After another impressive sales quarter, Lookers increased its earnings projection and initiated a stock buyback program.
Due to increased vehicle gross margins, the car dealership chain now anticipates underlying pre-tax profits of at least £75 million for the current fiscal year.
Continual supply chain challenges, notably a scarcity of semiconductors, have resulted in fewer vehicles rolling off the assembly line, consequently increasing prices for both new and used automobiles.
Lookers’ new car sales have also remained high, surpassing the stagnant UK automotive market by approximately 5.6% in the September-ending quarter and 6.0% last month.
Used unit purchases were 7.1% lower compared to the same period last year, although aftersales income exceeded 2021 levels.
In response to this outcome, the Altrincham-based company has announced a stock repurchase program with a maximum value of £15 million to increase earnings per share and reduce share capital.
It stated that its shares represent “an appealing investment opportunity at present” due to the substantial discount on its cash and property holdings.
On Tuesday, Lookers shares increased 16.5% to 82.7p, making them one of the top gainers on the London Stock Exchange. Their value has increased by nearly 30% during the past year.
The auto dealer stated that its order backlog was “beyond historical normalized levels,” but that growth was being hampered by a shortage of new cars.
As a result of broad economic uncertainties, inflationary pressures, and interest rate hikes, it also provided more cautious forecasts for consumer spending.
Mark Raban, the company’s chief executive officer, stated, “We remain cognizant of continued supply chain disruptions and considerable inflationary pressures affecting consumers and companies.”
Two weeks ago, Motorpoint Group warned that deteriorating economic conditions would continue to hurt company sales for the balance of the fiscal year.
Unlike Lookers, though, the firm predicts second-half earnings would be much lower, having already fallen to just £3 million in the first six months.
Despite the absence of business rates relief and furlough payouts, as well as greater staffing and energy costs, Lookers reported comparable profitability in its interim report compared to the previous year.
The company’s profitability was substantially bolstered by the approximately 27% increase in the average sales price of its pre-owned automobiles and the increase in gross margins for new vehicles due to supply restrictions.
Raban added, “Our focused focus on creating self-help operational improvements across the business and guaranteeing continued excellent vehicle margin retention has led us to raise our full-year profit projections.
