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

[winner69]

W69 my thoughts exactly.!
Turners have asked for expressions of interest.
I am sure Turners board know what price they would accept,and if they do not get that, they will hang onto it..
A sale would mean the Dorchester Pacific/then Turners original [finance business]goodwill [not on balance sheet] would be realised.

The UDC sale that fell through was 1.6 times net assets

Same multiple for Turners Finance would be $100m but then with ultra low interest rates since then multiples have possibly expanded.

All conjecture really as probably no buyers for what Turners think it’s worth ....we know how delusional the board is when it comes to ‘value’

[percy]

The UDC sale that fell through was 1.6 times net assets

Same multiple for Turners Finance would be $100m but then with ultra low interest rates since then multiples have possibly expanded.

All conjecture really as probably no buyers for what Turners think it’s worth ....we know how delusional the board is when it comes to ‘value’

Yes conjecture.
With Oxford worth $100mil plus in "our" opinion it is hard to see how anyone could call the board delusional.
I think "we"agree with them.Well I certainly do.
We must remember too the board have their skin in the game.
Any business I have ever owned I certainly knew its value,something any owner does.

[winner69]

Yes conjecture.
With Oxford worth $100mil plus in "our" opinion it is hard to see how anyone could call the board delusional.
I think "we"agree with them.Well I certainly do.
We must remember too the board have their skin in the game.
Any business I have ever owned I certainly knew its value,something any owner does.

Maybe they couldn’t find a buyer for the whole company (the Baker Exit Plan) so now hocking it off bit by bit

Again, maybe the sum of the parts are more than the ‘value’ of the whole

That be good.

[percy]

Maybe they couldn’t find a buyer for the whole company (the Baker Exit Plan) so now hocking it off bit by bit

Again, maybe the sum of the parts are more than the ‘value’ of the whole

That be good.

More conjecture.
Think it was the usual "conjecture" posters here who came up with [the Baker Exit Plan].
The fact was when the Business Bakery boys went their separate way, Baker made sure he held onto his TRA holding,and if my memory is correct, actually increased his holding.
So many people posting conjecture ,they end up believing their posts.?..lol.
"Again,maybe the sum of the parts are more than the 'value' of the whole."
Seems that way,although it really is that recycled funds from some parts, will be more profitably used growing other parts.Best use of shareholders capital.
I know I often recycle capital,think most of us do.

[Snoopy]

Getting 'well positioned' for what I believe is a big capital inflow to the business and what I believe will be a large payout to current shareholders in the next 3-6 months.

I'm expecting Oxford Finance to sell in the region of $60 million with majority returned to shareholders in one form or another, if not a big acquisition would make things interesting too. Oxford generate about 26% of the underlying earnings for Turners, so the impact vs capital returned isn't too bad.

Regarding the debt of the company, there is a borrowings of $312 million (annual report), but you have to consider that Oxford Finance's loans amount to $254 million, and in total consumer and commercial loans amount to $291 million. So once Oxford is sold off, the borrowings don't actually look that bad.

I see where you have picked up the value of the Oxford 'Finance Book' to be $254m. From AR2019 p8

"Finance book (excluding Turners Finance) grew by 9% to $254m as at 31st March 2019."

That total of $254m are liabilities from a borrowers perspective, but they are 'account receivable assets' from a TRA perspective. If you go to the 'operating segments' section of AR2019 (p52), then total finance assets are $276.356m. My own modelling adjusts for 'inter segment assets' and also adds a proportion of the 'corporate and other assets. That increases finance assets to $313.931m. A similar adjustment to the 'Finance division liabilities' sees them rise from $216.996m to $241.726m.

This means net assets of the finance division are:

1/ $313.931m - $241.726m = $72,205m as a going concern business unit (with appropriate corporate management included) OR

2/ $276.356m - $216.996m = $59.360m looking strictly at the operational loan book, ready to 'bolt on' to another existing acquirer finance company structure.

That latter figure is close enough to your $60m Silverblizzard.

You are quite right about 'losing the debt' on a takeover of subsidiary 'Oxford Finance'. But at the same time, you lose the corresponding 'account receivables' assets as well. If 2/ is the actual sale scenario, then we will lose $60m more assets than we lose liabilities, but that will be 'made up' by the $60m in cash received. That $60m potential sale price you estimate looks like it would not improve the net debt position of the company at all. So where would the resources for a potential capital return come from?

SNOOPY

PS On an EBIT basis, I am modelling 'Finance' to make 48% of company profits.

[silverblizzard888]

I see where you have picked up the value of the Oxford 'Finance Book' to be $254m. From AR2019 p8

"Finance book (excluding Turners Finance) grew by 9% to $254m as at 31st March 2019."

That total of $254m are liabilities from a borrowers perspective, but they are 'account receivable assets' from a TRA perspective. If you go to the 'operating segments' section of AR2019 (p52), then total finance assets are $276.356m. My own modelling adjusts for 'inter segment assets' and also adds a proportion of the 'corporate and other assets. That increases finance assets to $313.931m. A similar adjustment to the 'Finance division liabilities' sees them rise from $216.996m to $241.726m.

This means net assets of the finance division are:

1/ $313.931m - $241.726m = $72,205m as a going concern business unit (with appropriate corporate management included) OR

2/ $276.356m - $216.996m = $59.360m looking strictly at the operational loan book, ready to 'bolt on' to another existing acquirer finance company structure.

That latter figure is close enough to your $60m Silverblizzard.

You are quite right about 'losing the debt' on a takeover of subsidiary 'Oxford Finance'. But at the same time, you lose the corresponding 'account receivables' assets as well. If 2/ is the actual sale scenario, then we will lose $60m more assets than we lose liabilities, but that will be 'made up' by the $60m in cash received. That $60m potential sale price you estimate looks like it would not improve the net debt position of the company at all. So where would the resources for a potential capital return come from?

SNOOPY

PS On an EBIT basis, I am modelling 'Finance' to make 48% of company profits.

Great detailed explanation! Excuse my narrowly written sentence that must have confused anyone reading it thinking I was linking the borrowings directly with the loans, when my inference was meant indirectly. What I mean precisely was that most of the borrowed money is used by Oxford to make their $254 million loans and the high level of borrowings would more or less relate to the financing parts of the business, while the rest of the other parts like the car and insurance businesses do not have as much debt as it may seem, hence when Oxford is sold, the balance sheet will look fine and any other debt is part of the ongoing concerns of the other parts of the business.

Maybe my way of looking at the balance sheet is a bit simple, but the biggest liability is the borrowings, which affirmed by the CEO is majority related to the financing business without that there are not many other liabilities that need urgent attention. The sale proceeds of Oxford would mostly be available to be returned to shareholders if management deemed so. If management are running a highly leveraged situation, then what explains the high dividend payout and share buyback it would seem like a bit silly to do to risk their jobs and the company.

[percy]

I have compared Turners Balance sheet assets/liabilities page 33 with segement assats/liabilities page 53.
Taking the finance assets/liabilities out of the balance sheet I end up with total assets of $377,826,000 and total liabilities of $186,993,000.
Add other reserves of $452,000 and Retained earnings of $19,527,000 I end up with shareholders equity of $186,993,000 which means shareholders equity would improve from current 34.6% to 49.5%.
However should Oxford Finance sell for $100mil plus there would be a further $40mil to be added to shareholders equity.

[Brain]

Turners is a very complex business which breaks one of my rules in investing.

[sb9]

Not sure if there's a webcast for tomorrow's ASM, couldn't find details from their announcement.

[Snoopy]

I have compared Turners Balance sheet assets/liabilities page 33 with segement assats/liabilities page 53.
Taking the finance assets/liabilities out of the balance sheet I end up with total assets of $377,826,000 and total liabilities of $186,993,000.

	Balance Sheet	less Finance Segment	equals Oxfordless Entity (+ $60m from Oxford Sale)	Oxfordless Entity (+ $100m from Oxford Sale)	Agree with Percy?
Assets (A)	$654.182m	$276.356m	$377.826m + $60m		Yes
Assets: $100m Oxford Sale (C)				$377.826m + $100m
less Liabilities	$427.808m	$216.996m	$210.812m		No
equals Total Shareholder Equity {B}	$226.374m	$59.360m	$167.014m + $60m
Shareholder Equity: $100m Oxford Sale {D}				$167.014m + $100m
less Other Reserves	$0.452m		$0.452m
less Retained Earnings	$19.527m		$19.527m
equals Shareholder Equity	$206.395m		$207.035m
Equity Ratio {B}/{A}	34.6%		51.9%
Equity Ratio {D}/{C}				55.9%

Add other reserves of $452,000 and Retained earnings of $19,527,000 I end up with shareholders equity of $186,993,000

$167.014m + $19.527m +$0.453m = $186.993m

I see where you get your number from Percy, adding back the other reserves of $0.452m and retained earnings of $19.527m at the bottom of the balance sheet on page 33. However, I don't think you need have added those two figures onto the shareholders equity, because they were already in there before you did it!

which means shareholders equity would improve from current 34.6% to 49.5%.

Or from 34.6% to 51.9%? Either way though, anything with equity ratio of around 50% is not a low debt company.

However should Oxford Finance sell for $100mil plus there would be a further $40mil to be added to shareholders equity.

And the equity ratio would improve to 55.9%. With these very low interest rates, there could be a case for a one off 'cash' capital return if Oxford finance is sold for that optimistic $100m figure. But equally likely is that after struggling with high debt, Turners will bank the money and use it to expand their retail footprint. An equity ratio of 55.9% is not low, and the car retail business remains volatile.

SNOOPY