Norfolk car-maker Lotus ‘in best position for 20 years’ and on track for profitability this year
The boss of Norfolk car-maker Lotus has insisted the company remains on course to return to profitability this year, as its turnaround plan nears completion.
In a wide-ranging interview with the Eastern Daily Press, Jean-Marc Gales played down suggestions the company was up for sale, saying that after a “long, tough road” and years of losses, Lotus had completed a staff restructure, was looking to hire again and wanted to work with more East Anglian suppliers.
But he also called for greater support from the county council for the marque, which last year celebrated its 50th anniversary at Hethel.
“Lotus is in the best position it has been for 20 years,” said Mr Gales, who arrived at Lotus in 2014.
“Revenue will be higher this year than last year, earnings will be positive and volumes will be stable.
“We sell cars for much higher revenue than we did last year. That makes sure that Lotus can stay here for a long time – and a few years ago it didn’t look like we could do that.”
Lotus Group International’s most recently-filed results, for the year to the end of March 2016, show a loss of £41m, down from £45.2m the year before, with turnover down 18.6% to £79.3m.
The company also reported a loss of £16m for pre-exceptional EBITDA (earnings before interest, tax, depreciation and amortisation) – a figure often used to evaluate a company’s operating performance – which was a reduction from a loss of £19.2m in the year to March 2015.
Mr Gales said the latest figures would show the company to be “EBITDA-positive” for the first time on the cars side of the business.
“Lotus will be cashflow-positive this year,” he said. “Now, we are earning the money we spend, and spending the money we earn.”
A company spokesman said the financial year 2015-16 had included the resolution of several legacy issues and extraordinary items, and that the current year would “show a very different picture... reflecting an organisation with a massively improved cost base with significant improvements from a profitability perspective.”
Mr Gales also distanced himself from national newspaper speculation that Lotus’s Malaysian parent company DRB-HICOM Berhad was looking to sell.
“That is in the realm of the shareholders and I leave it to them. They don’t comment on this type of thing,” he said.
Mr Gales said the turnaround had been achieved by increasing the margin on each car sold, and reducing costs throughout the business.
In the past three years, the company was forced to cut 300 jobs “to save 800”, but has also cut its overheads by more than half by re-sourcing components, and reviewing travel and IT costs.
A review of above-statutory terms and conditions for staff also concluded in January to bring them “more in line with industry benefits”.
Mr Gales said: “Some people decided to retire - a manageable amount. The good thing is that we are retaining talent.
“The people who are instrumental for developing our success are with us.”
As well as reducing costs, Lotus has increased average revenue per car from around £37,000 per car to around £50,000, thanks to the increased prices and a focus on personalised fittings for which customers pay more.
“We offer more performance for a higher price – the customer is always willing to pay for performance,” he said.
“If you offer a better power-to-weight ratio, better 0-60mph times or better lap times, they are willing to upgrade or come to our brand from a competitor.”
As Lotus’s turnaround gathers pace, the company is looking to work with more local suppliers, and said it had asked for greater council support - something the council has said it will discuss.
Mr Gales said: “We employ 750 people in Norfolk, and four times that – 3,000 people – in the supply chain, of which 25% are in Norfolk, so you can fairly say we employ another 750 people in the county.
“We asked for a reduction [in business rates] but we have not yet had a response. Now that we have turned around the company, we hope that we can count on local support from the council, not only on rates but also on attracting automotive suppliers to Norfolk.”
STRENGTHENING LOCAL LINKS
With the company on a more secure footing, Lotus is now looking to strengthen its links with local suppliers.
Of the impact of the Brexit vote and subsequent fall in the pound, “the upside has been slightly higher than the downside”, said Mr Gales.
“The government tells us we are a model: we export 85% of our products and buy two-thirds of our components in this country. But we want to become an even better role model for companies.
“We are looking to increase our number of UK-sourced parts and we definitely want to increase the number of suppliers here in Norfolk.”
Currently, around a quarter of Lotus’s UK suppliers are Norfolk-based, but he said there were opportunities for existing companies and aspiring entrepreneurs to seize the opportunity.
“We want to contribute to the automotive supply chain industry being built around us,” he said. “There are logistical advantages to that - the nearer the suppliers are to you, the better it is.”
The number of cars Lotus built in 2015/16 fell by 20% from the year before, from 2,015 cars to 1,607.
It said a slower-than-planned production ramp-up of the new Evora 400 because of supply capacity had played its part, along with the decision to move the North American launch of the model to August 2016 “to ensure product quality”.
But Mr Gales said the decision to delay had been justified, hailing Lotus’s “triumphant return” to the US with its first model tailored specifically to the country.
“The car has received a great reception. The new Lotus
Evora 400 is fully homologated in the US. No exceptions, no waivers,” he said, citing a 500-strong order book from its 50 dealers.
“The customers in the US love it. Road and Track magazine says it’s the second best performance car of the year in the US, beating competitors from Germany, Italy and the USA.”
Mr Gales added that the Evora would be key to returning to profitability this year.