Peter Warren Automotive Slashes FY26 Profit Guidance on New Car Margin Squeeze

Peter Warren Automotive (ASX: PWR) has significantly slashed its FY26 underlying PBT forecast to $12m-$15m, down from previous expectations, citing a sharp deterioration in new car trading conditions driven by margin pressures.

This is largely due to rapid shifts in customer demand, influenced by factors such as higher fuel prices, three RBA interest rate rises, and broader cost-of-living pressures impacting Australian consumers.

Demand has shifted towards smaller, more fuel-efficient vehicles.

Adding to the challenge, increased competition within the Australian market, including new market entrants gaining market share, is further squeezing new car margins.

Offsetting Strength in Services & Used Cars

Despite the headwinds in new car sales, the company anticipates strong performance in other segments.

A record FY26 revenue is expected for its service and parts division.

Similarly, Peter Warren projects record FY26 results for its used vehicle segment.

The company is actively working to accelerate used car sales and enhance revenue and efficiency in these controllable areas.

Strategic Actions for FY27

Looking ahead to FY27, Peter Warren has outlined several mitigation strategies. These include optimising brands within its existing property footprint.

Furthermore, the company plans to expand its representation of New Energy Vehicle (NEV) brands. This move aims to adapt to evolving market preferences.

Cost-management initiatives remain a key focus for Peter Warren. These actions are being implemented to leverage the company's scale and property footprint, despite persistent inflationary pressures.

H1 FY26 Performance

In H1 FY26, Peter Warren Automotive reported revenue of $1,268.5m, marking a 3.2% increase year-on-year.

The underlying PBT for the period stood at $12.5m, a substantial 76.1% increase compared to H1 FY25.

The company maintained a stable gross profit margin of 16.2%.

Operating expenses as a percentage of revenue also showed an improvement, reaching 11.9%.

During H1 FY26, net debt improved to $61.5m, and the company also declared an interim fully franked dividend of 3.0 cents per share.

Acquisition of Wakeling Automotive

Peter Warren previously announced the acquisition of Wakeling Automotive, a multi-franchised dealership group.

The transaction is valued at approximately $28m and will be funded from existing debt facilities.

This deal is expected to be immediately EPS accretive after funding costs, with completion subject to standard conditions, including approvals from the ACCC and original equipment manufacturers (OEMs).

The acquisition aligns with Peter Warren's ongoing consolidation strategy, designed to add scale and strengthen its presence in the growing Western Sydney corridor.

Outlook and Risks

Peter Warren Automotive has significantly reduced its FY26 profit outlook due to severe pressure on new car margins, a stark contrast to prior expectations of record performance in services and used cars.

While the company is implementing strategic actions for FY27, including NEV expansion, near-term performance is clouded by macroeconomic factors and increased competition, alongside the pending regulatory and integration risks of the Wakeling Automotive acquisition.