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Pendragon results bonanza

Pendragon last week posted impressive results for 2004, which had an immediate impact on the stock market.

It was not so much the level of the profit – that was pretty much expected – but the substantial uplift in the dividend.

Pendragon has always been the shareholders’ friend when it comes to the payout and has managed an average growth rate of 10% a year for the 15 years it has been a public company. But this time it was 34% up.

The bonanza follows nearly a year of benefit from the acquisition of CD Bramall – a deal that has made Pendragon the UK market leader in car and truck retailing by a distance.

The basic numbers for the combined group now show a company with sales of £3.2bn earned from 244 dealerships on 213 sites in the UK, making pre-tax profit of £60.5m and paying dividend of 10.2p on a share hovering around £3.

Yet despite that dominant size, bigger Pendragon still only commands 3% of the UK new car market, around 77,000 sales or 320 per outlet. In few other areas of retailing in the UK is the market leader so tiny.

Chief executive Trevor Finn was pretty pleased when he briefed City analysts after the announcement. He said the growth and the potential for scale economies were good.

Some big money was made from selling property, and notice has been given that there will be another slug of land sale this year. Although property profit does little to help the share price, it does reduce gearing. It is down to 140% from a peak of 260% and is heading for the comfort zone of below 100%.

Despite all the confidence though, nobody is banking on a huge surge forward again in the present year. The consensus on volume is that it will be flattish and no matter how clever Pendragon becomes, the sensitivity to volume will never go away.

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