Pendragon shares plunge after warning over hefty half-year loss
The group will outline turnaround plans alongside interim results in late September.
Car dealer Pendragon has seen shares hammered after warning it expects to be “significantly” loss-making in the first half as it tackles trading woes and a pile-up of unsold used cars.
The Evans Halshaw and Stratstone owner saw shares plunge by more than a fifth on Wednesday, having dropped as much as 27% at one stage on the alert.
It said it is set to return to profit in its second half, but the dire half-year trading has put it on course for a small annual loss.
It had previously guided for 2019 results to be broadly in line with the previous year, when it reported an underlying pre-tax profit of £47.8 million.
The company blamed a challenging car market, but also said it faced “internal operational challenges”.
It revealed widening losses in its Car Store vehicle supermarket arm, high levels of used car stocks left to shift, one-off costs to its bottom line, and the impact of price cuts to boost new motor sales.
It is now launching a turnaround plan, which will be outlined in detail alongside interim results in late September.
We see significant addressable opportunities to improve the business and return to profitable growth Mark Herbert, Pendragon
It said this will focus on improving profitability of its core UK motor and leasing businesses, the launch of growth plans for its dealer management system and software business Pinewood, and overhauling Car Store.
Pendragon chief executive Mark Herbert said: “Notwithstanding the challenging market and uncertain macro outlook, the expected loss for the year is still disappointing.
“That said, we see significant addressable opportunities to improve the business and return to profitable growth.”
Pendragon saw shares dive in April when it announced a review into operations after it fell to an unexpected loss of £2.8 million in the first quarter.
The performance fell around £10 million short of board expectations, and comprised of some £7 million from the impact of falling margins, about £2 million from cost increases and £1 million from the worse-than-expected performance of Car Store, which increased from 26 to 34 sites last year.
Car sales have fallen steadily as nervous consumers hold off on big-ticket purchases, with latest industry figures showing new registrations down 3.1% in the year to May and heavy falls in used car values.
Dealers have reduced prices to drive an increase in sales but have seen margins hammered as a result.
Analyst Sanjay Vidyarthi at Liberum said: “We think that most of today’s downgrade is self-inflicted – a legacy of previous management.
“Given tough market conditions and the wide range of execution issues that need to be fixed, we think any recovery will be a difficult and slow process.”