Full Year Results to 31st December 2019

18th Mar 2020

A much improved second-half performance and a return to profitability in challenging market conditions were more than offset by significant underlying losses in the first half of the year, resulting in an overall underlying loss before tax in FY19. Financial performance in the first half was impacted by a combination of issues, with the principal driver being the impact of the clearance of used car stock from excess levels. The second half performance improved as a result of actions taken by management to re-set performance, which included the closure of 22 underperforming Car Store locations, better management of used vehicle inventory and a clear focus on operational cost management. The improvement in performance during the second half puts the business on a much stronger footing for FY20. The company is closely monitoring the unprecedented impact of the COVID-19 virus and its potential impact on the economy. At the moment, and excluding any impact from COVID-19, the company expects Group underlying profit before tax for FY20 to be in line with market expectations, but will continue to watch the situation closely, particularly in light of the measures that were announced by the UK Government on 16 March. At this stage, it is too early to accurately quantify what the impact may be.

Financial Highlights

  • Group Revenue £4,506.1m +3.8% LFL (-2.6% total)
  • Underlying (Loss) / Profit Before Tax £(16.4)m loss (2018 : £47.8m profit). H1 underlying loss of £(32.2)m loss,
  • H2 underlying profit of £15.8m
  • Non-Underlying Charge of £97.7m (2018 : £92.2m charge) including a non-cash charge principally for impairment of goodwill and non-current assets of £130.2m.
  • Loss After Tax £(117.4)m (2018 : £(50.5)m loss)
  • Dividend – The Group is not proposing a final dividend for FY19 (2018: 0.7p)
  • Net Debt – £119.7m (FY18 : £126.1m), down 5.1%

Operational Highlights 

Car Store

  • A full market and operating model assessment of Car Store was completed during H1, which confirmed there is a significant and attractive market opportunity and that the proposition is well received by its target customers.
  • Following this, a clear roadmap of short-term and long-term steps were established. The short-term actions included the closure of 22 Car Stores and one preparation centre in H2. In addition, following a review of capacity, a further preparation centre was closed.
  • Significant performance improvements in the remaining 12 stores since the closure programme was completed, with underlying operating losses from the remaining 12 stores reducing to £(1.1)m in the fourth quarter. Further improvements are targeted during 2020.

Franchised UK Motor

  • H1 reported underlying operating loss of £(7.7)m (H1 2018 : £31.8m) , H2 reported underlying operating profit of £20.7m (H2 2018 : £21.2m).
  • H1 2019 was impacted by the previously disclosed clearance of used car stock from excess levels.
  • Used car gross margins stabilised at 7.8% in H2 vs 4.9% in H1.
  • Further progress has been made with right-sizing the Franchised UK Motor operation with 6 Jaguar
  • Land Rover sites either disposed of or closed in FY19.
  • While market conditions remained challenging during H2, with the new car market down (1.1)%. The Group outperformed the new car market in the period, with H2 like-for-like new car unit sales growth of 2.3%.
  • Underlying operating costs were well managed in H2 and on a proforma comparable IAS 17 basis, in total were down 5.6% (down 0.8% on an LFL basis) as a result of the previously announced cost reduction programmes.

Software - Pinewood

  • Underlying operating profit up 14.5% to £13.4m (2018 : £11.7m).
  • The software business continues to perform well, with continued international expansion.
  • Additional customers were added in multiple territories, including Norway and Sweden during 2019.

Leasing – Pendragon Vehicle Management

  • Underlying operating profit down 13.5% to £12.8m (2018 : £14.8m), as a result of the previously disclosed provision release of £2.8m in FY18.
  • Continued high return on investment from a low capital base.
  • Valuable source of used car stock to the group.

US Motor Group

  • Disposal of two franchise locations in 2019 (Mission Viejo and Newport Beach) for a combined consideration of £59.3m.
  • This followed the initial disposal of Newport Beach Aston Martin in 2018 for £3.1m.
  • Puente Hills Chevrolet disposal was completed in February 2020 for consideration of £16.5m.
  • Discussions for the remaining two sites in the US Motor Group are continuing.
  • On target for expected total gross proceeds from the combined sale of US assets of c.£100m pre-tax.

Board and management changes

  • A number of Board and senior management positions have been added to strengthen the business to support its future growth potential.
  • Bill Berman appointed as Chief Executive Officer.
  • Two new Non-Executive Board members appointed.
  • New roles of Chief Information Officer and Chief Marketing Officer created and appointed.