Turners Auctions revenues up 14%

Turners Auctions Limited (NZX:TUA.NZ - News) has delivered a strong result for the financial year ended 31 December 2013, with revenues increasing 14% to $89.2 million and a Net Profit After Tax of $4.8 million, also up 14% on the previous year.

The year on year improvement was mostly driven by growing returns from the company’s Fleet and Finance divisions, reflecting a strategic shift from auction sales to higher margin retail sales, in line with Turners Auctions’ new multi-channel business model.

The Fleet division, where vehicles are acquired and on-sold by Turners, showed the largest improvement with revenues increasing by 30% to $46.9 million. This was mainly driven by an increased emphasis on the retail market, with more aggressive pricing to attract both retail buyers and sellers and the growing popularity of Turners’ CashNow service. Cost of sales has risen in line with volumes as increasing levels of second hand stock have been acquired. The focus has also expanded to generate more volume from end of life and damaged vehicles, to take advantage of New Zealand’s aging vehicle fleet.

The Finance division also delivered good growth, with revenues increasing 10% to $6.0 million, as more retail customers purchase vehicles using consumer finance provided through Turners BuyNow service. This growth has been reflected in the loan book with an increase of 20% to $25.6 million over the 2013 financial year.

Revenue in the Auctions division was down slightly on 2012. Growth in Car, Trucks and Machinery revenues largely offset a drop in damaged vehicle sales. Overall, the result was pleasing, particularly after accounting for significant IT investment costs and the loss of a major contract early in the 2013 financial year.

A number of major projects were undertaken during the 12 month period as Turners Auctions invested to create a strong platform for long term growth. These included the development of a new website (an important component of the online retail strategy), the implementation of a new operating platform and a better system for the provision of information to buyers online. All investment was funded out of operating cashflow.

Management priorities during the year included securing key customers, and a number of existing contracts were renewed and several new partnerships established. A cost review was also undertaken, leading to improved efficiencies and disciplines within the company.

The Board has confirmed a final dividend of 9.0 cents per share, to be paid on 9 April 2014. This takes the total dividends for the FY13 year to 16.0 cents per share and continues the company’s long term track record of paying approximately 90% percent of profit in shareholder dividends.

Chairman of Turners Auctions, Mr Michael Dossor, said: "2013 was a transitional year for Turners as we moved our focus from wholesale to higher margin retail customers, using online channels to support our national bricks and mortar footprint.

"Management, led by Turners’ new CEO Todd Hunter, who was appointed in August 2013, has been focused on developing a new and more profitable multi-channel business model, in line with our growth strategy.

"Our goal is to grow our market share by creating more opportunities to source and sell vehicles. We are having good success sourcing more product through our CashNow service, where we buy product up-front from our customers at an agreed price. We are also growing our retail sales channels, such as Trade Me and the new Turners website, to reach a bigger group of retail buyers. With the growth in these sales channels, we are taking advantage of our increased involvement in the sales process and the trusted Turners brand to offer add-ons such as consumer finance and insurance sales.

"Although we have only recently started to implement our new multi-channel business model, early indications of its success are encouraging and the potential for growth is considerable."

Mr Dossor continued: "We have developed a sound and sustainable, forward-looking strategy for Turners Auctions and investment has been made into establishing our new business model and strengthening the operating platform. A cultural change is taking place within the company as we move from event-based sales, such as auctions, to a customer-centric retail model utilising multiple retail channels. This change is being overseen by an experienced management team and Board.

"The New Zealand used car market is showing strong growth and was up 5.4% in 2013. There is an enormous opportunity for Turners Auctions to grow its market share in the second hand vehicle sector and, as we continue to invest and rollout our new growth strategy and business model, the future for our company is looking very promising."