Final Results

RNS Number : 2691I

Lookers PLC

09 March 2010

 



9 March 2010

LOOKERS plc

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009

Lookers plc, a leading UK motor retail group announces its results for the year ended 31 December 2009.

Commenting on the results, Lookers Chief Executive Peter Jones said:

"We are pleased to announce that we have delivered a record trading performance for the company in 2009 despite difficult market conditions. Although we believe that market conditions will remain challenging in 2010, we are encouraged to report that we have made a strong start to the year. The strong performance from both the Parts and Motor Divisions, supported by our strengthened balance sheet and reduced cost base, places us in a strong position and gives us confidence that we will continue to trade successfully through the period, and be in a position to pursue strategic growth opportunities as they arise."

 

Financial Highlights

·      Revenue on a like for like basis increased by 4.2% to £1.75 billion (2008: £1.68 billion)

·      *Adjusted profit from operations increased by 33% £45.1 million (2008: £33.9 million)

·      Profit from operations increased by 187% to £29.3 million (2008: £10.2 million)

·      *Adjusted profit before tax increased by 102% to £28.3 million (2008: £14.0 million)

·      Profit before tax increased by £26.4 million to £11.5 million (2008: loss £14.9 million)

·      *Adjusted earnings per share increased by  57% to 7.32p (2008: 4.66p)

·      Basic earnings per share increased to 2.79p (2008: loss 7.68p)

·      Operational cashflow of £20.1 million

·      Stocks reduced by £56.2 million and net debt reduced by £70.5 million

·      Gearing reduced to 49% (2008: 180%)

Operational Highlights

·     Resilient performance against difficult market backdrop

·     Strong performance from market leading independent aftermarket parts division

·     Product ranges expanded

·     National infrastructure strengthened

·     Profit before tax increased by 34%

·     Strong performance from the motor division

·     New car sales increased by 13% (like for like)

·     Used car sales increased by 6% (like for like)

·     Improved performance from aftersales

·     Dual franchised a further 8 businesses

·     Group well positioned to take advantage of economic recovery

·     Strong start to trading in 2010

*Adjusted before amortisation of intangible assets, impairment of goodwill (in the prior year), exceptional items and debt issue costs as defined in the income statement.

Enquiries:

Lookers	Telephone:  [phone]
Peter Jones, Chief Executive
Robin Gregson , Finance Director
Hudson Sandler	Telephone:  [phone]
Nick Lyon/Kate Hough

CHAIRMAN'S REVIEW

I am delighted to report that Lookers has delivered a record trading performance for the year, ahead of market expectations, with group like for like new car sales (defined as excluding businesses closed in 2008) outperforming the UK new car market. The results should be considered against the background of the difficult trading conditions in the UK motor retail market which started in 2008 and continued in 2009, as well as difficult general economic conditions across the UK. The group's performance, therefore, represents an impressive achievement against this background and is encouraging for the future and in particular the remainder of 2010.

As I reported in our last annual report, the second half of 2008 saw an unprecedented decline in new car sales volumes and used car values which resulted in management taking decisive action at the time to restructure the Motor Division with the closure of 21 underperforming franchised operations. This action significantly reduced overheads, strengthened the business and placed it in a stronger position to trade through the economic downturn and to emerge from it as a stronger and more efficient business. We continue to benefit from our diversified business structure with strong performances from both the motor division and our market leading independent parts division.

The UK new car market reduced by 6% in 2009 compared to the previous year with total registrations of just under 2 million. This was the lowest volume since 1995, despite the introduction of the Government scrappage scheme which added 284,000 registrations. Group like for like new car sales increased by 13% to 61,372 units as we continue to increase our market share. Used car values recovered strongly during the year and like for like sales of used cars increased by 6% with margins also improving. Dealership aftersales delivered strong results and benefited from a combination of the consolidation in dealership representation in the UK, a trend which we anticipate may continue during 2010, and the managed restructuring of market areas and franchise representation within our dealership portfolio. Both these factors have increased aftersales revenue and profitability per site, further strengthening our share of the aftersales market.

Our independent parts division, which provides a significant contribution to group earnings, had another excellent year and produced record levels of operating profit in all of the three businesses of this division. The parts division is of particular importance to the group as it is not subject to cyclical fluctuations in the new car market. Furthermore, as the national market leader in this sector of the market, we are in a strong position to exploit future growth opportunities through the introduction of new products and services.

Whilst economic conditions remain uncertain, our strong performance in 2009 demonstrates the resilience of the group's businesses which are underpinned by profits generated by dealership aftersales and the independent parts division. This leaves us well positioned to continue to trade successfully by outperforming the new car market and developing further opportunities from all areas of the business.

FINANCIAL HIGHLIGHTS

Turnover was a similar level to last year at £1.75 billion.  *Adjusted operating profit before amortisation, impairment and exceptional items increased to £45.1 million from £33.9 million last year.  Total exceptional items amounted to £14.2 million, primarily in relation to refinancing and restructuring costs. Following significant reductions in working capital, interest costs reduced by 15.6% to £16.8 million. *Adjusted profit before tax was £28.3 million compared with an *adjusted profit of £14.0 million last year.  *Adjusted earnings per share were 7.32p compared to 4.66p last year. Net cash inflow before exceptional items improved to £22.3 million compared to £7.3 million in 2008.

BANK FACILITIES

As reported in our 2008 Annual Report, on 29 May 2009 we agreed terms and conditions with our banking syndicate on new facilities of £210 million. Whilst the facilities provide a sound financial structure for the group in the medium term, they were considerably more expensive and onerous than the previous facilities, as a result of the conditions prevalent in the banking industry at that time. We therefore, considered alternative sources of capital to reduce the additional cost of these bank borrowings. On 26 June 2009, we announced a fully underwritten Firm Placing and Placing and Open Offer to raise gross proceeds of £80.7 million (£77.6 million net of expenses) which facilitated significant improvements to the terms under the amended banking facility agreement. The fundraising has strengthened the group's financial position, with the net proceeds being used to pay down debt and assist in securing more favourable terms on the group's banking facilities, as well as providing flexibility for the group to pursue its future development strategy. The fundraising received strong support from our existing shareholders and also provided the opportunity for several new institutional shareholders to participate in the share issue which received shareholder approval at the General Meeting held on 22 July 2009.

DIVIDEND

A condition of the revised banking agreement is that the group will pay no dividends before 30 June 2010. As a result, the group is therefore not in a position to pay a dividend for this financial year. However, it is the board's intention to return to a progressive dividend policy in 2010, within the restrictions placed on the group by the terms of the amended banking facility agreement and subject to satisfactory trading results.

BOARD CHANGES 

As announced at the Annual General Meeting in June 2009, Ken Surgenor retired from his position as Chief Executive on 30 September 2009.  Ken has been with the group for nearly 25 years and CEO for 8 years and we would like to thank him for his hard work and dedication during this time. I am pleased to say that Ken remains with the group running the Charles Hurst group of businesses in Northern Ireland. On 1 October 2009 Peter Jones, who was Managing Director of the Motor Division, was appointed to the position of Group Chief Executive. Peter has extensive experience of the motor sector and is well qualified to lead the company in the next phases of its development. On 1 March 2010, as part of a reorganisation of the board, Andy Bruce was appointed Managing Director of the Motor Division and Brian Schumacker stood down from the board. I would like to thank Brian for his valuable contribution to the board over the last ten years. I am pleased to report that he will be staying with the group, although not on the board but in an important new role as Operations Director for business development, where he will lead the delivery of improved profitability across the group, particularly in dealership aftersales.

THE FUTURE

The breadth of our operations gives the group resilience and the flexibility to adapt to changing market conditions to help protect profitability.  The majority of gross profit is generated from aftersales and the independent parts division which represent 60% of gross profit and are not subject to cyclical fluctuations in the new car market.

The group has been strengthened by the actions taken in the Motor Division to reduce costs and close loss making businesses and the strong results achieved in 2009 have benefited from this. However, we will continue to focus on areas where we can improve the performance of the group's franchised outlets to bring further improvements in profitability. We continue to develop the independent parts division with the addition of new product lines, improved facilities and investment in systems, all of which will bring further increases in profitability. The successful equity raising and negotiation of amended banking facilities have strengthened the group's balance sheet, providing greater flexibility to ensure that we are well placed and focussed to take advantage of strategic growth opportunities that may arise.

The new year has started well with current trading being ahead of both our budget and the prior year. We continue to outperform the new car market and trading in the Motor Division is ahead of both budget and prior year. The independent parts division continues to perform well and is showing further progress. We are therefore confident that the company will emerge from the current downturn a stronger and more efficient business which is well placed to deliver future growth.

I would like to conclude by thanking all our people at Lookers for their hard work and dedication in an exceptionally challenging year without whom we would not have been able to deliver such an excellent result.

Phil White

Chairman

9 March 2010

CHIEF EXECUTIVE'S REVIEW

2009 Performance Overview

The 2009 *underlying profit before tax of £28.3 million, up from £14 million in 2008, was a record result for the company and was delivered despite an economic backdrop that saw the lowest new car market since 1995, a declining used car market and a reducing 1 - 3 year aftersales vehicle parc. 

The key factors in driving performance recovery throughout the business were:

·     strong used vehicle sales volumes and margin growth;

·     new vehicles sales volume growth, which was 19% ahead of the market;

·     strong turnover and margin growth in our parts division and a strong aftersales performance in the motor division; and

·     managed reductions within our business cost base.

The strength of our underlying profit performance in difficult market circumstances gives us confidence that we can continue to grow the business in 2010, despite short term market conditions remaining challenging. The business is exceptionally well placed to take full advantage of improving economic conditions in the medium term.

OPERATING REVIEW

Motor Division

Our motor division consists of 122 franchise dealerships representing 32 marques from 73 sites.  The business generates revenue from the sale of new cars, the sale of used cars, vehicle servicing and repair, and the sale of franchise parts. In 2009 our motor division increased profit before tax to £25 million from £5 million in 2008.

Restructuring in late 2008 removed 21 underperforming franchise businesses, reduced headcount in ongoing businesses by 6% and reduced the working capital base. These actions have recalibrated the business so that it can be successful at a reduced level of market activity.

The restructuring has radically improved the profile of our business, enhancing sales and aftersales throughputs per business. During 2009 we have made further changes which have strengthened activity levels per site with the addition of 8 incremental franchises within existing facilities.

New Cars

The new car market fell 6% to just under 2 million cars, the lowest new car market since 1995, despite the market boost of 284 thousand sales stimulated by the government scrappage scheme.

Group new car sales of 61,372 cars increased by 13% compared to 2008 levels and were 19% ahead of the UK market, improving our market share to 3.1% from 2.6% in 2008.  Within the new car market sub sectors, our share of the private retail sector is now 4.2%, our share of government scrappage sales is 2.6% and our share of the company car sales sector is 2.5% (2008: 1.3%).

Gross margins for new cars reduced to 8.1% (2008: 9.3%), primarily due to the effect of margin dilution from sales under the Government scrappage scheme, along with an increase in corporate sector sales.

Used Cars

The total used car market in the UK declined by circa 6% in 2009. Group sales of 42,378 vehicles were in contrast up by 6% on 2008 levels, well ahead of the market and we continue to gain market share. Gross margins improved from 8% in 2008 up to 11% in 2009 and this performance was delivered from a much leaner stock base through improved stock turn.

The used car market, which has annual sales of circa 7 million vehicles per annum, remains a huge area of opportunity for the group. Through improved sourcing and a broader stock mix on our forecourts, we expect to take advantage of the stable market conditions in the used car sector to enhance our volumes and make further improvements in gross margin.

Aftersales

Despite a declining vehicle parc within the 1 - 3 year vehicle sector, the group improved like for like aftersales revenue by 4%, held gross margin levels at 43%, and improved operating profits by 6%. This resulted in the further strengthening of dealership aftersales profitability and further improved our share of the aftermarket opportunity.

Our continued aftersales growth has been underpinned by further improvements in our customer relationship marketing centre processes and the deployment of electronic health checks in all businesses. This enables us to identify and optimise service and repair requirements on all vehicles visiting us for aftersales work, which combined with our determination to deliver excellent customer service, are key factors in strengthening and optimising customer retention.

Dealership representation continues to consolidate in the UK market and this has the effect of strengthening our franchise representation per site. These factors, combined with our focus on increasing the retention of aftersales customers with vehicles over three years old, gives us further confidence that we can continue to grow our share of the lucrative aftermarket business opportunity.

Motor Division: further restructuring

During the second half of 2008, we restructured the motor division and this delivered significant cost savings during 2009. Towards the end of 2009, the group took further actions in respect of the motor division central cost base, reviewing central marketing, group IT and systems, which has reduced our central cost base by £1.8 million, the full benefit of which will be realised in 2010.  We have also improved buying terms with specific service providers which will deliver savings of £0.8 million in 2010.

The group is currently in final negotiations to add a further six franchises to current locations. This will strengthen throughputs per site with minimal uplift to our fixed cost base, resulting in operational improvements and increased profitability.

As referred to in the Chairman's review, in March 2010 we refined the management structure of the motor division with Andy Bruce being appointed Managing Director and Brian Schumacker being appointed as Operations Director for Business Development. This will further improve our focus on the franchise operations and provide additional impetus on delivering programmes to underpin future business growth.

The equity fund raising exercise undertaken earlier in the year has transformed the group's balance sheet enabling us to take advantage of opportunistic acquisitions in 2010. We are actively progressing talks to add incremental brands to strengthen the group portfolio and to strengthen our representation with specific brands where we currently have limited representation in comparison to their share of the UK market.

Parts Division

The group's independent parts division operates through three companies, each supplying hard parts to the aftermarket, the customer base being primarily motor factors who, in turn supply the independent repair sector.

The total vehicle car parc in the UK market is now over 30 million vehicles, with just over 6.5 million of these being in the conventionally, dealership dominated 1 to 3 year vehicle parc.  In contrast to the younger vehicle parc, the 4 year plus vehicle parc in the UK continues to grow and the outlook for our independent parts operations is good as each of the businesses continues to take an increased share of a growing market opportunity.

Our independent parts division continues to go from strength to strength, achieving record results, with all three businesses producing record levels of operating profit. This performance is even more impressive as it follows a record performance in 2008. Turnover for the division increased by 18%, operating profit increased by 34% and profit before tax also increased by 34%, from £8.34 million to £11.16 million. The business continues to benefit as the slower demand for new cars translates into a greater need by consumers for car repairs to their current vehicle as they choose to maintain rather than exchange that vehicle for a new vehicle. 

FPS, the only national distributor of quality branded automotive hard parts delivered strong results with turnover increasing by 17% and operating profit of £7.9 million representing an increase of 38%. The business now operates from 19 regional depots supported by our National Distribution Centre in Sheffield. Two depots were relocated during the year to new, expanded premises which allowed the full range of products to be carried at more locations, including exhausts at all locations for the first time. Growth was also supported by the introduction of new product lines whilst efficiency benefits were achieved by an increase in electronic order capture and information exchange.

Apec, a market leader in the UK and Irish markets for aftermarket braking components, also had a very successful year overcoming the pressures caused by the weakness in Sterling to produce a record result. Turnover increased by 23% and operating profit increased by 9% to £1.9 million. A significant customer contract was renewed during the year and the company continues to develop hydraulic braking products. New marketing initiatives and the launch of a new website helped strengthen the company's position as market leader in terms of product range and availability.

BTN, a leading supplier and provider of technical support and servicing of turbochargers also delivered an excellent performance in 2009. Turnover increased by 21% as the company continues to expand sales to motor factors and new specialist customers. A move to new premises during the year provides modern facilities to enhance technical and service support to customers and provide a basis for further growth in this expanding market.

OUTLOOK

Both the Motor Division and Parts Division have made a good start to the year. We have continued to outperform the new car market and our used car performance continues to be strong. Furthermore we have a healthy new car order book for March and aftersales continue to perform well with the result that the Motor Division is ahead of both budget and prior year. Moreover the independent parts division is again showing further year on year progress and is in line with budget. We therefore expect the result for the first quarter to be ahead of both budget and last year.

Whilst economic conditions remain uncertain, our strong performance in 2009, our market leading parts division, together with the actions that have been successfully completed in the Motor Division to reduce costs, demonstrates the resilience of the group's diversified business model and leaves us well positioned to continue to trade successfully.

We continue to focus on areas where we can improve the performance of the group's franchised outlets including consolidation of existing sites and adding dual franchises where this is appropriate. We will also focus on targeted and selective acquisitions to further improve our franchise representation. We continue to invest in new marketing initiatives, including the adoption of the Lookers brand across all mainland car dealerships, together with a relaunch of our website and enhanced digital marketing. The Parts Division continues to benefit from the addition of new product lines and the slower demand for new cars continues to boost car repairs and demand for parts.

The successful equity fund raising in July has strengthened the group's balance sheet providing greater flexibility to ensure that we are well placed and focussed to take advantage of strategic growth opportunities that may arise and we are confident that the company will emerge from the current downturn a stronger and more efficient business which is well placed to deliver future growth.

Peter Jones

Chief Executive

9 March 2010

FINANCE DIRECTOR'S REVIEW

GROUP RESULTS

Despite the difficult trading conditions in the motor retail sector, on a like for like basis turnover increased by 4.2% from £1.68 billion last year, with positive growth in all sectors of the business. Overall turnover remained at a similar level to last year at £1.75 billion compared to £1.78 billion the previous year. *Adjusted profit from operations increased by 33.0% to £45.1 million, an increase of £11.2 million compared to the prior year of £33.9 million.  

Following a significant reduction in working capital, particularly in stocks of new and used cars, total interest costs reduced by 15.6% to £16.8 million compared to £19.9 million in 2008, with operational interest charges, excluding interest on pension scheme liabilities, reduced by 27% from £19.8 million to £14.5 million. Interest on group borrowings is based initially on floating interest rates supplemented with interest rate hedges. A significant element of the term loan was covered by interest rate hedges during the year, as described in more detail in the notes to the financial statements. The proportion of long term debt covered by hedging instruments reduced by £48 million in October 2009 when one of the hedges expired, reducing hedging coverage to approximately 66% of the term loan. However, as the hedges were established in 2007 when interest rates were significantly higher than current levels, they have the effect of increasing the interest charge so that we do not get the full benefit of the low base rate which is currently applicable in the UK.

*Adjusted profit before tax, amortisation, exceptional items and debt issue costs for the year increased by 102% to £28.3 million, a record result for the company and an improvement of £14.3 million compared to the previous year of £14.0 million. Profit before tax and after exceptional items was £11.5 million compared to a loss before tax in the previous year of £14.9 million. This resulted in adjusted earnings per share* of 7.32p compared to 4.66p in the prior year, an increase of 57% and basic earnings per share of 2.72p compared to a loss of 7.68p in the previous year. The calculation of earnings per share has been affected by the equity raising, which is referred to in more detail below and which resulted in an increase in the weighted average number of shares in issue of 37.5%.

Net exceptional items amounted to £14.2 million compared to £20.0 million in 2008. Refinancing costs were £6.6 million which relates to the new bank facilities. Costs in relation to closed dealerships represent £6.2 million, reorganisation costs were £0.8 million, and other exceptional items were £0.5 million. The cash impact of exceptional items was a cash outflow of £12.5 million.

TAXATION

The tax charge for the year of £3.5 million compares to a net tax charge of £1.1 million in the prior year and reflects a charge of 30% of profit before tax. This is slightly higher than the standard rate of corporation tax as some of the exceptional costs are not allowable for tax.

CASHFLOW AND CAPITAL EXPENDITURE

Cash generated from operations for the year was £20.1million, although this increases to £32.6 million after adjusting for exceptional items and debt issue costs incurred in the refinancing. Working capital increased by £14.1 million with a reduction in stock of £56.2 million offsetting the repayment of stocking loans and other creditors of £52.0 million. However, an increase in debtors of £18.3 million due to higher levels of trading, was the principal reason for the increase in working capital. Capital expenditure was £7.2 million compared to £8.6 million the previous year and proceeds from the sale of properties were £2.5 million. The majority of capital expenditure was on new or improved premises for the parts division or improvements to dealership properties.

As referred to earlier, the group successfully raised £77.6 million from the proceeds of the share issue. The proceeds were used to repay £65 million of bank loans with the balance of £12.6 million being applied against the revolving credit facility. Net cash inflow was £9.8 million, compared to a cash outflow of £12.7 million in 2008. Adjusting for exceptional items gives a cash inflow for the year of £22.3 million compared to £7.3 million in 2008. This resulted in a reduction in net debt to £79.0 million compared to £149.5 million at the start of the year.

SHAREHOLDERS FUNDS AND FINANCING

As set out in the Chairman's Review, the group renewed its banking facilities to provide total facilities of £210 million until 30 April 2012 and raised £77.6 million net of expenses through the Firm Placing and Placing and Open Offer. £50 million of the proceeds was used to repay the high interest loan, which incurred interest at 10% above LIBOR, £15 million was used as a partial repayment of the term loan and £12.6 million was applied against the revolving credit facility. This resulted in a significant reduction in the company's gearing and also allowed revisions to be made to the banking agreement which were more favourable to the company, particularly in relation to interest charges. Following these amendments to the banking facilities, the group has available bank facilities which consist of a revolving credit facility of £53 million and a term loan of £91 million. Interest is charged on both loans at a margin of between 3% and 4.0% above LIBOR. These facilities are subject to quarterly covenant tests on interest cover, bank debt to EBITDA, total debt to EBITDA and debt service cash cover. The covenant tests are set at levels that provide sufficient headroom and flexibility for the group until maturity of the facilities in April 2012.

At 31 December 2009 total facilities were £144 million of which £79 million was being utilised. These facilities together with the group's strong operational cash flow, indicate that the group has sufficient facilities available to fund its operations and allow for future expansion. At 31 December 2009 gearing was 49% compared to 180% at 31 December 2008 and net debt to EBITDA was 1.5 compared to 3.4 last year. The group's underlying profitability and strong cash flow should result in further reductions in borrowing in the future and help ensure that the level of borrowing remains under control and is at a reasonable level in relation to net assets. Further information on the going concern basis of preparation is included in note 1.

PROPERTY PORTFOLIO

The group has a policy of investing in freehold and long leasehold property as the preferred means of providing premises for the car dealerships, where possible. As a result we have a significant and valuable portfolio of freehold and long leasehold properties where the net book value at 31 December 2009 was £183.4 million compared to £186.2 million last year. Of this amount £9.2 million has been disclosed within current assets as assets held for sale. Short leasehold properties had a value of £8.5 million (2008: £8.8 million).

DIVIDENDS

Following agreement of the new banking facilities the group is not in a position to pay a dividend for this financial year. However it is the board's current intention to return to a progressive dividend policy in 2010 within the restrictions placed on the group by the terms of the amended banking facility agreement and subject to satisfactory trading results.

PENSION DEFICIT

The group operates two defined benefit pension schemes both of which are closed to entry for new members. Whilst there has been a recovery in the value of pension scheme assets during the year, the underlying assumptions used to calculate liabilities of the schemes have resulted in an increase in total liabilities compared to the previous year. The effect of these factors is that the pension deficit for both schemes has increased by £5.6 million, after deferred tax, so that the total deficit is £25.6 million (2008: £20.0 million). The assessment of valuation is based on several key assumptions prescribed by accounting standards, where relatively small changes in the bases of valuation can have a significant effect on the calculated deficit. The group has very little control over the assumptions used and their impact on the valuation, hence the movement in the calculated deficit can be subject to high levels of volatility which are outside of our control. The board continues to look at its options to reduce both the annual cost of operating both schemes and what actions can be taken to reduce the deficit on the schemes, thereby reducing exposure to movements in these liabilities and reducing the deficit over the medium and longer term.

VAT

The group has previously submitted a number of claims with HM Revenue & Customs ('HMRC') in respect of potential overpayments of VAT relating to prior years. If the group is successful in its negotiations with HMRC, then there is the potential for significant repayments to be received by the group. The nature of the process for negotiating these claims with HMRC can take a considerable time so the timing of any potential receipt is uncertain and no benefit for any potential repayment has been included in the accounts and no income will be included until the claims have been agreed with HMRC.

Robin Gregson

Finance Director

9 March 2010

Responsibility statement

The responsibility statement below has been prepared in connection with the company's financial statements for the year ending 31 December 2009. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

·        the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

·        the management report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board 

P Jones                                                           R A Gregson

Chief Executive Officer                                   Finance Director        

9 March 2010                                                  9 March 2010

The Directors announce the following audited results of the Group for the year ended 31 December 2009

Consolidated Income Statement

For the Year Ended 31 December 2009

	Note	2009	2008
		£m	£m
Revenue		1,749.0	1,775.9
		(1,487.9)	(1,533.8)
Cost of sales
Gross profit		261.1	242.1
Distribution costs		(139.5)	(160.1)
Administration expenses		(92.7)	(72.1)
Other operating income		0.4	0.3
Profit from operations		29.3	10.2
Profit from operations before amortisation and exceptional items		45.1	33.9
Amortisation of intangible assets		(1.7)	(1.4)
Impairment of goodwill		-	(3.1)
Exceptional items from operations	2	(14.1)	(19.2)
Profit from operations		29.3	10.2
Interest payable		(17.1)	(21.2)
Interest receivable		0.3	1.3
Net interest	3	(16.8)	(19.9)
Exceptional Interest payable on closed businesses	2	(0.1)	(0.8)
Fair value on derivative instruments		-	(4.0)
Debt issue costs		(0.9)	(0.4)
Profit/(loss) on ordinary activities before taxation		11.5	(14.9)
Profit before tax, amortisation, exceptional items  and debt issue costs		28.3	14.0
Amortisation of intangible assets		(1.7)	(1.4)
Impairment of goodwill		-	(3.1)
Total exceptional items	2	(14.2)	(20.0)
Fair value on derivative instruments		-	(4.0)
Debt issue costs		(0.9)	(0.4)
Profit/(loss) on ordinary activities before taxation		11.5	(14.9)
Exceptional tax charge		-	(7.2)
Tax (charge)/credit excluding exceptional tax charge		(3.5)	6.1
Profit/(loss) for the year		8.0	(16.0)
Continuing operations
Earnings/(Loss) per share
Basic earnings/(loss) per share	4	2.79p	(7.68)p
Diluted earnings/(loss) per share	4	2.72p	(7.68)p

Consolidated Balance Sheet

As at 31 December 2009		2009	2008
		£m	£m
NON CURRENT ASSETS
Goodwill		44.8	44.8
Intangible assets		17.1	18.4
Property, plant & equipment		197.6	205.8
		259.5	269.0
CURRENT ASSETS
Inventories		247.4	303.7
Trade and other receivables		106.3	84.3
Cash and cash equivalents		12.3	2.1
Derivative Financial Instruments		-	0.3
Assets held for sale		9.2	5.4
		375.2	395.8
TOTAL ASSETS		634.7	664.8
CURRENT LIABILITIES
Financial liabilities - Bank loans and overdrafts - Hire purchase obligations		10.4 0.2	10.0 -
Trade and other payables		315.1	371.7
Current tax liabilities Short term provisions Derivative financial instruments		8.8 0.9 6.3	4.5 1.6 5.4
		341.7	393.2
NET CURRENT ASSETS		33.5	2.6
NON CURRENT LIABILITIES
Financial liabilities - Bank loans - Trade and other payables		80.9 4.6	141.6 5.4
Retirement benefit obligations		35.5	27.7
Deferred tax liabilities Long term provisions		11.2 0.7	13.3 0.7
		132.9	188.7
TOTAL LIABILITIES		474.6	581.9
NET ASSETS		160.1	82.9
SHAREHOLDERS' EQUITY Ordinary share capital Share premium Capital redemption reserve Other reserve Retained earnings		19.2 73.6 14.6 (1.4) 54.1	9.1 6.2 14.6 (1.1) 54.1
TOTAL EQUITY		160.1	82.9

Consolidated Cashflow Statement

For the year ended 31 December 2009

		2009	2008
		£m	£m
Cash flows from operating activities
Profit/(loss) for the year		8.0	(16.0)
Adjustments for: Tax Depreciation		3.5 8.3	1.1 9.0
Impairment of fixed assets on dealership closures		-	2.5
Loss on disposal of plant and equipment		-	0.2
Loss on closed businesses		(1.8)	-
Amortisation of intangible assets		1.7	1.4
Impairment of goodwill		-	3.1
Interest income		(0.3)	(1.6)
Interest payable		17.2	26.3
Debt issue costs		0.8	0.4
Share based payment credit		-	(0.4)
Changes in working capital:
Decrease in inventories		56.2	17.1
(Increase)/decrease in trade and other receivables		(18.3)	24.2
Decrease in payables		(52.0)	(42.8)
Difference between pension charge and cash contributions		(3.0)	(2.2)
Movement in provisions		(0.2)	1.4
Cash generated from operations		20.1	23.7
Interest paid		(15.0)	(20.3)
Interest received		0.2	1.2
Tax refunded/(paid)		1.0	(3.0)
Net cash inflow from operating activities		6.3	1.6
Cashflows from investing activities
Acquisition of subsidiaries (net of overdraft acquired)		-	(4.4)
Purchase of property, plant and equipment		(7.2)	(8.6)
Purchase of intangible assets		(0.2)	(3.8)
Proceeds from sale of property, plant & equipment		2.5	0.5
Proceeds from sale of business		0.3	-
Net cash used by investing activities		(4.6)	(16.3)
Cashflows from financing activities
Proceeds from issue of ordinary shares		77.6	-
Repayment of loans		(65.9)	(10.0)
Net proceeds from issue of new bank loans		-	18.9
Debt issue costs		(3.5)	-
Principal payments under hire purchase agreements		(0.1)	(0.1)
Dividends paid to Group shareholders		-	(6.8)
Net cash from financing activities		8.1	2.0
Increase/(decrease) in cash and cash equivalents		9.8	(12.7)
Cash and cash equivalents at 1 January		2.1	14.8
Cash and cash equivalents at 31 December		11.9	2.1

Consolidated Statement of Comprehensive Income
		2009 £m	2008 £m
Actuarial losses recognised in post-retirement benefit schemes		(9.4)	(6.1)
Movement in deferred taxation on pension liability		2.3	1.7
Fair value on derivative instruments		(1.2)	(1.1)
Net losses recognised directly in equity		(8.3)	(5.5)
Profit/(loss) for the financial year		8.0	(16.0)
Total recognised in comprehensive income		(0.3)	(21.5)

Consolidated Statement of Changes in Equity
Group	Share capital £m	Share premium £m	Capital Redemption reserve £m	Other reserve £m	Retained earnings £m	Total £m
As at 1 January 2008	9.1	5.6	14.6	0.4	81.8	111.5
New shares issued	-	0.6	-	-	-	0.6
Loss for the year	-	-	-	-	(16.0)	(16.0)
Dividends	-	-	-	-	(7.3)	(7.3)
Actuarial losses on defined benefit Pension schemes	-	-	-	-	(6.1)	(6.1)
Deferred taxation on pension liability	-	-	-	-	1.7	1.7
Share based payments	-	-	-	(0.4)	-	(0.4)
Fair value on derivative instruments	-	-	-	(1.1)	-	(1.1)
As at 31 December 2008	9.1	6.2	14.6	(1.1)	54.1	82.9
New shares issued	10.1	67.4	-	-	-	77.5
Profit for the year	-	-	-	-	8.0	8.0
Actuarial losses on defined benefit Pension schemes	-	-	-	-	(9.4)	(9.4)
Deferred taxation on pension liability	-	-	-	-	2.3	2.3
Fair value on derivative instruments	-	-	-	(0.3)	(0.9)	(1.2)
As at 31 December 2009	19.2	73.6	14.6	(1.4)	54.1	160.1

Notes

1.         Basis of Preparation

The financial information has been prepared under International Financial Reporting Standards (IFRS) issued by the IASB and as adopted by the European Commission (EC). This financial information has been prepared on the same basis as in 2008 with the exception of the adoption of IFRS 8 'Operating Segments' and IAS 1 (2007) Revised. The adoption of these standards has not led to any changes to the financial performance or position of the group. Further information in relation to the Standards adopted by the group is available on the group's website www.lookers.co.uk.

       
Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS's), this announcement does not itself contain sufficient information to comply with IFRS's.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2009 or 2008, but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

A copy of the group accounts for the period ended 31 December 2009 can be found at www.lookers.co.uk and will be posted to shareholders this month.

Going Concern

This financial information has been prepared on a going concern basis which the Directors believe to be appropriate for the reasons set out below.

The company and the group continue to meet their day to day working capital requirements through short term stocking loans and the revolving credit facility and medium term funding requirements through a term loan which had been successfully renegotiated during the year. As noted in the Chairman's review, the group successfully raised £77.6 million (net of expenses) following an equity raising. These net proceeds were used to repay a proportion of the group's debt which has consequently significantly reduced net debt.

At the year end the medium term banking facilities included a revolving credit facility of up to £53.3 million and a term loan of £90.9 million, providing total facilities of £144.2 million.

The financial position of the group, its cash flows, liquidity position and borrowing facilities are described earlier. The group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facility. Therefore, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Principal Risks and Uncertainties

The group's business activities, financial condition, results of operations or the company's share price could be affected by any or all of the following risks or uncertainties.

Global Economy

The new and used car markets are influenced by general economic conditions, including changes in interest rates, fuel prices, indirect taxation, the cost and availability of credit and other factors which affect levels of consumer confidence.  The demand for new cars is cyclical, which in some years will lead to reduced margins caused by oversupply.  This could have an adverse impact on the earnings of the group, though this would likely be mitigated by potential increases in both the used car market and the aftersales market as customers substitute nearly new for new, or spend more keeping their old vehicles roadworthy.  The UK is currently experiencing problems caused by the Global downturn.  Despite lower interest rates, the lack of available credit, together with a general feeling of uncertainty in the economy has resulted in a significant fall in new car registrations.  However, we have seen an increase in activity in both used car sales and within the parts distribution businesses and the group's business has proved to be resilient against this background.

Manufacturers' Financial Stability

The group relies on its manufacturer partners for a significant proportion of its revenues and profits.  The failure of a manufacturer could have a significant impact to the short term profitability of a retailer partner.  The group has attempted to mitigate this risk by having trading relationships with a large number of manufacturers, so that the impact of any one manufacturer failing would be lessened.  Due to global economic events, several manufacturers have come under severe financial pressure.  However, it appears that there has been significant political will to support these manufacturers to prevent their demise because of the effect this would have on their local economies.

Liquidity and Financing

The group uses a number of methods to fund its day to day business.  These methods are

(i)         Bank borrowings by way of committed borrowing facilities;

(ii)        From manufacturer and third party finance houses through uncommitted stocking facilities to fund our purchase of stock; and

(iii)       From suppliers by way of trade credit. 

A withdrawal of any of these financing facilities or a failure to renew them as they expire could lead to a significant reduction on the trading ability of the group However, the share issue in 2009 has significantly strengthened the group's balance sheet and provided a substantial source of additional funding.

Exchange Rates

The group is affected by currency fluctuations to the extent that a large proportion of our manufacturer partners either source parts or manufacture vehicles overseas.  The appreciation of the Euro against Sterling has meant that most manufacturers have had to increase prices despite the current market conditions.  In recent years, Sterling had appreciated against most currencies, allowing imported vehicles to be priced more competitively.  The Board is aware of the uncertainties this causes and the only protection that can be taken is to ensure the group retains a broad mix of the major manufacturers, both UK and overseas, to limit the effect.

Block Exemption

Block Exemption is a complex set of rules that defines how new vehicles are supplied, distributed and dealt with after they are sold.  These rules were changed in 2003 and certain parts became effective in 2005 scrapping the restrictions on the number of dealers operating within a territory, and allowing the provision of aftersales support to be separate from the sale of new vehicles.  The group has yet to see any impact of these changes, though the Board is aware of the possible competition that these changes could bring to our established businesses.  By ensuring that our franchise businesses continue concentrating on customer service, the Board believes that the group will minimise the impact of these, and any future changes to Block Exemption rules.

Competitive Nature of the Market

The motor vehicle distribution market is highly competitive and comprises a small number of large dealer networks, similar to Lookers, down to a large number of much smaller operators.  In addition, the market includes internet-based dealers and private individuals.  The franchised businesses also compete in the aftersales market which comprises similar franchised businesses, supply and fit chains, and a large number of small independent garages and bodyshops.  The market therefore offers customers different options dependent upon price and quality of service they wish to take, with owners of new and nearly new vehicles tending to use the franchised businesses and owners of older vehicles tending towards the small independent provider.  The group's franchised businesses rely on the quality of their customer service and the ability to adjust pricing, enabling them to react to local competitive conditions.

The parts distribution business operates in a very competitive market place, dominated by a few larger players.  The differentiator in this market is the quality of customer service offered by the group's businesses which continues to give the competitive edge where price differences would not be enough.

Government Legislation

In addition to Block Exemption rules noted above, changes to the Government's transport policy could adversely affect the group's profitability if, as a result, customers choose to use alternative forms of transport.

Information Systems

The group is dependent upon a number of business critical systems which, if interrupted for any length of time, could have a material effect on the efficient running of the group's businesses.  The Board has implemented a series of contingency plans which would enable the group to resume operations within a short space of time, thus mitigating the likelihood of material loss.

Manufacturers' Influence

The group's activities are also influenced by manufacturers in other ways.  The timing, frequency and efficiency of new model roll-outs and changes in consumers' perception of these models and brands could materially affect the group's business.  Similarly, manufacturers use a series of incentive schemes to support new car sales, warranty programmes etc., and changes or discontinuation of these schemes could also affect the group's business.  By representing over thirty marques, the group believes that this diversity reduces the impact to the group that manufacturers' influence could cause.

2.         Exceptional items

	2008	2008
	£m	£m
Refinancing costs	(6.6)	-
Loss on terminated businesses	(6.2)	(13.3)
Integration costs	-	(3.3)
Aborted acquisition costs	-	(1.6)
Other costs	(0.5)	(0.7)
VAT	-	0.3
Profit on disposal of properties	-	1.9
Reorganisation costs	(0.8)	-
Exceptional items included within operating profit	(14.1)	(19.2)
Interest on closed business	(0.1)	(0.8)
Total exceptional items	(14.2)	(20.0)

3.         Finance costs - net

Interest payable	£m	£m
Bank interest payable	(11.0)	(12.2)
Interest on consignment vehicles	(3.6)	(8.7)
Other interest	(0.2)	(0.2)
Net interest payable on pension schemes	(2.3)	(0.1)
	(17.1)	(21.2)
Interest receivable
Bank interest receivable	0.3	1.3
	0.3	1.3
Finance costs - net	(16.8)	(19.9)

4.         Earnings/(loss) per share

Earnings per share for the prior year have been restated to reflect the effect of the issue of new ordinary shares in the current year at a price below market price. The calculation of earnings/(loss) per ordinary share is based on profit on ordinary activities after taxation amounting to £8.0 million (2008: loss £16.0 million) and a weighted average number of ordinary shares in issue during the year of 286,417,558 (2008: 208,324,184).

The diluted earnings/(loss) per share is based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 7,337,396 (2008: nil).

Adjusted earnings per share is stated before amortisation of intangible assets, impairment of goodwill, debt issue costs and exceptional items and is calculated on profits of £21.0 million for the year (2008: £9.7 million).

4.         Earnings/(loss) per share (continued)

		2009				2008
		Earnings £m		Earnings per share p		(Loss)/ earnings £m		(Loss)/ earnings per share p
Earnings/(loss) attributable to ordinary shareholders		8.0		2.79		(16.0)		(7.68)
Amortisation of intangible assets		1.7		0.59		1.4		0.67
Impairment of goodwill		-		-		3.1		1.49
Debt issue costs		0.9		0.31		-		-
Exceptional items (net)		14.2		4.96		20.0		9.60
Tax on exceptional items (net)		(3.8)		(1.33)		(6.0)		(2.88)
Exceptional tax due to withdrawal of Industrial Buildings Allowance		-		-		7.2		3.46
Adjusted earnings per share		21.0		7.32		9.7		4.66

5.         Property, plant and equipment

	2009	2008
	£m	£m
Freehold property	127.6	132.7
Long leasehold property	46.6	48.1
Short leasehold property	8.5	8.8
Plant and machinery	5.5	6.4
Fixtures, fittings, tools and equipment	9.4	9.8
	_____	_____
	197.6 =====	205.8 =====
Properties held for sale	9.2 =====	5.4 =====

 

END

 

 

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