British auto dealer Pendragon (PDG.L) cancelled its dividend and issued a dismal forecast for the year after deep price cuts to offload used car inventory pushed it to a first-half loss and sent shares down 13% on Wednesday.
In the latest abrupt management change this year, the car dealership chain named a new executive chairman to oversee the two senior executives running the company in the absence of a CEO and said its non-executive chairman would step down.
The company, which operates the Evans Halshaw, Stratstone, Quickco and Car Store brands, has already seen two CEOs leave this year – the last after just three months in the position.
It has also felt the pain of the wider British car industry, which has seen vehicle sales fall amid uncertainty over Britain’s impending exit from the European Union, stricter emissions regulations and a shift towards sales of electric or hybrid cars.
The company said it expects an annual loss at the bottom of its expectations, blaming weak consumer confidence due to heightened political and Brexit uncertainties.
“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,” Pendragon said.
Mirroring the troubles of its rival Lookers (LOOK.L), which issued a profit warning in July, Pendragon also said challenges would continue into the second half.Shares of the London-listed company fell 13% to a more than 7-1/2-year low of 9.50 pence. The stock has lost more than half of its value so far this year.
The company reported an underlying pretax loss of 32.2 million pounds ($40.22 million) for the first-half, compared with a profit of 28.4 million pounds a year earlier.
Its biggest unit – franchised UK motor – incurred underlying operating losses of 7.7 million pounds, compared with an operating profit of 31.8 million pounds a year ago. Losses at its Car Store segment widened to 19.1 million pounds.
To revive its loss-making Car Store unit, Pendragon said it will shut 22 of 34 store locations identified as the worst performing in the second half of the year, leading to 300 job cuts.
“We view a significant retrenching of the Car Store strategy as a necessary first step towards establishing a credible recovery strategy and underpinning forecast stability,” Jefferies, which rates Pendragon ‘hold’, wrote in a note.
The company said the process to recruit a new Chief Executive Officer continues in addition to searching for a new non-executive chairman.
As part of the latest management changes, non-Executive Chairman Chris Chambers will step down and Bill Berman takes on the new role of executive chairman on an interim basis from Oct. 1.
Chief Operating Officer Martin Casha and Chief Financial Officer Mark Willis, who have been running the firm on a daily basis, will report to Berman, a company spokesperson said.