Inflation and rising interest rates drove a hole through third quarter profits at Pendragon despite a continuing shortage of new cars which has boosted prices for new and used vehicles.
The group, which trades under the Evans Halshaw and Stratstone brands, said it expects shortages to continue into next year. Across the market, new vehicle volumes during the three months to the end of September were 0.1 per cent lower than in the same period a year earlier, which itself was “well below historic norms”.
Pendragon outperformed the market with new units up 14.2% in the quarter, and margins remained strong with a gross profit per unit of £2,597, £743 higher than a year earlier. However, the reduction in new production impacted the availability of used vehicles, with volumes down and a decline in gross profit per unit to £1,561 from £2,052 previously.
The Nottingham-based group, which is the subject of a potential takeover bid, said total underlying profit before tax fell to £14.7 million in the third quarter, down from £25.1m a year earlier. While gross profit remained at the “exceptional level” seen in the third quarter of last year, Pendragon had to absorb a £7m increase in operating costs along with a £3m rise in interest charges.
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“We are encouraged that the momentum we saw going into the second half was continued throughout the third quarter,” chief executive Bill Berman said. “Our agile and diversified business model positions the business well to respond to the uncertain environment, as demonstrated by the outperformance in new vehicles and the strong margin profile of the broader UK motor division.
“While supply chain challenges and other market pressures are set to persist, we are confident we have the right strategy in place to deliver for our customers and partners, and to meet our expectations for the full year.”
Pendragon revealed last month that it had received an “unsolicited, preliminary and highly conditional” offer from its largest shareholder, Sweden’s Hedin Mobility Group, at a mooted price of 29p cash per share. Hedin has been granted an extension to continue discussions and due diligence with Pendragon until November 21, at which point it must make a formal offer or walk away.
Shares in Pendragon closed yesterday's trading 0.7p higher at 27.6p, an increase of 2.6%.
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