Pendragon profits surges ahead in first half

Pendragon, the UK’s biggest dealer group, has seen profits before tax double in the six months to June 2014 as the business benefits from increases to it new and used sales, aftersales and internet operations.

The group has also powered out of the downturn by doubling its underlying profit before tax in four years, a move it largley attributed to its accelerating used car business where margins and volumes grew.

Profit before tax rose 98.8% from £16.7m to £33.2m, while underlying profit before tax grew by £9.2million, an increase of 39.0%, to £32.8m. While revenue grew 2.7% to £2.07bn (2013: £2.01bn).

“We continue to deliver on our strategy of growing the used sector of our business. The largest contributory factor to our overall increase in profitability is our used car department, where we grew gross profit by £9.1m on a like for like basis,” said chief executive Trevor Finn (pictured).

The group also highlighted its improved internet performance with traffic in the period reaching 8 million visitors as it aims to be the leading dealer group on the internet for sales and aftersales. Online operating profit for the period increased by £6m.

“The internet transformation of our business continues to yield sizeable benefits for the Group, as website visitors grew by 16.2%,” said Finn.

“The balance sheet, combined with our strong cash flow, now gives us the flexibility to invest in our national footprint.  We are increasingly confident that we are positioning Pendragon for the future: to be number one on the internet; leverage our superior IT systems; complete our national footprint to increase customer touch-points, and offer customers value for money.  Our performance for the full year remains comfortably in line with expectations.”

Pendragon results for half year to 30 June 2014

Strategic Highlights

• Underlying profit before tax up by £9.2m, an increase of 39.0%.
• Over 8 million online visitors in the period, up 16.2%.
• Increasing geographical footprint expansion, to optimise our national coverage.

Operational Highlights

• Stratstone.com and Evanshalshaw.com increase operating profit by £6m million in the period.
• Aftersales gross profitability increase of 3.3% (like for like
• Used gross profitability increase of 13.7% (like for like). Used gross profitability on a like for like basis increased by £21m or 38.9% in four years
• New gross profitability increase of 9.4% (like for like), resulting from continuing improvement in the new car market.

Financial Highlights

• Strong operating leverage, with gross profit up 7.8% and operating profit up 16.3% (like for like).
• Underlying earnings per share up 0.50p (+41.0%), from 1.22p to 1.72p.
• Interim dividend up 0.2p per share (+200.0%), from 0.1p to 0.3p per share.
• Underlying profit before tax up £9.2m (+39.0%), from £23.6m to £32.8m.
• Profit before tax up £16.5m (+98.8%), from £16.7m to £33.2m.
• Net debt reduced to £105.7m, producing a 0.8 debt : underlying EBITDA ratio, which is better than our target range of 1.0 to 1.5.