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Pendragon reports strong results despite weak market

AM100-leading dealer group Pendragon delivered a 19% rise in first-half profits today after cost savings and new acquisitions helped it defy a weak car market.

Pendragon said current trading was in line with expectations, despite a fall in new car registrations, and it planned to continue expanding this year.

"I am pleased with the trading performance in all parts of the group's activities in the first half," chief executive Trevor Finn said. "These good results leave us well positioned to achieve our full year objectives. Our range of brands and activities has enabled us to carry on producing good results even though the trading conditions in the UK have become tougher this year.

"The performance of the group in the first half gives us confidence that we will meet our objectives for the year. We will continue to grow our business in line with our strategic plans and use our new technology systems to continue to improve the efficiency of our retailing business model."

The company said pretax profit before exceptionals for the six months to June 30 was £36.8m, compared with £30.8m a year ago.

The group has been expanding through acquisitions and reducing costs as it integrates the new purchases into its own dealer management systems.

It reduced borrowings by £20.5m in the period, achieving internal targets following a major acquisition the previous year, which now gives the group room to eye more deals.

This performance comes in the face of a new car market that fell 5.8%. The result included a £2.9m exceptional charge related to the collapse of MG Rover in April. Pendragon has closed three of its 16 original MG Rover sites. Three others will be reopened under different franchises and 10 sites will continue to sell Rover cars.

Pendragon said it would recover the exceptional costs through profits on Rover property disposals.

Pendragon, which has 258 franchised sales centres in the UK and 22 overseas, nearly doubled the size of its UK business with the £230m purchase of rival CD Bramall in 2003.

Gross margins for UK dealerships to the end of June were maintained at 13.5%, despite the change in mix of national new car sales towards lower margin corporate, Finn said.

"The split of profits from each of our activities has remained in line with last year with 44% from the high margin aftersales area of the business. The cost savings accruing from the increased scale of the group this year and some excellent performances from our Aston Martin, Porsche and DAF franchise groups have contributed towards operating margins increasing to 3.2% from 2.7% last year," Finn said.

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