Lookers Plc (lon:look)
Lookers – Positive Trading Update

Lookers Plc Financials

ItemCurrent PeriodPrevious Period
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Period12 Months12 Months
Adjusted Earnings
Adjusted EBITDA
Statutory Profit
Adjusted Profit
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Lookers Plc Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: Lookers – Positive Trading Update
Company: LOOK - Lookers Plc
Share Price Then: 25p
Author: Ian Smith
Date: Thu 04 Jun 2020
Comments: LOOK – Positive Trading Update
Lookers have just released a trading update after the re-opening of its dealerships on Monday 1 June and it seems quite upbeat.

With the benefit of enhanced online functionality which the business has been implementing, in the last two weeks, the Group has taken retail orders for 2,865 new and used vehicles which on a like-for-like basis represents approximately 51% of sales for the same period last year
Given that buying cars can’t be that high on many peoples to do list this seems like a pretty good number, suggesting that demand is still there and when people can access vehicles more readily getting back to last year’s volume could happen quite quickly.

The Group had approximately 66% of its total current colleague base (c.8,100) remaining on furlough at the end of May. In June it is expected that this will reduce to approximately 55%.
With furlough payments being withdrawn and demand apparently recovering this seems to say that most people will be back to work at roughly the same time as demand recovers.

Although all of these numbers are terrible in an absolute sense, they seem to me to suggest that the business is still solid and unless there are some loans hidden somewhere that would allow someone with a secured loan to take advantage any new needs for funds should be easily resolved.

The downside is that there are some cutback, since Nov 2019 the group has decided to close 27 dealerships leaving it with 136 this doesn’t seem too bad

They are now looking at losing 1,500 jobs, they seem to have around 7k-8k at the moment, how do you lose that many people? It is possible that control got lax and there a few jobs that could go at each dealership and head office.

Net debt of £57m at the end of May with a facility of £250m and property portfolio with an adjusted net book value of £325m at 31 December 2019
The group’s property portfolio is valued at 83p per share although the value of every businesses’ property has be questioned at the moment, also it is not clear what the borrowing are.
They seem to be a significant bit over £100, the reports often talk about net debt and the group seems to keep around £50m of cash. If the proceeds of planned property sales are mostly used to reduce debt this would be positive as interest on the debt seems to be quite high at around £15m a year.
So a fire sale of the property might yield £200m, £100m plus would pay of debts leaving around £100m which is roughly the current market cap. Surely this suggest that the market doesn’t thinks that things are so bad?

We have used the time as the business has been closed to adapt and evolve to meet changes in consumer behaviour, not just for a post Covid environment, but also to enhance our digital offering and the trend towards electrification
Not quite sure what this means in concrete terms, but if it is substantial then good.

The formal results are now expected to published at the end of June.
Read Count: 177/11139

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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