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Pendragon reports strong Q3 trading and roll out of Sell Your Car brand

Pendragon, the UK's largest car dealer, has reported its third quarter trading resulted in a 4.9% rise in gross profit and 28.8% uplift in operating profit as its Stratstone and Evans Halshaw divisions continue to outperform the prior year.

It said trading highlights included a 2.9% rise in profitability in aftersales and 3.5% in  used cars, while new cars profits "increased in line with the market in the period".

It also launched a new brand, 'Sell Your Car', at 29 retail points in the UK, aimed at competing head of with Webuyanycar.com and providing a direct source of used cars from consumers.

It enables the consumer to sell their car direct to Evanshalshaw.com with a promise it will pay them more than Webuyanycar. National marketing begins in Q4 along with a roll out to 10 further retail points, and the TV advert on YouTube has already been viewed more than 1m times.

Visitors to its websites, Stratstone.com, Evanshalshaw.com and Quicks.co.uk rose by 16.8% in the quarter.

Chief executive Trevor Finn said: "We continue to grow the business and deliver against our strategy.  Strong performance improvement continued across our used, aftersales and new departments in quarter three.

"Our strategy is underpinned by our competitive advantages which are: to be number one online; leverage our superior IT; complete our national footprint to increase customer touch-points; and offer customers value.

"Given the continued strong performance in quarter three, we will be ahead of expectations for the full year."

Pendragon said it is seeking to expand its used presence by increasing its footprint and scale in the UK. The group currently has six Quicks used car dealerships.

"Work is underway to expand our UK footprint and we will provide an update on progress with our year end announcement," adds the Pendragon statement.

Pendragon said its expectations of the market ahead are that new car registrations growth will stabilise in 2015, and a trend towards a greater proportion of these being retail sales will continue in the medium term.

It noted that the used car market increased by 1.0% in the first half of 2014, assisted by increased volume of newer used cars, and said it expects the used car market to have grown by 2% over the full year.

Mike Allen, analyst at Zeus Capital, said: "This is another strong update from a major player in the UK motor retail sector, which has been taken well by the market today.

"The shares are currently trading on sub 11x 2014E EPS falling to 10x in 2015, with an EV/EBITDA below 5x in each year with the net debt/EBITDA now running well below 1x.

"EPS growth for 2014 is now expected to be in excess of 30%, with revised assumptions on the conservative side if we look at what we expect it to deliver in Q4 (i.e. broadly flat YOY).

"Overall, this is further evidence that the sector looks good value at present, and we await final results from Cambria Automobiles on 25 November as the next scheduled sector news flow."



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