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Pendragon business restructure could include 1,300 redundancies

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Pendragon could be poised to make 1,300 redundancies as part of a business restructure designed to stem the faltering financial performance revealed by a series of profit warnings.

The former AM100-topping car retail group's share prices fell to their lowest level since 2012 yesterday (September 9) with its half-year financial announcement is only a week away, declining to 10p at the close of trading on the London Stock Exchange.

The fall in value represents a 64.8% value drop since its 2019 high of 28.4p achieved in April.

That was shortly before then new chief executive, Mark Herbert begun his review of the business’s operational and financial prospects.

Despite an alleged disagreement between former chief executive Herbert and the Pendragon board about the future direction of the group - prior to Herbert's June departure from the post - AM understands that the business could now be poised to take robust action in an effort to address its faltering financial performance.

An AM source claimed that a plan is being drawn-up which could include up to 1,300 redundancies across the business, which currently operates 118 Evans Halshaw sites, 59 Stratstone premium car franchised sites and 32 used car locations under its Car Store banner across the UK.

Pendragon said that it had “no comment” when AM made enquiries about the claim this week.

It also said that it would not provide “ongoing commentary” about its progress in appointing a new chief executive.

A report in the Sunday Telegraph newspaper this week highlighted how Pendragon had conducted what it referred to as a “beauty parade of financial advisers” as it considered its options for a restructure, only for the process to be paused in the wake of Herbert's departure.

A Pendragon spokesperson told AM: “Earlier in the year we spoke to a number of firms about helping management to conduct an operational costs review of the business.

“Following the departure of the previous chief executive, that process was put on hold and no decision was made about which partner to proceed with.”

In August Pendragon announced that its results for six months ended June 30, 2019, will be released on Wednesday, September 18.

The group last issued official commentary on its financial prospects back in June when the results of the initial business review conducted by Herbert and his leadership team stated that it expected to be to be “significantly loss making” in the first half of the year, with a small loss in underlying pre-tax profits for 2019 as a whole.

A statement, issued via the London Stock Exchange, said that £11.9m losses incurred by the Car Store division in 2018 would accelerate to over £25m this year, principally as a result of “execution inefficiency and the impact of excess used car stock”.

Pendragon held £458m worth of used car stock at the end of 2018, compared to £372m a year earlier

However, an accelerated programme during the second quarter of 2019 will now aim to reduce the level of aged, pre-reg and ex-demonstrator stock to 38% of used stock units held on April 1 and Herbert said that he still saw “significant addressable opportunities to improve the business and return to profitable growth".

Last month Pendragon furthered its plans to withdraw from the US market with the sale of a California Chevrolet dealership, following its earlier sale of a Jaguar Land Rover (JLR) franchise in the West Coast state.

July also brought the sale of its Stratstone Jaguar Land Rover franchises in Swansea to Sinclair Group for an undisclosed sum.

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