PENDRAGON today announced hundreds of job losses as it published a post-tax loss of £129.6m for the six months to June 30.
The troubled motor group, which made £21m profit in the same period last year, said it would be axeing 22 of its 34 Car Stores and one of its three preparation centres. It is still searching for a managing director for the division.
Its underlying pre-tax loss figure was £32.2m against a like-for-like profit of £28.4m – a drop of more than £60m (213 per cent).
Group revenue was £2.455bn – a 0.8 per cent drop on last year. Used revenue was up 3.9 per cent, new revenue up by 1.7 per cent, and aftersales up by 3.23 per cent, but its US Motor division suffered a 5.3 per cent drop.
It said that although total Car Store sales grew by 16.4 per cent, operating losses increased by £12.7m to £19.1m through a combination of an increase in operating costs, mainly because of adding nine locations year on year, and a decline in the gross margin rate from seven per cent to 3.1 per cent. As a result, some 300 jobs will be lost. The preparation centre affected is in Stoke.
Meanwhile, its Franchised UK Motor division, which includes its Evans Halshaw and Stratstone brands, made an operating loss of £7.7m against a like-for-like profit of £31.8m.
Pendragon said it was sent into the red in the first half after slashing prices to shift a pile-up of unsold used cars, combined with the impact of a fall in national used car prices of around seven per cent during the second quarter and Brexit woes.
Non-executive chairman Chris Chambers, who – it was also announced today – will step down on October 1, said: ‘Whilst market conditions have been challenging in the first half of 2019 with headwinds in both the used and new car markets, the group has continued to deliver like-for-like revenue growth.
‘However, 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 focused on maximising performance, but we expect the market to continue to be challenging during the second half of 2019.’
In its outlook, the company said: ‘Economic and market conditions are very challenging. The heightened political and Brexit uncertainty, as to both outcome and timing, is adversely affecting customer confidence. We are not anticipating any improvement in this for the rest of our financial year and are closely monitoring market conditions and customer behaviour particularly during the important trading month of September.
‘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.’
Non-executive director Bill Berman is to assume the newly created role of executive chairman with effect from October 1 but on an interim basis. Pendragon said he would provide leadership and strategic direction for the company while it continued its search for a new chief executive, following the sudden departure of Mark Herbert in June after less than three months in the role.
Its share price closed at 10.92p yesterday, having topped 28p in April. The price dropped to 9.81p this morning following the interim results announcement.
Julie Palmer, partner at corporate recovery and professional services consultancy Begbies Traynor, said: ‘The automotive industry, often seen as a key component of British manufacturing, continues to stall as low global demand and poor domestic consumer confidence hits businesses like Pendragon.
‘The automotive retailer is still recovering from the shock departure of chief executive Mark Herbert in June, who left following a preliminary review of the group’s profitability and strategic focus.
‘While the search is ongoing for his replacement, the firm faces an uphill battle to reassure investors and drive profit growth, with the company currently looking to restructure.
‘August’s new car sales would have offered little comfort, with registrations falling by 1.6 per cent, and the uncertainty towards a no-deal Brexit from the new prime minister will have added to the distress in the boardroom.
‘Although disruption is clearly impacting every corner of the automotive industry, with many businesses in for a bumpy ride, for those who get their business model right and adapt to the shifting landscape, there are some exciting times ahead.’