With group turnover of £4.3 billion in 2016, Lookers is one of the leading motor retail and aftersales groups in the UK. We sell over 210,000 new and used cars and light commercial vehicles. Our operations are across the UK and Ireland, with a presence in most of the major population centres. Until 4 November 2016, when the parts division was sold, the group operated through two distinct divisions, the motor division and the parts division. Details of each division are explained below.
The motor division consists of 160 franchised dealerships representing 33 marques from 102 locations. The business generates revenue from the sale of new and used cars, vans and aftersales activities.
The number of new cars sold per annum in the UK has varied between 2.1 million and 2.69 million during the past five years. Our share of the retail sector of this market is 5.5%.
The size of the UK new car market increased by 2.3% in 2016 to 2.69 million cars, its highest ever level. The new car market has two principal sectors, each of which represents approximately 50% of the market. The retail sector represents sales to individual customers and the fleet sector provides sales to corporate customers. Retail sales are generally at higher margins whilst fleet sales consume significantly higher levels of working capital.
The used car market in the UK has annual transactions of approximately 8 million vehicles, of which franchised dealers represent approximately 50%. There continues to be a major opportunity for Lookers to increase volumes in this part of the market.
Aftersales represents the servicing, repair and sale of franchised parts to customers’ vehicles. The aftersales market applies to the overall number of cars in use on UK roads, which is referred to as the UK car parc. There are approximately 34 million vehicles with
22% (7.5 million) under three years old. This is the predominant market for franchised motor dealers. The internet continues to be the primary means for our customers to research and determine which new or used cars they are interested in buying. Our website and digital marketing channels are therefore a very important part of our business and customer service offering. We continue to invest in and develop these channels in order to meet the needs of our growing customer base.
On 4 November 2016, our parts division was sold to Alliance Automotive UK Ltd for £126 million. The rationale for the sale of the parts division is explained in the business review.
Our strategy is to have the right brands and locations alongside excellent execution. Underpinning this strategy is our commitment to providing an outstanding retail experience.
We deliver on our strategy by operating a diverse business in the UK motor sector, supported by a variety of manufacturing partners across various geographies. This helps reduce our exposure to anomalies or uctuations in demand, which may affect speci c manufacturers or geographic locations.
We aim to grow the existing business through a combination of organic growth, seeking opportunities to increase our revenue and presence whilst actively pursuing an earnings- enhancing acquisitive strategy. Our track record of successful acquisitions makes this a significant differentiator for us, as we generate an average ROI of over 15% on acquisitions made in recent years.
Another key differentiator is the service and experience we offer to our customers. We aim to provide the highest standards of customer experience in the sector by continually investing in and improving three key areas of our business:
Our eighth successive year of profit growth highlights the strength of our strategy and demonstrates that our sub-sector and business model are no more overly exposed to the economic cycle than general retailers.
The group’s business activities, financial condition, results of operations or the company’s share price could be affected by certain principal risks or uncertainties which are included in the governance section of the 2016 annual report and accounts.
