Profit decline for Citygate Automotive in 2022 due to brand challenges and declining used car prices

author: FutureCar Staff    

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

In its annual results submitted to Companies House, Citygate Automotive noted that many of its brands had lost market share in the new car market. While profit on new vehicles improved, this 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, with registrations reaching a record 100,200 vehicles and an increased market share of 6.2%. Additionally, the light commercial vehicle segment experienced a decline of 20.6% to 282,000 units, but VW Commercial Vehicles outperformed the market and grew its market share to 10.0%, becoming the second-largest brand in the market.

Despite the challenges, Citygate Automotive saw positive developments in its service hours, bodyshop hours, and parts turnover. Service hours increased by 2.1%, bodyshop hours increased by 21.7%, and parts revenue increased by 15.5%. The company's strategic report highlighted that the growth in turnover was driven by higher average prices, which offset the decline in both new and used car volumes. The supply constraints on new vehicles and the favorable mix of new products also contributed to improved gross profit on new vehicle sales. However, the decline in used car profitability offset these gains.

Citygate Automotive reported a 13% year-on-year improvement in aftersales profitability. However, the combined gross margin declined by 50 basis points to 14.7%. Distribution expenses increased by £1.8m to £26.9m, mainly due to increased staff and vehicle costs. Administration costs also increased by £2.6m to £20.5m, driven by ongoing investments in IT projects to digitize processes and increase operational efficiency.

Overall, Citygate Automotive faced challenges in the new car market, with some brands losing market share. However, the company saw growth in turnover, service hours, bodyshop hours, and parts turnover. Profitability in aftersales improved, but the decline in used car profitability offset some of the gains. The company also made investments in IT projects to enhance operational efficiency.

Image: Citygate Volkswagen West London

FutureCar Staff