Pendragon faces third consecutive shareholder revolt over leadership bonuses

Pendragon’s leadership team could be set to face another shareholder revolt over “inappropriate” financial bonuses – a year after their last showdown with investors.

The Times newspaper reported today (May 30) that the AM100 car retail PLC faces a third year of conflict over its leadership remuneration as it prepared for next month’s AGM.

Influential shareholder advisory group Glass Lewis has branded the group’s decision to issue sizable bonuses in a year in which the business claimed almost £65m in COVID-19 support from the UK Government as “inappropriate”.

As a result, Glass Lewis has written to shareholders calling them to vote against the re-election of Pendragon’s remuneration committee chair, non-executive director Mike Wright and to reject the dealer group’s pay report.

“We do not believe such a significant bonus pay out in terms of maximum opportunity is reconcilable with the significant utilisation of government support”, said Glass Lewis.

A statement issued to AM by Pendragon said: “Pendragon delivered a strong performance last year with new and used car sales ahead of our sector benchmarks, resulting in record underlying profits.

"The group also continued to make positive progress against its strategy despite operational challenges caused by the pandemic, including lockdowns in the early part of the year.

"The remuneration committee believes the rewards for the executive team and the wider operational management team are commensurate with this performance and in line with the wider sector, and the remuneration policy supports the longer-term success of the business for all stakeholders.”

2021 'revolt'

In May last year major Pendragon shareholder, Hedin Group, joined other key stakeholders in stating it would vote against “out of tune” bonus payments.

That move came after Bill Berman, Pendragon’s chief executive received payment of a deferred bonus worth £413,000 which looked set to take his annual rewards to £3.2m.

That payment was proposed despite the business’s axing of 1,800 jobs and utilisation of millions of pounds of taxpayers' money to furlough staff through the Coronavirus Job Retention Scheme (CJRS).

At the time, Hedin Group boss Anders Hedin said: “This needs to stop as it is totally out of tune with what all other stakeholders in the company are experiencing and the amount of taxpayer support received.”

But Berman received his bonus payments despite a 41.04% against the re-election of non-executive director and remuneration board chairman Wright and 20.91% against the re-election of Berman to the board in a show of opposition against the payments.

Since then, Hedin has increased his stake in Pendragon to just over 25% of voting rights, taking the total to over 27% with a further share purchase revealed today.

Pendragon's turnaround

Berman has overseen the turnaround of Pendragon’s fortunes since he joined the business from US-based car retail giant AutoNation in 2019 and is on track to hit its 2020 target of achieving an underlying profit before tax target of £85m to £90m by 2025.

Last month it reported that a push to “maximise margins” to mitigate against automotive supply constraints on its new and used car sales had helped deliver a 73.1% increase in Q1 pre-tax profits.

Gross profit per unit (GPU) grew to £2,456 – £975 higher than Q1 2021 – in the period as it sought to mitigate the impact of supply issues by “maximising the level of margins achieved per unit”.

The trading update came less than a month after Berman said that he was “delighted” with the car retail group’s 10-fold increase in profits during 2021.

He said: “The positive momentum in the business has continued into the first quarter of this year and I am very pleased with how we have performed.

“The benefits of the work we have done in the past two years to improve our operations, from vehicle sourcing through to online and in store sales practices is evident in our strong trading performance and we have seen good contributions from all parts of the group.

“While we are mindful of the pressures facing our market and our customers, we are confident in our strategy and focused on continuing to deliver profitable growth over the medium term.”