Turners counts cost of lockdown

Turners Automotive Group estimates its car retail division lost $1 million a week during the latest national Covid-19 lockdown but expects another “bounce back” as restrictions ease.

The company says the current financial year had started well prior to the government introducing alert level four on August 17, with the business on track to deliver a 15 per cent increase in net profit compared to FY2021

Shareholders at Turners’ annual meeting on September 9 were told the short-term performance will be impacted by the level and duration of Covid-19 restrictions on trading, with plans to revisit guidance in November.

Turners notes the biggest impact of the pandemic restrictions has been in the auto retail division, which “burns cash at $1m per week” during a national lockdown. 

However, it adds this is partly offset by annuity revenue streams in finance and insurance.

Grant Baker, chairman, said while the company may take a hit in the short term it remains confident about prospects in the medium-term. 

“It is good to see our branches outside of Auckland now returning to level two restrictions, and we are hopeful we will see Auckland move down levels in the next few weeks,” he explained. 

“Our nationwide geographic diversification is helpful at the moment, as it was in previous Auckland-centric lockdowns.

“At the annual results announcement in May, we put out a marker for our three-year growth plans. We aim to deliver a further 31 per cent growth in underlying profits to $45 million profit before tax in FY24. 

“If anything, we feel even more confident on this medium-term target given how the businesses performed heading into this lockdown.”

As consumer behaviour shifts in the wake of the coronavirus crisis, Turners says its digital assets represent a substantial and growing competitive advantage and has been underpinned by 28 million visits to its website over the past 12 months.

The meeting also heard how the industry continues to consolidate with the number of registered dealers down about 10 per cent in 2021 from 2019 levels, while import numbers are also down over the same period. 

Todd Hunter, chief executive officer, told shareholders he is optimistic about Turners’ prospects despite the challenges of Covid-19.

“Last year’s experience will tell us we can expect a bounce back in transaction levels once normal operating conditions return,” he said. 

“It’s still too early to have a firm view of how this halt followed by acceleration will affect our business. However, we are more confident than we were during the first lockdown on how this will play out.” 

Hunter added that he expects the supply of new cars to be affected by the microchip shortage for at least another couple of years, which in turn means used vehicles will be more difficult to buy in Japan.

“We are much less exposed to this shortage than most of our competitors, with less than 10 per cent of our vehicles coming from overseas. 

“This overall reduction in supply has led to used car prices increasing over the last 12 months probably somewhere in the 10-15 per cent range. The price rises are more pronounced in specific makes and models, such as utes.”

Turners also delivered updates on developing sites at Rotorua and Nelson, with the former set for a phased opening starting from September.

Demolition work has been completed at the Nelson site and Hunter said branch is expected to be operating in the first quarter of FY23.