Lookers is investing £10 million over the next two years in a bid to deliver a “gold-plated” sales process ahead of the launch of an official investigation of the business by the Financial Conduct Authority (FCA).

Nigel McMinn, chief operating officer of the AM100’s second-placed franchised car retail group, said that the re-training its entire 2,500 sales workforce, a thorough re-design of its point-of-sale software and an investment in consultants and legal experts to underpin the push to a more simplified sales process were all part of the plan.

“You quickly get into big numbers with all of those things,” he said. “But this is a thorough overhaul of the way we do things to achieve a new gold-plated standard that will benefit both our customers and the staff in the business.”

Lookers plans were revealed in half-year financial results for the period to June 30, 2019, which showed the business had increased turnover by 2.7% to £2.64bn (H1 2018: £2.58bn) but a significant 39.7% decline in profit before tax to £24.9m (H1 2018: £41.3m).

The FCA is about to begin an investigation into the regulated sales activities at Lookers after the group raised concerns with the regulator after identifying “some control issues” via an independent review of its practices, in December last year.

A statement included within the H1 financial results said: “The Board takes this matter very seriously and continues to co-operate and co-ordinate fully with the FCA.

“When these improvements are fully deployed across the Group, our strengthened infrastructure and enhanced customer experience will create a robust and industry leading platform that will facilitate further growth. We will provide further updates as appropriate.”

During the reported period to June 30 Lookers reported a 1.3% increase in new car sales, from 66,635 to 67,512 as fleet sales grew by 7.1%. Retail sales declined by 3.6%.

Revenues from new car sales declined from £1.31bn to £1.29bn as gross profit declined marginally from £85m to £84.9m.

Used sales rose by 4.1%, from 51,943 to 54,088, generating a 7.1% increase in revenues, from £996m to £1.07m, but gross profit declined by 1.7% to £70.9m (H1 2018: £72.1m).

Aftersales revenues rose 8.3% to £247m (H1 2018: £228m) and gross profit was up by 4.8% to £109.9m (H1 2018: 104.9m), meanwhile.

McMinn said: “The profit before tax decline is significant, but it is a trend that we are seeing across the sector. There is not a business out there that hasn’t issued some kind of downgrading in recent months.

“We were doing alright until Q2 when the used car pricing realignment, the biggest since 2002, hit the market.

“When you are carrying £250m of used car stock you cannot help but be affected by that.”

During the reported period Lookers closed the Seat and Mazda sites in Middlesbrough and Kia in Sunderland which it added as part of last year’s acquisition of the Jennings Motor Group.

Its statement also revealed that, as part of our rationalisation programme agreed with Volkswagen, it had closed its VW sites in Morden – with much of the business transferred to the new flagship Volkswagen Battersea dealership – and Dumfries.

As part of its succession planning the group also saw its chief financial officer of ten years, Robin Gregson, replaced by former Marshall Motor Holdings CFO Mark Raban.

Lookers chairman Phil White said: “Together with my colleagues on the Board I would like to thank (Robin) for his significant contribution and wish him well in the future.”

In his appraisal of what H2 might hold for Lookers and the wider sector, 2019, White said: “As outlined in the Group’s trading statement on 12 July 2019, the Board expects that the more recent challenging conditions are likely to continue during the second half of the year with continued weakness in consumer confidence in the light of political and economic uncertainty and further pressure on used car margins.

“There is also the possibility of new vehicle supply restrictions as real-life emissions regulations come into force in Q3. In addition, the retail cost inflation pressure experienced in H1 could continue to impact earnings during the second half of the year.

“As a result of the above factors, the Board believes it is right to remain cautious as we enter the second half of the year. However, the Board’s current outlook for underlying profit before tax for the full year remains unchanged.”