Lookers has reported growth in its used car and aftersales operations as new car volumes and turnover declined in-line with the market during the period to September 30.
In a trading update the AM100 retailer said that it was pleased to report a “very respectable result for the important month of September”, despite the challenges in the supply of new cars presented by the transition to new Worldwide Harmonised Light Vehicle Test Procedure (WLTP), which came into force on September 1.
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Lookers’ statement said: “We were able to mitigate the effect of the reduced volumes in the market and take advantage of this short supply by improving our margins on new cars across the quarter as a whole.”
The sale of new cars represents approximately a third of Lookers gross profit, but volumes and turnover in this area of the business has declined by 7% YTD, against UK-wide new car registrations down by 7.5% at the end of September.
Total gross profit from new cars reduced by 5%, despite new car margins and profit per unit which were higher than the prior year, it said.
The group’s statement said that Lookers expected to see higher levels of vehicle sales in the final quarter with recent supply issues easing, as further vehicles pass through the new testing regime.
Commenting on a 10% increase in turnover from its used car operations, and a corresponding 10% increase in gross profit, the statement said: “The used car market continues to be buoyant and values have remained stable and predictable in the period.
“Used cars contributed 27% of total gross profit and are an important and successful part of our business, delivering additional growth in both volumes and gross profit.
“With our increased focus on used cars we were pleased to replace the reduction in new car gross profit in September with the improvement in used car gross profit in the month.”
In aftersales, Lookers’ higher margin aftersales business, which represents 42% of its total gross profit, achieved a 5% increase in turnover and 6% increase in gross profit in the first nine months of 2018, meanwhile.
Lookers said that the £5.6m acquisition of Stockton-based Jennings Group – news of which was exclusively reported by AM on September 3 – during the reported period had strengthened its position in the region, adding that it was delighted to expand its key partnership with Ford.
“Given the timing of the acquisition the Board expects it to be earnings neutral this year with a modest enhancement next year”, it said.
Lookers said that its operational cash flow in the period which was significantly higher than the the same period in 2017.
The sale of three properties during the period generated total proceeds of £35m, which further contributed to what it described as “strong cash flow”.