New branches, more sales

The success of Turners Automotive Group is “underpinned” by new branches and more sales through them drives growth in automotive retail. 

“Headwinds in finance will become tailwinds”, and the company will start growing its loan book in a “more material fashion”. 

Expansion of its insurance division will come from direct and digital distribution, while credit management will deliver growth as low pandemic-level arrears return to a more long-term run rate level. 

These were some of the takeaways provided by chairman Grant Baker at Turners’ annual general meeting on September 18.

Having met its financial target for 2023/24 a year early and remaining on track for its financial year 2025 target of $50 million, the company has updated its profit target to $65m net profit before tax by financial year 2028.

Baker, pictured, told shareholders: “We know the brand, systems, technology and people in Turners are a powerful combination, and we’ve been giving thought to adjacent opportunities to used cars for further growth. 

“In the past month, we have made two investments in companies that operate in adjacent markets – insurance, and vehicle servicing and repairs.”

The company recently bought 50 per cent of My Auto Shop, a platform with more than 300 Motor Trade Association-approved repairers and a mobile offering via a fleet of My Auto Shop branded mechanics.

“Vehicle servicing and repairs is a $3 billion business in New Zealand and has been a gap in Turners’ offering,” said Baker. “We buy and sell vehicles, we can insure and finance those vehicles too.

Now we service and repair. The potential lifetime value of customers to us has increased substantially.

“The repairs business is highly fragmented and this is an opportunity to help develop a provider of scale. This fits well with our mission to consolidate across the auto business and enhance customer experience.”

Turners has also made a strategic investment of $1m in Quashed, an “innovative online insurance platform”. 

Baker explained: “It allows consumers to easily compare, shop and manage policies from multiple insurers across motor, contents, home, pet and life. 

“Insurance is something everyone needs and is complementary to our core business of selling used cars. We want Kiwis to be protected. Quashed enables this through the effortless comparison of a multitude of policies, pricing and features. 

“The fairness, ease and simplicity Quashed brings to insurance is aligned with how we think about our own customer proposition. As part of our investment, we have a commercial agreement established between Quashed and Turners for referrals.”

‘There’s more to come’

Baker described Turners as being a business with an attractive yield. “Our track record speaks for itself and there’s more to come. The business has stood up incredibly well to the challenges of the economy, interest rates and changing regulation. 

“Auto retail has been a stand-out performer and we know our finance division will start ramping up as interest-rate headwinds become tailwinds.”

He said the past financial year provided another record result. “We’re delivering on our plan for growing this business. 

“For the most recent three-year period, we’re proud to have delivered almost $97m in after-tax profits, an increase of 37 per cent. 

“We’ve also paid 71.5 cents in dividends for every share in the company, which is 40 per cent up on the prior three-year period. The best news is there’s more to come for Turners and we are focused on future growth.”

Baker added 2023/24 was “yet another proof point for Turners”. Despite headwinds in the economy, the business showed resilience and its people kept delivering.

“Regardless of the economy, patchy customer demand and challenging interest rates, the business has continued to grow. 

“While many consumer and retail businesses struggle, Turners is outperforming. Our compound annualised growth rate over the past seven years sits at 11 per cent, which is impressive.

“We try to operate the business to a simple formula. If we provide a quality environment and conditions for our people, this will give us the best chance of providing a quality experience for customers and should lead to quality outcomes for shareholders. 

“Being customer driven is one of our core values. We’ve won the most trusted brand in the used-car category for the fifth year running and we’ve delivered growing dividends now for 10 years, except for 2020 when were a little conservative given the pandemic. 

“Our engaged team and customer experiences underpin the returns we can deliver. The yield on our shares continues to be one of the best on the NZX.

“While we might not be seeing the share price we think we deserve, we have received some third-party endorsement over the past year. We entered the NZX 50 in December 2023, which has been a goal since 2017. This is a significant milestone.”