Interim Results
Lookers PLC
03 September 2003
3 September 2003
LOOKERS PLC
UNAUDITED INTERIM RESULTS FOR THE
HALF YEAR ENDED JUNE 30 2003
Lookers plc, a leading UK retail motor group, announces record results for the
half-year ended June 30 2003
HIGHLIGHTS
• Turnover up 28% to £516.1 million (2002: £402.7 million)
• Operating profit pre goodwill up 28% to £11.6 million (2002: £9.0 million)
• Profit before interest and tax up 36% to £12.7 million (2002:£9.3 million)
• Profit before tax up 34% to £10.3 million (2002: £7.7 million)
• Basic earnings per share up 52% to 21.6p (2002: 14.2p)
• Dividend up 10% to 3.3p
• Operating cash flow up 76% to £13.2 million (2002:£7.5 million)
• Equity shareholders funds increased by 13% against June 2002.
Commenting on the outlook for the Group, Fred Maguire, Chairman, said:
'Lookers has once again delivered outstanding results for the first half of the
year, exceeding the record levels achieved in the same period last year'.
'Since the period end trading in July and August is well ahead of last year and
the order bank for September would indicate that this positive trend will
continue'.
'In addition to the many organic initiatives in place throughout the Group, we
are actively reviewing further acquisitions and will continue to identify
opportunities in support of our stated strategy of profitable growth and
building shareholder value'.
An analyst meeting will be held today at 9.30am, followed by a press briefing at
11.30am, at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN.
Please contact Rebecca Ghent on 020 7796 4133 for further details or to confirm
attendance.
Enquiries:
Fred Maguire, Executive Chairman ) Telephone: 020 7796 4133
Ken Surgenor, Chief Executive ) (on Wednesday 3 September only)
David Dyson, Finance Director ) and on 0161 291 0043 thereafter)
Andrew Hayes/James Hill Telephone: 020 7796 4133
Hudson Sandler
High resolution photographs will be available to media from 12.30pm at
www.vismedia.co.uk
CHAIRMAN'S REVIEW
INTRODUCTION
Lookers has once again delivered outstanding results for the first half of the
year, exceeding the record levels achieved in the same period last year.
Turnover increased by 28% to £516.1 million (2002: £402.7 million), with profit
before tax up 34% to £10.3 million. This excellent performance is driven by our
ongoing commitment to providing quality customer care, a strong portfolio of
franchises, tight management controls, the strengthening of our strategic
partnerships with successful manufacturers and continued investment to improve
and expand the business.
Set against a continuing buoyant new and used car market, we are confident that
this performance will carry through in the second half.
The Group acquired Jackson and Edwards Ltd in January 2003 and JN Holdings Ltd
(Taggarts) in February 2003. These businesses have now been successfully
integrated into the current management structure and have performed ahead of
expectations. We expect to see further benefits as we begin to fully realise
economies of scale.
During the course of 2002 we took the opportunity to rationalise the business to
focus on a franchise, rather than regional, structure for our management team.
This reorganisation is now benefiting the Group, by driving sales and
profitability through operational efficiencies and improved relationships with
manufacturers.
Our strategy remains to continue to work with our preferred partners with a view
to extending our market areas and territories where appropriate with both volume
and prestige manufacturers. This is reflected in our recent acquisition in late
July 2003 of Savoy Honda Centre in Warrington, Cheshire from Mainland
Investments Ltd for a total consideration of approximately £2 million. This
strong local business complements our existing Honda outlets bringing the total
number within Lookers to six.
TRADING CONDITIONS
Despite original market estimates that new car volume would be down 7% on last
year, the demand for new cars to the end of June 2003 has almost matched the
historically high levels of 2002. Following the very strong June and July new
car market, the Society of Motor Manufacturers and Traders ('SMMT') has now
revised upwards its market forecasts for the year to 2.52 million units, which
would make 2003 the second highest year on record.
New car sales at Lookers were up 20% on the same period last year with used cars
enjoying a similar 20% increase. Trading conditions remain buoyant due to a
combination of factors including low interest rates, lower car prices and the
introduction of exciting new models by our manufacturer partners.
Block Exemption
With revised Block Exemption regulations coming into effect from 1 October 2003,
already we are benefiting from the significant changes in the structure of the
industry favouring large dealer groups.
Many of our manufacturing partners are restructuring their franchise networks
ahead of the implementation of the new regulations and I am pleased to confirm
that we have strengthened our relationship with ten new dealerships. In
addition, we have been presented with a number of opportunities with our
preferred manufacturing partners which will enable us to further review and
improve both the balance of our franchises and the quality of our earnings.
The European Commission's desire to see more price harmonisation across Europe
is placing greater emphasis on pan-European pricing and this has already had a
significant impact on the level of cross-border importing to Northern Ireland,
where we already sell one in five new cars.
RESULTS AND DIVIDEND
Against very strong prior year comparatives, turnover for the six months of the
year to 30 June 2003 rose by 28% to £516.1 million (2002: £402.7 million) with
operating profit before goodwill up 28% to £11.6 million (2002: £9.0 million).
Profit before interest increased by 36% to £12.7 million (2002: £9.3 million)
and profit before tax was up 34% to £10.3 million (2002: £7.7 million),
generating reported earnings per share of 21.6p - an increase of 52%.
During the period, we generated significant profits on the disposal of
properties. The Group has a very strong portfolio of freehold and long
leasehold properties, which were most recently valued in 1999. Since the period
end, we have sold surplus property in Birmingham, which will generate
approximately £1.2 million of cash and realise a profit of just under £1
million. We will continue to manage this prudently valued portfolio to take the
opportunity to realise gains where appropriate.
On 2 January 2003 we successfully redeemed the balance of the preference shares.
In the financial statements at our year-end we disclosed on a pro-forma basis
the profit & loss account and balance sheet taking into account the effects of
redeeming the preference shares. In the half-year, the additional interest cost
on the loan taken out to redeem the preference shares was £338,000. After tax
the cost of £237,000 compared with the preference dividend for the same period
last year of £576,000 has improved earnings by £339,000 (1.0p per share).
As a result of the preference share redemption, we anticipated that gearing
would rise significantly. At the half-year end, despite incurring expenditure on
acquisitions and building development of £15 million, gearing has been held at
68%.
We have continued to manage our working capital effectively and we have seen a
healthy increase in our operating cash flow for the first six months of the year
to £13.2 million against £7.5 million in the same period last year which has
been used to fund our acquisition and building programme.
Dividend
Reflecting management's continuing confidence in the business and the positive
outlook for the Group, the Board is pleased to declare a 10% increase in the
ordinary dividend to 3.3p per share (2002: 3.0p). This will be paid on 28
November 2003 to shareholders on the register at 31 October 2003.
Following the payment of the dividend, equity shareholders' funds have increased
by 11% since 31 December 2002.
OPERATING PERFORMANCE
Overview
Overall, the Group made excellent progress in the first half. We have achieved
growth in all areas of our business. It was particularly pleasing that our new
car sales, on a like for like basis, outperformed the market by 6%.
We continue to grow our aftersales business and the gross profits achieved in
the six months to 30 June 2003 represented 49% of the total gross profits which
is very similar to last year.
Our operating priorities continue to be investment in our well established '
Customers for Life' programmes, franchise extension with our preferred
manufacturing partners and ongoing investment to improve the business and the
existing franchise portfolio.
Our Customer Management Centre in Liverpool is now reaching maturity and is
helping to drive forward all aspects of our business with well established
customer relationship programmes.
Internet and Sub Prime Finance
Over the first half of the year we refocused our internet and sub prime finance
business. Although in relative terms, this is a small operation, the initiatives
taken have helped us to double the number of units sold whilst margins on our
sub-prime business have increased by 65%. A new e-mail management system has
been introduced and this has improved our customer conversion ratios. We intend
to develop and enhance these activities in the second half of 2003 to enable us
to deliver more volume in 2004.
Renault
On 2 January 2003 we acquired the share capital of Jackson & Edwards Limited -
comprising two Renault businesses in Altrincham and Northwich. This completed
and considerably expanded our existing Renault territory in Cheshire and South
Manchester. The management team is now in place to move these businesses
forward and take advantage of the economies of scale that our Group can bring to
such businesses.
Vauxhall
In April 2003 we relocated our Vauxhall Chester business from Hoole Lane to a
prime motor retail site on Sealand Road, just outside the city of Chester
adjacent to our existing Renault facility. The disposal of the original site for
alternative use gave rise to a £2 million profit on disposal, which has been
disclosed below operating profit.
In addition, the refurbishment of our Renault facility on Sealand Road is
virtually complete.
Premier Automotive Group
On 5 February 2003 we made our first move into Scotland by completing the
acquisition of J N Holdings Limited (Taggarts), comprising seven outlets in
total, three Jaguar, one Land Rover, one Mazda, one MG Rover, one LDV together
with a Unipart and Bodyshop operation. Profits from this business have exceeded
expectations.
We have successfully integrated this business into the Group. To further improve
its performance, we have recently appointed an Operations Director for this
business to ensure that we maximise the profitability and fully realise
economies of scale.
This acquisition has provided us with a firm foundation for further expansion in
Scotland.
In December 2002 we acquired three Volvo businesses from two different owners.
We have had to consolidate these three businesses into two operations in the
South East and due to a short rental agreement, one of these operations had to
be relocated. This has caused significant disruption to this part of our PAG
business and as a result these businesses have only moved into profit in the
month of June 2003.
Further disruption will take place as we relocate the Volvo Chelmsford business
alongside our Land Rover operation on our Chelmer Village site. Once this is
completed we expect to see the benefits flow.
VAG
In line with the manufacturers reorganisation strategy we have relinquished our
Blackburn Audi business and have been awarded the significant South Lancashire
territory for Volkswagen. In addition to the existing dealership in Burnley we
are currently in the process of developing a new facility for Volkswagen in a
prime retail location on the outskirts of Blackburn. At the present time we are
operating this business from premises rented from the previous owner of the
business and we do not expect to achieve the full economies of running this
market area until we are established in the new facility in the first quarter of
2004.
Adjacent to this retail site we are building a Volkswagen approved Bodyshop to
handle all the body work for the market area.
Honda
As mentioned above, on 31 July 2003 we acquired the property and assets of Savoy
Honda Centre in Warrington from Mainland Investments Limited for a total
consideration of £2 million. This completes a significant market area for Honda,
which includes Liverpool, Southport and Warrington. We expect this to operate
profitably in the second half of 2003.
BMW
Since the period end we have officially opened a new solus facility for BMW
Motorcycles representing the whole of Northern Ireland. This has immediately
generated improved customer satisfaction resulting in increased sales and
profitability.
Northern Ireland
We continue to be the market leader in Northern Ireland, selling 1 in 5 of all
new cars. The excellent performance of the business has been bolstered by the
success of our development of the used car marketing brand Usedirect.
Significant refurbishment work has been carried out on our Boucher Road site
culminating in the new specialist car facility. This now houses three of our
prestige franchises including Bentley, Ferrari and Maserati. We believe that
this 18-acre site is now the largest and most impressive motor retail complex in
Europe.
Disposals
In March 2003, we closed our MG Rover operations in Hadleigh, Essex which
enabled us to install Volvo alongside our Hadleigh Land Rover facility.
In May 2003 we closed the parts and bodyshop operation at Crossley Park,
Stockport. A break clause in the rental of this facility gave us the
opportunity to withdraw from this marginal business.
Following the half-year end we sold our loss making Jeep and SEAT operations in
Middlesbrough. There will be a small loss on disposal, which will be included
within the loss on disposal/closure of businesses in the year-end accounts. It
will, however, release approximately £1 million for reinvestment.
In the six months to 30 June 2003 Platts Harris made a loss of £141,000. In line
with our stated strategy, since the half-year end we have agreed Heads of Terms
to dispose of this non-core agricultural business to management, provided
certain pre-conditions are met.
The two disposals referred to above since the half year end together with the
disposal of the surplus property in Birmingham will initially reduce borrowings
by approximately £4.2 million.
CURRENT TRADING AND OUTLOOK
Although the second half of the year is traditionally a more challenging period,
we expect the new car market will remain buoyant given the favourable economic
conditions and remarkably robust consumer confidence. Since the period end,
trading in July and August is well ahead of last year and the order bank for
September would indicate that this positive trend will continue. Our aftersales
business continues to post impressive results and we are excited by new products
that are coming on line in the second half from our manufacturing partners.
Lookers, in line with other similar groups in the industry has submitted
retrospective VAT claims regarding demonstrator vehicles. Confirmation of the
sums involved is anticipated to be received in the next 12 months. The cash
received will be used to reduce debt and assist with the funding of the Group's
acquisition programme.
In addition to the many organic initiatives in place throughout the Group, we
are actively reviewing further acquisitions and will continue to identify
opportunities in support of our stated strategy of profitable growth and
building shareholder value.
We are delighted by the progress that has been made so far this year. Our
long-term investment in developing the Group and our recent acquisitions,
combined with our emphasis on delivering a high quality service to our customers
through our 'Customers for Life' programmes, provide Lookers with a strong
platform for further growth in the second half and into the longer term.
These results could not have been achieved without the hard work and dedication
of all our employees. I would like to thank my co-Directors and staff for their
efforts and look forward with confidence to their continued support throughout
the second half.
Fred Maguire, Chairman
3 September 2003
The Directors announce the following unaudited results of the Group for the
half-year ended 30 June 2003
Consolidated Profit and Loss Account (Summarised)
Half-year Year
Half-year ended ended
ended 30 June 2002 31 December
30 June 2003 (Unaudited) 2002
(Unaudited) (As restated) (Audited)
(As restated)
£000 £000 £000
Turnover
- Existing businesses 464,588 402,742 790,352
- Acquisitions 51,555 - -
_______ ______ ______
Total continuing operations 516,143 402,742 790,352
_______ ______ ______
Operating profit before Goodwill Amortisation 11,566 9,036 13,899
Goodwill Amortisation (433) (375) (728)
Operating Profit
- Existing businesses 10,324 8,661 13,171
- Acquisitions 809 - -
______ _____ ______
11,133 8,661 13,171
(Loss)/profit on disposal of businesses (619) 340 340
Profit on disposal of properties 2,147 278 1,609
_______ _____ _____
Profit before interest and taxation 12,661 9,279 15,120
Interest payable (2,365) (1,589) (3,291)
_______ _______ _______
Profit on ordinary activities before taxation 10,296 7,690 11,829
Taxation (2,831) (2,306) (3,007)
_______ _______ _______
Profit after taxation attributable
to shareholders 7,465 5,384 8,822
Dividends - preference shares - (576) (1,126)
- ordinary shares (1,193) (1,021) (3,428)
_______ ______ ______
Retained profit 6,272 3,787 4,268
====== ====== ======
Basic/diluted earnings per ordinary share 21.6p 14.2p 22.6p
====== ====== ======
Earnings per ordinary share before profit on disposal of properties
and (loss)/profit on disposal of businesses 16.6p 12.6p 17.2p
Consolidated Balance Sheet (Summarised)
30 June 2003 30 June 2002 31 December
(Unaudited) (Unaudited) 2002
(Audited)
£000 £000 £000
FIXED ASSETS
Intangible assets 10,643 9,501 9,165
Tangible assets 86,992 81,310 82,789
______ ______ ______
97,635 90,811 91,954
______ ______ ______
CURRENT ASSETS
Stocks 82,997 65,368 72,963
Debtors 70,584 56,281 36,979
Cash at bank and in hand 37 31 32
_________ _________ _________
153,618 121,680 109,974
_______ _______ ______
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Bank overdrafts 1,508 5,179 3,756
Trade creditors 92,578 67,300 64,596
Other creditors 57,807 40,072 38,586
Proposed dividend 1,152 1,021 2,403
_______ _______ _______
153,045 113,572 109,341
_______ _______ _______
NET CURRENT ASSETS 573 8,108 633
_______ _______ _______
TOTAL ASSETS LESS CURRENT 98,208 98,919 92,587
LIABILITIES
CREDITORS: AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR (27,478) (22,001) (15,347)
PROVISIONS FOR LIABILITIES AND CHARGES (535) (735) (316)
________ ________ ________
SHAREHOLDERS' FUNDS 70,195 76,183 76,924
====== ====== ======
Shareholders' funds are attributable to
Non-equity shareholders' funds - 13,889 13,889
Equity shareholders' funds 70,195 62,294 63,035
_______ _______ _______
70,195 76,183 76,924
====== ====== ======
TOTAL BORROWINGS 47,600 39,138 29,593
====== ====== ======
GEARING 68% 51% 39%
====== ====== ======
RESTATED GEARING (note 4) 68% 85% 69%
====== ====== ======
Consolidated Cashflow Statement (Summarised)
Half-year Half-year Year
ended ended ended
30 June 2003 30 June 2002 31 December
(Unaudited) (Unaudited) 2002
(Audited)
£000 £000 £000
Net Cash Inflow from Operating Activities 13,201 7,537 21,233
Returns on investments and servicing of finance
- Interest paid (1,870) (1,834) (3,378)
- Non-equity Dividends paid - (576) (1,126)
Taxation paid (1,048) (967) (3,319)
Net Cash (Outflow)/Inflow from Capital Expenditure and Financial
Investments (1,346) 2,457 4,566
Net Cash Outflow from Acquisitions and Disposals (7,289) (552) (2,540)
Equity Dividends paid (2,443) (2,202) (3,227)
Net Cash Inflow/(Outflow) from Financing 3,048 (3,705) (10,627)
_______ _______ _______
INCREASE IN CASH 2,253 158 1,582
====== ====== ======
Reconciliation of operating profit to net cash inflow from operating
activities
Operating profit 11,133 8,661 13,171
Depreciation charges 1,934 2,164 3,104
Goodwill amortisation 433 375 728
Loss/(profit) on sale of fixed assets 2 (70) (37)
Increase in stock (2,652) (1,787) (7,728)
Increase in debtors (25,832) (22,192) (5,923)
Increase in creditors 28,183 20,386 17,918
_______ _______ _______
Net cash inflow from operating activities 13,201 7,537 21,233
====== ====== ======
Notes
1. Dividends
Ordinary shares of 25p
The interim dividend proposed at the rate of 3.3p per share (2002 -
3.0p per share) is payable on 28 November 2003 to shareholders on the
register at the close of business on 31 October 2003.
2. Earnings per share
The earnings per share is based on profit on ordinary activities after
taxation (and in 2002, preference dividends) calculated on a weighted
average of 34,557,836 ordinary shares in issue during the period (half-
year ended 30 June 2002 - 33,942,273, year ended 31 December 2002 -
34,036,200).
The earnings per share before profit on disposal of properties and
(loss)/profit on disposal of businesses is calculated on profits of
£5,751,000 for the period (£4,292,000 for the half-year ended 30 June
2002, £5,849,000 year ended 31 December 2002) as detailed below:-
30 June 2003 30 June 2002 31 December
2002
£000 £000 £000
Profit after taxation 7,465 5,384 8,822
Profit on disposal of properties (2,147) (278) (1,609)
Loss/(profit) on disposal of businesses 619 (340) (340)
Tax (credit)/charge on loss/(profit) on disposal of businesses @ 30% (186) 102 102
Preference dividends - (576) (1,126)
________ ________ ________
5,751 4,292 5,849
===== ===== =====
3. Taxation
The tax charge for the period has been provided at the rate of 27.5%,
being the estimated effective rate for the full year.
4. Preference Share Capital
On 2 January 2003, the Group redeemed the whole of the issued
Preference Share Capital amounting to £13,889,000 at par.
Had the preference share redemption taken place on 1 January 2002,
gearing would have been as follows:-
30 June 2003 30 June 2002 31 December 2002
£000 £000 £000
Total shareholders' funds 70,195 62,294 63,035
Total borrowings 47,600 53,027 43,482
Gearing 68% 85% 69%
5. Financial Information
The interim financial information has been prepared on the bases of the
accounting policies adopted at 31 December 2002. A presentational
change has been made within the Profit and Loss Account in relation to
profits/losses on disposal of businesses and disposals of properties,
which have now been shown separately after operating profit. Given the
relative size of such profits in the six months ended 30 June 2003 the
Directors feel this treatment is more appropriate and consistent with
the sector. Comparative figures have been restated so as to ensure
consistency of presentation. This change has had no impact on the
profit attributable to shareholders.
The financial information set out in this interim report for the
financial year ended 31 December 2002 are not the Company's statutory
accounts for that financial year. Those accounts have been reported on
by the Company's auditors and delivered to 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.
6. Auditors
At the Annual General Meeting on 8 May 2003, Deloitte & Touche were
re-appointed as auditors. Since that time, a full review of the
provision of audit services has been undertaken and on 19 August 2003,
PricewaterhouseCoopers LLP were appointed as the Group's auditors.
Taxation services will continue to be provided by the TACS Partnership.
7. Interim Report
The interim report was approved by the Board and posted to shareholders
on 3 September 2003. Copies are also available to the public at the
registered office of the Company at 776 Chester Road, Stretford,
Manchester M32 OQH.
A copy of the presentation to Analysts and Institutional Shareholders
following the release of the interim report can be found at
www.lookers.co.uk in the 'About us' section of our website.
Executive Directors
F S Maguire MSc - Chairman
H K Surgenor - Chief Executive
D V Dyson BSc FCA - Finance Director
D J Blakeman LL.B - Company Secretary
B Schumacker MSc - Operations Director
A C Bruce BA - Operations Director
Non-Executive Directors
G J Morris
D C Mace BSc
N Clyne
Registered Office
776 Chester Road
Stretford
Manchester
M32 OQH
Telephone: 0161 291 0043
Website: www.lookers.co.uk
Registrars and Transfer Office
Northern Registrars Limited
Northern House
Woodsome Park
Penistone Road
Fenay Bridge
Huddersfield
HD8 OLA
Telephone : 01484 600900
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