Partnered with long-time colleague and former CD Bramall chief executive Peter Jones, Bramall has established a three-outlet Audi group following the Pendragon deal. Two sites were acquired back from Pendragon in May 2004, which was not a preferred Audi partner; the third was bought from Gilders in January.
So will this be CD Bramall mark three? “We do have plans to expand to 15-20 sites initially, but we are in no rush to do this,” says chairman Tony Bramall. His focus is strategy and planning; Jones’s on day-to-day operations. “There’s not enough to keep us busy at the moment – we are trying to alter that,” Bramall adds.
Prestige marque is the way forward
The focus is on premium franchises, principally Audi (Jones: “The pleasant surprise is just how much more new product there is to come”), BMW, Mercedes-Benz and VW. Twenty dealerships selling these brands would take Bramall and Jones comfortably beyond £300m turnover, and into the AM100 top 25.
Growth won’t be easy: premium franchises attract a lot of interest from plcs and regionals when opportunities come onto the market, which drives up the price, but in Jones, Bramall has the perfect partner. While chief executive at CD Bramall, Jones identified the need to build the prestige side of the business, which, at the time of the sale, had grown to 22% of turnover.
Block exemption has also seen property prices rise, although Bramall says that “on the whole” the revised rules have been positive for the industry. “Dealers have more security and it has driven showroom prices up because they have more flexibility in who they sell to,” he says.
“Manufacturers can still influence the relationship but a degree of realism comes in. It’s better as an invited guest, working with the manufacturer.” Jones adds: “Even when the business is not sold to a preferred buyer, it will still influence the price upwards. You get a fair value. A lot of consolidation wouldn’t have taken place without block exemption changes – the CD Bramall deal wouldn’t have happened.”
Raising funds to finance acquisitions shouldn’t be a problem. CD Bramall enjoyed an enviable position in the City compared to most of its dealer group rivals. Its consistently high profits and return on capital employed performance ensured share prices stayed buoyant and investors were kept happy. “We can leverage fairly highly if we need to. We have credibility with financial people,” says Bramall.
“We will consider sites where we think we can add value and what is geographically manageable from our base in Harrogate. We have been round all the manufacturers that we are interested in and we have clearance to get involved with the franchise – a green light for progress.”
He’s relaxed about the time frame, pointing out that the next 12 months are focused on refurbishing or relocating the existing three outlets. Around £1m has been earmarked for the Lincoln showroom, expanding the used car display area and adding five bays to the workshop (taking it to 12), and bringing the site up to Audi’s GP3 standards. The Derby dealership will be relocated later this year to a 2.9-acre site at Pride Park, and Grimsby will be in new, larger premises by the end of the first quarter next year.
Each investment is based on a business plan outlining the future returns for the dealership. Manufacturers are more aware of the commercial issues, although their expectations still sometimes need holding in check. “Their planning figures can be a bit optimistic; you have to interpret them with your own gut feel and see if this gets the go ahead,” says Bramall.
“You have to have confidence in your manufacturer partners and vice versa. We take a conservative approach to our business plan and ensure we have a sustainable business.”
Brand name will draw in customers
The three dealerships trade under the Audi brand, like all businesses in the network. Growth into other premium franchises could see the Bramall and Jones name adorn signage for the first time.
“Audi is a brand that people relate to more than the dealer business,” says Jones. “The one downside with neutral branding is, if you buy a dealership with poor customer relationships, you have to work much harder to change the perception.”
Bramall adds: “If you have a bigger group, the dealer name becomes more important because you can put across a consistent message on marketing, particularly for volume brands.”
Tight financial controls a strength
Group turnover will rise from £45m last year to £100m this year, putting Bramall and Jones on the fringes of the AM100. But, of course, turnover isn’t the main driver – profit returns are.
Bramall and Jones operates to the same management principles that drove CD Bramall to success. Tight financial controls include strict rules on cashflow and accounting policies, while staff remuneration is linked to group financial performance, which helps to attract good quality, confident people.
The Lincoln site, which has 5.7% market share compared to Audi’s 3.57% national average, has margins of 4.5%. Grimsby holds a 3.8% market share, and earns 2% margins. Bramall says he would “be disappointed” not to be netting at least 3% returns once the refurbishment work is complete. “If we’re getting the returns we won’t be driven out unless we want to sell.”
He believes there will always be room for smaller operators. Manufacturers need a healthy split of plcs, regionals and smaller dealers, particularly for premium franchises. “On the volume side, there will be an increasing number of outlets in the hands of the plcs and large regionals due to the nature of a business focusing on volume sales,” he says. “There will be more consolidation here.”
‘A winning formula’
Piers Trenear-Thomas, industry analyst and consultant, believes Bramall and Jones will have no problems picking up their franchises of choice.
“Tony Bramall and Peter Jones have proved themselves to be good on the detail,” says Trenear-Thomas.
“They concentrated on the basics at CD Bramall and were very hands on, visiting each site on a regular basis and checking on financial data, stocking and cashflow. Everyone knew what the priorities were.
“There’s no reason why that formula shouldn’t stand them in good stead again. “The combination of Bramall and Jones’s plc disciplines in a smaller group environment – and without plc constraints – should be a winning formula.
“Any manufacturer whom they wish to represent should take them seriously.”
Five management rules for success
Company: Bramall and Jones
Turnover (2005): £100m
Number of outlets: Three
Number of staff: 170
New car sales: 3,000
Used car sales: 1,500