Pendragon targets FY profits of up to £90m after revamp

Car dealer Pendragon said it was targeting full-year profits of up to £90m by mid-decade as it looked for more cost cuts across the group amid the coronavirus crisis.

The owner of UK car dealerships Evans Halshaw and Stratstone said in July it planned to cut 1,800 jobs, from a workforce of 8,000 people before coronavirus struck and shut down 15 of its showrooms.

Pendragon had already started a review before the pandemic and on Wednesday said efficiency gains made so far would deliver around £37m of annual benefit, adding that it was targeting an underlying pre-tax profit of £85-to-£90m by the 2025 financial year.

The company said changes in consumer behaviour during the Covid-19 lockdown towards online car purchases had led it to strengthen “both our digital and home delivery capabilities during lockdown so we could continue to trade”.

“Whilst we fundamentally believe that there will always be a major role for bricks and mortar in vehicle purchasing, we expect these shifts in consumption habits to be permanent and that better digital and fulfilment experiences will be necessary to augment physical retailing. We are focused on delivering a number of initiatives to drive performance through digital innovation. “

“In addition, we believe there are further cost base efficiencies we will be able to unlock across the property portfolio, through the replacement of manual process with systemic solutions and through reviewing existing key contracts and services,” Pendragon said in a statement.

It said would now look to unlock value its in franchised UK motor division, growing its Pinewood unit and improving the group’s used cars operation.

Pendragon said it planned create bigger facilities to provide both stocking points, customer retail and collection points and hubs for home delivery.

“Over the next five years we are targeting the development of eight physical locations at an approximate capital cost of £7.5m per location,” Pendragon said.

“We believe that a combination of a digital proposition and these physical stores will allow us to gain a meaningful share of the target market.”

Chief executive Bill Berman said the company’s strategy was designed to “equip the business to react to changing consumer patterns in the years ahead and ensuring, in particular, that we are well positioned to take advantage of digital innovation”.