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Used cars help Pendragon improve profits

Strong demand for used cars helped dealership Pendragon improve profit by 37% in the first half of the year as it continues to trade in line with company expectations for the full year.

The group, which recently raised £75 million from a rights issue, said pre-tax profit for six months ended June 30 increased to £18.2m from £13.3m last year.

Revenue fell to £1.77 billion from £1.83bn in 2010. Operating profit rose to £42.5m from £39m.

The AM100-topping group said like-for-like used-car volumes jumped 13.2% over the last year.

Retail registrations, excluding scrappage, fell 2.9% year-on-year. New retail sales volumes increased 0.7% like-for-like excluding scrappage.

However, sales of premium models fell from the previous year with retail registrations down nearly 13%.

The company said its Evans Halshaw division had made a strong recovery in the first half, but the performance of its Stratstone division was below 2010's results.

New product launches of the Range Rover Evoque and Jaguar XF models in the second half of 2011 are expected to have a positive impact on the second half performance for the Stratstone division, said Pendragon.

Aftersales is most profitable activity for the group. Performance has been impacted by a reduction in warranty work and the less than three-year-old car parc, following a reduction in new car registrations since 2008. Pendragon’s aftersales gross profit remained broadly flat, down just 0.9% like-for-like.

Chief executive Trevor Finn said: "Pendragon's encouraging performance in 2010 has continued into 2011, despite a challenging economic environment."

"The success of our operational initiatives has again helped the group's performance in its aftersales and used businesses despite a challenging macro-economic environment."

The focus for the group continues to be used vehicles, higher margin business over low margin fleet activity and control of cost base.

The repatalisation was described as a "turning point" for the group. Its cashflow will be enhanced by £46m to December 2014 by a reduction in its pension contributions.

Net borrowings fell to £294.9m from £346.7m previously.

No dividend has been recommended, but the board intends to resume paying dividends in relation to its 2012 financial year onwards, subject to a review of the group's position then. 

The share price is at 9.95p, up today 0.19p. 

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