Pendragon plans 1,800 job cuts and car dealership closures across the UK

Pendragon has announced a plan to axe 1,800 jobs from its UK car retail network as part of a bid to create a “leaner and more sustainable operating model” in the wake of the COVID-19 crisis.

The former AM100 top-ranking retail group will initially close a total of 15 dealerships (7 freehold and 8 leasehold) as a result of a review of its operational structure, it revealed in a statement issued via the London Stock Exchange today (July 30). 

But wider-reaching proposed changes to its car retail operating model are expected to result in a total of around 1,800 redundancies in an effort to save £35m – a process which will command an estimated one-off cash restructuring cost of approximately £5m.

News of the changes comes just weeks after a Pendragon spokesperson denied that any large-scale redundancies would be taking place at the group after consultation opened over “a small amount of leadership roles”.

Commenting on the changes to the business announced today (July 30), Bill Berman, Pendragon’s chief executive, said that its restructuring proposals “reflect our intention to create a resilient, leaner and more profitable business across the entire group”. 

He said: “These have been difficult decisions for the board to make and our priority now is to manage the transition to our new operating model. 

“The COVID-19 pandemic is a uniquely challenging situation and we want to protect as many jobs as we can sustainably and the proposed redundancies are, of course, extremely regrettable. 

“During the pandemic we have focused on ways to improve workflow, efficiency and our digital capabilities.  

“It is paramount that we embed these behaviours into all areas of the business, as we expect the economic environment to remain challenging. 

“The actions that we are undertaking are for the long-term health and success of the group and ensure that we emerge from the pandemic as a more competitive and stronger business with the ability to thrive in the future.”

Pendragon said it planned to close 15 of its car retail locations which had been predominently loss-making and had made an operating loss before tax of over £2m in 2019.

Around 400 redundancies are expected from the 15 locations with estimated one-off cash redundancy costs of £1.2m and closure costs of approximately £1m. 

There will also be associated lease and asset impairment charges of approximately £5.5m. 

In March Pendragon reported a £117.4 million loss after tax (pre-tax loss £16.4m) from 2019 trading, due to "significant H1 losses”.

Last month it revealed that COVID-19 disruption had wiped out almost £10m operating profit at its franchised dealerships before the end of March.

Underlying operating profit at Pendragon’s franchised motor division, which includes the brands Stratstone and Evans Halshaw, was £4.4m, a decline of £4.7m versus Q1 2019.

Its Car Store division of used car supermarkets, which was radically rationalised in 2019, reduced operating losses from £7m in Q1 2019 to £1m in Q1 2020 and improved gross margin from 7.4% to 8.0%.

Berman, who completed an in-depth interview with AM ahead of the COVID-19 crisis, added: "I would like to take this opportunity to thank every one of our employees for the hard work that has been done to reopen our businesses from lockdown.

“I am proud of the essential work we undertook to assist key workers during lockdown and for the way we have served our customers in store and online during these difficult times."