RESILIENT
BUSINESS
TRUSTED
BRANDS
Turners Cars North Shore, Auckland
ANNUAL REPORT
FOR THE YEAR ENDED 31 MARCH 2020
On behalf of the Board and management of
Turners Automotive Group Limited, we are pleased
to present the Annual Report for the financial year
ended 31 March 2020.
Grant Baker
Chairman
Todd Hunter
Chief Executive Officer
FY20 AT A GLANCE
OUR CHANGING LANDSCAPE
STRATEGIC THEMES FOR FY21
OUR STRATEGY
CHAIR AND CEO’S REPORT
OUR BUSINESS:
RESPONDING TO THE COVID-19 CHALLENGE
LEADING CHANGE
BUY SAFE
FY20 FINANCIAL COMMENTARY
THE BOARD
SENIOR LEADERSHIP TEAM
FINANCIALS
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
CONCLUDED STRATEGIC REVIEW OF OXFORD FINANCE, with
ownership retained and focus on reshaping and growing the business.
REBRANDED BUY RIGHT CARS TO TURNERS: Completed in May 2019,
leveraging the high levels of awareness and trust in the Turners brand.
CONTINUED FOCUS ON HIGH QUALITY BORROWERS, resulting in
improved arrears performance.
REFINEMENT OF RISK PRICING: For the insurance and finance
businesses.
GROW THE BUSINESS
DE-RISK THE BUSINESS
SIMPLIFY THE BUSINESS
SIMPLIFY, DE-RISK AND GROW
E LAUNCH OF NEW STRATEGY IN MAY 2019 –
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FY20 FINANCIAL SNAPSHOT
■ Underlying NPBT $28.8m, up 11%
and Level 4 lockdown
■
Increase in Net Profit Before Tax (NPBT) to $29.1m, in line with
pre COVID-19 guidance of $28m to $30m
INNOVATION AND VENTURES: Investment into ASX-listed Collaborate
Corporation, a tech-focused vehicle subscription business based in
Australia. Agreed commercial terms for the launch of Carly vehicle
subscription in New Zealand.
EXPANDED AUTOSURE DISTRIBUTION NETWORK: Agreed strategic
distribution agreement with Heartland Bank to sell Autosure insurance
products through Heartland’s consumer intermediary network.
EXPANSION OF THE RETAIL NETWORK: Relocated North Shore site to
new Wairau Valley location, opened new Hamilton site and committed to
development of two new Auckland sites and a large new site in Dunedin.
DIGITAL ADVANTAGE: Continued to invest into technology platform,
digital marketing and leveraging data assets.
■ Final six weeks of the financial year impacted by COVID-19 pandemic
■ Net Profit After Tax down 8% to $21.0m
■ Solid gains in the finance, insurance & credit management businesses;
Auto retail impacted by slowdown in last six weeks of FY20 due to
COVID-19
■ Group revenue decreased 1% on previous year
■ Solid market share gains, within the context of a softening used car
market
■ Paid 14.0 cents per share in fully imputed dividends for the FY20 year
FINANCIAL SNAPSHOT
GROUP REVENUE
$332.7M
-1%
NET PROFIT BEFORE TAX
$29.1M
0%
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FY16 FY17 FY18 FY19 FY20
FY16 FY17 FY18 FY19 FY20
NET PROFIT AFTER TAX
$21.0M
-8%
FULL YEAR DIVIDENDS
14.0 CENTS PER SHARE
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FY16 FY17 FY18 FY19
FY20
SECTOR REVENUE
SECTOR OPERATING PROFIT
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FY16 FY17 FY18 FY19 FY20
FY16 FY17 FY18 FY19
FY20
■ AUTOMOTIVE RETAIL ■ FINANCE AND INSURANCE ■ DEBT MANAGEMENT
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
The used car market is evolving and we are
positioning ourselves to take advantage of the
opportunities this brings. We are excited about
our potential in this changing environment.
CUSTOMER-CENTRIC: Customers are more
informed and delivering great customer
outcomes is essential to survive and prosper.
E MARKET DYNAMICS AND TRENDS
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DATA AND TECHNOLOGY: Big data and
technology are changing how and where we
do business.
ONLINE EXPERIENCE: More of the customer
experience is transitioning online, particularly
for finance and insurance.
INDUSTRY CONSOLIDATION is inevitable and
we are in the midst of this right now.
AGGREGATOR AND COMPARISON SITES are
proliferating.
REGULATION AND COMPLIANCE across all
our businesses is increasing.
DISRUPTION FROM ALTERNATIVE
OWNERSHIP MODELS which could
see people moving away from owning one,
two or more cars per household, to flexible
ownership and subscription models.
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Turners Cars Palmerston North
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The used car
market is
evolving and we
are positioning
ourselves to take
advantage of the
opportunities
this brings.
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
1. Opportunity to Accelerate Market Share We are
in a position to realise any new opportunities
that arise from a disrupted market and expect
to accelerate the market share gains that have
been made in recent years. We will concentrate
on increasing our market share through
optimising our existing branch network, creating
new consignment relationships, expanding our
retail footprint and taking advantage of market
consolidation.
2. Leverage Our Scale and Brand Equity
Our scale offers multiple advantages, giving
us greater buying power, greater strength and
greater access to capital. Our highly trusted
Turners brand will become even more relevant
in the new economy. Turners is consistently
NZ’s leading used auto retail brand, according
to independent market research, and recently
received the 2020 Readers Digest Trusted Brand
Award as New Zealand’s most trusted used car
dealer.
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1 STRATEGIC THEMES FOR FY21
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3. Playing to Our Strengths
4. Digital Advantage
Diversified Business: Turners is a purposefully
diversified business. Each business has different
business cycles and delivers a balance of
annuity vs activity based revenue. Geographical
diversification also allows the business to
redeploy inventory if there are any localised
lockdowns going forward or regional demand
differences.
We are committed to creating competitive
advantage from technology investments and will
double down on these efforts to further broaden
our technology advantage. A key differentiator
for our business is the Turners’ digital platform
which is the #2 most visited auto website in NZ
behind TradeMe.
5. Balance Sheet Capacity to Support Growth
Our balance sheet is a major competitive
advantage, and will enable continued growth in
a consolidating market. We are well positioned
from a funding and capital perspective to take
advantage of growth opportunities in the future.
OUR STRATEGY
TURNERS’ STRATEGY IS
BASED ON OUR STRENGTHS
AND THE OPPORTUNITIES
THAT EXIST FOR OUR BUSINESS.
The industry is changing
and we are taking action to ensure
we are well positioned to take
advantage of future trends.
The Automotive Retail sector
remains our primary
focus.
OUR AMBITION
OUR STRENGTHS
OUR STRATEGY
For Turners to be New
Zealand’s best place to
buy and sell vehicles,
delivering high customer
satisfaction every time.
■ Unrivalled reach and
scale
■ High profile, trusted
Turners’ brand
■ Diversified businesses
■ Strong balance sheet
■ Large customer base
■ Rich data assets
■ Digital advantage
SIMPLIFY THE BUSINESS
Focus on core products and
businesses that deliver value and
future opportunities.
DE-RISK THE BUSINESS
■ Continue to write high
quality loans through early
adoption and refinement of
comprehensive credit reporting
■ Actively engage with regulators
in regards to compliance and
regulatory change
■ Focus on low risk loan
origination rather than
underwriting a broader range
of credit risks
GROW THE BUSINESS
■ Continue to expand the auto
retail footprint across New
Zealand
■ Shift marketing investment into
digital platforms
■ Leverage data analytics to
transact smarter
■ Evolve the customer experience
in person and online
■ Look for innovation
opportunities within the auto
sector
OUTCOMES
A WINNING CUSTOMER EXPERIENCE, A MORE EFFICIENT AND
FOCUSED BUSINESS, HIGHER MARGINS AND LOWER RISK, AND
INCREASING VALUE FOR OUR SHAREHOLDERS.
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
businesses. Three of our four businesses (Oxford
Finance, Autosure Insurance and EC Credit
Control) were profitable even during the L3/L4
lockdown period.
We launched our new strategy in May 2019, with
a focus on three key themes – Simplify, De-Risk
and Grow our Business. These directed our
actions for most of the year.
We are creating a more streamlined and cost
efficient business, growing our market share
in sectors where we have a dominant position
and building on our strengths to position our
businesses as the preferred choice for our
customers.
Key achievements include our investment into
ASX-listed Collaborate Corporation, a tech-
focused car-sharing and vehicle subscription
business based in Australia; the continuation
of our property strategy with the development
and opening of two new sites with a further four
planned for FY21; and the completion of the
Oxford Finance strategic review.
THE USED CAR ECONOMY
The softening noted in the second half of
the FY19 year continued into FY20, further
compounded by the COVID-19 impact at the
end of FY20. However, underlying demand
remains robust driven by New Zealand’s aging
fleet, with hundreds of thousands of cars
needing replacement over the next few years.
New Zealand’s vehicle fleet continues to age.
Around 950,000 vehicles (20% of light vehicles)
are at or very near the scrapping age, which is
around 19.5 years for an import and 17.5 years
for a New Zealand-new car. More cars are now
exiting the fleet due to the cost of repairs and a
stricter Warrant of Fitness regime.
The NZ used vehicle market is still very
fragmented, however, consolidation is underway.
Dealer numbers have been in decline for the
last two years and we expect this to accelerate
further over the next 12 to 24 months. We know
this is a good time to be pushing hard for gains
in retail market share and we are well positioned
to take advantage of this.
We will focus on building our market share by
growing our customer base and adding value to
customers through our ‘one stop shop’ offer and
customer experience.
OPERATIONAL PERFORMANCE
■ AUTOMOTIVE RETAIL (TURNERS GROUP)
Revenue: $224.9m 0%
Operating Profit: $13.8m -24%
Turners’ strategy of retail optimisation and the
continued transition of wholesale to retail is
continuing to deliver growth in retail market
share. Throughout FY20 we observed a
softening of the used car market due to reduced
consumer confidence and this decline was
suddenly exacerbated during late February and
March 2020 due to the COVID-19 pandemic.
There was a cyclical reduction in consignment
vehicles (down 26%) through the Turners
business in FY20, however, this reduction was
somewhat offset by an increase in sales of
owned inventory (up 6%) with average gross
profits per unit up 12% to $529.
We have a particular focus on optimisation of
our property network. Following year end, a
decision was made to leave the main Penrose
“supersite” in December 2020. Around the same
time, we will bring on stream new retail sites in
Westgate and Mt Richmond which will enable
a better retail experience for our customers.
Penrose was established as a wholesale auction
facility twenty years ago and is no longer
appropriate both in terms of a cost base or
customer experience.
We have successfully integrated the Buy Right
cars business into the Turners’ car business
over the year. We started with the brand
consolidation early in FY20 and the integration
has now been extended to core IT and
operational systems which will enable further
efficiencies.
BuyNow retail sales were down around
0.5% year on year, which we were pleased
with considering the impact of COVID-19. A
new Dunedin branch at double the previous
footprint, and new sites in Westgate and Mt
Richmond, should see further gains made in
retail sales over the next one to two years,
depending on the speed of recovery in the
economy.
Damaged vehicle units were up 12% with some
good gains from existing insurance vendors and
the benefit from one-off events like the Timaru
hail storm and flood damaged cars from Sky
City.
OUT OF CHALLENGE AND ADVERSITY
COMES NEW OPPORTUNITIES FOR THOSE
BUSINESSES POSITIONED AND READY TO
TAKE ADVANTAGE OF IT.
Turners is the largest used vehicle retailer in the
country, with unrivalled reach, scale and national
brand awareness. Our strength is in Automotive
Retail and we are the largest and most trusted
brand in the industry.
Our focus for FY20 was very much on
organically growing underlying earnings and we
achieved this in three out of our four businesses
and were on track for a full house until COVID-19
hit.
Given the impact of the pandemic in the
last six weeks of the financial year, we were
pleased with the results. Year on year, we were
slightly ahead on reported Net Profit Before
Tax at $29.1m and we delivered strong growth
in underlying earnings, which were up 11% to
$28.8m.
The COVID environment has highlighted the
value of a diversified portfolio of businesses, and
the inherent “annuity” nature of three of those
Chief Executive Officer, Todd Hunter and Chairman, Grant Baker
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
All originators have now been transitioned
to a new retail policy generation system
and we continue to review dealers’ portfolio
performance for risk pricing.
Our Reserve Bank Culture and Conduct
Review work was completed with a number of
initiatives implemented, ensuring we are closer
to end users and better understand customer
outcomes and experience.
The distribution partnership announced
between Heartland Bank and our respective
brands, Autosure and MARAC, is now
implemented and working well. We are working
on similar models of distribution with a number
of other organisations which involve deep
integration of our insurance system into their
front end sales system. This is an area where we
will continue to invest.
■ CREDIT MANAGEMENT (EC CREDIT
CONTROL)
Revenue: $17.9m -1%
Operating Profit: $6.5m +3%
EC Credit Control’s performance was in line
with the previous year. Although debt load was
down 5% for the year, the debt collected was up
14%, driven mostly out of improved collections
from Australian SME clients and Corporate NZ
clients. Commission earned from debt collected
increased 11% to $10.0m.
Our traction with customers connecting to EC
Credit via Xero and MYOB continues to gather
momentum with over 420 customers now
connected and loading debt worth over $3m
during FY20.
The team responded quickly to the COVID
situation and all Work From Home systems
operated at 100 percent. We worked closely
with our large corporate customers to help
manage their reputational risk with debt
collection work during lockdown and we are
expecting a significant increase in debt loaded
from these customers in the medium term. We
have already seen a lift in debt load from SME
customers in the first quarter of FY21.
As we did with Oxford Finance, we will also
conduct a strategic review of EC Credit in the
next 12-24 months.
■ FINANCE (OXFORD FINANCE)
Revenue: $45.7m +4%
Operating Profit: $12.2m +10%
The Finance business had an excellent year
with operating profit increasing 10% to $12.2m.
This reflects our increasing focus on lending to
higher quality borrowers. We introduced 3-tier
risk pricing in August 2019 which has enabled
us to be much more targeted towards high
quality borrowers and tighten up at the lower
end of the quality range. Premium Tier risk now
accounts for 11% of our total existing book and
is around 30-40% of new lending each month.
Instalment arrears on Premium Tier business is
tracking at around 0.01% compared to Tier 2
instalment arrears at 5.6%.
The introduction of comprehensive credit
reporting alongside negative reporting is
proving to be a strong combination of data to
help us profile borrowers.
The Turners Cars loan origination is going well
and we are earning more margin in the Group
as a result of this. Turners Cars’ ledger is now up
to $52m and is performing exceptionally well on
lending quality metrics.
We also completed the strategic review process
for Oxford Finance during the year and, whilst
there was significant interest above the book
value of the business, in the Board’s view,
the offers received did not fully reflect the
intrinsic value of Oxford Finance, both today
and especially factoring in the planned organic
growth. We are pleased to have such a strong
annuity business within the Group at this
time and have funding and equity capacity to
continue growing this business over the next
few years.
■ INSURANCE (AUTOSURE)
Revenue: $44.1m -9%
Operating Profit: $6.2m -25%
Insurance revenue declined in FY20 reflecting
a one-off gain from property sale in the prior
year ($3.0m), and further risk optimisation
we are running through the portfolio. General
Gross Written Premium (GWP) was down 7%
to $36.8m as a result of market conditions and
focusing on lower risk portfolios and vehicles.
Pleasingly, underlying profit (which excludes the
gain on property sale in FY19) increased due
to continued improvements in risk pricing and
reduction in claims loss ratios, resulting from
a new insurance software system, as well as
procurement initiatives. The combined claims
loss ratio for FY20 was 62% (FY19: 64%), while
the MBI loss ratio was 66% (FY19: 75%).
DIGITAL, DATA AND DISRUPTION
In all our businesses, digital initiatives are being
prioritised.
We are continuing to invest in digital marketing
and data. We have several projects underway in
the areas of lead management and automated
communications. This investment enables us
to better identify users on our website and be
more targeted in subsequent communications
with them.
We have also implemented an automated digital
communications project which allows a more
strategic and targeted approach to people who
are looking to buy or sell through Turners.
We are working on two major data projects
which will help us in the area of pricing vehicles
and identifying credit risk. Both these projects
leverage “off-the-shelf” cloud-based data
tools, including machine-learning. The proof
of concept results are promising and we know
there is a significant opportunity in vehicle
purchasing to help identify and limit our “bad
buys”, as there is in the finance business with
identifying and limiting our “bad lending”.
We were planning to launch a car subscription
service in March this year, however, progress
has been impeded by COVID-19. We have
subsequently made the decision to brand the
business under the Turners brand umbrella
due to its high trust, strong brand value and
recognition. We are working directly with
Collaborate in Australia to get the subscription
platform set up for NZ and now expect Turners
Car Subscription to be up and running in Q2
FY21.
DIVIDEND AND SHARE BUY BACK
PROGRAMME
In March 2020, the Board deferred the Q3
dividend payment as a cautionary step due
to the uncertainty surrounding the length of a
L4/L3 lockdown. In June 2020, with a better
understanding of how the business was tracking,
the Board declared a final fully imputed dividend
incorporating the Q3 deferred dividend of 6.0
cents per share, resulting in full year dividends
of 14.0 cps. The Board believes this level of
pay out best ensures our ability to navigate
the volatility of the current environment, and
also the optionality to take advantage of any
upcoming opportunities.
The Board’s intention at this stage is to continue
dividend payouts for FY21 in line with the
current policy level of 60-70% of net profit after
tax.
The Board continues to believe that the
share price does not appropriately reflect the
fundamentals of the business and recommenced
the share buyback programme in August and
September 2019. Approximately, 1.4 million
shares were bought and cancelled, equating to
1.6% of shares on issue.
RESPONDING TO COVID-19
The impact of the COVID-19 pandemic began
to be seen on our business in February 2020.
While we have now moved to a ‘new normal’, we
would like to acknowledge and thank our team
for their efforts during this challenging time.
They have been committed, understanding, and
prepared to go above and beyond in difficult
circumstances. We would also like to thank
those landlords and business partners who
extended a helping hand during the early part of
lockdown…this was greatly appreciated.
The sudden change brought about by the
COVID-19 lockdown required dynamic planning
and execution urgency. The speed at which we
were able to respond was a testament to the
skills in our IT group but also the technology
investments we have made over the last few
years.
We had a very simple approach to our response
to the situation.
We reacted to make sure that, as a business, we
were in a position to survive a three to six month
lockdown and prepare for a potentially longer
restricted trading environment. We took a “cash
is king” approach to this.
We then had to start rethinking the business.
Our primary objective was to resume trading as
soon as possible, in a way that safely managed
the risk to our people and our customers. We
initiated a successful contactless, 100% online
trading programme and, even during the Level
4 and 3 lockdown, we were able to sell 600
vehicles online. The ability to sell uninspected
vehicles online at scale for the first time
demonstrates the high trust and awareness of
the Turners brand and given its popularity, we
plan to continue with this online service.
This ability to continue trading allowed us to
avoid a dilutive capital raise.
We knew that economic conditions were likely
to change for some people, so we needed to
think about our risk in the finance book and
adjust our lending criteria accordingly. We also
knew that strong trusted brands would have a
sizeable opportunity in a post-lockdown world.
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 We are now in the rebuilding
phase and focusing on the
opportunities. This will require
disciplined cost control,
leveraging our strong online
platform, continuing to invest
in technology where it makes
sense and building our market
share in all our respective
businesses.
We are now in the rebuilding phase and focusing
on the opportunities. This will require disciplined
cost control, leveraging our strong online
platform, continuing to invest in technology
where it makes sense and building our market
share in all our respective businesses.
SOCIAL RESPONSIBILITY
Our drive to create a better business
encompasses not only delivering returns to our
shareholders, but also supporting our people,
our communities and our environment.
We believe that creating a long lasting,
sustainable and profitable business also
delivers benefits for our people, by providing
employment in regions throughout New
Zealand. At no other time has the importance
of supporting our people been more evident
than during the lockdown. We were able to keep
many staff working from home and financially
supported those who were unable to work.
Health and safety remains a priority and we
moved quickly to create new ways of working,
to keep our people and our customers safe
during this time, with the launch of our BuySafe
initiative.
We are committed to ethical and fair conduct,
which is particularly relevant given the industries
we operate in. We believe in not only doing the
right thing for business, but also the right thing
for our customers and our people.
We are conscious that we operate in a sector
which has a high carbon footprint. We believe
that some of the initiatives we are taking will
help reduce this impact, from having more staff
working from home, through to car subscription
services and offering electric vehicles for sale.
We also take sustainability into account when
building new sites and premises, with solar
panels currently being trialled on the roof of our
Hamilton dealership.
FY21 OUTLOOK
As with many businesses there are many
unknowns in our operating environment, over
the next 12 to 24 months. However, the long
term dynamics of the used car industry remain
robust and an attractive opportunity for Turners.
We have identified five strategic themes, which
will help us navigate this environment and have
outlined these on page 8.
In summary, we will be looking to:
1. Accelerate market share growth
2. Leverage our scale and brand equity
3. Benefit from the diversification of our
business
4. Invest to build our digital advantage
5. Leverage our balance sheet capacity to
support growth opportunities
We have full confidence in our strategy,
our businesses and our teams to deliver
an improving performance for all our
stakeholders, from our customers through to
our shareholders. The pandemic has hastened
our move to become a more cost efficient, more
resilient and more focused business. This will
benefit Turners as we look to grow our business
and take advantage of opportunities.
Our thanks go to all our customers, suppliers
and business partners, and especially to
our people, who have helped us overcome
the recent challenges and positioned us for
an exciting future. We look forward to our
shareholders sharing this journey with us.
Grant Baker
Chairman
Todd Hunter
Chief Executive Officer
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 The sudden change brought about by COVID-19 required dynamic
planning and execution urgency. The speed at which we were able to
adapt our business was a testament to the technology investments we
have made over the last few years.
REACT
ENSURE SURVIVAL OF THE BUSINESS, ‘CASH IS KING’ APPROACH
■ Safety of staff and customers a priority
■ Rapid Working From Home setup completed
■ Hiring freeze implemented
■ Annual leave utilised, where appropriate
■ Accessed Government Wage Subsidy support
■ All permanent team members retained
■ Reduction in pay for senior management and directors for 3-month
S RESPONDING TO THE COVID-19 CHALLENGE
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RETHINK
ASSESS AND EVALUATE, POSITION FOR THE ‘NEW NORMAL’,
AVOID A DILUTIVE CAPITAL RAISE
■ Online purchasing and contactless delivery implemented
■ WFH on a more permanent basis
■ Customers reverting to trusted brands
■ Assessing the challenges of growing unemployment, weakening
■ All costs reviewed and discretionary spend halted
■ Deferred capital expenditure
■ Established what was possible eg. Essential service, selling cars
■ Daily reporting on critical KPIs established
period
online
demand and softening prices
■ Close communication with funder
■ Avoided a dilutive capital raise
REBUILD
EYES ON THE PRIZE AND PREPARE FOR OPPORTUNITIES
■ Disciplined cost control
■ Continue to offer 100% online customer experience
■ Review credit risk scoring
■ Enhance distribution in insurance
■ Push the trust and strength in our brands
■ Significant opportunity to build market share in all our businesses
■ Leverage strong balance sheet to take advantage of opportunities
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LEADING CHANGE
In FY20, we acquired a 12% stake in ASX-listed Collaborate Corp.
Collaborate’s core business centres around the rapidly evolving car
sharing market with DriveMyCar, Australia’s leading peer-to-peer car
rental business, complemented by Carly, Australia’s first truly flexible car
subscription offering, which launched in March 2019.
This investment provides an exciting opportunity for Turners to participate
in the rapid growth of the ‘Sharing Economy’ as it relates to transportation
and changing consumer preferences.
Alternative vehicle ownership models are on the rise internationally, and
vehicle subscription programmes could account for nearly 10% of all new
vehicle sales in the US and Europe by 2025. In developed markets like
the UK and the US, subscription-based ownership models have already
crossed 10% of monthly household incomes, driven in large part by the
benefits experienced by consumers such as greater flexibility and a
reduction in costs incurred including the purchase of vehicles, parking,
insurance, fuel and maintenance1.
We are excited about Turner’s future as we position ourselves for the long
term projected changes in the traditional retail car market. New concepts
such as peer to peer car rentals and car sharing are a part of the future
and provide a new revenue opportunity for car dealers and other industry
players.
https://www.forbes.com/sites/sarwantsingh/2018/07/30/your-next-car-could-be-a-flexible-
subscription-model/#2ec7ac4f4ffa
“New concepts such
as peer to peer car
rentals and car sharing
are a part of the future
and provide a new
revenue opportunity for
car dealers and other
industry players.”
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As Level Three approached, the opportunity to commence a contactless, safe and
trusted online retail service became a reality. Turners’ BuySafe program was designed to
sell vehicles under the operational restrictions of Level 3 while keeping our staff and our
customers safe.
BuySafe builds on the existing online research and buying capabilities of Turners and
added in new innovations such as virtual test drives via phone video calling, remote
finance approvals, a 5-day money back guarantee and a contactless handover process.
A impactful marketing campaign was launched to highlight that customers could
purchase vehicles through a safe, 100% contactless process, and to give customers the
confidence to do so. Designed to be a simple checklist of the vehicle buying journey, each
step of the process was outlined in the online campaign, with the emphasis being on
safety. And not just from a health perspective. Buying a car without a physical inspection
can be daunting for most. The addition of the 5-Day money back guarantee was made to
give customers ‘buying safety’. This gave the ultimate confidence to buy – a no questions
asked return policy.
The BuySafe program is still running for any who require it. And the 5-Day money back
guarantee has been made available on over half our stock for all customers through the
retail channel.
SAFETY FIRST
CHOOSE
YOUR CAR
VIRTUAL
TEST DRIVE
*
CONTACTLESS
ONLINE BUYING
MONEY BACK
GUARANTEE
CONTACTLESS
HANDOVER
*Not all vehicles have this offer. Terms and conditions apply.
18
A impactful marketing
campaign was
launched to highlight
that customers could
purchase vehicles
through a safe,
100% contactless
process, and to
give customers
the confidence
to do so.
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REVENUE
NET PROFIT BEFORE TAX (NPBT)
with the full financial statements and Notes to the Financial
Statements in the FY20 Annual Report.
Revenues were stable compared to the prior year. The gains
being made by Auto Retail prior to February were offset by
the COVID-19 impact. Finance revenues increased due to
the increase in origination from Turners Cars and third-party
originators. Insurance revenues reflected fewer policies sold as a
result of market conditions and further tweaks to risk pricing.
Y This financial commentary should be read in conjunction
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Reported NPBT of $29.1m was in line with guidance of $28-
$30m and stable on FY19 NPBT of $29.0m. The year on year
decrease for Auto Retail reflects the property settlement in
the prior year which provided a contribution of $3.4m. The
improvement in Finance was driven by higher quality new loans
and the resulting improved arrears performance. In addition, a
COVID-19 overlay of $1m has been applied to finance receivable
provisioning to mitigate any potential increase in credit losses
over the next 12 months. The Insurance result reflects the
positive progress in claims ratios which have continued to offset
reduced policy sales.
Excluding IFRS 16 changes and strategic review costs in FY20,
and property revaluations/sales and the Buy Right Cars brand
write off in FY19, Underlying NPBT was up 11% year on year. This
increase was driven by gains made in the Insurance, Finance
and Credit divisions, partially offset by a small drop in Auto
Retail due to COVID-19.
$MILLIONS
FY20
FY19
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2
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F
Reported profit before tax
Oxford strategic review costs
IFRS 16 Lease Accounting changes
Christchurch property revaluation
Property Settlement – Albany site
Brand Write-Off (Buy Right Cars)
Sale of property
29.1
0.2
(0.5)
-
-
-
-
Underlying operating result
28.8
29.0
0.3%
-
-
(0.8)
(3.4)
4.6
(3.4)
26.0
11%
NET PROFIT AFTER TAX (NPAT)
Net profit after tax (NPAT) was $21.0m (FY19: $22.7m).
Reported earnings per share was down 8% to 24.4 cents per
share largely reflecting a higher effective tax rate in FY20.
DIVIDEND
Turners paid fully imputed dividends for the FY20 year of 14.0 cents per share. In March 2020, the
Board deferred the Q3 dividend payment as a cautionary step due to the uncertainty surrounding
the length of a L4/L3 lockdown. In June 2020, with a better understanding of the impact on
the business and the trading environment, the Board declared a final fully imputed dividend
incorporating the Q3 deferred dividend of 6.0 cents per share, resulting in full year dividends of
14.0 cps.
BALANCE SHEET
Turners has a strong balance sheet and is well positioned from a funding and capital perspective to
take advantage of growth opportunities into the future. The primary changes in the balance sheet in
FY20 were as follows:
• Cash and cash equivalents: Just prior to year end, Turners increased its cash balances by pre-
emptively drawing down on facilities to ensure sufficient liquidity through the Level 4 lockdown.
These precautionary drawings have now been repaid.
•
Inventory: The increase in inventory reflects the COVID-19 slowdown and lockdown in March.
• The change in Finance Receivables reflects quality growth in Oxford Finance, offset by the
rundown in the MTF non-recourse ledger.
• The increase in Property, Plant and Equipment is due to the development of new sites in
Whangarei and North Shore and the Mt Richmond purchase.
• Shareholder equity decreased to $223m as at 31 March 2020 due to the share buyback and
impact of IFRS 16 Leases on retained earnings.
FUNDING AND LIQUIDITY
Turners’ funding remains at conservative levels. As at 31 March 2020, Turners’ funding capacity was
$428m with $78m undrawn. Sixty nine percent or $242m of this debt relates to finance receivables
funding within Oxford Finance. During March 2020, the BNZ increased the limit for the securitisation
warehouse facility from $200m to $250m (including capital contribution from TRA) to provide the
headroom for further growth in the finance book. The remaining 31% of debt ($108m) relates to
borrowings associated with property, inventory and the $25m Bond program.
FIVE YEAR FINANCIAL PERFORMANCE
$MILLIONS
Operating Revenue
FY16
FY17
FY18
FY19
FY20
170.3
251.0
330.5
336.6
332.7
Net Profit Before Tax (Operating
Profit)
Net Profit After Tax
Earnings Per Share
Dividends Per Share
Financial Position
Finance Receivables
Total Assets
Borrowings
Shareholder Funds
Shares on issue
(millions as at 31 March)
21.6
15.6
24.7
13.0
167.6
367.1
174.8
129.8
24.6
17.6
25.5
14.5
207.1
556.6
265.9
171.7
31.1
23.4
29.3
15.5
289.8
651.7
317.4
214.3
29.0
22.7
26.2
17.0
290.0
654.2
312.9
226.4
29.1
21.0
24.4
14.0
293.0
708.4
350.4
223.1
63.4
74.5
84.8
86.9
85.6
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
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GRANT BAKER
Non-executive Chairman | Appointed September 2009
Grant Baker has wide experience at a senior level in
both public and private New Zealand companies. He
has been involved in a number of successful ventures,
including 42 Below vodka and Trilogy International.
With a 7.13% shareholding, Grant is a long term
committed investor in Turners Automotive Group and
has been Chairman of Turners Automotive Group since
September 2009. As an avid collector of specialist
vehicles and motor racing enthusiast, both as a
competitor and as a backer of young up and coming
drivers, he is passionate about the strong Turners brand
and its focus on cars.
PAUL BYRNES
Deputy Chairman and Independent Director |
Appointed February 2004
Paul Byrnes is a chartered accountant, a professional
director and an investor with over 25 years’ experience
in senior and CEO roles in private and listed companies.
His career has included the management buyout of
previously listed Holeproof Industries, consulting and
participation in merger and acquisition opportunities
and business ‘turnaround’ management. Paul was
appointed CEO and Executive Director of Dorchester
Pacific in May 2008 (now Turners Automotive Group),
handing over the CEO role to Todd Hunter in June
2016. Paul is entrepreneurial at heart but combines this
with a wealth of top class governance experience (Top
Energy and Hellaby Holdings) and the real world CEO
experience of bringing a finance company positively out
of the GFC. Paul has a 2.90% shareholding in Turners
Automotive Group.
MATTHEW HARRISON
Non-executive Director | Appointed December 2012
Matthew Harrison has extensive management
experience and a background in finance and business
administration. He is the former Managing Director of
EC Credit Control, the debt recovery business acquired
in 2012 and has great experience dealing with credit
cycles and credit management. He joined EC Credit
Control in 1998, following senior management roles
in the courier industry. Matthew joined the Turners
Automotive Group Board in 2012 and represents his
family interests, which have a 7.65% combined holding
in the company. Matthew is a self-confessed “car nut”
and has owned some very special cars over the years
including a McLaren P1. He is very enthusiastic about the
future of Turners and, given his large shareholding and
love for automobiles, is strongly committed to seeing
Turners continue its successful journey.
ALISTAIR PETRIE
Non-executive Director | Appointed February 2016
Alistair Petrie has over 15 years of senior management experience in both
private and listed companies in the agribusiness sector. He has extensive
knowledge in sales and marketing in both international and domestic
environments, which is particularly useful for some of the challenges
and opportunities Turners has importing vehicles from Japan. He has a
number of directorships with companies that have a focus on growth and
innovation, and he represents the interests of Bartel Holdings, which has
a 11.17% shareholding in Turners Automotive Group. Alistair worked for
many years at Turners & Growers, the original parent company of Turners
Auctions, which provides a nice connection at Board level back to those
foundational brand values of “trust and integrity”. Alistair has a BSC (hons)
from Newcastle Upon Tyne university and an EMBA from Melbourne
University.
JOHN ROBERTS
Independent Director | Appointed July 2015
John Roberts has extensive experience in the financial services industry,
having held the role of Managing Director of credit bureau Veda
International for 10 years, during which time the Veda Advantage business
was successfully listed on the ASX. John previously had over 15 years in
advertising, with CEO roles with Saatchi & Saatchi in New Zealand and
Asia Pacific, before heading up MasterCard in New Zealand for three years.
John is currently a director of Centrix, a leading credit rating agency in NZ,
and this keeps him connected with the financial sector and the NZ credit
cycle. John’s advertising and branding experience has been invaluable
across a number of projects within the business and he continues to add
value and thought leadership around the use of data and analytics, drawing
on his Veda NZ experience.
ANTONY VRIENS
Independent Director | Appointed January 2015
Antony Vriens has been a director and chairman of Turners’ insurance
subsidiary, DPL Insurance (now Autosure), since 2012. He is a highly
experienced financial services industry professional, with demonstrated
success as a senior executive and consultant in insurance and wealth
management businesses across Asia Australia and New Zealand. He brings
a hands on, practical and commercial approach and a strong technology
focus to his Board role. His relationships across the insurance industry and
regulators are highly valuable to the Turners business and his collaborative
approach is embraced by both the Board and management.
MARTIN BERRY
Independent Director | Appointed August 2018
Martin Berry is a seasoned global financial services executive having run
large international businesses for the likes of ANZ, Citibank, Barclays and
Standard Chartered. He later focused on more entrepreneurial ventures
with a successful track record of having built, acquired and sold several
companies with values in excess of USD 500m. Martin later founded and
now runs venture capital firm d:tribe capital out of Singapore investing in
early stage tech companies across Asia-Pacific.
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
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Todd Hunter
Chief Executive Officer
Aaron Saunders
Group Chief Financial Officer
Todd Hunter
Chief Executive Officer
Todd is a strong and experienced senior executive, with a background in marketing, sales and
accounting in both large global and domestic businesses. Before joining Turners Auction in 2006
Todd worked for Microsoft NZ and Ernst and Young. He was appointed CEO of NZX listed Turners
Auctions in 2013, and took on the CEO role for the wider Turners Automotive Group in 2016. Todd is
a chartered accountant and holds a Bachelor and Diploma of Commerce from Auckland University.
Aaron Saunders
Group Chief Financial Officer
Aaron joined Turners Group NZ in 2006. He has a strong background in financial and management
accounting, at both a strategic and operating level in local and international markets. Over the last
20 years, Aaron has worked across a broad range of company sizes and industries including vehicle
importation and distribution, broadcasting and the finance sector. Aaron is a full member of the
New Zealand Institute of Chartered Accountants and holds a Bachelor of Commerce from Auckland
University.
Simon Gould-Thorpe
Group Chief Information Officer
Simon joined Turners in 2010. With over 30 years’ experience in IT, he has led dynamic and innovative
IT Teams to success across a wide range of industries. His current role has seen the delivery of
significant advancements to assist Turners business transformation, including the development
of new core systems and the introduction of key business and process automation. Turners IT
utilizes leading technologies and follows best practice IT management including DevOps and Agile
methodologies.
Simon Gould-Thorpe
Group Chief Information Officer
Greg Hedgepeth
CEO Turners Automotive Retail
Greg Hedgepeth
CEO Turners Automotive Retail
Greg joined Turners in 2017 as CEO of the Automotive Retail Division, with responsibility for Turners
Cars, Trucks & Machinery and the Damaged & End of Life business. He is an experienced automotive
executive and has previously held a number of senior roles with BMW Group NZ and Armstrong
Motor Group, one of NZ’s largest private owned retail automotive networks. With a Bachelor of
Commerce from Auckland University and a number of years working for Saatchis both in NZ and the
US, Greg brings a strong sales and marketing focus to his role.
James Searle
Group General Manager Insurance
James is responsible for operational performance and development of life and consumer (vehicle
and finance related) insurance products. James has over 25 years’ experience in the New Zealand
insurance industry having worked across underwriting, portfolio management, relationship
management and marketing roles for major insurance companies including IAG and Lumley General
Insurance.
David Wilson
CEO EC Credit Control
Dave joined EC Credit in 2007 and was appointed to his current role in April 2015. He has over 20
years’ experience in the banking, finance and recruitment industries, and has worked in the credit
management industry since 2001. Dave has a Diploma in Business Studies.
Jeremy Rooke
General Manager Digital Strategy
Jeremy joined Turners Automotive Group in 2009. His role involves leading the application of new
technologies, business models and channels to enable and expand Turners’ digital capabilities.
Jeremey holds degrees in Law and Arts, and prior to Turners, worked as a business analyst and
projects manager on several large transformative IT programmes, most notably in the insurance
sector.
James Searle
Group General Manager
Insurance
David Wilson
CEO
EC Credit Control
Jeremy Rooke
General Manager Digital Strategy
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TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Cars New Lynn
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FINANCIAL REPORTS
FOR THE YEAR ENDED 31 MARCH 2020
28 Independent Auditor’s Report
35 Consolidated Statement of Comprehensive Income
36 Consolidated Statement of Changes in Equity
37 Consolidated Statement of Financial Position
38 Consolidated Statement of Cash Flows
39 Notes to the Financial Statements
27
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 INDEPENDENT AUDITOR’S REPORT
for the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
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Level 9, 45 Queen Street, Auckland 1010 PO Box 3899, Auckland 1140 New Zealand T: +64 9 309 0463 F: +64 9 309 4544 E: auckland@bakertillysr.nz W: www.bakertillysr.nz INDEPENDENT AUDITOR’S REPORT To the Shareholders of Turners Automotive Group Limited Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Turners Automotive Group Limited and its subsidiaries ('the Group') on pages 35 to 93, which comprise the consolidated statement of financial position as at 31 March 2020, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 March 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards ('NZ IFRS') and International Financial Reporting Standards ('IFRS'). Our report is made solely to the Shareholders of the Group. Our audit work has been undertaken so that we might state to the Shareholders of the Group those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Shareholders of the Group as a body, for our audit work, for our report or for the opinions we have formed. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand) ('ISAs (NZ)'). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other than in our capacity as auditor and provider of other assurance services we have no relationship with, or interests in, Turners Automotive Group Limited or any of its subsidiaries. The provision of these other assurance services has not impaired our independence. In addition to this, principals and employees of our firm deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. This has not impaired our independence. Emphasis of Matter – Increased level of inherent uncertainty in the significant accounting estimates and judgments applied by Management in the preparation of these financial statements, arising from the ongoing global pandemic of coronavirus disease 2019 We draw attention to Note 4 of the Group’s consolidated financial statements, which describes the impact of the ongoing global pandemic of the novel coronavirus disease 2019 (‘COVID-19’) and Management’s assessment of and responses to the pandemic. Since March 2020, the COVID-19 pandemic has lowered overall economic activity and confidence, resulting in significant volatility and instability in financial markets and economic uncertainty. Consequently, there has been an increase in the level of inherent uncertainty in the critical accounting estimates and judgements applied by Management in the preparation of these consolidated financial statements, described in Note 4 of the Group’s consolidated financial statements. As at the date of the signing of these consolidated financial statements, all reasonably known and available information with respect to the COVID-19 pandemic has been taken into consideration in the critical accounting estimates and judgements applied by Management, and all reasonably determinable adjustments have been made in preparing these consolidated financial statements. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed the key audit matter IImmppaaiirrmmeenntt tteessttiinngg ooff GGooooddwwiillll aanndd OOtthheerr IInnddeeffiinniittee LLiiffee IInnttaannggiibbllee AAsssseettss As disclosed in Note 21 of the Group’s consolidated financial statements the Group has goodwill of $92.5m allocated across four of the Group’s cash-generating units (‘CGUs’) and brand assets of $67.1m allocated across two of those CGUs. Goodwill and brand assets were significant to our audit due to the size of the assets and the subjectivity, complexity and uncertainty inherent in the measurement of the recoverable amount of these CGUs for the purpose of the required annual impairment test. The measurement of a CGUs recoverable amount includes the assessment and calculation of its ‘value in-use’. Management has completed the annual impairment test for each of these four CGUs as at 31 March 2020. During the year ended 31 March 2020, the Buy Right Cars and Turners Group NZ CGUs were amalgamated to reflect the lowest level within the Group at which goodwill is monitored for internal management purposes. Our audit procedures among others included: • Evaluating Management’s determination of the Group’s four CGUs based on our understanding of the nature of the Group’s business and the economic environment in which the segments operate. We also analysed the internal reporting of the Group to assess how the CGUs are monitored and reported. • Evaluating the competence, capabilities, objectivity and expertise of Management's external valuation expert and the appropriateness of the expert's work as audit evidence for the relevant assertions. • Challenging Management’s assumptions and estimates used to determine the recoverable value of its indefinite life intangible assets, including those relating to forecasted revenue, cost, capital expenditure and discount rates, by adjusting for future events and corroborating the key market TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
30
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Key Audit Matter How our audit addressed the key audit matter Management has engaged an external valuation expert to assist in the annual impairment testing of the four CGUs. This annual impairment test involves complex and subjective estimation and judgement by Management on the future performance of the CGUs, discount rates applied to future cash flow forecasts, and future market or economic conditions. related assumptions to external data (including the consideration of the impact of the COVID-19 pandemic). Procedures included: o Evaluating the logic of the value-in-use calculations supporting Management’s annual impairment test and testing the mathematical accuracy of these calculations; o Evaluating Management’s process regarding the preparation and review of forecasts; o Comparing forecasts to Board approved forecasts; o Evaluating the historical accuracy of the Group’s forecasting to actual historical performance; o Challenging and evaluating the forecast growth assumptions; o Evaluating the inputs to the calculation of the discount rates applied; o Engaging our own internal valuation experts to evaluate the logic of the value-in-use calculation and the inputs to the calculation of the discount rates applied; o Evaluating Management’s sensitivity analysis for reasonably possible changes in key assumptions; and o Performing our own sensitivity analyses for reasonably possible changes in key assumptions, the two main assumptions being: the discount rate and forecast growth assumptions. • Evaluating the related disclosures about indefinite life intangible assets which are included in Note 21 in the Group’s consolidated financial statements. VVaalluuaattiioonn ooff FFiinnaannccee RReecceeiivvaabblleess iinncclluuddiinngg tthhee aaddooppttiioonn ooff NNZZ IIFFRRSS 99 FFiinnaanncciiaall IInnssttrruummeennttss As disclosed in Note 14 of the Group’s consolidated financial statements, the Group has finance receivable assets of $293.0m. Finance receivable assets were significant to our audit due to the size of the assets and the subjectivity, complexity and uncertainty inherent in the recognition of expected credit losses and the amount of those expected credit losses. Management has prepared expected credit losses models to complete its assessment of expected credit losses for the Group’s finance receivables as at 31 March 2020. This assessment involves complex and subjective estimation and judgement by Management on credit risk and the future cash flows of the finance receivables. Our audit procedures among others included: • Evaluating the design and operating effectiveness of the key controls over finance receivable origination, ongoing administration and expected credit losses model data and calculations. • Selecting a representative sample of finance receivables and agreeing these finance receivables to the signed loan agreement and client acceptance documents on origination. • Challenging and evaluating Management’s logic, key assumptions, and calculation of its expected credit losses models against the requirements specified in NZ IFRS 9 for recognising expected credit losses on financial assets. • For individually assessed finance receivables, examining those finance receivables and forming our own judgements as to whether the expected credit losses provision recognised by Management was appropriate (including the consideration of the impact of the COVID-19 pandemic on the expected credit losses provision). • For the collectively assessed finance receivables, challenging and evaluating the logic of Management’s expected credit losses models and the key assumptions used with our own experience (including the consideration of the impact of the COVID-19 pandemic on key assumptions). Also, testing key inputs used in the expected credit losses models and the mathematical accuracy of the calculations within the models. Key Audit Matter How our audit addressed the key audit matter • Evaluating the changes made to the provisioning model to capture the effect of the changing economic environment at 31 March 2020 compared to the economic environment at the date when the historical data used to determine the expected credit losses was collected (described in Note 4 to the Group’s consolidated financial statements). • Evaluating the disclosures related to finance receivable assets, and the risks attached to them, which are included in Note 5 and 14 in the Group’s consolidated financial statements. VVaalluuaattiioonn ooff IInnssuurraannccee CCoonnttrraacctt LLiiaabbiilliittiieess As disclosed in Note 35 of the Group’s consolidated financial statements the Group has insurance contract liabilities of $51.4m. The Group’s insurance contract liabilities were significant to our audit due to the size of the liabilities and the subjectivity, complexity and uncertainty inherent in estimating the impact of claims events that have occurred but for which the eventual outcome remains uncertain. Management has engaged an external actuarial expert to estimate the Group’s insurance contract liabilities as at 31 March 2020. Our audit procedures among others included: • Evaluating the design and operating effectiveness of the key controls over insurance contract origination, ongoing administration, claims management and reporting and the integrity of the related data. • Evaluating the competence, capabilities, objectivity and expertise of Management's external actuarial expert and the appropriateness of the expert's work as audit evidence for the relevant assertions. • Agreeing the data provided to Management's external actuarial expert to the Group’s records. • Engaging our own actuarial expert to assist in understanding and evaluating: o the work and findings of the Group’s external actuarial expert engaged by Management; and o the Group’s actuarial methods and assumptions to assist us in challenging the appropriateness of actuarial methods and assumptions used by Management. • Assessing the selection of methods and assumptions with a view to identify management bias. • Evaluating the related disclosures about insurance contract liabilities, and the risks attached to them, which are included in Note 35 in the Group’s consolidated financial statements. AAddooppttiioonn ooff NNZZ IIFFRRSS 1166 LLeeaasseess As disclosed in Note 32 of the Group’s consolidated financial statements, the Group has adopted NZ IFRS 16 Leases from 1 April 2019, using the retrospective approach. This has resulted in the recognition of a right-of-use asset of $24.9m and a lease liability of $32.5m as at 31 March 2020. The adoption of NZ IFRS 16 was significant to our audit due to the size of the assets and liabilities recognised, complexity of applying the new standard and the assumptions required by Management for the calculation of the lease balances. Management has completed calculations of the lease balances for all leases as at 1 April 2019 (upon adoption) and as at 31 March 2020. These calculations require estimates regarding the lease term and the discount rate. Our audit procedures, among others, included: • Assessing Management’s process relating to the identification, recording, recognition and measurement of leases within the scope of NZ IFRS 16. • Assessing Management’s judgements made in applying allowable practical expedients against the requirements of NZ IFRS 16. • Evaluating the key assumptions used by Management, including the incremental borrowing rates applied to the lease portfolio. • For a sample of leases: o Agreeing key inputs in the lease calculation to the underlying lease agreement; o Recalculating the lease liability and right-of-use asset based on the key inputs noted above and TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
32
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Key Audit Matter How our audit addressed the key audit matter compared our recalculations to the balances recognised by the Group; and o Checking the appropriateness of the classification of the lease liability between current and non-current based on the remaining term of the lease. • Evaluating the related disclosures about leases which are included in Note 32 in the Group’s consolidated financial statements. Other Information The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 31 March 2020 (but does not include the consolidated financial statements and our auditor’s report thereon). Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed , we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Consolidated Financial Statements The Directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Directors are responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs (NZ), we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ▪ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ▪ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ▪ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ▪ Conclude on the appropriateness of the use of the going concern basis of accounting by the Directors and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ▪ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent fairly the underlying transactions and events in a manner that achieves fair presentation. ▪ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 INDEPENDENT AUDITOR’S REPORT cont.
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2020
Notes
2020
$’000
2019
$’000
Revenue
Other income
Cost of goods sold
Interest expense
Impairment provision expense
Subcontracted services expense
Employee benefits (short term)
Commission
Advertising expense
Depreciation and amortisation expense
Property and related expenses
Systems maintenance
Claims
Movement in life insurance liabilities
Insurance deferred acquisition costs
Impairment of intangible brand asset
Other expenses
Profit before taxation
Taxation (expense)/benefit
Profit for the year
Other comprehensive income for the year (which may subsequently be reclassified to
profit/loss), net of tax
Cash flow hedges
Revaluation of financial assets at fair value through OCI
Foreign currency translation differences
Total other comprehensive income
Total comprehensive income for the year
Earnings per share (cents per share)
Basic earnings per share
Diluted earnings per share
7
7
7
7
7
35
8
9
9
332,174
500
328,358
8,221
(135,003)
(133,126)
(14,853)
(6,044)
(17,149)
(55,458)
(13,368)
(2,743)
(11,919)
(1,688)
(1,747)
(25,952)
(836)
(701)
-
(16,148)
29,065
(8,112)
20,953
(447)
(310)
(12)
(769)
(14,952)
(7,892)
(12,888)
(52,756)
(14,581)
(3,918)
(5,785)
(10,945)
(1,471)
(26,804)
(718)
(423)
(4,300)
(16,971)
29,049
(6,330)
22,719
(364)
-
(26)
(390)
20,184
22,329
24.35
26.21
24.35
27.28
34
The accompanying notes form part of these financial statements
35
The accompanying notes form part of these financial statements
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Matters Relating to the Electronic Presentation of the Audited Consolidated Financial Statements This audit report relates to the consolidated financial statements of Turners Automotive Group Limited and its subsidiaries for the year ended 31 March 2020 included on Turners Automotive Group Limited’s website. The Directors of Turners Automotive Group Limited are responsible for the maintenance and integrity of Turners Automotive Group Limited’s website. We have not been engaged to report on the integrity of Turners Automotive Group Limited’s website. We accept no responsibility for any changes that may have occurred to the consolidated financial statements since they were initially presented on the website. The audit report refers only to the consolidated financial statements named above. It does not provide an opinion on any other information which may have been hyper linked to or from these consolidated financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited consolidated financial statements and related audit report dated 30 July 2020 to confirm the information included in the audited consolidated financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of consolidated financial statements may differ from legislation in other jurisdictions. The engagement partner on the audit resulting in this independent auditor’s report is N S de Frere. BAKER TILLY STAPLES RODWAY AUCKLAND Auckland, New Zealand 30 July 2020 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Consolidated statement of changes in equity for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of financial position for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
TURNERS LIMITED
TURNERS LIMITED
for the year ended 31 March 2020
Consolidated statement of financial position for the year ended 31 March 2016
Consolidated statement of financial position for the year ended 31 March 2016
2020
Revaluation
of financial
assets at Cash flow
Share Translation
fair value
hedge Retained
options
reserve through OCI
reserve
earnings
$’000
701
$’000
(21)
$’000
(164)
$’000
14,659 214,323
Share
capital
$’000
199,148
Notes
Total
$’000
Assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Notes
10
Notes
Notes
11
12
$’000
2016
2016
32,771
$’000
$’000
64,988
8,609
Balance at 31 March 2018
Change in accounting policies
Impact of the implementation of NZ IFRS 15
Impact of the implementation of NZ IFRS 9
-
-
-
-
-
-
-
-
-
Balance at 1 April 2018 (restated)
199,148
701
(21)
Transactions with shareholders in their capacity as owners
Capital contributions (net of issue costs)
Capital buy back
Employee share based payments
Dividend paid
27
27
28
29
13,388
(6,141)
-
-
Total transactions with shareholders in their capacity as owners
7,247
Comprehensive income
Profit
Other comprehensive income
Total comprehensive income for the year, net of tax
-
-
-
-
-
326
-
326
-
-
-
-
-
-
-
-
-
(26)
(26)
Balance at 31 March 2019
206,395
1,027
(47)
Change in accounting policy
Impact of the implementation of NZ IFRS 16
32
-
-
-
Balance at 1 April 2019 (restated)
206,395
1,027
(47)
Transactions with shareholders in their capacity as
owners
Capital contributions (net of issue costs)
Capital buy-back
Cancellation of options
Dividend paid
Total transactions with shareholders
Comprehensive income
Profit
Other comprehensive income
Total comprehensive income for the year, net of tax
27
27
28
29
97
(3,192)
-
-
1,027
(1,027)
-
-
(2,068)
(1,027)
-
-
-
-
-
-
-
-
-
-
-
-
-
(12)
(12)
(59)
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(345)
(345)
(2,292)
(2,292)
(2,637)
(2,637)
(164)
12,022 211,686
-
-
-
-
-
-
(364)
(364)
-
-
-
13,388
(6,141)
326
(15,214)
(15,214)
(15,214)
(7,641)
22,719
22,719
-
(390)
22,719
22,329
(528)
19,527 226,374
-
(5,666)
(5,666)
(528)
13,861 220,708
-
-
-
-
-
-
-
-
-
97
(3,192)
-
(14,742)
(14,742)
(14,742)
(17,837)
20,953
20,953
-
20,953
(769)
20,184
(310)
(310)
(447)
(447)
Balance at 31 March 2020
204,327
(310)
(975)
20,072 223,055
Assets
Inventory
Trade receivables
Finance receivables
Cash and cash equivalents
Financial assets at fair value through profit or loss
Trade receivables
Assets
Inventories
Cash and cash equivalents
Finance receivables
Financial assets at fair value through profit or loss
Other receivables, deferred expenses and contract assets
Trade receivables
Reverse annuity mortgages
Inventory
Investment property
Finance receivables
Financial assets at fair value through OCI
Other receivables and deferred expenses
Property, plant and equipment
Reverse annuity mortgages
Right-of-use assets
Property, plant and equipment
Property, plant and equipment
Intangible assets
Tax receivables
Tax receivables
Total assets
Deferred tax asset
Deferred tax asset
Other receivables and deferred expenses
Reverse annuity mortgages
Intangible assets
Intangible assets
Liabilities
Total assets
Total assets
Other payables
Liabilities
Tax payables
Financial liability at fair value through profit or loss
Liabilities
Contract liabilities
Other payables
Other payables
Deferred tax
Deferred revenue
Deferred revenue
Tax payables
Tax payables
Derivative financial instruments
Derivative financial instruments
Borrowings
Borrowings
Lease liabilities
Life investment contract liabilities
Life investment contract liabilities
Insurance contract liabilities
Insurance contract liabilities
Total liabilities
Total liabilities
Derivative financial instruments
Borrowings
Life investment contract liabilities
Insurance contract liabilities
Total liabilities
Shareholders’ equity
Share capital
Shareholders’ equity
Shareholders’ equity
Share capital
Share capital
Other reserves
Other reserves
Other reserves
Retained earnings
Retained earnings
Retained earnings
Total shareholders’ equity
Total shareholders’ equity
Total shareholders’ equity and liabilities
Total shareholders’ equity and liabilities
Total shareholders’ equity and liabilities
Total shareholders’ equity
For and on behalf of the Board
For and on behalf of the Board
For and on behalf of the Board
G.K. Baker
G.K. Baker
G.K. Baker
Chairman Director
Chairman Director
Chairman Director
2019
$’000
2015
2015
15,866
$’000
$’000
66,252
12,471
142,827
8,984
38,859
12,339
12,339
290,017
17,350
17,350
10,955
7,394
7,394
8,294
8,984
5,650
142,827
-
5,946
5,946
39,084
13,253
-
8,319
8,319
166,734
433
433
654,182
8,532
8,532
13,253
167,598
14,156
44,371
13,810
13,810
293,037
18,455
18,455
8,572
9,575
9,575
4,913
14,156
5,650
167,598
1,000
8,505
8,505
52,788
9,734
9,734
24,850
11,108
11,108
166,843
-
708,392
4,024
4,024
-
105,338
105,338
362,303
362,303
28,048
-
103,595
103,595
328,972
328,972
33,906
116
22,270
2,085
22,270
10,080
6,049
6,049
2,772
990
990
985
49
49
350,364
174,816
32,511
15,629
15,629
7,072
12,688
51,420
232,491
485,337
12,688
174,816
232,491
17,790
2,642
17,790
13,918
7,476
7,476
4,570
71
71
524
-
-
312,863
156,995
-
16,378
16,378
7,484
9,260
9,260
51,785
207,970
427,808
156,995
207,970
10
11
12
13
14
15
16
19
13
10
14
11
15
12
16
13
17
14
18
15
20
16
32
19
21
20
20
21
21
22
23
22
23
24
22
25
23
24
32
32
26
24
32
32
35
32
35
135,294
(14,269)
135,294
206,395
(23)
(23)
452
(14,269)
19,527
121,002
226,374
328,972
654,182
328,972
121,002
136,127
(6,263)
136,127
204,327
(52)
(52)
(1,344)
(6,263)
20,072
129,812
223,055
362,303
708,392
362,303
129,812
25
25
27
P.A. Byrnes
P.A. Byrnes
P.A. Byrnes
Deputy chairman
Executive Director
Executive Director
The accompanying notes form part of these financial statements
The accompanying notes from part of these financial statements
The accompanying notes form part of these financial statements
The accompanying notes from part of these financial statements
Authorised for issue on 30 July 2020
Authorised for issue on 22 June 2016
Authorised for issue on 22 June 2016
36
The accompanying notes form part of these financial statements
The accompanying notes form part of these financial statements
37
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Consolidated statement of cash flows for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Notes
2020
$’000
2019
$’000
1. REPORTING ENTITY
Turners Automotive Group Limited, ('the Company') is incorporated and domiciled in New Zealand. Turners Automotive Group Limited is
registered under the Companies Act 1993.
Cash flows from operating activities
Interest received
Receipts from customers
Interest paid
Payment to suppliers and employees
Income tax paid
Net cash outflow from operating activities before changes in operating assets and
liabilities
Net increase in finance receivables
Net decrease in reverse annuity mortgages
Net (increase)/decrease of financial assets at fair value through profit or loss
Net (withdrawals)/contributions from life investment contracts
Changes in operating assets and liabilities arising from cash flow movements
43,874
289,275
(12,856)
(285,795)
(11,460)
45,023
279,472
(12,184)
(272,052)
(10,752)
23,038
29,507
(27,826)
3,964
704
88
(34,926)
2,545
(12,163)
16
(23,070)
(44,528)
Net cash (outflow)/inflow from operating activities
31
(32)
(15,021)
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and intangibles
Purchase of property, plant, equipment and intangibles
Purchase of investments
Sale of investments
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Net bank loan advances/(repayments)
Principal elements of lease payments
Proceeds from the issue of shares
Proceeds from the issue of bonds
Other borrowings
Dividend paid
Net cash inflow/(outflow) from financing activities
Net movement in cash and cash equivalents
Add opening cash and cash equivalents
Translation difference
Closing cash and cash equivalents
Represented By:
Cash at bank
913
(19,245)
(1,310)
473
(19,169)
61,038
(6,998)
(3,192)
-
-
(14,742)
36,106
9,388
(12,753)
41
-
(3,324)
20,570
-
7,100
(561)
(2,837)
(15,214)
9,058
16,905
(9,287)
15,866
-
32,771
25,145
8
15,866
10
32,771
15,866
Closing cash and cash equivalents
32,771
15,866
Turners Automotive Group Limited is a FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013.
The consolidated financial statements of Turners Automotive Group Limited and its subsidiaries (together ‘the Group’) have been prepared in
accordance with the Companies Act 1993 and the Financial Markets Conduct Act 2013.
The Group is a for profit entity.
The Group's principal activities are:
•
•
•
automotive retail (second hand vehicle retailer)
finance and insurance (loans and insurance products); and
credit management (collection services).
The financial statements were authorised for issue by the directors on 30 July 2020.
2. BASIS OF PREPARATION
2.1 Statement of Compliance
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ('NZ GAAP').
They comply with New Zealand Equivalents to International Financial Reporting Standards ('NZ IFRS') and other applicable Financial
Reporting Standards, as appropriate for profit oriented entities. These financial statements also comply with International Financial Reporting
Standards ('IFRS').
2.2 Basis of measurement
The financial report has been prepared under the historical cost convention, as modified by revaluations for certain classes of assets and
liabilities to fair value and life insurance contract liabilities and related assets to net present value as described in the accounting policies
below.
2.3 Functional and Presentation Currency and Rounding
These financial statements are presented in New Zealand Dollars ($) which is the Company's functional currency. All values are rounded to
the nearest thousand ($000), except when otherwise indicated.
3. SIGNIFICANT ACCOUNTING POLICIES
Except as detailed in note 32, the accounting policies set out below have been applied consistently to all periods presented in these financial
statements, and have been applied consistently by Group entities.
3.1 Adoption of new and revised Standards and Interpretations
New standards and amendments and interpretations to existing standards that came into effect during the current accounting period beginning
on 1 April 2019 that materially impact the Group’s financial statements are as follows:
•
NZ IFRS 16 ‘Leases’.
The other standards did not have a material impact on the Group’s financial statements and did not require retrospective adjustment.
Refer to note 32 for the impact of implementing this new standard.
3.2 New standards and amendments and interpretations to existing standards that are not yet effective for the current accounting
period beginning on 1 April 2019
The following relevant standards and interpretations have been issued at the reporting date but are not yet effective.
NZ IFRS 17 Insurance Contracts
NZ IFRS 17, ‘Insurance Contracts’, will replace NZ IFRS 4, ‘Insurance Contracts’. Under the NZ IFRS 17, insurance contract liabilities will be
calculated at the present value of future insurance cash flows with a provision for risk. The discount rate applied will reflect current interest
rates. If the present value of future cash flows would produce a gain at the time an insurance contract is issued, the model would also require
a "contractual service margin" to offset the day 1 gain. The contractual service margin would be amortised over the life of the insurance
contract. There would also be a new income statement presentation for insurance contracts, including a revised definition of revenue and
additional disclosure requirements. NZ IFRS 17 will also have accommodations for certain specific types of insurance contracts. Short-duration
insurance contracts will be permitted to use a simplified unearned premium liability model until a claim is incurred. For some contracts, in
which the cash flows are linked to underlying items, the liability value will reflect that linkage.
The effective date is annual reporting periods beginning on or after 1 January 2021.
The Group is yet to assess the impact of NZ IFRS 17. The Group intends to adopt NZ IFRS 17 no later than the financial year beginning 1
April 2021.
The accompanying notes form part of these financial statements
3.3 Basis of consolidation
Subsidiaries
Subsidiaries are all entities controlled by the Group. The financial statements of subsidiaries are included in consolidated financial statements
from the date that control commences until the date that control ceases.
38
The accompanying notes form part of these financial statements
39
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
by the Group. There is no material amount of variable consideration under these contracts nor is there the existence of a significant
financing component. Costs to obtain contracts such as commissions are recognised as contract assets and incurred when the related
revenue for the contract is released to profit or loss.
3.4 Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currency of Group entities at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency
at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional
currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency
translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional
currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured
based on historical costs are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on
retranslation are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to New
Zealand Dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to New Zealand
Dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve
(translation reserve) in equity.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable
future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign
operation and are recognised in other comprehensive income, and are presented in the translation reserve in equity.
3.5 Revenue and expense recognition
The principal sources of revenue are sales of goods, sales of service, interest income, fees, commissions, and insurance premium income.
3.5.1 Revenue from contracts with customers
Sales of goods
Sales of goods comprise sales of motor vehicle and commercial goods owned by the Group. Sales of goods are recognised when the customer
gains control of the goods. This normally occurs on receipt of a deposit, full payment or approval of financing.
related warranties associated with goods cannot be purchased separately and they serve as an assurance that the products sold comply
upon specifications and cover the standard period established by legislation. There is no material amount of variable consideration
Sales
with agreed
‑
under these contracts nor is there the existence of a significant financing component.
‑
Sales of service
Auction commission is recognised at a point in time in the accounting period in which the service is rendered. Payment for services is normally
deducted from the proceeds from the sale. Other than those provided by legislation no warranties are provided by the Group. There is no
material amount of variable consideration under these contracts nor is there the existence of a significant financing component.
Other sales revenue comprises services rendered preparing the asset for sale and commission earned on the sale of third party products.
Services rendered while preparing the asset for sale are recognised over time in the accounting period in which the service is rendered, and
a contract asset is recognised for amounts relating to services rendered not yet invoiced. Payment for services rendered are either deducted
from the proceeds from the sale or raised as a trade receivable. Other than those provided by legislation no warranties are provided by the
Group. There are no rebates or volume discounts. Commissions earned on the sale of third party products is recognised at a point in time
when the sale is made. Payment is usually received when the sale is made. Other than those provided by legislation no warranties are
provided by the Group. There are no rebates or volume discounts.
Collection income, which is largely fees and commission earned for collecting debt on behalf of third parties and the sale of customised terms
of trade documents, is recognised at a point in time in the accounting period in which the service is rendered, by reference to completion of
the specific transaction assessed on the basis of the actual service provided as a proportion of the total service to be provided. Payment is
either deducted from the monies collected or raised as trade receivable and therefore a contract liability is recognised over the period in which
the services are performed representing the Group’s right to consideration for the services performed to date. If the consideration promised
includes a variable amount for rebates, refunds or credit, then the Group estimates the amount of variable consideration, to the extent that it
is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur, and recognises a contract liability.
Other than those provided by legislation no warranties are provided by the Group. Costs to obtain contracts such as commissions are
recognised as contract assets and incurred when the related revenue for the contract is released to profit or loss.
Voucher income
Voucher income is the proceeds from the sale of a voucher that on presentation entitles the holder to either load a debt for collection or
register of a security on the Personal Property Securities Register (‘PPSR’). Voucher income is recognised, at a point in time, when the
voucher is redeemed and the debtor’s information is loaded into the collection system or a security is registered on the PPSR. Payment is
normally received when the voucher is sold, and voucher income is initially recognised as a contract liability. For those vouchers that are
unredeemed, voucher income is recognised after a period of time based on historical non-redemption patterns. Estimates are readjusted as
necessary based on movements in the actual non-redemption patterns. Other than those provided by legislation no warranties are provided
3.5.2 Financial instruments
Interest income and expense
Interest income and expense is recognised in the profit or loss using the effective interest method.
The effective interest method calculates the amortised cost of a financial asset or financial liability and allocates the interest income or interest
expense over the relevant period. The calculation includes all fees paid or received and directly related transaction costs that are an integral
part of the effective interest rate. The interest income or expense is allocated over the life of the instrument and is measured for inclusion in
profit and loss by applying the effective interest rate to the instruments amortised cost.
Lending and funding - fees and commissions
Lending fee income (such as booking and establishment fees) that is integral to the effective yield of a loan held at amortised cost is capitalised
as part of the amortised cost and deferred over the life of the loan using the effective interest method. Lending fees not directly related to the
origination of a loan (account maintenance fee) are recognised over the period of service.
Incremental and directly attributable costs (such as commissions) associated with the origination of a financial asset (such as loans) and
financial liabilities (such as borrowings) are capitalised as part of the amortised cost and deferred over the life of the financial instrument using
the effective interest method.
3.5.3 Insurance Contracts
Premium income and acquisition costs
Recurring premiums on life insurance contracts are recognised as revenue when payable by the policyholder. Where policies provide for the
payment of amounts of premiums on specific due dates, such premiums are recognised as revenue when due. Unpaid premiums are only
recognised as revenue during the days of grace and are not recognised where policies are deemed to have lapsed at reporting date.
General insurance premiums comprise the total premiums payable for the whole period of cover provided by contracts entered into during the
reporting period and are recognised on the date on which the policy commences. Premiums include any adjustments arising in the reporting
period for premium receivables written in respect of business written in prior accounting periods. Premiums collected by intermediaries, but
not yet received, are assessed based on known sales and are included in written premium.
Unearned premiums are those proportion of premiums written in a year that relate to periods of risk after the reporting date. Unearned
premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned
premiums.
Under life investment contracts deposits are received from policyholders which are then invested on behalf of the policyholders and recognised
as Financial assets at fair value through profit or loss. No premium income is recognised as revenue. Fees deducted from members' accounts
are accounted for as fee income.
Those direct and indirect costs incurred during the financial period arising from the acquiring or renewing of insurance contracts are deferred
to the extent that these costs are recoverable out of future premiums from insurance contracts. All other acquisitions costs are recognised as
an expense when incurred.
Subsequent to initial recognition, the deferred acquisitions cost asset (DAC) for life insurance contracts is amortised over the expected life of
the contracts. DAC for general insurance contracts is amortised over the period in which the revenues are earned.
An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. When the recoverable
amount is less than the carrying value, an impairment loss is recognised in profit or loss. DACs are also considered in the liability adequacy
test for each reporting period.
DACs are derecognised when the related contracts are either settled or disposed of.
Claims expense
Claims expenses represent claim payments adjusted for the movement in the outstanding claims liability.
General insurance claims expenses are recognised when claims are notified with the exception of claims incurred but not reported for which
a provision is estimated. Life insurance contract claims are recognised when a liability has been established. Claims under life investment
contracts represent withdrawals of investment deposits and are recognised as a reduction in the life investment contract liabilities.
3.5.4 Other
Other income
Dividend income is recorded in the profit or loss when the Group’s right to receive the dividend is established.
Other expense recognition
All other expenses are recognised in profit or loss as incurred.
3.6 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
40
41
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or
loss.
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention
in the marketplace.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification
of the financial assets.
Classification of financial assets
Financial assets that meet the following conditions are measured subsequently at amortised cost:
•
the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;
and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
•
Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
•
the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the
financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
•
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:
•
the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if
certain criteria are met; and
the Group may irrevocably designate a financial asset that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing
so eliminates or significantly reduces an accounting mismatch.
•
(i) Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the
relevant period.
For financial assets other than purchased or originated credit
impaired on initial
recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or
received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit
losses, through the expected life of the financial asset, or, where appropriate, a shorter period, to the gross carrying amount of the financial
asset on initial recognition. For purchased or originated credit
adjusted effective interest rate is calculated
by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial
recognition.
impaired financial assets (i.e. assets that are credit
impaired financial assets, a credit
‑
‑
‑
‑
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal
repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity
amount, adjusted for any expected credit losses. The gross carrying amount of a financial asset is the amortised cost of a financial asset
before adjusting for any expected credit losses.
Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost and at FVTOCI.
impaired financial assets, interest income is calculated by applying the effective
For financial assets other than purchased or originated credit
interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit
impaired (see
below).
‑
‑
For financial assets that have subsequently become credit
the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit
so that the financial asset is no longer credit
amount of the financial asset.
impaired, interest income is recognised by applying the effective interest rate to
impaired financial instrument improves
impaired, interest income is recognised by applying the effective interest rate to the gross carrying
‑
‑
‑
Financial assets measured at amortised cost include cash and cash equivalents, trade receivables, finance receivables, reverse annuity
mortgages and other receivables.
(ii) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL. Specifically:
•
Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither held for
trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition.
Financial assets that do not meet the amortised cost criteria or the FVTOCI criteria are classified as at FVTPL. In addition, financial
assets that meet either the amortised cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such
designation eliminates or significantly reduces a measurement or recognition inconsistency (so called ‘accounting mismatch’) that would
•
42
arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has not designated
any financial assets as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in
profit or loss to the extent they are not part of a designated hedging relationship (see hedge accounting policy). Fair value is determined in
the manner described in note 5.5.
Financial assets measured at FVTPL include equity securities, unitised funds, fixed interest securities and term deposits.
(iii) Finance assets at FVTOCI
Equity securities which are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category.
These are strategic investments and the Group considers this classification to be more relevant.
On disposal of these equity securities, any related balance within the FVOCI reserve is reclassified to retained earnings.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets that are measured at amortised cost and contract assets.
The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective
financial instrument.
The Group recognises lifetime ECL for trade receivables and contract assets. The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date,
including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial
recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures
the loss allowance for that financial instrument at an amount equal to 12
month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial
instrument. In contrast, 12
month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial
instrument that are possible within 12 months after the reporting date. Homogeneous loans are assessed on a collective basis (collective
impairment provision) and non-homogeneous loans are assessed individually (specific impairment provision).
‑
‑
(i) Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk
of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date
of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward
looking information that is available without undue cost or effort such as:
•
•
actual or expected changes in economic indicators (ie change in employment rates); and
‑
for non-homogeneous loans significant changes in the value of the collateral supporting the loan or changes in the operating results
of the borrower.
The nature of the Group’s finance receivables (second tier retail and commercial lending) means there is little or no updated credit risk
information that is routinely obtained and monitored on an individual instrument until a customer breaches the contractual terms.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly
since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and
revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes
past due.
(ii) Definition of default
The Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and
supportable information to demonstrate that a more lagging default criterion is more appropriate.
‑
impaired financial assets
(iii) Credit
A financial asset is credit
asset have occurred. Evidence that a financial asset is credit
a)
b) a breach of contract, such as a default or past due event (see (ii) above); and
c)
significant financial difficulty of the borrower;
‑
‑
it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation.
impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial
impaired includes observable data about the following events:
off policy
(iv) Write
The Group writes off a financial asset when there is information indicating that the borrower is in severe financial difficulty and there is no
realistic prospect of recovery, e.g. when the borrower has been placed under liquidation or has entered into bankruptcy proceedings. Financial
assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where
appropriate. Any recoveries made are recognised in profit or loss.
‑
43
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
v) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there
is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted
by forward
looking information as described above.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid
or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected
life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.
As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date. No further
advances are allowed against financial assets in default.
‑
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in
accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate.
If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period,
but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at
an amount equal to 12
month ECL at the current reporting date, except for assets for which simplified approach was used.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying
amount through a loss allowance account.
‑
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL. However, financial
liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies
are measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination,
(ii) held for trading or (iii) it is designated as at FVTPL.
A financial liability is classified as held for trading if:
•
•
it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual
pattern of short
it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.
term profit
taking; or
•
‑
‑
A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a business combination may be
designated as at FVTPL upon initial recognition if:
•
•
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is
evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information
about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be
designated as at FVTPL.
•
Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss
to the extent that they are not part of a designated hedging relationship (see Hedge accounting policy).
However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of
changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The
remaining amount of change in the fair value of liability is recognised in profit or loss. Changes in fair value attributable to a financial liability’s
credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred
to retained earnings upon derecognition of the financial liability.
Fair value is determined in the manner described in note 5.5.
Financial liabilities measured at FVTPL include contingent consideration.
Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held
at FVTPL, are measured subsequently at amortised cost using the effective interest method.
for
trading, or (iii) designated as
‑
‑
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The
difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit
or loss.
When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange
is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group
accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the
recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the
new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different
from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the
difference between: (1) the carrying amount of the liability before the modification; and (2) the present value of the cash flows after modification
should be recognised in profit or loss as the modification gain or loss within other gains and losses.
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign
exchange forward contracts, and interest rate swaps.
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair
value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and
effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a
financial liability. Derivatives are not offset in the financial statements unless the Group has both legal right and intention to offset.
A derivative is presented as a non
and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
current liability if the remaining maturity of the instrument is more than 12 months
current asset or a non
‑
‑
Hedge accounting
The Group designates certain derivatives as hedging instruments in respect of interest rate risk in cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in cash flows of the hedged
item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements:
•
•
•
there is an economic relationship between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually
hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective
for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the
hedge) so that it meets the qualifying criteria again.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as
cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to
the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when
the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results
financial liability, the gains and losses previously recognised in other comprehensive income
in the recognition of a non
and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non
financial asset or
non
financial liability. This transfer does not affect other comprehensive income. Furthermore, if the Group expects that some or all of the loss
accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.
financial asset or a non
‑
‑
‑
‑
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The
discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow
hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge reserve is reclassified immediately to profit or
loss.
3.7 Right of use assets and lease liabilities
The Group leases various offices, warehouses, retail stores, equipment and cars. Rental contracts are typically made for fixed periods of 3 to
8 years but may have extension options as described in below. Lease terms are negotiated on an individual basis and contain a wide range
44
45
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Until the 2020 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period
of the lease.
From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use
asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in
a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or
loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office
furniture.
Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to
maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only
by the Group and not by the respective lessor.
The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The assessment of
whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease
liabilities and right-of-use assets.
A deferred tax asset is raised for the tax impact of the changes in recognised lease related assets and liabilities.
A lease is contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
In the Statement of cash flow, lessees present:
•
Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of
the lease liability as part of operating activities;
Cash paid for the interest portion of a lease liability as either operating activities or financing activities, as permitted by NZ IAS 7 Statement
of Cash Flows (the Group has opted to include interest paid as part of operating activities, consistent with its presentation of interest paid
on financial liabilities); and
Cash payments for the principal portion for a lease liability, as part of financing activities. Under NZ IAS 17, all lease payments on
operating leases were presented as part of cash flows from operating activities.
•
•
For the accounting policy applied prior to the adoption of IFRS 16 please refer to note 32.
Insurance contracts
3.8
Insurance contracts are those contracts that transfer significant insurance risk and are accounted for in accordance with the requirements of
NZ IFRS 4 Insurance Contracts. The Group issues the following insurance contracts:
•
Long-term insurance contracts with fixed and guaranteed terms, these contracts insure events associated with human life (for example,
death) over a long duration;
Temporary life insurance contracts covering death disablement, disability and redundancy risks; and
Short term motor vehicle contracts covering comprehensive, third party and mechanical breakdown risks.
•
•
The Group has determined that all assets of the Group’s subsidiary, DPL Insurance Limited, are assets backing policy liabilities and are
managed and reported in accordance with a mandate approved by the DPL Insurance Limited’s Board.
The liability for life insurance contracts is determined in accordance with Appendix C of NZ IFRS 4 Insurance Contracts and Professional
Standard No 20 of the New Zealand Society of Actuaries. In terms of these standards, the liability is determined using the methodology
referred to as Margin on Service (MoS). Under MoS the excess premium received over claims and expenses, 'the profit margin', is recognised
over the life of the contract in a manner that reflects the pattern of risk accepted from the policyholder 'the service'. Longer-term lines of
business (annuities, funeral plan) are valued using the projection method, and shorter-term life and longer-term life contracts written on yearly
renewable premiums, are valued using the accumulation method, as provided for in NZ IFRS 4.
General insurance contract liabilities include claims provision and the provision for unearned premium. The outstandings claims provision is
based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related
claims handling cost and a reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification
and settlement of claims, therefore the ultimate cost of these cannot be known at reporting date and are estimated based on past experience.
The liability is not discounted for the time value of money and is derecognised when the obligation to pay the claim expires, is discharged or
is cancelled.
The provision for unearned premiums represent the portion of premiums received or receivable that relates to risks that have not yet expired
at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is recognised as premium
income over the term of the contract in accordance with the pattern of insurance service provided under the contract.
Liability adequacy testing is performed in terms of NZ IFRS 4 in order to test the adequacy of all insurance liabilities recorded in the statement
of financial position, net of deferred acquisition costs. Liability adequacy testing is performed at a portfolio level of contracts that are subject
to broadly similar risks and are managed together as a single portfolio.
3.9 Life investment contracts
Life investment contracts are those contracts with minimal insurance risk and are accounted for in accordance with NZ IFRS 15 'Revenue
from Contracts with Customers' (refer note 3.5.1) and NZ IFRS 9 'Financial Instruments' (refer note 3.5.2). The life investment contacts are
unit-linked and fair value of a unit linked contract is determined using the current unit values that reflect the fair value of the financial assets
backing the contract, multiplied by the number of units attributable to the contract holder.
3.10 Inventories
Inventories comprise primarily motor vehicles held for sale and are stated at the lower of cost or net realisable value. Cost comprises purchase
price, shipping cost, compliance cost and other sundry related costs. Estimated selling prices are based upon recent observed vehicle sales
prices for comparable vehicles. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make the sale.
3.11 Investment property
Investment property is held for capital appreciation and comprises land that was transferred from finance receivables through the exercise of
the Group’s security interest in a finance receivable that was in default.
Investment property is initially recognised at fair value on date of transfer or purchase and subsequently carried at fair value. The fair value of
investment properties is determined by a qualified independent external valuer (refer note 17).
Any gains or losses arising from a change in fair value of the investment property is recognised in profit or loss. Subsequent expenditure is
charged to the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group
and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to profit or loss during the period in
which they are incurred.
3.12 Property, plant and equipment
Property, plant and equipment are recognised in the statement of financial position at cost less accumulated depreciation and impairment
losses. Land is not depreciated. Depreciation is calculated on all other property, plant and equipment on a diminishing value or straight-line
basis to allocate the costs, net of any residual amounts, over their useful lives.
The rates for the following asset classes are:
Diminishing value
Straight line
Leasehold improvements, furniture and
fittings, office equipment
Computer equipment
Motor vehicles and equipment
Signs and flags
7.5 - 60.0%
31.2 - 48.0%
26.0 - 31.2%
-
3 - 15 years
3 - 5 years
3 - 7 years
3 - 12 years
3.13 Intangible assets
Intangible assets comprise goodwill, acquired separable corporate brands, acquired customer relationships and computer software. Goodwill
and corporate brands are indefinite life intangibles subject to annual impairment testing.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or
groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according
to operating segment.
Corporate brands and customer relationships acquired as part of a business combination are capitalised separately from goodwill as intangible
assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are
attributable to the asset will flow to the Group.
Corporate relationship assets are amortised on the straight line basis over the expected life (2 – 10 years) of the relationship and are
recognised in the statement of financial position at cost less accumulated amortisation and impairment losses.
46
47
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Computer software is recognised in the statement of financial position at cost less accumulated amortisation and impairment losses.
Direct costs associated with the purchase and installation of software licences and the development of software for internal use are capitalised
where project success is probable and the capitalisation criteria is met. Cost associated with planning and evaluating computer software and
maintaining a system after implementation are expensed. Computer software costs are amortised on a diminishing value basis (rate of 50%)
or on a straight-line basis (one to five years).
and non-vesting conditions, the transactions are treated as vested irrespective of whether the market or non-vesting conditions is satisfied,
provided that all other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (refer note 9).
When options are exercised or cancelled, the option reserve relating to the options exercised or cancelled is reclassified to share capital.
3.14 Taxation
Income tax for the period comprises current and deferred tax. Current and deferred tax are recognised as an expense or income in the profit
or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in
equity), in which case the tax is also recognised outside profit or loss.
Superannuation plans
The Group pays contributions to superannuation plans, such as Kiwisaver. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at balance date
after taking advantage of all allowable deductions under current taxation legislation and any adjustment to tax liabilities in respect of previous
years.
Deferred tax is provided using the liability method, providing for temporary differences between the amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the amount of assets and liabilities, using tax rates enacted or substantively enacted as at balance date.
Deferred taxation assets arising from temporary differences or income tax losses, are recognised only to the extent that it is probable that a
future taxable profit will be available against which the asset can be utilised. Deferred taxation assets are reduced to the extent that it is no
longer probable that the related tax asset will be realised. Any reduction is recognised in profit or loss.
3.15 Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually or more frequently if
events or changes in circumstances indicate that they might be impaired. Intangible assets not yet available for use are tested for impairment
annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The Group conducts an annual internal review of asset values, which is used as a source of information to assess for any
indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also
monitored for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is determined by estimating future cash flows
from the use and ultimate disposal of the asset and discounting these to their present value using a pre-tax discount rate that reflects current
market rates and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Impairment losses directly reduce the carrying amount of assets and are
recognised in profit or loss.
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
3.16 Managed funds
DPL Insurance Limited, a wholly owned subsidiary, has saving plans, which are not open to new members, with assets managed by a third
party investment manager. The assets and liabilities of these funds are included in the financial statements.
3.17 Employee benefits
Wages, salaries and annual leave
Liabilities for wages, salaries and annual leave are recognised in respect of employees' services up to the reporting date. They are measured
at the amounts expected to be paid when the liabilities are settled.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured at the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to future wage and salary levels, experience of employee departures and periods of service. Expected future payments
are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises an accrual where contractually obliged or where
there is a practice that has created a constructive obligation.
Share based payments
The cost of options issued to employees under the Group’s share option plan is measured by reference to fair value of the options at the date
on which they are granted. Service and non-market performance conditions are not taken into account when determining the grant date fair
value, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that
will ultimately vest. Market conditions are reflected within the grant date fair value.
The cost of equity settled transactions is recognised over the vesting period. If the service condition is not met during the vesting period, the
expense is revised to reflect the best available estimate of the number of equity instruments expected to vest. Where awards include market
3.18 Statement of cash flows
The statement of cash flows has been prepared using the direct approach modified by netting certain cash flows in order to provide more
meaningful disclosure to better reflect the activities of the Group's customers or the party providing funding to the Group than those of the
Group. These include reverse annuity mortgages, finance receivables and borrowings.
3.19 Comparatives
Where necessary, comparative information has been reclassified and represented for consistency with current year. Comparative information
has not been restated for the impact on application of NZ IFRS 16.
4. USE OF ESTIMATES AND JUDGEMENTS
In preparing the financial statements in accordance with NZ IFRS, the Board and management are required to make judgements, estimates
and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ
from those estimates.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
COVID-19
The COVID -19 pandemic and responses has reduced the ability of many businesses to operate and reduced the demand for many goods
and services resulting in significant volatility and instability in financial markets. The Group's four businesses experienced significant declines
in new business during lockdown level 4 and level 3, however three of the four businesses earn annuity income and were profitable during
this period. The COVID-19 pandemic and responses continue to effect general activity and confidence levels in the economy. While the scale
and duration of these effects remain uncertain, the Group continues to monitor developments and initiate plans to mitigate adverse impacts
and maximise opportunities.
These financial statements have been prepared based upon conditions existing as at 31 March 2020 and consider those events occurring
subsequent to that date that provide evidence of conditions that existed at the end of the reporting period. As the outbreak of the COVID-19
pandemic occurred before 31 March 2020 its impacts are considered an event that is indicative of conditions that arose prior to reporting
period. Accordingly, as at the date of signing these financial statements, all reasonably known and available information with respect to the
COVID-19 pandemic has been taken into consideration in the critical accounting estimates and judgements applied by Management and all
reasonably determinable adjustments have been made in preparing these financial statements.
When assessing the possible future impact of COVID-19 pandemic on the carrying value of assets and liabilities, the Group reviewed past
experience, including the impact of the global financial crisis, on the Group's performance and aligned the forecast and estimates with this
experience.
The principal areas of judgement in preparing these financial statements are set out below.
Inventories - impairment provision
Inventories comprise primarily motor vehicles held for sale and are stated at the lower of cost or net realisable value. Cost comprises the
purchase price, shipping cost, compliance cost and other sundry related costs. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Estimated selling prices are
based upon recent observed vehicle sales prices for comparable vehicles. Management has estimated the net realisable value of inventories
based on their estimate of the selling price in a post lockdown market.
Based on the work done the inventories impairment provision includes $0.5m for any economic uncertainty associated with the COVID-19
pandemic and its potential impact on inventory provisions.
Provision for impairment on loan receivables
Significant increase in credit risk
As explained in note 3.6, ECL are measured as an allowance equal to 12 month ECL for performing assets, or lifetime ECL for doubtful or in
default assets. An asset moves to doubtful when its credit risk has increased significantly since initial recognition. The Group presumes a
significant increase in credit risk subsequent to initial recognition when contractual payments are more than 30 days overdue. In assessing
whether the credit risk of an asset has significantly increased the Group takes into account qualitative and quantitative reasonable and
supportable forward looking information.
Calculation of loss allowance
When measuring ECL the Group has used reasonable and supportable forward looking information, which is based on estimates for the future
movement of different economic drivers (i.e. unemployment rates and government stimulus) and how these drivers will affect each other.
48
49
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those
that the Group would expect to receive, taking into account cash flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given
time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
There remains inherent uncertainty of the economic impact of COVID-19 pandemic on the economic drivers used to determine ECL. When
assessing the impact of the COVID-19 pandemic, Management determined that the likely impact would be an increase in the estimated
probability of default. Management's assessment included reviewing past experience, during the global financial crisis, and a review of loans
in at risk related industries.
Based on the work done the finance receivables expected credit loss provision includes $1.0m for any economic uncertainty associated with
the COVID-19 pandemic and its potential impact on the expected impact on credit losses.
If the ECL rates on performing finance receivables increased/(decreased) by 1% higher (lower) as at 31 March 2020, the loss allowance on
finance receivables would have been $2.7 million higher/(lower).
If the ECL rates on doubtful or in default finance receivables increased/(decreased) 1% higher (lower) as at 31 March 2020, the loss allowance
on finance receivables would have been $0.3 million higher/(lower).
Impairment of goodwill
The carrying value of goodwill is assessed at least annually to ensure that it is not impaired. Performing this assessment generally requires
management to estimate future cash flows to be generated by the cash-generating unit, which entails making judgements, including the
expected rate of growth of revenues, margins expected to be achieved and the appropriate discount rate to apply when valuing future cash
flows (refer note 21). A sensitivity analysis of the recoverable amounts of the CGU’s is disclosed in note 21.
When estimating future cash flows, Management considered the impact of the COVID-19 pandemic on the Group’s performance and
judgements, including the forecasting of the year-on-year movements in the operating assets of individual CGUs such as:
•
•
•
for the Finance and Auto Retail CGUs, the movement in their portfolios of finance receivables and related movement in debt financing;
for the Auto Retail CGU, the movement in inventory levels, trade payables and related movement in trade financing; and
for the DPL Insurance CGU, the movement in deferred insurance contract premiums and acquisition costs, and solvency capital
requirements.
Liabilities arising from claims made under insurance contracts
Liabilities arising from claims made under insurance contracts are estimated based on the terms of cover provided under an insurance contract.
The estimation of the ultimate liability arising from claims made under insurance contracts is based on a number of actuarial techniques that
analyse experience, trends and other relevant factors. The estimate process involves using Group specific data, relevant industry data and
general economic data, including but not limited to, claim frequencies, average claim sizes and historical trends (refer note 35).
Impairment of corporate brands
The carrying values of brands are assessed at least annually to ensure that it is not impaired. Performing this assessment generally requires
management to estimate future cash flows to be generated by the related investment or a cash-generating unit, which entails making
judgements, including the expected rate of growth of revenues, margins expected to be achieved and the appropriate discount rate to apply
when valuing future cash flows (refer note 21).
Unredeemed voucher liabilities
The Group's estimate of the unredeemed voucher liability is based on historic redemption patterns. Changes in the redemption pattern of
unredeemed vouchers could affect the reported value of this liability. At year end, the Group readjusted the unredeemed prepaid collection
voucher liability write off methodology based on movements in the actual redemption patterns to reflect the continued decline in the redemption
of historically issued prepaid collection vouchers. The change in accounting estimate resulted in a $0.1m (2019: $0.2m) decrease in the
unredeemed voucher liability (note 24).
Determining lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not terminated).
Valuation of investment properties
The fair value of the investment property has been determined by an independent qualified valuer. Note 17 sets out the valuation
methodology, key assumptions and sensitivity analysis. The fair value of the investment property is subjective and changes to the
assumptions can have a significant impact on profit and the fair value.
The derecognition of finance receivables
The Group follows the guidance in NZ IFRS 9 'Financial Instruments', in transactions where substantially all the risks and rewards of
ownership of a financial asset are neither retained nor transferred. The Group derecognises the transferred asset if control over that asset is
relinquished. The rights and obligations retained in the transfer, such as servicing assets and liabilities, are recognised separately as assets
and liabilities, as appropriate. If control over the asset is retained, the Group continues to recognise the asset to the extent of its continuing
involvement, which is determined by the extent to which it remains exposed to changes in the value of the transferred asset. This
determination of whether risks and rewards of ownership of a financial asset are neither retained nor transferred requires significant
judgement (refer note 3.6). Prior to derecognition, the Group assesses whether the finance receivables qualify for derecognition using the
criteria noted above.
Fair value measurement
The fair value of financial instruments that are not quoted in active markets are determined using discounted cash flow models. To the extent
practical, models use observable data however normal volatilities require management to make estimates. Changes in assumptions about
these factors could affect the reported fair values of financial instruments (refer note 11 and 23).
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded
as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price
used for financial assets held by the group is the current bid price. These instruments are included in Level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by
using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in
level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The fair value of level 3
instruments is determined by using valuation techniques based on a range of unobservable inputs. The Group establishes fair value by
using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. Investments in
equity instruments that do not have a quoted market price in an active market and whose fair values cannot be reliably measured are
recognised and subsequently carried at cost.
Specific valuation techniques used to value financial instruments in each level are detailed in notes 5.5 and 17.
5. RISK MANAGEMENT
The financial condition and operating results of the Group are affected by a number of key financial and non-financial risks. Financial risks
include credit risk, liquidity risk and market risk. The non-financial risks include insurance risk, which is covered in note 35, and fair value risk
relating to the Group’s Investment property (refer note 17).
5.1 Financial instrument by category
Carryi ng val ue
Financial assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Amortised cost
Trade receivables
Finance receivables
Other receivables and deferred expenses
Reverse annuity mortgages
Financial liabilities
Other payables
Financial liability at fair value through profit or loss
Borrow ings
2020
$’000
32,771
64,988
8,609
293,037
3,390
4,913
407,708
19,700
-
350,364
370,064
2019
$’000
15,866
66,252
12,471
290,017
3,776
8,294
396,676
25,247
116
312,863
338,226
5.2 Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises
principally from the Group's cash and cash equivalents, financial assets at fair value through profit or loss (excluding equities held in unitised
funds), trade receivables, finance receivables, reverse annuity mortgages, and other receivables.
The Group’s cash and cash equivalents and financial assets at fair value through profit or loss (excluding equities in unitised funds) are placed
with registered banks.
Management assesses the credit quality of trade customers, taking into account their financial position, past experience and other factors.
Individual risk limits are set based on these assessments. The use of credit limits by trade customers is regularly monitored by management.
Sales to public customers are settled in cash, bank cheques or using major credit cards, mitigating the credit risk.
50
51
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
To manage credit on finance receivables the Group performs credit evaluations on all customers requiring advances. The approval process
considers a number of factors including: borrower’s past performance, ability to repay, amount of money to be borrowed against the security
and the creditworthiness of the guarantor/co-borrower involved.
The Group operates a lending policy with various levels of authority depending on the size of the loan. A lending and credit committee operates
and overdue loans are assessed on a regular basis by this body.
Risk grades categorise loans according to the degree of risk of financial loss faced and focuses management on the attendant risks. The
current risk grading framework consists of four grades reflecting varying degrees of risk of default and the availability of collateral or other
credit risk mitigation. They are as follows:
•
•
•
•
performing – the counterparty has a low risk of default and does not have any past due amounts greater than 30 days;
doubtful –amount is > 30 days past due or there has been a significant increase in credit risk since initial recognition;
in default - amount is > 90 days past due or evidence indicating the asset is credit impaired; and
write-off – there is evidence indicating the debtor is in severe financial difficulty and the Group has no realistic prospect of recovery.
The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for
finance receivables are:
•
•
mortgages over properties, with the maximum loan to value rate being 75%;
mortgages over houses for reverse annuity mortgages, with a maximum loan to value ratio of 30% at inception (no new reverse annuity
mortgages have been advanced since 2009);
charges over vehicle stock for dealer floorplans;
chattel paper where the Group acts as a wholesale funder;
charges over business assets such as equipment; and
charges over motor vehicles.
•
•
•
•
For finance receivables secured by collateral, estimates of the value of collateral are assessed at the time of borrowing, and are not updated
unless the receivable is being assessed for specific impairment. The allowance for impairment includes the Group's estimate of the value of
collateral held.
For Life investment linked contracts the investments credit risk is appropriate for each particular product and the risk is borne by the policy
holder. There is no significant risk assumed by the Group.
5.3 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations associated with financial liabilities as they fall due.
The Group endeavours to maintain sufficient funds to meet its commitments based on forecasted cash flow requirements. Due to the dynamic
nature of the underlying businesses, flexibility is maintained by having diverse funding sources and adequate committed credit facilities.
Management has internal control processes and contingency plans to actively manage the lending and borrowing portfolios to ensure the net
exposure to liquidity risk is minimised. The exposure is reviewed on an on-going basis from daily procedures to monthly reporting as part of
the Group's liquidity management process.
The liquidity risk for cash flows payable on the life investment contracts liabilities that are unit linked contracts is managed by holding a pool
of readily tradable investment assets (included in financial assets at fair value through profit or loss) and deposits on call. The liability and
supporting assets have been excluded from the maturity analysis below because there is no contractual or expected maturity date for the life
investment contracts and the readily tradable investment assets offset any liquidity risk. The liquidity risk on other insurance cash flows is
managed by holding designated percentages of insurance reserves in liquid assets such as cash and cash equivalents.
The table below analyses the Group’s financial liabilities and net settled derivative financial instruments into relevant maturity groupings based
on the remaining period at reporting date to contractual maturity date. The amounts disclosed in the tables are the contractual and the expected
undiscounted cash flows.
2020
Contractual undiscounted cash flows:
Other payables
Derivative financial instruments
Borrow ings
Lease liabilities
Expected undiscounted cash flows:
Other payables
Derivative financial instruments
Borrow ings
Lease liabilities
0-6 months
$’000
7-12
months
$’000
13-24
months
$’000
25-60
months
$’000
60+ months
$’000
Total
$’000
19,700
440
34,143
4,042
58,325
19,700
440
34,143
4,042
58,325
-
367
8,568
4,181
13,116
-
367
8,568
4,181
13,116
-
144
317,427
7,796
325,367
-
144
45,039
7,796
52,979
-
34
370
16,324
16,728
-
34
71,802
16,324
88,160
-
-
-
6,262
6,262
-
-
256,880
6,262
263,142
19,700
985
360,508
38,605
419,798
19,700
985
416,432
38,605
475,722
2019
Contractual undiscounted cash flows:
Other payables
Derivative financial instruments
Borrow ings
Expected undiscounted cash flows:
Other payables
Derivative financial instruments
Borrow ings
0-6 months
$’000
7-12
months
$’000
13-24
months
$’000
25-60
months
$’000
60+ months
$’000
Total
$’000
25,247
164
35,870
61,281
25,247
164
35,870
61,281
-
142
17,951
18,093
-
142
17,951
18,093
-
175
174,007
174,182
-
175
19,409
19,584
-
43
106,093
106,136
-
-
-
-
-
43
94,832
94,875
-
-
213,492
213,492
25,247
524
333,921
359,692
25,247
524
381,554
407,325
5.4 Market Risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices, will affect the Group's
income or the value of its holdings of financial instruments.
5.4.1 Insurance business
For the life investment policies market risk is transferred to the policy holder. The Group earns fees on investment linked policies that are
based on the amount of assets invested and it may receive lower fees should markets fall. Asset allocation for investment linked policies is
decided by the Policy Holder.
In the other insurance business, market risk arises when there is a mismatch between the insurance policy liabilities and the assets backing
those liabilities. Refer to note 35K for insurance liabilities interest rate sensitivity. The insurance business has no significant currency and
equity risk.
5.4.2 Interest rate risk
Interest rate risk is the risk of loss to the Group arising from adverse changes in interest rates. The Group's financing activities are exposed
to interest rate risk in respect of its interest earning assets and interest bearing liabilities. Changes to interest rates can impact the Group's
financial results by affecting the interest spread earned on these assets and liabilities.
Interest rates are managed by assessing the demand for funds, new lending, expected debt repayments and maintaining a portfolio of financial
assets and liabilities, including derivative financial instruments, with a sufficient spread between the Group's lending and borrowing activities.
Exposure to interest rates is monitored by the Board of Directors on a monthly basis.
The interest rates earned on finance receivables are fixed over the term of the contract. When approving interest rates for individual loan
advances, interest rate risk is measured in accordance with the approved lending policy. The Group uses interest rate swap contracts to
convert a portion of its variable rate debt to fixed rate debt. No exchange of principal takes place. The notional principal amount of interest
rate swaps at 31 March 2020 was $75m (2019: $74m) and weighted average interest was 1.73% (2019: 2.23%). There was no hedge
ineffectiveness recognised in profit or loss during the period (2019: $nil).
Turners Finance Limited borrows at fixed rates to fund finance receivables. The terms and the amounts of the finance payables are matched
to each corresponding finance receivable, for which the lending rates are also fixed at inception, thus eliminating the cash flow interest rate
risk on these financial instruments.
The table below summarises the sensitivity of the Group’s financial assets and liabilities to interest rate risk.
Carrying amount
$’000
-1% Prof it
$’000
-1% Equity +1% Profit +1% Equity
$’000
$’000
$’000
2020
Financial Assets
Cash and cash equivalents
Financial assets at f air value through prof it or loss
Finance receivables
Reverse annuity mortgages
Financial Liabilities
Derivative financial instruments
Borrow ings
Total increase/(decrease)
32,771
64,988
293,037
4,913
985
350,364
(328)
(650)
(2,930)
(49)
(236)
(468)
(2,110)
(35)
328
650
2,930
49
236
468
2,110
35
-
3,504
(453)
(1,983)
2,523
(2,309)
-
(3,504)
453
(6)
(2,523)
320
52
53
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Carrying amount
$’000
-1% Prof it
$’000
-1% Equity +1% Prof it +1% Equity
$’000
$’000
$’000
2019
Cash and cash equivalents
Financial assets at fair value through profit or loss
Finance receivables
Reverse annuity mortgages
Financial Liabilities
Financial liability at fair value through profit or loss
Derivative financial instruments
Borrow ings
Total increase/(decrease)
15,866
66,252
290,017
8,294
116
524
312,863
(159)
(663)
(2,900)
(83)
1
-
3,129
(675)
(114)
(477)
(2,088)
(60)
1
(1,404)
2,253
(1,889)
159
663
2,900
83
(1)
-
(3,129)
675
114
477
2,088
60
(1)
295
(2,253)
780
5.4.3 Currency risk
The Group is exposed to currency risk arising from various currency exposures, primarily with respect to the Australian Dollars (‘AUD’) and
Japanese Yen (‘JPY’). Currency risk arises from the future commercial transactions, recognised assets and liabilities and net investment in
foreign operations.
To ensure the net exposure to EC Credit Control (Aust) Pty Ltd, which has AUD as its functional currency, is kept to an acceptable level, the
Group has a comprehensive transfer pricing policy and converts the AUD unredeemed voucher liability (refer note 24) into a NZD liability by
selling the AUD liability to the New Zealand entity that will be providing the relevant services to settle the liability when the voucher is redeemed.
To limit its exposure to JPY, the Group hedges the anticipated cash flows (mainly purchased inventory) when the commitment is made. All
projected purchases qualify as ‘highly probable’ forecast transactions for hedge accounting purposes.
The table below summarises the Group’s financial exposure to currency risk.
in NZD'000
Net exposure to AUD
Net exposure to JPY
2020
NZ$'000
560
2,171
2019
NZ$'000
224
1,560
The table below summaries the Group’s sensitivity to +/- 10% foreign exchange fluctuations.
In NZD'000
2020
AUD
JPY
2019
AUD
JPY
-10% Profit -10% Equity +10% Prof it +10% Equity
-
(82)
-
(177)
29
170
(25)
129
-
67
-
145
(24)
(140)
21
(105)
5.4.4 Equity price risk
Equity price risk is the risk that the Group's profit or loss will fluctuate as a result of changes in share prices. The Group is exposed to equity
price risk through its investment in MTF Shares (refer note 11). A +1%/-1% movement in the MTF share price will increase/(decrease) profit
and equity by $32k/($32k) (2019: $36k/($36k)).
2020
Fair value assets:
Financial assets at fair value through profit or loss - Insurance
Financial assets at fair value through profit or loss - investment in equities
Financial assets at fair value through profit or loss - term deposits
Investment property
Fair value liabilities:
Derivative financial instruments
2019
Fair value assets:
Financial assets at fair value through profit or loss - Insurance
Financial assets at fair value through profit or loss - investment in equities
Financial assets at fair value through profit or loss - term deposits
Investment property
Fair value liabilities:
Financial liability at fair value through profit or loss
Derivative financial instruments
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
-
-
54,637
-
54,637
7,197
3,154
-
-
10,351
-
-
-
5,650
5,650
7,197
3,154
54,637
5,650
70,638
-
-
985
985
-
-
985
985
-
-
54,999
-
54,999
-
-
-
7,658
3,595
-
-
11,253
-
524
524
-
-
-
5,650
5,650
116
-
116
7,658
3,595
54,999
5,650
71,902
116
524
640
Fair value insurance
The financial assets in this category back life investment contract liabilities and are investments in managed funds. The fair value of the
investments in the managed funds are determined by reference to published exit prices, being the redemption price based on the market price
quoted by the fund manager, ANZ New Zealand Investments Limited (refer 5.4.1).
Fair value assets - investment in equities
The fair value of the investment in equities has been estimated by reference to recent transactions with MTF shares (refer 5.4.4).
Fair value liability - term deposits and fixed interest securities
Term deposits are recognised at fair value based on the interest rate set at inception of the term deposit (refer 5.4.2).
Fair value - investment property
The fair value of the investment property was determined by an independent registered valuer using the comparable sales methodology (refer
note 17).
This is a level 3 fair value measurement and the key output used in determining the consideration is the probable sales price. A change in
sales price of +/- 5% would increase/(decrease) the total fair value and profit or loss by $0.3m/($0.3m).
These financial liabilities are exposed to interest rate risk as disclosed above.
Derivative financial instruments
The fair value of forward exchange contracts is determined using forward exchange rates at balance date, with the resulting value discounted
to present value. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows based on observable
yield curves.
Reconciliation of recurring level 3 fair value movements:
5.5 Assets and liabilities carried at fair value:
The fair value of assets and liabilities carried at fair value as well as the methods used to calculate fair value are summarised in the table
below.
Assets
Level 1
Level 2
Level 3
the fair value is calculated using quoted prices in active markets.
the fair value is estimated using inputs other than quoted prices in level 1 that are observable for the assets or liabilities, either
directly (as prices) or indirectly (derived from prices).
the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
Opening balance
Revaluation at reporting date - investment property
Closing balance
Liabilities
Opening balance
Revaluation at reporting date
Closing balance
2020
$'000
5,650
-
5,650
2020
$'000
116
(116)
-
2019
$'000
4,820
830
5,650
2019
$'000
226
(110)
116
During the year there were no movements of fair value assets or liabilities between levels of the fair value hierarchy.
54
55
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Other material non-cash items
Automotive retail - impairment provisions
Finance - impairment provisions
Insurance - reverse annuity mortgage interest
Corporate & other - write down of brand and collateral
Segment assets and liabilities
Automotive retail
Finance
Credit management
Insurance
Corporate & other
Eliminations
Revenue
2020
$’000
-
-
613
-
613
Assets
2020
$’000
129,496
308,696
38,268
134,236
216,173
826,870
(118,478)
708,392
2019
$’000
-
-
846
-
846
2019
$’000
132,839
276,356
31,685
135,001
195,673
771,554
(117,372)
654,182
Acquisition of property, plant & equipment, intangible assets and other non-current assets
Automotive retail
Finance
Credit management
Insurance
Corporate & other
Eliminations
Expenses
2020
$’000
(126)
(5,888)
-
-
(6,014)
Liabilities
2020
$’000
92,078
241,086
7,585
73,133
91,423
505,305
(19,968)
485,337
Other
2020
$’000
17,085
1,218
197
5,949
236
24,685
(5,440)
19,245
2019
$’000
(503)
(7,436)
-
(4,570)
(12,509)
2019
$’000
88,065
216,996
5,686
73,293
83,030
467,070
(39,262)
427,808
2019
$’000
11,478
671
135
14,884
74
27,242
(14,489)
12,753
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
6. SEGMENTAL INFORMATION
6.1 DESCRIPTION OF SEGMENTS
Management has determined the operating segments based on the components of Turners Automotive Group Limited and its subsidiaries (the
Group) that engage in business activities, which have discrete financial information available and whose operating results are regularly reviewed by
the Group's chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors. The Board of
Directors makes decisions about how resources are allocated to the segments and assesses their performance. Geographically the Group's
business activities are located in New Zealand and Australia.
Five reportable segments have been identified as follows:
Automotive retail:
Finance:
Credit management:
Remarketing (motor vehicles, trucks, heavy machinery and commercial goods) and purchasing goods for sale.
Provides asset based finance to consumers and SME's.
Insurance:
Corporate & other:
Collection services, credit management and debt recovery services to the corporate and SME sectors. Geographically the
collections services segment business activities are located in New Zealand and Australia.
Marketing and administration of a range of life and consumer insurance products.
Corporate centre.
OPERATING SEGMENTS
Revenue
Automotive retail
Finance
Credit management
Insurance
Corporate & other
Total
segment
revenue
2020
$’000
229,512
45,744
17,939
45,236
6
338,437
Inter-
segment
revenue
2020
$’000
(4,634)
-
-
(1129)
-
(5,763)
Revenue
from
external
customers
2020
$’000
224,878
45,744
17,939
44,107
6
332,674
Total
segment
revenue
2019
$’000
228,672
44,193
18,196
49,206
17
340,284
Inter-
segment
revenue
2019
$’000
(2,963)
-
-
(742)
-
(3,705)
Revenue
from
external
customers
2019
$’000
225,709
44,193
18,196
48,464
17
336,579
Revenue from external customers reported to the Board of Directors is measured on the same basis as revenue reported in the profit or loss. Inter-
segment transactions are done on an arms length basis. The Group has no customers representing 10% or more of the Group's revenues.
Operating profit
Automotive retail
Finance
Credit management
Insurance
Corporate & other
Profit/(loss) before taxation
Income tax
Net profit attributable to shareholders
Automotive retail
Finance
Credit management
Insurance
Corporate & other
Eliminations
2020
$’000
13,829
12,167
6,494
6,215
(9,640)
29,065
(8,112)
20,953
2019
$’000
18,274
11,112
6,321
8,227
(14,885)
29,049
(6,330)
22,719
Depreciation and
Interest revenue
Interest expense
amortisation expense
2020
$’000
3,904
40,579
5
2,276
6
46,770
(86)
46,684
2019
$’000
8,383
38,544
9
2,434
17
49,387
(218)
49,169
2020
$’000
(3,967)
(6,912)
(39)
(91)
(3,930)
(14,939)
86
(14,853)
2019
$’000
(4,206)
(6,596)
-
-
(4,368)
(15,170)
218
(14,952)
2020
$’000
(7,960)
(717)
(249)
(2,783)
(210)
(11,919)
-
(11,919)
2019
$’000
(2,457)
(413)
(104)
(2,746)
(65)
(5,785)
-
(5,785)
56
57
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
7. PROFIT BEFORE TAX
Revenue from continuing operations includes:
Interest income
Bank accounts, short term deposits and investments
Finance receivables
Reverse annuity mortgages
Total interest income
Operating revenue
Sales of goods
Commission and other sales revenue
Finance related insurance commissions
Loan fee income
Insurance and life investment contract income
Collection income
Bad debts recovered
Other revenue
Total operating revenue
Revenue from continuing operations
Other income comprises:
Gain on sale of investments
Revaluation gain on investment property
Dividend income
Gain on sale of property, plant and equipment
Gain on compulsory acquisition on leasehold premise by the NZTA
Fair value gain on contingent consideration
Revenue from contracts with customers
Over time
Automotive retail
Commission and other sales revenue
Insurance
Motor vehicle insurance commissions
At a point in time
Automotive retail
Sales of goods
Auction commissions
Credit management
Collection income
Voucher income
Interest expense
Bank borrowings and other
Bonds
Total interest expense
Movement in impairment provisions
Provisions for:
Specific impaired finance receivables
Collective impairment provision for finance receivables
Collective impairment on reverse annuity mortgages
Finance receivables bad debts written off
Movement
Notes
2020
$’000
2019
$’000
1,743
44,328
613
46,684
167,264
52,714
3,397
2,958
39,676
17,709
591
1,181
285,490
332,174
35
-
367
61
-
37
500
1,791
46,532
846
49,169
159,438
48,965
4,199
2,950
42,968
18,187
897
1,585
279,189
328,358
-
830
391
3,607
3,393
-
8,221
29,401
23,352
1,683
31,084
1,731
25,083
167,264
23,313
10,021
495
13,330
1,523
14,853
2,304
3,641
30
69
6,044
159,438
25,613
16,506
1,681
13,241
1,711
14,952
914
6,890
(47)
135
7,892
14
14
16
Net operating profit includes the following specific expenses
Depreciation
- Plant, equipment & motor vehicles
- Leasehold improvements, furniture, fittings & office equipment
- Computer equipment
- Signs & flags
Intangible amortisation
Amortisation of software
Amortisation of customer relationships
Amorisation of right-of-use asset
Insurance contract liabilities amortisation
Amortisation of policies in force
Tax advisory fees
Donations
Directors’ fees
Post-employment benefits
Loss on sale of property, plant and equipment
Fees paid to auditor
Baker Tilly Staples Rodway Auckland (auditor of the Group)
Audit of financial statements
Audit of annual financial statements
Under accrual in prior year
Other services
Other assurance services
- Audit of DPL Insurance Limited solvency return
- Agreed Upon Procedures in relation to the Turners Marque Trust
- Agreed Upon Procedures in relation to the EC Credit Control Limited trust account
Total other services
Total fees paid to Baker Tilly Staples Rodway Auckland
8. TAXATION
Net operating profit before taxation
Income tax expense at prevailing rates
Tax impact of income not subject to tax
Tax impact of expenses not deductible for tax purposes
Tax assets recognised
Under provision in prior years
Taxation (expense)/benefit
Comprising:
Current
Deferred
Under provision in prior years
2020
$’000
681
828
594
184
1,203
557
6,300
1,572
11,919
329
3
665
1,322
71
452
50
7
-
3
10
512
2020
$’000
29,065
(8,146)
274
(46)
-
(194)
(8,112)
(9,817)
1,635
70
(8,112)
2019
$’000
675
864
519
96
1,435
630
-
1,566
5,785
104
5
637
1,164
-
442
-
7
15
3
25
467
2019
$’000
29,049
(8,134)
2,035
(125)
-
(106)
(6,330)
(10,030)
3,958
(258)
(6,330)
58
59
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
9. EARNINGS PER SHARE
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Basic earnings per share
The calculation of basic earnings per share at 31 March was based on the profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding, as follows:
Profit for the year ($'000)
Weighted average number of ordinary shares at 31 March
Basic earnings per share (cents per share)
Weighted number of shares
Opening balance
Shares issued for the conversion of bonds
Shares issued for the dealer share scheme
Share cancel from the share buy back
2020
20,953
86,055,495
24.35
2019
22,719
86,671,483
26.21
2020
2019
86,888,064
-
23,111
(855,680)
86,055,495
84,802,612
2,303,925
20,766
(455,820)
86,671,483
Diluted earnings per share
The calculation of diluted earnings per share at 31 March was based on the diluted profit attributable to shareholders and a diluted weighted
average number of ordinary shares outstanding as follows:
Continuing operations
Add: interest expense relating to optional convertible bonds, net of tax
Add: Long term incentive expense relation to options
Profit for the year
Weighted number of ordinary shares (diluted)
Weighted average number of shares (basic)
Diluted earnings per share (cents per share)
10. CASH AND CASH EQUIVALENTS
The carrying value of cash and cash equivalents are denominated in the following currencies:
Australian dollars
Japanese yen
New Zealand dollars
2020
$’000
20,953
-
-
20,953
2019
$’000
22,719
598
326
23,643
86,055,495
86,671,483
24.35
27.28
2020
$’000
365
-
32,406
32,771
2019
$’000
663
142
15,061
15,866
The Group's insurance business is required to comply with the solvency standards for licensed insurers issued by the Reserve Bank of New
Zealand. The solvency standards specify the level of assets the insurance business is required to hold in order to meet solvency requirements,
consequently all cash and cash equivalents and term deposits, disclosed in financial assets through the profit or loss, held in the insurance
business may not be available for use by the wider Group. DPL Insurance's cash and cash equivalents at 31 March 2020 were $1.5m (2019:
$2.2m).
Cash and cash equivalents at 31 March 2020 of $5.1m (2019: $4.6m) belong to the Turners Marque Trust 1 and are not available to the Group
(refer note 14).
Insurance:
Investments in unitised funds
Term deposits
Other:
Investment in equities
Total
Investments in unitised funds comprise:
New Zealand and overseas equities
Fixed Interest securities
Cash - deposits
New Zealand and overseas property securities
Total
Investments with external investment managers
ANZ New Zealand Investments Limited - Unitised Funds
2020
$’000
7,197
54,637
3,154
64,988
2,935
1,369
1,333
1,560
7,197
2019
$’000
7,658
54,999
3,595
66,252
1,309
1,350
3,141
1,858
7,658
7,197
7,658
The carrying amounts of the financial assets at fair value through profit or loss, excluding investments in unitised funds, are denominated in the
following currencies:
Australian dollars
New Zealand dollars
-
57,791
57,791
-
58,594
58,594
All term deposits held in the insurance business may not be available for use by the wider Group (refer note 10). DPL Insurance's term deposits
at 31 March 2020 were $54.6m (2019: $55.0m). Investments in unitised funds, disclosed in Financial assets through the profit or loss, underwrite
the Life investment policies and are not available for use by the wider Group.
Interest rate and currency risk
A summarised analysis of the sensitivity of financial assets at fair value through profit or loss, excluding investments in unitised funds (as market
risk on unitised funds is transferred to the policy holder), to interest rate risk and currency risk can be found in note 5.4.
Credit risk
The maximum exposure to credit risk from financial assets at fair value through profit or loss at reporting date, excluding investments in unitised
funds, is the carrying value. The financial assets in this category, excluding equity investments, are invested in term deposits with banks. For
Life investment linked contracts (investment in unitised funds) the investments credit risk is borne by the policy holder, there is no significant
credit risk assumed by the Group.
Refer to note 5 for more information on the risk management policies of the Group.
12. TRADE RECEIVABLES
Performing
Doubtful
In default
Impairment provision
Net trade receivables
Trade receivables are a current asset, with terms of trade usually 30 days or less.
2020
$’000
7,643
1,130
231
9,004
(395)
8,609
2019
$’000
11,633
807
323
12,763
(292)
12,471
60
61
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Impaired receivables
If a trade receivable falls overdue and the Group is unable to enter into an arrangement to recover the amount owed then the receivable is
classified as impaired.
14. FINANCE RECEIVABLES
Commercial loans
Finance leases
Consumer loans
Property development & investment loans
Gross finance receivables
Specific impairment provision
Collective impairment provision
Deferred fee revenue and commission expenses
Current
Non-current
Gross financial receivables are summarised as follows:
Performing
Doubtful
In default
Movement in specific impaired receivables
Opening balance
Additions
Amounts moved to collective
Amounts recovered
Amounts written off
The aging of loans specifically assessed are as follows:
Past due up to 30 days
Past due 30 – 60 days
Past due 60 – 90 days
Past due 90+ days
In default
The age of default trade receivables is as follows:
Past due up to 30 days
Past due 30 – 60 days
Past due 60 – 90 days
Past due 90+ days
The age of doubtful trade receivables is as follows:
Past due up to 30 days
Past due 30 – 60 days
Past due 60 – 90 days
Past due 90+ days
Movement in the impairment provision:
Opening balance
Impairment charge/(release) included in other operating expenses
Amounts written off
2020
$’000
-
-
-
231
231
1,009
73
48
-
1,130
292
221
(118)
395
2019
$’000
-
-
-
323
323
722
59
26
-
807
275
27
(10)
292
The Group recognises lifetime expected credit loss for trade receivables. The expected credit loss rate is 4.4% (2019: 2.3%). Amounts charged
to the impairment provision are generally written off when there is no expectation of recovering additional cash.
The carrying amounts of the Group's trade receivables are denominated in the following currencies:
Australian dollars
New Zealand dollars
666
7,943
8,609
1,099
11,372
12,471
Currency risk
A summarised analysis of the sensitivity of financial assets included in trade receivables to currency risk can be found in note 5.4.
Fair value and credit risk
Due to the short-term nature of trade receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to
credit risk from trade receivables at the reporting date is the carrying amount of trade receivables. Credit risk is concentrated predominantly in
New Zealand within the motor trade sector and private household sector, there is no concentration of credit risk on any individual customer.
Refer to note 5 for more information on the risk management policies of the Group.
13. INVENTORY
Motor vehicles
Commercial goods
Less provision for stock obsolescence
Inventories are a current asset.
Movement in provisions for stock obsolescence
Opening balance
Movement (included in Cost of goods sold)
Closing balance
2020
$’000
45,975
32
46,007
(1,636)
44,371
2019
$’000
40,391
30
40,421
(1,562)
38,859
1,562
74
1,636
1,049
513
1,562
2020
$’000
25,674
4,194
274,773
2,857
307,498
(3,706)
(17,999)
7,244
293,037
137,742
155,295
293,037
279,627
5,685
22,186
307,498
2,377
3,168
-
(317)
(505)
4,723
1,171
935
273
1,833
3,358
7,570
2019
$’000
25,831
6,860
267,616
3,069
303,376
(1,915)
(17,680)
6,236
290,017
147,101
142,916
290,017
274,656
7,113
21,607
303,376
2,342
1,179
(283)
(422)
(439)
2,377
1,944
1,305
572
1,695
2,377
7,893
62
63
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
The following table details the risk profile of the Group's provision matrix for finance receivables collectively assessed for impairment. As the
Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss
allowance based on past due status is not further distinguished between the Group's different customer base. The expected loss provision
includes $1.0m for any uncertainty associated with the COVID-19 pandemic and its potential impact on credit losses. A review of the Group's
experience during the global financial crisis and of loan, in at risk industries was included in the assessment of the COVID 19 expected loss
provision.
31 March 2020
Current
Past due up to 30 days
Past due 30 – 60 days
Past due 60 – 90 days
Past due 90+ days
In default
31 March 2019
Current
Past due up to 30 days
Past due 30 – 60 days
Past due 60 – 90 days
Past due 90+ days
In default
Movement in the impairment provisions:
Specific impairment provision
Opening balance
Impairment charge/(release) through profit or loss
Amounts written off
Collective impairment provision
Opening balance
Change in accounting policy
Impairment charge/(release) through profit or loss
Amounts written off
Gross
Collective
Expected
finance
impairment
loss rate
%
1.21
receivables
$’000
269,668
provision
$’000
3,252
10.39
21.27
31.01
52.33
78.94
0.90
8.72
19.95
29.25
55.72
81.29
8,788
3,042
1,435
2,532
14,463
299,928
262,160
10,552
4,036
1,200
3,943
13,592
295,483
2020
$’000
1,915
2,304
(513)
3,706
2020
$’000
17,680
-
3,641
(3,322)
17,999
913
647
445
1,325
11,417
17,999
2,358
920
805
351
2,197
11,049
17,680
2019
$’000
1,592
914
(591)
1,915
2019
$’000
9,702
3,184
6,890
(2,096)
17,680
Total impairment provision
21,705
19,595
Interest rate and foreign exchange risk
A summarised analysis of the sensitivity of finance receivables to interest rate risk can be found in note 5.4.2.
The Group's finance receivables are all denominated in NZD.
Fair value and credit risk
Carrying
amount
2020
$’000
Fair
value
2020
$’000
Carrying
amount
2019
$’000
Fair
value
2019
$’000
Finance receivables
293,037
293,594
290,017
290,326
The fair values are based on cash flows discounted using a weighted average interest rate of 13.81% (2019: 14.46%).
The maximum exposure to credit risk is represented by the carrying amount of finance receivables which is net of any provision for impairment.
The reported credit risk exposure does not take into account the fair value of any collateral, in event of the counterparties failing to meet their
contractual obligation.
Refer to note 5 for more information on the risk management policies of the Group.
Securitisation
The Group has a wholesale funding facility with the Bank of New Zealand (BNZ) under which it securitises finance receivables through The
Turners Marque Warehouse Trust 1 (the Trust). Under the facility, BNZ provide funding to the Trust secured by finance receivables sold to the
Trust from the finance segment. The facility is for a 24 month term that will be renewed annually. The facility is for $230m.
The Trust is a special purpose entity set up solely for the purpose of purchasing finance receivables from the finance segment with the BNZ
funding up to 92% of the purchase price with the balance funded by sub-ordinated notes from the Group. The New Zealand Guardian Trust
Company Limited has been appointed Trustee for the Trust and NZGT Security Trustee Limited as the security trustee. The Company is the sole
beneficiary.
The Group has the power over the Trust, exposure, and rights, to variable returns from its involvement with the Trust and the ability to use its
power over the Trust to affect the amount of the Group's returns from the Trust. Consequently the Group controls the Trust and has consolidated
the Trust into the Group financial statements.
The Group retains substantially all the risks and rewards relating to the finance receivables sold and therefore the finance receivables do not
qualify for derecognition and remain on the Group's consolidated statement of financial position.
During the financial year $149.4m finance receivables were sold to the Trust (2019: $114.5m). As at 31 March 2020 the carrying value of finance
receivables in the Trust was $210.2m (2019: $175.3m).
15. OTHER RECEIVABLES, DEFERRED EXPENSES AND CONTRACT ASSETS
Other receivables and prepayments
Insurance deferred acquisition costs
Contract assets
- Amount relating to services rendered not yet invoiced
- Contract fulfilment costs
Current
Non-current
Carrying amount of financial assets included in other receivables
The carrying amounts of the financial assets included in other receivables are denominated in the following currencies:
Australian dollars
New Zealand dollars
Expected credit losses on contract assets and other receivables is 0%.
2020
$’000
3,203
3,268
1,996
105
8,572
6,153
2,419
8,572
3,390
72
3,318
3,390
2019
$’000
5,129
4,015
1,538
273
10,955
6,961
3,994
10,955
3,776
3
3,773
3,776
64
65
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Fair value and credit risk
The carrying value of these receivables is assumed to approximate their fair value. The maximum exposure to credit risk at the reporting date is
the fair value of the financial assets included in other receivables. There is no concentration of credit risk to any individual customer or sector.
Refer to note 5 for more information on the risk management policies of the Group.
16. REVERSE ANNUITY MORTGAGES
Reverse annuity mortgages
Provision for impairment
Current
Non-current
Movement in provisions for impairment
Opening balance
Impairment charge/(release) through profit or loss
Closing balance
Interest rate
2020
$’000
4,993
(80)
4,913
444
4,469
4,913
50
30
80
A summarised analysis of the sensitivity of reverse annuity mortgages to interest rate risk can be found in note 5.4.2.
The Group's reverse mortgage annuities are all denominated in NZD.
Fair value and credit risk
Reverse annuity mortgages
Carrying
amount
2020
$’000
4,913
Fair
value
2020
$’000
6,021
Carrying
amount
2019
$’000
8,294
2019
$’000
8,344
(50)
8,294
-
8,294
8,294
97
(47)
50
Fair
value
2019
$’000
9,333
The fair value of reverse annuity mortgages is estimated using a discounted cash flow model based on a current market interest rate for similar
products after making allowances for impairment.
The maximum exposure to credit risk is represented by the carrying amount of reverse annuity mortgages which is net of any provision for
impairment. The reported credit risk exposure does not take into account the fair value of any collateral, in event of the counterparties failing to
meet their contractual obligation. All reverse annuity mortgages are secured by residential property in New Zealand.
17. INVESTMENT PROPERTY
Investment property
Movements in carrying amounts
Opening balance
Net change in fair value
Closing balance
2020
$’000
5,650
5,650
-
5,650
2019
$’000
5,650
4,820
830
5,650
The investment property is 26.8 hectares of residentially zoned land at Sanctuary Hill, 358 Worsleys Road, Christchurch.
The investment property was valued at reporting date by a Property Institute of New Zealand registered valuer, Jones Lang LaSalle Limited,
Valuation & Advisory. Jones Lang LaSalle Limited is an external independent valuation company with appropriate recognised professional
qualifications and recent experience in the location and category of property being valued. Fair values have been determined using a comparable
sales approach methodology, having regard to current market conditions and comparable sales within the locality. Subjective adjustments have
been applied where necessary to account for variations in location, land, improvements, time adjustment and overall quality. A material valuation
uncertainty, due to the COVID 19 pandemic, was included in the valuation report.
No income has been earned and no direct operating expenses, other than council rates, have been incurred on the investment property. There
are no restrictions on the disposal or the remittance of proceeds on disposal.
18. FNANCIAL ASSETS AT FAIR VALUE THROUGH OCI
Investment in Collaborate Corporation Limited
Movements in carrying amounts
Opening balance
Purchase of investment
Net change in fair value recognised in OCI
Closing balance
19. INVESTMENT IN SUBSIDIARIES
Subsidiary
Buy Right Cars (2016) Limited
Carly NZ Limited
DPL Insurance Limited
EC Credit Control (Aust) Pty Limited
EC Credit Control (NZ) Limited
Estate Management Services Limited
Oxford Finance Limited
Payment Management Services Limited
Turners Finance Limited
Turners Fleet Limited
Turners Group NZ Limited
Turners Property Holdings Limited
Turners Staff Share Plan Trustees Limited
EC Web Services Limited
2020
$’000
1,000
-
1,327
(327)
1,000
Ownership
Interest Held
2020
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
66.6%
2019
$’000
-
-
-
-
-
2019
100.0%
-
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
66.6%
Vehicle trade
Vehicle subscription services
Insurance
Collection services
Collection services
Collection services
Finance
Collection services
Finance
Vehicle and commercial goods trade
Auctions
Property
Trustee
Dormant
All subsidiaries have a balance date of 31 March and, with the exception of EC Credit Control (Aust) Pty Limited (incorporated in Australia), all
subsidiaries are incorporated in New Zealand.
The Group has a wholesale funding facility with the Bank of New Zealand (BNZ) under which it securitises finance receivables through The
Turners Marque Warehouse Trust 1 (the Trust). The Group has the power over the Trust, exposure, or rights, to variable returns from its
involvement with the Trust and the ability to use its power over the Trust to affect the amount of the Group's returns from the Trust. Consequently
the Group controls the Trust and has consolidated the Trusts into the Group financial statements.
66
67
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
20. PROPERTY, PLANT AND EQUIPMENT
21. INTANGIBLE ASSETS
Buildings,
leasehold
improvements,
furniture, fittings
& office
equipment
Plant, equipment
& motor vehicles
Computer
equipment
Signs & flags
$’000
$’000
$’000
$’000
4,613
(2,269)
2,344
112
1,493
(676)
(681)
2,592
5,494
(2,902)
2,592
3,632
(1,622)
2,010
1,391
(382)
(675)
2,344
4,613
(2,269)
2,344
20,495
(3,850)
16,645
(406)
5,514
(307)
(828)
20,618
26,413
(5,795)
20,618
12,652
(2,987)
9,665
8,550
(706)
(864)
16,645
20,495
(3,850)
16,645
2,467
(1,777)
690
79
534
(10)
(594)
699
3,766
(3,067)
699
2,023
(1,257)
766
441
2
(519)
690
2,467
(1,777)
690
729
(415)
314
215
285
(142)
(184)
488
1,205
(717)
488
471
(319)
152
264
(6)
(96)
314
729
(415)
314
Land
$’000
19,091
-
19,091
-
9,300
-
-
28,391
28,391
-
28,391
23,352
-
23,352
-
(4,261)
-
19,091
19,091
-
19,091
Total
$’000
47,395
(8,311)
39,084
-
17,126
(1,135)
(2,287)
52,788
65,269
(12,481)
52,788
42,130
(6,185)
35,945
10,646
(5,353)
(2,154)
39,084
47,395
(8,311)
39,084
2020
At cost
Accumulated depreciation
Opening carrying amount
Reclassifications
Additions
Disposals & translation difference
Depreciation
Closing carrying amount
At cost
Accumulated depreciation
Closing carrying amount
2019
At cost
Accumulated depreciation
Opening carrying amount
Additions
Disposals & translation difference
Depreciation
Closing carrying amount
At cost
Accumulated depreciation
Closing carrying amount
Brand
Opening carrying amount at cost
Impairment
Closing carrying amount
Goodwill
Opening carrying amount at cost
Foreign exchange adjustment
Closing carrying amount
Software
At cost
Accumulated amortisation
Opening carrying amount
Additions
Disposals
Amortisation
Closing carrying amount
At cost
Accumulated amortisation
Closing carrying amount
Corporate relationships
At cost
Accumulated amortisation
Opening carrying amount
Amortisation
Closing carrying amount
At cost
Accumulated amortisation and impairment provision
Closing carrying amount
2020
$’000
67,100
-
67,100
92,534
7
92,541
8,342
(5,825)
2,517
2,138
(276)
(1,203)
3,176
10,204
(7,028)
3,176
6,510
(1,927)
4,583
(557)
4,026
6,510
(2,484)
4,026
2019
$’000
71,400
(4,300)
67,100
92,524
10
92,534
6,235
(4,390)
1,845
2,107
-
(1,435)
2,517
8,342
(5,825)
2,517
6,510
(1,297)
5,213
(630)
4,583
6,510
(1,927)
4,583
Total intangible assets carrying amount
166,843
166,734
The impairment and amortisation is recognised in other operating expenses in profit or loss.
Impairment testing for cash-generating units (CGU) containing brands and goodwill
The aggregate carrying amounts of brands and goodwill allocated to the cash generating units are outlined below. Goodwill primarily relates to
growth expectations, expected future profitability and the substantial skill and expertise of the work force of the cash generating unit. Management
have assessed that there is no foreseeable limit to the period of time over which the goodwill and brand is expected to generate net cash inflows
for the Group, and as such goodwill and brand have been assessed as having an indefinite useful life.
Goodwill
Allocated to the insurance CGU/segment
Allocated to collection services CGU/segment
Allocated to the finance CGU/segment
Allocated to the automotive retail CGU/segment
12,777
24,005
9,272
46,487
92,541
12,777
23,998
9,272
46,487
92,534
68
69
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Brand
Allocated to the insurance CGU/segment
Allocated to the automotive retail CGU/segment
2020
$’000
21,500
45,600
67,100
2019
$’000
21,500
45,600
67,100
The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow
projections based on financial budgets approved by the Board covering at least a five-year period. Cash flows beyond the projected period are
extrapolated using the estimated long term growth rates stated below. The cash flows for the Insurance and Collection services CGUs are free
cash flows to the firm, while the Auto retail and Finance CGUs are free cash flows to equity. The Buy Right Cars and Turners Group (NZ) CGUs
have been aggregated in the current financial year to align with internal reporting. For each of the CGUs with goodwill and brand the key
assumptions, long term growth rate and discount rate used in the value-in-use calculations are as follows:
Key assumptions:
Sales, price and operating cost assumptions where based on the Board's best estimate of the range of economic conditions the CGUs are likely
to experience during the forecast period (including the Group's experience in the global financial crisis). The forecasts for each CGU covering a
period of a minimum of 5 years or the period required for the CGU's profitability to return to pre-COVID 19 levels (for Auto retail this is 6 years).
Annual capital expenditure, the expected cash costs in CGUs, was based on historical experience and planned expenditure. The forecasts
assume that New Zealand will remain at Alert Level 1 or lower and no further restrictions are placed on the business operations during the
forecast period.
2020 Forecast growth rates (%)
Auto retail CGU (cost of equity)
Insurance CGU (Weighted average cost of capital)
Finance CGU (cost of capital)
Collection services CGU (Weighted average cost of equity)
2019 Forecast growth rates (%)
TGNZ CGU (cost of equity)
Buy Right Cars CGU (Weighted average cost of capital)
Insurance CGU (Weighted average cost of capital)
Finance CGU (cost of equity)
Collection services CGU (Weighted average cost of capital)
Long-term growth rate
Pre-tax discount rate
Auto retail CGU (cost of capital)
Insurance CGU (Weighted average cost of capital)
Finance CGU (cost of capital)
Collection services CGU (Weighted average cost of capital)
Year 2
Year 3
Year 4
Year 5
(16.7)
24.9
(28.3)
74.5
113.5
(8.6)
19.5
(6.3)
21.9
(8.1)
18.0
5.0
Year 2
Year 3
Year 4
Year 5
22.3
14.6
12.7
30.7
0.2
19.3
11.0
3.2
20.4
5.0
15.6
(9.3)
2.5
5.0
5.0
2020
1.25%
16.40%
12.80%
17.70%
15.20%
17.9
3.5
5.0
5.0
2.0
12.8
2.5
5.0
5.0
2019
1.50%
17.10%
13.10%
18.10%
13.60%
22. OTHER PAYABLES
Accounts payable
Employee entitlements (short term)
Employee entitlements (long term)
Other payables and accruals
Carrying value of financial liabilities in other payables
The carrying amounts of the Group's financial liabilities in other payables are denominated in the following currencies:
Japanese Yen
Australian dollars
New Zealand dollars
2020
$’000
13,833
4,500
227
9,488
28,048
2019
$’000
12,743
4,127
225
16,811
33,906
19,700
25,247
734
355
18,611
19,700
1,738
536
22,973
25,247
Currency risk
A summarised analysis of the sensitivity of financial liabilities included in other payables to currency risk can be found in note 5.4.
Fair value
Due to the short-term nature of the financial liabilities in other payables, their carrying value is assumed to approximate their fair value.
23. FINANCIAL LIABILITY AT FAIR VALUE THROUGH PROFIT OR LOSS
Contingent consideration
2020
$’000
-
2019
$’000
116
Interest rate and foreign exchange risk
A summarised analysis of the sensitivity of the Financial liability at fair value through profit or loss to interest rate risk can be found in note 5.4.2.
The Group's deferred consideration liability is denominated in NZD.
The long term growth rate is the weighted average growth rate used to extrapolate cash flows beyond the forecast period and is based on the
current implied inflation rates and does not exceed the long-term average growth rate for the products, industries, or country or countries in which
the CGUs operate. The discount rates were established by taking into account the specific attributes and size of the CGUs.
In assessing the impairment of the goodwill and brand value in the CGUs, a sensitivity analysis for reasonably possible changes in key
assumptions was performed. This included increasing and reducing the terminal growth rate by 0.25% (2019: +/- 0.5%) and increasing and
decreasing the discount rate as follows:
Auto retail CGU
Insurance CGU
Finance CGU
Collection services CGU
1.50%
1.10%
1.20%
0.90%
1.00%
1.00%
1.00%
1.00%
These reasonably possible changes in rates did not cause any impairment in the Insurance, Finance and Collection services CGUs. For the Auto
retail CGU the sensitivity analysis at the upper end of the assessment indicated possible impairment of between $0.9m and $4.0m. Subsequent to
31 March 2020, the Auto retail CGU has been trading ahead forecast, consequently no impairment expense was recognised.
70
71
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
24. CONTRACT LIABILITIES
Unredeemed debt and PPSR voucher liability
Motor vehicle insurance rebate liability
Movement in contract liabilities
Unredeemed debt and PPSR voucher liability
Opening balance
Change in accounting policy
Additions
Release to profit or loss
Release to profit or loss
Income relating to current year
Income relating to prior years
Motor vehicle insurance rebate liability
Opening balance
Change in accounting policy
Additions
Release to profit or loss
Release to profit or loss
Income relating to current year
Income relating to prior years
25. DEFERRED TAXATION
2020
$’000
1,886
199
2,085
2,502
-
31
(647)
1,886
-
647
647
140
-
59
-
199
-
-
-
2019
$’000
2,502
140
2,642
1,793
617
1,773
(1,681)
2,502
485
1,196
1,681
-
100
-
40
140
(40)
-
(40)
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset assets against liabilities and when the
deferred income taxes relate to the same fiscal authority. The movement on the deferred tax account is as follows:
Opening balance
Change in accounting policy (refer note 32)
Charge to profit or loss
Closing balance
The charge to profit or loss is attributable to the following items:
Corporate relationships
Policy in force asset
Loan impairment provision
Brand write off
Insurance deductible reserves
Property, plant and equipment
Lease liability
Right of use asset
Provisions and accruals
Deferred tax (assets)/liabilities to be recovered after more than 12 months
Deferred tax (assets)/liabilities to be recovered within 12 months
Closing balance
The deferred tax asset/liabilities have been recognised at 28%, the tax rate at which it is expected to reverse.
2020
$’000
13,918
(2,203)
(1,635)
10,080
2020
$’000
(146)
(439)
(647)
-
(242)
(53)
1,194
(1,030)
(272)
(1,635)
11,715
(1,635)
10,080
2019
$’000
18,786
(910)
(3,958)
13,918
2019
$’000
(146)
(438)
(1,428)
(1,204)
(264)
42
-
-
(520)
(3,958)
14,627
(709)
13,918
Deferred tax relates to the following:
Deferred tax assets:
Loan impairment provision
Lease liability
Provisions and accruals
Total deferred tax asset
Deferred tax liabilities:
Brand
Customer relationships
Insurance reserves - policies in force
Right of use asset
Deferred expenses and accruals
Net deferred tax liabilities
Imputation credit memorandum account
Opening balance
Income tax payments/(refunds received)
Imputation credits utilised
Closing balance
6,209
9,103
2,323
17,635
18,788
1,019
-
6,958
950
27,715
10,080
11,879
11,726
(4,357)
19,248
5,558
-
2,062
7,620
18,788
1,165
439
-
1,146
21,538
13,918
7,010
10,744
(5,875)
11,879
Policy holder tax losses
The policy holder tax losses carried forward at 31 March 2020 are $5,180,000 (2019: $4,949,000). The policy holder tax losses are only available
to be offset against future policy holder income.
26. BORROWINGS
Secured bank borrowings
Deferred borrowing costs
Non-bank borrowings
Motor Trade Finance
Bonds
Deferred issue costs
Total borrowings
Current
Non-current
2020
$’000
312,320
(116)
312,204
2019
$’000
251,282
(105)
251,177
13,382
37,055
25,000 25,000
(369)
24,631
(222)
24,778
350,364
312,863
213,825 34,981
277,882
136,539
312,863
350,364
Secured bank borrowings
In May 2018 the Group entered into a 3 year syndicated funding facility, including a 1 year working capital facility, with the Bank of New Zealand
and ASB Bank and a self liquidating trade finance facility with ASB Bank. The facilities replaced the Group's bank borrowing excluding
securitisation which remains with the Bank of New Zealand.
The bank borrowings, together with trade and lease premise guarantees of $0.9 million (2019: $0.9 million), are secured by a first-ranking general
security agreement over the assets of the Company and its subsidiaries, excluding DPL Insurance Limited, Turners Finance Limited and EC
Credit (Aust.) Limited. Current interest rates on the bank borrowings are variable and average 2.99% (2019: 3.88%). The Group's securitisation
financing arrangement with the Bank of New Zealand as described in note 14.
72
73
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Motor Trade Finance
Turners Finance Limited is a shareholder of a motor trade based company called Motor Trade Finance Limited (MTF). MTF provides the services
of a finance company, including funding, on a full recourse basis back to its shareholders.
MTF provides finance to Turners Finance Limited to fund the finance receivables. The MTF funding is secured by a chattel security over the
Turners Finance Limited's customer's asset securing the finance receivable and by a general security over the assets of Turners Finance Limited.
Turners Finance Limited has also given undertakings to MTF as the nature and conduct of its business, and overall quality of the finance
receivables and aggregate. Turners Finance has complied with these undertakings in the current and prior financial year.
Bonds
On 1 October 2018 Turners Automotive Group issued secured subordinated fixed rate bonds with a fixed maturity on 30 September 2021. Interest
is fixed at 5.5% and is paid quarterly in arrears in equal amounts. The bonds rank behind the indebtedness owing under the bank facilities and are
guaranteed by Turners Automotive Group Limited, Oxford Finance Limited, Buy Right Cars (2016) Limited, EC Credit (NZ) Limited, Estate
Management Services Limited, Payment Management Services Limited, EC Web Services Limited, Turners Group NZ Limited, Turners Fleet
Limited and Turners Property Holdings Limited.
Borrowing covenants
The Group has complied with all borrowing covenants in the both the current and prior financial year.
Foreign currency risk
All the Group's borrowings are in NZD.
Fair value
Borrowings
Carrying
amount
2020
$’000
350,364
Fair
value
2020
$’000
350,781
Carrying
amount
2019
$’000
312,863
Fair
value
2019
$’000
312,863
The fair values are based on cash flows discounted using a weighted average borrowing rate of 3.26% (2019: 3.91%).
Contractual repricing dates
1 year or less
Over 1 to 2 years
Over 2 to 5 years
2020
$’000
2019
$’000
321,498 269,343
29,204 13,282
- 30,712
350,702 313,337
Reconciliation of borrowings arising from financing activities
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or future cash flows will be classified in the Group's consolidated statement of
cash flows as cash flows from financing activities.
Balance at 31 March 2018
Financing cash flows (i)
Other - netted off finance receivables
Non-cash changes
Deferred borrowing costs
Balance at 31 March 2019
Financing cash flows (i)
Other - netted off finance receivables
Non-cash changes
Bank
borrowings
$’000
230,459
20,570
-
Motor Trade
Finance
$’000
58,603
-
(21,548)
Vendor
property
funding
$’000
2,837
(2,837)
-
Bonds
$’000
25,474
(561)
-
-
251,177 37,055
148
(282)
- 24,631
-
61,038
-
-
(23,673)
-
-
-
-
147
Deferred borrowing costs
Balance at 31 March 2020
(i) Financing cash flows make up the net amount of proceeds from borrowings and repayments of borrowings in the statement of cash flows.
312,204
13,382
-
-
-
(11)
24,778
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
27. SHARE CAPITAL
Number of ordinary shares
Opening balance
Shares issued for the dealer share scheme
Shares issued for the conversion of bonds
Shares cancel for share buy back
Total issued and authorised capital
Dollar value of ordinary shares
Opening balance
Transfer of share option reserve
Shares issued for the conversion of bonds
Shares issued for the dealer share scheme
Shares purchased and cancelled under share buy back
Share issue costs
Total issued capital
2020
2019
86,888,064
40,752
-
(1,374,106)
85,554,710
84,802,612
79,050
4,646,037
(2,639,635)
86,888,064
2020
$'000
206,395
1,027
-
97
(3,188)
(4)
204,327
2019
$'000
199,148
-
13,241
200
(6,141)
(53)
206,395
Ordinary shares are fully paid with no par value. All ordinary shares have equal voting rights and share equally in dividends and surplus on
winding up.
Capital management
The Group’s capital consists of share capital, share option reserve, translation reserve, cash flow reserve and retained earnings. The Board
seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security
afforded by a sound capital position. The allocation of capital between its specific business operations and activities is, to a large extent, driven by
optimisation of
to specific operations and activities is undertaken
independently of those responsible for the operation. The Group’s strategies in respect of capital management and allocation are reviewed
regularly by the Board of Directors.
the return on the capital allocated. The process of allocating capital
The Group's funding covenants include minimum equity ratios. There have been no breaches of covenants. In addition to the above, the life
insurance company is required to retain equity for solvency purposes, refer note 35G.
28. SHARE OPTIONS
In the financial year ending 31 March 2020 all options granted were cancelled and no option were granted in the years ending 31 March 2020 and
31 March 2019.
In July 2017, Senior Executives of the Company were granted 1,700,000 options at an exercise price of $3.60 under the Group's Share Option
Plan. The grant is split into four tranches of 425,000 options with the following vesting dates; 1 August 2017, 1 August 2018, 1 August 2019 and 1
August 2020. Each tranche expires two year after the vesting date.
In November 2016, the Chief Executive Officer of the Company was granted 1,002,692 options at an exercise price of $2.99195 under the
Group's Share Option Plan. The grant is split into four tranches of 250,673 options with the following vesting dates; 1 June 2017, 1 June 2018, 1
June 2019 and 1 June 2020. Each tranche expires two year after the vesting date.
If a participant in the Group Share Option Plan leaves (by any means and for any reason) the employment of the Company or any applicable
subsidiary, the participant’s options which have reached their vesting date, together with any other options as may be nominated at the discretion
of the Board of Directors of the Company in extraordinary circumstances (such as the redundancy, permanent disablement or death of a
participant), may be exercised within a period of 60 days (following which they will
lapse
immediately.
lapse) and the participant's other Options will
The weighted average fair value of the options granted in the previous financial year, using the Binomial Tree option pricing model, was $0.36 per
option. The significant inputs in the model were, the share price at grant date of $3.53, the exercise price of $3.60, volatility of 21.5%, an expected
option life for tranche 1 of 2.03 years, tranche 2 of 3.03 years, tranche 3 of 4.03 years, tranche 4 of 5.03 years and an annual risk free rate of
2.63%. Volatility is measured as the standard deviation of changes in the Company's share price over a 12 month period. The share based
payment for the current financial year is $nil (2019: $326,000).
74
75
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Movement in the number of share options outstanding and their related weighted average exercise prices are as follows:
Opening balance
Granted
Cancelled
Closing balance
Exercise
price
2020
$
3.32316
-
Options
2020
000's
2,203
-
3.32316
(2,203)
Exercise
price
2019
$
3.32316
-
-
Options
2019
000's
2,203
-
-
-
-
3.32316
2,203
Share options outstanding at balance sheet have the following expiry dates and exercise prices:
Expiry date
31 May 2019
31 July 2019
31 May 2020
31 July 2020
31 May 2021
31 July 2021
31 May 2022
31 July 2022
29. DIVIDENDS
Exercise
price
$
3.32316
3.60000
3.32316
3.60000
3.32316
3.60000
2.99195
3.60000
Interim dividend for the year ended 31 March 2019 of $0.040 (31 March 2018: $0.045) per fully
paid ordinary share, imputed, paid on 30 April 2019 (2018: 20 April 2018).
Final dividend for the year ended 31 March 2019 of $0.05 (31 March 2018: $0.05) per fully paid
ordinary share, imputed paid on 18 July 2019 (2018: 18 July 2018)
Interim dividend for the year ended 31 March 2020 of $0.04 (31 March 2019: $0.04) per fully
paid ordinary share, imputed, paid on 22 October 2019 (2019: 30 October 2018).
Interim dividend for the year ended 31 March 2020 of $0.04 (31 March 2019: $0.04) per fully
paid ordinary share, imputed, paid on 30 January 2020 (2019: 3 January 2019).
Dividends not recognised at year end
In addition to the above dividends, after year end the directors recommended the payment of the following dividend:
Interim dividend for the year ended 31 March 2019 of $0.040 per fully paid ordinary share,
imputed, paid on 30 April 2019.
Final dividend of $0.06 (31 March 2019: $0.05) per fully paid ordinary share, imputed, payable
on 24 July 2020 (2019: 18 July 2019).
30. TRANSACTIONS WITH RELATED PARTIES
Major shareholders, directors and closely related persons to them are considered related parties of the Group.
Turners Automotive Group Limited Employee Share Scheme
As at 31 March 2020, 35,122 shares (2019: 41,746) were issued and allocated to employees under the scheme.
Options
2020
000's
-
-
-
-
-
-
-
-
Options
2019
000's
251
300
251
300
251
300
250
300
2020
$’000
2019
$’000
3,489
3,816
4,366
4,240
3,441
3,596
3,446
14,742
3,562
15,214
-
3,489
5,133
4,366
At 31 March 2020 balance on the loans outstanding to the share scheme were $31,606 (2019: $63,458). The loans bear interest at 5%, are for a
3 year term with fortnightly repayments and the Group has unlimited recourse against the participants in the Scheme.
Turners Automotive Group Limited
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Key management personnel compensation
The key management personnel are all the Directors of the Company and Group General Managers. Compensation of key management
personnel for the years ended 31 March 2020 and 31 March 2019 was as follows:
($'000)
Short-
term
benefits
$'000
Post-
employment
benefits
$'000
Other long-
term
benefits
$'000
Share-based
payments
$'000
Total
$'000
Year ended 31 March 2020
2,595
- 73
- 2,668
Year ended 31 March 2019
3,004
- 77
326
3,407
Key management personnel that resigned during the year received no termination benefits and were paid only contractual employment
obligations. Key management do not have any post employment entitlements.
Directors that resigned during the year did not receive any termination benefits and directors do not have any post employment entitlements.
The Group has no transactions or loans with key management personnel, other than what is reported above and detailed in the statutory
information section on pages 94 to 97. Directors fees are detailed in note 7 and in the shareholder and statutory information section. The details of
the director share purchases are included in the statutory and shareholder information section.
31. RECONCILIATION OF NET SURPLUS WITH CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year
Adjustment for non-cash and other items
Impairment charge on finance receivables, reverse annuity mortgages and other receivables
Net profit on sale of property, plant and equipment
Depreciation and amortisation
Capitalised reverse annuity mortgage interest
Deferred revenue
Financial assets at fair value through profit and loss
Net annuity and premium change to policyholder accounts
Non-cash long term employee benefits
Non-cash adjustment to finance receivables effective interest rates
Deferred expenses
Fair value adjustment on investment property
Fair value adjustment to contingent consideration
Write off of intangible brand asset
Adjustment for movements in working capital
Net decrease/(increase) in receivables and pre-payments
Net increase in inventories
Net increase in current tax payable
Net decrease in payables
Net (decrease)/increase in contract liabilities
Net increase in finance receivables
Net decrease in reverse annuity mortgages
Net decrease/(increase) of insurance assets at fair value through profit or loss
Net contributions from life investment contracts
Net increase in deferred tax
Cash flows from operating activities
2020
$’000
20,953
6,044
(33)
11,919
(613)
(2,892)
77
(500)
-
(226)
(2,652)
-
(116)
-
5,251
(5,512)
(1,806)
(3,544)
(1,694)
(27,826)
3,964
704
88
(1,618)
(32)
2019
$’000
22,719
7,943
(3,660)
5,785
(846)
1,620
(799)
341
330
(209)
2,839
(830)
-
4,300
(259)
(263)
(851)
(5,220)
132
(34,926)
2,545
(12,163)
16
(3,565)
(15,021)
76
77
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Impact of the adoption of NZ IFRS 16 in the Statement of financial position as at 1 April 2019:
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
32. CHANGE IN ACCOUNTING POLICY
Impact of the adoption of NZ IFRS 16.
This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements and discloses the new accounting
policies that have been applied from 1 April 2019.
The Group has adopted IFRS 16 retrospectively from 1 April 2019, but has not restated comparatives for the 2019 reporting period, as
permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening statement of financial position on 1 April 2019.
Adjustments recognised on adoption of NZ IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating
leases’ under the principles of NZ IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as of 1 April 2019. The weighted average lessee’s incremental borrowing rate
applied to the lease liabilities on 1 April 2019 was 6.1%.
Operating lease commitments disclosed as at 31 March 2019
Discounted using the incremental borrow ing rate as at 1 April 2019
Less: short-terms leases recognised on a straight-line basis as ex pense
Add: adjustments as a result of a different treatment of ex tension and termination options
Lease liability recognised as at 1 April 2019
$'000
32,511
26,863
(168)
10,080
36,775
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied.
Other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognised in the statement of financial position as at 31 March 2019. There were no onerous lease
contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
31 March 2020
1 April 2019
Properties
Equipment
Total right-of-use assets
$'000
24,691
159
24,850
The change in accounting policy affected the following items in the Statement of financial position on 1 April 2019:
Right-of-use assets
Other pay ables
Deferred tax
Lease liabilities
Retained earnings
$'000
28,279
250
28,529
1 April 2019
$'000
28,529
(377)
(2,203)
36,775
(5,666)
Practical expedients applied
In applying NZ IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
reliance on previous assessments on whether leases are onerous;
the accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases; and
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts
entered into before the transition date the Group relied on its assessment made applying NZ IAS 17 and IFRIC 4 Determining whether an
Arrangement contains a Lease.
Assets
Cash and cash equiv alents
Financial assets at fair v alue through profit or loss
Trade receiv ables
Inv entories
Finance receiv ables
Other receiv ables, deferred ex penses and contract assets
Rev erse annuity mortgages
Inv estment property
Property , plant and equipment
Right-of-use assets
Intangible assets
Total assets
Liabilities
Other pay ables
Contract liabilities
Deferred tax
Tax pay ables
Deriv ativ e financial instruments
Borrow ings
Lease liabilities
Life inv estment contract liabilities
Insurance contract liabilities
Total liabilities
Shareholders' equity
Share capital
Other reserv es
Retained earnings
Total shareholders' equity
31 March 2019
As originally
presented
$'000
1 April 2019
NZ IFRS 16
adjustments
$'000
1 April 2019
restated
$'000
15,866
66,252
12,471
38,859
290,017
10,955
8,294
5,650
39,084
-
166,734
654,182
33,906
116
2,642
13,918
4,570
524
312,863
-
7,484
51,785
427,808
206,395
452
19,527
226,374
-
-
-
-
-
-
-
-
28,529
-
28,529
(377)
-
-
(2,203)
-
-
-
36,775
-
-
34,195
-
-
(5,666)
(5,666)
15,866
66,252
12,471
38,859
290,017
10,955
8,294
5,650
39,084
28,529
166,734
682,711
33,529
116
2,642
11,715
4,570
524
312,863
36,775
7,484
51,785
462,003
206,395
452
13,861
220,708
Total shareholders' equity and liabilities
654,182
28,529
682,711
The recognised right-of-use assets relate to the following types of assets:
Financial liability at fair v alue through profit or loss
78
79
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Presentation of the Statement of comprehensive income for the year ended 31 March 2020 as if NZ IFRS 16 had not been adopted:
Presentation of the Statement of financial position as at 31 March 2020 as if NZ IFRS 16 had not been adopted:
Rev enue from continuing operations
Other income
Cost of goods sold
Interest ex pense
Impairment prov ision ex pense
Subcontracted serv ices ex pense
Employ ee benefits (short term)
Commission
Adv ertising ex pense
Depreciation and amortisation ex pense
Property and related ex penses
Sy stems maintenance
Claims
Mov ement in life insurance liabilities
Insurance deferred acquisition costs
Impairment of intangible brand asset
Other ex penses
Profit before tax ation
Tax ation ex pense
Profit from continuing operations
Other comprehensiv e income for the period (w hich may subsequently
be reclassified to profit/loss), net of tax
Cash flow hedges
Rev aluation of financial assets at fair v alue through OCI
Foreign currency translation differences
Total comprehensiv e income for the period
Earnings per share (cents per share)
Basic earnings per share
31 March 2020
Year ended
31 March 2020
reported w ith
31 March 2020
reported w ithout
adopting
NZ IFRS 16
$'000
NZ IFRS 16
adjustments
$'000
adopting
NZ IFRS 16
$'000
332,174
500
(135,003)
(14,853)
(6,044)
(17,149)
(55,458)
(13,368)
(2,743)
(11,919)
(1,688)
(1,747)
(25,952)
(836)
(701)
-
(16,148)
29,065
(8,112)
20,953
(447)
(310)
(12)
20,184
-
-
-
2,034
-
-
-
-
-
6,300
(8,806)
-
-
-
-
-
-
(472)
132
(340)
-
-
-
(340)
332,174
500
(135,003)
(12,819)
(6,044)
(17,149)
(55,458)
(13,368)
(2,743)
(5,619)
(10,494)
(1,747)
(25,952)
(836)
(701)
-
(16,148)
28,593
(7,980)
20,613
(447)
(310)
(12)
19,844
24.35
(0.40)
23.95
Assets
Cash and cash equiv alents
Financial assets at fair v alue through profit or loss
Trade receiv ables
Inv entories
Finance receiv ables
Other receiv ables, deferred ex penses and contract assets
Rev erse annuity mortgages
Inv estment property
Financial assets at fair v alue through OCI
Property , plant and equipment
Right-of-use assets
Intangible assets
Total assets
Liabilities
Other pay ables
Contract liabilities
Deferred tax
Tax pay ables
Deriv ativ e financial instruments
Borrow ings
Lease liabilities
Life inv estment contract liabilities
Insurance contract liabilities
Total liabilities
Shareholders' equity
Share capital
Other reserv es
Retained earnings
Total shareholders' equity
31 March 2020
Year ended
31 March 2020
reported w ith
31 March 2020
reported w ithout
adopting
NZ IFRS 16
$'000
NZ IFRS 16
adjustments
$'000
adopting
NZ IFRS 16
$'000
32,771
64,988
8,609
44,371
293,037
8,572
4,913
5,650
1,000
52,788
24,850
166,843
708,392
27,340
2,793
10,080
2,772
985
350,364
32,511
7,072
51,420
485,337
204,327
(1,344)
20,072
223,055
-
-
-
-
-
-
-
-
-
-
(24,850)
-
(24,850)
264
-
2,071
-
-
-
(32,511)
-
-
(30,176)
-
-
5,326
5,326
32,771
64,988
8,609
44,371
293,037
8,572
4,913
5,650
1,000
52,788
-
166,843
683,542
27,604
2,793
12,151
2,772
985
350,364
-
7,072
51,420
455,161
204,327
(1,344)
25,398
228,381
Total shareholders' equity and liabilities
708,392
(24,850)
683,542
Total assets per share ($)
Net tangible assets ($)
8.28
0.77
7.99
0.86
80
81
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
The Group’s leasing activities and how these are accounted for
For the Group’s current accounting policies for leasing activities refer to accounting policy 3.7 on page 45 of the Group’s consolidated
financial statements for the year ended 31 March 2020.
Until the 2020 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period
of the lease.
33. COMMITMENTS AND CONTINGENT LIABILITIES
Capital Expenditure:
At reporting date, the Group has capital commitments of $1.5m to purchase computer equipment (2019: nil).
Future Lease Commitments:
The Group has committed to two property leases, the commencement date of both leases is dependent on the Landlord obtaining a Code
Compliance Certificate or Certificate of Public Use for agreed works included in the lease agreements. It is anticipated the leases will
commence during the financial year ending 31 March 2021.
Loan Commitments:
The Group has no material undrawn credit commitments at reporting date (2019: nil).
Contingent Liabilities:
Buy Right Cars
The vendor of the business has brought legal action against the Company disputing the quantum of the final earn out. A trial date has been
set for 10 August 2020 with both parties seeking payment. The directors consider that on balance of probabilities no payment will be made
to the vendor.
The Group has no other material contingent liabilities at reporting date.
34. SUBSEQUENT EVENTS AFTER BALANCE DATE
In July 2020, the Board approved the grant of 2,300,000 options to Senior Executives of the Group at an exercise price of $2.00 under the
Group's Share Option Plan. The grant is split into four tranches of 575,000 options with the following vesting dates; 1 June 2021, 1 June
2022, 1 June 2023 and 1 June 2024. Each tranche expires two years after the vesting date.
2019
In June 2019, all staff options were cancelled for no consideration, resulting in release of $1,027,000 from the share option reserve to
retained income.
Presentation of the Segment information as at 31 March 2020 as if NZ IFRS 16 had not been adopted:
Operating profit
Automotiv e retail
Finance
Credit management
Insurance
Corporate & other
Profit/(loss) before tax ation
Income tax
Profit attributable to shareholders
Interest expense
Automotiv e retail
Finance
Credit management
Insurance
Corporate & other
Eliminations
Depreciation and amortisation expense
Automotiv e retail
Finance
Credit management
Insurance
Corporate & other
Segment assets
Automotiv e retail
Finance
Credit management
Insurance
Corporate & other
Eliminations
Segment liabilities
Automotiv e retail
Finance
Credit management
Insurance
Corporate & other
Eliminations
31 March 2020
Year ended
31 March 2020
reported w ith
31 March 2020
reported w ithout
adopting
NZ IFRS 16
NZ IFRS 16
adjustments
adopting
NZ IFRS 16
$'000
13,829
12,167
6,494
6,215
(9,640)
29,065
(8,112)
20,953
(3,967)
(6,912)
(39)
(91)
(3,930)
(14,939)
86
(14,853)
(7,960)
(717)
(249)
(2,783)
(210)
(11,919)
129,496
308,696
38,268
134,236
216,173
826,870
(118,478)
708,392
92,078
241,086
7,585
73,133
91,423
505,305
(19,968)
485,337
$'000
(514)
(43)
1
55
29
(472)
132
(340)
1,847
43
39
91
14
2,034
-
2,034
5,472
343
153
191
141
6,300
(23,141)
(1,165)
(589)
(1,372)
(654)
(26,921)
2,071
(24,850)
(28,221)
(1,221)
(660)
(1,463)
(682)
(32,247)
2,071
(30,176)
$'000
13,315
12,124
6,495
6,270
(9,611)
28,593
(7,980)
20,613
(2,120)
(6,869)
-
-
(3,916)
(12,905)
86
(12,819)
(2,488)
(374)
(96)
(2,592)
(69)
(5,619)
106,355
307,531
37,679
132,864
215,519
799,949
(116,407)
683,542
63,857
239,865
6,925
71,670
90,741
473,058
(17,897)
455,161
82
83
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
35. Insurance related disclosures
A. Actuarial policies and the methods
The actuarial report on insurance contract liabilities and prudential reserves for the current reporting period was prepared as at 31 March 2020
by Peter Davies, a Fellow of the New Zealand Society of Actuaries.
Life insurance contract liabilities
The value of life insurance contract liabilities has been determined in accordance with Professional Standard No. 20 of the New Zealand
Society of Actuaries. After making appropriate checks, the actuary was satisfied as to the accuracy of the data from which the amount of
policy liabilities has been determined.
The key assumptions used in determining policy liabilities are as follows:
a) Discount Rates
Discount rates used to determine the life insurance contract liabilities are based on an appropriate risk-free rate of return, taking account of
the term of the insurance contracts.
Tax was deducted at the rate of 28% on investment earnings net of investment expenses (2019: 28%). The net discount rates assumed were
as follows:
Whole of Life and Endowment Policies (including Funeral Plan)*
Quick Cover term life plan*
Term Insurance Policies
Caring Plan Funeral Benefit Policies
Annuity Policies
Consumer Credit and Key Person Loan Protection
2020
Treasury risk-free rates
Treasury risk-free rates
Not applicable
Not applicable
Treasury risk-free rates
Not applicable
2019
Treasury risk-free rates
Treasury risk-free rates
Not applicable
Not applicable
Treasury risk-free rates
Not applicable
* These rates are provided by Treasury as at 31 January, and are then adjusted to 31 March based on the movement in swap rates, as quoted
by the Reserve Bank, between January and March. Illustrative forward rates for the respective valuations are as follows:
Cash-flows in year 10:
March 2019:
March 2020:
1.83% per annum net of tax
1.11% per annum net of tax
b) Inflation Rates
In determining the future expected rate of return, general inflation was assumed to continue into the future at 2.0% per annum (2019: 2.0%).
c) Mortality Rates
Rates of mortality were assumed as follows:
For underwritten whole of life, endowment and term insurance policies: NZ97 (2019: NZ97).
For guaranteed issue regular premium funeral plans: NZ97 (DPL plans), NZ04 (ex-Greenwich plans) multiplied by a factor to reflect higher
mortality at younger ages, and the impact of guaranteed issue anti-selection (DPL - no change from 2019).
QuickCover plans - NZ04 with additional loadings reflecting the impact of guaranteed issue anti-selection.
For annuities the assumed mortality table is 90% of the NZ12-14 population tables. For the Cook Islands Annuity Pension Plan the assumed
mortality table is the PA(90) table without adjustment (2019: no change).
d) Profit Carriers
The policies were divided into major product groups with profit carriers as follows:
Major Product Groups
Participating Whole of Life and Endowment Policies
Non Participating Whole of Life and Endowment Policies
Lump Sum Funeral Benefit Policies (Caring Plan)
Term Insurance Policies
Funeral Plan Policies (Regular premium guaranteed issue)
Quick Cover term life plan
Annuities
Consumer Credit / Lifestyle
Motor business
Accidental death & redundancy – Stop Gap
Accidental death regular & single premium
Carrier
Premiums
Premiums
Not Applicable
Premiums
Gross claims
Gross claims
Annuity payments
Not Applicable
Not Applicable
Not Applicable
Not Applicable
e) Investment and Maintenance Expenses
The maintenance expense and general growth and development expense allowances assumed for the main classes of business were as
follows:
Endowments
$152 per policy per annum (2019: $149)
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Funeral plans
Term life plans (for loss recognition)
Consumer credit plans (for loss recognition):
Annuity plans
$9.20 per policy per annum (2019: $9.00)
$9.20 per policy per annum (2019: $9.00)
$9.20 per policy per annum (2019: $9.00)
$152 per policy per annum (2019: $149)
Investment management expenses were assumed to be 1.0% (2019: 1.0%) of policy liabilities.
f) Inflation and Automatic Indexation of Benefits
Maintenance expenses are assumed to increase 2.0% per annum (2019: 2.0%). Investment management expenses are assumed to remain
a constant percentage of funds under management.
g) Taxation
The assumed future tax rates reflect the corporate tax rate applying in New Zealand with effect from 1 April 2011. The calculations have been
carried out on the basis of current life insurance income tax legislation.
h) Rates of Discontinuance
Rates of discontinuance are assumed to be 5.0% for whole of life, endowment and term insurance business (2019: 5.0%), and nil for annuity
pension plan business (2019: nil).
For the DPL Funeral plan the rates of discontinuance are based on company experience, beginning at 15% in year 1 and reducing ultimately
to 8% per annum (2019: No change).
For the Funeral plan (ex Greenwich) product the rates of discontinuance are based on the pricing assumption for this product, beginning at
40% in year 1, and reducing ultimately to 3% per annum (2019: 40% to 6%).
For Quick Cover the rates of discontinuance are based on the pricing assumption for this product, beginning at 40% in year 1, and reducing
ultimately to 10% per annum (2019: no change).
i) Surrender Values
The Company's current basis of calculating surrender values is assumed to continue in the future.
j) Rates of Future Supportable Participating Benefits
Rates of bonus supported by the participating fund are simple annual bonuses of $0.00 (2019: $2.00) per $1,000 of sum assured on
endowment policies.
k) Impact of changes in assumptions
The impact of the change in the discount rate is an increase in policy liabilities of $331,000 (2019: $207,000).
The policy liabilities are not affected by the revised expense assumptions (2019: $11,000).
l) Crediting Policy Adopted for Future Supportable Participating Benefits
For participating business the Company's policy is to distribute profits arising such that over long periods the returns to policy holders are
commensurate with the investment returns achieved on relevant assets, together with other sources of profit arising from this business. In
applying the policyholders' share of distributions to provide bonuses, consideration is given to achieving equity between generations of
policyholders and equity between the various classes and sizes of policies in force. Assumed future bonus rates included in policyholder
liabilities were set such that the present value of policyholder liabilities, allowing for the shareholders' right to participate in distributions, equals
the value of assets supporting the business. The supportable future bonus rate on this basis is zero.
Non-life insurance liabilities
The value of non-life outstanding claims and the Liability Adequacy Test of the non-life business, have been carried out in accordance with
Professional Standard no. 30. After making appropriate checks, the actuary was satisfied as to the accuracy of the data from which the
amount of policy liabilities has been determined.
B. Financial strength rating
The Insurance (Prudential Supervision) Act 2010 requires all licensed insurers to have a current Financial Strength Rating, given by an
approved rating entity. DPL Insurance Limited has been issued a Financial Strength Rating of B+ (Good) and an Issuer Credit Rating of bbb-
(Good), with the outlook assigned to both ratings as 'Positive' by A.M. Best. The rating was issued by A.M. Best on 19 July 2019.
The A.M Best company rating scale is
A++, A+ Superior
A, A- Excellent
B++, B+ Good
Issuer credit rating:
Investment grade
aaa (Exceptional)
aa (Superior)
a (Excellent)
bbb (Good)
B, B- Fair
C++, C+ Marginal
C, C- Weak
D Poor
E Under Regular Supervision
F In liquidation
S Suspended
Non-investment grade
bb (Fair)
b (Marginal)
ccc, cc (Weak)
c (Poor)
rs (Regulatory Supervision / Liquidation)
84
85
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
C. Surplus after taxation from insurance activities arose from:
E. Insurance related expenses
Insurance Contracts
Planned margin of revenues over expenses
Change in discount rate: 1.83% to 1.11% (2019:2.61% to 1.83%)
Difference between actual and assumed experience
Life investments contracts
Difference between actual and assumed experience
Investment returns on assets in excess of insurance
contract and investment contract liabilities
Surplus after taxation attributable to insurance activities
2020
$’000
339
(331)
3,711
240
982
4,941
2019
$’000
164
(207)
5,745
266
1,022
6,990
The disclosure of the components of operating profit after tax expense are required to be separated between policyholders’ and shareholders’
interests. We have included only one column, as policyholder profits arise only in respect of a small number of participating policies, and the
profits arising on these policies over the year were effectively zero. Accordingly all of the profits earned over the year are shareholder profits.
It is not currently possible to identify all experience variances separately for life investment contracts. The difference between actual and
assumed experience for life insurance contracts therefore includes some variances relating to life investment contracts.
D. Insurance and investment contract income
Insurance contract premiums
Investment revenue
Less: investment revenue paid to life insurance investment contracts
Other Revenues
Total insurance and investment contract income
Investment Income
Equity securities
Fixed interest securities
Property investments
2019
$’000
40,416
792
(680)
2,440
39,676 42,968
2020
$’000
39,277
(77)
189
287
(30)
382
127 104
306
792
(174)
(77)
Included within equity securities is dividend income of $Nil (2019: $Nil) and included within fixed interest securities is interest income of $Nil
(2019: $Nil). Included within total Investment Income is net realised and unrealised gains/(losses) on securities at fair value through profit or loss
of ($77,000) (2019: $792,000).
Insurance contract claims
Reinsurance expenses
Insurance contracts
Policy acquisition expenses - commission costs
Deferred acquisition cost amortisation
Total insurance contract related expenses
Life investment contracts
Investment management expenses
Movement in life insurance liabilities
Net operating profit includes the following specific expenses
Audit fees for the audit of financial statements
Rental and lease costs
Amortisation of policies in force
Amortisation of customer relationships
Amortisation of other intangible assets
Depreciation
Employee benefits
F. Taxation
Net operating profit before taxation
Income tax expense at prevailing rates
Tax impact of expenses not deductible for tax purposes
Prior year adjustment
Taxation (expense)/benefit
Comprising:
Current
Deferred
Prior year adjustment
Deferred tax
Opening balance
Charge to profit or loss
Transition adjustment
Deferred tax on intangibles
Closing balance
The charge to profit or loss is attributable to the following items:
Insurance deductible reserves
Provisions and accruals
Prior year adjustment
Income tax losses on policyholder base
The policy holder tax losses carried forward at 31 March 2020 are $5,180,385 (2019: $4,948,638).
Imputation credit memorandum account
The policyholder imputation credit account has a closing balance at 31 March 2020 of $Nil (2019: $Nil).
2020
$’000
23,890
587
2,067
701
2,768
42
836
126
25
1,566
558
218
442
5,934
6,712
1,879
(106)
1
1,774
2,949
(1,176)
1
1,774
(8,369)
1,184
4
-
(7,181)
681
487
8
1,176
2019
$’000
25,112
630
2,382
423
2,805
40
718
125
481
1,566
630
262
287
5,912
8,577
2,402
(826)
11
1,587
2,530
(954)
11
1,587
(9,395)
998
28
-
(8,369)
702
252
44
998
86
87
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
G. DPL Insurance Limited solvency calculation
In terms of the Insurance (Prudential Supervision) Act 2010, DPL Insurance Limited must comply with the Solvency Standard for Life Insurance
Business 2014 and the Solvency Standard for Non-life Business 2014. DPL Insurance Limited is required to hold minimum solvency capital of
$5.0 million and have a solvency margin of at least $0.
Actual solvency capital
Calculated minimum solvency capital
Coverage ratio on calculated margin (times)
Overall minimum capital requirement
Solvency margin on overall minimum requirement
Coverage ratio on overall minimum requirement (times)
Non-life insurance
Actual solvency capital
Calculated minimum solvency capital
Solvency margin on calculated minimum requirement
Life insurance
Actual solvency capital
Calculated minimum solvency capital
Solvency margin on calculated minimum requirement
H. Policyholder liabilities
Insurance contract liabilities
Opening insurance contract liabilities
Increase in insurance contract liabilities
Amortisation Intangible asset - policies in force
Increase in deferred acquisition costs
Closing insurance contract liabilities
Policyholder liabilities contain the following components:
Future policy benefits
Future expenses
Future profit margins
Balance of future premiums
Re-insurance
Life deferred acquisition costs
Intangible asset - policies in force
Life insurance contracts with a discretionary participation feature - the amount of the liabilities that relates
to guarantees
Other contracts with a fixed or guaranteed termination value - current termination value
Life investment contracts at fair value through profit or loss
Opening life investment contracts at fair value through profit or loss
Increase / (decrease) in life investment contract liabilities recognised through profit or loss
Deposit premium
Withdrawals
Activity, plan, and establishment fees
Closing life investment contract liabilities
2020
$’000
32,321
16,598
1.95
16,598
15,723
1.95
24,324
14,244
10,080
7,997
2,354
5,643
2020
$’000
51,785
1,032
(1,566)
169
51,420
55,586
6,475
5,880
(22,541)
6,286
(266)
-
51,420
221
7,175
2019
$’000
33,284
16,714
1.99
16,714
16,570
1.99
21,557
12,850
8,707
11,727
3,864
7,863
2019
$’000
48,376
4,519
(1,566)
456
51,785
57,964
6,283
5,250
(21,058)
5,348
(435)
(1,567)
51,785
262
6,577
(260)
7,484 7,127
607
1,529 1,611
(1,595)
(266)
7,072 7,484
(1,441)
(240)
The benefits offered under the Group's unit-linked investment contracts are based on the returns of selected equities and debt securities. This
investment mix is unique, and it cannot be associated to an individual benchmark index with a sufficiently high correlation. All financial liabilities at
fair value through profit and loss are designated by the Group to be in this measurement category. The liabilities originated from unit-linked
contracts are measured with reference to their respective underlying assets of these contracts. Changes in the credit risk of the underlying assets
do not impact the measurement of the unit-linked liabilities. The maturity value of these financial liabilities is determined by the fair value of the
linked assets, at maturity date.
Policyholder liabilities comprise
Annuities
Endowment
Whole of life, provision for bonus and future margins
Consumer Credit Protection & key person loan protection
Accidental death/redundancy
Term Life
General
General claims provisions
Saving plans
Deferred acquisition costs - life
Life investment contract liabilities
Insurance contract liabilities
General outstandings claim provision
Gross claims
IBNR provision
Reconciliation of movement in general gross claims liability
Opening Balance
Movement
Payments
Closing Balance
2020
$’000
1,280
232
4,504
5,669
7
53
36,718
3,223
7,072
(266)
58,492
7,072
51,420
58,492
118
2,473
2,591
2019
$’000
1,245
279
3,651
5,093
7
65
38,236
3,644
7,484
(435)
59,269
7,484
51,785
59,269
113
3,020
3,133
3,133
20,277
(20,819)
2,591
3,518
23,012
(23,397)
3,133
The policy liabilities in respect of annuities, endowment, whole of life, term life, super life and life bond have been established in accordance with
the policy conditions and maintained at a level equivalent to obligations due to policy holders as maturity or partial benefits.
88
89
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
I. Disaggregated information
DPL Insurance Limited has one statutory life fund. The disaggregated income statement and balance sheet between the statutory and
shareholder funds is as follows:
Statement of income for the year ended 31 March 2020
Insurance contract premiums
Outward reinsurance premium
Recoveries
Other insurance revenue
Insurance revenue
Claims expense
Movement in life insurance liabilities
Commission expense
Other expenses
Underwriting (loss)/profit
Fair value gain on revaluation of investment properties
Investment income
Profit before taxation
Taxation
Profit after taxation
Statement of financial position as 31 March 2020
Assets
Investments backing insurance policy liabilities
Other assets
Total assets
Liabilities
Life investment contract liabilities
Insurance contract liabilities
Deferred taxation
Other liabilities
Total liabilities
Solvency
Actual Solvency capital
Minimum solvency capital
Solvency Margin
Statement of income for the year ended 31 March 2019
Insurance contract premiums
Outward reinsurance premium
Recoveries
Other insurance revenue
Insurance revenue
Claims expense
Movement in life insurance liabilities
Commission expense
Other expenses
Underwriting (loss)/profit
Investment income
Fair value gain on revaluation of investment properties
Gain on sale of investment properties
Profit before taxation
Taxation
Profit after taxation
Statutory
$’000
6,447
(587)
419
404
6,683
(2,529)
(836)
(598)
(1,747)
973
-
751
1,724
(455)
1,269
Statutory
$’000
27,557
-
27,557
7,072
12,111
-
378
19,561
7,997
2,354
5,643
Statutory
$’000
7,598
(630)
324
270
7,562
(1,537)
(718)
(1,226)
(1,819)
2,262
1,216
-
-
3,478
(644)
2,834
Shareholder
$’000
32,830
-
11
1,865
34,706
(21,361)
-
(1,469)
(9,896)
1,980
500
2,511
4,991
(1,319)
3,672
Shareholder
$’000
70,679
37,361
108,040
-
39,309
7,181
7,046
53,536
24,324
14,244
10,080
Shareholder
$’000
32,818
-
92
1,819
34,729
(23,575)
-
(1,157)
(10,317)
(320)
2,039
900
2,480
5,099
(943)
4,156
Total
$’000
39,277
(587)
430
2,269
41,389
(23,890)
(836)
(2,067)
(11,643)
2,953
500
3,262
6,715
(1,774)
4,941
Total
$’000
98,236
37,361
135,597
7,072
51,420
7,181
7,424
73,097
32,321
16,598
15,723
Total
$’000
40,416
(630)
416
2,089
42,291
(25,112)
(718)
(2,383)
(12,136)
1,942
3,255
900
2,480
8,577
(1,587)
6,990
Turners Automotive Group Limited
Consolidated statement of comprehensive income for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
Statement of financial position as 31 March 2019
Assets
Investments backing insurance policy liabilities
Other assets
Total assets
Statutory
$’000
29,845
-
29,845
Shareholder
$’000
68,364
37,694
106,058
Liabilities
Life investment contract liabilities
Insurance contract liabilities
Deferred taxation
Other liabilities
Total liabilities
Solvency
Actual Solvency capital
Minimum solvency capital
Solvency Margin
Reconciliation of Profit before tax to Operating profit (note 6)
Profit before tax
Less: revaluation of investment property disclosed as property, plant and equipment
in the Group financial statements at cost
Operating profit (note 6)
7,484
10,416
-
218
18,118
11,727
3,864
7,863
-
41,369
8,369
5,437
55,175
21,558
12,850
8,708
2020
$’000
6,715
(500)
6,215
Total
$’000
98,209
37,694
135,903
7,484
51,785
8,369
5,655
73,293
33,285
16,714
16,571
2019
$’000
8,577
(350)
8,227
Restriction on assets
Access to the retained profits and capital in the statutory fund held for policyholders is restricted by the Insurance (Prudential Supervision) Act
2010.
The business undertaken and policies accepted by DPL Insurance Limited are a combination of investment linked and non-investment linked.
Investment linked business is business for which the life insurer issues a contract where the benefit amount is directly linked to the market value
of the investments held in the particular investment linked fund. Non-investment linked business is life insurance business other than investment
linked business.
2020
Premium income
Investment income
Claims expense
Other operating revenue
Other operating expenses
Investment revenues allocated to policyholders
Net profit before taxation
Net profit after taxation
Policy liabilities
Investment assets
Other assets
Other liabilities
Retained earnings
Investment linked
$’000
Non – investment
linked
$’000
-
(77)
-
-
(73)
261
111
80
38,690
3,839
(23,890)
2,699
(14,734)
-
6,604
4,861
Total
$’000
38,690
3,762
(23,890)
2,699
(14,807)
261
6,715
4,941
7,072 51,420 58,492
7,197 91,039 98,236
- 37,361 37,361
- 14,605 14,605
1,250 14,900 16,150
90
91
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
TURNERS AUTOMOTIVE GROUP LIMITED
Notes to financial statements for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
2019
Premium income
Investment income
Claims expense
Other operating revenue
Other operating expenses
Investment revenues allocated to policyholders
Net profit before taxation
Net profit after taxation
Policy liabilities
Investment assets
Other assets
Other liabilities
Retained earnings
Investment linked
$’000
Non – investment
linked
$’000
-
792
-
-
(69)
(611)
112
81
39,786
5,901
(25,112)
2,449
(14,559)
-
8,465
6,909
Total
$’000
39,786
6,693
(25,112)
2,449
(14,628)
(611)
8,577
6,990
7,484 51,785 59,269
7,658 90,551 98,209
- 37,694 37,694
- 14,024 14,024
1,170 15,090 16,260
The above information is disclosed prior to the elimination of any related party transactions or balances as the insurance contract disclosures
relate to DPL Insurance Limited.
J. Managed Funds and other Fiduciary Activities
DPL Insurance Limited acted as a promoter for a number of superannuation funds with assets managed by a third party investment manager.
The assets and liabilities of these funds are not included in the financial statements. Arrangements exist to ensure the activities of the
superannuation funds are managed independently from the other activities of the company.
Insurance Risk
K.
The insurance business of the Group involves a number of financial and non-financial risks. The financial risks are covered in note 5. Key
objectives in managing insurance risk are:
(i) To ensure sound business practices are in place for underwriting risks and claims management;
(ii) To achieve a target return on capital that is invested in order to take on insurance risk; and
(iii) To ensure solvency and capital requirements are met.
Life insurance
The life insurance business of the Group involves a number of non-financial risks concerned with the pricing, acceptance and management
of the mortality, and longevity risks accepted from policyholders. These risks are controlled through the use of underwriting procedures and
adequate premium rates and policy charges, all of which are approved by the Actuary. Tight controls are also maintained over claims
management practices to ensure the correct and timely payment of insurance claims.
Terms and conditions of life insurance contracts
The nature of the terms of the insurance contracts written by the Group is such that certain external variables can be identified on which
related cash flows for claim payments depend. The tables below provide an overview of the key variables upon which the amount of related
cash flows are dependent.
Type of contract
Non-participating life
insurance contracts
with
and
fixed
guaranteed terms
insurance
with
Life
contracts
discretionary
participating benefits
and
(endowment
whole of life)
Life
Contracts
Annuity
Details of the contract workings
Benefits paid on death or maturity are
fixed and guaranteed and not at the
discretion of the issuer
initial guaranteed
include a clearly
These policies
defined
sum
assured which is payable on death.
The guaranteed amount is a multiple
of the amount that is increased
throughout the duration of the policy
by the addition of regular bonuses
annually which, once added, are not
removed. Regular bonuses are also
added retrospectively
These policies provide guaranteed
regular payments to the life assured
Nature of compensation for claims
Benefits, defined by the insurance
contract, are determined by
the
contract and are not directly affected
by the performance of underlying
assets or the performance of the
contracts as whole
Benefits
the
arising
discretionary participation feature are
based on the performance of a
specified pool of contracts or a
specified type of contract.
from
Key variables affecting cash
flows
Mortality, lapses, expenses and
market earnings on assets
backing the liabilities
Mortality, lapses, expenses and
market earnings on assets
backing the liabilities
The amount of the payment is set at
inception of the policy
Longevity, expenses and market
earnings on assets backing the
liabilities
Non-life insurance
The risk management activities include prudent underwriting, pricing, and management of risk, together with claims management, reserving
and investment management. The objective of these disciplines is to enhance the financial performance of the insurance operations and to
ensure sound business practices are in place for underwriting risks and claims management.
Claims
Variations in claim levels will affect reported profit and equity. The impact may be magnified if the variation leads to a change in actuarial
assumptions which cannot be absorbed within the present value of planned margins for a group of related products. Insurance risk may arise
through the reassessment of the incidence of claims, the trend of future claims and the effect of unforeseen diseases or epidemics. Insurance
risk is controlled by ensuring underwriting standards adequately identify potential risk, retaining the right to amend premiums on risk policies
where appropriate. The experience of the Group's life insurance business is reviewed regularly.
Concentration of insurance risk
The Group does not believe it has any major geographic concentration of insurance risk. The Group's policies aim to reduce concentration
risk by maintaining a portfolio of policyholders with a broad spread of insurance risk types, ages, sexes, occupation classes and geographic
locations. The group uses reinsurance to limit the insurance risk exposure for any one individual.
Sensitivity Analysis
The liabilities included in the reported results are calculated using certain assumptions about key variables as disclosed above. Sensitivity
analysis is conducted to assess the impact of actual experience being different to that assumed in the calculation of liabilities. Movements in
any variable will impact the profit and net assets of the Group. The tables below describe how a change in actual experience relative to that
expected will affect next financial year's expected shareholder profit.
Variable
Expense risk
Impact of movement in underlying variable
An increase in the level or inflationary growth of expenses over assumed levels will decrease profit and shareholders’
equity
Mortality rates
Interest rate risk Depending on the profile of the investment portfolio, the investment income of the Group will decrease as interest rates
decrease. This may be offset to an extent by changes in the market value of fixed interest investments. The impact on
profit and shareholder equity depends on the relative profiles of assets and liabilities, to the extent that these are not
matched
For insurance contracts providing death benefits, greater mortality rates would lead to higher levels of claims,
increasing associated claims cost and therefore reducing profit and shareholder equity
The impact of discontinuance rate assumption depends on a range of factors including the type of contract, the
surrender value basis (where applicable) and the duration in force. For example, an increase in discontinuance rates
at earlier durations of life insurance contracts usually has a negative effect on profit and shareholder equity. However,
due to the interplay between the factors, there is not always an adverse outcome from an increase in discontinuance
rates
For benefits which are not contractually linked to the underlying assets, the Group is exposed to Market Risk
Discontinuance
Market Risk
The table below illustrates how changes in key assumptions would impact the reported profit and liabilities of the Group.
Change in key assum ptions ($'000)
2020
Market risks
Increase in interest rates of 1%
Decrease in interest rates of 1%
Insurance risks
Increase in expenses of 10%
Decrease in expenses of 10%
Decrease in mortality by 10%
Increase in mortality by 10%
Worsening of discontinuance rate by 10%
Improvement in discontinuance rate by 10%
2019
Market risks
Increase in interest rates of 1%
Decrease in interest rates of 1%
Insurance risks
Increase in expenses of 10%
Decrease in expenses of 10%
Decrease in mortality by 10%
Increase in mortality by 10%
Worsening of discontinuance rate by 10%
Improvement in discontinuance rate by 10%
Ef fect on policy
liabilities
Ef fect on
f uture prof it
(238)
265
1
(1)
(5)
6
-
-
(224)
249
1
(1)
(4)
5
-
-
(48)
52
(28)
28
(241)
265
76
(86)
(48)
52
(28)
28
(242)
266
76
(86)
92
93
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
STATUTORY INFORMATION
STATUTORY INFORMATION
STATUTORY INFORMATION
STATUTORY INFORMATION
Directors’ remuneration and other benefits
Grant Baker
Paul Byrnes
Martin Berry
Matthew Harrison
Alistair Petrie
John Roberts
Antony Vriens
Directors’ fees
$
150,000
75,000
75,000
75,000
75,000
75,000
75,000
During the year ended 31 March 2020 Mr Harrison received an additional $15,000 (2019: $15,000) in fees for services as chairman of the
Credit and Lending Committee.
During the year ended 31 March 2020 Mr Roberts received an additional $15,000 (2019: $15,000) in fees for his services as chairman of the
Audit and Risk Management Committee.
During the year ended 31 March 2020 Mr Vriens received an additional $35,000 (2019: $35,000) in fees for his services as chairman of DPL
Insurance Limited.
Disclosure of interests recorded in the interest’s register
There were no new specific disclosures of interests entered in the interests’ register in the accounting period ending 31 March 2020.
Dealings in Turners Automotive Group Limited shares by Directors
Date of transaction
Shares
acquired/(disposed)
Consideration
(received)/paid $
Nature of relevant interest
Paul Byrnes
07/06/2019 - 10/06/2019
Paul Byrnes
13/06/2019 -17/06/2019
Paul Byrnes
Martin Berry
17/06/2019
05/07/2019
(76,951)
(703,049)
(120,000)
500,000
(185,961) Registered holder and beneficial interest
(1,659,992) Registered holder and beneficial interest
(278,400) Registered holder and beneficial interest
1,150,000 Registered holder and beneficial interest
Directors’ relevant interest in quoted shares as at 31 March 2020
Grant Baker (own shareholding)
Paul Byrnes
Martin Berry
Matthew Harrison
Alistair Petrie
John Roberts
Antony Vriens
Shares
6,100,000
2,484,860
500,000
5,179,294
25,011
66,000
-
Other Directorships
Mr Baker, Mr Byrnes and Mr Harrison are directors of Turners Staff Share Plan Trustees Limited which acts as Trustee of the Employee Share
Purchase Scheme Trust.
The following represents interests of directors in other companies as disclosed to Turners Automotive Group Limited and entered in the
Interests Register:
Grant Baker
Baker Consultants Limited
Montezemolo Holdings Limited
Me Today Limited (Chairman)
Velocity Capital
Liam Lawson Supporters Partnership LP (Chairman)
Paul Byrnes
Vic Road Restaurant Group Limited
Ship to Shore Restaurant Group Limited
John Roberts
Apollo Foods Limited
Centrix Group Limited
Matthew Harrison
Harrigens Trustees Limited
JHFT Trustees Limited
GJG Trustees No.2 Limited
GJG Trustees Limited
MJH Consultants Limited
Antony Vriens
Me Today Limited
Alistair Petrie
RH Investment Trust
Dossor Trust
Bartel Holdings Ltd
Henergy Cage Free Ltd
Jellicoe St Enterprises Ltd
Zeafruit Limited
Breadcraft Wai Limited Advisory Board (Chairman)
Melita Honey Limited Advisory Board
Employee remuneration
During the year ended 31 March 2020, the number of employees or former employees of the Group, not being directors of Turners Automotive
Group Limited, who received remuneration and other benefits in their capacity as employees, the value of which exceeded $100,000 for the
year was as follows:
Remuneration range
100,000 - 109,999
110,000 - 119,999
120,000 - 129,999
Number of employees
2020
21
16
14
2019
21
14
13
130,000 - 139,999
140,000 - 149,999
150,000 - 159,999
160,000 - 169,999
170,000 - 179,999
180,000 - 189,999
190,000 - 199,999
200,000 – 209,999
210,000 - 219,999
220,000 - 229,999
230,000 - 239,999
240,000 - 249,999
250,000 – 259,999
260,000 – 269,999
270,000 – 279,999
280,000 – 289,000
290,000 – 299,000
300,000 – 309,999
320,000 – 329,999
330,000 – 339,999
340,000 – 349,999
370,000 – 379,000
400,000 – 409,999
420,000 – 430,000
430,000 – 439,999
640,000 – 645,000
700,000 – 709,000
4
8
4
4
8
3
2
-
2
-
1
-
-
-
-
-
3
1
-
-
-
1
-
1
-
1
-
7
5
4
7
4
4
5
3
1
1
1
2
2
-
1
1
-
-
1
1
1
-
1
-
1
-
1
94
95
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
STATUTORY INFORMATION
STATUTORY INFORMATION
STATUTORY INFORMATION
STATUTORY INFORMATION
NZX LISTING
The Company's shares are listed on the NZX Main Board (equity securities market) operated by NZX Limited (NZX) and as a foreign exempt entity
on the ASX operated by ASX Limited (ASX).
Substantial Product Holders
The following information is given pursuant to section 293 of the Financial Markets Conduct Act 2013.
PRINCIPAL ORDINARY SHAREHOLDERS AS AT 30 June 2020
The following table shows the names and holdings of the 20 largest holdings of quoted ordinary shares (TRA) of the Company.
Rank Name
Shares
% of Issued
Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Bartel Holdings Limited
Montezemolo Holdings Limited
Harrigens Trustees Limited
FNZ Custodians Limited
HSBC Nominees (New Zealand) Limited - NZCSD
National Nominees Limited - NCSD
BNP Paribas Nominees (NZ) Limited - NZCSD
JBWere (NZ) Nominees Limited
Stephen John Sinclair & Jacqueline Margaret Sinclair & Roger Frederick Wallis
Custodial Services Limited
Paul Bernard Mora
Paul Anthony Byrnes
John Jeffers Harrison
Accident Compensation Corporation - NZCSD
New Zealand Permanent Trustees Limited - NZCSD
Glenn Arthur Duncraft
Custodial Services Limited
Cushla Mary Smithies
JPMorgan Chase Bank NA NZ Branch-segregated clients acct - NZCSD
John Tomson
SPREAD OF ORDINARY SHAREHOLDERS AS AT 30 JUNE 2020
Range
1 – 999
1,000 - 1,999
2,000 - 4,999
5,000 - 9,999
10,000 - 49,999
50,000 - 99,999
100,000 - 499,999
500,000 - 999,000
1,000,000 plus
Total
9,552,642
6,100,000
5,179,294
4,153,981
3,427,171
3,288,667
2,543,090
2,491,951
2,171,461
1,863,524
1,700,000
1,484,860
1,363,782
1,361,833
1,000,000
870,000
707,685
542,841
534,487
519,754
11.17
7.13
6.05
4.86
4.01
3.84
2.97
2.91
2.54
2.18
1.99
1.74
1.59
1.59
1.17
1.02
0.83
0.63
0.62
0.61
Total Holders
Shares
% of Issued
Capital
1,812
839
792
458
593
54
61
5
15
817,508
1,145,767
2,440,199
3,037,518
11,618,031
3,406,786
12,231,878
3,174,767
47,682,256
0.96
1.34
2.85
3.55
13.58
3.98
14.30
3.71
55.73
4,629
85,554,710 100.00
Domicile of Ordinary Shareholders
Number
%
Number
%
Shareholders
Shares
New Zealand
Australia
Other
Total
96
4,460
77
92
4,629
96.35
1.66
1.99
100.00
84,594,629 98.88
521,055 0.61
439,026
85,554,710
0.51
100.00
As at 31 March 2020 the following shareholders are registered by the company as Substantial Product Holders in the Company, having
disclosed a relevant interest in quoted voting products under the Financial Markets Conduct Act 2013.
Bartel Holdings Limited
Salt Funds Managers Limited
Montezemolo Holdings Limited
Harrigens Trustees Limited
Number of Shares
%
11.17
9.32
7.13
6.05
9,552,642
7,974,325
6,100,000
5,179,294
The total number of quoted voting products of the company on issue at 31 March 2020 was 85,554,710 paid ordinary shares.
97
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT
TURNERS LIMITED FY20 GOVERNANCE REPORT
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
Turners’ Board of Directors has adopted a corporate governance framework which encourages the highest standards of ethical
conduct and provides accountability and control systems commensurate with the risks involved.
The Board considers that this framework and governance practices for the year ended 31 March 2020 are generally in line with
the 1 January 2020 NZX Corporate Governance Code (NZX Code), except as stated below:
•
•
•
Recommendation 2.5: Turners has a Diversity Policy which encourages a culture of diversity and inclusiveness at
Turners. While no measurable objectives are in place, the board requires management to provide regular reporting
and monitoring on diversity within the Turners workforce. The Board also uses tools such as the annual staff
engagement survey to measure diversity and how the business is recognising, valuing and respecting differences to
establish benchmark measures and progress.
Recommendation 2.9: An issuer should have an independent chairperson of the board. The chairperson of the
board is Grant Baker, a non-executive director. Grant has a 7.13% shareholding in Turners and therefore the Board
has deemed that he is not an independent director. The chair is not the CEO of Turners, is not involved in the day to
day running of the business and has no influence over operational decisions.
Recommendation 3.3 and 3.4: An issuer should have a Remuneration Committee and a Nomination Committee:
Due to the size of the Company's Board, matters normally dealt with by a Remuneration Committee or Nominations
Committee are dealt with by the full Board.
•
•
identifies procedures to ensure that the Board meets regularly, conducts its meetings in an efficient and effective
manner; and
that each Director is fully empowered to perform his or her duties as a director of Turners and to fully participate in
meetings of the Board.
Day to day management of Turners is undertaken by the executive team under the leadership of the Chief Executive Officer,
through a set of delegated authorities which are reviewed annually.
In discharging their duties, directors have direct access to and may rely on information, financial data and professional or expert
advice provided by Turners’ senior management and external advisers. Directors have the right, with the approval of the Chairman
or by resolution of the Board, to seek independent legal or financial advice at the expense of Turners for the proper performance
of their duties.
Newly elected directors are expected to familiarise themselves with their obligations under the constitution, Board Charter,
Turners Corporate Governance Code and the NZX Listing Rules. Training is also provided to new and existing Directors where
required to enable directors to understand their obligations.
Board Composition and Appointment
The Company will continue to monitor best practice in the governance area and update its policies to ensure it maintains the
most appropriate standards.
The number of elected directors and the procedure for their retirement and re-election at Annual Shareholder Meetings is set out
in Turners Constitution.
The information in this report is current as at 30 July 2020 and has been approved by the Board of Turners.
The Corporate Governance Code and key policies are available on the Turners Automotive Group Limited website:
https://www.turnersautogroup.co.nz/About+Us/Corporate+Governance.html.
Turners is listed on the NZX’s Main Board and is subject to regulatory control and monitoring by both the NZX and the Financial
Markets Authority (FMA).
PRINCIPLE 1 – CODE OF ETHICAL BEHAVIOUR
Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for
these standards being followed throughout the organisation.
The Board recognises that high ethical standards and behaviours are central to good corporate governance and it is committed
to the observance of a written Code of Ethics for Turners.
The Code of Ethics is the framework of standards by which directors, employees, contractors for personal services and advisers
to Turners Automotive Group Limited and its related companies are expected to conduct their professional lives. It has been
approved by the Board.
It is intended to facilitate decisions that are consistent with Turners values, business goals and legal and policy obligations,
thereby enhancing performance outcomes. The Code of Ethics is available on the Company’s website. Employees are expected
to report any breaches in line with the processes outlined in the Code of Ethics. The Board believes that all directors conformed
to the Code of Ethics during the 2020 financial year.
Turners has a Securities Trading Code of Conduct to mitigate the risk of insider trading in Turners financial products by employees
and directors. A copy of this is available on Turners’ website. Additional trading restrictions apply to Restricted Persons including
directors and certain employees. Details of directors’ share dealings are on page 94 of the 2020 Financial Statements.
Turners considers that the nomination process for new Director appointments is the responsibility of the whole Board and it does
not have a separate Nomination Committee. The Board takes into consideration tenure, capability, diversity and skills when
reviewing Board composition and new appointments.
Directors will retire and may stand for re-election by shareholders every three years, in accordance with the NZX Listing Rules.
A Director appointed since the previous annual meeting holds office only until the next annual meeting, but is eligible for re-
election at that meeting.
When a director is newly appointed, Turners will enter into a written agreement with them setting out the terms of their
employment.
The Board currently comprises of seven directors: a non-executive chairman, four independent directors and two non-executive
directors. The non-executive directors are not involved in the day to day running of the business and have no influence over
operational decisions. Directors are all elected based on the value they bring to the Board and against set criteria detailed in
Turners Corporate Governance Code. In order for a Director to be independent, the Board has determined that he or she must
not be an executive of Turners and must have no disqualifying relationships. The Board follows the guidelines of the NZX Listing
Rules and the NZX Code. Information on each director is available on the Turners website and on page 22 and 23 of the 2020
Annual Report.
Director’s interests are disclosed on pages 94 to 97 of the 2020 Financial Statements.
Board Training and Performance
The Company encourages all Directors to undertake appropriate training and education so that they may best perform their
duties. This includes attending presentations on changes in governance, legal and regulatory frameworks; attending technical
and professional development courses; and attending presentations from industry experts and key advisers. In addition, Directors
receive updates on relevant industry and Company issues, and briefings from key executives.
The Board regularly considers individual and collective performance, together with the skill sets, training and development and
succession planning required to govern the business. An external review was conducted in FY20, and the Board is considering
the recommendations made before implementing any changes.
PRINCIPLE 2 – BOARD COMPOSITION AND PERFORMANCE
Diversity
To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience and
perspectives.
The Turners Board is responsible for setting the strategic direction of the Company, overseeing the financial and operational
controls of the business, putting in place appropriate risk management strategies and policies and enhancing its value for
shareholders in accordance with good corporate governance principles.
In addition to the Turners Corporate Governance Code, the Turners Board also operates under a written charter which sets out:
•
•
•
the structure of the Board;
the role and responsibilities of directors;
procedures for the nomination, resignation and removal of directors;
Turners believes that diversity and inclusion of background, experiences, thoughts and ways of working lead to greater creative
and innovative solutions which ultimately lead to a superior outcome for its stakeholders socially, economically and
environmentally.
Diversity in Turners includes (but is not limited to) the following: gender, race, ethnicity and cultural background, thinking, physical
capability, age, sexual orientation, and religious or political belief.
Turners Diversity and Inclusion Policy is available on the Turners website. The Board requires management to provide regular
reporting and monitoring on diversity within the Turners workforce. As at 31 March 2020, the gender balance of Turners directors
and people was as follows:
Directors
Females
Males
31 March 2020
31 March 2019
-
7
-
7
98
99
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
Turners’ people – 31 March 2020
Senior leadership
Management
Other Employees
Total
Board Meetings and Attendance
2020
2019
Females
6
37
268
311
Males
26
57
377
460
Females
8
35
279
322
Males
28
55
364
447
The Board has 14 scheduled meetings a year. The table below sets out Directors’ attendance at Board and Committee meetings
during FY20. In total, there were 14 Board meetings; 3 Audit and Risk Management Committee meetings; and 4 Lending and
Credit Committee meetings.
Board
Audit and Risk
Management
Committee
Lending and Credit
Committee
14
14
12
14
13
14
12
3
3
3
4
4
4
Total number of meetings held
Grant Baker
Paul Byrnes
Martin Berry
Matthew Harrison
Alistair Petrie
John Roberts
Antony Vriens
PRINCIPLE 3 – COMMITTEES
Lending and Credit Committee
The Lending and Credit Committee reviews the lending and credit policies of Turners’ Finance subsidiary company. It is also
responsible for the approval of lending policies, the approval/decline of loan applications in terms of approval authority and
reviews the recovery of overdue loans and doubtful debt provisions in order to ensure that provisioning is satisfactory.
The Lending and Credit Committee members as at 31 March 2020 were Matthew Harrison (Chair), Alistair Petrie and John
Roberts. It met three times during the financial year.
Takeovers
Turners Automotive Group Limited is prepared in the event of a takeover. The Board has adopted a written Takeover Response
Policy (contained within the Turners Automotive Group Corporate Governance Code) to follow in the event that a takeover notice
or scheme of arrangement proposal is imminent. This policy would involve Turners forming an Independent Takeover committee
to oversee disclosure and response, and engage expert legal and financial advisors to provide advice on procedure.
PRINCIPLE 4 – REPORTING AND DISCLOSURE
The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of
corporate disclosures
Turners’ directors are committed to keeping investors and the market informed of all material information about Turners and its
performance, and ensuring compliance with applicable legislative and the NZX Listing Rules. The release of material information
is guided by the Reporting and Disclosure section in Turners Corporate Governance Code, and the Turners Continuous
Disclosure Policy, which are available to view on our website.
Copies of other key governance documents are also available on our website.
In addition to all information required by law, Turners also seeks to provide sufficiently meaningful information to ensure
stakeholders and investors are well informed, including financial and non-financial information.
The Board should use committees where this will enhance its effectiveness in key areas, while still retaining Board
responsibility.
Financial information
The Board has constituted two standing Committees being the Audit and Risk Management Committee and the Lending and
Credit Committee. Turners will continue to monitor best practice in the governance area and update its policies to ensure it
maintains the most appropriate standards.
Committees allow issues requiring detailed consideration to be dealt with separately by members of the Board with specialist
knowledge and experience, thereby enhancing the efficiency and effectiveness of the Board. However, the Board retains ultimate
responsibility for the functions of its Committees and determines their responsibilities.
The Committees meet as required and have terms of reference (Charters), which are approved and reviewed by the Board.
Minutes of each Committee meeting are forwarded to all members of the Board, who are all entitled to attend any Committee
meeting. Management may only attend committee meetings at the invitation of the Committee. Each Committee is empowered
to seek any information it requires from employees in pursuing its duties and to obtain independent legal or other professional
advice. The membership and performance of each Committee is reviewed annually. From time to time, special purpose
committees may be formed to review and monitor specific projects with senior management.
Audit and Risk Management Committee
The role of the Audit and Risk Management Committee is to assist the Board in carrying out its responsibilities under the
Companies Act 1993 and the Financial Reporting Act 2013 regarding accountancy practices, policies and controls relative to the
Turner’s financial position and make appropriate enquiry into the audits of the Turner’s financial statements. This responsibility
includes providing the Board with additional assurance about the quality and reliability of the financial information issued publicly
by Turners. All matters required to be addressed and for which the Committee has responsibility were addressed during the
reporting period.
The Committee is comprised solely of Directors of Turners, has a minimum of three members, has a majority of independent
Directors and has at least one director with an accounting or financial background. The Chair of the committee is not the Chair
of the Board and does not have a long-standing association with Turners external audit firm as a current, or retired, audit partner
or senior manager at that firm. Management and employees may only attend meetings at the invitation of the Committee and the
Committee routinely has Committee-only time with the external and internal auditors without management present. The
Committee Charter is available as Appendix B in the Turners Corporate Governance Code.
Members as at 31 March 2020 were John Roberts (Chair), Antony Vriens and Alistair Petrie. It met three times during the financial
year.
The Board is responsible for ensuring that the financial statements give a true and fair view of the financial position of Turners
and have been prepared using appropriate accounting policies, consistently applied and supported by reasonable judgements,
estimates and for ensuring all relevant financial reporting and accounting standards have been followed.
For the financial year ended 31 March 2020, the directors believe that proper accounting records have been kept which enable,
with reasonable accuracy, the determination of the financial position of Turners and facilitate compliance with the Financial
Reporting Act 1993. The Chief Executive and Chief Financial Officer have confirmed in writing to the Board that Turners’ external
financial reports present a true and fair view in all material aspects. Turners’ full financial statements and half year results are
available on our website.
Non-financial information
The Board recognises the importance of non-financial disclosure. Given Turners size, the Board has elected not to adopt a formal
environmental, social and governance framework. Turners has an Environmental, Social and Governance Policy in section 14 of
Turners Corporate Governance Code.
Turners discusses its strategic objectives and its progress against these in the Chair and CEO’s commentary in shareholder
reports, and at other investor events during the year including investor presentations and the Annual Shareholders’ Meeting.
Turners is committed to using its resources responsibly and will look for opportunities to reduce any negative environmental risk
or impact from business operations, products and services. Turners is committed to providing fair and responsible products and
services that includes adherence to the Responsible Lending Code, the Responsible Credit-Related Insurance Code, Insurance
(Prudential Supervision) Act 2010 and various other Acts.
The Board will encourage diversity and will not knowingly participate in business situations where Turners’ could be complicit in
human rights and labour standard abuses.
PRINCIPLE 5 – REMUNERATION
The remuneration of directors and executives should be transparent, fair and reasonable.
The Board promotes the alignment of the interests of the directors, the CEO and management with the long term interests of
shareholders. Remuneration policies and structure are reviewed regularly to ensure remuneration of management and directors
is fair and reasonable in a competitive market for the skills, knowledge and experience required by Turners. The Board recognises
that it is desirable that executive (including executive director) remuneration should include an element dependent upon the
performance of both Turners and the individual, and should be clearly differentiated from non-executive director remuneration.
100
101
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
Details of directors and executives’ remuneration and entitlements for the 2020 financial year are detailed on pages 77 and 94 of
the Annual Report.
PRINCIPLE 6 – RISK MANAGEMENT
The Remuneration Policy is included in section 10 of Turners Corporate Governance Code. Turners does not have a
Remuneration Committee and matters pertaining to remuneration are dealt with by the full Board.
Director Remuneration
The total remuneration pool available for Directors is fixed by shareholders. The Board determines the level of remuneration paid
to Directors from the approved collective pool. Directors also receive reimbursement for reasonable travelling, accommodation
and other expenses incurred in the course of performing their duties. The annual fee pool limit is $665,000 and was approved by
shareholders at the annual meeting in September 2018. Any proposed increases in non-executive Director fees and remuneration
will be put to shareholders for approval. If independent advice is sought by the Board, it will be disclosed to shareholders as part
of the approval process.
Board Remuneration
•
•
•
•
•
•
Chairman $150,000
Non-executive Director $75,000
Chair of DPL Insurance Limited $35,000
Chair of DPL Insurance Limited for duties as a non-executive director for TRA $75,000
Chair of Audit & Risk Committee $15,000
Chair of Credit and Lending Committee $15,000
DPL Insurance is legally required to operate a separate board because it holds an insurance license with the Reserve Bank of
New Zealand. Antony Vriens is the current chairman of the DPL Insurance board and is also a non-executive director of Turners.
Details of individual Directors’ remuneration are detailed on page 94 of the 2020 Annual Report.
Executive Remuneration
Executive remuneration consists of a fixed base salary, a variable short term bonus paid annually and a long term incentive,
being a Share Option Plan. Bonuses are paid against targets agreed with executives at the commencement of the year and are
based on profitability, growth and personal objectives.
Details of executives’ remuneration and entitlements are detailed under Key Management Compensation on page 77 and
Remuneration of Employees information on page 95 of the 2020 Financial Statements.
Details of the Group’s Share Option Plan are detailed on page 75 of the 2020 Financial Statements. All outstanding share options
were cancelled at the start FY20 and new options were issued in July 2020.
CEO Remuneration
The review and approval of the CEO’s remuneration is the responsibility of the Board. The CEO’s remuneration comprises a fixed
base salary, a variable short term bonus payable annually and a long term incentive, being participation in the Group’s Share
Option Plan.
The CEO’s remuneration can be summarised as follows:
Salary
Benefits
Subtotal
Pay for Performance
Total
remuneration
STI
% STI
against
maximum
FY20
FY19
543,761
531,205
50,224
47,520
593,985
578,725
-
101,275
-
46%
593,985
680,000
Short term incentive: A short term bonus is paid against profit targets agreed at the commencement of the year.
Long term incentive: In November 2016, the Chief Executive Officer of the Company was granted 1,002,692 options at an exercise
price of $2.99195 under the Group's Share Option Plan. The grant is split into four tranches of 250,673 options with the following
vesting dates; 1 June 2017, 1 June 2018, 1 June 2019 and 1 June 2020. Each tranche expires two years after the vesting date.
The weighted average fair value of the options granted, using the Binomial Tree option pricing model, was $0.75 per option. All
options were cancelled at the beginning of FY20.
If a participant in the Group Share Option Plan leaves (by any means and for any reason) the employment of the Company or
any applicable subsidiary, the participant’s options which have reached their vesting date, together with any other options as may
be nominated at the discretion of the Board of Directors of the Company in extraordinary circumstances (such as the redundancy,
permanent disablement or death of a Participant), may be exercised within a period of 60 days (following which they will lapse)
and the participant's other Options will lapse immediately.
Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The
Board should regularly verify that the issuer has appropriate processes that identify and manage potential and material
risks.
Turners is committed to proactively managing risk. While this is the responsibility of the entire Board, the Audit and Risk
Management Committee assists the Board and provides additional oversight in regards to the risk management framework and
monitoring compliance with that framework.
The Board’s approach to risk management is incorporated into the Audit and Risk Committee Charter which is included as
Appendix B in Turners Corporate Governance Code. The Board delegates day to date management of the risk to the Chief
Executive. The executive team and senior management are required to regularly identify the major risks affecting the business
and develop structures, practices and processes to manage and monitor these risks. Individual risks are discussed with the Board
in detail as required.
Key financial and non-financial risks are included in note 5 of the financial statements.
The Board is satisfied that Turners has in place a risk management process to effectively identify, manage and monitor Turners’
principal risks. Turners maintains insurance policies that it considers adequate to meet its insurable risks.
Health and Safety
The Board recognises that effective management of health and safety is essential for the operation of a successful business, and
its intent is to prevent harm and promote wellbeing for employees, contractors and customers.
The Board is responsible for ensuring that the systems used to identify and manage health and safety risks are fit for purpose,
being effectively implemented, regularly reviewed and continuously improved.
Turners has a Health and Safety Policy which is monitored by a Health and Safety Committee assisted by Health and Safety co-
ordinators in each business unit. Health and Safety reports, including incident reports, for all business units are included in the
compliance section of Board papers.
PRINCIPLE 7 – AUDITORS
The Board should ensure the quality and independence of the external audit process.
The Board’s approach to the appointment and oversight of the external auditor are outlined in Turners’ External Audit Policy
(section 9 of the Turners Corporate Governance Code) and ensures that audit independence is maintained, both in fact and
appearance, such that Turners external financial reporting is viewed as being highly reliable and credible.
The Audit and Risk Management Committee provides additional oversight of the external auditor, reviews the quality and cost of
the audit undertaken by the Company’s external auditors and provides a formal channel of communication between the Board,
senior management and external auditors. The Committee also assesses the auditor’s independence on an annual basis.
Procedures are detailed in the Audit and Risk Committee Charter (Appendix B of the Turners Corporate Governance Code).
For the financial year ended 31 March 2020, Baker Tilly Staples Rodway was the external auditor for Turners Automotive Group
Limited. Baker Tilly Staples Rodway were first appointed as external auditor in 1999 and were automatically re-appointed under
the Companies Act 1993 at the 2019 Annual Shareholder Meeting. The last audit partner rotation was this year.
All audit work at Turners is fully separated from non-audit services, to ensure that appropriate independence is maintained. The
amount of fees paid to Baker Tilly Staples Rodway for audit and other services is identified on page 59 of the 2020 Annual Report.
Baker Tilly Staples Rodway has provided the Turners’ Board with written confirmation that, in their view, they were able to operate
independently during the year.
Baker Tilly Staples Rodway attends the Annual Shareholder Meeting, and the lead audit partner is available to answer questions
from shareholders at that meeting. Baker Tilly Staples Rodway attended the 2019 Annual Shareholder Meeting.
Turners has a number of internal controls overseen by Audit and Risk Management Committee, including controls for
computerised information system, security, business continuity management, insurance, health and safety, conflicts of interest,
and prevention and identification of fraud. Turners does not have a dedicated Internal Auditor role.
102
103
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
TURNERS LIMITED FY20 GOVERNANCE REPORT cont.
PRINCIPLE 8 – SHAREHOLDER RIGHTS AND RELATIONS
The Board should respect the rights of shareholders and foster constructive relationships with shareholders that
encourage them to engage with the issuer.
The Board is committed to open dialogue and to facilitating engagement with shareholders. Turners has a calendar of
communications and events for shareholders, including but not limited to:
DIRECTORY
DIRECTORY
CORPORATE DIRECTORY
DIRECTORS
Grant Baker
Chairman
Appointed 10 September 2009
Annual and Interim Reports
Annual Shareholder Meeting
Financial results calls
•
• Market announcements
•
•
• Other ad hoc investor presentations
•
•
Easy access to information through the Turners website www.turnersautogroup.co.nz
Access to management and the Board via email info@turnersautogroup.co.nz
Turners maintains a comprehensive investor relations website which provides access to key corporate governance documents,
copies of all major announcements, company reports and presentations.
Shareholders are encouraged to attend the Annual Shareholder Meeting and may raise matters for discussion at this event. In
accordance with the NZX Code, the Board ensured that the notice of the 2019 Annual Shareholder Meeting was posted to
Turners’ website as soon as possible, and at least 20 working days prior to that meeting.
Shareholders have the ultimate control in corporate governance by voting directors on or off the Board. Voting is by poll, upholding
the ‘one share, one vote’ philosophy.
In accordance with the Companies Act 1993, Turners’ constitution and the NZX Listing Rules, Turners refers major decisions
which may change the nature of Turners’ to shareholders for approval.
REGISTERED OFFICE
Level 5, 70 Shortland Street, Auckland, New Zealand
PO Box 1232, Shortland Street, Auckland, 1140, New Zealand
Freephone: 0800 100 601
Email enquiries: info@turnersautogroup.co.nz
Web: www.turnersautogroup.co.nz
Paul Byrnes
Deputy chairman
Appointed 2 February 2004
TURNERS LIMITED
Martin Berry
Independent Director
Consolidated statement of financial position for the year ended 31 March 2016
Appointed 17 August 2018
TURNERS LIMITED
Consolidated statement of financial position for the year ended 31 March 2016
AUDITOR
Baker Tilly Staples Rodway
Matthew Harrison
Non-executive director
Appointed 12 December 2012
Alistair Petrie
Non-executive director
Appointed 24 February 2016
Cash and cash equivalents
Cash and cash equivalents
Assets
Assets
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
John Roberts
Trade receivables
Trade receivables
Independent Director
Inventory
Appointed 1 July 2015
Finance receivables
Inventory
Other receivables and deferred expenses
Other receivables and deferred expenses
Finance receivables
Antony Vriens
Independent Director
Reverse annuity mortgages
Reverse annuity mortgages
Appointed 12 January 2015
Property, plant and equipment
Property, plant and equipment
BANKERS
Bank of New Zealand and ASB Bank
2016
2016
2015
Notes
Notes
$’000
$’000
$’000
2015
$’000
LAWYERS
Chapman Tripp
10
11
12
13
14
15
16
19
10
11
12
13
14
15
16
19
13,810
13,810
12,339
12,339
18,455
18,455
17,350
17,350
9,575
9,575
7,394
14,156
14,156
8,984
7,394
8,984
167,598
167,598
142,827
142,827
8,505
9,734
8,505
5,946
5,946
9,734
13,253
13,253
11,108
11,108
8,319
8,319
All shareholders are given the option to elect to receive electronic communications from us.
Tax receivables
Tax receivables
-
-
433
In addition to shareholders, Turners has a wide range of stakeholders and maintains open channels of communication for all
audiences, including shareholders, brokers and the investing community, as well as our staff, suppliers and customers.
ENDS
Deferred tax asset
Deferred tax asset
SHAREHOLDER INFORMATION
Intangible assets
Intangible assets
Total assets
Total assets
COMPANY PUBLICATIONS
The Company informs investors of the Company’s business
and operations by issuing an Annual Report, an Interim Report
and releasing announcements on the NZX’s website.
Other payables
Liabilities
Other payables
Liabilities
Life investment contract liabilities
Tax payables
Deferred revenue
Life investment contract liabilities
Deferred revenue
Financial calendar
Tax payables
First quarterly dividend
Derivative financial instruments
Derivative financial instruments
Annual meeting
Borrowings
Borrowings
Half year results announced
Second quarterly dividend
Insurance contract liabilities
Third quarterly dividend
Total liabilities
End of financial year
Annual results announced
Annual report
Shareholders’ equity
Shareholders’ equity
Final dividend
Insurance contract liabilities
Total liabilities
Share capital
Share capital
Other reserves
Other reserves
Retained earnings
Retained earnings
October
September
November
January
April
31 March
May
June
July
20
20
4,024
4,024
8,532
21
SHARE REGISTER
Computershare Investor Services Limited
328,972
Level 2, 159 Hurstmere Road, Takapuna, Auckland
Private Bag 92119, Auckland 1142, New Zealand
Telephone: +64 9 488 8777
103,595
105,338
362,303
105,338
362,303
21
433
8,532
103,595
328,972
22
23
24
32
32
22
23
24
32
32
22,270
22,270
17,790
17,790
6,049
6,049
7,476
7,476
990
49
990
49
71
-
71
-
174,816
174,816
156,995
156,995
15,629
15,629
16,378
16,378
12,688
12,688
9,260
9,260
232,491
232,491
207,970
207,970
25
25
136,127
136,127
135,294
135,294
(52)
(52)
(23)
(23)
(6,263)
(6,263)
(14,269)
(14,269)
Total shareholders’ equity
Total shareholders’ equity
ENQUIRIES
Total shareholders’ equity and liabilities
Shareholders with enquiries about transactions, change of address or dividend payments should contact Computershare Investor Services
on +64 9 488 8777. Other questions should be directed to the Company at the registered address.
Total shareholders’ equity and liabilities
362,303
129,812
328,972
362,303
129,812
328,972
121,002
121,002
STOCK EXCHANGE
The Company’s shares trade on the NZSX operated by the NZX under the code TRA. The minimum marketable parcel on the NZX is 100
For and on behalf of the Board
shares.
For and on behalf of the Board
This annual report is dated 30 July 2020 and is signed on behalf of the board by:
G.K. Baker
G.K. Baker
Chairman
Chairman Director
G.K. Baker
Chairman Director
P.A. Byrnes
P.A. Byrnes
P.A. Byrnes
Deputy chairman
Executive Director
Executive Director
104
The accompanying notes from part of these financial statements
The accompanying notes from part of these financial statements
105
Authorised for issue on 22 June 2016
Authorised for issue on 22 June 2016
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020
106
107
TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2020 Turners Automotive Group Limited
Level 5, 70 Shortland Street
PO Box 1232, Auckland 1140
T: 0800 100 601
E: info@turnersautogroup.co.nz
www.turnersautogroup.co.nz