Lookers (LON:LOOK): Another record year of performance was achieved by the continuing activities of the group despite challenging market conditions that are persisting into 2018. As management pursues its strategy of focusing on the right brands in the right locations supported by appropriate levels of investment, it is continuing to outperform its markets. We expect this to continue with a remaining proactive focus on costs. Comparatives should ease as FY18 progresses but will start tougher due to the strength of markets in Q117. We now expect a modest decline in PBT for the full year.
Delivered growth in FY17 despite market backdrop
New and used car retailing, aftersales and leasing all grew sales volumes on a like-for-like basis boosted by the FY16 acquisitions. Revenues for the continuing business grew by a better than expected 15% to £4.7bn. However, the acquisitions generated a lower than expected £7m of pre-tax profits, against an expectation in excess of £10m, while management restructured HQ in December at a cost of £2.5m to save £3m in FY18. In the absence of these factors, pre-tax profits would have exceeded our forecast, instead finishing the year up 5% at £68.4m, representing a record level for the ongoing retail activities. Net debt rose to £97.8m due to two one off factors that should unwind this year, resulting in cash inflows in excess of £40m. The full year dividend was increased 7% to 3.89p.
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