Preliminary Results - Part 2
Inchcape PLC
5 March 2001
PART 2
Notes
1 Segmental analysis
______________________________________________________________________________
a Turnover Group subsidiaries Share of joint ventures
______________________________________________________________________________
2000 1999 2000 1999
restated restated
(i) By geographical market: £m £m £m £m
______________________________________________________________________________
UK 797.7 784.1 16.2 19.8
Greece/Belgium 560.1 553.0 3.8 4.7
Australia/New Zealand 478.2 399.5 6.9 4.5
Hong Kong 335.9 243.2 20.0 20.4
Singapore/Brunei 389.7 295.3 - -
Other 267.9 299.5 0.8 0.9
_____________________________ _______ _______ _______ _______
Continuing 2,829.5 2,574.6 47.7 50.3
Discontinued 256.6 887.9 13.4 114.0
_____________________________ _______ _______ _______ _______
3,086.1 3,462.5 61.1 164.3
============================= ======= ======= ======= =======
______________________________________________________________________________
Turnover Share of associates Total
______________________________________________________________________________
2000 1999 2000 1999
restated restated
By geographical market: £m £m £m £m
______________________________________________________________________________
UK 195.0 184.8 1,008.9 988.7
Greece/Belgium 1.5 1.3 565.4 559.0
Australia/New Zealand - - 485.1 404.0
Hong Kong - - 355.9 263.6
Singapore/Brunei - - 389.7 295.3
Other - - 268.7 300.4
_____________________________ _______ _______ _______ _______
Continuing 196.5 186.1 3,073.7 2,811.0
Discontinued 373.7 637.1 643.7 1,639.0
_____________________________ _______ _______ _______ _______
570.2 823.2 3,717.4 4,450.0
============================= ======= ======= ======= =======
______________________________________________________________________________
Turnover Group subsidiaries Share of joint ventures
______________________________________________________________________________
2000 1999 2000 1999
restated restated
(ii) By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 2,132.0 1,878.9 - -
UK Retail 621.5 618.6 - -
Financial Services 74.9 76.3 47.7 50.3
E-commerce 1.1 0.8 - -
_____________________________ _______ _______ ________ ______
Continuing 2,829.5 2,574.6 47.7 50.3
Discontinued 256.6 887.9 13.4 114.0
_____________________________ _______ _______ ________ ______
3,086.1 3,462.5 61.1 164.3
============================= ======= ======= ======== ======
______________________________________________________________________________
Turnover Share of associates Total
______________________________________________________________________________
2000 1999 2000 1999
restated restated
By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 195.0 184.8 2,327.0 2,063.7
UK Retail - - 621.5 618.6
Financial Services 1.5 1.3 124.1 127.9
E-commerce - - 1.1 0.8
_____________________________ _______ _______ _______ _______
Continuing 196.5 186.1 3,073.7 2,811.0
Discontinued 373.7 637.1 643.7 1,639.0
_____________________________ _______ _______ ________ _______
570.2 823.2 3,717.4 4,450.0
============================= ======= ======= ======== ======
Segmental analyses by geographical market and activity have been redefined and
accordingly all comparatives have been restated.
The principal reclassification within geographical market has been to disband
the Continental Europe classification and replace this with the Greece/Belgium
category. The businesses based in France and Finland have been reclassified
into Other. The previous category of Far East has been disbanded to now
display only Hong Kong, with the other businesses previously included being
reclassified into Other. The previous categories of Australasia and South
East Asia have been renamed Australia/New Zealand and Singapore/Brunei.
Refer to Financial Review 'Segmental Reporting'.
With regard to the change in activity definition, E-commerce, which is a UK
based business, was previously included within Import & Distribution. UK
Retail was previously part of Retail, which also included small scale retail
activities, principally in Continental Europe. These have now been included
within Import, Distribution & Retail for activity and within Other for
geographical market. The retail activities within Import, Distribution &
Retail predominantly relate to where the Group also acts as importer and
distributor. Accordingly, the retail results of these businesses cannot be
meaningfully separated from the underlying Import & Distribution business.
Activities treated as discontinued in 2000 were Toyota (GB), Mazda France,
Volkswagen Passenger Import & Distribution business in Australia, activities
in China and two agricultural and industrial vehicle activities in Latin
America.
Activities discontinued in 1999 comprised primarily Bottling South America,
Marketing, Shipping, Office Automation, Timberland and the Motors businesses
of Chrysler Jeep Imports UK, Inchcape Peugeot Japan and Daihatsu (UK).
Geographical analysis of turnover is by origin and is not significantly
different to turnover by destination. Turnover between segments is not
material.
______________________________________________________________________________
b Total operating profit Group subsidiaries Share of joint ventures
______________________________________________________________________________
2000 1999 2000 1999
restated restated
(i) By geographical market: £m £m £m £m
______________________________________________________________________________
UK (6.2) 16.2 3.4 3.6
Greece/Belgium 15.4 15.0 2.0 1.5
Australia/New Zealand 9.0 11.3 0.4 0.1
Hong Kong 34.0 17.9 6.7 6.1
Singapore/Brunei 25.2 15.9 - -
Other 5.7 4.8 0.4 0.4
_____________________________ _______ _______ _______ _______
83.1 81.1 12.9 11.7
Central costs (16.3) (17.8) - -
_____________________________ _______ _______ _______ _______
Continuing 66.8 63.3 12.9 11.7
Discontinued 5.2 5.8 0.3 0.8
_____________________________ _______ _______ _______ _______
72.0 69.1 13.2 12.5
============================= ======= ======= ======= =======
______________________________________________________________________________
Total operating profit Share of associates Total
______________________________________________________________________________
2000 1999 2000 1999
restated restated
By geographical market: £m £m £m £m
______________________________________________________________________________
UK 3.5 5.2 0.7 25.0
Greece/Belgium 0.3 0.2 17.7 16.7
Australia/New Zealand - - 9.4 11.4
Hong Kong - - 40.7 24.0
Singapore/Brunei - - 25.2 15.9
Other - - 6.1 5.2
_____________________________ _______ _______ _______ _______
3.8 5.4 99.8 98.2
Central costs - - (16.3) (17.8)
_____________________________ _______ _______ _______ _______
Continuing 3.8 5.4 83.5 80.4
Discontinued 1.1 14.0 6.6 20.6
_____________________________ _______ _______ _______ _______
4.9 19.4 90.1 101.0
============================= ======= ======= ======= =======
______________________________________________________________________________
Total operating profit Group subsidiaries Share of joint ventures
______________________________________________________________________________
2000 1999 2000 1999
restated restated
(ii) By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 84.3 68.4 - -
UK Retail 8.8 9.1 - -
Financial Services (2.1) 5.0 12.9 11.7
E-commerce (7.9) (1.4) - -
________________________________ _____ _____ _____ _____
83.1 81.1 12.9 11.7
Central costs (16.3) (17.8) - -
________________________________ _____ _____ _____ _____
Continuing 66.8 63.3 12.9 11.7
Discontinued 5.2 5.8 0.3 0.8
________________________________ _____ _____ _____ _____
72.0 69.1 13.2 12.5
================================ ===== ===== ===== =====
______________________________________________________________________________
Total operating profit Share of associates Total
______________________________________________________________________________
2000 1999 2000 1999
restated restated
By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 1.9 4.1 86.2 72.5
UK Retail - - 8.8 9.1
Financial Services 1.9 1.3 12.7 18.0
E-commerce - - (7.9) (1.4)
________________________________ _____ _____ _____ _____
3.8 5.4 99.8 98.2
Central costs - - (16.3) (17.8)
________________________________ _____ _____ _____ _____
Continuing 3.8 5.4 83.5 80.4
Discontinued 1.1 14.0 6.6 20.6
________________________________ _____ _____ _____ _____
4.9 19.4 90.1 101.0
================================ ===== ===== ===== =====
______________________________________________________________________________
c Net assets Group subsidiaries Share of joint ventures
______________________________________________________________________________
2000 1999 2000 1999
restated restated
(i) By geographical market: £m £m £m £m
______________________________________________________________________________
UK 120.6 116.9 6.5 3.9
Greece/Belgium 123.4 110.1 6.8 2.4
Australia/New Zealand (14.9) (4.1) 4.0 0.1
Hong Kong 39.4 38.3 34.9 30.9
Singapore/Brunei 84.2 53.4 - -
Other 59.1 69.8 3.1 3.2
_____________________________ _______ _______ _______ _______
Continuing 411.8 384.4 55.3 40.5
Discontinued 13.9 52.0 - (3.8)
Net debt* (16.8) (87.4) - -
Other unallocated assets and
liabilities** (95.2) (78.3) - -
_____________________________ _______ _______ ________ ______
313.7 270.7 55.3 36.7
============================= ======= ======= ======= =======
______________________________________________________________________________
Net assets Share of associates Total
______________________________________________________________________________
2000 1999 2000 1999
restated restated
By geographical market: £m £m £m £m
______________________________________________________________________________
UK 41.8 25.6 168.9 146.4
Greece/Belgium 1.3 1.1 131.5 113.6
Australia/New Zealand - - (10.9) (4.0)
Hong Kong - - 74.3 69.2
Singapore/Brunei - - 84.2 53.4
Other - - 62.2 73.0
_____________________________ _______ _______ ________ _______
Continuing 43.1 26.7 510.2 451.6
Discontinued 0.4 32.2 14.3 80.4
Net debt* - - (16.8) (87.4)
Other unallocated assets and
liabilities** - - (95.2) (78.3)
_____________________________ _______ _______ ________ _______
43.5 58.9 412.5 366.3
============================= ======= ======= ======== =======
______________________________________________________________________________
Net assets Group subsidiaries Share of joint ventures
______________________________________________________________________________
2000 1999 2000 1999
restated restated
(ii) By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 289.2 264.2 - -
UK Retail 108.4 102.0 - -
Financial Services 15.3 18.2 55.3 40.5
E-commerce (1.1) - - -
_____________________________ _______ _______ ________ ______
Continuing 411.8 384.4 55.3 40.5
Discontinued 13.9 52.0 - (3.8)
_____________________________ _______ _______ ________ ______
425.7 436.4 55.3 36.7
Net debt* (16.8) (87.4) - -
Other unallocated assets and
liabilities** (95.2) (78.3) - -
_____________________________ _______ _______ ________ ______
313.7 270.7 55.3 36.7
============================= ======= ======= ======== ======
______________________________________________________________________________
Net assets Share of associates Total
______________________________________________________________________________
2000 1999 2000 1999
restated restated
By activity: £m £m £m £m
______________________________________________________________________________
Import, Distribution & Retail 36.6 20.7 325.8 284.9
UK Retail - - 108.4 102.0
Financial Services 6.5 6.0 77.1 64.7
E-commerce - - (1.1) -
_____________________________ _______ _______ _______ _______
Continuing 43.1 26.7 510.2 451.6
Discontinued 0.4 32.2 14.3 80.4
_____________________________ _______ _______ ________ ______
43.5 58.9 524.5 532.0
Net debt* - - (16.8) (87.4)
Other unallocated assets and
liabilities** - - (95.2) (78.3)
_____________________________ _______ _______ ________ ______
43.5 58.9 412.5 366.3
============================= ======= ======= ======== ======
* Reconciled to debt as follows:
Net debt as above (16.8) (87.4)
Motors Financial Services debt in respect
of consumer financing (52.3) (61.6)
________________________________________________ ________ _______
Net debt as reported (69.1) (149.0)
================================================ ======== =======
** Other unallocated assets and liabilities include central provisions,
taxation, dividends and assets not directly related to operating activity.
______________________________________________________________________________
2 Exceptional items
______________________________________________________________________________
2000 1999
£m £m
______________________________________________________________________________
Net (loss) profit on sale of properties
and investments (0.4) 1.8
________________________________________________ _____ _____
Net (loss) profit including provisions on the
sale and termination of operations:
Motors:
- Toyota (GB) - UK 14.0 -
- Chrysler - UK (1999 includes goodwill written
off: £13.0m) (0.9) (14.8)
- Nanjing Hong Kong Changjiang - China (2000
includes goodwill written off: £0.9m) (6.2) -
- John Deere - Peru (3.1) -
- Towell Auto Centre - Oman (2000 includes
goodwill written off: £5.1m) (3.0) -
- Daihatsu (UK) - UK (4.7) (4.1)
- Daihatsu (UK) utilisation of provision for net
loss on sale of operations 4.1 -
- Other (1999 includes goodwill written off:
£4.2m) 1.8 (6.5)
Non-Motors:
- Bottling South America (1999 includes goodwill
written off: £14.4m) 0.9 279.0
- Bottling Russia - (2.7)
- Marketing (1999 includes goodwill written off:
£23.9m) (14.1) (137.1)
- Marketing utilisation of provision for net
loss on sale of operations 14.1 126.4
- Shipping (1999 includes goodwill written off:
£15.6m) - (22.8)
- Other (3.2) -
________________________________________________ _____ _____
Total net (loss) profit including provisions on
the sale and termination of operations (0.3) 217.4
________________________________________________ _____ _____
Costs of fundamental reorganisation - (5.2)
________________________________________________ _____ _____
Total exceptional items (0.7) 214.0
================================================ ===== =====
During 2000 the Group has disposed of various businesses. The principal
profits and losses on those transactions are noted above and in the Financial
Review.
During 1999 the Group undertook a fundamental restructuring precipitated by
the disposal of the following businesses: Bottling South America, Marketing,
Shipping and Office Automation (during 1998 Bottling Russia was also disposed
of). The financial impact of the fundamental restructuring is summarised
above. The Group has given normal commercial warranties and indemnities in
respect of these disposals. As a consequence, Non-Motors Other includes
external professional fees and other costs that have been incurred in managing
those warranties and indemnities.
Goodwill written off included above of £6.0m (1999 - £71.1m) had been charged
against reserves in previous years.
______________________________________________________________________________
3 Interest
______________________________________________________________________________
2000 1999
£m £m
______________________________________________________________________________
Interest payable and other charges:
On bank loans, overdrafts and other loans falling
due within five years 23.1 30.2
On finance leases mainly repayable within five years 0.1 0.6
Other interest 7.6 8.6
____________________________________________________________ ____ ____
30.8 39.4
Less amounts included in cost of sales for
Motors Financial Services subsidiaries (3.8) (4.5)
____________________________________________________________ ____ ____
27.0 34.9
____________________________________________________________ ____ ____
Interest receivable:
Bank and other interest (26.9) (34.3)
Less amounts included in:
- Motors Financial Services subsidiaries' turnover 11.1 12.0
- Discontinued activities included in other operating
income (Shipping) - 0.3
____________________________________________________________ ____ ____
(15.8) (22.0)
____________________________________________________________ ____ ____
The Company and its subsidiaries 11.2 12.9
Share of joint ventures' net interest 0.4 0.7
Share of associates' net interest 4.4 2.1
____________________________________________________________ ____ ____
16.0 15.7
============================================================ ==== ====
______________________________________________________________________________
4 Taxation
______________________________________________________________________________
2000 1999
Current taxation £m £m
______________________________________________________________________________
United Kingdom corporation tax at 30% (1999 - 30%) 8.9 0.9
Double taxation relief (10.0) (0.4)
____________________________________________________________ ____ ____
(1.1) 0.5
Advance corporation tax written off (back) 0.2 (1.4)
____________________________________________________________ ____ ____
(0.9) (0.9)
Overseas taxes 27.7 24.2
Deferred taxation (6.7) 0.7
____________________________________________________________ ____ ____
20.1 24.0
Adjustments to prior year liabilities:
- UK (2.4) (2.9)
- overseas (2.1) (0.2)
____________________________________________________________ ____ ____
The Company and its subsidiaries 15.6 20.9
Share of joint ventures' taxation 2.5 2.8
Share of associates' taxation 0.1 3.4
____________________________________________________________ ____ ____
18.2 27.1
============================================================ ==== ====
The tax charge is reduced by £5.0m (1999 - increased by £0.3m) in respect of
exceptional items. This benefit is in respect of prior year disposals.
______________________________________________________________________________
5 Earnings per ordinary share Headline FRS3
______________________________________________________________________________
2000 1999 2000 1999
£m £m £m £m
______________________________________________________________________________
Headline profit before tax 74.1 85.3 74.1 85.3
Exceptional items - note 2 - - (0.7) 214.0
________________________________________ _______ _______ _____ ______
Profit before tax 74.1 85.3 73.4 299.3
Taxation - note 4 (23.2) (26.8) (18.2) (27.1)
Minority interests (7.6) (5.6) (7.6) (5.4)
________________________________________ _______ _______ _____ ______
Earnings 43.3 52.9 47.6 266.8
======================================== ======= ======= ===== ======
Headline earnings per share 49.3p 60.0p
======================================== ======= =======
Basic and diluted earnings per
share 54.2p 302.4p
========================================= ====== ======
The weighted average number of fully paid shares in issue during the year,
excluding those held by the Inchcape Employee Trust, was 87,776,386 (1999 -
88,225,026).
The diluted earnings per share are calculated by adjusting the weighted
average number of ordinary shares for the dilution arising from the exercise
of share options where the exercise price is less than the average market
price of the Company's ordinary shares during the period. The adjusted
weighted average number of ordinary shares was 87,825,497 (1999 - 88,228,664).
Headline profit before tax and earnings (before exceptional items and after
the utilisation of termination provisions) are adopted in that they provide a
representation of underlying performance.
______________________________________________________________________________
6 Dividends
______________________________________________________________________________
2000 1999 2000 1999
pence pence £m £m
______________________________________________________________________________
Special - paid 9 July 1999 - 600.0* - 529.3
Interim - paid 21 September 2000 (1999
paid - 23 September 1999) 7.3 7.0 6.4 6.2
Final - proposed - payable 15 June 2001
(1999 paid - 16 June 2000) 14.7 14.0 12.8 12.4
_______________________________________________ _____ ____ _____ _____
22.0 621.0 19.2 547.9
=============================================== ===== ==== ===== ====
If approved at the Annual General Meeting the final ordinary dividend will be
paid to ordinary shareholders registered in the books of the Company at the
close of business on 25 May 2001.
Dividends above exclude £0.2m (1999 - £0.8m) payable on shares held by the
Inchcape Employee Trust.
* Adjusted for share consolidation.
______________________________________________________________________________
7 Foreign currency translation
______________________________________________________________________________
The main exchange rates used for translation purposes are as follows:
Average rates Year end rates
2000 1999 31.12.00 31.12.99
______________________________________________________________________________
Australian dollar 2.62 2.53 2.69 2.46
Belgian franc 66.4 60.9 64.2 64.9
Dutch guilder 3.63 3.33 3.51 3.54
Euro 1.65 1.51 1.59 1.61
Greek drachma 555 493 542 531
Hong Kong dollar 11.84 12.55 11.65 12.53
Singapore dollar 2.62 2.74 2.59 2.69
US dollar 1.52 1.62 1.49 1.61
______________________________________________________________________________
______________________________________________________________________________
8 Basis of presentation
______________________________________________________________________________
The figures contained in this announcement have been prepared in accordance
with applicable accounting standards on the historical cost basis, modified
to include the revaluation of certain tangible fixed assets.
The financial information presented does not constitute the statutory
financial statements of 2000 nor 1999. The 2000 figures are extracted from
the audited financial statements for that year which have not yet been
approved by the shareholders and have not yet been delivered to the Registrar.
The comparative figures are extracted from the latest published financial
statements that have been delivered to the Registrar of Companies. The
auditors' reports in respect of both years were unqualified and did not
contain a statement under either Section 237(2) or Section 237(3) of the
Companies Act 1985.
FINANCIAL REVIEW FOR PRELIMINARY STATEMENT
No new Financial Reporting Standards (FRS) were adopted in the year. As noted
in the 1999 Annual Report and Accounts, the Group has already adopted FRS15
'Tangible Fixed Assets' and FRS16 'Current Tax'. FRS17 'Retirement Benefits',
FRS18 'Accounting Policies' and FRS19 'Deferred Tax', will be adopted within
the time scales advised in those pronouncements. In relation to FRS18 the
Group's policy is already consistent with this new standard.
SEGMENTAL REPORTING
The Group has revised the segmental reporting format during the year. All
prior year comparatives have been restated accordingly.
The new geographical analysis has been constructed so that core markets are
highlighted.
The new activity analysis splits out our E-commerce and pure UK Retail
businesses. The separation of our E-commerce activity ensures that our
investment and performance in this area is explicitly disclosed. This was
previously included as part of the old Import and Distribution activity, now
renamed Import, Distribution and Retail. The UK Retail business is the only
material stand-alone retail operation. Separately analysing its performance
and asset base allows a more direct comparison with our major UK competitors.
The other small retail businesses have been reclassified into Import,
Distribution and Retail. This activity includes our pure import and
distribution businesses and those that have vertically integrated into retail.
The retail element within this activity cannot be meaningfully separated out
from the import and distribution results.
DISPOSALS AND DISCONTINUED ACTIVITIES
As noted in the Chief Executive's Review, the Group has continued to
concentrate its resources in core markets with fewer, stronger manufacturer
partners. Accordingly, the Group has sold, closed or transferred 18 businesses
this year. The operating profit associated with businesses sold or closed in
the year was £0.1m, with the proceeds being £64.4m. For businesses transferred
the operating profit was £6.8m. The transactions which had the most
significant impact on the results this year were: the sale of the 49.0% equity
interest in Toyota (GB) to Toyota Motor Corporation; the sale of the Group's
60.0% equity interest in its operations in China to one of the minority
shareholders; and the transfer of the Volkswagen Passenger Import and
Distribution business in Australia back to the manufacturer, as agreed.
Discontinued activities in 2000 mainly consisted of these businesses, along
with Mazda France referred to below in 'Post Balance Sheet Events'.
POST BALANCE SHEET EVENTS
Subsequent to 31 December 2000 the Group has announced disposals in respect of
Mazda France, an Import and Distribution business and IRB, a Financial
Services subsidiary. These businesses made an operating profit of £2.9m in the
year and have been treated as discontinued.
ACQUISITIONS
In late December 2000, the Group acquired a 49.0% equity interest in Eurofleet
Limited for £12.3m (excluding professional fees). The results of the Group for
the year ended 31 December 2000 are not impacted by this acquisition. As a
result of this transaction, loan notes were issued that have been included
within debt and goodwill of £17.9m has been included within associate
investments. The goodwill is to be amortised over its estimated useful working
life, which is considered to be 20 years. Our share of net liabilities
acquired was £4.9m.
OPERATING PROFIT
2000 operating profit was £90.1m of which £6.6m related to discontinued
businesses. Continuing operating profit of £83.5m was £3.1m higher than 1999.
Included in the operating profit results of 2000 is a one-off charge of £3.0m
within Central costs relating to the research and development of new products
and channels to market. In addition the Group's UK Leasing business, whose
results are included within the activity of Financial Services in note 1b(ii),
made provisions of £7.0m to cover future losses anticipated on residual value
buy back guarantees.
EXCEPTIONAL ITEMS
The exceptional items, a net loss of £0.7m, are set out in note 2.
The material transactions are as follows:
-£14.0m gain on the disposal of the Group's 49.0% equity stake in Toyota (GB);
-£6.2m loss on the disposal of the Group's 60.0% equity stake in its
operations within China, including £0.9m of goodwill previously written off to
reserves;
-The Group has sold or closed its Timberland businesses and the loss
associated with these transactions was fully provided for in 1998.
In addition, but included within tax, is a £5.0m exceptional deferred tax
benefit arising in respect of prior year disposals, as set out in note 4.
CASH FLOW
Net debt at 31 December 2000 was £69.1m compared to £149.0m at 31 December
1999. Net debt at the year end benefits by £20.6m as a result of substituting
debt financing, for working capital in Greece, with economically priced
supplier related credit (shown in creditors). This was put in place in late
December 2000. This policy will continue in 2001.
The disposal of Toyota (GB) on 31 July 2000 generated cash of £42.1m. Spending
on acquisitions totalled £22.1m mainly relating to the investment in Eurofleet
and the purchase of shares in Autobytel Europe. Total net funds from
acquisitions and disposals was £48.2m.
Working capital absorbed £2.0m in the year, with £44.7m being generated in the
first half of the year and £46.7m being absorbed in the second half of the
year. Activity levels in the final quarter of the year were the cause of this
significant change.
Capital expenditure less disposal proceeds was £21.1m, which was £3.7m less
than the depreciation charge.
INTEREST
Net interest charge for the year ended 31 December 2000 was £16.0m (1999
£15.7m). The net interest charge in 1999 benefited from holding the proceeds
from the non-Motors disposal program prior to the payment of the £529.3m
special dividend on 9 July 1999.
Of the net interest charge, £4.8m relates to the share of associates and joint
ventures, which is non debt related for the purposes of the Group's balance
sheet. As noted in the above section 'Cash Flow', part of the Group's debt,
previously used to fund working capital is being replaced by supplier related
credit. This will impact the 2001 profit and loss account as the cost of this
financing (some £2-3m p.a.) transfers from interest to operating profit, as
interest on supplier related credit is included in cost of sales. There is no
material effect on PBT.
The net interest charge for the six months ended 30 June 2000 was £10.4m,
including £3.7m relating to associates and joint ventures. The second half net
interest charge was £5.6m, of which £1.1m related to associates and joint
ventures. The decrease was attributable to the sale of Toyota (GB) on 31 July
2000, this business being treated as an associate, plus the benefit of the
proceeds from this and all other disposals held within the business.
TAXATION
The Headline tax rate was 31.0% (1999 - 31.0%). The rate was impacted from a
change in geographical mix of profits, with a higher percentage being earnt in
Hong Kong, a low tax jurisdiction, being more than offset by unrelieved losses
in the UK. This adverse impact was offset by one-off benefits including those
arising from the utilisation of losses in markets such as Australia. In 2001
the geographical mix in profits is likely to be more favourable than this
year, however this year's one-offs are not expected to be repeated.
MINORITY INTEREST
The two main constituents are Inchcape Motors Limited in Singapore and Subaru
(Australia) Pty Limited in Australia. The charge for 2000 of £7.6m is £2.2m
higher than 1999 as the increased profits from Singapore outweighed the lower
profits from Subaru Australia. Also 1999 contained a loss of £0.6m in relation
to discontinued non-Motors businesses.
TREASURY POLICIES AND ACTIVITIES
The centralised Treasury function is responsible for managing the key
financial risks of the Group; funding, foreign exchange and interest rate
risks. This function operates under Board approved objectives and policies
that expressly forbid speculative transactions and is subject to regular
internal audit.
Group policy restricts the use of derivative instruments to forward foreign
exchange contracts, foreign currency and interest rate swaps, forward rate
agreements, currency options and caps. Where possible the Group will match
foreign exchange transaction exposures before entering into currency
instruments, usually forward contracts, to hedge the net exposure. Foreign
currency swaps are used to hedge cross border Group loans. Interest rate
fluctuations are managed by the use of swaps, forward rate agreements or caps.
BORROWING FACILITIES
The Group's principal committed borrowing facilities are a £250.0m standby
revolving credit facility, a £30.0m term loan and a US private placement for
US$72.0m. Loan notes for £12.3m, due 31 October 2005, were issued on 19
December 2000 following the acquisition of a 49.0% interest in the share
capital of Eurofleet Limited.
The standby revolving credit facility has a maturity date of March 2003. The
facility was not utilised during the year ended 31 December 2000.
Maturing loan notes totalling US$100.0m were part refinanced in May 2000 with
a £30.0m term loan, provided by a relationship bank. These loan notes
represented the first tranche of a US private placement totalling US$172.0m
put in place in 1995. It was deemed appropriate to refinance the loan notes
for a lower amount given the ongoing disposal program and the lower forecast
borrowing requirement for the Group. The term loan, which has been fully
utilised since inception, matures in September 2002. The second tranche of the
US private placement comprises loan notes for US$72.0m with a coupon of 7.09%
and a maturity date of May 2002. These loan notes were swapped to sterling in
1998.
In addition to the committed facilities the Group has available significant
uncommitted borrowing lines made available by relationship banks. These
facilities are used for liquidity management purposes.
CASH AND DEBT
£M DEBT CASH NET
Greek Drachma (77.3) 8.3 (69.0)
Hong Kong Dollar - 31.2 31.2
Singapore Dollar (55.0) 42.8 (12.2)
US Dollar (Latin America) (2.5) 7.3 4.8
Other (10.9) 15.2 4.3
Total other than Sterling (145.7) 104.8 (40.9)
Sterling (46.3) 61.6 15.3
Swapped US Loan Notes (43.5) - (43.5)
Total Sterling (89.8) 61.6 (28.2)
Total (235.5) 166.4 (69.1)
The Group has significant borrowings in Sterling, Greek Drachma and Singapore
Dollars.
Sterling debt includes the swapped US loan notes totalling £43.5m, the term
loan for £30.0m and loan notes for £12.3m.
Borrowings in Greek Drachma include trade finance of £41.1m and money market
borrowings of £36.2m. Agreement was reached before the year end to replace the
trade finance facility with supplier related credit. As a result the trade
finance funding at the year end will mature by the end of the first quarter
2001. Following Greek entry into the Euro a pan European cash management
structure is under consideration which would enable the pay down of Greek debt
with surplus Euros held elsewhere in the Group.
IRB, our Financial Services subsidiary, is financed by customer deposits of
£54.1m and loans from Group companies of £21.4m. Cash totalling £23.2m is held
for regulatory and liquidity purposes.
On 3 March 2001 Inchcape Motors Limited, the Group's Singapore quoted company,
entered into an agreement to sell its 70% interest in IRB for circa £15.5m.
This transaction is not expected to complete until late March 2001. Following
disposal Group net debt will be reduced by circa £67.8m.
Cash is held locally in Hong Kong ahead of remittance to the UK, whilst
deposits are held in Singapore to support purchases of Certificates of
Entitlement required for new car sales.
EFFECTIVE INTEREST RATES
The objective of the Group's interest rate policy is the minimisation of net
interest expense and the protection of the Group from material adverse
movements in interest rates. Following review, the policy of adjusting from
time to time, the balance of fixed and floating debt has been continued. In
light of reductions in Group debt, and a benign interest rate outlook, the
Group's principal gross borrowings were at floating rates at the year end.
BALANCE SHEET TRANSLATION
Translation exposures are managed, where possible, by financing working
capital requirements in local currency and maximising the remittances of
overseas earnings into sterling. In early December 2000 the Group's exposure
to the Euro was significantly reduced by the permanent remittance of Euros
177.8m (c. £105.0m) into sterling. Largely as result of this remittance the
59.5% of Group assets denominated in the Euro at 31 December 1999 has been
reduced to 9.1% at 31 December 2000.
The percentages of net assets by currency at 31 December 2000 for the Group
are set out below:
NET ASSETS BY CURRENCY %
Sterling 12.5
Euro 9.1
Greek Drachma 3.5
US Dollar 6.9
Hong Kong Dollar 25.3
Singapore Dollar 27.4
Other 15.3
Total 100.0
FOREIGN CURRENCY TRANSACTION EXPOSURE
In many of our businesses the Group has negotiated local currency billing
arrangements with our principals. For businesses which continue to be billed
in foreign currency Group policy requires that committed transaction exposures
are hedged into their reporting currency. Where possible the Group will match
foreign exchange exposures internally before entering into currency
instruments, usually forward contracts to hedge the Group's net exposure.
Uncommitted transaction exposures are monitored and cover put in place where
appropriate. In addition to existing and future anticipated exchange rates the
level of cover is evaluated by reference to the manufacturer's pricing
strategy and the competitive position of the product in the market.
FOREIGN CURRENCY EARNINGS EXPOSURE
Had the average sterling rates in 1999 continued into 2000 the Group's 2000
operating profit for the continuing businesses would have been £1.2m lower.
Headline profit before tax would have been £1.8m lower.
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