Car dealer Pendragon
has said that its profits for full-year 2007 will be £12m lower
than predicted, sparking a 35 per cent slide in its share price.
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Pendragon has also lowered its profit forecast for 2008 by £18m,
the company said. It still plans to return a 2p dividend to
investors for 2007.
The profit warning is Pendragon’s second of the year, after
profit expectations were reduced by £20m in June. Chief
executive Trevor
Finn blamed weaker residual values in the used car market,
brought about by lower new car prices: “Whilst [lower prices for
new cars have] been positive on new car volumes, [they have] had a
negative effect on used car margins as the deflationary effect on
new car prices also feeds into used car prices.
“We have been successful in maintaining activity levels in used
car sales although this has not compensated for the loss of
margin.”
Finn said that better margins on used car sales over “recent
months” had not been enough to offset profits forfeited earlier in
the year. In addition, he pointed to the bushfires in California
which have adversely affected Pendragon’s US operations, along with
general economic uncertainties. The troubles in the US are believed
to be responsible for one-third of 2007’s £12m profit
slide.
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By GlobalDataMembers of the executive board of Pendragon have bought extra
shares in the company after the price crashed. Finn bought 1m
shares at 35.5p, chairman Nigel Rudd bought 1m shares at
35.25p, while three other board members bought between 40,000
and 280,000 shares apiece.
In 2006 Pendragon made pre-tax profits of £96.5m on turnover of
£5.1bn. This year it expects to make profits of around £33m, after
announcing profits for the six months to June 30 2007 of £33.5m –
meaning investors should not expect the company to make any more
profit this year.
With its share price currently sticking below 40p, Pendragon has
a market capitalisation of around £256m, a steep fall from the
year-ago figure of over £700m. Its high-profile acquisitions
of the CD Bramall and Reg Vardy chains in 2004 and 2006
respectively cost the UK’s largest dealer chain a total of £680m –
a sum not reflected in its current market value.
