Lookers’ (LOOK) full-year profits are set to decline more than half on last year, after the car retailer revealed that it had underperformed an already-flagging new car market for the first time in years, prompting the departure of senior figures.
The retailer’s new car sales fell 3.2 per cent on a like-for-like basis during the third quarter, against a market decline of 0.6 per cent. New car sales to retail customers slumped by 11.5 per cent. In October, the Society of Motor Manufacturers and Traders (SMMT) blamed Brexit uncertainty for a weakening UK car market that has failed to catch up with recovering European counterparts, as the continent gets to grip with updated emissions standards.
Margin pressure brought gross profit from the sale of new cars around £7m below last year. Lookers expects to report underlying pre-tax profits of around £20m, down from a previous consensus of £38m. But with around £4m in annual adjusting items such as share-based payments and pension interest costs to be taken above the line, Lookers’ overall pre-tax profits should sit around £15.5m for the full year, according to house broker Peel Hunt.
Chief executive Andy Bruce and chief operating officer Nigel McMinn have left the board, and have been replaced by chairman Phil White until their permanent successors are identified.
The news comes as the Financial Conduct Authority (FCA) investigates Lookers over its commission arrangements, which it has said may be harming consumers and costing as much as £300m more annually than flat fee models. Lookers has conducted its own review of its internal controls, which will require an investment of £10m spread over two years. The retailer said that it was currently unable to predict any resulting impact from the FCA’s investigation, which is in its early stages.
Lookers has accelerated the planned closure of a number of dealerships, identifying 15 of its 165 sites for closure and, where possible, relocation or consolidation with other dealerships. One-off closure costs are expected to be around £8m, although the sales of 13 sites are expected to raise proceeds of £28m.
Lookers shares plummeted in morning trading after the profit warning was issued, before recovering to around 13 per cent below their opening price. On the back of Lookers’ announcement, house broker Numis does not now envisage the payment of a full-year dividend.
Peel Hunt trimmed its earnings per share forecasts from 7.6p to 3.1p.
