Lookers shows resilience against tough backdrop

Lookers rallied on Tuesday as the car dealership's first-quarter trading update revealed a resilient performance against a tough backdrop.

In the three months to the end of March, turnover of news cars fell by 4%, but this was much better than the total market drop of 12% and against strong comparatives, as the changes in vehicle excise duty last year significantly bumped up volumes in the first quarter.

Total gross profit from new cars was down 8%, with a modest reduction in profit per unit. Used car demand fared better, however, with turnover up 8% and gross profit 6% higher. Meanwhile, turnover in the aftersales business was slightly higher than the previous year, while gross profit nudged up 2%.

"The group has produced a positive financial performance for the first quarter of the year, against very strong prior year comparatives for the new car market and in an ongoing environment of subdued consumer confidence. There continues to be strong momentum in both our used car and aftersales businesses, demonstrating the resilience and diversity of the group's business model," the company said.

"We have a strong balance sheet which continues to be supported by operational cash flow and our level of net debt to EBITDA has improved. We also have substantial headroom in our bank facilities which gives us flexibility and capacity to develop the business through further acquisitions at a time when there are significant consolidation opportunities within the sector."

Numis, which rates the stock at 'buy', said: "The group's market position and execution continue to strengthen, while its liquidity remains robust at a time of significant consolidation opportunities. We continue to view the shares as good value relative to the peer group and on an absolute basis and, having navigated the toughest part of the year with forecasts intact, we believe the Lookers story should gain increasing traction."

At 1450 BST, the shares were up 10% to 109.20p.