Turners expects to make further acquisitions

Acquisitions and more business is expected by Turners Automotive Group this year.PHOTO: PETER...
Acquisitions and more business is expected by Turners Automotive Group this year.PHOTO: PETER MCINTOSH
Integrated automotive financial services Turners Automotive expects growth to continue in the current financial year after reporting increased profits and dividend payout for the year ended March.

Turners, which operates in Dunedin, reported a before-tax profit of $24.6million for the year, up 14% on the previous corresponding period, and slightly ahead of forecast.

The reported profit of $17.6million was up 13% and revenue for the year was up 48% to $252.4million.

Based on the ongoing positive performance of the group, chief executive Todd Hunter said the board declared a final quarter tax-paid dividend of 4.5c per share, taking the full-year dividend to 14.5cps, up 13% on the pcp.

The dividend was in line with the board's dividend policy of a payout of between 50% and 55% of underlying tax-paid profit. The dividends this year had been fully imputed when earlier dividends were not, he said.

Recent acquisitions, growth in automotive retail and growth in the finance and insurance books and been positive on the revenue mix. An increasing percentage of annuity income from finance and insurance contracts provided additional consistency and security of earnings.

The acquired businesses Pacific Life and Buy Right Cars had both contributed during the period. Contributions from the Autosure Insurance business would flow from the start of the 2018 financial year, following Reserve Bank approval in late March to the transfer of policies and integration into the Turners' portfolio, Mr Hunter said.

Shareholder equity at March 31 was $171.7million, up 32% on the pcp. The increase was mainly due to Turners' bondholders showing confidence in the company performance and direction by converting $17.5million (75%) of $23.2million 2014 bonds to equity, and the subsequent capital raising in October 2016 of $13.4million.

The securitisation programme was fully implemented and operating. There was credit approval for an initial $150million limit from the BNZ, currently drawn to $87million. The balance of the finance book was funded by a mix of bank and equity funding, Mr Hunter said.

The securitisation programme had been a significant project for Turners' funding base for its finance business. The full benefits would be realised from the 2018 financial year.

Reviewing the trading performance, Mr Hunter said the automotive retail division delivered a 64% increase in revenue to $193million and an operating profit of $15.4million for the year - an increase of 54%, including a revaluation increase of $700,000 in the Motor Trade Finances shareholding.

``In the Turners business, increased numbers of vehicles are selling to retail customers rather than dealers, creating better opportunity for add-on sales of finance and insurance.''

The percentage of ``fleet'' vehicles purchased and on sold by Turners had increased to about 50% of transactions, up from 15% three years ago, generating better margins and more finance opportunities.

Mr Hunter said further retail business acquisitions were expected as Turners moved to grow its share of the second-hand vehicle market.

The finance division produced $26.8million of revenue, an increase of 10%. The operating profit of $10.2million was 4% ahead of last year.

The majority of the finance book was lending for vehicle loans to customers, arranged both directly and through motor vehicle dealers.

Establishment of the non-recourse lending partnership with MTF, of Dunedin, which was official launched from December 2016, was building quickly. More than $16million in loans was written at the end of March, he said.

``The partnership with MTF significantly increases the company's reach into the motor vehicle finance sector and provides access to a number of new lending opportunities for all parties.''

Revenue of $13.7million from the insurance was an increase of 49% from the pcp. However, despite the increase in policies sold, operating profit for the division fell year-on-year.

Low and stable interest rates caused a significant negative impact on life insurance reserves, which would unwind as interest rates increased, he said.

EC Credit Control, the debt management business, continued to grow its market share in both New Zealand and Australia.

The focus on loading higher quality debt had resulted in lower debt loads but more debt collected. Results were slightly up on last year. Revenue was $19.1million for the period and the operating profit was $6.2million.

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