Pendragon, one of Britain’s biggest car dealers, has slumped to a loss in the first quarter after it was forced to lower prices to shift cars.
The Nottingham-based company, which trades under the Evans Halshaw, Stratstone and Car Store brands, also said the cost of expanding its second-hand car business had been higher than expected.
Pendragon made a loss before tax of £2.8m in the first three months of the year, about £10m below where it expected to be. The group blamed falling margins across all parts of the business in new and used car sales as well as its after-sales business, although new cars were worst hit.
Shares initially fell 13% after the trading update was published and were down 8% at 23p by mid-morning.
Pendragon is in the middle of a five-year plan to double second-hand car revenues by 2021. As part of that process it has been opening more stores that only sell used vehicles, under the Car Store brand.But it warned on Wednesday that costs associated with expansion had been higher than expected and contributed to the first-quarter loss.
It will now be up to the new chief executive, Mark Herbert, who started on 1 April, to decide whether to press ahead with the strategy or change course.
The company said on Wednesday: “In light of this trading update and given the recent appointments to the business of both Mark Herbert and Mark Willis [as chief financial officer], a review of the operational and financial prospects of the group is currently being undertaken.
“The results of this review will be communicated to the market during June. In addition, a strategic update will be provided with the interim results.”
Pendragon’s weaker-than-expected performance comes at a difficult time for the wider UK car industry, which is being hit by a combination of falling consumer confidence as Brexit uncertainty persists and by a slump in demand for diesel vehicles.
The latest figures show that sales of new cars in the UK fell 3.4% to 458,054 in March, which is traditionally a strong month for sales when buyers are encouraged into showrooms by the new plate change. It was the lowest number of sales for March in six years, according to the Society of Motor Manufacturers and Traders, which published the figures.
