Turners Automotive Group Ltd · NZX:TRA
Turners Automotive — Investor Presentation (April 2021)
62 slides from Turners Automotive's investor presentation, Apr 14, 2021
Slide 1: Investor morning
For personal use only TURNERS AUTOMOTIVE GROUP Investor morning 1 • 2021 INVESTOR MORNING 14 April 2021
Slide 2: Meeting Agenda
Meeting Agenda For personal use only 1. Chairman’s Perspective – Grant Baker 2. Turners Overview – Todd Hunter 3. Auto Retail Division – Greg Hedgepeth 4. Finance Division – Todd Hunter 5. Insurance Division – James Searle 6. Credit Division – Matt Gannaway 7. Capital & Funding – Aaron Saunders 8. Q
Slide 3: Chairman's Perspective
For personal use only Chairman’s Perspective Grant Baker 3 • 2021 INVESTOR MORNING
Slide 4: A Transformed Business
A Transformed Business For personal use only FY21 As at March YE FY10 FY15 FY20 Guidance Shareholder Equity ($m) (3) 121 223 233 forecast Total Assets ($m) 109 329 708 725 forecast NPBT ($m) (18) 19 29 35+ as per guidance Dividend per Share (cps) - 10.0 14.0 18.0 as per guidance Market Capitalisatio
Slide 5: Successfully delivered on growth strategy
Successfully delivered on growth strategy Earnings and dividends have grown substantially and predictably For personal use only 5 • 2021 INVESTOR MORNING
Slide 6: Activity vs Annuity Revenue
Activity vs Annuity Revenue For personal use only Activity vs annuity - % of total operating profits • Businesses are a mix of activity 70% and annuity based revenue 66% business 59% 60% 60% 56% 53% • Annuity profits (Finance and 53% Insurance) now account for 53% of 50% group profits 47% 47% 40% 44
Slide 7: Our pathway to future growth
Our pathway to future growth For personal use only 1. A strong focus on organic growth 2. Further optimisation in all businesses with margin expansion and market share gains 3. Focus on sustainable dividend growth - management and board “skin in the game” 4. We will consider and look at opportunisti
Slide 8: Turner's Overview
For personal use only Turner’s Overview Todd Hunter 8 • 2021 INVESTOR MORNING
Slide 9: Building Quality
For personal use only Building Quality 9 • 2021 INVESTOR MORNING
Slide 10: Four key areas underpinning earnings growth
Four key areas underpinning earnings growth We have found the right formula, and will optimise further … For personal use only A number of changes we have been working on over the last 2-3 years are now delivering both market share growth and margin expansion as well as de-risking the business. • Pr
Slide 11: Businesses are well positioned for the "new norm"
Businesses are well positioned for the “new norm” For personal use only Auto Retail Insurance • Used cars have demonstrated resilience • Annuity earnings helpful in lockdown • Geographical diversification • Premium taken up front • Improving technology and distribution • Diversified sources of suppl
Slide 12: Resilient and well placed for an uncertain environment
Resilient and well placed for an uncertain environment COVID was a stress-test, but we exceeded expectations For personal use only 1. Used car market is resilient 2. Diversified and resilient business 3. High “trust” brands 4. Digital is a competitive advantage 12 • 2021 INVESTOR MORNING
Slide 13: The used car market is resilient and robust
1. Market - The used car market is resilient and robust For personal use only NZ Used Car Change of Ownerships • COVID had a temporary impact, before a 120,000 strong rebound in June and July • August impacted by second lockdown, AKL 100,000 sales dropped most (c.1/3 of population) 80,000 • Underlyi
Slide 14: Diversification - geographic
2a. Diversification - geographic Our nationwide network offers a unique advantage For personal use only • Geographical diversification allows the business to redeploy inventory • Advantage if there are any localised lockdowns or regional demand differences • Online sales / click n collect at any bra
Slide 15: Diversification - business
2b. Diversification - business Turners Group is a purposefully diversified business For personal use only 100% 20% Each business has different business cycles: 80% • Stable annuity revenue (finance + 33% insurance) helps offset short-term drop in 60% activity-based revenue (auto retail + credit). 40
Slide 16: Brand - leverage the trusted Turners brand
3. Brand - leverage the trusted Turners brand Trust is even more important in a time of uncertainty For personal use only • Most trusted brand Turners is consistently NZ’s leading used auto retail brand (independent market research) • 100% online sales demonstrates trust Sold 600 vehicles during Lev
Slide 17: Data Focus – Our digital advantage
4. Data Focus – Our digital advantage Continue to invest in this crucial advantage versus competitors For personal use only • Maintained headcount of Technology team: 26 FTE (Applications 15,Infrastructure/Operations11) • Major investment and resource commitment in high redundancy data centre spread
Slide 18: Three most important Digital initiatives
Three most important Digital initiatives we are working on For personal use only Customer Data Platform API Development Valuation Tool (Auto Retail) (Insurance) (Auto Retail) • Integrates our customer omni- • Development of APIs for the policy • Uses a traffic light warning system channel experience
Slide 19: Our vision
For personal use only Our vision: To be NZ’s leading ecosystem for vehicle users 19 • 2021 INVESTOR MORNING
Slide 20: Our business
Our business For personal use only Finance Auto Retail Insurance Credit Management 20 • 2021 INVESTOR MORNING
Slide 21: Auto Retail Division CEO
For personal use only Auto Retail Division CEO Greg Hedgepeth Auto Retail Division 21 • 2021 INVESTOR MORNING
Slide 22: What does the Auto Retail business look like?
What does the Auto Retail business look like? We are New Zealand’s favourite place to buy & sell vehicles (~30,000 cars p.a.) For personal use only Cars Division (80%): • Transition from auction/wholesale to retail/consumer … better yield and cross- sell to Finance and Insurance • ~50% of cars sold
Slide 23: Auto Retail - Today
Auto Retail - Today For personal use only #1 NZ’s largest buyer and 6 mins Turners sell 1 car every 6 minutes, NZ’s #1 most trusted used vehicle seller of vehicles which equates to over 100 cars per day dealership brand 2 years in a row 22,000 26 $58m Damaged vehicles sold on Locations in NZ from Wo
Slide 24: Why we have an unfair advantage
Why we have an unfair advantage For personal use only • Scale – overall size, volume and our transactional database (NZ’s biggest) helps us buy & sell better than others • Diversification of locations and supply – network of nationwide locations, mix of consignment + owned stock • Customer Driven –
Slide 25: Our retail optimisation strategy is progressing well
Our retail optimisation strategy is progressing well For personal use only New Dunedin operation (opened May 2020) Continue to optimise our network Transition from wholesale to retail (eg. exit Penrose Super site) Rationalise sub-scale sites (e.g. New Lynn vs Westgate) Getting closer and more ac
Slide 26: Expansion - new sites - Rotorua
Expansion - confirmed new sites in the next 12 months - Rotorua For personal use only 26 • 2021 INVESTOR MORNING
Slide 27: Expansion - new sites - Nelson
Expansion - confirmed new sites in the next 12 months - Nelson For personal use only 27 • 2021 INVESTOR MORNING
Slide 28: Recent examples of our "Digital First" approach
Data Focus - Recent examples of our “Digital First” approach For personal use only Reduction in loss making purchases Nationwide deployment of diagnostic scan (Live Q1 2020) tools to help identify mechanical issues prior to purchase. Development of a 1st party data strategy Reduction in our cost per
Slide 29: Growth Focus – Auto growth priorities
Growth Focus – Auto growth priorities Opportunity For personal use only Buy more local car inventory Profit / vehicle 1. Sourcing & maintain margin. $1,500 Regional Branch 2. Retail Optimization 1-2 additional retail location pa. Operating Profit of Investment in staff. $500k pa Maximise F&I as a sa
Slide 30: Introducing Tina from Turners
Introducing Tina from Turners … Upcoming promotional campaign For personal use only 30 • 2021 INVESTOR MORNING
Slide 31: Questions
For personal use only Questions 31 • 2021 INVESTOR MORNING
Slide 32: Group + Oxford CEO
For personal use only Group + Oxford CEO Todd Hunter 32 • 2021 INVESTOR MORNING
Slide 33: History of Oxford Finance
History of Oxford Finance Oxford Finance includes the former Dorchester & Southern Finance businesses For personal use only 2016 AutoApp Launch 2017 BNZ securitisation facility is established Amalgamation of Oxford Finance, Dorchester and Southern Finance brands on to a single receivables platform 2
Slide 34: Finance Today
Finance Today For personal use only $322m $51m $251m Gross receivables less Commercial ledger less Consumer ledger less impairments @ Mar-21 impairments @ Mar-21 impairments @ Sept-21 20% 16% 190 Ledger has grown over $45m Average number of dealers and % of new lending generated from Mar-20 to Mar-2
Slide 35: Credit scores improve, arrears decline, market share increases
Credit scores improve, arrears decline, market share increases For personal use only Consumer Total Arrears Percentage 10.0% 9.0% 1. High quality Turners Auto-Retail origination tracking 8.0% 7.0% ~2% total arrears with ledger size of $55m 6.0% 5.0% 4.0% 3.0% 2. Introduction of Centrix Credit Rating
Slide 36: Growth Focus – Finance growth priorities
Growth Focus – Finance growth priorities Provide a competitive product, that meets needs of introducers + customers For personal use only Grow distribution • Partnerships, more originators, direct • Investment in market leading online portal, AutoApp • Introduction of auto-scraping of bank account d
Slide 37: Questions
For personal use only Questions 37 • 2021 INVESTOR MORNING
Slide 38: Insurance Division CEO
For personal use only Insurance Division CEO James Searle 38 • 2021 INVESTOR MORNING
Slide 39: Insurance – What do we do in the business?
Insurance – What do we do in the business? For personal use only We help Kiwis with motor vehicle, loan protection and life insurance solutions • Distributed through licensed car dealers, finance companies & brokers, life insurance advisers and online • Head office in Auckland (incl. claims and oper
Slide 40: Insurance Today
Insurance Today For personal use only 5,500+ 3,000+ 200,000+ Number of insurance Mechanical Breakdown Insurance Number of active policies as at Sept policies sold per month policies sold per month 20 $35m 1,400 $20m Value of new polices sold in FY20 Monthly average number of claims Value of claims p
Slide 41: Insurance – What do we do differently?
Insurance – What do we do differently? For personal use only • Our value proposition is based on service and quality • Expertise and economies of scale in vehicle repairs delivers value for customers • Our premium rating and underwriting controls are more refined • Network: We have an extensive appr
Slide 42: Insurance – MBI loss ratio performance
Insurance – MBI loss ratio performance For personal use only Our MBI portfolio has seen an improvement in loss ratio over the last four years • Rate for risk: improved risk rating treatment of vehicles with revision of vehicle categories and standardised underwriting of vehicles within scope of risk
Slide 43: Growth Focus – Insurance growth priorities
Growth Focus – Insurance growth priorities For personal use only • Key Partnerships – increase sales with large industry partners from linking systems via API - secure exclusive partnership arrangements - enhanced system functionality to assist growth in insurance sales (PPI & GAP) - improved proces
Slide 44: Questions
For personal use only Questions 44 • 2021 INVESTOR MORNING
Slide 45: Credit Division CEO
For personal use only Matt Gannaway Credit Division CEO 45 • 2021 INVESTOR MORNING
Slide 46: The debt collection process
The debt collection process For personal use only Debt load from SME and Corporate clients Run debtors against FOCUS to generate FOCUS is an analytical process which creates a “propensity to collect score” to enable “propensity to collect score” prioritisation of collection strategies Debtor actions
Slide 47: Credit Management Today
Credit Management Today For personal use only $89m 2,291 $41.4m Corporate debt load in FY21 Number of SME clients loading Amount of money collected from debt FY21 debtors FY21 712 33% 36% Number of SME clients who The average recovery rate The average recovery rate for have loaded debts via Xero for
Slide 48: Credit – Why are we good at it?
Credit – Why are we good at it? For personal use only • Debt Recovery – represent all major trading banks and finance institutions in New Zealand as well as many major household brands. • Approach – We are resolution experts that seek to rehabilitate customers • Brand protection – During Covid-19 pr
Slide 49: Impact of Covid-19 on Corporate Debt Load
Impact of Covid-19 on Corporate Debt Load For personal use only Banking Client Debt Load FY17 - FY21 • Significant reduction in debt load 8.00 due to covid. Millions 7.00 • All major banks except 1 ceased actionable debt load from April 20. 6.00 • Additional lockdowns caused 5.00 uncertainty and cau
Slide 50: Data Focus – Using Data to Improve Results
Data Focus – Using Data to Improve Results For personal use only More than 1,000,000 • Our proprietary “propensity to pay” score: unique Company's and Individuals • A key element of our contact strategy used to segment customers with the aim of delivering recovery results faster. 1,350,000 accounts
Slide 51: Growth Focus – Credit growth priorities
Growth Focus – Credit growth priorities For personal use only • Grow SME Debt Load through targeted advertising & marketing activity • Increase value of RESOLVE portal to enable self-service, 24/7 resolution for debtors • Increase use of data to improve contact strategies via FOCUS • Build efficienc
Slide 52: Questions
For personal use only Questions 52 • 2021 INVESTOR MORNING
Slide 53: Funding the Business
For personal use only Funding the Business Aaron Saunders Group CFO 53 • 2021 INVESTOR MORNING
Slide 54: Balance sheet has capacity to support growth
Balance sheet has capacity to support growth For personal use only Funding Mix ($M) as at Mar 31 2021 Limits Drawn • Our balance sheet is robust with capacity to support growth Finance Receivables Funding plans; Securitisation 276 239 • The group continues to operate well within its bank Banking Syn
Slide 55: Capital Allocation – high level thinking
Capital Allocation – high level thinking For personal use only • Organic growth to be funded via retained earnings and additional debt • Clear message from market that shareholders want yield and growth supported from existing capital base • Current dividend policy of 60% to 70% NPAT to be maintaine
Slide 56: Turners has a strong and sustainable yield
Turners has a strong and sustainable yield For personal use only Dividend per Share (Cents) Dividends fully imputed from FY17 onwards • Updated guidance issued in February of FY21 0.20 Net Profit Before Tax (NPBT) to be at least $35 0.18 million (compared to January 2021 NPBT 0.18 0.17 guidance of $
Slide 57: Environmental, social, and governance (ESG)
Environmental, social, and governance (ESG) For personal use only • The focus through FY21 has been on delivering on the “social” pillar of our ESG strategy. This includes the following initiatives… • Health and safety of customers and staff during Covid-19 • Implementing and employee engagement mea
Slide 58: Questions
For personal use only Questions 58 • 2021 INVESTOR MORNING
Slide 59: Summary + Overall Q&A
For personal use only Summary+ Overall Q&A 59 • 2021 INVESTOR MORNING
Slide 60: Wrap-up - Building a quality business
Wrap-up - Building a quality business For personal use only Auto retail Finance • Margin improvement through • Finance continued focus on targeting supply initiatives high quality borrowers, attracting 50%+ • Continued optimisation for retail of new lending in premium risk business eg. new sites in
Slide 61: Growth Focus - Four key areas underpinning earnings growth
Growth Focus - Four key areas underpinning earnings growth For personal use only We have found the right formula, and will optimise further … This gives us confidence in continued earnings growth through the cycle 1. Retail optimisation 2. Vehicle purchasing decision-making 3. Premium lending 4. Ins
Slide 62: For personal use only
For personal use only 62 • 2021 INVESTOR MORNING
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