Pendragon (lon:pdg)
PDG – Pendragon Any Better Then Lookers?

Pendragon Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period12 Months12 Months
Revenue£4506m£4627m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit(£114m)(£44m)
Adjusted Profit(£16m)£47m
Total Debt
Net Debt£119m£126m
Pendragon Share Price
Grade:The Green Grade - Shares That I Think Are Oversold..
Title: PDG – Pendragon Any Better Then Lookers?
Company: PDG - Pendragon
Share Price Then: 9p
Author: Ian Smith
Date: Wed 08 Jul 2020
Comments: 2019 started off badly as the group cleared out their excessive stock of used cars and the results were hit heavily by a Non-Underlying Charge of £97.7m as well as the one taken in 2018 of £92.2m.

However this was an accounting exercise including a non-cash charge principally for impairment of goodwill and non-current assets of £130.2m.

The UK Motor division is Evans Halshaw (120 sites) and Stratstone (46 sites), along with a used car only brand, Car Store (12 sites)

Evans
Stratstone Halshaw
Aston Martin 3 0
BMW 7 0
Citroen 0 14
Dacia 0 6
Daff 0 4
Ferrari 1 0
Ford 0 38
Harley-Davidson 2 0
Hyundai 0 4
Jaguar 5 0
Kia 0 3
Land Rover 5 0
Mercedes-Benz 8 0
MINI 7 0
Nissan 0 4
Peugeot 0 6
Porsche 5 0
Renault 0 6
Seat 0 1
Smart 2 0
Used Car Centres 1 4
Vauxhall 0 30

Although mostly UK based there is/was the US Motor Division which still has two sites which are up for sale, specialising on Jaguar/Land Rover.
This has been about 10% of group revenue and underlying profits so it is not a great loss, with around £400m in revenue compared to the £3,730m from UK new cars.

The software business Pinewood which provides everything you need to run a dealer network had revenue up to £18m from £17m but they claim massive underlying profits of around £13m. There was relatively little detail about Pinewood in the last annual report, but it did appear to mention that revenue is recognised over the period of the contract rather than taking all on day one and hoping that it isn’t cancelled.

If this is genuine profit and it could be as relatively small web based solutions can scale up pretty cheaply and £4-5M funds a lot of people and hosting fees.

22 car stores and two preparation centres were closed during the year along with 6 Jaguar Land Rover sites either disposed of or closed.

Tesla haven’t been able to crack the affordable electric car yet, the cheapest Model 3 is still solidly in the luxury car price bracket, but there seems to be confusion among retail customers about ICE only, ICE/Electric Hybrid and pure electric cars.

Both Pendragon and Lookers seem to be saying that there is still a big demand among retail customers and both groups seem to be less interested in low margin fleet deals.

A merger between Lookers and Pendragon was discussed in early 2020 but came to nothing possibly as the combined group would be dominant and blocked by the M&M commission, so both may actually be looking at splitting themselves up, possibly merging these smaller divisions.

The group seems to have good brand coverage which is important as the more that I think about it the less likely it seems that any one brand is going to come out with a market dominant car.

Tesla have dominated the electric car market by being a new maker with no investment in the ICE, no dealer network and a demand that only they could supply to a wealthy section of the market. To my mind they are now entering the volume market and are starting to stall because the technology is still not there at a price that most of the market can afford.
Read Count: 52

Buy/No Buy In A Nutshell
NegativesLike Lookers they have suffered from some unsuccessful dealerships and also overstocking of used vehicles. If you avoid the low margin fleet business you susceptible to customer indecision ICE, ICE/Electric Hybrid or Electric.
PositivesOne maker may come out with a market dominant product as Tesla are still struggling to make the affordable electric car. One of the major players in new car dealerships and demand may be backing up,
Initial Review Price9p
Last Review Price9p
Last Review Date18-Jul-2020
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