Final Results
European Motor Hldgs PLC
28 April 2004
EUROPEAN MOTOR HOLDINGS plc ("EMH")
Preliminary results for the year ended 29 February 2004
EMH, consistently one of the UK's most profitable quoted motor retail groups,
announces record results for the year ended 29 February 2004.
Highlights:
•Profit before tax up 27% to £16.8 million
•Profit before exceptional items, goodwill amortisation and tax increased
by 24% to £13.9 million
•Earnings per share up 27% to 23.2p
•Dividends up 13% to 8.5 pence per share
•Net funds of £13.0 million as at 29 February 2004
•New financial year started well with a record motor retail performance in
March
Commenting on these results, chief executive Richard Palmer said:
"EMH has delivered another set of record results, achieving substantial
increases in profits, earnings per share and dividend. We have significantly
strengthened our franchise portfolio and have ended the financial year with a
strong cash position. We look forward to another successful year which has
started with a record March performance."
Enquiries:
Richard Palmer Chief Executive
European Motor Holdings plc
Ann Wilson Finance Director
European Motor Holdings plc
Morning: Biddick Associates 020 7448 1000
Afternoon: European Motor Holdings plc 01491 413399
Chief Executive's statement
European Motor Holdings plc performed extremely well in the year ended 29
February 2004.
In the period, turnover was up by 14% to £490 million. The profit before tax for
the Group rose 27% from £13.2 million to £16.8 million and earnings per share
increased from 18.2 pence per share to 23.2 pence per share.
Our reported profit before taxation included exceptional profits on the disposal
of surplus properties and businesses of £3.0 million this year and £2.0 million
last year. Excluding these exceptional items and goodwill amortisation, our
profits rose from £11.2 million to £13.9 million, an increase of 24%, with
earnings per share on this basis rising from 14.3 pence per share to 17.7 pence
per share.
At the year end, net cash stood at £13.0 million and net assets per share had
risen to 121.7 pence per share.
We remain the most profitable quoted UK motor group based on return on sales and
have further improved our performance again this year.
Trading
Within our motor retail division, operating profit before goodwill amortisation
increased by 27% from £11.9 million to £15.1 million. Our return on sales based
on operating profit increased from 2.9% to 3.2%.
In the calendar year 2003, car sales in the UK increased to a new record level
of 2.58 million units. This level of sales continued to be fuelled by interest
rates and new vehicle prices which have both remained at relatively low levels
throughout the year.
The growth in national registrations in our financial year for our key
franchises of 3% has again outstripped growth for all makes of 2%. On a like for
like basis, we achieved a growth level in our key franchises of 10%, which was
significantly better than the national picture.
Our businesses continue to offer high levels of customer service in both their
sales and after sales departments. Outstanding customer service levels were
achieved within our Audi, BMW, Jaguar and Volvo businesses. We believe firmly
that good customer service leads to higher levels of profitability and remain
committed to continuing to focus on this area.
The profitability achieved within each of our key franchises improved on the
previous year as a result of both operational efficiencies and the acquisitions
that we made in this and the previous year. We have also benefited from the
introduction of several new models from our manufacturer partners: most notably
the Audi A8 and A3, the BMW '5' series, the Jaguar 'XJ' range and 'X' type
diesel, the Volkswagen Touareg and Mark 5 Golf and the new Volvo S40.
Our continuing BMW and Mini operations generated very strong performances for
the year, with second half BMW margins improving over the first half due to new
product introductions and a more orderly market. Our registrations for these
franchises on a like for like basis were 13% up on the previous financial year
compared with 9% nationally and, overall, including new businesses,
registrations were up by 54% for BMW and 57% for Mini. Our BMW performance was
aided by the introduction of the new '5' series saloon which has proven to be
very successful. The BMW and Mini operation in Stockton acquired in February
2003 made a significant contribution in the period.
Our Premier Automotive Group operations had a very good year with our continuing
Jaguar dealerships in particular achieving a significant improvement in
profitability. This was mainly due to the increasing maturity of these
businesses where our after sales operations continue to grow. Our existing Land
Rover business moved forward with an excellent used vehicle performance. In
October 2003 we acquired major Jaguar and Land Rover businesses in Preston for
£2.7 million and £2.4 million respectively. We are very encouraged by the
performance of these businesses, which have made a positive contribution since
acquisition.
Our Volvo operations suffered some mild disruption in the second half of the
year with the sale of one business and the relocation of our Newcastle
operations to a new facility in the centre of the city. This had an effect on
the performance for the year, but we now have excellent representation in our
market area in the North East of England and expect to make further progress
this year.
Our Audi centres performed extremely well during the whole period with their
profitability improving year on year.
For Volkswagen, the first half proved difficult due to margin erosion on the run
out of the Mark 4 Golf and a weak economic environment in London where some of
our operations are based. However, we achieved a significant improvement in the
second half due to the increasing maturity of the businesses we opened and
acquired last year and as a result of the availability from Volkswagen of a
number of vehicles at advantageous prices. The new Mark 5 Golf was available in
certain derivatives towards the end of the financial year and we look forward in
the current year to further expansion of the model line up for this vehicle.
During the period we made a number of disposals, including our Park Royal
property which had previously housed our Mercedes-Benz franchise. We sold this
property for £8.3 million, generating an exceptional profit of £ 2.8 million. We
also disposed of our loss making Vauxhall business in Heathrow; this resulted in
an exceptional profit of £0.1 million. In December we withdrew from the Leeds
market for Volvo and generated a small exceptional profit on this disposal.
Our Motor Services Division had another good year, with operating profits
increasing by 17%. An excellent performance in sales, where we achieved 16%
growth in equipment sales, was offset by the impact of a less favourable Euro
exchange rate on our machine purchases. The service department also performed
well and we increased by 12% the number of machines under contract with our
major customers, which include oil companies, supermarkets and motor dealers.
Our retail washing operations have shown a large improvement in the period and
operating losses are now minimal. Actions we have taken will, we believe, result
in a further improvement in this area next year.
Overall, Wilcomatic has made a very good contribution to the results of the
Group during this period.
Business development
In January we acquired land in Durham where we will construct a facility to
house a new BMW and Mini operation which will open early next year. This
business will complement our existing contiguous territory which stretches from
York and Malton in North Yorkshire through Stockton to Sunderland. We are
obviously delighted to have been given this new opportunity by BMW and Mini and
believe that we will continue to make a major contribution to the growth of
these brands in the North East of England. During the year we also successfully
transferred our Mini operation in York into a stand alone dealership and, in
line with BMW group policy and as a result of the rapid growth of the
franchises, will be relocating our other Mini businesses into separate
facilities in due course.
As detailed above, we have acquired certain Premier Automotive Group businesses
during the year. We remain keen to continue to expand with these franchises and
hope to do so in the coming period.
I am delighted to confirm that we have agreed our future position with Audi. We
have recently been confirmed as Audi's preferred candidate for a market area in
the West of England in which we already represent the franchise at one location.
Audi's proposal is that we should expand within this territory by acquiring
other existing businesses and establishing new sites. We hope to make progress
on this during the current financial year. In the coming months we expect to
divest two of our existing three Audi operations which form part of market areas
for other Audi partners. We are very happy with the outcome of the discussions
that have taken place with Audi over the last eighteen months and can now look
forward to our future with this franchise with more certainty.
I stated previously that our Volkswagen businesses have had a difficult year.
During the coming months we will probably sell two of our existing businesses as
part of Volkswagen's restructuring of the dealer network into market areas.
However, we remain totally committed to the brand and to bringing the level of
return which is seen in our other franchises to the Group's Volkswagen
operations. We are in regular discussions with our manufacturer partner in order
to identify areas which will assist us to achieve this goal and, as indicated
above, progress has already been made.
As a result of our relationship with the Volkswagen group, we were introduced to
Bentley last year which was seeking sales representation in the North East of
England. We were subsequently granted this prestigious franchise and our
operation, based at Silverlink, Newcastle, opened on 1 March 2004. The
performance of this business to date has been extremely good and the launch of
the Continental GT has meant that we have started trading with a long order
book. That, together with further new models expected in 2005 and beyond, will
ensure an exciting future for this new operation.
Our partners' products are key to our success and during our current financial
year we will benefit from the launches of the following models: the new Audi A6
and A3 Sportback, the BMW '1' Series, X3 and '6' Series, the Jaguar 'S' type
diesel, the new Land Rover Discovery, the Mini convertible and the Volvo V50. We
are sure that these new products will continue to stimulate consumer demand for
the brands we represent.
In the next few months we expect to acquire land and develop another auction
business which will complement our existing auction operations in Telford and
Queensferry.
In October 2003, the new Block Exemption regime became law within the European
Union. We are very happy to embrace the new regime and believe that it benefits
the larger groups such as ourselves, giving us more franchise stability and
greater opportunities with our partners. We have always viewed our strong
relationships with our manufacturer partners as fundamental to the Group's
success and we are keen to work with our partners to capitalise on the changes
that the new Block Exemption rules have brought about.
Financial review
As stated above, the Group's profit on ordinary activities before tax for the
year ended 29 February 2004 was £16.8 million compared to £13.2 million in the
previous year. This year's results include exceptional profits of £2.9 million
(£1.7 million last year) arising on the disposal of two surplus properties and
exceptional profits of £0.1 million (£0.3 million last year) relating to the
disposal of two businesses.
Excluding these exceptional items and goodwill amortisation, the Group's
underlying trading profit was £13.9 million, compared to £11.2 million last
year, an increase of 24%.
The Group's effective tax rate in the year ended 29 February 2004 was 26.5%.
However, this is distorted by the tax treatment of the exceptional property and
business disposal profits, for which rollover relief is available. When these
items are excluded, the effective tax rate for the year is 32.4%, similar to
last year's rate of 33.0%.
Earnings per share for the year were 23.2p compared to 18.2p last year.
Excluding goodwill amortisation and exceptional items, the figure for this year
is 17.7p, an increase of 24%. The Board is recommending a final dividend of 5.1p
per share, bringing the full year's dividend to 8.5p. This represents a 13%
increase on last year's total dividend of 7.5p per share. Dividend cover,
excluding exceptional items, for the year is 2.0 times, compared to 1.9 times
last year.
The net effect on turnover of branches opened and closed is an increase of £22
million. In addition, our continuing Motor Retail businesses have achieved
increases in both vehicle sales volumes and the average prices of cars sold.
There has also been higher turnover at Wilcomatic, due to increases in both
equipment sales and service work. The net result of all of these factors is an
increase in Group turnover of £60 million.
Operating profit has increased to 2.8% of turnover, compared to 2.5% last year
and the Group continues to be one of the most profitable in the industry at this
level, an achievement which is even more pronounced at the profit before
taxation level.
Increased profits, offset by lower average net cash balances and lower interest
rates, have resulted in net interest receivable (excluding new vehicle stocking
interest) for the year of £0.2 million, compared to £0.3 million last year.
As evidenced by the balance sheet, the Group continues to be in a very strong
financial position. Shareholders' funds have increased by £8.4 million to £65.2
million at 29 February 2004. During the year, we have invested £6.1 million in
capital expenditure, principally represented by a new site for our Newcastle
Volvo business, the freehold of our Bebington Volkswagen site and the purchase
of a site in Durham for a new BMW and Mini business which we will open early
next year. The proceeds of the disposal of fixed assets amounted to £8.5
million, relating primarily to the property disposals referred to above. The net
proceeds of the businesses disposed of during the year amounted to £0.8 million
and we have invested £5.6 million in the acquisition of new businesses in the
same period.
During the year, the Company issued 690,000 shares in respect of the exercise of
options, giving a cash inflow of £0.6 million.
Notwithstanding the acquisitions made in the year, we have managed our working
capital efficiently and achieved a reduction of £0.5 million. Payments in
respect of taxation and dividends in the year amounted to £8.0 million and there
has been a net inflow of £1.4 million in respect of finance leases and letters
of credit during the year. The net effect of these cash flows and of the £16.7
million operating profit (after adding back depreciation and amortisation) in
the year is a net cash inflow of £9.0 million. This gives the Group a healthy
net funds balance of £13.0 million at 29 February 2004, compared with £5.6
million at the previous year end, an increase of £7.4 million.
The Group's net funds position at the year end is not representative of the year
as a whole because, immediately prior to a month with a registration plate
change, used vehicle stocks and vehicle debtors are lower than at other times of
the year and we are in receipt of deposits on cars being prepared for sale in
March. This year's peak net funds level of £13.0 million occurred at the end of
the financial year, but the Group also experienced net borrowings of £12.4
million in October following the high sales month of September. Nevertheless,
the Group remains extremely well placed to expand whilst retaining low borrowing
levels.
The principal elements of our borrowings are a loan from a finance house and
leasing obligations in respect of demonstrator vehicles and certain dealership
refurbishments. Most utilised borrowings are repayable either on demand or
within the current calendar year, although some leases in respect of fixed
assets have five or ten year terms. In addition, the Group has substantial
banking facilities which were unutilised at the balance sheet date.
The triennial actuarial valuation of the Group's defined benefit scheme, which
was closed to new members many years ago, as at 5 April 2003 has recently been
completed. At that date, the actuarial valuation of the scheme's assets
represented 86% of the value of accrued liabilities. The previous valuation
showed a surplus with an equivalent funding ratio of 127%. This change in
funding position has arisen largely due to the fall in equity values in the
three year period, although the position has improved significantly since the
effective valuation date. The current accounting standard on pension accounting,
SSAP 24, requires that the deficit now shown by the valuation is spread over the
average remaining service lives of the scheme members. The net result of the
valuation is that the Group's pension costs have increased by £196,000 in the
financial year. The Group has not contributed to the scheme for a number of
years as previous valuations have reported surpluses but will recommence
contributions with effect from 5 April 2004 in line with the actuary's
contributions report when this has been finalised. Whilst we will not know the
exact amount of the contributions until the report has been finalised, it is
expected that these will amount to £156,000 per annum, including scheme costs to
be paid by the Group.
In line with other similar groups in the motor retail industry, we announced
last year that we had been negotiating with HM Customs & Excise in respect of
issues arising from changes in VAT case law. These discussions have continued
and we hope to be able to announce the conclusion of our negotiations shortly.
All listed companies in the European Union will have to report their
consolidated results under International Financial Reporting Standards for
accounting periods commencing on or after 1 January 2005. This means that the
new standards will first affect the Group's reporting for the year ending 28
February 2006, commencing with the interim results for the six months ending 31
August 2005. The standards to be applied in that period have only recently been
finalised by the authorities and we are currently assessing their impact on the
Group's financial reporting.
In addition, we are dealing with new regulations issued by the Financial
Services Authority in response to an EU directive which will affect the sale and
administration of insurance based products within our businesses and which take
effect in January 2005.
Conclusion and outlook
We have had an outstanding year with the Group moving forward once again and
have continued to refine and enhance our franchise portfolio.
The new year has started particularly well with the March trading month being
another record motor retail performance. We have much to look forward to in the
coming months and, whilst there are some residual disposals to be made following
the Block Exemption review, we expect to make complementary acquisitions and
continue to improve our existing businesses.
We look forward to another successful year.
Richard Palmer
Chief Executive
28 April 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes Year ended Year ended
29 February 28 February
2004 2003
£'000 £'000
Turnover 1 489,525 430,005
Cost of sales (417,592) (365,934)
--------- ---------
Gross profit 71,933 64,071
Distribution
costs (33,932) (29,315)
-------------------------- ----------- --------- ---------
Goodwill
amortisation (208) (28)
Other
administrative
expenses (24,218) (23,829)
-------------------------- ----------- --------- ---------
Administrative
expenses (24,426) (23,857)
--------- ---------
Operating
profit 2 13,575 10,899
Profit on
disposal of
businesses 3 117 298
Profit on disposal of 2,929 1,746
properties
Interest receivable 377 516
Interest
payable (221) (228)
--------- ---------
Profit on ordinary activities 16,777 13,231
before taxation
Tax on profit
on ordinary
activities (4,444) (3,689)
--------- ---------
Profit for the financial year 12,333 9,542
Dividends 4 (4,563) (3,965)
--------- ---------
Retained profit for the 7,770 5,577
financial year ========= =========
Earnings per
share (basic) 5 23.2p 18.2p
========= =========
Earnings per
share
(diluted) 5 22.7p 17.9p
========= =========
Dividend per
share 4 8.5p 7.5p
========= =========
There are no recognised gains or losses other than the profit for the financial
year as reported above.
CONSOLIDATED BALANCE SHEET
29 February 28 February
2004 2003
£'000 £'000
Fixed assets
Tangible assets 36,317 35,178
Intangible assets 2,854 2,332
--------- ---------
39,171 37,510
--------- ---------
Current assets
Stocks 88,096 78,379
Debtors 18,381 17,657
Cash at bank and in hand 22,553 13,543
--------- ---------
129,030 109,579
Creditors: amounts falling due within
one year (101,727) (89,029)
--------- ---------
Net current assets 27,303 20,550
--------- ---------
Total assets less current liabilities 66,474 58,060
Creditors: amounts falling due after
more than one year (260) (273)
Provisions for liabilities and charges (1,042) (969)
--------- ---------
65,172 56,818
========= =========
Capital and reserves
Called up share capital 21,427 21,151
Share premium account 27,309 27,001
Capital redemption reserve 746 746
Profit and loss account 15,690 7,920
--------- ---------
Equity shareholders' funds 65,172 56,818
========= =========
Net funds 12,978 5,562
========= =========
Net assets per share 121.7p 107.4p
========= =========
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
29 February 28 February
2004 2003
£'000 £'000
Net cash inflow 18,967 9,967
from operating
activities
Returns on 156 288
investments and
servicing of
finance
Tax paid (3,868) (3,717)
Capital
expenditure
and financial
investment 2,359 (4,008)
Acquisitions
and disposals (4,818) (1,003)
Equity
dividends paid (4,105) (3,767)
--------- ---------
Net cash
inflow/(outflow) before
financing 8,691 (2,240)
Financing 319 (1,478)
--------- ---------
Increase/(decrease) in cash
in the year 9,010 (3,718)
========= =========
Reconciliation of operating profit to net cash flow from operating
activities
Year ended Year ended 28 February 2003
29 February 2004
£'000 £'000
Operating 13,575 10,899
profit
Depreciation 2,999 2,774
Amortisation 208 28
of goodwill
Profit on sale
of tangible
fixed assets (25) (63)
(Increase) in
stocks (8,211) (9,698)
(Increase) in
debtors (735) (1,908)
Increase in 9,461 8,675
creditors
Net movement
in
demonstrator
funding 1,695 (740)
--------- ---------
Net cash
inflow from
operating 18,967 9,967
activities ========= =========
Analysis of
changes in net
funds
At 1 March Cash flow Other non- At 29 Feb 2004
2003 cash changes
£'000 £'000 £'000 £'000
Cash at bank 13,543 9,010 - 22,553
and in hand
--------
Debt due
within one
year (3,205) 77 - (3,128)
Finance leases
(demonstrators (4,354) 19,284 (20,979) (6,049)
Finance leases
(other) (422) 188 (164) (398)
--------
19,549
-------- -------- --------- ---------
Total 5,562 28,559 (21,143) 12,978
======== ======== ========= =========
NOTES TO THE STATEMENT OF PRELIMINARY RESULTS
1. Analysis of turnover
Year ended Year ended
29 February 28 February
2004 2003
£'000 £'000
Motor Retail Division 468,390 410,566
Motor Services
Division 17,248 15,494
Other Businesses 3,887 3,945
--------- ---------
489,525 430,005
========= =========
2 Analysis of operating profit
Year ended Year ended
29 February 28 February
2004 2003
£'000 £'000
Motor Retail Division 14,855 11,879
Motor Services Division 1,209 1,034
Other
Businesses (37) 90
Central costs (2,452) (2,104)
--------- ---------
13,575 10,899
========= =========
3 During the year, the Group disposed of its Vauxhall dealership in Heathrow
and its Volvo dealership in Leeds.
4 The Directors recommend a final dividend of 5.1p (2003, 4.3p) per share, to
be paid on 6 September 2004 to shareholders on the register at 6 August
2004. An interim dividend of 3.4p (2003, 3.2p) per share was paid during the
year, making a total for the year of 8.5p (2003, 7.5p).
5 The calculation of earnings per share for the year ended 29 February 2004
is based on the profit for the financial year of £12,333,000 (2003,
£9,542,000) and on 53,208,778 (2003, 52,533,688) ordinary shares, being the
weighted average number of shares in issue during the year. The number of
dilutive potential ordinary shares arising from share options, as calculated
in accordance with FRS 14: Earnings per Share, is 1,021,912 (2003, 875,340).
Therefore, the calculation of diluted earnings per share is based on the
profit for the financial year of £12,333,000 (2003, £9,542,000) and on
54,230,690 (2003, 53,409,028) ordinary shares. Earnings per share before
goodwill amortisation and exceptional items have been calculated on profits
for the year of £9,434,000 (2003, £7,519,000) as detailed below:
Year ended Year ended
29 February 28 February
2004 2003
£'000 £'000
Profit after taxation 12,333 9,542
Goodwill amortisation (net of tax relief) 147 21
(Profit) on
disposal of
businesses (117) (298)
(Profit) on
disposal of
properties (2,929) (1,746)
--------- ---------
9,434 7,519
========= =========
6 This preliminary results statement has been prepared on the basis of the
same accounting policies as those set out in the financial statements for
the year ended 28 February 2003.
7 This preliminary results statement was approved by the Board of Directors
on 28 April 2004. The above results for the year ended 29 February 2004 have
been abridged from the full Group accounts for that year, which received an
unqualified auditors' report and which will be delivered to the Registrar of
Companies shortly.
8 The above results for the year ended 28 February 2003 have been abridged
from the full Group accounts for that year, which received an unqualified
auditors' report and which have been delivered to the Registrar of
Companies.
9 The Annual Report and Financial Statements will be posted to shareholders as
soon as practicable. Further copies will be available from the company's
registered office at Craigmore House, Remenham Hill, Henley-on-Thames, Oxon
RG9 3EP.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 2 days ago IntegraFin Holding
- 2 days ago Spirent Communications
- 2 days ago CRH (CDI)
- 2 days ago Bezant Resources
- 2 days ago EJF Investments Ltd NPV