RNS Number:1255Q
H.R. Owen PLC
24 September 2003
For immediate release
24 September, 2003
H. R. OWEN PLC
("the Company")
Interim Results for the six months ended 30 June, 2003
CHAIRMAN'S STATEMENT
"Results and Dividends
The results for the first half of 2003 are a reflection of what has been an
unsettled period for the Group. Consumer confidence has been affected,
particularly in London, at a time when the motor industry was entering its most
intense period of upheaval following the Block Exemption Review. The extensive
rationalisation and refocusing programme concentrating on holding franchises for
prestige and specialist marques undertaken by the Group, as a result of the
review, has held back profitability in the short term, but allowed the Group to
position itself more effectively for the future.
Turnover increased to #264 million compared to #251 million for the first half
of 2002. This increase was largely the result of acquisitions made since 30 June
last year. Operating profit before exceptional items was #2.7 million (2002:
#3.4 million). Profit before tax was #1.7 million (2002: #2.3 million).
Profit after tax was #1.0 million (2002: #1.4 million) representing earnings per
share of 5.2p (2002: 7.6p). The directors are declaring an unchanged interim
dividend of 5p per share. Payment will be made on 28 October, 2003 to
shareholders on the register at the close of business on 3 October, 2003.
Expenditure on acquisitions was #10.1 million and net capital expenditure
totalled #0.7 million in the six months to 30 June 2003. Overall there was a
cash outflow of #l.5 million and an increase in net debt to #14.0 million. The
net debt at 30 June 2003 represented 55 per cent. of shareholders' funds (2002:
26 per cent.). Interest cover was 2.5 times.
Review of Business
The performance of the various franchises during the period under review has
been mixed across the Group. While some have continued to perform well, most
notably Mercedes-Benz and Porsche, others have been held back by softer markets
generally and delays in the introduction of new models. Some franchises
operating in Central London have found trading conditions especially difficult,
particularly with regard to corporate sales.
Acquisition and disposal activity during the period has been high, with a number
of corporate transactions taking place. At the same time the Group has continued
with its installation of a new computer system, backed by a comprehensive staff
re-training programme. As I explained in my statement in the 2002 Annual Report,
this system is designed both to control costs and increase efficiency across all
disciplines of our business, and will undoubtedly generate economies in the
operation of our new larger territories.
Specialist Division
Bentley, Ferrari, Maserati, Lamborghini, Porsche, Rolls-Royce, Lotus, Noble
The top end of the market has seen high levels of forward orders being taken for
the Group's specialist brands, in particular, orders for the new Bentley,
Rolls-Royce and Lamborghini. However, deliveries of these higher margin vehicles
have all been delayed, and this has adversely affected the results. Although
these delays will continue in the short term it is expected that deliveries will
commence towards the end of the year.
Against this background there have been a number of key developments in the
division.
In July, the Group sold its successful Porsche franchise in Hatfield to a
subsidiary of Porsche Cars Great Britain Limited for a consideration of
approximately #2.3 million. During the first six months, this dealership made a
substantial contribution to the Group's results, as we were able to fulfill
significant outstanding orders.
In March, the Group established a new Lamborghini showroom at its former Bentley
premises in South Kensington and it also announced its intention to open a
second Lamborghini showroom in Stockport to cover the North-West. Lamborghini
has recently announced its new model, Gallardo, and the Group is holding
substantial forward orders for this car, with deliveries commencing later in the
year.
In January, the Group opened a new Rolls-Royce showroom in Park Lane in
temporary premises and is planning to take over new premises later in the year.
The new Rolls-Royce model was launched in January, and despite delays the car
has been well received with good forward orders.
The new Bentley Continental GT has now been unveiled and our Jack Barclay
subsidiary, which holds the sole franchise for London, has one of the largest
forward-order lists for any specialist car that the Group has handled.
The Group is announcing today that it has reached agreement to sell its Maserati
franchise at St Albans. The Group will now concentrate its Maserati, Lotus and
Noble franchises in London, with Maserati continuing to be represented alongside
Ferrari at the Kensington showrooms.
DaimlerChrysler
Mercedes-Benz Car, Chrysler/Jeep, Smart
In previous reports, the Group announced that it had been appointed as the
dealer to represent the Mercedes-Benz franchise at locations in Sussex and
Surrey. We now operate sales and service points for Mercedes-Benz at Redhill,
Gatwick, Eastbourne and Brighton. We also operate sales and service points for
Smart at Gatwick. Plans are now at an advanced stage for the redevelopment of
several of the sites, and the Group is pleased to report that all of the
dealerships have performed well, in line with our expectations.
The two Chrysler Jeep franchises have continued to provide a good return and
have also benefited from the reduction in the number of dealers in the catchment
area. We now await the introduction of new models, including the Crossfire which
is substantially forward-sold.
Premier Automotive Group
Jaguar, Land Rover, Volvo
The three brands continue to benefit from the introduction of new models.
Early in the year, Jaguar announced its new XJ Series and, more recently, a
diesel variant of the X-Type and an X-type Estate. Volvo announced the new XC90
off road vehicle. All of these models have created strong interest.
During the period, the Group established a new Jaguar franchise alongside its
Land Rover franchise at Bury St Edmunds and relocated Volvo alongside its Land
Rover franchise at Colchester. The necessary building works interrupted normal
business, but the multi-franchising of both outlets provides cost-effective
coverage for the brands.
In July, we acquired from Guy Salmon the Northwest London franchise for Jaguar,
with outlets in Colindale and Hampstead. Simultaneously, the Group sold its Land
Rover business in Stockport to Guy Salmon.
The Group is now in the early stages of reorganising the London sites for the
three brands and is delighted to have returned the Jaguar brand to London as
part of the Group's product offering.
Volkswagen Group Brands
Audi, Volkswagen, Volkswagen Van, SEAT
Our two current Audi dealerships at Colindale and Whetstone have recorded solid
results for both sales and aftersales. Recent new model introductions of the A8
and A3 have created strong interest.
In April, the Group closed its SEAT franchise in Chiswick. We have now agreed
in principle to acquire an additional Audi dealership and are in negotiations to
acquire a further two, which together with our existing sites will serve one of
the largest catchment areas for the brand in the UK.
The Volkswagen franchises have experienced difficult trading conditions awaiting
the introduction of new models covering new sectors, namely the Phaeton, Touran
and Touareg. These have been well received and we now await full supplies. This
year has also seen the run-out for the largest selling model, the Golf, for
which a replacement is due to be launched shortly. We also await the
introduction of the new Volkswagen van range.
BMW
BMW, Mini
Earlier in the year, the Group announced an agreement to develop a new
dealership at Park Royal in London and has subsequently announced the
acquisition of three further BMW and Mini dealerships in West London. In March,
the Group acquired Heathrow Limited, a BMW and Mini dealership trading in the
West Drayton and Hillingdon area, for a sum of #4.7 million. In June, the Group
acquired the business and goodwill of Park West Chiswick, a substantial BMW and
Mini dealership in West London, for approximately #4.7 million. Finally, in late
August the Group acquired the business and goodwill of Sytner Chelsea, a BMW and
Mini dealership in Chelsea.
These three acquisitions, together with our existing BMW dealership at Holland
Park, complete a large catchment area for West London for both the BMW and Mini
franchises. Whilst business has been tough during the period, the recent
introduction of new models, Z4, 5 Series and 6 Series, along with the X3, are
expected to be a great success.
Lexus
The Group's Lexus dealership at Hatfield has performed in line with
expectations, although we eagerly anticipate the new engines and models that are
due to be introduced in 2004/5.
The Group is announcing today that it has reached agreement to acquire the
business and assets of the Lexus franchise for Brighton.
Current Trading and Outlook
The Group's strategy has been to rebalance its portfolio at the upper end of the
market, necessitating a substantial reorganisation of its franchises to coincide
with and take advantage of new franchise laws with which all existing franchise
agreements will have to comply in October of this year.
At the beginning of the year, we had plans to dispose of two businesses, close
one, establish or move five franchises to new sites, including
multi-franchising, and acquire two more with three to follow in 2004. However,
there were delays whilst the manufacturers finalised their franchising plans
with knock-on effects delaying the timing of some of these events and bringing
forward others, at the same time creating some new strong opportunities. Several
of these plans will impact adversely on profits this year on a one-off basis,
but the new dealerships will add undoubted strength to the Group. Corporate
activity in the full year will have been intense with three businesses disposed
of, one closed, five new franchises established or relocated and six new
franchises acquired. The fifteen businesses thus affected represent a large
percentage of the Group's franchised portfolio.
The remaining dealerships, which we have owned for the full year without
disruption, have been experiencing mixed fortunes. The London franchises have
been particularly affected by a weak retail economy. Two of the brands have been
adversely affected by model changes and three specialist brands have experienced
delays in introducing new higher-margin models, for which the Group holds strong
forward orders.
In the opinion of the directors, the outcome for the full year will be affected
by the disruption caused by the dealership implementation programme and will
also be dependent on receipt of some of the forward sold new models, which have
been previously delayed. However the directors believe that, with the major
structural changes behind us, the financial and trading prospects of the Group
for the medium term are very encouraging."
John P MacArthur
Chairman
24 September, 2003
Unaudited consolidated results for the six months ended 30 June 2003
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Turnover
Continuing operations 254,741 250,616 489,775
Acquisitions 9,210 - -
Total turnover 263,951 250,616 489,775
Operating profit
Continuing operations 2,625 3,392 4,209
Acquisitions 121 - -
2,746 3,392 4,209
Exceptional items:
Profit on sale of freehold property - 1,434 1,434
Profit on disposal of business - 148 1,133
Loss on closure of business - (1,456) (1,456)
Amounts written off investments - - (789)
Profit on ordinary activities
before interest 2,746) 3,518 4,531
Net interest payable (1,093) (1,178) (2,221)
Profit for the period
before taxation 1,653 2,340 2,310
Taxation charge (659) (913) (827)
Profit for the period
after taxation 994 1,427 1,483
Dividends (951) (950) (1,902)
Retained profit/(loss) for the period 43 477 (419)
Basic earnings per share 5.2p 7.6p 7.8p
Dividends per share 5.0p 5.0p 10.0p
Unaudited consolidated balance sheet as at 30 June 2003
Unaudited Unaudited Audited
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible fixed assets 11,012 3,115 5,610
Tangible fixed assets 16,562 14,904 14,973
Other investments 200 889 200
Total fixed assets 27,774 18,908 20,783
Current assets
Stocks and work in progress 74,938 58,992 72,258
Debtors 26,769 29,279 20,352
Cash at bank and in hand 23 2,838 683
101,730 91,109 93,293
Current liabilities (102,756) (82,682) (87,042)
Net current (liabilities)/assets (1,026) 8,427 6,251
Total assets less current liabilities 26,748 27,335 27,034
Long term liabilities & provisions (1,096) (1,618) (1,429)
Net assets 25,652 25,717 25,605
Called-up share capital 19,030) 19,003) 19,027
Share premium account 11,917) 11,908) 11,916
Profit & loss account (5,295) (5,194) (5,338)
Equity shareholders' funds 25,652 25,717 25,605
Unaudited cash flow statement for the six months ended 30 June 2003
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Net cash inflow from operating activities 9,146 3,339 6,791
Returns on investments and servicing of (1,092) (1,178) (2,221)
finance
Taxation (286) (301) (1,111)
Capital expenditure and financial investment (723) 2,119 1,426
Acquisitions and disposals (10,147) 1,656 373
Equity dividends paid (951) (939) (1,890)
Net cash (outflow)/ inflow before (4,053) 4,696 3,368
financing
Financing 2,524 (1,304) (2,131)
(Decrease)/increase in cash (1,529) 3,392 1,237
Notes to the cash flow statement for the six months ended 30 June 2003
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Reconciliation of operating profit to to net
cash flow from operating activities
Operating profit 2,746 3,392 4,209
Depreciation 1,178 1,042 2,054
Amortised goodwill 182 143 294
Loss/(profit) on disposal of tangible fixed 34 (185) 71
assets
Exceptional losses from closure of business - - (295)
Decrease/(increase) in stocks 3,515 7,446 (5,296)
Increase in debtors (4,886) (9,121) (616)
Increase in creditors 6,377 622 6,370
Net cash inflow from operating activities 9,146 3,339 6,791
Reconciliation of net cash flow to movement
in net debt
(Decrease)/increase in cash in the period (1,529) 3,392 1,237
Cash (inflow)/outflow from financing (2,520) 1,589 2,449
Changes in net debt resulting from cash (4,049) 4,981 3,686
flows
New finance leases - - -
Loans associated with acquisitions and (997) 1,000 39
disposals of dealerships
Movement in net debt in the period (5,046) 5,981 3,725
Net debt brought forward (8,935) (12,660) (12,660)
Net debt carried forward (13,981) (6,679) (8,935)
Profit and loss account
All of the results of the Group for the six months ended 30 June 2003 derive
from continuing operations.
Accounting policies
The Interim results for the period have been prepared in accordance with the
accounting policies disclosed in the 2002 financial statements..
Prior period exceptional items
During the six months ended 30 June 2002 the Company recorded the following
exceptional items:
* the closure of the Group's Citroen dealership in Burnham, Berkshire at
the end of March 2002 produced a total loss of #1,456,000 of which #1,161,000
related to goodwill associated with the purchase of the business in 1994 and
which had been written off directly to reserves at that time;
* the sale of a freehold property in Bromley, Kent in April 2002 for a
cash consideration, before disposal costs, of #3,000,000, generated a profit on
sale of #1,434,000;
* the sale of Bradshaw Webb, a Mercedes-Benz dealership based in Central
London, on 31 May 2002 to Mercedes-Benz generated a profit, after writing off a
loss on purchased goodwill of #147,000, of #148,000
Earnings per share
The calculation of earnings per share is based on profit on ordinary activities
after taxation of #994,000 and the weighted average of shares in issue during
the period of 19,030,000.
Comparative figures
The comparative figures for the year ended 31 December 2002 have been taken
from, but do not constitute, the Company's statutory accounts for that financial
year. These accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
Interim Statement
Copies of the Interim Statement are available to the public at the registered
office of the Company at 75 Kinnerton Street, London SW1X 8ED.
This information is provided by RNS
The company news service from the London Stock Exchange
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