Pendragon shifts gear for sales recovery

The group yesterday reported that first-half sales had fallen by more than a third, but said it had seen a "significant" improvement in trading over the course of the period.

Chief executive Trevor Finn said the government scheme, which gives motorists 2,000 off the price of a new car when scrapping a vehicle that is more than ten years old, had brought more buyers into the market.

While the scheme has been praised by dealers across the industry, it is set to expire in February 2010, or sooner if the 300 million allocated to the programme is exhausted earlier.

Finn said that, as well as boosting the new car market, the scheme cost the government very little and should be extended, at least by a few months.

"The average vehicle sale from the scrappage scheme generates a VAT receipt of about 1,000 for the government, so it's self- financing," Finn said. "Given that is the case, it wouldn't hurt the government to extend it."

New car sales in July were ahead of the same month a year earlier, the first improvement since April 2008.

Finn said the market had now turned and predicted that sales for the second half of the year would be ahead of the end of 2008. "Used car margins have improved significantly and through further investment in used car stock we anticipate a growth in our sales volumes in the second half," he said.

"The new car market has risen for the first time year on year in July, which gives us reason for guarded optimism."

Pendragon, which operates the Evans Halshaw and Stratstone brands, said sales in the first half of the year came in at 1.59 billion, a 35 per cent fall on the start of 2008.

Falling revenue meant pre-tax profits dropped by 46 per cent to 11.4m.

As well as an improving sales trend, the firm said it was benefiting from a drive to cut costs, after closing 14 franchises in the first half of the year and keeping staff numbers under review.

The figures for the six months to June were a marked improvement on the 200m loss the company reported for 2008, a period when consumer confidence plunged, creating fears in the City that Pendragon would breach its banking covenants.

Finn said yesterday that while trading remained "challenging", Pendragon had reduced its borrowings and negotiated a new three-year debt facility "which underlines the financial stability of the group".

Shares, which dropped below 5p at the start of the year, have since rallied strongly, but last night closed down 2.25p or 5 per cent at 42.75p.