Shares in Pendragon, the UK's largest car dealership, today fell by two per cent – having dropped over five per cent earlier in the day – after the firm revealed its full-year figures.
But the FTSE 250 firm's boss steadfastly stuck to his predication that car sales would not fall during 2017.
Sales of new cars fell by 1.4 per cent to £2.2bn in the year to December but used car sales grew by 5.6 per cent to £1.9bn. Aftersales figures grew by 4.1 per cent to £317m.
While gross profit was 1.9 per cent higher at £560m, operating profit fell by 17.5 per cent to £100m and profit before tax was down 7.6 per cent at £73m.
However on an underlying basis – which "exclude items that are not incurred in the normal course of business" – operating profit rose by 0.7 per cent to £101m with profit before tax up (rather than down) 7.6 per cent at £75.4m.
Gross margins – the proportion of profit the firm makes on each sale – fell from 11.9 per cent to 11.8 per cent.
Dividends were increased by 11.5 per cent to 1.45p per share.
Why it's interesting
Despite concerns in some quarters that the impact of Britain's exit from the EU is starting to hit car sales in the UK, Pendragon chief executive Trevor Finn has previously remained bullish about what the future will bring.
Speaking to City A.M. he couldn't fathom why markets had taken umbrage with the firm's financial performance given they were broadly in line with expectations.
Finn stood by his previous predication that UK car sales would be flat this year and refuted forecasts by The Society of Motor Manufacturers and Traders (SMMT) of a five per cent decline in sales during 2017.
"Once the SMMT has seen the the March sales, I think it will revise it's forecasts," said Finn, who is expecting a solid month after the semi-annual change in number plates at the end of February.
What the company said
"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."
What the analysts said:
Berenberg analysts agreed with the company that used car growth presented an opportunity for Pendragon, "where margins, returns and cyclicality all remain more attractive".
"The company is also uniquely positioned in used cars," analysts said and added it had a leading dealer software business in Pinewood, a centralised pricing model and a click-and-collect offering.
"Having doubled used car revenue since 2010, Pendragon now has a target to double this business again… If Pendragon can achieve this, it would imply 50 per cent upside to our base-case price target [of 46p]."