PDG Pendragon Plc

 
TIDMPDG 
 
Q1 Trading Update & COVID-19 Update 
 
                             (ISSUED 21 May 2020) 
 
Q1 trading performance 
 
The following trading update covers the period from the 1 January 2020 to 31 
March 2020. 
 
The Group's performance during the first two months of the quarter was 
encouraging, and demonstrated a continuation of the improving trend from the 
second half of FY19, with a GBP5.1m improvement in underlying profit before tax 
to the end of February compared to the same period in FY19.  Trading in March 
had also started strongly, but was significantly impacted by nationwide 
lock-down measures and the subsequent closure of all the Group's retail 
locations on 23 March; a key trading period for both new and used cars.  It is 
estimated that the slow-down in trading, caused by the effects of COVID-19, 
impacted Group underlying profit before tax by c.GBP10m in the quarter, with the 
Franchised UK Motor division being the most affected. 
 
As a result of these factors, the Group recorded an underlying loss before tax 
of GBP2.3m for the quarter, an improvement of GBP0.5m from the Q1 FY19 underlying 
loss before tax of GBP2.8m, despite the significant negative impact of COVID-19 
disruption. 
 
Underlying operating profit in the Franchised UK Motor division was GBP4.4m, a 
decline of GBP4.7m vs Q1 FY19, driven by sales volume reductions as a result of 
COVID-19 disruption, with like-for-like new revenue declining by 19.1% against 
market declines as measured by SMMT of 31% and with new gross margins broadly 
flat year-on-year.  Further good progress with used vehicle stock management, 
as a result of the previously outlined self-help measures, resulted in used 
vehicle gross margin rates of 8.2% in the quarter (Q1 FY19: 7.2%), a continued 
improvement on the 7.8% achieved in the second half of FY19. 
 
The COVID-19 driven reduction in the Franchised UK Motor division operating 
profit was more than offset by a GBP6.0m improvement within the Car Store 
division, where underlying operating losses of GBP1.0m were recorded (Q1 FY19: GBP 
7.0m).  Car Store performed in line with expectations, despite the shut-down 
period, as a result of the actions taken in H2 FY19 and improved gross margin 
performance of 8.0% in Q1 FY20 vs 7.4% in Q4 FY19. 
 
The underlying profit in the combination of the Pinewood, Leasing and US Motor 
divisions was down GBP1.8m vs Q1 FY19 primarily driven by the disposals of the US 
dealerships during the second half of FY19.  These declines were partially 
offset by a GBP1.0m reduction in underlying Group net finance costs. 
 
Current operational status 
 
On 23 March, in light of the situation with COVID-19 and in line with the 
requirements of HM's Government, Pendragon temporarily closed all of its retail 
locations. 
 
Pendragon initially reopened, with new safety procedures, around 20 service 
centres during April (out of a total of 145), to either service or repair 
vehicles for key workers or for customers who depend upon having access to a 
vehicle.  As demand has started to return, the Group has reopened more of its 
service centres, with a total of 125 open as of today, operating at a reduced 
capacity with around 20% of total technicians currently now returned to work. 
Weekly labour sales, whilst building momentum, currently remain significantly 
down on the same time last year, with last week representing c.17% of the level 
achieved in the same week in 2019.  As customer demand builds, further 
technicians will be brought back to work to increase capacity and meet this 
higher demand. 
 
Pendragon recognises the key strategic importance of a strong omni-channel 
offer, and during the period of closure has continued to develop its digital 
capabilities, with enhanced online home delivery functionality being deployed 
on the Car Store website, ahead of a wider group roll-out.  Additionally, 
telephone sales operations have continued, with a focus on providing support 
for customers and facilitating home delivery where required.  This additional 
capability has helped to take a total of 3,610 customer orders and complete 
1,187 home deliveries since the beginning of April.  Whilst this volume is 
still significantly below normal levels, there has been an increasing daily 
trend in order numbers in used car sales in particular. 
 
Protective actions and cash position 
 
From the outset of the current store closure period, the Group has worked to 
protect its cash position.  A significant number of actions have been taken 
including utilising the wide measures of government support via business rates 
holidays, VAT deferrals and application of the furlough scheme, which was 
applied to c.80% of the Group's colleagues at the peak of its usage.  In 
addition, Directors and senior management have voluntarily reduced their pay 
during this period by up to 20% of their basic salary. 
 
The Group has also reviewed and reduced all non-essential expenditure during 
the current time, and will benefit from lower levels of utility costs, 
logistics costs and travel expenses during the lock-down period.  In addition, 
all non-essential capital expenditure has been paused and will be reviewed when 
trading resumes. 
 
The business has also benefited from measures of both financial and operational 
support from its stakeholders, including the OEM's and stocking loan providers, 
and the Group continues to recognise the importance of these relationships. 
 
Bank net debt as at 20 May 2020 was GBP100.5m (31 December 19 : GBP119.7m,  24 
March 2020: GBP105m) against a total facility of GBP235m. 
 
Reopening plans 
 
The safety of colleagues and customers remains the Group's absolute priority. 
The business has worked hard to be in a position to implement measures and 
plans to safely reopen locations as permitted or appropriate.  These strict new 
measures will allow dealerships to operate through the introduction of ways of 
working that enable social distancing and will include changes to both 
operational methods and physical layout within dealerships.  The Board is 
confident colleagues will be provided with a safe environment in which to work 
and that customers are provided with a safe environment in which to shop. 
 
The Group will also continue to develop its digital propositions for customers 
who choose to shop for their next car online. 
 
It is currently expected that dealerships will be able to open, with compliant 
social distancing measures, from 1 June, and the Group will work with trade 
bodies and OEM partners as the situation develops to enable this to happen 
safely and effectively. 
 
AGM 
 
The Company's AGM is being held at 10.30am today.  As usual, the results of the 
AGM voting on the resolutions will be available on the Company's website and 
published through the RNS. 
 
Bill Berman, Chief Executive Officer said: 
 
"I would like to take this opportunity to recognise the way in which our 
associates have responded to the challenges posed by the COVID-19 pandemic and 
to thank them for working to keep key workers on the move over the past two 
months. 
 
"The actions we took during the second half of 2019 to focus on costs and to 
reduce used stock levels started to show results both during that period and on 
into the first quarter of 2020, resulting in increased profitability in Q1, 
despite the impact of the pandemic.  The commercial consequences of a full 
lockdown have obviously affected the business, but we moved quickly to 
implement a broad range of actions to mitigate the enforced closure, and I am 
confident that we will emerge in a strong position as the current restrictions 
ease. 
 
"We are now preparing to reopen from 1 June and will therefore have the 
capabilities in place to meet the full needs of our customers across new, used 
and aftersales, as well as driving our "We come to you" online offer." 
 
 Enquiries 
 
 Henry Wallers      Headland                    07876 562436 
 
 Jack Gault         Headland                    07799 089357 
 
 
 
END 
 

(END) Dow Jones Newswires

May 21, 2020 02:00 ET (06:00 GMT)

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