Annual Report 2020
RESILIENT
BUSINESS
TRUSTED
BRANDS
ANNUAL REPORT
FOR THE YEAR ENDED 31 MARCH 2020
Turners Cars North Shore, Auckland
On behalf of the Board and management of
Turners Automotive Group Limited, we are pleased
to present the Annual Report for the financial year
ended 31 March 2020.
FY20 AT A GLANCE 4
OUR CHANGING LANDSCAPE 6
STRATEGIC THEMES FOR FY21 8
OUR STRATEGY 9
CHAIR AND CEO’S REPORT 10
OUR BUSINESS:
RESPONDING TO THE COVID-19 CHALLENGE 16
LEADING CHANGE 17
BUY SAFE 18
FY20 FINANCIAL COMMENTARY 20
THE BOARD 22
SENIOR LEADERSHIP TEAM 24
FINANCIALS 27
Grant Baker Todd Hunter
Chairman Chief Executive Officer
32
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
FY20 AT A GLANCE
LAUNCH OF NEW STRATEGY IN MAY 2019 –
SIMPLIFY, DE-RISK AND GROW
SIMPLIFY THE BUSINESS
REBRANDED BUY RIGHT CARS TO TURNERS: Completed in May 2019,
leveraging the high levels of awareness and trust in the Turners brand.
DE-RISK THE BUSINESS
CONCLUDED STRATEGIC REVIEW OF OXFORD FINANCE, with
ownership retained and focus on reshaping and growing the business.
CONTINUED FOCUS ON HIGH QUALITY BORROWERS, resulting in
improved arrears performance.
REFINEMENT OF RISK PRICING: For the insurance and finance
businesses.
GROW THE BUSINESS
EXPANSION OF THE RETAIL NETWORK: Relocated North Shore site to
new Wairau Valley location, opened new Hamilton site and committed to
development of two new Auckland sites and a large new site in Dunedin.
EXPANDED AUTOSURE DISTRIBUTION NETWORK: Agreed strategic
distribution agreement with Heartland Bank to sell Autosure insurance
products through Heartland’s consumer intermediary network.
DIGITAL ADVANTAGE: Continued to invest into technology platform,
digital marketing and leveraging data assets.
INNOVATION AND VENTURES: Investment into ASX-listed Collaborate
Corporation, a tech-focused vehicle subscription business based in
Australia. Agreed commercial terms for the launch of Carly vehicle
subscription in New Zealand.
FY20 FINANCIAL SNAPSHOT
■
Final six weeks of the financial year impacted by COVID-19 pandemic
and Level 4 lockdown
■
Increase in Net Profit Before Tax (NPBT) to $29.1m, in line with
pre COVID-19 guidance of $28m to $30m
■
Underlying NPBT $28.8m, up 11%
■
Net Profit After Tax down 8% to $21.0m
■
Solid gains in the finance, insurance & credit management businesses;
Auto retail impacted by slowdown in last six weeks of FY20 due to
COVID-19
■
Group revenue decreased 1% on previous year
■
Solid market share gains, within the context of a softening used car
market
■
Paid 14.0 cents per share in fully imputed dividends for the FY20 year
FINANCIAL SNAPSHOT
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GROUP REVENUE
$332.7M
-1%
NET PROFIT AFTER TAX
$21.0M
-8%
SECTOR REVENUE
■ AUTOMOTIVE RETAIL ■ FINANCE AND INSURANCE ■ DEBT MANAGEMENT
NET PROFIT BEFORE TAX
$29.1M
0%
FULL YEAR DIVIDENDS
14.0 CENTS PER SHARE
SECTOR OPERATING PROFIT
54
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
OUR CHANGING
LANDSCAPE
MARKET DYNAMICS AND TRENDS
The used car market is evolving and we are
positioning ourselves to take advantage of the
opportunities this brings. We are excited about
our potential in this changing environment.
CUSTOMER-CENTRIC: Customers are more
informed and delivering great customer
outcomes is essential to survive and prosper.
DATA AND TECHNOLOGY: Big data and
technology are changing how and where we
do business.
ONLINE EXPERIENCE: More of the customer
experience is transitioning online, particularly
for finance and insurance.
AGGREGATOR AND COMPARISON SITES are
proliferating.
REGULATION AND COMPLIANCE across all
our businesses is increasing.
INDUSTRY CONSOLIDATION is inevitable and
we are in the midst of this right now.
DISRUPTION FROM ALTERNATIVE
OWNERSHIP MODELS which could
see people moving away from owning one,
two or more cars per household, to flexible
ownership and subscription models.
The used car
market is
evolving and we
are positioning
ourselves to take
advantage of the
opportunities
this brings.
Turners Cars Palmerston North
76
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
OUR AMBITION
For Turners to be New
Zealand’s best place to
buy and sell vehicles,
delivering high customer
satisfaction every time.
OUR STRENGTHS
■
Unrivalled reach and
scale
■
High profile, trusted
Turners’ brand
■
Diversified businesses
■
Strong balance sheet
■
Large customer base
■
Rich data assets
■
Digital advantage
OUR STRATEGY
SIMPLIFY THE BUSINESS
Focus on core products and
businesses that deliver value and
future opportunities
.
DE-RISK THE BUSINESS
■
Continue to write high
quality loans through early
adoption and refinement of
comprehensive credit reporting
■
Actively engage with regulators
in regards to compliance and
regulatory change
■
Focus on low risk loan
origination rather than
underwriting a broader range
of credit risks
GROW THE BUSINESS
■
Continue to expand the auto
retail footprint across New
Zealand
■
Shift marketing investment into
digital platforms
■
Leverage data analytics to
transact smarter
■
Evolve the customer experience
in person and online
■
Look for innovation
opportunities within the auto
sector
OUR STRATEGY
TURNERS’ STRATEGY IS
BASED ON OUR STRENGTHS
AND THE OPPORTUNITIES
THAT EXIST FOR OUR BUSINESS.
The industry is changing
and we are taking action to ensure
we are well positioned to take
advantage of future trends.
The Automotive Retail sector
remains our primary
focus.
OUR STRATEGIC
THEMES FOR FY21
STRATEGIC THEMES FOR FY21
1. Opportunity to Accelerate Market Share We are
in a position to realise any new opportunities
that arise from a disrupted market and expect
to accelerate the market share gains that have
been made in recent years. We will concentrate
on increasing our market share through
optimising our existing branch network, creating
new consignment relationships, expanding our
retail footprint and taking advantage of market
consolidation.
2. Leverage Our Scale and Brand Equity
Our scale offers multiple advantages, giving
us greater buying power, greater strength and
greater access to capital. Our highly trusted
Turners brand will become even more relevant
in the new economy. Turners is consistently
NZ’s leading used auto retail brand, according
to independent market research, and recently
received the 2020 Readers Digest Trusted Brand
Award as New Zealand’s most trusted used car
dealer.
3. Playing to Our Strengths
Diversified Business: Turners is a purposefully
diversified business. Each business has different
business cycles and delivers a balance of
annuity vs activity based revenue. Geographical
diversification also allows the business to
redeploy inventory if there are any localised
lockdowns going forward or regional demand
differences.
4. Digital Advantage
We are committed to creating competitive
advantage from technology investments and will
double down on these efforts to further broaden
our technology advantage. A key differentiator
for our business is the Turners’ digital platform
which is the #2 most visited auto website in NZ
behind TradeMe.
5. Balance Sheet Capacity to Support Growth
Our balance sheet is a major competitive
advantage, and will enable continued growth in
a consolidating market. We are well positioned
from a funding and capital perspective to take
advantage of growth opportunities in the future.
OUTCOMES
A WINNING CUSTOMER EXPERIENCE, A MORE EFFICIENT AND
FOCUSED BUSINESS, HIGHER MARGINS AND LOWER RISK, AND
INCREASING VALUE FOR OUR SHAREHOLDERS.
98
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
businesses. Three of our four businesses (Oxford
Finance, Autosure Insurance and EC Credit
Control) were profitable even during the L3/L4
lockdown period.
We launched our new strategy in May 2019, with
a focus on three key themes – Simplify, De-Risk
and Grow our Business. These directed our
actions for most of the year.
We are creating a more streamlined and cost
efficient business, growing our market share
in sectors where we have a dominant position
and building on our strengths to position our
businesses as the preferred choice for our
customers.
Key achievements include our investment into
ASX-listed Collaborate Corporation, a tech-
focused car-sharing and vehicle subscription
business based in Australia; the continuation
of our property strategy with the development
and opening of two new sites with a further four
planned for FY21; and the completion of the
Oxford Finance strategic review.
THE USED CAR ECONOMY
The softening noted in the second half of
the FY19 year continued into FY20, further
compounded by the COVID-19 impact at the
end of FY20. However, underlying demand
remains robust driven by New Zealand’s aging
fleet, with hundreds of thousands of cars
needing replacement over the next few years.
New Zealand’s vehicle fleet continues to age.
Around 950,000 vehicles (20% of light vehicles)
are at or very near the scrapping age, which is
around 19.5 years for an import and 17.5 years
for a New Zealand-new car. More cars are now
exiting the fleet due to the cost of repairs and a
stricter Warrant of Fitness regime.
The NZ used vehicle market is still very
fragmented, however, consolidation is underway.
Dealer numbers have been in decline for the
last two years and we expect this to accelerate
further over the next 12 to 24 months. We know
this is a good time to be pushing hard for gains
in retail market share and we are well positioned
to take advantage of this.
We will focus on building our market share by
growing our customer base and adding value to
customers through our ‘one stop shop’ offer and
customer experience.
OPERATIONAL PERFORMANCE
■ AUTOMOTIVE RETAIL (TURNERS GROUP)
Revenue: $224.9m 0%
Operating Profit: $13.8m -24%
Turners’ strategy of retail optimisation and the
continued transition of wholesale to retail is
continuing to deliver growth in retail market
share. Throughout FY20 we observed a
softening of the used car market due to reduced
consumer confidence and this decline was
suddenly exacerbated during late February and
March 2020 due to the COVID-19 pandemic.
There was a cyclical reduction in consignment
vehicles (down 26%) through the Turners
business in FY20, however, this reduction was
somewhat offset by an increase in sales of
owned inventory (up 6%) with average gross
profits per unit up 12% to $529.
We have a particular focus on optimisation of
our property network. Following year end, a
decision was made to leave the main Penrose
“supersite” in December 2020. Around the same
time, we will bring on stream new retail sites in
Westgate and Mt Richmond which will enable
a better retail experience for our customers.
Penrose was established as a wholesale auction
facility twenty years ago and is no longer
appropriate both in terms of a cost base or
customer experience.
We have successfully integrated the Buy Right
cars business into the Turners’ car business
over the year. We started with the brand
consolidation early in FY20 and the integration
has now been extended to core IT and
operational systems which will enable further
efficiencies.
BuyNow retail sales were down around
0.5% year on year, which we were pleased
with considering the impact of COVID-19. A
new Dunedin branch at double the previous
footprint, and new sites in Westgate and Mt
Richmond, should see further gains made in
retail sales over the next one to two years,
depending on the speed of recovery in the
economy.
Damaged vehicle units were up 12% with some
good gains from existing insurance vendors and
the benefit from one-off events like the Timaru
hail storm and flood damaged cars from Sky
City.
OUT OF CHALLENGE AND ADVERSITY
COMES NEW OPPORTUNITIES FOR THOSE
BUSINESSES POSITIONED AND READY TO
TAKE ADVANTAGE OF IT.
Turners is the largest used vehicle retailer in the
country, with unrivalled reach, scale and national
brand awareness. Our strength is in Automotive
Retail and we are the largest and most trusted
brand in the industry.
Our focus for FY20 was very much on
organically growing underlying earnings and we
achieved this in three out of our four businesses
and were on track for a full house until COVID-19
hit.
Given the impact of the pandemic in the
last six weeks of the financial year, we were
pleased with the results. Year on year, we were
slightly ahead on reported Net Profit Before
Tax at $29.1m and we delivered strong growth
in underlying earnings, which were up 11% to
$28.8m.
The COVID environment has highlighted the
value of a diversified portfolio of businesses, and
the inherent “annuity” nature of three of those
CHAIR
AND CEO’S
REPORT
Chief Executive Officer, Todd Hunter and Chairman, Grant Baker
1110
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
■ FINANCE (OXFORD FINANCE)
Revenue: $45.7m +4%
Operating Profit: $12.2m +10%
The Finance business had an excellent year
with operating profit increasing 10% to $12.2m.
This reflects our increasing focus on lending to
higher quality borrowers. We introduced 3-tier
risk pricing in August 2019 which has enabled
us to be much more targeted towards high
quality borrowers and tighten up at the lower
end of the quality range. Premium Tier risk now
accounts for 11% of our total existing book and
is around 30-40% of new lending each month.
Instalment arrears on Premium Tier business is
tracking at around 0.01% compared to Tier 2
instalment arrears at 5.6%.
The introduction of comprehensive credit
reporting alongside negative reporting is
proving to be a strong combination of data to
help us profile borrowers.
The Turners Cars loan origination is going well
and we are earning more margin in the Group
as a result of this. Turners Cars’ ledger is now up
to $52m and is performing exceptionally well on
lending quality metrics.
We also completed the strategic review process
for Oxford Finance during the year and, whilst
there was significant interest above the book
value of the business, in the Board’s view,
the offers received did not fully reflect the
intrinsic value of Oxford Finance, both today
and especially factoring in the planned organic
growth. We are pleased to have such a strong
annuity business within the Group at this
time and have funding and equity capacity to
continue growing this business over the next
few years.
■ INSURANCE (AUTOSURE)
Revenue: $44.1m -9%
Operating Profit: $6.2m -25%
Insurance revenue declined in FY20 reflecting
a one-off gain from property sale in the prior
year ($3.0m), and further risk optimisation
we are running through the portfolio. General
Gross Written Premium (GWP) was down 7%
to $36.8m as a result of market conditions and
focusing on lower risk portfolios and vehicles.
Pleasingly, underlying profit (which excludes the
gain on property sale in FY19) increased due
to continued improvements in risk pricing and
reduction in claims loss ratios, resulting from
a new insurance software system, as well as
procurement initiatives. The combined claims
loss ratio for FY20 was 62% (FY19: 64%), while
the MBI loss ratio was 66% (FY19: 75%).
All originators have now been transitioned
to a new retail policy generation system
and we continue to review dealers’ portfolio
performance for risk pricing.
Our Reserve Bank Culture and Conduct
Review work was completed with a number of
initiatives implemented, ensuring we are closer
to end users and better understand customer
outcomes and experience.
The distribution partnership announced
between Heartland Bank and our respective
brands, Autosure and MARAC, is now
implemented and working well. We are working
on similar models of distribution with a number
of other organisations which involve deep
integration of our insurance system into their
front end sales system. This is an area where we
will continue to invest.
■ CREDIT MANAGEMENT (EC CREDIT
CONTROL)
Revenue: $17.9m -1%
Operating Profit: $6.5m +3%
EC Credit Control’s performance was in line
with the previous year. Although debt load was
down 5% for the year, the debt collected was up
14%, driven mostly out of improved collections
from Australian SME clients and Corporate NZ
clients. Commission earned from debt collected
increased 11% to $10.0m.
Our traction with customers connecting to EC
Credit via Xero and MYOB continues to gather
momentum with over 420 customers now
connected and loading debt worth over $3m
during FY20.
The team responded quickly to the COVID
situation and all Work From Home systems
operated at 100 percent. We worked closely
with our large corporate customers to help
manage their reputational risk with debt
collection work during lockdown and we are
expecting a significant increase in debt loaded
from these customers in the medium term. We
have already seen a lift in debt load from SME
customers in the first quarter of FY21.
As we did with Oxford Finance, we will also
conduct a strategic review of EC Credit in the
next 12-24 months.
DIGITAL, DATA AND DISRUPTION
In all our businesses, digital initiatives are being
prioritised.
We are continuing to invest in digital marketing
and data. We have several projects underway in
the areas of lead management and automated
communications. This investment enables us
to better identify users on our website and be
more targeted in subsequent communications
with them.
We have also implemented an automated digital
communications project which allows a more
strategic and targeted approach to people who
are looking to buy or sell through Turners.
We are working on two major data projects
which will help us in the area of pricing vehicles
and identifying credit risk. Both these projects
leverage “off-the-shelf” cloud-based data
tools, including machine-learning. The proof
of concept results are promising and we know
there is a significant opportunity in vehicle
purchasing to help identify and limit our “bad
buys”, as there is in the finance business with
identifying and limiting our “bad lending”.
We were planning to launch a car subscription
service in March this year, however, progress
has been impeded by COVID-19. We have
subsequently made the decision to brand the
business under the Turners brand umbrella
due to its high trust, strong brand value and
recognition. We are working directly with
Collaborate in Australia to get the subscription
platform set up for NZ and now expect Turners
Car Subscription to be up and running in Q2
FY21.
DIVIDEND AND SHARE BUY BACK
PROGRAMME
In March 2020, the Board deferred the Q3
dividend payment as a cautionary step due
to the uncertainty surrounding the length of a
L4/L3 lockdown. In June 2020, with a better
understanding of how the business was tracking,
the Board declared a final fully imputed dividend
incorporating the Q3 deferred dividend of 6.0
cents per share, resulting in full year dividends
of 14.0 cps. The Board believes this level of
pay out best ensures our ability to navigate
the volatility of the current environment, and
also the optionality to take advantage of any
upcoming opportunities.
The Board’s intention at this stage is to continue
dividend payouts for FY21 in line with the
current policy level of 60-70% of net profit after
tax.
The Board continues to believe that the
share price does not appropriately reflect the
fundamentals of the business and recommenced
the share buyback programme in August and
September 2019. Approximately, 1.4 million
shares were bought and cancelled, equating to
1.6% of shares on issue.
RESPONDING TO COVID-19
The impact of the COVID-19 pandemic began
to be seen on our business in February 2020.
While we have now moved to a ‘new normal’, we
would like to acknowledge and thank our team
for their efforts during this challenging time.
They have been committed, understanding, and
prepared to go above and beyond in difficult
circumstances. We would also like to thank
those landlords and business partners who
extended a helping hand during the early part of
lockdown...this was greatly appreciated.
The sudden change brought about by the
COVID-19 lockdown required dynamic planning
and execution urgency. The speed at which we
were able to respond was a testament to the
skills in our IT group but also the technology
investments we have made over the last few
years.
We had a very simple approach to our response
to the situation.
We reacted to make sure that, as a business, we
were in a position to survive a three to six month
lockdown and prepare for a potentially longer
restricted trading environment. We took a “cash
is king” approach to this.
We then had to start rethinking the business.
Our primary objective was to resume trading as
soon as possible, in a way that safely managed
the risk to our people and our customers. We
initiated a successful contactless, 100% online
trading programme and, even during the Level
4 and 3 lockdown, we were able to sell 600
vehicles online. The ability to sell uninspected
vehicles online at scale for the first time
demonstrates the high trust and awareness of
the Turners brand and given its popularity, we
plan to continue with this online service.
This ability to continue trading allowed us to
avoid a dilutive capital raise.
We knew that economic conditions were likely
to change for some people, so we needed to
think about our risk in the finance book and
adjust our lending criteria accordingly. We also
knew that strong trusted brands would have a
sizeable opportunity in a post-lockdown world.
1312
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
We are now in the rebuilding phase and focusing
on the opportunities. This will require disciplined
cost control, leveraging our strong online
platform, continuing to invest in technology
where it makes sense and building our market
share in all our respective businesses.
SOCIAL RESPONSIBILITY
Our drive to create a better business
encompasses not only delivering returns to our
shareholders, but also supporting our people,
our communities and our environment.
We believe that creating a long lasting,
sustainable and profitable business also
delivers benefits for our people, by providing
employment in regions throughout New
Zealand. At no other time has the importance
of supporting our people been more evident
than during the lockdown. We were able to keep
many staff working from home and financially
supported those who were unable to work.
Health and safety remains a priority and we
moved quickly to create new ways of working,
to keep our people and our customers safe
during this time, with the launch of our BuySafe
initiative.
We are committed to ethical and fair conduct,
which is particularly relevant given the industries
we operate in. We believe in not only doing the
right thing for business, but also the right thing
for our customers and our people.
We are conscious that we operate in a sector
which has a high carbon footprint. We believe
that some of the initiatives we are taking will
help reduce this impact, from having more staff
working from home, through to car subscription
services and offering electric vehicles for sale.
We also take sustainability into account when
building new sites and premises, with solar
panels currently being trialled on the roof of our
Hamilton dealership.
FY21 OUTLOOK
As with many businesses there are many
unknowns in our operating environment, over
the next 12 to 24 months. However, the long
term dynamics of the used car industry remain
robust and an attractive opportunity for Turners.
We have identified five strategic themes, which
will help us navigate this environment and have
outlined these on page 8.
In summary, we will be looking to:
1. Accelerate market share growth
2. Leverage our scale and brand equity
3. Benefit from the diversification of our
business
4. Invest to build our digital advantage
5. Leverage our balance sheet capacity to
support growth opportunities
We have full confidence in our strategy,
our businesses and our teams to deliver
an improving performance for all our
stakeholders, from our customers through to
our shareholders. The pandemic has hastened
our move to become a more cost efficient, more
resilient and more focused business. This will
benefit Turners as we look to grow our business
and take advantage of opportunities.
Our thanks go to all our customers, suppliers
and business partners, and especially to
our people, who have helped us overcome
the recent challenges and positioned us for
an exciting future. We look forward to our
shareholders sharing this journey with us.
We are now in the rebuilding
phase and focusing on the
opportunities. This will require
disciplined cost control,
leveraging our strong online
platform, continuing to invest
in technology where it makes
sense and building our market
share in all our respective
businesses.
Grant Baker Todd Hunter
Chairman Chief Executive Officer
1514
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
OUR BUSINESS
RESPONDING TO THE COVID-19 CHALLENGE
The sudden change brought about by COVID-19 required dynamic
planning and execution urgency. The speed at which we were able to
adapt our business was a testament to the technology investments we
have made over the last few years.
REACT
ENSURE SURVIVAL OF THE BUSINESS, ‘CASH IS KING’ APPROACH
■
Safety of staff and customers a priority
■
Rapid Working From Home setup completed
■
Hiring freeze implemented
■
Annual leave utilised, where appropriate
■
Accessed Government Wage Subsidy support
■
All permanent team members retained
■
Reduction in pay for senior management and directors for 3-month
period
■
All costs reviewed and discretionary spend halted
■
Deferred capital expenditure
■
Established what was possible eg. Essential service, selling cars
online
■
Daily reporting on critical KPIs established
RETHINK
ASSESS AND EVALUATE, POSITION FOR THE ‘NEW NORMAL’,
AVOID A DILUTIVE CAPITAL RAISE
■
Online purchasing and contactless delivery implemented
■
WFH on a more permanent basis
■
Customers reverting to trusted brands
■
Assessing the challenges of growing unemployment, weakening
demand and softening prices
■
Close communication with funder
■
Avoided a dilutive capital raise
REBUILD
EYES ON THE PRIZE AND PREPARE FOR OPPORTUNITIES
■
Disciplined cost control
■
Continue to offer 100% online customer experience
■
Review credit risk scoring
■
Enhance distribution in insurance
■
Push the trust and strength in our brands
■
Significant opportunity to build market share in all our businesses
■
Leverage strong balance sheet to take advantage of opportunities
LEADING CHANGE
In FY20, we acquired a 12% stake in ASX-listed Collaborate Corp.
Collaborate’s core business centres around the rapidly evolving car
sharing market with DriveMyCar, Australia’s leading peer-to-peer car
rental business, complemented by Carly, Australia’s first truly flexible car
subscription offering, which launched in March 2019.
This investment provides an exciting opportunity for Turners to participate
in the rapid growth of the ‘Sharing Economy’ as it relates to transportation
and changing consumer preferences.
Alternative vehicle ownership models are on the rise internationally, and
vehicle subscription programmes could account for nearly 10% of all new
vehicle sales in the US and Europe by 2025. In developed markets like
the UK and the US, subscription-based ownership models have already
crossed 10% of monthly household incomes, driven in large part by the
benefits experienced by consumers such as greater flexibility and a
reduction in costs incurred including the purchase of vehicles, parking,
insurance, fuel and maintenance
1
.
We are excited about Turner’s future as we position ourselves for the long
term projected changes in the traditional retail car market. New concepts
such as peer to peer car rentals and car sharing are a part of the future
and provide a new revenue opportunity for car dealers and other industry
players.
“New concepts such
as peer to peer car
rentals and car sharing
are a part of the future
and provide a new
revenue opportunity for
car dealers and other
industry players.”
https://www.forbes.com/sites/sarwantsingh/2018/07/30/your-next-car-could-be-a-flexible-
subscription-model/#2ec7ac4f4ffa
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
As Level Three approached, the opportunity to commence a contactless, safe and
trusted online retail service became a reality. Turners’ BuySafe program was designed to
sell vehicles under the operational restrictions of Level 3 while keeping our staff and our
customers safe.
BuySafe builds on the existing online research and buying capabilities of Turners and
added in new innovations such as virtual test drives via phone video calling, remote
finance approvals, a 5-day money back guarantee and a contactless handover process.
A impactful marketing campaign was launched to highlight that customers could
purchase vehicles through a safe, 100% contactless process, and to give customers the
confidence to do so. Designed to be a simple checklist of the vehicle buying journey, each
step of the process was outlined in the online campaign, with the emphasis being on
safety. And not just from a health perspective. Buying a car without a physical inspection
can be daunting for most. The addition of the 5-Day money back guarantee was made to
give customers ‘buying safety’. This gave the ultimate confidence to buy – a no questions
asked return policy.
The BuySafe program is still running for any who require it. And the 5-Day money back
guarantee has been made available on over half our stock for all customers through the
retail channel.
A impactful marketing
campaign was
launched to highlight
that customers could
purchase vehicles
through a safe,
100% contactless
process, and to
give customers
the confidence
to do so.
*
CONTACTLESS
ONLINE BUYING
CONTACTLESS
HANDOVER
MONEY BACK
GUARANTEE
CHOOSE
YOUR CAR
SAFETY FIRSTVIRTUAL
TEST DRIVE
1918
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
*Not all vehicles have this offer. Terms and conditions apply.
FY20 FINANCIAL
COMMENTARY
This financial commentary should be read in conjunction
with the full financial statements and Notes to the Financial
Statements in the FY20 Annual Report.
REVENUE
Revenues were stable compared to the prior year. The gains
being made by Auto Retail prior to February were offset by
the COVID-19 impact. Finance revenues increased due to
the increase in origination from Turners Cars and third-party
originators. Insurance revenues reflected fewer policies sold as a
result of market conditions and further tweaks to risk pricing.
NET PROFIT BEFORE TAX (NPBT)
Reported NPBT of $29.1m was in line with guidance of $28-
$30m and stable on FY19 NPBT of $29.0m. The year on year
decrease for Auto Retail reflects the property settlement in
the prior year which provided a contribution of $3.4m. The
improvement in Finance was driven by higher quality new loans
and the resulting improved arrears performance. In addition, a
COVID-19 overlay of $1m has been applied to finance receivable
provisioning to mitigate any potential increase in credit losses
over the next 12 months. The Insurance result reflects the
positive progress in claims ratios which have continued to offset
reduced policy sales.
Excluding IFRS 16 changes and strategic review costs in FY20,
and property revaluations/sales and the Buy Right Cars brand
write off in FY19, Underlying NPBT was up 11% year on year. This
increase was driven by gains made in the Insurance, Finance
and Credit divisions, partially offset by a small drop in Auto
Retail due to COVID-19.
NET PROFIT AFTER TAX (NPAT)
Net profit after tax (NPAT) was $21.0m (FY19: $22.7m).
Reported earnings per share was down 8% to 24.4 cents per
share largely reflecting a higher effective tax rate in FY20.
DIVIDEND
Turners paid fully imputed dividends for the FY20 year of 14.0 cents per share. In March 2020, the
Board deferred the Q3 dividend payment as a cautionary step due to the uncertainty surrounding
the length of a L4/L3 lockdown. In June 2020, with a better understanding of the impact on
the business and the trading environment, the Board declared a final fully imputed dividend
incorporating the Q3 deferred dividend of 6.0 cents per share, resulting in full year dividends of
14.0 cps.
BALANCE SHEET
Turners has a strong balance sheet and is well positioned from a funding and capital perspective to
take advantage of growth opportunities into the future. The primary changes in the balance sheet in
FY20 were as follows:
• Cash and cash equivalents: Just prior to year end, Turners increased its cash balances by pre-
emptively drawing down on facilities to ensure sufficient liquidity through the Level 4 lockdown.
These precautionary drawings have now been repaid.
• Inventory: The increase in inventory reflects the COVID-19 slowdown and lockdown in March.
• The change in Finance Receivables reflects quality growth in Oxford Finance, offset by the
rundown in the MTF non-recourse ledger.
• The increase in Property, Plant and Equipment is due to the development of new sites in
Whangarei and North Shore and the Mt Richmond purchase.
• Shareholder equity decreased to $223m as at 31 March 2020 due to the share buyback and
impact of IFRS 16 Leases on retained earnings.
FUNDING AND LIQUIDITY
Turners’ funding remains at conservative levels. As at 31 March 2020, Turners’ funding capacity was
$428m with $78m undrawn. Sixty nine percent or $242m of this debt relates to finance receivables
funding within Oxford Finance. During March 2020, the BNZ increased the limit for the securitisation
warehouse facility from $200m to $250m (including capital contribution from TRA) to provide the
headroom for further growth in the finance book. The remaining 31% of debt ($108m) relates to
borrowings associated with property, inventory and the $25m Bond program.
FIVE YEAR FINANCIAL PERFORMANCE
$MILLIONSFY16FY17FY18FY19FY20
Operating Revenue 170.3251.0330.5336.6332.7
Net Profit Before Tax (Operating
Profit)
21.624.631.129.029.1
Net Profit After Tax15.617.623.422.721.0
Earnings Per Share24.725.529.326.224.4
Dividends Per Share13.014.515.517.014.0
Financial Position
Finance Receivables167.6207.1289.8290.0293.0
Total Assets367.1556.6651.7654.2708.4
Borrowings174.8265.9317.4312.9350.4
Shareholder Funds129.8171.7214.3226.4223.1
Shares on issue
(millions as at 31 March)
63.474.584.886.985.6
$MILLIONSFY20FY19VA R
Reported profit before tax29.129.00.3%
Oxford strategic review costs0.2-
IFRS 16 Lease Accounting changes(0.5)-
Christchurch property revaluation-(0.8)
Property Settlement – Albany site-(3.4)
Brand Write-Off (Buy Right Cars)-4.6
Sale of property -(3.4)
Underlying operating result28.826.011%
2120
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
THE BOARD
GRANT BAKER
Non-executive Chairman | Appointed September 2009
Grant Baker has wide experience at a senior level in
both public and private New Zealand companies. He
has been involved in a number of successful ventures,
including 42 Below vodka and Trilogy International.
With a 7.13% shareholding, Grant is a long term
committed investor in Turners Automotive Group and
has been Chairman of Turners Automotive Group since
September 2009. As an avid collector of specialist
vehicles and motor racing enthusiast, both as a
competitor and as a backer of young up and coming
drivers, he is passionate about the strong Turners brand
and its focus on cars.
PAUL BYRNES
Deputy Chairman and Independent Director |
Appointed February 2004
Paul Byrnes is a chartered accountant, a professional
director and an investor with over 25 years’ experience
in senior and CEO roles in private and listed companies.
His career has included the management buyout of
previously listed Holeproof Industries, consulting and
participation in merger and acquisition opportunities
and business ‘turnaround’ management. Paul was
appointed CEO and Executive Director of Dorchester
Pacific in May 2008 (now Turners Automotive Group),
handing over the CEO role to Todd Hunter in June
2016. Paul is entrepreneurial at heart but combines this
with a wealth of top class governance experience (Top
Energy and Hellaby Holdings) and the real world CEO
experience of bringing a finance company positively out
of the GFC. Paul has a 2.90% shareholding in Turners
Automotive Group.
MATTHEW HARRISON
Non-executive Director | Appointed December 2012
Matthew Harrison has extensive management
experience and a background in finance and business
administration. He is the former Managing Director of
EC Credit Control, the debt recovery business acquired
in 2012 and has great experience dealing with credit
cycles and credit management. He joined EC Credit
Control in 1998, following senior management roles
in the courier industry. Matthew joined the Turners
Automotive Group Board in 2012 and represents his
family interests, which have a 7.65% combined holding
in the company. Matthew is a self-confessed “car nut”
and has owned some very special cars over the years
including a McLaren P1. He is very enthusiastic about the
future of Turners and, given his large shareholding and
love for automobiles, is strongly committed to seeing
Turners continue its successful journey.
ALISTAIR PETRIE
Non-executive Director | Appointed February 2016
Alistair Petrie has over 15 years of senior management experience in both
private and listed companies in the agribusiness sector. He has extensive
knowledge in sales and marketing in both international and domestic
environments, which is particularly useful for some of the challenges
and opportunities Turners has importing vehicles from Japan. He has a
number of directorships with companies that have a focus on growth and
innovation, and he represents the interests of Bartel Holdings, which has
a 11.17% shareholding in Turners Automotive Group. Alistair worked for
many years at Turners & Growers, the original parent company of Turners
Auctions, which provides a nice connection at Board level back to those
foundational brand values of “trust and integrity”. Alistair has a BSC (hons)
from Newcastle Upon Tyne university and an EMBA from Melbourne
University.
JOHN ROBERTS
Independent Director | Appointed July 2015
John Roberts has extensive experience in the financial services industry,
having held the role of Managing Director of credit bureau Veda
International for 10 years, during which time the Veda Advantage business
was successfully listed on the ASX. John previously had over 15 years in
advertising, with CEO roles with Saatchi & Saatchi in New Zealand and
Asia Pacific, before heading up MasterCard in New Zealand for three years.
John is currently a director of Centrix, a leading credit rating agency in NZ,
and this keeps him connected with the financial sector and the NZ credit
cycle. John’s advertising and branding experience has been invaluable
across a number of projects within the business and he continues to add
value and thought leadership around the use of data and analytics, drawing
on his Veda NZ experience.
ANTONY VRIENS
Independent Director | Appointed January 2015
Antony Vriens has been a director and chairman of Turners’ insurance
subsidiary, DPL Insurance (now Autosure), since 2012. He is a highly
experienced financial services industry professional, with demonstrated
success as a senior executive and consultant in insurance and wealth
management businesses across Asia Australia and New Zealand. He brings
a hands on, practical and commercial approach and a strong technology
focus to his Board role. His relationships across the insurance industry and
regulators are highly valuable to the Turners business and his collaborative
approach is embraced by both the Board and management.
MARTIN BERRY
Independent Director | Appointed August 2018
Martin Berry is a seasoned global financial services executive having run
large international businesses for the likes of ANZ, Citibank, Barclays and
Standard Chartered. He later focused on more entrepreneurial ventures
with a successful track record of having built, acquired and sold several
companies with values in excess of USD 500m. Martin later founded and
now runs venture capital firm d:tribe capital out of Singapore investing in
early stage tech companies across Asia-Pacific.
2322
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
LEADERSHIP
TEAM
Todd Hunter
Chief Executive Officer
Aaron Saunders
Group Chief Financial Officer
James Searle
Group General Manager
Insurance
David Wilson
CEO
EC Credit Control
Jeremy Rooke
General Manager Digital Strategy
Simon Gould-Thorpe
Group Chief Information Officer
Greg Hedgepeth
CEO Turners Automotive Retail
Todd Hunter
Chief Executive Officer
Todd is a strong and experienced senior executive, with a background in marketing, sales and
accounting in both large global and domestic businesses. Before joining Turners Auction in 2006
Todd worked for Microsoft NZ and Ernst and Young. He was appointed CEO of NZX listed Turners
Auctions in 2013, and took on the CEO role for the wider Turners Automotive Group in 2016. Todd is
a chartered accountant and holds a Bachelor and Diploma of Commerce from Auckland University.
Aaron Saunders
Group Chief Financial Officer
Aaron joined Turners Group NZ in 2006. He has a strong background in financial and management
accounting, at both a strategic and operating level in local and international markets. Over the last
20 years, Aaron has worked across a broad range of company sizes and industries including vehicle
importation and distribution, broadcasting and the finance sector. Aaron is a full member of the
New Zealand Institute of Chartered Accountants and holds a Bachelor of Commerce from Auckland
University.
Simon Gould-Thorpe
Group Chief Information Officer
Simon joined Turners in 2010. With over 30 years’ experience in IT, he has led dynamic and innovative
IT Teams to success across a wide range of industries. His current role has seen the delivery of
significant advancements to assist Turners business transformation, including the development
of new core systems and the introduction of key business and process automation. Turners IT
utilizes leading technologies and follows best practice IT management including DevOps and Agile
methodologies.
Greg Hedgepeth
CEO Turners Automotive Retail
Greg joined Turners in 2017 as CEO of the Automotive Retail Division, with responsibility for Turners
Cars, Trucks & Machinery and the Damaged & End of Life business. He is an experienced automotive
executive and has previously held a number of senior roles with BMW Group NZ and Armstrong
Motor Group, one of NZ’s largest private owned retail automotive networks. With a Bachelor of
Commerce from Auckland University and a number of years working for Saatchis both in NZ and the
US, Greg brings a strong sales and marketing focus to his role.
James Searle
Group General Manager Insurance
James is responsible for operational performance and development of life and consumer (vehicle
and finance related) insurance products. James has over 25 years’ experience in the New Zealand
insurance industry having worked across underwriting, portfolio management, relationship
management and marketing roles for major insurance companies including IAG and Lumley General
Insurance.
David Wilson
CEO EC Credit Control
Dave joined EC Credit in 2007 and was appointed to his current role in April 2015. He has over 20
years’ experience in the banking, finance and recruitment industries, and has worked in the credit
management industry since 2001. Dave has a Diploma in Business Studies.
Jeremy Rooke
General Manager Digital Strategy
Jeremy joined Turners Automotive Group in 2009. His role involves leading the application of new
technologies, business models and channels to enable and expand Turners’ digital capabilities.
Jeremey holds degrees in Law and Arts, and prior to Turners, worked as a business analyst and
projects manager on several large transformative IT programmes, most notably in the insurance
sector.
2524
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Cars New Lynn
FINANCIAL REPORTS
FOR THE YEAR ENDED 31 MARCH 2020
28 Independent Auditor’s Report
35 Consolidated Statement of Comprehensive Income
36 Consolidated Statement of Changes in Equity
37 Consolidated Statement of Financial Position
38 Consolidated Statement of Cash Flows
39 Notes to the Financial Statements
2726
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
for the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
Level 9, 45 Queen Street, Auckland 1010
PO Box 3899, Auckland 1140
New Zealand
T: +64 9 309 0463
F: +64 9 309 4544
E: auckland@bakertillysr.nz
W: www.bakertillysr.nz
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Turners Automotive Group Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Turners Automotive Group Limited and its
subsidiaries ('the Group') on pages 35 to 93, which comprise the consolidated statement of financial position
as at 31 March 2020, and the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at 31 March 2020, and its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards ('NZ IFRS') and International Financial Reporting Standards ('IFRS').
Our report is made solely to the Shareholders of the Group. Our audit work has been undertaken so that we
might state to the Shareholders of the Group those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Shareholders of the Group as a body, for our audit work, for our report
or for the opinions we have formed.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) ('ISAs (NZ)').
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group in accordance
with Professional and Ethical Standard 1 (Revised) International Code of Ethics for Assurance Practitioners
(including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Other than in our capacity as auditor and provider of other assurance services we have no relationship with, or
interests in, Turners Automotive Group Limited or any of its subsidiaries. The provision of these other assurance
services has not impaired our independence.
In addition to this, principals and employees of our firm deal with the Group on normal terms within the ordinary
course of trading activities of the business of the Group. This has not impaired our independence.
Emphasis of Matter – Increased level of inherent uncertainty in the significant accounting estimates and
judgments applied by Management in the preparation of these financial statements, arising from the
ongoing global pandemic of coronavirus disease 2019
We draw attention to Note 4 of the Group’s consolidated financial statements, which describes the impact of
the ongoing global pandemic of the novel coronavirus disease 2019 (‘COVID-19’) and Management’s
assessment of and responses to the pandemic. Since March 2020, the COVID-19 pandemic has lowered overall
economic activity and confidence, resulting in significant volatility and instability in financial markets and
economic uncertainty. Consequently, there has been an increase in the level of inherent uncertainty in the
critical accounting estimates and judgements applied by Management in the preparation of these consolidated
financial statements, described in Note 4 of the Group’s consolidated financial statements. As at the date of
the signing of these consolidated financial statements, all reasonably known and available information with
respect to the COVID-19 pandemic has been taken into consideration in the critical accounting estimates and
judgements applied by Management, and all reasonably determinable adjustments have been made in
preparing these consolidated financial statements.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements of the current year. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key Audit Matter How our audit addressed the key audit matter
IImmppaaiirrmmeenntt tteessttiinngg ooff GGooooddwwiillll aanndd OOtthheerr IInnddeeffiinniittee LLiiffee
IInnttaannggiibbllee AAsssseettss
As disclosed in Note 21 of the Group’s consolidated
financial statements the Group has goodwill of $92.5m
allocated across four of the Group’s cash-generating units
(‘CGUs’) and brand assets of $67.1m allocated across two
of those CGUs. Goodwill and brand assets were significant
to our audit due to the size of the assets and the
subjectivity, complexity and uncertainty inherent in the
measurement of the recoverable amount of these CGUs for
the purpose of the required annual impairment test. The
measurement of a CGUs recoverable amount includes the
assessment and calculation of its ‘value in-use’.
Management has completed the annual impairment test for
each of these four CGUs as at 31 March 2020.
During the year ended 31 March 2020, the Buy Right Cars
and Turners Group NZ CGUs were amalgamated to reflect
the lowest level within the Group at which goodwill is
monitored for internal management purposes.
Our audit procedures among others included:
• Evaluating Management’s determination of the Group’s four
CGUs based on our understanding of the nature of the
Group’s business and the economic environment in which the
segments operate. We also analysed the internal reporting of
the Group to assess how the CGUs are monitored and
reported.
• Evaluating the competence, capabilities, objectivity and
expertise of Management's external valuation expert and the
appropriateness of the expert's work as audit evidence for the
relevant assertions.
• Challenging Management’s assumptions and estimates used
to determine the recoverable value of its indefinite life
intangible assets, including those relating to forecasted
revenue, cost, capital expenditure and discount rates, by
adjusting for future events and corroborating the key market
2928
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
Key Audit Matter How our audit addressed the key audit matter
Management has engaged an external valuation expert to
assist in the annual impairment testing of the four CGUs.
This annual impairment test involves complex and
subjective estimation and judgement by Management on
the future performance of the CGUs, discount rates applied
to future cash flow forecasts, and future market or
economic conditions.
related assumptions to external data (including the
consideration of the impact of the COVID-19 pandemic).
Procedures included:
o Evaluating the logic of the value-in-use calculations
supporting Management’s annual impairment test
and testing the mathematical accuracy of these
calculations;
o Evaluating Management’s process regarding the
preparation and review of forecasts;
o Comparing forecasts to Board approved forecasts;
o Evaluating the historical accuracy of the Group’s
forecasting to actual historical performance;
o Challenging and evaluating the forecast growth
assumptions;
o Evaluating the inputs to the calculation of the
discount rates applied;
o Engaging our own internal valuation experts to
evaluate the logic of the value-in-use calculation
and the inputs to the calculation of the discount
rates applied;
o Evaluating Management’s sensitivity analysis for
reasonably possible changes in key assumptions;
and
o Performing our own sensitivity analyses for
reasonably possible changes in key assumptions,
the two main assumptions being: the discount rate
and forecast growth assumptions.
• Evaluating the related disclosures about indefinite life
intangible assets which are included in Note 21 in the Group’s
consolidated financial statements.
VVaalluuaattiioonn ooff FFiinnaannccee RReecceeiivvaabblleess
iinncclluuddiinngg tthhee aaddooppttiioonn ooff NNZZ IIFFRRSS 99 FFiinnaanncciiaall IInnssttrruummeennttss
As disclosed in Note 14 of the Group’s consolidated
financial statements, the Group has finance receivable
assets of $293.0m. Finance receivable assets were
significant to our audit due to the size of the assets and the
subjectivity, complexity and uncertainty inherent in the
recognition of expected credit losses and the amount of
those expected credit losses.
Management has prepared expected credit losses models
to complete its assessment of expected credit losses for
the Group’s finance receivables as at 31 March 2020.
This assessment involves complex and subjective
estimation and judgement by Management on credit risk
and the future cash flows of the finance receivables.
Our audit procedures among others included:
• Evaluating the design and operating effectiveness of the key
controls over finance receivable origination, ongoing
administration and expected credit losses model data and
calculations.
• Selecting a representative sample of finance receivables and
agreeing these finance receivables to the signed loan
agreement and client acceptance documents on origination.
• Challenging and evaluating Management’s logic, key
assumptions, and calculation of its expected credit losses
models against the requirements specified in NZ IFRS 9 for
recognising expected credit losses on financial assets.
• For individually assessed finance receivables, examining
those finance receivables and forming our own judgements
as to whether the expected credit losses provision recognised
by Management was appropriate (including the consideration
of the impact of the COVID-19 pandemic on the expected
credit losses provision).
• For the collectively assessed finance receivables, challenging
and evaluating the logic of Management’s expected credit
losses models and the key assumptions used with our own
experience (including the consideration of the impact of the
COVID-19 pandemic on key assumptions). Also, testing key
inputs used in the expected credit losses models and the
mathematical accuracy of the calculations within the models.
Key Audit Matter How our audit addressed the key audit matter
• Evaluating the changes made to the provisioning model to
capture the effect of the changing economic environment at
31 March 2020 compared to the economic environment at
the date when the historical data used to determine the
expected credit losses was collected (described in Note 4 to
the Group’s consolidated financial statements).
• Evaluating the disclosures related to finance receivable
assets, and the risks attached to them, which are included in
Note 5 and 14 in the Group’s consolidated financial
statements.
VVaalluuaattiioonn ooff IInnssuurraannccee CCoonnttrraacctt LLiiaabbiilliittiieess
As disclosed in Note 35 of the Group’s consolidated
financial statements the Group has insurance contract
liabilities of $51.4m. The Group’s insurance contract
liabilities were significant to our audit due to the size of the
liabilities and the subjectivity, complexity and uncertainty
inherent in estimating the impact of claims events that have
occurred but for which the eventual outcome remains
uncertain.
Management has engaged an external actuarial expert to
estimate the Group’s insurance contract liabilities as at 31
March 2020.
Our audit procedures among others included:
• Evaluating the design and operating effectiveness of the key
controls over insurance contract origination, ongoing
administration, claims management and reporting and the
integrity of the related data.
• Evaluating the competence, capabilities, objectivity and
expertise of Management's external actuarial expert and the
appropriateness of the expert's work as audit evidence for the
relevant assertions.
• Agreeing the data provided to Management's external
actuarial expert to the Group’s records.
• Engaging our own actuarial expert to assist in understanding
and evaluating:
o the work and findings of the Group’s external
actuarial expert engaged by Management; and
o the Group’s actuarial methods and assumptions to
assist us in challenging the appropriateness of
actuarial methods and assumptions used by
Management.
• Assessing the selection of methods and assumptions with a
view to identify management bias.
• Evaluating the related disclosures about insurance contract
liabilities, and the risks attached to them, which are included
in Note 35 in the Group’s consolidated financial statements.
AAddooppttiioonn ooff NNZZ IIFFRRSS 1166 LLeeaasseess
As disclosed in Note 32 of the Group’s consolidated
financial statements, the Group has adopted NZ IFRS 16
Leases from 1 April 2019, using the retrospective approach.
This has resulted in the recognition of a right-of-use asset
of $24.9m and a lease liability of $32.5m as at 31 March
2020.
The adoption of NZ IFRS 16 was significant to our audit due
to the size of the assets and liabilities recognised,
complexity of applying the new standard and the
assumptions required by Management for the calculation
of the lease balances.
Management has completed calculations of the lease
balances for all leases as at 1 April 2019 (upon adoption)
and as at 31 March 2020. These calculations require
estimates regarding the lease term and the discount rate.
Our audit procedures, among others, included:
• Assessing Management’s process relating to the
identification, recording, recognition and measurement of
leases within the scope of NZ IFRS 16.
• Assessing Management’s judgements made in applying
allowable practical expedients against the requirements of
NZ IFRS 16.
• Evaluating the key assumptions used by Management,
including the incremental borrowing rates applied to the lease
portfolio.
• For a sample of leases:
o Agreeing key inputs in the lease calculation to the
underlying lease agreement;
o Recalculating the lease liability and right-of-use
asset based on the key inputs noted above and
3130
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
Key Audit Matter How our audit addressed the key audit matter
compared our recalculations to the balances
recognised by the Group; and
o Checking the appropriateness of the classification
of the lease liability between current and non-
current based on the remaining term of the lease.
• Evaluating the related disclosures about leases which are
included in Note 32 in the Group’s consolidated financial
statements.
Other Information
The Directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 31 March 2020 (but does not include the consolidated
financial statements and our auditor’s report thereon).
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed , we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Consolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of the consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible on behalf of the Group for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (NZ) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs (NZ), we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
▪ Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
▪ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
▪ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
▪ Conclude on the appropriateness of the use of the going concern basis of accounting by the Directors and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
▪ Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements re present fairly the underlying
transactions and events in a manner that achieves fair presentation.
▪ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
3332
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2020
The accompanying notes form part of these financial statements
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
2020
2019
Notes
$’000
$’000
Revenue
7
332,174
328,358
Other income
7
500
8,221
Cost of goods sold
(135,003)
(133,126)
Interest expense7
(14,853)
(14,952)
Impairment provision expense
7
(6,044)
(7,892)
Subcontracted services expense
(17,149)
(12,888)
Employee benefits (short term)
(55,458)
(52,756)
Commission
(13,368)
(14,581)
Advertising expense
(2,743)
(3,918)
Depreciation and amortisation expense7
(11,919)
(5,785)
Property and related expenses
(1,688)
(10,945)
Systems maintenance
(1,747)
(1,471)
Claims
(25,952)
(26,804)
Movement in life insurance liabilities35
(836)
(718)
Insurance deferred acquisition costs
(701)
(423)
Impairment of intangible brand asset
-
(4,300)
Other expenses
(16,148)
(16,971)
Profit before taxation29,065
29,049
Taxation (expense)/benefit8
(8,112)
(6,330)
Profit for the year20,953
22,719
Cash flow hedges
(447)
(364)
Revaluation of financial assets at fair value through OCI
(310)
-
Foreign currency translation differences
(12)
(26)
Total other comprehensive income (769)
(390)
Total comprehensive income for the year20,184
22,329
Earnings per share (cents per share)
Basic earnings per share 9
24.3526.21
Diluted earnings per share
9
24.3527.28
The accompanying notes form part of these financial statements
Other comprehensive income for the year (which may subsequently be reclassified to
profit/loss), net of tax
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current year and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Matters Relating to the Electronic Presentation of the Audited Consolidated Financial Statements
This audit report relates to the consolidated financial statements of Turners Automotive Group Limited and its
subsidiaries for the year ended 31 March 2020 included on Turners Automotive Group Limited’s website. The
Directors of Turners Automotive Group Limited are responsible for the maintenance and integrity of Turners
Automotive Group Limited’s website. We have not been engaged to report on the integrity of Turners
Automotive Group Limited’s website. We accept no responsibility for any changes that may have occurred to
the consolidated financial statements since they were initially presented on the website.
The audit report refers only to the consolidated financial statements named above. It does not provide an
opinion on any other information which may have been hyper linked to or from these consolidated financial
statements. If readers of this report are concerned with the inherent risks arising from electronic data
communication they should refer to the published hard copy of the audited consolidated financial statements
and related audit report dated 30 July 2020 to confirm the information included in the audited consolidated
financial statements presented on this website.
Legislation in New Zealand governing the preparation and dissemination of consolidated financial statements
may differ from legislation in other jurisdictions.
The engagement partner on the audit resulting in this independent auditor’s report is N S de Frere.
BAKER TILLY STAPLES RODWAY AUCKLAND
Auckland, New Zealand
30 July 2020
3534
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
The accompanying notes form part of these financial statementsThe accompanying notes form part of these financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of changes in equity for the year ended 31 March 2020
Revaluation
of financial
assets at Cash flow
Share Share Translation fair value hedge Retained
capital options reserve through OCI reserve earnings Total
Notes$’000$’000$’000$’000$’000$’000 $’000
Balance at 31 March 2018199,148701(21)-(164) 14,659 214,323
Change in accounting policies
Impact of the implementation of NZ IFRS 15-----(345) (345)
Impact of the implementation of NZ IFRS 9----- (2,292) (2,292)
---- (2,637) (2,637)
Balance at 1 April 2018 (restated)199,148701(21)-(164) 12,022 211,686
Transactions with shareholders in their capacity as owners
Capital contributions (net of issue costs)2713,388----- 13,388
Capital buy back27(6,141)----- (6,141)
Employee share based payments28-326----326
Dividend paid29----- (15,214) (15,214)
Total transactions with shareholders in their capacity as owners7,247326--- (15,214) (7,641)
Comprehensive income
Profit----- 22,719 22,719
Other comprehensive income--(26)-(364)- (390)
Total comprehensive income for the year, net of tax--(26)-(364) 22,719 22,329
Balance at 31 March 2019206,395 1,027(47)-(528) 19,527 226,374
Change in accounting policy
Impact of the implementation of NZ IFRS 1632----- (5,666) (5,666)
Balance at 1 April 2019 (restated)
206,395 1,027(47)-(528) 13,861 220,708
Transactions with shareholders in their capacity as
owners
Capital contributions (net of issue costs)2797-----97
Capital buy-back27(3,192)----- (3,192)
Cancellation of options281,027 (1,027)-----
Dividend paid29----- (14,742) (14,742)
Total transactions with shareholders(2,068) (1,027)--- (14,742) (17,837)
Comprehensive income
Profit--
--
- 20,953 20,953
Other comprehensive income
--(12)(310)(447)-
(769)
Total comprehensive income for the year, net of tax--(12)(310)(447) 20,953 20,184
Balance at 31 March 2020204,327-(59)(310)(975) 20,072 223,055
The accompanying notes form part of these financial statements
Turners Automotive Group Limited
Consolidated statement of financial position for the year ended 31 March 2020
2020
2019
Notes
$’000
$’000
Assets
Cash and cash equivalents10
32,771
15,866
Financial assets at fair value through profit or loss11
64,988
66,252
Trade receivables12
8,609
12,471
Inventories13
44,371
38,859
Finance receivables14
293,037
290,017
Other receivables, deferred expenses and contract assets15
8,572
10,955
Reverse annuity mortgages16
4,913
8,294
Investment property17
5,650
5,650
Financial assets at fair value through OCI18
1,000
-
Property, plant and equipment20
52,788
39,084
Right-of-use assets32
24,850
-
Intangible assets21
166,843
166,734
Total assets708,392
654,182
Liabilities
Other payables22
28,048
33,906
Financial liability at fair value through profit or loss23
-
116
Contract liabilities24
2,085
2,642
Deferred tax25
10,080
13,918
Tax payables
2,772
4,570
Derivative financial instruments
985
524
Borrowings26
350,364
312,863
Lease liabilities32
32,511
-
Life investment contract liabilities35
7,072
7,484
Insurance contract liabilities35
51,420
51,785
Total liabilities485,337
427,808
Shareholders’ equity
Share capital27
204,327
206,395
Other reserves
(1,344)
452
Retained earnings
20,072
19,527
Total shareholders’ equity223,055
226,374
Total shareholders’ equity and liabilities708,392
654,182
For and on behalf of the Board
G.K. BakerP.A. Byrnes
Chairman DirectorDeputy chairman
Authorised for issue on 30 July 2020
The accompanying notes form part of these financial statements
TURNERS LIMITED
Consolidated statement of financial position for the year ended 31 March 2016
2016
2015
Notes
$’000
$’000
Assets
Cash and cash equivalents10
13,810
12,339
Financial assets at fair value through profit or loss11
18,455
17,350
Trade receivables12
9,575
7,394
Inventory13
14,156
8,984
Finance receivables14
167,598
142,827
Other receivables and deferred expenses15
8,505
5,946
Reverse annuity mortgages16
9,734
13,253
Property, plant and equipment19
11,108
8,319
Tax receivables
-
433
Deferred tax asset20
4,024
8,532
Intangible assets21
105,338
103,595
Total assets362,303
328,972
Liabilities
Other payables22
22,270
17,790
Deferred revenue23
6,049
7,476
Tax payables
990
71
Derivative financial instruments
49
-
Borrowings24
174,816
156,995
Life investment contract liabilities32
15,629
16,378
Insurance contract liabilities32
12,688
9,260
Total liabilities232,491
207,970
Shareholders’ equity
Share capital25
136,127
135,294
Other reserves
(52)
(23)
Retained earnings
(6,263)
(14,269)
Total shareholders’ equity129,812
121,002
Total shareholders’ equity and liabilities362,303
328,972
For and on behalf of the Board
G.K. BakerP.A. Byrnes
Chairman DirectorExecutive Director
Authorised for issue on 22 June 2016
The accompanying notes from part of these financial statements
TURNERS LIMITED
Consolidated statement of financial position for the year ended 31 March 2016
2016
2015
Notes
$’000
$’000
Assets
Cash and cash equivalents10
13,810
12,339
Financial assets at fair value through profit or loss11
18,455
17,350
Trade receivables12
9,575
7,394
Inventory13
14,156
8,984
Finance receivables14
167,598
142,827
Other receivables and deferred expenses15
8,505
5,946
Reverse annuity mortgages16
9,734
13,253
Property, plant and equipment19
11,108
8,319
Tax receivables
-
433
Deferred tax asset20
4,024
8,532
Intangible assets21
105,338
103,595
Total assets362,303
328,972
Liabilities
Other payables22
22,270
17,790
Deferred revenue23
6,049
7,476
Tax payables
990
71
Derivative financial instruments
49
-
Borrowings24
174,816
156,995
Life investment contract liabilities32
15,629
16,378
Insurance contract liabilities32
12,688
9,260
Total liabilities232,491
207,970
Shareholders’ equity
Share capital25
136,127
135,294
Other reserves
(52)
(23)
Retained earnings
(6,263)
(14,269)
Total shareholders’ equity129,812
121,002
Total shareholders’ equity and liabilities362,303
328,972
For and on behalf of the Board
G.K. BakerP.A. Byrnes
Chairman DirectorExecutive Director
Authorised for issue on 22 June 2016
The accompanying notes from part of these financial statements
3736
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
The accompanying notes form part of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of cash flows for the year ended 31 March 2020
2020
2019
Notes
$’000
$’000
Cash flows from operating activities
Interest received43,87445,023
Receipts from customers289,275279,472
Interest paid(12,856)(12,184)
Payment to suppliers and employees(285,795)(272,052)
Income tax paid
(11,460)
(10,752)
23,03829,507
Net increase in finance receivables
(27,826)(34,926)
Net decrease in reverse annuity mortgages
3,9642,545
Net (increase)/decrease of financial assets at fair value through profit or loss
704(12,163)
Net (withdrawals)/contributions from life investment contracts8816
(23,070)(44,528)
Net cash (outflow)/inflow from operating activities
31
(32)(15,021)
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and intangibles
9139,388
Purchase of property, plant, equipment and intangibles
(19,245)(12,753)
Purchase of investments
(1,310)41
Sale of investments
473-
Net cash inflow/(outflow) from investing activities
(19,169)(3,324)
Cash flows from financing activities
Net bank loan advances/(repayments)
61,03820,570
Principal elements of lease payments
(6,998)-
Proceeds from the issue of shares(3,192)7,100
Proceeds from the issue of bonds-(561)
Other borrowings-(2,837)
Dividend paid(14,742)(15,214)
Net cash inflow/(outflow) from financing activities
36,1069,058
Net movement in cash and cash equivalents
16,905(9,287)
Add opening cash and cash equivalents
15,866
25,145
Translation difference
-
8
Closing cash and cash equivalents
32,77115,866
Represented By:
Cash at bank10
32,771
15,866
Closing cash and cash equivalents
32,77115,866
The accompanying notes form part of these financial statements
Net cash outflow from operating activities before changes in operating assets and
liabilities
Changes in operating assets and liabilities arising from cash flow movements
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
1. REPORTING ENTITY
Turners Automotive Group Limited, ('the Company') is incorporated and domiciled in New Zealand. Turners Automotive Group Limited is
registered under the Companies Act 1993.
Turners Automotive Group Limited is a FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013.
The consolidated financial statements of Turners Automotive Group Limited and its subsidiaries (together ‘the Group’) have been prepared in
accordance with the Companies Act 1993 and the Financial Markets Conduct Act 2013.
The Group is a for profit entity.
The Group's principal activities are:
• automotive retail (second hand vehicle retailer)
• finance and insurance (loans and insurance products); and
• credit management (collection services).
The financial statements were authorised for issue by the directors on 30 July 2020.
2. BASIS OF PREPARATION
2.1 Statement of Compliance
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ('NZ GAAP').
They comply with New Zealand Equivalents to International Financial Reporting Standards ('NZ IFRS') and other applicable Financial
Reporting Standards, as appropriate for profit oriented entities. These financial statements also comply with International Financial Reporting
Standards ('IFRS').
2.2 Basis of measurement
The financial report has been prepared under the historical cost convention, as modified by revaluations for certain classes of assets and
liabilities to fair value and life insurance contract liabilities and related assets to net present value as described in the accounting policies
below.
2.3 Functional and Presentation Currency and Rounding
These financial statements are presented in New Zealand Dollars ($) which is the Company's functional currency. All values are rounded to
the nearest thousand ($000), except when otherwise indicated.
3. SIGNIFICANT ACCOUNTING POLICIES
Except as detailed in note 32, the accounting policies set out below have been applied consistently to all periods presented in these financial
statements, and have been applied consistently by Group entities.
3.1 Adoption of new and revised Standards and Interpretations
New standards and amendments and interpretations to existing standards that came into effect during the current accounting period beginning
on 1 April 2019 that materially impact the Group’s financial statements are as follows:
• NZ IFRS 16 ‘Leases’.
The other standards did not have a material impact on the Group’s financial statements and did not require retrospective adjustment.
Refer to note 32 for the impact of implementing this new standard.
3.2 New standards and amendments and interpretations to existing standards that are not yet effective for the current accounting
period beginning on 1 April 2019
The following relevant standards and interpretations have been issued at the reporting date but are not yet effective.
NZ IFRS 17 Insurance Contracts
NZ IFRS 17, ‘Insurance Contracts’, will replace NZ IFRS 4, ‘Insurance Contracts’. Under the NZ IFRS 17, insurance contract liabilities will be
calculated at the present value of future insurance cash flows with a provision for risk. The discount rate applied will reflect current interest
rates. If the present value of future cash flows would produce a gain at the time an insurance contract is issued, the model would also require
a "contractual service margin" to offset the day 1 gain. The contractual service margin would be amortised over the life of the insurance
contract. There would also be a new income statement presentation for insurance contracts, including a revised definition of revenue and
additional disclosure requirements. NZ IFRS 17 will also have accommodations for certain specific types of insurance contracts. Short-duration
insurance contracts will be permitted to use a simplified unearned premium liability model until a claim is incurred. For some contracts, in
which the cash flows are linked to underlying items, the liability value will reflect that linkage.
The effective date is annual reporting periods beginning on or after 1 January 2021.
The Group is yet to assess the impact of NZ IFRS 17. The Group intends to adopt NZ IFRS 17 no later than the financial year beginning 1
April 2021.
3.3 Basis of consolidation
Subsidiaries
Subsidiaries are all entities controlled by the Group. The financial statements of subsidiaries are included in consolidated financial statements
from the date that control commences until the date that control ceases.
3938
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
3.4 Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currency of Group entities at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency
at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional
currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency
translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional
currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured
based on historical costs are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on
retranslation are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to New
Zealand Dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to New Zealand
Dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve
(translation reserve) in equity.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable
future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign
operation and are recognised in other comprehensive income, and are presented in the translation reserve in equity.
3.5 Revenue and expense recognition
The principal sources of revenue are sales of goods, sales of service, interest income, fees, commissions, and insurance premium income.
3.5.1 Revenue from contracts with customers
Sales of goods
Sales of goods comprise sales of motor vehicle and commercial goods owned by the Group. Sales of goods are recognised when the customer
gains control of the goods. This normally occurs on receipt of a deposit, full payment or approval of financing.
Sales‑related warranties associated with goods cannot be purchased separately and they serve as an assurance that the products sold comply
with agreed‑upon specifications and cover the standard period established by legislation. There is no material amount of variable consideration
under these contracts nor is there the existence of a significant financing component.
Sales of service
Auction commission is recognised at a point in time in the accounting period in which the service is rendered. Payment for services is normally
deducted from the proceeds from the sale. Other than those provided by legislation no warranties are provided by the Group. There is no
material amount of variable consideration under these contracts nor is there the existence of a significant financing component.
Other sales revenue comprises services rendered preparing the asset for sale and commission earned on the sale of third party products.
Services rendered while preparing the asset for sale are recognised over time in the accounting period in which the service is rendered, and
a contract asset is recognised for amounts relating to services rendered not yet invoiced. Payment for services rendered are either deducted
from the proceeds from the sale or raised as a trade receivable. Other than those provided by legislation no warranties are provided by the
Group. There are no rebates or volume discounts. Commissions earned on the sale of third party products is recognised at a point in time
when the sale is made. Payment is usually received when the sale is made.
Other than those provided by legislation no warranties are
provided by the Group. There are no rebates or volume discounts.
Collection income, which is largely fees and commission earned for collecting debt on behalf of third parties and the sale of customised terms
of trade documents, is recognised at a point in time in the accounting period in which the service is rendered, by reference to completion of
the specific transaction assessed on the basis of the actual service provided as a proportion of the total service to be provided. Payment is
either deducted from the monies collected or raised as trade receivable and therefore a contract liability is recognised over the period in which
the services are performed representing the Group’s right to consideration for the services performed to date. If the consideration promised
includes a variable amount for rebates, refunds or credit, then the Group estimates the amount of variable consideration, to the extent that it
is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur, and recognises a contract liability.
Other than those provided by legislation no warranties are provided by the Group. Costs to obtain contracts such as commissions are
recognised as contract assets and incurred when the related revenue for the contract is released to profit or loss.
Voucher income
Voucher income is the proceeds from the sale of a voucher that on presentation entitles the holder to either load a debt for collection or
register of a security on the Personal Property Securities Register (‘PPSR’). Voucher income is recognised, at a point in time, when the
voucher is redeemed and the debtor’s information is loaded into the collection system or a security is registered on the PPSR. Payment is
normally received when the voucher is sold, and voucher income is initially recognised as a contract liability. For those vouchers that are
unredeemed, voucher income is recognised after a period of time based on historical non-redemption patterns. Estimates are readjusted as
necessary based on movements in the actual non-redemption patterns. Other than those provided by legislation no warranties are provided
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
by the Group. There is no material amount of variable consideration under these contracts nor is there the existence of a significant
financing component. Costs to obtain contracts such as commissions are recognised as contract assets and incurred when the related
revenue for the contract is released to profit or loss.
3.5.2 Financial instruments
Interest income and expense
Interest income and expense is recognised in the profit or loss using the effective interest method.
The effective interest method calculates the amortised cost of a financial asset or financial liability and allocates the interest income or interest
expense over the relevant period. The calculation includes all fees paid or received and directly related transaction costs that are an integral
part of the effective interest rate. The interest income or expense is allocated over the life of the instrument and is measured for inclusion in
profit and loss by applying the effective interest rate to the instruments amortised cost.
Lending and funding - fees and commissions
Lending fee income (such as booking and establishment fees) that is integral to the effective yield of a loan held at amortised cost is capitalised
as part of the amortised cost and deferred over the life of the loan using the effective interest method. Lending fees not directly related to the
origination of a loan (account maintenance fee) are recognised over the period of service.
Incremental and directly attributable costs (such as commissions) associated with the origination of a financial asset (such as loans) and
financial liabilities (such as borrowings) are capitalised as part of the amortised cost and deferred over the life of the financial instrument using
the effective interest method.
3.5.3 Insurance Contracts
Premium income and acquisition costs
Recurring premiums on life insurance contracts are recognised as revenue when payable by the policyholder. Where policies provide for the
payment of amounts of premiums on specific due dates, such premiums are recognised as revenue when due. Unpaid premiums are only
recognised as revenue during the days of grace and are not recognised where policies are deemed to have lapsed at reporting date.
General insurance premiums comprise the total premiums payable for the whole period of cover provided by contracts entered into during the
reporting period and are recognised on the date on which the policy commences. Premiums include any adjustments arising in the reporting
period for premium receivables written in respect of business written in prior accounting periods. Premiums collected by intermediaries, but
not yet received, are assessed based on known sales and are included in written premium.
Unearned premiums are those proportion of premiums written in a year that relate to periods of risk after the reporting date. Unearned
premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned
premiums.
Under life investment contracts deposits are received from policyholders which are then invested on behalf of the policyholders and recognised
as Financial assets at fair value through profit or loss. No premium income is recognised as revenue. Fees deducted from members' accounts
are accounted for as fee income.
Those direct and indirect costs incurred during the financial period arising from the acquiring or renewing of insurance contracts are deferred
to the extent that these costs are recoverable out of future premiums from insurance contracts. All other acquisitions costs are recognised as
an expense when incurred.
Subsequent to initial recognition, the deferred acquisitions cost asset (DAC) for life insurance contracts is amortised over the expected life of
the contracts. DAC for general insurance contracts is amortised over the period in which the revenues are earned.
An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. When the recoverable
amount is less than the carrying value, an impairment loss is recognised in profit or loss. DACs are also considered in the liability adequacy
test for each reporting period.
DACs are derecognised when the related contracts are either settled or disposed of.
Claims expense
Claims expenses represent claim payments adjusted for the movement in the outstanding claims liability.
General insurance claims expenses are recognised when claims are notified with the exception of claims incurred but not reported for which
a provision is estimated. Life insurance contract claims are recognised when a liability has been established. Claims under life investment
contracts represent withdrawals of investment deposits and are recognised as a reduction in the life investment contract liabilities.
3.5.4 Other
Other income
Dividend income is recorded in the profit or loss when the Group’s right to receive the dividend is established.
Other expense recognition
All other expenses are recognised in profit or loss as incurred.
3.6 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or
loss.
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention
in the marketplace.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification
of the financial assets.
Classification of financial assets
Financial assets that meet the following conditions are measured subsequently at amortised cost:
• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;
and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the
financial assets; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:
• the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if
certain criteria are met; and
• the Group may irrevocably designate a financial asset that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing
so eliminates or significantly reduces an accounting mismatch.
(i) Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the
relevant period.
For financial assets other than purchased or originated credit‑impaired financial assets (i.e. assets that are credit‑impaired on initial
recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or
received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit
losses, through the expected life of the financial asset, or, where appropriate, a shorter period, to the gross carrying amount of the financial
asset on initial recognition. For purchased or originated credit‑impaired financial assets, a credit‑adjusted effective interest rate is calculated
by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial
recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal
repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity
amount, adjusted for any expected credit losses. The gross carrying amount of a financial asset is the amortised cost of a financial asset
before adjusting for any expected credit losses.
Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost and at FVTOCI.
For financial assets other than purchased or originated credit‑impaired financial assets, interest income is calculated by applying the effective
interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit‑impaired (see
below).
For financial assets that have subsequently become credit‑impaired, interest income is recognised by applying the effective interest rate to
the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit‑impaired financial instrument improves
so that the financial asset is no longer credit‑impaired, interest income is recognised by applying the effective interest rate to the gross carrying
amount of the financial asset.
Financial assets measured at amortised cost include cash and cash equivalents, trade receivables, finance receivables, reverse annuity
mortgages and other receivables.
(ii) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL. Specifically:
• Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither held for
trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition.
• Financial assets that do not meet the amortised cost criteria or the FVTOCI criteria are classified as at FVTPL. In addition, financial
assets that meet either the amortised cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such
designation eliminates or significantly reduces a measurement or recognition inconsistency (so called ‘accounting mismatch’) that would
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has not designated
any financial assets as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in
profit or loss to the extent they are not part of a designated hedging relationship (see hedge accounting policy). Fair value is determined in
the manner described in note 5.5.
Financial assets measured at FVTPL include equity securities, unitised funds, fixed interest securities and term deposits.
(iii) Finance assets at FVTOCI
Equity securities which are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category.
These are strategic investments and the Group considers this classification to be more relevant.
On disposal of these equity securities, any related balance within the FVOCI reserve is reclassified to retained earnings.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets that are measured at amortised cost and contract assets.
The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective
financial instrument.
The Group recognises lifetime ECL for trade receivables and contract assets. The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date,
including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial
recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures
the loss allowance for that financial instrument at an amount equal to 12‑month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial
instrument. In contrast, 12‑month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial
instrument that are possible within 12 months after the reporting date. Homogeneous loans are assessed on a collective basis (collective
impairment provision) and non-homogeneous loans are assessed individually (specific impairment provision).
(i) Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk
of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date
of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward‑looking information that is available without undue cost or effort such as:
• actual or expected changes in economic indicators (ie change in employment rates); and
• for non-homogeneous loans significant changes in the value of the collateral supporting the loan or changes in the operating results
of the borrower.
The nature of the Group’s finance receivables (second tier retail and commercial lending) means there is little or no updated credit risk
information that is routinely obtained and monitored on an individual instrument until a customer breaches the contractual terms.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly
since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and
revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes
past due.
(ii) Definition of default
The Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and
supportable information to demonstrate that a more lagging default criterion is more appropriate.
(iii) Credit‑impaired financial assets
A financial asset is credit‑impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial
asset have occurred. Evidence that a financial asset is credit‑impaired includes observable data about the following events:
a) significant financial difficulty of the borrower;
b) a breach of contract, such as a default or past due event (see (ii) above); and
c) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation.
(iv) Write‑off policy
The Group writes off a financial asset when there is information indicating that the borrower is in severe financial difficulty and there is no
realistic prospect of recovery, e.g. when the borrower has been placed under liquidation or has entered into bankruptcy proceedings. Financial
assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where
appropriate. Any recoveries made are recognised in profit or loss.
4342
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
v) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there
is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted
by forward‑looking information as described above.
As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date. No further
advances are allowed against financial assets in default.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in
accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate.
If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period,
but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at
an amount equal to 12‑month ECL at the current reporting date, except for assets for which simplified approach was used.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying
amount through a loss allowance account.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL. However, financial
liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies
are measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination,
(ii) held for trading or (iii) it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of repurchasing it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual
pattern of short‑term profit‑taking; or
• it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.
A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a business combination may be
designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is
evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information
about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be
designated as at FVTPL.
Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss
to the extent that they are not part of a designated hedging relationship (see Hedge accounting policy).
However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of
changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The
remaining amount of change in the fair value of liability is recognised in profit or loss. Changes in fair value attributable to a financial liability’s
credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred
to retained earnings upon derecognition of the financial liability.
Fair value is determined in the manner described in note 5.5.
Financial liabilities measured at FVTPL include contingent consideration.
Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held‑for‑trading, or (iii) designated as
at FVTPL, are measured subsequently at amortised cost using the effective interest method.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid
or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected
life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The
difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit
or loss.
When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange
is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group
accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the
recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the
new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different
from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the
difference between: (1) the carrying amount of the liability before the modification; and (2) the present value of the cash flows after modification
should be recognised in profit or loss as the modification gain or loss within other gains and losses.
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign
exchange forward contracts, and interest rate swaps.
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair
value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and
effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a
financial liability. Derivatives are not offset in the financial statements unless the Group has both legal right and intention to offset.
A derivative is presented as a non‑current asset or a non‑current liability if the remaining maturity of the instrument is more than 12 months
and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
The Group designates certain derivatives as hedging instruments in respect of interest rate risk in cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in cash flows of the hedged
item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually
hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective
for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the
hedge) so that it meets the qualifying criteria again.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as
cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to
the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when
the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results
in the recognition of a non‑financial asset or a non‑financial liability, the gains and losses previously recognised in other comprehensive income
and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non‑financial asset or
non‑financial liability. This transfer does not affect other comprehensive income. Furthermore, if the Group expects that some or all of the loss
accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The
discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow
hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge reserve is reclassified immediately to profit or
loss.
3.7 Right of use assets and lease liabilities
The Group leases various offices, warehouses, retail stores, equipment and cars. Rental contracts are typically made for fixed periods of 3 to
8 years but may have extension options as described in below. Lease terms are negotiated on an individual basis and contain a wide range
4544
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Until the 2020 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period
of the lease.
From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use
asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in
a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or
loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office
furniture.
Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to
maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only
by the Group and not by the respective lessor.
The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The assessment of
whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease
liabilities and right-of-use assets.
A deferred tax asset is raised for the tax impact of the changes in recognised lease related assets and liabilities.
A lease is contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
In the Statement of cash flow, lessees present:
• Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of
the lease liability as part of operating activities;
• Cash paid for the interest portion of a lease liability as either operating activities or financing activities, as permitted by NZ IAS 7 Statement
of Cash Flows (the Group has opted to include interest paid as part of operating activities, consistent with its presentation of interest paid
on financial liabilities); and
• Cash payments for the principal portion for a lease liability, as part of financing activities. Under NZ IAS 17, all lease payments on
operating leases were presented as part of cash flows from operating activities.
For the accounting policy applied prior to the adoption of IFRS 16 please refer to note 32.
3.8 Insurance contracts
Insurance contracts are those contracts that transfer significant insurance risk and are accounted for in accordance with the requirements of
NZ IFRS 4 Insurance Contracts. The Group issues the following insurance contracts:
• Long-term insurance contracts with fixed and guaranteed terms, these contracts insure events associated with human life (for example,
death) over a long duration;
• Temporary life insurance contracts covering death disablement, disability and redundancy risks; and
• Short term motor vehicle contracts covering comprehensive, third party and mechanical breakdown risks.
The Group has determined that all assets of the Group’s subsidiary, DPL Insurance Limited, are assets backing policy liabilities and are
managed and reported in accordance with a mandate approved by the DPL Insurance Limited’s Board.
The liability for life insurance contracts is determined in accordance with Appendix C of NZ IFRS 4 Insurance Contracts and Professional
Standard No 20 of the New Zealand Society of Actuaries. In terms of these standards, the liability is determined using the methodology
referred to as Margin on Service (MoS). Under MoS the excess premium received over claims and expenses, 'the profit margin', is recognised
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
over the life of the contract in a manner that reflects the pattern of risk accepted from the policyholder 'the service'. Longer-term lines of
business (annuities, funeral plan) are valued using the projection method, and shorter-term life and longer-term life contracts written on yearly
renewable premiums, are valued using the accumulation method, as provided for in NZ IFRS 4.
General insurance contract liabilities include claims provision and the provision for unearned premium. The outstandings claims provision is
based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related
claims handling cost and a reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification
and settlement of claims, therefore the ultimate cost of these cannot be known at reporting date and are estimated based on past experience.
The liability is not discounted for the time value of money and is derecognised when the obligation to pay the claim expires, is discharged or
is cancelled.
The provision for unearned premiums represent the portion of premiums received or receivable that relates to risks that have not yet expired
at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is recognised as premium
income over the term of the contract in accordance with the pattern of insurance service provided under the contract.
Liability adequacy testing is performed in terms of NZ IFRS 4 in order to test the adequacy of all insurance liabilities recorded in the statement
of financial position, net of deferred acquisition costs. Liability adequacy testing is performed at a portfolio level of contracts that are subject
to broadly similar risks and are managed together as a single portfolio.
3.9 Life investment contracts
Life investment contracts are those contracts with minimal insurance risk and are accounted for in accordance with NZ IFRS 15 'Revenue
from Contracts with Customers' (refer note 3.5.1) and NZ IFRS 9 'Financial Instruments' (refer note 3.5.2). The life investment contacts are
unit-linked and fair value of a unit linked contract is determined using the current unit values that reflect the fair value of the financial assets
backing the contract, multiplied by the number of units attributable to the contract holder.
3.10 Inventories
Inventories comprise primarily motor vehicles held for sale and are stated at the lower of cost or net realisable value. Cost comprises purchase
price, shipping cost, compliance cost and other sundry related costs. Estimated selling prices are based upon recent observed vehicle sales
prices for comparable vehicles. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make the sale.
3.11 Investment property
Investment property is held for capital appreciation and comprises land that was transferred from finance receivables through the exercise of
the Group’s security interest in a finance receivable that was in default.
Investment property is initially recognised at fair value on date of transfer or purchase and subsequently carried at fair value. The fair value of
investment properties is determined by a qualified independent external valuer (refer note 17).
Any gains or losses arising from a change in fair value of the investment property is recognised in profit or loss. Subsequent expenditure is
charged to the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group
and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to profit or loss during the period in
which they are incurred.
3.12 Property, plant and equipment
Property, plant and equipment are recognised in the statement of financial position at cost less accumulated depreciation and impairment
losses. Land is not depreciated. Depreciation is calculated on all other property, plant and equipment on a diminishing value or straight-line
basis to allocate the costs, net of any residual amounts, over their useful lives.
The rates for the following asset classes are:
Diminishing value Straight line
Leasehold improvements, furniture and
fittings, office equipment
7.5 - 60.0%
3 - 15 years
Computer equipment 31.2 - 48.0% 3 - 5 years
Motor vehicles and equipment 26.0 - 31.2% 3 - 7 years
Signs and flags - 3 - 12 years
3.13 Intangible assets
Intangible assets comprise goodwill, acquired separable corporate brands, acquired customer relationships and computer software. Goodwill
and corporate brands are indefinite life intangibles subject to annual impairment testing.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or
groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according
to operating segment.
Corporate brands and customer relationships acquired as part of a business combination are capitalised separately from goodwill as intangible
assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are
attributable to the asset will flow to the Group.
Corporate relationship assets are amortised on the straight line basis over the expected life (2 – 10 years) of the relationship
and are
recognised in the statement of financial position at cost less accumulated amortisation and impairment losses.
4746
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Computer software is recognised in the statement of financial position at cost less accumulated amortisation and impairment losses.
Direct costs associated with the purchase and installation of software licences and the development of software for internal use are capitalised
where project success is probable and the capitalisation criteria is met. Cost associated with planning and evaluating computer software and
maintaining a system after implementation are expensed. Computer software costs are amortised on a diminishing value basis (rate of 50%)
or on a straight-line basis (one to five years).
3.14 Taxation
Income tax for the period comprises current and deferred tax. Current and deferred tax are recognised as an expense or income in the profit
or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in
equity), in which case the tax is also recognised outside profit or loss.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at balance date
after taking advantage of all allowable deductions under current taxation legislation and any adjustment to tax liabilities in respect of previous
years.
Deferred tax is provided using the liability method, providing for temporary differences between the amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the amount of assets and liabilities, using tax rates enacted or substantively enacted as at balance date.
Deferred taxation assets arising from temporary differences or income tax losses, are recognised only to the extent that it is probable that a
future taxable profit will be available against which the asset can be utilised. Deferred taxation assets are reduced to the extent that it is no
longer probable that the related tax asset will be realised. Any reduction is recognised in profit or loss.
3.15 Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually or more frequently if
events or changes in circumstances indicate that they might be impaired. Intangible assets not yet available for use are tested for impairment
annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The Group conducts an annual internal review of asset values, which is used as a source of information to assess for any
indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also
monitored for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is determined by estimating future cash flows
from the use and ultimate disposal of the asset and discounting these to their present value using a pre-tax discount rate that reflects current
market rates and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Impairment losses directly reduce the carrying amount of assets and are
recognised in profit or loss.
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
3.16 Managed funds
DPL Insurance Limited, a wholly owned subsidiary, has saving plans, which are not open to new members, with assets managed by a third
party investment manager. The assets and liabilities of these funds are included in the financial statements.
3.17 Employee benefits
Wages, salaries and annual leave
Liabilities for wages, salaries and annual leave are recognised in respect of employees' services up to the reporting date. They are measured
at the amounts expected to be paid when the liabilities are settled.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured at the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to future wage and salary levels, experience of employee departures and periods of service. Expected future payments
are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises an accrual where contractually obliged or where
there is a practice that has created a constructive obligation.
Share based payments
The cost of options issued to employees under the Group’s share option plan is measured by reference to fair value of the options at the date
on which they are granted. Service and non-market performance conditions are not taken into account when determining the grant date fair
value, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that
will ultimately vest. Market conditions are reflected within the grant date fair value.
The cost of equity settled transactions is recognised over the vesting period. If the service condition is not met during the vesting period, the
expense is revised to reflect the best available estimate of the number of equity instruments expected to vest. Where awards include market
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
and non-vesting conditions, the transactions are treated as vested irrespective of whether the market or non-vesting conditions is satisfied,
provided that all other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (refer note 9).
When options are exercised or cancelled, the option reserve relating to the options exercised or cancelled is reclassified to share capital.
Superannuation plans
The Group pays contributions to superannuation plans, such as Kiwisaver. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
3.18 Statement of cash flows
The statement of cash flows has been prepared using the direct approach modified by netting certain cash flows in order to provide more
meaningful disclosure to better reflect the activities of the Group's customers or the party providing funding to the Group than those of the
Group. These include reverse annuity mortgages, finance receivables and borrowings.
3.19 Comparatives
Where necessary, comparative information has been reclassified and represented for consistency with current year. Comparative information
has not been restated for the impact on application of NZ IFRS 16.
4. USE OF ESTIMATES AND JUDGEMENTS
In preparing the financial statements in accordance with NZ IFRS, the Board and management are required to make judgements, estimates
and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ
from those estimates.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
COVID-19
The COVID -19 pandemic and responses has reduced the ability of many businesses to operate and reduced the demand for many goods
and services resulting in significant volatility and instability in financial markets. The Group's four businesses experienced significant declines
in new business during lockdown level 4 and level 3, however three of the four businesses earn annuity income and were profitable during
this period. The COVID-19 pandemic and responses continue to effect general activity and confidence levels in the economy. While the scale
and duration of these effects remain uncertain, the Group continues to monitor developments and initiate plans to mitigate adverse impacts
and maximise opportunities.
These financial statements have been prepared based upon conditions existing as at 31 March 2020 and consider those events occurring
subsequent to that date that provide evidence of conditions that existed at the end of the reporting period. As the outbreak of the COVID-19
pandemic occurred before 31 March 2020 its impacts are considered an event that is indicative of conditions that arose prior to reporting
period. Accordingly, as at the date of signing these financial statements, all reasonably known and available information with respect to the
COVID-19 pandemic has been taken into consideration in the critical accounting estimates and judgements applied by Management and all
reasonably determinable adjustments have been made in preparing these financial statements.
When assessing the possible future impact of COVID-19 pandemic on the carrying value of assets and liabilities, the Group reviewed past
experience, including the impact of the global financial crisis, on the Group's performance and aligned the forecast and estimates with this
experience.
The principal areas of judgement in preparing these financial statements are set out below.
Inventories - impairment provision
Inventories comprise primarily motor vehicles held for sale and are stated at the lower of cost or net realisable value. Cost comprises the
purchase price, shipping cost, compliance cost and other sundry related costs. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Estimated selling prices are
based upon recent observed vehicle sales prices for comparable vehicles. Management has estimated the net realisable value of inventories
based on their estimate of the selling price in a post lockdown market.
Based on the work done the inventories impairment provision includes $0.5m for any economic uncertainty associated with the COVID-19
pandemic and its potential impact on inventory provisions.
Provision for impairment on loan receivables
Significant increase in credit risk
As explained in note 3.6, ECL are measured as an allowance equal to 12 month ECL for performing assets, or lifetime ECL for doubtful or in
default assets. An asset moves to doubtful when its credit risk has increased significantly since initial recognition. The Group presumes a
significant increase in credit risk subsequent to initial recognition when contractual payments are more than 30 days overdue. In assessing
whether the credit risk of an asset has significantly increased the Group takes into account qualitative and quantitative reasonable and
supportable forward looking information.
Calculation of loss allowance
When measuring ECL the Group has used reasonable and supportable forward looking information, which is based on estimates for the future
movement of different economic drivers (i.e. unemployment rates and government stimulus) and how these drivers will affect each other.
4948
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those
that the Group would expect to receive, taking into account cash flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given
time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
There remains inherent uncertainty of the economic impact of COVID-19 pandemic on the economic drivers used to determine ECL. When
assessing the impact of the COVID-19 pandemic, Management determined that the likely impact would be an increase in the estimated
probability of default. Management's assessment included reviewing past experience, during the global financial crisis, and a review of loans
in at risk related industries.
Based on the work done the finance receivables expected credit loss provision includes $1.0m for any economic uncertainty associated with
the COVID-19 pandemic and its potential impact on the expected impact on credit losses.
If the ECL rates on performing finance receivables increased/(decreased) by 1% higher (lower) as at 31 March 2020, the loss allowance on
finance receivables would have been $2.7 million higher/(lower).
If the ECL rates on doubtful or in default finance receivables increased/(decreased) 1% higher (lower) as at 31 March 2020, the loss allowance
on finance receivables would have been $0.3 million higher/(lower).
Impairment of goodwill
The carrying value of goodwill is assessed at least annually to ensure that it is not impaired. Performing this assessment generally requires
management to estimate future cash flows to be generated by the cash-generating unit, which entails making judgements, including the
expected rate of growth of revenues, margins expected to be achieved and the appropriate discount rate to apply when valuing future cash
flows (refer note 21). A sensitivity analysis of the recoverable amounts of the CGU’s is disclosed in note 21.
When estimating future cash flows, Management considered the impact of the COVID-19 pandemic on the Group’s performance and
judgements, including the forecasting of the year-on-year movements in the operating assets of individual CGUs such as:
• for the Finance and Auto Retail CGUs, the movement in their portfolios of finance receivables and related movement in debt financing;
• for the Auto Retail CGU, the movement in inventory levels, trade payables and related movement in trade financing; and
• for the DPL Insurance CGU, the movement in deferred insurance contract premiums and acquisition costs, and solvency capital
requirements.
Liabilities arising from claims made under insurance contracts
Liabilities arising from claims made under insurance contracts are estimated based on the terms of cover provided under an insurance contract.
The estimation of the ultimate liability arising from claims made under insurance contracts is based on a number of actuarial techniques that
analyse experience, trends and other relevant factors. The estimate process involves using Group specific data, relevant industry data and
general economic data, including but not limited to, claim frequencies, average claim sizes and historical trends (refer note 35).
Impairment of corporate brands
The carrying values of brands are assessed at least annually to ensure that it is not impaired. Performing this assessment generally requires
management to estimate future cash flows to be generated by the related investment or a cash-generating unit, which entails making
judgements, including the expected rate of growth of revenues, margins expected to be achieved and the appropriate discount rate to apply
when valuing future cash flows (refer note 21).
Unredeemed voucher liabilities
The Group's estimate of the unredeemed voucher liability is based on historic redemption patterns. Changes in the redemption pattern of
unredeemed vouchers could affect the reported value of this liability. At year end, the Group readjusted the unredeemed prepaid collection
voucher liability write off methodology based on movements in the actual redemption patterns to reflect the continued decline in the redemption
of historically issued prepaid collection vouchers. The change in accounting estimate resulted in a $0.1m (2019: $0.2m) decrease in the
unredeemed voucher liability (note 24).
Determining lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not terminated).
Valuation of investment properties
The fair value of the investment property has been determined by an independent qualified valuer. Note 17 sets out the valuation
methodology, key assumptions and sensitivity analysis. The fair value of the investment property is subjective and changes to the
assumptions can have a significant impact on profit and the fair value.
The derecognition of finance receivables
The Group follows the guidance in NZ IFRS 9 'Financial Instruments', in transactions where substantially all the risks and rewards of
ownership of a financial asset are neither retained nor transferred. The Group derecognises the transferred asset if control over that asset is
relinquished. The rights and obligations retained in the transfer, such as servicing assets and liabilities, are recognised separately as assets
and liabilities, as appropriate. If control over the asset is retained, the Group continues to recognise the asset to the extent of its continuing
involvement, which is determined by the extent to which it remains exposed to changes in the value of the transferred asset. This
determination of whether risks and rewards of ownership of a financial asset are neither retained nor transferred requires significant
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
judgement (refer note 3.6). Prior to derecognition, the Group assesses whether the finance receivables qualify for derecognition using the
criteria noted above.
Fair value measurement
The fair value of financial instruments that are not quoted in active markets are determined using discounted cash flow models. To the extent
practical, models use observable data however normal volatilities require management to make estimates. Changes in assumptions about
these factors could affect the reported fair values of financial instruments (refer note 11 and 23).
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded
as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price
used for financial assets held by the group is the current bid price. These instruments are included in Level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by
using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in
level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The fair value of level 3
instruments is determined by using valuation techniques based on a range of unobservable inputs. The Group establishes fair value by
using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. Investments in
equity instruments that do not have a quoted market price in an active market and whose fair values cannot be reliably measured are
recognised and subsequently carried at cost.
Specific valuation techniques used to value financial instruments in each level are detailed in notes 5.5 and 17.
5. RISK MANAGEMENT
The financial condition and operating results of the Group are affected by a number of key financial and non-financial risks. Financial risks
include credit risk, liquidity risk and market risk. The non-financial risks include insurance risk, which is covered in note 35, and fair value risk
relating to the Group’s Investment property (refer note 17).
5.1 Financial instrument by category
5.2 Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises
principally from the Group's cash and cash equivalents, financial assets at fair value through profit or loss (excluding equities held in unitised
funds), trade receivables, finance receivables, reverse annuity mortgages, and other receivables.
The Group’s cash and cash equivalents and financial assets at fair value through profit or loss (excluding equities in unitised funds) are placed
with registered banks.
Management assesses the credit quality of trade customers, taking into account their financial position, past experience and other factors.
Individual risk limits are set based on these assessments. The use of credit limits by trade customers is regularly monitored by management.
Sales to public customers are settled in cash, bank cheques or using major credit cards, mitigating the credit risk.
Carrying value
20202019
$’000$’000
Financial assets
Cash and cash equivalents32,77115,866
Financial assets at fair value through profit or loss64,98866,252
Amortised cost
Trade receivables8,60912,471
Finance receivables293,037290,017
Other receivables and deferred expenses3,3903,776
Reverse annuity mortgages4,9138,294
407,708396,676
Financial liabilities
Other payables19,70025,247
Financial liability at fair value through profit or loss -116
Borrowings350,364312,863
370,064338,226
5150
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
To manage credit on finance receivables the Group performs credit evaluations on all customers requiring advances. The approval process
considers a number of factors including: borrower’s past performance, ability to repay, amount of money to be borrowed against the security
and the creditworthiness of the guarantor/co-borrower involved.
The Group operates a lending policy with various levels of authority depending on the size of the loan. A lending and credit committee operates
and overdue loans are assessed on a regular basis by this body.
Risk grades categorise loans according to the degree of risk of financial loss faced and focuses management on the attendant risks. The
current risk grading framework consists of four grades reflecting varying degrees of risk of default and the availability of collateral or other
credit risk mitigation. They are as follows:
• performing – the counterparty has a low risk of default and does not have any past due amounts greater than 30 days;
• doubtful –amount is > 30 days past due or there has been a significant increase in credit risk since initial recognition;
• in default - amount is > 90 days past due or evidence indicating the asset is credit impaired; and
• write-off – there is evidence indicating the debtor is in severe financial difficulty and the Group has no realistic prospect of recovery.
The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for
finance receivables are:
• mortgages over properties, with the maximum loan to value rate being 75%;
• mortgages over houses for reverse annuity mortgages, with a maximum loan to value ratio of 30% at inception (no new reverse annuity
mortgages have been advanced since 2009);
• charges over vehicle stock for dealer floorplans;
• chattel paper where the Group acts as a wholesale funder;
• charges over business assets such as equipment; and
• charges over motor vehicles.
For finance receivables secured by collateral, estimates of the value of collateral are assessed at the time of borrowing, and are not updated
unless the receivable is being assessed for specific impairment. The allowance for impairment includes the Group's estimate of the value of
collateral held.
For Life investment linked contracts the investments credit risk is appropriate for each particular product and the risk is borne by the policy
holder. There is no significant risk assumed by the Group.
5.3 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations associated with financial liabilities as they fall due.
The Group endeavours to maintain sufficient funds to meet its commitments based on forecasted cash flow requirements. Due to the dynamic
nature of the underlying businesses, flexibility is maintained by having diverse funding sources and adequate committed credit facilities.
Management has internal control processes and contingency plans to actively manage the lending and borrowing portfolios to ensure the net
exposure to liquidity risk is minimised. The exposure is reviewed on an on-going basis from daily procedures to monthly reporting as part of
the Group's liquidity management process.
The liquidity risk for cash flows payable on the life investment contracts liabilities that are unit linked contracts is managed by holding a pool
of readily tradable investment assets (included in financial assets at fair value through profit or loss) and deposits on call. The liability and
supporting assets have been excluded from the maturity analysis below because there is no contractual or expected maturity date for the life
investment contracts and the readily tradable investment assets offset any liquidity risk. The liquidity risk on other insurance cash flows is
managed by holding designated percentages of insurance reserves in liquid assets such as cash and cash equivalents.
The table below analyses the Group’s financial liabilities and net settled derivative financial instruments into relevant maturity groupings based
on the remaining period at reporting date to contractual maturity date. The amounts disclosed in the tables are the contractual and the expected
undiscounted cash flows.
0-6 months
7-12
months
13-24
months
25-60
months 60+ months Total
$’000$’000$’000$’000$’000$’000
2020
Contractual undiscounted cash flows:
Other payables19,700 - - - -19,700
Derivative financial instruments44036714434 -985
Borrowings34,1438,568 317,427370 - 360,508
Lease liabilities4,0424,1817,79616,3246,26238,605
58,325 13,116 325,36716,7286,262 419,798
Expected undiscounted cash flows:
Other payables19,700 - - - -19,700
Derivative financial instruments44036714434 -985
Borrowings34,1438,568 45,03971,802 256,880 416,432
Lease liabilities4,0424,1817,79616,3246,26238,605
58,325 13,116 52,97988,160 263,142 475,722
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
5.4 Market Risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices, will affect the Group's
income or the value of its holdings of financial instruments.
5.4.1 Insurance business
For the life investment policies market risk is transferred to the policy holder. The Group earns fees on investment linked policies that are
based on the amount of assets invested and it may receive lower fees should markets fall. Asset allocation for investment linked policies is
decided by the Policy Holder.
In the other insurance business, market risk arises when there is a mismatch between the insurance policy liabilities and the assets backing
those liabilities. Refer to note 35K for insurance liabilities interest rate sensitivity. The insurance business has no significant currency and
equity risk.
5.4.2 Interest rate risk
Interest rate risk is the risk of loss to the Group arising from adverse changes in interest rates. The Group's financing activities are exposed
to interest rate risk in respect of its interest earning assets and interest bearing liabilities. Changes to interest rates can impact the Group's
financial results by affecting the interest spread earned on these assets and liabilities.
Interest rates are managed by assessing the demand for funds, new lending, expected debt repayments and maintaining a portfolio of financial
assets and liabilities, including derivative financial instruments, with a sufficient spread between the Group's lending and borrowing activities.
Exposure to interest rates is monitored by the Board of Directors on a monthly basis.
The interest rates earned on finance receivables are fixed over the term of the contract. When approving interest rates for individual loan
advances, interest rate risk is measured in accordance with the approved lending policy. The Group uses interest rate swap contracts to
convert a portion of its variable rate debt to fixed rate debt. No exchange of principal takes place. The notional principal amount of interest
rate swaps at 31 March 2020 was $75m (2019: $74m) and weighted average interest was 1.73% (2019: 2.23%). There was no hedge
ineffectiveness recognised in profit or loss during the period (2019: $nil).
Turners Finance Limited borrows at fixed rates to fund finance receivables. The terms and the amounts of the finance payables are matched
to each corresponding finance receivable, for which the lending rates are also fixed at inception, thus eliminating the cash flow interest rate
risk on these financial instruments.
The table below summarises the sensitivity of the Group’s financial assets and liabilities to interest rate risk.
0-6 months
7-12
months
13-24
months
25-60
months 60+ months Total
$’000$’000$’000$’000$’000$’000
2019
Contractual undiscounted cash flows:
Other payables25,247 - - - -25,247
Derivative financial instruments16414217543 -524
Borrowings35,870 17,951 174,007 106,093 - 333,921
61,281 18,093 174,182 106,136 - 359,692
Expected undiscounted cash flows:
Other payables25,247 - - - -25,247
Derivative financial instruments16414217543 -524
Borrowings35,870 17,951 19,40994,832 213,492 381,554
61,281 18,093 19,58494,875 213,492 407,325
Carrying amount -1% Profit -1% Equity +1% Profit +1% Equity
$’000$’000$’000$’000$’000
2020
Financial Assets
Cash and cash equivalents32,771(328)(236)328236
Financial assets at fair value through profit or loss64,988(650)(468)650468
Finance receivables293,037 (2,930) (2,110)2,9302,110
Reverse annuity mortgages4,913(49)(35)4935
Financial Liabilities
Derivative financial instruments985 - (1,983) -(6)
Borrowings350,3643,5042,523 (3,504) (2,523)
Total increase/(decrease)(453) (2,309)453320
5352
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
5.4.3 Currency risk
The Group is exposed to currency risk arising from
various currency exposures, primarily with respect to the Australian Dollars (‘AUD’) and
Japanese Yen (‘JPY’). Currency risk arises from the future commercial transactions, recognised assets and liabilities and net investment in
foreign operations.
To ensure the net exposure to EC Credit Control (Au
st) Pty Ltd, which has AUD as its functional currency, is kept to an acceptable level, the
Group has a comprehensive transfer pricing policy and converts the AUD unredeemed voucher liability (refer note 24) into a NZD liability by
selling the AUD liability to the New Zealand entity that will be providing the relevant services to settle the liability when the voucher is redeemed.
To limit its exposure to JPY, the Group hedges the
anticipated cash flows (mainly purchased inventory) when the commitment is made. All
projected purchases qualify as ‘highly probable’ forecast transactions for hedge accounting purposes.
The table below summarises the Group’s financial ex
posure to currency risk.
The table below summaries the Group’s sensitivity t
o +/- 10% foreign exchange fluctuations.
5.4.4 Equity price risk
Equity price risk is the risk that the Group's prof
it or loss will fluctuate as a result of changes in share prices. The Group is exposed to equity
price risk through its investment in MTF Shares (refer note 11). A +1%/-1% movement in the MTF share price will increase/(decrease) profit
and equity by $32k/($32k) (2019: $36k/($36k)).
5.5 Assets and liabilities carried at fair value
:
The fair value of assets and liabilities carried at fair value as well as the methods used to calculate fair value are summarised in the table
below.
Level 1 the fair value is calculated using quoted prices in active markets.
Level 2 the fair value is estimated using inputs other than quoted prices in level 1 that are observable for the assets or liabilities, either
directly (as prices) or indirectly (derived from prices).
Level 3 the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
Carrying amount -1% Profit -1% Equity +1% Profit +1% Equity
$’000$’000$’000$’000$’000
2019
Cash and cash equivalents15,866(159)(114)159114
Financial assets at fair value through profit or loss66,252(663)(477)663477
Finance receivables290,017 (2,900) (2,088)2,9002,088
Reverse annuity mortgages8,294(83)(60)8360
Financial Liabilities
Financial liability at fair value through profit or loss11611(1)(1)
Derivative financial instruments524 - (1,404) -295
Borrowings312,8633,1292,253 (3,129) (2,253)
Total increase/(decrease)(675) (1,889)675780
20202019
in NZD'000NZ$'000NZ$'000
Net exposure to AUD560224
Net exposure to JPY 2,171 1,560
In NZD'000-10% Profit -10% Equity +10% Profit +10% Equity
2020
AUD -29 -(24)
JPY(82)17067(140)
2019
AUD -(25) -21
JPY(177)129145(105)
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Fair value insurance
The financial assets in this category back life inv
estment contract liabilities and are investments in managed funds. The fair value of the
investments in the managed funds are determined by reference to published exit prices, being the redemption price based on the market price
quoted by the fund manager, ANZ New Zealand Investments Limited (refer 5.4.1).
Fair value assets - investment in equities
The fair value of the investment in equities has be
en estimated by reference to recent transactions with MTF shares (refer 5.4.4).
Fair value liability - term deposits and fixed interest securities
Term deposits are recognised at fair value based on the interest rate set at inception of the term deposit (refer 5.4.2).
Fair value - investment property
The fair value of the investment property was deter
mined by an independent registered valuer using the comparable sales methodology (refer
note 17).
This is a level 3 fair value measurement and the ke
y output used in determining the consideration is the probable sales price. A change in
sales price of +/- 5% would increase/(decrease) the total fair value and profit or loss by $0.3m/($0.3m).
These financial liabilities are exposed to interest rate risk as disclosed above.
Derivative financial instruments
The fair value of forward exchange contracts is det
ermined using forward exchange rates at balance date, with the resulting value discounted
to present value. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows based on observable
yield curves.
Reconciliation of recurring level 3 fair value move
ments:
During the year there were no movements of fair value assets or liabilities between levels of the fair value hierarchy.
Level 1 Level 2 Level 3Total
$’000$’000$’000$’000
2020
Fair value assets:
Financial assets at fair value through profit or loss - Insurance -7,197 -7,197
Financial assets at fair value through profit or loss - investment in equities -3,154 -3,154
Financial assets at fair value through profit or loss - term deposits54,637 - -54,637
Investment property - -5,6505,650
54,63710,3515,65070,638
Fair value liabilities:
Derivative financial instruments -985 -985
-985 -985
2019
Fair value assets:
Financial assets at fair value through profit or loss - Insurance -7,658 -7,658
Financial assets at fair value through profit or loss - investment in equities -3,595 -3,595
Financial assets at fair value through profit or loss - term deposits54,999 - -54,999
Investment property - -5,6505,650
54,99911,2535,65071,902
Fair value liabilities:
Financial liability at fair value through profit or loss - -116116
Derivative financial instruments -524 -524
-524116640
Assets
20202019
$'000$'000
Opening balance5,6504,820
Revaluation at reporting date - investment property -830
Closing balance5,6505,650
Liabilities
20202019
$'000$'000
Opening balance116226
Revaluation at reporting date (116)(110)
Closing balance -116
5554
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
6. SEGMENTAL INFORMATION
6.1 DESCRIPTION OF SEGMENTS
Five reportable segments have been identified as follows:
Automotive retail:Remarketing (motor vehicles, trucks, heavy machinery and commercial goods) and purchasing goods for sale.
Finance:Provides asset based finance to consumers and SME's.
Credit management:
Insurance:Marketing and administration of a range of life and consumer insurance products.
Corporate & other: Corporate centre.
OPERATING SEGMENTS
Revenue
Revenue Revenue
TotalInter-fromTotalInter-from
segmentsegmentexternalsegmentsegmentexternal
revenue
revenue
customersrevenue
revenue
customers
2020
2020
2020
201920192019
$’000$’000$’000
$’000$’000$’000
Automotive retail229,512(4,634)224,878228,672(2,963)225,709
Finance45,744-45,74444,193-44,193
Credit management17,939-17,93918,196-18,196
Insurance45,236(1129)44,10749,206(742)48,464
Corporate & other6-617-17
338,437(5,763)332,674340,284(3,705)336,579
Operating profit2020
2019
$’000
$’000
Automotive retail13,82918,274
Finance12,16711,112
Credit management6,4946,321
Insurance6,2158,227
Corporate & other
(9,640)(14,885)
Profit/(loss) before taxation
29,06529,049
Income tax
(8,112)(6,330)
Net profit attributable to shareholders20,95322,719
2020
2019
2020
2019
2020
2019
$’000
$’000
$’000
$’000
$’000
$’000
Automotive retail3,9048,383(3,967)(4,206)(7,960)(2,457)
Finance40,57938,544(6,912)(6,596)(717)(413)
Credit management59(39)-(249)(104)
Insurance2,2762,434(91)-(2,783)(2,746)
Corporate & other617(3,930)(4,368)(210)(65)
46,77049,387(14,939)(15,170)(11,919)(5,785)
Eliminations(86)(218)86218--
46,68449,169(14,853)(14,952)(11,919)(5,785)
Management has determined the operating segments based on the components of Turners Automotive Group Limited and its subsidiaries (the
Group) that engage in business activities, which have discrete financial information available and whose operating results are regularly reviewed by
the Group's chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors. The Board of
Directors makes decisions about how resources are allocated to the segments and assesses their performance. Geographically the Group's
business activities are located in New Zealand and Australia.
Depreciation and
amortisation expenseInterest expenseInterest revenue
Revenue from external customers reported to the Board of Directors is measured on the same basis as revenue reported in the profit or loss. Inter-
segment transactions are done on an arms length basis. The Group has no customers representing 10% or more of the Group's revenues.
Collection services, credit management and debt recovery services to the corporate and SME sectors. Geographically the
collections services segment business activities are located in New Zealand and Australia.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Other material non-cash items
2020
2019
2020
2019
$’000
$’000
$’000
$’000
Automotive retail - impairment provisions--(126)(503)
Finance - impairment provisions--(5,888)(7,436)
Insurance - reverse annuity mortgage interest613846--
Corporate & other - write down of brand and collateral---(4,570)
613846(6,014)(12,509)
Segment assets and liabilities
2020
2019
2020
2019
$’000
$’000
$’000
$’000
Automotive retail129,496132,83992,07888,065
Finance308,696276,356241,086216,996
Credit management38,26831,6857,5855,686
Insurance134,236135,00173,13373,293
Corporate & other216,173195,67391,42383,030
826,870771,554505,305467,070
Eliminations(118,478)(117,372)(19,968)(39,262)
708,392654,182485,337427,808
Acquisition of property, plant & equipment, intangible assets and other non-current assets
2020
2019
$’000
$’000
Automotive retail17,08511,478
Finance1,218671
Credit management197135
Insurance5,94914,884
Corporate & other23674
24,68527,242
Eliminations(5,440)(14,489)
19,24512,753
Other
RevenueExpenses
AssetsLiabilities
5756
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
7. PROFIT BEFORE TAX
2020
2019
Notes$’000
$’000
Revenue from continuing operations includes:
Interest income
Bank accounts, short term deposits and investments
1,743
1,791
Finance receivables
44,328
46,532
Reverse annuity mortgages
613
846
Total interest income46,684
49,169
Operating revenue
Sales of goods
167,264
159,438
Commission and other sales revenue
52,714
48,965
Finance related insurance commissions
3,397
4,199
Loan fee income
2,958
2,950
Insurance and life investment contract income
39,676
42,968
Collection income
17,709
18,187
Bad debts recovered
591
897
Other revenue
1,181
1,585
Total operating revenue285,490
279,189
Revenue from continuing operations332,174
328,358
Other income comprises:
Gain on sale of investments
35
-
Revaluation gain on investment property
-
830
Dividend income
367
391
Gain on sale of property, plant and equipment
61
3,607
Gain on compulsory acquisition on leasehold premise by the NZTA
-
3,393
Fair value gain on contingent consideration
37
-
500
8,221
Revenue from contracts with customers
Over time
Automotive retail
Commission and other sales revenue
29,401
23,352
Insurance
Motor vehicle insurance commissions
1,683
1,731
31,084
25,083
At a point in time
Automotive retail
Sales of goods
167,264
159,438
Auction commissions
23,313
25,613
Credit management
Collection income
10,021
16,506
Voucher income
495
1,681
Interest expense
Bank borrowings and other
13,330
13,241
Bonds
1,523
1,711
Total interest expense14,853
14,952
Movement in impairment provisions
Provisions for:
Specific impaired finance receivables
142,304914
Collective impairment provision for finance receivables
143,6416,890
Collective impairment on reverse annuity mortgages
1630(47)
Finance receivables bad debts written off
69135
Movement
6,0447,892
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
2020
2019
$’000
$’000
Net operating profit includes the following specific expenses
Depreciation
- Plant, equipment & motor vehicles
681
675
- Leasehold improvements, furniture, fittings & office equipment
828
864
- Computer equipment
594
519
- Signs & flags
184
96
Intangible amortisation
Amortisation of software
1,203
1,435
Amortisation of customer relationships
557
630
Amorisation of right-of-use asset
6,300
-
Insurance contract liabilities amortisation
Amortisation of policies in force
1,572
1,566
11,919
5,785
Tax advisory fees
329
104
Donations
3
5
Directors’ fees
665
637
Post-employment benefits
1,322
1,164
Loss on sale of property, plant and equipment
71
-
Fees paid to auditor
Baker Tilly Staples Rodway Auckland (auditor of the Group)
Audit of financial statements
Audit of annual financial statements
452
442
Under accrual in prior year
50
-
Other services
Other assurance services
- Audit of DPL Insurance Limited solvency return
7
7
- Agreed Upon Procedures in relation to the Turners Marque Trust
-
15
- Agreed Upon Procedures in relation to the EC Credit Control Limited trust account
3
3
Total other services
10
25
Total fees paid to Baker Tilly Staples Rodway Auckland
512
467
8. TAXATION
2020
2019
$’000
$’000
Net operating profit before taxation
29,06529,049
Income tax expense at prevailing rates
(8,146)
(8,134)
Tax impact of income not subject to tax
274
2,035
Tax impact of expenses not deductible for tax purposes
(46)
(125)
Tax assets recognised
-
-
Under provision in prior years
(194)
(106)
Taxation (expense)/benefit(8,112)
(6,330)
Comprising:
Current
(9,817)
(10,030)
Deferred
1,635
3,958
Under provision in prior years
70
(258)
(8,112)
(6,330)
5958
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
9. EARNINGS PER SHARE
Basic earnings per share
2020
2019
Profit for the year ($'000)
20,953
22,719
Weighted average number of ordinary shares at 31 March
86,055,495
86,671,483
Basic earnings per share (cents per share)
24.35
26.21
2020
2019
Weighted number of shares
Opening balance
86,888,064
84,802,612
Shares issued for the conversion of bonds
-
2,303,925
Shares issued for the dealer share scheme
23,111
20,766
Share cancel from the share buy back
(855,680)
(455,820)
86,055,49586,671,483
Diluted earnings per share
2020
2019
$’000
$’000
Continuing operations
20,95322,719
Add: interest expense relating to optional convertible bonds, net of tax
-598
Add: Long term incentive expense relation to options
-326
Profit for the year
20,95323,643
Weighted number of ordinary shares (diluted)
Weighted average number of shares (basic)
86,055,495
86,671,483
Diluted earnings per share (cents per share)24.3527.28
10. CASH AND CASH EQUIVALENTS
2020
2019
$’000
$’000
The carrying value of cash and cash equivalents are denominated in the following currencies:
Australian dollars
365663
Japanese yen
-142
New Zealand dollars
32,40615,061
32,77115,866
The calculation of basic earnings per share at 31 March was based on the profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding, as follows:
The calculation of diluted earnings per share at 31 March was based on the diluted profit attributable to shareholders and a diluted weighted
average number of ordinary shares outstanding as follows:
The Group's insurance business is required to comply with the solvency standards for licensed insurers issued by the Reserve Bank of New
Zealand. The solvency standards specify the level of assets the insurance business is required to hold in order to meet solvency requirements,
consequently all cash and cash equivalents and term deposits, disclosed in financial assets through the profit or loss, held in the insurance
business may not be available for use by the wider Group. DPL Insurance's cash and cash equivalents at 31 March 2020 were $1.5m (2019:
$2.2m).
Cash and cash equivalents at 31 March 2020 of $5.1m (2019: $4.6m) belong to the Turners Marque Trust 1 and are not available to the Group
(refer note 14).
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2020
2019
$’000
$’000
Insurance:
Investments in unitised funds
7,197
7,658
Term deposits
54,637
54,999
Other:
Investment in equities
3,154
3,595
Total64,988
66,252
Investments in unitised funds comprise:
New Zealand and overseas equities
2,935
1,309
Fixed Interest securities
1,369
1,350
Cash - deposits
1,333
3,141
New Zealand and overseas property securities
1,560
1,858
Total7,197
7,658
Investments with external investment managers
ANZ New Zealand Investments Limited - Unitised Funds
7,197
7,658
Australian dollars
-
-
New Zealand dollars
57,791
58,594
57,79158,594
Interest rate and currency risk
Credit risk
Refer to note 5 for more information on the risk management policies of the Group.
12. TRADE RECEIVABLES
2020
2019
$’000
$’000
Performing7,64311,633
Doubtful1,130807
In default231323
9,00412,763
Impairment provision(395)(292)
Net trade receivables8,60912,471
Trade receivables are a current asset, with terms of trade usually 30 days or less.
A summarised analysis of the sensitivity of financial assets at fair value through profit or loss, excluding investments in unitised funds (as market
risk on unitised funds is transferred to the policy holder), to interest rate risk and currency risk can be found in note 5.4.
The maximum exposure to credit risk from financial assets at fair value through profit or loss at reporting date, excluding investments in unitised
funds, is the carrying value. The financial assets in this category, excluding equity investments, are invested in term deposits with banks. For
Life investment linked contracts (investment in unitised funds) the investments credit risk is borne by the policy holder, there is no significant
credit risk assumed by the Group.
All term deposits held in the insurance business may not be available for use by the wider Group (refer note 10). DPL Insurance's term deposits
at 31 March 2020 were $54.6m (2019: $55.0m). Investments in unitised funds, disclosed in Financial assets through the profit or loss, underwrite
the Life investment policies and are not available for use by the wider Group.
The carrying amounts of the financial assets at fair value through profit or loss, excluding investments in unitised funds, are denominated in the
following currencies:
6160
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Impaired receivables
2020
2019
$’000
$’000
The age of default trade receivables is as follows:
Past due up to 30 days--
Past due 30 – 60 days--
Past due 60 – 90 days--
Past due 90+ days231323
231323
The age of doubtful trade receivables is as follows:
Past due up to 30 days1,009722
Past due 30 – 60 days7359
Past due 60 – 90 days4826
Past due 90+ days--
1,130807
Movement in the impairment provision:
Opening balance292275
Impairment charge/(release) included in other operating expenses22127
Amounts written off(118)(10)
395292
The carrying amounts of the Group's trade receivables are denominated in the following currencies:
Australian dollars6661,099
New Zealand dollars7,94311,372
8,60912,471
Currency risk
Fair value and credit risk
Refer to note 5 for more information on the risk management policies of the Group.
13. INVENTORY
2020
2019
$’000
$’000
Motor vehicles45,97540,391
Commercial goods
32
30
46,00740,421
Less provision for stock obsolescence(1,636)(1,562)
44,37138,859
Inventories are a current asset.
Movement in provisions for stock obsolescence
Opening balance1,5621,049
Movement (included in Cost of goods sold)74513
Closing balance1,6361,562
If a trade receivable falls overdue and the Group is unable to enter into an arrangement to recover the amount owed then the receivable is
classified as impaired.
Due to the short-term nature of trade receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to
credit risk from trade receivables at the reporting date is the carrying amount of trade receivables. Credit risk is concentrated predominantly in
New Zealand within the motor trade sector and private household sector, there is no concentration of credit risk on any individual customer.
A summarised analysis of the sensitivity of financial assets included in trade receivables to currency risk can be found in note 5.4.
The Group recognises lifetime expected credit loss for trade receivables. The expected credit loss rate is 4.4% (2019: 2.3%). Amounts charged
to the impairment provision are generally written off when there is no expectation of recovering additional cash.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
14. FINANCE RECEIVABLES
2020
2019
$’000
$’000
Commercial loans
25,674
25,831
Finance leases
4,194
6,860
Consumer loans
274,773
267,616
Property development & investment loans2,8573,069
Gross finance receivables
307,498303,376
Specific impairment provision
(3,706)
(1,915)
Collective impairment provision
(17,999)
(17,680)
Deferred fee revenue and commission expenses
7,244
6,236
293,037
290,017
Current
137,742147,101
Non-current
155,295142,916
293,037
290,017
Gross financial receivables are summarised as follows:
Performing
279,627
274,656
Doubtful
5,685
7,113
In default
22,186
21,607
307,498
303,376
Movement in specific impaired receivables
Opening balance
2,377
2,342
Additions
3,168
1,179
Amounts moved to collective
-
(283)
Amounts recovered
(317)
(422)
Amounts written off
(505)
(439)
4,723
2,377
The aging of loans specifically assessed are as follows:
Past due up to 30 days
1,171
1,944
Past due 30 – 60 days
935
1,305
Past due 60 – 90 days
273
572
Past due 90+ days
1,833
1,695
In default
3,358
2,377
7,570
7,893
6362
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
31 March 2020Gross Collective
Expectedfinance impairment
loss rate receivablesprovision
%$’000$’000
Current
1.21269,6683,252
Past due up to 30 days
10.398,788913
Past due 30 – 60 days
21.273,042647
Past due 60 – 90 days
31.011,435445
Past due 90+ days
52.332,5321,325
In default
78.9414,46311,417
299,92817,999
31 March 2019
Current
0.90262,1602,358
Past due up to 30 days
8.7210,552920
Past due 30 – 60 days
19.954,036805
Past due 60 – 90 days
29.251,200351
Past due 90+ days
55.723,9432,197
In default
81.2913,59211,049
295,48317,680
2020
2019
$’000
$’000
Movement in the impairment provisions:
Specific impairment provision
Opening balance1,9151,592
Impairment charge/(release) through profit or loss2,304914
Amounts written off(513)(591)
3,7061,915
2020
2019
$’000
$’000
Collective impairment provision
Opening balance17,6809,702
Change in accounting policy-3,184
Impairment charge/(release) through profit or loss3,6416,890
Amounts written off(3,322)(2,096)
17,99917,680
Total impairment provision21,70519,595
Interest rate and foreign exchange risk
A summarised analysis of the sensitivity of finance receivables to interest rate risk can be found in note 5.4.2.
The Group's finance receivables are all denominated in NZD.
Fair value and credit risk
CarryingFairCarryingFair
amountvalueamountvalue
20202020
20192019
$’000$’000
$’000$’000
Finance receivables293,037293,594290,017290,326
The following table details the risk profile of the Group's provision matrix for finance receivables collectively assessed for impairment. As the
Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss
allowance based on past due status is not further distinguished between the Group's different customer base. The expected loss provision
includes $1.0m for any uncertainty associated with the COVID-19 pandemic and its potential impact on credit losses. A review of the Group's
experience during the global financial crisis and of loan, in at risk industries was included in the assessment of the COVID 19 expected loss
provision.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
The fair values are based on cash flows discounted using a weighted average interest rate of 13.81% (2019: 14.46%).
Refer to note 5 for more information on the risk management policies of the Group.
6ecuritisation
15. OT+ER RE&EI9ABLE6, 'EFERRE' EXPEN6E6 AN' &ONTRA&T A66ET6
2020
2019
$’000
$’000
Other receivables and prepayments
3,203
5,129
Insurance deferred acquisition costs
3,268
4,015
Contract assets
- Amount relating to services rendered not yet invoiced
1,996
1,538
- Contract fulfilment costs
105
273
8,572
10,955
Current
6,153
6,961
Non-current
2,419
3,994
8,572
10,955
Carrying amount of financial assets included in other receivables
3,390
3,776
Australian dollars723
New Zealand dollars3,3183,773
3,3903,776
Expected credit losses on contract assets and other receivables is 0%.
The carrying amounts of the financial assets included in other receivables are denominated in the following currencies:
The maximum exposure to credit risk is represented by the carrying amount of finance receivables which is net of any provision for impairment.
The reported credit risk exposure does not take into account the fair value of any collateral, in event of the counterparties failing to meet their
contractual obligation.
The Group has a wholesale funding facility with the Bank of New Zealand (BNZ) under which it securitises finance receivables through The
Turners Marque Warehouse Trust 1 (the Trust). Under the facility, BNZ provide funding to the Trust secured by finance receivables sold to the
Trust from the finance segment. The facility is for a 24 month term that will be renewed annually. The facility is for $230m.
The Trust is a special purpose entity set up solely for the purpose of purchasing finance receivables from the finance segment with the BNZ
funding up to 92% of the purchase price with the balance funded by sub-ordinated notes from the Group. The New Zealand Guardian Trust
Company Limited has been appointed Trustee for the Trust and NZGT Security Trustee Limited as the security trustee. The Company is the sole
beneficiary.
The Group has the power over the Trust, exposure, and rights, to variable returns from its involvement with the Trust and the ability to use its
power over the Trust to affect the amount of the Group's returns from the Trust. Consequently the Group controls the Trust and has consolidated
the Trust into the Group financial statements.
The Group retains substantially all the risks and rewards relating to the finance receivables sold and therefore the finance receivables do not
qualify for derecognition and remain on the Group's consolidated statement of financial position.
During the financial year $149.4m finance receivables were sold to the Trust (2019: $114.5m). As at 31 March 2020 the carrying value of finance
receivables in the Trust was $210.2m (2019: $175.3m).
6564
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Fair value and credit risk
Refer to note 5 for more information on the risk management policies of the Group.
16. REVERSE ANNUITY MORTGAGES
2020
2019
$’000
$’000
Reverse annuity mortgages
4,993
8,344
Provision for impairment
(80)
(50)
4,913
8,294
Current
444
-
Non-current
4,469
8,294
4,913
8,294
Movement in provisions for impairment
Opening balance5097
Impairment charge/(release) through profit or loss30(47)
Closing balance8050
Interest rate
A summarised analysis of the sensitivity of reverse annuity mortgages to interest rate risk can be found in note 5.4.2.
The Group's reverse mortgage annuities are all denominated in NZD.
Fair value and credit risk
CarryingFairCarryingFair
amountvalueamountvalue
20202020
20192019
$’000$’000
$’000$’000
Reverse annuity mortgages4,9136,0218,2949,333
17. INVESTMENT PROPERTY
2020
2019
$’000
$’000
Investment property5,6505,650
Movements in carrying amounts
Opening balance
5,6504,820
Net change in fair value
-830
Closing balance5,6505,650
The investment property is 26.8 hectares of residentially zoned land at Sanctuary Hill, 358 Worsleys Road, Christchurch.
The carrying value of these receivables is assumed to approximate their fair value. The maximum exposure to credit risk at the reporting date is
the fair value of the financial assets included in other receivables. There is no concentration of credit risk to any individual customer or sector.
The fair value of reverse annuity mortgages is estimated using a discounted cash flow model based on a current market interest rate for similar
products after making allowances for impairment.
The maximum exposure to credit risk is represented by the carrying amount of reverse annuity mortgages which is net of any provision for
impairment. The reported credit risk exposure does not take into account the fair value of any collateral, in event of the counterparties failing to
meet their contractual obligation. All reverse annuity mortgages are secured by residential property in New Zealand.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
18. FNANCIAL ASSETS AT FAIR VALUE THROUGH OCI
2020
2019
$’000
$’000
Investment in Collaborate Corporation Limited1,000-
Movements in carrying amounts
Opening balance
- -
Purchase of investment
1,327 -
Net change in fair value recognised in OCI
(327) -
Closing balance1,000 -
19. INVESTMENT IN SUBSIDIARIES
2020
2019
Subsidiary
Buy Right Cars (2016) Limited
Vehicle trade100.0%100.0%
Carly NZ Limited
Vehicle subscription services100.0% -
DPL Insurance Limited Insurance100.0%100.0%
EC Credit Control (Aust) Pty Limited
Collection services100.0%100.0%
EC Credit Control (NZ) Limited
Collection services100.0%100.0%
Estate Management Services Limited
Collection services100.0%
100.0%
Oxford Finance LimitedFinance100.0%100.0%
Payment Management Services Limited
Collection services100.0%100.0%
Turners Finance Limited
Finance100.0%100.0%
Turners Fleet Limited
Vehicle and commercial goods trade100.0%100.0%
Turners Group NZ Limited
Auctions100.0%100.0%
Turners Property Holdings Limited
Property100.0%100.0%
Turners Staff Share Plan Trustees Limited Trustee100.0%100.0%
EC Web Services Limited
Dormant66.6%66.6%
Ownership
Interest Held
All subsidiaries have a balance date of 31 March and, with the exception of EC Credit Control (Aust) Pty Limited (incorporated in Australia), all
subsidiaries are incorporated in New Zealand.
The Group has a wholesale funding facility with the Bank of New Zealand (BNZ) under which it securitises finance receivables through The
Turners Marque Warehouse Trust 1 (the Trust). The Group has the power over the Trust, exposure, or rights, to variable returns from its
involvement with the Trust and the ability to use its power over the Trust to affect the amount of the Group's returns from the Trust. Consequently
the Group controls the Trust and has consolidated the Trusts into the Group financial statements.
No income has been earned and no direct operating expenses, other than council rates, have been incurred on the investment property. There
are no restrictions on the disposal or the remittance of proceeds on disposal.
The investment property was valued at reporting date by a Property Institute of New Zealand registered valuer, Jones Lang LaSalle Limited,
Valuation & Advisory. Jones Lang LaSalle Limited is an external independent valuation company with appropriate recognised professional
qualifications and recent experience in the location and category of property being valued. Fair values have been determined using a comparable
sales approach methodology, having regard to current market conditions and comparable sales within the locality. Subjective adjustments have
been applied where necessary to account for variations in location, land, improvements, time adjustment and overall quality. A material valuation
uncertainty, due to the COVID 19 pandemic, was included in the valuation report.
6766
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
20. PROPERTY, PLANT AND EQUIPMENT
Land
Plant, equipment
& motor vehicles
Buildings,
leasehold
improvements,
furniture, fittings
& office
equipment
Computer
equipment Signs & flagsTotal
$’000$’000$’000$’000$’000$’000
2020
At cost
19,0914,61320,4952,46772947,395
Accumulated depreciation
-(2,269)(3,850)(1,777)(415)(8,311)
Opening carrying amount
19,0912,34416,64569031439,084
Reclassifications
-
112(406)79215-
Additions
9,3001,4935,51453428517,126
-(676)(307)(10)(142)(1,135)
Depreciation
-(681)(828)(594)(184)(2,287)
Closing carrying amount
28,3912,59220,61869948852,788
At cost
28,3915,49426,4133,7661,20565,269
Accumulated depreciation
-(2,902)(5,795)(3,067)(717)(12,481)
Closing carrying amount
28,3912,59220,61869948852,788
2019
At cost23,3523,63212,6522,02347142,130
Accumulated depreciation-(1,622)(2,987)(1,257)(319)(6,185)
Opening carrying amount23,3522,0109,66576615235,945
Additions-1,3918,55044126410,646
(4,261)(382)(706)2(6)(5,353)
Depreciation-(675)(864)(519)(96)(2,154)
Closing carrying amount19,0912,34416,64569031439,084
At cost19,0914,61320,4952,46772947,395
Accumulated depreciation-(2,269)(3,850)(1,777)(415)(8,311)
Closing carrying amount19,0912,34416,64569031439,084
Disposals & translation difference
Disposals & translation difference
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
21. INTANGI%L( A66(T6
2020
2019
$’000
$’000
%rand
Opening carrying amount at cost
67,100
71,400
Impairment
-
(4,300)
Closing carrying amount
67,100
67,100
Goodwill
Opening carrying amount at cost
92,534
92,524
Foreign exchange adjustment
7
10
Closing carrying amount
92,541
92,534
6oftware
At cost
8,342
6,235
Accumulated amortisation
(5,825)
(4,390)
Opening carrying amount
2,517
1,845
Additions
2,138
2,107
Disposals
(276)
-
Amortisation
(1,203)
(1,435)
Closing carrying amount
3,176
2,517
At cost
10,204
8,342
Accumulated amortisation
(7,028)
(5,825)
Closing carrying amount
3,176
2,517
&orporate relationships
At cost
6,510
6,510
Accumulated amortisation
(1,927)
(1,297)
Opening carrying amount
4,583
5,213
Amortisation
(557)
(630)
Closing carrying amount
4,026
4,583
At cost
6,510
6,510
Accumulated amortisation and impairment provision
(2,484)
(1,927)
Closing carrying amount
4,026
4,583
Total intangible assets carrying amount
166,843
166,734
Impairment testing for cash-generating units (&G8) containing brands and goodwill
Goodwill
Allocated to the insurance CGU/segment
12,777
12,777
Allocated to collection services CGU/segment
24,005
23,998
Allocated to the finance CGU/segment
9,272
9,272
Allocated to the automotive retail CGU/segment
46,487
46,487
92,541
92,534
The impairment and amortisation is recognised in other operating expenses in profit or loss.
The aggregate carrying amounts of brands and goodwill allocated to the cash generating units are outlined below. Goodwill primarily relates to
growth expectations, expected future profitability and the substantial skill and expertise of the work force of the cash generating unit. Management
have assessed that there is no foreseeable limit to the period of time over which the goodwill and brand is expected to generate net cash inflows
for the Group, and as such goodwill and brand have been assessed as having an indefinite useful life.
6968
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
2020
2019
$’000
$’000
Brand
Allocated to the insurance CGU/segment
21,500
21,500
Allocated to the automotive retail CGU/segment
45,600
45,600
67,100
67,100
Key assumptions:
2020 Forecast growth rates (%)
Year 2Year 3Year 4Year 5
Auto retail CGU (cost of equity)
(16.7)113.521.917.9
Insurance CGU (Weighted average cost of capital)
24.9(8.6)(8.1)3.5
Finance CGU (cost of capital)
(28.3)19.518.05.0
Collection services CGU (Weighted average cost of equity)
74.5(6.3)5.05.0
2019 Forecast growth rates (%)Year 2Year 3Year 4Year 5
TGNZ CGU (cost of equity)22.319.315.62.0
Buy Right Cars CGU (Weighted average cost of capital)14.611.0(9.3)12.8
Insurance CGU (Weighted average cost of capital)12.73.22.52.5
Finance CGU (cost of equity)30.720.45.05.0
Collection services CGU (Weighted average cost of capital)0.25.05.05.0
2020
2019
Long-term growth rate
1.25%
1.50%
Pre-tax discount rate
Auto retail CGU (cost of capital)
16.40%
17.10%
Insurance CGU (Weighted average cost of capital)
12.80%
13.10%
Finance CGU (cost of capital)
17.70%
18.10%
Collection services CGU (Weighted average cost of capital)
15.20%
13.60%
Auto retail CGU
1.50%
1.00%
Insurance CGU
1.10%
1.00%
Finance CGU
1.20%
1.00%
Collection services CGU
0.90%
1.00%
Sales, price and operating cost assumptions where based on the Board's best estimate of the range of economic conditions the CGUs are likely
to experience during the forecast period (including the Group's experience in the global financial crisis). The forecasts for each CGU covering a
period of a minimum of 5 years or the period required for the CGU's profitability to return to pre-COVID 19 levels (for Auto retail this is 6 years).
Annual capital expenditure, the expected cash costs in CGUs, was based on historical experience and planned expenditure. The forecasts
assume that New Zealand will remain at Alert Level 1 or lower and no further restrictions are placed on the business operations during the
forecast period.
The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow
projections based on financial budgets approved by the Board covering at least a five-year period. Cash flows beyond the projected period are
extrapolated using the estimated long term growth rates stated below. The cash flows for the Insurance and Collection services CGUs are free
cash flows to the firm, while the Auto retail and Finance CGUs are free cash flows to equity. The Buy Right Cars and Turners Group (NZ) CGUs
have been aggregated in the current financial year to align with internal reporting. For each of the CGUs with goodwill and brand the key
assumptions, long term growth rate and discount rate used in the value-in-use calculations are as follows:
In assessing the impairment of the goodwill and brand value in the CGUs, a sensitivity analysis for reasonably possible changes in key
assumptions was performed. This included increasing and reducing the terminal growth rate by 0.25% (2019: +/- 0.5%) and increasing and
decreasing the discount rate as follows:
These reasonably possible changes in rates did not cause any impairment in the Insurance, Finance and Collection services CGUs. For the Auto
retail CGU the sensitivity analysis at the upper end of the assessment indicated possible impairment of between $0.9m and $4.0m. Subsequent to
31 March 2020, the Auto retail CGU has been trading ahead forecast, consequently no impairment expense was recognised.
The long term growth rate is the weighted average growth rate used to extrapolate cash flows beyond the forecast period and is based on the
current implied inflation rates and does not exceed the long-term average growth rate for the products, industries, or country or countries in which
the CGUs operate. The discount rates were established by taking into account the specific attributes and size of the CGUs.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
22. OTHER PAYABLES
2020
2019
$’000
$’000
Accounts payable
13,833
12,743
Employee entitlements (short term)
4,500
4,127
Employee entitlements (long term)
227
225
Other payables and accruals
9,488
16,811
28,048
33,906
Carrying value of financial liabilities in other payables
19,700
25,247
The carrying amounts of the Group's financial liabilities in other payables are denominated in the following currencies:
Japanese Yen
734
1,738
Australian dollars
355
536
New Zealand dollars
18,611
22,973
19,700
25,247
Currency risk
Fair value
23. FINANCIAL LIABILITY AT FAIR VALUE THROUGH PROFIT OR LOSS
2020
2019
$’000
$’000
Contingent consideration
-
116
Interest rate and foreign exchange risk
A summarised analysis of the sensitivity of financial liabilities included in other payables to currency risk can be found in note 5.4.
Due to the short-term nature of the financial liabilities in other payables, their carrying value is assumed to approximate their fair value.
A summarised analysis of the sensitivity of the Financial liability at fair value through profit or loss to interest rate risk can be found in note 5.4.2.
The Group's deferred consideration liability is denominated in NZD.
7170
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
24. &ONTRA&T LIABILITIE6
2020
2019
$’000
$’000
Unredeemed debt and PPSR voucher liability
1,886
2,502
Motor vehicle insurance rebate liability
199
140
2,085
2,642
Movement in contract liabilities
Unredeemed debt and PPSR voucher liability
Opening balance
2,502
1,793
Change in accounting policy
-
617
Additions
31
1,773
Release to profit or loss
647
(1,681)
1,886
2,502
Release to profit or loss
Income relating to current year
-
485
Income relating to prior years
647
1,196
647
1,681
Motor vehicle insurance rebate liability
Opening balance
140
-
Change in accounting policy
-
100
Additions
59
-
Release to profit or loss
-
40
199
140
Release to profit or loss
Income relating to current year
-
(40)
Income relating to prior years
-
-
-
(40)
25. 'EFERRE' TAXATION
2020
2019
$’000
$’000
Opening balance13,91818,786
Change in accounting policy (refer note 32) 2,203 (910)
Charge to profit or loss 1,635 (3,958)
Closing balance10,08013,918
2020
2019
$’000
$’000
The charge to profit or loss is attributable to the following items:
Corporate relationships 146 (146)
Policy in force asset 439 (438)
Loan impairment provision 647 (1,428)
Brand write off-(1,204)
Insurance deductible reserves 242 (264)
Property, plant and equipment 53 42
Lease liability1,194-
Right of use asset 1,030 -
Provisions and accruals 272 (520)
1,635 (3,958)
Deferred tax (assets)/liabilities to be recovered after more than 12 months11,71514,627
Deferred tax (assets)/liabilities to be recovered within 12 months 1,635 (709)
Closing balance10,08013,918
The deferred tax asset/liabilities have been recognised at 28%, the tax rate at which it is expected to reverse.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset assets against liabilities and when the
deferred income taxes relate to the same fiscal authority. The movement on the deferred tax account is as follows:
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Deferred tax relates to the following:
Deferred tax assets:
Loan impairment provision6,2095,558
Lease liability9,103-
Provisions and accruals2,3232,062
Total deferred tax asset17,6357,620
Deferred tax liabilities:
Brand18,78818,788
Customer relationships1,0191,165
Insurance reserves - policies in force-439
Right of use asset6,958-
Deferred expenses and accruals9501,146
27,71521,538
Net deferred tax liabilities
10,080
13,918
Imputation credit memorandum account
Opening balance11,8797,010
Income tax payments/(refunds received)11,72610,744
Imputation credits utilised(4,357)(5,875)
Closing balance19,24811,879
Policy holder tax losses
26. BORROWINGS
2020
2019
$’000
$’000
Secured bank borrowings
312,320
251,282
Deferred borrowing costs
(116)
(105)
312,204
251,177
Non-bank borrowings
Motor Trade Finance13,38237,055
Bonds
25,000
25,000
Deferred issue costs
(222)
(369)
24,778
24,631
Total borrowings350,364312,863
Current
213,825
34,981
Non-current
136,539
277,882
350,364312,863
Secured bank borrowings
The policy holder tax losses carried forward at 31 March 2020 are $5,180,000 (2019: $4,949,000). The policy holder tax losses are only available
to be offset against future policy holder income.
In May 2018 the Group entered into a 3 year syndicated funding facility, including a 1 year working capital facility, with the Bank of New Zealand
and ASB Bank and a self liquidating trade finance facility with ASB Bank. The facilities replaced the Group's bank borrowing excluding
securitisation which remains with the Bank of New Zealand.
The bank borrowings, together with trade and lease premise guarantees of $0.9 million (2019: $0.9 million), are secured by a first-ranking general
security agreement over the assets of the Company and its subsidiaries, excluding DPL Insurance Limited, Turners Finance Limited and EC
Credit (Aust.) Limited. Current interest rates on the bank borrowings are variable and average 2.99% (2019: 3.88%). The Group's securitisation
financing arrangement with the Bank of New Zealand as described in note 14.
7372
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Motor Trade Finance
Bonds
Borrowing covenants
Foreign currency risk
All the Group's borrowings are in NZD.
Fair value
CarryingFairCarryingFair
amountvalueamountvalue
20202020
20192019
$’000$’000
$’000$’000
Borrowings350,364350,781 312,863312,863
The fair values are based on cash flows discounted using a weighted average borrowing rate of 3.26% (2019: 3.91%).
2020
2019
$’000
$’000
Contractual repricing dates
1 year or less
321,498
269,343
Over 1 to 2 years
29,204
13,282
Over 2 to 5 years
-
30,712
350,702
313,337
Reconciliation of borrowings arising from financing activities
Bank
borrowings
Motor Trade
Finance
Vendor
property
funding
Bonds
$’000$’000$’000
$’000
Balance at 31 March 2018230,45958,6032,83725,474
Financing cash flows (i)
20,570-(2,837)(561)
Other - netted off finance receivables
-(21,548)--
Non-cash changes
Deferred borrowing costs148--(282)
Balance at 31 March 2019
251,177 37,055 -
24,631
Financing cash flows (i)
61,038 - -
-
Other - netted off finance receivables
-(23,673)--
Non-cash changes
Deferred borrowing costs
(11) - - 147
Balance at 31 March 2020
312,20413,382-24,778
The Group has complied with all borrowing covenants in the both the current and prior financial year.
(i) Financing cash flows make up the net amount of proceeds from borrowings and repayments of borrowings in the statement of cash flows.
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or future cash flows will be classified in the Group's consolidated statement of
cash flows as cash flows from financing activities.
Turners Finance Limited has also given undertakings to MTF as the nature and conduct of its business, and overall quality of the finance
receivables and aggregate. Turners Finance has complied with these undertakings in the current and prior financial year.
Turners Finance Limited is a shareholder of a motor trade based company called Motor Trade Finance Limited (MTF). MTF provides the services
of a finance company, including funding, on a full recourse basis back to its shareholders.
MTF provides finance to Turners Finance Limited to fund the finance receivables. The MTF funding is secured by a chattel security over the
Turners Finance Limited's customer's asset securing the finance receivable and by a general security over the assets of Turners Finance Limited.
On 1 October 2018 Turners Automotive Group issued secured subordinated fixed rate bonds with a fixed maturity on 30 September 2021. Interest
is fixed at 5.5% and is paid quarterly in arrears in equal amounts. The bonds rank behind the indebtedness owing under the bank facilities and are
guaranteed by Turners Automotive Group Limited, Oxford Finance Limited, Buy Right Cars (2016) Limited, EC Credit (NZ) Limited, Estate
Management Services Limited, Payment Management Services Limited, EC Web Services Limited, Turners Group NZ Limited, Turners Fleet
Limited and Turners Property Holdings Limited.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
27. SHARE CAPITAL
2020
2019
Number of ordinary shares
Opening balance
86,888,064
84,802,612
Shares issued for the dealer share scheme
40,752
79,050
Shares issued for the conversion of bonds
-
4,646,037
Shares cancel for share buy back
(1,374,106)
(2,639,635)
Total issued and authorised capital85,554,710
86,888,064
2020
2019
$'000
$'000
Dollar value of ordinary shares
Opening balance
206,395
199,148
Transfer of share option reserve
1,027
-
Shares issued for the conversion of bonds
-
13,241
Shares issued for the dealer share scheme
97
200
Shares purchased and cancelled under share buy back
(3,188)
(6,141)
Share issue costs
(4)
(53)
Total issued capital204,327
206,395
Capital management
28. SHARE OPTIONS
The Group’s capital consists of share capital, share option reserve, translation reserve, cash flow reserve and retained earnings. The Board
seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security
afforded by a sound capital position. The allocation of capital between its specific business operations and activities is, to a large extent, driven by
optimisation of the return on the capital allocated. The process of allocating capital to specific operations and activities is undertaken
independently of those responsible for the operation. The Group’s strategies in respect of capital management and allocation are reviewed
regularly by the Board of Directors.
The Group's funding covenants include minimum equity ratios. There have been no breaches of covenants. In addition to the above, the life
insurance company is required to retain equity for solvency purposes, refer note 35G.
Ordinary shares are fully paid with no par value. All ordinary shares have equal voting rights and share equally in dividends and surplus on
winding up.
If a participant in the Group Share Option Plan leaves (by any means and for any reason) the employment of the Company or any applicable
subsidiary, the participant’s options which have reached their vesting date, together with any other options as may be nominated at the discretion
of the Board of Directors of the Company in extraordinary circumstances (such as the redundancy, permanent disablement or death of a
participant), may be exercised within a period of 60 days (following which they will lapse) and the participant's other Options will lapse
immediately.
The weighted average fair value of the options granted in the previous financial year, using the Binomial Tree option pricing model, was $0.36 per
option. The significant inputs in the model were, the share price at grant date of $3.53, the exercise price of $3.60, volatility of 21.5%, an expected
option life for tranche 1 of 2.03 years, tranche 2 of 3.03 years, tranche 3 of 4.03 years, tranche 4 of 5.03 years and an annual risk free rate of
2.63%. Volatility is measured as the standard deviation of changes in the Company's share price over a 12 month period. The share based
payment for the current financial year is $nil (2019: $326,000).
In November 2016, the Chief Executive Officer of the Company was granted 1,002,692 options at an exercise price of $2.99195 under the
Group's Share Option Plan. The grant is split into four tranches of 250,673 options with the following vesting dates; 1 June 2017, 1 June 2018, 1
June 2019 and 1 June 2020. Each tranche expires two year after the vesting date.
In the financial year ending 31 March 2020 all options granted were cancelled and no option were granted in the years ending 31 March 2020 and
31 March 2019.
In July 2017, Senior Executives of the Company were granted 1,700,000 options at an exercise price of $3.60 under the Group's Share Option
Plan. The grant is split into four tranches of 425,000 options with the following vesting dates; 1 August 2017, 1 August 2018, 1 August 2019 and 1
August 2020. Each tranche expires two year after the vesting date.
7574
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Movement in the number of share options outstanding and their related weighted average exercise prices are as follows:
ExerciseExercise
priceOptionspriceOptions
20202020
20192019
$000's
$000's
Opening balance
3.323162,203
3.323162,203
Granted
--
--
Cancelled
3.32316(2,203)
--
Closing balance
--
3.323162,203
Share options outstanding at balance sheet have the following expiry dates and exercise prices:
Exercise
priceOptionsOptions
2020
2019
Expiry date
$
000's
000's
31 May 20193.32316
-
251
31 July 20193.60000
-
300
31 May 20203.32316
-
251
31 July 20203.60000
-
300
31 May 20213.32316
-
251
31 July 20213.60000
-
300
31 May 20222.99195
-
250
31 July 20223.60000
-
300
29. DIVIDENDS
2020
2019
$’000
$’000
3,489 3,816
4,366 4,240
3,4413,596
3,4463,562
14,74215,214
Dividends not recognised at year end
In addition to the above dividends, after year end the directors recommended the payment of the following dividend:
- 3,489
5,133 4,366
30. TRANSACTIONS WITH RELATED PARTIES
Major shareholders, directors and closely related persons to them are considered related parties of the Group.
Turners Automotive Group Limited Employee Share Scheme
Interim dividend for the year ended 31 March 2020 of $0.04 (31 March 2019: $0.04) per fully
paid ordinary share, imputed, paid on 30 January 2020 (2019: 3 January 2019).
Interim dividend for the year ended 31 March 2020 of $0.04 (31 March 2019: $0.04) per fully
paid ordinary share, imputed, paid on 22 October 2019 (2019: 30 October 2018).
Final dividend of $0.06 (31 March 2019: $0.05) per fully paid ordinary share, imputed, payable
on 24 July 2020 (2019: 18 July 2019).
As at 31 March 2020, 35,122 shares (2019: 41,746) were issued and allocated to employees under the scheme.
At 31 March 2020 balance on the loans outstanding to the share scheme were $31,606 (2019: $63,458). The loans bear interest at 5%, are for a
3 year term with fortnightly repayments and the Group has unlimited recourse against the participants in the Scheme.
Final dividend for the year ended 31 March 2019 of $0.05 (31 March 2018: $0.05) per fully paid
ordinary share, imputed paid on 18 July 2019 (2018: 18 July 2018)
Interim dividend for the year ended 31 March 2019 of $0.040 (31 March 2018: $0.045) per fully
paid ordinary share, imputed, paid on 30 April 2019 (2018: 20 April 2018).
Interim dividend for the year ended 31 March 2019 of $0.040 per fully paid ordinary share,
imputed, paid on 30 April 2019.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
Key management personnel compensation
($'000)
ShortPost Other long
term employmentterm
Sharebased
benefitsbenefitsbenefits
paymentsTotal
$'000$'000$'000$'000$'000
<ear ended 31 March 2020 2,595 73
2,668
<ear ended 31 March 2019 3,004 77 326 3,407
31. RECONCILIATION OF NET SURPLUS WITH CASH FLOWS FROM OPERATING ACTIVITIES
2020
2019
$’000
$’000
Profit for the year
20,95322,719
Adjustment for non-cash and other items
Impairment charge on finance receivables, reverse annuity mortgages and other receivables
6,0447,943
Net profit on sale of property, plant and equipment
(33)(3,660)
Depreciation and amortisation
11,9195,785
Capitalised reverse annuity mortgage interest
(613)(846)
Deferred revenue
(2,892)1,620
)inancial assets at fair value through profit and loss
77(799)
Net annuity and premium change to policyholder accounts
(500)341
Noncash long term employee benefits
-330
Noncash adMustment to finance receivables effective interest rates
(226)(209)
Deferred expenses
(2,652)2,839
)air value adMustment on investment property-(830)
)air value adMustment to contingent consideration(116)
Write off of intangible brand asset-4,300
Adjustment for movements in working capital
Net decrease(increase) in receivables and prepayments
5,251(259)
Net increase in inventories
(5,512)(263)
Net increase in current tax payable
(1,806)(851)
Net decrease in payables
(3,544)(5,220)
Net (decrease)increase in contract liabilities
(1,694)132
Net increase in finance receivables
(27,826)(34,926)
Net decrease in reverse annuity mortgages
3,9642,545
Net decrease(increase) of insurance assets at fair value through profit or loss
704(12,163)
Net contributions from life investment contracts
8816
Net increase in deferred tax(1,618)(3,565)
Cash flows from operating activities
(32)(15,021)
The key management personnel are all the Directors of the Company and Group General Managers. Compensation of key management
personnel for the years ended 31 March 2020 and 31 March 2019 was as follows:
.ey management personnel that resigned during the year received no termination benefits and were paid only contractual employment
obligations. .ey management do not have any post employment entitlements.
Directors that resigned during the year did not receive any termination benefits and directors do not have any post employment entitlements.
The Group has no transactions or loans with key management personnel, other than what is reported above and detailed in the statutory
information section on pages 94 to 97. Directors fees are detailed in note 7 and in the shareholder and statutory information section. The details of
the director share purchases are included in the statutory and shareholder information section.
7776
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
32. CHANGE IN ACCOUNTING POLICY
Impact of the adoption of NZ IFRS 16.
This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements and discloses the new accounting
policies that have been applied from 1 April 2019.
The Group has adopted IFRS 16 retrospectively from 1 April 2019, but has not restated comparatives for the 2019 reporting period, as
permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening statement of financial position on 1 April 2019.
Adjustments recognised on adoption of NZ IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating
leases’ under the principles of NZ IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as of 1 April 2019. The weighted average lessee’s incremental borrowing rate
applied to the lease liabilities on 1 April 2019 was 6.1%.
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied.
Other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognised in the statement of financial position as at 31 March 2019. There were no onerous lease
contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
The change in accounting policy affected the following items in the Statement of financial position on 1 April 2019:
Practical expedients applied
In applying NZ IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• reliance on previous assessments on whether leases are onerous;
• the accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases; and
• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts
entered into before the transition date the Group relied on its assessment made applying NZ IAS 17 and IFRIC 4 Determining whether an
Arrangement contains a Lease.
$'000
Operating lease commitments disclosed as at 31 March 2019 32,511
Discounted using the incremental borrowing rate as at 1 April 2019 26,863
Less: short-terms leases recognised on a straight-line basis as expense (168)
Add: adjustments as a result of a different treatment of extension and termination options 10,080
Lease liability recognised as at 1 April 201936,775
31 March 20201 April 2019
$'000$'000
Properties24, 69128,279
Equipment159250
Total right-of-use assets24, 85028,529
1 April 2019
$'000
Right-of-use assets 28,529
Other payables (377)
Deferred tax (2,203)
Lease liabilities 36,775
Retained earnings (5,666)
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Impact of the adoption of NZ IFRS 16 in the Statement of financial position as at 1 April 2019:
31 March 20191 April 2019
As originallyNZ IFRS 161 April 2019
presentedadjustmentsrestated
$'000$'000$'000
Assets
Cash and cash equivalents 15,866 -
15,866
Financial assets at fair value through profit or loss 66,252 66,252
Trade receivables 12,471 - 12,471
Inventories 38,859 - 38,859
Finance receivables 290,017 - 290,017
Other receivables, deferred expenses and contract assets 10,955 -
10,955
Reverse annuity mortgages 8,294 - 8,294
Investment property 5,650 - 5,650
Property, plant and equipment 39,084 -
39,084
Right-of-use assets - 28,529 28,529
Intangible assets 166,734 - 166,734
Total assets654,18228,529682,711
Liabilities
Other payables 33,906 (377)
33,529
Financial liability at fair value through profit or loss 116 - 116
Contract liabilities 2,642 - 2,642
Deferred tax 13,918 (2,203)
11,715
Tax payables 4,570 - 4,570
Derivative financial instruments 524 - 524
Borrowings 312,863 - 312,863
Lease liabilities - 36,775
36,775
Life investment contract liabilities 7,484 - 7,484
Insurance contract liabilities 51,785 -
51,785
Total liabilities427,80834,195462,003
Shareholders' equity
Share capital 206,395 - 206,395
Other reserves 452 - 452
Retained earnings 19,527 (5,666)
13,861
Total shareholders' equity226,374(5,666)220,708
Total shareholders' equity and liabilities654,18228,529682,711
7978
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Presentation of the Statement of comprehensive income for the year ended 31 March 2020 as if NZ IFRS 16 had not been adopted:
31 March 2020Year ended 31 March 2020
reported with 31 March 2020 reported without
adoptingNZ IFRS 16 adopting
NZ IFRS 16adjustmentsNZ IFRS 16
$'000$'000$'000
Revenue from continuing operations 332,174 - 332,174
Other income 500 - 500
Cost of goods sold(135,003) - (135,003)
Interest expense(14,853) 2,034 (12,819)
Impairment provision expense(6,044) - (6,044)
Subcontracted services expense(17,149) - (17,149)
Employee benefits (short term)(55,458) - (55,458)
Commission(13,368) - (13,368)
Advertising expense(2,743) - (2,743)
Depreciation and amortisation expense(11,919) 6,300 (5,619)
Property and related expenses(1,688) (8,806) (10,494)
Systems maintenance(1,747) - (1,747)
Claims(25,952) - (25,952)
Movement in life insurance liabilities(836) - (836)
Insurance deferred acquisition costs(701) - (701)
Impairment of intangible brand asset - - -
Other expenses(16,148) - (16,148)
Profit before taxation29,065(472)28,593
Taxation expense(8,112) 132(7,980)
Profit from continuing operations 20,953(340)20,613
Other comprehensive income for the period (which may subsequently
be reclassified to profit/loss), net of tax
Cash flow hedges(447) - (447)
Revaluation of financial assets at fair value through OCI(310) - (310)
Foreign currency translation differences(12) - (12)
Total comprehensive income for the period20,184(340)19,844
Earnings per share (cents per share)
Basic earnings per share 24.35 (0.40) 23.95
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Presentation of the Statement of financial position as at 31 March 2020 as if NZ IFRS 16 had not been adopted:
31 March 2020Year ended 31 March 2020
reported with 31 March 2020 reported without
adoptingNZ IFRS 16 adopting
NZ IFRS 16adjustmentsNZ IFRS 16
$'000$'000$'000
Assets
Cash and cash equivalents 32,771 -
32,771
Financial assets at fair value through profit or loss 64,988 - 64,988
Trade receivables 8,609 - 8,609
Inventories 44,371 -
44,371
Finance receivables 293,037 - 293,037
Other receivables, deferred expenses and contract assets 8,572 - 8,572
Reverse annuity mortgages 4,913 - 4,913
Investment property 5,650 - 5,650
Financial assets at fair value through OCI 1,000 - 1,000
Property, plant and equipment 52,788 -
52,788
Right-of-use assets 24,850 (24,850) -
Intangible assets 166,843 - 166,843
Total assets708,392(24,850)683,542
Liabilities
Other payables 27,340 264
27,604
Contract liabilities 2,793 - 2,793
Deferred tax 10,080 2,071
12,151
Tax payables 2,772 - 2,772
Derivative financial instruments 985 - 985
Borrowings 350,364 - 350,364
Lease liabilities 32,511 (32,511)
-
Life investment contract liabilities 7,072 - 7,072
Insurance contract liabilities 51,420 -
51,420
Total liabilities485,337(30,176)455,161
Shareholders' equity
Share capital 204,327 - 204,327
Other reserves(1,344) - (1,344)
Retained earnings 20,072 5,326
25,398
Total shareholders' equity223,0555,326228,381
Total shareholders' equity and liabilities708,392(24,850)683,542
Total assets per share ($)
8.28 7.99
Net tangible assets ($)
0.77 0.86
8180
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Presentation of the Segment information as at 31 March 2020 as if NZ IFRS 16 had not been adopted:
Operating profit31 March 2020Year ended 31 March 2020
reported with 31 March 2020 reported without
adoptingNZ IFRS 16 adopting
NZ IFRS 16adjustmentsNZ IFRS 16
$'000$'000$'000
Automotive retail 13,829 (514)
13,315
Finance 12,167 (43) 12,124
Credit management 6,494 1 6,495
Insurance 6,215 55 6,270
Corporate & other(9,640)29(9,611)
Profit/(loss) before tax ation 29,065 (472)
28,593
Income tax(8,112)132(7,980)
Profit attributable to shareholders20,953(340)20,613
Interest expense
Automotive retail(3,967) 1,847 (2,120)
Finance(6,912) 43 (6,869)
Credit management(39) 39
-
Insurance(91) 91 -
Corporate & other(3,930)14(3,916)
(14,939) 2,034 (12,905)
Eliminations86-86
(14,853)2,034(12,819)
Depreciation and amortisation expense
Automotive retail(7,960) 5,472 (2,488)
Finance(717) 343 (374)
Credit management(249) 153
(96)
Insurance(2,783) 191 (2,592)
Corporate & other(210) 141
(69)
(11,919)6,300(5,619)
Segm ent assets
Automotive retail 129,496 (23,141) 106,355
Finance 308,696 (1,165) 307,531
Credit management 38,268 (589)
37,679
Insurance 134,236 (1,372) 132,864
Corporate & other216,173(654)215,519
826,870 (26,921) 799,949
Eliminations(118,478)2,071(116,407)
708,392(24,850)683,542
Segment liabilities
Automotive retail 92,078 (28,221)
63,857
Finance 241,086 (1,221) 239,865
Credit management 7,585 (660) 6,925
Insurance 73,133 (1,463)
71,670
Corporate & other91,423(682)90,741
505,305 (32,247) 473,058
Eliminations(19,968)2,071(17,897)
485,337(30,176)455,161
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
The Group’s leasing activities and how these are accounted for
For the Group’s current accounting policies for leasing activities refer to accounting policy 3.7 on page 45 of the Group’s consolidated
financial statements for the year ended 31 March 2020.
Until the 2020 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period
of the lease.
33. COMMITMENTS AND CONTINGENT LIABILITIES
Capital Expenditure:
At reporting date, the Group has capital commitments of $1.5m to purchase computer equipment (2019: nil).
Future Lease Commitments:
The Group has committed to two property leases, the commencement date of both leases is dependent on the Landlord obtaining a Code
Compliance Certificate or Certificate of Public Use for agreed works included in the lease agreements. It is anticipated the leases will
commence during the financial year ending 31 March 2021.
Loan Commitments:
The Group has no material undrawn credit commitments at reporting date (2019: nil).
Contingent Liabilities:
Buy Right Cars
The vendor of the business has brought legal action against the Company disputing the quantum of the final earn out. A trial date has been
set for 10 August 2020 with both parties seeking payment. The directors consider that on balance of probabilities no payment will be made
to the vendor.
The Group has no other material contingent liabilities at reporting date.
34. SUBSEQUENT EVENTS AFTER BALANCE DATE
In July 2020, the Board approved the grant of 2,300,000 options to Senior Executives of the Group at an exercise price of $2.00 under the
Group's Share Option Plan. The grant is split into four tranches of 575,000 options with the following vesting dates; 1 June 2021, 1 June
2022, 1 June 2023 and 1 June 2024. Each tranche expires two years after the vesting date.
2019
In June 2019, all staff options were cancelled for no consideration, resulting in release of $1,027,000 from the share option reserve to
retained income.
8382
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
35. Insurance related disclosures
A. Actuarial policies and the methods
The actuarial report on insurance contract liabilities and prudential reserves for the current reporting period was prepared as at 31 March 2020
by Peter Davies, a Fellow of the New Zealand Society of Actuaries.
Life insurance contract liabilities
The value of life insurance contract liabilities has been determined in accordance with Professional Standard No. 20 of the New Zealand
Society of Actuaries. After making appropriate checks, the actuary was satisfied as to the accuracy of the data from which the amount of
policy liabilities has been determined.
The key assumptions used in determining policy liabilities are as follows:
a) Discount Rates
Discount rates used to determine the life insurance contract liabilities are based on an appropriate risk-free rate of return, taking account of
the term of the insurance contracts.
Tax was deducted at the rate of 28% on investment earnings net of investment expenses (2019: 28%). The net discount rates assumed were
as follows:
2020 2019
Whole of Life and Endowment Policies (including Funeral Plan)* Treasury risk-free rates Treasury risk-free rates
Quick Cover term life plan* Treasury risk-free rates Treasury risk-free rates
Term Insurance Policies Not applicable Not applicable
Caring Plan Funeral Benefit Policies Not applicable Not applicable
Annuity Policies Treasury risk-free rates Treasury risk-free rates
Consumer Credit and Key Person Loan Protection Not applicable Not applicable
* These rates are provided by Treasury as at 31 January, and are then adjusted to 31 March based on the movement in swap rates, as quoted
by the Reserve Bank, between January and March. Illustrative forward rates for the respective valuations are as follows:
Cash-flows in year 10: March 2019: 1.83% per annum net of tax
March 2020: 1.11% per annum net of tax
b) Inflation Rates
In determining the future expected rate of return, general inflation was assumed to continue into the future at 2.0% per annum (2019: 2.0%).
c) Mortality Rates
Rates of mortality were assumed as follows:
For underwritten whole of life, endowment and term insurance policies: NZ97 (2019: NZ97).
For guaranteed issue regular premium funeral plans: NZ97 (DPL plans), NZ04 (ex-Greenwich plans) multiplied by a factor to reflect higher
mortality at younger ages, and the impact of guaranteed issue anti-selection (DPL - no change from 2019).
QuickCover plans - NZ04 with additional loadings reflecting the impact of guaranteed issue anti-selection.
For annuities the assumed mortality table is 90% of the NZ12-14 population tables. For the Cook Islands Annuity Pension Plan the assumed
mortality table is the PA(90) table without adjustment (2019: no change).
d) Profit Carriers
The policies were divided into major product groups with profit carriers as follows:
Major Product Groups Carrier
Participating Whole of Life and Endowment Policies Premiums
Non Participating Whole of Life and Endowment Policies Premiums
Lump Sum Funeral Benefit Policies (Caring Plan) Not Applicable
Term Insurance Policies Premiums
Funeral Plan Policies (Regular premium guaranteed issue) Gross claims
Quick Cover term life plan Gross claims
Annuities Annuity payments
Consumer Credit / Lifestyle Not Applicable
Motor business Not Applicable
Accidental death & redundancy – Stop Gap Not Applicable
Accidental death regular & single premium Not Applicable
e) Investment and Maintenance Expenses
The maintenance expense and general growth and development expense allowances assumed for the main classes of business were as
follows:
Endowments $152 per policy per annum (2019: $149)
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Funeral plans $9.20 per policy per annum (2019: $9.00)
Term life plans (for loss recognition) $9.20 per policy per annum (2019: $9.00)
Consumer credit plans (for loss recognition): $9.20 per policy per annum (2019: $9.00)
Annuity plans $152 per policy per annum (2019: $149)
Investment management expenses were assumed to be 1.0% (2019: 1.0%) of policy liabilities.
f) Inflation and Automatic Indexation of Benefits
Maintenance expenses are assumed to increase 2.0% per annum (2019: 2.0%). Investment management expenses are assumed to remain
a constant percentage of funds under management.
g) Taxation
The assumed future tax rates reflect the corporate tax rate applying in New Zealand with effect from 1 April 2011. The calculations have been
carried out on the basis of current life insurance income tax legislation.
h) Rates of Discontinuance
Rates of discontinuance are assumed to be 5.0% for whole of life, endowment and term insurance business (2019: 5.0%), and nil for annuity
pension plan business (2019: nil).
For the DPL Funeral plan the rates of discontinuance are based on company experience, beginning at 15% in year 1 and reducing ultimately
to 8% per annum (2019: No change).
For the Funeral plan (ex Greenwich) product the rates of discontinuance are based on the pricing assumption for this product, beginning at
40% in year 1, and reducing ultimately to 3% per annum (2019: 40% to 6%).
For Quick Cover the rates of discontinuance are based on the pricing assumption for this product, beginning at 40% in year 1, and reducing
ultimately to 10% per annum (2019: no change).
i) Surrender Values
The Company's current basis of calculating surrender values is assumed to continue in the future.
j) Rates of Future Supportable Participating Benefits
Rates of bonus supported by the participating fund are simple annual bonuses of $0.00 (2019: $2.00) per $1,000 of sum assured on
endowment policies.
k) Impact of changes in assumptions
The impact of the change in the discount rate is an increase in policy liabilities of $331,000 (2019: $207,000).
The policy liabilities are not affected by the revised expense assumptions (2019: $11,000).
l) Crediting Policy Adopted for Future Supportable Participating Benefits
For participating business the Company's policy is to distribute profits arising such that over long periods the returns to policy holders are
commensurate with the investment returns achieved on relevant assets, together with other sources of profit arising from this business. In
applying the policyholders' share of distributions to provide bonuses, consideration is given to achieving equity between generations of
policyholders and equity between the various classes and sizes of policies in force. Assumed future bonus rates included in policyholder
liabilities were set such that the present value of policyholder liabilities, allowing for the shareholders' right to participate in distributions, equals
the value of assets supporting the business. The supportable future bonus rate on this basis is zero.
Non-life insurance liabilities
The value of non-life outstanding claims and the Liability Adequacy Test of the non-life business, have been carried out in accordance with
Professional Standard no. 30. After making appropriate checks, the actuary was satisfied as to the accuracy of the data from which the
amount of policy liabilities has been determined.
B. Financial strength rating
The Insurance (Prudential Supervision) Act 2010 requires all licensed insurers to have a current Financial Strength Rating, given by an
approved rating entity. DPL Insurance Limited has been issued a Financial Strength Rating of B+ (Good) and an Issuer Credit Rating of bbb-
(Good), with the outlook assigned to both ratings as 'Positive' by A.M. Best. The rating was issued by A.M. Best on 19 July 2019.
The A.M Best company rating scale is
A++, A+ Superior B, B- Fair D Poor
A, A- Excellent C++, C+ Marginal E Under Regular Supervision
B++, B+ Good C, C- Weak F In liquidation
S Suspended
Issuer credit rating:
Investment grade
aaa (Exceptional)
aa (Superior)
a (Excellent)
bbb (Good)
Non-investment grade
bb (Fair)
b (Marginal)
ccc, cc (Weak)
c (Poor)
rs (Regulatory Supervision / Liquidation)
8584
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
C. Surplus after taxation from insurance activities arose from:
2020
2019
$’000
$’000
Insurance Contracts
Planned margin of revenues over expenses
339
164
Change in discount rate: 1.83% to 1.11% (2019:2.61% to 1.83%)
(331)
(207)
Difference between actual and assumed experience
3,711
5,745
Life investments contracts
Difference between actual and assumed experience
240
266
Investment returns on assets in excess of insurance
contract and investment contract liabilities
982
1,022
Surplus after taxation attributable to insurance activities
4,941
6,990
D. Insurance and investment contract income
2020
2019
$’000
$’000
39,277
40,416
(77)
792
Less: investment revenue paid to life insurance investment contracts
189
(680)
287
2,440
39,676
42,968
(30)
382
127
104
(174)
306
(77)
792
The disclosure of the components of operating profit after tax expense are required to be separated between policyholders’ and shareholders’
interests. We have included only one column, as policyholder profits arise only in respect of a small number of participating policies, and the
profits arising on these policies over the year were effectively zero. Accordingly all of the profits earned over the year are shareholder profits.
It is not currently possible to identify all experience variances separately for life investment contracts. The difference between actual and
assumed experience for life insurance contracts therefore includes some variances relating to life investment contracts.
Included within equity securities is dividend income of $Nil (2019: $Nil) and included within fixed interest securities is interest income of $Nil
(2019: $Nil). Included within total Investment Income is net realised and unrealised gains/(losses) on securities at fair value through profit or loss
of ($77,000) (2019: $792,000).
Property investments
Investment revenue
Insurance contract premiums
Other Revenues
Total insurance and investment contract income
Fixed interest securities
Investment Income
Equity securities
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
E. Insurance related expenses
2020
2019
$’000
$’000
Insurance contract claims
23,890
25,112
Reinsurance expenses
587
630
Insurance contracts
Policy acquisition expenses - commission costs
2,067
2,382
Deferred acquisition cost amortisation
701
423
Total insurance contract related expenses
2,768
2,805
Life investment contracts
Investment management expenses
42
40
Movement in life insurance liabilities
836
718
Audit fees for the audit of financial statements
126
125
Rental and lease costs
25
481
Amortisation of policies in force
1,566
1,566
Amortisation of customer relationships
558
630
Amortisation of other intangible assets
218
262
Depreciation
442
287
Employee benefits
5,934
5,912
F. Taxation
Net operating profit before taxation
6,712
8,577
Income tax expense at prevailing rates
1,879
2,402
Tax impact of expenses not deductible for tax purposes
(106)
(826)
Prior year adjustment
1
11
Taxation (expense)/benefit
1,774
1,587
Comprising:
Current
2,949
2,530
Deferred
(1,176)
(954)
Prior year adjustment
1
11
1,774
1,587
Deferred tax
Opening balance
(8,369)
(9,395)
Charge to profit or loss
1,184
998
Transition adjustment
4
28
Deferred tax on intangibles
-
-
Closing balance
(7,181)
(8,369)
The charge to profit or loss is attributable to the following items:
Insurance deductible reserves
681
702
Provisions and accruals
487
252
Prior year adjustment
8
44
1,176
998
Income tax losses on policyholder base
Imputation credit memorandum account
The policyholder imputation credit account has a closing balance at 31 March 2020 of $Nil (2019: $Nil).
The policy holder tax losses carried forward at 31 March 2020 are $5,180,385 (2019: $4,948,638).
Net operating profit includes the following specific expenses
8786
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
G. DPL Insurance Limited solvency calculation
2020
2019
$’000
$’000
Actual solvency capital
32,321
33,284
Calculated minimum solvency capital
16,598
16,714
Coverage ratio on calculated margin (times)
1.95 1.99
Overall minimum capital requirement
16,59816,714
6olvency margin on overall minimum requirement
15,72316,570
Coverage ratio on overall minimum requirement (times)
1.951.99
Non-life insurance
Actual solvency capital
24,32421,557
Calculated minimum solvency capital
14,24412,850
6olvency margin on calculated minimum requirement
10,0808,707
Life insurance
Actual solvency capital
7,99711,727
Calculated minimum solvency capital
2,3543,864
6olvency margin on calculated minimum requirement
5,6437,863
H. Policyholder liabilities
2020
2019
$’000
$’000
Insurance contract liabilities
Opening insurance contract liabilities
51,785
48,376
1,0324,519
Amortisation Intangible asset - policies in force
(1,566)(1,566)
Increase in deferred acquisition costs
169456
Closing insurance contract liabilities
51,420
51,785
Policyholder liabilities contain the following components:
)uture policy benefits
55,586
57,964
)uture expenses
6,475
6,283
)uture profit margins
5,880
5,250
%alance of future premiums
(22,541)(21,058)
Re-insurance
6,286
5,348
Life deferred acquisition costs
(266)
(435)
Intangible asset - policies in force
-
(1,567)
51,420
51,785
221
262
7,175
6,577
Opening life investment contracts at fair value through profit or loss
7,484
7,127
Increase / (decrease) in life investment contract liabilities recognised through profit or loss(260)
607
1,529
1,611
(1,441)
(1,595)
(240)
(266)
7,072
7,484
Life investment contracts at fair value through profit or loss
In terms of the Insurance (Prudential 6upervision) Act 2010, DPL Insurance Limited must comply with the 6olvency 6tandard for Life Insurance
%usiness 2014 and the 6olvency 6tandard for Non-life %usiness 2014. DPL Insurance Limited is required to hold minimum solvency capital of
$5.0 million and have a solvency margin of at least $0.
Increase in insurance contract liabilities
Life insurance contracts with a discretionary participation feature - the amount of the liabilities that relates
to guarantees
Other contracts with a fixed or guaranteed termination value - current termination value
Deposit premium
:ithdrawals
Activity, plan, and establishment fees
Closing life investment contract liabilities
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
Policyholder liabilities comprise
2020
2019
$’000
$’000
1,280
1,245
232
279
4,504
3,651
5,669
5,093
Accidental death/redundancy
7
7
Term Life
53
65
General
36,718
38,236
General claims provisions
3,223
3,644
7,072
7,484
Deferred acquisition costs - life
(266)
(435)
58,492
59,269
Life investment contract liabilities
7,072
7,484
Insurance contract liabilities
51,420
51,785
58,492
59,269
General outstandings claim provision
Gross claims
118
113
IBNR provision
2,473
3,020
2,591
3,133
Reconciliation of movement in general gross claims liability
Opening Balance
3,133
3,518
Movement
20,277
23,012
Payments
(20,819)
(23,397)
2,591
3,133Closing Balance
The benefits offered under the Group's unit-linked investment contracts are based on the returns of selected equities and debt securities. This
investment mix is unique, and it cannot be associated to an individual benchmark index with a sufficiently high correlation. All financial liabilities at
fair value through profit and loss are designated by the Group to be in this measurement category. The liabilities originated from unit-linked
contracts are measured with reference to their respective underlyingassets of these contracts. Changes in the credit risk of the underlyingassets
do not impact the measurement of the unit-linked liabilities. The maturity value of these financial liabilities is determined by the fair value of the
linked assets, at maturity date.
Annuities
Saving plans
Endowment
Whole of life, provision for bonus and future margins
Consumer Credit Protection & key person loan protection
The policy liabilities in respect of annuities, endowment, whole of life, term life, super life and life bond have been established in accordance with
the policy conditions and maintained at a level equivalent to obligations due to policy holders as maturity or partial benefits.
8988
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
I. Disaggregated information
Statement of income for the year ended 31 March 2020StatutoryShareholderTotal
$’000$’000$’000
Insurance contract premiums
6,44732,83039,277
Outward reinsurance premium
(587)-(587)
Recoveries
41911430
Other insurance revenue
4041,8652,269
Insurance revenue
6,68334,70641,389
Claims expense
(2,529)(21,361)(23,890)
Movement in life insurance liabilities
(836)-(836)
Commission expense
(598)(1,469)(2,067)
Other expenses
(1,747)(9,896)(11,643)
Underwriting (loss)/profit
9731,9802,953
Fair value gain on revaluation of investment properties
-500500
Investment income
7512,5113,262
Profit before taxation
1,7244,9916,715
Taxation
(455)(1,319)(1,774)
Profit after taxation
1,2693,6724,941
Statement of financial position as 31 March 2020StatutoryShareholderTotal
Assets
$’000$’000$’000
Investments backing insurance policy liabilities
27,55770,67998,236
Other assets
-37,36137,361
Total assets
27,557108,040135,597
Liabilities
Life investment contract liabilities
7,072-7,072
Insurance contract liabilities
12,11139,30951,420
Deferred taxation
-7,1817,181
Other liabilities
3787,0467,424
Total liabilities
19,56153,53673,097
Solvency
Actual Solvency capital
7,99724,32432,321
Minimum solvency capital
2,35414,24416,598
Solvency Margin
5,64310,08015,723
Statement of income for the year ended 31 March 2019StatutoryShareholderTotal
$’000$’000$’000
Insurance contract premiums
7,59832,81840,416
Outward reinsurance premium
(630)-(630)
Recoveries
32492416
Other insurance revenue
2701,8192,089
Insurance revenue
7,56234,72942,291
Claims expense
(1,537)(23,575)(25,112)
Movement in life insurance liabilities
(718)-(718)
Commission expense
(1,226)(1,157)(2,383)
Other expenses
(1,819)(10,317)(12,136)
Underwriting (loss)/profit
2,262(320)1,942
Investment income
1,2162,0393,255
Fair value gain on revaluation of investment properties
-900900
Gain on sale of investment properties
-2,4802,480
Profit before taxation
3,4785,0998,577
Taxation
(644)(943)(1,587)
Profit after taxation
2,8344,1566,990
DPL Insurance Limited has one statutory life fund. The disaggregated income statement and balance sheet between the statutory and
shareholder funds is as follows:
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
Statement of financial position as 31 March 2019StatutoryShareholderTotal
Assets
$’000$’000$’000
Investments backing insurance policy liabilities
29,84568,36498,209
Other assets
-37,69437,694
Total assets
29,845106,058135,903
Liabilities
Life investment contract liabilities
7,484-7,484
Insurance contract liabilities
10,41641,36951,785
Deferred taxation
-8,3698,369
Other liabilities
2185,4375,655
Total liabilities
18,11855,17573,293
Solvency
Actual Solvency capital
11,72721,55833,285
Minimum solvency capital
3,86412,85016,714
Solvency Margin
7,8638,70816,571
Reconciliation of Profit before tax to Operating profit (note 6)
2020
2019
$’000
$’000
Profit before tax
6,715
8,577
(500)
(350)
Operating profit (note 6)
6,215
8,227
Restriction on assets
Investment linked
Non – investment
linkedTotal
$’000$’000$’000
2020
- 38,69038,690
(77)3,8393,762
- (23,890)(23,890)
- 2,6992,699
(73)(14,734)(14,807)
261 - 261
1116,6046,715
804,8614,941
7,072 51,420
58,492
7,197 91,039 98,236
- 37,361 37,361
- 14,605 14,605
1,250 14,900 16,150
The business undertaken and policies accepted by DPL Insurance Limited are a combination of investment linked and non-investment linked.
Investment linked business is business for which the life insurer issues a contract where the benefit amount is directly linked to the market value
of the investments held in the particular investment linked fund. Non-investment linked business is life insurance business other than investment
linked business.
Premium income
Investment income
Access to the retained profits and capital in the statutory fund held for policyholders is restricted by the Insurance (Prudential Supervision) Act
2010.
Less: revaluation of investment property disclosed as property, plant and equipment
in the Group financial statements at cost
Claims expense
Other operating revenue
Other operating expenses
Investment revenues allocated to policyholders
Net profit before taxation
Net profit after taxation
Policy liabilities
Investment assets
Other assets
Other liabilities
Retained earnings
9190
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
The above information is disclosed prior to the elimination of any related party transactions or balances as the insurance contract disclosures
relate to DPL Insurance Limited.
J. Managed Funds and other Fiduciary Activities
DPL Insurance Limited acted as a promoter for a number of superannuation funds with assets managed by a third party investment manager.
The assets and liabilities of these funds are not included in the financial statements. Arrangements exist to ensure the activities of the
superannuation funds are managed independently from the other activities of the company.
K. Insurance Risk
The insurance business of the Group involves a number of financial and non-financial risks. The financial risks are covered in note 5. Key
objectives in managing insurance risk are:
(i) To ensure sound business practices are in place for underwriting risks and claims management;
(ii) To achieve a target return on capital that is invested in order to take on insurance risk; and
(iii) To ensure solvency and capital requirements are met.
Life insurance
The life insurance business of the Group involves a number of non-financial risks concerned with the pricing, acceptance and management
of the mortality, and longevity risks accepted from policyholders. These risks are controlled through the use of underwriting procedures and
adequate premium rates and policy charges, all of which are approved by the Actuary. Tight controls are also maintained over claims
management practices to ensure the correct and timely payment of insurance claims.
Terms and conditions of life insurance contracts
The nature of the terms of the insurance contracts written by the Group is such that certain external variables can be identified on which
related cash flows for claim payments depend. The tables below provide an overview of the key variables upon which the amount of related
cash flows are dependent.
Type of contract Details of the contract workings Nature of compensation for claims
Key variables affecting cash
flows
Non-participating life
insurance contracts
with fixed and
guaranteed terms
Benefits paid on death or maturity are
fixed and guaranteed and not at the
discretion of the issuer
Benefits, defined by the insurance
contract, are determined by the
contract and are not directly affected
by the performance of underlying
assets or the performance of the
contracts as whole
Mortality, lapses, expenses and
market earnings on assets
backing the liabilities
Life insurance
contracts with
discretionary
participating benefits
(endowment and
whole of life)
These policies include a clearly
defined initial guaranteed sum
assured which is payable on death.
The guaranteed amount is a multiple
of the amount that is increased
throughout the duration of the policy
by the addition of regular bonuses
annually which, once added, are not
removed. Regular bonuses are also
added retrospectively
Benefits arising from the
discretionary participation feature are
based on the performance of a
specified pool of contracts or a
specified type of contract.
Mortality, lapses, expenses and
market earnings on assets
backing the liabilities
Life Annuity
Contracts
These policies provide guaranteed
regular payments to the life assured
The amount of the payment is set at
inception of the policy
Longevity, expenses and market
earnings on assets backing the
liabilities
Investment linked
Non – investment
linkedTotal
$’000$’000$’000
2019
- 39,78639,786
7925,9016,693
- (25,112)(25,112)
- 2,4492,449
(69)(14,559)(14,628)
(611) - (611)
1128,4658,577
816,9096,990
7,484 51,785
59,269
7,658 90,551 98,209
- 37,694 37,694
- 14,024 14,024
1,170 15,090 16,260
Other operating revenue
Other operating expenses
Premium income
Investment income
Claims expense
Investment assets
Other assets
Other liabilities
Retained earnings
Investment revenues allocated to policyholders
Net profit before taxation
Net profit after taxation
Policy liabilities
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
Non-life insurance
The risk management activities include prudent underwriting, pricing, and management of risk, together with claims management, reserving
and investment management. The objective of these disciplines is to enhance the financial performance of the insurance operations and to
ensure sound business practices are in place for underwriting risks and claims management.
Claims
Variations in claim levels will affect reported profit and equity. The impact may be magnified if the variation leads to a change in actuarial
assumptions which cannot be absorbed within the present value of planned margins for a group of related products. Insurance risk may arise
through the reassessment of the incidence of claims, the trend of future claims and the effect of unforeseen diseases or epidemics. Insurance
risk is controlled by ensuring underwriting standards adequately identify potential risk, retaining the right to amend premiums on risk policies
where appropriate. The experience of the Group's life insurance business is reviewed regularly.
Concentration of insurance risk
The Group does not believe it has any major geographic concentration of insurance risk. The Group's policies aim to reduce concentration
risk by maintaining a portfolio of policyholders with a broad spread of insurance risk types, ages, sexes, occupation classes and geographic
locations. The group uses reinsurance to limit the insurance risk exposure for any one individual.
Sensitivity Analysis
The liabilities included in the reported results are calculated using certain assumptions about key variables as disclosed above. Sensitivity
analysis is conducted to assess the impact of actual experience being different to that assumed in the calculation of liabilities. Movements in
any variable will impact the profit and net assets of the Group. The tables below describe how a change in actual experience relative to that
expected will affect next financial year's expected shareholder profit.
Variable Impact of movement in underlying variable
Expense risk An increase in the level or inflationary growth of expenses over assumed levels will decrease profit and shareholders’
equity
Interest rate risk Depending on the profile of the investment portfolio, the investment income of the Group will decrease as interest rates
decrease. This may be offset to an extent by changes in the market value of fixed interest investments. The impact on
profit and shareholder equity depends on the relative profiles of assets and liabilities, to the extent that these are not
matched
Mortality rates For insurance contracts providing death benefits, greater mortality rates would lead to higher levels of claims,
increasing associated claims cost and therefore reducing profit and shareholder equity
Discontinuance The impact of discontinuance rate assumption depends on a range of factors including the type of contract, the
surrender value basis (where applicable) and the duration in force. For example, an increase in discontinuance rates
at earlier durations of life insurance contracts usually has a negative effect on profit and shareholder equity. However,
due to the interplay between the factors, there is not always an adverse outcome from an increase in discontinuance
rates
Market Risk For benefits which are not contractually linked to the underlying assets, the Group is exposed to Market Risk
The table below illustrates how changes in key assumptions would impact the reported profit and liabilities of the Group.
Effect on policyEffect on
Change in key assumptions ($'000)
liabilities future profit
2020
(238)(48)
26552
1(28)
(1)28
(5)(241)
6265
-76
-(86)
(224)(48)
24952
1(28)
(1)28
(4)(242)
5266
-76
-(86)
Increase in mortality by 10%
Worsening of discontinuance rate by 10%
Market risks
Increase in interest rates of 1%
Decrease in interest rates of 1%
Insurance risks
Increase in mortality by 10%
Worsening of discontinuance rate by 10%
Improvement in discontinuance rate by 10%
Insurance risks
Increase in expenses of 10%
Decrease in expenses of 10%
Decrease in mortality by 10%
Improvement in discontinuance rate by 10%
2019
Market risks
Increase in interest rates of 1%
Decrease in interest rates of 1%
Increase in expenses of 10%
Decrease in expenses of 10%
Decrease in mortality by 10%
9392
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
STATUTORY INFORMATION
STATUTORY INFORMATION
Directors’ remuneration and other benefits
Directors’ fees
$
Grant Baker 150,000
Paul Byrnes 75,000
Martin Berry 75,000
Matthew Harrison 75,000
Alistair Petrie 75,000
John Roberts 75,000
Antony Vriens 75,000
During the year ended 31 March 2020
Mr Harrison received an additional $15,000 (2019: $15,000) in fees for services as chairman of the
Credit and Lending Committee.
During the year ended 31 March 2020 Mr Roberts received an additional $15,000 (2019: $15,000) in fees for his services as chairman of the
Audit and Risk Management Committee.
During the year ended 31 March 2020 Mr Vriens received an additional $35,000 (2019: $35,000) in fees for his services as chairman of DPL
Insurance Limited.
Disclosure of interests recorded in the interest’s register
There were no new specific disclosures of interests entered in the interests’ register in the accounting period ending 31 March 2020.
Dealings in Turners Automotive Group Limited shares by Directors
Date of transaction
Shares
acquired/(disposed)
Consideration
(received)/paid $
Nature of relevant interest
Paul Byrnes
07/06/2019 - 10/06/2019
(76,951) (185,961) Registered holder and beneficial interest
Paul Byrnes 13/06/2019 -17/06/2019 (703,049) (1,659,992) Registered holder and beneficial interest
Paul Byrnes 17/06/2019 (120,000) (278,400) Registered holder and beneficial interest
Martin Berry 05/07/2019 500,000 1,150,000 Registered holder and beneficial interest
Directors’ relevant interest in quoted shares as at 31 March 2020
Shares
Grant Baker (own shareholding) 6,100,000
Paul Byrnes 2,484,860
Martin Berry 500,000
Matthew Harrison 5,179,294
Alistair Petrie 25,011
John Roberts 66,000
Antony Vriens -
Other Directorships
Mr Baker, Mr Byrnes and Mr Harrison are directors of Turners Staff Share Plan Trustees Limited which acts as Trustee of the Employee Share
Purchase Scheme Trust.
The following represents interests of directors in other companies as disclosed to Turners Automotive Group Limited and entered in the
Interests Register:
Grant Baker
Baker Consultants Limited
Montezemolo Holdings Limited
Me Today Limited (Chairman)
Velocity Capital
Liam Lawson Supporters Partnership LP (Chairman)
Paul Byrnes
Vic Road Restaurant Group Limited
Ship to Shore Restaurant Group Limited
John Roberts
Apollo Foods Limited
Centrix Group Limited
STATUTORY INFORMATION
STATUTORY INFORMATION
Matthew Harrison
Harrigens Trustees Limited
JHFT Trustees Limited
GJG Trustees No.2 Limited
GJG Trustees Limited
MJH Consultants Limited
Antony Vriens
Me Today Limited
Alistair Petrie
RH Investment Trust
Dossor Trust
Bartel Holdings Ltd
Henergy Cage Free Ltd
Jellicoe St Enterprises Ltd
Zeafruit Limited
Breadcraft Wai Limited Advisory Board (Chairman)
Melita Honey Limited Advisory Board
Employee remuneration
During the year ended 31 March 2020, the number of employees or former employees of the Group, not being directors of Turners Automotive
Group Limited, who received remuneration and other benefits in their capacity as employees, the value of which exceeded $100,000 for the
year was as follows:
Number of employees
Remuneration range 2020 2019
100,000 - 109,999 21 21
110,000 - 119,999 16 14
120,000 - 129,999
14 13
130,000 - 139,999 4 7
140,000 - 149,999 8 5
150,000 - 159,999 4 4
160,000 - 169,999 4 7
170,000 - 179,999 8 4
180,000 - 189,999 3 4
190,000 - 199,999 2 5
200,000 – 209,999 - 3
210,000 - 219,999 2 1
220,000 - 229,999 - 1
230,000 - 239,999 1 1
240,000 - 249,999 - 2
250,000 – 259,999 - 2
260,000 – 269,999 - -
270,000 – 279,999 - 1
280,000 – 289,000 - 1
290,000 – 299,000 3 -
300,000 – 309,999 1 -
320,000 – 329,999 - 1
330,000 – 339,999 - 1
340,000 – 349,999 - 1
370,000 – 379,000 1 -
400,000 – 409,999 - 1
420,000 – 430,000 1 -
430,000 – 439,999 - 1
640,000 – 645,000 1 -
700,000 – 709,000 - 1
9594
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
STATUTORY INFORMATION
STATUTORY INFORMATION
NZX LISTING
PRINCIPAL ORDINARY SHAREHOLDERS AS AT 30 June 2020
Shares
% of Issued
Rank NameCapital
1
Bartel Holdings Limited9,552,642 11.17
2 Montezemolo Holdings Limited6,100,000 7.13
3 Harrigens Trustees Limited5,179,294 6.05
4 FNZ Custodians Limited4,153,981 4.86
5 HSBC Nominees (New Zealand) Limited - NZCSD3,427,171 4.01
6 National Nominees Limited - NCSD3,288,667 3.84
7 BNP Paribas Nominees (NZ) Limited - NZCSD2,543,090 2.97
8 JBWere (NZ) Nominees Limited2,491,951 2.91
9 Stephen John Sinclair & Jacqueline Margaret Sinclair & Roger Frederick Wallis2,171,461 2.54
10 Custodial Services Limited <A/C 16>1,863,524 2.18
11 Paul Bernard Mora1,700,000 1.99
12 Paul Anthony Byrnes1,484,860 1.74
13 John Jeffers Harrison1,363,782 1.59
14 Accident Compensation Corporation - NZCSD1,361,833 1.59
15 New Zealand Permanent Trustees Limited - NZCSD1,000,000 1.17
16
Glenn Arthur Duncraft870,000 1.02
17 Custodial Services Limited <A/C 4>707,685 0.83
18 Cushla Mary Smithies542,841 0.63
19534,487 0.62
20 John Tomson519,754 0.61
SPREAD OF ORDINARY SHAREHOLDERS AS AT 30 JUNE 2020
Range
Total Holders Shares
% of Issued
Capital
1 – 9991,812817,5080.96
1,000 - 1,9998391,145,7671.34
2,000 - 4,9997922,440,1992.85
5,000 - 9,9994583,037,5183.55
10,000 - 49,999593 11,618,03113.58
50,000 - 99,999543,406,7863.98
100,000 - 499,99961 12,231,87814.30
500,000 - 999,00053,174,7673.71
1,000,000 plus15 47,682,25655.73
Total4,629 85,554,710
100.00
Shareholders Shares
Domicile of Ordinary Shareholders
Number%Number %
New Zealand
4,460 96.35
84,594,629
98.88
Australia
77 1.66
521,055 0.61
Other
92 1.99 439,026
0.51
Total4,629100.00 85,554,710100.00
The Company's shares are listed on the NZX Main Board (equity securities market) operated by NZX Limited (NZX) and as a foreign exempt entity
on the ASX operated by ASX Limited (ASX).
The following table shows the names and holdings of the 20 largest holdings of quoted ordinary shares (TRA) of the Company.
JPMorgan Chase Bank NA NZ Branch-segregated clients acct - NZCSD
STATUTORY INFORMATION
STATUTORY INFORMATION
Substantial Product Holders
The following information is given pursuant to section 293 of the Financial Markets Conduct Act 2013.
Bartel Holdings Limited9,552,64211.17
Salt Funds Managers Limited
7,974,3259.32
Montezemolo Holdings Limited
6,100,0007.13
Harrigens Trustees Limited5,179,2946.05
As at 31 March 2020 the following shareholders are registered by the company as Substantial Product Holders in the Company, having
disclosed a relevant interest in quoted voting products under the Financial Markets Conduct Act 2013.
Number of Shares
%
The total number of quoted voting products of the company on issue at 31 March 2020 was 85,554,710 paid ordinary shares.
9796
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT
TURNERS LIMITED FY20 GOVERNANCE REPORT
Turners’ Board of Directors has adopted a corporate governance framework which encourages the highest standards of ethical
conduct and provides accountability and control systems commensurate with the risks involved.
The Board considers that this framework and governance practices for the year ended 31 March 2020 are generally in line with
the 1 January 2020 NZX Corporate Governance Code (NZX Code), except as stated below:
• Recommendation 2.5: Turners has a Diversity Policy which encourages a culture of diversity and inclusiveness at
Turners. While no measurable objectives are in place, the board requires management to provide regular reporting
and monitoring on diversity within the Turners workforce. The Board also uses tools such as the annual staff
engagement survey to measure diversity and how the business is recognising, valuing and respecting differences to
establish benchmark measures and progress.
• Recommendation 2.9: An issuer should have an independent chairperson of the board. The chairperson of the
board is Grant Baker, a non-executive director. Grant has a 7.13% shareholding in Turners and therefore the Board
has deemed that he is not an independent director. The chair is not the CEO of Turners, is not involved in the day to
day running of the business and has no influence over operational decisions.
• Recommendation 3.3 and 3.4: An issuer should have a Remuneration Committee and a Nomination Committee:
Due to the size of the Company's Board, matters normally dealt with by a Remuneration Committee or Nominations
Committee are dealt with by the full Board.
The Company will continue to monitor best practice in the governance area and update its policies to ensure it maintains the
most appropriate standards.
The information in this report is current as at 30 July 2020 and has been approved by the Board of Turners.
The Corporate Governance Code and key policies are available on the Turners Automotive Group Limited website:
https://www.turnersautogroup.co.nz/About+Us/Corporate+Governance.html.
Turners is listed on the NZX’s Main Board and is subject to regulatory control and monitoring by both the NZX and the Financial
Markets Authority (FMA).
PRINCIPLE 1 – CODE OF ETHICAL BEHAVIOUR
Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for
these standards being followed throughout the organisation.
The Board recognises that high ethical standards and behaviours are central to good corporate governance and it is committed
to the observance of a written Code of Ethics for Turners.
The Code of Ethics is the framework of standards by which directors, employees, contractors for personal services and advisers
to Turners Automotive Group Limited and its related companies are expected to conduct their professional lives. It has been
approved by the Board.
It is intended to facilitate decisions that are consistent with Turners values, business goals and legal and policy obligations,
thereby enhancing performance outcomes. The Code of Ethics is available on the Company’s website. Employees are expected
to report any breaches in line with the processes outlined in the Code of Ethics. The Board believes that all directors conformed
to the Code of Ethics during the 2020 financial year.
Turners has a Securities Trading Code of Conduct to mitigate the risk of insider trading in Turners financial products by employees
and directors. A copy of this is available on Turners’ website. Additional trading restrictions apply to Restricted Persons including
directors and certain employees. Details of directors’ share dealings are on page 94 of the 2020 Financial Statements.
PRINCIPLE 2 – BOARD COMPOSITION AND PERFORMANCE
To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience and
perspectives.
The Turners Board is responsible for setting the strategic direction of the Company, overseeing the financial and operational
controls of the business, putting in place appropriate risk management strategies and policies and enhancing its value for
shareholders in accordance with good corporate governance principles.
In addition to the Turners Corporate Governance Code, the Turners Board also operates under a written charter which sets out:
• the structure of the Board;
• the role and responsibilities of directors;
• procedures for the nomination, resignation and removal of directors;
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
• identifies procedures to ensure that the Board meets regularly, conducts its meetings in an efficient and effective
manner; and
• that each Director is fully empowered to perform his or her duties as a director of Turners and to fully participate in
meetings of the Board.
Day to day management of Turners is undertaken by the executive team under the leadership of the Chief Executive Officer,
through a set of delegated authorities which are reviewed annually.
In discharging their duties, directors have direct access to and may rely on information, financial data and professional or expert
advice provided by Turners’ senior management and external advisers. Directors have the right, with the approval of the Chairman
or by resolution of the Board, to seek independent legal or financial advice at the expense of Turners for the proper performance
of their duties.
Newly elected directors are expected to familiarise themselves with their obligations under the constitution, Board Charter,
Turners Corporate Governance Code and the NZX Listing Rules. Training is also provided to new and existing Directors where
required to enable directors to understand their obligations.
Board Composition and Appointment
The number of elected directors and the procedure for their retirement and re-election at Annual Shareholder Meetings is set out
in Turners Constitution.
Turners considers that the nomination process for new Director appointments is the responsibility of the whole Board and it does
not have a separate Nomination Committee. The Board takes into consideration tenure, capability, diversity and skills when
reviewing Board composition and new appointments.
Directors will retire and may stand for re-election by shareholders every three years, in accordance with the NZX Listing Rules.
A Director appointed since the previous annual meeting holds office only until the next annual meeting, but is eligible for re-
election at that meeting.
When a director is newly appointed, Turners will enter into a written agreement with them setting out the terms of their
employment.
The Board currently comprises of seven directors: a non-executive chairman, four independent directors and two non-executive
directors. The non-executive directors are not involved in the day to day running of the business and have no influence over
operational decisions. Directors are all elected based on the value they bring to the Board and against set criteria detailed in
Turners Corporate Governance Code. In order for a Director to be independent, the Board has determined that he or she must
not be an executive of Turners and must have no disqualifying relationships. The Board follows the guidelines of the NZX Listing
Rules and the NZX Code. Information on each director is available on the Turners website and on page 22 and 23 of the 2020
Annual Report.
Director’s interests are disclosed on pages 94 to 97 of the 2020 Financial Statements.
Board Training and Performance
The Company encourages all Directors to undertake appropriate training and education so that they may best perform their
duties. This includes attending presentations on changes in governance, legal and regulatory frameworks; attending technical
and professional development courses; and attending presentations from industry experts and key advisers. In addition, Directors
receive updates on relevant industry and Company issues, and briefings from key executives.
The Board regularly considers individual and collective performance, together with the skill sets, training and development and
succession planning required to govern the business. An external review was conducted in FY20, and the Board is considering
the recommendations made before implementing any changes.
Diversity
Turners believes that diversity and inclusion of background, experiences, thoughts and ways of working lead to greater creative
and innovative solutions which ultimately lead to a superior outcome for its stakeholders socially, economically and
environmentally.
Diversity in Turners includes (but is not limited to) the following: gender, race, ethnicity and cultural background, thinking, physical
capability, age, sexual orientation, and religious or political belief.
Turners Diversity and Inclusion Policy is available on the Turners website. The Board requires management to provide regular
reporting and monitoring on diversity within the Turners workforce. As at 31 March 2020, the gender balance of Turners directors
and people was as follows:
31 March 2020 31 March 2019
Directors
Females - -
Males 7 7
9998
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
2020 2019
Turners’ people – 31 March 2020 Females Males Females Males
Senior leadership 6 26 8 28
Management 37 57 35 55
Other Employees 268 377 279 364
Total 311 460 322 447
Board Meetings and Attendance
The Board has 14 scheduled meetings a year. The table below sets out Directors’ attendance at Board and Committee meetings
during FY20. In total, there were 14 Board meetings; 3 Audit and Risk Management Committee meetings; and 4 Lending and
Credit Committee meetings.
Board Audit and Risk
Management
Committee
Lending and Credit
Committee
Total number of meetings held
Grant Baker 14
Paul Byrnes 14
Martin Berry 12
Matthew Harrison 14 4
Alistair Petrie 13 3 4
John Roberts 14 3 4
Antony Vriens 12 3
PRINCIPLE 3 – COMMITTEES
The Board should use committees where this will enhance its effectiveness in key areas, while still retaining Board
responsibility.
The Board has constituted two standing Committees being the Audit and Risk Management Committee and the Lending and
Credit Committee. Turners will continue to monitor best practice in the governance area and update its policies to ensure it
maintains the most appropriate standards.
Committees allow issues requiring detailed consideration to be dealt with separately by members of the Board with specialist
knowledge and experience, thereby enhancing the efficiency and effectiveness of the Board. However, the Board retains ultimate
responsibility for the functions of its Committees and determines their responsibilities.
The Committees meet as required and have terms of reference (Charters), which are approved and reviewed by the Board.
Minutes of each Committee meeting are forwarded to all members of the Board, who are all entitled to attend any Committee
meeting. Management may only attend committee meetings at the invitation of the Committee. Each Committee is empowered
to seek any information it requires from employees in pursuing its duties and to obtain independent legal or other professional
advice. The membership and performance of each Committee is reviewed annually. From time to time, special purpose
committees may be formed to review and monitor specific projects with senior management.
Audit and Risk Management Committee
The role of the Audit and Risk Management Committee is to assist the Board in carrying out its responsibilities under the
Companies Act 1993 and the Financial Reporting Act 2013 regarding accountancy practices, policies and controls relative to the
Turner’s financial position and make appropriate enquiry into the audits of the Turner’s financial statements. This responsibility
includes providing the Board with additional assurance about the quality and reliability of the financial information issued publicly
by Turners. All matters required to be addressed and for which the Committee has responsibility were addressed during the
reporting period.
The Committee is comprised solely of Directors of Turners, has a minimum of three members, has a majority of independent
Directors and has at least one director with an accounting or financial background. The Chair of the committee is not the Chair
of the Board and does not have a long-standing association with Turners external audit firm as a current, or retired, audit partner
or senior manager at that firm. Management and employees may only attend meetings at the invitation of the Committee and the
Committee routinely has Committee-only time with the external and internal auditors without management present. The
Committee Charter is available as Appendix B in the Turners Corporate Governance Code.
Members as at 31 March 2020 were John Roberts (Chair), Antony Vriens and Alistair Petrie. It met three times during the financial
year.
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
Lending and Credit Committee
The Lending and Credit Committee reviews the lending and credit policies of Turners’ Finance subsidiary company. It is also
responsible for the approval of lending policies, the approval/decline of loan applications in terms of approval authority and
reviews the recovery of overdue loans and doubtful debt provisions in order to ensure that provisioning is satisfactory.
The Lending and Credit Committee members as at 31 March 2020 were Matthew Harrison (Chair), Alistair Petrie and John
Roberts. It met three times during the financial year.
Takeovers
Turners Automotive Group Limited is prepared in the event of a takeover. The Board has adopted a written Takeover Response
Policy (contained within the Turners Automotive Group Corporate Governance Code) to follow in the event that a takeover notice
or scheme of arrangement proposal is imminent. This policy would involve Turners forming an Independent Takeover committee
to oversee disclosure and response, and engage expert legal and financial advisors to provide advice on procedure.
PRINCIPLE 4 – REPORTING AND DISCLOSURE
The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of
corporate disclosures
Turners’ directors are committed to keeping investors and the market informed of all material information about Turners and its
performance, and ensuring compliance with applicable legislative and the NZX Listing Rules. The release of material information
is guided by the Reporting and Disclosure section in Turners Corporate Governance Code, and the Turners Continuous
Disclosure Policy, which are available to view on our website.
Copies of other key governance documents are also available on our website.
In addition to all information required by law, Turners also seeks to provide sufficiently meaningful information to ensure
stakeholders and investors are well informed, including financial and non-financial information.
Financial information
The Board is responsible for ensuring that the financial statements give a true and fair view of the financial position of Turners
and have been prepared using appropriate accounting policies, consistently applied and supported by reasonable judgements,
estimates and for ensuring all relevant financial reporting and accounting standards have been followed.
For the financial year ended 31 March 2020, the directors believe that proper accounting records have been kept which enable,
with reasonable accuracy, the determination of the financial position of Turners and facilitate compliance with the Financial
Reporting Act 1993. The Chief Executive and Chief Financial Officer have confirmed in writing to the Board that Turners’ external
financial reports present a true and fair view in all material aspects. Turners’ full financial statements and half year results are
available on our website.
Non-financial information
The Board recognises the importance of non-financial disclosure. Given Turners size, the Board has elected not to adopt a formal
environmental, social and governance framework. Turners has an Environmental, Social and Governance Policy in section 14 of
Turners Corporate Governance Code.
Turners discusses its strategic objectives and its progress against these in the Chair and CEO’s commentary in shareholder
reports, and at other investor events during the year including investor presentations and the Annual Shareholders’ Meeting.
Turners is committed to using its resources responsibly and will look for opportunities to reduce any negative environmental risk
or impact from business operations, products and services. Turners is committed to providing fair and responsible products and
services that includes adherence to the Responsible Lending Code, the Responsible Credit-Related Insurance Code, Insurance
(Prudential Supervision) Act 2010 and various other Acts.
The Board will encourage diversity and will not knowingly participate in business situations where Turners’ could be complicit in
human rights and labour standard abuses.
PRINCIPLE 5 – REMUNERATION
The remuneration of directors and executives should be transparent, fair and reasonable.
The Board promotes the alignment of the interests of the directors, the CEO and management with the long term interests of
shareholders. Remuneration policies and structure are reviewed regularly to ensure remuneration of management and directors
is fair and reasonable in a competitive market for the skills, knowledge and experience required by Turners. The Board recognises
that it is desirable that executive (including executive director) remuneration should include an element dependent upon the
performance of both Turners and the individual, and should be clearly differentiated from non-executive director remuneration.
101100
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
Details of directors and executives’ remuneration and entitlements for the 2020 financial year are detailed on pages 77 and 94 of
the Annual Report.
The Remuneration Policy is included in section 10 of Turners Corporate Governance Code. Turners does not have a
Remuneration Committee and matters pertaining to remuneration are dealt with by the full Board.
Director Remuneration
The total remuneration pool available for Directors is fixed by shareholders. The Board determines the level of remuneration paid
to Directors from the approved collective pool. Directors also receive reimbursement for reasonable travelling, accommodation
and other expenses incurred in the course of performing their duties. The annual fee pool limit is $665,000 and was approved by
shareholders at the annual meeting in September 2018. Any proposed increases in non-executive Director fees and remuneration
will be put to shareholders for approval. If independent advice is sought by the Board, it will be disclosed to shareholders as part
of the approval process.
Board Remuneration
• Chairman $150,000
• Non-executive Director $75,000
• Chair of DPL Insurance Limited $35,000
• Chair of DPL Insurance Limited for duties as a non-executive director for TRA $75,000
• Chair of Audit & Risk Committee $15,000
• Chair of Credit and Lending Committee $15,000
DPL Insurance is legally required to operate a separate board because it holds an insurance license with the Reserve Bank of
New Zealand. Antony Vriens is the current chairman of the DPL Insurance board and is also a non-executive director of Turners.
Details of individual Directors’ remuneration are detailed on page 94 of the 2020 Annual Report.
Executive Remuneration
Executive remuneration consists of a fixed base salary, a variable short term bonus paid annually and a long term incentive,
being a Share Option Plan. Bonuses are paid against targets agreed with executives at the commencement of the year and are
based on profitability, growth and personal objectives.
Details of executives’ remuneration and entitlements are detailed under Key Management Compensation on page 77 and
Remuneration of Employees information on page 95 of the 2020 Financial Statements.
Details of the Group’s Share Option Plan are detailed on page 75 of the 2020 Financial Statements. All outstanding share options
were cancelled at the start FY20 and new options were issued in July 2020.
CEO Remuneration
The review and approval of the CEO’s remuneration is the responsibility of the Board. The CEO’s remuneration comprises a fixed
base salary, a variable short term bonus payable annually and a long term incentive, being participation in the Group’s Share
Option Plan.
The CEO’s remuneration can be summarised as follows:
Salary Benefits Subtotal Pay for Performance Total
remuneration
STI % STI
against
maximum
FY20 543,761 50,224 593,985 - - 593,985
FY19 531,205 47,520 578,725 101,275 46% 680,000
Short term incentive: A short term bonus is paid against profit targets agreed at the commencement of the year.
Long term incentive: In November 2016, the Chief Executive Officer of the Company was granted 1,002,692 options at an exercise
price of $2.99195 under the Group's Share Option Plan. The grant is split into four tranches of 250,673 options with the following
vesting dates; 1 June 2017, 1 June 2018, 1 June 2019 and 1 June 2020. Each tranche expires two years after the vesting date.
The weighted average fair value of the options granted, using the Binomial Tree option pricing model, was $0.75 per option. All
options were cancelled at the beginning of FY20.
If a participant in the Group Share Option Plan leaves (by any means and for any reason) the employment of the Company or
any applicable subsidiary, the participant’s options which have reached their vesting date, together with any other options as may
be nominated at the discretion of the Board of Directors of the Company in extraordinary circumstances (such as the redundancy,
permanent disablement or death of a Participant), may be exercised within a period of 60 days (following which they will lapse)
and the participant's other Options will lapse immediately.
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
PRINCIPLE 6 – RISK MANAGEMENT
Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The
Board should regularly verify that the issuer has appropriate processes that identify and manage potential and material
risks.
Turners is committed to proactively managing risk. While this is the responsibility of the entire Board, the Audit and Risk
Management Committee assists the Board and provides additional oversight in regards to the risk management framework and
monitoring compliance with that framework.
The Board’s approach to risk management is incorporated into the Audit and Risk Committee Charter which is included as
Appendix B in Turners Corporate Governance Code. The Board delegates day to date management of the risk to the Chief
Executive. The executive team and senior management are required to regularly identify the major risks affecting the business
and develop structures, practices and processes to manage and monitor these risks. Individual risks are discussed with the Board
in detail as required.
Key financial and non-financial risks are included in note 5 of the financial statements.
The Board is satisfied that Turners has in place a risk management process to effectively identify, manage and monitor Turners’
principal risks. Turners maintains insurance policies that it considers adequate to meet its insurable risks.
Health and Safety
The Board recognises that effective management of health and safety is essential for the operation of a successful business, and
its intent is to prevent harm and promote wellbeing for employees, contractors and customers.
The Board is responsible for ensuring that the systems used to identify and manage health and safety risks are fit for purpose,
being effectively implemented, regularly reviewed and continuously improved.
Turners has a Health and Safety Policy which is monitored by a Health and Safety Committee assisted by Health and Safety co-
ordinators in each business unit. Health and Safety reports, including incident reports, for all business units are included in the
compliance section of Board papers.
PRINCIPLE 7 – AUDITORS
The Board should ensure the quality and independence of the external audit process.
The Board’s approach to the appointment and oversight of the external auditor are outlined in Turners’ External Audit Policy
(section 9 of the Turners Corporate Governance Code) and ensures that audit independence is maintained, both in fact and
appearance, such that Turners external financial reporting is viewed as being highly reliable and credible.
The Audit and Risk Management Committee provides additional oversight of the external auditor, reviews the quality and cost of
the audit undertaken by the Company’s external auditors and provides a formal channel of communication between the Board,
senior management and external auditors. The Committee also assesses the auditor’s independence on an annual basis.
Procedures are detailed in the Audit and Risk Committee Charter (Appendix B of the Turners Corporate Governance Code).
For the financial year ended 31 March 2020, Baker Tilly Staples Rodway was the external auditor for Turners Automotive Group
Limited. Baker Tilly Staples Rodway were first appointed as external auditor in 1999 and were automatically re-appointed under
the Companies Act 1993 at the 2019 Annual Shareholder Meeting. The last audit partner rotation was this year.
All audit work at Turners is fully separated from non-audit services, to ensure that appropriate independence is maintained. The
amount of fees paid to Baker Tilly Staples Rodway for audit and other services is identified on page 59 of the 2020 Annual Report.
Baker Tilly Staples Rodway has provided the Turners’ Board with written confirmation that, in their view, they were able to operate
independently during the year.
Baker Tilly Staples Rodway attends the Annual Shareholder Meeting, and the lead audit partner is available to answer questions
from shareholders at that meeting. Baker Tilly Staples Rodway attended the 2019 Annual Shareholder Meeting.
Turners has a number of internal controls overseen by Audit and Risk Management Committee, including controls for
computerised information system, security, business continuity management, insurance, health and safety, conflicts of interest,
and prevention and identification of fraud. Turners does not have a dedicated Internal Auditor role.
103102
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
PRINCIPLE 8 – SHAREHOLDER RIGHTS AND RELATIONS
The Board should respect the rights of shareholders and foster constructive relationships with shareholders that
encourage them to engage with the issuer.
The Board is committed to open dialogue and to facilitating engagement with shareholders. Turners has a calendar of
communications and events for shareholders, including but not limited to:
• Annual and Interim Reports
• Market announcements
• Annual Shareholder Meeting
• Financial results calls
• Other ad hoc investor presentations
• Easy access to information through the Turners website www.turnersautogroup.co.nz
• Access to management and the Board via email info@turnersautogroup.co.nz
Turners maintains a comprehensive investor relations website which provides access to key corporate governance documents,
copies of all major announcements, company reports and presentations.
Shareholders are encouraged to attend the Annual Shareholder Meeting and may raise matters for discussion at this event. In
accordance with the NZX Code, the Board ensured that the notice of the 2019 Annual Shareholder Meeting was posted to
Turners’ website as soon as possible, and at least 20 working days prior to that meeting.
Shareholders have the ultimate control in corporate governance by voting directors on or off the Board. Voting is by poll, upholding
the ‘one share, one vote’ philosophy.
In accordance with the Companies Act 1993, Turners’ constitution and the NZX Listing Rules, Turners refers major decisions
which may change the nature of Turners’ to shareholders for approval.
All shareholders are given the option to elect to receive electronic communications from us.
In addition to shareholders, Turners has a wide range of stakeholders and maintains open channels of communication for all
audiences, including shareholders, brokers and the investing community, as well as our staff, suppliers and customers.
ENDS
DIRECTORY
DIRECTORY
CORPORATE DIRECTORY
DIRECTORS
Grant Baker
Chairman
Appointed 10 September 2009
Paul Byrnes
Deputy chairman
Appointed 2 February 2004
Martin Berry
Independent Director
Appointed 17 August 2018
Matthew Harrison
Non-executive director
Appointed 12 December 2012
Alistair Petrie
Non-executive director
Appointed 24 February 2016
John Roberts
Independent Director
Appointed 1 July 2015
Antony Vriens
Independent Director
Appointed 12 January 2015
SHAREHOLDER INFORMATION
COMPANY PUBLICATIONS
The Company informs investors of the Company’s business
and operations by issuing an Annual Report, an Interim Report
and releasing announcements on the NZX’s website.
Financial calendar
First quarterly dividend October
Annual meeting September
Half year results announced November
Second quarterly dividend January
Third quarterly dividend April
End of financial year 31 March
Annual results announced May
Annual report June
Final dividend July
REGISTERED OFFICE
Level 5, 70 Shortland Street, Auckland, New Zealand
PO Box 1232, Shortland Street, Auckland, 1140, New Zealand
Freephone: 0800 100 601
Email enquiries: info@turnersautogroup.co.nz
Web: www.turnersautogroup.co.nz
AUDITOR
Baker Tilly Staples Rodway
BANKERS
Bank of New Zealand and ASB Bank
LAWYERS
Chapman Tripp
SHARE REGISTER
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Takapuna, Auckland
Private Bag 92119, Auckland 1142, New Zealand
Telephone: +64 9 488 8777
ENQUIRIES
Shareholders with enquiries about transactions, change of address or dividend payments should contact Computershare Investor Services
on +64 9 488 8777. Other questions should be directed to the Company at the registered address.
STOCK EXCHANGE
The Company’s shares trade on the NZSX operated by the NZX under the code TRA. The minimum marketable parcel on the NZX is 100
shares.
This annual report is dated 30 July 2020 and is signed on behalf of the board by:
G.K. Baker P.A. Byrnes
Chairman Deputy chairman
TURNERS LIMITED
Consolidated statement of financial position for the year ended 31 March 2016
2016
2015
Notes
$’000
$’000
Assets
Cash and cash equivalents10
13,810
12,339
Financial assets at fair value through profit or loss11
18,455
17,350
Trade receivables12
9,575
7,394
Inventory13
14,156
8,984
Finance receivables14
167,598
142,827
Other receivables and deferred expenses15
8,505
5,946
Reverse annuity mortgages16
9,734
13,253
Property, plant and equipment19
11,108
8,319
Tax receivables
-
433
Deferred tax asset20
4,024
8,532
Intangible assets21
105,338
103,595
Total assets362,303
328,972
Liabilities
Other payables22
22,270
17,790
Deferred revenue23
6,049
7,476
Tax payables
990
71
Derivative financial instruments
49
-
Borrowings24
174,816
156,995
Life investment contract liabilities32
15,629
16,378
Insurance contract liabilities32
12,688
9,260
Total liabilities232,491
207,970
Shareholders’ equity
Share capital25
136,127
135,294
Other reserves
(52)
(23)
Retained earnings
(6,263)
(14,269)
Total shareholders’ equity129,812
121,002
Total shareholders’ equity and liabilities362,303
328,972
For and on behalf of the Board
G.K. BakerP.A. Byrnes
Chairman DirectorExecutive Director
Authorised for issue on 22 June 2016
The accompanying notes from part of these financial statements
TURNERS LIMITED
Consolidated statement of financial position for the year ended 31 March 2016
2016
2015
Notes
$’000
$’000
Assets
Cash and cash equivalents10
13,810
12,339
Financial assets at fair value through profit or loss11
18,455
17,350
Trade receivables12
9,575
7,394
Inventory13
14,156
8,984
Finance receivables14
167,598
142,827
Other receivables and deferred expenses15
8,505
5,946
Reverse annuity mortgages16
9,734
13,253
Property, plant and equipment19
11,108
8,319
Tax receivables
-
433
Deferred tax asset20
4,024
8,532
Intangible assets21
105,338
103,595
Total assets362,303
328,972
Liabilities
Other payables22
22,270
17,790
Deferred revenue23
6,049
7,476
Tax payables
990
71
Derivative financial instruments
49
-
Borrowings24
174,816
156,995
Life investment contract liabilities32
15,629
16,378
Insurance contract liabilities32
12,688
9,260
Total liabilities232,491
207,970
Shareholders’ equity
Share capital25
136,127
135,294
Other reserves
(52)
(23)
Retained earnings
(6,263)
(14,269)
Total shareholders’ equity129,812
121,002
Total shareholders’ equity and liabilities362,303
328,972
For and on behalf of the Board
G.K. BakerP.A. Byrnes
Chairman DirectorExecutive Director
Authorised for issue on 22 June 2016
The accompanying notes from part of these financial statements
105104
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
107106
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Level 5, 70 Shortland Street
PO Box 1232, Auckland 1140
T: 0800 100 601
E: info@turnersautogroup.co.nz
www.turnersautogroup.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.