27th Apr 2007 10:57
Pendragon PLC27 April 2007 FOR IMMEDIATE RELEASE 27 April 2007 AGM STATEMENT Pendragon PLC, the UK's largest car dealership group, today held its AnnualGeneral Meeting. The Chairman, Sir Nigel Rudd, made the following statement: "Car market and current trading National new car registrations in the first quarter were up 2.9%. Nationally thedemand for new cars during the first quarter has been below the same period lastyear. Moving into April there were a significant number of cars registered andnot sold to a customer. These cars are known as pre-registered cars and areusually sold with a greater discount than a new car. This over supply of nearly new cars puts pressure on the used car market and inthe first quarter volumes and margins on used cars have been lower although theyhave improved during March. The over supply of new cars is placing increasing pressure on franchiseddealerships as manufacturers supply other "channels" usually categorised as"fleet". This is particularly affecting small outlets in secondary markets asretail customers are more and more seeking to buy pre-registered cars, aspreviously explained. For many small dealership locations the value of holding anew car franchise is outweighed by the cost and complexity of holding it. As aconsequence of this there is an ongoing attrition of dealerships and the numberof dealership locations is reducing as owners leave the industry and often selltheir property for alternative use. Over the last 10 years the number offranchised dealers in the UK has fallen from approximately 8,000 toapproximately 5,000. Consolidation and rationalisation At the same time as this attrition is taking place there is also a consolidationunderway in which Pendragon is taking a leading role. The Pendragon businessmodel is based upon consolidating by acquisition using debt then using businessand asset disposals combined with positive cash flow to reduce debt and thenrepeating the process. After a delay of eight months due to deliberations by the OFT we were cleared tointegrate our most recent acquisition Reg Vardy PLC. We have also now completedan appraisal, post Vardy integration, of other dealerships and franchises whichwe believe have, or will, become too marginal to continue trading in the currentmarket or where we can reconfigure our assets in a particular geographic area inorder to accelerate our debt reduction programme. Since the OFT clearance at theend of October we have taken the following actions: •We have sold 8 franchised dealerships. •We have terminated or ceased operating 8 new car franchises. •We have served notice to cease operating with a further 26 new car franchises. These actions will have a one off adverse effect on operating profits but willbring a significant acceleration to our cash generation plans. The action abovewould be very similar to the approach taken by private equity. Over the next 18 months the actions should have the following effect: •Reduction in operating profit of approximately £12 million over the period will be more than offset by profits from business and property disposals of approximately £28 million after goodwill write offs. •Cash inflow of approximately £75 million over the same period. Clearly the reduction in our borrowing requirements will have a positive effecton profits as a result of our reduced funding requirements. Importantly thiscash flow will financially reposition the group to quickly continue theconsolidation of the sector. Property disposals and share buyback At the current time we have surplus properties under offer with estimatedproceeds of £53 million and a current book value of £26 million. These proceedsare included in the £75 million referred to above. In order to give shareholders the benefit of holding freehold property it is theBoard's current intention to use profits made from property disposals to buyback shares for cancellation. The above plan of action should give long term shareholders increasedtransparency of our plans. As a further change to give greater transparency tolong term investors I am pleased to announce that we will give a forecast ateach AGM of our minimum dividend for the year. The dividend relating to 2007will be at least 4.0 pence per share, an increase of 16% over our total dividendfor 2006. Finally, over the last five years we have increased adjusted earnings per shareby 26.4% on an annual compounded basis. In the same period we have increased ourdividend by 22.1% on an annual compound basis. This is an excellent record andwe hope that shareholders will be supportive of our proactive action toaccelerate the building of shareholder value as a publicly quoted company." Enquiries: Pendragon PLC Trevor Finn, Chief Executive Tel: 01623 725114 David Forsyth, Finance Director Finsbury Gordon Simpson Tel: 0207 2513801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PDG.L