Interim Results
Inchcape PLC
03 August 2006
Interim results
Strong financial, operational and strategic progress
Inchcape plc, the international automotive retail group, announces its interim
results for the six months to 30 June 2006.
Financial highlights:
• Sales up 8.1% to £2.44bn; 6.4% in constant currency
• Headline PBT* up 11.1% to £112.0m, 7.2% in constant currency
• Reported PBT up 6.9% to £112.0m
• Headline EPS* up 17.8% to 18.5p, 13.3% in constant currency
• Reported EPS up 22.4% to 20.2p
• Interim dividend up 56.3% to 5.0p per share
* Before exceptional items
Operational & strategic highlights:
• Record profits in UK, Australia, Greece and Belgium.
• Outstanding performance in UK with strong like-for-like sales growth and
margin progression.
• Market leadership maintained in Hong Kong and Singapore in the face of
more challenging trading conditions.
• £110.4m Lind Automotive acquisition agreed in May, completed on 4 July
2006.
• Pipeline of investment opportunities remains strong.
Peter Johnson, Chairman of Inchcape plc, said:
'Inchcape has delivered strong progress in the first half of 2006. This reflects
the success of our strategy and the benefits of a broad geographic spread.'
'UK, Australia, Greece and Belgium all achieved record profits in the first six
months of 2006. In the face of easing consumer demand and a decline in the
passenger car market, our UK Retail business grew trading profits by 49.1%,
achieving a record trading margin of 2.8%. The Group regained market leadership
for Toyota in Greece in the period.'
'Hong Kong and Singapore suffered challenging trading conditions and the run out
of several core models. Nonetheless we retained substantial market leadership
for Toyota in both these markets. In Australia, Subaru's market share continued
to grow, achieving a record 3.9%.'
'Inchcape's strong operating cash flow qualities and the strength of our balance
sheet leave us well placed to play a leading role in the industry consolidation
happening around the world. Also, it enables us to expand where we can achieve
scale operations in fast growing markets. Our strategy is to increase our scale
geographical spread from six to ten core markets over the next five years. We
are building a strong pipeline of investment opportunities to achieve this.'
'In the second half we will benefit from our continued focus on customer
service, the introduction of new models, improved vehicle supply and the Lind
acquisition. As a result, although market conditions remain challenging, we are
well placed to deliver another year of growth in 2006.'
For further information, please contact:
Group Communications, Inchcape plc
020 7546 0022
Hogarth Partnership Limited (John Olsen/Barnaby Fry)
020 7357 9477
Ex Dividend Date 9 August 2006
Record Date 11 August 2006
Payment Date 11 September 2006
Strategy Presentation Day 10 October 2006
Notes to editors
Inchcape is a scale automotive retail group operating in Australia, Belgium,
Greece, Hong Kong, Singapore and the UK. The Group also has operations in a
number of other global markets. In addition to growing our core businesses, we
are looking to develop scale operations in new and emerging regions. We
represent leading automotive brands and operate either a retail, or a vertically
integrated retail model (i.e. exclusive distribution and retail), depending on
the market. Our current key manufacturer partners are Toyota/Lexus, Subaru, BMW,
the Premier Automotive Group of Ford, Mazda, Mercedes-Benz, Volkswagen, Audi and
Honda.
For further information, visit us at www.inchcape.com
Inchcape plc
Interim results for the half year ending 30 June 2006
Results overview
Inchcape has delivered strong progress in the first half of 2006. This reflects
the success of our strategy and the benefits of a broad geographic spread.
UK, Australia, Greece and Belgium all achieved record profits in the first six
months of 2006. In the face of easing consumer demand and a decline in the
passenger car market, our UK Retail business grew trading profits by 49.1%,
achieving a record trading margin of 2.8%. The Group regained market leadership
for Toyota in Greece in the period.
Hong Kong and Singapore suffered challenging trading conditions and the run out
of several core models. Nonetheless we retained substantial market leadership
for Toyota in both these markets. In Australia, Subaru's market share continued
to grow, achieving a record 3.9%.
Overall sales increased by 8.1% to £2,440.6m, a 6.4% increase at constant
currency. Headline profit before tax increased by 11.1% to £112.0m, representing
7.2% growth at constant currency. Headline earnings per share rose 17.8% to
18.5p, some 13.3% at constant currency. Strong cash generation is a key
attribute of our business model as demonstrated by the operating cash flow of
£142.3m in the first six months of 2006, 129.4% of operating profit.
The Group has successfully concluded its £65.0m share buy back programme through
the purchase of 17.9m shares, now held in treasury, at an average price of £3.64
per share.
As a result of this continued strong performance, the Board has declared an
interim dividend of 5.0p per share, an increase of 56.3% on 2005. This uplift
reflects our continuing confidence in the business and its future and is
consistent with our aim of maintaining a progressive approach to dividends and
capital returns to shareholders.
The interim dividend will be paid on 11 September 2006 to shareholders on the
register at 11 August 2006.
Strategy update
Our key strategic goals are to strengthen our core businesses and to develop
expansion opportunities in existing and new markets.
We are developing initiatives in a number of areas to increase both our like for
like sales and productivity in order to strengthen the existing businesses.
Inchcape's strong operating cash flow qualities and the strength of our balance
sheet leave us well placed to play a leading role in the industry consolidation
happening around the world. Also, it enables us to expand where we can achieve
scale operations in fast growing markets. Our strategy is to increase our scale
geographical spread from six to ten core markets over the next five years. We
are building a strong pipeline of investment opportunities to achieve this.
Initially the strategic expansion in our core markets is focused on the UK,
Australia and Eastern Europe. The pace of consolidation in the UK and Australia,
and expansion in Eastern Europe, should provide significant opportunities for
us.
In February 2006 the Group acquired Keystar Motors Pty Limited (Keystar) in
Australia for £9.1m. It represents Subaru, Hyundai, Kia and Mitsubishi in the
Brisbane area across two multi-franchise retail centres. The acquisition
complements our existing retail operations in Melbourne and Sydney, and provides
a platform to build a larger business in Queensland.
In March we announced our intention to enter the Russian market by developing a
partnership with the Independence Group of Companies, one of Moscow's leading
independent car retailers. This partnership will establish two Toyota retail and
service centres in Moscow. These will be newly constructed and are due to be
open towards the end of 2007. The joint venture will initially invest US$35.0m
in the construction and fit out of the new facilities.
The purchase of the Lind Automotive Group Holdings Limited (Lind) in the UK for
£110.4m was completed on 4 July 2006. It is a significant step in our strategic
development. This sizeable acquisition enhances our geographic coverage in the
south and east of England. It develops further our partnership with BMW/MINI,
Volkswagen and Land Rover. It also renews our partnership in the UK with Audi
and establishes an important new partnership with Honda.
We continue to invest in our operations in the high growth Eastern European
markets. In June 2006 we opened a new flagship Toyota retail centre in
Bucharest, Romania.
In addition, we invested in the Lexus brand in Europe and in March 2006 we
opened a new Lexus showroom in the Greater Brussels area.
Operational review
Inchcape reports its results in the Financial statements on a statutory basis
using actual rates of exchange. To enhance comparability, the Operational review
reports results in a form that isolates the impact of currency movements from
period to period by applying the June 2005 exchange rates to both period's
results (constant currency). It also adjusts for the impact of exceptional
items. Where exceptional items and central costs are excluded from operating
profit the results are referred to as trading profit.
Australia
%change
on 2005
% change (constant
2006 2005 on 2005 currency)
Sales £335.3m £312.4m +7.3% +6.5%
Trading Profit £18.8m £16.1m +16.8% +15.5%
In Australia the vehicle market in the first half of 2006 remained fundamentally
strong at 483,160 units, albeit slightly down on the record 2005. This slowdown
was in line with our expectations following the softening of the market in the
second half of 2005. Higher petrol prices continue to shift consumer preference
towards the light and small vehicle segments which is benefiting Subaru,
particularly the Impreza model.
Subaru outperformed the market and achieved a record market share of 3.9%. This
was assisted by special edition variants across all models and record Impreza
sales. Our Subaru Distribution business enjoyed very good trading profit
progression in the face of a competitive market.
Like for like sales growth in the Retail business was up 2.6% over the first
half of 2005, despite a softening market. The continuous focus on improving
operational performance and customer service in Melbourne and Sydney Retail has
generated like for like trading profit growth of 27.2% and has improved trading
margins. This, coupled with the benefit from the exit of the underperforming
retail centres in Sydney during 2005, and with the acquisition of Keystar in
Brisbane, has resulted in overall trading profits increasing by 60.2% in our
Australian Retail business during the first half of 2006.
We continued to invest in AutoNexus, our parts and logistics operation, in
response to increased consumer demand. This expansion, together with the benefit
of securing several new refurbishment contracts, increased sales by 13.5% in the
first half of 2006.
Overall, Australia enjoyed an outstanding first half in 2006. Sales were up by
6.5% and trading profit increased by 15.5%. Trading margins progressed well in
the period to 5.6%.
Belgium
%change
on 2005
% change (constant
2006 2005 on 2005 currency)
Sales £300.3m £257.5m +16.6% +16.6%
Trading Profit £9.2m £8.3m +10.8% +10.8%
Consumer confidence and demand in Belgium strengthened in the first half of
2006, with the vehicle market stimulated by the biennial Brussels Motor Show.
Overall passenger car registrations were 325,611 units in the period, some 13.7%
up on June 2005. Demand was stimulated by the launch of several new Toyota/Lexus
models in Europe in the first quarter of 2006, together with the broadening of
the Toyota model range with the Aygo, and Corolla special edition variants.
Customer orders for over 9,000 units were secured in January, assisted by the
Brussels Motor Show. However, constrained supply has held back sales and market
share growth in the period. Despite this, our passenger car market share at 5.6%
showed an improvement of 0.2ppts compared to June 2005.
Sales and trading profit were up by 16.6% and 10.8% respectively in the first
half of 2006. An increase in vehicle sales by the Distribution business more
than compensated for a slightly weaker vehicle margin due to a shift in mix
towards sales of smaller models. In Belgium, where we are the dominant Lexus
retailer, the new generation of Lexus cars, including the IS220 diesel,
contributed to a strong performance in Belgium Retail in the first half of 2006.
Greece
%change
on 2005
% change (constant
2006 2005 n 2005 currency)
Sales £187.6m £156.8m +19.6% +19.6%
Trading Profit £9.2m £7.8m +17.9% +17.9%
In the first half of 2006 the Greece passenger car market was almost in line
with last year at 152,658 units. The recent release of several new Toyota/Lexus
models has been well received. This, allied with the benefits of an investment
programme by the dealer network upgrading operational facilities, has stimulated
demand. Toyota regained market leadership in the first half of 2006. In June,
the passenger car market share reached 9.7%, an improvement of 1.6ppts over last
year. Distribution in Greece experienced strong sales progression due to
increased vehicle and parts sales.
The performances of our Athens and Salonica Retail businesses are improving.
Like for like sales were up 24.6% benefiting from strong vehicle and service
sales. We expect to build on this in the second half and continue the
improvement of these businesses.
Overall in Greece, the trading profit was 17.9% up on 2005.
Hong Kong
%change
on 2005
% change (constant
2006 2005 on 2005 currency)
Sales £106.0m £114.4m -7.3% -12.2%
Trading Profit £10.1m £13.0m -22.3% -26.2%
This year is Crown Motors' fortieth anniversary of selling Toyota vehicles in
Hong Kong. Our outstanding customer experience, retail excellence and innovation
has led to it securing the Toyota Triple Crown Award for fourteen consecutive
years. It is the only distributor worldwide to have achieved this.
The Hong Kong vehicle market overall remained soft in the first six months of
2006, declining by 4.0% year on year.
In the face of a challenging market Crown Motors, our Toyota/Lexus business,
maintained its strong market leadership with a 32.2% market share at June 2006.
This was 2.2ppts down from 2005. Consumer demand in the period was affected by
the run out of several core models whilst competitors launched new products,
initial supply constraints for the new models, and lower public bus sales.
Overall, sales and trading profit in Hong Kong were 12.2% and 26.2% lower
respectively in the first half of 2006.
Singapore
%change
on 2005
% change (constant
2006 2005 on 2005 currency)
Sales £358.2m £366.3m -2.2% -9.2%
Trading Profit £33.8m £34.6m -2.3% -9.2%
Between 2001 and 2005 the Singapore market enjoyed an annual average growth of
12.4% per annum. This was stimulated by a change in fiscal policy in May 2002
which, coupled with the declining price of the Certificate of Entitlement (COE),
encouraged consumers to replace their cars before the expiry of the ten year COE
term. The vehicle population entitled to the attractive rebates under the old
policy is now depleted substantially. We expect, therefore, the annual vehicles
sales to slow down over the next few years.
Toyota/Lexus retained a dominant market leadership in the period. Borneo Motors
sales were down 11.2% in the period impacted by the discontinuance of the
Liteace commercial vehicle, the run out of the Camry, lower taxi sales and
higher parallel imports.
Lower sales volumes, together with continued margin pressure in a competitive
market, have affected our profitability. We continue to broaden the base of our
Toyota/Lexus sales in Singapore with like for like aftersales growth up 19.7%
year on year.
Our Suzuki franchise enjoyed an excellent performance in the first half of the
year benefiting from the new Swift model.
Overall, strong Suzuki trading profit progression partly mitigated a softer
Toyota/Lexus performance. In aggregate Singapore generated a trading profit 9.2%
lower than the first half of last year.
Looking forward to 2007, new emission regulations will result in the absence of
Singapore taxi sales and impact profit by around £3.0m in 2007.
United Kingdom
%change
on 2005
% change (constant
2006 2005 on 2005 currency)
Sales £783.0m £744.1m +5.2% +5.2%
Trading Profit £23.2m £15.0m +54.7% +54.7%
The UK vehicle market continued to soften in the first half of 2006.
Manufacturer new retail vehicle sales for the franchises represented by UK
Retail fell by 4.7%. However, in the face of these challenging market
conditions, UK Retail's like for like sales increased by 3.4% in the first half
of 2006 to £663.4m. This was due to improved used car and aftersales performance
and new car sales declining at a lesser rate than the market. Like for like
trading profit increased by 37.3%.
These performances were achieved through the success of our focus on process
improvements, operational excellence and customer initiatives. The strengthening
of the core business, together with the full year impact of the acquisition of
Mercedes-Benz retail centres in the north west of England, generated sales up by
6.1% to £727.8m for the first half of 2006. UK Retail's trading profit rose by
49.1% to £20.6m. This was due to strong performances, in particular from BMW,
Mercedes-Benz, Lexus and Volkswagen. Trading margin improved an outstanding
0.8ppts to 2.8% in the first half of 2006.
Inchcape Automotive has benefited from the actions taken in 2005 to improve
production efficiency. The business broke even for the first half of 2006, which
represents a £2.2m improvement in profitability over the first half of 2005.
Inchcape Fleet Solutions achieved a growth of 12.9% in trading profit assisted
by increased rental and fleet management income together with tight overhead
control.
Overall, our UK businesses achieved an excellent 5.2% growth in sales to £783.0m
in the first six months of 2006. Furthermore, outstanding trading margin
progression in the period, led by an impressive UK Retail performance and a
turnaround in the Inchcape Automotive business, has delivered UK trading profit
improvements of 54.7% to £23.2m at June 2006.
Other
%change
on 2005
% change (constant
2006 2005 on 2005 currency)
Sales £370.2m £305.5m +21.2% +19.2%
Trading Profit £16.1m £14.3m +12.6% +8.4%
Market conditions in Finland are in line with prior year. Focused marketing
activity enabled our Mazda Distribution business to increase its market share to
3.3% in the period. Overall the trading profit delivered by Finland increased by
c.70.0% in the period to £2.3m.
The Baltic markets of Estonia, Latvia and Lithuania continue to experience a
significant period of growth, with a combined year to date market increase of
34.5%. Our businesses in these countries outperformed the markets, improving
market share from 5.4% in the first half of 2005 to 6.0% in 2006. This resulted
in trading profits increasing by 97.0%.
Our Balkans businesses in Bulgaria and Romania continue to thrive in the high
growth markets experienced in these countries. The business should benefit in
the second half of the year from the opening in June of our new flagship
facility in Bucharest. In Bulgaria our business improved market share to 9.3%,
and increased vehicle volumes by 28.0%. Overall Balkans trading profit grew by
21.6%.
Our business in Ethiopia continues to achieve strong results. An increase in
vehicle sales and an improvement in spare parts sales generated trading profits
up by 26.9% to £4.1m.
In France, we have decided to focus our operations on the south west region in
the market areas of Bordeaux, Toulouse and Montpellier. We are undertaking a
restructuring programme to exit from non-core businesses.
In Poland the start up of our BMW/MINI operations is slower than anticipated.
This, together with challenging market conditions, has resulted in a trading
loss in the period.
Central costs are £10.4m for the period, £1.4m higher than June 2005. This
increase is primarily due to our investment in new management, systems and
processes to facilitate the next phase of growth for the Group.
Financial review
Cash flow, interest and finance
The Group's tight control of working capital has resulted in a reduction in the
period of £76.9m. This, together with strong operating profits, generated net
cash from operating activities of £142.3m for the first half of 2006. This
represents 129.4% of operating profit and demonstrates the Group's excellent
cash generating capabilities.
During the period the Group returned £63.6m to shareholders, £34.0m by way of
the share buy back programme and £29.6m in respect of the final 2005 dividend.
The Group maintained its policy of investing to improve the quality and
operating standards of its retail centres. Net capital expenditure of £16.3m was
made in the period principally in UK Retail and Romania.
The impressive operating cash flow more than funded the capital expenditure and
acquisitions during the period with the Group strengthening its net cash
position to £189.2m at 30 June 2006. Adjusting for the Lind acquisition which
completed on 4 July 2006 the pro-forma cash position at 30 June was £78.8m.
The net finance charge of £0.6m in the first half of 2006 is £1.8m lower than
June 2005. This improvement has been generated by the strong cash balances held
by the Group during the period. The finance charge also has benefited from an
improvement in notional pension interest income.
In July 2006, the Group extended its syndicated five year revolving credit
facility of £275.0m for a further year. The facility expires on 13 July 2011.
Pensions
In March 2006, in advance of the triennial valuation for two of the Group's UK
defined benefit pension schemes, the Group agreed a funding programme to address
the deficits associated with these schemes. This programme included making a one
off contribution totalling £32.0m to the schemes in March 2006. It is
anticipated that additional contributions of c.£55.0m will be made over the
following five years. These payments together with an increase in long term
interest rates since year end, have significantly reduced the net pension
deficit from £69.4m at 31 December 2005 to £11.0m at 30 June 2006.
Tax
The subsidiaries Headline tax rate for the first half of 2006 is 21.7% compared
to 25.5% for the full year 2005. The reduction benefits from a number of one off
items. These include the satisfactory outcome of a tax audit in Greece,
settlements of UK prior year tax computations and tax allowances exceeding
depreciation in the UK.
In 2006 we have determined that it is now appropriate to recognise a net
deferred tax asset of £11.6m in the UK. This mainly relates to the future
corporate tax deductions associated with payments to the UK defined benefit
pension schemes.
Exceptional items
The exceptional tax credit of £8.0m reflects the favourable settlement in 2006
of the corporation tax treatment of the VAT recovery and associated interest
income received by the Group in 2003 and 2004.
Exchange rates
The first half 2006 operating profit at June 2006 average exchange rates was
£110.0m. If June 2005 exchange rates had prevailed operating profit would have
been £106.2m. The £3.8m exchange difference primarily arose due to the impact of
the weaker Hong Kong and Singapore dollar.
Share split
In May 2006 we carried out a six for one share split. Our equity was trading at
more than £29.00 per share, which is a comparatively high price for shares
traded on the London Stock Exchange. We felt that many shareholders would prefer
to deal at a lower price per share and therefore sub-divided each existing
ordinary share into six new ordinary shares. This further increased liquidity in
the stock.
People
The success of Inchcape is above all else due to the commitment, passion and
dedication of our people. My sincere thanks go to all our employees. I hope
that, like me, they feel proud of what we have been able to achieve together.
Outlook
In the second half we will benefit from our continued focus on customer service,
the introduction of new models, improved vehicle supply and the Lind
acquisition. As a result, although market conditions remain challenging, we are
well placed to deliver another year of growth in 2006.
Peter Johnson
Chairman
2 August 2006
CONSOLDIATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Revenue (note 2) 2,440.6 2,257.0 4,488.1
Cost of sales (2,086.2) (1,937.4) (3,847.4)
Gross profit 354.4 319.6 640.7
Operating expenses before exceptional
items (244.4) (219.5) (451.3)
Exceptional items (note 3) - 4.0 (13.0)
Total operating expenses (244.4) (215.5) (464.3)
Operating profit (note 2) 110.0 104.1 176.4
Share of profit after tax of joint
ventures and associates 2.6 3.1 6.2
Profit before finance and tax 112.6 107.2 182.6
Finance income (note 4) 25.3 21.5 44.7
Finance costs (note 5) (25.9) (23.9) (50.0)
Profit before tax 112.0 104.8 177.3
Tax before exceptional tax - UK 1.1 (0.4) (0.3)
- Overseas (24.8) (24.5) (46.6)
Exceptional tax - UK (note 3) 8.0 - -
Total tax (note 6) (15.7) (24.9) (46.9)
Profit for the period 96.3 79.9 130.4
Attributable to:
- Equity holders of the parent 94.4 77.8 126.6
- Minority interests 1.9 2.1 3.8
96.3 79.9 130.4
Basic earnings per share (pence) (note 7) 20.2p 16.5p 27.0p
Diluted earnings per share (pence) (note 7) 20.1p 16.3p 26.8p
Proposed dividend per share (pence) (note 8) 5.0p 3.2p 6.3p
Paid dividend per share (pence) (note 8) 6.3p 5.8p 9.0p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Cash flow hedges (net of tax) 5.1 0.8 0.6
Fair value (losses) gains on available for
sale financial assets (1.4) 0.5 2.3
Effect of foreign exchange rate changes (20.8) 13.6 30.4
Actuarial gains (losses) on defined benefit
pension schemes (net of tax) 13.8 (3.6) (15.3)
Net (losses) gains recognised directly in
shareholders' equity (3.3) 11.3 18.0
Profit for the period 96.3 79.9 130.4
Total recognised income and expense for the
period 93.0 91.2 148.4
Attributable to:
- Equity holders of the parent 91.4 89.0 144.2
- Minority interests 1.6 2.2 4.2
93.0 91.2 148.4
Adoption of IAS 32 and IAS 39 - (4.5) (4.5)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT 30 JUNE 2006
As at As at As at
30.6.06 30.6.05 31.12.05
£m £m £m
Non-current assets
Intangible assets 74.2 88.4 69.5
Property, plant and equipment 354.4 337.0 346.7
Investments in joint ventures and
associates 44.4 47.6 44.7
Available for sale financial assets 12.5 11.9 15.0
Trade and other receivables 21.5 22.8 22.4
Deferred tax assets 35.4 21.4 23.4
542.4 529.1 521.7
Current assets
Inventories 536.1 541.5 615.8
Trade and other receivables 222.0 226.3 221.1
Available for sale financial assets 2.8 2.3 2.4
Derivative financial instruments - - 2.1
Current tax assets 3.2 1.6 1.0
Cash and cash equivalents 348.7 262.3 309.0
1,112.8 1,034.0 1,151.4
Total assets 1,655.2 1,563.1 1,673.1
Current liabilities
Trade and other payables (696.0) (645.4) (688.2)
Derivative financial instruments (2.3) (12.7) (12.6)
Current tax liabilities (39.0) (41.9) (43.8)
Provisions (22.3) (27.2) (22.5)
Borrowings (152.9) (137.1) (145.4)
(912.5) (864.3) (912.5)
Non-current liabilities
Trade and other payables (38.6) (36.2) (45.3)
Provisions (35.1) (33.7) (35.6)
Deferred tax liabilities (13.4) (17.2) (13.5)
Borrowings (6.6) (5.4) (5.6)
Retirement benefit liability (11.0) (60.6) (69.4)
(104.7) (153.1) (169.4)
Total liabilities (1,017.2) (1,017.4) (1,081.9)
Net assets 638.0 545.7 591.2
Shareholders' equity
Share capital 120.3 119.8 120.1
Share premium 113.4 111.6 112.5
Capital redemption reserve 16.4 16.4 16.4
Other reserves (3.8) (5.0) 13.1
Retained earnings 385.1 293.8 319.6
Equity attributable to equity holders of
the parent 631.4 536.6 581.7
Minority interests 6.6 9.1 9.5
Total shareholders' equity 638.0 545.7 591.2
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Cash generated from operating activities
Cash generated from operations (note 9a) 169.8 114.8 195.4
Tax paid (26.5) (30.9) (51.4)
Interest received 6.2 8.5 13.9
Interest paid (7.2) (7.4) (16.8)
Net cash generated from operating
activities 142.3 85.0 141.1
Cash flows from investing activities
Acquisition of businesses, net of cash and
overdrafts acquired (17.7) (28.5) (29.9)
Net cash inflow (outflow) from sale of
businesses 0.2 (5.5) (5.5)
Purchase of property, plant and equipment (18.6) (39.3) (63.5)
Purchase of intangible assets (0.7) (0.8) (2.2)
Proceeds from disposal of property, plant
and equipment 3.0 5.0 17.6
Net disposal (purchase) of available for
sale financial assets 1.1 0.9 (0.5)
Dividends received from joint ventures and
associates 0.8 1.2 9.7
Net cash used in investing activities (31.9) (67.0) (74.3)
Cash flows from financing activities
Proceeds from issue of ordinary shares 1.1 1.2 2.4
Share buy back programme (34.0) (31.0) (31.0)
Net (purchase) disposal of own shares by
ESOP Trust (0.5) 1.0 0.1
Net cash outflow from borrowings (2.2) (2.7) (2.3)
Payment of capital element of finance leases (0.2) (0.2) (0.2)
Equity dividends paid (29.6) (27.2) (42.0)
Minority dividends paid (3.7) (1.8) (3.0)
Net cash used in financing activities (69.1) (60.7) (76.0)
Net increase (decrease) in cash and cash 41.3 (42.7) (9.2)
equivalents (note 9b)
Cash and cash equivalents at beginning of
the period 165.9 158.8 158.8
Effect of foreign exchange rate changes (10.5) 10.8 16.3
Cash and cash equivalents at end of the
period 196.7 126.9 165.9
Cash and cash equivalents consist of:
- Cash and cash equivalents 348.7 262.3 309.0
- Bank overdrafts (152.0) (135.4) (143.1)
196.7 126.9 165.9
NOTES TO THE ACCOUNTS (UNAUDITED)
1 BASIS OF PREPARATION
The results for the periods to 30 June have been prepared on the basis of the
accounting policies set out in the Annual report and accounts 2005, which were
prepared in accordance with International Financial Reporting Standards (IFRS)
and International Financial Reporting Interpretations Committee (IFRIC)
interpretations as adopted by the European Union and implemented in the UK and
with the parts of the Companies Act 1985 applicable to companies reporting under
IFRS.
The Group adopted IAS 32 Financial Instruments: Disclosure and Presentation and
IAS 39 Financial Instruments: Recognition and Measurement with effect from
1 January 2005. This decreased shareholders' equity by £4.5m at 1 January 2005.
These interim financial statements are unaudited but have been reviewed by the
external auditors. They do not constitute statutory accounts within the meaning
of Section 240 of the Companies Act 1985. The Group's published financial
statements for the year ended 31 December 2005 have been reported on by the
Group's auditors and filed with the Registrar of Companies. The report of the
auditors was unqualified and did not contain a statement under Section 237 (2)
or (3) of the Companies Act 1985.
The principal exchange rates used for translation purposes are as follows:
Average rates Period end rates
30.6.06 30.6.05 31.12.05 30.6.06 30.6.05 31.12.05
Australian
dollar 2.40 2.42 2.38 2.49 2.35 2.34
Euro 1.45 1.45 1.46 1.45 1.48 1.46
Hong Kong
dollar 13.84 14.62 14.16 14.37 13.93 13.31
Singapore
dollar 2.87 3.09 3.02 2.92 3.02 2.85
2 SEGMENTAL ANALYSIS
The Group's primary reporting format is by geographical segments.
Revenue
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Australia 335.3 312.4 612.7
Belgium 300.3 257.5 450.8
Greece 187.6 156.8 300.4
Hong Kong 106.0 114.4 242.3
Singapore 358.2 366.3 719.6
UK 783.0 744.1 1,530.3
Other 370.2 305.5 632.0
2,440.6 2,257.0 4,488.1
Operating profit before
exceptional items Exceptional items
Six months Six months Year to Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05 to 30.6.06 to 30.6.05 31.12.05
£m £m £m £m £m £m
Australia 18.8 16.1 31.9 - - -
Belgium 9.2 8.3 14.0 - - -
Greece 9.2 7.8 13.8 - - -
Hong Kong 10.1 13.0 28.8 - - -
Singapore 33.8 34.6 62.1 - - -
UK 23.2 15.0 29.2 - - (19.5)
Other 16.1 14.3 28.4 - - -
120.4 109.1 208.2 - - (19.5)
Central costs (10.4) (9.0) (18.8) - 4.0 6.5
110.0 100.1 189.4 - 4.0 (13.0)
Operating profit after
exceptional items
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Australia 18.8 16.1 31.9
Belgium 9.2 8.3 14.0
Greece 9.2 7.8 13.8
Hong Kong 10.1 13.0 28.8
Singapore 33.8 34.6 62.1
UK 23.2 15.0 9.7
Other 16.1 14.3 28.4
120.4 109.1 188.7
Central costs (10.4) (5.0) (12.3)
110.0 104.1 176.4
Share of results of joint ventures and associates
The Group's share of the results of joint ventures and associates of £2.6m for
the six months ended 30 June 2006 (£3.1m for the six months ended 30 June 2005;
£6.2m for the year ended 31 December 2005) arises in Hong Kong (£1.3m), the UK
(£0.4m), Greece (£0.4m), Belgium (£0.4m) and Other (£0.1m).
3 EXCEPTIONAL ITEMS
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Provision release arising from non-motors
business exits - 4.0 6.5
Goodwill impairment - - (19.5)
Operating exceptional items - 4.0 (13.0)
Exceptional tax (note 6) 8.0 - -
Total exceptional items 8.0 4.0 (13.0)
Exceptional tax relates to the release of tax provided against the VAT
recoveries in 2003 and 2004 following the favourable settlement of the
corporation tax treatment.
4 FINANCE INCOME
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Bank interest receivable 4.9 2.8 6.5
Expected return on post retirement plan
assets 19.0 16.6 33.8
Other interest receivable 1.4 2.1 4.4
Total finance income 25.3 21.5 44.7
5 FINANCE COSTS
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Bank interest payable 1.9 0.8 2.8
Stock holding interest 4.8 4.4 8.7
Interest expense on post retirement plan
liabilities 17.8 16.7 33.4
Other interest payable 1.4 2.0 5.1
Total finance costs 25.9 23.9 50.0
6 TAX
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Current tax - UK 6.1 0.9 1.3
- Overseas 24.9 24.6 46.2
31.0 25.5 47.5
Deferred tax - UK (7.2) (0.5) (1.0)
- Overseas (0.1) (0.1) 0.4
Tax before exceptional tax 23.7 24.9 46.9
Exceptional tax (note 3) (8.0) - -
Total tax 15.7 24.9 46.9
7 EARNINGS PER SHARE
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Profit for the period 96.3 79.9 130.4
Minority interests (1.9) (2.1) (3.8)
Basic earnings 94.4 77.8 126.6
Exceptional items (including tax
exceptional) (8.0) (4.0) 13.0
Headline earnings 86.4 73.8 139.6
Basic earnings per share 20.2p 16.5p 27.0p
Diluted earnings per share 20.1p 16.3p 26.8p
Basic Headline earnings per share 18.5p 15.7p 29.8p
Diluted Headline earnings per share 18.4p 15.5p 29.5p
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
number number number
Weighted average number of fully
paid ordinary shares in issue during
the period 480,326,644 478,355,682 479,060,496
Weighted average number of fully
paid ordinary shares in issue during
the period:
- Held by the ESOP Trust (2,631,921) (3,759,366) (3,115,806)
- Repurchased as part of the share
buy back programme (11,102,862) (3,224,358) (6,684,408)
Weighted average number of fully
paid ordinary shares for the purposes
of basic EPS 466,591,861 471,371,958 469,260,282
Dilutive effect of potential
ordinary shares 4,001,925 5,596,692 3,624,888
Adjusted weighted average number of
fully paid ordinary shares in issue
during the period for the purposes
of diluted EPS 470,593,786 476,968,650 472,885,170
Following the six for one share split on 15 May 2006, the comparative number of
shares have been restated and the earnings per share recalculated accordingly.
Basic earnings per share is calculated by dividing the basic earnings for the
period by the weighted average number of fully paid ordinary shares in issue
during the period, less those shares held by the ESOP Trust and those
repurchased as part of the share buy back programme.
Diluted earnings per share is calculated on the same basis as the basic earnings
per share with a further adjustment to the weighted average number of fully paid
ordinary shares to reflect the effect of all dilutive potential ordinary shares.
Dilutive potential ordinary shares comprise share options and deferred bonus
plan awards.
Headline earnings (which excludes exceptional items) is adopted to assist the
reader in understanding the underlying performance of the Group. Headline
earnings per share is calculated by dividing the Headline earnings for the
period by the weighted average number of fully paid ordinary shares in issue
during the period, less those shares held by the ESOP Trust and those
repurchased as part of the share buy back programme.
Diluted Headline earnings per share is calculated on the same basis as the basic
Headline earnings per share with a further adjustment to the weighted average
number of fully paid ordinary shares to reflect the effect of all dilutive
potential ordinary shares. Dilutive potential ordinary shares comprise share
options and deferred bonus plan awards.
8 SHAREHOLDERS' EQUITY
Share buy back programme
The Group repurchased 7,792,578 of shares for £34.0m during the six months ended
30 June 2006 (10,088,028 for £31.0m for the six months ended 30 June 2005 and
the year ended 31 December 2005) in relation to its share buy back programme.
Issue of ordinary shares
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Share capital 0.2 0.3 0.6
Share premium 0.9 0.9 1.8
1.1 1.2 2.4
Share split
On 15 May 2006, the Group effected a six for one share split reducing the
nominal value of the Group's ordinary share capital from 150.0p per share to
25.0p per share and increasing the number of authorised ordinary shares from
131,000,000 to 786,000,000.
Dividends
The following dividends were paid by the Group:
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Interim dividend for the six months
ended 30 June 2005 of 3.2p per share - - 14.8
Final dividend for the year ended 31
December 2005 of 6.3p per share
(2004 - 5.8p per share) 29.6 27.2 27.2
29.6 27.2 42.0
The interim dividend for the six months ended 30 June 2006 of 5.0p per share
(£23.0m) was approved by the Board on 2 August 2006 and has not been included
as a liability as at 30 June 2006.
Following the six for one share split carried out during the period, comparative
dividends per share have been restated accordingly.
9 NOTES TO THE CASH FLOW STATEMENT
a Reconciliation of cash generated from operations
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Cash flows from operating activities
Operating profit 110.0 104.1 176.4
Exceptional items - (4.0) 13.0
Amortisation 1.5 1.6 3.2
Depreciation 11.0 11.7 22.8
Loss (profit) on disposal of property,
plant and equipment 0.1 (1.1) (2.1)
Share-based payments charge 1.7 1.9 2.9
Decrease (increase) in inventories 79.0 51.2 (15.7)
Increase in trade and other receivables (1.6) (24.9) (15.2)
(Decrease) increase in trade and other
payables (0.5) (24.8) 13.6
Increase (decrease) in provisions 0.2 (2.4) (3.8)
Decrease in post retirement defined
benefits* (33.7) (2.1) (4.8)
Increase in vehicles subject to residual
value commitments 2.9 4.3 4.5
Other items (0.8) (0.7) 0.6
Cash generated from operations 169.8 114.8 195.4
* The decrease in post retirement defined benefits in 2006 includes one-off
payments of £32.0m.
A number of minor amendments have been made to the presentation of cash flows
from operating activities, the principal changes being the separate disclosure
of movements in provisions and post retirement defined benefits. Comparative
information has been restated accordingly for the period ended 30 June 2005 and
the year ended 31 December 2005.
b Reconciliation of net cash flow to movement in net funds
Six months Six months Year to
to 30.6.06 to 30.6.05 31.12.05
£m £m £m
Net increase (decrease) in cash and cash
equivalents 41.3 (42.7) (9.2)
Net cash outflow from borrowings and lease
financing 2.4 2.9 2.5
Change in net cash and debt resulting from
cash flows 43.7 (39.8) (6.7)
Effect of foreign exchange rate changes on
net cash and debt (10.5) 10.8 16.3
Net loans and finance leases relating to
acquisitions (2.0) (4.0) (4.4)
Movement in net funds 31.2 (33.0) 5.2
Opening net funds 158.0 151.9 151.9
Adoption of IAS 32 and IAS 39 - 0.9 0.9
Closing net funds 189.2 119.8 158.0
10 POST BALANCE SHEET EVENTS
On 4 July 2006, the Group completed its acquisition of 100.0% of the equity of
Lind Automotive Group Holdings and associated UK properties for a total
consideration (including debt assumed) of £110.4m.
INDEPENDENT REVIEW REPORT TO INCHCAPE PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the consolidated income
statement, the consolidated statement of recognised income and expense, the
consolidated balance sheet, the consolidated cash flow statement and the
related notes to the accounts. We have read the other information contained in
the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes,
and the reasons for them, are disclosed.
The interim report has been prepared in accordance with the basis set out in
Note 1.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom.
A review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the disclosed accounting
policies have been applied. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit and therefore provides a lower level
of assurance. Accordingly we do not express an audit opinion on the financial
information. This report, including the conclusion, has been prepared for and
only for the company for the purpose of the Listing Rules of the Financial
Services Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
PricewaterhouseCoopers LLP
Chartered Accountants
London
2 August 2006
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