PENDRAGON has underlined its growth ambitions after posting better than expected first half results helped by surging car sales.

The company, which operates dozens of sites in Scotland under the Evans Halshaw and Stratstone brands, increased new car sales revenues by 16.5 per cent in the six months to June as consumers and fleet customers carried on spending.

Used car sales revenues increased by 11.8 per cent in the period, during which the division achieved what Pendragon described as a record performance.

The growth in sales powered a 23 per cent increase in underlying profits at Pendragon, to £40.3m, up from £32.8m in the same period last year.

The group’s underlying profit has more than doubled in the past three years, reflecting buoyant conditions in the motor trade.

Car sales in the UK have been boosted by the availability of cheap financing deals during a long period in which the Bank of England has held interest rates at a record low of 0.5 per cent.

Economists have noted uncertainty about the impact any eventual increases in interest rates will have on consumer spending.

The odds that the bank could increase rates within months have shortened following signs the economic recovery is firmly established.

However, Pendragon does not appear to be concerned the car sales market will stall.

The company said: “In previous statements we have shared our belief that the UK 2015 market will return to more normal growth than the prior year. We maintain these expectations. This is already being demonstrated.”

It added: “From 2016 we believe the UK new car market should run at a “natural” 2.5 million to 2.6 million units per annum level.”

UK new car registrations increased by 9.3 per cent in 2014, to 2.476m, from 2.265m in 2013.

Led by chief executive Trevor Finn, Pendragon’s directors have shown their confidence in the prospects for the market by starting a £100m multi-year expansion drive.

Pendragon plans to open 40 new outlets over the next five years, focusing on areas where it has no representation. The company reckons it already has the largest motor retail footprint and scale in the UK.

Mr Finn said: “Our business continues to perform strongly across all sectors, owing to a combination of our strategy, market leading initiatives and favourable market conditions.”

He added: “The Group has had an encouraging start to the year and our anticipated outturn for the full year is comfortably ahead of expectations.”

Pendragon’s experience shows the rise in UK new car sales is fuelling growth in the used market, as owners trade in vehicles.

The company expects to grow used car sales steadily over the next three years, by one per cent to two per cent annually.

It predicts the supply of cars aged under six years will grow more rapidly than the supply of those that are older.

In February Pendragon launched a programme under which buyers can view used cars on line and have them moved to a dealership nearby so that they can test drive them.

The company said the high margin after sales business will benefit from increased new and used car activity.

Pendragon, which also sells cars in California, grew total first half revenues by 13.4 per cent, stripping out the effect of changes in the dealership network. Total revenues increased to £2.3bn from £2.1bn in the first half last year.

Aftersales revenues rose by five per cent.

The company proposed an interim dividend of 0.6p per share, compared with 0.3p last time.