Interim Results

Lookers PLC 05 September 2005 5 September 2005 LOOKERS PLC UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2005 Lookers plc, a leading UK motor retail group, announces another record set of results for the half-year ended 30 June 2005. HIGHLIGHTS Financial • Turnover up 12% to £648.1 million (2004: £576.4 million) • Operating profit pre amortisation and exceptional items up 27% at £15.0 million (2004: £11.8m) • Profit before amortisation, exceptional items and tax up 21% at £11.1 million (2004: £9.2 million) • Adjusted earnings per share excluding exceptional items up 10% at 22.3p (2004: 20.3p), • Total exceptional credits of £2.4 million (2004: £16.8 million) • Profit on ordinary activities before tax at £13.1million (2004: £25.9 million) • Basic earnings per share at 26.2p • Interim dividend up 19% to 4.75p Operational • New car sales on a like for like basis down 3.5% for the first half against a market down 5.8%, with an improving trend in the second quarter • Used Car sales up 25% and on a like for like basis up 4.7%, against strong prior year comparatives • Overall Group underlying operating profit margin up 15% from 2.0% to 2.3%. • Acquisition of used car supermarkets Bristol Trade Centre and Ian Shipton Cars, both of which are exceeding expectations • Since the period end expanded with PAG in Scotland and with Vauxhall in the North West Commenting on the prospects for the Group, Ken Surgenor, Chief Executive, said: 'Whilst we have been operating in a more subdued new car retail market , our strategy of having a diverse network of franchises representing both prestige and volume manufacturers with a wide geographical spread, together with our recently acquired parts distribution and Used Car Supermarket businesses, has combined to strengthen our revenue streams enabling us to again improve the quality and quantity of earnings in the first half . This broad based model provides the Group with a solid business platform to continue to improve profitability and support future growth'. An analyst meeting will be held at 9.30am, followed by a press briefing at 12.15pm, on 5 September 2005 at the offices of Hudson Sandler, 29 Cloth Fair, London EC1A 7NN. Please contact Rebecca Ghent or James Hill on 020 7796 4133 for further details or to confirm attendance. Enquiries: Ken Surgenor, Chief Executive ) Telephone: 020 7796 4133 David Dyson, Finance Director ) (on Monday 5 September only) and on 0161 291 0043 (thereafter) Nick Lyon / James Hill Telephone: 020 7796 4133 Hudson Sandler High resolution photographs will be available to media at www.vismedia.co.uk from 12.30pm. Notes to editors: Lookers plc, headquartered in Stretford, Manchester, is one of the UK's leading multi-franchise motor retail groups. It operates over 80 franchised outlets and 36 vehicle servicing and parts sales facilities across the UK. It also owns Charles Hurst, the largest motor dealer in Northern Ireland. Lookers represents 22 marques, roughly equally split between volume (12) and prestige (10). The Group specialises in new and used car sales, as well as servicing and parts distribution. For further information on Lookers, including all its outlets in the UK and the franchises it represents, please visit its website at www.lookers.co.uk. CHIEF EXECUTIVE'S REVIEW OVERVIEW Lookers has performed well in the first six months of the year, achieving record profit and revenue growth. Our aftersales and used car operations have continued to exceed expectations and more than compensated for the decline in new retail sales. In line with our stated strategy, we continued to strengthen our revenue streams from the automotive industry by acquiring two significant stand-alone used car supermarkets in the Midlands (Ian Shipton Cars) and the South West (Bristol Trade Centre). In addition, since the period end we have expanded with selected manufacturing partners in market areas where we already have scale by acquiring PLP Motors in the North West and Murray Motors Volvo in the Glasgow and Lanarkshire areas. RESULTS AND DIVIDEND Lookers has once again delivered impressive sales and profit growth against the same period last year, with turnover up 12% to £648.1 million (2004: £576.4 million). Profit before amortisation of intangibles, exceptional items and tax was up 21% at £11.1 million (2004: £9.2 million), generating adjusted earnings per share of 22.3p (2004: 20.3p) - an increase of 10%. Operating profit pre amortisation of intangibles and exceptional items increased 27% at £15.0 million (2004: £11.8 million). Profit on ordinary activities before tax was £13.1 million, compared with £25.9 million in 2004. Total exceptional items in 2005 represent a credit of £2.4 million (2004: credit of £16.8 million) and in both periods, principally relates to VAT repayments together with the associated interest. Despite the more competitive market environment, we have improved the overall Group underlying operating profit margin from 2.0% to 2.3%, reflecting the increased contribution from used cars and aftersales. Working capital remains tightly controlled, resulting in a healthy increase in our operating cash flow before exceptional interest for the period from £16.6 million in 2004 to £19.7 million. The Group has invested over £21 million on acquisitions and over £8 million on additional franchise facilities in the first half, which has combined to increase the gearing from 69% at 31 December 2004 to 80% at 30 June 2005. The remainder of the Group's surplus properties have now been sold and these realised a profit of approximately £0.4 million in the period. These results are the first produced under International Financial Reporting Standards (IFRS), with the 2004 comparatives as published on 9 August 2005. Dividend The Board is proposing an interim dividend of 4.75p, against 4.0p last year, representing a 19% increase. This will be paid on 30 November 2005 to shareholders on the register on 23 September 2005. As previously stated in our interim announcement last year, given the level of profit earned in the first half of the year, the Board intends to move nearer to a 45% and 55% dividend split for the interim and final stage respectively. OPERATING REVIEW Trading environment Our new car franchised network comprises 84 outlets across the UK. Overall, new car sales were down 3.5%, against a market down 5.8% for new car registrations. Fleet sales were up 17%, significantly ahead of the market. Sales in the first quarter were more in line with those achieved in 2003, although sales progressively improved during the second quarter, tracking an upward trend in the overall market. Additionally, our used car sales performance has risen by 25%, and 4.7% on a like for like basis on what was a strong performance in 2004. The industry forecast for 2005 is for an annual new car market at 2.45 million, down 4.6% on 2004. Current forecasts are therefore factoring in an improvement in the second half of this year, which contrasts with the declining trend from quarter to quarter in 2004. Sales of new cars now account for 48% of turnover, and 28% of gross profit. The gross profit contribution from used car operations is now 19%, with aftersales now representing 53%. Whilst the new car market is undoubtedly more challenging, we believe our business is well positioned for growth given our high exposure to the aftersales market through our franchised network and our aftermarket network trading as FPS, as well as our increasing focus on used cars, which traditionally is three times the size of the new car market. Used Car Supermarkets In the first half of the year we made a number of acquisitions to strengthen the business and improve earnings. In January 2005 we acquired Bristol Trade Centre ('BTC'), a leading used car supermarket, and the largest in the South West of England. This business gave Lookers a significant presence in the used car supermarket sector and is in line with our stated strategy of broadening our revenue streams in the automotive industry. We complemented this deal in May by acquiring Ian Shipton Cars ('IS Cars'), a leading used car supermarket in Burton upon Trent. Our existing management were able very quickly to integrate this business and significantly improve its performance. Together the businesses should add £85 million to turnover on an annualised basis and have been earnings enhancing from the outset. BTC, a four-acre site in St George, Bristol sells around 4,000 used cars a year. The performance of the business since we acquired it has been exceptional. IS Cars, which operates on a five acre site, currently sells around 7,000 cars a year. As part of the original transaction, the site has a further two and a half acres available for development. Once again, it has performed ahead of expectations. Both businesses have made a strong contribution to operating profits during our period of ownership and a number of synergies have been established with the supply of used cars from our franchised network. North of England Our strategy for growth over the last few years has included expansion with preferred manufacturing partners in, or adjacent to, existing market areas where we have scale. With this in mind, in July 2005 we acquired PLP Motors Limited in the North West. This business consists of Vauxhall dealerships in Warrington and Widnes, as well as a Chevrolet, Saab service centre and bodyshop in Warrington. This business increases Lookers' Vauxhall outlets in the UK to 16 and will result in additional annual sales of Vauxhall units of approximately 2,000. In the North West, we now have the largest market area for Vauxhall of any motor retailer. We are confident that further operational efficiencies in parts, fleet, marketing and administration can be realised with PLP Vauxhall. Despite the falling market, Vauxhall sales nationally were on a par with last year in the first half and Lookers' like for like volumes mirrored this, with a particularly robust performance being achieved in the North of England and in the Birmingham market area. Sales at our Vauxhall Brand Centre on Star Park, Star City, opened in June 2004, have improved steadily over the course of the last twelve months and we would expect the sales and aftersales momentum to continue as the Brand Centre establishes itself as the leading retail offering in the area. A number of new exciting Vauxhall models are now coming on stream, with the recently launched Zafira, and the new Vectra and VXR Astra due out in September of this year. This healthy pipeline of new models gives us confidence that we will achieve another strong performance in the year ahead with Vauxhall. PLP also gives Lookers its first Chevrolet outlet in the UK and a Saab service centre ideally positioned to support our existing Saab operations in Liverpool and Chester. We have identified further possible Chevrolet opportunities in the North West of England within our existing market territory which we hope to announce in due course. Northern Ireland and Scotland Lookers trades under the Charles Hurst brand in Northern Ireland and Taggarts in Scotland. Charles Hurst continues to dominate the Northern Ireland market, with sales in the business up over 3% on the prior year. A significant investment in franchised facilities has been undertaken on our twenty acre Boucher Road site in Belfast during the first half of the year. Chrysler Jeep has been relocated from leased premises in Belfast and Lisburn to the main site on Boucher Road; Citroen has been relocated on the site enabling Toyota to move onto the main site for the first time, adjacent to our existing Lexus outlet. A new Vauxhall facility is scheduled for completion on Boucher Road close to our main site by September of this year. The changes to the site have been carefully managed to avoid major disruption and protect profitability. From September 2005 our MG Rover facility has been refranchised with Hyundai, our second Hyundai dealership in the region. Since the period end we have strengthened our Taggarts business in Scotland by acquiring Murray Motors Volvo in Glasgow and Hamilton. These represent our first Volvo outlets in Scotland and bring the total in the Group to four. This acquisition complements our existing Premier Automotive Group (PAG) businesses in the Glasgow and Lanarkshire market areas and reinforces our offering of prestige brands. Initially we will continue to operate short-term rentals in their existing locations. However, these dealerships will be relocated to our PAG facilities in Glasgow and Motherwell during 2006. We anticipate that these businesses will initially operate at break even but will contribute positively to earnings when they have been relocated and we then look forward to realising further economies of scale in the region. We will then represent PAG with Jaguar, Land Rover, and Volvo in Motherwell and with Jaguar and Volvo for the whole of Glasgow. South of England Trading in the South of England has been the most challenging area for the Group. Whilst sales volumes have held up well, profitability has suffered due to margin pressures. However, our PAG businesses in the region (Volvo and Land Rover) have continued to perform strongly, despite volumes being marginally below last year, following the introduction of, the all new Range Rover Sport and new model year Range Rover. The forward orders of these new models already takes us to the end of the current financial year. Parts Distribution - FPS In August 2004 Lookers completed the acquisition of FPS Distribution Limited, the UK's leading wholesale distributor of vehicle parts to the automotive market. The business performed strongly in the first half, achieving sales and profit growth beyond last year and slightly ahead of our own aggressive budget for this year. All the existing management were retained and are focussed to continue to grow the quality and quantity of earnings in this business. We are planning to double the warehouse capacity in Sheffield in 2006 and this will enable us to significantly increase the volume of distribution business we can undertake at little incremental cost. Agriculture Platts Harris, our agricultural vehicle and parts business, which now operates from just two locations in Darley Dale and Tuxford, continues to benefit from a much reduced and rationalised working capital base and a more focussed management team. BOARD A number of changes have been made to the Board in the first six months. Graham J Morris stepped down as a non-executive Director at the conclusion of the Annual General Meeting of the Company in May 2005, after serving six years as a Board member. He was replaced by John Brown, currently the Chairman of Voller Energy Plc and previously the Chief Executive of Speedy Hire Plc. I would like to take this opportunity to welcome John to the Board and we are confident his wide-ranging experience will prove invaluable to Lookers in the future. CURRENT TRADING AND PROSPECTS Trading since the period end has remained in line with expectations. New car sales on a like for like basis have improved slightly on our first half performance, supported by ongoing strong fleet sales, whilst the order intake for September, normally a strong retail month, is encouraging. FPS has continued to perform ahead of expectations in July and August, and we are finding that the aftersales market has not been affected by reductions in consumer spending. Equally, we have experienced strong performances in our used car supermarkets in these months. Nevertheless, it is prudent to be cautious given weak consumer confidence. Whilst we have been able to absorb the downturn in the new car market without it having an adverse impact on profitability, this has been due to the strengthening of our used car and aftersales businesses over the last twelve months. However, following the recent cut in interest rates, this should help to begin to stimulate retail demand. As we have previously stated, our unstinting focus on broadening the revenue streams from the automotive industry by building up our used car and aftersales capability, means that a significant proportion of gross profits are no longer directly related to the new car market. The excellent half-year performance has been driven by the benefits we derive from our diverse franchise mix, our strong focus on aftersales and our wide geographical coverage. Additionally, we are enjoying the rewards of our previously stated strategy of broadening our business base through strengthening our franchise portfolio and increasing the contribution from our parts and used car operations. This has allowed us to overcome a more challenging market for new cars, particularly in the retail sector. We are therefore confident that we are in a strong position to achieve our full year objectives. Ken Surgenor Chief Executive 5 September 2005 The Directors announce the following unaudited results and the interim statement of the Group for the half-year ended 30 June 2005 Consolidated Income Statement (Summarised) Half-year Half-year Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £000 £000 £000 Revenue 648,142 576,430 1,093,752 Operating profit before amortisation and exceptional items 14,995 11,823 20,268 Amortisation of intangible assets (287) - (162) Exceptional items 564 7,750 4,054 Profit from operations 15,272 19,573 24,160 Interest costs (3,937) (2,672) (6,177) Exceptional interest income on VAT refund 1,798 9,000 8,400 _______ ______ ______ Profit on ordinary activities before amortisation and 11,058 9,151 14,091 exceptional items (287) - (162) Amortisation of intangible assets 2,362 16,750 12,454 Total exceptional items Profit on ordinary activities before taxation 13,133 25,901 26,383 Taxation 3,874 7,040 7,068 _______ _______ _______ Profit for the period 9,259 18,861 19,315 _______ _______ _______ Basic earnings per ordinary share 26.2p 53.8p 55.0p ====== ====== ====== Diluted earnings per ordinary share 26.1p 53.4p 54.8p ====== ====== ====== Adjusted basic earnings per ordinary share 22.3p 20.3p 30.5p ====== ====== ====== Ordinary dividend per share - paid in period 8.10p 7.70p 11.70p ====== ====== ====== - proposed 4.75p 4.00p 8.10p ====== ====== ====== Consolidated Statement of Recognised Income and Expense Half-year Half-year Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £000 £000 £000 Actuarial losses recognised in post retirement benefit scheme - (280) (4,598) Taxation thereon - 84 1,379 ______ ______ ______ Net losses recognised directly in equity - (196) (3,219) Profit for the financial period 9,259 18,861 19,315 ______ ______ ______ Total recognised income and expense for the period 9,259 18,665 16,096 ===== ===== ===== Consolidated Balance Sheet (Summarised) 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 NON-CURRENT ASSETS Goodwill 18,413 10,612 15,190 Other intangible assets 14,644 - 13,454 Property, plant and equipment 122,708 103,645 106,205 Deferred tax asset 5,415 4,670 6,095 ______ ______ ______ 161,180 118,927 140,944 ______ ______ ______ CURRENT ASSETS Inventories 166,239 97,168 140,410 Trade and other receivables 82,230 78,331 52,193 Cash and cash equivalents 2,681 28 2,514 _______ _______ ______ 251,150 175,527 195,117 _______ _______ ______ Non current assets classified as held for resale - 7,192 1,792 _______ _______ ______ TOTAL ASSETS 412,330 301,646 337,853 ====== ====== ====== CURRENT LIABILITIES Bank loans and overdrafts 19,749 26,350 16,637 Trade and other payables 209,191 134,365 156,720 Tax liabilities and short term provisions 10,274 8,057 9,470 ________ ________ _______ 239,214 168,772 182,827 ======= ====== ====== NET CURRENT ASSETS 11,936 13,947 14,082 _______ _______ ______ NON CURRENT LIABILITIES Bank loans 56,218 27,139 43,700 Retirement benefit obligations 18,051 13,900 18,051 Deferred taxation and long term provisions 7,350 4,031 9,047 ______ ______ ______ 81,619 45,070 70,798 ====== ===== ====== TOTAL LIABILITIES 320,833 213,842 253,625 ====== ===== ====== NET ASSETS 91,497 87,804 84,228 ====== ====== ===== Total Borrowings 73,286 53,461 57,823 ====== ====== ====== Gearing 80% 61% 69% ====== ====== ====== Consolidated Cashflow Statement (Summarised) Half-year Half-year Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Cash generated from operations Net profit 9,259 18,861 19,315 Adjustments for tax 3,875 7,040 7,068 Adjustments for depreciation 2,376 1,936 4,117 Profit on disposal of property, plant and equipment (434) (4) (401) (Profit)/loss on disposal/termination of businesses (944) - 3,425 Amortisation of intangibles 287 - 162 Interest on VAT (1,798) (9,000) (8,400) Interest expense 3,937 2,672 6,177 Changes in working capital (excluding effects of acquisitions and disposal of subsidiaries) (Increase)/decrease in inventories (19,590) 295 (24,596) (Increase)/decrease in trade and other receivables (30,037) (29,104) 3,068 Increase in payables 52,808 23,873 31,465 Decrease in pensions - - (118) ______ _____ _____ Cash generated from operations 19,739 16,569 41,282 Tax paid (3,585) (635) (2,372) Interest paid (4,273) (2,693) (5,660) Exceptional interest received on VAT refund 1,798 - 8,400 _____ _____ _____ Net cash from operating activities 13,679 13,241 41,650 Cashflows from investing activities Acquisition of subsidiaries (21,550) (7) (34,892) Purchase of property, plant and equipment (8,393) (5,319) (11,915) Proceeds from sale of property, plant and equipment 2,791 409 9,596 Proceeds from sale of business - - 789 ______ ______ ______ Net cash used by investing activities (27,152) (4,917) (36,422) Cashflows from financing activities Proceeds from issue of ordinary shares 42 - 332 Repayment of loans (4,370) (4,568) (17,033) New loans 20,000 - 30,000 Dividends paid to group shareholders (2,032) (2,501) (3,890) Net cash from financing activities 13,640 (7,069) 9,409 Increase in cash and cash equivalents 167 1,255 14,637 Cash and cash equivalents at the beginning of the period 2,514 (12,123) (12,123) _____ ______ ______ Cash and cash equivalents at the end of the period 2,681 (10,868) 2,514 ==== ====== ====== Notes 1. Basis of Preparation The interim financial information has been prepared under International Financial Reporting Standards (IFRS) issued by the IASB and as endorsed by the European Commission (EC) with the exception of IAS19 (revised) - adopted by the Group but not yet endorsed by the EC and IAS34 (not yet mandatory). As a result, the comparative figures to 30 June and 31 December 2004 have been restated. Further information in relation to the Standards adopted by the Group and its accounting policies are available on the Group's website www.lookers.co.uk. The information for the year ended 31 December 2004 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year have been delivered to the Register of Companies. The auditors' report on those accounts under UK GAAP was unqualified. 2. Dividends Ordinary shares of 25p The interim dividend proposed at the rate of 4.75p per share (2004 - 4.0p per share) is payable on 30 November 2005 to shareholders on the register at the close of business on 23 September 2005. 3. Exceptional items Half-year Half-year Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Exceptional item - VAT 174 7,750 7,248 Loss on termination of businesses (3) - (3,425) Profit on disposal of properties 393 - 231 ____ ____ ____ 564 7,750 4,054 ==== ==== ==== Exceptional interest income on VAT refund 1,798 9,000 8,400 ==== ==== ==== 4. Interests costs Half-year Half-year Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Bank interest payable 2,700 1,722 4,374 Bank interest receivable (33) - (306) Hire purchase agreements 7 416 151 Interest on consignment vehicles 1,263 534 1,958 ____ ____ ____ 3,937 2,672 6,177 ==== ==== ==== 5. Earnings per share The calculation of earnings per ordinary share is based on profits on ordinary activities after taxation amounting to £9,259,000 (2004 : £18,861,000) and a weighted average of 35,413,850 ordinary shares in issue during the period (2004 : 35,038,900) The diluted earnings per share is based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 47,134 (2004 : 277,058). The diluted earnings per share is 26.1p (2004 : 53.4p). Adjusted earnings per share is stated before amortisation of intangible assets, loss on disposal/termination of businesses and the profit on disposal of properties and exceptional VAT credits and is calculated on profits of £7,893,000 (2004: £7,136,000) for the period. 30 June 2005 30 June 2004 31 December 2004 Earnings Earnings Earnings Earnings Earnings Earnings per £000 per share £000 per share £000 share p p p Earnings attributable to ordinary shareholders 9,259 26.2 18,861 53.8 19,315 55.0 Amortisation of intangible assets 287 0.8 - - 162 0.1 Loss on disposal/ termination of businesses 3 - - - 3,425 9.7 Tax thereon (1) - - - (946) (2.7) Profit on disposal of properties (393) (1.1) - - (231) (0.7) Tax thereon 118 0.3 - - 69 0.2 Exceptional VAT credits (1,972) (5.6) (16,750) (47.8) (15,648) (44.5) Tax thereon 592 1.7 5,025 14.3 4,694 13.4 Adjusted 7,893 22.3 7,136 20.3 10,840 30.5 6. Taxation The tax charge for the period has been provided at the rate of 29.5%. Tax on the exceptional VAT credit has been provided at the rate of 30%. 7. On 28 January 2005 the Group acquired the trade and assets of Bristol Trade Centre for cash consideration of £8.5million. On 11 May 2005 the Group acquired the trade and assets of Ian Shipton Cars for cash consideration of £12.0million. Subsequent to the half year end, on 31 July 2005 the Group acquired PLP Motors Ltd for cash consideration of £3.2million and on 1 September 2005 the trade and certain assets of Murray Motors for a cash consideration of approximately £1.2 million. 8. Interim Statement The interim announcement was approved by the Board and posted to shareholders today. Copies are also available to the public at the registered office of the company at 776 Chester Road, Stretford, Manchester M32 OQHand on the Group's website www.lookers.co.uk This information is provided by RNS The company news service from the London Stock Exchange

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