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Group 1 Automotive UK CEO reflects on buoyant post-COVID performance

Earl J Hesterberg, Group 1 Automotive

Group 1 UK chief executive Earl J Hesterberg expressed hopes that strong car retail margins would persist for some time to come after recording increased profit and turnover in Q3 2021.

The US-based car retail group’s financial results showed that its UK operations had delivered gross profit up 18.3% to $103.7m (£76m) and turnover growth of 1.3% to $750.4m (£550.2m) during the period.

Across its 191 retail operations across the US, UK and Brazil, meanwhile, its total revenues increased 15.4%, to $3.5bn (£2.57bn) as total gross profit increased 27.6%, to $653.2m (£479m).

Hesterberg said that Group 1 had benefitted from the market tailwinds of “strong vehicle margins” – the result of limited availability and strong demand – and said that the business had been able to “more than offset unit sales declines, as well as continued growth in after sales and impressive cost control”.

Expressing hopes that the trend would continue for some time to come, he added: “Consumer demand for vehicles remains extremely strong heading into the fourth quarter. And we continue to sell most units almost immediately after OEM delivery.

“This dynamic should continue throughout the fourth quarter, and potentially much further out, assuming no material change in consumer demand.”

Hesterberg acknowledged that automotive retail’s new car supply issues, resulting from shortages of semiconductor microchips and other components, were creating issues for the sector, however.

He told investors that Group 1 now had backlogs of orders in the UK extending into Q2 2022.

“As with the US, consumer demand for vehicles in the UK is extremely strong. But new vehicle availability is severely constrained,” he said.

“We have an order bank with most of our major UK brands extending into the second quarter of next year.

“Strong margins were able to more than offset sales declines due to inventory shortages. And we’re proud to report that we generated an all-time record quarterly profit in the third quarter of 2021.”

But Hesterberg added: “We believe pent-up demand built over the past several years due to both Brexit and the pandemic will help drive strong UK vehicle demand into the foreseeable future,” he said.

In July this year Group 1 added nine car dealerships with the acquisition of Robinsons Motor Group, taking its total UK operation to 55 locations.

While Group 1’s latest financial statements revealed that it is well positioned to grow through acquisition, it also highlighted the impact of new efficiencies leveraged as a result of the COVID-19 pandemic.

Cost savings and streamlined processes were both credited with the improved financial performance.

Hesterberg said: “We've increased the productivity of our salespeople by 30%, pre-COVID versus today.

“There is absolutely no reason to go backwards on that, selling 13 or more units a month instead of 10. Same with our technicians, they are at least 25% more efficient.”

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