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

[Snoopy]

And as a Turners shareholder you are still worried but slightly less so? That's reassuring at least

Thinking about this overnight, I think 'worried' was probably not quite the right word to use in relation to Heartland and Turners indebtedness. 'Concerned' is what I should have written. 'Worry' has a connotation of some imminent unfolding disaster. 'Concerned' carries a connotation of noticing that something is not ideal, and keeping an eye on things with a view to avoiding further future deterioration. The latter is what I meant.

Lenders like these operate across a range of customer market sectors. So it is less likely, for instance, that rental car buyers, farmers and marketing travellers will all stop buying new vehicles at the same time. This means that a higher level of finance company debt might be acceptable than if all customers were tied to the fortunes of a single industry.

Also the ability to service debt is based on cashflow. An impairment provision is a non cashflow item. So I was probably misleading in suggesting that Heartland's MDRT could blow out to 14.3 years. 12.2 years (still concerning) is I think the better figure on which to make a debt servicing judgement.

On my mind were two contrasting separate trajectories being laid out for the future from the two companies.

1/ Heartland (the more indebted) was proposing a $75m return of capital to shareholders as recently as December 2015. $75 represents

$75m / $2,862.070m = 2.6% of the loan book @ 30-06-2015

2/ Turners (the lesser indebted) is lookig at a potential cash injection of up to $23m (should all bondholders convert to Turners shares) at the end of this year.

$23m/ $164.386m = 14% of the loan book @ 30-09-2015

To me that represented, and still does, a rather large divergence on what each team of management regards as suitable working capital for each respective business. That's the point that was festering away in the back of my mind when I made my poorly worded post yesterday.

SNOOPY

[blackcap]

Is this good for TNR? Apologies if someone has already posted this.

Turners auction group is benefiting from strong New Zealand and overseas demand for trucks and machinery.
The country's second largest vehicle retailer has spent $7 million on new dedicated truck and machinery sales sites in Auckland and Christchurch.
They operate as a standalone unit selling excavators, diggers, rollers, graders, scrapers, dump trucks, tippers, trailers and utes.
Turners Group chief executive Todd Hunter said following opening of the new auction sites over the past year, their revenue had risen 50 per cent.
Sales had been strong for the past four years and Canterbury's earthquake rebuild was partly responsible for growth in demand for used trucks and machinery, he said. "In Canterbury the market's been kind to us."
New Zealand Transport agency figures show 142, 647 trucks heavier than 1500kg were traded last year, compared to sales of 10,000 new vehicles.
Businesses in Australia, the Pacific Islands and Asia were also interested in buying quality civil contracting equipment.
Hunter said the truck and machinery business had grown sufficiently to justify standalone management, so Turners had appointed a new manager, Jason Prendergast, to run the new truck and machinery offshoot.
In other changes, Hunter was recently appointed chief operating officer of Turners Limited, the parent company of Turners Group, in addition to being chief executive.
Turners Group financial officer, Aaron Saunders, will take on additional duties as chief operating officer in the cars division. General managers have also been appointed within that division to cover supply, sales and operations.
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- Stuff

[Snoopy]

Is this good for TNR? Apologies if someone has already posted this.

Turners auction group is benefiting from strong New Zealand and overseas demand for trucks and machinery.
The country's second largest vehicle retailer has spent $7 million on new dedicated truck and machinery sales sites in Auckland and Christchurch. They operate as a standalone unit selling excavators, diggers, rollers, graders, scrapers, dump trucks, tippers, trailers and utes.

Turners Group chief executive Todd Hunter said following opening of the new auction sites over the past year, their revenue had risen 50 per cent. Sales had been strong for the past four years and Canterbury's earthquake rebuild was partly responsible for growth in demand for used trucks and machinery, he said. "In Canterbury the market's been kind to us." New Zealand Transport agency figures show 142, 647 trucks heavier than 1500kg were traded last year, compared to sales of 10,000 new vehicles. Businesses in Australia, the Pacific Islands and Asia were also interested in buying quality civil contracting equipment. Hunter said the truck and machinery business had grown sufficiently to justify standalone management, so Turners had appointed a new manager, Jason Prendergast, to run the new truck and machinery offshoot.

Sounds very positive to me. Some of that heavy equipment would have a limited number of potential buyers/users. So if Turners can on sell that equipment to overseas operators, that has to be good for the NZ owners and Turners. I suppose a counter potential downside is Australian operators realising things are still going quite well in New Zealand, looking to dump theoir excess machinery on the second hand market in New Zealand and depressing values. But I guess as an auction player/financer as long as machinery is moving in any direction, and you are clipping the ticket, it is good news for you?

In other changes, Hunter was recently appointed chief operating officer of Turners Limited, the parent company of Turners Group, in addition to being chief executive. Turners Group financial officer, Aaron Saunders, will take on additional duties as chief operating officer in the cars division. General managers have also been appointed within that division to cover supply, sales and operations.

As the company gets bigger, so does the managment overhead. Whether that is good or not, depends on how the newly grown organization performs I suppose?

SNOOPY

[Snoopy]

	Heartland	Turners Limited	Turners Limited (Finance Divisions Only)
EBIT /(Loan Book {averaged})	7.0%	N/M	12.8%

The calculations supporting the above entry in my comparative table are as follows:

Heartland:

($260.488m-$69.403m) / (1/2 x($2,862.070m + $$2,627.393m) = 7.0%

Turners:

2($5.901m + $4.008m-$0.046m) / (1/2 x ($164.436m + $142.827m)) = 12.8%

The above comparison is interesting because, historically Turners pays no tax (IIRC tax losses are finally used up this year). So taking tax (and interest) out of the equation shows that Turners finance is in underlying terms a lot more profitable than Heartland. Almost twice as profitable in fact, a huge difference.

Of course coming back to reality, interest and tax bills still have to be paid (tax only after tax losses are used up in the case of Turners).

SNOOPY

[Snoopy]

	Heartland	Turners Limited	Turners Limited (Finance Divisions Only)
ROE (averaged equity)	12.2%	12.0%	11.8%

Calculations backing up the above table entry are as follows:

Heartland:

$48.163m +0.72($12.105m) /( 1/2( $480.125m + $452.622m)) = 12.2%

Turners:

2x ($7.432m- $0.046m) /( 1/2 x( $125.810 + $121.002)) = 12.0%

Turners (Finance division only):

For this piece of analysis I have deconstructed the HY2016 result (Ended 30th Sept 2015) as follows

	Profit BeforeTax (EBT)	Interest Expense (I)
Auctions	$1.726m	$0.550m
Fleet	$0.229m	$0.145m
Collection Services (NZ)	$1.930m	$0.271m
Collection Services (Aus)	-$0.047m	$0.023m
Finance	$5.903m	$4.008m
Insurance	$0.518m	$0.775m
Total	$10.260m	$5.772m

The way I have split these results up is to add back a fraction of 'eliminations' and then a fraction 'corporate costs' back onto the divisional results in the segmented report. The fractions I have used used are in proportion to divisional revenues. This is almost certainly not completely realistic and open to criticisim. But I believe it is more realistic than the raw divisional figures given and useful enough for my purposes.

Using the above information to make a 'divisional' ROE calculation for 'Finance'.

2x ($5.903m - $0.046) / ( 1/2 x ($79.54m + $65.33m)) = 11.8%

SNOOPY

[blackcap]

Sounds very positive to me. But I guess as an auction player/financer as long as machinery is moving in any direction, and you are clipping the ticket, it is good news for you?



As the company gets bigger, so does the managment overhead. Whether that is good or not, depends on how the newly grown organization performs I suppose?

SNOOPY

Cheers Snoopy... I know, I just wanted to assuage your worry or should that be concern

[percy]

Results will move him from concern to sheer joy for both TNR and HBL.lol.

[Snoopy]

Calculations backing up the above table entry are as follows:

Heartland:

$48.163m +0.72($12.105m) /( 1/2( $480.125m + $452.622m)) = 12.2%

Turners:

2x ($7.432m- $0.046m) /( 1/2 x( $125.810 + $121.002)) = 12.0%

From the above, Heartland NPAT for FY2015 with annual impairment charge removed was:

$48.163m +0.72($12.105m)= $56.879m

The annual interest charge, already taken out of the above figure is $43.515m (from Note 2, AR2015).

This represents: $43.515m/ $56.879m = 77% of NPAT

From the above, Turners NPAT (half year,no tax payable at operational level) for HY2016 with half yearly annual impairment charge (revaluation in this case) removed was:

($7.432m- $0.046m) = $7.386m

The annual interest charge, already taken out of the above figure, was $5.772m. This represents

$5.772m/ $7.386m = 78% of NPAT

Very interestingly, in percentage terms,there is almost no difference between the two.

However, Heartland faced an operational tax bill of $16.170m, for which there was no Turners Finance Equivalent.

$16.170m/$56.879m = 28% of NPAT

So despite ROE being close for Heartland and Turners over our comparison, we might expect Turners relative performance in ROE to decline, once they start paying full tax.

Conclusion: Heartland win round two of our head to head contest.


SNOOPY

[Jinx]

Director buying another reasonable 71k parcel while the prices are this low?
https://www.nzx.com/files/attachments/229784.pdf

[Under Surveillance]

Director buying another reasonable 20k parcel while the prices are this low?
https://www.nzx.com/files/attachments/229784.pdf

The parcel bought was 71,500.