Group makes online impression

Turners Automotive Group says the company is going from strength to strength, with growing profits and increased attention from consumers online.

The company released its annual report for the year ended March 31, 2023, to the NZX on June 29 and hails achieving “strong results in challenging conditions”.

Grant Baker, chairman, and Todd Hunter, chief executive, add their own remarks in the report and the brand has also been boosted by Google searches for “Turners Cars” overtaking searches for “used cars”.

“The combined effect of branch expansion, improved customer experience, digital marketing and brand investment are helping us reach and connect with more and more customers,” they add.

Turners notes the 2023 financial year delivered market share gains and margin improvement for its auto retail section, which led to record earnings. It expects to clinch more of the market as its branch network expands. 

Hunter and Baker, pictured, from left, say the latest results are pleasing as costs are up due to inflation, interest rates have never increased faster, there has been more government regulation in finance and vehicle markets, and market demand is down. 

“Our auto retail business is without doubt the hero with 28 per cent profit growth off a strong prior year, and reflects the investment and effort put into this part of the business,” they add. 

“The used car market is needs-based and stable through downturns, as we envisaged. Insurance has also had a stellar year with just under 10 per cent profit growth. 

“Our third core business, finance, is well-positioned as market conditions change.”

They describe increasing interest rates as the single biggest challenge and risk to the business this year and note Turners was unable to price in all the official cash rate (OCR) movements. “Interest expense is up 110 per cent within the finance division and, unsurprisingly, this had a material impact on profitability within this business.” 

The used car market has stayed “relatively stable” through the economic downturn and transactions were below pre-pandemic levels and down 10 per cent on the prior year.

“Government regulation with the introduction of the clean car programme has had the most material impact on supply during the past 12 months, resulting in fewer used imports coming into New Zealand,” the report continues. 

“With economic conditions becoming more challenging, we are continuing to see demand shift into the lower price point segments.”

Growth plan

Baker and Hunter say Turners has made “excellent progress” in the key areas and business priorities identified in its three-year plan for growth, which is reviewed annually.

Its pipeline of branch expansion projects has seen new branches completed in Rotorua and Nelson and the company has acquired additional sites in Tauranga, Napier and Christchurch.

There is a focus to shift a number of consignment vehicles sold down its wholesale auction channel into retail to achieve a better selling price for the seller and a better margin for the business, as well as the opportunity to attach finance and insurance. 

Quality and margin have become a stronger priority for its lending operations in the past year. A tightening of its credit policy has seen the average credit scores of new customers increasing, reflecting the higher proportion of premium borrower business. 

Turners says it will continue to invest in digital initiatives to improve its online customer experience and build automated digital marketing follow-up. It notes Turners Subscription also broke past the 300-mark for live subscriptions in February 2023.

Key results

Group revenue was up 13 per cent year on year, to $389.6 million, with auto retail delivering a $35.6m increase, with revenue growth also from the finance and insurance businesses. 

Credit management revenues dropped slightly as a result of less debt load and lower levels of payment arrangements.

Net profit before tax was a record $45.5m, with auto retail again leading the way after achieving a $5.5m profit increase year on year.

Insurance profits also grew and were up by nine per cent to $12.6m. Profit for credit management was largely unchanged at $2.9m. 

Turners also still has its sights set on achieving its target of $50m profit before tax in the 2025 financial year.

“We remain confident about our growth, however, are very mindful of the macro challenges still in the market, particularly the headwinds in finance,” explain Baker and Hunter. 

“If interest rates start to cycle down by the second half of this calendar year, then our modelling shows we will remain on track to achieve our target by FY25. If interest rates continue to rise, then it is likely our timing will push out to FY26.”

Outlook

While the impacts of the Covid-19 pandemic have diminished, economic and market uncertainty continues to rise, according to the bosses. 

“We see macro headwinds likely to intensify in the short term. In auto retail, we expect to see upside from our new branches in the second half and expect those to follow the success of our branch expansion strategy over the last couple of years,” they say. 

“Domestic supply continues to be an advantage for Turners, and the transition of wholesale auction units into retail sales channel will underpin further market share and margin growth.” 

For the company’s finance business, quality and margin management remain key priorities in the near term before refocusing on growth initiatives once the OCR has peaked. 

They expect sales in the insurance division to be buoyant based on Turners’ distribution and market share gains, while credit management is expected to perform better in the coming year as consumer arrears worsen and bad debts begin to be called in.