Pendragon triples profit as bonuses slashed
The UK’s second largest car retailer is facing headwinds as Brexit continues to hit consumer confidence.
Bosses at Pendragon have more than tripled the company’s bottom line as they controlled costs by slashing bonuses in the face of Brexit.
The car retailer, one of the UK’s largest, brought costs under control in the three months to September 30 as Brexit uncertainty made it trickier to convince customers to buy cars.
After slashing bonus payments for executive directors, closing stores, and trying to make the business more efficient, management were rewarded with a £3 million underlying profit before tax.
Whilst the improved performance during the period is encouraging, we continue to expect economic and market conditions to be challenging Pendragon
It compares to £1.1 million in the same period last year, and is a major improvement on the first half of the year when the firm lost £32.2 million.
“In our view, these cost reductions are sustainable and reflect a more agile cost base which better matches a poor macro environment,” James Winckler, an analyst at Jefferies, said.
Although the results were better than some analysts had expected, Sanjay Vidyarthi at Liberum had a warning for investors.
“It remains far too early to call the recovery from a trading and strategic perspective,” he said.
The company closed 22 of its Car Stores, with the last shutting their doors on October 18.
Like-for-like revenue on sales of new cars grew 11%, but they fell 16.7% for used cars.
Costs fell by 8% over the period as a proportion of operating and interest costs.
“Whilst the improved performance during the period is encouraging, we continue to expect economic and market conditions to be challenging, with the ongoing uncertainty around Brexit impacting consumer confidence,” the company said.
“The full-year underlying loss before tax remains in line with the board’s expectations.”
MPs are set for further discussions over the future of Britain’s relationship with the European Union this week as the country prepares for the Brexit deadline on October 31.