Lookers ups profit outlook and reveals share buyback scheme

Lookers has raised its earnings forecast and launched a share repurchase program after another impressive quarter of sales.

The motorcycle dealer chain now expects underlying pre-tax profits for the current fiscal year to be at least £75 million, thanks to higher vehicle gross margins.

Ongoing supply chain problems, especially a shortage of semiconductors, have resulted in fewer vehicles coming off the production line, pushing up prices for both new and used cars.

Lookers new car sales also remained strong, outperforming the flattening UK car market at around 5.6 percent in the quarter ended September and 6.9 percentage points last month.

Purchases of used units were down 7.1 percent on a comparable basis from the same period last year, but after-sales sales surpassed the 2021 level.

In response to this result, the Altrincham-based company has announced a share buy-back program of up to £15 million to increase earnings per share and reduce share capital.

It said its shares represent “an attractive investment opportunity at the moment” because its cash and real estate portfolio is at a significant discount.

Lookers shares rose 9.7 percent on Tuesday to 77.9 pence, marking them as one of the top gains on the London Stock Exchange. Over the past 12 months, their value has increased by about a fifth.

The car salesman noted that his car order bank was “above historically normalized levels” but said growth was held back by a shortage of new car availability.

It also provided more cautious forecasts, given the impact of widespread economic uncertainty, inflationary pressures and interest rate hikes on consumer spending.

Mark Raban, the group’s CEO, commented: ‘We remain aware of the ongoing disruption of the supply chain and significant inflationary pressures affecting both consumers and businesses.

Fellow car dealer chain Motorpoint Group warned two weeks ago that deteriorating economic conditions would continue to negatively impact trade for the remainder of this year.

However, unlike Lookers, the company revealed that sales fell in September and predicts profits will be significantly lower in the second half of the year, having already fallen to just £3 million in the first six months.

Raban added: “Our intense focus on driving self-help operational efficiencies across the company and ensuring continued strong vehicle margin retention means we are raising our full-year earnings guidance.”