Car dealer share prices rally in August

Car dealer group share prices proved to be reasonably resilient in August despite the continuing slump in the new and used car markets that has driven down values over the last 12 months.

According to corporate finance analyst Houlihan Lokey, most car retail stocks staged a “marginal” recovery last month despite underperforming in the UK’s FTSE Retail Index.

Brokers were divided in their forecasts for global group Inchcape, which performed strongly in emerging markets, particularly Russia, in the first half-year, but saw progress slowed by the downturn in the UK. Arden Partners recommended buying Inchcape shares whereas Societe Generale advised selling.

While Arden predicted flat earnings for 2008 followed by a 10 per cent rise next year, Societe Generale was far less optimistic – expecting a flat 2008 to be followed by a 20 per cent decline in earnings per share in 2009 and a further 10 per cent decline in 2010.

Inchcape’s chief executive Andre Lacroix registered his confidence in the business by buying 18,825 shares in early August at 263.5 pence each.

Between 31 July and 29 August Inchcape’s share price grew 3.1 per cent to 258.8 pence.

The UK’s largest dealer group Pendragon saw its shares rise 27 per cent in August to 9.5 pence.

The increase however, came from the 12 month low starting point of 7.5 pence. The group’s travails were highlighted by the fact that its value has fallen from a 12 month high point of 78 pence per share.

Its market capitalisation at the end of August was £62.6m, compared to rival Lookers’ £101m. Pendragon launched an unsuccessful hostile bid to buy Lookers in 2006 shortly after its £500m purchase of Reg Vardy.

Lookers’ share price increased from 55 pence to 56 pence during August.

Houlihan Lokey head of Automotive Philip Wylie said: “There seemed to be relief the first half results, which saw like-for-like revenue down 6 per cent and pre-exceptional profit down 13 per cent, were not worse.”

Luxury group HR Owen bucked the downturn with a 28 per cent hike in pre-tax profits to £1.83m on sales of £95.9m in the year to 30 June.

The group said it benefited from the comparative immunity of the top end of the market to the economic downturn.

Its share price in August grew 3.5 per cent to 103 pence.

Volume sector group Vertu also appears to be steering a steady course through the credit crunch.

It said results for the six months to the end of August would be in line with expectations and saw share values rise 10 per cent to 26.5 pence in the month.

Following the resignation of chairman Brian Carte on health grounds, Caffyns shares dipped 6 per cent to 530 pence each.