LOOKERS plc Resilient trading performance and refocusing on strategic opportunities

Lookers plc (LON:LOOK)

Lookers plc (LON:LOOK), one of the leading UK motor retail and aftersales service groups, has announced its unaudited interim results for the six months ended 30 June 2020, a trading update for the full year ended 31 December 2020 and an update on the restoration of listing of the Company’s shares to the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange.

Interim Results

·    Revenue of £1,563.7m (H1 2019: £2,605.1m) reflecting the impact of COVID-19 and the closure of a large part of the Group’s business for a significant period.

·    Modest outperformance of the UK new car market, with resilient trading in both used car sales and aftersales.

·    Commenced a planned restructuring to strengthen the Group’s operating model. This included a further 12 site closures before the end of 2020 (15 closed in 2019) and a total of c.1,500 redundancies. The full benefit of these changes will be seen in FY 2021. 

·    Strong cost control mitigated some of the reduction in revenue, however, the Group recorded an underlying loss before tax of £36.1m (H1 2019: profit of £22.0m) and statutory loss before tax of £50.0m (H1 2019: profit of £19.6m).

·    Net debt of £11.0m at 30 June 2020 (31 December 2019: £59.5m) driven by strong working capital and cost control, alongside the benefit of deferred VAT and delayed PAYE / National Insurance payments agreed under Government schemes.

H1 2020H1 2019 (restated)*Var %FY 2019
Underlying
Revenue £m£1,563.7m£2,605.1m(40.0%)£4,787.2m
Underlying (loss)/profit before tax £m(£36.1m)£22.0m(264.1%)£4.2m
Underlying (loss)/earnings per share (p)(7.50p)4.58p(263.6%)0.87p
Statutory
(Loss)/profit before tax £m(£50.0m)£19.6m(355.1%)(£45.5m)
(Loss)/earnings per share (p)(12.94p)3.96p(427.0%)(10.69p)
Dividend per share (p)Nil1.48p(100.0%)1.48p
Net debt £m£11.0m£71.7m84.7%£59.5m

*The figures shown for H1 2019 reflect the adjustments to the interim results for 2019, consistent with those made in the recently published audited financial statements for the year ended 31 December 2019. A reconciliation of these adjustments is presented in Note 18.

** Underlying profit before tax is profit before tax and non-underlying items. Underlying earnings per share is (Loss)/earnings per share after tax and before non-underlying items (see Note 3).

*** Bank loans and overdrafts less cash and cash equivalents, excluding stocking loans and lease liabilities under IFRS 16.

Full year trading update

·    Trading in the second half of 2020 was encouraging, underpinned by significant outperformance of the retail UK new car market, continued resilient trading in used and aftersales and increasing used car margins. The second half performance also includes the early impact of the Group’s restructuring programme.

·    Despite the impact of the second national lockdown in November, performance in the second half of the year is expected to be ahead of last year, largely offsetting H1 underlying loss before tax of £36.1m.

·    The Group continues to benefit from improvements made to its online offering and call centre capabilities, including the launch of ‘Click and Drive’ which enables contactless vehicle purchases, alongside upgraded sales systems and processes.

·    The Board remains focused on working capital control, with significantly reduced net debt of approximately £45.0m at the end of December 2020 (2019: £59.5m) reflecting the net proceeds of £17.4m from the disposal of a number of properties during 2020.

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·    Completion of the planned restructuring commenced in the first half of 2020, with the closure of 12 sites and a total of c1,500 redundancies across the Group.

·    The disposal of Platts Harris in November 2020 is expected to realise proceeds of £1.6m.

·    The Group has reduced its RCF from £250m to £238m following the sale of certain properties. The Group continues to have strong liquidity headroom and refinancing conversations with the Group’s banking club are ongoing.

·    The Board refresh is progressing, and we are pleased to welcome Robin Churchouse and Anna Bielby to the Board of Lookers plc as Chair of the Audit Committee and Interim Chief Financial Officer, respectively. Also, today we have announced the appointment of Duncan McPhee to the Board as Chief Operating Officer. A search is underway for the appointment of Phil White’s successor as Chairman.

·    As previously announced, BDO LLP have been appointed as the Group’s statutory auditors.

·    As a result of the continued uncertainty around the COVID-19 pandemic and as part of its ongoing actions to protect the Group’s balance sheet, the Board has decided that it will not be recommending any dividends for the year ended 31 December 2020. However, the Board recognises the importance of dividends to shareholders and will reinstate the payment of dividends as soon as it believes that it is prudent to do so.

  Outlook

·    The country is now in a third national lockdown and whilst the closure of showrooms will impact revenue, this will be partly mitigated by the continued progress of ‘Click and Drive’ and the continued operation of the Group’s COVID-19 compliant Aftersales division.

·    In light of the evolving COVID-19 situation and latest lockdown restrictions impacting much of the Group’s portfolio, the Board remains cautious about the outlook for 2021. However, the Board continues to believe the Group is well positioned to benefit from its continued progress and the exciting sector developments including electrification and further digitisation.

Restoration of listing

·    The Board has applied to the FCA for the restoration of the Company’s shares to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange.

Mark Raban, Lookers plc Chief Executive Officer, said:

“2020 was a challenging year for Lookers, managing the impact of the COVID-19 pandemic and a number of legacy issues facing the Group, which required significant action to restructure and improve the business for the long term. Despite a resilient sales performance, the benefit of Government support and prompt action taken to manage costs, in the first half we incurred a significant loss in a very difficult period for the car retail industry.

Although various restrictions continued into the second half of the year, trading improved significantly, benefiting from the material cost saving measures implemented earlier in the year and enhancements we have made to our retail offer, including the capability to carry out contactless vehicle sales.

I would like to thank all my colleagues for their continued dedication in these difficult circumstances and also our OEM brand partners for their ongoing support.

Going into 2021 there remains a high level of uncertainty in the wider environment, but we are confident that the Group is now much better positioned for the longer term and can capitalise on the various opportunities ahead, not least in electrification and digital developments.”

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