Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — HY24 Earnings Presentation
39 slides from Turners Automotive's earnings presentation, Nov 22, 2023
Slide 1: HY24 Results Presentation
HY24 For personal use only Results Presentation For the six months ending 30 September 2023 1 • HY24 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, or
Slide 3: Agenda
Agenda For personal use only 1 Overview of HY24 2 HY24 Financial Performance 3 Segment Results 4 Outlook 3 • HY24 RESULTS PRESENTATION
Slide 4: Overview of HY24
1 Overview of HY24 For personal use only 4 • HY24 RESULTS PRESENTATION
Slide 5: Key highlights: Turners continues to grow earnings despite macro challenges
Key highlights: Turners continues to grow earnings despite macro challenges… For personal use only 1. Record net profit before tax of $25.7M for HY24, 10% ahead of HY23 ($23.4M NPBT) despite a challenging macro environment 2. Reaffirm guidance from Oct-23 that after a strong H1 our FY24 result will
Slide 6: NZ used car market off the bottom
NZ used car market off the bottom NZ used car transaction volumes (Apr to Sep) For personal use only 600,000 • Transaction levels continue to track well behind pre- Covid levels due to rising interest rates, and increased 550,000 government regulation. • Used car Change of Ownership transactions up
Slide 7: Turners digital strategy working and dealer numbers dropping
Turners digital strategy working and dealer numbers dropping For personal use only Google search terms used cars v Turners cars Registered dealer numbers NZ (source MBIE) 100 3,600 90 3,500 80 3,400 70 3,300 Search interest in topic 60 3,518 3,200 Feb-18 50 3,100 40 3,000 30 18% drop 2,900 20 2,891
Slide 8: Turners supporting the transition of the NZ fleet
Turners supporting the transition of the NZ fleet ~92k EVs are registered in NZ out of a total light vehicle fleet of ~4.4M cars For personal use only Total number of BEVs and PHEVs in NZ vehicle fleet 100,000 5.0% 90,000 80,000 4.0% 9% Market share of EVs as % of total fleet Actual Number of Electr
Slide 9: HY24 and Q3 Summary
HY24 and Q3 Summary For personal use only Financials Key Drivers for HY24 Q3 Update • Revenue $214.2M +16% • Auto Retail revenue grew strongly due to • Auto Retail: Volumes and margins • EBIT $30.2M +16% increased volume, margins and finance attach holding up well in car sales. Damaged • Continued s
Slide 10: HY24 Financial Performance
2 HY24 Financial For personal use only Performance 10 • HY24 RESULTS PRESENTATION
Slide 11: HY24 Results snapshot
HY24 Results snapshot Revenue 450 For personal use only Revenue Shareholders’ Equity 400 350 $214.2M +16% $279.6M as at 30 Sept 2023 300 250 NZ$M 2H 200 1H 150 Q2 Fully Imputed Dividend 6.0 cps EBIT 100 Projected FY fully imputed Div 50 $30.2M +16% of at least 24.0cps 0 FY18 FY19 FY20 FY21 FY22 FY23
Slide 12: HY23: HY24 Revenue bridge
HY23: HY24 Revenue bridge 16% increase in revenue, predominantly driven by Auto Retail For personal use only Revenue bridge HY23 to HY24 • Revenue growth in Auto Retail reflects overall increase in car units sold (both “owned” and consignment units), and increase in Damaged and End of Life vehicles
Slide 13: HY23: HY24 Net profit before tax (NPBT) bridge
HY23: HY24 Net profit before tax (NPBT) bridge NPBT increased from $23.4M to $25.7M, up 10% For personal use only NPBT Bridge HY23 to HY24 • Auto Retail result underpinned by growth in car units sold, improved finance attach and higher numbers of damaged vehicle units. Market share gains and new bra
Slide 14: The business has a diverse and resilient earnings base
The business has a diverse and resilient earnings base For personal use only Operating profit contribution by segment 35.0 • Super growth from Auto Retail division which makes up ~56% of group profits. 30.0 • Finance continues to be materially impacted by 25.0 the fastest ever tightening cycle in in
Slide 15: Growing dividends for almost a decade
Growing dividends for almost a decade For personal use only Dividend per share ($) 0.30 • Proven track record of delivering consistency 0.25 COVID 0.24 and growth in dividends. impacted year 0.23 0.23 • Dividend payout ratio is 60-70% of NPAT. 0.20 0.20 • Quarterly dividend payments 0.17 0.155 • Q1
Slide 16: Robust balance sheet
Robust balance sheet NZ$M HY24 HY23 • Inventory levels are down due to faster stock turn and a deliberate strategy to For personal use only Cash and cash equivalents 12.6 17.7 acquire lower priced cars to reflect Financial assets at fair value 67.5 66.2 where demand in the market is. Units in Invent
Slide 17: Funding mix optimised to support growth
Funding mix optimised to support growth Borrowings Borrowings by asset class (NZ$M) For personal use only (NZ$M) Limit Drawn 450 421 Receivables – Securitisation Trusts 351 281 400 Receivables – Banking Syndicate (ASB/BNZ) 50 42 350 323 300 Less Cash (8) 250 Net Receivables Funding 401 315 200 Recei
Slide 18: Segment Results
3 Segment Results For personal use only 18 • HY24 RESULTS PRESENTATION
Slide 19: HY24 by segment
HY24 by segment For personal use only NZ$M Automotive Retail Finance Insurance Credit Revenue 156.1 +20% 30.2 +3% 22.7 +5% 5.3 8% Segment Profit 18.0 +62% 5.1 (44%) 7.1 +14% 1.8 29% Note – HY24 reported NPBT of $25.7M includes corporate costs of $6.3M 19 • HY24 RESULTS PRESENTATION
Slide 20: Automotive Retail
Automotive Retail Revenue 156.1M +20%, Segment Profit $18.0M +62% For personal use only Turners retail market share % (Quarterly) 10.0% • Market share has continued to improve subject to high levels of pre-registered used imports 9.0% when Clean car Discount changes made in June. • Retail (BuyNow) u
Slide 21: Agile sourcing strategy driving additional sales
Agile sourcing strategy driving additional sales Average margin1 ($) and units of “owned” cars sold For personal use only 14,000 • Vehicle sourcing capability continues to improve through lead generation 12,000 investment, pricing tools, pricing strategies. 10,000 • We continue to position stock 8,0
Slide 22: 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 For personal use only 20,000 • 20% of the NZ vehicle fleet are more 18,000 than 20 years old • Accident damaged vehicles and older 16,000 vehicles getting more expensive to 14,000 repair
Slide 23: Retail expansion pipeline
Retail expansion pipeline Ready for expansion. We have a balance of committed sites and future opportunities Committed development pipeline For personal use only Expected additional “Opportunities” pipeline Location Size Timing profit contribution • New locations • Takanini/Drury Timaru (Cars) 4,00
Slide 24: Updated Photo of Timaru
Updated Photo of Timaru For personal use only 24 • HY24 RESULTS PRESENTATION
Slide 25: Updated Photo of Napier
Updated Photo of Napier For personal use only 25 • HY24 RESULTS PRESENTATION
Slide 26: Finance
Finance Revenue $30.2M +3%, Segment Profit $5.1M (44%) Receivables growth by month (excl impairments) For personal use only 450 • Loan book starting to grow again off the back of stronger premium consumer lending. 400 • Margins have stabilised and we expect these to expand once interest rates start
Slide 27: The impact of rising OCR is starting to slow down
The impact of rising OCR is starting to slow down… NIM % after originator commission For personal use only 8.0% • Net Interest Margin has stabilised 7.4% and is back growing but will gather 7.0% 6.8% 6.6% pace as a reducing OCR cycle 5.9% begins. 6.0% 5.4% • Interest expense up 62% HY24 v 5.0% 5.0%
Slide 28: Improvement in underwriting quality
Improvement in underwriting quality Average Centrix credit score for loans on-boarded Total new lending with premium tier risk split For personal use only 100% 3% 90% 26% Average consumer CENTRIX credit score Avg NZ auto loan 80% portfolio 47% 48% 48% 49% 51% 54% 53% 70% 60% 50% 40% 30% 20% 10% 0% 1
Slide 29: Quality lending strategy resulting in arrears well below industry benchmarks
Quality lending strategy resulting in arrears at well below industry benchmarks Consumer arrears vs auto-loan industry For personal use only Hardship As at HY24 As at HY23 COVID peak in FY22 8.0% Number 50 47 511 7.0% Balance $1,012,000 $971,000 $12,260,000 6.0% 5.4% 5.0% • Oxford loan arrears conti
Slide 30: Insurance
Insurance Revenue $22.7M +5%, Segment Profit $7.1M +14% Net earned premium HY23 to HY24 ($000s) For personal use only • Market share gains continuing to provide growth in policy sales…MBI premium up 3% on prior year. • Claims costs inflation being offset by reduction in claims frequency due to peopl
Slide 31: Credit management
Credit management Revenue $5.3M +8%, Segment Profit $1.8M +29% Debt loaded HY23 to HY24 ($M) For personal use only • Debt value loaded increased by 32% to $83.7M as market wide credit metrics continue to deteriorate. NZ SME debt load is up 45% year on year. • Debt value collected was up 10% to $20.5
Slide 32: Great employee experience + great customer experience = great shareholder experience
Great employee For personal use only experience + Great customer experience = Great shareholder experience 32 • HY24 RESULTS PRESENTATION
Slide 33: 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 we are averaging 9/10 to the question “How likely is 9.5 it that you would recommend Turners Auto Group as a place to work?” • Turners rank in the top 5
Slide 34: Outlook
4 Outlook For personal use only 34 • HY24 RESULTS PRESENTATION
Slide 35: Our key risks are narrowing
Our key risks are narrowing… Challenge Mitigation FY23 rating for TRA FY24 rating for TRA HY24 rating for TRA • Diversifying funding sources For personal use only Rapid increases • Increase volume of direct lending in interest and High Medium Low • Increase hedging Inflation rates • Tightening cycle
Slide 36: Outlook – FY24 Guidance
Outlook – FY24 Guidance Division Commentary For personal use only Auto Retail • Upside in Q4 from our new branches. Timaru now open and trading well, and Napier to open Jan-24 • Supply of low cost vehicles critical to operating in market segments with demand. • The transition of wholesale auction un
Slide 37: Outlook – FY24 Guidance affirmed
Outlook – FY24 Guidance affirmed Guidance For personal use only August 2023 • 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 div
Slide 38: What's next
What’s next… • Business continues to show great resilience in the face of challenging market conditions. For personal use only • Turners is 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…Timaru and Napier ope
Slide 39: 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 39 • HY24 RESULTS PRESENTATION
Turners Automotive Group — HY24 Earnings Presentation on 6ix