Car chain Lookers profits dip as soaring costs throttle jump in sales

Car dealership chain Lookers has reported a dip in profits for the first half of the year as soaring costs and supply strains offset a jump in revenue to £2.23bn. 

In a trading update today, bosses said that pre-tax profits fell from £50.4m in the first six months of last year to £49.9m in 2022, despite a rise in revenues to £2.23bn, up from £2.145bn last year.

Chief executive Mark Raban said today the first half financial performance was “very strong” despite vehicle supply disruption and inflationary pressures battering the economy. 

“We remain focussed on our customers and improving our proposition to ensure the process of buying or leasing a car is as easy and simple as possible, particularly in the current challenging economic environment,” he said.

“We are focussed on operational ‘self-help’ efficiencies across the business. At the same time, we continue to pursue a number of exciting growth opportunities including with new brand partnerships. Whilst mindful of the pressures facing consumers, we are confident in our strategic direction and retain our expectations for the remainder of the year.”

Inflationary pressures have pushed up costs across the firm, with underlying net operating expenses rising 15.1 per cent to  £224m above the same period last year, including the repayment of Government support schemes.

The rise in costs included an additional £8.6m of staff costs as new pay plans were introduced across several areas including sales teams and technicians in the period, as well as additional utility costs of £4.1m amid soaring energy prices.

Lookers is not the only car dealership to suffer from the uncertain economic backdrop.

Earlier this month, rival Cazoo posted a £243m half-year loss, which prompted a full strategic review of its EU business to reduce cash burn.

“In times like these businesses like ours need to be laser-focused on what is important,” chief executive Alex Chesterman told analysts on 4 August. “Our number one priority is to reach cash flow break-even without the need for further capital.”

The car dealer was also forced to axe 750 UK and EU positions to retain more than £200m by the end of next year.