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Business: Pendragon's pounds 20m Ford deal; US car giant buys stake in group.

The country's largest car dealership group announced a pounds 20 million agreement with Ford yesterday, which heralds a further stage in the revolution of the fast changing sector.

Midland-based Pendragon, which bought out Birmingham's Evans Halshaw earlier this year, has agreed to sell the US giant a 49 per cent stake in its 30-strong Ford dealership chain.

Chief executive of Pendragon Mr Trevor Finn said Ford had become frustrated at the way cars are sold and hinted at similar deals with other manufacturers.

"The manufacturers want influence, but do not want to run the sales side," he added.

It is Ford's second investment in UK dealerships having already bought out struggling Dagenham Motors.

The cash allows Pendragon to pay down debts built up from the pounds 92 million Evans Halshaw acquisition last February and leaves the Derby-based group well placed to play a key role in further consolidation.

"We are one of the few businesses with the strength of balance sheet," said Mr Finn.

The manufacturers' increasing influence over the sector has led to dealers splitting up the country into large market areas as opposed to single isolated sites.

Pendragon's focus on scale has led to the disposal of Honda and VW sites including a number of former Evans Halshaw businesses.

Disposals have pulled in around pounds 27.5 million in the current financial year with the funds going to pay down debts.

On top of the Ford money, Pendragon expects to raise a further pounds 20 million from the sale and lease back of the properties concerned.

Fear of falling used-car prices, with increasing political pressure to harmonise prices across Europe, led the company to reduce stock levels and cut working capital by pounds 36 million in the first half of the year.

Interim figures out yesterday showed, as forecast, pounds 3 million of costs have been removed following the Evans Halshaw merger.

Profits, including disposal gains, came in 18 per cent ahead at pounds 12.2 million and underlying earnings improved to 13.2p per share from 11.7p with the full-year result forecast to hit at least 23.5p.

News of a seven-fold increase in net cash in-flow is likely to lead to reductions in the expected interest bill which stood at pounds 6.5 million at the half-year end.

The shares still dipped p to 188p with the Ford deal already discounted. Investors see their half-year dividend rise ten per cent to 4.4p per share.

Pendragon said September had started well with new car sales matching the industry's near five per cent improvement and the more expensive marques showing double-digit growth.

"The indications are that the system of two number plate changes is achieving its principal goal, namely smoothing demand," said Mr Finn.
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Author:City, MARTIN WOOD
Publication:The Birmingham Post (England)
Date:Sep 14, 1999
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