Turners posts 33% gain in full-year profit

Turners Automotive Group profit rose to $23.4 million in the 12 months ended March 31. Photo / 123RF

Turners Automotive Group posted a 33 per cent 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 $17.6m a year earlier, the Auckland-based company said in a statement. Sales rose to $325m from $249m.

Turners' insurance business was the stand-out, delivering a 283 per cent gain in sales to about $47m and a 518 per cent gain in operating profit to $5.7m reflecting the "step change in scale" from its acquisition of Autosure in late 2016 for $34m.

Finance also recorded sturdy growth - revenue up 48 per cent to $39.7m and operating profit up 16 per cent to $11.7m as the company's loan book grew by 40 per cent to $290m. Its credit management business delivered largely unchanged sales of $18.7m and an operating profit of $6.1m.

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 $34m to $36m, up from $31.1m in 2018. It will pay a final quarterly dividend of 5 cents a share making 15.5 cents for the year, up 7 per cent from 2017.

While automotive retail earnings grew 8 per cent to $16.6m in the latest year on 16 per cent growth in revenue to $223m, operating profit at its Buy Right Cars business fell 21 per cent, 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 $15.3m in 2016, with some $6m 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 per cent to $3.04 and has declined 10 per cent this year.