Lookers Plc (lon:look)
Lookers – After The Lockdown Are They Still Safe?

Lookers Plc Financials

ItemCurrent PeriodPrevious Period
YearN/A N/A
Period12 Months12 Months
Adjusted Earnings
Adjusted EBITDA
Statutory Profit
Adjusted Profit
Total Debt
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Lookers Plc Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: Lookers – After The Lockdown Are They Still Safe?
Company: LOOK - Lookers Plc
Share Price Then: 27p
Author: Ian Smith
Date: Mon 01 Jun 2020
Comments: A while back I quite liked Lookers, they had a good range of franchises, owned quite a lot of land but had been punished a bit share price wise because of an FCA investigation.

As someone who has been following companies like NMC, Patisserie Valerie, Carillion, Kier, Conviviality and other similar businesses an FCA investigation is fine, only those seriously in trouble don’t get investigated :-), okay that is a bit of an exaggeration but…..

Clearly car sales will have been terrible on the back of COVID and this will have had an effect on retail customer confidence so not all sales lost in the shut down will be made when the showrooms first open but surely some will.

In the past the company has tried to move away from low margin fleet sales, whether this continues is unclear, as many company cars are on fixed length leases so those that have been idle for a couple of months will still be replaced.

Equally servicing will still be needed, and this may possibly be slightly more expensive if cars have been left idle, I didn’t notice the flat and now damaged tire or flat battery that now won’t hold a charge.

Jan/Feb 2020 saw a 4.8% drop in new car sales which was slightly better than the industry average suggesting that the group is still strong in the important brands.

Net debt was about £62m well short of the RCF limit of £220m which is due for renewal in March 2022, this certainly looks manageable.

There have been notifications of fraud but they are mentioned as non cash charges and the investigation is ongoing and the 2019 accounts are expected at the end of June. As the company put 7,000 staff on furlough wage costs will have tumbled, but until we then can’t really look at numbers.

So it a good buy now on the expectation that the drop to 60p around Jun 2019 is the right price, the drop after delaying the accounts is hard to evaluate as the drop in many companies was similar.

Freehold property is being sold off, I am not sure if this getting rid of no longer wanted property or part of a plan for sale and leaseback or a combination of both. In the short term £17.6m was received in 2019.
Read Count: 221/11137

Buy/No Buy In A Nutshell
NegativesShares suspended and accounts delayed beacuse of a relativelly small fraud.
PositivesA big player in the new car market and if all the funnies have been found they don't appear to be terminal for the business.
Initial Review Price21p
Last Review Price21p
Last Review Date02-Sep-2020
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