Franck Baduel, AAG: “2024 is a risky year where only excellence will pay off”

Franck Baduel: In 2023, we directed our cash towards external growth, primarily through investments in maintaining our industrial facilities and project financing. We executed a total of twenty-five acquisitions, including five distributors in France, seven in Benelux, one in Germany, and approximately ten companies in the UK. Notable acquisitions include CAAR Limited (CAAR), a commercial group with 300 members, and Gaudi (€100 million, 350 people), strengthening our positions in Spain following strategic purchases of Lausan and Soulima. Significant investments were made in the logistics overhaul of Alliance Automotive Group, featuring the First platform in Paris set to be operational by the beginning of 2024. Additionally, we invested in Spain, planning to open a “megahub” of18,000m² in Torrejón de Ardoz in April 2024 to cover the Iberian Peninsula within one day. We financed the Sheffield platform in England, scheduled to open in2025, extended the platform in the Netherlands, and initiated a 26,000 m² platform in Germany dedicated to original parts from car manufacturers other than BMW, expected to open in June. Furthermore, we progressed on our digital roadmap by overhauling our IT systems. We finalized the implementation of new solutions in our IT nerve centre based in the Netherlands, including a multi-brand and multi-product electronic catalogue (parts, tyres, consumables) for all our European suppliers. We also planned to deploy lead generators to generate traffic in our European workshops (already active in two countries) and a repair and maintenance module so that they can work with major accounts.

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I would describe it as a continuation of our successful journey in a year marked by overall prosperity in distribution, significantly aided by inflation. However, I approach this cautiously, considering the uneven impact of inflation across countries, varying by a factor of two(e.g.,+10% in Germany and the Benelux, +5% in Spain and the United Kingdom). There seems to be a kind of standardisation of inflation, which has been slowing down since May 2023. In France, we anticipate ending the year around +5%. To be honest, we all navigated through inflation without significant setbacks. Overall, the service rates of suppliers have returned to the standard level of 90% (95% for segment A), except for some minor deviations in a few product lines. The remaining challenge is the persistently high energy costs. Despite a decrease, these costs continue to be disproportionate. However, AAG holds the first or second position in each country, with the exception of Germany (No. 3).

Let’s put it this way, these two territories serve as a launching pad for everything! We’ve acquired two excellent companies (Lausan in Spain, Soulima in Portugal), and we’re providing them with additional logistical support, which is essential for expanding in a growing market. This market is highly dynamic, and we lacked the space to stock additional ranges and diversify the product portfolio and suppliers. NAPA is an integral part of this strategy, although we already introduced this brand at the beginning of 2023. We expect to start the year with our entire product offering in the catalogue. In Europe, we anticipate exceeding €440 million in turnover with NAPA alone. This means achieving even better results in 2024.

It is a regional model tailored to a specific French need [Editor’s note: a platform dedicated to mass-market parts with delivery within one hour, close to major urban centres]. However, certain aspects of this model are already applied elsewhere in Europe. The markets are all so different that replication can only occur in small doses. But why not consider it?

It’s indeed a clear area of development for AAG. We have doubled our key account activity in Europe over the last three years. This activity is aimed at traditional customers such as car centres or specialised networks in general, but also emerging players such as rental companies or insurers. This is an area that we are strongly developing because concentration is also very present among them. Just look at the acquisition of LeasePlan by ALD Automotive, giving birth to a global rental giant with a fleet of more than three million vehicles worldwide! They form partnerships with repair players like us, having at least a European footprint. We are increasingly called upon to maintain their fleets or even to support them in their local locations. This is how things are developing.

We have a total of 450 certified garages around the world (including400 in Europe), slightly less than the 500 announced last year. We are not rushing! Building volume is counterproductive. On the contrary, we are selective because we have time to prepare our networks for electrification, train them, and certify them correctly. The reception is positive in the workshops, and we ares urprised by some countries more inclined than others: thirteen workshops are already operating under the Nexdrive brand in Poland, even though electric cars will arrive there later than elsewhere. But Polish garages want to stand out with an immediate response for fleet customers.

They do – the figures are regularly made official – and Europe is well positioned in the GPC environment. The American group entrusts the European team with management, customers, and commercial development for each country. And to dispel certain rumours–which are not accurate – I would like to point out that the reshuffling carried out in France last year was not motivated by a lack of profitability in the French operations.

At present, we are still aligned with our Vision 2025 strategic plan, and we are even ahead in terms of volume and profitability. We invested more than initially planned in external growth–Spain being an addition, for instance – but our appetite remains strong. The 2025 Plan has already evolved into the 2030 Plan! On the other hand, 2024 could be a challenging juncture, and some players might face disappointment. The inflation of the last three years has obscured a certain reality that could catch up with us rapidly. We all grappled as best we could against macro factors (pandemic, cost of raw materials and energy, Russian-Ukrainian conflict), but they were beyond our control. We are entering a period where inflation persists, interest rates remain high, and countries’ economies are in the red, limiting their flexibility. In this context, consumer purchasing power is constrained, and the entire value chain for the automobile industry is already under strain. I remind you that Germany and the United Kingdom were in recession just a few months ago. 2024 is a risky year where only excellence will pay off.

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Key figures 
• €3.4 billion in turnover
•780 subsidiaries, 2,500 salespoints
• 9 European countries