PENDRAGON shares tumbled today after the car dealership owner warned that profits will take a hit from falling demand for new cars amid a decline in consumer confidence.
The group, which is behind the Evans Halshaw and Stratstone brands, said that it expects full-year profit to come in at £60 million, down from last year’s £75.4 million.
‘The decline in demand for new cars and the consequent used car price correction has impacted this year’s profit outturn and we anticipate that our full year underlying profit before tax will now be approximately £60 million,’ it said in an interim management statement and strategy update issued today.
Consumer confidence ‘waned’ and the firm experienced ‘significant market pressures’ in the third quarter, it added.
Shares collapsed by 17 per cent to 24p in morning trading.
Pendragon is now conducting a strategic review of its premium brands to evaluate their ‘investment appeal’.
The company also announced that Mel Egglenton had stepped down as chairman and non-executive director with immediate effect for personal reasons, with Chris Chambers, a non-executive director since January 2013 and the senior independent director since November 2014, appointed chairman in his place.
Chief executive Trevor Finn, pictured, said: ‘Following a strategic review, the board is now committed to focusing on reshaping the business to accelerate transformation.
‘We are placing our software and online technologies at the heart of our business as a platform to fulfil customers’ vehicle and servicing needs. We believe this strategy will provide more reliable and sustainable returns.’
The announcement comes after the Society of Motor Manufacturers and Traders (SMMT) painted another dismal picture of the new car market in the face of a slowing economy as Brexit weighs on growth and pummels consumer spending power.
Figures from the SMMT showed that the new car market declined for a sixth consecutive month in September.
Just over 426,000 new cars were registered in the month – down 9.3 per cent on the same month last year.
The figures echoed Pendragon’s three-month trading update, in which it said new car gross profit reduced by 20.7 per cent on a like-for-like basis.
For the year to date, gross profit in the new car category has fallen 10.2 per cent on a comparable basis.
Nevertheless, Pendragon said that it expects to return to profitable growth in 2018. In a statement, it said: ‘We expect the new car market to continue to decline this year and the first half of next year as car manufacturers continue to adjust to the reduced level of demand for new cars. However, we anticipate resumption of growth in profits in 2018.’
Part of the reason for its optimism is its plan to double used car revenue by 2021.
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