Thursday 18th April 2019
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Turners Automotive has adopted a single-brand strategy for its used car network and will rebrand its Buy Right Cars in an effort to cut marketing costs and latch on to Turners Cars' high level of national recognition.
The auto-lender, insurer and used car vendor will book a $4.5 million non-cash charge to write off the value of the Buy Right Cars brand in its 2019 annual results.
Turners paid $11.9 million in cash and $3.4 million in shares when it bought the company in 2016, plus a further $2.7 million in cash and $700,000 in shares from earn-out targets being achieved in 2017. However, last year's annual report didn't expect the second-year targets would be met.
The decision to drop the brand is part of a wider strategic review, which the board expects to unveil in June.
"A single brand strategy provides opportunity to further leverage the high levels of awareness and the very strong trust that Kiwis place in the Turners brand," the company said.
"This will also enable marketing and other cost synergies. The Turners brand dominates the New Zealand used automotive retail market for awareness and trust, with 90 percent brand awareness nationally. "
The company said pre-tax profit was more than $32 million in the year ended March 31. That's in line with previous guidance for earnings when it said pre-tax profit would be 5-10 percent lower than an earlier forecast of $34-36 million.
Turners said March quarter trading was slightly better than expected and that margins on used vehicles have improved through the financial year. Margins for second-hand imports were still under pressure, and the company said the demand in Auckland remained soft.
Outside its auto business, the performance of the finance, insurance and debt collection divisions was in line with expectations, it said.
The board will review whether to resume a share buyback programme after annual earnings are announced, with the current price still below what directors see as the firm's fundamental value. The shares were unchanged at $2.42, and have increased 2.1 percent so far this year.
The board affirmed its expectation to pay annual dividends of 17 cents per share, which will be up from 15.5 cents in 2018.
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