11 minute read
Interview: Darren Edwards
INTERVIEW Sytner boss talks furlough, CarShop growth and his thoughts on Cazoo and Cinch
In an exclusive and wide-ranging chat at the company’s flagship Jaguar Land Rover site, chief executive Darren Edwards tells James Baggott how the US-owned dealer group has flourished and could well be on course for a record year.
SYTNER GROUP LIMITED
Position: 2 2019 turnover: £5.9bn 2019 EBITDA: £152m ROS: 1.3%
Sytner boss Darren Edwards has given an exclusive video interview to Car Dealer.
In the Car Dealer Live special, the boss of the second most profitable dealer group in the UK – according to the Car Dealer Top 100 – reveals his secrets to success.
In a wide-ranging interview, recorded at the group’s showcase Jaguar Land Rover site in Sunbury, Edwards gives his thoughts on a variety of topics.
With a portfolio of luxury and premium new car brands, and a high-performing used car supermarket group, it’s little wonder it’s one of the UK’s most profitable groups.
Sytner came second in our Car Dealer Top 100 list of most profitable dealers – in 2019 it made £152m EBITDA profit on turnover of nearly £6bn.
Edwards told Car Dealer he was disappointed with the second-place position and hopes to top our list in the future. But how do they do it?
‘Our strategy has always been to focus on premium brands,’ reveals Edwards.
‘We figure you can get better return on investment, you can attract a higher quality of people for the team and we invest a lot to attract them.
‘We have very low staff attrition levels. Our head of business turnover is less than five per cent, the board is zero turnover and has been for many years, and our managers are about eight per cent.
‘By having these great brands, it gives us the opportunity to make great returns for our shareholders, do a brilliant job for our manufacturers and then you have this circle of investment: Focus on people, focus on customers and delight your manufacturers and shareholders, and keep on doing that all the time.
‘By doing that since 1968 when we first started and really the early 2000s when we started to grow, that’s given us the opportunity to continue to grow as we have.’
Sytner has a chocolate box of brands that most dealers would envy.
In the high-end luxury world, it represents Ferrari, McLaren, Bentley, Bugatti, Aston Martin, Lamborghini, Maserati, Rolls-Royce and Porsche.
Sytner is also Audi’s biggest partner in the UK and represents Jaguar Land Rover, BMW, Mercedes, Seat, Skoda and Volkswagen among others.
‘Return at the moment is really, really strong and the partnerships with our brands are incredible,’ said Edwards.
He says the group learnt a lot during the pandemic and was quick to offer customers the chance to buy cars on its website.
It introduced an online buying function last year, and the combination of sales in store and on its website has helped it continue to record impressive results.
Sales of new cars rose nearly eight per cent in the first quarter of the year, despite showrooms being closed by the third lockdown.
Sytner is owned by American giant Penske Automotive Group, which snapped the dealer off the stock market in 2002.
Drive-in service lanes were introduced by Sytner
CarShop Nottingham
Sytner’s Guy Salmon Jaguar Land Rover Sunbury dealership
The American ownership has taught Sytner plenty of new tricks, and many of the innovations brought over from the States have been rolled out by other dealers, too.
‘In Q1 we delivered 42,500 cars, new used and fleet – 10 per cent of those were done purely online,’ said Edwards.
‘We’ve enjoyed massive investment since Roger [Penske] bought the business in terms of monetary and intellectual.
‘Things like our drive-through service lanes have been adopted by the rest of the industry now. That was new back in 2000.
‘Little touches like making sure colleague areas are finished to the same standard as customer areas – the sort of things you’d see in a five-star hotel – these are the things that were brought home by Roger.’
Despite the success Sytner has enjoyed during the pandemic, Edwards doesn’t think paying back any government furlough or rates support is necessary.
‘When we think back to that period of time, the industry was worried about paying the bills and whether it would stay liquid,’ he explained.
‘That money was vital to us. It allowed us to keep people employed.
‘Since then, that support was used for a short period of time. The support was significant as we are a large group. We had 9,500 people on furlough for a couple of months. But now we are focused on investment.
‘We’ve opened up five or six large dealerships and we’re still investing millions in premises and training.
‘For us now it is about looking forward rather than thinking about paying back.
‘Ultimately, every large corporation is going to be paying more tax as the government announced.’
In the video interview, Edwards also explains how the CarShop deal came about.
He said Sytner didn’t want to get into volume franchises for new cars and was ‘happy’ with the mix that it had in its portfolio, but was looking at opportunities to grow.
‘The used car business is huge and we wanted a bigger piece of that,’ said Edwards.
‘We looked at different options and CarShop came to our attention. It’s a great business and Jonathan [Dunkley] and the team had done a brilliant job and we were very happy when they agreed for us to acquire them.
‘In a normal year without the pandemic, off the 12 sites we now have, we should do 60,000 units and the EBIT contribution is significant.
‘We’ll be looking to grow that over the next few years and it’ll probably be the biggest area of growth for us.’
CarShop also benefits greatly from the Sytner ownership, receiving around 300-400 cars a week from the wider group.
When it comes to the likes of Cazoo and other online used car dealers, Edwards wishes his rivals well – but is quick to point out his group has more used cars in stock than the big three online sites combined.
Edwards said: ‘I think there is a place for everyone, and as far as I am concerned,
Sytner boss Darren Edwards chats to James Baggott
good luck to them. They think they’ve got a unique model, but I think that’s probably changed over the last year.
‘Our view is that we want to appeal to everyone and not just online customers.
‘From our point of view, we appeal to 100 per cent of customers who are out there, whereas the online guys appeal to a certain part.’
When it comes to growth, Edwards says he thinks Sytner is now at the ‘upper threshold’ of what manufacturers like its dealer partners to have.
He says there is some opportunity to grow with some, but adds Sytner is ‘very picky’ when it comes to taking on more sites.
‘We’ve divested a number of brands and dealerships in the last 10 years or so to end up with what we have today and it’s more about getting the most out of those businesses.’
That said, Sytner will be opening up with Ferrari in Glasgow and has taken on Bugatti in Manchester.
‘When we have got really good opportunities to grow with brands we will, but our main opportunity now is with CarShop – it’s about getting a bigger share of that market with a national footprint,’ added Edwards.
The Sytner boss said he was taken a little by surprise with quite how good business has been since the April 12 reopening, but believes it ‘generated’ some of its ‘own luck’.
‘Overall, it has been strong,’ he said.
‘I hope we’re on course for a record year. Based on current predictions, it’s looking very good. We delivered 16,000 cars in April and were up 45-50 per cent on order take.’
Sytner has big plans to expand its auction platform too. Launched 15 years ago, it sells cars to the trade that the group doesn’t want.
Modelled on eBay, it has 10,000 traders registered on the site and sells around 30,000 cars a year. Sytner matches the number of cars it sells on the site with a donation of the same amount to the charity Ben every year too.
‘It’s been very successful and we’re looking at how we can leverage that even further,’ said Edwards.
‘Very shortly, we’re going to allow other traders to list cars on that site, and that will massively increase the number of cars on there.
‘We’ll manage it and are excited about it. With the world moving towards online auctions we see that as being a potential big platform for us. It’s very profitable for us.’
But what does Edwards think really makes the difference for the group? What makes it one of the most successful?
‘If you look at our leadership, most of these people have all been with the company since they were in sales themselves, they’ve been through the company and now they’re managing the company,’ added Edwards.
‘They understand the culture and can really inject that culture into new people. Fundamentally, our success is our people.’
£152m
Sytner’s EBITDA profit for 2019
OPINION My issues with agency sales models
Sytner CEO Darren Edwards
The advantages of agency sales have been highlighted in recent weeks by OEMS and some dealer groups. However, there are some unintended consequences that may appear as a result of the switch from franchise holders to agents that I believe should be considered.
Many high-performing investors – let’s call them ‘upper quartile’ dealers – will have issues with agency sales because it removes the advantage they have enjoyed due to their high level of entrepreneurial ability. This advantage has normally been honed over many years of investment in training, process invention and continual improvement in the pursuit of an above-average performance.
The result is a performance in both volume share and margin retention that is significantly greater than the average in the network, and often so far ahead of the next best that other dealers wonder how on earth they manage to achieve this.
By the very definition of upper quartile, this means that this is obviously a minority of dealers, so you could say well that’s a small proportion of the network, so what’s the problem? As long as most dealers (the average) are happy with the performance they will receive under a fixed-price handling fee, based on the average, then that’s okay, isn’t it?
The problem is that these high-performing dealers are, in most cases, the trendsetters and trailblazers of their networks. They continually invest and innovate to extract improved performance and this innovation is picked up by the manufacturers and shared across the network as so-called best practice.
In most cases, the drive to innovate in new car retail sales is there to create increased levels of gross profit per unit (GPPU) as well as volume and market share.
This materialises in forward-thinking marketing approaches, technology solutions, online and in-store customer-centric processes and, of course, incredible retail premises.
My concern is that once the transition to agency sales has occurred, will these investors continue to innovate at previous levels across all these disciplines if they can no longer influence their GPPU or volume?
Without this drive, will the network performance become stuck at an average level?
Or in the worst-case scenario, if these high-performing investors feel that the opportunity is no longer attractive enough for them, do they divest and then the network is much weaker as a result?
Agency sales work for the OEM in a perfect world, but what happens when a manufacturer produces a slow-selling model or there is a downturn? If the skill of the network has been diminished over time due to becoming just another link in the distribution chain, who is going to come up with those great ideas that get shared networkwide? I have heard OEMs say many times, ‘we are manufacturers, not retailers’, meaning that they don’t have all the answers when it comes to getting cars sold and on to driveways.
So before OEMs transition to agency sales I believe that a great deal of consideration should be given to how to keep the best in their networks interested (and invested).
In particular, with the absence of variable margins and (potentially) sales targets, how will high performance be rewarded, because I am struggling to recall a company that has succeeded over the long term with a business populated by averageness.
