Pendragon shares power ahead after bumper third quarter

Pendragon - which owns the Stratstone and Car Store brands, among others - said underlying pre-tax profit in the three months to 30 September was £27.3m, an 810% improvement on the same period a year earlier.

Revenues fell 13.8%, or by 1.2% on a like-for-like basis, which strips out new store openings. Like-for-like gross profits rose 9.8%.

Pendragon said the third quarter had been "very strong", adding: "The profit in the quarter has almost entirely offset the losses incurred during the first half as a result of Covid-19, with the year-to-date underlying loss before tax reduced to just £3.6m."

Group new vehicle revenues were down 1.2% on a like-for-like basis during the three months, slightly ahead of the overall market, which was off 0.5%. Group used vehicle revenues were flat on the same basis, but gross profit rose 25.9%.

Cost reduction programmes and store closures helped reduce costs by 9.2%, while net debt as at 30 September was £26.9m, compared to £46.0m at the half year.

Looking ahead, Pendragon said it remained cautious about the fourth quarter, "given the ongoing level of macro-economic uncertainty" and did not reinstate full-year guidance.

But chief executive Bill Berman added: "I am confident the business is well-positioned to deliver the best result possible for the remaining months of 2020, which remain unpredictable, and beyond, and our focus remains firmly on the successful delivery of our long-term strategy."

As at 1045 BST, shares in Pendragon were ahead 12% at 11.88p.

Liberum, which has a ‘hold’ recommendation on the stock, is predicting full-year pre-tax profits of £1.8m, a little above consensus for around £1.3m. Analyst Sanjay Vidyarthi said that given the year-to-date loss of £3.6m, this "implies a materially weaker fourth quarter than last year and suggests upside risk to consensus, assuming no material impacts from local lockdowns".