AM100 car dealer group Lookers has announced that chief executive Andy Bruce and chief operating officer Nigel McMinn are leaving at the end of this year.
The experienced motor retail leaders have agreed to step down from the board today, as Lookers issued a profits warning and revealed the Financial Conduct Authority began its formal investigation into its consumer credit regulation compliance last month.
Following the profit warning, Lookers said it has stepped up its "portfolio consolidation" to improve the future financial performance of the UK's second largest car dealer group.
It will close 15 dealerships and, where possible, relocate or consolidate those businesses into existing group dealerships in adjacent territories.
Of these, 13 will close before the year-end.
Lookers, which has been subject to an investigation by the Financial Conduct Authority this year, today told the stock market that its Q3 trading was below expectations, with a 3.2% drop in like-for-like new car sales volume.
"September is normally one of the most profitable trading months of the year. Despite the level of orders for new cars both before September and in the first half of the month being satisfactory, we lost momentum as the month progressed and had a much weaker than expected finish," said Lookers.
Gross profit from the sale of new vehicles during the period dropped by £7 million compared to the same period in 2018.
Although like-for-like unit sales of used cars increased by 2.6%, Lookers said used car gross margins remained below last year
In aftersales. like-for-like gross profit was 2.9% above last year.
Net debt as at 30 June 2019 was £73.9m (31 December 2018: £86.9m) representing 0.9 times EBITDA.
Of the sites to be closed, nine are freehold properties. Selling these, and four additional surplus sites, is expected to raise £28m.
In response to the review of its FCA regulated activities, Lookers' board has implemented to plan to boost its internal control, audit and risk assurance systems, at a one-off cost of £10m and an ongoing cost of around £3m annually.
"The improvement plan is progressing as expected and will be implemented by the end of 2019," Lookers said.
"Following discussions with the FCA in October, that investigation has now commenced and is in its initial planning and fact-finding phase. The group continues to fully support the FCA in its investigation but, at this stage, we are unable to predict what, if any, impact the outcome of the investigation may have."
With Bruce and McMinn agreeing to step down from the board today, with immediate effect chairman Phil White has become executive chairman and non-executive director Richard Walker will take a part-time executive director role.
Bruce has been at Lookers since 2000, on its board since 2002 and chief executive since 2014.
McMinn joined Lookers as a director in 2013 following its takeover of Benfield Motor Group, where he was managing director, and became chief operating officer in 2017.
Lookers said both "will remain available to the group until 31 December 2019 to ensure an effective transition".
Phil White, chairman, said: "It is disappointing to report this downturn in trading, but we have taken action to drive the future financial performance of the group. The board is resolute in its determination to restore the group’s fortunes with market leading practices in the sector.”
“I would like to thank both Andy and Nigel for their significant contributions to the group since joining and wish them both well in the future.”
Bruce said: “After nearly two decades with Lookers, it is now time for me to move onto new ventures and allow new leadership to take the business into its next chapter.
“I am extremely proud of what we have achieved in building the group into one of the leading car retailers in the sector and I am confident that the talented people in the business will continue to take the business forwards. I wish them all the best for the future.”
McMinn said: "I have enjoyed helping to build the business at Lookers and working with a great team of people."
Pendragon, the UK's third largest dealer group, is also continuing to search for a new chief executive after a boardroom bust-up with Mark Herbert, who lasted three months after being hired to replace its long-serving chief executive Trevor Finn.