Final Results
Pendragon PLC
20 February 2003
PRELIMINARY RESULTS TO 31 DECEMBER 2002
Pendragon PLC, the UK's largest car dealership group, today reports preliminary
results for the twelve months to 31 December 2002.
Financial Highlights:
• Turnover up 9% to £1,876 million (2001 £1,728 million)
• Profit before tax up 17% to £35.8 million (2001 £30.6 million)
• Basic earnings per share up 23% to 43.7p (2001 35.5p)
• Total dividend up 8% to 17.2p (2001 15.9p).
• Strong operating cash flow of £62.9 million (2001 £62.4 million)
Trevor Finn, Chief Executive, commented:
'In an uncertain environment, Pendragon continues to generate impressive profits
and cash flow, whilst once again significantly increasing the dividend.
As we enter 2003, we will continue to focus on the high-margin, specialist end
of the market, while seeking further opportunities to expand our profitable US
business. The new rules relating to block exemption are expected to increase
the independence of car retailers, thereby enabling Pendragon to further develop
on its leading position in the UK.'
Enquiries:
Pendragon PLC Trevor Finn, Chief Executive Tel: 01623 725114
David Forsyth, Finance Director
Finsbury Rupert Younger Tel: 0207 2513801
Charlotte Hepburne-Scott
Introduction
The operating results for 2002 have exceeded the record levels achieved last
year. We have demonstrated that our focus on luxury and specialist franchises,
both in the UK and California, is enabling us to deliver constantly increasing
shareholder returns.
Results and Dividend
Total turnover for the year ended 31 December 2002 was £1.9 billion compared to
£1.7 billion in 2001. Profit before tax, amortisation of goodwill and
exceptionals is up by 16% to £30.2 million from £26.1 million in 2001.
Additionally, the group made a net profit on property and business disposals of
£9.5 million compared to £7.9 million in 2001. Profit on ordinary activities
before taxation increased to £35.8 million from £30.6 million last year.
Earnings per share increased by 23% to 43.7 pence compared to 35.5 pence in
2001. The board has proposed a final dividend of 11.5 pence per share. Together
with the interim dividend of 5.7 pence per share, this makes a total of 17.2
pence per share for the year which compares to 15.9 pence per share in 2001.
Good operating profits and strong working capital control have resulted in
operating cash inflow of £62.9 million compared to £62.4 million last year.
This has allowed us to strengthen our balance sheet and at the same time invest
in the existing business and in new business opportunities. Borrowings decreased
to £114.0 million at the end of 2002 from £127.5 million last year.
The table below summarises our results for the year:
2002 2001
£m £m
Total Turnover 1,875.5 1,728.4
Total Underlying Operating Profit 43.3 42.6
Goodwill Amortisation (3.8) (3.4)
Total Operating Profit 39.5 39.2
Business Disposals (0.3) (2.3)
Property Disposals 9.7 10.2
Profit on ordinary activities before interest 48.9 47.1
Interest (13.1) (16.5)
Profit on ordinary activities before tax 35.8 30.6
Earnings per share 43.7p 35.5p
Dividend per share 17.2p 15.9p
Trading Environment
The 2002 market for both new and used cars in the UK was sustained due to robust
consumer confidence and the relatively low cost of finance. The overall level
of UK new car registrations increased by just over 4% year on year and was led
by brands such as Mini and Jaguar with the first full year of X-type.
Registrations by manufacturers we represent increased broadly in line with the
general market although Ford was slightly down. The steady growth over the past
few years in the absolute number of motor cars on the road in the UK contributed
to a strong performance in the after sales area of the business.
In the USA interest rates were reduced during the year which helped maintain
consumer spending. We represent Jaguar and Land Rover brands both of which
achieved record levels of sales across the USA. In Germany the general economy
remained weak which adversely impacted our business there.
Motor Retail Business
The principal activity of the business is the sale and servicing of motor cars.
Across the whole group, new car sales accounted for 32% of gross profit, used
car sales for 18% and aftersales for 46%. These percentages have not changed
significantly year on year. The business can also be categorised by market
area: UK, USA and Germany, each of which is explained in more detail below.
UK
We currently operate 132 franchises in the UK. We have a national network of
dealerships from Exeter in the south to Edinburgh in the north. Our activities
are principally centred on specialist and luxury cars representing Aston Martin,
BMW, Jaguar, Land Rover, Mercedes, Porsche, MG Rover and Volvo. We also operate
Vauxhall and Ford dealerships in the volume sector.
The results for the UK business can be summarised as follows:
Turnover Gross Profit Gross Margin % Underlying Underlying
£m Operating Profit Operating Margin %
Existing 1,238.8 166.4 13.4 44.6 3.6
Acquired 325.0 43.8 13.5 - -
Disposed 80.4 9.4 11.7 (1.1) (1.3)
Total 2002 1,644.2 219.6 13.4 43.5 2.6
Total 2001 1,378.5 185.1 13.4 41.7 3.0
The UK businesses have performed well. The existing businesses, which exclude
the impact of acquisitions and disposals, have increased turnover by 5% and
maintained margins. We are particularly pleased with the results of our Land
Rover and Vauxhall dealerships.
In order to aid comparison year on year, the acquired businesses, as shown in
the above table, include our Ford franchise group, which became wholly owned in
November 2001. Acquired businesses also include two Mercedes-Benz dealers and a
number of greenfield developments.
Of the acquired turnover £295 million relates to Ford on which an operating loss
of £0.8million arose. A number of steps are being taken to improve the results.
Towards the end of the year we consolidated the trading activities in our
Thames Valley market area to Slough and closed the Maidenhead operation. A
satellite site has also been closed within the South Wales operation. Further
economies of scale have been made in the centralised functions, which are
performed at Loxley House, thereby reducing the cost base. One important step
in the restructuring of our Ford business was the disposal at net asset value of
the loss making North London market area in May 2002. The results prior to May
are included within the disposed business category in the table. We expect
further reconfiguration of our Ford franchise in 2003.
As part of the UK Mercedes-Benz dealership network reorganisation we were
appointed the dealer for the West Yorkshire market area. This year we acquired
a dealership in Huddersfield in April and one in Bradford in July to add to our
existing two dealerships in this territory. Both new businesses have produced
results ahead of our expectations. We anticipate that our five other Mercedes
dealerships in areas outside West Yorkshire will transfer to other operators on
30 June 2003 at a pre-agreed sale price.
In the year we undertook selective greenfield developments within our existing
franchise territories. The Volvo sites in Leeds and Harrogate were transferred
to Rover dealerships in the first half of the year. Towards the end of the year
we completed refurbishment of our new BMW/Mini site in Windsor. This dealership
has now started trading.
We have continued to focus attention on underperforming and non core
dealerships. Apart from the Ford dealerships, eleven other sites were either
sold or closed. The disposals during the year contributed turnover of £80.4
million and an operating loss of £1.1 million. Those properties that have not
been sold or identified for future disposal are being retained for alternative
use within the group.
USA
During 2002 we operated four sales points and two separate service centres
representing six franchises - four Jaguar, one Land Rover and one Aston Martin.
We are very pleased with the progress we have made in building our business in
the USA. As the business has grown we have increased the size of the leadership
team in order to establish the systems and processes required to enable us to
expand the business further over the next few years. The USA leadership team
has successfully negotiated a stand alone borrowing facility during the year
which will be used to help fund further acquisitions. The table below
summarises the performance of the USA business during the year:
Turnover Gross Profit Gross Margin % Underlying Underlying
Operating Profit Operating Margin %
£m
Total 2002 157.2 24.2 15.4 5.1 3.2
Total 2001 102.2 16.0 15.6 4.4 4.3
The results include a full year contribution from all four businesses we
operated in California in 2002. Underlying operating profit increased by £0.7
million compared to last year. Our Jaguar dealership in San Juan Capistrano, a
greenfield start-up, which commenced trading in the last quarter of 2001 has
diluted operating margins although it was profitable in the year and continues
to improve. The other factor affecting margins is the additional overhead which
we put in place during the year to prepare for further growth.
In October we purchased a property in Irvine, Southern California for a Lincoln
Mercury franchise. The property has been undergoing refurbishment and the
business started trading this month. We also purchased land in Mission Viejo,
which is being developed as a Jaguar dealership.
Germany
Trading conditions in Germany in the second half of the year did not improve on
those of the first six months. These poor economic conditions led to
disappointing total Jaguar sales in the German market. We have seen little sign
of improvement in the Jaguar market towards the end of the year but are more
encouraged by the results in our Land Rover businesses. We have continued to
reduce the cost base of the business as volumes fail to meet expectations and we
will be seeking to reduce further the level of overheads in 2003. In total we
operate six sites in Munich and Frankfurt with twelve franchises - six Jaguar,
four Land Rover and two Aston Martin.
The results for our German business can be summarised as follows:
£m Turnover Gross Profit Gross Margin % Underlying Underlying
Operating Loss Operating Margin %
Total 2002 39.6 5.2 13.2 (1.5) (3.8)
Total 2001 33.9 4.9 14.5 (0.6) (1.8)
The results include a full year trading at the Darmstadt dealership which was
acquired in March 2001.
Technology and Support Services
This group of businesses provides a broad range of technology based services to
both the Pendragon group and to outside customers. The services are provided by
a number of specialist businesses which comprise:
* Pinewood Technologies (computer systems, telecoms and security
monitoring solutions for dealerships)
* Car Fleet Control (fleet management software)
* Pendragon Contracts (business and personal contract hire)
* Loxley House (centralised customer service provider)
Collectively, these businesses contributed 4% of the total group gross profit
and made an operating profit of £3.6 million (2001: £2.5 million).
Pinewood Technologies Pinewood specialises in the provision of dealership
management systems, telecommunications and remote security monitoring systems
for the retail motor industry. It provides services to third parties as well as
to Pendragon's operations. Pinnacle, an exciting new dealership management
system has been developed by Pinewood. The system has been tested successfully
at one of our BMW and one of our Porsche dealerships. The system is Windows
based, simple to operate and flexible. Our initial marketing of the system to
dealers and manufacturers has been very encouraging.
Pendragon Contracts Our contract hire business made an operating profit of
£1.4 million (2001: £0.5 million). We have continued to be selective in the
type of business we accept and as a consequence the fleet size has reduced to
6,412 cars at the end of 2002 compared to 8,127 cars at the end of 2001. We
expect the fleet size to increase in 2003.
Loxley House The customer service centre provides a broad range of services
to the group including a call centre, video sales functions, customer retention
and accounting services. During the year we have integrated several more
dealerships from the group into this business model.
Profits on Sale of Property and Share Buybacks
During 2002 surplus property disposals generated £26.2 million proceeds (2001:
£25.6 million) and a net profit before tax of £9.7 million (2001: £10.2
million). We are continuing to manage our property portfolio in order to
release value from properties which become, through the property management
process, surplus to our business requirements. We currently have under offer
properties with a market value of £6.1 million. In addition, we have a number
of properties being considered for alternative planning approval.
During 2002 we repurchased 4.7 million shares (2001: 1.7 million) at a cost of
£14.9 million (2001: £3.9 million). We have stated our intention to realise
shareholder value created as a result of holding freehold property by utilising
net profits from the disposal of surplus properties to repurchase the company's
ordinary shares. It is currently the board's intention to continue with this
policy.
Outlook
Our efforts over the past few years to position our franchise portfolio at the
luxury end of the market and focus on a select core of manufacturers has
provided us with a stable platform for future growth. We are encouraged by the
performance of our US franchises and it is our intention to continue to expand
in this market during 2003. In addition, our initiative to utilise profits
raised through property disposals to buy back the company's shares has enhanced
value for shareholders and we remain committed to pursuing this policy in the
year ahead.
In the short term we believe that new car demand will be adversely affected by
consumer uncertainty caused by global issues. This appears to have been the
situation in January 2003 as new car sales have fallen year on year. This
aside, our trading results this year have been in line with our expectations and
ahead of last January. Longer term, the European Commission's changes to block
exemption, fully effective by October this year, will work in favour of large
dealer groups such as ours. By late summer we expect the detail of new
contracts to have been finalised which, when put in place, will enhance the
value of our business by giving us greater commercial independence.
We remain optimistic for another successful year for Pendragon.
TREVOR FINN
Chief Executive
20 February 2002
Consolidated Profit and Loss Account
Year ended 31 December 2002
2002 2002 2002 2001
Existing Acquisitions Total
Operations
£000 £000 £000 £000
Total turnover - group and share of joint venture 1,853,302 22,192 1,875,494 1,728,363
Less: share of joint venture turnover - - - (179,188)
Group turnover 1,853,302 22,192 1,875,494 1,549,175
Cost of sales (1,597,283) (19,595) (1,616,878) (1,329,400)
Gross profit 256,019 2,597 258,616 219,775
Net operating expenses (217,421) (1,740) (219,161) (179,892)
Group operating profit 38,598 857 39,455 39,883
Operating profit before goodwill amortisation 42,262 1,036 43,298 43,257
Goodwill amortisation (3,664) (179) (3,843) (3,374)
Group operating profit 38,598 857 39,455 39,883
Share of operating loss in joint venture - - - (654)
Total operating profit 38,598 857 39,455 39,229
Loss on sale of businesses (230) (2,302)
Profit on disposal of fixed assets 9,733 10,201
Profit on ordinary activities before interest 48,958 47,128
Net interest payable
Group (13,123) (15,617)
Joint venture - (909)
(13,123) (16,526)
Profit on ordinary activities before taxation 35,835 30,602
Taxation (11,859) (10,375)
Profit for the financial year 23,976 20,227
Dividends (Note 1) (9,171) (8,940)
Retained profit for the financial year 14,805 11,287
Earnings per ordinary share (Note 2) 43.7p 35.5p
Diluted earnings per ordinary share 42.4p 34.5p
Consolidated Balance Sheet
At 31 December 2002
2002 2001
£000 £000
Fixed assets
Goodwill 25,673 27,500
Tangible assets 166,589 173,773
Investments 16,302 5,091
208,564 206,364
Current assets
Stocks 239,926 267,160
Repurchase commitments 25,199 31,675
Debtors 72,143 95,166
Cash at bank and in hand 9,544 14,707
346,812 408,708
Creditors: amounts falling due within one year (320,748) (327,516)
Net current assets 26,064 81,192
Total assets less current liabilities 234,628 287,556
Creditors: amounts falling due after more than one year (86,226) (142,996)
Provisions for liabilities and charges (3,003) (911)
Net assets 145,399 143,649
Capital and reserves
Called up share capital 13,858 14,812
Share premium account 76,039 74,716
Other reserves 11,944 10,769
Profit and loss account 43,558 43,352
Equity shareholders' funds 145,399 143,649
Consolidated Cash Flow Statement
Year ended 31 December 2002
2002 2001
£000 £000
Cash flow from operating activities (Note 3) 62,868 62,420
Interest received 488 391
Interest paid (13,721) (14,711)
Returns on investments and servicing of finance (13,233) (14,320)
Taxation paid (7,517) (1,746)
Payments to acquire tangible fixed assets (44,587) (40,307)
Payments to acquire investments (79) (1,490)
Receipts from sales of tangible fixed assets 50,344 58,042
Receipts from sales of investments 424 12
Capital expenditure and financial investment 6,102 16,257
Business acquisitions (5,396) (18,580)
Borrowings of acquired businesses - (21,303)
Business disposals 4,641 -
Acquisitions and disposals (755) (39,883)
Equity dividends paid (9,073) (8,727)
Net cash flow before financing 38,392 14,001
Financing
Issue of ordinary share capital 1,544 22
Redemption of issued ordinary share capital (14,858) (3,930)
Repayment of unsecured bank loans (50,813) (73,294)
Repayment of loan notes (161) (203)
Unsecured bank loans 22,000 90,000
Net cash (outflow)/inflow from financing (42,288) 12,595
Movement in cash and overdrafts (3,896) 26,596
Reconciliation of net cash flow to movement in net debt
Movement in cash and overdrafts (3,896) 26,596
Exchange differences (84) (18)
Issue of loan notes on purchase of investment in Ryland Group (11,556) -
plc
Cash outflow/(inflow) from decrease/(increase) in debt financing 28,974 (16,503)
Movement in net debt in the year 13,438 10,075
Net debt at 31 December 2001 (127,482) (137,557)
Net debt at 31 December 2002 (114,044) (127,482)
Group Statement of Total Recognised Gains and Losses
Year ended 31 December 2002
2002 2001
£000 £000
Profit for the financial year 23,976 20,227
Currency translation adjustments relating
to net investments in foreign enterprises 259 438
Total recognised gains and losses relating 24,235 20,665
to the year
Group Reconciliation of Movements in Shareholders' Funds
Year ended 31 December 2002
2002 2001
£000 £000
Profit for the financial year 23,976 20,227
Dividends (9,171) (8,940)
14,805 11,287
Exchange adjustment 259 438
Issue of ordinary shares 1,544 22
Repurchase of ordinary shares (14,858) (3,930)
Unrealised profit eliminated on
acquisition of Stripestar Limited - (4,038)
Net addition to shareholders' funds 1,750 3,779
Opening shareholders' funds 143,649 139,870
Closing shareholders' funds 145,399 143,649
Notes to the Financial Statements
1. Dividends 2002 2001
£000 £000
Ordinary shares
Interim paid 5.7p per share (2001 : 5.3p) 3,139 3,006
Final proposed 11.5p per share (2001 : 10.6p) 6,032 5,934
9,171 8,940
Subject to final approval at the Annual General Meeting, the final dividend will be paid on 16 April 2003 to
shareholders appearing on the register at the close of business on 21 March 2003.
2. Earnings per share
a) Adjustments to basic earnings per share, 2002 Earnings 2002 2001 2001
based on ordinary shares in issue per share Total Earnings per Total
pence share
pence
£000 £000
Earnings 43.7 23,976 35.5 20,227
Goodwill amortisation 7.0 3,843 5.9 3,374
Tax effect of goodwill (0.2) (116) (0.2) (113)
Earnings excluding goodwill amortisation 50.5 27,703 41.2 23,488
Non trading items:
Profit on business and fixed assets disposals (17.3) (9,503) (13.8) (7,899)
Tax effect of non trading items 2.5 1,407 1.6 917
Earnings excluding goodwill amortisation and
non trading items 35.7 19,607 29.0 16,506
b) Diluted earnings per share, based on 2002 2002 2001 2001
weighted average number of shares in issue Diluted earnings Total Diluted Total
per share earnings per
pence share
pence
£000 £000
Earnings 42.4 23,976 34.5 20,227
c) Shares in issue 2002 2001
number number
Weighted average number of ordinary shares in 54,852,430 56,994,128
issue
Weighted average number of dilutive shares 1,736,270 1,650,126
under option
Weighted average number of shares in issue
taking account of applicable outstanding
share options 56,588,700 58,644,254
The directors consider that the adjusted earnings per share figures provides a better measure of comparative
performance.
3. Net cash inflow from operating activities 2002 2001
£000 £000
Operating profit 39,455 39,229
Add share of joint venture's operating loss - 654
Depreciation 10,480 11,115
Goodwill amortisation 3,843 3,374
Loss on disposal of fixed assets 140 14
Increase in stocks (15,884) (31,970)
Decrease in debtors 19,870 21,559
Increase in creditors 4,964 18,445
62,868 62,420
4. Annual Report
The above financial information does not represent the full financial
statements of the company. Full financial statements for the year ended
31 December 2001, containing an unqualified audit report have been delivered
to the registrar of companies. Full financial statements for the year ended
31 December 2002, which have been reported on without qualification by the
group's auditors, will shortly be posted to shareholders, and after
adoption at the Annual General Meeting on 15 April 2003 will be delivered to
the registrar.
Copies of this announcement are available from Pendragon PLC, Loxley House,
2 Oakwood Court, Little Oak Drive, Annesley, Nottinghamshire NG15 0DR.
This information is provided by RNS
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Monday, 13th May 2024
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