2008/09 recession was the worst since the 1930's in terms of its impact on UK GDP but few would have expected the post-recession recovery to take so long. In the second annual Motor 150 report BDO have looked at the motor retail sector’s performance through 2010 into 2011 and considered what the current endurance test means for motor dealerships going forward. It is encouraging to note overall the industry had a better year in 2010. The report is compiled from the consolidation of the top 150 motor retail groups in the UK and shows that combined turnover increased from £35bn to £39bn, more importantly profit before tax increased from £360m to £483m resulting in a return on sales for ‘the group’ of 1.21% and net debt reduced to £1.7bn from a high of £2.7bn in 2008. But by the end of 2010 a ‘winter of discontent’, appropriately marked by heavy snow crippling economic output, signalled the start of our current plodding pace of recovery.
So whilst the early part of 2010 showed signs of recovery to pre-recessionary levels and the second half of the year continued to be steady, we have seen trade slow down from mid 2011 due to the end of the governments scrappage scheme, the austerity cuts from the Government beginning to take hold and continued concerns with the Euro. This reduction in profitability has continued into 2012 and as a result over the past 6 months we have seen more corporate finance and business recovery acquisition than for a number of years.
Within the Motor 150 we’ve had a few runners drop out and several who have ‘lost a few pounds’, financially and structurally, while making themselves fitter. Setting the pace would appear to be the prestige franchises (i.e. Mercedes, BMW, Audi, Land Rover) and those dealers who closely monitor costs and ensure controls and processes are as efficient as possible.
So, who is up for the long run? Many companies are in better shape now than they were during the 2010 review period, but our advice remains the same: The retailers who succeed going forward will need to:
Those motor dealers who want to cross the finish line will need to be prepared to adapt to meet market requirements, learn new skills, and be ready to face a more competitive atmosphere, including greater M&A activity and industry consolidation.
If you would like to discuss any of the issues raised in the Motor 150 Report, or to find out how our Motor Retail team could help your business please contact Steve Le Bas on 023 8088 1906 or send an email to firstname.lastname@example.org
6 March 2012