Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — FY2023 Earnings Presentation
48 slides from Turners Automotive's earnings presentation, May 2023
Slide 1: FY23 Results Presentation
FY23 Results Presentation For the twelve months ending 31 March 2023 1 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 2: We love cars
We love cars 2 • TURNERS TURNERS AUTOMOTIVE AUTOMOTIVEGROUP GROUP FY23 FY23 RESULTS RESULTS
Slide 3: 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 4: Ready for what's next
Record result Resilient model Ready for what’s next 4 • TURNERS TURNERS AUTOMOTIVE AUTOMOTIVEGROUP GROUP FY23 FY23 RESULTS RESULTS
Slide 5: Agenda
Agenda 1. FY23 Results 2. Segment results 3. Looking forward … 5 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 6: Delivering on our plan for growth
Delivering on our plan for growth … 1. Record result despite macro headwinds of interest rates and a supply constrained used car market 2. Auto Retail Division grows profits 28%, Insurance 9% helping to offset material impact from increasing interest rates in Finance Division. 3. Full year dividend
Slide 7: FY23 Results overview
FY23 Results overview In an environment where costs are up significantly, interest rates have never increased faster, there has been more government regulation in finance and vehicle markets than ever before, and market demand is down…Turners business has continued to perform. Financials Key Drivers
Slide 8: We have made great progress in 4 years
We have made great progress in 4 years… KPI FY19 FY23 Progress Finance conversion 30.3% 30.7% + No. of locally sourced vehicles purchased 16,179 24,089 + BuyNow sales % 48% 51% + Auto retail market share 4.9% 8.7% + Avg GP per owned unit $470 $839 + Average monthly premium lending $2M $11M + Consume
Slide 9: Turners building a strong and sustainable business with a proven track record
Turners building a strong and sustainable business with a proven track record… Total NPBT/NPAT over 3 year period ($M) Aggregate dividends paid over 3 year period (cps) 140.0 70.0 66.0 126.0 120.0 60.0 100.0 91.0 50.0 46.5 89.2 80.0 40.0 37.5 65.2 67.1 60.0 51.3 30.0 40.0 20.0 20.0 10.0 8.3 3.4 0.0
Slide 10: Regulatory changes driving drop in used car market sales
Regulatory changes driving drop in used car market sales… NZ Used Car Change of Ownerships (000s) 1,200 40,000 35,000 • Government regulation Clean car Standard and Clean Car Discount 1,000 NZ Used car Market Transations continuing to constrain the supply of used vehicles in NZ. 30,000 Turners cars
Slide 11: Registered dealer numbers continue to decline
Registered dealer numbers continue to decline… Registered Dealer Numbers NZ (source MBIE) 3,600 3,500 3,400 • Registered dealer numbers at lowest point since Feb- 2014. 3,300 3,518 3,200 • We expect to track down further due to challenges in 3,100 supply and impact of government regulation. 3,000 18
Slide 12: Turners brand becoming synonymous with used car sales in NZ
Turners brand becoming synonymous with used car sales in NZ (rolling 12-months) Combined effect of branch expansion, customer experience, brand investment, digital marketing capability 100 90 80 Search interest in topic 70 60 50 40 30 20 10 0 2011 2013 2015 2017 2019 2021 2023 'Turners Cars' 'Used C
Slide 13: The rate of change of the OCR is having a material impact on our finance business
The rate of change of the OCR is having a material impact on our finance business… Oxford base rate price movements v OCR actual and forecasted • Oxford base rates have increased 12 times since Oct-21 but pricing remains ultra- competitive. • Our strategy has been to proactively review pricing to mi
Slide 14: 1. FY23 Results
1. FY23 Results 14 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 15: FY23 Results snapshot
FY23 Results snapshot Revenue 450 400 350 Revenue Shareholders’ Equity 300 Millions 250 2H $389.6M +13% $272M as at 31 March 23 200 1H 150 100 Net Profit Before Tax Final Dividend 7.0 cps 50 0 $45.5M +6% FY Div 23.0 cps 0% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Net profit after tax EBIT* 35.0 FY22
Slide 16: FY22 to FY23 Revenue bridge
FY22 to FY23 Revenue bridge Revenue increased from $345M to $390M Revenue Bridge FY22 to FY23 ($M) • Auto revenues have grown off increased car and damaged vehicle unit sales, new branches and more owned stock flowing through the business has helped grow our cars market share. • Finance book revenue
Slide 17: FY22 to FY23 Net profit before tax (NPBT) bridge
FY22 to FY23 Net profit before tax (NPBT) bridge NPBT increased from $43.1M to $45.5M NPBT Bridge FY22 to FY23 ($M) • Auto Retail profit growth from increased unit sales, better margins, more owned stock and new branches. • Finance result impacted driven by increasing interest rates and impact on ne
Slide 18: Turners has a strong and sustainable yield
Turners has a strong and sustainable yield Dividend per Share ($) 0.25 • Proven track record of delivering strong, sustainable and COVID 0.23 0.23 impacted year growing dividends in the business. 0.20 0.20 • Directors have declared a final dividend of 7.0 cents per 0.17 0.155 share taking full FY23
Slide 19: Balance sheet has capacity to support growth
Balance sheet has capacity to support growth ($M) FY23 FY22 Cash and cash equivalents 12 13 Financial assets at fair value 67 70 Inventory 26 32 • Inventory levels have reduced further as we improve Finance receivables 425 423 processing times and overall stock turn metrics. Property, plant and equi
Slide 20: Funding mix optimised to support growth
Funding mix optimised to support growth Borrowings Borrowings by Asset Class ($M) ($M) Limit Drawn 450 425 Receivables – Securitisation (BNZ) 316 295 400 Receivables – Banking Syndicate (ASB/BNZ) 50 35 350 330 Less Cash (5) 300 Net Receivables Funding 366 325 250 Receivables Funding Capacity 41 200
Slide 21: Our strong culture is a key advantage for our business
Our strong culture is a key advantage for our business Peakon Employee Engagement Scores • Turners rank in the top 5% of consumer businesses globally using the Peakon survey tool 9.5 • Having a strong culture and an engaged team is very 9 important to us, particularly at a time when recruitment and
Slide 22: 2. Segment Results
2. Segment Results 22 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 23: FY23 by segment
FY23 by segment ($M) Automotive Retail Finance Insurance Credit Revenue 278.2 15% 58.6 13% 43.6 8% 9.2 (5%) Segment Profit 25.0 28% 15.0 (17%) 12.6 9% 2.9 (6%) 23 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 24: FY23 Update by segment
FY23 Update by segment Auto Retail Finance • Market share gains and margin improvement through • Finance margin management through regular pricing increases. brand promotion and retail optimisation initiatives. • Credit policy regularly reviewed and tightened to continue • Stock turn improving throu
Slide 25: Automotive retail
Automotive retail Revenue 278M +15%, Segment Profit $25M +28% Turners Retail Quarterly Market Share • Turners “retail” market share has continued to grow throughout FY23. Retail (BuyNow) unit sales up 6% to ~19,500, wholesale 10.00% auction unit sales up 25% to ~14,700 units. 9.00% • Total “owned” u
Slide 26: Conversion of wholesale auction units to retail channel material opportunity
Conversion of wholesale auction units to retail channel material opportunity • 51% of sales in FY23 through the retail channel. SOURCING SELLING • 18,500 units sold through auction in FY23 v 14,700 sold in FY22, largely due to adding Fleet Partners ex-lease consignment vehicles. Owned local 19,200 (
Slide 27: Retail expansion pipeline
Retail expansion pipeline Committed development pipeline Expected additional “Opportunities” pipeline Location Size Timing profit contribution New locations Timaru 4,000m2 Q4 FY24 $500k • Takanini/Drury • Whanganui Napier (site expansion) 8,000m2 Q4 FY24 $500k • North East Christchurch • Lower Hutt
Slide 28: Improving our speed to sale has improved our stock turn and reduced inventory levels
Improving our speed to sale has improved our stock turn and reduced inventory levels • Data tools have enabled accurate measurement of the Key Indicator Sept-21 Mar-22 Sep-22 Mar-23 process. • Vehicle preparation process has been re-engineered and Speed to sale optimised for specific vehicle require
Slide 29: Focus on local sourcing continues to deliver
Focus on local sourcing continues to deliver… Average Margin 1 ($) and Units of “owned” cars sold 30,000 900 800 • Positive impact on volume and margins from focus on local 25,000 sourcing in FY23, use of data, branch network, lead 700 generation, customer experience and conversion. 20,000 600 • Imp
Slide 30: Turners Subscription moves into profit
Turners Subscription moves into profit Turners Subscription snapshot by month Profitable months 315 265 • Turners Subscription has broken through the milestone of 300 concurrent subscriptions in February 2023. 215 • The average subscription period has reduced due to a spike in short term Xmas subscr
Slide 31: Finance
Finance Revenue $58.6M +13%, Segment Profit $15.0M (17%) Total Receivables (ex impairments) 450 • Growth has moderated as credit quality, regulatory compliance and margin become higher priorities. 400 • A 110% or ~$7M increase in interest expense has had a material impact on profits on average loan
Slide 32: The quality of the finance book continues to improve
The quality of the finance book continues to improve… Average Credit Score Total New Lending with Premium Tier Risk Split 740 100% 3% 720 90% Average consumer CENTRIX credit score 26% Average Centrix autoloan portfolio 80% 700 47% 48% 48% 49% score 51% 54% 70% 680 60% 660 50% 640 40% 620 30% 600 20%
Slide 33: Quality lending strategy resulting in arrears at well below industry benchmarks
Quality lending strategy resulting in arrears at well below industry benchmarks Consumer arrears 8.0% • Oxford loan arrears continue to track better than market data 7.0% 6.0% 5.4% published by Centrix (see chart at top left). 5.0% 4.0% • Our large proportion of premium borrower business combined wi
Slide 34: The impact of rising OCR on interest expense has been material
The impact of rising OCR on interest expense has been material % growth in Oxford interest expense and average loan book size 120% 110% • Average loan book growth from FY22 to FY23 100% was 13% against interest expense growing at 110% over the same period. 80% Year on year % Var 60% • To combat the
Slide 35: Insurance
Insurance Revenue $43.6M +8%, Segment Profit $12.6M +9% Net Earned Premium FY22 to FY23 ($000’s) • Market share gains continuing to provide robust policy sales despite challenging market conditions. • Digital distribution arrangements continuing to work well with further opportunities in pipeline. •
Slide 36: Credit management
Credit management Revenue $9.2M (5%), Segment Profit $2.9M (6%) Total Debt Loaded ($M) $250m $237m $225m • Debt value loaded increased by 20% ($22M) over FY22 however $200m 80% ($18M) of this increase was from harder to contact and collect $150m second placement debt. $130m $119m $108m $100m • Debt
Slide 37: Debt load increasing as NZ credit arrears metrics deteriorate
Debt load increasing as NZ credit arrears metrics deteriorate Consumer Arrears Trend Centrix NZ Credit Metrics • Consumer arrears are on the increase to 11.8% of the credit active population (11.3% in Mar-22). • Number of people that are behind on their payments has increased to 427,000. • The curre
Slide 38: 3. Looking forward
3. Looking forward … 38 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 39: Resilient and well diversified, poised for further growth ahead
Resilient and well diversified, poised for further growth ahead The business benefits from strong geographical and earnings diversification during restrictions. 1. Used car market is resilient…20% of the vehicle fleet % Change Yr on Yr, New Car vs Used Car Sales over 20 years old. Replacement demand
Slide 40: Challenges have concentrated on economy and interest rates
Challenges have concentrated on economy and interest rates… Challenge Mitigation FY23 risk rating for TRA FY24 risk rating for TRA • Diversifying funding sources by introducing new funders into Rapid increases Securitisation Warehouse in interest and High High • Increase volume of direct lending Inf
Slide 41: Growth model: FY24
Growth model: FY24 Auto Retail • Stock acquisition – Keep building domestic sourcing • Retail optimisation and expansion – develop new sites and build retail volumes • Transition wholesale auction transactions to retail Finance • Pricing and margin management • Focus on credit quality • Growth focus
Slide 42: Growth model: FY23 – FY25
Growth model: FY23 – FY25 The model gives us confidence in higher earnings growth through the cycle. We have found the right formula, and will optimise further … Five key areas underpin our earnings growth, a combination of both physical and digital: 1. Auto - Branch expansion 2. Auto - Vehicle purc
Slide 43: We are ready for what's next … $50M PBT by FY25
We are ready for what’s next … $50M PBT by FY25 The broader economic environment and specifically the OCR track could have a timing impact on achieving our FY25 goal Net Profit Before Tax ($M) 1 55 3yr FY22 target 50.0 FY21 target of $45M by FY24 50 • Achieved 12 months ahead of time. 45.5 45.0 45 4
Slide 44: Roadmap to $50M NPBT
Roadmap to $50M NPBT… Net Profit Before Tax Bridge ($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 in Auto Retail out o
Slide 45: Outlook + guidance
Outlook + guidance • Whilst the pandemic uncertainty has decreased, NZ’s economic uncertainty has increased. In an environment where costs are up significantly, interest rates have never increased faster, there has been more government regulation in finance and vehicle markets than ever before, and
Slide 46: Results Video
Results Video A short video is available summarising the FY23 results at… https://www.turnersautogroup.co.nz/investor-centre 46 • TURNERS AUTOMOTIVE GROUP FY23 RESULTS
Slide 47: Questions
Questions 47 • TURNERS 47 • TURNERS AUTOMOTIVE AUTOMOTIVE GROUPGROUP FY23 RESULTS FY23 RESULTS
Slide 48: 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 48 • TURNERS 48 • TURNERS AUTOMOTIVE AUTOMOTIVE GROUPGROUP FY23 RESULTS FY23 RESULTS
Turners Automotive Group — FY2023 Earnings Presentation on 6ix