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

[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	$37.692m	7.85%	-$0.532m	-$1.452m	$43.212m	1.23%	3.36%
EOFY2015	$3.182m	$143.365m	2.22%	-$1.607m	-$1.375m	$150.351m	1.07%	0.94%
EOFY2016	$5.129m	$168.889m	3.04%	-$1.041m	-$1.041m	$175.675m	0.59%	0.59%
EOFY2017	$1.331m	$207.143m	0.64%	-$2.025m	-$1.442m	$213.130m	0.95%	0.68%
Total				-$5.205m	-$5.310m
Average							0.96%	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 Year	2014b	2015	2016	2017
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	$1,961.402m	2.50%	-$22.567m	-$13.660m	$2,060.867m	1.10%	0.66%
EOFY2014	$49.654m	$2,566.039m	1.94%	-$5.895m	-$38.518m	$2,631.754m	0.22%	1.46%
EOFY2015	$39.066m	$2,829.246m	1.38%	-$12.105m	-$4.891m	$2,893.724m	0.42%	0.17%
EOFY2016	$37.851m	$3,113.957m	1.21%	-$13.501m	-$18.663m	$3,140.105m	0.43%	0.59%
EOFY2017 (*)	$38.324m	$3,545.897m	1.08%	-$15.015m	-$11.671m	$3,575.613m	0.42%	0.33%
Total				-$40.567m	-$57.069m
Average							0.52%	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 Year	2013	2014	2015	2016	2017
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	$2,161.193m	4.02%	-$7.123m	-$12.339m-$3.745m	$2,198.653m	0.32%	0.73%
EOFY2014	$95.444m	$2,344.131m	4.07%	-$11.733m	-$18.633m+$3.300m	$2,375.936m	0.49%	0.65%
EOFY2015	$82.267m	$2,429.695m	3.39%	-$10.427m	-$12.162m-$0.659m	$2,421.224m	0.43%	0.53%
EOFY2016	$85.475m	$2,721.710m	3.14%	-$7.418m	-$11.055m+$1.297m	$2,750.619m	0.27%	0.35%
Total				-$36.701m	-$53.996m
Average							0.38%	0.57%

Financial Year	2013	2014	2015	2016
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	$37.692m	7.85%	-$0.532m	-$1.452m	$43.212m	1.23%	3.36%
EOFY2015	$3.182m	$143.365m	2.22%	-$1.607m	-$1.375m	$150.351m	1.07%	0.94%
EOFY2016	$5.129m	$168.889m	3.04%	-$1.041m	-$1.041m	$175.675m	0.59%	0.59%
EOFY2017	$1.331m	$207.143m	0.64%	-$2.025m	-$1.442m	$213.130m	0.95%	0.68%
EOFY2018	$8.6211m	$289.739m	2.97%	-$6.380m	-$0.433m	$295.693m	2.16%	0.15%
Total				-$11.585m	-$5.743m
Average							1.20%	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 Year	2014b	2015	2016	2017	2018
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	$2,829.246m	1.38%	-$12.105m	-$4.891m	$2,893.724m	0.42%	0.17%
EOFY2016	$37.851m	$3,113.957m	1.21%	-$13.501m	-$18.663m	$3,140.105m	0.43%	0.59%
EOFY2017	$38.324m	$3,545.897m	1.08%	-$15.015m	-$11.671m	$3,575.613m	0.42%	0.33%
EOFY2018	$44.192m	$3,984.941m	1.11%	-$22.067m	-$19.470m	$4,017.436m	0.55%	0.48%
Total				-$40.567m	-$57.069m
Average							0.52%	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 Year	2015	2016	2017	2018
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	$2,161.193m	4.02%	-$7.123m	-$12.339m-$3.745m	$2,198.653m	0.32%	0.73%
EOFY2014	$95.444m	$2,344.131m	4.07%	-$11.733m	-$18.633m+$3.300m	$2,375.936m	0.49%	0.65%
EOFY2015	$82.267m	$2,429.695m	3.39%	-$10.427m	-$12.162m-$0.659m	$2,421.224m	0.43%	0.53%
EOFY2016	$85.475m	$2,721.710m	3.14%	-$7.418m	-$11.055m+$1.297m	$2,750.619m	0.27%	0.35%
EOFY2017	$116.131m	$3,088.450m	3.76%	-$5.929m	-$7.698m+$2.860m	$3,117.323m	0.19%	0.16%
Total				-$42.630m	-$58.834m
Average							0.34%	0.48%

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

Financial Year	2013	2014	2015	2016	2017
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 Retail	Collections NZ	Collections Aus	Finance	Insurance	Corporate & Other	Total	As 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 Retail	Collections NZ	Collections Aus	Finance	Insurance	Corporate & Other	Total	As 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 Retail	Collections NZ	Collections Aus	Finance	Insurance	Corporate & Other	Total	As 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	$4.480m		$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 Retail	Collections NZ	Collections Aus	Finance	Insurance	Corporate & Other	Total	As 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