Strong third quarter leads to uplift in profit forecast for motors group Lookers

Car dealership group Lookers has raised forecasts for its annual underlying pre-tax profits after a strong third quarter.

The Altrincham-based group published a trading update for the period to September 30, today, which revealed a strong performance, despite a shortage of new vehicles caused by the global micro chip shortage.

It also revealed a post-period increase in interest in electric vehicles, as a result of the recent fuel shortages.

Lookers said trading in the third quarter remained strong and above the board’s expectations driven by new vehicle market outperformance, excellent new and used vehicle margins and continued tight cost and working capital control.

The well documented global shortage of semi-conductors continued to place increasing pressure throughout the third quarter on the supply and availability of new vehicles, with used vehicles in strong demand as a consequence.

During the reporting period the UK new car market declined by 31.1%, but the group continued to outperform this by approximately 3.4 percentage points supported by its significantly improved omni-channel customer experience, which gives more flexibility to customers in purchasing a car.

In the important registration plate change month of September, the UK new car market declined by 34.4%.

Supply of used vehicles also remained restricted during the period. Like-for-like used unit sales were down 16.9% in quarter three versus strong comparatives.

However, this was more than offset by unprecedented margin retention driven by ongoing strong customer demand and improvement to the group’s stock management processes.

Aftersales revenues in the period remained robust and, on a like-for-like basis, were 3.5% below last year.

The board said it retains its focus on cash management and liquidity. At September 30, 2021, the group had a net cash balance of approximately £30m, compared with net debt of £25.9m at September 30, last year.

As previously announced, the board has undertaken to repay all CJRS (Coronavirus Job Retention Scheme) receipts in 2021 and in this regard a £4.1m payment has now been made.

Looking ahead, the group said it has a strong new car order bank which is above normalised levels.

However, it said there remains material and increasing uncertainty as to the availability of these vehicles which is dependent on specific brand and model-related factors.

The group is continuing to work closely with all its OEM (original equipment manufacturer) brand partners and customers to minimise the impact wherever possible, which is now widely expected to continue into next year.

Notwithstanding this considerable uncertainty for the final quarter of the year, given the strength of performance in the period, the board said it now expects underlying profit before tax for 2021 to be materially ahead of its previous expectations.

Chief executive, Mark Raban, said: “The group has built on its record first half result and performed strongly in a challenging market, underpinned by further enhancements to its omni-channel experience, which allows customers the flexibility to buy a car however they choose.

“Interest in electric vehicles continues to grow, particularly in light of the UK wide fuel shortage, and the group remains well positioned to benefit from this exciting growth opportunity moving forward.

“Although supply restrictions remain, we continue to work with our OEM partners to minimise the impact and I would like to thank my colleagues and customers for their patience and understanding.”