Lookers reinstates dividend despite market uncertainties
Lookers reported a 9% improvement in group revenue in its preliminary results on Wednesday, to £4.05bn, as the board reinstated the company’s dividend.
The London-listed vehicle retailer and servicer said its gross profit margin expanded to 12.8% for the year ended 31 December, from 11.1% in 2020.
Its underlying profit before tax totalled £90.1m, up from a restated £13.7m in the prior year, with the growth primarily driven by used vehicle margins.
Lookers described its operational performance and working capital management as “exceptional”, resulting in net funds of £3m at year-end, swinging from net debt of £40.7m a year earlier.
The board said its capital allocation policy was focussed on investment to grow revenue and profits, and to maximise shareholder returns through the “disciplined deployment” of cash.
It reinstated the company’s dividend, with a proposed full-year dividend of 2.5p per share, which the directors said they intended to grow progressively.
Looking at the current financial year, Lookers noted that on 25 March it completed a sale-and-leaseback of its property at York Road, Battersea.
The sale generated cash of £28m before costs, resulting in a gain on sale of £6m.
It signed a 20-year lease on the property, which is occupied by its Volkswagen Battersea franchise, meaning the group now held property assets with a net book value of £290m, or 74p per share.
Lookers said the momentum of 2021 had continued into the first quarter of 2022, with “robust” consumer demand and supply constraints on both new and used vehicles seeing gross margins maintained at last year’s levels.
That, combined with a tight control on costs, saw the business trading ahead of 2021 on an underlying profit basis.
The board said the ongoing semiconductor shortage was likely to see new car supplies constrained for the rest of the year, however.
Headwinds caused by high levels of inflation in areas such as utilities meant the group would also experience material cost increases.
Wider inflationary pressures and the macroeconomic impacts of the Russian invasion of Ukraine added “significant uncertainty” to the trading conditions the group was facing, the board added.
Notwithstanding those uncertainties, the directors said they were “confident” on the firm’s outlook, and that the group was “well-placed” for the rest of 2022.
“2021 was a record year for Lookers - we navigated another year of limited new vehicle supply and Covid-19 disruption,” said chief executive officer Mark Raban.
“We have reported excellent profits and cash generation, through strong used car margins, continued focus on costs and the unstinting efforts of our people.
“We have successfully moved back to a net funds position in the business and have a strong balance sheet, underpinned by our property assets, supporting our investment capacity to grow the business.”
Raban said Lookers and its customers faced some uncertainties in 2022, although first quarter trading was strong despite new vehicle supply remaining tight.
“The current crisis in Ukraine and significant cost of living increases will put pressure on consumer sentiment and disposable incomes.
“However, the group is looking forward to the future with confidence.
“It has emerged from the challenges of the past couple of years stronger and with a clear strategy to navigate future challenges and drive value for all our stakeholders.”
At 0909 BST, shares in Lookers were down 1.35% at 94.7p.