8:32 am, September 27, 2023
Bosses at Pendragon say they are ‘considering’ rival bids to Lithia Motors’ buy-out deal as the firm published its half year accounts.
Ownership of the group’s car dealership business has dominated the headlines over the past ten days, with a bidding war breaking out following news of Lithia’s offer last Monday (Sep 18).
Yesterday (Sep 26), Car Dealer reported that American giant AutoNation has submitted a bid for the firm, joining Lithia and a joint offer from Hedin Group and Penske.
Despite the latest two offers being described as ‘unsolicited’ by Pendragon chief Bill Berman, both are now said to be under consideration.
In a statement included in the half year results, posted on the London Stock Exchange, Berman said: ‘Earlier this month, the board of Pendragon formally concluded its strategic review of the business, which was focused on delivering full value for our shareholders.
‘The group announced a recommended transaction with Lithia Motors that would deliver the sale of our automotive retailing and leasing operations, the launch of Pinewood Technologies as a standalone, listed company and a strategic partnership with Lithia to accelerate Pinewood’s growth in North America.
‘The board has subsequently received unsolicited approaches from Hedin Mobility Group and PAG International and from AutoNation, which it is considering in consultation with shareholders. We will provide a further update at the appropriate time.’
The story so far:
- Lithia makes second bid for Pendragon with £280m offer
- Analysis: Why Hedin won’t be able to block Pendragon deal
- Q&A: Everything you need to know about Lithia
- Rival bid to buy Pendragon from Hedin and Sytner-owner Penske rejected
- Hedin and Penske increase their offer to buy Pendragon
- Bidding war hots up for Pendragon as THIRD suitor enters race to buy car dealer group
Whoever does come out on top in the bidding war is set to inherit a dealer group in a strong position, if the firms half-year results are anything to go by.
Figures show that the publicly-listed outfit saw its revenue rise to £2.09bn in the first six months of the year – a like-for-like rise of 15.5 per cent on the same period in 2022.
Meanwhile, underlying profit-before-tax experienced a 9.6 per cent hike from £33.5m in 2022 to £36.7m in 2023.
When it came to car sales, Pendragon experienced a new vehicle gross margin of 9.6 per cent, a used vehicle gross margin of 6.6 per cent and an aftersales gross margin of 51.5 per cent.
New vehicle volumes also rose by 18.3 per cent on a like-for-like basis, compared to an overall market increase of 18.4 per cent in the six months to the end of June.
Overall, Pendragon sold 49,650 used cars in the first half of the year, representing a 7.9 per cent year-on year-rise, as well as 28,646 new cars – a rise of 16 per cent.
Elsewhere, the firm’s dealer management software business Pinewood – which has not been included in recent takeover talks – made a £6.5m operating profit from revenue of £14.5m.
Reacting to the figures, Berman said: ‘I am pleased to report a strong trading performance in the first half, with revenue and profits up across all our divisions despite a challenging backdrop.
‘We delivered strong volume growth for both new and used vehicles during the period, while a robust operational performance supported healthy margins in our UK Motor division.
‘Pinewood continues to make very encouraging progress, with investments into product innovation and the delivery of new functionality helping to drive user growth and higher average revenue per user.
‘I’d like to thank all our associates for their hard work delivering another strong set of results.’
Offers show value in UK motor trade – Zeus Capital
Pendragon’s half year results have already been poured over by industry finance expert’s Zeus Capital, described the firm’s performance as ‘strong’.
The financial services group said that the group’s success highlights once again, the value there is to be had within the UK motor trade for outside investors.
A spokesman for Zeus Capital said: ‘As flagged in a July trading update, Pendragon’s interim results showed strong sales and gross profit growth more than offsetting underlying cost inflation and interest rate rises.
‘Underlying PBT in H1 2023 increased by 9.6 per cent as a result.
‘We believe proposed deals from three of the largest US motor retailers highlights the value within the separate parts of Pendragon’s business and the UK motor retail sector as a whole.’
Zeus Capital’s forecasts for Pendragon remain unchanged following the latest results.
