UK car retailer Lookers has reported strong results for the
first six months of 2007, with profit before tax at £18.1m, up 41
per cent year on year (H1 2006: £12.8m).

Access deeper industry intelligence

Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.

Find out more

 Turnover also grew significantly, from £726.6m in the six
months to June 30 2006 to £878.9m in the same period this year,
showing growth of 21 per cent, boosted by acquisitions.

 Lookers operates 111 dealerships in the UK selling new and
used cars, and has significantly grown its presence in the
aftermarket sector, aided by the purchase in May of parts
distribution business BTN Turbo Charger Ltd.

 The company said it had outperformed the market in new car
sales, which grew by 6 per cent on a like-for-like basis in a
sector which saw overall growth of 2 per cent. Chief executive, Ken
Surgenor commented: “This success has once again been driven by the
group’s broad base of manufacturing partners and wide geographic
coverage, coupled with our decentralised dealer structure, which
empowers key franchise directors and local management.”

A refurbishment programme in 2006 across Vauxhall dealerships had
helped the brand’s sales, and while sales in the Premier Automotive
Group (PAG) were “performing well”, Surgenor said, the Volvo
franchise in the south-east has “performed well below our
expectations”. However, the eight PAG dealerships acquired in 2006
from HR Owen have been “successfully integrated”, Surgenor said,
and a further four Mercedes Benz outlets, also acquired from HR
Owen in late 2006, were also delivering good results following
integration into the Lookers chain.

GlobalData Strategic Intelligence

US Tariffs are shifting - will you react or anticipate?

Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.

By GlobalData

Learn more about Strategic Intelligence

However, the group’s used car supermarket business delivered “a
very disappointing financial performance” and made an unspecified
loss in the first half, due to “management issues”, Surgenor said,
although these have now been addressed and the company is
anticipating improved results in this area in the second half of
2007.

Operating profit at Lookers’ parts distribution business FPS
Distribution grew by more than 5 per cent in H1 2007 compared with
H1 2006, with greater capacity after the opening of a new warehouse
in Sheffield and the opening of a new FPS outlet in Nottingham in
June.
 The group’s gearing ratio fell from 79 per cent to 61 per
cent.

Ford coup

There was more good news for Lookers to celebrate as it announced
that it has for the first time been approved as a retail partner by
manufacturer Ford after the acquisition of assets, including a Ford
franchise, formerly belonging to Dixon Motors, which went into
administration in late July (see Motor Finance Aug 07).

 Surgenor commented: “We are delighted to have been approved
to represent Ford. The introduction of Ford into our portfolio
complements our existing mix of volume and prestige brands.”

 Lookers is to take over the operation of the Sheffield Ford
franchise. David Dyson, finance director at Lookers said the
retailer would re-employ “somewhere in the region of 85” former
Dixons staff, and that the company was very pleased to have won the
agreement with Ford: “It is no secret that [working with Ford] is
something we have been looking to do for some time.

“Ford is the market leader in the UK with a great range of
products. We look at all potential acquisitions but Ford was of
particular interest,” Dyson added.

Further expansion planned

Dyson confirmed that Lookers is looking to acquire further retail
outlets, as well as to get better results from its existing
businesses.

 He said that Lookers would look first to expansion
opportunities in the UK, where more than 85 per cent of car retail
sites are not part of a plc, but that it would be “foolish” to
discount opportunities for overseas expansion.

 In response to the subject of HR Owen’s decision to dispose
of some or all of its six BMW dealerships, Dyson said: “It is no
secret we would like to represent BMW, as its range of prestige
models are very desirable and deliver bottom-line
profitability.” 

Retail outlook

In Dyson’s view, the Bank of England’s five interest rate rises in
12 months have had a negative impact on consumer confidence, as
well as raising Lookers’ own interest bill, but he said he thought
the retailer had “weathered the storm pretty well”.

Due to outside factors Dyson said he thought a further rise in
interest rates would be delayed, but that one further raise before
the end of the year – as widely predicted by analysts – “would not
be catastrophic” for the business.

In particular, Dyson said Lookers was better insulated from the
effects of interest rate rises than its competitors, thanks to its
diverse business, which is split across the new sales, used sales
and aftermarket sectors, as well as its range of manufacturers – it
represents 28 manufacturers – and geographic spread.

“We have not noticed margin pressure for either new or used cars,”
Dyson stated, adding that while new car sales were ahead, this was
at the expense of used car sales, although this was a trend which
affected the retail sector as a whole.