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Pendragon cutting 2,500 jobs this year

Pendragon is expecting to make a £30 million full year loss before exceptionals and is cutting 2,500 jobs this year following an announcement to the London stock exchange.

The dealer group outlined in its interim statement for the period from July 1 to August 28, 2008 that it will also have closed 75 dealerships by the end of this year.

Pendragon said: “Since we last commented on our trading performance there has been a marked deterioration in the outlook for economic activity in the UK.

“While we welcome recent interest rate cuts, we believe it will be some time before the consumer benefits from banks pass this benefit on. In common with most companies in the retail sector, we are experiencing the impact of faltering consumer spending in the face of a squeeze on household budgets and tighter credit.”

The economic downturn has made a significant impact on Pendragon’s new registrations, with year-to-date new car registrations down by 9% with the retail sector down at 12%.

Pendragon said: “The used car market has also been more difficult in the last four months with prices falling by approximately 5% per month on average, with executive and large 4x4 vehicles being hardest hit. The aftersales market, while holding up well, has become more difficult in recent months.”

Cost reductions

The cost of the 2,500 redundancies (20% of Pendragon's workforce) will amount to £3m.

However, Pendragon expects to save at least £40m as a result of the cuts.

The trading losses and the closure costs of the 75 dealerships have cost the group £12m, but the annualised losses of the closed dealerships are estimated at £20m.

Pendragon will be focussing on stock reductions and is targeting to reduce its non-manufacturer funded stocks by at least £50m by the end of this year.

New manufacturer funded stocks had risen at the half year and are now reducing, as anticipated, as manufacturers are starting to reduce production levels.

Pendragon said: “The actions taken this year have negatively impacted our results, both directly through such things as redundancy and closure costs, and indirectly through disruption caused.

“However, these actions have been necessary in the light of the ever declining outlook for our economy. The benefits to profits next year, coupled with savings from the recent interest rate reductions, will be significant and at least £60 million.”

Pendragon is optimistic for improved trading next year, benefiting from the interest rate cut to 3%.

The group said: “Notwithstanding a further reduction in the new car market the positive actions taken on the cost base and the favourable impact of the recent interest rate cut lead us to be optimistic of improved trading next year.”

Pendragon has also addressed speculation that it is rumoured to be selling off its software subsidiary, Pinewood for £60m.

The dealer group confirmed that it was considering options regarding the future of Pinewood but would make a further announcement “in due course”.
 

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