2020 Annual Report & Accounts
The year of our people
Contents
Strategic Review
6
Chairman’s Statement
10 2020 at a Glance
12 Our Business and Locations
14 Business Model and Strategy
16
In Conversation with our CEO
18 Operating Review
22 COVID-19 Response
24 Financial Review
28 Key Performance Indicators
30 Risk Overview and Management
38 Viability Statement
40 Section 172 Statement and Non-financial
Information Statement
Governance
50 Board of Directors
56 Group Executive Team
58 Chairman’s Statement on Corporate Governance
70 Report from the Chairman of the Nomination Committee
74 Report from the Chairman of the Audit and Risk Committee
80 Corporate Social Responsibility Review
84 Directors’ Remuneration Report
108 Directors’ Report
111 Directors’ Responsibilities Statement
Financial Statements
114
Independent Auditor’s Report to the members of Lookers plc
124 Principal Accounting Policies
136 Statement of Consolidated Total Comprehensive Income
137 Consolidated and Company Statements of Financial Position
138 Consolidated Statement of Changes in Equity
138 Company Statement of Changes in Equity
139 Consolidated Cash Flow Statement
140 Notes to the Financial Statements
177 Trading outlets
178 Glossary of terms
180 Corporate Information
180 Trading outlets
181 Glossary of terms
183 Corporate information
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Lookers plc Annual Report & Accounts 2020 | 3
Strategic
Review
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Lookers plc Annual Report & Accounts 2020 | 5
Chairman’s statement
Introduction
I was appointed Chairman of the Board on 4 September 2006 and it
is with some sadness that I present my final Chairman’s Statement.
The recruitment process for my successor is progressing as planned
and I will step down when an appointment is confirmed later this
year.
From the middle of May 2020 we progressively opened all our
locations in a manner consistent with appropriate local regulations.
We implemented new operational processes to ensure the
appropriate COVID-19 secure protocols were in place protecting
both staff and customers. This included the complete redesign of our
sales processes to offer a fully contactless experience.
Like all businesses, over the years Lookers has experienced many
challenges and none greater than those of 2020. The COVID-19
global pandemic resulted in the complete closure and severe
disruption to our normal business operations and trading patterns
throughout much of the year. This had a material impact on our
financial performance. During this time, we made many changes and
enhancements to our operating model which not only helped
mitigate the impact of COVID-19 but also served to act as a catalyst
for permanent change and improvement across the business.
In addition, in June 2020 we requested the FCA temporarily
suspend our shares whilst we investigated potentially fraudulent
transactions in one of our operating divisions, concluded a
substantial independent investigation and delayed the publication of
both the full year 2019 results and interim 2020 results. Following
the successful conclusion of these matters, we requested and were
granted restoration of our shares to the official list of the London
Stock Exchange on 29 January 2021.
In June 2020 we also announced a material restructuring
programme to prepare the business for a more sustainable future
and to optimise the many opportunities we believe lie ahead.
The combination of these issues resulted in material uncertainty
throughout much of the year.
Strategy
Following this period of uncertainty and reflecting on our learnings
throughout the COVID-19 pandemic, we refreshed our strategy. The
customer remains front and centre of everything we do, underpinned
by the right brands in the right locations. Our strategic building
blocks are centred on delivering operational excellence, providing an
engaging and safe environment for all our colleagues and
customers, enabling technology both front and back of house and
simplifying and strengthening our policy framework.
Our strategic initiatives are focused on continuing with increasing our
efficiency and improved cash management, digital investment,
preparing for electrification which we see as the biggest opportunity
in a generation and our controls enhancement programme.
COVID-19
On 23 March 2020, in order to protect the safety and welfare of our
people and customers and in response to the UK Government’s
social distancing advice, we temporarily closed all our trading
locations. Following the introduction of new operating measures, the
Group partly reopened 31 locations to provide essential repairs and
maintenance to key workers’ vehicles alongside 10 parts distribution
centres.
In November 2020 further restrictions came into effect and as a
result we were only able to provide our customers with pre-booked
aftersales appointments and to provide both new and used vehicles
sales using our Click & Drive contactless solution as the showrooms
remained closed. In December 2020 various regional and tiered
restrictions were implemented across England, Scotland and Ireland.
On 4 January 2021 a third national lockdown commenced which
saw our vehicle showrooms closed. This situation continued until
12 April 2021 (Northern Ireland - 30 April 2021) when we were
delighted to be able to re-open the entire business as normal.
We remain committed to providing the best possible service whilst
ensuring the wellbeing of both our colleagues and customers.
Restructuring
In June 2020 the Board undertook a review of the Group to
consider the future operating model in light of potential demand, a
reduced dealership estate and structural changes taking place
across the industry. As a result, the Board took the difficult decision
to commence redundancy consultations across all areas of the
business, which resulted in approximately 1,500 redundancies and
the closure or consolidation of 12 sites. The Board carefully
considered all options and regrettably considered this action as
being necessary in the current environment to sustain, protect and
enhance the business over the long term.
Performance in 2020
The financial performance of the Group during the year was
significantly impacted by the disruption caused by the COVID-19
global pandemic together with a number of non-underlying one-off
costs resulting from the Group’s restructuring programme,
impairment of goodwill and costs in relation to the investigation and
resolution of legacy accounting issues.
Statutory profit before tax for the year was £2.0m (2019: restated
loss of £45.7m). Excluding the impact of non-underlying items, the
Group recorded an underlying profit before tax* of £14.1m (2019:
restated £4.0m).
The first six months of the year (H1) proved very challenging with the
complete closure and lockdown of operations for over two months.
As we emerged from lockdown, performance in the second six
months of the year (H2) improved materially. This was driven by
strong outperformance of the retail new car market, improved used
car margins, the early benefits of the Group’s restructuring initiatives
and several operational improvements implemented during
lockdown. Underlying profit before tax* in H2 was £50.2m
(2019: loss (£18.1m)). Our performance in H2 brings me
confidence that we can deliver our 1.5% - 2.0% target return on
sales over the long term.
*Alternative performance measure - see Note 30 to the Financial Statements
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“I am extremely grateful for the support and patience
that we have received from our stakeholders, including
the UK government, throughout what has been a very
challenging period for both the business and our people.”
6 | Strategic Review
Lookers plc Annual Report & Accounts 2020 | 7
We were also pleased to appoint Robin Churchouse as an
independent Non-Executive Director and Chair of Audit and Risk
Committee in December 2020 and January 2021 respectively, and
Paul Van der Burgh as Non-Executive Director in April 2021 and
then as Senior Independent Director from May 2021.
As the search for my successor continues the Board has asked me
to remain as Chair in order to ensure an orderly handover, and I
therefore stood for reelection at the 2021 AGM.
I would like to thank all my Board colleagues, past and present, for
their continued support and contribution to the Group.
Dividends
The Board remains mindful of its relationships and commitments to
all stakeholders. The dividend policy remains that subject to
satisfactory trading prospects, dividends are covered around 3.0 to
3.5 times underlying earnings and paid in approximately one third
(interim dividend) and two thirds (final dividend) split.
In the light of the financial performance during the period, continued
uncertainty around COVID-19 and as part of its ongoing actions to
protect the Group’s balance sheet the Board has decided not to
recommend any dividends for the year.
Current trading and financial outlook
In line with COVID-19 restrictions, the Group’s showrooms remained
closed until 12 April 2021 (Northern Ireland - 30 April 2021).
Despite these restrictions, the Group continued to take orders and
fulfill vehicle handovers through its dealership teams, call centres
and website. These activities were underpinned by our Click & Drive
and contact-less technology platform.
As we announced on 25 May 2021 and 28 June 2021, trading
across the Group has been robust since the reopening of our
dealerships. We continue to experience strong consumer demand
and ongoing outperformance of the UK retail new car market. Used
vehicle margins also remain strong, benefitting from improving
residual values and greater operational focus. In addition to these
market trends, the Group continues to benefit from its enhanced
hybrid omni-channel customer offer, and the decisive self-help
restructuring initiatives implemented last year.
As we look forward into the second half of 2021, there remains some
uncertainty driven by the ongoing impact of COVID-19 and notable
supply restrictions in both new and used vehicles which have been
tightening in recent weeks - the former in part due to the current
worldwide semiconductor chip shortage.
Notwithstanding these uncertainties, given the strength of
performance during the first half of 2021, the Board remains
confident about the outlook for the remainder of 2021.
Conclusion
2020 was a very challenging year. I am extremely proud of how our
people responded, showing real dedication and flexibility. I would like
to personally thank the whole Lookers team for their understanding
and dedication during such a challenging time for the Group.
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We have always enjoyed strong relationships with our Original
Equipment Manufacturer (OEM) Brand Partners and are grateful for
their support across a range of financial and other measures during
the year.
The investigation into our financial systems and accounting controls,
the delay in the publication of our 2019 results and the subsequent
temporary suspension of our shares were a great disappointment.
With these matters now resolved we can look to the future with
increased confidence.
Lookers is a great business with great brands and great people. It is
difficult to look too far ahead at the moment, but I am reassured that
we have the resilience to weather the current storm and the agility to
emerge as a business which can build on its strong foundations. We
can now move forward from here focussing on the many thousands
of customers who rely on us for their mobility.
It has been a great privilege to chair Lookers, and I wish all my
colleagues, past and present, our stakeholders, and my successor as
Chair every future success.
Phil White
Chairman
30 June 2021
Lookers plc Annual Report & Accounts 2020 | 9
Refinancing
Throughout the year the Board was focused on preserving cash and
protecting the Group’s liquidity position. As at 31 December 2020
net debt* was £40.7m (2019: £59.5m). This reduction has been
delivered through increased control and focus on all aspects of
working capital management and a robust approach to capital
allocation.
In May 2021 we agreed with our Banking Club a new credit facility
providing an initial £150m expiring in September 2023. I would like
to take the opportunity to thank our Banking Club for all their
support over the last 18 months.
Regulatory relations
As previously reported, we have been working internally to review our
governance, systems and controls including as they relate to our
regulated activities. On 2 March 2021 we announced that the FCA
had advised the Board of its decision to close the investigation
against Lookers Motor Group Limited for the possible mis-selling of
regulated products between January 2016 and June 2019. The
FCA closed the investigation without applying any sanction but noted
several concerns relating to the historic culture, systems and controls
of the Group which the Board fully accepted.
The Group is satisfied that the FCA confirmation represents an
adjusting event after the balance sheet date as this provides proof
that there was not an obligating event and have therefore released
the £10.4m provision made in the 2019 Financial Statements in
2020.
8 | Strategic Review
Management and Board changes
2020 was a year of significant change as we sought to refresh and
reshape the Board to prepare for the significant opportunities and
challenges ahead. Richard Walker, Sally Cabrini, Stuart Counsell and
Tony Bramall all left the Board during 2020.
We were delighted to appoint Mark Raban as Chief Executive Officer
in February 2020 and Duncan McPhee as Chief Operating Officer in
January 2021.
Anna Bielby was appointed as Interim Chief Financial Officer in
January 2021 for a term of six months. Since then she has made a
very valuable contribution to the Group. She has agreed to extend
her assignment and will leave the Group at the end of July 2021
following completion of a number of big projects. A search for Anna’s
replacement is underway.
Heather Jackson was appointed Senior Independent Director and
Chair of the Remuneration Committee in July 2020 and November
2020 respectively. On 13 April 2021 Heather advised the Board of
her decision to step down to focus on her increasing non-executive
directorships and business interests.
Victoria Mitchell assumed the role of Chair of Lookers Motor Group,
the FCA regulated entity, in July 2020.
*Alternative performance measure - see Note 30 to the Financial Statements
2020 at a glance
Click&Drive
Implemented and launched completely online system for buying a car
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£3.70 billion
revenue
(2019: £4.81bn)
150
franchise
dealerships*
(2019: 151)
32
manufacturer
brands*
(2019:32)
*Cars and light commercial vehicles
Sold nearly
165,000
new & used cars and light
commercial vehicles
(2019: 213,000)
NOTE: Throughout the Annual Report &
Accounts, Alternative Performance Measures
(APMs) have been used which are non-GAAP
measures that are presented to provide readers
with additional financial information that is
regularly reviewed by management. Definitions
of APMs are made within the Glossary of Terms
on page 181.
10 | Strategic Review
11.1%
gross profit margin (2019: 10.7%)
£30.9m
operating profit/(loss) (2019: £(12.8)m)
£14.1m
underlying profit before tax (2019: £4.0m)
£2.0m
profit/(loss) before tax (2019: £(45.7)m)
£40.7m**
net debt (2019: £59.5m)
**Bank loans and overdrafts less cash and cash equivalents. Lease liabilities,
vehicle rental liabilities and stocking loans are not included in net debt.
Lookers plc Annual Report & Accounts 2020 | 11
Our business and locations
Car & commercial vehicles
1
13
1
3
1
Aston Martin
Audi
Bentley
BMW
Citroen
1
7
Cupra
Dacia
1
1
1
DS
4
Honda
Hyundai
Jaguar
10
1
1
1
Ferrari
1
Jeep
14
16
Ford
4
Kia
3
Land Rover
Lexus
Maserati
Mercedes-Benz
MINI
8
1
1
7
Nissan
Peugeot
Polestar
Renault
4
10
3
10
2
Seat
12
Skoda
smart
Toyota
Vauxhall
Volkswagen
4
3
VW Commercials
Volvo
Motorcycles
1
1
1
BMW
Honda
Yamaha
12 | Strategic Review
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TPS
TPS
TPS
TPS
( x2 )
TPS
Lookers plc Annual Report & Accounts 2020 | 13
Business model and strategy
Our strategy is to have the right brands in the right locations. We
deliver on our strategy by operating a diverse business in the UK
motor sector, supported by a variety of OEM Brand Partners which
we represent across the UK. This structure helps reduce our
exposure to anomalies or fluctuations in demand, which may affect
specific manufacturers or geographic locations.
We aim to put the customer and safe customer outcomes at the
centre of everything we do. Underpinning this strategy is our focus
on people, simplicity and consistency, operational excellence and
technology to ensure that we deliver a great customer experience
achieving customer loyalty and retention. We aim to serve our
customers through whatever means they choose, and so should
they decide to engage with us in person, by phone or through the
internet we are here to deliver a simple, engaging and transparent
customer experience every time.
People driven
Our people are our most
important asset. We aim to
build an empowering and safe
environment with a culture
based on always doing the
right thing.
We are Lookers
We aim to keep things simple
with consistent processes
and systems, so our people
are equipped with the right
tools to do the right thing for
our customers.
Customers
for life
Operational
excellence
Committed to best in class
performance and delivering long
term sustainability for our brand
partners. Relationship based on
mutual respect and trust.
Technology enabled
Technology is a key business
enabler. We aim to deploy
technology creatively in all
areas of the business to drive
real competitive advantage
and benefit our customers, our
people and our brand partners.
Customers for life
Continuous focus on putting customers at the heart of everything we
do ensuring right first time, safe outcomes, building loyalty and a long
lasting relationship.
What we do:
• We sell new and used vehicles through retail, motability, fleet
and leasing channels with an aftersales business that offers
servicing, parts, repair, MOT and body repair.
• We aim to have the right brands in the right locations. We
continuously review and refresh and in 2020 we carried out
restructuring of existing sites whilst launching a new and
exciting all electric brand to the UK called Polestar.
• Our people are our greatest asset. Our people support excellent
customer experience to deliver our business model.
• Our model is underpinned by the customer lifecycle. Our
customers typically buy a new car from us, provide a used car
in part exchange to support our used business and use
Lookers’ aftersales department for servicing, parts and repair.
Our happy customers are customers for life.
• Our business model is agile, and we have continued to adapt
to evolution (for example digitisation though Click & Drive)
alongside our regulatory requirements. We also adapted well
to the challenges caused by the COVID-19 pandemic.
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We aim to achieve this through investment in the following areas:
• People driven
We have a hard working, committed, resilient and talented team
at Lookers and we see our people as our most important asset.
To continue to succeed we will continue to drive staff
engagement through a number of reward, recognition and
well-being initiatives. We aim to build an empowering and
safe environment with a culture based on always doing the
right thing.
• We are Lookers
As a result of several years of acquisition driven growth, the
Group has become quite fragmented and complex. We are now
firmly focused on driving simplicity, consistency and transparency
in our operating model. We aim to keep things simple with
consistent processes, systems and controls so our people are
equipped with the right tools to do the right thing for our
customers.
• Operational excellence
We are committed to delivering best in class performance and
to deliver long term sustainability for our OEM Brand Partners.
We aim to foster relationships that are built on mutual respect.
From operational profit, volume, margin and cost control to
customer satisfaction, brand scorecard performance,
compliance and staff engagement our aim is to be the best. It is
through this approach that we hope to grow our existing brand
partner relationships and attract new OEM Brand Partners to
the Group.
• Technology enabled
We see technology as a key business enabler. We aim to deploy
technology creatively in all areas of the business to drive real
competitive advantage that benefits our customers, our people
and our OEM Brand Partners. We have made significant
advances over the past 12 months in standardising and
developing the various sales and aftersales platforms all with
the customer experience remaining front and centre. To support
this, as a progressive business, we will continue to drive
efficiencies through a cycle of continuous improvement and
technology upgrades which will enhance the user experience
and drive operational efficiency. We recognise the importance
of the omni-channel experience and whilst the transition
towards online is moving at pace, we are equally focused on
developing our instore experience.
How we create value:
• For our customers:
We aim to have customers for life. And we strive to increase
the customer experience and our customer satisfaction
scores
• For our people:
We employ over 6,500 people and our feedback tells us that
our people are engaged with the business
• Customers for life
Built on trust and driven to be the best, is our purpose. The
Lookers business has been around for over 100 years during
which time we have delivered a great customer experience. We
are trusted with every journey. The Group recently appointed a
Director of Customer Engagement to focus on improving the
customer experience through better data management,
enhanced customer insights, simplified and transparent
marketing communications and a consistent approach to our
Customer Contact Hub operations. We are now ready to build
on this with continuous focus on putting our customers at the
heart of everything we do ensuring right first time, safe
outcomes, building loyalty and a long-lasting relationship.
In a rapidly changing, ever evolving and competitive marketplace
we continue to develop our retail proposition. In addition to our
core strategy we are working on a number of other initiatives, to
further develop our business for a long, sustainable and successful
future. These are:
• Electrification and sustainability
We have recently appointed a Business Development Director
and Group Energy Manager in order to accelerate our progress
in electrification and sustainability.
• SMART repair
We are in the process of recruiting a senior manager to head up
our SMART repair and bodyshop operations. We see SMART
repair as being a significant contributor to aftersales profitability
in the future.
• Retention
The process is underway to improve customer retention through
improved extended warranty and service plan sales, improved
finance renewals performance and a robust approach towards
lapsed customers.
Our goal is to be recognised as the local dealer of choice by our
customers, the brand partner of choice by our OEM Brand Partners
and the employer of choice by our people throughout both the UK
and Ireland.
• For our shareholders:
We sell cars and generate revenue, we have a laser focus on
margin and we manage our cost base appropriately. Over the
medium to long term we aim to create value for our
shareholders via capital growth and dividends
14 | Strategic Review
Lookers plc Annual Report & Accounts 2020 | 15
In conversation:
Mark Raban
Chief Executive Officer
“I am most proud of the
fantastic Lookers team
who have continued to
show great resolve, trust
and loyalty as we navigated
our way through the
challenges of 2020, a year
that we will not forget!”
How would you describe 2020 for Lookers?
Last year was without doubt one of the toughest years in the
Group’s history. Shortly before we were due to publish our 2019
financial results in March 2020, we discovered some potentially
fraudulent transactions in one of our operating divisions. We
delayed the publication of our results and immediately instructed
an independent investigation. At the same time, the first national
COVID-19 lock down commenced and we closed virtually our
entire operations furloughing the vast majority of our colleagues.
Completing the investigation in such conditions was challenging
and after delaying our results we requested that our shares be
temporarily suspended in July 2020.
We concluded our investigation and finally published our 2019
accounts in November 2020. Although our 2018 and 2017
comparatives were materially restated we were pleased to achieve
an unqualified audit opinion.
16 | Strategic Review
Dealing with the investigation and the impact of COVID-19
together was a “perfect storm” for the Group which placed
considerable pressure on our colleagues, shareholders, pension
trustees, OEM Brand Partners, suppliers and our Banking Club. I
am very grateful for the way all our stakeholders stepped up to
support the Group during this difficult time.
Against this background, from a financial perspective, I am
particularly pleased that in 2020 we managed to increase our
underlying profit and reduce our net debt.
Finally, I am most proud of the fantastic Lookers team who have
continued to show great resolve, trust and loyalty as we navigated
our way through the challenges of 2020, a year that we will not
forget!
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invention of the automotive vehicle itself. Battery and plug in hybrid
powered vehicles currently account for over 10% of the UK new
car market and under government policy by 2030 all new vehicles
sold will be electric powered.
All our OEM Brand Partners have invested significantly in electric
product development and have good pipelines of electric vehicles
coming to market over the next few years. Initial customer “range
anxiety” and comparatively high vehicle pricing has been an issue
for early adopters but as technology improves many new models
will have extended range capability.
There are many hurdles to overcome as we move towards pure
electrification but as charging infrastructure is rolled out and
vehicle pricing normalises, I believe we will see a material increase
in the adoption of electric vehicles at a greater rate than currently
anticipated.
Electrification is a fantastic opportunity for Lookers. In 2020 we
launched our first new electric only partnership with Polestar. We
aim to build on this success creating a centre of excellence and
product knowledge for both sales and aftersales.
What are the priorities for the next 12 months?
We have four key priorities:
• Investment and development of the Group’s omni-channel
customer experience, enhancing choice through a flexible
combination of digital engagement and high quality
forecourt service. We are excited about our continued digital
investment plans. Having invested significantly in our online
capability over recent months we aim to build on this investing
further in both front and back of house technology solutions to
ensure the customer remains at the centre of everything we do.
• Harnessing growth from the transition to electric vehicles
through infrastructure investment and connected car services,
alongside the roll-out of new aftersales services. We believe this
is a material opportunity for the Group moving forward.
• Continued focus on driving operational excellence through
further productivity improvements, effective cash management
and a robust approach to capital allocation.
• Focus and investment in people and systems to support the
Group’s simplification, controls, engagement and transparency
initiatives.
Mark Raban
Chief Executive Officer
30 June 2021
Are all the legacy issues behind you now?
Our fraud and accounting investigation is complete; our historic
financials have been restated and our shares were restored to the
London Stock Exchange at the end of January 2021. In addition, in
March 2021 the enforcement division of the FCA confirmed that
they had closed their investigation into our historic sales processes
without further sanction. We remain absolutely committed to
delivering safe and transparent customer outcomes as part of our
“customers for life” strategy. I am personally leading a cultural
development programme across the Group that aims to build on
the Group’s core values of simplicity, engagement and
transparency. We have recently rolled out a new remuneration and
incentive programme for our sales team, to underpin and
encourage these values.
We are continuing our programme of strengthening our systems
and controls environment and are well underway with progress
towards a single, standardised dealer management system
throughout the entire dealership network.
I continue to strongly believe that the right culture and behaviours
underpinned by robust systems and controls will provide the right
customer outcomes and give us significant competitive advantage.
How did the COVID-19 global pandemic impact the business?
The COVID-19 global pandemic touched every aspect of
everyone’s lives. My first thoughts remain with all of those that have
been personally impacted by the virus and the nation’s key workers,
including our own technicians, who have done a fantastic job at
looking after others.
History teaches us that at times of crisis the pace of change,
development and invention often accelerates. Over the last 12
months the Group has developed significantly. In order to mitigate
the impact of COVID-19 we rolled out many operational changes
and enhancements to enable the Group to continue to operate in
this “new world”. Our colleagues and customers were quick to
respond to and accept these new ways of working. New technology
solutions like Click & Drive, our online sales proposition,
unaccompanied test drives, remote document signing and
contactless sales experience are initiatives which will all continue
and develop as the Group moves forward post COVID-19.
As we reflect on the learnings of the last year, I am more convinced
than ever that we must continue to strive to allow our customers to
interface with us in a way that is driven by and satisfies them. Many
customers want to be able to experience a hybrid online / offline
process and we aim to create technology which allows them this
seamless interconnectivity.
My overriding memory of the global pandemic is again rooted in
the reaction and response from the Lookers team who throughout
have looked out for each other and our customers with great care.
What are your views on electric vehicles?
The pathway to the entire replacement of the internal combustion
engine in favour of battery powered electric vehicles is already well
underway. This represents the biggest industry change since the
Lookers plc Annual Report & Accounts 2020 | 17
Operating review
Analysis of revenue
Revenue
New cars
Used cars
Aftersales
Leasing and other
Less: intercompany
2020 £m
2019 £m
(restated)
1,709.3
1,779.1
383.8
148.4
(320.7)
2,226.4
2,326.3
495.3
153.3
(394.8)
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Variance
2020 LFL £m
2019 LFL £m
LFL variance
-23.2%
-23.5%
-22.5%
-3.2%
1,690.3
1,757.1
378.0
136.0
(313.6)
3,647.8
2,135.3
2,214.3
470.0
137.3
(376.0)
4,580.9
-20.8%
-20.6%
-19.6%
-0.9%
-20.4%
Total
3,699.9
4,806.5
-23.0%
Market overview
The new car market in 2020 was severely disrupted by the
COVID-19 global pandemic. UK new vehicle registrations at 1.63m
was the lowest level on record since 1992 and represented a
decline of 29.4% versus 2019. New vehicle registrations to fleet
customers were 0.88m representing 54.2% of the total market,
declining by 31.7%. New vehicles registrations to retail customers
declined by 26.6%.
Registrations of diesel and petrol engines continued to decline being
48% and 33% below 2019 respectively. There are notable
regulatory pressures facing our OEM Brand Partners in achieving
emissions targets. As a result of changing customer preferences and
the evolving legislative landscape the registrations of alternative fuel
vehicles continued to gain market share and showed a growth of
67%. The Board believes that the continued migration towards pure
electric vehicles represents a significant opportunity for the Group.
In the period the Group outperformed the new car market and
currently enjoys a 6.2% (2019: 5.8%) share of the UK retail market.
The used car market remains an area of material opportunity for the
Group. In 2020 there were approximately 6.8m used vehicle
transactions. Throughout the COVID-19 global pandemic consumers
have continued to favour private transportation and in the period
after the first lockdown in particular the Group experienced strong
demand for cheaper used cars as consumers sought second and
third vehicles for the household.
18 | Strategic Review
Aftersales represents the servicing and repair of vehicles and sale of
franchised parts. In the UK the car parc is approximately 36.7m cars
and light commercial vehicles, with a significant proportion under
three years old. This represents a significant opportunity for
franchised motor dealers, and we are focused on developing the
aftersales business and investing in our offering through initiatives to
increase volumes and margins.
The internet remains the primary means for our customers to
research and determine which new or used cars they are interested
in buying. As the Group responded to COVID-19 we made many
enhancements to our online capabilities including launching Click &
Drive, online finance applications, remote document authorisation
and contactless handover. These initiatives have helped to mitigate
the financial impact of COVID-19 trading restrictions and to ensure
the continued safety of customers and our colleagues.
Operations summary
Total revenue of £3,699.9m (2019: £4,806.5m) was 23.0% lower
than 2019. Like-for-like (LFL*) revenue declined by 20.4% with
revenue from new cars, used cars and aftersales all declining as a
result of the temporary closure of the Group’s dealerships as a
consequence of the COVID-19 global pandemic.
*See Glossary of terms on page 181.
Note: Leasing and other includes revenue from non-leasing vehicle sales made by the Group’s leasing businesses.
Analysis of gross profit
Gross profit
2020 £m
New cars
Used cars
Aftersales
Leasing and other
Total
Gross Margin %
109.2
117.9
164.6
19.3
411.0
11.1%
2019 £m
(restated)
147.0
138.1
211.9
16.1
513.1
10.7%
Variance
2020 LFL £m
2019 LFL £m
LFL variance
-25.7%
-14.6%
-22.3%
19.9%
-19.9%
107.6
116.8
161.7
18.0
404.1
11.1%
143.3
135.1
198.3
17.7
494.4
10.8%
-24.9%
-13.5%
-18.5%
1.7%
-18.3%
Gross profit decreased by 19.9% to £411.0m (2019: £513.1m)
driven by the revenue shortfall. Gross margin at 11.1% was 0.4
percentage points ahead of 2019. Gross margin in the first six
months of the year (H1) was broadly flat recovering in the second six
months of the year (H2) as the Group drove stronger used vehicle
margin.
New cars
New cars
Retail unit sales
Fleet unit sales
Total unit sales
Gross margin %
2020
46,665
39,890
86,555
6.4%
2019
Variance
2020 LFL
2019 LFL
LFL variance
59,212
53,694
112,906
6.6%
-21.2%
-25.7%
-23.3%
45,784
39,834
85,618
6.4%
55,179
52,687
107,866
6.7%
-17.0%
-24.4%
-20.6%
The sale of new cars represented 26.6% (2019: 28.7%) of total
gross profit. The COVID-19 global pandemic had a material impact
on UK new car registrations during 2020. The start of lockdown
during March resulted in a market decline of 44.4%, before the full
impact was felt in April and May, with the market recording a decline
of 97.3% and 89.0% respectively. This had a material impact on the
overall H1 new car market which declined by 48.5%. Against this on
a like-for-like basis, the Group’s sale of new units declined by 45.2%
representing a modest outperformance against the UK market.
In H2 the new car market showed some recovery with UK new
vehicle registrations declining by 6.2%. The Group’s new vehicle
sales performance improved materially in H2, benefitting from
several operational initiatives and recording an outperformance of
the total market by 16.2%.
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Operating review
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Used cars
Used cars
Retail unit sales
Gross margin %
2020
78,341
6.6%
2019
Variance
2020 LFL
2019 LFL
LFL variance
100,764
-22.3%
5.9%
76,968
6.6%
94,629
6.1%
-18.7%
The sale of used cars represented 28.7% (2019: 26.9%) of total
gross profit. Like-for-like used unit sales declined by 18.7% which is
a resilient result given the serious disruption caused by various
lockdown restrictions throughout the year.
Gross margin was 0.7 percentage points ahead of 2019. In H1 gross
margin was below last year’s levels as the Group took active
measures to reduce overall used car stock levels and significantly
improve the ageing profile in response to the initial lockdown. These
measures together with an improved market and robust residual
values drove improved margin during H2.
We continue to focus on robust stock management and sourcing
good quality vehicles, both of which help to improve profitability. The
used car market remains of significant importance to our business
model and continues to represent a significant opportunity for the
Group. During the period we made several enhancements to our
business processes including unaccompanied test drives, a number
of online enhancements and contactless handover all of which have
helped mitigate the impact of lockdown restrictions and provide a
catalyst for permanent positive change.
Aftersales
Aftersales
Revenue £m
Gross margin %
2020
383.8
42.9%
2019
495.3
42.8%
Variance
2020 LFL
2019 LFL
LFL variance
-22.5%
378.0
42.8%
470.0
42.2%
-19.6%
Aftersales is a key part of the Group and represented 40% (2019:
41.3%) of total gross profit. On a like-for-like basis aftersales
revenues were 19.6% down versus 2019. At the outset of lockdown,
the Group asked for volunteers from its technicians and parts teams
in order to maintain a presence at 41 aftersales locations supporting
key workers.
We continue to focus on increasing the penetration of service plans.
We now have 168,986 live service plan agreements, which is up 5%
on 2019. Service plan contracts are a strong retention tool for the
Group, creating a long lasting and sustainable relationship with our
customers.
Our workshops remained fully operational throughout H2 operating
with upweighted COVID-19 secure protocols to protect both our
customers and colleagues. We implemented online service check in
which has proved popular with customers and has helped to drive
productivity.
We remain fully committed to our ongoing technician apprentice
scheme which has developed significantly over the past year.
20 | Strategic Review
Lookers plc Annual Report & Accounts 2020 | 21
COVID-19 response
Key events 2020 timeline
23 March
Temporary closure of all trading locations announced. Following the introduction of new operating measures,
the Group subsequently partly reopened 31 locations providing essential repairs and maintenance to key
workers vehicles and 10 parts distribution centres.
20 April
11 May
18 May
1 June
Group launched new website functionality allowing customers to reserve vehicles, pay a deposit, complete an
online finance application and receive vehicle delivery and handover at home. We subsequently developed this
by launching our Click & Drive online offer.
Successfully implemented and tested new operating procedures and the Group reopened all its aftersales
facilities gradually rebuilding capacity.
Group implemented a new contactless vehicle handover and delivery process delivering nearly 4,000 new and
used retail vehicle orders in May. Unaccompanied test drives initiated.
Group fully reopened all dealerships in England in accordance with government policy and updated operating
procedures.
8 June
Group fully reopened all dealerships in Northern Ireland.
29 June
Group fully reopened all dealerships in Scotland. All UK dealerships fully operational from this point.
5 November
New lockdown restrictions in place, pre-booked aftersales service being provided with new and used car sales
activity carried out via Click & Drive.
December
Various regional and tiered restrictions implemented across England, Scotland, NI and ROI.
4 January 2021
A third national lockdown was implemented. Pre-booked aftersales service being provided with new and used
car sales activity carried out via Click & Drive.
12 April 2021
(30 April 2021 - NI)
All dealerships fully reopened and trading normally.
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Responding to COVID-19
The COVID-19 global pandemic remains an unprecedented
challenge. Our response to the pandemic and its consequences
has been guided by three key principles:
• Protecting colleagues and customers
• Managing the financial consequences and protecting
• The Group accessed the Government’s Coronavirus Job
Retention Scheme (CJRS) and other Government initiatives to
protect cash flow. The Group benefited during the year from
£34.9m of receipts under the CJRS arrangements, and a
£10.2m business rates holiday. In addition the Group deferred a
VAT payment of £15.6m that it settled in full in March 2021.
The Board would like to thank its financing and Banking Club
who have been very supportive through this difficult period.
Proactive engagement and communication with all
stakeholders
The Board is very grateful for the support of all stakeholders
throughout this challenging period. Our OEM Brand Partners have
been particularly supportive from both an operational and financial
perspective which has highlighted the underlying strength of the
UK franchised dealer model.
Employees: Communication and engagement with our colleagues
is a key priority for the Group. We made every effort to keep our
teams engaged including the use of our Workplace by Facebook
application and various video messages from the Executive
Management Team. Team wellbeing remains a key focus with
additional measures and support for those needing them.
Customers: We have remained in active dialogue with both our
retail and corporate customer base. We were particularly proud to
support key workers with subsidised servicing and repair and
continued safe fleet deliveries into the NHS during the lockdown
period.
Suppliers: We have been grateful for the support from our key
suppliers. We have sought to agree fair terms and have continued
to adhere to normal payment practices unless an alternative
arrangement has been mutually agreed.
Landlords: Unless otherwise agreed the Group continued to pay
rent throughout the period in accordance with our lease
obligations. We were very grateful to certain landlords who
responded positively to our request for deferred payment terms.
Shareholders: We sought to engage proactively with shareholders
and issued a number of trading and operational updates ensuring
the market was informed of our trading performance.
the business
• Proactive engagement and communication with all stakeholders
Protecting colleagues and customers
Our first thoughts are for those impacted by the virus and their
families. The Group’s key priority was and remains to protect our
colleagues and customers and to do everything possible to prevent
the further spread of the virus.
We provided a comprehensive suite of new operating procedures
and protocols to all colleagues and we keep these under constant
review as the situation continues to develop.
We have upgraded our cleaning regimes and continue to work with
our supply chain partners to ensure that personal protective
equipment, hand sanitiser and masks are available.
We introduced a comprehensive contactless handover process
and rapidly rolled out unaccompanied tests drives. Our vehicle
cleaning process is based on a 40-point check giving our
customers additional peace of mind when taking delivery of their
vehicle or undertaking a test drive.
Our new Click & Drive website functionality provides an additional
route for our customers to remotely order a vehicle and have it
delivered to their home if required.
We rapidly rolled out new technology solutions to support remote
working from home wherever possible including our customer
contact colleagues, the head office team and certain dealership
administrative and sales functions.
Managing the financial consequences and protecting the
business
The Board took decisive action in managing the Group’s finances
in order to protect the business for the long term. These actions
included:
• The vast majority of colleagues were immediately furloughed
as all trading locations were temporarily closed.
• All members of the Board and various members of senior
management took 30% pay cuts. These were removed on
1 September 2020. Executive bonus entitlement was also
waived.
• Various capital expenditure programmes were delayed.
• Dividends were suspended.
• All discretionary costs were reviewed and reduced.
• Restructuring activity including further site closures and
redundancies were accelerated. These were regrettable but
necessary to protect the long-term future of the business.
• The Group’s fleet business was reviewed and restructured to
focus on margin retention and working capital control.
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Cash flow
The Group’s net cash inflow from operating activities is £37.8m
(2019: restated £79.0m).
The prior year net cash inflow includes the benefit of increases
stocking funding in 2019 (from 81% in 2018 to 93% in 2019)
alongside a small delay in payments of trade and other payable
balances at the end of that year.
In 2020, we have seen the unwind of those 2019 year end actions
which did not repeat in 2020. We have also seen the continued
focus on working capital, in particular tighter controls around the
management of inventory and debtors. The year end Consolidated
Statement of Financial Position shows a significant year on year
reduction in inventory and debtors and we have also seen an
improvement in the ageing profiles. Stock funding at the balance
sheet date has remained consistent at 93%.
Property, plant and equipment capital expenditure totalled £13.8m
(2019: £45.8m) reflecting significantly lower spend as a result of
the COVID-19 pandemic as the Board took the decision to delay
and cancel certain initiatives in order to protect the cash position of
the Group.
The Group realised £18.0m from the disposal of freehold
properties during the year (2019: £17.6m) and continues to
benefit from its strong property portfolio. The net book value of
freehold and leasehold properties was £301m (equivalent to
77 pence per share) at the year-end.
Net debt* (excluding lease liabilities, vehicle rental liabilities and
stocking loans) at 31 December 2020 was £40.7m (2019:
£59.5m). This includes the benefit of £15.6m of deferred VAT
agreed under Government schemes.
Bank funding
At 31 December 2020, the Group had a revolving credit facility
(RCF) of £238m provided by five banks (The Bank of Ireland,
Barclays, HSBC, Lloyds and NatWest).
In May 2021, the Group agreed an amendment and extension to
its RCF, with the same banks. The amended RCF is for an initial
£150m and will expire on 30 September 2023. Under the
amended facility, interest is charged at a margin of between 3.25%
and 4.25% (above SONIA) based on the level of utilisation. The
facility is subject to quarterly covenant tests on leverage, interest
cover and a minimum EBITDA* per rolling twelve month period.
The Board has run a number of scenarios and stress tests in order
to test the appropriateness of these facilities and based on the
results of those tests, the Board supports the preparation of the
Annual Report & Accounts on a Going Concern basis.
Financial review
Financial performance
Despite operating against a backdrop of COVID-19 for the majority
of the year, the Board is pleased with the financial performance
of the business, recording an underlying profit before tax* of
£14.1m ahead of 2019 restated £4.0m and a profit before tax of
£2.0m (2019: restated loss of £45.7m).
The first half of the year was materially impacted by the COVID-19
pandemic which led to the closure of the Group’s operations for a
significant period. Despite this, restructuring, strong cost control
actions and the development of the Group’s omni-channel offering
(including the launch of Click & Drive) led to a resilient performance
in the second half, underpinned by significant outperformance of
the retail UK new car market.
Revenue for the year was £3,699.9m which was 23.0% lower than
last year (£4,806.5m). Like-for-like* revenue declined by 20.4%
with revenue from new cars, used cars and aftersales all impacted
by the COVID-19 pandemic. In line with revenue, gross profit
decreased by £102.1m to £411.0m (2019: £513.1m). Gross profit
margin was higher than the prior year at 11.1% (2019: 10.7%)
largely as a result of strong used margins in the second half of the
year, driven by a buoyant market and robust residual values.
Underlying net operating expenses at £368.0m (2019: £476.2m)
were 22.7% below last year. The Group’s Statement of
Consolidated Income includes the benefit of both a £34.9m
receipt from the Government’s job retention scheme and £10.2m
of rates reductions under the Government’s business rates holiday
scheme. Excluding the elements of government support included
within net operating expenses (as opposed to cost of sales),
underlying net operating expenses were 14.6% below last year as
a result of ongoing focus and control of the Group’s cost base.
During the year, the Group’s bank borrowings were based on a
floating rate linked to LIBOR. Net finance costs were slightly below
the prior year at £28.9m (2019: £32.9m). Given the unprecedented
COVID-19 situation, the Board made the decision to make
substantial drawings against the Group’s revolving credit facility
and hold these sums in cash, creating an inefficient liquidity
position and increasing financing costs; however, this was offset by
lower interest cost on vehicle rental liabilities and reduced stock
levels.
Taxation
The Group’s taxation charge for the year is £6.1m (2019: credit of
£3.9m) which is composite of a corporation tax credit of £0.4m and
a deferred tax charge of £6.5m. The Group’s tax charge is
considerably higher this year as a result of a significant increase in
profits chargeable for taxation, capital gains resulting from property
disposals, and the revaluation of the Group’s deferred tax liabilities
following the 11 March 2020 Budget announcement that the
standard rate of corporation tax would remain at 19% instead of
reducing to 17% from 1 April 2020. The current tax recoverable
recorded in the Group statement of financial position has reduced
from £9.8m to £1.1m following receipts received from HMRC
during the year.
*Alternative performance measures – see Note 30 to the Financial Statements
24 | Strategic Review
Lookers plc Annual Report & Accounts 2020 | 25
Financial review
Dividends
As a result of the impact of the COVID-19 pandemic, the Board
previously communicated that it will not be recommending a
dividend for the year ended 31 December 2020.
The Board remains mindful of its relationships with, and
commitments to, all stakeholders and recognises the importance of
dividends to shareholders and will reinstate the payment of
dividends as soon as it believes that it is prudent to do so.
As noted in our 2019 Annual Report & Accounts, the Board has
become aware of an issue concerning technical compliance with
the 2006 Act in relation to the payment of interim and final
dividends in 2013, 2014 and 2015.
The effect of these irregularities is that the interim and final
dividends paid in 2013, 2014 and 2015 were paid to shareholders
at a time when the Company did not hold adequate distributable
reserves. However, there were sufficient reserves held in
subsidiaries of the Company which could have been distributed to
the Company in order to provide the Company with adequate
reserves.
To satisfy the steps required to rectify these irregularities, the
Company will put forward a resolution at the Company’s
forthcoming General Meeting. The Company has put in place the
necessary controls and processes to ensure that a similar issue will
not reoccur.
Pension schemes
The Group has two defined benefit pension schemes, The Lookers
Pension Plan and The Benfield Motor Group Pension Plan. Both
schemes are closed to entry for new members and closed to future
accrual.
During June 2020 the former Dutton Forshaw Pension Plan
trustees resolved to transfer all remaining assets and liabilities to
The Lookers Pension Plan.
During the year the Group concluded its triennial valuation of The
Lookers Pension Plan and received approval from its lenders to
increase pension deficit payments to £12m plus expenses and
PPF levy, all subject to increases linked to CPI. The revised
contributions were effective from 1 July 2020.
The Group’s triennial valuation of the Benfield Pension Plan was
concluded in February 2021 with a continuation of deficit
contributions of £0.3m plus expenses and PPF levy.
At 31 December 2020, the aggregate IAS 19 pension deficit is
£79.3m (31 December 2019: £55.7m). The year on year increase
arises as a result of the decrease in both corporate bond yields and
discount rate, which has been partly offset by an increase in the
schemes’ asset values. The total actuarial loss on the Group’s
defined benefit pension schemes in the year was £32.5m (2019:
gain of £7.1m).
Relatively small changes in the bases of valuation can have a
significant effect on the calculated deficit hence the movement in
the calculated deficit can be subject to high levels of volatility.
Non-underlying items
The Group recorded net non-underlying costs of £12.1m during
the year. The Board has taken the view that each of the following
items relate to costs or income which are not incurred in the normal
course of business or due to their size, nature and irregularity are
not included in its assessment of financial performance. Non-
underlying items have been presented separately on the face of
the Statement of Total Comprehensive Income.
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The principal items are as follows:
Prior period adjustments - Group
Restructuring costs and associated asset impairment £12.5m
During the year, the Board took decisive restructuring actions to
position the Group for a strong and sustainable future. This
included the identification of 12 sites (2019: 15) for either closure,
consolidation or refranchising. The Group now operates from a
portfolio of 150 dealerships.
The Board also undertook a review of the Group’s operating model
in light of both its strategy and the structural changes taking place
across the industry. This led to 1,500 redundancies being made.
These costs are now complete.
(a) IFRS 16 leases
During the course of our year end procedures we identified a
number of leases which had been omitted in error from our IFRS
16 lease calculations. These omissions have a material impact on
balance sheets at 1 January 2019 and 31 December 2019. As a
result, and in line with IAS8, we have included this as a prior year
adjustment. The most significant impact of this adjustment on the
Group’s 2019 Consolidated statement of financial position is an
increase in right of use assets and lease liabilities of £11.3m and
£12.8m respectively. Full details of this adjustment are set out in
Notes 1 and 13.
Professional fees - £9.2m
In our 2019 Annual Report & Accounts we detailed the Accounts
investigation. During the year, the Group incurred certain
professional fees in relation to procedures carried out by a number
of different advisory firms. These costs are now complete.
During 2020, and into 2021, the Group has continued to improve
its controls and governance and is making progress against the
remediation. To date the Group has:
• Made progress in the formalisation of accounting policies,
processes and procedures, focussing initially on financial
reporting risk and judgemental areas
• Restructured the Finance team and recruited a Group
Financial Controller
• Implemented a Financial Reporting attestation process for
senior financial and operational management
• Continued to standardise the Group’s Dealer Management
System with more dealerships now aligned to the Group’s
agreed “blueprint.”
Goodwill and intangible impairments £3.6m
In the first half of the year the Group made a non-cash impairment
charge of £2.6m against its Ford cash generating unit, following a
deterioration in market conditions. The Group also fully impaired its
Lomond brand in the second half of the year, resulting in a non-
cash charge of £1.0m.
FCA provision £10.4m credit
In March 2021, the FCA advised the Board that it had decided to
close its investigation against Lookers Motor Group Ltd for the
possible mis-selling of regulated products between January 2016
and June 2019. The FCA investigation was closed without
applying any sanction but noted several concerns relating to the
historic culture, systems and controls of the Group which the Board
fully accepted. The Group is satisfied that the FCA confirmation
represents an adjusting event after the balance sheet date as this
provides evidence that there was not an obligating event and have
therefore released the £10.4m provision - created in the 2019
Annual Report & Accounts - into non-underlying items in 2020.
(b) Rental fleet vehicles
In addition, as part of our year-end procedures, we identified that
certain balances and transactions in the Group’s Get Motoring UK
Limited subsidiary had been incorrectly treated in respect of IFRS
16 in the Group’s 2019 Annual Report & Accounts. Whilst the
impact of this is not material to the Group’s Financial Statements,
the correct accounting treatment does impact the classification
and treatment of particular financial statement line items and these
have therefore been corrected. See Note 1 for details.
Prior period adjustment – Company
Dividend receipts
In preparing subsidiary Financial Statements, the Directors
identified a number of adjustments that had not been made in the
2019 Group Financial Statements and that impacted dividends
paid by these subsidiaries to Lookers plc in 2019 and prior. This
has required an adjustment to the Lookers plc Financial
Statements. See Note 1d.
*Alternative performance measures
The Group uses a number of Alternative Performance
Measures (APMs) which are non-IFRS (International Financial
Reporting Standards) measures in establishing their financial
performance. The Group believes the APMs provide useful,
historical financial information to assist investors and other
stakeholders to evaluate the performance of the business and
are measures commonly used by certain investors for
evaluating the performance of the Group. APMs should be
considered in addition to IFRS measures and are not intended
to be a substitute for IFRS measurements.
More details of the APMs and a reconciliation of the IFRS
measures used in the Annual Report & Accounts to those
APMs used for KPI monitoring are included in Note 30 to the
Financial Statements.
Gain on property disposal £3.1m credit
Following the closure of 15 dealerships in 2019, and a further 12
this year, a number of freehold properties no longer required within
the Group have been disposed, generating a gain of £3.1m.
Anna Bielby
Interim Chief Financial Officer
30 June 2021
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Key performance indicators
The Group has a number of financial and non-financial KPIs to monitor the performance of the business against its strategic objectives.
The Board’s target is to improve performance across all KPIs whilst maintaining a balanced approach to risk and the future development
of the business.
Financial KPIs
KPI
Definition
Performance
Link to risk factor
Revenue
Total revenue generated across the Group.
2020: £3,699.9m 2019: restated
1,3,4,5,6,7
This statutory measure is a key metric that shows
our business performance and is linked to our
long term strategy.
£4,806.5m
A decrease of 23.0%, largely as a
result of COVID-19 and the closure of
our operations for a significant period
of time.
Gross profit
margin
Gross profit as a percentage of revenue.
2020: 11.1%
2019: 10.7%
1,3,4,5,6,7
This is a key metric as it shows growth in
profitability. Our target is to increase the Group’s
gross profit margin. This metric is linked to our
long term strategy.
An increase of 0.5 percentage points,
driven by strong used car margins,
particularly in H2.
2020: £14.1m 2019: restated
1,2,3,4,5,6,7
£4.0m
Despite the challenging year, strong
cost control and government support
has allowed us to increase underlying
profit before tax.
2020: 2.93p
2019: restated
0.83p
1,2,3,4,5,6,7
An increase of 2.10p reflecting
higher year on year earnings.
2020: £40.7m
2019: £59.5m
1,2,5,6,7
Our net debt balance continues to
reduce. We managed net debt well
during the year through strong
working capital disciplines. We also
benefitted from lower capex and the
Government’s VAT deferral scheme.
2020: 42.9%
2019: 42.8%
1,6,7
Aftersales gross profit margin is
broadly in line with 2019.
Underlying
profit before
tax*
Profit before tax before the impact of non-
underlying items. This is a key metric for our
stakeholders and is also linked to remuneration.
Our target is to increase underlying profit before
tax year on year, and to exceed market
expectation. This metric is linked to our long term
strategy.
Underlying
basic earnings
per share*
The ratio of underlying profit after tax to the
weighted average number of ordinary shares in
issue during the financial year.
Net debt*
Aftersales
Gross profit
margin
Our target is to increase underlying basic
earnings per share year on year. This metric is
linked to our long term strategy.
Total borrowings excluding lease liabilities, vehicle
rental liabilities and stocking loans less cash and
cash equivalents.
This is an important metric as the Group has a
number of obligations and it is important that we
continue to generate cash and manage working
capital effectively in order to remain compliant
with banking covenants.
This KPI supports our operational or shorter term
objectives.
Aftersales represents a key part of the Group’s
profitability and it is important that this is
monitored closely. This is the first time that this
metric has been included in our Annual Report &
Accounts as a KPI.
Our target is to maintain gross profit margins
against a backdrop of changing technologies.
This metric is linked to our long term strategy.
* Alternative performance measures defined in Note 30 of the Financial Statements.
28 | Strategic Review
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Non-financial KPIs
KPI Objective
Definition
Performance
Link to risk factor
New car
performance v
SMMT
Group new car
sales
Group used car
sales
This metric shows the annual performance over
the year of the Group’s new car registrations (in %
terms) relative to the market, by comparing to data
provided by the Society of Motor Manufacturers
and Traders (SMMT).
This important performance indicator is a new KPI
this year and supports our long term strategy.
2020: +9.6 percentage points
2019: -5.4 percentage points
1,6, 7
The Group outperformed the UK
retail market for 8 consecutive
months from May 2020 to December
2020. This trend has continued in
2021.
Number of new vehicles sold in units.
2020: 86,555
2019: 112,906
1,6,7
This KPI supports our operational and medium
term objectives. This metric may evolve in the
future as OEM Brand Partners relationships and
business models change.
Vehicle sales were lower than 2019,
largely as a result of our dealership
closures due to COVID-19.
Number of used vehicles sold in units.
2020: 78,341
2019: 100,764
1,6,7
This KPI supports our operational and medium
term objectives.
Vehicle sales were lower than 2019,
largely as a result of our dealership
closures due to COVID-19.
Employee
satisfaction
In 2020 we introduced a pulse survey to measure engagement across a number of topics.
The response rate was 53% and the overall results suggest that our colleagues are
engaged with the business with particular strengths across personal growth, co-operation
and teamwork alongside recommending Lookers as a great place to work.
6,7
We are also clear that further investment and support is needed on recognition and
wellbeing and these are two cornerstones of our approach in 2021. We intend to repeat this
pulse survey in Q3 of 2021 and are expecting to see improvements across the responses.
This KPI supports our operational or shorter term objectives.
The Group continues to track a number of other performance
indicators and will review and evolve the externally published KPIs
as required.
Other KPIs which the Group may share in the future, but for which
consistent data points do not exist at present include Lookers’
Customer Satisfaction score (at the moment the Group is tracking
above industry average), enhanced People metrics covering
Diversity and Inclusion and indicators around digitisation and sales
of electric vehicles.
Lookers plc Annual Report & Accounts 2020 | 29
Risk overview and management
Enterprise risk management framework
As with all organisations, Lookers is exposed to a wide range of
risks, both internal and external, as part of our on-going activities.
The identification and management of those risks is integral to the
achievement of our long-term goals which rely on our ability to
identify and control those things that can hurt us and exploit
opportunities that arise, both within our business and the wider
market. We identify risks and assess the effectiveness of our
control environment on an ongoing basis through robust risk
management processes and reporting. As a part of this, we
undertake horizon scanning to identify emerging risk, maintain
ongoing dialogue with the business, provide management
information to the Executive and the Board and keep up to date
with developments in the automotive sector and wider economy. To
assist, we have developed an Enterprise Risk Management
Framework (ERMF) designed to deliver a common language that
helps us define and categorise the risks that we face. It sets the
high-level principles and underpinning minimum requirements for
the identification, assessment, management and monitoring of
each of those risk categories in line with Lookers’ defined risk
appetite.
Three lines of defence
Lookers applies a “three lines of defence” governance model
across its business. The principal aim of this model is to ensure
that Lookers exercises ownership of risk in the business, and
independent oversight and challenge of those risks and their
management by its second line departments (Risk and
Compliance). Internal Audit (the third line) are in place to provide
independent assurance to the Board of the effectiveness of our
controls. In summary the accountabilities between lines are split as
follows:
• The first line of defence (the business) are accountable for
owning, taking and managing the risk
• The second line of defence (Risk and Compliance) operate
independently of the first line. They do not own the risk but
instead independently oversee, advise and challenge the first
line activity
• The third line of defence (Internal Audit) provide independent
assurance to the Board of the controls
Risk appetite framework
Our risk appetite framework defines the level of risk we are willing
to take across the different risk categories and allows us to track
mitigating action when our tolerance metrics suggest that we are
moving away from where we want to be. Risk appetite is key for our
decision-making process, including ongoing business planning,
new product approvals and business change initiatives.
In setting the risk appetite, the Board outlines the “tone from the
top” and provides a basis for ongoing dialogue between
management and Board with respect to our current and evolving
risk profile, allowing strategic and financial decisions to be made
on an informed basis.
Financial reporting
The Executive Directors oversee the preparation of the Group’s
annual corporate plan; the Board reviews and approves it and
monitors actual performance against it on a monthly basis. When
deemed appropriate, revised forecasts are prepared and presented
for Board review and approval. To ensure that information
consolidated into the Group’s Financial Statements is in
compliance with relevant accounting standards and the Group’s
own accounting policies, internal reporting data is reviewed
regularly.
The Audit and Risk Committee reviews the appropriateness of the
Group’s accounting policies each reporting period. The Audit and
Risk Committee considers reports from Executive Management,
Internal Audit, the Risk and Compliance teams and the Group’s
external auditor, the application of IFRS and the reliability of the
Group’s system of control over financial reporting.
During 2020 the Group’s control environment has continued to
evolve, including internal controls over financial reporting. The
Financial Risk Policy and supporting Policy Standards have been
further developed. A review of the underpinning processes and
procedures has been undertaken and documented, including a
strengthened balance sheet reconciliation process and a
dedicated risk and control register. In addition, the Finance function
has been strengthened with an enhanced operating model
introduced across the period.
The Board continues to oversee a programme of work to further
enhance finance controls. These enhancements address the issues
previously identified in the Financial Review.
Controls have been designed to ensure that the Group’s financial
reporting presents a true and fair reflection of the Group’s financial
position. Many of these improvements have been implemented
although the process of further improving controls will continue
during 2021.
Overview of principal risks and uncertainties
Appreciating that the operation of any business entails an element
of risk, the Board maintains a policy of continuous identification,
management and review of risks which may threaten the
achievement of our strategic objectives.
These risks are those that could cause the greatest damage if not
effectively identified, assessed and managed. The Board keeps the
Group’s risk appetite under periodic review in light of changing
market conditions and the Group’s performance and strategic
focus.
The tables opposite give an overview of the principal risks and their
impact, aligned to the corresponding controls and mitigating
actions. These risks are not intended to represent an exhaustive list
of all potential risks and uncertainties, and the factors outlined
below should be considered in conjunction with the Group’s system
for managing risk as described below and in the Governance
section of the Annual Report & Accounts.
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Financial risks
No.
Principal risk and description
Impact
Mitigating activity
1
Liquidity and funding risk
• The risk that Lookers does not
hold enough liquid assets to meet
our financial obligations. Funding
risk is the risk that Lookers is
unable to meet its strategic and
business objectives due to lack of
funding availability. Liquidity risk is
the shorter-term risk that Lookers
may be unable to access cash, or
bank facilities such as deposits,
overdrafts or loans, required to
meet its day-to-day business
requirements.
• A failure of cash
management to ensure all
financial obligations are met
when they fall due or failure
to fund the future needs and
growth of the business.
• We ensure that this risk is managed by
preparing regular financial forecasts to
evaluate our funding and liquidity
requirements for the foreseeable future.
These forecasts are reviewed and approved,
and appropriate solutions are put in place.
• Reputational damage with
external stakeholders.
• We ensure that monthly budget
management accounts are monitored.
• Failure of the Group to
secure Bank funding,
leading to a dramatic
reduction in profitability
which may adversely change
the lending decision
by banks.
• Failure of the Group to
secure Bank funding,
leading to lack of cash to
meet short term funding
needs owing to banking
convents being breached.
• We ensure that debt to equity ratios remain
in line with policies.
• We ensure that the position with our
Banking Club is kept under continual review
including compliance with our covenants.
• We ensure that cash and short term
deposits exceed short term liabilities.
• The management of this risk has been
under close daily review throughout the
period of the COVID-19 outbreak and
tactical measures put in place as appropriate
to ensure an appropriate level of liquidity
and funding until such time as the business
returns to our normal trading environment.
• The Group applied for and received support
from the Government’s emergency
measures for business, notably the
Coronavirus Job Retention Scheme
• We strive to achieve optimal working capital
efficiency and debt repayment forecasting.
We continually maintain open dialogue with
the Banking Club
Pension risk
No.
Principal risk and description
Impact
Mitigating activity
2
Pension risk
• The risk that Lookers does not
adequately manage pension
liabilities.
• The risk that Lookers fails to
manage funding of its pension
schemes.
• Failure to manage the
pension deficit leading to an
increase in the deficit which
impacts on the level of
deficit payments we are
required to make to the
scheme. Indirectly it may
also have an adverse
implication on share price
and credit rating.
• We maintain relationships with pension
trustees and deliver against pension
investment plans. We have kept both the
trustees and regulator informed as we have
managed the threats posed by the business
being temporarily closed as a result of
COVID-19.
• We regularly review investment performance
and liability. The investment strategy aims to
partly mitigate the impact of increases in
liabilities, for example by investing in assets
that will increase in value if future inflation
expectations rise. The assets held are also
well diversified reducing the impact.
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Lookers plc Annual Report & Accounts 2020 | 31
Risk overview and management
Regulatory risk
Conduct risk
No.
Principal risk and description
Impact
Mitigating activity
No.
Principal risk and description
Impact
Mitigating activity
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3
Regulatory risk
• Where the Group’s activities are
subject to regulatory compliance
there is risk of failure to comply
with applicable laws, regulations,
and codes.
• Potential poor customer
outcomes, financial loss or
imposition of penalties,
damages or fines on the
Group.
• We have continued to invest in capability
and capacity of the Risk and Compliance
function to support the business and
manage our relationship with regulators and
other stakeholders.
• Failure to address
forthcoming regulatory
developments.
• We have a Legal function which supports
colleagues in identifying and limiting
Legal risks.
4
Conduct risk
• Conduct risk is the risk that our
behaviours, attitudes, motivations
and actions lead to unfair
customer outcomes or poor
standards of conduct in our
trading activities.
• Failure to maintain
appropriate regulatory
permissions for Lookers’
activities.
• Failure to manage regulatory
relationships effectively.
• Failure to comply with
appropriate reporting
disclosure and associated
requirements.
• We have reviewed and refreshed our
regulatory rule mapping to ensure
applicable regulations remain covered and
that we have an appropriate compliance
framework.
• We conduct horizon scanning processes to
identify changes in regulatory expectations.
These include any changes that may be
required as a result of the FCA supervisory
review and enforcement process.
• We ensure that we maintain open and
transparent relationships with our regulator.
In the period we have continued to work
closely not only with our Supervisory team
but also the Enforcement team who have
now closed their investigation into our
historic sales practices without sanction and
the Primary Market Oversight division who
ended their active interest following the
publication of the 2019 year-end accounts
and restoration of our shares.
• We have also engaged appropriate external
advisors to provide knowledge and
assurance to enable the Board to assess its
compliance with its legal and regulatory
obligations as and when appropriate.
• We have identified a number of gaps in our
financial reporting and financial control
processes which we have and are continuing
to address and enhance by formalising
procedures, training staff, recruiting
additional staff and implementing
compliance reviews.
• Ineffective governance and
monitoring arrangements
leading to unfair customer
outcomes.
• A culture that does not put
the customer at the heart of
everything we do.
• Failure to securely maintain
and monitor our customer
data.
• Failure to have procedures
in place to identify and treat
vulnerable customers
appropriately.
• Failure to design products in
accordance with the firm’s
values or to meet customer
needs.
• Failure to manage and
investigate complaints
appropriately.
• We ensure that fair customer outcomes are
embedded within our corporate strategy.
• We ensure that identification and fair
treatment of vulnerable customers is integral
to the Lookers’ way of doing business.
• We ensure new financial promotions, sales
process and products design processes are
based on robust market research and deliver
clear and simple products that meet the
needs of our customers.
• We deliver effective training to help our
people understand how they can deliver the
best customer outcomes.
• We have invested considerably during the
year in capability and capacity within the
Compliance function to support the
business and manage our relationship with
the regulators and other stakeholders.
• Our remuneration incentives, commissions
and performance management practices
are being designed to drive the right
behaviours helping to deliver fair customer
outcomes.
• We continually work towards ensuring the
accuracy, security and consistency of the
customer data that we hold.
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Lookers plc Annual Report & Accounts 2020 | 33
Risk overview and management
Financial crime risk
Strategic and business risk
No.
Principal risk and description
Impact
Mitigating activity
No.
Principal risk and description
Impact
Mitigating activity
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5
Financial crime risk
• The risk that Lookers is used to
launder the proceeds of crime,
finance terrorist activities, commit
fraud or evade financial sanctions.
This includes any actions
perpetrated against Lookers
involving fraud, theft, dishonesty
(including bribery and corruption),
internal or external, misconduct or
misuse of information relating to a
financial market.
• We fail to protect our
customers, and our business
from breaching obligations
designed to prevent and
deter the risk of financial
crime, including internal and
external fraud against the
Group or its customers.
• Failure to comply with the
Group’s obligations under
the Corporate Criminal
Offence legislation and the
subsequent consequences.
• We continue to embed the financial crime
policies and procedures that we put into
place over 2019 and have trained our
colleagues accordingly to ensure that they
understand their obligations to report all anti
money laundering-related suspicions or
concerns.
• We ensure that colleagues understand their
obligations and put in place processes that
allow them to report all suspicions of internal
fraud/malpractice by colleagues, contractors,
customers or suppliers.
• We ensure that anonymous reporting
processes are in place via the whistleblowing
process.
• We have in place an Anti-bribery and
Corruption Policy and the appropriate
underpinning processes and procedures.
• Where instances of financial crimes arise
these are thoroughly investigated and where
appropriate criminal prosecution is pursued.
6
Strategic and business risk
The risk that insufficient strategic
planning and/or poor execution
result in a failure to deliver our
strategy and create shareholder
value, including to:
• adequately manage relationships
with the manufacturers.
• adapt to changing market
demands including autonomous
driving, EVs and shared mobility
demands.
• adequately monitor and react to
changes following the UK’s
departure from the EU.
• Monitor and react to any potential
new COVID-19 variants that lead
to additional restrictions and/or
interruption to the supply chain.
The risk that developments in the
wider market, including the
worldwide shortage in semiconductor
chips impacts on the ability of the
firm to execute its strategy.
• Failure to demonstrate the
value-add of the franchise
model resulting in
manufacturers moving to
direct to customer
sales model.
• Failure to meet customers’
demand for greener vehicles
and adapt the business
model to potentially lower
demand of diesel vehicles
resulting in revenue and
profits suffering damage.
• Failure to create or protect
shareholder value.
• Failure to proactively monitor
and react to issues following
the departure of the UK
from the EU, and the
developing world-wide
shortage of semiconductor
chips impacting supply
chain.
• General economic
uncertainty or downturn in
consumer confidence
arising from Brexit or other
macro-economic issues
e.g. COVID-19 resulting in
loss of revenue and
operating profit.
• We have comprehensive management
information which tracks performance
against strategic objectives and allows
dynamic adjustments to be made to
inventories, pricing and procurement
processes in order to respond to
market forces.
• We maintain manufacturer and brand
diversity in order to reduce risk.
• We continually work on improving existing
day-to-day business relationships with
manufacturers and consider their needs
when setting our own business objectives
and strategies.
• We ensure that research is conducted, and
industry leading advice is sought when
setting the strategic objectives.
• The impact on our market of the COVID-19
outbreak is being carefully managed so that
the firm is best placed when the restrictions
are relaxed.
• We have worked hard on digital and
contactless journeys, ensuring that we can
meet the needs of our OEM Brand Partners
and customers whilst ensuring safety,
compliance and confidence in a COVID-19
environment.
• We are working closely with our OEM Brand
Partners who manage the global automotive
supply chain to develop the necessary
mitigating actions to ensure continuity of
supply to mitigate issues such as the
world-wide shortage of semiconductor chips
and changes in trade relations with the EU.
• We mitigate economic risk by managing a
balanced portfolio of new vehicle sales, used
vehicle sales and after sales and continually
optimising our dealerships and operating
model.
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Risk overview and management
Operational risk
No.
Principal risk and description
Impact
Mitigating activity
7
Operational risk
Operational risk is defined as a failure
of our people, policies or procedures
and is divided into a number of
subcategories (Level 2 Risks)
including:
Information, IT and cyber security
and business continuity risk
• The risk of ineffective underlying
IT infrastructure supporting the
Group’s day-to-day operations and
generating timely management
information.
• The Group processes personal
information which leads to a risk of
failure to protect confidential or
sensitive data which could result in
significant operational and
reputational damage.
• The Group is responsible for the
safeguarding of data, in
accordance with the Data
Protection Act 2018 (DPA)
and related legislation.
• As the Group clearly defines its
digital presence it is also mindful
of the additional Cyber risks that
require identification from
management.
Health, safety and wellbeing risk
• The risk that the Group does not
have adequate learning and
development, resource and
succession planning
arrangements in place.
• The risk that Lookers is unable to
meet its business objective
including legal and regulatory
compliance owing to poor health
and safety management and
failures to comply with legal
obligations.
Third party supplier and
outsourcing risk
• The risk that third-party suppliers
and/or critical outsourcing
providers are not appropriately
managed on an ongoing basis,
including the impacts in the event
of supplier failure.
• The Group is unable to meet its
current and future business
objectives because of
Information Technology systems
failures, failing to keep pace with
technological change, or
logistical crisis and inadequate
investment in systems and
controls.
• Business interruption without
robust business continuity
provisions could materially
impact the ability to service
customers and clients, resulting
in reputational damage and
associated financial loss.
• The Group could be subject to
Cyber-attack resulting in
business interruption, theft of
data or ransom.
• Failure of the Group to develop,
retain and motivate highly skilled
employees, in a safe working
environment that are necessary
to support operations.
• The Group fails to meet HSE
legislation leading to the risk of
personal injury and/or fines and
legal action.
• The Group fails to meet its legal
and regulatory compliance
because of inappropriate
sourcing decisions including
outsourcing, errors or omissions
in supplier contracts and/or
supplier failure.
• We have established Operational Risk
policies which are regularly reviewed.
• We have implemented incident
management processing to ensure major
incidents are dealt with appropriately and
problems are logged and actively
progressed to resolution.
• We undertake risk and control
assessments to monitor compliance.
• We continually monitor our mandatory
regulatory training to ensure that all
colleagues are kept informed.
• We continually invest in our IT
infrastructure.
• We are making risk management
improvements involving people,
processes and technology as well as
prioritising the work according to our
assessments of security and resilience
exposure.
• We have continued to tighten our
control of personal data in accordance
with the DPA 2018 requirements.
• We are undertaking a wide-ranging
programme of work to enhance our
Cyber and information security controls.
• We operate a robust Health and Safety
system to ensure compliance with HSE
legislation. In addition, we have
developed detailed health and safety
protocols to ensure social distancing and
safe working practices as we begin to
reopen after the COVID-19 lockdown.
This includes ensuring the right level of
personal protective equipment (PPE) is
available at all of our sites.
• We ensure that incident reporting
including lessons learnt exercises take
place to meet health and safety obligations.
• We have established Third Party
Supplier and critical outsourcing
policies which are regularly reviewed.
• We ensure where relevant that all
suppliers are subject to audits to ensure
our suppliers are compliant with legal
and regulatory requirements.
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Viability statement
In accordance with the Corporate Governance Code, the Board
have assessed the viability of the Group over the three-year period
to 31 December 2023.
The Board believe this period to be appropriate as:
i) The Group’s detailed plan encompasses this period; and
ii) We typically look to obtain a revolving credit facility for at
least three years.
Process and scenarios considered
The Group’s detailed plan considers the profit and loss, cash flows,
debt and other key financial ratios over the period including
compliance with existing covenant arrangements. These metrics
are subjected to sensitivity analysis, in which a number of the main
underlying assumptions are adjusted and tested to consider
alternative risk-based scenarios. The detailed plan takes into
account the Group’s response to COVID-19, including the
development of Click & Drive, see pages 22 to 23 for more detail
on the Group’s responses to COVID-19.
As detailed in Risk Overview and Management on page 30 the
Group identifies risks on an ongoing basis through a robust risk
management process. We have stress tested our detailed plan
taking into account severe but plausible scenarios which are
aligned to the Group’s risk appetite and principal risks as
documented on pages 31 to 36. The Board has also considered
the availability of the Group’s banking facility, which runs until 30
September 2023, and the likelihood of securing a new facility
thereafter.
The Board’s assessment of the Group’s viability over the period has
been made with reference to:
• The impact on the Group of the COVID-19 pandemic, and
potential longer-term impacts on consumer confidence;
• the long-term impact of automotive technological change;
• digital disruption to our markets and pricing; and
• potential business model changes of our key suppliers.
We have also considered the emerging issue of semi-conductor
shortages, and the likely impact on stock availability. Whilst
accepting that this could reduce sales volumes in the short term, in
a severe but plausible scenario we do not consider there to be a
significant impact on our overall viability assessment. The impact of
Brexit has been considered and it is not deemed to have a
significant impact on this assessment. Modelling these risks tests
the Group’s ability to withstand a material reduction in revenue and
margin.
While it is impossible to foresee all risks (or take into account risks
which are currently immaterial but could turn out to be significant)
mitigating activities could be performed, for example reducing
capital expenditure, discretionary spend or making changes to
dividend payments.
In the most severe scenario modelled, the test indicates that the
Group has sufficient headroom in its banking facility and would not
breach any of the associated covenants. Details of the Group’s
financing arrangements can be found in Note 22 of the Financial
Statements.
Viability statement
Having assessed the current position of the Group, its prospects
and principal risks and taking into account the assumptions above,
the Board has determined that it has a reasonable expectation that
the Group is financially sound and stable and therefore will be able
to continue in operation and meet its liabilities as they fall due over
a period of three years from 1 January 2021.
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Section 172 statement and
non-financial information statement
The Board is accountable to shareholders for the management,
performance and long-term success of the Company. The Directors
have regard to their duty under section 172 of the Companies Act
2006 to act in the way which they consider, in good faith, would be
most likely to promote the success of the Company for the benefit
of its members as a whole and, in doing so, consider (amongst
other matters):
(i) the likely consequences of any decision in the long term;
(ii) the interests of the Company’s employees;
(iii) the need to foster the Company’s business relationships with
suppliers, customers and others;
(iv) the impact of the Company’s operations on the community
and the environment;
(v) the desirability of the Company maintaining a reputation for
high standards of business conduct; and
(vi) the need to act fairly as between members of the Company.
Section 172 requires Directors to have regard to wider stakeholder
interests when discharging their duty to promote the success of the
Company. The Board understands that the long-term prosperity
and success of the Group is dependent on understanding and
respecting the views and needs of our stakeholders including
shareholders, customers, employees, and the wider communities in
which we operate across the UK and Republic of Ireland.
It is the Board’s view that our ability to engage effectively with our
stakeholders is critical to the success of the Group. Details of our
stakeholder engagement in relation to Workforce Engagement,
Corporate Social Responsibility, our Modern Slavery policy and
Relations with shareholders are detailed in the Non-Financial
Information Statement below and are also covered in part in this
statement. The various sections of our Strategic Report, including
our COVID-19 update, and the Corporate Social Responsibility
Report are also key documents of reference when considering how
the Company has interacted with its stakeholders.
The Board recognises the support of all of its stakeholders,
including its employees, OEM Brand Partners, shareholders,
Banking Club and also its regulators during the challenges faced
by the Group during 2020 and would like to extend its thanks to all
of those who helped the Group resolve the issues faced.
The following table provides information on the ongoing
stakeholder engagement methods used by the Group, information
on areas of note for 2020 and management actions on matters
applicable to each stakeholder group.
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Engagement method
Considerations
Actions taken
Our shareholders
The Board recognises that the
Company’s relationship with its
shareholders are of critical importance. It
is against this backdrop that the Board
engages with shareholders and investors
on a regular basis on matters of policy
and strategy. We have regular
communications such as trading results,
annual reports and stock exchange
announcements.
Meetings are regularly held with analysts
and major shareholders and our PR
advisers.
Shareholders are encouraged to attend
the Annual General Meeting where they
have an opportunity to ask questions of
Board members and senior executives.
The Company also adheres to its
obligations in respect of material votes
against any resolutions at General
Meetings and further engages with
shareholders accordingly.
The Chairman and Company Secretary
are available to answer shareholder
queries via CoSec@lookers.co.uk
The Board was extremely disappointed
that the share listing was suspended
during 2020. The Board considered
carefully the implication of this to
shareholders and the senior executives
worked extremely hard to ensure the
issues that had led to this were resolved
so that the listing could be restored,
which it believed was in the best interests
of all stakeholders.
In light of the COVID-19 pandemic the
Board had to consider the safety of
shareholders and comply with
Government rules and was disappointed
to have to hold a closed Annual General
Meeting (AGM) and General Meeting in
2020 and AGM in 2021.
Feedback from our PR advisers, brokers
and other sources on significant issues
raised following the release of
information is provided to the Board and
the Board uses this feedback to help
better inform any decision making
process.
The Board sponsored and oversaw a
systems and controls remediation
programme to ensure that the Company
was able to have its shares restored to
the Official List and to be traded on the
London Stock Exchange. The Board was
extremely pleased that following the
considerable effort made to enhance the
governance of the Group in order to
satisfy the FCA that we can meet the
obligations to maintain a premium listing,
the share listing was restored in January
2021.
As at the time of writing the Government
restrictions and guidelines indicate that
the Company will be able to hold the
Accounts General Meeting as an “open”
meeting, with all shareholders able to
attend. However, it is relatively soon after
the lifting of restrictions and we
anticipate that the event will be quite
different to usual because of social
distancing requirements. We are
monitoring Government advice on the
format of the Accounts General Meeting,
which could change ahead of the
meeting. The Board is keen to resume
the usual format for its AGM in future.
At the General Meeting held in
December 2020, significant votes
against the Remuneration Report were
received. Details of how this has been
addressed are included in the Directors’
Remuneration Report on page 84.
The level of debt was significantly
reduced during the year providing more
stability to the liquidity of the Group to
the benefit of our stakeholders.
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Section 172 statement and
non-financial information statement
Engagement method
Considerations
Actions taken
Engagement method
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Our colleagues
We keep in touch with our colleagues
through regular updates from the
Executive team. This includes ensuring
that all people working with us are aware
of financial and economic factors
affecting the Group’s performance.
Regular staff surveys are conducted.
Staff consultations are undertaken,
where appropriate, on matters impacting
them.
A schedule of quarterly listening
sessions hosted by a Non-Executive
Director have been implemented.
We encourage and nurture a culture that
is open and supportive with a healthy
approach to speaking up. We are
committed to the highest possible
standards of openness and
accountability and acknowledge that
there may be occasions when people
become aware of or suspect
wrongdoing.
As such, we operate a Whistleblowing
Policy that encourages our people to
raise any concerns of wrongdoing as
soon as possible in the knowledge that
their concerns will be taken seriously and
investigated appropriately whilst
protecting its confidential nature and
their anonymity. To ensure objectivity and
independence, our Chief Risk Officer is
the nominated point of escalation with
oversight of each case being given by a
Non-Executive Director.
Operating a safe environment for our
colleagues is of paramount importance
and we have worked hard during the
period to ensure that our COVID-19
protocols are in place and working
appropriately.
Our people are central to our business.
We strive to create a culture of diversity
and inclusion. We provide a workplace
with attractive benefits and opportunities
for career progression.
The quarterly listening sessions are an
opportunity for the Non-Executive Board
to hear feedback from staff directly and
raise the profile of the Non-Executive
Directors across the business. Any issues
or suggestions arising from these are
communicated to management on a no
names basis.
During 2020 a new Head of HR was
appointed, who has subsequently been
promoted to Chief People Officer. One of
the key tasks for this executive is to
improve the way in which management
interacts and communicates with our
colleagues and seeks their views. One
such consultation taking place is to seek
views on how the Head Office will
operate in a post COVID-19 environment.
The Group operates various employee
ownership share schemes.
Staff surveys are undertaken, with the
results and proposed actions reported
across the business and to the ExCo and
Board.
Statistics on staff turnover, attrition,
internal promotions and recruitment
statistics that indicate the level of
engagement within the organisation are
presented to the Board.
Our Health and Safely team continually
audit our dealerships and liaise with the
appropriate public bodies where needed.
This is in turn reported to the Board to
give them the assurance that our
COVID-19 protocols are effective.
The Board recognises the incredible
amount of hard work and great results
achieved by all teams across the business
during what was a very difficult year for
the Group. Senior Executives have made
sure that the appreciation of the
management team has been
communicated, and the Board would like
to reiterate the thanks.
Careful consideration to the furlough of
staff was given and staff safety during the
pandemic was of prime consideration.
The Group utilised the Government’s
Coronavirus Job Retention Scheme to
support the retention of staff as far as was
possible. More information on this is
included in the separate statement on
page 82.
Revised staff remuneration and incentive
schemes were discussed during the year
and introduced for management and
sales staff in early 2021. The aim of these
was to improve the balance between
basic salary and OTE in order to drive the
correct behaviours and to make them
more consistent and easier for our
colleagues to understand. Further
changes will be implemented over the
course of 2021 for aftersales staff. We
also standardised work hours to improve
work/life balance.
Our training and competency scheme has
been embedded and all sales staff and
sales management are required to
complete a number of mandatory
e-learning modules and receive a monthly
one-to-one.
Redundancies were made during the year
via a properly consulted and documented
process. Whilst this was an incredibly
difficult decision to have to make, the
Board had to consider Stakeholders as a
whole, including our colleagues who
would remain, and took a difficult decision
to ensure a strong business remained as
we emerge out of lockdown.
Action taken following the results of staff
surveys include the introduction of various
initiatives. More information on this and
some of the other workforce matters
described above can be found in the
Corporate Social Responsibility
Statement on pages 81 to 82.
Our customers
We obtain the views of our customers in
a number of different ways, including
customer listening and from
manufacturer, in-house and online
surveys.
Our customer listening sessions have a
direct influence on business decisions.
For example, during the session at the
end of 2020 our customers told us how
much they enjoyed unaccompanied test
drives. We have continued to offer these
despite the relaxing of COVID-19
restrictions in this area.
We use Reputation.com to benchmark
our performance and reputation against
our industry peers. This partnership has
also increased the number of customer
reviews we receive with our average star
rating on google increasing from an
average of 4.1 in 2019, to 4.2 in 2020
and 4.4 2021 year to date. We now have
over 20,000 five star reviews on Google.
We are also able to benchmark against
manufacturers in relation to customers
using research including net promoter
scores, manufacturer balanced scorecard
metrics and customer satisfaction
measures.
We undertake mystery shopping
exercises to gain insights into the sales
process and ensure that we are
obtaining good customer outcomes.
Reporting and insights are regularly
shared and reviewed with senior
management and the Board.
The Board considers that the fostering
and promotion of a culture of treating
customers fairly and behaving ethically in
all our interactions is of paramount
importance. As a retailer, we appreciate
that our reputation for excellent
customer service is key to our success,
and that retaining the trust of our
customers is crucial to our business. Our
strapline “Lookers for Life” embodies our
focus on having positive and long-lasting
and sustainable relationships with our
customers.
Ensuring a fantastic customer
experience is fundamental to the
success of Lookers. Customer
complaints metrics are reviewed at
Board meetings with updates given on
numbers of complaints, speed with
which complaints are resolved, complaint
themes, and root cause analysis
undertaken to improve customer
outcomes.
Training and development is critical not
only to deliver a compliant experience for
our customers but also to help our
customer facing teams with the softer,
more emotional aspects of customer
experience. Over the next four months
we will be rolling out GREAT customer
experience. This is a simple framework
that has been designed following
feedback from our top performing sales
colleagues; those that are exceeding
sales targets by consistently
demonstrating great behaviours.
Training has been designed to introduce
the framework and the behavioural skills
required with the objective of maximising
sales, by delivering a GREAT customer
experience and good customer
outcomes.
GREAT Customer Experience training
compliments the Sales Process
Awareness – L1 & L2 training that all our
sales colleagues and new starters are
required to complete. Sales Process
Awareness delivers the “What” we need
to do and GREAT focuses on the “How”.
The Group has worked hard to improve
its score on Reputation.com over the
past six months and all divisions have a
score above that of the national average.
The Board continues to oversee a
cultural change programme for the
Group as part of the transformation
programme reported in our 2019 Report
and Accounts. The independent Board
Committee comprised of certain Non-
Executive Directors that was established
to ensure the proper implementation of
actions identified has made considerable
progress and a lot of work has been
done to set the cultural tone from the
top. Whilst the Board believes that the
situation is vastly improved the process
of change and improvement is ongoing.
Enhancements to the way we monitor
both culture and behaviours and
embedding these across the Group is an
ongoing area of focus.
We have reviewed our remuneration
frameworks to ensure that the structure
of our incentives promote the right
behaviours. This has included the
introduction of compliance underpins.
During 2020 we identified examples
where there were inconsistencies
between the outstanding balance of
some settled finance agreements and
the amount that had been passed back
to the customer. Remediation action was
taken to ensure that the impacted
customers were put back into the
position that they would have been prior
to the error. In any such instance, it is
important to the Board that management
conduct a thorough root cause analysis
of the problem and take action to
improve our training, processes and
systems to ensure the issues do not
reoccur. We view this as a continual
improvement process.
We have designed our sales processes
and sales oversight framework to ensure
good customer outcomes.
We do however acknowledge that things
can go wrong and commit that where
they do, we have measures in place to
take corrective action promptly.
42 | Strategic Review
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Section 172 statement and
non-financial information statement
Engagement method
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Engagement method
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Our customers (continued)
Senior management receive feedback
from dealerships on customer feedback
and report to the Board.
As with our colleagues, operating a safe
environment for our customers is of
paramount importance and we have
worked hard during the period to ensure
that our COVID-19 protocols are in place
and working appropriately.
In addition to our Quality Assurance
framework, we undertake mystery
shopping exercises and customer
listening sessions to gain insights into
the sales process and ensure that we are
obtaining good customer outcomes.
In addition, during 2020, the Board took
the decision to recommence certain
capital expenditure to improve both
equipment and premises as a direct
consequence of health and safety
considerations.
Health and safety at our dealerships is of
prime importance and the operation of
the Group’s business during the
COVID-19 pandemic was an ongoing
Board discussion during 2020. Our
Health and Safely team continually
audited our dealerships and liaised with
the appropriate public bodies where
needed. This was in turn reported to the
Board to give them the assurance that
our COVID-19 protocols were effective.
Click & Drive was introduced in order to
allow customers to continue to purchase
cars whilst our dealerships were shut.
We wanted to ensure that our customers
were able to still take possession of
vehicles in the most safe and frictionless
environment as possible. The restrictions
forced us to look at things differently and
enhance our online capabilities which
has made a real improvement to our
customer experience and the transaction
process.
During the periods that the dealerships
were open, we ensured that all
precautions were taken to reduce the
risk of transmission of COVID-19 to best
protect our customers and staff. More
information is included in our specific
COVID-19 statement on pages 22 to 23.
Our suppliers
The Group deals with a wide range of
third-party suppliers.
Our OEM Brand Partners are clearly
central to our strategic aims and as such
our senior management team work
closely with them to ensure a close and
continuous dialogue.
Our funding relationships are also core to
the achievement of our strategic aims.
The Finance team maintain regular, open
and constructive dialogue with our
Banking Club.
The management of our wider third party
suppliers is also recognised as critical to
the Group’s success and as such we
keep these relationships under continual
review.
The Group is fortunate to have as its key
suppliers the leading automotive
manufacturers. Almost all of our
manufacturer partners use a variety of
ways to measure the performance of our
dealerships such as balanced
scorecards, customer feedback surveys
and dealership audits.
We engage fully with these assessments
and use the data to improve our
processes, reviewing dealership KPIs on
a monthly basis and sharing best
practice across divisions to improve
processes and performance. The Board
receives these measures and factors
these into the decision-making process.
The Board received regular updates from
the Director of Finance (Corporate) on
the facilities with our funders and
lending banks, both in terms of corporate
debt and stocking funding.
Third party supplier risk is managed as a
category within the Board approved
Enterprise Risk Management Framework
which sets the high level principles and
minimum requirements that the Board
and Executive expect the Group to align
to when entering into and then
managing a third party relationship.
The franchised dealer model is strong,
resilient and supportive. The management
team worked closely with our OEM
Brand Partners during 2020 and a
number of initiatives were agreed with
them to support the Dealer network.
These included the removal of targets
and introduction of guaranteed margin,
extension to funding periods, suspension
of brand audits and standards,
suspension of training fees and
reduction of demo and courtesy vehicle
requirements.
We worked closely with our OEM Brand
Partners during 2020 to reduce the
impact of the COVID-19 pandemic on
our operations.
The Group was focussed on amending
and extending its banking facilities
during 2020 and into 2021. The banks
have been very supportive throughout a
protracted period of uncertainty. The
Board is pleased to have been able to
secure the necessary revolving credit
funding from its lending banks and
stocking funding from both manufacturer
and third party funders to ensure the
Group can operate to the benefit of all
stakeholders. More information is
included on page 25.
As a part of the embedding our
Enterprise Risk Management framework,
we have worked through an assessment
of the risks and controls associated with
our third-party management. This has
seen us look to invest further in
procurement and ongoing supplier
management.
44 | Strategic Review
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Section 172 statement and
non-financial information statement
Non-financial information
statement
Engagement method
Considerations
Actions taken
This section of the Strategic Review constitutes Lookers plc’s Non-Financial Information Statement, produced to comply with sections
414CA and 414CB of the Companies Act. The information listed is incorporated by cross-reference.
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Our communities and the environment:
Environmental policies are regularly
reviewed.
During the COVID-19 pandemic, we
were pleased to be able to keep our
aftersales facilities open to offer support
to the NHS and key worker community.
This included 41 locations from 23
March 2020 with a phased approach to
see the remaining aftersales centres
being open by mid-May.
The Board and Executive Committee
have been considering how to accelerate
our approach towards EV and
sustainability and have made two key
hires to lead on this. More information
can be found in our Corporate and Social
Responsibility statement on page 80.
Lookers supports its communities
through a number of different initiatives
including supporting colleagues to
volunteer in our communities, creating an
award-winning apprenticeship
programme which creates routes into
work for young people and charitable
giving.
The Group recognises that its activities
have an impact on the environment and
is therefore keen to promote and support
initiatives that minimise the effect of
such activities through adherence to its
environment policy. We monitor the areas
of our business that may impact on the
environment including contamination,
asbestos, waste oil, waste recycling
together with energy, water and fuel
efficiency. Lookers monitors its energy
consumption and continues to
implement energy saving initiatives such
as solar PV installations, biomass boilers
and energy saving technologies such as
smart controls. We recognise the
importance of committing to reducing
our carbon emissions. We work to review
our use of resources and the emissions
of the products that we sell with the goal
of improving our carbon footprint and
reducing our emissions.
Taking the above into account, the Board considered several key
areas impacting stakeholders during the course of 2020. The
Board was cognisant of its duties under section 172 and the
impact on its various stakeholders when making decisions, some of
which were extremely difficult to make but vital to the ongoing
success of the Group. A summary of the key decisions is below;
more information is described within the Chairman's Statement
and COVID-19 Response sections of the Strategic Report and in
the table above.
• Introduction of new remuneration and incentive schemes and a
cultural change programme.
• Capital expenditure programme to improve equipment
and premises.
• Extension of banking facilities.
• Suspension of the share listing and subsequent actions to
secure restoration.
• Closure of 12 sites.
• Board and senior management pay cuts.
• Dividend suspension.
• Furlough of staff and redundancies.
Reporting requirement
Policies and standards which
govern our approach
Page(s) in the Annual Report & Accounts
Environmental matters and
greenhouse gases
Environmental policy*
Section 172 Statement – Page 46
Corporate social responsibility review,
including mandatory carbon reporting –
Pages 80 to 81
Employees
Employee Gender Pay Reporting**
COVID-19 response – Pages 22 to 23
Health and Safety Policy*
Section 172 Statement – Page 42
Ethical Policy Statement*
Diversity Policy**
Code of Conduct Policy*
Corporate social responsibility statement,
including ethical employment and diversity,
human rights, recruiting, retaining and
developing our people, communicating with
our people, COVID-19 impact and stay safe
and healthy – Pages 81 to 82
Volunteering Standards*
Section 172 Statement – Page 46
Corporate Social Responsibility review –
Pages 80 to 82
Corporate social responsibility review, human
rights – Page 81
Social matters and
Community Engagement
Respect for human rights
Modern Slavery Act Statement**
Data Privacy Policy*
Information and Cyber-Security Policy*
Anti-corruption and anti-bribery
Anti-bribery and Anti-Corruption
Fraud Risk Management Policy
Operational and other risks – Page 34
Modern Slavery - Page 81
Description of the business
model
Description of principal risks and
impact of business activity
Non-financial key performance
indicators
Business model and strategy – Pages 14 to 15
Risk overview and management -
Pages 30 to 36
Non-financial key performance indicators -
Page 29
*Certain Group policies are internal standards and guidelines and are not published externally.
**These policies are published elsewhere and are not contained within this Annual Report & Accounts.
This report was approved by the Board of Directors and is signed
on its behalf by:
Mark Raban
Chief Executive Officer
30 June 2021
46 | Strategic Review
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Governance
48 | Governance
Lookers plc Annual Report & Accounts 2020 | 49
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Board of Directors
We are committed to ensuring the right balance of skills and
experience in the Board and regularly review its composition in
line with our Company purpose.
We made a number of changes to the Board throughout the
year and subsequently. In December 2020, we were pleased to
welcome Robin Churchouse as Independent Non-Executive
Director and Chair of the Audit and Risk Committee. In January
2021, Anna Bielby was appointed as Interim Chief Financial
Officer and Duncan McPhee was promoted to Chief Operating
Officer. Both have been appointed to the Board as Executive
Directors. On 1 April 2021 Paul Van der Burgh was appointed
as a Non-Executive Director. Heather Jackson stepped down
from the Board on 30 April 2021.
Full details of changes made to the Board during 2020 and up
to the date of this report are described within the Nomination
Committee Report on page 72.
Key:
• PLC: Board of Directors of Lookers plc;
• ARC: Audit and Risk Committee;
• NomCo: Nomination Committee;
• RemCo: Remuneration Committee;
• LMGB: Board of Directors of
Lookers Motor Group Limited;
• ExCo: Executive Committee;
• OpsCo: Operations Committee.
Mark Raban
Chief Executive Officer
Appointed: July 2019 (CFO)
(February 2020 (CEO))
Membership:
PLC, LMGB, ExCo, OpsCo
Skills and Experience:
• 30 years retail experience
• Significant experience with acquisitions,
integration and disposals
Mark has 30 years retail experience including finance and
acquisitions director at Inchcape Retail Limited, finance &
commercial director at Care UK and finance director at
Selfridges. Mark played a significant role in the IPO of
Marshall Motor Holding and its subsequent growth in his
role as chief financial officer.
Mark is a natural leader and his deep sector knowledge
alongside his strong finance and turnaround background
makes him a strong and invaluable Chief Executive Officer
of the Group.
Mark supplements these talents with significant finance
experience including financial planning and analysis;
business development initiatives and project
management; working capital improvement, cash
management and debt financing; turnaround and
performance improvement.
External Appointments:
• Director of Precise Finance Limited
50 | Governance
Lookers plc Annual Report & Accounts 2020 | 51
Board of Directors
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Phil White CBE
Non-Executive Chairman
Victoria Mitchell
Non-Executive Director, Chair of LMGB
and Interim Chair of RemCo
Robin Churchouse
Non-Executive Director and
Chair of ARC
Anna Bielby
Interim Chief Financial Officer
Appointed: September 2006
(Non-Executive Chairman), November 2019 (interim
Executive Chairman until 31 March 2020 when he returned
to his Non-Executive role). Phil once again took on the interim
role of Executive Chairman on 1 July 2020 in order to guide
the business through the restoration of its premium listing on
the Official List of the London Stock Exchange. Following
release of the interim results on 29 January 2021, he
returned to his position as Non-Executive Chairman.
Membership:
PLC (Chair), NomCo (Chair), RemCo*
Skills and Experience:
• Qualified chartered accountant
• Considerable board governance experience, at both
non-executive and executive level
Phil was chief executive of National Express plc for nearly
10 years until 2006. Prior to this, Phil joined West Midlands
Travel Limited as finance director in 1994 before taking on
the role of managing director in 1995 where he stayed for
two years until his promotion at National Express Group. Phil
brings his wealth of experience as a chair of FTSE and other
companies to the Group, ensuring Board effectiveness and
corporate governance. Within the board, he helps ensure
clarity, critical thinking, constructive debate and challenge
and the running of an effective Board. Externally, he ensures
there is effective engagement with our investors over our
strategy, long-term sustainability and corporate governance.
External Appointments:
• Non-Executive Director of VP plc
• Non-Executive Director of Vibroplant Trustees Limited
• Non-Executive Director of Vantage Motor Group Limited
•
•
Non-Executive Director of Vantage Garages (Blackburn) Limited
Non-Executive Director of Vantage Motor Group Automotive
Limited
• Non-Executive Director of Vantage Motor Group Holdings Limited
*Not during periods of Executive office
52 | Governance
Appointed: December 2019
Appointed: December 2020
Appointed: January 2021
Membership:
PLC, LMGB (Chair), ARC, NomCo, RemCo (Interim Chair)
Membership:
PLC, LMGB, ARC (Chair), NomCo, RemCo
Skills and Experience:
• Experienced chief operating officer
• Strong risk and legal experience
Victoria has a 30-year history of working in the financial
services industry. She is skilled in financial services and risk
management.
Victoria was formerly chief operating officer of Capital One
(Europe) plc after previously holding the positions of chief risk
officer and chief legal counsel.
As well as her legal background, Victoria also brings board
experience across operations and risk within the financial
services sector. Victoria’s deep regulatory experience and
understanding of regulation and risk in the financial services
sector is of the upmost importance to the long-term
sustainability of the Group.
External Appointments:
• Non-executive director of The West Bromwich
Building Society
• Non-executive director of N Brown Group plc
Skills and Experience:
• Qualified chartered accountant and experienced
chief financial officer, with a background in risk and
operations management
• Extensive financial services regulatory experience,
alongside a track record in mergers and acquisitions and
strategic consulting
Robin has over 30 years financial services experience in
leading and advising finance, risk, operational and strategic
teams in a wide range of regulated financial services
organisations. Most recently, he was chief financial officer of
Yorkshire Building Society, having held a variety of senior
executive roles there after working as finance and commercial
director for a number of mortgage servicing companies, and
as both a strategy consultant and financial services regulator.
Robin graduated in law at Cambridge and qualified as a
chartered accountant with Price Waterhouse.
Robin’s experience as an accountant and his strong
professional and financial services background are key
attributes to the long-term sustainability of the Group.
External Appointments:
• Non-executive director of Belmont Green Financial Limited
• Non-executive director of Commercial and Northern Limited
Membership:
ExCo, OpsCo
Anna stepped down from the Board with effect from 30 June
2021 but remains as Interim Chief Financial Officer until 31
July 2021.
Skills and Experience:
• Qualified chartered accountant
• Retail and plc experience
Anna trained as a chartered accountant with PwC, where she
worked for 14 years specialising in retail and was an audit
director. She brings plc experience, having worked at KCOM
Group for five years in a number of senior financial roles,
latterly as chief financial officer.
External Appointments:
• Director of BLB (UK) Limited
Lookers plc Annual Report & Accounts 2020 | 53
Board of Directors
Duncan McPhee
Chief Operating Officer
Paul Van der Burgh
Non-Executive Director and
Senior Independent Director
Philip Kenny
General Counsel and Company Secretary
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Appointed: January 2021
Membership:
PLC, LMGB, ExCo, OpsCo
Skills and Experience:
• 25 years retail operations experience
Duncan has over 25 years of experience in the motor retail
industry including spending the last 12 years at Lookers in a
number of senior management roles, the previous 9 years at
Franchise Director level and most recently, he has been Chief
Retail Operations Officer with responsibility for the dealership
portfolio and OEM Brand Partners relationships. Before
joining Lookers, he spent 10 years with Arnold Clark in
Scotland, including five years as general manager.
Duncan’s deep sector expertise and insight is of paramount
importance to the Board. His strategic thought, customer
centric mindset and pragmatic approach are a real asset to
the long-term sustainability of the Group.
External Appointments:
• Director of Bryn Edwin Management Company Limited
Appointed: April 2021
Membership:
PLC, LMGB, ARC, NomCo, RemCo
Skills and Experience:
• Highly experienced in the global automotive industry
• 35 years experience, with senior executive positions
at leading multinational brands around the world
Paul has extensive experience in the global automotive
industry, having held senior executive positions at leading
multinational brands around the world for 20 years.
He spent 15 years at Toyota and Lexus, most recently as the
president and managing director of Toyota (GB). Prior to this,
Paul held a variety of roles at Ford in the UK and the
Americas. Paul has also been an executive director of the
Society of Motor Manufacturers & Traders.
He is well known and highly respected throughout the motor
industry for all he has achieved in his career. His in-depth
understanding of the industry and the changing dynamics in
the market are invaluable to the long-term sustainability of
the Group.
External Appointments:
• None
Appointed: December 2019
Membership:
PLC*, LMGB*, ExCo, OpsCo
* as Company Secretary
Skills and Experience:
• Qualified Solicitor (2007)
• Significant experience in corporate finance and
commercial law
• Specialising in aerospace, IT and the textile industries
Philip graduated from the University of Central Lancashire in
2004 with a Bachelor of Laws. He has 14 years legal
experience as a qualified solicitor including as counsel for
defence information: military air and information at BAE
Systems plc and director, general counsel and company
secretary at Best Dressed Group Limited (incorporating
Jigsaw Clothing).
Philip has significant experience in sitting on and advising
both plc and private company boards of Directors in all areas
of business and commercial/corporate finance law including
IPR, IT, general commercial, data, terms and conditions, cross
border, employment, litigation, corporate finance and capital
markets, company secretarial matters and mergers and
acquisitions.
External Appointments:
• Legal consultant - PK Business Consulting Limited
• Director, Perfect Human Limited
54 | Governance
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Group Executive Team
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Mark Raban
Chief Executive Officer
Anna Bielby
Interim Chief Financial Officer
Duncan McPhee
Chief Operating Officer
Philip Kenny
General Counsel and Company Secretary
See page 50 for full profile
See page 53 for full profile
See page 54 for full profile
See page 55 for full profile
Marcus Kenny
Chief Risk Officer
Andy Garrett
Chief Information Officer
Chris Whitaker
Chief People Officer
Appointed: Joined in an interim capacity in May 2019 and
switched to permanent (and became a Director of Lookers
Motor Group Ltd) in October 2019
Appointed: October 2020
Membership:
ExCo & OpsCo
Membership:
LMGB, ExCo, OpsCo
Skills and Experience:
• Extensive regulatory and strategic change expertise having
led a number of regulatory and strategic remediation
programmes and high profile acquisitions and disposals.
• Multi-channel retail and PLC experience.
• Proven regulatory relationship management experience
with both the FCA (authorisations, supervision and Primary
Market Oversight) and PRA.
• Developed and implemented contemporary Enterprise
Risk Management frameworks appropriate for the varying
size and complexity of various firms and their varied markets.
• Successful track record in developing and leading risk
and compliance teams with the right levels of capability
and capacity.
Marcus is a senior governance, risk and compliance
professional with a unique blend of capability and experience
across a variety of sectors including retail, insurance, consumer
credit and banking.
External Appointments:
• None
56 | Governance
Skills & Experience:
• Over 10 years experience driving technology enabled
change and transformation in major omni-channel retailers.
• Proven C-suite IT professional in all aspects of IT strategy,
delivery and day-to-day operations.
• Has led significant technology changes to stabilise and
now modernise the Lookers business.
• Leading the digital transformation at Lookers including
key strategic projects across the business.
Andy started his career in Technology at Fujitsu and has
worked for several big retailers over the years, such as B&Q,
Screwfix and Travis Perkins; holding a range of senior roles in
both Technology & Business Change.
Now as Chief Information Officer the purpose of his role is to
lead on the digital transformation of the organisation and
deliver the Technology that underpins it.
Andy also attends the LMGB and Audit and Risk Committee
by invite.
External Appointments:
• None
Appointed: March 2021
(interim from 1st December 2020)
Membership:
ExCo & OpsCo
Skills and Experience:
• 25 years of HR leadership experience gained at a leading
listed technology services business, and within the
public sector.
• Deep expertise in Reward, Change Management, the
impact of the UK governance code on remuneration
matters, and mergers and acquisitions.
• Significant experience of attending and advising PLC
Boards, Remuneration and Nomination Committees on all
people related issues.
Chris brings extensive HR & Leadership experience gained
across all HR disciplines and carries expertise in Reward and
Change Management. Chris is leading the Group’s review of
Equality, Diversity and Inclusion in 2021.
Chris attends and advises Remuneration and Nomination
Committee by invite.
External Appointments:
• None
Lookers plc Annual Report & Accounts 2020 | 57
Chairman’s statement on
corporate governance
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Introduction from the Chairman
As I report in my opening Chairman’s statement, 2020 proved to be
an extremely difficult year for the Group. During the year the Board
had to address many legacy issues including the newly discovered
potentially fraudulent transactions and accounting irregularities
which we set out in detail in our reports for 2019.
were in 2019. Governance will continue to be a focus, recognising
the role this will play in the delivery of our strategy and purpose.
More information on the work undertaken in 2020 and so far in
2021 is described in the Risk Overview and Management section
of the Strategic Report on page 30 and in the Report from the
Chairman of the Audit and Risk Committee on pages 74 to 79.
This led to both external and internal accounting investigations, the
findings of which resulted in detailed discussions with our auditors
and regulators. As a consequence of these issues, combined with
the global COVID-19 pandemic, we were unable to publish our
2019 Annual Financial Statements or our June 2020 interim
financial results on time. A request to the FCA to temporarily
suspend our shares ensued.
Once concluded, our full year results for the year 2019 were
published on 25 November 2020 and our unaudited interim
results for the six months ended 30 June 2020 were published on
29 January 2021. During the period of suspension, the Board
instigated a review into the Group’s systems and controls, both
financial and non-financial, insofar as they related to the
Company’s ability to adhere to its listing obligations. As a
consequence of this, the Group took the opportunity to enhance its
control framework including updating policies, procedures and
processes.
Corporate governance statement
The Board is responsible for the culture and values of the Group,
and the system for internal controls. The Board has taken action in
following recommendations made in relation to improvements in its
governance, systems and controls and financial reporting
described above and elsewhere in this Report. It is confident that
there are processes and practices in place within the Group to
promote the long-term sustainable success of the business and
protect the interests of our stakeholders.
The UK Corporate Governance Code published by the Financial
Reporting Council in July 2018 (the Code) sets out principles for
good corporate governance. The Code is available on the FRC
website, www.frc.org.uk. Good governance supports the Board’s
decision-making and ensures risks are identified and appropriately
managed to enable the long-term sustainable success of the
Company. In 2020, the Group complied with the provisions of the
Code other than:
On the publication of the interim results on 29 January 2021 and
in conjunction with the conclusion of the control framework
improvements, we requested and were granted restoration of our
shares to the official list of the London Stock Exchange on 29
January 2021.
On behalf of the Board, I apologise unreservedly for the uncertainty
caused by this and I would like to thank my Lookers colleagues for
their tireless work during this period to both ensure we continued
to trade as effectively and compliantly as possible but also for their
inherent desire to do the right things. I would also like to thank our
stakeholders for their ongoing support of the Company during this
difficult time.
As far as legacy issues are concerned, and as previously reported,
we have been working internally to review our governance, systems
and controls as they relate to our regulated activities. On 2 March
2021 we announced that the FCA had advised the Board of its
decision to close the investigation against Lookers Motor Group
Ltd for the possible mis-selling of regulated products between
January 2016 and June 2019. The FCA closed the investigation
without applying any sanction but noted several concerns relating
to the historic culture, systems and controls of the Group which the
Board fully accepted. The £10.4m financial provision contained
within the 2019 Financial Statements has now been released
following confirmation of the outcome.
In summary, the Board continued to respond to ongoing challenges
seen by the Group during 2020 by driving transformative change
through all aspects of our business. The change process is
ongoing, but I am pleased to report on the significant changes
made and that the Group is now in a stronger position than we
i) Provision 5 in relation to the methods used to engage with the
workforce. The Board has used an alternative method to engage
to those recommended by the Code. More detail on the method
used is given on page 61.
ii) Provision 12 regarding the Senior Independent Director
meeting the Non-Executive Directors to appraise the Chair’s
performance. The rationale for this is explained on page 64.
iii) Provision 19 concerning the tenure of the Chair. An explanation
of the reasons for this position are provided on page 67.
Board leadership and the Company’s purpose
Culture
Treating customers fairly is central to our culture and is
fundamental to the delivery of our business strategy. The Board is
ultimately responsible for the oversight of the Company’s culture
and ensuring that this reflects our customer-centric values. The
Board believes that tone is set from the top and in the importance
of leading by example.
Considerable progress was made during the second half of 2020,
continuing into 2021, to document our values and ensure they are
reflected in the behaviours of our colleagues and other stakeholders
and in the undertaking of activities which support our strategic,
operational and risk management objectives. A significant part of
the Board evaluation for 2020 related to behaviours and setting the
tone across the business.
58 | Governance
Lookers plc Annual Report & Accounts 2020 | 59
Chairman’s statement on
corporate governance
We recognise that governance and culture is central to achieving
fair treatment of our customers and returns for our shareholders.
2019 and 2020 were the ultimate test of where the Lookers
culture was and where we wanted to be. We believe, in the
management of the challenges across this period, from the
financial reporting issues to the emergence of the COVID-19
pandemic, that we have shown adaptability and acceptance of
challenge on and of our culture. We acknowledged and have
addressed areas where there is need for improvement and we
continue to embed and build trust with our colleagues and
stakeholders, acting with integrity, identifying our mistakes if made,
putting things right where so and preventing them from occurring
again in the future.
Purpose
Our purpose and values from the showroom to the boardroom are
set out below:
• We are proud to serve the communities around us
• We inspire and excel in the work we do and the talent we build
• We promote a workplace culture that rewards merit, values
diversity and cares for the environment
• We work with our suppliers in a spirit of partnership
• We faithfully represent the values and culture of our global OEM
Brand Partners through commitment to technology, training and
people development; and
• We trade responsibly and govern to ensure the long-term
sustainability of the Company
This was a key focus for the Board during 2020 with work being
done to document, communicate and update practices (including
in relation to how staff are incentivised) to fully embed the required
culture to address previous issues across the business. We believe
that the Group now has a stronger culture which reinforces and
rewards the right behaviours by ensuring our colleagues have the
knowledge, tools and motivation to do the right thing. Culture is
seen as a key driver to the success of our business and our
disclosures within the Strategic Report highlight the importance of
this on our operations.
Looking to the future
The CEO sponsored ongoing enterprise wide cultural change
programme looking at our mission, strategy and, very importantly
behaviours and key operating principles, continues. This programme
will include the continued focus on all the issues identified by
Grant Thornton in an independent review undertaken and
subsequent internal investigations. Transparency and doing the
right thing sit right at the heart of this change programme. We
believe that the Group’s future high level of business performance
will be made possible by the fundamental values that underpin
each of its actions. Keeping these values in mind, we build our
customers’ and stakeholders’ trust in us, our employees’ dedication
to the Group, a comfortable work environment and effective
business practices.
More information is included in our Business Model and Strategy
on pages 14 to 15, our section 172 Statement on pages 40 to 46
and the Corporate Social Responsibility Review on pages 80 to 82.
Stakeholder engagement
In its decision-making, the Board considers the interests of its
investors, key stakeholders, and the wider communities in which it
operates. Further information on stakeholder engagement
activities can be found in the Corporate Social Responsibility
Statement at page 82 and the section 172 statement on pages
41 to 46.
Shareholders
The Company places considerable importance on communications
with shareholders and responds to them on various issues. It has an
ongoing programme of dialogue and meetings with major
institutional shareholders, where a range of relevant issues
including strategy, performance, remuneration, management and
governance are discussed.
The Chairman always makes himself available to meet any major
shareholder, as required.
All Company announcements are posted on our website
www.lookersplc.com/investors/regulatory-news as soon as they
are released. Our website contains a dedicated investor relations
section, with an archive of past announcements and presentations,
historical financial performance, share price data and a calendar of
events.
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The principal communication with private investors is through the
Annual Report & Accounts (ARA), the Interim Report and the
Annual General Meeting (AGM). A presentation is usually made at
the AGM to facilitate greater awareness of the Group’s activities.
The Board were unable to offer this at the AGM or separate
General Meeting held on 29 June and 28 December 2020 due to
Governmental restrictions imposed as a consequence of the global
COVID-19 pandemic, although investors were given the
opportunity to submit questions beforehand. As explained in the
Notice of Annual General Meeting posted to shareholders on 7
June 2021, because of the timing of publishing the 2020 ARA, the
Company’s AGM only considered matters that are not related to the
ARA. A separate General Meeting to approve the ARA related
business will be convened (the “Accounts General Meeting”). Whilst
the 2021 AGM had to be held as a closed meeting due to
COVID-19 restrictions, the Accounts General Meeting is currently
expected to be held without Government restrictions, although we
will be operating with social distancing measures. Shareholders will
again be given the opportunity to submit questions in advance.
Under normal circumstances, shareholders are given the
opportunity to ask questions of the Board and of the Chairs of each
Board Committee and to meet the Directors informally after the
meeting. The Board values the opportunity given by the AGM to
meet with shareholders in person and to take their questions.
Separate resolutions are proposed for each item of business, with
voting conducted by a poll. All valid proxy appointment forms are
recorded and counted and, after a vote has been counted,
information regarding the votes is published on the Company’s
website. The Notice is posted to shareholders at least twenty-one
days before the date of the Annual General Meeting. Should a
significant proportion of the votes cast be against the resolution,
the Company would explain, when announcing the result, what
action it intends to take to understand the reasons behind the
result. At the General Meeting held on 28 December 2020 there
were concerns raised by shareholders in relation to the
Remuneration Report, with 29% of those shares voted being
against the passing of the resolution to approve it. The Company
announced that the Remuneration Committee would reflect on this
and communicate with shareholders in relation to the specific
actions it intended to take. A statement was published on the
Company’s website setting out the Board’s understanding of the
reasons for the objections and more information is also included in
the Directors’ Remuneration Report on page 84.
Workforce engagement
The Code recommends ways in which the Board should engage
with employees by either a director appointed from the workforce,
a formal workforce advisory panel or a designated non-executive
director. During 2020 the Board agreed that rather than adopt one
of these options, it should have collective responsibility for
workforce engagement and a quarterly listening session
programme has commenced in 2021 whereby via rotation a Non-
Executive Director will meet with different groups of employees to
gather views. The Board believes that this will provide both the
ability to receive a wider range of feedback from a large and
geographically diverse range of employees and also aid visibility of
the Board across the workforce. Feedback from these sessions is
relayed to the Board and executives on an anonymised basis. More
information on this and the employment initiatives undertaken
during 2020 are explained within the business model and strategy
and section 172 Statement.
The Group has whistleblowing arrangements in place whereby the
workforce can raise concerns in confidence. The Audit and Risk
Committee routinely reviews this and reports arising from its
operation, as explained in the Report of the Chairman of the Audit
and Risk Committee.
Division of responsibilities
The Board
The Board currently comprises the Non-Executive Chairman, Chief
Executive Officer, Chief Operating Officer, Senior Independent
Director, two independent Non-Executive Directors and, until 30
June 2021, the Interim Chief Financial Officer. The biographies of
the Directors on pages 50 to 55 provide details of their roles and
details of their external appointments.
Chairman and Chief Executive Officer
The Chairman leads the Board and the Chief Executive Officer
manages the Group and implements the strategy and policies
adopted by the Board. The division of responsibilities between the
role of Chairman and Chief Executive Officer is clear and is set out
in writing. The Chairman and the Chief Executive Officer work
together to set the Board’s agenda, supported by the Company
Secretary. The Chairman ensures a culture of openness and
debate and facilitates constructive discussions between the
Executive and Non-Executive Directors. Managing these
relationships has been of particular importance during what has
been a difficult year for the Group.
Senior Independent Director
It is the primary responsibility of the Senior Independent Director to
act as a sounding board for the Chairman, and to provide a
communication channel between the Chairman and the Non-
Executive Directors ensuring that the views of each Non-Executive
Director are given due consideration. The Company Secretary would
minute any unresolved concerns expressed by any Director. In
normal circumstances, the Senior Independent Director will lead the
other Non-Executive Directors in the annual performance evaluation
of the Chairman. As explained elsewhere in this report, a different
approach was taken to the evaluation in 2020. The Senior
Independent Director would also usually chair the Nomination
Committee in respect of the Chairman’s succession. However, due to
the timing of the search for a Chairman’s successor and the
departure of Heather Jackson as Senior Independent Director, the
current search for a new Chairman is being led by Victoria Mitchell
and she is also taking the Chair for relevant meetings of the
Nomination Committee where Chair succession is discussed.
60 | Governance
Lookers plc Annual Report & Accounts 2020 | 61
Chairman’s statement on
corporate governance
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Board balance and independence
The Board has a balance of Executive and Non-Executive Directors
such that no individual or small group of individuals can dominate
the Board’s decision-making process. The Board reviewed the
overall balance of skills, experience, diversity, independence and
knowledge, making additional appointments in 2020 and 2021 to
enhance the balance between Executives and Non-Executives.
The Nomination Committee Report on pages 70 to 73 provides
more details on the changes to the Board and process for
appointment of new Directors. The Non-Executive Directors are
encouraged by the Chairman to provide constructive challenge and
scrutiny of management performance.
The table below sets out the Directors in place during 2020 and as at the date of this report. The numbers in the table indicate the
balance of Directors (Executive versus Non-Executive) excluding the Chairman to evidence the Company’s compliance with the Code.
Period
2020
Executive
Directors
Independent
Non-Executive Directors
Non-Independent
Non-Executive Directors
Chairman
1 January – 4 February
Mark Raban
Richard Walker
2
5 February – 12 March
13 March – 28 February
1 March – 30 March
31 March – 29 June
30 June
1 July – 7 December
8 December –
31 December
2021
1 January – 4 January
5 January – 28 January
29 January – 31 March
1 April – 30 April
1 May – 30 June
Mark Raban
Cameron Wade
Richard Walker
Mark Raban
Richard Walker
Mark Raban
Mark Raban
Mark Raban
Mark Raban
Mark Raban
Mark Raban
Anna Bielby
Mark Raban
Anna Bielby
Duncan McPhee
Mark Raban
Anna Bielby
Duncan McPhee
Mark Raban
Anna Bielby
Duncan McPhee
Mark Raban
3
2
1
1
1
1
1
1
2
3
3
3
Sally Cabrini
Stuart Counsell
Heather Jackson
Victoria Mitchell
Sally Cabrini
Stuart Counsell
Heather Jackson
Victoria Mitchell
Sally Cabrini
Stuart Counsell
Heather Jackson
Victoria Mitchell
Sally Cabrini
Stuart Counsell
Heather Jackson
Victoria Mitchell
Richard Walker
Sally Cabrini
Stuart Counsell
Heather Jackson
Victoria Mitchell
Richard Walker
Stuart Counsell
Heather Jackson
Victoria Mitchell
Stuart Counsell
Heather Jackson
Victoria Mitchell
Robin Churchouse
Stuart Counsell
Heather Jackson
Victoria Mitchell
Robin Churchouse
Heather Jackson
Victoria Mitchell
Robin Churchouse
Heather Jackson
Victoria Mitchell
Robin Churchouse
Heather Jackson
Victoria Mitchell
Robin Churchouse
Heather Jackson
Victoria Mitchell
Paul Van der Burgh
Robin Churchouse
Victoria Mitchell
Paul Van der Burgh
4
Tony Bramall
1
Phil White1
4
Tony Bramall
1
Phil White1
4
Tony Bramall
1
Phil White1
5
Tony Bramall
1
Phil White1
5
Tony Bramall
1
Phil White2
3
3
4
3
3
3
4
3
Tony Bramall
1
Phil White2
Tony Bramall
1
Phil White1
Tony Bramall
1
Phil White1
Phil White1
Phil White1
Phil White2
Phil White2
Phil White2
62 | Governance
1 Executive Chairman 2 Non-Executive Chairman. Further details of changes made to the Board in the year under review are included in
the Nomination Committee report on page 72.
Lookers plc Annual Report & Accounts 2020 | 63
Chairman’s statement on
corporate governance
Time commitment and external appointments
The time commitment of Non-Executive Directors is set out on
appointment and is regularly monitored. Details of the Board’s
external appointments can be found on pages 50 to 55. The
Board has considered each of these appointments, noting the
Directors’ other commitments, and is satisfied that each of the
Non-Executive Directors is able to devote sufficient time to the
Group’s business.
Board operation
The Board meets regularly throughout the year. It is responsible,
with the support of Board Committees and the Executive
Committee, for setting the purpose, values, culture, and strategy of
the Group. The Board has a schedule of matters reserved that is
regularly monitored. Matters reserved for decision by the Board
include decisions in relation to the Group’s strategy, oversight of
the system of internal control, compliance and risk management,
major capital expenditure, approval of bank borrowings, and major
changes to the Group’s corporate structure.
The Group maintains appropriate Directors’ and Officers’ liability
insurance in respect of legal action against its Directors.
Induction and training
The Chairman takes overall responsibility for the Directors, training
and development. Following appointment to the Board, Directors
receive a comprehensive induction to enable them to acquire a
detailed understanding of the Group’s business, strategy and the
key risks and issues. This includes meetings with the Chairman, the
Chairs of the Board Committees, the Company Secretary, senior
management and other key individuals from around the business
and visits to a range of dealerships.
Throughout the year, updates on developments in legal and
governance matters are provided to all Directors. All Directors are
required to complete our e-learning training modules which
includes training on a variety of legal and regulatory topics. The
Board has received specific refresher training via an interactive
online session with Freshfields Bruckhaus Deringer on the
obligations, responsibilities and liabilities of directors on a premium
listed company. This occurred in November 2020 and all new
subsequent Directors have also received an in-house version of
this training.
Board evaluation
The Board last commissioned an external Board evaluation in
2019, the results of which were shown in last year’s Annual Report
& Accounts. In 2020 an internal evaluation was carried out via the
completion of questionnaires by the Board of Directors and
representatives of the management team. The questionnaire was
sent out towards the end of 2020 and was designed to allow free
form responses rather than a series of tick boxes. The information
gathered as part of this exercise was then collated into a detailed
discussion paper by the Chairman which was deliberated on at a
special meeting of the Board in March 2021. This more informal
process allowed Directors and senior management to speak freely
about issues and concerns which was important after what had
been a very difficult period for the Group.
64 | Governance
Because of the events of 2020 and the numerous changes to the
Board over the period, it was not deemed practical to have
separate appraisals for the individual Directors and the Chairman
as the performance and behaviours of the Board and how the
members worked together were discussed in detail as part of the
wider process. The challenges experienced by the Group during
2020 meant that a considerable amount of extra input was needed
by the Non-Executive Directors over the year. Careful consideration
was given to the split of duties between Non-Executive and
Executive roles of the Directors and as a result of the challenges
faced there was often some overlap in responsibilities. The 2020
Board evaluation highlighted this and allowed this to be discussed
and addressed once again. It was noted that from the beginning of
2021 we have been able to move back to a normal split of
responsibilities and we believe that the Board is now operating
more effectively. The recent changes to the Board have introduced
additional skills which will continue to enhance its performance.
This has allowed us to move into 2021 in a very positive way and
we will continue to build on this during the year. As we moved
forward through 2021, we are conscious that we have a relatively
new Board with the exception of the Chairman. This brings about
both opportunities and challenges and these will be monitored and
optimised accordingly.
Key recommendations arising from the evaluation discussions
included:
• The need to return to normality with a clear distinction between
Executive and Non-Executive roles;
• More meetings to be held across the various dealerships and
amongst the workforce;
• Continue to rebalance the Board to ensure its composition
captures all the necessary skills;
• The Board needs to be more accessible and visible to the Group
as a whole post the elimination of COVID-19 restrictions;
• To put greater emphasis on strategic planning post COVID-19;
Increased profile for the Committees with particular regard to
•
the Audit and Risk Committee and the Internal Audit function.
Role of the Company Secretary
In furtherance of their duties, the Directors have full access to the
advice and services of the Company Secretary and may take
independent professional advice at the Company’s expense. The
Company Secretary attends all meetings and is responsible for
advising the Board and its Committees, through the respective
Chairs, on corporate governance and matters of procedure. The
appointment and removal of the Company Secretary is a matter for
the Board.
Board procedures
The Company Secretary, on behalf of and at the instruction of the
respective Committee Chair who remains responsible, ensures that
the Directors receive accurate, timely and clear information and
provides advice and support in relation to regulatory and
governance matters. Monthly financial, operational and risk
management information is provided to the Directors.
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The requirement of the Code in relation to the recent and relevant
financial experience of the Chairman of the Audit Committee were
met throughout 2020. The requirement for the Chair of the
Remuneration Committee to have served on a remuneration
committee for over 12 months was also met during 2020.
Regular and ad hoc reports and presentations are circulated, with
all Board and Committee papers being issued in advance of
meetings by the Company Secretary and made available to all
Directors on a Board portal. A range of governance documents to
assist the Board in their duties are also included on the Board
portal. In addition to formal Board meetings, the Chairman
maintains regular contact with the Chief Executive and the other
Directors to discuss specific issues. The Board meets regularly and
is given adequate time to probe and debate issues.
Board committees
The Board has established a Nomination Committee,
Remuneration Committee and Audit and Risk Committee. Details
of the responsibilities of each of these Committees, their
membership and the work undertaken by each during 2020 are
given in the individual reports of those Committees which appear
on pages 70 to 73, 84 to 106 and 74 to 79 respectively. The Terms
of Reference of these Committees, together with documents
setting out the responsibilities of the Board, the Chairman, Chief
Executive and Senior Independent Director, can be found on the
website www.lookersplc.com/investors/corporate-governance.
Board and Committee attendance
The following table shows the attendance of Directors at scheduled Board meetings and at meetings of the Audit and Risk Committee
(ARC), Remuneration Committee and Nomination Committee during 2020:
Director
Number held
Number attended
Tony Bramall
Sally Cabrini1
Robin Churchouse2
Stuart Counsell
Heather Jackson
Victoria Mitchell
Mark Raban
Cameron Wade3
Richard Walker1
Phil White4
Board
15
15
9
1
15
15
15
15
1
9
15
ARC
11
n/a
2
0
11
11
11
n/a
n/a
1
n/a
1 Sally Cabrini and Richard Walker stepped down from the Board on 29 June 2020.
2 Robin Churchouse was appointed on 8 December 2020.
3 Cameron Wade stepped down from the Board on 12 March 2020.
4 Phil White was only a member of the Remuneration Committee between 1 April and 30 June 2020.
Directors who are not members of a Committee are able to attend by invitation.
Remuneration
Nomination
9
n/a
4
1
9
8
9
n/a
n/a
1
1
5
n/a
3
1
5
5
5
n/a
n/a
n/a
5
Lookers plc Annual Report & Accounts 2020 | 65
Chairman’s statement on
corporate governance
In addition to the schedule of regular attendance at meetings
detailed above, the Board met formally on a further 43 occasions
during 2020. Informal Director updates were also held on a daily
basis at certain times during the year. Participation levels by
Directors at these ad hoc and informal meetings was high and
reflects the considerable extra time and effort involved in seeking
to address the issues seen by the Group in the year. The items
considered at these meetings included:
•
the investigation into fraud and accounting irregularities and the
resultant delays in the 2019 audit, publication of the 2019 ARA
and 2020 Interim Financial Statements
•
the impact of COVID-19, including receipt of regular trading
updates, health and safety and furlough of staff, rent reviews
and the debt position
• corporate culture
•
• Board and senior management composition
• FCA engagement
• banking and refinancing
the suspension of the listing and work needed to gain restoration
These items were a key part of the considerations by the Board
in accordance with section 172, as explained further on pages
40 to 46.
The increased number of ARC meetings held during 2020 is also
reflective of the additional input needed to consider the financial
reporting and control issues faced by the Group during the year.
Succession planning, election, and diversity
The Code includes a recommendation that the Chairman of the
Board does not remain in post in excess of 9 years from the date of
their first appointment to the Board. The Code acknowledges that,
if a clear explanation is provided, the Code permits a limited time
extension where this would facilitate effective succession planning
and the development of a diverse board. The Chairman has been in
post for over 15 years and so is currently not in compliance with
this provision of the Code. We announced in our 2018 Annual
Report & Accounts that we had started the succession planning
process for the Chairman. As described in our 2019 report, in view
of the Executive management changes in November 2019, it was
decided to postpone the recruitment process for a new Chairman
until the handover process to a new Chief Executive Officer was
completed, in order to maintain the stability of the Group during a
period of significant change. At the request of the Board, Phil White
assumed the role of Interim Executive Chairman on 1 November
2019 until 31 March 2020 to oversee the transition in the
Business arising from the Board changes and the accounting and
governance issues identified.
Although the appointment of a new Chief Executive Officer was
concluded in February 2020, in view of the executive management
changes in 2019 and the significant challenges faced by the
Group in 2020, including the Grant Thornton investigation, the
Board carefully considered the position and agreed to delay its
search for a new Chairman. It concluded that it continued to benefit
from the Chairman’s corporate knowledge and experience during
this difficult period, and asked that he again fulfil an Executive role
from 1 July 2020 until the 2020 interim results were published on
29 January 2021.
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The succession planning and recruitment process for a new Non-
Executive Chairman is underway. The Nomination Committee, in
the absence of Phil White, discussed how best to proceed in terms
of Phil’s intention to stand down at the 2021 Annual General
Meeting and it was agreed that it was in the best interests of
stakeholders that Phil White be asked to extend his tenure on an
interim basis. Phil White has confirmed that he is willing to
continue in office on an interim basis and the Nomination
Committee agreed that his re-election would therefore be put to
shareholders at the AGM.
The Board recognises the importance of effective succession and
once the current Chairman has stood down, the policy for the
tenure of the Chairman will be no longer than nine years, subject to
extension for a limited time if necessary to aid succession planning
or continuity in certain circumstances in accordance with the
provisions of the Code.
Succession planning, rotation of Directors and the process of
appointing new Directors is managed by the Nomination
Committee which makes recommendations to the Board. Lookers
recognises and embraces the benefits of having a diverse Board
and sees increasing diversity at Board level as an essential element
of maintaining competitive advantage. Further information about
the succession planning process, including its consideration of
diversity in its succession plans and gender diversity metrics is
detailed in the Nomination Committee Report on page 71.
We are keen to do more to look at diversity in its widest sense. We
are building frameworks to ensure that everyone is paid fairly
based on talent and performance. We want to be renowned as a
place where talented individuals can thrive and be at their best,
combining all aspects of diversity and representation including
areas such as age, background, gender and sexual orientation.
Some progress has been made during 2020, however, the
challenge presented by both the internal and external distractions
during the year has limited this. The Board recognises the need for
continued focus on this issue during 2021. More information on
workforce diversity is included in Corporate and Social
Responsibility Report on page 81.
Risk management and internal control
Accountability
The Board recognises the importance of maintaining a sound
system of internal control to safeguard shareholders’ investment
and the Company's assets. The Board is responsible for ensuring a
robust framework is in place for risk management and internal
control against the backdrop of fulfilling the Group’s objectives.
The Board has established a system of control that addresses the
mitigation of business and operational risks as well as risks to
financial reporting. The system of internal control is designed to
manage rather than eliminate the risk of failure to achieve business
objectives and can provide reasonable assurance against material
misstatement or loss.
How risk is managed
The Board determines the Group’s overall risk strategy and risk
appetite. The Board, in conjunction with management, identifies the
principal risks to which the Group is exposed and establishes a risk
management framework and internal controls to identify, assess,
monitor and mitigate its risk exposure. Further details on the
Group’s risk management framework and how risks are evaluated
and mitigated are detailed on pages 30 to 36.
Lookers operates a three lines of defence model, which provides a
framework of responsibilities and accountabilities across the
organisation. This is detailed more fully on page 30.
The effectiveness of the Group’s internal controls is reviewed by the
Board and the Audit and Risk Committee. The management of risk is
independently overseen and challenged by the Group’s Risk
Management and Compliance Teams who constitute the second line
of defence. Internal audit, as the third line of defence, undertakes
independent assurance activities and provides reports to the Board
and senior management on the quality and effectiveness of
governance, risk management and internal controls.
Following the first COVID-19 lockdown in March 2020, the
functioning and structure of the internal audit department has
been reviewed and a new permanent head of internal audit was
appointed during 2020. These changes have evidenced materially
better risk and internal control governance.
Review of risk management during the year
In 2020, the Group continued to review and improve its processes
for identifying, evaluating, managing and monitoring the risks faced
by the Group. The key focus of the risk strategy was to continue the
work started in 2019 to review the design and implementation of a
new enterprise risk management framework to strengthen controls
over the business operations. Over the year management was
heavily involved in risk assessment and related actions arising from
COVID-19 and the management of the internal fraud and financial
reporting control issues. Our response is detailed in the Risk
Overview and Management section on pages 30 to 36.
The Board has closely monitored the progress of the
implementation of these controls by management and receives an
update at each meeting on the project tasked with addressing the
financial, operational and compliance controls identified in 2019.
In addition, it receives regular reports on risk management and
internal controls via the Audit and Risk Committee.
Identifying, evaluating and managing risks, including
emerging risks
There is a process in place for the identification, assessment and
management of risk, which is covered in further detail in the Risk
Overview and Management section on page 30. This includes
consideration of the principal risks to the Group and any emerging
risks identified, with the input of management and Internal Audit.
This includes a robust assessment, at least annually, by the Audit
and Risk Committee of the probability and potential impact of the
risks which the Group may face. Reporting has been developed to
track the Group’s performance against Board agreed risk appetite
and escalate new and emerging risks to the Audit and Risk
Committee and the Board as appropriate.
Lookers plc Annual Report & Accounts 2020 | 67
Chairman’s statement on
corporate governance
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Internal control
The Board is responsible for overseeing the Group’s system of
internal controls, reviewing its effectiveness at least once a year
and reporting to shareholders that it has done so. It does so
through its governance arrangements and oversight of the
Enterprise Risk Management Framework (see above).
Financial reporting
The Executive Directors oversee the preparation of the Group’s
annual corporate plan; the Board reviews and approves it and
monitors actual performance against it on a regular basis. When
deemed appropriate, revised forecasts are prepared and presented
for Board review and approval.
To ensure that information consolidated into the Group’s Financial
Statements is in compliance with relevant accounting standards
and the Group’s own accounting policies, internal reporting data is
reviewed regularly.
The Audit and Risk Committee reviews the appropriateness of the
Group’s accounting policies for each reporting period. The Audit
and Risk Committee considers reports from Executive
Management, Internal Audit, the Risk and Compliance team and
the Group’s external auditor, the application of IFRS and the
reliability of the Group’s system of control over financial reporting.
Internal control effectiveness
The Board confirms it has performed its annual review of the
effectiveness of internal controls. Controls have been designed to
ensure that the Group’s financial reporting presents a true and fair
68 | Governance
reflection of the Group’s financial position. The Board has
acknowledged the significant weakness in the control environment
identified by the Grant Thornton investigation and its own internal
reviews. Responding to these weaknesses, it considered and
approved significant improvements to the Group’s internal control
and financial reporting structure. Many of these improvements
have been implemented although the process of improving
controls will continue during the remainder of 2021.
Assessment of position
The Financial Statements aim to provide a fair, balanced and
understandable assessment of the Group’s business model,
strategy and performance and prospects in relation to material
financial, economic, social, environmental and governance issues.
The material focus areas have been determined considering the
following:
• Specific quantitative and qualitative criteria
• Matters critical in relation to achieving strategic objectives
• Principal and emerging risks identified in the risk management
process
• Identification and application of appropriate accounting
standards
Phil White
Chairman
30 June 2021
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Anna Bielby’s appointment as Interim Chief Financial Officer was
for an initial term of six months. She has agreed to extend her
assignment and will leave the Group at the end of July following
finalisation of a number of key projects. She did not seek election
as a Director at the 2021 Annual General Meeting, and stepped
down from the Board with effect from 30 June 2021.
As detailed on page 9, I have agreed to extend my tenure and
therefore, whilst previously announced that I would not be standing
for re-election, I stood for re-election at this year’s AGM.
Diversity
Lookers recognises the benefits of having a diverse Board and
sees increasing diversity at Board level as an essential element of
maintaining both a competitive advantage and good corporate
governance. Appointments to the Board are based on merit and
objective criteria reflecting the skills, knowledge, experience,
diversity and independence needed to ensure a balanced and
effective Board. The Committee’s diversity policy has set a target of
ensuring that the proportion of women on the Board is not less
than 20% by 2022 and not less than 33% by 2024. With these
targets in mind, we continue to review the composition of the
Board, ensuring any appointments continue to be based on merit.
More information on the considerations in relation to diversity of
the workforce is given in the Corporate Social Responsibility
Review on page 81.
The gender balance as at 31 December was:
Board Members
Senior Management*
All staff**
2020
2019
Male
5
19
4,991
Female
2
1
1,603
Male
5
25
6,636
Female
3
3
1,988
*Includes representatives of the Executive Committee (including the Company Secretary) and senior direct reports,
excluding Executive Directors.
** Excludes Non-Executive Directors.
Report from the Chairman of the
Nomination Committee
Dear Shareholder
As Chair of the Nomination Committee, I am pleased to be able to
update you on the ongoing work which has been carried out during
2020, and 2021 so far, in terms of refreshing the Board and the
leadership. As reported in my report for 2019, the Nomination
Committee and the Board have been reflecting upon the
leadership needs of the Group, together with the skills, knowledge,
independence, diversity and experience needed from the Board
and senior management.
Composition and attendance
The Nomination Committee is composed solely of the Non-
Executive Directors and met five times during 2020 to consider a
number of ongoing significant changes to the Board and senior
management. Any Non-Independent Director, the CEO and Chief
People Officer are able to attend meetings of the Committee by
invitation as appropriate.
The attendance at meetings by each member of the Committee is
set out on page 65.
The role of the Nomination Committee
The role of the Nomination Committee is to establish a framework
for appointments of Executive and Non-Executive Directors and
senior management. The Nomination Committee further assists the
Board in ensuring its size, structure and composition is regularly
reviewed and refreshed and makes recommended changes to the
Board, so that it is effective and able to operate in the best interests
of the shareholders. In addition, the Nomination Committee
oversees the development of a diverse pipeline for succession to
the Board and senior management roles.
Succession planning
Recognising that improvements were needed in terms of the
process for succession planning during 2020, in the first quarter of
2021 the Nomination Committee spent some time considering
Board and senior executive succession, which included the
mapping of skills and experience in order to identify any gaps. This
included i) setting out the succession to fill any sudden and
unforeseen departures, ii) medium term planning for the orderly
replacement of Directors as they reach the end of their tenure
period and iii) long term planning to ensure that the alignment of
skills now and in the future were right to ensure the delivery of the
Company’s strategy and objectives. This included identifying
appropriate staff within the business who could, over time and with
the necessary support and training, be candidates for future senior
executive roles.
A number of emerging skill requirements were identified for senior
management and these will be filled either by training or
recruitment. At Board level, the Nomination Committee feels that
following Board refreshment, it went into 2021 with the right mix of
people to carry forward the strategy of the Group. However, the
Company is in a fast paced environment and the needs may
change over time and the succession plan will need to be flexible
to adapt. The Committee will continue to review this and ensure
the succession of the Chair, Chair of RemCo and a permanent CFO
are a priority. The recruitment process for these positions is well
underway as at the date of this report.
As part of succession planning, the length of service of the Board
as a whole is considered. The Committee is cognisant that as a
result of the recent refreshment of the Board, the end of tenure
periods of the Non-Executive Directors are all very close together
and how to ensure a gradual and orderly succession will need to be
addressed in the future.
Appointment of Directors
The Nomination Committee leads the process, as set out below, for
appointments to Board and senior management positions (other
than for the Chairman and the Chief Executive Officer which are
matters considered by the Company’s Board).
The Nomination Committee determines:
• Where external candidates are sought, whether a search agency
will be used and the process for their appointment;
• Specification for the role, (including a definition of the role and
capabilities required) taking into account the current balance of
skills and experience on the Board;
• Whether there is internal talent available to fill any vacancy;
• Other ways it can access a diverse pool of candidates including
a wide range of backgrounds;
• The content of the role specification and usage of open
advertising where appropriate;
• The structure of the interview process;
• The interview panel;
• Referencing requirements and candidate checks;
• Shareholder consultation; and
• Engagement with the Remuneration and other Board
committees as appropriate.
Once the above are agreed, a timetable for the appointment is
approved and the process commences.
Recent appointments to the Board were facilitated in a variety of
ways. Anna Bielby was appointed on an interim basis following a
personal recommendation; Duncan McPhee was promoted
internally; Paul Van der Burgh was appointed following an
approach made by the Board on his retirement as president of
Toyota GB; and Robin Churchouse was recruited via a search
agency. The external agency used to assist with the appointment
of Robin Churchouse had no connection with the Company or
individual Directors. All external appointments were subject to
interviews by the Non-Executive Directors.
All Directors stand for election or re-election by shareholders at the
next AGM following their appointment to the Board. Details of the
Directors who stood for election/re-election and 2021 AGM, with
supporting information on their contribution to the Group, were
included in the Notice of AGM. The Committee recommended to
the Board that all Directors standing for election or re-election at
the 2021 AGM be recommended for approval by shareholders.
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Lookers plc Annual Report & Accounts 2020 | 71
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Objectives for 2021
As the new Board and senior management structure continues to
embed over the remainder of 2021, the Nomination Committee
will continue to review our succession plans for the short, medium
and long term for the Board and senior management positions. A
core element for this programme will be to develop the training and
resources available to support internal progression to senior
management positions and the Board.
The Nomination Committee will continue to keep under review the
options for workforce engagement as described elsewhere in this
report.
Our key priorities during 2021 are the appointment of a new
Chairman and a permanent Chief Financial Officer; our searches
for both are well underway. The Chairman does not participate in
meetings to discuss his successor and the current search is being
managed by a sub-group of the Nomination Committee, led by
Victoria Mitchell.
Phil White
Chairman
30 June 2021
Report from the Chairman of the
Nomination Committee
In addition to gender diversity, a diverse range of experience and
backgrounds is also important. Part of the Nomination Committee’s
deliberations on the appointment of an additional Non-Executive
Director subsequent to the year-end sought to diversify the Non-
Executive pool of experience and it is believed that Paul Van der
Burgh’s experience in the motor industry will aid the Board’s
understanding of the workforce and its customers. The additional
Board appointments to fill key roles on the Board will be made with
the need to continue to ensure a broad range of skills and
experience in mind.
Changes to the Board
As explained in our 2019 Annual Report & Accounts, during 2020
the Board recognised the need to bring in new skills and
experience to guide the business through the next stage of
development. With our dealerships re-opened after the first
COVID-19 lockdown, we believed it was time to put in place plans
for the future of Lookers and agreed an orderly transition to refresh
the Board. As part of this process, and as recommended by the
Committee, the following changes to the Board took place
between 1 January 2020 and the date of this report:
The Committee has noted the Parker Review in relation to Ethnic
Diversity of UK Boards and confirms that it is cognisant of all
diversity issues when considering succession and potential Board
candidates but recognises that there is substantially more to be
done in this area.
5 February 2020
• Mark Raban appointed as Chief Executive Officer
• Cameron Wade appointed as Chief Operating Officer and to the Board
1 March 2020
• Richard Walker returned to Non-Executive role
12 March 2020
• Cameron Wade stepped down from the Board
30 March 2020
• Jim Perrie appointed as Interim Chief Financial Officer (not to the Board)
31 March 2020
• Phil White returned to Non-Executive role
29 June 2020
• Richard Walker stepped down from the Board
• Sally Cabrini stepped down from the Board
1 July 2020
• Heather Jackson appointed as Senior Independent Director
• Victoria Mitchell appointed as Chair of Lookers Motor Group Ltd, the Group’s FCA regulated entity
• Phil White resumed the role of Executive Chairman to oversee a transitional period
25 November 2020
• Heather Jackson appointed as Chair of the Remuneration Committee
8 December 2020
• Robin Churchouse appointed as Non-Executive Director
31 December 2020
• Stuart Counsell stepped down from the Board
• Tony Bramall stepped down from the Board
1 January 2021
• Robin Churchouse appointed as Chair of the Audit and Risk Committee
5 January 2021
• Anna Bielby appointed as Interim Chief Financial Officer and as an Executive Director
29 January 2021
• Phil White returned to Non-Executive role
• Duncan McPhee promoted to Chief Operating Officer and appointed as an Executive Director
1 April 2021
• Paul Van der Burgh appointed as a Non-Executive Director
30 April 2021
• Heather Jackson stepped down from the Board
5 May 2021
• Paul Van der Burgh appointed as Senior Independent Director
• Victoria Mitchell appointed as Interim RemCo Chair
30 June 2021
• Anna Bielby stepped down as an Executive Director but remains as Interim Chief Financial Officer
Details of the experience of the Directors in situ as at the date of this report and the key attributes they bring to the Board are detailed
on pages 50 to 55.
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Lookers plc Annual Report & Accounts 2020 | 73
Report from the Chairman of the
Audit and Risk Committee
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Composition and attendance
The Committee’s membership is composed solely of independent
Non-Executive Directors. During 2020 membership consisted of:
On Stuart Counsell’s resignation on 31 December 2020, I was
appointed as Chair of the Committee, a role for which I had been
specifically assessed and recruited.
Stuart Counsell (Chair – resigned 31 December 2020)
Heather Jackson
Richard Walker (reappointed 5 March 2020, resigned 29 June 2020)
Robin Churchouse (appointed 8 December 2020)
Sally Cabrini (resigned 29 June 2020)
Victoria Mitchell
The Committee members have, through their current and previous
business activities, broad experience in financial, risk and
commercial matters. Biographies of all members are shown on
pages 50 to 55.
The Committee met on eleven occasions during the year. The table
on page 65 provides details of attendance. Through the year a
broad range of management were also invited to attend meetings
of the Committee, including the CEO, CFO, CRO, Head of Internal
Audit, Company Secretary and Group Chair.
Dear Shareholder
The Committee is specifically responsible for:
I am pleased to present my first report as Chair of the Audit and
Risk Committee (“the Committee”). The report details the
Committee’s role, responsibilities and activities during 2020,
including how it considered and responded to developments in the
business and the wider environment.
Having joined the Board in December 2020, and assumed the role
of Chair of the Committee from 1 January 2021, this review relies
heavily on a review of the papers and minutes of the Committee’s
meetings through 2020, as well as conversations with the
members of the Committee who are still in office.
The year under review was clearly a very challenging one for the
Group, with the ongoing impact of internal and external regulatory
reviews, ongoing risk and regulatory improvement and remediation
programmes, and the management of the Group’s response to
fraudulent activities, accounting irregularities and the impact of
COVID-19. I cover all of these in more detail below, and they are
also discussed in the Chairman’s Report on pages 6 to 9.
Role and responsibilities
The Committee is an essential part of the Group’s governance
framework. Its fundamental purpose is to oversee and advise the
Board on the Group’s financial reporting, risk management, internal
audit and internal controls.
1. Monitoring the integrity of the Financial Statements, including
ensuring they present a fair, balanced and understandable
view of the Group’s performance and position;
2. Reviewing, and challenging, the Group’s accounting and
financial reporting processes;
3. Advising the Board in assessing material accounting
judgements, estimates and issues;
4. Advising the Board in assessing the Group’s going concern
and viability statements;
5. Overseeing the Group’s overall risk profile, strategy, appetite
and risk management framework, including the review of
risk management arrangements, key risk policies, reports on
risk positions, and activity by the Group’s risk and compliance
functions;
6. Monitoring the risk culture throughout the Group, and how
effectively it supports good risk management;
7. Reviewing the role and effectiveness of the Group’s risk and
compliance functions, including the adequacy of the
resources available to these functions;
8. Monitoring the scope, adequacy and effectiveness of the
Group’s internal control, internal financial control and risk
management systems, as well as the implementation of any
remediation and improvement programmes;
9. Reviewing the arrangements in place to deal with
whistleblowing, fraud, bribery and anti-money laundering;
10. Reviewing the role and effectiveness of the Group’s internal
audit function, including the adequacy of the resources
available to the function;
11. Reviewing the annual workplan for the Group’s internal audit
function, as well as the results of the function’s work and
resolution of any identified issues;
12. Reviewing the role, effectiveness and independence of the
Group’s external audit arrangements.
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Audit and Risk Committee
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Key matters impacting the Committee
During 2020 two issues understandably dominated the
Committee’s agenda, namely:
•
the ongoing investigations, enhancements and remediation of
regulatory sales issues; and,
the investigation of potentially fraudulent transactions, other
•
accounting irregularities, and the impact of these on the
Group’s 2019 and prior year accounts.
Taking these in turn:
Regulated sales – systems and controls
The FCA’s consideration of the issues has now concluded and
whilst no enforcement action and/or fines were imposed,
significant concerns relating to the historic culture, systems and
controls of the Group were emphasised, which the Board fully
accepted. The Group cooperated fully with the FCA on these
issues.
The S166 reviews, which were undertaken by Grant Thornton, were
received in November 2019 and February 2020. They identified a
significant number of issues and improvements with which the
Group agreed, and which it committed to resolve. A key focus for
the Committee (as well as for the Group as a whole, and both the
Board of the Company and its principal trading subsidiary, Lookers
Motor Group Limited (LMGL)) in 2020 was the implementation and
embedding of these recommendations. This included establishing
a risk sub-committee within LMGL (where the regulated activity
sits) to monitor and advise on the Company’s response. This sub-
committee included three members of the Committee, and in July
2020 was integrated into the LMGL Board.
The restructuring actions taken by the Group include the
appointment of a Chief Risk Officer, and the introduction of a broad
range of risk and compliance enhancements within LMGL and the
broader Group. This has included the development of a revised
governance structure and the design and implementation of a new
enterprise risk management framework, as well as a refresh and
re-approval of the Group’s key risk policies. During 2020 the
Committee played a key role in reviewing, challenging and
recommending to the Board all of these improvements. A
significant amount of work has been carried out, and in 2021 the
focus of the Group and the Committee has shifted to fully
embedding the new framework.
Fraud, accounting irregularities and 2019 accounts
In March 2020 the Group announced an investigation into
potentially fraudulent transactions within one of its divisions. This
investigation, which was undertaken with the help of Grant
Thornton, uncovered a significant number of accounting
irregularities including systems and control weaknesses, non-
compliance with policies and accounting standards and poor
accounting practices. The nature of these issues, including their
scale, was fully disclosed in the 2019 Report and Accounts.
The Committee was closely involved in the work performed by the
Group and its advisors (Grant Thornton and PwC) to both identify
the exact nature, scale and quantum of the accounting issues, their
impact on the 2019 and prior year results, and the remedial
actions required to ensure they do not re-occur. This included
liaising regularly with the external auditors, Deloitte, who, as part of
their audit work, reviewed and challenged the issues identified and
their impact on the 2019 accounts.
Throughout the second half of the year the Committee spent
significant time reviewing and challenging the final analyses of all
of the issues and their impact on the 2019 accounts. This included
a particular focus on:
• Fictitious transactions - identified within one division, but with
challenges including not just the impact of those items but also
ensuring no wider issues existed;
• Policy misapplications – across a number of areas including
cash and bank classifications, lease accounting across
different subsidiaries and staff car schemes;
• Property, plant and equipment and intangibles – with, in
particular, inappropriate treatment of costs associated with
capital projects;
• Control weaknesses – on accounting for manufacturers’
bonuses, and also more broadly across divisional and head
office functions.
In 2021, our focus has been on resolving the knock on impacts of
delays in finalising the 2019 Accounts on our 2020 interim results
and subsidiary accounts, on returning our financial reporting to a
normalised timetable, on transitioning to a new external auditor and
on embedding and building on the improvements to our financial
reporting and broader finance function.
Committee activities
Looking at the Committee’s responsibilities (as set out above) and
the work undertaken in 2020:
1. Monitoring the integrity of the Financial Statements
2. Reviewing, and challenging, the Group’s accounting and
financial reporting processes;
3. Advising the Board in assessing material accounting
judgements, estimates and issues;
4. Advising the Board in assessing the Group’s going concern and
viability statements;
Much of the work in these areas during the year is covered above
(see “Fraud, accounting irregularities and 2019 accounts”). In
terms of the 2019 accounts, the Committee also looked in detail at
a wide range of areas including:
• Leasing – with the Group retrospectively adopting IFRS 16
for the 2019 accounts, the Committee reviewed management’s
implementation of the standard and its key judgements.
• Goodwill and intangibles – the Committee reviewed the results
of the Group’s annual assessment of the carrying value of
goodwill and intangibles. This includes challenging the
judgements and assessments used including long term growth
rates, forecast cashflows, forecast timeframes and discount
rates. The Committee considered and challenged the
methodology, as well as the consideration of reasonable
“downside” sensitivity analyses. For the 2019 results the
Committee also focussed on ensuring that the impact of wider
accounting adjustments had been correctly recognised.
•
Inventories – the Committee reviewed and challenged
management’s assessment of the fair value of inventories,
including both standard and judgemental provisions, with a
particular focus on used car valuations which are more volatile;
• Pensions – the Group operates 3 defined pension schemes,
and for each of these the Committee reviewed the assumptions
used by management and the Group’s external actuaries. This
included discussion of appropriate approaches to deficit
reduction;
• Alternative performance measures – the Committee
considered the treatment of certain items as non-underlying
and agreed with management’s view that they were either not
incurred in the normal course of business, or due to their size,
nature and irregularity should not be included in the assessment
of core trading.
• Regulatory provisions – the Committee reviewed the proposed
provision for a fine from the FCA in relation to its review of the
Group’s past regulated sales processes;
• Customer remediation – the Committee reviewed and agreed
management’s approach to identifying and calculating
provisions required for known customer detriment and redress;
• Brexit – the Committee considered the potential impacts of
Brexit on the Group’s prospects, including possible impacts on
new vehicle prices, vehicle parts supply and used vehicle values,
as well as broader macro-economic repercussions. Whilst even
after 31 December 2020 the outlook remains uncertain, the
Committee was satisfied with the mitigating actions taken by
management;
• Going concern and viability statements – the Committee’s
considerations were significantly complicated by the impact of
COVID-19 and the associated lockdowns and economic
impacts. The Group’s reaction to COVID-19 is laid out in more
detail in this report (and in the 2019 accounts). The Committee
monitored these actions, and discussed in detail the Group’s
forecasts and funding arrangements, as well as a number of
stressed scenarios tested against financing covenants and
broader financial sustainability. The Committee was satisfied
that the assumptions used were appropriate, and, taking into
account discussions with the external auditors, were satisfied
that it is appropriate to adopt the going concern basis. The
Committee satisfied itself as to the appropriateness of the going
concern and viability statements;
As part of the process for the completion of the 2020 accounts
the Committee looked in detail at a reduced number of areas,
reflecting the progress made by management in resolving legacy
issues. Those areas specifically considered were:
Inventories
• Going concern and viability
• Goodwill and intangibles
•
• Pensions
• Regulatory provisions
• Commercial Income
• Non-underlying items
The Committee reviewed and agreed management’s approach for
estimating commercial income owed from manufacturers, and
agreed with management’s judgement that the non-underlying
items presented within these accounts were consistent with the
Group’s policy and their separate presentation more accurately
reflected the underlying results of the Group. The Committee’s
actions regarding the other areas were consistent with those
performed as part of the 2019 accounts process.
As set out in the Financial Review and Note 1 to the Financial
Statements, the 2020 Annual Report & Accounts includes three
prior period adjustments which impact the year ended 31
December 2019.
(i) An adjustment to the Lookers plc Company Statement of
Financial Position in order to correct retained earnings in the
years ended 31 December 2019 and 31 December 2018,
resulting from adjustments to subsidiary retained earnings that
were made after the completion of the 2019 Group Financial
Statements.
(ii) An adjustment to the Group Financial Statements in order to
correctly account for a number of leases which have been
omitted in error from our IFRS 16 right of use lease calculations
on adoption of this standard. This adjustment is non-cash and
not material to the Group’s net assets or reported profit.
(iii) An adjustment to the application of IFRS 16 in the Group’s Get
Motoring UK Limited subsidiary. This adjustment is non-cash
and is not material to the Group’s net assets or reported profit.
An overarching responsibility of the Committee is to make certain
that the Group’s accounts present a fair, balanced and
understandable view of the Group’s performance and position.
Inherent in this is that they provide shareholders with the
information they need to assess the Group’s position, performance,
business model and strategy. In doing this the Committee
specifically considered, alongside the broader picture the
following:
• That satisfactory verification and remedial processes were
undertaken by management in respect of the adjustments
required in 2019 and prior years, and that adequate explanation
of those items was included in the accounts;
76 | Governance
Lookers plc Annual Report & Accounts 2020 | 77
Report from the Chairman of the
Audit and Risk Committee
• That key events during the year were fairly reported, as well as
any significant post balance-sheet date events;
• That key messages and judgements within the financial and
narrative sections are consistent;
• That alternative performance measures were clearly explained
and appropriate to explaining the underlying performance of
the business.
5. Overseeing the Group’s overall risk profile, risk strategy, risk
management framework and risk appetite
6. Monitoring the risk culture throughout the Group, and how
effectively it supports good risk management.
7. Reviewing the role and effectiveness of the Group’s risk and
compliance functions.
8. Monitoring the scope, adequacy and effectiveness of the
Group’s internal control, internal financial control and risk
management systems, as well as the implementation of any
remediation and improvement programmes;
9. Reviewing the arrangements in place to deal with
whistleblowing, fraud, bribery and anti-money laundering;
Whilst the Board has overall responsibility for the Group’s internal
control environment and for assessing its effectiveness, the
Committee, along with the LMGL Board, plays a critical role in
helping it to fulfil this responsibility. It does this through more
detailed review and challenge, in particular of the Group’s risk
management structures, strategies and appetites. As previously
noted, 2020 was a year of continued change for the Group’s risk and
internal control structures. The Committee spent a significant
amount of time reviewing and monitoring the development of a
revised governance structure and the design and implementation of
a new enterprise risk management framework, as well as a refresh
and re-approval of the Group’s key risk policies.
Specific areas considered by the Committee during the year include:
• Receiving regular updates from the CRO on over-arching risk
management and compliance activities and developments,
including health and safety matters;
• Receiving updates from the CRO on regulatory compliance
performance and reviews (including regulated complaints
performance and quality assurance programmes), and on
progress in embedding of revised sales processes;
• Receiving updates on all interactions with the FCA;
• Monitoring progress in implementing and embedding the
enhancements to the Group’s governance framework (including
ongoing compliance with the FCA’s Senior Management
Regime), risk and compliance management and broader
internal controls;
• Receiving updates and reports on the impact of COVID-19 on
the Group’s activities, and on the Group’s response;
• Progress reports on incidents of actual or potential customer
harm, and associated remediation programmes to ensure
customers were made good;
• Receiving updates from the Chief Information Officer on
general IT controls and their maintenance and continuous
improvements, including specifically cyber security and GDPR;
• Receiving briefings and reports on whistleblowing, money
laundering and related financial crime matters, regulatory
developments and “horizon risks”;
78 | Governance
• Reviewing and approving an enhanced suite of risk
management policies including conduct risk, regulatory risk,
operational risk and financial crime risk policies;
• Reviewing the Risk and Compliance functions forward looking
plans and resourcing requirements.
The Committee plays a significant role in preparing the Group’s
overall risk assessment and identification of key risks, which are set
out on pages 31 to 36.
The Committee, as noted above, is responsible for monitoring the
scope, adequacy and effectiveness of the Group’s internal control,
internal financial control and risk management systems. Clearly the
events of 2020 evidence that the systems in place were not fully
effective. With this in mind:
•
In terms of the 2019 Accounts, the Committee satisfied itself
that the extensive additional work undertaken in preparing,
reviewing and auditing of those accounts compensated for
shortcomings in the systems of control;
• There has been significant improvement in the systems and
their effectiveness during 2020, and this continues into 2021.
In the latter part of the year an external review was undertaken
to confirm adequate progress on key financial controls, and this
review, along with extensive internal work and challenge, was
critical in the Group being comfortable to apply for re-listing of
its shares in January 2021 and the accompanying duty to
comply with its ongoing obligations as a premium listed company;
• Combined with the work undertaken internally, and by our new
auditors on the 2020 Accounts, the Committee is satisfied that
the combination of internal controls and more substantive
internal finance and external audit work has provided adequate
assurance over these accounts.
As noted elsewhere, whilst we are satisfied that our systems and
controls are adequate, we remain committed to a programme of
further and continuous improvement and embedding.
10. Reviewing the role and effectiveness of the Group’s internal
audit function, including the adequacy of the resources and
budgets available to the function;
11. Reviewing the annual workplan for the Group’s internal audit
function, as well as the results of the function’s work and
resolution of any identified issues;
2020 saw continued development of the Internal Audit function
and programme, including the appointment of a new Head of
Internal Audit in September 2020. Throughout the year internal
audit reports and their associated actions were reviewed by the
Committee, as well as enhancements to the risk register and risk
dashboards. Areas considered included GDPR, Cyber Security and
financial controls. A full review of the forward looking internal audit
plan was considered, and a programme agreed that will see further
development of our approach and use of internal audit through
2021.
12. Reviewing the role, effectiveness and independence of the
Group’s external audit arrangements;
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The Committee is responsible for assessing the effectiveness of
Deloitte’s audit including their independence and objectivity.
During 2020 Deloitte informed the Board that it intended to resign
as auditors following completion of the 2019 audit. The steps that
the Committee took to assess Deloitte’s independence and
objectivity were set out in the 2019 Accounts.
We note that the Financial Reporting Council (FRC) has
commenced an investigation into the audits by Deloitte LLP of the
Financial Statements of the Group for the years ended 31
December 2017 and 31 December 2018.
Following on from Deloitte’s indicative intention to resign, the
Committee ran a tender process with two firms for the provision of
external audit services:
• Both confirmed their independence;
• The process was run so as to ensure both had fair and equal
information and access to Committee members, the Group’s
Chair, the CEO, CFO, CRO and other senior managers;
• Both were invited to present to the Committee.
The Committee, taking into account sector and public company
experience, independence, ability to challenge and audit quality,
recommended that BDO LLP be appointed for the year ended 31
December 2020.
In considering BDO’s independence and objectivity in the context
of the 2020 Accounts the Committee has taken into account:
• The short tenure of BDO;
• The Committee’s own interactions with BDO.
Taking all of these into account, the Committee is satisfied with
BDO’s independence and level of challenge.
BDO received £nil non audit fees (2019: Deloitte £nil).
Looking forward
The Group clearly faced significant challenges throughout 2019 and
2020. There has been much change and improvements in the
systems of governance, financial management, risk and compliance
management, internal audit and broader control areas over that
period. As we have moved into 2021 the focus is shifting to:
• Clearing the backlog issues caused by the delays in finalising
the 2019 Accounts;
• Re-establishing normal financial reporting and transitioning to a
new external auditor;
• Embedding and continuously building on the improvements to
systems and controls.
The Committee will continue to play its part in successfully
managing the Group safely through uncertain times including the
impacts of Brexit, COVID-19, broader economics and a changing
motor market, doing so in a way that protects the interests of all of
our stakeholders including customers, colleagues, funders,
shareholders and regulators.
• BDO’s annual independence statement, and their compliance
with relevant laws, regulations and other professional and
ethical statements;
• The business’s feedback on BDO’s approach and performance;
Robin Churchouse
Chairman of the Audit and Risk Committee
30 June 2021
Lookers plc Annual Report & Accounts 2020 | 79
Corporate social
responsibility review
Corporate social responsibility management
Whilst our focus is on creating a great place to work, the Board sets
a clear standard when it comes to corporate social, environmental
and ethical issues.
We continue to seek to achieve waste reduction within our
businesses and can report that during 2020 we recycled (95.9%)
of all waste (2019: 95.9%).
We have increased site EV charge capacity across the entire estate
by 15% during 2020. Our journey to vehicle electrification is now
well underway combined with a cohesive sustainability programme.
We are investing in dedicated senior resource to drive these
programmes and an experienced Business Development Director
has been recruited to develop EV combined with sustainability. This
appointment is supported by the new Group Energy &
Sustainability Manager and the property team and will drive
progress over 2021.
Mandatory carbon reporting
As has been noted in previous years, the Group reports each year
to the Environment Agency under the Government’s CRC Energy
Efficiency Scheme. The Group now aligns its carbon reporting with
the new requirements under Streamlined Energy and Carbon
Reporting (SECR); its first report is due in Q2 2021.
This is our eighth year of mandatory carbon reporting and covers
the period 1 January to 31 December 2020 to align to the SECR
reporting.
Our carbon reporting methodology is the Greenhouse Gas
Protocol and the requirements of the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations. Our reporting
boundary is the financial control method and covers all occupied
premises and vehicles operated by the Group, whether owned or
leased, relating to our UK based operations. Data relating to our
business in the Republic of Ireland has been excluded. As this
business accounts for 1.1% of our turnover, this exclusion is not
considered material.
We report under Scope 1 and Scope 2 in respect of emissions
from diesel and petrol consumed, gas burnt, and electricity
purchased. The information relating to emissions from gas and
electricity has been extracted in full from the data that we have
reported to the Environment Agency under CRC reporting.
This data is collected and collated by an independent supplier to
the Group. The information relating to emissions resulting from the
use of diesel and petrol has been extracted from data supplied by
the Group’s main fuel card provider. The intensity ratio being
adopted is emissions (tonnes of CO2) per million pounds of
turnover.
Each operating company includes social, environmental and ethical
issues in their risk assessment processes to ensure any potential
problems are identified and contingency strategies are in place.
Lookers and the environment
The Group recognises that its activities have an impact on the
environment and is therefore keen to promote and support
initiatives that minimize the effect of such activities through
adherence to its environmental policy.
We continue to monitor the areas of our business that may impact
on the environment including contamination, asbestos, waste oil,
waste recycling together with energy, water and fuel efficiency. The
Group has recently appointed a Group Energy & Sustainability
Manager with key responsibility for driving improvements in energy
and sustainability throughout Lookers.
We continue to reduce energy consumption and related carbon
emissions. This is achieved through a number of
areas including:
• Regular energy surveys of our dealership estate
• Regular monitoring of energy consumption
• Deployment of energy-saving technologies including, biomass
heating and cooling, solar PV installations and the increasing
use of smart controls
• Deployment of energy monitoring and metering solutions to
further improve data capture and reporting.
As ever, the reduction of carbon emissions continues to be a high
priority for the Group, and we continue with our reporting
responsibilities in respect of energy consumption and
management in the following three areas:
1. Lookers has completed the Energy Saving and Opportunities
Scheme reporting and the Streamlined Energy and Carbon
Reporting for 2019 and 2020. During 2020 Lookers’ total
carbon emissions fell by 28%, however this reduction is in
context of the reduction in operations due to COVID-19.
2. Greenhouse Gas Reporting (GHG). This is our eighth year of
reporting and the results are shown at the end of this section.
3. Energy Savings Opportunity Scheme (ESOS). This reporting
requirement was introduced by the European Union and we
have been compliant since 2015.
Our continuous programme of dealership newbuilds and
refurbishments offers us the opportunity to deploy the latest and
most efficient building materials together with systems to control
the use of water, heating, cooling and lighting.
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Our mandatory carbon reporting data for the years to 31 December 2020 and 2019 are:
Scope 1
Gas
Vehicle fuels
Total
Scope 2
Electricity
Statutory total
2020
(tCO2e)
5,252
13,345
18,597
7,050
25,647
2020
(tCO2e/£m)
1.41
3.58
4.99
1.89
6.88
2019*
(tCO2e)
6,310
17,707
24,017
9,119
33,136
2019*
(tCO2e/£m)
1.32
3.70
5.02
1.91
6.93
* Prior year disclosures updated to 31 December 2019 (2019: 31 March 2019).
With effect from the current reporting period, we are also required
to disclosure the annual quantity of energy consumed by the Group
from activities and that consumed resulting from the purchase of
electricity, heat, steam or cooling in kilowatt hours. The data for the
year to 31 December 2020 is below:
Gas
Vehicle fuels
Electricity
Total
2020 (kWh)
28,289,432
56,407,456
30,097,246
114,794,134
This energy is materially consumed in the UK. As the business
conducted outside of the UK is de minimis, as described earlier, we
have not reported on energy usage outside of the UK.
Ethical employment and diversity
We are committed to encouraging equality and diversity amongst
our workforce and eliminating unlawful discrimination. Everyone
has a part to play in the application of the policy, which extends to
the treatment of job applications, employees (including former
employees), customers, clients, suppliers and visitors. Diversity
factors include geography, background, education, disability,
gender, sexual orientation, religion, belief, age, culture, personality,
workstyle and cognitive or personal strengths.
The purpose of this policy on diversity is to provide equality,
fairness and respect for all in our workplace, promote positive
measures to prevent discrimination occurring and set standards
and monitor conduct to support the policy.
It is the Group’s policy to offer equal opportunities to disabled
persons applying for vacancies and provide them with
the same opportunities for employment, training, career
development and promotion as are available to all employees,
within the limitations of their aptitude and abilities. In the event
of members of staff becoming disabled, every effort is made
to ensure that their employment with the Group continues and
appropriate arrangements are made.
We are continuously seeking to improve our gender split and
gender pay gap, with a focus on attracting more women and
changing perceptions of our industry. We have signed up to the
Automotive 30% Club (the Club), an initiative to promote the
industry to women and seek to have 30% of management roles
filled by women by 2030 and our Chief Executive Officer (CEO) is
undertaking a number of initiatives with the Club.
We recognise that we are behind the curve when it comes to the
consideration of wider diversity issues. The newly appointed Chief
People Officer (CPO) has the remit of leading this forward over the
course of 2021 and will launch a diversity audit in order to
understand where we are currently and how we can move forward
to improve the position.
Human rights
All of our direct employees are based in the UK or Republic of
Ireland and are covered by UK and Irish employment law. Our
supply chain in the motor division is predominantly major
international motor manufacturers who take this issue very
seriously. We are committed to acting with integrity in all our
business relationships and to implementing and enforcing
effective systems and controls to ensure slavery and human
trafficking is not taking place anywhere in our supply chains.
Further details can be found in our Modern Slavery Statement
which is available on our website at www.lookersplc.com/
modern-slavery-statement.
Recruiting, retaining and developing our people
We are committed to building success together by putting our
people first. We actively encourage promoting talent from within,
demonstrated recently by a number of senior level promotions. Our
people policies provide guidance on key issues including equal
opportunities, disciplinary and grievances, recruitment and
selection, discrimination and harassment.
The CPO reports directly into the CEO and is responsible for
developing the HR function alongside a Senior team , supported
by divisional HR Managers.
Lookers plc Annual Report & Accounts 2020 | 81
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Corporate social
responsibility review
Communicating with our people
We believe the way we communicate has a huge impact on how
our people feel about the Group. We communicate with our people
on a regular basis through team briefings, digital magazines,
Workplace by Facebook, Microsoft Teams and more. On a quarterly
basis a Non-Executive Director (with support from the Chief People
Officer) holds a listening session with colleagues. Feedback from
this session is shared with the Board and action points agreed with
Executives.
to support with any financial or wellbeing concerns. The HR team
worked closely with managers to ensure that contact was
maintained with those furloughed to have continuous dialogue
about wellbeing and support available and that regular reviews
took place with employees who continued to work to ensure we
were operating in COVID-19 safe environment. The Health and
Safety team worked closely with the operational team to ensure
the safety of employees and customers throughout the period.
Pulse surveys are undertaken and actions are monitored monthly
within the HR team and reported at least bimonthly to the OpsCo
and ExCo and Boards as applicable. All results are also
communicated across the business. Initiatives agreed as result of
this included the following in 2020:
Introduction of consistent pay and reward
• Meet the ExCo media introducing the members of our
management team
•
• Mental Health training for 163 management level employees
• Encouragement throughout the year for our people to book and
take their annual leave entitlement to rest and relax ensuring we
promote a healthy work life balance.
• An increase in recognition interventions through the course of
2021 including personal thank you letters to nominated
individuals from the COO.
Introducing feel good rewards for all team member as
•
demonstrated with Easter Chocolates.
COVID-19 impact
At the height of the COVID-19 pandemic in 2020 Lookers
furloughed 6,800 employees. These were predominately
operational roles, with a small number of aftersales employees
returning to the business to support with emergency/key worker
aftersales requirements early in April 2020. We maintained
between 90-100% of earnings during April 2020 for all
employees. In May, furloughed workers were paid in line with CJRS
guidelines, with the exception of managers who received 80% of
basic pay uncapped. In June, all employees who remained
furloughed were paid in line with the CJRS. A monthly update was
emailed to all employees to highlight any changes to pay/
mandated holidays and included contact details for queries. A
selection matrix was used to determine those employees that were
to be unfurloughed and requested to return to the business. This
was to ensure we were fair and transparent during the process of
furlough/unfurlough of our employees.
During the pandemic, those who were at work and were in variable
paid roles continued to receive their average pay, capped at
£3,500. This was to compensate for their missed opportunity to
earn bonus due to business trading conditions. Those who were in
management or salaried roles received 100% of basic pay. In July
2020, all pay plans were re-instated, including operational
management bonus plans. Employees who were shielding were
furloughed, and were paid in line with all other colleagues.
All employees were made aware of the whistleblowing policy, and
provided with the details for the Employee Assistance Programme
Stay safe and healthy
Lookers is committed to providing a safe and healthy environment
to all who work or visit our premises. We continuously promote high
standards of health and safety provision, which will minimise risks
and avoid accidents and ill health.
The Board retains ultimate responsibility for health and safety at
Lookers. Senior management take responsibility for the
implementation of day-to-day health and safety standards, with the
support of dedicated Health and Safety Advisors who assist with
Health, Safety and Environmental risk. The Health and Safety
Advisors undertake activity such as site visits, accident
investigation, Health and Safety training and guidance for
management on best practice. The activity of this team has been
crucial in the defining and implementation of our COVID-19
Secure protocols, designed to keep both our colleagues and
customers safe as we reopened our business.
All colleagues are issued with the Group Health and Safety Policy
and have access to a detailed Health and Safety guide. Health and
Safety training is mandatory for all employees.
The Group has significantly streamlined the Health and Safety
Management systems and standardised documentation and
processes.
All managers have access to a Health referrals system for their
teams and where required we offer health surveillance.
The statistics for the Group, under UK Health and Safety
regulations for the years ended 31 December are:
2020
2019
Number of fatalities
Injuries resulting in absence over three days
-
14
Major injuries reported under RIDDOR*
12**
Dangerous occurrences reported
under RIDDOR*
Number of enforcement notices issued by HSE
Number of prohibition notices issued by HSE
-
-
-
-
23
17
-
-
-
*Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations 1995
** 11 injuries / 1 illness reported to HSE
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Lookers plc Annual Report & Accounts 2020 | 83
Directors’ remuneration report
Dear Shareholder,
I’m pleased to introduce the Directors’ remuneration report for the
year ended 31 December 2020. This letter sets out the
performance for the year and the resulting pay outcomes, the work
undertaken by the Committee during 2020 and the
implementation of the policy for 2021.
The Remuneration Committee is composed solely of the
independent Non-Executive Directors. Sally Cabrini chaired the
Remuneration Committee until she stepped down at the AGM on
29 June 2020. Heather Jackson took the chair at meetings of the
Committee for an interim period before formally being appointed
as Chair of the Committee with effect from 25 November 2020.
Following Heather’s decision to step down from the Board I was
appointed Committee Chair on 5 May 2021. I would like to thank
Sally and Heather for their service to the business.
Context for executive pay and review of policy
Our approach to pay during the year was determined by the
existing Directors’ Remuneration Policy that was approved at our
AGM in 2017. This has continued to shape our thinking and
approach during the year. The Committee was pleased that over
90% of shareholders voted in support of the revised Remuneration
Policy which was tabled at the General Meeting in December
2020. The formulation of this policy followed a close review of its
effectiveness and an ever-changing economic background. While
we originally intended to put a revised policy to a shareholder vote
at the 2021 AGM, the Committee has determined that the timing is
not right for this given the challenges being faced by the business.
We will continue to monitor market sentiment and the alignment of
the policy with the business strategy and will engage with
shareholders to the extent that seeking approval for a revised
policy is deemed to be appropriate ahead of the usual three year
timescale.
We recognise there was a significant vote against the Annual
Report on Remuneration for 2020 and understand that this was
related to termination payments for Robin Gregson. Robin Gregson
stood down from the Board in July 2019 and continued to receive
basic salary and full benefits for a further period of 3 months while
a handover of responsibilities was undertaken. The Board was
comfortable this was a fair and reasonable arrangement in the
circumstances. However, the Committee is mindful of the views of
shareholders in relation to this issue, and we will ensure that we
minimise the cost of any departures from the Board. We have
demonstrated this with the treatment of Cameron Wade, Andy
Bruce and Nigel McMinn, all of whose unvested incentive awards
lapsed on cessation. The Committee has taken independent advice
following shareholder feedback on CEO pay and are comfortable
that the current level of remuneration is reasonable and
competitive given the scale and complexity of the business.
Changes to Board
During 2020 and early 2021 there were several changes across
the Executive and Non-Executive Director roles. Full details are
included in the Report of the Chairman of the Nomination
Committee on page 72.
In relation to the two new Executive Directors appointed to the
Board during the year:
1. Anna Bielby’s interim contract as Chief Financial Officer expires
on 31 July 2021. She was appointed on a base salary of
£300,000 with a 10% salary allowance linked to the production
of the 2020 Annual Report & Accounts. This was agreed to
reflect the interim appointment, and Anna has no entitlement to
any variable pay during the term of the interim appointment.
2. Duncan McPhee was appointed as Chief Operating Officer with
a base salary of £280,000 and other remuneration provisions in
line with the Directors’ Remuneration Policy.
Changes to remuneration
As reported in the 2019 Directors’ Remuneration Report, in order
to support the Group following cash constraints and disruption to
the business caused by the ongoing outbreak of the coronavirus,
the Directors volunteered to accept reductions in remuneration as
follows for periods during 2020:
• Non-Executive Directors (April to July 2020 inclusive,
Fee of £50,000 p.a. (reduced from £65,000 p.a.);
• Non-Executive Chairman (April to June 2020 inclusive):
Fee of £97,500 p.a. (reduced from £130,000 p.a.);
• Executive Chairman (July to August 2020 inclusive):
Fee of £245,000 p.a. (reduced from £350,000 p.a.);
• Chief Executive Officer (April to August 2020 inclusive):
Salary of £315,000 (reduced from £450,000).
Following a review of the increased role and responsibilities of the
Non-Executive Chairman, it was agreed that the fee for this role
would increase from £130,000 to £160,000 per annum with
effect from 1 February 2021. It was also agreed that additional
allowances of £20,000 for the role of the Chairman of Lookers
Motor Group and £10,000 for the role of Senior Independent
Director would be introduced with effect from this date.
Performance and incentive outcomes during 2020
As reported in the 2019 Directors’ Remuneration Report, it was
agreed that there would not be an annual bonus award for the
Chief Executive Officer for 2020 given the disruption caused by
COVID-19 and the challenges faced by the business.
2020 was a year of change and uncertainty, not only within
Lookers but nationally. This uncertainty continues into 2021 and
will be reflected in our approach to executive remuneration for this
period.
None of the Executive Directors serving during the year had
outstanding LTIP awards due to vest based on performance to 31
December 2020.
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Incentive awards for 2020 and 2021
In recognition of the external environment and the delay to the
publication of our 2019 Annual Report & Accounts, no long-term
incentive awards were made in 2020. The Committee believed that
it would be inappropriate to grant long term incentives when there
was an external investigation into the Group uncertainty of financial
accounts and ongoing disruption from COVID-19.
The Committee believes that long term incentive arrangements,
linked to the Company’s performance, are an integral part of the
Directors’ Remuneration Policy. It has been agreed that an LTIP
award will be made in respect of 2021. The details of this award
will be finalised when the Group’s financial performance in the first
half of 2021 is known. These awards will be in accordance with the
existing Remuneration policy.
Page 90
Remuneration summary
Pages 88 to 97
Annual report on remuneration
In line with the approved Directors’ Remuneration Policy, Executive
Directors will be able to earn up to 150% of salary subject to the
achievement of stretching bonus targets for 2021, against
financial, team and individual objectives, with majority weighting
(60%) on financial measures. Further detail is available on page 87.
Contents
This Directors’ Remuneration Report has been prepared on behalf
of the Board by the Committee in accordance with the
requirements of the Companies Act 2006 and the Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 and in addition to this statement,
is split into the following sections.
This sets out payments and awards made to the Directors and details the link between Company performance
and remuneration for 2020 and, together with this statement, is subject to an advisory shareholder vote at the
General Meeting convened to approve the Annual Report & Accounts & Financial Statements.
Pages 101 to 106
This sets out key sections of the Company’s policy on Directors’ Remuneration which was approved at the
December 2020 General Meeting.
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Lookers plc Annual Report & Accounts 2020 | 85
Directors’ remuneration report
In conclusion
This was a year of change across the Board, the Company and our
industry. Together with our advisors we continue to monitor
changes within corporate governance developments and best
practice during 2021 to determine whether we need to revise our
approach to remuneration going forward.
We are always keen to listen to shareholder feedback and very
much look forward to engaging with you in future.
Remuneration summary
Our strategy is focused on having the right brands and locations
alongside excellent execution. Underpinning this strategy is our
commitment to providing an outstanding retail experience and
good outcomes for our customers. We have developed a reward
strategy and elements of remuneration that align with this business
strategy.
By Order of the Board
Victoria Mitchell
Interim Chair of Remuneration Committee
30 June 2021
Lookers business strategy
Base salary
Grow the business through organic growth and acquisition
Provide great service and expertise to customers through our
people, technology and brand
Purpose and link to strategy
Fair
Competitive
Shareholder-aligned
To ensure that the Executive Directors are
fairly rewarded for their individual
contributions to the Group’s overall
performance.
To provide a competitive remuneration
package to Executive Directors, including
long-term incentive plans, to motivate
individuals.
A substantial proportion of the
remuneration of the Executive Directors is
performance related. Executive Directors
should build up a significant holding of
shares in the Company.
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Elements of reward
Purpose
Operation in
2021
In-employment and
post-employment
shareholding
requirement
Ensure alignment
between the interests of
Executive Directors and
shareholders
Shareholding at 31
December 2020:
M Raban: 2% vs
requirement of 200% of
salary
The deferral of bonus
into shares and the
holding period are
measures that seek to
facilitate the increase of
the Executive’s holding
towards the requirement
Base salary and pension
benefits
Annual bonus
Long-term incentive
plan
Attract and retain
Executives of high calibre
and provide funding for
future pension
Incentivise and motivate
the achievement of
business objectives and
reward performance
against annual targets
Align interests with
shareholders by
providing long-term
incentives delivered in
the form of shares
Base salaries:
M Raban: £450,000
D McPhee: £280,000
A Bielby: £300,000
Pension allowance:
Up to 5% of salary
A Bielby has a 10% of
salary allowance linked to
production of the 2020
Annual Report &
Accounts. This was
agreed on appointment
to reflect the interim
appointment.
Benefits include:
Participation in the
Company’s car schemes,
health insurance, life
assurance and the
opportunity to join the
SAYE
Maximum bonus:
Normal LTIP opportunity:
150% of salary
CEO: 150% of salary
The performance targets
for the 2021 bonus will
be based on profit before
tax, net debt, team and
personal objectives
Up to 50% of bonus
earned is deferred into
shares. For 2021, 35% of
the bonus will be
deferred
Subject to regulatory,
customer and
performance underpin
bonus is subject to malus
and clawback
A Bielby is not entitled to
any variable pay during
the term of her interim
appointment
Other Executives: 100%
of salary
The Committee has
agreed that an award will
be made in respect of
2021, but that the details
of this award will be
finalised when the
Group’s financial
performance for the first
half of 2021 is known.
Subject to regulatory,
customer and
performance underpin
3-year performance
period and 2 year holding
period
LTIP is subject to malus
and clawback
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Directors’ remuneration report
Considerations when determining remuneration policy and practice
The remuneration policy and practices have been operated in accordance with the principles and provisions in the Code. The table below
sets out how the Committee has addressed various aspects in the Code:
Aspect
Clarity
How this is addressed in remuneration policy and practice
• The Committee’s policy has been clearly set out in this report, including the individual elements of
remuneration and their operation.
• The Committee sets out the targets and performance against them in each Directors’ Remuneration Report,
as well as any exercise of discretion.
Simplicity
• The remuneration policy is simpler than the previous policy in a number of ways including in relation to
bonus deferral and shareholding requirements.
Risk
• The structure of remuneration is in line with normal market practice.
• The incentive metrics are well understood by Executives and shareholders alike as they are in common use
in the market.
• The Committee believes that the incentive structure does not encourage undue risk-taking. There are a
number of mechanisms available to the Committee, including discretions within incentive plans that allow
adjustment in the case that the Committee believes the outcomes are excessive.
•
In particular, the underpins, discretion and malus and clawback provisions attached to incentive plans under
the current policy contain specific reference to customer outcomes and regulatory compliance.
• There has been no use of these discretion, malus and clawback provisions during 2020.
Predictability
• The policy table and the illustrations of remuneration provide an indication of the possible levels of
remuneration that may result from the application of the policy under different performance scenarios.
• The Committee believes that the range of potential total remuneration scenarios is appropriate for the roles
and responsibilities of the Executive Directors and in the context of the performance required for incentive
awards to pay out.
Proportionality
• The policy has been designed to give overall flexibility in operation, particularly in relation to incentive plan
metrics. This allows the Committee to implement the policy from year to year using the metrics that most
closely align with the Group’s strategy. This is demonstrated by the change in the proposed metrics for 2021.
• The policy contains discretion to allow the Committee to adjust remuneration outcomes to ensure that they are
reflective of overall performance in the short and long term. This discretion has not been used for 2020.
Alignment to
culture
• As well as aligning with the strategy of the business, the policy has been formed to allow focus on
broader stakeholders.
•
In particular, there is an increased focus on customer outcomes through incentive metrics and discretion by
the Committee. This is demonstrated in the metrics used for the 2021 bonus.
Annual report on remuneration
The information included in this report has been prepared in
accordance with the requirements of the Companies Act 2006 and
the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (as amended) (the Regulations).
The report also meets the relevant requirements of the Listing
Rules of the Financial Conduct Authority, and the principles and
provisions of the UK Corporate Governance Code relating to
remuneration matters. Remuneration disclosures are, where stated,
subject to audit in accordance with the relevant statutory
requirements.
The Committee is satisfied that the remuneration policy operated
as intended during 2020. In particular, no bonus award was made
in respect of performance for 2020 and no LTIP was granted
during the year given the circumstances faced by the business. In
assessing the appropriateness of the policy, the Committee carries
out remuneration benchmarking using companies of similar size
and complexity for the Directors at least every three years. The
Committee is satisfied that the current levels of remuneration are
appropriate in the light of the information provided.
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Directors’ remuneration report
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Single total figure of remuneration (audited)
The table below sets out the single total figure of remuneration and breakdown for each Director in respect of the 2020 financial year.
Comparative figures for the 2019 financial year have also been provided.
Salary and fees (audited)
No salary increases took place during the year. The table below sets out the salary rates applicable during the year.
£’000
Salary/
Fees
Benefits (12)
Annual
bonus
LTIP (11)
Pension
Total
Total fixed
pay
Total
variable pay
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Executive Directors
Mark Raban (1)
381 139
Cameron Wade (2)
33
-
1
-
1
-
-
-
Directors carrying out Non-Executive and Executive roles
Richard Walker (3)
98
116
Phil White (4)
269 167
Non-Executive Directors
Tony Bramall (5)
Sally Cabrini (6)
Robin Churchouse (7)
Stuart Counsell (8)
Heather Jackson (9)
Victoria Mitchell (10)
61
28
5
60
69
69
46
52
-
52
11
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22
2
-
-
-
-
-
-
-
-
7
-
-
-
-
-
-
-
-
-
404 147 404 147
35
-
35
-
98
116
98
116
269 167 269 167
61
28
5
60
69
69
46
52
-
52
11
5
61
28
5
60
69
69
46
52
-
52
11
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes:
1 Mark Raban joined the Group as Chief Financial Officer on 15 July 2019 and was appointed to the Board on this date. He was appointed to the role of
Chief Executive Officer on 5 February 2020.
2 Cameron Wade joined the Group as Chief Operating Officer on 5 February 2020 and was appointed to the Board on this date. He subsequently stepped down
from the Board on 12 March 2020.
3 Richard Walker fulfilled a part-time Executive role from 1 November 2019 to 29 February 2020. Prior to this, Richard was a Non-Executive Director. He
subsequently stepped down from the Board on 29 June 2020.
4 Phil White became interim Executive Chairman effective between 1 November 2019 and 31 March 2020, and between 1 July 2020 and 31 January 2021.
Prior to 1 November 2019 and between 1 April 2020 and 30 June 2020, Phil was the Non-Executive Chairman.
5 Tony Bramall stepped down from the Board on 31 December 2020.
6 Sally Cabrini stepped down from the Board on 29 June 2020.
7 Robin Churchouse was appointed to the Board as a Non-Executive Director on 8 December 2020.
8 Stuart Counsell stepped down from the Board on 31 December 2020.
9 Heather Jackson was appointed to the Board as a Non-Executive Director on 25 November 2019.
10 Victoria Mitchell was appointed to the Board as a Non-Executive Director on 20 December 2019.
11 The aggregate Directors’ emoluments excluding pension and LTIP awards in 2020 was £1,073,000 (2019: £1,347,000).
12 Benefits are participation in the Company’s car schemes, health insurance and life assurance premiums.
Director
Mark Raban (1)
Cameron Wade (2)
Salary from
1 January 2020
Salary from
5 February 2020
Reduced salary from
1 April 2020 to 31 August 2020
£300,000
-
£450,000
£310,000
£315,000
-
Notes:
1. Mark Raban was Chief Financial Officer until 5 February 2020 and was appointed to the role of Chief Executive Officer from 5 February 2020. Mark’s salary
was reduced by 30% to £315,000 for the period from April to August 2020 inclusive to support the business during the COVID-19 pandemic.
2. Cameron Wade was appointed to the Board in the role of Chief Operating Officer on 5 February 2020 and stepped down from the Board on 12 March 2020.
Following the departure of the previous Executive Directors, Phil White became interim Executive Chairman and Richard Walker took on
an Executive role on a part-time basis from 1 November 2019. The annual rates of fees they received during 2020 are set out below:
Director
Interim Executive
Director fee from
1 January 2020
Non-Executive
Director fee for
March 2020
Reduced Non-Executive
Director fee for April to
June 2020 inclusive
Fee for July 2020
(notice period)
Richard Walker (1)
£450,000
£65,000
£50,000
£65,000
Notes:
1. Richard Walker returned to his Non-Executive Director role with effect from 1 March 2020. He subsequently stepped down from the Board on 29 June 2020.
His fees were reduced by £15,000 p.a. from April to June 2020 inclusive to support the business during the COVID-19 pandemic.
Director
Interim Executive
Chairman fee from
1 January 2020
Reduced Non-
Executive Chairman
fee from April to June
2020 inclusive
Interim Executive
Chairman Fee for July to
August 2020 inclusive
Fee from
1 September 2020
Phil White (1)
£350,000
£97,500
£245,000
£350,000
Notes:
1. Phil White returned to his Non-Executive Chairman role with effect from 1 April 2020. He subsequently was re-appointed to the Executive Chairman role
with effect from 1 July 2020. His fees were reduced by 30% for the period from 1 April 2020 to 31 August 2020 to support the business during the
COVID-19 pandemic.
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The Non-Executive Director fees applying during 2020, were
reduced from £65,000 to £50,000 for the period between April
and July 2020 to support the business during the COVID-19
pandemic.
In the light of the additional workload and responsibilities of the
roles, including additional time commitment for various projects
being undertaken during the year, it was agreed that the fees for
Heather Jackson and Victoria Mitchell would be increased to
£85,000 for a transition period with effect from 1 August 2020 to
31 January 2021.
Annual bonus (audited)
As reported in the 2019 Directors’ Remuneration Report, it was
agreed that there would not be an annual bonus award for
Executive Directors in respect of 2020 given the disruption caused
by COVID-19 and the challenges faced by the business.
LTIP awards vesting during the year (audited)
None of the Executive Directors serving during the year had
outstanding LTIP awards due to vest based on performance to 31
December 2020.
Pension entitlements and cash allowances (audited)
The cash in lieu of pension payments to Executive Directors during
the year was 5% of salary per annum.
Payments for loss of office (audited)
On 12 March 2020, Cameron Wade stepped down from the Board
as Chief Operating Officer with immediate effect. No further
payments were made to Cameron. In particular, he was not eligible
for any bonus in respect of his service as an Executive Director and
his outstanding share awards lapsed on termination.
Payments to past Directors (audited)
Andy Bruce and Nigel McMinn stepped down from the Board as
Chief Executive Officer and Chief Operating Officer on 1 November
2019 and left the Company on 31 December 2019. Both former
Directors were entitled to payments in lieu of the remaining
proportion of their notice period calculated by reference to base
salary and benefits, payable in monthly instalments and subject to
mitigation. However, in response to the Company’s circumstances
and the ongoing investigations, the Committee considered it
appropriate to suspend the notice payments in March 2020.
In the course of the year, the Committee considered whether it was
appropriate to reinstate the notice payments due to Andy Bruce
and Nigel McMinn and permit the exercise of their vested share
awards, alongside considering whether it should seek to claw back
any share awards and bonus amounts paid to any of the
Company’s former Directors.
After careful consideration and having taken legal advice on the
extent of its powers to apply malus and clawback to the former
Directors’ remuneration, the Committee approved that (1) malus be
applied to the vested LTIP awards granted in 2016 to Andy Bruce
and Nigel McMinn, which were previously suspended, such that the
number of shares under award be reduced to nil; (2) settlement
payments of £170,112 and £79,875 be made to Andy Bruce and
92 | Governance
Nigel McMinn respectively, equal to a portion of the suspended
notice payments, but with a reduction in the total amounts to reflect
the Committee’s decision to clawback 100% of the gross amount
of each of Andy Bruce and Nigel McMinn’s FY2018 annual
bonuses, on the grounds of material misstatement in the
Company’s accounts; and (3) the suspension on the ability of Andy
Bruce and Nigel McMinn to exercise their vested LTIP awards
granted to them in 2015 be lifted, which was determined by the
Committee in its discretion to be appropriate, taking into account
that the 2015 LTIP awards were granted some time before the
discovery of financial misstatements in the Company’s accounts,
the Committee’s decision to clawback 100% of the former
Directors’ FY 2018 bonuses and the benefit to the Company of
avoiding protracted legal proceedings. Andy Bruce’s 2015 LTIP
award is over 274,615 shares with a value of £191,681based on a
share price of £0.698 on vesting as at 25 June 2021, whilst Nigel
McMinn’s 2015 LTIP award is over 209,884 shares with a value of
£146,499 based on a share price of £0.698 as at 25 June 2021.
In addition the Committee resolved to lift the suspension of the
ability to exercise Andy Bruce and Nigel McMinn’s outstanding
ESOS awards, granted on 5 January 2011 and 30 June 2014.
Andy Bruce’s 2011 ESOS award is over 269,836 shares with a
value of £188,346 based on a share price of £0.698 as at 25
June 2021 and his 2014 ESOS award is over 289,256 shares
with a value of £201,901 based on a share price of £0.698 as at
25 June 2021. Nigel McMinn’s 2014 ESOS award is over 221,074
shares with a value of £154,310 based on a share price of £0.698
as at 25 June 2021.
The Committee also agreed to pay £15,000 + VAT to each of Andy
Bruce and Nigel McMinn by way of contribution to their legal fees.
As previously reported, Robin Gregson’s 2017 LTIP award
completed its performance period as at 31 December 2019.
However, in the course of the year, the Committee considered
whether, in light of the restatements to Lookers’ Financial
Statements following the completion of investigations, it would be
appropriate to clawback all or a percentage of (i) Robin Gregson’s
FY2018 annual bonus; (ii) the LTIP awards made to him in each of
2015 and 2016; and (iii) whether it should seek to apply malus to
his LTIP awards for the years 2017, 2018 and 2019 such that the
number of shares subject to those awards would be reduced to nil.
Having taken legal advice on the extent of its powers to apply
malus and clawback to Robin Gregson’s remuneration in respect of
both the bonus amount and LTIP awards, the Committee has
determined that taking this course of action would be appropriate.
The Company is therefore currently in correspondence with Robin
Gregson in order to seek to apply clawback and malus.
LTIP awards granted during the year (audited)
Robin Gregson stepped down from the Board as Chief Financial
Officer in July 2019. He was treated as a good leaver and
therefore retained his long term incentive awards granted in 2017,
2018 and 2019, subject to time pro-rating and performance.
While the performance period for the 2017 and 2018 awards is
completed, the Committee has not yet approved the vesting of
these awards, but is working with the business to undertake an
exercise to review the performance against the targets in the light
of the restatements to Lookers’ Financial Statements following the
completion of investigations.
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Statement of Directors’ shareholdings (audited)
The table below summarises the Directors’ shareholdings as at 31 December 2020, or the date they stepped down from the Board if
earlier. The shareholding as a percentage of salary is determined by reference to the share price on 31 December 2020 of £0.21 and
effective salary as at that date.
Shareholding
requirement*
(% of salary)
Number of
shares held
(including by
connected
persons)
Vested but
unexercised
share
options)
Unvested
share
interests not
subject to
performance
Overall shareholding
Number of
shares
% of salary
Unvested
share interests
subject to
performance
Directors carrying out Non-Executive and Executive roles
Mark Raban
Cameron Wade (1)
200%
200%
50,000
-
Directors carrying out Non-Executive and Executive roles
Richard Walker
Phil White
Non-Executive Directors
Tony Bramall
Sally Cabrini
Robin Churchouse
Stuart Counsell
Heather Jackson
Victoria Mitchell
-
-
-
-
-
-
-
-
-
53,716
75,658,051
-
-
226,559
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
-
-
53,716
75,658,051
-
-
226,559
-
-
2%
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-
-
-
-
-
-
-
-
-
-
Notes:
1. Cameron Wade’s outstanding share interests lapsed on cessation on 12 March 2020.
[There were no subsequent changes in shareholdings for Directors who remain in service as at the date of approval of this report.]
* See policy on page 103.
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Performance graph and table
The chart below shows the Company’s ten-year annual Total Shareholder Return (TSR) performance against the FTSE All-Share Total
Return Index, which is considered to be an appropriate comparison to other public companies of a similar size.
Percentage change in remuneration of Directors and employees
The table below sets out the percentage change in salary, taxable benefits and annual bonus paid to each Director in respect of 2019
and 2020, compared to that of the average change for employees in the Group as a whole.
The table below the chart sets out the total single figure of remuneration for the Chief Executive over each of the last ten years.
% increase from 2019 to 2020
Salary and fees
Benefits
Annual Bonus
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
)
0
0
2
r
e
b
m
e
c
e
D
1
3
t
a
0
0
1
o
t
d
e
s
a
b
e
r
(
400
350
300
250
200
150
100
50
0
3 1 / 1 2 2 0 1 0
3 1 / 1 2 2 0 1 1
3 1 / 1 2 2 0 1 2
3 1 / 1 2 2 0 1 3
3 1 / 1 2 2 0 1 4
3 1 / 1 2 2 0 1 5
3 1 / 1 2 2 0 1 6
3 1 / 1 2 2 0 1 7
3 1 / 1 2 2 0 1 8
3 1 / 1 2 2 0 1 9
3 1 / 1 2 2 0 2 0
Lookers
FTSE All Share
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Peter
Jones
Peter
Jones
Peter
Jones(1)
Andy
Bruce
Andy
Bruce
Andy
Bruce
Andy
Bruce
Andy
Bruce
Andy
Bruce(2)
Richard
Walker(3)
Richard
Walker
Mark
Raban(4)
583
739
1,436
806
894
1,628
553
633
463
75
43
373
63% 100% 100% 100% 87%
67%
20%
34%
-
-
100%
-
-
100%
-
-
-
-
-
-
-
-
-
-
Chief
Executive
Officer
Total single
figure
(£’000)
Annual
bonus
(% of max)
LTIP
vesting
(% of max)
Notes:
1. Peter Jones retired on 31 December 2013.
2. Andy Bruce was appointed on 1 January 2014 and stepped down on 1 November 2019.
3. Richard Walker became interim Executive Director on 1 November 2019.
4. Mark Raban was appointed Chief Executive Officer on 5 February 2020.
Executive Directors
Mark Raban (1)
Cameron Wade (2)
27%
-
Directors carrying out Non-Executive and Executive roles
Richard Walker (3)
Phil White (4)
Non-Executive Directors
Tony Bramall
Sally Cabrini (5)
Robin Churchouse (6)
Stuart Counsell
Heather Jackson (7)
Victoria Mitchell (8)
Employee average
All employees
8%
61%
33%
17%
-
15%
6%
6%
1%
0%
0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10%
-22%
Notes:
1. Mark Raban was Chief Financial Officer between 15 July 2019 and 4 February 2020 inclusive and Chief Executive Officer with effect from 5 February 2020.
The percentage increase is based on the difference between his annual rate of pay as Chief Financial Officer and the total pay received during 2020.
2. Cameron Wade served during 2020 only.
3. Richard Walker fulfilled a part-time Executive role and a Non-Executive role during 2019 and 2020. Richard stepped down from the Board on 29 June 2020.
The percentage increase is based on the difference between his 2019 pay and his annualised rate of pay assuming he had remained in service as a
Non-Executive Director for the remainder of 2020.
4. Phil White fulfilled a part-time Executive role and a Non-Executive role during 2019 and 2020.
5. Sally Cabrini stepped down from the Board on 29 June 2020. The percentage increase is based on the difference between her 2019 pay and her annualised
rate of pay assuming she had remained in service as a Non-Executive Director for the remainder of 2020.
6. Robin Churchouse served during 2020 only.
7. Heather Jackson was appointed to the Board as a Non-Executive Director on 25 November 2019. The percentage increase is based on the difference
between her annualised rate of pay for 2019 and her actual pay for 2020.
8. Victoria Mitchell was appointed to the Board as a Non-Executive Director on 20 December 2019. The percentage increase is based on the difference between
her annualised rate of pay for 2019 and her actual pay for 2020.
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Chief Executive Officer pay ratio
The table below compares the 2020 single total figure of remuneration for the Chief Executive Officer with the Group’s employees paid at
the 25th percentile (lower quartile), 50th percentile (median) and 75th percentile (upper quartile) of its UK employee population:
Year
2020
2019
Method
Option B
Option B
25th percentile
pay ratio
21:1
26:1
Median
pay ratio
15:1
20:1
75th percentile
pay ratio
11:1
13:1
As required by the regulations, the CEO single figure used to
determine the 2020 pay ratios is based on the sum of the total
single figures of remuneration for Richard Walker (as Acting CEO)
between 1 January 2020 and 4 February 2020 inclusive and for
Mark Raban from 5 February 2020. This gives a total of £415,463.
The remuneration figures for the employee at each quartile
were determined with reference to the financial year ended
31 December 2020.
Option B, as prescribed under the reporting regulations, was used
to calculate these figures. The Committee is comfortable that this
approach provides a fair representation of the Chief Executive
Officer to employee pay ratios and is appropriate in comparison to
alternative methods.
Under this option, the latest available gender pay gap data (i.e. from
April 2020) is used to identify the best equivalent for three Group
UK employees whose hourly rates of pay are at the 25th, 50th and
75th percentiles for the Group. A total pay and benefits figure for
2020 is then calculated for each of those employees. This is also
sense checked against a sample of employees with hourly pay rates
either side of the identified individuals to ensure that the
appropriate representative employee is selected. The pay ratios
outlined above are then calculated using the total pay and benefits
of the selected employee for each quartile point.
No elements of pay were estimated or excluded in the calculations,
and all pay and benefits were valued in line with the single figure
methodology. Full-time equivalent total pay and benefits was
determined by up-rating elements of pay based on average full-
time equivalent hours for the financial year, where appropriate. All of
the identified employees were employed for the full financial year.
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The table below sets out the salary and total pay and benefits for the three quartile point employees:
25th percentile (P25)
Median (P50)
75th percentile (P75)
Salary
Total pay and benefits
£18,138
£19,383
£25,598
£27,638
£33,429
£36,293
The Committee considers that the median pay ratio is consistent
with the relative roles and responsibilities of the Chief Executive
Officer role and the identified employee. Base salaries of all
employees, including our Executive Directors, are set with
reference to a range of factors including market practice,
experience and performance in role. The remuneration package of
our Executive Directors is weighted towards variable pay (including
the annual bonus and LTIP) due to the nature of their roles, and this
means the CEO pay ratio is likely to fluctuate depending on the
outcomes of incentive plans in each year. The ratios have
decreased between 2019 and 2020, which is primarily due to a
reduction in the total pay of the CEO of around 20%. The
Committee believes that the ratios are at a level that are
appropriate in a year when Executive Directors did not earn any
variable pay in the form of bonus or LTIP pay-outs, given the role
and responsibilities of the Chief Executive Officer.
Relative importance of spend on pay
The table below sets out the total spend on pay in 2019 and 2020 compared with distributions to shareholders and which was the most
significant outgoing for the Company in the last financial year:
Spend on staff pay
(including Directors)1
Profit distributed by way of
dividend and share buy-back2
2020
£234.3m
£0m
2019
£300.2m
£15.9m
% increase
-22%
-100%
Notes:
1 Excluding share based compensation – see Note 5 to the Financial Statements. 2020 is net of £34.9m of Coronavirus Job Retention Scheme receipts.
2 No dividends were paid and no share buy-backs occurred in the year ended 31 December 2020.
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Directors’ remuneration report
Benefits and pension
No changes are intended to be made to the benefits available to
the Directors during 2021.
Consistent with the proposed Directors’ Remuneration Policy,
Executive Directors receive a pension contribution of up to 5% of
salary, which is aligned with the current pension for the wider
workforce, as follows:
Director
Pension provision
Anna Bielby
3% of salary between Lower Earnings Limit
and Upper Earnings Limit
Duncan McPhee
6% of salary above the Upper Earnings
Limit (equivalent to 4.9% of total salary)
Mark Raban
5% of salary
Non-Executive Directors are not eligible to receive pension
contributions.
Incentives for 2021
Bonus awards of up to 150% of salary may be earned by
Executive Directors in respect of performance during 2021.
The following metrics and weightings will apply:
Metric
Weighting
Financial objectives:
• Underlying Profit Before Tax
Team objectives, including those related to
Dealer Management System, Business
Development Centres and Culture.
Individual objectives
40%
20%
25%
15%
No bonuses will be paid if a minimum level of Underlying Profit
Before Tax is not earned.
Details of the targets are commercially sensitive and will be
disclosed in the 2021 Directors’ Remuneration Report, alongside
performance against them.
65% of the bonus earned will be paid in cash and 35% will be
deferred into shares for three years.
Anna Bielby has a 10% of salary allowance linked to production of
the 2020 Annual Report & Accounts. This was agreed to reflect the
interim appointment. Anna is not entitled to any variable pay during
the term of the interim appointment.
It has been agreed that an LTIP award will be made in respect of
2021. The details of this award will be finalised when the Group’s
financial performance for the first half of 2021 is known. These
awards will be in accordance with the existing Remuneration Policy.
£ pa
2021 Salary/Fees
• Net debt
Statement of implementation of Directors’ remuneration
policy in 2021
Salaries and fees
The salaries and fees to be paid to Directors in 2021 are set out in
the table below. Following a review of the role and responsibilities
of the Non-Executive Chairman, it was agreed that the fee for this
role would increase from £130,000 to £160,000 per annum with
effect from 1 February 2021. Save for an adjustment to the
structure of the fees for the Non-Executives, there were no further
changes in salary or fee levels between 2020 and 2021.
Executive Directors
Anna Bielby (1)
Duncan McPhee (2)
Mark Raban
£300,000
£280,000
£450,000
Non-Executive Directors
Non-Executive Chairman
£160,000
Non-Executive Director
base fee
Lookers Motor Group
Chairman additional fee (3)
Senior Independent Director
additional fee (4)
£65,000
£20,000
£10,000
Notes:
1. Anna Bielby was appointed to the role of Interim Chief Financial Officer on
5 January 2021.
2. Duncan McPhee was appointed to the role of Chief Operating Officer on
29 January 2021.
3. Additional fee for Lookers Motor Group Chairman was introduced effective
from 1 February 2021.
4. Additional fee for Senior Independent Director was introduced effective
from 1 February 2021.
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Consideration by the Directors of matters relating to Directors’
remuneration
PwC has no other connection with the Company or with individual
Directors.
The Committee
The Committee is responsible for reviewing and recommending
the framework and policy for remuneration of the Executive
Directors and of senior management.
The members of the Committee during 2020 were:
• Sally Cabrini, (Chair of the Remuneration Committee until she
stepped down from the Board on 29 June 2020);
• Stuart Counsell;
• Phil White (between 1 April and 30 June 2020 only);
• Richard Walker (for a meeting in May 2020 only);
• Heather Jackson (Chair of the Remuneration Committee
from 25 November 2020);
• Victoria Mitchell; and
• Robin Churchouse, from 8 December 2020.
The Committee met nine times during 2020. The attendance at
meetings by each member of the Committee is set out in the
Corporate Governance Statement on page 65.
The primary role of the Committee is to:
• set the Directors’ remuneration policy applying to
Executive Directors;
• approve the quantum and structure of the remuneration
packages for the Executive Directors, and from 2019, for
other senior Executives;
• determine the balance between base pay and performance
related elements of the package to align senior Executives’
interests with those of shareholders; and
• approve annual and long-term incentive payments for
senior Executives.
Summary of activity during 2020
The Committee carried out the following during 2020:
• Reviewed and determined:
• salary levels for the Executive Directors and fees for
the Chairman;
• the outcome of targets under the annual bonus plan and LTIP;
• Set targets for the 2020 annual bonus plan;
• Considered LTIP awards and determined that no LTIP award
would be granted for 2020;
• Considered emerging developments in executive pay;
• Completed a consultation exercise with shareholders on the
Directors’ Remuneration Policy;
• Approved remuneration arrangements for appointments to and
departures from the Board;
• Reviewed the 2019 Remuneration Report; and
• Reviewed the 2020 gender pay gap report.
The Committee previously appointed PwC and received advice
over the year on all aspects of remuneration, including the review
of the Directors’ Remuneration Policy and its operation. PwC is a
member of the Remuneration Consultants’ Group and complies
with its Code of Conduct which includes guidelines to ensure that
advice is independent and free of undue influence. During the year,
PwC was paid fees of £125,400 in respect of advice to the
Committee relating to Directors’ pay, based on a time-spent basis.
Members of the Senior Management team, including the Chief
People Officer, the General Counsel and Company Secretary, the
Chairman (including periods of Executive office) and the Executive
Directors have provided input to the Committee in determining the
remuneration of the Directors. None of the individuals were present
when their own remuneration was being discussed.
The Committee undertook a consultation exercise including
investors and their representative proxy bodies during 2020 ahead
of seeking approval for a new Directors’ Remuneration Policy.
Although we were not proposing significant changes to the policy,
we were pleased with the support demonstrated by shareholders,
culminating in votes in favour from over 90% of shareholders at
the General Meeting in 2020. The Committee is happy to take on
board feedback from shareholders and to meet with shareholders
to discuss any aspect of remuneration.
The Committee receives reports on an annual basis on the level of
pay rises awarded across the Group and takes these into account
when determining salary increases for Executive Directors. In
addition, the Committee receives regular reports from the Human
Resources team on workforce remuneration and on the structure
of remuneration for senior management in the tier below the
Executive Directors and uses this information to ensure a
consistency of approach for the most senior managers in the
Group. The Committee approves the award of any long-term
incentives. The Chairman of the Remuneration Committee has
attended meetings with the Chief People Officer to develop a
greater level of understanding in relation to pay and people
practices in the business, but the Committee has not engaged
directly with employees in relation to how executive pay policy
aligns with wider pay policy.
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Directors’ remuneration policy
The Directors’ Remuneration Policy was approved by shareholders
at a General Meeting held on 28 December 2020. The following
section reproduces certain sections of the approved Directors’
Remuneration Policy.
Remuneration policy
The policy of the Committee, the principles underlying which are
unchanged from the previous policy approved at the 2017 AGM, is
to ensure that the Executive Directors are fairly rewarded for their
individual contributions to the Group’s overall performance and to
provide a competitive remuneration package to include long-term
incentive plans, to motivate individuals and align their interests with
those of shareholders, customers and other stakeholders. In
addition, the Committee’s policy is that a substantial proportion of
the remuneration of the Executive Directors should be
performance related and that they be required to build up a
significant holding of shares in the Company, which are retained for
two years post-employment.
This policy has been determined by the Committee, with input from
management and external advisers. The Committee members have
no conflicts of interest arising from cross-directorships and no
Director is involved in any decisions as to his or her own
remuneration.
Future policy table
BASE SALARY
Attract and retain high calibre Executive Directors to deliver the strategy.
Operation
Paid in monthly instalments during the year.
Maximum potential value
Salaries are generally set at or below market median, with an
emphasis on incentive pay.
Reviewed annually to reflect role, responsibility and performance
of the individual and the Company, and to take into account rates
of pay for comparable roles in similar companies.
When selecting comparators, the Committee has regard to the
Group’s size and business sector.
There is no prescribed maximum increase, but normally increases
will be in line with those for the wider workforce, unless there are
reasons such as a change in Executive Director’s role and/or
responsibilities, or to apply salary progression for an Executive
Director who has been appointed below market level.
Performance metrics
None
PENSION
Attract and retain Executive Directors for the long term by providing funding for retirement.
Operation
All Executive Directors are entitled to participate in money
purchase arrangements, or to receive a cash allowance in lieu of
pension contributions.
N.B. Any pensions paid as salary supplements are not counted
for the purposes of determining bonus or LTIP levels.
Maximum potential value
5% of salary.
Performance metrics
None
Directors’ remuneration report
Statement of voting
The latest votes in respect of remuneration matters were cast at a General Meeting on 28 December 2020 for the Directors’
Remuneration Policy and the 2019 Annual Report on Remuneration as follows:
To approve the Directors’
Remuneration Policy
To approve the 2019 Annual Report
on Remuneration
Votes for
Votes against
Abstentions
Number
%
Number
%
Number
256,362,073
92.2%
21,743,451
7.8%
228,792
197,690,603
71.1%
80,413,403
28.9%
230,310
The Committee took note that while the vast majority of
shareholders voted in favour of the policy, a number of
shareholders voted against last year’s Annual Report on
Remuneration. The Board understands that the reason for the
number of votes cast against was primarily concerned with notice
being served for our previous Chief Financial Officer with effect
from his date of stepping down from the Board rather than from the
date of announcement. While Mark Raban was recruited to the
role of CFO in July 2019, there was a significant amount of
handover work to be completed and therefore there was a
requirement for Robin Gregson to continue employment until
September to assist with this. The Remuneration Committee
determined at the time that it was fair given the circumstances
surrounding Robin’s departure that a full 12 month notice period
should be provided for from his termination date. We will take on
board the response to this decision in future and continue a
dialogue with shareholders.
Victoria Mitchell,
Interim Chair of Remuneration Committee,
30 June 2021
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Directors’ remuneration report
Future policy table
BENEFITS
Provide benefits consistent with role.
Operation
Currently these consist of participation in the Company’s car
schemes, health insurance, life assurance premiums, D&O
insurance and the opportunity to join the Company’s savings
related share option scheme (SAYE).
The Committee reviews the level of benefit provision from time to
time and has the flexibility to add or remove benefits to reflect
changes in market practice or the operational needs of the Group.
Maximum potential value
The cost of providing benefits is borne by the Company and
varies from time to time.
Performance metrics
None
ANNUAL BONUS
Incentivises achievement of business objectives by providing a reward for performance against annual targets.
Maximum potential value
Up to 150% of salary.
Performance metrics
Performance conditions are determined annually by the
Committee and threshold and maximum targets are set for each
condition.
At least 50% of the bonus is subject to financial targets. The
measures vary from year to year to reflect priorities and business
strategy.
In exceptional circumstances such that the Committee believes
the original measures and/or targets are no longer appropriate,
the Committee has discretion to amend performance measures
and targets during the year.
Operation
A proportion of the bonus earned (up to 50%) is deferred into
shares for two years and the remaining amount is paid in cash.
Annual bonus awards are subject to provisions which enable the
Committee to recover (clawback) or withhold (malus) value in the
event of a misstatement of the accounts for the financial year in
respect of which the bonus was paid, an error in the assessment
of the extent to which the applicable performance target had
been met, fraud, employee misconduct, failure of risk
management and regulatory failure within two years of the
payment date of the cash bonus and within two years of the
vesting date of the deferred shares.
A sliding scale operates between threshold and target
performance, and between target and maximum performance.
No bonus is payable where performance is below the threshold.
The proportions of bonus payable for different levels of
performance may vary based on the nature of measures and the
level of stretch in the targets.
Payment of any bonus is subject to the overriding discretion of
the Committee. The Committee may adjust the bonus outcome
(either upwards or downwards) from the formulaic outcome to
ensure that any bonus paid reflects individual and underlying
Company performance, customer outcomes and regulatory
compliance.
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Future policy table
LONG-TERM INCENTIVE PLAN (LTIP)
Alignment of interests with shareholders by providing long-term incentives delivered in the form of shares.
Operation
Grant of nil-cost options, which vest at least 3 years from grant
subject to the achievement of performance conditions and may
not be exercised after the tenth anniversary of grant.
Maximum potential value
Maximum annual award over shares with a market value of 150%
of base salary for the CEO and 100% of base salary for other
Executive Directors.
A two-year holding period applies to all vested awards, during
which time Executive Directors may not sell shares, save to settle
tax due.
In exceptional circumstances, such as to secure an external
appointment or in specific retention scenarios, an award up to
250% of salary may be made.
LTIP awards are subject to provisions which enable the
Committee to recover (clawback) or withhold (malus) value in the
event of a misstatement of the accounts for the financial year in
respect of which the LTIP award vested, an error in the
assessment of the extent to which the applicable performance
target had been met, fraud, employee misconduct, failure of risk
management and regulatory failure within two years of the
vesting of the LTIP award.
The Committee has discretion to:
(i) adjust the vesting of LTIP awards and/or the number of
shares underlying unvested LTIP awards on the
occurrence of a corporate event or other reorganisation;
(ii) amend the formulaic outcome of LTIP awards upwards or
downwards to reflect the Committee’s assessment of
individual and underlying business performance,
customer outcomes and regulatory compliance.
Performance metrics
Awards are based on a combination of performance metrics, with
at least 50% being financial measures.
Threshold and maximum targets are set at grant.
The Committee has discretion to amend the performance
conditions/targets attached to outstanding awards granted under
this policy in the event of a major corporate event or significant
change in economic circumstances, or a change in accounting
standards having a material impact on outcomes.
SHARE OWNERSHIP REQUIREMENT
To ensure alignment between the interests of Executive Directors and shareholders.
Maximum potential value
Not applicable
Performance metrics
Not applicable
Operation
200% of salary for all Executive Directors, to be reached over a
five-year period from appointment to the Board.
Executive Directors must retain 50% of any deferred shares and
shares they acquire under the LTIP, after allowing for the sale of
shares to pay tax and other deductions, until such time as they
have built up the required holding level.
Executive Directors must retain a shareholding on cessation of
employment for two years equal to the lower of 200% of salary
and the actual shareholding on cessation. Shares bought by
Executive Directors and shares granted prior to this policy coming
into force are not subject to this holding requirement.
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Approach to recruitment remuneration
The Committee’s approach to recruitment remuneration is to offer
a market competitive remuneration package sufficient to attract
high calibre candidates who are appropriate to the role but without
paying any more than is necessary.
and non-performance related awards, reflecting the profile of the
awards forgone. The terms of these awards will reflect those
forgone so far as is possible to provide an equivalent opportunity,
including taking into account the likelihood of meeting
performance conditions.
Any new Executive Director’s regular remuneration package would
include the same elements and be in line with the policy table set
out earlier in this Directors’ remuneration policy, including the same
limits on performance related remuneration.
Where it is necessary to “buy-out” an individual’s awards of variable
remuneration made by a previous employer, the Committee will
make replacement awards through a combination of performance
Where an internal candidate is promoted to the Board, the original
grant terms and conditions of any bonus or share awards made
before that promotion will continue to apply, as will their
membership of any of the Group’s pension arrangements.
Reasonable relocation and other similar expenses may be paid if
appropriate.
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Directors’ service contracts, notice periods and termination payments
Executive Directors have service contracts with a 12-month notice period by the Company and 6 months by the Executive Director, with
the elements of variable remuneration dealt with in accordance with the rules of the relevant scheme, as more fully described in the table
below:
Provision
Policy
Notice periods and compensation
for loss of office in Executive
Directors’ service contracts
12 months’ notice by the Company and 6 months’ notice by Executive Director.
Payment in lieu of any part of the notice period not served may be made by the Company
equal to basic salary, pensions and benefits for that part of the notice period only. The payment
of any sum in lieu of notice will be phased over the notice period and subject to mitigation.
Treatment of annual bonus on
termination
Treatment of unvested LTIP awards
A bonus for the financial year of termination may be paid at the discretion of the Committee
having regard to applicable performance conditions and normally with time pro-rating being
applied. Any bonus would normally be subject to deferral in shares, although the Committee
has discretion to pay the bonus fully in cash.
Good leavers (i.e. leavers in circumstances of death, injury, disability, redundancy, retirement or
transfer of employing business outside Group) will be allowed to retain their deferred share
awards. The Committee has discretion to treat any other leaver as a good leaver. The deferred
share awards of any leaver who is not a good leaver will lapse on cessation of employment.
Awards for good leavers will normally vest following the end of the applicable vesting period.
Good leavers (i.e. leavers in circumstances of death, injury, disability, redundancy, retirement or
transfer of employing business outside Group) will be allowed to retain their LTIP awards. The
Committee has discretion to treat any other leaver as a good leaver. The awards of any leaver
who is not a good leaver will lapse on cessation of employment.
Awards for good leavers will normally vest following the end of the applicable performance
period subject to an assessment of the extent to which performance targets have been met
and the application of time pro-rating.
The Committee has discretion to allow awards to vest immediately on a cessation of
employment subject to an assessment of the extent to which performance targets have been
met.
The Committee has the discretion to waive the requirement to pro-rate for time.
Good leavers may exercise their LTIP awards within 6 months of vesting (1 year for death).
On a change of control, awards will vest immediately subject to an assessment of the extent to
which the performance targets have been met. The number of shares subject to LTIP awards is
reduced pro-rata to reflect the proportion of the vesting period completed before cessation.
The Committee has the discretion to waive the requirement to pro-rate.
Outside appointments
One outside appointment is permitted subject to Board approval.
Executive Directors may retain the fees paid in respect of any external appointment.
Non-Executive Directors
All Non-Executive Directors are subject to annual re-election. No compensation is payable if a
Non-Executive Director is required to stand down.
In the event of the negotiation of a compromise or settlement
agreement between the Company and a departing Director, the
Committee may make payments it considers reasonable in
settlement of potential legal claims. Such payments may also
include reasonable reimbursement of professional fees in
connection with such agreements.
The Committee may also include the reimbursement of repatriation
costs or fees for professional or outplacement advice in the
termination package, if it considers it reasonable to do so. It may
also allow the continuation of benefits for a limited period.
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Non-Executive Directors’ fee policy
The policy for the remuneration of the Non-Executive Directors is as set out below. Non-Executive Directors are not entitled to a bonus,
they cannot participate in the Company’s share option schemes and they are not eligible for pension arrangements.
NON-EXECUTIVE DIRECTOR FEES
To attract Non-Executive Directors who have a broad range of experience and skills to oversee the implementation of our
strategy.
Operation
Non-Executive Director fees are determined by the Board within
the limits set out in the Articles of Association.
Maximum potential value
Reviewed annually to reflect role, responsibility and performance
of the individual and the Company.
An additional fee may be paid for additional duties and/or
specific roles.
Annual rate set out in the Annual Report on remuneration for the
current year and the following year.
Paid in 12 equal monthly instalments during the year.
No prescribed maximum annual increase.
Expenses, including travel to and from Board meetings, are
reimbursed by the Company including any tax payable on those
expenses.
By Order of the Board
Victoria Mitchell
Interim Chair of Remuneration Committee
30 June 2021
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Directors’ report
Content of the report
Lookers plc is a public limited company incorporated in the United
Kingdom under the Companies Act 2006, with registered number
111876 in England and Wales. The Directors present their report for
the year ended 31 December 2020. Our Strategic Review on pages
6 to 47 contains the information to be presented by way of a
management report in accordance with DTR 4.1.8, i.e. a fair review of
the Company’s business and a description of the principal risks and
uncertainties it faces. It also includes certain other information on
which reports and statements are required by the UK Corporate
Governance Code (this includes our section 172 statement and
information on stakeholder and UK workforce engagement) and an
indication of the likely future developments in the Group’s business. The
Board approved the Strategic Review set out on pages 6 to 47 and the
Viability Statement set out on page 38. Additional information on which
the Directors are required by law to report is set out below or within the
following sub-sections of the Governance section:
• Board of Directors
• Chairman’s statement on Corporate Governance
• Report from the Chairman of the Nomination Committee
• Report from the Chairman of the Audit and Risk Committee
• Corporate Social Responsibility Review (including energy
consumption and efficiency reporting, greenhouse gas
emissions disclosures and disclosures in relation to the
employment of disabled persons)
• Directors’ Remuneration Report (including details on
compensation for loss of office)
• Directors’ Report
• Directors’ Responsibility Statement
Dividends
As explained in the Chairman’s Statement on page 9, the Board is
not recommending the payment of a dividend for the year to 31
December 2020.
Directors who served during the year
The following were the Directors of the Company who served during
the year:
Name
Tony Bramall1
Sally Cabrini2
Robin Churchouse3
Stuart Counsell1
Heather Jackson5
Mark Raban
Richard Walker2
Victoria Mitchell
Cameron Wade4
Phil White
1 Stuart Counsell and Tony Bramall resigned as Directors of the Company
with effect from 31 December 2020.
2 Sally Cabrini and Richard Walker did not stand for re-election at the AGM
on 29 June 2020.
3 Robin Churchouse was appointed as a Director of the Company on
8 December 2020.
4 Cameron Wade was appointed a Director of the Company on
5 February 2020 and resigned with effect from 12 March 2020.
5 Heather Jackson resigned from her position after the year-end and her
resignation was effective 30 April 2021.
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Directors’ interests and conflicts
The Directors have a statutory duty to avoid conflicts of interest.
There are procedures in place to deal with any conflicts or potential
conflicts of interest and to ensure that all such interests are disclosed
and (where appropriate) approved by the Board. The Board maintains
a register of interests to identify and, where appropriate, manage
conflicts or potential conflicts of interest. At each Board meeting, the
Board considers the register and any potential conflicts of Directors
in order to provide the necessary approvals.
Details of the Directors’ interests in the Company’s shares and
securities are disclosed in the Directors’ Remuneration Report on
page 93.
Directors’ indemnity provisions
The Company (and its subsidiaries) has made qualifying third-party
indemnity provisions for the benefit of all the Directors. Such
indemnity provisions were in force during the year and remain in
force at the date of this report.
Share buy-back and share capital
The Company’s issued share capital is made up of ordinary shares of
5p each with full voting, dividend and capital distribution, including
distribution rights. They do not confer any right of redemption. On a
poll every ordinary shareholder is entitled to one vote for each share
of which they are the holder.
Details of the current shares in issue and changes during the year is
shown in Note 24 to the Financial Statements.
The powers of the Directors to issue or buy back shares are
restricted to those approved by shareholders at a general meeting.
At the AGM in June 2020, pursuant to section 570 of the Companies
Act 2006, shareholders approved the issue of shares for cash up to
5% of the existing issued share capital and an additional 5% (only to
be used in connection with an acquisition or specified capital
investment) in each case without the application of pre-emption
rights. That authority expired at the conclusion of the 2021 AGM, at
which a resolution was proposed for its renewal.
At the AGM in June 2020, pursuant to section 701 of the Companies
Act 2006, shareholders approved that the Company could make
market purchases of shares up to 10% of the existing issued share
capital. This authority, which has not been used, expired at the
conclusion of the 2021 AGM, at which a resolution was proposed for
its renewal.
The Company operates a number of share option schemes
available to all staff and/or executives. More information is included
in Note 25 to the Financial Statements.
Financial instruments
Details of the Group’s use of financial instruments is included in
Note 22 to the Financial Statements. That Note provides details of
the financial risk management objectives and policies and the policy
on hedging and the exposure to price risk, credit risk, liquidity risk
and cash-flow risk.
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Donations
Charitable donations amounted to £2k paid in the year (2019:
£623k). No political donations were made in the current or prior
financial year.
Research and development
The Group is committed to developing its offering and devotes time
to researching emerging technologies and developing its practices
and service to customers, for example in relation to the electrification
of vehicles. More information on this is included in the Strategic
Report on pages 6 to 47.
Auditor
In the case of each of the persons who are Directors of the Company
at the date when this report was approved:
• So far as each is aware, there is no relevant audit information (as
defined by the Companies Act 2006) of which the Company’s
auditor is unaware; and
• Each of the Directors has taken all the steps that he/she ought
to have taken as a Director to make himself/herself aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of S418 of the Companies Act 2006.
Substantial shareholdings
As at 31 December 2020, the following interests in the ordinary
share capital of the Company had been disclosed to the Company
in accordance with DTR 5 concerning notification of major
shareholdings or voting rights arising from the holding of certain
financial instruments:
Interests disclosed to the Company that have occurred between
31 December and the date of this report are as follows:
Number of
Shares
% Voting
Rights
Interest
D. C. A. Bramall
78,598,051
20.14
Indirect
Guernsey Investments
Limited
44,699,087
11.45
Direct
Articles of association
The Company is required to conduct its business in accordance
with its Articles of Association, changes to which have to be
approved by shareholders.
Subsequent events
Details of events occurring subsequent to the year-end are made
within Note 27 to the Financial Statements.
Information to be disclosed under LR 9.8.4R
Listing Rule
Detail
Page reference
9.8.4R (1), (2)
and (5) to (14)
9.8.4R (4)
Not applicable
Long-term incentive
schemes
n/a
92
This report was approved by the Board of Directors and is signed
on its behalf by:
Phillip Kenny
Company Secretary
30 June 2021
Number of
Shares
% Voting
Rights
Interest
D. C. A. Bramall
75,658,051
19.44
Indirect
Artemis Fund
Managers Limited
Guernsey Investments
Limited
JO Hambro Capital
Management
39,604,611
10.15
Indirect
39,034,087
10.03
Direct
22,129,189
5.62
Indirect
Aberforth Partners LLP
19,727,002
5.07
Indirect
JPMorgan Asset
Management Holdings
Inc
19,528,035
5.02
Indirect
Tweedy Browne
Not stated
5.01
Direct
Aggregate of Standard
Life Aberdeen plc
affiliated investment
management entities
12,378,153
3.14
Indirect
Norges Bank
11,716,384
3.01
Direct
Lookers plc Annual Report & Accounts 2020 | 109
Directors’ responsibilities statement
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The Directors are responsible for preparing the Annual Report &
Accounts and the Financial Statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and applicable law and
regulations.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law the Directors are required to
prepare the Group financial in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006. The Company Financial Statements applied
FRS 101 ‘Reduced Disclosure Framework’. Under company law the
Directors must not approve the Financial Statements unless they are
satisfied that they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss for the Group and
Company for that period. The Directors are also required to prepare
Financial Statements in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
In preparing these Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006, subject to any material
departures disclosed and explained in the Financial Statements;
• state whether they have been prepared in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union, subject to any material departures disclosed and explained
in the Financial Statements;
• prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
• prepare a Directors’ report, a strategic report and Directors’
remuneration report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006 and,
as regards the Group Financial Statements, Article 4 of the IAS
Regulation.
responsible for ensuring that the Annual Report & Accounts, taken
as a whole, are fair, balanced, and understandable and provides the
information necessary for shareholders to assess the Group’s
performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report &
Accounts and the Financial Statements are made available on a
website. Financial Statements are published on the Company’s
website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of Financial
Statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the Financial Statements
contained therein.
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• The Financial Statements have been prepared in accordance with
the applicable set of accounting standards and Article 4 of the
IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group and
Company.
• The Annual Report & Accounts includes a fair review of the
development and performance of the business and the financial
position of the Group and Company, together with a description of
the principal risks and uncertainties that they face.
• The Annual Report & Accounts, taken as a whole, are fair,
balanced and understandable and provide the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
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Lookers plc Annual Report & Accounts 2020 | 111
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors are
Mark Raban
Chief Executive Officer
30 June 2021
Financial
Statements
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Lookers plc Annual Report & Accounts 2020 | 113
Independent auditor’s report to the
members of Lookers plc
Opinion on the Financial Statements
In our opinion:
•
the Group Financial Statements have been properly prepared in
the Group Financial Statements have been properly prepared in
the Financial Statements give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at 31
December 2020 and of the Group’s loss for the year then
ended;
•
accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
•
accordance with international financial reporting standards:
adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union;
•
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
•
with the requirements of the Companies Act 2006; and, as
regards the Group Financial Statements, Article 4 of the
IAS Regulation.
the Parent Company Financial Statements have been properly
the Financial Statements have been prepared in accordance
We have audited the Financial Statements of Lookers plc (the
‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2020 which comprise the statement of total
consolidated comprehensive income, the consolidated and
company statement of financial position, the consolidated and
company statement of changes in equity, the consolidated
statement of cash flows and Notes to the Financial Statements,
including a summary of significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and international accounting
standards in conformity with the requirements of the Companies
Act 2006 and international financial reporting standards, adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. The financial reporting framework that has been
applied in the preparation of the Parent Company financial
statements is United Kingdom Accounting Standards, including
Financial Reporting Standard 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting
Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the Financial Statements
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion. Our audit opinion is consistent with the additional report to
the Audit and Risk Committee.
Independence
Following the recommendation of the Audit and Risk Committee,
we were appointed by the Directors on 22 January 2021 to audit
the Financial Statements for the year ended 31 December 2020
and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and re-appointments of
the firm is 1 year, covering the year ended 31 December 2020.
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the Financial Statements in the UK, including the FRC’s
Ethical Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with
these requirements. The non-audit services prohibited by that
standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.
The Group’s disclosure on application of the going concern basis
of preparation for the Financial Statements is included in the
principal accounting policies disclosed on pages 124 to 135.
The Group is reliant on its finance facilities to ensure that it can
meet its liabilities as they fall due. These have been renegotiated
subsequent to the year-end and require the Group to maintain
specified financial ratios and certain other financial covenants
including an assessment of liquidity and minimum cumulative
EBITDA requirements tested quarterly.
Due to the ongoing effects of the COVID-19 pandemic and the
global shortage of semiconductor chips, there is an increased risk
that the business may fail to comply with the required covenant
conditions which may affect the Group’s ability to operate as a
going concern.
Management have prepared estimates of future trading
performance and costs and the impact of this performance on
future covenant requirements and liquidity. In completing this
model management have included the ongoing effects of the
COVID-19 pandemic and taken into consideration latest guidance
from manufacturers on the potential impact of the shortage of
semiconductor chips on new car stock available over the period
under review.
Management have also prepared a number of reverse stress tests
that models changes in the forecast performance to test how
resilient the business is to reasonably possible events, including an
analysis of what mitigating actions may be required to rectify
forecast loss of headroom in key covenants. As a result of the
judgements required by management in their forecasts and
assessments we considered going concern and viability to be a key
audit matter.
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• We reviewed the facility and covenant headroom
calculations, and re-performed sensitivities on
management’s base case and downside scenarios;
• We considered the reasonableness of mitigating factors
available to management in respect of the ability to restrict
discretionary expenditure, close further parts of the business
and sell surplus assets; and
• We reviewed the going concern disclosures, and assessed
its consistency with management’s forecasts.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group
and Parent Company’s ability to continue as a going concern for a
period of at least twelve months from when the Financial
Statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied
the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the Directors’ statement in
the Financial Statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
Our evaluation of the Directors’ assessment of the Group and the
Parent Company’s ability to continue to adopt the going concern
basis of accounting and our response to the key audit matter
included the following procedures:
We obtained management’s assessment that supports the Board’s
conclusions with respect to the disclosures provided around going
concern and viability and performed the following:
• We considered the consistency of management’s cash flow
forecasts with other areas of the audit, such as the
impairment model;
• We challenged the rationale for the assumptions utilised in
the forecasts including new and used car sales, using our
knowledge of the business, the sector and wider
commentary available from competitors and peers with the
support of internal business restructuring experts. We
challenged the underlying assumptions behind the forecasts
(including reasonably possible downside scenarios
identified), by reference to third party industry and economic
reports to assess whether the forecasts prepared by
management are reasonable;
• We considered the appropriateness of management’s
forecasts by testing their mechanical accuracy, assessing
historical forecasting accuracy and understanding
management’s consideration of downside sensitivity
analysis;
• We obtained an understanding of the renewed financing
facilities, including the nature of the facilities, repayment
terms, covenants and attached conditions as well as
amendments to the facilities prior to the Directors’ approval
of the Financial Statements. We assessed whether the terms
and conditions therein were consistent with those applied by
management in their base case and downside scenario
forecasts;
Coverage of areas subject to a full scope audit
84% of Group revenue
75% of Group net assets
Key audit matters
Inventory Valuation and Provisioning for Used Vehicles
Management Override of Controls
Valuation of Goodwill and Other Intangibles
Materiality
Commercial Income Recognition
Classification of Non-underlying Items
Going Concern and Viability
Group Financial Statements as a whole
£1.84m (based on 0.05% of revenue)
2020
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114 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 115
Independent auditor’s report to the
members of Lookers plc
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
that we identified, including those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the audit, and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the Financial Statements as
a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the
Financial Statements. We also addressed the risk of management
override of internal controls, including assessing whether there was
evidence of bias by the Directors that may have represented a risk of
material misstatement.
Overall our audit procedures accounted for 84% of the Group’s
revenue and 75% of the Group’s total net assets. Components were
scoped in to address aggregation risk and to ensure sufficient
coverage was obtained over Group balances on which to base our
audit opinion. The scope of our audit is summarised below:
• We focused primarily on the audit work at ten significant
components, which were subject to full scope audit
procedures. The ten components considered significant were
Lookers plc, Bolling Investments Limited, Lookers Motor
Group Limited, The Dutton-Forshaw Motor Company Limited,
Charles Hurst Limited, Addison Motors Limited, Colebrook
and Burgess Limited, MB South Limited, Drayton Group
Limited and Warwick Holdings Limited.
• At the parent entity we also tested the consolidation process
and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material
misstatement of the aggregated financial information of the
remaining entities not subject to audit.
• Dutton-Forshaw Holdings Company Limited and Lookers
Motor Holdings Limited were audited to a set component
materiality to provide additional coverage of net assets.
• Three leasing entities including Get Motoring UK Limited,
Lookers Leasing Limited and Fleet Financial Limited were
subject to risk based agreed upon procedures.
All audit work was performed by the UK engagement team including
a Group team as well as component team, with the use of external
experts where necessary. The Group engagement team directed and
supervised the work of the component team, attended planning calls
with the component team where the scope of their work was
discussed, and also attended further planning calls with divisional
management. The Group engagement team reviewed the working
papers of the component team and attended meetings with them
and the respective divisional management teams following
completion of the work.
The Parent Company is accounted for by the head office finance
team. The audit work in respect of the Parent Company was
completed by the Group engagement team. The remaining
components of the Group were considered non-significant and
these components were principally subject to analytical review
procedures by the Group engagement team.
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Key Audit Matter
How the scope of our audit addressed the key audit matter
Management override of controls
Our audit response involved the following:
The Group addressed a number of accounting
irregularities in the prior year following a series of
investigations. These were a combination of
correctional adjustments for fictitious
transactions, inappropriate or inconsistent
accounting standards being applied over a
number of years and errors arising from control
deficiencies.
There are three principal ways in which
management might be likely to override the
controls:
• Overriding the Group’s revenue recognition
policies meaning that profits on sales are
moved from one accounting period to another;
• Changes to accounting estimates affecting the
relevant charge to the profit and loss account;
and
• Posting of manual journals outside the normal
accounting process to fraudulently misstate
the relevant balance.
Due to the unpredictable way in which such
override could occur and recognising the known
issues from the prior year, this was an area of
increased risk of fraud and error for the audit.
• an assessment of the scope of the review carried out by management and
the forensic accountants in the prior year including the procedures
performed;
• use of internal forensic specialists to support the audit team in evaluating
the scope and findings of the investigation. This included an assessment of
the evidence pertaining to the adjustments identified and other evidence
gathered as part of the investigation. The forensic specialists also
supported the audit team in tailoring the audit response to those findings;
• Assessment of whether there was any understatement of liabilities,
incorrect capitalisation of PPE or issues in relation to offsetting of cash and
overdrafts which were all identified as key adjustments in the prior year at
head office;
• use of data analytics tools to interrogate accounting journals and other
adjustments to the Financial Statements. In doing so determining key risk
characteristics based on our understanding of the Group and its divisions
and verification of a sample of entries made that met the risk criteria,
agreeing the journals to supporting documentation;
• challenge of estimates and judgements applied by management in the
preparation of the Financial Statements to assess their appropriateness
and determine whether there is any evidence of the existence of
systematic bias. See other key audit matters documented below;
• consideration of the nature of unadjusted audit differences to assess
whether there are any indications of bias or deliberate misstatement;
•
testing of revenue recognition and cut-off around the year end to check
revenue had been recognised in the correct period;
• a critical assessment of the consolidation (including recharges and intra
Group eliminating entries) and verification through supporting
documentation for all related journals posted over our set thresholds. This
included the consideration of manual or late journals posted in the
consolidation.
Key observations
Based on the procedures performed, we did not identify any material bias in
management’s estimates and consider the key judgements and assumptions
used to be appropriate. Our testing of journal entries and other adjustments
did not identify any inappropriate items.
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Lookers plc Annual Report & Accounts 2020 | 117
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Independent auditor’s report to the
members of Lookers plc
Key Audit Matter
How the scope of our audit addressed the key audit matter
Key Audit Matter
How the scope of our audit addressed the key audit matter
Our audit response involved the following:
• challenge of the appropriateness of the CGUs identified including the
allocation changes made during the current year with reference to the
accounting standards;
• assessment of management’s considerations on which specific assets/
groups of assets give rise to the most concern in relation to impairment by
challenging the underlying cash flows in the impairment model;
• consideration of the rationale for key inputs made by management in the
cash flow forecasts and how these linked back to the going concern
forecasts;
• consideration of IAS 36 requirements in respect of the assumptions related
to growth and discount rates to understand any areas of estimation
uncertainty;
• use of our internal valuation experts to review the appropriateness of the
discount rates adopted;
• use of third party market data to assess the appropriateness of growth
rates applied;
• assessment of the accuracy and the mechanics behind management’s
impairment model.
Key observations
Based on the work performed, we concluded that the assumptions applied in
the impairment model are appropriate.
Valuation of goodwill and other intangible
assets
The Group’s accounting policies are disclosed on
pages 124 to 135. See critical accounting
judgements and key sources of estimation
uncertainty on page 128, disclosure on page 149
(Note 10) and the Audit and Risk Committee
Report on page 77.
Where there are low contribution dealerships then
there is a risk that goodwill and intangible assets
attributed to those cash generating units (“CGU”)
may be impaired. At the year-end, impairments
were recognised to goodwill amounting to £2.6
million and to intangible assets amounting to £1
million.
The Group’s assessment of impairment in
accordance with IAS 36 “Impairment of Assets” is
a judgemental process which requires estimates
concerning the estimated cash flows, discount
rates and growth rates based on management’s
view of future business prospects.
Management performed a full impairment
assessment for goodwill to determine if the
carrying value of goodwill is supported.
The key assumptions applied by the Directors in
the impairment reviews are:
• cash flow forecasts are consistent with those
used as part of the going concern review,
including assumptions of future growth, gross
margin and central cost allocation; and
• discount rates.
We considered this to be a key audit matter as the
value of goodwill is supported by forecasts of
future cash flows of the business. There is
inherent uncertainty within these forecasts arising
from changing industry and economic conditions
and thus significant management judgement and
assumptions are required.
Inventory valuation and provisioning for used
vehicles
The Group’s accounting policies are disclosed on
pages 124 to 135. See critical accounting
judgements and key sources of estimation
uncertainty on page 128, disclosure on page 158
(Note 16) and the Audit and Risk Committee
Report on page 77.
The used inventory balance, included within
goods for resale, totalled £196.7 million (2019:
£221.6 million) at the year-end.
The assessment of net realisable value of used
vehicles inventory can fluctuate as a result of
market factors and the condition of vehicles.
These factors lead to difficulty in estimating the
likely sale price of a vehicle and thus the level of
provisioning required.
As a result of the inherent judgement in the
provision requirements for used inventory we
considered this to be a key audit matter.
Our audit response involved the following:
• attendance of stock counts to assess the identification of obsolete stock as
well as the condition of the stock to check any impact on the provision was
considered;
• verification of the ageing of inventory across the divisions to assess
whether the ageing profiles which flow into the provision calculations are
accurate on a sample basis;
• challenging the net realisable value of used vehicles by comparing the
carrying value on a sample of vehicles to third party data, and also by
reference to a selection of post year-end sales; and
• assessment of the historical accuracy of management’s estimate of
provisions held by way of review of utilisation of the prior year provision.
Key observations
Based on the work performed, we concluded that the valuation and
provisioning for used vehicles at year-end are appropriate.
Commercial income recognition
Our audit response involved the following:
The Group’s accounting policies are disclosed on
pages 124 to 135. See critical accounting
judgements and key sources of estimation
uncertainty on page 128 and the Audit and Risk
Committee Report on page 77.
Commercial income receivable at the year-end
was £34.1 million (2019: £46.3 million). The risk
has been focused to the valuation of commercial
income receivable held on the balance sheet at
the year-end.
Commercial income arises from volume related
and vehicle specific rebates derived from the
Group’s manufacturer partners and is significant
to the Group’s overall results.
This is due to a large number of differing
agreements in place which can lead to a level of
judgement being required to assess whether
recognition criteria has been met at the year-end.
• review of post year end receipts/credit notes to assess subsequent
recovery on a sample basis;
• a retrospective review of the recoverability of prior year commercial income
receivable;
• challenge of the integrity of the recorded data by management, through
recalculating a sample of commercial income receivable at the year -end
with reference to the terms and volumes of vehicles sold in the
manufacturer agreements; and
• an assessment of the suppliers’ financial stability and therefore their ability
to settle the commercial income receivable.
Key observations
Based on the work performed, we consider that the valuation of commercial
income receivable at year end is appropriate.
118 | Financial Statements
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Key Audit Matter
How the scope of our audit addressed the key audit matter
We challenged the Directors’ rationale for the designation of certain items as
non-underlying items, assessed such items against the Group’s accounting
policy and consistency of treatment with prior periods, taking into account the
significant changes in the business that have occurred during the year. We also
performed the following procedures:
• challenged the appropriateness of those items disclosed as non-underlying,
with particular consideration to European Securities and Markets Authority
(ESMA) guidance, to assess whether the items are outside the ordinary
course of business and as such may distort comparability;
• considered the consistency of treatment for non-underlying items between
debit and credit items;
• challenged the treatment of the FCA provision release (£10.4m) as an
adjusting post balance sheet event in line with IAS 10; and
• assessed the extent to which non-underlying items relate to previous
underlying business performance to evaluate whether they are comparable.
Key observations
Based on the work performed, we consider that those items disclosed as non-
underlying on the face of the statement of total consolidated comprehensive
income have been appropriately classified.
Classification of non-underlying items
The Group’s accounting policies are disclosed on
pages 124 to 135. See critical accounting
judgements and key sources of estimation
uncertainty on page 127 and the Audit and Risk
Committee Report on page 77.
In the statement of total consolidated
comprehensive income, the Group presents both
non-underlying and underlying operating profit
and profit before tax.
During the current year a net £12.1 million
expense (2019: £49.7 million) has been
presented as non-underlying items. Refer to Note
30 for management’s reconciliation of non-
underlying items to the Group’s statutory profit
measure.
Management judgement is required when
applying their accounting policy and determining
the classification of items as non-underlying
within the Group’s statement of total consolidated
comprehensive income. We have determined that
there is a potential for possible manipulation of
the Group’s underlying performance results
through classifications of items due to the level of
judgement involved and the importance of
underlying profit to readers of the Financial
Statements.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
Financial Statements.
In order to reduce to an appropriately low level the probability that
any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing
needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of
the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on
the Financial Statements as a whole.
Component materiality
Component materiality ranged from £50,000 to £1,656,000 in the
audit of each component based on the size and our assessment of
the risk of material misstatement of that component. We further
applied performance materiality levels of 60% of the component
materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit and Risk Committee that we would report
to them all audit differences in excess of £36,800. We also agreed
to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other
information comprises the information included in the Annual
Report & Accounts other than the Financial Statements and our
auditor’s report thereon. Our opinion on the Financial Statements
does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other
information is materially inconsistent with the Financial Statements
or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the Financial Statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
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We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in
relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Parent Company’s
compliance with the provisions of the UK Corporate Governance
Statement specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the Financial
Statements or our knowledge obtained during the audit.
Going concern and longer-
term viability
• The Directors’ statement with regards to the appropriateness of adopting the going concern
basis of accounting and any material uncertainties identified set out on page 125; and
• The Directors’ explanation as to its assessment of the entity’s prospects, the period this
assessment covers and why the period is appropriate set out on page 38.
Other Code provisions
• Directors’ statement on fair, balanced and understandable set out on page 68;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 30;
• The section of the Annual Report & Accounts that describes the review of effectiveness of risk
management and internal control systems set out on page 68; and
• The section describing the work of the Audit and Risk Committee set out on page 74.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions
and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial year for
•
which the Financial Statements are prepared is consistent with the Financial Statements; and
the Strategic report and the Directors’ report have been prepared in accordance with
•
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Matters on which we are
required to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate
for our audit have not been received from branches not visited by us; or
the Parent Company Financial Statements and the part of the Directors’ remuneration report to
•
be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
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A further description of our responsibilities is available on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the Parent Company’s members those matters we are
required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company
and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
3 Hardman Street
Spinningfields
Manchester
M3 3AT
30 June 2021
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
Independent auditor’s report to the
members of Lookers plc
Responsibilities of Directors
As explained more fully in the Directors’ Responsibility Statement,
the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is
necessary to enable the preparation of Financial Statements that
are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are
responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether
the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these Financial
Statements.
Extent to which the audit was capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud
is detailed below.
Based on our understanding and accumulated knowledge of the
Group and the sector in which it operates we considered the risk of
acts by the Group which were contrary to applicable laws and
regulations, including fraud and whether such actions or non-
compliance might have a material effect on the Financial
Statements. These included but were not limited to those that
relate to the form and content of the Financial Statements, such as
the Group accounting policies, international accounting standards,
the UK Companies Act 2006 and the UK Corporate Governance
Code; those that relate to the payment of employees; and industry
related such as compliance with health and safety and FCA
compliance. All team members were briefed to ensure they were
aware of any relevant regulations in relation to their work and
potential fraud risks.
We assessed the susceptibility of the financial statements to
material misstatement including fraud and evaluated
management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
override of controls as referred to in the key audit matter section
above), and determined that the principal risks were related to
posting inappropriate journal entries, revenue recognition,
commercial income, lease accounting and management bias in
accounting estimates.
Our audit procedures included, but were not limited to:
• Use of forensic specialists to consider the outcome of the
investigations in the prior year, and the resulting impact this
would have on the procedures to be performed;
• Obtaining an understanding of the control environment in
monitoring compliance with laws and regulations;
• Consideration of the processes in place in relation to furlough
and substantive testing of amounts received to ensure valid
recognition;
• Enquiring of management, the Audit and Risk Committee, along
with internal and external legal counsel concerning actual and
potential litigation and claims;
• Performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
• Reading minutes of meetings of those charged with
governance, reviewing internal audit reports and reviewing
correspondence with the FCA;
• Challenging assumptions and judgements made by
management in their significant accounting estimates, in
particular in relation to the Group’s defined benefit pension
scheme liabilities, commercial income debtor recognition, and
forecasts used within impairment models utilised to assess
goodwill impairment; (as referred to in the key audit matter
sections above);
• A critical assessment of the consolidation and consideration of
manual or late journals posted at consolidated level;
•
Identification and testing of journal entries, in particular any
journal entries posted with unusual account combinations or
including specific keywords using data analytics; and
• Agreement of the Financial Statement disclosures to underlying
supporting documentation;
Our audit procedures were designed to respond to risks of material
misstatement in the Financial Statements, recognising that the risk
of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the
events and transactions reflected in the Financial Statements, the
less likely we are to become aware of it.
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Principal accounting policies
The principal accounting policies adopted in the preparation of
these Financial Statements are set out below. These policies have
been consistently applied to all years presented, unless stated
otherwise.
• Disclosure of the future impact of new International Financial
Reporting Standards in issue but not yet effective at the
reporting date; Comparative narrative information.
General information
Lookers plc is a public limited company incorporated in the United
Kingdom under the Companies Act 2006, with registered number
111876 in England and Wales. The address of the registered office
is given in Note 15 to the Financial Statements. The nature of the
Group’s operations and its principal activities are set out in the
Directors’ Report. The main activities of the Group are the sale, hire
and maintenance of motor vehicles and motorcycles, including the
sale of tyres, oil, parts and accessories, and the FCA-regulated
activities of credit broking and insurance distribution.
1.Basis of preparation
The consolidated Financial Statements of the Company are
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union.
The Financial Statements have been prepared on the historical
cost basis. The Company has elected to take exemption under
section 408 of the Companies Act 2006 not to present the
Company profit and loss account. The loss for the Company for the
year was £33.9m (2019: restated loss £9.3m).
The Company has applied FRS 101 ‘Reduced Disclosure
Framework’ in the year ended 31 December 2020.
The following exemptions from the requirements of IFRS have
been applied in the preparation of the Company’s Financial
Statements and, where relevant, equivalent disclosures have been
made in the Group Financial Statements of the ultimate controlling
party, in accordance with FRS 101:
• Presentation of a Statement of Cash Flows and related Notes;
• Disclosure of the objectives, policies and processes for
managing capital;
• Disclosure of key management personnel compensation;
• The requirements in IAS 24 (Related Party Disclosures) to
disclose related party transactions entered into between two or
more members of a group;
• Disclosure of the categories of financial instruments and the
nature and extent of risks arising on these financial instruments;
• The effect of financial instruments on the Statement of
Comprehensive Income;
•
Information about financial instruments that have been
reclassified or derecognised, transfers of financial assets, credit
losses recorded in a separate account, netting arrangements,
loan defaults or breaches and collateral;
• Comparative period reconciliations for the number of shares
outstanding;
Adoption of new and revised standards
From 1 January 2020, the following standards became effective in
the Group’s consolidated Financial Statements:
– Amendments to References to the Conceptual Framework in
IFRS Standards;
– Amendments to IAS 1 and IAS 8 – Definition of Material;
– Amendments to IFRS 3 – Definition of a Business;
– Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate
Benchmark Reform; and
– Amendment to IFRS 16 in relation to COVID-19 Related
Rent Concessions
The accounting policies have been applied consistently throughout
the reporting period. The standards that became applicable for the
current period did not have any impact on the Group’s accounting
policies and did not require adjustments.
The Group has not early adopted other standards, amendments to
standards or interpretations that have been issued but are not yet
effective.
Amendment to IFRS 16 – COVID-19 Related Rent Concessions
The amendment provides lessees with relief in the form of an
optional exemption from assessing whether a rent concession
related to COVID-19, and that meets certain conditions, is a lease
modification. Lessees can elect to account for qualifying rent
concessions in the same way as they would if they were not lease
modifications. In applying the practical expedient, a lessee would
generally account for a forgiveness or waiver of lease payments as
a variable lease payment, and recognise the concession in the
period in which the event or condition that triggers those payments
occurs. The lessee also makes a corresponding adjustment to the
lease liability, in effect derecognising the part of the lease liability
that has been forgiven or waived. On adoption of the amendment,
the Group has recognised a credit of £0.1m in the consolidated
income statement.
New and revised IFRSs in issue but not yet effective
The following standards were in issue but were not yet effective at
the balance sheet date. These standards have not yet been early
adopted by the Group, and will be applied for the Group’s financial
years commencing on or after 1 January 2021:
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 –
Interest Rate Benchmark Reform – Phase 2;
– Annual Improvements to IFRS Standards 2018–2020;
– Amendments to IAS 16 – Property, Plant and Equipment –
Proceeds before Intended Use;
– Amendments to IAS 37 – Onerous Contracts –
Cost of Fulfilling a Contract;
– Amendments to IFRS 3 (May 2020) – Reference to the
Conceptual Framework;
– IFRS 17 – Insurance Contracts; and
– Amendments to IAS 1 – Classification of Liabilities as Current or
Non-current.
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The Directors do not expect that the adoption of the standards
listed above will have a material impact on the Financial Statements
of the Group in future periods.
2. Going concern
The consolidated Financial Statements are prepared on a going
concern basis. The Group’s business activities, together with the
factors likely to affect its future development, performance and
position are set out in the Strategic Review section of the Annual
Report & Accounts. In addition, Note 22 to the Annual Report &
Accounts includes the Group’s objectives, policies and processes
for managing its capital, its financial risk management objectives,
details of its financial instruments and its exposures to credit risk
and liquidity risk.
The Directors have considered the future prospects and
performance of the Group and have made an assessment of going
concern considering the Group’s cash and liquidity position, current
performance and outlook, which assessed the restrictions put in
place by the UK Government to control the impact of the
COVID-19 pandemic, using the information available up to the date
of issue of these Financial Statements. The details of this
assessment conducted by the Directors is set out below.
During the lockdown restrictions throughout 2020 and 2021,
management worked closely with its key OEM Brand Partners, who
have positively supported the business and are continuing to do so.
Management has continued to take action to protect the balance
sheet and cash flow including accepting UK Government support
measures including the Coronavirus Job Retention Scheme and
the Expanded Retail Discount 2020/21 for business rates in
addition to other self-help measures through a significant cost
reduction programme, the deferral of capital expenditure,
identification of property assets available for sale and cessation of
the FY20 dividend.
Additionally, management has taken a number of longer term
actions to protect cash including continued investment in the
development of the Group’s end-to-end online ordering capability
through the use of Click & Drive, a comprehensive review of
working capital management, and changed operational practices
to de-risk the intra-month cash requirements.
At the date of approval of the consolidated Financial Statements,
the UK is returning to some level of normality as lockdown
restrictions are eased, however the Directors are cautiously
monitoring the potential impact for future disruption. The UK
Government is very well progressed in the roll out of the
vaccination programme which should help the UK manage the
future impact from the pandemic.
Banking facilities and funding position
As at 31 December 2020 the Group had £238m of committed
revolving credit facilities due to expire on 31 March 2022. In
recognition of the trading uncertainty through 2020 the financial
covenants were renegotiated and included a suspension of the
interest cover ratio and replacement with EBITDA and Liquidity
covenants. The Group has satisfied each of those financial
covenants.
The Group’s revolving credit facilities were successfully
renegotiated with its existing Banking Club in May 2021, for an
initial amount of £150m and with an extension to September
2023. The profitability and cash generation of the Group has
rebased the size of facility required to support the ongoing working
capital needs of the Group following the restructuring of operations
and reduced footprint of the Group and closure of sites in 2020.
The amended facilities return to more normal covenant tests
including core leverage, interest cover and EBITDA testing on a
quarterly basis.
The Group has not made use of any borrowing under the
COVID-19 Corporate Financing Facility or the Coronavirus Large
Business Interruption Loan Scheme.
In addition to the revolving credit facility, the Group has stocking
funding lines which were utilised at £210.0m as at 31 December
2020 (2019: £337.1m).
Assessment of the Group’s financial position
The Group experienced significant disruption as a result of the
impact of the COVID-19 pandemic, the details of which are set out
in the Operating Review on page 18 and the Financial Review on
page 25.
The Directors have considered the potential impact of ongoing
measures to manage the impact of COVID-19 pandemic and
considered the possible medium term-risks on the macro-
economic impact the restrictions could have on the UK economy
across the period to June 2022. The Directors have also
considered the potential disruption to supply of new vehicles
following the worldwide shortage of semiconductor chips.
Management has modelled a number of adverse scenarios to
assess the potential impact that COVID-19 and possible stock
shortages may have on the Group’s operations in addition to the
scenarios discussed in the Viability Statement.
The Directors acknowledge that there remains uncertainty
regarding the timing of a full return to the UK economic activity
following the easing of restrictions in the UK and the potential for
some further disruption to the UK economy. The Group has
demonstrated significant resilience to issues faced during 2020.
The business has adapted to a new omni-channel operating
platform and has shown great resilience to the issues faced in
2020 and 2021. This is underpinned by a strong balance sheet
which has been reinforced by the renegotiation of the core funding
facilities. The support received from OEM Brand Partners, the UK
Government and other key partners has contributed to a strong
financial position and places the Group in a strong position to
manage its way through other future potential disruptions.
The conclusion of a trade deal between the UK and the EU has
created more confidence with supply chains. The impact of Brexit
has thus far been immaterial and the Directors do not expect it to
cause any material impact to the supply chain or cause any issues
with access to skilled labour.
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Principal accounting policies
To support the assessment of the Group’s ability to continue as a
going concern, the Directors have modelled a Base Case and three
downside scenarios as follows.
The Group has equally reacted well to previous COVID-19
lockdowns as demonstrated by the performance in the four
months to April 2021, where the Group has consistently
outperformed the market.
The reverse stress test scenario models a decrease in sales
volumes and aftersales revenues not factoring in management
taking any significant mitigating actions. If the Group experienced a
significant reduction in aftersales or vehicle sales revenue, the
Board would take a series of actions to protect the business as
evidenced in 2020.
Based on the findings above, the Directors are confident in the
scenarios tested that there are no liquidity issues and that any
potential breaches in financial covenants can reasonably be
prevented or avoided through mitigating actions, as we have
demonstrated very well in 2020.
In view of the various sensitivities and additional stress testing, the
Board concludes that preparing the accounts on the basis of Going
Concern is appropriate.
• A medium-term downside scenario, where further lockdown
measures occur in quarter 4 of 2021 followed by a recession in
the first half of 2022 caused by macro-economic conditions.
• A medium-term downside scenario, where potential stock
restrictions are caused by the impact of semiconductor chip
shortages. This sensitivity reduces volumes of new, used and
fleet sales from September 2021 to March 2022. This would be
partly offset by a reduction in operating costs. Normal trading
performance is expected to resume from April 2022. As this
potential issue continues to evolve, a second more severe
sensitivity was run to further test the Group’s resilience. The
additional sensitivity reduces volumes of new and fleet volumes
further and extends the downturn out to June 2022. This is
partly offset by an increase in used volumes - though these are
still below the Base Case - and reflects both slightly stronger
gross margins and a modest reduction in operating costs.
• A reverse stress test scenario, which is designed to breach
either liquidity or financial covenants. This scenario is driven
from Base Case and sensitises a reduction in vehicles sales
volumes and aftersales revenue only from April 2021. The
scenario assumes a constant reduction in aftersales revenues
from April 2021 and various reductions in vehicle volumes at
increments over the period to June 2022. It does not reflect any
mitigating actions which the Board could take.
In each of the scenarios the Directors have assumed that property
disposals between May 2021 and June 2022 are postponed and
therefore increase the net debt by the same value. Throughout
2020 and despite the impact of COVID-19, Management achieved
several surplus property disposals with a net profit to book value.
Under the base case and medium-term downside scenarios, the
Group is forecast to comply with the financial covenants set out in
its funding agreements and operate comfortably within its banking
facility limits. The Government has reacted to the impact of
COVID-19 by initiating demonstrable financial support to the
macro-economy and implemented a world leading roll out of the
vaccine.
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3. Judgements and estimates
Accounting judgements
The Financial Statements of the Group have been prepared in accordance with International Reporting Standards (IFRS) adopted by the
European Union and with those parts of the Companies Act 2006 applicable for companies under IFRS. The Group Financial Statements
comply with article 4 of EU IAS Regulation.
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Judgement
Effect on Financial Statements
Recognition and
measurement of provisions
and contingencies.
Classification of non-
underlying items
Consideration of whether the Group has a legal
or constructive obligation arising from a past
event and the likelihood of such an obligation
crystallising in an outflow of economic benefit
requires a significant judgement in the Financial
Statements.
In this financial year significant judgement was
made in relation to the release of the “FCA
provision” recognised in the prior year. The
provision was recognised for liabilities that may
have arisen from the FCA’s review of historic
sales practices and Enforcement Investigation.
In March 2021 the FCA advised the Board that it
had decided to close its investigation. The FCA
investigation was closed without applying any
sanction but noted several concerns relating to
the historic culture, systems and controls of the
Group which the Board fully accepted. As a result
of this outcome the Board concluded that this
was an adjusting post balance sheet event and
the £10.4m provision was released.
Judgement required whether transactions are
outside the course of normal business and
whether the presentation of exceptional items will
assist in providing a meaningful comparison of the
Group’s trading results with previous periods.
The Group has treated the impact of the
COVID-19 pandemic as being within its
underlying activities and has therefore not
disclosed any related revenues or costs as
non-underlying.
Alternative accounting
judgement that could
have been applied
Effect of that
alternative accounting
judgement
A non-underlying post
balance sheet event
with release of the
£10.4m provision in
2021.
Liabilities and net
operating expenses
would decrease,
increasing net assets
and shareholders’
funds.
Non-underlying items
classified within
underlying results.
Any of the non-
underlying items
detailed in Note 4
would be reclassified to
the underlying result.
In 2019 capitalisation of development expenditure was considered a key accounting judgement. This is no longer considered a key
accounting judgement due to lower levels of expenditure in the year.
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Principal accounting policies
Accounting estimates
The preparation of Financial Statements in conformity with IFRSs
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
Financial Statements and the reported amounts of revenues and
expenses during the reporting year. Although these estimates are
based on management’s best knowledge of the amount, events or
actions, actual results ultimately may differ from those estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both
current and future periods. The Directors consider the following to
be the key estimates applicable to the Financial Statements, which
have a significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year or in the long term:
Potential impact within
the next financial year?
Potential impact in
the longer term?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Key estimate area
Key assumption
Goodwill and
intangible assets
Retirement benefit
obligations
Recognition of
commercial income
Inventory valuation
We undertake an exercise to estimate future cash flows
from each CGU when we conduct our annual impairment
review. We have key assumptions over the growth rates of
revenue and operating margin which impacts the profit
assumed and hence cash flow generation in each CGU.
These key assumptions include our best estimates of the
impact of COVID-19. The key area for estimation
uncertainty surrounds the growth rates applied to
revenue. Numerical disclosure regarding key assumptions
used are made in Note 10.
The main assumptions in determining the Group’s
retirement benefit obligations are: discount rate, mortality
rate and rate of inflation. Disclosure of these assumptions
are made within Note 26. Due to the relative sizes of the
pension schemes it is only considered to be the Lookers
Pension Plan that could be materially affected by key
estimates. The key area for estimation uncertainty
surrounds the discount rate applied of 1.3% (2019: 2.1%).
The Group is party to a number of commercial
arrangements with its OEM Brand Partners that result in
manufacturer bonus credits being earned. The key area for
estimation uncertainty in relation to these arrangements
surrounds the interpretation of whether the commercial
income bonus targets have been met and are therefore
appropriate to be recognised as income and accruals at
the balance sheet date. The total amount accrued at the
balance sheet date amounts to £34.1m (2019: £46.3m)
The fair value of inventories is reviewed by management
regularly, applying a mix of standard and judgemental
provisions to adjust values, where appropriate, down to
prevailing market values.
The key area for estimation uncertainty is the assessment
of net realisable value of vehicle inventory, which can
fluctuate as a result of market factors and the condition of
vehicles.
The inventory provision as at 31 December 2020
represents 0.6% of the gross inventory balance
(2019: 0.7%).
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4. Basis of consolidation
The consolidated Financial Statements comprise the accounts of
the Company and its subsidiary undertakings. An undertaking is
regarded as a subsidiary if the Group has control over its operating
and financial policies. Control is achieved when the Company has
the power over the investee; is exposed, or has rights, to variable
returns from its involvement with the investee; and has the ability to
use its power to affect its returns. The profits and losses of
subsidiary undertakings are consolidated as from the effective
date of acquisition or to the effective date of disposal.
The Group uses the purchase method of accounting to account for
the acquisition of subsidiaries. The cost of an acquisition is
measured as the fair value of the assets acquired, equity
instruments issued, and liabilities incurred or assumed at the date
of completion, plus costs directly attributable to the acquisition.
Identifiable assets acquired, liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the fair
value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is
recognised directly in the Income Statement.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of
acquired subsidiaries are changed where necessary to ensure
consistency with the policies adopted by the Group.
5. Foreign currencies
Items included in the Financial Statements of all Group
undertakings are measured using that entity’s functional currency,
which is the currency of the primary economic environment in
which the entity operates. The consolidated Financial Statements
are presented in Sterling, which is the Parent Company’s functional
and presentation currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period-
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the consolidated income
statement, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges.
The results and financial position of all Group undertakings that
have a functional currency different from the presentation currency
are translated into the presentation currency with: (i) assets and
liabilities for each balance sheet translated at the closing rate at
the date of that balance sheet; (ii) income and expenses for each
income statement translated at average exchange rates for the
period; and (iii) all resulting exchange differences recognised as a
component of other comprehensive income. In the case of
subsidiaries acquired during a financial period, the average
exchange rate takes into account the period of ownership only.
Exchange differences arising from the translation of the net
investment in foreign entities, and of borrowings and other
currency instruments designated as hedges of such investments,
are recognised in the retained earnings reserve within other
comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
The principal exchange rates applied in the preparation of the
Financial Statements were as follows:
GBP:EUR at the end of the year
GBP:EUR average for the year
2020
1.11
1.13
2019
1.18
1.14
6. Revenue
Revenue is measured based on the consideration specified in a
contract with a customer. Amounts collected on behalf of third
parties are excluded. Revenue is recognised by the Group when it
transfers control over a product or service to a customer.
Revenue is measured at invoice price, excluding value added taxes,
and principally comprises external vehicle sales, parts, servicing
and bodyshop sales. Vehicle and parts sales are recognised when
control over the vehicles or parts have been transferred to the
customer. This is generally at the time of delivery to the customer.
Service and bodyshop sales are recognised when the work has
been completed.
Revenue also comprises commissions receivable for arranging
vehicle financing and related insurance products. Commissions are
based on agreed rates and income is recognised at the time of
approval of the vehicle finance by the finance provider.
Where the Group is acting as agent on behalf of a principal,
(eg assigning finance), the commission earned is also recorded at
an agreed rate when the transaction has occurred. The income
received in respect of warranty policies sold and administered by
the Group is recognised over the period of the policy on a straight-
line basis.
In terms of its leasing operations the Group makes an assessment
whether substantially all risks and rewards incidental to ownership
of the underlying asset are transferred on the commencement of
the lease. Where substantially all risks and rewards are transferred
the lease is classified as a finance leases, otherwise the lease is
classified as an operating lease.
Under finance lease arrangements all revenues are recognised at
the point risks and rewards of ownership are transferred. Under
operating lease arrangements the initial amounts received in
consideration are held as deferred income and the remaining
deferred revenue, which effectively represents rentals received in
advance, is taken to the income statement on a straight-line basis
over the related lease term.
All Company income is from recharges within the Group.
Lookers plc Annual Report & Accounts 2020 | 129
Principal accounting policies
7. Commercial income
Commercial income, including manufacturer bonuses, is credited to
cost of sales. Volume related and vehicle specific rebates from
suppliers are credited to the carrying value of inventory to which
they relate. Once the inventory is sold, the rebate amount is then
recognised in the income statement.
11. Dividends
Final dividends proposed by the Board and unpaid at the end of
the year are not recognised in the Financial Statements until they
have been approved by the shareholders at the Annual General
Meeting. Interim dividends are recognised when they are paid.
8. Non-underlying items
In preparing the Financial Statements the Board has taken the view
to present the statutory statement of total comprehensive income
incorporating the disclosure of underlying and non-underlying
items separately. Non-underlying items are presented separately in
the statement of total comprehensive income and have been
defined by the Board as: Relating to costs or incomes which are
not incurred in the normal course of business or due to their size,
nature and irregularity, and are not included in the assessment of
financial performance in order to reflect management’s view of the
core-trading performance of the Group.
9. Finance costs
Finance cost comprises interest payable on borrowings,
consignment, repurchase liabilities, stocking loans, lease liabilities,
interest on pension scheme obligations and debt issue costs.
Interest income is recognised in the Consolidated Statement of
Total Comprehensive Income as it accrues using the effective
interest method.
10. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. The tax currently payable is based on taxable
profit for the year. Taxable profit differs from net profit as reported
in the Consolidated Statement of Total Comprehensive Income
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is provided in full, using the liability method, on taxable
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated Financial
Statements. However, if the deferred tax arises from initial
recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the balance sheet date
and are expected to apply when the related deferred tax asset is
realised, or the deferred tax liability is settled. Deferred tax assets
are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can
be utilised. Deferred tax is not provided on temporary differences
arising on investments in subsidiaries, as the Group controls the
timing of the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
12. Segmental reporting
A business segment is a component that engages in business
activities from which it may earn revenues and incur expenses;
whose operating results are regularly reviewed by the entity’s chief
operating decision maker (the Board of Directors) to make
decisions about resources to be allocated to the segment and
assess its performance; and for which discrete financial
information is available. The Group has only one reportable
segment.
13. Goodwill and impairment
All business combinations are accounted for by applying the
purchase method. Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired entity at the date of the
acquisition. Goodwill is allocated to cash generating units (CGUs),
which are franchise groups and other business units.
An impairment test is performed annually as detailed below.
Goodwill and intangible licences are then held in the balance sheet
at cost less any accumulated impairment losses.
For the purposes of impairment testing of goodwill, indefinite life
intangible assets, property, plant and equipment and right of use
assets are allocated to their respective cash generating units
based on their manufacturer profile and the Directors assess the
value in use for each cash generating unit. Value in use is
calculated by applying the Board approved budget/forecast and
applying a suitable cost of capital to discount cash flows to
perpetuity.
14. Intangible assets
IT development assets are stated at cost less accumulated
amortisation and any impairment losses. Any subsequent
expenditure on capitalised intangible assets is capitalised only
when it increases the future economic benefits embodied in the
specific asset to which it relates. This category of asset includes
purchased computer software licences, computer software and
internally generated intangible assets. These assets are amortised
by equal instalments over the specific software licence period
(typically 12 months) or over their useful economic life (typically up
to five years) as appropriate. All amortisation charges are made
within net operating expenses.
Internally generated intangible assets relate to activities that
involve the development of computer systems designed to
enhance the selling process so to achieve increased orders for
both vehicles and aftersales work. Expenditure arising from the
Group’s development is recognised only if all of the following
conditions are met:
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It is probable that the asset created will generate future
• An asset is created that can be separately identified;
•
economic benefits;
• The development cost of the asset can be measured reliably;
• The Group has the intention to complete the asset and the
ability and intention to use or sell it;
• The product or process is technically and commercially feasible;
and
• Sufficient resources are available to complete the development
and to either sell or use the asset.
Where these criteria have not been achieved, development
expenditure is recognised in the Consolidated Statement of Total
Comprehensive Income in the year in which it is incurred.
Intangible licences relate to the values ascribed following the
advice of third-party consultants to franchise operating licences in
connection with historic business combinations. The Directors have
considered that as a result of the high barriers to entry in the
marketplace and the historic length of the respective franchise
operating licences that these assets have no foreseeable limit to
the period over which they are expected to generate net cash
inflows and as such have been classified as having an indefinite
useful economic life.
As intangible licenses have an indefinite useful economic life, they
are subjected to the Group’s annual impairment review as detailed
in the Goodwill and impairment policy.
15. Property, plant and equipment
Freehold land is not depreciated. Depreciation is provided to write
off the cost less the estimated residual value of other assets by
equal instalments over their estimated useful economic lives. On
transition to IFRS as at 1 January 2004, all land and buildings were
restated to fair value as permitted by IFRS 1, which is then treated
as the deemed cost. All other assets are initially measured at cost.
Freehold buildings and long leasehold properties are depreciated
over 50 years on a straight-line basis to their estimated residual
values. Short leasehold properties are amortised by equal
instalments over the periods of the respective leases.
Other property, plant and equipment disclosed in Note 12 includes
plant and machinery, motor vehicles, fixtures, fittings, tools and
equipment (including computer equipment and terminals) and
assets in the course of construction. These assets (excluding
assets in the course of construction) are depreciated on a straight-
line basis at rates varying between 10% and 33% per annum over
their estimated useful lives. Assets in the course of construction are
initially measured at cost and are depreciated when they are
brought into economic use.
The residual value of all assets, depreciation methods and useful
economic lives, if significant, are reassessed annually. The
depreciation charge in respect of property, plant and equipment is
recognised within net operating expenses within the income
statement.
Motor vehicles hired to customers under rental agreements over
one year are included within property, plant and equipment. These
vehicles are depreciated to their residual value over the period of
their lease. Vehicle residual values are based on the industry
standard CAP values and are regularly reviewed.
All costs in relation to the maintenance of property, plant and
equipment are recognised in the income statement as an expense
as incurred.
16. Leases
(a) As a lessee
The Group assesses whether a contract is or contains a lease, at
inception of a contract. The Group recognises a right-of-use asset
and a corresponding lease liability with respect to all lease
agreements in which it is the lessee, except for short-term leases
(defined as leases with a lease term of 12 months or less) and
leases of low value assets. For these leases, the Group recognises
the lease payments as an operating expense on a straight-line
basis over the term of the lease unless another systematic basis is
more representative of the time pattern in which economic benefits
from the leased asset are consumed. The lease liability is initially
measured at the present value of the lease payments that are not
paid at the commencement date, discounted by using the rate
implicit in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate. The weighted average
incremental borrowing rate applied to lease liabilities is 4.2%
(2019: 4.5%).
Lease payments included in the measurement of the lease liability
comprise:
• Fixed lease payments (including in-substance fixed payments),
less any lease incentives;
• Variable lease payments that depend on an index or rate, initially
measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under
residual value guarantees;
• The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options;
• And payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the Statement
of Financial Position. The lease liability is subsequently measured
by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made. Payments of
lease liabilities are disclosed within financing activities and the
associated interest cost is disclosed within operating activities
within the Consolidated Statement of Cash Flows.
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Principal accounting policies
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
• The lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease
payments using a revised discount rate;
• The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual
value, in which cases the lease liability is remeasured by
discounting the revised lease payments using the initial
discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised
discount rate is used);
• A lease contract is modified, and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease
payments using a revised discount rate.
Liabilities associated with the financing of these vehicles are
recorded as vehicle rental finance liabilities in either current or non-
current liabilities. Once the vehicle is no longer utilised for rentals it
is transferred to inventory at its carrying amount and becomes
available for sale as part of the Group’s ordinary course of business.
Income from operating leases is recognised on a straightline basis
over the period of the rental agreement.
On the commencement of finance lease arrangements a finance
lease receivable is recognised equal to the net investment in the
lease, whilst the underlying leased asset is derecognised from the
Group’s balance sheet. Rentals received over the lease term
reduce the finance lease receivable.
17. Investments in subsidiaries
Investments in subsidiaries held on the statement of financial
position are stated at cost less provision for impairment.
In accordance with the amendment to IFRS 16 COVID-19 Related
Rent Concession the Group took the optional exemption from
assessing whether a rent concession related to COVID-19, and that
meets certain conditions, is a lease modification. In applying the
practical expedient, adjustments to the lease liabilities have been
made to derecognise the part of the liability that has been forgiven
or waived in the period.
18. Impairment of assets
At each reporting date, the Group reviews the carrying amounts of
its non-financial assets (other than inventories, contract assets and
deferred tax assets) to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. Goodwill and intangible assets
with indefinite lives are tested annually for impairment.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and
remove a leased asset, restore the site on which it is located or
restore the underlying asset to the condition required by the terms
and conditions of the lease, a provision is recognised and measured
under IAS 37. The costs are included in the related right-of-use asset,
unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the right-
of-use asset reflects that the Group expects to exercise a purchase
option, the related right-of-use asset is depreciated over the useful
life of the underlying asset. The depreciation starts at the
commencement date of the lease. The right-of-use assets are
presented as a separate line in the Statement of Financial Position.
The Group applies IAS 36 Impairment of Assets to determine
whether a right-of-use asset is impaired and accounts for any
identified impairment loss.
(b) As a lessor
The Group operates a number of vehicle leasing businesses in
which it acts as a lessor either under finance or operating leases.
Vehicles leased under operating leases greater than one year are
classified as property, plant and equipment and depreciated to
their residual values over the course of the lease agreement.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or CGUs. Goodwill arising from a business
combination is allocated to CGUs or groups of CGUs that are
expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. Value in use is based
on the estimated future cash flows, discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset or CGU. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair
value less disposal costs, and value in use.
Impairment losses are recognised in the Statement of
Comprehensive Income. They are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU, and then to
reduce the carrying amounts of the other assets in the CGU on a
pro rata basis. An impairment loss in respect of goodwill is not
reversed. For other assets, an impairment loss is reversed only to
the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
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19. Inventories
Motor vehicle inventories are stated at the lower of net purchase
price and net realisable value. A review of the net realisable values
of inventories is conducted on a regular basis and values are
adjusted to prevailing market value. The market value is assessed
with reference to external benchmarking publications and applying
historical industry knowledge on the pricing of those vehicles by
reference to make and specific models. We also ensure inventories
that exist at the year-end are valued correctly by sampling against
further post year-end actual sales data. Whilst this data is deemed
representative of current values it is possible that ultimate sales
values can vary from those applied.
Parts inventories are valued on a first-in, first-out basis and are
written down to net realisable value by providing for obsolescence
on a time in stock based formula approach.
Consignment vehicle inventories are regarded as being effectively
under the control of the Group and are included within inventories
on the balance sheet as the Group has the ability to direct the use
of, and obtain substantially all of the remaining benefits from, the
asset. Control includes the ability to prevent other entities from
directing the use of, and obtaining the benefits from, an asset even
though legal title has not yet passed. The corresponding liability is
included in trade payables.
Motor vehicles are transferred from contract hire activities at the
end of their lease term to inventory at their book value. No cash
flow arises from these transfers.
20. Rental fleet vehicles
Motor vehicles purchased by the Group and hired to customers
under short term operating leases are included within current
assets and depreciated on a straight-line basis over the course of
the rental agreement to their estimated residual value on
termination of that agreement. Income from such rentals is
recognised on a straight- line basis over the period of the rental
agreement. Motor vehicles hired to customers over longer-term
rental agreements are capitalised within other property, plant and
equipment.
21. Vehicle financing
Stocking loans are finance arrangements to fund new and used
vehicles before sale with repayment periods set by the finance
house.
Consignment vehicle creditors are recorded for any vehicles
recognised as consignment vehicle inventory.
Repurchase commitment liabilities are recognised when the Group
enters into repurchase commitments as part of the operation its
Company staff car schemes.
Liabilities are disclosed as vehicle rental finance liabilities if they
are incurred by the Group’s leasing operations in order to procure
vehicles.
22. Pensions
The Group operates the “Lookers Pension Plan”, the “Dutton
Forshaw Group Pension Plan” and the “Benfield Group Pension
Plan” which are defined benefit pension schemes providing
benefits based on final pensionable salary. The defined benefit
schemes define the amount of pension benefit that an employee
will receive on retirement, dependent on one or more factors
including age, years of service and salary. All schemes are closed to
new members and to future accrual. The last triennial valuation of
the “Lookers Pension Plan” was carried out at 31 March 2019 by
Aon Hewitt Limited and has been updated to 31 December 2020
by a qualified independent actuary. The last triennial valuation of
the “Dutton Forshaw Group Pension Plan” was carried out at 31
March 2016 by Aon Hewitt Limited and has been updated to 31
December 2020 by a qualified independent actuary. The last
triennial valuation of the Benfield Group Pension Plan was carried
out at 31 March 2019 by Deloitte Total Reward and Benefits
Limited and has been updated to 31 December 2020 by a
qualified independent actuary.
Under IAS 19 (Revised), the defined benefit deficits are included
on the Group’s balance sheet. Liabilities are calculated based on
the current yields on high quality corporate bonds and on market
conditions. Surpluses are only included to the extent that they are
recoverable through reduced contributions in the future or through
refunds from the schemes.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or credited, net
of deferred tax, each year to reserves and shown in the Statement
of Comprehensive Income. Interest expense or income is
calculated on the net defined benefit liability or asset respectively
by applying the discount rate to the net defined benefit liability or
asset.
The Group also provides pension arrangements for employees and
certain Directors under defined contribution schemes.
Contributions for these schemes are charged to the Statement of
Consolidated Income in the year in which they are payable.
23. Share based payments
The Group issues equity-settled options to certain employees.
These are measured at fair value (excluding the effect of non-
market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the options is expensed on a
straight-line basis over the vesting period, based on the Group’s
estimate of shares that will eventually vest and adjusted for the
effect of non-market-based vesting conditions.
Fair value is measured by use of a Black Scholes model. The
expected life used in the model has been adjusted, based on
management’s best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
132 | Financial Statements
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Equity instruments
Equity instruments issued by the Company are recorded at fair
value on initial recognition net of transaction costs.
25. Share capital and reserves
Ordinary shares are classified as equity. All ordinary shares rank
equally and have the same rights attached. Incremental costs
directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds.
Premium recognised on allocation of shares is recorded within the
share premium account and is not available for distribution.
The capital redemption reserve has arisen following the purchase
by the Group of its own shares and comprises the amount by which
distributable profits were reduced by these transactions in
accordance with S733 of the Companies Act 2006.
26. Assets held for sale
Non-current assets are classified as held for sale when their
carrying amount is to be recovered principally through a sale
transaction rather than continuing use. In order to be classified as
held for sale, the asset must be available for immediate sale in its
present condition subject only to terms that are usual and
customary, and the sale must be highly probable. Non-current
assets held for sale are measured at the lower of carrying amount
and fair value less cost to sell.
27. Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. The grant is recognised as income
on a systematic basis over the periods that the related costs, for
which it is intended to compensate, are expensed. The grant
income is included within either cost of sales or net operating
expenses depending on where the related costs are accounted for.
All grants relate to expense items.
Principal accounting policies
24. Financial instruments
Recognition of financial instruments
Financial assets and financial liabilities are recognised when the
Group becomes party to the contractual provisions of the
instrument.
amount of the financial asset net of any loss allowance. If a
financial asset is no longer credit-impaired due to an improvement
in credit risk that objectively relates to a subsequent event, the
‘effective interest rate’ reverts to being applied to the carrying
amount before any loss allowance.
Initial and subsequent measurement of financial assets
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
other short-term deposits held by the Group with maturities of less
than three months. In common with sector practice, vehicle
stocking loans are included within trade creditors rather than cash
and cash equivalents. In the consolidated statement of cash flows,
cash and cash equivalents comprise cash and cash equivalents, as
defined above, net of bank overdrafts.
Trade, Group and other receivables
Trade receivables, Group and other receivables are initially
measured at their transaction price. Trade receivables and other
receivables are held to collect the contractual cash flows which are
solely payments of principal and interest. Therefore, these
receivables are subsequently measured at amortised cost using
the effective interest rate method. Group receivables have no credit
terms.
Where the Group enters into vehicle purchase agreements with
suppliers a repurchase debtor is recognised should the supplier
have a contractual commitment to repurchase the vehicle. The
repurchase debtor is initially recorded at the committed repurchase
value. Repurchase debtors are due within 1 year.
Impairment of financial assets
A provision for impairment is established on an expected credit
loss model under IFRS9. The amount of the provision is the
difference between the asset’s carrying amount and the expected
value of the amounts recovered.
The probability of default and expected amounts recoverable are
assessed using reasonable and supportable past and forward-
looking information that is available without undue cost or effort.
The expected credit loss is a probability- weighted amount
determined from a range of outcomes (including assessments
made using forward looking information) and takes into account
the time value of money. Credit losses are measured on a collective
basis and all instalments have been grouped based on their similar
collective characteristics. Some financial assets which have been
written off because there is no reasonable expectation of recovery
(e.g. where the counterparty enters formal administration
proceedings) or are subject to enforcement activity. For trade
receivables including Group receivables, expected credit losses are
measured by applying an expected loss rate to the gross carrying
amount. The expected loss rate comprises the risk of a default
occurring and the expected cash flows on default based on the
aging of the receivable. The risk of a default occurring always takes
into consideration all possible default events over the expected life
of those receivables (“the lifetime expected credit losses”).
Amortised cost is the amount initially recognised less repayments
of principal, plus or minus the ‘effective interest’ which amortises
any difference between the amount initially recognised and the
maturity amount over the expected life of the instrument.
Expected credit losses are considered over the maximum
contractual period during which the entity is exposed to credit risk
by extrapolating expectations beyond periods covered by
reasonable and supportable forecasts.
Bank loans
Bank loans are recognised initially at fair value, net of transaction
costs incurred, and are subsequently stated at amortised cost. Any
difference between the proceeds (net of transaction costs) and the
redemption value is recognised in the consolidated income
statement over the period of the borrowings, using the effective
interest method.
Effective interest rate method
The ‘effective interest’ is calculated using the rate that exactly
discounts estimated future cash payments or receipts (considering
all contractual terms) through the expected life of the financial
asset or financial liability to its carrying amount before any loss
allowance.
For trade receivables, differences between the contractual and
expected cash flows are discounted at the original effective
interest rate used in the amortised cost measurement.
Impairment losses and subsequent reversals of impairment losses
are adjusted against the carrying amount of the receivable and
recognised in profit or loss.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities.
Initial and subsequent measurement of financial liabilities
The ‘effective interest rate’ is applied to the carrying amount of a
financial asset before any loss allowance, unless the financial
assets becomes credit-impaired, (i.e. an event has occurred which
has a detrimental impact on the estimated future cash flows), in
which case the ‘effective interest rate’ is applied to the carrying
Trade, Group and other payables
Trade, Group and other payables (which include repurchase
commitments, stocking loans and consignment creditors) are
initially recognised at fair value, net of transaction costs and
subsequently at amortised cost using the effective interest method.
134 | Financial Statements
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Statement of Total Consolidated Comprehensive Income
For the year ended 31 December 2020 and 31 December 2019
Consolidated and Company Statements of Financial Position
As at 31 December 2019 and 31 December 2020
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Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit/(loss)
Underlying operating profit
Non-underlying items
Finance costs
Profit/(loss) before taxation
Underlying profit before taxation
Non-underlying items
Tax (charge)/credit
Loss for the year (attributable to shareholders of the Company)
Exchange differences on translation of foreign operation
(may be recycled to profit and loss)**
Actuarial (losses)/gains on pension scheme obligations (not recycled to profit and loss)
Deferred tax on pension scheme obligations (not recycled to profit and loss)
Total other comprehensive (expense)/income for the year
Note
2
4
6
3
4
7
26
7
2020
£m
3,699.9
(3,288.9)
411.0
(380.1)
30.9
(Restated)*
2019
£m
4,806.5
(4,293.4)
513.1
(525.9)
(12.8)
43.0
(12.1)
(28.9)
2.0
14.1
(12.1)
(6.1)
(4.1)
0.3
(32.5)
7.3
(24.9)
36.9
(49.7)
(32.9)
(45.7)
4.0
(49.7)
3.9
(41.8)
(0.4)
7.1
(1.2)
5.5
Total comprehensive expense for the year (attributable to shareholders of the Company)
(29.0)
(36.3)
Loss per share:
Basic loss per share (p)
Diluted loss per share (p)***
*See Note 1 for details.
9
9
(1.05)
(1.05)
(10.74)
(10.74)
**In the year ended 31 December 2019 the exchange difference loss of £0.4m was incorrectly disclosed directly in equity.
***In the years ended 31 December 2020 and 31 December 2019 the basic and diluted earnings per share are equal as a result of
the Group incurring a loss for the year.
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Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right of use assets
Investment in subsidiaries
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Rental fleet vehicles
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Bank loans and overdrafts
Trade and other payables
Lease liabilities
Current tax payable
Note
10
11
12
13
15
23
16
17
18
19
14
22
20
22
Group
2020
£m
79.3
110.8
399.9
117.6
-
-
707.6
655.2
124.6
1.1
30.1
243.0
13.0
1,067.0
(Restated)*
2019
£m
(Restated)*
2018
£m
Company
2020
£m
(Restated)* (Restated)*
2018
£m
2019
£m
81.9
114.2
429.2
119.0
-
-
744.3
111.7
113.4
416.8
110.6
-
-
752.5
956.5
168.3
9.8
32.0
150.3
10.0
972.9
182.6
-
32.9
152.8
8.0
1,326.9 1,349.2
-
11.1
0.7
0.8
126.8
14.2
153.6
-
327.4
3.4
-
0.1
-
330.9
-
13.5
0.8
1.1
126.8
9.5
151.7
-
356.1
11.7
-
17.4
-
385.2
-
12.0
0.9
1.2
126.8
12.2
153.1
-
399.3
8.8
-
19.2
-
427.3
1,774.6
2,071.2
2,101.7
484.5
536.9
580.4
116.9
911.8
19.1
-
1,047.8
119.4
1,261.5
20.1
-
110.0
1,220.4
19.8
3.3
1,401.0 1,353.5
36.5
61.1
0.5
-
98.1
40.6
149.2
0.7
-
190.5
25.9
139.1
0.6
-
165.6
Net current assets/(liabilities)
19.2
(74.1)
(4.3)
232.8
194.7
261.7
Non-current liabilities
Bank loans
Trade and other payables
Lease liabilities
Provisions
Pension scheme obligations
Deferred tax liabilities
Total liabilities
Net assets
Shareholders’ equity
Ordinary share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity
*See Note 1 for details.
22
20
22
21
26
23
24
166.8
39.8
125.3
-
79.3
33.2
444.4
90.4
42.3
126.8
10.4
55.7
34.0
359.6
128.7
39.3
117.0
-
68.9
33.0
386.9
158.4
-
0.4
-
77.0
-
235.8
81.4
-
0.4
-
56.6
-
138.4
118.7
-
0.6
-
69.4
-
188.7
1,492.2
1,760.6
1,740.4
333.9
328.9
354.3
282.4
310.6
361.3
150.6
208.0
226.1
19.5
78.4
15.1
169.4
282.4
19.5
78.4
15.1
197.6
310.6
19.4
78.4
15.1
248.4
361.3
19.5
78.4
15.1
37.6
150.6
19.5
78.4
15.1
95.0
208.0
19.4
78.4
15.1
113.2
226.1
The loss after tax for the Company was £33.9m (2019: restated loss of £9.3m). The Financial Statements of Lookers plc,
registered no. 111876 were approved by the Directors on 30 June 2021.
Signed on behalf of the Board of Directors
Mark Raban
Director
136 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 137
Consolidated Statement of Changes in Equity
As at 1 January 2019, 31 December 2019 and 31 December 2020
Consolidated Statement of Cash Flows
For the year ended 31 December 2020 and 31 December 2019
i
F
n
a
n
c
a
i
l
Year ended 31 December 2019
As at 1 January 2019
Correction of errors*
As at 1 January 2019 (restated)
Loss for the year (restated)*
Total other comprehensive income for the year
Total comprehensive expense for the
year (restated)
New shares issued
Share based compensation
Dividends paid
As at 31 December 2019
Year ended 31 December 2020
As at 1 January 2020
Loss for the year
Total other comprehensive expense for the year
Total comprehensive expense for the year
Share based compensation
As at 31 December 2020
Note
24
25
8
25
Share
capital
£m
19.4
-
19.4
-
-
-
0.1
-
-
19.5
19.5
-
-
-
-
19.5
Share
premium
£m
78.4
-
78.4
-
-
Capital
redemption
reserve
£m
15.1
-
15.1
-
-
-
-
-
-
78.4
78.4
-
-
-
-
78.4
-
-
-
-
15.1
15.1
-
-
-
-
15.1
Retained
earnings
£m
249.0
(0.6)
248.4
(41.8)
5.5
(36.3)
-
1.4
(15.9)
197.6
197.6
(4.1)
(24.9)
(29.0)
0.8
169.4
Total
equity
£m
361.9
(0.6)
361.3
(41.8)
5.5
(36.3)
0.1
1.4
(15.9)
310.6
310.6
(4.1)
(24.9)
(29.0)
0.8
282.4
*Opening reserves as at 1 January 2019 have been restated by £0.6m and the loss for the year ended 31 December 2019 has
been restated by £0.2m, a result of corrections to lease accounting entries in one of the Group’s subsidiaries, and adjustments in
relation to the Group’s adoption of IFRS 16. See Note 1.
Retained earnings include £16.5m (2019: £16.5m) of non-distributable reserves relating to properties which had been revalued
under UK GAAP, but treated as deemed cost under IFRS.
Company Statement of Changes in Equity
As at 1 January 2019, 31 December 2019 and 31 December 2020
Year ended 31 December 2019
As at 1 January 2019
Correction of errors*
As at 1 January 2019 (restated)
Loss for the year (restated)*
Total other comprehensive income for the year
Total comprehensive expense
for the year (restated)*
New shares issued
Share based compensation
Dividends paid
As at 31 December 2019 (restated)*
Year ended 31 December 2020
As at 1 January 2020
Loss for the year
Total other comprehensive expense
for the year
Total comprehensive expense for the year
Share based compensation
As at 31 December 2020
Note
24
25
8
25
Share
capital
£m
19.4
-
19.4
-
-
-
0.1
-
-
19.5
19.5
-
-
-
-
19.5
Share
premium
£m
78.4
-
78.4
-
-
Capital
redemption
reserve
£m
15.1
-
15.1
-
-
-
-
-
-
78.4
78.4
-
-
-
-
78.4
-
-
-
-
15.1
15.1
-
-
-
-
15.1
Retained
earnings
£m
123.9
(10.7)
113.2
(9.3)
5.6
(3.7)
-
1.4
(15.9)
95.0
95.0
(33.9)
(24.3)
(58.2)
0.8
37.6
Total
equity
£m
236.8
(10.7)
226.1
(9.3)
5.6
(3.7)
0.1
1.4
(15.9)
208.0
208.0
(33.9)
(24.3)
(58.2)
0.8
150.6
Cash flows from operating activities
(Loss) for the year
Tax charge/(credit)
Depreciation of property, plant and equipment, rental fleet and right of use assets
Profit on disposal of property, plant and equipment
Gain on lease surrenders
Gain on disposal of right of use asset associated with rental fleet vehicles
Amortisation of intangible assets
Share based compensation
Impairment of property, plant and equipment
Impairment of right of use assets
Impairment of intangible assets (underlying)
Impairment of goodwill and intangible assets (non-underlying)
Finance costs excluding pension related finance costs and debt issue costs
Debt issue costs
Difference between pension charge and cash contributions
Purchase of rental fleet vehicles
Purchase of right of use assets associated with rental fleet vehicles
Purchase of vehicles for long term leasing
Changes in provisions
Changes in inventories
Changes in receivables
Changes in payables
Cash generated from operations
Finance costs paid
Finance costs paid - finance leases
Tax refunded/(paid)
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles
Finance lease rentals collected
Proceeds from disposal of property, plant and equipment
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Receipt of funding advanced for vehicle leasing arrangements
Repayment of funding advanced for vehicle leasing arrangements
Repayment of loans
Draw down on RCF
Repayment on RCF
Repayment of lease liabilities
Receipt of lease incentives
Dividends paid
Net cash inflow/(outflow) from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Analysis of cash and cash equivalents
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents at 31 December
Note
3
3, 4
13
3
3
25
12, 14
4
3
4
6
6
21
22
22
22
22
22
8
19
2020
£m
(4.1)
6.1
51.2
(3.1)
(1.2)
(1.9)
4.8
0.8
5.0
0.4
-
3.6
27.3
0.5
(8.9)
(21.8)
(1.9)
(27.8)
(10.4)
355.1
43.4
(359.8)
57.3
(21.2)
(6.1)
7.8
37.8
(13.8)
(3.0)
4.0
18.0
5.2
-
74.8
(84.1)
(0.6)
150.0
(72.0)
(15.3)
-
-
52.8
95.8
31.4
127.2
243.0
(115.8)
127.2
S
t
a
t
e
m
e
n
t
s
(Restated)*
2019
£m
(41.8)
(3.9)
52.3
(4.9)
(0.4)
(3.3)
6.1
1.4
4.3
1.8
0.4
30.4
30.6
0.4
(6.1)
(17.4)
(3.3)
(35.5)
10.4
57.4
14.7
25.3
118.9
(24.3)
(6.3)
(9.3)
79.0
(45.8)
(7.9)
6.2
17.6
(29.9)
0.1
76.5
(69.0)
(1.4)
186.9
(224.2)
(16.2)
1.2
(15.9)
(62.0)
(12.9)
44.3
31.4
150.3
(118.9)
31.4
*Opening reserves at 1 January 2019 have been restated by £10.7m and loss for the year ended 31 December 2019 has been
restated by £2.2m in relation to unlawful dividends. See Note 1d.
*See Note 1 for details.
138 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 139
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
1a Statement of Total Consolidated Comprehensive Income (restated)
For the year ended 31 December 2019
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating loss
Underlying operating profit
Non-underlying items
Finance costs
Loss before taxation
Underlying profit before taxation
Non-underlying items
Tax credit
Loss for the year (attributable to shareholders of the Company)
Exchange differences on translation of foreign operation
(may be recycled to profit and loss)
Actuarial losses on pension scheme obligations
Deferred tax on pension scheme obligations
Total other comprehensive income for the year
As previously
reported
31 December
2019
£m
4,787.2
(4,274.1)
513.1
(526.3)
(13.2)
(Restated)
Correction of 31 December
2019
£m
4,806.5
(4,293.4)
513.1
(525.9)
(12.8)
errors
£m
19.3
(19.3)
-
0.4
0.4
36.5
(49.7)
(32.3)
(45.5)
4.2
(49.7)
3.9
(41.6)
(0.4)
7.1
(1.2)
5.5
0.4
-
(0.6)
(0.2)
(0.2)
-
-
(0.2)
-
-
-
-
36.9
(49.7)
(32.9)
(45.7)
4.0
(49.7)
3.9
(41.8)
(0.4)
7.1
(1.2)
5.5
Total comprehensive expense for the year (attributable to shareholders of the Company)
(36.1)
(0.2)
(36.3)
(Loss) per share:
Basic (loss) per share (p)
Diluted (loss) per share (p)
(10.69)
(10.69)
(0.05)
(0.05)
(10.74)
(10.74)
In preparing the IFRS16 adjustments for the year ended 31 December 2020 the Directors identified errors in the underlying calculations. These
errors originated at the point of initial adoption for the leases in question, so adjustments to the statement of financial position at 1 January
2019 were required to increase the amounts recorded within right of use assets by £7.3m, to increase total lease liabilities by £8.4m and to
decrease retained earnings by £1.1m. Adjustments to the statement of financial position at 31 December 2019 were required to increase the
amounts recorded within right of use assets by £11.3m, to increase total lease liabilities by £12.8m and to decrease retained earnings by £1.5m.
The impact of these adjustments has been to increase the loss for the year ended 31 December 2019 by £0.4m, being the net impact of a
£0.6m increase in finance costs and £0.2m reduction in net operating expenses. The adjustments had no overall impact on cashflows, however
cash inflows from operating activities increased by £0.6m and cash outflows from financing activities decreased by £0.6m.
In addition, as part of our year end procedures, we identified that certain balances and transactions in the Group’s Get Motoring UK Limited
subsidiary had been incorrectly treated in respect of IFRS 16. Rental fleet vehicles acquired via sale and repurchase agreements had
incorrectly been recognised as owned assets within current assets. As the Group has the right to control the vehicles only for a period of time
the transactions should have been treated as leases. In addition, adjustments have been recorded to change the treatment of the subsequent
rental of these vehicles, in which the Group acts as lessor, from operating leases to finance leases as these sub-leases are for substantially
the entire period of the lead leases. The combined impact of these adjustments to the statement of financial position at 1 January 2019 is
an increase to trade and other receivables of £21.8m (being the recognition of a repurchase debtor at the contractual repurchase amount
(£20.8m) and finance lease receivable (£1.0m)), a reduction in rental fleet vehicles of £21.3m, and an increase in retained earnings of £0.5m.
Adjustments to the statement of financial position at 31 December 2019 have increased trade and other receivables by £28.1m (being the
recognition of a repurchase debtor at the contractual repurchase amount (£26.7m) and finance lease receivable (£1.4m)), reduced rental
fleet vehicles by £27.4m, and increased retained earnings by £0.7m. The impact of these adjustments has been to reduce the loss for the
year ended 31 December 2019 by £0.2m. Despite no overall impact to cashflows, the adjustments described above decrease both cash
inflows from operating activities and cash outflows from investing activities by £6.2m in the Consolidated Statement of Cash Flows for the
year ended 31 December 2019. In addition the treatment of proceeds from sale of rental fleet vehicles has been corrected, alongside the
treatment of proceeds from sale of vehicles for long term leasing, to remove both the proceeds and associated profits from the face of the
cashflow statement, with adjustments recorded against changes in inventories. These adjustments have no overall impact on the Consolidated
Statement of Cash Flows, or any sub-categories included within.
Further, the profit on sale of owned rental fleet vehicles in the Group’s Get Motoring UK Limited subsidiary had been incorrectly recorded net
within the statement of consolidated comprehensive income for the year ended 31 December 2019 as disposals of fixed assets but should
have been presented as sales of inventories. Adjustments to recognise sale proceeds and costs separately have increased revenues and cost
of sales by £19.3m, with no change to profit for the year.
Separately, purchase of vehicles for long term leasing and purchase of rental fleet vehicles were incorrectly presented as investing cash
outflows. In accordance with IAS 7, as these vehicles are subsequently held for sale the cashflows should be presented within operating
activities. As a result these have been reclassified in the Consolidated Statement of Cash Flows for the year ended 31 December 2019,
decreasing cash flows from operating activities and cash outflows from investing activities by £97.2m.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
At
1 January
2019
(restated)
£m
111.7
113.4
416.8
110.6
752.5
972.9
182.6
-
32.9
152.8
8.0
1,349.2
1b Consolidated Statement of Financial Position (restated)
As at 1 January 2019 and 31 December 2019
As previously
reported
Group
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right of use assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Rental fleet vehicles
Cash and cash equivalents
Assets held for sale
31 December Correction
of errors
£m
2019
£m
At
31 December
2019
(restated)
£m
As previously
reported
1 January
2019
£m
Correction
of errors
£m
81.9
114.2
429.2
107.7
733.0
956.5
140.2
9.8
59.4
150.3
10.0
1,326.2
-
-
-
11.3
11.3
-
28.1
-
(27.4)
-
-
0.7
81.9
114.2
429.2
119.0
744.3
956.5
168.3
9.8
32.0
150.3
10.0
1,326.9
111.7
113.4
416.8
103.3
745.2
972.9
160.8
-
54.2
152.8
8.0
1,348.7
-
-
-
7.3
7.3
-
21.8
-
(21.3)
-
-
0.5
Total assets
2,059.2
12.0
2,071.2
2,093.9
7.8
2,101.7
Current liabilities
Bank loans and overdrafts
Trade and other payables
Lease liabilities
Current tax payable
119.4
1,261.5
18.5
-
1,399.4
-
-
1.6
-
1.6
119.4
1,261.5
20.1
-
1,401.0
110.0
1,220.4
18.6
3.3
1,352.3
-
-
1.2
-
1.2
110.0
1,220.4
19.8
3.3
1,353.5
Net current liabilities
(73.2)
(0.9)
(74.1)
(3.6)
(0.7)
(4.3)
Non-current liabilities
Bank loans
Trade and other payables
Lease liabilities
Provisions
Pension scheme obligations
Deferred tax liabilities
Total liabilities
Net assets
Shareholders’ equity
Ordinary share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity
90.4
42.3
115.6
10.4
55.7
34.0
348.4
-
-
11.2
-
-
-
11.2
90.4
42.3
126.8
10.4
55.7
34.0
359.6
128.7
39.3
109.8
-
68.9
33.0
379.7
-
-
7.2
-
-
-
7.2
128.7
39.3
117.0
-
68.9
33.0
386.9
1,747.8
12.8
1,760.6
1,732.0
8.4
1,740.4
311.4
(0.8)
310.6
361.9
(0.6)
361.3
19.5
78.4
15.1
198.4
311.4
-
-
-
(0.8)
(0.8)
19.5
78.4
15.1
197.6
310.6
19.4
78.4
15.1
249.0
361.9
-
-
-
(0.6)
(0.6)
19.4
78.4
15.1
248.4
361.3
140 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 141
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
1c Consolidated Statement of Cash Flows (restated)
1d. Company Statement of Financial Position (restated)
As
previously
reported
31 December
2019
£m
Correction of
errors
£m
At
31 December
2019
(restated)
£m
Cash flows from operating activities
Loss for the year
Tax charge
Depreciation of property, plant and equipment, rental fleet and right of use assets
Profit on disposal of property, plant and equipment
Gain on lease surrenders
Gain on disposal of right of use asset associated with rental fleet assets
Amortisation of intangible assets
Share based compensation
Impairment of property, plant and equipment
Movement in right of use assets
Impairment of intangible assets (underlying)
Impairment of goodwill and intangible assets (non-underlying)
Finance costs excluding pension related finance costs and debt issue costs
Debt issue costs
Difference between pension charge and cash contributions
Proceeds from sale of vehicles for long term leasing
Proceeds from sale of rental fleet vehicles
Purchase of fleet vehicles
Purchase of right of use assets associated with rental fleet vehicles
Purchase of vehicles for long term leasing
Changes in provisions
Changes in inventories
Changes in receivables
Changes in payables
Cash generated from operations
Finance costs paid
Finance costs paid - finance leases
Tax refunded/(paid)
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment and own use vehicles
Purchase of vehicles for long term leasing
Purchase of rental fleet vehicles
Purchase of intangibles
Finance lease rentals collected
Proceeds from disposal of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Receipt of funding advanced for vehicle leasing arrangements
Repayment of funding advanced for vehicle leasing arrangements
Repayment of loans
Draw down on RCF
Repayment on RCF
Repayment of lease liabilities
Receipt of lease incentives
Dividends paid
Net cash outflow from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Analysis of cash and cash equivalents
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents at 31 December
142 | Financial Statements
(41.6)
(3.9)
54.1
(5.2)
(0.4)
-
6.1
1.4
4.3
1.8
0.4
30.4
30.0
0.4
(6.1)
11.3
58.7
-
-
-
10.4
23.1
20.6
25.3
221.1
(24.3)
(5.7)
(9.3)
181.8
(45.8)
(35.5)
(61.7)
(7.9)
-
17.6
(133.3)
0.1
76.5
(69.0)
(1.4)
186.9
(224.2)
(15.6)
1.2
(15.9)
(61.4)
(12.9)
44.3
31.4
150.3
(118.9)
31.4
(0.2)
-
(1.8)
0.3
-
(3.3)
-
-
-
-
-
-
0.6
-
-
(11.3)
(58.7)
(17.4)
(3.3)
(35.5)
-
34.3
(5.9)
-
(102.2)
-
(0.6)
-
(102.8)
-
35.5
61.7
-
6.2
-
103.4
-
-
-
-
-
-
(0.6)
-
-
(0.6)
-
-
-
-
-
(41.8)
(3.9)
52.3
(4.9)
(0.4)
(3.3)
6.1
1.4
4.3
1.8
0.4
30.4
30.6
0.4
(6.1)
-
-
(17.4)
(3.3)
(35.5)
10.4
57.4
14.7
25.3
118.9
(24.3)
(6.3)
(9.3)
79.0
(45.8)
-
-
(7.9)
6.2
17.6
(29.9)
0.1
76.5
(69.0)
(1.4)
186.9
(224.2)
(16.2)
1.2
(15.9)
(62.0)
(12.9)
44.3
31.4
150.3
(118.9)
31.4
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
As previously
reported
1 January 2019
£m
12.0
0.9
1.2
126.8
12.2
153.1
399.3
8.8
19.2
427.3
580.4
25.9
128.4
0.6
154.9
Correction of
errors
£m
At
1 January
2019
(restated)
£m
-
-
-
-
-
-
-
-
-
-
-
-
10.7
-
10.7
12.0
0.9
1.2
126.8
12.2
153.1
399.3
8.8
19.2
427.3
580.4
25.9
139.1
0.6
165.6
Company
Non-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Investment in subsidiaries
Deferred tax assets
Current assets
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total assets
Current liabilities
Bank loans and overdrafts
Trade and other payables
Lease liabilities
As
previously
reported 31 Correction of
errors
£m
December 2019
£m
At
31 December
2019
(restated)
£m
13.5
0.8
1.1
126.8
9.5
151.7
356.1
11.7
17.4
385.2
536.9
40.6
136.3
0.7
177.6
-
-
-
-
-
-
-
-
-
-
-
-
12.9
-
12.9
13.5
0.8
1.1
126.8
9.5
151.7
356.1
11.7
17.4
385.2
536.9
40.6
149.2
0.7
190.5
Net current assets
207.6
(12.9)
194.7
272.4
(10.7)
261.7
Non-current liabilities
Bank loans
Lease liabilities
Pension scheme obligations
Total liabilities
Net assets
Shareholders’ equity
Ordinary share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity
81.4
0.4
56.6
138.4
-
-
-
-
81.4
0.4
56.6
138.4
118.7
0.6
69.4
188.7
-
-
-
-
118.7
0.6
69.4
188.7
316.0
12.9
328.9
343.6
10.7
354.3
220.9
(12.9)
208.0
236.8
(10.7)
226.1
19.5
78.4
15.1
107.9
220.9
-
-
-
(12.9)
(12.9)
19.5
78.4
15.1
95.0
208.0
19.4
78.4
15.1
123.9
236.8
-
-
-
(10.7)
(10.7)
19.4
78.4
15.1
113.2
226.1
In preparing the subsidiary Financial Statements for Lookers Motor Group Limited and Lookers Motor Holdings Limited for the year
ended 31 December 2019 the Directors identified a number of further adjustments affecting these subsidiaries that were not already
adjusted in the 2019 Group Financial Statements. These adjustments were in relation to impairments to investment carrying values and
goodwill held within the subsidiaries and reduced the distributable reserves within these entities. To the extent that the dividends paid
by the subsidiaries in the year ended 31 December 2019 and previous periods exceeded their restated distributable reserves, these
amounts are repayable by Lookers plc and have been restated as amounts repayable to Group undertakings.
The impact on the retained earnings of Lookers plc has been to reduce the total by a cumulative figure of £10.7m as at 31 December
2018 and by a cumulative figure of £12.9m at 31 December 2019. Amounts payable to Group undertakings have increased by an
equal amount as at 31 December 2018 and 31 December 2019 respectively.
These adjustments do not affect the previously disclosed financial performance of the Group.
Lookers plc Annual Report & Accounts 2020 | 143
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Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
2. Segmental reporting
4. Non-underlying items
The Group presents segmental information to better reflect the Group’s revenue streams and the single-segment trading nature
of the business’ operations. No further disclosures have been made given the single segment trading nature of the business’
operations which are predominantly transacted in the United Kingdom. All channels have been shown as gross totals prior to the
elimination of intercompany trading activity so as to provide more granular detail around the Group’s internal trading activities.
New cars
Used cars
Aftersales
Leasing and other
Less: intercompany
Revenue
2020
£m
1,709.3
1,779.1
383.8
148.4
(320.7)
3,699.9
2019
(restated)
£m
2,226.4
2,326.3
495.3
153.3
(394.8)
4,806.5
Mix*
42.5%
44.3%
9.5%
3.7%
-
100%
Mix*
42.8%
44.7%
9.5%
3.0%
-
100%
*Mix calculation excludes the effect of intercompany revenues.
3. Profit/(loss) before taxation
The following have been included before arriving at profit/(loss) before taxation:
Staff costs
Depreciation of property, plant and equipment and right of use assets
Depreciation of rental fleet assets
Gain on disposal of right of use asset associated with rental fleet vehicles
Amortisation of intangible assets
Impairment of intangible assets (underlying element)
(Gain) on disposal of rental fleet vehicles
Loss/(gain) on disposal of leased vehicles
Cost of inventories recognised as an expense
Non-underlying items
Restructure of regulated activities (underlying element)
Low value leased assets
Utilities and rates
Other expenses
Total cost of sales and operating expenses
Services provided by the Group’s auditor
The analysis of auditor’s remuneration is as follows:
Group
Audit of the Company
Audit of the Group and Company’s subsidiaries
Total audit fees
Note
2020
5
12,13
18
11
11
4
£m
235.1
47.2
4.0
(1.9)
4.8
-
(0.5)
0.2
2,779.2
12.1
-
0.4
20.7
567.7
3,669.0
2019
(restated)
£m
301.6
49.3
3.0
(3.3)
6.1
0.4
-
(0.5)
3,770.3
49.7
2.1
0.4
33.8
606.4
4,819.3
2020
£m
20.0
1,130.0
1,150.0
2019
£m
20.0
2,030.0
2,050.0
Fees paid in 2020 are in relation to BDO LLP and in 2019 are in relation to Deloitte LLP. Neither BDO LLP or Deloitte LLP provided
non-audit services to the Group in either the year ended 31 December 2020 or 31 December 2019.
BDO LLP undertook stocktake procedures in relation to the year ended 31 December 2020 as an agreed upon procedures
engagement prior to being appointed as auditor.
Details of the Company’s policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than
another supplier and how the auditor’s independence and objectivity was safeguarded are set out in the Report from the Chairman
of the Audit and Risk Committee.
Audit fees paid in 2019 have been restated to show the final agreed fees payable to Deloitte LLP for the audit of the Group and
subsidiaries in the year ended 31 December 2019.
The following details items of income and expenditure that the Group has classified as non-underlying in its statement of total
comprehensive income.
Non-underlying items at operating profit
1 - Gain on property disposals
2 - Impairment of property, plant and equipment
2 - Impairment of right of use assets
2 - Gain on lease surrenders
2 - Restructuring costs
3 - Impairment of goodwill and intangible assets
4 - Value added tax (VAT)
5 - Restructure of regulated activities
5 - FCA provision
6 - Accrual for potential tax penalties
7 - Professional fees
8 - Finance overpayments
Non-underlying items at operating profit
Note
12,14
12
13
10,11
21
2020
£m
(3.1)
3.4
0.4
(1.2)
9.9
3.6
-
-
(10.4)
-
9.2
0.3
12.1
2019
(restated)
£m
(4.9)
3.7
1.8
(0.4)
9.2
30.4
(6.2)
4.7
10.4
1.0
-
-
49.7
1 – Property disposals relate to the net gains on the sale of a number of freehold properties during the current and prior year.
2 – During the year the Board took decisive restructuring actions to position the Group for a strong and sustainable future. This
included the closure, consolidation or refranchising of 12 sites (2019: 15 sites). In addition to the Group-wide restructuring,
costs relating to site closure and impairment losses have been recognised during the current and prior year net of £1.6m
(2019: net of £0.6m income) insurance income. The restructuring and site changes were completed during the year.
3 – During the current and prior year the Directors have concluded that impairment charges against the carrying value of certain
elements of the Group’s intangible asset base are required (Ford CGU goodwill impairment £2.6m - see Note 10; Lomond brand
impairment £1.0m - see Note 11).
4 – During the prior year the Group benefitted from a change in how HMRC view VAT treatment for dealer deposit contributions
which was previously uncertain and has given rise to a one-off credit of £5.6m in respect of prior periods. In addition a one-
off VAT charge totalling £2.0m was made in relation to manufacturer deposit contributions and following a challenge over
accounting for VAT on Motability sales, the Group recognised a credit of £2.6m in year ended 31 December 2019.
5 – Costs totalling £4.7m in respect of the Group-wide FCA focused restructure plan were recorded as non-underlying in the
prior year. These costs represented the infrequently occurring set-up expenditure for the establishment of new processes and
controls and governance structure in order to improve internal control, risk assurance systems and internal audit as well as
delivering best practice and an enhanced customer experience. A provision of £10.4m was recorded in the year ended
31 December 2019 in respect of FCA matters. This provision was released in the year ended 31 December 2020. See Note 21
for further details.
6 – An accrual of £1.0m was recognised in the prior year in respect of potential tax penalties arising from the understatement of
taxable profits in prior years in some of the Group’s subsidiary undertakings.
7 – Professional fees incurred in relation to dealing with the Group’s share suspension and investigation into prior period accounting
irregularities have been treated as non underlying items.
8 – £0.3m of additional costs have been incurred during the current year in respect of rectifying historic issues in relation to
finance overpayments.
144 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 145
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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5. Information regarding employees
Group
Employee costs:
Wages and salaries
Social security costs
Other pension costs - defined contribution scheme
Share based compensation
Less: Furlough scheme (CJRS) income
2020
£m
242.6
21.0
5.6
0.8
270.0
(34.9)
235.1
2019
£m
270.7
24.7
4.8
1.4
301.6
-
301.6
During the year ended 31 December 2020 the Group received Government funds of £34.9m in relation to assistance with the
COVID-19 pandemic.
Average number employed during the year:
Aftersales
Sales
Administration
Company
Employee costs:
Wages and salaries
Social security costs
Other pension costs - defined contribution scheme
Share based compensation
Less: Furlough scheme (CJRS) income
2020
No.
1,891
1,832
3,766
7,489
2020
£m
18.7
1.9
0.3
0.8
21.7
(1.2)
20.5
2019
No.
2,091
2,194
4,376
8,661
2019
£m
14.8
1.8
1.5
1.4
19.5
-
19.5
During the year ended 31 December 2020 the Company received Government funds of £1.2m in relation to assistance with the
COVID-19 pandemic.
The average number employed by the Company during the year was 319 (2019: 310).
Key management personnel compensation:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share options
2020
£m
4.4
0.1
-
-
4.5
2019
£m
6.0
0.2
0.8
0.3
7.3
The key management compensation given above includes Executive Directors and key operational staff. During the year the
aggregate gains made on the exercise of share options by Directors was £nil (2019: £nil). Further details of Directors’ remuneration
is included in the Directors’ Remuneration Report.
6. Finance costs
Finance costs:
On revolving credit facility
On other bank borrowings
On consignment, repurchase vehicle liabilities and stocking loans
On vehicle rental finance liabilities
On lease liabilities
Debt issue costs
Net pension costs:
On defined benefit pension obligation
On pension scheme assets
Finance costs
S
t
a
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e
m
e
n
t
s
Note
26
26
2020
£m
(3.9)
(1.6)
(14.0)
(1.7)
(6.1)
(0.5)
(27.8)
(6.1)
5.0
(1.1)
2019
(restated)
£m
(3.3)
(2.7)
(16.1)
(2.2)
(6.3)
(0.4)
(31.0)
(8.1)
6.2
(1.9)
(28.9)
(32.9)
Amounts disclosed in the year ended 31 December 2019 have been reanalysed to show a more detailed split of finance costs and
have been restated for prior year adjustments. See Note 1.
7. Taxation
Current tax credit:
Current year
Adjustment in respect of prior years
Deferred tax charge/(credit):
Deferred tax - origination and reversal of temporary differences
Deferred tax rate adjustment
Adjustment in respect of prior years
Total tax charge/(credit)
Tax on items (credited)/charged to other comprehensive income:
Tax on pension scheme obligations
2020
£m
-
(0.4)
(0.4)
3.5
5.0
(2.0)
6.5
6.1
(7.3)
(7.3)
2019
£m
(1.2)
(2.5)
(3.7)
0.2
-
(0.4)
(0.2)
(3.9)
1.2
1.2
146 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 147
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Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
7. Taxation (continued)
9. Loss per share
Reconciliation of total tax
Profit/(loss) before tax
Standard rate of corporation tax at 19% (2019: 19%)
Disallowable items
Capital gains
Share based compensation
Adjustment in respect of prior years
Deferred tax rate adjustment
Difference on overseas tax rate
Total tax
2020
£m
2019
(restated)
£m
2.0
0.4
1.4
1.3
0.5
(2.4)
5.0
(0.1)
6.1
(45.7)
(8.7)
6.5
-
0.7
(2.9)
-
0.5
(3.9)
In the 11 March 2020 budget it was announced that the UK tax rate will remain at the current rate of 19% and not reduce to 17%
from 1 April 2020. Deferred tax assets and liabilities have been recalculated based on a rate of 19% as at 31 December 2020
which has given rise to an overall increase in the Group’s deferred tax base and an increased charge in the current period.
A UK corporation tax rate of 25% was announced in the Chancellor’s budget of 3 March 2021 along with a temporary extension to
the loss carry-back rules allowing up to £2.0m of tax losses to be carried back to the proceeding three periods. The 25% rate will
apply from 1 April 2021 and the carry-back of losses is expected to apply to years ended 31 December 2020 and 31 December
2021. If these two measures had been substantively enacted at the balance sheet date the Group’s deferred tax liability would have
increased by £10.4m and the current tax asset increased by £0.3m.
8. Dividends
Group
Interim dividend for the year ended 31 December 2020 nil p (2019: 1.48p)
Final dividend for the year ended 31 December 2019 nil p (2018: 2.60p)
2020
£m
-
-
-
2019
£m
5.8
10.1
15.9
The Directors do not propose a final dividend in respect of the financial year ended 31 December 2020 (2019: nil).
As noted in the Financial Review on page 25, the Board has become aware of an issue regarding technical compliance with the
2006 Act in relation to the payment of interim and final dividends in 2013, 2014 and 2015. The effect of these irregularities is
that the dividends paid in 2013, 2014 and 2015 were paid to shareholders at a time when the Company did not hold adequate
distributable reserves. However, there were sufficient reserves held in subsidiaries of the Company which have been distributed to
the Company in order to provide the Company with adequate reserves.
To satisfy the steps required to rectify these irregularities, the Company will put forward a resolution to retrospectively rectify these
dividends at the Company’s forthcoming General Meeting.
Loss attributable to ordinary shareholders (£m)
Weighted average number of shares in issue
Basic loss per share (p)
2020
2019
(restated)
(41.8)
390,138,374 389,182,654
(10.74)
(1.05)
(4.1)
Loss attributable to ordinary shareholders (£m)
Dilutive effect of share based payment options and weighted average
number of shares in issue
Diluted loss per share (p)
(4.1)
(41.8)
390,138,374 389,182,654
(10.74)
(1.05)
Profit/(loss) before tax (£m)
Add: Non-underlying items (£m)
Underlying profit before tax (£m)
Tax rate
Underlying tax (£m)
Underlying earnings attributable to ordinary shareholders (£m)
Weighted average number of shares in issue
Underlying basic earnings per share (p)
2.0
12.1
14.1
19.0%
(2.7)
11.4
(45.7)
49.7
4.0
19.0%
(0.8)
3.2
390,138,374 389,182,654
0.83
2.93
In the years ended 31 December 2020 and 31 December 2019 the basic and diluted earnings per share are equal as a result of
the Group incurring a loss for the year. This has therefore created an anti-dilutive impact. The diluted weighted average number of
shares in issue in 2020 was 398,084,323 (2019: 393,961,890).
10. Goodwill
Group
Cost
At 1 January and 31 December
Aggregate impairment
At 1 January
Charge for the year
At 31 December
Carrying amount at 31 December
2020
£m
122.4
2019
£m
122.4
40.5
2.6
43.1
79.3
10.7
29.8
40.5
81.9
Following the Group’s annual impairment review and a deterioration in expected market conditions and site closures underpinning
the value in use calculations, an impairment charge of £2.6m has been recognised during the year (2019: £29.8m). The
2020 charge of £2.6m was recognised in the first half of the year. No additional goodwill impairment was required following
management’s year-end impairment reviews.
In 2020 the Group has merged the operational activities of the former Renault Nissan Dacia CGU with that of the former Vauxhall
CGU to form one new revised CGU. No impairments were identified during the annual impairment review on either the new or old
CGU allocation basis.
Details of the £1.0m impairment of intangible assets is given in Note 11.
148 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 149
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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11. Intangible assets
Group
Cost
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2020
Additions
Reclassifications to property, plant and equipment
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2019
Charge for the year
Impairment charge
At 31 December 2019
At 1 January 2020
Charge for the year
Impairment charge
At 31 December 2020
Carrying amount
As at 1 January 2019
As at 31 December 2019 and 1 January 2020
As at 31 December 2020
S
t
a
t
e
m
e
n
t
s
Licenses and
brands
£m
IT
development
£m
102.6
-
102.6
102.6
-
-
102.6
1.5
-
0.6
2.1
2.1
-
1.0
3.1
101.1
100.5
99.5
31.7
7.9
39.6
39.6
3.0
(0.6)
42.0
19.4
6.1
0.4
25.9
25.9
4.8
-
30.7
12.3
13.7
11.3
Total
£m
134.3
7.9
142.2
142.2
3.0
(0.6)
144.6
20.9
6.1
1.0
28.0
28.0
4.8
1.0
33.8
113.4
114.2
110.8
Intangible assets are considered as part of the Group’s annual impairment review (see Note 10).
An impairment charge of £1.0m has been made relating to the Group’s Lomond brand. Following a review of the Group’s marketing
positioning the Board are now of the view that the value previously attributed to the Lomond brand has now been diminished and as
such have recorded an impairment charge in the year as a non-underlying item.
At 31 December 2020 there is an amount of £nil {2019: £nil) committed for future capital expenditure.
10. Goodwill (continued)
The following table summarises goodwill and intangibles with an indefinite useful economic life allocated by CGU:
CGU
2020
Goodwill
JLR
Audi
Charles Hurst
Ford
Mercedes-Benz
Volkswagen
BMW
Vauxhall Renault Nissan Dacia
Fleet & Leasing
£m
9.0
22.1
9.4
4.8
15.2
6.9
-
2.8
9.1
79.3
2020
Licences
and brands
£m
-
27.9
-
2.9
28.2
15.9
21.7
2.9
-
99.5
2020
Total
2019
Goodwill
£m
9.0
50.0
9.4
7.7
43.4
22.8
21.7
5.7
9.1
178.8
£m
9.0
22.1
9.4
7.4
15.2
6.9
-
2.8
9.1
81.9
2019
Licences
and brands
£m
-
28.9
-
2.9
28.2
15.9
21.7
2.9
-
2019
Total
£m
9.0
51.0
9.4
10.3
43.4
22.8
21.7
5.7
9.1
100.5
182.4
The Group’s three year strategic review considers the Group’s profit and loss, cashflows, debt and other key financial ratios over
the period. There are a number of key assumptions within these forecasts and these have been based on management’s past
experience and knowledge of the market.
The value-in-use of each CGU is calculated using cash flow projections for a five-year period; from 1 January 2021 to 31 December
2025. These projections are based on the Board approved strategic plan to 31 December 2023. The key assumptions in the
strategic plan on which the cash flow projections are based relate to expectations of sales volumes and margins and expectations
around changes in the operating cost base. The assumptions made are based on the Board’s understanding of the extent and
duration of the COVID-19 related trading restrictions currently imposed in addition to the current macro-economic context and
outlook, past experience adjusted for expected charges, and external sources of information.
The key assumptions that have been used in determining the value in use of each cash generating unit in the impairment model are
set out in the table below:
Assumption
2020
2019
2018
Three to five year revenue growth
0.0% to 1.4%
0.0% to 1.0%
0.0% to 1.4%
Three to five year operating expenses growth
0.0% to 2.0%
0.0% to 2.0%
0.0% to 1.1%
Post year five growth rate
Discount rate
0%
9.87%
0%
8.51%
0%
8.70%
The pre-tax adjusted discount rate used has been calculated using the Group’s estimated cost of capital and benchmarked against
externally available data.
As noted above, an impairment of £2.6m has been recognised in the current year to reduce the carrying amount of goodwill in the
Ford CGU. This impairment was recorded during the preparation of the Group’s interim Financial Statements and appreciated the
uncertainty COVID-19 was causing the business and on the market conditions at that time. In accordance with IFRIC 10 Interim
Financial Reporting and Impairment, impairments recorded in interim Financial Statements are not permitted to be reversed should
changes in facts and circumstances result in the recoverable amount of the CGU being higher than its carrying amount at the
subsequent impairment test date. Having performed a number of additional sensitivity tests including modelling the impact of the
Group’s sensitised going concern model and increasing the WACC rate by 1.0% no additional disclosures are considered necessary
as neither of these models resulted in any impairment. In addition a reverse stress test on the base case model was performed in
order to eradicate the headroom on the CGU that started with the least headroom in the base case model. In order to achieve this a
change in circumstances beyond what the Board considers to be a reasonable change in circumstances and assumptions would be
required. As a result, no additional sensitivity disclosures have been disclosed.
150 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 151
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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11. Intangible assets (continued)
Company
Cost
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2020
Additions
Reclassifications to property, plant and equipment
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2019
Charge for the year
Impairment charge
At 31 December 2019
At 1 January 2020
Charge for the year
At 31 December 2020
Carrying amount
As at 1 January 2019
As at 31 December 2019 and 1 January 2020
As at 31 December 2020
At 31 December 2020 there is an amount of £nil {2019: £nil) committed for future capital expenditure.
IT
development
£m
30.7
7.9
38.6
38.6
3.0
(0.6)
41.0
18.7
6.0
0.4
25.1
25.1
4.8
29.9
12.0
13.5
11.1
S
t
a
t
e
m
e
n
t
s
12. Property, plant and equipment
Group
Cost
At 1 January 2019
Movements in foreign exchange
Additions
Disposals
Transfers
Transfers to inventories
Transfers to assets held for sale
At 31 December 2019
At 1 January 2020
Movements in foreign exchange
Additions
Disposals
Transfers
Transfer from intangible assets
Transfers to inventories
Transfers to assets held for sale
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Movements in foreign exchange
Charge for the year
Impairment loss
Disposals
Transfers to inventories
Transfers to assets held for sale
At 31 December 2019
At 1 January 2020
Movements in foreign exchange
Charge for the year
Impairment loss
Disposals
Transfers to inventories
Transfers to assets held for sale
At 31 December 2020
Carrying amount
As at 1 January 2019
As at 31 December 2019 and 1 January 2020
As at 31 December 2020
Freehold
property
Leasehold
property
£m
£m
Motor
vehicles for
rental
£m
Other
£m
Total
£m
268.5
(1.0)
3.7
(9.7)
15.3
-
(6.6)
270.2
270.2
1.1
3.0
(14.1)
(2.5)
-
-
(7.8)
249.9
19.8
-
2.5
3.1
(0.6)
-
(1.5)
23.3
23.3
-
2.9
0.2
(3.1)
-
(0.8)
22.5
248.7
246.9
227.4
77.4
-
10.5
(1.6)
6.6
-
-
92.9
92.9
-
1.2
(3.0)
3.2
-
-
(2.4)
91.9
16.6
-
3.0
-
(1.3)
-
-
18.3
18.3
-
2.5
-
(2.2)
-
-
18.6
60.8
74.6
73.3
98.5
-
35.5
(0.4)
-
(32.5)
-
101.1
101.1
-
28 .9
(2.8)
4.2
-
(34.6)
-
96.8
30.9
-
19.0
-
(0.4)
(17.6)
-
31.9
31.9
-
16.8
-
(1.9)
(18.0)
-
28.8
67.6
69.2
68.0
84.9
(0.1)
31.6
(10.2)
(21.9)
-
-
84.3
84.3
0.1
8.5
(13.3)
(4.9)
0.6
-
-
75.3
45.2
(0.1)
9.5
1.2
(10.0)
-
-
45.8
45.8
0.1
10.0
1.3
(13.1)
-
-
44.1
39.7
38.5
31.2
529.3
(1.1)
81.3
(21.9)
-
(32.5)
(6.6)
548.5
548.5
1.2
41.6
(33.2)
-
0.6
(34.6)
(10.2)
513.9
112.5
(0.1)
34.0
4.3
(12.3)
(17.6)
(1.5)
119.3
119.3
0.1
32.2
1.5
(20.3)
(18.0)
(0.8)
114.0
416.8
429.2
399.9
Assets in the course of construction relate to build costs that have been incurred but the property is not yet in use and are included
in Other. The total of these assets held at 31 December 2020 is £4.3m (2019: £3.6m). These assets will be transferred to Freehold
or Leasehold property when complete. Other includes plant and machinery, fixtures, fittings and tools and equipment.
Included within freehold property is freehold land at a cost of £7.5m (2019: £7.5m) which is not depreciated. At 31 December 2020
there is an amount of £7.3m (2019: £7.2m) committed for future capital expenditure.
152 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 153
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
i
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12. Property, plant and equipment (continued)
During the year ended 31 December 2020 the total net book value of disposals from property and other amounted to £12.0m
(2019: £9.6m). Total proceeds received was £14.5m (2019: £14.7m) resulting in a gain on disposals of £2.5m (2019: £5.1m).
Following the Group’s restructuring program, an impairment charge of £1.5m (2019: £3.0m) has been recorded representing an
adjustment to the expected recoverable values of assets. In the prior year, a further £1.3m has been recognised as an impairment
loss against the carrying amount of affected assets following a fire at one of the Group’s dealerships during 2019. At the balance
sheet date £9.4m (2019: £5.1m) of properties have been reclassified into assets held for sale. See Note 14 for further details.
Company
Cost
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2020
Disposals
Transfers from intangible assets
Transfers from fellow Group companies
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for the year
At 31 December 2019
At 1 January 2020
Charge for the year
Disposals
Transfers from fellow Group companies
At 31 December 2020
Carrying amount
As at 1 January 2019
As at 31 December 2019 and 1 January 2020
As at 31 December 2020
Other
£m
3.6
0.2
3.8
3.8
(1.3)
0.6
0.3
3.4
2.7
0.3
3.0
3.0
0.5
(1.0)
0.2
2.7
0.9
0.8
0.7
13. Right of use assets
Group
Cost
At 1 January 2019
Correction of errors*
As 1 January 2019 (restated)
Additions
Retirements and surrenders
At 31 December 2019
Cost
At 1 January 2020
Additions
Retirements and surrenders
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Correction of errors*
At 1 January 2019 (restated)
Charge for the year
Impairment charge
Retirements and surrenders
At 31 December 2019
At 1 January 2020
Charge for the year
Impairment charge
Retirements and surrenders
At 31 December 2020
Carrying amount
As at 1 January 2019
As at 31 December 2019 and 1 January 2020
As at 31 December 2020
S
t
a
t
e
m
e
n
t
s
Property
£m
Other
£m
240.1
18.2
258.3
24.5
(5.3)
277.5
277.5
12.7
(11.0)
279.2
138.9
10.9
149.8
12.5
1.8
(3.4)
160.7
160.7
12.4
0.4
(10.5)
163.0
108.5
116.8
116.2
6.0
-
6.0
6.2
(5.9)
6.3
6.3
3.7
(2.9)
7.1
3.9
-
3.9
2.8
-
(2.6)
4.1
4.1
2.6
-
(1.0)
5.7
2.1
2.2
1.4
Total
£m
246.1
18.2
264.3
30.7
(11.2)
283.8
283.8
16.4
(13.9)
286.3
142.8
10.9
153.7
15.3
1.8
(6.0)
164.8
164.8
15.0
0.4
(11.5)
168.7
110.6
119.0
117.6
At 31 December 2020 there is an amount of £nil (2019: £nil) committed for future capital expenditure.
*Details of the correction of errors are shown in Note 1.
Included within the Other category are leases for motor vehicles and IT equipment.
A charge of £0.4m (2019: £1.8m) has been recognised following the cessation of trade from certain dealerships during the year
thereby giving rise to an impairment charge which has been treated as a non-underlying item (see Note 4)
Further details regarding leased assets are provided in the following Notes:
Disclosure of lease costs of low value assets
Gains on property disposals
Lease interest costs
Movements in lease liabilities
Note
3
4
6
22
154 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 155
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
i
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13. Right of use assets (continued)
Company
Cost
At 1 January 2019
Additions
At 31 December 2019
Cost
At 1 January 2020
Additions
Retirements and surrenders
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for the year
At 31 December 2019
At 1 January 2020
Charge for the year
Retirements and surrenders
At 31 December 2020
Carrying amount
As at 1 January 2019
As at 31 December 2019 and 1 January 2020
As at 31 December 2020
Other
£m
2.3
0.6
2.9
2.9
0.5
(1.0)
2.4
1.1
0.7
1.8
1.8
0.8
(1.0)
1.6
1.2
1.1
0.8
Included within the Other category are leases for IT equipment.
14. Assets held for sale
Lower of carrying amount and fair value less cost to sell
At 1 January
Net transfers from property, plant and equipment
Impairment charge
Disposals
At 31 December
Group
2020
£m
10.0
9.4
(3.5)
(2.9)
13.0
Group
2019
£m
8.0
5.1
-
(3.1)
10.0
Company
2020
£m
-
-
-
-
-
Company
2019
£m
-
-
-
-
-
All items included as at 31 December 2020 and 31 December 2019 relate to properties held by the Group and have been
transferred into assets held for sale following the cessation of trade at certain dealerships and the subsequent commencement of
procedures to dispose of these vacant properties from the Group’s portfolio. Properties held within assets held for sale are being
actively marketed for disposal and there is an expectation that such properties will be disposed of within 12 months of the balance
sheet date. Where necessary, provision for impairment to bring the assets carrying value in-line with its estimated fair value less
costs of disposal have been recorded whilst the assets were held within property, plant and equipment and prior to their subsequent
transfer into assets held for sale.
During the year the total carrying amount disposed from held for sale amounted to £2.9m (2019: £3.1m). Total proceeds received
amounted to £3.5m (2019: £2.9m) resulting in a gain on property disposals of £0.6m (2019: loss of £0.2m). As a result of the
restructuring events during the years ended 31 December 2020 and 31 December 2019 certain properties have been transferred
from property, plant and equipment into assets held for sale. In 2020 an impairment charge of £3.5m has been incurred in respect
of recording these properties at fair value less cost to sell.
156 | Financial Statements
15. Investments in subsidiary undertakings
Company
Cost and Net Book Value
At 1 January and 31 December
S
t
a
t
e
m
e
n
t
s
2020
£m
126.8
2019
£m
126.8
Details of the subsidiary undertakings of Lookers plc (Registered Office: Lookers House, 3 Etchells Road, West Timperley,
Altrincham, WA14 5XS, England) are as follows:
Registered Office: Lookers House,
3 Etchells Road, West Timperley,
Altrincham, WA14 5XS England
Addison Motors Limited (m)
Addison TPS Limited (m)
Aston Green Limited (d)
Benfield Motor Group Limited (d)
Benfield Pension Trustees Limited (d)
Billingham Motors Limited (d)
Bluebell (Crewe) Limited (d)
Bolling Investments Limited (p)
Bramall & Jones VW Limited (h)
Bristol Trade Centre Limited (d)
Burton Trade Centre Limited (d)
Castle Bromwich Motors Limited (d)
Chipperfield Garage Limited (d)
Chipperfield Holdings Limited (d)
Colborne (HGG) 2012 Limited (d)
Colbornes Trade Parts Limited (m)
Colebrook & Burgess (Teesside) Limited (d)
Colebrook & Burgess Holdings Limited (h)
Colebrook & Burgess Limited (m)
Cox & Co (Lookers) Limited (d)
Drayton Group Limited (m)
Dutton-Forshaw Holdings Limited (h)
Dutton-Forshaw Limited (d)
*Get Motoring UK Limited (l)
Harpers Carlisle Limited (p)
Howdens of Harrogate Limited (d)
Jackson & Edwards Limited (d)
Kings Langley Land Rover Limited (d)
Knights North West Limited (d)
Look 4 Car Credit Limited (d)
Lookers (J & S Leaver) Limited (d)
Lookers (St. Helens) Limited (d)
Lookers Bedale Garage Limited (d)
Lookers Birmingham Limited (d)
Lookers Colborne Limited (m)
Lookers Directors Limited (d)
Lookers GB & E Limited (d)
Lookers JV Limited (d)
Lookers Leasing Limited (l)
*Lookers Motor Group Limited (m)
*Lookers Motor Holdings Limited (h)
*Lookers Motors Limited (d)
*Lookers North West Limited (d)
*Lookers Norwich Limited (d)
*Lookers of Barnsley Limited (d)
*Lookers of Bradford Limited (d)
*Lookers of Burton Limited (d)
*Lookers of Colwyn Bay Limited (d)
*Lookers of Dewsbury Limited (d)
*Lookers of Macclesfield Limited (d)
*Lookers of Manchester Limited (d)
*Lookers of Northwich Limited (d)
*Lookers of Rochdale Limited (d)
*Lookers Pension Plan Trustee Limited (d)
*Lookers Secretaries Limited (d)
Lookers South East Limited (d)
Lookers Southern Limited (d)
Lookers Thornton Engineering Limited (d)
Martins (Middlesbrough) Limited (d)
Martins (Stockton) Limited (d)
Martins (Sunderland) Limited (d)
Martins-Wellington Limited (d)
MB South Limited (m)
Meteor Group Limited (d)
NNK Holdings Limited (h)
Picking (Liverpool) Limited (d)
Platts Harris Limited (a)
PLP Motors Limited (d)
Pollendine Motors (Frinton) Limited (d)
Radford (Bavarian) Limited (d)
Roadshow Limited (d)
Rosedale Finance & Leasing Limited (d)
S. Jennings Group Limited (h)
S. Jennings Limited (m)
The Dovercourt Motor Company Limited (d)
The Dutton-Forshaw Group Limited (h)
The Dutton-Forshaw Motor Company
Limited (m)
*The Dutton-Forshaw Trustee Company
Limited (d)
Truc-Bodies Limited (d)
Vehicle Rental Services Limited (d)
Vikings Canterbury Limited (d)
Warwick Holdings Limited (p)
Incorporated and registered in
Northern Ireland. Registered Office:
62 Boucher Road, Antrim, Belfast,
Northern Ireland, BT12 6LR
Adelaide Finance Limited (d)
Bairds Cars Limited (d)
Balmoral Motors Limited (d)
Charles Hurst Holdings Limited (h)
Charles Hurst JV Limited (d)
Charles Hurst Limited (m)
Charles Hurst Motors Limited (d)
Fleet Financial Limited (l)
Guthrie & Anderson Limited (d)
Hurstco Limited (d)
Savilles Auto Village Limited (d)
*The Charles Hurst Corporation Limited (h)
Thompson-Reid Tractors Limited (d)
Town & Country Fuels Limited (d)
Ulster Garages Limited (d)
Incorporated and registered in Scotland
**Arran Oils Limited (d)
**Ballcop (No.1) Limited (dissolved 20 April
2021) (d)
**Ballcop (No.2) Limited (dissolved 20 April
2021) (d)
**Ballcop (No.3) Limited (d)
**Ballcop (No.4) Limited (d)
**Ballcop (No.5) Limited (d)
**Ballcop (No.7) Limited (d)
**Ballcop (No.8) Limited (d)
**Ballcop (No.9) Limited (d)
**Ballcop (No.10) Limited (d)
**Ballcop (No.11) Limited (d)
**Hurst Energy Services Limited (d)
**Hurst Fuels (Caledonia) Limited (d)
**Inverclyde Sales & Service Limited (d)
***J M Sloan & Company (Car Hire) Limited (d)
***J M Sloan & Company Limited (d)
**JN Holdings Limited (d)
****Lomond Motors (East) Limited (m)
****Lomond Motors Limited (m)
****Lomond TPS Limited (m)
***Shields Automotive Limited (d)
***Taggarts Motor Group Limited (d)
Incorporated in Republic of Ireland
Charles Hurst Dublin Limited (m)
All subsidiary companies are wholly owned
through ownership of ordinary share
capital.
*These subsidiaries are directly owned
by Lookers plc whilst the remaining are
indirectly owned.
**Registered Office: 528/540 Windmill Hill
Street, Motherwell, ML1 2AQ
***Registered Office: 1 Brasswell Park,
Annan Road, Dumfries, DG1 3JA
****Registered Office: 520 Hillington
Road, Braehead, Glasgow, G52 4UB
Principal activities key:
(a) Sale and maintenance of agricultural
vehicles - business disposed November 2020
(d) Dormant
(h) Intermediate non-trading holding
company
(l) Lessor of vehicles
(m) Sale and maintenance of vehicles;
distribution of spare parts
(p) Property management company
Lookers plc Annual Report & Accounts 2020 | 157
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
19. Cash and cash equivalents
Cash at bank and in hand
Bank overdraft
Cash and cash equivalents per statement of cash flows
Group
2020
£m
243.0
(115.8)
127.2
2019
£m
150.3
(118.9)
31.4
Company
2020
£m
0.1
(36.5)
(36.4)
2019
£m
17.4
(40.6)
(23.2)
Total restricted cash for the Group at 31 December 2020 is £0.2m (2019: £0.3m) and for the Company is £0.1m (2019: £0.2m).
20. Trade and other payables
Current:
Trade payables
Repurchase commitments
Stocking loans
Consignment vehicle creditors
Group payables
Other tax and social security payable
Other creditors
Deferred income
Vehicle rental finance liabilities
Accruals
Non current:
Deferred income
Vehicle rental finance liabilities
Group
2020
£m
138.1
20.8
210.0
382.3
-
29.4
24.2
7.2
55.4
44.4
911.8
7.3
32.5
39.8
2019
£m
206.9
47.6
337.1
533.7
-
0.8
16.3
6.4
62.2
50.5
1,261.5
7.3
35.0
42.3
Company
2020
£m
7.9
-
-
-
22.5
16.1
1.4
0.7
-
12.5
61.1
2019
(restated)
£m
8.9
-
-
-
125.5
-
1.5
-
-
13.3
149.2
2018
(restated)
£m
4.4
-
-
-
127.4
-
0.2
-
-
7.1
139.1
-
-
-
-
-
-
-
-
-
Further details of the prior period restatement affecting Group payables in the year ended 31 December 2019 are made in Note 1.
16. Inventories
Group
Goods for resale
Vehicle spare parts for resale
Consignment vehicles
2020
£m
255.7
17.2
382.3
655.2
2019
£m
398.7
24.1
533.7
956.5
Total write-offs of £nil (2019: £nil) have been incurred during the year and there have been no reversals of past write-downs (2019:
none). Stocking loans provided by third party finance houses are secured over the vehicles used for the provision of such finance.
Included within goods for resale are vehicles leased out to staff employees on short-term lease arrangements via a third party
but are still actively marketed for immediate sale to third parties by the Group as the Group has not relinquished control of these
vehicles. As at 31 December 2020 these total £23.6m (2019: £33.0m).
At 31 December 2020 the Group had entered into a number of future purchase commitments amounting to £4.8m (2019: £11.6m)
which are not recognised in the Financial Statements.
17. Trade and other receivables
Trade receivables
Group receivables
Other receivables
Repurchase debtor
Finance lease receivables
Prepayments
Group
2020
£m
74.5
-
12.8
21.8
1.1
14.4
124.6
2019
(restated)
£m
111.6
-
8.0
26.7
1.4
20.6
168.3
2018
(restated)
£m
119.8
-
17.3
20.8
1.0
23.7
182.6
Company
2020
£m
0.3
309.6
10.4
-
-
7.1
327.4
2019
£m
1.1
343.5
7.7
-
-
3.8
356.1
Balances held within Group receivables relate to balances due from subsidiary undertakings of the Company. All amounts are
unsecured, interest free and repayable on demand.
18. Rental fleet vehicles
Cost
At 1 January
Correction of errors
At 1 January (restated)
Transfer from Group inventories
Additions
Transfer to group inventories
At 31 December
Accumulated depreciation
At 1 January
Correction of errors
At 1 January (restated)
Charge for the year
Transfer to Group inventories
At 31 December
Carrying amount at 1 January
Carrying amount at 31 December
Group
2020
£m
33.7
-
33.7
12.3
21.8
(35.1)
32.7
1.7
-
1.7
4.0
(3.1)
2.6
32.0
30.1
2019
(restated)
£m
57.1
(22.4)
34.7
25.4
17.4
(43.8)
33.7
2.9
(1.1)
1.8
3.0
(3.1)
1.7
32.9
32.0
Rental vehicles included in current assets reflect those vehicles which are purchased for the purpose of short-term rentals and
which are expected to be disposed of in less than one year.
158 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 159
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
i
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21. Provisions
Provision in respect of regulatory matters
At 31 December
At 1 January
Created in the year
Released during the year
At 31 December
Group
2020
£m
-
-
2019
£m
10.4
10.4
Company
2020
£m
-
-
2019
£m
-
-
Provisions for Provisions for
other charges other charges
2019 £m
-
10.4
-
10.4
2020 £m
10.4
-
(10.4)
-
In the year ended 31 December 2019, after careful consideration of the open matters with the FCA (namely the past business
review, ongoing enforcement review and the events that led to the delay in publishing the Annual Report & Accounts and the
suspension of shares on 1 July 2020) the Board concluded that it is more likely than not that the Group will incur an outflow of
economic resources in respect of at least some of these matters and recorded a provision at 31 December 2019. The spectrum
of possible outcomes, including restitution of customer detriment, additional costs associated with the regulated activities and
potential sanctions, was considered broad and the considered outcome based on that range was considered to be £10.4m.
On 2 March 2021 the Group announced that the FCA had advised the Board of its decision to close the investigation against
Lookers Motor Group Limited, the Group’s FCA regulated entity, for the possible mis-selling of regulated products, and associated
issues relating to potential customer detriment. In closing the case, the FCA further advised the Board that it did not intend to use
its statutory powers to apply any sanctions against the Group in relation to the matters under investigation. As the investigation
specifically covers the period from January 2016 to June 2019, the Group is satisfied that the FCA confirmation represents an
adjusting event after the balance sheet date as this provides evidence that there was not an obligating event and have therefore
released the £10.4m provision into non-underlying items in the year ended 31 December 2020.
22. Financial instruments
Carrying amount of financial assets
The carrying amounts of financial assets by category were:
Financial assets measured at amortised cost:
Cash at bank and in hand
Trade receivables
Other receivables
S
t
a
t
e
m
e
n
t
s
Group
2020
£m
243.0
74.5
35.7
353.2
2019
(restated)
£m
150.3
111.6
36.1
298.0
2018
(restated)
£m
152.8
119.8
39.1
311.7
None of the assets are materially credit-impaired and there has been no significant increase in credit risk since initial recognition.
The amounts disclosed above also represent the maximum exposure to credit risk ignoring cash flows from realisation of the assets
and impairment losses.
The gross carrying amounts of trade receivables is as follows:
Current (not past due)
Past due up to three months
Past due from three months up to six months
Past due over six months
Total gross amount at 31 December
Less: General loss allowance at 31 December
Less: Specific credit provision
Trade receivables
The loss allowance based on the simplified approach for lifetime expected credit losses is as follows:
Current (not past due)
Past due up to three months
Past due from three months up to six months
Past due over six months
Total loss allowance at 31 December
2020 weighted
average loss rate
2.4%
3.0%
5.0%
8.0%
2019 weighted
average loss rate
1.0%
2.0%
4.0%
8.0%
Group
2020
£m
61.6
12.9
2.0
1.6
78.1
(2.0)
(1.6)
74.5
Group
2020
£m
1.5
0.4
0.1
-
2.0
2019
£m
86.9
23.9
2.4
2.4
115.6
(2.4)
(1.6)
111.6
2019
£m
1.4
0.8
0.1
0.1
2.4
With the exception of one (2019: none) specific provision the Group has not disaggregated out customer risk profiles to account for
variation in credit risk grades as the majority of the debt is held with a number of OEM Brand Partners with similar risk profiles. At 31
December 2020 a specific provision of £1.6m has been allocated against aged debts.
A reconciliation of the changes in the loss allowance is set out below:
As at 1 January
Derecognition including write-off’s
(Credit)/charge for the year
As at 31 December
Group
2020
£m
2.4
(0.1)
(0.3)
2.0
2019
£m
2.1
(0.1)
0.4
2.4
160 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 161
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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22. Financial instruments (continued)
Carrying amount of financial liabilities
The carrying amounts of financial liabilities by category were:
Financial liabilities measured at amortised cost:
Bank overdrafts
Secured bank loans (current and non-current)
Trade and other payables
Vehicle rental finance liabilities
Total lease liabilities
Current
Bank overdraft
Secured bank loans
Non-current
Secured bank loans
Total borrowings
Bank loans and overdraft repayable:
Less than one year
More than one year and not more than two years
More than two years and not more than five years
More than five years
Total lease liabilities
Current
Non-current
Lease liabilities repayable:
Less than one year
More than one year and not more than two years
More than two years and not more than five years
More than five years
Less: finance charges allocated to future years
Group
2020
£m
115.8
167.9
819.8
87.9
144.4
1,335.8
115.8
1.1
116.9
166.8
283.7
Group
2020
£m
116.9
159.5
3.3
4.0
283.7
2019
£m
20.1
126.8
146.9
2019
£m
20.1
18.5
47.5
126.4
(65.6)
146.9
2019
£m
118.9
90.9
1,192.1
97.2
146.9
1,646.0
118.9
0.5
119.4
90.4
209.8
2019
£m
119.4
1.1
84.7
4.6
209.8
2018
£m
19.8
117.0
136.8
2018
£m
19.8
17.7
46.8
111.2
(58.7)
136.8
Group
2020
£m
19.1
125.3
144.4
Group
2020
£m
19.1
18.8
46.8
121.9
(62.2)
144.4
The Group is party to a number of lease arrangements as a lessee and are primarily long leasehold property leases for a number
of dealerships, workshops and office space across the Group. The Group also holds a number of leases for motor vehicles and
IT equipment used to support the Group’s operations. The Group is not materially exposed to variable lease payments however a
number of the property leases have contractual clauses including rent reviews, contract extension and contract termination options
which, dependent upon any significant business reorganisation activities, may affect the future cashflows of the Group.
During the financial year ended 31 December 2020 the Group successfully completed a sale and leaseback transaction from its
property portfolio. This transaction resulted in a nominal gain being recognised immediately in the income statement as a result of
the previous property carrying amount being less than the sale price (established at fair value) at the point of leaseback. The effect
of this transaction gave rise to an inflow in the consolidated cash flow statement.
22. Financial instruments (continued)
Trade and other payables
Current
Non-current
Movement in financial liabilities
Other loans
RCF
Lease liabilities
Vehicle rental finance liabilities
Net RCF
Loan
At Jan
2020 movement repayment
£m
£m
(0.6)
-
-
78.0
-
-
(84.1)
-
(84.7)
78.0
£m
10.1
80.8
146.9
97.2
335.0
S
t
a
t
e
m
e
n
t
s
Group
2020
£m
875.2
32.5
907.7
2019
£m
1,254.3
35.0
1,289.3
Lease
incentives
£m
-
-
-
-
-
Lease
repayment
£m
-
-
(15.3)
-
(15.3)
Loan Non-cash At 31 Dec
2020
£m
9.5
158.4
144.4
87.9
400.2
receipt movement
£m
-
(0.4)
12.8
-
12.4
£m
-
-
-
74.8
74.8
Cash and cash equivalents
Bank overdraft
Net debt excluding lease and
vehicle rental liabilities
Net debt including lease and
vehicle rental liabilities
(150.3)
118.9
59.5
303.6
At Jan
Loan
2019 movement repayment
Net RCF
Lease
incentives
Lease
repayment
(243.0)
115.8
40.7
273.0
receipt movement
Loan Non-cash At 31 Dec
2019
(restated)
Movement in financial liabilities
Other loans
RCF
Lease liabilities
Vehicle rental finance liabilities
Cash and cash equivalents
Bank overdraft
Net debt excluding lease and
vehicle rental liabilities
Net debt including lease and
vehicle rental liabilities
(restated)
£m
11.5
118.7
136.8
89.7
356.7
(152.8)
108.5
85.9
312.4
£m
-
(37.3)
-
-
(37.3)
£m
(1.4)
-
-
(69.0)
(70.4)
£m
-
-
1.2
-
1.2
£m
-
-
(16.2)
-
(16.2)
£m
-
-
-
76.5
76.5
£m
-
(0.6)
25.1
-
24.5
10.1
80.8
146.9
97.2
335.0
(150.3)
118.9
59.5
303.6
Non-cash movements in relation to lease liabilities relate to the recognition and de-recognition of lease liabilities and accrued and
repaid interest and amortisation of the Group’s debt issue costs in relation to movements on the Group’s RCF.
Movements in relation to vehicle rental finance liabilities relate to specific funding sourced or repaid during the financial year in relation
to vehicles leased out by the Group in its capacity as a lessor.
At 31 December 2020 the Group had a revolving credit facility of £238.0m with a further of £50.0m available for future acquisitions.
This facility had been renegotiated on 21 December 2018 with the Banking Club who had provided the previous term loan and
previous revolving facility. As noted in the Accounting Policy around Going Concern, during 2020 the financial covenants were
renegotiated, including a suspension of the interest cover ratio and replacement with EBITDA and liquidity covenants. The Group
satisfied each of those covenants. The revolving credit facility expires on 31 March 2022 and has an option for a further one year
extension subject to syndicate approval. The facility is secured via a debenture over certain assets (predominantly property) of the
Group.
In May 2021 the Group renegotiated its revolving credit facilities with its existing Banking Club for an initial amount of £150m with an
extension to September 2023. The amended facilities include core leverage, interest cover and EBITDA covenants which are tested on
a quarterly basis commencing 30 June 2021.
162 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 163
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
22. Financial instruments (continued)
22. Financial instruments (continued)
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t
a
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m
e
n
t
s
An analysis of the Group’s fixed and floating rate borrowings and lease liabilities is as follows:
2020
Other loans
RCF
Lease liabilities
Total borrowings
2019
Other loans
RCF
Lease liabilities
Total borrowings
Floating rate Fixed rate
Weighted
average
effective
interest rate
%
1.6
2.0
-
2.0
£m
9.5
158.4
-
167.9
Weighted
average
effective
interest rate
%
-
-
4.5
4.5
£m
-
-
144.4
144.4
Total
interest
bearing
On which
no interest
is paid
£m
9.5
158.4
144.4
312.3
£m
-
-
-
-
Floating rate Fixed rate
Weighted
average
effective
interest rate
%
2.2
2.1
-
2.1
£m
10.1
80.8
-
90.9
Weighted
average
effective
interest rate
%
-
-
4.5
4.5
£m
-
-
146.9
146.9
Total
interest
bearing
On which
no interest
is paid
£m
10.1
80.8
146.9
237.8
£m
-
-
-
-
A maturity analysis of the Group’s undiscounted inflows from operating lease receivables is as follows:
Year ended
31 December 2020
31 December 2019
Within 1 year
£m
Within
1-2 years
£m
Within
2-3 years
£m
Within
3-4 years
£m
Within
4-5 years
£m
After
5 years
£m
18.6
19.5
9.6
11.0
4.4
4.5
0.6
0.9
-
-
-
-
Finance lease receivables of £1.1m (2019: £1.4m) are due within one year.
2020
Total
£m
9.5
158.4
144.4
312.3
2019
Total
£m
10.1
80.8
146.9
237.8
Total £m
33.2
35.9
Financial risk management objectives
The Board manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures
by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk),
credit risk, liquidity risk and capital risk. The Group does not enter into or trade financial instruments (including derivative financial
instruments) for speculative purposes.
Credit risk
Credit risk refers to the risk that a counter party will default on its contractural obligations resulting in financial loss to the Group. The
Group is exposed to credit risk on its financial assets which consist of cash balances with banks, and trade and other receivables to
the extent that settlement is cash-related.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.
Foreign exchange risk arises as a result of having monetary assets and liabilities denominated in non-Sterling balances. Exchange
rate exposures are managed within approved policy parameters utilising natural hedges where appropriate.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is
as follows:
Euro
Assets
Liabilities
Group
2020
£m
1.1
2019
£m
2.2
Group
2020
£m
6.2
2019
£m
8.8
The majority of the Group’s business is carried out in sterling. However for the limited number of transactions in foreign currency
the Group is mainly exposed to Euros. The following table details the Group’s sensitivity on financial assets and liabilities to a 10%
change in pounds sterling against the respective foreign currency. 10% is the rate used when reporting foreign currency risk
internally to key management personnel and represents management’s assessment of the possible change in foreign exchange
rates. The sensitivity analysis of the Group’s exposure to foreign currency risk at the reporting date has been determined based on
the change taking place at the beginning of the financial year and held constant throughout the reporting period.
Financial assets
Financial liabilities
2020
£m
+10%
change
(0.1)
(0.6)
2020
£m
-10%
change
0.1
0.7
2019
£m
+10%
change
(0.2)
(0.8)
2019
£m
-10%
change
0.2
1.0
Interest price risk
This risk results from financial instruments bearing fixed interest rates; changes in floating interest rates therefore affect the fair
value of these fixed rate financial instruments. The Group has no debt subject to fixed interest rates and is, therefore, not exposed to
interest price risk.
Interest cash flow risk
This risk results from financial instruments bearing floating interest rates. Changes in floating interest rates affect cash flows on
interest receivable or payable. The Group is exposed to interest rate risk on its floating rate debt, namely all loans and borrowings.
The interest rate exposure of the Group is managed within the constraints of the Group’s business plan and the financial covenants
under its revolving credit facilities.
Interest rate risk management
The sensitivity analysis below have been determined based on the exposure to changes in interest rates at the reporting date and
stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. Based
on historical experience, a 50 basis point change is used when reporting interest risk internally to the Board and represents the
Board’s assessment of the possible change in interest rates. Interest rate risk is the risk that a change in interest rates adversely
effects the Group’s performance or ability to settle financial obligations and comprises two elements.
Group
2020
£m
0.5
2019
£m
0.7
Market risk
The Group has exposures to the following risks inherent in its financial instruments.
Profit or loss and equity
A decrease of 50 basis points has an equal and opposite effect to that disclosed above.
164 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 165
Credit risk management
Trade receivables are spread across a large number of counterparties across the UK and Ireland. The Group does not have any
significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit
risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the Financial Statements, net of any allowances for losses, represents the
Group’s maximum exposure to credit risk.
i
F
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a
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c
a
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S
t
a
t
e
m
e
n
t
s
Company
2020
£m
0.5
0.4
0.9
Company
2020
£m
0.5
0.4
0.1
(0.1)
0.9
2019
£m
0.7
0.4
1.1
2019
£m
0.7
0.4
0.1
(0.1)
1.1
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
22. Financial instruments (continued)
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Ultimate responsibility for
liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for
the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. At the year-end the Group is in
a net current assets position of £19.2m (2019: net current liabilities of £74.1m) and has more than sufficient headroom available on
the Group’s working capital facility to draw down long-term repayable funds into available cash to ensure that all current liabilities
can be met in-line with their contractual maturities.
The following table details the Group’s and the Company’s remaining contractual maturity for its non-derivative financial liabilities.
The tables below have been drawn up based on the undiscounted contractual maturities of the financial liabilities including interest
that will accrue to those liabilities except where the Group is entitled and intends to repay the liability before its maturity.
22. Financial instruments (continued)
Details of the Company’s lease liabilities are as follows:
Total lease liabilities
Current
Non-current
Lease liabilities repayable:
Less than one year
More than one year and not more than two years
More than two years and not more than five years
(Less): interest allocated to future years
2020
Bank overdraft and loans
Total lease liabilities
Vehicle rental finance liabilities
Trade and other payables
2019
Bank overdraft and loans
Total lease liabilities
Vehicle rental finance liabilities
Trade and other payables
Less than
1 year
£m
116.9
19.1
55.4
819.8
1,011.2
119.4
20.1
62.2
1,192.1
1,393.8
Over
1 year
£m
166.8
187.5
32.5
-
386.8
90.4
192.4
35.0
-
317.8
Total
£m
283.7
206.6
87.9
819.8
1,398.0
209.8
212.5
97.2
1,192.1
1,711.6
Included within the analysis above are balances relating to consignment stock where the liability is contractually due for payment
when the related vehicle is adopted by the Group. Adoption usually occurs for the purpose of selling the vehicle to the end customer
at which point the cash outflow in respect of the liability matches the cash inflow from the sale.
An analysis of the Company’s borrowings is as follows:
Current
Bank overdrafts
Non-current
Secured bank loans
Bank loans and overdrafts repayable
Less than one year
More than one year and not more than two years
More than two years and not more than five years
More than five years
Details of the Company’s RCF borrowings are as per the analysis for the Group position.
Company
2020
£m
36.5
2019
£m
40.6
158.4
194.9
81.4
122.0
Company
2020
£m
36.5
158.4
-
-
194.9
2019
£m
40.6
-
81.4
-
122.0
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged
since the prior year.
The capital structure of the Group consists of cash and cash equivalents, debt and borrowings, and equity holders of the parent,
comprising issued share capital, share premium, a capital redemption reserve and retained earnings. The Group is not subject to any
externally imposed capital requirements.
The Board reviews the capital structure on a semi-annual basis. As part of this review, the Board considers the cost of capital and
the risks associated with each class of capital.
Gearing ratio
The gearing ratio at the year-end is as follows:
Total borrowings excluding lease and leasing liabilities
Cash at bank and in hand
Net debt
Total equity
Net debt to equity ratio
Group
2020
£m
283.7
(243.0)
40.7
282.4
14.4%
2019
£m
209.8
(150.3)
59.5
310.6
19.2%
Debt is defined as long-term and short-term borrowings as detailed above. In accordance with sector practice and the Group’s
accounting policy, stocking loans are included as trade and other payables. Equity includes all capital and reserves of the Group that
are managed as capital.
The gearing ratio inclusive of lease and leasing liabilities is as follows:
Net debt (including lease and vehicle rental liabilities)
Total equity
Net debt (including lease and vehicle rental liabilities) to equity ratio
Group
2020
£m
273.0
282.4
96.7%
2019
(restated)
£m
303.6
310.6
97.7%
166 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 167
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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23. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2019: 17%) and
movements in the year are as follows:
Group
2020
£m
34.0
6.5
(7.3)
33.2
2019
£m
33.0
(0.2)
1.2
34.0
Intangible
assets
£m
18.0
2.0
20.0
Accelerated
tax
depreciation
£m
27.3
2.0
29.3
Share
options
£m
(0.2)
0.2
-
-
Employee
benefits
£m
(9.7)
1.9
(7.3)
(15.1)
Company
2020
£m
(9.5)
1.9
(6.6)
(14.2)
Capital
gains
£m
4.1
(0.6)
3.5
Provisions
£m
(1.2)
0.9
-
(0.3)
As at 1 January
Charged/(credited) to the Income Statement
(Credited)/charged to Other Comprehensive Income
As at 31 December
Group
Deferred tax liabilities:
As at 1 January 2020
Movement in year via income statement
As at 31 December 2020
Deferred tax assets:
As at 1 January 2020
Movement in year via income statement
Movement in year via statement of other comprehensive income
As at 31 December 2020
Leases
£m
(4.3)
0.1
-
(4.2)
Net deferred tax liability:
As at 1 January 2020
As at 31 December 2020
Company
Deferred tax assets:
As at 1 January 2020
Movement in year via income statement
Movement in year via statement of other comprehensive income
As at 31 December 2020
Accelerated
tax depreciation
£m
0.5
-
-
0.5
Share
options
£m
(0.3)
0.3
-
-
Employee
benefits
£m
(9.6)
1.6
(6.6)
(14.6)
Provisions
£m
(0.1)
-
-
(0.1)
2019
£m
(12.2)
1.5
1.2
(9.5)
Total
£m
49.4
3.4
52.8
Total
£m
(15.4)
3.1
(7.3)
(19.6)
34.0
33.2
Total
£m
(9.5)
1.9
(6.6)
(14.2)
The Board are satisfied with the recognition of a deferred tax asset in the Company due to the probability of future taxable profits
becoming available.
S
t
a
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e
m
e
n
t
s
24. Share capital
Group and Company
Authorised:
Ordinary shares of 5p each
Allotted, called up and fully paid:
As at 1 January
Allotted under share option schemes
As at 31 December
All ordinary shares rank equally and have the same rights attached.
25. Share-based compensation
2020
Shares
£m
2019
Shares
£m
480,000,000
24.0
480,000,000
24.0
390,138,374
-
390,138,374
19.5
-
19.5
389,038,358
1,100,016
390,138,374
19.4
0.1
19.5
The Company has a share option scheme for all employees of the Group and an Executive share option scheme (ESOS).
Employee ShareSave Scheme
The Employee ShareSave scheme is available to all eligible employees and is based on Save As You Earn (SAYE) savings contracts
with options exercisable within a period from the conclusion of a three year term as appropriate from the date of grant. Under the
terms and conditions of this scheme, for every month (up to no more than six months) an employee fails to contribute the agreed
monthly amount determined under the rules of the scheme, the last date exercisable will be delayed by one month.
Details of the Employee ShareSave Scheme options outstanding during the year are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Cancelled during the year
Forfeited during the year
Lapsed during the year
Outstanding at the end of the year
2020 Weighted average
exercise price
Number of
share options
2,667,221
7,944,257
-
(604,103)
(2,185,036)
(211,956)
7,610,383
Number of
(in £) share options
0.90 11,265,412
-
0.40
(2,080)
-
(8,024,206)
1.04
(154,161)
0.55
(417,744)
0.48
2,667,221
0.48
2019 Weighted average
exercise price
(in £)
0.91
-
0.86
0.89
0.89
1.32
0.90
Options granted in the year ended 31 December 2020 have a weighted average exercise price of 40 pence and have been issued
with a fair value calculated as 10p (2019: no issue). No options were granted in 2019. The options outstanding at 31 December
2020 have an exercise price in the range of 40 pence to 87 pence and a weighted average contractual life of 20 months
(2019: range of 84 pence to £1.07 and a weighted average contractual life of 24 months). All share options are settled via equity.
168 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 169
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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25. Share-based compensation (continued)
26. Pensions
Executive Share Option Scheme (ESOS LTIPs)
The Executive Share option scheme was available to all eligible senior management of the Group. Options are exercisable at the
nominal share value and the vesting period is three years. If the options remain unexercised after a period of ten years from the date
of grant the options expire.
The Group operates three defined benefit pension schemes, The Lookers Pension Plan (operated by Lookers plc company), The
Dutton Forshaw Group Pension Plan and the Benfield Group Pension Plan. The summary of the assets, liabilities and surplus or
deficits of these schemes are summarised below. The Group’s risk management strategy for pension liabilities is summarised on
page 31 within the Strategic Review section.
S
t
a
t
e
m
e
n
t
s
Details of the Executive Share option Scheme options outstanding during the year are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Cancelled during the year
Forfeited during the year
Lapsed during the year
Outstanding at the end of the year
2020 Weighted average
exercise price
Number of
share options
3,872,442
-
-
-
(411,786)
-
3,460,656
Number of
(in £) share options
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6,376,480
2,216,058
(1,012,419)
-
(3,707,677)
-
3,872,442
2019 Weighted average
exercise price
(in £)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
The weighted average option price at the date of exercise for share options exercised during the period was £nil (2019: £nil). The
options granted in the year ended 31 December 2019 were issued with a fair value calculated as 82p. The options outstanding at
31 December 2020 and 31 December 2019 had a weighted average exercise price of £nil and a weighted average contractual life
of 8 months (2019: 11 months).
The estimate of the fair value of the services received in respect of share option schemes is measured using the Black-Scholes
option pricing model. The inputs into the Black-Scholes model are as follows:
Expected volatility
Expected life
Risk-free rate
Expected dividend yields
2020
36% - 50%
3 years
0.02%
1.00% - 4.00%
2019
36%
3 years
0.02%
4.00%
Volatility was measured by reference to the changes in the Company’s share price between 1 January 2015 and 1 March 2020.
The total share based payment charge recorded in the year ended 31 December 2020 was £0.8m (2019: £1.4m).
During the previous year the Dutton Forshaw Group Pension Plan merged with the Lookers Pension Plan. Some assets were
retained in the Dutton Forshaw Group Pension Plan to cover any remaining scheme liabilities and associated costs with closing the
scheme.
Defined benefit obligation
Scheme assets
(Deficit)
Amounts recognised in the income statement
Actuarial (losses)/gains recognised in the statement of
comprehensive income
Cumulative fair value losses on actuarial movements
Defined benefit obligation
Scheme assets
(Deficit)/surplus
Amounts recognised in the income statement
Actuarial gains recognised in the statement of
comprehensive income
Cumulative fair value losses on actuarial movements
The Lookers
Pension Plan
2020
£m
(322.0)
245.0
(77.0)
2.6
The Dutton Forshaw
Group Pension Plan
2020
£m
-
-
-
0.1
The Benfield
Pension Plan
2020
£m
(15.8)
13.5
(2.3)
-
Total
2020
£m
(337.8)
258.5
(79.3)
2.7
(30.9)
(41.4)
0.3
0.3
(1.9)
(2.9)
(32.5)
(44.0)
The Lookers
Pension Plan
2019
£m
(283.1)
226.4
(56.7)
2.8
The Dutton Forshaw
Group Pension Plan
2019
£m
(2.7)
4.4
1.7
0.1
The Benfield
Pension Plan
2019
£m
(14.2)
13.5
(0.7)
-
Total
2019
£m
(300.0)
244.3
(55.7)
2.9
6.8
(10.5)
0.1
-
0.2
(1.0)
7.1
(11.5)
The Lookers Pension Plan - Group and Company
“The Lookers Pension Plan”, provides benefits based on final pensionable salary and is administered by Aon Hewitt Limited. The
scheme has been registered with the Registrar of Pensions. The assets of the scheme are held separately from those of the Group,
being held in separate funds by the Trustees of the Lookers Pension Plan.
A valuation update was made as at 31 December 2020 by a qualified independent actuary, using the projected unit credit method
to take account of the IAS 19 (Revised) requirements. Scheme liabilities have been calculated using a consistent projected unit
valuation method and compared to the scheme’s assets at their 31 December market value. The assets of the scheme are held
separately from those of the Employer. The value of the insured pensions (£3.4m) is omitted from both assets and liabilities below for
clarity.
Fair value and major categories of assets:
Equities
Target return funds
Corporate bonds
Cash
Total fair value of assets
Market value
2020
£m
27.9
108.0
105.4
3.7
245.0
Plan %
2020
11.4
44.1
43.0
1.5
100.0
Market value
2019
£m
36.7
84.4
56.6
48.7
226.4
Plan %
2019
16.2
37.3
25.0
21.5
100.0
None of the equity assets of the scheme are held in quoted investments. For those assets that are not quoted, excluding cash, the
investments are valued on a daily basis by the investment managers.
170 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 171
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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26. Pensions (continued)
Amounts recognised in the income statement:
Non investment expenses
Finance costs on obligation
Finance income
Past service cost
Total defined benefit expense
Changes in the present value of the defined benefit obligation:
Opening defined benefit obligation
Finance costs
Actuarial losses
Past service cost
Bulk transfer from the Dutton Forshaw Group Pension Plan
Benefits paid
Total defined benefit obligation
2020
£m
1.3
5.8
(4.7)
0.2
2.6
2020
£m
283.1
5.8
44.8
0.2
2.9
(14.8)
322.0
2019
£m
0.9
7.7
(5.8)
-
2.8
2019
£m
271.2
7.7
15.0
-
-
(10.8)
283.1
Demographic changes was a gain of £nil (2019: £3.1m), other actuarial experience from financial assumptions was a loss of £44.8m
(2019: £29.0m) with an experience gain of £nil (2019: £10.9m).
Changes in the fair value of scheme assets:
Opening fair value of scheme assets
Finance income
Actuarial gains
Contributions
Bulk transfer from the Dutton Forshaw Group Pension Plan
Benefits paid
Non investment expenses
Closing fair value of scheme assets
2020
£m
226.4
4.7
13.9
11.3
4.8
(14.8)
(1.3)
245.0
2019
£m
201.8
5.8
21.8
8.7
-
(10.8)
(0.9)
226.4
None of the scheme’s assets were invested in Lookers plc or property occupied by Lookers plc. The Group made contributions
of £11.3m in 2020 (2019: £8.7m) to fund accruing pensions and expects to maintain a similar level of pension contributions in the
future to fund current service costs and deficit repayments.
Since the defined benefit scheme is closed to future accrual there is no funding required for future service, the funding required will
be in relation to any current deficit and highly dependent on the future performance of the fund. Any agreed contributions will be
reconsidered at each triennial valuation.
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26. Pensions (continued)
The most recent triennial valuation of the Lookers Pension Plan was carried out as at 31 March 2019. This was agreed between
the trustees and the Group in December 2020 and includes annual contributions of £12.0m, subject to annual inflation increases
and continuing over the recovery period of 7 years and 10 months. By funding the defined benefit pension scheme, the Group
is exposed to the risk that the cost of meeting its obligations is higher than anticipated. This could occur for several reasons, for
example:
• Investment returns on the schemes’ assets may be lower than anticipated, especially if falls in asset values are not matched by
similar falls in the value of the schemes’ liabilities;
• The level of price inflation may be higher than that assumed, resulting in higher payments from the schemes;
• Scheme members may live longer than assumed, for example due to advances in healthcare. Members may also exercise (or not
exercise) options in a way that leads to increases in the schemes’ liabilities, for example through early retirement or commutation of
pension for cash, and;
• Legislative changes could also lead to an increase in the schemes’ liabilities.
The trustees investment objectives and the processes undertaken to measure and manage the risks inherent in the scheme
investment strategy are documented in the scheme’s Statement of Investment Principles. The trustees and the Group review the
investment strategy at the time of each funding valuation, with informal reviews carried out during the period between valuations.
The trustees review the investment strategy based on professional advice from their investment advisors. The strategy determines
the proportion of assets which are growth or matching assets and what policy is to be followed to hedge against increases in
interest rates and inflation. It also considers the funding level of the scheme and the point at which a de-risking strategy might be
appropriate. The risks that may be applicable to the investment strategy are primarily that investment returns on the scheme’s assets
may be lower than anticipated, especially if falls in asset values are not matched by similar falls in the value of the schemes’ liabilities.
The average duration of the defined benefit obligation at 31 December 2020 is 17 years (2019: 17 years).
Actuarial assumptions
Discount rate
Price inflation
Future pension increases
Life expectancy at age 65 for:
current pensioners - males
current pensioners - females
future pensioners - males
future pensioners - females
2020
1.30%
2.30%-2.90%
2.20%-2.85%
2019
2.10%
1.90%-2.90%
1.80%-2.85%
87.0
88.7
87.4
89.5
86.7
88.7
87.2
89.5
The table below gives a broad indication of the impact on the scheme valuation for changes in the key assumptions:
Change in assumption
Reduce discount rate by 0.1% p.a.
Increase inflation assumptions by 0.1% p.a.
Change mortality assumptions to SAPS SINA (-1 year) CMI 2011 (1%)
Approximate impact on current deficit
(2019 +£4.8m)
(2019 +£3.7m)
(2019 +£11.3m)
+5.4m
+£4.2m
+£14.5m
A change in more than one of these assumptions in the same direction would clearly have a more significant and potentially
materially adverse impact on the deficit of the scheme.
172 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 173
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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26. Pensions (continued)
The Dutton Forshaw Group Pension Plan - Group
“The Dutton Forshaw Group Pension Plan”, provides benefits based on final pensionable salary and is administered by Aon Hewitt
Limited. The scheme has been registered with the Registrar of Pensions. The assets of the scheme are held separately from those
of the Group, being held in separate funds by the Trustees of the Dutton Forshaw Group Pension Plan.
A valuation update was made as at 31 December 2020 by a qualified independent actuary, using a projected unit credit method
to take account of the IAS 19 (Revised) requirements. Scheme liabilities have been calculated using a consistent projected unit
valuation method and compared to the scheme’s assets at their 31 December market value.
Fair value and major categories of assets of the scheme:
Corporate bonds
Cash
Total fair value of assets
All assets excluding cash are unquoted investments.
Amounts recognised in the Income Statement:
Non investment expenses
Finance costs
Finance income
Total defined benefit expenses
Changes in the present value of the defined benefit obligation:
Opening defined benefit obligation
Finance costs
Actuarial losses
Bulk transfer to the Lookers Pension Plan
Benefits paid
Closing defined benefit obligation
Financial changes was a loss of £0.2m (2019: £0.1m).
Changes in the fair value of scheme assets:
Opening fair value of scheme assets
Finance income
Actuarial gains
Bulk transfer to the Lookers Pension Plan
Benefits paid
Non investment expenses
Closing fair value of scheme assets
Market value
2020
£m
-
-
-
Plan %
2020
-
-
-
Market value
2019
£m
2.5
1.9
4.4
Plan %
2019
57.1
42.9
100.0
2020
£m
0.1
-
-
0.1
2020
£m
2.7
-
0.2
(2.9)
-
-
2020
£m
4.4
-
0.5
(4.8)
-
(0.1)
-
2019
£m
0.1
0.1
(0.1)
0.1
2019
£m
2.8
0.1
0.1
-
(0.3)
2.7
2019
£
4.5
0.1
0.2
-
(0.3)
(0.1)
4.4
26. Pensions (continued)
Actuarial assumptions
Discount rate
Price inflation
Future pension increases
Life expectancy at age 65 for:
current pensioners - males
current pensioners - females
future pensioners - males
future pensioners - females
S
t
a
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m
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n
t
s
2020
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2019
2.10%
1.90%-2.90%
2.85%
86.7
88.7
87.3
89.4
The table below gives a broad indication of the impact on the scheme valuation for changes in the key assumptions:
Change in assumption Approximate impact on current surplus
(2019 + £negligible)
Reduce discount rate by 0.1% p.a.
(2019 + £negligible)
Increase inflation assumptions by 0.1% p.a.
(2019 + £0.1m)
Change mortality assumptions to SAPS SINA (-1 year) CMI 2011 (1%)
N/A
N/A
N/A
A change in more than one of these assumptions in the same direction would clearly have a more significant and potentially
materially adverse impact on the surplus of the scheme.
The Benfield Group Pension Plan - Group
“The Benfield Motor Group Pension Plan” provides benefits based on final pensionable salary. The Plan, which is a funded scheme,
is administered by Deloitte. The scheme has been registered with the Registrar of Pensions. The assets of the scheme are held
separately from those of the Group, being held in separate funds by the Trustees of the Benfield Motor Group Pension Plan.
A valuation update was made as at 31 December 2020 by a qualified independent actuary to take account of the IAS 19
requirements. Scheme liabilities have been calculated using a consistent projected unit valuation method and compared to the
scheme’s assets at their 31 December market value.
Fair value and major categories of assets of the scheme:
Equities
Corporate bonds
Cash
Total fair value of assets
All assets excluding cash are unquoted investments.
Amounts recognised in the Income Statement:
Non investment expenses
Finance costs
Finance income
Total defined benefit expenses
Market value
2020
£m
6.2
7.2
0.1
13.5
Plan %
2020
46.2
53.3
0.5
100.0
Market value
2019
£m
9.1
4.2
0.2
13.5
Plan %
2019
67.6
31.2
1.2
100.0
2020
£m
-
0.3
(0.3)
-
2020
£m
14.2
0.3
1.8
(0.5)
15.8
2019
£m
-
0.3
(0.3)
-
2019
£m
12.6
0.3
2.0
(0.7)
14.2
The Group contributed an additional £nil in 2020 (2019: £nil) to fund accruing pensions and expects to make no pension
contributions in 2021 following the transfer of the remaining assets and liabilities to the Lookers Pension Plan in 2020.
Changes in the present value of the defined benefit obligation:
Opening defined benefit obligation
Finance costs
Actuarial losses
Benefits paid
Closing defined benefit obligation
174 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 175
Demographic changes was a gain of £nil (2019: £0.2m), other actuarial experience from financial assumptions was a loss of £1.8m
(2019: £1.5m) with an experience loss of £nil (2019: £0.7m).
Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
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26. Pensions (continued)
Changes in the fair value of scheme assets:
Opening fair value of scheme assets
Finance income
Actuarial (losses)/gains
Contributions by employer
Benefits paid
Closing fair value of scheme assets
2020
£m
13.5
0.3
(0.1)
0.3
(0.5)
13.5
2019
£m
11.4
0.3
2.2
0.3
(0.7)
13.5
The Group made contributions of £0.3m (2019: £0.3m) during the year and expect to make a similar level of contributions in the
future to fund current service costs and deficit repayments.
Since the defined benefit scheme is closed to future accrual there is no funding required for future service, the funding required will
be in relation to any current deficit and highly dependent on the future performance of the fund. Any agreed contributions will be
reconsidered at each triennial valuation.
The most recent actuarial valuation of the Benfield Group Pension Plan was carried out as at 31 March 2019. This was agreed
between the trustees and the Group. Contributions of £0.3m were made to the plan in 2020. No administrative expenses are
currently required to be made to the Plan. By funding the defined benefit pension scheme, the Group is exposed to the risk that the
cost of meeting its obligations is higher than anticipated. This could occur for several reasons, for example:
• Investment returns on the scheme’s assets may be lower than anticipated, especially if falls in asset values are not matched by
similar falls in the value of the schemes’ liabilities;
• The level of price inflation may be higher than that assumed, resulting in higher payments from the schemes;
26. Pensions (continued)
Actuarial assumptions
Discount rate
Price inflation
Future pension increases
Life expectancy at age 65 for:
current pensioners - males
current pensioners - females
future pensioners - males
future pensioners - females
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m
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s
2020
1.30%
2.30%-2.90%
2.85%
2019
2.10%
1.90%-2.90%
2.85%
87.0
88.7
87.9
89.9
86.7
88.7
87.9
89.9
The table below gives a broad indication of the impact on the scheme valuation for changes in the key assumptions:
Change in assumption Approximate impact on current deficit
Reduce discount rate by 0.1% p.a.
Increase inflation assumptions by 0.1% p.a.
Change mortality assumptions to SAPS SINA (-1 year) CMI 2011 (1%)
A change in more than one of these assumptions in the same direction would clearly have a more significant and potentially
materially adverse impact on the deficit of the scheme.
(2019 + £0.2m)
(2019 + £0.1m)
(2019 + £0.6m)
+£0.2m
+£0.1m
+£0.7m
Defined contribution scheme
The Group and Company provide pension arrangements for certain Directors and employees under defined contribution schemes
and have a defined contribution Stakeholder Pension Scheme for employees. The Income Statement account charge for the year in
respect of defined contribution schemes was £5.6m (2019: £4.8m).
• Scheme members may live longer than assumed, for example due to advances in healthcare. Members may also exercise (or not
exercise) options in a way that leads to increases in the schemes’ liabilities, for example through early retirement or commutation of
pension for cash, and;
27. Subsequent events
• Legislative changes could also lead to an increase in the scheme’s liabilities.
The trustees investment objectives and the processes undertaken to measure and manage the risks inherent in the scheme
investment strategy are documented in the scheme’s Statement of Investment Principles. The trustees and the Group review the
investment strategy at the time of each funding valuation, with informal reviews carried out during the period between valuations.
The trustees review the investment strategy based on professional advice from their investment advisors. The strategy determines
the proportion of assets which are growth or matching assets and what policy is to be followed to hedge against increases in
interest rates and inflation. It also considers the funding level of the scheme and the point at which a de-risking strategy might be
appropriate. The risks that may be applicable to the investment strategy are primarily that investment returns on the scheme’s assets
may be lower than anticipated, especially if falls in asset values are not matched by similar falls in the value of the schemes’ liabilities.
The average duration of the defined benefit obligation at 31 December 2020 is 15 years (2019: 15 years).
COVID-19
On 4 January 2021 a third national lockdown was implemented. The business has been able to continue to operate with pre-
booked aftersales service being provided supplemented by new and used car sales activity being carried out via Click & Drive.
This activity has continued in earnest up to 12 April 2021 when all of the Group’s dealerships fully re-opened and began
trading normally. The Board continues to consider the effects of COVID-19 as being within its underlying activities.
FCA regulatory matters
On 2 March 2021 the Group announced that the FCA had advised the Board of its decision to close the investigation against
Lookers Motor Group Limited, the Group’s FCA regulated entity, for the possible mis-selling of regulated products, and associated
issues relating to potential customer detriment. In closing the case, the FCA further advised the Board that it did not intend to use
its statutory powers to apply any sanctions against the Group in relation to the matters under investigation. As the investigation
specifically covers the period from January 2016 to June 2019, the Group is satisfied that the FCA confirmation represents an
adjusting event after the balance sheet date as this provides evidence that there was not an obligating event and have therefore
released the £10.4m provision into non-underlying items in the year ended 31 December 2020.
Banking facilities
In May 2021 the Group successfully renegotiated its revolving credit facilities with its existing Banking Club for an initial amount of
£150m with an extension to September 2023. The amended facilities include core leverage, interest cover and EBITDA covenants
which are tested on a quarterly basis commencing 30 June 2021.
176 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 177
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Notes to the Financial Statements
For the year ended 31 December 2020
Notes to the Financial Statements
For the year ended 31 December 2020
28. Related party transactions
30. Reconciliation of Alternative Performance Measures
The following table provides the total amount of transactions that have been entered into with related parties for the relevant
financial year:
Sales to
related
parties
£m
Purchases from
from related
parties
£m
Amounts
owed by
related
parties £m
Amounts
owed to
related
parties £m
Key management personnel of the Group:
Other Director interests:
2020
2019
-
0.9
0.1
0.4
-
-
-
-
During both the years ended 31 December 2020 and 31 December 2019, Group companies made purchases at market prices
from Bramall Properties Limited. During the year ended 31 December 2019, Group companies made sales at market prices to
Winterquay Limited, Bramall Properties Limited and Vantage Motor Group Limited. These are considered to be related parties due
to them having directors common to those of Lookers plc.
Details of key management remuneration are shown in Note 5.
29. Ultimate controlling party
There is no controlling party of the Company’s share capital.
The Group uses a number of Alternative Performance Measures (APM) which are non-IFRS measures in establishing their financial
performance. Like for Like is the collection of dealerships and other trading businesses that have both a full year of trading activity
in the current year and prior year. The Group believes the APM provide useful, historical financial information to assist investors
and other stakeholders to evaluate the performance of the business and are measures commonly used by certain investors for
evaluating the performance of the Group. In particular, the Group uses APM which reflect the underlying performance on the
basis that this provides users of the Financial Statements with additional useful information to better assess the core business
performance of the Group. Details of the definitions of APM are made within the Glossary on pages 181 to 182. A reconciliation of
the statutory measures to the APM is set out below:
Like-for-like revenue
Revenue (£m)
Less: Non like-for-like revenue
Like-for-like revenue (£m)
Gross profit margin
Revenue (£m)
Gross profit (£m)
Gross profit margin (%)
EBITDA and underlying EBITDA
Operating profit/(loss) (£m)
Add: Depreciation (£m) - Note 3
Add: Amortisation (£m) - Note 3
EBITDA (£m)
Add: Non-underlying items (£m) - Note 4
Underlying EBITDA (£m)
Underlying operating profit (£m)
Operating profit/(loss) (£m)
Add: Non-underlying items (£m) - Note 4
Underlying operating profit (£m)
Underlying profit before tax and underlying basic EPS
Profit/(loss) before tax (£m)
Add: Non-underlying items (£m) - Note 4
Underlying profit before tax (£m)
Tax rate (%)
Underlying tax (£m) - Note 9
Underlying profit after tax (£m)
Weighted average number of shares in issue - Note 9
Underlying basic EPS (p)
Property portfolio and property portfolio by share
Property, plant and equipment (£m)
Less: Other property, plant and equipment (£m) - Note 12
Less: Motor vehicles (£m) - Note 12
Property portfolio (£m)
Share capital at 31 December - Note 24
Property portfolio per share (p)
Net debt excluding lease liabilities and rental vehicle finance liabilities
Bank loans and overdrafts (£m)
Less: Cash and cash equivalents (£m)
Net debt (£m)
2020
3,699.9
(52.1)
3,647.8
3,699.9
411.0
11.1%
30.9
51.2
4.8
86.9
12.1
99.0
30.9
12.1
43.0
2019
(restated)
4,806.5
(225.6)
4,580.9
4,806.5
513.1
10.7%
(12.8)
52.3
6.1
45.6
49.7
95.3
(12.8)
49.7
36.9
2.0
12.1
14.1
19.0%
(2.7)
11.4
390,138,374
2.93
399.9
(31.2)
(68.0)
300.7
390,138,374
77.1
(45.7)
49.7
4.0
19.0%
(0.8)
3.2
389,182,654
0.83
429.2
(38.5)
(69.2)
321.5
390,138,374
82.4
283.7
(243.0)
40.7
209.8
(150.3)
59.5
178 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 179
Franchise & Distribution Outlets
Glossary of terms
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Ford Transit Centre
Chelmsford
Colchester
Gateshead
Leeds
Middlesbrough
Sheffield
Honda
Orpington
Hyundai
Dundonald
Jaguar
Aston Clinton
Belfast
Glasgow
West London
Jeep
Belfast
Kia
Belfast
Chester
Newcastle
Stockport
Land Rover
Aston Clinton
Battersea
Belfast
Bishop’s Stortford
Chelmsford
Colchester
Glasgow North
Glasgow South
Lanarkshire
West London
Lexus
Belfast
Maserati
Belfast
Mercedes-Benz
Ashford
Brighton
Canterbury
Eastbourne
Gatwick
Maidstone
Shrewsbury
Stafford
Stoke-on-Trent
Stourbridge
Tonbridge
Walsall
Wolverhampton
Worcester
MINI
Crewe
Stafford
Stoke-on-Trent
Nissan
Belfast
Carlisle
Chester
Gateshead
Leeds
Newcastle
Newtownabbey
Newtownards
Peugeot
Belfast
Polestar
Manchester
Renault
Belfast
Carlisle
Chester
Newcastle
Newtownabbey
Newtownards
Stockport
Seat
Manchester
Stockport
Skoda
Guildford
Manchester
Newcastle
Stockport
Smart
Ashford
Brighton
Eastbourne
Gatwick
Maidstone
Shrewsbury
Stoke-on-Trent
Tonbridge
Wolverhampton
Worcester
Toyota
Belfast
Dundonald
Newtownabbey
Vauxhall
Belfast
Birmingham
Chester
Ellesmere Port
Lisburn
Liverpool
Newtownabbey
Portadown
Selly Oak
St Helens
Volkswagen
Blackburn
Blackpool
Carlisle
Darlington
Guildford
Battersea
Newcastle
Northallerton
Preston
Silverlink
Teesside
Walton-on-Thames
Volkswagen - CV
Glasgow
Guildford
Newcastle
Teesside
Volvo
Colchester
Glasgow
Stockport
Aston Martin
Belfast
Audi
Ayr
Basingstoke
Dublin
Farnborough
Edinburgh
Glasgow
Guildford
Hamilton
Newcastle
Stirling
Teesside
Tyneside
Wearside
Bentley
Belfast
BMW
Crewe
Stafford
Stoke-on-Trent
Citroen
Belfast
Cupra
Stockport
Dacia
Belfast
Carlisle
Chester
Newcastle
Newtownabbey
Newtownards
Stockport
DS
Belfast
Ferrari
Belfast
Ford
Braintree
Chelmsford
Colchester
Gateshead
Leeds
Middlesbrough
Sheffield
South Shields
South Woodham
Ferrers
Sudbury
Accident Repair Centres
Belfast (+ CarsmeticNI)
Carluke
Chelmsford
Glasgow
Maidstone
Middlesbrough
Newcastle
Fleet Financial
Belfast
Lookers Leasing
Harrogate
Motorcycles
BMW - Belfast
Honda - Belfast
Yamaha - Belfast
Parts Centres
Belfast (+ PSA Parts Distribution)
Birmingham
Chelmsford
Gateshead
Ipswich
Middlesbrough
Preston
Sheffield
Service Centres
Jaguar Chelmsford
VW - Wimbledon
TPS
Edinburgh
Glasgow North
Glasgow South
Newcastle
Teesside
Tyres
Belfast - Boucher Road
Belfast - Sydenham Road
Used Car Supermarkets
Belfast
Budget Direct
Dublin
Dundonald
Lisburn
Newtownabbey
Newtownards
Portadown
Van Centre
Vehicle Rental Services
Beaconsfield
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Introduction
In the reporting of the Financial Statements, the Directors have adopted various Alternative Performance Measures (APMs) of financial
performance, position or cash flows other than those defined or specified under International Financial Reporting Standards (IFRS).
These measures are not defined by IFRS and therefore may not be directly comparable with other companies’ APMs, including those in
the Group’s industry. APMs should be considered in addition to IFRS measures and are not intended to be a substitute for IFRS
measurements.
Purpose
The Directors believe that these APMs provide additional useful information on the underlying performance and position of the Group.
APMs are also used to enhance the comparability of information between reporting periods by adjusting for irregularity factors which
affect IFRS measures, to aid the user in understanding the Group’s performance.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting
purposes. The key APMs that the Group has focused on this period are as follows:
Performance measure
Definition
Like-for-like (LFL)
These are calculated where dealerships have contributed
twelve months of revenue and profit contribution in both the
current and comparative periods presented.
Gross profit margin
Gross profit as a percentage of revenue.
Why we measure it
To provide a consistent overview of
comparative trading performance
A measure of the significant revenue
channels’ operational performance
A key metric of the Group’s non-
underlying business performance.
Relate to costs or incomes which are not incurred in the normal
course of business or due to their size, nature and irregularity
are not included in the assessment of financial performance in
order to reflect management’s view of the core-trading
performance of the Group.
Operating profit before deducting depreciation and
amortisation
A key metric of the Group’s underlying
business performance
EBITDA before the impact of non-underlying items as defined
above
A key metric of the Group’s non-
underlying business performance
Non-underlying items
Earnings before
interest, depreciation
and amortisation
(EBITDA)
Underlying earnings
before interest,
depreciation and
amortisation
(underlying EBITDA)
Underlying operating
profit
Operating profit before the impact of non-underlying items as
defined above.
A key metric of the Group’s underlying
business performance.
Underlying profit before
tax
Profit before tax before the impact of non-underlying items as
defined above.
A key metric of the Group’s underlying
business performance
Profit after tax
Profit after tax before the impact of non-underlying items as
defined above.
A key metric of the Group’s underlying
business performance
Underlying earnings per
share (EPS)
Earnings per share before the impact of non-underlying items
as defined above.
A key metric of the Group’s underlying
business performance
Net debt
Property portfolio
New car unit sale
Bank loans and overdrafts less cash and cash equivalents.
Lease liabilities, vehicle rental liabilities and stocking loans are
not included in net debt.
A measure of the Group’s net
indebtedness that provides an indicator
of the overall balance sheet strength
The net book value of freehold and leasehold properties as at
the balance sheet date.
A key metric of the Group’s statement of
financial position
A new vehicle sale which has generated revenue for the Group. A measure of statistical volumes and
indicator of operational performance
Used car unit sale
Any vehicle sold that isn’t a new car unit sale.
A measure of statistical volumes and
indicator of operational performance
180 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 181
Glossary of terms (continued)
Corporate information
Performance measure
Definition
Car parc
The approximate number of vehicles on the UK road network.
New car market
Total number of annual new vehicle unit registrations made in
the UK as defined by the Society of Motor Manufacturers and
Traders (SMMT).
Why we measure it
A measure of the UK market size and
indicator for growth opportunities
A measure of the UK market size and
indicator for growth opportunities
New car market share
The Group’s annual share of the new car market calculated as
a percentage of the Group’s new car unit sales to the new car
market size.
Our relative performance against the
UK market
Details of the reconciliations of APMs to statutory measures are in Note 30 to the Financial Statements. The ‘Code’ The UK Corporate
Governance Code is a part of UK company law with a set of principles of good corporate governance aimed at companies listed on the
London Stock Exchange. It is overseen by the Financial Reporting Council. A copy is available at www.frc.org.uk
Financial PR Advisers
MHP Communications
60 Great Portland Street
London
W1W 7RT
Bankers
National Westminster Bank Plc
250 Bishopsgate
London
EC2M 4AA
Lloyds Bank Plc
25 Gresham St
London
EC2V 7HN
Barclays Bank Plc
3 Hardman Street
Manchester
M3 3HF
HSBC UK Bank Plc
1 Centenary Square
Birmingham
B1 1HQ
Bank Of Ireland
40 Mespil Road
Dublin 4
D04 C2N4
Ireland
Registered Office
Lookers plc
3 Etchells Road
West Timperley
Altrincham
WA14 5XS
Tel: 0161 291 0043
Email: CoSec@lookers.co.uk
Registrar
Link Group
10th floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Tel: 0371 664 0300
overseas +44 371 664 0300.
Email: enquiries@linkgroup.co.uk and
www.linkgroup.eu
Auditor
BDO LLP
3 Hardman Street
Spinningfields
Manchester
M3 3AT
Corporate Brokers
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Numis Securities Ltd
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Solicitors
Eversheds Sutherland Ltd
Eversheds House
70 Great Bridgewater Street
Manchester
M1 5ES
Freshfields Bruckhaus Deringer LLP
100 Bishopsgate
London
EC2P 2SR
182 | Financial Statements
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184 | Financial Statements
Lookers plc Annual Report & Accounts 2020 | 185