LOOKERS’ fortunes may have taken a battering over the past six months but the company is still confident for the future.
That was the message from chief operating officer Nigel McMinn in an interview with Car Dealer Magazine after the dealership group posted interim results showing that its pre-tax profit had plummeted by nearly 40 per cent to £24.9m year-on-year during the six months to the end of June.
Its underlying profit before tax dropped by 27.5 per cent to £29.2m from £40.3m, having predicted it would be around £32m – a drop of 26 per cent – and it was this figure that McMinn, pictured, said was important.
‘The underlying profit before tax is the key number, but we’ve changed the definition of that,’ he told Car Dealer.
‘Previously, we were amortising lease costs to do with technology as a below-the-line cost, so not part of the underlying profit. We now classify that to say actually it’s become quite a significant operational expense that should be part of the underlying profit and loss, so we’ve restated last year’s figures and this year’s to take that as part of the underlying profit before tax, which is how you get the difference from £32m to £29.2m.’
And he was upbeat about the future of the multi-franchise dealer group that represents 32 volume and premium car manufacturers across the UK and Ireland. ‘While we’re obviously disappointed to have any kind of negative news flow, even under the new restated underlying profit before tax, which is a lower figure than before, and having taken that hit, it’s still a business that’s going to make about £40m this year, with a very strong balance sheet. This is by no means a broken business. We still think it’s a profitable cash-generative business.’
In June, it was revealed that the Financial Conduct Authority (FCA) would be investigating the group’s sales processes between January 1, 2016 and June 13, 2019, which shook investor confidence in the company and sent its share price spiralling downwards, tumbling overnight from 67.6p to 57.4p. Between January and July, the price dropped by 54.9 per cent and it was 47.7p at the time of publication of this article.
‘Because the investigation hasn’t even started, we can’t give any kind of clarity as to what the result of that will be, but we are already addressing our sales process to make it simpler and slicker, with less scope for people to make errors or take shortcuts,’ he said.
‘We are investing in the sales process, the system that underpins it, the quality assurance and the whole regulatory governance framework that sits around the whole business. So, we don’t know what the FCA will conclude, looking historically, but certainly we’re not waiting around for that. We’re getting on and fixing the areas where we can see it’s not to the level of a banking or insurance company. I think that’s what the FCA is expecting of the sector.’
Was he confident about the company’s future? ‘Absolutely, yes. There’s no greater statement of confidence I suppose than buying shares in your own company, and you’ll see that quite a lot of the directors – including myself and [chief executive] Andy [Bruce] – have recently been buying shares in the company, so the external share price, the market valuation of the company, doesn’t reflect the strength of the company which you see inside and the numbers that we’re producing.’