The Turners Automotive Group Ltd (ASX: TRA) share price was a standout performer on the ASX today. Turners shares finished 28.24% higher at $2.18 after the group released its full-year FY20 results for the year ending 31 March 2020.
Turners Automotive Group is an integrated financial services group that, as its name suggests, primarily operates in the automotive sector. The group has three main business segments: automotive retail, finance and insurance, and debt management systems.
Alongside the cornerstone Turners business, the group has a number of brands under its banner, including Oxford Finance, Autosure, and EC Credit Control.
Headline results
Starting from the top line, FY20 group revenue declined by 1% to NZ$333 million. Turners noted that trading towards the back end of the financial year was impacted by the early effects of COVID-19.
Nonetheless, the group delivered an 11% increase in underlying net profit before tax (NPBT), which rose from NZ$26 million in FY19 to NZ$28.8 million in FY20.
The group attributed this growth to gains made in the insurance, finance and credit divisions, which were partially offset by a drop in auto retail due to COVID-19.
Reported NPBT came in at NZ$29.1 million, in line with the group’s guidance range of NZ$28 million to NZ$30 million and flat on FY19 NPBT of NZ$29 million.
Automotive retail
Turners observed a softening of the used car market throughout FY20 due to reduced consumer confidence. Unsurprisingly, this decline was exacerbated during late February and March in the wake of the coronavirus pandemic.
The group highlighted a cyclical reduction in consignment vehicles in FY20. However, this was partially offset by an increase in the sales of owned inventory, with average gross profits per unit up 12% to $529.
Overall, the group’s automotive retail segment delivered revenue of NZ$224.9 million and underlying profit of NZ$13.3 million.
Other segment performance
The group’s finance business, Oxford Finance, delivered marginal revenue growth of 4% to come in at NZ$45.7 million. Operating profit also jumped 10% to NZ$12.2 million. Turners attributed this improvement to writing higher quality new business and the resulting improved arrears performance.
Meanwhile, the group’s insurance arm, Autosure, recorded a 9% drop in revenue as a result of market conditions and focusing on lower risk portfolios and vehicles. Operating profit saw a steeper decline, falling 25% to NZ$6.2 million.
Finally, credit management business EC Credit Control booked in a 1% drop in revenue, while operating profit increased by 3%.
What next?
Looking forward, Turners noted its auto retail business is fully operational, with sales stronger than expected.
The finance segment is seeing arrears performing well, while new insurance policy claims are recovering, with claims tracking below expectations.
On the whole, the group stated that trading in April and May has been “significantly better than what we expected”. This comes as New Zealand moved through its COVID-19 alert levels and the benefits of cost reductions, rent reductions and wage subsidies materialised.
At the end of FY20, the group had net debt of NZ$317.6 million, comprising NZ$32.8 million cash and NZ$350.4 million debt. Turners has an additional NZ$78 million of undrawn funding.
After today’s strong gains, the Turners Automotive share price is down 3.11% year-to-date.
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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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