REG - Lookers PLC - 2022 Full Year results
05/04/2023 07:15
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RNS Number : 3941V Lookers PLC 05 April 2023
5 April
2023
Lookers plc ("Lookers" or the "Group")
2022 Full Year results
Excellent performance against strong headwinds
Strong growth momentum leading to higher profit expectations for 2023
Lookers plc, one of the UK's leading integrated automotive retail and service
groups, announces its preliminary results for the year ended 31 December 2022
(the "Year").
Mark Raban, Chief Executive Officer, said:
"I am delighted to report another excellent performance achieved against a
backdrop of material supply disruption, inflation and rising interest rates.
It makes me immensely proud of the Lookers team and the progress we are making
together.
"We have strong momentum in the execution of our strategic priorities. Our
operational optimisation agenda remains the cornerstone of our strategy and we
have made demonstrable progress on our self-help initiatives. In addition, I
am particularly pleased to see the expansion of our offerings through
partnerships with a number of exciting new brands and the addition of
incremental revenue streams including cosmetic repairs.
"We remain mindful of pressures faced by the consumer and on discretionary
spending. However, we are confident in our proposition, our balance sheet and
strategic focus, with significant opportunities ahead. With good momentum
across the business, we have continued to trade strongly in Q1 2023, and the
Board's outlook for underlying PBT for the current financial year is now ahead
of its previous expectations."
Financial summary
Year ending 31 December 2022 2021
Revenue £4,300.9m £4,050.7m
Underlying profit before tax* £82.7m £90.1m
Underlying basic earnings per share* 18.21p 20.07p
Statutory profit before tax £84.4m £90.0m
Basic earnings per share 18.87p 15.65p
Dividend per share 3.0p 2.5p
Net funds** £66.5m £3.0m
* Underlying profit before tax is profit before tax and non-underlying items.
Underlying basic earnings per share is earnings per share before the impact of
non-underlying items and the impact of tax rate changes.
** Cash and cash equivalents less bank loans and overdrafts, excluding
stocking loans, vehicle rental finance liabilities and lease liabilities under
IFRS 16.
2022 Highlights
· Group revenue of £4,300.9m (2021: £4,050.7m) reflecting strong
trading across all divisions despite supply restrictions and logistics
disruption
· Basic earnings per share of 18.87p (2021: 15.65p), up 20.6%
versus 2021
· Underlying profit before tax of £82.7m (2021: £90.1m, £80.3m
excluding £9.8m of COVID support), primarily driven by new and used vehicle
market outperformance and cost control
· Robust balance sheet with net cash of £66.5m (2021: £3.0m) and
a property portfolio with a net book value of £290.5m, equivalent to a
combined 92p per share
· Final dividend of 2.0 pence per share proposed, full year
dividend up 20.0% versus 2021
Significant progress and momentum across all six strategic priorities
1) Operational optimisation: Delivered significantly increased penetration
of finance and ancillary products generating an additional £15.7m income in
the year. 31k used warranties sold (2021: 12k) with 163k live service plans in
operation. Strong working capital cashflow management generating £32.1m of
cashflow benefit.
2) Leveraging technology and digitisation: Further progress on dealer
management system simplification with approximately three quarters of the
portfolio now on a standard platform. Sales transformation programme on track
for rollout, commencing Q4 2023 across all channels.
3) Expanding OEM relationships: New partnerships delivered with BYD, ORA,
Lotus and MG. Successful launch, in partnership with Mercedes-Benz, of the new
agency model. Headroom for further acquisitive growth with all existing brand
partners.
4) Increasing used vehicle penetration: Expect the first new, standalone
multi franchise site to be operational from existing premises Q4 2023.
5) Developing aftersales revenues: 29 cosmetic repair sites and 20 mobile
units now in operation, with further sites and units planned for rollout in
2023.
6) Leveraging corporate leasing and fleet capabilities: Lookers Vehicle
Solutions platform and operational consolidation now complete, with the
acquisition of Fourways in Q1 2023 adding further to our capabilities.
Current trading and outlook
· Excellent start to Q1 with underlying profit before tax ahead of
2022 driven by used vehicle and aftersales revenue growth, stable margins and
ongoing working capital and cost disciplines.
· Continued robust order bank with c.18k new retail units and c.24k
fleet units as at end of Q1.
· Continued cash generation with net cash* at 31 March 2023 of c.
£93m.
· Board remains mindful of continued trading headwinds including
economic uncertainty, inflationary pressure and both supply and logistics
disruption.
· The Board's expectations for underlying PBT for the year ended 31
December 2023 are now ahead of its previous expectations.
* Net cash is before taking into account period end accounting adjustments
including cash in transit.
Details of results presentation and webcast
There will be an in-person meeting on 5 April 2023 at the Numis offices, 45
Gresham St, London, EC2V 7BF, at 9:30am UK time for analysts and
institutional investors. The event will also be webcast for those unable to
participate in person. To register for details please contact MHP by email
on lookers@mhpgroup.com (mailto:lookers@mhpgroup.com) .
Enquiries:
Lookers
Mark Raban, Chief Executive
Officer
0161 291 0043
Oliver Laird, Chief Financial Officer
MHP
Tim Rowntree / Simon Hockridge / Charles
Hirst
020 3128 8193
Lookers@mhpgroup.com (mailto:Lookers@mhpgroup.com)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR. The person responsible for making this announcement is the Company
Secretary.
The Company is registered in England at Lookers House, 3 Etchells Road, West
Timperley, Altrincham WA14 5XS. Company registration number 00111876. LEI
number 213800TSB8PJEACDAV33
Chair's statement
Another excellent performance
This, my first Chair's statement, looks back on another year of excellent
financial results and operational progress. The trading performance was
impressive and ahead of the Board's expectations at the start of the year,
despite the well-documented headwinds in our sector. We have had to deal with
supply chain disruption limiting new car availability and an increasingly
uncertain outlook for the UK consumer. We have built on the extensive work
completed during 2021 to refocus the Group on our strategic priorities and
laid good foundations to make further strides in the year ahead.
Revenues increased to £4.30 billion (2021: £4.05 billion) and profit before
tax decreased to £84.4 million (2021: £90.0m, including £9.8m of COVID
support), reflecting extremely strong comparatives from our record performance
in 2021. Last year we benefited from an unprecedented environment in which
supply issues strongly drove up margins across both new and used vehicles.
Although we are still operating in a far-from-normal environment, the strong
performance in 2022 is a result of Lookers' outperformance of the new and used
car markets in the UK, despite a backdrop of increasing inflationary
pressures, including both employment and utility costs. Our financial position
was considerably improved by the sale and leaseback of the freehold dealership
property in Battersea, London. The sale generated £28.0m in cash with the
proceeds used to invest in the Group's strategic priorities and further
strengthen the balance sheet. The Group now holds property assets with a net
book value of approximately £290.5m and net funds of £66.5m, representing
92p per share as at 31 December 2022.
The strength of our financial and operational performance leaves Lookers in a
strong position to pursue and progress our strategic growth strategy as we
invest in new avenues for growth.
Significant strategic progress
This trading outperformance demonstrates the positive progress made against
our six strategic priorities to grow the business, the most important being
our focus on operational optimisation. We've also made significant inroads in
expanding our proposition through new OEM partnerships, particularly in the EV
market, new offerings for customers, such as cosmetic repairs, and further
progress with our omnichannel experience. Ultimately, we are adapting at pace
to an evolving industry landscape, ensuring that we are best placed with our
OEM brand partners, suppliers, and customers, to provide the best experience.
Together, the Board believes the strategy will maintain Lookers' position as a
leading player in the industry. We want the business to capture growth
opportunities and to create a sustainable model which delivers long-term value
for all stakeholders. We are excited by the considerable progress we made
during 2022 and the platform this gives us to develop these projects into
2023.
A focus on all our stakeholders
We are proud to be a business that cares about the various communities we deal
with. It is because of our incredible people across the business, that we are
in the position of strength that we are in today. We have spent time over the
last 12 months looking at how we can be an industry leader in investing in and
retaining our people.
In the summer, we introduced the Lookers Living Wage, a scheme that ensures
all full-time employees earn more than the National Living Wage. We also
recognised the importance of rewarding our apprentices and now offer pay
packages at around 35% more than the minimum level required in year one of
their training.
We are also investing in training and learning & development programmes
across all areas and levels of the business so that we ensure Lookers is a
place where our people can grow their skills during their career.
We remain focused on driving great customer outcomes through our regulated
activities and we continued to invest in new systems, controls, and processes
to ensure we have strong regulatory compliance. We have seen an improvement in
our customer review ratings showing tangible reputational gains with our
customers. I am also delighted that Robin Churchouse took up the position as
Chair of the Board of our FCA regulated entity, Lookers Motor Group Limited,
in September. Under his guidance, we will continue to make significant
progress in this field.
We encourage our colleagues to volunteer in our communities and support this
by offering all employees paid volunteering days. During the year the Group's
flagship charitable initiative was a 400-mile cycle challenge from Birmingham
to Belfast, which raised almost £160,000.
While we are delighted with the progress we have made in 2022, we know that
there is still much to do in 2023 and we will continue to build a strong and
sustainable business that delivers value for all stakeholders. Next year, our
focus will be on continuing our progress on operational optimisation, and
further embedding technology and digitisation across the Group. We have also
introduced a formal strategy regarding the utilisation of our expansive
property portfolio which will principally focus on operational usage; we hope
that this will lead to further value generation for our stakeholders.
Shareholder returns
The Board is proposing a final dividend for 2022 of 2.0p per share (2021:
2.5p) to be paid in June 2023. This, combined with the interim dividend of
1.0p (2021: nil p) per share, brings the total dividend for the year to 3.0p
(2021: 2.5p). We will continue to operate under our progressive dividend
policy, underpinned by a capital structure aimed at providing long-term
sustainable returns to shareholders.
On 18 October 2022, we announced the commencement of a share buyback programme
of up to £15m. The Board concluded that repurchasing the Company's shares at
the current discount to our cash and property portfolio was an attractive
investment opportunity and the decision remains in line with our capital
allocation framework. The purpose of the Share Buyback Programme is to reduce
the capital of the Company and increase earnings per share. At the year end,
we have bought back 5.7m shares at an average of 78p per share at a total cost
of £4.5m.
The basic earnings per ordinary share increased by 20.6% to 18.87p (2021:
15.65p).
Board composition
In a year of significant progress for the business, we have taken further
steps to optimise the Board to ensure Lookers has the right mix of skills and
experience.
On 1 September 2022, Sue Farr, a highly experienced professional with
experience in marketing, branding and consumer issues, joined as a
Non-Executive Director and chair of the Remuneration Committee, as well as
joining the Audit and Risk and Nomination Committees. Sue is also now the
Interim Senior Independent Director.
Robin Churchouse was appointed Chair of the Board of Lookers Motor Group
Limited, the Group's FCA regulated entity on 13 September 2022.
On 31 December 2022, Ian Bull stepped down from his role of Independent
Non-Executive Chair. Ian was instrumental in helping us develop and implement
our strategic priorities.
On 31 December 2022, Victoria Mitchell and Deborah Sherry stepped down from
the Board. The Board thanks them both for their valuable contributions to
Lookers and wishes them the best for the future.
Outlook
The Company continues to make rapid progress in the delivery of its strategic
priorities and the hard work that has already been completed leaves the
business in a position of strength.
We are optimistic and excited for the future with a robust order bank, and
encouraging early trading results in Q1 2023.
Against this backdrop, we are confident in the future success of Lookers, but
we must be mindful of the impact of upward inflationary pressures and interest
rate rises on both consumer confidence and the Group's operating costs.
The war in Ukraine continues to be deeply concerning and the new car supply
challenges are only just beginning to ease after 12 months of serious
disruption. Taken together, this means there is a degree of uncertainty for
the business and our customers in the coming months.
Lookers has strong relationships with its manufacturers and the past 12 months
has seen the business undergo an extensive improvement programme to its
operations meaning the business is in a strong position despite the concerns
raised by the macroeconomic backdrop.
To conclude, the Group has a strong balance sheet, supported by £290.5m of
property assets and robust cash flows which will enable further execution of
the strategy that will support the Group as it navigates the current
challenges, drives future expansion and delivers value for all our
stakeholders. I would like to thank our colleagues, OEM brand partners,
suppliers, and banking club for their support and collaboration throughout
2022.
Paul Van der Burgh
Interim Non-Executive Chair
Operating review
Market overview
New vehicle sales
In 2022 there were 1.9m (2021: 2.0m) new car and van registrations, which was
a 5.3% decrease against the prior year; this was 0.8m registrations behind
2019, being the most recent comparative year prior to the market disruption
caused by COVID-19. When looked at in isolation the new car market (retail and
fleet) fell by 2.0%; this compares to the Group's equivalent volumes
decreasing by 1.1%, meaning that we have outperformed the market by 0.9
percentage points.
Supply challenges remained during 2022 due to continued semiconductor
shortages and a lack of logistics resource. This meant that manufacturers
prioritised the more profitable retail channel which then impacted supply in
the motability, fleet, leasing, and rental channels. New vehicle supply
improved slightly in H2 2022 and we remain cautiously optimistic in terms of
improved supply for 2023. The latest market outlook is forecasting 2.1m new
car and van registrations in 2023, compared to 1.9m in 2022.
New car retail performance was relatively consistent with the market as the
Group saw a 1.5% increase in volume. Despite new fleet volumes declining by
4.1% the Group outperformed the market by 1.7 percentage points. Overall, the
Group achieved a new car market share of 4.3% which is consistent with the
prior year.
Across the market, Battery Electric Vehicles (BEVs) accounted for 16.6% of new
car registrations, a 5.0 percentage point increase against 2021. In 2022
Lookers sold 70,116 new retail and fleet units of which 19.8% were BEVs. The
additional volume of electric vehicles is attributed to the key strategic
partnerships the Group has developed to help support the customer proposition
as they look to transition away from petrol and diesel.
The sale of diesel powertrains continued to decline with market share reducing
by 4.6 percentage points when compared to 2021. Petrol powertrains retain the
largest portion of the market share at 55.9%, although this is down by 2.4
percentage points year on year. Fleet accounted for 67.7% of all BEV
registrations due to favourable benefit in kind tax rates for company car
drivers and the ESG initiatives of many companies.
The Group recently announced its appointment as official retailer for two new
Chinese Electric Vehicle (EV) entrants to the UK market, being Great Wall
Motors under the ORA brand, and Build Your Dreams (BYD). ORA launched the
"Funky Cat" in Q4 and BYD will commence trading in Q2 2023. This is further to
the important additions of Lotus and MG as brand partners.
The Group is optimistic going into 2023 and carries with it a strong vehicle
order bank across both retail (17,321) and fleet (23,393) channels.
Looking to the future, we are excited to continue to work with our existing
OEM brand partners, and we look forward to welcoming new partners to the
Group. We also remain committed to traditional franchise operating models and
equally we will embrace new models. Mercedes-Benz introduced agency in January
2023, an operating model that creates new commercial opportunities and ways of
working that we look forward to developing throughout 2023.
Used vehicle sales
The volume of used vehicle sales declined by 4.9% in 2022 compared to the
prior year, however we outperformed the market which saw a decline of 8.5%
(7.5m in 2021 to 6.9m in 2022). The used vehicle market continues to be
dominated by petrol and diesel vehicles which accounted for 95.7% of
transactions in 2022.
The Group saw a sharper decline in used vehicle sales in H1 2022 of 8.3% due
to ongoing supply issues for new vehicles; in H2 performance recovered and was
broadly flat when compared to the prior year.
Despite a challenging macroeconomic outlook the Group expects strong margins
on used vehicle sales to continue into 2023, and that a slight softening of
consumer demand will be countered by the continuation of a limited supply of
vehicles in the market.
Aftersales
Overall aftersales revenues were ahead of 2021 by 6.8% which was pleasing
despite a reduction in new and used vehicle sales impacting internal
aftersales revenues. This was driven in the main by increased parts sales
through our trade parts centres and an increase in cosmetic repair revenues.
During 2022 the Group has focused on improving performance of retention
product sales (used warranty and service plan), and has worked hard to improve
employee retention through a blend of enhancements to remuneration packages
and investment in tooling.
In line with the strategic priorities the Group has expanded its cosmetic
repair capabilities, preventing leakage of work to third parties and building
a service to be offered to other motor retailers and service centres. At the
end of 2022 we had established 29 fixed cosmetic repair facilities and have 20
mobile cosmetic repair vans on the road. In 2023 the Group plans to introduce
a further 20 cosmetic repair facilities supported by an additional 10 vans.
Leasing
During 2022 we have continued to consolidate our Leasing businesses under our
Lookers Vehicle solutions umbrella. Our contract hire, and vehicle rental
businesses have been adversely impacted by both the lack of vehicle supply in
2022 resulting in a 7.5% reduction in revenue, as well as the increased cost
of financing on the back of interest rate rises.
Operations summary
Total revenue for the year was £4,300.9m (2021: £4,050.7m), which was 6.2%
higher than 2021. All revenue streams, apart from leasing and other,
increased. This was despite a 5.8% overall reduction in new and used vehicle
volumes sold. The revenue increase is attributable to three main factors
being: 1) the average selling price of a new vehicle increasing by 12.9%
compared to 2021; 2) the supply to the new retail sales channel being
prioritised by OEMs in 2022; and 3) the Group increasing its used vehicle
finance penetration performance.
Analysis of revenue
Revenue 2022 £m 2021 £m Variance 2022 LFL £m 2021 LFL £m LFL Variance
New vehicles 1,965.5 1,866.2 5.3% 1,955.1 1,852.2 5.6%
Used vehicles 2,255.2 2,038.7 10.6% 2,240.6 2,018.7 11.0%
Aftersales 458.4 429.2 6.8% 444.9 406.5 9.4%
Leasing and other 126.6 136.9 (7.5%) 126.6 136.8 (7.5%)
Less: intercompany (504.8) (420.3) (498.1) (411.3)
Total 4,300.9 4,050.7 6.2% 4,269.1 4,002.9 6.7%
Analysis of gross profit
Gross profit 2022 £m 2021 £m Variance 2022 LFL £m 2021 LFL £m LFL Variance
New vehicles 163.6 131.3 24.6% 163.1 128.2 27.2%
Used vehicles 170.1 180.3 (5.7%) 168.8 178.6 (5.5%)
Aftersales 192.7 182.2 5.8% 189.9 176.2 7.8%
Leasing and other 23.8 22.8 4.4% 23.8 22.8 4.4%
Total 550.2 516.6 6.5% 545.6 505.8 7.9%
Gross margin % 12.8% 12.8% 12.8% 12.6%
Gross profit increased by £33.6m to £550.2m (2021: £516.6m), with gross
margin percentage consistent with the prior year at 12.8%. Of the total gross
profit increase, £32.3m is attributable to new vehicles where consumer demand
continued to exceed supply levels, which in turn has allowed the group to
focus on minimising the levels of discount offered. The historic impact of
COVID-19 and the contraction within the new car market over recent years has
continued to impact on our ability to source used vehicle stock. As a direct
consequence used volumes reduced by 4.9%, however margins per unit remained
strong.
New vehicles
2022 2021 Variance 2022 LFL 2021 LFL LFL Variance
Car retail unit sales 38,750 38,187 1.5% 38,503 37,731 2.0%
Car fleet unit sales 30,916 32,230 (4.1%) 30,842 32,171 (4.1%)
Total car unit sales 69,666 70,417 (1.1%) 69,345 69,902 (0.8%)
Motorbike retail 450 470 (4.3%) 450 470 (4.3%)
Commercial vehicles 13,830 19,080 (27.5%) 13,830 19,080 (27.5%)
Total unit sales 83,946 89,967 (6.7%) 83,625 89,452 (6.5%)
Gross margin % 8.3% 7.0% 8.3% 6.9%
Finance penetration (retail) % 74.5% 78.0%
The sale of new vehicles represented 29.7% (2021: 25.4%) of total gross
profit.
The new vehicle market in H1 was down by 14.1% year on year; however, there
were some encouraging signs in H2 as new vehicle supply constraints showed
indications of easing, as the market grew by 5.4% when compared to the same
period in 2021. The combination of limited vehicle supply and continued strong
consumer demand across the full year allowed the business to exercise strong
control over both retail and fleet trading terms whilst exercising discount
control. This resulted in new vehicle margins improving by 1.3 percentage
points to 8.3%.
The increase in gross margin percentage also included the impact of growth in
finance and supplementary products, and the continued simplification of our
sales process and customer product offerings, whilst still ensuring regulatory
compliance.
In 2022 the OEMs continued to prioritise supply to the more profitable retail
channel which resulted in an overall volume reduction within both our fleet
and commercial vehicle sales activities. The reduction in our commercial
vehicle sales is primarily attributable to OEMs restricting new vehicle supply
to the vehicle rental market.
Used vehicles
2022 2021 Variance 2022 LFL 2021 LFL LFL Variance
Retail unit sales 79,101 83,141 (4.9%) 78,549 82,324 (4.6%)
Gross margin % 7.5% 8.8% 7.5% 8.8%
Finance penetration % 50.5% 39.2%
The sale of used vehicles represented 30.9% (2021: 34.9%) of the total gross
profit. The Group's sales volumes have outperformed the market by 3.9
percentage points (like-for-like).
The shortage of supply in the new vehicle market continues to directly impact
used vehicle supply and has restricted our ability to source stock throughout
the year. Our outperformance of the market was driven by optimising basic
principles incorporating:
· Improved speed to market by driving down time taken to prepare
used vehicles to retail standards.
· Our Group-wide repatriation scheme which sees us retain as many
part exchange vehicles within the Group as possible.
· Improved used vehicle finance penetration.
· Retailing increased volumes of segment 2 & 3 vehicles.
· Enhanced online imagery through the use of new technology and
inclusion of video content.
Used vehicle margin per unit in 2022 was broadly flat with the prior year at
£2,151 (2021: £2,168). However, the gross margin was 1.3 percentage points
behind 2021 at 7.5% (2021: 8.8%), as costs increased more rapidly than sales
price. The business achieved exceptional margins in 2021, whereas in 2022 we
saw the market start to soften.
Aftersales
2022 2021 Variance 2022 LFL 2021 LFL LFL Variance
Revenue £m 458.4 429.2 6.8% 444.9 406.5 9.4%
Gross margin % 42.0% 42.5% 42.7% 43.3%
Aftersales represented 35.0% (2021: 35.3%) of total gross profit. On a
like-for-like basis aftersales revenues increased by 9.4% versus 2021.
Within aftersales, service labour sales increased by 6.2%, part sales
increased by 6.7%, and bodyshop sales, driven by the introduction of cosmetic
repair facilities and mobile vans, increased by 21.0%. Costs in the year
increased due to our investment in technicians, with gross margins down by 0.5
percentage points as a result.
The growth within service sales has been driven by a number of factors
including:
· Improved staff retention and increased productive headcount. This
has helped reduce customer lead times but there is still opportunity to
improve this further.
· During the year we commenced a project to consolidate and
simplify our customer contact strategy. This project is now delivering
improved customer conversion rates across both inbound and outbound enquiries.
· Simplified and improved our aftersales IT platforms which have
allowed us to focus on retention of older vehicles and improving our essential
maintenance work conversion rates.
· Continued to improve our customer propositions specific to both
service plans and the sales of extended warranties, both of which are now
contributing towards improved customer retention rates.
· Continued focus on simplifying the customer experience by further
digitalising the customer aftersales journey.
One of our key strategic objectives is to increase our aftersales revenues by
investing further to grow our cosmetic repair facilities, both mobile and
fixed. We have made this investment in order to undertake all cosmetic and
alloy wheel repairs internally, serve our customers needing cosmetic works
through insurance and aftersales, and to offer cosmetic repair services to
other local motor retail and service centres.
Leasing and other
2022 2021 Variance 2022 LFL 2021 LFL LFL Variance
Revenue £m 126.6 136.9 (7.5%) 126.6 136.8 (7.5%)
Gross margin % 18.8% 16.7% 18.8% 16.7%
The leasing and other segment represented 4.3% (2021: 4.4%) of total gross
profit.
Leasing and other revenue decreased by 7.5% to £126.6m in 2022. The fall in
revenue is due to supply constraints limiting access to new vehicles.
Contrary to the fall in revenue, gross profit increased by 4.4% to £23.8m.
Rental margins have improved significantly due to increased rental prices (at
lower volumes) combined with lower depreciation expenditure because of
increased vehicle residual value. Increased vehicle values also led to
improved margins on vehicle de-fleeting. Increases in the base rate in H2 saw
increased finance costs in the second half of the year, however the full
impact will not be seen until 2023.
Duncan McPhee
Chief Operating Officer
Financial review
The Group's income statement is set out in the table below. Profit before tax
in the year is reported as £84.4m (2021: £90.0m, including £9.8m of COVID
support). The key elements of this strong financial performance are contained
within the operating review of the report.
2022 2021
£m £m
Revenue 4,300.9 4,050.7
Cost of sales (3,750.7) (3,534.1)
Gross profit 550.2 516.6
Net operating expenses (441.3) (402.5)
Operating profit 108.9 114.1
Underlying operating profit* 107.2 114.2
Non-underlying items* 1.7 (0.1)
Finance costs (24.5) (24.1)
Profit before taxation 84.4 90.0
*Alternative performance measures - see Note 12
Operating expenses
Net operating expenses, which include central administrative and operating
costs, have increased by £38.8m in 2022. However, £9.8m of rates reductions
were received in 2021 under the business rates holiday scheme. The remaining
increase was the result of the Group facing significant cost pressures
including staff costs, utilities, and maintenance costs. The increase in staff
costs represents the Group's commitment to its people following a review of
rewards and incentives during the year. The increasing cost of utilities
relates primarily to energy prices increasing significantly during the year
(the rates reductions net off in the comparative line item in the table). The
increased maintenance costs stem from our focus of ensuring the property
portfolio is well maintained following a period of post COVID-19 cost
consolidation for the Group.
2022 2021
£m £m
Staff costs 241.6 227.8
Vehicle and valeting costs 45.1 43.4
IT 18.7 19.3
Insurance, legal and professional 15.6 13.3
Utilities and maintenance 48.7 30.4
Depreciation and amortisation 35.6 34.9
Other 37.7 33.3
Net operating expenses before non-underlying items 443.0 402.4
Non-underlying items:
Gain on sale and leaseback and property disposals (7.7) (2.4)
Sales transformation 2.1 -
Other 3.9 2.5
Net operating expenses 441.3 402.5
Non-underlying items
Non-underlying items are items that are not incurred in the core operations of
the business and are sufficiently significant and/or irregular to impact the
underlying trends in the business. During the year the Group has recognised a
net credit of £1.7m of pre-tax non-underlying items against a charge of
£0.1m in 2021. The Group recorded net gains of £7.7m (2021: £2.4m) on the
sale of a number of properties during the current year, with the largest being
the sale and leaseback of a freehold dealership property in Battersea, London.
The significant associated cash inflow from the sale and leaseback is already
being reinvested, with £2.1m of non-underlying expenditure on the sales
transformation project. In addition, the current year credit includes non-cash
net impairments (principally property, plant & equipment and right of use
assets) amounting to £0.9m (2021: £1.9m), as well as restructuring costs
totalling £3.0m (2021: £0.6m).
Cash flow (reconciliation to net funds)
2022 2021
£m
£m
Profit for the year before tax 84.4 90.0
Depreciation and amortisation 54.6 53.9
Other non-cash items (4.0) 2.8
Contribution to defined benefit pension scheme (14.5) (13.2)
Rental fleet and leasing purchases (75.7) (58.9)
Working capital changes 32.1 6.3
Tax paid (19.8) (16.3)
Cash inflow from operating activities 57.1 64.6
Capital expenditure (19.3) (17.4)
Finance lease rentals collected 1.5 2.9
Business and property disposals 32.9 11.8
Net investing activities 15.1 (2.7)
Funding movements for vehicle leasing 29.5 (3.8)
Payment of loan arrangement fees (1.1) -
Repayment of lease liabilities (16.3) (16.4)
Returns to shareholders (18.3) -
Net financing activities (6.2) (20.2)
Non-cash movement in prepaid finance costs (2.5) 2.0
Total movement in net funds 63.5 43.7
Net funds/(debt) at 1 January 3.0 (40.7)
Net funds at 31 December 66.5 3.0
The Group continued to generate cash inflows from operations during the
financial year following another pleasing trading performance. Net funds
(excluding lease liabilities, vehicle rental liabilities and stocking loans)
at 31 December 2022 were £66.5m (2021: £3.0m). The Group remains committed
to controlling working capital tightly, which alongside capital expenditure
remaining at comfortable levels during the year, and the cash inflow of
£28.0m from the sale and leaseback of the freehold dealership property in
Battersea, has resulted in an increase in net funds. Inventory levels actually
increased by £152.7m, however the impact on working capital was offset by an
increase in consignment vehicle creditors of £150.4m. At the balance sheet
date stocking loans totalled £247.2m (2021: £248.1m), equivalent to 79.4% of
goods for resale (2021: 79.9%). The cash inflow relating to vehicle leasing is
the result of a net increase in funding sourced in the year for vehicles
leased out by the Group.
Total capital expenditure during the year amounted to £71.9m, of which
£52.8m relates to vehicles purchased for long-term leasing, £15.7m relates
to improvements to our property portfolio and new equipment, £2.3m investment
in IT development, and £1.1m on own-use vehicles. As the Group continues to
work towards achieving its strategic priorities, capital expenditure will be
focussed on the rollout of our cosmetic repair centres, the development of the
Group's first supercentre (Lookers Car Hub), the continued development of our
IT infrastructure, and the continuous improvement to our property portfolio
which is critical to maintaining our position of strength in the market.
Additionally, the Group showed its commitment to delivering returns to
shareholders with £18.2m (£18.3m in the reconciliation to net funds includes
commission, PTM levy, and stamp duty) distributed in the form of dividends and
a share buyback programme (further details provided below).
Bank funding
The Board remains focussed on maintaining the Group's liquidity, whilst
retaining flexibility to implement strategic priorities. The Group's revolving
credit facility (RCF) was undrawn as at 31 December 2022, leaving the Group
ideally placed to utilise the available capital when the appropriate
opportunities arise. As at 31 December 2022 the Group had net funds of £66.5m
(2021: £3.0m). This increase has been delivered through the continuation of
the Group's exceptional trading performance, working capital focus, and
pragmatic approach to capital allocation.
In June 2022, the Group was pleased to renegotiate and extend its RCF,
including a refreshment of our banking club (The Bank of Ireland, HSBC,
NatWest, and ABN Amro). The updated RCF provides £100.0m of credit with the
agreement running until at least 30 September 2025. The new facility offers
improved interest rates which are now charged at a margin of 2.5% (above
SONIA) (2021: margin between 3.25% and 3.75% (above SONIA)). The facility is
subject to less stringent quarterly covenant tests on leverage and interest
cover, which is representative of the Group's much improved financial position
and outlook.
We would like to take this opportunity to thank our banking club for all their
support throughout 2022.
Taxation
The Group's taxation charge for the year is £10.5m (2021: £28.8m), which is
a composite of a current year corporation tax charge of £16.6m (2021:
£12.2m) and a deferred tax credit of £6.1m (2021: deferred tax charge of
£16.6m). The overall reduction in taxation charge is driven by the reflection
of the rise in substantially enacted future UK tax rates 19% to 25% in 2021.
This increased the prior year taxation charge by £16.9m. The current year
effective rate (12.4%) is lower than the standard rate of corporation tax
(19%) due to adjustments in respect of prior years, which result from the
finalisation of prior year tax positions during the year.
Pension schemes
The Group has two defined benefit pension schemes, the Lookers Pension Plan
and the Benfield Motors Group Pension Plan. Both schemes are closed to entry
for new members and closed to future accrual.
The Lookers Pension Plan received deficit contributions of £12.9m in 2022,
plus expenses and PPF Levy of £1.3m. The deficit contributions are subject to
increases linked to CPI, which will result in a £13.6m contribution in 2023
(plus expenses and PPF levy). Further, the Group pays additional contributions
of 10p for every £1 of returns to shareholders (ordinary dividends and share
buyback) in excess of £5.0m. This will result in an additional payment being
made in May 2023 relating to 2022 financial year. The triennial valuation date
was 31 March 2022, with the deadline for agreement being 15 months after the
valuation date. The Trustee of the Lookers Pension Plan and the Group are in
the process of agreeing the triennial review valuation prior to the deadline,
including the preferred funding strategy.
The Group's most recent triennial valuation of the Benfield Pension Plan as at
31 December 2019 was concluded in February 2021, with the agreed annual
deficit contributions of £0.3m plus expenses and PPF levy being paid by the
Group during 2022. The next triennial review has now commenced for the
valuation date of 31 December 2022.
At 31 December 2022, the aggregate IAS19 pension deficit is £23.5m (2021:
£43.2m). The year-on-year decrease arises due to the continued deficit
contributions made by the Group and significantly increased discount rate
assumptions, which have been driven by increased corporate bond yields. The
increase in discount rates has not been offset by increases in inflation,
rather the inflation assumption has decreased year on year. The extreme
volatility in the long-dated gilt markets following the Government's
"mini-budget" in September 2022 resulted in some pension schemes suffering
liquidity shortfalls; however, neither of the Lookers defined benefit pension
schemes was materially affected, as a reasonable collateral buffer had been
maintained.
Relatively small changes in the basis of valuation can have a significant
effect on the calculated deficit, hence the movement in the calculated deficit
can be subject to high levels of volatility.
Capital allocation policy
Capital allocation is a critical consideration when the Board is making
decisions. This remains a priority as we believe that the Group needs to
continue to invest in the business to grow revenues and profit. This
investment is expected to include capital expenditure within existing
operations and the capital expenditure required to pursue the strategic
priorities of the Group. The Group aims to maintain a strong balance sheet
with low levels of gearing, with long-term debt utilised to ensure the
business can withstand the cyclical nature of the retail sector. The Group's
objective is to maximise long-term shareholder returns through the disciplined
deployment of cash generated, and it continues to adopt the following capital
allocation policy:
Capital expenditure
The Board will continue to invest in capital assets to support operations in
our chosen markets. Capital expenditure will include maintenance capital
expenditure in the range of £10.0m to £15.0m per annum (excluding OEM brand
partner requirements for refurbishments and EV capital expenditure). During
the year the Group has invested in capital expenditure to begin the
implementation of our strategic priorities such as the cosmetic repairs
business in aftersales, and the development of our IT infrastructure.
Leverage
The Board is committed to maintaining an efficient balance sheet. To support
this, the Group will target net debt in the range of +/- 0.5 times EBITDA
depending on working capital requirements throughout the year (although it is
prepared to operate outside this if circumstances warrant). At 31 December
2022 the net debt was - 0.41 times EBITDA, and therefore within the target
range.
Shareholder returns
The Board will continue to review the Group's balance sheet in light of the
capital allocation policy, and medium-term investment requirements, and will
return excess capital to shareholders if and when appropriate.
The Board intends to pay a regular dividend to shareholders, with a policy of
progressively growing dividends through the business cycle. A final dividend
relating to 2021 of 2.5 pence per share and an interim dividend relating to
2022 of 1.0 penny per share were paid in June 2022 and November 2022
respectively. The total dividend paid to shareholders during 2022 was £13.7m.
The Group commenced a share buyback programme of up to £15.0m in October
2022. As at 31 December 2022 the Group had purchased 5.7m shares at a cost of
£4.5m, equivalent to an average price of 78p per share.
Property strategy
During 2022 the Group has developed a strategy on how its substantial property
portfolio can be utilised to generate the maximum return for our shareholders.
The vision is for the Group property portfolio to be strategically asset
managed, with properties being fully utilised, primarily to facilitate Group
operations, and secondly to provide complementary revenue streams. A holistic
view of the portfolio is taken, consolidating assets where appropriate and
identifying the Group's key locations and locations for growth, enabling
strategic acquisitions and disposals when market conditions prevail.
Properties shall be compliant, meeting the required regulatory, and health and
safety requirements, whilst also providing operational teams with facilities
which support the Group's strategy. Properties shall be well maintained
providing a high-quality environment for employees and customers, whilst also
being energy efficient and sustainable, supporting the Group's Net Zero
strategy.
Dividends
The Board has adopted a progressive Dividend Policy. The Board is pleased to
be proposing a final dividend of 2.0 pence per share (2021: 2.5 pence per
share). This dividend will be paid on 16 June 2023 to shareholders on the
register at close of business on 10 May 2023. The Board intends to maintain a
capital structure that is conservative, yet efficient in terms of providing
long-term sustainable returns to shareholders.
*Alternative performance measures
The Group uses a number of alternative performance measures (APMs) which are
non-IFRS (International Financial Reporting Standards) measures in
establishing its financial performance. The Group believes the APMs provide
useful, historical financial information to assist investors and other
stakeholders to evaluate the performance of the business and are measures
commonly used by certain investors for evaluating the performance of the
Group. APMs should be considered in addition to IFRS measures and are not
intended to be a substitute for IFRS measurements. More details of the APMs
and a reconciliation of the IFRS measures used in the Annual Report &
Accounts to those APMs used for KPI monitoring are included in Note 12 to the
Financial Statements.
Oliver Laird
Chief Financial Officer
Risk overview and management
Enterprise risk management framework
As part of the normal course of business the Group is exposed to a wide range
of risks, both internal and external. The identification and management of
those risks is integral to achieving our strategic priorities which rely on
our ability to identify and control those things that can hurt us and exploit
opportunities that arise, both within our business and the wider market.
Management identify risks and assess the effectiveness of our control
environment on an ongoing basis through robust risk management processes and
reporting.
To assist, we have an established Enterprise Risk Management Framework (ERMF).
It is designed to deliver a common language that helps us define and
categorise the risks that we face. It sets the high-level principles and
underpinning minimum requirements for the identification, assessment,
management and monitoring of each of those risk categories in line with
Lookers' defined risk appetite.
The Risk Management Framework Policy is reviewed annually. This 2022 Annual
Report sets out how we categorise our risks. The risks are set in a hierarchy
with 6 Level 1 risks that are then sub-divided into an additional 16 Level 2
risks. For example, Operational Risk is a level 1 risk, and it has a further
12 Level 2 risks beneath it, including, inter alia, Health & Safety,
Information Technology, and Business Continuity. This enables us to record our
risks at a more granular level that can be aggregated to an Enterprise view of
the risk profile. Each of these Level 1 risks and the Level 2 risks has their
own risk policy that we use to define what they mean to us, set our appetite
for that particular risk, and help the business understand how we expect the
risk to be managed and reported on.
Day to day management of risk
The Board expects the management team to own the risk management process,
identify emerging risks, maintain ongoing dialogue with the business and our
other stakeholders, provide management information to the Executive Committee
and the Board, and provide updates on developments in the automotive sector
and wider economy.
Three lines of defence
Lookers applies a "three lines of defence" governance model across the Group.
The principal aim of this model is to ensure that Lookers exercises ownership
of risk in the first line business functions, and independent oversight and
challenge of those risks and their management by its second line departments
(Risk and Compliance). Internal Audit (the third line) are in place to provide
independent assurance to the Board of the effectiveness of our controls. In
summary the accountabilities between lines are split as follows:
· The first line of defence - Line management and the wider
business own the risks and are responsible for the identification, assessment,
management, and reporting of those risks
· The second line of defence - Risk and Compliance operate
independently of the first line. They do not own the risk but instead
independently oversee, advise, and challenge the first line activity
· The third line of defence - Internal Audit provide independent
assurance to the Board on the effectiveness of our controls
In addition to these three internal lines of defence, our external auditors
play an important role through their consideration of the governance and
control structure where this is relevant to financial reporting.
Risk appetite framework
Our risk appetite framework defines the level of risk we are willing to take
across the Lookers Level 1 Risk categories. This allows us to track mitigating
action when our tolerance metrics suggest that we are moving away from where
we want to be. Aligned to our strategic planning, risk appetite is key for our
decision-making process, including ongoing business planning, new product
approvals and business change initiatives.
In setting the risk appetite, the Board outlines the "tone from the top" and
provides a basis for ongoing dialogue between management and Board with
respect to our current and evolving risk profile, allowing strategic and
financial decisions to be made on an informed basis. Lookers' risk appetite
for its Level 1 Risks in 2022 was as follows:
· Strategic Risk: we had appetite to accept risks in pursuing our
strategic aims, but implemented controls to minimise the risks around planning
and implementation, whilst looking to achieve our strategy without threatening
our financial strength and sustainability. In doing so we continuously
monitored and reacted to risks associated with our OEM and supplier
relationships, competition and product/service developments, and broader
economic developments.
· Financial Risk: we had no appetite for risks relating to
financial control, including financial reporting, funding and liquidity
management, banking undertakings and covenants, financial forecasting and
planning, general financial control, and tax compliance. We maintained robust
controls across these areas, with no appetite for activities being undertaken
outside of this control. We will only take financial risks to deliver our
strategy and generate returns when suitably assessed, governed and controlled.
· Regulatory Risk: we had no appetite for knowingly breaching or
failing to adhere to regulatory rules and standards for all our regulators,
this includes the Listing Obligations. We operated robust internal processes
to ensure that all regulatory expectations were met, whilst maintaining an
open and transparent dialogue with all our regulators. We were proactive and
performed horizon scanning to react to changing regulation.
· Conduct Risk: we have no appetite for knowingly behaving
inappropriately in ways that could result in adverse outcomes for our retail
customers. Where unintended adverse outcomes arose, we rectified these fairly
and promptly, ensuring that the customer was no worse off.
· Financial Crime Risk: we managed our financial crime risks in a
controlled manner, reducing our risk exposure to all aspects of financial
crime, which in turn reduced our net risk exposure to an extreme financial, or
other, impact (equivalent of a rare probability). We have no appetite to
knowingly breach financial crime regulatory guidance or requirements.
· Operational Risk: we accept that, as a part of our day-to-day
activity, operational risk will crystallise but we sought to reduce it to a
net exposure equivalent of a rare probability of a critical impact. We
prioritised the management of our most material operational risks through a
robust and proportionate level of control. We focused our monitoring and
analysis on the key categories of: Information Technology; Information
Security & Cyber; Third Party and Operational Resilience; Change
Management; People; Health & Safety; and general operational risk.
The Board keeps the Group's risk appetite under periodic review in light of
changing market conditions and the Group's performance and strategic focus.
Financial reporting
The Executive Directors oversee the preparation of the Group's annual
corporate plan; the Board reviews and approves it and monitors actual
performance against it on a monthly basis.
We also produce, and the Board reviews and approves, a three year plan and
updates to the annual corporate plan. To ensure that information consolidated
into the Group's financial statements is in compliance with relevant
accounting standards and the Group's own accounting policies, internal
reporting data is reviewed regularly.
The Audit and Risk Committee (ARC) reviews the appropriateness of the Group's
accounting policies each reporting period, the application of IFRS, and the
reliability of the Group's system of control over financial reporting. The ARC
considers reports from the Executive Committee, Internal Audit, the Risk and
Compliance teams, and the Group's external auditor.
The drive to improve the Group's financial reporting controls has continued
through 2022 with oversight from the ARC. Work will continue to further
enhance those controls and ensure that the Group's financial reporting
presents a true and fair reflection of the Group's financial performance and
position.
Overview of the risks and uncertainties
Whilst demand and performance remained strong over the reporting period, we
continue to be mindful of potential headwinds as we pursue our strategic
objectives in FY23.
The upward inflationary pressure, and in particular a significant rise in
energy costs, has the potential to impact consumer confidence and the Group's
operating costs.
In addition, the strain on supply chains continues with a particular impact on
new car and parts supply as a result of the semiconductor shortage, the
conflict in Ukraine, and COVID restrictions in China. These disruptions to
supply have also seen an impact on used car valuations which will have to be
closely managed across the year.
More information on these risks and their impact on the Group will be included
in the 2022 Annual Report.
Directors' responsibilities statement
The Directors confirm to the best of their knowledge:
· The Financial Statements have been prepared in accordance with
the applicable set of accounting standards and Article 4 of the IAS Regulation
and give a true and fair view of the assets, liabilities, financial position
and profit and loss of the Group and Company.
· The Operating and Financial Review in this announcement includes
a fair review of the development and performance of the business and the
financial position of the Group, together with a description of the principal
risks and uncertainties that they face.
This responsibility statement was approved by the Board of Directors and is
signed on its behalf by:
Mark Raban
Chief Executive Officer
Basis of preparation
The financial information presented in this preliminary announcement is
extracted from, and is consistent with, the Group's audited financial
statements for the year ended 31 December 2022. The financial information set
out below does not constitute the Company's statutory financial statements for
the periods ended 31 December 2022 or 31 December 2021 but is derived from
those financial statements. Statutory financial statements for 2022 will be
delivered following the Company's annual general meeting. The auditors have
reported on those financial statements; their report was unqualified and did
not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The financial information in this announcement has been extracted from the
Group's Annual Report and Accounts for the year ended 31 December 2022 and is
prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and UK Adopted International
Accounting Standards. Whilst the financial information included in this
preliminary announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to comply with
IFRS and the financial information set out does not constitute the Company's
statutory accounts for the current or prior year.
Going concern
At the time of approving the Financial Statements, the Board of Directors is
required to formally assess that the business has adequate resources to
continue in operational existence for a period of at least 12 months from the
date of the approval of the 2022 financial statements and as such can adopt
the 'Going Concern' basis of accounting. The Group's Base Case financial model
has been subjected to sensitivity analysis, in which a number of the main
underlying assumptions have been adjusted and tested to consider several
'severe but plausible' downside scenarios which are detailed below.
Following this review, the Board has a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future and continues to adopt the going concern basis of
accounting in preparing the annual financial statements. The Board has reached
this conclusion based on the following considerations.
Key judgements and mitigating actions
In assessing whether the Group is a going concern the Board have considered
the potential impact on future revenues, profits, and cashflows of worsening
macroeconomic conditions reducing consumer demand alongside rising inflation
and interest rates, a supply shortage of vehicle components (e.g.
semiconductors), a potential steep decline in gross profit margins, and the
impact of a targeted cyber-attack.
In forming their conclusions, the Board have also considered potential
mitigating actions the Group could take to preserve liquidity and ensure
compliance with the Group's financial covenants. In doing so, judgement has
been applied in determining whether such actions would be plausible to execute
as well as the financial impact of taking such actions. In terms of mitigating
actions, the Board would take immediate decisive actions should the need
arise.
Modelling potential downside scenarios
In their consideration of the going concern of the Group, the Board have
reviewed the future profit forecasts and cash projections, and debt and other
key financial ratios over the period including compliance with existing
covenant arrangements. These metrics are subject to sensitivity analysis, in
which a number of the main underlying assumptions are adjusted and tested to
consider alternative risk-based scenarios.
As detailed in the Risk Overview and Management section, the Group identifies
risks on an ongoing basis through a robust risk management process. We have
stress tested our detailed plan, considering several severe but plausible
scenarios which are aligned to the Group's risk appetite and principal risks.
The Board has also considered compliance with covenants associated with the
Group's banking facility, which runs until 30 September 2025.
The Board have used their experience to model four different downside
scenarios to ascertain the Group's ability to continue as a going concern. The
scenarios modelled are as follows:
Macroeconomic - As the economy recovers from the COVID-19 pandemic the
domestic market has seen elevated inflation due to global supply issues and
other global events, such as the war in Ukraine, these factors may contribute
to a contraction in consumer demand. Management have modelled a potential
scenario whereby retail volumes fall by 2% compared to the Base Case and
continue to reduce by an additional 2% each year. This scenario assumed that
aftersales margins remain at the same levels achieved in FY22. All costs have
been increased by a further 2% compared to the Base Case and an additional
percentage point has been added to the Group's interest rate assumption.
Supply constraints - Management have modelled a volume reduction scenario,
where potential stock restrictions reduce Base Case new (including agency),
fleet, and motability volumes by 50% between February and September 2023,
gradually building back to Base Case levels by March 2024. In this scenario,
all non-variable direct and indirect expenditure has remained in line with
Base Case.
Margin reduction - This scenario models a decline in new, motability, and used
margins by 15% compared to the Base Case in FY23 and an additional 15% in
FY24. All costs have remained in line with Base Case.
Cyber security - The increasing sophistication and occurrence of cyber-attacks
could result in a significant disruption to the Group's business activities.
The final scenario modelled assumes that a cyber incident occurs significantly
reducing the Group's ability to trade, whilst retaining the existing cost
base.
Under all of the scenarios tested, the Group would not breach any of its
financial covenants and no additional financing is required.
Reverse stress testing
To provide additional assurance around the Group's going concern reverse
stress tests have been modelled. These reverse stress tests are designed to
breach financial covenants or exceed liquidity. We have looked at what point
we would breach each financial covenant and subsequently assessed the
likelihood of this occurring. The following scenarios have been run:
· Rise in interest rates required to breach interest cover;
· Increase in stock levels, and the associated financing, needed to
breach interest cover; and
· Reduction in EBITDA to breach interest cover.
For the Group to breach interest cover over the going concern period as a
direct consequence of rising interest rates an additional 5.2 percentage
points is required in order to generate an additional £21m interest charge
expenditure. Alternatively, if interest rates remain in line with the Base
Case, average stock levels would need to increase by c. £260m for interest
cover to be breached. In respect of EBITDA, a reduction of 55% is required to
breach Interest Cover, this equates to a 15% reduction in all retail and
aftersales volumes over a 12-month period.
In each of the reverse stress test scenarios, the Board believes the events
that would lead to a covenant breach are remote and that there is appropriate
headroom in each covenant and material headroom in liquidity to assess going
concern of the Group, before any material and demonstratable mitigating
actions would be required.
Financing
The Group's banking agreements and associated covenants are set out in the
Financial Review and include a £100.0m RCF (maturing in September 2025). The
Group ended the year with net funds of £66.5m (2021: £3.0m). The financial
covenants are tested quarterly in line with December year-end reporting. The
covenants throughout 2022 have been met with headroom to spare. In all of the
downside scenarios discussed above, the Group continues to forecast compliance
with all financial covenants for the next 12 months. In addition to the RCF,
the Group has stocking funding lines which were utilised at £247.2m at 31
December 2022 (2021: £248.1m).
Going concern
In all the scenarios, the Group has sufficient liquidity to continue trading,
including payment of dividends. The reverse stress test modelling demonstrated
that a prolonged period of volume and sales decline is required to breach
covenants, however we would maintain material liquidity headroom. If the Group
was at risk of breaching one or more of its financial covenants, management
would take mitigating actions, which include but are not limited to:
· Dealership closures and headcount reductions;
· A reduction in capital investment and pausing new strategic
initiatives;
· Reduction in stock levels to meet demand; and
· Suspension of dividends.
Considering the various sensitivities and additional stress testing, the Board
has concluded that preparing the accounts on a Going Concern basis is
appropriate.
Statement of Total Consolidated Comprehensive Income
For the year ended 31 December 2022 and 31 December 2021
Note 2022 2021
£m £m
Revenue 1 4,300.9 4,050.7
Cost of sales (3,750.7) (3,534.1)
Gross profit 550.2 516.6
Net operating expenses (441.3) (402.5)
Operating profit 108.9 114.1
Underlying operating profit 107.2 114.2
Non-underlying items 2 1.7 (0.1)
Finance costs 3 (24.5) (24.1)
Profit before taxation 84.4 90.0
Underlying profit before taxation 2 82.7 90.1
Non-underlying items 1.7 (0.1)
Tax charge 4 (10.5) (28.8)
Profit for the year (attributable to shareholders of the Company) 73.9 61.2
Exchange differences on translation of foreign operation (may be recycled to 0.8 (0.5)
profit and loss)
Actuarial gains on pension scheme obligations (not recycled to profit and 6.9 24.9
loss)
Deferred tax on pension scheme obligations (not recycled to profit and loss) (1.7) 0.4
Total other comprehensive income for the year 6.0 24.8
Total comprehensive income for the year (attributable to shareholders of the 79.9 86.0
Company)
Earnings per share:
Basic earnings per share (p) 6 18.87 15.65
Diluted earnings per share (p) 6 18.64 15.55
Consolidated Statement of Financial Position
As at 31 December 2022 and 31 December 2021
Note Group 2021
2022 £m
£m
Non-current assets
Goodwill 7 79.3 79.3
Intangible assets 8 105.2 107.9
Property, plant and equipment 9 404.4 399.3
Right of use assets 10 114.9 115.7
703.8 702.2
Current assets
Inventories 11 664.6 511.9
Trade and other receivables 125.4 108.5
Current tax receivable 8.8 5.6
Rental fleet vehicles 51.9 27.5
Cash and cash equivalents 111.8 103.9
Assets held for sale 2.6 5.0
965.1 762.4
Total assets 1,668.9 1,464.6
Current liabilities
Bank loans and overdrafts 45.3 83.6
Trade and other payables 905.9 729.6
Lease liabilities 22.3 20.7
973.5 833.9
Net current liabilities (8.4) (71.5)
Non-current liabilities
Bank loans - 17.3
Trade and other payables 74.3 35.1
Lease liabilities 120.7 116.1
Pension scheme obligations 23.5 43.2
Deferred tax liabilities 45.0 49.4
263.5 261.1
Total liabilities 1,237.0 1,095.0
Net assets 431.9 369.6
Shareholders' equity
Ordinary share capital 19.3 19.6
Share premium 78.4 78.4
Capital redemption reserve 15.4 15.1
Retained earnings 318.8 256.5
Total equity 431.9 369.6
Mark Raban
4 April 2023
Consolidated Statement of Changes in Equity
As at 1 January 2021, 31 December 2021 and 31 December 2022
Year ended 31 December 2021 Share capital Share premium Capital redemption reserve Retained earnings Total equity
£m £m £m £m £m
As at 1 January 2021 19.5 78.4 15.1 169.9 282.9
Profit for the year - - - 61.2 61.2
Total other comprehensive income for the year - - - 24.8 24.8
Total comprehensive income for the year - - - 86.0 86.0
New shares issued 0.1 - - - 0.1
Share based compensation - - - 0.6 0.6
As at 31 December 2021 19.6 78.4 15.1 256.5 369.6
Year ended 31 December 2022
As at 1 January 2022 19.6 78.4 15.1 256.5 369.6
Profit for the year - - - 73.9 73.9
Total other comprehensive income for the year - - - 6.0 6.0
Total comprehensive income for the year - - - 79.9 79.9
Share based compensation - - - 0.7 0.7
Own shares purchased for cancellation (0.3) - 0.3 (4.6) (4.6)
Dividends paid to shareholders - - - (13.7) (13.7)
As at 31 December 2022 19.3 78.4 15.4 318.8 431.9
Retained earnings include £16.5m (2021: £16.5m) of non-distributable
reserves relating to properties which had been revalued under UK GAAP, but
treated as deemed cost under IFRS.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022 and 31 December 2021
Note 2022 2021
£m £m
Cash flows from operating activities
Profit for the year 73.9 61.2
Tax charge 4 10.5 28.8
Depreciation of property, plant and equipment, rental fleet and right of use 49.9 48.9
assets
Gain on disposal of property, plant and equipment (6.4) (2.4)
Gain on disposal of leases (1.9) -
Gain on modification of leases (0.1) -
Gain on disposal of right of use asset associated with rental fleet assets (0.4) (0.4)
Amortisation of intangible assets 8 4.7 5.0
Loss on disposal of intangibles 0.3 -
Share-based compensation 0.7 0.6
(Impairment reversal)/impairment of property, plant and equipment (0.2) 0.7
Impairment of right of use assets 10 1.1 1.2
Finance costs excluding pension related finance costs and debt issue costs 3 22.7 22.1
Amortisation of debt issue costs 3 1.2 1.1
Difference between pension charge and cash contributions (12.8) (11.2)
Purchase of rental fleet vehicles (22.6) (23.6)
Purchase of right of use assets associated with rental fleet assets (0.3) (0.4)
Purchase of vehicles for long-term leasing (52.8) (34.9)
Changes in inventories (139.7) 183.5
Changes in receivables (14.1) 11.7
Changes in payables 185.9 (188.9)
Cash generated from operations 99.6 103.0
Finance costs paid (16.5) (16.1)
Finance costs paid - lease liabilities (6.2) (6.0)
Tax paid (19.8) (16.3)
Net cash inflow from operating activities 57.1 64.6
Cash flows from investing activities
Purchase of property, plant and equipment and own use vehicles (16.8) (14.1)
Purchase of intangibles (2.3) (3.3)
Amounts paid to surrender leases (0.2) -
Finance lease rentals collected 1.5 2.9
Proceeds from disposal of property, plant and equipment 32.9 11.8
Net cash inflow/(outflow) from investing activities 15.1 (2.7)
Cash flows from financing activities
Receipt of funding advanced for vehicle leasing arrangements 75.4 58.5
Repayment of funding advanced for vehicle leasing arrangements (45.9) (62.3)
Payment of loan arrangement fees (1.1) -
Repayment of loans (8.3) (1.2)
Drawdown on revolving credit facility - 35.1
Repayment on revolving credit facility (12.5) (181.5)
Repayment of lease liabilities (16.3) (16.4)
Purchase of own shares (4.6) -
Dividends paid (13.7) -
Net cash outflow from financing activities (27.0) (167.8)
Increase/(decrease) in cash and cash equivalents 45.2 (105.9)
Cash and cash equivalents at 1 January 21.3 127.2
Cash and cash equivalents at 31 December 66.5 21.3
Analysis of cash and cash equivalents
Cash and cash equivalents 111.8 103.9
Bank overdraft (45.3) (82.6)
Cash and cash equivalents at 31 December 66.5 21.3
Notes to the financial information
For the year ended 31 December 2022
1. Segmental reporting
The Group presents segmental information to better reflect the Group's revenue
streams and the single-segment trading nature of the business' operations. No
further disclosures have been made given the single-segment trading nature of
the business' operations which are predominantly transacted in the United
Kingdom. All channels have been shown as gross totals prior to the elimination
of intercompany trading activity so as to provide more granular detail around
the Group's internal trading activities.
2022 Mix* 2021 Mix*
£m £m
New cars 1,965.5 40.9% 1,866.2 41.7%
Used cars 2,255.2 46.9% 2,038.7 45.6%
Aftersales 458.4 9.6% 429.2 9.6%
Leasing and other 126.6 2.6% 136.9 3.1%
Less: intercompany (504.8) - (420.3) -
Revenue 4,300.9 100% 4,050.7 100%
*Mix calculation excludes the effect of intercompany revenues.
2. Non-underlying items
The following details items of income and expenditure that the Group has
classified as non-underlying in its statement of total comprehensive income.
2022 2021
£m £m
Non-underlying items at operating profit
1 - Gain on sale and leaseback 6.0 -
2 - Gain on property disposals 1.7 2.4
3 - Impairment of property, plant and equipment (1.8) (0.7)
3 - Impairment of right of use assets (1.1) (1.2)
3 - Other property exit and restructuring costs (3.0) (0.6)
4 - Impairment reversal of property, plant and equipment 2.0 -
5 - Sales transformation project (2.1) -
Non-underlying items at operating profit 1.7 (0.1)
1 - In March 2022 the Group completed the sale and leaseback of the VW
dealership in Battersea. The net gain on sale has been deemed non-underlying
by its size and nature.
2 - Property disposals relate to the net gains on the sale of a number of
freehold and leasehold properties during the current and prior year. These
items have been deemed non-underlying by nature.
3 - During the prior year a number of sites were exited as part of Group-wide
restructuring. This has continued into the current year where we have closed
or announced our intention to close six sites (2021: three sites). Items
include site closure costs, restructuring costs, and impairment losses. These
items have been deemed non-underlying by nature and irregularity.
4 - In 2020 we classified a site as an asset held for sale and at this point
it was impaired in line with IAS 36. In the current year we have secured a new
franchise for this site and it is due to re-open in 2023, therefore the value
in use has significantly increased and we have reversed the impairment. Both
the original impairment and subsequent reversal have been included within
non-underlying items.
5 - In the current year we have commenced a Sales transformation project.
Costs incurred include external and internal incremental resource required to
implement the new sales system. These items are considered non-underlying due
to their irregularity.
The net cash inflow from activities associated with non-underlying items is
£25.1m (2021: inflow £11.0m).
3. Finance costs
Finance costs: 2022 2021
£m £m
On revolving credit facility (0.9) (2.9)
On other bank borrowings (0.4) (0.4)
On consignment, repurchase vehicle liabilities and stocking loans (12.7) (10.7)
On vehicle rental finance liabilities (2.5) (2.1)
On lease liabilities (6.2) (6.0)
Debt issue costs (1.2) (1.1)
(23.9) (23.2)
Net pension costs:
On defined benefit pension obligation (5.6) (4.3)
On pension scheme assets 5.0 3.4
(0.6) (0.9)
Finance costs (24.5) (24.1)
4. Taxation
2022 2021
£m £m
Current tax charge:
Current year 14.9 11.3
Adjustment in respect of prior years 1.7 0.9
16.6 12.2
Deferred tax (credit)/charge:
Deferred tax - origination and reversal of temporary differences 0.6 4.8
Change in UK tax rate - 16.9
Adjustment in respect of prior years (6.7) (5.1)
(6.1) 16.6
Total tax charge 10.5 28.8
Tax on items charged/(credited) to other comprehensive income:
Tax on pension scheme obligations excluding change in UK tax rate 1.7 4.7
Change in UK tax rate - (5.1)
1.7 (0.4)
2022 2021
Underlying Non-underlying Reported Underlying Non-underlying Reported
£m £m £m £m £m £m
Reconciliation of total tax
Profit before tax 82.7 1.7 84.4 90.1 (0.1) 90.0
Standard rate of corporation tax at 19% (2021: 19%) 15.7 0.3 16.0 17.1 - 17.1
(Non taxable income)/disallowable items (0.2) (0.1) (0.3) (0.9) 0.3 (0.6)
Share-based compensation (0.2) - (0.2) (0.3) - (0.3)
Adjustment in respect of prior years (5.0) - (5.0) (4.2) - (4.2)
Difference between current and deferred tax rates 1.2 (1.1) 0.1 - - -
Change in UK tax rate - - - 16.9 - 16.9
Difference on overseas tax rate (0.1) - (0.1) (0.1) - (0.1)
Total tax charge 11.4 (0.9) 10.5 28.5 0.3 28.8
5. Dividends
Group 2022 2021
£m £m
Interim dividend for the year ended 31 December 2022 1.0p (2021: nil p) 3.9 -
Final dividend for the year ended 31 December 2021 2.5p (2020: nil p) 9.8 -
13.7 -
The Directors propose a final dividend of 2.0p per share in respect of the
financial year ended 31 December 2022 (2021: 2.5p). The proposed final
dividend is subject to shareholder approval at the Annual General Meeting and
has therefore not been included as a liability in these financial statements.
6. Earnings per share
2022 2021
Profit attributable to ordinary shareholders (£m) 73.9 61.2
Weighted average number of shares in issue 391,627,955 391,073,686
Basic earnings per share (p) 18.87 15.65
Profit attributable to ordinary shareholders (£m) 73.9 61.2
Dilutive effect of share-based compensation options and weighted average 396,385,849 393,466,275
number of shares in issue
Diluted earnings per share (p) 18.64 15.55
Profit before tax (£m) 84.4 90.0
Add: Non-underlying items (£m) (1.7) 0.1
Underlying profit before tax (£m) 82.7 90.1
Underlying tax (£m) (11.4) (28.5)
Change in UK tax rate (£m) - 16.9
Underlying earnings attributable to ordinary shareholders (£m) 71.3 78.5
Weighted average number of shares in issue 391,627,955 391,073,686
Underlying basic earnings per share (p) 18.21 20.07
7. Goodwill
Cost 2022 2021
£m £m
At 1 January and 31 December 122.4 122.4
Aggregate impairment
At 1 January and 31 December 43.1 43.1
Carrying amount at 31 December 79.3 79.3
Following the Group's annual impairment review an impairment charge of £nil
has been recognised during the year (2021: £nil).
The following table summarises goodwill and intangibles with an indefinite
useful economic life allocated by CGU:
CGU 2022 2022 2022 2021 2021 2021
Goodwill Licences & brands Total Goodwill Licences & brands Total
£m £m £m £m £m £m
Jaguar Land Rover 9.0 - 9.0 9.0 - 9.0
Audi 22.1 27.9 50.0 22.1 27.9 50.0
Charles Hurst 9.4 - 9.4 9.4 - 9.4
Ford 4.8 2.9 7.7 4.8 2.9 7.7
Mercedes-Benz 15.2 28.2 43.4 15.2 28.2 43.4
Volkswagen 6.9 15.9 22.8 6.9 15.9 22.8
BMW - 21.7 21.7 - 21.7 21.7
Vauxhall Renault Nissan Dacia 2.8 2.9 5.7 2.8 2.9 5.7
Fleet & Leasing 9.1 - 9.1 9.1 - 9.1
79.3 99.5 178.8 79.3 99.5 178.8
Goodwill and licences are tested for impairment at least annually through
assessment of carrying value against value-in-use.
The value-in-use of each CGU is calculated using cash flow projections for a
five-year period; from 1 January 2023 to 31 December 2027. These projections
are based on the Board approved strategic plan to 31 December 2025 and
extrapolated to 31 December 2027 based on management's expectations. The
Board's strategic plan considers the Group's profit and loss, cashflows, debt
and other key financial ratios over the period. The key assumptions in the
strategic plan on which the cash flow projections are based relate to
expectations of sales volumes and margins and expectations around changes in
the operating cost base. The assumptions made are based on the Board's
understanding of the current macroeconomic context and outlook, past
experience adjusted for expected changes, and external sources of information.
The key assumptions that have been used in determining the value in use of
each cash generating unit in the impairment model are set out in the table
below:
Assumption 2022 2021 2020
Three to five year revenue growth 0.0% 0.0% to 1.4% 0.0% to 1.4%
Three to five year operating expenses growth 1.0% 0.0% to 2.0% 0.0% to 2.0%
Post year five growth rate 2.5% 0.0% 0.0%
Discount rate 14.0% 12.4% 9.9%
The pre-tax adjusted discount rate used has been calculated using the Group's
estimated cost of capital and benchmarked against externally available data.
Sensitivity
The Group has carried out sensitivity analyses on the possible changes in key
assumptions in the impairment testing. Neither a 1.0 percentage point increase
in discount rate nor a reduction to nil of the post 5 year growth rate would
indicate impairment in any CGU. The lowest headroom in any CGU is £5.3m; for
this headroom to be extinguished the discount rate would need to increase by
1.8 percentage points above that used in the impairment testing.
8. Intangible assets
Group Licences and brands IT development Total
£m
£m £m
Cost
At 1 January 2021 102.6 42.0 144.6
Additions - 3.3 3.3
Disposals - (23.3) (23.3)
Reclassifications to property, plant and equipment - (1.2) (1.2)
At 31 December 2021 102.6 20.8 123.4
At 1 January 2022 102.6 20.8 123.4
Additions - 2.3 2.3
Disposals - (0.3) (0.3)
At 31 December 2022 102.6 22.8 125.4
Accumulated amortisation and impairment
At 1 January 2021 3.1 30.7 33.8
Charge for the year - 5.0 5.0
Disposals - (23.3) (23.3)
At 31 December 2021 3.1 12.4 15.5
At 1 January 2022 3.1 12.4 15.5
Charge for the year - 4.7 4.7
At 31 December 2022 3.1 17.1 20.2
Carrying amount
As at 1 January 2021 99.5 11.3 110.8
As at 31 December 2021 and 1 January 2022 99.5 8.4 107.9
As at 31 December 2022 99.5 5.7 105.2
At 31 December 2022 there is an amount of £2.2m (2021: £0.7m) committed for
future capital expenditure. Included within IT development are IT assets in
the course of construction totalling £0.1m (2021: £0.3m).
9. Property, plant and equipment
Group Land and buildings Motor vehicles Other Total
£m £m £m £m
Cost 341.8 96.8 75.3 513.9
At 1 January 2021
Movements in foreign exchange (1.2) - (0.1) (1.3)
Additions 4.7 35.2 9.1 49.0
Disposals (1.6) (0.4) (10.7) (12.7)
Transfers 4.5 - (4.5) -
Transfers from intangible assets - - 1.2 1.2
Transfers to inventories - (32.3) - (32.3)
Net transfers from assets held for sale 1.4 - - 1.4
At 31 December 2021 349.6 99.3 70.3 519.2
At 1 January 2022 349.6 99.3 70.3 519.2
Movements in foreign exchange 0.8 - 0.1 0.9
Additions 4.6 53.9 11.1 69.6
Disposals (11.1) (0.2) (7.0) (18.3)
Transfers 1.9 - (1.9) -
Transfers to inventories - (32.6) - (32.6)
Net transfers to assets held for sale (2.5) - - (2.5)
Transfers to right of use assets (5.9) - - (5.9)
At 31 December 2022 337.4 120.4 72.6 530.4
Accumulated depreciation and impairment 41.1 28.8 44.1 114.0
At 1 January 2021
Movements in foreign exchange (0.1) - (0.1) (0.2)
Charge for the year 5.3 16.9 8.4 30.6
Impairment charge - - 0.6 0.6
Disposals (0.3) (0.2) (9.2) (9.7)
Transfers 0.2 - (0.2) -
Transfers to inventories - (15.3) - (15.3)
Net transfers from assets held for sale (0.1) - - (0.1)
At 31 December 2021 46.1 30.2 43.6 119.9
At 1 January 2022 46.1 30.2 43.6 119.9
Movements in foreign exchange - - 0.1 0.1
Charge for the year 8.1 17.0 8.4 33.5
Impairment (reversal)/charge (0.6) - 0.4 (0.2)
Disposals (2.1) (0.2) (6.2) (8.5)
Transfers (0.6) - 0.6 -
Transfers to inventories - (14.8) - (14.8)
Net transfers to assets held for sale (1.4) - - (1.4)
Transfers to right of use assets (2.6) - - (2.6)
At 31 December 2022 46.9 32.2 46.9 126.0
Carrying amount 300.7 68.0 31.2 399.9
As at 1 January 2021
As at 31 December 2021 and 1 January 2021 303.5 69.1 26.7 399.3
As at 31 December 2022 290.5 88.2 25.7 404.4
Assets in the course of construction relate to build costs that have been
incurred but the property is not yet in use and are included in Other. The
total of these assets held at 31 December 2022 is £4.5m (2021: £4.7m). These
assets will be transferred to land and buildings when complete. Other includes
plant and machinery, fixtures, fittings and tools and equipment.
Included within land and buildings is freehold land at a cost of £83.4m
(2021: £94.8m) which is not depreciated. At 31 December 2022 there is an
amount of £8.5m (2021: £15.4m) committed for future capital expenditure.
Included within additions to motor vehicles of £53.9m (2021: £35.2m) are
additions of £1.1m (2021: £0.3m) relating to own use vehicles. At 31
December 2022 there is a net book value amount of £1.8m (2021: £1.1m) of
own-use vehicles included within the total net book value for motor vehicles.
During the year ended 31 December 2022 the total net book value of disposals
from property and other amounted to £9.8m (2021: £2.8m) including £8.7m
(2021: £nil) attributed to a sale and leaseback transaction. Total proceeds
received were £28.1m (2021: £3.0m) resulting in a gain on disposals of
£5.6m (2021: £0.2m) after applying the sale and leaseback treatment
prescribed under IFRS 16.
During the year ended 31 December 2022 the total net book value of disposals
from motor vehicles relating to own-use vehicles amounted to £nil (2021:
£0.2m). Total proceeds received were £nil (2021: £0.2m) resulting in a gain
on disposals of £nil (2021: £nil).
An impairment charge reversal of £0.2m (2021: charge of £0.6m) has been
recorded representing an adjustment to the expected recoverable values of
assets. During the year £1.1m (2021: £1.5m) of properties have been
transferred to assets held for sale from property, plant and equipment, and
£nil (2021: £3.0m) of properties have been transferred from assets held for
sale to property, plant and equipment.
10. Right of use assets
Group Property Other Total
£m £m £m
At 1 January 2021 122.9 1.5 124.4
Additions 4.7 3.7 8.4
Modifications 1.0 - 1.0
Depreciation charge (12.7) (2.6) (15.3)
Impairment (1.2) - (1.2)
Disposals (1.6) - (1.6)
At 31 December 2021 113.1 2.6 115.7
At 1 January 2022 113.1 2.6 115.7
Additions 9.7 6.5 16.2
Modifications (1.4) - (1.4)
Depreciation charge (10.7) (3.1) (13.8)
Impairment (1.1) - (1.1)
Transfer from property, plant and equipment 3.3 - 3.3
Disposals (4.0) - (4.0)
As at 31 December 2022 108.9 6.0 114.9
Included within the Other category are leases for motor vehicles and IT
equipment.
A charge of £1.1m (2021: £1.2m) has been recognised following the cessation
of trade from certain dealerships during the year thereby giving rise to an
impairment charge which has been treated as a non-underlying item (see Note
2).
11. Inventories
Group 2022 2021
£m £m
Goods for resale 311.4 310.7
Vehicle spare parts for resale 20.3 18.7
Consignment vehicles 332.9 182.5
664.6 511.9
Total write-offs of £nil (2021: £nil) have been incurred during the year and
there have been no reversals of past write-downs (2021: none). Stocking loans
provided by third party finance houses are secured over the vehicles used for
the provision of such finance.
Included within goods for resale are vehicles leased out to staff employees on
short-term lease arrangements via a third party but are still actively
marketed for immediate sale to third parties by the Group as the Group has not
relinquished control of these vehicles. As at 31 December 2022 these total
£31.2m (2021: £27.6m).
At 31 December 2022 the Group had entered into a number of future purchase
commitments amounting to £0.2m (2021: £0.8m) which are not recognised in the
financial statements.
12. Reconciliation of Alternative Performance Measures
The Group uses a number of Alternative Performance Measures (APM) which are
non-IFRS measures in establishing their financial performance. Like-for-like
is the collection of dealerships and other trading businesses that have both a
full year of trading activity in the current year and prior year. The Group
believes the APM provide useful, historical financial information to assist
investors and other stakeholders to evaluate the performance of the business
and are measures commonly used by certain investors for evaluating the
performance of the Group.
In particular, the Group uses APM which reflect the underlying performance on
the basis that this provides users of the financial statements with additional
useful information to better assess the core business performance of the
Group. Details of the definitions of APM are made within the Glossary in Note
13. A reconciliation of the statutory measures to the APM is set out below:
Like-for-like revenue 2022 2021
Revenue (£m) 4,300.9 4,050.7
Less: Non like-for-like revenue (31.8) (47.8)
Like-for-like revenue (£m) 4,269.1 4,002.9
Gross profit margin
Revenue (£m) 4,300.9 4,050.7
Gross profit (£m) 550.2 516.6
Gross profit margin (%) 12.8% 12.8%
EBITDA and underlying EBITDA (£m)
Operating profit (£m) 108.9 114.1
Add: Depreciation (£m) 49.9 48.9
Add: Amortisation (£m) 4.7 5.0
EBITDA (£m) 163.5 168.0
Add: Non-underlying items (£m) (1.7) 0.1
Underlying EBITDA (£m) 161.8 168.1
Underlying operating profit (£m)
Operating profit (£m) 108.9 114.1
Add: Non-underlying items (£m) (1.7) 0.1
Underlying operating profit (£m) 107.2 114.2
Underlying profit before tax and underlying basic EPS
Profit before tax (£m) 84.4 90.0
Add: Non-underlying items (£m) (1.7) 0.1
Underlying profit before tax (£m) 82.7 90.1
Underlying tax (£m) (11.4) (28.5)
Change in UK tax rate (£m) - 16.9
Underlying profit after tax (£m) 71.3 78.5
Weighted average number of shares in issue 391,627,955 391,073,686
Underlying basic EPS (p) 18.21 20.07
Property portfolio and property portfolio by share
Property, plant and equipment (£m) 404.4 399.3
Less: Other property, plant and equipment (£m) (25.7) (26.7)
Less: Motor vehicles (£m) (88.2) (69.1)
Property portfolio (£m) 290.5 303.5
Share capital at 31 December 386,694,274 391,887,909
Property portfolio per share (p) 75.1 77.4
Net funds excluding lease liabilities and rental vehicle finance liabilities
Cash and cash equivalents (£m) 111.8 103.9
Less: Bank loans and overdrafts (£m) (45.3) (100.9)
Net funds (£m) 66.5 3.0
13. Glossary of terms
Performance measure Definition Why we measure it
Like-for-like (LFL) These are calculated where dealerships have contributed twelve months of To provide a consistent overview of comparative trading performance.
revenue and profit contribution in both the current and comparative periods
presented.
Gross profit margin Gross profit as a percentage of revenue. A measure of the significant revenue channels' operational performance.
Non-underlying items Relate to costs or incomes which are not incurred in the core operations of A key metric of the Group's non- underlying business performance.
the business or due to their size, nature and irregularity are not included in
the assessment of financial performance in order to reflect management's view
of the core-trading performance of the Group (see Note 2).
Earnings before interest, tax, depreciation, and amortisation (EBITDA) Operating profit before deducting depreciation and amortisation. A key metric of the Group's underlying business performance
Underlying operating profit Operating profit before the impact of non-underlying items as defined above. A key metric of the Group's underlying business performance.
Underlying profit before tax Profit before tax before the impact of non-underlying items as defined above. A key metric of the Group's underlying business performance.
Underlying basic earnings per share (EPS) Earnings per share before the impact of non-underlying items as defined above, A key metric of the Group's underlying business performance.
and the impact of tax rate changes.
Net funds Cash and cash equivalents less bank loans and overdrafts. Lease liabilities, A measure of the Group's net funds that provides an indicator of the overall
vehicle rental liabilities and stocking loans are not included in net funds. balance sheet strength.
Property portfolio The net book value of freehold and leasehold properties as at the balance A key metric of the Group's statement of financial position.
sheet date.
New car unit sale A new car sale which has generated revenue for the Group. A measure of statistical volumes and indicator of operational performance.
Used car unit sale Any car sold that isn't a new car unit sale. A measure of statistical volumes and indicator of operational performance.
Car parc The approximate number of vehicles on the UK road network. A measure of the UK market size and indicator for growth opportunities.
New car market Total number of annual new car unit registrations made in the UK as defined by A measure of the UK market size and indicator for growth opportunities.
the Society of Motor Manufacturers and Traders (SMMT).
New car market share The Group's annual share of the new car market calculated as a percentage of Our relative performance against the UK market.
the Group's new car unit sales to the new car market size.
Details of the reconciliations of APMs to statutory measures are made in Note
12.
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. END FR SSUESLEDSELLRecent news on Lookers
See all newsREG - Global Auto Holdings Lookers PLC - Update to stated post-offer intention statements
AnnouncementREG - Jefferies Int Ltd. Lookers PLC - Form 8.5 (EPT/NON-RI) Lookers Plc
AnnouncementREG - Lookers PLC - Delisting and cancellation of trading
AnnouncementREG - Official List - Removal - LOOKERS PLC
AnnouncementREG - Lookers PLC Bank of America Corp - Holding(s) in Company
Announcement