Inflationary pressures and Toyota start-up costs hit Eastern Western profits

Heavy investment in Toyota and Lexus and inflationary headwinds saw Eastern Holdings pre-tax profits fall 24.1% to £18.9m on turnover up 5.8% to £857.8m in 2023.

The increase in turnover is after the switch by Mercedes-Benz to an agency model, where the group gets a handling fee instead of invoicing the new vehicles. This reduced turnover by £50m.

Eastern Holdings, the holding company for Eastern Western Motor Group and subsidiaries, said the cut in profits could be attributed to higher interest rate payment, energy costs, salaries and “substantial” costs associated with the development and opening of three new start-up Toyota dealerships in Dundee, Stirling and Perth and a new Lexus dealership in Dundee.

The opening of these businesses was delayed due to planning issues which meant it carrying the costs of 70 staff it had recruited for a month in the final quarter of 2023.

New vehicles sales increased by 21%, driven by corporate, fleet and Motability. It said the strong new performance had impacted its used volumes, which fell by -3.8%.

In accounts filed at Companies House Eastern said the new car market had reverted to a push market after a few years of operating in a pull environment.

“The lack of retail demand for electric cars is increasing the force of the push as our manufacturer partners work to achieve the zero-emission mandate,” it said.

Turnover in the service and parts department rose by 9.2% and 5.3% while gross profit rose by 7.9% and 4%, respectively.

Eastern flagged up the shortage of technicians in the motor sector which is driving up costs. “This is likely to continue unabated in 2024,” it said.

The average number of staff it employed for the year was 1,561, a marginal increase in the 1,528 in 2022.

“We were pleased with our performance of 2.2% ROS considering the back drop of ever increasing overheads,” said Douglas John Brown, chairman & CEO, Eastern Holdings Ltd and Eastern Western Motor Group.