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Analysis: The heir to a Scottish throne

A number of senior dealer chiefs who developed their retail empires at similar periods in the 1970s and 1980s are now putting in place succession plans as they take a step back from the business. At Dixon Motors, Paul Dixon has handed the day-to-day control to his son Simon, while John Tordoff has taken over from father Jack at JCT600. Not everyone has that luxury – Tony Bramall sold his business to Pendragon because he had no family heirs.

John Martin, the “sixty-something”-year-old chairman and figurehead at one of Scotland's leading retailers, has his succession well in hand. His son, John Martin Jnr, has been working at the business since leaving school in 1983, and is now easing his way into the management team. Although unlikely to take full control for a couple of years, he is working hand-in-hand with the senior directors.

“It's a big machine to get your head around, but we have some good staff,” says John Martin Jnr. “Gordon Nisbet (managing director) and Paul Nelson (finance director) have been with the business for years and you don't have to tell them – they understand what we want to do with the business.”

He certainly has the backing of the management team, and it would appear the confidence of his staff, although his as yet untitled role will be slightly different – Nelson calls it “specialised” – to his father's. His job is to maintain and expand the group which his father built from scratch. That offers its own challenge as opportunities in the Scottish market are restricted by the concentration of population around the Glasgow-Edinburgh corridor. Competition is tough, but the group sees that as a positive.

“Strong competition is good for the business – that's why we are not afraid to sit next door to Arnold Clark.

Weak competition is bad for business because it undercuts margins,” says finance director Paul Nelson. Ah yes, Arnold Clark. The ubiquitous car retailer dominates the Scottish scene. No other group comes close for new and used car sales volumes, and each is swamped by Clark's 120 outlets. “All groups in Scotland operate under his shadow. You can't beat him, but you can compete,” says John Martin Group managing director Gordon Nisbet. “He's competition you can respect.”

John Martin Snr established the business in 1964 when purchasing his first garage. Four years later he took on the Volvo franchise, but it wasn't until the 1980s that the business really started expanding, taking on BMW, Rolls-Royce, Lotus, Aston Martin, Peugeot and Vauxhall – all franchises it holds today. This focus on developing long relationships is a consistent theme at the company, and one that applies to franchises, customers, suppliers and staff – 15% of whom have served more than 10 years with the company.

“Our relationship with the manufacturers has been developed over time,” says Nisbet. “We stick with them through thick and thin – and there have been some thin times – and they appreciate that. There's lots of people around during the good times, but not during the bad.” A mutual understanding with Vauxhall developed during the two years when John Martin Group ran a couple of dealerships on behalf of the carmaker, in Aberdeen and Fraserburgh. It purchased outright the outlets in December 2002. “This helped us establish a proper partnership with Vauxhall. We both took decisions that were the correct ones for the dealership and the franchise – and that relationship has continued,” says Nisbet. “We both have a job to do, but neither of us can do that job without customers – they come first.”

John Martin Group now has 15 sites, accommodating 27 franchises. It's due to add two Mazda showrooms – a new franchise – this year. Further expansion is likely, although it has to be a good fit. That suggests growth with current partners – “that's easier because we already know what they want and expect”, says Martin – although new franchises aren't ruled out. Neither is a move into England.

“If we did expand south it would need to be a business of sufficient size to make it worthwhile, with a franchise we currently hold and one that is in the north,” says Nelson. “From talking to other Scottish dealers with a presence in England it appears that you get better returns here from doing the same job.”

The biggest difference between the two countries is population size: five million people live in Scotland, of which three million are squeezed into the Glasgow-Edinburgh corridor. Many inhabit city centre flats, which also means a lower car ownership per head than in England. Compounding this is the fact that overall, disposable income is slightly lower.

Property costs, though, are above average, and rates are especially high. And that poses a different dilemma for retailers, many of whom are not making a profit. “If property values continue to go up, you have to say that many dealers can make as much money from selling the site as they can in 10 years from selling cars,” says Nisbet. Consolidation, then, is a certainty in Scotland. The three directors are expecting a big improvement in performance this year, conceding that preparing for block exemption last year was “a distraction” which cost the business time and money.

Turnover is expected to rise from £230m last year to around £260m. Likewise profits should rise from £3.5m to £5m. Used cars are key – John Martin needs to do a better job of sourcing them, and is in talks with leasing companies and manufacturers. Availability of ex-fleet cars is poor, largely because most are owned by Arnold Clark's leasing company.

John Martin Jnr's challenge over the next couple of years is to seamlessly ease himself into the senior position. Thanks to his father, he'll be given sufficient time – and he'll enjoy excellent support from an experienced, highly skilled management team.

Dunedin, Murray, Belmont – something for all

John Martin Group divides its volume, premium and specialist franchises between three trading names, which allows clear brand differentiation. Belmont includes Vauxhall, Peugeot and Citroen franchises, Dunedin accounts for BMW, Mini and Rolls-Royce, while brands like Volvo, Lotus and Aston Martin trade as Murray Motor Company.

“It's better for customers because they can tell the difference, rather than having all dealerships trading under the same name,” says Paul Nelson. “It's hard to cut across the brands and be all things to all people.” And the sticky issue of carmaker brand versus dealer brand? “You are up against pressure from the manufacturer to focus on its brand, but you need to use both their name and the dealer name to sell the most cars,” says Nelson. John Martin Jnr adds: “It's a case of two plus two equals five.”

The group does everything itself. It has five bodyshops, a call centre which handles all servicing and MoT business, a training facility and a marketing department. “We are a motor group, which means offering a complete service,” says Nelson.

Factfile: John Martin Group
Head Office: Edinburgh
Founded: 1964
Turnover (2003): £230m
Pre-tax profit (2003): £3.5m
No of sites: 15
Franchises held: 27
Employees: 1,000
Management team: John Martin Snr, chairman; John Martin Jnr, operations director; Gordon Nisbet, managing director; Paul Nelson, finance director

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