Car dealer Pendragon braced for loss of £30m

Nov 11 2008 by Peter McCusker, The Journal

PENDRAGON, the owner of the former North East car dealer Reg Vardy, has warned it expects to make losses of £30m this year.

Nottinghamshire-based Pendragon also said it had made 2,500 jobs redundant over the past year – equivalent to 20% of its workforce – as it faces up to the impact of the economic downturn on the car market.

It also expects 75 of its dealerships will have closed between June 2007 and the end of this year, but it said the actions taken and the impact of recent interest rate cuts will lead to improved trading next year.

Pendragon, which bought Reg Vardy for £500m in 2006, is heavily exposed to the domestic market, with all but a handful of its 300-plus dealerships based in the UK.

It said the consumer downturn had caused a significant impact on new car registrations for this year, with the industry figure for October down for the sixth successive month and by 21.4% over the previous three months.

The used car market has also seen prices fall by around 5% per month on average, with executive and large 4x4 vehicles being hardest hit.

Pendragon said: “Assuming no significant further downturn in economic activity between now and the year end, we expect to report a full year loss before exceptional items for 2008 of £30m.”

However, it added: “Notwithstanding a further reduction in the new car market, the positive actions taken on the cost base and the favourable impact of the recent interest rate cut lead us to be optimistic of improved trading next year.”

Analysts at Numis Securities revised their full-year forecasts for Pendragon from a £14.9m profit to a loss of £31.1m. Pendragon made profits of £34.8m in 2007.

The broker also cut its 2009 forecast from £24.8m to £6m and said a further decline in the car market should be outweighed by £60m of savings. Meanwhile, a senior union leader has urged the Government to help draw up a worldwide plan to boost the motor industry and help save the jobs of skilled workers in countries including the UK.

Tony Woodley, joint leader of Unite, stressed the urgency of the “crisis” facing the industry when he met Business Secretary Lord Mandelson.

Mr Woodley said global action was needed, especially to stave off the threat of bankruptcy at motor giant General Motors, which was “running out of money” as a result of the financial downturn in the United States.

A number of UK car firms are cutting production in the coming months in the face of a fall in sales.