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Lookers on course to 'meet market expectations' after 5% H1 revenues rise

Lookers plc chief executive Andy Bruce

Lookers chief executive Andy Bruce has said he expects the car retail group to “meet market expectations for the full year” after reporting a 5% rise in turnover to £2.58m during the first half of 2018.

Profit before tax at the AM100’s third-placed retail group rose by 2% to £45.7m (2016: £44.6) only by virtue of a £7.6m profit from the sale of a dealership property, however, with adjusted profit before tax down 14% to £43.1m (2016: £50.2m).

EBITDA was £70.7m for the period compared to £68.1 million in the prior year.

Bruce said that he was pleased with the performance over the first half of the year, which had been delivered “despite ongoing challenging market conditions”.

He added: “Although profits, excluding a profit of £7.6m on the sale of a property, are down on last year, as expected, this was due to a very strong comparative period, driven by record new car sales ahead of the decline seen across the market from April 2017.”

Lookers reported that it expected its balance of profit between H1 and H2 to return after a 2017 market which saw VED road tax changes and declining demand for diesel vehicles result in a realisation of 73% of its full-year profit in the first half of the year.

New car turnover for the reported period, to June 30, 2018 stood at £1.31bn as Lookers’ retail sales volumes fell by 4.9% as turnover reduced by 2% and fleet turnover, including commercial vehicles, increased by 3%, compared to the market reduction of 6%.

The group warned that the introduction of the Worldwide Harmonised Light Vehicle Testing Procedure (WLTP) could cause some disruption to the production and supply of certain vehicles in the coming months, however.

Bruce said: “Looking forward, we have an encouraging level of orders for the important month of September.

“Whilst the new car market has seen further reductions in 2018, the decrease appears to have stabilised and volumes remain at a historically high level. Based on our first half performance we expect to meet market expectations for the full year.”

Used cars remained buoyant in H1.

Lookers reported that its turnover from used cars increased by 12% (to £996m), compared to 2017, with gross profit increased by 4% (to £72m) with profit per unit maintained at the same level, adding that the average selling price of its stock had increased.

In its financial statement, the group stated: “The used car market still represents a significant additional opportunity for the group and we plan to accelerate our growth in used cars to take advantage of this.”

The higher margin aftersales business increased in turover by 6% (to £228m) compared to 2017 and gross profit increased by 7% (to £105m), with the margin also at a slightly higher level compared to last year.

Lookers group now consists of 154 franchised dealerships representing 32 manufacturers from 99 locations.

The high margin aftersales sector of the business represents the largest proportion of gross profit at 42%, with new cars and used cars contributing 31% and 27% respectively.

During the reported period it closed “underperforming” Vauxhall dealerships at Warrington and Yardley, near Birmingham, with the agreement of Vauxhall as part of the rationalisation of its UK dealer network under new owner, the PSA Group.

The group invested over £14m it its dealership facilities over the period, however, and acquired Essex-based Ford retailer Pollendine Motors.

It also completed the purchase and termination of three million shares over the period, following the announcement of a £10m buy-back scheme, and reduced its net debt to £54.5m compared to £97.8
million at the start of the year. 

Bruce said that the group is maintaining “good strategic momentum, winning market share and outperforming the wider industry, demonstrating the benefits of our clear strategy of having the right brands in the right locations”.

He added: “We are also benefiting from our scale and our diversified business model which has resulted in revenue and gross profit growth across both used cars and aftersales.”

 

 

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