Lookers remains 'cautious' about car sales despite first-half growth

A decline in sales of new vehicles across the UK, weaker exchange rates and the ongoing uncertainty regarding Brexit have caused motor retailer Lookers to approach the second half of the year with "some caution".

One of the largest car dealerships in Britain, the company reported a 4.5% drop in pre-tax profits over the first six months to £44.6m, even as revenues grew 5% to £2.46bn.

Lookers' revenues from new cars sped up 7% in the half, even though the number of vehicles sold in the country skidded 1.3% lower.

Used car revenues also rose 7%, and aftersales revenue, the company's primary business unit, grew 4%.

Chief executive Andy Bruce said he believed the company was, "well positioned to continue its strong performance and deliver sustainable value to shareholders."

The group posted a significant drop in net debt, down from £74.1m at 31 December to £61.9m at the end of the half.

Basic earnings per share were 9.07p, a 4% year-on-year slip.

Cash and cash equivalents saw a significant boost, up to £72.7m from the £27.1m it had on hand on 30 June 2016.

While Bruce said he anticipated a "historically high level" of sales in the new car market, the group noted UK car sales were forecasted to fall 2.6% for the year as a whole.

As of 0815 BST, shares had backtracked 4.73% to 109.56p.

House broker Numis left its full year and subsequent forecasts unchanged, based on steady underlying profit enhanced by acquisitions.

"Lookers continues to focus on its edited portfolio of key OEM partnerships, with modernised premises in prime locations backed by best execution," said Numis, noting that profit per dealership has increased 3.3 times during the past six years, reflecting brand investment and portfolio changes.

"We think the group will continue to be the prime agent of industry consolidation, driven by its OEM relationships, selective acquisition approach, consistent financial discipline and strong balance sheet. Meanwhile, residual values remain stable, and used and aftersales markets are still growing."