Lookers says second-half profits to offset interim losses

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Lookers PLC (LON:LOOK) has said its performance in the second half of the year is expected to be ahead of 2019, which will offset the interim losses caused by the coronavirus (COVID-19) pandemic.


The car retailer said the current closure of showrooms will impact revenue but it will be partly mitigated by the ‘Click and Drive’ initiative to buy cars without any contact and the continued operation of the COVID-19-compliant servicing division.


The company did not provide any guidance for the current financial year but said it is well-positioned to benefit from sector developments including electrification and further digitisation.


Trading in the second half of 2020 was encouraging, Lookers said, underpinned by significant outperformance of the retail UK new car market, continued resilient trading in used and after-sales and increasing used car margins, alongside the early impact of the group’s restructuring programme.


So far, Lookers has closed 12 sites and completed 1,500 job cuts.


Net debt was cut to GBP45mln as at the end of December 2020 after Lookers sold GBP17mln worth of assets, while the disposal of Platts Harris in November will realise proceeds of GBP1.6mln to be recognised this year.


In the delayed results for the six months to June 30, 2020, Lookers revenue dropped by 40% to GBP1.5bn and the group posted a GBP50mln loss before tax from a GBP20mln profit the year before. The firm did not propose a dividend.


In a separate announcement, the company announced the promotion of Duncan McPhee to be its new chief operating officer. He has over 25 years of experience in the motor retail industry and has been at Lookers for the past 12 in senior management roles.


Analysts at house broker Peel Hunt reinstated the target price at 75p and said that Lookers looks well placed for recovery with significant operational improvements and lower debt levels.


“The interim loss of GBP36mln is much better than our GBP50mln forecast loss, driven by a marked improvement in working capital efficiency and gross margin. With significant cost reductions (GBP50mln annualised payroll cost), second-half profit will almost offset the half-year loss, we upgrade from GBP20mln loss to a GBP4mln loss,” they noted.


–Adds analyst comment–

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