Record results and well positioned for further growth

Record results and well
positioned for further growth
Interim Results
Six months ended 30 June 2016
Presented by
Andy Bruce Chief Executive
Robin Gregson Finance Director
Lookers plc / Six months ended 30 June 2016
Continued Strong Performance
§  Strong financial performance
§  Record interim profit before tax of £50.1m, increase of 16%
§  Revenue increased 33% to £2.34 billion (2015: £1.75 billion)
§  Earnings per share up 17% at 9.44p (2015: 8.08p)
§  Robust capital structure
§  Strong cashflow, reduces debt to £75m from £161.7m at year end
§  Debt/ EBITDA now at 0.7:1 and at lower end of range 0.5:1 – 1.5:1
§  Interim dividend increased by 20% to 1.28p per share (2015: 1.07p)
§  Proven business model
§  Continued focus on optimising portfolio
§  Increasing investment in customer experience
§  Website launched last year drove a 31% increase in enquiries
§  New website launching in Q4 will deliver significantly improved functionality
§  Post period end events:
§  Proposed disposal of Parts Division for £120m – expected to complete by end of October 2016
§  Conditional agreement to acquire Drayton Group for £55.4m – earnings enhancing in 2017
§  Strategy focused on the highest growth division of Lookers’ business
§  Healthy order book for the delivery of new cars in September 2016
2
Strategy and Market
Lookers plc / Six months ended 30 June 2016
4
How We Create Value
Right brand
Active portfolio
management
Right location
Customer
experience
Excellent
execution
Operational
excellence
§  Acquisitions
§  Disposals
§  Upgrading facilities
§  Online / offline customer
journey
§  Employees
§  Utilising data to better
manage performance across
the group
§  Calibre of management
Lookers plc / Six months ended 30 June 2016
Market Update: Resilient Fundamentals
§  Evidence of levelling off in new car volumes (34% of gross
profit)
§  Volumes will increase in line with GDP and population over
time
§  Resilient used car market with healthy RVs and bigger players
taking share (25% of gross profit)
§  Aftersales remains robust with 0-3 year car parc set to grow
(38% of gross profit)
§  38% of cars sold with a service plan
New car registration growth
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
0
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
500,000
5
Lookers plc / Six months ended 30 June 2016
6
Market Update:
Consolidation of Ownership Creates Opportunities
§  Anticipated capacity withdrawal
amongst dealerships
§  Operators of scale will be the winners
– positive for Lookers
§  Drivers of sector consolidation:
§  Investment requirements of the
OEMs
§  Need for access to capital
§  Succession issues
§  ‘Lack of scale’ benefits
§  Regulation
§  Creates a healthy pipeline of
acquisition opportunities and will drive
higher sales per dealership/outlet
Leverage Effect of Scale
Per outlet Av turnover Av new car sales
Av ROS
Av PBT
UK
£16m
500
1.4%
£220k
US
£36m
1000
2.2%
£790k
Financial Review
Lookers plc / Six months ended 30 June 2016
8
Strong Financial Performance
§  Record interim profit before tax of
£50.1m, increase of 16%
§  Revenue increased 33% to £2.34
billion (2015: £1.75 billion)
§  Earnings per share up 17% at 9.44p
(2015: 8.08p)
§  Strong cashflow, reduced debt to
£75m from £161.7m at year end
§  Interim dividend increased by 20% to
1.28p per share (2015: 1.07p)
Lookers plc
H1 2016
(£m)
H1 2015
(£m)
Turnover
2,340.5m
1,746.8m
Operating Profit
57.2m
47.8m
Interest
(9.0)m
(6.1)m
Underlying Profit Before Tax
50.1m
43.1m
Underlying Operating Margin
2.4%
2.7%
Pre-Tax Margin
2.1%
2.5%
Basic EPS
9.44p
8.08p
Net Debt
74.9m
38.2m
Gearing
24%
13%
109.6m
91.0m
Dividend per share
1.28p
1.07p
Tax Charge
9.3m
8.1m
Profit after Tax
37.4m
31.8m
Return on Capital Employed
25.7%
23.8%
EBITDA (12 months)
Lookers plc / Six months ended 30 June 2016
Underlying Profit
Consistent growth across the business
Group Profit Bridge
9
Lookers plc / Six months ended 30 June 2016
10
Operational Execution: Margin Analysis
Comparative figures are as reported
Lookers plc
H1
2016
H1
2015
Gross Margin %
11.0%
12.1%
Operating Margin %
2.4%
2.7%
Group – Gross Profit Margin % by Department
50
45.0%
43.3%
45
40
35
28.1% 27.6%
30
Gross
Margin
%
2016
25
20
11.0%12.1%
15
10
6.4% 7.1%
6.9% 7.7%
New Cars
Used Cars
5
0
Aftersales
Parts Division
Company
2015
Lookers plc / Six months ended 30 June 2016
11
Strong LFL Growth Across the Business
H1 2016
£m
H1 2015
£m
% change
TURNOVER
H1 2016
£m
H1 2015
£m
% change
GROSS PROFIT
New Cars
1,188
861
38%
New Cars
75
61
23%
Used Cars
809
584
38%
Used Cars
56
45
24%
Aftersales
189
152
24%
Aftersales
84
66
27%
Parts Division
115
113
2%
Parts Division
32
31
3%
Leasing and other
39
37
5%
Leasing and other
8
8
-
TOTAL TURNOVER
2,340
1,747
33%
TOTAL GROSS
PROFIT
257
211
21%
LFL TURNOVER
LFL GROSS
PROFIT
New Cars: retail
730
666
10%
New Cars: retail
60
59
2%
New Cars: fleet
458
398
15%
New Cars: fleet
15
13
15%
Used Cars
809
753
7%
Used Cars
56
50
12%
Aftersales
189
176
7%
Aftersales
84
78
8%
Lookers plc / Six months ended 30 June 2016
12
Strong Capital Structure
§ 
Significant reduction in net debt to
£74.9m due to strong cashflow (31
December: £161.7m)
§ 
Low levels of gearing, reduced to
24% (31 December: 54%)
§ 
Strong balance sheet and high
levels of unutilised bank facilities
H1
2016
(£m)
Fixed Assets
31 Dec 2015
£m
268.9
H1
31 Dec
2015
2015
(£m)
(£m)
31 Dec 2014
£m
216.7
282.9
Rental Fleet Vehicles (VRS)
63.9
55.6
67.0
Stocks
797.1
566.5
816.0
Debtors
330.0
268.9
252.6
1,104.0
800.8
1,002.0
Non Current Liabilities (excluding bank
loans)
133.9
100.1
115.3
Vehicle rental fleet finance (VRS)
52.7
41.3
53.8
Net Assets
307.5
284.8
297.8
Net Debt
74.9
38.2
161.7
Gearing
24%
13%
54%
Net Debt / EBITDA
0.68
0.42
1.61
Current Liabilities (excluding bank
loans)
Lookers plc / Six months ended 30 June 2016
13
Strong Cash Flow Generation
H1
2016
(£m)
H1
2015
(£m)
EBITDA
67.7
54.9
•  Invested £19.8m of capital expenditure in improving
dealership facilities
Working capital decrease/ (increase)
40.1
(12.9)
Cash generated from operations
107.8
42.0
•  Received £27.5m for the sale of properties: receipt
of £18.1m in cash for VW premises in Battersea
Acquisition of subsidiary companies
-
(4.3)
(19.8)
(5.8)
Proceeds from asset disposals
27.5
0.9
VRS Rental Fleet Vehicles
purchased
44.6
(43.4)
Sale of VRS Rental Fleet Vehicles
44.2
42.4
•  The ratio of net debt to EBITDA has reduced from
1.4 at the start of the year to the current level of 0.68
Dividends paid to shareholders
(8.1)
(7.4)
Loan repayments
(5.7)
(3.9)
•  Gearing was reduced to 24% compared to 54% at
the start of the year
Interest paid (net)
(9.0)
(6.1)
Tax paid
(6.0)
(3.7)
Decrease in net debt
86.8
13.7
Increase in cash
82.3
9.4
•  Cash flow was particularly strong with cash
generated from operations of £107.8m (2015:
£42.0m)
•  Net cash inflow was £82.3m compared to £9.4m in
2015
•  Reduction in net debt to £74.9m compared to
£161.7m at the start of the year
Purchase of fixed assets
Lookers plc / Six months ended 30 June 2016
14
Consistent Financial Track Record
Group Net Assets Trend
Group H1 Pre-tax Profit Trend
350
60
50.1
50
40.2
40
£m 30
24.1
300
43.1
250
308
2015
Jun-16
257
200
29.6
£m 150
20
100
10
50
0
0
2012
204
228
300
2013
2014
2015
2012
Jun-16
2016
2013
2014
Group Net Debt
180
161.7
160
140
120
£m
100
74.9
80
60
40
40
48
43
2012
2013
51
20
0
2011
2014
2015
Jun-16
Lookers plc / Six months ended 30 June 2016
16
Motor Division: New Cars
All figures on a like for like basis
Key highlights:
§  Gross profit increase of 2% in retail and 15% in fleet
§  Finance penetration increased from 79% to 82%
§  Record UK market for retail and fleet cars and LCV
§  Maintained share in retail and significant gain in fleet
LFL new car turnover
800
LFL total gross profit
+10%
70
700
600
500
730
666
Retail
459
398
200
Fleet
£m
£m
50
+15%
400
300
+ 2%
60
40
30
59
0
2015
2016
Fleet
+ 15%
20
10
100
Retail
60
15
13
0
2015
2016
Lookers plc / Six months ended 30 June 2016
17
Motor Division: Used Cars
All figures on a like for like basis
Key highlights:
§  Gross profit increase of 12%
§  Finance penetration increased from 41% to 42%
§  Residual value stability underpins margins
§  Disciplined approach to stock management
LFL used car turnover
LFL total gross profit
+7%
810
800
790
780
809
£m
760
2016
750
740
730
2015
753
1,123
720
2015
2016
£m
770
57
56
55
54
53
52
51
50
49
48
47
+12%
56
2015
2016
5084.3
2015
2016
Lookers plc / Six months ended 30 June 2016
18
Motor Division: Dealership Aftersales
All figures on a like for like basis
Key highlights:
§  Turnover increased by 7% and gross profit by 8%
§  Strong gross margin result from 43.3% to 45%
§  Continued progress in creating capacity
LFL aftersales turnover
LFL aftersales gross profit
+7%
190
86
+8%
84
185
82
180
85
189
80
170
£m
£m
175
176
78
76
165
2015
2016
78
74
2015
2016
Lookers plc / Six months ended 30 June 2016
19
Motor Division: Dealership Aftersales
Retention Strategy
Cumula4veServicePlans–Livebook
%VehiclessoldwithaServicePlan
90,000
50%
80,000
45%
70,000
40%
60,000
35%
50,000
40,000
30,000
20,000
10,000
0
32%
33%
H12012
H12013
38%
38%
38%
H12014
H12015
H12016
30%
25%
20%
15%
10%
5%
0%
Lookers plc / Six months ended 30 June 2016
20
Motor Division: Dealership Aftersales
Market Opportunity
UKVehicleParc
9,000,000
+3%
8,000,000
Age(years)0-3
7,000,000
6,000,000
Age(years)4-6
5,000,000
4,000,000
Age(years)7-9
3,000,000
2,000,000
Age(years)10-12
1,000,000
0
2014
2015
2016
2017Predicted
Lookers plc / Six months ended 30 June 2016
22
Developing the Customer Experience
Website
Developing the brand
Investing in people
Retail environment
Investment in technology
Lookers plc / Six months ended 30 June 2016
Developing the Customer Experience:
Website
§  Improved website performance year to date on like for like basis
includes 15% growth in traffic with 18% more unique visitors leading
to 31% more unique leads
§  New website with improved search functionality and more relevant
and personalised content
23
Lookers plc / Six months ended 30 June 2016
24
Developing the Customer Experience:
Retail Environment
Jaguar Land Rover Park Royal
Newcastle Nissan
Silverlink VW
Mercedes-Benz Tonbridge
Lookers plc / Six months ended 30 June 2016
Developing the Customer Experience:
Investment in Technology
§  Single customer view database is
hub of all customer touch points
§  Provides vastly improved insight to
deliver more personalised and
relevant communication
§  Roll out iPads to all front line staff
§  New technology product integrates
all customer touch points
§  Host of other technology
developments
25
Lookers plc / Six months ended 30 June 2016
Investing in Our People
§  New Group People Director
appointed in May 2016
§  New HR structure in place to
drive people recruitment
§  Dedicated resource for
senior management
development
§  HR business partnership
to improve resource
planning and productivity
§  Dedicated resource to
improve diversity,
apprenticeships and
culture
26
Lookers plc / Six months ended 30 June 2016
27
Developing the Lookers Brand
§  Creating a more
compelling Lookers
brand personality
§  Investing in driving
awareness levels
§  Use technology
to improve
personalisation
§  Right message,
right customer,
right time
New is... that beautiful moment your
dream car becomes a reality.
New is... those lovely little
gestures that just make it special.
New is... soaking up the jealous
glances from across the street.
Operational Review
Parts Division
Lookers plc / Six months ended 30 June 2016
29
Parts Division: H1 Performance
§ 
Steady end-demand
§ 
Growth in core and new areas
§ 
Infrastructure investment
£m
H1 2015
H1 2016
Change
Sales
113
115
+2.2%
PBT
7.3
7.5
+3.2%
ROS
6.5%
6.5%
-
Parts Division
Transaction
Highlights
Lookers plc / Six months ended 30 June 2016
31
Parts Division: Transaction Highlights
Acquisitions since 2009:
§  Conditional contract agreed to sell Parts Division to
Alliance Automotive UK Ltd
•  Total Spend - £134m
§  Proceeds of £120m on a cash free and debt free basis
•  Estimated PBT in 2016 - £30m
§  Approval by Lookers shareholders at EGM – end of
September 2016
•  ROI – 22%
§  EU Merger clearance expected by end of October
2016
§  Redeploy the capital into acquiring car retail
businesses
§  Drayton Group acquisition already announced
§  At stated minimum ROI of 15% PBT would be £18m v
£13m in Parts
§  Advanced stage due diligence on another premium
branded motor group
Post-period end
Drayton Group
acquisition
Lookers plc / Six months ended 30 June 2016
33
Drayton Group: Transaction Highlights
Overview of transaction
• 
Conditional contract agreed to acquire Warwick
Holdings Ltd, trading as Drayton Group
• 
Price agreed at £55.4m, payable in cash
• 
Conditional on successful completion of sale of
Parts Division, expected end October 2016
• 
Earnings enhancing in 2017 with clear
synergies and growth prospects
• 
Significantly increases our partnership with
Mercedes Benz and Smart, taking it to 14
dealerships
• 
New combined annual turnover in excess of
£600m
• 
Enhances Lookers presence in the West
Midlands
Drayton Group
• 
Founded originally in 1915
• 
Luxury car retailer offering sales,
parts, service and repair facilities for
new and used cars
• 
Turnover of £276m and profit before
tax of £5.2m (FY 2015)
• 
Gross assets of £84.2m and net
assets of £22.0m
• 
Four-time winner of Mercedes-Benz
Retailer of the Year
• 
Operates from seven locations in
Stoke on Trent, Stafford, Shrewsbury,
Wolverhampton, Walsall, Stourbridge
and Worcester
Lookers plc / Six months ended 30 June 2016
Short Term Outlook §  Supply-side likely to be robust
§  Demand-side uncertain
§  Order take since EU referendum stable
§  September order book on plan
§  PCP has reduced exposure to 'big ticket' hold off
§  Aftersales strength provides defensive quality
35
Lookers plc / Six months ended 30 June 2016
Medium to Long Term Outlook
Consolidation of ownership, scale and a focus on growth
§  Proven strategy leaves us ideally placed to continue our growth and position of
leadership in the motor retail sector
-
Investment in facilities and multi-channel customer experience
-
Right brands in the right locations with excellent execution
§  High growth as a priority, via the Motor Division
§  Market consolidation drivers are:
- Investment requirements of the OEMs / lack of access to capital / succession
issues / lack of scale / regulation
§  Healthy acquisition pipeline in place: high ROI a pre-requisite
§  20% interim dividend increase reflects confidence in the medium term outlook
36
Lookers plc / Six months ended 30 June 2016
37
How We Create Value
Right brand
Active portfolio
management
Right location
Customer
experience
Excellent
execution
Operational
excellence
§  Acquisitions
§  Disposals
§  Upgrading facilities
§  Online / offline customer
journey
§  Employees
§  Utilising data to better
manage performance across
the group
§  Calibre of management
Business Portfolio – Franchise & Distribution Outlets
MOTOR DIVISION
Alfa Romeo
Cardiff
Aston Martin
Belfast
Audi
Ayr
Basingstoke
Camberley
Dublin
Edinburgh
Glasgow
Guildford
Hamilton
Newcastle
Stirling
Teesside
Tyneside
Wearside
Bentley
Belfast
Ferrari
Belfast
Fiat
Stockport
Ford
Braintree
Chelmsford
Colchester
Guiseley
Harrogate
Leeds
Sheffield
S.W. Ferrers
Sudbury
Sunderland
Honda
Orpington
Hyundai
Land Rover
Belfast
Bishop's Stortford
Chelmsford
Chipperfield
Colchester
Glasgow North
Glasgow South
London - Battersea
London - Park Royal
Motherwell
Lexus
Belfast
Hatfield
Maserati
Belfast
Mercedes-Benz
Ashford
Brighton
Canterbury
Eastbourne
Gatwick
Maidstone
Tonbridge
Chrysler
Belfast
Dundonald
Leeds
Motherwell
Newcastle
Citroen
Belfast
Blackpool
Liverpool
Newport
Preston
Jaguar
Amersham
Belfast
Glasgow
London - Park Royal
Motherwell
Dacia
Belfast
Carlisle
Chester
Newcastle
Newtownabbey
Newtownards
Jeep
Belfast
Cardiff
Nissan
Belfast
Carlisle
Chester
Gateshead
Leeds
Motherwell
Kia
Belfast
Newcastle
Newcastle
Newtownabbey
Newtownards
Stockport
Sheffield
Stockport
Peugeot
Belfast
Cardiff
Motherwell
Newport
Renault
Belfast
Carlisle
Chester
Newcastle
Newcastle (CV)
Newtownabbey
Newtownards
Stockport
Seat
Manchester
Stockport
Skoda
Battersea
Eccles
Guildford
Harrogate
Manchester
Newcastle
Stockport
Smart
Brighton
Gatwick
Maidstone
Tonbridge
Toyota
Belfast
Dundonald
Newtownabbey
Vauxhall
Belfast
Birkenhead
Birmingham
Vauxhall (cont.d)
Chester
Ellesmere Port
Lisburn
Liverpool
Portadown
Selly Oak
Speke
St. Helens
Warrington
Yardley
USED CAR
SUPERMARKETS
Belfast
Dublin
MOTORCYCLES
BMW
Belfast
Yamaha
Belfast
TPS
Volkswagen
Battersea
Blackburn
Blackpool
Carlisle
Hexham
Dumfries
Darlington
Guildford
Morden
Newcastle
Northallerton
Preston
Silverlink
Teesside
Walton on Thames
Edinburgh
Glasgow
Guildford
Newcastle
Reading
Teesside
TYRES
Belfast – Boucher Rd
Belfast – Sydenham Rd
Coleraine
Omagh
Portadown
SERVICE CENTRES
Renault Chelmsford
Volkswagen (CV)
Carlisle
Darnley
Glasgow
Guildford
Newcastle
Teesside
Volvo Chelmsford
Vauxhall Dundonald
Volvo
Colchester
Glasgow
Motherwell
Belfast
PARTS DISTRIBUTION
FPS
Barking
Birmingham
Bristol
Cardiff
Charlton
Colchester
Glasgow
Leeds
Leicester
Liverpool
Luton
Maidstone
Manchester
Newcastle
Nottingham
Preston
Reading
Sheffield
Southampton
Staples Corner
Apec
Bristol
BTN Turbo
Uxbridge
LOOKERS LEASING
AGRICULTURAL
DIVISION
Harrogate
Manchester
‘New Holland’
Darley Dale
FLEET FINANCIAL
Tuxford
VEHICLE RENTAL
SERVICES
Beaconsfield
Franchise Locations
Lookers plc / Six months ended 30 June 2016
41
15 year trend
Outlook - new car market
(E)
Vehicle Registrations – Units m’s
3
2.3
2.5
PENT UP DEMAND
2.4
2.1
2.48
2.63
(E)
2.75
2.7
2.3
2.27
2.0
2.0*
2009
2010
2
1.9**
2.0
1.5
1
0.5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
NewCarRegistra-ons
2011
2012
2013
2014
2015
2016
2017
2
Lookers plc / Six months ended 30 June 2016
42
Finance and PCP %
New Cars
Used Cars
90%
75% 77%
80%
67%
56%
45%
40% 37% 37% 37% 36%
35%
38% 39%
42% 43% 42% 42% 42%
30%
60%
25%
20%
30%
20062007 2008200920102011201220132014 20152016
NewFinance%
%ofPCP
42%
37%
26%
17%
5%
9%
10%
7%
84%
79%
72%
15%
63%
40%
50%
55%
52%
50%
61%
54%
70%
60%
78% 79%
82%
0%
20062007 2008200920102011201220132014 20152016
UsedFinance%
%ofPCP%
Lookers plc / Six months ended 30 June 2016
43
Divisional Summary
H1 2016
£m
%
H1 2015
£m
%
Motor
53.6
88
43.7
86
Parts
7.5
12
7.3
14
Underlying Operating
Profit
61.1
100
51.0
100
Interest
(6.5)
-
(4.0)
-
Underlying profit
54.6
-
47.0
-
Lookers plc
44
Lookers plc / Six months ended 30 June 2016
Track record of consistent revenue and profit growth
Group turnover last 15 years
4000
3500
3000
£m
2500
2000
1500
1000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Group profit last 15 years
80
70
60
£m
§  CAGR of 15.3% over 15
years (EBIT)
50
40
30
§  Consistent profit growth
20
§  Strong and swift recovery
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015