Pendragon has announced plans to close 22 of its Car Store used car supermarkets and one vehicle preparation centre after detailing a £32.2m underlying pre-tax loss in its H1 2019 financial results.
The AM100’s former number one franchised car retail group by turnover saw its share price opened for trading at 9.08p at the opening of the London Stock Exchange this morning (September 18) – its lowest level this decade – after it reported “significant losses” in the period to June 30, 2019.
And following its efforts to reduce the levels of excess used car stock, after a review commissioned by former chief executive Mark Herbert identified the issue amid losses in the group’s rapidly established Car Store network, Pendragon today announced its plan to close 22 of its 34 UK-wide sites along with one of three vehicle preparation centres, in Stoke, during H2.
AM reported in April that Car Store divisional director, Chris Caygill, was away from the business on ‘gardening leave’ amid the mounting losses.
Now the group is set to take more wide-reaching steps to restructure the operation, a week after AM reported the allegations of a source who claimed that Pendragon’s plan to curb its ailing financial performance could result in 1,300 job losses. The group would not comment.
However, in today's results statment, it said: “The Board initiated a detailed strategic and market review of the Car Store business and the challenges it has faced. This review confirmed that there continues to be a significant and attractive market opportunity for Car Store, however a number of short-term actions are required to improve performance, including a number of site closures.”
Pendragon said that it was anticipated that the closure of 22 locations and one of its three vehicle preparation centres would have “an immediate, and significant positive impact on the financial performance of Car Store”, adding that its board remained “very confident in the long-term potential of Car Store”.
H1 financial results today showed that the group had achieved a 0.8% decline in turnover, to £2.46bn (2018: £2.47bn) during the first half of 2019, but a 2.9% increase on a like-for-like basis.
Pendragon reported that its franchised retail operations in the UK also delivered like-for-like revenue growth of 2.6% despite “challenging trading conditions” in both new and used cars.
The improved performance came as progress was made with its plan to right-size its franchised operations – and reduce its exposure to premium brands – with the sale or closure of nine Jaguar and Land Rover (JLR) franchise points, and its exposure to overage used stock was reduced by £140m to £236m.
During the reported period Pendragon also announced the sale of two of its franchise locations in the US as it continues its plan to withdraw from the overseas market.
The businesses in Mission Viejo and Newport Beach were sold for a combined consideration in excess of £60m, with the £28.2m sale of Mission Viejo JLR subsequently completed on July 1.
Discussions for the disposal of the remainder of the US Motor Group are continuing, with the disposal of Puente Hills announced in August for consideration of over £17m, Pendragon said.
Despite the steps taken to restructure the group so far, its overall underlying profit before tax fell 188% to a £32.2m loss following a £28.4m profit during the same period in 2018.
Its said in its financial statement: “As a result of these market conditions, Group underlying loss before tax for FY19 is now expected to be at the bottom of the Board's expectations.
“This outcome still reflects a meaningful recovery in profitability during the second half based upon self-help actions that the business is taking as well as the assumption that current market conditions do not deteriorate further.”
The group said that it was not proposing an interim dividend for shareholders (2018: 0.8p).
While Pendragon’s search for a new chief executive continues it announced today that non-executive chairman Chris Chambers will step down from the Board on October 1 as the business makes the move to appointing an executive chairman.
Non-executive director Bill Berman will assume, on an interim basis, the newly created role of executive chairman upon Chambers’ departure.
Pendragon said in a statement that Berman would provide “leadership and strategic direction of the company while the process for recruitment of a new chief executive officer continues and the process for the recruitment of a new non-executive chairman commences.”
Berman joined Pendragon as a non-executive director in April 2019 following an extensive career with US car retail group AutoNation, where he served as president and chief operating officer.
Berman said: “Having joined the business in April, I am looking forward immensely to continuing to work with the Board and colleagues in my new role as executive chairman and remain confident that we can take the business forward in the execution and delivery of our long-term strategy.”