Lookers has reported that trading in Q3 resulted in underlying pre-tax profits “significantly ahead of last year” to largely offset losses recorded in a COVID-19 impacted first half of 2020.
But while the AM100 2019’s second-placed group by turnover reported encouraging Q3 growth in a trading update detailing its performance in the three months to September 30, it admitted that publications of its delayed 2019 annual financial results was not now expected until November.
Lookers said in this morning’s (October 16) statement that its had sold over 42,000 new retail and used cars during the period, 13.6% up year-on-year on a like-for-like basis – suggesting that the result would “largely offset” the £1bn sales losses suffered in H1.
It also revealed that it had succeeded in reducing its retail operating costs by approximately 9% as a result of the continued focus on all discretionary cost items, reducing its net debt to around £22.5 million (2018: c.£132.6m).
Lookers also said that it currently holds freehold property for disposal with a net book value of circa £30m, of which around £12m is expected to be received before December 31, 2020.
Chief executive, Mark Raban, said: “Our decisive self-help measures, combined with better than expected trading in Q3 and strong support from our brand partners, have helped the group emerge from lockdown in a strong position.
“Naturally, we remain cautious around the future outlook given the ongoing COVID-19 backdrop but we are well positioned to deal with any emerging challenges.
“I would like to thank all my colleagues for their amazing and continued support and dedication.”
Shares trading suspension
The suspension of Lookers’ shares trading, and the wait for publication of its 2019 annual financial results, remains ongoing as the investigation into financial irregularities across the group continues, however.
The hopes of the rankings’ second largest group by turnover in 2019 (at £5.13bn) to publish by the end of August were dashed after audit carried out by Deloitte found more work was needed on the Lookers Leasing division and vehicle financing arrangements, plus on previous years’ balance sheets to make necessary adjustments.
Grant Thornton were brought into the business back in March to investigate financial irregularities and discovered a £19m “black hole” in the accounts, going back several years, due to overstated supplier bonuses, fraudulent expenses claims and inconsistent application of policies, processes and accounting standards.
The resulting delays in publication of its 2019 annual report triggered a suspension of shares trading on the London Stock Exchange from July.
In today’s statement, the group said that it would not be submitting a request to the FCA to restore the listing of the company’s shares until shortly before publication of the Interim Results.
It said: “We are continuing to work with our auditors to finalise the accounts for the year ended 31 December 2019 (the “2019 Results”) and the interim results for the 6 months ended 30 June 2020 (the “Interim Results”).
“We currently expect both the 2019 Results and the Interim Results to be published in November 2020.
“As 31 October 2020 is the last date permitted for the publication of the Interim Results under the Financial Conduct Authority’s (the “FCA”) Disclosure Guidance and Transparency Rules (as modified by the temporary relief granted to all listed companies by the FCA on 27 May 2020), the Company does not now expect to submit a request to the FCA to restore the listing of the Company’s shares until shortly before publication of the Interim Results.”
Q3 performance and H2 outlook
Detailing its Q3 trading period, Lookers said that it had seen revenue growth across new and used cars sales and aftersales.
It said that a repositioned fleet business, which had withdrawn from certain “uneconomic activities” to focus on business which maximises margin retention and working capital efficiency, had delivered a like-for-like invoiced and delivered approximately 12,000 fleet units which was 12.6% below last year.
While Lookers said the COVID-19 lockdown period had a significant impact on financial performance during H1 – resulting in an expected material underlying PBT loss in H1 – it was able to outperform the UK retail market with like-for-like unit sales in Q3, with sales up 27.1% on last year.
Used vehicle unit sales grew 6.2% and benefited from “significant margin growth”, while Q3’s like-for-like service revenue was 7.4% above last year.
Trading in Q3 resulted in underlying PBT significantly ahead of last year, largely offsetting the loss recorded in H1.
Looker’s operational update back in August said that, in light of an estimated £1bn loss of revenue as a result of the COVID-19 pandemic, it expected its half-year trading result to show a drop in its H1 revenues to about £1.6bn.
As a result, a plan was drawn-up to close a further 12 sites while making 1,500 redundancies to realise annual savings of £50m.
By the end of 2020 Lookers will have closed, consolidated or refranchised 27 dealerships since November 2019, and reduced its workforce by about 22% through redundancies and a recruitment freeze.
Today’s statement said: “Q4 will benefit from the full impact of the Group’s restructuring activity, however the board remains mindful of the ongoing uncertainty regarding COVID-19 and the possible impact on the UK car market.”