Eastern Western’s profits came under pressure from higher employment and expansion costs in 2025, although the Scottish dealer group remained profitable.
Pre-tax profit fell 14.5% to £11.3 million, while operating profit declined by 13% from £20.1m to £17.5m for the year to December 31.
The top 30 AM100 group’s operating margin narrowed from 2.18% to 1.96%, while the pre-tax margin declined from 1.44% to 1.27%.
Revenue decreased by 3.1% from £920.8m to £892.5m.
Eastern Western attributed the reduction mainly to Mini and Honda moving from wholesale to agency sales, under which the group receives a handling fee rather than recording the full value of each vehicle as revenue.
It also closed its Harley-Davidson and Kawasaki franchises in April 2025.
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Higher costs reduce profitability
Gross profit increased by 2.1% from £106m to £108.2m despite the reduction in revenue. However, administrative expenses rose by 3.3% to £104.5m.
Eastern Western attributed the pressure on profitability primarily to higher employer National Insurance contributions and increases in minimum wage rates.
Total payroll costs increased by 5.5% from £71.9m to £75.8m. This included a rise in social security costs from £6.5m to £7.8m.
The dealer group employed an average of 1,674 people during the year, compared with 1,624 in 2024.
Other operating income fell from £15.2m to £13.8m, including a reduction in finance commission from £10.6m to £10.2m.
Chery expansion adds start-up costs
Eastern Western opened three Chery dealerships during 2025, marking its first partnership with a Chinese car brand, and added a fourth location after the year-end.
The group said recruiting employees three months before the first locations opened, together with other start-up costs, had a material impact on its performance during the final quarter.
Eastern Western also acquired Audi Edinburgh and Audi Stirling from Lookers Motor Group on November 1, 2025.
The assets were acquired for £7.7m, with the transaction generating £2.7m of goodwill. The wider cost of the acquisition was reported at £8.1m.
Vehicle margins and aftersales grow
Eastern Western reported that new and used vehicle margins remained strong, with every franchise exceeding its manufacturer’s comparative average for used vehicle gross profit.
Aftersales revenue grew by 6%, while gross profit from the division increased by 8%. Labour gross margin improved by 1.1 percentage points despite further increases in technician employment costs.
The group warned that new car availability had returned to pre-pandemic levels, introducing additional stock risk in a higher interest rate environment.
New and used vehicle stock increased from £100.9m to £128.3m. Total stock rose from £105.6m to £133.2m, while vehicle funding increased from £71.9m to £105.6m.
Eastern Western ended the year with net assets of £113.7m, up from £108.7m, and net current assets of £23.8m.
The group used existing cash to fund the Audi acquisitions, £2.9m of leasehold improvements and the £2.4m purchase of a 33,000sq ft industrial unit in Halbeath.
The property will become an aftersales centre serving its nearby Mercedes-Benz, Toyota, Honda, Nissan and Volkswagen dealerships.
Cash at the bank and in hand reduced from £12.2m to £5.6m at the year-end. The directors said the cash position had subsequently risen to more than £10.9m by the time the accounts were signed and that the business had outperformed its original 2026 budget across all areas.