Interim Results
Pendragon PLC
15 August 2002
FOR IMMEDIATE RELEASE 15 August 2002
INTERIM RESULTS TO 30 JUNE 2002
Pendragon PLC, the UK's largest car dealership group, today reports interim
results for the six months to 30 June 2002.
Financial Highlights:
• Turnover up 14% to £998 million (2001 £879 million)
• Profit before tax up 17% to £15.5 million (2001 £13.3 million)
• Basic earnings per share up 20% to 18.5p (2001 15.4p)
• Interim dividend up 8% to 5.7p (2001 5.3p)
• Strong operating cashflow £32.9 million (2001 £35.3 million)
Trevor Finn, Chief Executive, commented:
'The group has once again performed strongly in the first half, delivering
increased returns. This demonstrates the benefits of the measures we have taken
to consolidate our market position. We are now in excellent shape to take
advantage of the opportunities that will arise following the changes to the
block exemption trading rules, and we continue to consider options to expand in
the US.'
Enquiries:
Pendragon PLC Trevor Finn, Chief Executive Tel: 01623 725114
David Forsyth, Finance Director
Finsbury Rupert Younger Tel: 020 7251 3801
Charlotte Festing
CHIEF EXECUTIVE'S OPERATIONAL REVIEW
Introduction
The results for the first half of 2002 have improved upon the excellent
performance of the business last year. Profit before tax is up by 17% and
earnings per share up by 20% against the same period in 2001. We continue to
benefit from a strong franchise portfolio and a favourable new car market both
in the UK and in California. The position is now clearer on the changes to be
introduced to the block exemption rules and our view is that large dealer groups
with national coverage like ourselves will benefit.
We have made a number of strategic investments over the past four years, which
have enabled strong earnings growth to continue. Ongoing enhancements to our UK
franchise portfolio, acceleration of investment in the USA and future share
buybacks should ensure this trend is maintained.
Results and Dividend
The results for the half year to 30 June 2002 are summarised as follows:
2002 2001
£m £m
Total Turnover 997.8 878.8
Total Underlying Operating Profit 24.1 23.3
Goodwill Amortisation (1.9) (1.6)
Total Operating Profit 22.2 21.7
Business Disposals (0.3) (0.7)
Property Disposals 0.5 0.9
Profit on ordinary activities before interest 22.4 21.9
Interest (6.9) (8.6)
Profit on ordinary activities before tax 15.5 13.3
Earnings per share 18.5p 15.4p
Dividend per share 5.7p 5.3p
Turnover increased to £997.8 million from £878.8 million for the first half of
last year. The results include the effect of our taking full ownership of our
Ford franchise group which was held in a joint venture with Ford last year. In
addition, the Hornburg businesses acquired in April 2001 have contributed a full
six months revenue.
Operating profit before exceptionals and goodwill amortisation increased to
£24.1 million from £23.3 million last year. Our operating margin of 2.4%
compares favourably with the 2.5% achieved for the whole of 2001. The dilutive
effect on the margin of including the whole of the Ford division results and
disappointing trading in Germany have been offset by general improvements in
performance across the rest of the group.
Profit before tax increased by 17% to £15.5 million from £13.3 million. In
addition to the improvement in operating profit, interest charges are lower than
the equivalent period last year. Adjusted earnings per share have improved by
21% to 21.6p from 17.9p last year.
The board has declared an interim dividend of 5.7p per ordinary share, an
increase of 8% over the interim dividend of 5.3p in 2001.
Motor Retail Business
Our motor retail activities continue to centre on specialist and luxury cars in
the UK, California and Germany. Trading conditions have been good in both the
UK and California, however, the current economic situation across Germany has
adversely impacted our business there.
The European Commission announced on 17 July 2002 that the new rules relating to
block exemption would become effective from 1 October this year. There will be
a transitional period with the majority of the changes effective by October
2003. We welcome the changes, which are broadly in favour of both the consumer,
through the introduction of more competition, and the dealer, through having a
stronger contractual position with regard to manufacturers. The new rules will
lead to more freedom for dealers to buy and sell dealerships and it will make
termination of dealers' franchise agreements by manufacturers more difficult.
Overall, the effect of the changes will serve to create greater commercial
independence for the dealer, facilitating better terms for the consumer, which
in turn has a positive impact on businesses such as ours.
UK
The results of the UK business can be summarised as follows:
£m Turnover Gross Profit Gross Underlying Underlying
Margin % Operating Operating
Profit Margin %
Existing 691.5 90.9 13.1 25.1 3.6
Acquired 168.7 22.4 13.3 0.3 0.1
Disposed 21.5 2.5 11.7 (0.4) (1.8)
Total 2002 881.7 115.8 13.1 25.0 2.8
Total 2001 703.3 91.1 12.9 24.2 3.4
The turnover of existing businesses has increased by £34 million, an increase of
over 5%, as the favourable market conditions experienced last year have
continued in 2002. Margins in these businesses have also improved from 3.5% to
3.6%.
During the first six months of this year there have been relatively few changes
in our UK franchise portfolio. We have made selective acquisitions and continue
to dispose of poorly performing businesses.
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. Of the acquired turnover £162.5 million is in respect of the
Ford group. We acquired two Mercedes-Benz dealerships, the first in
Huddersfield in April, and the second in Bradford in July. These form part of
our Mercedes-Benz West Yorkshire market area along with our existing Leeds and
Wakefield dealerships. In addition, we opened two Rover dealers at Leeds and
Harrogate in the half year.
We have disposed of six dealerships, which in the first 6 months had contributed
£21.5 million of turnover. The principal disposal, which was at net asset
value, was the three dealerships in the loss making North London Ford market
area. This is a key part of our re-configuration of our Ford franchise group.
USA
The results of the USA business for the first half of 2002 are summarised as
follows:
£m Turnover Gross Profit Gross Underlying Underlying
Margin % Operating Operating
Profit Margin %
Total 2002 82.5 12.3 14.9 2.8 3.3
Total 2001 38.4 5.5 14.4 1.4 3.7
The results include a full six months contribution from all four businesses we
now operate in California. The green field start up Jaguar dealership, South
Coast Motors, made a positive contribution in the first half and will continue
to improve as it becomes more established. The Bauer dealership in Santa Ana
and Hornburg businesses in Santa Monica and Hollywood continue to perform well.
Jaguar and Land Rover have enjoyed good growth, and the introduction of the new
Range Rover in the US market positions the business for a continued strong
performance in the second half.
Germany
The results of the German business for the first half of 2002 are summarised as
follows:
£m Turnover Gross Profit Gross Underlying Underlying
Margin % Operating Operating
Loss Margin %
Total 2002 19.4 2.7 13.7 (0.5) (2.6)
Total 2001 14.3 2.2 15.3 (0.2) (1.2)
The performance of the German business has been disappointing. The German
economy has been poor for the past two years and we do not expect to see any
improvement until at least 2003. The economy's impact on our business has been
exacerbated by the manufacturers' failure to take positive action in the
marketplace to maintain the position of the brands we represent. Until we can
see improvement in these areas further investment will not be made. The value
of the net assets in Germany is £8.0 million.
Support and Business Services Group
Our technology and support services businesses continue to make a valuable
contribution to the group in both financial and innovative terms. We have seen
an increased contribution from our Contract Hire business and our support
services at Loxley House continue to improve the efficiency of our dealerships.
Pinewood Technology is currently in the final stages of testing its new web
designed version of its dealer management system, which is running live at one
of our dealerships. The testing is going well and we expect to take this
exciting new product to market in the second half of this year. A number of
manufacturers have already expressed their interest in adopting the system.
Profit on Sale of Property and Share Buyback
In our 2000 annual report we stated that it was 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 and cancel the
company's ordinary shares. Subsequently, we have acquired and cancelled 3.7
million shares at a cost of £10.6 million, of which 2.0 million shares at a cost
of £6.6 million have been in the first half of 2002.
During the first half of 2002 surplus property disposals generated £5.6 million
of proceeds and a net profit of £0.6 million. Further property disposals,
including the recently announced Limeharbour sale, have been made in July and
August and have generated proceeds of £10.7 million and profit of £5.3 million.
We currently have under offer properties with a market value in the region of
£13.4 million. As part of our active management in this area, we are evaluating
the profit potential of some of our other properties which could realise profits
if sold to be put to alternative uses.
Finance
Our borrowings at 30 June 2002 were £120.8 million, a reduction of £6.7 million
since the beginning of the year. Gearing has reduced from 88.7% at 31 December
2001 to 82.7% at 30 June 2002, a level which is within our ongoing target range.
Cashflow generated from operations for the first six months was £32.9 million,
which compares with £35.3 million generated in 2001. We continue to focus on
working capital levels, and achieved a further reduction of £2.9 million. Net
capital expenditure, excluding the sale of properties, was £10.9 million
compared to £3.5 million in 2001. The proceeds from property disposals amounted
to £5.6 million.
Current Trading and Prospects
Sales of new and used vehicles have continued strongly into the second half.
Our parts and servicing activities, which contribute approximately half of the
group's gross profits, remain buoyant fuelled by record new car markets over the
past two years.
Our portfolio of franchises centred on premium brands provides a stable platform
for future growth. We also look forward to a sustained improvement in our Ford
dealerships. A lot of hard work is currently underway in the USA to provide a
base from which to expand the business there in the near term. Our policy on
share buybacks funded by the profits from property disposals will continue.
Taking all of this into consideration, I am confident the group is better placed
than ever to deliver benefits to shareholders.
TREVOR FINN
Chief Executive
15 August 2002
Consolidated Profit and Loss Account
Interim Results
for the six months ended 30 June 2002
Unaudited Unaudited Audited
6 Months to 6 Months to 12 Months to
30.06.02 30.06.01 31.12.01
£000 £000 £000
Total turnover - group and share of joint venture 997,788 878,838 1,728,363
Less: share of joint venture turnover - (109,351) (179,188)
Group turnover 997,788 769,487 1,549,175
Gross profit 135,670 104,078 219,775
Net operating expenses (113,442) (82,399) (179,892)
Group operating profit 22,228 21,679 39,883
Group operating profit before goodwill amortisation 24,119 23,280 43,257
Goodwill amortisation (1,891) (1,601) (3,374)
Group operating profit 22,228 21,679 39,883
Share of operating loss in joint venture - (40) (654)
Total operating profit 22,228 21,639 39,229
Loss on disposal of businesses (341) (687) (2,302)
Profit on disposal of fixed assets 558 942 10,201
Profit on ordinary activities before interest 22,445 21,894 47,128
Net interest payable (Note 4)
Group (6,899) (8,025) (15,617)
Joint venture - (569) (909)
(6,899) (8,594) (16,526)
Profit on ordinary activities before taxation 15,546 13,300 30,602
Taxation (Note 5) (5,231) (4,455) (10,375)
Profit on ordinary activities after taxation 10,315 8,845 20,227
Dividends (Note 6) (3,136) (3,006) (8,940)
Retained profit for the period 7,179 5,839 11,287
Earnings per ordinary share (Note 7) 18.5p 15.4p 35.5p
Diluted earnings per ordinary share (Note 7) 17.8p 14.9p 34.5p
Adjusted earnings per ordinary share (Note 7) 21.6p 17.9p 31.7p
All amounts relate to continuing operations
Consolidated Balance Sheet
Restated
Unaudited Unaudited Audited
30.06.02 30.06.01 31.12.01
£000 £000 £000
Fixed assets
Intangible assets 26,458 26,528 27,500
Tangible assets 173,474 181,475 173,773
Share of gross assets in joint venture - 64,875 -
Share of gross liabilities in joint venture - (56,325) -
Share of net assets in joint venture - 8,550 -
Investments 5,079 5,096 5,091
205,011 221,649 206,364
Current assets
Stocks 193,579 133,151 187,557
Consignment vehicles 48,255 39,897 79,603
Vehicles subject to repurchase agreements 27,784 38,640 31,675
Debtors 110,897 121,219 95,166
Cash at bank - 17,891 14,707
380,515 350,798 408,708
Creditors: amounts falling due within one year
Unsecured loans (8,336) (74,018) (14,000)
Unsecured bank loans and overdrafts (2,766) - (1,183)
Consignment vehicle liabilities (48,255) (39,897) (79,603)
Repurchase commitments (12,080) (23,442) (17,516)
Trade and other creditors (229,165) (194,911) (203,799)
Corporation tax (8,730) (4,587) (5,481)
Dividends payable (3,140) (3,006) (5,934)
(312,472) (339,861) (327,516)
Net current assets 68,043 10,937 81,192
Total assets less current liabilities 273,054 232,586 287,556
Creditors: amounts falling due after more than one year
Bank loans (109,696) (69,167) (127,006)
Repurchase commitments (16,404) (18,098) (15,654)
Other - - (336)
(126,100) (87,265) (142,996)
Provisions for liabilities and charges (964) (1,481) (911)
Net assets 145,990 143,840 143,649
Capital and reserves
Called up share capital 14,544 14,995 14,812
Share premium 76,030 74,697 74,716
Other reserves 11,257 15,067 10,769
Profit and loss account 44,159 39,081 43,352
Equity shareholders' funds (Note 10) 145,990 143,840 143,649
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to 30.06.02 to 30.06.01 to 31.12.01
£000 £000 £000
Cash flow from operating activities (Note 8) 32,936 35,284 62,420
Net interest paid (7,672) (6,750) (14,320)
Returns on investments and servicing of finance (7,672) (6,750) (14,320)
Taxation (1,943) 1,409 (1,746)
Payments to acquire tangible fixed assets (20,697) (11,945) (40,307)
Payments to acquire investments - (1,483) (1,490)
Receipts from sales of tangible fixed assets 15,248 14,856 58,042
Receipts from sales of investments 12 - 12
Capital expenditure and financial investment (5,437) 1,428 16,257
Business acquisitions (1,644) (11,131) (18,580)
Borrowings of acquired businesses - - (21,303)
Business disposals 1,504 - -
Acquisitions and disposals (140) (11,131) (39,883)
Equity dividends paid (5,930) (5,721) (8,727)
Net cash flow before financing 11,814 14,519 14,001
Financing
Issue of ordinary share capital 1,534 22 22
Redemption of issued ordinary share capital (6,648) (2,278) (3,930)
Repayment of unsecured bank loans (44,974) (3,276) (73,294)
Repayment of loan notes - (42) (203)
Unsecured loans 22,000 22,000 90,000
Net cash (outflow)/inflow from financing (28,088) 16,426 12,595
Movement in cash and overdrafts (16,274) 30,945 26,596
Reconciliation of net cash flow to movement in net debt
Movement in cash and overdrafts (16,274) 30,945 26,596
Exchange differences (16) - (18)
Cash outflow/(inflow) from increase in debt financing 22,974 (18,682) (16,503)
Movement in net debt in the period 6,684 12,263 10,075
Opening net debt (127,482) (137,557) (137,557)
Closing net debt (Note 9) (120,798) (125,294) (127,482)
Group Statement of Total Recognised Gains and Losses Restated
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30.06.02 30.06.01 31.12.01
£000 £000 £000
Profit for the financial period 10,315 8,845 20,227
Currency translation adjustments relating to net investments in 276 387 438
foreign enterprises
Total recognised gains and losses relating to the period 10,591 9,232 20,665
Prior year adjustment (note 5) 3,234
Total gains and losses since last report 23,899
Notes
1. This interim report has been prepared on a basis consistent with the
accounting policies stated in the financial statements for the year
ended 31 December 2001. Applicable accounting standards have
been followed.
2. The comparative results for the year ended 31 December 2001 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 s237 (2) or (3) of
the Companies Act 1985.
3. The interim report has been approved by the board of directors and is
unaudited.
4. Interest Payable 6 Months 6 Months 12 Months
to 30.06.02 to 30.06.01 to 31.12.01
£000 £000 £000
Bank loans and overdrafts 3,378 5,881 11,156
Manufacturer stocking loans 3,521 2,144 4,930
Interest capitalised - - (78)
Other interest receivable - - (391)
6,899 8,025 15,617
5. The effective tax rate for 2002 of 33.6% (2001 - 33.5%) is an
estimate based upon the anticipated charge for the full year on profit
on ordinary activities before taxation.
The group adopted Financial Reporting Standard 19 in the year ended
31 December 2001, in advance of the mandatory effective date. Full
details of the adjustments to previously published results are
included in the financial statements for the year ended
31 December 2001.
The previously published results at 30 June 2001 have been restated as
follows:
i) the deferred tax balance has been reduced by £2,491,000 and has
been transferred to debtors from provisions for liabilities and
charges;
ii) investment in the joint venture has been increased by £743,000
These changes have resulted in an increase in shareholders' funds of
£3,234,000. There is no material effect on the tax charge for the
6 months ended 30 June 2001.
6. A dividend of 5.7p (2001 - 5.3p) net per ordinary share will be paid
on 18 October 2002 to shareholders appearing on the register at the
close of business on 20 September 2002.
7. Earnings per share 30.06.02 30.06.01 31.12.01
pence pence pence
Basic earnings per share 18.5 15.4 35.5
Effect of non trading items 3.1 2.5 (3.8)
Adjusted earnings per share 21.6 17.9 31.7
Diluted earnings per ordinary share 17.8 14.9 34.5
The calculation of basic, diluted and adjusted earnings per share is
based on:
Number of shares 30.06.02 30.06.01 31.12.01
number number number
Weighted average number of shares used in basic and 55,793,709 57,478,260 56,994,128
adjusted earnings per share calculation
Weighted average number of dilutive shares under 2,007,098 1,816,336 1,650,126
option
Diluted weighted average number of shares used in 57,800,807 59,294,596 58,644,254
diluted earnings per share calculation
Earnings 30.06.02 30.06.01 31.12.01
£000 £000 £000
Earnings for basic and diluted earnings per share 10,315 8,845 20,227
calculation
Non trading items:
Loss on disposal of businesses 341 687 2,302
Profit on disposal of fixed assets (558) (942) (10,201)
Goodwill amortisation 1,891 1,601 3,374
Tax effect of non trading items 65 77 2,370
Earnings for adjusted earnings per share calculation 12,054 10,268 18,072
The directors consider that the adjusted earnings per share figures
provide a better measure of comparative performance.
8. Net cash inflow from operating activities 6 Months 6 Months 12 Months
to 30.06.02 to 30.06.01 to 31.12.01
£000 £000 £000
Operating profit 22,228 21,639 39,229
Add share of joint venture's operating loss - 40 654
Loss on sale of fixed assets - - 14
Depreciation 5,917 4,478 11,115
Goodwill amortisation 1,891 1,601 3,374
Movement in working capital 2,900 7,526 8,034
32,936 35,284 62,420
9. Analysis of net debt 30.06.02 30.06.01 31.12.01
£000 £000 £000
Cash at bank and in hand - 17,891 14,707
Overdrafts and other borrowings (2,766) - (1,183)
(2,766) 17,891 13,524
Other borrowings due within one year (8,336) (74,018) (14,000)
Other borrowings due after one year (109,696) (69,167) (127,006)
Total (120,798) (125,294) (127,482)
Movement in period
Cash at bank and in hand (14,707) 17,891 14,707
Overdrafts and other borrowings (1,583) 13,054 11,871
(16,290) 30,945 26,578
Other borrowings due within one year 5,664 (17,018) 43,000
Other borrowings due after one year 17,310 (1,664) (59,503)
Total 6,684 12,263 10,075
10. Reconciliation of movements in shareholders' funds Restated
30.06.02 30.06.01 31.12.01
£000 £000 £000
Opening shareholders' funds 143,649 139,870 139,870
Retained earnings 7,179 5,839 11,287
Issue of ordinary share capital 1,534 22 22
Redemption of issued ordinary share capital (6,648) (2,278) (3,930)
Goodwill written back - - (4,038)
Exchange adjustment 276 387 438
Closing shareholders' funds 145,990 143,840 143,649
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