Pendragon, who operate the Evans Halshaw and Stratstone brands, has released annual results for 2016 showing used vehicle revenue up +9.5% , Aftersales revenue up +7.3%, and new vehicle revenue up +3.1% (all on a like for like basis).
In 2016 Pendragon recorded an underlying profit before tax increase of 7.6%. The group’s revenue grew by £83.1 million, up 1.9% on the prior year, mainly due to increased contributions from the used vehicle department. On a like for like basis revenues by 5.9%. The Group maintained gross margin at 12.3%.
Used revenues for Pendragon have grown by 64% in 5 years at a compound annual growth rate of 10.4%. The Group sold 159,000 used vehicles in 2016. With its revenue streams developing in this manner it is perhaps not a surprise that the group also sets out a strategic goal to double used revenue in 5 years.
Trevor Finn, Chief Executive commented: “Future growth will be driven by our initiatives, our investment in additional physical capacity for used car sales and by our strategic advantages in IT and intellectual property. We believe that we can achieve at least double digit growth in used revenue in 2017 and our aspiration over the next five years is to double our used vehicle revenue.
In order to test this, during the final quarter of 2016 we invested in inventory and adjusted our algorithms and marketing initiatives with a view to driving growth in used vehicle activity levels to test the capacity of our current footprint.”
The group’s results statement outlines a strategy of “Investment in additional physical capacity for used vehicle sales continues so that we can achieve at least double digit growth in used vehicle revenue in 2017”.
More specifically Pendragon outlines that it will “be opening five sites in the first half of 2017 and have five sites actively being pursued for the second half of 2017. This investment will take place over the coming four year period and is expected to amount to approximately £100 million in total investment since initiation in 2015 (assuming all additional sites are freehold).”
With regard to new vehicle retail, Pendragon, unlike many industry commentators, is predicting a stable market in 2017: “we believe the new car market is more likely to be flat in 2017 than the 5% reduction that is forecast. This is due to the continuing ready availability of consumer finance and the fact that markets in the rest of the world are still comparatively weak. Moderate increases are expected in the long term due to increases in car ownership and population growth.”
Summarizing Pendragon’s outlook for 2017, the group’s statement said: “We are focussed on our strategy of gaining market share in the used and aftersales markets. We believe there will be growth in the used and aftersales markets with marginal growth in the new vehicle market in 2017.”
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