Turners Annual Meeting Presentation

1• 2020 ANNUAL MEETING
TURNERS AUTOMOTIVE
GROUP
2020 ANNUAL MEETING
23 September 2020

2• 2020 ANNUAL MEETING
ONLINE ATTENDEES – QUESTION PROCESS
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3• 2020 ANNUAL MEETING
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4• 2020 ANNUAL MEETING
Board of Directors
Antony Vriens
Independent Director
Grant Baker
Non-executive
Chairman
Alistair Petrie
Non-executive Director
John Roberts
Independent Director
Matthew Harrison
Non-executive Director
Paul Byrnes
Independent Dep
Chairman
Martin Berry
Independent Director

5• 2020 ANNUAL MEETING
Meeting Agenda
Presentations
•
Chairman’s Address (Grant Baker)
•
CEO Update (Todd Hunter)
Shareholder Discussion
Resolutions per Notice of Meeting
General Business

6• 2020 ANNUAL MEETING
Chairman’s Address
Grant Baker

7• 2020 ANNUAL MEETING
Building quality ...

8• 2020 ANNUAL MEETING
A Transformed Business
As at March YEFY10FY15FY20
Shareholder Equity ($m)
(3)121223
Total Assets ($m)
109329708
NPBT ($m)
(18)1929
Dividend per Share (cps)
-10.0 14.0
Market Capitalisation ($m)
4202118
Numbers adjusted for 1-10 share swap in 2016
Note -$118m
valuation as at 31
March 2020

9• 2020 ANNUAL MEETING
Robust improvement in earnings and dividends
TRA has the third highest dividend yield on the NZX
1
1
Source: NZX. Based on rolling 12 month gross div (net div + imps) divided by share price at 14 September 2020.
Excludes three NZX-listed higher yields (LIC (because co-op); NWF (because micro-cap with $39m mkcap); KMD (because dividend suspended).
2
Dividends fully imputed from FY17 onwards

10• 2020 ANNUAL MEETING

11• 2020 ANNUAL MEETING
The rationale for the group’s structure now proven
The Strategic Reviews for Oxford and EC Credit determined that the group was most
valuable in its current structure.
Consumer brandsWholesale/B2B brands

12• 2020 ANNUAL MEETING
Business unitWhat we liked pre-COVID?What we like post COVID?
Auto retail
•Used cars is a large resilient market
•Leading “trust” brand
•Diversifiedsources of supply
•Acquiring strategic sites and building
property portfolio over time
•Used cars have demonstrated
resilience
•Geographical diversification
•Diversifiedsources of supply
•Trust brand
Benefit of Auto retail business became clearer in COVID

13• 2020 ANNUAL MEETING
Business unitWhat we liked pre-COVID?What we like post COVID?
Finance
•Challenger brand
•Promising signs from de-risk strategy
•Pricing risk differently
•Annuity earningshelpful in lockdown
•Arrears proven to be robust
•De-riskingstrategy working well
Benefit of Finance business became clearer in COVID

14• 2020 ANNUAL MEETING
Business unitWhat we liked pre-COVID?What we like post COVID?
Insurance
•#1brand in niche insurance
•Promisingsigns from de-risk strategy
•Improvements in distribution
•Using a portion of capital reserves to
build property portfolio used in
AutoRetail
•Annuity earningshelpful in lockdown
•Premiumtaken up front
•Technology and distribution
•Using a portion of capital reserves to
build property portfolio used in
AutoRetail
Benefit of Insurance business became clearer in COVID

15• 2020 ANNUAL MEETING
Business unitWhat we liked pre-COVID?What we like post COVID?
Credit Management
•Strong cash flows
•Capital light business
•Dataand web opportunity
•Payment bank stickier than expected
•Counter-cyclical, defensive
•Strong relationships from debtloaders
Benefit of Credit business became clearer in COVID

16• 2020 ANNUAL MEETING
Resilient and well placed for an uncertain environment
COVID was a stress-test, but we exceeded expectations
1. Used car market is resilient
2. Diversified business
3. High “trust” brands
4. Digital is a competitive advantage
5. Strong and sustainable yield
6. Experienced management team and directors

17• 2020 ANNUAL MEETING
1. Market - The used car market is resilient and robust
•COVID had a temporary impact, before a strong
rebound in June and July
•August impacted by second lockdown, AKL sales
dropped most (c.1/3 of population)
•Net migration has added to post lockdown
demand
•Underlying demand still strong with more cars
exiting the fleet
•Mar 2020: all vehicles imported into the
country required to have ESC, impact in sub
$8k budget segment
•Cost of repairs increasing
•Stricter WoF regime
•20% of vehicle fleet 20 years or older
Source: NZTA

18• 2020 ANNUAL MEETING
2a. Geographic diversification
Our 37 sites nationwide offer a unique advantage
•
Geographical diversification
allows the business to
redeploy inventory
•
Advantage if there are any
localised lockdowns or
regional demand differences
•
Online sales / click n collect at
any branch nationwide

19• 2020 ANNUAL MEETING
2b. Business diversification
Turners Group is a purposefully diversified business
Each business has different business cycles:
•
Stable annuity revenue (finance +
insurance) helps offset short-term drop in
activity-based revenue (auto retail + credit).
•
Credit management is counter-cyclical
•
Can increase our mix towards consignment
(reduce working capital & any pricing risk).

20• 2020 ANNUAL MEETING
3. Brand - leverage the high trust Turners brand
Trust is even more important in a time of uncertainty
•Most trusted brand: Turners is consistently
NZ’s leading used auto retail brand
(independent market research)
•100% online sales demonstrates trust: Sold
600 vehicles during Level 4 and 3 lockdown.
The ability to sell uninspected vehicles online
at scale demonstrates the high trust and
awareness of the Turners brand
•Valuable online presence: Second most visited
auto site, with traffic online hitting all time
highs
2020 Readers Digest Trusted Brand Award:
NZ’s most trusted used car dealer.

21• 2020 ANNUAL MEETING
4. Digital advantage
Continue to invest in this crucial competitive advantage
•Maintained headcount of Technology
team: 26 FTE (Applications
15,Infrastructure/Operations11)
•Major investment and resource
commitment in high redundancy data
centre spread between 2 sites (AKL +
HAM)
•Turners Car Subscription launched in
mid-Sept
•Focus going forward on digital
marketing, customer data platform and
marketing automation

22• 2020 ANNUAL MEETING
•Q3 dividend (payable April-20) was deferred as a
precaution due to uncertainty of L4 lockdown
•Final FY20 6.0 cps dividend paid July-20
•Turners’ dividend stream is supported by its
robust balance sheet and stability of earnings,
even in this extreme environment
•Directors intend to continue current dividend
policy during FY21 (60% to 70% of NPAT).
Dividend per share (cents)
2
0.100
0.130
0.145
0.155
0.170
0.140
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
FY15FY16FY17FY18FY19FY20
5. Attractive + defensive dividend yield
TRA has the third highest dividend yield on the NZX
1
1
Source: NZX. Based on rolling 12 month gross div (net div + imps) divided by share price at 14 September 2020.
Excludes three NZX-listed higher yields (LIC (because co-op); NWF (because micro-cap with $39m mkcap); KMD (because dividend suspended).
2
Dividends fully imputed from FY17 onwards

23• 2020 ANNUAL MEETING
6. “Through the cycle” experience
Team has alignment with shareholders, and plenty of experience, including the GFC
•Board and management control just under 30% of shares in the
company...high degree of alignment with shareholder interests
•All the businesses have key executives or directors who were involved in
the management of these business units during the GFC
•Board continue to be involved in key areas of the business where skills
directly apply
•During Covid response board and management meeting every few days
and reviewing critical business KPIs
•Board and management continue to work collaboratively and engage to
review and improve the business.

24• 2020 ANNUAL MEETING
•Quality of our trusted brands
•Purposefully diversified business model
•Risk optimisation
•Extending our competitive advantage for digital
Building a quality business

25• 2020 ANNUAL MEETING
25• 2020 ANNUAL MEETING
CEO’s Update
Todd Hunter

26• 2020 ANNUAL MEETING
FY20 Results snapshot
Revenue
Net profit after tax
Revenue
$332.7m
-1% YoY
Shareholders’ Equity
$223m as at 31 March 20
Underlying Net Profit Before Tax
$28.8m +
11% YoY
Final FY20 Dividend 6.0 cps
FY Div 14.0 cps
Net Profit Before Tax
$29.1m
0% YoY
FY20 Earnings Per Share
24.4cps
(FY19 26.2cps,
-7%
)
Net Profit After Tax
$21.0m
-8% YoY
0
100
200
300
400
FY15FY16FY17FY18FY19FY20
Millions
2H
1H
0
5
10
15
20
25
FY15 FY16 FY17 FY18 FY19 FY20
Millions
2H
1H

27• 2020 ANNUAL MEETING
FY20 Results Overview
•NPBT $29.1M in line with FY19
and guidance ($28m – $30m)
•Underlying NPBT $28.8m up 11%
•NPAT $21.0m down 8%
•Final Q4 Dividend (incorporating
the Q3 deferred dividend)
declared at 6.0cps
•EPS 24.4cps (FY19 26.2cps)
FY20 Financials
•Auto Retail: Retail optimisation
continues, both sites + digital mktg
•Finance: Building a high quality loan
book
•Insurance: Building a high quality
insurance portfolio
•Credit: Continued digitisation of
interfaces into EC Credit Control
FY20 Review by business
Key Learnings from FY20
•
“Trust” equity in the Turners brand is
very strong
•
New auto retail optimised sites
materially outperform old auction
wholesale premises
•
Investments in IT/digital infrastructure
have been worth every dollar
•
De-risking Finance book and Insurance
business have been the right strategy
•
Strategic review process worthwhile

28• 2020 ANNUAL MEETING
Our approach to lockdown...
ReactRethinkRebuild
Ensure survival of business
“cash is king” approach
Customer experience
and cost base
“Eyes on the prize” and
prepare for opportunities
Thank You to Our Team, Landlords and Business Partners

29• 2020 ANNUAL MEETING
FY21 YTD Update
Strong recovery in business levels since April lockdown
•Brand: Continuing marketing spend focusing on
Turners “trusted brand”
•Auto: Car margins on “owned” fleet has bounced
back strongly due to supply constraints
•Finance: Supported finance customers, hardship
numbers are now negligible. Credit policy
tightened, arrears in finance book very low.
•Insurance: Strong rebound in policy sales, low
claim environment
•Credit: Large corporate debt load still subdued
due to reputation management challenges
1 Group operating profit excluding wage subsidy of $5.1m
-$0.5m
$0.0m
$0.5m
$1.0m
$1.5m
$2.0m
$2.5m
$3.0m
$3.5m
$4.0m
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20
Group Profit Before Tax
1
($m)

30• 2020 ANNUAL MEETING
Auto Retail
•Strong recovery in metrics since April low point
•Car margins on “owned” fleet has bounced back
strongly due to supply constraints
•Diversified sources of supply a real strength
•Inventory levels down 30% from peak at
beginning of April
•Continuing marketing spend focusing on
Turners “trusted brand”
•Accelerate our Phase 1 data strategy
YTD operating profit flat on Aug 19 YTD

31• 2020 ANNUAL MEETING
We continue to optimise our network
Our focus this year is on continued retail optimisation
New Dunedin operation opened May 2020
Continue to optimise retail network

Transition from wholesale to retail eg. exit Penrose, open Mt
Richmond and Westgate

Rationalise sub-scale sites
We want to be closer and more accessible to our customers

Omnichannel world: our sweet spot is c.10,000m2, high profile
site, adjacent to large customer catchment eg. Westgate

Convenience is key, manageable selection on each site, but
maximum selection online and cars are moved around more in a
region (JIT approach)

Logistically simpler and easier to manage a 10,000m2 site than
40,000m2
We continue to cautiously assess new sites either lease or own ...
Property portfolio now 8 sites (valued on books at $50m)

Retail Units up 34% Aug YTD

Gross Profit per unit up 43%

Operating profit $243k v $31k in FY20

32• 2020 ANNUAL MEETING
Finance
•Post lockdown lending very strong.
•Improving credit quality via data-driven risk
pricing. Early adopter of comprehensive credit
reporting
•Premium Tier business now accounts for over 50%
of our new business per month
•Promote 100% digital loan process
•Arrears at historic all-time lows, material buffer in
arrears provisioning to allow for any
unemployment increase
•Initial cohort of finance customers with hardship
applications during L4 lockdown are all back paying
YTD operating profit significantly ahead of Aug 19 YTD

33• 2020 ANNUAL MEETING
Credit scores improving; arrears declining
350
400
450
500
550
600
650
1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21
Avergae consumer VEDA
credit score
Improving Customer Credit Scores
Oxford Finance
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Total Arrears %3 per. Mov. Avg. (Total Arrears %)

34• 2020 ANNUAL MEETING
Insurance
•Policy sales rebounded strongly, in-line with used
car market
•Claims loss ratios continue to improve (due to
better underwriting, less movement in lockdown)
•Focus is on digital distribution eg. Marac Finance,
MotorCentral
•New portfolio management system providing
product and pricing agility
•Increased regularity of claims payments to
support workshop partners...important for
partner relationships
•AM Best upgraded credit rating for Insurance.
Financial strength rating improving to B++ (good).
YTD operating profit significantly ahead of Aug 19 YTD

35• 2020 ANNUAL MEETING
Credit management
•Lockdown has been a good reminder of the strong
“payment bank” annuity component to this business
which has held up very well.
•Due to the cautious approach by large banks and
government agencies to manage reputational risk,
we expect the debt load to ramp up early in 2021.
•This impacted new debt load and ability to work
existing debtors already loaded.
•Digital cost efficiencies – Xero/MYOB integration and
building digital self-service channels for debtors.
•Non performing debt expected to build, which ECCC
will be a beneficiary of similar to pattern
experienced post GFC
YTD operating profit down on Aug 19 YTD; but poised for acceleration

36• 2020 ANNUAL MEETING
Our focus for FY21
Auto Retail
•Cost discipline – property and people
•Continue to invest in promoting the Turners brand - build market share
•Retail optimisation – Exit Penrose and launch Westgate, Mt Richmond
Finance
•Keep improving credit quality through data driven risk pricing
•Continued focus on arrears and rehabilitation
•Promote 100% digital loan process
Credit/Management
•Extending into ledger management from credit collections
•Cost discipline with Digital efficiencies – debtor self service portal, Xero/MYOB
•Working closely with corporates to manage reputational risk
36• FY20 RESULTS PRESENTATION
Insurance
•Cost and claims management discipline
•Increasing distribution through partnership strategy and sales integration
into other businesses eg Marac
•Enhance risk pricing

37• 2020 ANNUAL MEETING
37• 2020 ANNUAL MEETING
Digital and Data

38• 2020 ANNUAL MEETING
•Contactless 100% online buying process
initiated in 1
st
week of lockdown April - 20
•5 day money back guarantee developed in
consultation with vendors...now applies to all
retail vehicles sold to consumers
•Consultants trained to provide virtual
inspections of vehicles
•Contactless handover at branch or at home
•Used in April – 20 however since then people
have reverted to more traditional modes of
purchasing
Example #1 Digital - Rapid deployment of BuySafe

39• 2020 ANNUAL MEETING
Example #2 Data - Fleet profitability tool
Big data enables higher margins by optimising pricing
$19,000
$17,500
$18,500
$18,000
$17,250
$17,000
$16,500
$16,750
Current Offer:
+
Premium features
---
Past Sales
--
Recent experience
ThisRedscore is based on...
-
Panel condition
Vehicle:
Projected Offers:
---
Comparable listings
Profitable purchases: 3
Recent results:
Unprofitable purchases: 5
Recommended
offer
Maximum risk
offer
$19,000
•In FY20 we sold 26% of cars at a loss, equating to $2.87m
•Optimising sales prices is a substantial opportunity
•A proof of concept has been developed using AI technology in February 2020, expecting
deployment early in 2021

40• 2020 ANNUAL MEETING
Example #3 Digital - Customer data platform - Business case
”Low hanging fruit” opportunity to improve lead conversion
Improve conversion metrics:
•100,000 unique users visit turners.co.nz each month
•Most were anonymous, only ~10% are returning customers
•Now communicating in a more personalised, relevant and timely
way
•Current conversion into sale/purchase/finance less than c. 5% of
top of funnel leads
•High ROI project that will yield significant business outcomes
Achieved by marketing automation + improved customer data

41• 2020 ANNUAL MEETING
Example #4 Digital - 100% online loan sign up process
•Deployed 100% online sign up process in July
•25% of loans in July used “secured signing”,
rising to 40% of loans in August
•Much faster process for customers and
originators and helps with identity fraud as well
•Secured Signing uses Digital Signature (PKI
encryption) technology to verify & proves the
document has not been modified after signing
Obtaining customer signatures in order to
close a deal can prove challenging. The
traditional paper process is often time
consuming and costly and may take days
to complete.
Digital signing replaces the need to
capture a physical signature on a
document moving the process online.

42• 2020 ANNUAL MEETING
Launched 21-09-20

Outlook

44• 2020 ANNUAL MEETING
•
Business has rebounded strongly since lockdown and demonstrated resilience, and business has
momentum and providing some optimism about H2
•
We are targeting FY21 NPBT to be in the range of $28m to $31m. This is conditional upon no further
substantive lockdowns occurring before year end.
•
An indicative full year dividend at this level of net profit before tax would be 17.0 cps (fully imputed).
•
FY21 Q1 dividend declared at 4.0 cps
FY21 outlook

45• 2020 ANNUAL MEETING
Shareholder Discussion

46• 2020 ANNUAL MEETING
ONLINE ATTENDEES – VOTING PROCESS
• When the poll is open, the vote will
be accessible by selecting the
voting icon at the top of the screen
• To vote simply select the option you
wish to send, the selected option will
change colour

47• 2020 ANNUAL MEETING
ORDINARY RESOLUTIONS:
•
RESOLUTION 1: That Baker Tilly Staples Rodway be reappointed as auditors of the
Company and that the Directors be authorised to fix the auditors’ remuneration.
•
RESOLUTION 2: That John Roberts, who retires by rotation and has offered himself for re-
election, be re-elected as a Director of the Company.
•
RESOLUTION 3: That Matthew Harrison, who retires by rotation and has offered himself
for re-election, be re-elected as a Director of the Company.
Resolutions

48• 2020 ANNUAL MEETING
Voting
Resolution: Proxies FORAGAINSTPROXY
DISCRETION
Auditor’s remuneration30,593,72176,3021,821,186
Re-election of John Roberts30,574,08341,0001,874,853
Re-election of Matthew Harrison29,795,792339,0441,589,337
Total proxies received in respect of 32,491,209 shares representing 38.0% of total shares on issue.
Voting on each resolution will be by way of poll.

49• 2020 ANNUAL MEETING
CONTACT
Todd Hunter
CEO Turners Limited
T: 64 21 722 818
E: todd.hunter@turners.co.nz
Other Business
Close Of Meeting

50• 2020 ANNUAL MEETING
Turners Automotive Group the (company) is solely responsible for the content of this document. This document is not an investment statement or
prospectus and does not constitute an offer of securities.
This document or any other written or oral statements made by, or on behalf of, the company may include forward-looking statements that reflect the
company’s current views with respect to future events and financial performance. These forward-looking statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to:
•
Uncertainties relating to government and regulatory policies;
•
The occurrence of catastrophic events with a frequency or severity exceeding our estimates;
•
The legal environment;
•
Loss of services of any of the company’s officers;
•
General economic conditions; and
•
The competitive environment in which the company, its subsidiaries and its customers operate; and other risks inherent in the company’s industry
The words “believe,” “anticipate,” “investment,” “plan,” “estimate,” “expect,” “intend,” “will likely result,” or “will continue” and other similar
expressions identify forward-looking statements. Recipients of this document are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The company undertakes no obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Disclaimer

---

Distribution Notice
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NZX ticker code
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Type of distributionFull YearQuarterlyX
(Please mark with an X in the Half YearSpecial
relevant box/es)
DRP applies
Record date
Ex-Date(onebusinessdaybefore
the Record Date)
Payment date
Totalmoniesassociatedwiththe
distribution
3,422,188.40$
Source of distribution
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Gross distribution
Total cash distribution
Excluded amount (applicable to listed
PIEs)
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Iffullyorpartiallyimputed,please
state imputation rate as % applied
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Date of release through MAP
Section 1: Issuer information
Turners Automotive Group Limited
Ordinary shares
TRA
NZVNLE0001S1
Section 3: Imputation credits and Resident Withholding Tax
12 October 2020
9 October 2020
22 October 2020
Retained earnings
NZD
Section 2: Distribution amounts per financial product
$0.05555556
$0.04000000
n/a
$0.00705882
Todd Hunter
021 722 818
Todd.Hunter@turners.co.nz
23 September 2020
Fully imputed
28%
$0.01555556
$0.00277778
Section 4: Authority for this announcement
Barbara Badish