The owner of the Stratstone and Evans Halshaw car dealerships warned yesterday it expected to make losses of £30?million this year.
Nottinghamshire-based Pendragon said it made 2,500 jobs redundant over the year – 20 per cent of its workforce – as it faces up to the impact of the economic downturn.
It expects 75 of its 300 dealerships will have closed between June 2007 and December 31, but said the actions taken and impact of recent interest rate cuts will lead to improved trading next year.
The company said at the time of its interim results announcement in August profits for the six months to June 30 fell nearly 60 per cent to £13.4 million on the back of “unexpected and significant” falls in used car prices.
It went on to say it faced another 18 months of tough market conditions.
Yesterday, in an interim management statement covering the period from July 1, it said: “Since we last commented on our trading performance there has been a market deterioration in the outlook for economic activity in the UK. Whilst we welcome interest rate cuts, we believe it will be some time before the consumer benefits from this.
“In common with most companies in the retail sector we are experiencing the impact of faltering consumer spending in the face of a squeeze on household budgets and tighter credit.”
Pendragon is heavily exposed to the domestic market, with all but a handful of its dealerships based in the UK.
It said the consumer downturn had caused a significant impact on new car registrations this year, with the industry figure for October down for the sixth successive month and by 21.4 per cent over three months.
The used car market has seen prices fall five per cent per month, with executive and large 4x4 vehicles hardest hit.
Pendragon said: “Assuming no significant further downturn between now and the year end, we expect to report a full year loss before exceptional items for 2008 of £30 million. Notwithstanding a further reduction in the new car market, the positive actions taken on the cost base and the favourable impact of the interest rate cut lead us to be optimistic of improved trading next year.”
Pendragon said it would take a charge of £3 million to cover the cost of redundancies in the current year.
The company has not yet identified the dealerships that are closed or earmarked for closure. But it said they were sites “identified as likely to be unviable in the more difficult markets” the company was now experiencing.
“The trading losses and closure costs of those dealerships this year have been £12 million.
“The annualised losses of the closed dealerships are estimated at £20 million,” the statement said.
Analysts at Numis Securities revised full-year forecasts for Pendragon from a £14.9 million profit to a loss of £31.1 million. Pendragon made profits of £34.8 million in 2007. The broker also cut its 2009 forecast from £24.8 million to £6?million and said a further decline in the car market should be outweighed by £60 million of savings.