RNS Number:9451Q
European Motor Hldgs PLC
16 October 2003
EUROPEAN MOTOR HOLDINGS plc
Interim results for the six months ended 31 August 2003
Key points:
*Profit before exceptional items, goodwill amortisation and tax up 9.0% to
#6.7 million
*Interim dividend increased by 6.3% to 3.4 pence per share
*Net assets per share up by 4.7% since 28 February 2003 to 112.4 pence
*Net cash #10.4 million
*Good start to second half with record September performance
*New Jaguar and Land Rover businesses acquired on 1 October
*Bentley franchise secured for the North East of England
Commenting on these results, Chief Executive Richard Palmer said:
"Our profitability has improved further, we have captured new franchise
territories, have strengthened our balance sheet and had a record start to the
second half. We are therefore confident of the outcome for the year."
Enquiries:
Richard Palmer Chief Executive
European Motor Holdings plc
Ann Wilson Finance Director
European Motor Holdings plc
Morning: Biddick Associates 020 7448 1000
Afternoon: European Motor Holdings plc 01491 413399
Chief Executive's statement
The Group's profit before tax for the six months ended 31 August 2003 was #6.7
million on turnover of #242 million and we continued to show progress within our
Motor Retail and Motor Services Divisions, with both improving on the prior
period's results. The Group has consolidated its position as the leading
performer in the quoted motor retail sector.
Earnings per share before exceptional items and goodwill amortisation have risen
from 7.9p to 8.4p, an increase of 6%, whilst overall earnings per share have
increased to 8.5p for the first half. In line with our progressive dividend
policy, we are increasing our interim dividend payment from 3.2p per share to
3.4p per share.
Net assets have continued to rise during the period, totalling #59.8 million at
31 August, including net cash of #10.4 million.
Trading
Performance within our Motor Retail Division has been good, with operating
profits before amortisation of goodwill increasing from #6.8 million to #7.2
million in the period under review, an increase of 7%.
National registrations of new vehicles were 2% ahead of the previous period with
our own like for like registrations increase exceeding this, as has been the
pattern in recent years because of our strong brand profile. For our key
franchises, total Group registrations including new businesses were 23% above
the same period last year.
Whilst some of our brands have suffered margin pressure, growth within others
has more than compensated for this and, overall, our return on sales has
improved compared to last year.
During the period our profits and margins have improved with Audi, Jaguar and
Volvo and profits at our Land Rover and Mini businesses have increased as the
businesses continue to grow albeit with slightly lower margins. With BMW, like
for like profits growth was hampered by some margin pressure in the first half
of the year but, overall, profits from this franchise have improved
significantly as a result of the purchase of our Stockton dealership in February
this year.
Our Volkswagen businesses' margins and profits have suffered during the period
due to two factors. Firstly, in the South East where we are at the early stages
of developing a market area in South West London and have very immature
businesses, the economic environment has been more difficult than in other parts
of the country and, secondly, the current Volkswagen Golf is reaching the end of
its product cycle and discounting on this retail oriented car has become
prevalent. The new Golf is expected in early 2004 and will, we believe, help
greatly to reverse this situation.
Within the Motor Retail Division we have replaced earnings from the established
businesses that we sold in the comparative period last year with earnings from
less mature or start-up businesses. We are, therefore, very satisfied with our
increased profits in the period and believe that we have considerable scope to
continue to improve the new businesses.
Our auction businesses have had an excellent start to the year, with higher
volumes and profits, and our import business, even though in a very competitive
sector of the market, continues to perform well.
Our Motor Services Division, which comprises Wilcomatic and related companies,
performed particularly well, with operating profit up from #189,000 to #548,000.
The Division sold more equipment and took on increased volumes of service work
during the period, and these factors, together with an improved performance from
our retail washing operations, resulted in an excellent performance overall.
Business development
Changes to the EU Block Exemption regulations took effect on 1 October 2003 and
these changes will have a number of effects upon the motor retailing industry.
Further consolidation within the industry is now likely as acquirors have
greater freedom, and the new franchise contracts give us greater security,
making investment decisions easier. The introduction of new manufacturer
standards by the brands we represent will ensure that potential customers will
continue to enjoy a high level of facilities and services, and this, we believe,
will help to ensure their loyalty. We intend to continue to expand our portfolio
with our core partners.
Our position with Audi is still to be resolved but, following discussions, we
remain confident that we will secure a territory to represent Audi beyond August
next year when our current franchises expire.
On 1 October 2003 we acquired the business and certain assets of the Jaguar and
Land Rover operations in Preston for a net consideration of #4.93 million, of
which #3.35 million represented freehold and very long leasehold properties at
two sites and #0.65 million represented goodwill. The payment for goodwill
represented less than one year's profits for the businesses, based on management
accounts for the year ended 31 December 2002. These businesses complement our
existing successful operations within these franchises and represent an
outstanding opportunity to develop with these brands.
It gives me great pleasure to inform you that, subject only to completion of
facilities within agreed timescales, we will represent Bentley exclusively in
the North East of England, opening in the first quarter of next year. We will be
joining the Bentley brand at a very exciting time, with the imminent launch of
the widely acclaimed Continental GT. We believe this will prove to be a very
important and profitable addition for the Group. It also further extends our
relationship with the Volkswagen group.
Financial review
As stated above, profit on ordinary activities before tax for the six months
ended 31 August 2003 was #6.7 million compared to #6.4 million in the
corresponding period last year. This year's result includes exceptional profits
of #0.1 million relating to the surrender of a leasehold property in Nantwich,
whilst the comparative figure included exceptional profits of #0.3 million on
the disposal of a number of businesses. Excluding these exceptional items, the
profit for the period was #6.6 million, compared to #6.1 million for the same
period last year, an increase of 8%. These results demonstrate that the
acquisitions we made in February and March this year and the continuing growth
within our established businesses have more than compensated for the loss of the
earnings of the businesses disposed of last year.
When the impact of goodwill amortisation charges relating to businesses acquired
recently is removed, underlying profits, excluding exceptional items, increased
from #6.1 million to #6.7 million, an increase of 9%.
The tax charge for the period under review is based on the estimated effective
tax rate for the full financial year. This results in a tax rate for the six
months of approximately 33%, the same as last year.
Earnings per share for the period were 8.5p compared to 8.4p last year.
Excluding the exceptional items, the figure for this year is 8.3p compared to
7.8p last year. The Board has declared an interim dividend of 3.4p per share,
representing a 6% increase on last year. Dividend cover excluding exceptional
items for the period is 2.4 times, the same as last year.
The net effect of branches opened and sold since last year is a reduction in
turnover of #7 million. However, within our continuing Motor Retail businesses,
increases in vehicle sales volumes and increases in the average prices of
vehicles sold have more than offset this reduction. There has also been an
increase in turnover at Wilcomatic, due primarily to a significant increase in
equipment sales. As a result of all these factors, there has been a net increase
of #11 million in overall Group turnover compared to the first half of last
financial year.
Operating profit has increased to 2.7% of turnover, compared to 2.6% last year
and the Group continues to be one of the most profitable in the industry.
Notwithstanding the cash generated during the period, average net cash balances
were lower than in the comparative period due to the net cash outflow in the
second half of last financial year on acquisitions, dividends and investment in
working capital. This has resulted in a small decrease in net interest
receivable (excluding new vehicle stocking interest) for the period.
As evidenced by the balance sheet, the Group continues to be in a very strong
financial position. During the period, we have invested #1.3 million in capital
expenditure, less receipts of #0.2 million in respect of disposals and also
invested #0.5 million in the acquisition of a Volkswagen business in Walton on
Thames.
During the period, the Company issued 360,000 shares in respect of the exercise
of options, resulting in a cash inflow of #0.3 million.
We have invested #0.2 million in working capital during the period, and paid
#1.8 million in respect of taxation, against which there has been a net receipt
from finance leases and letters of credit of #2.0 million. The net effect of
these cash flows, together with the #8.1 million operating profit (after adding
back depreciation and amortisation) in the period, is a net cash inflow of #6.8
million. The Group has a net cash balance of #10.4 million at 31 August 2003.
The Group's net cash level at 31 August is not representative of the year as a
whole because, immediately prior to a month with a registration plate change,
used vehicle stocks and vehicle debtors are lower than at other times of the
year and we are in receipt of deposits on cars being prepared for sale.
Additionally, the timing of dividend payments is such that all dividends are
paid in the second half of the financial year.
As we announced in August, we have been negotiating with HM Customs & Excise in
respect of issues arising from recent changes in VAT case law. Confirmation has
been received from HM Customs & Excise that the Group's retrospective claims in
respect of these changes have been agreed in principle, although the quantum of
recovery is yet to be confirmed. We hope to receive this confirmation before the
end of this financial year and the amounts receivable are expected to be
significant, but are not, as yet, accurately predictable.
Outlook
We have just had a record performance for September in our Motor Retail
Division, giving us a very positive start to the second half of the financial
year.
We have a number of key new model introductions in the second half including,
from BMW, the '5' series which was launched in September, the '6' series and
facelifted X5 to be launched early next year; from Jaguar, the 'X' type diesel
which was launched in September, and, from Volkswagen, the important new Golf,
which is expected early next year. Based on this, I believe that we can look
forward to a period of enhanced sales activity in our second half year.
Businesses acquired at the end of our last financial year and our recently
acquired Jaguar and Land Rover businesses will make an additional contribution
in the period and we are confident of the outcome for the year.
Current trading and prospects enable us to look forward to a very satisfactory
result for the year for our Motor Services Division.
Our goal is to continue to expand the Motor Retail business with our core
manufacturer partners and we have significant resources available to do this.
Richard Palmer
Chief Executive
16 October 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes Six months Six months Year
ended ended ended
31 August 31 August 28 February
2003 2002 2003
#'000 #'000 #'000
Turnover 1 242,100 231,357 430,005
Cost of sales (207,070) (198,220) (365,934)
--------- --------- ---------
Gross profit 35,030 33,137 64,071
Distribution
costs (16,639) (15,422) (29,315)
----------------------------------------------------------------------------
Goodwill
amortisation (89) (10) (28)
Other
administrative
expenses (11,773) (11,714) (23,829)
----------------------------------------------------------------------------
Administrative
expenses (11,862) (11,724) (23,857)
--------- --------- ---------
Operating
profit 2 6,529 5,991 10,899
Profit on
disposal of
businesses - 304 298
Profit on
disposal of
properties 3 115 - 1,746
Interest
receivable 163 320 516
Interest
payable (97) (187) (228)
--------- --------- ---------
Profit on
ordinary
activities
before
taxation 6,710 6,428 13,231
Tax on profit
on ordinary
activities 4 (2,185) (2,009) (3,689)
--------- --------- ---------
Profit on
ordinary
activities
after taxation 4,525 4,419 9,542
Dividends 5 (1,825) (1,690) (3,965)
--------- --------- ---------
Retained
profit for the
financial
period 2,700 2,729 5,577
========= ========= =========
Earnings per
share (basic) 6 8.5p 8.4p 18.2p
========= ========= =========
Earnings per
share
(diluted) 6 8.4p 8.3p 17.9p
========= ========= =========
Dividend per
share 5 3.4p 3.2p 7.5p
========= ========= =========
There are no recognised gains or losses other than the profit for the period as
reported above.
CONSOLIDATED BALANCE SHEET
31 August 31 August 28 February
2003 2002 2003
#'000 #'000 #'000
Fixed assets
Tangible assets 34,998 31,474 35,178
Goodwill 2,283 130 2,332
---------- --------- ---------
37,281 31,604 37,510
---------- --------- ---------
Current assets
Stocks 73,702 71,947 78,379
Debtors 18,443 16,681 17,657
Cash at bank and in hand 20,294 25,905 13,543
---------- --------- ---------
112,439 114,533 109,579
Creditors: amounts falling
due within one year (88,602) (91,473) (89,029)
---------- --------- ---------
Net current assets 23,837 23,060 20,550
---------- --------- ---------
Total assets less current
liabilities 61,118 54,664 58,060
Creditors: amounts falling
due after more than one year (236) (271) (273)
Provisions for liabilities
and charges (1,052) (768) (969)
Deferred income - (140) -
---------- --------- ---------
59,830 53,485 56,818
========== ========= =========
Capital and reserves
Called up share capital 21,295 20,924 21,151
Share premium account 27,169 26,743 27,001
Capital redemption reserve 746 746 746
Profit and loss account 10,620 5,072 7,920
---------- --------- ---------
Equity shareholders' funds 59,830 53,485 56,818
========== ========= =========
Net cash 10,378 18,045 5,562
========== ========= =========
Net assets per share 112.4p 102.2p 107.4p
========== ========= =========
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2003 2002 2003
#'000 #'000 #'000
Net cash
inflow from
operating
activities 9,685 8,589 9,967
Returns on
investments
and servicing
of finance 66 133 288
Tax paid (1,759) (1,489) (3,717)
Capital
expenditure
and financial
investment (1,091) (4,042) (4,008)
Acquisitions
and disposals (496) 7,087 (1,003)
Equity
dividends paid - - (3,767)
---------- --------- ---------
Net cash
inflow/(outflo
w) before
financing 6,405 10,278 (2,240)
Financing 346 (1,634) (1,478)
---------- --------- ---------
Increase/(decr
ease) in cash
in the period 6,751 8,644 (3,718)
========== ========= =========
Reconciliation of operating profit to net cash flow from operating
activities
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2003 2002 2003
#'000 #'000 #'000
Operating
profit 6,529 5,991 10,899
Depreciation
and
amortisation 1,555 1,378 2,802
(Profit) on
sale of
tangible fixed
assets (9) (41) (63)
Decrease/(incr
ease) in
stocks 5,136 (5,657) (9,698)
(Increase) in
debtors (786) (907) (1,908)
(Decrease)/inc
rease in
creditors (4,577) 8,937 8,675
Net movement
in
demonstrator
funding 1,837 (1,112) (740)
---------- --------- ---------
Net cash
inflow from
operating
activities 9,685 8,589 9,967
========== ========= =========
Analysis of changes
in net cash
At Cash Other non At
1 March flow cash 31 August
2003 changes 2003
#'000 #'000 #'000 #'000
Cash at bank and in 13,543 6,751 - 20,294
hand
--------
Debt due
within one
year (3,205) (115) - (3,320)
Finance leases
(demonstrators) (4,354) 8,405 (10,242) (6,191)
Finance leases
(other) (422) 81 (64) (405)
--------
8,371
-------- -------- --------- ---------
Total 5,562 15,122 (10,306) 10,378
======== ======== ========= =========
NOTES TO THE STATEMENT OF PRELIMINARY RESULTS
1. Analysis of turnover
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2003 2002 2003
#'000 #'000 #'000
Motor Retail
Division 231,193 222,911 410,566
Motor Services
Division 8,990 6,550 15,494
Other
Businesses 1,917 1,896 3,945
---------- --------- --------
242,100 231,357 430,005
========== ========= ========
2 Analysis of operating profit
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2003 2002 2003
#'000 #'000 #'000
Motor Retail
Division 7,116 6,742 11,879
Motor Services
Division 548 189 1,034
Other
Businesses (35) 15 90
Central costs (1,100) (955) (2,104)
---------- --------- ---------
6,529 5,991 10,899
========== ========= =========
3 During the period, the Group surrendered its interest in a vacant leasehold
site in Nantwich.
4 The charge for taxation is based on the estimated effective rate for the
financial year.
5 An interim dividend of 3.4p (2002, 3.2p) per share will be paid on 4
December 2003 to shareholders on the register at 7 November 2003.
6 The calculation of earnings per share for the six months ended 31 August
2003 is based on the profit for the financial period of #4,525,000 (2002,
#4,419,000) and on 53,041,319 (2002, 52,451,938) ordinary shares, being the
weighted average number of shares in issue during the period. The number of
dilutive potential ordinary shares arising from share options, as calculated
in accordance with FRS 14: Earnings per Share, is 748,927 (2002, 998,254).
Therefore, the calculation of diluted earnings per share is based on the
profit for the financial period of #4,525,000 (2002, #4,419,000) and on
53,790,246 (2002, 53,450,192) ordinary shares.
7 This interim statement has been prepared on the basis of the same accounting
policies as those set out in the financial statements for the year ended 28
February 2003.
8 This interim statement was approved by the Board of Directors on 16 October
2003. The foregoing financial information does not represent full accounts
within the meaning of Section 240 of the Companies Act 1985 and has been
neither reviewed nor audited by the auditors nor delivered to the Registrar
of Companies. The above results for the year ended 28 February 2003 have
been abridged from the full Group accounts for that period, which received
an unqualified auditors' report and which have been delivered to the
Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
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