Pendragon has published its 2019 full-year financial results, revealing a £117.4m loss after tax – driven by “significant underlying losses in the first half of the year”.
The business saw performance improve during the second half of 2019, as a result of measures taken after a poor H1. These included the closure of 22 Car Store locations, better management of used vehicle inventory and a clear focus on operational cost management.
Revenue dropped 2.6% year-on-year to £4.5bn, while gross profit fell 14.1% to £472.7m.
The company’s franchised UK motor arm reported an underlying operating profit of £20.7m in H2, following losses of £7.7m in H1. The group outperformed the new car market (-1.1%) in H2, with like-for-like new car unit sales up 2.3%.
Bill Berman, chief executive of Pendragon, said: “2019 was a year of transition for the Group that played out against challenging market conditions, however, we returned to profitable growth in the second half and this provides us with a solid platform for the coming year. At the moment, we are closely monitoring the impact of COVID-19 on the economy as the situation continues to develop.
“We will be providing a fuller update on the Group strategy later in the year, which will continue to be based on four strategic pillars; the opportunity to create a strong, stand-alone used car brand, an improved and stable platform in the Franchised UK Motor division, delivering growth in Pinewood and further strengthening our leasing business. I am confident in the long-term prospects for Pendragon and look forward to communicating our strategy in more detail in due course.”
To combat the effects of coronavirus, car dealership group Pendragon has taken some additional protective measures.
These include deferring commitments in its capital expenditure programme, increasing the flexibility in marketing spend, closely monitoring inventory levels and developing alternating work schedules and home-working options for employees.
Pendragon said it is has seen minimal impact on business due to the virus, but is closely monitoring the evolution of COVID-19.
The group noted that its new vehicles are predominantly sourced from the EU and UK. Although some manufacturers have announced short-term shutdowns to their production facilities, Pendragon understands that most OEMs have inventory buffers of several months. Therefore, the group does not anticipate its supply of new vehicles to be significantly disrupted before autumn 2020.
Pendragon also acknowledged the potential impact on consumer shopping habits in the UK. “Most of our new car sales and a substantial proportion of used car sales are made through a Purchase Car Plan or similar arrangement which provides an incentive to customers to change their vehicle at the expiry of the arrangement.
“Consumers can purchase both new and used cars with associated finance over the telephone or internet without visiting dealerships. We also offer vehicle delivery to the customer’s chosen destination. This provides underpinning for vehicle sales, although if the situation worsens, we anticipate there may be some level of deferral.”
The company said it has modelled the impact of a severe reduction in vehicle sales over a sustained period on our financial covenants and bank facility limits and remains comfortable that it is well-positioned, with mitigants available in the more severe scenarios where headroom becomes more limited.