Trading environment ‘harder’
The chief executive officer of Turners Automotive Group says the persistence of the Middle East conflict has slowed New Zealand’s economic recovery and dented consumer confidence.
Todd Hunter, pictured, told shareholders at their annual general meeting that higher fuel prices have materially reduced demand for diesel and larger vehicles with petrol engines.
In turn, this made the first half of financial year 2027 “a far harder trading environment than either of the two prior first halves”.
Outlining what has changed – and what hasn’t – since the company issued a market update three months ago, he added: “Although we repositioned inventory quickly, the effect on vehicle margins has been longer and larger than we anticipated in May.
“On top of this, we’ve had lower sales volumes of ex-lease cars. The reduction in market prices for diesel utilities and petrol SUVs has reduced the level of sales as lease vendors take time to adjust to new market prices.
“Consignment units sold are down 14 per cent for the first four months to July. We see this as a timing issue. As lease vendors’ pricing expectations adjust, we expect those units to start to sell through.”
As for what hasn’t changed since May, Hunter told the AGM in Auckland on August 19 that the company’s diversification continues to deliver stability in earnings. Finance growth has more than offset the reduction in automotive retail profit, and group net profit before tax (NPBT) for April to July was four per cent ahead of the same period last year.
“This is a great result given the conditions we’ve been operating in,” said Hunter. “We’ve seen strong loan-book growth continue, up a further 7.5 per cent since March 2026, and arrears at 2.1 per cent in July against an industry figure of 5.2 per cent despite the pressure on consumers. Insurance and credit management are broadly in line with last year.
“Most importantly, what hasn’t changed is our long-term strategy. We remain confident and continue to work at pace on both our auto-retail branch expansion and finance-book growth opportunities.”
As for the outlook, the group continues to target $65m NPBT in 2026/27. “However, without a resolution to the Middle East situation and volatile swings in oil prices, and a recovery in consumer confidence, sales of large-engined vehicles and diesel product are likely to remain challenging.
“This short-term uncertainty does create some risk in achieving that $65m target. Conversely, a faster recovery in confidence and margins in financial year 2027 would work the other way.
“But I reiterate the short-term nature of this environment and we expect strong earnings growth momentum to return in financial year 2028. Nothing has changed management’s conviction in the medium-term plan. Turners is tracking well towards its $100m NPBT target by financial year 2031.”
What follows is an edited version of Hunter’s presentation to shareholders at the AGM.
Vehicle market
“It’s been a bit bumpy out in the vehicle markets at the moment. Overall used-car volumes from April to August this year are tracking around three per cent behind the same period in 2025, and there has been a noticeable shift in the market since the fuel shock hit New Zealand.
“It has definitely impacted consumers’ confidence and we are still seeing demand for lower-value cars at the expense of higher-value cars, and diesels and larger petrol engine vehicles. We would expect this to revert as the economy improves as we saw in the November to February period in the last financial year.
“Dealer numbers are flat and we have seen a stronger demand for used imports with small hybrids in demand.
“It is interesting to look at the relative market shares of new-car sales by fuel type since the Middle East conflict kicked off. Diesel’s share of new-car sales has dropped by almost one-third from around 30 per cent a year ago to 21 per cent in July.
“The other half of that story is battery and plug-in hybrids have gone from about 15 per cent of new sales to more than 30 per cent in 12 months.
“The other material change is the number of new-car brands available in the New Zealand market. Three years ago this was around 50 and today it’s around 80. And it’s the Chinese brands being the big change.”
Automotive retail division
“We were pleased with what was a record year in the auto retail division and what turned out to be a much stronger second half as the economy kicked back into gear.
“As we called out in May, trading has been impacted by the Middle East conflict. We think this is short term in nature, but selling diesel and larger engine SUV type product has been particularly challenging. Our expectation is this will improve through the spring and summer period.
“What I did want to spend some time on was updating you on how our branch expansion plans were coming along. We have six projects under way at the moment and another five opportunities we are in a negotiation process on.
“We are targeting another 15 branches by financial year 2031. There is no expected profit impact from new branches in financial year 2027 – this year is groundwork.
“We think the property ownership aspect of the business remains overlooked by the market and we currently own 23 of the branches with a carrying value of $170 million. We are adding value to these sites and this asset will appreciate over time as well.”
Credit quality discipline
“Finance has been a very strong performer again for us in financial year 2026 with a record profit achieved. We have continued to maintain our discipline around credit quality and seen further improvements in overall lending quality metrics.
Consumer arrears were 2.1 per cent in July against an industry figure of 5.2 per cent. We are outperforming the arrears in the broader market, so this validates our strategy of being focused on the quality end of the market.
“The other big benefit is this focus on quality delivers us great operating leverage. We are growing the loan book but having to add very few people to help service this growth because our customers are reliable, stick to their commitments and are easy to serve. The upside for us as a business is even greater.”
Insurance returns up
“Insurance has also had a record year of profit performance. This is a stable and consistently performing business in the group.
“Our distribution networks are strategically important and we are continuing to build out our digital direct capability as an additional growth channel. We’ve had strong premium growth across all insurance portfolios, with our dealer and finance broker partnerships the primary driver.”
Servicing and repairs
“We continue to gain traction in the servicing and repairs business. Our partnership with VTNZ where we have integrated into the failed WOF process and comms is starting to deliver repair bookings. This is still very much in its infancy.
“We have also seen some good wins with small fleet owners and with one of Turners major lease vendors, who have offered mobile servicing to their leasing customers. Bookings from both are starting to come through.”
Credit management
“Financial year 2026 debt referrals were constrained because several large clients placed temporary holds on debt referrals while undertaking major system implementations. As a result, revenue was down 17 per cent and segment profits down 49 per cent.
“We also wrote down the goodwill on EC Credit by $7.5m with the new intangible valuation reflecting more conservative future earnings forecasts.
“So far in financial year 2027, we’ve seen all but one of the banks recommence their debt load and we are seeing improvement in profit performance over last year. EC Credit is non-core to our automotive platform. It will be managed for cash with capital progressively reallocated to the core business.”
Latest Centrix data
“New Zealand credit metrics somewhat surprisingly continue to improve and are at their lowest level since 2021. What this suggests is people are more aware of credit scores and the impact of their defaults, and are acting conservatively by building savings buffers and keeping on top of commitments.
“Consumer behaviour is being shaped by concerns around interest rates, employment security and political uncertainty. The result is less spend on discretionary items, so the consumer is cautious rather than stressed – spending less, but staying on top of their financial commitments.”
Company funding
“The key message around funding is that our banks are being very supportive. We’ve improved our funding structures over the past 12 months to improve pricing, increase credit limits and reduce the amount of our own capital required to support these facilities.
“We are getting credit for managing our business well. We have funding capacity in place to support current committed branch expansion plans and to keep Oxford Finance growing over the next 12 months. And every investment decision still has to clear a 15 per cent return on equity hurdle.”
