Pendragon plc (LON:PDG) has performed strongly in the first-half of the financial year, recording underlying profit before tax of £35.1m (H1 FY20: Loss of £31.0m). The significant improvements delivered in digital propositions enabled the Group to largely mitigate the impact of the third national lockdown in the first quarter and emerge strongly in quarter two, out-performing the market in both new and used cars. A strong trading performance was underpinned by the delivery of the Group’s cost restructuring programme, delivering material cost savings.
The Group has continued to make strong progress with its strategy to “transform automotive retail through digital innovation and operational excellence” leading to improved efficiency and to the introduction of new digital propositions.
Bill Berman, Chief Executive Officer, said:
“The first half of the year marked another strong period of progress and growth within the business despite the impact of a nationwide lockdown in the first quarter. We exceeded our initial expectations for the half and delivered an underlying profit before tax of £35.1m.
“While we acknowledge the positive market tailwinds, much of this progress has been underpinned by our new strategy, which has resulted in significant improvements to the Group’s digital capabilities and cost savings associated with the restructure of our store estate and the improved efficiency of our operating model. The work undertaken to advance our online channels last year meant more than 40,000 vehicles were delivered to customers during the lock-down period alone.
“In line with the wider market, we are anticipating continued shortages in both new and used vehicle supply for the remainder of the year. We’re continuing to deliver on our strategy and see significant prospects for the Group to capitalise on the exciting market opportunities ahead. We remain confident that underlying profit before tax for the full year will be £55m to £60m, ensuring we stay on track to deliver our target of £85m to £90m by FY 2025.”
Group Financial Highlights
| H1 FY21 £m’s | H1 FY20 £m’s | Total change % | Like-for-like change % | |
| Group Revenue | 1,815.6 | 1,218.3 | 49.0% | 62.6% |
| Underlying Profit / (Loss) before tax | 35.1 | (31.0) | n/a | |
| Non-Underlying charge | (4.3) | (21.0) | -79.5% | |
| Profit / (Loss) after tax | 28.4 | (41.4) | n/a | |
| H1 FY21 £m’s | H1 FY20 £m’s | FY20 £m’s | Change vs FY20 % | |
| Adjusted Net Cash / (Debt)* | 9.5 | (46.0) | (100.4) | n/a |
Like for like (LFL) results only include trading businesses which have been trading for 12 consecutive months. Reconciliations of the like for like figures to the total reported figures can see seen in Note 1 – Alternative Performance Measures.
*Adjusted Net Cash / (Debt) – All loans and borrowings less cash and cash equivalents less IFRS 16 lease liabilities less vehicle stocking loans.
Operating Highlights
Group Highlights
o Group Revenue up 49.0% to £1,815.6m (H1 FY20: £1,218.3m).
o Underlying PBT of £35.1m, compared to a loss of £31.0m in H1 FY20.
o After non-underlying items the Group reported a profit before tax of £28.4m (H1 FY20: Loss of: £41.4m).
o Outperformed the new car market as measured by SMMT with a 42.7% like-for-like increase in new cars sold vs a total market growth of 39.2%, and a market increase of 35.7% in Pendragon represented franchises.
o Encouraging progress against Group Strategy, significant number of initiatives underway.
o Adjusted net cash of £9.5m (FY20: adjusted net debt of £100.4m).
Franchised UK Motor
o Strong recovery from the initial impact of the pandemic in H1 FY20.
o Underlying operating profit of £37.6m (H1 FY20: Loss of £18.1m)
o Revenue up 56.9% to £1,673.8m (64.6% on a like-for-like basis).
o Gross margin of 10.9%, up from 10.2% in H1 FY20
– Used gross margin of 8.8% (H1 FY20: 7.1%)
– New gross margin of 6.4% (H1 FY20: 5.9%)
– Aftersales gross margin of 49.6% (H1 FY20: 46.4%)
o Strength in used stock sourcing maximising access to higher margins in favourable market conditions.
o Total operating costs up by 13.9%, with FY20 costs lower as a result of the significant government support programmes accessed in H1 FY20.
o Cost reduction programmes and store closures delivering significant benefit, with costs down £45.2m compared to H1 FY19.
Software – Pinewood
o Operating profit up 13.6% to £6.7m (H1 FY20: £5.9m).
o Revenue grew by 12.0% to £12.1m
o 14% increase in international users.
o Continued investment in product developments to enable Group digital capabilities, deliver finance products online and facilitate digital payments.
o Achieved accreditation as first certified DMS system by BMW UK, and second global RIS partner.
Car Store
o Underlying operating profit of £0.3m (H1 FY20: loss of £1.7m).
o Revenue up 53.1% to £66.0m on a total basis (54.2% on a like-for-like basis).
o Gross margin rate of 8.0% (H1 FY20: 6.7%).
o Development of the Used Car proposition ahead of relaunch.
Leasing – Pendragon Vehicle Management
o Revenue up 31.7% to £49.0m principally driven by a 90% year on year increase in de-fleeted vehicle disposals.
o High margin on disposals.
o Operating profit up 72.3% to £8.1m (H1 FY20: £4.7m).
US Motor Group
o Disposal of final US Motor assets completed in FY21.
o Total proceeds of £106.0m from the combined total of all US sites since 2018.
Outlook
o Good performance has continued early in the second-half into July and August.
o Robust used volumes and margins continue to underpin performance.
o New car supply has begun to impact the market, down 29.5% in July and down 22.0% in August, as measured by SMMT. Customer demand and our order book remain strong, but we expect to continue to see shortfalls in supply and therefore delayed delivery dates through the remainder of the current financial year.
o Whilst uncertainty remains for the remainder of the second half, we remain confident that underlying profit before tax for the full year will be £55m to £60m
o The Board continues to believe the Group’s strategy positions it well to respond to the ongoing market uncertainty and to capitalise on any resultant opportunities.
Conference call and presentation
A presentation for analysts and investors on Pendragon’s half-year results will be held at 9.00am today and this will be followed by a Q&A session with the management team. The webcast can be found at: https://webcasting.brrmedia.co.uk/broadcast/6131d2bd1bbecc503c40a064
To request conference call details for the Q&A please contact pendragon@headlandconsultancy.com.
