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Reg Vardy shares hit by Rover demise

Guy Dresser|This Is Money
13 April 2012

SHARES in car dealerships company Reg Vardy lost ground today after it admitted that the collapse of Rover will result in a one-off administrative charge for the year.

Vardy shares dropped 14p to 492p after the admission though its problems are likely to be more limited than those faced by components manufacturers who will all lose a significant customer with the car company's demise.

According to the Birmingham Chamber of Commerce and Industry (BCCI), the total debt for suppliers of MG Rover could run into tens of millions of pounds. Some 25 suppliers are owed £9m by MG Rover itself, while the company's engine-making division Powertrain owes an estimated £400,000.

BCCI chief executive Sue Battle said the situation was a 'very real and immediate crisis' but said that the suppliers' position could be helped by details of a Government rescue package, unveiled by the Prime Minister Tony Blair today.

Battle said the situation was complicated by uncertainty over the exact ownership of supplier stock held at the Longbridge plant. With receivers likely to be appointed very early next week, suppliers who have sent components and sub-assemblies to the plant may find they cannot get them back.

Battle added: 'There is no clear picture about what stock is paid for and who owns it. This needs clarification by the administrator so that suppliers can recover their property or at least know the extent of the bad debt. It is the supplier who has to prove they own the stock by going into the plant and labelling their goods.'

Reg Vardy, meanwhile, said Rover owed it £600,000 and that it might need to make further exceptional provisions to cover the valuation of new and used cars made by Rover and warranty obligations that the manufacturer may not now fund.

Vardy, which runs three Rover dealerships, said the full financial impact of the items was likely to be clear by the time of its year-end results. The group's Rover dealerships account for annual sales of around £25m, or less than 2% of its turnover.

Chief executive Sir Peter Vardy said the dealerships concerned would be refranchised in due course and he did not foresee any impact to its trading results in the next financial year. Vardy added: 'As a Rover dealer since 1982, we sincerely hope that a positive route forward can be found for the business and that Reg Vardy can continue to support UK car manufacturing.'

Britain's largest motor dealer, Pendragon, down 3p at 295p, said the effect on the group of its 15 MG Rover outlets would be 'minor'.

However, there was still no official statement from Caffyns, another smaller listed company that operates nine MG Rover dealerships in Sussex and Kent, making up more than 25% of the group. Caffyns shares extended their recent fall to 14% today, losing 15p to 807½p.

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