LOOKERS PLC — Annual Report 2016

Dec 31, 2016

2016 Annual Report & Accounts

Lookers plc Annual Report & Accounts 2016

04	2016 at a glance
	Strategy and Business
07	Strategic and Operational Review
24	Our Business
24	— Industry Update
26	— Our Manufacturer Brands
27	— Our Locations
28	— Our Business
30	— Board of Directors
38	Business Model & Strategy
38	— How we create value
40	— Developing the customer experience
42	— People first
	Corporate Governance
49	Directors' Report
53	Chairman's Statement on Corporate Governance
57	Report from the Chairman of the Audit
	and Risk Committee
59	Corporate Social Responsibility Review
62	Directors' Remuneration Report
82	Directors' Responsibilities Statement
	Financial Statements
83	Independent Auditor's Report to the
	members of Lookers plc
91	Principal Accounting Policies
99	Consolidated Income Statements
100	Consolidated and Company Statements
	of Comprehensive Income
101	Consolidated and Company Statements
	of Financial Position
102	Consolidated Statements of Changes in Equity
103	Company Statements of Changes in Equity
104	Consolidated and Company Cash Flow Statements
105	Notes to the Consolidated Financial Statements
142	Trading Outlets and Interests in Major
144	Subsidiary Companies Five Year Record

Contents

2016 at a glance

Revenue up 18% to £4.3 billion

Dividend increased 17% to 2.36p per share

(2015: 2.05p)

Profit before tax up 7% to £77.1m

Adjusted Earnings per Share up 4% to 15.87p (2015: 15.24p)

• 1. New BMW and Mini acquisitions
• 1. Annual Charity Golf Day
• 1. Lookers acquires the Mercedes-Benz group Drayton
• 1. Jaguar Land Rover West London opens
• 1. Automotive Challenge Cup charity event

160 franchise dealerships

Sold over 210,000 new & used cars and light commercial vehicles

33 manufacturer brands

Strategy & Business "I am pleased to announce an excellent set of year end results. Our profit is at record levels and has increased for the eighth consecutive year – evidence of both an expansive and a resilient business model. We know our strategy of having the right brands in the right locations and excellent execution is the right one and during the year we've managed our portfolio of dealerships to reflect that."

Andy Bruce Chief Executive Officer

Strategic and Operational Review

Andy Bruce Chief Executive Officer

Business model

With group turnover of £4.3 billion in 2016, Lookers is one of the leading motor retail and aftersales groups in the UK. We sell over 210,000 new and used cars and light commercial vehicles. Our operations are across the UK and Ireland, with a presence in most of the major population centres. Until 4 November 2016, when the parts division was sold, the group operated through two distinct divisions, the motor division and the parts division. Details of each division are explained below.

Motor Division

The motor division consists of 160 franchised dealerships representing 33 marques from 102 locations. The business generates revenue from the sale of new and used cars, vans and aftersales activities.

The number of new cars sold per annum in the UK has varied between 2.1 million and 2.69 million during the past five years. Our share of the retail sector of this market is 5.5%.

The size of the UK new car market increased by 2.3% in 2016 to 2.69 million cars, its highest ever level. The new car market has two principal sectors, each of which represents approximately 50% of the market. The retail sector represents sales to individual customers and the fleet sector provides sales to corporate customers. Retail sales are generally at higher margins whilst fleet sales consume significantly higher levels of working capital.

The used car market in the UK has annual transactions of approximately 8 million vehicles, of which franchised dealers represent approximately 50%. There continues to be a major opportunity for Lookers to increase volumes in this part of the market.

Aftersales represents the servicing, repair and sale of franchised parts to customers' vehicles. The aftersales market applies to the overall number of cars in use on UK roads, which is referred to as the UK car parc. There are approximately 34 million vehicles with 22% (7.5 million) under three years old. This is the

Business Model and Strategy

predominant market for franchised motor dealers. The internet continues to be the primary means for our customers to research and determine which new or used cars they are interested in buying. Our website and digital marketing channels are therefore a very important part of our business and customer service offering. We continue to invest in and develop these channels in order to meet the needs of our growing customer base.

Parts Division

On 4 November 2016, our parts division was sold to Alliance Automotive UK Ltd for £126 million. The rationale for the sale of the parts division is explained in the business review.

Business strategy

Our strategy is to have the right brands and locations alongside excellent execution. Underpinning this strategy is our commitment to providing an outstanding retail experience.

We deliver on our strategy by operating a diverse business in the UK motor sector, supported by a variety of manufacturing partners across various geographies. This helps reduce our exposure to anomalies or fluctuations in demand, which may affect specific manufacturers or geographic locations.

We aim to grow the existing business through a combination of organic growth, seeking opportunities to increase our revenue and presence whilst actively pursuing an earningsenhancing acquisitive strategy. Our track record of successful acquisitions makes this a significant differentiator for us, as we generate an average ROI of over 15% on acquisitions made in recent years.

Another key differentiator is the service and experience we offer to our customers. We aim to provide the highest standards of customer experience in the sector by continually investing in and improving three key areas of our business:

People: Attracting, nurturing and retaining the best people and empowering them to deliver a genuine and personalised experience;

Technology: Striving in an omni-channel retail environment to provide a seamless customer experience, allowing customers to engage with us whenever and wherever they choose to; and

Brand: Developing our brand proposition to enhance our reputation with our customers, employees, suppliers and shareholders.

Our eighth successive year of profit growth highlights the strength of our strategy and demonstrates that our sub-sector and business model are no more overly exposed to the economic cycle than general retailers.

The group's business activities, financial condition, results of operations or the company's share price could be affected by certain principal risks or uncertainties which are included in the governance section of the 2016 annual report and accounts.

	2015
£4,282m	£3,649m
£504.2m	£452.2m
11.8%	12.4%
£94.7m	£85.9m
2.2%	2.4%
£77.1m	£72.1m
1.8%	2.0%
15.87p	15.24p
£74.1m	£161.7m
22%	54%
0.66	1.61
22.6%	24.2%
	2016

Non-financial

UK new car market	2.69m	2.63m
Group new car sales	101,931	90,009
Share of UK new car retail market	5.5%	4.7%
Group used car sales	81,387	70,492
Group employees	9,081	7,287

Performance

I am very pleased to report another strong year for the company with our eighth successive year of profit growth generating *adjusted profit before tax of £77.1 million (2015: £72.1 million), an increase of 7%. This result has been achieved during a period in which volumes in the UK new car market improved to their highest ever level. It also represents a great achievement in what has been a year of significant change and reorganisation for the group with the sale of the parts division, the major acquisitions of Knights BMW and MINI as well as Drayton Mercedes-Benz. We also reviewed and realigned our franchise representation with the sale of ten dealerships where the financial performance was either loss making or provided a limited profitability.

This result demonstrates a significant achievement and provides further evidence that our business model is both resilient and expansive. The motor division delivered another excellent trading performance during the year with an increase in profit before tax of 7.3% to £69.2 million, compared to £64.5 million last year.

The parts division made positive progress and produced a good result for the ten months of the year that it was part of the group, with a profit before tax of £12.2 million. This compares to £12.6 million last year, for a full twelve month period.

The key elements of our performance were:

• A significant increase in new car turnover and gross profit;
• Further growth in used car turnover and gross profit;
• Improvement in both aftersales turnover and margin; and
• Improved profitability in the parts division.

This growth has been encouraging and gives us further confidence in our ability to grow the business in 2017, as we believe that both the used and new car markets are likely to be stable this year. The growth in the new car market over recent years will continue to increase demand for aftersales and parts, as the number of cars under three years old continues to rise. This should provide significant opportunities for further growth in both these sectors of the market where Lookers, as a leading company in the industry, benefits from economies of scale, the skills of our people and our ability to invest in improved technology.

Sale of the parts division

As referred to above, a major event of the year was the sale of the parts division to Alliance Automotive UK Ltd ("Alliance Automotive"). On 10 August 2016 we announced that the company had entered into a conditional agreement to sell the parts division to Alliance Automotive. This was subject to clearance from the EU competition commission and subsequently completed on 4 November and a total consideration of £126 million was received. The £28.0 million profit on the sale of the parts division has been included in the accounts as an exceptional profit.

This disposal, which was at a price that the Board believed to be attractive, provided the group with an opportunity to refine its strategy of buying and selling cars in our motor retail division and adding value through acquisitions. The sale proceeds will be used to pursue acquisitions in the motor division over the short and medium-term, two of which were completed during the second half of 2016.

Given the group's proven track record of delivering successful acquisitions in recent years, the Board is confident of acquiring further businesses in the motor division, which we believe will deliver an increase in shareholder value over the medium-term.

Business Review

(*Adjusted profit is profit before amortisation and impairment of intangible assets, debt issue costs, pension costs, exceptional items and share based payments)

Our Motor Division increased turnover by £658m

*Adjusted earnings per share up to 15.87p

Gross profit up to £504.2m

Group new car sales Share of UK new car retail market 2015 90,009 2015 4.7% 2016 101,931 2016 5.5%

Group used car sales Group employees 2015 70,492 2015 7,287 2016 81,387 2016 7,872

Motor Division

I am pleased to report that the motor division increased turnover by £658 million to £4.1 billion and profit before tax by 7.3% to £69.2 million, compared to £64.5 million last year. The acquisitions of Knights BMW/MINI and Drayton Mercedes-Benz made a good contribution to the increase in turnover but it was also pleasing to see organic growth in turnover of £527 million, with acquisitions contributing £131 million of the total increase.

Acquisitions and portfolio management

2016 has been a year of transformation for the motor division, with highlights of the year being the acquisition of Knights on 22 August and Drayton on 4 November 2016. Both of these were strategically important and major transactions for the group. Knights was acquired for £26.6 million and represents BMW and MINI from six dealerships in Stoke, Stafford and Crewe and it was also a major milestone in introducing both these prestige brands to the group's portfolio.

Drayton was acquired for £56.3 million and represents Mercedes-Benz and smart from seven locations in Stoke on Trent, Stafford, Shrewsbury, Wolverhampton, Walsall,

Stourbridge and Worcester. The acquisition complements our existing Mercedes-Benz and smart businesses in Kent and Sussex. This has increased our partnership with these brands and the combined business will have an annual turnover of more than £600m and has established us as the leading retailer for Mercedes-Benz and smart in the UK.

Both of these acquisitions have been successfully integrated during the year and will make a further positive contribution in 2017. I am delighted to welcome our new colleagues from Knights and Drayton to Lookers.

We also carried out a strategic review of our brand representation during the year. Our strategy is to have a meaningful representation of the major automotive brands in the larger areas of population in the UK. As part of this review, we decided to relinquish some of our franchise representation of dealerships. This would ensure that all our dealerships were aligned with our strategy and could generate meaningful profits in the future. Following this review we have sold or closed ten businesses and this, together with the two acquisitions, has significantly improved and strengthened the balance of our portfolio of franchise representation.

New cars

The UK new car market increased by 2.3% to 2.69 million cars in the year, with the new car retail market being essentially flat, with a reduction of 0.2% compared to 2015. The fleet market showed positive growth and increased by 4.3%. Our total new car turnover increased by 20% year-on-year, or 11% on a like-for-like basis. Turnover of used cars increased by 19%, or 7% on a like-for-like basis, compared to 2015. Gross profit increased by 17%, or 7% on a like-for-like basis. This is a positive performance given our used car volumes have increased significantly over the last four years. We continue to focus on stock management and sourcing good quality used cars, both of which help to improve profitability.

We have continued to put more focus and investment into the fleet sector and our fleet turnover, including commercial vehicles, increased by 16%, or 13% on a like-for-like basis. The fleet sector is a significant part of the market and is a major profit opportunity, providing scope for organic growth given our lower market share compared to our retail business. Despite this increase in volumes, we have continued to target quality fleet sales and avoid very low margin business. To facilitate this, we continue to make the necessary investment in people with the specialist skills, relationships and reputation in the sector, as well as investing in systems and facilities to process higher volumes. The used car market still represents a significant opportunity for the group and this will benefit from the increasing number of leads generated by the group's website, which have increased by 25% compared to last year. We have seen significant increases in our online visitor and enquiry levels from our improved and responsive website which was launched last year. We plan to develop the website further in order to continue to drive momentum in our online offering. Aftersales

Therefore, we have a more optimistic view and believe that the market is likely to be a similar level to 2016. As this was the highest market ever, the outlook for new cars is still positive and is an opportunity for us to increase market share.

Used cars

Gross profit from new cars increased by 11% year-on-year. Whilst new car market conditions were favourable during the first six months of the year, they were less buoyant in the second half. However, the new car market continues to be relatively healthy into 2017 with our order take for the important month of March continuing to build in line with our expectations. Industry forecasts suggest that the new car market will show a 5% reduction this year, although in recent years, these forecasts have been outperformed with volumes being higher than forecast. As well as improving the margin, our high margin aftersales business increased gross profit by 18%, or 9% on a like-for-like basis compared to 2015, with the margin being maintained at a similar level to last year. The increased profitability has benefitted from the growth in the vehicle parc of cars under three years old and is also due to the initiatives we have made in recent years to develop the aftersales business, with an increased emphasis on performance and specific targets being introduced to improve profitability. We continue to have great success in improving penetration of an increasing proportion of

customers who choose to enter into service contracts, which improves customer loyalty and retention.

We have also developed further initiatives to improve the aftersales business, particularly in relation to technology and systems. In this area, we are focussed on improving the customer experience to improve retention levels.

Operating Review

Developing our retail environment

We have previously announced that the group is committed to developing the customer journey through a significant programme of further capital investment planned for the next three years.

This programme will ensure that our entire dealership estate represents the best in class in modern motor retailing. We also announced that we were making a significant investment in our multi-channel customer experience concept.

The internet and our website play a critical and important part of the customer journey, influencing how our customers research vehicles before they enter the showroom. Our in-house digital marketing team now covers all digital marketing activities and the latest version of a new, much improved and fully responsive website, which was launched during the previous year, has resulted in a significant increase in our visitor and enquiry levels. To continue with this momentum we are making further major developments to our website and a new website will be launched later this year. This will result in exciting improvements in functionality and interaction with our customers. Our aim is to produce an industry-leading website, which will improve the customer experience, and ultimately increase sales and profitability.

Good progress has been made during the year and we are introducing new systems which will improve the customer experience further. This will also result in greater operational efficiencies. We believe this will enable us to provide an industry leading customer experience and give us a significant competitive advantage and improved profitability.

Customer experience

Our goal is to be recognised as providing the best customer experience in the UK motor retail sector. We conduct extensive customer research to monitor feedback as we appreciate that customers have high expectations and increasingly more access to detailed product information themselves. We also continue to invest in our technology through new and improved systems.

Our people

Our people are the key to help us to deliver our strategy and provide a first class customer experience. We continue to invest in our people with a new training and development programme, including induction training for all new recruits as well as further improvements to our structured and formal management development programme.

We have also made significant enhancements to the holidays and benefits for our people so that we can now offer the most attractive employment prospects in our sector. Our aim is to be the best place to work in our industry so that we can attract and retain the best people to achieve enhanced levels of customer satisfaction and help us become the best in the UK motor retail sector. It was therefore a great achievement in this important area to be the only motor retailer to be awarded the exclusive Top Employers' United Kingdom 2017 certification. This is a symbol of our commitment to building a positive employee experience and of our commitment to optimise, develop and work with all our people to build a meaningfully and noticeably different experience for them and our customers.

Parts Division

Against a background of an improving but competitive market, our independent parts division made good progress in the period with increases in both turnover and profit compared to the prior year. Turnover for the division in the ten months prior to the sale increased by £4.0 million, up 2% on the prior year, as the business continued to expand by investment in existing and new product lines.

Operating margins improved slightly compared to the prior year and careful control of overheads resulted in a 9% increase in profit before tax compared to £11.2 million last year. This was a good result for the division in the ten month period and we wish all our colleagues in the parts division every success for the future under their new ownership.

Operating Review

Group results

Turnover increased by 17% to £4.3 billion (2015: £3.65 billion), with strong growth from new and used cars. The acquisitions of Knights and Drayton contributed £131 million of turnover following their acquisition in August and November. Gross profit of £504 million increased by £52 million compared to the previous year, with the growth coming from new and used cars as well as £14.5 million from acquisitions. The gross margin of 11.8% was slightly lower compared to the prior year of 12.4%, due to a greater proportion of gross profit coming from the increased volume of car sales, which have a lower percentage margin than parts and aftersales.

The operating margin was slightly lower than last year at 2.2% (2015: 2.4%) and overheads increased by £37.1 million in the year, primarily due to the higher turnover and acquisitions in the period. *Adjusted operating profit from operations increased by 10% to £94.7 million (2015: £85.9 million).

Net interest costs increased by 27.5%, to £17.6 million (2015: £13.8 million) due to interest on pursuing our acquisitive strategy, including the acquisition cost of Benfield last year and interest incurred in the Benfield business. Higher levels of working capital, a large proportion of which were due to the acquisitions, were also a factor contributing to the higher interest charge.

Interest on group borrowings is based on floating interest rates together with interest rate hedges, where we have £30 million of hedges which were established in 2007 at an average rate of 5.1%, when interest rates were significantly higher than current levels. These increase the total interest charge so that we do not get the full benefit of the low UK base rate which has now been applicable for nine years.

Key financial highlights are summarised below:

• *Adjusted profit before tax for the year increased by 7% to £77.1 million, from £72.1 million last year, which is the highest trading result to date for the company;
• Profit before tax was £91.8 million compared to a profit before tax in the previous year of £62.8 million, an increase of 46%. This includes net exceptional income of £23.3m which is explained in further detail below;
• Profit after tax was £81.3 million, an increase of 61% compared to £50.8 million in 2015; and
• Earnings per share increased by 59.2% to 20.51p compared to 12.88p in the prior year and *adjusted earnings per share of 15.87p compared to 15.24p in the prior year, an increase of 4.1%.

Taxation

The tax charge for the year is £10.5 million (2015: £12 million) and reflects a charge of 11.4% of profit before tax. This is significantly lower than the standard rate of Corporation Tax for the year of 20%. This is due to two factors: the first is the reduction in the deferred tax liability due to a future reduction in the rate of Corporation Tax to 17%. This creates a one off benefit of approximately £4 million which is reflected in the current year tax charge.

The second relates to the taxation of the sale of the Battersea property in last year's accounts where Corporation Tax of £3.4m was provided. This is subsequently not required as the gain on the sale of the property is covered by roll over relief and the tax provision reversed this year, which reduced this year's tax charge by £3.4m.

Exceptional items

Exceptional items in the year consist of the following and there has been a significant level of exceptional profit included in profit before tax which predominantly relates to the sale of the parts division in the year.

	2016	2015
	£million	£million
Profit on sale of the parts division	28.0	-
Refund of overpaid VAT	4.8	-
Profit on the sale of property	-	18.1
Property write downs	-	(11.4)
Terminated businesses	(9.1)	(1.7)
Transaction costs	(0.4)	(0.6)
Reorganisation costs	-	(2.7)
Total exceptional income	23.3	1.7
Tax charge on exceptional items	(3.7)	-
Total exceptional income after tax	19.6	1.7

The loss on terminated businesses relates to the strategic review of our brand representation during the year, as described in the operating review, where we relinquished dealerships which did not fit our strategy.

Cash flow

Cash generated from operations for the year was a large increase compared to the prior year at £140.9 million (2015: £67.9 million). Net working capital reduced by £33.3 million (2015: increase of £32.7 million). Stock increased by £23.4 million but this was more than offset by positive movements in debtors which reduced by £27.6m and creditors which increased by £93.2 million.

As referred to in the Strategic and Operational Review, expenditure on acquisitions during the year relates to the acquisitions of Knights on 22 August 2016 for a cash consideration of £26.6 million and Drayton on 4 November 2016 for a cash consideration of £56.3 million. The sale of the parts division on 4 November 2016 resulted in gross sale proceeds of £126 million, including £9.1 million for the freehold properties used in the business.

The strong operational cash flow allowed us to make further reductions in bank loans where loan repayments of £10.2 million were made during the year compared to £11.8 million last year. New loans of £14.0 million relate to the loans acquired with the Knights business which were funding the freehold properties. We had intended to lease these properties as the interest rate on the loans was significantly above the market rate. However, we negotiated a reduction in the interest rate and it was therefore sensible to retain these loans at the reduced rate of interest.

Capital expenditure was £36.3 million (2015: £35.2 million) and proceeds from the sale of properties and dealership businesses was £28.9 million (2015: £9.8 million), so net capital expenditure was £7.4 million (2015: £25.4 million). The majority of capital expenditure was on new or improved premises for dealerships and the increase compared to the previous year reflects our ongoing commitment to improve our retail premises so they reflect modern and state of the art facilities, as we signalled in our annual report last year. and Yorkshire Bank. The facilities consisted initially of a term loan of £100 million, which has since reduced to £85.0 million and a revolving credit facility of £150 million. There is also the potential to increase the term loan by up to an additional £30 million to fund future acquisitions. Interest is charged on both loans at a margin of between 1.2% and 2.15% above LIBOR, depending on the ratio of net bank debt to EBITDA. These facilities are subject to half yearly

Net debt reduced by £87.6 million due to the strong operational cash flow but also as a result of the proceeds from the sale of the parts division exceeding the amount spent on the acquisitions of Knights and Drayton. This reduction in net debt resulted in net borrowings of £74.1 million at 31 December 2016 compared to £161.7 million at the start of the year, net debt being calculated as gross bank borrowings less cash balances.

Bank funding

Our bank facilities were renewed and increased on 2 September 2015, at the time of and to fund the acquisition of Benfield. The facilities were also extended for two years to March 2020 and were agreed with a group of six banks: Bank of Ireland, Barclays, HSBC, Lloyds, RBS

Financial Review

(*Adjusted profit is profit before amortisation and impairment of intangible assets, debt issue costs, pension costs, exceptional items and share based payments)

covenant tests on interest cover and net bank debt to EBITDA. The covenant tests are set at levels that provide sufficient headroom and flexibility for the group until maturity of the facilities in March 2020.

At 31 December 2016, total facilities were £235.0 million (2015: £245.0 million) of which £74.1 million, net of cash balances, was being utilised, leaving unutilised facilities of £160.9 million. These bank facilities, together with the group's strong operational cash flow, indicate that the group has sufficient facilities available to fund its operations and allow for future expansion.

At 31 December 2016, gearing was 22% compared to 54% at 31 December 2015 and net debt to EBITDA was 0.66 compared to 1.61 last year. The group's underlying profitability and strong cash flow should result in further reductions in borrowing in the future and help ensure that the level of borrowing remains under control and is at a reasonable level in relation to net assets.

Property portfolio

The group has a policy of investing in freehold and long leasehold property as the preferred means of providing premises for our car dealerships, where possible. As a result, we have a significant and valuable portfolio of freehold and long leasehold properties, where the net book value at 31 December 2016 was £287.7 million compared to £252.4 million last year. Short leasehold properties had a value of £4.6 million (2015: £5.9 million).

Dividends

In our interim report, we indicated that due to the encouraging results and strong financial position of the group, the interim dividend would be increased by 20% to 1.28p per ordinary share and this was paid on 25 November 2016. We are now proposing a 15% increase in the final dividend to 2.36p per share (2015: 2.05p), giving a total dividend for the year ended 31 December 2016 of 3.64p per share (2015: 3.12p), representing an annual increase of 17%.

The dividend has now increased by over 100% compared to the dividend payable for the year ended 31 December 2010 and continues our policy of increasing the dividend provided there is satisfactory growth in profitability.

The increase in the total dividend this year recognises that the dividend cover has risen significantly due to the continued increase in profits of recent years. The Board has taken the decision that the level of cover should reduce over the medium-term to a level of between 3.5 and 4.0 times. However, the board will continue to review the dividend policy in the light of the company's trading performance whist retaining sufficient cash flow to fund future expansion in terms of both organic growth and acquisitions.

The final dividend of 2.36p per share is subject to shareholder approval at the Annual General Meeting and will be payable on 31 May 2017. The ex-dividend date will be 4 May 2017 and the record date will be 5 May 2017. This will represent a cash outflow of £9.3 million, which gives a total dividend for the year of £14.4 million (2015: £12.3 million). Dividends paid in cash during the year were £13.2 million, an increase of 13.8% compared to the previous year.

important to appreciate that the assessment of valuation of

Pension schemes The group has operated two defined benefit pension schemes for a number of years, The Lookers Pension Plan and The Dutton Forshaw Pension Plan. We also acquired another defined benefit pension scheme with the acquisition of Benfield. However, the Benfield scheme is reasonably well funded and there is a modest surplus in the 2016 accounts in relation to the Benfield pension scheme. All three schemes are closed to entry for new members and also closed to future accrual. Whilst the asset values of the Lookers and Dutton Forshaw schemes have increased by £26.6 million during the year, the valuation of the liabilities has increased by £49.7 million due to the significant reduction in the yield of UK Government bonds, following the EU referendum. As a result, the net deficit included in the balance sheet increased by £23.1 million, although there is a deferred tax asset which reduces this by £3.9 million. However it is the pension schemes is based on several key assumptions prescribed by accounting standards and over which the directors have no control. As a result, the calculation which estimates the potential liabilities of the schemes can increase or decrease the liabilities due to factors that have no relation or relevance to the trading results of the group. The impact of these factors is that the combined value of the deficits of both schemes increased in the year and the total deficit after deferred tax is now £65.1 million (2015: £44.2 million). 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. The board continues to look at its options to reduce both the annual cost of operating both schemes and what actions can be taken to reduce the deficit on the schemes, thereby reducing exposure to movements in these liabilities and reducing the deficit over the medium and longer term.

Financial Review

2016 was a transformational year for the company with a healthy increase in profit, the sale of the parts division and the acquisition of Knights and Drayton. Our strategy of having the right brands in the right locations with excellent execution leaves us ideally placed to continue our growth of the last eight years. The group has made a good start to the current financial year and we have a healthy order book for the delivery of new cars in the important month of March. Our used car volumes continue to show growth and aftersales continues to perform well. We therefore expect the result for the first quarter to be in line with management's expectations.

The company has achieved outstanding growth in recent years, with the 2016 profit being twice that compared to 2012. We believe the significant investment we are making in upgrading our facilities and enhancing our multi-channel customer experience gives us a competitive advantage, strengthening our position as a leading UK motor retail and aftersales service group.

Whilst the new car market achieved a record level in 2016, we believe it will be relatively stable in 2017 and this is also likely to apply to the used car market. The continuing increase in the vehicle parc of cars less than three years old provides further opportunities for us to increase revenue in the high margin aftersales sector. However, there is still uncertainty resulting from the process and timing for the UK to leave the EU. Whilst we have not yet noticed any significant difference in customer behaviour, particularly for orders of new and used cars, we have to remain aware of consumer confidence levels and the Pound-Euro exchange rate, both of which could have an impact on our business. representation. Our track record of successfully integrating differentiator for Lookers and these factors, together with the broad base of our franchise representation, leave us very well positioned for the future. We are therefore confident of the group delivering further growth in 2017. I would like to finish my review by thanking all my colleagues at Lookers for their hard work, commitment and dedication to the company and without whom we would not have been able to yet again deliver another excellent result for the eighth successive year.

The group balance sheet has been strengthened by strong operational cash flow and we have substantial headroom in our bank facilities with both net debt and net debt to EBITDA being at relatively low levels. This provides secure funding capacity and financial security to grow the business through further strategic acquisitions at a time when there continues to be significant consolidation opportunities within the sector.

The important acquisitions of Knights and Drayton should also make a greater contribution this year and as in previous years, we are continuing to look to acquire high quality businesses which will complement our existing franchise acquisitions and turning around performance is a significant

The strategic report on pages 7 to 48 was approved at a meeting with full authority of the board on 7 March 2017 and signed off on its behalf by Andy Bruce, Chief Executive Officer.

Andy Bruce, Chief Executive 8 March 2017

Industry Update

The new car market increased by 2.3% to 2.69 million cars, its highest ever level and we believe it will be relatively stable in 2017.

The used car market has an annual transaction value of approximately 8 million vehicles, which we also believe will stay stable.

The increase in finance and PCP presents us with higher customer retention opportunities going forward.

The increase in finance and PCP

Sources: SMMT, Experian (2006 to 2014) and Lookers (2015 to 2018)

Used vehicle market

Alfa Romeo

Manufacturer brands in our portfolio Our locations

Motorcycles

Car & commercial vehicles

Citroen

Honda

Land Rover

Peugeot

Toyota

BMW

Dacia

Lexus

Renault

Vauxhall

Ferrari

Maserati

Seat

Volkswagen

Bentley BMW

Fiat

Jeep

Mercedes-Benz MINI

Skoda

Volvo

Ford

Nissan

smart

Our Business

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Our unique Belfast site

houses 19 marques on one site ranging from prestigious brands like Bentley and Maserati, to top volume brands like Nissan, Renault, Kia and Citroen.

Taggarts remains the name for Lookers in parts of Scotland and includes marques like Land Rover, Jaguar, Volvo and Nissan.

North East England

Lookers have further established ourselves with the acquisition of Benfield including Nissan, VW, Audi, Ford and Skoda.

Charles Hurst also has an Audi dealership and a UseDirect dealership based in Dublin, selling quality

North West & Midlands

The acquisition of Drayton Group makes Lookers the largest Mercedes-Benz dealer group in the UK, and the acquisition of Knights North West brings BMW and MINI into the portfolio.

South East England

New flagship London dealerships for Land Rover, Jaguar and Skoda further establish Lookers in the region.

Wales

Continued strong performances from Alfa Romeo Cardiff and our mainland Jeep store.

*Adjusted profit is profit before amortisation and impairment of intangible assets, debt issue costs, pension costs, exceptional items and share based payments.

Revenue £4.3 billion

Adjusted Profit from Operations £94.7m*

Adjusted Profit before Tax £77.1m*

Our Business Continuing growth

*Adjusted Operating Profit from Operations (Millions of pounds)

Growth across the business

	2016 £m	2015 £m	% change		2016 £m	2015 £m	change
Turnover				Gross Profit
New cars	2,206	1,835	20%	New cars	161	145	11%
Used cars	1,437	1,212	19%	Used cars	105	90	17%
Aftersales	365	319	14%	Aftersales	166	141	18%
Parts Division	193	219	NC	Parts Division	55	62
Leasing & other	80	64	25%	Leasing & other	17	14	21%
Total Turnover	4,281	3,649	17%	Total Gross Profit	504	452	12%
LFL Turnover				LFL Gross Profit
New cars: retail	1,375	1,277	8%	New cars: retail	135	130
New cars: fleet	831	736	13%	New cars: fleet	26	26
Used cars	1,437	1,341	7%	Used cars	105	98
Aftersales	365	337	8%	Aftersales	166	153

Our turnover increased by 17% to £4.3 billion, with strong growth from both new and used car sales. Adjusted profit before tax for the year increased by 7% to £77.1 million, which is the highest trading result for the company to date. Other key performance elements were improvements in both aftersales turnover and margin.

Adjusted Earnings per Share 15.87p

Group profit before tax

Having studied business, mainly marketing, at Strathclyde University, Andy began his career in the motor industry in 1986 as a graduate trainee at Land Rover. He advanced to a number of dealer facing roles and eventually became Sales Director for Land Rover in the UK. Andy joined the Group in 2000 and was appointed to the Board in 2002. In March 2010 he was appointed as Managing Director of the Motor Division and Chief Operating Officer in March 2013. Andy became Group Chief Executive on 1st January 2014.

The last year under Andy's leadership has seen Lookers post a record profit before tax of £77.1m and the Group's revenue move past £4 billion for the first time. Andy continues to drive our proven business model of 'Right Brands, Right Locations' which has seen a significant restructure of our portfolio including the acquisition of both Drayton and Knights Group making us the largest Mercedes-Benz dealer group in the UK and bringing the prestigious BMW and MINI brands into the portfolio.

The year ahead will see no let up with a continued commitment to upgrade our retail environments to provide the best customer experience, investment in key touch points and continual optimising of our brand portfolio among priorities.

Our Business 30

Executive Directors Our Business

Andy Bruce Chief Executive Officer

2016 highlights Awarded CEO of the Year at the 2016 Motor Trader Industry Awards

Instrumental in bringing Drayton Group and Knights Group into the Lookers family

Driving force behind the 'Right Brands, Right Locations' business model

"Our strategy of acting as a consolidator, as well as growing organically, leaves us ideally placed for further growth and increased earnings in 2017 and beyond."

Nigel is a Chartered Accountant and, prior to joining Lookers, held several senior positions; latterly as Chief Executive of Benfield Motor Group, and previously with Pendragon plc and Reg Vardy plc. He joined the Group and the Board in August 2013 as Managing Director of Lookers Motor Division and was promoted in 2017 to a newly created position of Chief Operating Officer, which will see him focus on the execution of the company's strategy.

Nigel chairs our new Development Board. This team will concentrate on developing strategic initiatives that meet our longer terms ambitions and our goal to be best known for retail experience.

Under Nigel's leadership, the company will continue to focus on operational excellence and performance metrics. Through technology, culture, process and marketing Lookers will provide a relaxed, seamless, online-channel retail experience.

In the past year under Nigel's management, gross profit increased 15% in fleet, 2% in new retail, 8% in used and 9% in aftersales. Finance penetration increased from 79% to 83%. Our gross margin in aftersales rose from 43.3% to 45% and we made good progress in creating capacity in used cars and aftersales.

Lookers plc Annual Report & Accounts 2016

Executive Directors Our Business

Nigel McMinn Chief Operating Officer

2016 highlights Promoted from Managing Director to COO

Chair of our new Development Board

Oversaw significant organic gains in fleet and retail share

Company was awarded Dealer Group of the Year at the 2016 Motor Trader Industry Awards

"The future looks bright for Lookers. We will turn over more than £4bn this year. We would like to add more brands to our business but it is not scale for scale's sake."

Robin is a Chartered Accountant who started his career and qualified with Deloitte. He has previously held senior finance positions as Group Finance Director of CD Bramall plc and Cardpoint plc. Robin joined the group and the Board in May 2009 as Group Finance Director, a position he has held since it was changed to Chief Financial Officer in 2017 in recognition of his contribution to the company.

Robin has overseen an eighth consecutive year of growth for Lookers with revenue increased to £4.3 billion, a robust capital structure and strong cash flow. He was heavily involved in the acquisitions of both Knights Group and Drayton Group for £26.6m and £56.3m respectively and the sale of our parts division for £126m.

The last year has seen our earnings per share up 4% at 15.87p and our annual dividend increase 17% to 3.64p.

Our financial strength allowed us to invest £30m in 2016 on our retail estate, including major new projects like Jaguar Land Rover in London, Mercedes-Benz in Tonbridge, and in Newcastle upon Tyne state-of-the-art dealerships for Volkswagen and Nissan.

We have also invested in technology both online and instore to help us to achieve our goal of being best known for retail experience.

Executive Directors Our Business

Robin Gregson Chief Financial Officer

2016 highlights Promoted to Chief Financial Officer

Oversaw record turnover and profit for the group

The company delivered strong cash flow and reduced debt to £74.1m from £161.7 the previous year

"The group balance sheet has been strengthened by strong operational cash flow and substantial headroom in bank facilities. This provides financial security to grow the business through strategic acquisitions at a time of significant consolidation opportunities within the sector. "

"2016 has been a year of significant transformation at Lookers. The sale of the Parts Division and the acquisitions of the Drayton and Knights businesses were managed very smoothly and resulted in significant contributions. Integrating acquired businesses into the existing group structure, culture and brand portfolio is something Lookers does particularly well. "

37

Richard Walker † ¥ ∆

Appointed in February 2014. Previously an Executive Director of Talk Talk. Prior to Talk Talk's demerger with Carphone Warehouse Group plc, Richard spent 18 years with the retailer and held various positions including Managing Director for Europe and COO of the UK Business.

Tony Bramall

Appointed in June 2006. Chairman and Director of CD Bramall plc until February 2004.

Bill Holmes * † ¥ ∆

Appointed in June 2008. Previously managing partner of the Leeds office of BDO Stoy Hayward, whom he joined in 2002 from Arthur Andersen where he had been a partner since 1988. Prior to joining Arthur Anderson he qualified as an Inspector of Taxes with HM Revenue & Customs.

Sally Cabrini † ¥ ∆

Appointed in January 2016. Currently Business Services Director for United Utilities with responsibility for information technology and human resources.

Sally joined United Utilities in 2007 as HR Operations Director and started her career in HR with Rowntree Mackintosh Ltd before working in senior roles for Northern Foods and then as a consultant to a number of companies.

* Senior Independent Director † Member of the Audit and Risk Committee ¥ Member of the Remuneration Committee ∆ Member of the Nomination Committee

Phil White ¥ ∆ Chairman

Appointed in September 2006. Phil was Chief Executive of National Express for nearly 10 years until 2007. He is also Chairman of Kier Group plc and The Unite Group plc.

Non Executive Directors Our Business

How we create value

There are two key ingredients to our road map; firstly we will continue to optimise our portfolio to ensure we have the right brands in the right locations. If we can achieve this fundamental part of our strategy, it will have a direct impact on our financial success.

Secondly, we want to become known for the retail experience we offer to our customers. The key is to be noticeably and meaningfully different to increase brand recognition and customer loyalty. To support this vision we will continue to invest in our people, to attract, retain and nurture the best talent; invest in our technology and engage our colleagues and customers in a seamless and effortless experience. This will all help to strengthen our brand as we work to become a partner of choice for customers, colleagues, brand partners and investors. Of course all of this has to be underpinned by operational excellence in our every day delivery.

Our near term focus will be on optimising our cost base, making roles in our dealerships simpler and providing more focus on key measurements. There are also some 'sacred cows' in our industry that need addressing: we want to attract more women to develop their careers with us, we need to optimise our service capacity and we will consider changed consumer expectations with regards to opening hours and omni-channel integration.

We don't believe in 'a one size fits all' approach to further optimise our business for both brand partners and customers. Instead we aim to share best practices and develop blueprints for success so we can lighten the load and accept that shared services are often a more effective way of running a business of our size and complexity. Many of these shared resources will be within the nine divisions and some will be based at head office.

Best known for Retail Experience Meaningfully and noticeably different

Right Brands, Right Locations

People	Technology	Brand
Engaged and empowered teams to deliver a personalised experience	Seamless omni-channel experience	for customers, and investors

Partner of choice for customers, people, suppliers and investors

Operational Excellence Progressive, successful organisation

People

We aim to create and maintain a stable, engaged high quality workforce that will ensure we continue to succeed. We have highlighted future focused roles to offer specialist support including Group Qualifications to manage the incoming Apprenticeship levy and Group Diversity to ensure that the best talent from all backgrounds can access and succeed at Lookers.

We have also introduced market leading new benefits for staff including extra holiday, critical illness cover for all and 12 months full maternity pay.

Technology

Technology will play a key role in the development of the Lookers business in the coming years. We recognise the importance of the omni-channel experience that our customers now expect. We have a brand new website in development which will embody our aim to put information at our customers' fingertips and give them more control over of how they interact with us. To make sure the process is as seamless as possible, we are updating how we manage the customer journey, have a new retail experience using Citnow and are constantly upgrading our network to keep the business moving.

Brand

As a modern motor retailer, we understand the importance of a strong brand. We are creating a compelling 'Why Lookers' proposition for customers, colleagues, suppliers and investors through engaging, creative and relevant content to increase retention, brand recognition and sentiment. We are creating a customer-centric engagement strategy across all channels and touch points with unique, content-rich proof points that allows us to become best known for an added-value retail experience, and embracing next generation digital capabilities.

Business Model & Strategy

Developing the customer experience

One of the key differentiators of our retail proposition is the service and experience we offer our customers across all channels and touch points. We strive to provide the highest level of customer engagement and experience in our retail sector through relevant, personal, meaningful and memorable expert advice that allows our customers to make the right choices.

In addition, we are committed to a significant capital investment plan to further improve our dealership estate over the next three years to make it best in class in a modern and contemporary multi-channel motor retail environment.

In order to be recognised as providing the best customer experience we are investing into new technologies, a new and enhanced website, our Lookers retail brand proposition, new training and development plans for our people, our dealership portfolio, customer research and our operational capabilities to make the customer journey more seamless and rewarding.

We are developing a brand new industry leading website that will offer the customer an improved retail experience that will mirror our instore offer. The platform will be centred on the individual customer, providing intuitive search facilities and a personalised area for storing information.

We are currently working on 80 projects to deliver technology that is faster, better, easier and richer for the business. These include the new website and introducing Microsoft Office 365, with includes applications like OneDrive, Yamma and Skype – all designed to increase efficiency.

In order to be the retailer of choice we understand that we need to create a compelling brand proposition, with distinct benefits that make our offer meaningfully and demonstrably different from our competitors. Our recently adopted strapline 'For you, for life' will ensure we stand out from the competition and give customers a real reason to choose Lookers.

Retail brands differ from product brands. Our customers choose a retailer based on choice, expert advice, accessibility, convenience and trust. We are bringing all these to life in our retail environments, from drive-in service areas with barista bars, to kids zones and interactive information touchscreens.

We are going to invest in our people and work to create an empowered team who know how to put customers first on every occasion. We aim to be the very best for customer experience, not just in automotive but across every sector.

At Lookers we are proud to call ourselves a 'people business'. This doesn't just mean a personal service to our customers, it extends to the communities we work within and, of course, the people all across the UK who make us who we are. We are always exploring ways to make people's experience of Lookers noticeably and meaningfully different both within the business and to the customers we serve.

If there's one thing we can all be proud of here at Lookers it's the tireless work that our people do for charity. Whether it's volunteering out in the local community or making

complete fools of ourselves for Red Nose Day, our people love to get involved.

As well as encouraging our people to support causes in their local area, we have identified group wide objectives for CSR. This is split into four key areas; consumer, employee, industry and community. In each area we will support charitable organisations including MacMillan, Children in Need, Duke of Edinburgh Award, Cash for Kids, 353, BEN and Lord Taverners.

Business Model & Strategy

over the UK and at the heart of

where we live and work.

Over the past 12 months we have been involved with and organised a number of corporate fundraising events. The year began with the annual BEN Automotive Challenge Event held on the waves around the Solent. This was followed by our track day at Croft Racing Circuit to raise money for the military charity 353.

Later in the year we were joined by Alan Shearer and Jonathon Edwards at our annual golf day for The Prince's Trust at Close House in Northumberland. We are also committed to helping raise £21m for the Prince and Princess of Wales' Glasgow Hospice redevelopment.

£35,000 raised for Prince's Trust at the Lookers Golf Day

Fundraising

The Guild Awards

The Lookers Guild of Excellence Awards ceremony gives us the opportunity to show employees that their commitment to Lookers, and our customers, does not go unnoticed. The scheme is open to all Lookers employees.

A dedicated Guild website allows all staff members to see how they are performing in their respective leagues, which introduces a healthy element of competitive spirit. In addition to the performance related awards throughout the year, staff who are nominated by their colleagues for

going beyond the call of duty, receive monthly awards in recognition of their contribution.

The Guild Awards are our way of recognising some of our wonderful people for making a difference over the past 12 months, whether it's raising money for charity or giving time back to the local community. The winners are chosen based on their performance levels, customer satisfaction ratings and the overall contribution they have made to Lookers. There are a total of 19 categories ranging from aftersales to charity work.

We invest in our people and work to create an empowered team who know how to put customers first on every occasion. We aim to be the very best for customer experience, not just in automotive but across every sector.

We also want to deliver a "genuine" service to our customers, a one where we put them at the heart of what we do rather than allow processes to drive what happens.

Personal growth

We will start with more investment in training. The VESPA Philosophy is our new flagship workshop designed to help improve skills and be even more focused on our customers. In time we will invite everyone to join the workshop. We will provide Leadership Development workshops to help people work together more effectively. The NICER Index will also evolve to be more engaging. It will be designed to measure customer experience in a simple to understand way that is easier to take action from.

Recruiting the best

It's vitally important we attract the best people to Lookers. To help with this we are setting up a central resourcing team who will replace the use of recruitment agencies, reducing cost and providing a constant flow of great people.

Valuing diversity

We are focusing more than ever on diversity and have appointed a Group Diversity Manager. To support our people both at home and at work, we will now be offering one year's full maternity pay for those who have been with us for over a year and who return to work.

Looking after our people

We want to look after our people with new industry leading benefits. We understand 9 to 5 isn't for everyone so we support flexible working and provide 2 years critical illness cover for the times of greatest need. We also provide increased holidays that rapidly accelerate with length of service.

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Corporate Governance The Directors are pleased to submit their report which includes the Statements on Corporate Governance and the audited financial statements for the year ended 31 December 2016.

1. Activities

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.

2. Strategic And Operational Review

An analysis of the functional performance of the group, is provided on pages 7 to 48. The main financial KPIs of the group are revenue, profit before tax, earnings per share and gearing. The additional information required to be disclosed in the Strategic and Operational Review is detailed below.

Corporate Social Responsibility and Diversity

The group has a long-standing Corporate and Social Responsibility agenda and further details of this are included on page 59 of our annual report. Additional information on which the directors are required by law to report is set out below and in the following:

• Directors' Report
• Chairman's Statement on Corporate Governance
• Corporate Social Responsibility Review
• Audit Committee Report
• Directors' Remuneration Report
• Directors' Responsibility Statement

The UK Corporate Governance Code includes a recommendation that boards should consider the benefits of diversity, including gender when making board appointments. The Board recognises the importance of gender balance and considers this issue among the wider issues of diversity where the most important requirement is to ensure that there is an appropriate range of experience, balance of skills and background on the Board. We will continue to make changes to the composition of the Board irrespective of gender or any form of discrimination so that the best candidate is appointed.

Principal Risks and Uncertainties

The group's business activities, financial condition, results of operations or the company's share price could be affected by any or all of the following principal risks or uncertainties:

Global Economy

The new and used car markets are influenced by general economic conditions, including changes in interest rates, fuel prices, indirect taxation, the cost and availability of credit and other factors which affect levels of consumer confidence.

The demand for new cars can be cyclical as it follows the general UK economy, which in some years will lead to reduced margins caused by oversupply. This could have an adverse impact on the earnings of the group, although it is likely that this would be mitigated by potential increases in both the used car market and the aftersales market as customers substitute nearly new for new cars, or spend more keeping their old vehicles roadworthy. Despite the general uncertainty in the economy several years ago, the group's business has proved to be resilient against this background and has continued to be profitable.

Manufacturers' Financial Stability

The group relies on its manufacturer partners for a significant proportion of its revenues and profits. The failure of a manufacturer could have a significant impact on the short-term profitability of a retailer partner. The group has attempted to mitigate this risk by having trading relationships with a large number of manufacturers, so that the impact of any one manufacturer failing would be reduced.

Liquidity and Financing

The group uses a number of methods to fund its day to day business. These methods are (i) bank borrowings by way of committed borrowing facilities (Banking facilities of £235.0 million, maturing March 2020); (ii) from manufacturer and third party finance houses through uncommitted stocking facilities to fund the purchase of stock; and (iii) from suppliers by way of trade credit. A withdrawal of any of these financing facilities or a failure to renew them as they expire could lead to a significant reduction in the trading ability of the group. However the group's balance sheet has been strengthened significantly over the past five years and this together with the renewal of the group's banking facilities in 2015, provides sufficient liquidity and funding.

Exchange Rates

The group is affected by currency fluctuations to the extent that a large proportion of our manufacturer partners either source parts or manufacture vehicles overseas. The relationship of the Euro against Sterling is considered to be the primary factor that could impact on this either to a beneficial or negative effect. The Board is aware of the uncertainties and seeks to mitigate this by ensuring the group retains a broad mix of the major manufacturers, both UK and overseas, to limit the effect.

Block Exemption Aftersales / General Exemption Sales

The franchise agreement legislation for the automotive sector changed in June 2013. Aftersales agreements continue to be legislated by a Block Exemption, dictating that aftersales businesses meeting manufacturers qualitative standards criteria have an entitlement to represent the brands aftersales service and parts franchise.

2. Strategic And Operational Review (continued)

Sales agreements are granted by car manufacturers based on standards, but agreements are restricted to territories granted by manufacturers, who also determine choice of partner, enabling them to restrict the number of outlets any dealer can hold or entry into the sales franchise.

By continuing to focus on providing excellent customer facilities, excellent customer service and providing high level representation for the group's manufacturer partners, current business relationships will be maintained, providing opportunities for selective growth.

Competitive Nature of the Market

The motor vehicle distribution market is highly competitive and comprises a small number of large dealer networks, similar to Lookers, down to a large number of much smaller operators. In addition, the market includes internet-based dealers and private individuals. The franchised businesses also compete in the aftersales market which comprises similar franchised businesses, supply and fit chains, and a large number of small independent garages and bodyshops.

The market therefore offers customers different options depending upon price and quality of service they wish to take, with owners of new and nearly new vehicles tending to use the franchised businesses and owners of older vehicles tending towards the smaller independent provider. The group's franchised businesses rely on the quality of their customer service and the ability to adjust pricing, enabling them to react to local competitive conditions.

The parts distribution business continued to operate in a very competitive market place, dominated by a few large players. The differentiator in this market is the quality of customer service offered by the group's businesses, which continues to give the competitive edge where price differences would not be enough. The parts business was sold on 4 November 2016.

Government Legislation

In addition to franchise regulation rules noted above, changes to the government's transport policy or other statutory regulations for example in relation to the environment, could adversely affect the group's profitability if, as a result, customers choose to use alternative forms of transport.

Information Systems and Data Security

The group is dependent upon a number of business critical systems which, if interrupted for any length of time, could have a material effect on the efficient running of the group's businesses. The Board has implemented a series of contingency plans which would enable the group to resume operations within a short space of time, thus mitigating the likelihood of material loss. Our IT security team monitors cyber security threats and uses software and processes in place to deal with incidents which may occur. The Board is aware of its obligations to protect confidential data and has taken steps to implement systems and procedures to further improve data security.

Manufacturers' Influence

The group's activities are also influenced by manufacturers in other ways. The timing, frequency and efficiency of new model roll-outs and changes in consumers' perception of these models and brands could materially affect the group's business. Similarly, manufacturers use a series of incentive schemes to support new car sales, warranty programmes etc. and changes or discontinuation of these schemes could also affect the group's business. By representing over thirty marques, the group believes that this diversity reduces the impact to the group that manufacturers' influence could cause.

3. Dividends and Shares Ordinary shares of 5p each.

An interim dividend of 1.28p per ordinary share was paid on 25 November 2016 (2015: 1.07p). The directors are recommending a final dividend of 2.36p per ordinary share (2015: 2.05p) which will be payable on 31 May 2017 following approval at the Annual General Meeting, bringing the total dividend for 2016 to 3.64p (2015: 3.12p).

4. Directors

The following were directors of the company at the end of the financial year and thereafter. Their interests in the issued ordinary share capital of the company were as follows:

	31.12.16	31.12.15
	Number	Number
D. C. A. Bramall	63,487,636	63,487,636
A. C. Bruce	642,086	642,086
N. A. Davis	277,041	277,041
R. A. Gregson	357,815	357,815
W. Holmes	54,666	54,666
N. J. McMinn	160,000	160,000
R. S. Walker	-	-
P. M. White	53,716	53,716
S. J. Cabrini	-	-

Details of directors' share options are shown in the Directors' Remuneration Report.

All holdings are beneficial.

S. J. Cabrini was appointed a director on 1 January 2016.

N. A. Davis resigned as a director on 4 November 2016.

There was no change in the interests of the Directors in shares or share options of the company between 31 December 2016 and 8 March 2017.

The mid-market price of the ordinary shares at 31 December 2016 was £118.0 and the range during the year was £0.925 to £1.85.

As permitted by the Company's articles of association, the Board has decided that all directors will retire from office at the 2016 Annual General Meeting and will seek re-election by the shareholders. Biographical details of all the directors are included on pages 30 to 37. Following formal performance evaluation by the board, the Chairman confirms that each of the directors standing for re-election continues to be effective and demonstrates commitment to the role.

There are no other contracts with the company or its subsidiaries in which a director of the company has any interest, other than service contracts (executive directors) or letters of appointment (non-executive directors).

The company 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.

5. Approval Of The Directors' Remuneration Report

The company will propose at the 2017 Annual General Meeting an ordinary resolution to seek shareholder approval of the Directors' Remuneration Report for the financial year ended 31 December 2016 (other than the part containing the Directors' remuneration policy which will be covered by a separate resolution). The Directors' Remuneration Report can be found on pages 62 to 81. The vote on the Directors' Remuneration Report is advisory in nature and the directors' entitlement to remuneration is not conditional on it being passed.

The company will also propose at the Annual General Meeting an ordinary resolution to seek shareholder approval of the Directors' remuneration policy set out on pages 64 to 71 of the directors' Remuneration Report for the financial year ended 31 December 2016.

The Companies Act 2006 requires the remuneration policy to be put to shareholders for approval annually unless the approved policy remains unchanged, in which case it need only be put to shareholders for approval at least every three years. As the policy has changed in the year this will be put forward for resolution again. The remuneration policy sets out how the company proposes to pay the directors and includes details of the company's approach to recruitment, remuneration and loss of office payments.

The resolution this year follows extensive consultation with shareholders and further details are included in the Directors Remuneration Report.

The vote on this resolution is binding and, if passed, will mean that the Directors' can only make remuneration payments in accordance with the approved policy unless such payments have been approved by a separate shareholder resolution.

6. Ethical Employment

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.

Employment within the group is offered on the basis of the person's ability to work and not on the basis of race, individual characteristics, sexual orientation, creed or political opinion.

7. Donations

Charitable donations amounted to £34,581 (2015: £38,040). No political donations were made (2015: £nil).

8. 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.

9. Supplier Payment Policy

The group does not formally follow the better payment practice code issued by the Department of Trade and Industry because, in line with industry practice, manufacturers insist upon direct access to our bank accounts and they take funds to pay for both vehicles and parts when they fall due. Other suppliers are generally paid in accordance with their terms of trading. At 31 December 2016, the trade creditors of the group and the company represented 25 and 159 days (2015: 29 and 137 days) purchases respectively.

10. Derivatives and Financial Instruments

The group's treasury activities are operated within policies and procedures approved by the Board, which include defined controls on the use of financial instruments managing the group's risk. The major financial risks faced by the group relate to interest rates and funding. The policies agreed for managing these financial risks have remained the same since the beginning of the period under review, and are summarised below.

The group finances its operations by a mixture of retained profits, bank borrowings, stock financing and commercial paper. To reduce the group's exposure to movements in interest rates, the group seeks to ensure that it has an appropriate balance between fixed and floating rate borrowings. The group uses interest rate swaps and collars in order to manage its exposure to interest rate risk; all such arrangements are approved by the Board in line with its treasury policies.

The group seeks to ensure continuity of funding by taking out certain borrowings which are repayable in instalments over periods of at least three years. Short-term flexibility is achieved by overdraft facilities.

The group has no significant exposure to foreign currency, nor does it undertake any trading in financial instruments.

Refer to notes 17, 20, 21 and 31 of the notes to the Financial Statements for further information in this area.

11. Substantial Shareholdings

On 8 March 2017 the following shareholders, so far as the Directors are aware, had an interest in 3% or more of the issued ordinary share capital of the company:

	At 8 March 2017	At 31 December 2016
D. C. A. Bramall	63,487,636 shares	63,487,636 shares
and Family	(16.01%)	(16.01%)
Standard Life	34,984,911 shares	37,916,685 shares
Investments	(8.82%)	(9.56%)
Schroder Investment Management Limited	18,566,701 shares (4.68%)	13,057,308 shares (3.29%)
BAE Systems	16,486,936 shares	16,957,293 shares
Pensions	(4.16%)	(4.28%)
Black Rock	12,119,778 shares (3.06%)	12,248,544 shares (3.09%)

The Directors have not been notified of any other holders of 3% or more of the issued ordinary share capital.

By Order of the Board

G. MacGeekie

Company Secretary 8 March 2017

Compliance Statement

The Board of directors is collectively accountable to the company's shareholders for good corporate governance and is committed to achieve compliance with the principles of corporate governance set out in the 2014 UK corporate governance code issued by the Financial Reporting Council (the "Code"). Throughout 2016 the company has been in compliance with the provisions set out in the Code.

The company is committed to the principles of corporate governance contained in the 2014 UK Corporate Governance Code issued by the Financial Reporting Council ("the Code") for which the Board is accountable to shareholders.

The Board have reviewed the contents of this report and consider the document, taken as a whole, to be fair, balanced and understandable and provides the information necessary for shareholders to assess the company's position and performance, business model and strategy. The basis for this view is that all of the directors are furnished with the requisite information to perform their duties and are provided access to key members of management as they require. The Board meet regularly and are given adequate time to probe, debate and challenge business performance as and when they consider it necessary to do so. The Board has also discussed the detail of the financial results with the Audit Committee and are satisfied they have been prepared appropriately. Having gained a thorough understanding of the business each member has also had the opportunity to review and influence this report and as such have concluded in line with the statement above.

The Board

The Board of directors at the start of the financial year under review comprised four executive directors and five non-executive directors. W. Holmes, R. S. Walker and S. J. Cabrini (appointed 1 January 2016) are considered to be independent non-executive directors.

The Code requires 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 number and quality of the non-executive directors on the Board, with their combination of diverse backgrounds and expertise, ensures this principle is met.

The Board has a documented schedule of matters reserved for its decision which includes the following:

• agreeing objectives, policies and strategies, and monitoring the performance of the executive management;

• approval of the group's strategic plans and business plans;

• approval of annual and interim results;

• deciding on major changes in organisation and the shape of the group, including entry into new fields of operation and departure from those which are no longer considered to be appropriate; and
• approving major individual capital projects.

The Chairman takes responsibility for ensuring the directors receive accurate, timely and clear information. Monthly financial information is provided to the directors. 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. In addition to formal Board meetings, the Chairman maintains regular contact with the Chief Executive and the other directors to discuss specific issues. In furtherance of their duties, the directors have full access to the services of the Company Secretary and may take independent professional advice at the company's expense. The Chairman believes that given the experience and skills of its particular directors, the identification of general training needs is best left to the individual's discretion. If any particular development need is identified through the Board's formal appraisal process or by an individual director, the company makes the necessary resources available. The Chairman takes overall responsibility for the directors training.

Director Roles

P. M. White is the Non-Executive Chairman and A. C. Bruce is the 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 has been set out in writing.

W. Holmes is the Senior Independent Director. It is the prime responsibility of the Senior Independent Director to provide a communication channel between the Chairman and the Non-Executive Directors and to ensure that the views of each non-executive director are given due consideration. The Company Secretary would minute any unresolved concerns expressed by any director.

The company maintains appropriate directors' and officers' insurance in respect of legal action against its directors.

Attendance at Meetings

The following table shows the attendance of directors at regular Board meetings and at meetings of the Audit, Remuneration and Nomination Committees.

Scheduled meetings held in 2016

	Board	Audit	Remuneration	Nomination
Number held	11	3	2	1
Number attended
D. C. A. Bramall	10	1*	1*
A. C. Bruce	11	1*	1*
S. J. Cabrini	11	3	2	1
N. Davis	9
R. A. Gregson	11	3*	1*
W. Holmes	11	3	2	1
R. S. Walker	11	3	2	1
N. J. McMinn	11
P. M. White	11	3**	2	1

*in attendance by invitation of the Committee for all or part of the meeting. **in attendance by invitation of the Committee for all of 2 meetings.

Appointment and Selection of Directors Appointments

The Code requires there to be a formal, rigorous and transparent procedure for the appointment of appropriate new directors, which should be made on merit and against objective criteria. The Board has an established Nominations Committee for this purpose and its terms of reference are available from the Company Secretary.

The Board approves the appointment and removal of directors.

The Board is aware of the other commitments of its nonexecutive directors and is satisfied that these do not conflict with their duties as non-executive directors of the company.

The service contracts of executive directors and the letters of appointment of non-executive directors are available for inspection at the company's registered office during normal business hours and at the Annual General Meeting.

Directors receive induction on their appointment to the Board as appropriate, covering matters such as the operation and activities of the group (including key financial and business risks to the group's activities), the role of the Board and the matters reserved for its decision, the tasks and membership of the principal Board Committees, the powers delegated to those Committees, the Board's governance policies and practices, and the group's latest financial information. The training and induction process for directors takes into account the development of the group and applicable governance standards. Major shareholders are offered the opportunity to meet new directors as any appointments are made.

The requirement to propose directors for re-appointment at regular intervals is met by applying the company's Articles of Association. These require that at each Annual General Meeting not less than one-third of the directors who are subject to retirement by rotation must retire, and that any director, who was not appointed at either of the two previous Annual General Meetings and who has served as a director for more than two years since appointment or last reappointment, has to retire.

In accordance with the Code, each new non-executive director is appointed for a specified term, being an initial period from appointment to the next Annual General Meeting where they will be subject to re-appointment at that meeting, for a further period ending not later than the Annual General Meeting held three years thereafter. There is a general assumption on the part of the Board that independent non-executive directors will not normally be invited to stand for re-appointment after serving six years.

Nomination Committee

The Nomination Committee comprises P. M. White, W. Holmes, R. S. Walker and is chaired by P. M. White. The Committee reviews the size, structure and composition of the Board and Committees and makes recommendations to the Board with regard to any changes that are considered necessary. The Committee also reviews the time required of non-executive directors.

The Nomination Committee is responsible for assisting the Board in the formal selection and appointment of directors (including non-executive directors) and considers succession planning for the Board. In considering an

appointment, the Nomination Committee evaluates the balance of skills, knowledge and experience of the Board and prepares a description of the role and capabilities required for a particular appointment. In identifying suitable candidates, open advertising or external search agencies will be used by the Committee, where appropriate. It also considers potential candidates and recommends appointments of new directors to the Board. The appointments are based on merit and made against objective criteria including the time available and commitment which will be required of the potential director.

The Committee has the power to employ the services of such advisors as it deems necessary in order to carry out its responsibilities and may retain appropriate executive search consultants having prepared a job specification for the role.

The UK Corporate Governance Code includes a recommendation that boards should consider the benefits of diversity, including gender, when making board appointments. The Board recognises the importance of gender balance and considers this issue among the wider issues of diversity where the most important requirement is to ensure that there is an appropriate range of experience, balance of skills and background on the Board.

Evaluation of Board Performance

A formal independent evaluation exercise in relation to the Board and its Committees was undertaken in 2016 by Aretai Consulting Limited (which has no other connection with the company). This considered the balance of skills, experience, independence and knowledge of the company on the board, its diversity including gender, how the board works together as a unit and other factors relevant to its effectiveness. The results of that evaluation indicated that the Board (and its Committees), generally, operated effectively. Certain recommendations were made as a result of this evaluation and these either have been or will be subsequently implemented. A follow-up evaluation will be performed in 2019. The evaluation of the effectiveness of individual Directors was, in the case of the non-executive directors, carried out by the Chairman and, in the case of the Chairman, by the non-executive directors, in each case taking account of the views of the executive directors. The evaluation of the effectiveness of the executive directors was carried out as part of the annual appraisal procedure by the Chief Executive in the case of the other executive directors and by the Chairman in the case of the Chief Executive Officer.

Accountability and Audit

Going Concern

After making enquiries, the directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. In forming this view, the directors have reviewed trading and cash flow forecasts and have also taken into consideration that the group's banking facilities remain available to them and are appropriate given the group's current trading, medium-term plans and conditions in the global economy. For this reason the directors continue to adopt the going concern basis in preparing the financial statements. Further details surrounding the directors' rationale regarding the going concern assumption are included in Principal Accounting Policies on page 91.

Viability Statement

In accordance with provision C.2.2. of the UK Corporate Governance Code, the directors have assessed the viability of the company over a three year period to 31 December 2019. The directors believe this period to be appropriate as the company's strategic plan which has been approved by the board encompasses this period. In making their assessment the directors have considered the company's current financial position and performance, cash flow projections including future capital expenditure, in relation to the availability of finance and funding facilities and have considered these factors in relation to the principal risks and uncertainties which are included in the directors' report.

During 2016, the Board carried out a robust assessment of the principal risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity. The directors believe that the group is well placed to manage its business risks successfully, having taken into account the group's principal risks and uncertainties. Accordingly, the Board believes that, taking into account the group's current position, and subject to the principal risks faced by the business, the group will be able to continue in operation and to meet its liabilities as they fall due for the period up to 31 December 2019.

Internal Control

The Code requires the company to maintain a sound system of internal control to safeguard shareholders' investment and the company's assets. The Board must review the effectiveness of the system at least annually, covering all material controls, including financial, operational and compliance controls and risk management systems, and report to shareholders that it has done so. The Turnbull Report, adopted by the UK Listing Authority, provides guidance for compliance with that part of the Code. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the company. Steps are being taken to embed internal control and risk management further into the

operations of the businesses and to deal with areas of improvement which come to management's and the Board's attention. The process has been in place throughout the year and up to the date of approval of the Annual Report and Accounts. It is regularly reviewed by the Board and accords with the guidelines set out in the FRC'S Internal Control: Guidance on Risk Management, internal control and related financial and business reporting.

The Board confirms that the actions it considers necessary have been or are being taken to remedy such failings and weaknesses which it has determined to be significant from its review of the system of internal control. This has involved considering the matters reported to it and developing plans and programmes that it considers are reasonable in the circumstances. The Directors acknowledge that they are responsible for the group's system of internal control, for setting policy on internal control and for reviewing the effectiveness of internal control. The role of management is to implement Board policies on risk and control.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against material misstatement or loss. In the year there have been no significant internal control issues.

The group has an internal audit function that reports to the Audit Committee. Detailed control procedures exist throughout the operations of the group and compliance is monitored by management, internal auditors, and, to the extent that they consider necessary to support their audit report, the external auditor.

The board confirms it has performed its annual review of the effectiveness of internal control. The Board has concluded that, as at 31 December 2016, the Group's systems of control over financial reporting were effective.

Relations with Shareholders

The company places considerable importance on communications with shareholders and responds to them on a wide range of issues. It has an ongoing programme of dialogue and meetings with major institutional shareholders, where a wide range of relevant issues including strategy, performance, management and governance are discussed. The Chairman makes himself available to meet any major shareholder, as required.

All company announcements are posted on our website www.lookers.co.uk as soon as they are released. Our website contains a dedicated investor relations section, www.lookersplc.com, with an archive of past announcements and presentations, historical financial performance, share price data and a calendar of events.

The principal communication with private investors is through the Annual Report, the Interim Report and the Annual General Meeting. A presentation is made at the Annual General Meeting to facilitate greater awareness of the group's activities. Shareholders are given the opportunity to ask questions of the Board and of the Chairman of each Board Committee and to meet the Directors informally after the meeting. Separate resolutions are proposed for each item of business and the 'for', 'against' and 'vote withheld' proxy votes cast in respect of each resolution proposed at the Meeting are counted and announced after the shareholders present have voted on each resolution. Notice of the Annual General Meeting is posted to shareholders at least twenty one days before the date of the Annual General Meeting.

P. M. White Chairman 8 March 2017

Report from the Chairman of the Audit and Risk Committee

Report from the Chairman of the Audit and Risk Committee ("ARC")

The ARC comprises Bill Holmes (chair) Richard Walker and Sally Cabrini. Sally Cabrini joined the ARC in February 2016, replacing Phil White.

The ARC met formally three times during 2016. Each of these meetings were attended by the Board Chairman, the Chief Financial Officer and the Internal Audit Manager. The Deloitte audit team including the engagement partner also attended all three meetings to discuss and evaluate their work and conclusions on the 2015 audit, and to present their audit plan for the 2016 year end.

The ARC also met informally on several occasions to consider the audit tender process and the selection of auditors described in more detail below. In addition to these meetings there is a regular dialogue between the Committee members, and with the Chief Financial Officer and Internal Audit Manager.

The key responsibilities of the ARC are to:

• review critical accounting estimates and their impact on the financial statements,
• monitor the quality and the performance of the internal and external auditors,
• set policy for the use of the external auditor for non-audit work,
• review and evaluate the group's control of risk and its policies for risk management,
• assess the quality of disclosure in the financial statements and other formal documents,
• consider the evidence for the Board's conclusions on the group's long term viability.

Principal areas of focus in 2016 Selection of Auditors

Following discussion within the ARC and with the Board as to which firms should participate, audit and tax proposals were requested from the four largest UK accounting firms. All participating firms were aware that appointment as auditors would preclude involvement in any tax work and the need for any material non audit work to be approved in advance by the ARC.

We received three audit and four tax proposals; one firm being unwilling to propose for the audit, as it would have required them to cease to act on an ongoing project. The firms proposing were given full access to the wider finance and tax team at Lookers prior to submitting their proposals.

Two members of the ARC and the Chief Financial Officer reviewed all proposal documents, and attended all audit and tax presentations. The views of the selection committee were discussed within the ARC and with the Chairman prior to formal Board recommendation. The ARC recommended to the Board that Deloitte be reappointed as auditors, and confirmed the appointment of Patrick Loftus as audit partner. The audit fee estimate submitted by Deloitte was also recommended for

approval. EY's proposal to provide tax advisory and compliance services was recommended by the Finance Director and agreed by the ARC.

Oversight of risk issues and risk management

The Committee has continued to increase its focus on risk and risk issues, in line with the greater attention and visibility they receive in the business as a whole. We have continued our involvement in the development of the risk register, which is now periodically reviewed by the Main Board. The substantial progress mentioned in last year's report in making this a working document has continued, with specific tasks and individual responsibilities clearly identified.

There are now quarterly meetings of the operational risk subcommittee which is chaired by the Chief Financial Officer and attended by a member of the ARC. This subcommittee receives reports from the individuals named as responsible for specific risk issues, and monitors their progress in reducing and responding to them.

Performance of internal audit

The head of internal audit attends ARC meetings and copies all internal audit reports to the ARC chairman. Internal audit results are discussed as part of the ARC's standing agenda. The improvement in internal audit grades noted in 2015 has not continued in 2016, with a small decline in average ratings across the group. The acquisition of several large businesses over the last two to three years partially explains this result, as some of these businesses have taken time to adjust to new procedures and documentation. The ARC is discussing with internal audit ways in which we can capture any declining performance on compliance by individual dealerships more quickly, and flag it for remedial action.

There will be a focus in 2017 on ensuring that follow up procedures involve providing resource and training where needed so that underperformance is eliminated. The ARC has also continued a discussion with internal audit, and more widely, on understanding and monitoring risks relating to our increasingly complex and critical IT systems, and to risks relating to compliance with financial services regulations and best practice. In part this is already dealt with by the teams responsible for the operational risk concerned, but the ARC believes that there is scope for improvement in the alignment between risk and how internal audit is deployed to monitor it. Evaluating how this can be achieved will be a priority for the ARC this year.

Performance of external audit

As part of the audit selection process we and Deloitte identified the need for better communication between the external auditors and the ARC, including more direct contact between the audit team and ARC members outside formal ARC meetings. This is now happening, and is visible in the way in which this year's audit has been planned and discussed. Deloitte is also providing training opportunities and updates for the ARC.

At the conclusion of the audit selection process we considered the de minimis amount below which our approval would not be required for non audit work carried out by the auditor, and agreed that this should be £10,000 with effect from 1 January 2017.

Details of the non-audit services fees charged for the period have been presented separately in Note 4. In our opinion there are no inconsistencies between APB Ethical Standards for Auditors and the company's policy for the supply of non-audit services or any apparent breach of that policy. We note that non-audit fees (£1,277,000) have exceeded audit fees (£385,000). The non-audit fees included £848,000 of one off VAT contingent fees where the work commenced in 2007 and crystallised in 2017, £98,000 of tax compliance services which we have now resigned from, £130,000 working capital report in relation to the disposal of the Parts business and £60,000 in relation to due diligence on the acquisition of Drayton. We have considered the potential threats to independence of the overall non-audit fee level and concluded auditor independence is not impaired. This is due to different partners leading the audit and non-audit workflows, a separate independent partner reviewing the audit, the audit partner is not remunerated on non-audit fees and the quantum of the fees not giving rise to concern on the overall economic dependence of the firm. We note that the new EU Audit Reform guidance in relation to capping non-audit fees as a percentage of audit fees at 70% does not come into force until 31 December 2020. Further, the tax compliance work has now transitioned to the Group's new tax advisors as our auditors are restricted from providing these services from 31 December 2016. The current year tax compliance and advisory fees were in relation to the 31 December 2015 computations, as permitted in the EU Audit Reform Guidance.

Evaluation of ARC work

There has been no specific review of the work undertaken by the ARC during 2016, though the members of the ARC were interviewed and their contribution evaluated as part of the Board effectiveness review carried out by Aretai Consulting Limited in 2016.

Areas of focus identified by the audit and risk committee Goodwill and intangibles

The ARC considered the carrying value of goodwill and intangibles of the continuing business, and particularly the risk of overstatement in parts of the business which underperformed against budget. We concur with the judgements made, in the light of the action taken to improve or restore performance in poorer performing areas of the business and also with the judgement to impair goodwill by £1m.

Going concern

The Chief Financial Officer provides an assessment of the company's ability to continue to trade on a going concern basis for at least the next twelve months. Forecasts are based on financial plans agreed with the Board (budgets or forecasts), the company's most recent trading results and also include a range of possible downside scenarios. The assumptions that underpin the assessments are considered and discussed in detail when the ARC meet. The conclusion of that review is included in the Directors' report section of this report.

Stock valuation

Stock valuation is a critical issue for the business in view of absolute stock levels and the impact of ageing, particularly on new and used car values. Based on our review of management's calculations, we concur with the judgement that stock provisions are sufficient and appropriate.

Commercial income

A significant proportion of the company's profit is derived from the receipt of rebates from manufacturers and the ARC considers the risks and controls over this, so as to be satisfied that this is not likely to be materially mis-stated.

Exceptional items

There are a number of exceptional items disclosed in the accounts. The ARC has generally sought, in line with best practice, to challenge the use of exceptional items where these are simply large amounts which might reasonably be expected to recur in the Lookers business. We have discussed the treatment adopted in the accounts with the Chief Financial Officer and with the external auditor. The scale and nature of the items has led us to conclude that the treatment adopted is appropriate.

Pension scheme liabilities

The group operates three defined benefit schemes which have an excess of liabilities over assets. Details of these schemes are given in note 29 to the accounts. The ARC has discussed the assumptions used in calculating liabilities with the Chief Financial Officer and with the external auditor. We have concluded that the assumptions used are reasonable and appropriate.

Adequacy of disclosure in accounts and other documents The ARC provides advice to the Board on whether the annual report is fair and balanced, and whether it provides the information which shareholders require to assess the company's performance, business model and strategy. The advice is largely based on a review of key strategic risks.

In the course of our dialogue with external and internal auditors, the Committee has considered the arrangements for reporting by employees of concerns about possible improprieties in financial reporting or other matters, as set out in the Employee Handbook. We have concluded that there is a reasonably clear and well defined system for reporting of concerns. This policy and system of reporting will be reviewed annually.

W. Holmes

Chairman of the Audit and Risk Committee 8 March 2017

Corporate Social Responsibility Management

Our Main Board of Lookers is responsible for setting the group's strategy, values and standards regarding social, environmental and ethical issues. It delegates the responsibility for implementing strategy and instils values and standards throughout the group's businesses. The operating companies each include social, environmental and ethical issues in their risk assessment processes. This enables the Main Board to ensure that any potential problems are identified and contingency strategies are in place.

Lookers and the Environment

The group is aware that our activities have an impact on the environment. The group is keen to fulfil its legal obligations on this issue and has a group-wide environmental policy in place. The need to deal with contamination, waste oil and asbestos issues are at the forefront of the group's concerns.

On a wider level, Lookers supports a number of industry initiatives and the group also engages in all environmental issues raised by stakeholders, consumers, suppliers, shareholders and employees.

Mindful of the impact that our business activities may have on the environment, the group embraces initiatives that seek to protect our surroundings.

We continue to monitor a variety of areas that may impact on the environment including contamination, asbestos, waste oil, waste recycling together with energy, water and fuel efficiency,

As we construct and refurbish dealership premises we incorporate the latest and most efficient building materials, water management systems, heating & cooling plants and lighting systems.

On an ongoing basis we continue with our electrical testing regime, re-lighting programmes and air leak testing. Our in-house energy management team continues to explore energy saving initiatives as exampled by the large number of solar PV and biomass heating & cooling installations that we have throughout our dealership estate.

The group continues to have in place a variety of initiatives and controls that measure, monitor and seek to reduce energy usage and related carbon emissions. These result from regular energy surveys of our businesses. 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. CRC Energy Efficiency Scheme, whereby we report to the Environment Agency each year. We have been fully compliant for the six years ending 31 March 2016. Like for like CO2 emissions in 2015 / 2016 reduced by 5.4% compared to the previous year. This statistic does, however, reflect a milder winter year on year
• 1. Greenhouse Gas Reporting (GHG). This is our third year of reporting and the results are shown at the end of this section.
• 1. Energy Savings Opportunity Scheme (ESOS). This reporting requirement was introduced by the European Union and we achieved compliance during 2015.

We actively seek to reduce waste within our businesses and can report that:

(a) we continue with our water management processes which monitor and reduce usage. Despite the company's growth in the last year, our like for like water charges increased by only 2.2%.

(b) during 2016 we recycled 62.5% of all waste (2015: 64%)

Mandatory Carbon Reporting

As has been noted in previous years, the company reports each year to the Environment Agency under the government's CRC Energy Efficiency Scheme. The group aligns its carbon reporting period with that used for data submitted under the CRC scheme (April to March).

This is our third year of mandatory carbon reporting and covers the period 1st April 2015 to 31st March 2016.

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 1.3% 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 burned 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.

Our mandatory carbon reporting data for the 2015/2016 and 2014/2015 reporting years are summarised as follows:

	2015/2016 (tCO2e) (tCO2e/£m) (tCO2e) (tCO2e/£m)			2014/2015
Scope 1
Gas	5,074	1.26	4,140	1.27
Vehicle fuels	24,517	6.11	17,762	5.47
Total	29,591	7.37	21,902	6.74
Scope 2
Electricity Statutory Total	16,471 46,062	4.10 11.47	15,705 37,607	4.84 11.58

*Statutory carbon reporting disclosures required by Companies Act 2006.

Lookers and Ethics

We believe that integrity in its relationships with customers, suppliers, staff, shareholders, regulatory agencies and the community is important and gains the respect of all its stakeholders. Treating Customers Fairly is now embedded into the group's ethos and will continue to be part of the group's culture.

We make every effort to ensure our people are aware of these expectations and that they contribute to the high standards required of them. This statement, together with our corporate values, is at the heart of how Lookers conducts its business, externally in its relationships with stakeholders and internally through its performance management and promotion processes.

Human Rights

We are also very conscious of human rights issues within the company and the key area that would impact our business would be across our supply chain. All of our directly employed staff are based in the UK or the Republic of Ireland and are covered by UK and Irish employment law. Our supply chain in the motor division is predominantly the major international motor manufacturers who clearly take these issues very seriously as well.

Lookers as an Employer

People are crucial to Lookers' success. This approach is reflected in our policies on recruitment and retention, staff share scheme, staff communication, and health and safety.

Recruitment and Retention

We ensure that the group has fair employment terms for our people. Employment handbooks set out formal policies for key issues such as equal opportunities, disciplinary and grievance procedures, sexual, religious and racial harassment.

Our Group Director of People is responsible for raising employment standards and implementing best practice employment policies throughout the organisation. Performance reviews are conducted at least once a year and include an assessment of each individual's training needs. We have a comprehensive training programme for our people which has received industry recognition in the form of national awards for the automotive industry.

Staff Communication

We believe that our people have a right to be kept informed. Regular discussions take place to keep people updated and to seek out their ideas and opinions.

Face-to-face dialogue between managers and staff takes place regularly; information is communicated through our group intranet site "Engage", which is used by the majority of our staff on a regular basis. We also use newsletters and updates to keep our staff informed.

Health and Safety

We aim to do all that is reasonably practicable to ensure the health, safety and welfare of our people, and others who may be affected by our activities. The Main Board maintains ultimate responsibility for health and safety issues at Lookers with the manager responsible for the day-to-day responsibility, supported by all levels of management. This policy is defined in the group's Health and Safety policy statement and all staff are issued with, or have access to, a detailed health and safety guide.

The statistics for the group, under UK Health and Safety regulations for the year ended 31 December 2016, are set out below:

	2016	2015
Number of fatalities	-	-
Injuries resulting in absence	11	3
over three days
Major injuries reported	11	3
under RIDDOR*
Dangerous occurrences reported	-	-
under RIDDOR*
Number of enforcement notices	-	-
issued by HSE
Number of prohibition notices	-	-
issued by HSE

*Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995

Lookers and the Community

Lookers are committed to playing an active role in the communities it serves. All our businesses operate their own community programmes and fund raising charity events. In addition, some charities are supported at a group level such as the motor trades' BEN and our staff choose which charities to support on a group basis where we alternate between different charities every six months.

Directors' Remuneration Report

Annual Statement From The Chairman Of The Remuneration Committee

Introduction

On behalf of your Board, I am pleased to present our Directors' Remuneration Report for the year ended 31 December 2016.

Remuneration outcomes for 2016

In 2016 we had another successful year both in terms of progress against strategic priorities within the existing business and in completion of the sale of the parts business. Lookers has continued its strategy of growth through acquisition by reinvesting proceeds from the sale of the parts division to acquire Knights North West Limited and Warwick Holdings Limited. Turnover for the year increased to £4.3 billion, a 17% increase against 2015. Adjusted profit before tax ("ABPT") increased by 7% to £77.1 million.

The performance target for the annual bonus arrangement for the CEO and FD (now CFO with effect from 1 January 2017) was based on the APBT of the company and the figure for payment of the maximum opportunity of 150% of salary was £84.7 million. Actual performance was £77.2 million, which resulted in a bonus of 100% salary being paid to those executive directors in respect of 2016. The 2016 bonus of the managing director of the motor division (now COO with effect from 1 January 2017) is based on a combination of this APBT target and the performance of the division. The Committee believes that the bonus outcomes are fair in the context of the overall performance of the company. Details of bonus payments for executive directors are set out on page 70.

As part of the long term incentive structure introduced in 2013 which envisaged a three year integrated programme of long term incentives, awards granted in 2014, 2015 and 2016 were due to complete their performance period at the end of the year. The maximum Adjusted EPS targets over the period were met which included meeting the requirements whereby the exercise price reduces to £1 in aggregate. Full details are provided on page 71.

Summary of remuneration committee decisions in 2016

In 2016 we undertook a full review of the Directors' Remuneration Policy. As we communicated last year, we sought in particular to restructure the long term incentive arrangements to simplify remuneration. As a result of the review we are seeking shareholder approval for an amended Directors' Remuneration Policy to be adopted effective from the 2017 AGM.

A summary of the main amendments to the policy approved at the 2015 AGM are:

• Restructuring awards for 2017 onwards to operate more market-aligned performance share plan awards;
• Introduction of a post-vesting holding period to LTIP awards; and

• Increase to the LTIP opportunity for the CEO from 100% to 150% of salary. There is no change to the LTIP opportunity for the CFO or COO, which remains at 100% of salary.

Based on performance over recent years, the Committee firmly believes that Andy Bruce is the right Chief Executive Officer to lead Lookers into its next growth phase. The Committee seeks to ensure that he is appropriately incentivised and aligned to focus him over the coming years to deliver on that strategy. Whilst recognising that Andy's base salary is low compared to market, the Remuneration Committee continue to take the view that a substantial increase to realign base salary would not be in line with the philosophy of pay for performance at Lookers. Instead, the additional opportunity gives additional incentivisation for Andy to reach stretch targets and aligns the Chief Executive Officer more closely with shareholder value.

The Committee's view is that alongside the increase to share ownership guidelines implemented for 2016, the revised policy increases alignment between executive pay and shareholder value as well as simplifying the way we pay our executives.

Remuneration in 2017

The base salaries of the executive directors were increased by 1% with effect from 1 January 2017 in line with similar increases applied across the company.

The bonus opportunity for executive directors will be up to 150% of salary based on ABPT targets for group APBT.

In 2017 we will have the first grant of awards under the new LTIP structure with awards of 150% of salary for the Chief Executive Officer and 100% of salary for other executive directors. The LTIP awards for 2017 onwards will have standalone three year rolling vesting cycles (i.e. the integrated three year programme from the current LTIP will not be retained).

The Committee has determined that an additional net debt to EBITDA ratio metric will be introduced alongside the existing Adjusted EPS measure and will comprise onequarter of the LTIP. As well as ensuring that management are incentivised to increase earnings delivered over the long term, a fundamental part of our strategy for the coming years is to focus on operational efficiency with the aim to further strengthen our balance sheet and reduce reliance on external funding and to continue to maintain appropriate levels of cash for capital expenditure including a number of large systems projects that are currently ongoing. The additional net debt to EBITDA metric will incentivise the executive team to manage debt while continuing to grow earnings sustainably.

Directors' Remuneration Report

Annual Statement From The Chairman Of The Remuneration Committee

A two-year holding period will apply to 50% of awards vesting under the award granted in 2017. This seeks to further align executive remuneration with shareholder value.

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 is split into three sections, comprising this statement and the:

Pages 64 to 71	Directors' remuneration policy This sets out the Company's proposed policy on directors' remuneration for adoption at the 2017 AGM.
Pages 62 to 81	Annual report on remuneration This sets out payments and awards made to the directors and details the link between company performance and remuneration for 2016 and, together with this statement, is subject to an advisory shareholder vote at this year's AGM.

In conclusion

We are proposing a revised directors' remuneration policy that we believe will continue to incentivise the executive directors as we enter a new phase of the business. We hope that we will have your support in favour of the revised remuneration policy and annual report on remuneration at the AGM.

By Order of the Board

R. S. Walker Chairman of the Remuneration Committee 8 March 2017

This Directors' Remuneration Report has been prepared in accordance with Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended (the Regulations).

Directors' Remuneration policy

The company's current Directors' Remuneration Policy was approved by shareholders on 29 May 2015 at the company's AGM and became effective from that date. The full policy was disclosed in the 2014 annual report and accounts, which is available within the investor section of the corporate website and located at http://www.lookersplc.com/ investors/results-centre.

Remuneration policy

The policy of the Committee 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 executive directors, including long-term incentive plans, to motivate individuals and align their interests with those of shareholders. 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.

The new remuneration policy set out in this section is subject to shareholder approval at the 2017 Annual General Meeting (AGM), and will be effective from immediately after the AGM on 25 May 2017 binding upon the group until the close of the 2020 AGM. There are no planned changes to the policy over the three-year period to which it relates.

Future policy table

The elements of the remuneration package of executive directors are set out below:

Purpose and link to strategy	Operation	Maximum potential value	Performance metrics
Base Salary
Attract and retain high calibre executive directors to deliver strategy.	Paid in 12 equal monthly instalments during the year.	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 revenue, market worth and business sector. Salaries are generally set below market median, with a greater emphasis on performance related pay. There is no prescribed maximum increase. Annual rate set out in the annual report on remuneration for the current year and the following year.	None.

Future policy table (continued)

Purpose and link to strategy	Operation	Maximum potential value	Performance metrics
Benefits
Provide benefits consistent with role.	Currently these consist of provision of a company car, health insurance, life assurance premiums 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.	The cost of providing benefits is borne by the company and varies from time to time.	None.
Annual Bonus
Incentivises achievement of business objectives by providing a reward for performance against annual targets.	Paid in cash after the end of the financial year to which it relates, save that for an executive director who has not met the share ownership requirement any bonus in excess of 110% of salary is deferred into shares. 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 and misconduct on the part of the executive director, within two years of the payment date of the cash bonus.	Up to 150% of salary.	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 targets based on adjusted profit before tax of the company or divisional targets where appropriate. In general: • 40% of the maximum bonus is payable for meeting the threshold performance level • 67% of the maximum bonus is payable for hitting the target • 100% of the maximum bonus is payable for meeting or exceeding the maximum performance level A sliding scale operates between threshold and maximum performance. No bonus is payable where performance is below the threshold.

Future policy table (continued)

Purpose and link to strategy	Operation	Maximum potential value	Performance metrics
Annual Bonus (continued)
			Payment of any bonus is subject to the overriding discretion of the Committee.
			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.
Long-term incentives
Alignment of interests with shareholders by providing long-term incentives delivered in the form of shares.	Grant of nil-cost options under the LTIP, which vest at least 3 years from grant subject to the achievement of performance conditions and may not be exercised after the 10th anniversary of grant. A portion of LTIP awards vesting are subject to a holding period at the discretion of the Committee. 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 and misconduct on the part of the executive director, within two years of the vesting of the LTIP award.	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.	Targets are based on single or a combination of performance metrics, with the majority being financial measures. Threshold and maximum targets are set at grant. The Committee reserves discretion to: (i) 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; (ii) 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.

Future policy table (continued)

Purpose and link to strategy	Operation	Maximum potential value	Performance metrics
Pension
Attract and retain executive directors for the long term by providing funding for retirement.	A C Bruce is a member of the group's defined benefit pension arrangement. The scheme closed to future accrual in 2011 and Mr Bruce's pension is no longer linked to his final pensionable salary. This defined benefit pension is payable from age 60. All executive directors are entitled to participate in money purchase arrangements, or to receive a cash allowance in lieu of pension contributions.	20% of salary up to a maximum of the annual allowance with any excess payable as a salary supplement. Any such salary supplements are not counted for the purposes of determining bonus or LTIP levels.	None.
Share ownership
To ensure alignment between the interests of executive directors and shareholders.	200% of salary for the CEO and CFO effective from 1 January 2016. 100% of salary for other executive directors.	Not applicable.	Not applicable.

Notes to the Policy Table

Performance conditions

The Committee selected the performance conditions as they are central to the company's strategy and are the key metrics used by the executive directors to oversee the operation of the business.

The APBT performance target for the annual bonus is based upon the budgeted APBT for the company, as follows:

The APBT figure is set out in note 7 to the accounts. The Committee is of the opinion the figure for budgeted APBT is commercially sensitive for the company and that it would be therefore be detrimental to the company to disclose details of the targets in advance. The targets will be disclosed after the end of the financial year in the annual report on remuneration.

The targets for any additional bonus measures which the Committee introduces during the life of this policy will be disclosed at the point that these are considered no longer commercially sensitive.

The EPS performance target for the LTIP is based on adjusted EPS as set out in note 7 to the accounts; such measure being

stated before the amortisation of intangibles, impairment of goodwill, debt issue costs, pension costs, exceptional items and share based payments, as referred to in note 7 to the accounts. The EPS target is set with reference to the budget and external market conditions, and is intended to represent a considerable level of stretch above budget in order for maximum payout to occur.

Adjusted EPS is considered to be a suitable measure of performance as it is not affected by pension costs, debt issue costs, amortisation or share based payments as these costs are not within the control of the executive directors.

The Committee has the ability to adjust the bonus and LTIP targets or measurement where it considers this is necessary to achieve a fair and consistent measurement of the company's performance.

Changes from previous policy

As set out in the annual statement from the Chairman of the Committee, the Committee undertook a full review of the executive directors' remuneration policy during the course of 2016 and the changes summarised below reflect the changes from the previous policy:

• LTIP awards made from 2017 onwards will be in the form of nil-cost options, whereas awards under the previous policy were in the form of market-value options with a reduction in exercise price subject to meeting Adjusted EPS conditions. The purpose of this change is to simplify remuneration arrangements and align with typical market practice on LTIP structure.
• The ability for the Committee to apply a post-vesting holding period has been introduced to further align executive directors' remuneration with shareholder value.
• The annual LTIP opportunity has been increased to 150% of salary (previously 100% of salary) for the CEO. The increase is to increase alignment between the CEO's pay and shareholders, and to ensure that the CEO is appropriately incentivised to deliver the business strategy.
• The policy now allows the Committee to introduce additional metrics to the bonus over the life of the policy, while at least half of the bonus will be based on profit before tax.

Statement of consideration of employment conditions of employees elsewhere in the group

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 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 also approves the award of any long-term incentives. The Committee does not specifically invite employees to comment on the directors' remuneration policy, but it does take note of any comments made by employees.

Statement of consideration of shareholder views

The Chairman of the Committee consults with major shareholders from time to time to understand their expectations with regard to executive director remuneration and reports back to the Committee. Any other concerns raised by individual shareholders are also considered, and the Committee also takes into account emerging best practice and guidance from major institutional shareholders.

Total remuneration opportunity

The chart below illustrates the remuneration that would be paid to each of the executive directors under three different performance scenarios: (i) Minimum; (ii) On-target; and (iii) Maximum.

The elements of remuneration have been categorised into three components: (i) Fixed; (ii) Annual variable (annual bonus awards); and (iii) Multiple year (LTIP awards) which are set out in the future policy table

A. C. Bruce

Maximum		29%		36%			35%
On-target		39%		32%		29%	£1,152
Minimum		100%	£447
	£0	£200	£400	£600	£800	£1,000	£1,200	£1,400

R. A. Gregson

N. J. McMinn

Maximum	32%	41%		27%	£1,051
On-target	43%	36%		21%	£796
Minimum	100%	£342
	£0 £200	£400	£600 £800	£1,000	£1,200 £1,400

Total remuneration opportunity (continued)

Each element of remuneration is defined in the table below:

Element	Description
Fixed	Base salary for 2017 plus pension and benefits (benefits being taken from the single total figure of remuneration for 2016).
Annual bonus	Annual bonus awards, applied as minimum: 0% of opportunity, on-target: 67% of opportunity (i.e. in line with budget), maximum: 100% of opportunity.
LTIP	LTIP awards. These awards take the form of nil cost options.
	For the on-target scenario, 60% of the award is assumed to vest.
	For the maximum scenario, full vesting is assumed.

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.

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 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.

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.

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 no special arrangements applying following a change of control and 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	12 months' notice by the company and 6 months' notice by executive director.
compensation for loss of office in executive directors' service contracts.	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.
	For any new appointments, 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.	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.
Treatment of unvested LTIP awards.	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.

Directors' service contracts, notice periods and termination payments (continued)

Provision	Policy
Treatment of unvested LTIP awards.	Awards of 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 but 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-rata.
	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-rata.
Outside appointments.	Board approval must be sought.
	Executive directors may retain the fees paid in respect of any external appointment.
Non-executive directors.	All non-executives are subject to annual re-election. No compensation is payable if a non executive 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.

Copies of directors' service contracts and letters of appointment are available for inspection at the company's registered office.

The executive directors' notice periods are set out in the service contracts section above.

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.

Dates of service contracts / letters of appointment

Director	Date of service contract / letter of appointment
A. C. Bruce	11.05.2006
R. A. Gregson	22.02.2010
N. J. McMinn	19.08.2013
P. M. White	04.09.2006
R. S. Walker	04.02.2014
D. C. A. Bramall	30.06.2006
W. Holmes	12.06.2008
S. Cabrini	01.01.2016

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.

Purpose and link to strategy	Operation	Maximum potential value	Performance metrics
Non-executive director fees
To attract NEDs who have a board range of experience and skills to oversee the implementation of our strategy.	NED fees are determined by the Board within the limits set out in the Articles of Association. An additional fee may be paid for chairing a sub committee of the Board. Paid in 12 equal monthly instalments during the year.	Reviewed annually to reflect role, responsibility and performance of the individual and the company. Annual rate set out in the annual report on remuneration for the current year and the following year. No prescribed maximum annual increase.	None.

Annual report on remuneration

Save for the performance graph and table, the change in remuneration of the Chief Executive, the relative importance of the spend on pay, the implementation of remuneration policy in 2017, the consideration by the directors of matters relating to directors' remuneration and the statement of shareholder voting, the information set out in this part of the Director's Remuneration Report is subject to audit.

Single total figure of remuneration

The following table shows a single total figure of remuneration in respect of qualifying services for the 2016 financial year for each director, together with the comparative figures for 2015.

	Salary and fees £000		Taxable Benefits £0001		Annual bonus £000		LTIP £0002		Pension benefits £000		Other £0003		Total £000
	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
Executive Directors
A. C. Bruce	364	357	1	1	364	464	826	Nil	73	71	1	1	1,629	894
R. A. Gregson	278	273	1	1	278	355	631	Nil	55	55	1	1	1,244	685
N. A. Davis4	194	225	1	1	218	275	524	Nil	39	45	-	-	976	546
N. J. McMinn	278	273	1	1	278	355	631	Nil	55	55	-	-	1,243	684
Total	1,114	1,128	4	4	1,138	1,449	2,612	Nil	222	226	2	2		5,092 2,809
Non Executive Directors
P. M. White	123	120	-	-	-	-	-	-	-	-	-	-	123	120
R. S. Walker	41	40	-	-	-	-	-	-	-	-	-	-	41	40
D. C. A. Bramall	41	40	-	-	-	-	-	-	-	-	-	-	41	40
W. Holmes	46	45	-	-	-	-	-	-	-	-	-	-	46	45
S. Cabrini5	41	-	-	-	-	-	-	-	-	-	-	-	41	-
Total	292	245	-	-	-	-	-	-	-	-	-	-	292	245
Aggregate directors emoluments3	1,406	1,373	4	4	1,138	1,449	2,612	Nil	222	226	2	2	5,384 3,054

• 1. Taxable benefits include items such as a company car, health insurance and life assurance premiums.
• 1. LTIP figures are in respect of ESOS awards granted in 2014 and LTIP awards granted in 2015 and 2016 whose performance periods ended on 31 December 2016. Further detail is provided in the section titled "LTIP awards completing performance period in 2016".
• 1. The amounts set out in the "other" column relate to the grant of SAYE options on 4 October 2016 and 6 October 2015. The figure quoted for each executive director was determined by reference to the discount that the exercise price per share represented to the share price immediately preceding grant. For the 2016 SAYE grant, the exercise price was £1.0747 compared to a share price of £1.1575. For the 2015 SAYE grant, the exercise price was £1.449 compared to a share price of £1.663.
• 1. N. A. Davis left the Board on 4 November 2016 following the sale of the parts division. Further details of his remuneration arrangements are provided in the following sections of the report.
• 1. S.J. Cabrini joined the Board on 1 January 2016.
• 1. The aggregate directors' emoluments excluding pension and LTIP awards in 2016 was £2,550,000 (2015 - £2,828,000).

Annual bonus

Bonuses are earned by reference to the financial year and paid in March following the end of the financial year. The

bonuses accruing to the executive directors in respect of 2016 are based on figures for adjusted profit before tax (APBT) as shown below:

			Total bonus value as % of salary
Executive director	Bonus target	Weighting	Max	Actual	Bonus receivable
A.C. Bruce	APBT of the group	100%	150%	100%	£364,100
R.A Gregson	APBT of the group	100%	150%	100%	£278,307
N. A. Davis1	APBT of the group APBT of the parts division	33% 67%	150%	114%	£218,432
N. J. McMinn	APBT of the group APBT of the motor division	33% 67%	150%	100%	£278,307

1 - N. A. Davis left the Board on 4 November 2016. The maximum bonus opportunity for FY 2016 was 150% of annual salary of £229,928. Based on the Remuneration Committee's assessment of the performance of Lookers and FPS over the period to termination of employment and pro-rating for the time served during the year, the bonus outcome was 114% of annual salary.

The targets for each element and actual performance against each of these were as set out below:

Measure	Threshold performance required	On-target performance required	Maximum performance required	Actual performance
APBT of the group	£69.3 million	£77.0 million	£84.7 million	£77.1 million
APBT of the parts division	£11.9 million	£13.2 million	£14.5 million	£12.1 million1
APBT of the motor division	£58.5 million	£65.0 million	£71.5 million	£65.0 million

1 - Figure is based on 10 months' actual result, rather than full year

Pension entitlements and cash allowances

A. C. Bruce remains a member of the group defined benefit scheme, which closed to future accrual from 31 March 2011. As at 31 December 2016 Mr Bruce's accrued pension was £30,818.

The scheme provides a pension of up to two-thirds of final pensionable salary on retirement at age 60 years, as well as lump sum death-in-service benefit and pension benefits based on final pensionable salary. Pension increases are in line with Limited Price Indexation. Death-in-service pays at four times salary and death-in-retirement pays benefits at 50%. No enhanced benefits are payable on early retirement. A.C. Bruce's pension in the defined benefit scheme is no longer linked to his salary and therefore there is no value attributable to the increase in the value of his defined benefits for the purposes of the single total figure of remuneration. All of the pension entry in the single total figure of remuneration therefore relates to his membership of money purchase arrangements.

R.A. Gregson, N. J. McMinn and N. A. Davis participated only in money purchase arrangements during 2016.

LTIP awards granted in 2016

Market value share options were granted under the LTIP to the executive directors in 2016 over a number of shares equal in value to 100% of salary, calculated based on the mid-market closing price of a share on 31 December 2015 of £1.85. The awards were the final set of awards made

under the integrated LTIP structure operated for 2014 to 2016 inclusive with performance measured over the period from 1 January 2014 to 31 December 2016. The table below summarises the awards granted to executive directors in 2016:

	Date of Grant	Number of shares subject to award	Exercise price at grant1	Share price at grant	Face Value of shares1	End of performance period
A. C. Bruce	12.04.2016	196,810	£1.88	£1.501	£295,412	31.12.2016
R. A. Gregson	12.04.2016	150,436	£1.88	£1.501	£225,804	31.12.2016
N. A. Davis	12.04.2016	124,285	£1.88	£1.501	£186,552	31.12.2016
N. J. McMinn	12.04.2016	150,436	£1.88	£1.501	£225,804	31.12.2016

1 - Face value has been calculated using the share price at grant.

The performance target for the awards was growth in Adjusted Earnings Per Share (AEPS).

Provisional vesting was determined based on growth in AEPS measured over 2016. The growth targets give 20% provisional vesting for 5% AEPS growth rising to 100% provisional vesting for 15% AEPS growth relative to the 2015 AEPS.

The final vesting was based on achievement against AEPS performance targets which applied over the 3 year period between 2014 and 2016 i.e. relative to AEPS growth for 2013.

• For AEPS growth over 2014-2016 below 20% the awards lapse (notwithstanding any provisional vesting);
• For AEPS growth over 2014-2016 between 20% and 45% there is no adjustment to the provisional vesting result;
• For AEPS growth over 2014-2016 between 45% and 50% then the provisional vesting will be increased to 80% if it is otherwise below this level; and
• For AEPS growth over 2014-2016 above 50% then the awards will vest in full, if not already applicable.

In addition, if AEPS growth in 2016 exceeds 15%, or if AEPS growth exceeds 45% over the period 2014-2016 then the exercise price of the awards reduces to nil. Awards vest on the third anniversary of grant.

LTIP awards completing performance period in 2016

LTIP awards granted in 2014 (under the ESOS), 2015 and 2016 all completed their performance period on 31 December 2016.

The awards have AEPS performance conditions measured over the period between 1 January 2014 and 31 December 2016. Vesting of the awards is based on a combination of the growth in AEPS over the year of grant and over the 3 year period to 2016.

If AEPS growth in the year of grant exceeds 15%, or if AEPS growth exceeds 45% over the 3 year period to 2016, then the aggregate exercise price of the awards reduces to £1.

LTIP awards completing performance period in 2016 (continued)

The tables below sets out the AEPS growth achieved for each award and the resulting proportion of each award due to vest as a result of this performance:

Provisional vesting

Award	1 year AEPS growth required for threshold vesting (20% of award)	1 year AEPS growth required for maximum vesting	AEPS growth in year of award relative to previous year	Provisional vesting
2014	5%	15%	30.5%	100%
2015	5%	15%	12.7%	77%
2016	5%	15%	4.1%	0%

Final vesting

Award	3 year AEPS growth to 2016 required for threshold vesting (20% of award)	3 year AEPS growth to 2016 required for maximum vesting	AEPS growth for 2016 relative to 2013	Final vesting
2014	20%	45%1
2015	20%	50%2	53.2%	100%
2016	20%	50%2

1 – 45% growth in AEPS was required over the whole performance period given the provisional vesting for the 2014 award was above 80%.

2 – 50% growth in AEPS was required over the over the whole performance period given the provisional vesting for the 2015 and 2016 awards was below 80%.

The growth in AEPS between for 2016 relative to the base AEPS in 2013 was 53.2% and therefore the awards will vest in full on the third anniversary of grant and the aggregate exercise price for each award is reduced to £1. The table below summarises the value of the LTIP awards as at 31 December based on the vesting result and using the average share price for the final quarter of 2016.

	Number of shares awarded			Value of award (at 31 December 2016)1	Total value in
	2014 award – vesting on 30.6.2017	2015 award – vesting on 25.6.2018	2016 award – vesting on 12.04.2019	2014 award	2015 award	2016 award	single figure table
A. C. Bruce	289,256	274,615	196,810	£314,015	£298,121	£213,656	£825,792
R. A. Gregson	221,074	209,884	150,436	£239,997	£227,849	£163,312	£631,158
N. A. Davis2	183,057	173,792	124,285	£200,4463	£188,668	£134,923	£524,047
N. J. McMinn	221,074	209,884	150,436	£239,997	£227,849	£163,312	£631,158

1 – Using the company's average share price of £1.0856 in the three months from 1 October 2016 to 31 December 2016 inclusive and based on 100% final vesting.

2 – N. A. Davis left the company on 4 November 2016. Under the terms of the ESOS, the 2014 award vested in full on leaving employment. The awards granted in 2015 and 2016 will vest on their normal vesting dates.

3 – The 2014 award value for N. A. Davis is calculated using the share price on 4 November 2016 of £1.095.

Payments to past directors

No payments to past directors were made in 2016.

Payments for loss of office

Neil Davis's employment with the company ended on the completion of the sale of the parts division on 4 November 2016. Under the settlement agreement agreed between Neil Davis and the Company there was no payment for loss of office. Treatment of payments under the Annual bonus and long term incentive plans were agreed as detailed in the notes to the single figure table.

Statement of directors' shareholding

The table below summarises the directors' shareholdings as at 31 December 2016. The shareholding as a % of salary is determined by reference to the share price on 31 December 2016 of £1.1725. There were no changes in these shareholdings between that date and the date of approval of this report.

	Number of shares held (including by connected persons)			Vested but unexercised share options	Shareholding on 31 December 2016 as a % of salary1	conditions	Unvested share options subject to performance
	2016	2015	2016	2015		2016	2015
A. C. Bruce	642,086	642,086	269,836	269,836	294%	760,681	563,871
R. A. Gregson	357,815	357,815	269,836	269,836	264%	581,394	430,958
N. A. Davis2	277,041	277,041	183,057	-	219%2	298,077	356,849
N. J. McMinn	160,000	160,000	-	-	67%	581,354	430,958
P. M. White	53,716	53,716	-	-	N/A	-	-
R. S. Walker	-	-	-	-	N/A	-	-
D. C. A. Bramall	63,487,636	63,487,636	-	-	N/A	-	-
W. Holmes	54,666	54,666	-	-	N/A	-	-
S. Cabrini	-	-	-	-	N/A	-	-

1 –The shareholding requirement is 200% of salary for the CEO and CFO, and 100% of salary for other executive directors. The directors' remuneration policy contains provisions for the deferral of elements of annual bonuses into shares and post-vesting holding of shares acquired under LTIP awards for directors who have not met the shareholding requirement, which will apply until this is met.

2 – Shareholdings for N. A. Davis are shown as at his date of leaving the company on 4 November 2016 and based on a share price of £1.095 at that date.

Long term incentive awards

Prior to 2015, long term incentive awards were made under The Lookers Executive Share Option Scheme (ESOS).

Details of long term incentive award share options held by executive directors are as follows:

The Lookers plc Long Term Incentive Plan (LTIP) was introduced in 2015, under which the company now makes long term incentive awards.

	Scheme	Date of Grant	Earliest Exercise Date	Expiry Date	Exercise Price (pence)	Number at 1 January 2016	Lapsed in Year	Exercised in Year	Number at 31 December 2016
A. C. Bruce	ESOS	5.1.2011	5.1.2014	5.1.2021	Nil	269,836	-	-	269,836
A. C. Bruce	ESOS		30.6.2014 30.6.2017 30.6.2024		121.0	289,256	-	-	289,256
A. C. Bruce	LTIP		25.6.2015 25.6.2018 25.6.2025		130.0	274,615	-	-	274,615
A. C. Bruce	LTIP		12.4.2016 12.4.2019 12.4.2026		188.0	-	-	-	196,810
R. A. Gregson	ESOS	5.1.2011	5.1.2014	5.1.2021	Nil	269,836	-		269,836
R. A. Gregson	ESOS		30.6.2014 30.6.2017 30.6.2024		121.0	221,074	-	-	221,074
R. A. Gregson	LTIP		25.6.2015 25.6.2018 25.6.2025		130.0	209,884	-	-	209,884
R. A. Gregson	LTIP		12.4.2016 12.4.2019 12.4.2026		188.0	-			150,436
N. J. McMinn	ESOS		30.6.2014 30.6.2017 30.6.2024		121.0	221,074	-	-	221,074
N. J. McMinn	LTIP		25.6.2015 25.6.2018 25.6.2025		130.0	209,844	-	-	209,844
N.J. McMinn	LTIP		12.4.2016 12.4.2019 12.4.2026		188.0	-	-	-	150,436

All-employee share scheme

Details of share options held by executive directors under the all-employee SAYE scheme are as follows:

	Scheme	Date of Grant	Earliest Exercise Date	Expiry Date	Exercise Price (pence)	Number at 1 January 2016	Lapsed in Year	Exercised in Year	Number at 31 December 2016
A. C. Bruce	SAYE	8.10.2012 1.12.2015		1.6.2016	58.66	15,340	-	15,340	-
A. C. Bruce	SAYE	6.10.2014 1.12.2017		1.6.2017	108.80	8,272	-	-	8,272
A. C. Bruce	SAYE	6.10.2015 1.12.2018		1.6.2019	144.91	6,210	6,210	-	-
A. C. Bruce	SAYE	4.10.2016 1.12.2019		1.6.2020	107.47	-	-	-	8,374
R. A. Gregson	SAYE	8.10.2012 1.12.2015		1.6.2016	58.66	15,340	-	15,340	-
R. A. Gregson	SAYE	6.10.2014 1.12.2017		1.6.2017	108.80	8,272	-	-	8,272
R. A. Gregson	SAYE	6.10.2015 1.12.2018		1.6.2019	144.91	6,210	6,210	-	-
R. A. Gregson	SAYE	4.10.2016 1.12.2019		1.6.2020	107.47	-	-	-	8,374
N. J. McMinn	SAYE	6.10.2014 1.12.2017		1.6.2017	108.80	16,544	-	-	16,544

Performance graph and table

The chart below shows the company's eight-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.

The table below sets out the total remuneration delivered to the Chief Executive over each of the last eight years, valued using the same methodology as applied to the single total figure of remuneration.

Chief Executive		2009	2010	2011	2012	2013	2014	2015	2016
	H.K. Surgenor1	P. Jones2	P. Jones	P. Jones	P. Jones	P. Jones	A.C. Bruce3	A.C. Bruce A.C. Bruce
Total single figure (£000) Annual bonus % of maximum opportunity	645 100%	568 100%	692 100%	583 63%	739 100%	1,436 100%	806 100%	894 87%	1,629 67%
LTIP vesting % maximum opportunity (if applicable)	-	-	-	-	-	100%	-	-	100%

Lookers FTSE All-Share

1. H. K. Surgenor retired on 30 September 2009. 2. P. Jones was appointed on 1 October 2009 and retired on

31 December 2013.

1. A. C. Bruce was appointed on 1 January 2014.

Change in remuneration of Chief Executive

The following table sets out the change in the Chief Executive's salary, benefits and bonus between 2015 and 2016 compared with the average percentage change in each of those components for the employees of the group.

	Increase in base salary	Increase in benefits	Increase in bonus
CEO	2%	0%	-22%
Employees	2%	0%	0%

Relative importance of spend on pay

The table below sets out the total spend on pay in 2016 and 2015 year compared with distributions to shareholders and which was the most significant outgoing for the company in the last financial year.

	Spend in 2016 £m	Spend in 2015 £m	% increase
Spend on staff pay (including Directors)	272.2	229.9	18.4%
Profit distributed by way of dividend	13.1	11.6	12.9%

Implementation of directors' remuneration policy in 2017

The salaries and fees to be paid to directors in 2017 are set out in the table below, together with any increases expressed as a percentage.

	2017 salary/fees	2016 salary/fees	Increase %
A. C. Bruce	368,000	364,100	1%
R. A. Gregson	281,250	278,307	1%
N. J. McMinn	281,250	278,307	1%
P. M. White	123,750	122,500	1%
R. S. Walker	42,000	41,500	1%
D. C. A. Bramall	42,000	41,500	1%
W. Holmes	46,500	46,000	1%
S. Cabrini	42,000	41,500	1%

Annual bonus for 2017

The bonus opportunity for 2017 will be 150% of salary for each executive director. The performance targets for the annual bonus are based on budgeted APBT of the company, with payments determined based on the scale set out in the Directors' Remuneration Policy.

The APBT figure for the company is set out annually in note 7 to the accounts. The Committee is of the opinion that budgeted APBT information is commercially sensitive and that it would be therefore be detrimental to the company to disclose details of the targets in advance. The targets will be disclosed after the end of the financial year in the annual report on remuneration.

LTIP for 2017

As set out in the Chairman's statement, the Committee has restructured LTIP awards to be granted from 2017 onwards. In particular LTIP awards will operate in the following way:

• Standalone three year rolling vesting cycles (i.e. the integrated three year programme from the current LTIP will not be retained); and

• Awards will be nil-cost rights to acquire shares. Subject to approval of the Directors' Remuneration Policy at the 2017 AGM, awards over 150% of salary will be to the Chief Executive and awards over 100% of salary will be made to other executive directors in 2017.

For the 2017 awards:

• An additional Net debt to EBITDA ratio metric will be introduced alongside the existing Adjusted EPS measure and will comprise 25% of the LTIP; and
• A two-year holding period will apply to 50% of vested awards.

The performance target for 75% of the LTIP for 2017 is based on growth in adjusted EPS over a three year period. Adjusted EPS is set out annually in note 7 to the accounts. The figure stated is before the amortisation of intangibles, impairment of goodwill, debt issue costs, pension costs and share based payments, as referred to in note 7 to the accounts.

The table below sets out the adjusted EPS targets that will apply for the 2017 award:

Performance condition	Weighting	Threshold target (20% vesting)	Maximum target (100% vesting)
Adjusted EPS	75%	15% total growth over performance period	30% total growth over performance period

The remaining 25% of the LTIP for 2017 is based on the ratio of Net debt to EBITDA over the three year performance period to 31 December 2019.

The table below sets out the Net Debt to EBITDA targets that will apply for the 2017 award:

Performance condition	Weighting	Threshold target (50% vesting)	Mid-point target (75% vesting)	Maximum target (100% vesting)
Net Debt: EBITDA	25%	Less than 2.0 but more than 1.5	Less than 1.5 but more than 1.0	Equal to or less than 1.0

The targets have been set by the Committee in conjunction with the Board, and have been calibrated to have a stretch in excess of previous LTIP awards taking into account forwardlooking business plans and external market conditions.

Consideration by the directors of matters relating to directors' remuneration

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 Committee's terms of reference are available from the Company Secretary.

The members of the Committee during 2016 were P. M. White, R. S. Walker, W. Holmes and S. J. Cabrini. The Committee met 2 times during 2016, at which all members of the Committee attended.

The primary role of the Committee is to set the directors' remuneration policy and accordingly to:

• review, recommend and monitor the level and structure of remuneration for the executive directors and other senior executives;
• approve the remuneration package for the executive directors;
• determine the balance between base pay and performance related elements of the package to align executive directors' interests with those of shareholders; and
• approve annual and long term incentive payments for executive directors.

Summary of activity during 2016

During 2016 the Committee's primary activities related to the review of remuneration policy for executive directors. This resulted in formalising the plans for restructuring the LTIP arrangements to operate more market-aligned performance share plan awards, including the introduction of a postvesting holding period. The Committee also undertook a review of performance conditions and their alignment with business strategy, leading to a decision to introduce the Net Debt condition for the LTIP for 2017 awards.

The Committee appointed and received advice over the year from PwC LLP in connection with the review of the remuneration arrangements and the implementation of awards made under the LTIP. 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 £72,400.

Statement of voting

The latest votes in respect of remuneration matters were cast at the 2015 and 2016 AGMs as follows:

Resolution	Votes For	%	Votes Against	%	Abstentions
To approve the directors' remuneration policy	254,151,648	89.69%	29,202,798	10.31%	1,473,974
To approve the 2015 Annual Report on Remuneration (including the Annual Statement from the Chairman of the Remuneration Committee)	247,401,170	86.18%	39,682,850	13.82%	154,515

By Order of the Board

R. S. Walker

Chairman of the Remuneration Committee 8 March 2017

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with 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 statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRS as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
• make an assessment of the company's ability to continue as a going concern.

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. 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 responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
• the strategic and operational review includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
• the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company's performance, business model and strategy.

By Order of the Board

A. C. Bruce R. A. Gregson Chief Executive Officer Chief Financial Officer

8 March 2017 8 March 2017

Financial Statements

Opinion on financial statements of Lookers plc

In our opinion 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 2016 and of the group's and the parent company's profit for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.

The financial statements that we have audited comprise:

• the Group Income Statements;
• the Group and Parent Company Statements of Comprehensive Income;
• the Group and Parent Company Statements of Financial Position;
• the Group and Parent Company Cash Flow Statements;
• the Group and Parent Company Statements of Changes in Equity;
• the Principal Accounting Policies; and
• the related notes 1 to 32.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

Summary of our audit approach

Key risks
The key risks that we identified in the current year were: • Inventory valuation and provisioning • Commercial income including supplier rebate arrangements (i.e. manufacturer bonuses) • Potential impairment of goodwill and intangible assets	Within this report, any new risks are identified and any risks which are the same as the prior year identified.
Materiality
The materiality that we used in the current year was £3.2m which was determined on the basis of adjusted pre-tax profit. Pre-tax profit has been adjusted by	removing the effect of exceptional items of income and expense (see note 4 from the pre-tax profit).
Scoping
Based on our scoping assessment, our audit work covered 96% of the group's profit before tax, 93% of revenue and 92% of the group's net assets.	We have outlined our detailed scoping approach in the scoping section.
Significant changes in our approach
The group acquired the ordinary share capital of the Knights Group and the Drayton Group; the post acquisition trading results and balance sheets were subject to a full audit. In addition to this, the group	disposed of the Parts division where we audited the pre-acquisition results included within the consolidation at a component materiality.

Going concern and the directors' assessment of the principal risks that would threaten the solvency or liquidity of the group

As required by the Listing Rules we have reviewed the directors' statement regarding the appropriateness of the going concern basis of accounting contained within note 1 to the financial statements and the directors' statement on the longer-term viability of the group contained within corporate governance statement on page 55.

We are required to state whether we have anything material to add or draw attention to in relation to:

• the directors' confirmation on page 58 that they have carried out a robust assessment of the principal risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity;
• the disclosures on page 58 that describe those risks and explain how they are being managed or mitigated;
• the directors' statement in note 1 to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the group's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and
• the directors' explanation on page 55 as to how they have assessed the prospects of the group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We confirm that we have nothing material to add or draw attention to in respect of these matters.

We agreed with the directors' adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group's ability to continue as a going concern.

Independence

We are required to comply with the Financial Reporting Council's Ethical Standards for Auditors and confirm that we are independent of the group and we have fulfilled our other ethical responsibilities in accordance with those standards.

Details of the non-audit service fees charged for the year have been presented in Note 4 and discussed in the Report from the Chairman of the Audit and Risk Committee.

We confirm that we are independent of the group and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services referred to in those standards.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.

The risks included within this audit report are consistent with those reported in the year ended 31 December 2015 audit report aside from the removal of the pension scheme valuation risk. We did not consider this a key risk in the current year as it did not have the greatest effect on our audit strategy nor the allocation of resources in the audit and therefore was not an area of focus for our audit.

Inventory valuation and provisioning

Risk description

There are a number of risks that can have a material impact on the inventory balance in the financial statements, principally:

• the assessment of net realisable value of inventory, which for used vehicles in particular can fluctuate as a result of market factors and the condition of vehicles;
• manufacturer bonuses, which should be offset against the inventory balance where the vehicle is still recorded as inventory at the balance sheet date; and
• provision requirements for slow-moving inventory.

How the scope of our audit responded to the risk We have:

• assessed the design and implementation of controls in place in relation to the recording of ageing of inventory held across the Group;
• performed substantive procedures (discussed below), including data audit techniques on the Group's vehicle and parts inventory reports, to identify any issues in respect of valuation and slow-moving inventory;
• tested the cost of inventory by reference to a sample of supplier invoices and confirmations;

Key observations

The results of our test were satisfactory and the value of inventory held is appropriate and in line with the requirements of IAS 2. We are satisfied that the

Inventory has increased to £839.4 million (2015: £816.0 million) due to the acquisition of the Drayton Group and Knights Group in the year and increased inventory levels to support the Group's growth offset by the reduction in parts inventory due to the disposal of the Parts business in the current year

The inventory valuation accounting policy is disclosed on page 96 and the inventory note is disclosed on page 117.

• assessed whether manufacturer bonuses have been appropriately recorded within the inventory balance where appropriate; and
• assessed the risk around net realisable value of used cars by comparing the carrying value of a sample of vehicles to the industry accepted valuation methodology set out in the Glass' Guide and CAP, and also by reference to a selection of post year-end sales.

judgements made by management in calculating the provisions in place at year end are reasonable based on the audit evidence obtained.

evidence received. We consider the disclosures in relation

Commercial income including supplier rebate arrangements (i.e. manufacturer bonuses)
Risk description Commercial income £147m (2015: £127m) derived from the Group's manufacturer partners is significant to the overall result. The principal risk associated with commercial income relates to its recognition as a result of the complex nature of the agreements and hence the interpretation of whether	targets have been met. This can make it difficult to prove that the commercial income is correct to be recognised The commercial income accounting policy is disclosed on page 98.
How the scope of our audit responded to the risk We have:
• assessed the design and implementation of controls in place in relation to the recognition of commercial income across the Group;	• reviewed the ageing of amounts due and evaluated management's judgements relating to the recoverability of any aged balances, including considering the need for any provision;
• compared a sample of bonus balances to credits received from the manufacturer and subsequent cash received;	• performed analytical procedures to test the completeness and accuracy of the amounts recorded in the year.
• enquired of management of the results of any audits performed by manufacturers in relation to commercial income in the year;
Key observations We are satisfied with the timing of recognition of commercial income in the year based on the audit	to manufacturer bonuses to adequately describe the types of rebate income received and the recognition within the

statement of financial position as at 31 December 2016.

Potential impairment of goodwill and intangible assets
Risk description The Group has goodwill and intangible assets of £217.4 million (2015: £158.3 million) which arose from a number of acquisitions over several years including £69.9 million on the acquisition of the Drayton group and the Knights Group in the year ended 31 December 2016. The Group's assessment of impairment is a judgemental process which requires estimates concerning the estimated cash flows, useful economic lives, discount rates	and growth rates disclosed in note 9 on page 112 based on management's view of future business prospects. Should there be low contribution dealerships recognising specific goodwill and intangible balances then there is a risk that those balances might be impaired. See critical accounting estimates and judgements on page 93.
How the scope of our audit responded to the risk We have:
• assessed the design and implementation of controls in place in relation to the impairment review and analysis carried out for the Group • reviewed management's impairment calculation and assessed whether the requirements of IAS 36 'Impairment of Assets' have been followed; • evaluated the underlying assumptions applied, including key judgements relating to growth in profits, useful economic lives and the discount rates applied; • compared management's growth assumptions to recent trading performance of the relevant cash generating units and also compared to external growth data provided by the Society of Motor Manufacturers & Traders;	• considered the historical accuracy of management's forecasting; • benchmarked the discount rates against peer Group businesses; and • engaged our internal valuation specialists to review the discount rates adopted.
Key observations We concluded that the assumptions applied in the impairment models were appropriate, including those	above. In some circumstances goodwill continues to be recognised in relation to low contribution dealerships. We

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.

around low contribution dealerships and no additional impairments were identified from the work performed

are satisfied management has reached the conclusion not to impair these based on the audit evidence obtained.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group materiality

£3.2 million (2015: £3.2 million)

Basis for determining materiality

5% of adjusted pre-tax profit. Pre-tax profit has been adjusted by removing the effect of exceptional items of income and expense (see note 4 from the pre-tax profit). This basis is consistent with the prior year.

Rationale for the benchmark applied

Adjusted pre-tax profit has been used to take account of the exceptional items within the year which do not accurately reflect the underlying trade of the business.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £162,000 (2015: £60,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. The change in the reporting threshold has been made following our reassessment of what matters require communicating. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing the risks of material misstatement at the group level.

Based on that assessment, we focused our group audit scope primarily on the audit work at 26 (2015: 22) locations which are primarily regional accounting centres. 25 (2015: 16) of these were subject to a full audit, whilst the remaining 1 (2015: 6) was subject to an audit of specified account balances where the extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of the group's operations at this location. The change in the number of locations subject to full audit or specified account balances is due to the acquisition of the Drayton Group and Knights Group in the year. These 25 locations represent the principal business units and account

This is also the key performance measure for the Group and receives significant focus from shareholders and analysts.

for 93% (2015: 90%) of the group's revenue, 96% (2015: 98%) of the group's profit before tax and 92% (2015: 97%) of the group's total net assets. They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our audit work at the 25 locations was executed at levels of materiality applicable to each individual entity which were lower than group materiality and were capped at £1.7 million (2015: capped at £1.5 million).

At the parent entity level 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 components not subject to audit or audit of specified account balances.

The Group audit team followed a programme of visits that involved a senior member of the Group audit team visiting each of the locations where the Group audit scope was focused. One key component had a separate component audit partner. The component audit partner and team attended the Group team planning briefing led by the Group engagement partner, we discussed their risk assessment, and we also reviewed documentation of the findings from their work. Furthermore, alongside the component audit partner, the Group engagement partner attended the component close meeting.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;
• 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 company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Directors' Report.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• 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 are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors' remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the Directors' Remuneration Report to be audited is not in agreement with the accounting records and returns.

We have nothing to report arising from these matters.

Corporate Governance Statement

Under the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the company's compliance with certain provisions of the UK Corporate Governance Code.

We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course of performing our audit; or
• otherwise misleading.

We confirm that we have not identified any such inconsistencies or misleading statements.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.

This report is made solely to the 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 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 company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Patrick Loftus FCA (Senior statutory auditor) for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor Manchester, UK 8 March 2017

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.

1. General Information

Lookers plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is given in note 12 to these Financial Statements. The nature of the group's operations and its principal activities are set out in section 1 of the Directors' Report.

2. Basis of Preparation

The financial statements of the group have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union. Therefore the group financial statements comply with article 4 of EU IAS Regulation.

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 profit for the Company for the year was £23.2million (2015: £29.3million). The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments.

Adoption of new and revised Standards

Amendments to IFRSs that are mandatorily effective for the current year

In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2016. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The Group has adopted the amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception for the first time in the current year. The amendments clarify that the exemption from preparing consolidated financial statements is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all its subsidiaries at fair value in accordance with IFRS 10. The amendments also clarify that the requirement for an investment entity to consolidate a subsidiary providing services related to the former's investment activities applies only to subsidiaries that are not investment entities themselves.

As the Company is not an investment entity and does not have any holding company, subsidiary, associate or joint venture that qualifies as an investment entity, the adoption of the amendments has had no impact on the Group's consolidated financial statements.

Amendments to IFRS 11

Accounting for Acquisitions of Interests in Joint Operations The Group has adopted the amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations for the first time in the current year. The amendments provide guidance on how to account for the acquisition of a joint operation that constitutes a business as defined in IFRS 3 Business Combinations. Specifically, the amendments state that the relevant principles on accounting for business combinations in IFRS 3 and other standards should be applied. The same requirements should be applied to the formation of a joint operation if and only if an existing business is contributed to the joint operation by one of the parties that participate in the joint operation.

A joint operator is also required to disclose the relevant information required by IFRS 3 and other standards for business combinations.

The adoption of these amendments has had no impact on the Group's consolidated financial statements.

Amendments to IAS 1

Disclosure Initiative

The Group has adopted the amendments to IAS 1 Disclosure Initiative for the first time in the current year. The amendments clarify that an entity need not provide a specific disclosure required by an IFRS if the information resulting from that disclosure is not material, and give guidance on the bases of aggregating and disaggregating information for disclosure purposes. However, the amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users of financial statements to understand the impact of particular transactions, events and conditions on the entity's financial position and financial performance.

In addition, the amendments clarify that an entity's share of the other comprehensive income of associates and joint ventures accounted for using the equity method should be presented separately from those arising from the Group, and should be separated into the share of items that, in accordance with other IFRSs: (i) will not be reclassified subsequently to profit or loss; and (ii) will be reclassified subsequently to profit or loss when specific conditions are met.

The amendments also address the structure of the financial statements by providing examples of systematic ordering or grouping of the notes.

The adoption of these amendments has not resulted in any impact on the financial performance or financial position of the Group.

Amendments to IAS 16 and IAS 38

Clarification of Acceptable Methods of Depreciation and Amortisation

The Group has adopted the amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation for the first time in the current year. The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This

presumption can only be rebutted in the following two limited circumstances:

a) when the intangible asset is expressed as a measure of revenue; or

b) when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

As the Group already uses the straight-line method for depreciation and amortisation for its property, plant and equipment and intangible assets, respectively, the adoption of these amendments has had no impact on the Group's consolidated financial statements.

Amendments to IAS 16 and IAS 41

Agriculture: Bearer Plants

The Group has adopted the amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants for the first time in the current year. The amendments define a bearer plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16, instead of IAS 41. The produce growing on bearer plants continues to be accounted for in accordance with IAS 41.

The adoption of these amendments has had no impact on the Group's consolidated financial statements as the Group is not engaged in agricultural activities.

Amendments to IAS 27

Equity Method in Separate Financial Statements The Group has adopted the amendments to IAS 27 Equity Method in Separate Financial Statements for the first time in the current year. The amendments focus on separate financial statements and allow the use of the equity method in such statements. Specifically, the amendments allow an entity to account for investments in subsidiaries, joint

ventures and associates in its separate financial statements: • at cost,

• in accordance with IFRS 9 (or IAS 39 for entities that have not yet adopted IFRS 9), or
• using the equity method as described in IAS 28 Investments in Associates and Joint Ventures. The same accounting must be applied to each category of investments.

The amendments also clarify that when a parent ceases to be an investment entity, or becomes an investment entity, it should account for the change from the date when the change in status occurs.

The adoption of the amendments has had no impact on the Company's separate financial statements as the Company accounts for investments in subsidiaries and associates at cost and is not an investment entity.

Annual Improvements to IFRSs 2012-2014 Cycle

The Group has adopted the amendments to IFRSs included in the Annual Improvements to IFRSs 2012-2014 Cycle for the first time in the current year.

The amendments to IFRS 5 introduce specific guidance in IFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa). The amendments clarify that such a change should be considered as a continuation of the original plan of disposal and hence requirements set out in IFRS 5 regarding the change of sale plan do not apply. The amendments also clarify the guidance for when held-for-distribution accounting is discontinued.

The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets.

The amendments to IAS 19 clarify that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high qualify corporate bonds should be at the currency level (i.e. the same currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead.

The adoption of these amendments has had no effect on the Group's consolidated financial statements.

New and revised IFRSs in issue but not yet effective

At the date of authorisation of these financial statements, The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective and [in some cases] had not yet been adopted by the EU:

IFRS 9	Financial Instruments
IFRS 15	Revenue from Contracts with Customers
IFRS 16	Leases
IFRS 2 (amendments)	Classification and Measurement of Share-based Payment Transactions
IAS 7 (amendments)	Disclosure Initiative
IAS 12 (amendments)	Recognition of Deferred Tax Assets for Unrealised Losses
IFRS 10 and IAS 28 (amendments)	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

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, except as noted below:

• IFRS 9 will impact both the measurement and disclosures of financial instruments;
• IIFRS 15 may have an impact on revenue recognition and related disclosures; and
• IIFRS 16 may have an impact on the reported assets, liabilities, income statement and cash flows of the Group. Furthermore, extensive disclosures will be required by IFRS 16.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

Going Concern

This financial information has been prepared on a going concern basis which the Directors believe to be appropriate for the reasons set out below.

The company and the group meet their day to day working capital requirements through short-term stocking loans, the revolving credit facility and its medium-term funding requirements through a term loan. At the year end the medium-term banking facilities included a revolving credit facility of up to £150.0 million and a term loan totalling £85.0 million, providing total facilities of £235.0 million. These facilities were renewed in September 2015 and are due for renewal in March 2020.

In addition to the total facility limit, the facilities include certain covenant tests. The failure of a covenant test would render the entire facilities repayable on demand at the option of the lenders.

The Directors have assessed the future funding requirements of the group and the company and compared them to the level of committed available borrowing facilities. This assessment included a detailed review of trading and cash flow forecasts for a period 12 months from the date of this annual report which projects that the total revised facility limit is not exceeded over the duration of the forecasts and forecast covenant levels are met. Whilst uncertainty remains in the global economy these forecasts are considered reasonable.

The Directors have a reasonable expectation that the group and the company have adequate resources to continue in operational existence for the foreseeable future. For those reasons, they continue to adopt the going concern basis in preparing this Annual Report.

3. Critical accounting estimates and judgements

In the process of applying the groups Accounting Policies, which are described above, the directors have made the following judgements that have had the most significant effect on the amounts recognised in the financial statements.

Pensions

The liability recognised in the balance sheet in respect of the group's retirement benefit obligations represents the liabilities of the group's defined benefit pension schemes after deduction of the fair value of the related assets. The schemes' liabilities are derived by estimating the ultimate cost of benefits payable by the schemes and reflecting the discounted value of the proportion accrued by the year end in the balance sheet. In order to arrive at these estimates, a number of key financial and non-financial assumptions are made by management, changes to which could have a material impact upon the net deficit and also the net cost recognised in the comprehensive income statement.

The principal assumptions relate to the rate of inflation, mortality and the discount rate. The assumed rate of inflation is important because this affects the rate at which salaries grow and therefore the size of the pension that employees receive upon retirement. Over the longer term, rates of inflation can vary significantly.

The overall benefits payable by the schemes will also depend upon the length of time that members of the schemes live for; the longer they remain alive, the higher the cost of the pension benefits to be met by the schemes. Assumptions are made regarding the expected lifetime of the schemes' members, based upon recent national experience. However, given the rates of advance in medical science, it is uncertain whether these assumptions will prove to be accurate in practice.

The rate used to discount the resulting cash flows is equivalent to the market yield at the balance sheet date on UK government securities with a similar duration to the schemes liabilities. This rate is potentially subject to significant variation. The net cost recognised in the Income Statement is also affected by the return on the schemes' assets. The impact of the pension estimates on the group's accounts can be seen in note 29.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation and uncertainty at the balance sheet date, that have had a significant risk of causing a material adjustment to carrying amounts of assets and liabilities are discussed below.

Goodwill and Intangible Assets

The group reviews the goodwill arising on the acquisition of subsidiaries or businesses and any intangible assets with an indefinite life for impairment at least annually or when events or changes in economic circumstances indicate that impairment may have taken place. The impairment review is performed by projecting the future cash flows, excluding finance and tax, based upon budgets and plans and making appropriate assumptions about rates of growth and discounting these using a rate that takes into account prevailing market interest rates and the risks inherent in the business. If the present value of the projected cash flows is less than the carrying value of the underlying net assets and related goodwill, an impairment charge would be required in the Income Statement.

This calculation requires the exercise of significant judgement by management; if the estimates made prove to be incorrect or changes in the performance of the subsidiaries affect the amount and timing of future cash flows, goodwill may become impaired in future periods.

In respect of acquisitions, at the point of acquisition the group is required to assess whether intangible assets need to be separately identified and measured. The measurement and assessment of the useful economic lives of intangible assets requires the use of judgement by management.

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. 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. Revenue recognition

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 substantially all risks and rewards have been transferred to the customer. This is generally at the time of delivery to the customer. Service and bodyshop sales are recognised in line with the work performed. 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, the commission earned is also recorded at an agreed rate when the transaction has occurred. Where a property transaction is deemed to be exceptional, the profit on sale is recognised when the contract for sale becomes unconditional.

6. 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 to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete financial information is available. The business segments are set out in note 1.

7. Operating profit

Operating profit is stated before net interest costs and debt issue costs.

8. Goodwill arising on Consolidation

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 on acquisitions of subsidiaries is shown separately on the balance sheet. Goodwill arising on acquisitions is tested annually for impairment and is carried at cost less accumulated impairment losses.

9. Intangible Assets

Intangible assets acquired on a business combination are capitalised separately from goodwill if the asset is separable and if fair value can be measured reliably on initial recognition. Intangible assets so acquired are carried at cost less accumulated amortisation and any impairment losses. Amortisation is provided on a straight line basis to allocate the cost of the asset over its estimated useful life. The useful life of customer relationships is expected to be up to 20 years, and the useful lives of acquired brands and licences vary between 5 years and indefinite life. Intangible assets with indefinite life are tested annually for impairment. A valuation of intangible assets is performed by an independent external specialist to assess their useful lives. The group has no internally generated intangible assets.

10. Investments

Investments held as fixed assets are stated at cost less provision for impairment.

11. Property, Plant and Equipment

Assets are stated at their deemed cost less depreciation. With the exception of certain properties which were revalued on 31 December 2003, all assets are recorded at historical cost. The basis of the revaluation, being open market value was, in the opinion of the Directors, approximate to fair value and has been adopted as deemed cost on transition to IFRS. The group has adopted the cost model under IAS 16, 'Property plant and equipment'.

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.

Plant and machinery (including motor vehicles), fixtures, fittings, tools and equipment (including computer equipment and terminals), are depreciated on a straight line basis at rates varying between 10% and 33% per annum over their estimated useful lives.

Property, plant and equipment are transferred to "Assets held for sale" when management expect their disposal to be completed within one year from the balance sheet date. Non-current assets classified as held for sale are stated at the lower of net book value or expected proceeds.

12. Impairment of Assets

Assets that have an indefinite life are not subject to amortisation and are tested at least annually for impairment. Assets subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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.

13. Leases

Assets purchased under hire purchase contracts are capitalised in the balance sheet and are depreciated over their useful lives. The interest element of the rental obligation is charged to the Income Statement so as to give a constant rate of charge on the remaining balance of the obligation.

Rental costs under operating leases are charged to the Income Statement in equal annual amounts over the periods of the leases.

14. Inventories

Inventories are valued at the lower of purchase price and net realisable value. Deposits paid for vehicles on consignment represent bulk deposits paid to manufacturers. The group recognises consignment stock in its balance sheet when there has been a substantial transfer of the risks and rewards of ownership. The related liabilities are included in trade payables.

15. Rental fleet vehicles

Motor vehicles hired to customers under short term rental agreements less than 1 year are included within Current Assets. Income from such rentals are recognised on a straight line basis over the period of the rental agreement.

Vehicles held under short term rental agreements are depreciated on a straight line basis over the course of the rental agreement to their estimated residual value on termination of that agreement.

16. 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 Income Statement 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.

17. Pension Costs

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 2013 by Aon Hewitt Limited and has been updated to 31 December 2016 by a qualified independent actuary to take account of IAS 19 (Revised). The last triennial valuation of the "Dutton Forshaw Group Pension Plan" was carried out at 31 March 2013 by Aon Hewitt Limited and has been updated to 31 December 2016 by a qualified independent actuary to take account of IAS 19 (Revised).

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.

The directors have carried out an assessment of whether there is an unconditional right to a refund of contributions or a reduction in contributions by reference to the schedule of contributions and are satisfied that no further liability is likely to arise.

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.

As a result of the amendments to IAS 19 Employee Benefits, the group has changed its accounting policy with respect to determining the income or expense related to its defined benefit pension scheme. The standard prescribes that an 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 Income Statement in the year in which they are payable.

18. Cash and Cash Equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial institutions, bank and cash balances, and liquid investments, net of bank overdrafts. In the balance sheet, bank overdrafts are included in current borrowings.

19. Share Based Payments

The group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-marketbased vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled sharebased payments 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-marketbased vesting conditions.

Fair value is measured by use of the 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.

20. Derivative Financial Instruments

The group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including forward foreign exchange contracts and an interest rate collar. Further details of derivative financial instruments are disclosed in note 21 to the financial statements.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in the Income Statement immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in the income statement depends on the nature of the hedge relationship.

The fair value of hedging derivatives is classified as a noncurrent asset or a non-current liability if the remaining maturity of the hedge relationship is more than 12 months and as a current asset or a current liability if the remaining maturity of the hedge relationship is less than 12 months.

Derivatives not designated into an effective hedge relationship are classified as a current asset or a current liability.

21. Effective interest method

The effective interest method is a method of calculating the amortised cost of financial liabilities and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Debt instruments that are held-to-maturity, are available for sale or are loans and receivables recognised in income on an effective interest rate basis.

Loans and Receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method less impairment.

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of Financial Assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For loans and receivables the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

22. Financial Instruments Debt Instruments

Debt instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Financial Liabilities

Financial liabilities are classified as either financial liabilities 'at fair value through profit or loss' or other financial liabilities.

23. 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.

24. Repurchase commitments

As part of its normal trading activities, the group has contracted to repurchase, at predetermined values and dates, certain vehicles previously sold under a financial arrangement. The company's residual interest in these vehicles is included in inventories and the related liability is included as repurchase commitments within trade and other payables. The valuation of these vehicles is at the lower of the repurchase price and the expected future sales price.

25. Commercial income

Commercial income, including supplier rebates (i.e. manufacturer bonuses), are 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.

The amount of commercial income receivable at 31 December 2016 was £50.9m (2015: £39.2m).

26. Other items including exceptionals

Other items have been separately identified to provide a better indication of the group's underlying business performance. They are not considered to be business as usual items and have a varying impact on different businesses and reporting periods. They have been separately identified as a result of their magnitude, incidence or unpredictable nature.

These non-underlying items are presented as a separate box within their related consolidated income statement category. Their separate identification results in the calculation of an underlying profit measure in the same way as it is presented and reviewed by management.

Items that may give rise to classification as non-underlying include, but are not limited to, the amortisation of acquired intangible assets, pension costs, debt issue costs, share based payments, impairment of goodwill and exceptional items.

Exceptional items are those items that are unusual because of their size, nature or incidence, or that the directors consider should be disclosed separately to enable a full understanding of the group's results. This includes nonrecurring transaction costs.

Exceptional items have been presented separately on the face of the income statement. The directors consider that this presentation gives a fairer presentation of the results of the group.

Consolidated Income Statements

		Continuing	Discontinued	Total	Continuing	Discontinued	Total
	Note	Operations £m	Operations £m	2016 £m	Operations £m	Operations £m	2015 £m
Revenue	1	4,088.2	193.5	4,281.7	3,430.3	218.8	3,649.1
Cost of sales		(3,638.7)	(138.8)	(3,777.5)	(3,039.6)	(157.3)	(3,196.9)
Gross Profit		449.5	54.7	504.2	390.7	61.5	452.2
Distribution costs		(254.5)	(27.8)	(282.3)	(217.4)	(33.2)	(250.6)
Administration expenses		(94.2)	(14.7)	(108.9)	(105.2)	(15.8)	(121.0)
Other Operating income		0.5	-	0.5	0.5	-	0.3
Profit from operations		101.3	12.2	113.5	68.6	12.5	80.9
Profit from operations before amortisation,
share based payments, impairment
of goodwill and exceptional items		82.5	12.2	94.7	73.4	12.5	85.9
Amortisation of intangible items	10	(1.7)	-	(1.7)	(1.6)	-	(1.6)
Impairment of goodwill	9	(1.0)	-	(1.0)	(3.6)	-	(3.6)
Share based payments		(1.8)	-	(1.8)	(1.5)	-	(1.5)
Exceptional items	4	23.3	-	23.3	1.7	-	1.7
Profit from operations		101.3	12.2	113.5	68.4	12.5	80.9
Interest payable	3	(17.6)	-	(17.6)	(14.1)	-	(14.1)
Interest receivable	3	-	-	-	0.3	-	(0.3)
Net interest		(17.6)	-	(17.6)	(13.8)	-	(13.8)
Net interest on pension scheme obligation		(3.7)	-	(3.7)	(3.9)	-	(3.9)
Debt issue costs		(0.4)	-	(0.4)	(0.4)	-	(0.4)
Profit on ordinary activities before taxation		79.6	12.2	91.8	50.3	12.5	62.8
Profit before taxation, amortisation,
exceptional items, debt issue costs,
pension costs, impairment of goodwill
and share based payments		64.9	12.2	77.1	59.6	12.5	72.1
Amortisation of intangible items		(1.7)	-	(1.7)	(1.6)	-	(1.6)
Share based payments		(1.8)	-	(1.8)	(1.5)	-	(1.5)
Net interest on pension
scheme obligation	4	(3.7)	-	(3.7)	(3.9)	-	(3.9)
Exceptional items	4	23.3	-	23.3	1.7	-	1.7
Impairment of goodwill		(1.0)	-	(1.0)	(3.6)	-	(3.6)
Debt issue costs		(0.4)	-	(0.4)	(0.4)	-	(0.4)
Profit on ordinary activities before taxation		79.6	12.2	91.8	50.3	12.5	62.8
Tax (charge)/credit	5	(7.9)	(2.6)	(10.5)	(9.4)	(2.6)	(12.0)
Profit for the year		71.7	9.6	81.3		9.9	50.8
Attributable to:
Shareholders of the company		71.7	9.6	81.3		9.9	50.8
Earnings per share:
Basic earnings per share	7			20.51p			12.88p
Diluted earnings per share	7			20.10p			12.58p

		Group		Company
		2016	2015	2016	2015
	Note	£m	£m	£m	£m
Profit for the financial year		81.3	50.8	23.2	29.3
Items that will never be reclassified to profit and loss:
Actuarial (losses) gains recognised in post
retirement benefit schemes	29	(27.2)	(2.1)	(15.4)	0.4
Movement in deferred taxation on pension liability	23	4.1	0.6	2.2	(0.2)
Tax rate adjustment		(0.5)	(0.4)	(0.3)	-
Items that are or may be reclassified to profit and loss:
Fair value on derivative instruments and
share based payments		(2.0)	-	(2.0)	-
Movement in deferred taxation on
derivative instruments	23	(0.8)	1.1	0.5	-
Other comprehensive (expense) / income
for the year		(26.4)	(0.8)	(15.0)	0.2
Total comprehensive income for the year		54.9	50.0	8.2	29.5
Attributable to:
Shareholders of the company		54.9	50.0	8.2	29.5

		Group		Company
		2016	2015	2016	2015
	Note	£m	£m	£m	£m
Non-current assets
Goodwill	9	107.6	96.4	-	-
Intangible assets	10	109.8	61.9	8.7	1.6
Property, plant and equipment	11	319.1	282.9	0.3	0.9
Investment in subsidiaries	12	-	-	57.8	57.8
Deferred tax asset	23	-	-	8.7	5.3
		536.5	441.2	75.5	65.6
Current assets
Inventories	13	839.4	816.0	-	-
Trade and other receivables	14	225.0	252.6	405.6	357.1
Rental fleet vehicles	16	67.1	67.0	-	-
Cash and cash equivalents	17	39.8	8.3	30.6	32.9
		1,171.3	1,143.9	436.2	390.0
Total assets		1,707.8	1,585.1	511.7	455.6
Current liabilities
Bank loans and overdrafts	20	25.1	83.4	23.4	79.9
Trade and other payables	18	1,087.5	982.8	215.8	107.0
Current tax liabilities	19	14.7	13.8	6.4	-
Short-term provisions	22	-	0.6	-	-
Derivative financial instruments		3.0	4.8	3.0	5.0
		1,130.3	1,085.4	248.6	191.9
Net current assets		41.0	58.5	187.6	198.1
Non-current liabilities
Bank loans	20	88.8	86.6	75.0	85.0
Trade and other payables	18	33.6	34.1	-	-
Retirement benefit obligations	29	78.4	55.3	39.9	26.7
Deferred tax liabilities	23	35.0	25.2	-	-
Long-term provisions	22	-	0.7	-	-
	20	235.8	1.9	114.9	111.7
Total liabilities		1,366.1	1,287.3	363.5	303.6
Net assets		341.7	297.8	148.2	152.0
Shareholders' equity
Ordinary share capital	24	19.8	19.8	19.8	19.8
Share premium	25	77.7	77.7	77.7	77.7
Capital redemption reserve	26	14.6	14.6	14.6	14.6
Retained earnings	27	229.6	185.7	36.1	39.9
Total equity		341.7	297.8	148.2	152.0

The financial statements of Lookers plc registered no. 111876 on pages 91 to 141 were approved by the Directors on 8 March 2017.

Signed on behalf of the Directors.

Director Director

A. C. Bruce R. A. Gregson

	Share	Share	Capital redemption	Retained	Total
	capital	premium	reserve	earnings	equity
Group	£m	£m	£m	£m	£m
As at 1 January 2016	19.8	77.7	14.6	185.7	297.8
Profit for the year	-	-	-	81.3	81.3
Actuarial losses on defined benefit pension
schemes (note 29)	-	-	-	(27.2)	(27.2)
Deferred taxation on
pension liability	-	-	-	3.6	3.6
Share based payments	-	-	-	1.8	1.8
Deferred taxation on derivatives	-	-	-	(0.8)	(0.8)
Current and deferred taxation on
share based payments	-	-	-	(1.6)	(1.6)
Dividends to shareholders	-	-	-	(13.2)	(13.2)
As at 31 December 2016	19.8	77.7	14.6	229.6	341.7
As at 1 January 2015	19.7	76.9	14.6	145.7	256.9
New shares issued	0.1	0.8	-	-	0.9
Profit for the year	-	-	-	50.8	50.8
Actuarial losses on
defined benefit pension
schemes (note 29)	-	-	-	(2.1)	(2.1)
Deferred taxation on
pension liability	-	-	-	0.6	0.6
Share based payments	-	-	-	1.5	1.5
Rate adjustment	-	-	-	(0.4)	(0.4)
Foreign exchange gain	-	-	-	0.1	0.1
Deferred taxation on
share based payments	-	-	-	1.1	1.1
Dividends to shareholders	-	-	-	(11.6)	(11.6)
As at 31 December 2015	19.8	77.7	14.6	185.7	297.8

Company Statements of Changes in Equity

		Capital
				Total equity
				£m
				152.0
				23.2
				(15.4)
				1.6
				(13.2)
19.8	77.7	14.6	36.1	148.2
				133.2
				0.9
-	-	-	29.3	29.3
-	-	-	0.4	0.4
-	-	-	(0.2)	(0.2)
-	-	-	(11.6)	(11.6)
19.8	77.7	14.6	39.9	152.0
	Share capital £m 19.8 - - - - 19.7 0.1	Share premium £m 77.7 - - - - 76.9 0.8	redemption reserve £m 14.6 - - - - 14.6 -	Retained earnings £m 39.9 23.2 (15.4) 1.6 (13.2) 22.0 -

Consolidated and Company Cash Flow Statements

		Group		Company
		2016	2015	2016	2015
	Note	£m	£m	£m	£m
Cash flows from operating activities
Profit for the year		81.3	50.8	23.2	29.3
Adjustments for:
Tax		10.5	12.0	(0.3)	2.3
Depreciation	4	21.5	16.7	0.1	0.2
Dividend received			-	(17.4)	(21.7)
Loss on disposal of plant and equipment	4	-	0.6	-	-
Profit on disposal of rental fleet vehicles	4	(0.2)	(0.4)	-	-
Profit on disposal of business		(28.0)	-	-	-
Amortisation of intangible assets	4	1.7	1.6	1.5	1.0
Share based payments		1.8	1.5	-	-
Interest income		-	(0.3)	(2.6)	(2.6)
Interest payable		17.6	14.1	6.8	6.3
Debt issue costs		0.4	0.4	0.4	0.4
Impairment of goodwill		1.0	3.6	-	-
Changes in working capital
Increase in inventories		(23.4)	(267.2)	-	-
Decrease/(Increase) in receivables		27.6	(73.2)	(48.5)	(136.0)
Increase in payables		93.2	289.9	111.5	4.5
Impact of net working capital from discontinued businesses		(70.2)	-	-	-
Impact of net working capital of acquisitions		6.1	17.8	-	-
Cash generated from / (used by) operations		140.9	67.9	74.7	(116.3)
Difference between pension charge and cash contributions		(7.1)	(6.8)	(3.9)	(3.9)
Net interest and costs on pension scheme obligation		3.7	3.9	1.6	1.6
Purchase of rental fleet vehicles		(93.7)	(83.2)	-	-
Proceeds from sale of rental fleet vehicles		87.4	76.2	-	-
Interest paid		(17.6)	(14.1)	(6.8)	(6.3)
Interest received		-	0.3	2.6	2.6
Tax paid		(14.2)	(11.3)	-	(0.6)
Net cash inflow / (outflow) from operating activities		99.4	32.9	68.2	(122.9)
Cash flows from investing activities
Acquisition of subsidiaries	28	(92.6)	(104.4)	-	-
Purchase of property, plant and equipment		(36.3)	(35.2)	(0.2)	(0.9)
Purchase of intangibles		(9.2)	(0.8)	(8.7)	(0.8)
Purchase of goodwill		-	(1.8)	-	-
Proceeds from sale of property, plant and equipment		28.9	9.8	0.7	-
Net proceeds from sale of business		111.5	-	-	-
Dividends received		-	-	17.4	21.7
Net cash (used) / generated by investing activities		2.3	(132.4)	9.2	20.0
Cash flows from financing activities
Proceeds from issue of ordinary shares		-	0.9	-	0.9
Repayment of loans		(10.2)	(11.8)	(10.0)	(8.8)
New loans		14.0	62.2	-	61.3
Dividends paid to group shareholders		(13.2)	(11.6)	(13.2)	(11.6)
Net cash (outflow) / inflow from financing activities		(9.4)	39.7	(23.2)	41.8
Increase / (decrease) in cash and cash equivalents		92.3	(59.8)	54.2	(61.1)
Cash and cash equivalents at 1 January		(63.5)	(3.7)	(37.0)	24.1
Cash and cash equivalents at 31 December	17	28.8	(63.5)	17.2	(37.0)

1. Segmental Reporting

At 31 December 2016 the group is organised into one business segment being the motor distribution segment. The parts distribution segment was discontinued on the sale of FPS Distribution Limited on 4 November 2016 (see note 2). All revenue and profits originate in the United Kingdom and the Republic of Ireland.

Primary reporting format - business segments

Year ended 31 December 2016		Motor Division	Parts Distribution (Discontinued)	Unallocated	Group
	Note	£m	£m	£m	£m
Continuing operations
New Cars		2,206.1	-	-	2,206.1
Used Cars		1,437.2	-	-	1,437.2
Aftersales		444.9	193.5	-	638.4
Revenue		4,088.2	193.5	-	4,281.7
Segmental result before amortisation of
intangible assets		82.6	12.1	-	94.7
Amortisation of intangible assets	10	-	-	(1.7)	(1.7)
Interest expense		(13.4)	-	(4.2)	(17.6)
Share based payments		-	-	(1.8)	(1.8)
Impairment of goodwill		-	-	(1.0)	(1.0)
Exceptional items		-	-	23.3	23.3
Net interest and costs on pension
scheme obligation		-	-	(3.7)	(3.7)
Debt issue costs		-	-	(0.4)	(0.4)
Profit before taxation		69.2	12.1	10.5	91.8
Taxation					(10.5)
Profit for the financial year attributable to shareholders					81.3
Segmental assets		1,707.8	-	-	1,707.8
Total assets		1,707.8	-	-	1,707.8
Segmental liabilities
Unallocated liabilities		1,252.2	-	-	1,257.2
- Corporate borrowings		-	-	113.9	113.9
Total liabilities		1,252.2	-	113.9	1,366.1
Other segmental items:
Capital expenditure	11	32.2	4.1	-	36.3
Expenditure on Rental Fleet Vehicles	16	93.7	-	-	93.7
Depreciation	11, 16	20.1	1.4	-	21.5
Amortisation of intangible assets	10	-	-	1.7	1.7

1. Segmental Reporting (continued)

Year ended 31 December 2015		Motor Division	Parts Distribution	Unallocated	Group
	Note	£m	£m	£m	£m
Continuing operations
New Cars		1,835.3	-	-	1,835.3
Used Cars		1,212.1	-	-	1,212.1
Aftersales		382.9	218.8	-	601.7
Revenue		3,430.3	218.8	-	3,649.1
Segmental result before amortisation of
intangible assets		74.9	12.6	(1.6)	85.9
Amortisation of intangible assets	10	-	-	(1.6)	(1.6)
Interest expense		(10.4)	-	(3.7)	(14.1)
Interest income		-	-	0.3	0.3
Share based payments		-	-	(1.5)	(1.5)
Impairment of goodwill Exceptional items		- -	- -	(3.6) 1.7	(3.6) 1.7
Net interest and costs on pension
scheme obligation		-	-	(3.9)	(3.9)
Debt issue costs		-	-	(0.4)	(0.4)
Profit before taxation		64.5	12.6	(14.3)	62.8
Taxation		-	-	(12.0)	(12.0)
Profit for the financial year from continuing
operations attributable to shareholders					50.8
Segmental assets		1,429.4	155.7	-	1,585.1
Total assets		1,429.4	155.7	-	1,585.1
Segmental liabilities		1,037.2	80.1	-	1,117.3
Unallocated liabilities
- Corporate borrowings		-	-	170.0	170.0
Total liabilities		1,037.2	80.1	170.0	1,287.3
Other segmental items
Capital expenditure	11	32.8	2.4	-	35.2
Expenditure on Rental Fleet Vehicles	15	91.4	-	-	91.4
Depreciation	11, 16	14.7	2.0	-	16.7
Amortisation of intangible assets Impairment of trade receivables	10 14	- -	- 0.2	1.6 -	1.6 0.2

Segment assets include property, plant and equipment, inventories, debtors and operating cash. Segment liabilities comprise operating liabilities and exclude certain corporate borrowings. Capital expenditure comprises additions to property, plant and equipment, including additions resulting from acquisitions through business combinations.

Company

The company's business is to invest in its subsidiaries and, therefore, it operates in a single segment.

2. Discontinued Operations

On 4 November 2016, the group disposed of FPS Distribution Limited and its subsidiary companies to Alliance Automotive UK Limited. FPS Distribution Limited and subsidiaries operated the company's Parts Division segment.

The disposal was effected in order to generate cash flow for the expansion of the groups other dealership networks.

The results of the discontinued operation are disclosed in the consolidated income statement.

A profit of £28.0 million arose on the sale of the parts division companies being the difference between sale proceeds and the carrying value of the net assets and attributable goodwill. The profit has been disclosed within exceptional items (note 4).

The carrying value of the assets and net cash generated on disposal are detailed below.

Carrying value of assets on disposal	£m
Property, plant and equipment	16.2
Deferred tax	2.4
Inventories	63.1
Trade and other receivables	77.0
Cash and cash equivalents	4.5
Trade and other payables	(69.9)
Corporation tax	(4.0)
Provisions	(1.3)
	88.0
Total consideration in cash	116.0
Net profit on disposal	28.0
Net cash inflow arising on disposal	£m

Consideration received in cash	116.0
Less cash disposed of	(4.5)
	111.5

During the year, FPS Distribution limited used £2.8 million in the groups net operating cash flows, and paid £12.7 million in respect of investing activities.

Cash flow items resulting from discontinued

operations:-	£m
Decrease in inventories	63.1
Decrease in receivables	77.0
Decrease in payables	(69.9)
Impact of net working capital	70.2
Cash flows from investing activities:
Disposal of fixed assets	16.2

3. Finance Costs - Net

	Group 2016 £m	2015 £m	Company 2016 £m	2015 £m
Interest expense
On amounts wholly repayable within 5 years:
Interest payable on bank borrowings	(5.6)	(5.9)	(6.8)	(6.3)
Interest on consignment vehicle liabilities	(12.0)	(8.2)	-	-
Interest and similar charges payable	(17.6)	(14.1)	(6.8)	(6.3)
Interest income
Bank interest	-	0.3	-	-
Interest received from group companies	-	-	2.6	2.6
Total interest receivable	-	0.3	2.6	2.6
Finance costs - net	(17.6)	(13.8)	(4.2)	(3.7)

4. Profit on Ordinary Activities before Taxation

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
The following items have been included in
arriving at operating profit from operations:
Staff costs (note 8)	272.2	229.9	12.5	11.1
Depreciation of property, plant and equipment
- Owned assets (note 11)	15.1	11.0	0.1	0.2
Depreciation of rental fleet vehicles (note 16)	6.4	5.7	-	-
Amortisation of intangible assets (note 10)	1.7	1.6	1.6	1.0
(Profit) / loss on disposal of plant, equipment
and rental fleet vehicles	(0.2)	0.2	-	-
Other operating lease rentals payable:
- Property	8.5	8.4	-	-
- Plant & equipment	2.8	2.3	-	-
Net finance and debt issue costs	20.4	15.8	5.9	5.4
Cost of inventories recognised as an expense	4,107	3,298	-	-
Dividends from subsidiary companies	-	-	17.4	21.7
Management charges	-	-	(1.1)	(2.2)
Exceptional items:		-	-	-
Profit on sale of business	28.0	-	-	-
VAT refund	4.8	-	4.8	-
Termination of franchises	(9.1)	-	(5.3)	-
Loss on terminated businesses	-	(1.7)	-	(3.2)
Net profit on property sales	-	6.7	-	7.9
Reorganisation costs	-	(2.7)	-	(1.0)
Transaction costs on acquisition	(0.4)	(0.6)	-	-
Total exceptional items	23.3	1.7	0.5	3.7

Services provided by the group's auditor

The analysis of auditor's remuneration is as follows:

	2016	2015
Group	£m	£m
Fees payable to the company's auditor for the audit of the company's annual accounts	-	-
Fees payable to the company's auditor and their associates for other services to the group
The audit of the company's subsidiaries	0.4	0.4
Total audit fees	0.4	0.4
Taxation compliance services	0.1	0.1
Services relating to corporate finance transactions	0.2	-
Other non-audit fee	0.2	0.1
Other advisory fees	0.9	0.1
Total non-audit fees	1.4	0.3

Fees payable to Deloitte LLP and their associates for non-audit services to the company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis and therefore included above.

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 Audit Committee report on page 58.

5. Taxation

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
Current tax charge / (credit):
Current year	16.3	12.8	2.6	0.7
Adjustment in respect of prior years	1.2	(0.3)	(1.1)	(0.2)
	17.5	12.5	1.5	0.5
Deferred tax charge / (credit):
Deferred tax	(6.2)	0.6	0.1	2.3
Adjustment in respect of prior years	(0.8)	(1.1)	(1.9)	(0.5)
	(7.0)	(0.5)	(1.8)	1.8
Total income tax charge / (credit) in Income Statement	10.5	12.0	(0.3)	2.3
Tax on items charged to other comprehensive income:
Rate adjustment	0.5	0.4	0.3	0.2
Deferred tax on derivative instruments and share based payments	0.8	(1.1)	0.5	-
Deferred tax on pension liability	(4.1)	(0.6)	(2.2)	(0.1)
Tax on items charged directly to equity:
current and deferred tax on share options	1.1	-	-	-
The tax charge / (credit) was affected by the
following factors:
Standard rate of corporation tax	20.0%	20.3%	20.0%	20.3%
Inter group dividend	-	-	(14.6)%	(13.6)%
Items not allowable for taxation	1.4%	3.6%	0.2%	2.6%
Change in rate	(3.5)%	(2.9)%	2.3%	0.1%
Exceptional items	(7.0)%	-	3.5%	-
Adjustments to prior years' taxation	0.5%	(2.3)%	(12.8)%	(2.2)%
Effective tax rate	11.4%	19.2%	(1.4)%	7.2%

The future tax charge will be affected by the levels of expenditure not deductible for taxation and any profits on sale of properties.

6. Dividends

	2016	2015
Group and company	£m	£m
Interim dividend for the year ended 31 December 2016 1.28p (2015: 1.07p)	5.0	4.2
Final dividend for the year ended 31 December 2015 2.05p (2014: 1.87p)	8.2	7.4
	13.2	11.6

The Directors propose a final dividend of 2.36p per share in respect of the financial year ending 31 December 2016 (2015: 2.05p). The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

7. Earnings per share

The calculation of earnings per ordinary share is based on the profit on ordinary activities after taxation attributable to shareholders amounting to £81.3m (2015: £50.8m) and a weighted average number of ordinary shares in issue during the year of 396,357,194 (2015: 394,384,284).

The diluted earnings per share are based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 9,510,213 (2015: 9,062,088).

Adjusted earnings per share are stated before amortisation of intangible assets, pension costs, debt issue costs, impairment of goodwill, exceptional items and share based payments and are calculated on profits of £62.9m (2015: £60.1m) for the year. These adjustments are net of tax.

	2016	2016 Earnings	2015	2015 Earnings
	Earnings	per share	Earnings	per share
Continuing operations	£m	p	£m	p
Basic EPS
Earnings attributable to ordinary shareholders	81.3	20.51	50.8	12.88
Effect of dilutive securities	-	(0.41)	-	(0.30)
Diluted EPS	81.3	20.10	50.8	12.58
Adjusted EPS
Earnings attributable to ordinary shareholders	81.3	20.51	50.8	12.88
Amortisation of intangible assets	1.7	0.43	1.6	0.41
Net interest and costs on pension scheme obligations	3.7	0.93	3.9	0.99
Share based payments	1.8	0.45	1.5	0.38
Exceptional items	(23.3)	(5.88)	(1.7)	(0.43)
Tax on exceptional items	(3.7)	(0.93)	-	-
Impairment of goodwill	1.0	0.25	3.6	0.91
Debt issue costs	0.4	0.10	0.4	0.10
Adjusted EPS	62.9	15.87	60.1	15.24

8. Information regarding Employees

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
Employee costs during the year
(inclusive of Executive Directors)
Wages and salaries	244.3	206.0	11.0	9.9
Social security costs	23.6	19.9	1.3	1.0
Other pension costs	4.3	4.0	0.2	0.2
	272.2	229.9	12.5	11.1
	2016	2015	2016	2015
	No.	No.	No.	No.
Average number employed during the year (including Directors)
Production	3,249	2,283	-	-
Selling and distribution	3,233	2,821	-	-
Administration	2,599	2,183	172	145
	9,081	7,287	172	145
	2016	2015	2016	2015
	£m	£m	£m	£m
Key management compensation
Salaries and short-term employee benefits	5.3	3.1	3.1	3.1

The key management compensation given above includes Directors and key operational staff.

During the year the aggregate gains made on the exercise of share options by Directors was £nil (2015: £550,539). Further details of Directors' remuneration is included in the Directors' Remuneration Report on pages 62 to 81.

9. Goodwill

Group	2016 £m	2015 £m
Cost
As at 1 January	105.8	83.9
Disposals	(7.5)	1.8
Recognised on acquisition of subsidiaries	19.7	20.1
As at 31 December	118.0	105.8
Aggregate impairment
As at 1 January	9.4	3.3
Disposal	-	2.5
Impairment	1.0	3.6
As at 31 December	10.4	9.4
Net book amount at 31 December	107.6	96.4

During the year, the acquired goodwill was tested for impairment in accordance with IAS 36. Following the impairment test, a goodwill impairment charge of £1.0m was deemed necessary (2015: £3.6m). This impairment was in relation to various franchise dealerships following deterioration in trading.

Goodwill arose in the year on the acquisition of Warwick Holdings Limited and Knights North West Limited (note 28).

On 10 August 2016, the company disposed of the entire issued share capital of FPS Distribution Limited, which comprised the parts division of the group, to Alliance Automotive UK Limited. The goodwill relating to FPS Distribution Limited has been disposed of as part of the sale agreement.

For the purposes of impairment testing of goodwill and intangible assets, the Directors recognise the group's Cash Generating Units ("CGU") to be connected groupings of dealerships. The recoverable amount of each CGU's goodwill and intangible assets is based on value in use using Board approved budget projections over the next year and projected following four years for each CGU to calculate each CGU's discounted cash flows to perpetuity, where individual budgets are produced for all businesses within the group. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the year and the impairment calculation is sensitive to these key assumptions. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. An annual growth rate of 1.6% (2015: 1.6%) (UK GDP) is assumed and a risk adjusted discount rate applied. The discount rates are estimated based on the group's cost of capital which is calculated after consideration of market information and risk adjusted for individual circumstances with all units carrying a goodwill value operating in the UK and the motor retail or related sector a single pre-tax discount rate of 9.71% (2015: 9.44%) has been applied.

The two key assumptions made by the Directors are the discount rate used and profitability rates beyond the business plan. Neither a 1% increase in the discount rate or a 10% reduction in operating profit would result in any impairment being required.

10. Intangible Assets

	Licences	Customer relationships	Brands	Total
Group	£m	£m	£m	£m
Acquired intangible assets
Cost
As at 1 January 2016	56.4	11.5	7.2	75.1
Recognised on acquisition of subsidiaries	50.2	-	-	50.2
Additions	9.2	-	-	9.2
Disposals	-	(11.5)	(4.7)	(16.2)
As at 31 December 2016	115.8	-	2.5	118.3
Aggregate amortisation
As at 1 January 2016	5.3	6.4	1.5	13.2
Charge for the year	1.7	-	-	1.7
Disposals	-	(6.4)	-	(6.4)
As at 31 December 2016	7.0	-	1.5	8.5
Net book amount at 31 December 2016	108.8	-	1.0	109.8
Cost
As at 1 January 2015	26.5	11.5	7.2	45.2
Additions	0.8	-	-	0.8
Recognised on acquisition of subsidiary	29.1	-	-	29.1
As at 31 December 2015	56.4	11.5	7.2	75.1
Cost
Aggregate amortisation
As at 1 January 2015	4.3	5.8	1.5	11.6
Charge for the year	1.0	0.6	-	1.6
As at 31 December 2015	5.3	6.4	1.5	13.2
Net book amount at 31 December 2015	51.1	5.1	5.7	61.9

£50.2 million of franchise licences were acquired as part of the acquisition of Knights North West Limited and Warwick Holdings Limited (note. 28). A valuation of these intangible assets has been performed by Globalview Advisors, an independent external specialist. These intangible assets have been assigned indefinite lives on the basis that these arrangements are expected to be renewed for the foreseeable future.

The Brands intangible asset of £1.0m (2015: £5.7m) is deemed by the Directors to have an indefinite useful economic life. These Brands arose on the acquisition of a subsidiary undertaking. The trading activities under these brand names generate a substantial part of the group's revenue and operating profit. The group is continually investing in these brands through promotional activities and advertising. Due to this continued investment these brands are judged to have an indefinite useful economic life and no amortisation is charged.

All amortisation charges in the year have been recognised within administrative expenses. The impairment testing for intangible assets is performed as described in note 9.

10. Intangible Assets (continued)

Company	Licences £m
Acquired intangible assets
Cost as at 1 January 2016	6.6
Additions	8.7
As at 31 December 2016	15.3
Aggregate amortisation
As at 1 January 2016	5.0
Charge for the year	1.6
As at 31 December 2016	6.6
Net book amount at 31 December 2016	8.7
Acquired intangible assets
Cost as at 1 January 2015	5.8
Additions	0.8
As at 31 December 2015	6.6
Aggregate amortisation
As at 1 January 2015	4.0
Charge for the year	1.0
As at 31 December 2015	5.0
Net book amount at 31 December 2015	1.6

11. Property, Plant and Equipment

	Freehold property	Long leasehold	Short leasehold	Plant & machinery	Fixtures	Total
Group	£m	£m	£m	£m	£m	£m
Cost
As at 1 January 2016	208.8	67.1	12.4	27.8	44.8	360.9
On acquisition (see note 28)	43.2	-	-	3.8	4.1	51.1
Additions	13.7	7.3	-	7.0	8.3	36.3
Reclassifications	-	0.4	-	1.1	(1.5)	-
On disposal of subsidiary	(11.5)	-	-	(4.8)	(13.8)	(30.1)
Disposals	(8.9)	(6.2)	-	(2.9)	(4.0)	(22.0)
As at 31 December 2016	245.3	68.6	12.4	32.0	37.9	396.2
Depreciation
As at 1 January 2016	15.0	8.5	6.5	18.7	29.3	78.0
On acquisition	2.0	-	-	2.6	2.6	7.2
Charge	2.2	1.6	1.3	5.3	4.7	15.1
On disposal of subsidiary	-	-	-	(3.2)	(10.7)	(13.9)
Disposals	(2.2)	(0.9)	-	(2.9)	(3.3)	(9.3)
As at 31 December 2016	17.0	9.2	7.8	20.5	22.6	77.1
Net book value at 31 December 2016	228.3	59.4	4.6	11.5	15.3	319.1

11. Property, Plant and Equipment (continued)

	Freehold property	Long leasehold property	Short leasehold property	Plant & machinery	Fixtures, fittings, tools & equipment	Total
Group	£m	£m	£m	£m	£m	£m
As at 1 January 2015	149.7	56.4	11.5	20.8	31.7	270.1
On acquisition (note 28)	51.8	5.5	-	5.8	7.9	71.0
Additions in year	18.2	5.3	0.9	3.6	7.2	35.2
Disposals	(10.9)	(0.1)	-	(2.4)	(2.0)	(15.4)
As at 31 December 2015	208.8	67.1	12.4	27.8	44.8	360.9
Accumulated depreciation
As at 1 January 2015	7.0	6.0	5.5	13.8	22.2	54.5
On acquisition	7.9	1.3	-	3.8	4.5	17.5
Charge for the year	1.7	1.2	1.0	3.0	4.1	11.0
Disposals	(1.6)	-	-	(1.9)	(1.5)	(5.0)
As at 31 December 2015	15.0	8.5	6.5	18.7	29.3	78.0
Net book value at 31 December 2015	193.8	58.6	5.9	9.1	15.5	282.9

Assets held under finance leases, capitalised and included in plant & machinery and fixtures and fittings:

	2016 £m	2015 £m
Cost	0.3	0.3
Aggregate depreciation	(0.3)	(0.3)
	-	-

In accordance with IFRS 1 'First time adoption of International Reporting Standards', and IAS 16 'Property, plant and equipment' the group has adopted the cost model, electing to use revaluations made under previous UK GAAP as deemed cost for its freehold and leasehold properties.

The group's freehold and leasehold properties were revalued on 31 December 2003, by independent qualified valuers on the basis of open market value in England and Scotland by Messrs. Donaldsons, Chartered Surveyors, and in Northern Ireland by Messrs. Hamilton Osborne King, Chartered Surveyors. The Directors are satisfied that open market value approximates to fair value.

	Short leasehold	Fixtures, fittings, tools &
Company	property £m	equipment £m	Total £m
Cost
As at 1 January 2016	0.7	2.2	2.9
Additions	-	0.2	0.2
Disposals	(0.7)	-	(0.7)
As at 31 December 2016	-	2.4	2.4
Accumulated depreciation
As at 1 January 2016	-	2.0	2.0
Charge for the year	-	0.1	0.1
As at 31 December 2016	-	2.1	2.1
Net book value at 31 December 2016	-	0.3	0.3

11. Property, Plant and Equipment (continued)

Short leasehold property	Fixtures, fittings, tools & equipment	Total
£m	£m	£m
		2.0
		0.9
0.7	2.2	2.9
		1.8
-	0.2	0.2
-	2.0	2.0
0.7	0.2	0.9
	- 0.7 -	2.0 0.2 1.8

12. Investment in Subsidiaries

	2016	2015
Company	£m	£m
Cost
As at 1 January and 31 December	57.8	57.8

Details of the subsidiary undertakings are as follows:

*

*

Registered Office: 776 Chester Road, Stretford, Manchester, M32 0QH

Incorporated and registered

in England Addison Motors Limited Addison TPS Limited Aston Green Limited Benfield Motor Group Limited Benfield Pension Trustees Limited Billingham Motors Limited Bluebell (Crewe) Limited Bolling Investments Limited Bramall & Jones VW Ltd Bristol Trade Centre Limited Burton Trade Centre Limited Castle Bromwich Motors Limited Chipperfield Garage Limited Chipperfield Holdings Limited Colborne (HGG) 2012 Limited Colbornes Trade Parts Limited Colebrook & Burgess (North Shields) Limited Colebrook & Burgess (Teesside) Limited Colebrook & Burgess (Wallsend) Limited Colebrook & Burgess Holdings Limited Colebrook & Burgess Limited Cox & Co (Lookers) Limited Drayton Group Limited The Dutton-Forshaw Trustee Company Limited Dutton-Forshaw Holdings Limited Dutton-Forshaw Limited * Get Motoring UK Limited Golf & Turf Machinery Limited Harpers Carlisle Limited Howdens of Harrogate Limited Jackson & Edwards Limited Kings Langley Land Rover Limited Knights North West Limited

Look 4 Car Credit Limited Look 4 Car Deals Limited Lookers (J & S Leaver) Limited Lookers Bedale Garage Limited Lookers Birmingham Limited Lookers Colborne Limited Lookers Directors Limited Lookers GB & E Limited Lookers JV Limited Lookers Leasing Limited Lookers Motor Group Limited Lookers Motor Holdings Limited Lookers Motor Market Limited Lookers Motors Limited Lookers North West Limited Lookers Norwich Limited Lookers of Barnsley Limited Lookers of Bradford Limited Lookers of Burton Limited Lookers of Colwyn Bay Limited Lookers of Dewsbury Limited Lookers of Macclesfield Limited Lookers of Manchester Limited Lookers of Northwich Limited Lookers of Rochdale Limited Lookers Pension Plan Trustee Limited Lookers plc Lookers Property (Warehouse) Limited Lookers Secretaries Limited Lookers South East Limited Lookers Southern Limited Lookers Thornton Engineering Limited Martins (Burnley) Limited Martins (Middlesbrough) Limited Martins (Stockton) Limited

Martins-Wellington Limited MB South Limited Motor Trade Centres (UK) Limited Picking (Liverpool) Limited Platts Harris Limited PLP Motors Limited Radford (Bavarian) Limited Roadshow Limited Rosedale Finance & Leasing Limited The Dovercourt Motor Company Limited The Dutton-Forshaw Group Limited The Dutton-Forshaw Motor Company Limited The Dutton-Forshaw Trustee Company Limited Truc-Bodies Limited Vehicle Rental Services Limited Vikings Canterbury Limited Warwick Holdings Limited

Incorporated and registered in Northern Ireland

Adelaide Finance Limited Bairds Cars Limited Balmoral Motors Ltd Charles Hurst Holdings Limited Charles Hurst JV Limited Charles Hurst Limited Charles Hurst Motors Ltd Fleet Financial Limited Guthrie & Anderson Limited Hurstco Limited Lookers Property (NI) Limited Savilles Auto Village Limited * The Charles Hurst Corporation Limited Thompson-Reid Tractors Limited

Town & Country Fuels Limited Ulster Garages Limited Incorporated and registered in Scotland Arran Oils Limited Ballcop (No.1) Limited Ballcop (No.2) Limited Ballcop (No.3) Limited Ballcop (No.4) Limited Ballcop (No.5) Limited Ballcop (No.7) Limited Ballcop (No.8) Limited Ballcop (No.9) Limited Ballcop (No.10) Limited Ballcop (No.11) Limited Clyde Rover Limited Hurst Energy Services Limited Hurst Fuels (Caledonia) Limited Inverclyde Sales & Service Limited J M Sloan & Company (Car Hire) Limited J M Sloan & Company Limited JN Holdings Limited Lomond Motors (East) Limited Lomond Motors Limited Lomond TPS Limited Lookers Clyde Limited Lookers Property (Scotland) Limited Shields Automotive Limited Taggarts Motor Group Limited

Incorporated in Republic of Ireland Charles Hurst Dublin Limited

All subsidiary companies are wholly owned with the exception of Lookers Birmingham Limited and Charles Hurst Motors Limited in which 99% shareholdings are held.

*These subsidiaries are directly owned by Lookers plc whilst the remaining are indirectly owned.

Martins (Sunderland) Limited

13. Inventories
	2016	2015
Group	£m	£m
Goods for resale	463.3	470.6
Consignment vehicles	376.1	345.4
	839.4	816.0

14. Trade and other receivables

	Group 2016	2015	Company 2016	2015
Note	£m	£m	£m	£m
Amounts falling due within one year:
Trade debtors	153.7	166.7	0.3	0.5
Less: provision for impairment of receivables	(2.2)	(2.1)	-	-
	151.5	164.6	0.3	0.5
Amounts owed by group undertakings	-	-	389.5	317.6
Other debtors	47.8	69.6	12.9	34.5
Prepayments	25.7	18.4	2.9	4.5
	225.0	252.6	405.6	357.1

The average credit period on sales of goods is 13 days (2015: 17 days). Trade receivables are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. Included in the group's trade receivable balance are debtors with a carrying amount of £1.9m (2015: £17.8m) which are past due at the reporting date for which the group has not provided as there has not been a significant change in credit quality and the group believes that the amounts are still considered recoverable. The group does not hold any collateral over these balances. The average age of these receivables is 45 days (2015: 45 days).

Amounts owed by group undertakings in the company balance sheet are incurred in the normal course of trading and the Directors consider there to be no significant credit risk.

	Group 2016	2015	Company 2016	2015
Movement in the allowance for doubtful debts	£m	£m	£m	£m
Balance at beginning of the year	2.1	2.1	-	-
Amounts written off during the year	-	(0.2)	-	-
Increase in allowance recognised in income statement	0.1	0.2	-	-
Balance at the end of the year	2.2	2.1	-	-

In determining the recoverability of the trade receivables, the group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

Included in the allowance for doubtful debts are specific trade receivables with a balance of £nil (2015: £nil) for the group and £nil (2015: £nil) for the company which have been placed under liquidation. The impairment represents the difference between the carrying amount of the specific trade receivable and present value of the expected liquidation dividend.

		2016 2015 Value of Receivables Value of Receivables
Group	£m	%	£m	%
Not impaired:
- Neither past due nor impaired	165.7	83.7	218.8	93.4
- Past due up to 3 months but not impaired	33.6	16.3	17.4	6.6
	199.3	100.0	234.2	100.0
	2016 Value of Receivables		2015 Value of Receivables
Company	£m	%	£m	%
Not impaired:
- Neither past due nor impaired	402.7	100.0	352.1	100.0

15. Other Financial Assets

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
Investments carried at cost:
Non-current
Investments in subsidiaries	-	-	57.8	57.8
Loans carried at amortised cost:
Current
Loans to subsidiaries	-	-	389.5	317.6
Disclosed in the financial statements as:
Current other financial assets	-	-	389.5	317.6
Non-current other financial assets	-	-	57.8	57.8

16. Rental Fleet Vehicles

Rental fleet vehicles comprise passenger car vehicles held by the customer on short term hire, of less than 1 year.

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
Cost
As at 1 January	69.0	59.4	-	-
Additions in year	93.7	91.4	-	-
Disposals	(92.8)	(81.8)	-	-
As at 31 December	69.9	69.0	-	-
Accumulated depreciation
As at 1 January	2.0	2.3	-	-
Charge for the year	6.4	5.7	-	-
Disposals	(5.6)	(6.0)	-	-
As at 31 December	2.8	2.0	-	-
Net book value at 31 December	67.1	67.0	-	-

Rental fleet vehicles held under short term finance leases amounted to £67 million (2015: £66 million).

17. Cash and Cash Equivalents

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
Cash at bank and in hand	39.8	8.3	30.6	32.9
Bank overdraft (note 20)	(11.0)	(71.8)	(13.4)	(69.9)
Reconciliation to cash flow statements	28.8	(63.5)	17.2	(37.0)

Cash and cash equivalents comprise cash held by the group and short-term bank deposits. The carrying amount of these assets approximates to their fair value.

18. Trade and other Payables

	Group		Company
Note	2016 £m	2015 £m	2016 £m	2015 £m
Trade payables	266.7	265.7	8.4	8.0
Repurchase commitments and stocking loans	273.6	205.9	-	-
Consignment vehicle creditors	376.1	345.4	-	-
Amounts owed to group undertakings 30	-	-	49.3	55.6
Rental fleet vehicle finance	53.2	49.7	-	-
Other tax and social security payable	18.4	15.0	4.3	0.1
Other creditors	38.4	24.3	16.2	8.9
Accruals and deferred income	61.1	76.8	137.6	34.4
	1,087.5	982.8	215.8	107.0
Repurchase commitments due after more than 1 year	33.6	34.1	-	-

19. Current Tax Liabilities

	Group 2016	2015	Company 2016	2015
	£m	£m	£m	£m
Current tax liabilities	14.7	13.8	6.4	-

20. Borrowings

	Group		Company
	2016	2015	2016	2015
	£m	£m	£m	£m
Current
Bank overdraft	11.0	71.8	13.4	69.9
Secured bank loans	14.1	11.6	10.0	10.0
	25.1	83.4	23.4	79.9
Non-current
Secured bank loans	88.8	86.6	75.0	85.0
Total borrowings	113.9	170.0	98.4	164.9

	Group 2016 £m	2015 £m	Company 2016 £m	2015 £m
Bank loans and overdraft repayable:
Less than one year	25.1	83.4	23.4	79.9
More than one year and not more than two years	11.8	10.4	10.0	10.0
More than two years and not more than five years	77.0	76.2	65.0	75.0
	113.9	170.0	98.4	164.9

20. Borrowings (continued)

The principal features of the group's borrowings are as follows: At 31 December 2016 the group had 2 principal bank loans:

• (i) A loan of £85.0m which will continue until 31 March 2020. The loan carries an interest rate of between 1.2% and 2.15% above LIBOR.
• (ii) A revolving loan facility of £150.0m. The facility can be drawn in whole or part at any time and will continue until 31 March 2020. The drawn down part of the loan carries an interest rate of between 1.2% and 2.15% above LIBOR.

The weighted average interest rate paid during the year on the bank loans was 1.88% (2015: 1.88%). At 31 December 2016, the group had available £160.9m (2015: £83.3m) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

The group's current facilities were negotiated on 2 September 2015 and are due for renewal in March 2020.

Of this amount £85.0m (2015: £95.0m) is repayable in instalments up until 2020 (2015: 2020).

21. Financial Instruments

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the Principal Accounting Policy note.

	Group 2016	2015	Company 2016	2015
Categories of financial instruments	£m	£m	£m	£m
Financial assets
Cash	39.8	8.3	30.6	32.9
Receivables	151.5	164.6	389.5	316.4
Financial liabilities
Derivatives	3.0	4.8	3.0	5.0
Amortised cost	1,060.3	1,016.6	156.1	228.4

Financial Instruments Carried at Fair Value

The fair values of the group's financial instruments are categorised as Level 2, based on the degree to which the fair value is observable. Level 2 fair value measurements are those derived from inputs other than unadjusted quoted prices in active markets (Level 1 categorisation) that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Financial Risk Management Objectives

The group's Corporate Treasury function 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 cash flow interest rate risk.

The group seeks to minimise the effects of these risks, by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the group's policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and nonderivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market Risk

The group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including:

• forward foreign exchange contracts to hedge the exchange rate risk arising on the purchase of parts;
• forward interest rates; and
• interest rate risk management.

During the course of the year there has been no change to the market risk or manner in which the group manages its exposure.

Foreign Currency Risk Management

The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

The carrying amount of the group's foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

The company had no foreign currency denominated monetary assets or monetary liabilities at the reporting date (2015: same).

	Liabilities		Assets
2016	2015	2016	2015
Group £m	£m	£m	£m
Euro 17.0	12.2	17.3	11.9

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 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. A positive number indicates an increase in profit or loss and other equity where pounds sterling strengthens against the respective currency.

	Euro Impact Group
	2016	2015
	£m	£m
Profit or loss	0.1	0.1

Interest Rate Risk Management

The group and company are exposed to interest rate risk as entities in the group borrow funds at both fixed and floating interest rates. The risk is managed by the group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring strategies to mitigate risks are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.

The group and company's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

The sensitivity analyses below have been determined based on the exposure to 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. A 50 basis point change is used when reporting interest risk internally to key management personnel and represents management's assessment of the possible change in interest rates.

	Group	+ 50 Basis Points Company			Group	- 50 Basis Points Company
	2016 £m	2015 £m	2016 £m	2015 £m	2016 £m	2015 £m	2016 £m	2015 £m
Profit or loss	0.6	0.6	0.1	0.1	0.6	0.6	0.1	0.1

Under interest rate swap contracts, the group and company agree to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the group and company to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the year end is determined by discounting the future cash flows using the year end curves and the credit risk inherent in the contract, and is disclosed on the next page. The average interest rate is based on the outstanding balances at the start of the financial year.

Credit Risk Management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The group's exposure and the credit ratings of its counterparties are controlled by counterparty limits that are reviewed and approved by the risk management Committee annually.

Trade receivables are spread across a large number of counterparties across a large geographical area. 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 without taking account of the value of any collateral obtained.

Liquidity Risk Management

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. Included in note 31 is a listing of additional undrawn facilities that the group / company has at its disposal to further reduce liquidity risk.

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 / company is entitled and intends to repay the liability before its maturity.

	Less than 1 Month	1-3 Months	3 Months to 1 Year	1-5 Years	Total
Group	£m	£m	£m	£m	£m
2016
Variable interest rate instruments	11.0	1,087.5	14.1	122.4	1,235.0
	11.0	1,087.5	14.1	122.4	1,235.0
2015
Variable interest rate instruments	71.8	982.8	11.6	120.7	1,186.9
	71.8	982.8	11.6	120.7	1,186.9

Included within variable interest rate instruments in the 1 to 3 month column is an amount of £273.6m (2015: £205.9m) relating to repurchase commitments where the liability is only contractually due at the point where the related vehicle is sold to the end customer. In this way the group matches the cash outflow in respect of the liability with the cash inflow from the sale.

Also included within variable interest rate instruments in the 1 to 3 months column is an amount of £239.9m (2015: £234.3m) relating to vehicle stocking loans.

Included within variable interest rate instruments in the 1 to 3 month column is an amount of £376.1m (2015: £345.4m) 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.

	Less than 1 Month	1-3 Months	3 Months to 1 Year	1-5 Years	Total
Company	£m	£m	£m	£m	£m
2016
Variable interest rate instruments	13.4	215.8	10.0	75.0	314.2
	13.4	215.8	10.0	75.0	314.2
2015
Variable interest rate instruments	69.9	107.0	10.0	85.0	271.9
	69.9	107.0	10.0	85.0	271.9

The objectives, policies and strategies for holding or issuing financial instruments adopted by the Board are given in the Directors' Report. Instruments held at the year end are set out in note 31.

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 stakeholders through the optimisation of the debt and equity balance. The group's overall strategy remains unchanged since 2015.

The capital structure of the group consists of debt, which includes the borrowings disclosed in note 20, cash and cash equivalents and equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 24 and 27.

The group is not subject to any externally imposed capital requirements.

The group's risk management committee reviews the capital structure on a semi-annual basis. As part of this review, the committee 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:

	2016	2015
	£m	£m
Debt	113.9	170.0
Cash and cash equivalents	(39.8)	(8.3)
Net Debt	74.1	161.7
Total Equity	341.7	297.8
Net debt to equity ratio	21.6%	54.2%

Debt is defined as long-term and short-term borrowings (excluding derivatives and financial guarantee contracts) as detailed in note 20.

Equity includes all capital and reserves of the group that are managed as capital.

22. Provisions

	Dilapidations
Group	£m
As at 1 January 2016	1.3
Disposals in the year	(1.3)
As at 31 December 2016	-

Provisions have been allocated between current and non-current as follows:
	2016	2015
	£m	£m
Current	-	0.6
Non-current	-	0.7
	-	1.3

Dilapidations

The group disposed of its Parts Division on 4th November 2016. All provisions related to dilapidations for that business were sold to the acquiring business.

23. Deferred Taxation

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17% (2015: 19%). The movement on the deferred tax account is as shown below:

	Group		Company
	2016	2015	2016	2015
	£m	£m	£m	£m
As at 1 January	25.2	12.3	(5.3)	(7.1)
Adjustment to Prior Year Deferred Taxation (note 5)	(0.8)	(1.1)	-	(0.7)
Change of rate – (credited) / charged to Income
Statement (note 5)	(3.2)	(1.3)	-	0.4
Change of rate – charged to Comprehensive Income	0.5	0.4	-	-
On acquisition / disposals of subsidiary	17.7	14.9	-	-
(Credited) / charged to Income Statement (note 5)	(3.0)	1.7	(1.8)	1.9
(Credited) / charged to statement of Comprehensive Income
in respect of pension scheme liabilities	(4.1)	(0.6)	(1.6)	0.2
(Credited) / charged to statement of Comprehensive Income
with respect to derivative instruments	0.8	-	-	-
(Credited) / charged to equity with respect to
share based payments	1.8	(1.2)	-	-
As at 31 December	35.0	25.2	(8.7)	(5.3)

The deferred tax credited to equity during the current year related to the deferred tax movement on the pension liability, derivatives and share based payments. The prior year related to the deferred tax movement on the pension liability.

Deferred tax assets have been recognised in respect of other temporary differences giving rise to deferred tax assets because it is probable that there will be future taxable profits available.

The movements on deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balance net.

The Finance Act 2016, which was substantially enacted in September 2016, included provisions to reduce the rate of corporation tax to 17% with effect from 1 April 2020. The deferred tax balances have been revalued to 17% in the 2016 accounts.

23. Deferred Taxation (continued)

Group

Deferred tax liabilities

	Intangible Assets	Accelerated tax depreciation	Capital gains	Total
	£m	£m	£m	£m
As at 1 January 2016	12.3	24.3	3.4	40.0
Credited to Income Statement	(1.2)	(7.0)	1.1	(7.1)
On acquisition of subsidiary	14.1	3.2	0.2	17.5
As at 31 December 2016	25.2	20.5	4.7	50.4

Deferred tax assets

	Share options	Employee benefits	Provisions	Total
	£m	£m	£m	£m
As at 1 January 2015	(2.5)	(10.8)	(1.5)	(14.8)
Charged (credited) to Income Statement	(0.2)	1.2	(0.9)	0.1
On acquisition / disposal	-	-	0.3	0.3
Credited to statement of changes in equity	1.8	-	-	1.8
Credited to Statement of Comprehensive Income	-	(3.6)	0.8	(2.8)
As at 31 December 2015	(0.9)	(13.2)	(1.3)	(15.4)

Net deferred tax liability

As at 31 December 2016	35.0
As at 31 December 2015	25.2

Company

Deferred tax assets

	Employee Accelerated tax benefits Provisions		Accelerated tax depreciation	Total
	£m	£m	£m	£m
As at 1 January 2016	(5.2)	-	(0.1)	(7.1)
Charged to Income Statement	0.6	(2.4)	(0.1)	(1.8)
Charged to Statement of Comprehensive Income	2.1	0.6	-	(1.5)
As at 31 December 2016	(6.7)	(1.8)	(0.2)	(8.7)
As at 31 December 2015				(5.3)

24. Share Capital

Shares
	£m
480,000,000	24.0
392,824,895	19.7
3,207,613	0.1
396,032,508	19.8

24. Share Capital (continued)

Potential Issues of Ordinary Shares

Options on 3,470,326 ordinary shares in relation to the employee share save scheme lapsed or were forfeited during 2016 and 1,360,852 options were exercised during the year.

The number of shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below:

	Exercise price	Exercise	2016 Number	2015 Number
Year of grant	pence	period	(5p Shares)	(5p Shares)
2011 ESOS	Nil	2014-2021	539,672	539,672
2012 ESOS	Nil	2015-2022	660,664	983,988
2014 ESOS	Nil	2017-2024	914,461	914,461
2015 ESOS	Nil	2018-2025	1,860,878	1,860,878
2016 ESOS	Nil	2019-2026	621,967	-

Employee ShareSave Scheme

The Employee ShareSave scheme was available to all eligible employees and was 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. The latest grant under the ShareSave scheme was made in the year ended 2016. No further grants have been made under this scheme. Options outstanding under this scheme at 31 December 2016 were 10,974,006 (2015: 7,072,092).

The total expense included within operating profit from continuing operations in respect of share based payments was £1.8m (2015: £1.5m).

25. Share Premium

Group and Company	£m
As at 1 January 2016	77.7
Arising on issue of new shares	-
As at 31 December 2016	77.7
As at 1 January 2015	76.8
Arising on issue of new shares	0.8
As at 31 December 2015	77.7

26. Capital Redemption Reserve

Group and Company	£m
As at 1 January 2016 and 31 December 2016	14.6

This reserve is non-distributable.

27. Retained Earnings

	Group	Company
	£m	£m
Net profit for the year	50.8	29.3
Actuarial losses on defined benefit pension schemes	(2.1)	0.4
Deferred taxation on pension liability	0.6	(0.2)
Movement in deferred taxation on derivative instruments	1.1	-
Foreign exchange gain	0.1	-
Dividends to shareholders	(11.6)	(11.6)
Rate adjustment	(0.4)	-
Share based payments	1.5	-
As at 31 December 2015	185.7	39.9
Net profit for the year	81.3	23.2
Actuarial losses on defined benefit pension schemes	(27.2)	(15.4)
Deferred taxation on pension liability	3.6	1.6
Movement in deferred taxation on derivative instruments	(0.8)	-
Dividends to shareholders	(13.2)	(13.2)
Current and deferred taxation on share based payments	(1.6)	-
Share based payments	1.8	-
As at 31 December 2016	229.6	36.1

Retained earnings include £17.1m (2015: £17.1m) of non-distributable reserves relating to properties which had been revalued under UK GAAP, but treated as deemed cost under IFRS.

28. Acquisitions

In line with the group strategy of growth by selective acquisition the following companies were acquired during the year.

(1) Acquisition of Knights North West Limited

On 22 August 2016, Lookers Motor Group Limited, a wholly owned subsidiary of Lookers plc, acquired the entire issued share capital of Knights North West Limited, a company incorporated in the UK for a total consideration of £26.6m. The acquisition has been accounted for by the acquisition method of accounting.

	Book value at acquisition	Fair value adjustment	Fair value at acquisition
	£m	£m	£m
Intangibles	-	22.2	22.2
Tangible fixed assets	19.9	-	19.9
Vehicle and other stocks	38.4	-	38.4
Debtors (gross contractual amounts receivable)	7.5	(0.7)	6.8
Cash and cash equivalents	0.8	-	0.8
Overdraft and loans	(14.0)	-	(14.0)
Payables	(49.4)	-	(49.4)
Deferred tax	(0.7)	(6.2)	(6.9)
	2.5	15.3	17.8
Goodwill			8.8
Consideration in cash			26.6
Cash and cash equivalents			(0.8)
Overdrafts and loans			14.0
Net cash outflow			39.8

The deferred tax adjustment is in relation to the intangible asset acquired on acquisition (note 23) and is calculated in line with IAS 12 Income Taxes. This liability crystallises if the intangible asset is either disposed of or impaired. The Directors do not expect this to be the case in the near future given the external valuation performed which concluded the intangible assets had an indefinite life.

The goodwill arising on the acquisition of the above company is attributable to the anticipated profitability of the distribution of the group's products in new markets and the anticipated operating synergies derived from the combination. The summarised Income statement and statement of changes in equity of Knights North West Limited, are disclosed below, for the year ended 31 December 2016. The transaction costs are disclosed within exceptional items in note 4.

Period to 22 August 2016	Period from acquisition to 31 December 2016	Total
£m	£m	£m
143.5	88.5	232.0
1.2	2.0	3.2
(0.9)	(0.4)	(1.3)
0.3	1.6	1.9
-	(0.3)	(0.3)
0.3	1.3	1.6

The business acquired during the year generated cash resources amounting to £1.3m.

28. Acquisitions (continued)

(2) Acquisition of Warwick Holdings Limited

On 4 November 2016, MB South Limited, a wholly owned subsidiary of Lookers plc, acquired the entire issued share capital of Warwick Holdings Limited, a company incorporated in the UK for a total consideration of £56.3m. The acquisition has been accounted for by the acquisition method of accounting.

	Book value at acquisition	Fair value adjustment	Fair value at acquisition
	£m	£m	£m
Intangible assets	-	28.0	28.0
Tangible fixed assets	21.9	2.1	24.0
Vehicle and other stocks	44.6	(0.5)	44.1
Debtors (gross contractual amounts receivable)	28.2	-	28.2
Cash and cash equivalents	5.1	-	5.1
Overdraft and loans	(1.6)	-	(1.6)
Payables	(74.2)	-	(74.2)
Deferred tax	(0.5)	(7.7)	(8.2)
	23.5	21.9	45.4
Goodwill			10.9
Consideration in cash			56.3
Cash and cash equivalents			(5.1)
Overdrafts and loans			1.6
Net cash outflow			52.8

The deferred tax adjustment is in relation to the intangible asset acquired on acquisition (note 23) and is calculated in line with IAS 12 Income Taxes. This liability crystallises if the intangible asset is either disposed of or impaired. The Directors do not expect this to be the case in the near future given the external valuation performed which concluded the intangible assets had an indefinite life.

The goodwill arising on the acquisition of the above company is attributable to the anticipated profitability of the distribution of the group's products in new markets and the anticipated operating synergies derived from the combination. The summarised Income statement and statement of changes in equity of Warwick Holdings Limited, are disclosed below, for the year ended 31 December 2016. The transaction costs are disclosed within exceptional items in note 4.

	Period from Period to acquisition to 4 November 2016 31 December 2016		Total
	£m	£m	£m
Turnover	252.4	42.9	295.3
Operating profit	3.8	2.2	6.0
Net interest payable	(0.9)	(0.2)	(1.1)
Profit before taxation	2.9	2.0	4.9
Taxation	(0.8)	(0.4)	(1.2)
Profit and total recognised gains for the period	2.1	1.6	3.7

The business acquired during the year generated cash resources amounting to £nil.

29. Pensions

Pension Scheme - The Lookers Pension Plan

The pension plan "The Lookers Pension Plan", which is a defined benefit scheme, 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.

The group has applied IAS 19 (Revised) to this scheme and the following disclosures relate to this standard. The group recognises any actuarial gains and losses in each period in the Statement of Comprehensive Income.

The pension charge for the scheme for 2016 recognised in the Income Statement was £1.6m (2015: £1.6m).

A valuation update was made as at 31 December 2016 by a qualified independent actuary, using the projected unit credit method 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.

Based on actuarial advice and using the assumptions below in calculating the scheme's liabilities, the total value of these liabilities under IAS 19 is £143.8m at 31 December 2016 (2015: £118.8m).

The fair value of assets of the scheme on each class of assets are:

	Market value 2016	Market value 2015
	£m	£m
Equities	42.5	39.4
Target return funds	40.3	34.5
Corporate bonds	20.3	17.4
Cash	0.9	0.8
Total fair value of assets	104.0	92.1

The amounts recognised in the Income Statements are as follows:

	2016	2015
	£m	£m
Non investment expenses	0.6	0.5
Interest on obligation	4.5	4.5
Interest income on scheme assets	(3.5)	(3.4)
Total defined benefit expense	1.6	1.6

Changes in the present value of the defined benefit obligation are as follows:

	2016	2015
	£m	£m
Opening defined benefit obligation	118.8	120.7
Interest cost	4.5	4.5
Actuarial losses/(gains)	26.1	(1.3)
Benefits paid	(5.6)	(5.1)
Closing defined benefit obligation	143.8	118.8

29. Pensions (continued)

Changes in the fair value of scheme assets are as follows:

	2016	2015
	£m	£m
Opening fair value of scheme assets	92.1	91.3
Interest income	3.5	3.4
Actuarial gains/(losses)	10.7	(0.9)
Contributions by employer	3.9	3.9
Benefits paid	(5.6)	(5.1)
Non-investment expenses paid	(0.6)	(0.5)
Closing fair value of scheme assets	104.0	92.1

None of the scheme's assets were invested in Lookers plc or property occupied by Lookers plc. The company contributed an additional £3.9m in 2016 (2015: £3.9m) to fund accruing pensions and expects to maintain a similar level of pension contributions in 2017.

	2016	2015
	£m	£m
Total amount of actuarial losses/(gains) recognised in the Statement
of Comprehensive Income in the year	(15.4)	0.4
Cumulative amount of actuarial losses recognised in the
Statement of Comprehensive Income at the year end	(53.9)	(38.5)
The major categories of scheme assets as a percentage of total scheme assets are as follows:
Equities	40.9%	42.8%
Target return funds	38.7%	37.5%
Bonds	19.5%	18.9%
Cash	0.9%	0.8%

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) are as follows:

	2016	2015
Discount rate	2.85%	3.9%
Future pension increases	2.05 - 3.2%	1.9% - 3.05%
Life expectancy at age 65 for:
current pensioners - males	87.1	87.0
current pensioners - females	89.5	89.4
future pensioners - males	89.0	88.0
future pensioners - females	90.6	90.6

Sensitivity analysis

For information, the table below gives a broad indication of the impact on the IAS 19 valuation for changes in the key assumptions:

Change in assumption	Approximate impact on current deficit
Reduce discount rate by 0.1% p.a.	+ £2.5m
Increase inflation assumptions by 0.1% p.a.	+ £1.5m
Change mortality assumption to SAPS SINA (-1 year) CMI 2011 (1%)	+ £4.5m

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.

29. Pensions (continued)

Amounts for the current and previous year are as follows:

	2016	2015
	£m	£m
Defined benefit obligation	(143.9)	(118.8)
Scheme assets	104.0	92.1
Deficit	(39.9)	(26.7)
Experience gains/(losses) on plan assets	10.7	(0.9)

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 £3.9m (2015: £3.9m).

Pension Scheme - The Dutton Forshaw Group Pension Plan

The Dutton Forshaw Group's pension plan "The Dutton Forshaw Group Pension Plan", which is a defined benefit scheme 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.

The group has applied IAS 19 (Revised) to this scheme and the following disclosures relate to this standard. The group recognises any actuarial gains and losses in each period in the Statement of Comprehensive Income.

A valuation update was made as at 31 December 2016 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.

The pension charge for 2016 recognised in the Income Statement was £2.1m (2015: £2.3m)

Based on actuarial advice and using the assumptions below in calculating the scheme's liabilities, the total value of these liabilities under IAS 19 is £145.0m at 31 December 2016 (2015: £120.3m).

The fair value of assets of the scheme on each class of assets are:

	Market value 2016 £m	Market value 2015 £m
Absolute / target Return Funds	27.9	25.2
Equities	38.9	31.6
Corporate Bonds	38.9	34.3
Cash	0.7	0.6
Total fair value of assets	106.4	91.7

29. Pensions (continued)

Pension Scheme - The Dutton Forshaw Group Pension Plan (continued)

The amounts recognised in the Income Statements are as follows:

	2016	2015
	£m	£m
Non investment expenses	1.0	1.3
Total included in administrative expenses	1.0	1.3
Interest on obligation	4.6	4.4
Interest income on scheme assets	(3.5)	(3.4)
Total included in finance costs	1.1	1.0
Total defined benefit expenses	2.1	2.3

Changes in the present value of the defined benefit obligation are as follows:

	2016	2015
	£m	£m
Opening defined benefit obligation	120.3	119.4
Interest cost	4.6	4.4
Actuarial losses	25.0	0.8
Benefits paid	(4.9)	(4.3)
Closing defined benefit obligation	145.0	120.3

Changes in the fair value of scheme assets are as follows:

	2016	2015
	£m	£m
Opening fair value of scheme assets	91.7	91.2
Interest income	3.5	3.4
Actuarial gains/(losses)	13.2	(1.7)
Contributions by employer	3.9	4.4
Benefits paid	(4.9)	(4.3)
Non investment expenses paid	(1.0)	(1.3)
Closing fair value of scheme assets	106.4	91.7

None of the scheme's assets were invested in Lookers plc or property occupied by Lookers plc. The company contributed an additional £3.9m in 2016 (2015: £4.4m) to fund accruing pensions and expects to make a similar level of pension contribution in 2017.

	2016	2015
	£m	£m
Total amount of actuarial losses recognised in the Statement
of Comprehensive Income in the year	(11.8)	(2.5)
Cumulative amount of actuarial losses recognised in the
Statement of Comprehensive Income at the year end	(36.5)	(24.7)

29. Pensions (continued)

Pension Scheme - The Dutton Forshaw Group Pension Plan (continued)

The major categories of scheme assets as a percentage of total scheme assets are as follows:

	2016	2015
Equities	36.5%	34.4%
Absolute / Target Return Funds	26.3%	27.5%
Corporate Bonds	36.5%	37.4%
Cash	0.7%	0.7%

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) are as follows:

	2016	2015
Discount rate	2.85%	3.9%
Future pension increases	3.2%	3.05%
Life expectancy at age 65 for:
current pensioners - males	87.1	87.0
current pensioners - females	89.5	89.4
future pensioners - males	88.0	88.0
future pensioners - females	90.6	90.6

Sensitivity analysis

For information, the table below gives a broad indication of the impact on the IAS 19 valuation for changes in the key assumptions:

Change in assumption	Approximate impact on current deficit
Reduce discount rate by 0.1% p.a.	+ £2.5m
Increase inflation assumptions by 0.1% p.a.	+ £1.4m
Change mortality assumption to SAPS SINA (-1 year) CMI 2011 (1%)	+ £4.5m

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.

Where investments are held in bonds and cash, the expected long-term rate of return is taken to be the yields generally prevailing on such assets at the balance sheet date. A higher rate of return is expected on equity investments, which is based more on realistic future expectations than on the returns that have been available historically. The overall expected long-term rate of return on assets is then the average of these rates taking into account the underlying asset portfolio of the pension plan.

Amounts for the current period are as follows:

	2016	2015
	£m	£m
Defined benefit obligation	(145.0)	(120.3)
Scheme assets	106.5	91.7
Deficit	(38.5)	(28.6)
Experience gains on plan assets	13.2	(1.7)

29. Pensions (continued)

Pension Scheme - The Benfield Group Pension Plan

"The Benfield Motor Group Pension Plan" which is a defined benefit scheme 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. The group has applied IAS 19 (Revised) to this scheme and the following disclosures relate to this standard. The group recognises any actuarial gains and losses in each period in the Statement of Comprehensive Income.

The pension charge for the scheme for 2016 recognised in the Income Statement was £nil (2015: £nil).

A valuation update was made as at 31 December 2016 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.

Based on actuarial advice and using the assumptions below in calculating the scheme's liabilities, the total value of these liabilities under IAS 19 is £11.5m at 31 December 2016 (2015: £9.8m).

The fair value of assets of the scheme and the expected rates of return on each class of assets are:

	Market value 2016	Market value 2015
	£m	£m
Equities	8.5	7.4
Corporate Bonds	3.4	3.0
Cash	-	-
Total fair value of assets	11.9	10.4

The amounts recognised in the Income Statements are as follows:

	2016	2015
	£m	£m
Interest on obligation	0.3	0.35
Interest income on scheme assets	(0.3)	(0.35)
Total included in finance costs	-	-
Total defined benefit expenses	-	-

Changes in the present value of the defined benefit obligation are as follows:

	2016	2015
	£m	£m
Opening defined benefit obligation	9.8	10.1
Interest cost	0.3	0.4
Actuarial losses	1.7	(0.3)
Benefits paid	(0.3)	(0.4)
Closing defined benefit obligation	11.5	9.8

29. Pensions (continued)

Pension Scheme - The Benfield Group Pension Plan (continued)

Changes in the fair value of scheme assets are as follows:

	2016
	£m
Opening fair value of scheme assets	10.5
Interest income	0.3
Actuarial gains	1.4
Contributions by employer	-
Benefits paid	(0.3)
Closing fair value of scheme assets	11.9

None of the scheme's assets were invested in Lookers plc or property occupied by Lookers plc. The company made no contribution to fund accruing pensions and expects to make no pension contribution in 2016.

	2016
	£m
Total amount of actuarial losses recognised in the Statement
of Comprehensive Income in the year	(0.3)
Cumulative amount of actuarial losses recognised in the
Statement of Comprehensive Income at the year end	(0.3)

The major categories of scheme assets as a percentage of total scheme assets are as follows:

	2016
Equities	71.1%
Corporate Bonds	28.9%

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) are as follows:

	2016	2015
	£m	£m
Discount rate	2.85%	3.9%
Future pension increases	3.2%	3.05%
Life expectancy at age 65 for:
current pensioners - males	87.1	87.0
current pensioners - females	89.5	89.4
future pensioners - males	88.7	88.7
future pensioners - females	91.4	91.4

Sensitivity analysis

For information, the table below gives a broad indication of the impact on the IAS 19 valuation for changes in the key assumptions:

Change in assumption	Approximate impact on current deficit
Reduce discount rate by 0.1% p.a.	+ £0.2m
Increase inflation assumptions by 0.1% p.a.	+ £0.1m
Change mortality assumption to SAPS SINA (-1 year) CMI 2011 (1%)	+ £0.3m

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.

29. Pensions (continued)

Pension Scheme - The Benfield Group Pension Plan (continued)

Amounts for the current period are as follows:

	2016	2015
	£m	£m
Defined benefit obligation	11.5	9.8
Scheme assets	11.5	10.4
Deficit surplus	-	0.6
Experience gains/(losses) on plan assets	1.4	(0.2)

30. Related Party Transactions

The company bears certain administrative costs and interest costs centrally which are recharged to the group. In addition, the company charges management charges and receives dividends from its subsidiaries. The balances with group undertakings are summarised in the table below.

	Amounts owed by Group undertakings (Note 14)		Amounts owed to Group undertakings (Note 18)
	2016	2015	2016	2015
	£m	£m	£m	£m
Bolling Investments Limited	28.7	46.1	-	-
Lookers Motor Holdings Limited	80.5	80.5	-	-
Charles Hurst Limited	10.0	4.3	-	-
Charles Hurst (Dublin) Limited	3.8	0.5	-	-
Platts Harris Limited	0.5	0.3	-	-
FPS Distribution Limited	-	-	-	0.2
Apec Braking Limited	-	1.1	-	-
BTN Turbocharger Service Limited	-	0.5	-	-
Lookers Motor Group Limited	6.0	167.6	28.8	25.8
Lookers Birmingham Limited	8.2	2.8	-	-
MB South Limited	51.5	-	-	5.7
Dutton Forshaw Motor Company Limited	-	-	16.4	19.9
Knights North West Limited	5.8	-	-	-
Lookers Colborne Limited	6.6	5.2	-	-
Lomond Motors Limited	186.4	0.1	0.1	0.1
Addison Motors Limited	0.9	8.0	-	-
Lookers Leasing Limited	-	-	3.0	2.9
Dormant Companies	0.6	0.6	1.0	1.0
	389.5	317.6	49.3	55.6

Key management compensation is included in note 8.

30. Related Party Transactions (continued)

Trading Transactions

During the year, the company entered into a number of re-charging activities for centrally incurred costs with related parties. Purchases of goods to related parties were made at market value. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.

The values of the recharges made with group undertakings are summarised in the table below:

	2016	2015
	£m	£m
Lookers Motor Group Limited	5.8	7.0
MB South Limited	1.5	1.5
Lookers Birmingham Limited	0.6	0.6
Dutton Forshaw Motor Company Limited	1.9	1.9
Lookers Colborne Limited	1.2	1.2
Lookers Leasing Limited	0.1	0.1
Charles Hurst Limited	2.8	2.8
Ferrari Piston Services Limited	0.1	0.1
Platts Harris Limited	0.1	0.1
Lomond Motors Limited	1.3	1.3
Charles Hurst (Dublin) Limited	0.1	0.1
Fleet Financial	0.1	0.1
	15.6	16.8

31. Financial Assets and Liabilities

The objectives, policies and strategies for holding or issuing financial instruments adopted by the Board are given in the Directors' Report. Details regarding the group's derivative financial instruments at 31 December 2016 and 2015 are given in note 21. The group's other financial assets and liabilities are detailed below.

Fair Values

The fair values of the group's trade receivables, cash and cash equivalents, trade payables (which include liabilities in respect of interest-bearing consignment stock), short-term provisions and loans and overdrafts with a maturity of less than one year are assumed to approximate to their book value. The fair value of the group's non-current provisions is not materially different from its fair value.

The group's other non-current financial liabilities are all subject to floating interest rates and so their fair value also approximates to book value. The treatment of Fair Value of derivatives is discussed in section 20 of the Principal Accounting Policies.

Maturity of Financial Liabilities

The maturity profile of the carrying amount of the group's non-current financial liabilities at 31 December 2016 and 2015 are given in note 21.

31. Financial Assets and Liabilities (continued)

Borrowing Facilities

The group has the following undrawn committed borrowing facilities available at 31 December 2016 and 2015 which expire:

	2016	2015
	£m	£m
Within two to five years	160.9	83.3

The above facilities represent loans and overdrafts, for which the facilities have been confirmed.

Interest Rate Profile

Financial assets comprise cash of £8.8m (2015: £8.3m). An analysis of the group's loans and overdrafts between fixed and floating rates is given below.

	2016	2015
	Financial	Financial
	liabilities	liabilities
	£m	£m
Floating Rate	113.9	170.0

Interest rates on the group's floating rate liabilities are based on the London Interbank Rate. At 31 December 2016 all of the group's bank loans and overdrafts are potentially exposed to re-pricing within 12 months of the balance sheet date (2015: 12 months).

Foreign Currencies

The majority of the group's activities are transacted in sterling although some of its purchases are made in Euros. The group manages the foreign currency risk associated with these foreign currency purchases through the use of forward contracts as a commercial hedge. The group has not sought hedge accounting under IAS 39 in respect of these contracts.

32. Operating Lease Commitments - Minimum Lease Payments

	2016 Property	Plant & equipment	2015 Property	Plant & equipment
Group	£m	£m	£m	£m
Commitments under non-cancellable operating leases expiring:
Within one year	8.0	0.8	9.9	2.2
Within two to five years	29.0	0.6	33.1	1.2
After five years	58.8	-	45.5	-
	95.8	1.4	88.5	3.4

Trading Outlets and Interests in Major Subsidiary Companies

Franchises

Alfa Romeo Cardiff Aston Martin Belfast Audi Ayr Basingstoke Camberley Dublin Edinburgh Glasgow Guildford Hamilton Newcastle Stirling Teesside Tyneside Wearside Bentley Belfast BMW Crewe Stafford Stoke-on-Trent Citroën Belfast Newport Dacia

Belfast Carlisle Chester Newcastle Newtownabbey Newtownards Stockport

Ferrari Belfast

Fiat

Stockport

Ford Braintree Chelmsford Colchester Guiseley Harrogate Leeds Sheffield South Woodham Ferrers Sudbury Sunderland

Honda Orpington

Hyundai Dundonald Motherwell

Jaguar

Amersham Belfast Glasgow London - Park Royal Motherwell

Jeep Belfast Cardiff

Kia

Belfast Newcastle Sheffield Stockport

Land Rover

Belfast Bishop's Stortford Chelmsford Glasgow - North Glasgow - South London - Battersea London - Park Royal Motherwell

Lexus

Belfast

Maserati

Belfast

Mercedes-Benz

Ashford Brighton Canterbury Eastbourne Gatwick Maidstone Stafford Shrewsbury Stoke-on-Trent Stourbridge Tonbridge Walsall Wolverhampton Worcester

Mini

Crewe Stafford Stoke-on-Trent

Nissan

Belfast Carlisle Chester Gateshead Leeds Motherwell Newcastle Newtownabbey Newtownards

Peugeot

Belfast Cardiff Newport

Renault

Belfast Carlisle Chester Newcastle Newcastle (Commercial) Newtownabbey Newtownards Stockport

Seat

Manchester Stockport

Trading Outlets and Interests in Major Subsidiary Companies

Skoda

Eccles Guildford Harrogate Manchester Newcastle Stockport West London

smart

Brighton Gatwick Maidstone Stoke-on-Trent Stourbridge Tonbridge Wolverhampton Worcester

Toyota

Belfast Dundonald Newtownabbey

Vauxhall

Belfast Birkenhead Birmingham Chester Ellesmere Port Lisburn Liverpool Newtonabbey Portadown Selly Oak Speke St. Helens Warrington Yardley

Volkswagen

Battersea Blackburn Blackpool Carlisle Dumfries Darlington Guildford Morden Newcastle Northallerton Preston

Volkswagen (continued) Silverlink Teesside Walton-on-Thames

Volkswagen –

Commercial Vehicles Carlisle Darnley Glasgow Guildford Newcastle

Volvo

Teesside

Colchester Glasgow Motherwell Stockport

Used Car Supermarkets Belfast Dublin

Motorcycles

BMW - Belfast Honda - Belfast Yamaha - Belfast

TPS

Edinburgh Glasgow Newcastle Teesside

Tyres

Belfast - Boucher Road Belfast - Sydenham Road Coleraine Omagh Portadown

Service Centres

Renault Chelmsford Volvo Chelmsford Vauxhall Dundonald

Lookers Leasing

Harrogate

Fleet Financial Belfast

Vehicle Rental Services Beaconsfield

Agricultural Division

Darley Dale New Holland Tuxford

Major Subsidiary Companies

Lookers Motor Holdings Limited Bolling Investments Limited Charles Hurst Limited Charles Hurst Motors Limited Fleet Financial Limited Lookers Motor Group Limited Lookers Birmingham Limited MB South Limited FPS Distribution Limited Apec Limited BTN Turbocharger Service Limited Dutton Forshaw Motor Company Limited Lookers Leasing Limited Lomond Motors Limited Platts Harris Limited Ferraris Piston Service Limited GET Motoring UK Limited Charles Hurst Dublin Limited Shields Automotive Limited Lookers Colborne Limited Addison Motors Limited Colebrook and Burgess Limited Knights North West Limited Warwick Holdings Limited

Website: www.lookers.co.uk

	Year ended 31 December 2012	Year ended 31 December 2013	Year ended 31 December 2014	Year ended 31 December 2015	Year ended 31 December 2016
	£m	£m	£m	£m	£m
Turnover	2,056.6	2,464.5	3,042.9	3,649.1	4,281.7
Profit before tax, amortisation, exceptional items, debt issue
costs and pension costs	38.0	48.1	65.0	72.1	77.1
Amortisation	(1.1)	(1.1)	(1.2)	(1.6)	(1.7)
Net interest on pension
scheme obligation	(2.2)	(2.7)	(3.1)	(3.9)	(3.7)
Debt issue costs	(0.4)	(0.4)	(0.4)	(0.4)	(0.4)
Impairment of goodwill	-	-	-	(3.6)	(1.0)
Exceptional items	-	-	-	1.7	23.3
Share based payments	-	-	(1.1)	(1.5)	(1.8)
Profit before taxation	34.3	43.9	59.2	62.8	91.8
Taxation	(8.0)	(7.7)	(12.4)	(12.0)	(10.5)
Profit attributable to
shareholders	26.2	36.0	46.8	50.8	81.3
Non-controlling interests	0.1	0.2	-	-	-
Equity dividend per share†	2.35p	2.58p	2.84p	3.12p	3.64p
Basic earnings per
ordinary share	6.77p	9.28p	12.03p	12.88p	20.51p
Adjusted earnings per
ordinary share	7.37p	10.36p	13.52p	15.24p	15.87p
As at year end
Shareholders' interests
Share capital	19.4	19.4	19.7	19.8	19.8
Reserves
- non-distributable	105.8	106.4	107.7	109.5	109.5
- distributable	78.6	102.2	129.5	168.5	212.4
Net assets	203.8	228.0	256.9	297.8	341.7

† Dividends per share are based on interim dividend paid and final dividend declared for the year.