Cost cutting at Group 1 UK still playing out in Q2 as sales rise

Cost-cutting aimed at saving £10 million annually from Group 1 Automotive's UK operation are continuing to play out through the second quarter of this year to deliver benefits to the bottom line.

Group 1 Auto UK has reduced headcount by around 10% through Q1 redundancies, and is making reductions through demonstrators, managing used car stocks and other efficiencies after it was slow to react to trading conditions in late 2023 and it had become inefficient in recent years.

Daryl Kenningham, president and chief executive of USA-based Group 1, told AM the company "took a hard look at where we were", and has identified aspects for improvement, including the need to "get smarter with back office functions".

Its Q1 report shows its UK business achieved record revenues of $824.8 million (£663 million), marking a 4.7% increase compared to the previous year. However, gross profit declined by -6.2% to $103.5 million.

Globally, Group 1 reported a pre-tax profit decrease of -6.4% to $193.3 million, with turnover increasing by 8.2% to $4.47 billion.

Kenningham said that the UK business had recovered well from a challenging Q4 in the previous year.

Chief financial officer Daniel McHenry added: "Our quarter one revenues were record revenues that the company has ever achieved in the UK."

He highlighted that the UK team achieved record quarterly revenues from parts and service up 9%, new vehicle sales up 10%, and a significant increase in used vehicle sales volumes, by over 19%.

"So some significant strides in growing our business, and we didn't add any new stores in that period," McHenry added.

Kenningham (pictured) told AM: "We're happier with the first quarter than we were with the fourth quarter.

"The work is not done, but we felt like we made meaningful progress in cost containment while still growing our business in meaningful areas and showing some discipline around some specific executional areas like used cars.

"It's a very dynamic used car environment but we didn't execute as well as we should have in the fourth quarter. Happy to see we did a better job in the first quarter."

Group 1 is on track to complete the acquisition of Inchcape’s UK retail business for £346 million during Q3 2024. 

“We believe the UK business is well positioned and look forward to the expansion of our UK operations with the pending acquisition of Inchcape’s UK retail automotive business planned for Q3 2024,” he said.