Lookers warns on profits amid falling demand, rising costs | 12 July 2019

Lookers shares were down by a quarter on Friday after issuing a profit warning

Lookers shares were down by a quarter on Friday after issuing a profit warning

Vehicle dealership chain Lookers Plc said on Friday it anticipates full-year underlying pretax profit below its expectations as it battled weaker auto demand in Britain in June and margin pressures.

The London-listed firm had reported in its annual general meeting statement that trading for the three months ended 31 March was positive, underpinned by outperformance of the United Kingdom new auto market and growth in both turnover and gross profit in used vehicles and aftersales.

Lookers said underlying pretax profit for the first half of the year is expected to be about 32 million pounds, compared to 43 million pounds a year earlier.

Although the first quarter was positive, trading in the three months to June 30 was "increasingly more challenging" against a backdrop of declining new auto sales in the UK.

Throughout the entirety of H1 and in line with general retail sector trends, Lookers continued to experience cost inflation pressures.

Adding to the uncertainty is an investigation by the Financial Conduct Authority (FCA) into its sales practices, which was announced last month.

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It reported a "strong" balance sheet, having agreed a new £250m revolving credit facility to March 2022.

Vehicle retailer Lookers warned that its profits would take a hit this year amid falling consumer demand for cars and rising costs.

The year ahead didn't much positivity either, with the company saying it expected the challenging market conditions to continue into its second half, exacerbated by "continued weakness in consumer confidence" and political and economic uncertainty, which would add further pressure to used auto margins.

At 31 December, the company had net assets of £399m, including freehold and long leasehold property of £309m at net book value. "In addition, the retail sector cost inflation experienced in H1 is likely to continue to impact earnings during the second half of the year".

Ultimately, the group said its outlook for underlying pre-tax profits for the full year was now below its previous expectations.

He added that investors would get a better look at the company's health at its first half results on 14 August, with management likely to be under "a lot of pressure to get its operations back on the right road".

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