passenger vehicles include emission rating estimates. $6.2 million of EVs have been funded through AMS' green finance.

In terms of social impact, our PSS segment delivered over 65,000 hours of education to NDIS providers and customers. Our partnership with Wheelchair Rugby Australia supported adaptive sports participation, and the 2025 Wheelchair Rugby World Challenge. We also extended our partnership with Jigsaw Australia to promote mainstream employment for people with disability while assisting approximately 43,000 PSS customers participate more fully in social and economic life, furthering the NDIS goals. Through our salary packaging services, we supported 376,000 Australians to maximize their pay at a time when it's needed most.

As a responsible business, we progressed further on our gender equality goals with our gender pay equity ratio of 102.9%. In FY '25, we earned Great Place To Work, highlighting our commitment to employee engagement while maintaining our MSCI ESG AA rating.

We now move to the performance of each of our 3 segments during the period. Now turning to Slide 11. GRS demonstrated resilience in FY '25 with normalized revenue up slightly at $293.4 million despite the previously announced nonrenewal of the SA government contract. Novated lease sales grew 4.1% year-on-year, supported by new client wins, growth from existing clients, the rollout of Oly and shorter delivery times leading to a quicker order to sale process. Yields remained steady, down 0.1% on pcp.

As expected, the conclusion of the plug-in hybrid EV FBT discount in April caused a temporary spike in sales for PHEV in Q3 of FY '25 with EV percentage of new novated sales reaching 56% before returning to around 45% in Q4, consistent with 2 half FY '24 and 1 half FY '25. Notwithstanding the strong Q3 novated result, with the lead-up to the end of the PHEV FBT exemption, novated sales activity continued in Q4, which was up 1.4% on pcp and up 9.2% on Q3.

Demand and momentum has remained strong as we ended FY '25 and started FY '26 with order growth of 11.3% in June and July on the same period last year. We're starting to see the productivity benefits from our strategic investments with customer to FTE ratio up 8.9% in the second half.

Now moving on to Slide 12 and the operating performance of the GRS segment. Our strategy for GRS of diversifying our offer has expanded our serviceable addressable market. Our expanded opportunity represents 7.9 million employees in Australia with at least $60,000 in income. Of these, 2.1 million are in our more traditional employer areas of government, health, education and charities, whereas 3.8 million are employed in the SME segment and 2.0 million are employed in the corporate segment.

We have enhanced our focus and proposition to this large and increasing opportunity in the SME and corporate segment. This has translated into a 15.8% increase in the number of employees of our SME and corporate clients over the past 12 months with our novated sales in these segments representing 29% of total novated sales in FY '25 versus 25% in FY '24 and 22% in FY '23.

We continue to grow [indiscernible] second half of FY '25, including an additional 6 net new clients to be onboarded in 1 half FY '26 with approximately 60,000 employees. Oly also continues to open us up to new market opportunities with now more than 650 SME employers accessing novated leases for their employees and 14 strategic partnerships providing new novated lease referral channels.

Now moving on to Slide 13. FY '25 marked the last year our results will be normalized for our funding warehouse, Onboard Finance. Receivables grew strongly, up 54.6% to approximately $503 million. Our successful $300 million private placement was well supported, validating the scalability and strength of the onboard funding model. We are pleased with the progress made in Onboard Finance, which reinforces the strategic rationale for its introduction. Onboard diversifies our funding and helps manage our risk profile. It provides MMS with a sustainable new source of income and a recurring revenue stream, delivering incremental NIM versus P&A funding.

Now moving on to Slide 14. Our Asset Management Services segment delivered consistent performance in FY '25 with revenue up 4.3% to $185.5 million and UNPATA at $19 million. Improved vehicle supply and customer demand saw written down value increase 6.4% to $386.3 million. Remarketing units rose 6.5% with yields proving to be resilient, down just 0.6% against moderation in used car prices.

We continue to invest in growth and digital solutions, including a digitized trade-in process for novated customers and a new carbon capture product for gray fleets to support clients with emissions reporting. Investments in productivity saw leased assets per FTE rise 7.1%.

Turning now to PSS performance on Slide 15. PSS revenue grew 11.5% to $56.5 million, while UNPATA rose 20.9% to $10.3 million. Organic growth saw participant numbers increase 10.5%. And with the acquisition of My Plan Support, which was completed in May 2025, we saw total customers increase 21.5% to more than 42,600. My Plan Support acquisition provided us with approximately 3,800 customers and strengthens our regional footprint on the central coast of New South Wales.

PSS EBITDA grew 20.4% to $15.8 million with margin expansion to 27.9%. These gains reflected both customer growth and the benefits of automation, which also saw productivity improve with customers per FTE up 8.3% to 234. In FY '25, PSS continued to support scheme integrity as $67.3 million of invoices were withheld for investigation while also delivering $86.9 million in scheme savings as customers receive services under the price guide limit.

During the period, we gained more regulatory clarity. In October 2024, the NDIA defined what participants are allowed to spend their funds on, being the black and white list, making it very clear what NDIS funds can and cannot be used for. As part of the annual pricing review, monthly planned management fees have been maintained at FY '25 levels while setup fees were removed effective 1 July 2025.

While the government continues to focus on measures to manage scheme cost growth, NDIS participants growth in FY '25 was again strong at 11.8%. PSS remains well positioned to support the sustainability and integrity of the scheme and continues to engage constructively with NDIA and government stakeholders to ensure our services remained aligned with reform objectives.

I will now pass to Paul Varro to talk to our financial performance in more detail.

Thanks, Rob. If you turn to Page 17. What we thought we'd do is lay out some of the financial outcomes for FY '25 in some more detail. On the left-hand side of the page, you'll see the P&L. And as noted by Rob earlier, revenue was up 3% year-on-year or $15.8 million with growth across all segments. A resilient performance, in particular, from the GRS business to mitigate the norenewal of the SA gov contract through the year. Cost of sales were up 5%, predominantly on Asset Management Services written down value, which grew 6.4%, driving higher operating lease depreciation with further detail on cost of sales noted on the bottom of the P&L. Operating expenses, as noted in our first half results, increased due to our deliberate investments in future growth and productivity. I'll talk about these in further detail in a moment.

Further down the P&L, D&A and interest was relatively flat year-on-year, taking you to our normalized UNPATA for the year of $103.2 million. Whilst down 4.1% on FY '24, a strong result when you consider the level of investment we've made in the business this year. Statutory earnings were up 6.4% to $95.8 million from continuing operations. The other key callout in the P&L is our Onboard normalization adjustment of $8.4 million, down from $17.2 million, with FY '25 being the last year of normalization.

If we move to the right-hand side of the page, you'll see our normalized expenses walk with total costs up 6.9%. If you move from left to right, the first 2 bars are our cost increases due to wage and vendor inflation along with extra tech usage costs and cyber investments. We've also realized some efficiency benefits in the year, which largely offset the inflation cost pressures. And we expect to deliver more benefits into FY '26.

The next 4 blue bars are our investments in growth and productivity for the year, which drives the vast majority of our cost increase versus FY '24. The first bar is the finalization of the Simply Stronger program, which concluded in FY '25, [ in-year ] nonrecurring cost for this program of $5.7 million, which along with the acquisition costs for My Plan Support and other costs, takes us to $6.1 million in nonrecurring costs for the year.

Next, we have our investments in Oly increasing $4.9 million to support the product scaling and to increase our market reach, noting Oly already has reached 4.7% of novated lease sales in FY '25. The increase of $6.9 million in the walk is our investments in automation, customer experience and process improvement. $2.9 million of the cost is our investments in customer and partner experience, which has contributed to our strong NPS results across the board and new client wins. The other part of the cost is our investments in process efficiency and automation. These investments are delivering benefits such as improved novated lease customer journey experience, enhanced dashboards for PSS suppliers and operational productivity.

The last bar is our cost of sales, which, as I noted earlier, is the cost of growth in our AMS business, driving increases in depreciation and cost of funds. On the bottom right-hand side of the page, you'll see the half-on-half momentum in FTE efficiency and cost-to-income ratio, which remains a focus for the management team into FY '26.

If we turn to Page 18. The balance sheet remains strong. On the left-hand side, you can see the material movements year-on-year relate to the growth of Onboard Finance novated lease receivables in the assets and the associated debt movements in liabilities. On the top right-hand side, all of our key covenant metrics remain in line, and we continue to hold strong net cash and run a conservative level of debt in our AMS business.

On the bottom right-hand side, we've laid out our debt maturity profile. Through the course of FY '25, we completed an inaugural private placement transaction in Onboard Finance for $300 million, which increased investor diversity, lowered drawn margin and balanced our maturity profile. This month, we also completed an increase in extension to our Onboard Finance warehouse, adding further room to grow and extending the revolving period out to March 2027. Our debt profile remains well balanced with no maturities due in the next 12 months. Overall, we've got a strong balance sheet position to enter FY '26 with plenty of flexibility to grow.

I'll now hand it back to Rob, who will take you through our outlook.

Thank you, Paul. Finally, turning to the outlook for FY '26 on Slide 20. MMS enters FY '26 with business momentum and a clear strategy for growth. We expect auto supply and used car values to remain broadly consistent with 2 half FY '25. While the benefits from the plug-in hybrid EV FBT exemption expired in the second half of FY '25, the FBT exemption on battery electric vehicles continues with the federal government committed to review by mid-2027.

Following the 2025-'26 NDIS pricing review, monthly plan management fees will remain consistent, while setup fees were removed effectively 1 July 2025. Setup fees represented 7.9% of PSS revenue in FY '25. Cash rates are expected to reduce as inflation moderates, supporting customer confidence.

From a business outlook perspective, new client wins in GRS and AMS, buoyant novated orders in Q4 FY '25 and continued NDIS participant growth are expected to support customer growth across all segments. Benefits are to be realized from our strategic investments and removal of nonrecurring costs. As previously mentioned, Onboard Finance normalization concluded in FY '25. Finally, we will continue to take a disciplined approach to investing and execute on our strategic priorities, excelling in customer experience, driving simplicity and technology enablement and delivering valued solutions. We thank our people for their commitment, our customers for their trust and our shareholders for their ongoing support.

Paul and I would now welcome any questions you may have. I will pass back to Drew to moderate questions. Thank you.

[Operator Instructions] Your first question comes from Phil Chippindale and Ord Minnett Limited.

Just firstly, on the novated yield. You said that the '25 number was broadly flat versus '24. If we look at the first half, it was down, I think, around 4% or 5% sequentially on the first half of '24. So it sort of implies the second half was up 4% or 5%. Can you just unpack sort of the drivers for that improvement, please?

Yes. Thanks. Phil. Yes, we were up about 4% on the second half, largely just reflective of a couple of things. I'd say the first one is see a higher proportion of plug-in hybrids in Q3 at higher price points given they're all new vehicles. And second is we've continued to see generally, [ and ] our Oly business is quite new, a larger proportion of what we've written in our novated at higher prices for EVs and plug-in hybrids being a much higher proportion than our core business. So largely reflecting of net amount financed, some elements of some improvements in insurance, particularly around residual risk, which has grown by about 5% over the period, reflecting customers more aware of that product and available to them, particularly with EVs.

Okay. You mentioned the Oly brand. You've got a stat in the pack where you talked to I think it was the month of June volume is about 4.7% or thereabouts of all novated leases were in Oly. Do you view that as being incremental volumes versus MMS without Oly? Or is part of that -- [ that's kind ] of 5%. Is part of that coming from Maxxia and other brands that may well have serviced smaller enterprises? Or is this really all new businesses as far as you consider it?

Yes. Thanks, Phil. No, no, largely, we see this as incremental flow to our business. They are -- slightly over 90% of the customers we're acquiring are in employee brackets of 20 to 200, which wasn't a segment that we target through our Maxxia and RemServ brand. There is always some through our partnerships that we use the Oly platform for that somebody might walk into a dealer or go online to the OEMs and purchase the car directly and get novated [ lease ] finance that might be employed with a larger organization. All of those coming through the SME channel would be incremental for us.

Okay. Just turning to the cost-to-income ratio, an improved sort of second half versus first half. On the full year number, I think it was about 58.7%, but you've referred to about [ $6.1 million ] of nonrecurring costs. If we exclude that, it pulls that CTI down to sort of closer to the 57% mark. Just trying to think about FY '26. Given that first half, second half movement was quite significant, how should we be thinking about CTI in FY '26? If we exclude that recurring, it's around that 57% mark. Is that a fair sort of assessment for '26? Or do you think perhaps you could do better?

Thank you, Phil. Great question. I think that's a pretty fair assessment. We think we will get further benefits from our investments in productivity. But just to note, we'll look to reinvest some of those savings into growth with things like Oly. So I would say around that 57% mark is probably a fairly -- fair kind of number to think about going forward into '26.

Okay. And then last one, just before I jump back in the queue. On Onboard Finance, FY '25 was the last year of normalization. Do you expect it to be a positive contributor to UNPATA for '26? Presumably you do. And just whether you have any comments there as to the quantum of that potential contribution.

Yes. Thanks. Largely, it's going to be flat in FY '26. So it won't be a positive contribution for that financial year. We obviously expect it to be positive after that period. If you recall some of our previous disclosures and in particular, in the first half, we noted that FY '26 is expected to be neutral and then to grow thereafter. So not positive for '26, neutral, but then positive thereafter.

Your next question comes from Tim Lawson and Macquarie.

Probably a similar theme to what Phil was asking about. Just in terms of that transition from normalization to an underlying, obviously, within GRS, but do you feel that like the second half is a fair exit rate for the -- sort of Paul's comment on maybe it's a neutral impact into 2026.

In terms of Onboard, it actually grows through the course of the year, Tim. So if you think about the normalization adjustments that have been through the past few years, it was negative $17 million then minus $8.4 million this year. In the first half, it's still marginally negative to neutral. And then through the second half of FY '26, we expect it to be marginally accretive but not much. So think about the entire year, it's going to be neutral, slightly under in the first half, but then slightly accretive in the second half. But we're not talking material numbers.

Yes. Okay. And then just a question on PSS. Obviously, the pricing change is the full margin impact, but then you've got a new acquisition. So just sort of thinking about how you view margin within PSS. Obviously, you've had more automation as well, which has helped margins there throughout this year. But what are your sort of thoughts over the next year with those 2 major changes?

Yes. Thanks, Tim. Yes, I mean, the removal of the setup fees, we experienced a similar period back in '22, '23 when they removed the fees that we used to generate for extensions. It will take a little bit of time to start to get the margins back up. So I would expect '26, we'll see a bit of margin decline. And then as we continue to invest in automation and process improvements over time, we'll start to [ eat ] that back. So there will be a bit of downward movement on the margin in '26 from where it sits. I mean we've started to get close to the 30%, which was always our goal for the business. But I think it will take a bit of time until we get back to those levels.

And the impact of the new acquisition, is that coming in at similar margins? Or is there lower margins from that?

Pretty similar margins. The business probably wasn't as scalable as our business. So we'll get some margin benefit from moving on to our platform, which will progress during the year. So there's a little bit of margin improvement for that size of the business.

And then last one for me, just on the fleet business. Just on the remarketing yields, you called out sort of how that's been broadly stable over the year, a little bit down, but not a lot. You just -- what are you putting into pricing on [ contract wins ]? So maybe get some view on your conviction as to whether that sort of holds where we are now.

Yes. I mean, certainly, the last couple of months of FY '25, so far, the start of '26, they've been pretty consistent in terms of where the yields are at the moment. We had a period around that election time, April, May, that there wasn't a lot of stock coming back from our clients. I think people were just holding, waiting to see outcomes and get a bit more certainty. Started to see that flow improve over the last couple of months, which is pleasing. And certainly, the yields we're receiving that has remained at good levels. So our assumption this year is broadly consistent at a yield level from what we experienced in the second half of '25 for AMS.

Obviously, the mix of clients you win and the types of vehicles that you replace will differ. So -- but most of those clients that we've won, we'll bring them on first as managed-only assets, and then we start to convert them to financed assets over time.

And what you're putting into pricing in terms of what the competitive environment is sort of forcing you to do?

Yes. I mean, look, the pricing in the market is pretty competitive. We've seen that now for a period of time. Obviously, people take different approaches to how they think about residual value risk and other elements and depending on the portfolio of their business. So the market remains reasonably competitive, but we're pleased with certainly the client wins over the last few months. We've got a lot of clients to onboard over the first 6 months of this year.

Your next question comes from Scott Hudson and MST.

Just a couple of questions. Just a follow-up on the yield question in relation to the second half. Could you give us a sense of what fourth quarter yields were like compared to the third quarter?

Yes. Not materially different. A little bit different between the 2 quarters, but not materially different, Scott. We did have a little bit more, obviously, proportion of new in Q3 in the core business. But our Oly business has continued at pretty similar levels between Q3 and Q4. So it wasn't as impacted by plug-in hybrids in that part of the portfolio. So slightly higher with the plug-in hybrids in Q3 than 4, but not materially different.

And then how should we be thinking about, I guess, as that share of, I guess, corporate and SME rises? I guess my understanding is that's maybe a slightly more competitive segment. How should we be thinking about the mix of yields as that share of volume increases?

Yes. I mean it varies a little bit. On one hand, there's a competitive element of transparency and consumers who are kind of looking for business, particularly more in the SME space and maybe some elements of the corporate. Having said that, in the corporate space, though, when you win the contract, you're usually sole provider, which is a little bit different to, obviously, in the government space and the large health care space. So it's a little bit different in terms of once you've won the contract in terms of competition on panel versus sole. But obviously, winning the tender is an important part of being competitive in that space.

We don't see a material difference so far in -- as we've been growing the corporate space in our yields to where our historical levels have been in our core business, marginally in some areas, but not across -- not consistent across all of our corporate clients. I'd say the SME is probably a little bit more competitive because the employees in the SME are traditionally used to getting car financing or financing through dealers as they kind of explore their options. And so I think we're seeing a little bit more tighter pricing in that space than the traditional corporate space.

And then the new client wins that you've called out commencing first half FY '26, are those predominantly corporate clients?

There's a mixture within it. We've got a couple of government ones that we've been appointed to panels, which is great for us. There's one very large non-for-profit organization and then the others are largely corporates, large corporates.

In relation to the, I guess, the growth expenses, how should we be thinking about any further investments through FY '26?

Yes. I mean I think if you go back to the slide that Paul talked everyone through on Slide 17, if you look at those bars, the Simply Stronger investment goes. The Oly business we will continue to invest in, in terms of salespeople, marketing as we grow that business. And the customer growth and efficiency, there will be an element within that, but not materially increase from what we've done previously. We're trying to move more to an ongoing squad model for parts of our business, particularly around digital and automation and AI. And over time, that will be increased more as an OpEx cost and a CapEx cost as well in terms of as we modernize our systems. So there will be an element within that, but not to that level.

And then just lastly, just a follow-up on Tim's question around PSS. I guess the removal of the setup fees were partly offset by the impact of the acquisition or neutral from a revenue perspective.

Yes. Look, I suspect -- our objective would be to grow revenue. The profit will be a bit tougher because those setup fees that we generate the income from, the cost doesn't go away for that activity. So that drops straight to the bottom line impact. But there will be a large part of it offset by the acquisition of My Plan Support. What I'd say in this space, certainly since the October changes came in late last year, we've experienced a period of a lot of contact from participants and providers trying to understand the changes and what that means for what they can claim versus what they claim. We've used our investments in our dashboards to help do that more self-service, but still a large portion of our client base here like to contact us. So every time there are changes from the NDIA or government around this, we get influx of calls. So it will depend a little bit about what other changes the government made during the year in terms of cost to serve that.

We've also, during the second half period, continued to hold tight on what can be claimed versus what can't be claimed since the changes came in October, and that has a bit of an impact as well in terms of us being a bit tighter, I suspect, than maybe some plan managers in the market.

Maybe just a follow-up on that. In terms of any material risk to PSS from the government shift in relation to determining who's eligible for developmental support, particularly young children?

Yes. There will be an element -- so as best we understand at this stage, and I think the work to be done between the government and in the states and territories at this stage, they've signaled federal government is going to allocate about $2 billion to it. They need to agree what the states and territories will contribute to it. Stage 1, what we understand in July 2026, those with what we would term as moderate autism children under the age of 9 will start to be utilizing the thrive program, Thriving Kids. And then for the start of July '27, the following financial year, then they will look at any participants that are in the NDIS that may need to transition to Thriving.

As we've done our numbers, that's probably somewhere between 4% to 5% of our customers at the moment would be under 9 with what we'd say moderate or minor autism. So there will be an element with it at some point in time. We'll think a little bit about our acquisition strategy where we focus our attention for growth versus what potentially may mean some future participants coming into the scheme.

Your next question comes from Chenny Wang and Morgan Stanley.

Maybe firstly, can I just clarify on salary packaging, on salary packs? You called out 376,000 at period end. And then you also, I guess, called out that 60,000 net new. Should I just basically interpret that as pro forma to start FY '26 at 436,000? Or are there some other movements that we should be aware of?

No, that 60,000 is FTE employees within those clients. Not all of those will be [ take ] up salary packaging.

Got it. Okay. Cool. And then just maybe secondly, on the Onboard Finance, obviously, we've talked a lot about that warehouse normalization piece. But I guess is there any effect we should be thinking about from lower interest rates in terms of whether there's any headwinds there or whether that's kind of fully hedged out?

Chenny, yes, great question. You're right. Your portfolio is all hedged. So there shouldn't be any NIM sort of pressure off the back of movements in interest rates. Essentially, we'll take out a fixed rate hedge as we lock in every [indiscernible] of receivables. So that portfolio of $503 million is already locked in. And then for every subsequent month through the course of FY '26 and beyond, we'll essentially hedge that out and maintain our NIM where it is.

Got it. Cool. And then just maybe a question on EV penetration between 3Q and 4Q. Look -- and let's put PHEVs in there as well for that matter. But I fully appreciate that third quarter saw the pull-forward in terms of the PHEV exemptions ending. But fourth quarter from an industry perspective was also really, really strong on EV and PHEV sales. So yes, I just want to kind of get a sense of that quarter-on-quarter dip just against that industry backdrop.

Yes. It's interesting on the industry side and our discussions with dealers in terms of what they've experienced. If you kind of go through the plug-in hybrids in the Q4, the Shark, obviously, was the largest-selling vehicle. That was up 16% for the period. And the Sealion was up 10% for the period. Every other product line was down, other than there's a couple of new ones that didn't exist. And what we've heard certainly through our discussions with the dealers that a lot of the take-up in the plug-in hybrids in the Q4 have been kind of sole businesses, [ tradees ] who have taken advantage of some of the deals that are available from a financing perspective.

So we saw a little bit of a decline in that Q4 versus Q3. So we really want to understand, was that a sector thing? Was it us thing? And certainly, we got some insights in terms of just who's been taking up the product and the type of financing that's gone through. So excluding the Shark, actually, it was down 29% for the quarter. It's quite interesting.

When we look at our own kind of numbers, Chenny, what I looked at is I looked at the last quarter and then compared it to the final quarter of '24 just to see what's changed. Now plug-in hybrids kind of were about 6%, and they're about 4% for Q4 of '25. So they're down about 2% in a relative sense. Interesting, though, hybrids, so combustion hybrids, went from 8% to 13%. So there's been a bit of a shift in the consumer sentiment and how they're thinking about what they're purchasing. And actually, that's gone up, whereas the ICE for us went down by the same amount. So there's been of a shift from ICE to hybrids, and battery electric picked up the extra 2% that we reduced in plug-in hybrid.

So that's kind of what's happened in our mix shift for the quarter. I think obviously, time will tell as this plays out, what actually the kind of right level will be for the plug-in hybrid. But we certainly saw a bit of a comeback, but a bit of a change in our mix in our kind of novated lease sales.

Got it. And then maybe just one last one for me. And apologies if this was already asked previously. I was kind of jumping between things. But just the next 12 months for your GRS contract renewals and maybe how we should be thinking about the opportunities out there as well.

Yes. And I think I might have touched on this at the half, but obviously, 6 months later, what's changed for us. If we think about the next 18-month period, we've got a portfolio as at 30 June that you alluded to of 376,000. Just shy of 10% of that is up for contract renewals over the next 18 months. So not a very large portion given what we've been through over the last couple of years. But the pipeline is pretty strong in terms of new opportunities and also opportunities for panels as well. So we're optimistic about some growth opportunities from a client perspective. Obviously, we still need to give the right attention to our smaller number of renewals over that period, but we don't have as many in the next 18 months.

Your next question comes from Hayden Nicholson and Bell Potter.

Just looking at GRS. I know orders were included in the deck. Going back to the interim result, Oly was pretty strong. I think it was 19% on the pcp. And your outlook comment is kind of the same in terms of supply. Sales were only up, I think, 2% second half '25 on the pcp. So just trying to get a sense, I guess, how we bridge between some of the good progress you're seeing like in that new brand and what's actually getting settled, like how we think about that, if you have any comments.

Yes. I think it's outlined in my introduction. What we're seeing now is because the average days to settle was a lot shorter in terms of the delivery times of vehicles, we're settling a lot more in the period. So for all of vehicles in '25, our delivery time was on average 37 days versus '24, 64 days. So we're able to convert a lot of that much faster during the period, which helps support, obviously, the sales in the period.

In terms of Oly, yes, we had really good growth in the Oly part of our channel, supported in part by partnerships, in part by just the SME growth within it. So we're pleased with how that's going. In the core business, it takes a little bit of time from when you win a contract to then start to see the novated lease coming through. So they have an existing portfolio in some cases, which have generally somewhere between 4 to 5 years in terms of the average life of lease.

If they're newer to the market -- so some of our clients that we've brought onboard during the period have never had employee benefits packages arrangements for their employees. There's a lot of effort that goes into education of the customers to get them to a point of comfortable to take on the product. So that's generally a little bit more work in progress. And if we look at our, obviously, sales during the period, as you alluded to, our second half on second half was shy of 2%. Our second half on first half for novated sales was just over 3% in the period, 3.3%.

Yes. I mean just coming back to the PHEVs and, I guess, the mix, looks as well like ICE was down, EV growing pretty strongly. Should we be worried about cannibalization here in terms of selling into the future with that change in the policy?

No, less concerned about cannibalization. So at the end of the day, obviously, our objective is to help our customers, clients with their needs in terms of salary packaging and novated leasing. If they make a decision to have an ICE vehicle, plug-in hybrid, traditional hybrid or battery electric vehicle, indifferent from our perspective, it's making sure they've got the right customer to suit their needs. As I alluded to before, what we've seen here is there's always a mix shift slightly depending on what happens at any point in time. So we certainly feel that there is incremental growth in novated leases as a result of the introduction of the EV legislation.

Yes, there was obviously a bit of pull-forward for Q3 between plug-in hybrids that kind of inflated the Q3 on the mix there. As I said earlier to one of the other questions asked though that we've seen a bit of a shift out of that into battery electric. So there will always be a little bit of a shift between consumer preferences between the types of cars that they take on.

Okay. And then just last quick -- just to clarify on PSS, did you say that revenue loss is going to be fully seen at the bottom line in terms of the leverage there, like just straight revenue that's taken upfront on the onset for those plans? Is that right?

Yes. What I said was a lot of the cost doesn't go away with renewals of clients and setup of clients. So we onboard a customer, nothing changes in terms of the removal of that fee. The opportunity for us is twofold. One is we onboard a business that we acquired, My Plan Support, which wasn't using a scalable platform that we migrate onto our platform and get some opportunities to make that more efficient and productive in terms of how we service those customers. And the second is the ongoing investments we're making in our platform and driving efficiencies as we've done over the last few years.

And we have a follow-up from Scott Hudson and MST.

So Rob, did you say that novated lease sales were up 9% in the fourth quarter versus the third quarter?

Novated sales?

Novated lease sales. Is that what you said?

I said in the Q4 on the Q3.

So up 9% sequentially.

Quarter-on-quarter.

Yes, quarter 4 on quarter 3 in FY '25. Yes. So to obviously address the point, which is did the world fall over after the plug-in hybrid went? No, we had a really good quarter in Q4 and probably our strongest quarter ever.

Can you maybe help us reconcile that given that, I guess, the PHEV sort of cutoff -- I mean, did you maybe underperform a little bit in the third quarter and catch up some of that in the fourth quarter? Or [indiscernible] strong fourth quarter?

Yes. A couple of things to think about during the periods that happened. So in the Q3 period, we had the impacts in Queensland from the cyclones. So we had a number of days that actually we had no orders and unable to deliver cars. So our Q3 in March at the end, whilst it was a really strong performance, wasn't as strong as it would have been without that. So that was -- and because obviously Queensland government for us is our largest client. And so therefore, we've got a larger exposure to that than otherwise. So that would be the first thing. And then the second would be obviously the end of the Q4 both between Oly and the June month with kind of financial year-end deals that were going on was a really strong month for us.

And we have a follow-up from Chenny Wang and Morgan Stanley.

So just following on from that, could you update us on what your carryover was at the end of FY '25? Because it sounds like with the strong June month, like there's still a delay in terms of when the orders are processed versus when the sales actually come through. So yes, just wondering if there's some color on carryover you guys can provide.

Yes. Carryover is sitting somewhere around $13.5 million at the end of June, Chenny. It was $15.5 million at the end of 1 half. In part, we're seeing, as I mentioned earlier, a lot more movement between the month now from orders ending up in sales as the delivery times are shortening.

That does conclude the question-and-answer session and the McMillan Shakespeare Limited full year results FY '25 conference for today. Thank you for participating. You may now disconnect.

Thank you.