Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — Shareholder Meeting (August 2023)
54 slides from Turners Automotive's shareholder meeting presentation, Aug 23, 2023
Slide 1: 2023 Annual Meeting Presentation
2023 Annual Meeting Presentation 23rd August 2023 1 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 2: Board of Directors
Board of Directors Grant Baker Matthew Harrison Lauren Quaintance Alistair Petrie Non-executive Chairman Non-executive Director Independent Director Non-executive Director John Roberts Martin Berry Antony Vriens Independent Director Independent Director Independent Director 2 • 2023 ASM PRESENTATION
Slide 3: Meeting Agenda
Meeting Agenda 1. Presentations • Address from the Chair, Grant Baker • Address from the CEO, Todd Hunter • Address from Directors up for re-election 2. Shareholder Discussion 3. Resolutions are per Notice of Meeting • Auditors’ Remuneration • Re-election of John Roberts, Matt Harrison and Lauren Qu
Slide 4: Chairman’s Address
Chairman’s Address Grant Baker 4 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 5: We are getting even stronger
We are getting even stronger 5 • ASM 5 • 2023 2023PRESENTATION ASM PRESENTATION TURNERS TURNERS AUTO AUTO GROUPGROUP
Slide 6: Turners has built a strong and sustainable business with a proven track record
Turners has built 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 66 126 120.0 60.0 100.0 91 50.0 47 89 80.0 40.0 38 65 67 60.0 51 30.0 40.0 20.0 20.0 10.0 8 3 0 - 0.0 FY12 - FY14 FY15
Slide 7: A record result in FY23 and positioned for future growth
A record result in FY23 of …and positioned for future growth. 1. Record result despite macro headwinds 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 at 23.0 cps. EBIT* $52.2M (+9%) 4
Slide 8: FY23 Results snapshot
FY23 Results snapshot Revenue 500.0 400.0 Revenue Shareholders’ Equity Millions 300.0 $389.6M +13% $272M as at 31 March 23 200.0 100.0 Net Profit Before Tax Final Dividend 7.0 cps 0.0 $45.5M +6% FY Div 23.0 cps 0% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Net profit after tax EBIT* FY23 Earnings Per S
Slide 9: We operate to a simple formula
We operate to a simple formula 9 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 10: Quality environment + customer experiences = outcomes for shareholders
Quality Quality Quality environment + customer = outcomes for our for our people experiences shareholders 10 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 11: High team engagement + ownership mindset is powerful combination
High team engagement + ownership mindset is powerful combination. Peakon Employee Engagement Scores How likely is it that you would recommend Turners Automotive Group as a place to work? 10.0 9.0 • Turners rank in the top 5% of consumer 8.0 businesses globally using the Peakon survey tool 7.0 6.0 •
Slide 12: We're building our ownership of the used car category
We're building our “ownership” of the used car category. Most trusted winner for 4th year in a row. 12 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 13: Turners has been growing dividends for almost a decade
Turners has been growing dividends for almost a decade Dividend per Share ($) 0.30 • Proven track record of delivering strong, sustainable and growing dividends in the business. COVID 0.25 0.24 impacted year 0.23 0.23 • Full FY23 dividends to 23.0 cents per share, with 0.20 forecast for FY24 of 24.0
Slide 14: We have acted to mitigate our challenges
We have acted to mitigate our challenges… Challenge Mitigation FY23 rating for TRA FY24 rating for TRA Rapid • Diversifying funding sources increases in • Increase volume of direct lending High Medium interest and • Increase hedging Inflation rates • Acquiring more lower value cars <$15k Recession H
Slide 15: We remain focused on our target of $50M PBT by FY25
We remain focused on our target of $50M PBT by FY25 The OCR track could have a timing impact on achieving our FY25 goal Net Profit Before Tax ($M) 1 55 3yr FY22 Target $45M by FY24 (target set in FY21) target 50 50.0 • Achieved 12 months ahead of time. 45.5 45.0 45 43.1 Target $50M by FY25 (target s
Slide 16: What’s next…
What’s next… • Business has never been stronger, building genuine ownership of the used car category in NZ. • On track to achieve our 10% market share goal in Auto Retail in the near term… • Still so much opportunity in the used car space, 20% of registered cars in NZ 20+ years old. • A strong Auto
Slide 17: Some insights into what it is like to work at Turners
Some insights into what it is like to work at Turners [play video] 17 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 18: CEO’s Update
CEO’s Update Todd Hunter 18 • 2022 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 19: What is happening in the markets we operate in?
What is happening in the markets we operate in? 19 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 20: 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 1,000 NZ Used car Market Transations • Government regulation continuing to constrain the supply of used 30,000 vehicles in NZ. Turners cars Sales 800 25,000 600 20,000 • Demand for h
Slide 21: Cars advertised for sale on TradeMe still falling
Cars advertised for sale on TradeMe still falling… Used Car Listings Advertised on TradeMe by month • Low numbers of cars advertised for sale due to difficulty in sourcing. • Costs of TradeMe increasing and dealers listing fewer cars on TradeMe and using alternatives like Facebook market place. • Tw
Slide 22: 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- 3,300 2014. 3,518 3,200 • We expect to track down further due to challenges in 3,100 supply and impact of government regulation. 3,000 19
Slide 23: EVs account for around 2% of the total vehicle fleet in NZ
EVs account for round 2% of the total vehicle fleet in NZ At the end of July ~86k EVs were registered in NZ out of a total light vehicle fleet of ~4.4M cars Total number of BEVs and PHEVs in NZ Vehicle Fleet 90,000 5.0% Turners Subscription EVs 80,000 % market share of total NZ vehicle fleet 4.0% 70
Slide 24: Business divisions
Business divisions 24 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 25: Our flywheel for our Auto ecosystem
Our “flywheel” for our Auto ecosystem More margin = more competitive Brand awareness + branch network + sourcing and selling data + diagnostic tools Higher Source transaction smarter margins More F&I More retail Secure the right cars at right price Higher X-Sell + Margins opportunity cars for sale D
Slide 26: Auto Retail Division
Auto Retail Division Focus: Sourcing and retail optimisation 26 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 27: Automotive retail
Automotive retail Number of Google Searches for Used Cars v Turners Cars 100 90 • Selling more locally owned vehicles, buying less used imports 80 which enables quicker turnaround in processing Search interest in topic 70 60 • Opening more branches – bringing a supermarket approach to 50 the used ca
Slide 28: Branch expansion, local sourcing and brand awareness driving market share growth
Branch expansion, local sourcing and brand awareness driving market share growth Material growth opportunity to shift wholesale/auction units into retail sales channel Retail market share v Forecasted property retail m2 Forecasted retail m2 in 9% FY26 190,000 Focus on local sourcing and 8% 180,000 l
Slide 29: Retail expansion pipeline
Retail expansion pipeline Ready for expansion. We have a balance of committed sites and future opportunities Committed development pipeline Expected additional “Opportunities” pipeline Location Size Timing profit contribution New locations Timaru 4,000m2 Q4 FY24 $500k • Takanini/Drury • Whanganui N
Slide 30: Timaru: New territory open Nov-23
Timaru: New territory open Nov-23 30 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 31: Napier: Bigger better branch open Nov-23
Napier: Bigger better branch open Nov-23 31 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 32: Christchurch: 1 becomes 3 from mid-2025 to 2026
Christchurch: 1 becomes 3 from mid-2025 to 2026 Wairakei Moorhouse Hornby 32 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 33: Damaged and End of Life Vehicle volumes on the rise
Damaged and End of Life Vehicle volumes on the rise Damaged and End of Life Vehicle Units sold through Turners 35,000 30,000 • 20% of the NZ vehicle fleet are more than 20 years old 25,000 • Accident damaged vehicles and older vehicles getting more 20,000 expensive to repair (parts/labour), vehicl
Slide 34: Our digital engagement continues to grow
Our digital engagement continues to grow… 1M+ 24% 26,500 Unique website visitors up 25% to over increase to 13,500 vehicle People saved a vehicle to 1m visitors in first 4 months of FY24 appraisals booked online FY24 YTD watchlists up 26% FY24 YTD 32% 30% 24% Lift in test drives booked Lift in onlin
Slide 35: Finance Division
Finance Division Focus: Quality and Margin 35 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 36: Finance
Finance Total Receivables (ex impairments) 450 Millions 400 • Growth has moderated as credit quality, regulatory compliance and margin become higher priorities. 350 • A 110% or ~$7M increase in interest expense has had a material impact on profits on average 300 loan book. • Strong receivables growt
Slide 37: The quality of the finance book continues to improve
The quality of the finance book continues to improve… Average Credit Score 740 720 Average consumer CENTRIX credit score 700 680 660 640 620 600 580 560 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 2H23 37 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 38: Quality lending strategy resulting in arrears well below industry benchmarks
Quality lending strategy resulting in arrears at well below industry benchmarks Consumer arrears 8.0% 7.0% 6.0% 5.7% 5.0% 4.0% 3.5% 3.0% 2.0% 2.0% 1.0% 0.0% Total consumer arrears Industry arrears (Centirx) 38 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 39: Insurance
Insurance Focus: Growing distribution 39 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 40: Insurance
Insurance Net Earned Premium FY22 to FY23 ($000’s) • Market share gains continuing to provide robust policy sales despite challenging market conditions. • Digital distribution arrangements continuing to work well with further opportunities in pipeline. • Pandemic and weather events have confirmed no
Slide 41: Examples of our digital distribution
Examples of our digital distribution Autosure mechanical breakdown 52 franchisees and 200 dealer insurance and Car insurance integrated originators into the finance application system Full suite of Autosure insurance 400 dealer and finance broker products integrated into the originators finance appl
Slide 42: Credit Management
Credit Management Focus: Growing debt load 42 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 43: Credit management
Credit management Total Debt Loaded ($M) $250m $237m $225m $200m • Debt value loaded increased by 20% ($22M) over FY22 however 80% ($18M) of this increase was from harder to contact and collect second placement debt. $150m $130m $119m $108m • Debt value collected was down 9% to $34.4M due to diminis
Slide 44: Debt load increasing as NZ credit arrears metrics deteriorate
Debt load increasing as NZ credit arrears metrics deteriorate Consumer Arrears Trend Centrix NZ Credit Metrics to June 2023 • Consumer arrears at 11.4% of the credit active population in June • Number of people that are behind on their payments is 414,000 • The current arrears level is 5% higher yea
Slide 45: Funding
Funding 45 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 46: Funding run conservatively and optimised to support growth
Funding run conservatively and optimised to support growth 80% of borrowings are related to the finance receivables business Borrowings by Asset Class ($M) as at Mar-23 450 425 400 • Receivables funding capacity of $41M and Corporate and 350 330 Property funding capacity of $65M 300 250 • Inventory
Slide 47: Looking forward
3. Looking forward … 47 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 48: Outlook + guidance
Outlook + guidance Group guidance: • Positive results for FY24 year to date, and on track for our FY24 result to be ahead of record FY23 result. • Forecast dividend at this level of profit will be 24 cents per share (+4%), and Directors have declared a Q1 dividend of 6.0 cents per share fully impute
Slide 49: Shareholder Discussion
Shareholder Discussion • 2023 • 2023 49 49 ASMASM PRESENTATION PRESENTATION TURNERS TURNERS AUTO AUTO GROUP GROUP
Slide 50: Resolutions
3. Resolutions 50 • 2023 ASM PRESENTATION TURNERS AUTO GROUP
Slide 51: Resolutions
Resolutions ORDINARY RESOLUTIONS: • Resolution 1 - That Baker Tilly Staples Rodway be reappointed as auditor of the Company and that the Directors be authorised to fix the auditor’s remuneration. Directors • Resolution 2 - That John Roberts, who retires by rotation and has offered himself for re-ele
Slide 52: Resolutions
Resolutions SPECIAL RESOLUTIONS: • Resolution 6 - To alter the Constitution of the Company by deleting clause 4 of Schedule 2 and substituting the following: Proposed new clause 4 Schedule 2 4 Proxy form must be sent or made available with notice A proxy form must be sent or made available with each
Slide 53: Voting
Voting PROXY Resolution: Proxies FOR AGAINST DISCRETION 1. Auditor’s reappointment / remuneration 21,563,727 97,842 1,973,737 2. Re-election of John Roberts 21,675,343 23,589 1,943,047 3. Re-election of Matthew Harrison 21,658,606 9,439 1,942,495 4. Election of Lauren Quaintance 21,586,041 11,251 1,
Slide 54: Close of meeting
Close of meeting 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 54 • ASM 54 • 2023 2022PRESENTATION ASM PRESENTATION TURNERS TURNERS AUTO AUTO GROUPGROUP
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