Strong Share Price Growth for Quoted Dealer Groups
29/07/2009
2009 has seen significant improvements in the share prices of the majority of the listed dealer groups with a number of the companies returning to the market to raise additional funds from shareholders. The 2nd quarter saw these gains consolidated, with slight changes in market outlook and the beginnings of positive news emerging from the sector providing a positive boost.
The UK's largest car retail group Pendragon has seen the most spectacular percentage increase recording a 1814% increase on the share price from the start of the year by the end of June. At the end of 2008 the share price had been driven down to under 2p reflecting uncertainty over the Company's banking arrangements and covenant compliance. This fed through to a share price of 6p at the start of the quarter, however speculation, followed by a formal announcement that the Company had successfully secured a 3 year financing package saw the share price rise significantly during April.
Other significant moves during the quarter were made by Lookers and Vertu. Both businesses have seen their share price double and both have been back to the market to raise additional capital, albeit for contrasting purposes.
Lookers secured additional funding facilities from lenders during May, however these facilities carried hefty interest burdens of between 4 and 10 percentage points over Libor. As a response to this later in June the Company went to the stock market to raise £81m to repay part of the loan facilities.
Vertu raised £30m through an additional placing of shares, however unlike Lookers this fundraising was not with a view to paying down corporate debt. The cash is to be set aside to fund further acquisitions, with Vertu starting on the process through the purchase of the Ford and Mazda dealerships of Brooklyn Motors, plus the acquisition of Ilford Vauxhall and Chevrolet.
Inchcape, HR Owen and Caffyns produced smaller gains over the quarter, with Inchcape having undergone a rights issue in the first quarter to bolster its' balance sheet. During this 9 for 1 rights issue Inchcape raised £234m which was used to reduce its' debt.
The refinancing and fundraising efforts undertaken by 3 of the listed motor groups are also symptomatic of waves being felt within the wider UK motor sector with privately held businesses either struggling to renegotiate additional facilities or finding that the interest charges and arrangement fees have increased significantly.
If you have any questions concerning the above, please contact Mike Jones on 0161 493 1930