The impact of Covid-19 has accelerated a review of the Group’s future operating model which had already commenced before the pandemic struck. As a result, the Board has taken the decision to introduce a more efficient operating model with fewer stores and leaner support functions.
Store estate reductions
A total of 15 stores will be closed as a result of the review (7 freehold and 8 leasehold). Predominantly, the closure sites are loss making and are therefore no longer expected to be viable, or are not part of the future network structure between us and our OEM partners. Combined, these stores made an operating loss before tax of c.£2.0m in FY19.
A total of approximately 400 redundancies are expected from these locations with estimated one-off cash redundancy costs of £1.2m and closure costs of approximately £1.0m. There will also be associated lease and asset impairment charges of approximately £5.5m.
Store and support function operating models
The Board has concluded that a leaner and more sustainable operating model is necessary to safeguard the Pendragon business and position it to deliver improved results over the short to medium-term, against what is expected to remain a challenging economic environment. This decision has been taken as a result of work undertaken pre-Covid-19 and follows efficiency gains achieved during the lockdown and in the subsequent reopening programme. The proposed changes to our operating model are expected to result in approximately 1,400 redundancies and, subject to consultation, are expected to deliver an annual reduction in costs of approximately £35.0m, with an estimated one-off cash restructuring cost of approximately £5.0m.
In total, as a result of the store estate reductions and operational structure changes described above, there will be approximately 1,800 redundancies. The Group will accordingly enter into redundancy consultations with a number of its employees across the business.
Bill Berman, Chief Executive Officer, said;
“The above proposals reflect our intention to create a resilient, leaner and more profitable business across the entire group. 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.
“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.“
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