Join our community of smart investors

Lookers looks sharp

RESULTS: Sales are forging ahead at car retailer Lookers, and the showroom is set for further growth in 2014
March 6, 2014

With a return to growth in its parts division and aftersales gathering pace, car retailer Lookers (LOOK) ended the year on a high. Outperforming the market with a 19 per cent increase in new car retail volumes - compared with 16 per cent for the industry - the company's adjusted pre-tax profits rose 27 per cent to £48.1m. Used car volumes also surged by one-fifth, helped by leads from the group's website. And finance director Robin Gregson says 2014 looks equally promising.

IC TIP: Buy at 135p

The aftermarket is crucial for any car dealership. For Lookers, the gross profit margin on aftersales is roughly 40 per cent, compared with 8 per cent on new and used vehicle sales. As such, the 4 per cent increase in the division's turnover last year generated much higher group profits. The sales growth was driven by recovering new car volumes in previous years, as customers with young cars tend to bring them in for servicing and are more loyal to their dealership.

The return to growth in the parts division was helped by introducing cheaper products for older cars. Turnover growth of 6 per cent drove pre-tax profit up to £11.8m.

Broker Peel Hunt has upgraded pre-tax profit forecasts for 2014 by 5 per cent to £51.5m, giving EPS of 10.2p

LOOKERS (LOOK)
ORD PRICE:135pMARKET VALUE:£522m
TOUCH:134-136p12-MONTH HIGH:137pLOW: 80p
DIVIDEND YIELD:1.9%PE RATIO:15
NET ASSET VALUE:59p*NET DEBT:19%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20091.7511.52.8nil
20101.8831.16.01.8
20111.9031.46.52.18
20122.0634.36.82.35
20132.4643.99.32.58
% change+19+28+37+10

Ex-div: 23 Apr

Payment: 4 Jun

*Includes intangible assets of £87.5m, or 23p a share