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‘Powerful US performance' drives Group 1 to record financial results

Earl J Hesterberg, Group 1 Automotive

Group 1 Automotive boss Earl J. Hesterberg has said that the retail group had been able to overcome “serious challenges presented by Brexit uncertainty in the UK” in 2019 thanks to its “powerful US performance”.

Hesterberg, the AM100 retailer’s president and chief executive officer, told a full-year results presentation that the business achieved a 3.8% increase in turnover to a record $12 billion (£9.3bn) as total gross profit grew 5.3% (6.2 percent), to a record $1.8bn (£1.4bn).

UK market revenues rose by 1% to $2.41bn (£1.87bn) and gross profit decreased by 4.4% to $267.7m (£207m) as total new car sales declined by 3% to 37,565 and used car sale rose 0.3% to 53,815.

Hesterberg indicated that the UK business’s overall performance had been hampered by Brexit uncertainty, shrinking margins and supply issues, particularly with regard to UK premium partner Audi, during 2019.

“Our (total) adjusted net income number represented a 13.4% increase in our adjusted earnings per share performance, a 22.7% increase over last year,” he said.

“This strong performance was driven by our US operations. On a full-year, same-store basis, we grew used retail unit sales by 8.4% and after sales gross profit by 9.5%, two remarkable numbers.

“Our powerful U.S. performance was able to overcome the serious challenges presented by Brexit uncertainty in the UK market last year.”

Group 1 reported that it had experienced new and used vehicle margin declines of approximately 15% in the UK last year as a result of “weak overall demand in the market and excess supply”.

Hesterberg added: “We also suffered from supply shortages of key models in our biggest business, Audi, due to the latest round of new vehicle emissions regulations impacting the OEM supply chain.

“However, we're optimistic about the UK market in 2020 as the new and used margin declines improved to approximately 4% in the fourth quarter.

“The Audi supply chain issues are mostly resolved. And we've seen more foot traffic in many of our stores following the December 12 general election.

“We're also optimistic that our 2019 cost-cutting efforts will pay benefits in 2020.”

Despite the market uncertainty, Group 1 invested heavily in its UK operations during 2019.

In August it acquired five Volkswagen car and van franchises - in Chelmsford, Colchester, Romford and Southend - from Inchcape Retail, adding an anticipated £93m to its UK revenues.

Speaking after the acquisition, Hesterberg said: “The OEM very much wanted us to acquire those Volkswagen franchises as they're contiguous to our existing stores. So we did that in concert with the OEM.”

He added: “The Volkswagen brand has been recovering nicely in the UK after the diesel issue of a few years ago.

“So we really didn't plan on that. That was circumstantial but it will work out well for us and the OEM long term.”

The second half of 2019 also saw Group 1 Group 1 Automotive open the doors to its new flagship five-storey Beadles Jaguar Land Rover (JLR) dealership in North West London and a new 17-car Audi facility in Chelmsford.

In November Group 1’s UK managing director Darren Guiver left the business.

Guiver, who was appointed as managing director of the UK operations of the AM100’s ninth-ranked franchised retail group by turnover back in March 2018, told AM at the time that he simply wanted to step away from the business to spend “quality time” with his family.

He said: “I just wanted some quality time for myself and my family,” he said. “I have enjoyed every minute of working with Group 1 and (president and chief executive) Earl, but the time has come to take some time to step back and do some of the things I want to do.”

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