F&I Management & Training

Pendragon UK's biggest car dealer stung by market slowdown

Pendragon, the UK’s largest car dealer, has warned that a slowdown in consumer spending is set to blow a £20m hole in profits this year.

Finn: Profits warning -->
In a statement to the stock exchange, Pendragon chief executive Trevor Finn said spending had been hit by uncertainty over interest rate rises, which would also affect profits in 2008.
“We believe the slowdown in consumer spending will continue into next year and will adversely affect our operating profits this year by £20m and by £10m in 2008,” said Finn.
“Of the £20m reduction this year, approximately £5m is due to a reduction of 4 per cent in the number of new and used vehicle unit sales and the remainder is due to a reduction in vehicle operating margin of approximately £50 per unit.”
Share price fall
Following the disclosure this morning Pendragon’s shares plummeted 16.75p - 17 per cent - to 81.25p.
Finn said there would be little respite for the group as the used car market was highly pressurised due to a slowdown in consumer spending and manufacturers forcing new cars into the market through pre- registrations.
“The negative effect of manufacturers seeking to protect volumes in the new car market is that consumers switch away from used cars as they see greater value in new cars,” Finn said.
“We expect this consumer switching to reduce our used car margins and unit sales this year compared to last year.”
Acquisition possibilities
Despite the market downturn, Pendragon, which acquired Reg Vardy for £500m last year, did not rule out further expansion.
Finn said in previous downturns the group had been successful in identifying opportunities for further consolidation.
“We expect to be able to continue to do so as smaller dealers seek to exit this difficult trading environment,” he added.

DATED: 25.06.07

FEED: MT