Lookers : Interim Management Statement

28 October 2014

INTERIM MANAGEMENT STATEMENT

Lookers plc, ("Lookers" "the company" or "the group"), one of the leading UK motor retail and aftersales service groups, issues its interim management statement for the period from 1 July 2014 to 27 October 2014, which shows a strong performance in the period and continued margin improvements in all areas of the business; momentum which the Board believes is sustainable.  

Unless otherwise stated, the figures in this statement relate to the quarter ended 30 September 2014.

The company produced an excellent trading performance in the quarter to 30 September 2014, in particular during the important month of September and the Board is very pleased to yet again report a record result for the period. These strong results were both ahead of budget and a significant improvement on the corresponding period in 2013. 

The UK new car market increased by 9.1% overall in the nine months to 30 September. Against this background, our motor division delivered another strong performance, increasing its market share by delivering total new car sales 12.6% higher than the corresponding period in 2013. Our core retail new car sales were 11.7% higher than the previous year, on a like for like basis, compared to a UK market increase of 10%. New car retail margins were also further improved on the prior year. We have recently raised our investment in the fleet sector, in which our volumes increased by 19.5% in the period, more than double the growth in the market, which rose by 8.2%. We continued to concentrate on quality fleet sales and avoid very low margin business; margins for the period were slightly ahead of last year.

Our used car volumes have increased by over 30% in the past two years and it is pleasing to report further growth with volumes increasing by 5.4% compared to 2013, which was also a strong period. The increase in volume was accompanied by improved margins, a notable performance when viewed against the background of a relatively flat used car market. This highlights our successful focus on used car sourcing, pricing, stock management and ongoing increases in sales leads and enquiries, generated by the group website Lookers.co.uk in which we continue to invest to deliver greater functionality and further increases in enquiries.

As well as improving the margin, our aftersales business increased turnover by 6.3% on a like for like basis compared to 2013, benefitting in part from the growth in the vehicle parc of cars under three years old. This trend should continue due to the increase in the new car market over the last two years. The increase in volumes and margins demonstrates the benefits from our continuing investment in technology and procedures to improve both customer retention and average sales value per customer visit. It also reflects the success of our focus on increasing customer retention through the sale of service plans, where customers commit to longer term contracts for vehicle servicing. Our commitment to enhance customer experience continues with the objective of improving retention and delivering our "customers for life" strategy to strengthen the business and improve profitability further.

Our independent parts division made further progress in the period with increases in both turnover and profits compared to the prior year, against a background of an improving yet competitive market. Turnover rose by 5% compared to the prior year, as we continued to grow the business by investing in new and existing product lines. Margins were slightly higher during the period and careful control of overheads resulted in an increase in profit before tax compared to last year.

Cash flow continued to be strong during the period and was significantly higher compared to budget and the ratio of net debt to EBITDA remains well below 1.0. Following the renegotiation and increase in our bank facilities in February 2014, the group has significant levels of unutilised funding capacity.

Outlook

The group has produced an excellent result for the nine month period and continues to outperform a strong new car market. The group balance sheet continues to be strengthened by strong operational cash flow and working capital management and we have substantial headroom in our new and increased bank facilities.

These excellent results represent a further significant improvement in the financial performance of the company and build on what was already a strong performance in the previous year. The Board believes this momentum is sustainable and that the group is positioned to deliver further growth in the final quarter of 2014 and produce results for the year slightly ahead of current market expectations, which will represent a significant increase over the result for the previous financial year.  

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