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Lookers holds its own in tough market

The auto dealer's performance is creditable given market conditions
March 13, 2019

By now, the issues affecting Lookers' (LOOK) full-year performance are familiar to industry analysts, but shares in the auto dealer were still marked down on results day. Fleet volumes, including commercial vehicles, reduced by 5 per cent on a like-for-like basis, but the key metric was the 9.5 per cent reduction in adjusted pre-tax profit once the impact of property sales was discounted.

IC TIP: Buy at 102p

The after-effects of the VW diesel scandal and the delay brought about by WLTP emission regulations have been well documented, but management spelt out the stark reality of the new car market since the high-water mark in 2016: annual sales down by 320,000 units, which translates to a loss in gross profit of around £20m based on the group’s market share of 6.2 per cent.

Yet, Lookers increased gross profit by 2 per cent to £515.5m (on a broadly flat margin), as the aftersales and used car revenue streams proved more resilient, with like-for-like sales up 7 per cent and 14 per cent, respectively.

Analysts at Peel Hunt envisage adjusted EPS of 12.2p, rising to 12.4p in 2020.

LOOKERS (LOOK)   
ORD PRICE:102pMARKET VALUE:£397m
TOUCH:102-102.2p12-MONTH HIGH:114pLOW: 87p
DIVIDEND YIELD:4.0%PE RATIO:10
NET ASSET VALUE:103p*NET DEBT:22%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20143.0459.212.02.84
20153.6562.812.93.12
20164.2891.820.53.64
20174.7058.412.13.89
20184.8853.111.14.08
% change+4-9-12+5
Ex-div:25 Apr   
Payment:05 Jun   
*Includes intangible assets of £231m, or 59p a share.