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Pendragon reveals interim results

Pendragon’s revenue and pre-tax profits increased for the six months to June 30, 2012 but operating profits and margins fell.

Chief executive Trevor Finn said the group’s interim performance is in line with expectations.

Revenue increased from £1.8 billion to £2bn in the six month period, profit before tax was up from £18.2 million to £23.6m. Operating profit fell from £42.3m to £38.5m and operating margins fell from 2.4% to 2.0%.

Finn said: “Overall the group delivered results for the first half in line with our expectations.

“Our new and used sectors performed particularly well over the six month period, with results across the group generally improving into the second quarter of 2012.

“Trading momentum in new and used is expected to continue into the second half of the year and the group's current performance remains consistent with the board's expectations for the full year.”

Finn said operting profits fell due to operating costs, redundancy costs and team member related costs largely relating to new and used volume increases, property-related costs for heating, electricity, power, rates and property provisions, partly offset by a reduction in warranty provision.

Investment bank analysis

Investment bank Panmure Gordon said the half year result was below its expectations.

Its statement said: “H1 results from Pendragon are below our expectations at the adjusted PBT level, reflecting an increase in overhead costs with gross profits marginally ahead YOY.

“Within the mix, both Evans Halshaw and Stratsone went backwards in EBIT terms year-on-year with Chatfields and California broadly flat and support services mixed.”

The firm has switched its recommendation from hold to sell as a result.

Aftersales

Like for like aftersales turnover is down by 3.6%, with the key variance due to reductions in new vehicle warranty turnover of 14.7%.

However, Pendragon's like for like service retail turnover has shown a small improvement of 0.2%, the first increase since the 2008/9 recession. Aftersales margin has remained stable at 59.9%, increasing slightly from 59.8%.

Pendragon typically operates in the less than three year old age profile for servicing cars but has been looking to service older vehicles due to the reduction in the size of less than three-year old parc from 23% five years ago to 19% now.

As the level of new vehicle sales increase, there is no expected to be an increase in the less than three-year old car parc.

Used cars

During the period, the group's like for like used units grew by 7.5% to 70,700. Overall, used margin is down slightly from 9.6% to 9.4%. Pendragon is expecting used car margins to improve in the second half of the year.

New cars

In the first six months of the year the retail market represented 45% of the new car market; and it operates at a higher margin compared to fleet.

Pendragon grew retail sales (excluding Motability) by 14.9% on a like for like basis owing to strong performance from its Stratstone premium brands.

Fleet business grew by 51.8%, with total new vehicle sales up by 13.9% on a like for like basis. The group expects new car sales to increase in the second half of 2012. New margin was maintained at 7.7%.

Click on the next page to see a breakdown of each Pendragon's operating businesses Stratstone, Evans Halshaw, Chatfields and its business in California.



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