Jack Petchey, the 84-year-old former car dealer turned share trader and philanthropist, does not believe the UK’s listed car sector will be on its uppers for long. 

He has spent many millions buying 11% of Pendragon, which makes him the biggest single shareholder. He is also the owner of 21% of Lookers, having bought a stake in January.
He has already made profit from investment in H R Owen and European Motor Holdings.

Petchey has made the most of very depressed share prices. Pendragon, which was trading at 2p around Christmas, is now 20p. Lookers bottomed out at 60p, having fallen from 90p. 

The reason for the very severe fall in Pendragon was the news that it had breached its banking covenants, would have to pay a ‘fine’ for doing so, and would be forced to renegotiate the loans on worse terms. 

So long did the talks go on that investors feared agreement would never be reached. It did happen, but the properties in the company had to be written- down in value by £58 million and shareholders’ funds in the company reduced to £80 million.

Loss-making companies

Pendragon has worked hard to take out the loss-making companies, and the number of dealers in the group now is down from 341 to 280. Volvo, Ford, Renault and Kia are the franchises that have been most reduced.

Nevertheless, the company fell into a loss of £30 million at the pre-tax level, compared with a positive £42 million the previous year.

Lookers has done better than expected over the last year. In April it was able to announce a profit of £14 million (compared with £23 million last year) which became a loss of £15 million after write-downs on the value of the business and goodwill. It paid no dividend in order to con-serve cash. 

After lengthy negotiations with bankers it managed to secure fresh borrowings of £210 million which will not fall due for repayment until 2010. The arrangement fees also contributed to the bottom line losses caused by the write-downs. It is possible the company will want to copy Inchcape and raise money from the stock market in a rights issue if conditions allow.

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