Half Yearly Report

RNS Number : 9578O
Lookers PLC
13 August 2014
 

13 August 2014

LOOKERS plc

 

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

 

Lookers plc, ("Lookers" or "the group") one of the leading UK motor retail and aftersales service groups, announces its results for the six months ended 30 June 2014.

 

Andy Bruce, Chief Executive, said: "We have delivered a strong trading performance in the first half of the year which is another record result and represents six successive years of profit improvement. Both the motor and parts divisions have produced excellent results. Operational cash flow for the period was particularly positive, strengthening the balance sheet further. Lookers is well placed to take advantage of further growth opportunities in the new and used car markets and increased demand for aftersales and parts. This gives us confidence that we can continue to grow the business and deliver improved results for the full year."

 

Financial highlights

·           Revenue increased to £1.6 billion (2013: £1.24 billion) - up 29%

·           *Adjusted profit before tax increased to £40.2 million (2013: £29.6 million) - up 36%

·           Profit before tax increased to £37.7 million (2013: £27.4 million) - up 38%

·           Earnings per share increased to 7.59p (2013: 5.36p) - up 42%

·           Operational cash flow improved to £55.9 million (2013: £42.4 million)

·           Increase in interim dividend of 10% to 0.97p per share (2013: 0.88p)

 

Operational highlights

·           Record performance from the motor division

·           Strong growth in new car volumes and margins

·           Further growth in used car volumes and margins

·           Revenue and margins increased in aftersales

·           Further growth from our market leading independent aftermarket parts division

 

 

*Adjusted before amortisation of intangible assets, debt issue costs and pension costs

 

Enquiries:

 

Lookers

Today 020 7920 3150

Andy Bruce, Chief Executive

Robin Gregson, Finance Director

Thereafter:  0161 291 0043





Tavistock Communications

Telephone:  020 7920 3150

Catriona Valentine/Keeley Clarke/

Emma Blinkhorn

 

 


 

Interim Management Report

 

INTRODUCTION

I am delighted to report that Lookers has delivered another excellent trading performance, generating *adjusted profit before tax of £40.2 million (2013: £29.6 million) which is a record for a half year. This result has been achieved during a period in which volumes in the UK new car market have returned to a more normal level of activity in conjunction with further improvements in the UK economy. The board is therefore confident that Lookers should deliver a strong performance for the full year.

 

The UK new car market improved by 10% during the six months to 30 June 2014, with total registrations of 1.29 million units. Our motor division again delivered an outstanding performance, producing strong growth in volumes of both new and used cars which were ahead of the market. Further details of this are provided in the operating review below.

 

I am also very pleased to report that our independent parts distribution business has made good progress in the period in an improving but competitive market place with increases in both turnover and profits compared to the prior year.

 

Our continued growth demonstrates the strength of the group's businesses and this is underpinned by strong operational cash flow. Working capital continues to be well managed which, combined with the generation of significant levels of free cash flow, has reduced financial gearing compared to the start of the year, despite significant investment expenditure in the period. Our improved financial position and strong trading results have enabled the company to increase the interim dividend again, further details of which are set out below.

 

FINANCIAL REVIEW

Turnover increased by 29% to £1.6 billion (2013: £1.24 billion) with strong growth from new and used cars. *Adjusted profit from operations increased by 31% to £45.9 million (2013: £35.0 million). Good control of working capital ensured that interest costs of £5.7 million were maintained at a similar level to last year. *Adjusted profit before tax increased by 36% to £40.2 million (2013: £29.6 million) and profit before tax improved by 38% to £37.7 million (2013: £27.4 million). Earnings per share, increased by 42% to 7.59p compared to 5.36p. Profit after tax improved by 41% to £29.5 million (2013: £20.9 million) after a tax charge of £8.2 million, which is an effective tax rate of 21.75%.

 

The pension charge for the period of £1.7 million has been calculated in accordance with the updated accounting standard IAS 19 (Revised) which was adopted last year. The comparative figures for 2013 have been re-stated to comply with the new accounting standard which has increased the cost for the period to 30 June 2013 from £0.8 million to £1.4 million.

 

Cash flow for the six months continued to be strong with cash generated from operations of £55.9 million (2013: £42.4 million), an increase of 32%. As previously reported, on 10 March 2014 we acquired Colborne Garages Limited ("Colborne") for a total consideration of £33.6 million of which £5.0 million was deferred until 14 July 2014. We also invested £6.6 million of capital expenditure in improving dealership facilities and both these investments had an impact on reducing net cash flow compared to last year. Net cash inflow was therefore £6.0 million compared to £17.4 million in 2013. 

 

 

 

*Adjusted before amortisation of intangible assets, debt issue costs and pension costs

 

The group continues to benefit from a strong balance sheet where, despite significant spending on investment, net borrowings increased by only £0.6 million to £43.7 million compared to £43.1 million at the start of the year. If net debt is adjusted for the acquisition, then it would be at a level which would be significantly lower than the corresponding period last year and also at the start of this year. Gearing was therefore maintained at 18% and the ratio of net debt to EBITDA has now fallen to 0.56 compared to 0.60 at 1 January 2014. The value of freehold and long leasehold properties of £193 million at the end of the period remains a key strength of the business.

 

Our group bank facilities were renewed and increased in February this year and consist of a term loan of £46.25 million and a revolving credit facility of £90 million, giving total facilities of £136.25 million. There is also the potential to increase the term loan by an additional £30 million to fund future acquisitions. As net debt at 30 June 2014 was £43.7 million, the group has a significant level of unutilised bank facilities, which were £92.6 million at the end of the period. The extent and term of the facilities, which are renewable in March 2018, provide significant financial security for the group.

 

DIVIDEND

I am pleased to announce that, given the encouraging results and strong financial position of the group, the board intends to increase the interim dividend by 10%, which follows the 43% increase in the dividend over the last three financial years. The interim dividend will therefore be 0.97p per share (2013: 0.88p) and will be payable to shareholders on 28 November 2014.

 

OPERATING REVIEW

Motor Division

Our motor division consists of 127 franchised dealerships representing 31 marques from 77 locations.  The business generates revenue from the sale of new and used cars and aftersales activities.  Aftersales represents the servicing, repair and sale of franchised parts to customers' vehicles.  The new car market in the UK has been approximately 2 million new cars sold per annum during the past five years and our share of the retail sector of this market is just over 4%.  The used car market in the UK has annual transactions of approximately 6.7 million vehicles and represents a major opportunity for us to increase volumes in this part of the market.  The aftersales market applies to the overall number of cars in use on UK roads, which is referred to as the UK car parc.  This consists of approximately 30 million vehicles where approximately 20% or six million vehicles are under three years old and these vehicles are primarily the market which is catered for by the franchised motor dealers, including our motor division. In recent years the internet has become increasingly important and is now the primary means for our customers to research and determine which new or used car they are interested in buying. Our website and associated digital marketing channels are now a very important part of the business.

 

I am pleased to report that, in the first six months of this year, the motor division increased profit before tax by 43%, to £37.5 million, compared to £26.3 million last year. We continue to improve the balance of our portfolio of franchise representation and, since the start of the year, we have added seven businesses with the acquisition of Colborne, which operates three Audi, one Bentley, one Skoda, two Volkswagen passenger car and one Volkswagen commercial vehicle dealerships in the South East.

 

New Cars

The UK new car market increased by 10% to 1.29 million cars in the period, with the retail new car market increasing by 12% and the fleet market increasing by 9.5%. Our core retail new car sales increased by 15% compared to 2013, on a like for like basis, 3% ahead of the UK market. We have put more focus and investment into the fleet sector and our volumes increased by 19%, double the market growth, even though we have continued to focus on quality fleet sales and avoid very low margin business.

 

Gross profit per unit on new retail cars increased by 5%, whilst gross profit per unit on fleet was slightly ahead of last year. New car market conditions have been very favourable during the first six months of the year and our order take for the important month of September is tracking on plan. Industry forecasts suggest that the new car market will continue to benefit from prevailing good conditions in the second half of the year, anticipating an outturn for the year in excess of 2.4 million units compared to 2.26 million in 2013, an increase of at least 6%.

 

Used Cars

Group sales volumes increased by 5%, when compared on a like for like basis to 2013 and gross profit per unit increased by 7%. This is a positive performance when considered against the background where our used car volumes have increased by over 30% in the last two years. We have continued to follow a robust stocking policy to deliver increased stock turn as well as increasing our resource for sourcing good quality used car stock. These policies have been in place for some time now and it is encouraging to see that we are continuing to achieve improved volumes and margins. We continue to believe that the used car market represents a significant opportunity for the group and believe that further growth in volumes and margins will deliver increased profitability. A further factor which is helping to improve used car volumes is the increasing number of leads being generated from the group website, which have increased by 12% compared to last year. This is an area in which we shall continue to invest so that our website maintains its position as one of the best in the industry. 

 

Aftersales

Turnover in the important area of aftersales increased by 6% on a like for like basis compared to the prior year continuing to benefit from an increase in the vehicle parc of cars under three years old. This trend will continue due to the increase in the new car market in the last two years. Aftersales turnover has also increased due to the various initiatives that we have taken to develop this business in recent years, with an increased emphasis on performance with specific targets being introduced to improve overhead absorption and therefore overall profitability. It is therefore a creditable result to see that the aftersales margin has increased by 1.0% to 42.8%. This is a positive step which demonstrates the success of our continued investment in technology and procedures to further improve customer retention and average sales value per customer visit. We continue to develop and have significantly improved our electronic vehicle health check system across the motor division and have renewed our focus on the significant opportunity that tyre sales represent. Sales of service plans, where customers commit to longer term contracts for vehicle servicing, which improves customer loyalty and retention, have also continued to increase. Our commitment to enhance customer experience continues with the objective of improving retention and delivering our "customers for life" strategy, to strengthen the business and further improve profitability.

 

Parts Division

Our parts division operates in the independent aftermarket sector of the UK motor retail market, through three distinct companies which supply automotive parts to the independent automotive aftermarket from 22 locations, providing a national network to cover the whole of the UK.  This means that our customers are predominantly motor factors who are the final part of the distribution chain and who distribute parts to the independent non franchised repairers.  The parts division is typically supplying parts to 80% of the UK vehicle parc where the vehicles are over three years old and therefore operates in a different part of the market to the franchised dealerships.  This represents a market of approximately 24 million cars in the UK and each of the three companies in our parts division are market leaders in their segment of the market.

 

I am very pleased to report that the parts division has continued to make further progress in the period with increases in both turnover and profit compared to the prior year, against a background of an improving but competitive market.

 

Turnover for the division increased by 6% compared to the prior year as we continue to grow the business by investing in new and existing product lines. Whilst sales volumes increased, margins were maintained at the same level as last year and careful control of overheads resulted in an increase in profit before tax of 5% to £6.9 million, compared to £6.6 million in the previous year. Our parts division continues to make a significant contribution to group earnings where it represents 18% of group profit before tax and also produces a consistent and relatively high net margin of 6.6 %.

 

FPS, our national warehouse distributor of quality branded automotive parts, is the largest company in the parts division and represents 75% of divisional turnover. Turnover increased by 6% with profit before tax increasing by a similar amount. The increase in turnover resulted from active pricing management leading to higher product volumes in conjunction with new product development and range extension. The business continues to benefit from efficiency improvements particularly in relation to process improvement projects.

 

Apec Braking, the aftermarket leader in the UK for 'dry' braking (pads and discs), made further progress compared to last year and increased turnover by 7%, with profit before tax increasing by 1%. Demand for core products has improved and the introduction of a second tier braking product last year has successfully increased activity and helped to secure key customers and protect the business from lower priced competitors.

 

BTN Turbo, the UK's leading distributor of turbochargers and supplier of related value added services, continues to experience competitive trading conditions. However, the business has made further progress and benefitted from developing business with key customers and from the introduction of new product lines. This has resulted in an increase in both turnover and profit before tax of 3%.

 

OUTLOOK

The group has produced an excellent result for the first six months of the year. Growth in our new car sales has been ahead of a strong new car market and we have a healthy order book for the delivery of new cars in the important month of September. We have also benefited from further increases in used car volumes, increasing our share of this market and have seen a healthy increase in aftersales turnover. It is particularly pleasing that the increase in volumes has been achieved at the same time as an increase in margins in each of these three business sectors. As in previous years we continue to target selective acquisitions to further improve our franchise representation.

 

The parts division made good progress with healthy improvements in turnover and profit before tax, which together with continued investment in new product lines, improved facilities and systems, leaves the business in a stronger position for further growth and development. We also continue to seek appropriate acquisition targets in the parts aftermarket.

 

The group balance sheet continues to be strengthened by strong operational cash flow. We have substantial headroom in our new and increased bank facilities with net debt continuing to be closely controlled and at a lower level than budget and at a similar level to the start of this year. This provides secure funding capacity for several years and financial security to grow the business through further strategic acquisitions in both the motor and parts divisions.

 

The excellent performance of the group in the first half of the year represents a further significant improvement in the financial performance of the company and builds on what was already a strong performance in the previous year. This, together with the broad base of our franchise representation, the aftersales bias to the business and further recovery in the UK new car market, create a positive environment for future growth and the board are confident that the group should make further progress during the rest of this year with a result for the year which should exceed current market expectations.

 

I would like to conclude by thanking all our people at Lookers for their hard work and dedication and without whom we would not have been able to yet again deliver another strong result for the period.

 

 

 

Phil White

Chairman

13 August 2014

 

 

 

 

Condensed Consolidated Statement of Financial Performance

Six months ended 30 June 2014

 


Note

Unaudited

Six months ended

30 June

2014

£m

Restated*

Unaudited

Six months ended

30 June

2013

£m

Audited

Year ended

31 Dec

2013

£m






Continuing operations





Revenue

3

1,601.3

1,243.5

2,464.5






Cost of sales


(1,400.7)

(1,074.6)

(2,128.7)






Gross profit


200.6

168.9

335.8

Distribution costs


(106.7)

(91.2)

(184.8)

Administration expenses


(48.7)

(43.4)

(94.0)

Other operating income


0.1

0.1

0.3

Profit from operations


45.3

34.4

57.3






Profit from operations before amortisation


45.9

35.0

58.4

Amortisation of intangible assets


(0.6)

(0.6)

(1.1)






Profit from operations


45.3

34.4

57.3






Interest payable

5

(5.7)

(5.4)

(10.5)

Interest receivable

5

-

-

0.2

Net interest


(5.7)

(5.4)

(10.3)

Net interest and costs on pension scheme obligation


(1.7)

(1.4)

(2.7)

Debt issue costs


(0.2)

(0.2)

(0.4)

Profit on ordinary activities before taxation


37.7

27.4

43.9






 





Profit before tax, amortisation





and debt issue costs


40.2

29.6

48.1

Amortisation of intangible assets


(0.6)

(0.6)

(1.1)

Net interest on pension scheme obligation


(1.7)

(1.4)

(2.7)

Debt issue costs


(0.2)

(0.2)

(0.4)

Profit on ordinary activities before taxation


37.7

27.4

43.9






Tax charge

7

(8.2)

(6.5)

(7.7)

Profit for the period / year


29.5

20.9

36.2






Attributable to:





Shareholders of the company


29.5

20.8

36.0

Non-controlling interests


-

0.1

0.2






Continuing operations





Earnings per share










Basic earnings per share

6

7.59p

5.36p

9.28p

Diluted earnings per share

6

7.43p

5.25p

9.10p

*Restated to reflect the impact of IAS19 (Revised) and a reclassification

 

 

 

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2014

 


Unaudited

Six months ended

30 June

2014

£m

Restated*

Unaudited

Six months ended

30 June

2013

£m

 

Audited

Year ended

31 Dec

2013

£m

Profit for the period / year

29.5

20.9

36.2





Actuarial (losses)/gains recognised in post




retirement benefit schemes

(4.7)

0.1

(3.3)

Movement in deferred taxation on pension liability

0.8

(0.1)

0.6

Other comprehensive expense for the period / year

(3.9)

-

(2.7)

Total comprehensive income for the period / year

25.6

20.9

33.5





Attributable to:




Shareholders of the company

25.6

20.8

33.3

Non-controlling interests

-

0.1

0.2

 

 

 

Condensed Consolidated Statement of Financial Position

As at 30 June 2014

 


Unaudited

30 June

2014

£m

Unaudited

30 June

2013

£m

Audited

31 Dec

2013

£m





Non current assets




Goodwill

96.6

62.6

73.7

Intangible assets

13.3

14.2

13.8

Property, plant and equipment

214.5

207.6

204.6


324.4

284.4

292.1





Current assets




Inventories

480.7

411.3

446.7

Trade and other receivables

231.3

202.3

154.0

Rental fleet vehicles

54.8

41.4

52.9

Cash and cash equivalents

16.6

21.7

5.2

Assets held for sale

0.5

1.9

0.5


783.9

678.6

659.3

Total assets

1,108.3

963.0

951.4





Current liabilities




Bank loans and overdrafts

20.2

23.3

14.5

Trade and other payables

683.7

588.9

578.9

Current tax liabilities

15.0

10.8

8.9

Short term provisions

0.4

0.6

1.0

Derivative financial instruments

7.0

8.5

7.0


726.3

632.1

610.3





Net current assets

57.6

46.5

49.0





Non current liabilities




Bank loans

40.1

37.5

33.8

Trade and other payables

37.0

22.0

24.2

Retirement benefit obligations

47.8

42.1

44.1

Deferred tax liabilities

9.2

9.0

10.2

Long term provisions

0.8

0.8

0.8


134.9

111.4

113.1





Total liabilities

861.2

743.5

723.4





Net assets

247.1

219.5

228.0





Shareholders' equity




Ordinary share capital

19.4

19.4

19.4

Share premium

75.6

75.5

75.6

Capital redemption reserve

14.6

14.6

14.6

Other reserve

(1.1)

(1.4)

(1.1)

Retained earnings

138.6

110.8

118.8

Equity attributable to shareholders of the company

247.1

218.9

227.3

Non-controlling interests

-

0.6

0.7

Total Equity

247.1

219.5

228.0

 

 

 

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2014

 


Share

capital

£m

Share premium

£m

Capital

redemption

reserve

£m

Other

reserve

£m

Retained

earnings

£m

Equity

distributable

to shareholders

of company

£m

Non

controlling

interest

Total equity

£m










As at 1 January 2014

19.4

75.6

14.6

(1.1)

118.8

227.3

0.7

228.0

Profit for the period

-

-

-

-

29.5

29.5

-

29.5

Actuarial losses recognised on defined








benefit pension schemes

-

-

-

-

(4.7)

(4.7)

-

(4.7)

Deferred taxation on pension liability

-

-

-

-

0.9

0.9

-

0.9

Transfer of shares in minority interest

 

-

 

-

 

-

 

-

 

0.7

 

0.7

 

  (0.7)

-

Dividend to shareholders

-

-

-

-

(6.6)

(6.6)

-

(6.6)

As at 30 June 2014  (unaudited)

19.4

75.6

14.6

(1.1)

138.6

247.1

-

247.1

 

Six months ended 30 June 2013*










As at 1 January 2013

19.4

75.3

14.6

(1.4)

95.4

203.3

0.5

203.8

Profit for the period (Restated)

-

-

-

-

20.8

20.8

0.1

20.9

New shares issued

-

0.2

-

-

-

0.2

-

0.2

Actuarial gains recognised on defined








benefit pension schemes (Restated)

-

-

-

-

0.7

0.7

-

0.7

Deferred taxation on pension liability

-

-

-

-

(0.1)

(0.1)

-

(0.1)

Dividend to shareholders

-

-

-

-

(6.0)

(6.0)

-

(6.0)

As at 30 June 2013  (unaudited)

19.4

75.5

14.6

(1.4)

110.8

218.9

0.6

219.5

 

Year ended 31 December 2013










As at 1 January 2013

19.4

75.3

14.6

(1.4)

95.4

203.3

0.5

203.8

New shares issued

-

0.3

-

-

-

0.3

-

0.3

Profit for the year

-

-

-

-

36.0

36.0

0.2

36.2

Actuarial losses recognised on defined








benefit pension schemes

-

-

-

-

(3.3)

(3.3)

-

(3.3)

Deferred taxation on pension liability

-

-

-

-

0.6

0.6

-

0.6

Rate adjustment

-

-

-

-

(1.3)

(1.3)

-

(1.3)

Foreign exchange adjustment

-

-

-

0.3

(0.3)

-

-

-

Dividends to shareholders

-

-

-

-

(9.5)

(9.5)

-

(9.5)

Fair value on derivate instruments

-

-

-

-

1.5

1.5

-

1.5

Deferred taxation on derivative instruments

 

-

 

-

 

-

 

-

 

(0.3)

 

(0.3)

 

-

 

(0.3)

As at 31 December 2013

19.4

75.6

14.6

(1.1)

118.8

227.3

0.7

228.0

 

*Restated to reflect the impact of IAS19 (Revised)

 

 

 

Condensed Consolidated Cash Flow Statement

Six months ended 30 June 2014

 


Unaudited

Six months ended

30 June

2014

£m

Unaudited

Six months ended

30 June

2013

£m

Audited

Year ended

31 Dec

2012

£m





Cash flows from operating activities



Profit for the period/year

21.5

36.2

Adjustments for:



Tax

6.5

7.7

Depreciation

6.0

12.5

Profit on disposal of plant and equipment

-

(0.1)

Profit on disposal of rental fleet vehicles

(0.3)

(0.4)

Amortisation of intangible assets

0.6

1.1

Interest income

-

(0.2)

Interest payable

6.2

10.5

Debt issue costs

0.2

0.4

Changes in working capital




Increase in inventories

(27.2)

(62.6)


Increase in trade and other receivables

(78.5)

(30.2)


Increase in payables

108.1

102.6


Impact of net working capital of acquisitions

(0.7)

(1.0)

Cash generated from operations

55.9

42.4

76.5

Difference between pension charge and cash contributions

(2.4)

(5.4)

Net interest and costs on pension scheme obligation

-

2.7

Purchase of rental fleet vehicles

(27.7)

(67.4)

Proceeds from sale of rental fleet vehicles

23.7

49.5

Interest paid

(6.2)

(10.5)

Interest received

-

0.2

Tax paid

(2.4)

(3.7)

(8.1)

Net cash inflow from operating activities

43.1

26.1

37.5





Cash flows from investing activities



Acquisition of subsidiaries

(8.7)

(19.4)

Purchase of property, plant and equipment

(8.5)

(16.5)

Purchase of intangibles

0.2

0.1

Proceeds from sale of property, plant and equipment

5.8

12.6

Proceeds from sale of business

-

-

0.1

Net cash used by investing activities

(28.5)

(11.2)

(23.1)





Cash flows used by financing activities



Proceeds from share save scheme

0.2

0.3

Repayment of loans

(3.7)

(7.5)

New loans

12.0

-

Dividends

(6.0)

(9.5)

Net cash (outflow)/inflow from financing activities

(8.6)

2.5

(16.7)





Increase/(decrease) in cash and cash equivalents

17.4

(2.3)

Cash and cash equivalents at the beginning of the period/year

(1.8)

0.5

0.5

Cash and cash equivalents at the end of the period/year

4.2

17.9

(1.8)

 

 

 

Notes to the Set of Financial Information

Six months ended 30 June 2014

 

1. GENERAL INFORMATION

The financial information for the period ended 30 June 2014 and similarly the period ended 30 June 2013 has neither been audited nor reviewed by the auditor.  The financial information for the year ended 31 December 2013 has been based on information in the audited financial statements for that year.

The information for the year ended 31 December 2013 and the Interim Financial Report for the period ended 30 June 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

2. ACCOUNTING POLICIES

The annual financial statements of Lookers plc are prepared in accordance with IFRSs as adopted by the European Union.  The set of condensed financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standards 34 'Interim Financial Reporting', as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the half yearly financial report as applied in the group's latest annual audited financial statements.

 

For the year ended 31 December 2013, the group applied the revised version of IAS 19 (as revised in June 2011) 'Employee Benefits' and the related consequential amendments.  The group applied the revised version of IAS 19 (as revised in June 2011) retrospectively and in accordance with the transitional provisions as set out in IAS19.173.  These transitional provisions do not have an impact on future periods.  The amendments to IAS 19 change the accounting for defined benefit schemes and termination benefits.  The most significant change relates to the accounting for changes in defined benefit obligations and scheme assets.  All actuarial gains and losses are recognised immediately through the statement of other comprehensive income in order for the net pension asset or liability recognised in the consolidated balance sheet to reflect the full value of the scheme deficit or surplus.  Furthermore, the interest cost and expected return on scheme assets used in the previous version of IAS 19 are replaced with a 'net-interest' amount under the revised version of IAS 19 (as revised in June 2011), which is calculated by applying a discount rate to the net defined liability or asset.  The revised version of IAS19 (as revised in June 2011) also introduces more extensive disclosures in the presentation of the defined benefit cost.

 

These condensed financial statements are the first interim financial statements in which the group has adopted the revised version of IAS 19 (as revised in June 2011).  As the group has always recognised actuarial gains and losses immediately, there is no effect on the prior year defined benefit obligation and balance sheet disclosure.

 

For the six months ended 30 June 2013, the condensed consolidated statement of financial performance shows an expense which is £0.6m higher and the condensed group statement of comprehensive income shows a profit which is £0.6m lower than it would have been prior to the adoption of the revised version of IAS 19 (as revised in June 2011). For the six months ended 30 June 2013, the condensed consolidated statement of financial performance includes a reclassification to gross margin of £11.9m to more accurately reflect the underlying records.

 

Basis of preparation: Going concern

This financial information has been prepared on a going concern basis which the directors believe to be appropriate. This conclusion is based on, amongst other matters, a review of the group's financial projections together with a review of the cash and committed borrowing facilities available to the group.

 

At 30 June 2014 the medium-term banking facilities included a revolving credit facility of up to £90.0 million and a term loan totalling £46.25 million, providing total facilities of £136.25 million. These facilities are due for renewal in March 2018.

 

3. SEGMENTAL REPORTING

At 30 June 2014 (2013: same) the group is organised into two main business segments, motor distribution and parts distribution.

 

Unaudited

Six months

ended 30 June 2014

Motor

Division

£m

Parts

Distribution

£m

Unallocated

£m

Group

£m

Continuing operations










New Cars

787.2

-

-

787.2

Used Cars

530.1

-

-

530.1

Aftersales

179.3

104.7

-

284.0

Revenue

1,496.6

104.7

-

1,601.3






Segmental result before amortisation





of intangible assets

41.1

6.9

(2.1)

45.9

Amortisation of intangible assets

-

-

(0.6)

(0.6)

Interest expense

(3.6)

-

(2.1)

(5.7)

Net interest and costs on pension scheme obligation

-

-

(1.7)

(1.7)

Debt issue costs

-

-

(0.2)

(0.2)






Profit before taxation

37.5

6.9

(6.7)

37.7

Taxation

-

-

-

(8.2)






Profit for the financial period from continuing





operations attributable to shareholders




29.5






Segmental assets

963.8

144.5

-

1,108.3

Total assets

963.8

144.5

-

1,108.3






Segmental liabilities

727.9

73.0

-

800.9

Unallocated liabilities

- Corporate borrowings

-

-

60.3

60.3

Total liabilities

727.9

73.0

60.3

861.2

 

 

 

Unaudited

Six months

ended 30 June 2013

 

Motor

Division

£m

Parts

Distribution

£m

Unallocated

£m

Group

£m

Continuing operations










New Cars

580.8

-

-

580.8

Used Cars

428.0

-

-

428.0

Aftersales

135.9

98.8

-

234.7

Revenue

1,144.7

98.8

-

1,243.5






Segmental result before amortisation




 

of intangible assets

29.9

6.6

(1.5)

35.0

Amortisation of intangible assets

-

-

(0.6)

(0.6)

Interest expense

(3.6)

-

(2.6)

(6.2)

Debt issue costs

-

-

(0.2)

(0.2)






Profit before taxation

26.3

6.6

(4.9)

28.0

Taxation

-

-

-

(6.5)






Profit for the financial period from

continuing operations attributable to shareholders




21.5

 

 

 

Unaudited

Six months

ended 30 June 2013

Motor

Division

£m

Parts

Distribution

£m

Unallocated

£m

Group

£m

 

Segmental assets

822.2

140.8

-

963.0

Total assets

822.2

140.8

-

963.0






Segmental liabilities

608.9

73.8

-

682.7

Unallocated liabilities

- Corporate borrowings

-

-

60.8

60.8

Total liabilities

608.9

73.8

60.8

743.5






Audited

Year ended

31 December 2013

Motor

Division

£m

Parts

Distribution

£m

Unallocated

£m

Continuing operations










New Cars

1,130.2

-

-

1,130.2

Used Cars

794.4

-

-

794.4

Aftersales

342.8

197.1

-

539.9






Revenue

2,267.4

197.1

-

2,464.5






Segmental result before amortisation

Of intangible assets

49.6

11.8

(3.0)

58.4

Amortisation of intangible assets

-

-

(1.1)

(1.1)

Interest expense

(7.0)

-

(3.5)

(10.5)

Interest income

-

-

0.2

0.2

Net interest and costs on pension scheme obligations

-

-

(2.7)

(2.7)

Debt issue costs

-

-

(0.4)

(0.4)






Profit before taxation

42.6

11.8

(10.5)

43.9

Taxation

-

-

(7.7)

(7.7)






Profit for the financial year from continuing operations attributable to shareholders




36.2






Segmental assets

814.3

137.1

-

951.4

Total assets

814.3

137.1

-

951.4






Segmental liabilities

603.2

71.9

-

675.1

Unallocated liabilities

- Corporate borrowings

-

-

48.3

48.3

Total liabilities

603.2

71.9

48.3

723.4

 

 

For the purposes of monitoring segment performance and allocating resources between segments, the group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment.  All assets are allocated to reportable segments with the exception of other financial assets (except for trade and other receivables) and tax assets.  Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments.

 

4. Dividends

An interim dividend of 0.97p per ordinary share is proposed (2013: 0.88p per share).

 


Unaudited

Six months

ended

30 June

2014

p

Unaudited

Six months

ended

30 June

2013

p

Audited

Year

ended

31 Dec

2013

p





Ordinary dividend per share - paid in period/year

1.7

1.55

1.38

- proposed

0.97

0.88

0.8

 

The interim dividend will be paid on 28 November 2014 to shareholders on the register on 31 October 2014.

 

5. FINANCE costs - net

 


Unaudited

Six months

ended

30 June

2014

£m

Unaudited*

Six months

ended

30 June

2013

£m

Audited

Year

ended

31 Dec

2013

£m





Interest expense




On amounts wholly repayable within 5 years:




Interest payable on bank borrowings

(2.3)

(2.5)

(4.7)

Interest on consignment vehicle liabilities

(3.4)

(2.8)

(5.8)

Other interest

-

(0.1)

-

Interest and similar charges payable

(5.7)

(5.4)

(10.5)

Interest income




Bank interest

-

-

0.2

Total interest receivable

-

-

0.2

Net interest

(5.7)

(5.4)

(10.3)

* Restated to reflect the impact of IAS 19 (Revised)

 

6. earnings per share

The calculation of earnings per ordinary share is based on profits on ordinary activities after taxation amounting to £29.5 million (2013: £20.8 million) and a weighted average of 388,614,148 ordinary shares in issue during the period (2013: 387,973,748).

The diluted earnings per share is based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 8,689,120 (2013: 7,905,389). The diluted earnings per share is 7.43p (2013: 5.25p).

Adjusted earnings per share is stated before amortisation of intangible assets, impairment of goodwill and debt issue costs and is calculated on profits of £32.0 million for the period (2013: £23.0 million).


Unaudited

Six months ended

30 June 2014

Unaudited*

Six months ended

30 June 2013

Audited

Year ended

31 Dec 2013


Earnings

£m

Earnings

per share

p

Earnings

£m

Earnings

per share

p

Earnings

£m

Earnings

per share

p








Earnings attributable to







ordinary shareholders

29.5

7.59

20.8

5.36

36.0

9.28








Amortisation of intangible assets

0.6

0.15

0.6

0.15

1.1

0.3

Net interest and costs on pension scheme obligation

 

1.7

 

0.44

 

1.4

 

0.36

 

2.7

 

0.69

Debt issue costs

0.2

0.05

0.2

0.05

0.4

0.09

Adjusted

32.0

8.23

23.0

5.92

40.2

10.36

 

7. TAXATION

The tax charge for the period has been provided at the effective rate of 21.75% (2013: 23.72%) representing the best estimate of the average annual effective tax rate expected for the full year applied to the pre-tax income for the six month period.

 

8. ACQUISITIONS

On 10 March 2014 the group acquired the entire issued share capital of Colborne Garages Limited, a company incorporated in England for a consideration of £33.8 million.  The acquisition accounting has been applied on a provisional basis and this may be adjusted in the 12 month measurement period. A table detailing the assets acquired at fair value will be included in the annual financial statements for the year ending 31 December 2014.

 

9. PENSIONS

The defined benefit obligation as at 30 June 2014 has been calculated in a manner consistent with that used in the group's latest annual audited financial statements.  This is calculated as a valuation update as at 30 June 2014 by a qualified independent actuary to take account of the requirements of IAS19. Scheme liabilities have been calculated using a consistent projected unit valuation method and compared to the schemes' assets at their market value at 30 June.

 

10. POST BALANCE SHEET EVENT

On 7 July 2014 the group sold the trade and assets of a Jaguar and Land Rover dealership, acquired with the acquisition of Colborne Garages Limited, to Grange Motors (Brentwood) Limited for a consideration of £10.5m.

 

11. RISKS AND UNCERTAINTIES

There are a number of potential risks and uncertainties which could have a material impact on the group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The Board believes these risks and uncertainties to be consistent with those disclosed in pages 23 and 24 of our latest annual report, including general economic factors such as oil prices, interest rates, manufacturers' influence and stability.

 

12. INTERIM STATEMENT

The interim announcement was approved by the Board and will be posted to shareholders in August 2014.  Copies are also available to the public at the registered office of the company at 776 Chester Road, Stretford, Manchester M32 0QH.

 

 

 

Responsibility Statement

 

WE CONFIRM THAT TO THE BEST OF OUR KNOWLEDGE

 

(a)

The interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'.

(b)

The interim financial statements include a fair review of the information required by DTR 4.2.7R

(identification of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c)

The interim financial statements include a fair review of the information required by DTR 4.2.8R

(disclosure of related parties' transactions and charges therein).

 

By order of the Board

 

Andy Bruce

Robin Gregson

Chief Executive

Finance Director

13 August 2014

13 August 2014

 

 


This information is provided by RNS
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