Lookers’ sales dented by car shortages but profits rise

Lookers’ sales dented by a lack of cars to sell but profits rise as supply shortage lifts margins and profits

  • Expectations of £45m in first-half profits compare to record £50.3m in 2021
  • Lookers expects supply issues to continue throughout 2022 into next year 

Supply problems in the new and used car market may be denting sales but they have boosted Lookers’ margins, with the dealership hiking profit expectations.

The group told investors that ‘margins remained strong’ throughout its fiscal first half, ‘driven primarily by vehicle supply shortages’, and it now expects underlying profit before tax for the six months to come in at around £45million.

Lookers shares jumped 3.2 per cent on Wednesday morning in response to the update to trade at 76.4p, bringing year-to-date gains to 14.8 per cent.

Lookers ‘outperformed the market in the brands which it represents’ in the first half 

Expectations of £45million in half-year profits compare to £50.3million in the equivalent period in 2021, when there was a late boom in trading on the back of the lifting of lockdown restrictions.

In the five months to 31 May, the UK passenger car market declined by 8.7 per cent primarily as a result of supply and logistics issues.

Lookers said it performed ‘broadly in line’ with the market in this respect, with its used vehicles volumes falling 8.1 per cent, but it had ‘outperformed the market in the brands which it represents’.

It added that it had been able to offset some ‘material increases’ in operating expenses during the period, ‘particularly within utility and staff costs where we have experienced significant inflationary pressures’.

Lookers said it has a ‘good order bank’ going into the second half of the year, and it anticipates that the new and used vehicle supply restrictions ‘will continue for the remainder of 2022 and beyond’.

It added: ‘Given the unique trading conditions we are seeing across the market and in light of the performance to date, the board anticipates the year will be substantially H1 weighted and that underlying profit before tax will be ahead of its previous expectations.’

Lookers boss Mark Raban said: ‘Following a record year in 2021 we have maintained strong trading momentum whilst continuing to make progress with our key strategic initiatives.

‘There is no doubt that challenges lie ahead but with continued operational optimisation Lookers is extremely well positioned to continue to maximise its multiple growth opportunities.’

Analysts at Peel Hunt reiterated their buy recommendation with a target price of 120p, and boosted the full-year profit forecast by £10million to £65.5million.

The analysts said: ‘What is now clear is that the supply of new and used vehicles is unlikely to normalise until at least well into 2023, meaning the margin environment is also unlikely to change over the balance of 2022 either.

‘Clearly, with an order bank of 40,000 cars, any improvements in lead times could drive further upgrades, which we are not factoring in.’