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

[percy]

I have never known a business that does not have growing pains.Seems mature businesses going backwards have fewer problems.!
Like MFT the more you take on the more can and does go wrong.However the big picture remains the same.
Dorcester took over Turners.Turners retail exposure in Auckland was weak,as was their finance exposure in the South Island.Fixed by acquistions which saved years of organic growth.
MTF blocking stake acquired,and created more opportunities [not all good] for Turners.
Autosure lacked scale.
Scaling up all these businesses has come at a cost.Big set backs too.
However retail sales has bulk,and is growing with new sites and relocated sites working well.More coming on tap.
Finance now strong through out NZ and growing with not only Turners but also with more originators.
Insurance,as above.
Property .Growth has certainly given Turners great opportunities,which are looking very profitable.

[winner69]

It’s good if you can turn a problem into something that gives you a competitive advantage ...i’m sure that’s how Todd thinks ...mind you he and others didn’t give that impression when answering question about their problems at the agm.

[Beagle]

’Houston, we have a problem’ was in the film but Jim actually said ‘Houston, we had a problem’

Maybe Turners had a problem and it’s all fixed just like Apollo 13 getting back home safely was and Todd Turner is a hero

Agree with what you say about problems Percy but Turners seem to have a never ending set of problems ..wonder what the next one they tell us is.

I'd like to think after the passage of quite some time since the acquisition of Buy Wrong ? cars that the significant majority of issues of slow and problematic vehicles will be dealt with by the end of FY20 and likewise for the non recourse loans but to your latter point I agree that this is a very tough industry choc-a- bloc full of challenges. Its not without opportunity either but until they start to put eps growth runs on the board in a consistent way I can relate to the market's scepticism so will stick to a low portfolio allocation.

[percy]

The foundations for a really great business have been laid.
The next couple of years should see Turners delivering on their vertical intergrated business model strategy.
Not there yet,but getting closer [by the day].

[Snoopy]

I have often stated there are two areas of concern to me.
1] Buy Right Cars.
2] The length of tail for the MTF bad non-recouse loans,.
Rebrading BuyRight Cars to Turners will fix that problem.
We do know Turners tightened their lending criteria for MTF and other non-recourse loans in April 2018,so that tail should be getting shorter.
So I think the result will be messy with one off rights offs, and one off property gains.
Therefore the outlook statement will be all important.

I am not expecting to be able to judge much on the day the annual results are released. As per last year, we will have to wait until the full annual report is published with all of those messy one offs fully explained to truly understand how the year has panned out. It does make me a bit nervous though: That there is enough wriggle room to more or less make the headline result figure exactly what Turners have previously signalled.

With the demise of 'Buy Right cars', as a brand, I thought it was worth looking back at what was said at last years roadshow, where the outlook for 'Buy Right Cars' was a lot more positive, despite the signalled stock problems.

	Turners	Buy Right Cars
Satisfaction	87%	88%
Likelihood to Repurchase	71%	77%
Stock Turn	35-45 days	60-90 days

Turners is the better known brand, for sure. Yet the likelihood of repeat business is less. So does this mean we will see the not so satisfied ex 'Buy Right' customers will now be 'more certain' knowing exactly what yard they wish to avoid in the future? Brand recognition I assume works both ways! The 'Buy Right' business was structured around spending more time (4 hours) with customers, as opposed to the Turners 'No Frills' (1-2 hours) approach. IIRC, this partly explains the higher satisfaction and likelihood to repurchase ratings. I wonder if this will change, or whether Turners will roll out some kind of 'Turners Premium' branding for the smaller 'Buy Right' sites in the future? Perhaps it does mean that kiwi car buyers are impulsive and cheap?

It was masterful for Todd to rebrand himself at the same time: 'Todd Turner' sounds much less desperate than 'Todd Hunter' for sure. (thanks to Winner for pointing out this little known fact). The Aaron Saunders rebranding around losing the beard was less successful. Calling himself 'Aaron Turner' would have been the way to go, and would have made for a real family atmosphere at the top.

SNOOPY TURNER (Shareholder)

[winner69]

I am not expecting to be able to judge much on the day the annual results are released. As per last year, we will have to wait until the full annual report is published with all of those messy one offs fully explained to truly understand how the year has panned out. It does make me a bit nervous though: That there is enough wriggle room to more or less make the headline result figure exactly what Turners have previously signalled.

Isn’t that how things usually work in big business ....dress things up to make it all look good ....while dismissing the good stuff.

Your normalisation exercise is going to be one huge task but as long as you get eps growth of 20% it’ll be good

So many ‘abnormals’ / ‘one offs’ every year they’re becoming the norm but if you reckon worth it go for it.

[percy]

Snoopy I think you will make a better informed judgement why Turners are rebranding BuyRight Cars to Turners, should you reread page 16 of their Forsyth Barr Investor Day presentation,noting "Turners is seen as the most trustworthy used car dealer in NZ".
Interesting noting on page 11, Operating profit FY 2018 Finance [29%] combined with Insurance [15%] totalled 44%,which was slightly higher than Automotive Retail of 41%.
I expect we will see further growth in both Finance and Insurance.
The great unknown will be property which will added further to Insurance's contributuion.
Get used to "one offs","abmormals' etc, for the next few years as Turners develop and relocate sites.
One brand Turners for vehicle retail, and one brand Oxford Finance for finance makes good sense.

[Snoopy]

Snoopy I think you will make a better informed judgement why Turners are rebranding BuyRight Cars to Turners, should you reread page 16 of their Forsyth Barr Investor Day presentation,noting "Turners is seen as the most trustworthy used car dealer in NZ".

That 'trusted dealer comparison' is not really an 'apples with apples' comparison though, is it? "2 Cheap Cars" and "Enterprise Motor Group" are the only others with any kind of national footprint. ANZA (Palmerston North) and 'Value Car Warehouse' (Christchurch) are one site dealers. So ask someone in Auckland what they think of those two and they are hardly going to trust a company they have never heard of. Put in the context of 'Buy Right Cars' being Auckland only -plus one site in Hamilton- and that 4% rating is actually pretty good. If Auckland has 1/3 of NZ's population, maybe equivalent to 12% on a national per population comparison basis.

I see the 'intangible asset brand value' for 'Buy Right Cars' is listed in the FY2018 annual report as $4.3m.

The 18th April trading update where the brand rationalization plan is disclosed says:

"This will result in a $4.5m one-off, non-cash write-off for the Buy Right Cars brand and signage value."

So it looks like all the goodwill associated with the 'Buy Right Cars' purchase ($10.860m) is still intact. No nasty surprise here is good news for the TRA balance sheet.

Interesting noting on page 11, Operating profit FY 2018 Finance [29%] combined with Insurance [15%] totalled 44%,which was slightly higher than Automotive Retail of 41%.

Remember Percy that as of EOFY2018 (p50 AR2018) the 'Automotive Segment' was still booking $5.724m of 'finance operating profit' (the old Turners Auctions Finance division I believe) . That Automotive division finance profit is being moved into Oxford Finance over FY2019. That in turn means the part of the Automotive division that is taking the gross profit on the car sales themselves is not as profitable as the segmented results - as published on cursory inspection - would indicate.

SNOOPY

[percy]

It is very much apples for apples.
Directors/management know "we appear to have a problem".
And have taken the right course of action to fix the problem.

[LAC]

Finance and insurance are what I will be looking at to be honest, the automotive retail is just too flaky in the coming couple years to make me confident in its growth. If finance and insurance number look dismal then il be out with a substantial capital loss as I was buying from mid 3.50s to 2.14 so I am quite deep in it.