LOOKERS saw its pre-tax profit plummet by nearly 40 per cent from £41.3m to £24.9m over the six months to June 30, it reported today.
It was far worse than the motor retail group predicted last month, when it issued a profit warning and said it expected the figure to be around £32m – a drop of 26 per cent. Its underlying profit before tax dropped by 27.5 per cent to £29.2m from £40.3m.
In June, it was revealed that the Financial Conduct Authority would be investigating the car dealership group’s sales processes between January 1, 2016 and June 13, 2019, which shook investor confidence in the company and sent the share price spiralling downwards. It tumbled overnight from 67.6p to 57.4p, and was 43.44p when the stock market closed yesterday. Between January and July, the share price dropped by 54.9 per cent.
Despite the pre-tax profit fall, revenue against the first half of 2018 increased by 2.7 per cent to £2.646bn. Lookers also highlighted its continuing outperformance of the UK new car market in general, with like-for-like sales down by 1.2 per cent against a UK market decline of 3.4 per cent. Meanwhile, aftersales revenue grew by 6.2 per cent during the half year from £228m to £247m – with a gross profit increase of 2.9 per cent to £109.9m.
Lookers, which operates 165 franchised dealerships representing 31 manufacturers across 110 locations, also reported that its net debt had risen by 35.6 per cent to £73.9m, although it was down from the £86.9m figure as at December 31, 2018.
Andy Bruce, pictured, the chief executive of Lookers, put a brave face on things, saying in the interim results announced to the London Stock Exchange today: ‘Our performance for the first half reflects an ongoing backdrop of challenging UK market conditions for the sector.
‘Whilst we are reporting lower profits year-on-year, we have made good progress on a number of strategic initiatives and have a clear investment plan to restructure and strengthen our regulated activities.
‘Our balance sheet remains strong including our valuable property portfolio. Working closely with our brand partners, I am confident in the long-term prospects for the business. The board’s current outlook for the full year at the underlying profit before tax level remains unchanged.’
Looking ahead, it said it would be investing about £10m this year and next as part of a ‘restructure and strengthening of regulated activities’ including establishing a revised sales process This, it said, would create ‘a stable platform for future growth and an enhanced customer experience’. It added that ‘ongoing underlying costs in 2020 and beyond are expected to increase by c£3m per annum to deliver best practice and an enhanced customer experience’.
Chief financial officer Robin Gregson is stepping down after 10 years in the role, and he was thanked in the report ‘for his significant contribution’.