Car dealership Pendragon has shifted its profit outlook up a gear after as it shrugged off shortages of new vehicles and saw strong demand in the second-hand market.

The company behind the Evans Halshaw and Stratstone brands said it now expects underlying annual profits of £80m, up from previous guidance of £70m – and the second upgrade in two months.

It said the lack of new vehicles had bot been as bad as expected.

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The trading update comes as a global shortage of semiconductor chips holds back car production leaving manufacturers and retailers struggling to meet demand for new cars.

At the same time, the shortage has pushed up demand for used vehicles, with recent official data showing prices up by 27% between April and October.

Pendragon, which operates in both markets, said it had “continued to perform strongly” in the first two months of the fourth quarter.

“Whilst the shortfall in the supply of new vehicles persists, customer demand and order levels have continued at a higher level than last year,” the company said

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“Despite demand outpacing deliveries, the shortfall in October and November was lower than we had previously anticipated.

“In addition, we are continuing to see robust performance in used vehicles following successful implementation of the group’s strategy.”

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Pendragon added however that it remained “cautious about potential further disruption from COVID-19 to both our local markets and global supply chains”.

Shares rose 6% on the update, which comes after Pendragon last year announced plans to cut 1,800 jobs after the pandemic added to wider challenges it was already facing, some related to Brexit.

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