Pitcher Partners Automotive

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1 Pitcher Partners Automotive Key performance indicators for automotive retailers 2018/2019 edition (Luxury and Non-Luxury)

2 Contents Automotive services 1 Non-luxury edition 2 Luxury edition 4 About Pitcher Partners 6

Automotive services Welcome to the 2018/2019 Pitcher Partners Automotive Key Performance Indicators for Australian Automotive Retailers Non Luxury and Luxury Editions New vehicle sales The sale of

3 Automotive services Welcome to the 2018/2019 Pitcher Partners Automotive Key Performance Indicators for Australian Automotive Retailers Non Luxury and Luxury Editions New vehicle sales The sale of new vehicles has seen a reduction in units sold for the calendar year 2018 in comparison to the same period in Total vehicle sales in June 2018 amounted to 130,300 units, which represents a 2.9% reduction on the 134,171 units sold in June However, overall new vehicle sales have increased by 1% to 605,522 units for the six month period to 30 June 2018, in comparison to the 599,552 units sold in the six month period to 30 June The increased trend in SUV and light commercial vehicles has continued into 2018, with the Toyota Hilux and Ford Ranger models accounting for Australia s two highest selling vehicles. These two vehicles continue to perform well in the first half of calendar year 2018, with over 26,000 Toyota Hilux vehicles sold and over 22,000 Ford Ranger vehicles sold in the six month period to June With regards to the 2017 calendar year, official sales amounted to approximately million units, which accounted for a 1% increase in sales for the 2016 calendar year (1.178 million units). This was another record year of sales and is the eighth consecutive year in which new car sales have exceeded one million units. Consistent with previous years, Toyota and Mazda continue to generate the highest volume of sales, with Hyundai, Holden and Mitsubishi rounding out the top five vehicle sales by manufacturers, and accounting for approximately 51% of total new retail vehicle sales in calendar year However, we also witnessed Ford falling out of the top five sales by manufacturer, despite having its Ford Ranger model as the second highest selling vehicle in the 2017 calendar year. Australian economy The Australian economy accelerated in the first quarter of 2018, recording a (seasonallyadjusted) rise of 1%, the fastest growth rate in two years. This took the year-on-year GDP growth rate to 3.1% (a seven year high). Despite increased activity in many parts of the economy, household consumption continues to be relatively subdued. Consumer spending increased by just 0.3% in the first quarter and is largely a result of negligible wage growth (the lowest on record) and high debt levels. Household savings are unlikely to be re-directed into consumption whilst these two factors exist, which may impact on new vehicle sales moving forward. Retail automotive challenges A key issue impacting the future profitability of the retail automotive industry in Australia is in relation to commission models and structures in the context of ASIC s prohibition of flexible commission arrangements as announced in March 2017 and effective from 1 November ASIC s decision not only means the banning of flex-commissions, but also imposes restrictions on interest rates and origination fees, giving greater power to lenders. This decision will impact dealership profitability and will mean a shift in focus towards penetration in order to maintain current commission levels amongst tightening credit conditions. We also have the ACCC focusing on the new car retailing industry, issuing a final report on 14 December 2017 with key market observations centred around protections for customers when purchasing new cars and access to information and data required to repair and service new cars. Other key issues impacting the automotive industry are with reference to technology and innovation, with the emergence of various car sharing companies in the last few years. This presents challenges to automotive dealerships as consumers attitudes towards car ownership is changing and may result in declining demand for vehicles in the future. This is also compounded by surging online vehicle sales, which are continuing to increase each year. Further, automotive dealerships are rethinking their current business models, with shifts to online/virtual platforms starting to come in to effect. Dealerships will need to focus on and adapt with technological developments that will result in better relationships with the manufacturer, dealer and consumer. Conclusion Overall, we expect new vehicle sales to continue to hover around the one million sales mark for calendar year 2018, in line with VFACTS forecasts, with sales of SUV s continuing to underpin this growth. The unknown With the potential for disruption in the traditional retail automotive business model, the dealer will need to shift from a product-driven model to a customer-centric one and become the preferred provider of mobility solutions (with autonomous driving technology and a world of car sharing changing customer preferences). Dealers will also need to work hard in maintaining their position as original equipment supplier workshop providers. The new world of automotive retail will require dealers to rebalance their physical and digital assets. In saying that, dealers have always been good at adapting an innovative car dealer is a car dealer of the future. 1

Non-Luxury edition The Big Picture Dealership Profitability 2018/2019 KPI Gross Contribution 2018/2019 KPI Net profit % sales 3.0-3.

4 Non-Luxury edition The Big Picture Dealership Profitability 2018/2019 KPI Gross Contribution 2018/2019 KPI Net profit % sales % New 33% Rent % gross 13% Used 20% Admin & DP salary % gross 10% Front-end 53% Gross % sales 10-12% Parts 13% Monthly gross per employee $12,000-$13,000 Service 34% Net profit per employee $2,750 Back-end 47% Fixed absorption (minimum) 55% Finance and insurance income Vehicle Operations 18-22% of total gross New Vehicles 2018/2019 KPI Used Vehicles 2018/2019 KPI Gross profit % 7-9% Gross profit % 12-13% Gross profit per unit * $2,200-$2,400 Gross per unit $2,300-$2,500 Days supply Days supply Unit per sales staff per month Unit per sales staff per month Gross per sales person per month $35,000 Gross per sales person per month $34,000-$37,000 Advertising per unit $225 Advertising per unit $215 Floor plan per unit $280 Floor plan per unit $160 Salaries & comm. per unit $720 Salaries & comm. per unit $740 Gross ROI 60-65% Used/new ratio 0.5 Aftermarket income per unit $300 Gross ROI 65-70% * Includes holdback, bonuses and aftermarket Aftermarket income per unit $250 2

Fixed Operations Parts 2018/2019 KPI Service 2018/2019 KPI Gross profit % 23-25% Gross profit % total 65-68% Days supply 45-50 Gross profit % labour 75-80% Monthly gross per staff $18,500-$20,000

5 Fixed Operations Parts 2018/2019 KPI Service 2018/2019 KPI Gross profit % 23-25% Gross profit % total 65-68% Days supply Gross profit % labour 75-80% Monthly gross per staff $18,500-$20,000 Monthly labour gross per tech $12,500-$13,500 $ sales per $ salary $18-$20 Unapplied time % COS 5% max Gross ROI % Non-chargeable salaries % gross 25-30% Fixed absorption (minimum) 55% Back-end 47% * Apprentices and foreman are weighted to arrive at an adjusted number of technicians Finance and Insurance Chargeable to non-chargeable 2 to 1 Labour hours per retail RO 2.0 hours Technician to service advisor 5 to 1 Parts / labour ratio $0.65 Fixed absorption (minimum) 55% New Vehicles 2018/2019 KPI Used Vehicles 2018/2019 KPI Finance penetration 40-45% Finance penetration 40-45% Income per contract $2,400-$2,700 Income per contract $2,600-$2,800 Finance per retail unit $900 Finance per retail unit $860 Insurance per retail unit $160 Insurance per retail unit $170 F&I income per staff per month $50,000-$55,000 Units retailed per F&I staff per month F&I per new vehicle retailed $1,200 - $1,350 F&I per used vehicle retailed $1,050 - $1,150 3

Luxury edition The Big Picture Dealership Profitability 2018/2019 KPI Gross Contribution 2018/2019 KPI Net profit % sales 3.8-4.

6 Luxury edition The Big Picture Dealership Profitability 2018/2019 KPI Gross Contribution 2018/2019 KPI Net profit % sales % New 42% Rent % gross 12% Used 12% Admin & DP salary % gross 7% Front-end 54% Gross % sales 12-15% Parts 14% Monthly gross per employee $11,500 Service 32% Net profit per employee $2,600 Back-end 46% Fixed absorption (minimum) 55% Finance and insurance income Vehicle Operations 11-13% of total gross Vehicles 2018/2019 KPI Used Vehicles 2018/2019 KPI Gross profit % 10-12% Gross profit % 10-12% Gross profit per unit * $4,000-$4,500 Gross per unit $2,400-$2,600 Days supply Days supply Unit per sales staff per month 11 Unit per sales staff per month Gross per sales person per month $45,000-$50,000 Gross per sales person per month $30,000-$36,500 Advertising per unit $450 Advertising per unit $200 Floor plan per unit $350 Floor plan per unit $100 Salaries & comm. per unit $1,200 Salaries & comm. per unit $800 Gross ROI 60-65% Used / new ratio 0.4 Aftermarket income per unit $350 Gross ROI 70-75% * Includes holdback, bonuses and aftermarket Aftermarket income per unit $250 4

Fixed Operations Parts 2018/2019 KPI Service 2018/2019 KPI Gross profit % 22-25% Gross profit % total 65-70% Days supply 45-55 Gross profit % labour 76% Monthly gross per staff $20,000-$22,000

7 Fixed Operations Parts 2018/2019 KPI Service 2018/2019 KPI Gross profit % 22-25% Gross profit % total 65-70% Days supply Gross profit % labour 76% Monthly gross per staff $20,000-$22,000 Monthly labour gross per tech $13,500-$14,500 $ sales per $ salary $18-$20 Unapplied time % COS 5% max Gross ROI % Non-chargeable salaries % gross 30% * Apprentices and foreman are weighted to arrive at an adjusted number of technicians Finance and Insurance Chargeable to non-chargeable 2 to 1 Labour hours per retail RO 2.2 hours Technician to service advisor 5 to 1 Parts / labour ratio $0.75-$0.80 Fixed absorption (minimum) 55% New Vehicles 2018/2019 KPI Used Vehicles 2018/2019 KPI Finance penetration 34-38% Finance penetration 30-35% Income per contract $2,300-$2,500 Income per contract $2,100-$2,300 Finance per retail unit $850 Finance per retail unit $720 Insurance per retail unit $180 Insurance per retail unit $170 F&I income per staff per month $50,000-$55,000 Units retailed per F&I staff per month F&I per new vehicle retailed $1,100 - $1,200 F&I per used vehicle retailed $900 - $1,000 5

About Pitcher Partners Pitcher Partners is a full service accounting, auditing and business advisory firm with a strong reputation for providing quality advice to privatelyowned, corporate and public

8 About Pitcher Partners Pitcher Partners is a full service accounting, auditing and business advisory firm with a strong reputation for providing quality advice to privatelyowned, corporate and public organisations. In Australia, Pitcher Partners has firms in Adelaide, Brisbane, Melbourne, Perth, Sydney and Newcastle. We collaboratively leverage from each other s networks and draw on the skills and expertise of 1,200+ staff, in order to service our clients. Pitcher Partners is also an independent member of Baker Tilly International, one of the top ten largest networks in the world by fee income. Our strong relationship with other Baker Tilly International member firms, particularly in Asia Pacific, has allowed us to open many doors across borders for our clients. Pitcher Partners is a national association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Our commercial services to dynamic businesses Financial essentials Accounting and Business Advisory Services Audit, Risk Management and Assurance Internal Audit Recovery, Turnarounds and Insolvency Tax advice and Compliance Planning and growth Business Consulting and Commercial Advice Business Performance Improvement Business Structuring Corporate Finance Corporate Governance International Business Advisory Investment Advisory Services Succession Planning Superannuation Services Tax Consulting Technology and IT Consulting Valuations Our private wealth services Estate Planning Family Office Management Investment Advisory Services Philanthropy Services Succession Planning Superannuation Strategies Tax Advice and Compliance Insurance Industry specialisations Automotive Education Retail Professional services Financial services Health and aged care Manufacturing Not-for-Profit Property and construction Government and the public sector Agriculture Food and beverage Hospitality Sydney 240+ Total Sydney staff $3.4bn Worldwide revenue 2017 (USD) 147 Countries 33,000+ Partners and staff globally 110+ Partners nationwide 1,200+ People nationally 31 Sydney partners 6

Firm locations Pitcher Partners has the resources and depth of expertise of a major firm, but with a smaller firm feel.

MELBOURNE SYDNEY PERTH ADEL AIDE BRISBANE NEWCASTLE NE Firm of the Year Finalists AFR Top Graduate Employer Awards Less than $1bn (less than 5,000

Executive of the Year Accountants Daily New Partner of the Rob Southwell, Year Dean Love, Excellence Award Sydney Rob Southwell, Sydney Melbourne

Provider to Manufacturing, Retail and Wholesaling Winner Network of the Year in the Business Leader Finalist Rob Southwell 2016 International

9 Firm locations Pitcher Partners has the resources and depth of expertise of a major firm, but with a smaller firm feel. We give our clients the highest level of personal service and attention. That s the difference. MELBOURNE SYDNEY PERTH ADEL AIDE BRISBANE NEWCASTLE NE Firm of the Year Finalists AFR Top Graduate Employer Awards Less than $1bn (less than 5,000 employees) revenue Accounting Student of the Year Arlen Dabinett, Adelaide Professional Development Program of the Year W PAR TN ER OF TH EY EA R Executive of the Year Accountants Daily New Partner of the Rob Southwell, Year Dean Love, Excellence Award Sydney Rob Southwell, Sydney Melbourne Finalist 2017 Financial Review Client Choice Awards Best Accounting Firm (Rev $50m - $500m) Winner 2017 Financial Review Client Choice Awards Best Provider to Manufacturing, Retail and Wholesaling Winner Network of the Year in the Business Leader Finalist Rob Southwell 2016 International Accounting Bulletin 2017 Sydney City Regional Business Awards and the Accountant Awards Winner 2016 Acquisition International M&A Awards Best Mid-Market Financial Advisory Firm - Australia & Recognised Leader in Acquisition Growth Strategy - Australia 7

10 Our global reach Baker Tilly International is one of the world s leading networks of independently owned and managed accountancy and business advisory firms united by a commitment to provide exceptional client service. Every day, more than 33,000 people in 147 countries share experiences and expertise to help privately held businesses and public interest entities meet challenges and proactively respond to opportunities. International capability and global consistency of service are central to the way we work. 13 North America Firms 18 Middle East and African Firms Global Experts across a wide range of industry and business sectors, each Baker Tilly International member firm combines high quality services and in-depth local knowledge. 125 independent firms come together across four geographic areas. Sharing knowledge and resources, our business approach brings together the power of the global network to deliver exceptional results to clients globally Latin America Firms

11 Key 49 European Firms 20 Asia Pacific Firms Local Pitcher Partners is an independent member of Baker Tilly International. Our strong relationship with other Baker Tilly International member firms, particularly in Asia Pacific, has allowed us to open many doors across borders for our clients. 9

Get in touch... John Gavljak Partner Automotive +61 2 8236 7759 john.gavljak@pitcher.com.

au Martin Booth Partner Automotive +61 2 8236 7887 martin.booth@pitcher.com.

au MELBOURNE SYDNEY PERTH PITCHER.COM.AU +61 3 8610 5000 partners@pitcher.com.

com.au BRISBANE +61 7 3222 8444 partners@pitcherpartners.com.au NEWCASTLE +61 2 4911 2000 newcastle@pitcher.

12 Get in touch... John Gavljak Partner Automotive john.gavljak@pitcher.com.au John Taouil Manager Automotive john.taouil@pitcher.com.au Martin Booth Partner Automotive martin.booth@pitcher.com.au Nikki Mcmasters Manager Automotive nikki.mcmasters@pitcher.com.au MELBOURNE SYDNEY PERTH PITCHER.COM.AU partners@pitcher.com.au partners@pitcher-nsw.com.au partners@pitcher-wa.com.au ADELAIDE partners@pitcher-sa.com.au BRISBANE partners@pitcherpartners.com.au NEWCASTLE newcastle@pitcher.com.au Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Industry Statement_KPIs 2018_2019

Winter Wealth Update. Winter 2017

Winter Wealth Update. Winter 2017 SYD NEY WEAL TH M ANAGEMENT PTY L T D Winter Wealth Update In this edition we provide an overview of: The NSW first home buyer relief package, re-cap the super changes that will take effect from 1 July;