The company also announced plans to cut its costs by pounds 1m a year through the closure of more than 10 per cent of its branches. The shares fell by a third at one stage but recovered slightly to end the day 37.5p lower at 103.5p - a reverse of 26 per cent.
Since the beginning of this year learner drivers have been required to pass a written theory test before being allowed to book their practical driving test. As a result, driving test applications received by the Driving Standards Agency have fallen by 54 per cent in the first three months of the year. The company said that it was also hit by bad weather in January, which affected the number of people taking lessons.
Provisional driving licence applications, the accepted indicator of market trends, are down some 15 per cent on the first quarter of 1996, but only 5 per cent down on the first quarter of 1995.
"Nevertheless, many learners have postponed starting their practical driving lessons until they pass their theory test. Reflecting these market conditions, the number of BSM franchised driving instructors has declined by 110 to 2,018 since the start of the year, while the number of driving lessons and driving tests are also down," BSM said.
In the first half of 1996, BSM posted a pre-tax profit of pounds 2.92m and paid a dividend of 2.53p. Although it now expects profits for the current half year to be about 50 per cent of those last year, BSM said it intended to maintain the interim dividend.
The cost-cutting plan will see 18 of BSM's 154 branches closed down. BSM's chief executive, Richard Glover, said the cost reduction exercise would protect and reinforce the platform for future growth.