Lookers' profit accelerates

These comments do not overstate the case. Car sales are a barometer of the wider UK economy, and in this strengthening recovery more people are picking up a fresh set of wheels. Increased sales of new and used cars sent Lookers' revenue up 9 per cent in the first half. That provided adjusted pre-tax profit of £43m, up 7 per cent year on year.

Strong cash flow meant debt levels fell nearly £14m to £38.2m by the end of June, despite ongoing investments in existing dealerships and £4.3m in acquisition costs. Since the start of the year, Lookers has added a Mercedes Benz dealership in Canterbury to its portfolio, as well as an Audi service and two more used car centres - one in Glasgow and one in Dublin. These new outlets contributed to a 6 per cent improvement in pre-tax profit from the group's motor division to £39.7m.

Used car sales is the larger market for Lookers, logging 7m annual transactions compared with roughly 2m for new cars. In the first half, Lookers reported an 8 per cent improvement in used like-for-like sales volumes and, over the last three years, it's seen a 43 per cent improvement in used car volumes. This has been driven in large part by the group's website, which helps customers browse online before making their way down to the forecourt.

By comparison, total new car volumes rose 4 per cent in the first half, compared with wider UK market growth of 7 per cent. But a better focus on fleet sales and higher-margin business pushed new car gross profits 7 per cent ahead of last year on a like-for-like basis. The parts division also did well despite a competitive market, with pre-tax profit up 5.8 per cent to £7.3m.

Peel Hunt has upped its full-year pre-tax profit forecast by £1m to £68m. This should give EPS of 13.9p, compared with £63.9m and 12.9p in 2014.