Road ahead rough as Lookers profits skid

Published on Wednesday 27 August 2008 21:12

LOOKERS, one of Britain's biggest car dealers and owner of the Taggarts brand in Scotland, has reported a bumpy first half with buyers switching to cheaper, greener models to combat rising fuel and road duty costs.

The increase in sales of smaller, more fuel-efficient cars such as the Toyota Aygo and Kia Picanto came at the expense of more profitable prestige marques, including Lexus, whose sales slumped by more than a fifth.

Lookers, which operates 139 sites covering 31 manufacturers, said like-for-like new and used car sales were down 6.5 per cent and 5 per cent respectively during the first half of 2008. The performance contributed to a 28 per cent slide in the firm's pre-tax profits to 13 million. That was despite first-half revenues topping 1.04 billion, against 879m a year earlier, following the acquisition of rival Dutton Forshaw last October. The 54.9m deal added 31 sites.

Manchester-based Lookers said trading had remained challenging since the end of June, with no imminent improvement expected.

Stockbroker Panmure Gordon said market conditions for the group could get worse as the consumer slowdown intensified.

Analyst Mike Allen said he was reducing his forecast for the company's 2008 earnings per share by 14 per cent as a result, and by 25 per cent for 2009.

Lookers now expects its full-year pre-tax profits to be about 20m in 2008, compared with previous City estimates as high as 24m.

Chief executive Ken Surgenor described both the new and used car markets as "very tough at the moment".

He said: "Food and fuel price increases and uncertainty over the government's proposed level of car excise duty have put consumers off and are hitting the residual value of used cars.

"The ongoing credit squeeze is also making it difficult for consumers to find suitable financing arrangements."

Surgenor said buyers were downgrading their choice of vehicle, with sales of smaller "multi-purpose vehicles" such as the Land Rover Freelander holding up.

"Nobody's buying the big MPVs like the BMW X5 and the Porsche Cayenne any more," he said.

Lookers, which has Taggarts sites in Glasgow and Motherwell, also confirmed it had closed four franchise outlets during the first half.

Recent industry figures revealed a 13 per cent slump in new car registrations last month – the biggest fall since late 2006 – as soaring fuel bills, rising living expenses and the squeeze on credit for big-ticket purchases kept potential buyers away from the showrooms.

Rival car dealership Pendragon, which operates Evans Halshaw and Stratstone chains, is due to report its half-year figures today.