LONDON (ShareCast) - (Sharecast News) - Pendragon is predicting a consensus-beating end to the year, after pent-up demand and supply shortages saw profits surge in the second half.
In common with rival car dealerships, Pendragon - which owns the Stratstone and Evans Halshaw brands - has seen strong trading since non-essential retail was allowed to reopen on 12 April.

The car dealership said it had benefited from high demand coupled with supply constrains in the second-hand market, which was pushing up prices. A global semiconductor shortage is affecting the supply of both new and used cars worldwide.

Coupled with "particularly strong" conditions in May and June, the firm now expects to post underlying pre-tax profits of around £30m in the first half, compared to a loss of £31.0m a year previously.

Pendragon also reinstated its guidance for the full year. It conceded uncertainty around supply shortages and the ongoing pandemic remained. "As a result, there remains a wide range of possible outcomes for the full-year.

"However, the group now has more visibility on the outlook that at the height of the pandemic and is therefore in a potion to reinstate guidance."

Underlying pre-tax profits for 2021 are expected to be in the range of £45m-£50m, compared to 2020's figure of £8.2m. Analysts had pencilled in pre-tax profits of around £29m.

Pendragon said: "The board continues to believe that the group's strategy positions it well to respond to the ongoing market uncertainty and remains confident in the long-term outlook."

As at 1015 BST, shares in the stock were ahead 2% at 18.82p.

Sanjay Vidyarthi, analyst at Liberum, said: "In common with other motor retailers, Pendragon has seen a strong second quarter, with outperformance in new cars and high margins in used cars due to supply constraints.

"The key here will be how the situation normalises in 2022 and whether pre-tax profit growth can be achieved as supply and margins normalise. With the market supporting all the motor retailers, our preference remains for those with the strongest business models, track records and balance sheets, namely Vertu and Motorpoint."

Liberum has a 'hold' rating on Pendragon and an 18p target price.

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