Mondeo man choking on the fumes of Ferrari fella

Judging by the share price reactions to the results of trading updates from three car dealers on Tuesday, things are going a bit better at the Lamborghini end of the market than the Ford Mondeo end.

Judging by the share price reactions to the results of trading updates from three car dealers on Tuesday, things are going a bit better at the Lamborghini end of the market than the Ford Mondeo end.

Shares in luxury auto dealership H.R. Owen climbed higher after the company said it was trading ahead of expectations.

The firm specialises in "statement cars" made by the likes of Aston Martin, Bentley, Bugatti, Ferrari, Maserati and Rolls-Royce though, according to its web site, if German engineering is more your thing then they can also supply you with an Audi, a BMW or a Mini.

The cars may be expensive, but the shares are looking more reasonably priced at just under 70p a throw, even after Tuesday's sharp rise.

If the company hits broker estimates for the current year - and the latest estimate suggests the company will exceed them, at least at the trading level - then the shares are trading on less than 13 times projected 2012 earnings per share.

Things are also looking quite rosy for new and used car dealer Lookers, which posted record third quarter results as it increased new retail and used car volumes at improved margins.

As it happens, you don't seem to be able to buy a Bugatti or Lamborghini from Lookers but all the other cars offered by H.R. Owen are also available from Lookers. Unfortunately, the company's trading statement does not break down sales by brand or price band, so it is impossible to know whether the high end is driving Lookers' performance.

The company did reveal that it continued to gain market share in the first nine months of 2012 in the retail new car sales market; in a market which rose 9%, Lookers' new car retail sales were 11% higher year-on-year in the first nine months of 2012.

The company car market is a different kettle of fish, with Lookers' fleet volumes down 18%, but this was largely due to a low margin deal in 2011 which as not repeated in 2012. This probably contributed to an improvement in margins, which more than offset the reduction in volumes.

Used car volumes over the nine month period increased by what the company termed "a very pleasing" 12%, while used car margins also increased.

The parts division at Lookers is not firing on all cylinders, however, with turnover down a smidgen, though the group says the division continues to make a "significant contribution" to earnings.

The lucrative after-sales business maintained turnover on a like-for-like basis, but saw a small erosion in margins.

"The after sales bias to the business and our strong performance over the last three years, demonstrates the ability of the group to perform well in a challenging market," the company statement said, as it declared its confidence in achieving full year results in line with expectations.

If it does perform as the market expects, that will put the shares on a price/earnings ratio of 11.3, making them more attractive than H.R. Owen to the value-based investor.

The projected dividend yield is also more attractive than H.R. Owen's (3.1% versus 2.6%) but neither stock is anyone's idea of an income stock.

As for Pendragon, its reported profits were up in the third quarter as used car sales continued to form the backbone of sales.

Operating profit was up by £1.5m in quarter three compared with the prior year, including growth of £0.4m at its wholesale business, Quicks. After-sales turnover was flat compared to 2011, giving a similar picture to the one at Lookers.

Like-for-like sales of used cars were up by 2.8%, with profit on those sales 11.7% ahead of the previous year.

"Used performance continues to be a differentiator for the group and we believe this will continue in the final quarter with further recovery in used margin," the trading statement said.

In earnings multiple terms, Pendragon is the cheapest of the three, with a projected price/earnings ratio of 8.1.

As with Lookers, the group expects to meet market expectations for the full year.

JH

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