CD Bramall, No4 in the AM100 with a £990m turnover, is the only top 15 dealer group to figure in the top 20 ROCE companies. This underlines the difficulties of achieving economies of scale above a certain size.
Peter Jones, CD Bramall chief executive, said: “We have focused on expansion over the past decade, but within the principles that the group is managed: customer satisfaction and controlling the business assets.
“Return on capital employed is a key indicator of the health of the business and the quality of our staff, especially at dealer director level, has enabled us to focus on cash control and profitability.” Regional groups dominate return on capital employed. Milton Keynes-based Wayside Group heads the listing, achieving a 62% return.
The benchmark ROCE for large dealer groups – typically the top 30 of the AM100 – is around 15%, according to Piers Trenear-Thomas, client service director at Grant Thornton Motor Retail, which partnered Automotive Management in compiling the listing.
“Companies operating much lower than that might as well stick the money in a building society,” he said.
“Regional groups don't have the complications of scale of the nationals who are rarely able to achieve the necessary economies.”
Groups with nationwide aspirations are often forced to acquire sites in territories that do not sit well within their existing structures.
Add that to pressure from manufacturers which want their best dealers to move into vacant territories, and many groups are forced to absorb outlets that do not fit their needs.
“The top 30 dealer groups have to keep doing deals to keep the forward momentum for their shareholders,” said Mr Trenear-Thomas.
“But new outlets are likely to be less and less optimum – removing cost from the business doesn't seem to happen.”
AM100 dealers are averaging around 12% return on capital employed.
“This isn't as bad as it first appears – recent surveys show UK industry as a whole to be averaging around 11%,” said Mr Trenear-Thomas.
“A lot of dealers are still operating above 15% – although the larger groups are struggling more. Motor retailing has challenges and management conundrums to resolve, but in the main it is producing decent results.”