Pendragon posts pre-tax profit of £35.1m in first half of 2021

Pendragon has posted a pre-tax profit of £35.1 million for the first half of 2021, compared with a loss of £31m over the same period last year.

Revenues increased by 56.9% to £1.67 billion over the same period (up 64.6% on a like-for-like basis).

The top three AM100 group said “significant improvements” in its digital capabilities enabled the business to largely mitigate the impact of the third national lockdown in Q1 and then emerge strongly in Q2 to outperform the market with a 42.7% like-for-like increase in new cars compared with the total market.

Bill Berman, Pendragon chief executive, said a strong period of progress and growth led to a growth in underlying profit before tax that exceeded initial expectations.

He said: "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.”

Berman is expecting continued shortages of stock for new and used vehicles for the rest of 2021 and acknoweldged there is the potential for further disruption over the winter period from Covid-19 and a correction in used car prices following sustained increases.

However, he is confident the group’s profit before tax result for the full year will be around £55m to £60m.

Berman added this level of financial performance will put the business on track to deliver its target of up to £90m pre-tax profit by the 2025 financial year.

Pendragon's cost cutting programme, which included closing showrooms, delivered £45.2m in savings.

The main driver of the turnaround versus H1 2020 was Pendragon's franchised dealer businesses Evans Halshaw and Stratstone in the UK. The underlying result from this part of this business improved from an operating loss of £18.1m to a profit of £37.6m.

Revenue was up 57% at £1,673.8m, with Used revenue up 53.4% (at £781m), New Car up 65.5% (at £761.7m) and aftersales up 34.2% (at £131.1m).

The company's software business Pinewood also continues to perform well with revenues up by 12% to £12.1m, with international users increasing by 14%.

Leasing performed well in this area of the market and saw revenues up 31.7% to £49m driven by a 90% increasing in de-fleet vehicle disposals.

Outlook is "suitably cautious"

Analysts at Zeus Capital said that while Pendragon has delivered a strong H1 performance, its outlook on the future is “suitably cautious” given the supply pressures facing the new car market.

Zeus Capital’s analyst statement stated: “We believe the demand for new cars remains strong and is reflected in a stronger September order bank for this year vs. last.

“The key delta remains when these cars arrive - whether that’s Q4 2021 (calendar) or Q1 2022. The used car price inflation we have seen is expected to continue going into H2 2021.”

Pendragon had faced criticism in June after major shareholder and Swedish car retail group boss, Anders Hedin, criticised the PLC’s “silence” on its trading performance.

This was followed 24 hours later by a pre-close update.