Interim Management Statement

RNS Number : 5988C

Pendragon PLC

17 November 2009

 



17 November 2009

No: 659

PENDRAGON PLC

Interim Management Statement

This Interim Management Statement by Pendragon PLC covers the period from 1 July 2009 to 16 November 2009. Unless otherwise stated, figures quoted in this statement are for the four months ended 31 October 2009. 

Current trading for the four months ended 31 October 2009

During the four months ended 31 October 2009, UK new car demand has continued to show growth compared with the equivalent period last year. The Government's scrappage incentive scheme has boosted sales at the lower priced volume end of the market which has benefited our Evans Halshaw brand where new car sales are ahead for the four months to October by 3%. Evans Halshaw has continued to focus on higher margin retail sales and has reduced exposure to low margin fleet deals.  

Sales in our Stratstone premium brands business have benefited very little from the scrappage scheme, nevertheless new car sales are 5.2% ahead of last year for the same period and sales of certain brands have recovered significantly from last year's lows. Overall profitability in the new car business is well ahead of the same period last year as margins are better and our cost saving measures continue to have a positive impact.

The latest available data from Experian shows that national used car sales fell 5% in the first and 6.6% in the second quarter of 2009 compared with the equivalent quarters of 2008. No data for the third quarter is yet available and we expect that nationally volumes have not yet recovered to normal levels. Against this national background our used car sales for the four months are up 2.9% with margins showing significant improvement. Overall profitability continues to benefit from stable wholesale pricing and the substantial cost reductions which we made last year.

Our aftersales market opportunity has declined due to lower new car sales over the last 12 months. This was anticipated and our cost base was reset resulting in a 4% increase in profits in this part of the business. Other initiatives were also put in place to retain and attract owners of vehicles out of manufacturer warranty periods. We expect this to continue to be a growth area of the business.

Overall trading for this period, and indeed for the year to date, has been ahead of our original plan which we put in place at the start of the year. Since then we have absorbed higher than planned pension scheme financing costs which are expected to be around £4 million for the year. This is a non cash accounting cost which, due to its relative size compared to our underlying trading profits this year, we will disclose as a non trading, one off expense at the year end.

Outlook

Whilst the scrappage incentive scheme has been a welcome boost to certain parts of the new car market, our significant profit growth this year over last year has been largely driven by good cost control and an improved used car performance. We expect profitability to continue to benefit from a stable used car and aftersales market for the remainder of the year. New car sales may benefit in December if consumers elect to bring forward purchases prior to the year end VAT increase. We do not expect that to have a material effect on this year's results.

We are confident that this year's results will be in line with our current expectations and ahead of our original plan for the year. As we move into next year we will not have the same constraints on working capital investment which were in place during refinancing discussions at the start of this year and which held back profitability in that period especially in our used car business.  

We are already looking forward to next year during which we intend to continue to grow used car sales and capture more after sales business. We see many positive trends in our new car sales business and we expect to continue to see profit improvement next year from this part of the business.

We expect our balance sheet to be in line with our plan at the end of the year and lender covenants comfortably achieved.

Enquiries:

Pendragon PLC	Trevor Finn, Chief Executive	Tel:	01623 725114
	David Forsyth, Finance Director
Finsbury	Rollo Head/Gordon Simpson	Tel:	0207 2513801

 

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