Cost cuts steer John Martin back to profits but brake stays on dividend

JOHN Martin, one of Scotland's largest independent car dealers, has motored back into the black, although only just, after continuing down the cost-cutting route.

Newly filed annual accounts show that the group generated a profit before tax of 303,000 in 2009, after a 775,000 loss the previous year. Turnover was flat at just below 147 million.

The Edinburgh-based company, which trades under the Belmont and Murray Motor brands selling marques as diverse as Kia and Aston Martin - 007's car of choice - said it was not paying out a dividend, with the retained profit for the year being transferred to reserves.

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Britain's car dealers have suffered a torrid couple of years with potential buyers shunning showrooms amid job fears, a squeeze on credit and rising living expenses. Many have reported a boost to sales from the government's car-scrappage scheme, which was withdrawn at the end of March.

John Martin said its profit turnaround had been "assisted" by the introduction of the cash-for-bangers programme - funded jointly by the Treasury and the car industry.

"Though not a significant profit driver, it certainly stimulated the car market," the company's directors noted.

They added: "Following on from a very difficult year in 2008 the group continued its programme of cost base and working capital reduction, the benefits of which became evident during the second half of 2009.

"The strengthening of used car values and the reduction of finance costs were major contributors to the group's improved results in 2009."

The accounts for the holding company - John Martin Holdings - showed the number of employees falling by about 40 to 614 during the year. The total bill for wages, social security and pension costs fell back to 16.7m from 17.2m in 2008. At the operating level, profits nudged up fractionally to just over 1.6m.

John Martin runs a string of showrooms in the Central Belt, the Borders and the North-east. Other franchises held by the group include Lotus, Jeep and Rolls-Royce.

Since the year-end, the group has disposed of its Stirling site and also sold its Vauxhall dealerships in Edinburgh and Aberdeen to rival Peter Vardy. Vardy had previously bought Martin's BMW and Mini franchises when Peter Vardy was setting up his own company in 2006.

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Looking ahead, John Martin's directors wrote: "The company will continue to assess its programme of review of the current and future prospects of the franchises and the business location from which they operate."

The group's highest-paid director, likely to be managing director Gordon Nisbet, received 146,000, up from 138,000 the year before.

The report also highlighted a number of "key performance indicators", including operating profit per employee, which came in at 2,600, up from 2,500 in 2008 and 1,900 in 2007.

Earlier this week, UK-wide dealership Pendragon announced a 48 per cent surge in its first-half pre-tax profits to 15.7m. The result was driven by strong sales at its Stratstone division, whose top-end marques include Ferrari, BMW and Aston Martin. The company's volume car retailer, Evans Halshaw - which sells brands such as Citroen, Vauxhall and Ford from 127 dealerships - performed more sluggishly, posting flat gross profits.

Last month, rival Lookers, the London-listed parent group of Scottish chain Taggarts, reported that it was on course to post record half-year results. But it warned that both the new and used car markets were likely to "continue to be affected whilst consumer confidence remains fragile".