DETROIT -- Penske Automotive Group Inc. today reported its highest fourth-quarter and full-year net income in company history, driven by higher retail sales and cost controls.
The company expects its revenue to grow at a “double digit” percentage clip this year. It said half of the growth will come from increased same-store sales and half from acquisitions.
Last year, Penske completed acquisitions or was awarded new stores that are expected to contribute $850 million in annual revenue.
For the fourth quarter, Penske’s net income rose 21 percent to $59.7 million, as revenue increased 15 percent to $3.86 billion.
The higher revenue came on an 11 percent increase in retail sales to 90,622 units, with sales of new units rising 7 percent and used units rising 18 percent. On a same-store basis, retail sales -- new and used combined -- rose 10 percent to 87,924.
'Solid … growth'
The fourth quarter had “each area of our automotive dealership business posting solid year-over-year growth,” Chairman Roger Penske said in a statement. “Going forward,” he added, “we remain confident in our ability to continue growing our business.”
For the year, Penske’s net income rose 31 percent to $245.7 million, as revenue increased 12 percent to $14.71 billion.
Sterne Agee analyst Michael Ward, in an investment note after the release of the results, wrote that Penske’s “luxury and import portfolio and concentration in the U.K. market,” which accounted for 34 percent of revenue, and the company’s “ability to improve cost accounted for the better-than-expected financial performance. We expect the positive trends to continue in 2014.”
Penske said 64 percent of its revenue came from the United States, down from 65 percent a year earlier. The United Kingdom accounted for an unchanged 34 percent, with other international regions contributing the final 2 percent, up from 1 percent in 2012.
For the year, Penske’s total retail unit sales increased 12 percent. New-vehicle retail sales rose 10 percent to 199,795. Used-vehicle retail sales rose 15 percent to 166,419.
In the fourth quarter, Penske’s gross profit per new vehicle retailed rose 1 percent to $3,203. But gross profit per used vehicle retailed fell 6 percent to $1,742. For all of 2013, gross profit per vehicle retailed fell for new and used vehicles.
Gross profit per vehicle from finance and insurance gained 5 percent in the latest quarter to $1,037. For the year, it increased 4 percent to $1,026.
Since 2009, Penske has focused on improving its selling, general and administrative expenses as a percentage of total gross profit -- in other words, keeping its expenses in line to boost profits.
For the year, Penske trimmed its selling, general and administrative expenses, expressed as a percentage of total gross profit, by just more than a percentage point to 78 percent. Penske said that figure was as high as 83 percent in 2009.
“That does help develop and drive margin for us,” Penske said during a call with analysts.
He said the company’s target this year is to reduce that ratio by another 40 to 50 basis points, or up to half a percentage point.
Besides cost controls, Penske said the company will look for strategic acquisitions to contribute to its revenue growth. The company does not allocate a specific amount of capital for acquisitions.
When shopping for dealerships, Penske said, “We look at a business based on profitability where we can get scale.”
Penske said achieving economies of scale on new acquisitions takes time to show up in the bottom line.
“We can’t overnight consolidate offices,” Penske said. “In the U.K., that is a priority for us. In the U.S., we have significant opportunities in the pipeline and overall. Only about 10 percent of the market is consolidated today -- so it gives us an opportunity.”
Penske said the company is looking to do a joint venture in Spain, but provided no further details.
Penske ranks No. 2 on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 180,764 new vehicles in 2012.