‘Brexit’s long-term gain offers a massive opportunity for us’
Interview: Andrew Edmiston, chief executive of Citroën and Subaru importer IM Group
Andrew Edmiston: “If 60 per cent of our trade is with Europe, but Europe is only 17 per cent of world trade, then we’re doing rubbish with the rest of the world.” Photograph: Alan Betson
Andrew Edmiston is not just pro-Brexit, he’s hard Brexit. And he put his money where his mouth is, donating £1 million to the Leave campaign during the UK referendum.
It’s an odd position to take for someone whose business is built upon distributing international car brands in several European markets, and whose most recent venture is as distributor for French brand Citroën here. He fully accepts Brexit is going to hurt the IM Group he leads, certainly in the short term.
It’s not the only apparent contradiction when it comes to the 48-year-old avowed Christian and car-mad businessman.
Every bit the average Birmingham bloke, he doesn’t fit the stereotype of the jet-set son of a billionaire English peer and head of a family firm with a £629 million (€721 million) turnover. He may have flown into Dublin on the firm’s private jet, but his friendly demeanour and soft Midlands accent is far removed from the stereotypical motor industry executive. Or the belligerent Brexiteers we encounter on TV.
He is here to cast his eye over the firm’s Irish operations and we’ve barely sat down when Brexit comes up. How does he square the circle in terms of his business and his stance on the UK’s departure from the EU?
“As a company, and a family really, we were pro-Brexit for a number of reasons and not all that will benefit our business. And to be honest, we’re probably pro hard-Brexit.
“The price of us being linked to the European Union – which I believe is very protectionist – is increased prices of goods, even for those from within the EU, plus we are forgoing better international relations and trading relations with the rest of the world, which is growing at a much quicker pace.
“People are saying that 60 per cent of our trade is with the EU and how dare we turn our back on that bloc. I think that’s the wrong way to look at it. If 60 per cent of our trade is with Europe, but Europe is only 17 per cent of world trade, then we’re doing rubbish with the rest of the world.”
He says there are two types of hurdles businesses will face due to Brexit. “One is the extra complication if there is no customs union – and I think we will be out of it – because there is potentially more administration. For people to say that’s a barrier or a blockage is wrong; it’s an inconvenience but businesses are used to getting around inconveniences. We are dealing with inconveniences all the time. So actually that is not a big consideration.
“What has been a bigger consideration for me was the fact that the currency would weaken, and we’re an importer. In the short term, it does favour our rivals.”
Already the currency issue is impacting on the Irish car market, with used imports are predicted to top 100,000 this year and the prices in the Republic effectively being set on the garage forecourts of Belfast and Bristol. Ultimately, he says, there will have to be some short-term manoeuvring and restructuring of the economy. “But the long-term gain offers a massive opportunity for all of us,” he says.
Edmiston’s father, Bob, built the business in 1976 when British sports car maker Jensen Motors went bankrupt. Initially selling spare parts to Jensen customers, and with a minority shareholding in the business, he secured the UK franchises for niche Japanese brands Subaru and Isuzu.
By 1987, the group had expanded into the property market and, by 1989, Bob had become the sole shareholder. In 2006, he took a back seat as chairman and handed over the keys to his son.
Andrew Edmiston attributes his stoicism on Brexit’s costs to the firm’s family roots.
I think one of the reasons so many big firms in Britain were against Brexit were that these firms are led by hired hands and they are thinking about the next two to four years’ bonus
“In the plc world, there doesn’t exist the strength of a family. That’s a good and bad thing. It’s a much more short-term outlook. I think one of the reasons so many big firms in Britain were against Brexit were that these firms are led by hired hands and they are thinking about the next two to four years’ bonus. They’re not thinking about the next decade or two, or the long-term future of the economy.”
That long-term view must be a comfort for the Irish operations. In a new car market of 131,335 last year, Citroën recorded just 1,291 new registrations. The supposedly premium sub-brand DS had just 35. Subaru didn’t do much better with 103. While Citroën did hold a 6 per cent share of the van market, it all adds up to a rather lacklustre performance to date.
In fairness, Citroën had been in the doldrums long before IM Group took control. At an international level, the brand has been struggling to redefine itself for over a decade. Here in the Republic, it has done a few U-turns in its business model. The car firm took direct control of Irish operations from Gowan Group in 2009. That failed to revive its fortunes, so in 2015 it went back to the private importer route with IM Group.
Unsurprisingly, Edmiston believes a private importer is much better suited to catering for a relatively small market like Ireland. “The big pressure for a car manufacturer is that it’s got an investment in the factory and the production lines have to be kept going.
“If it finds not enough people want to buy its cars, it’s faced with a very difficult choice. If it halves production, for example, then the fixed costs per unit goes up, so it’s uncompetitive against traditional rivals. Therefore it’s very difficult to reduce production and a manufacturer has to find a way to get rid of the excess stock.
“For a private distributor, we are much keener and careful about managing the local market and resist the urges of the factory to flood the market with product. We can’t always do that. Sometimes it’s a balance and a relationship, but at the very least, we’re going to try and bring more maturity and sensible marketing to the way we do things, because that’s the way we will make profits.”
Driven by the need to offload excess stock, for years Citroën’s reputation in this market was largely built on discounting. Can IM reinvent the brand’s image?
When we arrived, the mentality of the manufacturer had been to get cars shifted, so they would do different deals with different dealers
“You’ve got to build from the bottom, really. You’ve got to strengthen the residual value of the vehicles and not oversupply the market.
“When we arrived, the mentality of the manufacturer had been to get cars shifted, so they would do different deals with different dealers. It left the dealers wondering if they are getting the best deal. We came in and stopped that. Even to our own detriment.”
Last year’s decision by Citroën owner PSA to take over the General Motor’s struggling Opel and Vauxhall business has raised questions as to whether there might be a move to consolidate Irish operations. Might this mean IM Group taking on the Opel franchise if PSA opted to go down the private importer route? “In concept what we would say to PSA is if it becomes a live question, we have an interest.”
For now Edmiston’s focus is on the brands he has, including Subaru.
“One of the things is that you can be cost-effective, so we are not really losing money with Subaru, even if our volume is quite small. It’s below where I would like it to be, obviously, and the thing that really affected it was the changes to the tax regime in Ireland in 2008. That was a fairly mortal blow to Subaru.”
Since the mid-1980s, IM Group has also developed a property arm.
“The reason was that the car business is very good at turning over cash and you can make profits from a car business but obviously you pay tax on any profits. A way of storing the cash is in property, so it delays paying tax and you pay capital gains tax when you sell it and so those two businesses go well together,” explains Edmiston.
It has become much more than that, however. Profits from this arm of the business came to £58.3 million in 2016, compared to £35 million from the motoring arm.
With Ireland’s property market surging ahead again, the firm has kept an eye towards investing here. “It’s something we’ve been looking at to some degree. We are aware the [Irish] market is moving quite strongly. Since we’ve increased the size of our property business, our style tends to be to get involved in large-scale properties – £20-€100 million blocks. It’s a size that we can manage.”
At several points during the interview, Edmiston references the family’s Christian roots. The company’s accounts show it donated £54 million in the last three years to Christian charities. Yet it also has a sub-prime finance arm. How does he square this arm of the business with his avowed Christian beliefs?
We had to think long and hard about this because you are selling finance at an increased rate to people, because the incidence of bad debt is higher
“We had to think long and hard about this because you are selling finance at an increased rate to people, because the incidence of bad debt is higher. But how we resolved that in our head is that many of these people have been through a divorce or something has happened in their lives and they’ve had a knock. You need a job to get out of it and often you need a car to get a job. So the only solution is for these people to pay a higher interest rate because more of them will not pay.”
Returning to the motoring world, Edmiston fully accepts the Citroën business here is a work in progress. “We haven’t yet proven to ourselves that our approach with Citroën is going to work for us and we’re still investing in the market in Ireland. Our mentality is, we’re not really quitters. If we were to hold our hands up and say this isn’t going to work, that would be quite a big thing.
“We have been here a little while and the business is not really in a position I’d like it to be in terms of return, but I think that will come: 2018 will be a breakthrough year.” It’s also likely to prove a telling year for Brexit.
Name: Andrew Edmiston
Position: Chief executive of Citroën and Subaru importer IM Group
Family: Married with five children
Something you may expect: He’s an absolute car nut. “My daily car is a Subaru, and I have a couple of Impreza Turbos. But I’ve also got a few Ferraris, including a Speciale 488 and an FF, and I’ve recently bought a Porsche GT3 RS.” There’s no Jensen in the collection though.
Something that might surprise: “For the last 34 years, I’ve played drums. I used to play in groups but now I play casually and for a band in our church. Our church is one of those lively ones that plays rock and roll music.”