Pendragon has reported a significant drop in profits in its H1
interim report, with pre-tax profits dropping 37.1 per cent and
revenue down 8.7 per cent thanks to “weak demand and rising vehicle
ownership costs.”
Pre-tax profits for the six months to June 30 2008 were £21.1m,
compared to £33.5m for the same period last year, a drop of £12.4m.
Revenue fell £224m to £2.47bn, and operating profit dropped 32.2
per cent to £41.2m.
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Trevor Finn, chief executive of Pendragon PLC said in the
report: “The market conditions we face are challenging and we have
taken a number of strategic actions to improve our
competitiveness.”
Wide ranging cost-cutting measures made by the car retail
company included alterations to its used car sales process as well
as better targeted dealership closures. Further to this, roughly
£30m of savings have now been actioned, including the redundancy
programme, with 500 job losses announced already.
Reductions made in expenditure as well as a shift to the web for
advertising saved £7m in H1, and should save a further £4m for H2.
Though £10m of the £30m saved will aid H2, analysts at Citi
predicted: “The outlook for H2 is pretty bleak,” with new car
volumes expected to drop a further 15 per cent for H2.
In their extensive report on Pendragon, the Citi analysts
concluded: “Interim results were below Citi expectations,
reflecting weak demand, falling car values and cost pressures in
the UK car market.” Group operating profit has fallen 35 per cent
to £41.8m, as opposed to Citi’s forecast of £52m.
Citi added that although there will be no earnings growth for
this year, by 2009 the returns from cutting fixed costs and
reducing net debt should come to fruition.
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