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Stock market: Pendragon set for results date

All eyes are on Pendragon and its half year results date of August 28. The date is significant.

It is three weeks later than last year.

The usually well-oiled Pendragon machine is not coping with the surreal pressures it faces.

What it faces are a falling share price, falling stock value, falling property values, falling dollar income and higher interest rates.

The company was floated in 1989 at 5.4p a share.

At the beginning of August it fell to 7.5p having peaked in 2006 at 130p.

Today Pendragon is worth £50 million, which values each of its 300 dealerships at the price of an Arnage Bentley.

Property values are a huge issue.

If you can price property at all, it is substantially lower that at the start of this year.

It is also the company’s principal asset on which borrowings of 97.8% are raised. And it is the sale of surplus property last year that permitted a dividend raised 27% to 2p.

The share price is very clearly saying that investors do not expect the dividend to be paid.

If you could get a 2p dividend twice a year by buying a 7p share that would be rather better than trading cars for a living.

#AM_ART_SPLIT# Then there are the stock losses.

Last year chief executive Trevor Finn based a severe profit warning on the fact that used car values dropped by £700 a car in April and May.

That translated to around 5% a car and a 25% loss in profit at the bottom line. The share price halved.

As I write, news arrives from EurotaxGlass’s that residuals fell 5% in July and from the SMMT that the July new market fell 13%.

Pendragon switched strategy last year away from nearly new cars and in favour of older used.

It will have done well to have escaped a fall in values of as much as 15%.

Pendragon’s leaders have been able to shield themselves from blame by pointing to market conditions.

The same opportunity will arise with the interim results.

But this time there will be little point in pursuing an admission that the real problem was the mess made of consolidating the Reg Vardy acquisition.

This time the focus will be on working out how it avoids running out of money.

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