Lex expects improved car sales

LEX SERVICE, rebuilding its fortunes after the loss of an exclusive Volvo import contract in March, expects sales of new cars in August to be up on last year.

David Leibling, head of corporate communications, said the order book for K-registered cars so far showed a 5 per cent rise but sales in August would still be well below the 500,000 in 1989.

In its first set of figures since losing the Volvo franchise and the pounds 46m acquisition of Swan National's car distribution interests in May, Lex reported a sharp recovery in pre-tax profits from pounds 4.2m to pounds 16m in the first half of 1991.

Despite a 4 per cent shrinkage of the car market during the period to its lowest level since 1977, Lex car retailing showed a slight improvment in operating profits to pounds 5.5m, including a small contribution from the new Swan outlets for one month.

Profitability has improved on the back of tight cost control, reflected in a 7 per cent reduction in head count in the past 12 months.

Lex netted an extraordinary profit of pounds 73.5m when Volvo bought out its franchise in March. In its final quarter Volvo contributed pounds 7.8m to operating profits.

Lex Vehicle Leasing, jointly owned with Lombard North Central, turned round from a loss of pounds 900,000 to profits of pounds 3m.

Borrowings have fallen from pounds 51m to pounds 19m this year against shareholders' funds of pounds 245m, leaving room for acquisitions.

After the coming sale of 1.5 million shares Lex will also hold 20 per cent of Arrow Electronics, which bought Lex's electronic component businesses last year. This holding is worth pounds 66.7m with a book value of pounds 31.7m.

County NatWest is forecasting pounds 25.8m pre-tax this year and a maintained total dividend of 10p.