TIDMLOOK
RNS Number : 7234K
Lookers PLC
24 April 2020
Lookers plc
("Lookers" or "the Group")
TRADING AND OPERATIONAL UPDATE
Lookers plc, ("Lookers" or "the Group"), one of the leading UK
motor retail and aftersales service groups, provides the following
trading and operational update.
Trading Update
In the two-month period ended 29 February 2020 ("the Period"),
prior to the impact of Covid-19, the Group recorded a like-for-like
decline in new vehicle unit sales versus last year of -4.8%
compared to a UK new car market which declined by -5.8%. In the
Period like-for-like unit sales of used vehicles declined by -2.6%
whilst like-for-like aftersales revenue was up by 0.9%.
In addition to the vehicle sales volume decline the Group also
suffered margin pressure primarily driven by a management decision
to reduce its holding of aged used and demonstrator inventory.
This was partly offset by a reduction in operating costs,
following a series of management actions implemented in November
2019, including a headcount and recruitment freeze. Headcount is
currently 6% below the level at the commencement of the initiative.
As a result of this and other actions, like-for-like operating
costs in the Period were marginally below last year's levels.
Operations
On 23 March 2020, in order to protect the safety and welfare of
our people and customers and in response to UK Government social
distancing advice, the Board took the decision to temporarily close
all its trading locations. Following the introduction of new
operating measures, the Group has subsequently partly reopened 31
locations which are providing essential repairs and maintenance to
key workers' vehicles and 10 parts distribution centres. The Board
would like to thank our colleagues who have volunteered to deliver
these essential services.
Portfolio Review
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 and liberated 9 Freehold sites. We have now
sold 7 sites, generating proceeds of GBP17.6m in 2019; the
remainder, along with other surplus freehold properties, will be
sold during 2020. With the support of its brand partners this
review remains ongoing and the Board anticipates that further
opportunities exist which will drive profitability and release
capital during the second half of 2020.
Financial Position
The Board is continuing to take a prudent and decisive approach
to managing cash and would like to thank all stakeholders for their
ongoing support during this period.
We welcome the measures announced by the UK Government to
support businesses through this unprecedented disruption. We have
furloughed approximately 7,000 colleagues. All members of the Board
and senior management have agreed to temporary reductions of up to
30% to their contractual remuneration.
As reported in the Group's year end trading update the Board
expects to report net debt at 31 December 2019 of approx. GBP62.0m
(2018: GBP86.9m). Net debt on a cleared funds basis as at the date
of this announcement is approximately GBP65m.The Group's GBP250m
revolving credit facility with five banks expires in March
2022.
Fraud Investigation
On 10 March 2020 the Group announced a delay to the publication
of its financial results for the year ended 31 December 2019 due to
the identification of potentially fraudulent transactions in one of
its operating divisions. During March 2020, in conjunction with
Grant Thornton LLP, the Board commenced an investigation, the
initial phase of which is now complete.
The initial phase of the investigation focused on the operating
division concerned and identified certain misrepresented debtor
balances in respect of bonus receivables together with a number of
fraudulent expenses claims. These items are expected to give rise
to a one-off, non-cash charge, in the 2019 financial statements of
circa GBP4m.
At the request of the Board the initial investigation was
extended across all operating divisions. As a result of movement
restrictions during the covid-19 crisis this remains ongoing.
Initial indications have identified some operating divisions where
certain non-cash balance sheet accounts have not been fully
reconciled, in accordance with Group policy. These items are
expected to give rise to a one-off, non-cash charge, however this
part of the investigation is still ongoing.
While the aggregate impact of the fraud investigation is not yet
known, the Board currently anticipates that the Group will still be
profitable for FY 2019 on an underlying PBT basis.
Net debt at 31 December 2019 is not anticipated to be impacted
by any of the investigations finding to date.
Further updates will be provided in due course.
Publication of 2019 results and AGM
In the light of the ongoing Covid-19 situation, the Board
intends to adopt the additional temporary relief measures announced
by the FCA, providing for an additional two-month extension to
publish audited financial statements, with an announcement in
June.
Outlook
The Board is contemplating a range of post covid-19 reopening
scenarios and is considering the challenge of managing the Group's
cost base against what the Board considers will be materially lower
volumes, as a consequence of continued social distancing
measures.
Given the ongoing uncertainties resulting from the covid-19
situation the Board continues to believe that it is too early to
make any reasonable estimate of the financial impact on the Group
during 2020 and beyond. The Board's key focus remains to safeguard
colleagues and customers and to ensure sustainable, long term
liquidity.
Mark Raban, Chief Executive Officer, said:
"These are challenging times and on behalf of everyone at
Lookers our first thoughts remain for those impacted by the virus
and those serving on the front line. I want to thank all my
colleagues who have been furloughed for their patience and
understanding during a difficult time for all.
We are also continuing to take prudent steps, with the support
of our major stakeholders, to ensure that the business returns to
full operation in the best possible condition."
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) No 596/2014
For further information:
MHP Communications Tel: 07709 496 125 / 07551
170 451
Tim Rowntree Email: Lookers@mhpc.com
Simon Hockridge
Alistair de-Kare Silver
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END
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