Pendragon full-year losses worsen
18 March 2020
Pendragon pre-tax losses increased in 2019 to £97.8 million down from £90.6m in 2018. Revenue dropped to £4.51 billion from £4.63bn in 2018. Despite the loss before tax figure being worse than predicted six months into 2019, new CEO Bill Berman claimed the business was recovering. However, the underlying loss before tax at £16.4m, compared to a £47.8m underlying profit before tax figure for 2018.
Mr Berman added that the second half of 2019 had seen the Pendragon achieve an underlying profit of £15.8m.
2019 was a turbulent year for Pendragon with the retirement of longstanding CEO Trevor Finn, followed by the loss of his replacement Mark Herbert only three months into his role, a profit downgrade and the closure of most of its Car Store used car operations. Pendragon also announce its six-month figures a month later than usual and the group revealed it had made a pre-tax loss of £130m at that point.
The UK franchised division of Pendragon saw a 1.1% fall in turnover to £3.37bn and a 75.5% fall in underlying operating profit to £13.0m. However the second-half figures did show an improvement over the first half.
Commenting on the results, Mr Berman said: “2019 was a year of transition for the Group that played out against challenging market conditions, however, we returned to profitable growth in the second half and this provides us with a solid platform for the coming year. At the moment, we are closely monitoring the impact of COVID-19 on the economy as the situation continues to develop.
“We will be providing a fuller update on the Group strategy later in the year, which will continue to be based on four strategic pillars; the opportunity to create a strong, stand-alone used car brand, an improved and stable platform in the Franchised UK Motor division, delivering growth in Pinewood and further strengthening our leasing business. I am confident in the long-term prospects for Pendragon and look forward to communicating our strategy in more detail in due course.”
Mr Berman also gave a statement on the potential impact of Covid-19.
“The Group is closely monitoring the evolution of COVID-19 and to date, we have seen minimal impact on our business. However, it is hard to predict with any certainty what may happen.
“Our new vehicles are predominantly sourced from the EU and UK and recently, some manufacturers have announced short term shut downs to their production facilities. However, we understand that the vehicle manufacturers have inventory buffers of several months. Therefore, we currently anticipate our supply of new vehicles should not be significantly disrupted before the Autumn of 2020.
“As the virus spreads across the UK then this will likely influence the willingness of customers to visit our dealerships, which could affect our financial performance. Most of our new car sales and a substantial proportion of used car sales are made through a Purchase Car Plan or similar arrangement which provides an incentive to customers to change their vehicle at the expiry of the arrangement. Consumers can purchase both new and used cars with associated finance over the telephone or internet without visiting dealerships. We also offer vehicle delivery to the customer’s chosen destination. This provides underpinning for vehicle sales, although if the situation worsens, we anticipate there may be some level of deferral. We also note that servicing and repair work is generally undertaken in compliance with manufacturer warranty, extended warranty or service plan arrangements that customers will continue to observe.
“We have modelled the impact of a severe reduction in vehicle sales over a sustained period on our financial covenants and bank facility limits and we are comfortable that we are well positioned in this regard, with mitigants available in the more severe scenarios where headroom becomes more limited. However, we have taken some additional protective measures such as deferring commitments in our capital expenditure programme, increasing the flexibility we have in our marketing spend and closely monitoring inventory levels.”