Lookers H1 profits drop on strong comparative but revenue up

15th Aug 2018 09:51

(Sharecast News) - Car dealership Lookers posted a drop in first-half pre-tax profit on Wednesday due to a strong comparative period, but revenue rose and the company said results for the year should be in line with market expectations.In the six months to 30 June, adjusted pre-tax profit declined 14% to £43.1m but turnover was up 5% to £2.58bn. Earnings per share increased to 9.71p from 9.07p in the first half of last year and Lookers upped its interim dividend by 5% to 1.48p.Turnover in the new car business was flat at £1.3bn, while the used cars division saw turnover rise 12% to £996m and aftersales turnover was 6% higher at £228m. Leasing and other turnover fell 7% to £41m.Chief executive Andy Bruce said he was pleased with the company's performance over the first half of the year, which has been delivered despite ongoing challenging market conditions."Although profits, excluding a profit of £7.6m on the sale of a property, are down on last year, as expected, this was due to a very strong comparative period, driven by record new car sales ahead of the decline seen across the market from April 2017."Against this backdrop, we continue to show good strategic momentum, winning market share and outperforming the wider industry, demonstrating the benefits of our clear strategy of having the right brands in the right locations, with a well invested dealership portfolio combined with excellent execution. We are also benefiting from our scale and our diversified business model which has resulted in revenue and gross profit growth across both used cars and aftersales."Numis said the first-half performance was "robust", with the drop in pre-tax profit as expected."The soft H2 comparative and positive commentary on current trading leave us comfortable with our FY18 estimate (unchanged at £67.5m)," the brokerage said. "In our view, the current valuation (sub-8x price-to-earnings) does not reflect Lookers' forecast resilience, the substantial growth opportunity in used, cash flow dynamics set to improve markedly as dealership investments fade, and the clear potential to leverage its liquidity and track record into acquisitions."At 0950 BST, the shares were up 0.5% to 105.50p.