Pendragon warns of ‘uncertainty’ as dip in new car sales weighs on profits

Car dealer Pendragon warned of “uncertainty” as its profit expectations were hit by a drop in new vehicle sales.

Underlying pre-tax profits are now expected to be £50 million for 2018, down from £60 million in the previous year.

Analysts had expected profits to remain flat at £60 million.

The group said new EU regulations on vehicles had disrupted supply, giving “cause for concern” over the coming months.

Since September, all new vehicles sold in the EU have had to undergo the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

Pendragon said in some cases this has caused an over-supply of cars which are “not desirable” and an under-supply of “desirable” cars.

Car sales in the UK have taken a nosedive, with demand falling by a fifth in September, according to a trade body.

The Society of Motor Manufacturers and Traders (SMMT) said the change was mainly due to the tougher emissions regulations, as well as a dip in consumer confidence.

Analysts at Jefferies said they expected the issues to persist, weighing on the outlook for 2019.

“We understand that new car sales are following similar trends in October as the disruption remains, and subsequently new car registrations for the UK could again be down double digits,” they said.

“While we expect into 2019 that the issues are worked through, there is an element of new car sales that will be lost as consumers and businesses make other arrangements.”

Pendragon is redoubling its efforts to offset this with investment in its used car business, but said the costs incurred in developing this part of the company are “significant”.

Pendragon is launching new sites under plans to double used car sales by 2022, with new showrooms opened in Norwich, Shrewsbury and Ipswich earlier this year.

The group is due to give a detailed third-quarter update on Friday October 26.