The business was suffering from lack of investment and focus, but Lavery recognized some key elements which indicated its potential. One was location – it has 650 metres of frontage on a major road in Swindon, only a few hundred metres from the town’s largest shopping park.
Another was its manufacturer representation. It has full new car sales franchises for Jaguar, Citroën and Seat, plus authorized repair franchises for Ford, Mazda, Saab and Rover, which enables it to market to a wide spread of Swindon’s populace.
Lavery had been working with his financial partner, Sebastian McKinlay of Promethean Investments, for a year before completing the Swindon acquisition last August.
The five-year plan is to build Cambria Automotive Holdings into a top 20 AM100 dealer group, turning over around £500m a year from 35-40 dealerships (that would place it at No 14). These will concentrate on three regions: the Midlands and north-west and south-west England.
McKinlay says the argument for investing in Cambria Automotive Holdings is compelling, as the business is asset-backed and has a first-rate management team. Promethean, which has a 50% stake in the business, put in £2.6m for the Swindon purchase, and has another £10m ready for bolt-on acquisitions.
But Lavery says he won’t rush expansion for the sake of growth, as he wants to select the right businesses which he can improve. Targets are likely to be in “tier two” towns, with examples cited as Wolverhampton and Reading. Lavery will focus on the profitability of nearly new/used cars and aftersales.
#AM_ART_SPLIT# “We think there’s a very good market out there in tier two operations which aren’t performing well and are interested in consolidation. We’re in talks with businesses at the moment,” he says. He had expected to add half a dozen dealerships within the first six months, however progress has been slower.
The deal for Swindon came off after a couple of other potential acquisitions had already been turned down in the late stages of due diligence as problems emerged.
Lavery’s business plan has allowed two years to turn Swindon Motor Park around. He describes the business as “haemorrhaging money” when he took it over last summer. Its last filed accounts, from 2005, show a loss of £0.14m from £7.65m turnover. Within the first few months it had increased sales five-fold.
“It’s about getting the structure, marketing and customer service right,” says McKinlay.
Under Lavery’s strategy, the company now regards visitors as “guests” rather than customers. He explains: “Because choosing a car is a big ticket purchase, it is traumatic for consumers to come over the threshold of the dealership. We want our associates to treat our customers as if they were in their own home, to give them an experience they will want to repeat.”
He recognizes the importance of staff satisfaction too. Within months of taking over the business, he has invested in significant training for employees, and recruited a number of department managers who have come from the ranks of groups such as Inchcape and Reg Vardy.
He also refers to the workforce as associates rather than employees, and says his aim is for them to be proud of the business and the role they can play in its success.
Lavery believes in welcoming staff empowered to deal with problems quickly to keep customers happy.
“If we’ve got something wrong we apologize, recognize our mistake and act on it, and give a small gesture such as a free valet, a discount, or some flowers or wine. It’s something unexpected, and it means they’ll tell their friends how helpful we were.”
#AM_ART_SPLIT# City looks to motor retail
Some City investors are taking a more positive view of the motor retail industry in its current climate of consolidation.
Cambria got itself on the map last August with the help of fund manager Promethean Investments, which has allocated a conditional equity facility of up to £10m to fund the business’s growth through acquisitions.
Key to its interest has been Mark Lavery’s considerable experience in motor retailing, gained while with Hartwell Group and Reg Vardy, plus his recruitment of a high quality management team. Promethean also identifies the investment value in underperforming businesses which can be improved.
In November, former Reg Vardy group MD Robert Forrester launched a similar venture, Vertu Motors, and began courting City investors. Its flotation on AIM, the Alternative Investment Market, one month later raised £25m which Forrester plans to use to acquire underperforming dealerships.
Forrester is building an experienced management team, which includes former Reg Vardy group financial controller Karen Anderson and its former audit committee chairman Bill Teasdale. Vertu Motors has yet to make its first dealership acquisition.
Name Cambria Automotive Holdings
No of sites: 1
No of staff: 70
New car sales: 550-600 units
Used car sales: 1,500 units
Franchises: Jaguar, Seat, Citroën, authorized repairer for Ford, Mazda, Saab and MG Rover/Xpart.