Phoenix Car Company has reported record full-year profits in the wake of the recession.
The Paisley-based group, which has 20 dealerships across six sites, saw pre-tax profits of £2.5 million last year in comparison to a loss of £3.7m in 2008. This was despite a flat turnover of £136m.
John McGuire, Phoenix managing director, told AM the turnaround was possible because the company took action before the recession set in.
He said: “We cut back on everything that wasn’t essential at the time, so marketing, sponsorships and advertising was all taken back.”
Phoenix didn’t cut training and continued to invest in its people. Staff that left the company weren’t replaced, taking headcount down by 34 to 397.
McGuire said: “When things started to turn round our business was then in a positive position to capitalise.
“The strengthening of used car values was a big help and we did 1,500 scrappage sales.”
The company has changed its business strategy to fund new acquisitions with its own cash rather than the bank’s.
McGuire said: “We know this is the right way to go forward now. We’re trying to reduce our gearing and we’re still looking to grow with all our franchises, but those new developments will be bought with our own money.”
Phoenix has seen organic growth from its aftersales and parts operations this year.
McGuire said: “Used car sales are going well, but acquiring quality stock will be a problem in the second half of the year.”
He believes incorrect price guide valuations are damaging the market, making it more difficult to find quality stock at the right price.
McGuire said: “VAT will also be a big problem. I don’t agree that a 2.5% increase won’t be noticed by customers. When VAT was reduced we were able to convert a lot of deals because of that price decrease.”
McGuire believes the price increase will put off customers next year which will mean a fillip in sales in Q4 to beat the VAT rise.
He said: “We believe we can take 10% of the Scottish market in the next 10 years. We were expecting the new car market to be at 1.7m for the next few years, so a 1.9m market is positive for us. We’re confident we can remain profitable next year despite the challenges ahead.”