Pendragon has launched a full review of its businesses under its new leadership team that could lead to a break-up of Britain’s largest car retailer, following a £10m profit shortfall caused by squeezed conditions in the sector.
Shares fell 10 per cent to 22.72p after the group announced a steep drop in profitability in its three divisions for the first quarter, while new chief executive Mark Herbert and chief financial officer Mark Willis announced a review of its operations, which could lead to a break-up or sale of parts of the company.
New car sales have been falling in the UK for months after years of strong growth, accelerated by consumer caution over Brexit and confusion over government policy surrounding diesel vehicles.
Under former chief executive, Trevor Finn, who led the business for close to 30 years before retiring unexpectedly in March, Pendragon had been focusing on used car sales, online business and software, including selling its US division last year. It trades under the Evans Halshaw and Stratstone brands, as well as Quickco.
“In light of this trading update and given the recent appointments . . . a review of the operational and financial prospects of the group is currently being undertaken,” the company said. The results of the review will be announced in June.
In the first three months of the year, trading deteriorated as buyers turned away from both new and used cars.
Gross profit at its new and aftersales businesses fell 9 per cent, while gross profit at its flagship used car division dropped 1.6 per cent.
Revenue from new cars rose 2.6 per cent, while used revenue fell 0.2 per cent, a surprising drop as it came during a period when much of the industry experienced a rise in used car prices and a 3.3 per cent increase in operating costs.
The company blamed “challenging trading conditions” for an underlying pre-tax loss of £2.8m in the quarter, which it said was £10m worse than it previously expected, caused in part from £2m of higher costs and £1m from its online Car Store venture.
The first quarter is the busiest for car sellers, often accounting for about a third of annual business.
Analysts at Jefferies said the results could see annual profit expectations reduced by a fifth.
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