Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — FY2022 Earnings Presentation
43 slides from Turners Automotive's earnings presentation, May 24, 2022
Slide 1: FY22 Results Presentation
FY22 For personal use only Results Presentation For the twelve months ending 31 March 2022 1 ••FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 2: Disclaimer
Disclaimer For personal use only 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
Slide 3: Record result, robust model, ready for what's next
For personal use only Record result Robust model Ready for what’s next
Slide 4: Agenda
Agenda For personal use only 1. FY22 Results 2. Segment results 3. Looking forward … 4 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 5: Delivering on our plan for growth
Delivering on our plan for growth … For personal use only 1. We achieved 15% growth in PBT in FY22…another record year for the business, and 48% growth in profits since FY19 2. Full year dividend at 23.0 cps versus guidance of 22.0 cps. Based on current share price this is a gross yield of over 8.0%
Slide 6: We have made great progress in years
We have made great progress in 3 years… For personal use only KPI FY19 FY22 Progress Finance conversion 30.3% 32.7% + No. of owned cars sold 16,179 22,170 + BuyNow sales % 48% 56% + Auto retail market share 4.85% 6.55% + Avg GP per owned unit $470 $818 + Average monthly premium lending $2m $14m + Co
Slide 7: FY22 Results overview
FY22 Results overview For personal use only Financials Key Drivers for FY22 FY22 • Strong Q1 followed by disruption from Covid • FY22 result a record…employee • NPBT $43.1m +15% lockdowns and Omicron outbreak engagement at all time high • NPAT $31.3m +16% • Consumer demand better than expected • Aut
Slide 8: Building a strong and sustainable business with a proven track record
Turners building a strong and sustainable business with a proven track record… For personal use only Total NPBT/NPAT over 3 year period ($m) Aggregate dividends paid over 3 year period (cps)* 120.0 0.6 0.57 109.6 100.0 0.5 0.47 84.7 79.2 80.0 63.7 0.4 60.0 45.5 41.9 0.3 40.0 0.23 20.0 15.1 0.2 - 0.1
Slide 9: NZ used car market transactions down in FY22
NZ used car market transactions down in FY22… NZ Used Car Change of Ownerships (Source NZTA) For personal use only Impact of Govt 120,000 Feebate Scheme 100,000 • Overall transaction levels in late 2021 and early 2022 tracking behind 80,000 pre-covid levels (down 4.4% on FY21). 60,000 40,000 • The e
Slide 10: EVs and Subscription (ESG #1)
EVs and Subscription (ESG #1) For personal use only EV/Hybrid sales as % of total sales • Turners have a role to play to help the NZ fleet transition, in partnership with EECA we have expanded 5.0% our EV fleet. 4.5% • We currently have 100 vehicles on subscription of which 4.0% 44 are EVs or Hybrid
Slide 11: Environmental Social Governance (ESG #2)
Environmental Social Governance (ESG #2) For personal use only Peakon Employee Engagement Scores • The focus through 2021 has been on delivering on the “social” pillar of our ESG strategy. 9.1 8.9 • Employee engagement has continued to increase at a time where 8.7 retention and recruitment has been
Slide 12: 1. FY22 Results
For personal use only 1. FY22 Results 12 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 13: FY22 Results snapshot
FY22 Results snapshot Revenue For personal use only 400 Revenue Shareholders’ Equity 300 $344.5m +14% $252m as at 31 March 22 Millions 2H 200 1H Underlying Net Profit Before Tax Final Dividend 7.0 cps 100 $44.1m +29% FY Div 23.0 cps +15% 0 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Net Profit Before Tax Net
Slide 14: FY21 to FY22 Revenue bridge
FY21 to FY22 Revenue bridge For personal use only Revenue increased from $297m to $345m Revenue Bridge FY21 to FY22 ($Millions) • Revenue still impacted by Delta lockdowns in Q2 and and Omicron in Q4 • Auto revenues have grown off increased market share, new branches and more owned stock flowing thr
Slide 15: FY21 to FY22 Net profit before tax (NPBT) bridge
FY21 to FY22 Net profit before tax (NPBT) bridge For personal use only NPBT increased from $37.4m to $43.1m NPBT Bridge FY21 to FY22 ($Millions) • Auto Retail result underpinned by better finance penetration, better margins, more owned stock and new branches. • Finance driven by loan book growth and
Slide 16: Reconciliation: NPBT to underlying NPBT
Reconciliation: NPBT to underlying NPBT For personal use only $Millions FY22 FY21 Var Reported profit before tax 43.1 37.4 15% • Significant improvement in underlying profit reflects improved margins, increased market Profit on sale of MTF shares (0.5) share in auto, finance and insurance, combined
Slide 17: Turners has a strong and sustainable yield
Turners has a strong and sustainable yield For personal use only Dividend per Share ($) 0.25 0.23 0.20 • Proven track record of delivering strong and 0.20 0.17 growing dividends in the business 0.155 0.145 0.14 0.15 0.13 • Directors declared a final dividend of 7.0 cents 0.10 per share (fully impute
Slide 18: Balance sheet has capacity to support growth
Balance sheet has capacity to support growth For personal use only $Millions FY22 FY21 Cash and cash equivalents 13 12 Financial assets at fair value 70 70 Inventory 32 30 • Inventory levels have remained stable as we improve Finance receivables 423 330 processing times and overall turn metrics Prop
Slide 19: Funding mix optimised to support growth
Funding mix optimised to support growth For personal use only Borrowings Borrowings by Utilisation ($Millions) $Millions Limit Drawn As at 30 March 2022 Receivables – Securitisation (BNZ) 320 302 Corporate & Receivables – Banking Syndicate (ASB/BNZ) 50 39 Property $68m (16%) Less Cash (5) Net Receiv
Slide 20: 2. Segment Results
For personal use only 2. Segment Results 20 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 21: FY22 by segment
FY22 by segment For personal use only $ Millions Automotive Retail Finance Insurance Credit Revenue 242.5 21% 51.9 8% 40.4 (4%) 9.7 (24%) Segment Profit 19.4 26% 18.0 14% 11.6 24% 3.0 (40%) 21 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 22: FY22 Update by segment
FY22 Update by segment For personal use only Auto Retail Finance • Market share gains through brand promotion and • Finance continued focus on targeting high quality retail optimisation initiatives borrowers, attracting 50%+ of new lending in • Covid recovery and cost management premium risk busines
Slide 23: Automotive retail
Automotive retail For personal use only Revenue 242.5m +21%, Segment Profit $19.4m +26% • Margins on “owned” fleet have continued to improve due to a number of buying improvement initiatives, more retail sales and constrained supply of used cars nationally. GP per unit on owned Turners Retail Market
Slide 24: Property asset unrecognised gain growing
Property asset “unrecognised gain” growing…22c of gains per share • We have continued to build our portfolio of property over For personal use only Site Purchase Original Mar-21 Mar-22 Unrealised the last 7 years Date Cost ($m) Valuation Valuation Gain/Loss Developed sites • These properties are on
Slide 25: Rotorua – on track for completion of development by end of Q2
Rotorua – on track for completion of development by end of Q2 For personal use only • Performance on track for delivering $1m+ in operating profit • Market share tracking at ~10%+ within 6 months of operation 25 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 26: Nelson operational H2 FY23
Nelson operational H2 FY23 For personal use only 26 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 27: Finance
Finance Revenue $51.9m +8%, Segment Profit $18.0m +14% For personal use only Total Receivables (ex impairments) • Loan book has grown 28% over FY21 to $423m, driven out 450 of strong premium borrower lending now accounting for 1/2 Millions of monthly lending. 400 • Navigated CCCFA changes in Dec-21
Slide 28: The quality of the finance book continues to improve
The quality of the finance book continues to improve… For personal use only Total New Lending with Premium Tier Risk Average Credit Score Split 200 720 180 700 160 680 Avergae consumer CENTRIX 140 120 660 credit score 100 640 80 620 60 600 40 20 580 - 560 H1FY20 H2FY20 H1FY21 H2FY21 H1FY22 H2FY22 Pr
Slide 29: Quality lending strategy resulting in arrears at record lows
Quality lending strategy resulting in arrears at record lows Consumer Customer +3 Day Arrears (Loan For personal use only Balance) 10.0% • Our large proportion of premium borrower business 8.0% combined with the run-off of legacy loan book leads to 6.0% structural improvement in arrears 4.0% 2.0% •
Slide 30: Pricing and margin management are a top priority
Pricing and margin management are a top priority… For personal use only Oxford base rate price movements v OCR actual and forecasted • Oxford Finance base rates have been increased 6 3.50% times for a total of 1.74% since Oct 2021 v OCR movement of 1.25% Actual movement in base rates 3.00% Forecast
Slide 31: Insurance
Insurance Revenue $40.4m -4%, Segment Profit $11.6m +24% For personal use only Net Earned Premium FY21 to FY22 ($000's • Market share gains driving strong policy sales, with Gross Written Premium up 6% on FY21 to $39.9m despite impact of lockdown periods. • Distribution arrangements working well (MT
Slide 32: Credit management
Credit management For personal use only Revenue $9.7m -24%, Segment Profit $3.0m -40% Total Debt Loaded ($000s) • Business continues to be hampered by historically low 250,000 236,711 225,044 consumer arrears and corporates working back into 200,000 recovery action 150,000 119,409 107,820 100,000 •
Slide 33: 3. Looking forward
For personal use only 3. Looking forward … 33 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 34: Resilient and well diversified, poised for further growth ahead
Resilient and well diversified, poised for further growth ahead For personal use only The business benefits from strong geographical and earnings diversification during restrictions. % Change Yr on Yr, New Car vs Used Car Sales 1. Used car market is resilient…proven over time 50% 2. Diversified busi
Slide 35: There are some challenges on the horizon
There are some challenges on the horizon… We are across the challenges in the macro environment and are working proactively For personal use only to minimise their impact… Challenge What we are doing now… What are still to do… • Increased buyer and seller fees in Auto • Investing in digital initiati
Slide 36: Growth model: FY23
Growth model: FY23 For personal use only Auto Retail • Stock acquisition – Keep building domestic sourcing • Improve speed to sale – operational cadence • Retail optimisation and expansion – develop new sites and build retail volumes Finance • Pricing and margin management • Improve credit decision
Slide 37: Growth model: FY22 – FY25
Growth model: FY22 – FY25 For personal use only The model gives us confidence in higher earnings growth through the cycle. We have found the right formula, and will optimise further … Four key areas underpin our earnings growth. These are a combination of both physical and digital: 1. Retail optimis
Slide 38: $50M PBT by FY25
$50M PBT by FY25… The broader economic environment is expected to moderate the rate of growth we For personal use only have experienced over the last 3 years. Underlying Net Profit Before Tax ($M) 1 Dividends Paid (cps) 55 28.0 50 26.0 24.0 45 22.0 COVID 40 impacted 20.0 35 18.0 16.0 30 14.0 25 12.0
Slide 39: Roadmap to $50M NPBT
Roadmap to $50M NPBT… For personal use only Net Profit Before Tax Bridge ($M) • Business is highly cash generative, leading to growth + yield for shareholders • Auto retail growth continues to come from retail optimisation and branch expansion. We are targeting a 10% market share. • Margin expansion
Slide 40: Outlook + guidance
Outlook + guidance For personal use only • Whilst the pandemic uncertainty has decreased, NZ’s economic uncertainty has increased. The used car market is “needs” based and stable through downturns. • In Automotive Retail, we expect to see upside from our new branches in H2 and the supply-constrained
Slide 41: Results Video
For personal use only Results Video A short video is available summarising the FY22 results at… https://www.turnersautogroup.co.nz/invest
Slide 42: Questions
For personal use only Questions 42 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Slide 43: Contact
Contact For personal use only 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 43 • FY22 RESULTS PRESENTATION – TURNERS AUTO GROUP
Turners Automotive Group — FY2022 Earnings Presentation on 6ix