23 March 2022

Pendragon, which today reported an annual pre-tax profit of more than £80 million, is under pressure to explain why it didn’t reveal a £400m takeover bid from Europe’s Hedin Group.

Shares in the retailer jumped 20% on Monday, 21 March, after it was revealed at the weekend that Hedin had offered 28p a share for Pendragon weeks ago. Hedin became the largest shareholder in Pendragon in November last year taking more than 26% of the UK firm. Under stock exchange rules, if a stake goes beyond 29.9% a takeover offer must be made to other shareholders.

Pendragon CEO Bill Berman is now under pressure to explain why the company didn’t reveal the bid from the Swedish-owned group which has a presence across Europe and last week completed the purchase of Dutch dealer group Stern.

The group’s results statement did not mention the bid and Pendragon decline to comment on the matter when approached by Auto Retail Agenda. However, one senior industry insider told Auto Retail Network they expected a new offer before the end of this week.

Pendragon reported a £83.0m underlying profit before tax for 2021 on a revenue of £3.45 billion against 2020 figures of a £24.7m loss on £2.92bn turnover. Underlying profit for last year was up ten-fold from £8.2m. The group also saw its net debt more than halve to £49.7m.

Pendragon CEO Bill Berman added that the group’s CarStore used car operation was now profitable and that the first two months of 2022 had been good with underlying profit in January and February ahead of 2021.

Mr Berman said: “I am delighted with the performance across each of our business divisions during FY21, which resulted in record levels of group underlying profit before tax.

Bill Berman, CEO, Pendragon

“We have worked hard to improve our digital capabilities, but it remains our belief, re-enforced with customer research and surveys that we conducted during the year, and evidenced by consumer behaviour post lock-downs, that around 90% of consumers want some form of physical interaction in their purchasing journey, whether this be in viewing, test-driving and inspecting the car or when they ultimately take ownership. Our focus therefore continues to be on providing our customers with a true omni-channel proposition across our business, developing our offering to allow seamless transition between physical and digital channels.”

“All of the strategic improvements we have made aided us in maximising favourable market conditions, in particular during the second half of the year, to deliver a very strong trading performance. The new car market was heavily constrained by well publicised supply shortages but we outperformed the market in the brands we represent with unit volumes down 2.1% on a like-for-like basis compared to a represented franchises market down 3.5%, supported by excellent gross profit per unit (GPU) performance of £1,911, up £463 year on year.”

Results highlights

Financial performance

• Increase in Group Revenue of 18.0% to £3,449.9m (FY20: £2,924.6m).  Revenue up 27.1% on a like-for-like basis.
• Record underlying profit before tax of £83.0m, up 912.2% from the previous year (FY20: £8.2m).
• After non-underlying items the Group reported profit before tax of £73.3m (FY20: loss of £29.6m).
• Cost restructuring resulted in Group underlying operating expenses £121.0m lower than pre-pandemic in FY19, whilst gross profit is down just £31.4m in the same period, driving higher profitability.
• Adjusted net debt reduced by £50.7m to £49.7m, including the repayment of £28.9m of VAT deferred from FY20.

Strategic delivery

• Strong progress with strategy to “transform automotive retail through digital innovation and operational excellence” with a large number of new initiatives delivered across the Group.
• Significant progress to unlock value in UK Motor, with material changes to digital capabilities and operational efficiency.
• Pinewood development powering Group’s digital capabilities.
• CarStore relaunched with new website, full omnichannel purchasing journey and a revised customer proposition.
• Appointment of experienced Non-Executive Chairman, Ian Filby.

Tags: Bill Berman, Hedin, Pendragon