TRA 2018 Secured Subordinated Bond Presentation

2018 Secured Subordinated Bonds Presentation

2018 Secured Subordinated Bonds Presentation - September 2018
1967

1984

2014


Turners Automotive Group was formed through the 2014 merger of New Zealand's largest vehicle and machinery retailer, Turners
Auctions, and leading consumer finance and insurance business, Dorchester Pacific.
Turners Auctions was established in 1967 when Turners and Growers Limited began
auctioning cars and trucks alongside its fruit and produce business
Today, Turners is New Zealand's largest auction house and vendor of used cars, trucks and
machinery

Dorchester was incorporated in 1984 as Venture Pacific Limited. The company became
Dorchester Pacific Limited in 1992
Over the following years, Dorchester developed a core financial services base through the
acquisition of a number of finance companies throughout New Zealand aligned to its
consumer finance and insurance strategy
In 2014, Dorchester launched a successful takeover offer for Turners Auctions and
consolidated its interests into a single entity that carried the Turners name
The decision to continue the Turners brand recognised the rich history and consumer
recognition attached to it
HISTORY OF TURNERS AUTOMOTIVE GROUP LIMITED
2017


In 2017, Turners Limited changed its name to Turners Automotive Group to enable a
Foreign Exempt Listing on the ASX and to reflect the focus of the group on the automotive
sector
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2018 Secured Subordinated Bonds Presentation - September 2018
TURNERS LEADERSHIP TEAM
Aaron Saunders - CFO Todd Hunter - CEO Grant Baker - Chairman
Chairman of Turners since 2009
Co-founder of Business Bakery
and formerly a significant
shareholder in 42 Below Vodka
and Trilogy International
Major shareholder in Turners
(7%)
CA
Nine years with Microsoft in a range
of commercial, marketing and sales
roles
Joined Turners Auctions in 2006,
appointed CEO in 2013
Appointed Group CEO in June 2016
CA
Industry experience in vehicle
importing and distribution,
broadcasting and finance
Joined Turners Auctions in 2006 as
CFO
Appointed Group CFO in April 2017

2018 Secured Subordinated Bonds Presentation - September 2018
Overview and
Market Analysis

2018 Secured Subordinated Bonds Presentation - September 2018
Turners Automotive Group - the largest seller of cars, trucks and machinery in NZ. We finance them and
insure them for mechanical breakdown, accident and loan repayments with a wide range of products.
CREDIT
MANAGEMENT
SERVICES
Controlling the buying and selling of
second hand cars, trucks and
machinery to earn a transactional
margin and delivering cross-sell
opportunities for Finance and
Insurance
Helping customers with simple and
attractive finance and insurance
products, and building annuity
revenue streams
Helping businesses of any size in New
Zealand and Australia with better
management of their credit
challenges
FINANCE AND
INSURANCE
AUTOMOTIVE
RETAIL
TURNERS: AN INTEGRATED AUTOMOTIVE GROUP
5

2018 Secured Subordinated Bonds Presentation - September 2018

TURNERS OVERVIEW
•Turners employs approximately 800 New Zealanders
•Operations from Whangarei down to Invercargill within NZ, and
in Australia
•NZ’s largest seller and buyer of used vehicles
•Importing approximately 6,000 cars from Japan per annum
•Currently lend around $290M to kiwis for buying cars, trucks,
plant and machinery
•Operate in 4 broad segments – auto retail, finance, insurance,
debt management
•NZX & ASX listed business with around 4,000 shareholders
6
“Ollie” star of the Turners TV commercials

2018 Secured Subordinated Bonds Presentation - September 2018
KEY BUSINESS STRENGTHS
7
1
Used vehicle sales is a growing industry, and the high level of industry fragmentation
presents an opportunity for Turners to consolidate
Strong capital structure and debt headroom as a result of recent banking syndication and equity raises
Sustainable growth strategy is delivering increasing shareholder value with track record of improving
financial results, increasing dividend pay-out with quarterly dividend payments
Experienced management team with oversight from professional and engaged Board of Directors
Leading market position in our core business of automotive retail provides new business
opportunity across the group for transactional margins and annuity finance and insurance
revenues.
Focus on growing organic market share in all operating sectors through improving customer
experience, and integration opportunities through cross-selling of finance and insurance products.
2
3
4
5
6

2018 Secured Subordinated Bonds Presentation - September 2018
THE KIWI USED CAR ECONOMY IS LARGE
61%
of people ended up spending
less than $10,000 on their car,
80% were less than $20,000
3.85m
Light vehicles in the NZ vehicle fleet
3,500
Registered dealers
in NZ
14yrs
Is the average age of used
vehicle in NZ since 2013
7,232 EVs
7,232 as at the end of March
2018, more than double its size
in March 2017.
164,000
used cars were imported
into NZ in year ended Mar
18
21 years
The average age light
vehicles were scrapped
from fleet was 22 years for
an import and 21 years for
NZ new
Source: NZTA, Ministry of Transport, MBIE, Turners Market Research Nov 17
Note 1. Dealer-to-public plus ex-overseas sales
8
153,000
New passenger and light
commercial vehicles sold into NZ
in year ended Mar 18
20%
Of the vehicle fleet are more
than 20 years old

2018 Secured Subordinated Bonds Presentation - September 2018
FY18 OPERATING ENVIRONMENT
•Used vehicle market continuing to grow:
oUsed cars in line with previous year
oUsed trucks up 5% YOY
oDamaged and end of life up 11% YOY

•New car registrations (passenger and light
commercial) up 5.4% to 153,000 units registered end-
March 2018.

•164,000 used vehicles imported from overseas (53% of
total new registrations for FY18)

•Intense competition for originators

•Indications of a tightening credit market


9
Used vehicle transactions in NZ (including deregistered vehicles and trucks)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
F10F11F12F13F14F15F16F17F18
Total Used Vehicle Sales
Financial Year
Car COOCar DeregsTrucks

Highlights and
Divisional
Performance

2018 Secured Subordinated Bonds Presentation - September 2018
11
FY18 FINANCIAL HIGHLIGHTS
Continued growth in revenue and profit
Revenue $330.5m (+32%)
Net Profit Before Tax $31.1m (+26%)
(Guidance NPBT $29m to $31m)
Net Profit After Tax $23.4m (+33%)
NPATA $24.9m (+42%)
Shareholders’ Equity $214.3m as at 31 Mar 18
Final Quarter Dividend 5.0 cps Total FY Dividend 15.5cps (+7%)
Earnings Per Share 29.3cps (+15%)
FY19 NPBT Guidance $34m to $36m (up 13% on mid)
0
50
100
150
200
250
300
350
FY14FY15FY16FY17FY18
Millions

REVENUE
0
5
10
15
20
25
30
35
FY14FY15FY16FY17FY18
Millions

NET PROFIT BEFORE TAX
NPATA – is net profit after tax and tax adjusted add back of amortised acquisition intangibles IE. Autosure portfolios
inforce and customer relationships
Percentage changes in this presentation are calculated compared to FY17 unless otherwise stated

2018 Secured Subordinated Bonds Presentation - September 2018
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY16FY17FY18
Sales by Customer Type for Turners Cars
% Sales to Wholesale% Sales to End User
AUTOMOTIVE RETAIL
Revenue $223.2m (+16%), Op Profit $16.6m (+8%)
12
•Turners Group strong result with operating profit up 15% off
revenue growth of 10%.
•Continued increase in fixed price sales (cf auction or tender) - up
17% YoY with sales to end users at 70% of all car purchases
•Corresponding increase in finance contract sales (16% increase
in loans written, 15% increase in MBI policies sold)
•Percentage of ‘owned vehicles’ increased to 50% (up from 48%)
of transactions – better margins
•Expansion of physical footprint with new sites for both Cars and
Trucks & Machinery
•Recent market research confirms Turners as most trusted used
car brand in NZ (Source: Turners Customer Research Project
November 2017)
•Recently inked partnership with Auto Super Shoppes (83
workshops in NZ) for delivery of service and maintenance
products

2018 Secured Subordinated Bonds Presentation - September 2018
AUTO RETAIL: BUY RIGHT CARS
•Revenue growth of 34% reflecting full year of
operation, operating profit down 21%.
•Financial performance has disappointed as new
management team deals with legacy issues
•New management team in place since
November 2017
•Dealing with aged inventory issue
•Earn-out mechanism working as intended
•Closer association with Turners Auto Group
branding to be implemented
•Grown physical footprint by one branch in FY18
(Penrose). Targeting three new branches over
the next two years
13
Turners Buy Right Cars
Satisfaction 87% 88%
Likelihood to
Repurchase
71% 77%
Customer view of Buy Right Car and Turners
TRA Market Research Nov 2017
Recent brand research reflects positively on quality
customer experience that Buy Right Cars provides

2018 Secured Subordinated Bonds Presentation - September 2018
AUTO RETAIL: PROPERTY OPPORTUNITY
•Property reconfiguration to drive improved retail experience
for further growth
•Used vehicle business creates opportunity to be innovative in
location and configuration eg container offices
•Purchasing either brown fields or bare land with straight
forward developments with customised lease
•Sale and lease back provides profit opportunity to capitalise
on “Turners” brand as a tenant
•Allocating pool of capital for property opportunities which
will be recycled
•Five years of property opportunities ahead including large
projects in Auckland and Christchurch
•Completed 2 major projects value $16M during FY18 (Porirua
Turners Cars and Wiri Trucks and Machinery)

14
Concept design for Cambridge Terrace site in
Wellington
New branch in Porirua purchased and developed
by Turners

2018 Secured Subordinated Bonds Presentation - September 2018
FINANCE
Revenue $39.7m (+48%), Op Profit $11.7m (+16%)
15
•Finance receivables growth has continued, up 40% to $290m
from March 2017
•Continued enhancements of online loan approval platform
AutoApp (insurance integration key deliverable)
•Continue to tighten credit criteria to position the business for
any change in the credit cycle
•Captive channel lending IE Turners Cars and BRC delivers higher
quality loans (more control)
•Total instalment arrears tracking at 2.0% (1.0% at end-March
2017). Arrears deterioration most noticeable in MTF – Non
Recourse (NR) book.
290
207
48
24
10
150
170
190
210
230
250
270
290
310
FY17MTF
Increase
OFL
Increase
TF IncreaseFY18
Millions

FY18 LOAN BOOK GROWTH
MTF – Motor Trade Finance
OFL – Oxford Finance Limited
TF – Turners Finance

2018 Secured Subordinated Bonds Presentation - September 2018
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
-
5
10
15
20
25
30
35
40
45
FY13FY14FY15FY16FY17FY18
Number of New Policies

$Millions Gross Written Premium

Policy and Gross Written Premium Growth in
Insurance
INSURANCE
Revenue $46.9m (+283%), Op Profit $5.7m, (+518%)
16
•Autosure acquisition creates step change in scale of
insurance business in FY18
•Consolidation of insurance brands into single entity
•Use of data analytics to re-price risk
•GEP at 4% above budget for FY18
•15% increase in policies sold through Turners captive
channels to 8,500 policies.
•Loss ratios at 70% tracking 3% above budget, implementing
initiatives to reduce to below 68% for FY19
•Identified potential opportunity to allocate a proportion of
insurance reserves to support auto retail property expansion

2018 Secured Subordinated Bonds Presentation - September 2018
CREDIT MANAGEMENT
Revenue $18.7m, Op Profit $6.1m (in line with FY17)
17
•Solid and consistent performer, delivering good cashflow and profitable
returns
•Continued increase in debt load from key NZ corporate accounts at
expense of competitors
•We believe there is still a big opportunity in Australian corporate
market (under penetrated)
•Strong Terms of Trade product sales in NZ up 20% v FY17
•Auto Dialler technology performing well and creating significant lift in
productivity
•Early stages of a strategic partnership established with IODM, an
Australian based online automated accounts receivable solution
provider, 23 clients subscriptions signed up at end of Mar 18
•Result includes $0.4m unredeemed voucher release ($1.1M FY17)

2018 Secured Subordinated Bonds Presentation - September 2018
FUNDING MIX
18
•$30M capital raise in Oct 17
•Convertible Bonds of $26M
mature Sept 2018.
•Growth in Securitisation
Warehouse reflects growth in
finance book and substitution
of corporate bank funding
• $140m syndication facility with
ASB and BNZ completed May
2018.
•Growth in MTF funding driven
by growth in Turners Finance.
FY18 $m % of Total FY17 $m % of Total
TOTAL ASSETS
652

557

Equity
214 33%
172 31%
Convertible bonds
26 4%
26 5%
Securitisation Funding (BNZ)
133 20%
69 12%
Bank Funding [Corporate BNZ &
ASB]
97 15%
122 22%
MTF Finance Receivables Funding
59 9%
49 9%
Insurance Contract Liabilities
49 8%
43 8%
Life Investment Contract Liabilities
7 1%
13 2%
Payables and Deferred Revenue
49 8%
43 8%
Deferred tax liability
19 3%
20 4%

2018 Secured Subordinated Bonds Presentation - September 2018
Opportunities and
Strategic Focus

2018 Secured Subordinated Bonds Presentation - September 2018
KEY FOCUS FOR FY19
•AUTO RETAIL – Customer experience (people and property),
redirect Finance into OFL, leverage trucks and machinery network

•FINANCE – redirect finance from Turners into OFL, Customer
experience quicker and easier through smart data analytics, re-
position to higher quality lending

•INSURANCE –continue pricing for risk, procurement / cost out
initiatives, replace dealer retail selling system

•CREDIT MANAGEMENT - customer acquisition Australia,
implement collections scorecard, target higher debt load from
existing customers
20

2018 Secured Subordinated Bonds Presentation - September 2018
OUTLOOK
•Used car market is resilient, less discretionary than new
•A large aging vehicle fleet that needs to be replaced
•80% of people purchasing vehicles under $20k, with a high demand for finance
•High trust position in the “Turners” brand
•FY19 NPBT guidance of $34 million to $36 million
21

Bonds

2018 Secured Subordinated Bonds Presentation - September 2018
2018 Bond Offer
23
Turners is undertaking a new bond offer to repay existing financing and replace the existing
TRAHB bonds, providing additional debt capacity to fund future business opportunities
•In 2016, Turners issued 2 year convertible bonds, maturing on 30 September 2018
•Turners expects approximately $13m of these bonds to exercise the conversion option (at a share
price equating to a 5% discount to the average daily volume weighted average price of the shares
in the 90 days prior to 30 September 2018).

Given Turners has recently raised equity, Turners has chosen to offer secured subordinated bonds
•Substantially similar features to TRAHB bonds, but no equity conversion option
•Longer term (3 years)
•Maintains diversity of funding for Turners

2018 Secured Subordinated Bonds Presentation - September 2018
KEY TERMS OF BONDS
24
Issuer Turners Automotive Group Limited
Instrument Fixed rate bonds, subordinated to certain bank debt and security as described in the PDS
Tenor 3 years, maturing 30 September 2021 (subject to subordination)
Issue Amount Up to $25,000,000 plus the ability to accept oversubscriptions up to $5,000,000
Interest Rate The Bonds will bear a fixed rate of interest of 5.5% per annum
Interest Payments Quarterly in arrears in equal amounts on 30 March, 30 June, 30 September and 30 December of each year,
commencing 30 December 2018 (subject to subordination)
Purpose The proceeds of this offer are expected to be applied towards repaying existing financing, including the
TRAHB bonds, providing additional debt capacity to fund future business opportunities
Issue Price Par ($1.00)
Listing Expected to be quoted on NZX Debt Market (ticker : TRA100)
Application amounts Minimum subscription amount is $2,000 and multiples of $1,000 thereafter
Investor Priority Priority will be given to holders of Existing Convertible Bonds applying through the Exchange Offer who have
elected not to convert their Existing Convertible Bonds into Shares, up to the principal amount of those
Existing Convertible Bonds
Brokerage Turners will pay brokerage of 1.0% on all valid applications accepted under the General Offer or the Exchange
Offer
( PDS available at www.turnersautogroup.co.nz/bonds and on the Disclose Register - www.companies.govt.nz/disclose )

2018 Secured Subordinated Bonds Presentation - September 2018
KEY DATES
25
Opening Date 28 August 2018
Latest Date for TRAHB
Conversion Notices
30 August 2018
Closing Date (Exchange
and General Offer)
12pm on 24 September 2018
Issue and Allotment Date 1 October 2018
First Interest Payment
Date
30 December 2018
Interest Payment Dates 30 March, 30 June, 30 September and 30 December in each year
Maturity Date 30 September 2021
(Turners may vary the timetable at its discretion, including closing the General Offer or both Offers early)

2018 Secured Subordinated Bonds Presentation - September 2018
Contact:

Todd Hunter
CEO Turners Automotive Group
T: 64 21 722 818
E: todd.hunter@turners.co.nz


Aaron Saunders
CFO Turners Automotive Group
T: 027 493 8794
E: aaron.saunders@turners.co.nz

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2018 Secured Subordinated Bonds Presentation - September 2018
DISCLAIMER
This document is prepared as at 31 August 2018.
Turners Automotive Group (the company) is solely responsible for the content of this document. This document is not a product disclosure statement and
does not constitute an offer of financial products. It has been prepared solely for informational purposes and is not a recommendation to purchase any
bonds described in this document (Bonds).
This document or any other written or oral statements made by, or on behalf of, the company may include forward-looking statements that reflect the
company’s current views with respect to future events and financial performance. These forward-looking statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited
to:
I.Uncertainties relating to government and regulatory policies;
II.The occurrence of catastrophic events with a frequency or severity exceeding our estimates;
III.The legal environment;
IV.Loss of services of any of the company’s officers;
V.General economic conditions; and
VI.The competitive environment in which the company, its subsidiaries and its customers operate; and other risks inherent in the company’s industry
The words “believe,” “anticipate,” “investment,” “plan,” “outlook,” “estimate,” “expect,” “intend,” “will likely result,” or “will continue” and other
similar expressions identify forward-looking statements. Recipients of this document are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The company undertakes no obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Application has been made to the NZX for permission to quote the Bonds on the NZX Debt Market. However, the Bonds have not yet been approved for
trading and NZX accepts no responsibility for any statement in this document.

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