TRA - Turners Automotive Group [previously TNR - Turners Limited]

[percy]

I make a point of not taking any Turners result at face value. It seems inevitable that once you delve into the results something comes out a bit smelly. And so it has proved with the FY2018 result. The key to 'cleaning out the garbage' is once again found under note 7 (the detail of the 'Profit Before Tax', and in particular the section marked 'Other Income'..

There you will find a very significant figure of $2.664m which is a 'Fair Value Gain on Contingent Consideration.'

Say what??? If there is a heading you can't understand, it often pays to look under the general heading of 'insurance' for further clarification. That took the nose of this hound to p76, and the heading 'Insurance Contracts' threw up the following detail.



Change in Discount rate 3.08% to 2.61% (Insurance Contracts)-$0.120m


Difference between Actual and Assumed Experience(Insurance Contracts)$2.491m


Difference between Actual and Assumed Experience (Life Investments)$2.491m


Total$2.665m



Within the bounds of the third decimal place rounding error, this is in agreement with the $2.664m which is a 'Fair Value Gain on Contingent Consideration.' I don't think this is a co-incidence. While this extra profit is real, I believe it is due to the ups and downs of markets and/or settlements of insurance contracts. These kinds of gains are not sustainable year to year. So the underlying profit for TRA was significantly less than the headline figure quoted. The same can be said for the money made on the 'revaluation gains on investments', 'revaluation gain on investment property' and the 'gain on sale of property plant and equipment'. In my judgement the actual comparable net profit gain, the figure that should be used when comparing results from year to year should be adjusted from the headline figure as follows:

Operating Net Profit = $23.192m - 0.72x$2.664m - ($0.590m+$0.820m+$1.000m) = $19.085m which is 18% lower than the headline figure.

With 84.802m shares on issue at balance date this equates to 'earnings per share' of 22.5cps

At today's trading price of $2.94, this puts TRA on an historical PE of 13.0

That looks 'about right' and shows that at under $3, TRA may not be quite the bargain that some think. Maybe Mr Market knows what he is doing after all?

The other element that must be factored into the 'profit growth' is the ever increasing number of shares on issue. I have added this information into the table below via an 'earnings per share' calculation..



FY2014FY2015
FY2016FY2017FY2018


NPAT (Turners Limited) (A)$3.823m$8.595m$15.332m$16.789m$19.085m


Shareholder Equity (Turners Auctions :TUA)$13.378mm


Shareholder Equity (Dorchester Pacific: DPC)$74.052m


Shareholder Equity (Turners Limited: TNR)$121.002m$129.812m$171.716m$214.323m


Total Combined Shareholder Equity (B)$92.430m$121.002m$129.812m$171.716m$214.323m


Shares on Issue EOFYNM63.077m63.431m74.524m84.802m


epsNM13.6c24.2c21.8c22.5c


Return On Equity (A)/(B)4.1%7.1%11.8%9.8%8.9%



Note: I have also now normalized the tax treatment of the FY2015 result, as this gives a better basis for comparison.

It is interesting to see that while share price has gone nowhere over the last two years neither has Operating NPAT. And that correlation might not be a co-incidence!

SNOOPY

Well the two broker's analysts who cover TRA pointed this out in May.[One it greater detail than the other]
What they did not factor in their projections was future property development margins/revaluations,which I feel could be substantial.
I am expecting an excellent first half result, confirming TRA are on track to beat analysts' full year projections.This 1st half result will be announced late November.

[Snoopy]

I don't know how you get the time for all this but I for one am glad you do

I find 'skin in the game' a great motivating factor!

SNOOPY

discl: shareholder

[RTM]

Good you've got the time to get your snout deep in the accounts mate. I don't know how you get the time for all this but I for one am glad you do and I am also glad I have a very modest stake in these. Looks like as I suspected all along Colonial Motors is better value.

Just wait till Snoopy gets his muzzle into Colonial !

[Snoopy]

Well the two broker's analysts who cover TRA pointed this out in May.[One it greater detail than the other]


I am glad that I have finally caught up! Those other analysts must be real whiz kids though. I went back to the May release of results and noticed that the detail of note 7 (spelling out just what the other income was) was not given. That detail was not released until the annual report was published on 28th June. So I guess they must have had a crystal ball connected directly to Turners HQ!



What they did not factor in their projections was future property development margins/revaluations,which I feel could be substantial.


This is fair comment. I did not invest in Turners Automotive Group for their property development skills. But I am happy to benefit from them. I understand the model of:

1/ buying a site,
2/ developing it yourself (complete with removable improvements) and
3/ then on selling the developed property on a long lease, monetising your development gains up front.

I think it is brilliant, and I wonder, once Turners have finished redeveloping their own sites, whether they can take this model and redevelop sites for other businesses? If we regard property development as part of 'normal business' then my normalised operating profit estimate changes:

Operating Net Profit = $23.192m - 0.72x$2.664m - ($0.590m+$1.000m) = $19.683m

Personally I prefer to leave property development profits out. But I wouldn't call you wrong if you put them in!

Hey Percy once more thing. I remember you posting when you received the hard copy of the TRA annual report. Was it a properly bound copy? Or was it a colour photcopy with a staple in the corner like I got?

SNOOPY

[Beagle]

Bet it was the low rent one like you and I got Snoops. Doubt they bound Percy's one specially for him. I guess for a company that uses shipping containers as offices for their car yards we should be pleased it was in colour and they bothered to use a staple :)

Trouble is I have to much skin in different games and being a tri colored beagle its easy to get confused with where your true colours are :)

[Snoopy]

Turners easily cover their 'current' liabilities from contracted liquidity that is coming due. That has to be very reassuring for shareholders and bondholders.

The 'problem', if you choose to see it as such, is the longer term resilience position as outlined in post 1481, titled 'Tier 1 and Tier 2 Lending Covenants FY2017'. What it comes down to is this.

If Turners management keep "doing what they say they will do" and keep delivering on results then there is no problem. But what happens if the car market slows?

Slower car sales mean less new finance contracts written and less new insurance business written. This would be a 'triple kick in the head' for Turners, and could result in goodwill write offs and an urgent capital injection need from shareholders. It wouldn't be a pretty picture and is the potential downside of the current growth strategy. I am not saying this scenario is likely. But I think investors should bear in mind that it is possible. The bare fact is the net tangible asset backing of TNR at balance date was:

($171.716 - $172.088) / 74.523m = -0.005c per share

The multi year asset value decline I have laid out in the table below



Shareholder Funds {A}Intangible Assets {B}No.Shares on Issue {C}NTA/share {{A}-{B}}/{C}


EOFY2015$121.002m$103.595m63.077m27.6c


EOFY2016$129.812m$118.106m63.432m18.4c


EOFY2017$171.716m$172.002m74.532m-0.4c



You read that right. Turners have negative tangible assets, all signed off by the auditors. No-one will mention this if things continue to go well. But actually Turners is a highly leveraged house of cards. You might not want to be in there if the automotive market catches a cool breeze.


Despite what I wrote above, I am generally comfortable with a company having lots of intangible assets on the books provided:

1/ The assets were bought at the right price.
2/ The businesses that Turners acquired have continued to grow.

My one cause for concern is 'Buy Right Cars'. Turners management have acknowledged that it has not performed up to expectations and that the management has been replaced. There is over $10m in 'Buy Right' goodwill on the Turners books ($10.860m to be exact AR2018 p60). This is tested annually by the auditors, who check whether such value can be justified. So far all is hunky dory. But I did notice a divergence in the growth assumptions for this acquisition going forwards. See AR2018 p65. I tabulate these results against the equivalent assumptions from last year:



Year 1 Forecast CashflowsYear 2 Forecast CashflowsYear 3 Forecast CashflowsYear 3-4 Forecast Cashflows
Year 4 to 5 Forecast CashflowsTerminal Cashflows


FY2017 Perspective10%7.5%5.0%2.0%


FY2018 Perspective60%8.0%5.0%2.0%



The note starts "The year 1 forecast cashflows were extrapolated". I think 'year 1' means the 'current reporting financial year', but am not 100% sure. If I am right then from an FY2018 perspective 'Year 2' means FY2019 (the current financial year). This model is telling us that Turners are budgeting for an increase in cashflows from Buy Right cars of 60% this financial year. That is an enormous increase, even for a company with the growth ambitions of Turners. It is particularly shocking when you realise that only 12 months previously, Turners were looking for an increase of only 7.5% over the same time period. No doubt part of the reason the 'Buy Right' growth rate is forecast to be so high is because FY2018 so was disastrous. Turners are starting from an unexpectedly low base. But even so I think it is a big ask.

The question is, what happens to the 'Buy Right' goodwill if this 60% growth is not achieved? Possibly nothing. But it is also possible that Turners will be facing a multi-million dollar goodwill write down. If it happens it will be a 'non cash item'. But it was real cash, not that long ago! The company might require some recapitalisation if the write down happens. This is a real 'extra risk' for shareholders going forwards IMO.

SNOOPY

[percy]

The Buyright cars acquisition was a disaster.
The Buyright cars acquisition was fantastic, as it saved them years getting the larger foot print they needed in Auckland.
Take your pick which one you agree with,keeping in mind both are correct.

[percy]

Bet it was the low rent one like you and I got Snoops. Doubt they bound Percy's one specially for him. I guess for a company that uses shipping containers as offices for their car yards we should be pleased it was in colour and they bothered to use a staple :)

Trouble is I have to much skin in different games and being a tri colored beagle its easy to get confused with where your true colours are :)

I received the cheap report.
Using containers as offices is a brilliant move.Fantastic signage area,and easily moved,giving TRA the agility to make use of great temporary prime sites.
OK the first will be in Wellington,however Beagle you will see them in The North Shore in the not to distant future.You will not miss them, as they will stand out like Beagles' b"lls,or should that be Couta1's b'lls.?...lol.

[Beagle]

I received the cheap report.
Using containers as offices is a brilliant move.Fantastic signage area,and easily moved,giving TRA the agility to make use of great temporary prime sites.
OK the first will be in Wellington,however Beagle you will see them in The North Shore in the not to distant future.You will not miss them, as they will stand out like Beagles' b"lls,or should that be Couta1's b'lls.?...lol.

Must admit its amazing what can be done with shipping containers these days. Some people making interesting homes out of them !
https://www.buzzfeed.com/kristinchirico/surprisingly-gorgeous-homes-made-from-shipping-containers?utm_term=.nqgpo1ZM2X#.bfo0MOykZK

[percy]

Just remember Turners will be making big dollars using them,and re-using them,and re-using them .

[Beagle]

Yeap, I'm ignoring this latest business pessimism survey out today saying things are at their worst since the depth of the GFC...survey was taken before Jacinda started schmoozing with Chris Luxon...our man Chris will sort her out and they looked great on telly together the other night.

Vast majority of Turners sales are not discretionary or to business anyway so everything is okay now.

[percy]

The results season has produced excellent results,with positive outlooks.
Unemployment remains low.
Interest rates remain low.
Spring is in the air,and people will be buying used vehicles.
Turners are here to help those people;Vehicles,finance,insurance,service.

[Snoopy]

Bet it was the low rent one like you and I got Snoops. Doubt they bound Percy's one specially for him.




I received the cheap report.


My cheap report started falling to bits today. I was probably doing something unusual that most shareholders would not do though. I was reading it!

Failing to have a stapler big enough, I might have to go into town tomorrow and get it professionally rebound. I might even laminate the front and back covers for good measure. In years to come it might be the only AR2018 report to survive! During the year I like to stick relevant documents into it. Things like letters from Todd, and the next half year report. So I actually do need it to stick together.

I am all for Turners innovating. But I wouldn't have thought making a 100 page report colour copied on both sides was cheap. I don't have a colour copier myself. But if I did such a copy at the library it would cost me $100! I reckon the cost price would be $50. Or am I just out of touch with the cost of copying today?

SNOOPY

[percy]

Spend the big money.Get it leather bound.
The more you spend,the more you will appreciate it.
Should you wear it out,by over fondling it, you can go on line and print off another one.…..lol.

ps.I have now moved on from last year, and am getting very excited waiting for the half year result late November.
Their outlook has been very positive, and I have no doubt they will deliver the goods.
pps.Talking about delivering the goods, we will get another fully imputed divie before the half year announcement.
Wonder how much this one will be.?

[Beagle]

I make a point of not taking any Turners result at face value. It seems inevitable that once you delve into the results something comes out a bit smelly. And so it has proved with the FY2018 result. The key to 'cleaning out the garbage' is once again found under note 7 (the detail of the 'Profit Before Tax', and in particular the section marked 'Other Income'..

There you will find a very significant figure of $2.664m which is a 'Fair Value Gain on Contingent Consideration.'

Say what??? If there is a heading you can't understand, it often pays to look under the general heading of 'insurance' for further clarification. That took the nose of this hound to p76, and the heading 'Insurance Contracts' threw up the following detail.



Change in Discount rate 3.08% to 2.61% (Insurance Contracts)-$0.120m


Difference between Actual and Assumed Experience(Insurance Contracts)$2.491m


Difference between Actual and Assumed Experience (Life Investments)$2.491m


Total$2.665m



Within the bounds of the third decimal place rounding error, this is in agreement with the $2.664m which is a 'Fair Value Gain on Contingent Consideration.' I don't think this is a co-incidence. While this extra profit is real, I believe it is due to the ups and downs of markets and/or settlements of insurance contracts. These kinds of gains are not sustainable year to year. So the underlying profit for TRA was significantly less than the headline figure quoted. The same can be said for the money made on the 'revaluation gains on investments', 'revaluation gain on investment property' and the 'gain on sale of property plant and equipment'. In my judgement the actual comparable net profit gain, the figure that should be used when comparing results from year to year should be adjusted from the headline figure as follows:

Operating Net Profit = $23.192m - 0.72x$2.664m - ($0.590m+$0.820m+$1.000m) = $19.085m which is 18% lower than the headline figure.

With 84.802m shares on issue at balance date this equates to 'earnings per share' of 22.5cps

At today's trading price of $2.94, this puts TRA on an historical PE of 13.0

That looks 'about right' and shows that at under $3, TRA may not be quite the bargain that some think. Maybe Mr Market knows what he is doing after all?

The other element that must be factored into the 'profit growth' is the ever increasing number of shares on issue. I have added this information into the table below via an 'earnings per share' calculation..



FY2014FY2015
FY2016FY2017FY2018


NPAT (Turners Limited) (A)$3.823m$8.595m$15.332m$16.789m$19.085m


Shareholder Equity (Turners Auctions :TUA)$13.378mm


Shareholder Equity (Dorchester Pacific: DPC)$74.052m


Shareholder Equity (Turners Limited: TNR)$121.002m$129.812m$171.716m$214.323m


Total Combined Shareholder Equity (B)$92.430m$121.002m$129.812m$171.716m$214.323m


Shares on Issue EOFY {C}NM63.077m63.431m74.524m84.802m


eps {A}/{C}NM13.6c24.2c21.8c22.5c


Return On Equity (A)/(B)4.1%7.1%11.8%9.8%8.9%



Note: I have also now normalized the tax treatment of the FY2015 result, as this gives a better basis for comparison.

It is interesting to see that while share price has gone nowhere over the last two years neither has Operating NPAT. And that correlation might not be a co-incidence!

SNOOPY

Big week on the NZX but TNR doesn't even give a small yelp. :(

[janner]

Big week on the NZX but TNR doesn't even give a small yelp. :(

I wonder why ..

[Beagle]

I have now moved on from last year, and am getting very excited waiting for the half year result late November.
Their outlook has been very positive, and I have no doubt they will deliver the goods.


I think you make a good point. Notwithstanding any unusual items for FY18 that needed a thorough forensic analysis, (thank you Snoopy), their FY19 forecast is in the market and represents a forward PE of just 9.7 on 30 cps earnings. Not sure the company is capable of forecasting unusual items so I am going to assume this forecast is ordinary earnings so the shares are fundamentally very good value.
Looking at the yield I have trimmed my expectations slightly to 55% of 30 cps = 16.5 cps for FY19. Grossing this up for full imputation credits gives (16.5 / 0.72) = 22.92 cps. On a SP of just $2.92 this gives a forecast yield of 7.85%.

[percy]

I think you make a good point. Notwithstanding any unusual items for FY18 that needed a thorough forensic analysis, (thank you Snoopy), their FY19 forecast is in the market and represents a forward PE of just 9.7 on 30 cps earnings. Not sure the company is capable of forecasting unusual items so I am going to assume this forecast is ordinary earnings so the shares are fundamentally very good value.
Looking at the yield I have trimmed my expectations slightly to 55% of 30 cps = 16.5 cps for FY19. Grossing this up for full imputation credits gives (16.5 / 0.72) = 22.92 cps. On a SP of just $2.92 this gives a forecast yield of 7.85%.

Thank you for sharing.
I am not sure what to expect.
I did note when their result was announced,[with the unusual items] they were very quick to give outlook guidance.
This guidance is interesting, as it is higher than the two analysts' who cover TRA.
I would guess Turners directors and management know their business,including trading outlook better than the analysts,so the interim result will confirm who is right.
Your 16.5 cps divie is 1 cent higher than current year's 15.5 cps, ie a 6.5% increase,which I am sure is attainable.

[couta1]

Hey come on guys, your forgetting to mention the near dollar increase in SP over the next year.PS-I know it sounds optimistic but watch this space(Not too often though)

[Beagle]

https://www.turnersautogroup.co.nz/site/turnerslimited/files/2018News/Turners%20PDS_28%20August%202018.pdf

Might defer to the other hounds thoughts on this one as he seems to have more time to get his snout deeper into these sort of things.

[winner69]

Hey come on guys, your forgetting to mention the near dollar increase in SP over the next year.PS-I know it sounds optimistic but watch this space(Not too often though)

Yes when it’s 385/400 we’ll be saying ‘always right buying under 3 bucks’

[percy]

Yes when it’s 385/400 we’ll be saying ‘always right buying under 3 bucks’

My only concern with the current share price,is it leaves Turners open for a takeover at $3.50 or under,where I see value at Couta1's $3.85 to $4.00 within the next year or so.
Looking three years out I see no reason why TRA should not trade at over $6.00.ie more than twice the current share price.
The share price will be driven by increasing dividends,eps growth, and PE expansion.

[Beagle]

https://www.marketscreener.com/TURNERS-LTD-20699914/consensus/

I'm feeling a little wee bit of vertigo from this talk of high future prices so perhaps its time to review where the analysts see it going...

[couta1]

https://www.marketscreener.com/TURNERS-LTD-20699914/consensus/

I'm feeling a little wee bit of vertigo from this talk of high future prices so perhaps its time to review where the analysts see it going... Yeah but which analysts are you going to believe, those two or the Percy/Couta/Winner combo.Lol.

[percy]

Yeah but which analysts are you going to believe, those two or the Percy/Couta/Winner combo.Lol.

Backed up by Turners' own guidance.

[winner69]

https://www.marketscreener.com/TURNERS-LTD-20699914/consensus/

I'm feeling a little wee bit of vertigo from this talk of high future prices so perhaps its time to review where the analysts see it going...

Jeez ....those analysts have EPS going nowhere next 2 years

Where’s the eps growth, increased divies that’s going to lead to pe expansion?

[percy]

Jeez ....those analysts have EPS going nowhere next 2 years

Where’s the eps growth, increased divies that’s going to lead to pe expansion?

Read Turners presentations and you will find out.
ps Keep an eye out for Turners' new yard near The Basin Reserve.Should be opening sometime soon.

[trader_jackson]

Jeez ....those analysts have EPS going nowhere next 2 years

Where’s the eps growth, increased divies that’s going to lead to pe expansion?

When the inevitable EPS/DPS etc upgrades occur, can the analysts ensure they don't do it earlier than 1 October?
Please don't get Mr Market excited yet - I want some cheap shares from my bond conversion.

[Beagle]

Jeez ....those analysts have EPS going nowhere next 2 years

Where’s the eps growth, increased divies that’s going to lead to pe expansion?
They are forecasting zero growth this year, 29.9 / 28.6 = 4.5% growth in Fy20 and 32.8 / 29.9 = 9.7% growth in EPS for 2021
6.36% net dividend yield for 2021 grossed up for full imputation credits is 8.83% gross.

The brokers target price of $3.32 a year hence seems fair and reasonable to me. In the meantime people are being rewarded for their patience with a 7.85% gross yield which is pretty good.

Disc: Modest stake & converting modest stake in bonds to shares. Upon conversion my stake will still be a modest part of my listed portfolio of assets.

[peat]

Using containers as offices is a brilliant move.Fantastic signage area,and easily moved,giving TRA the agility to make use of great temporary prime sites.

Take note Spark: true AGILE :p

The technical picture for TRA needs to improve quickly. Positive price action required about now.
9888

[percy]

Take note Spark: true AGILE :p

The technical picture for TRA needs to improve quickly. Positive price action required about now.
9888

"Will do."...
Maybe it will come once;
the TRAHBs have been converted,
a trading update,
when the interim is announced in November.

[Snoopy]

Spend the big money.Get it leather bound.
The more you spend,the more you will appreciate it.
Should you wear it out,by over fondling it, you can go on line and print off another one.…..lol.


Prepare for some of the best bargain saving advice ever dished out on this thread.....

I was on the way down to the book binder with the leaves of my once stapled Turners annual report in hand, just as Percy suggested. I was contemplating the colour of the leather I wanted, the hand stitched finish on the border and the font for the hand engraving on the front when I called into Whitcoulls. There on the bottom shelf was a plastic folder with a slide on plastic spine marked down from $2.50 to just 50c! Bought it in see through blue plastic. Mounted the pages and all are now held tight. It looks so good finished in blue. The added bonus of the water resistance means I reckon I could now take it surfing. Perfect reading for between waiting for the right wave.

Saving on the normal Whitcoulls price : 80%!
Saving on the $300 quote from leather finished hand etched custom bound edition I was planning: 99.83%!

These kind of savings means even a pensioner could afford to do this. For a business person, the 99.83% saving would earn a big tick from their accountant. And if you were a retired accountant, the cost saving would send you delirious! Don't spend all your savings at once folks!

SNOOPY

[Beagle]

Prepare for some of the best bargain saving advice ever dished out on this thread.....

I was on the way down to the book binder with the leaves of my once stapled Turners annual report in hand, just as Percy suggested. I was contemplating the colour of the leather I wanted, the hand stitched finish on the border and the font for the hand engraving on the front when I called into Whitcoulls. There on the bottom shelf was a plastic folder with a slide on plastic spine marked down from $2.50 to just 50c! Bought it in see through blue plastic. Mounted the pages and all are now held tight. It looks so good finished in blue. The added bonus of the water resistance means I reckon I could now take it surfing. Perfect reading for between waiting for the right wave.

Saving on the normal Whitcoulls price : 80%!
Saving on the $300 quote from leather finished hand etched custom bound edition I was planning: 99.83%!

These kind of savings means even a pensioner could afford to do this. For a business person, the 99.83% saving would earn a big tick from their accountant. And if you were a retired accountant, the cost saving would send you delirious! Don't spend all your savings at once folks!

SNOOPY

:lol: :lol:...I can top that. You can just file it away with staple intact and let someone else do all the hard analysis saving even more money and time. Even a beagle sometimes thinks why bark when you've got a dog :)

[percy]

Prepare for some of the best bargain saving advice ever dished out on this thread.....

I was on the way down to the book binder with the leaves of my once stapled Turners annual report in hand, just as Percy suggested. I was contemplating the colour of the leather I wanted, the hand stitched finish on the border and the font for the hand engraving on the front when I called into Whitcoulls. There on the bottom shelf was a plastic folder with a slide on plastic spine marked down from $2.50 to just 50c! Bought it in see through blue plastic. Mounted the pages and all are now held tight. It looks so good finished in blue. The added bonus of the water resistance means I reckon I could now take it surfing. Perfect reading for between waiting for the right wave.

Saving on the normal Whitcoulls price : 80%!
Saving on the $300 quote from leather finished hand etched custom bound edition I was planning: 99.83%!

These kind of savings means even a pensioner could afford to do this. For a business person, the 99.83% saving would earn a big tick from their accountant. And if you were a retired accountant, the cost saving would send you delirious! Don't spend all your savings at once folks!

SNOOPY

Snoopy.
I am very proud of you.
50 cents must be the "bargain of the year."
Trust you spent $2.00 and brought four,so you are "well positioned" for the next three year's reports.!

[Beagle]

Just 50% of bondholders elect to convert to shares. Chairman Grant Baker tells us this shows the confidence that bondholders have in the future of Turners.
https://www.nzx.com/announcements/323173
Actually I think it tells a story of relative confidence as he very conveniently overlooks the fact that last time the bond conversion happened 2 years ago 75% of bondholders converted to shares. This lower level of confidence in my opinion is reflective of the lack of EPS growth.
There a LOT of work to do to improve shareholder confidence in my opinion. They needs to start stringing together year on year genuine EPS growth.

Given the very poor SP performance over the last year I think they should be pleased with 50%.

[minimoke]

Just 50% of bondholders elect to convert to shares. Chairman Grant Baker tells us this shows the confidence that bondholders have in the future of Turners.
https://www.nzx.com/announcements/323173.
Initial response from market sems positive with a 4 cent bounce. Just what i need for my month end accounts.

[percy]

Funny old world.
I guess if TRA share price was over $3.75..... 75% to 90% of bond holders would show "real confidence" and convert their bonds to shares.
As a shareholder I am "over the moon" just 50% of bond holders will convert.Fewer shares issued suits me,as it makes it easier for TRA to achieve higher ROE, EPS,and dividend growth..
Turners have a strong balance sheet and have enough [including new issue of bonds] avenues of funding to source cheap funds, while interest rates are set to remain low.

[Beagle]

You can't compare a company that's grown EPS 45% per annum on average for six years with Turners. You can compare Colonial Motors with Turners.
I think the issue is that Turners MUST stop issuing new shares to fund their growth. I calculated on the weekend just approx. 4.5% eps growth forecast for FY19 this year because the estimated weighted average number of shares on issue for FY19, (assuming half bondholders convert to shares) is considerably higher than FY18. Maybe in FY20 they can grow organically and generate some decent eps growth without even more shares on issue or maybe this government sends us down a rat hole into a deep recession, who knows, but I think that's why the shares are trading on a forward PE of just 9.75. Maybe a bit cheap but try telling Colonial Motors shareholders that.

Posted 21 August, (before the doctor prescribed me another course of Vitamin D tablets). Not too shabby with that estimate.

On the other matter we'll be alright for FY19 now...the glass is definitely half full now because Chris and Cindy are all friendly and cozy and just the appearance of the Govt listening to business will be enough to sweep the problem under the carpet for another year.

Yes Percy if the SP had of been $4.50 or so for some "strange reason" you might have seen nearly all bondholders convert to shares :)

[RTM]

Just 50% of bondholders elect to convert to shares. Chairman Grant Baker tells us this shows the confidence that bondholders have in the future of Turners.
https://www.nzx.com/announcements/323173
Actually I think it tells a story of relative confidence as he very conveniently overlooks the fact that last time the bond conversion happened 2 years ago 75% of bondholders converted to shares. This lower level of confidence in my opinion is reflective of the lack of EPS growth.
There a LOT of work to do to improve shareholder confidence in my opinion. They needs to start stringing together year on year genuine EPS growth.

Given the very poor SP performance over the last year I think they should be pleased with 50%.

I bought on market instead of converting. Still confident they will do well.

[Snoopy]

Here is my update of background information that feeds into my divisional analysis, which I intend to use again. The first column is taken from the Segmented Information as presented in the annual report.



Divisional Asset Allocation FY2017


AssetsElimination Assets ReallocatedCorporate Assets Reallocated


Automotive Retail$134.16m18.60%$103.53m29.49%$164.16m


Finance$320.73m44.47%$247.51m70.51%$392.47m


Corporate & Other$266.40m36.93%$205.59m


Sub Total$721.30m


Eliminations[/TD]-$164.67m


Total$556.63m100.00%$556.63m100.00%$556.63m



Note that the 'finance' header in this instance also incorporates the insurance and debt collection divisions.


Here is my update of background information that feeds into my divisional analysis, which I intend to use again. The first column is taken from the Segmented Information as presented in the annual report.



Divisional Asset Allocation FY2018


AssetsElimination Assets ReallocatedCorporate Assets Reallocated


Automotive Retail$152.01m17.68%$115.20m27.09%$176.57m


Finance$409.09m47.56%$310.01m72.91%$475.16m


Corporate & Other$298.91m34.76%$226.53m


Sub Total$859.99m


Eliminations[/TD]-$208.21m


Total$651.73m100.00%$651.73m100.00%$651.73m



Note that the 'finance' header in this instance also incorporates the insurance and debt collection divisions. This is a 'building block' post used to derive divisional shareholder equity.


SNOOPY

[Snoopy]

Divisional Liability Allocation FY2017


LiabilitiesElimination Liabilities ReallocatedCorporate Liabilities Reallocated


Automotive Retail$103.82m26.89%$103.49m33.82%$130.18m


Finance$203.17m52.61%$202.52m66.18%$254.74m


Corporate & Other$79.17m20.50%$78.91m


Sub Total$386.16m


Eliminations[/TD]-$1.24m


Total$384.92m100.00%$384.92m100.00%$384.92m



Note that the 'finance' header in this instance also incorporates the insurance and debt collection divisions.




Divisional Liability Allocation FY2017


LiabilitiesElimination Liabilities ReallocatedCorporate Liabilities Reallocated


Automotive Retail$115.07m23.97%$104.85m29.46%$128.86m


Finance$275.52m62.99%$251.06m70.54%$308.55m


Corporate & Other$89.44m18.63%$81.50m


Sub Total$480.04m


Eliminations[/TD]-$42.63m


Total$437.41m100.00%$437.41m100.00%$437.41m



Note that the 'finance' header in this instance also incorporates the insurance and debt collection divisions. This is a 'building block' post used to derive divisional shareholder equity.

SNOOPY

[Snoopy]

Divisional EBIT Allocation FY2017


EBTRevenueEBT Corporate Reallocated (A)Interest ExpenseLiabilitiesCorporate Interest Expense Reallocated (B)EBIT: (A)+(B)


Automotive Retail$11.936m72.77%$6.046m$3.052m33.82%$3.838m$9. 884m


Finance$20.790m27.23%$18.585m$5.972m66.18%$7.512m
$26.097m


Corporate & Other-$8.095m$2.327m


Sub Total$24.631m


Eliminations[/TD]$0m


Total$24.631m100.00%$24.631m$11.350m100.00%$11.350 m$35.981m







Divisional EBIT Allocation FY2018


EBTRevenueEBT Corporate Reallocated (A)Interest ExpenseLiabilitiesCorporate Interest Expense Reallocated (B)EBIT: (A)+(B)


Automotive Retail$12.304m64.67%$6.514m$3.428m29.46%$4.226m$10 .740m


Finance$27.781m35.33%$24.619m$8.232m70.54%$10.118m
$34.737m


Corporate & Other-$8.952m$2.673m


Sub Total$31.133m


Eliminations[/TD]$0m


Total$31.133m100.00%$31.133m$14.344m100.00%$14.344 m$45.477m



Notes:

1/ Turners use thew term 'Operating Earnings' to mean EBT. To calculate divisional EBIT, we have to allocate the interest expense between divisions. This I have done in proportion to divisional liabilities.

2/ EBT figures from the 'segmented results' in the annual report do not correspond to the EBT figures in this table. This is because I have takn my esitmate of 'finance EBT' earned in the Automotive Division and added those to the Finance Division. Turners themselves have said they will we doing this from FY2019. By doing this in advance of what Turners themselves will do, it will make for more appropriate comparatives in the future.

3/ A substantial amount of the improvement in Finance EBT year on year is because of the 'Autosure' insurance acquisition.

SNOOPY

[Snoopy]

TRA for FY2017


AssetsLiabiliitiesShareholder EquityInterest ExpenseNPATROE


Automotive Retail (FY2017)$164.16m$130.18m$33.98m$3.84m$4.353m12.8%


Finance, Insurance & Collection Services (FY2017)$392.47m$254.74m$137.73m$7.51m$13.382m9.72 %


Divisional Total (FY2017)$556.63m$384.92m$171.71m$11.35m$17.73m10.3 %



Care needs to be taken when interpreting these figures, taken from the Annual Report of FY2017. The assets and liabilities are end of year figures. So they aren't necessarily representative of the assets and liabilities that were on the books through the year because two major acquisitions:

1/ 'Buy Right Cars' (29th July 2016), now part of 'Automotive Retail'
2/ 'Autosure' (31st March 2017), which I have grouped into 'Finance' above.

With 'Autosure' in particular, this came onto the Turners books on 31st March 2017. Yet no earnings for this business contributed to the 'Finance Division' result because 31st March 2017 was also the balance date. Thus the apparent sharp deterioration in 'Finance ROE' for the year is not what it seems.



The 'assets' sand 'liabilities' in this post have been taken from posts 2791 and 2792 respectively.
The interest expense figurs have been taken from post 2793
The NPAT figures have been calculated by multiplying the EBT 'Corporate Reallocated' figure from post 2793 by 0.72 (representing a tax rate of 28%).



TRA for FY2018


AssetsLiabiliitiesShareholder EquityInterest ExpenseNPATROE


Automotive Retail (FY2017)$176.57m$128.86m$47.71m$4.226m$4.690m9.83%


Finance, Insurance & Collection Services (FY2018)$475.16m$308.55m$166.61m$10.118m$17.726m10 .6%


Divisional Total (FY2018)$651.73m$437.41m$214.32m$14.344m$22.416m10 .5%



Note that the expected earnings and ROE improvements expected from incorporating the earnings contributions of 'Autosure' for the first time has occurred.

SNOOPY

[Snoopy]

In recognition of TNR being a hybrid company, I am now performing the EBIT to Interest expense test on the finance section of TNR only (my post 1477).

Updating for the FY2017 financial year (ended 31-03-2017)

The underlying interest expense is shown under note 7 (AR2017) to be $11.350m. Of this ( $11.350m x 0.6618= ) $7.511m can be applied to the finance division.

The underlying EBT for the finance division may be found in the same post.

(EBT +Interest Expense)/(Interest Expense) = [$18.585m+$7.511m]/$7.511m = 3.47 > 1.2

=> Pass Test


It is now time to give the Turners Finance division the same scrutiny it would have if it was a bank. Turners Finance isn't a bank, so there is no real world consequence for failing any of these tests. Nevertheless I think they are worth doing to see how 'Turners Finance' stacks up to some of the separately operating finance companies that do have to withstand the scrutiny of such tests.

In recognition of TRA being a hybrid company, I am performing the EBIT to Interest expense test on the finance section of TRA only (my post 2793).

Updating for the FY2018 financial year (ended 31-03-2018)

The underlying interest expense is shown under note 7 (AR2018) to be $14.344m. Of this ( $14.344m x 0.7054= ) $8.232m can be applied to the finance division.

The underlying EBT for the finance division may be found in the same post.

(EBT +Interest Expense)/(Interest Expense) = [$24.619m+$8.232m]/$8.232m = 3.99 > 1.2 (the test standard)

=> Pass Test

SNOOPY

[Snoopy]

To ensure liquidity over the next twelve months, management has the ability to move resources between divisions. So despite this measure being of primary interest in sizing up financial companies, I believe it is more correct to study the TNR group as a whole. The current account information that I seek is in the FY2017 annual report, but it is scattered. Let's see what happens when I bring it all together again.



Financial Assets0-12 monthsReference


Cash & Cash Equivalents$69.069m AR2017 p38


Financial Receivables Contractural Maturity$99.349m AR2017 p62


Reverse Annuity Mortgages$1.892m AR2017 p65 Note 16


Total Current Resources$170.310m (addition)


Financial Liabilities0-12 monthsReference


Current Liabilities$18.750m+$50.998mAR2017 p51


Total Current Liabilities$69.748m (addition)



What we have here is an on paper 'theoretical' current shortfall of:

$69.748m - $170.310m = -$100.562m

A 'negative shortfall' is in fact a surplus, and that is superficially a very healthy position to be in with this test's twelve month (current) time horizon.
I say 'theoretical' because I have based this forecasted cashflow deficit on contracted maturity of financial receivables and historically negotiated repayment of bank borrowings. In fact many of these 'contracted receivables' can be rolled over, if a new car is bought on finance to replace the old one (for example). It is also true that the planned repayment of bank borrowings can be renegotiated and retimed. This means that the actual cash surplus will very likely be greater than the $100.562m that I have predicted.


The test I am asking TNR to meet is a follows: Over the twelve months from balance date:-

[(Contracted Cash Inflow) + (Other cash Available)] > 1.1 x (Contracted Cash Outflow)

=> ($170.310m + $'X'm) > 1.1 x $69.178m
=> $170.310m > $76.096m (this is true)

The theoretical extra cash available " $ 'X'm from a net sell down of car inventory and retaining more earnings rather than paying dividends I haven't even bothered to calculate this year. The contracted cash position is so strong that it would be a waste of time showing that even more cash could be raised.

This is a huge turnaround from FY2016, and a very strong 'pass'


To ensure liquidity over the next twelve months, management has the ability to move resources between divisions. So despite this measure being of primary interest in sizing up financial companies, I believe it is more correct to study the TNR group as a whole. The current account information that I seek is in the FY2018 annual report, but it is scattered. Let's see what happens when I bring it all together again.



Financial Assets0-12 monthsReference


Cash & Cash Equivalents$25.415m AR2018 p30


Financial Receivables Contractural Maturity$144.001m AR2018 p56


Reverse Annuity Mortgages$0m AR2018 p58 Note 16


Total Current Resources$169.416m (addition)


Financial Liabilities0-12 monthsReference


Current Liabilities$88.066m+$30.690mAR2018 p44


Total Current Liabilities$110.756m (addition)



What we have here is an on paper 'theoretical' current shortfall of:

$110.756m - $169.416m = -$58.660m

A 'negative shortfall' is in fact a surplus, and that is superficially a very healthy position to be in with this test's twelve month (current) time horizon.
I say 'theoretical' because I have based this forecasted cashflow deficit on contracted maturity of financial receivables and historically negotiated repayment of bank borrowings. In fact many of these 'contracted receivables' can be rolled over, if a new car is bought on finance to replace the old one (for example). It is also true that the planned repayment of bank borrowings can be renegotiated and retimed. This means that the actual cash surplus will very likely be greater than the $58.660m that I have predicted.


The test I am asking TNR to meet is a follows: Over the twelve months from balance date:-

[(Contracted Cash Inflow) + (Other cash Available)] > 1.1 x (Contracted Cash Outflow)

=> ($169.416m + $'X'm) > 1.1 x $110.756m
=> $169.416m > $121.832m (this is true)

The theoretical extra cash available " $ 'X'm from a net sell down of car inventory (say) and retaining more earnings rather than paying dividends I haven't even bothered to calculate this year. The contracted cash position is so strong that it would be a waste of time showing that even more cash could be raised.

This 12 month outlook for the net maturity of cash, while not quite as strong as FY2016, is nevertheless still strong.

Turners earn a strong 'pass' on this test. Or as dear old Colin would have said "solid as", except this time he would be right!

SNOOPY

[Snoopy]

I am continuing my analysis this year so that the financial statistics that I am evaluating are applied only to the financial division of the company.

I am applying a 'banking covenant' to a non-bank. While not a legal requirement for TNR, this is to enable a comparison with other listed entities in the finance sector (real banks like Heartland for instance ;-) ), so please bear with me. The data below may be found in the 'Consolidated Statement of Financial Position' (AR2017, p38), and my post 1470 on asset allocation.

Tier 1 capital > 20% of the loan book.

(Turners Group (Finance Division) has only Tier 1 capital for these calculation purposes.)

Tier 1 Capital = (Shareholder Equity) - (Intangibles: less Turners Auctions Intangibles)
= (0.7051x$171.716m) - ($172.088m -$45.600 -$22.859)
= $17.448m

The money to be eventually repaid to the company (assets of the company) can be found as assets on the balance sheet. This is the sum total of:

1/ 'Financial Assets at fair value through profit or loss': $10.320m
2/ 'Finance Receivables': $207.143m
3/ 'Receivables and deferred expenses': 0.7051 x $8.489m
4/ 'Reverse annuity mortgages': $9.222m

For the FY17 year these come to $232.678m

$17.448m > 0.2 x $232.678m = $46.536m (false)

=> Fail Test



I am continuing my analysis this year so that the financial statistics that I am evaluating are applied only to the financial division of the company.

I am applying a 'banking covenant' to a non-bank. While not a legal requirement for TNR, this is to enable a comparison with other listed entities in the finance sector (real banks like Heartland for instance ;-) ), so please bear with me. The data below may be found in the 'Consolidated Statement of Financial Position' (AR2018, p30), and my post 2794 on asset allocation.

Tier 1 capital > 20% of the loan book.

(Turners Group (Finance Division) has only Tier 1 capital for these calculation purposes.)

Tier 1 Capital = (Shareholder Equity) - (Intangibles: less Turners Auctions and Buy Right Cars Intangibles{*))
= (0.7291x$214.323m) - ($170.982m -$45.600 -$22.859 -$10.860m)
= $64.600m

(*) Note these intangibles belong to the 'Automotive Retail' Division

The money to be eventually repaid to the company (assets of the company) can be found as assets on the balance sheet. This is the sum total of:



1/ 'Financial Assets at fair value through profit or loss': $53.378m


2/ 'Finance Receivables': $289.799m


3/ 'Other Receivables and deferred expenses':0.7291 x $11.747m


4/ 'Reverse annuity mortgages':$9.997m


For the FY2018 year these come to$361.739m



$64.600m > 0.2 x $361.739m = $72.348m (false)

=> Fail Test

One intangible included in this list is $11.752m relating to the Acquisition of 'Autosure'. Because this is so recent and it is contributing to Turners result to expectations, I believe this goodwill could easily be converted back to cash should Autosure be on sold. If this were done, Turners would pass this test. This means that subject to Autosure continuing to perform in the future for Turners, I don't think we shareholders should be that concerned about this test failure. Nevertheless I would describe Turners Automotive Group as 'adequately capitalised' rather than 'well capitalised' as a result of this test.

SNOOPY

[Snoopy]

Turners is free to negotiate with its parent bankers on what is a suitable level of funding for the company. It seems inconceivable that they would negotiate their own loan package in a way that would put their own 'funding core' at risk. So we can use the information we have combined with a 'rule of thumb' to calculate an appropriate sized funding core.

The table below has taken items from the balance sheet (marked (1)). I have written the table with all the pieces adding up to a whole. However, the table has largely been constructed in a reverse way. That means starting with 'the whole' then figuring out a way to allocate 'the whole' to the separate constituent pieces.



[AssetsLiabilitiesShareholder Equity


[Finance (Not Underlying)$185.326m (3)-$166.793m (4)=$18.533m (6)


[Underlying Finance$207.143m (1)-$87.948m (5)=$119.195m (6)


[Finance Sub Total$392.469m (*)-$254.741m (*)=$137.728m (2)


[Automotive Retail$164.164m (*)-$130.176m (*)=$33.988m (2)


[Balance Sheet Total (All)$556.633m (1)-$384.917m (1)=$171.716m (1)



(*) These items are from my off-line 'segmented' spreadsheet. Assets/Liabilities are sized in proportion to segmented balance sheet information, but with eliminations and corporate costs apportioned between the 'automotive retail' and 'all other finance' divisions.

Calculation (3) allows us to work out the core assets not related the underlying finance contracts of the business (everything else apart from the receivables book) by simple subtraction. The finance company 'rule of thumb' for their core is to ensure that:

(Non-Risk Liabilities)/(Non-Risk Assets) < 0.9

From this, we can work out that the Non-Risk Liabilities must be no more than:

(Non-Risk Assets) x 0.9 = $185.326m x 0.9 = $166.793m (which is answer 4 above).

Simple subtraction and addition is then used to work out the rest of the numbers in the table.

So what's the point of this so far?

By working out the minimum size of the business core (as measured by assets and liabilities), that means we can measure how well the rest of the business is set up to do the customer lending, the bit that actually generates the profits for the Turners Finance division. This is done by looking at the assets and liabilities left outside the core.

Implied Available Financing Gearing ratio
= (At Risk Liabilities)/(At Risk Assets)
= $87.948m/$207.143m
= 42.5%

Generally you would want to match your 'At Risk Liabilities' with your 'At Risk Assets'. This particular match looks acceptably conservative. But how does it compare with other listed finance entities? Rather better than the 64.3% that I have calculated for 'Geneva Finance' for FY2017 as it turns out. In practical terms, one might take this to mean that Turners has the capacity to expand their finance business loan book at a greater rate than Geneva, without issuing new capital. Not saying I wouldn't buy Geneva. But on this measure TNR looks better, which might be one reason why it trades on a higher PE than Geneva.


The underlying gearing ratio of a lending company is much more obvious when that company takes in deposits as well. In the case of TRA all of the 'deposit' funding is provided by their banking arrangements. Turners is free to negotiate with its parent bankers on what is a suitable level of funding for the core of the company. It seems inconceivable that they would negotiate their own loan package in a way that would put their own 'funding core' at risk. So we can use the information we have combined with a 'rule of thumb' to calculate an appropriate sized funding core.

The table below has taken items from the balance sheet (marked (1)). I have written the table with all the pieces adding up to a whole. However, the table has largely been constructed in a reverse way. That means starting with 'the whole' then figuring out a way to allocate 'the whole' to the separate constituent pieces. I start with filling in the number (1)s, then use arithmetic to calculate number (2)s. I keep on 'counting' the remaining numbers so that the table is filled in, in numerical order.



[AssetsLiabilitiesShareholder Equity


[Finance (Not Underlying)$185.368m (3)-$166.831m (4)=$18.537m (6)


[Underlying Finance$289.799m (1)-$141.715m (5)=$148.804m (6)


[Finance Sub Total$475.167m (*)-$308.546m (*)=$166.621m (2)


[Automotive Retail$176.565m (*)-$128.863m (*)=$47.702m (2)


[Balance Sheet Total (All)$651.732m (1)-$437.409m (1)=$214.323m (1)



(*) These items are from my off-line 'segmented' spreadsheet. Assets/Liabilities are sized in proportion to segmented balance sheet information, but with eliminations and corporate costs apportioned between the 'automotive retail' and 'all other finance' divisions.

Calculation (3) allows us to work out the core assets not related the underlying finance contracts of the business (everything else apart from the receivables book) by simple subtraction. The finance company 'rule of thumb' for their core is to ensure that:

(Non-Risk Liabilities)/(Non-Risk Assets) < 0.9

From this, we can work out that the Non-Risk Liabilities must be no more than:

(Non-Risk Assets) x 0.9 = $185.368m x 0.9 = $166.831m (which is answer 4 above).

Simple subtraction and addition is then used to work out the rest of the numbers in the table.

So what's the point of this so far?

By working out the minimum size of the business core (as measured by assets and liabilities), that means we can measure how well the rest of the business is set up to do the customer lending, the bit that actually generates the profits for the Turners Finance division. This is done by looking at the assets and liabilities left outside the core.

Implied Available Financing Gearing ratio
= (At Risk Liabilities)/(At Risk Assets)
= $141.715m/$289.799m
= 48.9%

Generally you would want to match your 'At Risk Liabilities' with your 'At Risk Assets'. The 'at Risk Assets' is another way of saying the 'finance receivables loan book'. The less borrowings you have to support the loan book, the more resilient your operation will be in a downturn. But there is another way to look at this. The less borrowings you have, the more restricted the size of the financial receivables loan book - you are not working the borrowing capacity to maximise the size of your loan book and hence maximise your returns. The greater the utilisation of your 'borrowing capacity' the greater the potential return, but also the greater the potential risk in a downturn. The fact that the at risk liabilities have increased as a percentage of the at risk assets over the year suggests to me that the Turners lending policy has become more conservative compared to FY2017.

SNOOPY

[blackcap]

Those director fees increases a bit hard to take if you ask me..

see notice of meeting. I can understand some of the justification like extra director but in some cases they want to double the amount.
I will probably vote AGAINST this resolution.

[winner69]

Those director fees increases a bit hard to take if you ask me..

see notice of meeting. I can understand some of the justification like extra director but in some cases they want to double the amount.
I will probably vote AGAINST this resolution.

Read this and they probably deserve even more than requested

Greedy bastards in the pigs trough (I can use that phrase because they are all boys)

https://www.turnersautogroup.co.nz/site/turnerslimited/files/AR2018/Strategic%20Pay_Directors'%20Fee%20Review.pdf

[percy]

Those director fees increases a bit hard to take if you ask me..

see notice of meeting. I can understand some of the justification like extra director but in some cases they want to double the amount.
I will probably vote AGAINST this resolution.
I have never seen a review that has not recommended increases."He who pays the piper calls the tune."
As the directors have a great deal of skin in the game I think they are double dipping,which should not be encouraged.
Wonder what they have against the DPL Insurance Chair ?

[Beagle]

Very poor timing with the SP deep in the toilet. Directors fees seem very similar to those at AIR and SUM, companies with a vastly bigger footprints and more complex operations. Greedy pigs sums it up perfectly....suppose you'd expect that from a company that's selling used cars. Zero EPS growth but plenty of directors fees growth...Hmmmmm
I think they should defer any increase until they deliver real EPS growth, (not EPS growth contrived by extraordinary items)

[blackcap]

Very poor timing with the SP deep in the toilet. Directors fees seem very similar to those at AIR and SUM, companies with a vastly bigger footprints and more complex operations. Greedy pigs sums it up perfectly....suppose you'd expect that from a company that's selling used cars. Zero EPS growth but plenty of directors fees growth...Hmmmmm
I think they should defer any increase until they deliver real EPS growth, (not EPS growth contrived by extraordinary items)

Lets all vote against to at least send a message that some retail s/h do not like it. If we even get a 10% against vote that will tell them something.

[Beagle]

Lets all vote against to at least send a message that some retail s/h do not like it. If we even get a 10% against vote that will tell them something.

Agree 100%.

[RTM]

Lets all vote against to at least send a message that some retail s/h do not like it. If we even get a 10% against vote that will tell them something.

Maybe they have some extra good news for all shareholders at the coming meeting.
Yes, share price is disappointing.

[percy]

Lets all vote against to at least send a message that some retail s/h do not like it. If we even get a 10% against vote that will tell them something.

The best fun is to appoint the chairman as your proxy,and instruct him to vote against the increase....lol.

[percy]

Maybe they have some extra good news for all shareholders at the coming meeting.
Yes, share price is disappointing.

Be fools to ask for an increase if they have not.!

[JayRiggs]

This is outrageous! Asking for a doubling of director fees when they've delivered very poor shareholder value (relative to the NZX50).
They don't deserve anything until they can get the share price up by at least 25% to make up for the under performance of the past year. And even that is being generous I believe.
I will be voting NO.

[Snoopy]

Those director fees increases a bit hard to take if you ask me..




Greedy bastards in the pigs trough (I can use that phrase because they are all boys)




I have never seen a review that has not recommended increases."He who pays the piper calls the tune."
As the directors have a great deal of skin in the game I think they are double dipping,which should not be encouraged.




Very poor timing with the SP deep in the toilet. Directors fees seem very similar to those at AIR and SUM, companies with a vastly bigger footprints and more complex operations. Greedy pigs sums it up perfectly...


A predictable reaction? I know the percentage increase sounds a lot, but there are real risks to being a director these days. Does the board have the skills to manage their way through a GFC mk2? Not sure I would want to be a director for $55k when the risk is there to be sued for zillions. The main complaint that I can see is the share price. But what do you expect the directors to do about that? Tell the senior staff to go on a nationwide road show?

You guys should just buy up a whole lot more shares! That should fix things!


The best fun is to appoint the chairman as your proxy,and instruct him to vote against the increase....lol.

Surely not as much fun as turning up in fancy dress as a discontented rabble with protest signs?

SNOOPY

[blackcap]

A predictable reaction? I know the percentage increase sounds a lot, but there are real risks to being a director these days. Does the board have the skills to manage their way through a GFC mk2? Not sure I would want to be a director for $55k when the risk is there to be sued for zillions.

SNOOPY


Covered by directors liability insurance is it not?

What are the extra risks involved?

What are the H&S risks? All they do is sell cars. Have no real responsibility towards people except their staff. (vs say AIR passengers, or RYM patients etc)

[minimoke]

How big was Strategic Pays sample size. Seems to me recommended increase way out of line.

[couta1]

This is outrageous! Asking for a doubling of director fees when they've delivered very poor shareholder value (relative to the NZX50).
They don't deserve anything until they can get the share price up by at least 25% to make up for the under performance of the past year. And even that is being generous I believe.
I will be voting NO. It's a NO to the Troughers from me.

[winner69]

They need a roadshow to justify it shareholders

But then it’s a done deal anyway

[Beagle]

It's a NO to the Troughers from me.

https://www.youtube.com/watch?v=3JxSLnvxP0w

[minimoke]

Very poor timing with the SP deep in the toilet. Directors fees seem very similar to those at AIR )
AirNZ Revenue $5,485m, TUA Revenue $325m
AirNZ Assets $7,846m TUA Assets $625m

AirNZ Board Member fee $100,000, Recommended TUA fee $70-$80,000


Colonial Motors Revenue $854m, TUA Revenue 325m
Colonial Assets $316m TUA Assets $625m

Colonial Board fee $51,500, Recommended TUA fee $70-$80,000

[Snoopy]

https://www.youtube.com/watch?v=3JxSLnvxP0w


A sure way to humble your superiors is to secretly film them in their birthday suits! I didn't realise that Grant Baker had such short legs and arms. He would probably need prosthetic extensions to able to drive his collection of Ferraris safely? Surely a near doubling of directors fees would be a sound investment in that light, to make sure he got back to the directors table safely after each track day?

SNOOPY

[Joshuatree]

LOL:t_up: Good one Snoopy.

[minimoke]

Given share price has gone nowhere over the past two years I think we'll find the Directors wont even put this on the agenda. No compelling reason why their fees should go somewhere if SP hasnt.

[blackcap]

Given share price has gone nowhere over the past two years I think we'll find the Directors wont even put this on the agenda. No compelling reason why their fees should go somewhere if SP hasnt.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/323249/285985.pdf

Its already there, resolution 5 to increase directors pool from $440k to $665k.

[minimoke]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/323249/285985.pdf

Its already there, resolution 5 to increase directors pool from $440k to $665k.
Maybe they'll have the decency of removing it.

[Beagle]

Maybe they'll have the decency of removing it.

I wouldn't hold your breath mate.

[Snoopy]

Another year goes by and now we have four separate annual perspectives to consider.



Turners


Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOFY2014$2.960m$37.692m7.85%-$0.532m-$1.452m$43.212m1.23%3.36%


EOFY2015$3.182m$143.365m2.22%-$1.607m-$1.375m$150.351m1.07%0.94%


EOFY2016$5.129m$168.889m3.04%-$1.041m-$1.041m$175.675m0.59%0.59%


EOFY2017$1.331m$207.143m0.64%-$2.025m-$1.442m$213.130m0.95%0.68%



Total-$5.205m-$5.310m


Average0.96%1.39%



'Stressed Loans' in the context of Turners as follows (figures given are calculations from the Annual Report of that Year, 'b' being a subsequent year retrospective):



Financial Year2014b201520162017


Impaired Loans Past due for 90+ days$4.740m$5.572m$5.939m$3.516m


plus Impaired Loans Less than 90 days due$0m$0m$0.461m$0.485m


plus Not Impaired Loans Past due for 90+ days$3.637m$4.012m$4.417m$2.583m


plus Not Impaired Loans Past due for 60 to 90 days$0.103m$0.584m$1.088m$0.775m


less Specific Impairment Provision-$2.061m-$2.505m-$1.952m-$0.973m


less Collective Impairment Provision-$3.459m-$4.481m-$4.824m-$5.055m


equals Total$2.960m$3.182m$5.129m$1.331m






Heartland


Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOFY2013$48.974m$1,961.402m2.50%-$22.567m-$13.660m$2,060.867m1.10%0.66%


EOFY2014$49.654m$2,566.039m1.94%-$5.895m-$38.518m$2,631.754m0.22%1.46%


EOFY2015$39.066m$2,829.246m1.38%-$12.105m-$4.891m$2,893.724m0.42%0.17%


EOFY2016$37.851m$3,113.957m1.21%-$13.501m-$18.663m$3,140.105m0.43%0.59%


EOFY2017 (*)$38.324m$3,545.897m1.08%-$15.015m-$11.671m$3,575.613m0.42%0.33%


Total-$40.567m-$57.069m


Average0.52%0.64%



(*) Results listed from EOY Disclosure Statement, pending the release of the full annual report.

'Stressed Loans' in the case of Heartland are defined as follows:



Financial Year20132014201520162017


Loans at least 90 days past due$26.598m$34.034m$34.975m$21.967m$35.629m


plus Loans individually impaired$69.301m$27.617m$25.622m$33.764m$28.578m


plus Restructured Assets$3.566m$4.064m$3.881m$3.281m$0m


less Provision for Impairment-$50.491m-$16.061m-$25.412m-$21.161m-$25.865m


equals Total$48.974m$49.654m$39.066m$37.851m$38.324m





UDC


Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOFY2013$86.887m$2,161.193m4.02%-$7.123m-$12.339m-$3.745m$2,198.653m0.32%0.73%


EOFY2014$95.444m$2,344.131m4.07%-$11.733m-$18.633m+$3.300m$2,375.936m0.49%0.65%


EOFY2015$82.267m$2,429.695m3.39%-$10.427m-$12.162m-$0.659m$2,421.224m0.43%0.53%


EOFY2016$85.475m$2,721.710m3.14%-$7.418m-$11.055m+$1.297m$2,750.619m0.27%0.35%


Total-$36.701m-$53.996m


Average0.38%0.57%





Financial Year2013201420152016


Take loan total from categories 7 and 8$87.054m$92.366m$81.156m$96.727m


add 'Default' loans$37.293m$34.883m$32.640m$17.657m


less Provision for Credit Impairment-$37.46m-$31.805m-$31.529m-$28.909m


equals Total$86.887m$95.444m$82.267m$85.475m





Another year goes by and I think it pertinent to look at the subject of 'loan impairment' in a wider context. I have added information from another couple of NZ finance companies. Neither are strictly comparable to one another. But you should get a view of the general 'loan climate' over a period of interest. I have added another year to each set of results. The FY2018 year for Turners ended on 31st March. The FY2018 for Heartland ended on 30th June. The FY2018 year for UDC ends on 30th September which hasn't happened at the time of writing. But I have updated UDC for the FY2017 result.



Turners


Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOFY2014$2.960m$37.692m7.85%-$0.532m-$1.452m$43.212m1.23%3.36%


EOFY2015$3.182m$143.365m2.22%-$1.607m-$1.375m$150.351m1.07%0.94%


EOFY2016$5.129m$168.889m3.04%-$1.041m-$1.041m$175.675m0.59%0.59%


EOFY2017$1.331m$207.143m0.64%-$2.025m-$1.442m$213.130m0.95%0.68%


EOFY2018$8.6211m$289.739m2.97%-$6.380m-$0.433m$295.693m2.16%0.15%


Total-$11.585m-$5.743m


Average1.20%1.14%



'Stressed Loans' in the context of Turners as follows (figures given are calculations from the Annual Report of that Year, 'b' being a subsequent year retrospective):



Financial Year2014b2015201620172018


Impaired Loans Past due for 90+ days$4.740m$5.572m$5.939m$3.516m$5.674m


plus Impaired Loans Less than 90 days due$0m$0m$0.461m$0.485m$2.654m


plus Not Impaired Loans Past due for 90+ days$3.637m$4.012m$4.417m$2.583m$8.937m


plus Not Impaired Loans Past due for 60 to 90 days$0.103m$0.584m$1.088m$0.775m$2.020m


less Specific Impairment Provision-$2.061m-$2.505m-$1.952m-$0.973m-$1.592m


less Collective Impairment Provision-$3.459m-$4.481m-$4.824m-$5.055m-$9.072m


equals Total$2.960m$3.182m$5.129m$1.331m$8.621m






Heartland


Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOFY2015$39.066m$2,829.246m1.38%-$12.105m-$4.891m$2,893.724m0.42%0.17%


EOFY2016$37.851m$3,113.957m1.21%-$13.501m-$18.663m$3,140.105m0.43%0.59%


EOFY2017$38.324m$3,545.897m1.08%-$15.015m-$11.671m$3,575.613m0.42%0.33%


EOFY2018$44.192m$3,984.941m1.11%-$22.067m-$19.470m$4,017.436m0.55%0.48%


Total-$40.567m-$57.069m


Average0.52%0.64%



I have removed the FY2013 and FY2014 Heartland results from the previously referenced table, because I no longer believe that these are indicative of the Heartland operation going forwards.

'Stressed Loans' in the case of Heartland are defined as follows:



Financial Year2015201620172018


Loans at least 90 days past due$34.975m$21.967m$35.629m$28.677m


plus Loans individually impaired$25.622m$33.764m$28.578m$45.186m


plus Restructured Assets$3.881m$3.281m$0m$0m



less Provision for Impairment-$25.412m-$21.161m-$25.865m-$29.671m



equals Total$39.066m$37.851m$38.341m$44.192m






UDC


Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOFY2013$86.887m$2,161.193m4.02%-$7.123m-$12.339m-$3.745m$2,198.653m0.32%0.73%


EOFY2014$95.444m$2,344.131m4.07%-$11.733m-$18.633m+$3.300m$2,375.936m0.49%0.65%


EOFY2015$82.267m$2,429.695m3.39%-$10.427m-$12.162m-$0.659m$2,421.224m0.43%0.53%


EOFY2016$85.475m$2,721.710m3.14%-$7.418m-$11.055m+$1.297m$2,750.619m0.27%0.35%


EOFY2017$116.131m$3,088.450m3.76%-$5.929m-$7.698m+$2.860m$3,117.323m0.19%0.16%



Total-$42.630m-$58.834m


Average0.34%0.48%



'Stressed Loans' in the case of UDC are defined as follows:




Financial Year20132014201520162017


Take loan total from categories 7 and 8$87.054m$92.366m$81.156m$96.727m$133.791m


add 'Default' loans$37.293m$34.883m$32.640m$17.657m$11.618m


less Provision for Credit Impairment-$37.46m-$31.805m-$31.529m-$28.909m-$29.278m


equals Total$86.887m$95.444m$82.267m$85.475m$116.131m




What does it all mean?

Before I start, I need to note that:

1/ There is no standard with which to define a 'Stressed Loan'. This is one reason why the 'normal' level of 'Stressed Loans' appears different for the three protagonists. This means it is best to compare the absolute level of stressed loans intra-company year to year and not inter-company. Despite the definition of stressed loan not being consistent, one thing that is consistent is that 'stressed loans' are defined in such a way to be separate to 'impaired loans'. There is no overlap between the two classes of loan.
2/ 'Impaired loans' are a judgement call, and we have to allow different companies to have their own level of judgement.
3/ 'Write off' has a more final ring to it, and all things being equal we might expect this statistic to be similar across all finance companies. But all things are not equal.

It looks like the car loans, that Turners specialise in, suffer approximately twice the percentage default rate compared to the more broadly based finance companies. This possibly reflects the nature of motor vehicles as a depreciating asset, and as a consequence more likely to be abandoned than other assets that are financed.

I would expect the 'Stressed Asset rate' to be correlated to the 'Impaired Asset Rate' which is in turn correlated to the 'Write Off rate' of any finance company. Of course the correlation may be 'time shifted'. What I am describing here is a steady deterioration in loan quality. I need to emphasise that the progression of any 'weakening loan' is not always one way. Both 'stressed loan's and 'impaired loans' can recover. I also need to repeat that the definition of each loan across the three finance companies under consideration is not exactly the same. Except for the 'write off' I suppose. Once a loan is goneburger then it is gone, and that doesn't leave much room for interpretation!

We can expect the 'Impaired Asset' bucket to always be larger than the 'Write Off' bucket when summed over several years. If that wasn't the case, then any impaired loan balance would eventually disappear. In this context the multi years sum of the 'V' and 'W' column situation at UDC raises eyebrows. The loan impairments couldn't be being massaged to an artificially low level to facilitate a sale could they!?!

Meanwhile back at Turners, the very low 'stressed loans' declared at the end of FY2017 jumped up again sharply back to more 'normal' levels in FY2018. This might indicate that Turners took an unrealistically rosy view of their debtors before being snapped back to reality in FY2018? The sharply increased impairment provision over FY2018 is consistent with this view, as is the restoration of 'Stressed Loans' to a more normalised level.

SNOOPY

[RTM]

Can any one help straighten out my thoughts ?

I had intended to convert the current Turner bonds to stock, but decided to simply purchase what I wanted instead. So this is done and I am happy with the number of shares I have in Turners. Soon the current bonds will be repaid and I'm trying to figure out whether I should take up some of the new Turners Bonds. The interest rate is OK'ish.

I have a probably dumb question..... Are bonds in a company really that much safer than stock ?

What I am looking for in my investments is a steady return on my capital and protection of the same. Not necessarily looking for a Synlait scenario, but prefer to avoid PEB's as well. As I see it, bonds would see the capital value eroded by inflation, especially if inflation accelerates. And while I understand that the company needs to stop paying dividends to Shareholders prior to bond holders, it seems to me that if the s..t really hit the fan, that the banks get the first call on any money available and shareholders and bond holders would in reality end up being treated in a very similar way ? Does this seem correct ? In case of a severe degradation of Turners business....I guess it is possible that one might lose significant capital if holding shares...e,g, the stock could go to $1.00..while with the bonds one might have a better chance of gettings ones capital back ? Or would the event that caused the stock to go to $1 also make it impossible for Turners to pay back the bond ?

Any thoughts anyone ?
Cheers

RTM







If the company was insolvent...what would the chances be of Bond Holders getting any of their capital back ?

[percy]

TRA.Should they go down the drain,this is approx. the pecking order.
1] Tax dept..
3] Staff entitlements.
4]Bond Holders
5] Unsecured creditors,ie outside panel beater who did repairs for TRA
6] Shareholders.

It would have to be a "hell of a mess" for 1 to 5 to miss out.If that did happen to TRA, most of the listed companies in NZ would be gone.
Bonds are a fixed interest which pay higher interest than bank deposits.
Bonds make up a model portfolio.
I do not hold any bonds,however I look at HBL,GNE,MEL,SPK as suitable substitutes for bonds.

ps.Most of the car dealers who have gone broke, the usual causes were,
1]They were under capitalized.
2]Sold cars on finance to people who could not make repayments.
3] Did not watch their overheads,ie paid to higher rent for their site.
4]Lived beyond their means.
5]Employed dishonest staff.

pps.At this stage TRA's dividend is higher than the bonds.The bonds are at a set 5.5% yield.
In the meantime TRA's increasing earnings will see their dividends grow.

[RTM]

TRA.Should they go down the drain,this is approx. the pecking order.
1] Tax dept..
3] Staff entitlements.
4]Bond Holders
5] Unsecured creditors,ie outside panel beater who did repairs for TRA
6] Shareholders.

It would have to be a "hell of a mess" for 1 to 5 to miss out.If that did happen to TRA, most of the listed companies in NZ would be gone.
Bonds are a fixed interest which pay higher interest than bank deposits.
Bonds make up a model portfolio.
I do not hold any bonds,however I look at HBL,GNE,MEL,SPK as suitable substitutes for bonds.

From memory the offer document seemed to stress that the banks are high, above the bondholders, in the pecking order. I’ll check tomorrow.

[percy]

From memory the offer document seemed to stress that the banks are high, above the bondholders, in the pecking order. I’ll check tomorrow.

Altered my post.Banks usually try to get in before staff ..

[Scrunch]

TRA.Should they go down the drain,this is approx. the pecking order.
1] Tax dept..
3] Staff entitlements.
4]Bond Holders
5] Unsecured creditors,ie outside panel beater who did repairs for TRA
6] Shareholders.

It would have to be a "hell of a mess" for 1 to 5 to miss out.If that did happen to TRA, most of the listed companies in NZ would be gone.
Bonds are a fixed interest which pay higher interest than bank deposits.
Bonds make up a model portfolio.
I do not hold any bonds,however I look at HBL,GNE,MEL,SPK as suitable substitutes for bonds.

ps.Most of the car dealers who have gone broke, the usual causes were,
1]They were under capitalized.
2]Sold cars on finance to people who could not make repayments.
3] Did not watch their overheads,ie paid to higher rent for their site.
4]Lived beyond their means.
5]Employed dishonest staff.

pps.At this stage TRA's dividend is higher than the bonds.The bonds are at a set 5.5% yield.
In the meantime TRA's increasing earnings will see their dividends grow.

One risk to be aware of is that TNR's shareprice IMO is basically supported only by its current earnings. If earnings decline, there's not much of a balance sheet to support the share price. Excluding intangible assets (which would lose their value if profitability disappeared), there's only 51c of net assets behind TNR (as at 31 March 2018). The provisioning reflects current economic conditions and write-off rates can go up lots if NZ slipped into a recession. On a PE valuation they look cheap. On a shareprice to net tangible assets basis there's on a high multiple.

Disc ex shareholder trying to decide if I should rebuy at some stage.

[Snoopy]

One risk to be aware of is that TNR's shareprice IMO is basically supported only by its current earnings.
If earnings decline, there's not much of a balance sheet to support the share price. Excluding intangible assets (which would lose their value if profitability disappeared), there's only 51c of net assets behind TNR (as at 31 March 2018). The provisioning reflects current economic conditions and write-off rates can go up lots if NZ slipped into a recession. On a PE valuation they look cheap. On a shareprice to net tangible assets basis there's on a high multiple.


Scrunch, you have to remember that the intangible assets came into being because at the time, a business was purchased that was generating a really good return. A return so good that buying that business at 'tangible asset' value would have been a 'steal' for the purchaser and would have seen the seller 'ripped off'. The intangible asset value was created at one point in time. However, once the asset was purchased the purchaser now has a new business unit, and the purchaser is now concerned with the return they are getting on their new purchase in the future. After the purchase, the fact that some of the assets purchased were 'intangible' becomes irrelevant.

If this same business unit was 'on sold' the next year to a third party and the profitability of the business unit has increased, then there is every chance that new purchaser would pay a higher total price for that business unit. Thus the new purchaser would have an even higher intangible value for that business unit on their own balance sheet. But for last years buyer (this years seller) what was an intangible asset would suddenly become very tangible as they received cash for it. The point I am making here is that an 'intangible asset' on a balance sheet is 'time frozen' at the time of its creation. At any future time point the market value of that intangible asset will not be the same on an open market, unless the business outlook is identical to the business outlook at the time of the first purchase (i.e. when the intangible asset was first created).

If a business unit really goes bad then both the value of the tangible and intangible assets of ther business are under threat. If, for instance, you own a manufacturing plant that has been superseeded by technology, then the intangible assets representing those manufacturing plant assets on the balance sheet will be worth nothing. But it is also true that the tangible assets representing those manufacturing plant assets on the balance sheet will be worth nothing. I am using this example to show that there is no difference between the fate of the tangible assets and the intangible assets. Intangible assets on a balance sheet are an historical construct. There is nothing to say that some years down the track that there is any difference between the value of the tangible and intangible assets in terms of their respective worth. So I wouldn't worry about the split of intangible to tangible assets on the TRA balance sheet.

It is not correct to say that if business conditions deteriorate the value of TRA's intangible assets will go down. Because even in a downturn the intangible asset value will only reduce if the business conditions deteriorate to below the level set way back at the time the original business unit was purchased. The Turners Auction business was purchased at very cheap multiples at the bottom of the independent advisors fair valuation range. Since then profits from selling cars have sky rocketed. So even if car sales profitability fell by -say- 40% from here in a recession, I would expect no change to the intangible assets on the TRA books relating to that business unit.

Short summary: You have very little to worry about with most of those Turners Automotive Group intangibles, IMO.

SNOOPY

[Snoopy]

A company that operates across disparate divisions can sometimes be better understood by seeing what happens when those divisions are separated out into virtual stand alone companies.



FY2017 (as presented)Automotive RetailCollections NZCollections AusFinanceInsuranceCorporate & OtherTotalAs Declared (Check)


EBT (as reported)$15.397m$6.006m$0.239m$10.156m$0.928m($8. 095m)$24.631m


EBT (corp costs apportioned)$9.266m$5.590m($0.071m)$9.306m$0.540m$ 24.631m


Tax @ 28%($2.595m)($1.565)m$0m($2.606m)($0.151m)($6.917m )($7.057m)


NPAT$6.671m$4.025m($0.071m)$6.700m$0.389m$17.714m$ 17.609m



Note: Corporate costs have been apportioned according to divisional revenues.

That looks quite nicely balanced, particularly when you consider the new 'Autosure' acquisition will substantially boost insurance earnings in the coming year. But as an exercise, let's make the segment change to the finance market business, by transferring the interest revenue from Automotive Retail back to finance. This is representative of what Turners themselves did as recently as FY2015.



FY2017 (Snoopy adjusted)Automotive RetailCollections NZCollections AusFinanceInsuranceCorporate & OtherTotalAs Declared (Check)


EBT (as reported)$15.397m$6.006m$0.239m$10.156m$0.918m($8. 095m)$24.631m


EBT (interest revenue adjusted)$11.936m$6.006m$0.239m$13.617m$0.928m($8. 095m)$24.631m


EBT (corp costs apportioned)$6.046m$5.590m($0.071m)$12.527m$0.540m $24.631m


Tax @ 28%($1.693m)($1.565)m$0m($3.508m)($0.151m)($6.917m )($7.057m)


NPAT$4.358m$4.025m($0.071m)$9.019m$0.389m$17.769m$ 17.609m



Suddenly the picture looks less balanced, with finance making up over 50% of the group's profits. It also highlights the contribution of the NZ Debt collection business, which in reality contributes almost as much to the bottom line as the much higher profile 'Automotive Retail' segment. Once corporate overheads are tacked onto the Australian debt collection unit we can see it is not profitable, an observation I find surprising. I do hope that Turners management know what they are doing over there.

I wonder how vulnerable the business is to the Auckland property slowdown? Will the Auckland car market, that Turners have so heavily leveraged themselves into with the 'Buy Right' cars acquisition hold up? Remember that profits can fall in Automotive retail by $1.026m and yet still remain flat on the books, because 'Buy Right' cars was not owned by Turners for all of FY2017.


A company that operates across disparate divisions can sometimes be better understood by seeing what happens when those divisions are separated out into virtual stand alone companies.



FY2018 (as presented)Automotive RetailCollections NZCollections AusFinanceInsuranceCorporate & OtherTotalAs Declared (Check)


EBT (as reported)$16.550m$5.845m$0.224m$11.735m$5.731m($8. 952m)$31.133m


EBT (corp costs apportioned)$10.511m$5.496m($0.029m)$10.675m$4.480 m$31.133m


Tax @ 28%($2.960m)($1.538)m$0m($2.999m)($1.251m)($8.748m )($7.773m)


NPAT$7.611m$3.958m($0.029m)$7.676m$3.229m$22.445m$ 23.192m



Note: Corporate costs have been apportioned according to divisional revenues.

That once again looks quite nicely balanced. But we must remember as well as 'Autosure' being in insurance for the first time, I believe the insurance division includes a $2.664m one off insurance settlement contribution.' As an exercise, let's make the segment change to the finance market business, by transferring the interest revenue from Automotive Retail back to finance. This is representative of what Turners themselves did as recently as FY2015 (and plan to do again from FY2019) .

Note: 'Automotive Group Retail Interest Revenue' was listed as $9.311m (AR2015 p49). But 'Interest Revenue' is not profit. If we use a profit fudge factor of 0.456 (The actual factor that worked in FY2015) then the adjustment we need to make works out at:

0.456 x $9.311m = $4.246m.

This comes off the 'Automotive Retail' earnings and goes on the 'Finance' earnings.



FY2018 (Snoopy adjusted)Automotive RetailCollections NZCollections AusFinanceInsuranceCorporate & OtherTotalAs Declared (Check)


EBT (as reported)$16.550m$5.845m$0.224m$11.375m$5.731m($8. 952m)$33.133m


EBT (interest revenue adjusted)$12.304m$5.845m$0.224m$15.981m$5.731m($8. 952m)$33.133m


EBT (corp costs apportioned)$6.514m$5.496m($0.029m)$14.672m$4.480m $33.133m


Tax @ 28%($1.824m)($1.539)m$0m($4.108m)($1.254m)($8.725m )($7.773m)


NPAT$4.690m$3.957m($0.029m)$10.564m$3.226m$22.408m $23.192m



Suddenly the picture looks less balanced, with finance -still- making up around 50% of the group's profits. It also highlights the contribution of the NZ Debt collection business, which in reality contributes almost as much to the bottom line as the much higher profile 'Automotive Retail' segment. Once corporate overheads are tacked onto the Australian debt collection unit we can see it is not profitable, an observation I still find surprising. Yet at the Turners roadshow presentation, we learned that the strategy is to try and use a successful record of debt collection with the Aussie owned banks in NZ, and sell the same deal to their parent banks in Australia. Turners think this will pay off big time if they can crack it!

Profits from Retail sales are up. But $1.026m of that might have been expected with 'Buy Right' cars under ownership for the full year. We have been told the first year with Buy Right Cars under Turners control was disappointing. This table allows us to estimate the quantitative effect of that, assuming unchanged sales from the rest of the Automotive sales outlets

$4.690m - $4.538m = +$0.152m

That means that Buy Right Cars must have contributed (at least):

$0.152m - $1.026m = $0.874m less than expected over the FY2018 financial year.

SNOOPY

[BlackPeter]

Hmm - interesting exercise. However - isn't the outcome just demonstrating that it was an amazing idea from TRA to grow a car dealership with its own finance (and insurance-) group instead of doing the hard work as car dealer and to leave the ticket clipping up to others?

Whats bad about this lack of balance? Are you afraid that from next year on all Kiwi used car buyers will pay cash?

[Snoopy]

Hmm - interesting exercise. However - isn't the outcome just demonstrating that it was an amazing idea from TRA to grow a car dealership with its own finance (and insurance-) group instead of doing the hard work as car dealer and to leave the ticket clipping up to others?

What's bad about this lack of balance? Are you afraid that from next year on all Kiwi used car buyers will pay cash?


If Automotive retail sales are below budget, what is a sales manager to do? Why, offer some really competitive finance packages of course! Let's just hope those buyers can keep up with their payments though, otherwise we might have some more impaired loans on our hands.

So what actually happened over FY2018?

1/ Interest received at Automotive Retail up from $7.590m to $9.311m ( +22.6% ).
2/ Automotive Retail Revenue up from $193.472 to $223.212m (+15.3%) .
3/ Bad debt impairment expense up from $2.025m to $6.380 ( +315% ).

This is one example where ticking all the boxes in house may not be a good thing(?).

My comment on 'balance' that I carried over from the previous year is a subtle reference to the lack of progress on the debt recovery business. It is still very profitable (in NZ at least) yet it doesn't seem to be going anywhere. If I were in charge at TRA, I would bit more effort into growing that division. Credit recovery isn't necessarily connected to the car business. So it would be a good thing to make stronger before the inevitable next motor market downturn occurs.

SNOOPY

[percy]

[QUOTE=Snoopy;728005]
3/ Bad debt impairment expense up from $2.025m to $6.380 ( +315% ).

Todd and Aaron explained this was caused not Turners originated lending, but by MTF originators, who put "suspect" loans through MTF/TRA.Previously the MTF originators only had recourse loans to offer.Being able to offer non-recourse loans meant they were lazy with their lending.
Turners reacted by tightening their lending criteria, and terminating their agreement with the MTF originators who were the cause of the problems.
Again all Turners originated lending was of excellent standard,
Todd and Aaron also explained they were tightening all their lending citeria,looking for quality rather than quantity.
As these poor MTF loans go through the cycle, we will see bad debt impairments come back to their normal low level.

The debt Recovery business's future is in Australia,and as you point out it isn't necessarily connected to the car business..
It fact no connection at all,and unlikely ever wil be.

[Scrunch]

you have to remember that the intangible assets came into being because at the time, a business was purchased that was generating a really good return.

Agreed. If profitability remains even close to current levels, intangibles will keep their value and the real value of them will probably be higher than reported on the Balance Sheet.


If this same business unit was 'on sold' the next year to a third party and the profitability of the business unit has increased, then there is every chance that new purchaser would pay a higher total price for that business unit.

Again I agree with you. One of the quirks of intangible's is that they aren't revalued upwards over time meaning they can be a very arbitary snapshot in time.


If a business unit really goes bad then both the value of the tangible and intangible assets of ther business are under threat.
For IT, plant and equipment that business specific - agreed. If the PP&E has alternative uses, the value doesn't always collapse if the business is under threat. For example, if the business owns the factory buildings it operates from, these may hold their value if other businesses could operate from this site. The combination of tangible assets owned means that if conditions detoriate suffiicently that intangibles are under threat, their value can collapse a lot more quickly than tangible assets.


It is not correct to say that if business conditions deteriorate the value of TRA's intangible assets will go down. Because even in a downturn the intangible asset value will only reduce if the business conditions deteriorate to below the level set way back at the time the original business unit was purchased.
Again you are correct, but most of the intangibles on the balance sheet came on from 2015 onwards. That's a number of years into the current NZ economic expansion. If NZ economy goes pear-shaped, business conditions could be a whole lot worse than they were across 2015-2018 onwards.

Mr market only puts a 40c price gap between equity and the share price. That either means almost all existing profitability was purchased (and still retains a positive margin over purchase price), or the fair value of intangibles isn't a lot more than currently represented in the balance sheet.

[Snoopy]

For IT, plant and equipment that business specific - agreed. If the PP&E has alternative uses, the value doesn't always collapse if the business is under threat. For example, if the business owns the factory buildings it operates from, these may hold their value if other businesses could operate from this site. The combination of tangible assets owned means that if conditions deteriorate suffiicently that intangibles are under threat, their value can collapse a lot more quickly than tangible assets.


Turners do not own most of the sites they operate from. Granted management policy has now reversed on this matter. They now favour buying sites, redeveloping them in house then either selling them on or perhaps keeping some as 'blue chip' real estate investments to back up the returns on their insurance division capital. But way back in the TUA days, Turners sold all their sites and used the proceeds to repay debt. This is why they are now tenants in their flagship sites in Christchurch and Auckland.

I agree that property assets normally remain 'tangible', because the price paid for those assets does reflect the fact that they could be sold and used for a new business purpose. But not always. A company might pay over the market price for a property because it is immediately adjacent to a property they already own. The over the market payment price would be for operational synergy gains between the two adjacent sites, which is an intangible.



Again you are correct, but most of the intangibles on the balance sheet came on from 2015 onwards. That's a number of years into the current NZ economic expansion. If NZ economy goes pear-shaped, business conditions could be a whole lot worse than they were across 2015-2018 onwards.


I think some of the intangibles reflect operational synergy gains. For example TRA can now buy cars in Japan for both the 'Turners' and 'Buy Right' retail brands in one lot: economies of scale. They will be able to sell more insurance from Autosure as part of a package deal for new buyers.: accessing a whole group of customers who did not even consider Autosure before. These kind of gains are there independently of the state of the used car market in New Zealand. So I do not agree that intangible assets are more at risk than tangible assets in a market downturn in Turners case. Land could easily devalue if the business climate deteriorates in NZ, while the intangibles retain their value.



Mr market only puts a 40c price gap between equity and the share price. That either means almost all existing profitability was purchased (and still retains a positive margin over purchase price), or the fair value of intangibles isn't a lot more than currently represented in the balance sheet.

Shareholder equity is $214.323m at EOFY2018

No. shares on issue at the same time was 84.803m

So shareholder equity per share at EOFY2018 was: $214.323m/ 84.803m = $2.53

Add 40c to that and I get $2.93, about where TRA is trading.

I don't disagree with what you are saying here Scrunch, as possibilities that are part of a wider picture. But there are other explanations for where the share price is today too. For example, there could be a temporary reduction in demand for shares as shareholders who would otherwise buy 'on market' elect to convert their bonds to shares. It could be pressure from some of the former business bakery shareholders reducing their holdings (just as the share price rose when former 'business baker' Grant Baker increased his holdings recently).

AFAIK the fair value of intangibles is based on a set of future assumptions about cash flows that may or may not be reflected in market fluctuations of the TRA share price.

SNOOPY

[LAC]

Scrunch, you have to remember that the intangible assets came into being because at the time, a business was purchased that was generating a really good return. A return so good that buying that business at 'tangible asset' value would have been a 'steal' for the purchaser and would have seen the seller 'ripped off'. The intangible asset value was created at one point in time. However, once the asset was purchased the purchaser now has a new business unit, and the purchaser is now concerned with the return they are getting on their new purchase in the future. After the purchase, the fact that some of the assets purchased were 'intangible' becomes irrelevant.

If this same business unit was 'on sold' the next year to a third party and the profitability of the business unit has increased, then there is every chance that new purchaser would pay a higher total price for that business unit. Thus the new purchaser would have an even higher intangible value for that business unit on their own balance sheet. But for last years buyer (this years seller) what was an intangible asset would suddenly become very tangible as they received cash for it. The point I am making here is that an 'intangible asset' on a balance sheet is 'time frozen' at the time of its creation. At any future time point the market value of that intangible asset will not be the same on an open market, unless the business outlook is identical to the business outlook at the time of the first purchase (i.e. when the intangible asset was first created).

If a business unit really goes bad then both the value of the tangible and intangible assets of ther business are under threat. If, for instance, you own a manufacturing plant that has been superseeded by technology, then the intangible assets representing those manufacturing plant assets on the balance sheet will be worth nothing. But it is also true that the tangible assets representing those manufacturing plant assets on the balance sheet will be worth nothing. I am using this example to show that there is no difference between the fate of the tangible assets and the intangible assets. Intangible assets on a balance sheet are an historical construct. There is nothing to say that some years down the track that there is any difference between the value of the tangible and intangible assets in terms of their respective worth. So I wouldn't worry about the split of intangible to tangible assets on the TRA balance sheet.

It is not correct to say that if business conditions deteriorate the value of TRA's intangible assets will go down. Because even in a downturn the intangible asset value will only reduce if the business conditions deteriorate to below the level set way back at the time the original business unit was purchased. The Turners Auction business was purchased at very cheap multiples at the bottom of the independent advisors fair valuation range. Since then profits from selling cars have sky rocketed. So even if car sales profitability fell by -say- 40% from here in a recession, I would expect no change to the intangible assets on the TRA books relating to that business unit.

Short summary: You have very little to worry about with most of those Turners Automotive Group intangibles, IMO.

SNOOPY

Thanks for this one. Was enlightening for me.

[percy]

Trust the Napier team deliver on finding a great car for "Aunty Jean."

[couta1]

I reckon I'll be nearly skiing as fast this arvo as the SP is currently falling.Lol.

[Beagle]

I reckon I'll be nearly skiing as fast this arvo as the SP is currently falling.Lol.

A pig dog with fleas and mange is more attractive than the SP.

[percy]

Going to make for a very interesting agm.
I voted for everything,except the increase in directors' fees, which I voted against.
The light at the end of the tunnel has turned out to be an approaching train...lol.

[RupertBear]

A pig dog with fleas and mange is more attractive than the SP.

Geez Mr Beagle are you still holding :confused: the sp and chart is looking uglier and uglier, I am feeling like getting out when I did was the right decision atm, phew ;)

[Beagle]

Geez Mr Beagle are you still holding :confused: the sp and chart is looking uglier and uglier, I am feeling like getting out when I did was the right decision atm, phew ;)

I halved my holding at $3.16 and halved the remaining half at $3.00 on the way down. No argument that TA is as described above in post #2839.

It is notable that despite yesterday's solid 2% market bounce all this pig dog wants to do is to keep biting shareholders.

[winner69]

Only down 1 cent today ...not much

Tomorrow’s another day ..probably go up

[couta1]

Only down 1 cent today ...not much

Tomorrow’s another day ..probably go up And up a cent from a few years ago before the 10:1 consolidation when it was 28c.Lol.

[percy]

Well run investor presentation. Management clearly articulated their strategy and have a goal of growing their market share to 10% within 5 years, from 5% now.
Steadily increasing amount of business done at a retail level, (as opposed to wholesale) will boost vehicle margins and generate significant growth in opportunities to cross sell insurance, finance and maintenance packages going forward.
Gradually expanding retail footprint.
Focus on organic growth in the years ahead.
Convertible bonds will be replaced with a new issue approx. a couple of months after maturity of current tranche but will probably be for a longer term, 3-4 years and probably won't have a convertibility aspect to them.
I spoke with some of the senior management after the meeting and all seemed to know their market well and impressed.
Todd Hunter impressed as a natural leader. My main reason for going was to get a handle on whether I think he is the right guy to drive future value growth in this company and he gets a big tick as far as I am concerned.

Investment case. I think in general terms the market is pricing Turners as a no growth company on a forward PE of 10 and I think there's a good case for believing that EPS will in fact show modest / good growth in the years ahead.

Summary I think this is probably the cheapest growth stock on the NZX disguised as a value play. I expect high single digits EPS growth for the foreseeable future.

Yet just over 2 months later, with no trading update from the company, you are calling them a "pig dog."????????????

[winner69]

Was Beagle easily seduced by cool looking slides, warm fuzzy words and slick car salesmen?

[winner69]

Just as this will never happen in NZ even though securitisation and car loans are often not a good mix

https://insight.factset.com/car-companies-face-liquidity-risks-due-to-rising-auto-loan-delinquencies

[Beagle]

Yet just over 2 months later, with no trading update from the company, you are calling them a "pig dog."????????????

To be clear I am saying the share price and technical analysis is as ugly as a flea infested and mange affected pig dog. This is an undisputed fact, it just looks plain ugly. Fundamentally it looks sound but Mr Market is telling us something is wrong.

The fact that they changed the timing of their new bond issue, (which at the investor presentation was suggested would be after the maturity of the current bonds) and brought it forward suggests they need the money from that new issue to repay the 50% of bondholders who didn't convert to shares back. This is another little clue that all is not going completely to plan.

My preference is to invest in high growth companies where TA and FA are in alignment and to hold a basket of high yield dependable shares as well. Since that earlier post I have realised that because of all the new shares issued last year and this year EPS growth for FY19 will probably only be in the region of 4%. For me that puts TRA into more of a yield case investment than a growth one and yield is no good if the SP keeps going down is it !

The directors fee increase also looks like the aforementioned animal. If things were going well why do shareholders (who must surely all be in the red) keep hitting any decent sized bid over and over and over and over again ?

[couta1]

Directors should actually feel embarrassed at asking for an increase in fees given the current SP(Which they will all be well aware of) Directors should not be Troughers whilst shareholders get a capital haircut. PS-I know it's an idealistic outlook but one can always hope.

[winner69]

Beagle

The fact that they changed the timing of their new bond issue, (which at the investor presentation was suggested would be after the maturity of the current bonds) and brought it forward suggests they need the money from that new issue to repay the 50% of bondholders who didn't convert to shares back. This is another little clue that all is not going completely to plan.

Hmmmm .......no waty, cash management better than that surely

[percy]

Directors should actually feel embarrassed at asking for an increase in fees given the current SP(Which they will all be well aware of) Directors should not be Troughers whilst shareholders get a capital haircut. PS-I know it's an idealistic outlook but one can always hope.

Agree...……………………..

[Beagle]

Hmmmm .......

Share price 31 January 2013 $3.40
Share price 31 January 2017 $3.85

Current share price after all these years $2.89.
What has the market been trying to tell us for all these years that flies in the face of their national road show presentation ?
Hmmmmmmm ????
Its just not happening, (wealth creation) for shareholders is it ? Why not ?

P.S. Colonial Motors share price 31 January 2013 $4.00 Current price $8.27.

[percy]

To be clear I am saying the share price and technical analysis is as ugly as a flea infested and mange affected pig dog. This is an undisputed fact, it just looks plain ugly. Fundamentally it looks sound but Mr Market is telling us something is wrong.

The fact that they changed the timing of their new bond issue, (which at the investor presentation was suggested would be after the maturity of the current bonds) and brought it forward suggests they need the money from that new issue to repay the 50% of bondholders who didn't convert to shares back. This is another little clue that all is not going completely to plan.

My preference is to invest in high growth companies where TA and FA are in alignment and to hold a basket of high yield dependable shares as well. Since that earlier post I have realised that because of all the new shares issued last year and this year EPS growth for FY19 will probably only be in the region of 4%. For me that puts TRA into more of a yield case investment than a growth one and yield is no good if the SP keeps going down is it !

The directors fee increase also looks like the aforementioned animal. If things were going well why do shareholders (who must surely all be in the red) keep hitting any decent sized bid over and over and over and over again ?

Interesting.
I found companies who steadily increase their dividends are the best long term performers.
Those that did this in GFC, found their share price recovered the quickest.
I am enjoying TRA's quarterly increasing fully imputed dividends,and believe they will continue to increase.
In which case I am sure TRA's will be an out performer.

ps.I have voted against the directors' pay increase,which I find offensive, as their efforts have not had any positive effect on the SP.
If the SP was over $4.00 I would happily vote in favour.
Maybe this time next year.?

[minimoke]

The fact that they changed the timing of their new bond issue, (which at the investor presentation was suggested would be after the maturity of the current bonds) and brought it forward suggests they need the money from that new issue to repay the 50% of bondholders who didn't convert to shares back. This is another little clue that all is not going completely to plan.

Isnt that how you would describe a ponzi scheme

[Beagle]

One would hope the current SP is very close to the bottom, (I have elected to convert my bonds to shares) but the relative SP performance of Colonial Motors to Turners over the last five years suggests the former are run like a well oiled Swiss watch whereas there could be issues within TRA. Maybe the problem they hinted at with loan delinquencies is an ongoing systemic issue and their hoped for relief from the new families package giving relief to low income earners so they can pay their bills isn't happening ? (People that are delinquent will simply use more Government assistance to feed their addictions not make outstanding loan repayments). My experience with dodgy finance company loans in Geneva suggests to me that where there's smoke there's fire and as loans get seasoned the problems get worse.

Average brokers target price is about $3.20 from memory. One would hope it might get there in a year from now.

[Beagle]

Isnt that how you would describe a ponzi scheme

LOL, probably best I don't comment on that. Possibly worth noting that Turners are having a big spring clean sale at present. This is probably just part of their normal marketing campaign at this time of year but it could be indicative of slower than expected used car sales over winter too ? Worth noting that only 50% of bondholders elected to convert to shares this time vs 75% two years ago. I think this is a pretty reliable indicator of the declining confidence that investors have in TRA to deliver the goods. This confidence will be eroded further by the directors putting their hand up for a very sizeable pay rise when EPS is doing almost nothing and the SP has been going backwards at a fairly quick rate of knots.

[percy]

[QUOTE=Beagle;728823]. Maybe the problem they hinted at with loan delinquencies is an ongoing systemic issue and their hoped for relief from the new families package giving relief to low income earners so they can pay their bills isn't happening ?

The problem was with MTF originated non-recourse loans.
No problems with TRA originated loans.
TRA have parted ways with the originators who caused the problems.
They have also tightened their lending reguirements.
Interesting is the fact, both TRA and HBL are both more interested in quality rather than quantity loans.
Both have very few bad vehicle loans,as people need their car to get to work.

[LAC]

Been enjoying the divies but not the share price so far... hope it plays out better in the coming months. Did the roadshow have anything about their expansion into Australia

[winner69]

Been enjoying the divies but not the share price so far... hope it plays out better in the coming months. Did the roadshow have anything about their expansion into Australia

If you never going to sell just keep collecting the ever increasing dividends

You should never look at the share price ....only ruins your enjoyment eh

[percy]

Been enjoying the divies but not the share price so far... hope it plays out better in the coming months. Did the roadshow have anything about their expansion into Australia

Yes they feel there are opportunities there for EC Credit to expand.

[BlackPeter]

Well ... I guess I remember companies where the market tried to tell me something and I didn't listen and I paid for it. MPG and CBL spring to mind.

But I have as well some outstanding companies in my portfolio which always were outstanding and the market had no clue how to fairly price them. Anybody worried about the current SP movement (or lack thereof) of TRA might look at e.g. a 5 year chart of SUM or SML. Look where they have been, look how far they dropped without any good reason (and read how worried some punters have been in the respective threads at that time) and look where they are now.

I can't tell you whether TRA is of category 1 or 2 above ... but just keep in mind that the market is a level 2 chaotic system. Yes, it does have some foresight, particularly if the companies are leaking, but to a degree it is as well just producing self fulfilling prophecies. If we tell each other all the time that this share is a dog, than it will be a dog for some time to come. Assuming the business stays healthy (and I have no reason to doubt that) this are amazing buying opportunities for the believers.

@ToddHunter, just wondering - any chance the company could think about e.g. short 3 monthly sales reports (similar to SUM)? Not a lot of effort involved and it would give investors a better chance to keep the hand on the pulse ...?

[Beagle]

[QUOTE=Beagle;728823]. Maybe the problem they hinted at with loan delinquencies is an ongoing systemic issue and their hoped for relief from the new families package giving relief to low income earners so they can pay their bills isn't happening ?

The problem was with MTF originated non-recourse loans.
No problems with TRA originated loans.
TRA have parted ways with the originators who caused the problems.
They have also tightened their lending reguirements.
Interesting is the fact, both TRA and HBL are both more interested in quality rather than quantity loans.
Both have very few bad vehicle loans,as people need their car to get to work.


That's all very well but keep in mind that those poor quality loans will take several years to work their way out of the system so we are talking about a current ongoing problem here not one that's anywhere near being fully resolved, (well, that's my understanding of it).

[McGinty]

Share price 31 January 2013 $3.40
Share price 31 January 2017 $3.85

Current share price after all these years $2.89.
What has the market been trying to tell us for all these years that flies in the face of their national road show presentation ?
Hmmmmmmm ????
Its just not happening, (wealth creation) for shareholders is it ? Why not ?

IMHO the reason for lack of wealth creation is the continued dilution of shares, of which there are two consequences for us retail shareholders.

The first is straight forward,

In July 2016 after the Buy Right Cars acquisition there were 64m shares on issue, since then

Sep 2016 - Convertible Bonds issue and Share Placement of 10.479m shares @ $2.945
Sep 2017 - Share Placement and Share Purchase Plan of 9.934m shares @ $3.02
Sep 2018 - Convertible Bond issue of (est) 4.526m shares @ $2.85 (down round?)

Total of 24.939m additional shares or 39% increase on July 2016 (26 months)


The second consequence is that the big money has the power to push the share price to suit their desired outcome.

In 2017 the price was consistently sold down the 2 months before the $25m placement was announced (2 months after the Hugh Green sell down), the result of this was a discounted capital raising 16% below where the price was early July. Then adding insult to injury the SPP was poorly conducted and a lot of retail investors didn't get a fair chunk of the offer.

The same thing is currently happening with the price now being pushed back 9.5% from early July for what I can only assume is for the current bond holders to get a more favorable conversion price.

It's been a long hard road being a TRA retail shareholder and I only recently decided to get over the 2017 SPP incident and join the register again. I personally think that management are doing a great job running the business side of things, but the board could have done better with the company. IMO The board doesn't seem to understand how the equity market works, which has helped contribute to the lackluster 3% p.a shareholder returns over the last 2 years.

I will not be voting in favour of rewarding the governors of our company for achieving lackluster returns!

[BlackPeter]

IMHO the reason for lack of wealth creation is the continued dilution of shares, of which there are two consequences for us retail shareholders.

The first is straight forward,

In July 2016 after the Buy Right Cars acquisition there were 64m shares on issue, since then

Sep 2016 - Convertible Bonds issue and Share Placement of 10.479m shares @ $2.945
Sep 2017 - Share Placement and Share Purchase Plan of 9.934m shares @ $3.02
Sep 2018 - Convertible Bond issue of (est) 4.526 shares @ $2.85 (down round?)

Total of 24.939m additional shares or 39% increase on July 2016 (26 months)


The second consequence is that the big money has the power to push the share price to suit their desired outcome.

In 2017 the price was consistently sold down the 2 months before the before the $25m placement was announced (2 months after the Hugh Green sell down), the result of this was a discounted capital raising 16% below where the price was early July. Then adding insult to injury the SPP was poorly conducted and a lot of retail investors didn't get a fair chunk of the offer.

The same thing is currently happening with the price now being pushed back 9.5% from early July for what I can only assume is for the current bond holders to get a more favorable conversion price.

It's been a long hard road being a TRA retail shareholder and I only recently decided to get over the 2017 SPP incident and join the register again. I personally think that management are doing a great job running the business side of things, but the board could have done better with the company. IMO The board doesn't seem to understand how the equity market works, which has helped contribute to the lackluster 3% p.a shareholder returns over the last 2 years.

I will not be voting in favour of rewarding the governors of our company for achieving lackluster returns!

good post - and I fully agree. competent management but a board which does not seem to be able (or willing) to represent share holder interests.

They clearly don't deserve a rise of director fees - and they should be embarrassed about making this proposal given the poor board performance. It is a disgrace and I voted against this proposal.

It might be as well time to look a bit closer into the composition of the TRA board and the history of individual directors. Some of them have a quite appalling track record of achieving good outcomes for share holders. Sure - maybe not in all cases the fault of the individual, but I still prefer to populate the board with directors who consistently achieve great outcomes for shareholders.

[percy]

good post - and I fully agree. competent management but a board which does not seem to be able (or willing) to represent share holder interests.

They clearly don't deserve a rise of director fees - and they should be embarrassed about making this proposal given the poor board performance. It is a disgrace and I voted against this proposal.

It might be as well time to look a bit closer into the composition of the TRA board and the history of individual directors. Some of them have a quite appalling track record of achieving good outcomes for share holders. Sure - maybe not in all cases the fault of the individual, but I still prefer to populate the board with directors who consistently achieve great outcomes for shareholders.

Yes agree with you and McGinty,however I think the board were badly advised about the Australian placement and listing.
I think there is more than meets the eye here,but I doubt we will ever hear the real reasons.
With the board being major shareholders they gave themselves an "own goal."
With the business bulked up,it is now time to perform.
Then when they have earnt it ,they may be in a better position to seek an increase in pay.
Would be the decent thing to do is to withdraw the resolution before the meeting,just to show empathy with fellow shareholders.

[couta1]

Plenty of shares being offered up under $2.90 on the sell side, someone with a good number of shares has been offloading for quite some time now.

[percy]

Plenty of shares being offered up under $2.90 on the sell side, someone with a good number of shares has been offloading for quite some time now.

Agree...………………
But no shareholder notices.?

[BlackPeter]

Some big bondholders playing games to get a really low conversion price? Maybe we need to wait until next month to see the SP recover?

I think the bond conversion rules belong probably as well on the long list of events where the board didn't act in the interest of existing shareholders ...

Just bad luck - or is it incompetence?

[Beagle]

Yes agree with you and McGinty,however I think the board were badly advised about the Australian placement and listing.
I think there is more than meets the eye here,but I doubt we will ever hear the real reasons.
With the board being major shareholders they gave themselves an "own goal."
With the business bulked up,it is now time to perform.
Then when they have earnt it ,they may be in a better position to seek an increase in pay.
Would be the decent thing to do is to withdraw the resolution before the meeting,just to show empathy with fellow shareholders.

I think there is near unanimous agreement on here that's the right thing to do but I think its almost certain they're not interested in small shareholders views on this. They have their so called independent report to "validate" the increase.

Valuable lessons here about ignoring TA for some people. Those with plenty of shares better fasten their seatbelts tightly...looks highly likely we're headed down to test the previous low of $2.80. Very pleased I sold 75% of my shareholding and disappointed I didn't listen to my gut and simply ask for my money back on the pending bond conversion.

BP - big volumes in the early part of the 90 bond conversion pricing process mean bondholders are now looking likely to be out of the money v current SP of circa $2.85.

[McGinty]

Some big bondholders playing games to get a really low conversion price? Maybe we need to wait until next month to see the SP recover?

I think the bond conversion rules belong probably as well on the long list of events where the board didn't act in the interest of existing shareholders ...

Just bad luck - or is it incompetence?


Absolutely agree, October will be the month the SP should recover. Unfortunately there will be now additional resistance into any positive SP movement as there are now more holders that are underwater (anyone who's purchased during the last 2 months).

I would enjoy hearing the boards own list of accomplishments on how they have increased shareholders value (would be a much simpler list than one BP suggested) :D

Page 16 of the Annual report under the board's picture, first line....."The board is focused on creating shareholder value..."

Maybe the board needs to be informed that Actions speak louder than words, and from the boards actions maybe they should amend this to The board's focus is to receive market level compensation* relative to our peers before adding shareholder value.

* As measured by an independent firm who we commissioned to tell us what we want

[JayRiggs]

I have voted against the increase in director fees and sent my forms away.

[minimoke]

Page 16 of the Annual report under the board's picture, first line....."The board is focused on creating shareholder value..."

Maybe the board needs to be informed that Actions speak louder than words, and from the boards actions maybe they should amend this to The board's focus is to receive market level compensation* relative to our peers before adding shareholder value.

* As measured by an independent firm who we commissioned to tell us what we want
When asking themsleves if they are worth market remuneration the Directors might want to spend a moment reflecting on the attached picture

[couta1]

When asking themsleves if they are worth market remuneration the Directors might want to spend a moment reflecting on the attached picture Yep that picture should be on the screen at the front of the meeting room, you can't blame a fickle market for that ski slope.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CMO/307647/266385.pdf

Colonial Motors - the closest comparable company on the NZX
Annual Sales last year $854m
Net profit after tax $22.2m
Chairman's fee $84.5K
Other Directors $50-60K
I guess the independent review of directors fees somehow, (perhaps very conveniently) managed to overlook that company as a valid comparative measure ?
What does it matter that Colonial is actually creating real shareholder value for its shareholders after all...that's completely irrelevant right ?
How hard is it really to govern a company running a bunch of used car dealerships which sell cars, finance and insurance for goodness sake...

[minimoke]

Yep that picture should be on the screen at the front of the meeting room, you can't blame a fickle market for that ski slope.
Heres another one if they want to compare director fees in the market

[JayRiggs]

Grant Baker + the other directors will try their best to give justification on why they should get an increase in director fees in an effort to convince shareholders to vote for it at the AGM.
DO NOT fall for it.

One of the things they might say is "we do not control the share price", which I've always believed is complete BS.
The share price is mostly dictated by the company's financial performance.


If the share price has gone down, it means they are NOT performing well enough.
Board of directors + management must be held accountable for poor performance, hence a poorly performing share price.

[Joshuatree]

Ive voted against increase in directors fees.
And thanks McGinty and others for sharing.

[alex f]

When is the quarterly dividend due ? , different years, different months. Any ideas?
The Cambridge Terrace, Wellington yard was due to open in August, the container office is in place, but the yard hasn’t been sealed and is deserted. The opening in August sign has been turned around, away from the road.
I’m expecting good things in the November announcement.
Cars are flying out the door at the Wellington branch. Every car they plan to sell by auction is withdrawn and sold with a buy now (presumably with finance as well)
A bit frustrating as I liked getting cars at a wholesale prices driving them for a year, then getting my money back.
I’ve been going to Turners for 30 years. Used to be public and fleet auctions.
Then the selling public went to Trademe.
Then it was full of their own imports, not that many fleet cars.
Finally, they have cornered a huge chunk of the used NZ vehicle fleet and offer finance and add ons.
Hardly any imports there.
I wonder what they charge the fleet sellers ? A Toyota Yaris with a $10,700 buy now, is also offered at $8500-9500 suggested auction selling price (there is a $460 fee on top of the auction sale price), which is over $1000 less than the buy now.
Or are Turners just buying the fleet vehicles, then selling them ? (not on behalf sale)
They send out an email with new listings on my watchlist. I click on the links and a third have already sold. (so never get to the auction)
The only downside I see, is if Turners lose any portion of their NZ new car supply.
Wgtn is overflowing with them, but many are being sold

[percy]

Welcome to ST.Great first post.
I received a dividend on 20th April,and another on 18th July.
Next one is due either 17th or 24th of October,Details have yet to be announced.
Pity the Cambridge Tce site is not up and running yet.Spring time should be a good time to open a new yard.Wonder what is causing the delay?
Sounds as though you have had great fun with your Turners Cars over the years.
NZ new supply.Seems secure.

[Ggcc]

Running out of buyers. Guess too many disagree with these outrageous salaries and feel their vote will mean nothing against the huge votes pro wage increase they will get from institutions.

[couta1]

Running out of buyers. Guess too many disagree with these outrageous salaries and feel their vote will mean nothing against the huge votes pro wage increase they will get from institutions. I doubt the Insto's clients will be happy with their capital being eroded away though.

[winner69]

Close 285 being the low of the day

Some say that’s not a good sign

Must have been irrational exuberance that drove the price up to the 380s a while ago ......euphoric hype just too much for some punters

So 25% down since .....that’s more than a correction

[McGinty]

A quick look through the latest Annual report shows that 4 of the directors hold or control around 39% of the shares

Grant Baker - 16.34%
Paul Byrnes - 4.44%
Matthew Harrison - 8.98%
Alistair Petrie - 9.05%

Unsure if any of these figures are double ups of the Business Bakery Holdings

What Turners have left out from the Annual report (admin error?) is the fact that Milford and Salt hold a few shares as well

- Milford - 7.995%
- Salt - 9.298%

Plus there is a/some mystery international holder that has 10.2m shares (12%), No SSH released

[winner69]

Wow — 85 odd employees earning more than $100,000

Not quite Fonterra proportions but seems relatively high number

[Ggcc]

I doubt the Insto's clients will be happy with their capital being eroded away though.
I have never seen a negative approach to wage demands for directors for any shares I have held and all I have seen. I will be pleasantly surprised to see their demands not met.

[winner69]

I have never seen a negative approach to wage demands for directors for any shares I have held and all I have seen. I will be pleasantly surprised to see their demands not met.

A few such resolutions have been withdrawn over the years

[BlackPeter]

Wow — 85 odd employees earning more than $100,000

Not quite Fonterra proportions but seems relatively high number

Question is - would this number include whatever bonus the sales people get for selling a car? If that's the case, than 85 employees nationwide would not be a high number ...

[blackcap]

I doubt the Insto's clients will be happy with their capital being eroded away though.

Insto's don't care, its not their money.

[peat]

... you can't blame a fickle market for that ski slope.

Or can you?

[Beagle]

When is the quarterly dividend due ? , different years, different months. Any ideas?
The Cambridge Terrace, Wellington yard was due to open in August, the container office is in place, but the yard hasn’t been sealed and is deserted. The opening in August sign has been turned around, away from the road.
I’m expecting good things in the November announcement.
Cars are flying out the door at the Wellington branch. Every car they plan to sell by auction is withdrawn and sold with a buy now (presumably with finance as well)
A bit frustrating as I liked getting cars at a wholesale prices driving them for a year, then getting my money back.
I’ve been going to Turners for 30 years. Used to be public and fleet auctions.
Then the selling public went to Trademe.
Then it was full of their own imports, not that many fleet cars.
Finally, they have cornered a huge chunk of the used NZ vehicle fleet and offer finance and add ons.
Hardly any imports there.
I wonder what they charge the fleet sellers ? A Toyota Yaris with a $10,700 buy now, is also offered at $8500-9500 suggested auction selling price (there is a $460 fee on top of the auction sale price), which is over $1000 less than the buy now.
Or are Turners just buying the fleet vehicles, then selling them ? (not on behalf sale)
They send out an email with new listings on my watchlist. I click on the links and a third have already sold. (so never get to the auction)
The only downside I see, is if Turners lose any portion of their NZ new car supply.
Wgtn is overflowing with them, but many are being sold

Welcome to the forum. I am wondering if this is an HR issue. The company did admit they are battling to get quality human resources on the ground, (or words to that effect) at their national roadshow...but then getting quality professional sales staff is not by any means a problem unique to TRA. That said if one was a salesman that was professional and successful I wonder how many would be happy to work from a converted shipping container as opposed to for example, the other end of the spectrum, some of Giltrap's fancy European car sales palaces ? Does this " rather unique" business premises proposition leave TRA with a real problem attracting good staff ?

My point is that anyone that's any good is going to want to gravitate further up the car sales food chain and be looking for a better quality working environment, among other things and I can't help wondering if that point has been somehow overlooked by management ?

[winner69]

Maybe they don’t enough cars to put on this pop up Wellington site

Hope the container office is heated to keep them warm in a decent southerly

[minimoke]

Welcome to the forum. I am wondering if this is an HR issue. The company did admit they are battling to get quality human resources on the ground, (or words to that effect) at their national roadshow...but then getting quality professional sales staff is not by any means a problem unique to TRA. That said if one was a salesman that was professional and successful I wonder how many would be happy to work from a converted shipping container as opposed to for example, the other end of the spectrum, some of Giltrap's fancy European car sales palaces ? Does this " rather unique" business premises proposition leave TRA with a real problem attracting good staff ?
If Turners have a solid reputation for being a great employer they should not be having difficulty finding great sales people. That said - working out of a container does not give an impression of being a great Employer. Even TooCheapCars work out of something more permanent.

[Beagle]

If Turners have a solid reputation for being a great employer they should not be having difficulty finding great sales people. That said - working out of a container does not give an impression of being a great Employer. Even TooCheapCars work out of something more permanent.

Looking at everyday brands it doesn't matter whether its a dealership representing Ford, Mazda, Hyundai, Suzuki, Honda Toyota, whatever...they all have decent quality working environments with good customer lounges, coffee machines e.t.c. e.t.c I really don't know about this whole converted shipping container idea...to me its analogous to stapling the annual report together rather than binding it properly, its really down-market and doesn't leave a good impression. That said I am cognisant that I do not fit Turners target market so maybe it doesn't matter to customers and they're happy to get a fair car for a good price rather than be the ones effectively paying for the higher overheads of other dealers ? 60% of cars sold by Turners are for less than $10K and the vast majority of those are bought with finance Hmmmm...maybe that is the converted shipping container sales office end of the market and Todd Hunter knows that end of the market much better than I do ?
That still leaves the HR problem possibly exacerbated by the working environment doesn't it !

[percy]

Some very nice "container homes' on Google.,;container homes nz.
Makes very good sense to me.
Perhaps someone could ask at the agm what is causing the delay.

[Joshuatree]

Yep keep jawboning it down Roger inner relentless negative obsessive way that i sadly thought you'd overcome, Heartland all over again anyone?. What is your price point buy that you've set by the way.This is the only conclusion i can come too by your posting going on here. Gnawing at bones alright.

[Beagle]

Just trying to understand why the SP is getting smashed like everyone else on here JT. I am not short and do hold some unlike HBL at that time. It will be interesting to see if the previous long term support level of $2.80 holds.
I have decided to convert bonds to shares which will be an out of the money conversion based on the current spot SP by my calculations.
If could be value at the current price if management give assurance that they are on track to meet FY19 guidance. Maybe that's all the market needs to hear at the annual meeting, what do you think ?

[BlackPeter]

Yep keep jawboning it down Roger inner relentless negative obsessive way that i sadly thought you'd overcome, Heartland all over again anyone?. What is your price point buy that you've set by the way.This is the only conclusion i can come too by your posting going on here. Gnawing at bones alright.

Relax ...

It is always good to hear about both sides of the medal - and I guess given the current SP I don't think that Roger is alone with some concerns.

The value of these discussion forums is to hear about both sides of a story, not just the cheerleaders version. Feel free to tell us about the amazing opportunities this share offers (and I don't mean that in jest).

If you don't like to hear about risks - than I do recommend the ostrich method ;);

Discl: I am holding ... and hope I do have a balanced view on both sides of the medal;

[percy]

[QUOTE=Beagle;729023 It could be value at the current price if management give assurance that they are on track to meet FY19 guidance. Maybe that's all the market needs to hear at the annual meeting, what do you think ?[/QUOTE]

In fact it would be "outstanding" value if directors/management state their strategy and FY19 guidance is on track at the agm.
Altogether the agm is looking to be a lively event.

[Beagle]

In fact it would be "outstanding" value if directors/management state their strategy and FY19 guidance is on track at the agm.
Altogether the agm is looking to be a lively event.

I might go along and save some barking and gnawing on bones till then :) Definitely worth asking whether they're on track to meet previous guidance and I won't be rolling over like a tame labrador and taking a we can't confirm or deny lightly. If they can't confirm, why not ? Might get some good barking in about the directors fees increase too !

[McGinty]

Just trying to understand why the SP is getting smashed like everyone else on here JT. I am not short and do hold some unlike HBL at that time. It will be interesting to see if the previous long term support level of $2.80 holds.
I have decided to convert bonds to shares which will be an out of the money conversion based on the current spot SP by my calculations.
If could be value at the current price if management give assurance that they are on track to meet FY19 guidance. Maybe that's all the market needs to hear at the annual meeting, what do you think ?

It's just part of the game IMHO. There was always a good chance the price was going to get pushed down to lower the conversion price (similar thing happened to BLT in 2012 which favoured an entity associated with a director - I'm not saying this is the case with TRA).

What would be interesting is if we knew the bigger holders of the convertible bonds (who has the most to gain).

I find it difficult to apply normal TA to TRA due to the large dilutionary effects that have been happening the last 3 years.

[winner69]

There WILL be a profit upgrade at the AGM ...you read it here first

[couta1]

There WILL be a profit upgrade at the AGM ...you read it here first Couta price target of $3.83 says it's undervalued so you must be right.Lol.

[percy]

I might go along and save some barking and gnawing on bones till then :) Definitely worth asking whether they're on track to meet previous guidance and I won't be rolling over like a tame labrador and taking a we can't confirm or deny lightly. If they can't confirm, why not ? Might get some good barking in about the directors fees increase too !

I doubt you will get a word in, as McGinty is all fired up with a huge number of well researched questions,that will most probably turn the meeting into a marathon event.

[McGinty]

I doubt you will get a word in, as McGinty is all fired up with a huge number of well researched questions,that will most probably turn the meeting into a marathon event.

Haha, Will have to cut a track from the AGM at 12:30pm at the latest to catch my flight to Wellington.

Of course the directors could always remove resolution 5 prior to the AGM which will cut the wind currently blowing my sails.

[Beagle]

Couta price target of $3.83 says it's undervalued so you must be right.Lol.

Thanks for the reminder mate. Who could possibly argue with the legendary Couta1 reversion theory ? All aboard, this train is about to leave the station and this must be a SCREAMING BUY !!!!

[minimoke]

Haha, Will have to cut a track from the AGM at **.**pm at the latest to catch my flight to Wellington.
.Jeez - dont publish that detail. It will just give the directors a target time for their filibuster.

[percy]

Jeez - dont publish that detail. It will just give the directors a target time for their filibuster.

Mr.Chairman, as I have a flight to catch, I here by hand over to Beagle...……………...lol.

[Beagle]

Mr.Chairman, as I have a flight to catch, I here by hand over to Beagle...……………...lol.

:lol: :lol: :lol: Too funny, that post really made my day !

[percy]

Should of said "I hereby UNLEASH The Beagle."

[percy]

[QUOTE=alex f;728947]
The Cambridge Terrace, Wellington yard was due to open in August, the container office is in place, but the yard hasn’t been sealed and is deserted. The opening in August sign has been turned around, away from the road.


Opens next week.
Trust you will give us an update when you see it opened.

ps.Thanks Todd Hunter for returning my call.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12125335

[McGinty]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12125335

I guess we have a clue which way Milford will vote, lets hope Salt see things the same way.

Both funds (like most retail shareholders) will be underwater with their TRA investment.

[blackcap]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12125335

Thanks Beagle, The Rubicon and Snakk pieces were interesting reading for me too.

[Beagle]

One wonders what the annual ASX listing fees are and why bother ? Add that one to the list of questions...
Colonial Motors annual turnover for FY18 was in fact $904m, nearly 3 times Turners and yet the Chairman is happy with $85K but Grant Baker wants $150K and yet the increased turnover was cited in the explanatory notes as one of the reasons for the directors fees increase ? Hmmmmm
Link to Strategic pay's directors fee review https://www.turnersautogroup.co.nz/site/turnerslimited/files/AR2018/Strategic%20Pay_Directors'%20Fee%20Review.pdf
I note no attempt to make a comparison to the only other closely comparable company on the NZX Colonial Motors.

[blackcap]

One wonders what the annual ASX listing fees are and why bother ? .

Todd covered that in the roadshow. I asked him pretty much this questions. The rationale is that (although no trades on ASX) it allows Australian fund managers with mandates that companies they invest in must have an ASX listing, to invest in TRA. These fund managers are buying the stock on the NZX.

[McGinty]

Todd covered that in the roadshow. I asked him pretty much this questions. The rationale is that (although no trades on ASX) it allows Australian fund managers with mandates that companies they invest in must have an ASX listing, to invest in TRA. These fund managers are buying the stock on the NZX.

Yet the 2018 Annual report shows a 50% drop in Australian resident shareholders from 2017. There has been a good increase in international shareholders though (could this be a results of the 2000 shares traded on the ASX?)


9939

[couta1]

Basically all holders are now under water with this stock.Lol.

[minimoke]

$2.82 today. Still waiting for directors to withdraw the Fee resolution.

[blackcap]

Except The Business Bakery and associates would have an average price of around 70-80 cents per share. (pre the rights and if they have participated fully then their average may be a bit higher.

[couta1]

$2.82 today. Still waiting for directors to withdraw the Fee resolution. I see pigs flying with their snouts still in the trough.

[Beagle]

WOW there is going to be livliness from McGinty and I, (among others) at the forthcoming meeting the way this is going. Maybe we should start selling tickets to this fireworks display lol

Will the previous low of $2.80 hold...that's the $64,000 question.

[blackcap]

WOW there is going to be livliness from McGinty and I, (among others) at the forthcoming meeting the way this is going. Maybe we should start selling tickets to this fireworks display lol

Will the previous low of $2.80 hold...that's the $64,000 question.

Cheers Beagle,

As I cannot make the AGM as I have another one that day in a different location, could you please be so kind to post us what happened and the questions that were asked with answers?
If you don't no worries but you write enough on this site anyway and would appreciate it.

[Beagle]

Cheers Beagle,

As I cannot make the AGM as I have another one that day in a different location, could you please be so kind to post us what happened and the questions that were asked with answers?
If you don't no worries but you write enough on this site anyway and would appreciate it.

Will do mate. Wild horses won't keep me away from this meeting and you can count of me to have a good yap about it afterwards :)

[McGinty]

I wonder when the next dividend will be announced and if the newly converted shares will be issued before it goes ex?

If there's 4.5m new shares issued (@2.85) a 4c dividend will cost the company an extra $180k.

[BlackPeter]

I wonder when the next dividend will be announced and if the newly converted shares will be issued before it goes ex?

If there's 4.5m new shares issued (@2.85) a 4c dividend will cost the company an extra $180k.

Last year the dividend was announced October 13th, record date October 27th and payment November 3rd.

Given however this was the first "quarterly" and given that they (hopefully) might want to give the SP a slight change in direction ... who knows - maybe they announce it already at the AGM (September 27)?

And yes, I'd expect the record date being after the conversion date of the new shares ... unless they really would need to rush it.

[minimoke]

Will the previous low of $2.80 hold...that's the $64,000 question.We might find out today. Currently on $2.80. Time for directors to take a pay cut - failing to deliver value to shareholders.

[Beagle]

Here we go....big test of multi year long term support level $2.80 started. Hope the directors and management are ready for a marathon quantum of questions on 26 Sept.

[BlackPeter]

Just received the NZSA voting intentions. They do look at revenue and earnings growth ...


The company enjoyed another strong performance on the back of increasing used vehicle sales and a buoyant
economy. Revenue was up 32% to $330.5 million, NPAT was up 33% to $23.4 million and the dividend was
15.5 cents per share up 7%.

... and comment on the additional complexity of governing an insurance together with a trading company.


A chart setting out the current and proposed fees is contained in the Notice of Meeting. The increase includes
provision for the additional Director appointed August 2018. Turners is unusual in that the insurance
subsidiary is required by RBNZ to have its own board and this adds to the total fees.
Since the last fee increase the company has grown revenues from $96.5 million in 2015 to $330.5 million this
year. NPAT has increased from $18.1 million to $23.4 million. The market is a little underwhelmed with the
share price declining over the last year, however we believe the proposed Fees are reasonable for a company
of this size and complexity.


They intend to vote for the proposal to increase the board fees.

Personally - a bit disappointed they looked at NPAT instead of EPS growth - i.e. didn't took the impact of the constant capital rises on revenue and earnings growth into account, but the comments on the additional complexity re governing an insurance might be fair.

But hey, I can't understand everything - can I?

I did gave them my proxy, but instructed them to vote (for my shares) against the fee rises.

[couta1]

Here we go....big test of multi year long term support level $2.80 started. Hope the directors and management are ready for a marathon quantum of questions on 26 Sept. This mongrel will be testing the patience of all holders now including myself, directors and management will have a hard time convincing anyone that it's just a fickle market that's to blame for the ski slope that started over a year ago.PS-This ski slope needs a mega dump of powder snow to freshen things up.

[blackcap]

Just received the NZSA voting intentions. They do look at revenue and earnings growth ...



... and comment on the additional complexity of governing an insurance together with a trading company.



They intend to vote for the proposal to increase the board fees.

Personally - a bit disappointed they looked at NPAT instead of EPS growth - i.e. didn't took the impact of the constant capital rises on revenue and earnings growth into account, but the comments on the additional complexity re governing an insurance might be fair.

But hey, I can't understand everything - can I?

I did gave them my proxy, but instructed them to vote (for my shares) against the fee rises.

I just got their undirected proxy voting intentions and was disappointed with their conclusion too. Did like their bit about Paul Byrnes and his tenure and that displays good though processes and analysis. Maybe a question that can be asked at the AGM for those going.
Like you BP, its the EPS that is important, NPAT is largely irrelevant. Maybe the NZSA nominee who wrote this piece is unaware of all the extra shares that have come on board the last few years?

[Beagle]

This mongrel will be testing the patience of all holders now including myself, directors and management will have a hard time convincing anyone that it's just a fickle market that's to blame for the ski slope that started over a year ago.PS-This ski slope needs a mega dump of powder snow to freshen things up.

60cm's, (yes 60 cm's !) of fresh powder at Coronet Peak mate...and we're back at work watching the Turners ski slope, life isn't fair is it lol (although some people watch share prices even in the toilet but best I don't tell tails out of school eh lol)

Very disappointed with NZSA approach. Quite obviously they overlooked Colonial Motors comparison with 3 times the annual turnover and the Chairman is happy with a little over half the fee Grant Baker wants. Doesn't he get enough already from his 10% shareholding and dividends for goodness sake. I'll be telling Noodles (who perhaps seems to be representing their interests a bit lately ?), that NZSA needs to think harder about these sort of outrageous fee increases for such a modest sized company. How hard is it really to govern a company that sells used cars with finance and insurance !

[BlackPeter]

I just got their undirected proxy voting intentions and was disappointed with their conclusion too. Did like their bit about Paul Byrnes and his tenure and that displays good though processes and analysis. Maybe a question that can be asked at the AGM for those going.
Like you BP, its the EPS that is important, NPAT is largely irrelevant. Maybe the NZSA nominee who wrote this piece is unaware of all the extra shares that have come on board the last few years?

Possible - but hopefully not for much longer. I just did send them an email explaining the difference between EPS growth and NPAT growth;);

[McGinty]

Back in 2013 the Chairman's fees were $72k and Directors were $44k, this is for the old Dorchester Pacific which already ran there finance, insurance and debt collection businesses.

So 5 years down the track with the addition of the 'selling cars business' they want a 108% increase for the Chairman and 70.5% for the directors!

Since their last fee raise in 2015 when the Chairman got a 34% increase and Directors 10%, the 3 year return for SH's is just under 6% p.a (given you purchased around the AGM at $2.75). This is most likely a negative return if you have purchased since then at a higher price.

If the "boards focus is on creating shareholder value" then they have failed the last 3 years IMHO. What type of organisation rewards failure with a 36% pay rise?

On top of this, if resolution 5 is passed. Then it is back dated to 1 April 2018! :scared:

[Beagle]

The continuous smashing of any reasonable sized bid suggests something is seriously amiss here. If there's a profit downgrade at the annual meeting I will be asking the NZX and FMA to investigate who has been selling in recent weeks.

[sb9]

The continuous smashing of any reasonable sized bid suggests something is seriously amiss here. If there's a profit downgrade at the annual meeting I will be asking the NZX and FMA to investigate who has been selling in recent weeks.

Agree entirely, what baffles me more is that with so much selling over past few weeks, still yet to sight any SSH notice.

[minimoke]

Roadshow started 2 July. Something about the presentations, perhaps, market not liking

[winner69]

Roadshow started 2 July. Something about the presentations, perhaps, market not liking



More likely the presenters .....not convincing punters the story is for real and more than just buzz words and pretty pictures on a slide

Interesting reading the post meeting comments on here ...good raw material for my mate at the LSE Behavioural Finance faculty

[forest]

The continuous smashing of any reasonable sized bid suggests something is seriously amiss here. If there's a profit downgrade at the annual meeting I will be asking the NZX and FMA to investigate who has been selling in recent weeks.

Beagle maybe it's time to watch once more the clip you posted some time ago about the demise of Kodak and the horse and cart. Is it possible some people are looking ahead not at the next couple of years but maybe 5 years plus. Maybe this company got more downside risk as some on this forum allow for.

[Beagle]

Beagle maybe it's time to watch once more the clip you posted some time ago about the demise of Kodak and the horse and cart. Is it possible some people are looking ahead not at the next couple of years but maybe 5 years plus. Maybe this company got more downside risk as some on this forum allow for.

Timely reminder forest that self driving electric cars will be a reality at some stage in the future. Not sure when or how they will cope with N.Z. roads but I agree that this is coming at some stage in the future which kind of makes this the opposite of the retirement industry which has long term tailwinds. Maybe a PE of 10 is all its really worth ?...about $3, assuming the current year's plans are still tracking okay ?

[percy]

page 15 Turners annual report for year ended 31st march 2018...………
………………………………………….Fy.14...…….Fy.15...…..FY16...….FY 17...…..FY 18.
Earnings per share...………...20cps...….33cps.…….24.7cps...25.5cps .…...29.3cps.……….average growth 10% pa.
Dividends per share...………. 4cps...… 10cps...…….13cps......14.5cps......15.5cps...And paid quarterly.!
All going the right way.The business bulk up is set to produce excellent rewards for shareholders.
Just need the sp to catch up,and everybody will be happy.?

[minimoke]

All going the right way.The business bulk up is set to produce excellent rewards for shareholders.
Just need the sp to catch up,and everybody will be happy.?
I hope the AGM can help explain how the SP will catch up when its currently heading in the opposite direction

[percy]

You are not alone.
I think the directors with so much skin in the game will be feeling the most pain.
Maybe that's why they need the big increase in fees..???....lol.

[alex f]

I’d love to know who is selling, there’s and order of 43000 sell @ 2.80 in now (2 sellers)
Those sellers will be selling at a loss.

Having used Turners for years, it is now busier than ever and the cars are being sold at retail prices, not wholesale, plus the spin offs with finance insurance etc.
A 2014 small, petrol miser, nz new car for $10,000, who could say no?

[winner69]

Snoopy had Turners as a BUY a month or so ago when share price was over $3.10

[winner69]

Maybe the share price is just drifting down to match the company’s book value of $2.52

Could be as Turners don’t make much of a return on total invested capital

and i’ll leave it to Snoops to discuss goodwill

[BlackPeter]

Timely reminder forest that self driving electric cars will be a reality at some stage in the future. Not sure when or how they will cope with N.Z. roads but I agree that this is coming at some stage in the future which kind of makes this the opposite of the retirement industry which has long term tailwinds. Maybe a PE of 10 is all its really worth ?...about $3, assuming the current year's plans are still tracking okay ?

Worthwhile remembering though that somebody needs to buy (and sell) these electrical vehicles as well. And yes, while densely populated towns (any of them in NZ?) might observe a move from individual vehicles (no matter how they are powered) to community owned or rented self-driving and cheap cars - most (or should I say all?) of New Zealand is rural (compared to the rest of the world), and I don't hold my breath that I will still see the arrival of a cost effective, rentable self-driving transport solution in e.g. mid Canterbury. Large distances between houses make any form of public transport uneconomical. At this stage we don't even have a bus service (except limited school bus service) or Uber coverage - and if I really want to drive with the taxi into the next town - 2 and a half taxi round trips equal what I pay for our car per month.

I am sure the world will change, but at this stage I am not sure why Turners could not change with it? ... and if people want electric cars instead of petrol driven cars - from memory, their stock backlog is something like 6 weeks worth of sales. I am pretty sure the change from petrol to electric won't be that swift that their stock of petrol / diesel powered vehicles would be a problem.

[winner69]

page 15 Turners annual report for year ended 31st march 2018...………
………………………………………….Fy.14...…….Fy.15...…..FY16...….FY 17...…..FY 18.
Earnings per share...………...20cps...….33cps.…….24.7cps...25.5cps .…...29.3cps.……….average growth 10% pa.
Dividends per share...………. 4cps...… 10cps...…….13cps......14.5cps......15.5cps...And paid quarterly.!
All going the right way.The business bulk up is set to produce excellent rewards for shareholders.
Just need the sp to catch up,and everybody will be happy.?

Those numbers highlight why Directors should be rewarded with a pay rise

Yes EPS has grown at just over 10% pa

[minimoke]

Here we go....big test of multi year long term support level $2.80 started. Hope the directors and management are ready for a marathon quantum of questions on 26 Sept.Now got a $2.7* in front of the SP.

Getting closer to my stop loss.

[BlackPeter]

So - 5000 shares traded this afternoon for $2.79.

Based on analyst estimates does this calculate to a forward PE of 9.4; Forward EPS CAGR 2014 - 2021 (i.e. considering the dilution through CR's) is 28.2, admittedly starting in 2014, a year with quite low earnings. If we reduce the window and look only at the EPS CAGR 2015 - 2021, than the EPS growth is still roughly 9% pa. Not that stellar, but not bad either.

I am wondering how bad any hypothetical downgrade would have to be to make the current SP only "fair value", if we assume a PE of 10 would be fair for a non growth company.

Discl: hodl ;);

[McGinty]

You are not alone.
I think the directors with so much skin in the game will be feeling the most pain.
Maybe that's why they need the big increase in fees..???....lol.

Maybe Grant needs to supplement his old TIL remuneration of $220k ($110k as Chairman and 1/3 of $330k as a BB consultant)? - 2017 TIL Annual report

His classic car collection would cost a bit to maintain and gas is going up.

[couta1]

404k shares just gone through at $2.80, must be close to seeing a notice from someone.PS-That $2.80 sell line is being reloaded at lightning speed.Lol.

[winner69]

404k shares just gone through at $2.80, must be close to seeing a notice from someone.

Yep, 1% is 848,000 shares .....but then it could be non SSH playing around ..or maybe even percy reducing his holding.

[Beagle]

page 15 Turners annual report for year ended 31st march 2018...………
…………………………………………..…….Fy.15...…..FY16...….FY17...…. .FY 18......FY19 Forecast
Earnings per share...………… ... ..33cps.…... 24.7cp..s...25.5cps.…..29.3cps. 30.5cps….average growth NIL% pa.
Dividends per share...……..….… 10cps...……..13cps......14.5cps.....15.5cps... 16.0 cps

I hope you don't mind I edited your post and added 2019 forecast for the sake of illustrating my point below.

Those numbers highlight why Directors should be rewarded with a pay rise

Yes EPS has grown at just over 10% pa

I beg to differ. With statistics it all depends upon one's frame of reference. In this case the last directors pay rise was in 2015, I presume for earnings growth over pervious years. Since that time EPS has fallen. You could make the case that in recent years this company has been a woeful performer in terms of lack of EPS growth. In fact forecast 2019 earnings per share are still some 10% lower than 2015 4 years ago !

Is it really such a surprise that the SP has gone backwards for years seeing as EPS has done the same in recent years ?

[BlackPeter]

I hope you don't mind I edited your post and added 2019 forecast for the sake of illustrating my point below.


I beg to differ. With statistics it all depends upon one's frame of reference. In this case the last directors pay rise was in 2015, I presume for earnings growth over pervious years. Since that time EPS has fallen. You could make the case that in recent years this company has been a woeful performer in terms of lack of EPS growth. In fact forecast 2019 earnings per share are still some 10% lower than 2015 4 years ago !

Is it really such a surprise that the SP has gone backwards for years seeing as EPS has done the same in recent years ?

Just curious - where are the claimed 2015 EPS coming from? The company didn't exist at that time, i.e. you need to calculate it based on its parents financials. If you take DPC and TUA's adjusted EPS for 2015, than (according to Snoopies legendary post #1416: https://www.sharetrader.co.nz/showthread.php?4371-TRA-Turners-Automotive-Group-previously-TNR-Turners-Limited&p=668006&viewfull=1#post668006)

the FY2015 EPS was 20.2 cents.

Snoopy can't err - can he? And if we take his data, than the EPS growth since 2015 was roughly 9 % ...

[BlackPeter]

404k shares just gone through at $2.80, must be close to seeing a notice from someone.PS-That $2.80 sell line is being reloaded at lightning speed.Lol.

Early days (hours?) yet, but lat trade was $2.82 and next available offer is $2.84. As well - all other share offers below $2.90 magically disappeared - and there have been many a couple of hours ago. If this trend continues - a double bottom at $2.80 would be a quite bullish signal ...

[percy]

Just curious - where are the claimed 2015 EPS coming from? The company didn't exist at that time, i.e. you need to calculate it based on its parents financials. If you take DPC and TUA's adjusted EPS for 2015, than (according to Snoopies legendary post #1416: https://www.sharetrader.co.nz/showthread.php?4371-TRA-Turners-Automotive-Group-previously-TNR-Turners-Limited&p=668006&viewfull=1#post668006)

the FY2015 EPS was 20.2 cents.

Snoopy can't err - can he? And if we take his data, than the EPS growth since 2015 was roughly 9 % ...

Page 15 Turners Annual report for year ending 31st March 2018.

[winner69]

Just curious - where are the claimed 2015 EPS coming from? The company didn't exist at that time, i.e. you need to calculate it based on its parents financials. If you take DPC and TUA's adjusted EPS for 2015, than (according to Snoopies legendary post #1416: https://www.sharetrader.co.nz/showthread.php?4371-TRA-Turners-Automotive-Group-previously-TNR-Turners-Limited&p=668006&viewfull=1#post668006)

the FY2015 EPS was 20.2 cents.

Snoopy can't err - can he? And if we take his data, than the EPS growth since 2015 was roughly 9 % ...

so we are all totally confused eh .....so don’t worry about the past and just use the go to reference for the future

[winner69]

More likely earnings upgrade at AGM time ....no way a downgrade ..heck no

[winner69]

Early days (hours?) yet, but lat trade was $2.82 and next available offer is $2.84. As well - all other share offers below $2.90 magically disappeared - and there have been many a couple of hours ago. If this trend continues - a double bottom at $2.80 would be a quite bullish signal ...

Double bottoms — good news

$3.80 here we come

Must tell the neighbour about this double bottom. Might cheer him up as he’s heaps under water

[sb9]

More likely earnings upgrade at AGM time ....no way a downgrade ..heck no

I think if there's an upgrade or downgrade they probably have obligation to inform the market by now.
My pick is business as usual....

[BlackPeter]

Page 15 Turners Annual report for year ending 31st March 2018.

Cheers. Interesting ... might be worthwhile to find out how they calculated this 2015 EPS. Is this based on the numbers of DPC, TNR, a balanced mix out of both - and how did they allow for the share consolidation?

Edit ... so, yes I checked - Turners 2015 report claims 3.28 cent / share as earnings. After share consolidation is this nearly 33 cents.

Still not clear what happened with the DPC financials and shares ...

apples - pineapples?

[percy]

I think if there's an upgrade or downgrade they probably have obligation to inform the market by now.
My pick is business as usual....

Full year 2018 their NPBT was $31.1 mil.
Projected 2019 NPBT is expected to be between $34mil and $36mil.ie either 9.3% or 15.7% increase.[from investors presentation; outlook]
Until we know the exact number of shares there are on issue,after the bonds convert, we can not work out what the projected eps will be.

[percy]

Cheers. Interesting ... might be worthwhile to find out how they calculated this 2015 EPS. Is this based on the numbers of DPC, TNR, a balanced mix out of both - and how did they allow for the share consolidation?

Maybe NZSA may find the answers for you.?

[Beagle]

Full year 2018 their NPBT was $31.1 mil.
Projected 2019 NPBT is expected to be between $34mil and $36mil.ie either 9.3% or 15.7% increase.[from investors presentation; outlook]
Until we know the exact number of shares there are on issue,after the bonds convert, we can not work out what the projected eps will be.

Be careful that last year's EPS will be on weighted average number of shares on issue. I have crunched the numbers already based on assumed 50% bond conversion to shares, (which worked out to be spot on) and got 4.5% forecast EPS growth for FY19 using the mid point of the company forecast for FY19. The terms of the latest bond issue suggest the directors might finally have got it that profit growth is meaningless to shareholders unless its reflected in EPS growth. 4.5% annual EPS growth if maintained in future years means that by 2021 all going well, we will be back up to 2015 EPS of 33 cps, (unless there's a terrible recession in 2020 like some people reckon).

[percy]

Makes the agm outlook statement even more important.
In my discussions with Turners management, I have found they are fully aware of the importance of eps growth [and dividend growth],rather than just revenue growth.
I prefer to look past the figures, and see the real strength and quality of the business has been greatly improved over the past four years or so.In fact I would have to say they are extremely "well positioned."

[blackcap]

At least someone bought a truckload at $2.80 today.

[sb9]

Makes the agm outlook statement even more important.
In my discussions with Turners management, I have found they are fully aware of the importance of eps growth [and dividend growth],rather than just revenue growth.
I prefer to look past the figures, and see the real strength and quality of the business has been greatly improved over the past four years or so.In fact I would have to say they are extremely "well positioned."

And with Todd being a member here, am sure he'll drop in every once in a while to check us shareholders concerns.

[winner69]

Cheers. Interesting ... might be worthwhile to find out how they calculated this 2015 EPS. Is this based on the numbers of DPC, TNR, a balanced mix out of both - and how did they allow for the share consolidation?

Edit ... so, yes I checked - Turners 2015 report claims 3.28 cent / share as earnings. After share consolidation is this nearly 33 cents.

Still not clear what happened with the DPC financials and shares ...

apples - pineapples?

They’re the Dorchester Accounts with Turners folded into them from when they ‘effectively’ took over Turners

Its the Turners old accounts that have been kicked into account

[Beagle]

At least someone bought a truckload at $2.80 today.
Good to see some significant volume going through today and price at end of day holding. Maybe the long term 280 support floor will hold ?

[Snoopy]

Just curious - where are the claimed 2015 EPS coming from? The company didn't exist at that time, i.e. you need to calculate it based on its parents financials. If you take DPC and TUA's adjusted EPS for 2015, than (according to Snoopies legendary post #1416: https://www.sharetrader.co.nz/showthread.php?4371-TRA-Turners-Automotive-Group-previously-TNR-Turners-Limited&p=668006&viewfull=1#post668006)

the FY2015 EPS was 20.2 cents.

Snoopy can't err - can he? And if we take his data, than the EPS growth since 2015 was roughly 9 % ...

Yes I can make mistakes. Fortunately in most instances there are enough smart people on this forum to find them and I try to correct my mistakes when these are pointed out. I usually record the correction in the 'Last edit' line at the bottom of each post when someone else points it out. If I find my own mistake myself (sometimes something as trivial as a spelling mistake) , I normally fix it 'on the sly' without a comment, even though the 'last edit' time stamp records my tampering.

I have put considerable time into retrospective 'eps' analysis for Turners. One area where I always differ from the figures the company quotes is that when calculating 'earnings per share', I always use the number of shares on issue at the end of the financial year. Often the company uses the 'weighted average number of shares on issue during the year'. The company calculating 'eps' like this will result in a higher 'eps' value than I would calculate. However, for various reasons I have previously discussed, I don't consider this to be a 'mistake', although I accept that some might disagree.

As far as the 'NPAT component' goes of 'eps' for FY2015, I refer readers to my 'legendary' ;-P post 1398.

The main potential 'error' here is that I have taken the old Turners Auctions earnings based on 234 days of trading and annualised that out into 365 days of trading. If the EBIT earnings rate per day on the 234 days of TUA equity ownership, was different to the 131 days after TUA was fully absorbed, then my estimate of annual EBIT contribution from what was the old TUA will be wrong. Realistically it almost certainly is wrong. However, because of the mismatch in the year end balance date of the old TUA and DPC, I don't think it is possible to calculate what the accurate figure is. I stand by my figure as a 'best guess' that I have no reason to believe is 'too far wrong'.

At any rate, all the above is dwarfed by the adjustment I made stripping $7.098m from my EBT profit estimate for FY2015. $7.098m represents the increase in the 19.85% strategic TUA stake that Dorchester already owned before they gobbled up the rest of the TUA shares. The $7.098m EBT profit was real. But it was 'self created' by Dorchester offering a premium takeover price to other shareholders, which in the process increased the value of the TUA shares they already held. It certainly was not operational profit, and it was certainly a 'one off'. I believe that I was correct to remove it for comparison purposes.

Yet another change I made was to standardise the tax rate at 28% across the years I was looking at. This is not 'correct' because it includes the periods where Dorchester was using up their own tax losses from previous years. However, for the purpose of comparing operational performance across different periods I feel this was the right thing to do.

Putting all this together for FY2015:

eps = NPAT / (No. Shares on issue)

$12.722m / 63.077m = 20.2cps

While Turners published 33cps NPAT figure for FY2015 is undoubtedly in compliance with the income tax act(s), I do not consider it representative of operational performance, for the many reasons outlined in this post

SNOOPY

[Beagle]

Good work mate.
Thanks to my fellow beagle we now know on a normalised basis Turners really is growing EPS. Must be a BUY at the current price then !

[BlackPeter]

cheers Snoopy,

great stuff and thanks for explaining it to us none-bean-counters in a language we can fathom. And yes, I think this all makes sense.

Urgently need to spread some reputation to be able to acknowledge this post!

[Snoopy]

Back in 2013 the Chairman's fees were $72k and Directors were $44k, this is for the old Dorchester Pacific which already ran their finance, insurance and debt collection businesses.

So 5 years down the track with the addition of the 'selling cars business' they want a 108% increase for the Chairman and 70.5% for the directors!

Since their last fee raise in 2015 when the Chairman got a 34% increase and Directors 10%, the 3 year return for SH's is just under 6% p.a (given you purchased around the AGM at $2.75). This is most likely a negative return if you have purchased since then at a higher price.

If the "boards focus is on creating shareholder value" then they have failed the last 3 years IMHO. What type of organisation rewards failure with a 36% pay rise?

On top of this, if resolution 5 is passed. Then it is back dated to 1 April 2018! :scared:

One thing I did note in the 'fairness' report supporting the new fee structure is that they noted the director fee increase was 'a lot', and suggested it might be phased in over a couple of years. Doing it in one hit and then back dating the increase is hardly in line with the 'support report' the directors commissioned.

The loan business has grown quite a bit over the years with the acquisition of Southern Finance and Oxford Finance. Furthermore with the acquisition of Autosure, the insurance business is mega sized now compared to what it used to be. So I think they have done a bit more than 'just add a car sales division.'

Personally I don't think finance and insurance are easy businesses to understand.



60cm's, (yes 60 cm's !) of fresh powder at Coronet Peak mate...and we're back at work watching the Turners ski slope, life isn't fair is it lol (although some people watch share prices even in the toilet but best I don't tell tails out of school eh lol)

Very disappointed with NZSA approach. Quite obviously they overlooked Colonial Motors comparison with 3 times the annual turnover and the Chairman is happy with a little over half the fee Grant Baker wants. Doesn't he get enough already from his 10% shareholding and dividends for goodness sake. I'll be telling Noodles (who perhaps seems to be representing their interests a bit lately ?), that NZSA needs to think harder about these sort of outrageous fee increases for such a modest sized company. How hard is it really to govern a company that sells used cars with finance and insurance !


I think the increases advised are for the position rather than the current incumbents. Granted (sic) Grant Baker probably doesn't need the money. But at some point (maybe soon?) he won't be Chairman any more. You have to make sure the directors fee pot is big enough to encourage the next Chairman to 'give her all' in the wise governance of this business.

The Colonial Motors comparison is interesting, but really are the Colonial Boys and Girls not just 'box tickers'?:

1/ Rolling out their retail premises in accordance with Ford (and Mazda) NZ's plans. THEN
2/ Advertising for product (taken care of by Ford/Mazda), WHILE
3/ Financing deals for the product (taken care of by Ford/Mazda),
4/ And even getting the model mix in the showroom right(taken care of by Ford/Mazda) .

A lot of what directors do in other companies is all done for them. Perhaps the Colonial directors really do only need to be only on half the pay of those Turners guys?

SNOOPY

[Beagle]

Colonial Motors have trucks too and run a massive number of car servicing operations and develop vehicle sites properly so there's more to it than you suggest and there's three times the turnover. Maybe some car dealers are greedy and others aren't ?

[McGinty]

One thing I did note in the 'fairness' report supporting the new fee structure is that they noted the director fee increase was 'a lot', and suggested it might be phased in over a couple of years. Doing it in one hit and then back dating the increase is hardly in line with the 'support report' the directors commissioned.

The loan business has grown quite a bit over the years with the acquisition of Southern Finance and Oxford Finance. Furthermore with the acquisition of Autosure, the insurance business is mega sized now compared to what it used to be. So I think they have done a bit more than 'just add a car sales division.'

Personally I don't think finance and insurance are easy businesses to understand.

SNOOPY


Thanks for you views there Snoopy, yes you are correct in the most of the businesses are larger than they were back in 2012. One only needs to look at the number of employees receiving over $100k to understand to picture:

2013 - 7 over $100k
2015 - 16 over $100k
2018 - 86 over $100k

The point I was trying to highlight was that the governance around these businesses would most likely be the same (happy to be corrected with this). Judging by the 2018 figure of salaries over $100k, they should have more than enough capable managers within each business who would do all the leg work and report back to the board.

In the absence of the the boards own reasons to justify the increase in existing directors fees (for example increased workload), shareholders are left to come to their own conclusion.

[winner69]

Mcginty ...I think the 2013 and 2015 numbers you quoted are Dorchester employees only

Remember Dorchester effectively took over Turners and the reports you have used for those years are Dorchester reports

Snoops will have the old Turners reports ...he could look up how many Turners employees got >$100k in those years

More and more Employees getting paid more than $100k ...that good?

[McGinty]

Mcginty ...I think the 2013 and 2015 numbers you quoted are Dorchester employees only

Remember Dorchester effectively took over Turners and the reports you have used for those years are Dorchester reports

Snoops will have the old Turners reports ...he could look up how many Turners employees got >$100k in those years

More and more Employees getting paid more than $100k ...that good?


2013 was only DPC, but the 2015 figure was from the joint DPC plus TUA (Newly renamed Turners Limited) as at 31 March 2015. The Takeover was completed Dec 2014.

But you raise a good point so I checked TUA 2013 Annual report (Google search) and the during that year TUA had 39 employees over $100k, helps explain the increase (but not why the 2015 annual report only lists 16 over $100k)

[winner69]

2013 was only DPC, but the 2015 figure was from the joint DPC plus TUA (Newly renamed Turners Limited) as at 31 March 2015. The Takeover was completed Dec 2014.

But you raise a good point so I checked TUA 2013 Annual report (Google search) and the during that year TUA had 39 employees over $100k, helps explain the increase (but not why the 2015 annual report only lists 16 over $100k)

Because Turners employees only worked for the reporting entity being Dorchester (morphed into TRA) for a few months, not long enough to get to $100k for most

Tricky eh

[McGinty]

Because Turners employees only worked for the reporting entity being Dorchester (morphed into TRA) for a few months, not long enough to get to $100k for most

Tricky eh

It sure is, thanks for clearing that up.

The collective wisdom of the community shows it's worth again :)

[couta1]

Must be Couta reversion Friday, the worm is turning.

[sb9]

Must be Couta reversion Friday, the worm is turning.

$2.80 is proven to be strong support and floor again. Here's hoping we don't re-visit that level again.

[Beagle]

$2.80 is proven to be strong support and floor again. Here's hoping we don't re-visit that level again.

Yes good point.


Couta1 me old mate, I am still very happy to wager a case of cider we don't see $3.80 before 15 September 2019. Just waiting on your confirmation of this "huge" bet lol

[couta1]

$2.80 is proven to be strong support and floor again. Here's hoping we don't re-visit that level again. My Gutometer keeps confirming to me that this is one of only a handful of value buys currently on the NZX.

[minimoke]

$2.80 is proven to be strong support and floor again. Here's hoping we don't re-visit that level again.$2.80 was testing my patience. Hopefully its onwards and upwards from here on in.

[couta1]

Yes good point.


Couta1 me old mate, I am still very happy to wager a case of cider we don't see $3.80 before 15 September 2019. Just waiting on your confirmation of this "huge" bet lol Make it by end of March 2020(18 months) and your on.PS-Whoever wins will only get to drink half of them anyway.Lol.

[Beagle]

Make it by end of March 2020(18 months) and your on.PS-Whoever wins will only get to drink half of them anyway.Lol.

I thought the mighty Couta1 reversion theory worked quicker than that :p

[couta1]

I thought the mighty Couta1 reversion theory worked quicker than that :p Reversion theorum can't be rushed but it's still certain.:D

[percy]

Reversion theorum can't be rushed but it's still certain.:D

Only two proven certainties on the sharemarket,:
Buy...……... using the time tested Couta1 theorem...............….It really works.
Sell...........when W69 bowling club mates buy...............………..It really works.
…………………………………………………………………………………………………………………………………… ………...lol.

[sb9]

Only two proven certainties on the sharemarket,:
Buy...……... using the time tested Couta1 theorem...............….It really works.
Sell...........when W69 bowling club mates buy...............………..It really works.
…………………………………………………………………………………………………………………………………… ………...lol.

Guess we'll find out about TRA tomorrow morning from the ASM.

[Beagle]

Only two proven certainties on the sharemarket,:
Buy...……... using the time tested Couta1 theorem...............….It really works.
Sell...........when W69 bowling club mates buy...............………..It really works.
…………………………………………………………………………………………………………………………………… ………...lol.

:lol: :lol: Classic..didn't they buy Synlait or ATM the other day. Couta1 theorem says OCA worth at least $1.36 and Turners $3.80. BUY !

[percy]

:lol: :lol: Classic..didn't they buy Synlait or ATM the other day. Couta1 theorem says OCA worth at least $1.36 and Turners $3.80. BUY !

Yes we are all in agreement.
Modest targets for both...………………………...lol.

[percy]

Guess we'll find out about TRA tomorrow morning from the ASM.

I guess so.
I have the whole morning booked in my diary.!
Current trading and outlook should be of interest.
Will be watching from 10.30 am.Youtube,,Turners Automotive Group Ltd.agm 2018.
Looking forward to McGinty's questions.

[Timesurfer]

It seems word got out on Couta1's theorum.
Pressure is on to deliver now.

[percy]

It seems word got out on Couta1's theorum.
Pressure is on to deliver now.

Just keep it to yourself,closest you will ever come to inside trading. Mum's the word....

[McGinty]

I guess so.
I have the whole morning booked in my diary.!
Current trading and outlook should be of interest.
Will be watching from 10.30 am.
Looking forward to McGinty's questions.

Currently doing a bit of fine tuning for tomorrow in my Ellerslie hotel room (short drive to AGM). Looking forward to the AGM and to hear how the Turners businesses are all going and to see what kind of spread they put on :t_up:

[winner69]

Any live coverage of meeting

Neighbours bowling mates thinking they could put it up on the big screen at the club so see whether they’ll get their money back on the shares they still have....they but miffed they sold some though as they reckon they would have better off than swapping some into OCA

[percy]

Any live coverage of meeting

Neighbours bowling mates thinking they could put it up on the big screen at the club so see whether they’ll get their money back on the shares they still have....they but miffed they sold some though as they reckon they would have better off than swapping some into OCA

Go to ….YouTube from 10.30 am;Turners Automotive Group AGM 2018.

[Beagle]

Currently doing a bit of fine tuning for tomorrow in my Ellerslie hotel room (short drive to AGM). Looking forward to the AGM and to hear how the Turners businesses are all going and to see what kind of spread they put on :t_up:

Free hint, don't go hungry and expecting a good feed... might as well make sure you have a good breakfast as the spread at the roadshow was analogous to hanging the annual report together with a single staple. Directors seem to like saving money so they can lavish it upon themselves.
Shame our mate Noodles has to tow the official line of the shareholders association otherwise we could have set up a nice three way tag team to barrage them with questions.

[percy]

I will be in my comfy armchair "well positioned", with my date scones and coffee.

[couta1]

Free hint, don't go hungry and expecting a good feed... might as well make sure you have a good breakfast as the spread at the roadshow was analogous to hanging the annual report together with a single staple. Directors seem to like saving money so they can lavish it upon themselves.
Shame our mate Noodles has to tow the official line of the shareholders association otherwise we could have set up a nice three way tag team to barrage them with questions. We need you to be "Hungry like a Wolf " when it comes to addressing the floor about the increase in Directors fees, please refrain from eating breakfast to ensure you are as Wolf like as possible, leave the Beagle mindset at home, we need Bite not Bark.

[McGinty]

Free hint, don't go hungry and expecting a good feed... might as well make sure you have a good breakfast as the spread at the roadshow was analogous to hanging the annual report together with a single staple. Directors seem to like saving money so they can lavish it upon themselves.
Shame our mate Noodles has to tow the official line of the shareholders association otherwise we could have set up a nice three way tag team to barrage them with questions.

Thanks for the tip, the last AGM I attended was an NZO one (years ago) and although it was only finger food it was still decent.

It will be interesting to see how the directors answer (try to justify) the fee increase as that report isn't comprehensive enough to hide behind.

Disc: Immediately sold my NZO shares after that meeting

[Beagle]

We need you to be "Hungry like a Wolf " when it comes to addressing the floor about the increase in Directors fees, plenty refrain from eating breakfast to ensure you are as Wolf like as possible, leave the Beagle mindset at home, we need Bite not Bark.

Like this mate https://www.youtube.com/watch?v=ab4zQni0cIw ? I reckon that guy with where he had his arm was pretty brave :eek2: