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29 July 2021
Lookers plc
First Half Trading Update
Strong performance continuing - increase in full year expectations
Lookers plc ("Lookers" or the "Group"), one of the leading UK motor retail and aftersales service groups, today provides a trading update covering the six month period ended 30 June 2021 ("H1" or the "Period") and an increase in the Board's expectations for underlying profit before tax for the full year.
Trading Update
The Group has delivered an excellent trading performance throughout the Period, despite continued disruption and uncertainty caused by Covid-19. This positive momentum has been driven by continued outperformance of the UK new retail car market combined with strong used volumes and margins, underpinned by Lookers' improved hybrid, omni-channel customer experience. The results also reflect a resilient aftersales performance and the benefits of material cost reductions.
As a result of the above, underlying profit before tax in H1 is now expected to be approximately GBP50m compared to a GBP36.1m underlying loss last year.
Nice!
I take my grumpy comments back. Well done LOOK.
We will hear lookers trading update next week and i am expecting record profits and a Re rating.
Just need a similar improvement from Lookers, and I see no reason why not?
https://www.motortrader.com/motor-trader-news/automotive-news/trustford-delivers-record-13-6m-profit-1bn-turnover-h1-22-07-2021?eea=ZklYZ0dEZ1RSK2M0dHRvMkV2Sm5DbXZ5ZnQrZDF5ODJ4cGJNM2NSMy9IRT0=&n_hash=1550&utm_source=e-shot&utm_medium=email&utm_campaign=MT-107-(Edi)MTDailyNewsV2-
%231550
Would normally expect early September, or even late August if they want to appear on the ball for once.
H1 trading update, we should be due one? Anyone any idea when it can be expected?
I know the formal results will probably appear in Dec...
Clearly there continues to be some false worries about online sales taking over from the traditional route to market………
Anyone who does any detailed research will see that online continues to drop off as we venture back into normal living, just ask any sales executives who work in the motor trade about click and collect versus the traditional route…
The online research continues to increase but the stats clearly show that customers continue to want to visit dealerships, there are more walk-ins without appointments already this year compared to the same period 2019.
Customers want to visit dealerships whilst test driving and deciding on a purchase.
Cazoo and Cinch continue to purchase dealerships as they have realised that their model is clearly failing…
The city has called the motor sector as wrong as anyone could imagine, the current turnover and profit levels are phenomenal CAZOO and CINCH are fully aware at boardroom level that their model is not working as well as envisaged and the costs involved in transporting the cars retailed by them is clearly not sustainable……
Franchise Dealers are very focused on taking full advantage of the current market and this is likely to create a big surge in the number of opportunities available off the back of some very strong results.
Although the City continues to undervalue the Plc Dealer Groups the tide will turn when they finally realise that digital car retailing requires the support of a substantial infrastructure, CIMCH and CAZOO are not retailing as many vehicles as some would think.
Lookers are retailing over 8000 used cars per month, this is more than what CAZOO and CINCH hold as their total stock for sale…
Lookers is far from the only firm to be in this Final Salary Pension scheme position, which is caused by global quantative easing pushing the prices of government bonds etc many times higher than was envisaged when these schemes were devised. No doubt nice for those prudent schemes who were over-funded before that lark started and were no doubt criticised for doing so.
Until writing this I did wonder why such aspects didn't occupy a number 2 priority after the business iself in resource allocation and I think I can now see why. Firstly it's mainly a problem which may partly self-correct in time as the deficit calculation is one defined by accountants and legislators, and pensioners aren't going without their pensions and the funds have enough resources to pay them, or at least the Lookers one does.
Why buy these bonds etc now when most informed sources say that yields are going to rise soon due to inflation and thus their prices will fall while their income generated will be constant?
Net Assets of 77p per share + £18m of cash growing. The pension deficit coverage isn’t that material long term. The final salary scheme closed and it will right itself relatively quickly. Not alarmed at all and fair value 90p / share based upon enterprise value. This will increase as the cost cutting benefits come through as well as stock shortages and pent up demand - A lot of people deciding to get new motors rather than risk the unknown Delta variants on petri tubes (AKA Airplane cabins).
Lookers will report record profits well in excess analysts forecasts next month, i am told the profits will be around £50m..
Company could make north of £75m this financial year and the dividend will also be reinstated.
'triennial valuation', 'The year on year increase arises as a result of the decrease in both corporate bond yields and discount rate, which has been partly offset by an increase in the schemes' asset values. The total actuarial loss on the Group's defined benefit pension schemes in the year was £32.5m (2019: gain of £7.1m).'
I don't trust these figures or whoever is overseeing the triennial valuations.
This needs immediate remedial action. Understandably there are factors beyond the BOD's control.
An elephant in the room? Certainly a major problem and if this financial black hole gets worse over time it spells eventual doom for the group.
Copied from final results -
Pension schemes
The Group has two defined benefit pension schemes, The Lookers Pension Plan and The Benfield Motor Group Pension Plan. Both schemes are closed to entry for new members and closed to future accrual.
During June 2020 the former Dutton Forshaw Pension Plan trustees resolved to transfer all remaining assets and liabilities to The Lookers Pension Plan.
*Alternative performance measures - see Note 15
During the year the Group concluded its triennial valuation of The Lookers Pension Plan and received approval from its lenders to increase pension deficit payments to £12m plus expenses and PPF levy, all subject to increases linked to CPI. The revised contributions were effective from 1 July 2020.
The Group's triennial valuation of the Benfield Pension Plan was concluded in February 2021 with a continuation of deficit contributions of £0.3m plus expenses and PPF levy.
At 31 December 2020, the aggregate IAS 19 pension deficit is £79.3m (31 December 2019: £55.7m). The year on year increase arises as a result of the decrease in both corporate bond yields and discount rate, which has been partly offset by an increase in the schemes' asset values. The total actuarial loss on the Group's defined benefit pension schemes in the year was £32.5m (2019: gain of £7.1m).
Relatively small changes in the bases of valuation can have a significant effect on the calculated deficit hence the movement in the calculated deficit can be subject to high levels of volatility.
Copied from final results -
The Directors do not propose a final dividend in respect of the financial year ended 31 December 2020 (2019: nil).
As noted in the 2019 Annual Report & Accounts, the Board has become aware of an issue concerning the technical compliance with the 2006 Act in relation to the payment of interim and final dividends in 2013, 2014 and 2015. The effect of these irregularities is that the interim and final dividends paid in 2013, 2014 and 2015 were paid to shareholders at a time when the Company did not hold adequate distributable reserves. However, there were sufficient reserves held in subsidiaries of the Company which could have been distributed to the Company in order to provide the Company with adequate reserves.
To satisfy the steps required to rectify these irregularities, the Company will put forward a resolution at the Company's forthcoming General Meeting.
Thanks
As they say, it takes different views to make a market!
I don't doubt LOOK is undervalued but expecting a re-rate when the news is all out there is not logical to me or others it seems as the SP is going down. Other news is needed for it to go up form here.
Thanks for pointing out these issues redwine - too often these chats are positive echo chambers.
I'm new to lookers - bought in for broadly the reasons fastcar mentions. But if the stables haven't been completely cleared out and there's still some dung heaps stinking up the place, I'd much rather know about it.
Some investors will be waiting to see how big the dividend is when it is restored. Lookers used to be a reliable income stock. Patience and all will be rewarded!!
I agree its undervalued. Thats why I'm still here. The opposite of my moaning is that because of all of the undervaluation in my view there is a good chance that it will get taken out. If TB gets offered the right price Its a goner and I would imagine he is well hacked off. If a PE company can get him to agree, its a done deal. I wonder what his average holding price is.
The company will report in august wonderful profits, the sector continues to enjoy huge success and great margins and yet some people continue to expect instant success.
Sell up and move on if your not patient but fundamentally this company is way undervalued and don’t be surprised if Cinch or Cazoo enter with a bid in the coming weeks.
I have to agree with you red. I think we should be 90p + by now. The BOD are a disgrace. I all but sold out yesterday in disgust. I've just kept a few in case some miracle happens.
Should have also mentioned the CFO position has been open for a year. Why?
There is a reason they have not found a new Chairman. I believe its because they cant find anyone or at least anyone credible to step into the mess. Ex owner with massive stake, share suspensions, auditors quitting etc etc etc. If you were a credible candidate I guess you would be thinking about your reputation. Made me laugh in the annual report Phil White again saying something that is patently not the case "The recruitment process for my successor is progressing as planned and I will step down when an appointment is confirmed later this year". No it's not, it's one year late and you should be long gone. Disingenuous at best and par for the course.
The reason the SP is where it is is not about the market, or the underlying assets or even the potential. Its because the current BoD cant be trusted.
There are still clearly significant issues going on here and all the Directors should have been forced out under threat of Investigation by the Police. It’s disgraceful how these options can re instated like this. Best thing we can hope for is a takeover which might happen at these prices. I would think the enterprise value at around 100p. Gotta get Brammal to sell up and go away, he’s still pulling strings behind the scenes as the largest shareholder and should be behind bars.
Can anyone explain why 2014 and 2015 share option awards to the two disgraced directors are included in the announcement below?
When the awards were made it clearly states the options expire after three years under normal circumstances. It is puzzling that the options appear to still be valid at a price of 69.8p - see press release of 30th June on Lookers website (media).
If the options are still valid and have not expired in 2017 and 2018 then I wonder what the mix up could be as it seems very irregular.
There has been no RNS stating the options have either expired or been exercised.
Maybe there is some link to the financial mis-statements made by Andy Bruce and Nigel McMinn.?
Finally, how can it possibly be the case that the media release of 30th June, 16.30, be released in the way it was and not through RNS?
It beggars belief! Suspension of share options made to directors being lifted when those options should have already expired? So how many share options remain outstanding?
I need a clear explanation of all this and if there is no explanation before the up-coming general meeting that will be the best time to ask.
It all looks very questionable.