Lookers boosts profit forecast to £75m and reveals share buyback scheme as motor dealership outperforms
- Lookers now expects underlying pre-tax profits to be at least £75m this year
- Ongoing supply chain problems have driven much higher prices for vehicles
- The firm’s shares were one of the top risers on the London markets on Tuesday
Lookers has upgraded its earnings forecast and launched a share buyback scheme after another impressive sales quarter.
The motor dealership chain now expects underlying pre-tax profits to be at least £75million for the current financial year, thanks to elevated gross margins for vehicles.
Ongoing supply chain issues, notably a shortage of semiconductors, have led to fewer vehicles coming off the production line, thereby driving higher prices for both original and second-hand cars.
Outlook: Lookers now expects underlying pre-tax profits to be at least £75million for the current financial year thanks to elevated gross margins for vehicles
Lookers’ new car sales have also remained strong, outperforming the flatling UK automotive market by around 5.6 per cent in the quarter ending September and by 6.9 percentage points last month.
Used unit purchases were 7.1 per cent lower on a like-for-like basis compared to the same period last year, but aftersales revenues surpassed 2021 levels.
Following this result, the Altrincham-based retailer has declared a stock repurchase programme of up to £15million in order to boost its earnings per share and reduce share capital.
It said that its stock constitutes ‘an attractive investment opportunity at this time’ due to its cash and property portfolio being at a significant discount.
Lookers shares jumped 16.5 per cent to 82.7p on Tuesday, making them one of the top risers on the London Stock Exchange. Over the past 12 months, their value has risen by approximately 30 per cent.
The vehicle seller noted its car order bank was ‘above historical normalised levels’ but said growth was being held back by a shortfall in the availability of new cars.
It also presented more cautious guidance, prompted by the impact of widespread economic uncertainty, inflationary pressures and interest rate hikes on consumer spending.
Mark Raban, the firm’s chief executive, remarked: ‘We remain mindful of ongoing supply chain disruption and significant inflationary pressures affecting consumers and businesses alike.
Fellow car dealership chain Motorpoint Group warned a fortnight ago that worsening economic conditions would continue to negatively impact its trading for the remainder of the fiscal year.
Unlike Lookers, though, the retailer is predicting earnings will be significantly lower in the second half of the period, having already slumped to just £3million in the opening six months.
In its interim results, Lookers revealed profits were similar to the previous year’s levels despite the absence of business rates relief and furlough payments, as well as higher staff and energy costs.
The company’s performance was heavily boosted by the average sales price of its second-hand motors jumping by around 27 per cent and supply constraints lifting gross margins for new vehicles.
Raban added: ‘Our intense focus on driving self-help operational efficiencies across the business and ensuring ongoing strong vehicle margin retention means that we are increasing our profit expectations for the full year.’