Quarter Three Trading Update

RNS Number : 6746O

Lookers PLC

09 November 2016

 

9 November 2016

LOOKERS plc

QUARTER THREE TRADING UPDATE

Lookers plc, ("Lookers", "the company" or "the group"), one of the leading UK motor retail and aftersales service groups, issues its trading update for the quarter ended 30 September 2016.

The company produced a positive trading performance in the quarter, with a strong result during the important month of September.

Corporate Developments

The major developments for the company in the period included the announcement on 10 August 2016 that the group had entered into a conditional agreement to sell the parts division to Alliance Automotive UK Ltd, for a consideration of £120 million. This transaction formally completed on 4 November.

This disposal, which was at a price that the Board believed to be attractive, has provided the group with a great opportunity to refine our strategy on buying and selling cars in our motor retail division and adding value through acquisitions. The sale proceeds will therefore be used to add value through acquisitions in this division over the short and medium-term.

As part of this strategy, the group announced on 15 August the conditional acquisition of Warwick Holdings Limited, a Mercedes-Benz and Smart dealership business operating from seven locations in the West Midlands. As announced on 4 November, this transaction has also now completed.

A further development of this strategy was the announcement on 22 August that the group had acquired Knights North West Limited for £27.2 million. These transactions have made a significant change to the company by adding seven Mercedes-Benz and Smart dealerships, three BMW and three MINI dealerships. These will replace most of the profits previously generated by the parts division which ceased to be part of the group on 4 November. The group has also recently sold its Citroën businesses in Blackpool and Liverpool as well as Hyundai in Newcastle, where the profitability of these businesses was marginal.

Performance

The motor division delivered another good performance in the nine months to 30 September, with total gross profit from new cars increasing by 11%, or level on a like for like basis. Margins for fleet cars increased during the period but there was some softening in the margin for new retail cars.

Gross profit from used cars increased during the period and margins also improved, resulting in an increase in gross profit of 22% compared to the prior year or 8% on a like for like basis. The group's used car volumes continue to benefit from higher volumes of leads generated by the group's website. The group will be making further major developments to its website, which will be released early next year, and are expected to result in significant improvements in both functionality and interaction with customers.

The aftersales business increased gross profit by 24%, or 8% on a like for like basis and gross margins were maintained at a similar level to last year. The increase in volumes and margins continues to benefit from initiatives made in recent years including further increases in the penetration of the sale of service plans. The group also continues to invest in new technology and systems, to improve customer experience and increase retention.

The independent parts division made good progress in the period with increases in both turnover and gross profit compared to the prior year and will make an improved contribution to the group's profits this year, up to the point at which it was sold.

Cash flow continued to be strong during the period and was significantly higher at both the operational and net cash flow levels compared to budget. The level of net debt to EBITDA has improved compared to the prior year and the group has a high level of unutilised bank facilities. This provides the group with significant additional funding capacity which will be increased further with the receipt of the sale proceeds of the parts division less the cost of the Warwick Holdings acquisition.

Outlook

The group has produced strong results for the nine months, with positive results for both the motor and parts divisions. The balance sheet continues to be strengthened by strong operational cash flow and we have substantial headroom in our bank facilities. This provides financial security as well as funding capacity to help develop the business through further strategic acquisitions.

The financial performance of the group in the nine month period builds on what was already a strong comparative in the previous year, although the result of the EU referendum continues to create a degree of uncertainty in the UK economy.

As we said in our interim results in August, we have not noticed any significant difference in terms of customer behaviour so far, particularly in respect of orders for new and used cars. Notwithstanding the uncertainties over consumer confidence and the £:€ exchange rate, the board is confident that the group will make further progress during the rest of this year with revenue and profits ahead of last year's performance and in line with market expectations.

Enquiries

Lookers	Tel: [phone]
Andy Bruce, Chief Executive
Robin Gregson, Finance Director
Bell Pottinger	Tel:  [phone]
Nick Lambert Victoria Geoghegan Lucy Stewart

 

END

 

 

TSTEAXFPEANKFFF