Pendragon shares plunge after profit warning issued over hefty half-year loss

Time 8:30 am, June 13, 2019

CAR dealer Pendragon saw its shares hammered yesterday after warning that it expected to be ‘significantly’ loss-making in the first half of the year as it tackled trading woes and a pile-up of unsold used cars.

The Evans Halshaw and Stratstone owner’s shares plunged by more than a fifth to 17.21p, having dropped as much as 27 per cent at one stage on the alert.

It said it was set to return to profit in its second half, but the dire half-year trading had put it on course for a small annual loss.

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.

A turnaround plan is being launched, which will be outlined in detail alongside interim results in late September.

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.

Mark Herbert

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 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 per cent 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 yesterday: ‘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.’

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