Pendragon hikes profit

The UK's largest dealer group reported profit before tax of £96.4m, compared with £63.8m in 2005 while turnover leapt from £3.3bn to £5.1bn – dwarfing that of its nearest rival, Inchcape Retail, which has turnover of less than £3bn. Underlying profits before tax and exceptionals grew 15 per cent to £68.1m and there was good news for shareholders as earnings per share on this basis grew 12.3 per cent to 7.5 pence. After exceptionals earnings per share shot up 53 per cent to 10.7 pence as the group raked in £28.3m from the sale of fixed assets – mainly the disposal of property. With the integration of the Vardy network completed Pendragon hinted further expansion could be on the cards – describing the motor retail market as still being fragmented despite ongoing consolidation. Chief executive Trevor Finn said: “Pendragon has delivered another solid financial performance in 2006. The highlight was the acquisition and integration of Reg Vardy, which almost doubled our revenues and makes us the clear market leader in what remains a very fragmented market.” Pendragon now operates 390 franchises in the UK, which accounts for 95 per cent of its revenues, 170 under its prestige Stratstone, 183 under its volume division, Evans Halshaw and the rest under its Chatfields CV operation. Remaining revenue comes from its nine dealerships in California and five sites in Germany. The group said it generated much of its income from used sales and the aftermarket to avoid being over-reliant on the struggling new car market. “Having diverse revenue streams reduces exposure to retail economic cycles,” said Finn. “One of the benefits of the Vardy acquisition was that it gave us more exposure to the used car market which has continued to perform well and will be a major growth area for us.” Finn said new sales of brands in its Stratstone division declined by 2.8 per cent year-on-year, compared with a 1.2 per cent fall in the luxury sector overall, but that the used sector was stable while sales of finance and insurance products grew. New sales delivered 36 per cent of gross profits in the Stratstone network last year – 3 per cent down on 2005, aftersales pulled in 45 per cent, a marginal rise, and used sales accounted for 20 per cent compared with 18 per cent in 2005. Pendragon admitted it was hit by a loss of £3.5m from its start-up Cadillac network which now includes 12 sites. In the Evans Halshaw operation new sales dropped 5.1 per cent – above the overall decline in the volume sector of 3.8 per cent. The percentage of gross profit from new cars remained at 25 per cent, used profit grew 6 per cent to 34 per cent and aftersales profit fell 6 per cent to 41 per cent compared with 2005. Significantly, profits per unit and operating margins were higher in acquired businesses than existing sites due to “a larger proportion of profits in these dealerships coming from higher margin used car sales”.