Record profits at Lookers have prompted the car dealer group to return £4 million of furlough support, although its reinstated dividend is almost equal to the amount of business rates relief that it received last year.
Lookers has made its best profits as a lack of new cars, because of global shortages of microchips, and pent-up demand from people wary of public transport have resulted in significantly higher car prices. Cost-cutting, including the closure of 27 showrooms and 1,500 redundanies during the pandemic, also has led to higher margins.
Lookers unveiled a pre-tax profit of £90 million for the year to the end of December compared with one of £1.5 million a year earlier and a £45 million loss the year before, when it admitted that it had overstated its profits for three years. Sales rose by 9 per cent to £4.05 billion last year from £3.69 billion in 2020.
Mark Raban, its chief executive, said: “It’s been a difficult couple of years for the company with Covid and with our own issues, but we are moving forward with pace.”
Lookers is one of the largest British car retailers, with 6,500 employees. Two years ago it was engulfed in an accounting crisis and it came under criminal investigation for fraud and regulatory inquiries into mis-selling.
Raban, 55, an industry veteran, joined the business as finance chief before being promoted to chief executive in February 2020, four months before a boardroom clearout. The company’s fortunes turned in late January after Constellation Automotive, the owner of webuyanycar.com, bought a stake of nearly 20 per cent, which sent its shares soaring amid takeover speculation.
The Lookers boss said he was “proud and delighted” to have returned £4.1 million of furlough support that the group had received in the first half of last year and justified not returning £9.8 million of business rates relief because it “wasn’t support we claimed for, it was just applied by councils. We were closed for the first quarter and we weren’t designated essential retail so we think it’s bona fide.”
Lookers claimed £45 million from the government in 2020 but has since emerged from the pandemic in a much stronger position, as have Vertu and Pendragon, its dealership peers. It said its improved financial performance meant it was debt-free and it awarded investors a 2.5p-a-share dividend, equivalent to a £9.3 million payout.
Analysts at Peel Hunt said: “The dividend has been reinstated, the balance sheet is materially stronger than pre-Covid 19 and current trading conditions remain solid, with underlying profit ahead of the exceptionally strong prior year.”
Raban said that Lookers’ new strategy was paying off and that its investment in a cosmetic repair business, which fixes alloy wheels, small dents and scuffed bumpers, would continue to be lucrative even as the automotive industry moved towards electric cars. It is also adding two new five-acre second-hand car sites as part of its Cube Concept, which will include cafés on the premises.
The business warned that it was continuing to face shortages of new cars, with Raban saying that the war in Ukraine was likely to exacerbate the issue because a lot of electrocomponents and vehicle wiring was produced there. Drivers are waiting from six months to a year for new cars, while the industry is about 500,000 vehicles short of normal levels, meaning that the price of new cars has risen by about 15 per cent. Shares in Lookers fell by 4p, or 4.2 per cent, to 92p, valuing the company at about £376 million.
Lookers gives back £4m in furlough cash