Group 1 Automotive Inc.s revenue growth through acquisitions has fallen to a fraction of 2006 levels, and the rights to a Hyundai franchise acquired in April will be the dealership groups only addition in 2009.
Group 1, the fourth-largest U.S. dealership group, acquired franchises that brought $732 million in annual revenue in 2006 and $702 million in 2007. The company expects to gain only $36.7 million in annual revenues this year from acquisitions, all from the Hyundai store bought in Houston.
The companys freeze on acquisitions may change if the economy improves, CFO John Rickel said today at a Wachovia equity conference in Boston.
Group 1 is basically holding back right now and protecting the balance sheet, Rickel said. Were also waiting for valuations to come back and give us a little better value for what were holding right now.
The 99-store group has closed stores representing Detroit 3 brands, which are losing U.S. market share, and concentrated its purchases on import and luxury outlets, CEO Earl Hesterberg told Automotive News in March. As a result, over the past four years, domestic brands share of Group 1 unit sales has shrunk to 19 percent from 36 percent.
Group 1s acquisitions slowed to a point where new outlets brought in $90 million in annual revenues last year.
The moneys there
The retailer had $181.7 million in available liquidity at the end of the first quarter, enough to fund purchases when the economy picks up.
Weve really not missed any great deals, Rickel said. Theres a lot of cushion there -- or potential acquisition power should the conditions improve.
The companys eight Chrysler Group LLC stores survived the automakers 789 dealership closures this month, and Group 1 may benefit from the closure of some Chrysler dealerships in its markets, Rickel said. In addition, Group 1s seven General Motors outlets were not among the approximately 1,300 that were told by the now-bankrupt manufacturer that their franchise agreements would not be renewed in October 2010.
As U.S. light-vehicle sales continue to fall to near 30-year lows, the dealership group does not anticipate real estate purchases in 2009, Rickel said. Group 1 expects its capital spending this year to fall below $30 million, including maintenance expenses, he said. Thats down from $37 million in 2006, $70 million in 2007 and $53 million last year.
Group 1, of Houston, sold 110,705 new vehicles in 2008. In the first quarter, it posted net income of $8.4 million, down 45 percent from a year earlier. The profit included a $6.3 million charge for changes in how it accounts for debt and a $500,000 after-tax loss for the sale of a Ford store in Kendall, Fla.