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Lookers battles challenging market conditions

Top 10 AM100 dealer group Lookers this morning reported a dip in operating profits from trading over the first half of 2008.

Turnover increased by 18.2% to £1,039.2 million against £878.9 million in the same period last year.

However this boost was largely due to acquisition and integration of rival dealer Dutton Forshaw last October, and the May acquisition of Bramall & Jones Volkswagen outlets, as Lookers reported that like for like new car sales for the first six months were down 4.9%, and used car sales also declined 5%.

Operating profits after amortisation of intangible assets and exceptional items suffered a 5.2% dip to £23.7 million from £25 million.

The group's shares rose 7.4% to 54p following the announcement this morning.

Chief executive Ken Surgenor said: "The more turbulent macroeconomic environment has resulted in challenging trading conditions across the UK new and used car markets particularly in May and June and this has impacted the performance of our new and used car businesses.

"However, I am pleased to announce that against this tougher backdrop the group has delivered a solid performance for the period.

"Our diversified business model gives us the flexibility to adapt to the current uncertainties within the UK and global economies and our used car supermarkets and independent parts businesses are showing significant year on year progress."

Lookers expects its year-end results to be at the lower end of market expectations, as it does not predict an improvement in the market this year.

Focus on tight control of working capital has left the business in a stronger position, with £44.4m of working capital compared to £24.3m last year, and gearing has reduced from 113% to 98%.

The company has also taken some cost out of the business, through closing four satellite dealerships and considering dual-franchising showrooms where necessary.

"The subsequent benefits will begin to be seen in the second half, and will be more substantial in 2009," said Surgenor.

It now operates 139 dealerships representing 31 brands.

Lookers reports that its used car supermarkets have returned to profit following changes to their management structure and the closure of one site, Essex Trade Centre.

It said it has had a solid first half performance from its aftermarket parts division, which contributed £66.1m to total turnover. This division includes distributor FPS, braking parts supplier Apec and BTN Turbo Charger Service.

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