Northland Capital Partners View on the City Pendragon Group


Pendragon PLC (LON:PDG): Trading Statement

Market Cap: £526m; Current Price: 36p

  • Good performance in the 1Q15 
  • Strong performance from PDG where underlying profit before tax was +10.4% YoY on the back of not only an increase in online visits to Stratstone.com, Evanshalshaw.com and Quicks.co.uk +25.6% in the quarter but also the new ‘click and collect’ service which launched in February has helped used vehicle sales increase by over 8%, outperforming the market. 
  • Aftersales gross profit was +3.6% on a l-f-l basis on the back of technology enhancement. Used vehicle gross profit was +2.9% on a l-f-l basis which included benefit from the ‘click and collect’ service whilst new vehicle sales gross profit was +9.9% on a l-f-l basis as the business benefited from double digit revenue growth in Evans Halshaw and Stratstone.
  • Balance sheet remains in strong shape where underlying net debt to EBITDA ratio remains below the target range of 1x to 1.5x. The outlook remains positive and given the strong start to FY15 management are comfortable in meeting expectations. Consensus PBT forecasts imply 7.5% PBT growth for FY15 to £64.7m, however given that the 1Q15 was 10.4% or 300bps higher we expect there should be positive changes to forecasts.

NORTHLAND CAPITAL PARTNERS VIEW: The share price has been slightly weaker in recent months down c.12% since the early part of March. Today’s news should be well received so we expect the shares to trade well today. The stock trades on c. 11x FY15 consensus earnings which does not appear demanding in our view and with potential upgrades to follow the multiple looks less demanding. A prospective dividend yield of c. 3% doesn’t appear overly attractive. However, investors should be encouraged by the performance in the early part of FY15.

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