US Edition Pendragon
32½p-1¾
Questor says BUY
THE biggest car dealership in the UK, Pendragon, reported profits rising as customers used cheap credit to buy new cars. The company said the Ford Fiesta was the best-selling model last year as it reported an 18pc increase in sales of new cars in the UK, sending pre-tax profits 14pc higher to £38.9m.
Trevor Finn, chief executive, was confident on the outlook for the year ahead, and added that sales momentum had continued with a 17pc increase in like-for-like new car sales throughout January. The car purchases are largely being funded through credit from the car manufacturers. “When it comes to models like BMW, Mercedes and Audi, 80pc to 90pc are sold on finance,” said Mr Finn.
The UK car market increased by 11pc in 2013 with 2.3m registrations, up from 2m registrations the year before. Mr Finn said he was confident 2014 will be another year of strong performance. He said that of the 33m cars on UK roads about a third, or 11.5m, are now more than 10 years old, and that is almost double the level six years earlier.
Pendragon’s aftersales unit, which includes servicing, maintenance and repair of vehicles, is the company’s largest area of profitability, reporting sales up by 3pc in the second half, but during the full year gross profits were flat.
The company said visitors to its websites increased by 22pc to 13.3m during the year.
Market consensus is for Pendragon to achieve revenue of £4.02bn and pre-tax profits of £47.8m, giving earnings per share of 2.55p in the year ahead.
However, Questor thinks that 4pc revenue growth looks conservative when new car sales that contribute to half of group sales are racing away at double digits. This is higher risk but Questor upgrades to buy.