Thursday, 15 November 2012

The UK’s biggest dealer groups are set for growth through increased sales and acquisition, according to the latest analysis from the stockbroker Panmure Gordon.

In an upbeat analysis of the performance of listed dealer groups analyst Mike Allen (pictured) said the sector was in good shape despite the economic backdrop.

“We believe the [listed group] sub-sector should deliver growth in most quarters driven by the volume push we are seeing in the market at present,” he said.

“Valuations are below mid-cycle levels with returns steadily improving. Balance sheets are in much better condition versus the last recession and cost bases now leaner,” he said.

Panmure singled out Lookers and Vertu as the listed groups providing the best investment opportunities.

In its market predictions for next year Panmure said listed groups are set to benefit from excess European volumes.

“As the Eurozone crisis intensifies we would expect to see a further volume push into the UK market, which should provide good opportunities for dealers that have good pricing discipline,” said Allen.

“While there are clear economic headwinds going into 2013, we believe those dealers that can demonstrate good pricing discipline in the new and used car market should be able to grow and enhance returns against this backdrop.”

Allen said consolidation, as a result of Block Exemption rules making it easier for carmakers to streamline their networks, will further boost opportunities for listed groups.

“This should play into the hands of the plcs with Vertu likely to benefit most from this given its strengthening balance sheet. We would also expect Lookers to be more acquisitive given its strengthening balance sheet,” he said.