THE company which owns McConechy’s Tyre & Auto Centres has slipped into the red after writing off goodwill purchased on recent acquisitions – despite lifting turnover in competitive market conditions.

McConechy Holdings, which operates a network of 60 depots throughout Scotland, Yorkshire and Tyne and Wear, made a pre-tax loss of £24,206 in the 18 months ended October 31, accounts newly filed at Companies House show. It moved into reverse after lodging a pre-tax profit of £383,937 in the year to April 30, 2017.

The accounts signal solid revenue growth at the Ayr-based chain, with turnover rising to £69.7 million for the extended accounting period, compared with £43m for the preceding year.

But as turnover grew the company saw a significant rise in administrative expenses, which soared to £25.6m from nearly £16m the previous time. McConechy also booked a loss of £115,397 on the sale of a fixed asset, though the company saw a big increase in other operating income, to £656,770 from £322,293. The other operating income was generated by property rental activity.

Operating profit dipped to £301,563 for the 18 months compared with £448,120 for the year before.

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Donald Carmichael, managing director of McConechy, put the rise in administrative expenses down to a “significant increase in depreciation and amortisation”.

The accounts include a £360,000 adjustment against the amortisation of intangible assets, with the depreciation of tangible assets stated at £754,732 at October 31, compared with £434,978 last time.

Noting that the intention is to write the goodwill off over a five-year period, Mr Carmichael said: “Essentially, it is fairly aggressive write-off of goodwill purchased on various acquisitions.”

Those acquisitions include Strathclyde Tyres, which McConechy took over in September 2017. The integration of that business, which brought depots in Johnstone, Coatbridge, Kilmarnock and Leven into the McConechy fold, was completed during the period.

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Summing up trading in the period covered by the accounts, Mr Carmichael said: “The start of the year was sluggish for us, but then it started to pick back up again.

“We were very pleased to see that the EBITDA [earnings, before interest, tax,

depreciation and amortisation] figure was significantly up on the previous period, which is good. And you will see our debt has reduced fairly significantly too.

“In a tough marketplace, it is altogether a not disappointing set of results.”

The directors said the period again saw bricks and mortar tyre specialists face increasing competition from online suppliers and comparison sites.

Mr Carmichael observed: “Consumers are, understandably, seeking best value for money, and looking at the internet. We are able to offer a price-competitive offering to the internet. But we also have a huge degree of expertise within our centres, to advise on tyre purchases and the type of tyre that is suitable to each customer.”

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As well as the threat of online competition, McConechy underlines in the accounts the “additional strain” being exerted on parts of the tyre sector because of the imposition by the European Union of import tariffs on Chinese-manufactured truck tyres in May last year. Mr Carmichael said there had been a degree of uncertainty in the market until the level of the tariffs was decided in late 2018, and ultimately led to some tyre manufacturing moving from China to other countries. He noted: “It created, to an extent, a shortage in the marketplace. But also tyre manufacturing was then diverted to other countries. That said, the majority of our entry-level truck tyres do not come from the Far East. They come from Eastern European factories. To an extent, we have been kind of sheltered from that, but it certainly had an impact on the marketplace.”

Asked whether the Brexit impasse was affecting business, Mr Carmichael highlighted the challenge presented by the continuing uncertainty. And he added: “My frustration would be that, when I carry out negotiations to acquire businesses, I tend to do them very much in private, rather than in public. I think that is altogether more helpful.”

McConechy would consider further acquisitions, he added, but only “where there is either a business need or a significant opportunity. We are quite comfortable with the size of business that we are.”

According to the accounts, the company saw its average headcount drop to 376 from 413. That came as staff costs increased to nearly £15.2m from £9.7m, reflecting the extended accounting period. Directors’ pay grew to £321,345 from £191,314, with the remuneration of the highest-paid climbing to £250,320 from £166,880.