Interim Results: Half Year Ended 30 June 2018
Presented by Andy Bruce Chief Executive Officer Robin Gregson Chief Financial Officer Nigel McMinn Chief Operating Officer
Lookers Interim Results: Half Year ended 30th June 2018 Highlights
• Profit before tax of £43.1m (2017: £50.2m) • Unbalanced profit split H1 v H2 in 2017 • VED inflated H1 • Diesel issues suppressed H2 • More normal split expected in 2018 • Revenue increased to £2.58bn (2017: £2.46bn) • Continuing to take market share in new cars
• Further organic profit growth in used cars and aftersales
• Continued cost pressures mitigated by self help actions
Lookers Interim Results: Half Year ended 30th June 2018
2 A game of two halves
36% 38% 34% 27% 64% 62% 66% 73%
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017
Profits for H1 are generally between 60% and 65% of full year profits
Lookers Interim Results: Half Year ended 30th June 2018
3 Plenty of firepower
▪ Net debt / EBITDA 0.5:1 – at the lower end of the range of 0.5:1 - 1.5:1 ▪ Significant headroom to continue to invest in organic growth and sector consolidation ▪ Dividend increased by 5% to 1.48p per share ▪ Share buy back programme ongoing
Lookers Interim Results: Half Year ended 30th June 2018
4 Strategic progress
▪ Closure of 2 underperforming businesses in the period and opened 1 new dealership ▪ Clear focus on operational excellence ▪ Continuing to invest in dealership estate and omni-channel retailing
Lookers Interim Results: Half Year ended 30th June 2018
5 Investment in dealership estate
Land Rover Motherwell Audi Farnborough
JLR Belfast VW Battersea Audi Guildford
Lookers Interim Results: Half Year ended 30th June 2018
6 Financial Review
Lookers Interim Results: Half Year ended 30th June 2018 Financial performance
H1 2018 H1 2017 ▪ Revenue increased 5% with growth in used £ £ cars and aftersales Turnover 2,576.5m 2,458.5m
▪ Profit before tax of £43.1m in line with Operating Profit 52.8m 58.1m expectations: Interest (9.7)m (7.9)m
▪ Strong comparatives in 2017 Underlying Profit Before Tax 43.1m 50.2m
Underlying Operating Margin 2.1% 2.4% ▪ Excluding property profit of £7.6m Pre-Tax Margin 1.7% 2.0% ▪ Net debt down - positive cashflow and the sale and leaseback of two dealerships Adjusted EPS 9.07p 10.49p Net Debt 54.5m 61.9m ▪ Interim dividend increased by 5% reflecting our progressive dividend policy Gearing 13% 17% EBITDA (12 months) 107.9m 115.3m
Dividend per share 1.48p 1.41p
Tax Charge 7.2m 8.6m
Profit after Tax 38.5m 36.0m
Lookers Interim Results: Half Year ended 30th June 2018
8 Group profit bridge
58 +6.6 -12.0
56
54
52
50.2 -2.7 +2.8 50 £m 48
46 -1.8
44 43.1
42
40 H12017 2017 Profit Profit New Cars Used Cars Dealership Aftersales Costs Finance Costs H12018 2018 Profit Profit
Lookers Interim Results: Half Year ended 30th June 2018
9 Used cars and aftersales drive growth
H1 2018 H1 2017 % change H1 2018 H1 2017 % change £m £m £m £m TURNOVER GROSS PROFIT
New Cars 1,311 1,312 - New Cars 85 88 (3%)
Used Cars 996 887 12% Used Cars 72 69 4%
Aftersales 228 215 6% Aftersales 105 98 7%
Leasing and other 41 44 (7%) Leasing and other 9 9 -
TOTAL TURNOVER 2,576 2,458 5% TOTAL GROSS PROFIT 271 264 3%
Lookers Interim Results: Half Year ended 30th June 2018
10 Robust capital structure
31 Dec H1 2018 H1 2017 ▪ Significant increase in net assets 2017 £m £m £m
▪ Reduction in net debt to £54.5m Fixed Assets 341.1 328.0 342.0 (31 December: £97.8m) Stocks 864.6 857.1 984.1
▪ Low levels of gearing, reduced to 13% Debtors 251.7 320.4 242.1 (31 December: 25%) Current Liabilities (excluding bank loans) 1,152.2 1,216.9 1,228.1
Non Current Liabilities (excluding bank loans) 124.9 144.6 139.4 ▪ Strong balance sheet and high levels of unutilised bank facilities Net Assets 415.4 370.8 385.0
Net Debt 54.5 61.9 97.8 ▪ Well positioned to invest in Gearing 13% 17% 25% consolidation opportunities within the sector Net Debt / EBITDA 0.51 0.54 0.95
Lookers Interim Results: Half Year ended 30th June 2018
11 Positive cash generation H1 2018 H1 2017 £m £m
EBITDA (adjusted) 69.3 66.2 ▪ Strong operational cash flow Working capital (increase)/decrease (3.8) 0.3
Cash generated from operations 65.5 66.5 ▪ Working capital levels reduced Purchase of fixed assets (14.0) (19.7)
Proceeds from asset disposals 29.7 3.0 ▪ Investment of £14.0m in dealership facilities Purchase of intangibles (4.4) (7.1)
VRS rental fleet vehicles purchased (52.7) (46.7) ▪ Received £29.7m for the sale of properties VRS rental fleet vehicles sold 43.7 43.3
Dividends paid to shareholders (9.8) (9.5) ▪ Purchased £3.1m of shares Loan repayments (5.8) (5.2)
Interest paid (9.7) (7.9) ▪ Ratio of net debt to EBITDA continues to be at Tax paid (0.4) (8.7) low level Pension payments (net of charge) (1.6) (2.0)
Shares (purchased)/issued (3.1) 0.8
Increase in cash 37.3 6.8
Decrease in net debt 43.3 12.2
Lookers Interim Results: Half Year ended 30th June 2018
12 Capital expenditure outlook
2017 2018 2019 2020-2025
£m Maintenance 5 5 5 5
£m Upgrades 41 25 20 5
£m TOTAL 46 30 25 10
Lookers Interim Results: Half Year ended 30th June 2018
13 Operational Review
Lookers Interim Results: Half Year ended 30th June 2018 Industry backdrop
▪ New car market decline in H2 17 carried over into Q1 18 ▪ Prior year H1 inflated by: ▪ VED changes on 1 April ▪ Diesel demand still robust ▪ Pre election consumer confidence stronger ▪ H1 18 registration numbers inverse of H1 17 ▪ Diesel demand and new car market stabilised ▪ WLTP ▪ Resilience in PCP ▪ Residual values stable ▪ Used and aftersales markets still growing organically
Lookers Interim Results: Half Year ended 30th June 2018
15 PCP dominating
New Car Finance % Used Car Finance %
90% 60%
80% 50%
70% 40%
60% 30%
50% 20%
40% 10%
30% 0%
New Finance % New PCP % Used Finance % Used PCP %
Lookers Interim Results: Half Year ended 30th June 2018
16 UK New Passenger Car Registrations By Diesel stabilised Fuel Type 2017-2025 Forecast 70% UK Diesel Passenger Car New Registrations 60% 2000-2017 50% 1,500,000 60.0% 40%
1,000,000 40.0% 30% 20% 500,000 20.0% 10% 0 0.0% 0%
2017 2018 2019 2020 2021 2022 2023 2024 2025
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Diesel volume Diesel share Diesel Petrol HEV PHEV BEV
Petrol vs. Diesel 3 years 60,000 miles – black book live monthly movements 2.5 Diesel Petrol 1.5 Overall Market Movement From April 2018 petrol and diesel cars have 0.5 performed inline with each other -0.5
-1.5
-2.5
-3.5 Source: CAP HPi
Lookers Interim Results: Half Year ended 30th June 2018
17 Residual values remain strong
Cumulative movements for 2018 show strength in used cars (all fuel types)
6.0
4.0
2.0
0.9
0.0 February March April May June July August September October November December January -1.0 -2.3 -2.0
-2.5 -3.0
-4.0 -3.9
2018 2017 2016 2015 -6.0
Source: CAP HPi
Lookers Interim Results: Half Year ended 30th June 2018
18 WLTP – Different pattern, same H2 outlook
▪ Real world emissions testing commencing 1 September
▪ Good availability of compliant models
▪ Some limited pre-registration at 31 August
Lookers Interim Results: Half Year ended 30th June 2018
19 New Cars – Stability in a weaker market
▪ Total turnover maintained at same level ▪ Gross profit decrease in retail but stable in fleet ▪ Profit per unit maintained ▪ Selective growth in the fleet business
New car turnover Total gross profit
900 80 -2% 800 70 - 4% 700 60 600 m +3% £ 50
500 m 68 Retail £ Retail 822 490 40 71 400 808 503 Fleet Fleet 300 30 -% 200 20
100 10 17 17 0 0 2018 2017 2018 2017
Lookers Interim Results: Half Year ended 30th June 2018
20 Used Cars – Another period of growth
▪ Profit per unit stable ▪ Residual value stability underpins margins ▪ Significant growth opportunity
Used car turnover Total gross profit
1,020 72.5 +12% +4% 1,000 72 980 71.5 960 71
940 70.5
m m £ £ 70 920 996 72 900 69.5 880 69 860 887 68.5 69 840 68 820 67.5 2018 2017 2018 2017
Lookers Interim Results: Half Year ended 30th June 2018
21 Used Cars – Accelerating growth +40%
+30%
2015 2016 2017 2018 2019 2020 2021 Actual Projected
Lookers Interim Results: Half Year ended 30th June 2018
22 Aftersales – Further improvement in performance ▪ Strong gross margin, slightly improved ▪ Continued progress in creating capacity and customer retention
Aftersales turnover Aftersales gross profit
+6% 110 230
+7% 225
220 228 100 215 105
m 210 215
m 98
£ £
205 90 2018 2017 2018 2017
Lookers Interim Results: Half Year ended 30th June 2018
23 Investment in omni-channel retailing Growing Lookers Organic Visibility
Lookers.co.uk
Source: SEO Search Visibility (SearchMetrics.com) ▪ Sitecore ▪ Stock portal ▪ Microsoft Dynamics ▪ Upgraded Sales system ▪ Cisco telephony ▪ Red Box call recording ▪ DMS read and write API ▪ Manufacturer and Finance Company integration
Lookers Interim Results: Half Year ended 30th June 2018
24 Outlook
Lookers Interim Results: Half Year ended 30th June 2018 Strategic priorities for H2 and beyond
▪ Accelerate growth in used cars
▪ Value added acquisitions
▪ Expansion with key brand partners
▪ Ongoing investment in dealership estate and multi-channel offering
▪ Focus on operational excellence
Lookers Interim Results: Half Year ended 30th June 2018
26 Current trading and outlook
▪ Strong start to H2 trading - more normal H1/H2 profit split expected
▪ September orders building
▪ Diesel demand and new car market stabilised
▪ WLTP may distort normal pattern of sales - no change to H2 outlook
▪ On track to meet market expectations for the full year
Lookers Interim Results: Half Year ended 30th June 2018
27 Appendices
Lookers Interim Results: Half Year ended 30th June 2018 Consistent financial track record Group H1 pre-tax profit trend, continuing operations
60.0 50.2 50.0 42.6 43.1 40.0 35.8 28.9 £m 30.0
20.0
10.0
0.0 2014 2015 2016 2017 Jun-182018
Group net debt Group net assets trend 180 161.7 450 415 160 385 400 140 342 350 120 300 97.8 300 257 100 74.1 250 £m 80 £m 200 54.5 60 43 51 150 40 100 20 50 0 0 2013 2014 2015 2016 2017 Jun-18 2014 2015 2016 2017 Jun-18 December December
Lookers Interim Results: Half Year ended 30th June 2018
29 Stock mix
Total Group Consignment stock - £'000 600
550
500
450
400
350
300
250 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Trading Franchises Jul 17 - Jun 18 Trading Franchises Jul 16 - Jun 17 Linear (Trading Franchises Jul 17 - Jun 18) Linear (Trading Franchises Jul 16 - Jun 17)
Lookers Interim Results: Half Year ended 30th June 2018
30 Dealership aftersales retention maintained
Cumulative Service Plans – Live book Service plan penetration
120,000 45% 39% 40% 38% 38% 38% 38% 100,000 35% 32% 33% 80,000 30% 25% 60,000 20% 40,000 15% 10% 20,000 5% 0 0%
2012 2013 2014 2015 2016 2017 2018 H1
2007 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
All figures on a like for like basis
Lookers Interim Results: Half Year ended 30th June 2018
31 Strong market fundamentals New car registration growth ▪ Car sales track 3,000,000 population growth 2,500,000 and GDP 2,000,000 1,500,000 ▪ EU now recovered 1,000,000 to previous peak 500,000
0
2017
1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
EU Car Registrations
Lookers Interim Results: Half Year ended 30th June 2018
32 Strong market fundamentals ▪ Record used car market ▪ Demand for used cars is exceeding supply
Used vehicle market Average age of used vehicles 9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
New car market Used car market
Source: SMMT and DVLA Data Source: Statista.com
Lookers Interim Results: Half Year ended 30th June 2018
33 Dealership aftersales market
9
8 -2% +8%
7 Millions 6 5 0 - 3 Years 4 4 - 6 Years 3 7 - 9 Years 2 10 - 12 Years 1 0 2014 2015 2016 2017 2018 Forecast
Lookers Interim Results: Half Year ended 30th June 2018
34 Market Update: Consolidation of ownership creates opportunities
▪ Gradual reduction in franchised dealerships set to continue ▪ Will drive up average sales per outlet ▪ Helps leverage fixed cost base
Lookers Interim Results: Half Year ended 30th June 2018
35 Acquisition history: Delivering successful integration and synergies
VRS Total Acquisition Lomond Group cost £188m Chipperfield Land Rover Colbornes 2017 Actual £38m Canterbury Mercedes ROI 20% AMERSHAM smart Benfield Motor Group Amersham Jaguar Knights BMW Drayton Mercedes-Benz
Lookers Interim Results: Half Year ended 30th June 2018
36 Business Portfolio – Franchise & Distribution Outlets
MOTOR DIVISION Dacia Jaguar Mercedes-Benz Peugeot Toyota Volkswagen CV SERVICE CENTRE Aston Martin Belfast Amersham Ashford Belfast Belfast Carlisle Renault Chelmsford Belfast Carlisle Belfast Brighton Dundonald Darnley Volvo Chelmsford Chester Glasgow Canterbury Renault Newtonabbey Glasgow Vauxhall Dundonald Audi Newcastle West London Eastbourne Belfast Guildford Ayr Newtonabbey Motherwell Gatwick Carlisle Vauxhall Newcastle LEASING Basingstoke Newtonards Maidstone Chester Belfast Teesside Harrogate Camberley Stockport Jeep Shrewsbury Newcastle Birkenhead Dublin Belfast Stafford Newtonabbey Birmingham Volvo Edinburgh Ferrari Stoke on Trent Newtonards Chester Colchester FLEET FINANCIAL Glasgow Belfast Kia Stourbridge Stockport Ellesmere Port Glasgow Belfast Guildford Belfast Tonbridge Lisburn Stockport Hamilton Fiat Newcastle Walsall Seat Liverpool VEHICLE RENTAL Newcastle Stockport Stockport Wolverhampton Manchester Newtonabbey USED CAR SERVICES Stirling Worcester Stockport Portadown Belfast Beaconsfield Teesside Ford Land Rover Selly Oak Dublin Tyneside Braintree Belfast MINI Skoda Speke AGRICULTURAL Wearside Chelmsford Bishops Stortford Crewe Eccles St. Helens MOTORCYCLES DIVISION Colchester Chelmsford Stafford Guildford BMW – Belfast Darley Dale Bentley Frinton Chipperfield Stoke-on-Trent Harrogate Volkswagen Honda – Belfast Tuxford Belfast Guiseley Colchester Manchester London - Battersea Yamaha – Belfast Harrogate Glasgow – North Nissan Newcastle Blackburn BMW Leeds Glasgow – South Belfast Stockport Blackpool TPS Crewe Sheffield London – Battersea Carlisle West London Carlisle Edinburgh Stafford South W Ferrers Motherwell Chester Dumfries Glasgow Stoke-on-Trent Sudbury West London Gateshead Smart Darlington Guildford Sunderland Leeds Brighton Guildford Newcastle Citroen Lexus Motherwell Gatwick Morden Reading Belfast Honda Belfast Newcastle Maidstone Newcastle Teesside Orpington Newtonabbey Shrewsbury Northallerton Maserati Newtonards Stoke-on-Trent Preston TYRES Hyundai Belfast Stourbridge Silverlink Belfast Boucher Rd Dundonald Tonbridge Teesside Belfast Sydenham Rd Motherwell Wolverhampton Walton-on-Thames Colerane Worcester Omagh Portadown
Lookers Interim Results: Half Year ended 30th June 2018
37 Franchise Locations
Lookers Interim Results: Half Year ended 30th June 2018 Thank you
Lookers Interim Results: Half Year ended 30th June 2018