Okay, good morning, everyone. It's 10:30 A.M., so we'll crack on with things. Welcome, everyone. Thanks for your time this morning. Aaron and I will take you through an overview of the results and then open up for Q&A at the end of the session. So we'll just run that as we have done before. If you just put up your hand or you can just type in a question into the Q&A, and we can deal with it that way. But you know, it's probably easier to open up the audio if you wanna ask a few questions. So let's crack on with things. So yeah, I think these themes we used last year, and they're absolutely appropriate again for FY 2024.
So, yeah, really pleased to see a record result again. I think the business model that we've put in place is certainly showing its resilience in a really challenging environment, and we're absolutely ready for what's next coming at us. So we'll go over the results, drill down into the segments, and then give a few comments about sort of looking forward. Yeah, we're very pleased with the year just completed. I think pleased is probably somewhat of an understatement, actually. But, yeah, another record result for the business. And particularly pleasing, given we've been operating in an economy that is very clearly under pressure. So, yeah, the result demonstrates the resilience, and I think the ability for this company to react to where demand is strongest, and we'll drill into that a little bit later.
Three of our four businesses with material profit growth and, and obviously auto retail knocking it out of the park. Our plan for growth is standing up to the economic and interest rate challenges, being thrown at us, and, and, yeah, we're very confident in the, in the plan that we've got, moving forward as well. So results, EBIT up 12% to NZD 58.6 million, and net profit before tax up 8%, which obviously we use as the basis for our market guidance. Directors have declared a final dividend of NZD 0.075 per share, which takes our full-year payout to NZD 0.255 per share, and that's up 11% on last year.
Earnings per share and net profit after tax are essentially flat on last year, and this is due to a legislative change to remove depreciation on commercial buildings. So we just want to point out to people that that's increased our effective tax rate to 33% for FY 2024. But this is one-off and non-cash and impacts FY 2024 only. So if you apply the effective tax rate that we've had over the last couple of years, in fact, if we take last year's tax rate, net profit after tax would be NZD 35.1 million, up 8%, and EPS would be NZD 0.402 per share, up 7%. So, yeah, we're encouraging people to obviously look through that one-off impact.
It's always interesting to reflect on the progress over a slightly long time period than just the last 12 months, and obviously, these are the sorts of graphs that CEOs and CFOs want to show shareholders, so we're really pleased with the progress, and we are proud of the track record that we're continuing to deliver for our shareholders. We've made great progress over five years in a number of critical areas. I think the one to really point out here is that our sourcing strategy is just working so well, and our retail optimization is gaining momentum. The improvements in the quality of our loan book are obvious and are really paying dividends for us now, particularly in these sort of tough, tougher economic conditions. Our focus on these metrics is what is driving the most, the much improved outcomes for shareholders.
That's obviously demonstrated through those EPS and dividends paid. Car market, yeah, has bounced up in the last year, slightly up over FY 2023. I mean, largely that's due to an increase in used imports coming into the country, and a lot of that has been driven by changes in government regulation and a bunch of pre-registrations that have occurred with both consumers and importers of cars looking to either attract rebates on vehicles or to beat penalties. So I think, you know, I would say the market feels flat on last year, although it's showing an increase. I think there's quite a large number of probably used imports floating around in the market that have been pre-registered. Pleasingly for us, though, the red line keeps growing, and that is what we want to see.
So Turners units of car sales tracking up and really against a market that has been flat or going backwards. So I'll just move through the next few slides pretty quickly. Let me just go to the revenue bridge to start with. So auto revenues have grown off increased car and damaged vehicle unit sales, and we've seen the impact of new branches and just that flow of more own stock through the business. Finance book revenues reflect the higher average loan book over FY 2023, with growth in super prime borrower segment being, you know, quite good. Insurance revenue is up off strong policy sales and improved investment returns. And, yeah, great to see credit management revenues increasing off the back of that increasing debt load and that payment arrangements starting to build again.
On the profit bridge, yeah, obviously, auto retail standout result. So increased unit sales, better margins on more own stock, and the impact of the new branches towards the end of the financial year. The finance result, obviously impacted by the interest rates and the impact on net interest margin, but, and of course, net interest margin goes down as we prioritize credit quality as well. The contribution from finance is improving, though, and we've seen interest margins start to expand in the second half of last year. The insurance result reflects improvements in our risk pricing, investment returns, claims ratios in our cost base, and credit management result is driven off the increased debt load and the commissions that we generate from collecting that debt.
So, yeah, great result to get us to just over NZD 49 million net profit before tax for the year. Yeah, obviously dividends are a big part of our shareholder proposition, so given the strong performance, directors declared that final dividend to 7.5 cents per share, giving that total of 25.5 cents for the year. And based on a share price of NZD 4.10, yeah, you get to a yield of just under 9%. So, yeah, it's a great result for shareholders, I think. From a balance sheet perspective, nothing too much has changed from last year. Slightly less inventory, although more units, and we'll talk a little bit about that. We've developed some more property, so there's a little bit more flowing through into our property, plant, and equipment.
Little bit of growth in the finance book, and then you see the increase in borrowings, which really just reflect the property development and acquisition progress that we've made. On borrowings, I think the main thing to note is that we've brought two additional funders into our funding mix over the last 12 months, so one bank and one non-bank. And that's really helping bring further diversification and funding capacity to the business, which is really good. We're still very comfortable with the debt levels and debt capacity we have in the business to fund the plans that we have going forward. So we're in good shape.
Yeah, we talk about this every year as well, and I think it's worth repeating, just how much emphasis and how important this is to the future and success of Turners Automotive Group, is having a very strong culture. So employee engagement scores continue to be at very, very high levels, which is great to see. And also, we've now run our employee share scheme for two years, and we have just over 50% of our broader team owning shares in the company. So I think the combination of that engagement plus that ownership mindset is very powerful for us. Okay, let's move on to the segments.
Yeah, probably the first thing to touch on is just really a reminder that we have this mix, this quite a unique mix of activity and annuity businesses within the group. And that does give us quite a lot of earnings stability, particularly out of the annuity businesses, and there's no doubt that we're entering some challenging times. I mean, we've been in challenging times, but it feels like it could be more challenging. And knowing that we have those finance and insurance profits, in particular, sort of almost, you know, largely locked in for the year, brings us a lot of comfort, but brings good stability to our earnings as well. Yeah, so let's talk about Autos to start with.
So, yeah, I think summarizing auto, we would certainly say we've got a strong brand there in the Turners brand. Our sourcing capability is improving every year, and we've put a lot of effort into our systems efficiency as well. So, yeah, lots of progress made over the year in terms of the underlying platform that we're operating from. Auto retail revenue, 7% higher, which just really reflects the increase in the owned units that we've sold, but we've really generated some very good operating leverage in this business, with profits up 27%.
I think the hero of this story is really about our local sourcing strategy, and the way I like to think about this, and I'd like, you know, you, all of you to think about this, is that we are providing a very convenient and easy way for New Zealanders to sell their car, and that is absolutely meeting a customer need out there. But for us, it's delivering growth, margin, and good sources of vehicles for our used vehicle business. We've seen continued traction and development of this capability through the use of data, our branch network, lead generation, customer experience, and conversion. The high proportion of domestic buying have really helped lock in structural improvements in our margin over pre-pandemic levels, as well as stock turn improvements.
Owned units are up 5% on FY 2023, margin is up 18%, and we continue to target lower priced units, which is where the demand in the market is. We used this slide last year to illustrate where our cars come from and how we sell them, and we've made some good improvement in the buy now numbers, but clearly there is still further opportunity for us. Tied to achieving these higher percentages of retail sales is creating more retail capacity in the business, so very much tied to the branch expansion plans that we have.
We've also had more repo units from finance companies, probably not that surprising, and increased numbers of government fleet cars coming through over the last year, which all flows through into that wholesale auction channel, which is one of the reasons those numbers are up year-on-year. We thought this slide was useful just to help illustrate how the footprint is moved over a period of time, and kind of what it looks like based on the commitments that we've got so far and into the next sort of two to three years. So you can see the graph kind of moves up and down as we've moved out of some of the larger wholesale auction facilities and kind of distributed some of that footprint across smaller retail operations. But what we are in is more places.
You can see that the things that we control in terms of how this business performs are both the footprint expansion and the number of cars that we source locally. We think very much that there is a very tight connection between the number of places we are and our ability to source cars for the Turners Cars business. As a used car business, it's like any retail business, you make the money when you buy, and the sourcing of those cars is just so important to the ongoing success of the Turners Cars business. That is why we put the effort that we do into it.
But what we do know is the combination of that additional footprint we've committed to bring additional opportunities to source vehicles, and that will lead to additional sales, so we should see that red line continue to lift. Our pipeline of branch expansion projects is building really well. I mean, I think it is right for us to point out that we are entering a build phase now. So we've delivered Timaru and Napier over the last sort of 12 months, in fact, in the last quarter of FY 2024. But we're now into this kind of development phase where we've got a number of projects on the go, but they won't really land until the latter part of next year and into the next sort of couple of years after that.
So, yeah, we're certainly seeing more opportunity around the property side of things come to market as interest rates and holding costs increase. We've got, I think, four conditional offers in the market at the moment, Aaron?
Yes, correct.
Yeah. So there's a lot going on in this space. And, as you can see on the right, you know, still plenty, plenty of opportunity, for us. But we're really excited about the list of projects that we've got, on the go at the moment. The other highlight in the last year has been the growth that we've seen in, damaged and end-of-life volume. So, you can see the obvious uplift in units processed in both FY 2023 and FY 2024, due to the weather events. However, even without that additional volume, the numbers of damaged and written-off vehicles that we are getting to sell just continues to grow organically.
I think that's largely reflecting the fact that we've got this old vehicle fleet, so 20% of the cars in New Zealand are over 20 years old. So if something happens to one of those cars, it just becomes uneconomic to repair those vehicles, and they end up at one of our damaged and end of life branches. So yeah, we're expecting units in FY 2025 to normalize clearly, off the back of Cyclone Gabrielle and the anniversary weather events in Auckland. But that number should normalize around that 30,000 level, we think. In finance, we really do feel like we've done a pretty good job of weathering the interest rate shock. We've continued to improve the quality in the loan book, and we're, you know, pretty close now to being back into growth mode.
Revenue's up, and unsurprisingly, profits are down as we emerge from what is hopefully the last rise in the interest rate hiking phase. What I do want to focus on is a couple of things here. Our loan book has shown some growth from the low point, sort of mid last year. But I think it's worth pointing out that the period where the loan book declined was where we were most focused on rebuilding our margins and focusing on quality. We were prepared to accept that we would write less business, if we were to maintain our, maintain our margins and, maintain our quality standards. We were absolutely taking our medicine, but it wasn't the time to trade off risk, for growth, in our view, and that has put us in a strong position heading, into this next period.
Growth in our controlled lending, so that's the lending that we do directly through the Autz business, so no dealer or broker in between us and the customer, plus the lending that we do through the Turners auto retail network. So that lending is up 23% year-on-year, which is, you know, fantastic. But importantly, this is the lending we really want to see growing, because it's our highest margin business, but also our lowest arrears performing ledger as well. So we earn more margin, and the arrears perform significantly better on a like-for-like basis. So it's great to see these channels growing for us. Our net interest margin has stabilized. In fact, we've started to see it grow again, and that should gather pace as the interest easing cycle kicks in.
We do have a few lower priced interest swaps running off in H1. So these are some of the swaps that we took out in 2021, 2022, when interest rates were very much lower, which means, you know, clearly there won't be a straight line back off the bottom, but it is very good to see that net interest margin expanding again. Our quality continues to improve in the loan book, so the graph on the left there just showing the average credit score for the loans that we've onboarded in that half. So we're, we're continuing to see that graph move upwards, which is great. That is a very deliberate strategy on our part.
And, yeah, premium or super prime borrowers now make up over 50% of our entire loan book, and that number will continue to grow. As you can see, in the most recent half, 56% of our lending was made to those premium borrowers. And it's kind of no surprise that given our focus on quality, we are outperforming the broader market in terms of arrears performance. So the red line on that graph is data we get from Centrix. So that is measuring the entire auto loan portfolio, some 600,000 customers, against our own loan book, and you can see we're less than half of the arrears that the market is showing at the moment.
So, yeah, we're really pleased that we are in a very good position heading into what is going to be a tough, well, an even tougher period for consumers. And we're also taking what we think is a very conservative position around our provisioning. So as well as our BAU provisioning, we have another economic overlay provision, which has remained untouched over the last year. So that NZD 2 million we started with at the beginning of the year has actually been added to, so we've increased that by another NZD 300,000, which is very good. In insurance, yeah, well-tuned business distribution networks remain, you know, vitally important for us. And we've laid the groundwork or the building blocks for a direct-to-consumer offer.
So this is really about addressing that 50% of the market where people are selling private, private to private, and we think that's a big opportunity, particularly for mechanical breakdown insurance. We've also replaced our core system over the last year as well. So I think delivering the result that we have and replacing the core system has been an outstanding achievement from the team of people at Autosure. Our claims continue to be well managed. Claims cost inflation being offset by less frequent claims, and that's sort of as a result of people driving less, I suppose, so working from home and probably some cost of living pressures and things. But we feel we're starting to see the end of that claims inflation phasing.
Certainly the last couple of months, we've started to see that plateau off, which is good. We've also introduced two new layers of risk pricing in the last year, and that just means that we are getting the right return for the risks that we take in that mechanical breakdown book. In credit management, this is probably a reflection of the broader economy in some sense. We're seeing the business recover as we load more debt on behalf of our clients. That timing economy is absolutely supporting growth, and our payment bank of arrangements is starting to rebuild. So debt value up 14% year-on-year, and that has led to an increase in debt collected as well.
You can see here the New Zealand-wide credit metrics continue to deteriorate, and are now the worst they have been in the last seven years. So that does give us confidence about the debt loads that we should see going forward, for the likes of the banks and large government agencies and things that we do work for, as well as SMEs in New Zealand. Okay, looking forward, yeah, we've used this slide four times now, and I think it's useful just to, for people to understand how we view risks in the business and kind of how we see them tracking. So the interest rate risk and regulatory risks remain at the same levels as they did at the half year, back in September. But we do feel the recession risk has increased.
It moves from medium to medium plus. There's no doubt trading conditions have got harder in the last quarter as consumers continue to react to the higher interest rates here in New Zealand. For our growth model for FY 2025, in the short term, these are the key work streams that support growth. So very familiar themes, I'm sure, to many of you. In auto retail, it's all about stock acquisition, keeping our branch network plans going, increasing those percentages of retail sales, and driving up our lead to sale conversion rates to unlock further growth. In finance, we'll continue to target premium lending and manage margins and pricing. In insurance, expanding our digital distribution and launching this direct-to-consumer offer are top of the work stream list.
In credit management, we're well positioned for the next stage of the New Zealand credit cycle. Anticipated deterioration in economic conditions during the first half of 2025, combined with cycling against our high growth first half last year comparative period, rising from those extreme weather events, means we expect the first half to be testing. Our near-term focus remains on exceeding the NZD 50 million net profit before tax goal in FY 2025, and despite that is despite the economic backdrop. Beyond FY 2025, Turners is well-placed to continue to make strong progress thanks to the resilience of a diversified business model, that combination of activity and annuity revenues, strong and committed team, and a clear strategy for future growth.
Having successfully met our FY 2024 target a year early and remaining on track for our FY 2025 target, we are announcing a new NZD 65 million net profit before tax for FY 2028 target, and it is underpinned by sort of five key areas: Auto retail branch expansion; the retail optimization, which is that transition of unit sales from wholesale auctions to retail; growth in the premium lending and finance, and particularly as the economic cycle eases, those interest rates start to reduce and become a tailwind for that business. And insurance will come from growth in market share gains and direct-to-consumer distribution opportunities, and, and credit growth from rebuilding the payment bank as debt load increases.
As you can see here, over that 10 years, if we—you know, assuming we get to our NZD 65 million target, which we feel is on the conservative side, we'll achieve a compound annual growth rate of just under 10%. And this is how we see it building up. So we're calling out really that the big change is the additional growth coming from auto and a recovery from finance. So in auto, it's really about the new branch contribution, so that additional profit we create from bringing on those new sites and more retail sales shifting out of the auction channel and into our retail channel. The headwinds in finance become tailwinds. We start growing the loan book in a more material fashion. And that additional NZD 6 million is not far above where we've had that business historically.
Excuse me. In insurance, the growth will come from direct and digital distribution, and credit delivers growth as low pandemic level arrears return to more long-term run rate levels. So like last year, this gives some indication on what the growth pathway looks like, which we think is very useful for shareholders. There is a short video up on the Turners Automotive Group website, so that's just a short summary of our results if you want to take a look at that. But yeah, just before we finish and open up for questions, just want to acknowledge certainly the efforts of our team, our board of directors, people in our branch networks, who just continue to deliver day in, day out for our customers and for our shareholders. And this group continue to be totally committed.
to the business and prepared to go above and beyond. We're very lucky to have such an engaged group of people. So let's open up for questions. If you just wanna raise your hand. Grant Lowe, we'll start with you, so hopefully you can come off mute there.
Hi, guys. Can you hear me okay?
Can do. Thanks.
Yeah.
Yep.
Okay, good. Yeah, I mean, obviously very strong result and, you know, a number of, you know, continuation of the strategy performing well. But just sort of thinking about, you know, the next few months and, you know, looking for signs of where we might see some negatives. Just in terms of the volume side of things, so, you know, being flat at the industry level in the month in the year to date, and, you know, obviously improvement for you guys on footprint and et cetera, what are you seeing in terms of lead indicators for both buyers and sellers in terms of, like, either footfall or web traffic or the like? What, how should we be thinking about the next two or three months?
Yeah. Yeah, lead levels are very strong for our guys, so up on last year. I think the year is certainly, yeah, we're seeing some drop in the conversion rates from lead to sale. But yeah, not material. I mean, Aaron, you chip in here, but I suspect we're going, you know, see probably a slight reduction in margins as we push volume a bit harder.
Yep. Yep. Yeah, I think continuation of last year's trend as well, where, you know, demand is certainly moving down, down the price curve. So, you know, people, people are finding reasons not to do things, perhaps, in this environment, but, you know, used car market's pretty resilient, and if you need to change your car, then you need to change your car, and it, and it, it's just really where you, where you set your sights, what, what, you know, what price level and quality level you set your sights at.
Yeah, okay. No, that, that's useful. You answered a couple of questions there. And in terms of, you know, the recently opened, Napier and Timaru sites, how are they trading?
Yeah, really well. So both above expectation. Yeah, I mean, the sort of anecdote, I suppose, is, I mean, Napier's been in that geography for some time, and it's just a-
Yeah
... an upsized, upscaled site.
Yep.
And much more prominent, so you'd expect it to go better. The Timaru site is interesting 'cause it's a new, new geography, new market for us. I mean, they've had, yeah, market share levels, sort of high 20s within two months of operating. So yeah, that, that, that is going very, very well.
Oh, okay. That's, that's good. On the finance side of things, so yeah, it, it's, you know, we've obviously had quite a lot of change in the last few years with interest rates coming down and then rapidly rising alongside the changes in your loan quality. So, so we haven't really sort of seen a steady state path for some time, if, if ever.
Yes, that's true.
... Yeah. So with the current, you know, lending standards that you've got now and the book size at, you know, 420 odd or whatever it is, where do you see steady state profitability for that finance finance segment at, under sort of stable interest rates and mid-cycle impairments? And I guess that sort of, you know, leads on to the question around the FY 2028 target, which we can come back to, but, it like, where do you see that profitability steady state?
Yeah, it's a good question, Grant, because we don't, we don't see a steady state for that business. We see quite a growth path for that business in the medium term, for the reason that, you know, we do have, you know, we, we, we have quite a low market share in this business. We think we've got pretty competitive funding, get good support from our bankers, just added another financier into that mix. So, I mean, our first priority is to rebuild profits to the levels they were at a couple of years ago.
So that's kind of, you know, sort of 50% up on where they were, this year that we've just seen, and that's what's reflected in that medium-term forecast, is, essentially, I think we're looking at 60+% growth, to take it from NZD 12 million odd profit before tax this year to, to NZD 20 million in FY28. But I think you can see in the numbers there's been a significant improvement over the course of the last 12 months. So in the first half, profit in that business was around about NZD 5 million, and in the second half, it was 40% higher at NZD 7 million. So I think you can see in this year's numbers that the trend has certainly turned in the right direction again.
So yeah, pretty confident, pretty confident in that FY 2028 number. And yeah, I kind of see further growth from there. And that's simply a function of, you know, us growing market share in a market that we know really well.
Yeah. Yeah, okay. Look, I guess just while we're touching on the finance side of things, that, that FY 2028 target then, do, do you have a figure in mind for receivables to achieve that level?
Yeah, I think we're looking at another 25% from memory, receivables growth. So, you know, just over NZD 100 million.
Yeah. Okay, cool. And then-
Oh, no, no, no, sorry, no, more than that.
Yeah.
We're talking about getting to 600.
Yeah, 600. Okay, yep. Okay, cool. Just a couple more. Yeah, you talk about the lower interest rate swaps rolling off in the first quarter, impacting 1H 2025 NIM, which is, I understand, but in terms of, where you expect to see NIM in the first half, obviously it was sort of round about 5.2% in 2H 2024. Do you expect it to be flat on that, up or down?
Yeah, slightly up.
Yeah. Yeah, okay, and then, last one around arrears slash impairments and unemployment assumptions, and the level of arrears we might expect at sort of peak unemployment.
Yeah, so we've got some modeling going back to the GFC, which was probably the, you know, the most recent sort of significant jump in unemployment, and, you know, essentially, that informs us that there is, you know, the answer, your feeling, your sense that arrears would be tied to unemployment rates because essentially it's about loan affordability is correct. There's almost a direct correlation between unemployment and arrears in our GFC experience. So yeah, so we're modeling, and we modeled our economic overlay provision off the back of an increase in the unemployment rate up to sort of mid-fives.
So that's what a couple of the big banks are projecting, sort of 5.5%-5.7% unemployment, up from the 4.3% it was at the end of March this year. So that's our basis for putting aside another NZD 2.3 million of anticipated credit losses over the next two years, is really that, you know, the economic conditions all continue to tighten. And in order for the Reserve Bank to bring inflation under control, you know, I suspect they feel they need to break the economy, and, you know, that seems to be the path that we're on. Notwithstanding that, you know, unemployment rate peaking at sort of mid-fives is still quite low from historic standards.
So yeah, so we've gone with a forecast, a higher forecast. The Reserve Bank's own forecast is for 5.2% unemployment peak. The trading banks are a bit more pessimistic than that, and we've taken the more pessimistic view as well.
Okay, thank you. I'll let somebody else have a turn.
Thanks, Graham. James Lindsay, we'll go to you now.
Thanks, gents, and congratulations on a great result. I assume, given the recognition, the well-deserved recognition for the Infinz awards, Todd as well, that this is not just Tina involved with this one. Well done.
Thank you.
And again, yeah, sort of leading away with having good targets out to 28. A few questions if I can, maybe some for Aaron as well. Just with regard to sort of with the expansion of sites, et cetera, going on, and you talked about CapEx for the sort of latter part of the year. Can you give us an idea, sort of the of the actual CapEx spend that will be going on in FY 2025?
Yes, I can. We are talking about probably NZD 18 million, give or take, across the 4 sites that we're planning on having developed either, you know, by the end of FY 2025 or in the first quarter of FY 2026.
Okay, great. Thanks very much. And just a, as sort of a comment with regard to the great work that you've done on the brand over the last few years. What's the sort of general view with regard to spending more or less in sort of downturn time periods? And obviously, you've called for pretty good CAGR for the next three or four years, but just, you know, what you're expecting to spend on the brand.
Yeah, we've been sort of, I suppose, testing the effectiveness of the spend over the last, well, three years since we launched that campaign. So we've been dialing it up pretty much sort of every half or so, and we've seen a corresponding increase in the lead generation that we've seen from that spend. I mean, I suspect, you know, the next period I think will be, yeah, more judicious, probably, about the way we're spending that money, James. It just kind of feels like, yeah, that will be the right approach, but, you know, we'll kind of see how the half plays out, to be honest. I don't know if you've got any other...
Yeah, I mean, I think this is the time in the cycle when we would anticipate building market share. So, yeah, whilst we might be quite measured over the next six months, I think we'll still be-
Yeah
... sort of outspending our competitors. And yeah, I mean, my, my view is that we might look for other discretionary cost savings to tip into the marketing budget just to, you know, make sure we can continue to build our market share.
Yeah. That's good, good, heads-up. Just, thanks for the extra detail on slide 29 on the end-of-life stuff. Can you just remind us again just what the sort of one-off benefit for over the year was for on the sort of PBT?
Yeah, we talked about this the first half of last year, and we thought it was about... It's between NZD 1.5 million and NZD 2 million in the first half of FY 2024.
Yep. Okay, yeah, thanks. Yeah, yeah, so it hasn't changed. Albeit you sort of mentioned that you thought those end-of-life stuff was actually gonna remain relatively elevated, so is it probably more towards the lower end of that range?
... Yeah, so there'll be organic growth, you know, as we've seen in the last, well, for the last 10 years, organic growth in that business due to the aging fleet. So yeah, some of that will be mitigated. But yeah, there's a long-term trend of growth in that business, and unit volume is sort of up in the 5%-10% range. So obviously, we're not expecting a big surge from weather events, but every year, that business just grows organically, as you know, more and more old cars essentially hit the end of their economic lives, whether that's being damaged in an accident or simply running out of puff.
Yeah, it's got a long runway, that business, and that's one of the areas we're investing in for site expansion as well, is essentially to give us the capacity to deal with what we look at as, you know, quite a medium-term opportunity.
I think the other thing, James, is that those weather events did create some demand for the, you know, the cars business itself, just out of replacement vehicles.
Yeah. Yeah.
You are kind of cycling off that aspect as well.
Yep, noted. And then just last one from me. Yeah, obviously, on the credit management side of things, you know, sort of corporates are a bit less willing to sort of pass stuff over to you over COVID. Have you seen sort of a trend to, obviously the debt load's increasing, but sort of the willingness of people out of, you know, to have stuff passed to you, is that increasing as well?
Yeah, for sure. Yeah. I mean, I think what we are seeing, though, is the arrangements that we are putting in place with clients. So for people to pay down these debts are generally the arrangements are longer and of smaller amounts.
Yep. Great. That's it from me. Thanks so much, and, and well done again. Cheers.
Thanks, James. Okay, Kieran, are you happy to go?
Yes. Yeah. Can you hear me okay?
Yeah, sure can.
Great. Thanks for the presentation, guys, and, yeah, congrats on the strong result. First question from me is just around the uplift in profit before tax margin in auto retail. So it was about 170 basis points year-on-year. Would you mind just breaking that down for us and talking about what you think is sustainable going forward?
That's a good question for you.
That's a good question. That's a good question, Kieran. And from memory, we, we do get asked this question every year, so probably should be better prepared. And my answer is probably the same as last year, and that is, I assume it's gonna stay about the same. And the reason, the reason I say that is typically we make, in percentage terms, we make a better margin on lower-value vehicles, and that's where we've pivoted our sourcing, over the last 6-1 2 months. And the reason for that, in part, is, lower-value vehicles come with a higher risk premium, and we buy them and put our brand behind them, and if something goes wrong with them, people can just bring them back to us, and we'll take them back or fix them up.
So we typically see a better margin, or the same dollar margin out of a NZD 10,000 car as we do out of a NZD 25,000 car. So for that reason, I expect margins will stay, you know, pretty close to where they were last year. The only probably proviso to that is, you know, we do see people hitting affordability constraints around the amounts of money they can borrow at the moment, and, you know, certainly the cost of living pressure in some sectors of the economy, in particular, doesn't really feel like it's pulled back yet. So that would be my only kind of proviso around margin. It's not going to increase by the amount it increased over the last 12 months.
So yeah, flat, maybe down a fraction, probably the fair answer to that question.
Great. Thank you.
You're welcome.
And then just a couple of questions on the mechanical breakdown insurance. So what have you seen in terms of policy attachment rates in recent months? Are you seeing those fall as consumers come under financial pressure, or are they holding up okay?
They're holding up okay. Yep.
Okay, cool.
The pressure, the pressure's more on the claims side, Kieran, where the people aren't getting those discretionary nice-to-haves done because they, we feel, they are electing, you know, not to pay the excess, and so therefore, that's one of the reasons claims frequency has come down a little.
Yep, that makes sense. And then just in the last week or so, we have seen, you know, the MBI policies facing some scrutiny from the media. Do you see any potential risk around further regulation in that space going forward?
No, I, I don't. Yeah, I think the... So you're referring to that NBR article?
Uh, yes.
Yeah. Yeah, I mean, I'm... Yeah, look, I mean, the short answer is, well, firstly, our company wouldn't do that. I think that was an unfortunate incident. I think it could have been, you know, clearly better managed by the companies involved, but I don't think that, you know, reflects a sector-wide kind of problem. And Commerce Commission did an investigation of kind of add-on sales, in the car market, a couple of years ago, and, I mean, you know, to summarize their findings, it was essentially there's nothing to see here. Companies probably have an opportunity, as many do, when they're selling through agents and intermediaries, to do a better job of communicating directly with the end customer and making sure they're well-informed.
Which, yeah, I think as a whole, the industry has lifted their game there because it's the right thing to do, but also you've got some regulatory obligations under the CCCFA and things to do there. So, yeah, I don't see regulation as an issue.
Thanks. That's, that's all from me.
Great. Thanks, Kieran. Grant, did you wanna ask any more questions or...? I see you've got your hand up there.
Sorry, I hadn't taken that down, but, yeah, I do have a couple more, if that's okay.
Yeah, yeah, sure. Fire away.
Yeah, okay. Let me just get my thoughts. Yeah, so, just around the FY 2028 target. So is the right way to think about this, you know, receivables growth, NZD 600 million. Yeah, I can understand that. You know, it probably backs out what the NIM expansion or normalization needs to be at that point. And then the retail expansion, adding up the, you know, the various contributions you've called out on that slide from the various sites, that gets us about another NZD 3 billion of the, I think it's six for auto retail. So is the balance of that auto retail, is that primarily the wholesale to retail shift? Is that the way to think about those two components, the auto retail and finance?
Great. Yeah, and a bit of growth out of damage as well.
Right. Yeah. Yeah. And then, just, so we've called out a couple of things on the first half. Obviously, you know, macro will do whatever the macro does. Those swaps rolling off in the first half, you know, the damaged vehicles strong in the sort of prior year. Did you expect first half 2025, as we think about the NZD 50 million target, do you think first half 2025 is up on the previous half, or should we expect to see that slightly lower?
Oh, yeah. I, I think it's gonna be flat, Grant. I don't, I don't think necessarily it'll be, it'll be lower, but it's hard to see it, you know, growing significantly on the first half of last year.
Yeah. Thank you. Yeah, I think that's everything for me now. Thank you.
Okay, cheers. Okay, let me just check the Q&A here. Got no questions, so yeah. Is there any other, is there any other questions from attendees? If you do have any questions, just you could quickly type them into the Q&A, or you could raise your hand and I can unmute you. Your two options. Okay, feels like we might be drawing to a natural conclusion here. So thanks, everyone, for your time. As always, feel free to reach out to Aaron or I directly if you have any further questions. But otherwise, thank you for your time, and have a great day.
Thanks, everyone.
Cheers.