After three years of accelerated growth in Southeast Queensland, the company trading as Brisbane Motorcycles has found its parallel twin in NSW, acquiring Sydney City Motorcycles for an undisclosed sum.
From a backs-to-the-wall position five years ago when the Queensland dealership faced the prospect of being swallowed up by one of the country's largest players, Brisbane Motorcycles' parent company Motorcycle Trading has now doubled its store footprint size to six following the latest deal.
Led by owner and managing director James Mutton, the group expanded its dealership base of Windsor and Caboolture last year to Ipswich west of Brisbane, while the latest purchase gives the group a footprint in Lane Cove, Caringbah and Campbelltown. The deal is reportedly seven-figure, funded by a mix of debt and cash generated during the pandemic bike boom.
The acquisition seems to be a wheelie good idea, with Mutton noting a similar workplace culture and business model at Sydney City Motorcycles under its managing director David Baines, who has been in the industry for 30 years but has been planning his retirement.
"We did speak to a couple of other parties, but this dealership mimics what we have in Brisbane very closely in terms of its three-dealership set-up, the same key brands that we already have relations with in Brisbane, and a similar geographic spread across Sydney," he tells Business News Australia.
"We’ve got one out in the western suburbs, we’ve got one north, we’ve got one south, so it resembled a lot of what we do in Brisbane but with the added benefit of having a larger population. It just seemed to make sense and be a good fit for us," he says, clarifying that for now the Sydney City Motorcycles branding will remain at the retail outlets.
While Brisbane Motorcycles has a wider portfolio of brands, both businesses sell bikes from Kawasaki, Yamaha, Suzuki, Honda and Ducati. The combined group is still nowhere near as large as Motorcycle Holdings (ASX: MTO) with its 37 locations, and Peter Stevens has a slightly larger footprint of eight stores in Victoria, South Australia and NSW.
"Because of the size of our dealerships and what we’re able to churn out of them compared to our competitors, it puts us at the forefront of privately owned operators," explains Mutton, who made the Australia's Top 100 Young Entrepreneurs list in 2020 and 2021.
"With the growth we've had in Brisbane and the improvements we've been able to make with our core group of management staff, it puts me in a position where we’ve got a good pipeline of people who I need to provide more of an opportunity for.
"We didn’t want to further expand in Brisbane because I felt like we would probably start competing against ourselves, and Sydney is obviously the biggest market in Australia with the biggest population. The logical next step to progress the business was to turn that into a national company."
Motorcycle sales experienced a surge in volume in 2020 due to a mix of factors including the limited options for disposable income, the fact riding a motorbike is more COVID-safe than driving with others in a car or using public transport, and of course, the Federal Government's decision to allow people to withdraw savings from the superannuation accounts.
Dealership sales momentum continued although with an increased share in the repairs and accessories business, but Mutton says the market has now tapered off and normalised.
"We're not experiencing the kind of demand that we were 12 months ago, but we obviously acquired the [Ipswich] dealership last year that has added a substantial amount of revenue and net profit to our bottom line. I believe it’s our marketing efforts and the way we run the dealerships that have allowed us to keep growing," he says.
He says the group now has almost 120 staff on its books.
"Once we tack on this new entity and the three dealerships, from August 2019 and pro forma if nothing else changes in Sydney - and I do believe we can continue improving it there - you're talking net profit growth to next year of around 1,200 per cent," he says.
James Mutton took over running Brisbane Motorcycles in 2017 when his father Brett was diagnosed with cancer and the family was faced with the difficult decision of whether or not to sell-up. An offer was on the table, but as general manager James was determined to keep the company in family hands and “went all in” to hit performance targets and front up his own personal savings to purchase the business himself.
This culminated in him forming his own company Motorcycle Trading, which acquired all the dealership’s assets and intellectual property in 2019.
In addition to the retail business itself, Mutton has also developed his own dealer management software (DMS) which is still in the trial stage in QLD and will be extended to NSW, although his bigger plan is to take the technology global.
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