Lookers - Record FY21, but challenges remain

Lookers’ FY21 adjusted PBT was even more of a record than we had anticipated. Revenue growth in all the main segments was augmented by strong used car margins and improvements in the new car segment, which drove group gross margins up 180bp to an exceptional 12.8%. The positive demand and supply dynamics look set to continue for the time being. Used car prices may stay high for some time but as they plateau margins may moderate, compounded by inflationary cost factors. In addition, high energy prices are pressurising household and business budgets with increasing vehicle usage costs, which may start to reduce demand. However, FY22 looks set to return to at least the level of pre-pandemic highs while not matching the exceptional FY21 performance.