Preliminary Results 2001
Inchcape PLC
4 March 2002
4 March 2002
Inchcape announces preliminary results for year 2001
Inchcape plc, the international automotive services group, announces its
results for the year to 31 December 2001.
Highlights include
Results
- Continuing operating profit up 20.9% to £98.3m
- Headline profit before tax up 32.1% to £97.9m
- Headline EPS up 58.6% to 78.2p
- Strong operational cash flow - £188.5m in the year
- Cash positive after:
- £45.0m returned to shareholders
- Over £80.0m invested in acquisitions
- Dividend for this year up 22.7% to 27.0p
Strategic initiatives during 2001
- Acquisition of Bates Motor Group Ltd, one of the largest BMW/Audi dealers in
the UK, for £26.0m
- Acquisition of remaining 51.0% of Eurofleet, one of the leading UK providers
of automotive refurbishment and logistics services
- AA Buyacar new venture launched; Inchcape has a 30.0% stake and provides
sourcing and logistics services
- AutoCascade, a pan European re-marketing joint venture with Avis Europe plc,
initially launched in the UK
Outlook
- Encouraging outlook with continued growth in the UK and Australia, and
improvement expected in Greece and Belgium
Peter Johnson, Group Chief Executive of Inchcape plc, commented:
'It has been a highly successful year for Inchcape both in terms of on-going
trading and in the near completion of our disposal programme. As predicted,
we have seen a rapid bounce back in our UK operating profits. This has been
complemented by strong performances from our key overseas markets including an
exceptional year in Hong Kong, driven primarily by taxi sales, and Australia,
where our operating profits increased by over 55.0%.
Our balance sheet strength enabled us to make a number of strategic
investments during the year. We completed the acquisition of the remaining
51.0% of Eurofleet Ltd, the Bates Motor Group Ltd and entered into new
ventures with Avis Europe plc and the AA. Our UK Business Services division is
developing very well and we intend to begin the process of rolling out these
services into Continental Europe during the course of 2002.
Taken as a whole, the outlook in our six major markets is very encouraging.
We expect the recovery in the UK to continue and the introduction of the new
Corolla in Greece and Belgium should lead to an improvement in earnings in
those markets. Australian growth prospects are promising. We are confident
that 2002 will see further progress.'
Introduction
Inchcape's excellent results are testament to the decisive actions that have
been taken, since it became a pure automotive Group in June 1999, to re-focus
on its core markets. Operating profit from our continuing businesses rose by
20.9%. Headline profit before tax (PBT) was up 32.1%, a key driver being the
interest charge falling from £16.0m to £3.9m. This reduction was influenced in
part by the successful disposal programme. Headline earnings per share rose
58.6% to 78.2p.
In completing our transition into an automotive services group, we have
created a solid platform for the future by:
- Divesting 15 businesses, raising £90.1m in cash;
- Strong management of working capital, driving high levels of operational
cash flow;
- Improving the quality of earnings through focusing on markets where we have
scale, sustainability and solid growth prospects; and
- Acquiring Eurofleet Limited (Eurofleet), thus providing a creditable
Business Services platform.
These actions, amongst others, have allowed the Group to fund a £45.0m return
of cash to shareholders during 2001 and to invest in acquisitions totalling
£81.9m.
Acquisitions/New Ventures
The net result of completing this transformation phase is to leave the Group
effectively in a cash neutral position. We therefore have significant capacity
to continue to build on the solid foundations that have been put in place.
In the UK we have strengthened our UK Retail business with the acquisition of
the Bates Motor Group Ltd and associated properties (Bates Group) for £26.0m.
Following this acquisition, and a number of smaller 'in fill' acquisitions, we
are now approaching our goal of retailing 5.0% to 10.0% of our preferred
partners national sales volumes. Our partners are BMW, Toyota/Lexus, the
Premier Automotive Group (PAG) of Ford (encompassing Jaguar and Land Rover)
and VW/Audi. It is our view that opportunities will arise in the specialist
retail business as the manufacturers continue to consolidate their dealer
networks. We do not believe this business will be fundamentally impacted by
the proposed changes to Block Exemption. However we are currently reviewing
these changes to consider the implications for volume retailing.
Our new venture with the AA is a clear illustration of how we can play a major
role in supporting new entrants to the car retailing market. We are delivering
value to AA Buyacar through our retailing and sourcing business, and also
through the provision of a full service logistics operation.
The acquisition of the remaining 51.0% of Eurofleet in December 2001 was an
important part of our strategy to broaden our business base, into the
refurbishment and logistics markets. These are growing markets in their own
right. However, by using our retailing expertise, we are able to offer a fully
integrated service to manufacturers, self-drive hire and leasing companies.
This encompasses fleet management, a full logistics and refurbishment
capability as well as re-marketing expertise. The re-marketing activities are
mainly carried out through AutoCascade, a joint venture with Avis Europe plc.
Winning the contract to handle re-marketing and fleet management activities
for Fiat Auto UK's entire fleet of used vehicles for the next three years is a
clear demonstration of the success of this strategy.
Manufacturer Relationships
The strong relationship with Toyota Motor Corporation has provided the
platform for further investments in our core markets of Hong Kong, Singapore,
Greece and Belgium.
In Singapore we announced, on 28 February 2002, that a voluntary conditional
cash offer of S$2.30 per share for the remaining c.36.7% of Inchcape Motors
Limited not owned by the Inchcape Group would be made. If successful the total
consideration payable to the minority shareholders would be c. £53.2m.
Operational investments in Asia have been focused on providing better
aftersales facilities for our customers, a very important profit contributor
to the Group. We also continue to invest in Greek retail facilities whilst we
have used our Greek infrastructure to build a business in the Balkans, which
sold over 1,600 cars in the year.
In Australia we continue to invest with Subaru, VW and Jaguar. We will become
the exclusive retailer for Subaru in Melbourne during 2002 introducing a new
retail concept within this market. This will be a scale business selling over
6,000 new and used cars in a full year. We are also examining retail expansion
plans in Sydney, particularly with the PAG.
Our relationship with Ferrari/Maserati continues to develop and strengthen.
Maserati is set to expand significantly off the back of two new model launches
this year. We have recently acquired the rights to distribute and retail the
brand in Belgium.
Disposals
During the year we completed, among others, the disposal of IRB, our Financial
Services subsidiary in Brunei, Mazda France, Peugeot in Australia/New Zealand
and Ford in Peru and Ecuador.
Disposal proceeds this year were £90.1m, whilst the operating profit generated
by these businesses was £3.5m.
Return of capital
During 2001 the Company returned £45.0m to shareholders through a share
buyback programme. This reduced the number of shares in issue by 10.9m with
the average price paid per share being 412p. The positive effect on earnings
per share (EPS) from this buyback will continue to be felt throughout 2002.
The Board's policy in respect of further returns of capital is clear and
consistent, in that if available funds are not applied for investment
purposes, the Board will make additional returns of capital to shareholders.
Given our stated strategic intentions a further return of capital is not
currently considered appropriate by the Board. However, our shareholder value
driven approach balances short-term considerations with long-term investment
opportunities and is kept under regular review.
Board changes
Tony Alexander will step down from the Board at the Annual General Meeting in
May 2002, having completed nine years as a non-executive Director.
Financial performance
2001 Preliminary Results
Summary Results
(£ million) 2001 2000
Continuing turnover 3,228.3 2,971.7
Continuing operating profit 98.3 81.3
Headline profit before tax 97.9 74.1
Exceptionals (36.9) (0.7)
Profit before tax 61.0 73.4
Headline earnings per share 78.2p 49.3p
Ordinary dividend per share 27.0p 22.0p
Continuing operating profit rose by 20.9% to £98.3m. The total operating
profit increased 13.0% to £101.8m.
Headline profit before tax was £97.9m compared to £74.1m in 2000. Headline
earnings per share rose by 58.6% to 78.2p. Profit before tax was £61.0m. This
is below last year's figure of £73.4m due to the loss on sale and termination
of businesses of £36.3m. This has arisen due to historic goodwill of £36.7m
being written off.
Operational Review
Continuing Businesses
Continuing operating profit before exceptional items increased by 20.9% to
£98.3m. Of this increase £2.2m relates to the exchange benefit of using 2001
average exchange rates compared to 2000 rates. Continuing operating profit by
market is analysed below.
United Kingdom
Operating Profit £13.7m 2001, £0.7m 2000
The UK new car market grew by 10.7% to a record 2.46m units, fuelled by low
interest rates, price reductions and the return of consumer confidence
following the uncertainties that arose from the Competition Commission enquiry
in 2000.
Our UK Retail profits rose 38.6% to £12.2m. Adjusting for the acquisition of
the Bates Group, made in August, underlying growth was 24.0%. The Bates Group
made £1.6m pre-goodwill amortisation in the period to year end.
Our new car sales, on a like for like basis, were up over 16.0%. This, allied
to a continued robust performance in used cars and aftersales, contributed to
the strong result. The Financial Services profits (included in Financial
Services results) generated from our UK Retail operations were £0.8m.
Results from the Leasing and Fleet Management businesses (included in
Financial Services results) improved significantly due to the non-recurrence
of the £7.0m residual value provision made last year. Used car residual values
have stabilised as expected and the provision made last year has proved to be
adequate.
Autobytel UK losses fell as forecast by £3.7m. Brand recognition remains
strong and this business is an important part of our UK strategy of offering
consumers and businesses a choice of products and channels to market. As
revenues improve and costs are further reduced, losses in Autobytel UK will
continue to fall.
Losses in Seaking, our new car pre-delivery inspection business, were £3.3m
lower than last year due to the closures of loss making sites, and the fact
that all remaining operations are now managed by Eurofleet. However, Eurofleet
suffered as the nearly new car refurbishment sector had a difficult year with
upheaval in the daily rental market caused by the foot and mouth epidemic and
the events of 11 September. The market has now stabilised and this, allied to
new contracts awarded for 2002, bodes well for the future.
Profits for the Ferrari/Maserati business grew again this year despite volume
reductions due to supply constraints and the run out of the Maserati 3200. The
growth prospects for this brand are excellent with the launch of two new
models in 2002.
Profit from our associate, the MCL Group, fell by £2.6m. Profits from
Enterprise Car Finance (previously known as Chrysler Jeep Financial Services)
and Daihatsu Financial Services, which are in run off, fell as expected by
£2.0m.
Greece/Belgium
Operating Profit £12.7m 2001, £17.7m 2000
In Greece profit fell by £3.5m, however £1.7m of this was due to the change in
the way Greek stocks were financed, resulting in the stock holding charge
moving from interest to operating profit.
Other factors were a reduction in market share and a declining market, which
was down 4.0%. The share decline was primarily due to the run out of the
Corolla, Toyota's largest volume selling model. Despite this, Toyota retained
second position in the market. The new Corolla, with a wider range of
variants, was launched in January 2002.
Profits grew from our Greek ancillary businesses and from our modest recent
investment in the Balkans, where we sold over 1,600 cars. We are close to
finalising the closure of our Greek loss making daily rental business.
In Belgium volumes were down mainly due to the Corolla run out. The new
Corolla was extremely well received at the Brussels Motor Show in January
2002.
Australia/New Zealand
Operating Profit £12.8m 2001, £8.7m 2000
Subaru Australia continues to outperform the market, achieving a record volume
(over 27,000 units in 2001) for the fifth consecutive year. Market share was
3.6%, the largest share for a major Subaru market outside Japan.
The growing Sydney Retail business achieved 4,750 unit sales in the year and
improved profitability with VW performing particularly well. The launch of
Subaru Melbourne, our exclusive new retail concept for this city, which
represents some 20.0% of the Australian market, is scheduled for the second
quarter of this year. The real benefits from this substantial new business
(over 6,000 new and used cars per annum) will start to impact in 2003.
Hong Kong
Operating Profit £48.9m 2001, £40.7m 2000
Profits rose sharply driven by the strength of the taxi market and also by a
£2.5m currency translation benefit. Taxi sales increased more than 130.0% to
c.9,000 units representing just over half of the total taxi fleet. This was
the result of a government incentive campaign encouraging taxi drivers to
switch from diesel to Liquified Petroleum Gas (LPG) taxis. This has had the
effect of condensing the normal six year replacement cycle into three. As
Toyota achieves over 90.0% of the taxi market this has led to a particularly
high level of profit in the year. Taxi sales will continue but at a much
reduced level in 2002.
The underlying market was down just over 5.0%. However, Toyota/Lexus increased
market share, most other franchises performed well, especially Peugeot which
took 5.1% of the passenger car market. Mazda lost market share and profits
were well down, but the new product pipeline is strong and this should start
to impact from late 2002 onwards.
Singapore/Brunei
Operating Profit £19.2m 2001, £21.9m 2000
In Singapore the market fell slightly by 2.4%. Despite this Toyota increased
market share to 21.3%. Margins were under pressure as the price of Certificate
of Entitlements (COEs) varied more than expected.
Aftersales and finance income were strong in the year and helped mitigate the
new car margin reduction. The Singapore market, dictated by the number of COEs
issued, could fall by up to 15.0% in 2002, however, finance income and
aftersales are anticipated to rise.
In Brunei, where Toyota is again the market leader, the recent reduction in
import duties has resulted in retail price reductions. This should stimulate
the market, which has been at a depressed level for a number of years.
Other
Operating Profit £5.9m 2001, £7.9m 2000
Operating profits rose in our Toyota businesses in Guam and Ethiopia. In Latin
America, where the sole remaining businesses are BMW in Chile and Peru,
profits also rose. Mazda Finland incurred losses in the year, but prospects
look brighter given the new product pipeline. In the year we also provided
£2.5m against our investment in the US listed Autobytel.com.
Central Costs
£(14.9)m 2001, £(16.3)m 2000
Despite the expense associated with relocating the head office into more cost
efficient premises, Central Costs were still £1.4m lower than last year.
Headcount reductions, allied to property savings will mean a significant
reduction in Central Costs for 2002.
Discontinued Businesses
Profits in the year for businesses that were sold or closed prior to 4 March
2002 were £3.5m. Peugeot in Australia/New Zealand, IRB in Brunei, and numerous
businesses in Latin America contributed to this. The disposal programme is now
substantially complete.
Current Trading and Prospects
Trading in the UK has started well. The new car market is expected to fall
from its record levels achieved during 2001, however we expect our recovery to
continue and remain positive about this market.
Our performance in Greece and Belgium is expected to improve due to the
contribution from the new Toyota Corolla, which has been well received in both
markets since its launch in January 2002.
Profits in Hong Kong remain underpinned by the breadth and quality of our
earnings stream. However, the exceptional profits generated by the taxi market
last year will not be repeated and this will impact overall results. Whilst
the underlying retail market remains depressed, with little immediate sign of
recovery, our aftersales and finance earnings remain strong.
In Singapore, the market is likely to weaken as the Singaporean authorities
are expected to issue a lower quota of COEs this year.
Our Australian business continues to grow and improvements in the exchange
rate environment since year end will be beneficial. We should also see an
improved performance from our retail investments.
On balance there are a number of positives, which are expected to offset any
pressures felt in Asia. Taken as a whole the outlook is encouraging and we are
confident that 2002 will see further progress.
Dividend
The Board recommends the payment of a final ordinary dividend of 18.2p (2000 -
14.7p), giving a total dividend for the year of 27.0p (2000 - 22.0p). The
dividend is covered 2.9 times by Headline earnings per share. Subject to
approval at the Annual General Meeting on 16 May 2002, the final dividend will
be paid on 17 June 2002 to shareholders on the register on 24 May 2002.
Notes to Editors
For further information, please contact:
Group Communications, Inchcape plc
020 7546 0022
Hogarth Partnership Limited
020 7347 9477
Inchcape, as 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. Operating primarily in the UK, Greece, Belgium,
Australia, Hong Kong and Singapore, its key partners are Toyota, Subaru,
Ferrari, Jaguar and Land Rover. Inchcape's activities include exclusive
Import, Distribution and Retail, Business Services, automotive E-commerce and
Financial Services.
For further information, visit us at www.inchcape.com
Consolidated profit and loss account
for the year ended 31 December 2001
______________________________________________________________________________
Continuing Discontinued
operations operations Total
______________________________________________________________________________
2001 2001 2001 2000
£m £m £m £m
______________________________________________________________________________
Turnover including share
of joint ventures
and associates 3,228.3 91.2 3,319.5 3,717.4
Less:
- share of joint ventures (40.8) (0.6) (41.4) (61.1)
- share of associates (161.0) (4.1) (165.1) (570.2)
_____________________________ _________ _____________ __________ _________
Group subsidiaries'
turnover 3,026.5 86.5 3,113.0 3,086.1
Cost of sales (2,573.4) (75.2) (2,648.6) (2,607.3)
_____________________________ _________ _____________ __________ _________
Gross profit 453.1 11.3 464.4 478.8
Net operating expenses (369.3) (7.8) (377.1) (406.8)
_____________________________ _________ _____________ __________ _________
Operating profit 83.8 3.5 87.3 72.0
Share of profits of joint
ventures 11.6 0.1 11.7 13.2
Share of profits (losses)
of associates 2.9 (0.1) 2.8 4.9
_____________________________ _________ _____________ __________ _________
Total operating profit 98.3 3.5 101.8 90.1
Net (loss) profit on sale of
properties and investments (1.7) 1.1 (0.6) (0.4)
Net (loss) profit including
provisions on sale and
termination of operations (41.0) 4.7 (36.3) (18.5)
Utilisation of provision for
net loss on sale of
operations - - - 18.2
_____________________________ _________ _____________ __________ _________
Profit on ordinary
activities before interest 55.6 9.3 64.9 89.4
========= =============
Net interest (3.9) (16.0)
_____________________________ __________ _________
Profit on ordinary
activities before taxation 61.0 73.4
Tax on profit on
ordinary activities (28.7) (18.2)
_____________________________ __________ _________
Profit on ordinary
activities after taxation 32.3 55.2
Minority interests (8.3) (7.6)
_____________________________ __________ _________
Profit for the financial
year 24.0 47.6
Dividends (19.5) (19.2)
_____________________________ __________ _________
Retained profit for
the financial year 4.5 28.4
========================== ========== =========
Headline profit before
tax (£m) 97.9 74.1
Headline earnings per
share (pence) 78.2p 49.3p
FRS 3 profit before
tax (£m) 61.0 73.4
Basic earnings per share
(pence) 30.1p 54.2p
Diluted earnings per share
(pence) 29.7p 54.2p
Statement of total recognised gains and losses
for the year ended 31 December 2001
______________________________________________________________________________
2001 2000
£m £m
______________________________________________________________________________
Profit for the financial year 24.0 47.6
Effect of foreign exchange rate changes:
- results for the year (1.0) 0.8
- foreign currency net investments (3.2) 10.3
Unrealised deficit on impairment
of revalued properties (0.2) (0.3)
_________________________________________________________ ______ _______
Total recognised gains 19.6 58.4
_________________________________________________________ ______ _______
Note of historical cost profits and losses
for the year ended 31 December 2001
______________________________________________________________________________
2001 2000
£m £m
______________________________________________________________________________
Reported profit on ordinary activities before
taxation 61.0 73.4
Realisation of property revaluation (deficits)
surpluses (1.3) 1.5
Difference between the historical cost and the
actual depreciation charge 1.0 0.6
________________________________________________ _____ _____
Historical cost profit on ordinary activities
before taxation 60.7 75.5
================================================ ===== ======
Historical cost profit after taxation,
minority interests and dividends 4.2 30.5
================================================ ===== ======
Consolidated balance sheet
as at 31 December 2001
______________________________________________________________________________
2001 2000
£m £m
______________________________________________________________________________
Fixed assets:
Intangible assets 76.2 3.7
Tangible assets 251.1 244.5
Investments:
- joint ventures: share of gross assets 443.2 534.5
share of gross liabilities (392.0) (479.2)
_______ _______
share of net assets 51.2 55.3
- associates 29.0 43.5
- other investments 4.0 12.9
__________________________________________________ _______ _______
411.5 359.9
Current assets:
Stocks 519.7 530.1
Debtors:
- amounts due within one year 202.2 255.4
- amounts due after more than one year 13.4 68.0
Investments 14.2 10.4
Cash at bank and in hand 123.0 166.4
__________________________________________________ _______ _______
872.5 1,030.3
Creditors - amounts falling due within one year:
Borrowings (83.1) (138.6)
Other (582.7) (566.5)
__________________________________________________ _______ _______
(665.8) (705.1)
__________________________________________________ _______ _______
Net current assets 206.7 325.2
Total assets less current liabilities 618.2 685.1
Creditors - amounts falling due
after more than one year:
Borrowings (22.4) (96.9)
Other (81.6) (61.8)
__________________________________________________ _______ _______
(104.0) (158.7)
Provisions for liabilities and charges (111.4) (113.9)
__________________________________________________ _______ _______
Net assets 402.8 412.5
================================================== ======= =======
Capital and reserves:
Called-up share capital 116.2 132.5
Share premium account 107.0 106.9
Revaluation reserve 36.1 37.2
Capital redemption reserve 16.4 -
Profit and loss account 81.3 88.7
__________________________________________________ ______ _______
Equity shareholders' funds 357.0 365.3
Minority interests 45.8 47.2
__________________________________________________ _______ _______
402.8 412.5
================================================== ======= =======
Consolidated cash flow statement
for the year ended 31 December 2001
Reconciliation of operating profit to operating cash flows
______________________________________________________________________________
2001 2000
£m £m
______________________________________________________________________________
Operating profit 87.3 72.0
Amortisation 0.9 0.9
Depreciation 26.6 24.8
(Profit) loss on sale of tangible fixed assets
other than property (0.4) 1.2
Decrease in stocks 6.1 14.8
Decrease (increase) in debtors 44.4 (44.9)
Increase in creditors 14.4 28.1
Payments in respect of exceptional operating items - (1.3)
Payments in respect of termination of operations (2.2) (1.1)
Other items 11.4 (4.0)
__________________________________________________ _______ _______
Net cash inflow from operating activities 188.5 90.5
================================================== ======= =======
Consolidated cash flow statement
______________________________________________________________________________
Net cash inflow from operating activities 188.5 90.5
Dividends from joint ventures 7.2 5.9
Dividends from associates 3.5 3.1
Returns on investments and servicing of finance (6.7) (14.8)
Taxation (28.4) (12.4)
Capital expenditure and financial investment (17.6) (21.1)
__________________________________________________ _______ _______
146.5 51.2
Acquisitions and disposals 6.6 48.2
Equity dividends paid (18.4) (18.8)
__________________________________________________ _______ _______
Net cash inflow before use of liquid resources
and financing 134.7 80.6
Net cash inflow (outflow) from the
management of liquid resources 53.5 (88.1)
Net cash outflow from financing* (169.3) (49.1)
_________________________________________________ _______ _______
Net increase(decrease)in cash 18.9 (56.6)
================================================== ======= =======
Reconciliation of net cash flow to movement in net funds and debt
______________________________________________________________________________
Net increase (decrease) in cash 18.9 (56.6)
Net cash outflow from increase
in debt and lease financing 124.2 49.1
Net cash (inflow) outflow from
the management of liquid resources (53.5) 88.1
__________________________________________________ _______ _______
Change in net funds and debt resulting from
cash flows 89.6 80.6
Effect of foreign exchange rate changes on net debt (4.6) (1.4)
Net loans and finance leases relating to
acquisitions and disposals 13.0 1.0
Liquid resources of businesses sold (11.4) (0.3)
__________________________________________________ _______ _______
Movement in net funds (debt) 86.6 79.9
Net debt at 1 January (69.1) (149.0)
__________________________________________________ _______ _______
Net funds(debt) at 31 December 17.5 (69.1)
================================================== ======= =======
* Net cash outflow from financing includes £45.3m relating to the share
buyback programme.
Notes
1 Segmental analysis
______________________________________________________________________________
a Turnover Group subsidiaries Share of joint ventures
______________________________________________________________________________
2001 2000 2001 2000
(i) By geographical market: £m £m £m £m
______________________________________________________________________________
UK 904.7 797.7 10.2 16.2
Greece/Belgium 595.0 560.1 5.0 3.8
Australia/New Zealand 408.8 403.5 8.2 6.9
Hong Kong 420.5 335.9 17.4 20.0
Singapore/Brunei 427.5 378.6 - -
Other 270.0 252.6 - (0.1)
_____________________________ _______ _______ _______ _______
Continuing 3,026.5 2,728.4 40.8 46.8
Discontinued 86.5 357.7 0.6 14.3
_____________________________ _______ _______ _______ _______
3,113.0 3,086.1 41.4 61.1
============================= ======= ======= ======= =======
______________________________________________________________________________
Turnover Share of associates Total
______________________________________________________________________________
2001 2000 2001 2000
By geographical market: £m £m £m £m
______________________________________________________________________________
UK 159.3 195.0 1,074.2 1,008.9
Greece/Belgium 1.7 1.5 601.7 565.4
Australia/New Zealand - - 417.0 410.4
Hong Kong - - 437.9 355.9
Singapore/Brunei - - 427.5 378.6
Other - - 270.0 252.5
_____________________________ _______ _______ _______ _______
Continuing 161.0 196.5 3,228.3 2,971.7
Discontinued 4.1 373.7 91.2 745.7
_____________________________ _______ _______ _______ _______
165.1 570.2 3,319.5 3,717.4
============================= ======= ======= ======= =======
______________________________________________________________________________
Turnover Group subsidiaries Share of joint ventures
______________________________________________________________________________
2001 2000 2001 2000
(ii) By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 2,261.5 2,042.0 - -
UK Retail 711.7 621.5 - -
Financial Services 52.5 63.8 40.8 46.8
E-commerce 0.8 1.1 - -
_____________________________ _______ _______ ________ ______
Continuing 3,026.5 2,728.4 40.8 46.8
Discontinued 86.5 357.7 0.6 14.3
_____________________________ _______ _______ ________ ______
3,113.0 3,086.1 41.4 61.1
============================= ======= ======= ======== ======
______________________________________________________________________________
Turnover Share of associates Total
______________________________________________________________________________
2001 2000 2001 2000
By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 157.1 195.0 2,418.6 2,237.0
UK Retail - - 711.7 621.5
Financial Services 3.9 1.5 97.2 112.1
E-commerce - - 0.8 1.1
_____________________________ _______ _______ _______ _______
Continuing 161.0 196.5 3,228.3 2,971.7
Discontinued 4.1 373.7 91.2 745.7
_____________________________ _______ _______ ________ _______
165.1 570.2 3,319.5 3,717.4
============================= ======= ======= ======== =======
Activities treated as discontinued in 2001 were IRB Finance Berhad, Inchcape
France Finance, Jaguar Australia, Peugeot Australia, Peugeot New Zealand,
Ford Peru and Ford Ecuador.
Activities treated as discontinued in 2000 were Toyota (GB), Mazda France,
Volkswagen Australia, activities in China and two agricultural and industrial
vehicle activities in Latin America.
Geographical analysis of turnover is by origin and is not significantly
different to turnover by destination. Turnover between segments is not
material.
______________________________________________________________________________
b Total operating profit Group subsidiaries Share of joint ventures
______________________________________________________________________________
2001 2000 2001 2000
(i) By geographical market: £m £m £m £m
______________________________________________________________________________
UK 10.5 (6.2) 0.7 3.4
Greece/Belgium 9.4 15.4 2.9 2.0
Australia/New Zealand 12.3 8.3 0.5 0.4
Hong Kong 41.4 34.0 7.5 6.7
Singapore/Brunei 19.2 21.9 - -
Other 5.9 7.9 - -
_____________________________ _______ _______ _______ _______
98.7 81.3 11.6 12.5
Central costs (14.9) (16.3) - -
_____________________________ _______ _______ _______ _______
Continuing 83.8 65.0 11.6 12.5
Discontinued 3.5 7.0 0.1 0.7
_____________________________ _______ _______ _______ _______
87.3 72.0 11.7 13.2
============================= ======= ======= ======= =======
______________________________________________________________________________
Total operating profit Share of associates Total
______________________________________________________________________________
2001 2000 2001 2000
By geographical market: £m £m £m £m
______________________________________________________________________________
UK 2.5 3.5 13.7 0.7
Greece/Belgium 0.4 0.3 12.7 17.7
Australia/New Zealand - - 12.8 8.7
Hong Kong - - 48.9 40.7
Singapore/Brunei - - 19.2 21.9
Other - - 5.9 7.9
_____________________________ _______ _______ _______ _______
2.9 3.8 113.2 97.6
Central costs - - (14.9) (16.3)
_____________________________ _______ _______ _______ _______
Continuing 2.9 3.8 98.3 81.3
Discontinued (0.1) 1.1 3.5 8.8
_____________________________ _______ _______ _______ _______
2.8 4.9 101.8 90.1
============================= ======= ======= ======= =======
______________________________________________________________________________
Total operating profit Group subsidiaries Share of joint ventures
______________________________________________________________________________
2001 2000 2001 2000
(ii) By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 94.0 85.8 (0.2) -
UK Retail 12.2 8.8 - -
Financial Services (0.8) (5.4) 11.8 12.5
E-commerce (6.7) (7.9) - -
________________________________ _____ _____ _____ _____
98.7 81.3 11.6 12.5
Central costs (14.9) (16.3) - -
________________________________ _____ _____ _____ _____
Continuing 83.8 65.0 11.6 12.5
Discontinued 3.5 7.0 0.1 0.7
________________________________ _____ _____ _____ _____
87.3 72.0 11.7 13.2
================================ ===== ===== ===== =====
______________________________________________________________________________
Total operating profit Share of associates Total
______________________________________________________________________________
2001 2000 2001 2000
By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 1.5 1.9 95.3 87.7
UK Retail - - 12.2 8.8
Financial Services 1.4 1.9 12.4 9.0
E-commerce - - (6.7) (7.9)
________________________________ _____ _____ _____ _____
2.9 3.8 113.2 97.6
Central costs - - (14.9) (16.3)
________________________________ _____ _____ _____ _____
Continuing 2.9 3.8 98.3 81.3
Discontinued (0.1) 1.1 3.5 8.8
________________________________ _____ _____ _____ _____
2.8 4.9 101.8 90.1
================================ ===== ===== ===== =====
______________________________________________________________________________
c Net assets Group subsidiaries Share of joint ventures
______________________________________________________________________________
2001 2000 2001 2000
(i) By geographical market: £m £m £m £m
______________________________________________________________________________
UK 242.8 120.6 3.8 6.5
Greece/Belgium 46.2 123.4 7.4 6.8
Australia/New Zealand (16.3) (11.1) 0.5 4.0
Hong Kong 37.5 39.4 39.5 34.9
Singapore/Brunei 47.3 66.7 - -
Other 60.7 53.6 - -
_____________________________ _______ _______ _______ _______
Continuing 418.2 392.6 51.2 52.2
Discontinued (0.9) 33.1 - 3.1
_____________________________ ______ _______ _______ _______
417.3 425.7 51.2 55.3
Net cash (debt)* 17.5 (16.8) - -
Other unallocated assets and
liabilities** (112.2) (95.2) - -
_____________________________ _______ _______ ________ ______
322.6 313.7 51.2 55.3
============================= ======= ======= ======= =======
______________________________________________________________________________
Net assets Share of associates Total
______________________________________________________________________________
2001 2000 2001 2000
By geographical market: £m £m £m £m
______________________________________________________________________________
UK 27.4 41.8 274.0 168.9
Greece/Belgium 1.4 1.3 55.0 131.5
Australia/New Zealand - - (15.8) (7.1)
Hong Kong - - 77.0 74.3
Singapore/Brunei - - 47.3 66.7
Other - - 60.7 53.6
_____________________________ _______ _______ ________ _______
Continuing 28.8 43.1 498.2 487.9
Discontinued 0.2 0.4 (0.7) 36.6
_____________________________ ______ _______ ________ _______
29.0 43.5 497.5 524.5
Net cash (debt)* - - 17.5 (16.8)
Other unallocated assets and
liabilities** - - (112.2) (95.2)
_____________________________ _______ _______ ________ _______
29.0 43.5 402.8 412.5
============================= ======= ======= ======== =======
______________________________________________________________________________
Net assets Group subsidiaries Share of joint ventures
______________________________________________________________________________
2001 2000 2001 2000
(ii) By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 283.0 287.5 0.8 -
UK Retail 118.4 108.4 - -
Financial Services 17.9 (2.2) 50.4 52.2
E-commerce (1.1) (1.1) - -
_____________________________ _______ _______ ________ ______
Continuing 418.2 392.6 51.2 52.2
Discontinued (0.9) 33.1 - 3.1
_____________________________ _______ _______ ________ ______
417.3 425.7 51.2 55.3
Net cash (debt)* 17.5 (16.8) - -
Other unallocated assets and
liabilities** (112.2) (95.2) - -
_____________________________ _______ _______ ________ ______
322.6 313.7 51.2 55.3
============================= ======= ======= ======== ======
______________________________________________________________________________
Net assets Share of associates Total
______________________________________________________________________________
2001 2000 2001 2000
By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 21.9 36.6 305.7 324.1
UK Retail - - 118.4 108.4
Financial Services 6.9 6.5 75.2 56.5
E-commerce - - (1.1) (1.1)
_____________________________ _______ _______ _______ _______
Continuing 28.8 43.1 498.2 487.9
Discontinued 0.2 0.4 (0.7) 36.6
_____________________________ _______ _______ ________ ______
29.0 43.5 497.5 524.5
Net cash (debt)* - - 17.5 (16.8)
Other unallocated assets and
liabilities** - - (112.2) (95.2)
_____________________________ _______ _______ ________ ______
29.0 43.5 402.8 412.5
============================= ======= ======= ======== ======
* Reconciled to debt as follows:
Net cash (debt) as above 17.5 (16.8)
Financial Services debt in respect
of consumer financing - (52.3)
________________________________________________ ________ _______
Net cash (debt) as reported 17.5 (69.1)
================================================ ======== =======
** Other unallocated assets and liabilities include central provisions,
taxation, dividends and assets not directly related to operating activity.
______________________________________________________________________________
2 Exceptional items
______________________________________________________________________________
2001 2000
£m £m
______________________________________________________________________________
Net loss on sale of properties
and investments (0.6) (0.4)
________________________________________________ _____
_____
Net (loss) profit including provisions on
sale and termination of operations:
- MCL - UK (goodwill written off £24.5m) (24.5) -
- Seaking Automotive Ltd - UK (includes goodwill
written off £5.3m) (7.9) -
- UK Retail dealerships(includes goodwill
written off £5.8m) (6.7) -
- IRB Finance Berhad - Brunei 3.9 -
- Toyota (GB) - UK - 14.0
- Nanjing Hong Kong Changjiang - China (2000
includes goodwill written off £0.9m) - (6.2)
- Towell Auto Centre - Oman (2000 includes
goodwill written off £5.1m) - (3.0)
- John Deere - Peru - (3.1)
- Other (2001 includes goodwill written off
£1.1m) (1.1) (2.0)
________________________________________________ _____ _____
Total net loss including provisions on
sale and termination of operations (36.3) (0.3)
________________________________________________ _____ _____
Total exceptional items - note 5 (36.9) (0.7)
================================================ ===== =====
During 2001 the Group has disposed of various businesses. The principal
profits and losses on those transactions are noted above and in the Financial
Review.
Goodwill written off included above of £36.7m (2000 - £6.0m) had been charged
against reserves in previous years.
______________________________________________________________________________
3 Net interest
______________________________________________________________________________
2001 2000
£m £m
______________________________________________________________________________
Interest payable and other charges:
On bank loans, overdrafts and other loans falling
due within five years 10.7 23.1
On finance leases mainly repayable within five years - 0.1
Other interest 2.5 7.6
____________________________________________________________ ____ ____
13.2 30.8
Less amounts included in cost of sales for
Financial Services subsidiaries (0.6) (3.8)
____________________________________________________________ ____ ____
12.6 27.0
____________________________________________________________ ____ ____
Interest receivable:
Bank and other interest (11.9) (26.9)
Less amounts included in turnover for Financial
Services subsidiaries 1.8 11.1
____________________________________________________________ ____ ____
(10.1) (15.8)
____________________________________________________________ ____ ____
The Company and its subsidiaries 2.5 11.2
Share of joint ventures' net interest 0.1 0.4
Share of associates' net interest 1.3 4.4
____________________________________________________________ ____ ____
3.9 16.0
============================================================ ==== ====
______________________________________________________________________________
4 Taxation
______________________________________________________________________________
2001 2000
Current taxation £m £m
______________________________________________________________________________
United Kingdom corporation tax at 30.0% (2000 - 30.0%) 1.5 8.9
Double taxation relief (2.2) (10.0)
____________________________________________________________ ____ ____
(0.7) (1.1)
Advance corporation tax written off - 0.2
____________________________________________________________ ____ ____
(0.7) (0.9)
Overseas taxes 27.3 27.7
Deferred taxation (2.3) (6.7)
____________________________________________________________ ____ ____
24.3 20.1
Adjustments to prior year liabilities:
- UK (0.5) (2.4)
- overseas 0.9 (2.1)
____________________________________________________________ ____ ____
The Company and its subsidiaries 24.7 15.6
Share of joint ventures' taxation 2.9 2.5
Share of associates' taxation 1.1 0.1
____________________________________________________________ ____ ____
28.7 18.2
============================================================ ==== ====
The tax rate has been increased due to FRS 3 exceptional losses for which
no tax credit is available (2000 - tax charge reduced by £5.0m in respect of
FRS 3 exceptional items).
______________________________________________________________________________
5 Earnings per ordinary share Headline FRS 3
______________________________________________________________________________
2001 2000 2001 2000
£m £m £m £m
______________________________________________________________________________
Headline profit before tax 97.9 74.1 97.9 74.1
Exceptional items - note 2 - - (36.9) (0.7)
________________________________________ _______ _______ _____ ______
Profit before tax 97.9 74.1 61.0 73.4
Taxation - note 4 (28.7) (23.2) (28.7) (18.2)
Minority interests (6.8) (7.6) (8.3) (7.6)
________________________________________ _______ _______ _____ ______
Earnings 62.4 43.3 24.0 47.6
======================================== ======= ======= ===== ======
Headline earnings per share 78.2p 49.3p
======================================== ======= =======
Basic earnings per share 30.1p 54.2p
=========================================================== ====== ======
Diluted earnings per share 29.7p 54.2p
=========================================================== ====== ======
2001 2000
number number
______________________________________________________________________________
Weighted average number of fully paid ordinary shares
in issue during the year, less those held by
the Inchcape Employee Trust 79,816,472 87,776,386
Dilutive effect of potential ordinary shares 968,310 49,111
______________________________________________________________________________
Adjusted weighted average number of fully paid
ordinary shares in issue during the year 80,784,782 87,825,497
==============================================================================
Headline profit before tax and earnings (before exceptional items and after
the utilisation of termination provisions) are adopted in that they provide a
fair representation of underlying performance.
Headline and basic earnings per share are calculated by dividing the
respective headline and FRS 3 earnings (as outlined above) for the year by the
weighted average number of fully paid ordinary shares in issue during the
year, 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.
______________________________________________________________________________
6 Dividends
______________________________________________________________________________
2001 2000 2001 2000
pence pence £m £m
______________________________________________________________________________
Interim - paid 17 September 2001 (2000
paid - 21 September 2000) 8.8 7.3 5.6 6.4
Final - proposed - payable 17 June 2002
(2000 paid - 15 June 2001) 18.2 14.7 13.9 12.8
_______________________________________________ _____ ____ _____ _____
27.0 22.0 19.5 19.2
=============================================== ===== ==== ===== ====
If approved at the Annual General Meeting the final ordinary dividend will be
paid to ordinary shareholders registered in the books of the Company at the
close of business on 24 May 2002.
Dividends above exclude £0.3m (2000 - £0.2m) payable on shares held by the
Inchcape Employee Trust.
The 2001 dividend charge of £19.5m is net of a £1.1m benefit resulting from
a lower 2000 final dividend charge than was accrued in the 2000 financial
statements. This benefit was due to the share buyback programme reducing the
number of shares on the register at the record date.
____________________________________________________________________________
7 Foreign currency translation
______________________________________________________________________________
The main exchange rates used for translation purposes are as follows:
Average rates Year end rates
2001 2000 31.12.01 31.12.00
______________________________________________________________________________
Australian dollar 2.80 2.62 2.84 2.69
Euro 1.61 1.65 1.63 1.59
Hong Kong dollar 11.22 11.84 11.35 11.65
Singapore dollar 2.58 2.62 2.69 2.59
US dollar 1.44 1.52 1.46 1.49
______________________________________________________________________________
______________________________________________________________________________
8 Basis of presentation
______________________________________________________________________________
The figures contained in this announcement have been prepared in accordance
with applicable accounting standards on the historical cost basis, modified
to include the revaluation of certain tangible fixed assets.
The financial information presented does not constitute the statutory
financial statements of 2001 nor 2000. The 2001 figures are extracted from
the audited financial statements for that year which have not yet been
approved by the shareholders and have not yet been delivered to the Registrar.
The comparative figures are extracted from the latest published financial
statements that have been delivered to the Registrar of Companies. The
auditors' reports in respect of both years were unqualified and did not
contain a statement under either Section 237(2) or Section 237(3) of the
Companies Act 1985.
Financial Review for Preliminary Statement
Financial Reporting and Accounting Standards
During the year the Group has adopted FRS 18 'Accounting Policies'. The
Group's accounting policies were already consistent with this standard and
accordingly no changes in reporting have arisen.
FRS 17 'Retirement Benefits' and FRS 19 'Deferred Tax' were issued in December
2000. FRS 17 replaces SSAP 24 'Accounting for Pension Costs' and changes
existing accounting and disclosure requirements for defined benefit pension
schemes. Although transitional rules apply, when fully implemented the
principal changes will be the inclusion of pension scheme surpluses or
deficits on the balance sheet, analysis of the pension charge between
operating profit and net interest, and the reporting of actuarial gains and
losses in the Statement of Total Recognised Gains and Losses. Under the FRS 17
transitional rules the Group has a net pension asset of £5.7m at 31 December
2001.
FRS 19 replaces SSAP 15 'Accounting for Deferred Tax' and prescribes
significant changes to the existing accounting and disclosure for deferred
tax. In line with the standard, FRS 19 will be adopted for the first time in
the Group accounts for the year ending 31 December 2002. The main change is
that deferred tax must be recognised on a full provision basis in the Group's
accounts, as opposed to the partial provision method presently adopted by the
Group. On implementation of FRS 19, a prior year adjustment will be made to
reflect the change in basis of accounting. The impact of this on net assets
and the ongoing tax rate is unlikely to be significant.
Results
Operating Profit
2001 operating profit was £101.8m of which £3.5m related to discontinued
businesses. Continuing operating profit of £98.3m was £17.0m higher than 2000.
The acquisition of Bates Motor Group Ltd (Bates Group) in August 2001 and the
49.0% of Eurofleet Limited (Eurofleet) in December 2000 contributed £4.1m of
operating profit in 2001, before charging goodwill amortisation of £1.2m.
Operating profit for 2000 included a £7.0m one-off provision to cover future
losses anticipated on residual value buyback guarantees in our UK Leasing
business.
Exceptional Items
As set out in Note 2, the aggregate net exceptional loss for the period is
£36.9m (2000 - £0.7m). This is mainly attributable to historic goodwill being
written off on the sale of the Mazda UK Import and Distribution business by
our 40.0% associate, MCL Group Ltd (£24.5m), the restructuring of Seaking, a
UK pre-delivery and inspection company (£5.3m), and the sale of some UK Retail
dealerships (£5.8m).
Net Interest
The net interest charge for the year was £3.9m (2000 - £16.0m). This is split
between subsidiary net interest of £2.5m (2000 - £11.2m) and joint ventures
and associates of £1.4m (2000 - £4.8m).
The subsidiary net interest charge benefited from the proceeds of the disposal
programme in 2000 and early 2001, a lower interest rate environment and strong
operational cash flows. This was aided by a £1.7m one-off reduction in
interest due to the change in method of funding stock in Greece. This was
partly offset by the impact of a £45.0m share buyback, which was completed in
the first half of the year. The decrease in the joint ventures and associates
charge is primarily driven by the sale of Toyota (GB) in mid 2000.
Taxation
The Headline tax rate for the year was 29.4% (2000 - 31.0%). The rate
benefited from substantial profits being earned in Hong Kong, a low tax
jurisdiction although this was offset by unrelieved tax losses in the UK,
albeit at a lower level than last year.
Although the geographical mix of profits is likely to be less favourable in
2002, this should be offset by a much more favourable UK tax position partly
resulting from the acquisitions of the Bates Group and Eurofleet.
Minority Interest
Profit attributable to minorities has increased to £8.3m from £7.6m in 2000.
However, this year's charge included a £1.5m exceptional profit on the sale of
IRB, the Financial Services subsidiary in Brunei.
Cash Flow
The Group had net cash of £17.5m at 31 December 2001 compared to net debt of
£69.1m at 31 December 2000 despite returning £45.0m to shareholders.
Cash generated from operating activities was £188.5m. Working capital falling
by £64.9m was a major factor in this. However, £38.6m of the fall arose from a
change in the method of financing the Greek stock from debt to supplier
related credit. Capital expenditure less disposal proceeds was £17.6m, which
was £9.0m less than the depreciation charge, aided by the sale of surplus
properties.
Disposals
The Group has almost completed its programme to dispose of its non-core
businesses. During the year we sold IRB, Mazda France and sold, closed or
transferred 13 other non-core businesses generating in aggregate £90.1m of
cash.
Acquisitions
During the year, the Group spent £81.9m on acquisitions. In line with our
intentions to develop scale investments with a number of specialist retail
manufacturers, the Group acquired 100.0% of the Bates Group in August 2001 for
£26.0m, including £3.1m of net debt.
In December this year the Group acquired the remaining 51.0% of Eurofleet for
a consideration of £40.5m, including debt of £27.2m on completion. In addition
further consideration could be payable under an earn out formula based on EBIT
(earnings before interest and tax) growth. If compound EBIT growth is less
than 11.6% per annum, no further consideration is payable. The theoretical
maximum earn out payment could amount to £27.5m, however this would require a
compound annual growth rate of 32.8% based on EBIT, with no increase in
capital employed to 2004. The additional consideration payable could be in the
region of £14.0m to £22.0m, based on challenging EBIT growth rate assumptions.
For the purposes of FRS 10 it has been assumed that £21.8m deferred
consideration is payable.
Treasury Management and Policy
The centralised Group Treasury function is responsible for managing the key
financial risks of the Group encompassing funding and liquidity risk, interest
rate risk, counterparty risk and currency risk. Group Treasury operates under
Board approved objectives and policies, which expressly forbid speculative
transactions. The treasury function is subject to regular internal audit.
Funding and Liquidity Risk
Group policy is to ensure that the funding requirements forecast by the Group
can be met within available committed facilities.
The Group's principal committed facilities at 31 December 2001 are a £200.0m
standby revolving credit facility, maturing in March 2003 and a US private
placement for US$72.0m maturing on 31 May 2002. Negotiations are well underway
regarding the refinancing of the Group facilities later this year.
Loan notes totalling £26.8m were issued during the year. Notes for £13.9m were
issued on 31 August following the acquisition of 100.0% of the share capital
of Bates Group. A further £12.9m of notes were issued on 11 December following
the acquisition of the remaining 51.0% interest in Eurofleet. The £39.1m of
notes outstanding at the year end also include notes issued in 2000 for the
initial 49.0% interest in Eurofleet. Notes mature during 2002 through to
November 2005.
Reflecting the Group's lower forecast borrowing requirements, the standby
revolving credit facility was reduced from £250.0m to £200.0m during the year.
In addition, a £30.0m term loan facility was reduced to £15.0m in September
and was subsequently fully repaid during December 2001.
In addition to the committed facilities the Group has significant uncommitted
borrowing lines made available by relationship banks. These facilities are
used for liquidity management purposes.
The Group's cash and debt balances at the year end are set out below:
£m Debt Cash Net
Euro (6.2) 27.9 21.7
Hong Kong Dollar - 17.4 17.4
Singapore Dollar (0.7) 41.2 40.5
Australian Dollar - 5.2 5.2
Other (2.8) 18.4 15.6
Total (other than Sterling) (9.7) 110.1 100.4
Sterling (52.3) 12.9 (39.4)
Swapped US loan notes (43.5) - (43.5)
Total Sterling (95.8) 12.9 (82.9)
Total (105.5) 123.0 17.5
The Group's only significant borrowings are in sterling, as noted above. Cash
is held locally in Hong Kong for working capital purposes, whilst deposits are
held in Singapore, in part, to support the significant requirement to purchase
Certificates of Entitlement needed for new car sales.
Interest Rate Risk
The objective of the Group's interest rate policy is the minimisation of net
interest expense and the protection of the Group from material adverse
movements in interest rates. To achieve these objectives our policy is to
adjust the balance of fixed and floating rate debt in the light of
expectations for future interest rate movements. At the year end the Group's
principal borrowings were at floating rates reflecting both the cash surplus
and the expected continuance of a benign interest rate environment.
The Board has approved the use of interest rate swaps, forward rate agreements
and options for interest rate hedging activities. The Group continues to pay a
floating sterling interest rate on the $72.0m US private placement swapped in
1998.
Counterparty Risk
Cash deposits and other financial instruments result in credit risk on the
amount due from counterparties. Limits are in place, which reduce credit risk
by stipulating the aggregate amount and duration of exposure to any one
counterparty dependent upon the applicable credit rating. Credit ratings and
the appropriate limits are reviewed regularly.
Currency Risk
The Group faces currency risk on its net assets and earnings, a significant
proportion of which are in currencies other than sterling. On translation into
sterling, currency movements can effect the Group balance sheet and profit and
loss account. Group policy is to minimise balance sheet translation exposures,
where fiscally efficient, by financing working capital requirements in local
currency and maximising the permanent remittance of overseas earnings into
sterling.
Had the average sterling rates in 2000 continued into 2001, the Group's
operating profit for the continuing businesses would have been £2.2m lower.
Headline profit before tax would also have been £2.2m lower. This effect arose
primarily as a result of the strengthening of the Hong Kong dollar partially
offset by the weakening of the Australian dollar. Principal exchange rates are
listed in Note 7.
The percentages of net assets by currency at 31 December 2001 for the Group
are set out below:
Net assets by currency %
Sterling 16.8
Euro 25.0
Hong Kong Dollar 28.4
Singapore Dollar 20.3
Other 9.5
Total 100.0
The Group has transactional currency exposures where sales or purchases by an
operating unit are in currencies other than in that unit's reporting currency.
In many of our businesses, to remove this exposure, local currency billing
arrangements have been put in place with the principals. For those businesses
that continue to be billed in foreign currency, Group policy is that committed
transaction exposures are hedged into the business's reporting currency. Where
possible foreign exchange exposures will be matched internally before hedging
externally. Hedging instruments are approved by the Board and are restricted
to forward foreign exchange contracts, currency options and foreign exchange
currency swaps. Foreign exchange currency swaps are also used to hedge
transaction exposures arising on cross border Group loans.
Post Balance Sheet Events
On 7 February 2002 the Group announced a pre-conditional voluntary cash offer
at S$2.30 per share, to acquire the minority holding in Inchcape Motors
Limited (IML), our quoted Singaporean subsidiary. The pre-condition was that
IML's Independent Directors recommend by 28 February 2002 that IML's
shareholders should accept the offer. This pre-condition has been satisfied
and on 28 February 2002 the Group announced that the voluntary conditional
cash offer will be made. This valued the c. 36.7% minority share at c. £53.2m.
This information is provided by RNS
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