Newspapers and magazines

It is worth remembering that a penny stock is one that trades for less than £1. Smiths News is a UK-based wholesale distributor of published content such as magazines and newspapers.

So what’s happening with Smiths shares currently? Well, as I write, the shares are trading for 32p. At this time last year, the shares were trading for 38p, which is a 15% drop over a 12-month period. Many stocks have pulled back since the turn of the year due to macroeconomic headwinds and the tragic events in Ukraine.

The bull and bear case

Let’s start with some positives first. I noticed that Smiths has an over 50% share of the market in the UK for the distribution of newspapers and magazines. This significant advantage over competitors should allow it to perform consistently and offer generous returns.

Looking at Smiths’ fundamentals, it does just that. Firstly, the shares offer a dividend yield of over 7%. This is rare in a penny stock and Smiths yield is higher than the FTSE 100 average of 3%-4%. I am aware that dividends can be cancelled at any time, however. Furthermore, Smiths shares look dirt-cheap on a price-to-earnings ratio of just three at present levels.

Although performance remains consistent over the past few years, revenue and profit has been falling slightly — but more on that in a moment. I note that Smiths has undertaken massive cost-cutting exercises to continue being profitable and generating healthy volumes of cash. This could also result in further dividends.

So to the negatives then. Smiths operates in an industry that is declining due to the rise and popularity of technology. Many of us access news, magazines, and much more on smartphones and other devices. The traditional paper and its volumes are declining. This is reflected in its declining performance noted above. Smiths knows this too which is why it is cutting costs due to falling demand.

I believe the eventual decline towards minimal levels of newspapers and magazines that need distributing will hamper Smiths business. This will impact performance, returns, and investment viability. This is a concern for me as I like to invest for the long term.

A penny stock I’d avoid right now

Based on my investment strategy of buying stocks for the long term, I’m not convinced that Smiths News is right for me and my portfolio. I think the eventual shrinkage of the magazine and newspaper business will see Smiths shares fall by the wayside.

The only way Smiths could continue its current momentum is if it finds an alternative way to make money and boost growth and performance. I would not buy the shares today, but will keep a keen eye on developments.

I’ve been hunting for potential bargains and have found five stocks I’m interested in adding to my portfolio in 2022.

I reckon all of these unloved shares look good value and could deliver big gains over time. But there are no guarantees. Sometimes there’s a good reason why a share is cheap. Problems may be lurking in the background. The business may be losing key customers.

The share prices of smaller companies also tend to be more volatile than larger stocks. Losses (and gains) can be very sudden. For these reasons, I wouldn’t ever invest in penny shares with money I couldn’t afford to lose.

I reckon this share could double

My first pick is a business I’ve been following for some years. I reckon now could be the time to buy. Gulf Marine Services (LSE: GMS) owns a fleet of offshore drilling rigs hired out to customers in the Middle East and elsewhere.

Gulf Marine’s fleet is very modern, but this led to a problem. The company had funded its fleet expansion with debt. By 2016, net debt had topped $400m, but the oil market crash in 2015 had caused demand for hire rigs to slump.

However, the business is under new management, reporting regular contract wins and improved fleet utilisation. Importantly, debt has started to fall.

Gulf Marine shares currently trade on just 3.5 times 2022 forecast earnings. This reflects the company’s high debt load. But if debt continues to fall, then I think the shares should re-rate to a more normal valuation.

This is still a risky situation. Debt is still very high and the current boost from high oil prices may not last. But if trading remains good, I think Gulf Marine’s share price could rise strongly from current levels.

Can this quality business keep growing?

My next pick is quite different. Currency specialist Record (LSE: REC) provides services to clients who need to manage their foreign exchange exposure. It’s a highly profitable business, with an operating margin of about 30%.

The problem is that growth has been pretty weak in recent years. Between 2017 and 2020, profits were broadly flat.

Newish chief executive Leslie Hill has brought in some fresh ideas and seems to have restarted the group’s growth. Revenue rose by 38% to £16.3m during the six months to 30 September, while pre-tax profit doubled to £5.2m.

I don’t expect this rate of improvement to be maintained, but broker forecasts suggest Record’s earnings could rise by 20% in 2022. In the meantime, the group’s balance sheet looks rock-solid to me, and the stock boasts a generous 6% forecast dividend yield.

Record looks good value to me at current levels. I’d consider buying this penny stock for income and growth.

Still going strong after 157 years

Investing in old companies isn’t a guarantee of success. But, in my experience, businesses that have been trading for more than 100 years often have some attractive qualities. Renold (LSE: RNO) is one such firm. This business specialises in industrial chains and gearboxes — technology it’s been developing and perfecting since 1864.

Growth hasn’t always been in a straight line. Major customers in the mining and construction suffer cyclical slumps from time to time. Demand for some products has changed over the years. I suspect the shift to electric power and renewable energy will create fresh challenges.

Renold’s revenue and profits have fallen over the last two years, in part because of the pandemic. However, half-year figures for the six months to 30 September suggest the business has returned to growth. Revenue for the period rose by 17% and adjusted operating profit was 41% higher.

Broker forecasts suggest this growth should continue into 2022/23. With Renold shares trading on just eight times forecast earnings, I’d be happy to buy the shares for my portfolio.

A special situation with a 6% yield

Newspaper and magazine distributor Smiths News (LSE: SNWS) is in a special situation. The company’s valuation reflects this — the shares currently trade on just four times 2022 forecast earnings and offer a 6.3% dividend yield.

If this was a healthy, growing business, I’d probably expect a P/E of 8-10 and a yield of 3-4%. The problem is that printed newspaper and magazine sales are in long-term decline. These days, this stuff gets published online.

However, Smiths News has a 55% share of the remaining market. This makes it big enough to be profitable and cash generative.

The company says it already has plans to cut costs to match falling volumes. Brokers who cover the stock have bought into the story. They expect earnings to rise by 3% next year, pricing the stock on 3.9 times forecast earnings. Another chunky dividend is expected, indicating a potential yield of 6.3%.

The main risk I can see is that the business will keep shrinking unless management finds new markets for Smiths’ distribution services. At some point, which is hard to predict, this shrinkage could start to threaten the company’s viability.

My view is that there’s probably an opportunity here. For this reason, I’d be happy to open a small position in Smiths News today.

A penny stock turnaround?

Doorstep lender Morses Club (LSE: MCL) is expanding steadily into online lending and banking. The company focuses on customers with bad credit ratings, providing loans and pre-paid debit cards.

The pandemic caused revenue and profits to fall sharply, but Morses now appears to be on the road to recovery. The group’s loan book rose by 8.5% to £60.3m during the six months to 28 August, while pre-tax profit for the period rose from £2.3m to £2.6m.

This business will face ongoing regulatory risks, in my opinion, as I expect the rules on bad credit lending will continue to tighten. The impact of this could be that Morses’ profitability will be lower in the future.

Even so, Morses Club has a successful track record in this sector and a significant share of the market. Profits are expected to rebound in 2022/23, leaving the shares on just six times forecast profits. At this level, I see this penny stock as a potential buy.

Penny shares for growth

The first company on my list is N Brown (LSE: BWNG). I am wary of investing in the retail sector in general because of the ongoing shift from physical to online retailing.

However, N Brown is now a pureplay digital retailer. I think this gives the company an edge in the competitive retail landscape, although it is not immune from sector competition. 

After a rough 2020 and 2021, where sales declined more than 20%, analysts expect growth to return in 2022. Based on current growth projections, the stock is selling at a forward price-to-earnings (P/E) multiple of around 6. That looks cheap compared to the industry average, which is around 12 to 14. 

Based on this valuation and the company’s competitive advantage, I think the stock could increase in value over the next few years as growth returns. 

Unfashionable industry

Unfashionable sectors tend to be good places to hunt for discount shares. Smiths News (LSE: SNWS) is a great example.

The newspaper and magazine distributor operates in a slow and steady unfashionable industry, which is nowhere near as exciting as some of the hot sectors of the market like technology. 

Still, the company does provide an essential service, and after the disruption of the pandemic, it looks cheap. While revenues are expected to decline over the next two years, efficiency initiatives will help it improve bottom-line growth, according to City analysts. 

Based on these projections, the stock is selling at a forward P/E multiple of just 4. This makes the company one of the cheapest penny shares on the market. 

That said, I am under no illusion newspaper distribution is a declining business. Profit margins are also razor-thin, leaving no room for error.

These are the biggest challenges the organisation faces. Nevertheless, I do not think it will take much for the market to reevaluate the stock and its potential. This could lead to a substantial increase in the company’s share price. 

Construction sector growth

The final company I am highlighting is tool and equipment hire business HSS (LSE: HSS). There are two reasons why I like this business right now. First, the construction sector in the UK is booming, which could provide a solid tailwind to support the group’s growth in the years ahead. 

At the same time, the company is starting to reap the benefits of a multi-year transformation plan. City analysts believe the firm could report a net profit of £4m for the 2021 financial year, thanks to these twin tail winds. To put this into perspective, over the past six years, the corporation has lost a total of £130m. 

Based on analysts projections, the shares are trading at a 2022 P/E of 6.2.

The most significant danger here is the risk the company could go back to its old ways. If costs rise significantly and the construction market starts to stagnate, losses could return. 

Here are three I’ve found that I’d buy for my portfolio today.

Under-the-radar growth

My first pick is currency exchange specialist Argentex (LSE: AGFX). This £100m business is one of a handful of companies that’s disrupting the currency services offered by banks by providing cheaper and faster services.

Argentex doesn’t serve the holiday travel market. Instead, the firm targets higher-value customers with more sophisticated requirements, such as institutions, companies, and high net worth individuals.

This is still quite a small business, but growth has been strong so far. Revenue rose by 33% to £15.7m during the six months to 30 September, while pre-tax profit jumped 22% to £3.3m. The main risk I can see is that this is an increasingly competitive market. Argentex’s profit margins have fallen over the last 18 months, cancelling out some of its growth.

However, I think the risk of slowing growth is already priced into the stock. Argentex shares are trading on just 12 times 2022 forecast earnings and offer a 2.5% yield. This is a growth stock I’d be happy to buy for 2022.

This turnaround is delivering results

My next pick is industrial chain specialist Renold (LSE: RNO). Unlike Argentex, this British firm is more than 100 years old. Renold makes chains and related parts used for machinery such as cement mixers, conveyor belts, escalators, and train doors. It’s one of the oldest companies in this market. Renold’s products sell all over the world.

This business has been through a difficult patch over the last few years, but now seems to be back on track. The company’s adjusted earnings are expected to rise by a chunky 79% this year, as the turnaround kicks in.

If Renold delivers on this forecast, I think the stock looks quite cheap on just nine times forecast earnings. My only serious concern is that this business still has a sizeable £100m pension deficit. This requires cash contributions of around £5.5m each year.

I’d want to keep an eye on the pension situation. But Renold is certainly a penny stock I’d be happy to own.

Too cheap to ignore?

The last share I’m going to look at is currently priced at just four times 2022 forecast earnings. The shares are also expected to provide a chunky 6.7% dividend yield in 2022.

The company concerned is Smiths News (LSE: SNWS), which delivers newspapers and magazines to shops all over the UK. The company has a 55% share of the market and has been in business over 200 years.

I’m sure you’ve spotted the obvious risk here — sales of printed newspapers and magazines have been falling for years as readers move online. My guess is that this trend will continue.

This decline is an ongoing challenge for Smiths, but the company’s big market share means that it still handles enough volume to make money. Cash generation is good, and Smiths’ debt levels have been falling fast.

I think this penny stock is probably too cheap at current levels. For this reason, I’d be happy to add Smiths News to my portfolio today.

But things haven’t worked out so well in recent times. The shares topped at around 250p in 2014, trod water for the next three years, and crashed in 2018. The pandemic wasn’t kind to the stock either, and in 2020 the share price bottomed at 11.5p. That’s a 95% plunge!

But things have picked up recently, and the shares have rebounded to 40p. I think there might still be some value here.

A successful turnaround  

Smiths News released its full-year results last week that showed earnings grew by 11.3%. Free cash flow also rose by a highly impressive 120%, and dividends are being restored after they were halted last year due to the pandemic. Even better was that management said the overall performance was ahead of expectations. 

Another good thing about the business is its high return on capital – the metric used to gauge how efficient a business is at generating profits with both debt and equity capital. It has been consistently in double-digits. I take this as a sign that the business is a quality operator.

But there’s a turnaround story playing out here. In April last year, Smiths News decided to sell Tuffnells (the green van-owning parcel delivery company) after a strategic review. Now the company is able to focus on its main distribution business, and it has brought down its cost base.

There has also been a reshuffle of the management team at Smiths News, with a new chairman and CEO coming on board.

Debt is the issue 

What about the stock’s valuation? Well, the shares trade on an incredibly cheap price-to-earnings (P/E) ratio of just four. But there’s a reason for such a low P/E that I have to remember

In the results last week, net bank debt (the worst kind) was £53.2m. The company’s market value is only just under £100m, so this is significant.

However, Smiths News was able to refinance this debt at the end of 2020 with a syndicate of banks, giving breathing room for now. If trading deteriorates though, and cash generation dries up, this will be a huge problem.

When companies have high debt, I like to use a debt-adjusted P/E to take into account the extra risk of buying shares in such a business. For Smiths News, this is still an incredibly cheap 6.5.

The bottom line

With a new strategic direction, fresh leadership and more efficient operations, shares of Smiths News might only just be starting a charge back to 250p. That would be a return for my portfolio of 525% based on a share price of 40p! But my concern is the large debt load. If the cash generation stays high, and we avoid another lockdown, I might just buy this penny stock for my portfolio.

Activity at its photo booths has shown signs of strong recovery of late. But this isn’t why I’d buy Photo-Me today. I’d snap it up as recent restructuring gives it exposure to some other fast-growing self-service businesses. As well as providing self-service laundry services the penny stock operates food vending machines and digital printing kiosks. I’d buy it despite the threat of rising Covid-19 crisis to footfall in areas where its machines are located.

The leisure giant

Marston’s (LSE: MARS) is another dirt-cheap UK share on my radar right now. That’s even though food price inflation is currently running at “terrifying” levels, according to industry experts. The pub operator trades on a forward price-to-earnings (or P/E) ratio of just 8 times today, a reading I think makes it ultra-attractive for long-term investors like me.

A stark warning from Ian Wright, chief exec of the @Foodanddrinkfed about impending food price inflation.
“In hospitality which is a precursor of retail it is currently running somewhere between 14% and 18%. That is terrifying,” he told @CommonsBEIS.

— Joanna Partridge (@JoannaPartridge) October 19, 2021

Britons are spending an increasingly large portion of their disposable incomes on eating out and drinking. This naturally bodes well for Marston’s, which operates 1,500 pubs, eateries and hotels the length and breadth of the country. The leisure giant noted just last week that it has witnessed “a continuous improvement in trading” since Covid-19 restrictions were lifted on 12 April.

Read all about it

I also think Smiths News (LSE: SNWS) could be worth serious attention. Its forward P/E ratio sits even lower than that of Marston’s, at below 4 times. This penny stock is the largest magazine and newspaper distributor in the UK. So it could be argued that it’s in severe peril as digital publishing takes over from traditional print media.

Still, at current prices I think Smiths News could be a speculative stock worth buying. Attempts to improve efficiency to offset falling volumes have so far proved extremely successful. And as my Foolish colleague Roland Head recently commented, the company’s massive transport network provides opportunities to explore other profits-enhancing activities.

Another penny stock on a roll!

Meanwhile currency manager Record’s (LSE: REC) share price has exploded during the past 12 months. Yet it still looks pretty cheap in my opinion, the business trades on a forward PEG ratio of just 0.2. Trading here is going from strength to strength and total assets under management equivalents (or AUMEs) rose 5% in the three months to June. I think its move into sustainable investments could reap rich rewards too as responsible investing becomes ever-more-popular.

Record’s drive to modernise and diversify is resulting in massive costs at the business. This could go some way to explaining its ultra-low valuation. But at current prices I still think it’s an attractive penny stock to snap up today.

Top penny stocks

When looking for the best shares to buy, I like to see high return on capital. This is a key measure of a quality company. But don’t take my word for it. Both Warren Buffett of Berkshire Hathaway and Terry Smith of Fundsmith Equity make this same point.

I also like to see high profit margins, and plenty of cash flow. Right now, there are several penny stocks that meet my criteria.

Ready to fly

One of the stocks that I’d consider now is aviation services company Air Partner (LSE: AIR). It’s a small company with a market capitalisation of just £57m, but I reckon its shares are primed to fly.

Air Partner provides private jets and aviation safety and security solutions. Despite travel restrictions, it traded strongly in the first half of the year. In fact, the UK private jets division saw a rise in new customers in addition to more bookings from existing clients. In the US, demand from wealthy individuals helped boost bookings to levels seen before the pandemic.

Activity in Europe has been muted but I reckon that as travel restrictions begin to ease, business should pick up soon.

Bear in mind, however. Pandemic restrictions and cross-border limitations continue to be a concern. Also, in the long term there are business risks regarding its impact on the environment.

That said, I think the share are currently cheap. In addition to positive trading, I also like Air Partner’s financial metrics. It looks like a good quality and well managed operation. It offers a leading return on capital of over 35%, double-digit profit margins and a conservative balance sheet.

Read all about it

My next penny stock that I’d consider buying right now is in a very different industry to aviation. It’s the business of newspapers. Smiths News (LSE:SNWS) is the largest distributor of Newspapers and magazines in the UK. Although physical newspapers are a declining industry, Smiths has recently piqued my interest.  

In its most recent trading update, it reported a strong financial performance with trading set to be ahead of market expectations. Its core sales of newspapers and magazines stabilised as social movement picked up. And the return of major sporting events helped sales of its stickers and albums.

There are some negative points to bear in mind, however. This is a declining sector. It may not be a ‘hold forever’ stock for me. In the long run, I think sales of physical newspapers and magazines will decline. This could lead to poor share price performance for me.

That said, the company currently offers strong returns and cash flow generation. With a price-to-earnings ratio of just 4x, I reckon the shares are too cheap.    

With the recent dip in share prices, it has made both penny stocks even more attractive. I’d look to buy both for my portfolio.

Each of the three companies I’m looking at today operates in a specialised area where it’s a respected player. In my view, all three look cheap at current levels.

Flying could take off

Small-cap Air Partner (LSE: AIR) organises charter flights, private jet services and specialised aviation safety and security services. Last year’s results were hit by Covid-19 but were still better than expected, thanks to strong demand for private jet flights and cargo charters.

Demand for extra freight capacity is falling as more regular passenger aircraft return to the sky. But Air Partner said earlier in July that private jet demand is still very strong, especially in the US. The company says that bookings through its JetCard pre-paid scheme have risen by 57% over the last year, with a 153% increase in the US.

The main risk I can see here is that the path back to normality is not clear. Some of Air Partners’ operations remain affected by the pandemic. And we don’t know if private jet demand will remain high.

Even so, I’m tempted to buy this penny stock at current levels. The company is trading on around 14 times forecast earnings, with a 2.8% dividend yield. If profits return to the levels seen from 2016-2019, then I’d expect the shares to perform well.

A value opportunity

Smiths News (LSE: SNWS) is one of the UK’s two main distributors of newspapers and magazines.

Obviously, this is a business that’s in decline. People don’t buy as many newspapers as they used to. But Smiths News still has good scale and is surprisingly profitable. The company still handles more than £1bn of sales each year, from which it generates a reliable stream of cash.

What attracts me to Smiths is its transport network, which is geared to provide rapid daily distribution across the UK. In my view, the opportunity for this business — or for a trade buyer — is to find new uses for this well-established network.

There’s no certainty this will happen. But Smiths News shares currently trade on a price-to-earnings ratio of five and are expected to offer a 4% dividend yield this year. I’d buy this as a value stock.

A penny stock I bought earlier

My final pick is a share I already own. Vertu Motors (LSE: VTU) is one of the UK’s largest car dealership groups, trading under brands including Bristol Street Motors.

The company has warned that new car sales this year are likely to be hit by supply restrictions on new cars caused by the global chip shortage. However, slower delivery of new cars has led to “exceptional” demand in the used car market. As a result, management recently upgraded their profit guidance for the full year.

We don’t yet know how the UK economy or the Vertu’s business will perform over the next six months. But broker forecasts already include a substantial fall in profits from pre-pandemic levels.

Vertu shares currently trade on less than seven times forecast earnings and offer a 3.7% dividend yield. I think this penny stock is too cheap, so I recently added it to my portfolio.

A cheap insurance share

The first stock I’m looking at is Aviva (LSE: AV). It’s been going through a pretty aggressive turnaround with many international businesses sold off. Management is now focusing on the leaner (hopefully more profitable) business in the UK, Ireland and Canada.

On many value measures, Aviva looks cheap. Even after a solid share price rise over the last 12 months. The forward P/E is only eight. Although one caveat is that this makes it exactly the same as Legal & General, which is a broadly similar company, so that cheap P/E isn’t unusual.

The price-to-sales ratio is 0.35 and price-to-book is 0.84. With these ratios being well under one, it tells me as an investor that Aviva still appears to be a cheap share.

When I look at the recovery in the business, there’s the potential for strong dividend growth in the future. In 2021 the dividend is expected to grow by 75%. These figures are flattered by the 2019/20 financial year dividend cut. Nonetheless I think it’s a positive sign from the new Aviva.

In July the shares could rise in anticipation of August’s half year results, which should show Aviva’s progress and factor in the recovery from Covid-19. The big opportunity though, in my opinion, is to hold these shares longer term.

I’m considering adding Aviva to my own portfolio, based on the value and a growing dividend. 

Could the share price fall?

Of course the share price of Aviva, despite all the good work, could fall. The expected benefits of becoming smaller may not materialise long term. The UK economy could struggle and being more reliant on it, so in turn could Aviva.

Insurance is also a competitive market where it is hard to get customer loyalty, this could make growth harder to come by as could rules on penalising loyal customers, introduced in the UK recently. 

Low P/E + high yield = attractive?

Smiths News (LSE: SNWS) is a cheap share that’s less well known than bigger, consumer-facing company, Aviva. Yet for a value-inclined investor like me, it could have a lot of potential to provide useful returns within a balanced portfolio.

It’s a newspaper and magazine distributor, a business that may be in decline due to consumers switching to digital. However, the same has been the case for cigarettes for decades. Sometimes change is more incremental than the headlines would suggest. Good management can still eke out profits by focusing on costs and potentially new growth opportunities. 

When I look for cheap shares, Smiths News often comes up. That’s because the forward P/E is only four. That’s incredibly low. Together with a dividend yield of 5%, this appeals to both my value and income instincts.

However, as with any cheap share, there’s a risk it’s a value trap. So the shares could go even lower, even though they’re already priced very cheaply. Investors may fret about the decline of the newspaper business, which could hold back, or limit, any share price recovery.

Overall though, Smith’s News is a cheap share I’ll be keeping an eye on in July. I may even add it to my portfolio given the combination of low P/E and high dividend yield.

Back on track

Smiths News (LSE: SNWS) is the UK’s largest newspaper and magazine wholesaler. The firm supplies around 55% of the market, including many airports and railway stations.

Covid-19 hit retail sales last year. But the company’s financial situation remained stable, with underlying operating profit down by just 5% to £18.9m. Smiths also took another big step forward with the sale of the loss-making Tuffnells courier business.

Having steadied the ship, management feels confident they’ll be able to restart dividend payments this year. Analysts’ forecasts suggest a payout of 1.6p per share, giving this penny stock a useful 3.9% yield.

Smiths News’ shares currently trade on just five times forecast earnings. I think they deserve a higher valuation, but there’s a risk here — sales of printed newspapers and magazines are in decline. I don’t see this changing, so the business could face additional challenges over the coming years.

Despite this, I’d be happy to buy Smiths News today. I’d aim to hold the stock until it reaches a more normal valuation.

Household favourites

Sales of bread, cakes and other baked goods from supermarkets soared in 2020. One of the UK’s largest suppliers of these products is penny stock Finsbury Food (LSE: FIF).

Although the company suffered from the closure of the hospitality trade, pre-tax profit for 2020 was only about 5% lower than during the 2019 financial year.

Trading has continued to strengthen as the UK has started to reopen. In an update at the end of May, Finsbury said pre-tax profit for the year ending 26 June is now expected to be around 10% higher than in 2019.

My main concern is that this business is always likely to face pressure on prices from its big supermarket customers. However, Finsbury’s improving performance and strong market share suggest to me the company is hitting the right notes with customers.

Finsbury shares are trading on just 11 times forecast earnings and management plan to resume dividends this year. I think the shares still have plenty of room to grow and I’d be happy to buy at this level.

This penny stock is performing well online

Car dealership groups like Pendragon (LSE: PDG) were forced to close their showrooms during lockdown, with only service departments remaining open for essential repairs.

Happily, it seems that many of us are now happy to buy cars online. During the first three months of 2021 — when the UK was in lockdown — Pendragon delivered 40,000 vehicles. That’s only 11% fewer than during the same period in 2020, when showrooms were open for all but one week.

Profits are improving too, thanks to a restructuring programme. Pendragon is expected to report an adjusted pre-tax profit of £29m for 2021, up from just £8.2m in 2020.

I can see two main risk today. Firstly, the global semiconductor chip shortage could disrupt the supply of new cars. Secondly, I think there’s a risk the UK economy could slump when Covid support measures are withdrawn.

Despite these concerns, Pendragon shares look affordable to me on 10 times forecasts earnings. I’d consider buying at this level, as I’m impressed by the company’s turnaround progress.