Final Results

RNS Number : 3217Z

Lookers PLC

06 March 2013

 

6 March 2013

LOOKERS plc

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012

Lookers plc, ("Lookers", "the company" or "the group"), one of the leading UK motor retail and aftersales service groups, announces its annual results for the year ended 31 December 2012.

Financial Highlights

•	Revenue of £2.06 billion (2011: £1.90 billion)
•	*Adjusted profit before tax increased to £36.8 million (2011: £33.8 million)
•	Profit before tax increased to £35.3 million (2011: £31.4 million)
•	Earnings per share up 7% at 7.00p (2011: 6.54p)
•	Operational cash flow improved at £66.1 million (2011: £58.0 million)
•	Proposed final dividend of 1.55p per share - total dividend per share up 8% at 2.35p (2011: 2.18p)

(*Adjusted before amortisation of intangible assets and debt issue costs)

Operational Highlights

•	Record performance from the motor division
•	Strong growth in used car volumes and margins
•	Resilient performance from our market leading independent aftermarket parts division
•	Revenue maintained in aftersales
•	Acquisition of Lomond Audi and Fleet Financial

Commenting on the results, Lookers Chief Executive Peter Jones said:  "We are pleased to have delivered another strong trading performance in 2012 and we have now had four successive years of increased profits.  Our motor division has produced an excellent result and the parts division has delivered a resilient performance in challenging market conditions. Operational cash flow for the year was particularly positive, resulting in a strengthened balance sheet. These results give us further confidence that we can continue to grow the business in 2013, despite the fact that short term market conditions remain challenging. As economic conditions improve over the medium term, Lookers is well placed to take advantage of future growth in the new and used car markets and increased demand for aftersales and parts."

Enquiries:

Lookers	Today: 020 7920 3150
Peter Jones, Chief Executive	Thereafter: 0161 291 0043
Robin Gregson, Finance Director
Tavistock Communications	Telephone:  [phone]
Catriona Valentine/Keeley Clarke

CHAIRMAN'S REVIEW

I am very pleased to report that Lookers has delivered another record trading performance for the year, improving *adjusted profit before tax to £36.8 million (2011: £33.8 million). This successful result has been achieved against the background of slowly improving conditions in the motor retail market, despite the general uncertainty in the UK economy. The group's performance demonstrates continued progress, as we deliver a fourth consecutive year of record results.

The UK new car market increased by 5.3% in 2012, with total registrations of 2.05 million and the key retail sector benefiting from 12.9% growth. Our motor division delivered an excellent performance enjoying strong double digit growth in volumes of new and used retail cars, which was significantly higher than the record result achieved in 2011. Further details of our progress in the motor division are provided in the Chief Executive's Review.

As detailed in our interim report for this year, turnover in our independent parts division has been affected by a reduction in non essential maintenance spend and the consequential increased level of competition in the market. We have protected sales volumes by active pricing management and this is demonstrated by increased volumes for the second half of the year. These were higher than the prior half year and resulted in turnover for the full year being slightly ahead of 2011. Whilst these issues had an impact on margins, decisive action by management helped to preserve profitability. With a profit for the year of £11.1m the parts division continues to make a strong contribution to total group profits of which it represents 30%.

Our performance in 2012 demonstrates the strength of the group's businesses with profits generated by dealership aftersales and the independent parts division representing 57% of total gross profit. Furthermore, the capital structure of the group has strengthened significantly in the last four years and the business continues to generate substantial levels of operational cash flow. This improved financial position has enabled the board to increase the dividend payment for the year, details of which are set out below. The group is therefore in a strong position to continue to trade successfully in 2013 and develop further opportunities in all areas of the business.

FINANCIAL HIGHLIGHTS

Turnover increased by 8.3% to £2.06 billion and operating profit before amortisation increased by 9% to £49.2 million. I am pleased to report that there were again no exceptional charges in the year. We continued to focus on the control of working capital and operational cash flow, which increased to £66.1 million compared to £58.0 million in the prior year. Whilst we invested £18.2 million on acquisitions during the year, the control of cash flow restricted the increase in net bank borrowings to £8.7 million and also resulted in a modest increase in interest charges (before pension interest charges), for the year to £11.2 million compared to £10.9 million last year. *Adjusted profit before tax was £36.8 million compared with £33.8 million last year. Profit before tax increased to £35.3 million (2011: £31.4 million). Earnings per share increased by 7% to 7.0p compared to 6.54p in 2011. We continue to have the benefit of a strong balance sheet where despite significant spending on acquisitions, the level of gearing has been maintained at a low level of 24% compared to 20% last year, with net debt of £48.2 million compared to £39.5 million at the start of the year.

DIVIDEND

I am pleased to announce that, given the positive result for the year and the strong financial position of the group, the Board intends to increase the total dividend for the full year by approximately 8%, which follows the 21% increase in the dividend last year. We have previously paid an interim dividend of 0.8p per share, which was a similar level to that paid in the previous year, as the Board decided to restore the balance between the interim and final dividend payments. The interim dividend should now represent approximately one third of the total dividend for the year. As a result of restoring this ratio, I am pleased to announce that we are proposing to pay a final dividend for the year ended 31 December 2012 of 1.55p per share, giving a total dividend for the year ended 31 December 2012 of 2.35p per share (2011: 2.18p). This represents an increase in the final dividend for the year of 12%. Payment of the final dividend is subject to approval by shareholders at the Annual General Meeting and will be payable on 4 June 2013.

(*Adjusted before amortisation of intangible assets and debt issue costs)

BOARD CHANGES

I am pleased to report a change to the structure of the Board where I am delighted to announce the promotion of Andy Bruce, currently managing director of the motor division, to the newly established role of chief operating officer, with immediate effect.  Reporting to our chief executive Peter Jones, Andy will now take direct reporting responsibility for the group's leasing, rental and agricultural machinery businesses, whilst continuing to have his existing operational responsibilities for the motor division. Together with all my colleagues on the board I wish Andy continued success in this new role.

Our independent parts division will continue under the leadership of managing director Neil Davis who also reports directly to Peter Jones.

I believe this new role will improve the group's reporting structure by integrating the group's ancillary businesses into the motor division. It will also strengthen and provide greater flexibility for the Board's future succession and strategic development plans.

OUTLOOK

The motor division has made excellent progress and delivered a very strong performance in the period, through increased volumes of new and used retail cars at improved margins. We have an excellent opportunity to improve the returns generated by the recently acquired Lomond Audi and Fleet Financial businesses, which should make a significant contribution to the motor division. Despite suffering from a marginal reduction in turnover in the first half of the year, the parts division recovered well in the second half and continues to produce good results, with a stable return on sales of 6% and providing a significant contribution to group earnings. Product development and marketing initiatives introduced during the year are also having a positive impact in the parts division with turnover in the second half of the year being higher than last year.

The group balance sheet continues to be strengthened by positive operational cash flow. We have substantial headroom in our bank facilities and net debt continues to be closely controlled. This provides financial security for the group as well as providing funding for strategic acquisitions in both the motor and parts divisions, as further opportunities arise.

Whilst economic conditions continue to affect consumer confidence, restricting recovery in the new and used retail sectors, we continue to improve the operational and financial performance of the group. The aftersales bias of the business and our improved performance over the last four years demonstrates the ability of the group to perform well in a challenging market.

The new financial year has started well with the group making further progress with results so far being ahead of both budget and the prior year. We are therefore confident that we are well placed to deliver future growth.

I would like to conclude by thanking all our people at Lookers for their hard work and dedication in what continues to be a challenging trading environment and without whom we would not have been able to deliver such a result for the fourth consecutive year.

Phil White

Chairman

6 March 2013

CHIEF EXECUTIVE'S REVIEW

2012 Performance overview

The motor division has delivered an excellent trading performance during the year and the parts division has performed well in the difficult market conditions. The group delivered record results with *adjusted profit before tax of £36.8 million (2011: £33.8 million). I am delighted to report such a result which I believe is a significant achievement in the current trading environment.

The key elements of this creditable achievement were:

•	Significant increase in new car retail sales at improved margins;
•	Significant growth in used car volumes and margins;
•	A resilient aftersales performance in the motor division;
•	A strong second half performance in the parts division restricted the reduction in profits seen in the first half year to give a satisfactory result for the year.

We have now had four successive years of increased profits which have been delivered in restricted market circumstances. This gives us confidence that we will be able to grow the business again in 2013, despite market conditions remaining challenging. As economic conditions improve over the medium term, the business is well placed to take advantage of growth opportunities in the new and used car markets and increased demand for aftersales and parts.

(*Adjusted before amortisation of intangible assets and debt issue costs)

OPERATING REVIEW

MOTOR DIVISION

Our motor division consists of 121 franchise dealerships representing 32 marques from 70 sites.  The business generates revenue from the sale of new and used cars and aftersales, which are vehicle servicing and repair together with the sale of franchise parts. I am pleased to report that the motor division increased profit before tax by 16% to £31.7 million, a record for the business and a significant increase over the prior year's result of £27.4 million.

We continue to improve the balance of our portfolio of franchise representation and during 2012, we have sold or closed four underperforming businesses, added seven additional franchise businesses and made three new acquisitions as described in the following paragraphs.

On 5 July 2012, we acquired the entire issued share capital of Lomond Motors Limited ("Lomond") which operates four significant Audi Centre dealerships in key locations in Scotland, including Glasgow, Edinburgh, Stirling and Ayr, as well as the distribution of trade parts for the VW Group in Glasgow and Edinburgh. The acquisition is an important development in the group's representation of the Audi brand, further strengthening our relationship with the VW Group and enhancing the group's presence in Scotland, where we operate as Taggarts Motor Group in Glasgow and Motherwell. Lomond is a well established business which offers significant growth potential and we are pleased to have had the opportunity to add the business to the group's portfolio.

On 7 June 2012, we acquired Fleet Financial (N.I.) Limited which is a successful contract hire and leasing company based in Belfast. This company complements Lookers existing vehicle leasing and rental businesses and it will help to further broaden the range of earnings sources in the group.

On 6 August 2012, we completed the purchase of a Seat and Skoda dealership in Manchester, complementing our Stockport based Seat and Skoda dealerships.

New Cars

The new car market increased by 5.3% to 2.05 million cars in the period, with the new car retail market increasing by 12.9% and the fleet business market static. Group core retail new car sales increased by 12.0% compared to 2011 levels.  In the fleet sector, our volumes fell by 9.4%, the reduction in volume being due to reduced sales of low margin fleet business, where the margin on specific deals was reduced from 2011 levels.

Gross profit per unit on new retail cars increased by 3.7% compared to the prior year, whilst gross profit per unit on fleet business increased by 19% compared to the previous year. This more than offset the reduction in fleet volume. The new retail market is showing some recovery and our order take for the important month of March is tracking on plan.

Used Cars

Group sales volumes increased by an excellent 12% compared to 2011 levels and gross profit per unit increased by 10.5%. This was a very positive performance and was the result of a strong focus on pro-active pricing, stock management, improved buying and further focus on the effectiveness of the group's website. The used car market, which has annual sales of approximately 6.7 million vehicles, continues to represent a significant opportunity for the group. Through continually improving our web presence, improved sourcing and a broader stock mix, together with rigidly applied stock control policies, we expect to take advantage of the stable market conditions in the used car sector to continue to improve volumes and margins. The performance in 2012 indicates that we are making good progress with this strategy.

Aftersales

Despite continued pressure in the sector, the aftersales business in the motor division has increased turnover by 2.8%, although the focus on older vehicles has resulted in a slight reduction in margin from 42% to 40%. This represents a positive result secured by the success of our 'customers for life' strategy.

We continue to invest in technology and procedures to further improve customer retention and average sales value per customer visit. In particular, we have made a number of improvements to our electronic vehicle health check system across the whole motor division Our sales of service plans, whereby customers commit to longer term contracts for vehicle servicing, showed a significant level of growth in the year and this will further improve customer retention. All these initiatives help us to identify and optimise service and repair requirements on all vehicles visiting us which, combined with our determination to deliver excellent customer service, are key factors in strengthening and maximising our 'customers for life' strategy.

Business Development

Marketing strategy

We have made major improvements to our web presence and have seen visitor and enquiry levels increase significantly in 2012 showing year on year growth of 49% and 63% respectively, resulting in a significant reduction in the cost per enquiry. We have recently launched a mobile website so that users of mobile devices enjoy full functionality. We continue to invest in this area to ensure our digital showroom reflects the very latest trends in consumer behaviour so that we enhance customer engagement. Examples include live chat for extended hours and a fully managed social media monitoring function.

Customer satisfaction

During 2013 we will be introducing our new customer experience strategy which has been developed with leading industry professionals. This focuses on the concept of maintaining customers for life and will provide more insight in respect of our customer satisfaction both within the business and with our customers. Management incentives have been restructured to place more emphasis on our customer satisfaction levels and the scope of our customer research has become more widely focused. We believe these measures will continue to drive higher retention and referrals within our business.

Employee development

Recognising that our people are our key asset, we continue to invest in a much enhanced training and development programme. This dramatically increased the number of training courses available to all staff, including the innovative use of an e-learning platform as well as introducing a structured and formal management development programme. This will also be aligned with our new customer experience strategy to ensure our staff develop the skills to deliver enhanced levels of customer satisfaction. 

PARTS DIVISION

Following a record year in 2011, our independent aftermarket parts division has continued to perform well in the difficult market conditions I have referred to earlier in this report, with turnover being maintained just above the level achieved last year. The parts division operates through three companies, FPS, Apec Braking and BTN Turbo, each supplying hard parts to the independent aftermarket. The customer base is primarily motor factors which, in turn, supply the independent repair sector.

The total vehicle car parc in the UK market is over 30 million vehicles, with the markets served by the parts division representing up to 80% of the total. Each of the businesses in the parts division is a market leader in its sector and the business has previously expanded through increased sector and product penetration. However, market forces such as the reduction on non essential maintenance spend and the consequential impact of increased competition in the market, have put pressure on the demand for vehicle parts in the period and also resulted in pricing pressure, which has affected the financial results of the parts division.

As referred to in our interim report, turnover for the division was £1.3 million down on the prior year in the first half. Volumes were protected by active pricing management and this helped turnover in the second half to be £1.4 million ahead of the prior year. Turnover for the 12 months was therefore £0.1 million ahead of 2011. These factors did have an adverse impact on gross margins which reduced slightly from 30.5% to 29.9%, with total gross profit reduced by £1.1 million. However, overheads were kept under control with a net increase of £0.1 million, with the effect of restricting the reduction in operating profit to £1.2 million in the year to produce a profit before tax of £11.1 million.

FPS, our national warehouse distributor of quality branded automotive hard parts, is the largest company in the parts division and represents almost three-quarters of divisional turnover. Whilst turnover reduced by £0.9 million in the first half, it increased by £1.7 million in the second half, resulting in an increase in turnover for the year of £0.8 million, or 0.6%. Profit before tax reduced to £8.4 million from £8.8 million last year. The reduction in turnover was mitigated by new product development and penetration, with growth across most customer groups and the launch of new product ranges. Efficiency benefits were also achieved by an increase in electronic order capture and the implementation of new systems in quarter one forms the platform for further process development, although this resulted in an associated modest increased investment in overheads.

Apec Braking, the aftermarket leader in the UK for 'dry' braking (pads and discs), also suffered a reduction in turnover which was 6% lower than last year. Weaker demand was accompanied by significant competition in the market, particularly from lower cost, lower quality products. Active pricing management helped to mitigate further volume decline but with a consequent impact on margins, however no customers were lost in the year. Overheads were tightly controlled which restricted the reduction in profit to £0.7 million. The business has since introduced a second tier product which is competitively priced and will help regain some of the turnover lost to the lower quality budget competitor brands.

BTN Turbo, the UK's leading distributor of turbochargers and supplier of related value added services, experienced competitive trading conditions. However, the focus on developing business with key customers and the launch of new, competitively priced product ranges, improved turnover by £1 million or 5% over the previous year. Increased investment in new systems increased overheads but profit was maintained at a similar level to last year. The sector remains competitive, but development opportunities exist as the UK's installed turbo base continues to increase and value added and product segment opportunities are developed with key customers.

GROUP OUTLOOK

The group has made a good start to the current financial year and we continue to outperform the new retail car market. We have a healthy order book for the delivery of new cars in the important month of March and aftersales continue to perform well, with the result that the group is ahead of both budget and prior year. We therefore expect the result for the first quarter to be ahead of both budget and last year.

The new and used car retail markets are expected to be stable in 2013, providing a base to deliver continued growth, particularly in used car volumes. The group's strong performance during the past four years demonstrates the strength of the business and its ability to make progress in restricted markets. The broad base of our franchise representation and the aftersales bias to the motor division, together with the restructuring of our portfolio during the last four years, have provided a structural resilience which allows us to adapt to market challenges. This leaves us very well positioned for future growth. The acquisitions of Lomond Audi and Fleet Financial should make a significant contribution this year. Furthermore we continue to focus on the areas in which we can improve the performance of the group's franchised outlets, such as used car sales and also on targeted and selective acquisitions to further improve our franchise representation.

Whilst turnover in the parts division has been affected by a modest reduction in demand, the swift response taken by management of this division during 2012 resulted in turnover growth in the second half which offset the reduction in the first half of the year. The parts division continues to invest in new product lines, improved facilities and improved systems, which should help protect the business this year and support further growth. This division continues to generate a high return on sales as well as making a significant contribution to group earnings, where the profit before tax is 30% of the group total.

The group balance sheet continues to be strengthened by strong operational cash flow, we have substantial headroom in our bank facilities and net debt continues to be closely controlled. This provides financial security for the group as well as providing funding for us to make strategic acquisitions in both the motor and parts divisions, should further opportunities arise.

Peter Jones

Chief Executive

6 March 2013

FINANCE DIRECTOR'S REVIEW

GROUP RESULTS

Turnover increased by 8.3% to £2.06 billion compared to £1.89 billion last year, with positive growth from new and used cars. Whilst this included turnover from acquisitions, this offset turnover from dealerships sold or closed in the year. Gross profit of £272 million is £20 million higher than the previous year with the growth from new and used cars as well as acquisitions. The gross margin of 13.2% was a similar level to the prior year of 13.3% and the operating margin was 2.4%, the same as last year. Overheads increased by £15.6 million in the year, primarily due to the higher turnover and acquisitions.*Adjusted profit from operations increased by 9% to £49.2 million, compared to £45.2 million in 2011. 

Net interest costs increased by 9% to £12.4 million compared to £11.4 million in 2011, with operational interest charges, excluding interest on pension scheme liabilities, increasing by 3% from £10.9 million to £11.2 million, the increase being a result of higher borrowings due the acquisitions made during the year. Interest on group borrowings is based initially on floating interest rates supplemented with interest rate hedges. The term loan was fully covered by interest rate hedges during the year and this was also the situation at 31 December 2012. However, as the hedges were established in 2007, when interest rates were significantly higher than current levels, they have the effect of increasing the interest charge so that we do not get the full benefit of the low base rate which is currently applicable in the UK. The largest hedge, with a capital value of £50 million, expired on 28 February 2013, which will have a positive impact on the interest charge for the current year.

Key financial highlights are summarised below:

•	Profit before tax, amortisation, and debt issue costs for the year increased to £36.8 million, from £33.8 million last year, which is the highest trading result to date for the company;
•	Profit before tax was £35.3 million compared to a profit before tax in the previous year of £31.4 million;
•	Profit after tax was £27.1 million, an increase of 8% compared to £25.2 million in 2011;
•	This resulted in an increase of 7% in earnings per share of 7.0p compared to 6.54p in the prior year and *adjusted earnings per share of 7.4p compared to 7.17p in the prior year.

(*Adjusted before amortisation of intangible assets and debt issue costs)

TAXATION

The tax charge for the year of £8.2 million compares to a tax charge of £6.2 million in the prior year and reflects a charge of 23% of profit before tax, which is slightly lower than the standard rate of corporation tax of 24.5%.

CASH FLOW AND CAPITAL EXPENDITURE

Cash generated from operations for the year was £66.1 million, an increase of 14% compared to the operating cash flow in 2011 of £58.0 million. Working capital reduced by £6.8 million with an increase in creditors of £83.5 million and £2.0 million relating to acquisitions, which offset the increase in stock and debtors of £78.7 million. Capital expenditure was £15.3 million compared to £10.9 million the previous year and proceeds from the sale of properties and dealership businesses were £4.9 million (2011: £13.7 million). The majority of capital expenditure was on new or improved premises for dealerships. As referred to in the Chief Executive's Review, during the year we acquired two subsidiary companies: Lomond Motors Limited and Fleet Financial (N.I.) Limited, for a total cash consideration of £18.2 million.

The strong operational cash flow allowed us to make further reductions in bank loans where repayments of £7.5 million were made during the year, compared to £25.5 million in 2011, where last year benefited from £13.7 million of asset sales. Net debt increased by £8.7 million in the year, compared to a reduction of £17.1 million in the previous year, the increase being mainly due to the higher level of capital expenditure and the acquisitions made during the year. This reduction resulted in net borrowings of £48.2 million at 31 December 2012 compared to £39.5 million at the start of the year, net debt being calculated as gross bank borrowings less cash balances.

SHAREHOLDERS' FUNDS AND FINANCING

Our bank facilities were last renewed in November 2011 and remain in place until March 2016. The facilities consist of a term loan which was originally £60 million, but had reduced to £48.75 million by 31 December 2012 and a revolving credit facility of £55 million. There is also the potential to increase the term loan by up to an additional £30 million to fund future acquisitions. Interest is charged on both loans at a margin of between 1.4% and 2.35% above LIBOR, depending on the ratio of net bank debt to EBITDA. These facilities are subject to half yearly covenant tests on interest cover and net bank debt to EBITDA. The covenant tests are set at levels that provide sufficient headroom and flexibility for the group until maturity of the facilities in March 2016.

At 31 December 2012, total facilities were £103.75 million of which £48.2 million, net of cash balances, was being utilised. These facilities, together with the group's strong operational cash flow, indicate that the group has sufficient facilities available to fund its operations and allow for future expansion. At 31 December 2012, gearing was 24% compared to 20% at 31 December 2011 and net debt to EBITDA was 0.80 compared to 0.73 last year. The group's underlying profitability and strong cash flow should result in further reductions in borrowing in the future and help ensure that the level of borrowing remains under control and is at a reasonable level in relation to net assets. Further information on the going concern basis of preparation of the accounts is included in note 1 to this announcement.

PROPERTY PORTFOLIO

The group has a policy of investing in freehold and long leasehold property as the preferred means of providing premises for the car dealerships, where possible. As a result, we have a significant and valuable portfolio of freehold and long leasehold properties, where the net book value at 31 December 2012 was £181.4 million compared to £174.3 million last year. Of this amount £3.2 million has been disclosed within current assets as assets held for sale as there is an expectation that these properties will be sold within 12 months. Short leasehold properties had a value of £6.2 million (2011: £7.4 million).

DIVIDENDS

In our interim report, we indicated that due to the positive operational cash flow and strong financial position of the group, we intended to increase the annual dividend by 8%. This followed an increase in the dividend of 21% in the previous year and continues our policy of increasing the dividend provided there is satisfactory growth in profitability. The interim dividend of 0.8p per ordinary share was paid on 30 November 2012 and we are proposing a final dividend of 1.55p per ordinary share, to give a total dividend for the year of 2.35p per ordinary share. The final dividend is subject to shareholder approval at the Annual General Meeting and will be payable on 4 June 2013. The final dividend will represent a cash outflow of £6.0 million, which gives a total dividend for the year of £9.1 million.

PENSION SCHEMES

The group operates two defined benefit pension schemes both of which are closed to entry for new members and also closed to future accrual. Whilst the asset values of the schemes have increased during the year, returns on assets have been lower than anticipated. The assessment of valuation of the pension schemes is based on several key assumptions prescribed by accounting standards and over which the directors have very little control. Furthermore, the discount rate used to value the liabilities has reduced during the year as it is related to the yield available on UK Government securities, which has been adversely affected by the Bank of England's quantitative easing programme. As a result, the calculation which estimates the potential liabilities of the schemes has resulted in an increase in the liabilities of both schemes.

The impact of these factors is that the combined value of the deficits of both schemes has increased by £10.6 million in the year and the total deficit after deferred tax, is now £34.6 million (2011: £24.0 million).  Relatively small changes in the bases of valuation can have a significant effect on the calculated deficit, hence the movement in the calculated deficit can be subject to high levels of volatility. The board continues to look at its options to reduce both the annual cost of operating both schemes and what actions can be taken to reduce the deficit on the schemes, thereby reducing exposure to movements in these liabilities and reducing the deficit over the medium and longer term.

VAT

As we have referred to in previous years, the group has previously submitted a number of claims with HM Revenue & Customs ('HMRC') in respect of potential overpayments of VAT relating to prior years and this situation continues to apply. During the year we received £1.3 million of VAT and interest in relation to these claims and these funds were used to cover costs incurred in relation to surplus properties. This was a relatively modest repayment and if the group is successful in further negotiations with HMRC, then there is the potential for further repayments to be received by the group, which could be significant. The nature of the process for negotiating these claims with HMRC can take a considerable time, so the timing of any potential receipt is uncertain and no benefit for any potential repayment has been included in the accounts and no income will be included until the claims have been agreed with HMRC.

Robin Gregson

Finance Director

6 March 2013

Consolidated Income Statement
For the year ended 31 December 2012

		2012	2011
	Note	£m	£m
Continuing operations
Revenue		2,056.6	1,898.5
Cost of sales		(1,784.3)	(1,645.9)
Gross profit		272.3	252.6
Distribution costs		(144.3)	(138.6)
Administrative expenses		(80.1)	(70.2)
Other operating income		0.2	0.1
Profit from operations		48.1	43.9
Profit from operations before amortisation		49.2	45.2
Amortisation of intangible assets		(1.1)	(1.3)
Profit from operations		48.1	43.9
Interest payable	2	(12.6)	(11.7)
Interest receivable	2	0.2	0.3
Net interest		(12.4)	(11.4)
Debt issue costs		(0.4)	(1.1)
Profit on ordinary activities before taxation		35.3	31.4
Profit before tax, amortisation
and debt issue costs		36.8	33.8
Amortisation of intangible assets		(1.1)	(1.3)
Debt issue costs		(0.4)	(1.1)
Profit on ordinary activities before taxation		35.3	31.4
Tax charge		(8.2)	(6.2)
Profit for the year		27.1	25.2
Attributable to:
Shareholders of the company		27.0	25.1
Non-controlling interests		0.1	0.1
Continuing operations
Earnings per share
Basic earnings per share	3	7.0p	6.54p
Diluted earnings per share	3	6.9p	6.39p

Consolidated Statement of Comprehensive Income

		2012	2011
		£m	£m
Profit for the financial year		27.1	25.2
Actuarial losses recognised in post-
retirement benefit schemes		(15.9)	(6.4)
Movement in deferred taxation on pension liability		3.5	2.4
Movement in deferred taxation on derivative instruments		-	0.5
Other comprehensive expense for the year		(12.4)	(3.5)
Total comprehensive income for the year		14.7	21.7
Attributable to:
Shareholders of the company		14.6	21.6
Non-controlling interests		0.1	0.1

Consolidated Statement of Financial Position

As at 31 December 2012

	2012	2011
	£m	£m
Non-current assets
Goodwill	61.4	47.7
Intangible assets	14.8	14.5
Property, plant and equipment	197.1	191.1
	273.3	253.3
Current assets
Inventories	384.1	320.3
Trade and other receivables	123.8	109.1
Rental fleet vehicles	39.4	29.3
Cash and cash equivalents	8.7	17.9
Assets held for sale	3.2	3.5
	559.2	480.1
Total assets	832.5	733.4
Current liabilities
Bank loans and overdrafts	15.7	8.6
Trade and other payables	479.8	407.1
Current tax liabilities	8.4	8.4
Short-term provisions	0.6	0.9
Derivative financial instruments	8.5	8.5
	513.0	433.5
Net current assets	46.2	46.6
NON-CURRENT LIABILITIES
Bank loans	41.2	48.8
Trade and other payables	21.0	9.8
Retirement benefit obligations	44.1	32.0
Deferred tax liabilities	8.6	11.4
Long-term provisions	0.8	0.8
	115.7	102.8
Total liabilities	628.7	536.3
Net assets	203.8	197.1
Shareholders' equity
Ordinary share capital	19.4	19.3
Share premium	75.3	75.0
Capital redemption reserve	14.6	14.6
Other reserve	(1.4)	(1.4)
Retained earnings	95.4	89.3
Equity attributable to shareholders of the company	203.3	196.8
Non-controlling interests	0.5	0.3
TOTAL EQUITY	203.8	197.1

Consolidated Cash Flow Statement

For the year ended 31 December 2012

	2012	2011
	£m	£m
Cash flows from operating activities
Profit for the year	27.1	25.2
Adjustments for:
Tax	8.2	6.2
Depreciation	10.8	9.3
(Profit)/loss on disposal of plant and equipment	(0.3)	0.1
(Profit)/loss on disposal of rental fleet vehicles	(0.4)	0.4
Amortisation of intangible assets	1.1	1.3
Interest income	(0.2)	(0.3)
Interest payable	12.6	11.7
Debt issue costs	0.4	1.1
Changes in working capital
Increase in inventories	(63.9)	(28.0)
Increase in trade and other receivables	(14.8)	(23.3)
Increase in payables	83.5	55.8
Impact of net working capital of acquisitions	2.0	(1.5)
Cash generated from operations	66.1	58.0
Difference between pension charge and cash contributions	(4.5)	(4.1)
Purchase of rental fleet vehicles	(52.0)	(39.3)
Proceeds from sale of rental fleet vehicles	38.8	26.2
Interest paid	(12.6)	(11.7)
Interest received	0.2	0.3
Tax paid	(7.8)	(6.7)
Net cash inflow from operating activities	28.2	22.7
Cash flows from investing activities
Acquisition of subsidiary companies	(17.2)	(1.0)
Purchase of property, plant and equipment	(15.3)	(10.9)
Purchase of intangibles	(1.4)	(0.1)
Proceeds from sale of property, plant and equipment	3.7	12.5
Proceeds from sale of business	1.2	1.2
Net cash (used)/generated by investing activities	(29.0)	1.7
Cash flows from financing activities
Proceeds from issue of ordinary shares	0.4	1.5
Repayment of loans	(7.5)	(25.5)
New loans	-	0.9
Debt issue costs	-	(1.1)
Dividends paid to group shareholders	(8.4)	(7.7)
Net cash outflow from financing activities	(15.5)	(31.9)
Decrease in cash and cash equivalents	(16.3)	(7.5)
Cash and cash equivalents at 1 January	16.8	24.3
Cash and cash equivalents at 31 December	0.5	16.8

Consolidated Statement of Changes in Equity

	Share capital £m	Share premium £m	Capital redemption reserve £m	Other reserve £m	Retained earnings £m	Equity distributable to shareholders of company £m	Non controlling interest £m	Total equity £m
As at 1 January 2012	19.3	75.0	14.6	(1.4)	89.3	196.8	0.3	197.1
New shares issued	0.1	0.3	-	-	-	0.4	-	0.4
Profit for the year	-	-	-	-	27.0	27.0	0.1	27.1
Actuarial losses on defined benefit pension schemes	-	-	-	-	(15.9)	(15.9)	-	(15.9)
Deferred taxation on pension liability	-	-	-	-	3.5	3.5	-	3.5
Non-controlling interest in subsidiary undertaking	-	-	-	-	(0.1)	(0.1)	0.1	-
Dividends to shareholders	-	-	-	-	(8.4)	(8.4)	-	(8.4)
As at 31 December 2012	19.4	75.3	14.6	(1.4)	95.4	203.3	0.5	203.8
As at 1 January 2011	19.2	73.6	14.6	(1.4)	75.6	181.6	-	181.6
New shares issued	0.1	1.4	-	-	-	1.5	-	1.5
Profit for the year	-	-	-	-	25.1	25.1	0.1	25.2
Actuarial losses on defined benefit pension schemes	-	-	-	-	(6.4)	(6.4)	-	(6.4)
Deferred taxation on pension liability	-	-	-	-	2.4	2.4	-	2.4
Deferred taxation on derivatives	-	-	-	-	0.5	0.5	-	0.5
Non-controlling interest in subsidiary undertaking					(0.2)	(0.2)	0.2	-
Dividends to shareholders					(7.7)	(7.7)	-	(7.7)
As at 31 December 2011	19.3	75.0	14.6	(1.4)	89.3	196.8	0.3	197.1

Explanatory Notes to the Financial Information

1. Basis of preparation

The financial information has been prepared under International Financial Reporting Standards (IFRS) issued by the IASB and as adopted by the European Union (EU). This financial information has been prepared on the same basis as in 2011. Further information in relation to the Standards adopted by the group is available on the group's website, www.lookersplc.co.uk.

       
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS's), this announcement does not itself contain sufficient information to comply with IFRS's.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2012 or 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) Companies Act 2006.

A copy of the full group accounts that comply with IFRS's for the period ended 31 December 2012 can be found at www.lookersplc.co.uk and will be posted to shareholders this month.

Going Concern

This financial information has been prepared on a going concern basis which the directors believe to be appropriate for the reasons set out below.

The company and the group continue to meet their day to day working capital requirements through short term stocking loans, the revolving credit facility and medium term funding requirements through a term loan. At the year end, the medium term banking facilities included a revolving credit facility of up to £55.0 million and a term loan of £48.75 million, providing total facilities of £103.75 million until March 2016.

The financial position of the group, its cash flows, liquidity position and borrowing facilities are described earlier. The group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facility. Therefore the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2. Finance costs - net

	2012	2011
	£m	£m
Interest expense
On amounts wholly repayable within 5 years:
Interest payable on bank borrowings	(6.2)	(6.8)
Interest on consignment vehicle liabilities	(5.2)	(4.4)
Net interest on pension schemes	(1.2)	(0.5)
Interest and similar charges payable	(12.6)	(11.7)
Interest income
Bank interest	0.2	0.3
Total interest receivable	0.2	0.3
Finance costs - net	(12.4)	(11.4)

3. Earnings per share

The calculation of earnings per ordinary share is based on the profit on ordinary activities after taxation attributable to shareholders of the company amounting to £27.0 million (2011: £25.1 million) and a weighted average number of ordinary shares in issue during the year of 387,108,105 (2011: 383,750,120).

The diluted earnings per share is based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 8,404,347 (2011: 9,281,938)

Adjusted earnings per share is stated before amortisation of intangible assets, impairment of goodwill and debt issue costs and is calculated on profits of £28.5 million (2011: £27.5 million) for the year.

Continuing operations	2012 Earnings £m	2012 Earnings per share p	2011 Earnings £m	2011 Earnings per share p
Basic EPS
Earnings attributable to ordinary shareholders	27.0	7.0	25.1	6.54
Effect of dilutive securities	-	(0.1)	-	(0.15)
Diluted EPS	27.0	6.9	25.1	6.39
Adjusted EPS
Earnings attributable to ordinary shareholders	27.0	7.0	25.1	6.54
Amortisation of intangible assets	1.1	0.3	1.3	0.34
Debt issue costs	0.4	0.1	1.1	0.29
Adjusted EPS	28.5	7.4	27.5	7.17

4. Dividends 

	2012	2011
	£m	£m
Interim dividend of 0.8p per ordinary share (2011: 0.8p)	3.1	3.1
Final dividend paid during the year relating to the financial year ended 31 December 2011 of 1.38p per ordinary share (2010: 1.2p)	5.3	4.6
Total dividends paid In the year of 2.18p per ordinary share (2011: 2.0p)	8.4	7.7

The directors propose a final dividend of 1.55p per ordinary share in respect of the financial year ending 31 December 2012 (2011: 1.38p). The final dividend will be paid on 4 June 2013 to shareholders on the register on 26 April 2013.  The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in this financial information.

5. Principal risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the group's performance, business activities, financial condition, results of operations or the company's share price and could cause actual results to differ materially from expected and historical results. The Board maintains a policy of continuous identification and review of risks and uncertainty and the principal risks identified are the adverse impact of the global economy, manufacturers' financial stability, adverse movements in exchange rates, changes in the Block Exemption regulations which govern franchise agreements in the UK retail motor industry, liquidity and financing issues for the company, legislative changes in relation to vehicle taxation and transport policy, failure of group information systems and the relative strength and influence of the vehicle manufacturers on the UK market.  The Board has recently reviewed the risk factors and confirms that they should remain valid for the rest of this year.

 

END

 

 

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