Final Results - Year Ended 31 Dec 1999, Part 2

Inchcape PLC 6 March 2000 PART 2 INCHCAPE ANNOUNCES PRELIMINARY RESULTS FOR 1999 Notes 1 Segmental analysis ______________________________________________________________________________ a Turnover Group subsidiaries Share of joint ventures ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By activity: £m £m £m £m _____________________________ _______ _______ ________ ______ Import & Distribution 1,990.3 1,900.3 13.3 16.5 Retail 785.5 847.0 - - Financial Services 72.9 64.7 55.2 53.9 _____________________________ _______ _______ ________ ______ Continuing 2,848.7 2,812.0 68.5 70.4 Discontinued 613.8 1,445.0 95.8 216.2 _____________________________ _______ _______ ________ ______ 3,462.5 4,257.0 164.3 286.6 ============================= ======= ======= ======== ====== ______________________________________________________________________________ Turnover Share of associates Total ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By activity: £m £m £m £m ______________________________________________________________________________ Import & Distribution 760.3 813.7 2,763.9 2,730.5 Retail - - 785.5 847.0 Financial Services 1.3 1.1 129.4 119.7 _____________________________ _______ _______ _______ _______ Continuing 761.6 814.8 3,678.8 3,697.2 Discontinued 61.6 148.0 771.2 1,809.2 _____________________________ _______ _______ ________ ______ 823.2 962.8 4,450.0 5,506.4 ============================= ======= ======= ======== ====== ______________________________________________________________________________ Turnover Group subsidiaries Share of joint ventures ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By geographical market: £m £m £m £m ______________________________________________________________________________ Europe: - United Kingdom 789.4 826.6 20.4 18.1 - Continent 879.4 869.4 5.6 6.8 Australasia 477.4 414.0 4.5 2.5 Far East 322.5 366.8 24.7 26.5 South East Asia 295.8 227.8 - - Rest of World 84.2 107.4 13.3 16.5 _____________________________ _______ _______ _______ _______ Continuing 2,848.7 2,812.0 68.5 70.4 Discontinued 613.8 1,445.0 95.8 216.2 _____________________________ _______ _______ _______ _______ 3,462.5 4,257.0 164.3 286.6 ============================= ======= ======= ======= ======= ______________________________________________________________________________ Turnover Share of associates Total ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By geographical market: £m £m £m £m ______________________________________________________________________________ Europe: - United Kingdom 754.7 811.7 1,564.5 1,656.4 - Continent 1.3 1.1 886.3 877.3 Australasia - - 481.9 416.5 Far East 5.6 2.0 352.8 395.3 South East Asia - - 295.8 227.8 Rest of World - - 97.5 123.9 _____________________________ _______ _______ _______ _______ Continuing 761.6 814.8 3,678.8 3,697.2 Discontinued 61.6 148.0 771.2 1,809.2 _____________________________ _______ _______ _______ _______ 823.2 962.8 4,450.0 5,506.4 ============================= ======= ======= ======= ======= Geographical analysis of turnover is by origin and is not significantly different to turnover by destination. The analysis by geographical market of turnover, operating profit and net assets has been restated to better reflect continuing activities. Australasia is now shown separately and The Americas and Middle East are now included in Rest of World. Activities discontinued in 1999 comprised primarily Bottling South America, Marketing, Shipping, Office Automation, Chrysler Jeep Imports UK and Daihatsu UK. Activities discontinued in 1998 primarily consisted of Bottling Russia. ______________________________________________________________________________ b Total operating profit Group subsidiaries Share of joint ventures ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By activity: £m £m £m £m ______________________________________________________________________________ Import & Distribution 66.2 73.4 0.8 0.9 Retail 9.6 9.2 - - Financial Services 5.1 5.0 11.4 7.7 ________________________________ _____ _____ _____ _____ 80.9 87.6 12.2 8.6 Central costs* (17.8) (24.0) - - ________________________________ _____ _____ _____ _____ Continuing 63.1 63.6 12.2 8.6 Discontinued 6.0 10.7 0.3 13.7 ________________________________ _____ _____ _____ _____ 69.1 74.3 12.5 22.3 Exceptional operating items** - (131.3) - - ________________________________ _____ _____ _____ _____ Total operating profit (loss) 69.1 (57.0) 12.5 22.3 ================================ ===== ===== ===== ===== ______________________________________________________________________________ Total operating profit Share of associates Total ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By activity: £m £m £m £m ______________________________________________________________________________ Import & Distribution 9.9 25.2 76.9 99.5 Retail - - 9.6 9.2 Financial Services 2.6 4.0 19.1 16.7 ________________________________ _____ _____ _____ _____ 12.5 29.2 105.6 125.4 Central costs* - - (17.8) (24.0) ________________________________ _____ _____ _____ _____ Continuing 12.5 29.2 87.8 101.4 Discontinued 6.9 9.4 13.2 33.8 ________________________________ _____ _____ _____ _____ 19.4 38.6 101.0 135.2 Exceptional operating items** - - - (131.3) ________________________________ _____ _____ _____ _____ Total operating profit 19.4 38.6 101.0 3.9 ================================ ===== ===== ===== ===== ______________________________________________________________________________ Total operating profits Group subsidiaries Share of joint ventures ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By geographical market: £m £m £m £m ______________________________________________________________________________ Europe: - United Kingdom 16.2 15.8 3.3 1.9 - Continent 17.4 15.6 2.0 1.4 Australasia 10.5 14.7 0.1 (0.1) Far East 20.5 23.6 6.1 4.6 South East Asia 15.9 13.1 - - Rest of World 0.4 4.8 0.7 0.8 _____________________________ _______ _______ _______ _______ 80.9 87.6 12.2 8.6 Central costs* (17.8) (24.0) - - _____________________________ _______ _______ _______ _______ Continuing 63.1 63.6 12.2 8.6 Discontinued 6.0 10.7 0.3 13.7 _____________________________ _______ _______ _______ _______ 69.1 74.3 12.5 22.3 ============================= ======= ======= ======= ======= ______________________________________________________________________________ Total operating profit Share of associates Total ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By geographical market: £m £m £m £m ______________________________________________________________________________ Europe: - United Kingdom 12.3 28.6 31.8 46.3 - Continent 0.2 0.2 19.6 17.2 Australasia - - 10.6 14.6 Far East - 0.4 26.6 28.6 South East Asia - - 15.9 13.1 Rest of World - - 1.1 5.6 _____________________________ _______ _______ _______ _______ 12.5 29.2 105.6 125.4 Central costs* - - (17.8) (24.0) _____________________________ _______ _______ _______ _______ Continuing 12.5 29.2 87.8 101.4 Discontinued 6.9 9.4 13.2 33.8 _____________________________ _______ _______ _______ _______ 19.4 38.6 101.0 135.2 ============================= ======= ======= ======= ======= * Previously certain costs had been allocated to segmental operating profit. These costs are no longer allocated and accordingly central costs comparatives have been restated to reflect the manner in which central costs are managed. Included in the 1999 central costs is an amount of £3.5m relating to one off expenses. ** The operating exceptional items in 1998 comprised £131.3m. Of this amount, £124.7m relates to a charge for total and permanent impairment of historic goodwill relating to certain European Motors operations. Geographically, £24.9m relates to the UK and £99.8m to Continental Europe. ______________________________________________________________________________ c Net assets Group subsidiaries Share of joint ventures ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By activity: £m £m £m £m _____________________________ _______ _______ ________ ______ Import & Distribution 287.8 292.6 (1.1) (1.2) Retail 129.8 119.5 - - Financial Services 18.2 19.0 40.5 33.4 _____________________________ _______ _______ ________ ______ Continuing 435.8 431.1 39.4 32.2 Discontinued 0.6 317.2 (2.7) 13.9 _____________________________ _______ _______ ________ ______ 436.4 748.3 36.7 46.1 Net debt* (87.4) (116.5) - - Other unallocated assets and liabilities (78.3) (99.7) - - _____________________________ _______ _______ ________ ______ 270.7 532.1 36.7 46.1 ============================= ======= ======= ======== ====== ______________________________________________________________________________ Net assets Share of associates Total ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By activity: £m £m £m £m ______________________________________________________________________________ Import & Distribution 41.7 39.8 328.4 331.2 Retail - - 129.8 119.5 Financial Services 17.2 20.4 75.9 72.8 _____________________________ _______ _______ _______ _______ Continuing 58.9 60.2 534.1 523.5 Discontinued - 52.1 (2.1) 383.2 _____________________________ _______ _______ ________ ______ 58.9 112.3 532.0 906.7 Net debt* - - (87.4) (116.5) Other unallocated assets and liabilities - - (78.3) (99.7) _____________________________ _______ _______ ________ ______ 58.9 112.3 366.3 690.5 ============================= ======= ======= ======== ====== ______________________________________________________________________________ Net assets Group subsidiaries Share of joint ventures ______________________________________________________________________________ 1999 1998 1999 1998 restated By geographical market: £m £m £m £m ______________________________________________________________________________ Europe: - United Kingdom 116.8 102.6 3.9 2.4 - Continent 149.5 151.5 6.0 6.1 Australasia 1.4 (13.4) 0.1 - Far East 74.0 83.9 30.9 24.9 South East Asia 53.4 54.6 - - Rest of World 40.7 51.9 (1.5) (1.2) _____________________________ _______ _______ _______ _______ Continuing 435.8 431.1 39.4 32.2 Discontinued 0.6 317.2 (2.7) 13.9 Net debt* (87.4) (116.5) - - Other unallocated assets and liabilities (78.3) (99.7) - - _____________________________ _______ _______ ________ ______ 270.7 532.1 36.7 46.1 ============================= ======= ======= ======= ======= ______________________________________________________________________________ Net assets Share of associates Total ______________________________________________________________________________ 1999 1998 1999 1998 restated restated By geographical market: £m £m £m £m ______________________________________________________________________________ Europe: - United Kingdom 55.2 56.6 175.9 161.6 - Continent 1.1 1.1 156.6 158.7 Australasia - - 1.5 (13.4) Far East 2.6 2.6 107.5 111.4 South East Asia - - 53.4 54.6 Rest of World - (0.1) 39.2 50.6 _____________________________ _______ _______ ________ _______ Continuing 58.9 60.2 534.1 523.5 Discontinued - 52.1 (2.1) 383.2 Net debt* - - (87.4) (116.5) Other unallocated assets and liabilities - - (78.3) (99.7) _____________________________ _______ _______ ________ _______ 58.9 112.3 366.3 690.5 ============================= ======= ======= ======== ======= * Reconciled to debt as follows: Net debt as above (87.4) (116.5) Motors Financial Services debt in respect of consumer financing (61.6) (58.2) Shipping cash in respect of principal funds - 31.3 ___________________________________________________ ________ _______ Net debt as reported (149.0) (143.4) =================================================== ======== ======= Other unallocated assets and liabilities include central provisions, taxation, dividends and assets not directly related to operating activity. ______________________________________________________________________________ 1999 1998 2 Exceptional items £m £m ______________________________________________________________________________ Exceptional operating expenses: Goodwill write off - (124.7) Other exceptional operating expenses - (6.6) ________________________________________________ _____ _____ Total exceptional operating expenses - (131.3) ________________________________________________ _____ _____ Net profit on disposal of properties and investments 1.8 4.1 ________________________________________________ _____ _____ Net profit (loss) including provisions on the sale and termination of operations: Sale of: - Bottling South America (includes goodwill written off: £14.4m) 279.0 - - Bottling Russia (2.7) (43.2) - Marketing (includes goodwill written off: £23.9m, 1998 - £48.8m) (137.1) (189.1) - Marketing utilisation of provision for net loss on sale of operations 126.4 - ________________________________________________ _____ _____ (10.7) (189.1) - Shipping (includes goodwill written off: £15.6m) (22.8) - Motors sales and terminations (includes goodwill written off: £13.0m, 1998 - £13.7m) (14.2) (29.1) Sale of 26% interest in Toyota (GB) - 18.0 Other (includes goodwill written off: £4.2m, 1998 - £2.5m) (11.2) (22.5) ________________________________________________ _____ _____ Total net profit (loss) on the sale and termination of operations 217.4 (265.9) ________________________________________________ _____ _____ Costs of fundamental reorganisation (5.2) (10.6) ________________________________________________ _____ _____ Total exceptional items 214.0 (403.7) ================================================ ===== ===== During 1999 the Group has undergone a fundamental restructuring precipitated by the disposal of the following businesses: Bottling South America, Marketing, Shipping and Office Automation (during 1998 Bottling Russia was also disposed of). The financial impact of the fundamental restructuring is summarised above. In the case of Bottling South America the profit has increased from that envisaged in note 15 to the 1998 financial statements. In the cases of Marketing and Shipping losses have arisen. These differences arise from changes from contract terms, revisions to accounting estimates, adjustments to provisions made to cover certain terms in the sale contracts and foreign exchange movements. In addition, the Group has given normal commercial warranties and indemnities in respect of these disposals. Motors sales and termination in 1999 comprises primarily the sale of the Chrysler Jeep Imports UK business which includes £13.0m goodwill written off. The 1998 Motors sales and terminations include a number of exits from both Import & Distribution and Retail businesses, primarily in Europe. Other sales and terminations include a number of withdrawals from other businesses and costs arising on earlier disposals. The 1998 exceptional operating charge of £124.7m relates to the total and permanent impairment of historic goodwill relating to certain European Motors operations predominately purchased through the TKM acquisition in 1992. Goodwill written off included above (£71.1m, 1998 - £189.7m) had been charged against reserves in previous years. ______________________________________________________________________________ 1999 1998 restated 3 Interest £m £m ______________________________________________________________________________ Interest payable and other charges: On bank loans, overdrafts and other loans falling due within five years 30.2 47.1 On finance leases mainly repayable within five years 0.6 0.7 Cost of swapping fixed rate US$ borrowings into floating rate sterling on sale of Bottling Russia - 2.8 Other interest 8.6 13.4 ____________________________________________________________ ____ ____ 39.4 64.0 Less amounts included in cost of sales for Motors Financial Services subsidiaries (4.5) (5.3) ____________________________________________________________ ____ ____ 34.9 58.7 ____________________________________________________________ ____ ____ Interest receivable (34.3) (45.0) Less amounts included in: - Motors Financial Services subsidiaries' turnover 12.0 13.5 - Shipping subsidiaries' interest on principal funds included in other operating income 0.3 1.5 ____________________________________________________________ ____ ____ (22.0) (30.0) ____________________________________________________________ ____ ____ The Company and its subsidiaries 12.9 28.7 Share of joint ventures' net interest 0.7 1.5 Share of associates' net interest 2.1 (1.1) ____________________________________________________________ ____ ____ 15.7 29.1 ============================================================ ==== ==== The Directors have reviewed the treatment of interest on the Group's cash pooling arrangements and on interest rate swaps. The cash flows for these were previously shown gross, but are now shown net to better reflect the underlying nature of the transaction and to aid comparability with the FRS13 disclosures. The prior year figures have been restated to a similar basis, reducing both interest received and paid by £34.7m. 4 Taxation ______________________________________________________________________________ 1999 1998 Current taxation £m £m ______________________________________________________________________________ United Kingdom corporation tax at 30% (1998 - 31%) 0.9 16.8 Double taxation relief (0.4) (17.4) ____________________________________________________________ ____ ____ 0.5 (0.6) Advance corporation tax written back (1.4) (17.0) ____________________________________________________________ ____ ____ (0.9) (17.6) Overseas taxes 24.2 39.7 Deferred taxation 0.7 27.9 ____________________________________________________________ ____ ____ 24.0 50.0 Adjustments to prior year liabilities: - UK (2.9) (2.3) - overseas (0.2) 0.3 ____________________________________________________________ ____ ____ The Company and its subsidiaries 20.9 48.0 Share of joint ventures' taxation 2.8 2.7 Share of associates' taxation 3.4 10.7 ____________________________________________________________ ____ ____ 27.1 61.4 ============================================================ ==== ==== The tax charge includes £0.3m in respect of exceptional items (1998 - £6.2m). The tax rate in 1999 benefited by approximately three percentage points due to a one off change in the UK tax treatment of provisions. 5 Earnings per ordinary share Headline FRS3 ______________________________________________________________________________ _ 1999 1998 1999 1998 restated restated £m £m £m £m ________________________________________ ____________________________________ Headline profit before tax 85.3 106.1 85.3 106.1 Exceptional items - - 214.0 (403.7) ________________________________________ _____ _________ _____ ______ Profit (loss) before tax 85.3 106.1 299.3 (297.6) Taxation (26.8) (55.2) (27.1) (61.4) Minority interests (5.6) (6.6) (5.4) (6.5) ________________________________________ _____ _________ _____ ______ Earnings (loss) 52.9 44.3 266.8 (365.5) ======================================== ===== ========= ===== ====== Headline earnings per share 60.0p 50.2p ========================================= ==== ========= Basic and diluted earnings (loss) per share 302.4p (414.3)p ========================================= ====== ====== The weighted average number of fully paid shares in issue during the year (restated for share consolidation), excluding those held by the Inchcape Employee Trust, was 88,225,026 (1998 restated - 88,217,806). The diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares for the dilution arising from the exercise of share options where the exercise price is less than the average market price of the company's ordinary shares during the period. The adjusted weighted average number of ordinary shares was 88,228,664 (1998 restated - 88,217,806). Headline profit before tax and earnings (before total exceptional items and after the utilisation of termination provisions) are adopted in that they provide a representation of underlying performance. 6 Dividends ______________________________________________________________________________ Per Share ___________ 1999 1998 1999 1998 pence pence £m £m ______________________________________________________________________________ Special - paid 9 July 1999 600.0* - 529.3 - Interim - paid 23 September 1999 (1998 paid - 26 November 1998) 7.0 27.6* 6.2 24.4 Final - proposed - payable 16 June 2000 (1998 paid - 9 June 1999) 14.0 39.6* 12.4 35.0 _______________________________________________ _____ ____ _____ _____ 621.0 67.2 547.9 59.4 =============================================== ===== ==== ===== ==== If approved at the Annual General Meeting the final ordinary dividend will be paid to ordinary shareholders registered in the books of the Company at the close of business on 26 May 2000. Dividends above exclude £0.8m (1998 - £0.1m) payable on shares held by the Inchcape Employee Trust. * Adjusted for share consolidation. 7 Foreign currency translation The main exchange rates used for translation purposes are as follows: ______________________________________________________________________________ Average rates Year end rates 1999 1998 31.12.99 31.12.98 ______________________________________________________________________________ Australian dollar 2.53 2.63 2.46 2.71 Belgian franc 60.9 60.4 64.9 57.2 Chilean peso 823 763 854 787 Dutch guilder 3.33 3.30 3.54 3.12 French franc 9.91 9.82 10.55 9.29 Greek drachma 493 492 531 466 Hong Kong dollar 12.55 12.85 12.53 12.89 Peruvian sol 5.46 4.86 5.66 5.25 Singapore dollar 2.74 2.77 2.69 2.75 US dollar 1.62 1.66 1.61 1.66 ______________________________________________________________________________ 8 Basis of presentation ______________________________________________________________________________ The figures contained in this announcement have been prepared in accordance with applicable accounting standards on the historical cost basis, modified to include the revaluation of certain tangible fixed assets. The financial information presented does not constitute the statutory financial statements of 1999 nor 1998. The 1999 figures are extracted from the audited financial statements for that year which have not yet been approved by the shareholders and have not yet been delivered to the Registrar. The comparative figures are extracted from the latest published financial statements that have been delivered to the Registrar of Companies. The auditors' reports in respect of both years were unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. FINANCIAL REVIEW FOR PRELIMINARY STATEMENT This review is extracted from that which will be included in the Report and Accounts and gives further information on financial and accounting matters. RESTRUCTURING PROGRAMME In 1998, the Group announced a fundamental restructuring which, when complete, would result in the continuing businesses being a focused Motors Group. The majority of these transactions have been completed during 1999 and include the disposals of Bottling South America, Marketing, Shipping and Office Automation (Bottling Russia disposal in 1998). OPERATING PROFIT 1999 operating profit was £101.0m, of which £13.2m related to discontinued businesses. Of the discontinued operating profit, £5.7m relates to Motors businesses, mainly Chrysler Jeep Imports UK. The continuing operating profit of £87.8m was £13.6m lower than 1998. This decrease principally results from the lower contribution of our UK associate companies. Continuing operating profit includes some one off items that require explanation in order to understand the true underlying performance of the continuing Group. Import & Distribution in the UK benefited in the first half of 1999 from a £3.0m provision release previously held against the investment in Autobytel.com. Also within this business segment, but within Australia, in the second half of 1999 we incurred £3.0m of costs in terminating existing retail dealers within the Sydney region. This was a consequence of our expansion into retail activities within 'city markets'. Finally, central costs in the first half of 1999 included £3.5m of operating costs that will not be repeated. DISPOSALS AND DISCONTINUED ACTIVITIES The financial results of disposed operations (including relevant Motors operations) have been reclassified as discontinued within the financial statements. The principal Motors operations classified as discontinued are Chrysler Jeep Imports UK and Daihatsu UK. With regard to the former, as a result of the merger between Daimler-Benz and Chrysler, the business was transferred back to the manufacturer on 31 December 1999. Daihatsu was sold on 29 February 2000 to IM Group Limited. The exceptional items contributed a profit of £214.0m after charging previously written off goodwill of £71.1m. The disposal of Bottling South America contributed an exceptional profit of £279.0m, after charging previously written off goodwill of £14.4m. The disposal of the Marketing business contributed an exceptional loss of £10.7m, after charging previously written off goodwill of £23.9m. The disposal of the Shipping business contributed an exceptional loss of £22.8m, after charging previously written off goodwill of £15.6m. The transfer of the Chrysler Jeep Imports UK business gave rise to a £14.8m loss, after charging previously written off goodwill of £13.0m. The 600p per share special dividend (after adjusting for the one for six share consolidation) paid on 9 July 1999 effectively marked the end of the non-Motors disposal programme, with Office Automation being disposed of shortly thereafter in August 1999. POST BALANCE SHEET EVENTS On 6 January 2000 the Group announced a US$10.0m investment in Autobytel Europe representing 7.3% of the equity in that business. The Group will be exiting its Volkswagen Australia Import & Distribution business on 31 December 2000, which will be transferred back to Volkswagen. Since the year end the Group has also concluded the disposal of Daihatsu UK and its 50% holding in Inchcape Peugeot Japan. During 1999 these three businesses contributed less than £1.0m to Group operating profit. In addition, the Group has disposed of the majority of its Timberland business. FINANCIAL REPORTING AND ACCOUNTING STANDARDS The Group has adopted FRS12 'Provisions, Contingent Liabilities and Contingent Assets', FRS 13 'Derivatives and Other Financial Instruments: Disclosures', FRS15 'Tangible Fixed Assets' and FRS16 'Current Tax'. These standards have not had a material impact on the Group results or net assets. During 1998 the Group adopted FRS14 'Earnings Per Share'. The Directors have reviewed the treatment of interest on the Group's cash pooling arrangements and on interest rate swaps. The cash flows were previously shown gross, but are now shown net to better reflect the underlying transactions and to aid comparability with FRS13 disclosures. The effect of the restatement, excluding interest of joint ventures and associates, is as follows: Interest Interest Interest Receivable Payable Net £m £m £m As reported in 1998 64.7 (93.4) (28.7) Restated 30.0 (58.7) (28.7) Central costs 1998 comparatives have been restated to £24.0m from the previously reported £15.5m to include £8.5m previously allocated to the Motors segment. This method now better reflects the manner in which the Group manages such costs. CASH FLOW £m £m Net debt - 1 January 1999 (143.4) Operating profit 69.1 Depreciation and amortisation 33.9 Dividends from joint ventures and associates 17.8 Working capital 6.9 Net capital expenditure (34.3) Acquisitions and disposals 672.3 Payments in respect of exceptional (36.4) operating expenses and terminations Other items 1.6 Interest and minorities (15.7) Tax (17.6) Dividends paid to shareholders (570.5) 127.1 Foreign exchange (7.3) Net cash sold with disposals (125.4) Net debt - 31 December 1999 (149.0) Of the acquisitions and disposal proceeds total of £672.3m, £10.2m relates to the purchase of business assets of two retail businesses in Australia. Disposal cash proceeds totalled £682.5m, £557.1m net after taking account of net cash held in the businesses at disposal. This principally covered the special dividend of £529.3m, paid on 9 July, representing the return to shareholders from the disposal programme. Dividends from joint ventures and associates of £17.8m includes £8.3m in relation to discontinued businesses. Gross capital expenditure in respect of fixed assets totalled £73.9m with £33.9m of depreciation and amortisation and disposal proceeds of £39.6m. Discontinued businesses contributed £10.8m to gross capital expenditure and £9.0m to depreciation. Disposal proceeds are materially attributable to continuing businesses. With regard to continuing businesses, gross capital expenditure included £24.2m in relation to UK Retail, substantially completing the refurbishment programme and £21.8m in relation to leased and rented vehicles. The Group change in net debt over the period was £5.6m taking the net debt position at 31 December 1999 to £149.0m compared to an opening position of £143.4m. INTEREST Net interest decreased from £29.1m in 1998 to £15.7m in 1999. Of the 1999 charge, £2.8m (1998 - £0.4m) relates to associates and joint ventures. The 1998 charge contained the impact of two items that were one off in nature to the value of £3.7m (£0.9m of facility fees and £2.8m of cost for the closure for an interest rate swap). Excluding these items, the 1998 net interest charge would have been £25.4m. The balance of the reduction, £9.7m, is principally due to the disposal of businesses contributing £8.3m to the 1998 interest charge, lower levels of gross debt within the Group over the period and the one off benefit of the disposal proceeds received late in the first half of 1999 and not paid out as the special dividend until 9 July 1999. TAXATION The tax on Headline profit decreased to 31% in 1999 from an abnormally high rate in 1998 of 52%, which mainly arose due to unrelieved losses. The impact of the Group's restructuring during the year has not materially affected the 1999 Headline tax rate. The 1999 Headline tax rate has benefited from a one off change in the tax treatment of provisions in the UK. Without this benefit the 1999 Motors underlying Headline tax rate would be around 34%. MINORITY INTEREST The charge for 1999 of £5.4m has reduced from the 1998 charge of £6.5m. This reflects the lower contribution relating to discontinued businesses. Of the 1999 charge, £6.0m relates to continuing business. The two main constituents are Inchcape Motors Limited in Singapore and Subaru (Australia) Pty Limited in Australia. In relation to the latter, during 1999, the Group signed a ten year Import & Distribution agreement with Fuji Heavy Industries (FHI), the manufacturer of Subaru vehicles. This covers our Australasian region and as part of the agreement, FHI took an 8.0% equity stake in Subaru (Australia) Pty Limited. TREASURY POLICIES AND ACTIVITIES Group Treasury is responsible for managing the key financial risks of the Group encompassing funding, foreign exchange and interest rate risk. Treasury activities are conducted under Board approved policies and authorities which expressly forbid speculative transactions. The treasury function is subject to regular internal audit. The use of derivative instruments is restricted to forward foreign exchange contracts, foreign currency and interest rate swaps, forward rate agreements and currency options. Foreign currency swaps are used to hedge cross border Group loans. Interest rate fluctuations are managed by the use of swaps and forward rate agreements which change the mix of fixed and floating rate borrowings. Forward foreign exchange contracts and foreign currency options protect the Group from adverse changes in exchange rates from date of order to the date on which payments are made to suppliers. BORROWING FACILITIES The Group's principal committed borrowing facilities are a £250m standby revolving credit facility and a US private placement for US$172m which was swapped to sterling in 1998. The US private placement comprises two tranches of loan notes for US$100m and US$72m. These loan notes have interest rates of 6.93% and 7.09% and maturity dates of May 2000 and May 2002 respectively. Negotiations are well advanced to refinance the loan notes maturing in May this year. The standby revolving credit facility, maturing in March 2003, was reduced from £400m to £250m on 14 April 1999. Standby committed bilateral revolving credit facilities for £105m were cancelled shortly afterwards. These reductions reflect the lower forecast borrowing requirement for the Group after the effective completion of the disposal programme. In addition to the committed facilities the Group has access to significant uncommitted borrowing facilities provided by the Group's relationship banks. These facilities are used for liquidity management on a daily basis. CASH AND DEBT The Group held significant cash balances during the latter part of the first half of the year following the disposal of non-core assets. On 9 July 1999 this cash was returned to shareholders with the payment of a special dividend of £529.3m. Although for cash management purposes the Group lends cross border, cash and debt balances are held locally for operational purposes. Net debt of £149.0m at 31 December 1999 comprised a number of cash and debt balances. They are summarised as follows: Debt £m Cash £m Net £m Australian dollar (0.8) 1.5 0.7 Euro (7.7) 12.7 5.0 Greek drachma (84.8) 13.0 (71.8) Hong Kong dollar - 3.8 3.8 Singapore dollar (60.3) 38.6 (21.7) US dollar (5.1) 10.4 5.3 Other (14.1) 15.4 1.3 Total - other than sterling (172.8) 95.4 (77.4) Sterling (15.4) 47.1 31.7 Swapped US loan notes (103.3) - (103.3) Total - sterling (118.7) 47.1 (71.6) Total (291.5) 142.5 (149.0) The Group has significant borrowings in sterling, Greek drachma and Singapore dollars. Sterling debt includes £103.3m which represents the swapped US$172m loan notes. Trade finance totalling £73.7m supports working capital requirements in Greece. Customer deposits in the Brunei finance company of approximately £59.0m are included within Singapore debt. The sterling cash balance includes the initial sale proceeds of £36.1m for Chrysler Jeep Imports UK received shortly before the year end. Cash is held locally in Singapore to support purchases of Certificates of Entitlement required for new car sales. In addition cash held for regulatory requirements in the Brunei finance company is included within Singapore costs. To manage credit risk cash deposits are placed, within agreed counterparty limits, with relationship banks that have a strong credit rating. EFFECTIVE INTEREST RATES The Group operates an interest rate policy designed to minimise net interest expense and protect the Group from material adverse movements in interest rates. The balance of fixed and floating rate debt is adjusted from time to time to take account of changes in the interest rate environment. At the year end the Group's principal gross borrowings were either at floating rates or fixed for periods less than one year. The hedging of the Group's interest rate exposures will be considered in conjunction with the refinancing of the maturing US loan notes. BALANCE SHEET TRANSLATION Following the Asian currency crisis, which started in 1997, the Group adopted a policy of not hedging the risk in translating the profit and loss account and balance sheet into sterling. Since the adoption of this policy, translation exposure has been managed where possible by financing working capital requirements through local currency debt and by maximising remittances of overseas earnings. The percentages of net assets by currency at 31 December 1999 for the Group are set out below: Net assets by currency % Sterling (35.2) Euro 59.5 Greek drachma 2.7 US dollar 15.3 Australian dollar 8.0 Asian currencies 40.7 Other 9.0 100.0 Following the disposal of non-core activities the principal net assets of the Group have been denominated in currencies in Asia and the Euro zone. The Euro zone amounts include a high proportion of net assets in Dutch guilders at the year end. Moving forward as a Motors only business the Group net asset position is to be reviewed in conjunction with the refinancing of the US loan notes. The Group net asset hedging strategy will be looked at as part of this process. FOREIGN CURRENCY TRANSACTION EXPOSURE The Group has transactional currency exposure arising from sales or purchases by an operating unit in currencies other than the unit's functional currency. Group policy is to hedge all transaction exposures as soon as they are committed, mainly by using the forward foreign exchange market. Over recent years the Group has negotiated local currency billing with many of its principals. This has had the effect of transferring the direct transaction exposure back to the principal and so relatively few businesses are still billed in foreign currency. Pre-transaction exposures are monitored and cover taken when appropriate. In evaluating the level of cover management consider a number of factors relating to prevailing and future expected exchange rates, the position of the manufacturer and also the competitive position of the business in the local market place. FOREIGN CURRENCY EARNINGS EXPOSURE Had the average sterling rates in 1998 continued into 1999 the Group's operating profit for the continuing businesses would have been £1.3m lower. Headline profit before tax would have been £1.9m lower.

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