DF Capital

Twelve months like no other. But will we eventually go back to some normality or will the lifestyle changes we’ve made stick around?

Commentary from Andy Stafferton, Chief commercial officer, DF Capital

2020 was a year like no other. Who could have predicted at the beginning that we’d be locked in a global pandemic come Easter, experiencing two lockdowns before the end of the year?

Whilst some sectors were hit harder than most last year, we saw first-hand how a number of industries rode the wave and came out of the other end relatively unscathed, and in some instances, even stronger than before.

Admittedly between March and the end of June last year, many of our dealer and manufacturer customers were shut. There were high levels of stock in the market and it wasn’t easy to complete sales, so there were worrying signs. However, COVID-19 succeeded in changing some consumer’s behaviour. It encouraged some individuals to buy assets that they historically hadn’t considered, resulting in one of the best years -in terms of sales, and margin for our customers – for a long time.

There were fewer people willing to take public transport post the first lockdown, and many decided to buy electric bikes and motorcycles as an alternative travel method. Because of this, some of our motorcycle dealers have seen significantly more sales this year, even taking into consideration the period when they were closed.

A lack of international travel during the year also drove end users towards the motorhome, caravan, lodge and marine sectors, with leisure time and holidaying at home being more attractive. For instance, many of our lodge parks were inundated by demand between July and September and consumers were buying many more boats between June and August than historically.

Caravan, and motorhome dealers had a bumper summer and autumn and, in the end, could barely keep pace with handovers, especially in a socially distanced environment. In general, these leisure sectors benefited from new consumers joining the markets, and towards the end of the year, they had sold out of many items, they had low stock levels, and a scarcity of used units which were appreciating in value.

In terms of other sectors in the DF Capital portfolio, agriculture seemed stable enough, with farmers still buying machinery and operating during lockdown. Lots of commercial vehicle dealers saw an upside, with an increase in the number of smaller vehicles sold to cover different delivery methods. The trend for electric fleets also continued rising, although this was due to the change in culture rather than the pandemic.

There was of course a slightly mixed bag for other areas, particularly those in industries reliant on government infrastructure or capital expenditure investment which took a bit of a back step because businesses didn’t invest as heavily in these times. Dealer sales were down during the first lockdown and throughout the summer/first part of autumn. Nonetheless, we did see an upturn in the last quarter and hope this path will continue.

What will 2021 bring?

As for 2021, it will be interesting to see if the changes we’ve made – things like taking staycations when possible and the shift away from constantly commuting – remain in place or whether we drift back to what we were doing in 2019.

My personal view is that, whilst this year has been a difficult year for all of us individually and a massive challenge professionally, the lifestyle modifications that were place before the lockdown that started in January 2021, gave us more time for leisure and therefore a different work life balance. It may be that it was a change that was going to happen gradually anyway but has merely been accelerated.

However, if it emerges that this is just a “pandemic bubble”, we may need to be prepared for an economic impact on the industries that we serve. If new caravan or motorcycle owners eventually decide to go back to international travel when the borders open up again or commuting on the train and sell their newly acquired assets, supply will increase, and prices will drop. Equally, if the pandemic has contributed to lifestyle modifications that remain, the supply chain may struggle to keep pace with demand, meaning further price appreciation to come.

All eyes are also on what the government has got up its sleeve post Easter and after the restrictions that are in place at the moment. The current forms of contingency planning are scheduled to fall away and obviously we’ve also got a number of post-Brexit challenges. Will there be a recession? And what sectors will feel it more than others? SMEs have a higher probability of default historically, but also can be the most nimble in changing behaviour to cope, so will be key for lenders to support SMEs post-pandemic, in ensuring as many as possible survive any downside impact.

That said, dealers and manufacturers weathered last year relatively well. If we all pull together and support each other, we will make it through to the other side. Many of the manufacturers that I have spoken to have full order books well into 2021, and some significantly into 2022. So hopefully this is a shining light into the future.