Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — FY2024 Earnings Presentation
53 slides from Turners Automotive's earnings presentation, May 2024
Slide 1: FY24 Results Presentation
FY24 Results Presentation For the twelve months ending 31 March 2024 1 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 2: We love cars
We love cars 2 • TURNERS TURNERS AUTOMOTIVE AUTOMOTIVEGROUP GROUP FY24 FY24 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 FY24 FY24 RESULTS RESULTS
Slide 5: Agenda
Agenda 1. FY24 Results 2. Segment results 3. Looking forward … 5 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 6: Delivering on our plan for growth
Delivering on our plan for growth … 1. Record result despite an economy under significant pressure. Turners demonstrates resilience and ability to pivot to where the demand is strongest. 2. Auto Retail division grows profits 27%, Insurance 15%, Credit 9% helping to offset continued impact from incre
Slide 7: Our plan for growth is standing up to the economic and interest rate challenges
Our plan for growth is standing up to the economic and interest rate challenges being thrown at us Auto Retail • Volume growth and margin gains due to focus on domestic sourcing and retail optimisation. • Branch expansion pipeline building, entering next phase of development. Finance • Quality metri
Slide 8: FY24 Results overview
FY24 Results overview Key Drivers for FY24 FY24 Financials • Continued gains in margin and volume in Auto • FY24 result a record… • EBIT $58.6M +12% 1 Retail • Auto Retail: 2 new branches launched in FY24, • NPBT $49.1M +8% • Unusually high sales of damaged and end of growth in locally sourced cars
Slide 9: Turners is a strong and sustainable business with a proven track record
Turners is a strong and sustainable business with a proven track record… Total NPBT/NPAT over 3 year period ($m) Aggregate dividends paid over 3 year period (cps) 160 0.800 0.715 137.6 140 0.700 120 0.600 0.51 95.5 96.9 0.500 100 0.43 77.3 0.400 80 70.6 56.6 0.300 60 40 0.200 27.9 23.9 0.10 20 0.100
Slide 10: We have made great progress in 5 years
We have made great progress in 5 years… KPI FY19 FY24 Progress Finance conversion 30% 33% + No. of locally sourced vehicles purchased 16,179 25,312 + BuyNow sales % 48% 52% + Avg GP per owned unit $470 $992 + % of premium lending 3% 54% + Consumer arrears 10.6% 3.1% + Finance net interest margin aft
Slide 11: 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) • The last year saw a material impact on the used import market with unprecedented levels of change in government regulation. 1,200 45,000 40,000 • Overall transaction levels grew +5% in FY24, however
Slide 12: 1. FY24 Results
1. FY24 Results 12 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 13: FY24 Results snapshot
FY24 Results snapshot Revenue 450 400 350 Revenue Shareholders’ Equity 300 Millions 250 2H $417.0M +7% $278M as at 31 March 24 200 1H 150 Net Profit Before Tax Final Dividend 7.5 cps 100 50 $49.1M +8% FY Div 25.5 cps +11% 0 FY18 FY19 FY20 FY21 FY22 FY23 FY24 EBIT 1 Net profit after tax $58.6M +12% F
Slide 14: FY23 to FY24 Revenue bridge
FY23 to FY24 Revenue bridge Revenue increased from $389M to $417M Revenue Bridge FY23 to FY24 ($M) • Auto revenues have grown off increased car and damaged vehicle unit sales from weather events, new branches and more owned stock flowing through the business. • Finance book revenues reflect higher a
Slide 15: FY23 to FY24 Net profit before tax (NPBT) bridge
FY23 to FY24 Net profit before tax (NPBT) bridge NPBT increased from $45.4M to $49.1M NPBT Bridge FY23 to FY24 ($M) • Auto Retail profit growth from increased unit sales, better margins, more owned stock and new branches. • Finance result continuing to be impacted by increasing interest rates and im
Slide 16: Turners has a strong and sustainable yield
Turners has a strong and sustainable yield Dividend per Share ($) 0.30 COVID impacted year 0.255 • Continued the track record of delivering strong, 0.25 0.23 0.23 sustainable and growing dividends in the business 0.20 (CAGR 11%) 0.20 0.17 0.16 • Directors have declared a final dividend of 7.5 cents
Slide 17: Balance sheet has capacity to support growth
Balance sheet has capacity to support growth ($M) FY24 FY23 Cash and cash equivalents 18 12 Financial assets at fair value 70 67 Inventory 25 26 • Inventory levels tightly managed, increase in “budget” units. Finance receivables 430 425 Property, plant and equipment 114 106 • Finance receivables led
Slide 18: More diversification in funding introduced
More diversification in funding introduced Borrowings Borrowings by asset class ($M) ($M) Limit Drawn 450 Receivables – Securitisation (BNZ/ACC) 371 305 400 Receivables – Banking Syndicate (ASB/BNZ/Westpac) 50 23 350 Less Cash (10) 300 Net Receivables Funding 421 318 250 Receivables Funding Capacity
Slide 19: 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 9.0 important to us, particularly at a time when recruitment a
Slide 20: 2. Segment Results
2. Segment Results 20 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 21: FY24 by segment
FY24 by segment ($M) Automotive Retail Finance Insurance Credit Revenue 298.6 +7% 62.4 +6% 46.1 +6% 9.8 +6% Segment NPBT 31.8 +27% 12.2 (18%) 14.3 +15% 3.1 +9% 21 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 22: The mix of annuity and activity revenues gives Turners a diverse and resilient earnings base
The mix of annuity and activity revenues gives Turners a diverse and resilient earnings base Operating profit contribution by segment ($M) The mix of activity and annuity businesses gives 70 earnings stability during difficult times. 60 • Auto Retail super growth 27% which makes up 50 ~52% of group
Slide 23: Auto Retail Division
Auto Retail Division Strong brand Smarter sourcing Systems efficiency 23 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 24: Automotive retail
Automotive retail Revenue $299M +7%, Segment Profit $32M +27% • Total cars sold up +6% to 40,100 units for FY24, BuyNow retail units up 4% to 20,300 in FY24. • New branches in Timaru and Napier opened and both trading ahead of expectations • Total “owned” units sold up 5% to and margin up 18% for FY
Slide 25: Local sourcing continues to deliver growth, margin and address customer need
Local sourcing continues to deliver growth, margin and address customer need Owned cars sold through Turners + Average Margin 1 30,000 1,200 25,000 1,000 • Total “owned” units sold in FY24 up 5% to 25,312 and overall margin on cars we own is Avergae margin ($) 20,000 800 up 18% for FY24. Units Sold
Slide 26: Transition of wholesale to retail is a material opportunity
Transition of wholesale to retail is a material opportunity FY23 FY24 FY23 FY24 • BuyNow units increased by 4% to 19,500 20,300 20,300 in FY24. Most recent quarter at 21,700 25,300 OWNED RETAIL 53% of total sales. 57% 59% 51% 52% • 19,800 units sold through auction in FY24 v 18,500 sold in FY23 a 7%
Slide 27: Branch expansion + owning more local cars will drive growth in units sold
Branch expansion + owning more local cars will drive growth in units sold Car units sold v Forecasted property retail m2 Exiting inefficient Growth in retail focused and Committed plan to large branches eg. located branches + 218,000 Acquisition of have 29 branches 45,000 Penrose supersite Impact of
Slide 28: Entering a build phase for next growth push
Entering a “build” phase for next growth push Committed development pipeline Expected additional Location Branch Size Timing profit contribution “Opportunities” pipeline Timaru (COMPLETED) Cars 4,000m2 Q4 FY24 $500k New locations Napier (COMPLETED) Cars 8,000m2 Q4 FY24 $500k • Takanini/Drury Trucks
Slide 29: 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 40,000 35,000 • The comparative period in FY23 saw an unusual upward lift in units following the Auckland floods 30,000 and Cyclone Gabrielle where there was an 25,000 increased volume of “
Slide 30: Finance Division
Finance Division Weathered the interest rate shock Credit scores continue to improve Back into growth mode 30 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 31: Finance
Finance Revenue $62.4M +6%, Segment Profit $12.2M -18% • Focus on quality (56% premium lending in 2H24) has put us in a strong position. • Net interest margin into expansion cycle…bottom was 1H24. Pleasing improvements in weighted average interest rate. • Credit policy continually tightened througho
Slide 32: Finance receivables growth
Finance Total Receivables (ex impairments) Growth of 4% Pricing since Jun-23 450 low point discipline Millions 400 • Focus on quality (56% premium lending in H2FY24) has put us in 350 a strong position. • Back in growth mode. 300 250 200 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Jan-21 Jan-22 Jan-23 Jan-24
Slide 33: More controlled lending leads to better margins and arrears
More "controlled lending" leads to better margins and arrears Controlled Lending (Turners Cars + Direct) 140 10% 9% 120 • Targeting 80% of lending originated through 8% Turners branch network to go to Oxford 100 7% • Controlled lending through our own Turners and Total Ledger ($M) 6% 80 Arrears % Di
Slide 34: Net interest margin starting to lift
Net interest margin starting to lift. Net Interest Margin (NIM) % after originator commission 8% 7% 6% • NIM has stabilised and is back growing but will gather pace as a reducing OCR 5% cycle begins. 4% • Some older and low priced interest swaps running off in Q1 FY25 which will 3% have a negative i
Slide 35: 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% 26% Average Centrix 80% 47% 700 48% 48% 49% 51% 53% autoloan portfolio 54% 56% score 70% 680 60% 660 50% 640 40% 620 30% 600 20% 580 10% 560 0% 1H20 2H20 1H21
Slide 36: Quality lending strategy resulting in arrears well below industry benchmarks
Quality lending strategy resulting in arrears at well below industry benchmarks Hardship COVID peak As at FY23 As at FY24 in FY22 Consumer arrears 8% Centrix Auto Loan Number 511 45 58 7% Portfolio 6.5% Balance $12,260,000 $760,000 1,085,000 6% • Oxford has continued to tighten credit policy during
Slide 37: Insurance Division
Insurance Division Well tuned business Distribution networks still important Building blocks for a direct to consumer offer in place 37 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 38: Insurance
Insurance Revenue $46.1M +6%, Segment Profit $14.3M +15% Net Earned Premium FY23 to FY24 ($000’s) • Distribution networks delivering significant value. • Fastest growing comprehensive motor insurance book with Suncorp. • Core system replacement project completed • Building blocks in place to address
Slide 39: Claims are being well managed
Claims are being well managed Mechanical Breakdown Insurance (MBI) Loss Ratio Performance 59.8% • Claims Costs inflation being offset by frequency of claims reducing due to changes in consumer behavior 58.4% 58.0% 58.0% (WFH and cost of living). • Risk pricing very important in managing loss ratios,
Slide 40: Credit Management Division
Credit Management Division Business recovering Tightening economy supports growth Payment bank being rebuilt 40 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 41: Credit management
Credit management Revenue $9.8M +6%, Segment Profit $3.1M +9% • Business recovering and building off the back of improved marketing and a deteriorating economy. • Debt value loaded increased by 14% ($18M) over FY23. • Lower repayment amounts and extended payment arrangements due to diminished custom
Slide 42: Credit management
Credit management Total Debt Loaded ($M) $250 $237m $225m • Debt value loaded increased by 14% ($18M) over $200 FY23. $148m $150 $130m $119m $108m $100 • Higher yielding SME clients debt loaded up 23% in $50 FY24 and debt collected up 33% in FY24. $0 FY19 FY20 FY21 FY22 FY23 FY24 • Debt value collec
Slide 43: NZ credit arrears metrics worst in 7 years
NZ credit arrears metrics worst in 7 years Consumer Arrears Trend Centrix NZ Credit Metrics • Consumers reported in arrears in March rose to 12.70% of the credit active population (up from 11.8% in Mar-23). • Number of people that are behind on their payments is now 463,000 (compared to 427,000 Mar-
Slide 44: 3. Looking forward
3. Looking forward … 44 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 45: Our key risks are narrowing
Our key risks are narrowing… Challenge Mitigation Mar-22 Mar-23 Sept-23 Mar-24 • Diversifying funding sources Rapid increases • Increase volume of direct lending in interest and High Medium Low Low • Increase hedging Inflation rates • Tightening cycle at or close to end • Targeting lower value cars
Slide 46: Growth model: FY25
Growth model: FY25 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 • Improvement in conversion rates from lead to customer Finance • Pricing and ma
Slide 47: Outlook + guidance
Outlook + guidance • NZ’s economy has deteriorated and along with it consumer confidence and demand. We are expecting the first half of FY25 to be impacted by these conditions but expect to see a second half recovery. • Our focus remains on exceeding the $50M NPBT goal in FY25 however there remains
Slide 48: Growth model: FY25 – FY28
Growth model: FY25 – FY28 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 Retail - Branch expansion 2. Auto Retail -
Slide 49: New medium term goal of $65M NPBT for FY28
New medium term goal of $65M NPBT for FY28 Net Profit Before Tax ($M) 70 FY28 target 65 Target of $65M NPBT by FY28 60 • We achieved our FY24 target a year ahead, and remain on track for exceeding our $50M NPBT FY25 goal. 55 • Assumes organic growth out of Auto Retail with new 50 branches planned pl
Slide 50: Roadmap to $65M NPBT
Roadmap to $65M NPBT… Net Profit Before Tax Bridge ($M) • Auto retail growth continues to come from retail optimisation and branch expansion. • Margin expansion in Auto Retail out of transition of unit sales from auction into retail channels. • Finance growth to resume as we exit tightening cycle. •
Slide 51: Results Video
Results Video A short video is available summarising the FY24 results at… https://www.turnersautogroup.co.nz/investor-centre 51 • TURNERS AUTOMOTIVE GROUP FY24 RESULTS
Slide 52: Questions
Questions 52 • TURNERS 52 • TURNERS AUTOMOTIVE AUTOMOTIVE GROUPGROUP FY24 RESULTS FY24 RESULTS
Slide 53: 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 53 • TURNERS 53 • TURNERS AUTOMOTIVE AUTOMOTIVE GROUPGROUP FY24 RESULTS FY24 RESULTS
Turners Automotive Group — FY2024 Earnings Presentation on 6ix