Pendragon on the road to recovery
CAR retailer Pendragon announced today that it had clawed its way back to profit despite the recession’s devastating impact on the automotive sector.
The company, which owns the Stratstone and Evans Halshaw dealerships, has announced underlying pre-tax profits of £10.1m – a recovery of almost £44m on the situation a year ago.
Profit before tax stood at £1.3m, which compared with a devastating loss of £194m at the end of 2008.
The impact of the recession prompted the group to implement a major refinancing deal and at the end of April last year it agreed a new three year secured financing package with its lenders.
This smoothed the path to profitability and eased the group’s debt burden.
However, cost reductions also had to be implemented and in the past 12 months to group has closed 26 dealerships and shed a number of jobs.
In a statement accompanying the Full Year results today, Trevor Finn, chief executive, said: “The group has successfully dealt with the most challenging market conditions experienced since the nineties.
“We acted swiftly to implement significant cost saving and debt reduction actions. During 2009 we concluded a successful refinancing to secure the long term future of the group.”
“Consequently, we are now in sound shape and have returned to profitability. While we anticipate our market will remain difficult in 2010, we are well positioned to focus on the profit opportunities that will drive our core business forward,” he added.
The group said that market conditions during the past twelve months had been the most challenging since the early 1990s. However, the situation was improving and markets were beginning to stabilise although things remained challenging.
As a consequence of its decision to reduce low margin fleet activity from 61,600 units in 2008 to 24,600 units, together with declining sales generally in 2009, revenues fell to £3.2bn last year compared with £4.2bn in 2008.
The fall includes approximately £476m in reduced fleet sales and £222m from a reduction in used car sales.
Underlying operating profits were £53.4m compared to £25.8m in 2008 and each of the group’s operating divisions was profitable at this level.
The group said the profit improvement was primarily driven by margins in used car sales, which recovered strongly during the year, together with the benefit of the cost saving actions initiated in the previous year.
Underlying finance costs also fell, down by £18.3m on 2008. This was mainly due to a reduction in stock levels.
Non-underlying costs of £10.7m arose due to group’s redundancy programme and the closure of dealerships.
Pendragon now operates 276 franchises in the UK plus nine outlets in southern California specialising in luxury marques Aston Martin, Jaguar and Land Rover.
Having undertaken the refinancing, the group is now focusing its attention on the areas of the business that will generate greatest profit – servicing and used car operations.
In 2009 the total number of new car registrations in the UK was 1,995,000, of which 285,000 had been generated by the Government’s scrappage scheme.
However, Pendragon outperformed the market for new retail car sales in the brands it offers, seeing a 5.8% decline in sales compared with a 6.4% reduction in 2008.
Pendragon sold 106,000 new vehicles in the UK in 2009, equivalent to 5.3% of the total market. This was down on 2008 when the group’s sales represented 6.4% of the market. Excluding the reduction in fleet and scrappage sales, its proportion of the retail market in 2009 was 8.5% compared to 7.9% in 2008.
In 2009 the group sold 107,000 used cars in the UK, approximately 1.5% of the market. During the first half of the year – at the height of recession – used car sales were 21.6% down on the comparable period whereas in the second half this recovered to such an extent they were up 7% on the equivalent period in the prior year.
Traditionally the group has operated only in the newly new sector of the used car market but it has now moved into the older market and this has helped to strengthen sales.
