Pendragon swings to first-half loss, to cut 300 jobs

Car dealer Pendragon said on Wednesday that it swung to a loss in the first half in "challenging" markets as it scrapped its dividend, sounded a downbeat note on the outlook and announced the loss of around 300 jobs.

In the six months to the end of June, the company swung to an underlying loss of £32.2m from a profit of £28.4m in the first half of last year. Revenues came in at £2.5bn for the period, up 2.9% on a like-for-like basis but down 0.8% on a total basis. The group also said it was scrapping its interim dividend.

Pendragon said the losses were a result of price cuts as it looked to reduce excess levels of used-car stock.

"By the end of the first-half, stock levels had been largely addressed and improved stocking policies introduced to significantly reduce the risk of excess stock re-occurring," it said.

Pendragon said heightened political and Brexit uncertainty was denting confidence, with no improvement expected for the rest of the year. As a result, the group underlying loss before tax for FY19 is now expected to be at the bottom of the board's expectations.

The company said a detailed strategic and market review of the Car Store business confirmed that there continues to be a significant and attractive market opportunity, however a number of short-term actions are required to improve performance, which include site closures. Pendragon said 22 of the 34 current Car Store locations do not have the required attributes to become profitable.

"The business will take immediate action to address these worst performing locations, and they will be closed during the second-half of FY19," it said.

The company's preparation centre in Stoke will also be closed and in total around 300 jobs will be lost.

Pendragon also announced that non-executive chairman Chris Chambers will step down from the board on 1 October. Non-executive director Bill Berman has agreed to assume the newly-create role of executive chairman on an interim basis.

At 1015 BST, the shares were down 9.9% at 9.84p.

Berenberg said the loss was greater than the £25m it had initially expected, due to the sudden 3% decline in national used car values in June, which further worsened the expected gross margins in the H119 de-stocking programme.

"While it will be a long road to recovery and in the short term risk is perhaps more skewed to the downside given the challenging consumer outlook, it seems as though Pendragon is working on some credible measures to improve outer years," it said.