Turners Automotive Group Limited
Annual Report 2022

Plain-text annual report

WE’RE READY ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2022 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 2022. Grant Baker Chairman Todd Hunter Group Chief Executive Officer TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 OUR VISION OUR THREE-YEAR PLAN FY22 AT A GLANCE CHAIR AND CEO’S REPORT FY23 PRIORITIES CREATING A BETTER BUSINESS OUR PEOPLE OUR CUSTOMERS GIVING BACK TO OUR COMMUNITIES A CLEANER, LOWER EMISSION FUTURE FY22 FINANCIAL REVIEW THE BOARD THE EXECUTIVE TEAM FINANCIAL STATEMENTS 4 6 8 10 15 17 18 22 24 25 26 28 30 32 2 3 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 OUR VISION IS TO BE NEW ZEALAND’S LEADING ECOSYSTEM FOR VEHICLE USERS. AUTOMOTIVE RETAIL FINANCE ■ New Zealand’s largest buyer and seller of vehicles ■ One car sold every 6 minutes ■ Branches and sites from Whangarei to Invercargill ■ Awarded New Zealand’s number 1 Most Trusted Used Vehicle Dealership in the Readers Digest Trusted Brands awards for three years in a row ■ “Bricks and Clicks” retail model, combining our nationwide network with market leading online digital experience ■ Targeting high quality consumer and commercial lending – primarily for automotive customers ■ Loans originated through the Turners Auto Retail network and third party independent dealers and brokers ■ $423m in receivables ■ More than 25,000 current consumer loans ■ Average loan size $13,500 INSURANCE CREDIT MANAGEMENT ■ Helping Kiwis with motor vehicle, loan protection and life insurance solutions, distributed through 721 licensed car dealers, finance companies & brokers, and life insurance advisers as well as online ■ 5,200+ policies sold every month; 180,000+ active policies ■ $39.9m in new policies sold in FY22 ■ A recognised leader in the debt collection and credit management sectors, for both corporate and SME customers ■ $84m in corporate debt load in FY22; 36% average recovery rate ■ $37m-plus collected from debtors in FY22 ■ 2,534 SME customers loading debt in ■ Average 1,400 claims paid out monthly; FY22 $19.1m in claims paid out in FY22 WE’RE READY. With another record year of results, a stronger and de-risked business, a clear strategy and a near-term economic outlook that is looking more uncertain, our business has never been in better shape. We are ready for whatever comes next. ■ We achieved 15% growth in profit before tax in FY22…another record year for the business, and 48% growth in profits since FY19 ■ Our business has been strengthened and de-risked over the last three years. We have found the right formula and will optimise further: 1. Building out an omni-channel experience in Auto Retail 2. Growing our retail market share through branch expansion and retail optimisation 3. De-risking our loan book by growing in the premium borrower segment 4. Broadening digital distribution in Insurance ■ We are across the challenges in the macro environment and are working proactively to minimise their impact. ■ The used car market in NZ performs well through economic cycles. Consumers are purchasing out of need, not discretion. Looking beyond FY23, we remain very confident about further growth over the medium to longer term and we have updated our three-year rolling target to cross over $50m of profit before tax by FY25. 4 5 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 OUR THREE-YEAR PLAN FOR GROWTH: FY23 TO FY25 Our plan centres on organic growth, underpinned by four key areas. These are a combination of both physical and digital investments. RETAIL OPTIMISATION AND EXPANSION Expansion of the physical branch network and optimisation of people, property and processes, with a focus on delivering the optimal customer experience. VEHICLE PURCHASING DECISION-MAKING Use of data and tools to help identify new sourcing opportunities, and leveraging our brand strength to generate local sourcing leads. MARGIN MANAGEMENT AND PREMIUM LENDING Use of comprehensive credit data to strengthen our risk pricing strategy and attract higher quality borrowers, with lower margins more than offset by much lower impairments and losses. CONTINUED INVESTMENT IN DIGITAL AND OMNI-CHANNEL CUSTOMER EXPERIENCE Continued investment in digital and improvement of our omni-channel customer experience which allows customers to engage with us however, whenever and wherever they want. We have found the right formula and are confident our actions will deliver continuing growth over the next three years. 6 7 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 FY22 AT A GLANCE ■ Strong consumer demand despite continued disruption FY22 FINANCIAL SNAPSHOT REVENUE SEGMENT REVENUE from COVID-19 lockdowns and Omicron outbreak ■ Employee engagement at an all-time high (top 5% of companies using Peakon tool); continued to increase at a time where retention and recruitment have been under significant pressure ■ Record earnings from divisions operating in the used car market (Auto Retail, Finance and Insurance) ■ Auto Retail: Market share continued to grow in Auto Retail ■ Record NPBT up 15% to with a good pipeline of new branches $43.1m ■ Finance: Quality lending strategy resulting in arrears at ■ NPAT up 16% to $31.3m record lows ■ Insurance: Strong new policy sales with improving claims ratios ■ Credit Management: Debt load returning slowly but environment should be more productive in FY23 ■ Macro headwinds (inflation and interest rates) starting to impact… speed of change biggest challenge ■ EBIT up 11% to $47.7m1 ■ Underlying NPBT up 29% to $44.1m2 ■ Revenue up 14% to $344.5m ■ Dividends up 15% to 23.0 cents per share ■ Earnings per share up 16% to 36.4 cents per share ■ Unrealised property gains per share 22 cents per share (measured from carrying value) More information on Turners FY22 financial results can be read on pages 26 to 27 and in the financial statements. 400 300 200 100 0 s n o i l l i M $ FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 60 50 40 30 20 10 0 35 30 25 20 15 10 5 0 s n o i l l i M $ s n o i l l i M $ 1 Earnings Before Interest and Tax (EBIT) adjusted for interest expense in Finance (non-IFRS measure) 2 Underlying Net Profit Before Tax (NPBT) is a non-GAAP measure and excludes one-off or non-cash costs including property sales and acquisitions, covid-related support and remuneration sacrifice, review and restructure costs and profit normalisation (Turners’ estimated profit had the business not been shut during lockdown). In FY22, these totalled $1.0 million. A reconciliation can be viewed on page 27. FY18 FY19 FY20 FY21 FY22 400 400 300 400 400 300 400 200 300 300 200 300 400 400 300 400 300 400 400 200 300 200 300 300 s n o i l l i M s s n n $ o o i l l i i l l i s n o i l l i M s n $ o i l l i 100 200 200 100 200 0 0 100 100 100 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 M $ M M $ $ 0 ■ 1H ■ 2H FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 0 0 100 200 100 200 200 0 0 100 100 100 s n o i l l i M s s n n $ o o i l l i i l l i s n o i l l i M s n $ o i l l i M $ FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 M M $ $ ■ AUTO RETAIL ■ FINANCE ■ INSURANCE ■ CREDIT 0 0 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 0 EARNINGS BEFORE INTEREST AND TAX (EBIT) 60 60 SEGMENT OPERATING PROFIT 50 50 50 50 60 40 40 50 30 40 30 20 30 10 20 20 0 10 10 50 60 40 50 30 40 20 30 10 20 0 10 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 0 0 0 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 s n o i l l i s M s n n $ o o i i l l l l i i M M $ $ s n o i l l i s M n $ o i l l i M $ NET PROFIT AFTER TAX 35 35 30 35 25.0 25 30 20 20.0 25 15 15.0 20 s n 10 o 15 i l 10.0 l 5 i s M n 10 o $ 0 5.0 5 i l l i 30 35 25 30 20 25 15 20 10 15 5 10 0 5 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 0 0 0 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 e r a h s s n o i l l i r s M e n p o $ s t n M e C $ i l l i M $ 40 50 30 40 40 50 60 30 40 50 20 30 20 40 30 10 20 0 10 30 10 20 20 0 10 10 s n o i l l i s M n $ o i l l i M $ s n o i l l i s M s n n $ o o i i l l l l i i M M $ $ FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 0 0 0 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 ■ AUTO RETAIL ■ FINANCE ■ INSURANCE ■ CREDIT DIVIDENDS 25.0 25.0 20.0 25.0 20.0 25.0 35 30 15.0 20.0 25 10.0 15.0 20 15 5.0 10.0 e r a h s e r a h s r e p s t r n e e p C s t n e C 10.0 15.0 e 15.0 20.0 r a h s e r r e a p h s s 5.0 10.0 t r n e s e p n C o s i t l l n i M e C $ 0 5.0 0 10 0 5.0 5 0 0 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 400 300 200 100 0 s n o i l l i M $ FY18 FY19 FY20 FY21 FY22 50 40 30 20 10 0 FY18 FY19 FY20 FY21 FY22 s n o i l l i M $ 25.0 20.0 15.0 10.0 5.0 0 e r a h s r e p s t n e C FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 8 9 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 CHAIR AND CEO’S REPORT “Our growth plans are being realised and the work we’ve been doing over the last three years is delivering serious traction and positions us well for an uncertain economic environment. We are very pleased with our progress and proud of our track record of continuing to generate value for our shareholders.” Dear shareholder We are very pleased with the FY22 year, which delivered another record result for our business. Our focus on quality is paying off and our team’s engagement levels have never been higher, at a time in the economy where staff retention and recruitment is a real challenge. Our brand value is growing across all our key business divisions but the investment we have made in the Turners brand in particular, has created real tangible value both internally and externally. Our track record is showing how robust our business model is and we are ready for what comes next. Net profit before tax was up 15% to $43.1m, despite the continued impact of COVID-19 restrictions and lockdowns. While consumer demand remained stronger than we anticipated in FY22, overall used car transaction levels tracked well below pre-pandemic levels. The processes put in place in FY21 have stood our business in good stead and our geographic and earnings diversification have again proved their value in this environment. The initiatives we put in place three years ago are now paying off. Our retail momentum continues to gain traction, with increasing margins and market share. This is driving growth in our Finance and Insurance business, with a focus on quality in both these businesses lifting our returns. Debt load is returning slowly in the credit management business but we expect the environment to be more productive in FY23. Our growing returns are driving much improved outcomes for our shareholders, with increasing Earnings Per Share and Dividends. RECORD RESULT Turners not only demonstrated earnings resilience during FY22 but strong growth credentials as well. Group revenue was up 14% to $344.5m and three of the four segments grew very strongly for a second year in a row, delivering a record NPBT result of $43.1m, up 15% on the prior comparative period (pcp). Demonstrating the benefits of the Group’s resilience and diversified earnings, profit rose in each of the three largest business units (representing 94% of divisional operating profit). Profit grew 24% in Insurance, 14% in Finance and 26% in Automotive Retail, contributing to strong and sustainable yield. Revenue in the Credit Management business was down on last year’s result as consumer arrears tracked down and clients issued “no communication” instructions to “defaulters” during the lockdown. This resulted in a 40% year on year profit decrease in Credit Management.  Earnings Before Interest and Tax (EBIT) was up 11% to $47.7m, with Net profit after tax (NPAT) of $31.3m, up 16% on pcp. Underlying NPBT was up 29% to $44.1m. The business has a strong balance sheet and supportive banking partners and our funding mix is optimised to support growth. Earnings per share for FY22 were 36.4 cents per share (cps), up 16% on pcp. A further 7.0 cps dividend has been declared for the final payment of FY22 (payable in July 2022), taking FY22 dividends to 23.0 cps. This reflects the dividend policy to pay-out 60-70% of net profit after tax (NPAT). OPERATING PERFORMANCE BY DIVISION AUTO RETAIL Revenue $242.5m 21% Operating Profit $19.4m 26% Auto Retail has been both a margin and market share growth story. Gross margins on “owned” fleet have continued to improve (up 8% over FY21 to $818 per vehicle) due to a number of buying improvement initiatives, more retail sales and constrained supply of used cars nationally. Our market share has grown off the back of our retail optimisation and expansion strategy with Retail (BuyNow) sales up 6% over FY21 and improving retail market share. We launched a new branch in Rotorua during the year and are redeveloping this site and developing a new site in Nelson. We have also secured new sites in Timaru and Napier and are working on further opportunities. Sourcing of vehicles in the local market has been a top priority and our investment in the very popular ‘Tina from Turners’ brand campaign has helped build our inventory of locally owned cars, with “owned” inventory sales up 25% on FY21. Another goal is to increase our finance attach rate and thus further realise the synergies of our related businesses. Despite the disruption caused by the CCCFA changes in Dec-21, we have improved our finance attach rate to 32.7% (FY21 30.6%). FINANCE Revenue $51.9m 8% Operating Profit $18.0m 14% Our risk pricing model and focus on premium borrowers has been very successful over the last 12 months with the loan book growing 28% to $423m. Premium borrower lending now accounts for well over 50% of monthly lending. We were pleased with how the business navigated the Dec-21 CCCFA changes which generated further market share growth opportunities as other providers struggled to cope with the change in process. Arrears continue to track down at historic low levels and, at year end, consumer arrears were 2.0% (4.9% Mar-21) and commercial arrears were 0.5% (1.8% Mar-21). The business is still retaining a COVID-19 arrears provision buffer to allow for any unemployment increase in future months. 10 11 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022INSURANCE Revenue $40.4m 4% Operating Profit $11.6m 24% Robust market share gains and distribution agreements have helped drive strong policy sales with Gross Written Premium up 6% on FY21 to $39.9m, despite the impact of lockdown periods. Our distribution arrangements are working well (MTF, Marac Finance and Motorcentral using Autosure API), and there is a good pipeline of these opportunities ahead. Claims costs are slightly down on FY21, in part due to fewer repairs as a result of less vehicle movement in lockdown periods. Parts price inflation and labour rate increases are offsetting the positive benefits of our parts procurement initiatives. Operating cost ratios are continuing a decreasing trend with FY22 down to 22% compared to 25% in the prior comparative period. During the year, AM Best reaffirmed the Financial Strength Rating at B++ (good). CREDIT MANAGEMENT Revenue $9.7m 24% Operating Profit $3.0m 40% The Credit Management business continues to have lower debt load levels due to the historically low consumer arrears and corporates working back into recovery action post pandemic. Debt load in FY22 was down 54% on pre-pandemic levels and debt collected down 35%. This is a significant hit to revenues. Although debt load is down, we are seeing positive signs in debt recovery rates due to the new resolution collections strategy that was implemented during the year (FY22 34% vs. FY19 24%). Payment arrangement commitments are also being met more often under the new strategy (FY22 76%, FY21 74%, FY20 70%). With the economic environment expected to deteriorate, we expect debt load levels to increase as a result. A similar pattern was experienced post GFC, prior to a busy collection period. UNRECOGNISED PROPERTY GAINS OF $18.8M3 We continue to see property ownership as a key strategy that will ensure the long term resilience of the business. Over the last seven years we have continued to build our property portfolio and have generated unrecognised gains on the seven developed sites of just under $19m or 22 cents per share over this time, and 5.6 cents per share in the FY22 year alone. Combining these seven developed sites with new sites in Rotorua and Nelson and the three committed sites in Napier, Timaru and Tauranga (Tauriko), we have just under $95m worth of property in the portfolio. We also have offers and negotiations under way in Tauranga and Christchurch. GOVERNANCE Turners has a strong Board who are very active and passionate about our business. Many of our directors have worked directly in the sectors we operate in and have extensive knowledge and insights which help us develop strategy and oversee management initiatives. We believe that having Directors with relevant industry, commercial and governance skills is essential for the continuing success of the Turners’ group. We were pleased to appoint Lauren Quaintance as an Emerging Director and believe the addition of this role to our Board is an excellent way to build board talent, knowledge and expertise and ensure there is a succession plan in place when required. Lauren is an award- winning journalist and media executive turned entrepreneur and marketer. Most recently, she has been the co-founder and Managing Director of Storyation, a leading digital content marketing agency with offices in Auckland and Sydney, which was sold to ASX-listed NewsCorp Australia in late 2019. Lauren was named 3 Unrecognised property gains are generated from group owned properties that are subject to annual independent valuations and the unrecognised gain is the difference between the valuation as at 31 March 2022 and the original cost of the properties. Entrepreneur of the Year at the B&T Women in Media Awards in Australia. Her journalistic pedigree combined with digital marketing experience and entrepreneurial skills fit well with Turners’ direction and culture. We also farewelled long-standing director, Paul Byrnes, in February this year. Paul joined the Board in February 2004 and had a huge influence on the company during that time, including acting as CEO for eight years. Paul is a highly skilled director with broad business experience, who bought considerable value to Turners. On behalf of the Board, we would like to acknowledge and thank Paul for his considerable contributions. OUR THREE-YEAR PLAN Our three-year plan centres on organic growth and is focused on four key areas, comprising both physical and digital investments. 1. Retail Optimisation and Expansion across people, property and processes. 2. Vehicle purchasing decision-making using data and tools to help identify new sourcing opportunities, and leveraging our brand strength to generate local sourcing leads. 3. Margin management and Premium lending within Finance. 4. Continued investment in digital and improving our omni-channel customer experience which allows customers to engage with us however, whenever and wherever they want. OUTLOOK Whilst the near-term economic outlook is looking much more uncertain, our business has never been in better shape and we are ready for whatever comes next. There are clear New Zealand and global economic challenges over the next 12 to 24 months but we still see opportunities to grow our business and market share. As we head into an economic environment that will offer up different challenges and opportunities, the business has already been significantly de- risked and we are continuing to extend our competitive moat and build scale. In Auto Retail, we expect to see upside from our new branches in the second half of the financial year. We are still anticipating a supply constrained market for the next few years due to the impact of a shortage of semi- conductors, disruption to material supply and impact of government regulation. Registered dealer numbers are at the lowest point in the last five years and we expect these to track down further due to sector challenges. One of the most attractive aspects of the used car market is that it is a needs-based purchase and therefore more resilient and less affected by changing economic conditions. Our strong supplier relationships, high trust brand and digital platform position us well to continue to gain market share and take advantage of opportunities in the sector. With the rapidly changing interest rate environment, our priority in Finance shifts to margin management and we expect Finance “We couldn’t be more pleased about the shape the business is in, the trajectory we’re on and the future for the Turners business.” 12 13 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS LIMITED Consolidated statement of financial position for the year ended 31 March 2016 Notes 2016 $’000 2015 $’000 12,339 17,350 7,394 8,984 142,827 5,946 13,253 8,319 433 8,532 103,595 328,972 17,790 7,476 71 - 156,995 16,378 9,260 207,970 135,294 (23) (14,269) 121,002 328,972 margins will be impacted in the short term as we deal with the rapidly changing interest rate environment. In Insurance, we expect new policy sales to be buoyant based on our Assets distribution and market share gains, and for claims ratios to Cash and cash equivalents stabilise. Lastly, in Credit Management, levels of bad debt Financial assets at fair value through profit or loss recovery are slowly starting to build. The business is expected Trade receivables to perform better as the economic conditions worsen and the Inventory resultant impact on consumer arrears. Finance receivables Other receivables and deferred expenses Looking beyond FY23, we remain very confident about further Reverse annuity mortgages growth over the medium to longer term. We have updated Property, plant and equipment our three-year rolling target to grow to more than $50m of Tax receivables underlying profit before tax by FY25. Deferred tax asset Intangible assets Total assets $50M UNDERLYING PROFIT BEFORE TAX BY FY254 Liabilities Other payables Deferred revenue 60 Tax payables Derivative financial instruments Borrowings 50 40 Life investment contract liabilities s Insurance contract liabilities n o Total liabilities M 30 $ Shareholders’ equity 31.1 i l l i 29 >$50m 43.1 37.4 29.1 10 11 12 13 14 15 16 19 20 21 22 23 13,810 18,455 9,575 14,156 167,598 8,505 9,734 11,108 - 4,024 105,338 362,303 22,270 6,049 49 24 32 990 In three years, we are targeting a profit 174,816 before tax of more 15,629 than $50m. This 12,688 would equate to a 232,491 dividend payout of 26 cents per share. 32 Share capital 20 Other reserves Retained earnings 10 Total shareholders’ equity Total shareholders’ equity and liabilities 0 FY18 FY19 FY20 FY21 FY22 FY25 It has been a successful year for our business despite the For and on behalf of the Board challenges and we are well positioned and ready for the future. On behalf of the Board and management, we would like to thank our shareholders for your continued support. 25 136,127 (52) (6,263) 129,812 362,303 Grant Baker G.K. Baker Chairman Chairman Director Authorised for issue on 22 June 2016 Todd Hunter Group Chief Executive Officer P.A. Byrnes Executive Director TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 FY23 PRIORITIES AUTO RETAIL ■ Stock acquisition – Keep building domestic sourcing ■ Improve speed to sale – operational cadence ■ Retail optimisation and expansion – develop new sites and build retail volumes FINANCE ■ Pricing and margin management ■ Improve credit decision turnaround timing ■ Early settlement and loan application conversion INSURANCE ■ Expand distribution through partnership strategy ■ Core insurance system replacement ■ Continue to enhance risk pricing and product features CREDIT MANAGEMENT ■ Grow SME lead generation capability ■ Build on “resolution” focused collections strategy ■ Continue working closely with corporates to manage reputational risk The accompanying notes from part of these financial statements 4 Underlying NPBT is a non-GAAP measure Reported NPBT ($m). Reconciliations for each of the periods can be found in the respective Annual Results Presentation. 14 15 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 CREATING A BETTER BUSINESS 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. Turners’ sustainability strategy is underpinned by two key pillars: ■ Enhancing the well-being of our staff and the communities in which we operate. ■ Supporting and accelerating the transition of the New Zealand light vehicle fleet to a cleaner, lower emission future. We have a number of initiatives already in place which you can read about on the following pages. Turners is at the start of its sustainability reporting journey and we are working towards increased transparency and measuring of our footprint. FY22 COMPLETED ■ Formalised Turners’ sustainability committee ■ Appointed sustainability champions in each business ■ Identified key sustainability pillars ■ Initiatives undertaken to support Turners’ long term sustainability pillars FY23 FY24 ■ Confirm approach to Climate Related Disclosures and develop reporting framework ■ Identify climate related risks and opportunities for Turners ■ Commence measuring Scope 2 emissions ■ Integrate management of climate related risks and opportunities into risk framework ■ Continue to develop ■ Define Scope 1 and 2 disclosure and reporting measures ■ Commence measuring Scope 1 emissions ■ Implement external assurance process ■ Establish KPIs for emissions and other material issues ■ Increase disclosure and reporting 16 17 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022OUR PEOPLE Our ESG strategy in FY22 deliberately focused on the social aspect, ensuring the health and wellbeing of our people and customers during the ongoing pandemic, and creating a great environment for our people to work in. We believe in doing the right thing for our customers and our people and are committed to ethical and fair conduct. We are also investing in training and upskilling staff, with the introduction of a new Learning Management system during the year. More than 7,000 development training hours were undertaken by employees during the year. During FY22, 64% of our leadership vacancies were filled with internal candidates, a testament to our culture of growing and developing our people. We also supported our people by providing access to counselling sessions to discuss both work and personal issues and offered flu vaccinations, as well as supporting Mental Health Awareness Week. 7000+ Employee development training hours 27% Employee turnover 221 Number of employees having to isolate due to COVID-19 2% Employee absentee rate (excluding COVID-19 isolation period) 120 Number of employees accessing EAP services during the period EMPLOYEE WELLBEING INITIATIVES 653 Mental health awareness week exercises 118 Flu vaccinations HEALTH AND SAFETY 0 47 Employee notifiable injury/ incidents Employee health and safety reportable incidents (41 minor, 6 serious) AS AT MARCH 2022, EMPLOYEES RATED TURNERS AS FOLLOWS: 9.3/10 Turners is responding appropriately to the COVID-19 pandemic 9.3/10 People from all backgrounds are treated fairly at Turners 9/10 Employee Health & Safety is a priority at Turners 9/10 How likely is that you would recommend Turners as a place to work EMPLOYEE ENGAGEMENT In the current environment of growing economic uncertainty, now more than ever companies need staff who are fully engaged, motivated and eager to contribute. Our employee engagement score has continued to increase at a time where retention and recruitment has been under significant pressure in the wider economy and Turners ranks in the top 5% of consumer businesses5. Other stand out results from the Engagement Survey support our focus on diversity, inclusion and health and safety, and demonstrate the focus of the company over the past year. PEAKON EMPLOYEE ENGAGEMENT SCORE 9 8.5 8 7.5 Aug-20 Oct-20 Dec-20 Mar-21 Jun-21 Sep-21 Nov-21 Mar-22 Across nearly 700 employees we are averaging 9 out of 10 to the question “how likely is it that you would recommend Turners Auto Group as a place to work?”. 5 Top 5% of consumer businesses using the Peakon system 18 19 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 HOME GROWN TALENT IN ACTION JEREMY ROOKE, CHIEF DIGITAL OFFICER Over the last decade, Turners’ online and digital strategy has developed into an essential platform and customer channel for the business. Overseeing this evolution for more than 10 years has been Jeremy Rooke, Turners’ Chief Digital Officer. Jeremy has worked across dozens of high-value transformative projects for Turners including the replacement of Auto Retail’s core system and subsequent enhancements including mobile apps, the inception and development of AutoApp, and the development of Generator and partner integrations to name a few. Of particular note are Jeremy’s contributions in the innovation space, leading the charge on Cartopia in 2016 and Turners Subscription in 2020 as exciting opportunities to explore new consumer business models. As Chief Digital Officer, Jeremy leads a team of 40, focussed on empowering customers with innovative products and experiences. MARC WELLS, PROPERTY DEVELOPMENT MANAGER With more than 38 branches and facilities nationwide, Marc Wells is kept busy managing Turners’ ever expanding property portfolio. Joining Turners in 2010, Marc was originally in a commercial manager role, before stepping into the newly created Property Development Manager role in 2016. He oversaw the creation of the Group Property Strategy as the business transitioned from wholesale (auction) to a retail business and has been involved in more than 30 property projects in the last six years, including acquisitions, renovations and relocations. Marc has strong relationships with landlords, developers, commercial agents, professionals and consultants and his understanding and experience managing development projects has ensured these have come in on budget and on time. He is responsible for Turners’ owned properties, as well as negotiating and managing commercial leases for the group. “The customer is at the centre of everything for our team – this includes our internal Turners people, as well as external customers and partners. We’re focussed on using technology to make things easier and simpler, as well as creating innovative products, services and experiences that make Turners the number one choice.” “I love working in such a dynamic environment with a supportive Executive team and Board. It’s great to see the value our property work brings to both the business, the work environment for our people and for our customers as we expand our retail network.” 20 21 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 OUR CUSTOMERS Customers are at the heart of our business and our team is committed to delivering a world class customer experience. We have introduced customer experience measures across all parts of the business as part of “good customer outcomes” focus. In Auto Retail, our focus on customer experience is reflected in winning the Readers Digest Trusted Brands Award for the Most Trusted Used Vehicle Dealership for the third year in a row. Every month a selection of customers are surveyed across our 19 branches using BuyerScore, an independent rating and review collection service for vehicle dealers in New Zealand. In the latest survey, 96% of reviewers said they would recommend Turners to their friends and family. AUTO RETAIL APRIL 2022 96% of reviewers would recommend Turners to their friends and family 69% rate the overall experience as 5 out of 5 BUYERSCORE OVERALL EXPERIENCE 1 2 3 4 5 Improvements in customer satisfaction and feedback reflect our efforts to promote good customer outcomes in our insurance business and to achieve positive resolution of customer hardship situations in Oxford. Since April 2020, we have dealt with over 2,000 COVID-19 hardship accounts in Oxford Finance and successfully rehabilitated 99% of these over the last 24 months. In EC Credit, we have shifted our collections approach to focus on resolution rather than consequence. 22 23 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022GIVING BACK TO OUR COMMUNITIES A CLEANER LOWER EMISSION FUTURE “Turners Auto Group have been unwavering in their support over the years and their people continue to dig deep and embrace our efforts. We are very grateful to have their support right throughout the organisation.” Liam Willis, Executive Officer, Gut Cancer Foundation GUT CANCER FOUNDATION The Gut Cancer Foundation is a small not-for-profit organisation which has made it their mission to improve and help save the lives of all New Zealanders affected by gut cancers. They do this through leading research and innovation, raising awareness and providing education. Turners have supported the Gut Cancer Foundation over the last eight years and this year was no different. The wider team at Turners Automotive Group yet again got in behind this awesome cause, even at a time when people will be feeling the pinch from their own normal day-to-day living expenses. Turners runs a matching program for this fundraising where Turners’ people and teams across the company run their fundraising efforts and the company matches the donations dollar for dollar. This year Turners Automotive Group raised over $36,000 for the Gut Cancer Foundation. As New Zealand’s leading used car business, we recognise the role we can play to help transition New Zealand’s fleet. EV and Hybrid sales are growing as a percentage of total cars sold in Turners. As more corporate and government fleets transition, we will see these numbers grow further. We have continued to invest in Turners Subscription and, in partnership with EECA, we have expanded our subscription EV fleet. This allows customers to ‘try before you buy’, as well as providing an alternative form of vehicle ownership. We currently have more than 100 vehicles on subscription of which over 40% are EVs or Hybrids. Unfortunately, used EVs continue to be difficult to source. Japan is the major source of used vehicles for NZ and there are only 303,000 EVs in the Japanese vehicle fleet out of a total of 78 million cars. New EV sales in Japan in 2021 were 20,000 against new car sales of 4.4 million. We believe that it is a long term journey to transition New Zealand’s fleet and an integral part of this is to support people moving from older, high emission vehicles to newer, lower emission vehicles. We work with vehicle vendors, including insurance companies, to ensure that end of life vehicles are responsibly managed out of the New Zealand fleet. In FY22, Turners de-registered over 17,000 old or damaged vehicles, which were then onsold to wreckers and recyclers. A large portion of a car can be recycled, helping create a circulate economy. Overtime, as second hand EVs become more affordable and accessible, we will see more people switching to these vehicles. In the meantime, sourcing lower emission vehicles, particularly hybrids, to replace older vehicles continues to be a key focus for Turners. We also expect other alternative fuel vehicles, such as hydrogen, to become more prevalent over time and will continue to monitor international and market trends in this area. We also take sustainability into account when building new sites and premises. We are piloting solar power installations in two of our sites and have installed rainwater retention systems in another two sites. We are in the process of establishing and measuring emissions targets and look forward to reporting to shareholders as we move ahead with our sustainability reporting programme. EV/HYBRID SALES AS A % OF TOTAL SALES 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0% CY18 CY19 CY20 CY21 Exercise and an active lifestyle are a great way to help prevent Gut Cancers. Jason Smith in Oxford Finance Levin took on a Daily Press Up Challenge as part of the Gut Cancer “Give it Up” Campaign, helping to improve personal health while raising vital funds for research. 24 25 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 FY22 FINANCIAL REVIEW BALANCE SHEET Turners has a strong balance sheet with the capacity to support growth. Inventory levels have remained stable as we improve processing times and overall turn metrics. The increase in Finance Receivables reflects the positive growth in Oxford Finance, as does the increase in borrowings to support this growth. Property, plant and equipment has increased due to acquisition of sites in Rotorua and Nelson with Turners property portfolio now valued at $76.5m (on the balance sheet at $57.7m). FUNDING MIX Turners has a mix of bank loans and securitisation to fund its business. More than 80% of funding relates to finance receivables in Oxford Finance. During the year, the Corporate Bond was repaid with a new, lower cost term loan from ASB. A process has also been commenced to “term out” the securitisation warehouse to third party funders and a transaction is expected in FY23. This financial commentary should be read in conjunction with the full financial statements and Notes to the Financial Statements in the FY22 Annual Report. REVENUE The sector and the economy continued to be disrupted by COVID-19 with the Delta lockdowns in Q2 and Omicron in Q4. Despite this, the Group delivered revenue of $344.5m, up 14% on pcp. Auto Retail and Insurance both delivered increased revenues. Auto Retail revenue grew off increased market share, new branches and more owned stock flowing through the business. Finance book revenues reflected strong loan book growth from premium borrower segment. Insurance revenues were marginally down on FY21, reflecting downward movement in used car market and CCCFA impact. Credit Management revenues dropped as a result of less market arrears and “no communication” periods with debtors. PROFIT Net Profit before Tax was a 15% increase on the prior year, with profit increases in each of Turners’ largest business divisions. The Auto Retail result was underpinned by better finance penetration, better margins, more owned stock and new branches. Finance was driven by loan book growth and taking market share in premium borrower segment. The Insurance result reflects improvement in claims ratios and cost base, while the lower Credit management profit was due to reduced commissions from less debt loaded. The significant 29% year on year uplift in underlying profit before tax to $44.1m reflects improved margins, increased market share in Auto Retail, Finance and Insurance, combined with improved Group resilience in lockdown trading conditions. Net profit after tax rose to $31.3m, up 16% year on year. RECONCILIATION NPBT TO UNDERLYING NPBT $MILLIONS Reported Profit before tax Profit on sale of MTF shares NZ Government COVID-19 Support COVID-19 restriction profit normalisation Property exit and lease adjustments Staff restructuring Underlying profit before tax FY22 43.1 (0.5) (1.6) 3.1 - - 44.1 FY21 37.4 - (5.1) 3.5 (1.3) (0.2) 34.3 VAR 15% 29% BALANCE SHEET $MILLIONS FY22 FY21 Cash and cash equivalents Financial assets at fair value Inventory Finance receivables Property, plant and equipment Right of use Assets Intangible asset Other assets Total Assets Borrowings Other payables Deferred tax Insurance contract liabilities Lease liabilities Other Liabilities Total Liabilities Shareholders Equity 13 70 32 423 68 23 164 32 825 413 50 13 55 28 14 573 252 12 70 30 330 60 24 166 26 718 340 38 11 53 29 14 485 233 FUNDING MIX $MILLIONS Receivables – Securitisation (BNZ) Receivables – Banking Syndicate (ASB/BNZ) Less Cash Net Receivables Funding Receivables Funding Capacity Corporate and Property Working Capital (ASB and BNZ) Less Cash Net Corporate Borrowings Corporate and Property Funding Capacity LIMIT DRAWN 320 50 370 90 30 302 39 (5) 336 34 68 4 (8) 64 56 26 27 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 THE BOARD 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. He is chairman on NZX listed Me Today Limited and was chairman of 42 Below Vodka and Trilogy International. With a 7.49% 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 a motor racing enthusiast, both as a competitor and as a backer of young up and coming drivers. He is currently chairman of the Liam Lawson Supporters Partnership and is passionate about the strong Turners brand and its focus on cars. 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 7.57% combined holding in the company. Matthew is a self- confessed “car nut” and has collected and owned a variety of special cars over the years. 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 11.55% 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 25 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 and a director of Apollo Foods Limited which has launched the successful Apple Press range of products and Boring Oat Milk. 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. Antony currently holds the position of VP of Technical Insurance Services for Manulife Asia responsible for digital transformation. 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 entrepreneurial ventures where he has successfully built, acquired and exited several companies, most notably the Gong Cha Group, where he currently serves as Group Chairman. Martin also founded venture capital firm Launcho Ventures out of Singapore investing in and building early stage tech companies, with more than 100 investments globally. LAUREN QUAINTANCE Emerging Director | Appointed October 2021 Lauren Quaintance is an award-winning journalist and media executive turned entrepreneur and marketer. She has had an extensive career in media at a senior level in both the United Kingdom and Australasia and is the co-founder and Managing Director of Storyation, a leading digital content marketing agency, which was sold to ASX-listed NewsCorp Australia in late 2019. Lauren was named Entrepreneur of the Year at the B&T Women in Media Awards in Australia. Her journalistic pedigree combined with digital marketing experience and entrepreneurial skills fit well with the Turners direction and culture. 28 29 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022THE EXECUTIVE TEAM TODD HUNTER Group Chief Executive Officer AARON SAUNDERS Group Chief Financial Officer GREG HEDGEPETH CEO Turners Automotive Retail JAMES SEARLE Group General Manager Insurance JEREMY ROOKE Group Chief Digital Officer MATTHEW GANNAWAY CEO EC Credit Control MARYANNE BURNS Group General Manager People & Culture GUY BRYDEN COO Oxford Finance TODD HUNTER Group 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 Auctions 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. 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. With a Bachelor of Commerce majoring in marketing from Auckland University he has successfully completed numerous marketing roles, followed by a number of years working for Saatchi & Saatchi in NZ and other advertising agencies overseas. Greg brings a strong strategic sales and marketing focus to his current role. JAMES SEARLE Group General Manager Insurance James is responsible for the sustainable and profitable growth of DPL Insurance and leads the company’s focus on delivering outstanding outcomes for our customers. James has over 30 years’ experience in the New Zealand insurance industry with his previous roles encompassing all aspects of insurance; sales and marketing, intermediated distribution management and underwriting including portfolio acquisitions. James joined Turners Automotive Group in 2011 and holds a Diploma of Business (Marketing) from Auckland University. JEREMY ROOKE Group Chief Digital Officer Jeremy joined Turners Automotive Group in 2009. His current role involves leading the operation of our group IT services and product functions, as well as leading the adoption of new technologies, business models, and channels to transform Turners’ digital capabilities. Jeremy brings over 20 years of IT experience having worked on several large transformational IT programmes in NZ and Australia, most notably in the insurance sector. Jeremy holds degrees in Law and Arts from Auckland University. MATTHEW GANNAWAY CEO EC Credit Control Matt joined EC Credit Control in 2003 and has worked in many different areas of the business prior to becoming CEO in 2021. He holds a business degree from Massey University and has a strong technology focus to drive better outcomes. With a long career in the credit management industry, Matt brings a wealth of experience and expertise. MARYANNE BURNS Group General Manager People & Culture Maryanne joined Turners in 2019. She has 20 years of experience as a Human Resources Professional in a broad range of industries in New Zealand. These include automotive, financial services, insurance, environmental solutions, importation and distribution. Maryanne has led multiple transformational people projects across a number of businesses. GUY BRYDEN COO Oxford Finance Guy joined Turners in 2018, and is responsible for Finance and Operations at Oxford Finance. Before joining Turners Guy held a number of roles in the banking industry, including 3 years working in London for Mizuho Bank in corporate finance. Guy is a chartered accountant and holds a Bachelor of Commerce from Otago University. 30 31 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 34 Independent Auditor’s Report 40 Consolidated Statement of Comprehensive Income 41 Consolidated Statement of Changes in Equity 42 Consolidated Statement of Financial Position 43 Consolidated Statement of Cash Flows 44 Notes to the Financial Statements 32 33 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022INDEPENDENT AUDITOR’S REPORT for the year ended 31 March 2022 INDEPENDENT AUDITOR’S REPORT cont. for the year ended 31 March 2022 34 35 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 34 Level 9, 45 Queen Street, Auckland 1010PO Box 3899, Auckland 1140New Zealand T:+64 9 309 0463F:+64 9 309 4544E:auckland@bakertillysr.nzW:www.bakertillysr.nzINDEPENDENT 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 40 to 92, which comprise the consolidated statement of financial position as at 31 March 2022, 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 2022, 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 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’ International Code of Ethics for Professional Accountants (including International Independence Standards) (‘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. 35 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 Impairment of Goodwill and Other Indefinite Life Intangible Assets As disclosed in Note 22 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 2022. This annual impairment test involves complex and subjective estimation and judgement by Management on the future performance of the CGUs, discount rates applied to the future cash flow forecasts, the terminal growth rates, and future market and economic conditions. Management has also engaged an external valuation expert to assist in the annual impairment testing of the four CGUs. Our audit procedures among others included: •Understanding and evaluating the Group’s internal controls relevant to the accounting estimates used to determine the recoverable value of the Group’s CGUs. •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 related assumptions to external data (including the consideration of the impact of the COVID-19 pandemic). Procedures included: oEvaluating the logic of the value-in-use calculations supporting Management’s annual impairment test and testing the mathematical accuracy of these calculations; oEvaluating Management’s process regarding the preparation and review of forecasts; oComparing forecasts to Board approved forecasts; oEvaluating the historical accuracy of the Group’s forecasting to actual historical performance; oChallenging and evaluating the forecast growth assumptions; oEvaluating the inputs to the calculation of the discount rates applied; oEngaging 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; oEvaluating the forecasts, inputs and any underlying assumptions with a view to identifying Management bias; oEvaluating Management’s sensitivity analysis for reasonably possible changes in key assumptions; and oPerforming 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 22 in the Group’s consolidated financial statements. INDEPENDENT AUDITOR’S REPORT for the year ended 31 March 2022 INDEPENDENT AUDITOR’S REPORT cont. for the year ended 31 March 2022 36 37 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 202236 Key Audit Matter How our audit addressed the key audit matter Valuation of Finance Receivables As disclosed in Note 14 of the Group’s consolidated financial statements, the Group has finance receivable assets of $422.9m. 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 2022 (including a COVID-19 related overlay of $1.7m). 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: •Understanding and evaluating the Group’s internal controls relevant to the accounting estimates used to determine the recoverable value of the Group’s finance receivables. •Evaluating the design and operating effectiveness of the key controls over finance receivable origination (including changes implemented during the year as result of the changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) that came into force from 1 December 2021), ongoing administration and expected credit losses model data and calculations. •Challenging and evaluating the logic, key assumptions, and calculation of Management’s expected credit losses provision for impairment for each finance receivable, examining those finance receivables and forming our own judgements as to whether the expected credit losses provision for impairment recognised by Management is appropriate (including the consideration of the impact of the COVID-19 pandemic). Procedures included: oAgreeing a representative sample of finance receivables to the signed loan agreement, client acceptance documents, mortgage documents, and registered valuations performed on acceptance; oInspecting security documentation to ensure that the Group holds a valid charge on security; oEvaluating the logic of the discounted cash flow calculations supporting Management’s expected credit losses provision for impairment and testing the mathematical accuracy of these calculations; oEvaluating the key assumptions and inputs into these discounted cash flow calculations (including the consideration of the impact of the COVID-19 pandemic on key assumptions); oEvaluating and challenging Management’s sensitivity analysis for reasonably possible changes in key assumptions and inputs into the discounted cash flow calculations; and oInspecting the borrowers' payment history for indicators of difficulties in the borrowers' ability to meet the loan obligations. •Evaluating the selection of estimation methods, inputs and any underlying assumptions with a view to identifying Management bias. •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. •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. Also, testing key inputs used in the expected credit losses models and the mathematical accuracy of the calculations within the models. •Evaluating the changes made to the provisioning model to capture the effect of the changing economic environment at 31 March 2022 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 related disclosures (including the accounting policies and accounting estimates) about finance receivable assets, and the risks attached to them, which are included in Note 5 and 14 in the Group’s consolidated financial statements. 37 Key Audit Matter How our audit addressed the key audit matter Valuation and completeness of Insurance Contract Liabilities As disclosed in Note 35 of the Group’s consolidated financial statements the Group has insurance contract liabilities of $55.0m. 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 2022. Our audit procedures among others included: •Understanding and evaluating the Group’s internal controls relevant to the accounting estimates used to determine the valuation of the Group’s insurance policyholder liabilities. •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: othe work and findings of the Group’s external actuarial expert engaged by Management; and othe Group’s actuarial methods and assumptions to assist us in challenging the appropriateness of actuarial methods and assumptions used by Management. •Evaluating the selection of methods and assumptions with a view to identifying Management bias. •Evaluating the related disclosures (including the accounting policies and accounting estimates) about insurance contract liabilities, and the risks attached to them, which are included in Note 35 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 2022 (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 INDEPENDENT AUDITOR’S REPORT for the year ended 31 March 2022 INDEPENDENT AUDITOR’S REPORT cont. for the year ended 31 March 2022 38 39 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 202238 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. 39 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. 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 2022 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 29 June 2022 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 29 June 2022   CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2022   CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2022                             (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)  (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)                                                               (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)                                (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)         (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)  (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)  (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)                        (cid:7)(cid:182)(cid:19)(cid:19)(cid:19) (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)                                                                                       40 The accompanying notes form part of these financial statements The accompanying notes form part of these financial statements 41 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS LIMITED  Consolidated statement of financial position for the year ended 31 March 2016  CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 March 2022   CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 March 2022 Notes  2016  (cid:7)(cid:182)(cid:19)(cid:19)(cid:19) $’000  2015 (cid:7)(cid:182)(cid:19)(cid:19)(cid:19) $’000   (cid:7)(cid:182)(cid:19)(cid:19)(cid:19)  (cid:7)(cid:182)(cid:19)(cid:19)(cid:19) Assets  Cash and cash equivalents   Financial assets at fair value through profit or loss  Trade receivables  Inventory  Finance receivables  Other receivables and deferred expenses  Reverse annuity mortgages  Property, plant and equipment  Tax receivables  Deferred tax asset  Intangible assets  Total assets   Liabilities Other payables  Deferred revenue  Tax payables   Derivative financial instruments Borrowings  Life investment contract liabilities  Insurance contract liabilities   Total liabilities   Shareholders’ equity Share capital (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) Other reserves  Retained earnings  Total shareholders’ equity  Total shareholders’ equity and liabilities (cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) 10 11 12 13 14 15 16 19 20 21 22 23 24 32 32 25                      13,810  12,339  18,455  17,350  9,575  14,156  7,394  8,984  167,598  142,827  8,505  9,734  11,108 -     4,024 105,338 362,303   5,946  13,253       8,319 433 8,532 103,595 328,972   22,270 17,790  6,049   990 49  174,816  7,476   71 -  156,995  15,629  16,378  12,688  9,260  232,491  207,970     136,127 (52)  (6,263)  129,812  362,303  135,294 (23)  (14,269)  121,002   328,972 (cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)   For and on behalf of the Board   G.K. Baker  Chairman Director  Authorised for issue on 22 June 2016  P.A. Byrnes  Executive Director  The accompanying notes from part of these financial statements                                                                                                 42 The accompanying notes form part of these financial statements The accompanying notes form part of these financial statements 43 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                                                                                                                                                                                          44 45 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                      46    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                       47 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                     48    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                49 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     50 51 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022      NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                       52                                                                                                                                                                                              53 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022   TURNERS AUTOMOTIVE GROUP LIMITED Notes to financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                       The COVID-19 overlay provision of $1.4m included in the finance receivables expected credit loss provision as at 31 March 2021 has been increased to $1.7m as at 31 March 2022. Impairment of goodwill and corporate brands The carrying value of goodwill and corporate brands 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 identification of each cash-generating unit, 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 22). A sensitivity analysis of the recoverable amounts of the CGU’s is disclosed in note 22. 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). 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 (2020: $0.1m) 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 exercised. This assessment is reviewed if a significant event of significant change in circumstances occurs which affects this assessment and that is within the Group’s control. All extension options have been assumed for the calculation of the Groups’ lease liabilities. Valuation of investment properties The fair value of the investment property has been determined by an independent qualified valuer. Note 21 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). 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 54 55 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 TURNERS AUTOMOTIVE GROUP LIMITED Notes to financial statements for the year ended 31 March 2022 TURNERS AUTOMOTIVE GROUP LIMITED Notes to financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 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 21. 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 21). 5.1 Financial instrument by category Carryi ng val ue Financial assets Financial assets at fair value through profit or loss Cash and cash equivalents Financial assets at fair value through profit or loss Amortised cost Trade receivables Finance receivables Other receivables and def erred expenses Reverse annuity mortgages Financial assets at fair value through OCI Derivative financial instruments Financial assets at fair value through OCI Financial liabilities Financial liabilities at fair value through profit or loss Lif e investment contract liabilities Amortised cost Other payables Borrow ings Lease liabilities 2022 $’000 2021 $’000 13,373 70,199 11,867 70,396 7,581 422,870 5,726 3,242 5,414 225 528,630 7,155 330,165 4,146 4,152 40 570 428,491 8,153 8,116 32,295 412,761 28,209 481,418 26,945 339,611 28,747 403,419 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. 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. Contractual and expected amounts agree, except for borrowing where expected maturity is the facility maturity date. 2022 Contractual undiscounted cash flows: Other payables Borrow ings Lease liabilities Expected undiscounted cash flows: Other payables 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 32,295 8,741 3,681 44,717 32,295 8,741 3,681 44,717 - 5,023 3,716 8,739 - 5,023 3,716 8,739 - 390,470 6,854 397,324 - 10,040 6,854 16,894 - 20,296 13,392 33,688 - 30,118 13,392 43,510 - - 10,084 10,084 - 459,233 10,084 469,317 32,295 424,530 37,727 494,552 32,295 513,155 37,727 583,177 56 57 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                             NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                             58                                                59 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP LIMITED Notes to financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 2021 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 Derivative financial instruments Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 - - 59,211 - - 59,211 8,254 2,931 - - 40 11,225 - - - 5,950 - 5,950 8,254 2,931 59,211 5,950 40 76,386 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 note 5.4.1). Fair value - 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 note 5.4.2). Fair value - investment property The fair value of the investment property was determined by an independent registered valuer using the static hypothetical subdivision ` 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 assets 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: Assets Opening balance Revaluation at reporting date - investment property Closing balance 2022 $'000 5,950 - 5,950 2021 $'000 5,650 300 5,950 During the year there were no movements of fair value assets or liabilities between levels of the fair value hierarchy.   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                  60 61 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                                                                         62 63 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                          Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 9. EARNINGS PER SHARE 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 staff options Cancelled from share buy back 2022 31,281 85,968,563 36.39 2021 26,864 85,551,356 31.40 2022 2021 85,544,248 424,315 - 85,968,563 85,554,710 - (3,354) 85,551,356 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: Long term incentive expense relation to options Profit for the year Weighted number of ordinary shares (diluted) Weighted average number of shares (basic) Effect of the exercise of options 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 New Zealand dollars 2022 $’000 31,281 359 31,640 2021 $’000 26,864 255 27,119 85,968,563 841,642 86,810,205 85,551,356 420,482 85,971,838 36.45 31.54 2022 $’000 227 13,146 13,373 2021 $’000 265 11,602 11,867 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 2022 were $1.5m (2021: $0.7m). Cash and cash equivalents at 31 March 2022 of $3.4m (2021: $3.6m) belong to the Turners Marque Trust 1 and are not all available to the Group (refer note 14). 64 65 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                                                                                                              66 67 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 14. FINANCE RECEIVABLES Commercial loans Consumer loans Property development & investment loans Gross finance receivables Deferred fee revenue and commission expenses Specific impairment provision Collective impairment provision COVID-19 impairment provision Current Non-current Gross financial receivables are summarised as follows: Performing Doubtful In default Movement receivables subject to specific impairment assessment Opening balance Additions 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 In default 2022 $’000 82,688 334,455 3,959 421,102 12,788 (1,632) (7,706) (1,682) 422,870 168,329 254,541 422,870 412,482 1,163 7,457 421,102 3,164 1,447 (1,241) (472) 2,898 1,740 94 - 1,064 2,898 2021 $’000 50,058 284,301 3,254 337,613 9,742 (2,376) (13,403) (1,411) 330,165 136,931 193,234 330,165 320,368 1,778 15,467 337,613 4,723 1,684 (1,356) (1,887) 3,164 1,236 143 13 1,988 3,380 31 March 2021 Current Past due up to 30 days Past due 30 – 60 days Past due 60 – 90 days In default Expected loss rate % 0.71 9.97 22.87 35.09 82.77 Gross Collective finance impairment receivables $’000 315,552 4,653 984 684 12,360 334,233 provision $’000 2,244 464 225 240 10,230 13,403 the ECL rates on performing financial receivables increased/(decreased) by 1%, If higher/($3.1m lower) (2021: $3.1m higher/($2.2m lower)). the loss allowance on receivables would be $4.1m If the ECL rates on doubtful or in default financial receivables increased/(decreased) by 1% as at 31 March 2022, the loss allowance on receivables would be $0.1m higher/(lower) (2021: $0.2m higher/(lower)). 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 Impairment charge/(release) through profit or loss Amounts written off COVID-19 impairment provision Opening balance Impairment charge/(release) through profit or loss 2022 $’000 2,376 (337) (407) 1,632 13,403 2,264 (7,961) 7,706 1,411 271 1,682 2021 $’000 3,706 557 (1887) 2,376 16,988 2,996 (6,581) 13,403 1,011 400 1,411 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. Total impairment provision 11,020 17,190 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. 31 March 2022 Current Past due up to 30 days Past due 30 – 60 days Past due 60 – 90 days In default Gross Collective Expected finance impairment loss rate % 0.76 receivables $’000 409,031 provision $’000 3,113 7.53 20.08 32.61 88.86 3,453 787 371 4,562 418,204 260 158 121 4,054 7,706 The Group's finance receivables are all denominated in NZD. Fair value and credit risk Carrying amount 2022 $’000 Fair value 2022 $’000 Carrying amount 2021 $’000 Fair value 2021 $’000 Finance receivables 422,870 421,403 330,165 328,675 The fair values are based on cash flows discounted using a weighted average interest rate of 11.23% (2021: 12.14%). 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. 68 69 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 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 1 year term that will be renewed annually. The facility is for $320m. 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 $247.1m finance receivables were sold to the Trust (2021: $187.4m). As at 31 March 2022 the carrying value of finance receivables in the Trust was $329.9m (2021: $266.8m). 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 Expected credit losses on contract assets and other receivables is 0%. 2022 $’000 4,088 2,081 3,072 99 9,340 7,988 1,352 9,340 5,726 2021 $’000 3,126 2,404 2,326 260 8,116 5,789 2,327 8,116 4,146 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. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (OCI) Investment in Collaborate Corporation Limited Movements in carrying amounts Opening balance Net change in fair value recognised in OCI Closing balance 2022 $’000 225 570 (345) 225 2021 $’000 570 1,000 (430) 570                                                                                                                                                                                                                                                                                             70 71 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022  21. INVESTMENT PROPERTY                                                                                                                                                                                                                     Investment property Movements in carrying amounts Opening balance Net change in fair value Closing balance 2022 $’000 5,950 5,950 - 5,950 2021 $’000 5,950 5,650 300 5,950 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 the static hypothetical subdivision approach. This approach considers comparable sales within the locality, the cost of undertaking the development of the property, and interest incurred on the capital outlay over the development and realisation period. A further deduction is taken for the developers profit and risk to arrive at a residual value that a potential purchaser would be prepared to pay. Subjective adjustments have been applied where necessary to account for variations in comparable data. 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. 22. INTANGIBLE ASSETS Brand 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 2022 $’000 2021 $’000 67,100 67,100 92,509 8 92,517 6,857 (3,938) 2,919 701 (234) (1,536) 1,850 6,430 (4,580) 1,850 92,541 (32) 92,509 10,204 (7,028) 3,176 1,460 (190) (1,527) 2,919 6,857 (3,938) 2,919 72 73 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Corporate relationships At cost Accumulated amortisation Opening carrying amount Amortisation Closing carrying amount At cost Accumulated amortisation and impairment provision Closing carrying amount Total intangible assets carrying amount WIP included in software 2022 $’000 6,510 (3,004) 3,506 (520) 2,986 6,510 (3,524) 2,986 2021 $’000 6,510 (2,484) 4,026 (520) 3,506 6,510 (3,004) 3,506 164,453 186 166,034 886 Long-term growth rate Pre-tax discount rate Auto retail CGU (weighted average cost of capital) Insurance CGU (2022: cost of equity; 2021: weighted average cost of capital) Finance CGU (cost of equity) Collection services CGU (weighted average cost of capital) 2022 2.25% 13.10% 13.80% 18.70% 15.60% 2021 1.80% 12.80% 14.10% 18.70% 14.90% 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% (2021: 0.20% and 0.30% respectively) and increasing and decreasing the discount rate as follows: The amortisation and impairment charges are 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. Auto retail CGU Insurance CGU Finance CGU Collection services CGU 2022 1.10% 1.10% 1.20% 1.10% 2022 $’000 23,559 5,408 348 5,192 15,596 50,103 2021 1.00% 1.00% 1.00% 1.00% 2021 $’000 21,676 3,513 227 - 12,827 38,243 These reasonably possible changes in rates did not cause any impairment in the CGUs. 23. OTHER PAYABLES Accounts payable Employee entitlements (short term) Employee entitlements (long term) Dividend payable Other payables and accruals Carrying value of financial liabilities in other payables 32,295 26,945 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 1,644 61 30,590 32,295 1,181 99 25,665 26,945 Currency risk A summarised analysis of the sensitivity of financial liabilities included in other payables to currency risk can be found in note 5.4.3. 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. Goodwill Allocated to the insurance CGU/segment Allocated to collection services CGU/segment Allocated to the finance CGU/segment Allocated to the auto retail CGU/segment Brand Allocated to the insurance CGU/segment Allocated to the auto retail CGU/segment 2022 $’000 12,777 23,981 9,272 46,487 92,517 21,500 45,600 67,100 2021 $’000 12,777 23,973 9,272 46,487 92,509 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 Auto retail and Collection services CGUs are free cash flows to the firm, while the Insurance (2021: free cash flow to the firm) and Finance CGU is free cash flows to equity. 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. The forecasts for each CGU covering a period of a minimum of 5 years. Annual capital expenditure, the expected cash costs in CGUs, was based on historical experience and planned expenditure. 2022 Forecast cash flow growth rates (%) Auto retail CGU (weighted average cost of capital) Insurance CGU (cost of equity) Finance CGU (cost of equity) Collection services CGU (weighted average cost of capital) 2021 Forecast cash flow growth rates (%) Auto retail 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) Year 2 Year 3 Year 4 Year 5 12.8 (4.5) (30.4) 32.0 10.0 5.8 11.7 21.3 9.2 14.7 5.1 14.8 Year 2 Year 3 Year 4 Year 5 30.5 (15.4) 16.3 12.7 24.6 3.5 5.0 8.2 11.9 1.2 5.0 8.7 8.8 24.8 3.3 11.9 8.6 1.9 5.0 7.3 74 75 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                      Deferred tax liabilities: Brand Customer relationships 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 2022 $’000 18,788 837 6,580 1,345 27,550 13,191 20,033 9,472 (7,858) 21,647 2021 $’000 18,788 874 6,597 739 26,998 11,297 19,248 8,712 (7,927) 20,033 Policy holder tax losses The policy holder tax losses carried forward at 31 March 2022 are $4,723,000 (2021: $5,276,000). 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 2022 $’000 412,588 - 412,588 2021 $’000 311,928 (4) 311,924 173 2,761 - 25,000 (74) 24,926 - - 412,761 339,611 3,724 36,702 302,909 409,037 339,611 412,761 Secured bank borrowings In March 2022 the Group has a syndicated funding facility, including a 1 year working capital facility, with the Bank of New Zealand and ASB Bank, a self liquidating trade finance facility and three year term facility with ASB Bank and a securitisation facility with the Bank of New Zealand. The bank borrowings (2021:bank borrowings and a lease premise guarantee of $0.6 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 2.74% (2021: 2.07%). The Group's securitisation financing arrangement with the Bank of New Zealand as described in note 14. Motor Trade Finance Motor Trade Finance Limited (MTF) provides the services of a finance company, including funding, on a full recourse basis to Turners Finance Limited. 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 was fixed at 5.5% and paid quarterly in arrears in equal amounts. The bonds were repaid on maturity date. 76 77 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 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 2022 $’000 412,761 Fair value 2022 $’000 407,347 Carrying amount 2021 $’000 339,611 Fair value 2021 $’000 339,700 The fair values are based on cash flows discounted using a weighted average borrowing rate of 2.74% (2021: 2.38%). The fair value of borrowings considers the impact of interest rate swaps as referred to in note 5.4.2. Contractual repricing dates 1 year or less Over 1 to 2 years Over 2 to 5 years 27. LEASE LIABILITIES Lease liabilities Current Non-current 2022 $’000 2021 $’000 3,724 36,702 389,037 302,987 20,000 - 412,761 339,689 2022 $’000 2021 $’000 28,209 28,747 2,358 25,851 28,209 5,560 23,187 28,747 Lease liabilities have incremental borrowing rates of 2.87% to 7.07% (2021: 2.87% to 6.94%), with maturities up to 11 years (2021: up to 12 years). 3 new leases were entered into during the year (2021:3) and 4 leases were modified or cancelled during the year (2021: 7). During the year the Group received COVID-19 rent concession of $92,000 (2021: $780,000). The carrying amounts of the lease liabilities are denominated in the following currencies: Australian dollars New Zealand dollars Interest expense in profit or loss 28. SHARE CAPITAL Number of ordinary shares Opening balance Shares issued for staff options Cancelled from share buy back Total issued and authorised capital 2022 $’000 95 28,114 28,209 1,774 2021 $’000 163 28,584 28,747 1,640 2022 2021 85,544,248 525,000 - 86,069,248 85,554,710 - (10,462) 85,544,248   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           78 79 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022  31. TRANSACTIONS WITH RELATED PARTIES                                                                                                                                                   Major shareholders, directors and closely related persons to them are considered related parties of the Group. Key management personnel compensation The key management personnel are all the Directors of the Company and the Leadership team. Compensation paid to the Leadership team in the years ended 31 March 2022 and 31 March 2021 were as follows: ($'000) Year ended 31 March 2022 Year ended 31 March 2021 Short- term benefits $'000 Other long- term benefits $'000 Share-based payments $'000 Total $'000 2,628 81 241 2,950 3,453 102 255 3,810 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 93 to 96. 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. 32. CASH FLOW RECONCILIATIONS 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 loss/(profit) on sale fixed assets Depreciation and amortisation Capitalised reverse annuity mortgage interest Deferred revenues Fair value adjustments on assets/liabilities at fair value through profit and loss Net annuity and premium change to policyholders accounts Non-cash adjustments to finance receivables effective interest rates Deferred expenses Revaluation gain on investment property Gain on modification of a lease COVID-19 rent concessions Adjustment for movements in working capital Net decrease/(increase) receivables and pre-payments Net decrease/(increase) in inventories Net increase/(decrease) in payables Net increase/(decrease) in contract 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 contributions/(withdrawals) from life investment contracts Net increase/(decrease) in deferred tax liability Net increase/(decrease) in tax payable Cash flows from operating activities 2022 $’000 31,281 3,108 (306) 10,702 (294) 1,500 (297) (89) (14) (4,136) - (60) (92) (1,506) (1,792) 11,190 (465) (93,992) 1,164 (2,482) 126 1,952 561 (43,941) 2021 $’000 26,864 3,986 (689) 11,418 (403) 52 (1,582) 1,194 (86) (1,850) (300) (1,132) (780) 1,515 14,182 6,955 1,365 (48,654) 1,134 (4,090) (150) 1,248 681 10,878 80 81 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 Turners Automotive Group Limited Notes to the financial statements for the year ended 31 March 2022 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022 Reconciliation of liabilities 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 as at 31 March 2020 Borrowings Lease liabilities $'000 32,511 $'000 350,364 Share capital $'000 204,327 Retained earnings $'000 20,072 Changes from financing cash flows (392) (6,346) - (17,200) Other changes Capital buy-back Profit Amortisation of deferred issue costs Netted off finance receivables Interest paid Interest expense (excl. accrued interest) Non-cash lease movements - - 260 (10,621) (9,193) 9,193 - (10,361) - - - - (1,641) 1,640 2,583 2,582 (30) - - - - - - (30) - 26,864 - - - - - 26,864 Balance at 31 March 2021 339,611 28,747 204,297 29,736 Changes from financing cash flows 75,660 (5,563) 1,185 (13,770) Other changes Profit Dividend payable Amortisation of deferred issue costs Netted off finance receivables Interest paid Interest expense (excl. accrued interest) Non-cash lease movements - - 78 (2,588) (6,676) 6,676 - (2,510) - - - - (1,774) 1,774 5,025 5,025 - - - - - - - - 31,281 (5,164) - - - - - 26,117     NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                              Balance at 31 March 2022 412,761 28,209 205,482 42,083  33. COMMITMENTS AND CONTINGENT LIABILITIES Capital Expenditure: At balance date, the Group has committed to the purchase of three properties along with developments for two existing sites. This has resulted in capital commitments of $18,900,000 (2021: $nil). Future Lease Commitments: The Group has committed to one property lease with a commencement date of 1 September 2022 (2021: nil). Loan Commitments: The Group has no material undrawn credit commitments at reporting date (2021: nil). Contingent Liabilities: The Group has no other material contingent liabilities at reporting date(2021: nil). 34. SUBSEQUENT EVENTS AFTER BALANCE DATE The Group paid the dividend accrued at balance date of $5,164,000 on 20 April 2022 (refer note 30). There were no other material events subsequent to balance date. 31 March 2021 The first tranche of options in the Group's Share Option Plan vested on 1 June 2021, 525,000 options were exercised and the Group committed to purchase an Auto retail site in Rotorua for $5.5m.                                                       82 83 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                               84   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                         85 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022   NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                               86 87 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                88 89 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022  NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                             NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                                                                                                                                                                                           90 91 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022    NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2022                                                                                                                           92                                          STATUTORY INFORMATION STATUTORY INFORMATION Directors’ remuneration and other benefits for the financial year ended 31 March 2022 Grant Baker Paul Byrnes (resigned 18 February 2022) Martin Berry Matthew Harrison (1) Alistair Petrie John Roberts (2) Antony Vriens (3) Directors’ fees $ 150,000 68,750 75,000 75,000 75,000 75,000 75,000 1. During the year ended 31 March 2022 Mr Harrison received an additional $15,000 (2021: $14,250) in fees for services as chairman of the Credit and Lending Committee. 2. During the year ended 31 March 2022 Mr Roberts received an additional $15,000 (2021: $14,250) in fees for his services as chairman of the Audit and Risk Management Committee. 3. During the year ended 31 March 2022 Mr Vriens received an additional $35,000 (2021: $33,250) 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 2022. Dealings in Turners Automotive Group Limited shares by Directors Date of transaction Paul Byrnes 05/07/ – 15/07/2021 Shares (disposed)/acquired (273,649) Consideration (received)/ paid $ Nature of relevant interest (1,220,249) Registered holder and beneficial interest Paul Byrnes Alistair Petrie 08/12/2021 08/12/2021 (390,000) 390,000 (1,654,769) Registered holder and beneficial interest 1,654,769 Controller of shares held by Bartel Holdings Limited. Alistair Petrie is the legal owner of 100% of the shares in Bartel Holdings Limited in a trustee capacity, so does not have beneficial ownership of those shares. Directors’ relevant interest in quoted shares as at 31 March 2022 Grant Baker Martin Berry Matthew Harrison Alistair Petrie* John Roberts Antony Vriens Shares 6,450,000 500,000 5,179,294 9,967,653 71,900 - * Mr Petrie controls 9,942,642 shares held by Bartel Holdings Limited in a trustee capacity (so does not have beneficial ownership of those shares) and 25,011 shares as beneficial owner. Other Directorships Mr Baker 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 LP Liam Lawson Supporters Partnership LP (Chairman) The Home Bakery Limited 93 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022   STATUTORY INFORMATION                                                                                      94                                                                 STATUTORY INFORMATION                                                                                                                                                                                                                               95 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 STATUTORY INFORMATION                    CORPORATE GOVERNANCE REPORT FY22 CORPORATE GOVERNANCE REPORT 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 2022 are generally in line with the NZX Corporate Governance Code, except as stated below: Recommendation 2.8: A majority of the Board should be independent directors. Following the retirement of Paul Byrnes as an independent director in February 2022, the Board consists of three independent and three non-independent, non-executive directors. The non-executive directors are not involved in the day to day operations of the company and do not have significant influence over operational decisions. The Board has determined that each director provides considerable value to Turners through their individual skills and expertise. The company is in compliance with the relevant NZX Listing Rules regarding Board composition. • 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 7.49% shareholding in Turners and therefore the Board has determined 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 does not have significant 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. 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 information in this report is current as at 29 June 2022 and has been approved by the Board of Turners. The Turners’ Corporate Governance Code and other key policies are available on the Turners Automotive Group Limited website: https://www.turnersautogroup.co.nz/About+Us/Corporate+Governance.html. 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 and its related companies are expected to conduct their professional lives. It was last reviewed by the Board in April 2021. The Code of Ethics is intended to facilitate decisions that are consistent with Turners values, business goals and legal and policy obligations, thereby enhancing performance outcomes. In particular, it covers conflicts of interest, gifts, confidentiality, corporate opportunities, behaviour, proper use of assets and information and compliance with laws and policies. No donations have been made to any political parties in FY22. 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. Turners has a Whistle Blower Policy to allow employees to raise the alarm on concerns they may have over malpractice without fear of retribution from their colleagues or employer. The Board believes that all directors conformed to the Code of Ethics during the 2022 financial year. Turners has a Quoted Financial Product 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 93 of the 2022 Financial Statements. 96 97 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 CORPORATE GOVERNANCE REPORT cont. CORPORATE GOVERNANCE REPORT cont. PRINCIPLE 2 – BOARD COMPOSITION AND PERFORMANCE 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; • identifies procedures to ensure that the Board meets regularly, conducts its meetings in an efficient and effective manner; and • ensures 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 number of elected directors and the procedure for their retirement and re-election at Annual Shareholder Meetings is set out in Turners Constitution. 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. At the Annual Shareholders’ Meeting on 9 September 2021, Martin Berry and Antony Vriens were re- elected as directors and Paul Byrnes was re-elected as a director until 18 February 2022. When a director is newly appointed, Turners will enter into a written agreement with them setting out the terms of their employment. The Company has arranged policies of directors’ and officers’ liability insurance which, with a Deed of Indemnity entered into with all directors, ensure that generally directors will incur no monetary loss as a result of actions undertaken by them as directors. Certain actions are specifically excluded, for example, the incurring of penalties and fines which may be imposed in respect of breaches of the law. The Board currently comprises of six directors: a non-executive chairman, three independent directors and two non-executive directors. While the Board is very active, 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. The Board believes that the current directors provide valuable expertise and experience and offer complementary skill sets. The mix of long-standing and newer directors ensures that continuity of knowledge and organisational memory is balanced with fresh perspectives. As at 31 March 2022, Board members were: • Grant Baker, Non-executive Chairman: Appointed 10 September 2009 • Martin Berry, Independent Director: Appointed 17 August 2018 • Matthew Harrison, Non-executive director: Appointed 12 December 2012 • Alistair Petrie, Non-executive director: Appointed 24 February 2016 • John Roberts, Independent Director: Appointed 1 July 2015 • Antony Vriens, Independent Director: Appointed 12 January 2015 In order for a Director to be an independent director, the Board has determined that the relevant director must not be an executive of Turners and must have no disqualifying relationships. The Board follows the guidelines of the NZX Corporate Governance Code. Information on each director is available on the Turners website and on page 28 and 29 of the 2022 Annual Report. Director’s interests are disclosed on pages 93 to 96 of the 2022 Financial Statements. The table below summarises the current key skills and experience of the Board. Auto retail Finance Insurance Credit management Industry knowledge/experience Industry & sector knowledge - - - - Technology/digital Entrepreneurial growth and transformation Sales, marketing and brand experience People, culture and employee relations Finance and capital markets Risk management and regulatory Governance ESG Emerging Director Highly skilled Moderately skilled ⬤⬤⬤ ⬤⬤⬤⬤ ⬤⬤ ⬤⬤ ⬤⬤⬤ ⬤⬤⬤⬤⬤ ⬤⬤⬤⬤⬤ ⬤⬤⬤⬤⬤⬤ ⬤⬤⬤⬤ ⬤⬤⬤⬤⬤ ⬤⬤⬤⬤⬤ ⬤⬤⬤ ◯◯◯ ◯◯ ◯◯◯◯ ◯◯◯◯ ◯◯◯ ◯ ◯ ◯◯ ◯ ◯ ◯◯◯ Turners’ supports the Emerging Directors programme and views it as an excellent way of building board talent, knowledge and expertise and ensuring there is a succession plan in place when required. The Board appointed Lauren Quaintance as an Emerging Director in October 2021. 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 a self-evaluation was conducted in FY22. Diversity 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 and wellbeing within the Turners workforce. The quarterly staff survey includes questions on equality with respondents rating Turners 9.3 out of 10. As at 31 March 2022 the gender balance of Turners directors and people was as follows: Directors Emerging Director Senior Leadership Management Other Employees 31 March 2022 31 March 2021 Female - 1 7 42 250 Male 6 - 31 50 288 Female - - 7 38 223 Male 7 - 26 54 274 98 99 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 CORPORATE GOVERNANCE REPORT cont. CORPORATE GOVERNANCE REPORT cont. Board Meetings and Attendance The Board has 11 scheduled meetings a year. The table below sets out Directors’ attendance at Board and Committee meetings during FY22. In total, there were 14 Board meetings; 3 Audit, Risk Management & Sustainability Committee meetings; and 11 Lending and Credit Committee meetings. Board Audit, Risk Management & Sustainability committee Lending & Credit committee Total Number of Meetings Held Grant Baker Paul Byrnes 1 Martin Berry Matthew Harrison Alistair Petrie John Roberts Antony Vriens Lauren Quaintance2 14 13 12 12 14 14 13 11 5 3 3 3 2 11 11 11 11 The Lending and Credit Committee members as at 31 March 2022 were Matthew Harrison (Chair), Alistair Petrie and John Roberts. It met 11 times during the financial year. Takeovers Turners is prepared in the event of a takeover. The Board has adopted a written Takeover Response Policy (contained within the Turners 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 Turners’ website. PRINCIPLE 3 – COMMITTEES Copies of other key governance documents are also available on Turners’ website. The Board should use committees where this will enhance its effectiveness in key areas, while still retaining Board responsibility. The Board has constituted two standing Committees being the Audit, Risk Management and Sustainability 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, Risk Management & Sustainability Committee (ARMS Committee) The role of the ARMS Committee is to assist the Board in carrying out its responsibilities relating to the company’s risk management and internal control framework, the integrity of its financial reporting, and the company’s internal and external auditing processes and activities. 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. In addition the Committee oversees the strategies, activities and performance regarding sustainability, corporate social responsibility and the environment. The Committee is comprised solely of non-executive Directors of Turners, has 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 2022 were John Roberts (Chair), Antony Vriens and Alistair Petrie. It met three times during the financial year. 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. 1 Paul Byrnes retired from the Board on 18 February 2022 2 The Board appointed Lauren Quaintance as an Emerging Director in October 2021 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. Financial information 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. The Group Financial Controller holds the role of Company Secretary. In all accounting and secretarial matters, the Board ensures that the Secretary’s reports are objective and that the Secretary has unfettered access to the chair and the ARMS committee, without reference to the CEO. For the financial year ended 31 March 2022, 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 Part 7 of the Financial Markets Conduct Act 2013 and the Financial Reporting Act 2013. 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 Turners’ website. Non-financial information The Board recognises the importance of non-financial disclosure and in particular, environmental, social and governance (ESG) matters. Turners has an Environmental, Social and Governance Policy in section 14 of Turners Corporate Governance Code. A number of initiatives detail on pages 17 to 25 are underway which support Turners’ focus in these areas. 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. 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. 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 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 CORPORATE GOVERNANCE REPORT cont. CORPORATE GOVERNANCE REPORT cont. Details of directors and executives’ remuneration and entitlements for the 2022 financial year are detailed on pages 81 and 93 of the Annual Report. 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. 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. Director Remuneration PRINCIPLE 6 – RISK MANAGEMENT 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 policy is that no sum is paid to a director upon retirement or cessation of office. While there is no formal requirement, all of Turners’ directors either directly or indirectly own shares in the company. Details of shareholdings are on page 93 of the 2022 Financial Statements. Board Remuneration • Chairman $150,000 • Non-executive Director $75,000 • Chair of DPL Insurance Limited $35,000 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 ARMS 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 ARMS Committee Charter which is included as Appendix B in Turners Corporate Governance Code. The Board delegates day to day 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 2022 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. • Chair of DPL Insurance Limited for duties as a non-executive director for TRA $75,000 Health and Safety • Chair of ARMS 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 93 of the 2022 Annual Report. Turners does not pay fees upon retirement of directors. 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 81 and Remuneration of Employees information on page 94 of the 2022 Financial Statements. Details of the Group’s Share Option Plan are detailed on page 79 and 80 of the 2022 Financial Statements. 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 incentive 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: FY22 FY21 Salary Benefits Subtotal Cash STI Share LTI 659,000 539,117 50,325 56,434 709,325 595,552 375,0003 300,0005 535,0004 - Pay for Performance Total Remuneration 1,619,325 895,552 Short term incentive: A short term bonus is paid against profit targets agreed at the commencement of the year. Long term incentive: 750,000 options, with an exercise price of $2.00, granted under the Group’s Share Option Plan. The grant is split into 3 tranches of 250,000 options with the following vesting dates; 1 June 2022, 1 June 2023 and 1 June 2024. 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 $0.31 per option. 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 3 STI for FY22, paid in FY23, 100% of target achieved 4 Taxable value of 250,000 options, with an exercise price of $2.00, exercised in FY22 5 STI for FY21, paid in FY21, 100% of target achieved 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 coordinators in each business unit. Health and Safety 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 ARMS 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 ARMS Committee Charter (Appendix B of the Turners Corporate Governance Code). For the financial year ended 31 March 2022, 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 2021 Annual Shareholder Meeting. The last audit partner rotation was in the 2020 calendar 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 64 of the 2022 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. Turners has a number of internal controls overseen by ARMS 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 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 CORPORATE 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. Turners’ 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: • Annual and Interim Reports • Market announcements • Annual Shareholder Meeting • Financial results calls • 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 Shareholders’ Meeting and may raise matters for discussion at this event. The company live streams the annual meeting, which is accessible worldwide. In 2021, due to COVID-related disruption, the meeting was changed to be online only. In accordance with the NZX Corporate Governance Code, the Board ensured that the notice of the 2021 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. All shareholders are given the option to elect to receive shareholder communications in electronic form (by email). 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 staff, suppliers and customers. DIRECTORY DIRECTORY CORPORATE DIRECTORY REGISTERED OFFICE DIRECTORS TURNERS LIMITED Level 5, 70 Shortland Street, Auckland, New Zealand Grant Baker PO Box 1232, Shortland Street, Auckland, 1140, New Zealand Chairman Consolidated statement of financial position for the year ended 31 March 2016 Freephone: 0800 100 601 Appointed 10 September 2009 Email enquiries: info@turnersautogroup.co.nz Web: www.turnersautogroup.co.nz Martin Berry Independent Director Appointed 17 August 2018 Matthew Harrison Non-executive director Appointed 12 December 2012 Assets AUDITOR Baker Tilly Staples Rodway Notes 2016 $’000 2015 $’000 Financial assets at fair value through profit or loss Cash and cash equivalents Alistair Petrie Non-executive director Appointed 24 February 2016 Trade receivables BANKERS Bank of New Zealand and ASB Bank 11 10 Inventory John Roberts Finance receivables Independent Director Appointed 1 July 2015 Reverse annuity mortgages Other receivables and deferred expenses LAWYERS Chapman Tripp Property, plant and equipment Antony Vriens Independent Director Appointed 12 January 2015 Tax receivables Deferred tax asset Intangible assets Total assets SHAREHOLDER INFORMATION Liabilities Other payables 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. Deferred revenue Tax payables Insurance contract liabilities Financial calendar Derivative financial instruments First quarterly dividend Borrowings Annual meeting Life investment contract liabilities Half year results announced Second quarterly dividend Third quarterly dividend End of financial year Annual results announced Shareholders’ equity Annual report Final dividend Total liabilities Share capital Other reserves Retained earnings Total shareholders’ equity October August November January April 31 March May June July 13,810 18,455 9,575 14,156 167,598 8,505 9,734 11,108 - 4,024 105,338 362,303 22,270 12 13 14 15 16 19 20 21 22 32 32 25 15,629 12,688 232,491 136,127 (52) (6,263) 129,812 12,339 17,350 7,394 8,984 142,827 5,946 13,253 8,319 433 8,532 103,595 328,972 17,790 7,476 71 - 156,995 16,378 9,260 207,970 135,294 (23) (14,269) 121,002 23 SHARE REGISTER Computershare Investor Services Limited Level 2, 159 Hurstmere Road, Takapuna, Auckland Private Bag 92119, Auckland 1142, New Zealand Telephone: +64 9 488 8777 174,816 6,049 990 24 49 Total shareholders’ equity and liabilities ENQUIRIES 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. 362,303 328,972 STOCK EXCHANGE The Company’s shares trade on the NZX Main Board operated by the NZX Limited under the code TRA and as an exempt foreign entity For and on behalf of the Board on the ASX operated by ASX Limited. This annual report is dated 29 June 2022 and is signed on behalf of the board by: G.K. Baker G.K. Baker Chairman Chairman Director Authorised for issue on 22 June 2016 J.A Roberts P.A. Byrnes Director Executive Director The accompanying notes from part of these financial statements 104 105 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022 Notes Notes 106 107 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022108 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 TURNERS AUTOMOTIVE GROUP ANNUAL REPORT 2022

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