Turners posts 33% gain in FY profit, says 2019 pretax earnings may rise as much as 16%

Imported cars parked at Port of Auckland. Photo by Lynn Grieveson

Turners Automotive Group posted a 33 percent gain in full-year profit as New Zealand's largest second-hand vehicle retailer leveraged its position to provide more finance and an expanded insurance offering.

Profit rose to $23.4 million in the 12 months ended March 31 from $17.6 million a year earlier, the Auckland-based company said in a statement. Sales rose to $325 million from $249 million.

Turners' insurance business was the stand-out, delivering a 283 percent gain in sales to about $47 million and a 518 percent gain in operating profit to $5.7 million reflecting the "step change in scale" from its acquisition of Autosure in late 2016 for $34 million. Finance also recorded sturdy growth - revenue up 48 percent to $39.7 million and operating profit up 16 percent to $11.7 million as the company's loan book grew by 40 percent to $290 million. Its credit management business delivered largely unchanged sales of $18.7 million and an operating profit of $6.1 million.

Turners said it benefits from being an integrated automotive group. "This provides a number of advantages, from the ability to offer an end-to-end customer journey and higher margin transactions in controlled channels, through to better customer relationships, diversification of earnings and a balanced mix of annuity and transactional revenue," the company said.

"We are pleased to deliver another year of record results and increasing value for our shareholders," said chair Grant Baker. "Kiwis love their cars – more than 1.1 million transactions took place in the last year alone – and we expect the demand for second-hand vehicles to continue, whether that be today’s internal combustion engines or the electric vehicles of the future."

Turners forecast pretax profit for 2019 to be in a range of $34 million to $36 million, up from $31.1 million in 2018. It will pay a final quarterly dividend of 5 cents a share making 15.5 cents for the year, up 7 percent from 2017.

While automotive retail earnings grew 8 percent to $16.6 million in the latest year on 16 percent growth in revenue to $223 million, operating profit at its Buy Right Cars business fell 21 percent, which Turners said reflected legacy issues dealing with aged inventory. A new management team had been in place since November 2017, it said.

Turners acquired Auckland used car importer and dealer network Buy Right Cars for $15.3 million in 2016, with some $6 million tied to its performance over two years. Today it said the earn-out mechanism was "working as intended".

The company said its credit management arm was "a solid and consistent performer" that still had a big opportunity to expand in the Australian corporate market.

Turners' stock rose 3.8 percent to $3.04 and has declined 10 percent this year.