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Lookers’ results beat expectations

Lookers pushed aside all the concern that the City has developed about car retailing over the last few weeks, and announced results that were better than analysts were forecasting. It even had a cheerful message for the second half of the year.

Numbers would have been better still had there not been a false start with its used car supermarket business. Three sites were acquired in Bristol, Burton-on-Trent and Essex but the combined group was pushed “too quickly too soon”, according to chief executive Ken Surgenor.

He said: “We thought that the acquired management could scale up but it did not work out.”

Lookers has recruited Gary Tombs who was with CD Bramall and who is “renowned in the supermarket business” and “well known to us”.

It is expected that the car supermarket operation will swing from loss to profit in the second half of the year.

Analyst Jose Marco at Numis Securities said the reason Lookers is doing well is because of its “carefully selected and diversified spread of marques across a number of regional economies”. He expects pre-tax profit of £30m for the year.

Mike Allen, of Panmure Gordon, added that Lookers’ earnings quality is improving, the share price still has further to go and that there is still a chance the company will receive a bid.

Lookers’ Ford deal takes the number of brands it represents to 28 and together those brands have an 82% market share. The two big ones still missing are BMW and Audi.

Lookers retails all the other VW Group brands and the acquisition of the first Audi signage is thought to be just a matter of the right opportunity coming up. BMW might take longer.

The basic figures for Lookers at the interim point, were sales increased by 21% (mostly acquisitions) compared with the first half of last year and operating profit up 40% to £25m. The earnings per share were up 7% to 7.16p from which a 1.6p dividend will be paid. That is an increase of 23% and a strong indication of confidence.

Surgenor said: “The second half had started well against very strong comparatives and the order book for September (the year’s second strongest month) is ahead of last year.”

There has long been a suspicion that Lookers might get disproportional profits from Charles Hurst, its 14-franchise single site in Northern Ireland which has a dominant share of the local market. But finance director David Dyson said: “That might have been the case once but it is now a pretty similar margin to the rest of the UK (now 2.8).”

#AM_ART_SPLIT# Ford reunion

Lookers is back with Ford for the first time in nearly a decade. Lookers lost out when Ford restructured its market areas in the late 1990s.

“We ran some really good businesses. There were three of them and quite big, but they were all on the fringe of bigger market areas and we lost out.”

Though Lookers ran dealer sites very successfully with the Premier Auto Group and was recommended by them to Ford, the opportunity to get back with Ford never came up. Now it has, and Lookers is really pleased to have lifted Ford Sheffield out of the collapse and administration of the Dixon Group.

Ken Surgenor said: “We would like more Ford. We want scale with all of the manufacturers that we represent so that we can get all the deals that are going.

“We have 18 Vauxhall but would not necessarily need that many Ford. But we want to be upward of five”.

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