Final Results

European Motor Hldgs PLC 26 April 2006 EUROPEAN MOTOR HOLDINGS plc ("EMH") Preliminary results for the year ended 28 February 2006 EMH, consistently one of the UK's most profitable quoted motor retail groups, announces its results for the year ended 28 February 2006. Highlights: â€¢ Profit before exceptional items and tax up by 15% to Â£18.0 million (2005, Â£15.7 million) â€¢ Profit before tax Â£18.5 million (2005, Â£30.5 million) â€¢ Earnings per share before exceptional items up by 18% to 23.4 pence (2005, 19.8 pence) â€¢ Net assets per share 168.5 pence (2005, 150.3 pence) â€¢ Significant expansion through acquisition with the Group's chosen key manufacturer partners, adding fifteen franchised dealerships to the Group in the year â€¢ Acquisitions performing well and slightly ahead of expectations â€¢ Dividends per share for the year up by 13% to 10.75 pence (2005, 9.5 pence) â€¢ Record start to new financial year Commenting on these results, chief executive Richard Palmer said: "We have produced record trading profits (before exceptional items) in a period in which the new car market fell by 5% - an outstanding achievement. Our established businesses increased their profits by 10% on a like for like basis, our recent acquisitions are performing well and we expect to make further progress in the next twelve months." Enquiries: Richard Palmer Chief Executive Ann Wilson Finance Director Morning: Biddick Associates 020 7448 1000 Afternoon: European Motor Holdings plc 01491 413 399 EUROPEAN MOTOR HOLDINGS plc Preliminary results for the year ended 28 February 2006 Chief Executive's statement We are delighted to report another year of substantial progress and record trading profits as set out below. Year ended Year ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 Profit before taxation, exceptional items and the effect of Smith Knight Fay ("SKF") 16,775 15,660 Trading profit before taxation of SKF since acquisition 2,283 - Additional Group interest on SKF consideration (1,048) - ------- ------- Profit before taxation and exceptional items 18,010 15,660 Exceptional items VAT refund - 6,272 Interest on VAT refund - 6,279 Profit on disposal of businesses 1,545 2,580 Profit on disposal of properties - 277 MG Rover writedowns and losses (1,102) (588) ------- ------- 443 14,820 ------- ------- Profit before taxation 18,453 30,480 ------- ------- Earnings per share including exceptional items 24.8p 39.6p ------- ------- Earnings per share excluding exceptional items 23.4p 19.8p ------- ------- Dividend per share 10.75p 9.5p ------- ------- These results represent an outstanding achievement in a period in which the new car market fell by 5%. The result from SKF is slightly ahead of expectations for the eight months since acquisition on 1 July 2005, a period which excluded our traditionally strong trading months of March to June. Following the collapse of MG Rover in April 2005 we subsequently closed our two MG Rover businesses and have now surrendered the lease on one site and sublet the other. This resulted in an exceptional cost in the financial year of Â£1,102,000. We do not envisage any significant further costs in respect of these businesses in subsequent trading periods. Overall our earnings per share excluding exceptional items rose by 18% from 19.8 pence to 23.4 pence. Our net assets per share increased by 12% to 168.5 pence. As a result of this excellent performance we have decided to increase our final dividend to 6.75 pence from 5.8 pence, representing an increase of 13% in our total dividend payable for the financial year. These results continue to demonstrate that our strategy, brands and management deliver the highest returns in the quoted motor retail sector. Acquisitions and Disposals In July 2005 we acquired the SKF group in the North West of England for a consideration of Â£30.5 million through which the Group gained eight Volkswagen car franchises representing the whole of the Greater Manchester market area, one Volkswagen commercial vehicle franchise and four Audi franchises. We also gained three Toyota, one Lexus and one Mazda franchise as part of the acquisition but subsequently disposed of these businesses to Toyota's existing Manchester partner in January 2006 for a consideration of Â£13.2m. In addition, we retained the freehold interest in the Mazda and Lexus dealerships and will receive an annual rent of Â£0.3 million for these facilities. Interest savings resulting from the consideration received together with this rental income are estimated to amount to Â£1.1 million per annum for the Group. During the period of our ownership the businesses disposed of made a contribution to the Group's profit from operations of Â£0.5 million. We are delighted with the acquisition of SKF and are confident that improved income streams will be generated by these businesses in the future as they become fully integrated into the Group. We also acquired the Michael Powles Bentley businesses on 1 March 2005. During the financial year these operations in Leicester and Norwich made a contribution to Group profit before tax of Â£0.9 million. We are confident that we can develop these two businesses alongside our existing Bentley business in Newcastle and can look forward to higher levels of profitability in the future. Franchise Partners As a result of the acquisitions and disposals made in the last year, the Group now holds the following franchises: BMW group BMW 5 Mini 5 BMW motor cycles 1 Premier Automotive group Jaguar 5 Land Rover 2 Volvo 6 Volkswagen group Audi 6 Bentley 3 Volkswagen 16 Volkswagen LCVs 2 ------ Total 51 ------ Trading New car volumes in the UK suffered a 5% decrease in the calendar year 2005. We, however, managed to move our Motor Retail Division profit from operations forward by 27% to Â£22.8 million. Whilst acquisitions made a significant contribution to this increase, the profit from operations of our core businesses increased by 10% on a like for like basis. We have, over many years, refined our brand portfolio and believe that our strength in the premium sector of the market is one of the major reasons for our continued success in a market which has declined. Notwithstanding the fall in registrations for the new car market as a whole referred to above, the brands that we held for the entire period under review increased their market share by 8% in the calendar year 2005. The trend of our premium brands capturing sales from their 'volume' competitors has continued with our established brands increasing their market share by 38% over the last five years. New products have undoubtedly stimulated the premium sector of the market but the fundamental reason for the migration from volume to premium remains the lower cost of ownership of the premium cars that we retail. Our manufacturers' products retain higher residual values than their competitors in practically every sector of the market into which they sell. The performance of our BMW and Mini businesses in the year was outstanding. BMW (UK) awarded our Stockton dealership, Preston Hall, the highest possible accolade when it was named BMW Dealer of the Year for 2005. This award, together with Preston Hall also being named BMW's Aftersales Dealer of the Year and its associated Mini dealership being runner up in Mini Dealer of the Year, represents an excellent performance and our thanks go to all the staff in Stockton and our BMW management team who achieved this remarkable result. Our existing BMW dealerships moved forward with profit before taxation rising by 6%. Our BMW businesses benefited from the introduction of the new '3' series which, together with various niche products, has continued to place BMW at the top of the premium sector. BMW registrations increased nationally by 9% in 2005 and our BMW registrations increased by 17% in the same period. The expanding aftersales parc has further enhanced our profitability. We opened new BMW and Mini facilities at a greenfield site in Durham in July and, whilst the business made a small loss in the period under review, we are extremely confident of its future worth to the Group. BMW expects to increase its sales and market share in 2006 and we look forward to sharing in that success. We now have three separated Mini operations and are working towards ensuring that all our Mini franchises are 'stand alone' as soon as possible. The Mini brand justifies this investment in facilities and people as it approaches a 2% market share which will grow further with the next generation of Mini products which we will start to see later this year. Mini registrations for 2005 increased nationally by 3% and our Mini registrations moved forward by 5% in the same period. For our Premier Automotive Group businesses, the year was one primarily of consolidation. All our businesses performed well above national return on sales averages as is detailed below. EMH return on sales National return on sales (financial year) (calendar year 2005) Jaguar 2.8% 0.2% Land Rover 3.1% 1.8% Volvo 2.4% 0.6% As shown above, our Jaguar businesses had an excellent year in what was, for them, a period of relative product inactivity. Our businesses in the North of England have become established as very successful in both sales and aftersales, again a testament to our stable management and their individual teams. The XK coupe and convertible which were launched in March 2006 have been an outstanding success and have unquestionably generated new enquiry and interest levels in the brand. We have a very strong order book for the XK. In the calendar year 2005 Jaguar's national registrations fell by 19% whereas our Jaguar sales only suffered a minor fall of 3%. In March 2006 Jaguar's UK sales were at the same level as last year which represents a considerable change in its fortunes. Our Land Rover businesses in the North West had another very good year with demand outstripping supply for the Range Rover Sport which was launched in May 2005. We are working towards expanding our presence with Land Rover in the coming months and are confident of the franchise's continued success. The new Freelander is expected to be launched towards the end of this year and we will then have a complete range of new 4x4 products. Whilst our Land Rover sales for the financial year increased by 2%, the profit before taxation of our businesses rose by 22% in the period, principally as a result of a strong contribution from Range Rover Sport. Our Volvo businesses in the North East increased their sales and would have had a better year but for the extreme levels of competitive pricing on the flagship XC90 range in the second half of the year. Volvo is in the middle of a product cycle change which will be completed in the next twelve months when it will launch the new S80 and a new smaller Volvo, the C30. These cars, together with the recently launched C70, put Volvo in a strong position as it will have excellent products in almost every segment of the premium market. Volvo's national registrations were down 4% in 2005 but we managed to improve our registrations in that period by 4%. The acquisitions that we have made in the last year have further enhanced our representation with the Volkswagen group. Our Audi centres had a good year and we expect to continue this progress in the coming months. In the UK Audi has achieved outstanding results in the last three years and has overtaken Mercedes-Benz as the second largest brand by volume in the upper premium sector. Audi will introduce a new range of 4x4 vehicles in mid year when it brings the Q7 to the UK market. We have pre-sold nearly all our 2006 Q7 allocations and this product will further enhance our profitability. We are also expecting the new Audi TT to arrive during the next 12 months and are very optimistic about its prospects. Bentley had another good year with its national registrations increasing by over 5% in 2005. The introduction of the Flying Spur has generated new sales opportunities and the Continental range will be completed later in 2006 when the Continental GT convertible is introduced. This latter car will open another 'niche' for Bentley which we are eager to capitalise upon. We have an excellent opportunity to develop our three Bentley businesses in the North and East of the country where we are responsible for 13% of the sales for the brand in the UK. Volkswagen had a good year and, whilst some of its direct volume competitors suffered major market share setbacks, it moved forward by 2% in 2005. Our performance in the financial year was positively affected by the acquisition of SKF and the consequent increase in our Volkswagen registrations of 39%. Whilst trading continues to be competitive, we are extremely optimistic about the prospects with our Volkswagen businesses going forward, particularly as we now have a significant market territory in the North West. The new Passat was launched mid 2005 and is a class leading vehicle which has clearly established a new benchmark for its sector. The most recent addition to the Volkswagen range, the Jetta, is an extremely competitively priced saloon which will, in our view, considerably outperform its predecessor, the Bora. Polo and Golf remain as icons in their respective sectors and we also have the launches of Fox and Eos to look forward to in the next few months. In the period under review we increased our return on sales by 40% from 1.5% to 2.1%. Whilst our Volkswagen businesses do not currently generate the same levels of returns that we achieve elsewhere in the Motor Retail Division, their performance has improved over prior periods and the other benefits that their volumes give to the Group in our relationships with suppliers is extremely valuable. Our vehicle auction businesses performed exceptionally well once again with vehicle sales rising 8%. Profit before taxation increased by 17% and these businesses remain a vital part of the Group's operations. Our vehicle washing equipment subsidiary, Wilcomatic, had an excellent year with operating profits increasing by 43% to Â£1.5 million. The business moved forward for a variety of reasons; improved operational efficiency was achieved in its service activities and sales benefited from the capture of the Morrisons supermarket account where we installed 80 machines in the year. Wilcomatic remains a leading supplier of vehicle washing equipment and service in the UK for petrol retailers, supermarkets, motor dealers and commercial vehicle users. We have recently expanded our product offerings and look forward to another excellent year. Financial review As stated above, the Group's profit on ordinary activities before tax for the year ended 28 February 2006 was Â£18.5 million compared to Â£30.5 million in the previous year. This year's result includes exceptional profits of Â£1.5 million from the disposal of businesses and exceptional losses of Â£1.1 million resulting from the closure of our former MG Rover dealerships. Last year's result includes a number of exceptional items, totalling a net Â£14.8 million, mainly relating to a VAT refund and associated interest of Â£12.6 million. Excluding the exceptional items referred to above, the profit for the year was Â£18.0 million, compared to Â£15.7 million last year, an increase of 15%. The Group's effective tax rate in the year ended 28 February 2006 was 27.4%. This is distorted by the low tax charge on the exceptional items referred to above due to the availability of capital losses; after adjusting for this, the effective tax rate was 29.8%, compared to an adjusted rate of 32.4% last year. The reduction is largely due to the tax relief available to the Group in relation to share options exercised by Directors and employees in the year. Earnings per share for the year were 24.8p compared to 39.6p last year. Excluding exceptional items, the figure for this year is 23.4p compared to 19.8p last year, an increase of 18%. The Board is recommending a final dividend of 6.75p per share, bringing the full year's dividend to 10.75p. This represents a 13% increase on last year's total dividend of 9.5p per share. Dividend cover, excluding exceptional items, for the year is 2.2 times, compared to 2.1 times last year. The net effect of branches acquired, sold or closed since last year is an increase in turnover of Â£201 million. Within our continuing Motor Retail businesses, higher vehicle sales volumes of both new and used vehicles and an increase in average prices of new vehicles sold have increased turnover by a further Â£22 million. There have also been increases in the turnover of Motor Retail aftersales and Motor Services. As a result of all these factors, there has been a net increase of Â£226 million in overall Group turnover compared to last year. Profit from operations excluding exceptional items fell to 2.7% of turnover compared to 3.0% last year. This year's ratio is distorted by the acquisition of SKF as the Group's period of ownership of those businesses excluded the very important month of March with its peak level of sales and profitability. If the results of SKF are excluded, the ratio has remained at 3.0%, showing that the Group continues to be one of the most profitable in the industry. The acquisition of SKF and the subsequent disposal of the Toyota, Lexus and Mazda businesses have had a significant effect on the Group's gearing position. In addition to the purchase consideration paid of Â£30.5 million, the Group inherited SKF's net borrowings of Â£37.5 million as at the completion date of 1 July. The disposal of the Toyota, Lexus and Mazda businesses resulted in cash consideration received of Â£13.2 million and the disposal of net borrowings of Â£1.2 million. The net borrowings acquired with SKF less those disposed of amount to Â£36.3 million and these had been reduced to Â£14.7 million at 28 February. The net interest charge of the SKF businesses during the Group's period of ownership amounted to Â£1.6 million and EMH incurred interest costs of a further Â£1.0 million on the purchase consideration. Excluding the effects of the SKF acquisition and the exceptional interest received last year, the underlying interest charge, including vehicle stocking interest, is a small credit compared to a cost of Â£0.1 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 Â£11.6 million in the year to Â£91.7 million as a result of retained profits, share issues and an improvement in the Group's pension scheme deficit to Â£1.1 million net of deferred tax. During the year we have invested Â£10.9 million in capital expenditure and received Â£0.3 million in respect of the disposal of fixed assets. The total net cash outflow in the year in respect of the acquisitions of SKF and the Michael Powles Bentley businesses, including the net overdrafts acquired and net of Â£1.5 million in respect of shares subscribed for by the vendor of SKF, amounted to Â£47.9 million. The net proceeds of the businesses disposed of during the year amounted to Â£13.3 million. During the year, the Company also issued 545,000 shares in respect of the exercise of options, which resulted in a cash inflow of Â£0.5 million. We have continued to manage our working capital efficiently and have achieved a reduction of Â£1.5 million. During the year, the Group paid tax of Â£8.0 million and dividends of Â£5.3 million and there has been a net repayment of Â£6.5 million in respect of loans and finance leases. The net effect of these cash flows and of the Â£23.9 million profit from operations before other income (after adding back depreciation and other non cash items) and the net interest paid in the year of Â£2.8 million is a net cash outflow of Â£41.9 million. The Group had net borrowings of Â£23.6 million at 28 February 2006, giving a gearing ratio of 26% at that date. The Group's net borrowings 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 the Group is in receipt of deposits on cars being prepared for sale in March. The highest net borrowings level of Â£60.7 million occurred in early January, prior to the disposal of SKF's Toyota, Lexus and Mazda businesses. The principal elements of our borrowings are loans from banks and finance houses and leasing obligations in respect of demonstrator vehicles and certain dealership refurbishments. The bank loans are repayable over terms of five and ten years from inception whilst most other 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. The Group has substantial banking facilities which were largely unutilised at the balance sheet date and is well placed to expand as acquisition and other opportunities arise. International Financial Reporting Standards Prior to 2005 the Group reported its results under UK Generally Accepted Accounting Practice. All listed companies in the European Union now have to report their consolidated financial statements for accounting periods commencing on or after 1 January 2005 under International Financial Reporting Standards as endorsed by the European Union. The financial statements for the year ended 28 February 2006 are the Group's first annual financial statements prepared in accordance with such endorsed standards and the comparatives have been restated in accordance with the new policies. The effects on the Group's profits and net assets are not significant. A full report detailing the changes to the Group's accounting policies and their financial effect was published on 18 October 2005 and is available on the Company's website at www.emhplc.com/IFRS.pdf. Outlook As is evidenced by the results, we have had an excellent year. The next twelve months will benefit from the full year impact of profits from our recent acquisitions and from an anticipated continuing expansion of the premium vehicle sales sector. In confirmation of this, our March performance was exceptionally good giving us our best ever start to a new financial year. Naturally, acquisitions made up a large part of the increase but we are very pleased to report that our performance for the first full month is also better than last year on a like for like basis. Our gearing levels are relatively modest and we continue to focus on identifying opportunities to expand with our chosen manufacturer partners. We would particularly like to thank our staff, our suppliers and our advisers for their part in the last year's success. Richard Palmer Chief Executive 26 April 2006 CONSOLIDATED INCOME STATEMENT Notes Year Year ended ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Revenue 2 754,914 528,838 --------------------------- --------- --------- --------- Exceptional VAT refund - 6,272 Exceptional MG Rover writedowns - (588) Other cost of sales (646,147) (452,328) --------------------------- --------- --------- --------- Cost of sales (646,147) (446,644) --------- --------- Gross profit 108,767 82,194 Distribution costs (52,041) (35,553) Administrative expenses (37,178) (25,186) --------- --------- Profit from operations before other income 19,548 21,455 --------------------------- --------- --------- --------- Profit from operations before other income analysed as: Before exceptional items 20,598 15,771 Exceptional MG Rover writedowns and losses (1,050) (588) Exceptional VAT refund - 6,272 --------- --------- 19,548 21,455 --------------------------- --------- --------- --------- Profit on disposal of businesses 4 1,545 2,580 Profit on disposal of properties - 277 --------- --------- Profit from operations 3 21,093 24,312 Investment income 525 1,242 Finance costs (3,165) (1,353) Exceptional interest on VAT refund - 6,279 --------- --------- Profit before tax 18,453 30,480 --------------------------- --------- --------- --------- Profit before tax analysed as: Before exceptional items 18,010 15,660 Exceptional MG Rover writedowns and losses (1,102) (588) Exceptional VAT refund and interest - 12,551 Profit on disposal of businesses and properties 1,545 2,857 --------- --------- 18,453 30,480 --------------------------- --------- --------- --------- Tax (5,053) (9,320) --------- --------- Profit for the year 13,400 21,160 --------- --------- Earnings per share (basic) 6 24.8p 39.6p --------- --------- Earnings per share (diluted) 6 24.3p 38.8p --------- --------- Dividend per share for financial year 5 10.75p 9.5p --------- --------- CONSOLIDATED BALANCE SHEET 28 February 28 February 2006 2005 Â£'000 Â£'000 Non-current assets Goodwill 25,501 4,662 Property, plant and equipment 59,730 31,914 Trade and other receivables 2,448 1,300 --------- -------- 87,679 37,876 --------- -------- Current assets Inventories 140,930 88,893 Trade and other receivables 21,743 15,545 Cash at bank and in hand 2,558 43,977 --------- -------- 165,231 148,415 --------- -------- Total assets 252,910 186,291 --------- -------- Current liabilities Trade and other payables (151,543) (96,137) Tax liabilities (163) (4,289) --------- -------- (151,706) (100,426) --------- -------- Non-current liabilities Trade and other payables (5,402) (309) Retirement benefit obligation (1,576) (2,739) Deferred tax liabilities (2,357) (2,605) Long-term provisions (133) (97) --------- -------- (9,468) (5,750) --------- -------- Total liabilities (161,174) (106,176) --------- -------- Net assets 91,736 80,115 --------- -------- Share capital 21,779 21,319 Share premium account 28,889 27,392 Capital redemption reserve 926 926 Retained earnings 40,142 30,478 --------- -------- Total shareholders' equity 91,736 80,115 --------- -------- Net (debt)/funds (23,587) 36,573 --------- -------- Net assets per share 168.5p 150.3p --------- -------- CONSOLIDATED CASH FLOW STATEMENT Year Year ended ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Operating activities Profit from operations 21,093 24,312 Adjustments for: Depreciation of property, plant and equipment 4,167 3,350 Share option expense 122 94 Expense for defined benefit retirement obligations 227 148 Payments made for defined benefit retirement obligations (138) (55) (Profit) on disposal of property, plant and equipment (15) (23) (Profit) on disposal of businesses (1,545) (2,580) (Profit) on disposal of properties - (277) --------- -------- Operating cash flows before movements in working capital 23,911 24,969 (Increase) in inventories (7,903) (1,517) Decrease in receivables 9,598 2,992 (Decrease)/increase in payables (134) 123 Increase/(decrease) in demonstrator funding 1,637 (2,781) --------- -------- Cash generated by operations 27,109 23,786 Income taxes paid (8,033) (6,669) Interest paid (3,165) (1,353) --------- -------- Net cash from operating activities 15,911 15,764 --------- -------- Investing activities Interest received 334 1,162 Exceptional interest received - 6,279 Disposal of businesses 13,285 7,985 Proceeds on disposal of property, plant and equipment 329 430 Purchases of property, plant and equipment (10,907) (2,487) Acquisition of businesses (47,855) (1,380) --------- -------- Net cash (used in)/generated by investing activities (44,814) 11,989 --------- -------- Financing activities Dividends paid (5,321) (4,705) Repayments of borrowings (7,527) (643) Repayments of obligations under finance leases (608) (259) Proceeds on issue of share capital 457 155 Purchase of own shares - (877) --------- -------- Net cash (used in) financing activities (12,999) (6,329) --------- -------- Net (decrease)/increase in cash and cash equivalents (41,902) 21,424 Cash and cash equivalents at beginning of year 43,977 22,553 --------- -------- Cash and cash equivalents at end of year 2,075 43,977 --------- -------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year Year ended ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Actuarial gain/(loss) on defined benefit pension scheme 1,061 (180) Tax on items recognised directly in equity 402 455 Profit for the year 13,400 21,160 --------- -------- Total recognised income and expense for the year 14,863 21,435 --------- -------- NOTES TO THE STATEMENT OF PRELIMINARY RESULTS 1. Basis of preparation Prior to 2005 the Group has reported its results under UK Generally Accepted Accounting Practice ("UK GAAP"). All listed companies in the European Union now have to report their consolidated financial statements under International Financial Reporting Standards ("IFRS") for accounting periods commencing on or after 1 January 2005. The results in this preliminary results statement have been abridged from the full Group accounts for the year ended 28 February 2006 which have been prepared in accordance with IFRS for the first time. There is a requirement to include at least one year of comparative information in the financial statements for the year ended 28 February 2006 and therefore the transition date to IFRS for the Group is 1 March 2004. The results for the year ended 28 February 2005 in this preliminary results statement have been restated in accordance with IFRS. On 18 October 2005 the Group published a report explaining the impact of IFRS and this is available on the company's website at www.emhplc.com/IFRS.pdf. This document details the key differences between UK GAAP and IFRS that impact the Group. The document also includes reconciliations of the balance sheet as at 1 March 2004, 31 August 2004 and 28 February 2005, and of the income statement for the six months ended 31 August 2004 and the year ended 28 February 2005. The report referred to above sets out the Group's principal accounting policies as they have been modified to comply with IFRS. The principal differences which impact the Group are summarised below: i Goodwill - amortisation of goodwill is no longer permitted, it is instead tested at least annually for impairment. Goodwill previously written off to reserves is no longer required to be adjusted through the income statement on disposal of a business. ii Share options - the fair value of share options granted is charged to the income statement over the vesting period of the options. iii Pensions - the deficit in the pension scheme is incorporated in the balance sheet, operating and financing costs are charged to the income statement and actuarial gains and losses are taken directly to equity. iv Deferred tax - deferred tax is recognised on revaluations of property, on gains on assets rolled over, and on employee share options where tax relief is available on exercise. v Leases - leased land and buildings are considered as separate assets for the purpose of classification. Where capitalised long leasehold land is considered to be an operating lease under IFRS, the premium paid is treated as a long term prepayment and amortised over the period of the lease. vi Dividends - the recognition of dividends is on a declared rather than a proposed basis. The application of IFRS also changes the terminology and presentation of the financial statements as reflected in this preliminary results statement. This preliminary results statement has been prepared on the basis of the accounting policies which the Group has adopted in its financial statements for the year ended 28 February 2006. IFRS comprise a significant amount of accounting and financial reporting regulation, much of which has been originated or revised very recently. Interpretation of this regulation is expected to be refined throughout the financial community, both in the UK and the rest of the European Union, as IFRS are implemented for the first time by many listed companies. 2. Analysis of revenue Year Year ended ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Motor Retail Division 734,989 510,041 Motor Services Division 16,044 14,765 Other Businesses 3,881 4,032 --------- -------- 754,914 528,838 --------- -------- 3. Analysis of profit from operations Year Year ended ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Motor Retail Division 22,797 17,941 Motor Services Division 1,549 1,085 Other Businesses 7 65 Central costs (3,755) (3,320) Exceptional VAT refund - 6,272 Exceptional MG Rover writedowns and losses (1,050) (588) Profit from disposal of businesses 1,545 2,580 Profit from disposal of properties - 277 --------- --------- 21,093 24,312 --------- --------- 4. During the year, the Group disposed of its Toyota, Lexus and Mazda businesses in the Manchester area that were acquired as part of the Smith Knight Fay acquisition during the year. The Group also disposed of a Volkswagen aftersales business in Walton on Thames. In 2005, the Group disposed of its DAF and LDV trucks business in Taunton, its Audi dealerships in Sunderland and Chester, its Volkswagen dealership in Darlington and the assets of its retail car washing venture. 5. The Directors recommend a final dividend of 6.75p (2005, 5.8p) per share, to be paid on 5 September 2006 to shareholders on the register at 11 August 2006. An interim dividend of 4.0p (2005, 3.7p) per share was paid during the year, making a total for the year of 10.75p (2005, 9.5p). 6. The calculation of earnings per share for the year ended 28 February 2006 is based on the profit for the financial year of Â£13,400,000 (2005, Â£21,160,000) and on 53,975,534 (2005, 53,390,052) 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 IAS 33: Earnings per Share, is 1,138,266 (2005, 1,195,969). Therefore, the calculation of diluted earnings per share is based on the profit for the financial year of Â£13,400,000 (2005, Â£21,160,000) and on 55,113,800 (2005, 54,586,021) ordinary shares. Earnings per share before exceptional items has been calculated on profits for the year of Â£12,642,000 (2005, Â£10,588,000) as detailed below: Year Year ended ended 28 February 28 February 2006 2005 Â£'000 Â£'000 Profit after taxation 13,400 21,160 (Profit) on disposal of businesses (net of tax) (1,529) (1,939) (Profit) on disposal of properties (net of tax) - (259) Exceptional VAT refund and associated interest (net of tax) - (8,786) Exceptional MG Rover writedowns (net of tax) 771 412 --------- -------- 12,642 10,588 ========= ======== 7. This preliminary results statement was approved by the Board of Directors on 26 April 2006. The above results for the year ended 28 February 2006 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 statutory accounts for the year ended 28 February 2005, which received an unqualified auditors' report, 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 R IAMRTMMBTBFF

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