Turners Automotive Group Limited Analysis

Overview

Turners Automotive Group has been formed through the 2014 merger of New Zealand's largest vehicle and machinery retailer, Turners Auctions, and leading consumer finance and insurance business, Dorchester. Turners Auctions was established in 1967 when Turners and Growers Limited began auctioning cars and trucks alongside its fruit and produce business. Today, Turners is New Zealand's largest auction house and vendor of second hand cars, trucks and machinery. Dorchester was incorporated in 1984 as Venture Pacific Limited. The company became Dorchester Pacific Limited in 1992 and over the following years, Dorchester developed a core financial services base through the acquisition of a number of finance companies throughout New Zealand aligned to its consumer finance and insurance strategy. In 2014, Dorchester launched a successful takeover offer for Turners Auctions and consolidated its interests into a single entity that carried the Turners name. The decision to continue the Turners brand recognised the rich history and consumer recognition attached to it. In 2017, Turners Limited changed its name to Turners Automotive Group to enable a Foreign Exempt Listing on the ASX and to reflect the focus of the group on the automotive sector.

The Turners Automotive Group has 3 core operating divisions.

1. The Automotive Retail Division where we control the buying and selling of second hand cars, trucks and machinery to earn a transactional margin and deliver cross-sell opportunities for our Finance and Insurance products. Turners is the largest second hand vehicle retailer in New Zealand.

2. The Finance and Insurance Division where we help customers with simple and attractive finance and insurance products, and through this build annuity revenue streams. Turners has a portfolio of reputable businesses offering finance and insurance products to customers across New Zealand, including personal, motor vehicle loans and insurance.

3. The Debt Management and Credit Collection Division where we help businesses of any size in New Zealand and Australia with collecting debt from customers who are not paying. Turners has a growing presence in the debt management sector in both New Zealand and Australia through its EC Credit Control business.

Performance

The following information was extracted from Turners Limited's half year results, released on 25 November 2024:

Key HY24 financial metrics:

• Revenue $209.0m (- 2%)
• EBIT $31.0m (+3%)

-NPBT $26.9m (+5%)

• NPAT $19.3m (+4%)
• Earnings per share 21.8 cps (+2%)

-Q2 dividend declared at 7.0 cps

Highlights:

• Record net profit before tax (NPBT) of $26.9m for HY24 (HY23 $25.7m), 5% higher than the same period last year, proving resilience through the cycle during a significant retail downturn
• Reaffirm September 2024 guidance that the business is on track for another record result for FY25, exceeding $50m NPBT target, which was first communicated in [xx date]
• Forecast FY25 dividend of at least 27 cps up 6% on pcp and capping a decade of strongly growing dividends from 10 cps in FY15
• Earning diversification proven again, with lower Auto Retail revenue offset by strong results for Finance, Insurance and Credit Management, as expected
• Consumer sentiment downturn put pressure on vehicle prices, reducing margins during the period, but now showing signs of recovery

Turners Automotive Group (NZX/ASX: TRA) produced a strong result for the six months to September 30, 2024, in the face of extremely challenging macro market conditions, demonstrating that the company’s strategy to enable it to grow through the cycle, thanks to its diversified business model, and to maintain healthy dividends, is proving effective.