Pendragon closed a further 14 franchise points during the first half of the year, when its revenue was down £715.9 million on a like-for-like basis.
The group’s profit before tax and non-recurring items was £8.7m compared with £17.9m in the first half of last year. Turnover was £1.586 billion, against £2.478bn last time.
Trevor Finn, chief executive, said: “We have continued to keep our franchise portfolio under review. Our loss of earnings was caused mainly by the drop in the UK new car market and our performance has been in line with the overall retail market for brands where we are represented.”
In the UK, Pendragon now operates 279 franchised points: 128 are prestige (branded as Stratstone), 130 Evans Halshaw (volume dealerships) and 21 truck dealerships trade under the Chatfields brand. In its results Pendragon includes Chatfields in its Stratstone results. It has nine dealerships in the USA.
Finn said the interim results showed a significant turnaround from the loss in the second half of 2008, as a result of decisive actions to reduce costs and close non-viable dealerships.
“In addition to negotiating a new three-year borrowing facility we reduced debt levels in the first half of the year,” he said. “This underlines the financial stability of the group.”
Finn said the results demonstrated good progress in cutting costs and reducing working capital requirements. Key objectives were now to keep costs in line with activity levels, generate cash to reduce debt and build sales volumes, especially in Pendragon’s used car business.
The used car market suffered from an unprecedented drop in prices last year. In June this year wholesale used car values increased for the eighth month in succession.
“This has been due to demand outstripping supply and has been beneficial to us in respect of greatly improved used car margins,” said Finn. “It was also because of the discontinuance of the exceptional stock losses incurred last year. Aftersales continues to be a stable part of the business.
Scrappage campaign launched
Trevor Finn has launched a retail campaign to try to persuade the Government to extend the £2,000 scrappage incentive scheme.
Finn was a sceptic when scrappage was announced, but is now convinced of its value. “Most of those opting for the help of the Government’s £1,000 are not the types who normally buy new cars,” he said.
“The scrappage incentive is achieving the Government’s aim of helping the motor industry and getting old cars off the road.”
Finn and others, including the RMIF, which wants the initiative to continue, are aware that Business Secretary Lord Mandelson says the scheme will not be renewed.
The Government had received 154,927 scrappage orders by early August, meaning half of the £300m budget is already spoken for.
Those lobbying for its extension do not believe a final decision has been taken by the Government.
Finn said: “There needs to be a compelling argument if the Government does not keep the incentive going. As Pendragon is the biggest dealer group, we’re able to raise a bit of noise around the issue on behalf of the industry.”
Finn believes manufacturers must devise their own incentive schemes if the Government is against further support.