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Pendragon blames Brexit as annual profits drop, buyback paused

“Subdued” consumer confidence ahead of Brexit means people just aren’t prepared to shell out for a new car

evans halshaw dealership
People are holding off on big-ticket purchases

Pendragon PLC (LON:PDG) has blamed Brexit for a sharp drop-off in new car sales last year.

The car dealership group, which owns the Stratstone and Evans Halshaw brands, saw revenue in 2018 fall 4.0%to £4.07bn (2017: £4.24bn) while operating profits dropped 9.1% to £76.2mln (2017: £83.8mln).

READ: Pendragon appoints Mark Herbert to replace outgoing CEO Trevor Finn

Given the drop-off in performance, Pendragon trimmed its total dividend payout for the year to 1.50p (2017P: 1.55p), while it also paused its share buyback programme last month.

“Economic and market conditions remain relatively subdued and the expected UK exit from the EU has resulted in a continuing level of uncertainty in terms of consumer confidence, manufacturer behaviour in respect of new car supply and the possible impact of tariffs and currency movements,” read Tuesday’s results statement.

As a result, sales of new cars fell 3.8% last year, while new car profits plunged 8.3% as Pendragon’s dealerships cut their prices in a bid to clear their showrooms.

Things were more positive in used car sales, though. Revenue fell 0.9% in 2017 compared to the previous year, but gross profit rose almost 5% thanks to strengthening margins in that side of the business.

Used car profits up

“New car sales have been subdued and consumer confidence has been adversely affected in the period by macro newsflow,” said chief executive Trevor Finn, who is stepping down at the end of the month.

“We have seen strong performance in used cars in the second half of the year, with the transformation of preparation facilities and processes now embedded in our Car Stores.

“We anticipate this will carry on into 2019 and beyond as our new Car Store businesses further boost our used car growth.”

Pendragon shares edged 1.1% lower to 26.1p in early trading on Tuesday.

Quick facts: Pendragon Group

Price: 11.98 GBX

LSE:PDG
Market: LSE
Market Cap: £167.35 m
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