John Clark Motor Group delivered a strong performance in 2021, nearly quadrupling its pre-tax profits to £24.06m (£6.26m) on turnover up 26.1% to £910.3m (£721.8m). The group, with dealerships across North, East and Central Scotland, saw new vehicle sales volumes up 7.2% to 12,065, outperforming the UK market. Its retail used vehicle sales volumes grew by 33.4% to 20,831 units.
On the back of these strong results, Motor Trader spoke to Chris Clark, group managing director at John Clark, on taking 2020 as an opportunity for change, handling supply issues and a cost-of-living crisis, and the group’s approach to sustainability.
Although the results posted by John Clark were strong, they came from strong trading conditions in 2021 compared with a disjointed 2020. But Clark also sees them as a bounce back from the previous year and the result of taking a good look at the “historic issues” in the business.
He said: “We saw profits grow by nearly four times. We used 2020 to do some, admittedly much needed, re-engineering to address several historic issues so that we were coming into 2021 with a much leaner and fitter business with significant cash reserves. We have pulled in and taken a significant degree of control over working capital. This meant that we were well positioned to take on any opportunities that might come to us. That might be a stock opportunity, not necessarily an acquisition opportunity. And it’s really off the back of a lot of actions like this that we were able to see those 2021 results come through.”
And the positive trend is continuing this year. Clark added: “But the real positive for me is that we have come into 2022 with the same pattern of trading. It doesn’t feel like a flash in the pan. We’ve come from a position of strength into arguably a position of even stronger margin retention and trading conditions in 2022, so I’m confident that we’ve managed to retain that lean, fit approach. Working capital control is absolutely at the core of the business.”
Used sales for John Clark in 2021 increased by 33.4% as the used market performed well through the year and continues to do so in 2022. Clark sees no real end to the supply shortage of new cars, which will continue to boost the used market. He added: “Used business for everyone, in margin terms, is incredible. There was a period in July-August when the market went quite soft, but we got through that comfortably. We shortened the stock, and then lengthened it again as we came back into the strengthening market, so we haven’t suffered any significant impact from that revaluation. But ultimately, the used car market is supported by the ongoing short supply of new, which I can’t see a horizon on. We were told Q3 will be fine, and it wasn’t; Q4 will be fine, but I’m not sure it will be. If that cycle continues, we’re going to see a strong used car market.
“Also, the vehicle finance cycle is driving continued demand from consumers, which is vital. If we can’t renew into a new car, we are renewing into used and people seem very comfortable and confident with that. But although there is an overinflated market, I still think that it requires a specific skill set to make the most of the opportunity.
“Looking at how we harnessed that, we have invested heavily in used cars over the period and you see that from the growth in 2021. It’s not quite as buoyant this year in terms of volume growth. I think that reinvestment and refocus on used means that, with the ongoing short supply of new car, our teams are very well positioned to maintain that level of used performance into 2023.”
And how has this greater reliance on the used side of the business affected the group? Clark said that it has looked at its F&I performance to create a “buffer” against the new market’s decline.
He said: “Balancing new and used is difficult. Our businesses are very reliant upon the gross profit generated by new cars, and when the gap is as big as it is just now it’s difficult to replace all that gross profit through used. But we took on a new group F&I Director at the start of the year, Niral Patel, who joined us from Harwoods, and he has taken our F&I performance up significantly, which has been a real positive and generated more GP, which gives us a bit of cushioning around the loss of that new car piece.
“Alongside the volume growth, they have been the two key things to give us that buffer and balance against the shortfall on new. That pattern for us is set to continue because I don’t see the new car supply rebalancing as soon as we would like, unfortunately.”
Looking further into financing, Clark said that the group has been working with customers on PCP to find the best approach to a new car at the end of their agreement, be that refinancing or taking a young used car. He said: “People must decide on their PCP. We’ve done well with refinancing products, where people are happy to retain the vehicle for another year. We’ve worked well with some of our finance partners to come up with strong refinance offers, which customers are taking advantage of.
“But I think people are now prepared to move into a used vehicle. Two years later, the market will change again. Some people are looking at it and thinking this is my bridge to my first electric car.
“They are not ready to make that decision today and are happy to buy a young used car in the meantime. And I think people are quite prepared to move from a new to a used.”
Customer engagement
With long lead times for new, and uncertain economic situations for many, it is important for dealers to have effective communication with customers. On this, Clark has looked at service plans to keep customers coming back and has noticed an uptick in productivity with engagement back in the office.
He said: “Like most businesses, we are seeing an impact without a shadow of a doubt. But we’ve worked closely with both customers and our teams through the customer engagement centre, listening to the feedback they’re getting. And we have brought in some of our own service plans and worked well with EMaC too. In addition to that, we’re also seeing quite a lot of business through 0% finance products that we’re using for aftersales. That has really caught people’s imagination; it’s a 0% six-month product that we’re doing exceptionally well with.
“We have also just brought our customer engagement teams back into a physical location together and have seen a significant lift in productivity and booking success. You forget how much benefit there is to listening to your colleagues, hearing them overcome a challenge and then using the same skill set yourself. While we had everyone at home, we were still running weekly training sessions, but ultimately there’s nothing that can replace sitting next to and hearing live discussion and learning from that. We are quite excited about how much benefit that has brought and how quickly it’s been brought about. I think through that we’ll also be able to see a great and sustained level of service despite all the tough news.”
Physical and digital
On expansion, Clark said that the group is always open to the opportunity to grow its footprint, and feels it is important to grow the physical and digital footprint in tandem. He explained: “We’re lucky to have some fantastic franchise partners and I’m proud to represent them all. Obviously, we’d welcome the opportunity to grow with them through possible acquisitions, but given our preferred geographic focus, the opportunities are quite thin on the ground. So, to grow our footprint further and to expand what we can offer our customer base more quickly we are looking at new partnerships. I expect that we will be able to make some announcements shortly.
“Looking at physical versus digital piece, it is imperative to have a robust digital presence.Ecommerce must be part of that because ultimately, it’s about offering customers the ease of doing business with you how they want to.
“We have had a lot of success through our Ecommerce platform from 2020. We’ve seen significant growth; we’re knocking on the door of over 200 deals every month done purely online. We don’t touch the customer, they transact from end to end through our online platform, which is positive. But despite that, I think physical presence is important. As people are moving towards electric, there’s an awful lot of questions around how to make that move. So, they’ll want to test drive, want to understand about charging complexities, they’ll want to have multiple handovers. There are so many potential touch points and I think you can only serve a certain percentage of them remotely and online. Ultimately, I think people still buy from people. There is still a lot of trust to be built, particuarly when transitioning to electric.
“I see a digital and physical presence working hand in hand. What’s important is you must make sure that it’s seamless. You can’t have a stop on digital, start on physical. That’s the challenge, but it’s a challenge every industry is facing not just ours.”
Tackling sustainability
John Clark is also taking steps within the business to improve its sustainability, including digging into its carbon footprint, and setting up alternative energy solutions. On this, Clark said: “It’s an incredibly complex and quickly evolving area of the business. The first thing is to go work out where you are today; what does your carbon footprint look like? You can find out through an SECR report. Then you can start making decisions that will have a very significant impact.
“We started the year by appointing a sustainability champion. We then moved on to select specialist agents. We are working with a company called Net Zero to review our SECR report and help us shape our offsetting and mitigation strategy. By the end of this year we will have offset our carbon footprint.
“On top of that we’re carrying out several infrastructure changes. We’re about to embark on a photovoltaic installation programme. We are doing that combined with battery packs on every site. We’re not focusing on feed in tariff benefits but rather on energy generation and use on site. It is going to gather momentum and importance, but we’ve invested early to make the commitment and ensure that we’re carbon neutral by 2030.”
