Car dealership Pendragon has said first quarter profits more than halved after it was knocked by falling new car sales and a shortage of used vehicles.
The nationwide chain – whose brands include Evans Halshaw and Stratstone – said underlying pre-tax profits slumped to £15 million in the three months to March 31 from £32.4 million a year earlier.
It said new vehicle revenues fell 13.3%, with gross profits for the division down 17.6% in the quarter as it came up against a record performance from a year earlier amid a rush to snap up cars ahead of the licence tax changes in 2017.
Used cars sales – which have been more resilient – also suffered in the first quarter, with gross profits tumbling 16.5% on sales 1.5% lower.
The group said its stock of used cars was not enough to meet demand in March.
Shares fell 3% after the update.
The group assured it expects used car sales to pick up throughout the rest of the year as it increases its stock and opens more retail sites across the UK.
Pendragon is launching new sites under plans to double used car sales by 2012, with new showrooms opened in Norwich, Shrewsbury and Ipswich during the first quarter.
The firm said: “The expected market conditions in quarter one impacted profitability.
“We anticipate our performance in 2018 to be in line with expectations given our assessment of a stronger second half versus a weak 2017 comparative.”
Chief executive Trevor Finn said: “We are making progress on the delivery of our target of doubling used revenue by 2021 with three retail store openings this quarter and further retail stores planned in the year.”
The firm said like-for-like after-sales revenues rose 3.1% in the first quarter, but gross profits for the division fell 3.7% after investment in its expansion programme.
In December, Pendragon said it would shut premium brand dealerships in Britain and offload its US division following a profit warning in October.
It said cost-cutting actions are beginning to bear fruit, with £3.9 million of cost savings in the first quarter.
The UK car market has been hit by a slump in new vehicle sales amid confusion over Government restrictions on diesel vehicles, rising inflation, reduced availability of credit and low consumer confidence.
Recent figures from Begbies Traynor showed levels of financial distress among car dealerships rocketed by 35% at the end of 2017 amid flagging sales and worries over the future of diesel.