Citygate Automotive profit decline 2022 brand challenges used car prices

author: FutureCar Staff    

Car dealer group Citygate Automotive experienced a £2m drop in profits in 2022, according to its annual results for the 12 months ending December 31. The company reported a profit before tax of £7.4m, down from £9.4m in the previous year. Despite the decrease in profits, turnover increased from £336.3m to £362.4m. Gross profit also saw a modest increase of £2m, rising from £51.2m to £53.2m.

In its annual results submitted to Companies House, Citygate Automotive acknowledged that several of its brands had lost market share in the new car market. While the profit on new vehicles improved, it was offset by a decline in profit from used cars. The company sold 541 fewer new cars and 382 fewer used cars compared to the previous year.

The board of Citygate Automotive stated that the Volkswagen, Seat, and Skoda brands were particularly affected by the semiconductor crisis, which disrupted the supply of new vehicles. However, the Kia brand managed to gain market share and achieved a record of 100,200 vehicle registrations with a 6.2% market share. In the light commercial vehicle segment, there was a decline of 20.6% to 282,000 units. Volkswagen Commercial Vehicles outperformed the market and became the second-largest brand with a 10.0% market share.

Despite the challenges in the new car market, service hours and bodyshop hours increased, and parts turnover rose by £1.9m. The strategic report from the board highlighted that turnover grew by £26.1m (7.7%) to reach £362.4m. While there was a decline in both new and used car volumes, the favorable mix with higher average prices helped offset the decrease in volume. Aftersales also performed well, with service hours up by 2.1%, bodyshop hours up by 21.7%, and parts revenue up by 15.5%.

The report mentioned that the constraints in the supply of new vehicles and the favorable mix of new products contributed to improved gross profit on new vehicle sales. However, this improvement was overshadowed by a significant decline in used car profitability as the market returned to a more normalized level after the high prices seen during the post-pandemic period in 2021. Aftersales profitability increased by 13% compared to the previous year, but the combined gross margin declined by 50 basis points to 14.7%.

Additionally, distribution expenses increased by £1.8m to £26.9m, mainly due to higher staff and vehicle costs. Administration costs also rose by £2.6m to £20.5m, driven by ongoing investments in IT projects aimed at digitizing processes and increasing operational efficiency.

Image: Citygate Volkswagen West London

FutureCar Staff