Ann: FY20 Investor Presentation, page-2

My view is that it is a positive announcement. Key points for me are:

1. Operating EBITDA* of $11.8m (ahead of June 2020 guidance).

Under-promising and over-delivering.Beat the forecast by $0.8 million…A pattern of under-promising and overdelivering is emerging. You can feel it throughout the presentation, that there is a large upside, but Management do not want to overpromise.

For example, 20 redundancies occurred on completion. Obviously not great for those individuals, but there would have to be between $1.0-$2.0 million of saving alone…But management are still completing a review to identify likely all synergies and keeping their announcements low key…

2.The acquisition increases the diversity and scale of the Group. Diversification reduces risk and a broad product mix appeals to customers. Scale supports better service levels, more buying power and lower costs. It is likely that the transaction will also create revenue and cost synergies that will have a positive impact on earnings.

Sounds very promising.

3.The timing of earnings benefits from the acquisition are difficult to predict due to the uncertainties associated with the pandemic and the fact that, while Tyres4U was profitable over recent months, it was not profitable for the full 2020 financial year.

The company already announced that May and June were profitable. So, this change of wording indicates that July was profitable.

4.A strategic review of the Tyres4U business is presently underway to determine, amongst other things, the sustainability of profits made over recent months. The outlook for Tyres4U will become clearer in September when the review is completed.

The September announcement is now a key catalyst.

5. Benefits of near-source manufacture of key products were barely visible in FY20 but will have an impact in FY21. The higher AUD to USD will assist GP or volume in H1 of FY21. The Statewide Tyre Distribution expansion to the Australian east coast only began in a meaningful way in July 2020. The Group will launch a private label 4WD tyre in FY21.

GP should improve given the higher FX rate.

There are other good points (supplier / brand diversification, expansion of Statewise business to East Coast, increase tyre and wheel segments, increased customer base etc) while acknowledging the Marco headwinds of the pandemic.

This business has a great future!