Pendragon recovers, but car market won't until 2012, says Finn

CAR dealer giant Pendragon says it is braced for another tough year in 2010, and reckons the car market won't pick up properly for another two years.

The Notts-based firm, which has more car showrooms than any other group in the UK, clawed its way back into profit in 2009, despite a 25% drop in sales revenues.

It owns hundreds of Evans Halshaw and Stratstone dealerships across the country and employs around 400 people at its corporate nerve centre at the Sherwood Business Park, Annesley.

Even though revenues fell from £4.2bn in 2008 to £3.2bn last year, Pendragon's decision to cut some dealerships and shed more than 800 jobs helped it make more profit on the cars it did sell.

The result was that a £33.6m loss in 2008 was turned into an underlying profit of more than £10m last year.

Trevor Finn, the group's long-serving chief executive, told the Post that the Government's car scrappage scheme had made a tangible difference to trade over the past few months.

But he claimed most new cars bought under the scheme are effectively one-off sales to mostly mature buyers who normally look only at second-hand cars and will go back to a used vehicle in future.

"Scrappage did make a difference, accounting for around 4% of our sales," said Mr Finn. "But the people who used it were people who wouldn't normally have bought a new car. They will eventually go back to buying used.

"Even if you take scrappage out of the equation, sales volumes started to increase in October, so even when it goes there is an underlying trend towards recovery."

Pendragon's performance in 2009 was almost a game of two halves, with the firm's trading in the first few months badly compromised by the fact that it was unable to get to the cash to buy all the used stock it wanted while it waited for its banks to sign of a new financing deal.

Pendragon's three main divisions operate in different parts of the market, and Mr Finn said that they are all at different stages of the economic cycle.

Used cars are a lucrative earner for Pendragon's Evans Halshaw division, with more sales now coming from older vehicles.

Weak new car sales also means fewer used cars are filtering back on to the market when they are sold, pushing up the prices it can charge.

Mr Finn said that though the recession had taken its toll on the car market he believed that credit conditions would eventually improve.

He said: "What has clearly become harder over the past couple of years is the availability of credit for customers, which has compressed our margins. Is that going to go on forever? I don't think so.

"If you had asked me last year I would have said that 2011 is when recovery starts.

"I now think it is going to be 2012 before we see a tangible 'up-tick' on the demand side."