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Dealers profits fall by almost 40%

Total profits for the UK's dealer groups have fallen by almost 40%, according to research published today.

During the 1997 - 2000 financial period, the average total sales of 138 car, commercial vehicle and motor cycle dealers surveyed grew by 6.9% to £141.4m - but total profits fell by 39.1% to an average of £1.2m.

The Business Ratio report, entitled 'Vehicle dealers' published by The Prospect Shop, says: "Despite a modest growth in sales, a substantial fall in total profits has meant that profitability ratios have suffered during the three-year period under review. In addition, efficiency levels have suffered and debt levels have increased."

The report says that the 10 biggest players (see table below) in the industry appear to have returned a mixed performance in terms of pre-tax profit margin. Six companies surpassed the industry average figure of 0.9%, whilst three reported negative results. Compound sales growth figures were a little more promising with six companies exceeding the average of 4%. However, Inchcape saw the largest contraction in sales growth with a -24% result.

All four profitability ratios in the studied period have fallen:

  • the average pre-tax profit margin fell from 1.5% in 1997/98 to 0.9% in 1999/2000. The best performer for 1999/2000 was Carcraft of Rochdale with a pre-tax margin of 15.3%
  • average return on capital fell from 13% in 1999/98 to 7.8%
  • return on investment rose from 11.3% in 1997/98 to 8.5% in 1999/2000
  • average return on total assets almost halved, falling from 5.2% in 1997/98 to 2.9%.

    Profitability and sales growth of top 10 largest companies by sales turnover 1999/2000:

    {*Sales turnover*}

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