Pendragon FY profit seen at bottom end of expectations

The company had already warned in September that the group underlying loss before tax for FY19 was set to be at the bottom of the board’s expectations after a "challenging" first half.

In an update for the year to the end of December, Pendragon said its performance had improved "significantly" in the second half despite the challenging conditions and weakened consumer demand in the run up to the General Election.

"The period benefitted from the actions taken by management to re-set performance, as outlined at the group's interim results, which included the closure of 22 underperforming Car Store locations, better management of used vehicle inventory and a clear focus on operational cost management," it said.

The Car Store, leasing, Pinewood and US motor divisions all performed in line with expectations, Pendragon said, with the challenging consumer environment in the final quarter mostly affecting the franchised UK motor division.

As a result, it continues to expect underlying pre-tax profit to be around the bottom end of current expectations.

"However, the board remains confident that the improvement in performance during the second-half puts the business on a much stronger footing as we enter 2020," it added.

At 1020 GMT, the shares were down 3.5% at 11.16p.

Broker Liberum said in a note that Pendragon's FY pre-tax loss was expected at between £12m and £18.6m.

"Pendragon remains our least preferred stock in the sector," it said.

Berenberg said: "While this is clearly disappointing, there are a number of important takeaways from the update, the most important of which is that weaker trading appears isolated to the franchise motor business. In contrast, all other business units have performed in line with expectations and the group has recovered to a profit in H2.

"While solid progress is being made, it is difficult to become more positive until the market sees signs of recovery and/or a new formal CEO can unlock value through portfolio rationalisation. Despite this, given run-rate profit before tax in H2 2019, we keep out FY 2020 forecasts unchanged."