Car retailer Lookers published encouraging interim results in August which showed revenues ahead of expectations at £2.34bn. Operating profits rose 20% to £59.1m and the dividend was lifted to 1.28p from 1.07p. This success is set to continue as the company said orders for new car deliveries in September were strong, which makes Lookers an appropriate candidate for share of the week.

This is an exciting time for the group as the steady recovery in new car sales in the last three years has created a larger pool of potential customers for its aftersales division. Broader trends in the UK are making car ownership more attractive thanks to the lower oil price and popularity of financing deals which aim to make car ownership more affordable.

Investors will be interested by the company’s announcement that it would be selling its parts division for £120m and reinvesting the proceeds in acquiring new dealerships, to concentrate on car retail. The first of these, a Mercedes-Benz dealer, was then announced a few days later. The firm has the flexibility to pursue its strategy of boosting growth through acquisitions due to a low level of debt and strong cash flows.

We continue to recommend Lookers as a ‘Buy’ for investors willing to accept a higher level of risk. Investors should be mindful of the risk of a short to medium term downturn in the UK economy following the EU referendum.