Penske Q4 and year-end results driven by acquisitions, retail sales
DETROIT -- Penske Automotive Group Inc., coming off a year that saw higher earnings and revenue amid the U.S. auto industry’s steady recovery, is targeting several initiatives to keep profits and sales growing in 2013.
The company plans to raise revenue by at least 10 percent, reduce costs, improve finance and insurance-per-vehicle revenue by $50, upgrade its Web site, and create a standardized customer relationship management system companywide by year end.
Penske reported fourth-quarter and year-end earnings on Thursday.
The dealership group said fourth-quarter net income rose slightly to $48.6 million, from $47.7million in the fourth quarter of 2011.
Penske's net income for 2012 rose to $186 million, up 5 percent from $177 million in 2011. Annual revenue increased 18 percent to $13 billion.
Last year "was a very solid year of growth and profitability for our company," Chairman Roger Penske said in a statement. "We expanded our presence globally by completing acquisitions in Northern Ireland and Italy, and we entered the Madison, Wisconsin, market in the U.S."
Penske said the company added $750 million in estimated annualized revenue through acquisitions during the year, and generated a 10 percent boost in same-store retail revenue.
Penske is ranked second on the Automotive News top 125 U.S. dealership groups with total new retail unit sales of 154,829 in 2011. It reported total new retail unit sales of 180,764 for 2012.
Penske is targeting revenue growth of more than 10 percent through a combination of higher same-store sales and acquisitions, Penske said in an analyst conference call.
“When you look at this year, $750 million was our acquisition growth and on a same-store basis, we grew 10 percent,” Penske said. “We had a little bit of a holiday, all of the auto dealers including the publics, the [comparisons] have been easier. As we look at 2013, 2014 and ’15, we’ll have some tougher numbers.”
Penske is looking to further trim overhead as a percentage of its gross profit. It is targeting a 100 basis point improvement in this year’s selling, general and administrative expenses, as a share of gross profit.
As a percentage of total gross profit, general expenses were 79 percent in 2012, down from 81 percent in 2011, Penske said.
Penske said the company will cut costs through more efficient marketing, building a standard CRM system across the company and keeping compensation plans in line with revenue growth.
Penske also wants to boost finance and insurance sales. Fourth-quarter F&I revenue per vehicle was about flat year over year at $986. It slipped 1 percent for the year to $1,000.
“To me it’s a simplified menu, better training and consistency,” Penske said. “I would hope we can see a $50 increase in that [per vehicle revenue] throughout the year.”
Finally, Penske plans to roll out Web site enhancements that improve navigation and better showcase each brand.
Sandy and fourth quarter
Penske's fourth-quarter revenue jumped 18 percent to $3.4 billion. The fourth-quarter results include $1.7 million in expenses for insurance deductibles and clean-up costs associated with Hurricane Sandy, Penske said.
"Our retail automotive business reported record profitability in the fourth quarter, producing double-digit growth in operating income, income from continuing operations and earnings per share during the fourth quarter, despite the effects of Superstorm Sandy, which impacted operations in the northeast U.S. during the quarter," Penske said in the statement.
Retail sales surge
Penske said same-store retail revenue increased 12 percent in the fourth quarter to $3billion.
The fourth-quarter revenue increase was driven by a 19.3 percent increase in total retail unit sales, to 81,383 units, and an 11.5 percent increase in a same-store retail units, to 75,336. New-unit retail sales rose 22 percent, and used-unit retail sales grew by 16 percent.
Total retail unit sales grew by 15 percent in the United States, and by 30 percent outside of the United States.
Fourth-quarter gross profit improved 17 percent to $515.1 million, while operating income increased 20 percent to $91.5 million.
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