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Lookers confident for full year results

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Lookers has reported continued improvements in all areas of its business during Q3 this year, boosted by a strong September.

The biggest development for the group in the last quarter was its acquisition of Benfield Motor Group for £87.5 million.

The acquisition added 30 dealerships to the group and made a “significant contribution” to its plate-change results.

Lookers also acquired a Jaguar dealership in Amersham and it sold its used car supermarkets in Bristol and Burton-on-Trent.

Total gross profit from new cars is up by 7% for the nine months to September 30, while margins on new retail and fleet cars are flat.

Gross profit from used cars increased by 7% during the period, with Lookers managing to maintain margins at similar levels.

Lookers’ statement to the market said its focus on stock management, sourcing good quality used cars and improving its digital business were all key to keeping on track with its used car business.

The group’s aftersales business increased turnover by 8% compared to 2014, benefitting from the growth in the vehicle parc of cars under three years old and increased the gross margin compared to the previous year.

Gross profit from aftersales increased by 9% compared to the prior year.

Lookers’ independent parts division made “good progress” in the period with increases in both turnover and profit before tax compared to the prior year. Operating margins were maintained at a similar level to the prior year.

Net cash flow includes the acquisition of Benfield for £87.5m, but was ahead of last year if this is excluded.

Looker’s bank facilities were renewed and extended at the time of the Benfield acquisition with total facilities of £250m at lower interest rates than the previous facilities and for an extended term.

The board’s statement said its banking facilities provide the company with “substantial levels of unutilised facilities” which leaves it with a “significant amount of additional funding capacity”.

In it’s quarterly statement, Lookers said: “The financial performance of the group in the nine month period builds on what was  already a strong comparative in the previous year.

“The board is confident the group should make further progress during the rest of this year and we therefore believe that the results for the year ending December 31, 2015 should be in line with current market expectations, which will represent a significant increase over the result for the previous financial year.”

Analyst view

Mike Allen, Zeus Capital head of research, said: "Lookers has delivered another record Q3 period, and continues to deliver good growth across all of its business divisions. The stand out performance is that in aftersales, which bodes well given the rising UK car parc.

"On the back of this statement we are maintaining our forecast expectations. We raised our underlying forecasts by c4% on the back of the strong H1 results, with further upgrades delivered post the Benfield acquisition in September. We believe our net debt forecasts are conservative, and anticipate the group will deliver a better end result."

Allen said shares across the automotive retail sector have lagged following the VW emissions scandal, which he belives has been overplayed.

He said: "While we are cautious ahead of next year, we do think Lookers is in a good position to outperform, and continue to believe the potential rewards outweigh the risks at this juncture. The valuation also looks undemanding and attractive to long term investors in our view."

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