A decline in the demand for new cars means full-year profit for the Group will now be c. £60m.
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Car dealers Pendragon (LON: PDG) has issued a profit warning in its trading update today which has sent shares in the Group tumbling.
It said the decline in demand for new cars has impacted the current financial year's profits, and it anticipates full-year underlying PBT to be "approximately £60m". This is well below consensus' forecast of £75m for the period.
Management also said consumer confidence has "waned" in the current quarter leading to "significant market pressures", with the new car market expected to continue to decline this year and into H1 next year.
In its key new car division, Gross Profit fell by 21% as the industry-wide impact of falling registration numbers heavily impacts the Group's numbers.
As a result of the update shares in PDG fell 17% in Monday morning trading.
As a reaction to changes in the market, Management has initiated a number of in an attempt to provide more "reliable and sustainable returns". This includes investment in its used car and aftersales operations with the strategic goal of "doubling used car revenue over the five years to 2021", as well as placing a strategic priority on the Group's software business.
Zeus Capital released a note today as a result of the profit warning, upgrading their forecasts:
"We now expect adjusted PBT for the full year of £60m (-15.5% vs previous ZC forecasts and -20.0% vs consensus), growing to £67m in 2018E which is -7.3% vs previous ZC forecasts and -16.3% vs consensus. We now anticipate net debt in 2017E of £110m, falling to £105m in 2018E with net debt/EBITDA still looking comfortable at 0.9x and 0.8x."
Pendragon trades at an earnings multiple of 7x, almost half the industry median of 13x and has a Market Cap of c. £413m.