Wednesday 18 September 2019

Pendragon profits slump as consumers continue to shun new cars

The firm said underlying pre-tax profit fell nearly 20% to £60.4 million in 2017 as new vehicle revenue fell 4.9%.

New car sales in Britain are falling (PA)
New car sales in Britain are falling (PA)

By Ravender Sembhy, Press Association City Editor

Pendragon has seen full-year profits slump after a slowdown in new vehicle sales in the UK and difficult trading conditions hit the car dealership.

The firm said underlying pre-tax profit fell nearly 20% to £60.4 million in 2017 as new vehicle revenue fell 4.9%.

Pendragon pointed to a “challenging economic environment and lower consumer confidence”, particularly in the third quarter.

The results come as the Society of Motor Manufacturers and Traders (SMMT) continues to reel off dire monthly figures showing that Britain’s new car market is going in reverse.

  • Underlying pre-tax profit fell nearly 20% to £60.4m
  • New vehicle revenue fell 4.9%
  • Total revenue up 4.5% to £4.7 billion
  • Used car sales up 15.3% on a like-for-like basis

Earlier this month, the SMMT revealed that just over 163,600 cars were driven off forecourts in January, down by 6.3% compared with the same month in 2017.

Within that, there was a 30% drop in business buyers.

However, as consumers shun new vehicles, the used car market is revving up again.

Pendragon said total revenue was up 4.5% to £4.7 billion, driven by used car sales, which rose 15.3% on a like-for-like basis.

Pendragon boss Trevor Finn is focusing on that segment of the market, where it trades as Evans Halshaw, to help mitigate the decline in new cars.

He said: “The group has a clear focus and direction to transform the business and double used revenue by 2021.

“This will be enabled by our market-leading software business to provide the online and technology platform and by investment in increasing the used retail and after sales representation points in the UK.

“We made further progress towards our goal of doubling used vehicle revenue with growth in the period of 15%.

“We anticipate our performance in 2018 to be in line with expectations.”

In December Pendragon said it will shut dealerships in Britain and offload its US division following a profit warning in October.

Shares in Pendragon rose more than 15% in morning trading to 24p.

AJ Bell investment director Russ Mould said: “An 11%+ share price hike in response to weak 2017 results from car dealership Pendragon can be attributed to investor relief that life hasn’t got worse for the company, given a difficult market backdrop for the car seller.”

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