British car dealer group Lookers said on Monday trading at the start of 2006 was well ahead of expectations as it unveiled a 28% rise in underlying annual profit driven by strong second-hand car sales, according to Reuters.
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The 98-year-old Manchester-based company, which earlier this month rejected a GBP259m (US$455m) bid from bigger rival Pendragon [following that group’s successful bid for the Reg Vardy dealer group], said it made an adjusted pretax profit of GBP18 m (US$31.6m) last year, the report added.
“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.”
The news agency said Lookers’ turnover was up 13% to GBP1.23bn, driven by strong parts and used car sales as the company battles against a weakening new car market.
Lookers reportedly said 72% of gross profit was from its non-new car business. Used car sales were up 23%, helped by the acquisition of two used car ‘supermarkets’ in Bristol and the Midlands last year.
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By GlobalData“Used cars is certainly an area we are focusing on,” finance director David Dyson told Reuters, adding: “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,” he told Reuters.
Dyson added that the company would target prestige, used car operations and after-sales 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.”
Reuters noted that Lookers has recommended a 26% increase in the total dividend to 15.25 pence, signalling a more aggressive dividend policy as it tries to keep its 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% premium to Pendragon, so to offer 1.15 share for every Lookers one, we felt they weren’t really serious,” Surgenor told Reuters.
The news agency noted 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”, the Reuters report added.
