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AM100 2017: Car dealers should fix the roof while the sun shines

Last year’s commentary on the AM100 opened with the phrase “another record year”. Well, you have done it again: Total industry volume (TIV) reached new heights at nearly 2.7 million units; AM100 turnover reached £63.3 billion, an increase of 10% on last year’s record of nearly £57.5bn; AM100 groups now employ more than 120,000 staff:  they sold 2.75 million new and used cars and LCVs; and the AM100 controls almost 3,000 outlets.

Perhaps most significantly, acquisitions and disposals mean a record £3.1 billion of turnover changed ownership last year.

There were some significant moves in 2016 and the early part of 2017, both in scale and in strategic terms:

♦ Marshall’s acquisition of Ridgeway in May 2016, included in last year’s AM100, was one of the largest deals this side of the millennium, representing a significant increase in scale, mainly with existing brand partners.

♦ Group 1 continued its charge up the AM100 table, adding Spire and City Motor Holding’s Ford operation.

♦ Sytner’s purchase of CarShop stood out more in terms of strategic direction than scale, adding a

significant used car operation to the largely premium franchised business. A number of groups have recently increased their focus on used car operations.

♦ Lookers continued to grow its premium portfolio with Drayton Group’s Mercedes-Benz sites and some of Knights’ BMW sites.

♦ Jardine, after some disposals (Toyota to Steven Eagell) added to its Jaguar Land Rover relationship by acquiring Colliers and strengthening its BMW holding by buying Carrs.

♦ Hendy, after a number of years of organic growth, bought Lifestyle and jumped 10 places in the table.

♦ Swansway expanded its existing relationship with Audi by adding Thompson, moving turnover close to three quarters of a billion pounds.

♦ Steven Eagell acquired a number of Lexus and Toyota sites, taking it from one site at the beginning of the century to 12 sites today.

♦ Motorline continued its growth, acquiring Westlands.

♦ VT Holdings added Wessex to its existing businesses, Colt Cars and Griffin Mill.

♦ Vertu added Greenoaks Mercedes.

♦ Snows added three sites from City Motor Holdings.

♦ Most recently, Super Group UK added Essex Auto Group to its Allen Ford business, producing the largest increase of all the recent deals, in percentage terms.

It is a long list, which many may assume changes the landscape of the AM100. The acquisitions are significant for each business involved.

Sytner is the new number one, momentous in that Pendragon has been number one for as long as a lot of people can remember. But it only means a one-place gain. Lookers remains in third, Arnold Clark in fourth. Vertu, despite some further growth, just swaps places with Inchcape.

Elsewhere the moves are rather more dramatic – Swansway, Steven Eagell, Hendy, Super Group, Hatfields all rose between 10 and 14 places on the back of their acquisitions.

Despite all the records, AM100 turnover is up only 10% year on year, less than last year’s increase. In fact, less than the growth in any of the past three years. In the same period, the private new car market was down 0.2%.

 

Turnover growth by percentage and volume

 Rank 2017  Group  Turnover growth (%)   Rank 2017   Group  Turnover growth (£)
33 Super Group UK 60.60% 1 Sytner Group 972,000
7 Marshall Motor Holdings 58.90% 7 Marshall Motor Holdings 823,415
13 Mercedes-Benz Retail Group UK 49.50% 3 Lookers 763,841
19 Swansway Garages 47.10% 13 Mercedes-Benz Retail Group UK 379,292
31 Hendy Group 37.50% 5 Inchcape Retail 314,581
24 Rybrook Holdings 33.80% 4 Arnold Clark Automobiles 305,720
48 City West Country 32.60% 10 Group 1 Automotive 266,579
56 Hatfields 31.70% 19 Swansway Garages 224,000
28 Dick Lovett Group 29.40% 8 Jardine Motors Group 218,248
32 Lloyd Motors 28.00% 33 Super Group UK 181,684
79 Steven Eagell 27.40% 24 Rybrook Holdings 145,186
29 Motorline 26.60% 31 Hendy Group 133,740
78 Brindley Garages 25.60% 11 Listers Group 127,259
61 Sandown Motor Group 24.00% 6 Vertu Motors 121,081
1 Sytner Group 22.60% 28 Dick Lovett Group 117,901
51 Beadles Group 22.30% 29 Motorline 108,897
10 Group 1 Automotive 22.20% 32 Lloyd Motors 106,475
3 Lookers 20.90% 14 Greenhous Group 104,705
35 Sinclair Group 20.00% 16 Renault Retail Group 100,000
60 Snows Motor Group 19.30% 2 Pendragon 83,100
45 Westover Group 18.90% 48 City West Country 74,055
89 Foray Motor Group 18.80% 35 Sinclair Group 73,042
65 Caffyns 16.20% 23 Helston Garages Group 69,000
67 Currie Motors 15.90% 56 Hatfields 66,143
16 Renault Retail Group 15.60% 12 JCT600 60,305

 

The top 10 groups account for 49% of AM100 turnover, up from 47% last time and only up from 46% five years ago. The top 20 groups now cover 63% of AM100 turnover, vs 62% last year and 61% five years ago.

The entry point to the AM100 has dropped from £130m last year to £126m this year. This is one effect of the acquisitions – groups leaving the list through takeover by a larger group create “vacancies”, which will by definition be filled by smaller groups. However, there have been years of major acquisitions before, and the threshold has still risen.

Some commentators have observed that we are reaching “peak car”. Maybe we are also reaching “peak group”.

Whether or not that is true, what is unavoidable is my conclusion that massive consolidation has not arrived. However much commentators who routinely talk about “massive consolidation” and “massive change”, it is not supported by fact. There is a very slow drift towards less fragmentation, but looked at over 20 years, it is not massive.  Neither has there been any notable change in the business model.

 

Profit per outlet

 Rank 2017  Group  Profit per outlet (£) Rank 2016 Group Profit per outlet (£) Rank 2015 Group Profit per outlet (£)
52 Porsche Retail Group 1,920,400 51 Porsche Retail Group 1,767,600 58 CEM Day 1,125,545
64 CEM Day 1,076,364 63 CEM Day 1,203,182 86 Thompson Motor Company 889,333
56 Hatfields 984,091 82 Thompson Motor Company 957,000 22 Harwoods 819,188
1 Sytner Group 923,077 64 City West Country 951,875 2 Sytner Group 751,880
39 Halliwell Jones Group 751,000 2 Sytner Group 872,180 74 Currie Motors 709,600
59 Peoples 705,100 35 Dick Lovett Group 810,000 69 SG Smith Group 680,000
28 Dick Lovett Group 702,938 29 Peter Vardy 792,857 35 Dick Lovett Group 667,500
69 Stephen James Group 701,143 23 Harwoods 752,875 57 Porsche Retail Group 640,000
22 Harwoods 687,941 68 Hatfields 676,300 94 Marsh Wall 612,500
48 City West Country 675,615 4 Arnold Clark Automobiles 627,443 4 Lookers 609,016
36 Peter Vardy 671,733 37 Halliwell Jones Group 576,600 3 Arnold Clark Automobiles 585,261
4 Arnold Clark Automobiles 646,752 59 Peoples 552,000 18 John Clark Motor Group 556,818
67 Currie Motors 580,800 3 Lookers 541,176 72 Jacksons Bournemouth 530,857
3 Lookers 577,439 49 Drayton Motor Group 524,500 71 Knights Group 520,500
71 William Morgan 517,333 1 Pendragon 502,500 73 Hatfields 499,545
5 Inchcape Retail 515,173 98 Marsh Wall 479,750 5 Inchcape Retail 493,694
2 Pendragon 511,111 67 Stephen James Group 476,714 30 Peter Vardy 491,438
61 Sandown Motor Group 492,375 92 Steven Eagell 470,250 33 Spire Automotive 458,059
26 Eastern Western Motor Grp 479,167 11 JCT600 468,354 64 City West Country 456,818
9 TrustFord 444,778 28 Swansway 461,111 55 Drive Motor Retail 452,700

If this represents a trend – “peak car” being shorthand for market saturation – then there is a compelling reason to look for the overdue change in the business model.

There is plenty to go for. Used car penetration for franchised dealers is poor, most focusing on the younger, lower-mileage sector that represents a minority of the market. The proportion of service and repair work retained by the franchised sector is also a fraction of what is available.

There may be increased emphasis on service work and on used car sales, but it doesn’t show through in results, with one exception. The total hours sold reported this year is, by and large, significantly greater than those reported last year.

However profitability has, for many, declined and the early reports on 2017 indicate it is getting even tougher.

 

Profit before tax – top performers

Rank 2017 Group PBT (£'000) Rank 2016 Group PBT (£'000) Rank 2015 Group PBT (£'000)
4 Arnold Clark Automobiles 125,351 4 Arnold Clark Automobiles 110,387 3 Arnold Clark Automobiles 107,282
1 Sytner Group 121,000 2 Sytner Group 105,000 2 Sytner Group 90,000
3 Lookers 77,100 1 Pendragon 70,100 4 Lookers 62,300
2 Pendragon 75,400 3 Lookers 68,600 1 Pendragon 60,200
5 Inchcape Retail 49,476 5 Vertu Motors 25,825 7 Jardine Motors Group 24,780
6 Vertu Motors 32,516 11 JCT600 18,616 6 Vertu Motors 21,000
7 Marshall Motor Holdings 25,400 31 Glyn Hopkin 16,158 12 JCT600 18,565
9 TrustFord 18,975 7 Marshall Motor Holdings 15,400 11 Listers Group 14,143
11 Listers Group 16,027 *Acq Ridgeway Group 14,845 23 Helston Garages Group 13,500
12 JCT600 13,604 24 Helston Garages Group 14,700 10 Marshall Motor Holdings 13,453

We have often commented that businesses prosper when customers perceive that a business adds value at every touch point. It is people who add value. Therefore, a reduction in staff leads to a reduction in value, promoting or accelerating a downward spiral.

However, you cannot just add staff – that would lead to an unsustainable cost base. What is required is to identify the waste in the organisation’s processes, eliminate it and therefore allow the same number of staff to deliver more value.

This is not happening. If it were, the increasing number of cars and hours sold would be delivered by the same number of people (or the numbers would increase more slowly). Customer service would not suffer, costs would not rise and the AM100 would make more money.

For example, the number of cars sold per employee has been stable at about 24 units for year after year.

PIERS TRENEAR-THOMAS

 

Notes on the AM100

♦ Information in the AM100 is derived from responses to our questionnaire or from statutory accounts. Where no questionnaire has been returned and statutory accounts are not sufficiently current, an estimate is made.

♦ Profits are adjusted, where information is available, to eliminate exceptional items. Profit percentages are calculated on the unadjusted turnover numbers. Turnover is net of VAT.

♦ In order for the table to be as current as possible, information in the public domain, principally relating to acquisitions and disposals, is used to update questionnaire responses or statutory accounts.

 

 

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