The auto service industry has a "dirty" image, tarred with a reputation for grimy garages and questionable quotes for repairs. But Advance Pitstop, Ireland's largest fast-fit tyre service, has had to work harder than most to clean itself up.
When Terry Lennon joined the company from Bank of Ireland in 2001, Advance Pitstop was engulfed in a controversy over a Garda supply contract. The company had been overpaid €254,000 in two years to supply tyres to the Garda, the Comptroller and Auditor General found in 2002. It also emerged that some members of the force had enjoyed golf holidays in Spain and Italy, paid for by the tyre supplier.
Advance Pitstop, a subsidiary of German tyre giant Continental, needed new blood at its helm: Lennon became managing director in January 2003 and, along with a new management team, set about overhauling the company and sprucing up its image.
"What happened in the past happened. It was a long time ago," he says at the company's headquarters on the Naas Road. "We introduced more controls, a strong auditing function and core values. We also spent more than €700,000 on a new computer system that can show sales by product of any branch."
The turnaround paid off. By last year, pretax profit was up 28 per cent at €1.29 million, helped by an increase in revenue of more than 4 per cent to €37.4 million, the company's latest earnings report shows. Advance Pitstop also has about €6.6 million in cash and no debt.
"The good success we had in 2005 continued into the first half [ of this year]," says Lennon. "So we are well-positioned for the future."
Because the motoring market is a low-margin sector, with an average return of 2.5-3 per cent, Lennon began driving growth by selling more lucrative services and products. The company upgraded six of its 38 shops to include automotive service centres, which have computerised diagnostic equipment that find faults in vehicles. He aims to expand at an annual rate of two or three branches over the next three or four years.
It addition to being the main distribution channel in Ireland for Continental tyres, Advance Pitstop fits brakes, suspensions and timing belts, among other components, and carries out NCT work to fulfill its aim of being a one-stop shop for all automotive services, not just tyres.
Servicing retail customers, which is the higher-margin end of the business, now accounts for half the company's turnover.
"There's lots of money in the economy but people are short on time," Lennon says. "So if we can both identify problems such as faulty brakes and then replace them, we're filling a need in the market. We're not just a tyre company anymore."
In an effort to reinforce the company's new image as a service provider, Lennon went about making Advance Pitstop outlets more customer friendly by adding coffee machines, flat-screen televisions, couches and magazines to its waiting areas.
In particular it sought to make its shops more welcoming for women, with a view to increasing its female customer base. As the proportion of the company's female customers rose to a third of its total, Advance Pitstop hired actress Orlaith Rafter, who plays a mechanic in Fair City, to help capture a greater share of the female market.
"We used Orlaith to give the company a softer side, to show this trade is not all about boy racers or Formula One," says Lennon.
The managing director introduced four key values after taking up the reins at Advance Pitstop to help revive the business: professionalism; a focus on customers; honesty with customers and staff; and a positive attitude.
"We don't want to tell a customer their car will be ready in an hour and a half and then have them wait three hours," the 49-year-old executive says.
This approach is particularly important when competition is fierce. As well as main rival Fast-Fit, Advance Pitstop has to contend with more than 600 independent tyre shops and garages.
Although Lennon did not enter the motor trade until he joined Advance Pitstop, his experience as head of sales and marketing at Bank of Ireland's credit card division and his MBA has likely been behind the company's customer-focused strategy. Three-and-a-half years after taking up the top position at Advance Pitstop, Lennon is still brushing up on his business skills - at the moment he's reading Winning by retired General Electric chief executive Jack Welch.
"It says that once you have a strategy, implementation with vigour is key," Lennon explains.
"So you won't see a significant change in Advance Pitstop's strategic direction in the short term. Right now, it's all about execution of the strategy."
While Lennon's strategy may be working, the executive concedes it's not all a bed of roses. The company's raw material costs are rising due to higher oil and steel prices, a trend that is hampering Advance Pitstop's margin growth. Lennon is concerned, too, about how an overheating of the Irish property market might affect demand for Advance Pitstop's services.
The transition last year to FRS 17, which changed the accounting policies for pensions, wasn't easy either. The adoption of FRS 17 had a negative impact on Advance Pitstop's balance sheet, which showed a net pension liability of €3.9 million. However, the company has made cash contributions of €2 million to its pension fund in the past two years, according to Lennon.
Hanover-based parent company Continental, which posted revenue of €13.8 billion for last year, is pleased with Advance Pitstop's performance too.
"A lot of people have come from head office to see what we've done in Ireland as we are perceived as more innovative than the other companies in the Continental trade division," says Lennon.
