Shares in motor retailer Pendragon (PDG) jumped 7% to 19.9p following a fourth upgrade to profit forecasts for the current year. The group previously raised guidance in June, July and October.
Thanks to a strong performance in the fourth quarter to date, the firm now expects underlying pre-tax earnings to reach £80 million from a previous estimate of around £70 million.
Quoted car retailers are enjoying an extended upgrade cycle driven by the highly unusual supply and demand dynamics seen in the UK automotive market since the summer of 2020.
TOO FEW CARS
Post-lockdown, pent-up consumer demand is being released at the same time as the global semiconductor shortage impacts new car production, which is driving up second hand vehicle prices in particular and boosting sector-wide profit margins in the process.
The Society of Motor Manufacturers and Traders recently raised its forecast for the shortfall of new vehicles in the UK this year from 1.1 million units to 1.3 million units.
MORE DEALS TO COME
Meanwhile, Monday's 400p per share offer for Marshall Motor Holdings (MOTR:AIM) from European online car marketplace Constellation Automotive has fueled speculation of further consolidation in the sector.
The offer equates to a 42.8% premium to the closing price on 26 November. Broker Zeus Capital maintains ‘the sector remains undervalued and further consolidation cannot be ruled out’.
READ MORE ABOUT PENDRAGON HERE
