Weaker new car sales dent Lookers

Car dealership group Lookers, which also trades as Taggarts in Scotland, yesterday said political uncertainty around Brexit was continuing to take its toll on the new car market.

Lookers CEO Andy Bruce with the team at a Taggarts outlet. Picture: Stewart Robertson

The chain blamed a drop in new car sales and increased costs for contributing to a 1.6 per cent fall in annual profits last year, although it said the used car market remained buoyant.

Used car sales helped total revenues rise 3.9 per cent to £4.88 billion from £4.7bn the previous year but pre-tax profits fell to £67.3 million from £68.4m at an adjusted level.

Gross margins were maintained at a similar level to last year, despite higher levels of used car turnover, which tends to dilute the margin.

Costs increased in the year by £20.4m due to inflationary pressures and rising employer costs in areas including pension contributions.

The group also reported higher property costs in relation to rent, rates and energy and rising IT costs.

Lookers said the annual new car market has reduced by 12 per cent or 320,000 vehicles since the peak of 2.69 million seen in 2016. With Lookers’ share of just over 6 per cent of the total new car market, the fall represents a reduction of 12,800 new cars to the business and equivalent to a loss in gross profit in excess of £20m.

“We believe that to have substantially maintained our profitability despite the loss of this significant level of profit on new cars, demonstrates the effectiveness of our strategy,” the group said.

Chief executive Andy Bruce described it as a “resilient” set of results against a backdrop of more challenging conditions in the motor sector.

“In particular, growth in our used car and aftersales divisions has helped to offset the impact of a more muted new car market, demonstrating the resilience of our business model,” he said.

Bruce said the order book for new cars in March is in line with expectations and the group expects to make further progress in used cars and aftersales.

“We remain mindful of a prolonged period of political and economic uncertainty, but we believe we are well-positioned to strengthen our position to deliver growth and enhance shareholder value over the medium to long term,” he said.

The group said it was continuing to explore opportunities to grow its portfolio of dealerships.

In September it expanded its presence in the North-east of England with the acquisition of the Jennings Group.

However, last October it closed its Hyundai and Nissan business in Motherwell.

Lookers said it now plans to accelerate its growth in the used car market with a target to increase its sales ratio of used to new cars to 2:1.

“Digital channels will be a key tool to facilitate this growth and we continue to benefit from the increasing number of leads generated by our website,” it said.

Latest industry figures show that UK-wide, there was a 1.4 per cent year-on-year rise in new car sales in February following five consecutive months of decline.

Just under 82.000 new cars were registered during February 2018, the Society of Motor Manufacturers and Traders (SMMT) said.

Scotland’s new car market saw registrations in February rise by 13 per cent to 6,183.