Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — HY23 Earnings Presentation
39 slides from Turners Automotive's earnings presentation, November 2022
Slide 1: HY23 Results Presentation
HY23 Results Presentation For the six months ending 30 September 2022
Slide 2: Disclaimer
Disclaimer Turners Automotive Group the (company) is solely responsible for the content of this document. This document is not an investment statement or prospectus and does not constitute an offer of securities. This document or any other written or oral statements made by, or on behalf of, the com
Slide 3: Agenda
Agenda 1. Overview of HY23 2. HY23 Results 3. Segment results 4. Outlook 3 • HY23 RESULTS PRESENTATION
Slide 4: Overview of HY23
1 Overview of HY23 4 • HY23 RESULTS PRESENTATION
Slide 5: Key highlights: Turners maintains robust earnings despite macro challenges
Key highlights: Turners maintains robust earnings despite macro challenges… 1. Record net profit before tax of $23.4m for HY23 slightly ahead of HY22 ($23.2m NPBT) despite a challenging macro environment, 2. The HY23 was 58% up on the last pre-Covid earnings in HY20. 3. Based on our experience in H1
Slide 6: NZ used car market: Lower volumes and dealers leaving market
NZ used car market: Lower volumes and dealers leaving market … Total Change of Ownerships for Used Vehicles in NZ by HY (Apr to Sep) • Transaction levels tracking well behind pre-Covid levels due 600,000 to Omicron impact, rising interest rates, increased government regulation, and decreased industr
Slide 7: Used car transactions impacted by government regulation
Used car transactions impacted by government regulation Total Change of Ownerships for Used Vehicles in NZ Registered Dealer Numbers NZ (source MBIE) 3600 1,200,000 3500 1,100,000 1,000,000 3400 900,000 3300 800,000 3200 700,000 * 3100 600,000 3000 500,000 2900 400,000 300,000 2800 200,000 2700 Jul-
Slide 8: HY23 Results overview
HY23 Results overview Financials Key Drivers for HY23 Q3 Update • Revenue $185.3m +11% • Q1 impacted materially by Omicron both • Auto retail: Car sales holding up well, in customer demand and staff impact. margins improving. • EBIT $26.1m +2% • Reduced vehicle margins offset • Finance: Increasing i
Slide 9: HY23 Results
2 HY23 Results 9 • HY23 RESULTS PRESENTATION
Slide 10: HY23 Results snapshot
HY23 Results snapshot Revenue 400 350 300 Revenue Shareholders’ Equity 250 Millions $185.3m +11% $266.7m as at 30 Sept 2022 200 2H 150 1H 100 EBIT Q2 Dividend 5.0 cps 50 $26.1m +2% Projected FY Div 23.0cps 0 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Net Profit Before Tax Net profit after tax 35 $23.4m +1%
Slide 11: HY22: HY23 Revenue bridge
HY22: HY23 Revenue bridge 11% increase in revenue, predominantly driven by Auto Retail • Revenue growth in Auto Retail reflects increase in both “owned” units sold and increase in consignment units. • Finance revenue growth reflects larger loan book driven out of growth in high quality borrower segm
Slide 12: HY22: HY23 Net profit before tax (NPBT) bridge
HY22: HY23 Net profit before tax (NPBT) bridge NPBT increased from $23.2m to $23.4m, profit largely unchanged for each segment • Auto Retail result underpinned by market share gains and new branch growth, with market wide lower margins. • Finance impact of rising interest costs. • Insurance result r
Slide 13: The business has a diverse and resilient earnings base
The business has a diverse and resilient earnings base Operating Profit Contribution by Segment ($m) 30.0 • All three auto related businesses grew 2.1 1.4 materially from pre-pandemic levels. 25.0 6.3 5.8 • Credit management has been significantly 3.0 20.0 3.1 impacted by reduced debt load and no 3.
Slide 14: Reconciliation: NPBT to Normalised NPBT
Reconciliation: NPBT to Normalised NPBT $Millions HY23 HY22 Var • No material one-off gains or losses in HY23. Profit before tax actual 23.4 23.2 1% • Whilst there were no lockdowns in HY23 there Profit on sale of MTF shares (0.5) were disruptions from the Omicron outbreak however these were difficu
Slide 15: Dividend Payments and Policy
Dividend Payments and Policy Dividend (cents per share) 0.25 0.23 0.23 • Continued strong track record of sustainable dividends 0.20 for shareholders over time. 0.20 0.17 * 0.155 ** • Q1 FY23 dividend declared at 5.0 cps in Oct, Q2 FY23 0.145 0.14 0.15 dividend = 5.0 cps. 0.13 0.10 • Based on the cu
Slide 16: Balance sheet
Balance sheet $Millions HY23 HY22 Cash and cash equivalents 17.7 14.2 Financial assets at fair value 66.2 65.4 • Inventory levels down as we focus on improving Inventory 26.2 31.9 processing times and overall stock turn metrics. Units Finance receivables 443.1 372.3 down from 4,300 in Sept-21 to 3,0
Slide 17: Funding mix
Funding mix Borrowings Borrowings by Utilisation ($Millions) As at 30 September 2022 $Millions Limit Drawn Undrawn Receivables – Securitisation (BNZ) 331 316 15 Receivables – Banking Syndicate 50 29 21 Inventory Corporate & Property (ASB/BNZ) Finance Receivables $72m $345m Corporate & Property 110 7
Slide 18: Segment Results
3 Segment Results 18 • HY23 RESULTS PRESENTATION
Slide 19: HY23 by segment
HY23 by segment Automotive $Millions Finance Insurance Credit Retail Revenue 129.6 13% 29.2 16% 21.6 4% 4.9 (14%) Segment Profit 11.1 8% 9.1 (9%) 6.3 8% 1.4 (32%) Note – HY23 reported NPBT of $23.4m includes corporate costs of $4.3m 19 • HY23 RESULTS PRESENTATION
Slide 20: HY23 by segment
HY23 by segment Auto Retail Finance • Market share gains through brand promotion and retail • Finance continued focus on targeting high quality optimisation initiatives. borrowers, attracting 50%+ of new lending in premium risk • Speed to sale initiatives leading to more sales on lower business. inv
Slide 21: Automotive retail
Automotive retail Revenue 129.6m +13%, Segment Profit $11.1m +8% Turners Retail Market Share % (Quarterly) • Market share has continued to improve in HY23, “Tina” brand 9.00% campaign working well, winning multiple NZ Marketing Awards. • Retail (BuyNow) unit sales up 7% to ~9,500, wholesale auction
Slide 22: Improving our speed to sale has improved our stock turn and reduced inventory levels
Improving our speed to sale has improved our stock turn and reduced inventory levels • Data tools have enabled accurate measurement of the Key Indicator Sept-21 Mar-22 Sep-22 process. • Vehicle preparation process has been re-engineered and Speed to sale optimised for specific vehicle requirements,
Slide 23: Focus on local sourcing reduced reliance on import channel
Focus on local sourcing reduced reliance on import channel Average Margin1 ($) and Units of “owned” cars sold 14,000 1,000 900 12,000 • Noticeable impact on margins during high demand and 800 limited supply during COVID pandemic. 10,000 700 Avergae margin ($) 600 • Positive impact on volume and marg
Slide 24: The value of the Turners brand continues to grow
The value of the Turners brand continues to grow… • Gains in market share have been supported by our “Tina from Turners” brand investment. • In September 2022, Turners claimed the top award at the 2022 edition of the New Zealand Marketing Awards. With the Awards now in its 31st year, Turners took ho
Slide 25: Continue to expand footprint – Rotorua exceeds expectations
Continue to expand footprint – Rotorua exceeds expectations 25 • HY23 RESULTS PRESENTATION
Slide 26: Continue to expand footprint - Nelson exceeds expectations
Continue to expand footprint - Nelson exceeds expectations 26 • HY23 RESULTS PRESENTATION
Slide 27: Turners Subscription continues to gather momentum
Turners Subscription continues to gather momentum and clear pathway to viable business clear Concurrent subscriptions by month • Turners Subscription has broken through the milestone of 200 215 live subscriptions in October with almost 250 vehicles 195 concurrently on subscription in mid-Nov. 175 •
Slide 28: Finance
Finance Revenue $29.2m +16%, Segment Profit $9.1m (9%) Receivables growth by month (excl impairments) • Growth has moderated as quality and margin become higher 450 priorities. Millions • Focus on pricing and margin management has been critical in 400 dealing with the speed of interest rate rises. 3
Slide 29: The quality of the finance book continues to improve
The quality of the finance book continues to improve… Average Centrix Credit Score for loans onboarded Total New Lending with Premium Tier Risk 740 Split 100% 90% 720 80% 700 Avergae consumer CENTRIX 70% 680 60% credit score 660 50% 640 40% 30% 620 51% 47% 48% 48% 49% 20% 600 26% 10% 580 3% 0% H1 FY
Slide 30: Focus on quality reflected in arrears
Focus on quality reflected in arrears Consumer Customer +3 Day Arrears (Loan Balance) 8.0% • Our large proportion of premium borrower business combined with 7.0% the run-off of legacy loan book leads to structural improvement in 6.0% 5.0% arrears. 4.0% 3.0% 2.0% • Oxford has continued to tighten cre
Slide 31: Insurance
Insurance Revenue $21.6m +4%, Segment Profit $6.3m +8% Net Earned Premium HY22 to HY23 ($000s) • Market share gains continuing to provide robust policy sales despite challenging market conditions. • Distribution arrangements continuing to work well with further digital enhancements. • Claims Costs r
Slide 32: Credit management
Credit management Revenue $4.9m (14%) Segment Profit $1.4m (32%) Debt Loaded HY22to HY23 ($m) • Debt value loaded increased by 3% to $63.4m over HY22 as market wide credit metrics start to deteriorate. • Debt value collected was down 8% to $18.7m with cost of living pressure impacting on consumers s
Slide 33: Digital advantage continues to expand against competitors
Digital advantage continues to expand against competitors Car wizard launched on turners.co.nz • Team fully resourced in a very challenging employment environment – headcount increased to 40 and team strengthened in data and development • Data platform and tools – enabling sustainability measures, h
Slide 34: Our team engagement scores are at record high levels
Our team engagement scores are at record high levels Peakon Employee Engagement Scores How likely is it that you would recommend Turners Automotive Group as • Having a strong culture and an engaged a place to work? team is very important to us, particularly at a 9.5 time when recruitment and retenti
Slide 35: Outlook
4 Outlook 35 • HY23 RESULTS PRESENTATION
Slide 36: There are some challenges, but we are in a strong position
There are some challenges, but we are in a strong position… Challenges Competitive advantages… • Cost of living impact on consumer confidence • High trust brands in our stable • Rapidly increasing interest rate environment • Biggest buyer and seller of cars in NZ • New car supply chain issues • Unma
Slide 37: Outlook – FY23 Guidance
Outlook – FY23 Guidance • Based on our experience in the first half and early trading in H2 we expect FY23 NPBT to be at or slightly above last year’s record result. • We anticipate full year fully imputed dividends of 23 cents per share (FY22 23 cps) based on the current dividend payout policy of 6
Slide 38: Key Messages
Key Messages 1. Continue to produce robust and reliable earnings, despite macro challenges Following a number of strategic initiatives, and focus on de-risking, Turners continues to produce reliable and consistent earnings and a sustainable dividend yield. Auto and Insurance are growing strongly off
Slide 39: Contact
Contact Todd Hunter Group CEO T: 64 21 722 818 E: todd.hunter@turners.co.nz Aaron Saunders Group CFO T: 64 27 493 8794 E: aaron.saunders@turners.co.nz 39 • HY23 RESULTS PRESENTATION
Turners Automotive Group — HY23 Earnings Presentation on 6ix