Turners Automotive Group Limited (TRA) Earnings Call Transcript & Summary

[Presentation] Good morning, everyone. My name is Grant Baker, and I'm the Chairman of Turners. Thanks for coming along today to the 2023 Annual Meeting of Shareholders for Turners Automotive Group. I hope you enjoyed that little medley from Tina. We absolutely love Tina here because she's done so much for the company. And she's done really well with our customers as well. A few housekeeping matters before we begin. If the place catches on fire, go out the door in an orderly fashion and go down the escalators and fire marshals will direct you from there. If you need a bathroom, go out the door and to the right. The Notice of Meeting and 2023 annual report and financial statements have been circulated and made available to shareholders. A quorum is present, and therefore, I declare the meeting open. I'd also like to introduce my fellow directors, so Matt Harrison; Al Petrie; John Roberts; Antony Vriens; Lauren Quaintance. And we've also got Martin Berry, who's not here with us today, but he's online. So Martin's in Europe, where I think it's about 2:00 in the morning. So if you hear sort of yawning, snoring noises, you know where they're coming from. Also at the table with us are Todd Hunter, who's our CEO; and Aaron Saunders, our CFO. There's also a number of our senior managers and staff here today. So welcome to you all, and thanks for coming. Also in attendance today are the company's auditors, Staples Rodway, our legal advisers, Chapman Tripp, and other advisers. Thanks to all these firms that provide valuable service to us here at Turners. Today, you'll hear presentations from myself and Todd covering our business direction, the opportunities available to us and the progress we're making with those opportunities. Following the presentations, there will be an opportunity for discussion on any questions you have. Regarding the resolutions, we'll take questions on those at the time they are proposed, so later in the meeting. And there will also be an opportunity to ask questions right at the end of the meeting, if there's anything else anyone wants to talk about. So I'm pleased to tell you, Turners is getting even stronger. FY '23 was a record result for the business, and importantly, this is a business that's still growing. So we had a great start to this year, and our top line is growing and our bottom line is growing. We've shown this historic perspective before. And it's good to look back on the progress we've made. So when you look at it in 3-year blocks, for the most recent 3-year period, we're really proud of the fact that we've delivered $91 million in after-tax profit. So that's an increase of 36%. And in terms of dividends, we've paid $0.66 in dividends for every share in the company, and that's an increase of 40% compared to the prior 3-year period. Now for me, as a substantial shareholder in the company, I think that's a great result. And obviously, you guys are shareholders, so it's a great result for you as well. So our interests are aligned here. FY '23 has been a real proof point year for Turners. We've had a number of headwinds like higher interest rates, a declining car market, more government regulation and intervention, which are all very material changes. Now regardless of these, the businesses continue to grow, the absolute highlight being the Auto division profit, which was up 28%, and the Insurance division being up 9%. And our plans to continue -- and our growth plans continue to deliver results. In Auto Retail, our focus is on domestic sourcing, domestic retail optimization and expanding our branch network, all of which are creating a lot of growth. Our Finance quality metrics continue to improve and derisk our business and Insurance distribution has improved, helping deliver better and more sales. Now I won't talk about the FY '23 result. I think Todd and Aaron covered that in May when we announced. But it's interesting just to look back a bit further. So I want to point out that since FY '16, Turners Automotive Group have delivered a compound annualized growth rate of 11% each year. So 11% compounding over the last 7 years, which I think is a fantastic result and worth talking about. We do operate this business to a simple formula. So for me, simple context work best. And the formula is if we provide a quality environment and conditions for our people. This gives us the best chance of providing a quality experience for our customers, and this should lead to quality outcomes for all of you, our shareholders. I want to drill into each part of this equation a little further. So as we've talked about previously, we work hard on having a strong and positive culture in Turners. Our employee engagement results continue to be the best in class, and we feel with the introduction and take-up of our employee share scheme, the combination of a highly engaged team with ownership in the company will be even more powerful. Being customer-driven is one of our core values, and we've won the most trusted brand in the used car category for 3 years running. There's no doubt that we're growing our ownership of the used car category in New Zealand. Our customer experience measures across the rest of the business are all tracking very well, and we're seeing improvement year-on-year. Now for the last part of the formula as you, our shareholders, we have delivered growing dividends now for the last 10 years. And based on how the business is tracking so far in FY '24, the payout should lift to $0.24 per share. The combination of our highly engaged team and great customer experiences underpin the results we can deliver to you and to me, as shareholders. We've also introduced a dividend reinvestment plan in the most recent dividend cycle, and we plan to continue this going forward. The yield on our shares continues to be one of the best on the NZX, and we offer our dividends on a quarterly basis. We called out a number of key challenges last year. And fortunately, these challenges have been downgraded in terms of their likely impact on the business. Our mitigation plans have worked really well, and our business continues to demonstrate resilience while we are, at the same time, operating in markets that are declining. However, persistent inflation and interest rates are still a challenge. And a further lift in the OCR will impact our business through our borrowing costs, but we also know we're much closer to peak rates than we were in FY '23 so the impact won't be as great. In regard to our FY '25 target of $50 million, we see that the broader economic environment and specifically the OCR track could have could have a timing impact on achieving our FY '25 year goal. We are very confident about achieving the $50 million target. However, it's just a question of when we do that. We've outlined a couple of scenarios based on what happens with the OCR given the most recent update from our BNZ, you would have to say we're on a knife edge between the 2 scenarios. So what's next? A couple of comments to wrap up. The business is in really good shape, and the progress we've made in brand building within the used car category is really impressive. We should achieve our 10% market share goal in the near term, and then we need to set our sights on the next goal. There's still lots of opportunity for us with more than 20% of the cars in New Zealand over 20 years old. We know there's ample demand for replacements, no matter what happens in the economy. Also, a strong Auto Retail division creates the halo effect into our Finance and Insurance businesses. It is a great model. The brand, systems, technology and people in Turners are a powerful combo, and we need to push ourselves to see how far this can be extended into markets beyond used cars. We have a very strong and trusted consumer brand, which does need to be leveraged. We're close to our $50 million pretax profit target and also close to becoming part of the NZX50. Based on recent free float values, we sit at around 47th spot, and a number of current members are well below Turners. Before I hand over to Todd, I would like to acknowledge the efforts of our team. So from our Board of Directors, thanks very much, guys, and Lauren, to Aaron, Todd, Barbara and the head office team and others in the head office team, and our operational teams, who deliver day in, day out for our customers and for our shareholders. This group of people has been totally committed through some pretty unusual times lately, and they're always prepared to go above and beyond. We're really lucky to have such a talented and hard-working group of people in the business. That's it for me for the moment. We've got another short video to play here. And then Todd will talk to you. [Presentation]

Good morning, everyone. I hope that little video there gave you some insight into what it's like for our people who work in the organization day in and day out. I think it certainly gives me a lot of pride when I see what our people are saying about this organization. It's great to be with you here today. I thought as -- just as a kickoff, we talk about a few things going on in the car market itself. So overall used car transaction levels continue to track well below pre-pandemic levels. You can see that in the blue bars, they are tracking down. And we've seen some material impact from the government regulation that's been introduced. So that has been a big factor in those numbers coming down. Those changes have certainly constrained supply and made it more expensive to import used vehicles into the country. What is super pleasing, though, is that red line, and that red line is the unit sales through our business, and those have obviously been going up. So that is fantastic to see. We had a 14% increase in units sold in FY '23 over FY '22 and really happy to see that in FY '24, so far, we've seen a further increase on those FY '23 levels. One of the metrics that we watch quite closely is the number of cars advertised on Trade Me. And you can see sort of over the last year that, that line on that graph has been coming down for some time. So it gives us a general sense of what's happening from a supply perspective in the market. I think one of the good things about that is certainly it's supportive of our margins on the cars that we are selling, but also the number of cars that we have as a proportion advertised on Trade Me is growing as those numbers come off. The numbers of cars we're advertising is going up and the total number is coming down. So our brand presence grows as a result of that. With those difficulties in supply, it's probably not too surprising that we're seeing fewer and fewer dealers in the market. And you can see here that those registered dealer numbers have now been coming down for quite some time so down almost 19% since the peak in 2017. And our expectation would be that those numbers will probably continue to drop away. And that's, I think, a good thing for this market, and it's a good thing for this business. EVs are growing in numbers. I mean, my personal view is it's still important to remember that EVs account for less than 2% of the total vehicle fleet in New Zealand. It's always surprising to most people that there's about 4.4 million cars registered in the country. There are a lot of cars here in New Zealand. And that number has actually been growing over the last few years. So yes, I think it's still a long time for this vehicle fleet to change up. And we're certainly encouraging a try-before-you-buy kind of approach with our subscription offering. So you can see the screen shot there on the right-hand side is some of the EVs that we have available in our subscription fleet at the moment. So we are very supportive of EVs, but I think it's important to remind people that this business is based on churn. And whether it's an EV or a petrol car or a diesel car or some other form of energy, it doesn't matter. It's just -- we base off the churn. And I think it's always important to remember that we -- this business has been around for a long time, 56 years Turners has been selling cars, and we're not selling the same cars as we were 56 years ago. And I doubt we'll be selling the same cars in 56 years' time. So yes, we'll adapt no matter what comes at us. Just talking about the business divisions. I thought I'd just start off with the Turners flywheel, and I do think it's good to take a bit of time to reflect on this. So yes, for us, this business really starts with sourcing. The smarter we can be around the way we source vehicles in this business, the better the flywheel works. And we've got that really unique combination of consigned vehicles that we sell on behalf of the ex lease companies and government fleets and things and the other half that we own. And I think like any retail business, the money is made when you buy the cars. So the combination of our brand awareness, the branch network, the data and tools that we've put in place to make better and better buying decisions, and we are able to purchase more highly demanded cars at greater volumes than we have ever done before. So that's the start of this flywheel. The more cars that we can sign, the more cars that we buy, the more cars we have advertised. This leads to a larger audience and, obviously, support for growing our branch network, which is what we're doing. That scale gives us more reach, more market share, which leads to more retail sales. The more retail sales, that provides us greater opportunity for the add-on sales of Financing and Insurance. So you can see how this whole thing kind of interconnects, but it really starts with that sourcing. And obviously, the more finance and insurance we sell, the greater the transaction margin for us, which means we can kind of pay more for those cars at the start and the whole thing kind of builds on itself. So I really think that is what you are seeing in our results. Now we are starting to get this flywheel operating very, very well, and that's reflecting in our results. And it's been a very deliberate strategy on our part to build our capability in each of those different segments of that flywheel. And the good news is there's still plenty of opportunity for us to fine-tune those parts to deliver better growth. In Auto Retail, our focus has very much been around sourcing vehicles and this retail optimization area. So it's been an absolutely stellar 24 months of growth for Auto Retail. Greg Hedgepeth, CEO of that business division and his team have done a super job. We're sourcing more cars locally. We're earning more consistent margins on those vehicles and opening more branches. And we're now at a point as you can see from that graph, where Google searches for Turners cars has overtaken Google searches for used cars. That has been quite an eye-opener for a lot of people. Our market share has continued to improve, sales volumes increasing year-on-year. And the focus to source a much larger portion of our vehicles locally has paid off. And we're seeing elevated levels of consignment vehicles coming through at the moment now. We have more cars than we know what to do with them at the moment, and we had put them in some places. Our focus is very much also around this continuation of shifting sales out of that auction channel and into that retail channel as well. So we're still selling around 50% of the cars we sell down the auction channel. And every one of those we transfer into the retail channel, we make about another $1,000 of operating profit. So we're really encouraging particularly those lease customers to sell their cars down our retail channel. We're also continuing to expand our network, and that's both through bigger existing operations. So in a place like Napier, we have a double-sized branch there opening shortly, or new territories. And Nelson has been a really good example of that in the last 12 months. So this graph here shows you the contribution more recently from new branches. So that's the red portion of the graph, and what they've -- what difference they've made to our market share. So you can see our market share has really kind of taken off in the last 2 to 3 years. And it's a kind of combination of a bunch of things. The line is giving you a sense for what our retail property footprint from a retail perspective has been and where we see it growing, too. So most of that growth is actually locked-in in terms of property commitments that we've already got, it's some of the margins that we're still working on, but we're pretty confident that we will add another 20,000 to 30,000 square meters of retail footprint over the next 3 years. What I'd like you to understand is that growing our unit sales and market share is not just about opening in more places. It is very much around this combo effect of brand investment, the sourcing capability that we're doing, the great operational improvements that Greg and his team have made to really improve the kind of processing speed of the vehicles that we take into our branches, and the people that we've got in this business, as you can see from that video, who are really committed and care about what they do on a day-to-day basis. And also the investment in data and technology. So it's a combo effect of all of those things coming together. But it puts us in a very, very strong position and one, I think, that is very, very difficult for any other business to replicate. I think we've got a very strong competitive moat. Our pipeline of branch expansion projects is building really well. We've certainly seen more opportunity on the property front coming towards us as interest rates increase and holding costs increase, we're certainly seeing a lot more opportunity. And we now own 14 of our sites with a cost value on our balance sheet of just under $100 million. So it's a really growing and developing area for us. And just to cover off our sort of next projects that come on stream. We've got Timaru opening in, hopefully, November. Project's running on budget and on time, which is great to see. So just located north of the town on the main highway, so we've got a fantastic corner site there. I think it's going to go very, very well for us. We've got a great sort of recipe now for moving into these new towns. And we know the traction that we can get sort of very quickly. I'll give you a little sound bite. So Nelson, which we opened, we've just had our 1-year birthday of being in Nelson. Within 10 months, we've had market share numbers of mid-30%. So we can move into these territories and really make quite a big difference very quickly. So this branch will add another sort of $0.5 million in operating profit to the business. Then we've got the bigger, better, bolder branch in Napier. You can see there under construction now, sort of well on the way to being hopefully opening in November. And again, that will deliver us another $0.5 million in operating profit, that bigger, double-sized site here. So that's great to see. And then really exciting plans in Christchurch, where our current single branch in Christchurch. We've got sort of probably the last of our old big sort of auction setup sites down there in Detroit Place, becomes 3 separate sites across the city. So we're really sort of taking this approach where we want to spread our presence. So a lot of work has gone on to secure those sites. We, in fact, own all of those sites. We've done deals on them. And that will add at least another $1 million of operating profit contribution. But more importantly, the spread of those sites will enable us to buy more vehicles. We know that the more places we are, the closer we are to customers, the more likely they are to bring us their car to actually sell it to us. So that's very exciting to see that happen in Christchurch. One of the parts of our business that tends to be looked over is what we're doing in the damaged and end-of-life vehicle space. And this got a bit of coverage out of the Auckland weather events earlier this year, with all of those flood-damaged cars that had to find a home. And we sold these cars on behalf of most of the big insurance companies. The only one we don't have on our books is IAG. So yes, as you can see, this business has been growing very well from a unit perspective over the last few years. And you can see the last graph, obviously, is that a little bit of cream on the top from the weather events. But we've sold over 30,000 of those end-of-life vehicles in the last year. This is a big and growing part of our business. And as Grant was talking about, the 20% of cars that are 20 years or old, that old cohort of the vehicle fleet is very much ending up in this damaged and end-of-life business division. So it's a very important part of our business. And we're also seeing a lot of digital engagement and the amount of our customer experience now that happens online is really starting to grow very well. So we've seen web traffic up 25% year-on-year. The appointments booked online for vehicle appraisals, up 24%. The number of people saving vehicles to watch list, up 24%. So we're putting a huge effort into improving that whole customer experience for people online, but also testing and trialing and trying things to try and improve conversion rates and things as well. So we see that as a big area of opportunity for us going forward. Okay. Moving on to the Finance business, where our focus has been very much on quality and margin. And you've heard both Aaron and I talk about this for the last kind of 1.5 years to 2 years. Although I'm pleased to say, on that graph, you can just see a slight tick up in loan book growth over the last couple of months, as we've seen origination start to grow again, which is great to see. But we have been prioritizing pricing and margin management and quality, and that's been critical in terms of dealing with the speed of interest rate rises that we've had. And given that the Auto business has been going so well, I think we've been in quite a privileged position to be making more conservative calls about the type of credit that we take on to this book. And I think that's been absolutely the right thing to do. One of the aspects that we are very pleased about is the lending through what we call our controlled channels. So that's both the direct to Oxford-to-consumer channel, where there's no dealer or broker involved in that loan and through our Turners channel. So that lending has grown 8% over last year. And obviously, we make a lot more margin on those loans. You can see the quality in the Oxford loan book's continuing to improve. We've tightened the credit policy. The average credit scores of new customers is continuing to increase as we bring on a higher proportion of those premium borrowers, but also it reflects the affordability hurdles that we use to approve customers. And we've now had over 3 years of writing new business where our credit scores are higher than the average credit scores for the market. And it's no surprise that the focus on bringing higher-quality borrowers onto our loan book then reflects in terms of our arrears metrics. And you can see in that graph here that we are outperforming the broader market. And we're also continuing to carry this $2 million economic sort of provision buffer over and above our business-as-usual arrears provisioning as well. So we're -- the Finance business is well protected. In Insurance, we've seen really good market share gains and good robust policy sales. And I'd say despite some pretty challenging market conditions. And I particularly wanted to call out the distribution arrangements that we have in place, which are working very, very well, and we continue to work on other opportunities. And this insurance block has been very well tested from a catastrophe point of view. We've weathered the pandemic very well and, obviously, the recent kind of weather events that we've had this year, and we've seen no impact from either of those 2 things, which is great to see. These are just a couple of examples of some of the digital distribution arrangements we have in place. So we work with the likes of MTF, Marac Finance and Motorcentral. And this is where we integrate from our insurance systems directly into their finance application system. So they are able to quote insurance policies directly in their customer experience of signing someone up for finance. So with MTF Finance, we get to leverage their network of dealers and franchises to resell our insurance policies. Marac Finance, exactly the same. We're leveraging their network of 400 dealers and brokers sort of over and above our network. And the best thing about it is we are the sole supplier. So we are not competing through those distribution arrangements, which is great. In Credit Management, we're seeing finally that debt value loaded is starting to lift again. Debt collected is down due to sort of diminished customer repayment capacity. And obviously, we are accepting lower repayment amounts as part of those arrangements. But what is good to see is that the volume of payment arrangements that we have in place now, which we kind of call our payment bank, is now sitting above where we were pre-pandemic. So we can see good signs that the Credit Management business is starting to grow again. And I'm sure many of you have seen the releases from Centrix. This is data we get every month from them, which gives us some insight into the percentage of New Zealand consumers in arrears, and that now sits at 11.4%. It's the blue line here. And you can see the blue line now tracking above previous years. So not surprising that as things are getting tougher in the economy, more people are going into default. The more people that go into default, the better it is for EC Credit and our Credit Management business. I did want to touch on funding quickly. And I think we run this business pretty conservatively from a funding perspective. And I sort of think it's useful to think about the sort of 3 areas that we use funding for. So we obviously borrow money for the Finance book. That's the inventory of that business. We borrow money to buy property, and we're borrowing money to buy cars in the Auto Retail business. And as you can see from the graph, we've just matched kind of the asset against the borrowings. And I think it's good to see, obviously, that the blue line is above the red line. The asset value is above -- well above the amount that we borrowed against each of those areas. So I think you can see that we -- I think we've painted a picture here that we are geared in a conservative way, and we certainly have sufficient funding capacity to support our committed branch expansion plans. This is probably the slide that everyone has been waiting for, which is sort of how things have been going so far this year. We've had a very positive start to FY '24. We're certainly on track for our FY '24 result to be ahead of the record result we had last year. So that's -- I mean, that's excellent. Yes, I think we're feeling very confident about the rest of the year, and that has given us the confidence to come out with some guidance this morning, which we don't typically do at this stage in the year. And off the back of that, we've forecasted the FY '24 dividend to be at $0.24 a share or at least $0.24 a share, up 4% on last year. And directors declared last night a $0.06 Q1 dividend as well, fully imputed. So yes, very positive start to the financial year. Auto Retail car sales have been very strong. In fact, we had a record month of car sales in July, which has been fantastic to see. Just reflects the hard work going on in that business and particularly the impact of Tina. And margins that we've earned on the cars that we own have been very consistent as well. So we're expecting further upside from the new branches that we're introducing later in the year in this continuation of shifting those sales out of the wholesale channel into the retail channel. In Finance, we've seen a good lift in lending volumes. Quality and margin management still remain key priorities for us within Finance. And we are certainly seeing some impact on arrears. It's not surprising to us that those customers that are -- have small buffers getting themselves behind from time to time and taking some time to get themselves back on track. But nothing that has surprised us or is beyond where we would have expected it to be. Certainly more at the front-end kind of arrears rather than the aged arrears. In Insurance, new policy sales have been good. And based on those distribution arrangements that I talked about and market share gains and our claims ratios have been very stable. So it's good. In the flip side to the interest impact in Finance is, obviously, we have a lot of money on -- to deposit and insurance, and those returns have continued to lift. So we're seeing some good improvements there. And then finally, in Credit Management, we are definitely expecting better performance as those economic conditions worsen and the resultant lift in debt loads from corporate and SME clients, and their business is very well positioned to take advantage of the sort of next stage of the New Zealand credit cycle. So yes, really strong start to the year. It's given us some real confidence about the trajectory for the rest of the year. So it's a good start. I'll hand back to you now, Grant.

All right. Thanks, Todd. So now is the time to ask questions on the presentations so far or the results for the FY '23 year. If you have a question, you can direct it to me or anyone in the panel up here. If you do have a question, could you please clearly state your name and if you're a shareholder or a proxy holder or a corporate representative. So feel free. Okay. Break the ice. Sorry, do we -- have we got a microphone, guys?

I'm Bruce [ Parkes ]. I'm a shareholder and proxy holder for the shareholder association. To start with, thank for your announcement this morning, nice results, not [ by bated ] be pleased. Your corporate governance section of the annual report says the majority of the Board are very skilled in ESG. There's no mention of emission reduction or how you're preparing for TFCD (sic) [ TCFD ]. Are you preparing for TFCD (sic) [ TCFD ]?

I think you'd be best to answer that, Todd. The man in the hot seat.

I think Aaron...

Are you going to put -- is Aaron our expert? Okay.

Thanks, Barbara. We did include a little summary of some of the things we're doing and the plans we have in the initial section of the report, not in the corporate governance section but in the section around Todd's and Grant's reports. So that details some of the targets and some of the initiatives that we've got underway.

Second question in the same area. Looking at your video, it's great the training program you have for your staff. But I note there's a low level of take-up in your flu shots offered to staff. Is that a culture thing or what's the reason for that?

It's really puzzling, Bruce, because it's free. So I guess there's just a lot of people who feel that they're healthy enough not to need a flu vac every year. So yes, we make it available to people. We encourage people to make the booking, get a free jab. But yes, we must just have a bunch of people who think they're either too healthy or have a certain fear of needles and don't elect to have the jab.

Third question, your subscription service, is that going to grow slowly? Or I see it's in the black now, which is good, but where is that going?

Passing the baton. No, we absolutely see it growing. It's -- it certainly really took off over the summer period, where there was a shortage of rental cars. And we've seen it dip down sort of through the winter period, which wasn't surprising to us. And -- but yes, we're doubling the marketing that we're putting into it at the moment to see if we can really lift it up and see where it goes essentially, yes. I mean, I think the market is sort of growing with us. I know -- I think there's a huge sort of awareness of what vehicle subscription is as an alternative. And so we're cautiously kind of attacking that market at the same time.

Yes, over here.

Yuri [indiscernible] I'm a shareholder. Three questions regarding cars, please. You showed us on Trade Me the supply has dried up a bit. Can you just walk us through the shrinkage drivers, please? That would be the first question. So why do you think that is going down? Second one on ASPs, average selling price, not yours, but on -- in the New Zealand market overall. The average selling price for a used car, what has that -- how has that developed in the last 6 months? And where would you see that in the next 2 years? And the last question on -- you had a chart with the pipeline of the new sites coming on the market and with an estimated contribution. I was surprised to see that in the center of Christchurch, you're expecting, I think, it was $0.5 million. And then another site, which has 2.5x the square meters, a way larger site, you're expecting a lower contribution. Just trying to understand the rationale behind that.

Okay. I'll start with the Trade Me volumes, Yuri. Yes. I think the -- I mean, as I see it, the government regulation has had a big impact there. So the number of used imports coming into the country is down materially year-on-year. And that's essentially the government has narrowed the number of cars that can be brought into the country without a penalty being incurred. So that's had a big impact. I think possibly there's some behavioral kind of aspects from dealers that we're seeing in those numbers as well. Trade Me are continuing to lift their prices, they've put through, I think, the second price increase in the last 12 months. And I suspect dealers are being selective about the stock that they're putting on to Trade Me now. So if they've got 3 or 4 of the same car, they may only be putting 1 of those up to actually save themselves some money. So I think those are probably the 2 things that are going on there. But I think, mostly, it's about just the general supply in the New Zealand market is down, which is why the numbers are coming off. Yes, average selling price, I think, is -- yes, what we've seen is demand moderating for cars over $20,000 and probably demand shifting down that price point, more towards $10,000. And I know the Auto guys have been trying to source as many sort of $10,000 to $15,000 cars as they can and less in the $20,000-plus category because that's where the demand -- we source for where the demand is.

So that's a mix effect. What about the like-for-like for exactly the same car? What have the prices done...

Yes. I think the prices have probably been reasonably flat, Yuri. But I mean you've got -- you really do have, I think, a two-paced market going on. So prices might be firming around $10,000 because demand is growing here versus prices reducing in the $20,000 plus. But overall, it's probably about average the same. And in the new sites, yes, I think -- I mean, just to be clear, somewhere like Timaru, a new territory, a new site adds, obviously, operating profit contribution. We said that was about $0.5 million. Adding scale to Napier is another $0.5 million. What we're seeing in Christchurch, we've already got an existing site there. So we've got a figure, I think, it was 28,000 square meters we've got there, Aaron? And so that 28,000 square meters that we've got today gets split across 3 separate sites. And we're saying that those 3 separate sites are going to add another $1 million. Does that make sense?

Well, I guess, it's a little bit of how you're going to allocate the costs. And -- but I was just -- I was surprised about to see this square meters. I thought square meters would correlate to the contribution overall.

Yes, I think it does. So in Christchurch, what we're seeing is because we're going to be in more places, we will buy more cars.

You see that as 1 entity.

We see that as 1 entity, yes.

[ Michael Boutin ], shareholder. I'm just wondering, as more electric vehicles come on to the road, and they tend to kind of wear out slower, how do you see that as affecting the availability of used cars? I mean, my thinking is that people are going to hang on to the electric vehicles longer because they don't require the same level of mechanical repair. And so I just wonder whether that's going to have a long-term effect on the availability of used vehicles for your business?

Yes. I mean, I'll offer a sort of personal comment on that because you do you do see older electric vehicles now. I mean one of the problems of electric vehicles is they're so expensive to repair when they get older. So particularly things like batteries, like I know we've had things like Nissan Leafs come through that are maybe 10, 12 years old now, and they've only got sub-100,000 left on their battery. And a battery cost $14,000. So you basically -- if that was a petrol car, it would still be worth something, but as an electric, it's really worth nothing. And I think what -- the other thing that we're noticing is people who have electric cars, they're depreciating like hugely for resale, especially something like probably not stuff that we manage, but the more kind of high end of the market. The depreciation of those electric cars is huge. If you look at those Jaguar I-PACE and things like that, they just absolutely fall off of a cliff once they're sold. So yes, and I think there's lots of other reasons for people buying and selling cars, too, other than it's still going because I'm sure all of us, I know I do. I buy cars because I want the next new cool one. So I don't want that old one because, obviously, car manufacturers have that issue, and they have to keep bringing up things that are newer and better and then those cars become second hand on the market. I don't know if anyone has got anything to add to that but...

Yes. Actually, Grant, I'd just add something as well. Look, I think with EVs, what we're seeing is that the reality is the life span for, say, an Nissan Leaf is probably something like 10 years. And then they are worth nothing, as Grant mentioned, and they go through the DVA side of the business and they get junked. If you look at petrol and diesel-powered vehicles, look at, say, 20- or 30-year olds Toyota Hilux still going strong, still worth really good money. So I don't want to sort of disagree with you openly, but I probably do that EV cars are actually, in the long term, worth least from what we've seen at the moment from the reliability of the batteries and the cost to keep on the road. There's plenty of old HQ Holdens out there and Ford Falcons and things that are going strong at 20 or 30 years. But I suggest there won't be too many Nissan Leafs that are 20 years old.

I would have thought that it would be simply a matter of changing the battery.

The issue is the expense of the battery. That is the big challenge with those cars. So much of the value of that car is tied up in the cost of the battery. And I'll give you a quick anecdote around the lease companies that we deal with are obviously setting residual values on these cars. The day they come off the lot, and they're putting them into a lease, they have to guess what that residual value is in 3 years' time or 4 years' time. They are being archly conservative, around EVs. And that is because they -- as Grant said and Matt said, they are depreciating so fast because as soon as they're driving, that battery is degrading. And I take your point around the mechanics of an EV are obviously less complex than a ICE car or a diesel car. But I think if you're taking into account the degradation of the battery, it's quite a different story.

Yes. Any more questions? All right. We'll move on to the resolutions.

So moving to the resolutions before the meeting, these were notified in the Notice of Meeting and explanatory notes have been provided. Voting on each of the resolutions in the Notice of Meeting will be by way of poll. Staples Rodway, the company's auditors, will act as scrutineers. So please use the voting paper that you used in the mail or were given when you registered for this meeting. If you do not have a voting paper, you'll be able to request one from the scrutineers when the voting takes place. Only shareholders, proxy holders or corporate representatives of a shareholder may vote on today's resolution. So the first resolution is to record the reappointment of Staples Rodway as auditors of the company and authorize the directors to fix the auditor's remuneration. Is there anything -- any discussion on that required? Okay. I would like to move this motion. Do I have a seconder? Thanks, Bruce. So Resolutions 2, 3 and 4 are the reelection of directors. This is for John Roberts, Matt Harrison and Lauren Quaintance. We believe that having directors with relevant industry, commercial and governance skills is essential for the continuing success of the Turners Group. Diversity of thought, in particular, and broader commercial acumen are also taken into consideration by the Board when reviewing Board positions. We currently have directors with hands-on experience in the finance, insurance, debt management sectors as well as directors with expertise in governance and very diverse experience, as well as entrepreneurial skills in sales, digital marketing, communications and business growth. So to make things run a little bit more efficiently, we'll ask the 3 people in question to address the meeting and then vote after they've spoken, and we can obviously ask each individual any questions that you may have after their address. So we'll start with John.

Good morning, everybody. My name is John Roberts. And I've been an Independent Director with Turners Automotive Group now for the past 8 years. I'm also a Director of DPL Insurance, Oxford Finance. I'm Chair of the Audit, Risk and Sustainability Committee and sit on the Credit and Lending Committee for Oxford. So pretty active time. The last 3 years have been interesting, to say the least, from dealing with COVID and natural disasters. The company's executives, their teams and my colleagues on the Board have, in my view, been nothing short of impressive. I think a couple of major highlights for me personally have been the involvement in the development of the iconic Tina from Turners campaign. This has transformed the business from a static brand positioning persona to a reputation with personality of really the only place in New Zealand to go with confidence if you're selling or buying a used car, truck or piece of machinery. I think quite a few of you are aware that I was a CEO of Saatchi in New Zealand and overseas for many years. And in the 30 years I had in the communication industry, this would be probably the most successful and effective campaign that I've personally ever been involved with. And one of my colleagues, Kim Thorp, who we brought in to help develop the campaign who was on the Saatchi Worldwide Creative Board. I was speaking to him the other day, and he too has said that this is probably the most successful campaign he's ever been involved with as well. The other highlight has been working with the finance company to ensure that we are at the forefront of all credit changes, either by government regulation and/or new data that we can import into the credit decisioning process in this business. This is actually a key interest for me, this whole area, given my years of experience in the banking and finance industry, and one of the key reasons I believe that our payment arrears are well below the industry average. I'm also Vice Chair of the Centrix Group, which is New Zealand's leading credit reporting agency. This also keeps me very close to what's happening in the banking and finance sector and enables us to leverage early insights into our thinking for the Finance and Insurance businesses as consumer and commercial behaviors change. I also managed to keep close to the consumer pulse in New Zealand by my involvement as a Director and investor at a company called Apollo Foods, which many of you will know better from the supermarket brands, the Apple Press and Boring Oat Milk. This also helps in bring insights to what is manifesting in the New Zealand economy and with consumers to the boardroom and business unit strategic discussions. I'm also a shareholder in Turners and I firmly believe that my interest in this company are very aligned to those of our shareholders. I'm 100% committed to this business and the next term as a Director and work with my colleagues to ensure that we continue the growth path that we have been delivering over the past years. I'd really like to continue on this journey with Turners, and would appreciate your support to enable this. Thank you. And I'm open to any questions, if anyone has one.

What's the big risk you see facing Turners?

The biggest risk I see facing Turners. I would suspect another global pandemic would probably be, again, a challenging time, but we -- as history has shown, we managed our way through that. Natural disasters that demolish towns like Napier are obviously a challenge, but we managed to navigate our way through that. Todd has mentioned the supply of motor vehicles for us to purchase, procure. We seem to have managed our way through that and continue to manage our way through. So I can't actually say one thing that would actually I see as being a massive risk. Anything else? Okay. Thank you.

Okay, Matt, you're up.

Thanks, Grant. Look, I just want to welcome everyone here. These AGMs are great. I've been, as most probably know, a Director at Turners Automotive Group, previously Dorchester since 2012. And I think there is a great event every year. We had some hiccups through the pandemic, and we were stuck in a board room doing it by video and we didn't get to meet the shareholders, which was unfortunate. Anyway, my name is Matt Harrison. As mentioned, I've been involved since 2012 when I sold my business, EC Credit Control into the Dorchester Group, which later became the Turners Group and so on. I just want to thank you for your support that I've received to date being on the Board. I certainly enjoyed it. And look, it's a great business. I am 100% committed to it. I think the staff would agree, I probably asked too many questions at times, but I certainly like to be involved probably more on a day-to-day, a little than some of them would like. On a sort of monthly basis, I'm involved in the lending and credit side of things. I'm chair of that committee. So that's been very interesting. And as John mentioned, it certainly had its challenges. But I think we have structured that business to be very, very strong and the very low arrears rates, I think, show that that's the case, and I'm proud of what we've achieved there. Also quite involved in our property side. So Grant and myself sit on the Board for the property company, and I'm sort of reasonably active from that with our property manager and going to expand our branch network of branches that we own and sometimes have to lease. But certainly, owning is the preference to date. And also quite involved in the EC Credit business, which I sold into the Dorchester Group back in the day. So each month is quite busy, and I certainly enjoy it. And yes, I love the challenges that are thrown up and love the time and speaking with the team. Look, I've got a real passion for the business. In Turners, as we say, that we bleed blue, and I certainly think all the Board members, myself included, do actually do that. I think we're a different Board to some of the other Boards out there on the NZX. We get quite involved in the business on more of a day-to-day basis. And I'm sure the senior management team would certainly back that up. Personally, I've got quite a large family shareholding in the business. So I think my interests are very much aligned with all the interests of all the shareholders. We certainly want to see growth for our family investment as do you guys. So I think the strategies that we're putting in place for growth are very much aligned. Moving forward, I'd like to receive your support to continue on this journey as a Board member. I certainly enjoy it. And look forward to the future. I think it's a very bright future for Turners. As we've mentioned with the guidance going forward and the announcement today with the dividend and so on. So I think it's a very bright future. Any questions at all?

Good morning. For those I haven't met, my name is Lauren Quaintance. So my path to the boardroom table has been a little bit less conventional than some other directors. I started my career in media, working as a journalist and editorial leader in New Zealand, Australia, London and New York before moving into more commercial roles for media companies. At Fairfax Media in Australia, I was substantially focused on building new revenue streams in a company that was undergoing a print-to-digital transformation. And a little over a decade ago, I launched a digital content marketing agency where I worked with major brands in tourism, insurance and financial services. That business was acquired by News Corp Australia in 2019, and I joined the Board of Turner's as an Emerging Director in 2021 and had the opportunity to start to learn the business and to grow my governance skills. Earlier this year, I relocated to Christchurch and joined the Board of the Crusaders super rugby franchise and Christchurch, NZ the city's Economic Development Agency, where I am Chair of People and Performance as well as DPL Insurance. And in March this year, I was appointed to the Board of Turners as an Independent Director. Five months ago, also accepted a role at -- an executive role at Sky Television, just because I wasn't busy enough already, as Chief Media and Data Officer, which gives me responsibility for all non-subscription revenue for Sky, which is obviously a listed business, including advertising sales, partnerships and acquisitions, the free-to-air strategy and the monetization of data. I believe it is this breadth of experience that makes me a valuable addition to the Turners Board. Turners' success, as you know, is in large part due to the diversified nature of its earnings as well as the strength in equity in the Turners brand. The current Board has a broad range of experience and diversity of thinking, actually, that we see in the boardroom that I believe benefits shareholders and supports the company's executives. With strong growth in our regions via our Auto Retail network, our geographic diversity is an advantage of the Board itself, with directors based in Hawke's Bay, the Wairarapa and myself in the South Island. What I bring to the table, I believe, is a strong understanding of digital, media and communications and marketing, underpinned by commercial experience in listed companies as well as my own experience as an entrepreneur. I also don't think it's unhelpful that I am a woman since, depending on which research you read, something like 60% to 80% of car buying decisions are made by women. So as per the NZX listing rules, I'm retiring and offering myself for reelection and would ask you to support my appointment as a director. Thank you. I will answer any questions. Thank you.

Thanks, Lauren. Okay. Thanks for that, everyone. And we'll now deal with the specific resolutions. So Resolution 2 is in relation to the reelection of John Roberts, who retires by rotation and has offered himself for reelection. I'd like to move this motion. Do I have a seconder? Thanks, Paul. Resolution 3 is in relation to the reelection of Matt Harrison, who retires by rotation and has offered himself for reelection. I'd like to move this motion. Do I have a seconder, please? Thanks, Paul. [indiscernible] Resolution 4 is in relation to the election of Lauren Quaintance, who has offered herself for election. I'd like to move this motion. Do I have a seconder? Thank you, Bruce. Thank you. Resolution 5, directors' fees. This resolution is that the pool of directors' fees be increased by $255,000 from $665,000 to $920,000 per financial year, with effect for the financial year commencing 1 April 2023. Are there any questions on this? All right.

Is there a reason for this increase?

Well, there's a bunch of reasons here. So we -- the first thing, we haven't had an increase for 5 years. So we used Strategic Pay, who set our directors' fees or advise on our directors' fees back 5 years ago to come up with an independent report, and we're basically following their recommendation. And there's -- I think that was with the Notice of Meeting. So if you want to go back and read there, there's a lot of information about it. But it was a kind of comparison of peer groups, and you look at it by a similar company in terms of market cap, similar turnover company, similar number of employees, et cetera, et cetera. So -- and then just in terms of sort of risk profiles for directors as well. I mean, Antony was just saying to me, because he's our insurance guy, he was saying to me earlier that directors' and officers' liability insurance has doubled in cost in the last 5 years. So being a director is a hell of a lot more onerous than it used to be. And you have to basically work hard as a director and spend more time complying with all the things you've got to comply to, and the risk of not getting it right is huge. So I guess I don't know if anyone wants to add anything to that, but that's kind of the broad brush.

Do you personally pay for that liability insurance to you?

No, the company pays.

So that's not the reason.

No, I wasn't -- I wasn't saying we're paying for it, but it's just -- no, it's -- no, but it's illustrating the risk for directors, the personal risk for directors because the insurance companies are charging more to insure that risk so they think there's more risk. So if there's more risk, it's logical we should get paid more for taking more risk, risk and reward type of thing.

Yes, but [indiscernible].

Insurance doesn't completely covers some of the risks that are associated with being a director but we remain [ personally ] liable on certain decisions we make within the company [indiscernible] so the Insurance will not cover [indiscernible].

Yes. I mean the other thing I'd add, and this is just sort of for me personally, but I don't know how long you've been a shareholder in the company. I think some people have been here a long time. But if you remember back to the Dorchester times when the company was in a really, really bad shape, and myself and my business partners brought into the company, we couldn't afford directors' fees in those days. And myself and my business partner, Steve, we worked for a year for no directors' fees. So if people think we're trying to kind of get something we don't deserve, I think we do deserve it because we had a really good result. And when the company couldn't afford it, we didn't change a lot. And I'd go actually for all directors here. When COVID came along, we all got no pay for a period of time. We're just because we didn't know what the hell is going to happen and thought we'd preserve every dollar and not pay ourselves. So I think it sort of swings around about a bit, yes.

[indiscernible] adjust your fee to be second year rather than after 5 years.

Yes. A few people have said that because that's why the quantum of it is large because it's over a long period of time. And if you did it every year, it would obviously going to be easier to accept, I guess. The trouble is it always becomes kind of a controversial thing and what everyone wants to talk about and do we want to go through that every year. So that's, I guess, why we haven't. All right, sure.

Yes. I'll just give you a sort of an insider's view as to the contribution that this team of people make to this business. They give an enormous amount of time over and above the scheduled meetings. Most of these guys would be in our business every second week and adding value where they have skills and experience to do so. And I think it is absolutely part of the success of this company is the fact that they give their time so willingly. I think for the money that they're paid, the business actually gets a very, very good deal. And I know that's -- it's just a personal opinion, but I think it's worth sharing as someone who actually sees the contribution and the effort and the time that they will put in for what it's worth.

Thank you, Todd. Okay. Glad you appreciate us. Okay. Any other questions? All right. I'd like to move this motion. Do I have a seconder? Thank you.

Okay. Many -- so now for voting. Many shareholders who are not attending the meeting have voted by proxy. So I wish to advise that the proxies have been received for 23,672,683 shares being 27.1% of the total shares on issue. So this is the time to vote. So please complete your voting paper by ticking for, against or abstain in the appropriate place on the form and ensure you have signed the form. Please do not sign the discretion box. If you have any difficulty or don't have a voting paper -- I made a slight [ flipper ] here, but we'll come back to that. If you have any difficulty or do not have a voting paper, please raise your hand and someone will assist you. All right. You need a voting paper? Okay. Sorry. Just before we start the voting, I did miss 1 resolution, which is the last one, which is a technical matter. So Resolution 6, which is a minor adjustment of the constitution of the company. By deleting Clause 4 of Schedule 2 and substituting the following: a proxy form must be sent or made available with each Notice of Meeting. So I'd like to move this motion. Do I have a seconder? Thank you. Okay. So in terms of voting, we'll just give sort of 3 minutes for that to complete, and then we'll collect the papers. [Voting]

Okay. Thanks, everyone. That brings the formal part of the meeting to a close. Is there any other business or questions that people want to ask? All right. Thank you very much. I therefore call the Annual Shareholders' Meeting of 2023 to a close. Thanks for coming, and please join us for refreshments on the back table there. Thank you.