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New car sales undermine used success for Pendragon

Pendragon PLC’s annual report for 2018 shows a revenue and profit fall for the year.

The company’s UK motor business revenue fell by 4.0% in 2018 and by 2.8% on a like for like basis. Gross profit fell by 3.0% and by 2.0% on a like for like basis.

The decline comes from subdued new car sales as a result of low consumer confidence in the period.

In contrast to the new car performance, used cars gross profit has grown, with Pendragon highlighting the second half of 2018 as a particular success.

Used gross profit increased by 4.7% on a like for like basis.

This, Pendragon claims, was led by “exceptionally strong used margins in the second half of 2018, when like for like used profit was 27.6% higher than in the prior year compared with a reduction of 12.6% in the first half of the year.

“This was primarily driven by improved used inventory management and more efficient used car preparation resulting in increased margin and significantly reduced numbers of loss-making used vehicles in the second half of the year. This has enabled us to reduce the level of the provision we have for loss-making used vehicles.”

The company also highlighted its Car Store business as a success, with a revenue growth of £83.6m, which is an increase of 38.5%.

Gross profit rose by 42.2%. Including the impact of start-up and transformation costs the operating loss for the business was £11.9m.

Trevor Finn, chief executive at Pendragon PLC, said: “We continue to focus on our strategic priorities and the reallocation of our capital into the areas we see as providing the strongest long-term growth.

“We have seen strong performance in used cars in the second half of the year, with the transformation of preparation facilities and processes now embedded in our Car Stores.

“We anticipate this will carry on into 2019 and beyond as our new Car Store businesses further boost our used car growth.”

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