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Volkswagen emissions scandal and restructure slows profits at Motorline

By Chris Price

The Volkswagen emissions scandal and a corporate restructure put the brakes on profits at car retailer Motorline despite another year of growing sales.

The Canterbury-based company, which has 46 dealerships across the UK, featuring in seven towns and cities in Kent, suffered a 69% fall in pre-tax profits to £1.8 million, according to its latest accounts.

This was despite an 18% increase in sales to £461.2 million in 2016 – up more than £70 million – with a £45 million sales windfall thanks to the acquisition of 11 new businesses.

Motorline enjoyed a strong year

Motorline enjoyed a strong year

Bosses expect this growth to continue this year with the relocation of its Nissan and Skoda dealerships in Dartford to new £8.5 million premises in the town next month.

It will open three new dealerships for Peugeot, Hyundai and Lexus at Gatwick in early 2018.

Last year, sales in its Volkswagen and Skoda business only dipped 1% to £100.8 million but the division suffered pre-tax losses of £1.2 million after “significant pressure” on gross margins, which were down 1.6% to 6.8%.

In his company report, chairman Glen Obee said: “This result is a reflection on the reduced market share for the company’s Volkswagen and Skoda brands following the emissions scandal in 2015 and pressure in being able to maintain historically stronger vehicle profit margins.”

The revamped Motorline Nissan dealership in Maidstone

The revamped Motorline Nissan dealership in Maidstone

Trading improved significantly in the first three months of the year, with Mr Obee saying the directors are confident profitability will be achieved in 2017.

Elsewhere, Nissan contributed sales of £98 million, up 49%, but directors said it was “not surprising” the brand traded at a loss given four of its dealerships are less than two years old.

The company, which also has four Volkswagen trade parts centres, completed the takeover of a Nissan dealer in Newbury from Rowstock Limited last month.

The firm – which employs more than 1,300 people across the country – now has eight Nissan dealerships, having added another five last year, making it the second largest brand partner in the business after Toyota.

The emissions scandal at VW hampered sales of the brand for Motorline. Picture The Car Spy

The emissions scandal at VW hampered sales of the brand for Motorline. Picture: The Car Spy

Its three Renault businesses improved turnover by 20% but “margin pressures” led to losses.

Mr Obee, who runs Motorline with brothers Gary and Thomas and finance director Paul Betts, said: “The company has already seen an immediate improvement in the Renault contribution which will result in reporting a positive position at the end of the first quarter of the year.”

Motorline’s Toyota business set a new record for turnover and profit in the first three months of 2017.

Profit reduced to £1.4 million last year due to restructuring costs after the company added four Toyota branches.

“The company has already seen an immediate improvement in the Renault contribution which will result in reporting a positive position at the end of the first quarter of the year...” - Glen Obee, Motorline

The addition of a second Peugeot dealership in November 2015 doubled the brand’s turnover to £20.6 million, with pre-tax profits up 172% to £207,000.

A new consolidated company for the group’s Hyundai business made sales of £6.7 million in its first two months of trading, suffering a pre-tax loss of £238,000.

However, the directors of the company, founded in Canterbury in 1972 by the brothers’ father Tom, are “excited at the future prospect” and have agreed to add a further three Hyundai dealerships within the next 12 months.

Motorline also has Dacia, Lexus, Infiniti and Maserati franchises.

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