Slide 1: 2019 Half Year Results
2019 Half Year Results 18 September 2019 Pendragon PLC 2019
Slide 2: Business Review, Financial Review, Q&A
Business Review Martin Casha Financial Review Mark Willis Q&A Pendragon PLC 2019 2
Slide 3: H1 challenging for the Group
H1 challenging for the Group; Combination of factors impacted performance Action taken to reduce car stock to appropriate levels drove significant losses Weakened market conditions impacting both new and used performance Group remains a destination of choice for consumers; Like-for-like
Slide 4: Businesses
Businesses Car Store Sale of used vehicles in the UK Franchised UK Motor Sale/Servicing of vehicles in the UK Software SaaS solutions for retailers in international markets Leasing Vehicle leasing and fleet in the UK US Motor Sale/Servicing of vehicles in the US Pendragon PLC 2019 4
Slide 5: Car Store (£m)
Car Store (£m) Revenue up 16.4%, with LFL revenue up 5.1% % Change Positive engagement with customers H1 2019 H1 2018 % Change H1 20191 LFL attracted to the proposition Revenue 170.8 146.7 +16.4% +5.1% 170.8 Operating losses increased by 198% to £(19.1m) Gross Profit 5.3 10.3 -48.5% -57.3% 5.3
Slide 6: The UK used car market opportunity is large and highly attractive
The UK used car market +0.8% opportunity is large and highly -1.2% attractive +1.4% +3.8% UK has the highest used- 8.2 8.1 -5.2% 7.9 7.9 to-new transaction ratio 7.3 7.4 7.4 7.4 7.6 (3.4:1) 7.2 7.1 7.1 6.8 6.8 6.7 6.6 6.6 6.7 European markets are in 6.4 6.3 1.5-2.5 range (Italy: 1.6:1, France
Slide 7: Car Store competitor comparison
Retailer A Retailer B Retailer C Retailer D Average stock size ~ 140 ~ 300 ~ 500 700-1,000 ~ 2,300 per store Average car age ~ 4.2 yrs ~ 2.8 yrs ~ 1.5 yrs ~ 4.0 yrs ~ 2.5 yrs Operating (11%) c.4% c.2% c.4% c.5% margin The competitor set demonstrate attractive operating margins of 4-5% can be achei
Slide 8: Car Store selling cost per vehicle and store closures
Car Store selling cost per vehicle in £ vs. no. of vehicles transacted per month per store Car Store Closures Car Store Retain Selling cost per vehicle (£) New build site still scaling Retailers with larger store scale (i.e., larger stock per store and higher stock turn) achieve better economics (lo
Slide 9: 22 sites and 1 preparation centre to be closed
22 sites and 1 preparation centre not suited to the future proposition will be closed 17 ex-franchise conversions High rental costs Inefficienct space allocation High costs per unit 5 small-format locations (Avg of c.30 display spaces) Annualised improvement of c. £15m from site closur
Slide 10: UK Motor (£m)
UK Motor (£m) % Change H1 2019 H1 2018 % Change H1 20191 LFL Revenue down 2.4%, with the reduction in Revenue 1,999.2 2,048.3 -2.4% +2.6% 1,999.2 premium locations Gross Profit LFL revenue growth of 2.6% 182.2 227.1 -19.8% -16.3% 182.2 LFL gross profit down 16.3% mainly as a result Operating C
Slide 11: Used (£m)
Used (£m) Franchised UK Motor used LFL revenue up 3.9%. The UK % used market was down 1.6% by volume in HY19 H1 H1 % Change 2019 2018 Change LFL Increases in used car stock at the end of FY18 without an associated increase in sales rates led to excess used car Revenue 959.4 984.7 -2.6% +3.9% sto
Slide 12: Aftersales (£m)
Units UK Car Parc by Age Profile 10.0m 9.0m 8.0m 7.0m 6.0m 5.0m 4.0m 3.0m 2.0m 2018 2015 2016 2017 2015 2016 2017 2020 2015 2016 2017 2020 2015 2016 2017 2020 2015 2016 2017 2020 2019 2019 2018 2019 2020 2019 2018 2018 2019 2018 1.0m 0 0-3 years 4-6 years 7-10 years 11-15 years 15 years + Source: Ca
Slide 13: New (£m)
UK New Car Registrations Market Avg./Natural Level Source: SMMT Franchised UK Motor LFL new revenue up 1.0% and gross profit down 16.9% like for like New (£m) % The new retail market was down by 3.2% in HY19 and the H1 H1 % new fleet market was down 3.6% Change 2019 2018 Change LFL Challenging
Slide 14: Software (£m)
Software (£m) % Change H1 2019 H1 2018 % Change LFL 6.8% gross profit growth and 16.1% Revenue 8.9 8.4 +6.0% +6.0% operating profit growth achieved in the period Gross Profit 7.9 7.4 +6.8% +6.8% Pinewood in 13 countries across Europe & Asia Operating Costs (1.4) (1.8) -22.2% -22.2% Orders secu
Slide 15: Leasing (£m)
Leasing (£m) % Change H1 2019 H1 2018 % Change LFL Revenue 42.8 40.8 +4.9% +4.9% PVM fleet growth of 5.8% against a 6.0% year on year market decline Gross Profit 8.4 8.2 +2.4% 2.4% Revenue growth of 4.9%, generating a Operating Costs (2.1) (2.1) +0.0% +0.0% 2.4% increase in gross profit Operat
Slide 16: US Motor (£m)
LFL Revenue up 3.6%, Operating profit down 44% on a like-for- like basis driven by increased operating US Motor (£m) costs H1 2019 H1 2018 % Change % Change The disposal of the US Motor Group is LFL ongoing with total proceeds expected to Revenue be c.£100m before tax 233.9 232.0 +0.8% +3.6%
Slide 17: Financial Summary
Financial Summary Pendragon PLC 2019 17
Slide 18: Underlying Results (£m)
Underlying Results (£m) Summary H1 2019 Total revenue decline of 0.8%, driven by H1 2019 H1 2018 % Change Pre IFRS 16 business disposals and closures. LFL revenue increase of 2.9% Revenue 2,455.6 2,476.2 -0.8% 2,455.6 Gross profit reductions across used, Gross Profit 235.2 283.1 -16.9% 235.2 aft
Slide 19: Impact of Stock Clearance
Impact of Stock Clearance £m Franchised UK Motor used margin 24.0 Car Store 6.1 Transport Costs 1.0 Total Impact of Stock Clearance 31.1 £m £35.0 £25.0 £15.0 £(24.0) £28.4 £5.9 £(6.7) £5.0 £0.6 £(10.8) H1 2018 Franchised Franchised Franchised Franchised Franchised Car Store Software Leasing US Motor
Slide 20: Non-underlying Items (£m)
Non-underlying Items (£m) Goodwill impairment of £78.2m H1 2019 H1 2018 Impairment of goodwill and leases (102.5) - Impairments of £24.3m, principally in Car Store leases Settlement of Historic VAT Issues 3.5 - post IFRS 16 Termination and severance costs (1.4) - Other Exceptional items net cr
Slide 21: Summary Cashflow (£m)
Summary Cashflow (£m) H1 2019 H1 2018 H1 20191 Underlying Operating (Loss) / Profit (10.7) 42.7 (17.2) £57.5m cash inflow from Depreciation and Amortisation 22.6 13.3 12.8 working capital and contract hire driven by used stock Share Based Payments 0.4 0.6 0.4 reduction and c.£25m VAT Non-underlyin
Slide 22: Balance Sheet (£m)
Balance Sheet (£m) Goodwill impairment of £78.2m Jun-19 Dec-18 Jun-18 Jun-191 in the period Reduced stock levels following Property 225.2 227.9 228.2 228.8 excess used stock held at Dec- Plant & Equipment 232.6 236.0 226.0 232.6 18 Debtors increased by £14.8m as Goodwill & Intangibles 195.6 27
Slide 23: Outlook
Economic, political and market conditions are very challenging Adverse impact on consumer confidence FY19 underlying loss before tax expected to be at the bottom end of the Board’s expectations Focus on improving underlying performance in both Car Store and Franchised UK Motor, with recovery
Slide 24: Loss before tax expected at bottom end of Board's expectations
Loss before tax expected to be at bottom end of Board’s expectations Pinewood and Leasing in line with previous expectations FY19 Car Store losses now expected to be between £25m and £30m US Motor expected to be broadly in line with H1, with FY20 contribution to fall to negligible levels U
Slide 25: APPENDIX – Pendragon 2019 Half Year Results
APPENDIX – Pendragon 2019 Half Year Results Pendragon PLC 2019 25
Slide 26: Franchised UK Motor (£m) Summary
Franchised UK Motor (£m) Summary % Change H1 19 H1 18 % Change LFL • Used LFL gross profit reductions of 27.5% Used 959.4 984.7 -2.6% +3.9% • LFL aftersales gross profit down 7.6% Aftersales 168.0 168.4 -0.2% +4.4% • LFL new gross profit was down 16.9% New 871.8 895.2 -2.6% +1.0% • Operating costs h
Slide 27: Underlying Operating Profit (£m)
Underlying Operating Profit (£m) H1 2019 H1 2018 Change Change LFL H1 20191 UK Motor (7.7) 31.8 -39.5 -38.5 (13.6) Car Store (19.1) (6.4) -12.7 -11.3 (19.7) Software 6.5 5.6 +0.9 +0.9 6.5 Leasing 6.3 6.1 +0.2 +0.2 6.3 US Motor 3.3 5.6 -2.3 -2.6 3.3 TOTAL (10.7) 42.7 -53.4 -51.3 (17.2) 1 Restated to
Slide 28: Underlying Results (£m) – IFRS 16 impact
Underlying Results (£m) H1 2019 H1 2019 Net impact on underlying PBT of Following Without IFRS 16 adoption is a £0.2m credit Variance IFRS 16 IFRS 16 Adoption Adoption Reduced operating costs largely Revenue 2,455.6 2,455.6 - offset by interest increase Gross Profit 235.2 235.2 - £16.3m of ren
Slide 29: Operating profit, profit before tax, net debt and EPS charts
Underlying Operating Profit Underlying Profit Before Tax £60.0m £48.5m £42.7m £28.4m (£10.7m) H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 (£32.2m) Net Debt and Underlying EBITDA Ratio Underlying Earnings Per Share 1.3 0.9 0.8 2.6p £138.6m £105.1m £104.3m 1.6p H1 2017 H1 2018 H1 2019 H1 2017 H1 2
Slide 30: UK new car market summary
2.63 2.69 2.48 2.54 2.37 2.31 2.29 Summary • The UK new car market was down 3.4% in H1 2019 • The retail market fell by 3.2% and the fleet market fell by 3.6% in H1 2019 • Forecast of 2.2% fall in new car market in 2019 Pendragon PLC 2019 30
Slide 31: US Motor (£m) Summary
US Motor (£m) Summary % Change H1 2019 H1 2018 % Change LFL • Strong revenue growth in aftersales & Used 43.1 47.3 -8.9% -5.3% new departments Aftersales 22.5 21.6 +4.2% +6.6% • Used revenue fell by 8.9% however improved margin led to 20.7% fall in used New 168.3 163.1 +3.2% +5.8% gross profit Reven
Slide 32: Online visits summary
Summary • Online visits to Evanshalshaw.com and Stratstone.com increased by 7.9% in the period to 29.9m visits. • New Carstore.com website launched in December separating it from Evanshalshaw.com Pendragon PLC 2019 32