Geopolitical tensions cloud Turners’ retail outlook despite record FY26 profit

Record profit growth accelerates Turners’ strategic targets

Turners Automotive Group (NZX:TRA) has delivered a standout FY26 result, with normalised net profit before tax (NPBT) soaring 16% to a record $63.2 million. This performance not only surpasses the prior year but also accelerates the Group’s $65 million NPBT target by a full year, now expected in FY27 rather than FY28. The momentum underpins Turners’ ambitious $100 million NPBT goal set for FY31, signalling confidence in its integrated automotive platform despite a challenging macroeconomic backdrop.

The Group’s three core divisions, Auto Retail, Finance, and Insurance, all contributed to profit growth, with Q4 marking a record quarter. CEO Todd Hunter highlighted disciplined stock management and credit quality as key drivers, particularly in the face of a soft consumer environment in the first half and geopolitical tensions late in the year.

Auto Retail rebounds with margin expansion and network growth

Turners’ Auto Retail division posted a 12% increase in segment profit to $32.6 million on $315.3 million revenue, buoyed by a 9% rise in owned vehicle sales. The rollout of three new Christchurch branches has been a clear success, driving a 22% lift in local units sold and validating the economics of network expansion. Margin expansion in the second half offset a tougher first half marked by tight margins and supply constraints.

Stock management remained pivotal, with the business focusing on lower-priced vehicles where demand proved most resilient. The commercial division also performed strongly, benefiting from increased liquidations and damaged vehicle volumes. Turners is holding off new branch openings in FY27 but has six branches in development for FY28, reflecting a strategic pause to consolidate gains.

Finance division shines with loan book growth and credit discipline

Turners Finance delivered a standout 19% NPBT increase to $19.2 million, driven by a 27% growth in the loan book to $566 million. Consumer lending expanded robustly while credit quality tightened, resulting in consumer arrears of just 2.5%, less than half the industry average of 5.6%. Net interest margin improved to 5.7%, supported by a $200 million public securitisation warehouse transaction in October 2025 that lowered funding costs and capital commitment.

The division’s operating leverage was evident as lending volumes surged with only modest headcount growth. The hedged portion of finance borrowings increased to approximately 85%, reducing earnings volatility. The finance segment’s disciplined approach positions it well for further market share gains despite economic uncertainties.

Insurance grows steadily with digital distribution gains

Insurance revenue climbed 5% to $50.2 million, with NPBT up 7% to $17.3 million. Growth was driven by strong premium increases, particularly through dealer and finance broker partnerships. The direct-to-consumer comprehensive motor vehicle insurance offering is gaining traction, adding a diversified revenue stream. Claims cost inflation was well managed despite global supply chain pressures, and loss ratios remained consistent with historical trends.

Turners also expanded its digital footprint by partnering with VTNZ, Gaspy, and Quashed, strengthening distribution channels. The launch of a new Mechanical Breakdown Insurance product for the ‘private to private’ car market has shown encouraging early sales, validating digital as a scalable growth avenue.

EC Credit Management faces headwinds amid strategic repositioning

The non-core EC Credit Management business saw revenue decline 17% to $8.5 million and segment NPBT fall 49% to $1.8 million, excluding a $7.5 million non-cash goodwill impairment. Referral volumes were constrained by major client system upgrades, though collections remained resilient. The business is now managed for cash, with capital being reallocated to higher-return core automotive operations and potential divestment considered over the medium term.

Strong balance sheet and capital management support growth ambitions

Turners’ total assets increased to $1.07 billion, with finance receivables up $119 million and property, plant, and equipment rising $35 million due to new site developments. Shareholders’ equity expanded to $318 million. The Group’s $200 million securitisation warehouse and refreshed syndicated banking facilities have improved funding rates, increased capacity, and reduced capital commitments, underpinning the planned branch expansion and loan book growth.

The Board declared a final fully imputed dividend of 9 cents per share, bringing full-year dividends to 33 cents per share, a 14% increase and continuing a 12-year streak of dividend growth with a compound annual growth rate of 10.5%.

Outlook tempered by geopolitical uncertainty but growth trajectory intact

While Q4 FY26 was a record quarter, the onset of the Iran-US conflict in late March has softened consumer demand, with April trading subdued. Turners has reactivated its proven operational playbook from prior downturns, focusing on cost control, selective inventory buying, and credit quality maintenance. The diversified earnings base, particularly the annuity streams from Finance and Insurance, provides resilience against retail softness.

FY27 will focus on consolidating the network groundwork with no new retail branches opening, while four new and two replacement branches are slated for FY28. Finance expects continued loan book growth with stable margins, and Insurance aims to build on its digital distribution momentum. Turners remains on track to meet its $65 million NPBT target a year early and is laying the foundations for its $100 million NPBT ambition by FY31.