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Market pressures take toll on Ryland Group

The Ryland Group suffered a slump in profits last year, stung by new car pricing pressures and deflationary pressures in the used market.

Releasing its year-end results today the group revealed that before goodwill and exceptional charges operating profits were £1.4m in 2000 (1999: £7m) with the balance sheet hit hard by operating losses of £2.9m (1999: £1.3m) from discontinued operations.

Turnover on continued operations totalled £588.4m compared to £549.6 in 1999.

Ryland's five BMW businesses suffered from the aftermath of the manufacturer's sale of the Rover brand, with bad feeling towards BMW in the Midlands in particular presenting “significant difficulties for a short period” and resulting in a £1m loss of operating profit. Now, however, business growth has resumed.

The Mercedes-Benz businesses made solid progress, while the Audi outlets suffered as a result of increasing pressure from competitor brands on the A4.

Ryland said the continued decline in used car values led it to review the group's future vehicle repurchase commitments in the Motability scheme and losses absorbed during 2000 totalled £0.5m.

Volume car operations were the most vulnerable to recent pricing pressures.

In his statement Ryland chairman Peter Whale said: “The late 1999 completion of our two Ford market areas immediately preceded a period when American-owned manufacturers made substantial losses in Europe. This inevitably restricted their capability to focus on the necessary actions on pricing and product to maintain market share and dealer profitability.

“Despite substantial and costly restructuring we were unable to plan for the capricious nature of the franchise profit opportunity and thus determined to sell our largest Ford market area for south Warwickshire.”

Mr Whale said the Vauxhall business in central Birmingham needs substantial investment, which Ryland is unwilling to make and therefore the manufacturer is expected to find a new partner this year.

On the future, Mr Whale said: “2000 contained a unique cocktail of events that conspired to change significantly our business in a manner that we could not foresee.

“A number of substantial underperforming businesses have either been disposed of or are now actively being marketed.

“The enormous deflationary trend on new and used car prices now appears to be levelling off, with recent retail activity showing signs of a return of consumer confidence. The industry is undoubtedly subject to underlying structural change and the board believes it is focussed on those areas which provide the most stable platform possible for a rapid return to profitable growth.”

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