Lookers: Strategy For Driving Growth
Edison | Mar 16, 2017 05:22AM ET
Lookers (LON:LOOK) continued its impressive development in FY16, delivering yet another record performance. The buoyancy of the UK car market combined with the disposal of the parts distribution business enabled management to further its consolidate and build strategy. The addition of Warwick Holdings and Knights North West are further positive developments, with more acquisitions likely during 2017 adding to organic progression.
Delivering a more focused retail growth strategy
The disposal of the highly profitable parts distribution business, for an offer management say could not be refused, requires the successful car retail business to step up and drive growth, returns and cash flow. In FY16 Lookers delivered another record performance overall, but 16% of total pre-tax profit has now departed. Full year contributions from the two recent acquisitions should help to fill the gap, but the ongoing activities also need to continue to generate solid like-for-like growth to deliver guidance of higher earnings this year. The SMMT forecast for a 5% decline in new car sales is yet to be reflected in year-to-date demand, with two months sales growing 1.8%.
Lookers’ order book cover for March is better than in 2016 on higher budgeted sales. Combined with more favourable economic projections for the UK economy in recent weeks, management’s view of a flat new car market this year is credible. With used car sales and aftermarket services aided by one- to three-year-old car parc expansion and the increased penetration of personal contract plans (PCPs), the prospects for FY17 start to look increasingly bright.
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