Stoneacre Motor Group is in an acquisitive mood as the “cash-rich” business targets the fast track to £1 billion in turnover by 2020.
Group managing director Shaun Foweather describes himself as a “car man” and claims that his drive to grow the business comes purely from the buzz of going to work.
“We’ve not expanded because of any pressure to expand, because we have to, we have expanded because we love coming to work,” said Foweather.
“There are large groups that have shareholders and banks telling them what to do. We don’t have any of that. We started this business on our terms and we can still do pretty much anything we want to do, that’s one of our greatest strengths.”
However, he drives the numbers behind the business as hard as he does his collection of exotic cars.
Stoneacre’s rapid expansion from a former Peugeot dealership in Scunthorpe in 1995 to the AM100’s 21st-placed group, with a turnover of £560.9 million (for the year ended April 24, 2016) and 68 franchised outlets at 40 locations is testament to his ambition.
But the agility of the business’s earlier years is still evident, with Foweather crediting it for the fast development and deployment of initiatives such as an FCA-compliant programme that sold £2.8 million of GAP insurance; a connected aftersales partnership with Smartdriverclub; and specialist finance, used and remarketing divisions.
The desire to offer top-level training to staff and apprentices led to the creation of the Stoneacre Motor Group Academy 18 months ago, following the mantra ‘Career for Life’, a play on the company slogan ‘Motoring for Life’.
Based at Stoneacre’s headquarters – it moved to the sprawling former home of the now defunct online car-buying service JamJar.com in Doncaster six years ago – the Ofsted- and IMI-accredited project secured the group the AM Award for Best Training and Development Programme accolade in February.
Foweather said: “The academy has helped to add about £1.5m to our site costs here, but it will have been worth every penny.”
Recruitment for succession
Former Stoneacre apprentices have already risen to the ranks of management and Foweather expects the operation to deliver a future managing director.
“This is not about cheap labour – 96% of our apprentices are still with us. What it is about is that, because the motor trade is so incestuous and the job is changing so much, we want people who have a passion and a desire to go out there and make a difference to their lives.”
It is not lost on Foweather that the establishment of an accredited apprenticeship scheme will also offset any potential losses from the forthcoming apprenticeship levy scheme.
From April, employers with a payroll of more than £3million will have to start paying into their apprenticeship levy accounts. Dealers will only be able to claim back this money – 0.5% of their total wage bill – to fund training with accredited apprentice training providers.
Stoneacre now has its own.
Foweather said: “The apprenticeship levy will not be a concern to us at all, because I will be claiming every penny of that back.”
Stoneacre poached Claire Rooms from external training provider, the Learning Skills Partnership, to establish and run the academy two years ago.
She set the operation up in a little over three months, with assistance through a partnership with Hull College.
The academy has a 15-strong team, with many trainers recruited from senior positions within the group to ensure they understand the Stoneacre philosophy and command the respect of the existing staff, Rooms said.
Stoneacre currently has 171 apprentices in the business and the academy also oversees the regular training and development of staff from across the group’s workforce of 1,830.
Apprentices are recruited from across the UK and attend recruitment days in South Yorkshire where they carry out tasks and complete interviews ahead of selection, many receiving about 2,000 hours of guided learning if they are successful.
So far, Rooms has overseen two graduation ceremonies, in which about 50 apprentices received certificates at Stoneacre’s headquarters.
She said: “We really feel that we are providing top-class learning that will put them on the path to a career for life.”
Foweather said the academy’s results in training existing staff have led to more employees coming forward to be trained themselves.
“The quality of the people we are producing is raising standards across the group and that is a hugely positive outcome from my point of view,” he said.
Acquisitions have to be at the heart of Stoneacre’s strategy if the group is to achieve its £1bn turnover target.
Foweather said the business is in good shape and in an “acquisitive position” moving into 2017, having emerged from a record-breaking 2016 with 16,680 new car sales and 19,368 used vehicle sales. To date, the group’s largest acquisition was £85m turnover Huntson Holdings – trading as Autoworld Abarth, Alfa Romeo, Citroën, Fiat, Hyundai, Suzuki, Seat and Volvo in Chesterfield – in October 2015.
This furthered Stoneacre’s claim to be the UK’s largest independent retailer of Suzuki and Fiat, but the group must be prepared to up the stakes.
Stoneacre’s latest accounts – for the year to April 24, 2016 – show pre-tax profit fell from £6.7 million to £6.1m (9%) as turnover rose from £449m to £560m.
Return on sale (operating PBT%) went from 2.38% to 1.45%; return on capital employed from 21.36% to 15.68%. Its aftersales division achieved 8.71% growth in gross profit, however.
In 1993, Foweather was a general manager at Midlands-based, seven-site TK Motor Group when owner Richard Teatum decided to sell up.
Teatum initially retired to Spain, but returned to the UK the following year to form Stoneacre’s parent company, Decidebloom, and buy a bankrupt Peugeot retailer in Scunthorpe.
Foweather said: “That dealership was called Stoneacre and we were just too tight to change the signs.”
Its early focus was in used cars. Foweather said: “We didn’t want to get involved with manufacturers.”
A successful first year led to the acquisition of a second used car operation in Lincoln, but it was the purchase of a site at Ackworth, near Wakefield, that Foweather described as a “cornerstone of change”.
The deal stipulated that Stoneacre must stick with the attached Suzuki franchise for a year. That year, Suzuki sales at the site rose from 80 to more than 300 under a business model that lured used car customers into a new car with affordable finance.
An invitation from Suzuki to buy a franchise in Peterborough followed and Stoneacre expanded once more. An adjoining Seat franchise saw the group add another manufacturer partner.
“Now we won’t buy a site unless it has a franchise attached,” said Foweather.
Talks are ongoing with Honda and there is a desire to align the group with more premium partners in the shape of Audi, Mercedes-Benz or Jaguar Land Rover.
In March 2016, the business moved decidedly into the luxury sector, opening a new, 1,950-square-metre Aston Martin showroom at Silverlink, Newcastle.
This fulfilled a personal ambition for Foweather: “Even before we bought the franchise, I had two Astons in my garage at home.
“I think that was a big part of us getting the franchise, because they came to my office and saw all the pictures and the models and we got on very well from the off.”
Stoneacre prepared itself for the arrival of a luxury partner, by opening Stoneacre Specialist Cars at Wheatley, near Doncaster in 2015. The site offers an array of exotic used cars priced well into six figures.
The exercise was intended to help the group understand the market ahead of the opening of the Aston Martin site and the Specialist facility was then to be moved to Newcastle once it opened.
However, the success of the South Yorkshire business means Stoneacre Specialist Cars will now stay where it is, and a further site in the north-east is highly likely.
Foweather said: “The most important thing we learnt was that premium service is something that we want to see replicated across the group.
“People who buy premium cars often get blasé about it. We have to remember that the guy turning up to buy his new Suzuki is probably committing just as much of his income into that investment.”
Despite learning about the premium sector before opening its Aston Martin site, Stoneacre recruited 80% of its staff from previous franchise operator Stratstone.
Foweather said: “These are people that work for the brand as much as the company. We have two technicians there with a combined 53 years’ experience.”
Sweating the data
A landmark supercar showroom may draw customers from far and wide, but car sales are still a targeted, commission-driven operation at Stoneacre.
Among the 140-strong team at its Thorne headquarters is a 70-strong call centre back-selling GAP insurance, selling service packages and carrying out targeted sales events.
An in-house IT department, meanwhile, is working hard to develop new and more sophisticated ways of mining customer data.
Often their research is focused on activity surrounding near-prime and non-prime credit applications. Stoneacre is often able to facilitate a loan through Stoneacre Financial Services (SFS) or schedule an automated communication to a customer when they become eligible for a loan.
SFS was born out of a desire to create a wide customer base by getting everyone on the motoring ladder, lending its own funds to sub-prime customers.
Foweather said: “We’re a cash-rich business. There is no gearing and you’ll see that from our accounts.” Stoneacre’s gearing is 8.03% (2015) against an AM100 average of 55%.
“SFS is small. When we set it up, it was because we had a surplus of cash and we started to use that to get a better return, but where that is needed in acquisitions we’ll use it that way. Increasingly, that is where our attention is focused.”
In 2015, SFS announced it expected to lend £1.6m over the year, but its funding book for the year ended up at £1.2m. Foweather attributed this lack of growth to the re-emergence of cheap lending.
General digital sales manager, Mark Zavagno, said his main strategy is to make that lending available to potential Stoneacre customers: “Our targeted communications when a customer reaches a certain threshold to turn and get them back into the funnel have been a success. We’re seeing open rates of 23%.”
Zavagno said close monitoring of potential customers’ online habits and enquiries had resulted in 72 sales since November.
Stoneacre’s head of data science, Dr Stefan Blackwood, is currently trawling live chat transcripts to identify language indicators of a receptive customer, techniques also being used to brief sales staff on the language they use when prospecting.
“Our transcript patterns indicate how sales staff start to flag after 3pm and also how older customers respond positively to a more formal approach. These are things that need to be taken into account when developing a sales script.”
Lynn Oakes, Stoneacre’s business development centre manager, is in charge of Stoneacre’s call operators.
Taking the pressure off retailers by taking inbound enquiries, the team also sells 700 to 800 self-funded MOT test cover plans each month, at £25 each, alongside service plans that include entry into a VIP club offering free vehicle health checks and puncture repairs.
The team has seen huge success in its sales of GAP insurance since the introduction of FCA regulations and is on track to double its 2015 performance (5,000 GAP policies).
Customers are contacted three days after buying a car and all documentation is time- and date-stamped to ensure compliance, said Oakes.
She added: “In our first year, we are on target to sell 10,000 policies and profit is an average £200 per unit.”
Targeted car sales campaigns are also conducted by the business development centre.
Foweather is clear about their value, regularly selling about 350 cars in the space of five hours and serving as a morale-builder.
He said: “The sales teams will get dressed up, we’ll buy them pizzas, make it fun.”
Part of the process: connected aftersales
Aftersales and parts will feature heavily in Stoneacre’s next set of financial results, according to aftersales director Gerry George.
A recent partnership with Smartdriverclub offers a connected aftersales service to customers and gives Stoneacre’s 49 dealer sites access to important knowledge about their cars post-sale, via a telematics device plugged into the onboard diagnostics (OBD) port.
Customers pay £6 a month to be part of the ‘Stoneacre Connected’ initiative. This grants them access to a range of cost-saving and peace-of-mind benefits delivered via a smartphone or computer.
Daily reports of mileage information, fault alerts, low battery, collisions and stolen vehicles will mean that dealers can proactively contact customers to arrange services, repairs and replacement vehicles.
George said: “We have 23,480 service plans, so that gives us a good foundation to build on. Honestly, we don’t know what the financial reward might be, but it’s really about offering customers something that could benefit them and really boosting retention.”
Following its adoption of a Manheim service system for its dealership workshops, Stoneacre delivers 360-degree videos of every service in an attempt to boost transparency and promote aftersales retention.
An online booking system, which lets customers book directly into the workshop diary, and group-wide Saturday workshop opening have also added convenience.
George sees these as key factors in his department’s 8.5% rise in gross profit. In the medium-term, though, he is targeting growth in tyres and parts, both of which will benefit from online sales platforms and extended facilities.
He said he expects the rise of torque-rich EVs to boost tyre demand. He said: “Our aim is to sell five times more tyres in 2018 than in 2016. It needs to be a competitive product, but we can do it.”
Stoneacre’s 11 bodyshop facilities are experiencing growth. The group completed 7,000 more repairs in 2016 than it did in the previous 12 months.
Its Doncaster parts hub, caraccessoriesplus.com, is also destined for expansion as the group plans to compete directly with the likes of Euro Car Parts.
The parts business grew its turnover by 17% in the past calendar year, with gross profit rising 21%, and George said growth would be backed up by the facility’s expansion from 25,000 sq-ft to 80,000 by 2020. He added: “We’ll multiply business four times during that period”.