profits fall
In its full-year results for 2007, motor retailer Pendragon
announced its revenues had stayed flat year on year – but that
profits were cut in half.
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Pendragon made a profit in 2007 of £34.8m, before tax and
exceptionals, a year-on-year fall of 50 per cent (2006: £69.4m).
Revenues were unchanged on 2006, at £5.1bn. Chief executive
Trevor
Finn blamed the fall on a highly competitive motor retail
market, especially in the area of nearly-new used car sales, and
rising interest rates.
“As interest rates rose last year the car market became
progressively more competitive putting pressure on used car
margins. We acted early, closing poorly performing sites and, as a
result, are better placed to face the challenges in what remains an
uncertain market in 2008,” Finn commented.
Used car sales had been damaged by lower transaction prices on
new cars, caused at least in part by oversupply of new models as
manufacturers chased volume. “In 2007 the total number of new car
registrations in the UK was 2.4m which was an increase of 2.5 per
cent over 2006.
“We believe that in order to have achieved that growth in new
car registrations manufacturers have forced product into the market
with the knock-on effect that the nearly new used car market has
suffered,” Pendragon stated. Residual values were particularly
affected, it said, meaning margins had suffered for sellers of
nearly-new cars.
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By GlobalDataThe UK’s largest retailer, Pendragon operates 343 dealerships, a
number boosted in 2007 by the acquisition of 19 sites from failed
retailer Dixons Motors, but reduced by the closure elsewhere within
the group of 21 poorly-performing retail outlets, which cost the
group £9.2m to close. The former Dixons dealerships contributed a
net loss of £1.8m at year-end, although Pendragon said it expects
the sites will be profit-making by the end of 2008.
Sale of surplus property added £18.5m to Pendragon’s coffers,
which when combined with goodwill impairments on closed businesses
amounted to a net exceptional profit of £11.7m, it was
reported.
