TIDMPDG
RNS Number : 9533U
Pendragon PLC
04 August 2015
Issued: 04 August 2015 Press release
PENDRAGON PLC - The UK's Leading Automotive Retailer
Announces Interim Results to 30 June 2015
"Profits exceeding expectations, up 23% to GBP40.3 million, with
market leading initiatives in place for future growth."
Financial Highlights
-- Anticipated outturn for the full year is comfortably ahead of
expectations.
-- Underlying profit before tax up GBP7.5 million (+22.9%), from
GBP32.8 million to GBP40.3 million. Underlying profit has more than
doubled in three years.
-- Strong operating leverage continues, with gross profit up
5.7% and underlying operating profit up 17.0%.
-- Underlying earnings per share up 0.41p (+23.8%), from 1.72p
to 2.13p.
-- Interim dividend doubled to 0.6p per share following our 2014
final dividend of 0.6p per share.
Operational Highlights
-- Record used performance with gross profitability up GBP6.0
million (+8.3%), like for like, assisted by market leading
initiatives.
-- Aftersales gross profit increased by GBP6.2 million (+6.7%),
like for like, as we benefit from the growing vehicle market, which
is set to continue.
-- New gross profit increased, like for like, by GBP8.5 million
(+11.3%).
-- Visits to Evanshalshaw.com and Stratstone.com increased by
3.1 million (+39.7%), from 7.8 million to 10.9 million.
Trevor Finn, Chief Executive, commented:
"Our business continues to perform strongly across all sectors,
owing to a combination of our strategy, market leading initiatives
and favourable market conditions. We continue to be excited by the
initiatives launched last year, 'Sell Your Car' and 'Move Me
Closer', which appeal to customers from our key brands of
Evanshalshaw.com and Stratstone.com. We plan to expand our
footprint, by adding sites particularly in areas where we have no
representation, which will provide further convenience to our
customers. We have doubled our interim dividend in the period,
aligning to our higher year dividend for 2014. The Group has had an
encouraging start to the year and our anticipated outturn for the
full year is comfortably ahead of expectations."
Enquiries
================ ================= ============== ============
Trevor Finn Chief Executive Pendragon PLC 01623 725114
Tim Holden Finance Director Pendragon PLC 01623 725114
Gordon Simpson Partner Finsbury 0207 2513801
Associate
Philip Walters Partner Finsbury 0207 2513801
================ ================= ============== ============
Summary of Contents
1. Financial Overview
2. Segmental Results
3. Strategic Progress
4. Industry Insight and Outlook
5. Detailed Financials
1. Financial Overview
Pendragon PLC Results Underlying* Total
------------------------ ------------------------- ---------------------------
6 Months Ended 2015 2014 YOY 2015 2014 YOY
30 June Change Change
GBPm % %
------------------------ ------- ------- ------- ------- ------- ---------
Revenue 2,291.4 2,069.3 +10.7% 2,291.4 2,069.3 +10.7%
------------------------ ------- ------- ------- ------- ------- ---------
Gross Profit 283.0 267.8 +5.7% 283.0 267.8 +5.7%
Operating Expenses (226.7) (220.0) +3.0% (226.7) (220.0) +3.0%
Other Income - 0.3 - 21.7 1.6 +1,256.3%
------------------------ ------- ------- ------- ------- ------- ---------
Operating Profit 56.3 48.1 +17.0% 78.0 49.4 +57.9%
Interest (16.0) (15.3) +4.6% (17.2) (16.2) +6.2%
------------------------ ------- ------- ------- ------- ------- ---------
Profit Before Taxation 40.3 32.8 +22.9% 60.8 33.2 +83.1%
------------------------ ------- ------- ------- ------- ------- ---------
Tax Expense (9.5) (8.3) +14.5% (2.6) (7.9) -67.1%
Profit For The
Period 30.8 24.5 +25.7% 58.2 25.3 +130.0%
Gross Margin (%) 12.4% 12.9% -0.5% 12.4% 12.9% -0.5%
Operating Margin
(%) 2.5% 2.3% +0.2% 3.4% 2.4% +1.0%
Earnings Per Share
(p) 2.13 1.72 +23.8% 4.03 1.77 +127.7%
Dividend Per Share
(p) 0.60 0.30 +100.0% 0.60 0.30 +100.0%
------------------------ ------- ------- ------- ------- ------- ---------
* Underlying results, where stated, exclude items that have
non-trading attributes due to their size, nature or incidence.
NOTE: Within this document, like for like results include only
current trading businesses which have a 12 month comparative
history. All percentages shown are the calculated value from the
table shown and may vary from the actual numbers due to rounding.
Year on year percentage variances for margins show the absolute
percentage movement only. All commentary is versus the prior
period, unless stated.
Income Statement Highlights
Revenue increased by GBP222.1 million, up 10.7% on the prior
year, mainly due to increases within the used and new vehicle
departments. On a like for like basis, revenue increased by
GBP264.6 million (+13.4%). We improved used revenues by 11.8%, new
revenues by 16.5% and aftersales revenues by 5.0% on a like for
like basis.
Underlying gross profit increased by GBP15.2 million (+5.7%) in
the period and on a like for like basis by GBP21.9 million (+8.5%)
over the prior year. We achieved another record performance in our
used vehicle sector, with gross profit up GBP6.0 million (+8.3%) on
a like for like basis. In the used vehicle sector, we continue to
grow our presence and reputation. The new sector has increased
gross profit by GBP8.5 million (+11.3%) on a like for like basis as
the new car market continues to grow. Aftersales has grown by
GBP6.2 million (+6.7%) on a like for like basis as a result of new
car sales growth and growth in used vehicle sales increasing the
vehicle parc. In the period, overall underlying gross margin
reduced by 50 basis points, primarily as a result of the dilution
effect of increased new and used vehicle sales.
Operating costs increased on a like for like basis by GBP12.2
million (+5.8%), of which more than half relates to variable costs
(+10.2%) and the remainder to indirect costs. We have invested in
television and internet advertising as part of the launch of 'Sell
Your Car' and 'Move Me Closer', which we continue to roll out in
Evans Halshaw. This has helped generate a 39.7% increase in website
visits and contributed to our used performance exceeding the
market.
Underlying operating profit increased by GBP8.2 million in the
period and increased by GBP9.4 million on a like for like basis.
Underlying interest costs increased by GBP0.7 million in the
period, largely as a result of investment in vehicle stock. Our
operating profit margin of 2.5% is a 20 basis points improvement on
the prior year, assisted by strong operating leverage in the
period.
Balance Sheet and Cash Flow
The Group has a strong balance sheet and low debt level and is
in a strong position to reinvest at the appropriate return on
investment. The following table summarises the cash flows and net
debt of the Group for the six month periods ended 30 June 2015 and
30 June 2014 as follows:
Summary Cashflow and Net Debt 2015 2014
6 Months Ended 30 June
GBPm
------------------------------------ ------ ------
Underlying Operating Profit Before
Other Income 56.3 47.8
Depreciation and Amortisation 12.7 9.9
Share Based Payments 1.0 0.8
Working Capital 26.1 0.3
Operating Cash Flow 96.1 58.8
------------------------------------ ------ ------
Tax Paid (13.4) (2.9)
Underlying Net Interest (14.8) (14.6)
Replacement Capital Expenditure (32.5) (5.2)
Disposals 13.1 6.3
Dividends (8.6) (4.3)
Proceeds from Sale of Investments 22.4 -
Other (6.6) (4.2)
Reduction In Net Debt 55.7 33.9
------------------------------------ ------ ------
Closing Net Debt 53.1 105.7
------------------------------------ ------ ------
The Group's net debt was GBP53.1 million at 30 June 2015, a
reduction of GBP55.7 million from 31 December 2014. Within the
period the Group received proceeds of GBP22.4 million with respect
to the disposal of the King Arthur Property S.a.r.L property
investment of GBP10.0 million.
As a consequence of this lower debt level and strong EBITDA
performance, the debt : underlying EBITDA ratio has reduced from
0.8 at 31 December 2014 to 0.4 at 30 June 2015 and remains below
our target range of 1.0 to 1.5. This reflects the appropriate
balance of capital efficiency and growth potential, providing both
a strong balance sheet and, with our strong cashflow generation and
realisations from low performing assets, the ability to invest for
the future.
Property, acquisitions and disposals
Our property portfolio is an important aspect of our business,
with the Group operating from both leasehold and freehold
properties. In addition, through strategic investment choices,
including the decision to close some franchise points, we have a
number of vacant property assets which we hold for sale. At 30 June
2015, the Group had GBP177.9 million of land and property assets
(2014: GBP155.4 million). Additionally, the Group held property
assets for sale of GBP11.6 million (2014: GBP13.5 million).
Business disposals resulted in a profit on disposal of GBP8.0
million and property disposals resulted in a loss of GBP0.1
million. During the period, the Group reduced its franchise points
by four, which included businesses which were low performing,
requiring significant investment or surplus to requirements, and
added four used vehicle points.
Pensions
The net liability for defined benefit pension scheme obligations
has decreased from GBP66.4 million at 31 December 2014 to GBP47.6
million at 30 June 2015 (2014: GBP52.1 million). This reduction in
obligations of GBP18.8 million is largely due to an appropriate
increase in the discount rate applied.
Dividend
Following a final dividend of 0.6p per share in respect of 2014,
we are delighted to announce an interim dividend of 0.6p per share
taking our annualised dividend to 1.2p per share. We intend to
maintain a progressive dividend approach in the future.
The interim dividend will be paid on 23 October 2015 for those
shares registered on 25 September 2015.
Capital allocation
We have demonstrated a very strong record of cashflow generation
and capital management, with a reduction in net debt of GBP293.6
million in the last five years. We operate a target of maintaining
our debt : underlying EBITDA ratio between 1.0 and 1.5 times and
since our interim report of last year, this ratio has been below 1
times (currently 0.4 times). We continue to expect strong cashflow
generation and we have doubled the annualised dividend payable to
shareholders.
We are also working to expand our UK footprint by investing in
40 additional sites. This investment will take place over the
coming five year period and is expected to amount to approximately
GBP100 million investment (assuming all additional sites are
freehold). We will also continue to seek investment opportunities
that exceed our cost of capital to add to our existing US
operations.
In May 2016 the three year call period on the GBP175 million
bond comes to an end. We are examining our funding structure
opportunities in the context of our strong cashflow generation and
investment plans whilst optimising shareholder returns and
maintaining financial security.
Non-underlying Items
Non-underlying items for the six month periods ended 30 June
2015 and 30 June 2014:
Non-underlying Items 2015 2014
6 Months Ended 30 June
GBPm
--------------------------------- ----- -----
Gain on Disposal of Investments 13.8 -
Gain on Disposals 7.9 1.3
Pensions (1.2) (0.9)
Total 20.5 0.4
--------------------------------- ----- -----
In the period, the Group sold its GBP10.0 million 6% investment
in King Arthur Properties S.a.r.L for GBP23.8 million, which
realised a profit of GBP13.8 million.
In the period, property and business disposal profits, net of
impairments and associated property and business disposal costs,
enhanced profitability by GBP7.9 million (2014: GBP1.3 million).
The Group sold five franchise points in the period, yielding
proceeds of GBP13.1 million.
Non-underlying pension costs relate to pension obligations in
respect of defined benefit schemes closed to future accrual, shown
as non-underlying due to the volatility and non-trading nature of
this amount.
2. Segmental Results
The Group has three segments which, combined, we refer to as the
Motor Segment and three segments which, combined, we refer to as
the Support Segment. The Motor Segment consists of: Stratstone,
Evans Halshaw and California. In 2015, we have rebranded our Quicks
businesses as Evans Halshaw and accordingly we have moved the
Quicks segment as previously reported into the Evans Halshaw
segment. A reconciliation of this change can be found in note 7
within the condensed interim financial statements at the end of
this document. The Support Segment consists of: Pinewood, Leasing
and Quickco. The following table shows the revenue, gross profit,
operating costs and operating profit by segment for our Motor
Segment for the six month periods ended 30 June 2015 and 30 June
2014:
Underlying Motor Stratstone Evans Halshaw California Motor Segment
Segment
6 Months Ended 30
June
GBPm (unless stated) 2015 2014 2015 2014 2015 2014 2015 2014
======================= ====== ====== ======= ======= ====== ====== ======= =======
Revenue:
Aftersales 65.6 67.1 75.8 74.6 13.6 11.4 155.0 153.1
Used 367.1 352.2 547.9 492.2 32.9 28.4 947.9 872.8
New 451.6 395.1 619.1 544.6 74.2 61.5 1,144.9 1,001.2
Revenue 884.3 814.4 1,242.8 1,111.4 120.7 101.3 2,247.8 2,027.1
======================= ====== ====== ======= ======= ====== ====== ======= =======
Gross Profit:
Aftersales 38.4 39.2 55.1 52.4 7.0 6.0 100.5 97.6
Used 19.8 23.8 57.4 49.7 2.0 2.2 79.2 75.7
New 40.7 35.0 34.8 33.7 10.5 9.7 86.0 78.4
Gross Profit 98.9 98.0 147.3 135.8 19.5 17.9 265.7 251.7
Operating Costs (78.1) (79.8) (123.0) (118.9) (15.2) (13.3) (216.3) (212.0)
======================= ====== ====== ======= ======= ====== ====== ======= =======
Operating Profit 20.8 18.2 24.3 16.9 4.3 4.6 49.4 39.7
======================= ====== ====== ======= ======= ====== ====== ======= =======
Metrics:
Gross Margin % 11.2% 12.0% 11.9% 12.2% 16.2% 17.7% 11.8% 12.4%
Units Sold ('000) 28.3 28.3 118.2 108.5 2.5 2.4 149.0 139.2
Stratstone (Stratstone.com)
Our Stratstone business is one of the UK's leading premium motor
car retailers, with 76 franchise points. Stratstone holds
franchises to retail and service Aston Martin, BMW, Ferrari,
Jaguar, Land Rover, Mercedes-Benz, MINI, Morgan, Porsche and Smart
vehicles as well as three motor-cycle franchises. This segment also
contains our retail and service outlets for DAF commercial
vehicles, under our Chatfields brand name.
Stratstone.com has had a strong year to date, on a like for like
basis, operating profit increased by GBP3.6 million (+20.3%). The
new department improved like for like gross profit by 19.1% as a
result of strong retail growth performances in Land Rover,
Mercedes-Benz, MINI and Porsche. Used revenue was up by 9.5% on a
like for like basis in the period, albeit at a lower margin,
resulting in a slight fall in used profitability. Aftersales has
grown strongly in the period, with gross profit up 5.4% on a like
for like basis as we benefit from a strong aftersales market in a
number of franchises. We have now fully implemented and rolled out
high definition video within used vehicles and within our
aftersales activities.
Evans Halshaw (Evanshalshaw.com)
Our Evans Halshaw business is the UK's leading volume motor car
retailer, with 124 franchise points. Evans Halshaw holds franchises
to retail and service Citroen and DS, Dacia, Ford, Honda, Hyundai,
Kia, Nissan, Peugeot, Renault, SEAT and Vauxhall vehicles.
Evanshalshaw.com increased like for like operating profit by a
significant GBP7.6 million (+42.7%), with outstanding growth in the
used vehicle department. On a like for like basis, used sales
increased by 13.0% in the period and used gross profitability
increased by 17.3%. Used continues to be a strategic area of focus
for our business. We are benefiting from our market leading
initiatives and a recovery in the used market.
Aftersales like for like gross profit increased by GBP3.3
million (+6.4%) as result of strong market conditions and our own
initiatives. This is a key profit area and we are encouraged by
this improvement in profitability. At Evans Halshaw, consumers can
choose how they transact, from a variety of methods and channels
for aftersales services. We believe our innovation and
responsiveness to consumers' needs in this area gives us a
competitive advantage. We increased our like for like new vehicle
gross profit in the period by GBP1.4 million as a result of growing
new vehicle volumes.
Our Quicks segment was set up to test and deploy new strategies
and now has been integrated into the Evans Halshaw segment in the
period.
California
Our motor retail business in the US continues to achieve strong
results from its nine franchise points in Southern California,
which represent the Aston Martin, Jaguar and Land Rover brands.
Operating profit is marginally behind the prior year as a result of
an exceptionally strong comparator. New car performance continues
to improve and the vehicle parc is growing for our brands. We
continue to explore earnings enhancing opportunities to add to our
existing US operations.
Support Businesses
Our Support businesses provide a broad range of services, both
to the Group and to external customers. These specialist businesses
consist of Pinewood for dealer management systems, Leasing for
fleet and contract hire vehicles and Quickco for wholesale vehicle
parts.
The following table shows the revenue and operating profit for
our Support Segment and the Group results, for each of the six
month periods ended 30 June 2015 and 30 June 2014:
Underlying Support Pinewood Leasing Quickco Support Group Results*
Segment and Group Segment
Results
6 Months Ended
30 June
GBPm 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
==================== ===== ===== ===== ===== ==== ==== ===== ===== ======= =======
Revenue 5.9 5.3 4.7 8.7 33.0 28.2 43.6 42.2 2,291.4 2,069.3
Operating Profit 4.3 4.3 1.4 3.3 1.2 0.8 6.9 8.4 56.3 48.1
Operating Margin
(%) 72.9% 81.1% 29.8% 37.9% 3.6% 2.8% 15.8% 19.9% 2.5% 2.3%
==================== ===== ===== ===== ===== ==== ==== ===== ===== ======= =======
* Group comprises the total of the Motor Segment and Support
Segment.
3. Strategic Progress
Strategy
Our strategy is to grow profitability in used, aftersales and
new and we represent this by our four strategic pillars. These
strategic pillars are: Choice, Value, Service and Convenience and
are supported by the 'Our People' foundation.
Choice
Our 'Choice' pillar is our strategy to ensure that our consumers
can access the largest and best choice of vehicles and servicing in
the UK. Visits to Stratstone.com and Evanshalshaw.com increased by
21.1% over the prior year, to 18.8 million visitors on a rolling 12
months basis. Overall, we are attracting over 10.5 million online
visitors more than we did five years ago. This channel is becoming
a key aspect of our business to ensure we can give choice to our
consumers.
We have been operating our 'Sell Your Car' initiative for a
nearly a year. This initiative enables the consumer to have the
choice to sell their car direct to us at Evanshalshaw.com
(www.evanshalshaw.com/sell-your-car/). We will guarantee to pay
more than 'webuyanycar.com' giving consumers a value choice too.
This initiative is, in turn, enabling us to provide a greater
selection of choice and value to consumers and to turn stock more
quickly, given that this source of stock is acquired directly at
our vehicle preparation and retailing premises.
In February 2015, we launched 'Move Me Closer' which enables the
consumer to reserve a vehicle direct from their electronic device
and choose to have it physically delivered to their nearest store
location (www.evanshalshaw.com/move-me-closer/). Through this
service, consumers can research and view online over 20,000
vehicles then inspect the vehicle they reserved at a physical
location convenient to them.
Value
Our 'Value' pillar ensures that consumers get value with every
single purchase via our frequently researched prices at both local
and national levels. We have been operating our value pricing
methodology since 2008, enabling us to provide pricing transparency
to our customers.
Service
Our 'Service' pillar is ensuring that our consumers can transact
easily with our business, with outstanding customer service. We
monitor our customer satisfaction scores closely and regard as a
key measure of our success the proportion of customers who have
given us a four or five star rating for vehicle sales and
aftersales service. We are pleased to report that on this measure
our performance has increased from 83.4% at 31 December 2013 to
85.3% at 31 December 2014 to 85.6% at 30 June 2015. We continue to
put the customer first in all we do.
Convenience
Our business has the largest motor retail footprint and scale in
the UK, giving consumers local and national convenience. For both
vehicle selection and purchasing, and for aftersales services,
customers can visit our stores at locations convenient to them. We
have commenced a programme to invest and open stores in the key
market areas in the UK where we do not yet have a significant
presence. This investment will bring us even closer to existing and
potential customers, by further enhancing the offering of choice,
convenience of contact and service and our unique used car consumer
proposition.
We have added three more Evans Halshaw sites in the period
towards our plan of achieving 40 additional sites. We expect to add
further locations in the second half of the year, financed by our
cashflow and by recycling low performing assets.
Our 'Sell Your Car' initiative is now available at 42 retail
locations in the UK, giving further convenience to our consumer and
also providing an inflow of used cars for the business sourced
directly from consumers.
Our People
Our people are key to the success of our business. We have
always placed a significant focus on our team members to define and
refine how we do business, communicate, and engage with our
customers. As a result our people are the driver behind new
processes and propositions for our customers.
We wish to thank our team members, who continue to be part of
the journey at Pendragon PLC, and who enjoy the experience of being
with a growing and forward-looking organisation.
4. Industry Insight and Outlook
New Sector
The new vehicle sector consists of the first registration of
cars and commercial vehicles. In 2014, the UK new car market, the
second largest market in Europe, increased by 9.3% over the prior
year, with 2.476 million registrations (2013: 2.265 million). In
the first half of 2015, the UK new market has increased by 7.0%
over the prior year, with 1.377 million registrations.
The UK new car market is primarily divided into retail and fleet
markets. The retail market is the direct selling of vehicle units
to individual consumers and operates at a higher margin than the
fleet market. The fleet market represents selling of multiple
vehicles to businesses, and is predominantly transacted at a lower
margin and consumes higher levels of working capital than retail.
The retail market is the key market opportunity for the Group and
represents just under half of the total UK market.
The following table summarises the UK new car vehicle market,
separating the retail and fleet components for the six month
periods ended 30 June 2015 and 30 June 2014:
New Car Vehicle Registrations 2015 2014 Change Change
6 Months Ended 30 June %
'000
------------------------------- ------- ------- ------ ------
UK Retail Market 637.1 623.7 13.4 +2.1%
UK Fleet Market 739.8 663.6 76.2 +11.4%
------------------------------- ------- ------- ------ ------
UK New Market 1,376.9 1,287.3 89.6 +7.0%
------------------------------- ------- ------- ------ ------
Group Represented* UK
Retail Market 434.6 420.5 14.1 +3.3%
Group Represented* UK
Fleet Market 511.4 461.9 49.5 +10.7%
------------------------------- ------- ------- ------ ------
Group Represented* UK
New Market 946.0 882.4 63.6 +7.2%
------------------------------- ------- ------- ------ ------
Source: new car vehicle registrations data from the 'Society of
Motor Manufacturers and Traders'.
* Group Represented is defined as national registrations for the
franchised brands that the Group represents as a franchised
dealer.
The UK commercial vehicle market, consisting of light commercial
vehicles and trucks, had a market size of 363 thousand units in
2014, an increase of 11% over the prior year. At 30 June 2015, the
market had increased by 21.8% over the prior year.
The Group has a small and successful representation in
California. The USA new vehicle market was 16.4 million in 2014, an
increase of 6% over 2013 and the highest vehicle market since 2006.
The National Automobile Dealers' Association expects the USA market
to be 16.9 million vehicles in 2015, an increase of 3%.
New Industry Insight
In previous statements we have shared our belief that the UK
2015 market will return to more normal growth than the prior year.
We maintain these expectations. This is already being demonstrated,
with the growth in retail registrations in the period being 2.1%,
representing a more natural level of growth. We expect the second
half rate of growth in retail sales to be a reduced rate to the
first half and the current year's total new car market to reach
2.55 to 2.60 million units by the end of 2015. From 2016 we believe
the UK new car market should run at a "natural" 2.5 million to 2.6
million units per annum level.
Used Sector
The used vehicle sector comprises the selling of vehicles by one
party to another for all vehicles except newly registered vehicles.
We had previously expected the market to grow by around 1.6% in
2015. In the first quarter of 2015, the used car market was 1.759
million, with growth of 0.5% on 2014 but we expect the growth rate
to accelerate in the remaining quarters of the year. Around half of
these transactions are conducted by franchised dealers and the
balance by independent dealers and private individuals.
Used Industry Insight
We have previously modelled the impact of the new market volumes
on the used car market and still believe we will see steady growth
of 1% to 2% per annum over the next three years. When we segment
the used market by age of vehicle, our analysis shows that the
supply of vehicles that are less than six years old will continue
to grow more rapidly for the next three years than vehicles older
than six years. We have been tracking our used volume vehicle
performance to the used vehicle market for those cars aged between
1 and 8 years old which represents our key market segment. Since
2009 and the implementation of our used car initiatives and
strategies, we have doubled our market share from 2.5% to 4.9%.
Aftersales Sector
Aftersales encompasses the servicing, maintenance and repair of
motor vehicles, including bodyshop repairs, and the retailing of
parts and other motor related accessories. The main determinant of
the aftersales market is the number of vehicles on the road, known
as the 'vehicle parc'. The vehicle parc in the UK has risen to 33
million vehicles (cars only), having been typically around 32
million vehicles in the prior three years. The car parc can also be
segmented into markets representing different age groups.
Typically, around 20% of the car parc is represented by less than
three year old cars, around 17% is represented by four to six year
old cars and 63% is greater than seven year old cars.
The size of each of these age groups within the car parc is
determined by the number of new cars entering the parc and the
number exiting the parc. The demand for servicing and repair
activity is less impacted by any adverse economic conditions than
other sectors, as motor vehicles require regular maintenance and
repair for safety, economy and performance reasons.
Aftersales Industry Insight
The aftersales servicing and repair business will benefit from
increased new and used car activity. As a result of the increased
new vehicle supply, we are anticipating growth in the less than
three year old car parc of around 8%. Interestingly in 2015, within
the four to six year old vehicle parc, we are expecting growth of
around 2% following a number of years of decline. Overall we expect
good continuing growth in the vehicle parc for cars up to six years
old for at least the next three years.
Outlook
The Group has delivered a strong performance across the used,
aftersales and new sectors in the period owing to a combination of
our own strategy and initiatives and favourable market conditions.
The last four years of growth in new car sales will drive
favourable market conditions in our aftersales and used car sectors
for the medium term and we expect the new car market to be stable.
We continue to be excited by our innovations from 'Sell Your Car'
and 'Move Me Closer'. We have been investing in marketing spend on
these initiatives and will continue this investment in the second
half of the year to help drive brand recognition and sales. In the
medium term we are highly focussed on the further roll-out of
footprint in the UK, particularly by adding sites in areas of where
we have no representation, to provide further convenience to our
customers. The Group has had an encouraging start to the year and
our anticipated outturn for the full year is comfortably ahead of
expectations.
5. Detailed Financials
Condensed Consolidated Income Statement
For the six months ended 30 June
Note Underlying Non-underlying 2015 Underlying Non-underlying 2014
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Revenue 2,291.4 - 2,291.4 2,069.3 - 2,069.3
Cost of sales (2,008.4) - (2,008.4) (1,801.5) - (1,801.5)
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Gross profit 283.0 - 283.0 267.8 - 267.8
Operating expenses (226.7) - (226.7) (220.0) - (220.0)
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Operating profit
before other income 56.3 - 56.3 47.8 - 47.8
Other income -
gains on sale of
businesses and
property 6 - 7.9 7.9 - 1.3 1.3
Gain on disposal
of investment 6 - 13.8 13.8 - - -
Other income -
dividends received - - - 0.3 - 0.3
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Operating profit 56.3 21.7 78.0 48.1 1.3 49.4
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Finance expense 8 (16.1) (1.2) (17.3) (15.5) (0.9) (16.4)
Finance income 9 0.1 - 0.1 0.2 - 0.2
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Net finance costs (16.0) (1.2) (17.2) (15.3) (0.9) (16.2)
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Profit before taxation 40.3 20.5 60.8 32.8 0.4 33.2
Income tax (expense)
/ credit 10 (9.5) 6.9 (2.6) (8.3) 0.4 (7.9)
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Profit for the
period 30.8 27.4 58.2 24.5 0.8 25.3
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Earnings per share
Basic earnings
per share 12 4.03p 1.77p
Diluted earnings
per share 12 3.99p 1.72p
Non GAAP measure
Underlying basic
earnings per share 12 2.13p 1.72p
Underlying diluted
earnings per share 12 2.09p 1.67p
----------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
All amounts are
unaudited
Condensed Consolidated Statement
of Comprehensive Income
For the six months ended 30 June
2015 2014
GBPm GBPm
-------------------------------------- ------ -----
Profit for the period 58.2 25.3
-------------------------------------- ------ -----
Other comprehensive income:
Items that will never be reclassified
to profit and loss
Defined benefit plan remeasurement
gains and (losses) 18.6 (9.1)
Income tax relating to defined
benefit plan remeasurement gains
and (losses) (3.7) 1.8
-------------------------------------- ------ -----
14.9 (7.3)
-------------------------------------- ------ -----
Items that are or may be reclassified
to profit and loss
Foreign currency translation
differences of foreign operations 0.2 -
Fair value gains on investments
reclassified to profit and loss (14.0) -
-------------------------------------- ------ -----
(13.8) -
-------------------------------------- ------ -----
Other comprehensive income for
the period, net of tax 1.1 (7.3)
-------------------------------------- ------ -----
Total comprehensive income for
the period 59.3 18.0
-------------------------------------- ------ -----
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June
Share Share Other Translation Retained
capital premium reserves differences earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ -------- -------- --------- ------------ --------- -----
Balance at 1 January
2015 72.8 56.8 15.1 (0.6) 195.8 339.9
------------------------ -------- -------- --------- ------------ --------- -----
Total comprehensive
income for 2015
Profit for the period - - - - 58.2 58.2
Other comprehensive
income for the period,
net of tax - - - 0.2 0.9 1.1
Total comprehensive
income for the period - - - 0.2 59.1 59.3
Issue of ordinary
shares 0.2 - - - (0.2) -
Dividends paid - - - - (8.6) (8.6)
Own shares issued
under share schemes - - - - 1.2 1.2
Own shares purchased
under share schemes - - - - (7.5) (7.5)
Share based payments - - - - 1.0 1.0
------------------------ -------- -------- --------- ------------ --------- -----
Balance at 30 June
2015 73.0 56.8 15.1 (0.4) 240.8 385.3
------------------------ -------- -------- --------- ------------ --------- -----
Balance at 1 January
2014 71.9 56.8 15.1 (0.9) 162.3 305.2
------------------------ -------- -------- --------- ------------ --------- -----
Total comprehensive
income for 2014
Profit for the period - - - - 25.3 25.3
Other comprehensive
income for the period,
net of tax - - - - (7.3) (7.3)
Total comprehensive
income for the period - - - - 18.0 18.0
Issue of ordinary
shares 0.4 - - - (0.4) -
Dividends paid - - - - (4.3) (4.3)
Own shares purchased
under share schemes - - - - (4.2) (4.2)
Share based payments - - - - 0.8 0.8
------------------------ -------- -------- --------- ------------ --------- -----
Balance at 30 June
2014 72.3 56.8 15.1 (0.9) 172.2 315.5
------------------------ -------- -------- --------- ------------ --------- -----
Condensed Consolidated Balance Sheet
30 June 30 June 31 December
2015 2014 2014
Note GBPm GBPm GBPm
------------------------------- ---- --------- --------- -----------
Non-current assets
Property, plant and
equipment 330.8 292.5 312.0
Goodwill 363.1 365.4 365.4
Other intangible assets 6.5 5.3 6.1
Investments 1.4 10.0 24.0
Deferred tax assets 18.6 23.3 23.9
------------------------------- ---- --------- --------- -----------
Total non-current assets 720.4 696.5 731.4
------------------------------- ---- --------- --------- -----------
Current assets
Inventories 761.1 626.9 676.1
Trade and other receivables 163.6 137.3 117.9
Cash and cash equivalents 15 149.6 94.9 91.4
Assets classified as
held for sale 14 11.6 13.5 11.6
Total current assets 1,085.9 872.6 897.0
------------------------------- ---- --------- --------- -----------
Total assets 1,806.3 1,569.1 1,628.4
------------------------------- ---- --------- --------- -----------
Current liabilities
Trade and other payables (1,038.4) (863.3) (884.1)
Deferred income 18 (27.4) (19.2) (26.2)
Current tax payable (20.6) (34.3) (33.0)
Provisions 17 (2.1) (3.1) (2.5)
Total current liabilities (1,088.5) (919.9) (945.8)
------------------------------- ---- --------- --------- -----------
Non-current liabilities
Interest bearing loans
and borrowings (202.7) (200.6) (200.2)
Trade and other payables (32.7) (24.3) (31.0)
Deferred income 18 (44.4) (51.0) (41.6)
Retirement benefit obligations (47.6) (52.1) (66.4)
Provisions 17 (5.1) (5.7) (3.5)
Total non-current liabilities (332.5) (333.7) (342.7)
------------------------------- ---- --------- --------- -----------
Total liabilities (1,421.0) (1.253.6) (1,288.5)
Net Assets 385.3 315.5 339.9
Capital and reserves
Called up share capital 73.0 72.3 72.8
Share premium account 56.8 56.8 56.8
Capital redemption reserve 2.5 2.5 2.5
Other reserves 12.6 12.6 12.6
Translation reserve (0.4) (0.9) (0.6)
Retained earnings 240.8 172.2 195.8
------------------------------- ---- --------- --------- -----------
Total equity attributable
to equity shareholders
of the company 385.3 315.5 339.9
------------------------------- ---- --------- --------- -----------
All amounts are unaudited
Condensed Consolidated Cash Flow Statement
For the For the For the
six months six months twelve months
ended 30 ended 30 ended 31
June June December
Note 2015 2014 2014
GBPm GBPm GBPm
------------------------------- ---- ----------- ----------- --------------
Cash flows from operating
activities
Profit for the period 58.2 25.3 49.8
Adjustment for net financing
expense 17.2 16.2 32.6
Adjustment for taxation 2.6 7.9 14.8
Adjustment for dividend
received - (0.3) (4.2)
------------------------------- ---- ----------- ----------- --------------
78.0 49.1 93.0
Depreciation and amortisation 12.7 9.9 27.0
Share based payments 1.0 0.8 1.5
Profit on sale of businesses
and property (7.9) (1.3) (3.2)
Gain on disposal of
investments (13.8) - -
Impairment of assets
held for sale - 1.0 1.0
Reversal of impairment
of assets held for sale - (1.0) (1.0)
Changes in inventories 20 (56.3) (23.0) (60.1)
Changes in trade and
other receivables (45.8) (34.1) (15.1)
Changes in trade and
other payables 145.4 63.5 83.5
Changes in retirement
benefit obligations (1.4) (1.3) (2.9)
Changes in provisions 1.2 3.0 0.2
Movement in contract
hire vehicle balances 19 (17.0) (7.8) (17.5)
------------------------------- ---- ----------- ----------- --------------
Cash generated from
operations 96.1 58.8 106.4
Interest paid (14.9) (14.8) (29.5)
Interest received 0.1 0.2 0.5
Taxation paid (13.4) (2.9) (8.3)
------------------------------- ---- ----------- ----------- --------------
Net cash from operating
activities 67.9 41.3 69.1
------------------------------- ---- ----------- ----------- --------------
Cash flows from investing
activities
Dividends received - 0.3 4.2
Proceeds from sale of
businesses 13.1 0.2 1.1
Purchase of property,
plant and equipment (68.8) (33.6) (96.7)
Proceeds from sale of
property, plant and
equipment 36.3 34.5 65.6
Proceeds from the sale
of investments 22.4 - -
------------------------------- ---- ----------- ----------- --------------
Net cash from / (used
in) investing activities 3.0 1.4 (25.8)
------------------------------- ---- ----------- ----------- --------------
Cash flows from financing
activities
Proceeds on issue of
shares (net of costs
paid) - - 0.4
Dividends paid to shareholders (8.6) (4.3) (8.6)
Own shares acquired (7.5) (4.2) (4.7)
Own shares issued under
share schemes 1.2 - 1.0
Proceeds from issue
of bond and loans 2.2 2.3 1.6
Net cash outflow from
financing activities (12.7) (6.2) (10.3)
------------------------------- ---- ----------- ----------- --------------
Net increase in cash
and cash equivalents 58.2 36.5 33.0
Opening cash and cash
equivalents 91.4 58.4 58.4
------------------------------- ---- ----------- ----------- --------------
Closing cash and cash
equivalents 15 149.6 94.9 91.4
------------------------------- ---- ----------- ----------- --------------
Reconciliation of Net Cash Flow to Movement in Net Debt
For the For the For the
six months six months twelve months
ended 30 ended 30 ended 31
June June December
2015 2014 2014
GBPm GBPm GBPm
------------------------------------ ----------- ----------- ----------------
Net increase in cash and
cash equivalents 58.2 36.5 33.0
Proceeds from issue of
bond and loans (net of
directly attributable transaction
costs) (2.2) (2.3) (1.6)
Non-cash movements (0.3) (0.3) (0.6)
------------------------------------ ----------- ----------- ----------------
Decrease in net debt in
the period 55.7 33.9 30.8
Opening net debt (108.8) (139.6) (139.6)
------------------------------------ ----------- ----------- ----------------
Closing net debt (53.1) (105.7) (108.8)
------------------------------------ ----------- ----------- ----------------
Note: The reconciliation of net cash flow to movement
in net debt is not a primary statement and does not
form part of the consolidated cash flow statement but
forms part of the notes to the financial statements.
Notes
1 Basis of preparation
Pendragon PLC is a company domiciled in the United
Kingdom. The condensed consolidated interim financial
statements of the Company as at and for the six
months ended 30 June 2015 comprise the Company and
its subsidiaries (together referred to as the 'Group').
The directors consider that the Group has adequate
resources to continue in operational existence for
the foreseeable future. Accordingly, they continue
to adopt the going concern basis in preparing the
interim financial statements.
The condensed set of financial statements for the
six months ended 30 June 2015 are unaudited but
have been reviewed by the auditors.
2 Statement of compliance
These condensed consolidated interim financial statements
have been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting
as adopted by the European Union. They do not include
all the information required for full annual financial
statements, and should be read in conjunction with
the consolidated financial statements of the Group
as at and for the year ended 31 December 2014, which
are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union.
These condensed consolidated interim financial statements
were approved by the board of directors on 4 August
2015.
3 Significant accounting policies
As required by the Disclosure and Transparency Rules
of the Financial Conduct Authority, the condensed
set of financial statements has been prepared applying
the accounting policies and presentation that were
applied in the preparation of the Company's published
consolidated financial statements for the year ended
31 December 2014, except as explained below.
Adoption of new and revised standards:
The following standards and interpretations are
applicable to the Group and have been adopted in
2015 as they are mandatory for the year ended 31
December 2015.
* IAS 19: Defined Benefit Plans: Employee Contributions
- this clarifies the treatment of contributions from
employees or third parties.
* IFRIC Interpretation 21 Levies - provides guidance on
when to recognise a liability for a levy imposed by a
government.
* Amendments to IAS 36: Recoverable Amount Disclosures
for Non-Financial Assets - amends the disclosure
requirements in IAS 36 Impairment of Assets with
regard to the measurement of the recoverable amount
of impaired assets.
* Amendments to IAS 39: Novation of Derivatives and
Continuation of Hedge Accounting - provides guidance
on the treatment on novation of hedging derivatives.
There are no other new standards, amendments to
standards or interpretations mandatory for the first
time for the year ending 31 December 2015. The above
standards have not had a significant impact of the
financial statements of the Group.
4 Estimates
In preparing these interim financial statements,
management has made judgements, estimates and assumptions
that affect the application of accounting policies
and the reported amounts of assets and liabilities,
income and expenses. Actual results may differ from
these estimates.
Except as described below, in preparing these condensed
consolidated interim financial statements, the significant
judgements made by management in applying the Group's
accounting policies and the key sources of estimation
uncertainty were the same as those that applied
to the consolidated financial statements for the
year ended 31 December 2014.
The fair values of most financial instruments held
by the Group approximate to carrying value, the
most notable exception to this being the listed
debt. At 30 June 2015 the carrying amount of the
Group's listed debt (before setting off issue costs)
is GBP175.0m and the fair value (a Level 1 valuation,
i.e. determined from readily observable market data)
is GBP185.7m. Assets held for resale are held at
fair value less costs to sell and the fair value
(a Level 2 valuation, determined based on prices
for similar assets) is GBP11.6m. The Group has an
equity interest in the unquoted entity King Arthur
Holdings S.a.r.L which is held at fair value through
other comprehensive income. The fair value of this
interest is valued at GBP1.4m using a Level 2 methodology
based on the actual proceeds from the actual sales
of this asset.
During the six months ended 30 June 2015 management
reassessed its estimates and assumptions in respect
of employee post retirement benefit obligations.
The obligations under these plans are recognised
in the balance sheet and represent the present value
of the obligation calculated by independent actuaries,
with input from management. These actuarial valuations
include assumptions such as discount rates and return
on assets, details of which are provided in note
21 below.
The estimate in respect of the anticipated tax rate
to be applied for the full financial year 2015 and
subsequently used in the preparation of the results
for the six month period to 30 June 2015 are set
out in note 10.
5 Comparative figures
The comparative figures for the financial year ended
31 December 2014 are extracted from the Group's
statutory accounts for that financial year. Those
accounts have been reported on by the company's
auditor and delivered to the registrar of companies.
The report of the auditor was (i) unqualified, (ii)
did not include a reference to any matters to which
the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain
a statement under section 498(2) or (3) of the Companies
Act 2006.
6 Non-underlying items
Non-underlying income and expenses are items that
have non-trading attributes due to their size, nature
or incidence.
2015 2014
GBPm GBPm
--------------------------------------- ----- -----
Within operating expenses:
Impairment of assets held for
sale - (1.0)
Reversal of impairment on assets
classified as held for sale - 1.0
--------------------------------------- ----- -----
- -
--------------------------------------- ----- -----
Within other income - gains on
the sale of businesses, property
and investments:
Profit on the sale of businesses 8.0 0.2
(Loss) / gain on the sale of property (0.1) 1.1
Gain on disposal of investment 13.8 -
--------------------------------------- ----- -----
21.7 1.3
--------------------------------------- ----- -----
Within finance expense:
Net interest on pension scheme (1.2) (0.9)
--------------------------------------- ----- -----
(1.2) (0.9)
--------------------------------------- ----- -----
Total non-underlying items before
taxation 20.5 0.4
--------------------------------------- ----- -----
Group tangible fixed assets and assets held for
sale have been reviewed for possible impairments
in the light of economic conditions. As a result
of this review there was no impairment charge against
assets held for sale recognised in the period (2014:
GBP1.0m). During the previous year a release of
GBP1.0m was made on de-classification of assets
held for sale.
Other income, being the profit on disposal of businesses
and property comprises GBP0.1m loss on termination
of property leases (2014: profit on disposal GBP1.1m)
and a profit on the disposal of motor vehicle dealerships
of GBP8.0m (2014: GBP0.2m).
On 28 January 2015, King Arthur Holdings S.a.r.L
disposed of its only subsidiary company, King Arthur
Properties S.a.r.L. The Group will receive GBP23.8m
in total in respect of dividends and the repayment
of share capital. As at 30 June 2015, the Group
had received GBP22.4m in respect of this with further
proceeds of GBP1.4m received in July 2015.
The net interest expense on pension obligations
in respect of the defined benefit schemes closed
to future accrual is shown as a non-underlying item
due to the volatility and non-trading nature of
this amount. A net interest expense of GBP1.2m has
been recognised during the period (2014: GBP0.9m).
The non-underlying tax credit in the period relates
to the settlement of certain historic tax issues.
7 Segmental analysis
Changes in reporting structure
The Group has revised its reporting segments. In
January 2015 the Group re-organised its management
and reporting structure. The significant change
was that the Quicks used car operation was brought
under the management of the Evans Halshaw operation
and this is reflected in the internal reporting
structure as presented to the Chief Operating Decision
Maker. In the 2015 financial statements therefore
the Quicks segment is no longer reported separately.
The results of the Quicks segment for the comparative
period has been aggregated into the Evans Halshaw
segment and is restated as follows for the period
ended 30 June 2014:
As Reported 30 June
2014
--------------------
Evans Halshaw
Evans Halshaw Quicks Segment As Restated
GBPm GBPm GBPm
--------------------------------- -------------- ------ --------------------
Total gross segment
turnover 1,084.4 27.0 1,111.4
Inter-segment turnover - - -
Revenue from external
customers 1,084.4 27.0 1,111.4
--------------------------------- -------------- ------ --------------------
Operating profit before
non-underlying items 20.2 (0.9) 19.3
Other income and non-underlying -
items - -
Operating profit 20.2 (0.9) 19.3
--------------------------------- -------------- ------ --------------------
Finance expense (1.4) (0.2) (1.6)
Finance income - - -
Profit before tax 18.8 (1.1) 17.7
--------------------------------- -------------- ------ --------------------
Reconciliation to tables in the Segmental Results
Section
Operating profit as
above 20.2 (0.9) 19.3
Allocation of central
costs (2.4) - (2.4)
--------------------------------- -------------- ------ --------------------
Result presented in
Segmental results table 17.8 (0.9) 16.9
--------------------------------- -------------- ------ --------------------
Depreciation and amortisation 4.5 0.1 4.6
--------------------------------- -------------- ------ --------------------
For the six
months Evans
ended Stratstone Halshaw California Leasing Quickco Pinewood Central Total
30 June 2015 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total gross
segment turnover 884.3 1,242.8 120.7 4.7 37.5 15.9 - 2,305.9
Inter-segment
turnover - - - - (4.5) (10.0) - (14.5)
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Revenue from
external
customers 884.3 1,242.8 120.7 4.7 33.0 5.9 - 2,291.4
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Operating profit
before
non-underlying
items 24.9 28.5 4.3 1.6 1.4 4.4 (8.8) 56.3
Other income
and
non-underlying
items - - - - - - 21.7 21.7
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Operating profit 24.9 28.5 4.3 1.6 1.4 4.4 12.9 78.0
Finance expense (1.5) (1.4) (0.2) - - - (14.2) (17.3)
Finance income - - - - - - 0.1 0.1
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Profit before
tax 23.4 27.1 4.1 1.6 1.4 4.4 (1.2) 60.8
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Reconciliation to tables in the Segmental Results
section
Operating profit
as above 24.9 28.5 4.3 1.6 1.4 4.4 (8.8) 56.3
Allocation of
central costs (4.1) (4.2) - (0.2) (0.2) (0.1) 8.8 -
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Result presented
in Segmental
results table 20.8 24.3 4.3 1.4 1.2 4.3 - 56.3
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
Depreciation
and amortisation 3.6 6.2 0.7 14.3 0.1 0.2 - 25.1
----------------- ----------- -------- ---------- ------- ------- -------- ------- ----------
For the six
months Evans
ended Stratstone Halshaw* California Leasing Quickco Pinewood Central Total
30 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total gross
segment turnover 814.4 1,111.4 101.3 8.7 37.1 15.2 - 2,088.1
Inter-segment
turnover - - - - (8.9) (9.9) - (18.8)
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Revenue from
external customers 814.4 1,111.4 101.3 8.7 28.2 5.3 - 2,069.3
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Operating profit
before
non-underlying
items 20.7 19.3 4.6 3.5 1.0 4.4 (5.4) 48.1
Other income
and non-underlying
items - - - - - - 1.3 1.3
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Operating profit 20.7 19.3 4.6 3.5 1.0 4.4 (4.1) 49.4
Finance expense (1.5) (1.6) (0.2) - - - (13.1) (16.4)
Finance income - - - - - - 0.2 0.2
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Profit before
tax 19.2 17.7 4.4 3.5 1.0 4.4 (17.0) 33.2
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Reconciliation to tables in the Segmental Results
section
Operating profit
as above 20.7 19.3 4.6 3.5 1.0 4.4 (5.4) 48.1
Allocation of
central costs (2.5) (2.4) - (0.2) (0.2) (0.1) 5.4 -
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Result presented
in Segmental
results table 18.2 16.9 4.6 3.3 0.8 4.3 - 48.1
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
Depreciation
and amortisation 3.0 4.6 0.7 12.8 0.1 0.1 - 21.3
--------------------- ----------- --------- ---------- ------- ------- -------- ------- -------
* As restated - see above
8 Finance expense
2015 2014
Recognised in profit and loss GBPm GBPm
------------------------------------ ----- -----
Interest payable on bond, bank
borrowings and loan notes 7.4 7.6
Vehicle stocking plan interest 7.7 7.1
Net interest on pension scheme
obligations (non-underlying -
see note 6) 1.2 0.9
--------------------------------------- ----- -----
Total interest expense in respect
of financial liabilities held
at amortised cost 16.3 15.6
Unwinding of discounts in contract
hire residual values 1.0 0.8
--------------------------------------- ----- -----
Total finance expense 17.3 16.4
--------------------------------------- ----- -----
9 Finance income
2015 2014
Recognised in profit and loss GBPm GBPm
-------------------------------------- ----- -----
Interest receivable on bank deposits 0.1 0.2
Total finance income 0.1 0.2
----------------------------------------- ----- -----
10 Taxation
Based upon the anticipated profit on underlying
activities for the full year, the effective rate
on underlying profit for 2015 is estimated at 23.6%
(2014: 25.5%). The effective rate for 2015 is higher
than the current rate of UK tax due to the proportion
of profit taxed at a higher rate in the US. On 8
July 2015, the Chancellor stated his intention to
reduce the main rate of corporation tax to 19% from
1 April 2017 and 18% from 1 April 2020. These have
yet to be substantively enacted so therefore deferred
tax has been provided at the current corporation
tax rate of 20%.
11 Dividends
2015 2014
GBPm GBPm
------------------------------------------ ------- ------
Final Dividend paid in respect
of 2014 of 0.6p (2013: 0.3p)
per ordinary share 8.6 4.3
---------------------------------------------- ------- ------
An Interim dividend of 0.6p (2014: 0.3p) per ordinary
share totalling GBP8.7m (2014: GBP4.3m) will be
paid on 23 October 2015.
12 Earnings per share
2015 2014
pence pence
-------------------------------------------- -------- -------
Basic earnings per share 4.03 1.77
Effect of adjusting items (1.90) (0.05)
------------------------------------------------ -------- -------
Underlying basis earnings per
share (Non GAAP measure) 2.13 1.72
------------------------------------------------ -------- -------
Diluted earnings per share 3.99 1.72
Effect of adjusting items (1.90) (0.05)
------------------------------------------------ -------- -------
Underlying diluted earnings per
share (Non GAAP measure) 2.09 1.67
The calculation of basic, diluted
and adjusted earnings per share
is based on:
2015 2014
Number of shares (millions) number number
-------------------------------------------- -------- -------
Weighted average number of shares
used in basic and adjusted earnings
per share calculation 1,445.1 1,425.8
Weighted average number of dilutive
shares under option 12.2 45.7
------------------------------------------------ -------- -------
Diluted weighted average number
of shares used in diluted earnings
per share calculation 1,457.3 1,471.5
------------------------------------------------ -------- -------
2015 2014
Earnings GBPm GBPm
-------------------------------------------- -------- -------
Profit for the period 58.2 25.3
Adjusting items:
Non-underlying items attributable
to the parent (see note 6) (20.5) (0.4)
Tax effect of non-underlying
items (6.9) (0.4)
------------------------------------------------ -------- -------
Earnings for adjusted earnings
per share calculation 30.8 24.5
------------------------------------------------ -------- -------
The directors consider that the underlying earnings
per share figures provide a better measure of comparative
performance.
13 Business and property disposals
During the period the Group disposed of certain
assets of motor vehicle dealerships generating net
proceeds of GBP13.1m (2014: GBP0.2m) and a profit
on disposal of GBP8.0m (2014: GBP0.2m).
The Group sold property generating net proceeds
of GBPnil (2014: GBP6.1m) and a loss on disposal
of GBP0.1m (2014: profit GBP1.1m).
14 Assets classified as held for sale
The Group holds a number of freehold properties
that are currently being marketed for sale which
are expected to be disposed of during the next 12
months. No impairment losses have been recognised
in the income statement for the six months to 30
June 2015 on re-measurement of these properties
to the lower of their carrying amount and their
fair value less costs to sell (2014: GBP1.0m). No
impairment losses have been released in the period
relating to assets that ceased to be classified
as held for sale (2014: GBP1.0m).
During the period to 30 June 2015 there were no
disposals of assets classified as held for sale.
During the previous year disposals of assets classified
as held for sale realised a profit of GBP0.4m on
disposal.
The major classes of
assets comprising the
assets held for sale
are:
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
------------------------ ------- ------- -----------
Property, plant and
equipment 11.6 13.5 11.6
------------------------ ------- ------- -----------
15 Cash and cash equivalents
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
--------------------------- ------- ------- -----------
Bank balances and cash
equivalents 149.6 94.9 91.4
------------------------------- ------- ------- -----------
16 Net borrowings
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
------------------------------- ------- ------- -----------
Cash and cash equivalents
(note 15) 149.6 94.9 91.4
Non-current interest
bearing loans and borrowings (202.7) (200.6) (200.2)
----------------------------------- ------- ------- -----------
(53.1) (105.7) (108.8)
----------------------------------- ------- ------- -----------
17 Provisions
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
----------------- ------- ------- -----------
Vacant Property 6.6 8.2 5.4
VAT assessment 0.6 0.6 0.6
--------------------- ------- ------- -----------
7.2 8.8 6.0
--------------------- ------- ------- -----------
Non-current 5.1 5.7 3.5
Current 2.1 3.1 2.5
--------------------- ------- ------- -----------
7.2 8.8 6.0
--------------------- ------- ------- -----------
18 Deferred income
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
----------------------------- ------- ------- -----------
Property leases - sale
and leaseback proceeds
excess over fair value
and fixed rental increases 14.9 17.3 15.2
Warranty policies sold 7.0 6.0 6.0
Contract hire leasing
income 49.9 46.9 46.6
--------------------------------- ------- ------- -----------
71.8 70.2 67.8
--------------------------------- ------- ------- -----------
Non-current 44.4 51.0 41.6
Current 27.4 19.2 26.2
--------------------------------- ------- ------- -----------
71.8 70.2 67.8
--------------------------------- ------- ------- -----------
Changes in contract
19 hire vehicle balances
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
------------------------------ ------- ------- -----------
Depreciation 12.4 11.4 23.2
Changes in trade and
other payables and deferred
income 2.9 7.4 8.0
Purchases of contract
hire vehicles (31.3) (25.8) (47.1)
Unwinding of discounts
in contract hire residual
values (1.0) (0.8) (1.6)
---------------------------------- ------- ------- -----------
(17.0) (7.8) (17.5)
---------------------------------- ------- ------- -----------
20 Change in inventories
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
-------------------------------- ------- ------- -----------
Movement in inventory (85.0) (24.4) (73.6)
Inventory changes in
business combinations
and disposals (0.9) - (0.6)
Impact of exchange differences - - (0.2)
Non cash movement in
consignment vehicles 12.8 (5.2) (1.4)
Transfer value of contract
hire vehicles from fixed
assets to inventory 16.8 6.6 15.7
------------------------------------ ------- ------- -----------
Cash flow increase in
movements in inventory (56.3) (23.0) (60.1)
------------------------------------ ------- ------- -----------
21 Pension scheme obligations
The net liability for defined benefit obligations
has decreased from GBP66.4m at 31 December 2014
to GBP47.6m at 30 June 2015. The decrease of GBP18.8m
comprises a net interest expense of GBP1.2m recognised
in the income statement, a net remeasurement gain
of GBP18.6m and contributions paid of GBP1.4m. The
net remeasurement gain has arisen in part due to
changes in the principal assumptions used in the
valuation of the scheme's liabilities over those
used at 31 December 2014. The assumptions subject
to change are the discount rate of 3.90% (31 Dec
2014: 3.60%), the inflation rate (RPI) of 3.2% (31
Dec 2014: 3.0%), the inflation rate (CPI) of 2.2%
(31 Dec 2014: 2.0%) and the rate of increase of
pensions in payment of 2.80% (31 Dec 2014: 2.67%).
22 Related party transactions
There have been no new related party transactions
that have taken place in the first six months of
the current financial year that have materially
affected the financial position or performance of
the Group during that period and there have been
no changes in the related party transactions described
in the last annual report that could do so.
23 Risks and uncertainties
The Board maintains a policy of continuous identification
and review of risks which may cause our actual future
Group results to differ materially from expected
results. The principal risks identified were: failure
to adopt the right strategy or failure of our adopted
strategy to be effectively implemented or to deliver
the desired results, dependence on vehicle manufacturers
for the success of our business, failure to meet
competitive challenges to our business model or
sector, European economic instability affecting
the UK in particular impacting used vehicle prices,
UK governmental spending constraints, changes to
the type of vehicles sold or the amount of road
use, availability of debt funding, funding requirements
of the occupational pension scheme, significant
litigation or
regulator action against or otherwise impacting
the Group, failure of systems, reliance on the use
of estimates, failure to attract, develop, motivate
and retain good quality team members, failure to
provide safe working and retail environments and
failure to control environmental hazards. The Board
has recently reviewed the risk factors and confirms
that they should remain valid for the rest of the
current year. The Board considers the main areas
of risk and uncertainty that could impact profitability
to be used vehicle prices and economic and business
conditions.
Adoption of Financial Reporting Standard (FRS) 101
24 - Reduced Disclosure Framework
Following the publication of FRS 100 'Application
of Financial Reporting Requirements' by the Financial
Reporting Council, Pendragon PLC is required to
change its accounting framework for its entity financial
statements, which is currently UK GAAP, for its
financial year commencing 1 January 2015. The Board
considers that it is in the best interests of the
Group for Pendragon PLC to adopt FRS101 'Reduced
Disclosure Framework'. No disclosures in the current
UK GAAP financial statements would be omitted on
adoption of FRS 101. A shareholder or shareholders
holding in aggregate 5% or more of the total allotted
shares in Pendragon PLC may serve objections to
the use of the disclosure exemptions on Pendragon
PLC, in writing, to its registered office (Loxley
House, Little Oak Drive, Annesley, Nottingham, NG15
0DR) not later than 4 September 2015.
Responsibility Statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the European Union;
b) The interim management report includes a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
T G Finn
Chief Executive
T P Holden
Finance Director
4 August 2015
INDEPENDENT REVIEW REPORT TO PENDRAGON PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Changes
in Equity, Condensed Consolidated Balance Sheet, Condensed
Consolidated Cash Flow Statement and the related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA. As disclosed in note 2, the annual financial
statements of the Group are prepared in accordance with IFRSs as
adopted by the EU. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Michael Steventon
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
4 August 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFFDTIIVIIE
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