Troubled car dealership Pendragon is axing around 300 jobs, closing more than 20 of it secondhand showroom business and has warned investors of steep annual losses as Brexit causes uncertainty among consumers.
The sites will be closed by the end of the year, affecting nearly two thirds of Car Store showrooms, with just 12 of 34 outlets set to remain after the cull.
Pendragon – which trades under the Evans Halshaw and Stratstone brands – blamed Brexit uncertainty for hitting demand for cars and cautioned over steeper-than-expected annual losses as it swung into the red in the first half of the year. The group reported an underlying pre-tax loss of £32.2m for the six months to the end of June against a profit of £28.4m a year ago.
The group also announced the departure of chairman Chris Chambers, who will be replace non-executive director Bill Berman, who will take on the new role of executive chairman on an interim basis. It comes after chief executive Mark Herbert quit in June less than three months after taking the top job.
Pendragon said it was sent into the red in the first half after slashing prices to shift a pile-up of unsold used cars, combined with the impact of a fall in national used car prices of around 7% during the second quarter and Brexit woes.
The group cautioned that dismal market conditions meant underlying full-year profits are “now expected to be at the bottom of the board’s expectations”.
It said: “Economic and market conditions are very challenging. The heightened political and Brexit uncertainty, as to both outcome and timing, is adversely affecting customer confidence.
“We are not anticipating any improvement in this for the rest of our financial year and are closely monitoring market conditions and customer behaviour particularly during the important trading month of September.”
Second hand sales slump
The group’s Car Store used motor business slumped deeper into the red over the first half, with operating losses of £19.1m against £6.4m a year ago. It said the division was hit by the build-up of unsold used cars, but even with this stripped out, it was loss-making on an underlying level.
A strategic review by the group found 22 of its Car Stores sites were loss-making and unlikely to return to profit, and it said it was now taking “immediate action” through the planned closures.
The firm also revealed last month it had continued the sell-off of its US showrooms with the sale of its Chevrolet dealership in Puente Hills, California. It comes just three months after Pendragon sold two Jaguar Land Rover dealerships in California for £60m.
The sector has been knocked hard by a declining car market. The latest figures from the Society of Motor Manufacturers and Traders showed demand for new cars fell 1.6 per cent in August, marking the sixth consecutive month of decline.