There is no better example of that than Lookers, the Manchester-based distributor which yesterday announced profits for the year to September of pounds 8.1m, up from pounds 6.4m the previous year but only thanks to the acquisition at the beginning of 1996 of Charles Hurst, a Northern Ireland car dealer. After a dramatic fall from grace over the past three years, Lookers is now deemed to be worth only eight times expected earnings this year and the shares yield 8.6 per cent, twice as much as the rest of the market.
Why that should be is slightly puzzling. Results for the year to September were dull but they hardly threatened the collapse that Lookers' rating would imply. Earnings per share of 15.5p were slightly ahead of last year's 15.1p and the final dividend of 5.4p made for a full-year total of 8p, just better than last year's 7.9p. The Charles Hurst acquisition appears to be bedding in quite satisfactorily even despite the resumption of hostilities in the province.
But back in England the problems that have dogged the sector remain as insoluble as ever. Retail sales, the only really profitable part of the trade, remain sluggish while the growth has come from the highly competitive, low-margin fleet sales area. There are simply too many dealers chasing too few sales. In addition, Lookers suffers from a heavy exposure to Rover, itself struggling, and Vauxhall.
Profits of pounds 9m this year and pounds 9.5m next suggest pretty anaemic growth and little chance of much of a re-rating. The shares, which have fallen from 278p in 1994, are likely to remain dull.