Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — FY2019 Earnings Presentation
41 slides from Turners Automotive's earnings presentation, May 29, 2019
Slide 1: FY19 Full Year Results Presentation
For personal use only FY19 Full Year Results Presentation For twelve months ending 31 March 2019 1 ••FY19 RESULTS & STRATEGY PRESENTATION
Slide 2: NZ used car market still at strong historic levels
For personal use only NZ used car market still at strong historic levels Annual changes in used vehicle ownerships 1,200,000 • After a period of growth used car change of 1,000,000 ownership numbers have plateaued. 800,000 600,000 • Underlying demand still strong with more cars 400,000 exiting fleet
Slide 3: The Kiwi car economy
For personal use only The Kiwi car economy 3.85m 953,000 Light vehicles in the The number of cars in the light vehicle 1.13 m New Zealand vehicle fleet that are 20 years or older used cars were traded to the year fleet ended 31 March 2019 down 1% on year ended Mar 18 13,000 EVs The number of EVs reg
Slide 4: FY19 results snapshot
For personal use only FY19 results snapshot Revenue (millions) Revenue Shareholders’ Equity 400 350 $336.6m +2% $226.4m as at 31 Mar 19 300 250 2H 200 150 1H Net Profit Before Tax 100 Final Dividend 5.0 cps 50 $29.0m -7% Total FY Dividend 17.0cps 0 FY15 FY16 FY17 FY18 FY19 ($33.6m excl BRC brand wri
Slide 5: HY18: HY19 profit before tax bridge
For personal use only HY18: HY19 profit before tax bridge Operating profit NPBT Bridge FY18 to FY19 ($000s) • Turners Group improvement in local margins offset by drop in import margins. Damaged vehicle volumes and revenues positive. Buy Right Cars affected by tough market conditions in Auckland use
Slide 6: Reconciliation: NBPT to underlying NBPT
For personal use only Reconciliation: NBPT to underlying NBPT $000s FY19 FY18 Var • Property sale and lease back in line with Underlying Operating Result 25,775 25,953 -0.7% Turners’ property strategy Other Adjustments • Total “unredeemed voucher liability” for ECCC stands at $1.6m as at 31 Mar 2019
Slide 7: Earnings per share and dividend
For personal use only Earnings per share and dividend Earnings per share • Dividend Policy Change: Increase in pay out ratio to 60% (Cents per share) to 70% of NPAT 35 • FY19 fully imputed quarterly dividends and fully imputed Q1 @ 4.0c per share 30 Q2 @ 4.0c per share Q3 @ 4.0c per share 25 Q4 @ 5.
Slide 8: Balance sheet
For personal use only Balance sheet $000s FY19 FY18 • Reduction in cash balances due to Cash and cash equivalents 15,866 25,145 investment of insurance reserves into Financial assets at fair value longer dated term deposits 66,252 53,378 Finance Receivables 290,017 289,799 • Change in Finance Receiv
Slide 9: Funding mix
For personal use only Funding mix Borrowings Borrowings by utilisation As at 31 Mar 2019 $Millions Limit Drawn Undrawn Receivables – Securitisation (BNZ) 184 155 29 Receivables – Banking Syndicate Inventory 70 29 41 (ASB/BNZ) Receivables – MTF 60 37 23 Corporate & Property [incl Bond] 85 75 10 Corpo
Slide 10: Automotive retail: Turners Group
For personal use only Automotive retail Revenue 225.7m +1.1%, Segment Profit $18.3m +10.2 % Turners Group Revenue $162.3m, down 1%. Segment profit $19.1m, up 35.7% • Profit includes $3.4m of one off gains. • Continuing increase in BuyNow (retail sales) – up 3% YoY, with sales to end users at 67% of
Slide 11: Automotive retail: Buy Right Cars
For personal use only Automotive retail Revenue 225.7m +1.1%, Segment Profit $18.3m +10.2% Buy Right Cars Revenue $63.4m, up 7%. Segment profit $(0.9m) loss, down 136% • Temporary branch opened in Hamilton before larger format branch opens in Q2. • A number of cost out initiatives in place, includin
Slide 12: Finance
For personal use only Finance Revenue $44.2m +11%, Segment Profit $11.1m -5% • Directing Turners Cars lending into Oxford milestone Lending by Asset Class achievement in FY19, new lending from Turners at $28M. 4% 9% • MTF non-recourse book in run out, Mar 19 net receivables balance at $35m, down 43%
Slide 13: Finance drill down
For personal use only Finance drill down Improving Customer Credit Scores Consumer Payment Arrears by Channel Average customer VEDA credit score 14.4% 600 550 500 450 400 2.7% 2.1% 2.4% 350 0.2% 0.1% 300 1H17 2H17 1H18 2H18 1H19 2H19 OFL TFI MTF-NR FY18 FY19 Net Interest Margin 11.0% • Credit scorin
Slide 14: Insurance
For personal use only Insurance Revenue $48.5m +3%, Segment Profit $8.2m +126% • Improvements in loss ratios across all insurance products. Net Earned Premium FY18 to FY19 ($000) Combined loss ratio 62% (FY18: 68%), MBI loss ratio at 72% (FY18 at 78%). • Replacement of selling system for dealers com
Slide 15: Credit management
For personal use only Credit management Revenue $18.2m –3% Segment Profit $6.3m +4% Debt Collected FY18 to FY19 ($m) • 28% more outbound debtor actions taken in FY19 2.1m (FY18 1.64m) • Total debt load up 15% to $237m, commission earned from debt collected up 2% to $9.0m. • Product sales to SMEs up
Slide 16: Key focus for FY20
For personal use only Key focus for FY20 Auto retail Develop and extend retail footprint, deliver better digital and mobile customer experience, building data tools to understand demand, develop new sourcing opportunities. Finance Extend distribution through use of APIs and partnerships, grow direct
Slide 17: Strategic Review
For personal use only Strategic Review 17 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 18: Summary of our plan
For personal use only Summary of our plan… Our strategy is to… • Simplify the business • Accelerate growth in a capital efficient way A capital efficient • De-risk by focusing on our core business and strengths growth strategy for This will enable us to… Turners Group, with • Significantly increase
Slide 19: Strategic drivers
For personal use only Strategic drivers 19 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 20: Our industry dynamics are changing
For personal use only Our industry dynamics are changing The used-car industry is at the cusp of some significant changes, creating both opportunities and threats. Customer Aggregator & comparison sites expectations Transparency and a higher value Customer experience is offering vital Digital disrup
Slide 21: Primary drivers
For personal use only Primary drivers Strength of Complexity of Growth of NZ’s Demand for Turners brand existing business ageing vehicle fleet digitisation 21 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 22: Industry-leading brand
For personal use only Industry-leading brand With over 50 years in the market, we are the largest and most-trusted brand in the industry. 90% Brand awareness in the New Zealand 45% View Turners as the most trustworthy used car dealer in New market Zealand Turners 90% Turners 45% 2 Cheap 60% Other 21
Slide 23: Complexity of existing business
For personal use only Complexity of existing business • Our business model has the perception of being complicated, compounded by multi- brands and some low synergy businesses. • Turners business model and operating performance can be difficult to understand and compare. • Disproportionate resources
Slide 24: NZ's ageing and growing vehicle fleet
For personal use only NZ’s ageing and growing vehicle fleet A large proportion of cars in New Zealand are at the end of their economic life. 14 years 17.5 – 19.5 years Average age of light Average age of exit fleet in New Zealand (NZ new – used) 14yrs Average light vehicle scrappage age 11yrs 10yrs
Slide 25: Increased digitisation
For personal use only Increased digitisation Of all internet users in NZ 86% are using YouTube and 85% are using Facebook Source: Global WebIndex, 2018 The average car buyer used Before Now to visit five dealerships. Personal contact with dealers, Digital natives are becoming Now, with online resear
Slide 26: What is our ambition for Turners?
For personal use only What is our ambition for Turners? To be New Zealand’s best place to buy and sell vehicles with continually high customer satisfaction 26 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 27: Strategic initiatives
For personal use only Strategic initiatives 27 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 28: Strategic initiatives
For personal use only Strategic initiatives Simplify De-Risk Grow • Single brand strategy • Continue strategy of • Expand auto retail footprint in Auto Retail writing higher quality • Shift marketing investment into • Single brand and system loans digital platforms strategy in finance and • Early ad
Slide 29: Work has already started
For personal use only Work has already started… Simplify De-Risk Grow • Buy Right cars brand change • Average credit score • Plans to grow retail footprint by out completed continually improving 7 new branches by 2022 • Finance brands consolidated • Have adopted Centrix and • Engaged social media ma
Slide 30: Focus on a single brand strategy
For personal use only Focus on a single brand strategy SIMPLIFY Leverage our strong brands, remove complexity and play to strength in auto retail. Consumer brands Wholesale/B2B brands 30 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 31: Buy Right Cars brand change out completed in May
For personal use only Buy Right Cars brand change out completed in May 31 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 32: Strategic review of business units
For personal use only Strategic review of business units SIMPLIFY We are undertaking a Short term review Medium term review review of non-core businesses with lower synergies to the core auto business. • Capital intensive • High return capital growth model business • Profits from captive • Non-auto
Slide 33: Improve the customer experience
For personal use only Improve the customer experience GROW Expand our retail footprint New locations and retail formats Continue to expand our footprint in high potential Opening six new retail stores by 2022. locations across the country. Buy Right branch & digital rebrand to Turners complete. Incr
Slide 34: Better utilise existing data assets
For personal use only Better utilise existing data assets GROW • Leverage Turners leading market • Partner with third • Use big data analytics to position and ability to invest in data party data specialists make better business projects decisions Web data - Searches (20m), page views (29m), saved s
Slide 35: Adjacent opportunities
For personal use only Adjacent opportunities GROW Turners has a strong balance sheet, large customer base and rich data assets which put it in a unique Turners Group position to partner and invest to Leverage scale, harness the changing market brand, data assets dynamic. and network Provide capital
Slide 36: Adjacent opportunities
For personal use only Adjacent opportunities GROW Example 1: ‘Netflix for Cars’ – A subscription model Example 2: Aggregator Alternative vehicle access models are on the rise internationally, model – A platform offering flexibility, variety, minimal responsibility and an all-round approach simpler s
Slide 37: Strategic plan
For personal use only Strategic plan Auto retail Insurance Finance Credit Adjacent opportunities • Expand • Focus on auto- • Short term strategic • Medium term • Investigate, footprint retail insurance review strategic assess and invest • Invest in digital • Run down non- • Look for review and socia
Slide 38: What does this mean for our stakeholders?
For personal use only What does this mean for our stakeholders? A more efficient, lower risk business model. Sharpened focus Capital efficient People, capital and management focus will Strategic review to consider most efficient all be directed to the most attractive capital structure. Optimise divi
Slide 39: Questions
For personal use only Questions 39 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 40: Contact
For personal use only Contact Todd Hunter CEO Turners Limited T: 64 21 722 818 E: todd.hunter@turners.co.nz 40 • FY19 RESULTS & STRATEGY PRESENTATION
Slide 41: Disclaimer
For personal use only 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
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