Pendragon’s shares driven up by used car sales

The City heaved a sigh a relief on Tuesday after car dealer Pendragon revealed it is on track to overhaul the business, but clouds remain over the vehicle market.

Boss Trevor Finn expects to cut the number of car dealerships in Britain significantly over the next three years, contributing to £100 million of cost savings, and offload its American business this year.

The move comes as several car dealers are battling with a market slowdown after five years of sales growth.

Profits fell by £15 million to £60.4 million for the year to December 31, but crucially were in line with lowered City expectations after the company warned on profits in October.

Investors reacted positively, ploughing in and sending the shares up 15% to 24p. People bought fewer new cars and its margins were squeezed in the third quarter.

“The expectation that the [new car] market will grow forever is unrealistic,” the chief executive said. Margins recovered slightly in the fourth quarter.

Revenues were up 3.1% to £4.2 billion, lifted by used cars. Finn plans to “double used revenue by 2021” and prop up sales with Pendragon’s software business.

He added that the major tax reform in America will also help to boost earnings, saying: “Mr Trump’s actions will have a positive effect on earnings this year.”