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Keeping below radar

Arnold Clark Automobiles, the UK’s second largest car retail group, has been buying up substantial chunks of land in England in preparation for expansion over the next couple of years.

Eddie Hawthorne, Arnold Clark managing director, says the group opened 12 dealerships last year, taking the network to 130 sites, but the strategy is to remain “below the radar”.

He adds: “We are not involved in group purchases – our policy is about piecemeal acquisitions and greenfield developments. We are expanding heavily in the north west of England but we have no fixed targets and we will look anywhere for growth with any franchise opportunity. Our big advantage is that we can make a decision very quickly.”

The company raised turnover last year by 5% to £1.7bn, while pre-tax profits remained steady at £57m. Excluding exceptionals (the 2004 figure included a VAT payout and gains from the sale of property), the underlying profit figure rose from £46m to £52m. Return on sales was 3.3%, up on 2004’s 2.9% – underlying profit returns were 3.1% – with all the group’s franchises contributing to its bottom line.

Hawthorne says all but 10 of Arnold Clark’s 130 dealerships are in profit. Refurbishment costs, exceptionals and new-builds were the primary reasons for the sites losing money, with just “one or two” causing concern.

“We will address those sites. Where we have small dealerships that do not contribute to the bottom line, we will assess our options – either to sell to another dealer, sell for property or refranchise,” says Hawthorne. “We have a wide range of franchises, which gives us a chance to have a reasonable performance across the network.”

He describes the 2005 financial result as “better than our expectations”. While new cars fell slightly by 2% to 44,000, compared to the national dip of 5%, used car sales rose above the 100,000 mark for the first time, up 6% on 2004.

Speculation that the group is likely to be floated when owner and founder Sir Arnold Clark, now 78, finally retires is dismissed by the company. Sir Arnold, recently inducted into the AM Hall of Fame, has several family members in the business and is thought to have a clause written into his ownership contract that will ensure they retain control of the company in trust.

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