Leading UK car dealer Pendragon (PDG) edges 1.3% higher to 39p on strong annual results and a doubled final dividend. News of better-than-expected net debt, as well as the launch of the UK's first automotive 'click and collect' service, are also driving positive sentiment toward the stock.
You can peer under the bonnet of Pendragon's stellar calendar 2014 figures here. Key takeaways include a 36% underlying profit before tax gain to £60.2 million – this metric has now doubled in just three years as Pendragon benefits from operating leverage – as well as a doubling of the final dividend to 0.6p. Significantly, CEO Trevor Finn also reports a drop in net debt from £140 million to £109 million, estimated to have fallen further since year-end with the help of a £24 million asset sale.
Operating under the Stratstone franchise for luxury brands, Evans Halshaw for volume and Chatfields for trucks and vans, Pendragon is in an earnings upgrade cycle. As the UK's leading new car retailer, the £560 million cap is benefiting from buoyant industry conditions. Admittedly, most industry commentators believe the new car market's stellar growth will soon moderate, yet Pendragon's focus on used cars, where sales remain well below 2004 peaks, provides a road to continuing profits progress.
Seasoned used car dealer Finn is clearly embracing the profits potential of the digital age too, with the strength of Pendragon's online business helping the company win market share. Last year, visits to its Stratstone.com, Evanshalshaw.com and Quicks.co.uk sites accelerated 16.3% to 15.7 million, as car buyers are increasingly using the web as a used car showroom.
Given a strengthening balance sheet, Pendragon is looking to fill lingering gaps in its motor retail footprint, the biggest in the UK. This will help facilitate its major new online initiative, 'Move Me Closer', which allows customers to reserve vehicles direct via mobile devices, then inspect the vehicle they reserved at the nearest physical dealership. In addition, Pendragon has launched a 'Sell Your Car' initiative, where customers can sell cars direct to evanshalshaw.com at a guaranteed higher price than rival webuyanycar.com.