Pendragon profit rises but revenue declines in Q3
Car dealership Pendragon posted a rise in third-quarter profit but a decline in revenue on Tuesday as revenue from used car sales slumped.
In the period from 1 July to 30 September, the operator of Evans Halshaw and Stratstone saw underlying pre-tax profit rise to £3m from £1.1m in the same period a year ago thanks to a combination of "better momentum during September, improved processes and good control of cost".
However, total revenue was down 8% and like-for-like revenue fell 3.6% as used car revenue dropped 19.6% on a total basis and 16.7% on an LFL basis.
Total revenue from new car sales was 4.5% higher and 11% firmer on an LFL basis, while aftersales revenue was down 4% on a total basis and 0.7% higher on a LFL basis.
Pendragon said overall sales volumes were lower as it focussed on rebuilding both the quantity and quality of the age-profile of the stock during the period, as highlighted in September.
"Whilst the improved performance during the period is encouraging, we continue to expect economic and market conditions to be challenging, with the ongoing uncertainty around Brexit impacting consumer confidence. The full-year underlying loss before tax remains in line with the board's expectations," it said.
Berenberg said the used car segment has been "the bane of the year" for Pendragon, given the sizeable margin compression in the business in recent periods as a result of de-stocking older and pre-registered stock.
"Most of this has now happened and the business has achieved a marked improvement in margins month by month over the quarter. Specifically, gross margins have risen from 5.9% in July to 7.3% in August to 8.4% in September. With margins now back to normal used levels, we envisage that profitability can return here. With the problem car stores now shut, the company will benefit from the cost savings associated in upcoming periods."
At 1050 BST, the shares were up 1.8% at 11.81p.