Divisional overviews – Automotive

Steve Keys     Automotive

Steve Keys
Chief executive

Bidvest Automotive produced satisfactory results in a pressured market, with the new vehicle market decreasing more than 8% during the year under review. This resulted in margins coming under extreme pressure. The division’s revenue was flat and trading profit was marginally down at 1,7%.

 

Contribution to
trading profit

11%

McCarthy outperformed industry
Streamlined dealership portfolio
Used car profit +25%

Salient features

  • Bidvest McCarthy ended the year higher, despite market conditions where vehicle margins are lower and margin erosion is symptomatic of a declining market. Manufacturers have reduced incentives, leading to long lead times in adjusting targets.
  • The division grew its share of the total market, exited marginal brands, streamlined its franchise portfolio to focus on high-performing brands, and sold non-core assets.
  • Various dealer-of-the-year awards were won.
  • Auctioneering business Burchmores produced a solid result.
Driving innovation

The large-scale IT innovations implemented over the last few years have started bedding down, and we are beginning to achieve the efficiencies they bring to our business. We are migrating off the legacy systems, crafting a blueprint for the way forward and positioning the business for the future.

Given the Group’s inherently diverse structure, we are leveraging synergies, for example, in the fleet businesses of Bidvest’s Financial Services. We expect to extract further synergies in future.

On the retail side, we are refining our technological and digital innovations in response to the decline in traditional retail floor traffic. Our strategy is to take our showroom directly to the living room or the office, thus also improving the transparency of the buying experience for our customers. We are piloting beacon technology, which tracks productivity in real time in our service centre. Innovations in our customer relationships are being introduced across the division to improve the experience of the Bidvest McCarthy brand. As a consumer-focused division, customer centricity is the cornerstone of all our thinking.

Given how mobile technology is changing the business-as-usual approach, we are particularly pleased to be leading the market by introducing our Snappdrive app in our rental car operations. This innovation, which has been well accepted, allows for keyless car rental, and eliminates the need for waiting at a rental kiosk. Snappdrive, has firmly shifted our service offering into the future. We could use this technology in car-sharing.

Sustainable growth

We continue to invest in our people and are developing benchmarking and best practice tools to educate our dealers and drive productivity and efficiency throughout the organisation. Our McCarthy Multiplier Development Programme, geared towards management development, is operational at every dealer, and allows for a rating system at all operations.

Training and development spend has been recalibrated to advance transformation, which is a focus across the board. Certain disciplines have been introduced to advance this process and drive results. We have also launched an intensive mentorship programme to accelerate the development of managers from previously disadvantaged backgrounds. We don’t simply make an employee appointment, and then walk away. Following an appointment, our mentorship-type programme is initiated whereby the employee ‘walks’ alongside the manager for a stipulated period of time. This initiative is yielding good results.

We have a 100% success rate in placing graduates from our Johannesburg, Durban and Cape Town technical training academies, appointing approximately 90% of the trainees internally, and successfully placing the remainder externally.

We are making progress on our scorecards, which continue to be a focus area for all our businesses. We have a tightly controlled environmental management processes in place.

Going beyond

Increasingly, our benchmarking and best practice strategy will drive performance across the division. There is a rigorous evaluation of every business unit, and at a very granular level, to improve our focus on productivity and efficiency.

This focus is also intended to mitigate the risks inherent in the underlying trend in new car and commercial vehicle sales, which reflects progressive weakness. Subdued levels of economic activity, above-inflation new vehicle price increases, low consumer confidence and lower finance approvals have weighed on domestic new vehicle sales. Domestic sales are expected to remain under pressure over the short to medium term.

Our cost-to-income ratio is another key focus area, and we will seek further synergies between our rental and retail divisions and improve efficiencies in that cooperation.

We are positioned for organic growth and will pursue the opportunities available in the market to increase our retail footprint. We have firmly positioned the business for the future.

Automotive
Automotive