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Car dealership Pendragon today crashed to a £200 million loss but signed a vital deal with its banks to secure its future. The firm, Britain's biggest car dealer trading as Stratstone and Evans Halshaw, also said that the £2000 car "scrappage" scheme announced in the Budget last week will have "very little, if any" impact on the market.
Sales of new and used cars have fallen off a cliff in the last 18 months, both in the UK and around the world, as customers stop spending and banks cut financing deals with buyers.
Pendragon reported losses of £200.6 million for 2008 compared with profits of £46.5 million in 2007 and axed its final dividend.
Chief executive Trevor Finn said the firm and the wider industry faced "the most challenging market conditions since the early 1990s".
He forecast a "stabilisation" in the used car market this year, but warned that the new car market would "remain subdued for the next 12 months" before "a gradual improvement".
Pendragon also struck a deal with its banks for £530 million of borrowing over the next three years - albeit at a cost.
It paid an upfront fee of £5.3 million, gave its lenders a 7.5% stake in the company, and agreed to pay interest at 3.25% above Libor, up from 0.9% under the previous arrangements.
"As expected, in order to secure this new financing deal, we have had to pay considerably more in fees and increased margin than before the credit crunch," said Finn.
He said the deal "gives us the necessary headroom to work through what we continue to expect to be continued difficult trading conditions".
Pendragon's shares rose 4¼p to 18¼p on relief over the deal to value to company at £120 million. However, they were trading above 120p two years ago.
The desperate state of Pendragon's finances meant that it filed its results at 10pm last night - just two hours before breaching stock market rules which state companies have to report figures within four months of the end of the trading period.
Pendragon said it will close another seven dealerships this year, having shut or sold 53 last year to leave it with 301. It also axed 3700 staff last year taking its headcount down to 10,800.
Finn highlighted a fall in used car prices of 15% to 25% last year, and said the 4x4 market had been particularly badly affected as the backlash against "Chelsea tractors" saw many drivers opting for greener and less expensive vehicles.
The upmarket Stratstone brand, which sells luxury cars such as Aston Martins, BMWs, and Ferraris, said Land Rover sales were down more than 40% on 2007. Jaguar sales were up, however, thanks to demand for the new XF model.
Reader views (4)
I never understood why anyone buys a new car with their own money: all that Car Tax and VAT falls off the price before it turns the first corner outside the showroom. My long-time personal wheeze has been to be the second-last owner of a ten-year-old high spec car, especially models not particularly popular here, which will have been driven sedately and not thrashed. Citroen XM's were particularly good to me (carry a ton,take road humps at fifty!), but now they're too old to be reliable, alas.
- Mdj E10, london uk, 01/05/2009 22:04
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There are those who would love a new car, and I myself would like one to, but a roof over my head and food on the table is my priority ... a new car comes last on the list.
Yes there are big deals out there to be had, but why do car makers make vehicles so expensive even with a £2000 scrappage scheme, after all it's only a bus to get you from A to B?.
- John L., Scarborough North Yorkshire, U.K., 01/05/2009 14:35
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Scrappage, was not supposed to work in the UK. Germany embraced the system with the sole intention of removing older more polluting cars off the road, and there it worked.
The UK taxpayer coming up with £1,000 to enable people to buy new cars simple lacks anything other than catching the news headlines for a few days. It is called electioneering, it’s what governments do when they are in trouble and don’t have a plan.
In Germany they make the majority of cars involved, so the taxpayer’s money is going around the system. In the UK it is mainly a case of sending taxpayers money abroad
As for cutting the worlds CO2 emissions, the policy is flawed. Most of the CO2 result from the vehicles manufacture not in its use. Then add the transport emissions from the other side of the world and you get a flawed system.
In the USA it is reported that the life cycle emissions from a Toyota Prius is greater than that of a Ford Mustang. This comes from the fact that most claims on being green are distorted; the total life cycle is the important figure, not the day to day figure of the Prius. Scrapping a car because it is old and expended 90% of its total emissions, means nothing. CO2 emissions are a world problem, just moving them solves nothing
- Ian, Reading, England, 01/05/2009 14:22
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You really wonder if the car industry is suffering, i went into my local [Volvo] dealer and all i got was £3000 off a £30.000 car, which included the scrapping deal, so really you are only getting £1000 discount.
That will not convince me to buy a new car
- Mario Kempe, london, 01/05/2009 13:22
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