Interim Results
Inchcape PLC
02 August 2004
2 August 2004
Inchcape plc interim results
Significant profit increase supported by growth in all core markets
Inchcape plc, the international automotive services group, announces its results
for the half year to 30 June 2004.
Financial highlights:
- Operating profit up 33.5% at £88.1m
- Profit before tax up 30.9% at £83.4m
- Basic earnings per share up 28.9% at 75.4p
- Operating profit* up by 32.3% at £90.9m
- Headline profit before tax** up 33.9% at £88.9m
- Headline earnings per share** up 32.9% at 82.5p
- Dividend up 25.0% at 15.0p per share
- Strong net cash inflow of £85.5m
- Net cash at period end of £164.6m
* Before goodwill amortisation
** Before goodwill amortisation and exceptional items
Operational highlights:
- Growth in all core markets with market leadership maintained in Greece, Hong
Kong and Singapore
- Singapore and Australia achieved record unit sales
- UK profit growth driven by higher volumes and much improved Retail management
processes
- UK Retail operating profits up over 20.0%
- Acquisition in June of five dealerships created largest independent contiguous
territory for Mercedes-Benz in UK
- Recovery in Hong Kong following market difficulties in 2003
- Continued investment in Greece and Balkans
Peter Johnson, Group Chief Executive of Inchcape plc, commented:
'The year has started much better than expected, with a significant increase in
profits in all of our core markets.
'Our continued profit growth is testament to the effectiveness of our strategy
of building partnerships with selected manufacturers in, or adjacent to, our
core markets. Our geographic spread, in particular, remains an important factor
in supporting the quality and sustainability of our earnings.
'In addition to achieving a strong operational performance, we have continued to
further invest and develop our businesses. In UK Retail we have bought or opened
seven dealerships. In Greece and the Balkans we are expanding our Retail
footprint and facilities. In Singapore we are embarking on a significant
expansion of our aftersales facilities. In Finland and the Baltics the award of
the Land Rover import and distribution rights expands our presence in this
increasingly important market area.
'We have once again demonstrated the cash generative qualities of the Group and
are therefore in an excellent position to take advantage of investment
opportunities, which are consistent with the Group's strategy.
'The Board's policy remains clear that if available funds are not required for
investment purposes, we will return capital to shareholders.'
Financial summary
£m 2004 2003
Turnover 2,199.8 1,941.9
Operating profit* 90.9 68.7
Goodwill amortisation (2.8) (2.7)
Operating profit 88.1 66.0
Interest (2.0) (2.3)
Exceptional items (2.7) -
Profit before tax 83.4 63.7
Headline profit before tax** 88.9 66.4
Headline earnings per share** 82.5p 62.1p
Basic earnings per share 75.4p 58.5p
* Before goodwill amortisation
** Before goodwill amortisation and exceptional items
Notes to editors
A copy of the interim results, for the half year ending 30 June 2004, follows
this release.
High resolution photographs, which accompany this announcement, are available
for the media to view and download free of charge at www.vismedia.co.uk
For further information, please contact:
Group Communications, Inchcape plc
020 7546 0022
Hogarth Partnership Limited (John Olsen/Tom Leatherbarrow)
020 7357 9477
Inchcape, an international automotive services group, provides quality
representation for its manufacturer partners, a choice of channels to market and
products for its retail customers and a range of business services for its
corporate customers. Operations are focused on the UK, Greece, Belgium,
Australia, Hong Kong and Singapore. Inchcape's activities include exclusive
Import, Distribution and Retail, Business Services, automotive E-commerce and
Financial Services. Our key manufacturer partners are Toyota/Lexus, Subaru,
Ferrari/Maserati, BMW, the Premier Automotive Group of Ford, Mazda,
Mercedes-Benz and Volkswagen.
For further information, visit us at www.inchcape.com
Inchcape plc
Interim results for the half year ending 30 June 2004
Results overview
This is a set of high quality financial results. Profits have grown in all our
core markets, and these results continue the trend of reporting profit growth at
every set of interims since we became a pure automotive services group in July
1999. The core markets, which achieved the highest growth were Singapore, Hong
Kong, the UK and Australia.
Singapore and Australia both achieved record unit sales in the period, aided by
strong markets. In Hong Kong profits increased, partly as a result of the
recovery in consumer confidence after the severe impact of SARS on the economy
in 2003. The growth in the UK was principally driven by increased sales levels
and much improved management processes in UK Retail.
Headline profit before tax (before goodwill amortisation and exceptional items)
was up 33.9% to £88.9m in the first six months of 2004. Headline earnings per
share (before goodwill amortisation and exceptional items) increased from 62.1p
in 2003 to 82.5p in 2004, a growth of 32.9%.
Strategy update
Our strategy remains to grow with selected manufacturer partners, wherever
possible in scale contiguous territories in, or adjacent to, our core markets.
The strength of our balance sheet leaves us well placed to undertake such
investments.
In UK Retail, the European Block Exemption reforms have offered significant
consolidation opportunities enabling us to acquire and build scale contiguous
territories with our selected partners. To this effect, in June 2004 we acquired
five Mercedes-Benz dealerships in Derby, Nottingham, Loughborough, Mansfield and
Leicester. These businesses adjoin our existing market area and this has
resulted in the largest independent Mercedes-Benz territory in the country. We
have also acquired a Volkswagen dealership in Cheltenham, adjacent to our
Swindon territory, and opened Toyota Basingstoke extending our existing Surrey/
Berkshire market area for this brand.
The integration of the six BMW/MINI businesses acquired last year is progressing
well and, in anticipation of the broadening of the model range and higher sales
volumes, we are upgrading and investing in new facilities.
The new Brooklands pre-delivery inspection centre started operating this year
and will help decongest our Retail facilities. Over time Brooklands will also
help drive our trading margins.
We continue to invest in our Retail activities in Greece and the Balkans. In
Athens, our Retail operations are progressively taking on a more significant
role and we are currently investing in new facilities in the north east of the
city. In Romania, given the growth in the market, we are investing in new
facilities for our Distribution and Retail activities.
In Singapore we are undertaking a reorganisation and expansion of our aftersales
activities, in order to accommodate the increased size of the Toyota/Lexus
vehicle parc.
In June 2004 we were awarded the Land Rover import and distribution rights for
Finland and the Baltics, and this business will complement our existing Mazda
and Jaguar activities in these markets.
Operating review
The remainder of this section provides a summary of the Group's performance in
our core markets. The Group's operating profit before goodwill amortisation rose
by 32.3% from £68.7m to £90.9m. Profits rose in all of our core markets.
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 88.1 66.0 33.5
Goodwill amortisation 2.8 2.7 n/a
Operating profit before goodwill amortisation 90.9 68.7 32.3
United Kingdom
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 13.3 9.6 38.5
Goodwill amortisation 1.8 1.8 n/a
Operating profit before goodwill amortisation 15.1 11.4 32.5
Last year our UK Retail dealership network underwent significant change as we
acquired or opened thirteen dealerships and sold or closed twelve. We also
restructured our management team and introduced many new business processes.
During the first half of 2004 the benefit of these changes has become apparent.
On a like for like basis, our new car volumes were up 7.1%, finance and
insurance income per new unit was up 33.7%, and service profitability rose
28.3%. This growth, coupled with the successful integration of the new
dealerships, has resulted in a significant improvement in our overall UK Retail
performance. Operating profit before goodwill amortisation and stock holding
interest rose 20.2%, whilst the return on sales exceeded 2.0%.
Inchcape Fleet Solutions has shown strong year on year growth. It has benefited
from the increased business generated by new fleet management contracts won
towards the end of 2003, and better margins on the disposal of contract hire
vehicles.
Inchcape Automotive, our Business Services division, continues to suffer margin
pressure in its daily rental operations. However, we have been successful in our
strategy of broadening the business base by targeting other fleet owners such as
contract hire companies. An example of this is a recently awarded refurbishment
and remarketing contract with Bank of Scotland Vehicle Management.
Volumes in our Ferrari/Maserati Import and Distribution business were up 11.8%
on the first six months of 2003, helped by the new Maserati Quattroporte.
Maranello Sales, with its newly enlarged Retail market area, has had an
encouraging start to the year, with a significant increase in new and used car
volumes. Discussions regarding the renewal of the import and distribution
contract remain ongoing.
Our total UK operating profit before goodwill amortisation is up an encouraging
32.5%.
Greece/Belgium
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 17.7 16.2 9.3
Goodwill amortisation 0.1 0.2 n/a
Operating profit before goodwill amortisation 17.8 16.4 8.5
In Greece the market for the first six months was at its highest for the last
four years, and was 18.8% up on the first half of 2003. The continued success of
the Toyota/Lexus product range contributed to our market share increasing to
10.5% and the retention of market leadership, in spite of supply constraints.
Encouragingly, Bulgaria and Romania, our key businesses in the Balkans, are
candidate countries for future entry into the European Union. This has supported
economic growth and underpinned significant increases in vehicle markets.
Volumes were up over 65.0% and profits more than doubled from our Toyota/Lexus
businesses in the Balkans. We continue to invest in our Balkan operations,
especially in Retail, and look forward to benefiting from further expansion.
In Belgium, increased volumes have driven an 8.1% growth in operating profit as
the Brussels Motor Show, which took place in early 2004, supported an 11.5%
growth in the market. However compared with 2002, which was the last Motor Show
year, the market was up just 1.8%. Supply constraints had an impact on Belgium,
with our Toyota/Lexus market share remaining static at 4.8%.
Australia/New Zealand
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 13.7 11.2 22.3
Goodwill amortisation 0.3 0.3 n/a
Operating profit before goodwill amortisation 14.0 11.5 21.7
The Australian market reached a record level in the first half of 2004, and the
successful launch of the Liberty and Outback models in October 2003 helped
increase Subaru's market share to 3.7%. Together, these factors have driven a
significant increase in our volumes and profits.
Subaru Melbourne has now been operational for two years and is achieving a 3.1%
return on sales. In March 2004 we opened an additional satellite sales and
service facility, which will help continue to improve new and used car sales and
aftersales penetration.
A decline in national sales volumes for the Jaguar marque has resulted in
another disappointing performance for Sydney Retail. However, this business has
now been largely restructured and this will lead to an improvement in the second
half.
Hong Kong
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 14.3 10.3 38.8
Goodwill amortisation - - n/a
Operating profit before goodwill amortisation 14.3 10.3 38.8
In Hong Kong the market has continued its gradual recovery, which started in
late 2003 following the severe impact of weak economic conditions and SARS in
the first half of that year. The market, excluding taxis, is some 25.8% ahead of
2003 but remains 5.6% lower than in 2002. Our overall market share increased to
42.1% driven primarily by Toyota/Lexus and Mazda.
Despite a £1.8m currency translation loss, as a result of the weak Hong Kong
dollar, profits increased by 38.8% and margins rose to 11.5% driven by the
significant increase in volumes.
Singapore/Brunei
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 29.2 20.1 45.3
Goodwill amortisation 0.4 0.4 n/a
Operating profit before goodwill amortisation 29.6 20.5 44.4
The Singaporean car market grew by 29.6% in the first half of the year. This was
due to a greater number of Certificates of Entitlement (COEs) being issued by
the Government in the fiscal year to April 2004, compared to the same period
last year. Toyota/Lexus continues to enjoy market leadership with a 31.4% market
share.
A stabilisation of COE prices in the early part of the year plus the increase in
new vehicle registrations, allied to the associated aftersales and finance
income, have been the key drivers of a 44.4% increase in profits. Margins also
increased from 6.8% to 8.3%. The increase in profits would have been greater
still had it not been for a £2.8m currency translation loss due to the weakening
of the Singapore dollar.
Other
For the six months ended 30 June 2004 2003 Increase
£m £m %
Operating profit 10.6 7.9 34.2
Goodwill amortisation 0.2 - n/a
Operating profit before goodwill amortisation 10.8 7.9 36.7
Improved performances from Mazda in Finland and the Baltics, BMW in Chile, and a
return to profitability in our French Retail business, have generated a 36.7%
profit growth.
Central costs
For the six months ended 30 June 2004 2003 Increase
£m £m %
(10.7) (9.3) 15.1
The level of central costs has been influenced by one off charges of £2.2m in
2004 and £2.9m in 2003. In 2004 this related to the settlement of various
litigation issues. The underlying increase in central costs is mainly due to
project development spend, an increase in pension charges arising from the 2003
actuarial valuation and higher staff costs.
Financial review
Accounting standards
UITF 38 Accounting for ESOP Trusts was issued in December 2003 and has been
adopted with effect from 1 January 2004. As a result, a prior period adjustment
reducing the net assets, at 31 December 2003, by £4.1m has been made, as the
value of shares held by the ESOP Trust, and the associated share scheme
creditor, must now be deducted from reserves. Comparatives have been restated
accordingly. With this exception, the accounting policies applied during the
year are unchanged from those stated in the 2003 Annual report and accounts.
Inchcape will adopt International Financial Reporting Standards (IFRS) for the
year ending 31 December 2005 and will therefore prepare the 2005 Interim report
in accordance with these Standards. In anticipation of this, our IFRS steering
committee, in conjunction with our auditors, continues to assess the impact on
the Group of reporting under these new Standards. Whilst a substantial amount of
progress has been made, more time is needed to conclude the full effects of this
significant change in Standards.
Acquisitions and disposals
In June 2004 the Group acquired Southwell Motor Co. Limited and its subsidiary
Leadley Limited, which owned four Mercedes-Benz dealerships. On 30 June 2004
Leadley Limited acquired an additional dealership in Leicester. The estimated
total consideration is c. £28.0m, excluding costs. Of this, £21.8m was reflected
in the half year cash flow. The Midlands businesses complement the Group's
existing market area stretching from Coventry to Oxford. The total of eight
sites represents the largest independent contiguous territory for Mercedes-Benz
in the UK.
On 28 July 2004 the Group's 40.0% stake in UK associates, MCL Group Limited
(MCL) and Automotive Group Limited (AGL), was sold to Itochu, the 60.0% majority
shareholder. This will give rise to a cash inflow of £19.3m in the second half
but will result in a loss on disposal of c. £6.6m. This loss has been provided
for at 30 June 2004 as an exceptional item.
Cash flow, interest and financing
The net cash inflow for the period was £85.5m, resulting in a net cash position
of £164.6m at the end of June 2004. Net cash inflows include £36.7m in relation
to the VAT refund and associated interest. This, allied to strong trading
results and an abnormally low level of working capital, contributed to the
significant cash inflow. Supply constraints in Greece and Belgium were key
factors in the working capital reduction, although it is expected that this
position will normalise before the end of the year.
The net interest charge of £2.0m for the period was £0.3m lower than 2003
although this year benefited from additional interest on the VAT refund of
£0.5m. The Group is affected by the interest rate differentials that exist in
relation to the UK, where it has underlying debt, and overseas markets.
Exchange effects
The underlying Headline profit before tax would have been £4.8m higher if the
June 2003 exchange rates had continued into 2004. This was mainly caused by the
weakening of the Singapore and Hong Kong dollars.
Exceptional items
The net exceptional charge of £2.7m mainly reflects the loss arising on sale of
our stake in MCL and AGL, which was partially offset by the release of
litigation provisions relating to the sale of non-motors businesses.
Tax
The Headline tax rate for the first half of 2004 is 25.4%. This rate benefited
by 1.4% from the satisfactory outcome of a tax audit in Greece and the agreement
of UK tax computations by one of our associates. Stronger profits in the UK also
favourably impacted the rate.
The 2003 full year Headline tax rate of 23.4% included a one off tax benefit of
2.9%, associated with the release of a provision relating to a tax efficient
financing structure. Excluding this the 2003 underlying full year tax rate was
26.3%.
Minority interests
The minority interest charge, of £1.8m, for the period is £0.5m greater than the
first half of 2003, reflecting the improved trading performance of our
Australian and Bulgarian businesses.
Dividend
The Board has declared an interim dividend of 15.0p (2003 - 12.0p), an increase
of 25.0% on last year. The interim dividend payment will be made to shareholders
on the register at 13 August 2004 and will be paid on 13 September 2004.
Prospects
In the UK we expect profits to grow in the second half, compared to the same
period in 2003. This will be primarily driven by UK Retail where we expect our
existing dealerships to continue to deliver stronger performances and benefit
from the acquisitions that took place in June 2004.
Whilst in the short term supply constraints will continue to suppress volumes in
Greece and Belgium, we expect to see an improvement before the year end.
We expect another good performance from Australia in the second half of the year
although we do not anticipate the market matching the record levels achieved in
the first six months.
The recovery in Hong Kong is encouraging, especially as the market is still at a
relatively low level.
During the second half the Singapore market is likely to be at a similar level
to last year but COE allocations may impact margins.
This year has started much better than expected and whilst growth will not
continue at the level achieved in the first half, we are confident of a strong
performance in 2004.
Looking ahead
We have once again demonstrated the cash generative qualities of the Group and
we are therefore in an excellent position to take advantage of investment
opportunities, which are consistent with the Group's strategy.
In UK Retail we will continue to focus on developing scale contiguous
territories with selected partners and we aim to represent between 5.0% and
10.0% of their national sales volumes.
We will invest further in retail facilities with Toyota/Lexus in Greece and the
Balkans, and Subaru in Australia. We will also continue to examine ways of
entering new markets such as China and Eastern Europe. We are considering, for
example, taking a retail presence in the Baltics where we are currently an
Importer.
The Board's policy remains clear that if available funds are not required for
investment purposes, we will return capital to shareholders.
Sir John Egan
Chairman
2 August 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2004
Before VAT VAT
Six months to Six months to exceptional exceptional Year to
30.6.04 30.6.03 31.12.03 31.12.03 31.12.03
£m £m £m £m £m
Turnover including share
of joint ventures and
associates 2,199.8 1,941.9 3,855.2 - 3,855.2
Less:
- share of joint ventures (8.5) (10.5) (20.0) - (20.0)
- share of associates (31.4) (20.8) (42.0) - (42.0)
Group subsidiaries'
turnover 2,159.9 1,910.6 3,793.2 - 3,793.2
Operating profit 84.2 61.0 124.4 15.3 139.7
Share of profits of joint
ventures 3.7 4.1 10.0 - 10.0
Share of profits of
associates 0.2 0.9 0.9 - 0.9
Total operating profit 88.1 66.0 135.3 15.3 150.6
Net profit on sale of
properties and
investments 1.2 0.7 0.9 - 0.9
Net loss including
provisions on sale and
termination of operations (3.9) (0.7) (0.4) - (0.4)
Profit on ordinary
activities before
interest 85.4 66.0 135.8 15.3 151.1
Net interest (2.0) (2.3) (5.0) 22.2 17.2
Profit on ordinary
activities before
taxation 83.4 63.7 130.8 37.5 168.3
Tax on profit on ordinary
activities (22.6) (17.5) (31.8) (7.5) (39.3)
Profit on ordinary
activities after taxation 60.8 46.2 99.0 30.0 129.0
Minority interests (1.8) (1.3) (2.0) - (2.0)
Profit for the financial
period 59.0 44.9 97.0 30.0 127.0
Dividends (11.9) (9.2) (29.6) - (29.6)
Retained profit for the
financial period 47.1 35.7 67.4 30.0 97.4
Profit before tax (£m) 83.4 63.7 168.3
Basic earnings per share
(pence) 75.4p 58.5p 164.8p
Diluted earnings per
share (pence) 74.7p 57.3p 162.1p
Headline (before goodwill
amortisation and
exceptional items, note 6):
- profit before tax (£m) 88.9 66.4 135.8
- earnings per share
(pence) 82.5p 62.1p 132.4p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE SIX MONTHS ENDED 30 JUNE 2004
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Profit for the financial period 59.0 44.9 127.0
Effect of foreign exchange rate changes:
- results for the period (0.9) - (2.9)
- foreign currency net investments:
subsidiaries (19.7) 6.2 (4.6)
joint ventures and associates (0.9) (0.3) (2.9)
Total recognised gains 37.5 50.8 116.6
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 30 JUNE 2004
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
restated restated
£m £m £m
Profit for the financial period 59.0 44.9 127.0
Dividends (11.9) (9.2) (29.6)
47.1 35.7 97.4
Effect of foreign exchange rate changes (21.5) 5.9 (10.4)
Shares issued during the year under share option
schemes 1.5 0.5 3.4
Consideration paid for the purchase of own shares
held in an ESOP Trust (note 2) (0.2) (3.6) (3.6)
Consideration received for the sale of own shares
held in an ESOP Trust (note 2) 0.2 2.0 2.7
Credit in respect of employee share schemes
(note 2) 0.7 0.3 0.6
Goodwill written off to exceptional items
(note 3) 1.0 - -
Net change in shareholders' funds 28.8 40.8 90.1
Opening balance (2003 - originally £392.7m before
deducting restatement of £3.8m, note 2) 479.0 388.9 388.9
Closing balance 507.8 429.7 479.0
SUMMARISED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2004
As at As at As at
30.6.04 30.6.03 31.12.03
restated restated
£m £m £m
Fixed assets:
Intangible assets 76.2 79.2 60.9
Tangible assets 277.2 263.4 272.9
Investments:
- joint ventures:
share of gross assets 293.6 321.7 257.1
share of gross liabilities (253.9) (273.4) (216.7)
share of net assets 39.7 48.3 40.4
- associates 28.0 25.6 26.2
- other investments 0.8 0.8 0.8
421.9 417.3 401.2
Current assets:
Stocks 508.8 512.7 597.8
Debtors 225.7 236.3 246.3
Investments 12.1 12.0 13.8
Cash at bank and in hand 175.5 134.2 102.9
922.1 895.2 960.8
Creditors - amounts falling due within one year:
Borrowings (10.2) (30.2) (23.2)
Other (680.2) (622.8) (709.1)
(690.4) (653.0) (732.3)
Net current assets 231.7 242.2 228.5
Total assets less current liabilities 653.6 659.5 629.7
Creditors - amounts falling due after more than
one year:
Borrowings (0.7) (51.4) (0.6)
Other (49.2) (77.6) (56.5)
(49.9) (129.0) (57.1)
Provisions for liabilities and charges (88.8) (94.2) (87.0)
Net assets 514.9 436.3 485.6
Equity shareholders' funds 507.8 429.7 479.0
Minority interests 7.1 6.6 6.6
514.9 436.3 485.6
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2004
RECONCILIATION OF OPERATING PROFIT
TO OPERATING CASH FLOWS
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
restated restated
£m £m £m
Operating profit 84.2 61.0 139.7
Amortisation 2.8 2.6 5.2
Depreciation 13.3 12.7 26.6
Loss (profit) on sale of tangible fixed assets
other than property 0.2 (0.3) 1.7
Decrease (increase) in working capital 47.9 (1.2) (0.3)
Payments in respect of termination of operations (0.2) - (3.1)
Other items* 18.5 1.8 (18.1)
Net cash inflow from operating activities 166.7 76.6 151.7
CONSOLIDATED CASH FLOW STATEMENT
Net cash inflow from operating activities 166.7 76.6 151.7
Dividends from joint ventures 2.8 2.5 4.3
Dividends from associates - 1.6 1.9
Returns on investments and servicing of finance* 17.9 (3.6) (1.6)
Taxation (17.6) (16.4) (28.5)
Capital expenditure and financial investment (23.2) (13.0) (33.6)
146.6 47.7 94.2
Acquisitions and disposals (13.7) (0.8) (0.5)
Equity dividends paid (20.4) (16.1) (25.4)
Net cash inflow before use of liquid resources
and financing 112.5 30.8 68.3
Net cash (outflow) inflow from the management of
liquid resources (50.4) (13.0) 6.7
Net cash outflow from financing (16.6) (11.6) (64.7)
Increase in net cash 45.5 6.2 10.3
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Increase in net cash 45.5 6.2 10.3
Net cash outflow from decrease in debt and lease
financing 18.1 10.5 67.2
Net cash outflow (inflow) from the management of
liquid resources 50.4 13.0 (6.7)
Change in net cash and debt resulting from cash
flows 114.0 29.7 70.8
Effect of foreign exchange rate changes on net
cash and debt (21.8) 6.3 (8.3)
Net loans and finance leases relating to
acquisitions (6.7) - -
Movement in net funds 85.5 36.0 62.5
Opening net funds 79.1 16.6 16.6
Closing net funds 164.6 52.6 79.1
* Net cash inflows include £36.7m for the VAT exceptional (note 4). Of this total £15.4m is reported
within Other items and £21.3m within Returns on investments and servicing of finance. In the 2003
full year, Other items included £(14.3)m of non-cash VAT exceptional.
NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSIS
Group turnover plus share of joint Total operating profit
ventures and associates
Six months Six months Year to Six months to Six months Year to
to 30.6.04 to 30.6.03 31.12.03 30.6.04 to 30.6.03 31.12.03
By geographical market: £m £m £m £m £m £m
UK 716.5 658.1 1,292.5 13.3 9.6 17.1
Greece/Belgium 489.1 428.6 825.4 17.7 16.2 32.3
Australia/New Zealand 316.8 259.3 529.3 13.7 11.2 21.2
Hong Kong 124.0 117.7 233.7 14.3 10.3 22.6
Singapore/Brunei 356.7 300.6 614.3 29.2 20.1 46.9
Other 196.7 177.6 360.0 10.6 7.9 12.8
2,199.8 1,941.9 3,855.2 98.8 75.3 152.9
Central costs - - - (10.7) (9.3) (17.6)
VAT exceptional
(note 4) - - - - - 15.3
2,199.8 1,941.9 3,855.2 88.1 66.0 150.6
By activity:
Import, Distribution
and Retail 1,601.4 1,400.3 2,792.6 80.8 60.9 123.4
UK Retail 558.9 505.4 989.5 9.7 7.9 12.8
Financial Services 39.5 35.9 72.9 8.3 6.8 17.4
E-commerce - 0.3 0.2 - (0.3) (0.7)
2,199.8 1,941.9 3,855.2 98.8 75.3 152.9
Central costs - - - (10.7) (9.3) (17.6)
VAT exceptional
(note 4) - - - - - 15.3
2,199.8 1,941.9 3,855.2 88.1 66.0 150.6
Operating profit before goodwill amortisation
and VAT exceptional
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Operating profit 88.1 66.0 150.6
Goodwill amortisation 2.8 2.7 5.5
VAT exceptional (note 4) - - (15.3)
90.9 68.7 140.8
Goodwill amortisation arises in the following
geographical markets:
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
UK 1.8 1.8 3.8
Greece/Belgium 0.1 0.2 0.4
Australia/New Zealand 0.3 0.3 0.5
Singapore/Brunei 0.4 0.4 0.8
Other 0.2 - -
2.8 2.7 5.5
With the exception of £0.5m (interim 2003 - £0.5m, full year 2003 - £1.1m) in UK Retail,
goodwill amortisation relates entirely to Import, Distribution and Retail.
Goodwill amortisation on joint ventures is £nil (interim 2003 - £0.1m, full year 2003 - £0.3m).
2 BASIS OF PRESENTATION
The results for the periods to 30 June have been prepared using the discrete period approach (i.e.
considering them as accounting periods in isolation). The Headline tax charge is based on the
effective tax rates estimated for the full year in the Group's countries of operation being applied to
the actual profits for the first half.
These interim financial statements are neither audited nor reviewed by the external auditors and do
not constitute statutory accounts. They have been prepared on the basis of the accounting policies
set out in the Annual report and accounts 2003, except that UITF Abstract 38 Accounting for ESOP
Trusts has been adopted for the first time in these financial statements. This has resulted in a
reclassification of own shares held by the Company of £5.5m at 1 January, £7.1m at 30 June and £6.4m
at 31 December 2003 from investments to equity shareholders' funds. The associated share scheme
creditor of £1.7m at 1 January, £2.0m at 30 June and £2.3m at 31 December 2003 has been reclassified
from creditors to equity shareholders' funds. The cash outflows at 30 June and 31 December 2003 of
£1.6m and £0.9m respectively for the net purchases of own shares have been reclassified from other
items to net cash outflow from financing.
The results for the year ended 31 December 2003 have been abridged from the Group's published
financial statements, which have been reported on by the Group's auditors and filed with the Registrar
of Companies. The report of the auditors was unqualified and did not contain a statement under S237
(2) or (3) of the Companies Act 1985.
The main exchange rates used for translation purposes are as follows:
Average rates Period end rates
30.6.04 30.6.03 31.12.03 30.6.04 30.6.03 31.12.03
Australian dollar 2.46 2.63 2.53 2.61 2.48 2.38
Euro 1.48 1.46 1.45 1.50 1.44 1.42
Hong Kong dollar 14.15 12.54 12.75 14.20 12.87 13.90
Singapore dollar 3.09 2.82 2.86 3.11 2.90 3.04
3 EXCEPTIONAL ITEMS
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Net profit on sale of properties and investments:
- subsidiaries - 0.5 0.6
- associates 1.2 0.2 0.3
Total net profit on sale of properties and
investments 1.2 0.7 0.9
Net (loss) profit including provisions on sale
and termination of operations:
- MCL and AGL, UK (includes goodwill written off
£1.0m, note 9) (6.6) - -
- Provision release arising from non-motors
business exits - central 3.6 - 4.0
- UK Retail dealerships - (0.3) (4.6)
- Other (0.9) (0.4) 0.2
Total net loss including provisions on sale and
termination of operations (3.9) (0.7) (0.4)
Total exceptional items charged after operating
profit (2.7) - 0.5
4 VAT EXCEPTIONAL
The 2003 Annual report and accounts included claims for overpaid VAT. A net VAT recovery of £15.3m
was reported as operating exceptional income, £22.2m of associated interest as exceptional interest
income and £7.5m as an exceptional tax charge.
5 TAXATION
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
The charge for taxation includes the following: £m £m £m
Overseas taxes 22.6 17.0 37.5
Joint ventures 0.8 1.1 2.3
Associates (0.6) 0.3 (0.2)
Associates benefited by £0.7m from the agreement of prior years' tax computations.
6 EARNINGS PER ORDINARY SHARE
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
Based on the profit for the period: £m £m £m
Headline profit before tax 88.9 66.4 135.8
Taxation on Headline profit (22.6) (17.5) (31.8)
Minority interests (1.8) (1.3) (2.0)
Headline earnings 64.5 47.6 102.0
Goodwill amortisation (note 1) (2.8) (2.7) (5.5)
Exceptional items (note 3) (2.7) - 0.5
VAT exceptional (note 4) - - 37.5
Taxation on VAT exceptional (note 4) - - (7.5)
Basic earnings 59.0 44.9 127.0
Headline earnings per share 82.5p 62.1p 132.4p
Basic earnings per share 75.4p 58.5p 164.8p
Diluted earnings per share 74.7p 57.3p 162.1p
Six months Six months Year to
to 30.6.04 to 30.6.03 31.12.03
number number number
Weighted average number of fully paid ordinary
shares in issue during the period, less those
held by the Inchcape Employee Trust 78,200,898 76,709,674 77,049,311
Dilutive effect of potential ordinary shares 784,404 1,584,449 1,276,038
Adjusted weighted average number of fully paid
ordinary shares in issue during the period 78,985,302 78,294,123 78,325,349
Headline profit before tax and earnings (before goodwill amortisation and exceptional items) are
adopted in that they assist the reader in understanding the underlying performance.
Headline and basic earnings per share are calculated by dividing the respective Headline and basic
earnings (as outlined above) for the period by the weighted average number of fully paid ordinary
shares in issue during the period, less those shares held by the Inchcape Employee Trust.
Diluted earnings per share is calculated as per Headline and basic earnings per share with a further
adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all
dilutive potential ordinary shares. Dilutive potential ordinary shares comprise share options and
deferred bonus awards.
7 DIVIDENDS
The interim dividend of 15.0p per ordinary share (interim 2003 - 12.0p) will be paid on 13 September
2004 to shareholders on the register on 13 August 2004.
8 ACQUISITIONS
In June 2004 the Group acquired five Mercedes-Benz dealerships. The estimated consideration is
c. £28.0m of which £21.8m arose in this half year.
9 POST BALANCE SHEET EVENTS
On 28 July 2004, the Group completed the disposal of its 40.0% associates, MCL Group Limited and
Automotive Group Limited (MCL and AGL), for c. £19.3m (net of costs) in cash. A provision for
the anticipated loss of c. £6.6m has been recognised within exceptional items, including £1.0m
goodwill previously written off to reserves.
This information is provided by RNS
The company news service from the London Stock Exchange D
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