Shares of Manchester-based car dealership Lookers plc fell another 16% on Friday after it warned in a trading update its underlying profit before tax for the first half of the year is expected to fall to around £32 million compared to £43 million in the comparable period last year.
Lookers also warned that its current outlook for underlying profit before tax for the full year is now below its previous expectations.
The company’s share price is now at its lowest level in roughly 10 years.
“Whilst the period began satisfactorily, trading during the three months ended 30 June 2019 (“Q2″), against strong comparatives, has proved increasingly more challenging,” said Lookers.
“During Q2 the UK new car market continued to decline with registrations down -4.6% (Q1: -2.4%) versus the comparable period last year.
“In addition, weaker demand and the resulting margin pressure in the used car market has significantly increased, notably during the month of June in which we took a disciplined approach to managing stock.”
The profit warning follows an announcement in late June that the UK’s Financial Conduct Authority (FCA) intends to carry out an investigation into Lookers’ sales processes between January 1, 2016 and June 13, 2019, a development that sent the firm’s shares down about 25%.
In its outlook on Friday, Lookers added: “The board now expects that the more recent challenging conditions are likely to continue into H2, exacerbated by continued weakness in consumer confidence in light of wider political and economic uncertainty, and further pressure on used car margins.
“There is also the possibility of new vehicle supply restrictions as new emissions regulations come into force during Q3.
“In addition, the retail sector cost inflation experienced in H1 is likely to continue to impact earnings during the second half of the year.
“As a result of the above factors, the board’s current outlook for underlying profit before tax for the full year is now below its previous expectations.”
Lookers said in March its 2018 turnover increased 3.9% to £4.88 billion but 2018 adjusted profit before tax slipped 1.6% to £67.3 million, hurt by lower sales of new cars in the UK and higher costs.