Underlying pretax profit at the group, which operates more than 220 outlets under brands including Stratstone and Evans Halshaw, dropped to 60.4 million pounds in 2017 as Britain's new car market recorded its biggest drop since 2009.

Having issued a profit warning in October, the company said in December that it would sell its U.S. motor division, hoping to raise more than 100 million pounds.

It now aims to focus on strengthening domestic operations in the second-hand market by investing in new technology, it said on Tuesday.

"The used car market is over three times bigger than the new car market," Chief Executive Trevor Finn told Reuters.

"We're going for a 10 percent share of the market in 0-6 year old cars. We know the number of vehicles ... is increasing in that space so we know the market for us is going to grow for the next two or three years."

Britain's car industry body expects demand for new cars to fall by up to 7 percent this year, continuing a downward trend it has blamed on uncertainty created by Brexit and the government's diesel policy.

Shares in Pendragon were up 17 percent in early trade as investors welcomed details of how the company intends to restore profit growth. It said results would be in line with expectations in 2018.

(Editing by Paul Sandle and David Goodman)

By Costas Pitas