Final Results

RNS Number : 5296B

Lookers PLC

05 March 2014

 



5 March 2014

LOOKERS plc

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

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 2013.

Financial Highlights

·     Revenue of £2.46 billion (2012: £2.06 billion)

·     *Adjusted profit before tax increased to £48.1 million (2012: £38.0 million)

·     Profit before tax increased to £43.9 million (2012: £34.3 million)

·     Earnings per share up 37% at 9.28p (2012: 6.77p)

·     Operational cash flow improved at £76.5 million (2012: £66.1 million)

·     Proposed final dividend of 1.7p per share - total dividend per share up 10% at 2.58p (2012: 2.35p)

·     New and increased bank facilities agreed

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

Operational Highlights

·     Record performance from the motor division

·     Strong growth in used car volumes and margins

·     Improved performance from our market leading independent aftermarket parts division

·     Revenue and margin improved in aftersales

·     Strong contribution from acquisitions

Andy Bruce, Chief Executive said:  "We have delivered another strong trading performance in 2013, our fifth year of successive profit growth.  The motor division has produced an excellent result and the parts division has returned to growth, delivering a strong performance in improving but competitive market conditions. Operational cash flow for the year was particularly positive, strengthening the balance sheet further. Lookers is well placed to take advantage of future growth in the new and used car markets and increased demand for aftersales and parts which gives us further confidence that we can continue to grow the business in 2014."

Enquiries:

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

CHAIRMAN'S REVIEW

I am delighted to report that this is our fifth consecutive year of profit growth and that Lookers has achieved an *adjusted profit before tax of £48.1 million (2012: £38.0 million). This result has been achieved against the background of a welcome and strong recovery in the UK new car market which has returned to a more normal level of activity, in conjunction with an improving UK economy.

Total registrations for the UK new car market in the year were 2.26 million, an increase of 10.8%. Our motor division, again, delivered an excellent performance producing strong growth in volumes of both new and used cars, ahead of the market. 

I am very pleased to report that our independent parts distribution business has made good progress in the year. Whilst I have previously reported that market conditions in this sector have been challenging, the management team in the parts division have returned the business to growth with improvements in both turnover and profit before tax to levels which are ahead of last year.

The group continues to generate significant levels of operational cash flow, resulting in lower levels of bank borrowings, a strengthened balance sheet and a stronger financial position. We also renewed and extended our banking facilities in February 2014 which has provided the group with additional funding for a longer period of time.  Further details of our progress in both the motor division and the parts division are provided in the Strategic and Operational Review. A more detailed consideration of the improvement in financial performance during the year together with the cash flow and financial position of the group are given in the Financial Review.

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

DIVIDEND

I am pleased to announce that with another positive result for the year and improved financial position of the company, the board is again intending to increase the total dividend for the year. We are proposing to pay a final dividend for the year ended 31 December 2013 of 1.7p per share, giving a total dividend for the year ended 31 December 2013 of 2.58p per share (2012: 2.35p). This represents an increase in the total dividend for the year of 10%. Payment of the final dividend is subject to approval by shareholders at the Annual General Meeting and will be payable on 4 June 2014.

BOARD CHANGES

As I mentioned in our interim report, Peter Jones, our Chief Executive of over four years, retired on 31 December 2013. Peter made an outstanding contribution to Lookers, leading the company during a period in which the profitability and market capitalisation increased significantly with consecutive record results from 2009 to the present day.

Andy Bruce, previously the group's Chief Operating Officer, has now taken the role of Chief Executive, with effect from 1 January 2014. Andy is a key member of the board and the development of the motor division under his leadership has been tremendous.

I also referred in our interim report, to the appointment of Nigel McMinn as Managing Director of the motor division. Nigel assumed this important role on 1 January 2014 and is already making an excellent contribution to the company.

I am also pleased to report that Richard Walker joined the board on 4 February 2014 as a non-executive director. He brings significant operational expertise in the retail environment, which I am sure will be of great benefit to Lookers.

Together with all my colleagues on the board I would like to thank Peter for his invaluable contribution, wish Andy success in his new role and welcome Nigel and Richard to Lookers where I believe they will make a valuable contribution to the development of the company.

OUTLOOK

There has clearly been a welcome recovery in both the UK new car market and the general UK economy and our motor division has produced an outstanding result during the year. In the year ahead we have further opportunities to develop our existing business as well as benefiting from acquisitions made in 2013. The parts division has made a good recovery and has further potential for future growth.

The group balance sheet continues to be strengthened by positive operational cash flow and we have substantial headroom in our bank facilities, with net debt continuing 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.

The new financial year has started well, 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. The group is in a strong position to continue to trade successfully in 2014 and develop further opportunities in all areas of the business

I would like to conclude by thanking all our people at Lookers for their hard work and dedication and without whom we would not have been able to deliver such a result for the fifth consecutive year.

Phil White

Chairman

5 March 2014

STRATEGIC AND OPERATIONAL REVIEW

BUSINESS MODEL AND STRATEGY

Business model

With a group turnover of £2.4 billion in 2013, Lookers is one of the leading motor retail and aftersales groups in the UK. Our operations are carried out across all four UK countries and Ireland, with a presence in most of the major population centres. We sell approximately 117,000 new and used cars per year and in addition, we have a very significant independent parts distribution business, which is the leader in its sector of the market.

As noted above, the group operates through two distinct divisions, the motor division and the parts division and details of each division are explained in further detail below.  However, operating in two distinctly separate sectors within the UK motor retail market gives us a unique and diverse business structure.  This differentiates Lookers in the motor retail sector with the parts business providing a high quality, higher margin earnings stream that has greater stability than the new and used car markets, which can sometimes be subject to volatility. The group's business activities, financial condition, results of operations or the company's share price could be affected by certain principal risks or uncertainties which are included in the directors' report section of the 2013 annual report and accounts.

Motor division

The motor division consists of 119 franchised dealerships representing 32 marques from 70 locations.  The business generates revenue from the sale of new and used cars and aftersales activities.  Aftersales represents the servicing, repair and sale of franchised parts to customers' vehicles.  The new car market in the UK has been approximately 2 million new cars sold per annum during the past five years and our share of the retail sector of this market is just over 4%.  The used car market in the UK has annual transactions of approximately 6.7 million vehicles and represents a major opportunity for us to increase volumes in this part of the market.  The aftersales market applies to the overall number of cars in use on UK roads, which is referred to as the UK car parc.  This consists of approximately 30 million vehicles where approximately 20% or six million vehicles are under three years old and these vehicles are primarily the market which is catered for by the franchised motor dealers, including our motor division. In recent years the internet has become increasingly important and is now the primary means for our customers to research and determine which new or used car they are interested in buying. Our website and associated digital marketing channels are now a very important part of the business.

Parts division

Our parts division operates in the independent aftermarket sector of the UK motor retail market, where we operate through three distinct operating companies which supply automotive parts to the independent automotive aftermarket, where we operate from 22 locations, providing a national network to cover the whole of the UK.  This means that our customers are predominantly motor factors who are the final part of the distribution chain and who distribute parts to the independent non franchised repairers.  The parts division is typically supplying parts to 80% of the UK vehicle parc where the vehicles are over three years old and therefore operates in a different part of the market to the franchised dealerships.  This represents a market of approximately 24 million cars in the UK and each of the three companies in our parts division are market leaders in their segment of the market.

Business strategy

The company's strategy is to operate a diverse business in the UK motor sector. This includes operating with a wide range of manufacturer partners across a wide geographical area, both of which help to reduce exposure to anomalies or fluctuations in demand, which may affect specific manufacturers or locations.  The independent parts distribution business also provides further diversity as the revenue and profitability of this business are less subject to volatility that sometimes affects the demand for new and used cars.

We aim to grow the business by a combination of organic growth in the existing business, where there are many opportunities for increasing revenue, as well as from targeted and selective acquisitions in both the motor and parts divisions. We aim to be recognised as the UK's most professional and successful motor retail and aftersales service group by our customers, employees, business partners and shareholders. We strive to deliver sector leading value whilst providing our customers with market leading customer service, optimising customer retention and being an outstanding company that achieves our mission of customers for life.

Business review

Summary of financial and non financial KPIs:

Financial	2013	2012
Turnover	£2,464.5m	£2,056.6m
Gross Profit	£335.8m	£303.3m
Gross margin	13.6%	14.7%
Operating profit	£58.4m	£49.2m
Operating margin	2.4%	2.4%
*Adjusted profit before tax	£48.1m	£38.0m
* Adjusted net margin	1.95%	1.8%
Earnings per share	9.3p	6.77p
Net debt	£43.1m	£48.2m
Gearing	19%	24%
Non financial
UK new car market	2.26m	2.05m
Group new car sales	63,608	55,313
Share of UK market	2.8%	2.7%
Group used car sales	53,713	44,748
Group employees	5,772	5,489

Performance

The motor division delivered another excellent trading performance during the year and the parts division made a good recovery, returning to growth with a strong result for the year. The group delivered record results for a fifth year with *adjusted profit before tax of £48.1 million (2012: £38.0 million). I am delighted with this result which I believe is a significant achievement even against the background of the improving new car market in the UK.

The key elements of this creditable achievement were:

·           a significant increase in new car retail sales at improved margins;

·           a significant growth in used car volumes and margins;

·           improvement in both aftersales turnover and margin;

·           growth in both turnover and profit in the parts division against improving but competitive market conditions.

We have now had five successive years of increased profits, the majority of which have been delivered in restricted market circumstances. Growth in the UK new car market in 2013 was encouraging and this, together with our performance over recent years, gives us further confidence in our ability to grow the business again in 2014. As economic conditions improve further, we are well placed to take advantage of growth opportunities in the new and used car markets, which will also in turn increase demand for aftersales and parts, as the number of cars under three years old continues to rise.

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

OPERATING REVIEW

MOTOR DIVISION

I am pleased to report that the motor division increased its profit before tax by 34% to £42.6 million, a record for the business and a significant increase over the prior year's result of £31.7 million.

We continue to improve the balance of our portfolio of franchise representation and during 2013 we sold or closed five underperforming businesses and acquired three new businesses.

On 16 May 2013, we acquired Shields Automotive, which operates a significant Land Rover dealership in South Glasgow and was acquired for a cash consideration of £8.8 million. This included a number of surplus freehold properties, two of which were sold in June for £4.3 million, reducing the net consideration paid for the business.

On 1 October 2013, we acquired Chipperfield Land Rover, which operates a significant Land Rover dealership in Hertfordshire, for a cash consideration of £10.5 million. This is an important development in the group's representation of the Land Rover brand in the South East complementing our existing Land Rover businesses in Battersea and West London.

On 11 December 2013, we completed the purchase of a Volkswagen Commercial Vehicle business in Glasgow which represents this franchise for the important and major City of Glasgow and the surrounding area.

New Cars

The UK new car market increased by 10.8% to 2.26 million cars in the period, with the new car retail market increasing by 15.6% and the fleet market increasing by 6.7%. Lookers core retail new car sales increased by 19.0% compared to 2012 levels, on a like for like basis. In the fleet sector, our volumes reduced by 3.0%, as we continued to focus on higher margin business. Whilst volumes were slightly lower, overall gross profit from fleet business increased in the year.

Gross profit per unit on new retail cars increased by 6.5% compared to the prior year, whilst gross profit per unit on fleet business increased by 10% compared to the previous year. The new retail market continues to be strong and our order take for the important month of March is tracking ahead of plan.

Used Cars

Whilst used car transactions in the UK were stable at approximately 6.7 million vehicles, group sales volumes increased by an excellent 20% compared to 2012 levels and gross profit per unit increased by 3.6%. This was a very positive performance, particularly taking into account the strong increases in the previous year. We have continued to follow a robust stocking policy to deliver increased stock turn as well as increasing our resource for sourcing good quality used car stock. These policies have been in place for some time now and it is encouraging to see that we are continuing to improve volumes and margins. A further factor, which is helping to improve used car volumes, is the increasing number of leads being generated from the group's website, which have increased by 20% compared to last year. This is an area in which we shall continue to invest so that our website maintains its position as one of the best in the industry. 

We continue to believe that the used car market represents a significant opportunity for the group. By continuing to follow our policies, which have resulted in this success, we expect to take advantage of the stable market conditions in the used car sector to continue to improve volumes and margins.

Aftersales

Turnover in the important area of aftersales increased by 4% and this has benefited from an increase in the vehicle parc of cars under three years old, a trend which will continue due to the increase in the new car market. This was accompanied by an increase in margin from 40.2% to 41.6%. This is a positive result which demonstrates the success of our continued investment in technology and procedures to further improve customer retention and average sales value per customer visit. In particular, we have made a number of further improvements to our electronic vehicle health check system across the whole motor division. Sales of service plans, where customers commit to longer term contracts for vehicle servicing, which improves customer loyalty and retention, have also increased significantly. These initiatives help us to identify and optimise service and repair requirements on all vehicles visiting us which, combined with our commitment to deliver excellent customer service and enhance customer experience, are key factors in maximising our 'customers for life' strategy, to strengthen the business and further improve profitability.

Business Development

Marketing strategy

The internet increasingly dominates consumers' research and we continue to migrate marketing expenditure from offline, traditional media to online channels. Our visitor and enquiry levels continue to show significant increases, not only as more consumers research their purchases online, but as a result of our ongoing investment in improving our website. The website is now fully compatible with mobile devices and we are enhancing our digital showroom with extended hours to include live chat, increasing use of video and full engagement with social media.

Customer satisfaction

During 2013 we launched our Customers for Life strategy, which is designed to further improve our level of customer experience, retention and referral. Much of our focus has been on ensuring our staff satisfaction is enhanced as well as conducting extensive customer research to continually refine our offering to them. The early results of our refreshed approach have been very encouraging.

Employee development

We recognise that our people are our key asset that allows us to deliver our strategy and we continue to invest in an enhanced training and development programme. We have increased the number of training courses available to all staff, including the innovative use of an e-learning platform as well as further improvements to our structured and formal management development programme. This has been aligned with our new customer experience strategy to ensure our staff develop the skills needed to deliver enhanced levels of customer satisfaction.

PARTS DIVISION

As referred to earlier in the Chairman's review, our parts division experienced challenging market conditions in 2012, although managed to maintain turnover in that year. I am therefore very pleased to report that the parts division increased both turnover and profits compared to the prior year, against a background of an improving market although one that continues to be competitive.

Turnover for the division increased by £10.5m, an increase of 6% compared to the prior year as we continue to expand the business by investing in existing and new product lines. Whilst sales volumes increased, this was accompanied by a small increase in margin. Overheads, however, were carefully controlled resulting in an increase in profit before tax of 6% to £11.8 million, compared to £11.1 million in the previous year. Our parts division continues to make a significant contribution to group earnings where it represents 25% of group profit before tax and also produces a consistent and relatively high net margin of 6%.

FPS, our national warehouse distributor of quality branded automotive parts, is the largest company in the parts division and represents almost 75% of divisional turnover. Turnover increased by 6% with profit before tax increasing by a similar amount. The increase in turnover resulted from active pricing management leading to higher product volumes in conjunction with new product development and range extension. The business continues to benefit from efficiency improvements particularly in relation to process improvement projects.

Apec Braking, the aftermarket leader in the UK for 'dry' braking (pads and discs), had a difficult year in 2012 due to reduced demand, resulting from significant competition in the market, particularly from lower cost, lower quality products. I am therefore pleased to report an improved performance for Apec with turnover increasing by 8% compared to the prior year. Demand for core products was stable and a secondary tier braking product was introduced in the period, which helped to secure key customers and protect the business from lower priced competitors. The increased gross profit, together with careful overhead control, resulted in an excellent improvement in profit before tax which was 11% higher than the previous year.

BTN Turbo, the UK's leading distributor of turbochargers and supplier of related value added services, continued to experience competitive trading conditions. However, the focus on developing business with key customers and the expansion of recently introduced and new product lines resulted in an increase in turnover of 2% compared to the prior year. This was accompanied by an improvement in margins which, combined with good overhead control resulted in an improvement in profit before tax of 4%. Whilst the sector remains competitive, the business continues to pursue development opportunities within the turbo and ancillary products area of the market.

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 continues 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 car market is expected to show further growth in 2014 and the used car market is stable. This, together with the group's strong performance in 2013 and the previous four years, provide a firm foundation on which to deliver further growth in the current year. The continuing increase in the vehicle parc of cars less than three years old provides further opportunities for increasing revenue in the high margin aftersales sector of our business. These factors, together with the broad base of our franchise representation leave us very well positioned for future growth. The acquisition of Shields and Chipperfield Land Rover should make a good contribution this year and 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. As in previous years we continue to target selective acquisitions to further improve our franchise representation.

The parts division has made good progress with increased profits, which together with continued investment in new product lines, improved facilities and systems, leaves the business in a stronger position for further growth and development. We also continue to seek appropriate acquisition targets in the parts aftermarket.

The group balance sheet continues to be strengthened by strong operational cash flow. We have substantial headroom in our new and increased bank facilities with net debt continuing to be closely controlled and at a lower level than both budget and the start of 2013. This provides secure funding capacity for several years and financial security to grow the business through further strategic acquisitions in both the motor and parts divisions.

Andy Bruce

Chief Executive

5 March 2014

FINANCIAL REVIEW

GROUP RESULTS

Turnover increased by 19.4% to £2.46 billion compared to £2.06 billion last year, with strong growth from new and used cars. Gross profit of £336 million was £32 million higher than the previous year, with the growth coming from new and used cars as well as acquisitions. The gross margin of 13.6% was slightly lower compared to the prior year of 14.7%, which is due to the increased volumes of cars sold in the year, which by nature of their higher sales value and lower margin have the effect of reducing the overall margin. The operating margin was 2.4%, the same as last year. Overheads increased by £23.4 million in the year, primarily due to the higher turnover and acquisitions.*Adjusted profit from operations increased by 19% to £58.4 million, compared to £49.2 million in 2012. 

Net interest costs reduced by 8% to £10.3 million compared to £11.2 million in 2012. 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 at the start of the year but the largest hedge, with a capital value of £50 million, expired on 28 February 2013, which had a positive impact on the interest charge for the year. We continue to have £30 million of hedges which were established in 2007, when interest rates were significantly higher than current levels. These 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 pension charge for the year of £2.7 million has been calculated in accordance with the updated accounting standard IAS 19 (Revised). The adoption of this new accounting standard has resulted in an increase in the charge for the year of £1.5 million, compared to the charge last year of £1.2 million. The comparative figures for 2012 have now been re-stated to comply with the new accounting standard which has increased the cost for 2012 from £1.2 million to £2.2 million.

Key financial highlights are summarised below:

·        *adjusted profit before tax for the year increased by 27% to £48.1 million, from £38.0 million last year, which is the highest trading result to date for the company;

·        profit before tax was £43.9 million compared to a profit before tax in the previous year of £34.3 million, an increase of 28%;

·        profit after tax was £36.2 million, an increase of 38% compared to £26.3 million in 2012;

·        this resulted in an increase of 37% in earnings per share of 9.28p compared to 6.77p in the prior year and *adjusted earnings per share of 10.36p compared to 7.67p in the prior year, an increase of 35%.

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

TAXATION

The tax charge for the year of £7.7 million compares to a tax charge of £8.0 million in the prior year and reflects a charge of 17.5% of profit before tax. This is lower than the standard rate of corporation tax of 23% as it reflects a reduction in the rate at which deferred tax is calculated from 23% to 20% in line with the reduction in UK Corporation Tax to this rate.

CASH FLOW AND CAPITAL EXPENDITURE

Cash generated from operations for the year was £76.5 million, an increase of 16% compared to the operating cash flow in 2012 of £66.1 million. Working capital reduced by £8.8 million, including a £1.0 million increase relating to acquisitions, with an increase in creditors of £102.6 million, which offset the increase in stock and debtors of £92.8 million. Capital expenditure was £16.5 million compared to £15.3 million the previous year and proceeds from the sale of properties and dealership businesses were £12.7 million (2012: £4.9 million), so net capital expenditure was £3.8 million. The majority of capital expenditure was on new or improved premises for dealerships. As referred to in the Strategic and Operational Review, during the year we acquired two Land Rover dealerships in Glasgow and Hertfordshire as well as a VW Commercial Vehicle dealership in Glasgow, for a total cash consideration of £19.4 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, the same amount as repaid in 2012. Net debt decreased by £5.1 million in the year, compared to an increase of £8.7 million in the previous year. This reduction resulted in net borrowings of £43.1 million at 31 December 2013 compared to £48.2 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 recently renewed and increased on 7 February 2014 and remain in place until March 2018. The facilities are with a group of five banks being Barclays, HSBC, Lloyds, RBS and Yorkshire Bank and consist of a term loan of £50 million and a revolving credit facility of £90 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 2018.

At 31 December 2013, total facilities were £96.25 million of which £43.1 million, net of cash balances, was being utilised. The new bank 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 2013, gearing was 19% compared to 24% at 31 December 2012 and net debt to EBITDA was 0.6 compared to 0.8 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 2013 was £185.4 million compared to £181.4 million last year. Of this amount £0.5 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 £6.5 million (2012: £6.2 million).

DIVIDENDS

In our interim report, we indicated that due to the encouraging results and strong financial position of the group, the interim dividend would be increased by 10%, which followed the 29% increase in the dividend delivered over the previous two years and continues our policy of increasing the dividend provided there is satisfactory growth in profitability. The interim dividend of 0.88p per ordinary share was paid on 29 November 2013 and we are proposing a final dividend of 1.7p per share, giving a total dividend for the year ended 31 December 2013 of 2.58p per share (2012: 2.35p). This represents an increase in the total dividend for the year of 10%. The final dividend is subject to shareholder approval at the Annual General Meeting and will be payable on 4 June 2014. The final dividend will represent a cash outflow of £6.6 million, which gives a total dividend for the year of £10.0 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, the valuation of the liabilities increased by a similar amount so the net deficit included in the balance sheet remained unchanged. 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. As a result, the calculation which estimates the potential liabilities of the schemes can increase or decrease the liabilities due to factors that have no relation or relevance to the trading results of the group.

The impact of these factors is that the combined value of the deficits of both schemes has not changed in the year and the total deficit after deferred tax, is now £35.3 million (2012: £34.6 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.

Robin Gregson

Finance Director

5 March 2014

Consolidated Income Statement
For the year ended 31 December 2013

		2013	Restated* 2012
	Note	£m	£m
Continuing operations
Revenue		2,464.5	2,056.6
Cost of sales		(2,128.7)	(1,753.3)
Gross profit		335.8	303.3
Distribution costs		(184.8)	(175.3)
Administrative expenses		(94.0)	(80.1)
Other operating income		0.3	0.2
Profit from operations		57.3	48.1
Profit from operations before amortisation		58.4	49.2
Amortisation of intangible assets		(1.1)	(1.1)
Profit from operations		57.3	48.1
Interest payable	2	(10.5)	(11.4)
Interest receivable	2	0.2	0.2
Net interest		(10.3)	(11.2)
Net interest on pension scheme obligation		(2.7)	(2.2)
Debt issue costs		(0.4)	(0.4)
Profit on ordinary activities before taxation		43.9	34.3
Profit before tax, amortisation,
debt issue costs and pension costs		48.1	38.0
Amortisation of intangible assets		(1.1)	(1.1)
Net interest on pension scheme obligation		(2.7)	(2.2)
Debt issue costs		(0.4)	(0.4)
Profit on ordinary activities before taxation		43.9	34.3
Tax charge		(7.7)	(8.0)
Profit for the year		36.2	26.3
Attributable to:
Shareholders of the company		36.0	26.2
Non-controlling interests		0.2	0.1
Continuing operations
Earnings per share
Basic earnings per share	3	9.28p	6.77p
Diluted earnings per share	3	9.10p	6.67p

Consolidated Statement of Comprehensive Income

		2013	Restated* 2012
		£m	£m
Profit for the financial year		36.2	26.3
Items that will never be reclassified to profit and loss:
Actuarial losses recognised in post-
retirement benefit schemes		(3.3)	(14.9)
Movement in deferred taxation on pension liability		0.6	3.3
Rate adjustment		(1.3)	-
Items that are or may be reclassified to profit and loss:
Fair value on derivative instruments		1.5	-
Movement in deferred taxation on derivative instruments		(0.3)	-
Other comprehensive expense for the year		(2.8)	(11.6)
Total comprehensive income for the year		33.4	14.7
Attributable to:
Shareholders of the company		33.2	14.6
Non-controlling interests		0.2	0.1

*Restated to reflect the impact of IAS19 (Revised) as described in Principal Accounting Policies and a reclassification.

Consolidated Statement of Financial Position

As at 31 December 2013

	2013	2012
	£m	£m
Non-current assets
Goodwill	73.7	61.4
Intangible assets	13.8	14.8
Property, plant and equipment	204.6	197.1
	292.1	273.3
Current assets
Inventories	446.7	384.1
Trade and other receivables	154.0	123.8
Rental fleet vehicles	52.9	39.4
Cash and cash equivalents	5.2	8.7
Assets held for sale	0.5	3.2
	659.3	559.2
Total assets	951.4	832.5
Current liabilities
Bank loans and overdrafts	14.5	15.7
Trade and other payables	578.9	479.8
Current tax liabilities	8.9	8.4
Short-term provisions	1.0	0.6
Derivative financial instruments	7.0	8.5
	610.3	513.0
NET CURRENT ASSETS	49.0	46.2
NON-CURRENT LIABILITIES
Bank loans	33.8	41.2
Trade and other payables	24.2	21.0
Retirement benefit obligations	44.1	44.1
Deferred tax liabilities	10.2	8.6
Long-term provisions	0.8	0.8
	113.1	115.7
Total liabilities	723.4	628.7
Net assets	228.0	203.8
Shareholders' equity
Ordinary share capital	19.4	19.4
Share premium	75.6	75.3
Capital redemption reserve	14.6	14.6
Other reserve	(1.1)	(1.4)
Retained earnings	118.8	95.4
Equity attributable to shareholders of the company	227.3	203.3
Non-controlling interests	0.7	0.5
TOTAL EQUITY	228.0	203.8

Consolidated Cash Flow Statement

For the year ended 31 December 2013

	2013	2012
	£m	£m
Cash flows from operating activities
Profit for the year	36.2	27.1
Adjustments for:
Tax	7.7	8.2
Depreciation	12.5	10.8
Profit on disposal of plant and equipment	(0.1)	(0.3)
Profit on disposal of rental fleet vehicles	(0.4)	(0.4)
Amortisation of intangible assets	1.1	1.1
Interest income	(0.2)	(0.2)
Interest payable	10.5	12.6
Debt issue costs	0.4	0.4
Changes in working capital
Increase in inventories	(62.6)	(63.9)
Increase in trade debtors and other receivables	(30.2)	(14.8)
Increase in payables	102.6	83.5
Impact of net working capital of acquisitions	(1.0)	2.0
Cash generated from operations	76.5	66.1
Difference between pension charge and cash contributions	(5.4)	(4.5)
Net interest and costs on pension scheme obligation	2.7	-
Purchase of rental fleet vehicles	(67.4)	(52.0)
Proceeds from sale of rental fleet vehicles	49.5	38.8
Interest paid	(10.5)	(12.6)
Interest received	0.2	0.2
Tax paid	(8.1)	(7.8)
Net cash inflow from operating activities	37.5	28.2
Cash flows from investing activities
Acquisition of subsidiary companies	(19.4)	(17.2)
Purchase of property, plant and equipment	(16.5)	(15.3)
Purchase of intangibles	0.1	(1.4)
Proceeds from sale of property, plant and equipment	12.6	3.7
Proceeds from sale of business	0.1	1.2
Net cash used by investing activities	(23.1)	(29.0)
Cash flows from financing activities
Proceeds from issue of ordinary shares	0.3	0.4
Repayment of loans	(7.5)	(7.5)
New loans	-	-
Debt issue costs	-	-
Dividends paid to group shareholders	(9.5)	(8.4)
Net cash outflow from financing activities	(16.7)	(15.5)
Decrease in cash and cash equivalents	(2.3)	(16.3)
Cash and cash equivalents at 1 January	0.5	16.8
Cash and cash equivalents at 31 December	(1.8)	0.5

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 2013	19.4	75.3	14.6	(1.4)	95.4	203.3	0.5	203.8
New shares issued	-	0.3	-	-	-	0.3	-	0.3
Profit for the year	-	-	-	-	36.0	36.0	0.2	36.2
Actuarial losses on defined benefit pension schemes	-	-	-	-	(3.3)	(3.3)	-	(3.3)
Deferred taxation on pension liability	-	-	-	-	0.6	0.6	-	0.6
Rate adjustment	-	-	-	-	(1.3)	(1.3)	-	(1.3)
Foreign exchange adjustment	-	-	-	0.3	(0.3)	-	-	-
Fair value on derivate instruments	-	-	-	-	1.5	1.5	-	1.5
Deferred taxation on derivative instruments	-	-	-	-	(0.3)	(0.3)	-	(0.3)
Dividends to shareholders	-	-	-	-	(9.5)	(9.5)	-	(9.5)
As at 31 December 2013	19.4	75.6	14.6	(1.1)	118.8	227.3	0.7	228.0
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 (restated*)	-	-	-	-	26.2	26.2	0.1	26.3
Actuarial losses on defined benefit pension schemes (restated*)	-	-	-	-	(14.9)	(14.9)	-	(14.9)
Deferred taxation on pension liability (restated*)	-	-	-	-	3.3	3.3	-	3.3
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

*Restated to reflect the impact of IAS19 (Revised) as described in Principal Accounting Policies and a reclassification.

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 2012. 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 2013 or 2012, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 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 2013 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 £41.25 million, providing total facilities of £96.25 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

	2013	Restated* 2012
	£m	£m
Interest expense
On amounts wholly repayable within 5 years:
Interest payable on bank borrowings	(4.7)	(6.2)
Interest on consignment vehicle liabilities	(5.8)	(5.2)
Interest and similar charges payable	(10.5)	(11.4)
Interest income
Bank interest	0.2	0.2
Total interest receivable	0.2	0.2
Finance costs - net	(10.3)	(11.2)

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 £36.0 million (2012 Restated: £26.2 million) and a weighted average number of ordinary shares in issue during the year of 388,089,402 (2012:387,108,185).

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 7,590,189 (2012: 8,404,347).

Adjusted earnings per share is stated before amortisation of intangible assets, impairment of goodwill, debt issue costs and pension costs and is calculated on profits of £40.2 million (2012: £28.5 million) for the year.

Continuing operations	2013 Earnings £m	2013 Earnings per share p	Restated* 2012 Earnings £m	Restated* 2012 Earnings per share p
Basic EPS
Earnings attributable to ordinary shareholders	36.0	9.28	26.2	6.77
Effect of dilutive securities	-	(0.18)	-	(0.1)
Diluted EPS	36.0	9.10	26.2	6.67
Adjusted EPS
Earnings attributable to ordinary shareholders	36.0	9.28	26.2	6.67
Amortisation of intangible assets	1.1	0.3	1.1	0.3
Net interest and costs on pension scheme obligation	2.7	0.69	2.2	0.6
Debt issue costs	0.4	0.09	0.4	0.1
Adjusted EPS	40.2	10.36	29.9	7.67

* Restated to reflect the impact of IAS19 (Revised) as described in Principal Accounting Policies.

4. Dividends 

	2013	2012
	£m	£m
Interim dividend of 0.88p per ordinary share (2012: 0.8p)	3.5	3.1
Final dividend paid during the year relating to the financial year ended 31 December 2012 of 1.55p per ordinary share (2012: 1.38p)	6.0	5.3
Total dividends paid In the year of 2.43p per ordinary share (2012: 2.18p)	9.5	8.4

The directors propose a final dividend of 1.70p per ordinary share in respect of the financial year ending 31 December 2013 (2012: 1.55p). The final dividend will be paid on 4 June 2014 to shareholders on the register on 25 April 2014.  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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