Final Results

Lookers PLC 20 March 2003 20th March 2003 LOOKERS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2002 Lookers plc, a leading national retail motor group, today reports record results for the 12 months to 31st December 2002. An analyst meeting will be held at the offices of Hudson Sandler at 29 Cloth Fair, London EC1A 7NN at 11.00am today. A press briefing will be held at 12.45pm at the same address. Please contact Rebecca Ghent on 020 7796 4133 to notify attendance. HIGHLIGHTS • Turnover up 10% to £790.0 million (2001: £717.9 million) • Profit before tax and goodwill up 17% to £12.6 million (2001: £10.8 million) despite £0.8 million of reorganisation costs. • Profit before tax up 18% to a record level of £11.8 million (2001: £10.1 million) • Earnings per share up 20% to 22.6 pence • Total dividend up 7% to 10.0 pence (2001: 9.35 pence) • Gearing reduced to 39% from 56% last year, despite significant ongoing investment • New cars sold up 9% against a market increase of 4.3% • Aftersales profitability up 13% • Significant extension of partnerships with Vauxhall, Renault, Honda and Premier Auto Group • Strategic entry into Scotland with acquisition of Taggarts - Glasgow in 2003 • Redemption of preference shares at current interest rates will increase future earnings per share by 1.8 pence (and add £600,000 per annum to retained earnings) Commenting on the performance of the Group, Fred Maguire, Chairman, said: 'I am delighted to be able to announce another record year of turnover and profit for Lookers, building on our strong performance in 2001 and enhancing our track record of steady growth under strong management control. Acquisitions made during the first half of 2002 have been integrated successfully into the Group and we have seen strong growth in car sales and aftersales business. 'Looking ahead to 2003, trading in the first quarter has been encouraging. We are particularly pleased by the performance of the businesses acquired at the start of the year and the volume of sales achieved so far in March - a key trading month involving a registration plate change. 'Whilst the motor industry expects sales of new cars in 2003 to reduce slightly from the levels achieved in 2001 and 2002 the continued growth in our used car retail and aftersales operations will help to offset the impact on Lookers of any such reduction. During 2003 we expect immediately to see the benefits of the reorganisation which took place in the year under review. Overall, the Board believes Lookers is very well placed to make excellent progress in the current year.' Enquiries Fred Maguire, Chairman Ken Surgenor, Chief Executive David Dyson, Group Financial Director Telephone: 020 7796 4133 (on Thursday 20 March 2003 only) 0161 291 0043 (thereafter) Andrew Hayes/James Hill, Hudson Sandler: 020 7796 4133 CHAIRMAN'S REVIEW Lookers achieved an outstanding set of results in 2002 whilst continuing with the successful strategic development of the business. Turnover was up 10% to a record £790.0 million (2001: £717.9 million) and profit before taxation up 18% to a record £11.8 million (2001: £10.1 million). This was achieved despite bearing costs of £800,000 in reorganising our business and absorbing a £1 million increase in pension costs. EPS was up 20% to 22.6 pence (2001: 18.9 pence). The total number of cars sold increased to a record 82,000. The excellent progress during the year reflects the strength of our operations following the investment in recent years in our 'Customers for Life' initiatives and the strategic development of our relationships with our manufacturing partners. During 2002 we acquired the rights to be the sole authorised distributors for Vauxhall in Birmingham and Liverpool. With existing rights in Chester and the Wirral, we are now one of the largest Vauxhall retailers in the UK. The Group's strong existing franchise portfolio was further enhanced at the end of 2002, with the acquisition of the Volvo franchise for central and south Essex and in early 2003 with the purchase of Jackson and Edwards Ltd, the Renault franchise for south Manchester and central Cheshire. In addition, in February 2003, we acquired Taggarts of Glasgow which takes Lookers into Scotland for the first time. This acquisition also confirms the Group's position as the largest retailer of Jaguar and Land Rover in Premier Automotive Group's northern region. Our strategy remains to acquire good quality privately owned businesses which offer us the best prospective returns on our investment. Dividend Reflecting management's ongoing confidence in the outlook of the Group, the Board is pleased to declare a 7% increase in the final dividend, from 6.5 pence to 7.0 pence. This will be paid on 30th May 2003 to shareholders on the register on 16th May 2003. With the interim dividend of 3.0 pence paid on 29th November 2002 this brings the total dividend for the year to 10.0 pence (2001: 9.35 pence). Outlook Trading in the first quarter has been encouraging. We are particularly pleased by the performance of the businesses acquired in the year to date and by the volume of sales achieved so far in March - a key trading month involving a registration plate change. Much has been made of the expected reduction in the new car market in 2003. Industry forecasts all suggest a market in excess of 2.3 million units which is still a significant volume and would represent one of the best years on record. The continued growth in our used retail and aftersales operations will help to offset any reduction from new car sales. In addition, 2003 will immediately see the benefits of reorganisation which took place in the prior year. Overall, the Board believes Lookers is very well placed to make excellent progress in the current year. Fred Maguire 20th March 2003 Chairman CHIEF EXECUTIVE'S REVIEW Introduction The Group continued to make excellent progress during the year and delivered another record financial performance. This success reflects our longstanding commitment to providing outstanding customer care, tight management controls and the strategic development of our partnerships with successful manufacturers. We currently represent 22 manufacturers which are equally split between prestige and volume franchises from 86 outlets in England, Northern Ireland and Scotland - which we consider to be a very well balanced portfolio. During the year, we took the opportunity to rationalise the business to focus on a franchise, rather than regional, structure for our management team. This structure allows us to further benefit from economies of scale and to achieve a greater depth of understanding and focus on individual franchise partnerships. In addition, we began the process of reorganising the Company capital structure by redeeming the Preference Shares and this was completed just after the year end. The costs of all of the above were in excess of £800,000, but I am confident that we will reap the benefits of this in full in the current year. The principal activity of the Group is the sale and servicing of motor vehicles. Across the whole Group, sales of vehicles accounted for 54% of gross profit, and aftersales for 46%. Whilst the ratios have not changed, we have seen improvements in all areas of our business. Charles Hurst, our subsidiary in Northern Ireland, had another record year and was a strong contributor to Group profits and operating cash flow. Charles Hurst is still, by far, the market leader in Northern Ireland. Trading and Regulatory Environment The 2002 market for both new and used cars in the UK was sustained due to robust consumer confidence and the low cost of finance. The overall level of new car registrations increased by 4.3% year on year although the picture is mixed dependent upon the franchises concerned. There is much debate about economic uncertainty. However we still expect 2003 to be the third highest market on record for car sales. Our manufacturer partners have exciting new models coming on stream and offer consumers low financing costs which, combined with our emphasis on delivering high quality service to our customers through our ' Customers for Life' initiatives, enable us to be confident that Lookers is well placed to make progress in this more challenging trading environment. The revised Block Exemption regulations, currently being implemented in the industry, will favour larger dealer groups such as ourselves and significant opportunities are arising as our manufacturer partners restructure their franchise networks ahead of the implementation of the new regulations in October 2003. Operating Review Trading Our operating priorities continue to be investment in our 'Customers for Life' programmes and strategic franchise extension with our preferred manufacturing partners. The management structure put in place during 2002, with young and dynamic Franchise Directors responsible for a franchise brand on a national level, is ensuring that newly acquired businesses are quickly integrated and is increasing returns across the business. Delivering outstanding quality service to our customers lies at the heart of our business. We have continued to invest in our Customer Management Centre in Liverpool, allowing us to reinforce our customer relationship management programmes. Understanding our customers' needs affords us the opportunity to maximise our profit opportunity, particularly in aftersales which will continue to grow following the record levels of new car sales. Further development of our sub-prime finance arm Look 4 Car Credit.com, whereby we source cars to match the payment patterns of this segment of our customer base, has also allowed us to offer our customers more choice to finance their purchases and to drive sales. Our track record of long-term investment continues to deliver growth in the profitability of our aftersales business. In all areas of aftersales - service, parts and bodyshop we have increased the contribution to profitability. Our performance continues to be recognised in national awards. In the prestigious 2002 Motor Trader Awards, we were delighted to win the 'Excellence in Customer Care' award and be highly commended in the Dealer Group category. During the year we continued to invest in the quality of our facilities to achieve good organic growth. In Northern Ireland, we have completed many of the projects to upgrade and extend our facilities. We have already built one of the first combined Renault and Nissan facilities on the Boucher Road, Belfast site. The new Lexus stand-alone facility was completed in the first half and since it has been operating on this basis it has performed extremely well. The new 15,000 sq ft Peugeot facility has also been completed and this is now located onto our Boucher Road complex. These improvements will maintain Boucher Road, Belfast's status as one of the largest and most impressive multi-franchise sites in Europe, delivering excellence to our customers whilst maximising performance, efficiency and ultimately, profitability. The refurbishment of the Vauxhall site in Selly Oak Birmingham has been completed. In April 2003 we will have completed our new Vauxhall site in Chester to cover the whole of Chester and will relocate from our existing premises. The refurbishment of the adjacent Renault site acquired last year will be completed shortly after this. We have been operating five motorcycle franchises from single premises on our main Boucher Road complex for many years. The contribution from this business during that time has been good and 2002 was no exception. On 1 April we will be relocating our BMW franchise to a stand alone facility. We operate a successful cash-generative tyre division in Northern Ireland, with a high return on capital employed, which again, contributed strongly to profits this year. We have continued to rationalise and streamline our agricultural business - Platts Harris Group Limited. The results for this business, whilst disappointing, are not material to the Group but its future is being very carefully and continually reviewed. Acquisitions and franchise development Vauxhall Over the course of 2002 we acquired four Vauxhall dealerships in the Birmingham area. We are now the sole distributor of new Vauxhall cars in the highly important Birmingham territory. These businesses were previously held by three competitors and we have therefore spent much of 2002 rationalising and re-focusing them to operate as a market territory. We expect to see the benefits of this begin to flow through in 2003. In addition, we have identified a prominent site to relocate two of the existing Vauxhall premises onto a more strategic location in Star City, one of the largest leisure and entertainment complexes in Europe. By combining two outlets on one site, we will be creating a brand centre for Vauxhall in Birmingham in a key strategic location, whilst also reducing costs. We expect this facility to be available for operation during the early part of 2004. During 2002 we also expanded our relationship with Vauxhall by acquiring a dealership in Speke, Liverpool. We are now the sole distributor of new Vauxhall cars in the market area of Liverpool and St Helens. This dealership, which is located close to Speke International Airport, naturally sits alongside our existing Vauxhall outlets and confirms our dominant position in this important market territory. A rationalisation of management at the Speke dealership has resulted in immediate returns to the Group. Volvo - (Premier Automotive Group) Towards the end of 2002 we expanded our relationship with the Premier Automotive Group by acquiring two Volvo dealerships in Chelmsford and Brentwood, Essex. We have now relocated the Brentwood dealership onto one site in Hadleigh alongside our existing Land Rover operations. These transactions took place at the very end of the year and it will take the first six months of 2003 to rationalise these businesses and have them operating effectively, adding to Group profitability. Honda At the very start of 2002 we opened a new Honda dealership in Southport, Merseyside increasing our Honda representation to five outlets and creating a market area with our existing premises in Liverpool . The Chatsworth Honda business, acquired in 2001, is making a significant contribution. Renault Since the year end we have added two more Renault dealerships in Cheshire/South Manchester. These acquisitions consolidate our position as one of the largest retailers of Renault cars in the United Kingdom. In the north west, we now operate a market area covering the market territories of Stockport, Macclesfield, Altrincham, Northwich and Chester. We expect these businesses to be immediately profit enhancing for the Group. JN Holdings Limited acquisition In early February 2003 we acquired the entire share capital of J N Holdings Limited, trading as Taggarts in Scotland. This acquisition gives us the Jaguar franchise for the whole of Glasgow, as well as a Jaguar dealership in Motherwell, together with Land Rover, MG Rover, Mazda, Unipart and Bodyshop operations. Our entry into Scotland through this acquisition is an important strategic development for the Group. We have retained the existing senior management of this business in order to ensure an effective handover and the early results from this business are encouraging. Volkswagen Recently we were awarded the combined market territory for Blackburn and Burnley with Volkswagen. We currently operate a Volkswagen dealership for the Burnley territory, but this additional dealership in Blackburn expands the territory threefold in an area where Lookers have been present for a considerable amount of time. Our experience of this market area and our strong existing relationship with Volkswagen, will benefit us as we begin to operate in Blackburn from the second quarter. Outlook A large part of 2002 was spent on changing the Group structure to a brand specific management approach. We have taken the opportunity to remove unnecessary cost. We have reviewed the financial structure of the business and taken positive action. We have also reviewed our acquisition opportunities carefully, and invested where we believe we can achieve acceptable returns. We will continue this strategy of targeting high quality businesses that fit with our expansion plans in terms of manufacturer and location. There are exciting new products to come in 2003 in both our prestige and volume marques - the Jaguar XJ series, the Bentley Continental GT and the Volvo XC90, for all of which we have a large number of advance orders. Vauxhall will be introducing the new Meriva and Signum and Renault will be launching the Scenic and Cabriolet derivations of the very popular and recently introduced new Megane. All these factors lead me to be very optimistic about the Group's progress in the year ahead. Ken Surgenor 20th March 2003 Chief Executive FINANCIAL REVIEW Group Results Turnover of £790 million represents an increase of 10% over the previous year of which £58 million is accounted for by new businesses acquired during the year. The acquisitions took place throughout the year and include four Vauxhall dealerships comprising the Birmingham market area, the Vauxhall dealership in Speke to complete the Liverpool/St. Helens market area and the Volvo dealerships in Essex to ultimately locate alongside our Land Rover dealerships in Chelmsford and Hadleigh. Acquisitions contributed £309,000 to operating profit. In the case of Birmingham, four businesses were acquired from three previous owners from March 2002 through to August 2002. By the end of 2002, the business had been rationalised to operate as a market area. We expect to see the benefits of this impacting the 2003 results, and still further in 2004 when we relocate from two of the existing sites into one 'Brand Centre' on the highly visible Star City Retail Park adjacent to the M6. The new businesses acquired early in 2003 are already contributing to the operating profitability of the Group. Gross margins have increased slightly from 12.1% to 12.5%, which has resulted partly from the mix of business that we do and partly from the fact that we have avoided low margin business. This combined with the tight control of operating costs has provided the platform for an 8% increase in operating profit. Interest Charges The Group's interest cost reduced from £3.9 million to £3.3 million as a result of lower interest costs and lower overall borrowings. Interest cover has increased to 4.6 times from 3.6 times last year. We have taken advantage of the prevailing market rates and used the opportunity to hedge a larger proportion of our medium term facilities in order to protect the Group's position in the event of rising interest rates but allowing participation in reducing interest rates. We believe that we now have the right balance between hedged and unhedged facilities Taxation The tax charge for the year of £3 million represents an effective rate of 25.4% and it is expected that this rate will be maintained next year because of the continued anticipated level of property transactions. Dividends Ordinary dividends paid and proposed for the year amounted to £3.4 million compared to £3.2 million in 2001. In addition, £1.1 million of preference share dividends were paid which, following the redemption of the preference shares in January 2003, will not recur. Dividend cover has increased slightly over the previous year. During the year we took the opportunity of buying £702,000 of preference shares in the market and on 2nd January 2003 we redeemed the remainder of the preference shares at par, totalling circa £13.9 million. A pro-forma profit and loss account and balance sheet will be disclosed in the financial statements, which explains the impact of this had we redeemed the whole of the preference shares on 1st January 2002. As a result of this financial reorganisation, on a pro forma basis, the profit retained by the Group would have increased by over £600,000 and the earnings per share would have increased by 8%. A hedging facility has been put in place for the loan to repay the preference share capital such that regardless of interest rate movements this financial restructuring will always be earnings enhancing. Cash Flow and Capital Expenditure During the last two years, we have focused management's attention to ensure we operate very stringent controls over our working capital - a policy we consider to be essential, especially given the on-going level of capital investment in new acquisitions and relocating/refurbishing our existing properties. We have also, during the course of 2002, and will continue in 2003, to reduce the Group's small portfolio of surplus properties. These factors enable us to take full advantage of opportunistic purchases of large volumes of vehicles on more competitive terms from manufacturers. A significant quantity of such vehicles were acquired just prior to the year-end, which will benefit 2003. Despite this expenditure, we still generated £21.5 million of operating cashflow. This cash generation has provided us with a strong financial platform and enabled us to reduce gearing to 39% at the year end compared with 56% last year. Shareholders Funds and Financing Shareholders funds have increased by £4 million to £77 million, an increase of 5%. Net of new facilities, we have repaid £10 million of loans and reduced total borrowings by £12 million. The Group has an appropriate mix of short and medium term facilities and maintains good relationships with all its providers of finance. The strong operational cash flow achieved in 2001 and 2002 has meant that the Group had unutilised facilities in excess of £32 million at 31 December 2002. After accounting for the final dividend, the retained profit for the year in excess of £4.25 million was added to reserves. We anticipate a future level of profit retention that will support the continued strong financial position of your Company, providing the ability to finance suitable acquisitions as and when they arise. David Dyson 20th March 2003 Group Financial Director The Directors announce the following unaudited results for the Group for the year ended 31st December 2002 Consolidated Profit and Loss Account (Summarised) Year ended Year ended 31st December 2002 31st December 2001 (Unaudited) (Audited) £000 £000 Turnover Continuing operations 732,023 717,894 Acquisitions 58,329 - ________ ________ 790,352 717,894 ======= ======= Operating Profit before Goodwill Amortisation 15,848 14,697 Goodwill Amortisation 728 693 Operating Profit Continuing operations 14,811 14,004 Acquisitions 309 - ________ ________ Profit before interest 15,120 14,004 Interest payable 3,291 3,939 ________ ________ Profit on ordinary activities before taxation 11,829 10,065 Taxation 3,007 2,507 ________ ________ Profit after taxation attributable to shareholders 8,822 7,558 ======= ======= Dividends - preference shares 1,126 1,167 - ordinary shares 3,428 3,168 ======= ======= Earnings per ordinary share 22.6p 18.9p ======= ======= Consolidated Balance Sheet (Summarised) 31st December 2002 31st December 2001 (Unaudited) (Audited) £000 £000 FIXED ASSETS Intangible assets 9,165 9,534 Tangible assets 82,789 86,540 ________ ________ 91,954 96,074 ________ ________ CURRENT ASSETS Stocks 72,963 59,189 Debtors 36,979 30,443 Cash at bank and in hand 32 31 ________ ________ 109,974 89,663 ________ ________ CURRENT LIABILITIES Bank Overdraft 3,756 5,337 Trade Creditors 64,596 42,589 Other Creditors 38,586 39,299 Proposed dividend 2,403 2,202 ________ ________ 109,341 89,427 ________ ________ Net current assets 633 236 ________ ________ Total assets less current liabilities 92,587 96,310 Creditors: Amount falling due after more than one year 15,347 22,677 Provisions for liabilities and charges 316 691 ________ ________ Shareholders' funds 76,924 72,942 ======= ======= Shareholders' funds are attributable to: Non-equity shareholders' funds 13,889 14,591 Equity shareholder's funds 63,035 58,351 ________ ________ 76,924 72,942 ======= ======= Total borrowings 29,593 41,515 ======= ======= Gearing 39% 56% ======= ======= Consolidated Cashflow Statement (Summarised) Year ended Year ended 31st December 2002 31st December 2001 (Unaudited) (Audited) £000 £000 Net Cash inflow from Operating Activities Operating Profit 15,120 14,004 Depreciation Charges 3,104 2,935 Profit on sale of fixed assets (1,646) (388) Increase in debtors (5,923) (869) Increase in creditors 17,918 7,096 (Increase)/Decrease in stocks (7,728) 1,835 Goodwill amortisation 728 693 ________ ________ 21,573 25,306 Interest paid (3,378) (3,847) Non equity Dividends paid (1,126) (1,167) Taxation paid (3,319) (2,575) Net Cash inflow/(Outflow) from Capital Expenditure and Financial Investment 4,226 (6,536) Net Cash Outflow from Acquisitions and Disposals (2,540) (2,388) Equity Dividends Paid (3,227) (2,998) Net Cash Outflow from Financing (10,627) (1,436) ________ ________ INCREASE IN CASH 1,582 4,359 ======= ======= Notes: 1. Dividends (a) Ordinary shares of 25p An interim dividend of 3.00p per share (2001 - 2.85p per share) was paid on 29th November 2002. The final dividend proposed at the rate of 7.0p per share (2001 - 6.5p per share) is payable on 30th May 2003 to shareholders on the register at the close of business on 16th May 2003. Part of the consideration for the acquisition of J.N Holdings Limited, which completed in February 2003, was the issue of ordinary shares to the Vendors. The number to be issued will be determined upon agreement of the final completion accounts. The current best estimate of this is that the Company will issue 427,000 ordinary shares to the Vendors. At 31st December 2002, there was no liability to provide for the final dividend on these shares amounting to £30,000, however they will be eligible to receive the final dividend on the due date. (b) 8% Cumulative redeemable preference shares of £1 each Preference dividends of 4.0p per share (2001 - 4.0p per share) have been paid for the six months to 31st March 2002 and also for the six months to 30th September 2002 (2001 - 4.0p per share). 2. Earnings per share The earnings per share is based on profit on ordinary activities after taxation and preference dividends calculated on a weighted average of 34,036,200 ordinary shares in issue during the year (2001 - 33,870,060). There are ordinary shares or share options that give rise to a dilution of earnings per share although the impact is wholly insignificant (2001 - same). 3. Financial Information The financial information has been prepared on the basis of the accounting policies adopted at 31 December 2001 with the exception that Financial Reporting Standard 19 - Deferred Tax has been adopted. This has had the impact of increasing the deferred tax provision, and consequently reducing shareholder's funds by £614,000 at 31st December 2001. The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 31 December 2002 or the year ended 31 December 2001. The financial information for the year ended 31 December 2001 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2002 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange

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