Financial Strength of Lookers Plc.

Financial Strength
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EXECUTIVE SUMMARY
Lookers Plc. announced their new strategy for 2019 to embark the competitive advantages
against the automotive market.
In 2018, Lookers Plc.’s profit before tax is £67.3m, slightly decreased 1.6% YoY (2017:
£68.4m), revenue increased to £4.9bn (2017: £4.7bn). Their used car volume growth offsets
margin pressure
and continued strong growth in aftersales division. Furthermore, Lookers had adjusted earnings
per share to 14.68p from 14.57p in 2017, final dividend increased by 5% per share
(Lookersplc.com., 2019). Taken together with its strong financial performance and position,
shows Lookers is a competitive company in the market. In 2018, Looker’s ROCE is 11.2%,
recorded 1.72% points down compare with 2017, the fall was caused by cost inflation in
property, salaries and investment to improve dealerships, but it is still an impressive return
compared with Pendragon’s ROCE at
-2.1% in 2018.
Looker’s business has significant transformation and developments in recent years. To align with
their business strategy, they closed two underperforming businesses, the Vauxhall dealerships at
Warrington and Yardley in March 2018. In October 2018, they also closed Hyundai and Nissan
business in Motherwell to reduce cost. Besides, they acquired a Ford dealership in July 2018
which complements the larger representation of Ford in Essex and acquired the Jennings Group
for a gross payment of £10.1m. Because of the acquisitions, it incurs reorganization costs of
these changes. It has been earnings neutral this year and the group expected a modest
contribution to earnings in 2019 (About Lookersplc, 2019)
Introduction
Lookers Plc. are looking for a new Operations Director, as a recruitment specialist, this report
aims to provide information and analysis to the client who interested with this position.
This report provides recent market position and financial strengths of Lookers Plc, in order to
compare Looker’s performance with that of Pendragon whether to be a good career and financial
move to this senior management position of Lookers Plc. The package would include stock
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option, and this would also be a key factor to consider the total package. The CORE Strategic
Financial Analysis Model would apply for elaborate key ratios to compare Lookers Plc and
Pendragon Plc.
External Context
Lookers Plc. has a national network in car dealerships, with a wide ranges of car manufacturers
and different brands. The company also sells used vehicles, equipment and machinery, and oper-
ates the United Kingdom's leading wholesale auto parts distributor. The company operates
through over 160 franchised auto dealerships in the UK, Lookers has wide ranges of competitors,
such as Pendragon, Rybrook Holdings Ltd & Sytner Group Ltd (Hoovers, 2019). Lookers would
be able to maintain its competitive advantage as they provided one stop services including selling
used cars, new cars and auto parts services with wide range of brands to fulfill customer needs.
Internal Context
Lookers Plc. is operating 117 subsidiaries and 159 branches (Hoovers, 2019) with 8323
employees as of 2018(About Lookersplc, 2019).
Lookers continued their strong growth in used car & aftersales division and play a resilient
performance in the challenging market. They have strong market presence, having 20 lenders
representing 60% of the market. However, Lookers have the needs to review the commission
structures and revise to more transparency, removed discretion and aligned all rate bands and cap
in place.
Lookers provides online customer experience with vehicle recommendation engine in their
website and mobile version to improve in operational efficiency. They also continued investment
in the development of multi-channel customer experience and improving the dealership estate.
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Table 2: Improving used to new sales ratio (Resources:
Profitability ratios: Under this category of ratios, analysis is done over the profits earned by
company at different points, for instance, gross profit ratio, net profit ratio (Chandra, 2020).
Under it, different kinds of ratios are computed and some of them are explained below in such
manner:
Gross profit ratio= (Gross profit/sales) *100
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