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UPDATE: Pendragon profit warning panics investors and board buys shares

Britain's most prolific car dealer, Pendragon, slumped to a value of less than £250m today (Nov 27) after disclosing for the fourth time in a little over a year that it would miss the stock market’s profit targets.

The shares promptly fell from 55p to 38p having been at 125p as recently as April. The collapse was despite the fact that the company’s statement promised it would pay the forecast final dividend for the year end of 2p a share.

That means that sellers of the shares at 38p were preferring to kiss goodbye to a dividend yield of 12%.

Pendragon’s new market value of £265m compares with £500m in July and compares with the £680m that Pendragon spent buying Reg Vardy and CD Bramall.

It is now expected that the 2007 pre-tax profit from Pendragon will be below £40m. The brief statement from the company to the London Stock Exchange said that they would be short of the market forecasts by £12m.

The explanation for the collapse was in two parts. Firstly, the Californian fires and the wider US economic uncertainties have affected Pendragon’s profitable American businesses.

Secondly that the margins on used cars lost the company considerable amounts of money in the early part of the year which have not been recouped by a stabilisation of used car prices or by the strong finish to the year for new cars.

None of the other large listed UK dealer groups has yet acknowledged similar distress, and there has been no profit downgrade from Inchcape, Vertu or Lookers during the course of the year. Pendragon's announcement unnerved investors, knocking 3.01% off Lookers share price, 1.2% off HR Owens, 3.43% at Caffyns and 4.74% at Inchcape.

All three of those companies share a similar financial year-end of December 31.

The London Stock Exchange recorded a 35.48% drop in Pendragon shares to 35p at 15:30 today.


After the share price dive yesterday Pendragon’s executive board have all increased their stake in the company.

The UK's largest car dealership said chief executive officer Trevor Finn raised his stake to 2.51% after buying one million shares at 35.50p each (£354,999.99), while non-executive chairman Nigel Rudd increased his stake to 1.67% (£352,499.99), buying the same number of shares at 35.25p each.

Martin Casha, chief operating officer and David Forsyth lifted their stake to 0.77% and 0.28% respectively, buying 280,000 shares each at 35.50 pence per share (£99,400 and £99,400 respectively).

Hilary Sykes' shareholding rose to 0.28% following her purchase of 40,000 of the company's shares at 35.50 pence each (£14,200).

Yesterday, Pendragon issued its second profits alert this year and warned that it would have to revise down its profit expectations for the coming financial year to end-December 2008 as a sharp deterioration in the used car market has led to severe erosion in its profit margins.

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