TREVOR JONES FCA FIMI FOUNDER ASE PLC OSLO APRIL 2015

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Michael Atkinson
5 years ago
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1 TREVOR JONES FCA FIMI FOUNDER ASE PLC OSLO APRIL 2015

NORWEGIAN RETAIL MOTOR SECTOR RESULTS VEHICLE REGISTRATIONS 2012

2 NORWEGIAN RETAIL MOTOR SECTOR RESULTS VEHICLE REGISTRATIONS , , % , % % OF DEALERS IN LOSS %

3 HOW TO DELIVER STRONG DEALER PROFITABILITY? HELPING DEALERS TO HELP THEMSELVES

4 EUROPEAN DEALER RESULTS 13 SECOND HEALTH CHECK TARGET YEAR 2012 YEAR 2013 YEAR 2014 Overhead absorption 80% 58% 58% 61% Used Retail to New retail 1.5:1 0.7:1 1.0:1 1.0:1 Vehicle Expenses as a % of Vehicles Gross Profit 50% 64% 64% 63% Sales per Sales Executive Used Vehicle Days in Stock 45% % Used Vehicle Return on Investment 100% 35% 48% 47% Overall Efficiency 95% 80% 81% 80% Labour Gross Profit % 65% 62% 63% 62% Service Expenses as a % of Service Gross Profit 40% 65% 57% 63% Hours Sold per Retail Repair Order Parts Gross Profit % 35% 27% 27% 28% Parts Exspenses as a % of Parts Gross Profit 40% 34% 31% 32% Parts Stock Return Net Profit as a % of Turnover 3.00% 1.00% 1.10% 1.20%

5 WHAT ARE THE MOST CRITICAL PROFIT DRIVERS? Euro All Makes Benchmark Top 10% (UK) Overhead Absorption 61% 80% MIN 90% Vehicle Expenses as a % of Vehicle Gross profit 63% 50% MAX 49% Net Profit as a % of Turnover 1.20% 3.0% 4.6%

6 NORWEGIAN DEALER RESULTS 13 SECOND HEALTH CHECK YEAR 2014 Overhead absorption 76% Used Retail to New retail 1.0:1 Vehicle Expenses as a % of Vehicles Gross Profit 80% Sales per Sales Executive 121 Used Vehicle Days in Stock 65 Used Vehicle Return on Investment 38% Overall Efficiency 82% Labour Gross Profit % 66% Service Expenses as a % of Service Gross Profit 56% Hours Sold per Retail Repair Order 1.7 Parts Gross Profit % 39% Parts Exspenses as a % of Parts Gross Profit 25% Parts Stock Return 5.1 Net Profit as a % of Turnover 6 1.0%

7 Will the channel to market change in the next 5 years? Current dealership structure likely to survive Manufacturers believe that a route to market could be via virtual showrooms A massive move to smart phones for online searches Customers like to see used cars before they buy Failure of Tesco Cars in the UK The in-store experience must be compelling Will production be reduced to bring the supply/ demand equation back into equilibrium? Much more focus on used cars and customer retention Dealers need to be profitable OTHER CONSIDERATIONS European Economic Issues Russia Tesla 7

8 How will the retail sector have to adapt to maximise volume & profit opportunities? An inability to retail used cars to optimum levels Issues - Cultural We are new car dealers Profiling too many nearly new cars No buying policy Presenting used cars around the back Not enough attention to website lack of videos No understanding of return on investment Forget cars, think cash Are you a collector or an investor? New car volume targets are supply lead not demand lead 8

9 Matters to consider in respect of used cars 1. Know the market 2. Plan the inventory 3. Buy % of cars for Cash 4. Quality of the presentation of the cars 5. On display within 3 days 6. Adequate margin in each car 7. Marketing of the stock 8. Delivery within 2 days of signed order C O N T R O L 9

10 Matters to consider in respect of used cars The stronger the used car department The more new cars you will sell Forget cars think cash Are you a collector or an investor? 10

11 Matters to consider in respect of used cars Why aren t customers turning up? Wrong stock? Wrong price? Wrong marketing? Not enough attention paid to the internet site Not enough quality photos 11

12 Matters to consider in respect of used cars The importance of stock turn and return on investment (ROI) Turn, Turn, Turn 12

13 Matters to consider in respect of used cars RETURN ON INVESTMENT EXAMPLE 1 TARGET 100%

14 Matters to consider in respect of used cars RETURN ON INVESTMENT EXAMPLE 2 FRONT GROSS COST OF SALE % RETURN DAYS IN STOCK TURNS PER YEAR 1 12, , % % 2 11, , % % 3 11, , % % 4 10, , % % 5 10, , % % ROI NORWAY RESULTS I don t want to trade it because I cannot replace it I have to retail my way out of it 14

15 Matters to consider in respect of used cars STOCK ANALYSIS UNITS VALUE AV PER UNIT STOCK L EVEL 43 5,700, ,558 DAYS IN STOCK 0-30 DAYS 12 1,425, , DAYS 9 1,140, , DAYS 8 1,026, ,250 NORWAY RESULTS 90+ DAYS 15 2,109, ,600 15

16 Matters to consider in respect of used cars DAILY REVIEW OF YOUR INVESTMENT Oldest used cars in stock Most expensive used cars in stock Total investment in used cars Total selling price of used cars (margin) Average cost price on used cars The difference between the internet price & the transaction price

17 SHARING INFORMATION? 17

18 How to deliver strong dealer profitability? Helping dealers to help themselves 18

19 UK Motor retail Profitability Statistics January 2015 Breakeven January for average UK motor dealer shows challenges of current market and high targets The average UK motor dealer made a loss of 59 for the month of January, a deterioration of over 9,000 on the profit made for the same month in This has produced a significant drop in the rolling 12 month return on sales ratio which has fallen to its lowest level in over a year. New vehicle sales levels were marginally down on the prior year in the month. Given the official registration statistics for January showed a growth of 6.7% on January 2014 we can see tangible evidence of an increase in self registered vehicles now coming through the figures. Used vehicle volumes performed slightly better than new being marginally up on January 2014 however gross profit was down at 10.5%, its lowest level in recent years. This was a result of high average stand in values and profit per unit falling below 1,000. We remain very concerned about the impact self registered cars are having on used car stock profiles with average stand in values rising in January as the cars registered in September 2014 enter mainstream stock available for sale. Service hours were static in January albeit with a further improvement in overall efficiency which is pleasing to see. A key indicator to 2015 financial results will be performance in the pivotal first quarter. Whilst we will produce an increased level of registrations it looks like this will be through fleet and self registrations and therefore at the expense of profit. KEY Ratio Net Profit as % Sales Overhead Absorption 19 Rolling 12 months Jan 2015 Rolling 12 months Jan 2014 Bench -mark 1.40% 1.49% 3.0% 54.7% 56.7% 80% Used: New Sales 0.87:1 0.90:1 1.5:1 Vehicle Sales Expenses as % Gross Sales per Salesman Used Vehicle Stockturn (days) Return on Used Car Investment Overall Labour Efficiency Service Gross Profit % on Labour Service Expenses as % Gross Hours per Retail Job Card Parts Gross Profit % Parts Expenses as % Gross 62.7% 62.1% 50% % 80.1% 100% 82.0% 81.2% 100% 75.6% 75.8% 75% 58.8% 56.8% 40% % 22.4% 22% 44.6% 44.4% 40% Parts Stockturn

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Dealer Profitability in the Current Economic Climate. Presenter Trevor Jones F.C.A FIMI Founder ASE Plc

Dealer Profitability in the Current Economic Climate Presenter Trevor Jones F.C.A FIMI Founder ASE Plc Brief With the current economic situation and saturated markets, what will dealers have to do to improve