National Tyre & Wheel (ASX: $NTD) 1H24 report highlights

National Tyre & Wheel Limited (ASX: $NTD) has released its Appendix 4D Half-year report for the half-year ended 31 December 2023. The company reported an improved operating environment in 1H24 compared to 1H23, with an increase in gross profit, growth in revenue from commercial tyre sales, and a reduction in expenses, including employee costs. The company's statutory profit for the Group after providing for income tax and non-controlling interests amounted to a profit of $0.9m, a significant improvement from the loss of $1.6m in the previous corresponding period.

Executive commentary on 1H24 performance

NTAW enjoyed a more favourable operating environment in 1H24 compared to 1H23 as inflationary pressures subsided, supply chains improved, and labor became more available. The company implemented several initiatives that had a positive impact on operations, including discontinuing the sub-wholesaling business of T4UAU, aligning prices to reflect movements in the cost of goods throughout FY23, relaunching the 'Inner Circle' loyalty program for ETD and ETDNZ, expanding the Black Rubber commercial tyre footprint, and reducing employee costs and other expenses. These initiatives resulted in an improvement in gross profit, growth in revenue from commercial tyre sales, and a reduction in expenses, including a $2.6m reduction in employee costs. Additionally, the company generated $10.0m of cashflows from operating activities in 1H24, a significant improvement from the $1.4m cash outflow from operating activities in 1H23.

Summary of 1H24 results and outlook

National Tyre & Wheel Limited (ASX: $NTD) reported an improved operating environment in 1H24, with increased gross profit, growth in revenue from commercial tyre sales, and a reduction in expenses, including employee costs. The company's statutory profit for the Group after providing for income tax and non-controlling interests amounted to a profit of $0.9m, a significant improvement from the loss of $1.6m in the previous corresponding period. Looking ahead, NTAW expects benefits from various strategic initiatives, structural changes, and the distribution of Dunlop products to mostly accrue in FY25. The company anticipates substantial changes to the organisation of the Australian wholesale business units, with the benefits from discontinuing some brands depending on customers switching brand and supplier preferences over time. NTAW's go-to-market strategy for Dunlop involves reinforcing Dunlop's historical status as a premium brand and less price discounting, with the expectation that the impact on sales volume and margins will take some time to become clear. The company also expects better customer experiences, easier access to its products and services, and new customers coming from the Dunlop distribution to present opportunities to grow revenue from new 'whole of NTAW' incentives and loyalty programs that will be offered in FY25. NTAW's commercial retail operations in Australia and New Zealand, along with the New Zealand wholesale operations, are expected to continue recent growth in revenue and profitability, with further cost savings accruing from the sale or closure of the remaining non-commercial Tyreright stores owned by the Group. The company believes it is well placed to participate in opportunities arising from the open space left in the industry by Goodyear's departure.