Car retailers in the spotlight after Pendragon warning
Car retailer Pendragon (PDG) has warned (23 Oct) underlying full year pre-tax profit will come in at around £60m, more than 20% down on the £75.4m made in 2016.
Pendragon anticipates a resumption of profit growth in 2018, though analysts believe this is optimistic and there is significant downgrade risk for rival automotive retailers.
Nottingham-headquartered Pendragon warned a decline in demand for new cars and consequent used car price correction had eliminated third quarter profit. It has undertaken a strategic review into its new car business and slammed the brakes on US investment.
Investment bank Canaccord Genuity has slashed its 2017 pre-tax profit estimate by 21% to £59.5m, commenting: ‘That the market in Q3 has been difficult is hardly a surprise.
‘That Pendragon has not been able to navigate those conditions better is probably the point to focus on, particularly in light of Vertu Motor’s (VTU:AIM) unchanged full year 2018 guidance’.
That’s an important point of tactical difference as Vertu positioned itself for a difficult market at the start of the year.
Investment bank Liberum has downgraded its recommendation from ‘buy’ to ‘hold’, noting news of a strategic review places some uncertainty on Pendragon’s future shape. ‘Disposals, alongside the cautious medium-term outlook, mean that further forecast downside risk lies ahead,’ it comments. (JC)
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