Lookers eyes fleet growth by combining leasing companies

Lookers is integrating three businesses in its leasing division - Lookers Leasing, Fleet Financial and Vehicle Rental Services (VRS) - into one operating unit to create a single, multi-product offering to the group’s corporate customers.

Listed as one of parent company's Lookers six strategic priorities in its latest financial results, the new integrated business, Lookers Vehicle Solutions, will have a combined fleet size of approximately 12,000 units, which Lookers says it aims to grow "substantially" by 2024.

Lookers Leasing reported a risk fleet of 3,762 cars and vans in FN50 2021, putting it 32nd in the list of the UK’s largest vehicle leasing companies based on their risk fleet size. Fleet Financial was ranked 31st, with a risk fleet of 3,864.

The group’s preliminary results for the year ending December 31, 2021, showed revenues of £4.05 billion – a 9% increase compared with 2020 – and a record pre-tax profit of £90.1 million.

Leasing accounted for £136.9m (3.1%) of Lookers total reveues. 

Profits have taken a big leap year-on-year from the £13.7m performance in 2020, primarily driven by used vehicle margins.

Mark Raban, chief executive officer, said 2021 was a record year for Lookers despite having to ‘navigate’ limited new vehicle supply and Covid-19 'disruption'.

“We have reported excellent profits and cash generation, through strong used car margins, continued focus on costs and the unstinting efforts of our people,” continued Raban.

“We have successfully moved back to a net funds position in the business and have a strong balance sheet, underpinned by our property assets, supporting our investment capacity to grow the business.”

However, he acknowledged that the business and its customers face some uncertainties in 2022. “Trading in Q1 has been strong despite new vehicle supply remaining tight,” he said.

“The current crisis in Ukraine and significant cost of living increases will put pressure on consumer sentiment and disposable incomes. However, the Group is looking forward to the future with confidence.

“It has emerged from the challenges of the past couple of years stronger and with a clear strategy to navigate future challenges and drive value for all our stakeholders”.

New car performance

Lookers’ new retail registrations grew by 10% to 38,657 units in 2021, while new fleet and business registrations remained relatively static, compared to a market which grew by 2%. 

The group reported a 63% increase in electric vehicle (EV) sales in 2021, with equal growth across retail and fleet channels.

Previously the fleet channel had been dominant, driven by the tax treatment of EVs.

Lookers says it will introduce further new pure EV brands into the UK market in 2022 and 2023 and confirmed it is also in advanced discussions with a number of car manufacturers to increase representation.

Used vehicle sales

The group’s used car sales increased by 8% on a like-for-like basis.

The imbalance between supply and demand in the used vehicle market in 2021 resulted in unprecedented appreciation of used vehicle values and therefore margins.

Lookers’ margin per unit increased by 54% in H1 and 45% in H2, with an overall increase across the year of 44%.

The increased margin includes the impact of the used car market but also “several self-help actions and robust inventory control”, it said. 

Unprecedented unit margins alongside increased volumes resulted in a 53% increase in used vehicle gross profit compared to 2020.