Evans Halshaw owner Pendragon has seen its full-year profits reverse after a slowdown in new vehicle sales and tough trading conditions hit the car dealership giant.
Results yesterday revealed that underlying pre-tax profits had slumped nearly 20 per cent to £60.4 million last year as new vehicle revenue fell by just under 5 per cent.
The group, which also owns the premium Stratstone brand, selling makes such as Aston Martin, BMW, Ferrari and Porsche, pointed to a “challenging economic environment and lower consumer confidence”, particularly in the third quarter.
The results come amid a torrid time for sales of new vehicles in the UK. Just over 163,600 cars were driven off UK forecourts in January, down by 6.3 per cent compared with the same month in 2017, according to figures last week from trade body the Society of Motor Manufacturers and Traders (SMMT).
The fall was less than the double-digit declines recorded in the preceding three months. However, sales in Scotland were down by 15 per cent, year-on-year, last month.
Demand fell across the board during January, with UK registrations by business, private and fleet buyers down 29.7 per cent, 9.5 per cent and 1.8 per cent respectively.
Sales of new diesel cars reversed 25.6 per cent as “confusion” over government policy continued to cause buyers to hesitate, the SMMT added.
The new car market has been hit by the squeeze on spending power, more punitive vehicle excise duty rates and strong deals on nearly new vehicles.
However, as consumers shun new vehicles, the used car market is performing strongly.
Pendragon said total revenue was up 4.5 per cent to £4.7 billion, driven by solid demand for second-hand and nearly-new vehicles. Used car sales were up by 15.3 per cent on a like-for-like basis, it noted.
Pendragon chief executive Trevor Finn is focusing on that segment of the market, where the group trades as Evans Halshaw, to help mitigate the decline in new cars. He told investors: “The group has a clear focus and direction to transform the business and double used revenue by 2021.
“This will be enabled by our market-leading software business to provide the online and technology platform and by investment in increasing the used retail and after sales representation points in the UK.
“We made further progress towards our goal of doubling used vehicle revenue with growth in the period of 15 per cent. We anticipate our performance in 2018 to be in line with expectations.”
In December, the firm said it will close some dealerships in Britain and offload its US division following a profit warning in October.
AJ Bell investment director Russ Mould said: “An 11 per cent-plus share price hike in response to weak 2017 results from car dealership Pendragon can be attributed to investor relief that life hasn’t got worse for the company, given a difficult market backdrop for the car seller.”
Nick Bubb, the retail analyst, said the positive market reaction to the results would be welcome as the share price has been “particularly soggy of late”. “This is another management team that could do with giving its shares a boost,” he added.