Car dealer’s shares tumble on profit warning

Franchised car dealership Pendragon saw its shares fall more than 21% on Friday morning after the company issued a profit warning over fears a newly introduced global engine testing regulations will cause future market instability.

The Midlands-based group said in a trading update for its third quarter that it now expects its underlying profit before tax for the year to reach £50m, a drop of 17% from 2017’s £60.4m.

The company said: “The introduction of Worldwide Harmonised Light Vehicle Test Procedure (WLTP) has created disruption in new car sales and uncertainty over new vehicle supply. UK New Car market data for the month of September showed a decline of 20% in new car registrations and a similar trend has continued in October demonstrating the impact of WLTP.

“This has caused significant new vehicle supply disruption which gives us cause for concern over the coming months for new vehicle sales and profitability.  This will clearly have an effect on the group.”

Pendragon said that during the year it has continued to invest in its used car business in new start up locations and transformation costs.

“As announced at the half year we commenced the roll out of our “used car factories” for the refurbishment of used inventory.  This accelerated investment is being made in spite of the short term dilutive effect and the significant costs incurred, latest data gives us encouragement for the future growth of this part of the business.”

Pendragon will publish its Q3 interim management statement on 26 October 2018

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