Lookers’ earnings slumped by a third in the first half of this year.
Directors voted against increasing the dividend and paid the same 1.6p of a year ago.
But the City reaction was good with a 6% rise in share values as results were announced to the Stock Exchange, lifting them to 53p – a welcome shift away from the all-time low of 45p reached in July.
Investors had become more and more pessimistic about the impending results announcements.
The company – like so many retailers – is still heavily out of favour. Last year Lookers was worth £270m. Now it is worth less than £100m.
The day before its results, Pendragon shrivelled even further to £60m.
The general reaction was that Lookers was bad but not nearly as bad as it might have been.
The approval of management signified by the share price move also contained considerable caution.
The worst may yet be to come. Ken Surgenor, the chief executive, made this plain when he said that May and June were the worst two months of the first half of the year.
The trend was still downward, he said. July was worse and August as bad as usual.
David Dyson, the finance director, said: “We do not see a lot of blue sky before 2009.”
Fresh demand is confined to the cheap and cheerful
sector. Cars with a CO2 rating that allows a £35 road tax are the dish of the day.
Big 4x4s are unsaleable, and all Lookers dealers have been briefed on how to respond when offered them as a part-exchange. Compact 4x4s, however, are holding up.
Lookers has no residual value exposure other than stock which it reviews harshly each month and writes down to guide values. Out-of-favour models are falling by more than 6% a month.
Conventional stock that was losing £50 a month in stock is now showing losses four times that level.
With group stock at around £60m, the cost of the exposure is huge. The stock-turn achievable is 8-10 a year.
It is proving impossible to get into the target area of 12.
Four marginally profitable satellite dealerships have been closed: Jaguar in Scotland and Northern Ireland, and Renault and Volvo in England.
Sales for the first six months were swollen by the integration of Dutton Forshaw to £1,039m (£879m in 2007).
Operating profit was down to £23.7m (£25m). Pretax profit was £15.5m (£18.1m) with earnings per share at 4.86p (7.16p).