7:56 am, April 5, 2023
Lookers saw its underlying pre-tax profit sink by eight per cent last year to just under £83m on increased revenue.
Its results for the year to December 31, 2022, which were published this morning, show that it made £82.7m underlying pre-tax profit versus £90.1m in 2021 – the latter figure included £9.8m of Covid support.
The latest pre-tax profit figure was mainly driven by new and used vehicle market outperformance and cost control, it said, with CEO Mark Raban pointing out there had been ‘material supply disruption, inflation and rising interest rates’.
Statutory profit before tax, meanwhile, was £84.4m last year against £90m the year before – a fall of six per cent.
This year’s profit figures were set against revenue of £4.301bn, which was 6.2 per cent up from £4.051bn in 2021.
A final dividend of 2.0p per share is being proposed – up a fifth on 2021 – to be paid on June 16.
Basic earnings per share were 18.87p – up from 15.65p.
New car gross profit per unit (GPU) went up by more than 30 per cent to £1,949 per car, while used car GPU stayed mainly consistent at over £2,100.
Among the highlights were new partnerships with BYD, Ora, Lotus and MG, as well as what it called a ‘successful launch’ of the agency model with Mercedes-Benz.
It added that there was scope ‘for further acquisitive growth with all existing brand partners’.
Lookers reported a ‘robust balance sheet’ that had net cash of £66.5m as opposed to the £3.0m of 2021, plus a property portfolio that had a net book value of £290.5m, equivalent to a combined 92p per share.
The listed dealership chain added that it had enjoyed an ‘excellent start to Q1 with underlying profit before tax ahead of 2022, driven by used vehicle and aftersales revenue growth, stable margins and ongoing working capital and cost disciplines’.
It said its order bank showed some 18,000 new retail units and about 24,000 fleet units as of the end of the first quarter.
Its expectations for underlying pre-tax profit for this year are now ahead of its previous ones.
Raban said: ‘I am delighted to report another excellent performance achieved against a backdrop of material supply disruption, inflation and rising interest rates.
‘It makes me immensely proud of the Lookers team and the progress we are making together.
‘We have strong momentum in the execution of our strategic priorities. Our operational optimisation agenda remains the cornerstone of our strategy and we have made demonstrable progress on our self-help initiatives.
‘In addition, I am particularly pleased to see the expansion of our offerings through partnerships with a number of exciting new brands and the addition of incremental revenue streams including cosmetic repairs.
‘We remain mindful of pressures faced by the consumer and on discretionary spending. However, we are confident in our proposition, our balance sheet and strategic focus, with significant opportunities ahead.
‘With good momentum across the business, we have continued to trade strongly in Q1 2023, and the board’s outlook for underlying profit before tax for the current financial year is now ahead of its previous expectations.’
In his first statement as interim non-executive chairman, Paul Van der Burgh said: ‘The trading performance was impressive and ahead of the board’s expectations at the start of the year, despite the well-documented headwinds in our sector.
‘We have had to deal with supply chain disruption limiting new car availability and an increasingly uncertain outlook for the UK consumer.
‘We have built on the extensive work completed during 2021 to refocus the group on our strategic priorities and laid good foundations to make further strides in the year ahead.’
He added: ‘We are optimistic and excited for the future with a robust order bank, and encouraging early trading results in Q1 2023.
‘Against this backdrop, we are confident in the future success of Lookers, but we must be mindful of the impact of upward inflationary pressures and interest rate rises on both consumer confidence and the Group’s operating costs.
‘The war in Ukraine continues to be deeply concerning and the new car supply challenges are only just beginning to ease after 12 months of serious disruption.
‘Taken together, this means there is a degree of uncertainty for the business and our customers in the coming months.’
Reacting to the results, financial services group Zeus Capital raised its pre-tax forecast for the year by 23.1 per cent to £70.2m, adding: ‘We continue to think Lookers is materially undervalued for its forecast level of profitability and cash generation.’
Meanwhile, investment bank Peel Hunt upgraded its 2023 forecast from £63.3m to £70.5m, while fellow investment bank Numis raised its full-year estimate by 13 per cent to £70m.
Sarah Riding, automotive partner at law firm Gowling WLG, said: ‘Although current economic uncertainty is causing consumer confidence to wane, particularly in relation to big-ticket items, Lookers is one of the well-established and trusted brands in the market, so customers are more comfortable purchasing with the car dealer compared to others.
‘Shareholders will be wary of the challenges in the road ahead, but will be confident to gear up and take advantage of the growing demand for alternatively fuelled vehicles in the years ahead.’
