Preliminary Results
10th March 2010
Inchcape plc
2009 Annual Results Announcement
Record cash generation - Inchcape well positioned for future
Inchcape plc, a leading international automotive distributor and retailer, announces its annual results for the year ended 31 December 2009.
Operational and strategic highlights:
· Improved competitive position with further progress on customer service and market share
· Benefited from broad geographic spread
· Margin benefit from counter-cyclicality of used cars
· Resilient performance in aftersales, c.50% of Group gross margin
· Successful restructuring programme delivered cost saving of c.£70m
· Strengthened financial position, Group now debt free
Financial highlights:
· Reported sales of £5.6bn (2008: £6.3bn)
· Pre exceptional PBT £155.1m (2008: £190.7m)
· Reported PBT £136.7m (2008: £108.2m)
· Adjusted EPS* 2.7p (2008: 5.0p)
· Reported EPS* 2.3p (2008: 1.9p)
· Operating cash flow £336.7m (2008: £183.7m)
· Successful Rights Issue raised £234.3m net proceeds
*Adjusted to reflect the Rights Issue
André Lacroix, CEO of Inchcape plc, commented:
"The Group has delivered a resilient financial performance with record operating cash flow, demonstrating the success of our responsive management of the global downturn and the defensive strengths of Inchcape's unique business model.
We have strengthened our competitive position despite the weak demand for new vehicles across most of our markets, through a balanced focus on delivering high levels of customer service, growing market share, growing aftersales, reducing costs, managing working capital and selective capital expenditure investment.
In the second half of 2009 we saw strong growth in the UK, where we have continued to outperform the industry and both the Australian and Hong Kong markets have started to recover.
In 2010, we expect to benefit from continued market momentum in Hong Kong and Australia and stable industry in Belgium and Finland but we also continue to anticipate market declines in the UK, Greece, Singapore, Eastern Europe and Russia.
We therefore remain cautious for 2010 and do not expect a global recovery to start until well into the second half of this year given consumer confidence is still weak and unemployment continues to rise in many of our key markets. Nevertheless, we believe that the Group has the financial strength and flexibility both to continue to trade effectively and to further improve its competitive position.
We remain confident in our ability to deliver a robust performance in 2010 and we are uniquely positioned to benefit from the recovery in global demand."
Ends
Group Communications, Inchcape plc
+44 (0) 20 7546 0022
Investor Relations, Inchcape plc
+44 (0) 20 7546 8209
Financial Dynamics (Jonathon Brill/Billy Clegg)
+44 (0) 20 7831 3113
www.inchcape.com
Notes to editors
About Inchcape:
Inchcape is the leading, independent international automotive distributor and retailer operating in 26 markets. Inchcape has diversified multi-channel revenue streams including sale of new and used vehicles, parts, service, finance and insurance.
Inchcape's vision is to be the world's most customer-centric automotive retail group and represents some of the world's leading automotive brands, including Toyota, Lexus, Subaru, BMW, Mazda, Mercedes-Benz, Volkswagen, Audi, Honda, Land Rover and Jaguar.
Inchcape, which has been listed on the London Stock Exchange since 1958, is headquartered in London, employs around 15,000 people.
www.inchcape.com
2009 Annual Results
Chairman's statement
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Sales |
5,583.7 |
6,259.8 |
|
Adjusted profit before tax |
155.1 |
190.7 |
|
Exceptional items |
(18.4) |
(82.5) |
|
Profit before tax |
136.7 |
108.2 |
Inchcape has responded swiftly and decisively to an unprecedented global downturn. The Group's focus continues to be on customer service and we have gained share in most of our markets, while cutting costs and reducing inventory. We are well positioned for the future.
This is my first year as Chairman of Inchcape plc and despite challenging trading conditions in most of our markets around the world I am pleased to report results for 2009 above our expectations with particularly impressive cash generation. This has demonstrated the resilience of Inchcape's business model, the success of our self-help measures and an outstanding level of leadership and commitment from our employees.
Automotive industry
At the start of 2009, the global automotive industry faced a rapid and unprecedented downturn driven by falling consumer confidence and lack of credit availability. However, with the gradual thawing of global credit markets and falling interest rates, assisted by government incentive schemes in several markets, 2009 global car sales outperformed most expectations. Globally, the industry sold just over 63m vehicles in 2009, a 3.9% decline from 2008 and a 5.1% decline from 2007*.
Of particular note, China became the world's largest car market in 2009, surpassing the USA. Car sales in China surged some 50% to 12.9m vehicles in 2009, driven by government incentives on fuel efficient vehicles and increasing demand for car ownership*.
Strategy
We have remained true to our differentiating Customer 1st strategy which has enabled us to both strengthen our market position and to further cement our relationships with our manufacturer brand partners. At the same time, management has remained focused on five self-help measures: growing market share; growing aftersales; reducing costs; managing working capital; and selective capital expenditure investment. These measures have generated a strong cash performance with a cost base and levels of working capital that are well below those at the end of 2008.
Performance
As a result of the unprecedented decline in the global car markets, Group sales have decreased by 10.8% to £5.6bn for the full year to 31 December 2009. On a like for like, constant currency basis, sales fell by 14.6%.
We began our swift response to changing market conditions in the fourth quarter of 2008 when we implemented a number of restructuring measures to reduce our cost base. During the last quarter of 2008 and early 2009 we closed 31 less profitable sites and reduced our workforce by 2,350 people. These actions generated annualised cost savings of approximately £70m.
Profit before tax and exceptional items of £155.1m was 18.7% lower than 2008 and adjusted earnings per share fell 46% to 2.7p (adjusted for the bonus element of the Rights Issue). On a statutory basis profit before tax was £136.7m, 26.3% above 2008. Cash generated from operations during the year was £336.7m which is the highest level generated by the Group since 2000 and represents a 215% conversion of operating profit.
Debt reduction
The Group has historically maintained an appropriate level of borrowings based on a prudent balance sheet strategy. Given the precipitous decline in economic conditions seen at the end of 2008 and the challenging trading environment forecast for 2009, the Board announced an equity raise via a Rights Issue in March 2009 which was completed in April 2009. This enabled us to reduce our debt and strengthen the capital structure of the Group. I would like to thank our shareholders for their support.
The net proceeds of £234.3m raised by this Rights Issue together with the actions we took to restructure our cost base and reduce working capital, together with the benefits of our geographic spread and diversified revenue streams, enabled us to be in a net cash position at year end.
Acquisition and disposals
During 2009 we made an earn out payment of US$35m and a further US$5m will be paid in 2010 in relation to the acquisition of the 75.1% interest in Musa Motors group, one of Russia's largest car retailers. Whilst the Russian car market has been challenging in 2009 and we expect this environment to continue in 2010, we are confident that due to our scale position and the low levels of car ownership, our investment in Russia has placed us in a strong position to benefit when the market rebounds.
Capital expenditure
Whilst in 2009 we reduced our discretionary capital expenditure in agreement with our brand partners, we have continued to make strategic investments, opening nine greenfield sites across the world.
Board
After 15 years with the Group, Peter Johnson retired as Non-Executive Chairman and I was delighted to be appointed to the role with effect from 14 May 2009. I would like to thank Peter for his years of service and I feel privileged to be working with so many talented colleagues both on the Board and throughout the business.
There have been a number of other changes to the Board. On 14 May 2009 Graham Pimlott was appointed as Chairman of the Audit Committee, with Raymond Ch'ien and Karen Guerra both retiring as Non-Executive Directors.
Following three years with the Group and the successful completion of the Rights Issue, Barbara Richmond, Group Finance Director, left the Group at the end of June. John McConnell was appointed to the position with effect from 1 October 2009 and joined the Board as an Executive Director. John was formerly CEO Inchcape Australasia, before that CFO and has 10 years' experience with the Group.
Also, we were pleased to announce the appointment of two new Non-Executive Directors with effect from 1 July 2009: Alison Cooper, who is currently Chief Operating Officer, Chief Executive Designate and board member of Imperial Tobacco Group plc, joined the Board and has also become a member of the Audit Committee; Nigel Northridge, currently Chairman of Paddy Power plc, Senior Independent Director of Aggreko plc and Chairman of Debenhams plc, joined the Board and has also become a member of the Remuneration and Audit Committees.
Dividend
In line with our disclosure in last year's Annual Report and Accounts and in the Prospectus published at the time of the Rights Issue, the Board is not recommending the payment of an ordinary dividend for the year in light of the challenging trading conditions.
Whilst no decision has been made as yet concerning a dividend in 2010, we intend to return to our stated aim of maintaining a progressive dividend policy as soon as trading conditions allow.
Share consolidation
The Board intends to propose a 1 for 10 consolidation of Inchcape plc ordinary shares. The purpose of the share consolidation is to reduce the total number of shares now in issue following the Rights Issue undertaken in 2009 and to increase the likely price of the Company's shares to a figure more appropriate for a listed company of its size and nature in the UK market. The share consolidation is subject to approval by shareholders at the Annual General Meeting to be held on 13 May 2010. Following the share consolidation there is expected to be approximately 460 million Inchcape ordinary shares in issue, reduced from approximately 4.6 billion at present.
Approach to governance and corporate responsibility
We continue to focus on the importance of good governance and apply the Combined Code and other relevant guidance for listed companies in our global operations. Integrating socially responsible behaviour into every aspect of how we operate and define ourselves remains high on our agenda. In 2009 we have built on the foundations of a global approach to corporate responsibility that is making responsible economic, environmental and social behaviour intrinsic to the way we work.
People
On behalf of the Board, I wish to express my sincere thanks to all our colleagues across the Group for their commitment and support throughout the extremely challenging trading conditions in 2009.
Outlook
Inchcape is uniquely positioned in the global car industry and in 2009 the Group has continued to outperform its competitors. Whilst we expect market conditions in 2010 to remain challenging, the Group is well placed to benefit from the market recovery and to take advantage of industry consolidation opportunities in the medium term.
* Source: Global Insight
Ken Hanna
Chairman
Group Chief Executive's strategic review
Inchcape is uniquely positioned worldwide. We are a leading independent international automotive distributor and retailer who has delivered a record cash performance in the downturn by creating great value from great brands. We are strongly positioned for the global recovery.
Inchcape is a leading independent, international automotive distributor and retailer, with scale operations in Australia, Belgium, Greece, Hong Kong, Russia, Singapore and the UK as well as operations in 19 other markets. We represent some of the world's leading automotive brands with whom we have long standing relationships.
The Inchcape management team has reacted decisively to the unprecedented global slowdown in car sales witnessed in the latter part of 2008 and in early 2009 by focusing on five key operational priorities: to build market share; to grow our aftersales business; to reduce our costs; to manage our working capital by controlling inventory; and to limit capital expenditure to committed strategic investments.
These actions, together with our decision to strengthen our capital structure and reduce debt through a Rights Issue completed in April 2009 with the support of our shareholders, has meant the Group has ended 2009 in a significantly stronger position than we entered it.
Inchcape is in a net cash position, has gained share in many of its key markets, has enjoyed a resilient aftersales performance (approximately 50% of Group gross margin) and has significantly reduced the cost of doing business. Our operating cash flow was the highest achieved since 2000 and was almost twice our operating profit (before exceptional items) as we reduced our stock.
Further, we have strengthened our balance sheet which will enable the Group to trade effectively, invest in working capital and to take advantage of the upturn. During the Company's 160 plus year history, Inchcape has invariably emerged from a time of crisis stronger and more resilient.
Although we expect a continuation of difficult trading conditions in many of our markets until well into the second half of 2010, I am confident that we are uniquely positioned as the global industry leader to grasp the opportunities of recovery when they emerge.
In that context, I would like to emphasise why we believe that the medium to long term outlook for Inchcape is very exciting.
Resilient business model
We operate scale retail and distribution businesses in 26 markets across the world and are a leader in 14 of these. Our core brand partners, with whom we have longstanding relationships, have a history of outperforming the market. Inchcape's global scale of operation is unique in our industry.
Our business model is further strengthened by the Group's broad geographic spread, which embraces developed markets (like Australia, the UK and other western European countries together with powerful Asian centres like Hong Kong and Singapore), and emerging markets (such as Russia, China and other central and eastern European states) and is unequalled. Our diversity has spread risk, as decline in some markets has been balanced by strength in others. It also gives us a vital presence in those emerging markets where sales potential is highest and which, in the fullness of time, we believe will deliver strong returns thanks to our efficient retail footprint.
We also match the demands and opportunities in each territory with the appropriate channel strategy.
In small to medium sized markets, we predominantly operate as country distributors, where we become the custodian of brands like Toyota, Lexus and Subaru to manage every step of the journey between the factory and the end customer. This demands our deep involvement with our brand partners, as well as developing local brand, marketing and sales strategies, finance products, aftersales servicing, parts and accessories, plus managing sales via a mix of Inchcape-owned retail centres and third-party independent dealerships.
In larger markets like the UK and Russia, manufacturers use their own national sales companies to distribute and appoint independent dealers. In these markets, we operate a retail service that is increasingly focused on bigger, better sites that deliver an enhanced customer experience and provide scale volume for our sales and aftersales activities, including servicing, parts and accessories.
In the city state markets of Hong Kong and Singapore and a number of central European states, we operate a 'Vertically Integrated Retail' (VIR) model where we are both the distributor and the exclusive retailer, enabling us to deliver heightened efficiencies and strong margins through our management of the entire value chain.
Inchcape has a mix of growth and defensive value drivers, which gives the Group a diversity of revenue streams. Our growth drivers are new and used vehicle sales together with associated finance and insurance products, which are particularly important to facilitate the sales process. Defensive drivers are our resilient parts and aftersales servicing businesses, which in 2009 represented c.50% of our Group gross margin.
We are in close partnership with many of the best known and most respected automotive brands in the world. These are strong, innovative brands that outperform and lead the market based on years of investment, to create deep customer relationships through constant technological advance and continuous improvement.
Unique approach: Inchcape Advantage is our competitive advantage
To extract the greatest value from this unique global infrastructure, we have a clear and simple vision, to be 'the world's most customer-centric automotive retail group'.
Our industry is generally not known for the quality of its customer service and our approach is based on a simple insight: if we look after people and their cars better than the competition, customers are more likely to choose us; and if we perform demonstrably better for our brand partners than our competitors, manufacturers are more likely to expand their global business with us.
By successfully continuing to implement our strategy for improved customer service, based on our unique Inchcape Advantage programme, we increased market share in many of our markets in 2009, despite tough decision-making that led to the closure of underperforming sites and a reduction in headcount.
Through Inchcape Advantage, customer service is truly at the heart of the business, from the top of the company to the sales floor and service workshop. It is intrinsic to the way that every Inchcape person works, ensuring that providing superior service is present and evident at every stage of the customer journey.
As a result, we believe we are the most advanced company in our industry in implementing cutting edge retail techniques and technologies. Among other initiatives we manage a continuous mystery shopper programme to maintain the highest standards of in-centre service; we interview around 12,000 customers every month to identify precisely what we do well and what we should do better; and we constantly track a wide range of customer metrics - from footfall and test drives to leads and conversion rates.
Our global online portal (winner of a Microsoft Innovation Award) is used to interrogate this data, enabling local performance management and the sharing of information across the Group to learn on a daily basis from the experience of our businesses across the world. These leading indicators and a real time view of our customers provide us with valuable insights into changing consumer preferences and behaviours, effectively accelerating our response and enabling us to grasp new opportunities as they emerge.
These proprietary retail processes are truly unique in the automotive sector. They are a vital point of differentiation across our business and the foundation stone of the operational excellence that gives us a key advantage as we expand into emerging markets.
Decentralised and empowered organisation
I believe that this unique position also extends to the quality of our global and regional management teams, on whose personal judgement and freedom to make decisions so much depends.
It is our people across the world who have enabled us to deliver a performance in 2009 that was ahead of our own expectations and which improved as the year progressed. Revenues declined year on year but due to our committed operational focus, we ended 2009 with a robust gross margin performance, strong cash flows, improved customer service globally and increased market share in many territories across the world.
This performance was due, in no small part, to the tight management of our five key priorities - growing market share, growing aftersales, reducing costs, managing working capital, and selective capital expenditure investment - augmented by the in depth personal knowledge that our local management teams have of their markets. Our decentralised structure enables management to act swiftly with relevant, local, innovative propositions to meet the particular needs and preferences of their customer base, so ensuring that a localised customer focus builds on our global strategy.
High quality people are vital to ensure that the business model works, and I would like to thank all our employees for playing a fundamental role in delivering a record operating cash flow in 2009.
Uniquely positioned for the future
I believe that the future for Inchcape, its employees, brand partners and shareholders is very exciting.
While we remain cautious about the timing of the market recovery, we certainly believe that no competitor is better placed than Inchcape, both to weather any continuing impact of the downturn and to grasp the opportunities that recovery will bring. We consider Inchcape to be uniquely positioned worldwide to take advantage of the global upturn for a number of reasons.
We are one of the most international of FTSE 350 listed general retailers, having delivered 83% of trading profit outside of the UK in the last six years. Our diversified geographic portfolio has scale businesses in 26 developed and emerging markets and we are a leader in 14 of these.
Our resilient business model, with distribution and retail channels, differentiating Customer 1st strategy and empowered management has a proven track record.
Our portfolio of the world's strongest automotive brands consistently outperforms the industry.
Our balance of revenue streams provides us with both growth opportunities and recurring aftermarket income.
Our leading, customer-centric operational processes introduced with our Inchcape Advantage programme, have improved our competitive position globally.
Our competitive position has grown stronger over the last year, both in terms of customer service and market share, providing us with an excellent growth platform for the future.
We expect customer demand for greener technology to drive vehicle replacement in developed markets and we are partnered with manufacturers committed to investing in the newest technology and greener vehicles. In the emerging markets, where we have scale operations and the car ownership levels are relatively low, the increase in wealth will grow demand.
We believe consolidation of a fragmented market to be inevitable. Inchcape will benefit from increased market share and the desire of manufacturers to seek new retail or distribution partners with the strongest companies. We have the financial firepower to invest in the best strategic opportunities to give us and our brand partners access to markets with strong future wealth and growth potential.
We outperformed the market in 2009. I believe that we will continue to outperform our competitors in 2010 and that Inchcape is uniquely positioned worldwide to benefit from the global market recovery in 2011 and beyond.
André Lacroix
Group Chief Executive
Key Performance Indicators (KPIs)
These KPIs are how we measure the success of our business
The Inchcape plc Board of Directors and the Group Executive Committee monitor the Group's progress against its strategic objectives and the financial performance of the Group's operations on a regular basis. Performance is assessed against the strategy, budgets and forecasts.
We also measure the quality of revenues through the mix of revenue streams, and the flow through of value from sales revenue to trading profit.
Sales
Definition: Defined as the consideration receivable from the sale of goods and services. It is stated net of rebates and any discounts and excludes sales related taxes.
Achievements in 2009: Thanks to the growth in our market share, our sales decline was limited to 10.8% despite the severity of the global economic downturn.
Trading profit
Definition: Defined as operating profit excluding the impact of exceptional items and unallocated central costs.
Achievements in 2009: Trading profit declined by 22.4% in 2009 driven by the significant market declines across the Group's regions.
Trading margin
Definition: Calculated by dividing trading profit by sales.
Achievements in 2009: Resilient trading margin of 3.5% achieved in challenging trading conditions, benefiting from significant cost savings.
Like for like sales and trading profit
Definition: Excludes the impact of acquisitions from the date of acquisition until the thirteenth month of ownership and businesses that are sold or closed. It further removes the impact of retail centres that are relocated. This is from the date of opening until the thirteenth month of trading in the new location. These numbers are presented in constant currency.
Achievements in 2009: Like for like sales and trading profit declined as anticipated in 2009 due to the significant fall in demand in the majority of our markets.
Profit before tax and exceptional items
Definition: Represents the profit made after operating and interest expenses but before tax is charged excluding the impact of exceptional items.
Achievements in 2009: Profit before tax and exceptional items decreased by 19% in 2009 due to the global market downturn.
Working capital
Definition: Defined as inventory, receivables, payables, and supplier related credit.
Achievements in 2009: Our stock cover target of 1.5 months was achieved seven months ahead of plan. Total working capital reduced by £176m in 2009, a 69.6% reduction on 2008.
Cash generated from operations
Definition: Defined as trading profit adjusted for depreciation, amortisation and other non cash items plus the change in working capital and provisions.
Achievements in 2009: As a result of cost saving and working capital reductions, operating cash flow grew by 83.3% to £336.7m in 2009.
Operating review
Our resilient global business model and proven strategy has delivered a solid financial performance in the face of an unprecedented downturn.
Regional analysis*
|
|
2009 |
2009 |
2009 |
2008 |
2008 |
2008 |
|
|
Operating |
Exceptional |
Trading |
Operating |
Exceptional |
Trading |
|
|
profit |
items |
profit |
profit |
items |
profit |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Australasia |
37.9 |
- |
37.9 |
40.9 |
(1.3) |
42.2 |
|
Europe |
26.8 |
(1.8) |
28.6 |
33.6 |
(7.0) |
40.6 |
|
North Asia |
19.9 |
- |
19.9 |
38.6 |
(0.1) |
38.7 |
|
South Asia |
55.9 |
- |
55.9 |
63.0 |
- |
63.0 |
|
UK |
43.7 |
(3.0) |
46.7 |
- |
(23.1) |
23.1 |
|
Russia and Emerging Markets |
(7.1) |
(12.1) |
5.0 |
(7.1) |
(49.6) |
42.5 |
|
Central Costs |
(20.3) |
(1.5) |
|
(11.0) |
(1.4) |
|
|
Operating profit |
156.8 |
(18.4) |
|
158.0 |
(82.5) |
|
Business analysis*
|
|
2009 |
2008 |
change |
change in constant currency |
|
|
£m |
£m |
% |
% |
|
Sales |
|
|
|
|
|
Distribution |
2,427.0 |
2,654.7 |
(8.6) |
(19.7) |
|
Retail |
3,156.7 |
3,605.1 |
(12.4) |
(14.1) |
|
Trading profit |
|
|
|
|
|
Distribution |
137.6 |
192.9 |
(28.7) |
(37.7) |
|
Retail |
56.4 |
57.2 |
(1.4) |
0.2 |
* At actual rates
The unprecedented downturn which began in the second half of 2008 and continued throughout 2009 has significantly impacted the global demand for new and used vehicles. We faced extremely challenging trading conditions in all of our markets across the world and although we saw improvements in a few markets in the second half of 2009, particularly the UK and Australia, overall, total registrations in all of our markets were considerably down compared with 2008 for the full year.
Despite these significant market declines, the Group has delivered resilient results with sales of £5.6bn, a decline of 16.6% at constant currency for the year. Our swift response to market challenges, with a focus on our five key operational priorities of growing market share, growing aftersales, reducing costs, managing working capital and selective capital expenditure has been reflected in a Group operating profit of £175.2m before exceptional items, down from £240.5m in 2008.
The restructuring carried out at the end of 2008 and in the second quarter of 2009 has resulted in annualised like for like cost savings of c.£70m. This has resulted in a trading margin of 3.5% down from 4.0% in 2008.
The Group has reduced working capital by £176m in 2009 and our stock target of 1.5 months was achieved earlier than expected. This, together with our other self help measures has enabled the Group to deliver cash generated from operations significantly ahead of expectations, generating £336.7m, 83.3% better than 2008 (at actual rate).
The strong cash generation from operations combined with the proceeds from the Rights Issue enabled the Group to repay a significant portion of its borrowings. The Group ended the year with £0.8m of net cash compared to a net debt of £407.8m in 2008.
Distribution business
Our distribution businesses have been resilient despite the global decline in car markets resulting in sales of £2.4bn, a decline of 19.7% and a robust 5.7% trading margin, resulting in a trading profit of £137.6m, a decline of 37.7% on 2008.
Across Europe, we delivered resilient margin in distribution performances despite the continued downturn. In Greece, where the market declined by 18.8%, our Toyota and Lexus business retained its market leadership position. Although the Belgian market fell by 12.6% we preserved our market share under very competitive circumstances.
Although the market in Hong Kong improved in the fourth quarter of 2009, it was down 28.3% for the full year and we remained market leader despite strong pricing activity from our competitors. In Singapore the market slowed down further in the second half as new car quota sizes were reduced by the government. However, our strong marketing campaigns and lower parallel imports led to a 3.7ppts gain in market share to 21.4%.
In a year that saw the car market in Australia decline by 7.4% we improved our market share by 0.1ppts.
While our Russia and Emerging Markets segment has been significantly affected by the continued downturn, it remains profitable and the Group gained market share in the Baltics and the Balkans.
Retail business
Although sales declined by 14.1% versus 2008, trading margins improved by 0.2ppts delivering a trading margin of 1.8% as a result of our self help measures put in place at the start of the year to deliver a trading profit of £56.4m.
In the UK we delivered solid results, outperforming the market which fell by 6.4%, to deliver a like for like sales decline of 3.9%. With the beneficial impact of the scrappage scheme and a significantly reduced cost base, we generated a growth in trading profit of 49.0% and 34.7% on a like for like basis.
Our Australasian retail business delivered a strong trading profit 15.2% higher than the prior year and a trading margin of 3.9%, an improvement of 0.6ppts.
Across Europe we have continued to focus on delivering excellent customer service in very challenging trading environments.
In our Russia and Emerging Market businesses, sales decreased by 1.6%. Trading conditions remained extremely challenging, however we finished the year with a trading profit of £4.0m.
Regional analysis
For the year ended 31 December 2009, the Group adopted IFRS 8 'Operating Segments'. IFRS 8 replaces IAS 14 'Segment Reporting' and is effective for reporting periods beginning on or after 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to assess their performance and to allocate resources to the segments. These operating segments are then aggregated into reporting segments to combine those with similar characteristics. In contrast, the predecessor standard required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach.
Under IFRS 8, Group businesses previously reported within the Rest of World segment under IAS 14 are reported within the other segments that best match the characteristics of each individual business. As a result, the Group's reportable segments for 2009 are as below.
Distribution: Australasia; Europe; North Asia; South Asia; United Kingdom; Russia and Emerging Markets
Retail: Australasia; Europe; United Kingdom; Russia and Emerging Markets
Included within the Russia and Emerging Markets segment are Russia, China, South America, Africa, the Balkans, the Baltics and Poland on the basis that prior to the global downturn these markets had entered the growth phase of their development cycle and we expect these markets to return to that growth phase in the medium term. These changes require comparative segmental information to be restated accordingly.
Our results are stated at actual rates of exchange. However, to enhance comparability, we also present year on year changes in sales and trading profit in constant currency thereby isolating the impact of exchange. Unless otherwise stated, changes in sales and trading profit in this operating review are at constant currency.
Australasia
|
|
2009 |
2008 |
% change |
% change |
|
|
£m |
£m |
|
constant currency |
|
Sales |
|
|
|
|
|
Retail |
284.4 |
263.2 |
8.1% |
(1.8)% |
|
Distribution |
478.4 |
456.1 |
4.9% |
(4.4)% |
|
Trading profit |
|
|
|
|
|
Retail |
11.2 |
8.9 |
25.8% |
15.2% |
|
Distribution |
26.7 |
33.3 |
(19.8)% |
(27.2)% |
The market
The Australian market declined by 7.4% compared to 2008, despite government stimulus packages aimed at the business consumer that ended in December 2009. These stimulus packages supported the LCV market in particular, which was down 1.5% compared to a decline of 7.9% in the passenger car segment.
However the market rebounded in the second half in line with the improving Australian economy.
In New Zealand, the total market declined 28.0% with commercial vehicles most affected and the passenger car market down 25.9%.
Business model and strategy
We are the distributor for Subaru in both Australia and New Zealand. We have represented Subaru in Australia since 1973.
In addition, we have multi-franchise retail operations based in Sydney, Melbourne and Brisbane. These operations hold franchises for Subaru, Volkswagen, Hyundai, Mitsubishi and Kia.
To support these operations, we have a logistics business called AutoNexus, which is responsible for managing vehicle and parts inventory, distribution and vehicle refurbishment on behalf of Subaru Australia, and our retail business as well as other independent dealers.
Our strategy for our distribution operations is to continue to grow market share through our superior Customer 1st business processes.
Revenue is principally generated from vehicle sales, with aftersales a significant source of both revenue and gross margin.
This strategy is supported by the development of market specific special editions and new product specification in conjunction with Subaru.
Our retail operations are focused on delivering an outstanding customer experience for our brand partners and driving revenue from sales of new cars and vehicle parts. In addition, we generate revenue from used cars and through the sales of finance and insurance products.
Our operating performance
In both of our Australasian distribution businesses, we have continued to outperform the market and have grown share. Sales were down 4.4% in a market which was down by 7.9% and trading profit was 27.2% below 2008 at £26.7m, due primarily to a stronger Japanese Yen (JPY), with a solid trading margin of 5.6%.
In retail, the business benefited significantly in 2009 from improved used car margins as a result of strong demand and lower inventory levels. In addition, a strong contribution from after sales resulted in a trading profit 15.2% better than 2008 and a record trading margin of 3.9%.
This strong trading profit performance and our continued focus on working capital across the segment resulted in cash generated from operations of £17.8m in retail and £29.6m in distribution.
Outlook for 2010
The market in Australia was one of the more resilient in 2009 and we expect that the positive momentum in the fourth quarter together with improving economic conditions and market sentiment will lead to a small growth overall in the market in 2010.
We expect Subaru to achieve market share improvements in both Australia and New Zealand as the benefit of a full year of new Outback, Liberty, Exiga and Outback diesel models is realised.
We expect to see fluctuations in currency rates. However we have already put in place currency hedging to manage our JPY/AUD exposure on vehicle and parts purchases through to the end of the third quarter of 2010 and will implement coverage for the fourth quarter at the optimal time.
Europe
|
|
2009 |
2008 |
% change |
% change |
|
|
£m |
£m |
|
constant currency |
|
Sales |
|
|
|
|
|
Retail |
204.3 |
391.3 |
(47.8)% |
(54.0)% |
|
Distribution |
801.8 |
837.9 |
(4.3)% |
(15.6)% |
|
Trading profit |
|
|
|
|
|
Retail |
(1.6) |
0.7 |
(328.6)% |
(299.9)% |
|
Distribution |
30.2 |
39.9 |
(24.3)% |
(33.1)% |
The market
In Belgium, in the absence of the biannual Motor Show last held in 2008 and with no stimulus package for the motor industry, the market declined by 12.6%. In Greece the overall market declined by 18.8% despite a small recovery mid year as a result of several government stimuli including a tax incentive and a short lived scrappage scheme. In Finland the market declined by 35.2%.
Business model and strategy
In Belgium, we are the distributor for Toyota and Lexus. We own and operate eight Toyota and Lexus retail centres, with the remaining network of 85 retail centres operated by independent third party retailers.
In Luxembourg, we are the distributor and retailer of Jaguar, Toyota and Lexus, with one retail centre for each brand.
In Greece, we are the distributor for Toyota and Lexus. We operate six retail centres with the remaining network of 35 Toyota and Lexus retail centres and 40 authorised repairers independently owned.
In Finland, we are the distributor for Jaguar, Land Rover and Mazda with four retail centres in Helsinki.
We aim to drive growth in market share in our distribution business and to continue our turnaround plan for retail. In distribution, growth will be driven by strong marketing programmes increasing traffic into the dealer network, with new model launches and a focus on operational excellence, all supported by tight overhead cost control. In Retail, our plan continues to focus on customer-centric operational excellence and improvements in footfall conversion.
Our operating performance
Trading conditions across our European markets remained extremely difficult throughout the year resulting in trading profits in our distribution business declining by 33.1% to £30.2m and a trading loss in our retail business of £1.6m.
In Belgium the overall market decline led to strong price competition which resulted in a broadly flat Toyota market share. However the new hybrid Prius was launched in quarter three and we gained share in the second half of the year.
In the Retail business lower new vehicle sales have been partly mitigated by sales growth in used vehicles and strong aftersales performance.
In Greece we maintained clear market leadership achieving 10.1% share through effective marketing campaigns and successfully leveraging new products and technologies on car models.
In Finland we successfully restructured our retail operations.
Our focus on working capital and in particular inventory management has resulted in strong cash generated from operations of £7.6m for the retail business, and £76.6m for distribution, well ahead of last year.
Outlook for 2010
As a whole we expect the markets in Europe to continue to face challenging trading conditions throughout 2010.
In Greece the significant economic challenges faced by the new government is expected to lead to a contraction in the economy and further declines in the market. We will focus on effective marketing, model differentiation and price competitiveness in vehicle sales and aftersales.
In Belgium with the biannual Motor Show in January and an improving economic climate we expect the market to remain broadly stable. A continued focus on driving customer traffic, superior customer service and a growth in aftersales will be our aim.
In both Greece and Belgium we will capitalise on the launch of the upgraded Toyota Rav4, the Auris and the Yaris. We will continue to grow aftersales through service reminder programmes and vehicle health checks.
In Finland we expect an improving economy and therefore the industry to stabilise. We intend to leverage the new Mazda model launches and current model extensions to improve our competitive position.
North Asia
|
|
2009 |
2008 |
% change |
% change |
|
|
£m |
£m |
|
constant currency |
|
Sales: Distribution |
312.2 |
378.5 |
(17.5)% |
(31.3)% |
|
Trading profit: Distribution |
19.9 |
38.7 |
(48.6)% |
(57.2)% |
The market
While the market in Hong Kong declined by 28.3% versus 2008 an improvement was seen with the fourth quarter being 40% higher than the same period in 2008, as general sentiment improved in line with economic conditions.
In Guam and Saipan the markets followed a similar pattern to Hong Kong with improving conditions leading to growth in the fourth quarter. However overall the markets were 9.9% and 20.4% down respectively on 2008.
Business model and strategy
In Hong Kong and Macau, we are the distributor for Toyota, Lexus, Hino Trucks, Daihatsu, Jaguar and Mazda. We operate VIR for these brand partners in this market. Inchcape has been market leader in Hong Kong for over 20 years and has won the Triple Crown award (in recognition of outstanding customer service, retail excellence and innovation) from Toyota Motors Corporation for 17 consecutive years, the only company in the world to have done so over such an extended period.
In Guam we are the market leading distributor and retailer for Toyota, Lexus and Chevrolet and in Saipan we are distributor and retailer for Toyota and Lexus.
Our operating performance
Inchcape's market share in Hong Kong of 28.9% was lower than the previous year as a result of aggressive pricing promotions by European competitors who were destocking earlier in the year, a weak performance of the commercial vehicle segment and supply issues in the fourth quarter.
These extremely challenging trading conditions particularly in Hong Kong led to a sales decline of 31.3% with trading profit falling by 57.2% and a trading margin of 6.4%.
However, our North Asia segment delivered strong cash flow which at £50.1m was 40.7% better than 2008 driven by a reduction in working capital.
Outlook for 2010
We expect the markets in this segment to continue their gradual recovery in 2010. In Hong Kong and Macau we will leverage another strong year of new product launches from Toyota, Lexus, Mazda and Jaguar to strengthen our competitive position. Further we will continue our growth momentum in aftersales performance through innovative marketing programmes and added value packages whilst maintaining a tight control on costs.
South Asia
|
|
2009 |
2008 |
% change |
% change |
|
|
£m |
£m |
|
constant currency |
|
Sales: Distribution |
548.2 |
536.0 |
2.3% |
(11.7)% |
|
Trading profit: Distribution |
55.9 |
63.0 |
(11.3)% |
(23.4)% |
The market
In Singapore, the market declined against the previous year by 27.9%, due in part to the continued slowdown in de-registrations, reduced quota levels from the Singapore government and consistently higher Certificate of Entitlement prices throughout the year. Parallel importers share of the market declined by 10.8ppts against 2008.
The Brunei vehicle market fell by 5% in 2009.
Business model and strategy
In Singapore, Inchcape is the distributor for Toyota, Lexus, Hino Trucks and Suzuki. We have represented Toyota in Singapore since 1967 and been Singapore's market leading retailer by sales for seven consecutive years since 2002.We have held the Suzuki distribution franchise since 1977.
In Brunei we are the distributor and retailer for both Toyota and Lexus.
Our operating performance
Inchcape strengthened its market leading position and grew market share by 3.7ppts, to achieve a market share of 21.4%. This was largely driven by new products, the effectiveness of our value for money marketing programmes and the weakening of parallel importers due to the strengthening of the Yen versus the Singapore Dollar.
Aftersales outperformed the market through targeted marketing programmes for vehicles out of warranty.
Our business in Brunei performed well retaining its market leading position.
Sales fell 11.7%, but in actual terms sales grew by 2.3% resulting in a trading profit of £55.9m.
Cash generated from operations for the region was 5.4% above 2008 at £71.6m, driven by working capital reductions.
Outlook for 2010
2010 will be another challenging year in Singapore. We expect the market to continue its decline as a result of the lower quota sizes announced in October 2009 by the Singapore government and the expected continued slowdown in deregistrations.
Our priority will be to strengthen our market leadership position by capitalising on new product launches and special editions and continue to outperform the aftersales market through enhanced customer management.
UK
|
|
2009 |
2008 |
% change |
% change |
|
|
£m |
£m |
|
constant currency |
|
Sales |
|
|
|
|
|
Retail |
2,055.7 |
2,319.4 |
(11.4)% |
(11.4)% |
|
Distribution |
30.0 |
20.7 |
44.9% |
44.9% |
|
Trading profit |
|
|
|
|
|
Retail |
42.8 |
28.8 |
48.6% |
48.6% |
|
Distribution |
3.9 |
(5.7) |
168.4% |
168.4% |
The market
The government scrappage incentive, announced in early 2009 (and extended into early 2010) has had a significant impact on the 2009 market resulting in a full year decline of 6.4%, significantly better than early expectations. Since its introduction, the scrappage scheme has accounted for over a fifth of all new car registrations; excluding the scrappage registrations the market declined 19.6%. The demand for private vehicles was better than expected, up 13.7% buoyed by scrappage and consumers taking advantage of reduced VAT rates before 31 December 2009.
Business model and strategy
We have scale operations in the core regions of the South East, Midlands, North and North East of England with a streamlined portfolio which focuses on premium and premium-volume brands. We aim to create significant differentiation by delivering an outstanding level of customer service through our Inchcape Advantage programme and to drive growth in aftersales and car finance penetration.
Our fleet leasing business, Inchcape Fleet Solutions (IFS), offers fleet management and leasing services to corporate and government customers. With over 50 years' experience in the automotive industry, IFS has a combined fleet size of approximately 31,000 vehicles. This makes up the distribution element of our UK results.
Our operating performance
We continue to outperform our competitors. In a market which declined by 6.4%, our retail business delivered a decline in like for like sales of 3.9%. Margins in the used car market were strong on the back of a general shortage of quality part exchange vehicles.
The solid performance in our used and new car business together with cost savings generated by our restructuring has resulted in a strong trading profit of £42.8m which was 48.6% higher than 2008, and trading margin of 2.1%, 0.9ppts better than 2008.
IFS delivered a solid trading profit of £3.9m following a loss of £5.7m in 2008 in part due to recovery in used car prices.
Cash generated from operations was £55.1m.
Outlook for 2010
2010 will be another challenging year for the UK car market and our expectation is for an overall decline versus 2009.
The market has had a significant boost in 2009 from the scrappage scheme which is expected to end in March 2010 and from 'pull forward' of orders into the last quarter of 2009 ahead of the VAT rise on 1 January 2010.
Our priority for 2010 is to continue to grow market share through superior Customer 1st processes and capitalising on strong new product launches from our brand partners.
We will further develop our achievements in aftersales through prospecting, conversion and retention programmes.
We will maintain our significant achievements in working capital reduction through stock control.
Russia and Emerging Markets
|
|
2009 |
2008 |
% change |
% change |
|
|
£m |
£m |
|
constant currency |
|
Sales |
|
|
|
|
|
Retail |
612.3 |
631.2 |
(3.0)% |
(1.6)% |
|
Distribution |
256.4 |
425.5 |
(39.7)% |
(45.9)% |
|
Trading profit |
|
|
|
|
|
Retail |
4.0 |
18.8 |
(78.7)% |
(76.2)% |
|
Distribution |
1.0 |
23.7 |
(95.8)% |
(96.2)% |
The market
With the exception of Poland and China, 2009 saw significant declines in most of the emerging markets. In Russia the market declined by 49.5% on 2008. The Balkan markets of Romania and Bulgaria declined by 53%. The Baltics saw considerable declines in the market for the full year, down to 67%. Inchcape's South American markets fell by 10% in the premium sector and the Ethiopian market also declined. The new car market in China is one of the few globally to have grown in 2009, and became the largest car market in the world.
Despite these challenging market conditions Inchcape retained or gained market share in these markets.
Business model and strategy
We operate 20 retail businesses in St Petersburg and Moscow. In St Petersburg, we own and operate one of the largest car retailing businesses in the city with Toyota, Lexus, Audi and Peugeot. In 2008, we acquired a 75.1% shareholding in Musa Motors in Moscow, one of the largest car retail groups in Russia, providing the Group with scale presence in the Moscow region representing nine brands.
We are the distributor for Toyota and Lexus in Bulgaria and Romania. In Bulgaria we have increased our presence in Sofia with the opening of a new retail centre for Toyota in 2009. In addition, we are the distributor for Toyota and Lexus in Macedonia and Albania.
In Poland, we retail BMW and MINI in Warsaw and Wroclaw.
In the Baltics, we operate VIR for Mazda, Jaguar and Land Rover. We are also the retailer for BMW, Mitsubishi and Hyundai in these markets. We have market leading positions in Latvia and in Lithuania.
In China, we have scale Toyota and Lexus retail centres in Shaoxing. A third scale retail centre, for Lexus, opened in 2009 in Shanghai.
In Ethiopia we operate VIR for Toyota through four sites.
In Chile we operate VIR for BMW and retail for Honda. In Peru we operate VIR for BMW.
Our operating performance
The extremely challenging market conditions led to a retail sales decline of 1.6% and a distribution sales decline of 45.9%. This resulted in a trading profit of £4.0m in retail and a trading profit of £1.0m in distribution. Included in the distribution trading profit was a one off impairment charge for land value in Romania of £4.2m.
In Russia we improved our competitive position as we gained share and remained profitable with a trading profit of £9.1m.
Our business in Poland continues to perform ahead of our expectations. We capitalised on our successful BMW business by opening a new retail centre in the second half.
In the Balkans we experienced a significant market decline and pressure on margin, as all brand partners focused on liquidating stock throughout the year.
In the Baltics, the extremely low level of demand through the year and the need to liquidate stock has also resulted in margin pressure.
In the combined regions of the Baltics and Balkans we enjoyed a stronger margin performance in the second half as we benefited from our cost restructuring and the end of our destocking campaigns.
Our performance in China has been encouraging following the recent opening of our third showroom for Lexus in Shanghai.
In our business in Ethiopia a focus on strengthening our core business through the implementation of customer management, growing aftersales and prudent cost control has delivered another good performance.
The market driven declines in new vehicle sales in our South American markets were partially compensated for by an improved sales performance on used vehicles and aftersales.
Outlook for 2010
With the exception of China we expect all of these markets to continue to face very challenging trading conditions in 2010.
We will continue to improve our competitive position through superior operating and customer facing processes.
We will benefit from strong new product launches from our brand partners and will leverage these with effective marketing campaigns.
We will continue to grow aftersales through programmes to drive traffic, improved sales skills and vehicle health checks.
We will continue our rigorous focus on product margin, overhead management and control of working capital.
Financial review
Delivering solid results above our expectations despite the unprecedented global decline in the car industry.
The Group has produced results above expectations. In addition to the segmental results, detailed below are the financial implications of our operational activities.
Central costs
Unallocated central costs for the full year are £18.8m before exceptional items (2008: £9.6m). The year on year increase is due to our extremely low cost base in 2008 as we did not pay any management bonuses and benefited from a credit from long-term share based awards.
Included in central costs is a net gain of £0.1m from the currency call options taken out in February 2009 to hedge the currency impact from a potential strengthening of sterling. All options have now been exercised or lapsed at the end of December 2009.
Joint ventures and associates
The share of profit after tax from joint ventures decreased by £1.5m to £0.7m in 2009.This is mainly due to the start up costs of our joint venture in Moscow and lower profit from our joint venture leasing business in Belgium.
Exceptional items
The exceptional costs of £18.4m remain the same as those reported at the half year. We have taken a prudent view on prospects in Latvia based on the continued challenging trading conditions and have taken an impairment of £10.3m on the carrying value of the land and buildings. All of the goodwill relating to Latvia was written off in 2008.
Further restructuring costs of £5.1m were incurred relating to restructuring in Finland, the Baltics, and Russia and the streamlining of our European management layer.
We have also made a provision of £3.0m related to an onerous lease commitment on land which was part of the Inchcape Automotive business which was sold to Camden Motors. Camden went into administration during the first half of the year. The Group remains responsible for the head lease on this property.
Net financing costs
Net financing costs of £20.8m are £31.2m lower than last year, as we benefited from lower interest rates in the majority of our markets, a reduced debt balance following the use of the net proceeds from the Rights Issue and the cash generated from operations as a result of significantly lower working capital. The proceeds from the Rights Issue were used to pay down US$114m higher rate US$ loan notes at par, resulting in a one off benefit of £4.0m from the hedging arrangements in place for the US$ Private Placement. The balance was used to pay down revolving debt. Overall, the hedging arrangements in place for the US$ Private Placement resulted in a net gain of £0.9m, including the £4.0m realised benefit referred to above.
Tax
The effective tax rate before exceptional items for the year is 28% compared to 26% in 2008.This increase arises due to the mix of profits across the territories in which we operate. The rate is expected to be similar in 2010 based on our current assumptions of profit mix.
Minority interests
Profits attributable to minority interests reduced to £3.0m from £3.9m in 2008.This was largely a result of lower profits in our Lithuanian business and the annualised impact of the acquisition in the first quarter of 2008 of the remaining 24.9% interest in our St Petersburg businesses. At the year end the Group's minority interests principally comprise a 33% minority holding in UAB Vitvela in Lithuania, a 30% share in NBT Brunei and a 10% share of Subaru Australia.
Foreign currency
During 2009, the Group benefited by £16.7m from translation of its overseas profits before tax into sterling at the 2009 average exchange rate.
Cash flow and net debt
The Group's operations have proven to be significantly cash generative in 2009, in spite of the downturn, with cash generated from operations of £336.7m.The continued tight management of working capital, one of the Group's five key operating priorities, with particular focus on inventory and supply chain management has been a factor in the delivery of this result. The Group invested a total of £50.1m in capital expenditure across the Group and in addition raised £234.3m in a successful Rights Issue in April 2009.This has enabled the Group to report £0.8m of net cash at the end of 2009 versus £407.8m of net debt at the end of 2008.
In line with the Group's objectives announced as part of the Rights Issue process no interim dividend was paid and the Board is not recommending a final dividend for 2009.
Pensions
Following the successful Rights Issue in April 2009 the Group has reviewed and agreed a revised funding programme with the Trustees and as a result the Group made contributions to the UK defined benefit schemes amounting to £34.7m in 2009, an increase on 2008. A revision of market and actuarial assumptions for the UK defined benefit schemes has resulted in a closing deficit on Group schemes of £74.8m compared to a surplus of £6.0m in 2008.
Acquisitions and disposals
The Group agreed on the earn out payment for the 75.1% acquisition of Musa Motors business in Moscow and made a payment of US$35m in October 2009. A further US$5m is to be made in 2010.The remaining 24.9% is due to be acquired in early 2011 for a payment dependent on 2010 EBITA. The Group accounts for Musa Motors as if it is a wholly owned subsidiary.
Capital expenditure
The Group has worked closely with its brand partners to minimise the level of capital expenditure, while maintaining the required operational standards, and as a result capital expenditure reduced from £117.8m in 2008 to £49.9m in 2009.However we have continued to make strategic investments by opening nine greenfield sites across the Group.
The Group also continued with its implementation plan for a global SAP system for its operating business with the first live site in the UK. The next phase of implementations planned in 2010 are in the UK and Russia.
John McConnell
Group Finance Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
Before exceptional items |
Exceptional items (note 3) |
Total |
Before exceptional items |
Exceptional items (note 3) |
Total |
|
|
2009 |
2009 |
2009 |
2008 |
2008 |
2008 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
Revenue (note 2) |
5,583.7 |
- |
5,583.7 |
6,259.8 |
- |
6,259.8 |
|
Cost of sales |
(4,757.0) |
- |
(4,757.0) |
(5,358.8) |
(1.8) |
(5,360.6) |
|
Gross profit |
826.7 |
- |
826.7 |
901.0 |
(1.8) |
899.2 |
|
Net operating expenses |
(651.5) |
(18.4) |
(669.9) |
(660.5) |
(80.7) |
(741.2) |
|
Operating profit (note 2) |
175.2 |
(18.4) |
156.8 |
240.5 |
(82.5) |
158.0 |
|
Share of profit after tax of joint ventures and associates |
0.7 |
- |
0.7 |
2.2 |
- |
2.2 |
|
Profit before finance and tax |
175.9 |
(18.4) |
157.5 |
242.7 |
(82.5) |
160.2 |
|
Finance income (note 4) |
52.1 |
- |
52.1 |
68.4 |
- |
68.4 |
|
Finance costs (note 5) |
(72.9) |
- |
(72.9) |
(120.4) |
- |
(120.4) |
|
Profit before tax |
155.1 |
(18.4) |
136.7 |
190.7 |
(82.5) |
108.2 |
|
Tax (note 6) |
(43.5) |
1.8 |
(41.7) |
(49.3) |
(3.6) |
(52.9) |
|
Profit for the year |
111.6 |
(16.6) |
95.0 |
141.4 |
(86.1) |
55.3 |
|
|
|
|
|
|
|
|
|
Profit attributable to: |
|
|
|
|
|
|
|
- Equity holders of the parent |
|
|
92.0 |
|
|
51.4 |
|
- Minority interests |
|
|
3.0 |
|
|
3.9 |
|
|
|
|
95.0 |
|
|
55.3 |
|
Basic earnings per share (pence)* (note 7) |
2.3p |
|
|
1.9p |
|
Diluted earnings per share (pence)* (note 7) |
2.3p |
|
|
1.9p |
* Earnings per share for 2008 have been restated to reflect the bonus element of the Rights Issue.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Profit for the year |
95.0 |
55.3 |
|
|
|
|
|
Other comprehensive income: |
|
|
|
Cash flow hedges |
(126.8) |
111.6 |
|
Net investment hedge |
2.9 |
(14.4) |
|
Fair value gains / (losses) on available for sale financial assets |
0.4 |
(1.1) |
|
Effect of foreign exchange rate changes |
(76.6) |
205.4 |
|
Actuarial losses on defined benefit pension schemes |
(119.7) |
(41.3) |
|
Foreign exchange gains recycled through the consolidated income statement |
- |
(2.1) |
|
Deferred tax recognised directly in shareholders' equity |
60.6 |
(30.4) |
|
Other comprehensive income for the year, net of tax |
(259.2) |
227.7 |
|
Total comprehensive income for the year |
(164.2) |
283.0 |
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
- Equity holders of the parent |
(165.8) |
273.5 |
|
- Minority interests |
1.6 |
9.5 |
|
Total comprehensive income for the year |
(164.2) |
283.0 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2009
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Non-current assets |
|
|
|
Intangible assets |
545.6 |
537.4 |
|
Property, plant and equipment |
656.6 |
708.1 |
|
Investments in joint ventures and associates |
22.3 |
21.3 |
|
Available for sale financial assets |
17.8 |
17.9 |
|
Trade and other receivables |
25.4 |
26.5 |
|
Deferred tax assets |
37.6 |
11.5 |
|
Retirement benefit asset |
0.8 |
49.4 |
|
|
1,306.1 |
1,372.1 |
|
Current assets |
|
|
|
Inventories |
772.7 |
1,084.1 |
|
Trade and other receivables |
252.9 |
271.8 |
|
Available for sale financial assets |
0.7 |
2.0 |
|
Derivative financial instruments |
91.0 |
306.9 |
|
Current tax assets |
5.1 |
6.0 |
|
Cash and cash equivalents |
381.3 |
458.0 |
|
|
1,503.7 |
2,128.8 |
|
Assets held for sale (note 11) |
6.6 |
5.4 |
|
|
1,510.3 |
2,134.2 |
|
Total assets |
2,816.4 |
3,506.3 |
|
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
(939.1) |
(1,123.9) |
|
Derivative financial instruments |
(21.8) |
- |
|
Current tax liabilities |
(46.4) |
(48.2) |
|
Provisions |
(46.7) |
(50.6) |
|
Borrowings |
(166.0) |
(165.3) |
|
|
(1,220.0) |
(1,388.0) |
|
Non-current liabilities |
|
|
|
Trade and other payables |
(68.8) |
(78.1) |
|
Provisions |
(47.7) |
(52.0) |
|
Deferred tax liabilities |
(15.4) |
(69.1) |
|
Borrowings |
(299.2) |
(856.1) |
|
Retirement benefit liability |
(75.6) |
(43.4) |
|
|
(506.7) |
(1,098.7) |
|
Total liabilities |
(1,726.7) |
(2,486.7) |
|
Net assets |
1,089.7 |
1,019.6 |
|
|
|
|
|
Shareholders' equity |
|
|
|
Share capital |
163.3 |
121.9 |
|
Share premium |
126.1 |
126.1 |
|
Capital redemption reserve |
16.4 |
16.4 |
|
Other reserves |
112.4 |
273.1 |
|
Retained earnings |
649.5 |
458.0 |
|
Equity attributable to equity holders of the parent |
1,067.7 |
995.5 |
|
Minority interests |
22.0 |
24.1 |
|
Total shareholders' equity |
1,089.7 |
1,019.6 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
Share capital |
Share premium |
Capital redemption reserve |
Other reserves |
Retained earnings |
Equity attributable to owners of the parent |
Minority interest |
Total shareholders' equity |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2008 |
121.6 |
123.4 |
16.4 |
12.7 |
539.5 |
813.6 |
24.2 |
837.8 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
260.4 |
13.1 |
273.5 |
9.5 |
283.0 |
|
|
|
|
|
|
|
|
|
|
|
Share-based payments, net of tax |
- |
- |
- |
- |
(1.3) |
(1.3) |
- |
(1.3) |
|
Net purchase of own shares by ESOP Trust |
- |
- |
- |
- |
(4.2) |
(4.2) |
- |
(4.2) |
|
Share buy back programme |
- |
- |
- |
- |
(16.0) |
(16.0) |
- |
(16.0) |
|
Dividends: |
|
|
|
|
|
|
|
|
|
- Owners of the parent |
- |
- |
- |
- |
(73.1) |
(73.1) |
- |
(73.1) |
|
- Minority interests |
- |
- |
- |
- |
- |
- |
(2.6) |
(2.6) |
|
Issue of ordinary share capital |
0.3 |
2.7 |
- |
- |
- |
3.0 |
- |
3.0 |
|
Acquisition of businesses |
- |
- |
- |
- |
- |
- |
0.6 |
0.6 |
|
Acquisition of minority interest |
- |
- |
- |
- |
- |
- |
(7.6) |
(7.6) |
|
At 1 January 2009 |
121.9 |
126.1 |
16.4 |
273.1 |
458.0 |
995.5 |
24.1 |
1,019.6 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
(160.7) |
(5.1) |
(165.8) |
1.6 |
(164.2) |
|
|
|
|
|
|
|
|
|
|
|
Share-based payments, net of tax |
- |
- |
- |
- |
4.4 |
4.4 |
- |
4.4 |
|
Net purchase of own shares by ESOP Trust |
- |
- |
- |
- |
(0.7) |
(0.7) |
- |
(0.7) |
|
Dividends: |
|
|
|
|
|
|
|
|
|
- Minority interests |
- |
- |
- |
- |
- |
- |
(3.7) |
(3.7) |
|
Issue of ordinary share capital |
41.4 |
- |
- |
- |
192.9 |
234.3 |
- |
234.3 |
|
At 31 December 2009 |
163.3 |
126.1 |
16.4 |
112.4 |
649.5 |
1,067.7 |
22.0 |
1,089.7 |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Cash flows from operating activities |
|
|
|
Cash generated from operations (note 9a) |
336.7 |
183.7 |
|
Tax paid |
(58.5) |
(57.6) |
|
Interest received |
7.2 |
20.0 |
|
Interest paid |
(40.1) |
(74.0) |
|
Net cash generated from operating activities |
245.3 |
72.1 |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
Acquisition of businesses, net of cash and overdrafts acquired |
(21.1) |
(135.4) |
|
Net cash inflow from sale of businesses |
3.0 |
27.3 |
|
Purchase of property, plant and equipment |
(50.1) |
(117.8) |
|
Purchase of intangible assets |
(14.6) |
(10.8) |
|
Proceeds from disposal of property, plant and equipment |
15.8 |
26.8 |
|
Net disposal of available for sale financial assets |
0.1 |
0.4 |
|
Dividends received from joint ventures and associates |
0.6 |
1.3 |
|
Net cash used in investing activities |
(66.3) |
(208.2) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from issuance of ordinary shares |
234.3 |
3.0 |
|
Share buy back programme |
- |
(16.0) |
|
Net purchase of own shares by ESOP Trust |
(0.7) |
(4.2) |
|
Net cash (outflow) / inflow from borrowings |
(454.8) |
275.2 |
|
Payment of capital element of finance leases |
(3.7) |
(0.7) |
|
Loans granted to joint ventures |
(2.3) |
(1.7) |
|
Settlement of derivatives |
10.1 |
17.5 |
|
Equity dividends paid |
- |
(73.1) |
|
Minority dividends paid |
(3.7) |
(2.6) |
|
Net cash used in financing activities |
(220.8) |
197.4 |
|
|
|
|
|
Net (decrease) / increase in cash and cash equivalents (note 9b) |
(41.8) |
61.3 |
|
Cash and cash equivalents at the beginning of the year |
312.8 |
198.6 |
|
Effect of foreign exchange rate changes |
(13.8) |
52.9 |
|
Cash and cash equivalents at the end of the year |
257.2 |
312.8 |
|
|
|
|
|
Cash and cash equivalents consist of: |
|
|
|
Cash at bank and in hand |
319.6 |
351.3 |
|
Short-term deposits |
61.7 |
106.7 |
|
Bank overdrafts |
(124.1) |
(145.2) |
|
|
257.2 |
312.8 |
NOTES
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The consolidated Financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and International Financial Reporting Interpretation Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The accounting policies adopted in the preparation of the condensed set of consolidated financial information are consistent with those of the Group's Annual Report and Accounts 2008, other than the adoption, with effect from 1January 2009, of IFRS 8 'Operating segments', IAS 1 (revised) 'Presentation of financial statements' and the amendment to IAS 16 in respect of the sale of property, plant and equipment that has previously been held for rental to others.
The Group has adopted IFRS 8 'Operating segments' which replaces IAS 14 'Segment reporting' and requires segmental reporting to be presented on the same basis as the internal management reporting. This has had no impact on the results or financial position of the Group. All comparatives have been restated according to the revised segmental disclosure. Further discussion of the changes is set out in note 2.
IAS 1 (revised), 'Presentation of financial statements' has been adopted by the Group, which prohibits the presentation of non-owner items of income and expenses in the consolidated statement of changes in equity and has also had no impact on the results or financial position of the Group.
Upon the adoption of the amendment to IAS 16 'Property, plant and equipment', Group policy states that where an asset is held for rental to others, for a period of longer than 12 months, it is held as property, plant and equipment and depreciated to residual value over the course of the lease. Upon expiry of the lease, when the asset is held for sale, the asset is transferred to inventory at net book value and upon sale of the asset, the subsequent revenue and the net book value is recorded on a gross basis, through revenue and cost of sales. The Group has adopted the amended standard on a prospective basis from 1 January 2009. The adoption of the amendment has not had a material impact on the results or position of the Group for the year ended 31 December 2009.
The condensed set of consolidated financial information presented for the years ended 31 December 2008 and 2009 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group's published consolidated Financial statements for the year ended 31 December 2008 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 Section 237 (2) or (3) of the Companies Act 1985. The financial information for the year ended 31 December 2009 and the comparative information have been extracted from the audited consolidated Financial statements for the year ended 31 December 2009 prepared under IFRS, which have not yet been approved by shareholders and have not yet been delivered to the Registrar. The report of the auditors on the consolidated Financial statements for 2009 was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue as a going concern for the foreseeable future. As such, the Group continues to adopt the going concern basis in preparing the Annual Report and Accounts.
2 SEGMENTAL ANALYSIS
From 1 January 2009, the Group has adopted IFRS 8 'Operating segments'. IFRS 8 replaced IAS 14 'Segment reporting'.
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to assess their performance and to allocate resources to the segments. These operating segments are then aggregated into reporting segments to combine those with similar characteristics. In contrast, the predecessor standard required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach.
The Group has determined that the chief operating decision maker is the Executive Committee.
Under IFRS 8, the only change for the Group is that the businesses previously reported within the Rest of World segment under IAS 14 are reported within the other segments that best match the characteristics of each individual business. Comparative information has been restated accordingly.
Emerging markets are those countries in which the Group operates that have started to grow but have yet to reach a mature stage of development and accordingly were in, and are expected to return to, the growth phase of the development cycle. These currently comprise China, Balkans, Baltics, Poland, South America and Africa.
The Group's reported segments are based on the location of the Group's assets. Revenue earned from sales is disclosed by origin and is not materially different from revenue by destination.
Transfer prices between segments are set on an arm's length basis.
Distribution comprises Vertically Integrated Retail businesses as well as Financial services and other businesses.
|
|
|
|
|
|
|
|
Distribution |
|
2009 |
Australasia |
Europe |
North Asia |
South Asia |
United Kingdom |
Russia And Emerging Markets |
Total Distribution |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Revenue |
|
|
|
|
|
|
|
|
Total revenue |
607.4 |
947.8 |
312.2 |
548.2 |
30.0 |
300.1 |
2,745.7 |
|
Inter-segment revenue |
(129.0) |
(146.0) |
- |
- |
- |
(43.7) |
(318.7) |
|
Revenue from third parties |
478.4 |
801.8 |
312.2 |
548.2 |
30.0 |
256.4 |
2,427.0 |
|
|
|
|
|
|
|
|
|
|
Results |
|
|
|
|
|
|
|
|
Segment result |
26.7 |
30.2 |
19.9 |
55.9 |
3.9 |
1.0 |
137.6 |
|
Exceptional items |
- |
(0.2) |
- |
- |
- |
(3.9) |
(4.1) |
|
Operating profit after exceptional items |
26.7 |
30.0 |
19.9 |
55.9 |
3.9 |
(2.9) |
133.5 |
|
Share of profit after tax of joint ventures and associates |
- |
2.0 |
- |
- |
- |
- |
2.0 |
|
Profit before finance and tax |
26.7 |
32.0 |
19.9 |
55.9 |
3.9 |
(2.9) |
135.5 |
|
Finance income |
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
|
|
|
2009 |
Australasia |
Europe |
United Kingdom |
Russia And Emerging Markets |
Total Retail |
Total pre Central |
Central |
Total
|
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Revenue |
|
|
|
|
|
|
|
||
|
Total revenue |
284.4 |
204.3 |
2,055.7 |
612.3 |
3,156.7 |
5,902.4 |
- |
5,902.4 |
|
|
Inter-segment revenue |
- |
- |
- |
- |
- |
(318.7) |
- |
(318.7) |
|
|
Revenue from third parties |
284.4 |
204.3 |
2,055.7 |
612.3 |
3,156.7 |
5,583.7 |
- |
5,583.7 |
|
|
|
|
|
|
|
|
|
|
||
|
Results |
|
|
|
|
|
|
|
||
|
Segment result |
11.2 |
(1.6) |
42.8 |
4.0 |
56.4 |
194.0 |
(18.8) |
175.2 |
|
|
Exceptional items |
- |
(1.6) |
(3.0) |
(8.2) |
(12.8) |
(16.9) |
(1.5) |
(18.4) |
|
|
Operating profit after exceptional items |
11.2 |
(3.2) |
39.8 |
(4.2) |
43.6 |
177.1 |
(20.3) |
156.8 |
|
|
Share of profit after tax of joint ventures and associates |
- |
- |
- |
(1.3) |
(1.3) |
0.7 |
- |
0.7 |
|
|
Profit before finance and tax |
11.2 |
(3.2) |
39.8 |
(5.5) |
42.3 |
177.8 |
(20.3) |
157.5 |
|
|
Finance Income |
|
|
|
|
|
|
|
52.1 |
|
|
Finance costs |
|
|
|
|
|
|
|
(72.9) |
|
|
Profit before tax |
|
|
|
|
|
|
|
136.7 |
|
|
Tax |
|
|
|
|
|
|
|
(41.7) |
|
|
Profit for the year |
|
|
|
|
|
|
|
95.0 |
|
|
|
|
|
|
|
|
|
Distribution |
|
2009 |
Australasia |
Europe |
North Asia |
South Asia |
United Kingdom |
Russia And Emerging Markets |
Total Distribution |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Segment assets and liabilities |
|
|
|
|
|
|
|
|
Segment assets |
84.2 |
188.9 |
64.7 |
59.2 |
21.8 |
66.3 |
485.1 |
|
Other current assets |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Segment liabilities |
(173.4) |
(242.2) |
(52.6) |
(43.1) |
(60.2) |
(40.4) |
(611.9) |
|
Other liabilities |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
|
2009 |
Australasia |
Europe |
United Kingdom |
Russia And Emerging Markets |
Total Retail |
Total |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Segment assets and liabilities |
|
||||||
|
Segment assets |
32.4 |
28.5 |
346.9 |
151.4 |
559.2 |
1,044.3 |
|
|
Other current assets |
|
|
481.6 |
||||
|
Non-current assets |
|
|
|
|
|
1,280.7 |
|
|
Segment liabilities |
(29.4) |
(19.0) |
(311.2) |
(86.0) |
(445.6) |
(1,057.5) |
|
|
Other liabilities |
|
|
(659.4) |
||||
|
Net assets |
|
|
|
|
1,089.7 |
||
Segment assets include net inventory, trade receivables and derivative assets. Segment liabilities include payables, provisions and derivative liabilities.
|
|
|
|
|
|
|
|
Distribution |
|
2009 |
Australasia |
Europe |
North Asia |
South Asia |
United Kingdom |
Russia And Emerging Markets |
Total Distribution |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Other segment items |
|
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
0.9 |
0.2 |
0.5 |
1.6 |
0.1 |
3.3 |
6.6 |
|
- Interest in leased vehicles |
- |
14.3 |
2.3 |
- |
17.6 |
4.2 |
38.4 |
|
- Intangible assets |
- |
0.3 |
- |
- |
0.2 |
0.1 |
0.6 |
|
Depreciation: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
3.0 |
1.4 |
1.6 |
1.9 |
0.1 |
2.4 |
10.4 |
|
- Interest in leased vehicles |
- |
5.6 |
1.8 |
- |
13.0 |
4.0 |
24.4 |
|
Amortisation of intangible assets |
0.2 |
0.5 |
- |
- |
0.3 |
0.2 |
1.2 |
|
Impairment of property, plant and equipment |
- |
- |
- |
- |
- |
6.7 |
6.7 |
|
Net provisions charged / (released) to the consolidated income statement |
10.3 |
18.7 |
0.5 |
5.3 |
(1.3) |
4.0 |
37.5 |
|
|
|
|
|
|
Retail |
|
|
|
|
2009 |
Australasia |
Europe |
United Kingdom |
Russia And Emerging Markets |
Total Retail |
Total pre Central |
Central |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Other segment items |
|
|
|
|
|
|||
|
Capital expenditure: |
|
|
|
|
|
|||
|
- Property, plant and equipment |
0.3 |
0.4 |
5.3 |
37.3 |
43.3 |
49.9 |
- |
49.9 |
|
- Interest in leased vehicles |
- |
0.3 |
- |
- |
0.3 |
38.7 |
- |
38.7 |
|
- Intangible assets |
- |
- |
1.1 |
0.9 |
2.0 |
2.6 |
7.4 |
10.0 |
|
Depreciation: |
|
|
|
|
|
|||
|
- Property, plant and equipment |
0.6 |
1.5 |
10.0 |
5.6 |
17.7 |
28.1 |
0.5 |
28.6 |
|
- Interest in leased vehicles |
- |
0.3 |
- |
- |
0.3 |
24.7 |
- |
24.7 |
|
Amortisation of intangible assets |
- |
- |
1.2 |
0.2 |
1.4 |
2.6 |
0.2 |
2.8 |
|
Impairment of property, plant and equipment |
- |
- |
- |
7.8 |
7.8 |
14.5 |
- |
14.5 |
|
Net provisions charged / (released) to the consolidated income statement |
2.4 |
(0.5) |
4.9 |
4.1 |
10.9 |
48.4 |
(1.3) |
47.1 |
Net provisions include inventory, trade receivables impairment and other liability provisions.
|
|
|
|
|
|
|
|
Distribution |
|
2008 |
Australasia |
Europe |
North Asia |
South Asia |
United Kingdom |
Russia And Emerging Markets |
Total Distribution |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Revenue |
|
|
|
|
|
|
|
|
Total revenue |
599.4 |
1,014.5 |
378.5 |
536.0 |
20.7 |
502.5 |
3,051.6 |
|
Inter-segment revenue |
(143.3) |
(176.6) |
- |
- |
- |
(77.0) |
(396.9) |
|
Revenue from third parties |
456.1 |
837.9 |
378.5 |
536.0 |
20.7 |
425.5 |
2,654.7 |
|
|
|
|
|
|
|
|
|
|
Results |
|
|
|
|
|
|
|
|
Segment result |
33.3 |
39.9 |
38.7 |
63.0 |
(5.7) |
23.7 |
192.9 |
|
Exceptional items |
(1.3) |
(4.0) |
(0.1) |
- |
- |
(47.8) |
(53.2) |
|
Operating profit after exceptional items |
32.0 |
35.9 |
38.6 |
63.0 |
(5.7) |
(24.1) |
139.7 |
|
Share of profit after tax of joint ventures and associates |
- |
2.1 |
- |
- |
0.2 |
- |
2.3 |
|
Profit before finance and tax |
32.0 |
38.0 |
38.6 |
63.0 |
(5.5) |
(24.1) |
142.0 |
|
Finance income |
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
|
|
|
2008 |
Australasia |
Europe |
United Kingdom |
Russia And Emerging Markets |
Total Retail |
Total pre Central |
Central |
Total |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Revenue |
|
|
|
|
|
|
|
||
|
Total revenue |
263.2 |
391.3 |
2,319.4 |
631.2 |
3,605.1 |
6,656.7 |
- |
6,656.7 |
|
|
Inter-segment revenue |
- |
- |
- |
- |
- |
(396.9) |
- |
(396.9) |
|
|
Revenue from third parties |
263.2 |
391.3 |
2,319.4 |
631.2 |
3,605.1 |
6,259.8 |
- |
6,259.8 |
|
|
|
|
|
|
|
|
|
|
||
|
Results |
|
|
|
|
|
|
|
||
|
Segment result |
8.9 |
0.7 |
28.8 |
18.8 |
57.2 |
250.1 |
(9.6) |
240.5 |
|
|
Exceptional items |
- |
(3.0) |
(23.1) |
(1.8) |
(27.9) |
(81.1) |
(1.4) |
(82.5) |
|
|
Operating profit after exceptional items |
8.9 |
(2.3) |
5.7 |
17.0 |
29.3 |
169.0 |
(11.0) |
158.0 |
|
|
Share of profit after tax of joint ventures and associates |
- |
- |
0.3 |
(0.4) |
(0.1) |
2.2 |
- |
2.2 |
|
|
Profit before finance and tax |
8.9 |
(2.3) |
6.0 |
16.6 |
29.2 |
171.2 |
(11.0) |
160.2 |
|
|
Finance income |
|
|
|
|
68.4 |
||||
|
Finance costs |
|
|
|
|
|
|
|
(120.4) |
|
|
Profit before tax |
|
|
|
|
108.2 |
||||
|
Tax |
|
|
|
|
|
|
|
(52.9) |
|
|
Profit for the year |
|
|
|
|
|
|
|
55.3 |
|
|
|
|
|
|
|
|
|
Distribution |
|
2008 |
Australasia |
Europe |
North Asia |
South Asia |
United Kingdom |
Russia And Emerging Markets |
Total Distribution |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Segment assets and liabilities |
|
|
|
|
|
|
|
|
Segment assets |
242.0 |
242.8 |
80.1 |
86.3 |
31.9 |
177.8 |
860.9 |
|
Other current assets |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Segment liabilities |
(197.0) |
(255.3) |
(34.9) |
(53.4) |
(84.9) |
(81.7) |
(707.2) |
|
Other liabilities |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|||
|
2008 |
Australasia |
Europe |
United Kingdom |
Russia And Emerging Markets |
Total Retail |
Total |
|||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|||
|
Segment assets and liabilities |
|
||||||||
|
Segment assets |
43.4 |
45.5 |
429.0 |
145.6 |
663.5 |
1,524.4 |
|||
|
Other current assets |
|
|
636.3 |
||||||
|
Non-current assets |
|
|
1,345.6 |
||||||
|
Segment liabilities |
(35.9) |
(20.0) |
(411.1) |
(72.0) |
(539.0) |
(1,246.2) |
|||
|
Other liabilities |
|
|
|
|
|
(1,240.5) |
|||
|
Net assets |
|
|
|
|
|
1,019.6 |
|||
|
|
|
|
|
||||||
Segment assets include net inventory, trade receivables and derivative assets. Segment liabilities include payables, provisions and derivative liabilities.
|
|
|
|
|
|
|
|
Distribution |
|
2008 |
Australasia |
Europe |
North Asia |
South Asia |
United Kingdom |
Russia And Emerging Markets |
Total Distribution |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Other segment items |
|
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
1.9 |
0.7 |
5.2 |
2.5 |
0.9 |
10.1 |
21.3 |
|
- Interest in leased vehicles |
- |
13.7 |
- |
- |
38.8 |
10.1 |
62.6 |
|
- Intangible assets |
0.2 |
0.3 |
- |
- |
0.4 |
0.2 |
1.1 |
|
Depreciation: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
2.2 |
1.4 |
3.0 |
1.7 |
1.3 |
3.3 |
12.9 |
|
- Interest in leased vehicles |
0.6 |
4.8 |
- |
- |
10.7 |
3.3 |
19.4 |
|
Amortisation of intangible assets |
0.2 |
0.5 |
- |
0.1 |
0.2 |
0.3 |
1.3 |
|
Impairment of goodwill |
- |
- |
- |
- |
- |
46.8 |
46.8 |
|
Net provisions charged / (released) to the consolidated income statement |
5.2 |
17.2 |
2.1 |
3.7 |
9.2 |
6.0 |
43.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
|
|
|
2008 |
Australasia |
Europe |
United Kingdom |
Russia And Emerging Markets |
Total Retail |
Total Pre Central |
Central |
Total |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Other segment items |
|
|
|
|
|
||||
|
Capital expenditure: |
|
|
|
|
|
||||
|
- Property, plant and equipment |
0.5 |
3.7 |
36.9 |
50.4 |
91.5 |
112.8 |
5.0 |
117.8 |
|
|
- Interest in leased vehicles |
- |
0.9 |
- |
- |
0.9 |
63.5 |
- |
63.5 |
|
|
- Intangible assets |
- |
- |
0.5 |
0.1 |
0.6 |
1.7 |
18.3 |
20.0 |
|
|
Depreciation: |
|
|
|
|
|
||||
|
- Property, plant and equipment |
0.6 |
2.0 |
16.0 |
2.1 |
20.7 |
33.6 |
2.5 |
36.1 |
|
|
- Interest in leased vehicles |
- |
0.2 |
- |
- |
0.2 |
19.6 |
- |
19.6 |
|
|
Amortisation of intangible assets |
- |
0.1 |
0.9 |
1.1 |
2.1 |
3.4 |
0.3 |
3.7 |
|
|
Impairment of goodwill |
- |
- |
7.4 |
- |
7.4 |
54.2 |
- |
54.2 |
|
|
Net provisions charged / (released) to the consolidated income statement |
1.1 |
1.7 |
15.0 |
5.1 |
22.9 |
66.3 |
1.1 |
67.4 |
|
Net provisions include inventory, trade receivables impairment and other liability provisions.
3 EXCEPTIONAL ITEMS
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Impairment of property, plant and equipment |
(10.3) |
- |
|
Restructuring costs |
(5.1) |
(28.3) |
|
Vacant property |
(3.0) |
- |
|
Goodwill impairment |
- |
(54.2) |
|
Operating exceptional items |
(18.4) |
(82.5) |
|
Exceptional tax credit / (charge) |
1.8 |
(3.6) |
|
Total exceptional items |
(16.6) |
(86.1) |
The impairment charge for property, plant and equipment of £10.3m arises from an impairment review of the Group's business in Latvia which was updated following a further deterioration in trading conditions.
The restructuring costs of £5.1m represent the costs of headcount reduction and site closures in Finland, the Baltics and Russia, together with changes in the composition of the Executive Committee.
The charge for restructuring costs in 2008 relates to the cost of restructuring the Group's businesses in response to the downturn in the automotive industry and primarily represents the costs of reducing employee headcount and closing less profitable sites.
The vacant property cost of £3.0m represents an onerous lease provision relating to a site occupied by the Inchcape Automotive business that was sold in 2007 and which went into administration in early 2009. The Group remains responsible for the head lease on this property.
The goodwill impairment charge in 2008 was in respect of the business in Latvia and certain sites in the United Kingdom which have been sold or closed.
The 2009 exceptional tax credit represents a deferred tax credit of £0.9m in respect of the future deduction for overseas redundancy costs in the local territories and a current tax credit of £0.9m in respect of onerous lease costs on UK properties.
4 FINANCE INCOME
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Bank and other interest receivable |
4.2 |
16.9 |
|
Expected return on post-retirement plan assets |
44.5 |
49.4 |
|
Other finance income |
3.4 |
2.1 |
|
Total finance income |
52.1 |
68.4 |
5 FINANCE COSTS
|
|
2009 |
2008 |
|
|
|
£m |
£m |
|
|
|
|
|
|
|
Interest payable on bank borrowings |
5.1 |
11.7 |
|
|
Interest payable on other borrowings |
1.7 |
3.2 |
|
|
Interest payable on revolving credit facility |
1.6 |
11.3 |
|
|
Interest payable on Private Placement |
7.8 |
18.2 |
|
|
Fair value loss / (gain) on cross currency interest rate swaps |
70.8 |
(147.6) |
|
|
Fair value adjustment on Private Placement |
(71.7) |
144.8 |
|
|
Stock holding interest |
9.2 |
21.5 |
|
|
Interest expense on post-retirement plan liabilities |
38.9 |
43.1 |
|
|
Other finance costs |
10.6 |
17.1 |
|
|
Capitalised borrowing costs |
(1.1) |
(2.9) |
|
|
Total finance costs |
72.9 |
120.4 |
|
The Group capitalisation rate used for general borrowing costs in accordance with IAS23 was a weighted average rate for the year of 2.9% (2008 - 6.6%).
6 TAX
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Current tax: |
|
|
|
- UK corporation tax |
8.0 |
8.0 |
|
- Double tax relief |
(2.2) |
(11.6) |
|
|
5.8 |
(3.6) |
|
Overseas tax |
47.5 |
56.8 |
|
|
53.3 |
53.2 |
|
Adjustments to prior year liabilities: |
|
|
|
- UK |
8.0 |
1.0 |
|
- Overseas |
- |
(1.0) |
|
Current tax |
61.3 |
53.2 |
|
|
|
|
|
Deferred tax |
(17.8) |
(3.9) |
|
Tax before exceptional tax |
43.5 |
49.3 |
|
Exceptional tax - current tax |
(0.9) |
(2.4) |
|
Exceptional tax - deferred tax |
(0.9) |
6.0 |
|
Exceptional tax (note 3) |
(1.8) |
3.6 |
|
Total tax charge |
41.7 |
52.9 |
The effective tax rate for the year, before exceptional items, of 28.0% (2008 - 25.9%) is higher than the standard rate of tax of 24.8% (2008 - 20.4%). The standard rate comprises the average statutory rates across the Group, weighted in proportion to accounting profits.
7 EARNINGS PER SHARE
|
|
2009 |
2008 |
|
|
|
restated |
|
|
£m |
£m |
|
|
|
|
|
Profit for the year |
95.0 |
55.3 |
|
Minority interests |
(3.0) |
(3.9) |
|
Basic earnings |
92.0 |
51.4 |
|
Exceptional items |
16.6 |
86.1 |
|
Adjusted earnings |
108.6 |
137.5 |
|
|
|
|
|
Basic earnings per share |
2.3p |
1.9p |
|
Diluted earnings per share |
2.3p |
1.9p |
|
Basic Adjusted earnings per share |
2.7p |
5.0p |
|
Diluted Adjusted earnings per share |
2.7p |
5.0p |
Earnings per share have been restated to reflect the bonus element of the Rights Issue.
|
|
|
2008 |
|
|
2009 |
restated |
|
|
number |
number |
|
Weighted average number of fully paid ordinary shares in issue during the year |
4,050,851,856 |
486,854,223 |
|
Weighted average number of fully paid ordinary shares in issue during the year: |
|
|
|
- Held by the ESOP Trust |
(13,711,221) |
(1,257,218) |
|
- Repurchased as part of the share buy back programme |
(26,875,606) |
(26,602,853) |
|
- Bonus element of the Rights Issue |
- |
2,263,852,512 |
|
Weighted average number of fully paid ordinary shares for the purposes of basic EPS |
4,010,265,029 |
2,722,846,664 |
|
Dilutive effect of potential ordinary shares |
4,266,376 |
1,720,575 |
|
Adjusted weighted average number of fully paid ordinary shares in issue during the year for the purposes of diluted EPS |
4,014,531,405 |
2,724,567,239 |
Basic earnings per share is calculated by dividing the basic earnings for the year by the weighted average number of fully paid ordinary shares in issue during the year, less those shares held by the ESOP Trust and those repurchased as part of the share buy back programme.
Diluted earnings per share is calculated on the same basis as the 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, deferred bonus plan and other share based awards.
Adjusted earnings (which excludes exceptional items) is adopted to assist the reader in understanding the underlying performance of the Group. Adjusted earnings per share is calculated by dividing the Adjusted earnings for the year by the weighted average number of fully paid ordinary shares in issue during the year, less those shares held by the ESOP Trust and those repurchased as part of the share buy back programme.
Diluted Adjusted earnings per share is calculated on the same basis as the basic Adjusted 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, deferred bonus plan and other share based awards.
8 DIVIDENDS
The following dividends were paid by the Group:
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Interim dividend for the six months ended 30 June 2009 (2008 - 5.46p per share) |
- |
25.0 |
|
Final dividend for the year ended 31 December 2008 (2007 - 10.5p per share) |
- |
48.1 |
|
|
- |
73.1 |
There is no proposal to pay a final dividend for the year ending 31 December 2009. Dividends paid in 2008 exclude £4.6m payable on treasury shares and shares held by the ESOP Trust.
9 NOTES TO THE CASH FLOW STATEMENT
|
|
2009 |
2008 |
|
a Reconciliation of cash generated from operations |
£m |
£m |
|
|
|
|
|
Operating profit |
156.8 |
158.0 |
|
Exceptional items |
18.4 |
82.5 |
|
Amortisation of intangible assets |
2.8 |
3.7 |
|
Depreciation of intangible assets |
32.8 |
27.5 |
|
Profit on disposal of property, plant and equipment |
(2.6) |
(2.6) |
|
Share-based payments charge / (credit) |
3.8 |
(0.9) |
|
Decrease / (increase) in inventories |
271.8 |
(27.9) |
|
Decrease in trade and other receivables |
0.7 |
65.6 |
|
(Decrease) in trade and other payables |
(93.6) |
(112.8) |
|
(Decrease) / increase in provisions |
(2.6) |
7.9 |
|
Decrease in post-retirement defined benefits * |
(31.9) |
(16.2) |
|
(Increase) / decrease in interest in leased vehicles |
(6.5) |
4.3 |
|
Payment in respect of operating exceptional items |
(13.7) |
(5.8) |
|
Other items |
0.5 |
0.4 |
|
Cash generated from operations |
336.7 |
183.7 |
* The decrease in post-retirement defined benefits includes additional payments of £30.1m (2008 - £16.1m).
|
|
2009 |
2008 |
|
b Reconciliation of net cash flow to movement in net funds / (debt) |
£m |
£m |
|
|
|
|
|
Net (decrease) / increase in cash and cash equivalents |
(41.8) |
61.3 |
|
Net cash outflow / (inflow) from borrowings and finance leases |
458.4 |
(274.5) |
|
Change in net cash and debt resulting from cash flows |
416.6 |
(213.2) |
|
Effect of foreign exchange rate changes on net cash and debt |
(8.9) |
33.7 |
|
Net movement in fair value |
0.9 |
2.8 |
|
Net loans and finance leases relating to acquisitions and disposals |
- |
(17.6) |
|
Movement in net funds / (debt) |
408.6 |
(194.3) |
|
Opening net debt |
(407.8) |
(213.5) |
|
Closing net funds / (debt) |
0.8 |
(407.8) |
Net funds / (debt) is analysed as follows:
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Cash at bank and in hand |
319.6 |
351.3 |
|
Short-term deposits |
61.7 |
106.7 |
|
Bank overdrafts |
(124.1) |
(145.2) |
|
Cash and cash equivalents |
257.2 |
312.8 |
|
Bank loans |
(335.1) |
(858.0) |
|
Other loans |
(1.3) |
(9.2) |
|
Finance leases |
(4.7) |
(9.0) |
|
|
(83.9) |
(563.4) |
|
Fair value of cross-currency interest rate swap |
84.7 |
155.6 |
|
Net funds / (debt) |
0.8 |
(407.8) |
10 ACQUISITIONS AND DISPOSALS
Acquisitions
In July 2008, the Group acquired 75.1% of the issued share capital of Musa Motors for a total cash consideration of US$240m: a US$200m initial downpayment was made in 2008, a further payment of US$35m was made in October 2009 and a final settlement of US$5m is due in 2010. The remaining 24.9% is to be acquired in early 2011, with payment dependent on 2010 EBITA, capped at US$250m.
During the year, adjustments have been made to the net assets acquired of Musa Motors, as permitted by IFRS 3 'Business combinations'. These fair value adjustments were not material and therefore prior periods have not been restated. The changes to the net assets acquired were primarily due to a decrease in amounts due to suppliers and an increase in various taxes when compared to original estimates. These changes, together with revisions to amounts due in respect of the remaining contingent deferred consideration, have resulted in an increase in the amount of goodwill recognised on acquisition of £22.3m.
Disposals
During the year, the Group disposed of a small number of dealerships and operations generating disposal proceeds of £3.0m (2008 - £27.3m) and a loss on disposal of £0.7m (2008 - £1.2m) which has not been disclosed as an exceptional item.
11 ASSETS HELD FOR SALE
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Assets held for sale |
6.6 |
5.4 |
Assets held for sale relate to a surplus property that was disposed of in February 2010.
12 FOREIGN CURRENCY TRANSLATION
The main exchange rates used for translation purposes are as follows:
|
|
Average rates |
Year end rates |
||
|
|
2009 |
2008 |
2009 |
2008 |
|
|
|
|
|
|
|
Australian dollar |
1.99 |
2.19 |
1.80 |
2.06 |
|
Euro |
1.12 |
1.27 |
1.13 |
1.03 |
|
Hong Kong dollar |
12.11 |
14.56 |
12.52 |
11.14 |
|
Singapore dollar |
2.27 |
2.63 |
2.27 |
2.07 |
13 RELATED PARTY TRANSACTIONS
There have been no material changes to the principal subsidiaries and joint ventures as listed in the Annual Report and Accounts for the year ended 31 December 2008. All related party transactions arise during the ordinary course of business and are on an arm's length basis. There were no material transactions or balances between the Group and its key management personnel during the year ended 31 December 2009.
PRINCIPAL RISKS
The Group applies an effective system of risk management which identifies monitors and mitigates risks.
Risk is a part of doing business; the risk management system aims to provide assurance to all stakeholders of the effectiveness of our control framework in managing risk against a background of highly diverse and competitive markets. The key benefits of the system include maximised resource efficiency through controlled prioritisation of issues, benchmarking between business units, sharing best practice and effective crisis management.
The principal business risk areas remain unchanged from the previous year end and are summarised under the following headings:
· Strategy
· Brand partners and key relationships
· People
· Reputation
· Treasury
· Legal and regulatory
· Pensions
Further details on these risks are set out in the 2009 Annual Report and Accounts.
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the group for that period. In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent; and
· state whether IFRS as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Parent Company financial statements respectively.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
· the Operating review and Financial review includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
This information is provided by RNS
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