Car dealership Pendragon highlighted the need for its acquisition spree after warning today that the new car market faced a slowdown this year.
Pendragon, which is poised to buy Reg Vardy for £506m and is also considering a move for rival Lookers, predicted there would be a 5% drop in the new car market this year – following a 13% drop in registrations in January.
An earlier acquisition of CD Bramall helped pre-tax profits accelerate by 11.7% to £59.3m in 2005, based on sales of £3.3bn.
Without that deal in January 2004, Pendragon’s like-for-like revenues were down 2.7%.
Pendragon has until March 10 to announce whether it intends to make an offer for Manchester-based Lookers.
The deadline was put in place by the Takeover Panel after Pendragon shocked the City last month by revealing it was looking at a three-way deal to buy both Vardy and Lookers.
Benefits of the deal included synergies between the businesses and improved earnings for the Pendragon group.
Chief executive Trevor Finn said that the drop-off in UK car sales was a “double edged sword” for Pendragon.
“While it’s not helpful to us in terms of profitability it’s helpful in maintaining the momentum of consolidation.
“The large operators will consume the smaller ones because the small operators can’t compete.”
Pendragon won the bidding war for Sunderland-based Vardy after offers from Lookers forced it to drastically up its initial £422m offer.
It will meet with Vardy executives next week to discuss the integration of the firm which Mr Finn said would happen “fairly quickly” at an operational level.
CD Bramall had been fully integrated into the business ahead of schedule, the firm added today.
Mr Finn said the annual figures, which showed debt down by £69.8m to £177m, had shown investors it could integrate new businesses effectively.
Pendragon owns and operates 275 franchised dealerships from 219 UK sites including commercial dealerships.
Its premium marques – including Aston Martin, BMW, Porsche and Saab – trade under the Stratstone brand.
High volume dealerships, including Ford, Vauxhall and Nissan, use the Evans Halshaw name.
References: EGi News 09/02/06
