Turners looks to finance division as profit engine

Turners Auctions is hoping that selling finance to vehicle buyers will boost its earnings as the auction market shows signs of recovery.

In Turners' full-year earnings last week, vehicle unit sales were down 2 per cent last year with Turners putting the hammer down on about 79,500 vehicles. Net profit fell 29 per cent to $5 million for the year ending December, with a 1 per cent growth in revenue to $79.5 million.

At the same time, Turners Finance recorded a 300 per cent increase in profit to $881,000. The division, which was set up about 18 months ago, has a ledger of $10.7 million.

Turners provided the finance for 5 per cent of vehicle sales and would deploy specialist staff to help expand this business, said chief executive Graham Roberts.

ABN Amro Craigs analyst Selwyn Blinkhorne said there was potential for Turners to increase its finance business, as used-car dealers provided finance for about half of their vehicle sales.

"It's slightly different because used-car dealers can offer trade-ins, which Turners don't do, so maybe they'll never get to 50 per cent but they should be getting more than 5 per cent," he said.

Turners said half of its sales are to dealers and it was aiming to increase financing rates to 7 per cent or 8 per cent this year.

Blinkhorne said the fact that sales volumes had fallen by only 2 per cent was also encouraging.

Although total unit sales were down, the sales to private individuals were actually up 11 per cent.

"It's proving to be a bit of a myth that Trade Me is really having a hugely adverse impact on them," Blinkhorne said.

Online auction site Trade Me, which lists more than 35,000 vehicles at any one time, was part of a broader pool of competition but was not singled out as a threat, Roberts said.

However, the next few months will see the rollout of Turners Live, a real-time online service enabling people to place bids from computers in competition with live bidders.

Higher than expected one-off restructuring costs of more than $720,000 at Turners' North American businesses were singled out as the main reason for missing a reduced profit forecast issued last November.

Falling revenue from Turners Auctions and Turners Fleet businesses was blamed on a glut of Japanese imports slowing down the used-car market and high fuel costs affecting the price of larger vehicles.

However, Roberts was optimistic that dealer and fleet car resellers who had been holding back vehicles in the hope of getting better prices were moving more cars into the market.

"I'm confident this year will see an improvement [in unit sales] on last year," he said.

Reduced immigration, the strong dollar, more traders and aggressive new car pricing were also identified as having affected the market.

Despite the fall in profits Turners will pay a final dividend of 6c a share, bringing the full year's fully imputed dividend to 14c.