This morning car dealership group Lookers reported first half numbers that were on the whole very encouraging as group revenues of £2.34bn came in ahead of expectations, while operating profits rose by 20% to £59.1m, setting new records for the group.
With these good numbers, it makes it easier for the management to raise the dividend to 1.28p from 1.07p last year. The group’s restructuring and focus on having the right brands in the right locations is helping to drive its numbers.
Investors should appreciate that the group also announced the sale of their parts business earlier. The hope is that the sale will enable Lookers to focus on the car retail market for which they announced the acquisition of Drayton Group for £55.4m.
It seems to be that the UK consumer is still buoyant and while the group expects economic uncertainties, it has so far seen no impact from the Brexit decision amongst consumer behaviour. Looking forward, it says that the short term future still looks relatively good as orders for new car deliveries in September are strong.
We continue to rate Lookers as a buy for investors looking for a balanced return willing to accept a higher level of risk. However, while Brexit hasn’t shown through in these numbers, economic data coming out this week and the next few weeks should give us a clearer picture of the potential damage to consumer confidence which Lookers is highly susceptible to.
Nevertheless investors should appreciate that this may be offset by measures taken by policy makers to keep us borrowing and spending.