Automotive industry Major car dealership Lookers blames Brexit for profit warning
Collapse in diesel sales and low consumer confidence add to tough trading conditions
Shares in Lookers, one of Britain’s biggest car dealerships, have tumbled another 30% after the firm issued a profits warning, blaming increasingly challenging trading conditions.
It warned on Friday that weaker margins will push first-half profits down by 25%, to about £32m, and full-year figures will also fall below forecasts, as customer confidence is hit by continuing political and economic uncertainty.
Britain’s car manufacturers and traders have been buffeted by headwinds including the collapse in diesel sales after the emissions scandal, and Britain’s impending exit from the European Union. Lookers’ chief executive, Andy Bruce, has said that falling sales were entirely due to Brexit, preventing “a record car market” from developing.
In a trading update, Lookers said the recent challenging conditions are likely to continue, made worse by weakening consumer confidence amid political and economic uncertainty and the growing pressure on used-car margins.
BMW moves some engine production out of UK over Brexit fears
Shares in Lookers, which imports many of the vehicles it sells from multiple manufacturers, including Volkswagen, Ford and BMW, are now at their lowest point since 2009, valuing the firm at £180m. They halved in value overnight after the 2016 referendum and tumbled 20% last week when Lookers disclosed that the regulator, the Financial Conduct Authority, had opened an investigation into its sales processes. Lookers’ chief financial officer, Robin Gregson, also announced his departure.
The latest news underscores a torrid time for the sector. Pendragon, a rival dealership, also saw shares fall by 20% last month on the back of a profit warning and a glut of unsold used cars. The luxury carmaker Daimler warned on Friday that it expected a second-quarter loss.
New car registrations in the UK fell 4.9% in June, while British car production fell by 15.5% in May, the 12th successive month of declining output.
Analysts at Liberum said that while Lookers had outperformed the car retail market in recent years, “this momentum now seems to be lost”, adding that investors would want clarity on the regulatory investigation and possible costs. “Brexit, and the impact on [exchange rates] as well as consumer confidence, remains the biggest risk to the sector.”
Motor traders fear the potential imposition of tariffs of 10% at a new EU-UK border, as well as delays in moving goods.
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