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Pendragon's quarterly profits hit by new emissions standards

The car dealer now expects pre-tax profit for the year of £50mln, down from £60mln last year
Pendragon has been focusing on expanding its used car business

UK car dealer Pendragon PLC (LON:PDG) reported a slump in third-quarter profits and warned that it expects full-year earnings to fall, reflecting the impact of new emissions standards.

A new “worldwide light vehicles procedure” was introduced in September, requiring carmakers to provide a more accurate interpretation of the impact a vehicle has on the environment when testing fuel economy and emissions.

The new standards have caused disruption in supplies from manufacturers such as Volkswagen Group, which have struggled to get certifications completed in time and deliveries out to dealers.

In its third quarter trading update, Pendragon said the new legislation has had a “short-term dilutive effect on profitability”. Underlying profit before tax for the quarter fell to £1.1mln in the three months to September 30 from £3.0mln a year ago.

It now expects pre-tax profit for the year of £50mln, down from £60mln last year.

READ: Pendragon shares plunge as motor dealer warns on 2018 profits due to disruption caused by new EU tests

The company has been turning its attention to expanding in the used car market to offset falling demand for new vehicles.

Like-for-like new car revenue declined by 9.1% in the quarter due to the disruptions caused by the new emissions standards while like-for-like used car revenue decreased 6.3%.

Total revenue dropped 6.4% and on like-for-like basis fell 7.2%.

New car gross profit was flat on a like-for-like basis and used car gross profit increased 13.7%.

“We are encouraged by the improving used performance across the group in quarter three of this year and this will be a key growth area for the business in 2019,” the company said.

Shares fell 2.2% to 25.9p in morning trading. 

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