Turners Auto posts steady first half profit, says higher interest rates will soon bite

Turners said it was well-placed to continue to compete effectively in difficult market conditions. Photo / 123RF

Turners Automotive posted a 1 per cent lift in its first half net profit to $17.1 million but warned the impact of higher interest rates will bite in the second half and beyond.

Revenue gained 11 per cent to $185.3m in the half year to September, and Turners’ net profit before tax rose by 1 per cent to $23.4m.

The company declared a second-quarter dividend of 5 cps, following a 5c dividend in the first quarter.

As expected, higher interest rates were impacting net interest margins.

In its outlook, the company said: “Based on our experience in the first half and early trading in the second half, we expect 2023 net profit before tax to be at or slightly above last year’s record result, with a projected 2023 dividend of 23 cps, consistent with last year, representing a gross yield of 8.9 per cent per annum (based on a $3.60 share price).

“While we know economic headwinds will continue into the second half with interest rates continuing to rise at unprecedented speed and consumer confidence impacted, we are well-placed to continue to compete effectively in difficult market conditions,” the company said.

“We expect the auto retail business to continue to grow strongly from [the] execution of our retail optimisation strategy, however, the impact of the interest rate environment will be more pronounced in the second half of 2023, and 2024.”

Turners said it had successfully navigated Omicron disruption and tightening economic conditions, including rising inflation and interest rates, which impacted consumer spending and finance margins.

The company said its result reflected diversification of the business and strengthened positions of each core market segment over recent years.

Chief executive Todd Hunter said that in a market where used car sales were down 7.5 per cent, Turners grew market share and achieved higher sales, year-on-year.

“The robustness of our diversified business has been demonstrated despite the industry headwinds which we expect will continue into the second half of the year,” he said.

Chairman Grant Baker said considering the disruption of the Omicron variant of Covid-19, he was encouraged with the results.

“Undoubtedly, we will face tough economic conditions in the second half, but our geographic and earnings diversification continue to provide resilience through the cycle,” he said.

He said car sales had held up well so far in the third quarter, and margins were starting to improve.

Turners’ loan book was stable, although rising interest rates would continue to put pressure on the cost of funds.

Gains in market share were supported by the company’s successful “Tina from Turners” brand campaign.