AM Online

The big picture: Profit is the only focus

There’s only one reason for owning or managing a business – to make money. Yes, you have to look after staff and customers, perhaps satisfy shareholders or act with a social conscience. But if your P&L account is splashed with red, you’re not doing your job (or not being allowed to do it).

It’s a tough business environment, of course, with falling new car sales, abundant legislation and overbearing carmakers to cope with, and lots of companies are unsure of their future. Profit is not easy to make.

But there are success stories, as the latest AM100 shows, although the tables reveal a downwards trend.

In 2001, when there were just three billion-pound turnover groups and 67 with turnover above £100m, 19 of the top 20 return on capital employed performers achieved 20%-plus. Two groups, Foray and Wayside, shared top spot on 62%.

Now, with seven billion-pound groups and 98 exceeding £100m, the ROCE tables are somewhat different. Porsche Retail is top on 48.8%, and just 11 groups top 20%.

Over that period the industry has been through Block Exemption, which resulted in greater investment demands by carmakers and more administrative costs from audit processes, while the new car market started to decline, putting margins under pressure.

But AM100 turnover over that period has risen, from £27.4bn to more than £35bn. Are groups focusing too much on turnover at the risk of profits? This is certainly the case in a number of cases, something that has been brought into sharp focus by an emerging group of young entrepreneurs.

People like Stephen Lamb at Gordon Lamb, Richard Bryan at Bryan Brothers and Peter Vardy jnr understand that turnover is nothing without profit. They have revived their businesses, in some cases by slashing turnover. And they’re not the only ones.

They have a duty of care to staff, customers, carmakers and themselves – a duty that involves ensuring their future by making money. More carmakers should return that duty by removing cost and restrictions.

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