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Lookers defies car sales slowdown but confirmation market is softening

Alan Tovey
The Society of Motor Manufacturers and Traders has reported falling sales of new cars since April  - PA

Car dealer Lookers has defied the slowdown in the car market with sales of new and used cars rising.

Lookers, which vies with Pendragon for the title of Britain’s biggest dealer group, has not suffered the woes which caused its rival to issue a profit warning last month.

Updating on third quarter-performance, main market-listed Lookers said on a reported basis turnover on sales of new cars was up 10pc, some 24pc higher on used cars, and revenue in the lucrative aftersales sector increased by 11pc. On a like-for-like measure, the rises were 5pc, 14pc and 4pc respectively.

This comes despite the Society of Motor Manufacturers and Traders reporting falling sales of new cars since April. This caused the industry trade body to downgrade its annual forecasts after 2016’s all-time record of 2.7m new cars sold.

Andy Bruce, Lookers chief executive, said manufacturers “recognised the more difficult trading environment and are taking pragmatic and supportive actions such as reducing targets, increasing incentives and helping us to reduce operating costs”.

Andy Bruce, chief executive of car dealer Lookers, has said manufacturers are being 'pragmatic' about the slowing market Credit: Eddie Mulholland

His view is in contrast to Pendragon, whose chief executive Trevor Finn warned on profits in October  saying the UK market had hit “peak car” and said problems were being compounded by “certain manufacturers continuing to force vehicles into the market despite softening demand”.

Pendragon’s profit warning dragged down share prices across the sector, a decline which Mr Bruce said had been “aggressive”.

The Lookers chief said although he was taking a “prudent” approach to the remainder of the year, he expected the business to perform in line with forecasts.

He added that in light of the lower share price, a share buyback was planned, though the terms of it have yet to be decided.

Mark Carney, Governor of the Bank of England, has signalled the Bank is keeping a weather eye on car finance market for any signs it could be forming a bubble.

Peel Hunt analysts described Lookers shares as “oversold even if we were forecasting a re-run of the financial crisis”.

New car registrations continued their decline in October Credit: SMMT

The news came as AutoTrader, the new and used car sales website, reported revenue has risen 7pc to £165m in the first half, as dealers, who represent 80pc of the company’s business, continued to advertise on the platform.

Nathan Coe, chief financial officer at the AutoTrader said that while the market was softening, it was hard to pin down whether Lookers or Pendragon were giving the best interpretation of reality on the forecourt.

“It’s never the market doing one thing,” he said. “Some parts of it are winning and some are losing. It’s all down to who has the best product, the best design, the best finance on offer.” AutoTrader has about 450,000 cars listed on its site each day and is used by 80pc of dealers, giving it a unique insight into the state of the market.

Mr Coe said residual values on used cars are rising at a steady rate, meaning that there is “no evidence of a bubble forming in the market”.

He did forecast consolidation in the dealer market in the future though, as the slowdown in new car sales squeezes out mid-size players who are unwilling to make the multi-million pound investments car manufacturers require for showroom.

Mr Coe said the largest groups were likely to prosper, along with smaller independent dealers selling older cars.