7:12 am, December 20, 2022
Eddie Hawthorne is the car dealer that most car dealers want to be.
And after clocking up another year of record profits, the list of contemporaries that look on in wonderment at the Arnold Clark CEO grows ever longer.
‘He’s simply the best car dealer in Europe,’ said one gushing car dealer group boss when we asked him what he thought of Hawthorne.
‘The man is a magician. He’s been leading that business for years and every year still pulls it out of the hat.’
The admiration for Hawthorne runs deep in the motor trade. Mention his name to anyone running a car dealership and there’ll be a sharp intake of breath, before the praise begins to flow.
‘He is, pure and simply, the car dealer that everyone in this industry aspires to emulate – me included,’ added another dealer boss who runs what most people would call a very successful group in itself.
Once again, Arnold Clark sits atop our 2022 Car Dealer Top 100 list of most profitable dealers, thanks to incredible £398m profits in 2021.
The Scotland-based business is quite simply a money-making juggernaut. It’s one car manufacturers fear and car dealers want to copy.
The next best placed dealer group, Sytner, was some £152m adrift in second place.
So how does Hawthorne manage to clock up profits at a rate of £33m a month?
Chatting to Car Dealer on Zoom from his office in Hillington, the Arnold Clark boss deftly dodges the question.
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‘2021 was a lot of hard work for the motor trade but it was what I would call a Carlsberg year for the motor trade and as a specialist in used cars we were able to take advantage of that,’ he said in the video you can watch at the top of this post.
At the last count, Arnold Clark had 193 dealerships, 160 service centres and represented 28 brands in the UK.
The group was founded in 1954 by Sir Arnold Clark who used his demob cash from the RAF to buy a Morris Ten Four for £70 which he did up and sold for a profit. He got the buying and selling bug and opened his first showroom in Glasgow and rapidly expanded after that.
Arnold Clark is still owned by his widow Lady Philomena Clark, but the day-to-day running is left to Hawthorne and his management team.
‘It’s dead simple,’ he says, modestly, when asked about his leadership style.
‘A car a day keeps Eddie at bay. We try not to get too carried away, or complacent, we just focus on the basics – make sure customer calls are answered and it pays dividends.’
It might sound flippant that answering the phone is a secret to making £398m profit, but you’d be surprised how many dealers didn’t manage that when we mystery shopped our Used Car Awards entrants.
So where does the real cash get made for Arnold Clark?
‘Used cars really perform for us,’ explained Hawthorne. ‘And our contract hire and fleet hire divisions are performing exceptionally well.’
The rental business added £42.1m – up £27m on the year before – of profit to the group’s overall impressive figures.
In total, the firm turned over £4.7bn in 2021. And despite furlough cash being available to the business in the first part of the year, Arnold Clark didn’t take any.
It did, though, benefit from £5.7m of rates relief. This was small fry in the overall numbers with £61.1m available to be paid out in dividends to shareholders during the year.
‘I look at their business from a technology perspective and they really invested in that years ago,’ said Tim Smith, CEO of Car Dealer Top 100 sponsors ATG.
‘They were one of the first to invest in in-house teams to build out their own online tech. There is a discipline in that business for doing the right things like following up leads.
‘They’re hot on getting back to people and, you know what, it turns people off buying a car if they have to wait for a response. They do all of that very well and it’s no surprise to see that they are incredibly profitable.’
Arnold Clark’s digital gains have certainly helped underpin its financial success.
It clocked up some 50m sessions from 19m car buyers on its website in 2021. Nearly 100 per cent of its service bookings check in online, while 384,000 people have downloaded the Arnold Clark app that locks people into the group’s ecosystem
Hawthorne simply believes it’s important to make sure staff are doing their job – and rewarding them well for it.
‘We’ve made sure we’ve looked after our staff,’ he adds. ‘They work extremely hard.’
Arnold Clark accounts show the highest paid director received £6.4m in 2021, up from £3m the year before.
‘It doesn’t say it’s Eddie in the accounts, but it probably is and do you know what? He’s worth every penny and more,’ said a director of a family-owned car dealer group.
Mike Jones, who worked with Interpath to compile the Car Dealer Top 100 list, believes Arnold Clark is an incredible car dealer.
‘They do things brilliantly,’ he explained in our video (above), discussing the Top 100 2022 list.
‘They benefit from scale, they have a lot of manufacturers and benefit from the huge numbers of vehicles that brings into the business.
‘Their results shows that even at a time of supply constraints by doing the little things brilliantly, retaining the customer drives very strong profit levels.
‘I imagine they’ll soon have Darren Edwards at Sytner snapping at their heels, but it is a hell of a target to go for.’
Giving a hint at 2022’s results, which are unlikely to be released before September 2023, Hawthorne said profit levels are going to be much lower.
In 2021, profit before tax for Arnold Clark was £263m and Hawthorne says this is likely to be ‘closer to £200m’ for 2022.
‘We may not even get to £200m,’ he admitted in our Zoom chat. ‘From April, things started to slow down.’
He said new car orders he expected to be able to deliver this year have fallen into 2023 and combined with a shortage of used cars to sell, sales volumes have been lower.
‘Couple all that with the cost of living crisis and disposable income not what it was in 2021 and the number of people looking for a new car in the population is not what it was,’ added Hawthorne.
So how is he changing his business to ensure it’s fit for the future. Do agency sales keep him up at night?
‘Genuine agency sales is going to be a challenge and I am skeptical about non genuine agency too,’ he admits.
But, diplomatically, he adds: ‘I’m not sure how it will sit with a franchise model hand in hand but we’ll work it through with the manufacturers and we will achieve what we have to which is selling cars and making money.
‘One of the things that we are we’re constantly looking at is how can we continue to be relevant to our customers.
‘As long as we can be relevant to our customers, then we see a very firm, sustainable future for our business – but its relevance through ease of business and a digital environment.’
Arnold Clark might be pretty big now, but that doesn’t mean further growth is off the table.
Car Dealer recently exclusively reported on Arnold Clark’s attempt to buy the Cars2 business in Yorkshire, but this fell through when the two parties couldn’t agree terms.
‘Unfortunately, we didn’t quite get there with Alan and his team, but we managed to part as friends,’ Hawthorne said.
‘We’re always on the lookout for opportunities that will fit our business. We are looking for other opportunities.’
So acquisitions aside, how else is Hawthorne planning on keeping those profits rolling in?
‘I don’t want to give away our trade secrets,’ he says. ‘But we have a few things up our sleeves for 2023 that might give us a little bit of a shift and take our profitability to the next level.’
It’s tricks like this that will no doubt keep Eddie at the top of car dealers’ wannabe lists for many years to come.
You can read the full Car Dealer Top 100 list here.
