Car dealership group will close 12 more sites and axe 1,500 jobs
Lookers, the Altrincham car dealership group, announced plans to slim down its portfolio of sites, which will result in the closure of 12 sites and 1,500 redundancies.
The group, which last month rejected a merger approach from Pendragon, said this will save the business around £50m a year, for a one-off cost of £9m.
Chief executive Mark Raban said the decision to introduce further cutbacks was made during the lockdown period which saw all its showrooms shut.
The firm has now reopened its dealerships following the easing of some lockdown measures.
Mr Raban said the current situation has led to trading uncertainties, requiring a scaling back of operations: “Against this backdrop we have taken the decision to restructure the size of the group’s dealership estate to position the business for a sustainable future, which regrettably means redundancy consultation with a number of our colleagues.”
In a trading update released today, the group said it had 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 December 31, 2019.
Discussions are progressing with banks to agree amendments to covenants under the revolving credit facility.
On March 10, 2020, the group announced a delay to the publication of its financial results for the year ended December 31, 2019, due to the identification of potentially fraudulent transactions in one of its operating divisions.
The Grant Thornton investigation into this matter is nearing completion with Grant Thornton having prepared a draft report which is under review and verification by the board ahead of receiving the final report.
The initial findings of the investigation have highlighted areas where financial controls require strengthening to prevent a repetition of such accounting irregularities in the future.
In addition, the investigation has highlighted the need for Lookers to further strengthen some behavioural and cultural aspects relating to its control environment. Robust remediation activity is in progress.
The results for 2019 are expected to be published by the end of June, subject to the conclusion of banking discussions and audit.
Dealerships reopened on June 1 and the business said it has resumed selling new and used cars and providing after sales service, albeit at lower than normal capacity levels.
The group said it has taken the opportunity during the recent period of closure to enhance its digital capabilities to support the sale of vehicles through its dealership network and to focus on improving the customer experience.
In the past 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.
Lookers 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%.
In November 2019 the board announced an ongoing portfolio review and identified 15 dealerships for closure.
Taking into account the 12 dealerships now earmarked for closure following lockdown, the group said it will eventually operate from a portfolio of 136 dealerships.
It currently holds surplus freehold properties for disposal during the remainder of 2020 and 2021, with a net book value of £30m as at December 31, 2019.
Looking ahead, given the ongoing uncertainties faced by the group in the early days of reopening the business, the board continues to believe that it is too early to make any reasonable estimate of the financial impact on the group during 2020 and beyond.
Chief executive Mark Raban said: “We are pleased to have reopened our dealerships and have been careful to do this in a way that is safe for our customers and colleagues.
“At the same time, we are having to reflect on the outlook for the group and how we must adapt to ensure a positive future in what is likely to remain an uncertain economic and industry environment.
“Against this backdrop we have taken the decision to restructure the size of the group’s dealership estate to position the business for a sustainable future, which regrettably means redundancy consultation with a number of our colleagues.
“This has been a very difficult decision and we will be supporting our people as much as possible throughout the process.
“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.
“We will also ensure that our systems and processes are reliable and robust enough to position us as a leading UK motor retailer. There is still a lot more work to do, but we have the determination, platform and brand partnerships to take the business forward.”