Pendragon boss Bill Berman says he’s cautious about the UK’s economic outlook and notes the potential for constraints in new vehicle supply in 2021, but is confident the dealer group will be ‘strong and profitable’ thanks to a new strategy.
Speaking on the day Pendragon posted its full-year results for the 2020 financial year, Berman said the group’s new strategy, formed during a turbulent 2020, has allowed it to be ‘resilient’ and in a position to ‘capitalise’ on potential pent-up demand when showrooms reopen next month.
‘We are confident in the opportunity that our strategy provides, and will continue to make progress against our objectives, building a strong and profitable business,’ he said.
‘At this point, we remain cautious about the shorter-term economic outlook as government support is gradually withdrawn, and the board notes the potential for short-term constraints in new vehicle supply, but I am confident our business model has adapted to be resilient in the current conditions, and that we are well positioned to capitalise on the potential for any pent-up demand that may exist as our stores fully reopen in April.’
The dealer group – which is the third most profitable in the UK according to our Car Dealer Top 100 (which uses EBITDA as a benchmark) – posted a full-year profit before tax of £8.2m, as reported by Car Dealer.
A strong second-half saw the business claw back losses it made in the first half of the year as it grappled with lockdowns.
Berman said during the year Pendragon had completed a review of its strategy and launched a plan to ‘transform automotive retail through digital innovation and operational excellence’.
Pendragon is now targeting a return to ‘sustainable levels of profit growth’ and ‘underlying profit before tax of £85-90m by FY25’, and is focussing on meeting ‘evolving customer needs’.
Berman said: ‘I believe we are uniquely positioned, given our strong portfolio of assets and variety of divisions, to deliver on our three strategic priorities for growth and transformation.
‘These include taking advantage of a significant opportunity to unlock the value in the UK motor division, accelerating Pinewood’s geographic expansion and diversification into new products and disrupting standalone used car sales in the UK.’
Berman revealed the group is making ‘good initial progress’ with the strategy.
The Pendragon CEO also revealed the level of government support the business had received and some of the decisions it took as a reaction to the coronavirus pandemic.
The dealer group received around £42m of furlough support and circa £10m in rates relief during the year.
Additionally, Pendragon took measures to minimise cash flow such as reduced capital expenditure, agreements with OEMs and stocking loan providers to temporarily extend vehicle payment terms, voluntary management pay reductions and the temporary movement to monthly rental payments.
Berman said work to review Pendragon’s operating cost base ‘had started prior to Covid-19, but was accelerated by the pandemic’.
‘During the lock-down periods we saw strong efficiency gains from a smaller workforce, and, as a result of this and our prior work, we were able to implement changes to our structure to maximise these gains, reducing headcount to deliver annual equivalent savings of £35m,’ he explained.
As well as dealing with the shifting landscape we have had to operate in, we have set out a comprehensive plan and started to deliver against it
‘In addition to reviewing our operating model, we also successfully concluded a review of our store estate, which led to a conclusion that a further 15 stores did not form part of our future estate plan.
‘The closure of these stores was completed during the second-half. Prior to the pandemic, these stores collectively lost c.£2m per annum.’
Berman said he was ‘particularly pleased’ with Pendragon’s development of digital tools and click-and-collect and home delivery services, and said the firm had further ‘bolstered’ its online offer by ‘enabling digital finance and insurance sales as we move to develop an end-to-end online proposition for those who choose to shop this way’.
Looking back on the year, Berman said: ‘Overall, I am very pleased with the progress the group has made during what has undoubtedly been a challenging year.
‘Our teams have risen to each and every challenge put in front of them, enabling us to demonstrate the underlying strength in the organisation during the second-half in particular.
‘As well as dealing with the shifting landscape we have had to operate in, we have set out a comprehensive plan and started to deliver against it.’
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