Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — HY25 Earnings Presentation
50 slides from Turners Automotive's earnings presentation, Nov 25, 2024
Slide 1: HY25 Results Presentation
HY25 For personal use only Results Presentation For the six months ending 30 September 2024 1 • HY25 RESULTS PRESENTATION
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. For personal use only This document or any other written or oral statements made by,
Slide 3: Agenda
Agenda For personal use only 1 Overview of HY25 2 HY25 Financial Performance 3 Segment Results 4 Outlook 3 • HY25 RESULTS PRESENTATION
Slide 4: Overview of HY25
1 Overview of HY25 For personal use only 4 • HY25 RESULTS PRESENTATION
Slide 5: Key highlights
Key highlights Outstanding result given very challenging macro For personal use only • Record NPBT of $26.9M for HY25, +5% YoY despite very challenging macro environment. • Reaffirm Sept-24 guidance to exceed the $50M NPBT goal in FY25. • Forecasted FY24 dividend of at least 27 cents per share. • Pr
Slide 6: Brand investment rewarded
Brand investment rewarded… For personal use only GREATEST AD CAMPAIGN OF THE LAST 50 YEARS Finalist in Tina from Turners Advertising Effectiveness NZ Marketing Award 2024 for Company of the winner of the Gold Award for Sustained Excellence in Long-Term Year for 2024 2020s Success 2024 Marketing Stra
Slide 7: Used car market continues to show resilience
Used car market continues to show resilience NZ used car transaction volumes (Apr to Sep) For personal use only 600,000 550,000 • Overall used car transaction levels for FY25 YTD in- line with FY24. 500,000 • Used imports down 14% on HY23. 450,000 400,000 • Demand for higher-value cars continues to
Slide 8: New car vs used car performance
New car vs used car performance For personal use only % Change Year on Year, New Car vs Used Car Sales 40% • Used car sector proving more resilient than 30% new cars 20% • New car segment remains more 10% “discretionary” and sensitive to economic cycles. 0% 2003 2005 2007 2009 2011 2013 2015 2017 20
Slide 9: High engagement + ownership mindset is a powerful combination
High engagement + ownership mindset is a powerful combination For personal use only Peakon employee engagement scores • Across nearly 700 employees How likely is it that you would recommend Turners Automotive we average 9/10 on the question Group as a place to work? “How likely is it that you would
Slide 10: HY25 Financial Performance
2 HY25 Financial For personal use only Performance 10 • HY25 RESULTS PRESENTATION
Slide 11: HY25 and Q3 Summary
HY25 and Q3 Summary For personal use only Financials Key Drivers for HY25 Q3 Update • Revenue $209.0M -2% • Auto Retail volume up but vehicle • Auto Retail: Volumes elevated with • EBIT1 $31.0M +3% margins on owned stock declined as margins improving. demand dropped with economy. • Finance: Arrears
Slide 12: HY25 Results snapshot
HY25 Results snapshot Revenue For personal use only 450 Revenue Shareholders’ Equity 400 350 $209.0M -2% $287.7M as at 30 Sept 2024 300 NZ$M 250 2H 200 1H 150 Q2 Fully Imputed Dividend 7.0 cps 100 EBIT1 50 Projected FY fully imputed Div 0 $31.0M +3% FY19 FY20 FY21 FY22 FY23 FY24 FY25 of at least 27.
Slide 13: HY24: HY25 Revenue bridge
HY24: HY25 Revenue bridge 2% drop in revenue, driven by market conditions in Auto Retail For personal use only Revenue bridge HY24 to HY25 • Revenue drop in Auto Retail reflects shift to lower value cars and impact of lower consumer demand on vehicle pricing and margins. • Finance revenue growth ref
Slide 14: HY24: HY25 Net profit before tax (NPBT) bridge
HY24: HY25 Net profit before tax (NPBT) bridge NPBT increased +5% to $26.9M For personal use only NPBT Bridge HY23 to HY24 • Auto Retail impacted by pressure on owned car margins in Q1 and no weather event boost. Market share improved due to an increase in volume of cars sold. • Finance net interest
Slide 15: The business has a diverse and resilient earnings base
The business has a diverse and resilient earnings base For personal use only Operating profit contribution by segment ($M) 35.0 • Auto Retail impacted by pressure on owned car 1.8 margins in Q1 and no weather event boost, but 1.8 30.0 7.7 still largest contributor to overall group profit at 7.1 2.1
Slide 16: Growing dividends for almost a decade
Growing dividends for almost a decade Dividend cents per share ($) For personal use only 0.30 0.27 • Proven track record of delivering consistent 0.255 0.25 COVID and growing dividends. impacted year 0.23 0.23 • Dividend payout ratio is 60-70% of NPAT. 0.20 0.20 • Quarterly dividend payments are in
Slide 17: Robust balance sheet
Robust balance sheet NZ$M HY25 HY24 For personal use only Cash and cash equivalents 16.7 12.7 Financial assets at fair value 72.7 67.5 • Inventory levels are down due to tight Inventory 16.1 23.8 supply conditions and a deliberate strategy Finance receivables 430.9 420.9 to acquire lower priced cars
Slide 18: Funding mix optimised to support growth
Funding mix optimised to support growth Borrowings Borrowings by asset class (NZ$M) For personal use only (NZ$M) Limit Drawn 500 450 430.9 Receivables – Securitisation Trusts 355 312 400 Receivables – Banking Syndicate (ASB/BNZ) 50 24 $336 350 Less Cash (9) 300 Net Receivables Funding 405 327 250 Re
Slide 19: Segment Results
3 Segment Results For personal use only 19 • HY25 RESULTS PRESENTATION
Slide 20: HY24 by segment
HY24 by segment For personal use only NZ$M Automotive Retail Finance Insurance Credit Revenue 146.3 -6% 33.6 11% 23.7 4% 5.4 2% Segment Profit 14.7 -18% 8.1 59% 7.7 8% 1.8 2% Note – HY25 reported NPBT of $26.9M includes corporate costs of $5.4M 20 • HY25 RESULTS PRESENTATION
Slide 21: Auto Retail Division
For personal use only Auto Retail Division Strong brand Smarter sourcing Operational efficiency 21 • HY25 RESULTS PRESENTATION
Slide 22: Auto Retail - Summary
Auto Retail - Summary Revenue 146.3M -6%, Segment Profit $14.7M -18% For personal use only • Increased market share from our enhanced brand and growing footprint. • Margin pressure as vehicle prices dropped; however, pricing and margins have stabilised over the past two months. • Damaged/end-of-life
Slide 23: Line of sight on 10% market share
Line of sight on 10% market share Turners retail market share % (Quarterly) For personal use only 10% • Market share has continued to grow. 9% • Retail (BuyNow) unit sales +9% to ~11,050, wholesale auction unit sales +3% to ~10,050 8% units. Same store BuyNow units +6%. 7% • Total “owned” units sold
Slide 24: Transition of wholesale to retail remains a big opportunity
Transition of wholesale to retail remains a big opportunity For personal use only HY24 HY25 • BuyNow units increased by 9% to 11,048 in HY24 HY25 HY25. 11,371 11,629 OWNED 10,102 11,048 RETAIL 57% 55% 51% 52% • Lease unit BuyNow percentage rose to 38% in 1H25 from 33% in 1H24. • For each additional
Slide 25: Agile sourcing strategy driving additional sales
Agile sourcing strategy driving additional sales Average margin 1 ($) and units of “owned” vehicles sold For personal use only 16,000 1,000 14,000 12,000 • Pressure on vehicle pricing and margins during 800 Q1, with strong signs of recovery through Avergae Margin ($) 10,000 second half of Q2 and ear
Slide 26: DEL volumes down with no material weather events
DEL volumes down with no material weather events Damaged and end of life (DEL) vehicle units sold through Turners For personal use only 20,000 18,000 16,000 • HY24 had a one-off impact from Cyclone Gabrielle. HY25 damaged vehicle (DEL) unit 14,000 sales declined by 8% to 17,250 due to the 12,000 abs
Slide 27: Entering a build phase for next growth push
Entering a “build” phase for next growth push More opportunities to purchase sites at attractive valuations (stage of interest rate cycle). Committed development pipeline For personal use only Expected additional Location Branch Size Timing profit contribution “Opportunities” pipeline Timaru (COMPLE
Slide 28: Turners have invested $3.35M for 50% of My Auto Shop
For personal use only Turners have invested $3.35M for 50% of My Auto Shop. • Vehicle repair platform with 300+ MTA approved repairers plus a fleet of My Auto Shop branded mobile repair vans. • The goal is simple, to make vehicle repairs easier. • Turners supports growth by integrating My Auto Shop
Slide 29: Finance Division
For personal use only Finance Division Weathered the interest rate shock Credit quality continue to improve Benefiting from Turners market share growth 29 • HY25 RESULTS PRESENTATION
Slide 30: Finance - Summary
Finance - Summary Revenue $33.6M +11%, Segment Profit $8.1M, +59% For personal use only • Total ledger is growing again. • Quality has now been stress-tested. Arrears are substantially below industry norms. • Quality continues to improve with credit scores lifting and reduced commercial lending. • N
Slide 31: Lending book starting to grow again
Lending book starting to grow again Receivables by month (excl. impairments) For personal use only 450 • Despite industry contraction, the total ledger has increased to $430.9M, from $418M in September 2023. 400 • Consumer lending has increased while commercial lending has decreased. Credit policy h
Slide 32: Arrears well below industry due to quality lending
Arrears well below industry due to quality lending Consumer arrears vs auto-loan industry (Centrix) • Loan arrears continue to perform materially better than For personal use only market data (see chart at left). 8.0% • Hardship applications have consistently increased through 6.40% CY24, peaking in
Slide 33: Underwriting quality continues to improve
Underwriting quality continues to improve Average Centrix credit score for loans on-boarded For personal use only 740 720 Average consumer CENTRIX credit score 700 Avg NZ auto loan • In September 2024 Premium Tier lending (CCR score portfolio 680 of 735+ made up 60% of our new lending. 660 • Our cre
Slide 34: Net interest margin (NIM) on the rise
Net interest margin (NIM) on the rise NIM % (after originator commission) For personal use only 8.0% • NIM has stabilised and now returned to expansion, 7.0% with rate headwinds starting to turn into tailwinds. 6.0% • The heavy lifting on pricing done over last 18 months is paying off 5.0% 4.0% • Th
Slide 35: Improving conversion demonstrates operating leverage
Improving conversion demonstrates operating leverage For personal use only Opened loans as a percentage of total applications (above 500 CCR) 50% 48% • Cost to income ratio has reduced from 46% 68% to 62%, as a result of operational efficiency gains 44% 42% • Loan conversion rates have increased 40%
Slide 36: Insurance Division
For personal use only Insurance Division Stable and consistent business Distribution networks strategically important Digital direct platform live 36 • HY25 RESULTS PRESENTATION
Slide 37: Insurance - Summary
Insurance - Summary Revenue $23.7M +4%, Segment Profit $7.7M, +8% For personal use only • Gross Written Premium (GWP) remains flat, but margins are improving. • Claims ratio is being well managed. • Claims cost inflation has eased. • The digital direct platform has launched and offers substantial up
Slide 38: Earned premium lifting and margins improving
Earned premium lifting and margins improving Earned Premium HY24 to HY25 ($000’s) For personal use only • Gross written premium (GWP) remains flat at $20.6M for HY25 with Earned Premium (GEP) up slightly at $19.7M v $19.5M for HY24. • Total overheads decreased by $300k to $4.3M, investment income up
Slide 39: Claims are being well managed
Claims are being well managed Mechanical Breakdown Insurance (MBI) Loss Mechanical Breakdown Insurance (MBI) Average For personal use only Ratio Performance Claims Cost $1,275 59% $1,211 58% $1,071 58% $1,017 55% HY22 HY23 HY24 HY25 HY22 HY23 HY24 HY25 MBI Loss Ratio Average Claims Cost - MBI ($) •
Slide 40: Credit Management Division
For personal use only Credit Management Division Business recovering Tightening economy supports growth Payment bank being rebuilt 40 • HY25 RESULTS PRESENTATION
Slide 41: Credit Management - Summary
Credit Management - Summary Revenue $5.4M +2%, Segment Profit $1.8M, +2% For personal use only • Debt referred and collected is growing slowly. • Our customers remain “reputation-sensitive”, though this is starting to change. • Increasing economic pressures are expected to create a tailwind. • Deman
Slide 42: Debt referred/collected growing, steadily
Debt referred/collected growing, steadily Total debt referred for HY25 (NZ$M) For personal use only $140 $120 $100 • Increase in first referral debt loaded in HY25 +19% $80 $60 • Higher yielding SME clients debt loaded +22% in HY25 reflecting $40 where recession most acutely impacting. $20 $0 FY18 F
Slide 43: Payment arrangement bank rebuilding
Payment arrangement bank rebuilding For personal use only EC Credit debts under repayment arrangement 5800 • Total debt loaded up 2% to $85M. Driven by growth in SME of 22% to $23M. 5600 5400 One-off closure of NZTA debt • Cost-of-living pressures are resulting in longer 5200 arrangements settlement
Slide 44: Tailwinds for EC Credit from deteriorating NZ wide credit metrics
Tailwinds for EC Credit from deteriorating NZ wide credit metrics Consumer arrears trend For personal use only Source – Centrix Credit Bureau 44 • HY25 RESULTS PRESENTATION
Slide 45: Outlook
4 Outlook For personal use only 45 • HY25 RESULTS PRESENTATION
Slide 46: Our key risks are narrowing
Our key risks are narrowing… Challenge Mitigation Mar-22 Mar-23 Sept-23 Mar-24 Sept-24 For personal use only • Diversifying funding sources Rapid • Increase volume of direct increases in lending interest and High Medium Low Low Low • Increase hedging Inflation • Tightening cycle at or close to rates
Slide 47: Segment Outlook
Segment Outlook • For personal use only Automotive Retail – we are in a build phase over the next 18 months as several new sites are under development. We will continue to push hard for the transition of wholesale to retail and see upside coming from this strategy. Vehicle pricing has stabilised and
Slide 48: Guidance
Guidance For personal use only We expect to exceed our $50M NPBT goal in FY25 and deliver another record full year profit result. Some risks remain regarding the pace of recovery in consumer demand and the speed of economic rebuild. 48 • HY25 RESULTS PRESENTATION
Slide 49: Summary
Summary… • A very strong result despite challenging macroeconomic conditions, and on track for a record result in FY25 and set to For personal use only exceed the $50m NPBT target. • The deliberate work to strengthen the business has paid off, including investments in resilience, agile stock purchas
Slide 50: Contact
Contact Todd Hunter For personal use only 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 50 • HY25 RESULTS PRESENTATION
Turners Automotive Group — HY25 Earnings Presentation on 6ix