Grosvenor Leasing reported an 8% fall to £4.6m in pre-tax profits for 2017, as the lessor and Vauxhall-Peugeot retailer slowed down on volume pursuit, and reduced its reliance on brokers under plans to launch its own intermediary business.
Income from vehicle leasing was £35.3m, down 5% from 2016. Average end-of-contract profit for leases was up 2%, but the gain was offset by lower volumes of vehicle returns, down 9%. Fleet management revenues were more stable, keeping just under the £4.3m mark, thanks to investment in digitalisation.
Contracts written in 2017 were down 11%, which Grosvenor attributed to the decision of “not chasing low-margin high-volume opportunities and instead concentrating on long-term sustainable business”.
“We have also made the the strategic decision to reduce the percentage of broker-introduced business, and this has led to a marginal reduction in our customer base but with an improvement in average fleet size,” it added.
Vauxhall franchises show impact of PSA restructuring
Revenues from vehicle sales at used and new car dealerships, concentrated in the East Midlands region, were down 5.3% to £84.7m. Grosvenor called 2017 “a volatile year for the UK motor industry”, marked by “diminishing consumer confidence caused by Brexit and uncertainty over diesel“.
A consumer shift towards the second-hand market translated into “more aggressive competition” and stricter stocking policy at Grosvenor’s used car retailer Croyland, which maintained its focus on finance sales.
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Grosvenor’s franchised retail lines, meanwhile, were impacted by Groupe PSA’s restructuring of its own operations and the recently-acquired Opel-Vauxhall brands, in one of the first litmus tests for the French group’s multi-year cost-cutting exercise.
Vauxhall dealership York Ward & Rowlatt saw revenues fall 8% to £5.3m due to lower fleet sales. This was partly offset by a 7% increase in POS finance and insurance revenues.
Grosvenor noted PSA’s retreat from unprofitable and “toxic” areas of operations for Vauxhall – such as rental and bulk deals – and blamed the 52,000 drop in UK sales for the brand on previous parent GM’s reluctance to enter the booming and profitable SUV segment.
Peugeot break-up spurs push for PCH brokerage
Grosvenor’s Broad Green dealership saw its Peugeot franchise agreement terminated in March of this year, due to PSA “deem[ing] the market are unviable” as part of its ongoing cuts in franchisee numbers.
Grosvenor said it wants Broad Green to feature “significantly” in future development “without the constraints of the franchise, allowing the business to prosper”. The group now wants to reposition the retailer around used cars and LCVs, diversifying brands available.
The group added plans were “well-advanced” to create a broker business under the Broad Green name, which would target the “rapidly expanding personal contract hire sector”.