Lookers PLC Year-end trading update (9711B)
February 05 2020 - 2:00AM
UK Regulatory
TIDMLOOK
RNS Number : 9711B
Lookers PLC
05 February 2020
5 February 2020
LOOKERS plc
Year-end trading update
Performance in-line with expectations
Lookers plc ("Lookers" or "the Group"), one of the leading UK
motor retail and aftersales service groups, issues a trading update
for the 12 months ended 31 December 2019, ahead of the announcement
of its results on 11 March 2020.
Although challenging, trading during the three-month period
ended 31 December 2019 ("Q4" or "the Period") was as expected and
the Group anticipates reporting underlying profit before tax* for
the year in-line with the Board's expectations.
New car market
For the third consecutive year the UK new car market has
continued to contract. UK new car registrations declined by -2.4%
to 2.3m units during the year. The Group's like-for-like unit sales
of new vehicles over the same period performed marginally ahead of
the overall market.
In Q4 the Group's like-for-like unit sales of new vehicles
declined by -6.6% (Q3 -3.2%) compared to a UK market decline in new
vehicle registrations of -1.6% (Q3 -0.6%). This continues to be
impacted by the Group's volume brands and is partially driven by a
tactical reduction in lower margin fleet volume. In addition,
whilst we are pleased to report that all dealership sales teams
received further training and assessment in the sale of regulated
products during November and December, it did impact our sales
volumes during Q4. Margin pressure continued throughout the Period
but at lower levels than experienced during Q3.
Used car market
In Q4 the used car market remained stable. Like-for-like unit
sales of used cars increased by +3.8% (Q3 +2.6%). In Q4 the Group
remained focused on continuing to reduce and improve the profile of
its used vehicle inventory. The margin stabilisation reported in Q3
continued into Q4.
Aftersales
Like-for-like gross profit in Q4 was broadly flat (Q3 +2.9%),
with the corresponding period last year benefitting from
non-recurring parts volume bonus.
Portfolio consolidation
The Group announced in November that it had identified 15 sites
for closure as part of its ongoing portfolio review. This programme
is largely complete. Of the 15 identified, nine were owned on a
freehold basis. As expected, four sites have been sold, generating
proceeds of GBP8.3m; the remainder and other legacy surplus
properties will be sold during 2020.
Regulated activities
The FCA investigation into the Group's sales processes is
ongoing. The Group continues to co-operate fully with the
investigation.
Non-underlying items
The results for the year are expected to include a number of
material cash and non-cash non-underlying items in respect of the
Group's previously announced regulatory and portfolio review,
income from the settlement of historic VAT claims, net gains on
property disposals, impairment of current and non-current assets
and restructuring costs.
Financial position
The Group remains focused on driving cash flow through improved
working capital management, tighter control of discretionary costs,
additional capital expenditure discipline and the disposal of
surplus property. This is reflected in net debt at 31 December 2019
being better than expected at circa GBP62.0m (31 December 2018:
GBP86.9m), representing less than one times underlying EBITDA.
Outlook
The Society of Motor Manufacturers and Traders ("SMMT") are
forecasting a further decline in the new car market during 2020 and
the business faces the uncertainty and impact from the
practicalities of leaving the EU. In the near term the Group is
focused on improving operational execution and robust management of
discretionary costs. The Group is also targeting prudent levels of
gearing and is reviewing its capital allocation priorities.
Trading in the first few weeks of 2020 has been broadly in line
with expectations and the Board remains focused on the important
March trading period.
Mark Raban, Chief Executive Officer said: "2019 was a
challenging year for Lookers. The declining new car market,
political and economic uncertainty and increased operating costs
were all factors in the Group's decline in profitability. Over
recent weeks the Board has instigated a number of clear and
decisive actions to stabilise and improve operational and financial
performance.
The Board remains confident about the long-term prospects for
the Group, benefitting from excellent OEM relationships, strategic
trading locations and a strong freehold property portfolio."
*As previously announced, the Group now reports underlying
profit before tax including the impact of amortisation of
intangible assets, share based payments, net interest on pension
scheme obligations and debt issue costs. In addition, profit / loss
on the disposal of property is excluded from underlying profit
before tax.
ENDS
Enquiries
Lookers Tel: 0161 291 0043
Mark Raban, Chief Executive Officer
MHP Communications Tel: 020 3128 8742 / 8730
Tim Rowntree Email: Lookers@mhpc.com
Simon Hockridge
Alistair de-Kare Silver
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END
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