13 February 2018

Pendragon has seen its profit before tax fall for the second year running with a drop of 10.5% to £65.3 million during 2017, while turnover last year increased by 4.5% to £4.74 billion.

The results come after Pendragon stated it was starting a turnaround plan to step the decline in profits with a sale of its US operations, a sale of some premium sites in the UK and a focus on used cars.

The details of the results show that overall the operating margin for the whole business fell to 1.8% last year against 2.2% in 2016. The results were in line with expectations set in the stock market announcement in October last year.

The UK motor business, Pendragon’s biggest profit generator, saw an operating profit drop of 29.3% to £52.3m on a turnover up 3.1% to £4.24bn. The UK retail division’s operating margin ended the year at 1.2% against 1.8% in 2016.

Putting a positive spin on the figures and commenting on the UK retail division, Pendragon chief executive, Trevor Finn said: “The business increased like-for-like revenue by 4.0% in the period, largely as a result of used revenue growth of 15.8%, whilst new vehicle revenue fell by 7.5%. We are delighted to report that we achieved growth of 15.8% in used in the period while the used vehicle market fell by 1.6% – further increasing our market share in the UK. Our used revenue growth comprised 12.0% from organic (like for like) and 3.8% was achieved from investments in used retail points. We opened the following seven used retail points in the period: Amersham, Coventry, Dartford, Glasgow, Gloucester, Reading and Sunbury. We now have 27 used retail points in total. We are expecting to open four additional used retail points in the first half of 2018, with a further four additional sites in the second half of 2018.

“Our aftersales business revenue has grown by 6.5% on a like for like basis, and whilst there has been some reduction in gross margin, this is a result of investment in technician resource which will enhance our aftersales capacity and activity in the coming year.

“As announced on 23 October 2017, we experienced a downturn in new vehicle activity, this was particularly evident in the third quarter of the year, leading to lower than expected volumes and margins from new vehicles. This had a knock-on impact on the value of premium used vehicles, which impacted our used margin in quarter three of the year. We are pleased to report that new and used margin recovered to more normalised seasonal levels in quarter four and confirms the margin impact was only temporary. We have assessed the new vehicle market and believe that the market is moderating to a more normalised level. To support this, industry data indicates that the rate of new vehicles being sold on finance and the proportion of those finance sales on a PCP product became flat in 2016.”

The results made no mention of any progress on the group’s plans to sell its US division and no mention of which premium sites it would be selling in the UK.

Tags: annual results, financials, Pendragon