Shares in motor retailer Pendragon (PDG) fell heavily following a second profit warning in the space of just over a year. Further disruption to new car sales in September and October continues to blight the sector, with the introduction of a new emissions test in September for all cars sold into the European Union (EU) causing a 20 per cent drop in industry-wide new vehicle sales. Pendragon admits the Worldwide harmonized Light vehicles Test Procedure (WLTP) will “clearly have an effect on the group”, while ongoing investment into its used car business will also bear down on profitability this year. This is likely to result in a bottom line of around £50m – a material decline on 2017 pre-tax profits of £60m.
Suffice to say, it’s not been the best year for Pendragon. At the time of half-year results in early August – just as the Society of Motor Manufacturers and Traders (SMMT) suggested the industry might be stabilising – the company revealed a 41 per cent crash in underlying pre-tax profits to £28.4m for the six months ended June 2018. But as the group continues to transition its focus to used vehicles, profits clearly remain under pressure, while the shares remain vulnerable to negative industry trends.
