Lookers upbeat despite profits fall in ‘difficult’ 2017
The group posted a 27% drop in annual pre-tax profits to £58.4 million, but saw resilient sales despite a declining market for new cars.
Car dealership Lookers has revealed tumbling annual profits, but cheered resilient sales amid “difficult” trading as demand for new cars fell for the first time in six years.
The group posted a 27% drop in annual pre-tax profits to £58.4 million and cautioned over further wider market falls in new car sales in 2018 after a 5.6% fall last year.
The decline in new car sales across the market was the first fall for six years after demand hit an all-time high in 2016.
Sales have fallen amid confusion over Government restrictions on diesel vehicles, rising inflation, reduced availability of credit and low consumer confidence.
This result represents a positive performance against a backdrop of difficult trading conditions Andy Bruce, Lookers CEO
But Lookers said it put in a “robust” performance, with sales outperforming the market and underlying pre-tax profits lifting 5% to £68.4 million as better used car sales helped revenues jump 15%.
Bottom line profits were largely impacted by a one-off boost in 2016 from the sale of its parts division.
Andy Bruce, chief executive of Lookers, said: “This result represents a positive performance against a backdrop of difficult trading conditions across the motor sector, particularly in the second half of the year.”
He added: “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.”
Shares lifted more than 1% after the results.
Lookers – which has 155 franchised dealerships – posted a 3% rise in like-for-like new car sales as it outperformed the wider market, while used car sales surged 13%.
It saw continued demand for after-sales, which represents the largest proportion of the group’s business, with comparable sales up 4% and gross profit 3% higher on a like-for-like basis.
The group cautioned 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.
Figures recently from Begbies Traynor showed levels of financial distress among car dealerships rocketed by 35% at the end of 2017 amid flagging sales and worries over the future of diesel.
Many chains have also been hit by sky high increases in business rates following last year’s revaluation.
Rival car dealership Vertu Motors warned over profits in January as it saw sales of new cars plunge by 13.2% in the final four months of 2017, with a 3.2% drop for used cars.