Shares in Pendragon (PDG) motored 6.6% higher to 18.65p on Thursday after the car retailer raised underlying pre-tax profit guidance for the current calendar year from the previous £55 million-to-£60 million range to roughly £70 million.
The Nottingham-headquartered automotive dealer said performance remained strong during the third quarter, with new vehicle supply shortfalls offset by margin strength in both new and used cars as well as cost and efficiency savings.
UNUSUAL UPGRADE CYCLE
Quoted car dealers are in the midst of an upgrade cycle fuelled by the highly unusual supply and demand dynamics evident in the UK automotive retail market since the summer of 2020.
Pent-up demand is being released and the global semiconductor shortage is also impacting new car production, which in turn is driving up prices for second hand vehicles in particular.
As Pendragon explained: ‘In used cars, we continue to see benefits from the improvements delivered as a result of the strategic changes we have made and our sourcing advantages, as well as unprecedented tailwinds in used car margins.’
New car supply has remained a challenge, yet new car margins ‘have remained strong as a result of these supply shortages, and have also helped to mitigate the volume shortfall.’
Pendragon’s board continues to believe the group’s strategy ‘positions it well to respond to the ongoing market uncertainty and to capitalise on any resultant opportunities.’
MOTORPOINT ON THE MOVE
Also profiting from sustained strong vehicle pricing is Motorpoint (MOTR), shares in the second hand car seller speeding 5.5% to 375p as it revved in with a positive update for the first half to September 2021.
Group revenues rose 57% year-on-year amid continued strong demand for used cars, which drove bumper gross profit margins. Moreover, Motorpoint’s online retail sales grew by roughly 53%, encouraging growth for what is now a digital-led omnichannel retailer.
As widely seen across the industry, sales growth slowed from June due to the reduced supply of vehicles. Indeed, The Society of Motor Manufacturers and Traders (SMMT) reported year-on-year growth of 109% for the second quarter to June, though Motorpoint significantly outperformed this with growth of 242% over that period.
‘Our business continues to be agile and agnostic, qualities that allow us to take advantage of strategic opportunities and our transition to ecommerce is just one example of this’, enthused CEO Mark Carpenter.
‘We are firmly fixed on significant growth targets and the investments made to date in technology and marketing will continue to grow to realise our goal of doubling revenues in the medium term.’
House broker Shore Capital reiterated its view that Motorpoint remains ‘in the foothills of an ecommerce lead omnichannel strategy that targets a doubling of annual sales and subsequent margin expansion over the medium term, a highly attractive combination if delivered’.
