Car dealer Pendragon flags higher costs and supply chain concerns

British car distributor Pendragon has reported record annual earnings led by strong demand for used vehicles.

However, the London-listed firm has warned the Russia-Ukraine conflict could disrupt new-vehicle supply chains and lead to higher costs.

The Nottingham-headquartered company revealed a record underlying profit before tax of £83million, up 912.2 per cent from the previous year. 

Meanwhile, it managed to reduce its net debt by £50.7million to £49.7million, including the repayment of £28.9million of VAT deferred from 2020.

Pendragon put much of its success down down to its ‘digital capabilities’ during the pandemic, which allowed it to ‘fulfil demand through a combination of full store experiences, home delivery options and click and collect’. 

Other factors that drove Pendragon’s profitability included the restructuring of its cost base and store estate during the latter part of 2020.

Looking ahead, Pendragon says its expects the margins achieved with both new and used cars to reduce during the course of 2022 from the ‘extraordinary levels achieved in 2021’.

It also predicts that new cars will remain in short supply during 2022, while higher costs in labour and utilities are another consideration along with the fallout from the Russia-Ukraine conflict.  

In terms of shortages, like other British dealers Inchcape and Lookers, the firm has been grappling with a limited supply of semiconductors, which has disrupted vehicle deliveries around the world.

Commenting on the full-year results, Pendragon CEO Bill Berman said: ‘We have delivered a really strong set of results, with positive contributions from all parts of our business. 

‘Late in 2020, we set out our new strategy to transform our operations and adapt to the fast-changing retail environment. Our focus since then has been on creating value through the delivery of this strategy and we are seeing the operational and financial benefits of this hard work in our results today.

‘Our sector has experienced a unique set of trading conditions during the period and I am delighted with how we have performed in this environment. 

‘We have made the most of the favourable market dynamics to deliver record underlying profits and we have also reported a return to profit for CarStore, our relaunched, used car brand.’

Berman added that despite some of the obstacles faced, the firm has the ‘right strategy in place and we expect to make positive progress towards our long-term goals this year.’

Founded in 1989 following the de-merger of Williams PLC, Pendragon has grown to represent 21 different vehicle manufacturers in the retail sector.

It now has more than 160 sites across the UK under the brands of Evans Halshaw, Stratstone and CarStore, offering new and used vehicles as well as providing aftercare services. 

Pendragon is currently not proposing a final dividend for 2021.