Tuesday, June 30, 2009
Lookers to raise £80m to cut debt
Car dealership group Lookers is to raise £80.7 million in a fully underwritten share sale to reduce its debts and change its banking arrangements on to more favourable terms.
The announcement, which coincided with the company's annual general meeting, will see 201.85 million new shares issued at 40p each, a 19% discount on last Thursday's (June 25) closing price.
Chairman Phil White said: "Lookers has established a solid basis for protecting profitability in the current difficult trading environment and is trading relatively resiliently. The group's balance sheet will be strengthened significantly as a result of the offer. The improved capital structure will provide significant flexibility to enable the group to pursue its development strategy and capitalise on opportunities as the market recovers."
The company will use the cash raised to repay a £50m high interest loan, reduce a term loan by £15m and reduce a revolving credit facility by £11.5m.
The Lookers board recently agreed with its lending banks the accessing of up to £210m in loans until April 2012.
Commenting on the current crisis facing the UK motor industry, Lookers said: "The global economic downturn, uncertainties in financial markets and rising unemployment have affected UK consumer confidence. A reduction in consumer credit to finance car purchases has compounded this drop in consumer confidence."
Nevertheless, the company believes that the current Government and motor industry scrappage scheme designed to boost new car and van sales should improve registrations and thereby help strengthen the company's retail sales.
Lookers says that its like-for-like new car sales for the first five months of 2009 are 10% ahead of the market and the motor division's performance in the period was ahead of budget, despite market pressures affecting sales of new cars.
Describing the current new car market as 'extremely challenging', Lookers said that although its increasing sales would gain market share the decline in volume had reduced profits compared to the same period in 2008. Lookers says that its used car sales and aftersales business continue to grow.
In a statement, the company said: "The board believes that fragile consumer confidence will mean that 2009 will be challenging for the new car market. However, the impact of the UK scrappage scheme should ultimately benefit new car sales, and the board is endeavouring to optimise the opportunity that this presents to maximise sales.
"The board believes that the Group is well placed to take advantage of opportunities which may arise and emerge from the current downturn as a stronger and more efficient business."
At the AGM, it was announced that chief executive Ken Surgenor, who will be 65 in August, will stand down from the board on September 30. Peter Jones, currently managing director of the motor division, will takeover as chief executive on October 1. However, Mr Surgenor will remain with the group running the Charles Hurst group of businesses in Northern Ireland.
DATED: 30.06.09
FEED: AW
