Pendragon Group (LSE:PDG) PLC said supply constraints caused by lower car production continued to impact vehicle volumes in the first half and cautioned the challenging environment is set to persist for at least the rest of the year.
In addition, softening consumer sentiment could also hit demand in the second half, the car dealer said in a trading statement.
The company said it expects to report underlying pre-tax profit of around £33mln for the six months to 30 June 2022, down from £35.1mln in the same period last year.
New vehicle volumes in the wider market fell by 11.9% during the first half, and in addition, lower car production is having a knock-on effect on the used car market, where volumes are also down, Pendragon said.
It said it has focussed on maximising the level of margin achieved per unit to mitigate against the supply constraints.
It reported a rise in new vehicle gross profits per unit, which more than outperformed the volume shortfalls. Used gross profits per unit also “remained strong”, although, as anticipated, they were below the "exceptional" levels seen in the second half of 2021.
Aftersales revenue and profitability were both higher than the prior year.
However, the increase in UK motor gross profits were offset by an increase in underlying operating costs of approximately £20m as well as inflationary cost pressures, particularly in labour and utility costs, the company added.
"After a strong H1'22, Pendragon carries good momentum going into the second half of the year,” commented chief executive Bill Berman.
“While challenges persist in the form of new and used vehicle supply, we are confident that the progress we are making against our strategic initiatives provides us with a strong platform to navigate this period successfully."
Pendragon had adjusted net cash of £2.8mln as at 30 June, compared with net debt of £49.7mln at end-2021.