Profits rise as Pendragon says buyers are getting a better deal

The group, which sells new and used cars through Stratstone and Evans Halshaw dealerships, said underlying pre-tax profits gained eight per cent year-on-year to £19.1m in the first six months.

Chief executive Trevor Finn said buyers are getting a better deal in real terms, thanks to favourable exchange rates encouraging car manufacturers to target the British market, boosting sales. Pendragon’s revenues increased seven per cent to £1.9bn.

“The exchange rates have changed – car manufacturers have a bigger margin to play with,” he said.

“What we are seeing is cars being made slightly more affordable, and that would drive the volume. Most car manufacturers are subsidising finance and making it very affordable for you to buy that car.”

Pendragon, which operates a network of 236 franchised dealerships, employs about 10,000 staff.

Upmarket dealership Stratstone, which sells brands such as BMW, Mini, Mercedes, Smart and Honda, has 12 sites in Yorkshire, including in Harrogate, Leeds, Bradford and Hull. This includes a Leeds BMW and Mini dealership bought in January for £2.6m from Jardine Motors.

‘Volume’ dealership Evans Halshaw has another nine sites in Yorkshire, selling marques including Vauxhall, Citroen, Peugeot, Nissan and Ford.

Its Chatfields truck and van arm has sites in Leeds, Hull and Sheffield.

British car manufacturing is enjoying a revival, with firms including Vauxhall, Nissan and Jaguar Land Rover recently confirming investment in UK car plants.

Figures from industry body the Society of Motor Manufacturers and Traders this week showed a boost in new car registrations in July, which jumped 9.3 per cent versus a year earlier to 143,884 vehicles. That was the strongest figure since July 2010, when sales were boosted by the Government’s scrappage scheme.

In the year to the end of July, the SMMT said sales of new cars to consumers were up 10.5 per cent over the same period in 2011.

Pendragon said its 13.9 per cent growth in like-for-like sales of new cars beat the market, as did like-for-like sales growth of 7.5 per cent in used cars, which compared with a flat market. Of its £140.9m extra sales versus a year earlier, £100.3m was down to new cars and £48.8m from used car sales.

Mr Finn said lower GDP and falling unemployment create a “conflicting” picture of the UK’s economic recovery.

“If you look at this industry and cars as a barometer, they tend to be a good lead indicator,” said Mr Finn. In the 2008 recession you could chart the recession by falling new vehicle sales. We call it the recession indicator.

“From January this year the market has recovered. We’ve got the new car market rising by 10.5 per cent.”

He added Pendragon is on track for the year. “We think we can maintain this kind of momentum. We do not expect the rate of improvement to drop back off. Vehicle manufacturers are pushing that.”

However, margins at the group slipped to two per cent from 2.4 per cent in 2011.

Turnover in the lucrative aftersales market fell 3.6 per cent year-on-year to £164.4m.

Pendragon blamed this on falling sales of warranties for new vehicles, which were down almost 15 per cent.

Aftersales command a 60 per cent gross margin, compared with the 7.7 per cent earned on new car sales. Net debt was down to £220.7m from £294.9m a year earlier.

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