7:00 am, August 25, 2022
Lookers is excited about the future in the face of cost pressures and headwinds.
That’s according to chief operating officer Duncan McPhee, who spoke to Car Dealer following the release of the new and used car dealership chain’s interim results for 2022.
He said it was planning to open its second Polestar agency-model showroom – and that used vehicle values may continue to soften but they won’t go back to where they were before the pandemic.
Lookers announced yesterday that it made £49.9m pre-tax profit for the six months to the end of June – a dip of one per cent.
But that slight drop hasn’t fazed the company.
McPhee said: ‘We’re really pleased with where we are. When you look at the like-for-like basis, last year included government support of £12.7m, so it’s a different dynamic this year.
‘Used vehicle values are starting to drop, whereas they were very much appreciating last year.
‘You saw customers coming out of Covid with quite a lot of cash in the bank, but you’re looking at the cost-of-living crisis now.
‘So in the current market backdrop, we’re very pleased with where we finished the half-year.
‘The H1 performance has been really, really strong and we’re really pleased with it.
‘Aftersales revenue we’re really pleased with.
‘We’re really pleased with the gross margins we’re achieving in both new vehicles and used vehicles.’ (They were 8.7 per cent and 7.3 per cent respectively – up by 2.2 percentage points for new cars but down by 1.3 percentage points for used.)
‘I think it’d be wrong to say all is rosy in the garden – there are cost pressures and some headwinds in and around utilities and employment costs – but in general terms we’re really pleased,’ said McPhee.
‘We’re really, really excited about the future. It’s all about forward-looking. We’re thoroughly focused on delivering on our strategic priorities, and as and when they are fully delivered, they will deliver a lot more opportunity to the business.’
Turning to the topic of used car prices, he said: ‘Fundamentally, there’s been a rebasing of used vehicle values. They won’t go back to pre-pandemic levels, that’s for sure.
‘What’s going to happen in months to come I think is they’re going to be very much dictated by the normalisation of new vehicle supply.
‘There has been some softening. Potentially, going into Q4 we might see some more softening, but I think it’ll be very, very gradual. There’ll be no cliff edges.’
Future plans include Lookers opening its second Polestar site at the end of this year or the beginning of 2023, depending on factors such as planning permission.
It’ll be in Glasgow, and as with its Manchester site, it’ll operate using the agency model, which is something that Lookers is seeking to expand.
‘In terms of existing brands and the transition towards agency, we’re working closely with our brand partners to make sure that the journey’s right for the dealer network and for the customers,’ said McPhee.
‘I think the agency model is going to be fairly positive. It’s a really simple business model, and we know this from Polestar.
‘Margin will reduce but so will costs. And because of the direct sale element, it will probably remove some of the third parties from selling to customers, so potentially there’s a volume upside to the dealer network.’
Car Dealer last spoke to McPhee in April, and he told of what the company had been doing since then.
‘We’ve done a lot of work around simplification and standardisation of the way that we operate – we were quite a devolved business previously.
‘We’ve done a lot in terms of digitisation of the aftersales customer journey. We’re currently doing a big standardisation and harmonisation programme of our DMS, to get us on to one platform.
‘We’ve engaged the sales force on a new sales transformation programme that will join up the online experience with the in-store experience, making it truly omnichannel.
‘So I think we’ve done a lot of good things, and our colleagues are in a good place. They’re all very positive, they’re all very engaged and focused on the job in hand.
‘We’re proud of what we’ve come through and very pleased with where we are.’
With the 72-plate being released next Thursday (Sep 1), he agreed that New Plate Day just ain’t what it used to be.
‘In terms of is it as big a thing as it has been in the past, I don’t think customers really have a choice, given lead times and given new vehicle supply.
‘Some lead times are taking 14, 15, even 16 months, and I think customers are just so keen to get their car they don’t really care what month it is.
‘I think supply and just the availability of new vehicle stock is dictating as and when customers take their vehicle, so it becomes less important at that point.
‘As long as we keep selling them and they keep coming to us, we’ll deliver them at some point!’
