Lookers Motors On Strong Used Car Sales
Added: (Tue Mar 21 2006)
Pressbox (Press Release) -
Car dealer Lookers said on Monday trading at the start of 2006 was well ahead of expectations after it unveiled a 28 percent rise in underlying annual profit driven by strong second-hand car sales.
The 98-year-old Manchester-based company, which earlier this month rejected a 259 million pound bid from bigger rival Pendragon, said it made an adjusted pretax profit of 18.0 million pounds last year. 'These are an outstanding set of results by anyone's standards,' Chief Executive Ken Surgenor told Reuters. 'We have made an excellent start to the year. Trading is significantly ahead of expectations across all areas of our business.' Lookers shares, which more than doubled in the past year, were up 2.4 percent at 720-1/2 pence, valuing the company at around 259 million pounds.
Turnover was up 13 percent to 1.23 billion pounds, driven by strong parts and used car sales as the company battles against a weakening new car market.
BUYING SECOND HAND
Lookers said 72 percent of gross profit was from its non-new car business. Used car sales were up 23 percent, helped by the acquisition of two used car 'supermarkets' in Bristol and the Midlands last year. 'Used cars is certainly an area we are focusing on,' said Finance Director David Dyson. 'We now have our third supermarket, which came on stream in January, and they (car supermarkets) are all certainly performing ahead of expectations.' Dyson said the company would continue to look to buy up franchised businesses in Britain's fragmented car retail market. 'There are quite a few targets we are looking at. Last year we did at least one acquisition every quarter. There is no reason to doubt that that is going to be much different this year.' Dyson said the company would target prestige, used car operations and aftersales businesses. 'It's not that we won't look at
value brands, of course will. We just want to get the balance a bit more in favour of prestige brands.' Lookers also recommended a 26 percent increase in the total dividend to 15.25 pence, signalling a more aggressive dividend policy as it tries to keep shareholders happy following the recent bid from Pendragon.
Earlier this month, the Lookers board unanimously rejected the 725 pence a share offer from Britain's biggest car dealer, saying it significantly undervalued the company. 'Over the past 12 and 24 months, Lookers did trade at a 7 percent premium to Pendragon, so to offer 1.15 share for every Lookers one, we felt they weren't really serious,' said Surgenor. Pendragon's all-share proposal came after Pendragon had proposed taking control of both Lookers
and Britain's second-largest car dealer, Reg Vardy, in a three-way deal.
Lookers said on Monday a bid coming so soon after Pendragon had acquired control of Reg Vardy would 'involve major operational risk'.