Pendragon share prices fell by over 21% as markets opened this morning as the AM100 franchise car retailer issued a fresh profit warning.
This time last year the AM100’s former number one retail group issued a similar alert – warning of an expected fall in underlying profit before tax of over 20% to £60m, from 2016’s £75.4m – in a forecast branded “spectacular” by the London Evening Standard’s city expert, Simon English.
English took to Twitter with his appraisal of Pendragon’s performance, which he said at the time could have been an indicator that the “bottom just fell out of the UK car industry”.
Now Pendragon has warned the market that it expects its underlying profit before tax for the year to reach drop a further 17% to £50m in 2018.
Pendragon said it its statement, issued today, that the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) on September 1 had been partially to blame, stating: “This has caused significant new vehicle supply disruption which gives us cause for concern over the coming months for new vehicle sales and profitability. This will clearly have an effect on the Group.”
Pendragon said that it had continued to invest in its used car business in new start-up locations during 2018 and, as announced its half-year statement, had commenced the roll out of ‘used car factories’ to facilitate large-scale PDI of its used inventory.
It said that this “accelerated investment” was being made in “spite of the short-term dilutive effect and the significant costs incurred”, adding that its latest data had provided “encouragement for the future growth of this part of the business”.
Pendragon will publish our Q3 Interim Management Statement on October 26.