Investment: Lookers predicts tough year ahead

LOOKERS, THE motor distributor, yesterday reported a drop in its full-year profits and warned that conditions in the car market would continue to be difficult in the coming year.

In the year to last September the company, which operates a range of car dealerships around Manchester, Liverpool and in Northern Ireland, reported pre-tax profits of pounds 8.6m, down from pounds 9m in the previous twelve months.

The drop was entirely down to Lookers' Agricultural machinery division, which suffered a pounds 600,000 drop in profits as the BSE scandal continued to dent demand from farmers.

However, pressure on car prices also contributed to the slide, by limiting growth in the motors division.

Although new and used car volumes grew by 7.5 per cent and 10 per cent respectively, this growth was undermined by lower prices.

"In common with many other groups in the sector, trading conditions in recent months have been extremely testing," said Craig McKinney, the company's chairman.

Under chief executive Fred Maguire, Lookers has been investing heavily in its distribution network. In the past two years, the company has relocated or overhauled 80 per cent of its mainland dealerships.

This is expected to stand the company in good stead if it attempts to join forces with rival distributors, because Lookers is now more likely to receive the support of manufacturers. However, the company insists that it is not currently in talks.

West L B Panmure, Lookers' broker, forecasts that pre-tax profits will drop again to pounds 8m this year, putting the shares, which were unchanged at 75p yesterday, on a forward p/e ratio of less than six.