Okay, good morning, everyone. Welcome to the call today and for taking the time. With me is Aaron Saunders, our CFO, and I'm Todd Hunter. I just wondered if someone could raise their hand just to make sure they can hear us okay and see the presentation. Great, thanks. Thanks, everyone. Appreciate that. It's good we're coming through loud and clear. Okay, today we'll go through the full year results, and then we'll open up for Q&A at the end. Just like we've done previously, if people could just use the raise your hand function, and then we can open you up for audio from there. We're not going to go through every slide in the pack. It's reasonably lengthy, as no doubt you've already seen.
There is a bit of additional information that we've put into the appendix, just some of the slides that we've used over the last few years just for continuity. We are happy to take questions on any of the material at the end. Yeah, let's crack into things. Yeah, look, it's been another outstanding year for Turners Automotive Group, and this caps off a really great decade for the group. I think our formula of a great employee experience plus great customer experience leading to a great shareholder experience is well and truly being proven up. Our business has almost tripled in profits over 10 years, and shareholders have been rewarded with excellent dividend growth, as you can see from these graphs and share price growth.
I think the last 12 months in particular have been such a strong proof point for how resilient this business is and the growth plan that we still have to continue with. FY 2025 is our fifth record result in a row, and despite the very challenging macro environment the business was operating within. It certainly was a year of two halves, and you will see that reflected in the pack. Our team did an amazing job of reacting to the challenges that were thrown at us, and the team have remained focused and motivated throughout the year. Our final dividend has been declared at NZD 0.09, taking full year dividends to NZD 0.29 per share.
A slide that you would have seen before, but something that we do like to remind people about and talk about is the fact that this team here at Turners remain really engaged on what we're trying to achieve as a company. Now, people are a huge part of what makes us successful, and we are very proud of the fact that we have over half of our team enrolled in the employee share scheme. The combination of engagement plus that ownership mindset is very, very powerful for creating strong alignment. Okay, I'm just going to hand over to Aaron now to talk through the results.
Thanks, Todd. Good morning, everyone. Highlights, obviously, last year were 10% growth in profit before tax, which is our preferred measure, and that equated to a 17% increase in net profits after tax to NZD 38.6 million. With the growth in profits, as Todd pointed out, we've been able to reward shareholders with an increase in the dividend to NZD 0.29 per share, up 14% on the prior year. In terms of revenues, it's pretty well signaled at the half year that it was a challenging environment in auto retail, so revenue dropped there, reflecting that challenging first half, and also with a higher proportion of lower value cars sold and fewer damaged and end-of-life vehicles. Finance revenue growth reflects our efforts in repricing the loan book and some growth in the overall receivables.
Some modest insurance revenue gains came from higher levels of policy sales and repricing, and credit management revenue increased off higher levels of debt loaded. In terms of net profits, again, auto profits decreased due to that difficult first half. We have seen significantly improved momentum as vehicle pricing has stabilized and margins improved over the course of the second half, with profits over the second half ahead of the second half of 2024. The finance result benefits from strong discipline around credit quality and lower arrears and an increase in net interest margin from gains made on funding arrangements. Insurance result reflects improvements in risk pricing, higher investment returns, lower claims ratios, and a disciplined control of costs. Corporate costs have come down largely due to lower interest and other funding costs. This is a great graph. CAGR on dividends is 14% over this 11-year period.
I'd like to point out that our Dividend Reinvestment Plan will continue for the final FY 2025 dividend, and that gives shareholders the option of converting their dividend to shares at a discount of 2%. Always a reminder for those who aren't currently shareholders that we pay out around 60%-70% of profits after tax, and we pay a quarterly fully imputed dividend. In terms of the balance sheet, inventory levels are down due to faster stock turn and our strategy to acquire lower-priced cars to really reflect where demand in the market is. Finance receivables reflect some growth in the loan book, and borrowings have mirrored the increase in the loan book and also further investments in our property, plant, and equipment. We've completed developments of new sites in Napier, Tauranga, and Christchurch. Our funding is optimized for growth.
The key message here really is that our banks are super supportive. We have funding capacity in place to support current committed branch expansion plans and also to support Oxford lending over the next 12 months. I'll now hand you back to Todd.
Thanks, Aaron. Okay, let's just sort of do a quick flyover of the segments now. As Aaron said, auto retail revenue and profit down for the year, just pure and simply reflecting that New Zealand's economic downturn and that tough consumer environment in that first half in particular, but good improvement in margin and volume sold through the second half. Overall sales volumes for us for cars, we're up 3% year- on- year. I do want to point out that this is the second highest operating profit contribution from auto in the history of the company. Just to put that result into some perspective, I think one of the things that has gone really well is our disciplined approach to stock management. I think this graph demonstrates very well the challenge we had in the first half with vehicle margins.
That really was just because of such poor levels of customer demand that we were having to aggressively discount to achieve the sales volumes and make sure that we were not holding on to stock for too long. Excuse me. This disciplined approach to stock management positioned us well for when the market stabilized and we could rebuild margins in the second half. The used car market itself, talking about the New Zealand market now, is slowly recovering. I think I would emphasize the word slowly here with overall transaction levels up 1% across our financial year. Quite a change with used imports being sort of 21% down in terms of the numbers that were registered in 2025 versus 2024. There are a few changes going on. That is largely due to government regulation. Registered dealer numbers continue to decline, so they are down to around 2% year- on- year.
Just talking about property and branch expansion plans now, we're really pleased to have completed the branch, well, largely completed the branch expansion plan in Christchurch. We'll have our second branch probably opening this week, right, Aaron?
Yeah.
Yep. That is two of the three projects completed, and the third one should be a couple of months away. Also, in the last 12 months, we have completed a new commercial site in Tauriko, just out of Tauranga, and doubled the size of our damaged vehicle operation. We have made really good progress over the last six months. We also have a number of live conditional offers out there. We have three sort of live conditional offers that we are working on at the moment, and obviously a number still in the pipeline that we are working on too. That brings us now to a total of 17 of our sites that we own at a cost on the balance sheet of just under NZD 130 million. That is a photo of the new Hornby branch in Christchurch.
I'll play a little video at the end, which just gives you a bit of an overview of the branch there and a bit of insight into sort of how these projects are coming together now. For those of you who would have seen the new Tina from Turners campaign, we launched that in May. We're very excited to have some new content. We've sweated the 2021 content for four years, so we've done a pretty good job, I think, of getting bang for buck there. We've taken the "Sell Us Your Car" song that we've been playing on the radio for the last 12 months. Initial feedback has been very positive. We think we're in quite a unique position at the moment that we're pushing hard on our advertising spend when others are very much pulling back.
Despite the media attention that Tina has had about moving to Samoa, she is still very available for work for us, so no concerns there from our side. I thought I'd just give you a couple of quick data points. I looked this morning on our YouTube channel. Our 60-second version of that ad has now gone through 1.1 million views on YouTube. The average viewership for that ad for 60 seconds is 56 seconds. Essentially, we're getting people watching that whole ad. The 90-second version has had over 700,000 views. We're getting a very, very good cut-through on this new content, which is great to see. The finance book has been a very strong performer for us in FY 2025. We've continued to maintain our discipline around credit quality. I'm sure everyone's pleased to hear that.
We have seen further improvements in overall kind of lending quality metrics off the back of that. Despite the challenges in the economy, we have still seen some loan book growth, which we are pleased to see. We are growing the book and improving quality at the same time. The ledger's weighted average interest rate is up, and loan arrears continue to perform materially better than the market average. We will just go into that now. Again, it is no surprise with our focus on bringing better quality borrowers into the loan book. Our arrears levels have outperformed that of the market. I mean, what I would say is we have not been immune to the pressure in the economy and unemployment increasing. You can see that in our hardship numbers. Hardships March 2024 were at 58, and hardships this year at 111.
They're still running at very low levels given the size of our consumer book of around 28,000 customers. Yeah, we can see little signs of it, but certainly it's no concern for us because of our focus on quality. We're really pleased with the net interest margin gains that we've made. It's increased further, obviously, as cost of funds have stabilized, and it reflects the discipline that we've applied in repricing the loan book as well. What I would say is the pace of recovery is expected to slow, and medium-term run rate should consolidate around that 6% level. One of the other areas in Oxford that we've been really focused on is sort of operational efficiency and a combination of system enhancements, cutting out lender-intensive low-quality lending and process adjustments, and really enabled us to do more with less.
We have seen that through cost-to-income ratio dropping to 60% from 65%. Loan conversion rates are up to sort of just over 50% for the first time. What we are looking to do is really kind of create a system that auto-approves as much of the lending as possible, subject to certain conditions like providing us bank statements and things down the track. We have a much higher conversion on that auto-approval rate if we can get that positive right from the get-go. All of this is ultimately enabling strong operating leverage for us. We can tip more on the top and do more with less. Insurance has had strong policy growth and premium growth across all our insurance portfolios, and particularly the key distribution partnerships are continuing to deliver significant value. That is those large dealer and finance broker relationships that we have.
I think the other highlight is a comprehensive motor insurance portfolio. This is the portfolio underwritten by Suncorp, has increased by 25% over FY 2024. We are seeing really good growth in that comprehensive motor vehicle book without taking any of the risk on it, which is excellent. We have also launched our new digital platform. This is enhancing the ability for us to sell particularly mechanical breakdown insurance policies directly and through relationships like the NZAA, where we have established a partnership with them. Really good work done to launch the platform and some encouraging early signs. Claims ratios have come down in the last year, reflecting the great work our team does, but also the focus we apply to risk pricing. It is a big part of how we manage that we manage the right return for the risk that we are taking.
Over the last 12 months, we have moved from effectively six risk categories to 14 over FY 2025, which is allowing us to much more accurately price the risk that we are taking on in that mechanical breakdown insurance book. In credit management, we have continued to see the business rebuild from that sort of low point in FY 2022. Revenues up 5%, profits up 11%, and we have continued to see the debt load building in line with what you would expect to see from the tightening economy, particularly in the SME space, but also seeing it come through in the corporate debt load now as well. We have recently onboarded a major new corporate customer, and we are seeing material increase in the first referrer debt that we get from particularly some of the banks.
We're expecting to see some credit benefit from the tailwinds of that struggling New Zealand economy for the next two to three years. That's what this business experienced through the GFC. You can see from this slide, these are the payment arrangements that we have in place with some of our clients, is rebuilding really nicely. Despite the challenges in the economy, our team have done a super job of keeping that promise to keep rates. That's effectively the commitments around those arrangements has stayed steady at 77%. Okay, just to touch on My Auto Shop.
A reminder that we purchased just under half of My Auto Shop last September, and we've been very busy supporting Richard and the team there to grow and initially focus on setting up My Auto Shop to work very closely on some of our branch sites with them helping to service and prepare vehicles that we're getting up for sale. That has created some really, really great operating efficiencies for our branches by not having to move as many cars off-site. We're also now moving to rebrand the business. That process is now underway. We're rebranding that business to Turners Servicing and Repairs and about to start focusing on cross-selling into the Turners wider customer base as well.
Yeah, I still think it's a very exciting opportunity for us, and there's a lot going on, and the opportunity to be that scale player in a very fragmented market is very much live for us. We've used this risk table over the last six reporting periods to just help people understand how we are thinking about the risks and what we're doing to mitigate those. I think really the speed of economic recovery is the main risk to call out at this stage. I think it's now clear to everyone that the recovery is taking longer than we perhaps initially thought might happen last year. Clearly, interest rates are going to need to track lower than we initially thought. Overall, we're very comfortable with the risks and the strategies that we think we've got in place to deal with them.
Just a few comments to sort of finish up on the trading outlook. Yeah, I think while New Zealand's economic recovery is expected to be gradual, Turners anticipates continued strong progress towards our medium-term goal of $65 million over the next 12 months. The business will continue to benefit from the tailwind of reducing interest rates, as will the New Zealand economy, which will translate into more robust demand for cars ultimately. We also expect to see material benefits from our new branches in Christchurch and our other branch expansion plans. That will deliver us ongoing market share gains, and the branch rollout for auto retail will deliver that as well. There are supportive conditions and continued efficiency gains for our annuity businesses in finance and insurance, and increasing operating leverage across the group, which provides a solid foundation for continued profit growth.
Our team have worked incredibly hard to ensure that some of the toughest economic conditions we've faced did not derail our growth strategy. With auto retail now firmly back in growth mode and some really strong results in the second half of FY 2025, we enter FY 2026 with some strong momentum across all our divisions. We believe we are on track to reach that FY 2028 target earlier than expected. There is a lot to feel good about the business, I think. Okay, we will open up for questions now. If I just get back here. Grant Lowe, if I go to you first.
Oh, hi team. Can you hear me okay? Good day. Yeah. Okay. Yeah, just a couple for me. Just around the, yeah, good to see the margins on the vehicles improving.
I think at the first half result, you were talking about early signs of recovery and talking about the average price point for the vehicles that you were sourcing and selling. Can you talk a little bit more around where you're seeing that average price point, like sort of in the second half, and then also on the go forward, how you're thinking about that?
Yeah, sure. Hi, Grant. How are you? We're still operating in an environment where demand is at, it's still at the lower end of the spectrum. Yeah, we're increasingly more confident in buying and retailing higher value cars. Prices, they may have moved 5%-10% from where they were in the first half, and we just see a gradual climb out of that sort of, I guess, of challenge and depression between April and July of last year.
Yeah, right. Okay. I guess it's sort of related to this, but in terms of the finance book, sort of adding low single-digit growth in the period, as you sort of signaled. How are you thinking about that going into the current financial year? You sort of, in the outlook, you've mentioned solid book growth in FY 2026. Just sort of looking to understand what that means.
Yeah, it probably means low double digits, Grant. So 10%+ .
Yeah. Okay. Excellent. That's all for me. Thank you very much for that.
Thanks, Grant. Okay. James Lindsay, you should be able to unmute yourself, hopefully. Nope. James, can you unmute yourself?
Try that. Can you get you now, James? Okay. Let's try. For some reason, it's not working, James. I'm not sure why. Let's try you, Karen. Can you unmute yourself?
Morning, guys. Can you hear me okay?
Hey. Yep. Can.
Yep. Great. Thanks for the presentation. Just a couple of questions from me. Firstly, in terms of your transition from the auction to the retail sales channel in auto, you originally set the target of getting to 70%, I think it was, by FY 2026. But seemed to be making quite slow progress there, hovering around the 51% level. Can you just talk us through what the barriers have been and whether you think the 70% target's still achievable?
Yeah. I mean, clearly, the progress is much slower than what we had originally anticipated, as you kind of pointed out. A couple of challenges. One is, in the last 12 months, we bought a lot more what I would call end-of-life cars that just haven't been suitable for putting through the retail channel.
I think it sort of, I think it reflects the types of cars that people were wanting in terms of those lower value units. Consequently, they had quite low value units to sell back to us. A lot of those made their way through to the damage and end-of-life business. That is one challenge. I think that will sort of correct itself over time. I'm not expecting us to kind of be overweighted in that category of car going forward. Yeah, we'll buy any car. Ultimately, we want more to go through that retail channel. The kind of progress that we've made with the lease companies has been slower than we would have hoped for. Yeah, I think the 70% goal probably is looking optimistic at this point. I think first goal needs to be kind of 55 and then 60.
Clearly, I think 70% by the end of FY 2026 is not going to happen.
Great. Thank you. In terms of FY 2026, no guidance issued at this stage. Can you just help us understand how you expect that growth to come through for the year ahead just by division? Where should we be looking for the growth?
The two biggest businesses here are the auto business and Oxford Finance. I think by definition, the lion's share of growth will come from those two. We are expecting that momentum that we saw in the second half across all the companies in the group will continue.
Yeah, I mean, whilst we're heading into winter and it feels like things are still a bit scratchy out there, it's only nine months since the first interest rate cut, and the transmission mechanism is probably a bit longer than that. Certainly, I'd expect generally across the economy, things to be picking up come springtime. In the meantime, we'll continue to look at opportunities. We see good momentum across all of our businesses at the moment. Yeah, broadly speaking, auto and finance are probably where we see the bigger opportunities, but we should see growth across the board.
Thank you. Final question, just in terms of the pipeline of sites ahead. You've added a few into the pipeline on the slides.
Thinking longer term, how many more infill opportunities and new sites do you think are out there for Turners just in terms of long-term growth prospects?
We certainly feel that we're underrepresented in the Golden Triangle. The Auckland, Hamilton, Tauranga geography in particular, we feel has quite a lot of opportunity still for us. We only have one auto retail site in Wellington, so there's definitely further opportunity there. We probably see ourselves with four sites in Christchurch at maturity, so there's another site to come there. It feels like we've got still four to five years of rolling out sites and particularly infilling in Auckland, Hamilton, and Tauranga, Karen.
Great. Thank you. That's all from me.
Great. James Lindsay, do you want to have another go? Unmute yourself. Nope. Okay. Thanks, James. We've got your questions in the Q&A. Okay.
First question is, what's changing that is providing more confidence in your FY 2028 targets? And can you talk to how much from the servicing and repairs is aiding this in the three new sites you were looking at?
Yeah. I think we're expecting, James, that the environment will be a bit more benign and that interest rates are still going to come down a bit further and probably stay lower for a bit longer. That gives us quite a bit of confidence. We've got about 70% of our debt hedged. We're a beneficiary of the floating 30% whenever rates come down. It feels like we're operating from a better base with a longer runway of rates possibly slightly below neutral whilst the economy in general recovers further.
But broadly speaking, we have been heartened by the performance of our auto retail business in particular and what felt last year at times like more difficult conditions than the middle of the GFC. I think we've got a lot more confidence about the momentum, particularly across auto and finance over the next sort of two to three years.
You want to talk about servicing?
Yeah. We still see that opportunity as a focus on building market share. We haven't forecast any profits out of that business through the FY 2028. We'll just focus on continuing to build. I mean, we do expect to make profits, but this year will be about getting consistently breaking through break-even. Then, yeah, we'll kind of see where we land from a market share perspective.
But I suspect there'll be a trade-off between profitability and market share growth in that business for a bit longer yet.
Okay. We'll just go on to the second question for you, James. So regarding the large new credit management customer, any indication of what sort of debt load could be expected into FY 2026? Yeah, that'll build because the arrangements we will get from that customer are typically long-term arrangements. We will earn our commission as that payment arrangement bank sort of builds for that customer. There should be somewhere between NZD 100,000-NZD 200,000 of extra revenue off the back of that customer over the next 12 months. Yeah, reasonably material for the EC business. Can you talk through your view of corporate debt with the pipeline in the three new sites you're looking at?
Yeah. In particular, we've got two conditional purchase offers in market at the moment. Two of the larger sites will be leaseholds. The land in Drury and in Takapuna will both be lease deals. In Whanganui and one other unnamed site at this stage, we're looking at a purchase. Probably talking about a spend of around $15 million-$16 million across the two sites we're looking at buying if they go ahead. Obviously, leases will be at good sort of market terms on the other two. We're still quite relaxed. If a lease deal is a better deal for the business in the medium term, then we'll happily enter into that. Alternatively, if we think we can add more value by owning the site long-term, then we'll follow that path.
Okay. Just moving on to the next question in the Q&A, which is from Jori, Jori Sels. So Jori, you've asked, can you please elaborate more on how you have achieved the rebound in average margin per car from sort of $700-ish per unit to $900-$1,000 per unit from the first half to the second half? Yeah. I mean, perhaps I can just answer quickly, and Aaron can add any comments he wants to. I mean, in the first sort of four months of the year, we went through, the market went through quite a pricing transition. So prices for a vehicle or a type of vehicle were dropping quite fast. And we were having to, and that was just simply off the back of poor demand. Demand was leaking in the car market.
We were having to apply bigger discounts than we ordinarily would in a stable pricing market. As soon as pricing stabilized, which started happening probably from late August through to September, and we could see demand stabilizing at a level, we were able to buy at better pricing. Plus, we applied quite a bit more discipline around the discounting that we were doing inside the business as well. It was really a combination of those two things. Anything else that you'd add?
No. No.
Yep. Okay. Let's just go back to here. David, hopefully, you can, David Oxley, you can unmute yourself and ask a question or two.
Yeah. Thanks, Todd. Hopefully, that's worked.
Yep. It sure has. Perfect.
Cool. I just have one simple question if I may. I think it's a follow-up to what Grant asked earlier.
In the half-year pack, you had a bullet point telling us that the average Buy Now sales price for own stock fell by 11% in the first half to $11,600. Do you know the number for the second half and the movement and what that means from a four-year perspective, please?
Let me just bring that up, David.
Thank you.
Okay. I entered the analysis on a full-year perspective. The full-year perspective looks like we are down $800 on the full-year FY 2024 on a per-unit basis. Plus GST, you are close to $1,000 down for the full year. At what sort of level? Give or take, we have recovered half of the delta over the second half.
If it was $11,600 at the half-year, I think that implied it was like $13,000 at the first year, 2024.
What was the full-year number for FY 2024 that you're down $1,000 on?
Units or dollars?
Dollars per own vehicle through the buy-now channel.
Yeah. So that's probably close to $600 down. Probably best if I just go through those numbers again, David, and drop you a note rather than have them on the fly.
Yeah. Sure. Okay. Thank you. Sorry, just the other question I had, and we'll no doubt catch up later, but just the split of the impairment charge within the finance company heavily weighted to the second half. Should we be concerned that things are more worrying for you from that perspective given that increase that's come through relative to the first half?
No, I don't think so. I think we've probably taken a more conservative stance in terms of making those decisions earlier, which may, well, which has brought forward some of those write-off decisions. It is unusual. It's quite a difference. It normally isn't that seasonal. Looking at the arrears today, David, yeah, we don't see that concern.
Okay. Cool. Thank you.
Great. Thanks, David. Right. Heiko, did you want to ask a few questions? You could unmute yourself if you do, or as if you don't.
Hello? Can you hear me?
Yes, we can. Yep.
Fantastic. Yeah. Sorry. This amazing new technology. Yeah. I guess, first, thank you for the presentation and congratulations on the result. I guess, yeah, just a couple of questions when looking at the presentation. I noticed this trend of inventory down. I guess you said yourself, the markets ask for cheaper cars.
I assume this means they are as well a little bit older and maybe a little bit smaller. I was just wondering what this trend means for your insurance business. Do you expect higher costs for older cars to be repaired? Is this something you've thought about?
Yeah. I think that the granularity we've introduced into our risk pricing, Heiko, is probably to bear that in mind. There comes a certain age where we won't insure a car for mechanical breakdown insurance just because the propensity to break down goes up. Broadly speaking, we're happy with the risk pricing we've got in place in that business and that we are selecting vehicles that aren't going to behave in an unrepresentative fashion. It's something to know. It's something that's happening across the broader population of vehicles in New Zealand.
Vehicles continue to age in New Zealand. There comes a time when those vehicles get to their last owner, and we're unlikely to be insuring those vehicles for mechanical breakdown. Their next move is more likely to be to a scrapper.
Yeah. I think the other comment I'd make, Heiko, is that I think this is a moment in time. It reflects the kind of broader macro environment that people are wanting to spend less on vehicles. I mean, that will change as the economy improves. People will spend more on vehicles. I don't think it's necessarily a kind of a lasting sort of influence over our insurance portfolio or our stock portfolio for that matter.
Does this mean at the moment you insure less of your cars?
No. It hasn't changed that.
I think, as Aaron said, we've done quite a bit of work around our risk pricing in that insurance portfolio. We've actually introduced higher premiums for older cars that have done more mileage. We want to try and insure as many cars as we can. We just want to make sure that we understand the risk and we're pricing for it accordingly. I think we are doing well, I know we are doing a better job of that now than what we were a year ago.
Okay. Yeah. The other question in this context, I guess if we look at this trend, yeah, you're selling older cars. I guess I'm wondering where you see the end game. That's not saying you're doing anything wrong. It's just wondering how the future might look.
I mean, yeah, it's an interesting comment.
I mean, ultimately, what we sell reflects what was sold new into this country three to kind of 12 years prior and also reflects the kind of used import profile of cars coming into the country as well. If I look at the number of hybrids in particular and some electric cars, the proportion of hybrids and electrics that we sell are much higher than what it was a year ago, two years ago, three years ago. I mean, they're coming through at kind of record levels. I mean, largely, that's due to the hybrid and used imports. They are by far and away the biggest proportion of those cars. Ultimately, this business works on people cycling vehicles and cycling the vehicles that are in the country.
Yeah, I guess to some degree, our stock profile will just simply reflect the average stock profile of the fleet in New Zealand.
Okay. How is the Tesla business going?
That is a question for Elon, I think.
Yeah. I mean, residual values on electric cars are a challenge. We do not own any or very few. We have got a few old Leafs, I think. We have probably not even got any left anymore. That is a challenge for the owners of those cars.
Okay. Thank you.
Okay. Richard, Richard Cotty, did you want to ask some questions? Go ahead. I can see you have unmuted yourself, Richard. We just cannot hear you. Sure.
If the microphone's not working the other way, to do that would be just to ask a question through the Q&A function just by typing in a question if that's a better way. Richard, while we're waiting for you, I've just seen a couple of other questions come in. Just a question from Greg Main. G'day, Greg. Are you expecting any changes in your funding sources going forward? Can you remind us of your provisioning policy given the Centrix data is indicating potentially another tough year for consumer arrears? Do you want to take that, Aaron?
Yep. Yep. Yeah. We provision based on historic behavior, largely a function of how long loans are or aren't in arrears. As loans get longer without payment, then that provision percentages go up over time.
Typically, we write off loans if we have not had a payment over between 120-150 days. We will write that loan off, subject to our ability to contact that customer. We feel that we are pretty spot on in terms of provisioning. We are still carrying forward about NZD 1.9 million of economic overlay, which is essentially a buffer against further kind of challenges in that space. Unemployment is running at 5.1%. Depending on who you listen to, it will go to 5.3% or 5.5%. We feel we have pretty conservatively provided for that situation. Just to the second or third part of your question, do we get any contribution on sales using finance that is provided by other financiers? Yes, we do get an origination fee or an introduction fee on business that does not meet our criteria.
Around funding sources, yeah, we'll probably look to continue to diversify funding over the next couple of years. I think there's quite a bit of appetite amongst financiers for good growing businesses.
Okay. Thanks, Greg, for that one. Just a couple of follow-up questions from James Lindsay. Following on from Grant's question, can you talk to if you expect any further gains on second half 2025 margins in FY 2026 auto retail or just stabilisation on Q3, Q4 performance? We'd say stabilised, right? Yeah. Yeah. Stabilised performance, James. Okay. Richard, I'm not sure if you've got your microphone to work or not, but we can't hear you. I don't know if you want to give that another crack or, yeah, if you wanted to just ask a question through the Q&A would be the other option. It doesn't look like that's working as we might have hoped for.
Okay. Looks like we've got to the end of people who wanted to ask a question. I guess now is your opportunity. If there's any last questions people wanted to type into the Q&A, now is your chance. I was just going to finish up for those who want to stay on. It's probably about a minute video. Just to show you a quick overview of our new branch in Christchurch and Hornby. Bear with me for a second. This video might be a little jumpy, but hopefully, it should come through okay. One second. Okay. That's the new branch in Hornby, 15,500 sq m. Yeah. We're very proud of that development. The team moved in about three, four weeks ago. Yeah. All going well. Yeah, I think the strategy of us being closer to our customers is absolutely paying off.
I know the sourcing leads, the cash now leads. That is where we buy cars off people, have certainly risen off the back of being closer to people. I think the strategy of acquiring more stock is definitely going to pay off in Christchurch. Okay. That is a wrap for us. Again, if you have any further questions, please reach out to Aaron or me. Our details are on the back of the presentation. Apologies for the error that a few people have pointed out to us this morning, the bottom of the main announcement. We failed to update the time of this call, but we will get that right next year. Hope you have a great day. Thanks, everyone, for your interest.
Thanks, everyone.
Cheers.