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Lookers' operating profits take a drop

Lookers’ profit from operations saw a drop from £23.7 million to £17.6m for the first half of this year.

Group revenues were down from £1.04 billion to £870.4m and profit before tax was down from £13m to £8.6m. Adjusted profit before tax shows a growth in profits from £15.5m in the first half of 2008 to £17.6m in the first half of this year.

The financial results revealed that Lookers had spent £200,000 on adviser fees over a possible acquisition that has now been aborted. The Daily Mail reports that Lookers has spent £1.8m in the last 12 months on due diligence on a "sizeable acquisition".

However, Ken Surgenor, Lookers chief executive, declined to comment on whether it had been attempting to acquire rivals Pendragon or Inchcape.

Ken Surgenor, Lookers chief executive, said: “We are pleased with this strong trading performance for the first half of the year which has been delivered in a very difficult market.

“Economic conditions remain uncertain and we believe trading will continue to be challenging for the new car market. However, the combination of our diversified business model and growing independent parts business, underpinned by our strengthened balance sheet, gives us confidence that we will continue to successfully trade through these tougher conditions and be able to take advantage of any opportunities as they arise.”

Surgenor will be stepping down from the Lookers board and from his position as chief executive on September 30. Peter Jones, currently managing director of Lookers’ motor division will take over as chief executive on October 1.

Surgenor will remain with Lookers to run the group’s Charles Hurst business in Northern Ireland.

Lookers said its motor division was ahead of budget for the first half of 2009. Head count has been reduced across its dealerships by 6% since it restructured to due to the economic climate in 2008.

The company said it had saved £12m due to its restructuring process.

Lookers currently operates 121 franchise sites representing 33 brands from 79 locations.

New car sales

Phil White, Lookers’ chairman, said: “While the market for new cars remains challenging and the UK market for the six months to June 30,2009 has declined by 26%, the group’s reduction in new vehicle volumes of 19% is significantly ahead of the market and we are therefore continuing to build market share.

“Nevertheless the decline in volume has reduced overall profit from the sale of new cars compared to the same period in 2008.”

White said there had been an increase in enquiries due to the scrappage scheme and this would strengthen volume in the small and lower medium segments of the new car market for Lookers.

Used car sales

White said: “We have seen a strong recovery in used car values and volumes in the first six months of 2009, compared to the significant falls in value and volumes which were experienced during the second half of 2008.

“Volumes have increased by 8.5% and, with improved margins compared to the same period in 2008, there has been a significant improvement in profitability for the period. Our used car supermarkets have continued to benefit from the new management structure and have traded profitably in the period.”

Aftersales

Aftersales turnover increased by 4% for Lookers over the first six months of this year.

White said: “Revenue and gross profit are above 2008 levels and the group’s share of the aftermarket continues to increase.

“We are confident that this element of the business can still be developed further and we continue to monitor our customer satisfaction levels to ensure our service offering is a market leader.”

Independent parts division

Turnover has increased by 15% and gross profit has increased by 16% across Lookers’ FPS Distribution (“FPS”), APEC Limited and BTN Turbocharger Service Limited businesses.

White said: “Profit before tax of £6.1m represents an increase of 39% over the previous year, a very impressive performance.

“The business continues to benefit as the slower demand for new cars translates into a greater need by consumers for car repairs to their current vehicle as they choose to maintain rather than exchange that vehicle for a new vehicle.”

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