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Gloomy Pendragon expects 18 months misery
STRUGGLING motor dealership Pendragon predicted another 18 months of UK trading misery as it issued a warning over its full-year profits.
The Nottinghamshire-based firm, owner of retailers Evans Halshaw and Stratstone, has seen "unexpected and significant" falls in used car prices since its last update in June as consumer confidence falters.
The company, which cut 500 jobs earlier this year, said UK trading conditions "will continue to be difficult for the remainder of this year and throughout 2009".
Chief executive Trevor Finn said the group's cost-cutting moves would see the firm finish the year in profit, "albeit significantly down on last year".
Pendragon's underlying pre-tax profits slumped by almost 60 per cent to 13.4m in the six months to June 30. It is heavily exposed to the domestic market, with all but 11 of its 343 dealerships based in the UK.
In 2004, Pendragon took over the Harrogate-based car and truck dealer C D Bramall in a 230m deal.
At the time of the sale, C D Bramall had 133 franchises from 111 outlets and was also involved in leasing, contract hire and rentals.
Pendragon, which warned investors two months ago that it was difficult to forecast the profit outlook for the year, said wholesale prices for used cars had been cut aggressively in June and July to reflect falling demand.
June saw the biggest single monthly reduction in prices for five years, with large executive and off-road vehicles hit hardest.
The firm added: "We expect that the current price correction in the used car market has some way to go, although we anticipate that it will have run its course by the end of the year."
The falling prices knocked revenues at Pendragon – down 170m on a like-for-like basis – with margins at Stratstone and Evans Halshaw being squeezed.
The company has also embarked on a series of disposals, reducing its debt burden by 44.4m since the beginning of the year.
But shares fell as the market reacted to the firm's latest gloomy assessment of prospects.
They closed the day down 0.1p at 9.25p, a fall of one per cent.
Panmure Gordon analyst Mike Allen said market conditions were clearly tough "with Pendragon not seeing a respite to this until the second half of 2009 at the earliest. Cost reduction measures have been taken, but could be offset should we see a further deterioration in market conditions."
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Thursday 24 May 2012
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