- INTEREST RATES HIT PENTAGON RESULTS
- NFDA SPRING STATEMENT BRIEFING
- DERREN MARTIN JOINS PERCAYSO
- UK CEOs ‘QUIETLY OPTIMISTIC’ ABOUT ECONOMY
- WEEK AHEAD: Spring Statement
- CLOSE BROTHERS COUNTS COST OF DCA
- CHANCELLOR PROMISES CIVIL SERVICE CUTS
- AUSTRALIAN RETAILERS IN FRANCHISING CODE ‘BIG WIN’
- AMAZON ‘GETTING INTO USED CARS SOON’
- OPINION: Budget shock
Interest rates hit Pentagon results
Motus, the South African company trading as Pentagon, has revealed profit before tax of £14.4m in the year ended June 2024, marginally down on 2023’s £15.8m figure. Turnover grew 9.7% to £1.4bn.
The results will be of interest to fellow retailers as a more recent indication of what’s going on in the market.
The decline in PBT is largely down to increased interest rates, with the company otherwise performing strongly. Its finance costs rose from £10.5m to £15.7m, with manufacturer floorplan credit increasing from £6.2m to £11.5m.
“As a result of increased new vehicle production by manufacturers, inventory levels rose toward the end of the previous year and into the early part of the current financial year,” said the directors.
“The business focused on reducing inventory, achieving a 17.5% decrease by the end of the year to £360.3m (2023: £436.5m).”
They added that employee turnover has reduced from 29% to 24% and “we are focused on reducing employee turnover to our target rate of 20%”.
Commenting on the current financial year, the directors said the first three months have followed the trading patterns of the year to 30 June 2024.
Referencing the Vehicle Emission Trading Scheme (VETS) and ZEV Mandate, they said “retail demand for new battery electric vehicles is weak and this presents a considerable challenge in achieving the VETS targets for manufacturers.
“If unamended, this regime, together with the absence of incentives for consumers in the retail market, may cause volatility and disruption in the UK new vehicle market in the near and medium term.”
NFDA Spring Statement briefing
The NFDA has published a speculation briefing for the upcoming Spring Statement on Wednesday – an event in which no big automotive announcements are expected, with Chancellor Rachel Reeves committing to the principal of only holding one major fiscal event per year.
In the Autumn Budget, the OBR forecast the Chancellor was on target to meet her fiscal rules “by a fine margin,” says the NFDA. However, subsequent economic developments may mean the government fails to meet at least one, if not both, of its rules.
The Chancellor’s two fiscal rules are not to borrow to fund day-to-day public spending and to get debt falling as a share of national income by the end of this parliament. In the Autumn Budget, Reeves left herself just £9.9bn of headroom against the first rule, and £15.7bn for the second.
The OECD has now downgraded UK growth from 1.7% to 1.4% in 2025. Rachel Reeves is expected to respond to a new set of forecasts from the OBR with a parliamentary statement – probably including a downgrade to growth forecasts and a hefty scaling back in government spending.
In recent weeks, the SMMT has called for VAT to be halved on new EVs and for the 5% VAT rate on household electricity to be matched at public chargers. Industry leaders also want the ZEV Mandate to be revisited.
Read Spring Statement analysis and reaction in Auto Market Insight
Derren Martin joins Percayso
Derren Martin is to consult for Percayso, Auto Sunday can exclusively reveal. In the part-time role, he will confer on valuation and forecast methodology and accuracy, liaise with customers, collaborate with industry bodies and assist with automotive industry intelligence.
Martin, previously director of valuations at CAP HPI, has founded Black and Gold Consulting, which “has allowed me to offer my knowledge and expertise to new and agile organisations like Percayso”.
PVI is the automotive arm of Percayso, whose vehicle intelligence solution “provides unbiased automotive data” to auto retailers along with the lending, insurance, manufacturing and fleet sectors. Head of partnerships Ian Lilley said Martin is highly regarded and “will enhance the trust of our customers”.
UK CEOs ‘quietly optimistic’ about economy
The annual Berenberg conference saw 150 company bosses meet 300 of the world’s biggest investors last week. While a few delegates were still bearish, the outlook for British enterprises was more positive than it has been for years, reports The Sunday Times.
“The cost of capital is down, interest rates are down and there’s a growth agenda from the government,” said one fund manager. “I’m much more positive than a year ago.”
In a further boost to the UK, the London Stock Exchange is seeking to stop companies listing their shares in New York by lobbying firms on the “myths” surrounding the US market – from increased exposure of directors to litigation, to higher fees. The document is called ‘Mythbusting – UK vs US’.
WEEK AHEAD
Wednesday, Chancellor’s Spring Statement
DATA INSIGHT
Close Brothers counts cost of DCA
£103m: Close Brothers loss in the six months to 31 January, after setting aside £165m for discretionary commission arrangement consumer payouts, complaints handling and legal costs. It is the most exposed motor finance lender with around 20% of its portfolio dedicated to car loans.
Chancellor promises Civil Service cuts
15%: Cut in government running costs promised by the Chancellor. She said they will be from Civil Service back office and administrative roles, rather than front-line services, and suggested 10,000 jobs could go. The Civil Service employs around 550,000 people.
GLOBAL AUTO
Australian retailers in franchising code ‘big win’
Australian retailers will now have more certainty of receiving fair treatment from OEMs as the government strengthens enforcement of the Franchising Code of Conduct. The changes “effectively lower the burden of proof of unfair treatment and seek to even up the power imbalance… between car importers and their dealers”.
In a related development, the Australian Automotive Dealer Association (AADA) expressed disappointment last week in a Supreme Court ruling that GM did not breach its agreement with Holden retailers by failing to supply them with vehicles. The case was brought by a group of retailers who did not accept GM’s “controversial” compensation when it killed off the Holden brand.
Amazon ‘getting into used cars soon’
Fan Jin, director of Amazon Autos, has revealed the platform will be “getting into used cars soon”. Amazon Autos, which is now in 68 markets, partnered with Hyundai for its launch and Amazon has expressed interest in working with other OEMs. “We’re adding more dealers, and we’re excited to add not just new inventory for those dealers, but also used inventory,” Automotive News reported Jin as saying.
“Our focus is really on dealers and how we serve the whole dealer – all that they want to sell in the way that they want to sell them.”
OPINION
Budget shock
Five months ago, in the Autumn Budget, Chancellor Rachel Reeves sent shockwaves through almost every single business in the UK by revealing not only an increase in employers’ national insurance contributions but also a lowering of the threshold at which NIC kicks in. This, along with a scheduled rise in minimum wage, is now just over a week away from taking effect.
As we’ve shown before, this is likely to cost businesses between £1,000-£2,000 per employee not just because of the rises themselves but the ripple effect from the minimum wage hike that will push those staff just above that point higher so there’s still pay band differential, and onward and upward that goes.
Retailers, and all businesses, have spent the past few months working out how to handle these staffing cost increases because the certainly can’t absorb them and, equally, they can’t pass the rises on to the consumer.
In my mind, that leaves two main options. A tech solution or a wage bill reduction. Although in reality, both mean the same; increasing the number of cars (or workshop hours) sold per person.
Cutting staff, as we’ve seen several groups do over the past few months, is one option. It could mean reducing the hours staff work (but still sell the same number of cars) through Sunday closing, which several groups are moving to. However, this risks reducing customer satisfaction if not communicated correctly.
Implementation of new technology, probably using AI, is also an option, and a cost, but could result in longer term savings and greater efficiency
Similar to technology investment to improve efficiency, the one area I’ve not seen mentioned much in the past few months is training.
Training done right should mean staff can become better at their jobs, and become more efficient or take on more work. Again, in today’s world, that probably means using some form of AI to enhance their productivity.
This week, on 26 March, the Chancellor will reveal a Spring Statement. I’ll leave the predictions about what Reeves will announce to people far more qualified than me, but with the government facing another multi-billion pound financial shortfall, I don’t expect the picture to be particularly encouraging.
Tristan Young
Editorial Director
Get in touch: tristan@autosunday.co.uk
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