7:43 am, November 28, 2024
The Car Dealer Top 100 – sponsored by Heycar – is the only list that ranks the motor trade by the figures that matter the most – their profitability.
Using EBITDA profit as a guide – earnings before interest, taxes, depreciation and amortisation – it is the fairest way to compare dealers’ performance like for like.
The Car Dealer Top 100 is compiled by accountancy experts Cooper Parry and their audit partner Ian McMahon oversees the list.
In a special video interview, which you can watch at the top of this post, he chats about the performance of the most successful car dealers in the UK.
Why do we use EBITDA as a guide?
It’s a measure that’s often referred to because it indicates cash generative profit. In some respects, depreciation and amortization is an accounting adjustment. It doesn’t affect cash. However, it is worth mentioning that interest, especially in the current climate for dealers with the stocking loans and the typical funding that they do require, does have a big impact in terms of their net profit. Net profit is another good indicator, but I think for the purposes of what we’re doing, trying to compare a very mixed bag of businesses, it’s our favorite go-to measure.
We’ve seen a fall in profits in 2023 – what has caused that?
We were actually surprised at how little the absolute value of EBITDA had fallen. Anecdotally, a lot of dealers who had a December 23 year end, took quite a considerable level of provision against the used stock they had. If you’d asked us two year ago what would to happen by turnover, I think we would have expected it to actually fall if agency had come in the way we expected it to. In reality, the absolute value of sales has gone up year on year and EBITDA has dropped slightly.
Arnold Clark’s performance is impressive – they really are a juggernaut of a business are they not?
Yeah, they absolutely are. And there’s an expectation that they would have struggled with certain aspects of their business during the year, but EBITDA does seek to sort of normalise that. The top 10 of the top 100 account for more than 55% of the total earnings of the whole top 100 dealer portfolio.
Arnold Clark is an amazing business and to keep all the business units performing on target is a fantastic achievement. I’m sure many lesser businesses, and I say that, in terms of size and sort of breadth of skill sets they have, would have suffered more as a result of that cyber attack. Credit to them for ploughing through.
What makes Arnold Clark so special?
They have always had a fantastic used car focus, and I suppose part of that goes into understanding the product that they retail. You will have seen some really good initiatives that they have rolled out in terms of educating customers about EVs, about the market opportunity, about the need to knows before committing to buy. I think that reflected in the fact that it has given their customer base the confidence to go out and invest money in an EV platform, where others have maybe not been as full of thinking.
Has there been any major surprises for you?
I was surprised at the level of EBITDA. It’s reassuring that with aftersales components, these businesses are robust. And being quick to react to the market conditions on used cars has really seen that some of these businesses can weather the proverbial storm and do so with a degree of confidence.
How would you summarise the 2023 list?
I think it’s a great turn out. It’s a really good result and very positive. From here, I’m sure many dealer groups are looking towards cash generation and effectively reducing risk against any future borrowing needs or any adverse changes in rates.
