Lex wary of surge in new car sales

BY JOHN MURRAY

The new car market has got off to a flying start to the year, according to Lex Service, Britain biggest motor dealer, which yesterday reported strong results for 1994. But Sir Trevor Chinn, chairman, cautioned that the surge in sales was likely to run out of steam as it did last year.

The company said sales were at about the same level as in the first quarter last year, when the market was up 17 per cent. Sir Trevor forecast the car market would grow just over 2 per cent for the year as a whole, given the current low-inflation recovery. Such stable growth was preferable to a boom/bust cycle.

"I think the market for new cars will be 1.95 million this year," Sir Trevor said. New car sales in 1994 were 1.91 million.

He added it was unlikely that sales this decade would exceed the last peak of 2.3 million cars, achieved in 1989, and that growth in fleet sales was still outpacing demand from private buyers.

The market's exceptionally strong start last year faded away and ended with a fourth-quarter drop of 1 per cent in sales after a very disappointing August, the key month for new car registrations.

Lex said its market was still affected by over-supply and tough competition among car makers although it was pleased with its own position.

"In the context of this market our car businesses are performing well and we will see the immediate benefit from the reduction in costs," the group said. Last month Lex announced a restructuring of its retail business that slimmed the management team and reorganised dealerships into two regional divisions.

Lex made £42m before tax and exceptional items last year, against £38.5m in 1993 on the same basis. The group's pre-tax figure in 1993 of £101.5m included a £60m exceptional gain from the sale of Lex's remaining stake in Arrow, the US electronics group. The dividend jumps 1.5p to 14p.