DEALERSHIP group and contract hire company Pendragon increased the size of its contract hire fleet by a quarter as it searched out new business to counter the effect of dropping residual values. The firm's fleet size grew 25% to about 13,000 last year making up for the lower profit on disposal of used cars returning from contracts.

Contract hire was one of the key players in the good fortunes of the company, which has announced pre-tax profits of £10.4 million for the six months to the end of June, 56% up on the same time last year (£6.7 million). Turnover was up to £645.9 million (1997: 354.7m).

New car sales accounted for 35% of total gross profit as the new car market enjoyed a boom, but used cars saw a fall in value during April and May, according to chief executive Trevor Finn, who said: 'Our contract hire company was marginally affected by the adjustment in used car values. However, lower profit on disposals of returned cars has been partly compensated for by an increase in the size of the fleet and our enhanced ability to retail returned cars through our own network.'