3 March 2020 – trading update
The automotive retailer has provided a trading update with regards to the five-month period to 31 January 2020 ahead of announcing preliminary results for the year ended 29 February 2020. Trading performance is set to be in line with its overall expectations. The application of strong margin disciplines has delivered continued growth in operating profit in the period covered. There was strong performance in service, with like-for-like revenue growth of 5.4% achieved at increased margins. There was also growth in like-for-like used vehicle margins and gross profit generation as a result of strong pricing disciplines. There was tighter used car supply leading to a rebalancing between volume and margin. Like-for-like new retail vehicle volumes were 9.4% lower but margins were stable. Strong growth in fleet car sales volumes was delivered, significantly outperforming the market. However, commercial vehicle volumes were impacted by new WLTP regulations introduced in September 2019. Nevertheless, fleet and commercial margins rose in the five month period covered by the update. The company has noted that scale will become an increasingly important success factor as the sector evolves. The current pipeline of potential acquisition opportunities is strong and any deals are evaluated very carefully. The fact that results are due to be in line with expectations provides some reassurance. Trading conditions have not been ideal recently and the fact that the company continues to deliver strong figures underlines the quality of the business and its management. Final results for the year ended 29 February 2020 are due to be released on 6 May. We continue to rate the shares as a BUY.