Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Industrials
Lookers continues to perform robustly as the UK car market faces supply constraints for both new and used vehicles. While volumes are down, used prices are strongly ahead year-on-year despite plateauing in H122. As a result, Lookers expects £45m of underlying PBT in H122, ahead of its expectations. Conditions may moderate further in H222, but management still expects FY22 to be ahead of its previous expectations. We have increased our FY22 underlying PBT by 17% to £62m, while maintaining our FY23 estimates as we expect demand to face increasing challenges.
Written by
Lookers |
Smoothing out the bumps |
Pre-close H1 trading update |
Automotive retail |
30 June 2022 |
Share price performance
Business description
Next events
Analyst
Lookers is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Lookers continues to perform robustly as the UK car market faces supply constraints for both new and used vehicles. While volumes are down, used prices are strongly ahead year-on-year despite plateauing in H122. As a result, Lookers expects £45m of underlying PBT in H122, ahead of its expectations. Conditions may moderate further in H222, but management still expects FY22 to be ahead of its previous expectations. We have increased our FY22 underlying PBT by 17% to £62m, while maintaining our FY23 estimates as we expect demand to face increasing challenges.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20** |
3,700 |
13.7 |
2.97 |
0.00 |
25.7 |
N/A |
12/21 |
4,051 |
90.1 |
19.95 |
2.50 |
3.8 |
3.3 |
12/22e |
4,125 |
62.0 |
12.74 |
3.00 |
6.0 |
3.9 |
12/23e |
4,370 |
60.0 |
12.03 |
3.30 |
6.4 |
4.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Restated.
H122 performance remains resilient
In its H122 pre-close update, Lookers has indicated that its trading performance has been ahead of management expectations. It now sees H122 underlying PBT of around £45m (H121 £50.7m), which is more resilient than expected as the overall mix of market dynamics remains favourable. In the first five months, Lookers’ new cars segment has outperformed in its brand portfolio, although overall the volume drop is broadly in line with the market decline of 8.7%. Lookers’ used car volumes fell by 8.1%. The volume falls reflect continuing supply delays for new vehicles that constrain used car availability, with a favourable effect on margins, which remain substantially ahead of H121 levels. Inflationary pressures in utility and labour costs are a significant challenge and management continues to offset these through operational optimisation. The resilience of the high-margin aftersales activity delivered good growth during the period. The financial position remains strong, with adjusted net cash balances of £62.4m (FY21 £3.0m) at 31 May 2022. The balance sheet is underpinned by property and cash assets of c 91p per share.
Demand-side challenges may intensify
Used car pricing has levelled off during H122 with many models declining slightly but nevertheless margins remain well above H121 levels. Management expects the supply and cost trends seen so far this year to persist into FY23. Increased fuel costs and the cost-of-living squeeze on households add uncertainty for consumer demand. Nevertheless, Lookers expects FY22 underlying PBT to be ahead of its previous expectations, although heavily first-half weighted.
Valuation: Uncertainty defers multiple expansion
As markets recover, we would expect single-digit multiples for car retailers to expand in anticipation of higher EPS. With volume recovery appearing to be deferred by economic factors, Lookers’ single-digit FY23e P/E rating of 6.4x remains undemanding while we await more positive market indicators.
Earnings revisions
We have increased our adjusted PBT for FY22 on slightly reduced sales expectations, reflecting the H122 volume pressures more than offset by the robust margin performance especially in used vehicle markets. Our FY23 estimates remain unchanged and could now mark the expected nadir in profitability in the current cycle. We take a conservative view of H222 cash development compared to the end May balances given experiences in FY21.
Exhibit 1: Lookers’ earnings revisions
Year to December (£m) |
2022e |
2023e |
||||
Prior |
New |
% change |
Prior |
New |
% change |
|
New |
1,994.3 |
1,938.3 |
-2.8% |
2,054.2 |
2,054.6 |
0.0% |
Used |
2,079.5 |
2,018.3 |
-2.9% |
2,141.9 |
2,141.4 |
0.0% |
Aftersales |
442.1 |
442.1 |
0.0% |
455.3 |
455.3 |
0.0% |
Leasing |
141.0 |
141.0 |
0.0% |
145.2 |
145.2 |
0.0% |
(425.8) |
(415.1) |
-2.5% |
(426.6) |
(426.6) |
0.0% |
|
Sales |
4,231.0 |
4,124.6 |
-2.5% |
4,370.0 |
4,370.0 |
0.0% |
EBITDA |
128.3 |
136.1 |
6.1% |
137.8 |
137.8 |
0.0% |
Underlying EBITA |
81.8 |
90.8 |
11.0% |
88.7 |
88.7 |
0.0% |
Underlying OPBIT |
76.8 |
85.8 |
11.7% |
83.7 |
83.7 |
0.0% |
Underlying PBT |
53.0 |
62.0 |
17.0% |
60.0 |
60.0 |
0.0% |
EPS - underlying fully diluted (p) |
10.88 |
12.74 |
17.0% |
12.03 |
12.03 |
0.0% |
DPS (p) |
3.00 |
3.00 |
0.0% |
3.30 |
3.30 |
0.0% |
Net debt/(cash) |
(32.4) |
(37.7) |
16.2% |
(47.0) |
(53.8) |
14.3% |
Source: Edison Investment Research estimates
Exhibit 2: Financial summary
£m |
2020 |
2021 |
2022e |
2023e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
3,699.9 |
4,050.7 |
4,124.6 |
4,370.0 |
Cost of Sales |
(3,288.9) |
(3,534.1) |
(3,629.7) |
(3,845.6) |
||
Gross Profit |
411.0 |
516.6 |
495.0 |
524.4 |
||
EBITDA |
|
|
95.0 |
165.1 |
136.1 |
137.8 |
Operating Profit (before amort. and except.) |
|
|
47.6 |
119.2 |
90.8 |
88.7 |
Intangible Amortisation |
(4.8) |
(5.0) |
(5.0) |
(5.0) |
||
Exceptionals |
(12.2) |
(0.1) |
18.0 |
0.0 |
||
Other |
(1.6) |
(2.0) |
(2.0) |
(2.0) |
||
Operating Profit |
29.0 |
112.1 |
101.8 |
81.7 |
||
Net Interest |
(21.2) |
(16.1) |
(15.8) |
(15.7) |
||
Profit Before Tax (norm) |
|
|
13.7 |
90.1 |
62.0 |
60.0 |
Profit Before Tax (FRS 3) |
|
|
1.5 |
90.0 |
80.0 |
60.0 |
Tax |
(6.1) |
(28.8) |
(15.2) |
(12.6) |
||
Profit After Tax (norm) |
11.6 |
78.5 |
50.2 |
47.4 |
||
Profit After Tax (FRS 3) |
(4.6) |
61.2 |
64.8 |
47.4 |
||
Average Number of Shares Outstanding (m) |
390.1 |
391.1 |
391.8 |
391.8 |
||
EPS (p) |
|
|
2.97 |
20.07 |
12.81 |
12.10 |
EPS - normalised fully diluted (p) |
|
|
2.97 |
19.95 |
12.74 |
12.03 |
EPS - (IFRS) (p) |
|
|
(1.18) |
15.65 |
16.54 |
12.10 |
Dividend per share (p) |
0.00 |
2.50 |
3.00 |
3.30 |
||
Gross Margin (%) |
11.1 |
12.8 |
12.0 |
12.0 |
||
EBITDA Margin (%) |
2.6 |
4.1 |
3.3 |
3.2 |
||
Operating Margin (before GW and except.) (%) |
1.3 |
2.9 |
2.2 |
2.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
714.4 |
702.2 |
715.1 |
726.7 |
Intangible Assets |
190.1 |
187.2 |
192.2 |
197.2 |
||
Tangible Assets |
399.9 |
399.3 |
396.3 |
413.6 |
||
Right of use asset |
124.4 |
115.7 |
126.6 |
115.9 |
||
Investments |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
1,063.0 |
762.4 |
785.7 |
848.3 |
Stocks |
655.2 |
511.9 |
511.5 |
541.9 |
||
Debtors |
150.7 |
136.0 |
134.5 |
144.1 |
||
Cash |
243.0 |
103.9 |
128.9 |
150.9 |
||
Other |
14.1 |
10.6 |
10.8 |
11.4 |
||
Current Liabilities |
|
|
(1,029.9) |
(813.2) |
(713.6) |
(748.5) |
Creditors |
(913.0) |
(729.6) |
(713.6) |
(748.5) |
||
Short term borrowings |
(116.9) |
(83.6) |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(464.6) |
(281.8) |
(364.6) |
(369.4) |
Long term borrowings |
(166.8) |
(17.3) |
(91.2) |
(97.1) |
||
Lease liabilities |
(145.5) |
(136.8) |
(146.8) |
(146.8) |
||
Other long-term liabilities |
(152.3) |
(127.7) |
(126.6) |
(125.5) |
||
Net Assets |
|
|
282.9 |
369.6 |
422.6 |
457.1 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
68.2 |
114.6 |
84.4 |
90.6 |
Net Interest |
(24.3) |
(21.2) |
(16.1) |
(15.8) |
||
Tax |
(6.1) |
(28.8) |
(15.2) |
(12.6) |
||
Capex |
(16.8) |
(17.4) |
(32.7) |
(34.0) |
||
Acquisitions/disposals |
0.0 |
0.0 |
28.0 |
0.0 |
||
Financing |
0.0 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
(13.7) |
(12.1) |
||
Other |
(2.2) |
(3.5) |
0.0 |
0.0 |
||
Net Cash Flow |
18.8 |
43.7 |
34.7 |
16.1 |
||
Opening net debt/(cash) |
|
|
59.5 |
40.7 |
(3.0) |
(37.7) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
(0.0) |
||
Closing net debt/(cash) |
|
|
40.7 |
(3.0) |
(37.7) |
(53.8) |
Net financial Liabilities |
186.2 |
133.8 |
109.1 |
93.0 |
Source: Company accounts, Edison Investment Research
|
|
Research: Industrials
ArborGen delivered solid FY22 sales growth across continuing operations, with revenues up 11% to US$47.6m. Record US advanced genetic seedling sales, up 32% y-o-y, reflect the company’s focus on advanced genetics. Management also completed its strategic review, shifting focus to the high-growth US South and Brazilian markets, divesting the Australian and New Zealand business, exploring opportunities in using trees to offset carbon emissions and strategically expanding in its core markets. ArborGen is well positioned to deliver on its new strategy; we are reviewing our estimates and will update them in the near future.