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ASE & Motor Trader Financial Conference 2013. Mike Allen Executive Director – Panmure Gordon & Co 0151 243 0966 michael.allen@panmure.com. Overview. Introduction UK economic environment Reasons to be optimistic about UK Motor Retail Reasons to remain cautious about UK Motor Retail
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ASE & Motor Trader Financial Conference 2013 Mike Allen Executive Director – Panmure Gordon & Co 0151 243 0966 michael.allen@panmure.com
Overview • Introduction • UK economic environment • Reasons to be optimistic about UK Motor Retail • Reasons to remain cautious about UK Motor Retail • A look across the pond in the US • Stock market environment • Concluding thoughts • Q&A
UK Economic Environment Overview • UK economy recovery is underway but will be a long and slow process • Most economic projections suggest UK GDP growth will exceed 2% by 2015 at the earliest... • Austerity measures gathering pace, but likely to ease ahead of next election in 2015 • Unemployment structurally high, wage inflation modest and below inflation • Fuel costs impacting buying behaviour • Consumer confidence remains fragile, buying incentives remain key
Reasons to be optimistic on UK Motor Retail • New car data continues to improve and remains below historic peak levels • Euro Zone markets remain under pressure • Pent up demand building through ageing UK car parc • Used car market remains stable • Consolidation dynamics remain attractive • Valuations remain below peak levels
Clear evidence of pent up demand in UK market UK car parc/average age Source BCA
Reasons to be cautious about UK Motor Retail • UK consumer still faces significant pressures on household income • Fuel price inflation • Structurally high levels of unemployment • On-going squeeze on family income • Fragile confidence • Significant incentives to purchase still needed • Historical trends important – remember the 2% rule • OEM behaviour likely to remain erratic given Eurozone pressures – close eye needs to be kept on dealer targets • Used car values appear to have fallen in March – seasonal adjustment as opposed to real market income • Cyclical industry on wafer thin margins = rocky road at all times
Concluding Thoughts • UK economic recovery will be long and slow • PLC dealer groups expected to make progress in 2013 vs. a decent year that was 2012 – H1 2013 should be good • Dynamic sector with improving performance standards – online presence, stock control, cost base optimisation and consolidation • Stock market valuations undemanding at this stage of the cycle • Beware of fickle stock markets as well as consumers and on-going macro economic concerns • Rocky road always the case in this sector but through the worst • Q&A