Lookers is well-placed to make acquisitions as it reported turnover rises across all areas of the business during the first nine months of 2017.
The AM100 dealer group reported that the used car market had remained “buoyant” and its high margin aftersales business had “performed well” in a statement issued via the London Stock Exchange.
And while the Manchester-based retail group conceded that the new car market – which contributes 35% of its annual gross profit – had decreased since April and by the end of September, its statement acknowledged that key manufacturer partners "recognised the more difficult trading environment and are taking pragmatic and supportive actions such as reducing targets, increasing tactical incentives and helping us to reduce operating costs.”
While not reporting on Q3 in isolation, the group reported that in the nine months to September 30 it had seen its turnover of new cars increased by 10% (5% on a like for like basis) and total gross profit from new cars increase by 15% (6% on a like for like basis).
The statement added: “New car margins and profit per unit for both new retail and fleet cars were higher than the prior year.”
In the “buoyant” used car element of the business – which contribute 25% of total gross profit – Lookers reported turnover increased by 24% (14% on a like for like basis) for the period to September 30.
Gross profit from used cars increased during the period with improved margins, it added, resulting in an increase in gross profit of 20% compared to the prior year (12% on a like for like basis).
Lookers said that the group's used car volumes “continue to benefit from higher volumes of leads generated by the group's website” with “further improvements are expected with the launch of our new website at the start of next year”.
In aftersales, which represents 40% of Lookers’ annual total gross profit, turnover was up by 11% (4% on a like for like basis) and gross profit up by 15% (6% on a like-for-like basis).
Lookers, which also announced the commencement of a share buyback scheme within the trading update, said that it had maintained a strong balance sheet which continues to be supported by operational cash flow, its level of net debt to EBITDA had improved and substantial headroom in its bank facilities, had given it “flexibility and capacity to develop the business through further acquisitions at a time when there are significant consolidation opportunities within the sector”.
The statement from Lookers added: “In light of the softening in the new car market since April, as various factors impact on consumer confidence, we continue to plan prudently for the business.
“However, based on the progress seen in the year to date, the board is confident that the group will make further progress during the remainder of this year and believes that the results for the year ending 31 December 2017 will be in line with management's current expectations.”