TIDMLOOK
RNS Number : 8981R
Lookers PLC
01 November 2019
1 November 2019
LOOKERS plc
Trading Update and Board Changes
Lookers plc, ("Lookers" or "the Group"), one of the leading UK
motor retail and aftersales service groups, issues its trading
update for the period ended 30 September 2019 ("Q3" or "the
Period").
As reported in the Group's interim results statement trading
during the six months ended 30 June 2019 ("H1" or "first half") was
challenging. This was driven by ongoing weakness in consumer
confidence in the light of political and economic uncertainty,
pressure on used car margins and retail cost inflation. The Board
expected these conditions to continue to impact the Group during
the second half, but trading, particularly over recent weeks since
mid-September, has been much more challenging than expected.
As a result and reflecting the Board's caution about the outlook
for the remainder of the year, the Group now expects to report
underlying profit before tax for the full year of approximately
GBP20m.*
In light of the ongoing market challenges, the Board has
accelerated its portfolio consolidation to drive the future
financial performance of the Group.
New Car Market
Trading in new vehicles during the Period was below the Board's
expectations. In Q3 the Group recorded a -3.2% (H1 -1.2%) decline
in like-for-like unit sales of new cars. This compared to a market
decline of -0.6% (H1 -3.4%). September is normally one of the most
profitable trading months of the year. Despite the level of orders
for new cars both before September and in the first half of the
month being satisfactory, we lost momentum as the month progressed
and had a much weaker than expected finish.
Like-for-like unit sales to retail customers declined by -11.5%
in the Period, being particularly impacted by the Group's volume
brands. The Group also experienced margin pressure leading to total
gross profit from the sale of new vehicles during the Period to be
c.GBP7m below last year.
Used Car Market
The used car market has remained relatively stable during the
Period. Like-for-like unit sales of used cars increased by +2.6%
(H1 +2.0%). In H1 used car gross margins were -60bps below last
year and, although remaining below last year, gross margins showed
some improvement in Q3.
Aftersales
The Group's higher margin aftersales business continued to
perform broadly as anticipated. Like-for-like gross profit was
+2.9% above last year during the Period.
Portfolio Consolidation
The Board accelerated its portfolio consolidation to drive the
future financial performance of the Group. Working closely with its
brand partners, the Group identified 15 dealerships for closure
and, where possible, relocation or consolidation into existing
dealerships in adjacent territories. The Board believes that as
well as driving financial efficiencies, this will facilitate an
enhanced customer experience in line with the Group's strategy of
partnering with the right brands in the right locations. With the
exception of two dealerships all will be closed by 31 December
2019.
One-off closure costs are expected to be approximately GBP8m
including c.GBP2m of non-cash items. Financial efficiency benefits
together with elimination of losses are expected to be in the
region of GBP3m on a full year proforma basis.
Nine of the sites to be closed are owned on a freehold basis.
These sites and an additional four surplus legacy freehold sites
will be sold and are expected to realise total proceeds of
c.GBP28m, which in aggregate is above book value.
Regulated Activities
As reported in the Group's interim results statement, following
an independent review of the Group's regulated activities, the
Board implemented a plan to improve the Group's internal control,
risk assurance systems and internal audit. The plan requires a
one-off investment of c.GBP10m (2019: c.GBP7m, 2020: c.GBP3m) as
well as an ongoing c.GBP3m per annum to deliver best practice and
an enhanced customer experience. The improvement plan is
progressing as expected and will be implemented by the end of
2019.
As announced on 25 June 2019, the Group was informed by the FCA
that it intends to carry out an investigation into legacy sales
processes between the period 1 January 2016 to 13 June 2019.
Following discussions with the FCA in October, that investigation
has now commenced and is in its initial planning and fact-finding
phase. The Group continues to fully support the FCA in its
investigation but, at this stage, we are unable to predict what, if
any, impact the outcome of the investigation may have.
Financial Position
The Group's balance sheet remains underpinned by a strong
property portfolio. As at 30 June 2019 the Group held GBP312.1m of
freehold and leasehold property equivalent to 80p per share.
The Groups bank facilities consist of a revolving credit
facility of GBP250m with a term to March 2022.
Net debt as at 30 June 2019 was GBP73.9m (31 December 2018:
GBP86.9m) representing 0.9 times EBITDA.
The Group remains focused on driving cash flow through improved
working capital management, tighter control of discretionary costs,
additional capital expenditure discipline and disposal of surplus
property.
Presentational changes
In the year ending 31 December 2019, share-based payments, debt
issue costs and net interest on pension scheme obligations will be
presented as underlying items within the statement of total
comprehensive income and comparatives restated accordingly.
Board Changes
The Group announces that Andy Bruce, Chief Executive Officer and
Nigel McMinn, Chief Operating Officer have agreed that they will
step down from the Board today. Until permanent successors have
been appointed, Phil White, Chairman has agreed to become Executive
Chairman and Richard Walker, currently a Non-Executive Director
will assume a part time executive role, both to take effect from
today.
Andy has held a number of roles in the Group since joining in
2000, appointed to the Board in 2002 and becoming CEO in 2014.
Nigel joined the Group as a Director in 2013, becoming COO in 2017.
Both Andy and Nigel will remain available to the Group until 31
December 2019 to ensure an effective transition.
Phil White, Chairman, commented:
"It is disappointing to report this downturn in trading, but we
have taken action to drive the future financial performance of the
Group. The Board is resolute in its determination to restore the
Group's fortunes with market leading practices in the sector."
"I would like to thank both Andy and Nigel for their significant
contributions to the Group since joining and wish them both well in
the future."
Andy Bruce commented:
"After nearly two decades with Lookers, it is now time for me to
move onto new ventures and allow new leadership to take the
business into its next chapter.
"I am extremely proud of what we have achieved in building the
Group into one of the leading car retailers in the sector and I am
confident that the talented people in the business will continue to
take the business forwards. I wish them all the best for the
future."
Nigel McMinn commented:
"I have enjoyed helping to build the business at Lookers and
working with a great team of people."
*PBT before the proposed reclassification of share-based
payments, debt issue costs and net interest on pension scheme
obligations to underlying earnings.
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014.
ENDS
Enquiries
Lookers Via MHP Communications:
Phil White, Chairman 020 3128 8742 / 8789
Mark Raban, Chief Financial Officer
MHP Communications Tel: 020 3128 8742 / 8789
Tim Rowntree Email: Lookers@mhpc.com
Simon Hockridge
Alistair de-Kare Silver
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END
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