Pendragon told investors today it is “cautiously optimistic” about prospects for 2010 following a solid first quarter trading.

The UK’s largest franchised dealer group reported that Q1 aftersales profitability improved 3.9%, used car sales increased by 13.8% and margins up 11.8%, while it grew new retail car sales by 4.3%, excluding scrappage.

Its statement said: “Sales in our Stratstone premium business continue to demonstrate the "V" shaped recovery profile whilst our Evans Halshaw volume business demonstrate a more "U" shaped recovery profile. Retail sales excluding scrappage were up 10.6% in Stratstone and in Evans Halshaw were up 2.1%.

“New car margins have also been stronger resulting in a significant improvement in new car profitability compared with Q1 2009.”

Pendragon also said it expects to see a recovery in used car market volume this year, and it is confident that margins will remain stable.

However the group’s total 3.9% aftersales profit improvement was bolstered by internal work to PDI and prepare new and used cars. Its report shows that excluding these profits generated by internal work, aftersales profit was 2.3% down on Q1 2009.

Looking forward, the group expects to grow aftersales and improve used car and new premium sales volumes.

It said it also continues to focus on controlling costs, and expects its lender covenants to be “comfortably achieved”.