Lex buys chain and beats forecasts: UK's biggest motor dealer sets out expansion plans
After announcing the acquisition of Lucas's 62 Autocentre outlets for pounds 13m, Sir Trevor Chinn, chairman, said: 'There is considerable potential for us to expand the chain into a nationwide branded group, complementing the service we provide through our dealerships.'
He added that a target of 200 sites within five years would give Lex a third of the market for servicing, MOT testing and parts for older cars. Last year, Lucas Autocentres made a trading profit of pounds 1.2m, with net assets of about pounds 3m.
Pre-tax profits at Lex jumped from last year's depressed pounds 500,000 to pounds 28.3m, although substantial changes in the group during 1992 make a comparison difficult. Earnings per share were 18.3p after a 3.2p loss in 1991. A final dividend of 6.6p makes a total for the year of 10.6p, up from 10p.
During the year, Lex completed its withdrawal from electronic component distribution, selling its European operation to Arrow Electronics of the US for pounds 33m. As part of the deal Lex retains a 17.5 per cent stake, worth more than pounds 100m, which contributed profits of pounds 9.5m in 1992.
The company also lost the exclusive right to distribute Volvo cars, after the manufacturer took the operation in house. But it received compensation from Volvo of pounds 73.3m, which was taken as an extraordinary profit.
'We didn't actively seek it (the loss of the franchise), but arguably it came at a fortuitous time. We were paid a good price by Volvo and are now in a strong position to buy more dealerships,' Sir Trevor said. Lex was keen to acquire other import concessions.
Although Lex claimed it was not interested in buying quoted motor companies, it hopes to double the size of its retail business. It was talking with diversified groups that wanted to get rid of their motor activities and hoped to announce a deal this year.
Proceeds from the electronics disposal and compensation from Volvo wiped out Lex's borrowings, increased shareholders' funds from pounds 168m to pounds 256m and enabled Lex to acquire the Swan National motor group for pounds 44m. Swan's 20 dealerships took Lex's total to 90.
Sir Trevor said that, after a difficult three years, the challenge now was to provide a decent return on Lex's enlarged shareholders' funds. Albert E Sharp, the stockbroker, forecast profits this year of pounds 35m.
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