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Car dealer Pendragon slumps as it forecasts £15mln tumble in full-year profits

“The decline in demand for new cars and the consequent used car price correction has impacted this year's profit outturn”

car dealer
Pendragon owns the Evans Halshaw and Stratstone dealership brands

Car dealer Pendragon PLC (LON:PDG) expects profits to fall by around 20% this year, blaming declining demand for new vehicles and lower prices of second-hand cars for its weak performance so far in 2017.

The Evans Halshaw and Stratstone owner notched up an underlying pre-tax profit of just over £75mln last year, but it expects that figure to be closer to £60mln this time around.

“The decline in demand for new cars and the consequent used car price correction has impacted this year's profit outturn,” the firm said in a statement.

“During the quarter as consumer confidence waned we experienced significant market pressures.  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.”

Pendragon added that margins on its second-hand cars have started to pick up again, which should help it return to profit growth next year.

Focus on software business now

If there has been a bright spot this year, it is undoubtedly the company’s software and online business, Pinewood.co.uk.

The dealer management system saw the number of visits to its website jump by more than 20% over the past few months.

Pendragon said Monday it was placing this business at the heart of the group; a move which it expects will “provide more reliable and sustainable returns”.

Broker Liberum said today’s update was “clearly disappointing” as it moved both its price target and rating to ‘under review’.

Shares were down 16.4% to 24.24p in mid-morning trade on Monday.

Quick facts: Pendragon Group

Price: 10.6 GBX

LSE:PDG
Market: LSE
Market Cap: £1.54 m
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