TIDMPDG
RNS Number : 7781L
Pendragon PLC
15 September 2021
Pendragon PLC
HALF YEAR RESULTS FOR 30 JUNE 2021 (issued 15 September 2021 )
==============================================================
Pendragon has performed strongly in the first-half of the
financial year, recording underlying profit before tax of GBP35.1m
(H1 FY20: Loss of GBP31.0m). 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 GBP35.1m.
"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 GBP55m to GBP60m,
ensuring we stay on track to deliver our target of GBP85m to GBP90m
by FY 2025."
Group Financial Highlights
==========================
H1 FY21 GBPm's H1 FY20 GBPm'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 GBPm's H1 FY20 GBPm's FY20 GBPm'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
=====================
o Group Highlights
o Group Revenue up 49.0% to GBP1,815.6m (H1 FY20: GBP1,218.3m).
o Underlying PBT of GBP35.1m, compared to a loss of GBP31.0m in H1 FY20.
o After non-underlying items the Group reported a profit before tax
of GBP28.4m (H1 FY20: Loss of: GBP41.4m).
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 GBP9.5m (FY20: adjusted net debt of GBP100.4m).
o Franchised UK Motor
o Strong recovery from the initial impact of the pandemic in H1 FY20.
o Underlying operating profit of GBP37.6m (H1 FY20: Loss of GBP18.1m)
o Revenue up 56.9% to GBP1,673.8m (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 GBP45.2m compared to H1 FY19.
o Software - Pinewood
o Operating profit up 13.6% to GBP6.7m (H1 FY20: GBP5.9m).
o Revenue grew by 12.0% to GBP12.1m
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.
o Car Store
o Underlying operating profit of GBP0.3m (H1 FY20: loss of GBP1.7m).
o Revenue up 53.1% to GBP66.0m 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.
o Leasing - Pendragon Vehicle Management
o Revenue up 31.7% to GBP49.0m 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 GBP8.1m (H1 FY20: GBP4.7m).
o US Motor Group
o Disposal of final US Motor assets completed in FY21.
o Total proceeds of GBP106.0m 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, w
e remain confident that underlying profit before tax for the full year
will be GBP55m to GBP60m
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
.
Contacts
===========================================================================================
Name Title Responsibility Contact
======================= ====================== ===================
Bill Berman Chief Executive Pendragon PLC 01623 725200
======================= ====================== ===================
Mark Willis Chief Financial Officer Pendragon PLC 01623 725200
======================= ====================== ===================
Henry Wallers Director Headland 07876 562436
======================= ====================== ===================
Jack Gault Account Director Headland 07799 089357
======================= ====================== ===================
Financial Summary
=================
Consolidated Income Statement H1 2020
Six months ended 30 June H1 2021 GBPm Change
Underlying unless stated GBPm (%)
========== ========= ========
Revenue 1,815.6 1,218.3 49.0%
========== ========= ========
Cost of sales (1,604.4) (1,083.0) 48.1%
=========================================== ========== ========= ========
Gross profit 211.2 135.3 56.1%
=========================================== ========== ========= ========
Underlying operating expenses (159.3) (146.1) 9.0%
=========================================== ========== ========= ========
Underlying operating profit / (loss) 51.9 (10.8) n/a
------------------------------------------- ---------- --------- --------
Underlying net finance costs (16.8) (20.2) -16.8%
------------------------------------------- ---------- --------- --------
Underlying profit / (loss) before taxation 35.1 (31.0) n/a
------------------------------------------- ---------- --------- --------
Non-underlying charges (4.3) (21.0) -79.5%
------------------------------------------- ---------- --------- --------
Total income tax (expense) / credit (2.4) 10.6 n/a
------------------------------------------- ---------- --------- --------
Total profit / (loss) for the period 28.4 (41.4) n/a
------------------------------------------- ---------- --------- --------
Earnings per share
=========================================== ========== ========= ========
Basic earnings per share 2.0p (3.0)p n/a
========== ========= ========
Diluted earnings per share 2.0p (3.0)p n/a
========== ========= ========
Non GAAP Measure
=========================================== ========== ========= ========
Underlying basic earnings per share 2.3p (1.7)p n/a
========== ========= ========
Underlying diluted earnings per share 2.3p (1.7)p n/a
========== ========= ========
Segmental Performance
=============================================================================
Units Sold H1 2021 H1 2020 Change LFL Change
(%) (%)
======== ======== ====== ==========
Used Units
==================== ======== ====== ==========
Car Store 5,526 4,321 27.9% 28.5%
======== ======== ====== ==========
Franchised UK Motor 48,368 38,992 24.0% 38.3%
======== ======== ====== ==========
US Motor 51 275 -81.5% -
==================== ======== ======== ====== ==========
53,945 43,588 23.8% 37.2%
------ ----------
New Units
==================== ======== ======== ====== ==========
Franchised UK Motor 30,067 21,659 38.8% 42.7%
======== ======== ====== ==========
US Motor 397 945 -58.0% -
==================== ======== ======== ====== ==========
30,464 22,604 34.8% 42.7%
==================== ======== ======== ====== ==========
GBPm H1 2021 H1 2020 Change LFL Change
(%) (%)
======== ======== ======= ===========
Revenue
============================== ======== ======== ======= ===========
Car Store 66.0 43.1 53.1% 54.2%
======== ======== ======= ===========
Franchised UK Motor 1,673.8 1,067.1 56.9% 64.6%
======== ======== ======= ===========
Software 12.1 10.8 12.0% 12.0%
======== ======== ======= ===========
Leasing 49.0 37.2 31.7% 31.7%
======== ======== ======= ===========
US Motor 28.3 68.5 -58.7% -
============================== ======== ======== ======= ===========
Inter-segment revenue (13.6) (8.4) 61.9% 61.9%
============================== ======== ======== ======= ===========
1,815.6 1,218.3 49.0% 62.6%
------------------------------ -------- -------- ------- -----------
Gross Profit
Car Store 5.3 2.9 82.8% 76.7%
======== ======== ======= ===========
Franchised UK Motor 182.3 108.9 67.4% 75.0%
======== ======== ======= ===========
Software 11.2 9.9 13.1% 13.1%
======== ======== ======= ===========
Leasing 10.5 6.7 56.7% 56.7%
======== ======== ======= ===========
US Motor 4.0 9.0 -55.6% n/a
============================== ======== ======== ======= ===========
Inter-segment gross profit (2.1) (2.1) - -
============================== ======== ======== ======= ===========
211.2 135.3 56.1% 70.2%
------------------------------ -------- -------- ------- -----------
Underlying Operating Profit
Car Store 0.3 (1.7) n/a n/a
Franchised UK Motor 37.6 (18.1) n/a n/a
======== ======== ======= ===========
Software 6.7 5.9 13.6% 13.6%
======== ======== ======= ===========
Leasing 8.1 4.7 72.3% 72.3%
======== ======== ======= ===========
US Motor (0.8) (1.6) -50.0% -
============================== ======== ======== ======= ===========
51.9 (10.8) n/a n/a
============================== ======== ======== ======= ===========
Gross Margin % 11.6% 11.1% 0.5% 0.5%
Underlying Operating Margin % 2.9% (0.9)% 3.8% 3.2%
Operating Profit / (Loss) 48.1 (31.2) n/a n/a
============================== ======== ======== ======= ===========
---------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Chief Executive's Review
========================
The first-half of FY21 continued to be a period marked by
disruption by Covid-19, with the enforced closures of stores from 1
January to 12 April having the potential to significantly restrict
the Group's ability to trade. However, as a result of the work that
we started last year to adapt both our digital channels and our
customer proposition, together with a restructure of our store
estate and cost base, we were able to perform strongly despite this
disruption.
Following the reopening in April, the business was able to
capitalise on strong market conditions, created from a combination
of pent-up demand and restricted supply across both new and used
cars. In particular, this market resulted in exceptional increases
in used car margins, which the Group was able to maximise by
maintaining steady inventory levels as a result of the supply chain
sourcing advantages it has. Our omni-channel offering and well
executed plans meant we were able to outperform the market in new
cars, delivering a 42.7% like-for-like increase in sales of new
cars vs a total market growth of 39.2%, and a market increase of
35.7% in the franchises we represent.
Whilst we remain grateful for the government support available
during the period of enforced closure, our ability to continue to
trade at near-normal levels meant we were able to significantly
reduce the amount of support we received from the Coronavirus Job
Retention Scheme, drawing just GBP1.6m in the period (H1 FY20:
GBP30.9m) to protect the small number of roles that were unable to
be performed during lock-down. The Group also benefited from
GBP8.6m of business rate relief and grants in the half (H1 FY20:
GBP3.5m).
In addition to a strong trading performance, our excellent
financial results for the first-half were underpinned by the
successful delivery of our strategic aims to restructure the store
estate, including both the sale of our remaining US stores and the
closure of loss-making stores in both Car Store and the Franchised
business, and a significant reduction in overheads following
improvements in our operational efficiency. Following these
actions, we have reduced our underlying operating costs (adjusted
to remove the benefit of furlough and rates relief) by
approximately GBP75m compared to the same period in 2019, the last
comparable period before the pandemic, whilst gross profit is down
just GBP24.1m against FY19, despite the material reduction in the
number of sites in the UK from 204 to 150, the impact of the first
quarter lockdown on sales volumes, and the disposal of the US
assets. I am confident that this revised cost structure provides us
with the platform for profitable growth.
Each of our divisions performed impressively during the
first-half, with the strong financial performance in Franchised UK
Motor supported by further good performance in both our software
and leasing businesses. Car Store, ahead of its rebrand and new
proposition launch, was also able to contribute to the Group
result, with an operating loss of GBP0.7m during the lock-down in
the first quarter, more than offset by an operating profit of
GBP1.0m in quarter two. Finally, we successfully completed the sale
of the remaining US assets, with total proceeds of GBP106m before
tax now realised.
Group Strategy
In FY20 we launched our plan to "transform automotive retail
through digital innovation and operational excellence". This
strategy set out our ambition to return the Group to sustainable
levels of profit growth, targeting underlying profit before tax of
GBP85-90m by FY25 and positions us to meet evolving customer
needs.
I am delighted with the further progress we have made during the
first-half, with multiple initiatives launched against each of our
three pillars for growth:
1. Unlock value in the franchised UK motor division
2. Grow and diversify Pinewood
3. Disrupt standalone used cars
In the UK motor division, we have delivered some good early
wins, such as improvements to our vehicle valuation tools to drive
more efficient purchasing and higher purchase conversion rates. We
have also introduced new modules developed by Pinewood to improve
consistency in our sales processes and to deliver further
improvements to our digital propositions such as remote digital
signatures, new online payment functionality and the ability to
purchase finance and insurance products online. Several initiatives
are also underway to sustain delivery as we go through the
second-half and ahead into 2022.
Our software business has enabled many of the technology
improvements required to deliver these initiatives, and remains a
key advantage for the Group in order to facilitate and to maintain
a high pace of change. Pinewood's product developments will also
enable our future initiatives such as our planned vehicle
acquisition and management platform and the underpinning technology
for the revised used car proposition. Pinewood has also
demonstrated its reputation as a DMS provider through its recently
awarded certified status with BMW, one of only two global partners
to support BMW's retail integration strategy.
Finally, we have made good progress with the development of the
revised branding and both the digital and physical propositions for
our standalone used car proposition, with the brand relaunch
expected to be ready for late Q4 or early Q1 FY22.
I would like to extend my thanks to all of our associates who
have performed exceptionally during challenging times. We are
delighted to have added a new Chief People Officer to our team,
with Lizzie Downes joining us in September, who will focus on the
continued development of our culture and the nurturing of
talent.
Overall, I am very pleased with the progress we have made both
strategically and operationally, which have resulted in an
excellent financial performance, with the Group reporting
underlying profit before tax of GBP35.1m, a material turn-around
from the first-half losses of both FY19 and FY20.
Outlook
We remain very confident in the opportunity that our strategy
provides, and have made further progress towards our strategic
objectives in the first-half of the current financial year. Whilst
the used car market in particular has remained strong to date,
there still remains a high level of uncertainty over the remainder
of the current financial year, with the potential for further
disruption from Covid-19 over the winter period which could
continue to impact all areas of our Group, the potential for
shortfalls in new car supply from the ongoing impact of micro-chip
shortages and a correction in used car prices. Despite these
short-term challenges, I am confident our business model positions
us well, and that we are on track with our long-term objectives. As
such, we remain confident that underlying profit before tax for the
full year will be between GBP55m to GBP60m, ensuring we stay on
track to deliver GBP85m to GBP90m by FY 2025.
Bill Berman
Chief Executive
15 September 2021
Operating and Financial Review by Segment
==========================================
o The business is organised into 5 segments, analysed as
follows:
o Franchised UK Motor - sale and servicing of vehicles in the
U.K.
o Software - Licencing of Software as a Service to global
automotive business users
o Car Store - Own brand proposition for the sale of used
vehicles in the U.K.
o Leasing - Fleet and contract hire provider. Source of used
vehicle supply
o US Motor - Sale and servicing of vehicles in the U.S.
(Disposal completed H1 FY21)
Franchised UK Motor
===================
Underlying H1 H1 Change
(%)
2021 2020
============ ============ =======
Used Revenue GBP781.0m GBP509.2m 53.4%
============ ============ =======
Aftersales Revenue GBP131.1m GBP97.7m 34.2%
============ ============ =======
New Revenue GBP761.7m GBP460.2m 65.5%
============ ============ =======
Total Revenue GBP1,673.8m GBP1,067.1m 56.9%
============ ============ =======
Used Gross Profit GBP68.6m GBP36.4m 88.5%
============ ============ =======
Aftersales Gross Profit GBP65.0m GBP45.3m 43.5%
============ ============ =======
New Gross Profit GBP48.7m GBP27.2m 79.0%
============ ============ =======
Total Gross Profit GBP182.3m GBP108.9m 67.4%
============ ============ =======
Gross margin rate 10.9% 10.2% 0.7%
============ ============ =======
Underlying Operating
Expenses GBP(144.7)m GBP(127.0)m 13.9%
============ ============ =======
Underlying Operating GBP37.6m GBP(18.1)m n/a
Profit / (Loss)
============ ============ =======
Underlying operating
margin rate 2.2% (1.7)% 3.9%
============ ============ =======
Stocking Interest (1) GBP(4.7)m GBP(7.4)m -36.5%
============ ============ =======
Profit / (Loss) after GBP32.9m GBP(25.5)m n/a
Stocking Interest
============ ============ =======
Operating Profit / GBP37.5m GBP(32.0)m n/a
(Loss)
============ ============ =======
Total Revenue Change 56.9%
============ ============ =======
Like-for-like Revenue
Change 64.6%
============ ============ =======
Used Units Sold 48,368 38,992 24.0%
============ ============ =======
New Units Sold 30,067 21,659 38.8%
============ ============ =======
Used GPU (2) GBP1,418 GBP934 51.8%
============ ============ =======
New GPU (2) GBP1,620 GBP1,256 29.0%
============ ============ =======
Number of Locations 141 160 -11.9%
============ ============ =======
Average Used Selling
Price (3) GBP14,336 GBP12,590 13.9%
============ ============ =======
Average New Selling
Price (3) GBP25,092 GBP21,365 17.4%
============ ============ =======
(1) Stocking interest. Whilst stocking interest is an interest
expense and not part of operating profit, it is a cost that can be
directly related to the trading performance of both new and used
cars. It is included as an alternative performance measure in the
table above for information.
(2) GPU = Gross Profit per Unit. It is calculated as total
New/Used GP divided by total New/Used retail units sold.
(3) Trading dealerships only. The used selling price is retail
vehicles only and excludes any trade vehicles. The new selling
price excludes vehicles sold by our fleet business (National Fleet
Solutions).
Operating Review
The Franchised UK Motor business operated from 139 franchise points
and two used cars only retail points which represent a range of volume
and premium products offering both sales and service functions.
Whilst there continued to be significant disruption from Covid-19 during
the first quarter, with the mandatory physical closure of showrooms
from 1 January through to 12 April, the significant adaptations made
to the Group's omni-channel capabilities since the second-half of last
year were instrumental in the Group's ability to materially mitigate
the impact of the closures. A total of over 40,000 vehicles were delivered
to customers across the Group through a combination of home delivery
and customer collection in the first-quarter alone, whilst dealerships
were physically closed.
Both during this period, and following reopening in April, the business
has performed well, outperforming the market in both new and used vehicle
sales, maximising performance in used cars in particular through its
strength in used car supply through its array of sourcing channels
such as part exchanges, our Sell Your Car proposition, through PVM
and a number of other supplier relationships.
New Car volumes were up 42.7% on a like-for-like basis (total reported
up 38.8%), compared to growth of 35.7% across the franchises in which
Pendragon operates and a total market growth up 39.2%. Sales process
efficiency improvements and strong market demand for new cars ensured
that the Group was able to deliver volume targets and unlock bonus
income, resulting in a gross profit per unit ("GPU") of GBP1,620, up
29% compared to H1 FY20, which when combined with the volume growth
drove a 79.0% increase in gross profit.
Used Car volumes also rebounded strongly compared to FY20, up 38.3%
on a like-for-like basis (total reported up 24.0%), against market
growth in the period of 33.3%. Sales in Q1 during the lock-down, which
compared to a period where the business was largely open FY20, were
down just 12.1% on a like-for-like-basis as a result of the digital
capabilities developed, with Q2 up 188.4% with Q2 FY20 more severely
impacted by the first national lockdown and ahead of any material development
to our capability. Changes delivered through our strategy to "unlock
value in UK Motor", as outlined in more detail in the strategy review
below, combined with well-publicised tailwinds in used car pricing
during the second quarter, led to a GPU of GBP1,418 in the first-half,
up 51.8% compared to FY20. Further margin strengthening through the
half resulted in GPU in the second quarter increasing to GBP1,673.
Aftersales revenue also grew in the period, up by 40.4% on a like-for-like
basis (total reported up 34.2%) with aftersales services permitted
to continue throughout the lock-down, with the growth reflecting partial
opening during the lock-down in H1 FY20. The continued impact of strategy-led
productivity improvements made during H2 FY20 resulted in an improvement
in the gross margin of 320bps to 49.6% (H1 FY20: 46.4%).
Whilst underlying operating expenses grew by 13.9% compared to H1 FY20,
this is a reflection of the level of furlough support received in FY20.
The leaner operating model with reduced headcounts introduced in H2
FY20, delivering annual savings of c.GBP35m, combined with the reduced
cost base following the closure of 15 stores in H2 FY20 have resulted
in a reported cost base of GBP144.7m, with the UK Motor division utilising
just GBP1.5m from the Coronavirus job retention scheme and GBP8.1m
in rates relief and grants in the period. Adjusting for this support,
a cost base of GBP154.3m is a material reduction to a comparable cost
base of GBP189.9m in H1 2019, before the Covid-19 pandemic. This material
improvement in the cost base is reflected in the underlying profit
of GBP37.6m.
Strategy delivery - Unlock value in the franchised UK Motor division
The Group has made meaningful progress with its strategy to improve
performance and unlock significant value in the franchised UK Motor
division through actions to:
1. Accelerate digital innovation
2. Drive operational excellence and embed consistent best practice
3. Operate from a lean and efficient cost base
These initiatives have been designed to drive improvements in used
car margins, aftersales profitability and operating cost efficiency.
Accelerate digital innovation
Whilst we fundamentally believe that there will always be a major role
for bricks and mortar in vehicle purchasing, we expect that the changes
in consumer habits towards the adoption of new digital channels which
have occurred over the past 18 months to become permanent. Following
the rapid strengthening of our digital and home delivery capabilities
we identified a number of initiatives to drive performance through
digital innovation. We have delivered a number of key changes during
the first-half that will underpin our omni-channel model.
We have improved the technology and processes that we use to value
vehicles acquired through part-exchange and through our "Sell-Your-Car"
service, providing improved valuations and condition grading, as well
as developing the CRM to maximise valuation to appointment conversion.
Through Pinewood, we have developed a new "Sales+" module that introduces
a consistent enquiry to sale journey, in store and through digital
channels. Finally, we have enabled online payment across Evans Halshaw,
Stratstone and Car Store for customers with cleared funds, as well
as introducing fully online selling of Finance and Insurance products,
initially for Evans Halshaw customers, with development for Stratstone
underway.
In addition to these delivered changes, we have also made good initial
progress in our ambitions to develop a Group-wide platform to power
the appraisal, purchase, preparation and dynamic pricing of used vehicles.
Each of these improvements will drive our medium-term margin improvement
targets.
Drive operational excellence and best practice
There is further opportunity for us to improve performance through
better operational practices, driving efficiencies. We are developing
focussed internal reporting to drive insight into performance in areas
such as vehicle preparation efficiency and sales force effectiveness.
These improvements will also reduce costs, and improve profit margins.
Our strategic review also identified a series of opportunities and
initiatives to drive substantial improvements to aftersales gross margin.
During the first-half we have seen an improved level of penetration
from the new three-year used-car guarantee product we first introduced
in FY20 and we have commenced work to transition from fixed price models
to tailored and tiered products based on the age and mileage of a vehicle.
In addition, we are developing a programme to target both process and
procedure improvements in order to improve the speed and quality to
which we prepare newly acquired used vehicles, in order to bring cars
to market quicker, to improve the customer experience and reduce subsequent
rectification costs. Finally, we are developing our processes to improve
conversion of required work identified when a customer's car is in
a service centre, and developing self-serve finance payment options
for this work to improve the customer journey.
Operate from a lean and efficient cost base
In 2020 we made significant changes to our store and regional operating
teams in order to right-size the model and to embed the efficiency
gains we delivered during the Covid-19 pandemic. These changes have
contributed significantly to the performance in the first-half of FY21.
In addition, we transitioned from company provided cars to cash allowances
and associated preferential offers for a number of our associates,
and decentralised various customer enquiries to dealerships, reducing
central contact centre costs.
We continue to believe there are further cost base efficiencies. During
FY21 we will complete a Finance Transformation programme, which will
centralise core finance processes into a central shared service centre,
supported by investment into automation technologies in key processes
such as payments, receipts and reporting and we will invest into new
finance business partnering capabilities to support the businesses
growth objectives through high quality analytics.
Financial Review
Revenue increased by 56.9% to GBP1,673m in H1 FY21 (64.6% on a like-for-like
basis), for the reasons outlined above.
Gross profit grew by 67.4% to GBP182.3m in H1 FY21 (75.0% on a like-for-like
basis). The improvements in margin in both new and used GPU's, together
with improved efficiency in aftersales resulted in gross profit growth
out performing revenue growth materially.
Underlying operating costs have increased by 13.9% (24.2% on a like-for-like
basis), driven by the significantly lower usage of the Coronavirus
job retention scheme, partially offset by the delivery of the cost
reduction initiatives as outlined above.
The division recorded a total underlying operating profit of GBP37.6m
(H1 FY20: GBP18.1m underlying operating loss).
Software - Pinewood
====================================================================================
Underlying H1 2021 H1 2020 Change
(%)
========== ========== =======
Revenue GBP12.1m GBP10.8m 12.0%
========== ========== =======
Gross Profit GBP11.2m GBP9.9m 13.1%
========== ========== =======
Gross margin rate 92.6% 91.7% 0.9%
========== ========== =======
Operating Expenses GBP(4.5)m GBP(4.0)m 12.5%
========== ========== =======
Operating Profit GBP6.7m GBP5.9m 13.6%
========== ========== =======
Operating margin rate 55.4% 54.6% 0.8%
========== ========== =======
Revenue Change 12.0%
========== ========== =======
A more detailed breakdown of the Pinewood financials for H1 FY21
can be seen below:
Contribution Contribution Pinewood Share of Pinewood
from Pendragon from external standalone Pendragon segment
customers result Group overheads as reported
in Pendragon
Group accounts
================ =============== ============ ================= ================
Revenue GBP2.3m GBP9.8m GBP12.1m - GBP12.1m
================ =============== ============ ================= ================
Gross Profit GBP2.1m GBP9.1m GBP11.2m - GBP11.2m
================ =============== ============ ================= ================
Operating Expenses GBP(0.9)m GBP(3.4)m GBP(4.3)m GBP(0.2)m GBP(4.5)m
================ =============== ============ ================= ================
Operating Profit GBP1.3m GBP5.6m GBP6.9m GBP(0.2)m GBP6.7m
================ =============== ============ ================= ================
Operating Review
Pinewood is a software business that provides Software as a Service
("SaaS") in the UK and in a number of countries worldwide.
The UK Dealer Management Systems (DMS) market for Franchised Motor
Dealers is estimated to be worth over GBP100 million. Three DMS providers
dominate the UK market. The global DMS market is highly fragmented,
with over 50 different DMS providers within Europe alone.
Pinewood's unique approach to the DMS market is characterised by:
* a single product capable of global deployment, which
simplifies future developments to the system and
reduces operating costs;
* a feature-rich cloud-based solution, with no need for
costly third-party add-ons;
* focus on strong manufacturer partnerships and
supporting dealer profitability; and
* commitment to using the latest technology to reshape
motor retail
Pinewood was an early adopter of the SaaS business model and has focused
on developing recurring revenue streams. Today, around 90% of Pinewood's
revenues are on a recurring basis. Whilst Pendragon remains an important
customer to Pinewood, as Pinewood has grown, Pendragon's proportion
of the Pinewood total user base has been diluted to c.17%, from c.21%
in FY20, with intra-group charging maintained at a competitive market
rate, reducing as more external users have been added.
During H1 FY21, overall net user numbers (excluding Pendragon) increased
by 3%. Across Pinewood's international markets there was a 14% net
increase in user numbers. International growth was driven by system
installations in the Nordic markets, which was supported by overseas
hiring and the incorporation of Pinewood Technologies Northern Europe
AB in Sweden. Strong growth in international user numbers is expected
to continue in the second half of 2021, despite the travel limitations
arising from the pandemic. In the UK market (excluding Pendragon) there
was a small increase in user numbers in H1 FY21 as market conditions
stabilised.
In H1 FY21 Pinewood continued to invest in the functionality of its
DMS platform. These included the development of online sales capabilities
and tools, as well as platform architecture and security. There has
also been good further progress in terms of OEM support at an international
level, most notably with Pinewood DMS achieving UK certification as
part of BMW's Retail Integration Service alongside a role as a global
partner to lead further development.
Pinewood delivered a strong performance in H1 FY21 as reflected in
the increased user numbers. The performance was particularly pleasing
given the context of continuing pandemic related uncertainty and the
restrictions on international travel. Pinewood continues to ensure
full continuity of its services and develop the DMS to assist its customers
in the new retail environment.
Strategy update - Grow and diversify Pinewood
As part of its Group strategy presentation, Pendragon announced its
plan to 'grow and diversify Pinewood'. This included the key objectives
of:
* Growing the international user base by 80% and the
total user base by 10%; and,
* Further product extension enabling turn-key digital
automotive retail solutions.
In FY21 Pinewood has continued to focus on both elements of the 'grow
and diversify' strategy.
Grow: expansion of the direct sales model in Scandinavia has been supported
by local incorporation and new market hires, whilst Pinewood continues
to add customers in other international markets, and expects further
new market launches in the second half of 2021.
Diversify: development of the core DMS product continues. New products
designed to support digital automotive retail are being developed to
initially benefit Pendragon and, in the longer term, the external customer
base. A number of new modules were introduced during H1, most notably
a Sales+ module designed to improve the efficiency and consistency
of the sales process. Pinewood will also be a key enabler in the development
of vehicle acquisition, management and pricing platforms and powering
the new standalone used car brand's web capabilities.
Financial Review
Total revenues increased by 12.0% to GBP12.1m compared to H1 FY20.
Underlying recurring revenues on sales of DMS software to third parties
increased during the period by GBP0.4m. This underlying growth excludes
the impact of the one-off Covid discount given in H1 FY20, which impacted
the base period. In addition to recurring revenue growth, DMS transactional
charges and system training and implementation revenues increased by
41%, driven by lockdown restrictions easing.
Gross profit increased by 13.1% to GBP11.2m. This was driven by higher
revenues, with a slight increase in gross margins.
Operating costs increased by 12.5% compared to H1 2020. The increase
was driven by higher amortisation as a result of ongoing increases
in investment in the development of the software asset. There was also
an increase in payroll costs, driven by the reversal of the prior year
benefit from the Coronavirus job retention scheme. Offsetting cost
efficiencies were achieved through further reductions in travel and
office expenditure.
As a result of these movements, underlying operating profit was GBP6.7m,
an increase of 13.6% compared to H1 2020.
=========================================================================================
Car Store
===========
Underlying H1 2021 H1 2020 Change
(%)
========== ========== ========
Revenue GBP66.0m GBP43.1m 53.1%
========== ========== ========
Gross Profit GBP5.3m GBP2.9m 82.8%
========== ========== ========
Gross margin rate 8.0% 6.7% 1.3%
========== ========== ========
Underlying Operating
Expenses GBP(5.0)m GBP(4.6)m 8.7%
========== ========== ========
Underlying Operating GBP0.3m GBP(1.7)m n/a
Profit / (Loss)
========== ========== ========
Underlying Operating
margin rate 0.5% (3.9)% 4.4%
========== ========== ========
Stocking Interest GBP(0.2)m GBP(0.2)m -
========== ========== ========
Profit after Stocking GBP0.1m GBP(1.9)m n/a
Interest
========== ========== ========
Operating Profit / GBP0.3m GBP(1.7)m n/a
(Loss)
========== ========== ========
Total Revenue Change 53.1%
========== ========== ========
Like-for-like Revenue
Change 54.2%
========== ========== ========
Units Sold 5,526 4,321 27.9%
========== ========== ========
Used GPU (1) GBP959 GBP671 42.9%
========== ========== ========
Number of Locations 9 11 -18.2%
========== ========== ========
Average Selling Price
(2) GBP10,522 GBP8,677 21.3%
========== ========== ========
(1) GPU = Gross Profit per Unit. It is calculated as total Used
GP divided by total Used retail units sold.
(2) Trading dealerships only. The used selling price is retail
vehicles only and excludes any trade vehicles.
Operating Review
During the first half of FY21 Car Store recorded an underlying operating
profit of GBP0.3m compared to operating losses of GBP1.7m in H1 FY20.
As with franchised dealerships, Car Store showrooms were closed from
1 January to 12 April. With limited aftersales capability, there was
less potential to mitigate operating costs through service activity,
although the business continued to be able to remotely sell cars utilising
the Group's digital developments. As a result, Car Store reported a
loss in Q1 of GBP0.7m, before returning to profitability in Q2 with
an underlying operating profit of GBP1.0m.
Volumes were up 28.5% on a like-for-like basis (total reported up 27.9%),
whilst the average selling price grew by 21.3%, which together, resulted
in total revenue growth of 53.1% Car Store also benefitted from the
improvements made to technology and processes as well as the tailwinds
in used car pricing delivering a GPU of GBP959 in the first-half, up
42.9% compared to FY20.
Strategy Update - Disrupt standalone used cars
We believe the UK is the most attractive used vehicle market globally,
with a ratio of over three used vehicles sold for every one new. The
overall market for used cars is around eight million cars sold per
annum. Based on the desired age and mileage profile for our target
market, we believe there is an addressable market for Pendragon of
around three million cars per annum, which is larger than the total
new car market.
To capitalise on this opportunity, we will deliver:
1. Rebranding of the standalone used car proposition
2. Differentiated value proposition
3. A scaled physical estate
Rebrand the standalone used car proposition
During the past six months, work has progressed to define the vision
for the rebranded proposition, determine the brand values and behaviours
and to determine the brand promises. In addition, comprehensive research
has been completed to determine the revised brand name look and feel
ahead of its launch in late 2021 or early 2022. The brand will reflect
the new digital proposition.
Differentiate the value proposition
The revised brand value proposition will have market-leading, customer
focussed, clear propositions across buying, selling and aftersales,
including, but not limited to, access to Evans Halshaw used car inventory,
digital part exchange propositions, a national delivery proposition
and a money-back guarantee to underpin confidence. Multiple cross-functional
workstreams are in place to refine the final proposition ahead of launch.
Scale the physical estate
Over the next five years we are targeting the development of eight
physical locations. 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. During the first-half work was completed to identify
the first site to test the new physical proposition, utilising an existing
location in Chesterfield. Chesterfield was a purpose-built Car Store
with currently unutilised land owned adjacent to the current footprint,
providing the right potential to develop to the required scale, with
space for approximately 450 vehicles. The existing customer facilities
will be developed to represent the new brand proposition, including
the addition of preparation and aftersales facilities, with work starting
during the second-half of FY21 at an approximate incremental cost of
c.GBP3.0m.
Financial Review
Revenue grew by 53.1% to GBP66.0m in the period (54.2% on a like-for-like
basis). Whilst the period of weeks in lockdown were higher in H1 FY21
compared to H1 FY20 the enhanced digital proposition supported the
revenue growth.
Gross profit increased by 82.8% to GBP5.3m (76.7% on a like-for-like
basis), as a result of the volume growth combined with the improved
gross profit per unit of GBP959.
Operating costs increased by 8.7% from GBP4.6m to GBP5.0m with the
reduction in support via the Coronavirus job retention scheme received
in H1 FY20 largely offset by the efficiency improvements delivered
in H2 FY20.
The underlying operating profit for Car Store was GBP0.3m (H1 FY20:
loss of GBP1.7m).
Leasing
==========================================================================================
Underlying H1 2021 H1 2020 Change
(%)
========== ========== =======
Revenue GBP49.0m GBP37.2m 31.7%
========== ========== =======
Gross Profit GBP10.5m GBP6.7m 56.7%
========== ========== =======
Gross margin rate 21.4% 18.0% 3.4%
========== ========== =======
Operating Costs GBP(2.4)m GBP(2.0)m 20.0%
========== ========== =======
Operating Profit GBP8.1m GBP4.7m 72.3%
========== ========== =======
Operating margin rate 1 6.5% 12.6% 3.9%
========== ========== =======
Revenue Change 31.7%
========== ========== =======
Operating Review
Pendragon Vehicle Management (PVM), a vehicle leasing business offers
a complete range of fleet leasing and contract hire solutions. Its
customers represent all business sectors with varied fleet sizes.
The fleet of vehicles is financed through third party asset funders
which results in a high return on capital.
The increase in revenue compared to H1 FY20 was driven by the combined
impact of a 90% increase in the number of disposals of de-fleeted
vehicles compared to the pandemic impact in the prior year, partially
offset by lower income as a result of the smaller fleet. This, combined
with higher residual values achieved on disposals was the key driver
of the 56.7% improvement in gross profit.
PVM's fleet is experiencing a rapid change in the powertrains being
requested by customers in the car sector as the corporate sector seek
to improve their green footprint whilst providing their associates
with reduced levels of Company Car Benefit in Kind taxation.
Financial Review
Revenue increased by 31.7% to GBP49.0m, and gross profit rose by 56.7%
to GBP10.5m owing to higher disposals and strong residual values as
described above. Underlying operating costs were up 20% to GBP2.4m,
with H1 FY20 benefitting from payments from the Coronavirus job retention
scheme.
Underlying operating profit increased by 72.3% to GBP8.1m.
==========================================================================
US Motor
========================================================================================
Underlying H1 2021 H1 2020 Change
(%)
========== =========== ========
Used Revenue GBP3.0m GBP10.2m -70.6%
========== =========== ========
Aftersales Revenue GBP2.8m GBP7.9m -64.6%
========== =========== ========
New Revenue GBP22.5m GBP50.4m -55.4%
========== =========== ========
Total Revenue GBP28.3m GBP68.5m -58.7%
========== =========== ========
Used Gross Profit GBP0.2m GBP0.5m -60.0%
========== =========== ========
Aftersales Gross Profit GBP1.6m GBP3.9m -59.0%
========== =========== ========
New Gross Profit GBP2.2m GBP4.6m -52.2%
========== =========== ========
Total Gross Profit GBP4.0m GBP9.0m -55.6%
========== =========== ========
Gross margin rate 14.1% 13.1% 1.0%
========== =========== ========
Underlying Operating
Expenses GBP(4.8)m GBP(10.6)m -54.7%
========== =========== ========
Underlying Operating
Loss GBP(0.8)m GBP(1.6)m -50.0%
========== =========== ========
Underlying Operating
margin rate (2.8)% (2.3)% -0.5%
========== =========== ========
Operating Loss GBP(4.5)m GBP(8.1)m -44.4%
========== =========== ========
Total Revenue Change -58.7%
========== =========== ========
Used Units Sold 51 275 -81.5%
========== =========== ========
New Units Sold 397 945 -58.0%
========== =========== ========
Used GPU (1) GBP3,922 GBP1,818 115.7%
========== =========== ========
New GPU (1) GBP5,542 GBP4,868 13.8%
========== =========== ========
Number of Locations - 4 -
(2)
========== =========== ========
Average Used Selling
Price (3) GBP35,183 GBP32,660 7.7%
========== =========== ========
Average New Selling
Price (3) GBP56,091 GBP56,118 0.0%
========== =========== ========
(1) GPU = Gross Profit per Unit. It is calculated as total
New/Used GP divided by total New/Used retail units sold.
(2) Represents 4 franchise points across the remaining two
dealerships.
(3) Trading dealerships only. The used selling price is retail
vehicles only and excludes any trade vehicles.
The first-half performance is principally driven by the final months
of trading, which continued in the two remaining US Motor Group locations
until their disposal, which together with low levels of ongoing operational
costs associated with the winding up of US operations, resulted in
an underlying operating loss of GBP(0.8)m (H1 FY20: GBP(1.6)m.
The remaining disposals were both completed during the half, with Santa
Monica completed on the 29 March 2021 for consideration of GBP10.8m
and Los Angeles having previously completed on 29 January 2021 for
consideration of GBP16.3m.
Total cumulative proceeds since the first sale in 2018 of GBP106.0m
have been received for the disposal of the US Motor Group, against
a target objective of GBP100m.
============================================================================
Industry Insight
================
New Car Market
The UK new car market was 910k vehicles in the first half of
FY21 which was an increase of 39.2% over the prior year, reflecting
the enforced closure of the UK dealer network for a significant
part of H1 2020. The UK new car market is divided into two markets,
retail and fleet. The retail market is the direct selling of
vehicle units to individual customers and operates at a higher
margin than the fleet market. The retail market is the key market
opportunity for the Group and represents 45% of the total market in
the year. The fleet market represents the sale of multiple vehicles
to businesses, and is predominately transacted at a lower margin
and consumes higher levels of working capital than retail, and
represents 55% of the market in the year.
Used Car Market
In the first half of FY21, there were 3.9m used cars sold in the
UK, an increase of 33.3% on the prior year. This represents a
market opportunity that is more than three times the size by volume
of the new car market. The used market is more stable than the new
vehicle sector, being less affected by fluctuations in the UK
economy and providing a more reliable supply chain than the new
market.
Aftersales Market
The main determinant of the aftersales market is the number of
vehicles on the road, known as the 'car parc'. The car parc in the
UK has risen slightly to 35.3m vehicles at H1 FY21, a rise of 0.6%
from the end of FY20. The car parc can also be segmented into
markets representing different age groups. At H1 FY21, around 16%
of the car parc was represented by less than three-year-old cars,
around 20% by four to six-year-old cars and 64% is greater than
seven-year-old cars. The demand for servicing and repair activity
is less affected than other sectors by economic conditions, as
motor vehicles require regular maintenance and repair for safety,
economy and performance reasons.
UK New Car Registrations '000 H1 2021 H1 2020 Change (%)
======== ======= ==========
UK Retail Registrations 410.7 314.6 30.6%
======== ======= ==========
UK Fleet Registrations 499.3 338.9 47.3%
================================= ======== ======= ==========
Total UK Registrations 910.0 653.5 39.3%
================================= ======== ======= ==========
Group Represented* UK Retail
Registrations 242.7 184.2 31.8%
======== ======= ==========
Group Represented* UK Fleet
Registrations 275.7 197.9 39.3%
================================= ======== ======= ==========
Group Represented* Registrations 518.4 382.1 35.7%
================================= ======== ======= ==========
* Group Represented - defined as national registrations for the
franchised brands that the Group represents as a franchised
dealer.
The new retail market was up by 30.6% in H1 2021, and the new
fleet market increased by 47.3% in the period. All new car market
figures are from the Society of Motor Manufacturers and Traders
(SMMT).
Underlying Net Financing Costs
H1 H1 Change
(%)
2021 2020
============ ============ =======
Interest payable on bank borrowings, senior
note and loan notes GBP(4.4)m GBP(4.2)m 4.8%
============ ============ =======
Vehicle stocking plan interest GBP(5.0)m GBP(8.0)m -37.5%
============ ============ =======
Net lease interest GBP(5.9)m GBP(6.4)m -7.8%
============ ============ =======
Unwinding of discounts in contract hire residual
values GBP(1.5)m GBP(1.6)m -6.3%
============ ============ =======
Total Net Financing Costs GBP(16.8)m GBP(20.2)m -16.8%
============ ============ =======
Underlying net financing costs reduced by GBP3.4m to GBP16.8m,
principally driven by a reduction of GBP3.0m in vehicle stocking
plan interest as a result of lower inventories. The increase in
interest payable on bank borrowings was driven by an increase in
the interest rate of the revolving credit facility to 4.85% agreed
as part of the extension of the facility earlier in 2021, together
with amortisation of arrangement fees, partially offset by lower
average utilisation during the period.
Non-underlying Items
GBPm H1 H1
2021 2020
======= =======
Impairment of goodwill - (12.5)
======= =======
Impairment of right of use assets (5.4) -
======= =======
Termination and severance costs (0.9) (1.2)
=============================================== ======= =======
Gains / (losses) on the sale of businesses and
property, plant and equipment 2.4 (5.9)
=============================================== ======= =======
Business closure costs 0.1 (0.8)
=============================================== ======= =======
Pension costs (0.5) (0.6)
=============================================== ======= =======
Total non-underlying items before tax (4.3) (21.0)
=============================================== ======= =======
Non-underlying items in tax 0.8 3.4
=============================================== ======= =======
Total non-underlying items after tax (3.5) (17.6)
=============================================== ======= =======
Non-underlying income and expenses are items that are not
incurred in the normal course of business and are sufficiently
significant and/or irregular to impact the underlying trends in the
business. During the first-half the Group has recognised a net
charge of GBP4.3m of pre-tax non-underlying items compared to a
charge of GBP21.0m in H1 FY20.
A charge of GBP5.4m for the impairment of right of use assets
principally relates to the impairment of three leases that have
been retained following the disposal of the US assets. These
remaining leases are all in good locations and are currently being
marketed for sublet. These are short life leases, with expiry due
in 2022 and 2023.
Termination and severance cost of GBP0.9m principally relate to
the transfer of Finance process from dealerships to a centralised
shared service centre as outlined part of the Finance
Transformation in the UK motor business review. Gains of GBP2.4m on
the sale of business and property, plant and equipment mainly arise
from a combined profit of GBP1.0m on disposal of the US assets in
Santa Monica and Los Angeles, together with gains arising on the
disposal of other freehold and leasehold properties. Pension costs
of GBP0.5m represent the interest charge for the first half of FY21
(H1 2020: GBP0.6m)
Capital Allocation
Net cash* has improved by GBP109.9m from an adjusted net debt of
GBP100.4m at 31 December 2020 to adjusted net cash of GBP9.5m at 30
June 2021. The adjusted net debt to underlying EBITDA ratio* was
(0.1)x for the rolling 12 months to H1 FY21. The adjusted net debt
to underlying EBITDA ratio has moved from 0.8x at FY20 principally
as a result of the strong trading performance in the first-half,
combined with the disposal proceeds from the sale of the remaining
US assets received in the period. Since 2018, t he Group has
received total proceeds from the disposal of the entire US business
of 106.0m, before tax.
* This is an Alternative Performance Measure (APM), see note 1
of the Detailed Financials for more detail.
Cash Flow
The following table summarises the cash flows and adjusted net
debt of the Group for the six-month periods ended 30 June 2021 and
30 June 2020 as follows:
GBPm H1 2021 H1 2020
Underlying Operating Profit / (Loss) 51.9 (10.8)
=========================================== ======== ========
Depreciation and Amortisation 19.1 22.2
=========================================== ======== ========
Share Based Payments 1.4 0.4
=========================================== ======== ========
Non-underlying Items (0.8) (2.0)
=========================================== ======== ========
Contribution into defined benefit
pension scheme (6.3) (2.6)
=========================================== ======== ========
Working Capital and Contract Hire
Vehicle Movements(1) 49.5 69.1
=========================================== ======== ========
Cash Generated from Operations 114.8 76.3
=========================================== ======== ========
Capital Expenditure (6.9) (14.2)
=========================================== ======== ========
Fixed Asset Vehicles Net Movement 3.0 4.2
=========================================== ======== ========
Business and Property Disposals 28.8 31.9
=========================================== ======== ========
Net Capital Income(2) 24.9 21.9
=========================================== ======== ========
Tax Paid (1.6) 0.8
=========================================== ======== ========
Interest Paid excluding lease interest(3) (8.4) (11.5)
=========================================== ======== ========
Lease Payments & Receipts(4) (19.0) (13.2)
=========================================== ======== ========
Other (0.8) (0.6)
=========================================== ======== ========
Decrease in Adjusted Net Debt 109.9 73.7
=========================================== ======== ========
Opening Adjusted Net Debt(1) (100.4) (119.7)
=========================================== ======== ========
Closing Adjusted Net Cash / (Debt) 9.5 (46.0)
=========================================== ======== ========
(1) being the change in trade and other receivables, change in
trade and other payables and movement in contract hire vehicle
balances.
(2) being the proceeds from sale of businesses, purchase of
property, plant, equipment and intangible assets and proceeds from
sale of property, plant, equipment and intangible assets.
(3) being bank and stocking interest paid.
(4) being receipts of lease receivables and payment of lease
liabilities including lease interest paid and received.
Reconciliation to Consolidated Cash Flow Statement
GBPm H1 2021 H1 2020
======== ========
Net cash from operating activities 98.9 59.2
============================================ ======== ========
Net capital income 24.9 21.9
============================================ ======== ========
Receipt of lease receivables 1.2 0.5
============================================ ======== ========
Net cash from investing activities 26.1 22.4
============================================ ======== ========
Financing cash flows as included above:
======== ========
Payment of lease liabilities (14.3) (7.3)
======== ========
Financing cash flows not included
above relating to loans:
============================================ ======== ========
Repayment of loans (81.7) (40.0)
============================================ ======== ========
Proceeds from issue of loans (net
of directly attributable transaction
costs) (1.4) 28.2
============================================ ======== ========
Net cash outflow from financing activities (97.4) (19.1)
============================================ ======== ========
Cash generated from operations was an inflow of GBP114.8m
compared to an inflow of GBP76.3m in the first-half of FY20,
principally driven by an increase in the underlying operating
profit of GBP62.7m as a result of the strong trading performance in
comparison to the pandemic-impacted first of half of FY20, combined
with a further VAT timing benefit of approximately GBP35m, mainly
arising from the reduction in new car inventory. This is in
addition to the continued timing benefit of GBP29m from the
deferral of VAT payments in H1 FY20. The combined VAT timing
benefit of approximately GBP64m is expected to fully unwind during
the second half of FY21. Contributions to the defined benefit
pension scheme increased from GBP2.6m to GBP6.3m with contributions
reverting to the agreed level following a timing benefit in H1 FY20
as a result of the agreement with the scheme trustee to defer
payments during the initial impact of the pandemic.
The net capital expenditure inflow of GBP24.9m (H1 FY20: inflow
of GBP21.9m) was principally due to the GBP28.8m cash received from
business and property disposals. Disposal proceeds comprised of
GBP16.3m from the disposal of Los Angeles, GBP10.8m from the
disposal of Santa Monica and GBP1.7m from the disposal of other
property. There was a net GBP6.9m outflow from capital expenditure,
partially offset by a GBP3.0m net inflow from fixed asset vehicle
disposals. Capital expenditure remained at a lower level as we
continued to exercise caution during the national lock-down in the
first quarter, and with a number of projects weighted to the
second-half of FY21.
Lease payments & receipts increased by GBP5.8m to GBP19.0m,
with the increase primarily resulting from the reversal of the
timing benefit in H1 FY20 from the temporary move to monthly rent
payments during the early stages of the pandemic together with the
impact of inflationary rent inflation, partially offset by early
exits and increased sub-let income.
With effect from March 2021 in respect of light commercial
vehicles, and with effect from June 2021 in respect of passenger
vehicles, the way in which the Group acquires vehicles from Ford
has changed. From these two respective dates, the Group became the
importer of Ford vehicles into the UK, rather than acquiring the
vehicles from Ford UK. This has led to changes in both the amounts
ultimately payable to Ford for vehicles (the liabilities due to
Ford shall be lower because no VAT will be charged) and the removal
of VAT recovery in respect of the acquisition of vehicles. Taking
into account the revised expectation of new car supply, the
resulting change in cashflows is estimated in the range of -GBP1m
to -GBP21m, dependant on the month, although the impact on the
Group's peak borrowing is not expected to be significant. As at 31
December 2021, the impact is expected to increase adjusted net debt
by approximately GBP8m.
Balance sheet
The following table summarises the balance sheet of the Group at
30 June 2021, 30 June 2020 and 31 December 2020.
GBPm Jun-21 Jun-20 Dec-20
========== ========== ==========
Property 219.4 230.7 222.8
=============================== ========== ========== ==========
Plant & Equipment 178.8 215.5 204.0
=============================== ========== ========== ==========
Goodwill 150.3 150.3 150.3
=============================== ========== ========== ==========
Intangibles 10.7 10.1 10.2
=============================== ========== ========== ==========
Right of Use Assets 133.2 156.4 146.0
=============================== ========== ========== ==========
Inventories 469.0 747.8 608.8
=============================== ========== ========== ==========
Receivables (1) 138.2 89.3 113.2
=============================== ========== ========== ==========
Net Assets Held as for Sale
(2) 8.6 26.8 31.7
=============================== ========== ========== ==========
Payables (3) (1,127.6) (1,427.8) (1,222.2)
=============================== ========== ========== ==========
Retirement Benefit Obligations (34.9) (71.7) (75.5)
=============================== ========== ========== ==========
Net Tax Balance (4) 31.2 35.7 37.8
=============================== ========== ========== ==========
Adjusted Net Cash / (Debt)
(5) 9.5 (46.0) (100.4)
=============================== ========== ========== ==========
Shareholders Funds 186.4 117.1 126.7
=============================== ========== ========== ==========
(1 being trade and other receivables and finance lease
receivables 2 being assets classified as held for sale and
liabilities directly associated with assets held for sale 3 being
trade and other payables, deferred income and lease liabilities 4
being deferred tax assets, current tax assets and current tax
payable 5 being cash and cash equivalents and interest bearing
loans and borrowings)
Net assets have increased from GBP117.1m at 31 December 2020 to
GBP186.4m at 30 June 2021.
At 30 June 2021, the Group had GBP219.4m (GBP352.3m including
IFRS16 right of use assets) of land and property assets (31
December 2020: GBP222.8m (GBP368.3m including IFRS16 right of use
assets)). The reduction in property principally reflects the
disposal of excess property together with depreciation, partially
offset by capital investments.
The movement in plant and equipment largely reflects the ongoing
depreciation with a lower than planned level of capital expenditure
in the period, combined with the impact of disposals as a result of
store closures.
Stock has reduced by GBP139.8m to GBP469.0m (31 December 2020:
GBP608.8m), which is largely as a result of a reduction of
c.GBP170m in new car inventory driven by manufacturing shortfalls
resulting from the well-publicised chip shortages. This reduction
has been partially offset by an increase in used vehicle inventory
of approximately GBP40m as the average value of a used car in stock
appreciated by c.15% in the period as a result of the strong demand
for used cars driving higher selling and acquisition costs. We
currently expect New Car inventory levels to remain lower
throughout the second-half of FY21.
The reduction in payables of GBP94.6m to GBP1,127.6m (31
December 2020: GBP1,222.2m) principally relates to the lower
vehicle creditors as a result of the reduction in vehicle
inventory, partially offset by an increased VAT creditor as
described in the analysis of working capital above.
The net tax balance has decreased from GBP35.7m to GBP31.2m
primarily as a result of the lower deferred tax asset arising from
the decrease in the pension deficit.
The net liability for defined benefit pension scheme obligations
has decreased from GBP75.5m at FY20 to GBP34.9m at HY21. The
decrease of GBP40.6m comprises of contributions of GBP6.3m, a net
interest expense recognised in the income statement of GBP0.5m and
a net actuarial gain of GBP34.8m. The net actuarial gain has arisen
due in part to changes in the principal assumptions used in the
valuation of the scheme's assets and liabilities and also the
change in value of the assets held over the year. The Group
contributed GBP6.3m to the Pension Scheme in the period in line
with the Group's commitment as agreed in the triennial actuarial
valuation of the company's pension scheme as at 31 December
2018.
Dividend
The Group is not proposing an interim dividend for 2021.
Revolving Credit Facility (RCF)
In March 2021 the maturity date of the Group's RCF was extended
by 11 months to 1 March 2023, with the facility size maintained at
GBP175m. The Group has agreed to initially increase the margin to
4.85% for this extended facility. The GBP175m RCF and the GBP60m
private placement are both due to mature in March 2023.
Detailed Financials
===================
Consolidated Income Statement Continuing Discontinued 2021 Continuing Discontinued 2020
Six months ended 30 June operations operations GBPm operations operations GBPm
GBPm * GBPm *
GBPm GBPm
=========== ============ ========= ============ ============ =========
Revenue 1,787.3 28.3 1,815.6 1,149.8 68.5 1,218.3
=========== ============ ========= ============ ============ =========
Cost of sales (1,580.1) (24.3) (1,604.4) (1,023.5) (59.5) (1,083.0)
========================================= =========== ============ ========= ============ ============ =========
Gross profit 207.2 4.0 211.2 126.3 9.0 135.3
========================================= =========== ============ ========= ============ ============ =========
Operating expenses (155.9) (9.6) (165.5) (143.5) (17.1) (160.6)
========================================= =========== ============ ========= ============ ============ =========
Operating profit/(loss) before
other income 51.3 (5.6) 45.7 (17.2) (8.1) (25.3)
========================================= =========== ============ ========= ============ ============ =========
Other income - profit/(losses)
on the sale of businesses
and property 1.3 1.1 2.4 (5.9) - (5.9)
========================================= =========== ============ ========= ============ ============ =========
Operating profit/(loss) 52.6 (4.5) 48.1 (23.1) (8.1) (31.2)
----------------------------------------- ----------- ------------ --------- ------------ ------------ ---------
Analysed as
========================================= =========== ============ ========= ============ ============ =========
Underlying operating profit/(loss) 52.7 (0.8) 51.9 (2.7) (8.1) (10.8)
========================================= =========== ============ ========= ============ ============ =========
Non-underlying operating (loss)/profit** (0.1) (3.7) (3.8) (20.4) - (20.4)
----------------------------------------- ----------- ------------ --------- ------------ ------------ ---------
Finance expense (17.5) (0.2) (17.7) (20.6) (0.7) (21.3)
=========== ============ ========= ============ ============ =========
Finance income 0.4 - 0.4 0.5 - 0.5
========================================= =========== ============ ========= ============ ============ =========
Net finance costs (17.1) (0.2) (17.3) (20.1) (0.7) (20.8)
----------------------------------------- ----------- ------------ --------- ------------ ------------ ---------
Analysed as
========================================= =========== ============ ========= ============ ============ =========
Underlying net finance costs (16.6) (0.2) (16.8) (19.5) (0.7) (20.2)
========================================= =========== ============ ========= ============ ============ =========
Non-underlying net finance
costs ** (0.5) - (0.5) (0.6) - (0.6)
----------------------------------------- ----------- ------------ --------- ------------ ------------ ---------
Profit/(loss) before taxation 35.5 (4.7) 30.8 (43.2) (8.8) (52.0)
----------------------------------------- ----------- ------------ --------- ------------ ------------ ---------
Analysed as
========================================= =========== ============ ========= ============ ============ =========
Underlying profit/(loss) before
taxation 36.1 (1.0) 35.1 (22.2) (8.8) (31.0)
========================================= =========== ============ ========= ============ ============ =========
Non-underlying loss before
taxation** (0.6) (3.7) (4.3) (21.0) - (21.0)
----------------------------------------- ----------- ------------ --------- ------------ ------------ ---------
Income tax (expense)/credit (3.1) 0.7 (2.4) 8.8 1.8 10.6
========================================= =========== ============ ========= ============ ============ =========
Profit/(loss) for the period 32.4 (4.0) 28.4 (34.4) (7.0) (41.4)
========================================= =========== ============ ========= ============ ============ =========
Earnings per share
========================================= =========== ============ ========= ============ ============ =========
Basic earnings per share 2.3p (0.3p) 2.0p (2.5p) (0.5p) (3.0p)
=========== ============ ========= ============ ============ =========
Diluted earnings per share 2.3p (0.3p) 2.0p (2.5p) (0.5p) (3.0p)
=========== ============ ========= ============ ============ =========
Non-GAAP Measure
========================================= =========== ============ ========= ============ ============ =========
Underlying basic earnings
per share 2.6p (0.3p) 2.3p (1.2p) (0.5p) (1.7p)
=========== ============ ========= ============ ============ =========
Underlying diluted earnings
per share 2.6p (0.3p) 2.3p (1.2p) (0.5p) (1.7p)
=========== ============ ========= ============ ============ =========
* The discontinued operations are in respect of the Group's US
business.
** Non-underlying, see note 7 for explanation.
Consolidated Statement of Comprehensive Income H1 2021 H1 2020
Six months ended 30 June GBPm GBPm
========
Profit/(loss) profit for the period 28.4 (41.4)
========================================================== ======== =======
Other comprehensive income
======== =======
Items that will never be reclassified to profit and
loss:
======== =======
Defined benefit plan remeasurement gains/(losses) 34.8 (14.7)
======== =======
Income tax relating to defined benefit plan remeasurement
gains/(losses) (5.8) 2.8
========================================================== ======== =======
29.0 (11.9)
========================================================== ======== =======
Items that are or may be reclassified to profit and
loss:
========================================================== ======== =======
Foreign currency translation differences of foreign
operations (0.1) 1.1
======== =======
Other comprehensive income for the year, net of tax 28.9 (10.8)
========================================================== ======== =======
Total comprehensive income for the year 57.3 (52.2)
========================================================== ======== =======
Total comprehensive income for the period attributable
to equity
shareholders of the company arises from:
========================================================== ======== =======
Continuing operations 61.4 (46.3)
======== =======
Discontinued operations - see note 14 (4.1) (5.9)
========================================================== ======== =======
57.3 (52.2)
========================================================== ======== =======
Consolidated Statement Share Share Other Translation Retained Total
of Changes in Equity Capital Premium Reserves Differences Earnings GBPm
Six months ended 30 June GBPm GBPm GBPm GBPm GBPm
========= ======== ========== ============= ========== =======
Balance at 1 January
2021 69.9 56.8 18.2 (1.0) (17.2) 126.7
========= ======== ========== ============= ========== =======
Total comprehensive income
for H1 2021
========= ======== ========== ============= ========== =======
Profit for the period - - - - 28.4 28.4
========= ======== ========== ============= ========== =======
Translation differences
taken to profit and loss
on termination of operation - - - 1.0 - 1.0
========= ======== ========== ============= ========== =======
Other comprehensive income
for the period, net of
tax - - - (0.1) 29.0 28.9
============================= ========= ======== ========== ============= ========== =======
Total comprehensive income
for the period - - - 0.9 57.4 58.3
============================= ========= ======== ========== ============= ========== =======
Share based payments - - - - 1.4 1.4
========= ======== ========== ============= ========== =======
Balance at 30 June 2021 69.9 56.8 18.2 (0.1) 41.6 186.4
============================= ========= ======== ========== ============= ========== =======
Balance at 1 January
2020 69.9 56.8 18.2 (1.0) 25.0 168.9
============================= ========= ======== ========== ============= ========== =======
Total comprehensive income
for H1 2020
============================= ========= ======== ========== ============= ========== =======
Loss for the period - - - - (41.4) (41.4)
============================= ========= ======== ========== ============= ========== =======
Other comprehensive income
for the period, net of
tax - - - 1.1 (11.9) (10.8)
============================= ========= ======== ========== ============= ========== =======
Total comprehensive income
for the year - - - 1.1 (53.3) (52.2)
========= ======== ========== ============= ========== =======
Share based payments - - - - 0.4 0.4
============================= ========= ======== ========== ============= ========== =======
Balance at 30 June 2020 69.9 56.8 18.2 0.1 (27.9) 117.1
============================= ========= ======== ========== ============= ========== =======
Consolidated Balance Sheet 30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
========== ========== ============
Non-current assets
================================================= ========== ============
Property, plant and equipment 531.4 602.6 572.8
========== ========== ============
Goodwill 150.3 150.3 150.3
========== ========== ============
Other intangible assets 10.7 10.1 10.2
========== ========== ============
Finance lease receivables 16.6 17.5 16.6
========== ========== ============
Deferred tax assets 30.1 39.0 36.4
================================================= ========== ========== ============
Total non-current assets 739.1 819.5 786.3
================================================= ========== ========== ============
Current assets
================================================= ========== ============
Inventories 469.0 747.8 608.8
========== ========== ============
Trade and other receivables 119.4 69.4 94.6
========== ========== ============
Finance lease receivables 2.2 2.4 2.0
========== ========== ============
Current tax assets 1.1 - 1.4
========== ========== ============
Cash and cash equivalents 83.2 123.3 56.0
========== ========== ============
Assets classified as held for sale 8.6 100.4 99.0
================================================= ========== ========== ============
Total current assets 683.5 1,043.3 861.8
================================================= ========== ========== ============
Total assets 1,422.6 1,862.8 1,648.1
================================================= ========== ========== ============
Current liabilities
================================================= ========== ============
Lease liabilities (25.5) (30.3) (24.5)
========== ========== ============
Trade and other payables (774.8) (1,030.5) (834.9)
========== ========== ============
Deferred income (38.8) (53.6) (42.9)
========== ========== ============
Current tax payable - (3.3) -
========== ========== ============
Liabilities directly associated with the
assets held for sale - (73.6) (67.3)
================================================= ========== ========== ============
Total current liabilities (839.1) (1,191.3) (969.6)
================================================= ========== ========== ============
Non-current liabilities
================================================= ========== ============
Interest bearing loans and borrowings (73.7) (169.3) (156.4)
========== ========== ============
Lease liabilities (203.2) (228.3) (218.7)
========== ========== ============
Trade and other payables (46.2) (51.2) (60.4)
========== ========== ============
Deferred income (39.1) (33.9) (40.8)
========== ========== ============
Retirement benefit obligations (34.9) (71.7) (75.5)
========== ========== ============
Total non-current liabilities (397.1) (554.4) (551.8)
================================================= ========== ========== ============
Total liabilities (1,236.2) (1,745.7) (1,521.4)
================================================= ========== ========== ============
Net assets 186.4 117.1 126.7
================================================= ========== ========== ============
Capital and reserves
================================================= ========== ============
Called up share capital 69.9 69.9 69.9
========== ========== ============
Share premium account 56.8 56.8 56.8
========== ========== ============
Capital redemption reserve 5.6 5.6 5.6
========== ========== ============
Other reserves 12.6 12.6 12.6
========== ========== ============
Translation reserve (0.1) 0.1 (1.0)
========== ========== ============
Retained earnings 41.6 (27.9) (17.2)
================================================= ========== ========== ============
Total equity attributable to equity shareholders
of the Company 186.4 117.1 126.7
================================================= ========== ========== ============
Consolidated Cash Flow Statement For the For the For the twelve
six months six months months ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBPm GBPm GBPm
============ ============ ===============
Cash flows from operating activities
============ ============ ===============
Profit/(loss) for the period 28.4 (41.4) (24.7)
============ ============ ===============
Adjustment for net financing expense 17.3 20.8 38.8
============ ============ ===============
Adjustment for taxation 2.4 (10.6) (4.9)
================================================= ============ ============ ===============
48.1 (31.2) 9.2
============ ============ ===============
Depreciation and amortisation 19.1 22.2 43.7
============ ============ ===============
Share based payments 1.4 0.4 1.2
============ ============ ===============
Pension past service costs - - 3.3
============ ============ ===============
(Profit)/loss on sale of businesses and property (2.4) 5.9 6.8
============ ============ ===============
Impairment of goodwill - 12.5 12.5
============ ============ ===============
Impairment of assets property, plant and
equipment 5.4 - 0.8
============ ============ ===============
Impairment of assets held for sale - - 3.2
============ ============ ===============
Contributions into defined benefit pension
scheme (6.3) (2.6) (12.5)
============ ============ ===============
Changes in inventories 146.5 141.5 294.8
============ ============ ===============
Changes in trade and other receivables (19.8) 48.9 23.4
============ ============ ===============
Changes in trade and other payables (37.6) (91.9) (267.6)
============ ============ ===============
Movement in contract hire vehicle balances (39.6) (29.4) (51.3)
================================================= ============ ============ ===============
Cash generated from operations 114.8 76.3 67.5
============ ============ ===============
Taxation (paid)/received (1.6) 0.8 (4.4)
============ ============ ===============
Lease interest paid (6.3) (6.9) (14.0)
============ ============ ===============
Lease interest received 0.4 0.5 1.0
============ ============ ===============
Bank and stocking interest paid (8.4) (11.5) (20.5)
================================================= ============ ============ ===============
Net cash from operating activities 98.9 59.2 29.6
================================================= ============ ============ ===============
Cash flows from investing activities
============ ============ ===============
Proceeds from sale of businesses 27.2 16.6 16.6
============ ============ ===============
Purchase of property, plant, equipment and
intangible assets (16.8) (32.1) (60.2)
============ ============ ===============
Proceeds from sale of property, plant, equipment
and intangible assets 14.5 37.4 61.6
============ ============ ===============
Receipt of lease receivables 1.2 0.5 1.9
================================================= ============ ============ ===============
Net cash from investing activities 26.1 22.4 19.9
================================================= ============ ============ ===============
Cash flows from financing activities
================================================= ============ ============ ===============
Payment of lease liabilities (14.3) (7.3) (28.7)
============ ============ ===============
Repayment of loans (81.7) (40.0) (40.0)
============ ============ ===============
Proceeds from issue of loans (net of directly
attributable transaction costs) (1.4) 28.2 18.2
================================================= ============ ============ ===============
Net cash outflow from financing activities (97.4) (19.1) (50.5)
================================================= ============ ============ ===============
Net increase/(decrease) in cash and cash
equivalents 27.6 62.5 (1.0)
================================================= ============ ============ ===============
Opening cash and cash equivalents 56.0 55.7 55.7
============ ============ ===============
Effects of exchange rate changes on cash
held (0.4) 5.1 1.3
================================================= ============ ============ ===============
Closing cash and cash equivalents 83.2 123.3 56.0
================================================= ============ ============ ===============
Reconciliation of net cash flow to movement For the For the For the twelve
in adjusted net cash/(debt) six months six months months ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBPm GBPm GBPm
============ ============ ===============
Net increase/(decrease) in cash and cash
equivalents 27.6 62.5 (1.0)
============ ============ ===============
Repayment of loans 81.7 40.0 40.0
============ ============ ===============
Proceeds from issue of loans (net of directly
attributable transaction costs) 1.4 (28.2) (18.2)
============ ============ ===============
Non-cash movements (0.8) (0.6) (1.5)
============================================== ============ ============ ===============
Increase in adjusted net cash/decrease in
adjusted net debt in the period 109.9 73.7 19.3
============================================== ============ ============ ===============
Opening adjusted net debt (100.4) (119.7) (119.7)
============ ============ ===============
Closing adjusted net cash/(debt) 9.5 (46.0) (100.4)
============================================== ============ ============ ===============
Note: The reconciliation of net cash flow to movement in
adjusted net cash/(debt) is not a primary statement and does not
form part of the consolidated cash flow statement but forms part of
the notes to the financial statements.
Notes
1 Basis of Preparation
Pendragon PLC (the 'Company') is a public company incorporated,
domiciled and registered in England in the UK. The registered
number is 2304195 and the registered address is Loxley House, 2
Oakwood Court, Little Oak Drive, Annesley, Nottinghamshire, NG15
0DR. The condensed consolidated interim financial statements of the
Company as at and for the six months ended 30 June 2021 comprise
the Company and its subsidiaries (together referred to as the
'Group').
Covid-19
The Directors draw attention to the ongoing threat from further
deterioration in economic conditions in relation to Covid-19.
Pendragon's key priority remains the health and wellbeing of our
colleagues, customers and business partners, while we maintain our
high standards of service to customers. We have evolved our health
and safety policies and will continue to follow all relevant
guidelines to ensure all of our work-places are Covid-secure
environments. We have significantly reduced all non-essential
business travel, and have clear and effective plans in place for
alternative working locations.
If the virus returns more widely across the UK then this may
influence the willingness of customers to visit our dealerships,
which could further affect our financial performance. However, we
believe the changes to our operating procedures will give consumers
confidence that car dealerships remain a safe place to visit. In
addition, consumers can purchase both new and used cars with
associated finance over the telephone or internet without visiting
dealerships, including vehicle delivery to the customer's chosen
destination. The Group has also made changes to its operating
structure through changes to staffing models, which will help
protect the organisation in the event of further performance
downturns.
We believe that the improvements we have made to these services
will better position us if there are further lock-down situations,
either locally or nationally. As a result of the changes to our
digital propositions, in the event of any future lock-downs we
believe that our dealerships will be able to trade with a high
degree of mitigation to enforced closures, as we have experienced
in previous lockdowns. We also note that servicing and repair work
is generally undertaken in compliance with manufacturer warranty,
extended warranty or service plan arrangements that we expect
customers will continue to observe, with the majority of demand for
these services being deferred in the event of lock-down.
Going concern
The interim financial statements are prepared on a going concern
basis. Whilst the trading performance has been strong through the
first-half of the current financial year, which included a period
of national lock-down from January 1 to April 12, the directors
consider that the current economic outlook still presents
uncertainty in terms of sales volume and pricing arising from the
risk of further Coronavirus lock-downs, a market correction in used
car pricing, and shortfalls in new car supply resulting from
shortages in microchips impacting manufacturing.
The Group meets its day-to-day working capital requirements from
a revolving credit facility of GBP175m and senior note of GBP60m
together with cash balances and a requirement for ongoing access to
rolling vehicle credit stocking facilities. Both the senior note
and the revolving credit facility are due for renewal in March 2023
and include quarterly leverage and fixed charge covenants, a breach
of which would result in the amounts drawn becoming repayable on
demand. The Group plan to agree renewal of these facilities by
December 2021. The Group did not make use of government backed
borrowing facilities such as the Coronavirus large business
interruption loan scheme. The Group remained compliant with its
banking covenants throughout the period to 30 June 2021.
In the context of the above, the directors have prepared cash
flow forecasts for the 15-month period to 31 December 2022 which
indicate that, taking account of reasonably possible downsides, the
Group will have sufficient funds to meet its liabilities as they
fall due for that period. The Directors have assessed the potential
on-going impacts of the COVID-19 pandemic coupled with the risk of
disruption to new car supply and have modelled scenarios as
follows:
1. A base cash flow forecast. This forecast has considered
externally sourced economic forecasts to determine the outlook for
vehicle volume forecasts, which assume a reduction in both the used
and new vehicle volumes, and aftersales markets when compared to
the levels of FY19 throughout the period being assessed together
with the expectation that vehicle margins revert to levels
reflective of normal market conditions. This forecast assumes low
levels of market growth from 2022 onwards.
2. A severe, but plausible downside scenario. The directors have
also prepared a sensitised forecast which considers the impact of
certain severe but plausible downside events, when compared to the
base case. This scenario reflects a more severe downturn to vehicle
volumes, which consider both a worsening in economic conditions and
restricted new car supply due to manufacturing constraints,
together with the impact of two further national lock-downs of one
month duration as a result of government-imposed restrictions. This
scenario also reflects an increase in cost pressure driven by
higher rates of cost inflation. This scenario demonstrates that the
Group would remain within its facility limited and in compliance
with the relevant facility limits, before the need to consider any
mitigations available. Mitigations available to the Group, all of
which are within management's control, are items such as a further
review of investment capital expenditure, of discretionary bonuses,
and other reductions to the cost base.
Based on the above, the directors are confident that the Group
and Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements, and therefore the
directors believe it remains appropriate to prepare the financial
statements on a going concern basis.
The condensed set of financial statements for the six months
ended 30 June 2021 are unaudited but have been reviewed by the
auditors.
Alternative Performance Measures
The Group uses a number of key performance measures ('KPI's')
which are non-IFRS measures to monitor the performance of its
operations. The Group believes these KPI's provide useful
historical financial information to help investors and other
stakeholders evaluate the performance of the business and are
measures commonly used by certain investors for evaluating the
performance of the Group. In particular, the Group uses KPI's which
reflect the underlying performance on the basis that this provides
a more relevant focus on the core business performance of the
Group. The Group has been using the following KPI's on a consistent
basis and they are defined and reconciled as follows:
Gross margin % - gross margin is defined as gross profit as a
percentage of revenue.
Like for Like - results on a like for like basis include only
businesses which have been trading for 12 consecutive months. We
use like for like results to aid in the understanding of the like
for like movement in revenue, gross profit and operating profit in
the business. The difference to underlying results are simply those
businesses which are not like for like which have recently
commenced operation and therefore do not have a 12 month history
plus any businesses closed during the current or previous
period.
Operating margin % - operating margin is defined as operating
profit/(loss) as a percentage of revenue.
Underlying operating profit/(loss) / (loss)/profit before tax -
results on an underlying basis exclude items that are not incurred
in the normal course of business and are sufficiently significant
and/or irregular to impact the underlying trends in the business.
The detail of the non-underlying results is shown in note 7.
Operating profit/(loss) reconciliation
2021 2020
GBPm GBPm
====== ======
Underlying operating profit/(loss) 51.9 (10.8)
====== ======
Profit/(losses) on the sale of businesses and property
(see note 7) 2.4 (5.9)
====== ======
Impairment of goodwill (see note 7) - (12.5)
====== ======
Impairment of right of use assets (see note 7) (5.4) -
====== ======
Closure costs (see note 7) 0.1 (0.8)
====== ======
Termination and severance costs (see note 7) (0.9) (1.2)
====== ======
Non-underlying operating loss items (3.8) (20.4)
======================================================= ====== ======
Operating profit/(loss) 48.1 (31.2)
======================================================= ====== ======
Profit/(loss) before tax reconciliation
2021 2020
GBPm GBPm
====== ======
Underlying profit/(loss) before tax 35.1 (31.0)
====== ======
Non-underlying operating loss items (see reconciliation
above) (3.8) (20.4)
====== ======
Non-underlying finance (costs)/income (see note 7) (0.5) (0.6)
======================================================== ====== ======
Non-underlying operating loss and finance cost items (4.3) (21.0)
======================================================== ====== ======
Profit/(loss) before tax 30.8 (52.0)
======================================================== ====== ======
Profit/(loss) after tax reconciliation
2021 2020
GBPm GBPm
====== ======
Underlying profit/(loss) after tax 31.9 (23.8)
====== ======
Non-underlying operating loss and finance cost items
(see reconciliation above) (4.3) (21.0)
====== ======
Non-underlying tax (see note 7) 0.8 3.4
====================================================== ====== ======
Non-underlying operating (loss), finance and tax cost
items (3.5) (17.6)
====================================================== ====== ======
Profit/(loss) after tax 28.4 (41.4)
====================================================== ====== ======
Underlying basic earnings per share ('underlying earnings per
share') - the Group presents underlying basic earnings per share as
the directors consider that this is a better measure of comparative
performance. Underlying basic earnings per share is calculated by
dividing the underlying profit or loss attributable to ordinary
shareholders by the weighted average number of ordinary shares in
issue during the period. A full reconciliation of how this is
derived is found in note 12.
Underlying diluted earnings per share - the Group presents
underlying diluted earnings per share as the directors consider
that this is a better measure of comparative performance.
Underlying diluted earnings per share is calculated by dividing the
underlying profit and loss attributable to ordinary shareholders by
the weighted average number of ordinary shares in issue taking
account of the effects of all dilutive potential ordinary shares,
which comprise of share options granted to employees and LTIPs. A
full reconciliation of how this is derived is found in note 12.
Adjusted net (debt)/cash - All loans and borrowings less cash
and cash equivalents less IFRS 16 lease liabilities less vehicle
stocking loans.
Leverage ratio - the Group uses the ratio of adjusted net
cash/(debt) to underlying EBITDA to assess the use of the Group's
financial resources.
Leverage ratio - reconciliation
2021 2020
GBPm GBPm
====== ======
Underlying operating profit (12 months rolling 1 July
2020 to 30 June 2021) 108.6 9.3
====== ======
Depreciation and amortisation (12 months rolling 1 July
2020 to 30 June 2021) 80.3 67.9
======================================================== ====== ======
Underlying EBITDA (12 months rolling 1 July 2020 to
30 June 2021) 188.9 77.2
======================================================== ====== ======
Adjusted net cash/(debt) 9.5 (46.0)
======================================================== ====== ======
Adjusted net cash/(debt) : Underlying EBITDA ratio 0.1 (0.6)
======================================================== ====== ======
Like for Like reconciliations
Like for like - results on a like for like basis include only
businesses which have been trading for 12 consecutive months. We
use like for like results to aid in the understanding of the like
for like movement in revenue, gross profit and operating profit in
the business. The difference to underlying results are simply those
businesses which are not like for like which have recently
commenced operation and therefore do not have a 12 month history
plus any retail points closed during the current or previous
period.
Revenues by Department - Franchised UK 2021
Motor Other
2021 2021 non like 2021
Group Disposals for like Like for
revenue revenue revenue like revenue
GBPm GBPm GBPm GBPm
======== =========== ========== =============
Aftersales revenue 131.1 (0.6) (0.9) 129.6
======== =========== ========== =============
Used vehicle revenue 781.0 (3.5) (7.1) 770.4
======== =========== ========== =============
New vehicle revenue 761.7 (1.6) (8.6) 751.5
======== =========== ========== =============
Total Revenue 1,673.8 (5.7) (16.6) 1,651.5
======================================= ======== =========== ========== =============
Revenues by Department - Franchised UK 2020
Motor Other
2020 2020 non like 2020
Group Disposals for like Like for
revenue revenue revenue like revenue
GBPm GBPm GBPm GBPm
======== =========== ========== =============
Aftersales revenue 97.7 (5.4) - 92.3
======== =========== ========== =============
Used vehicle revenue 509.2 (45.3) - 463.9
======== =========== ========== =============
New vehicle revenue 460.2 (13.0) - 447.2
======== =========== ========== =============
Total Revenue 1,067.1 (63.7) - 1,003.4
======================================= ======== =========== ========== =============
Revenues by Department - Car Store 2021
Other
2021 2021 non like 2021
Group Disposals for like Like for
revenue revenue revenue like revenue
GBPm GBPm GBPm GBPm
======== =========== ========== =============
Used vehicle revenue 66.0 - - 66.0
======== =========== ========== =============
Total Revenue 66.0 - - 66.0
=================================== ======== =========== ========== =============
Revenues by Department - Car Store 2020
Other
2020 2020 non like 2020
Group Disposals for like Like for
revenue revenue revenue like revenue
GBPm GBPm GBPm GBPm
======== =========== ========== =============
Used vehicle revenue 43.1 (0.3) - 42.8
======== =========== ========== =============
Total Revenue 43.1 (0.3) - 42.8
=================================== ======== =========== ========== =============
Revenues by Department - US Motor 2021
Other
2021 2021 non like 2021
Group Disposals for like Like for
revenue revenue revenue like revenue
GBPm GBPm GBPm GBPm
======== =========== ========== =============
Aftersales revenue 2.8 (2.8) - -
======== =========== ========== =============
Used vehicle revenue 3.0 (3.0) - -
======== =========== ========== =============
New vehicle revenue 22.5 (22.5) - -
======== =========== ========== =============
Total Revenue 28.3 (28.3) - -
================================== ======== =========== ========== =============
Revenues by Department - US Motor 2020
Other
2020 2020 non like 2020
Group Disposals for like Like for
revenue revenue revenue like revenue
GBPm GBPm GBPm GBPm
======== =========== ========== =============
Aftersales revenue 7.9 (7.9) - -
======== =========== ========== =============
Used vehicle revenue 10.2 (10.2) - -
======== =========== ========== =============
New vehicle revenue 50.4 (50.4) - -
======== =========== ========== =============
Total Revenue 68.5 (68.5) - -
================================== ======== =========== ========== =============
Gross Profit by Department - Franchised 2021
UK Motor Other
2021 2021 non like 2021
Group Disposals for like Like for
gross gross gross like gross
profit profit profit profit
GBPm GBPm GBPm GBPm
======= =========== ========== ===========
Aftersales gross profit 65.0 (0.2) (0.5) 64.3
======= =========== ========== ===========
Used vehicle gross profit 68.6 0.1 (0.5) 68.2
======= =========== ========== ===========
New vehicle gross profit 48.7 (0.1) (1.2) 47.4
======= =========== ========== ===========
Total Gross profit 182.3 (0.2) (2.2) 179.9
======================================== ======= =========== ========== ===========
Gross Profit by Department - Franchised 2020
UK Motor Other
2020 2020 non like 2020
Group Disposals for like Like for
gross gross gross like gross
profit profit profit profit
GBPm GBPm GBPm GBPm
======= =========== ========== ===========
Aftersales gross profit 45.3 (2.5) - 42.8
======= =========== ========== ===========
Used vehicle gross profit 36.4 (2.9) - 33.5
======= =========== ========== ===========
New vehicle gross profit 27.2 (0.7) - 26.5
======= =========== ========== ===========
Total Gross profit 108.9 (6.1) - 102.8
======================================== ======= =========== ========== ===========
Gross Profit by Department - Car Store 2021
Other
2021 2021 non like 2021
Group Disposals for like Like for
gross gross gross like gross
profit profit profit profit
GBPm GBPm GBPm GBPm
======= =========== ========== ===========
Used vehicle gross profit 5.3 - - 5.3
======= =========== ========== ===========
Total Gross profit 5.3 - - 5.3
======================================= ======= =========== ========== ===========
Gross Profit by Department - Car Store 2020
Other
2020 2020 non like 2020
Group Disposals for like Like for
gross gross gross like gross
profit profit profit profit
GBPm GBPm GBPm GBPm
======= =========== ========== ===========
Used vehicle gross profit 2.9 0.1 - 3.0
======= =========== ========== ===========
Total Gross profit 2.9 0.1 - 3.0
======================================= ======= =========== ========== ===========
Gross Profit by Department - US Motor 2021
Other
2021 2021 non like 2021
Group Disposals for like Like for
gross gross gross like gross
profit profit profit profit
GBPm GBPm GBPm GBPm
======= =========== ========== ===========
Aftersales gross profit 1.6 (1.6) - -
======= =========== ========== ===========
Used vehicle gross profit 0.2 (0.2) - -
======= =========== ========== ===========
New vehicle gross profit 2.2 (2.2) - -
======= =========== ========== ===========
Total Gross profit 4.0 (4.0) - -
====================================== ======= =========== ========== ===========
Gross Profit by Department - US Motor 2020
Other
2020 2020 non like 2020
Group Disposals for like Like for
gross gross gross like gross
profit profit profit profit
GBPm GBPm GBPm GBPm
======= =========== ========== ===========
Aftersales gross profit 3.9 (3.9) - -
======= =========== ========== ===========
Used vehicle gross profit 0.5 (0.5) - -
======= =========== ========== ===========
New vehicle gross profit 4.6 (4.6) - -
======= =========== ========== ===========
Total Gross profit 9.0 (9.0) - -
====================================== ======= =========== ========== ===========
Underlying operating profit/(loss) 2021
Other
2021 2021 non like 2021
Group Disposals for like Like for
Underlying Underlying Underlying like Underlying
operating operating operating operating
profit/(loss) profit profit profit/(loss)
GBPm GBPm GBPm GBPm
============== ============ ============ ================
Franchised UK Motor 37.6 1.0 (1.0) 37.6
============== ============ ============ ================
Car Store 0.3 - - 0.3
============== ============ ============ ================
Software 6.7 - - 6.7
============== ============ ============ ================
Leasing 8.1 - - 8.1
============== ============ ============ ================
US Motor (0.8) 0.8 - -
============== ============ ============ ================
Total underlying operating profit/(loss) 51.9 1.8 (1.0) 52.7
========================================= ============== ============ ============ ================
Underlying operating (loss)/profit 2020
Other
2020 2020 non like 2020
Group Disposals for like Like for
Underlying Underlying Underlying like Underlying
operating operating operating operating
(loss)/profit (loss)/profit (loss)/profit (loss)/profit
GBPm GBPm GBPm GBPm
============== =============== =============== ================
Franchised UK Motor (18.1) 6.3 - (11.8)
============== =============== =============== ================
Car Store (1.7) 0.2 - (1.5)
============== =============== =============== ================
Software 5.9 - - 5.9
============== =============== =============== ================
Leasing 4.7 - - 4.7
============== =============== =============== ================
US Motor (1.6) 1.6 - -
============== =============== =============== ================
Total underlying operating (loss)/profit (10.8) 8.1 - (2.7)
========================================= ============== =============== =============== ================
2 Statement of compliance
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. Pendraon PLC
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 January 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework.
This condensed consolidated interim financial report for the
half-year reporting period ended 30 June 2021 has been prepared in
accordance with the UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. It does not include all the information required
for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group
as at and for the year ended 31 December 2020, which are prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union.
These condensed consolidated interim financial statements were
approved by the board of directors on 15 September 2021.
3 Significant accounting policies
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31
December 2020, except as explained below.
Adoption of new and revised standards
No new or amended standards and interpretations have been
adopted during the year.
4 Estimates and judgements
In preparing these interim financial statements, management has
made judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses. Actual results may
differ from these estimates.
Except as described below, in preparing these condensed
consolidated interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2020.
Assets held for resale are held at the lower of their carrying
value and fair value less costs to sell. The fair value (a Level 2
valuation, determined based on prices for similar assets) is
GBP8.6m.
The Group assessment of fair values of used inventory of
GBP271.9m involves an element of estimation. The key assumption is
estimating the likely sale period and the expected profit or loss
on sale for each of our inventory items that are held at the period
end point. We conduct this analysis by looking at stock by age
category and comparing historical trends and our forward
expectations on these assumptions.
During the six months ended 30 June 2021 management reassessed
its estimates and assumptions in respect of employee
post-retirement benefit obligations. The obligations under these
plans are recognised in the balance sheet and represent the present
value of the obligation calculated by independent actuaries, with
input from management. These actuarial valuations include
assumptions such as discount rates and return on assets, details of
which are provided in note 20 below.
The estimates in respect of the anticipated tax rate to be
applied for the full financial year 2021 and subsequently used in
the preparation of the results for the six month period to 30 June
2021 are set out in note 11.
5 Comparative figures
The comparative figures for the financial year ended 31 December
2020 are extracted from the Group's statutory accounts for that
financial year. Those accounts have been reported on by the
company's auditor and delivered to the registrar of companies. The
report of the auditor was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
6 Revenue
The Group's main operations and revenue streams are those
described in the last annual financial statements. All the Group's
revenue is derived from contracts with customers.
Disaggregation of revenue
In the following table, revenue is disaggregated by primary
geographical market, major products/service lines and timing of
revenue recognition. The table also includes a reconciliation of
the disaggregated revenue with the Group's four strategic
divisions, which are its reportable segments, see note 8.
For the six months ending Franchised Carstore Software Leasing US Motor* Total
30 June 2021 UK Motor GBPm GBPm GBPm GBPm GBPm
GBPm
=========== ========= ======== ======== ========== =======
Primary geographical markets
=========== ========= ======== ======== ========== =======
Europe 1,673.8 66.0 9.5 37.7 - 1,787.0
=========== ========= ======== ======== ========== =======
North America - - - - 28.3 28.3
=========== ========= ======== ======== ========== =======
Africa - - 0.2 - - 0.2
=========== ========= ======== ======== ========== =======
Asia - - 0.1 - - 0.1
=========== ========= ======== ======== ========== =======
Revenue from External customers 1,673.8 66.0 9.8 37.7 28.3 1,815.6
================================ =========== ========= ======== ======== ========== =======
Major products/service lines
================================ =========== ========= ======== ======== ========== =======
Aftersales revenue 131.1 - - - 2.8 133.9
=========== ========= ======== ======== ========== =======
Used vehicle revenue 781.0 66.0 - - 3.0 850.0
=========== ========= ======== ======== ========== =======
New vehicle revenue 761.7 - - - 22.5 784.2
=========== ========= ======== ======== ========== =======
Software revenue - - 9.8 - - 9.8
=========== ========= ======== ======== ========== =======
Leasing revenue - - - 37.7 - 37.7
================================ =========== ========= ======== ======== ========== =======
Revenue from External customers 1,673.8 66.0 9.8 37.7 28.3 1,815.6
================================ =========== ========= ======== ======== ========== =======
Timing of revenue recognition
=========== ========= ======== ======== ========== =======
At point in time 1,669.7 65.6 1.1 18.0 28.3 1,782.7
=========== ========= ======== ======== ========== =======
Over time 4.1 0.4 8.7 19.7 - 32.9
================================ =========== ========= ======== ======== ========== =======
Revenue from External customers 1,673.8 66.0 9.8 37.7 28.3 1,815.6
================================ =========== ========= ======== ======== ========== =======
For the six months ending Franchised Carstore Software Leasing US Motor* Total
30 June 2020 UK Motor GBPm GBPm GBPm GBPm GBPm
GBPm
=========== ========= ======== ======== ========== =======
Primary geographical markets
=========== ========= ======== ======== ========== =======
Europe 1,067.1 43.1 8.2 31.1 - 1,149.5
=========== ========= ======== ======== ========== =======
North America - - - - 68.5 68.5
=========== ========= ======== ======== ========== =======
Africa - - 0.2 - - 0.2
=========== ========= ======== ======== ========== =======
Asia - - 0.1 - - 0.1
=========== ========= ======== ======== ========== =======
Revenue from External customers 1,067.1 43.1 8.5 31.1 68.5 1,218.3
================================ =========== ========= ======== ======== ========== =======
Major products/service lines
================================ =========== ========= ======== ======== ========== =======
Aftersales revenue 97.7 - - - 7.9 105.6
=========== ========= ======== ======== ========== =======
Used vehicle revenue 509.2 43.1 - - 10.2 562.5
=========== ========= ======== ======== ========== =======
New vehicle revenue 460.2 - - - 50.4 510.6
=========== ========= ======== ======== ========== =======
Software revenue - - 8.5 - - 8.5
=========== ========= ======== ======== ========== =======
Leasing revenue - - - 31.1 - 31.1
================================ =========== ========= ======== ======== ========== =======
Revenue from External customers 1,067.1 43.1 8.5 31.1 68.5 1,218.3
================================ =========== ========= ======== ======== ========== =======
Timing of revenue recognition
=========== ========= ======== ======== ========== =======
At point in time 1,063.3 42.7 0.4 10.2 68.5 1,185.1
=========== ========= ======== ======== ========== =======
Over time 3.8 0.4 8.1 20.9 - 33.2
================================ =========== ========= ======== ======== ========== =======
Revenue from External customers 1,067.1 43.1 8.5 31.1 68.5 1,218.3
================================ =========== ========= ======== ======== ========== =======
* The Group's US business is a discontinued operation which is
currently classified as held for sale (see note 14).
7 Non-underlying Items
Non-underlying income and expenses are items that are not
incurred in the normal course of business and are sufficiently
significant and/or irregular to impact the underlying trends in the
business.
2021 2020
GBPm GBPm
====== ======
Within operating expenses:
======================================================= ====== ======
Impairment of goodwill - (12.5)
====== ======
Impairment of right of use assets (5.4) -
====== ======
Closure costs 0.1 (0.8)
======================================================= ====== ======
Termination and severance costs (0.9) (1.2)
======================================================= ====== ======
(6.2) (14.5)
======================================================= ====== ======
Within other income - gains on the sale of businesses,
property and investments:
====== ======
Profit/(loss) on the sale of businesses 1.0 (6.5)
====== ======
Profit on the sale of property 1.4 0.6
======================================================= ====== ======
2.4 (5.9)
======================================================= ====== ======
Within finance expense:
======================================================= ====== ======
Net interest on pension scheme obligations (0.5) (0.6)
======================================================= ====== ======
(0.5) (0.6)
======================================================= ====== ======
Total non-underlying items before tax (4.3) (21.0)
======================================================= ====== ======
Non-underlying items in tax 0.8 3.4
======================================================= ====== ======
Total non-underlying items after tax (3.5) (17.6)
======================================================= ====== ======
During the period there have been no indicators of impairment of
goodwill so no review was deemed necessary, as a consequence, no
impairment charge has been made during the period (2020:
GBP12.5m).
Following the sale of the businesses in the US a net GBP0.1m
credit was recognised as a non-underlying item in 2021 relating to
various costs incurred and rent contributions received post sale.
During the previous year the Group undertook a review of its
operations during the year which resulted in a number of business
closures with resultant costs of closure of these sites of GBP0.8m
which were recognised as a non-underlying item in 2020.
Group property, plant and equipment and assets held for sale
have been reviewed for possible impairments. As a result of this
review there was no impairment charge against assets held for sale
during the period (2020: GBPnil). In respect of property, plant and
equipment, on disposal of the final business in the US disposal
group, there remained three right of use property assets which were
impaired by GBP4.9m (2020: GBPnil). There were no reversals of
previous impairment charges in respect of assets held for sale
where anticipated proceeds less costs to sell have increased over
their impaired carrying values (2020: GBPnil).
During the period a number of employees were offered
compensation on either being made redundant or terminating their
employment contracts which amounted to GBP0.9m (2020: GBP1.2m).
Other income, being the profit on disposal of businesses and
property was GBP2.4m (2020: loss GBP5.9m). This comprises a profit
of GBP1.4m (2020: GBP0.6m profit) on disposal of property and a
profit on the disposal of motor vehicle dealerships of GBP1.0m
(after deducting GBP1.0m of cumulative foriegn exchange translation
differences transferred from other comprehensive income) (2020:
GBP6.5m loss).
The net interest expense on pension obligations in respect of
the defined benefit schemes closed to future accrual is shown as a
non-underlying item due to the volatility and non-trading nature of
this amount. A net interest expense of GBP0.5m has been recognised
during the period (2020: GBP0.6m).
8 Segmental Analysis
For the six months ending Franchised Carstore Software Leasing US Motor* Group Total
30 June 2021 UK Motor GBPm GBPm GBPm GBPm Interest GBPm
GBPm GBPm
=========== ========= ========= ======= ========== ========== =======
Total gross segment turnover 1,673.8 66.0 12.1 49.0 28.3 - 1,829.2
=========== ========= ========= ======= ========== ========== =======
Inter-segment turnover - - (2.3) (11.3) - - (13.6)
=========== ========= ========= ======= ========== ========== =======
Revenue from external customers 1,673.8 66.0 9.8 37.7 28.3 - 1,815.6
================================ =========== ========= ========= ======= ========== ========== =======
Operating profit/(loss)
before non-underlying items 37.6 0.3 6.7 8.1 (0.8) - 51.9
=========== ========= ========= ======= ========== ========== =======
Other income and non-underlying
items (0.1) - - - (3.7) - (3.8)
================================ =========== ========= ========= ======= ========== ========== =======
Operating profit/(loss) 37.5 0.3 6.7 8.1 (4.5) - 48.1
================================ =========== ========= ========= ======= ========== ========== =======
Finance expense (10.7) (0.4) - (1.5) (0.2) (4.9) (17.7)
=========== ========= ========= ======= ========== ========== =======
Finance income - - - - - 0.4 0.4
================================ =========== ========= ========= ======= ========== ========== =======
Segmental profit/(loss)
before tax 26.8 (0.1) 6.7 6.6 (4.7) (4.5) 30.8
================================ =========== ========= ========= ======= ========== ========== =======
Depreciation and amortisation 16.7 0.2 2.0 19.7 0.1 - 38.7
=========== ========= ========= ======= ========== ========== =======
Impairment of right of
use assets 0.5 - - - 4.9 - 5.4
================================ =========== ========= ========= ======= ========== ========== =======
For the six months ending Franchised Carstore Software Leasing US Motor* Group Total
30 June 2020 UK Motor GBPm GBPm GBPm GBPm Interest GBPm
GBPm GBPm
=========== ========= ========= ======= ========== ========== =======
Total gross segment turnover 1,067.1 43.1 10.8 37.2 68.5 - 1,226.7
=========== ========= ========= ======= ========== ========== =======
Inter-segment turnover - - (2.3) (6.1) - - (8.4)
=========== ========= ========= ======= ========== ========== =======
Revenue from external customers 1,067.1 43.1 8.5 31.1 68.5 - 1,218.3
================================ =========== ========= ========= ======= ========== ========== =======
Operating (loss)/profit
before non-underlying items (18.1) (1.7) 5.9 4.7 (1.6) - (10.8)
=========== ========= ========= ======= ========== ========== =======
Other income and non-underlying
items (13.9) - - - (6.5) - (20.4)
================================ =========== ========= ========= ======= ========== ========== =======
Operating (loss)/profit (32.0) (1.7) 5.9 4.7 (8.1) - (31.2)
================================ =========== ========= ========= ======= ========== ========== =======
Finance expense (13.8) (0.4) - (1.6) (0.7) (4.8) (21.3)
=========== ========= ========= ======= ========== ========== =======
Finance income - - - - - 0.5 0.5
================================ =========== ========= ========= ======= ========== ========== =======
Segmental (loss)/profit
before tax (45.8) (2.1) 5.9 3.1 (8.8) (4.3) (52.0)
================================ =========== ========= ========= ======= ========== ========== =======
Depreciation and amortisation 20.0 0.2 1.8 20.8 0.1 - 42.9
=========== ========= ========= ======= ========== ========== =======
Impairment of goodwill 12.5 - - - - - 12.5
================================ =========== ========= ========= ======= ========== ========== =======
9 Finance Expense
2021 2020
GBPm GBPm
====== =====
Recognised in profit and loss
====== =====
Interest payable on bank borrowings, Senior note and
loan notes 4.4 4.2
====== =====
Lease interest 6.3 6.9
====== =====
Vehicle stocking plan interest 5.0 8.0
====== =====
Net interest on pension scheme obligations (non-underlying
- see note 7) 0.5 0.6
=========================================================== ====== =====
Total interest expense being interest expense in respect
of financial liabilities held at amortised cost 16.2 19.7
====== =====
Unwinding of discounts in contract hire residual values 1.5 1.6
=========================================================== ====== =====
Total finance expense 17.7 21.3
=========================================================== ====== =====
10 Finance Income
2021 2020
GBPm GBPm
====== =====
Recognised in profit and loss
====== =====
Lease interest receivable 0.4 0.5
====== =====
Total finance income 0.4 0.5
============================== ====== =====
11 Taxation
Based upon the anticipated profit for the full year the
effective tax rate on the underlying profit for 2021 is estimated
at 9.30% (2020: credit rate of 22.76% on losses). The effective
rate for 2021 is lower than the current rate of UK tax
predominantly due to remeasurement of a portion of deferred tax
balances in the UK from 19% to 25%. In the 3 March 2021 Budget it
was announced that the UK tax rate will increase to 25% from 1
April 2023 (this change was substantively enacted on 24 May 2021),
as such an estimate of the net deferred tax assets forecast at 1
April 2023 has been revalued from 19% to 25% giving a GBP3.6m
credit to the income statement. Without the effect of the rate
change on deferred tax assets the effective rate for 2021 would
have been 19.63%.
12 Earnings per share
2021 2020
Pence Pence
======= ======
Basic earnings per share 2.04 (2.98)
======= ======
Effect of adjusting items 0.25 1.27
========================================== ======= ======
Underlying earnings per share (Non-GAAP
measure) 2.29 (1.71)
========================================== ======= ======
Diluted earnings per share 2.02 (2.97)
======= ======
Effect of adjusting items 0.25 1.27
========================================== ======= ======
Underlying diluted earnings per share
(Non-GAAP measure) 2.27 (1.70)
========================================== ======= ======
The calculation of basic, adjusted and diluted earnings per
share is based on;
Number of shares (millions) 2021 2020
number number
======== =======
Weighted average number of shares used
in basic and adjusted earnings per share
calculation 1,390.5 1,390.5
======== =======
Weighted average number of dilutive shares
under option 13.9 2.2
================================================== ======== =======
Diluted weighted average number of shares
used in diluted earnings per share calculation 1,404.4 1,392.7
======== =======
Earnings 2021 2020
GBPm GBPm
================================================ ======== =======
Profit/(loss) for the period 28.4 (41.4)
======== =======
Adjusting items:
======== =======
Non-underlying items attributable to
the parent (see note 7) 4.3 21.0
======== =======
Tax effect of non-underlying items (0.8) (3.4)
================================================== ======== =======
Earnings for adjusted earnings per share
calculation 31.9 (23.8)
================================================== ======== =======
The directors consider that the underlying earnings per share
figure provides a better measure of comparative performance.
13 Business and property disposals
During the period the Group generated net proceeds of GBP27.2m
(2020: GBP16.6m) with a profit on disposal of GBP1.0m (2020: loss
GBP6.5m) from the sale of businesses. Businesses sold in 2021
included the remaining two operations in the US which realised a
profit of GBP2.0m before the deduction of cumulative translation
differences of GBP1.0m to give a net GBP1.0m profit on disposal.
Three other small surplus UK businesses were sold during the
period.
The Group sold property generating net proceeds of GBP1.6m
(2020: GBP15.3m) with a break even result on disposal of GBP1.4m
(2020: GBP0.5m) and made net gains in respect of lease terminations
and aborted developments of GBP1.4m (2020: GBP1.1m). Of the
properties sold in the prior year, one was part of a sale and lease
back arrangement which generated proceeds of GBP10.5m.
14 Assets held for sale and Discontinued operations
The Group announced at the end of 2017 that it intended to
dispose of the US motor business and it was subsequently classified
as a discontinued operation and disposal group held for sale. In
the period between this announcement and the end of 2020 proceeds
of GBP78.8m had been received on the sale of individual stores.
During the first half of 2021 the Group sold its two remaining
stores for proceeds of GBP26.6m. The results of the US Business are
shown as a discontinued operation within these consolidated
financial statements. At the start of the financial year the assets
and liabilities of the US operation were classified as held for
sale as a disposal group. On disposal of the remaining two
businesses no further assets are being held for sale and any
remaining balances have been restated to their original
categorisations. The operation intends to maintain a small presence
in the US to facilitate the settlement of outstanding transactions
and provide support in assisting the complete wind down of the
business which is likely to be in excess of one year in duration.
No impairment loss has been recognised in the income statement for
the period ended 30 June 2021 in respect of this transaction.
The results of the discontinued operation are set out on the
face of the condensed consolidated income statement. Other
financial information relating to the discontinued operation for
the period is set out below.
2021 2020
GBPm GBPm
====== =====
Exchange differences on translation of
discontinued operation (0.1) 1.1
=============================================== ====== =====
Other comprehensive income from discontinued
operation (0.1) 1.1
=============================================== ====== =====
2021 2020
GBPm GBPm
======= ======
Net cash (used in)/from operating activities (5.3) 8.8
======= ======
Net cash from investing activities 26.6 14.1
=============================================== ======= ======
Net cash used in financing activities (22.7) (43.0)
=============================================== ======= ======
Net cash decrease generated by discontinued
operation (1.4) (20.1)
=============================================== ======= ======
2021 2020
pence pence
======= ======
Basic earnings per share from discontinued
operation (0.29) (0.50)
======= ======
Diluted earnings per share from discontinued
operation (0.28) (0.50)
=============================================== ======= ======
The Group also holds a number of properties that are currently
being marketed for sale which are expected to be disposed of during
the next 12 months. No impairment loss has been recognised in the
income statement for the six months to 30 June 2021 on
re-measurement of properties to the lower of their carrying amount
and their fair value less costs to sell (2020: GBPnil).
During the period to 30 June 2021 disposals of assets classified
as held for sale resulted in a profit of GBP1.2m on disposal. In
the previous period to 30 June 2020 disposals of assets classified
as held for sale resulted in a loss of GBP4.8m on disposal.
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
============= ============= ===========
Property, plant and equipment 8.6 58.8 57.8
============= ============= ===========
Inventories - 31.0 31.2
============= ============= ===========
Trade and other receivables - 10.6 10.0
=================================== ============= ============= ===========
Assets classified as held for sale 8.6 100.4 99.0
=================================== ============= ============= ===========
15 Cash and cash equivalents
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
============= ============= ===========
Bank balances and cash equivalents 83.2 123.3 56.0
=================================== ============= ============= ===========
16 Net Borrowings
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
============= ============= ===========
Cash and cash equivalents (note 15) 83.2 123.3 56.0
============= ============= ===========
Non-current interest bearing loans
and borrowings (73.7) (169.3) (156.4)
==================================== ============= ============= ===========
Adjusted net cash/(debt) 9.5 (46.0) (100.4)
============= ============= ===========
Lease liabilities (228.7) (258.6) (243.2)
==================================== ============= ============= ===========
Net Borrowings (219.2) (304.6) (343.6)
==================================== ============= ============= ===========
17 Deferred Income
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
============= ============= ===========
Warranty policies sold 16.2 17.9 15.0
============= ============= ===========
Contract hire leasing income 61.7 69.6 68.7
============================= ============= ============= ===========
77.9 87.5 83.7
============================= ============= ============= ===========
Current 38.8 53.6 42.9
============= ============= ===========
Non-current 39.1 33.9 40.8
============================= ============= ============= ===========
77.9 87.5 83.7
============================= ============= ============= ===========
18 Change to contract hire vehicle balances
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
============= ============= ===========
Depreciation 19.6 20.7 40.9
============= ============= ===========
Changes in trade and other payables
and deferred income (19.8) (14.6) (16.5)
============= ============= ===========
Purchases of contract hire vehicles (37.9) (33.9) (72.6)
============= ============= ===========
Unwinding of discounts in contract
hire vehicle balances (1.5) (1.6) (3.1)
==================================== ============= ============= ===========
Cash flow movement in contract hire
vehicle balances (39.6) (29.4) (51.3)
==================================== ============= ============= ===========
19 Change in inventories
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
============= ============= ===========
Movement in inventory 139.8 91.2 230.2
============= ============= ===========
Impact of exchange differences - (0.4) 0.3
============= ============= ===========
Non cash movement in consignment
vehicles (47.7) 14.7 2.2
============= ============= ===========
Classified as held for sale 16.8 15.3 17.8
============= ============= ===========
Transfer value of contract hire vehicles
from fixed assets to inventory 37.6 20.7 44.3
========================================= ============= ============= ===========
Cash flow increase due to movements
in inventory 146.5 141.5 294.8
========================================= ============= ============= ===========
20 Pension scheme obligations
The net liability for defined benefit obligations has decreased
from GBP75.5m at 31 December 2020 to GBP34.9m at 30 June 2021. The
decrease of GBP40.6m comprises a net interest expense of GBP0.5m
recognised in the income statement, a net remeasurement gain of
GBP34.8m and contributions paid of GBP6.3m. The net remeasurement
gain has arisen in part due to changes in the principal assumptions
used in the valuation of the scheme's liabilities over those used
at 31 December 2020. The assumptions subject to change are the
discount rate of 1.90% (31 Dec 2020: 1.40%), the inflation rate
(RPI) of 3.30% (31 Dec 2020: 3.05%), the inflation rate (CPI) of
2.80% (31 Dec 2020: 2.55%) and the mortality assumptions adopted at
30 June 2021 are 100% of 2018 VitaCurves projected using CMI_2020
converging to 1.00% p.a. (31 Dec 2020: 100% of 2018 VitaCurves
projected using CMI_2019 converging to 1.00% p.a).
21 Related party transactions
There have been no new related party transactions that have
taken place in the first six months of the current financial year
that have materially affected the financial position or performance
of the Group during that period and there have been no changes in
the related party transactions described in the last annual report
that could do so.
22 Risks and uncertainties
The Board maintains a policy of continuous identification and
review of risks which may cause our actual future Group results to
differ materially from expected results.
The principal risks identified were: failure to adopt the right
strategy or failure of our adopted strategy to be effectively
implemented or to deliver the desired results, dependence on
vehicle manufacturers for the success of our business, failure to
meet competitive challenges to our business model or sector,
European economic instability affecting the UK in particular
impacting used vehicle prices, UK governmental spending
constraints, impacts of international import tariffs on motor
vehicles, changes to the type of vehicles sold (including the trend
away from the purchase and use of diesel vehicles) or the amount of
road use, availability of debt funding, funding requirements of the
occupational pension scheme, significant litigation or regulator
action against or otherwise impacting the Group, failure of
systems, reliance on the use of estimates, failure to attract,
develop, motivate and retain good quality team members, failure to
provide safe working and retail environments, failure to control
environmental hazards, failure to comply with the General Data
Protection Regulation and the potential impacts associated with the
UK's decision to leave the EU. Additionally, there are vehicle
credit stocking facilities which are secured against inventory and
are made available to the group on a continuous basis with notice
periods of between 1 and 4 months. Based on discussions with the
main providers of these facilities and historic availability, the
directors expect these stocking facilities to remain available to
the Group throughout the forecast period. The increased risks to
the Group associated with the Coronavirus pandemic are detailed in
the Basis of Preparation note. There is also a short-term risk to
new car supply from the impact of micro-chip shortages.
The Risk Control Group has met to consider these risks and
uncertainties and will continue to monitor how these risks evolve.
The Board has recently reviewed the risk factors and confirms that
they remain an appropriate assessment of our risks for the rest of
the current year. The Board considers the main areas of risk and
uncertainty that could impact profitability to be used vehicle
prices and economic and business conditions, including the UK's
decision to leave the EU and Sterling/Euro exchange rates.
23 Responsibility Statement
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the European Union;
(b) The interim management report includes a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(ii) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
By order of the Board,
W Berman
Chief Executive Officer
M S Willis
Chief Financial Officer
15 September 2021
INDEPENT REVIEW REPORT TO PRAGON PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises Consolidated Income
Statement, Consolidated Statement of Comprehensive Income,
Consolidated Balance Sheet, Consolidated Cash Flow Statement and
the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The latest annual financial statements of the group were
prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and the next annual financial statements will be
prepared in accordance with UK-adopted international accounting
standards. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted for use in
the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Craig Parkin
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill
Snowhill Queensway
Birmingham B4 6GH
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END
IR EAXNLFAFFEFA
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September 15, 2021 02:00 ET (06:00 GMT)
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