Tyre firm thrives in tough conditions

The results for McConechy’s Holdings were disclosed as managing director Donald Carmichael declared that a second referendum on Scottish independence would be “unhelpful” at this time, given the uncertainty surrounding the UK’s exit from the European Union and businesses’ need for stability.

Family-owned McConechy’s, which added seven branches to its network following two acquisitions over the period, said gross margins had increased last year in spite of intense competition in the marketplace. That meant it was able to increase profits while turnover dipped by £500,000 to £37m.

Mr Carmichael said: “Generally, we’re very pleased with a stable and steady set of results in a somewhat difficult trading backdrop. We have been under pressure on margins, although it is pleasing to see that our gross margin percentage has increased.”

Mr Carmichael said competition in the car tyre market was being fuelled by the growth in online sales, with “price-aware” consumers seeking good deals on the internet. He noted the “price-competitive model” adopted by the firm had helped it improve unit numbers in double digit percentage terms over the period.

McConechy’s itself has a growing internet sales division. Although it is yet to become a “significant” part of the business, Mr Carmichael said the number of people visiting its website was growing rapidly.

“The advantage to ourselves as a ‘bricks’ business, as against a ‘clicks’ business, is we can offer a fair amount of expert knowledge and advice to our customers as they come into our centres,” he added. “We would also emphasise the safety nature of the tyres – the one thing that is between you and the road. We should not underestimate that and its importance in overall driving.”

Mulling the current political outlook, Mr Carmichael said Brexit and the prospect of a second Scottish independence referendum were significant considerations for the firm. On the prospect of a further plebiscite on Scotland’s constitutional status, he said: “At this moment in time that would be unhelpful.”

He cited the potential impact on costs arising from the current weakness of sterling as the single biggest factor emerging from the vote to leave the EU so far. While the firm’s practice of buying imported goods in sterling means it is “not exposed to currency exchange differences”, he admitted that “there appears to be a greater move towards some suppliers to pass on, effectively, the currency hedge to ourselves through different discount structures, which is not the easiest.”

Mr Carmichael, the only non-family member on the McConechy’s board, added: “We as a business are dealing in markets in Europe, the USA and the Far East which are important to us, and as a business we’re very proud of our Scottish roots, owned and run. But we also have a growing presence in England – stability is something that is hugely advantageous to ourselves, and I suspect it is to a number of other business.”

McConechy’s was active on the acquisition front over the year. The family-owned firm added four branches to its network – in Johnstone, Coatbridge, Kilmarnock and Leven – with the purchase of Strathclyde Tyre Services in September. That came after it took on three centres in the north-east of England – in Sunderland, Blythe and Gateshead – through the acquisition of McGill Tyres. On the prospect of the firm doing further deals, Mr Carmichael replied: “It is something that we are always alive to. Being a private company, we are not driven by any external forces that are requiring us to continue to acquire. It is only when there is a strategic fit and indeed the price is right [that we will do a deal].”

According to the accounts, McConechy’s employed an average of 281 last year, up from 301. Payroll costs rose to £8.2m from £7.9m. The accounts show that directors’ pay was booked at £245,239, compared with £261,551 in 2015, with the highest-paid receiving remuneration of £164,695, down from £261,551 .