1:50 pm, March 8, 2017
THE chief operating officer of Manchester-based Lookers said 2016 had been a ‘transformational’ year for the company as it revealed record profit levels this morning.
And Nigel McMinn, pictured, said it was important to remain ‘upbeat and optimistic’ for the future – even with the issues and challenges ahead.
As Car Dealer reported earlier today Lookers reported profit before tax of £91.8 million for 2016 – up 46 per cent on the previous year.
Chief executive officer Andy Bruce described the results as ‘excellent’, and this morning, COO Nigel McMinn said two particular highlights of the results were the fact that the company had broken through the £4bn revenue barrier and that underlying profit had risen, from £72.1m to £77.1m.
Speaking exclusively to Car Dealer, McMinn said: ‘People always talk about a very challenging market and tend to focus on the difficulties – and there’s no doubt some of those are there – but we’re pleased that our underlying profit grew again.
‘We have achieved quite a lot in the last 12 months, with well-controlled working capital, good cash generation, an increased dividend and a big reorganisation to make the company more orientated around premium brands.’
He said it had been a ‘transformational’ year with the sale of the company’s parts division in November and the replacement of that income stream with the acquisition of Knights BMW/Mini and Drayton Mercedes-Benz, adding: ‘We had been coveting that BMW franchise for a long time.’
Asked if Lookers was seeking to take on other brands, McMinn replied: ‘Not particularly, no, it’s all about consolidation with our key partners now. We’ve got the key partnerships that we would like – it’s a question of steady growth with them if the right opportunity presents itself.’
One of the 31 manufacturers that Lookers works with is Vauxhall, which is being sold off by General Motors to the PSA Group. Lookers has 10 Vauxhall dealerships in England and four in Northern Ireland. McMinn doesn’t predict any drastic changes once the new owners have fully taken control but asked what he thought would happen, he said: ‘It’s impossible for any of us to know. We’re seeing the same public statements as everybody else.
‘These things have a habit of moving very slowly and PSA have committed to not making any changes before 2020, and even then the changes are likely to be quite modest. I don’t think they bought it to do anything dramatic with it. Vauxhall represents about 10 per cent of our turnover and about five per cent of our profits. It’s not that material in the scale of things.’
Turning to the market in general, he said: ‘We think the market will perform a bit more strongly than the reverse the SMMT is predicting.
‘It’s noticeable that in private and fleet, the premium brands continue to drive share. Part of that is that they have very strong offerings in SUV. There is no doubt that the SUV side of the market is the one that’s growing in both new and used. It’s driven very heavily by the PCP offers again. It’s a very payment-driven market.
‘We had 83 per cent of our new retail cars on finance in 2016, so it’s a very payment-led market. The premium brands, with their strong residual values, have disproportionately good offers. The payments are close to, or sometimes even better than, the volume brands.
‘When you look at Mercedes, Audi, BMW, even Jaguar, the payments – particularly on the smallest models in their ranges – start at the £100s or £200s per month.
‘We’ve become a lot more like the States when it comes to car ownership – the leasing model has become far more popular.
‘People look at the amounts they need to put down and how much they have to pay a month. Nearly 100 per cent – 95 per cent or 96 per cent – go into another PCP at the end of their agreement.
‘We have become a nation of renting vehicles, rather than owning them.
‘That’s great for us. It makes us a much more resilient market, because those customers have to make a choice about what they do as they approach the end of the contract. Once you get used to having a better car than you could possibly have afforded on hire purchase, it’s pretty hard to go back.’
Two areas of the business that Lookers bosses are focusing on at the moment are aftersales and used cars – with the aim of building on good growth in 2016.
‘We grew by seven per cent in used cars and eight per cent in aftersales last year,’ McMinn said. ‘We know, just by the rhythm of new car registrations, that those markets will grow again in 2017. It’s more about our capacity to deal with that demand that will be in the market. We definitely see good growth coming again in 2017 from those areas.’
Part of the reason Lookers can look to the future with confidence is that a lot of exciting new models are on the way, from various manufacturers. ‘On the back of strong markets, all of the manufacturers poured a lot of money into product development,’ McMinn told us. ‘We’re expecting a strong year partly on the back of a lot of new product coming out.
‘A lot of the Jaguar Land Rover product is very strong. The new Velar looks like it’s going to be a big hit and Discovery will be a big step change for them. Elsewhere, new Micra has got very good rave reviews and new Fiesta is getting very strong reviews.
‘The cars I have mentioned are either SUVs or small cars – and they are segments which are very popular, so they will all have a good effect on our business. It’s a good market, it’s an exciting market to be in. We shouldn’t be downbeat about it, we should try to remain optimistic and upbeat.’
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