But cost-cutting exercises and rises in charges to compensate for lower RVs helped LVL put £2.5 million towards Lex Service first- half profits, announced as £29.2 million before tax, a shortfall of £6.6 million year-on-year. Group turnover, which included a £3.4 million contribution from Hyundai and Isuzu importer Lex Vehicle Marketing, was up £94.8 million at £682.4 million (June 30,1999: £587.6 million). Lex Service had issued a profits warning towards the end of the first half, blaming the debate on car prices for weakening the market.
Jon Walden, managing director of Lex Vehicle Leasing - ranked at number one in the 1999 FN 50 list of contract hire companies - said: 'Perversely the long-term outlook is very good. There continues to be a clear shift from outright purchase to contract hire as customers outsource activities which are not core. The cyclical nature of the market means that inevitably we take the high risks and the rewards.'
LVL's contribution was in line with the second half of 1999 despite the continuing fall in RVs and reflected a small increase in pre-disposal profits. Walden said the company was pricing contracts to take account of lower disposal values.
The RAC was a star performer, accounting for £14.3 million (£10 million second half 1999). Turnover rose to £174.2 million in the first half of this year from £160.2 million at the end of 1999. In the corporate sector the RAC won several new contracts, increasing business membership from 3.16 million to 3.5 million.
Andy Harrison, Lex Service chief executive, said: 'Lex has been transformed over the last year with the acquisition of RAC and the exit from franchised car retailing. These results show the benefits of these moves with profits up 43% compared to the second half of 1999.'