Pendragon reveals pandemic impact in latest results
29 September 2020
Covid-19 had a material impact on Pendragon’s first-half results for 2020 with the company reporting an underlying loss before tax of £31 million. The firm, which had shown signs of improving results in the preceding six months, said it had “refocused its strategy and is confident in the longer-term outlook”.
Pendragon’s half-year results to 30 June 2020, Pendragon point to its performance after the reporting period: “The shutdown impacted revenues and profits materially, however, trading through July and August has delivered significant improvement vs 2019, with underlying profit before tax of £7.0m an improvement of £19.0m compared to a loss of £(12.0)m for the corresponding two months last year. The Group remains cautious about the economic outlook as government support programmes are withdrawn and the business will continue to plan accordingly.”
Significant restructuring over the past year saw revenue for H1 2020 fall more than 50% to £1.22 billion, however on a like-for-like basis this drop was 43.4%.
CEO Bill Berman added: “Despite all the available actions being taken, Covid-19 had a material impact on the Group’s reported underlying profit before tax performance, with management estimating the financial impact on H1 FY20 to be approximately £44.1m.”
In Pendragon’s full year results for 2019, released in March just before the pandemic sent the UK into lockdown, Mr Berman had claimed the firm was recovering.
Last year the firm reported an 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.
Managing the Pandemic
- Government mandated closure of UK dealerships from 23 March until 1 June.
The Group’s primary focus was the health and wellbeing of its customers and colleagues. The business worked hard to safely reopen locations at the beginning of June.
- Rapid and decisive action taken to minimise the impact of the pandemic and to protect cash:
- Utilised government support measures; Coronavirus job retention scheme (CVJRS); rates holidays and VAT deferral
- At the height of the pandemic, over 80% of the Group’s workforce were furloughed
Capital expenditure reviewed and either reduced or postponed to mitigate cash impact of the pandemic o Vehicle payments deferred with support from OEM’s and stocking loan providers
Voluntary management pay cuts of up to 20% during lock-down period
Temporary move to monthly rent payments with the agreement of landlords
Reduced all discretionary cost activity to minimum levels
- 20 service centres remained open, initially to support key workers, up to 125 opened during May.
- The Group accelerated the development of its digital capabilities and introduced online payment functionality,
- click and collect and home delivery options.
- Pinewood and PVM continued trading throughout to support their customer base.
- A comprehensive reopening plan was developed and implemented, with a staggered return to work for colleagues based on increasing consumer demand whilst still utilising CVJRS where required.
H1 Operating Highlights – Franchised UK Motor
- Underlying operating loss of £(18.1)m (H1 FY19: £(7.7)m), Revenue down 46.6% (44.5% on a like-for-
- like basis), driven by the Covid-19 pandemic.
- 47.9% like-for-like reduction in new cars sold vs a market reduction of 48.5%.
- Improved gross margins of 10.2% increasing from 9.1% in H1 FY19.
- Used cars the main driver of margin improvement with gross margins improving from 4.9% in H1 FY19 to 7.1%, resulting from significant improvements to stock management.
- Based on the increased age profile of the stock, as a result of the extended lock-down period, the Group increased its provision for used inventory by £2.3m in H1. This increase impacted used gross margins by 0.5%. On an underlying trading basis, the used gross margin was 7.6%.
- Total operating costs were down 33.1% (down 31.3% on an LFL basis) with costs managed tightly during the pandemic, and supported by government programmes.