06 August 2013

The UK’s largest auto retail group, Pendragon, has delivered first half financial results ahead of expectations as the benefits of its refinancing package kick in. Revenue was up 5% at just over £2bn on a growing market and operating profit up 4% at £40.1m for the six months to end of June.

But operating costs have increased by £5.7 million and, in order to achieve its debt reduction targets, the group has had to pay £8m in refinancing costs. That hit pre-tax profits with a one-off charge, driving them down by 23% to £16.7m.

Chief executive, Trevor Finn, told shareholders: “The group achieved strong performance in the first half of 2013 with underlying profit up 24%. The group has achieved like for like gross profit improvements in all motor division sectors. The group’s used results continue to outperform the market and the used market remains a key area of strategic focus.”

However, as with Inchcape that reported last week, Pendragon has come under some margin pressure. Gross margin in the business as a whole was down two percentage points with used car margins also down two percentage points, new car margins flat and aftersales up by 2.9%.

Thanks to the refinancing, Pendragon has succeeded in significantly reducing its debt and easily achieving its declared target of gearing (debt:underlying earnings) under 1.5 by the end of 2014. The group’s net debt fell to £147.3 million at 30 June 2013 from £220.7 million at the same date last year, leaving the gearing ratio at 1.3.

Ongoing finance costs have fallen by around £1.7m for a six month period and the group has a number of vacant property assets up for sale which it values (along with plant and equipment) at £17.6 million. The seven dealerships sold in the reporting period earned £9.0m.

Pendragon said its like-for-like UK retail car volume increased by 21% year on year but gave no figures for fleet volumes which it had been growing strongly. The statement was neutral about future growth saying only the group “continues to perform in line with our expectations for the full year”.

Operating profit in the Stratstone division is up £0.5m to £14.8m in the period largely as a result of improved performance in the new sector together with a reduction in operating costs. But operating profits in Evans Halshaw were flat at £15.2m as a result of increased operating costs. Gross profit in the division increased by £4.8m.

The used car supermarket business, Quicks, continues to make losses though £0.9m deficit in the six month period was an improvement on the £2.5m lost in the same period last year.

In a sign of confidence, Pendragon will pay shareholders an interim dividend of 0.1p per share and Mr Finn concluded: “The positive markets, improving operational performance and balance sheet strength put the group on a solid platform for the future.”
 

Tags: 2013, Evans Halshaw, Financial results, Pendragon, Stratstone, Trevor Finn