03 November 2019

After more than 25 years reporting the auto retail sector, nothing much about the industry surprises me any more. But Friday morning’s news from Lookers that both Andy Bruce and Nigel McMinn were stepping down came as a real a shock.

What could possibly have gone wrong?

My first instinct (based partly on Bruce’s quoted comment that “it is now time for me to move onto new ventures”) was that they were off to start something new. But it soon became apparent that this was no voluntary departure.

Auto Retail Network understands from contacts close to the matter that both men were called in last Thursday and told they were no longer required. The board had decided they should both be dismissed “forthwith”.

Quite what was said in that board meeting will remain a matter for speculation. But we have been told that relations between the Lookers board and the executive have been strained for some time. One insider even described it as “toxic”.

It seems that the prospect of having to issue a second profit warning in the year, plus face an FCA investigation into finance sales, was enough to push matters over the edge.

It is not hard to imagine the hand of veteran auto retailer and major Lookers shareholder, Tony Bramall, at work here. He controls just under 19% of the stock and, despite being 94, remains a formidable force on the Lookers board. He will not have taken kindly to seeing his considerable investment in the business diminishing month by month.

Lookers is now telling investors it expects full year underlying profit to be in the region of £20m. But it made £29.2m (underlying) in the first half. To lose £9.2m in six months is, apparently, unforgivable.

Furthermore, we have been told that costs within the business are “out of control” and integration of major purchases, such as Benfield (2016) and Jennings (2018), has been slow. Anybody who remembers Tony Bramall’s operational days will know that ‘cost’ was not an expense he tolerated.

It is significant that the first action of the new era is an acceleration of dealership closures. There is no news yet on a replacement chief executive, but it is hard to imagine the board would have made this move without having somebody in mind. Swapping two senior executives for one is good business, after all.

So, this is not about heading off the FCA investigation, as has been suggested by some. Rather that Andy Bruce and Nigel McMinn have not been ruthless enough to satisfy a major shareholder. Truly the auto retail industry is no place for nice guys.

Rupert Saunders

Executive Director

Auto Retail Network

Tags: Lookers