Group 1 Has Grown in the UK and Will Continue US Acquisitions

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio improved to 64.2% including rent expense in 2023 compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, which are improving employee retention and increasing technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with new entrants to the online used-vehicle market such as Carvana but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.