Lookers Share Discussion Threads

[daz1712] 02/3/2021 07:12

FCA case today closed with a best practices review but zero fine, releasing the 10million provision

[woodwards26] 02/3/2021 00:35

My own hands on experience is cost cutting doesn't increase profitability in the motor trade.That is of course unless costs are out of control but I've found that to be a rare thing .But increasing the right mostly variable costs eg sales incentives, great used car reconditioning, pay plans linked to gross profit achievement can have major impact on turnover and gross profit.I've been in too many dealerships and seen them so focused on cost cutting that they then start losing business. Once they refocus on great customer service with all pay plans aligned to this and gross profit then profits go skyward.

[woodwards26] 02/3/2021 00:14

Don't ignore the if▪ To balance against these risks, we also look at the potential earnings upside if Lookers is able to navigate through this and indeed market conditions improve as we enter in 2022/23 and the impacts of COVID-19 start to recede. Looking further ahead,I've bought a few but as a retired motor trader I see no certainty in making a profit or even getting my money back but it is the first time in quite a few years I think that lookers are worth a punt on again.I will buy a few more each month with disposable income but not to the levels I did in the past

[daneswooddynamo] 01/3/2021 11:52

And they say cazoo might float with a value of 5 billion? Lol a lot

[jabers1] 01/3/2021 11:32

Investment case summary

▪ Following an extremely difficult period for Lookers over the last 18 months, we believe it is over the worst and is back on the road to recovery. While the market backdrop will remain challenging, we believe the Group is a position to move forward from the legacy issues and refocus on the strategic priorities for the future.

▪ The implied H2 2020 performance gives us comfort that the strategic plan and cost initiatives are working. Lookers announced an adjusted loss of £36m in H1 and is expected to be broadly break even in FY 2020E (we are forecasting a small loss of £1.0m). This implies a H2 profit of £34.5m, although we do acknowledge there was Government stimulus on costs (business rate relief and furlough) to support this outcome. We believe this improvement has not just come from annualised payroll savings of c.£50m but also lower investment in used car stock levels (c.£145m in H1 2020A from £240m in FY 2019A) as well as higher levels of stock turn running at 35-40 days vs. 55-60 days before.

▪ The near-term outlook is likely to remain challenging across the sector, albeit Lookers has used COVID-19 as a catalyst for significant change. Although new coronavirus infections and deaths falling rapidly in the UK and vaccination levels are progressing well, the roadmap out of lockdown 3 is cautious with motor dealerships not fully reopening until 12 April 2021. As a result, sales volumes in March – when the new 21 registration plate comes in – are still likely to be weaker than normal as restrictions are likely to be in place. That said, as we saw last year, once dealerships are allowed to be fully open, pent up demand could re-emerge post-March with data from Auto Trader pointing towards strong interest levels in new cars. Used car margins have remained strong in what we see as a supply constrained market.

▪ The shares have considerable asset backing, with property assets per share of 80.4p as at 30th June 2020 and net assets per share of 63.6p at the same date. Both figures are far
in excess of the current share price due to the company’s poor recent results and the lack of internal controls that led to the restatement of its 2018 figures and its run-in with the FCA.

▪ Lookers has already disclosed that net bank debt (which excludes IFRS 16 property leases and vehicle rental lease liabilities) was approximately £45 million at the end of 2020. This compares with £59.5 million at the end of 2019 and £11.0 million at the end of June 2020. Property lease debt was £135.8 million at 30th June 2010 and vehicle rental lease liabilities were £87.6 million giving total net debt of £234.4 million. In addition to this, the group had
a deficit on its defined benefit pension schemes of £69.5 million at the end of June 2019 and
the “subsequent events” section of its 2019 Annual Report (published on 30th November 2020) discloses that it will step up its deficit reduction payments from £9 million to £12 million
a year, we presume from 2021 onwards. There is a provision of £10.4m for the FCA fine on top of this as well. Consequently, there is no doubt that Lookers has high levels of leverage to contend with at present.

▪ To balance against these risks, we also look at the potential earnings upside if Lookers is able to navigate through this and indeed market conditions improve as we enter in 2022/23 and the impacts of COVID-19 start to recede. Looking further ahead, we believe Lookers is capable of re-emerging as a £5bn revenue group, driven in part by expanding its portfolio with Japanese brands following restructuring, as has been previously mentioned by the group. We have assumed a gross margin of 11.5%, with operating expenses as a % of revenue remaining below 10%. On that basis we can see Lookers achieving a PBT north of £60m, albeit the market would need to be in full recovery mode for this to be achieved. From an EPS perspective this would equate to 13.2p (vs. our 2022E forecast of 9.0p) and implies a P/E below 3.2x at current share price levels. To look at this another way, on a typical mid cycle P/E of 14x, this would equate to 184 per share.

▪ Based on our blue-sky EPS on Exhibit 1 and assuming a P/E multiple range of 8-14x, would suggest a value range of 105-184p per share. Our working (below) shows this analysis discounted back by 5 years to give range based on discount rates ranging from 5-20%. To get back to the current share price based on this analysis implies a mid-cycle PE of 10x discounted by 15%.

[flyfisher] 01/3/2021 08:36

Zeus capital comment today. 5 minute video.

[flyfisher] 01/3/2021 08:24

Which paper?

[middlesboroughfc] 01/3/2021 08:20

Paper said bid at 80

[seball] 22/2/2021 08:07

Lookers still under the radar at the moment.Happy to accumulate at current prices as extremely undervalued imo.

[seball] 19/2/2021 16:20

Just topped up. No smoke without fire. Good luck all

[seball] 19/2/2021 16:09

80p takeover? Thar would be a steal.

[oharebj] 19/2/2021 15:26

https://cardealermagazine.co.uk/publish/could-industry-stalwart-tony-bramall-be-about-to-launch-a-bid-to-take-car-dealer-group-lookers-private/217308

[abarclay] 19/2/2021 09:49

Massive pent up demand for motors

[seball] 19/2/2021 08:31

Something brewing here. Bramall increasing holding got me interested. No smoke without fire imo

[seball] 19/2/2021 08:28

NAV 90p suggests this is extremely undervalued. This has been battered down unfairly as economy will bounce back. The public will be using their savings to buy new cars as holidays are a no go imo.

[daneswooddynamo] 18/2/2021 16:43

I think that about most of my holdings

[nobilis] 18/2/2021 16:05

NAV 90p, like buying £1 for 45p

[dadster1854] 18/2/2021 14:14

My money is on Vertu .....ex CEO of Lookers was main board director of Vertu or .. Marshall as current CEO of Lookers was senior manager at Marshalls! I think we should never underestimate the power of peoples relationships not just balance sheets!!

I also think TB is too old to buy this business back, at 83 ish his micro management style would not be function on this beast.

Im not sure about TB cash investment in Lookers and whether he is in the red/black (but i assume Red!)He is expecting an offer soon and the vultures are probably already circling, his increase in stake is a tool to get some upside from a takeover position on recently acquired shares.

[jabers1] 18/2/2021 14:01

Bid won’t be too long in coming, Vertu in partnership with the owner of Stonehouse are the ones who are continually being mentioned..

[daneswooddynamo] 18/2/2021 13:59

Could be Mr B going to 29.99 and ready to strike

[seball] 18/2/2021 13:03

Some massive Buys going through paying over the ask. Big trade at 43.5p just went through. Looks like someone buying up all the cheap shares imo.

[seball] 18/2/2021 12:51

Mr Bramall increasing his holding over 20% suggests these are undervalued. No smoke with out fire. Takeover? Follow the money... Buy

[daneswooddynamo] 18/2/2021 12:22

Certainly has the potential to be much higher. Not sure the market knows quite where it should be trading at moment and analysts are treading cautiously which presents the opportunity imo

[seball] 18/2/2021 11:47

Economy bouncing back, these will be 100p by Q3 imo