Odey warns against breaking up struggling car dealer Pendragon
A TOP shareholder in Pendragon has urged the car dealer to reject calls for it to break itself up in the wake of a shock profit warning.
Hedge fund manager Crispin Odey, who holds almost 14pc of the company, said a strategic review of Pendragon launched by new chief executive Mark Herbert should not lead to it being dismantled.
“There is strength in Pendragon operating in the new, used and after-sales markets at the same time,” Mr Odey said. “That size needs to be leveraged to win more of the market.”
Last week, Pendragon, which trades as Evans Halshaw and Stratstone, announced a big drop in profitability in all three divisions in the first three months of the year. Mr Herbert said “challenging trading conditions” had seen like-for-like profit fall by 5.4pc on new cars, 1.6pc on used cars and 5pc on after-sales, such as parts and servicing.
Pendragon shares fell as much as 10pc on the news.
As a result, Mr Herbert, who replaced 30-year veteran Trevor Finn this month, said he had launched a “review of the operational and financial prospects of the group”, which has about 200 UK outlets. However, Mr Odey cautioned against disposals, saying instead Pendragon’s established brands and extensive footprint should be used to bolster its expansion in the used car market, where turnover is faster and margins are generally higher than new vehicles.
“The UK’S new car market is about 2.4m vehicles a year, while used is almost three times that,” the hedge fund chief said. “Pendragon needs to expand there, where the market turns over much faster. More focus there could change the economics of the business.”
Mr Odey, who has invested in Pendragon for a decade, said that growth in the second-hand market would also help the firm in the event of a recession.