lookers interim results: full year ended 31 december 2018€¦ · lookers interim results: full...

Lookers Interim Results: Full Year ended 31st December 2018


2

Highlights – resilient performance in a challenging market

§ Profit before tax of £67.3m (2017: £68.4m)

§ Improved H2 ‘18 vs H2 ‘17

§ Revenue increased to £4.9bn (2017: £4.7bn)

§ Further increase in market share in new cars

§ Used car volume growth offsets margin pressure

§ Continued strong growth in aftersales

§ Cost ratio improved by 1.5 basis points

2


3

Capital structure – strong financial position

§ Net debt at £86.9m (2017: £97.8m)

§ Net debt / EBITDA 0.9 slightly below the mid point of our stated range of 0.5:1 - 1.5:1

§ Refinancing completed in December gives improved headroom and term

§ Share buy back programme completed with £9.3m shares purchased

§ Final dividend for the year increased by 5%

3


4

Strategic progress – improving our estate

§ Continued refinement of portfolio

§ Acquisitions

- Pollendines in Essex (Ford)

- Jennings Motor Group (Ford based)

§ Closures

- Warrington and Yardley (Vauxhall)

- Motherwell (Nissan/Hyundai)

§ Further refinement planned in 2019

§ Investment in dealership estate and multi-channel customer experience

4


5

Investment in dealership estate

VW Battersea

JLR Belfast

JLR MotherwellAudi Dublin

Audi FarnboroughVolvo Stockport

5


7

Resilient financial performance

§ Adjusted profit before tax of £67.3m

§ Revenue increased 4% to £4.9 billion (2017: £4.7 billion)

§ Adjusted earnings per share of 14.68p (2017: 14.57p)

§ Final dividend increased by 5% to 2.60p per share (2016: 2.48p)

Lookers plc2018£m

2017£m

Turnover 4,879.5 4,696.3

Gross profit 515.5 504.1

Gross margin 10.6% 10.7%

Operating profit 85.5 84.7

Underlying operating margin 1.8% 1.8%

Property profit 7.7 2.5

Reorganisation costs (3.8) (2.0)

Interest 18.3 16.3

Adjusted profit before tax 67.3 68.4

Pre-tax margin 1.4% 1.5%

EPS 14.68p 14.57p

Net debt 86.9 97.8

Gearing 22% 25%

EBITDA (12 months) 98.4 102.8

Dividend per share 4.08p 3.89p

Underlying tax charge 9.6 10.5

Profit after tax 43.5 47.9

Return on capital employed 16.8% 17.8%


60

65

70

75

80

85

90

Profit 2017 New Cars Used Cars DealershipAftersales

Sale of Property Reorganisationand Closure

Costs

Costs Finance Costs Profit 2018

8

Profit bridge

-3.868.4+1.8

+13.6

+7.7

-2.0

63.4

-3.8

-18.5


9

Cost bridge

+7.2 +1.4 +0.8

+4.0 +1.0

+3.7+2.3

375

385

395

405

415

425

435

445

455

Total costs 2017 Wages & Salaries Indirect Wages &Salaries

Valeting Property Depreciation Computer charges Other Total Costs 2018

£m


10

Robust performance across the business2018£m

2017£m

% change

TURNOVER

New Cars: retail 1,481 1,499 -1%

New Cars: fleet 914 978 -7%

Used Cars 1,939 1,702 14%

Aftersales 433 409 6%

Leasing and other 112 108 4%

TOTAL TURNOVER 4,879 4,696 4%

2018£m

2017£m

% change

LFL TURNOVER

New Cars: retail 1,520 1,551 -2%

New Cars: fleet 946 992 -5%

Used Cars 1,968 1,732 14%


2018£m

2017£m

% change

GROSS PROFIT

New Cars: retail 128 134 -4%

New Cars: fleet 33 31 9%

Used Cars 135 133 2%


Leasing and other 17 17 -

TOTAL GROSS PROFIT 516 504 2%

2018£m

2017£m

% change

LFL GROSS PROFIT

New Cars: retail 130 137 -5%

New Cars: fleet 34 31 10%

Used Cars 137 135 1%


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Balance sheet

31 Dec 2014£m

31 Dec 2015£m

2018 £m

2017 £m

Fixed assets 350.9 342.0

Rental fleet vehicles (VRS) 54.2 60.9

Stocks 1,027.7 984.1

Debtors 179.5 242.1

Current liabilities (excluding bank loans) 1,236.6 1,228.1

Non current liabilities (excluding bank loans) 128.3 139.4

Vehicle rental fleet finance (VRS) 40.0 46.4

Net assets 399.3 385.0

Net debt 86.9 97.8

Gearing 22% 25%

Net debt / EBITDA 0.88 0.95

§ Low levels of gearing, at 22% (2017: 25%)

§ Strong balance sheet and high level of unutilised bank facilities

§ New bank facility agreed December 2018:

§ Provide increased facility and term for flexibility and security

§ £250m revolving credit facility with no amortisation

§ Additional £50m potentially available for acquisitions

§ Term to 31 March 2022, with option to extend to 31 March 2023


12

Impact of IFRS 16

§ Adoption of new accounting standard, IFRS 16, from 1 January 2019

§ Group expects an increase in gross assets of up to £100m

§ Increase in gross liabilities of up to £120m

§ EBITDA expected to increase by up to £20m

§ Operating profit is expected to increase by up to £7.5m

§ Profit before tax likely to be neutral

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13

Positive cash flow generation

§ Cash flow was strong with cash generated from operations of £81.5m (2017: £83.3m)

§ Invested £25.7m of capital expenditure in improving dealership facilities

§ Received £35.1m from sale and lease back of three properties

§ Net debt reduced £10.9m compared to £23.6m increase in 2017

§ Net debt to EBITDA continues to be low

§ Gearing reduced from 25% to 22%, remaining at a low level

2018 £m

2017 £m

EBITDA 91.6 101.1

Working capital increase (10.1) (17.8)

Cash generated from operations 81.5 83.3

Acquisition of subsidiary companies (13.7) (1.3)

Purchase of fixed assets (25.7) (46.1)

Proceeds from asset disposals 35.1 8.0

Purchase of intangibles (7.9) (8.1)

VRS Rental Fleet Vehicles purchased (89.4) (87.1)

Sale of VRS Rental Fleet Vehicles 90.3 87.0

Dividends paid to shareholders (15.6) (15.0)

Loan repayments (14.6) (12.5)

Loans movement 1.2 43.1

Interest paid (net) (18.3) (16.3)

Tax paid (7.1) (25.5)

Pension payments (net) (2.1) (3.6)

Shares (redeemed) / issued (9.3) 0.8

Increase / (Decrease) in cash 4.4 6.7

(Decrease) / Increase in net debt 10.9 (23.6)

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14

Capital expenditure – forward guidance

2017A 2018A 2019E 2020E 2021E

£m Maintenance 5 5 5 5 5

£m Upgrades 41 22 25 10 5

£m TOTAL 46 27 30 15 10

§ Coming to the end of the capex period into upgrading the estate

§ Free cash flow will benefit significantly for the next 5+ years

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16

Industry backdrop

§ New car market decline of 6.8% to 2.37m in 2018

§ Q1 2018 down by 12.4%

§ Diesel trends evolving

§ WLTP effects ongoing

§ Resilience in PCP

§ FCA review

§ Residual values robust

§ Used and aftersales markets stable

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17

Source: CAP HPi

UK New Passenger Car Registrations By Fuel Type, 2017-2025 Forecast

0%

10%

20%

30%

40%

50%

60%

70%

2017 2018 2019 2020 2021 2022 2023 2024 2025

Diesel Petrol HEV PHEV BEV

0. 0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Diesel volume Diesel share

UK Die se l Passe ng e r Car Re g is trations , 2000 -2018

Diesel trends

UK Diesel Passenger Car Registrations, 2000-2018

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18

Residual values remain robust

Cumulative movements for 2018 show strength in used cars (all fuel types)

1.7%

-1.0%

-3.0%

-3.9%

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

February March April May June July August September October November December January

2018 2017 2016 2015

Source: CAP HPi

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19

§ Real world emissions testing commenced 1 September

§ Expected “net neutral” effect in H2

§ Supply constraints, especially in Q4

§ Less significant impact in 2019

§ Commercial vehicles

§ NOx emissions

WLTP – impact slightly worse than expected

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20

FCA reviewReview § 20 lenders representing 60% of the market§ 1,000 cases reviewed

Main findings and concerns§ Commission structures§ Rates charged are at the discretion of the broker§ Rates not linked to strength of credit history§ Timing and transparency of pre contract information§ Disclosure that commission exists

Lookers response§ Removed discretion, aligned all rate bands and rate cap in place§ Robust electronic POS systems and processes

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21

New cars

§ 6.8% decline in new car market§ Modest reduction in turnover and gross profit ahead of the market§ Gross profit decrease in retail but stable in fleet§ Profit per unit maintained in retail but increased in fleet§ Selective attitude to fleet business

0

200

400

600

800

1,000

1,200

1,400

1,600

2017 2018

Retail

Fleet

£m

914

New car turnover

1,4811,499

978

-1%

-7%

0

20

40

60

80

100

120

140

160

2017 2018

Retail

Fleet

Total gross profit

£m

127

34

134

31

-4%

128

33

6%

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22

PCP dominating

New Car Finance %

67% 75%77% 78% 79% 83% 81% 84%

52% 54%63% 72%

79% 84% 84% 86%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017 2018

New Finance New PCP

Used Car Finance %

39% 42% 43% 42% 42%42%

42%44%

7%9%

17%

26% 37%47% 50%

55%

0%

10%

20%

30%

40%

50%

60%

2011 2012 2013 2014 2015 2016 2017 2018

Used Finance Used PCP

22


Used cars – another year of growth

§ Significant volume growth§ Some pressure on profit per unit§ Residual values stable§ Significant growth opportunity

1,600

1,650

1,700

1,750

1,800

1,850

1,900

1,950

2,000

2017 2018

Used car turnover

1,939

£m 1,437

1,702

+14%

130

131

132

133

134

135

136

2018 2018

Total gross profit

£m 56

133

+2%

135

2017

23


24

Improving used to new sales ratio

1.54

1.63

1.84

1.35

1.40

1.45

1.50

1.55

1.60

1.65

1.70

1.75

1.80

1.85

1.90

0

20000

40000

60000

80000

100000

120000

2016 2017 2018

Used / New Ratio

Used retail units New retail units Ratio

§ Additional used cars per year 29,498 (2021 vs 2018)

2021 = 2:1 +

24


Dealership aftersales – continued improvement

§ Strong growth in turnover and gross profit§ Further progress in creating additional capacity

370

380

390

400

410

420

430

440

2017 2018

Aftersales turnover

£m

409

433

395

+6%

150

160

170

180

190

200

210

2017 2018

£m

Aftersales gross profit

189

+7%

203

25


26

Website summary§ Full ownership of the online

customer experience, reducing dependence on 3rd party suppliers

§ Vehicle recommendation engine

§ Greater operational efficiency and reduced management cost

§ Strong base for future growth and improvement

26


27

Digital strategy

§ Mobile first design in line with 70% of our visits being from mobile or tablet

§ Ongoing improvement of digital customer journey

§ Continued focus on increasing visibility in organic search (shown in graph below)

Lookers.co.uk Keywords in top 3 search Positions

27


29

Outlook

§ SMMT forecast 2.3% reduction to 2.31m new cars in 2019

§ Good start to current financial year and March orders in line with our expectations

§ Continued growth in used volumes with improved margins

§ Aftersales growth maintained with increased capacity and technology

§ Continued investment into development of multi-channel customer experience and improving the dealership estate

§ Acquisitions remain a key focus


31

Strategy model


32

New car registration growth

EU Car Registrations

§ Car sales track population growth and GDP

§ EU now recovered to previous peak

Strong market fundamentals

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

2015

2017


33

Strong market fundamentals§ Record used car market§ Demand for used cars is exceeding supply

Average age of used vehiclesUsed vehicle market

Source: Statista.comSource: SMMT and DVLA Data

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

New car market Used car market

33


34

Market Update: Consolidation of ownership creates opportunities

§ Gradual reduction in franchised dealerships set to continue§ Will drive up average sales per outlet§ Helps leverage fixed cost base

34


35

Business Portfolio – Franchise & Distribution OutletsMOTOR DIVISION Dacia Hyundai Mazda Peugeot Toyota Volkswagen CV SERVICE CENTRE

Aston Martin Belfast Dundonald Sunderland Belfast Belfast Carlisle Renault ChelmsfordBelfast Carlisle Washington Dundonald Darnley Volvo Chelmsford

Chester Jaguar Renault Newtonabbey Glasgow Vauxhall DundonaldAudi Newcastle Amersham Mercedes-Benz Belfast GuildfordAyr Newtonabbey Belfast Ashford Carlisle Vauxhall Newcastle LEASING

Basingstoke Newtonards Glasgow Brighton Chester Belfast Teesside HarrogateCamberley Stockport West London Canterbury Newcastle Birkenhead

Dublin Eastbourne Newtonabbey Birmingham VolvoEdinburgh DS Jeep Gatwick Newtonards Chester Colchester FLEET FINANCIALGlasgow Belfast Belfast Maidstone Stockport Ellesmere Port Glasgow BelfastGuildford Shrewsbury Lisburn StockportHamilton Ferrari Kia Stafford Seat Liverpool VEHICLE RENTAL

SERVICESNewcastle Belfast Belfast Stoke-on-Trent Manchester Newtonabbey USED CARStirling Newcastle Stourbridge Middlesbrough Portadown Belfast Beaconsfield

Teesside Ford Stockport Tonbridge Stockport Selly Oak DublinTyneside Braintree Sunderland Walsall Speke AGRICULTURAL

DIVISIONWearside Chelmsford Washington Wolverhampton Skoda St. Helens MOTORCYCLESColchester Worcester Guildford BMW – Belfast Darley Dale

Bentley Frinton Land Rover Harrogate Volkswagen Honda – Belfast TuxfordBelfast Gateshead Belfast MINI Manchester London - Battersea Yamaha – Belfast

Guiseley Bishops Stortford Crewe Middlesbrough BlackburnBMW Harrogate Chelmsford Stafford Newcastle Blackpool TPSCrewe Leeds Chipperfield Stoke-on-Trent Stockport Carlisle Edinburgh

Stafford Middlesbrough Colchester West London Dumfries GlasgowStoke-on-Trent Sheffield Glasgow – North Mitsubishi Darlington Guildford

South Woodham Ferrers Glasgow – South Middlebrough Smart Guildford NewcastleCitroen Sudbury London – Battersea Nissan Brighton Morden ReadingBelfast Sunderland Motherwell Belfast Gatwick Newcastle Teesside

South Shields West London Carlisle Maidstone NorthallertonStockton Chester Shrewsbury Preston TYRES

Washington Lexus Gateshead Stoke-on-Trent Silverlink Belfast Boucher RoadBelfast Leeds Tonbridge Teesside Belfast Sydenham Road

Honda Newcastle Wolverhampton Walton-on-Thames ColeraneOrpington Maserati Newtonabbey Worcester Omagh

Belfast Newtonards Portadown

35


Franchise locations

36

lookers interim results: full year ended 31 december 2018€¦ · lookers interim results: full...

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