In common with most motor retailers, 2004 was a bumper year. Turnover was up 14% to £1,094, and the normalised profit was up 20% to £21.5m to generate operating margins a fraction under 2%, and dividend growth of 10% to 12.1p on a share worth £3.30.
Chief executive Ken Surgenor has been laying his strategy for improvements in two directions – better margins and better spread of income. To that end he made two acquisitions last year.
One was Bristol Trade Centre which allows Lookers to address some of the 6m car sales a year which franchised dealer sites cannot handle. The other was the purchase of FPS, Britain’s largest same-day car parts supplier with sales of £70m a year. The business can double sales with some logistics investment.
Lookers finance director David Dyson says the strategic moves will give a better profit mix. If it trades to form, the acquisitions should enable the group to push through 2% operating margins on this year’s revenue.
The other part of the strategy is to improve the quality of the car suppliers it deals with. MG Rover, for instance, is on two years’ notice because the buildings the four dealers are in were equipped for 15% market share by British Leyland not MGR’s present 3%.
Surgenor believes there will be a chance to grow with Mercedes which has been through a long and expensive adventure setting up a wholly-owned retail network in the UK.
Does he have evidence that M-B UK the retailer is now a seller of its assets? No. Does he believe it will happen? Yes.