Lookers profits drop as new car sales decline

Profits at car dealership group Lookers fell in 2018 as new car sales declined, but the company said it had a good start to 2019.

In the year to 31 December 2018, pre-tax profit was down 9% to £53.1m. Adjusted pre-tax profit, which includes a £7.7m profit from the sale of a property, was 1.6% lower at £67.3m.

Total turnover was up 4% during the year to £4.9bn, with new car turnover down 3.3% and 3% on a like-for-like basis and used car turnover up 14% in total and on an LFL basis. Aftersales turnover increased 6% on an absolute basis and 7% on a like-for-like basis.

Lookers said the new car market - which accounts for 31% of group gross profit - reduced by 6.8% during the year to 2.37 million. The retail new car market reduced by 6.4% to 1.05m and the fleet new car market fell by 7.2% to 1.32m. It said there were "significant" fluctuations in the market last year, including a big drop in the first quarter, given the strong comparatives from 2017 on the back of increased demand ahead of the changes in Vehicle Excise Duty in April.

This was followed by some modest growth within certain months in the second quarter, while the last four months of the year suffered from a shortage in the supply of new cars following the introduction of the more stringent Worldwide Harmonised Light Vehicle Test Procedure emissions regulations from 1 September.

"The resulting impact on the timings of when vehicles could be tested meant that certain brands and models were not available for sale. The impact of this in the final quarter was greater than we had originally anticipated in September," the company said.

Chief executive Andy Bruce said these were "resilient" 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.

"We remain focused on our strategy of having the right brands in the right locations, underpinned by ensuring operational excellence across our portfolio of dealerships. This focus, combined with the quality of our people, is our formula for success and is helping us to increase market share. At the same time, we continue to explore opportunities to grow the Lookers estate and in September we expanded our presence in the North East with the acquisition of the Jennings Group."

Bruce said the order book for new cars in the important month of March is in line with its expectations and the company 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."

At 1100 GMT, the shares were down 2.5% to 99.50p.