Pendragon slumps to £130m loss
18 September 2019
Pendragon’s half-year results have revealed it is to close 22 of its 34 Car Store used car operations, has taken a £102.4 million goodwill and property write-down, appointed an executive chairman to run the company while it looks for a new chief executive and downgraded its expectations for the full year.
The 2019 half-year results showed Pendragon hit a total loss, post-tax, of £129.6m. However, Pendragon’s underlying loss before tax was £32.2 million in H1 2019, down from an underlying profit before tax of £28.4m in H1 2018.
Turnover for the troubled retail group stood at £2.46 billion for the first six months of 2019, almost unchanged from last year’s £2.48bn.
The results were issued by outgoing non-executive chairman Chris Chambers who is stepping down from the board at the start of October. Bill Berman, who joined Pendragon as a non-exec director in April will become executive chairman and lead the search for a new chief executive to replace Mark Herbert who left the company three months after he started in April.
Before joining Pendragon Mr Berman has an extensive career at AutoNation, the largest automotive retailer in America, where he served as president and chief operating officer.
Commenting on the results Mr Chambers said: “There has been a material decline in the group’s profitability principally as a result of the actions taken to address excess used car stock. We made significant progress reducing this exposure in the latter period of the first-half and we remain committed to the strategy of growth in the group’s used car proposition. The business is fully focussed on maximising performance, but we expect the market to continue to be challenging during the second half of 2019.”
As part of the restructuring to get the group back on track, the group claimed that Car Stores are “a significant and attractive market opportunity and that the proposition is well received by its target customers”. Despite closing almost two-thirds of the businesses and one vehicle preparation centre. The closures are expected to result in around 300 job losses.
Pendragon also downgraded its results forecast for the full year adding: “As a result of these market conditions, group underlying loss before tax for FY19 is now expected to be at the bottom of the Board’s expectations. This outcome still reflects a meaningful recovery in profitability during the second half based upon self-help actions that the business is taking as well as the assumption that current market conditions do not deteriorate further.”
The £102.4m write-down was made up of “goodwill and non-current assets amounting to £102.5m. There is £78.2m impairment of goodwill, £22.8m impairment of property assets primarily within Car Store, £1.2m impairment of property, plant and equipment and £0.3m impairment of assets held for sale”.
Results for the UK’s franchised operations show that gross profit on new, used and aftersales all fell in the first half of 2019 on a turnover that fell just below £2bn.