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

Good morning, everyone. My name is Grant Baker, and I'm the Chairman of Turners. Thanks for coming along today. A few housekeeping matters. If the building catches fire, just go at those doors there, turn left down the escalator and apparently there'll be fire wardens there to help you out. Or if you need a bathroom, go out the doors and turn right, bathrooms there. The Notice of Meeting and 2024 annual report and financial statements have been circulated and made available to shareholders. A quorum is present. Therefore, I declare the meeting open. Now I'd like to introduce my fellow directors. So if you guys could just put a hand up or something when I say your name. Matthew Harrison, Al Petrie, John Roberts, Lauren Quaintance and Antony Vriens. Also at the table with us are Todd Hunter, who's our CEO; and Aaron Saunders, our company CFO. There's also a number of our senior managers with us here today. So welcome to all of you as well. And also in attendance today are the company's auditors, Staples Rodway, our legal advisers, Chapman Tripp and other advisers. So thanks to all these firms that provide us with valuable services. And 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. And following the presentations, there will be a discussion or opportunity for discussion and any questions you may have. Now we do have some giveaways related to the question. We've got some these beautiful limited edition Tina air fresheners. So nice for the car or the kitchen. And some have suggested whoever gives us the easiest question today gets one of these or alternatively if you want to vote for a director fee increase. That's not really on the agenda. On the questions, we'll answer the questions on the resolutions at the time they are proposed. And there will be a further opportunity at the end of the meeting to ask any other general question about the company and our operations. So FY '24 has been another record result for the business. And importantly, we keep doing what we say we're going to do. We're delivering on our plan for growing the business and creating value for our customers, our employees and also our shareholders. We've shown this historic perspective before, and it's important to reflect on the progress we've made. For the most recent 3-year period, we're really proud of the fact that we've delivered almost $97 million in after-tax profit. So that's an increase of 37% over the previous 3-year period. We've also paid $0.715 in dividends for every share in the company, which is up 40% on the previous 3-year period. Now as many of you know, I'm a substantial shareholder in the customer, so I'm pleased about that. It's a fantastic outcome. But it's obviously good for you guys as shareholders as well. And the better news is that we've got a really good growth in front of us. So we think we can keep growing and keep producing great results. FY '24 has been another proof point for Turners. So we've had headwinds in the economy. And in this time, the business has demonstrated resilience and our people have kept delivering. And that's in spite of the economy, customer demand has been pretty patchy. We've had high interest rates. But through all this, we've continued to grow. And 3 of our 4 businesses are materially ahead of where they were last year. And that shows the value of having a diversified business with a balance of activity and annuity revenues and that continues to be a strength for us. Unfortunately, the market doesn't seem to value this as highly as we would like in terms of our share price. So these headlines from the FY '24 results announcement capture our performance very well. So Turners Motors is on and slowdown being my particular favorite. The summary is that while many consumer and retail businesses struggled, Turners continues to outperform. I won't spend time on the FY '24 results because Todd and Aaron have sort of covered these pretty well from May when we announced. That's one thing worth pointing out. Over the last 7 years now, our compounded annual growth rate sits at 11%, which I think is a really, really good result. And we do operate to a pretty simple formula, and these simple concepts work well for us. So the formula is, if we provide a quality environment and conditions for our people, this will give us the best chance of providing a quality experience for our customers. And this leads to quality outcomes for our shareholders. So just drilling into each of those areas a little bit more. We do achieve very high levels of employee engagement and combined with our employee share scheme gives us 1 of Turners powers. We're really proud that we're now at 53% of our team who are shareholders and owners of the business. And being customer-driven as one of our core values, and we've won the most trusted brand in the Used Car category for the fifth year running and we've delivered growing dividends now for 10 years. That's with the exception of 2020 when we were a bit cautious around COVID time and had a slightly lower dividend. The combination of our highly engaged team and great customer experiences underpin the returns we can deliver to you and to me as shareholders. Now these are the sort of graphs that Chairs and CEOs love to show their shareholders because it keeps going up. We've also introduced a dividend reinvestment plan in '24 and plan to continue offering this going forward. The yield on our shares continues to be one of the best on the NZX, and we pay our dividends quarterly, which I think is better than waiting a long time. And while we're not seeing the share price we think we deserve, we have received quite a lot of third-party endorsement over the last year. We got into the NZX50 in December '23, and that's been a goal of ours since 2017. So we've been working hard towards that. I think it's a really significant and a major milestone for the business. And Todd was awarded CEO of the Year at the INFINZ Awards in May, which had fantastic result because there's obviously a lot of CEOs -- especially from all those finance guys. We were selected as a finalist in the New Zealand Diversity awards recently. And just last week, we won our New Zealand Marketing Award for Excellence and long-term marketing strategy, and that's for Tina from Turners. It's great to see our business being recognized for the progress we've made. Now we met our FY '24 target a year early, and we're remaining on track for our FY '25 $50 million profit before tax target. On top of that, we've updated our profit for -- or updated our profit target to $65 million by FY '28. How are we going to do that? Well, we're going to do it in the following key areas. As you may have seen, we're opening a lot of new branches. We have about 30 branches now up and down the country and opening more. And the more branches you open, the more sales you make, the more finance you ride, the more insurance you sell and so on. So branch will help us grow a lot. In finance, finance has been kind of a tough time because interest rates have been so high. So there's been headwinds in that area. But as rates come down, those will turn into tailwinds, and we think our book will really start growing. I was just telling someone on the foyer before that when we got into this finance business, quite a while back now, I can't remember the exact year, but it was about a $50 million book. And now it's well over $400 million, I think, $430 million. And I think we can grow that a lot more and will be a lot more profitable. The insurance growth will come from direct and digital distribution. Our credit business will deliver growth as low pandemic level arrears returned to a more long-term normal kind of run rate level. Like last year, they give some indication on what the growth pathway looks like, which we think is really useful for you as shareholders. A lot of that growth has been organic, and we've talked about a lot of that in the past. And we're executing there well and still growing. I think we've still only got around 8% to 9% of the used car market in New Zealand, so there's lot more we can get. We know that brand systems, technology and people in Turners are a powerful combo, and we've been giving thought to the adjacent opportunities to used cars to give us further growth. So in the last month, we've made a couple of investments in companies that operate in adjacent markets, these being insurance and vehicle servicing and repairs. So I'll expand on that a little bit now. So we've recently purchased 50% of the My Auto Shop business. It's a vehicle repair platform with more than 300 MTA approved repairers as well as a mobile repair offering from a fleet of MyAutoShop-branded mobile mechanics. Richard and Andy, who started the business, have done a really good job and they have a very strong customer proposition. They've got nearly 3,000 4.9 star Google reviews, so almost perfect. The vehicle servicing business in New Zealand is a $3 billion industry, and there's been a gap in the Turners offering. So we haven't really had anything to offer there. We buy and sell vehicles. We can ensure and finance them, but now we can offer to service and repair those vehicles. So the potential lifetime value of our customers to us has increased substantially. The investment made strategic sense right across the Turners Automotive Group of businesses. Vehicle repairing is actually a really big business in New Zealand, but it's very fragmented. And this is an opportunity to help a provider or scale -- help develop a provider of scale in this market. And that should deliver a significantly better customer experience. This fits in well with our mission to consolidate and scale right across the automotive business and to significantly enhance the customer experience in the markets we operate in. We've also made a strategic investment of $1 million into a business called Quashed, which is an innovative online insurance platform. Quashed allows customers to easily compare shop and manage insurance policies from multiple insurers across motor, home, contents and pet and life insurance. Insurance is something everyone needs and is clearly complementary to our core business of selling used cars. We want Kiwi consumers to be protected and Quashed enables this through the effortless comparison and a multitude of policies pricing and features. The fairness, ease, and simplicity the cost brings to our insurance is very aligned with how we think about our own customer proposition. And as part of that investment, we have a commercial agreement established between Quashed and Turners for customer referrals. Now just a couple of comments to wrap up and summarize. The business has a very attractive yield, and our track record speaks for itself, and there's a lot more to come. The businesses stood up incredibly well to the challenges of the economy, interest rates and changing regulations. Our auto retail business has been a standout performer, and we know our finance division will start ramping up as interest rate headwinds become tailwinds. We have a special culture in the Turners business. We're very customer focused. We're highly engaged with 53% of our team owning shares, and this only supercharges the care factor. Now before I hand over to Todd, I would like to acknowledge the efforts of our team, and that's from the Board of Directors through the operational teams who deliver day to day for our customers and for our shareholders. This group of people are totally committed and always prepared to go above and beyond. We're really lucky to have such a talented and hard-working group of people in this business. So thanks very much to you all. I'll now hand over to Todd.

Thanks, Grant. Good morning, everyone. Great to be with you all today. Let me just kick off with a few slides about the Used Car market and what's happening there. I think our Used Car volumes were kind of bouncing along the bottom to summarize the car market at the moment. Probably read quite a lot about new cars, in particular, being impacted in a material way, and that's because they tend to be much more discretionary than used cars. Overall used car volumes sort of April through to August are tracking largely in line with last year, which does support the position that we take that used cars are much more or tend to be a much more resilient market than new cars. But I would say, I think the overall trend is that we see demand continue to strengthen for lower value vehicles as the economy has deteriorated and consumers have been impacted. I think it's no surprise that people still need vehicles, but they're spending less because they can afford less. And in terms of dealer numbers, I mean, it's very clear. The overall trend is down, and there are significantly least registered dealers now than they were 5 years ago. It does seem to be a reasonable correlation between dealer numbers and the number of used imports coming into the country. And our expectation is that these dealer numbers will continue to drop. And ultimately, the used car market is a segment that scale will win, and that's what we're very focused on, obviously. In terms of the segment performance, with FY '24 being a record year, it clearly was a great year, with 3 of our 4 businesses showing material growth against FY '23. And as Grant outlined, finance was obviously being impacted by the interest rate environment. I think it's -- in terms of how FY '25 is playing out, it's pretty much exactly as Aaron and I outlined back in May that the composition of our profits will look different this year, in particularly finance, which is producing much higher levels of profit as interest margins start to expand again, which is really good to see. In Auto Retail, our brand is obviously very strong. We've continued to improve the way that we source vehicles. We're driving efficiencies sort of around how quickly we can bring those cars to sale once we source them and then sell them. We're opening more branches, which is critical to our continued success. But I think it is important to reflect on that graph here. It's a bit like Grant's dividend graph. This a great graph for a CEO. Growing profits 130% in the biggest division of our business as a phenomenal result. But there's more to come. We continue to expand our network. And really this slide, which was -- we showed back in May, was to show you that there is still growth to come in our property footprint, and there is a correlation between the red line and the bars on the graph, the red line being our unit sales. So we'll continue to expand our network through expanding our existing operations. So it's making some of our existing sites bigger than what they are now or opening in new territories. And certainly, the combination of that additional footprint we've committed to brings additional opportunities for us to source vehicles. So my message to you is that this branch network is now strategically way more important to us around sourcing vehicles than it actually is about selling vehicles because it gets us closer to our customers who we buy those cars off. So growing those unit sales is about being in more places, but it's about the brand investment we've made. It's about the sourcing we're doing. It's the operational improvements that we make. There is a very kind of nice recipe to making this all successful. It's about investment in data and technology as well. So I feel we're in a very strong position, and it's certainly one that I think is very difficult for others to replicate. Our branch expansion pipeline is building very nicely. We've delivered Timaru and Napier in the last 12 months, and we've certainly seen more opportunity come to market, particularly as interest rates and holding costs have increased. So great to see those 2 developments. And obviously, we've got a number on the go at the moment. So we have Tauriko in Tauranga, trucks and commercial site and then 3 sites in Christchurch, which I'll give you a little more detail on shortly, and then another site to come in Tauranga. And just a reminder that we now own 15 of our sites. So I think we're 30 or 31 overall, so roughly half. And that's all on the balance sheet at cost. So we've got a nice -- really nice property portfolio building there as well. So this is the plan for Christchurch. So we're very excited about what we've got coming together there. So this is sort of a move from our single branch in Christchurch to 3 different locations around the city, which will progressively sort of come on the market over the next sort of 12 to 18 months. So that's the Shands Road, which is the one that we've just got under development now. So that's obviously the architect's sort of render of what it will look like. They don't look like in reality right now. So we've got this sort of old warehouse, which we're remodeling. So that work started last month, and we should have that work completed in the next sort of 6 months or so. So we're hoping sort of March, April next year, that will be open. The next one we've got is on Moorhouse Ave. For those who know Christchurch, it's kind of the -- sort of car boulevard if you like. So we bought some land there, and we're hoping to start there in the next few weeks. The next one is Wairakei Road, which is out in the airport kind of precinct. So we bought actually quite a big piece of land out there, which is really exciting, so some quite big opportunities for us in that location. So we'll have a car site there, and it's likely we're going to have a Turners commercial site co-located on the same piece of land. I think if you talk to Aaron afterwards, he'll say this is the best property deal we've ever done, I think. Is that for you, Aaron? And then the last one is this new Turners commercial site in Tauranga and the Tauriko kind of industrial and retail area, where we will sell trucks and machinery and store and resell our damage or locate our damaged vehicle business there. So that's what that looks like at the moment. So you can see it's almost ready to sort of take the bow off and move in. So that development has gone extremely well, so we're very pleased with that. So lots of good stuff going on in the auto retail business. In terms of the finance business, I think the team have done just such a good job of sort of weathering their interest rate shock that we've been through, that the whole country has been through. I mean what I wanted to reassure you about is that we are very firmly and recently focused around borrower quality. We think that is absolutely the right thing to do for us and particularly focused around the margins that we're trying to generate on those loans that we write. And certainly, I've got a strong sense that once market conditions improve, we'll certainly see that get back into growth mode very strongly. I feel we're in a very good position. And just a reminder that we generate about sort of 35% to 40% of our origination comes out of the Turners auto network or through our direct lending. So those are our best performing loans on an arrears basis and our best margin business. So we've got a very good advantage there. You can see that net interest margin has stabilized, and we've started sort of climbing back out of that, sort of headwind that we had around the interest rates, and that will certainly get the pace that net interest margin will expand as the reserve bank hopefully does what it needs to do. And I just really wanted to give a bit of a shout out to Aaron and the finance team have done an amazing job of sort of managing our swap profiles and taking some really good -- taking advantage of some really good dips in rates, and we will certainly see that NIM start to expand as the year goes on. I imagine one of the things that you are interested in as shareholders is what we are doing around the quality of the loan book and who we are bringing on and lending money to. And so this graph here shows you the average credit score of loans that we're onboarding. You can see the average credit score continues to lift. So we have been, well, we think a very kind of pragmatic and sensible around, making sure that we're lending to money -- money to people who can pay us back but also have that buffer to withstand a shock that might occur in their lives. And ultimately, this is the reflection of that. So the red line is information we get from Centrix, our credit bureau, around every single auto loan in New Zealand. And you can see arrears have been tracking up sort of over the last sort of 18 months to 2 years to sort of 6.3%. And we're tracking at least less than half that amount. So you can be reassured that this book is being managed very well. I also wanted to remind you that we continue to carry an additional economic uncertainty provision buffer of $2 million, which sits over and above our BAU kind of provisioning. So should things deteriorate further, we are certainly well positioned from a provisioning point of view. Insurance, very well-tuned business. Our team have delivered excellent growth over the last 5 years. So it's a bit like the auto retail story. So it's 110% growth over the last 5 years. Our distribution networks remain really important, but we've also done a huge amount of groundwork in the last 12 months for our direct-to-consumer offer. So we've replaced our core insurance system, and as you can imagine, replacing core insurance systems comes with some complexity. That is being delivered on time and on budget. And it's put in place the building blocks for us for a direct-to-consumer offer. So we're really focused around that sort of 50% of cars that are sold private to private, who we think that's an opportunity to sell mechanical breakdown insurance to, so not just selling through dealers. Our claims continue to be well managed. Claims cost inflation being offset by less frequent claims. But managing claims ratios is not just about the actual claims. It's also about the pricing that you're putting on the policies you sell. So we have been working hard and analyzing our risk pricing and we've introduced some new layers of risk pricing over the last year. And that is to make sure that the cars that we're ensuring for mechanical breakdown reflects the cost of those repairs and how often they break down. So a good example of that might be the BMW X5. We charge more than for Toyota Corolla. Yes, makes sense. And I think more recently, we're also seeing evidence that claims inflation has sort of peaked and is starting to level off, which is good to see. In our credit management business, we're certainly seeing some recovery. I guess that's not unexpected as the economy tightens and our payment bank starts being rebuilt. So debt value loaded is up 14% year-on-year, and that has obviously led to an increase in the debt that we're collecting. The New Zealand -- this is information, again, we get from Centrix. So more than 12% of New Zealand consumers are now in arrears. So you can see that's the top red line here, so well above pre-pandemic levels. And with the economic environment expected to probably deteriorate a bit for the year. We're expecting debt loads to increase as a result. A couple of quick comments on funding. I think it's useful to think about the sort of purposes that we use funding for. So that's the graph on the right-hand side there. So we obviously borrowed to -- for the finance book, we borrow to buy property, and we borrow a little bit of money for buying inventory to sell through the Auto Retail business. We've also brought in 2 additional funders over the last year. So just to kind of spread and diversify our risk on those lenders, so we brought in Westpac into our banking syndicate. That's bought a bit of competitive tension as well, which is always useful from our perspective. And we've also bought an ACC as a funder of the finance book. So we're really pleased to have those 2 organizations supporting us. We're still geared in a conservative way, and we've certainly got sufficient funding capacity to support the committed branch expansion plans that we have on the go at the moment. And just to finish on a sort of somewhat light-hearted note and just to show how far Tina is reaching now. For those of you who watch the most recent NPE's press conference from Adrian Newey, you'll have seen an example of just how pervasive Tina has become when Adrian Newey actually quoted Tina at the end of his presentation -- and said -- as Tina says, the Internet is everywhere. So yes, you can't get more famous on that, can you? And I suppose a bit of the presentation that everyone's really interested in is kind of what we're seeing at the moment. So in Auto Retail, obviously, we're very focused around completing these branch developments. So we are in that kind of build phase for the next sort of 12 months or so. So no new branches coming onstream this financial year. We will -- we're continuing to push hard around that transition of wholesale units out of auction and into those retail channels. And we still see quite a lot of upside coming from that strategy. As I see, consumers are definitely demanding lower-priced vehicles and overall sort of fall in demand has had some impact on our margins, but that is what we had expected and is what we had anticipated. But I can tell you that overall sales volumes are tracking well ahead of last year, so we're about 7% ahead in terms of overall sales volumes. In finance, we're seeing that expected improved performance from Oxford as a result of lower-than-expected impairments and credit losses and improvements in interest margin. We still think it's the right thing to maintain our credit discipline, particularly given the downturn, still have some time to play out. In insurance, our earned premium is holding up very well. Claims ratios are stable. Insurance is performing very strongly. And credit management, our payment bank is rebuilding as debt load increases from those tighter economic conditions and the resultant impact on consumer arrears. So how we see that sort of playing out for the first half? We're expecting another record half performance for the end of this first half. So we're expecting HY '25 to be ahead of the first half last year, which is, I think, an incredible result given the environment that we're operating in. And we also confirm that we're certainly on track for exceeding the $50 million profit before tax goal for the end of FY '25 with the obvious caveat that there are still risks with the rate of recovery in the overall economy and consumer demand. So that's the report from me. Grant, back to you.

So are there questions on what you've heard so far? If you do have a question, we've got a microphone here. Don't forget you can win Tina.

Kevin Martin, shareholder, Hamilton. It may be not quite the right time to ask it, but I'm interested, particularly perhaps, and Todd or even your view, Grant, in terms of strategy, high level strategy to do with ICE vehicles versus hybrid versus fully electric in terms of be rocking up to Hamilton and saying can you take my 5-year-old Tesla?

Yes, that's an interesting one, isn't it? Because Greg, who's running our Auto Retail business at the back there would say pricing at Tesla today is very difficult, given how random Elon can be around his pricing strategy. So short answer is, we price those things very, very conservatively. And the interesting reflection for me is with some of our lease company customers who are taking 4-year bits on the price of a used EV will be in 4 years. They are being very, very hard on pricing around those cars. And I think I was -- I do a bit of -- time to time I go in the share trader forum and make a few comments. I'm not sure if anyone is on the share trader forum in the room. And someone had asked a question about the MyAutoShop investment in relation to EVs. And I've worked out that even if every single new car coming into the country at the moment was an EV, it would take more than 30 years to change out the vehicle fleet in New Zealand. And we know that EVs are not 100% of new cars coming into the country at the moment. They're more like 11%. So yes, there's still some runway, I think, for ICE vehicles.

In regard to the retailing model, it's not entirely clear to me from the annual report whether the company actually imports cars from overseas and takes the associated foreign currency risk. So could you give me a sort of an overview of the retailing model?

Yes, so we import around about 1,500 to 2,000 used vehicles from Japan every year. And essentially the week that we commit to buying the car in Japan, we take out forward cover. So we hedge our Japanese yen exposure pretty much at the time it occurs. We're not really interested in speculating on the [ Kiwi-yen ]. But that probably accounts for 5% to 10% of the vehicles that we sell that we own. So it's a very small part of vehicles that we sell through our retail channels. So 90-plus percent of the vehicles we sell, we buy locally in New Zealand. So we buy them off moms and dads who are trading up or trading down. So there is a small Japanese yen exposure. It lasts for somewhere between 1 and 7 days and it's a small proportion of the imports -- of the purchases that we make.

But an associated question on that. On Page 42, on the comprehensive income of the company, there is something called a cash flow hedges item, and that went up tenfold in the 24 years to over $4 million as what's regarded as a potential liability to the company. Is that in regard to the Japanese yen foreign currency?

No. It's not. That is in regard to the interest rate swaps that we take out to hedge some of our borrowings. So in essence, it's like fixing your mortgage. So we fix around about 60% of our borrowings. So if you've got $1 million mortgage, we fix, if you like, $600,000 of that. Now the perverse in some ways, accounting standards that we apply to, if the interest rates move in the meantime, we have to book what's called a hedging or a cash flow gain or loss. So that cost that you see in the P&L reflects the fact that our hedges were well below the existing interest rate in the prior year, and we used some of them up during the year, and therefore, that is the effect of us using up some of those favorable swaps. Your question is actually quite a technical accounting question. The net result is because we are revaluing our hedges at the market rate at year-end, it creates some anomalous results, and you'll see those results in the accounts of the likes of Heartland Bank and MTF. So everyone is faced with this accounting standard that says that despite the fact that you hedge, you must, in essence, revalue your hedges at market rates at period end.

A couple of more for you, Aaron. The Insurance division, is the company actually choosing to reinsurer any of insurance policies?

Yes, it's a very good question. So we have 10% of our insurance business as life business, and we reinsure 75% of that life exposure. So about $4 million out of our $40 million premium pool relates to life insurance, which is reinsured. The reason to take out reinsurance is to avoid, as you have a catastrophic loss that would, in essence, blow up your balance sheet. So the balance of our insurance business is largely around mechanical breakdown insurance. So we have almost, I think, 100,000 customers who have a mechanical breakdown policy with us. Now that doesn't cover preexisting conditions, and it doesn't expose us to any material natural disaster or catastrophe risk. So we do not reinsure that portion of our insurance business.

The company's chosen reporting metric, net profit before tax, tell me why you do it like that.

Yes, we chose that and it's a historic reason, and that is that in the years after the GFC, the company had accumulated quite significant tax losses. So the after-tax profit was higher than the before tax profit as we realized those losses. So to make comparisons relevant, we've chosen the before tax measure.

And one final question, and I just call it to the attention of shareholders. Every meeting that you go to, I would urge shareholders to raise this question, but in particular to Turners, there is some reporting in regard to the company's greenhouse gas emissions, carbon emissions, environmental reporting. Can you give me some sort of ballpark estimate as to what this kind of reporting, is it actually costing the company to research and gather the information and pass it on to whoever gets it?

In terms of money or pain and time and effort?

Talking about money.

I think over the -- so the climate-related reporting standards that were introduced in New Zealand last year, they essentially allow a 2-year implementation. The cost of the company over the 2-year period will be in excess of $1 million.

Grant Plummer, Shareholder. Obviously, Turners is now quite a diverse business with many divisions and you're continuing to add on additional divisions and services. I'm just wondering if we could get a bit of a broad spectrum on how this is all managed now because when you look at companies like, say, Skellerup, which has distinct divisions, more profitable, where you might look at someone like Fletchers, which I won't comment on. So I'd like to know that and get some confidence that Turners are handling these extra services and divisions in a really good way.

So we have distinct profit centers. So we've got 4 main businesses and within each of those businesses is a CEO or a General Manager, and they report to Todd. And each one is isolated from the other but interdependent on the other 2. So yes, I mean, we've been in this situation for a long time. I think we've had these 4 businesses since 2012 or something like that, a long time anyway.

So how does things like, say, car subscription services and things like [indiscernible]...

Yes. So that all of those businesses have their own P&Ls, so we can see if they're making money or losing money or how they're performing. I might just quickly introduce few of the people at the back who actually run these businesses because it's useful for you guys to know who they are. So it's Greg Hedgepeth, who is the CEO of our Auto Retail business. So he's in charge of Turners Cars, Turners Trucks & Machinery, Turners Damaged Vehicles, Turners Subscription. Next to him is James Searle, who runs our Insurance division. So that's the AutoShow business, mechanical breakdown insurance so on. Got Matt Gannaway, who's looking resplendent with a plaster on the side of his head. So Matt is based on Napier, running the credit management business. And then next to him is Guy Bryden, who's just actually taken over this year as the CEO of Oxford Finance. And I've been working very closely with Guy over the last sort of 4 years or so, helping run the Oxford business and Guy's taken over this year. So those are the people who are running these businesses for us.

The new company [indiscernible]...

So the question was just how we are handling the management of the new acquisitions that we've made. So cost is reasonably hands off in the sense that we are pretty minor shareholders at 13%. Really what we're interested in is how we refer our customers into their platform and we'll get a share of the revenue that they earn off those customers. So that will be managed out of our insurance business under James. And in MyAutoShop is obviously a more substantial acquisition. We've only just kind of confirmed that in the last week. So we actually have quite a big meeting tomorrow to kind of kick that off and put our team in place, but it is going to be managed out of Greg's business because that's where most of the intersection is. But there's big opportunities out of our Insurance business as well for MyAutoShop. So we're very, very excited about the opportunities that we've got in that acquisition. And I will be heavily involved in those as well as you'd expect.

[ Yuri Sales from JF Alpha ], I'm a shareholder. Can you elaborate a little bit more on MyAutoShop, please? You talked about an atomistic market structure. So does that mean MyAutoShop has 1% or 3% or 7% market share or where roughly do we stand?

I'd say the market share would be less than 1% at the moment. Really, it's about the opportunity. I mean I look at the vehicle repair and servicing market. It's got all the same characteristics that the Used Car market have. Big, big market, lots of spend, highly fragmented, generally reasonably low trust kind of customer experience, someone drops a car off at the mechanic and they know way more about what's happening in their process than you do. So having been a customer of MyAutoShop, I am really excited about the way they are transforming their customer experience. It's super impressive. So the way you procure the services, the way they deliver them, they come to your home or to your work, where they are not operating, they've got a network of repairers, everything is priced upfront. It's very transparent. So they're doing a super job. They need some scale and some [ homes ] behind them. And that is exactly what this business brings to them.

Sure. I find the business less adjacent compared to insurance and funding though. So you talked about cross-selling. This is going to be symmetric or stronger from one side or the other?

If I'm understanding your question correctly, where is the opportunity for us to cross sell into them. Yes, it's massive. So we have 100,000 people in the insurance business who have a mechanical breakdown insurance policy who need to service their car every year to keep their policy valid. So we can direct those people to MyAutoShop. We know that they're getting a much better customer experience. We know the pricing is going to be better. And we -- so it's a kind of walk-up start. I mean if I think about our Auto Retail business, we have this kind of periodic transaction. So someone buys a car from us today, we might see that person in 3 or 4 years when they change out their car again. Well, this gives us the opportunity to have a relationship, offer them something, generate some margin for the business in between those times. So I think, strategically, it makes so much sense.

And last one on this topic. So as you injected capital and it's a start-up, so shall we -- without numbers, but shall we assume this is still loss making?

The MyAutoShop business? Yes. It's bouncing around breakeven at the moment. So yes, clearly, our plan is to get that business some profit as soon as we can.

One other question, please. You may have noticed that Go Car sales is winding down its loan book here in New Zealand. So that's a daughter of former Money3 Corporation in -- so with a $200 million loan book wind down, they made a strategic decision to leave the market. They say because of regulation, economy and culture, and they see more better investment opportunity in Australia. So with them leaving, does it add mildly positively influence you or not really?

Not really for us, Yuri, because, to be honest, they are lending into a part of the market that we don't, so no net gain for us, I would say.

I'm Hamish Macleod, and I am a shareholder, and I'm also part of the automotive industry. I've got a few questions, so bear with me. But I think it will be valuable for us to work through this. So initially, congrats guys. You've done exceptionally well with these results. The brand with Tina and Turners has been a master class of success of how to build an amazing brand and trust with the general public. I mean, it's really good to see. What I think would be interesting is just to understand a little bit more about how we've managed to convert the success with Tina and the brand into such an exceptional financial result. I read through the report, and it's way but hard to understand the breakdown of the revenue. I mean looking at it simplistically, I'll try to [ cut your ] question, sorry. But the automotive retail sector is clearly the powerhouse that's been getting the outstanding results. Not that the other divisions haven't been doing well, but it's probably the one that's the sort of outstanding performer. Would you better -- I think you've touched on it already lightly just with a split of where that income comes from. So I think would you be able to give us a brief split of the what's sold on behalf or auction and what's owned? So what sort of ratio of your sales is that? And then secondarily, within that question, which ones of those, cash or cars, have been brought from the general public through the sort of Tina cash for car thing or which have been brought from other businesses or a lease company, et cetera.

So in terms of the ratio of sales, so roughly 60% of the cars we sell, we own. So 40% consignment, which are the ex lease, ex government, finance, repos, those sort of cars. So obviously, on the 60% we own, we kind of charge ourselves a fee for selling those cars, plus we make a margin because we've taken the risk on the car. So that's the kind of split if you like. In terms of that 60% of the cars that we own, it would be 85%, Aaron, 90% are bought locally. So buying off businesses, families, moms and dads who have been -- wants a quick and convenient and transparent way to sell their car, that's where we source those cars from and the balance are those used imports out of Japan.

Thanks for that question. And just to follow up from that, so you've noted here, your net profit, but I think it's after expenses, is sort of $500 for the -- on behalf and $1,000 for the owned cars. And would you be able to give us a gross profit margin on those transactions? So we're selling a car for $10,000 that be cash on. What's their gross margin, COGS included, but overheads not?

We're starting to get quite technical now, but...

The percentage is fine. I mean this is standard benchmarking numbers.

We would target a 10% to 15% margin depending on the vehicle. Probably make slightly higher margins on higher risk vehicles. So where we are taking the risk on a car, perhaps a euro, we would aim at that 15% end. If we were buying a Toyota Corolla and it's a competitive market to source them, we might be at the 5% to 10% end.

So you're saying that's a gross profit margin before overheads.

That's a gross margin, yes.

So the divisions achieved over a 10% net profit margin that would leave no room for overhead costs. Surely there's overheads in running the Automotive division.

No, because you're -- we're not -- we're just talking about cars here. That business sells a bunch of other things as well. Sells damaged vehicles for insurance companies, sells trucks and machinery for finance companies, and that's a fee-based business. So there's no sale or cost of sale associated with those. It's purely a commission and a buyer's fee from those businesses. So that's almost essentially pure revenue to go towards overheads and quite separate from a sale -- cost of sale equation.

I guess just as we look at the big picture math, the industry average for net profit for used vehicle sales according to Deloitte's latest output is 4% -- 3% to 4% net profit on turnover or sales. I mean you're sitting at 10% net profit for turnover. I mean, as Todd has mentioned, it's exceptional result. It really is. But I guess what I would like to understand is how are we achieving that? And I guess as a shareholder or representing shareholders here today, a lot of it is understanding how we're achieving it to ensure it is sustainable.

Yes. So as I said, we are not a typical new car dealer. Well, actually, I didn't say that. We're not a new car dealer at all. We're a used car dealer, but we also have other legs to that auto business. So the auto business sells 30,000 damaged vehicles a year on behalf largely of insurers and it sells 3-odd thousand pieces of trucks and machinery and other equipment. So we're not simply an auto business. We see the biggest growth opportunity in that auto retail space, but we're not simply a used auto business.

I do appreciate that. Then I uses other divisions. It still seems a little bit lacking in transparency exactly how we're making our money out of that and how sustainable it is. Anyway, just...

Is that a question or a comment?

I guess it's potentially both. I don't feel like my question has potentially been answered clearly. But I guess if we can't get that answer, we'll just have to persevere. With the brand, I look at the -- on our balance sheet, about $160 million or 40% of our sort of market cap is intangible value or goodwill, you could call it. What ratio of that would be put towards Turners or Tina in the automotive sort of sector? How much of that's sort of -- there's no breakdown of that value.

No, that balance grew through the acquisition of businesses. So there's nothing to do with Tina and those intangibles whatsoever.

So with 40% of the market value of the company, can you tell us what that is made up of?

Yes, it's goodwill on acquisition of Turners auctions of Autosure Insurance and of Oxford Finance.

Okay. And so just looking at it, how do you think the brand is holding up, I mean the company as a whole is doing exceptionally well, and it's largely built off this cash for cars by model, which we seem to be getting twice the industry average revenue out of. How is the brand tracking? I appreciate we're doing well in the Reader's Digest award system. How are we looking at the Google development for a Google reviews for Turners nationwide?

Google reviews are an interesting one. It sounds like you've actually looked at some of them. We tend to get quite poor reviews from people who bring their car to us and then don't like the price that we've offered them and they tend to give us bad reviews. We use a separate kind of measure called BuyerScore, which is product that's integrated into Trade Me listings and things, and we get very, very good reviews, market-leading reviews.

So I did do some research. Your BuyerScore is looking good. And so BuyerScore reviews people that have purchased cars on Turners. So I guess, to a degree, you've got 2 -- if you look at the auto segment, 2 key customer groups, right? You've got your consumers that are buying the product and you've got your customers who are supplying your cars that are essentially suppliers. I mean they come from the same community, but they've got very different purposes for Turners. BuyerScore doesn't really encapsulate any of your customers are supplying the cars. And so currently they are sort of the golden goose to a degree of that division or that segment. And so what I looked at because I've been intrigued with how it's worked on an industry. We're always looking to learn and I've got some investment in Turners now. But it's an exceptional result. It's doing very well. And I wonder how it's been achieved and how sustainable it was. And I've seen the Google reviews lifetime average is under 4 for most of the branches nationwide. So I got my data -- got to pull the data out of the Google reviews across the nation to look at a trend. So every year the reviews for that year, average for each year across each branch and the nation is declining quite considerably. So I think prior to the Tina campaign and the exceptional results we've seen in net profit, we're seeing an average of 4.5, which is probably where all good businesses should be. And Turners as a whole has got a long, long legacy of trust and good relationships with the community. Every year, it's trended down, and it's still trending down now to 3.5 as a national average. So some branches are treading slightly better than others. But say, Christchurch, for example, in the last 12 months, has got an average Google review rating of 2.48 stars. I look at that sort of catastrophic fall off of brand value with those consumers. And it largely is, as you've mentioned, people that aren't happy with this cash buying scheme and the prices that are being offered to them. How sustainable is the brand and the community if we've got that sort of level of fall off showing in the Google reviews? And when does that start affecting your ability to buy cars for cash with above industry average margins that we're fueling this whole business off?

Yes. I think your statement around above industry average margins is just wrong.

Well, you haven't given your margin. Hard to see that but yes...

Yes, I would suggest you spend -- so just let me answer. I suggest you spend some time with Aaron afterwards, so he can take you through if you want to drill down into the specifics, sit down with Aaron afterwards, we can work through the annual report. You are wrong. I can tell you that right now. We are a high-volume, low-margin turnover business. Our average margin on a car at the moment is tracking at around $700. So we are not making double the size margins of other used vehicle providers in New Zealand. And in terms of your...

How is the profit so good then? Please explain.

And in terms of your question around the Google reviews, I guess one thing I'd comment on, and maybe I can get Greg to talk about this as well, is what Tina has done has driven us an enormous increase in the number of people who want to come to Turners to sell us their car. Our conversion rate runs at depending on the month, somewhere between sort of 35% and 40% of the people who actually turn up to our branch were for an appraisal, we buy the car. So nearly 60% or sometimes more, we can't agree a price. And some of those people are unhappy. They do not -- they aren't liking the price that we necessarily give them. Now we don't -- clearly, we're not trying to make those people leave and be unhappy and grumpy to the point that they want to write a negative Google review for us. It's not a great thing. So there is skill, as you can imagine, in giving someone a number that they don't necessarily want or think that their car is worth a lot more. And I would say almost 100% of the time, we are giving people disappointing news. They all think their car is worth more than what we are prepared to pay for it.

The bulk of the feedback, would you look through the data on a micro level, that entails people, stories of either selling a car and Turners is saying it's worth X amount to retail and then buying it for less that understandably. Turners needs to be a business but then going latest vehicle listed for a much higher retail price than our total would be or taking the car to another dealer on the same day for an apples-to-apples transaction are being offered on average about $4,000 to $5,000 more for a similar transaction. So I guess my concern is, with all these negative experiences, are we not creating quite a liability as Turners gets bigger and time and the potential client base we can deal with becomes smaller. We're building up a lot of bad brand or bad equity for Turners. I find that concerning and problematic for our growth targets and future trajectory.

No, well, I'm not concerned about it. Greg, do you want to offer anything here?

No, I think Hamish...

I've seen them in the automotive industry.

What's your business, Hamish?

I'm a used car dealer [indiscernible] -- these questions are still valid. Sorry? In some spaces, yes. Yes.

Okay. Have you got any other questions, Hamish?

No, I think that's fine.

Grant, I noticed that the forecast for new branches opening after this year is just a little below. Your very bullish statements about expansion of branches. If I'm a car buyer and I live in Sydenham, I'm probably likely to buy a car from Wairakei Road. In other words, there's quite a long gap. If I live in Karori, I'm likely to buy in Upper Hutt. That suggests to me that the range of branches can be reasonably limited in larger centers and that you have to be very careful about opening new branches alongside others in the city. Can you give us some idea in your forecast. Have we got plenty of potential around the country to open more branches because that's showing a lot of the increase in sales and other business.

Yes, it's a good question. The numbers that I would sort of talk about there in terms of how we think about it is our relative market share in various territories and geographies. So in the metros, we tend to operate at kind of sub 8% market shares. And smaller territories, we might hit mid-teens or even higher than that. So places like Nelson, Timaru, Invercargill, we have often sort of in the mid-20s in terms of market share. So that's how we think about it. We look at those places where we have lower market share and say, okay, well, there is clearly opportunity for us to have more branches, be in more places. We're not looking to have Turners branches ideally 5 kilometers from each other. That's not what we're looking for. But for example, in Auckland, we've got a live opportunity working on now in Tokanui, so we're certainly looking kind of south, we're looking at Pukekohe, we're looking north in Silverdale, we don't have anywhere in the west. So there are pockets in particularly in Auckland and Wellington is a really good example of that. So we're in one location at the moment in Porirua. Often the challenge is getting these sites at a kind of cost base that economically makes sense for us and we're pretty careful about the bits that we make in that regard. We want to make sure that the business case stacks up.

Right. No more questions? Okay. I'd now like to move to the resolutions before the meeting. So these were notified in the Notice of Meeting and explanatory notes have been provided. So voting on each of the resolutions in the notice of meeting will be by way of poll. So Baker Tilly Staples Rodway, the company's auditors, will act as scrutineers. Please use the voting paper you used in the mail or were given when you registered for the meeting. If you do not have a voting paper, you'll be able to request one from scrutineers when voting takes place. Only shareholders and proxy holders or corporate representatives of a shareholder may vote on today's resolutions. 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 people would like to ask about that? I'd like to move this motion. Can I have a seconder, please? Yes. Thank you. 2 seconders. The next 2 resolutions are in regard to Director elections for Antony Vriens and for Alistair Petrie. We believe that having directors with relevant industry, commercial and governance skills are essential for continuing the success of 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 and debt management sectors as well as directors with expertise in governance and very diverse experience and entrepreneurial skills and sales, digital marketing and communications and business growth. To make things run a little bit more efficiently, I'll ask Antony and Al to come up and address the meeting. So Antony?

Thanks, Grant. It's not deliberate that we're channeling the look of Smurfs today. So good morning, everyone. I'm thrilled to be here. My name is Antony Vriens, and I've had the privilege to be an Independent Director of Turners Automotive Group since 2016 and Chair of DPL Insurance since 2012, which also includes the Autosure brand. Additionally, I'm a proud member of the Audit, Risk and Sustainability Committee for both organizations, sitting on audit and risk with Al and John. We're all gray haired after the sustainability work we've had to do in the last 12 months. Looking back over the last 5 years, I can confidently say that the journey of Turners has been nothing short of remarkable, and that success is no accident. It's a testament to its exceptional executive leadership and our forward-thinking Board. And together, we have skillfully navigated through challenges such as pandemics, natural disasters, fluctuating economic conditions and regulatory change. Each obstacle we've had to face has actually become an opportunity and that I believe is actually the essence of strong leadership at Turners. As per NZX listing rules, I am retiring by rotation but seeking your report for reelection. I'm wholeheartedly committed to continuing my role as director and DPL Chair. My expertise lies in insurance, risk management and sustainability, supported by over 2 decades of executive experience that includes leading digital transformation, customer engagement initiatives and complex financial risk assessment, particularly in the insurance world. As a chartered fellow of the IOD, I also bring strong governance credentials to all my Board and committee roles. I also bring a unique perspective to the table, having a background as a medical doctor, which adds a diverse dimension to my approach. And I'm going to say diversity of thinking does define our Board. Moreover, my strong relationships with regulators like the Reserve Bank of New Zealand and financial market authorities will position us well to navigate upcoming regulatory changes that are on the horizon. I want to express my heartfelt gratitude for your past support, and I am asking for your continued trust as we work together to propel this business forward for another compelling 3 years, which I believe we will achieve. So I would love to hear your thoughts and answer any questions that you may have. Thank you.

Yes. My name is Heidi Ching, shareholder of this company as well as Me Today. Are you a director of Me Today?

Well, I am indeed, yes.

Yes. Then that's good because what should I say, recently, Me Today have $5.8 million revenue, just earn that, but I wish to, what should I say, enhance that value. Also, I say Alistair is today going to be elected. He is 1.08% of Turners and Growers Global. Actually, the shareholders just now say about the brand name. I think he is not senior enough to know that Turners company is more than 130 years old company in New Zealand. That's why all the time and Turners Auto is being spin out from Turners and Growers, growing vegetables and foods, very healthy for us, make us very friendly and amicable, no temper. That's good and healthy. Today, I wish to see that Alistair, Alistair knows a lot of things and you are the biggest retail, what should I say, shareholder of Turners, Growers Global, and they have, what shall I say, many overseas market. They have already done a lot in that -- in those markets because I am now, on behalf of other shareholders, who are also, I know they are me today shareholders here, and so I wish to enhance the company's revenue by showing you their various markets and how they do that for this several years. Can I talk to you after the meeting?

I was going to sit here today, because I think Me Today is a separate conversation. But absolutely, we bring our relationships that we have globally to each of the businesses we work at. And thank you for raising that 130-year history...

I'll talk to you after the meeting.

Wonderful. All right. Any other questions?

As mentioned, Alistair Petrie is my name, and I have been a Director since 2016 and represent Bartel Holdings, who have been a cornerstone shareholder in what was Turners auctions since 1990 and was part of the Turners & Growers Group. And it's probably worth reflecting on the journey since the car business was separated from Turners and Growers in 2002. At that point, the market cap was $6 million. And today, 22 years later, it's approximately $380 million. The revenue stream was basically commissioned on car sales via auctions, and now as we've discovered today, it's a multipronged revenue stream that mitigates and self-insures against the broader macro environment. The recent positions we've taken in MyAutoShop and Quashed are examples of further growth opportunities in this used car ecosystem. I'm a director of a number of companies, mainly in the food and distribution sectors that all share the same objective of growth and innovation, leading to an improvement in shareholder value. And I believe I bring this mindset to Turners Automotive Group. I'm an active member of the lending and credit committee and along with Matt and John, we're proud of the way the management team has managed the last 2 years, putting us in a very strong position as this economic environment changes. I'm also a member of the climate-related disclosure team for [ MySense ], which has helped management navigate this not so straightforward requirement and also on the Audit and Risk Committee. I have extensive management experience in leading large teams especially in the sales and operations sectors and believe this, along with a fresh thinking as a skill set, which complements the current Board. Very supportive of Todd and the management team under the strategic directions that the business progresses and are excited about the growth opportunities ahead, and I look forward to working with the Board and management team to deliver for all shareholders. So I look forward to your continued support and vote for my reappointment. So thank you and any questions? I can get to you later about Turners and Growers.

All right. Thanks, everyone. Now we'll deal with a specific resolution. Resolution 2 is in relation to the reelection of Antony Vriens who retires by rotation and has offered himself for reelection. Are there any questions?

Yes, I'm [indiscernible] representing the Shareholders' Association. Just that meeting knows, I'm holding votes for somewhere over 60 shareholders and 2-point-something million shares. As you know, the Shareholders' Association have expressed concerns about independence of the Board. Can you give us some forward plan of what you've got for Board refreshment over the next few years?

Well, there's no particular plan for refreshment. I mean we had a conversation with Oliver a couple of days back from the Shareholders' Association, and we think our -- there's a few large shareholders, obviously, the people who represent myself, Matt, we own quite large shareholdings in the business. But we think our -- we are aligned with shareholders' interest. So what's good for us is good for the shareholders. So we now really subscribe to it. I mean, we'll do what legally we have to do, but we don't subscribe to things like you share majority of independent directors. We don't think that would improve the company. So we're happy with what we've got. Well, don't beat around the bush. There's nothing else from you. That's okay.

[indiscernible].

Sure. I mean we just [ respect ] you on the resolutions here, but you did that, okay. Thanks. So any questions regarding Antony's reelection? All right. I'd like to move the motion then. Do I have a seconder? Thank you. Resolution 3 is in relation to the reelection of Al Petrie who retires by rotation and has offered himself for reelection. Are there any questions regarding that? Okay. So I'd like to move the motion. Do I have a seconder? Okay. Got you this time. Thanks. So a number of shareholders who are not attending the meeting have voted by proxy. I wish to advise that proxies have been received for 22,096,871 shares, representing 24.8% of the total shares on issue. So please complete your voting paper by ticking "FOR", "AGAINST" or "ABSTAIN" in the appropriate place on the form and ensure you've signed the form, please. Please do not tick the discretion box. If you have any difficulty, or you do not have a voting paper, please raise your hand and someone will assist you. Once you are finished voting, scrutineers will collect the voting papers. So we'll just allow 2 or 3 minutes for that. [Voting]

Okay. That brings the formal part of the meeting to a close. Is there any other business shareholders would like to discuss in regard to today's presentation? I therefore call the 2024 Annual Meeting of Shareholders closed. Thanks for coming today, and there's some refreshments over there if anyone would like them. Thanks.