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It has been a busy time for independent Scania dealer Keltruck. After acquiring Silurian, it now has to line up all its ducks
Words: Steve Banner Keltruck is a substantial business in anybody’s language. Having acquired Welsh dealership Silurian Scania at the start of the year, Britain’s biggest independent Scania dealer now operates out of 21 locations, a mixture of dealerships and vehicle maintenance units.
Distributed across the West Midlands, the East Midlands and South Wales, they encompass outlets as far apart as Worksop, Cardiff, Rugby and Ross-on-Wye. Now undergoing a £1m redevelopment programme due for completion later this year that will result in greatly improved ofice accommodation, Keltruck’s West Bromwich HQ alone sprawls across 8.5 acres.
“In a normal year, we sell more new Scanias than are sold in certain countries,” says MD Andrew Jamieson. That is almost 900 trucks when registrations generated by the four Silurian outlets – now trading under the Keltruck name – are factored in.
“Unfortunately, we haven’t had a normal year for a while,” he adds. “As a consequence, we’re aiming to retail 550 to 600 new trucks this year plus about 500 used, down from around 660 used sales in the past.” He believes the new truck market is moving in the right direction, but thinks the recovery remains fragile. “The rate of improvement is not as quick as a lot of people anticipated it would be, and I believe we’ve still got some pain to come,” he says.
He wonders whether total annual registrations will reach the high levels of the past in the foreseeable future.
Cutting out wastage
“Nowadays customers are working their trucks more intensively, and are cutting out wastage,” he says. “They’re sweating their assets more.” As a result, they may not need quite as many vehicles as they once did. Like all dealerships, Keltruck, founded in 1983 and the largest privately owned Scania dealership in the world, was hit hard by the recession. Annual turnover fell to £82m as the new truck market collapsed says Jamieson, down from a peak of £109m.
Still 100% owned by chairman and founder Chris Kelly, the company has stayed proitable, but dificult decisions have had to be made.
“At the start of 2008 we had 507 employees,” Jamieson recalls. “By the end of 2010, before we acquired Silurian, we were down to 460.
“We didn’t have a huge amount of redundancies though,” he adds. “A lot of the reduction in staff numbers was due to natural wastage and not replacing people when they left.” Many of the savings were achieved by looking at working practices and shift patterns with an eye to cutting costs but without diluting customer support. “We’ve become far leaner and far more eficient,” Jamieson says.
A strong client base has helped. “We trade with around 3,000 different customers a month,” he says.
So has its approach to selling vehicles. “We don’t have out-and-out sales people in the conventional sense,” he explains. “Instead we have what we term account managers. They’re involved with used sales – used has always been a big priority for us – as well as new, and with selling aftersales packages as well. We’ve always been good at selling aftersales contracts – we’ve got over 4,000 on our books – and that gives us a lot of stability.
“If our penetration in this area isn’t the best in the network, then it’s certainly the second best.”
Aftersales revenues
When new sales slumped, aftersales revenue did not collapse because operators still had to keep their vehicles on the road. “Our parts front-counter business in fact held up a lot better than we expected and that continues to be the case,” he says.
“Remember, we don’t make money selling new trucks,” Jamieson continues. “We lose money – it’s a loss-leader.
“Aftersales is where the income is generated, and if our customers use their trucks more, then that generates more money for us.” Jamieson reckons that most of that money is generated by threeto ive-year-old vehicles, which means, paradoxically, that selling a new truck can be bad news for Keltruck’s revenue stream, at least in the short term. “Whenever we replace a leet of ive-year-old trucks with new ones then on the one hand it’s fantastic, because you’ve won the business, but on the other hand your aftersales proitability dives,” he observes.
“There’s also the point that new trucks are more reliable than their predecessors – reliability is improving at a rate of maybe 3% annually – and that too has implications for aftersales activities because it affects parts sales and the number of workshop hours sold.” If sales of new Scanias ceased, however, then in the long run Keltruck would shrivel as a business; and there are certainly no signs of that happening. “New truck sales feed the sausage machine,” he remarks.
That sausage machine now includes ATFs at West Bromwich, Worksop, Cardiff and Burton-on-Trent. “We plan to add more,” he says.
Despite the number of operators that have gone to the wall over the past three years, Keltruck has not been plagued by bad debt, says Jamieson. “So far as aftersales activities are concerned, the worst it has ever amounted to was less than £80,000 in the context of an annual aftersales turnover at the time of more than £37m,” he says.
That can be attributed in part to the quality of the dealership’s customer base and also, one suspects, to the eficiency of its credit control.
Although initially affected by the economic downturn – “we had to take some pain, no point in hiding it” – sales of second-hand trucks subsequently bounced back strongly.
“Used sales have enjoyed a really good run since last October,” he says. “In fact taken as a whole, 2010 was not a bad year for used sales at all, and I think the used market will remain strong.” Obtaining retailable second-hand stock is a struggle for many dealers.
“However, we’ve always been quite heavily into contract hire and we’ve got a lot of buy-back commitments,” Jamieson says. “A lot of our customers have admittedly extended their agreements for a year because they wanted to put off having to acquire new vehicles, but those trucks eventually come back to us.” That is one source of stock. Another is derived from Keltruck’s willingness to buy used vehicles in numbers.
Returning to new trucks, how does Jamieson react to criticisms from operators that factory-fresh Scanias are far too expensive?
“You’ve got to look at it in terms of whole-life costs,” he replies. Scanias cannot be described as cheap, but they hold their value. We were dealing with a customer the other day with some seven-year-old R-cab three-axle tractor units,” he says. “They were all built to basic speciications, had covered around one million kilometres each and were really nothing special.
“Some of them sold for over £20,000 nevertheless – their speciication meant they had a fantastic appeal in certain export markets – and the operator concerned probably paid less than £60,000 for them to begin with,” he adds.
For a truck to retain over one-third of its original value after such a long time is an impressive achievement, and allows Keltruck to quote competitive contract hire rates. ■