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Car dealer Pendragon issues profits warning; manufacturing confidence falls – business live Car dealer Pendragon issues profits warning; manufacturing confidence falls – business live
(35 minutes later)
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Just in: Eurozone consumer confidence has risen again - a sharp contrast with the UK today.
Figures from the European Commission show that consumer morale beat forecasts this month, as Europe’s economic recovery continued.
Oct. 2017, flash estimate of consumer confidence indicator remained broadly flat in #euroarea & unchanged in #EU 👉 https://t.co/6xwEOqBGww pic.twitter.com/ia8qJWF4pw
Curiously, the EC’s eurozone consumer confidence index was still in negative territory, rising from -1.2 in September to -1.0 this month. The long-term average for this index is minus 10 in the euro area.
Euro Zone Consumer Confidence rises in October $EurUsd pic.twitter.com/dHj73Xw0lY
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Analyst firm Langton Capital is also worried that profit warnings could accelerate in the next few months.Analyst firm Langton Capital is also worried that profit warnings could accelerate in the next few months.
Pendragon: Big ticket slump hits car sales. Not new news, bro? But shares down 18%. E&Y say profit warnings up in Q3. What about Q4?Pendragon: Big ticket slump hits car sales. Not new news, bro? But shares down 18%. E&Y say profit warnings up in Q3. What about Q4?
“Bro”?!
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Over in New York, the US stock market has hit new record high.Over in New York, the US stock market has hit new record high.
The Dow Jones Industrial Average, the S&P 500 and the tech-focused Nasdaq indices all struck new record levels at th start of trading.The Dow Jones Industrial Average, the S&P 500 and the tech-focused Nasdaq indices all struck new record levels at th start of trading.
Traders are citing relief about last weekend’s Japanese election, which delivered a large win for prime minister Shinzo Abe. That means investors can can look forward to more money-printing and record low interest rates under Abenomics.Traders are citing relief about last weekend’s Japanese election, which delivered a large win for prime minister Shinzo Abe. That means investors can can look forward to more money-printing and record low interest rates under Abenomics.
Donald Trump’s tax reform plan has also been driving shares higher, even though experts warn that most of the benefits will go to the richest Americans.Donald Trump’s tax reform plan has also been driving shares higher, even though experts warn that most of the benefits will go to the richest Americans.
The average American family would get a $4,000 raise under the President’s tax cut plan. So how could any member of Congress be against it?The average American family would get a $4,000 raise under the President’s tax cut plan. So how could any member of Congress be against it?
If I give 10 apples to one person and no apples to nine people, the average person has one apple. Why are nine people mad at me? https://t.co/ezQWsReU6iIf I give 10 apples to one person and no apples to nine people, the average person has one apple. Why are nine people mad at me? https://t.co/ezQWsReU6i
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I mentioned earlier that UK profit warnings have jumped sharply, from 45 per quarter to 75.I mentioned earlier that UK profit warnings have jumped sharply, from 45 per quarter to 75.
Well, the bad news is this trend will probably get worse if the British economy keeps slowing and Brexit talks keep stumbling, according to Pierre Bose of Credit Suisse.Well, the bad news is this trend will probably get worse if the British economy keeps slowing and Brexit talks keep stumbling, according to Pierre Bose of Credit Suisse.
Reuters has the details:Reuters has the details:
Pierre Bose, head of European equity strategy at Credit Suisse said more profit warnings from UK companies were to be expected if the economy’s growth continued to deteriorate.Pierre Bose, head of European equity strategy at Credit Suisse said more profit warnings from UK companies were to be expected if the economy’s growth continued to deteriorate.
“We need results on the Brexit talks because from a corporate perspective, for investment spending, you need better clarity,” he added.“We need results on the Brexit talks because from a corporate perspective, for investment spending, you need better clarity,” he added.
In a note, Credit Suisse said that despite the UK market benefiting from a global cyclical upturn, it faces significant economic and political challenges.In a note, Credit Suisse said that despite the UK market benefiting from a global cyclical upturn, it faces significant economic and political challenges.
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Pendragon profits warning: What the papers sayPendragon profits warning: What the papers say
Britain’s car industry is “in crisis” following Pendragon’s gloomy news today, says Simon English in the Evening Standard.Britain’s car industry is “in crisis” following Pendragon’s gloomy news today, says Simon English in the Evening Standard.
He writes:He writes:
A hefty profit warning from Britain’s biggest car dealer sent shares crashing nearly 20% and raised fears about the state of one of the nation’s most important industries.A hefty profit warning from Britain’s biggest car dealer sent shares crashing nearly 20% and raised fears about the state of one of the nation’s most important industries.
Pendragon alarmed the market and City analysts with a sudden admission that too many cars are being made and consumer confidence has stalled.Pendragon alarmed the market and City analysts with a sudden admission that too many cars are being made and consumer confidence has stalled.
In The Times (£), Robert Lea points out that Pendragon’s profits will be 20% lower than expected this year:In The Times (£), Robert Lea points out that Pendragon’s profits will be 20% lower than expected this year:
Shares in Britain’s biggest motor retailer went sharply into reverse after Pendragon finally admitted that it had been caught up in the decline in new car sales.Shares in Britain’s biggest motor retailer went sharply into reverse after Pendragon finally admitted that it had been caught up in the decline in new car sales.
The company, which trades under its Stratstone and Evans Halshaw showrooms, reported that profits this year will come in at about £60 million, nearly a fifth lower than last year.The company, which trades under its Stratstone and Evans Halshaw showrooms, reported that profits this year will come in at about £60 million, nearly a fifth lower than last year.
The FT’s Katie Martin flags up (£) that Pendragon is planning changes to halt its sales slide.The FT’s Katie Martin flags up (£) that Pendragon is planning changes to halt its sales slide.
The group said it is experiencing “unprecedented pressure” in the premium sector “caused by certain manufacturers continuing to force vehicles into the market despite softening demand”.The group said it is experiencing “unprecedented pressure” in the premium sector “caused by certain manufacturers continuing to force vehicles into the market despite softening demand”.
CEO Trevor Finn set out steps that he hopes will “accelerate transformation”, including looking for a senior hire in the UK, considering a pullback from premium brands, and halting any new acquisitions in the US. It hints that it may pull out of the US altogether.CEO Trevor Finn set out steps that he hopes will “accelerate transformation”, including looking for a senior hire in the UK, considering a pullback from premium brands, and halting any new acquisitions in the US. It hints that it may pull out of the US altogether.
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The City analysts who track Pendragon have been pulling some screeching handbrake turns since its profits warning came out.The City analysts who track Pendragon have been pulling some screeching handbrake turns since its profits warning came out.
Berenberg have lowered their recommendation for the stock to hold, from buy, and cut the price target from 46p to 26p.Berenberg have lowered their recommendation for the stock to hold, from buy, and cut the price target from 46p to 26p.
Canaccord Genuity have also cut their price target to 26p, from 36p.Canaccord Genuity have also cut their price target to 26p, from 36p.
All perfectly understandable, but a little late - as Pendragon’s shares have fallen by a sixth this morning, from 29p to 24p.....All perfectly understandable, but a little late - as Pendragon’s shares have fallen by a sixth this morning, from 29p to 24p.....
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UK stocks of unsold cars are risingUK stocks of unsold cars are rising
Pendragon’s profit warning is also fuelling fears that stocks of unsold cars in the UK are building up to dangerous levels.Pendragon’s profit warning is also fuelling fears that stocks of unsold cars in the UK are building up to dangerous levels.
Accountancy firm UHY Hacker Young warned earlier this month that car dealers are sitting on 16% more unsold stock than they were just a year ago. The total of new cars gathering dust is now worth £27.3bn, up from £23.6bn last year.Accountancy firm UHY Hacker Young warned earlier this month that car dealers are sitting on 16% more unsold stock than they were just a year ago. The total of new cars gathering dust is now worth £27.3bn, up from £23.6bn last year.
That helps to explain why Pendragon’s financial performance has deteriorated, as this big stockpile will put pressure on dealersThat helps to explain why Pendragon’s financial performance has deteriorated, as this big stockpile will put pressure on dealers
Paul Daly, Partner at UHY Hacker Young, blamed auto manufacturers for pumping more new cars into the market, even though demand is slowing.Paul Daly, Partner at UHY Hacker Young, blamed auto manufacturers for pumping more new cars into the market, even though demand is slowing.
“Car makers continue to push more and more vehicles on to dealers’ books, but that can’t go on indefinitely. It’s unsustainable for unsold stock to keep rising so quickly.”“Car makers continue to push more and more vehicles on to dealers’ books, but that can’t go on indefinitely. It’s unsustainable for unsold stock to keep rising so quickly.”
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Rain Newton-Smith, the CBI’s chief economist, says chancellor Philip Hammond must help Britain’s manufacturing sector:Rain Newton-Smith, the CBI’s chief economist, says chancellor Philip Hammond must help Britain’s manufacturing sector:
“To boost investment growth, Government should use the Budget to provide a fillip for factories through business rate reforms, including exempting new plant and machinery from rates altogether, and switching to the more recognized CPI inflation measure rather RPI when calculating upratings.”“To boost investment growth, Government should use the Budget to provide a fillip for factories through business rate reforms, including exempting new plant and machinery from rates altogether, and switching to the more recognized CPI inflation measure rather RPI when calculating upratings.”
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Here’s a handy chart showing how UK firms are hunkering down and resisting buying new buildings:Here’s a handy chart showing how UK firms are hunkering down and resisting buying new buildings:
Investment intentions for the year ahead weakened, particularly for buildings. #CBI_ITS https://t.co/hi00lEfMj0 pic.twitter.com/LLbjtD7lQdInvestment intentions for the year ahead weakened, particularly for buildings. #CBI_ITS https://t.co/hi00lEfMj0 pic.twitter.com/LLbjtD7lQd
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The recent slowdown in UK factory growth could deter the Bank of England from raising interest rates next month.The recent slowdown in UK factory growth could deter the Bank of England from raising interest rates next month.
So argues Simon French of Panmure Gordon:So argues Simon French of Panmure Gordon:
CBI order books data shows 10-month low in producers reporting order books above normal. Still above 20Y average however. Will worry BoE as adds to recent slowing signals. pic.twitter.com/Az5QMkrb7JCBI order books data shows 10-month low in producers reporting order books above normal. Still above 20Y average however. Will worry BoE as adds to recent slowing signals. pic.twitter.com/Az5QMkrb7J
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UK business optimism drops as manufacturing growth 'softens'UK business optimism drops as manufacturing growth 'softens'
NEWSFLASH: UK factory order growth has slowed, and bosses are gloomier about future prospects.NEWSFLASH: UK factory order growth has slowed, and bosses are gloomier about future prospects.
That’s according to the latest survey of British manufacturing, just released by the CBI (which represents UK business leaders).That’s according to the latest survey of British manufacturing, just released by the CBI (which represents UK business leaders).
It found that optimism about business conditions fell in the last quarter, for the first time in a year.It found that optimism about business conditions fell in the last quarter, for the first time in a year.
#UnitedKingdom CBI Business Optimism Index at -11 https://t.co/xUXpVxtOj2 pic.twitter.com/nUwPuPd852#UnitedKingdom CBI Business Optimism Index at -11 https://t.co/xUXpVxtOj2 pic.twitter.com/nUwPuPd852
CBI Business Optimism falls to the lowest since July 2016CBI Business Optimism falls to the lowest since July 2016
Worryingly, the survey found that growth in output, domestic orders and export orders also eased over the last three months.Worryingly, the survey found that growth in output, domestic orders and export orders also eased over the last three months.
Here’s the details:Here’s the details:
29% of businesses reported an increase in total orders, and 23% a decrease, giving a balance of +6%. Both domestic orders (+5%) and export orders (+12%) grew at a slower pace, albeit remaining above their long-run averages (-4% and -6% respectively)29% of businesses reported an increase in total orders, and 23% a decrease, giving a balance of +6%. Both domestic orders (+5%) and export orders (+12%) grew at a slower pace, albeit remaining above their long-run averages (-4% and -6% respectively)
The CBI also found that companies are planning to cut back on investing in new equipment, and are also worried that they’ll struggle to find new staff.The CBI also found that companies are planning to cut back on investing in new equipment, and are also worried that they’ll struggle to find new staff.
Investment intentions for the year ahead deteriorated, with spending plans for buildings at their lowest since July 2009. Expectations for spending on new equipment also weakened. Plans for investment in training and innovation remained much firmer by comparison.Investment intentions for the year ahead deteriorated, with spending plans for buildings at their lowest since July 2009. Expectations for spending on new equipment also weakened. Plans for investment in training and innovation remained much firmer by comparison.
Concerns over labour shortages edged up from already high levels, with the number of respondents citing them as a limitation to investment plans at the highest since October 2013.Concerns over labour shortages edged up from already high levels, with the number of respondents citing them as a limitation to investment plans at the highest since October 2013.
Manufacturing output growth eased in the three months to October. #CBI_ITS https://t.co/hi00lEfMj0 pic.twitter.com/08KOgNRv5nManufacturing output growth eased in the three months to October. #CBI_ITS https://t.co/hi00lEfMj0 pic.twitter.com/08KOgNRv5n
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Vertem Asset Management have summed up the situation...Vertem Asset Management have summed up the situation...
Pendragon issues profit warning 📉 -17%Sep UK new 🚗 sales fell for 6th month in a rowUK on track for first annual decline since 2011 pic.twitter.com/dIevHadTb4Pendragon issues profit warning 📉 -17%Sep UK new 🚗 sales fell for 6th month in a rowUK on track for first annual decline since 2011 pic.twitter.com/dIevHadTb4
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A bad autumn of profits warningsA bad autumn of profits warnings
The slew of profit warnings from UK firms this autumn is becoming a serious concern.The slew of profit warnings from UK firms this autumn is becoming a serious concern.
Too many companies, both big and small, have shocked the City in recent weeks by suddenly revealing unexpected problems - or a surprise deterioration in trading.Too many companies, both big and small, have shocked the City in recent weeks by suddenly revealing unexpected problems - or a surprise deterioration in trading.
Here’s a reminder of some of the gloom from this month alone:Here’s a reminder of some of the gloom from this month alone:
Merlin Entertainment, the theme park operator which owns Legoland and Madame Tussauds, warned that it experienced a “difficult summer’. It blamed recent terror attacks in the UK for scaring off customers, as it cut its profit expectations.Merlin Entertainment, the theme park operator which owns Legoland and Madame Tussauds, warned that it experienced a “difficult summer’. It blamed recent terror attacks in the UK for scaring off customers, as it cut its profit expectations.
Serviced office provider IWG saw a third wiped off its value last week after warning that sale were weaker than expected. A slowdown in London was partly to blame.Serviced office provider IWG saw a third wiped off its value last week after warning that sale were weaker than expected. A slowdown in London was partly to blame.
Engineering firm GKN slashed its profit forecasts, due to problems at its US aerospace arm and two unexpected legal claims.Engineering firm GKN slashed its profit forecasts, due to problems at its US aerospace arm and two unexpected legal claims.
Interserve, the construction and support services company, issued its second profit warning since the summer. The firm, whose public sector contracts include monitoring prisoners on probation, also warned it could breach its banking covenantsInterserve, the construction and support services company, issued its second profit warning since the summer. The firm, whose public sector contracts include monitoring prisoners on probation, also warned it could breach its banking covenants
Last week, The Times’s Patrick Hoskins wrote that the City’s “duffers’ corner” is getting crowded, adding:Last week, The Times’s Patrick Hoskins wrote that the City’s “duffers’ corner” is getting crowded, adding:
It was only a few months ago that Britain was celebrating a seven-year low in the number of profit warnings. That benign period feels well and truly over. The incompetent and the unlucky are now having to fess up. And the share market is grumpily intolerant of any deviation from plan. Share prices are getting thumped.It was only a few months ago that Britain was celebrating a seven-year low in the number of profit warnings. That benign period feels well and truly over. The incompetent and the unlucky are now having to fess up. And the share market is grumpily intolerant of any deviation from plan. Share prices are getting thumped.
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It’s also worth noting that the car industry is facing some fundamental changes - from self-driving vehicles to a renewed clampdown on pollution.It’s also worth noting that the car industry is facing some fundamental changes - from self-driving vehicles to a renewed clampdown on pollution.
My colleague John Harris has written a good column on this issue today, which will not bring much cheer to Pendragon.My colleague John Harris has written a good column on this issue today, which will not bring much cheer to Pendragon.
Here’s a flavour:Here’s a flavour:
After a century in which the car has sat at the heart of industrial civilisation, the age of the automobile – of mass vehicle ownership, and the idea (in the western world at least) that life is not complete without your own set of wheels – looks to be drawing to a close. Top Gear is a dead duck. No one writes pop songs about Ferraris any more. The stereotypical boy racer appears a hopeless throwback. And in our cities, the use of cars is being overtaken by altogether greener, more liberating possibilities.After a century in which the car has sat at the heart of industrial civilisation, the age of the automobile – of mass vehicle ownership, and the idea (in the western world at least) that life is not complete without your own set of wheels – looks to be drawing to a close. Top Gear is a dead duck. No one writes pop songs about Ferraris any more. The stereotypical boy racer appears a hopeless throwback. And in our cities, the use of cars is being overtaken by altogether greener, more liberating possibilities.
The sale of diesel and petrol cars is to be outlawed in the UK from 2040. But only 10 days ago Oxford announced that it is set to be the first British city to ban all petrol and diesel cars and vans – from a handful of central streets by 2020, extending to the entire urban centre 1o years later.The sale of diesel and petrol cars is to be outlawed in the UK from 2040. But only 10 days ago Oxford announced that it is set to be the first British city to ban all petrol and diesel cars and vans – from a handful of central streets by 2020, extending to the entire urban centre 1o years later.
Paris will ban all non-electric cars by 2030, and is now in the habit of announcing car-free days on which drivers have to stay out of its historic heart.Paris will ban all non-electric cars by 2030, and is now in the habit of announcing car-free days on which drivers have to stay out of its historic heart.
In the French city of Lyon, car numbers have fallen by 20% since 2005, and the authorities have their sights set on another drop of the same magnitude. London, meanwhile, has shredded the idea that rising prosperity always triggers rising car use, and seen a 25% fall in the share of journeys made by car since 1990.....In the French city of Lyon, car numbers have fallen by 20% since 2005, and the authorities have their sights set on another drop of the same magnitude. London, meanwhile, has shredded the idea that rising prosperity always triggers rising car use, and seen a 25% fall in the share of journeys made by car since 1990.....
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Pendragon’s profit warning has prompted traders to dump the stock, says David Madden of CMC Markets.Pendragon’s profit warning has prompted traders to dump the stock, says David Madden of CMC Markets.
So, after their early plunge, Pendragon’s shares are still down almost 17% today at a four-year low.So, after their early plunge, Pendragon’s shares are still down almost 17% today at a four-year low.
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Pendragon’s profit warning is the latest in a series of blows to Britain’s car sector.Pendragon’s profit warning is the latest in a series of blows to Britain’s car sector.
So far this month, we’ve learned that:So far this month, we’ve learned that:
New car sales in the UK plunged by 9% in September. That’s the sixth monthly fall in a row, leaving the market on course for its first annual decline since 2011.New car sales in the UK plunged by 9% in September. That’s the sixth monthly fall in a row, leaving the market on course for its first annual decline since 2011.
Vauxhall is cutting 400 jobs at its Ellesmere Port plant in the North West of England. One in four workers will be laid off, as demand for its Astra drops. PSA Group, the French company which owns Vauxhall, won’t commit to new investment until Brexit negotiations have advanced.Vauxhall is cutting 400 jobs at its Ellesmere Port plant in the North West of England. One in four workers will be laid off, as demand for its Astra drops. PSA Group, the French company which owns Vauxhall, won’t commit to new investment until Brexit negotiations have advanced.
Spending across the UK car industry is on course to halve this year. The Mail on Sunday reported yesterday that just £647m has been invested since the start of 2017, down from £1.66bn in 2016.Spending across the UK car industry is on course to halve this year. The Mail on Sunday reported yesterday that just £647m has been invested since the start of 2017, down from £1.66bn in 2016.