Sales at car retailer Lookers rev up despite profit fall

Lookers, the national car dealership group with a string of showrooms north of the Border, has seen its profits slide into reverse but yesterday cheered resilient sales amid a tough market for new car registrations.

Among their assets is this Edinburgh Audi dealership. Picture: Contributed

Full-year results revealed that pre-tax profits had tumbled 27 per cent to £58.4 million, while the group cautioned over further wider market falls in new car sales in 2018 after a 5.6 per cent decline last year.

The fall in new car registrations across the market was the first for six years after demand hit an all-time high in 2016.

Sales have come under pressure in recent months following concerns about additional levies on diesel vehicles, rising inflation, weak consumer confidence and draconian vehicle excise duty rates on more expensive motors.

However, Taggarts-owner Lookers said it put in a “robust” performance during the year, with sales outperforming the market and underlying pre-tax profits rising 5 per cent to £68.4m as better used car sales helped revenues jump 15 per cent. Its bottom-line profits were largely impacted by a one-off boost in 2016 from the sale of its parts division.

The firm, which has more than 150 franchised dealerships, posted a 3 per cent rise in like-for-like new car sales as it outperformed the market, while used car sales leapt 13 per cent.

It also pointed to continued strong demand for after-sales trade, with comparable sales up 4 per cent and gross profit 3 per cent higher on a like-for-like basis. A final shareholder dividend of 2.48p has been proposed, up from 2.36p, giving a total payout for the year of 3.89p – an increase of 7 per cent.

Chief executive Andy Bruce said: “We have delivered a robust set of results with good growth across all areas of the business, demonstrating the resilience and differentiation provided by the Lookers business model. The order book for new cars in the important month of March is in line with our expectations and whilst the new car market for this year is forecast to reduce, it is still at a historically high level. We expect to make further progress over 2018 with good momentum in used cars and aftersales and a resilient performance in new cars.”

The firm cautioned that the current Brexit uncertainty and weak pound was “unhelpful” to the under-pressure car market.

“We also have to remain aware of consumer confidence levels and the pound-euro exchange rate, both of which could have an impact on our business, so we continue to plan prudently for the business, mindful of these external factors,” it said.

Analysts at Numis Securities said Lookers has managed “steady growth in a tough market”. They noted: “FY17 profit before tax showed steady progress but was circa £6m short of consensus forecasts due to restructuring costs taken above the line and a tough Q4 in new cars.

“The group’s market position and execution continue to strengthen, while its liquidity remains very robust. We view the shares as good value relative to the peer group and on an absolute basis, but recognise that sentiment towards the sub-sector may not improve in the near term.”