Divisional Profit Breakdown FY2019
Quote:
Originally Posted by
winner69
The market valuing the car selling division as almost worthless just highlights why one Turners is a great investment going forward
You guys might be interested in the divisional profitability for FY2019 as served up by my own spreadsheet. Note that Turners call 'Earnings Before Tax (EBT)' 'Operating Profit'
|
EBT As Declared |
EBT A.R Finance Adjusted |
EBT C&O Apportioned |
Automotive Retail |
$18.274m |
$14.451m |
$4.815m |
Finance |
$11.112m |
$14.935m |
$12.635m |
Credit Management |
$6.321m |
$6.321m |
$5.525m |
Insurance |
$8.227m |
$8.227m |
$6.024m |
Corporate & Other |
($14.885m) |
($14.885m) |
Total EBT |
$20.048m |
$20.048m |
$20.048m |
1/ Turners retain a finance book inside the Automotive business. To truly see divisional profitability, I believe this should be removed and transplanted into the Finance division. This is what I have done in the second column.
2/ I have allocated 'Corporate and Other ' expenses amongst the divisions in proportion to their divisional revenue. I use 'divisional revenue' as an allocation tool, because I believe the more dollars that are involved in any particular deal, the more attention is required from management. This adjustment has produced the third column.
This is what concerns me about the plan to sell the 'finance division'. Looked at this way it is -by far- the most profitable division of Turners. But what this table does not show are any 'transfer pricing ' effects.
When Turners own both the finance company and the car sales company, it must be very tempting to 'knock a few dollars' of the retail price and gain them all back again with a finance deal with interest set at a suitably high rate. With the finance company sold, this tactic won't work for Turners. So I wouldn't be surprised to see Turners firmer on their prices while turning the screws on the new owners of Oxford finance to help 'seal the deal'. Thus the divisional profitability that I have worked out above may not be indicative of what is to come.
If / When a sale of Oxford Finance is announced, equally important as the price will be the 'referral fee' terms on each deal that is due to Turners, and the structure of those 'referral fee' kick back payments going forwards.
SNOOPY