7:38 am, March 24, 2021
Pendragon turned its fortunes around during the Covid-19 pandemic to post a full year profit before tax of £8.2m for 2020.
The third most profitable car dealer group – according to our Car Dealer Top 100 list (which uses EBITDA as a benchmark) – continued on its ‘road to recovery’ by swinging from an underlying loss before tax in 2019 of £16.4m .
A solid second half of year performance helped it post a profit as it clawed back losses made in the first half of the year ravaged by lockdowns.
Pendragon’s total statutory loss for 2020 was £24.7m compared to a loss on the same basis of £117m in 2019.
The group says it is now targeting profit before tax in the region of £85-90m in just four years time.
Giving an update on the first two months of this year at the same time as its annual results, the group said improvements it has made to its ‘digital proposition’ had enabled it to clock up 20,000 sales in the first two months of 2021.
Compared to the same time last year, Pendragon said new car sales were down 24.3 per cent, used car sales down 32.8 per cent and aftersales down 13.1 per cent in January and February 2021 – but overall it was ‘pleased’ with the performance during lockdown.
It said the sales declines had been ‘more than offset’ by improved margins and lower costs and have resulted in a £4.8m loss for the two months compared to an £8.2m loss for the same period last year.
Reflecting on 2020, chief executive Bill Berman said: ‘It has been a difficult year for many people and I’d like to thank all of our team who have worked exceptionally hard throughout the COVID-19 pandemic.
‘Their resilience and dedication meant we were able to deliver a solid performance in what has been a particularly challenging period for the car retail industry.
‘We took early and decisive action to ensure the safety of our associates and our customers and protect the group’s financial position.
‘We also accelerated the development of our digital capabilities and introduced both click and collect and home delivery options for our customers.
‘These actions, coupled with the positive progress made against our new strategy, provide us with a strong platform for the future and the results for this period show there is good momentum in the business, despite the external pressures.
‘We are confident the improvements made to our business model over the past year leave us well positioned to navigate this period and accelerate our strategy during the course of the year and beyond.’
The annual results show Pendragon made a loss before tax of £31m in the first half of 2020 – but swung to a £39.2m profit for the second half of the year.
Revenue fell 35.1 per cent to £2.92bn, down from £4.5bn in 2019.
The group’s used car operation Car Store cut losses from £25.2m in 2019 to £1.2m during 2020. Revenue for the arm was down 67.3 per cent to £88.5m from £270.3m.
The groups’ leasing arm booked a profit of £13.3m for the year, up 3.9 per cent, while its software division, the Car Dealer Power-winning Pinewood clocked up £12.1m of profit.
Mike Jones, compiler of the Car Dealer Top 100 and executive chairman of ASE Global, said the results showed Pendragon was on the right path.
He said: ‘Pendragon’s results are clearly a significant improvement on the prior year, even despite the pandemic, particularly in H2.
‘The overall profit before tax comes in behind their peers, with Lookers announcing last week that they expected to make £10m, which in turn was below the profit generated by Marshalls and Vertu, however Pendragon is clearly on the road to recovery.
‘Given the future strategy it was notable that Car Store was finally profitable for the second half of 2020, albeit with all of the sins of the past previously provided for, the underlying operating profit of £0.5m in H2 on turnover of £45.4m is disappointing given the strength of the used car market.
‘Reaching the 2025 group operating profit target of £85m-£90m will require this turnaround to continue and accelerate.’
Zeus Capital motor trade analyst Mike Allen said the group could achieve a share price of 28 pence per share. Yesterday it was trading at 18.4p.
He said: ‘FY20 results from Pendragon show good progress in testing times.
‘While there is a lot to do to hit its FY25 targets, we believe the risk/reward profile is positive from here despite recent share price gains.
‘We can see a pathway to the group delivering a PBT of £85-90m by 2025 and consider that the share price would exceed 50p on that basis.
‘If we discount this back on a risk adjusted basis, we remain comfortable with 28p per share as a target.’
