Preliminary Results

RNS Number : 5951C

Lookers PLC

09 March 2011

 



9 March 2011

LOOKERS plc

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

Lookers plc, a leading UK motor retail group, announces its results for the year ended 31 December 2010

Commenting on the results, Lookers Chief Executive Peter Jones said:

"We are pleased to announce that we have delivered another record trading performance for the Company in 2010, adjusted profit before tax increasing by £5.3million to £33.6 million.  Both our motor and parts divisions delivered record performances and we continued to reduce cost, improving efficiencies.  We have made a good start to 2011 within the business with an above plan performance which, combined with our strengthened balance sheet, places us in a strong position, giving confidence that we will continue to trade successfully and be in a position to pursue selective strategic growth opportunities as they arise."

 

Financial Highlights

·      Revenue increased by 7.7% to £1.9 billion (2009: £1.75 billion)

·      *Adjusted profit from operations increased by 4% to £46.9 million (2009: £45.1 million)

·      Profit from operations increased by 56% to £45.6 million (2009: £29.3 million)

·      *Adjusted profit before tax increased by 19% to £33.6 million (2009: £28.3 million)

·      Profit before tax increased by 170% to £31.1 million (2009: £11.5 million)

·      Basic earnings per share increased by 114% to 5.97p (2009: 2.79p)

·      Operational cashflow increased by 145% to £49.3 million (2009: £20.1 million)

·      Net debt reduced by £22.4 million to £56.6 million.

·      Gearing reduced to 31% (2009: 49%) and net debt to EBITDA reduced to 1.04 (2009: 1.5)

·      Final dividend of 1.2p per share proposed

Operational Highlights

·     Strong performance from the motor division

·     New car retail sales performed 10% ahead of the market

·     Used car sales improved in the second half of the year

·     Profit before tax increased by 12%

·     Strong performance from the market leading independent parts division

·     Further expansion of product ranges

·     National infrastructure strengthened

·     Profit before tax increased by 11%

*Adjusted before amortisation of intangible assets, exceptional items and debt issue costs as defined in the income statement.

Enquiries:

Lookers	Telephone:  [phone]
Peter Jones, Chief Executive
Robin Gregson , Finance Director
Hudson Sandler	Telephone:  [phone]
Nick Lyon/Kate Hough

CHAIRMAN'S REVIEW

I am delighted to report that Lookers has delivered another record trading performance for the year, improving *adjusted profit before tax by over £5 million to £33.6 million, an increase of 19%. It is particularly pleasing to announce another successful year despite operating against the background of the difficult economic conditions in the UK. This excellent performance demonstrates the strength of our business in these times of economic uncertainty.

Further to the restructuring of the motor division in 2008/9, we have continued to review the performance of the dealerships in our portfolio which led to the sale or closure of a number of underperforming businesses. This has resulted in improved overall Group performance and a reduction in costs. We continue to benefit from our diverse business structure, with strong performances from both the motor division and our market leading independent parts division.

The UK new car market increased by 1.8% in 2010, with total registrations of just over 2 million. This was the second lowest volume since 1995 despite the Government scrappage scheme which accounted for 107,000 registrations. However, the market displayed underlying growth net of the Government scrappage retail scheme, of 12% against this background, our motor division delivered another excellent performance, with a significant increase in profitability. Further details of our progress in the motor division are provided in the Chief Executive's Review.

Our independent parts distribution business, which provides an increasing and significant contribution to Group earnings, has had another excellent year. The division now accounts for in excess of 35% of Group profits and produced record levels of operating profit in all of the three businesses that comprise the division. The parts division is of particular importance to the Group as it produces a more resilient source of profit which is not subject to the fluctuations in the new and used car markets. Furthermore, as each of the three businesses is the national market leader in their sector of the market, we are in a strong position to exploit future growth opportunities through the introduction of new products and services.

Our strong performance in 2010 demonstrates the strength of the Group's businesses with profits generated by dealership aftersales and the independent parts division representing 59% of gross profit. Furthermore, the capital structure of the Group has strengthened significantly in the last two years and the business is generating substantial levels of free cashflow. This improved financial position has enabled the Company to recommence a progressive dividend policy. The Group is therefore, in a strong position to continue to trade successfully and develop further opportunities in all areas of the business.

(*Adjusted before amortisation of intangible assets, exceptional items and debt issue costs.)

FINANCIAL HIGHLIGHTS

Turnover was 8% higher than last year at £1.9 billion.  *Adjusted operating profit increased to £46.9 million from £45.1 million last year and we are pleased to report that there were no exceptional charges in the year compared to £14.2 million last year, which were primarily in relation to refinancing and restructuring costs. We have continued to focus on the control of working capital and operational cashflow, which together with cash raised from the sale of underperforming businesses or surplus properties, has reduced bank borrowings by £22.4m in the year. This has had a positive effect on net interest charges which have reduced by £3.5m to £13.3m, a reduction of 21%. *Adjusted profit before tax was £33.6 million compared with an *adjusted profit of £28.3 million last year. Profit before tax increased to £31.1 million compared to £11.5 million in the previous year.  *Adjusted earnings per share were 6.63p compared to 7.32p last year, with basic earnings per share of 5.97p compared to 2.79p last year. Earnings per share have been affected by the share issue in 2009 and further details of the improvement in earnings per share, after adjusting for the share issue are provided in the Finance Director's Review. Cashflow for the year was particularly strong and significantly improved compared to last year with net cash inflow improving to £12.4 million compared to £9.8 million in 2009. This had a beneficial effect on the balance sheet where gearing improved to 31% from 49% last year and net debt reduced to £56.6 million compared to £79.0 million at the start of the year.

DIVIDEND

We were pleased to announce in the half year report that, given the encouraging results for that period and the strong financial position of the Group, the Company intended to pay an interim dividend of 0.6p per share, which was paid in November. This represented the restoration of a progressive dividend policy which was previously followed by the Company until the difficult trading conditions in 2008. I am also pleased to announce that following the strong performance of the Group in the year, we are proposing to pay a final dividend for the year ended 31 December 2010 of 1.2p per share, giving a total dividend for the year of 1.8p per share. This is subject to approval by shareholders at the Annual General Meeting and will be payable on 31 May 2011.

OUTLOOK

Both divisions of the Group have delivered excellent trading performances in the year and with consumer confidence being affected by general economic conditions, the new and used car markets are likely to continue at similar levels. However, the Group has performed well in the difficult markets of the last two years. The motor division has a significant bias to aftersales which, together with the independent parts division, now represents 59% of gross profit. This demonstrates the resilience of the Group's business and the flexibility to adapt to changing market conditions to help protect profitability which gives us confidence for the future. 

We are continuing to focus on areas where we can improve the performance of the Group's dealership operations to bring further improvements in profitability. The independent parts division continues to deliver record levels of performance and the addition of new product lines, improved facilities and investment in systems, will bring further increases in profitability. The Group balance sheet has been strengthened significantly and will continue to improve with positive cashflow. These factors, together with substantial headroom in our bank facilities, will allow us to take advantage of strategic growth opportunities that may arise for both the motor and parts division.

The new year has started well with both the motor division and parts division continuing to make further progress. We are therefore confident that the Company is well placed to deliver future growth.

I would like to conclude by thanking all our people at Lookers for their hard work and dedication in a challenging year, without whom we would not have been able to deliver such an excellent result.

Phil White

Chairman

9 March 2011

CHIEF EXECUTIVE'S REVIEW

2010 Performance Overview

Both the motor division and parts division have delivered excellent trading performances in the year with the result that the Group achieved a 2010 *adjusted profit before tax of £33.6 million. This is an increase of 19% compared to the 2009 result of £28.3 million and is a record result for the Group.

The key factors in driving performance recovery throughout the business were:

·     Significant increase in new car gross profit;

·     Growth in new car retail volumes strengthening retail share;

·     Strong growth in turnover and gross profit in our parts division and a strong aftersales performance in the motor division; and

·     Further reductions in the cost base.

We have now had two successive years of record profits which have been delivered in difficult market circumstances. This gives us confidence that we can continue to grow the business in 2011, despite short term market conditions remaining challenging. As economic conditions improve over the medium term then the business is well placed to take advantage from future growth in the new and used car markets and increased demand for aftersales and parts.

OPERATING REVIEW

Motor Division

Our motor division consists of 119 franchise dealerships representing 33 marques from 71 sites.  The business generates revenue from the sale of new and used cars, vehicle servicing and repair, and the sale of franchise parts. In 2010 our motor division increased profit before tax to £28 million from £25 million in 2009.

During the year we have added 6 further franchises to existing locations which increased turnover without a significant increase in fixed costs, thereby improving efficiency and profitability of the site. We have established a new Ford business in Sheffield to complement our existing business there and acquired the Audi business in South Dublin as a precursor to establishing a flagship brand centre in Dublin, which will have the potential to develop into a very profitable business. We have also sold or closed seven underperforming or loss making businesses which were non core to our strategic development plan.

(*Adjusted before amortisation of intangible assets, exceptional items and debt issue costs).

New Cars

The new car market increased by 2% to just over 2 million cars, including additional sales of 107,000 vehicles as a result of the government scrappage scheme. Encouragingly however, the market net of scrappage saw 12% growth, a trend expected to continue in 2011.

Group total new car sales of 58,390 was a reduction of 4.8% compared to 2009 levels, with sales of new retail cars increasing by 1,661 units to 39,280, an increase of 4.4% compared to a decrease in the UK market of 6.1% strengthening our share of this sector of the market to 4.1%. In the fleet sector we sold 19,110 cars compared to 23,753 last year, reducing our share to 1.8% of the market, compared to 2.4% last year, the reduction in volume due to reduced sales of low margin fleet business, where the margins on specific deals were reduced from 2009 levels.

Gross profit per unit for new cars increased by 13%, with overall gross profit improving by £5 million despite the reduced volume.

Used Cars

The total used car market in the UK declined by approximately 2% in 2010. Group sales of 41,953 were a similar volume to 2009 levels and ahead of the market. This was a positive performance with volumes improving in the second half of the year following lower demand in the first half as a result of the adverse weather conditions at the start of the year. Gross profit per unit strengthened by 1.4% a strong performance given that 2009 margins benefitted from unprecedented price inflation.

The used car market, which has annual sales of circa 6.7 million vehicles, remains a huge area of opportunity for the Group. Through improved sourcing and a broader stock mix on our forecourts, we expect to take advantage of the stable market conditions in the used car sector to improve volumes and make further improvements in gross margin.

Aftersales

The aftersales business in the motor division continues to gain share of the declining vehicle parc within the 1 to 3 year vehicle sector. The Group generated a small increase in like for like aftersales revenue, which represents good progress in a declining market. However, whilst turnover has been maintained this has been at the expense of a small reduction in margin compared to last year, as we broaden our offering to older vehicle servicing and repairs.

We continue to invest in technology and procedures to further improve customer retention and average sales value per customer visit. These initiatives include improvements in our customer relationship marketing centre processes, the deployment of electronic health checks in all businesses, the introduction of service plans for new and used vehicles together with the implementation of a Lookers warranty scheme. All these initiatives help us to identify and optimise service and repair requirements on all vehicles visiting us, which combined with our determination to deliver excellent customer service, are key factors in strengthening and optimising customer retention.

Parts Division

Following a record year in 2009 our independent aftermarket parts division has continued to perform significantly ahead of last year and has produced another record performance. The Parts Division operates through three companies, each supplying hard parts to the independent aftermarket, the customer base being primarily motor factors who, in turn supply the independent repair sector.

The total vehicle car parc in the UK market is over 30 million vehicles, with just over 6.5 million of these being in the conventionally, franchise dealership dominated 1 to 3 year vehicle parc.  In contrast to the younger vehicle parc, the three year plus vehicle parc in the UK continues to grow and the outlook for our independent parts operations is good as each of the businesses continues to take an increased share of a growing market opportunity.

Turnover for the division increased by 14%, operating profit increased by 9% and *adjusted profit before tax increased by 11%, from £11.1 million to £12.3 million.

FPS, the only national warehouse distributor of quality branded automotive hard parts delivered strong results with turnover increasing by 14% and profit before tax increasing by 10% to £8.7 million. Growth was achieved across all major customer Groups and has also supported by the introduction of new product lines with further growth from product lines introduced in previous years. The national distribution centre was extended and a second warehouse was established in Sheffield for bulk storage and distribution of a new product line. Efficiency benefits were also achieved by an increase in electronic order capture and information exchange so that e-business now represents 60% of sales, up from 50% last year.

Apec Braking, the market leader in the UK for 'dry' braking (pads and discs) increased turnover by 9%. Margins were under pressure due to the weakness in sterling in the earlier part of the year, however, in spite of this, profit before tax increased slightly to £1.9 million. Margins have since improved due to re-sourcing discs and turnover growth was achieved across all major customers and product lines.

BTN Turbo is a leading supplier and provider of technical support and servicing of turbochargers and delivered another excellent performance in the year. Turnover increased by 28% and profit before tax increased by 24%, with increased sales to motor factor Groups and growth across all major customer sectors. There is significant potential for further growth opportunities with many specific customer prospects in progress.

OUTLOOK

Both the Motor Division and Parts Division have made a good start to the current year. The motor division has continued to outperform the new retail car market and our used car performance has shown further improvements. We have a healthy order book for the delivery of new cars in the important month of March  and aftersales continue to perform well with the result that the Motor Division is ahead of both budget and prior year. Furthermore the independent parts division has made further progress and is ahead of budget. We therefore expect the result for the first quarter to be ahead of both budget and last year.

As we look forward in this new financial year, the new and used car retail markets, whilst well below previous levels, are likely to continue to demonstrate conservative underlying growth creating opportunities for increased sales volumes. The aftersales bias to the motor division, and the Group's strong performance during the past two years, demonstrate the strength of the business and leave us well positioned for future growth.

We continue to focus on areas where we can improve the performance of the Group's franchised outlets and we will also focus on targeted and selective acquisitions to further improve our franchise representation.

The parts division is a key factor that differentiates Lookers in the retail motor sector and provides high quality earnings that are not subject to fluctuations in the new and used vehicle markets, as well as making a significant and increasing contribution to Group profitability.

The Group balance sheet has been strengthened significantly over the past two years and this, together with substantial headroom in our bank facilities, enables us to pursue strategic acquisition opportunities in both the motor and parts divisions, which will help underpin growth in future years.

Peter Jones

Chief Executive

9 March 2011

FINANCE DIRECTOR'S REVIEW

GROUP RESULTS

Turnover increased by 7.7% to £1.9 billion from £1.75 billion last year, with positive growth across the Group's business. Gross profit of £261 million was level with last year, although the gross margin was slightly reduced due to higher average selling prices of both new and used cars. Overheads reduced by £2.3 million in the year and *adjusted profit from operations therefore increased by 4% to £46.9 million, an increase of £1.8 million compared £45.1 million in the prior year.  

Total net interest costs reduced by 21% to £13.3 million compared to £16.8 million in 2009, with operational interest charges, excluding interest on pension scheme liabilities, reduced by 15% from £14.5 million to £12.3 million. Interest on Group borrowings is based initially on floating interest rates supplemented with interest rate hedges. A significant element of the term loan was covered by interest rate hedges during the year. At 31 December 2010, 99% of the term loan was covered by interest rate hedges. However, as the hedges were established in 2007, when interest rates were significantly higher than current levels, they have the effect of increasing the interest charge so that we do not get the full benefit of the low base rate which is currently applicable in the UK.

*Adjusted profit before tax, amortisation, exceptional items and debt issue costs for the year increased by 19% to £33.6 million, a record result for the Company and an improvement of £5.3 million compared to the result for the previous year of £28.3 million. Profit before tax was £31.1 million compared to a profit before tax in the previous year of £11.5 million. This resulted in *adjusted earnings per share of 6.63p compared to 7.32p in the prior year and basic earnings per share of 5.97p compared to 2.79p in the previous year. The calculation of earnings per share has been affected by the share issue in July 2009, which resulted in an increase in the weighted average number of shares in issue of 58%. The reduction in the adjusted earnings per share reflects the full year impact of the additional shares issued as part of the share issue. Adjusting for the impact of the share issue, the adjusted earnings per share for the prior period would have been 5.11p**, an increase of 30%.

No exceptional items were incurred in the year compared to £14.2 million in 2009, which related to refinancing and restructuring costs and this has had a positive impact on retained profits and cashflow.

TAXATION

The tax charge for the year of £8.2 million compares to a net tax charge of £3.5 million in the prior year and reflects a charge of 26.5% of profit before tax. This is slightly lower than the standard rate of corporation tax of 28%, as some tax benefit has arisen this year from prior year items. The tax charge is significantly higher than that of 2009 as the previous year's charge was reduced by the impact of exceptional items and prior year losses.

(*Adjusted before amortisation of intangible assets, exceptional items and debt issue costs.)

(**This calculation is based on * Adjusted earnings and a weighted average number of shares in issue of 410,777,400, which represents the weighted average number of shares in issue during the prior period as adjusted for the shares issued in the share issue.)

CASHFLOW AND CAPITAL EXPENDITURE

Cash generated from operations for the year was £49.3 million, an increase of 145% compared to the operating cashflow in 2009 of £20.1 million. Working capital increased by £1.5 million with an increase in creditors of £41.3 million offsetting most of the increase in stock of £44.9 million. Capital expenditure was £12.3 million compared to £7.2 million the previous year and proceeds from the sale of properties were £7.0 million (2009: £2.5 million). The majority of capital expenditure was on new or improved premises for the parts division or improvements to dealership properties.

Loan repayments of £10 million were made during the year and net cash inflow after this was £12.4 million, compared to a cash inflow of £9.8 million in 2009. However as there were no scheduled loan repayments in 2009 and 2009 benefited from the proceeds of the share issue, the cashflow in the current year was significantly stronger. This resulted in a reduction in net debt of £22.4 million to £56.6 million compared to £79.0 million at the start of the year, net debt being calculated as gross bank borrowings less cash balances.

SHAREHOLDERS' FUNDS AND FINANCING

The Group has available bank facilities which consist of a revolving credit facility of £53 million and a term loan of £81 million. Interest is charged on both loans at a margin of between 3% and 4% above LIBOR. These facilities are subject to quarterly covenant tests on interest cover, net bank debt to EBITDA, total net debt to EBITDA and debt service cash cover. The covenant tests are set at levels that provide sufficient headroom and flexibility for the Group until maturity of the facilities in April 2012. We are currently considering the options for refinancing and are confident of a successful outcome later this year.

At 31 December 2010 total facilities were £134 million of which £57 million, net of cash balances, was being utilised. These facilities together with the Group's strong operational cash flow, indicate that the Group has sufficient facilities available to fund its operations and allow for future expansion. At 31 December 2010 gearing was 31% compared to 49% at 31 December 2009 and net debt to EBITDA was 1.04 compared to 1.5 last year. The Group's underlying profitability and strong cashflow should result in further reductions in borrowing in the future and help ensure that the level of borrowing remains under control and is at a reasonable level in relation to net assets. Further information on the going concern basis of preparation is included in note 1.

PROPERTY PORTFOLIO

The Group has a policy of investing in freehold and long leasehold property as the preferred means of providing premises for the car dealerships, where possible. As a result we have a significant and valuable portfolio of freehold and long leasehold properties where the net book value at 31 December 2010 was £181.5 million compared to £183.4 million last year. Of this amount £7.8 million has been disclosed within current assets as assets held for sale. Short leasehold properties had a value of £7.4 million (2009: £8.5 million).

DIVIDENDS

An interim dividend of 0.6p per ordinary share was paid on 30 November 2011 and the Company is proposing to pay a final dividend of 1.2p per ordinary share. This is subject to shareholder approval at the Annual General Meeting and will be payable on 31 May 2011. The Company had previously followed a progressive dividend policy, until the difficult trading conditions of 2008 and this policy has now been restored. The final dividend will represent a cash outflow of £4.6 million which gives a total dividend for the year of £6.9 million.

PENSION SCHEMES

The Group operates two defined benefit pension schemes both of which are closed to entry for new members. There has been a recovery in the value of pension scheme assets during the year, which has resulted in a reduction in the pension deficit for both schemes. The total deficit has reduced by £5.7 million, after deferred tax, so that the total deficit is £19.8 million (2009: £25.5 million). The assessment of valuation is based on several key assumptions prescribed by accounting standards and over which the Directors have very little control.  Relatively small changes in the bases of valuation can have a significant effect on the calculated deficit, hence the movement in the calculated deficit can be subject to high levels of volatility. The board continues to look at its options to reduce both the annual cost of operating both schemes and what actions can be taken to reduce the deficit on the schemes, thereby reducing exposure to movements in these liabilities and reducing the deficit over the medium and longer term.

VAT

The Group has previously submitted a number of claims with HM Revenue & Customs ('HMRC') in respect of potential overpayments of VAT relating to prior years. If the Group is successful in its negotiations with HMRC, then there is the potential for significant repayments to be received by the Group. The nature of the process for negotiating these claims with HMRC can take a considerable time so the timing of any potential receipt is uncertain and no benefit for any potential repayment has been included in the accounts and no income will be included until the claims have been agreed with HMRC.

Robin Gregson

Finance Director

9 March 2011

Responsibility statement

The responsibility statement below has been prepared in connection with the Company's financial statements for the year ending 31 December 2010. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

·        the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·        The management report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board 

P Jones                                                           R A Gregson

Chief Executive Officer                                   Finance Director        

9 March 2011                                                  9 March 2011

Condensed Consolidated Income Statement
For the year ended 31 December 2010

		2010	2009
	Note	£m	£m
Continuing operations
Revenue		1,883.8	1,749.0
Cost of sales		(1,623.2)	(1,487.9)
Gross profit		260.6	261.1
Distribution costs		(140.0)	(139.5)
Administrative expenses		(75.5)	(92.7)
Other operating income		0.5	0.4
Profit from operations		45.6	29.3
Profit from operations before amortisation
and exceptional items		46.9	45.1
Amortisation of intangible assets		(1.3)	(1.7)
Exceptional items from operations	3	-	(14.1)
Profit from operations		45.6	29.3
Interest payable	2	(13.4)	(17.1)
Interest receivable	2	0.1	0.3
Net interest		(13.3)	(16.8)
Exceptional interest payable on closed businesses	3	-	(0.1)
Debt issue costs		(1.2)	(0.9)
Profit on ordinary activities before taxation		31.1	11.5
Profit before tax, amortisation,
exceptional items and debt issue costs		33.6	28.3
Amortisation of intangible assets		(1.3)	(1.7)
Total exceptional items	3	-	(14.2)
Debt issue costs		(1.2)	(0.9)
Profit on ordinary activities before taxation		31.1	11.5
Tax charge		(8.2)	(3.5)
Profit for the year		22.9	8.0
Continuing operations
Earnings per share
Basic earnings per share	4	5.97p	2.79p
Diluted earnings per share	4	5.85p	2.72p

Condensed Consolidated Statement of Comprehensive Income

		2010	2009
		£m	£m
Profit for the financial year		22.9	8.0
Actuarial gains / (losses) recognised in post-
retirement benefit schemes		3.8	(9.4)
Movement in deferred taxation on pension liability		(1.2)	2.3
Fair value on derivative instruments		(2.3)	(1.2)
Movement in deferred taxation on derivative instruments		0.6	-
Other comprehensive Income/(expense) for the year		0.9	(8.3)
Total comprehensive income/(expense) for the year		23.8	(0.3)

Condensed Consolidated Balance Sheet

As at 31 December 2010

	2010	2009
	£m	£m
NON-CURRENT ASSETS
Goodwill	44.8	44.8
Intangible assets	15.7	17.1
Property, plant and equipment	194.6	197.6
Investment in subsidiaries	-	-
Deferred tax asset	-	-
	255.1	259.5
Current assets
Inventories	292.3	247.4
Trade and other receivables	104.2	106.3
Cash and cash equivalents	24.3	12.3
Assets held for sale	7.8	9.2
	428.6	375.2
Total assets	683.7	634.7
Current liabilities
Financial liabilities
- Bank loans and overdrafts	14.1	10.4
- Hire purchase obligations	-	0.2
Trade and other payables	353.8	315.1
Current tax liabilities	9.7	8.8
Short-term provisions	0.9	0.9
Derivative financial instruments	8.5	6.3
	387.0	341.7
Net current assets	41.6	33.5
NON-CURRENT LIABILITIES
Financial liabilities
- Bank loans	66.8	80.9
Trade and other payables	7.2	4.6
Retirement benefit obligations	27.1	35.5
Deferred tax liabilities	13.3	11.2
Long-term provisions	0.7	0.7
	115.1	132.9
Total liabilities	502.1	474.6
Net assets	181.6	160.1
Shareholders' equity
Ordinary share capital	19.2	19.2
Share premium	73.6	73.6
Capital redemption reserve	14.6	14.6
Other reserve	(1.4)	(1.4)
Retained earnings	75.6	54.1
TOTAL EQUITY	181.6	160.1

Condensed Consolidated Cash Flow Statement

For the year ended 31 December 2010

		2010	2009
		£m	£m
Cash flows from operating activities
Profit for the year		22.9	8.0
Adjustments for:
Tax		8.2	3.5
Depreciation		7.8	8.3
Loss on disposal of plant and equipment		0.2	-
Loss on closed businesses		-	(1.8)
Amortisation of intangible assets		1.3	1.7
Interest income		(0.1)	(0.3)
Interest payable		13.4	17.1
Debt issue costs		1.2	0.9
Changes in working capital
	(Increase)/decrease in inventories	(44.9)	56.2
	Decrease/(increase) in trade and other receivables	2.1	(18.3)
	Increase/(decrease) in payables	41.3	(52.0)
	Difference between pension charge and
	cash contributions	(4.1)	(3.0)
	Movement in provisions	-	(0.2)
Cash generated from operations		49.3	20.1
Interest paid		(13.3)	(15.0)
Interest received		0.1	0.2
Tax (paid)/refunded		(5.9)	1.0
Net cash inflow from operating activities		30.2	6.3
Cash flows from investing activities
Purchase of property, plant and equipment		(12.3)	(7.2)
Purchase of intangible assets		-	(0.2)
Proceeds from sale of property, plant and equipment		7.0	2.5
Proceeds from sale of business		-	0.3
Net cash used by investing activities		(5.3)	(4.6)
Cash flows from financing activities
Proceeds from issue of ordinary shares		-	77.6
Repayment of loans		(10.0)	(65.9)
Debt issue costs		-	(3.5)
Principal payments under hire purchase agreements		(0.2)	(0.1)
Dividends paid to Group shareholders		(2.3)	-
Net cash (outflow)/inflow from financing activities		(12.5)	8.1
Increase in cash and cash equivalents		12.4	9.8
Cash and cash equivalents at 1 January		11.9	2.1
Cash and cash equivalents at 31 December		24.3	11.9

Condensed Consolidated Statement of Changes in Equity

	Share capital £m	Share premium £m	Capital redemption reserve £m	Other reserve £m	Retained earnings £m	Total £m
As at 1 January 2009	9.1	6.2	14.6	(1.1)	54.1	82.9
New shares issued	10.1	67.4		-	-	77.5
Profit for the year	-	-	-	-	8.0	8.0
Actuarial losses on defined benefit
pension schemes	-	-	-	-	(9.4)	(9.4)
Deferred taxation on pension liability	-	-	-	-	2.3	2.3
Fair value on derivative instruments	-	-	-	(0.3)	(0.9)	(1.2)
As at 31 December 2009	19.2	73.6	14.6	(1.4)	54.1	160.1
Profit for the year	-	-	-	-	22.9	22.9
Actuarial gains on defined benefit
pension schemes	-	-	-		3.8	3.8
Deferred taxation on pension liability	-	-	-	-	(1.2)	(1.2)
Fair value on derivative instruments		-	-	-	(2.3)	(2.3)
Deferred taxation on derivatives	-	-	-	-	0.6	0.6
Dividends to shareholders	-	-	-	-	(2.3)	(2.3)
As at 31 December 2010	19.2	73.6	14.6	(1.4)	75.6	181.6

Explanatory Notes to the Financial Information

1. Basis of preparation

The financial information has been prepared under International Financial Reporting Standards (IFRS) issued by the IASB and as adopted by the European Commission (EC). This financial information has been prepared on the same basis as in 2009. Further information in relation to the Standards adopted by the Group is available on the Group's website, www.lookersplc.co.uk.

       
Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS's), this announcement does not itself contain sufficient information to comply with IFRS's.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009, but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

A copy of the Group accounts for the period ended 31 December 2010 can be found at www.lookersplc.co.uk and will be posted to shareholders this month.

Going Concern

This financial information has been prepared on a going concern basis which the Directors believe to be appropriate for the reasons set out below.

The Company and the Group continue to meet their day to day working capital requirements through short term stocking loans and the revolving credit facility and medium term funding requirements through a term loan. At the year end the medium term banking facilities included a revolving credit facility of up to £53.3 million and a term loan of £80.9 million, providing total facilities of £134.2 million. These facilities are due for renewal in April 2012 and the Directors are currently considering the options for refinancing.

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described earlier. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facility. Therefore, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2.  Finance costs - net

	2010	2009
	£m	£m
Interest expense
On amounts wholly repayable within 5 years:
Interest payable on bank borrowings	(8.4)	(11.0)
Interest on consignment vehicle liabilities	(3.9)	(3.6)
Other interest	-	(0.2)
Net interest on pension schemes	(1.1)	(2.3)
Interest and similar charges payable	(13.4)	(17.1)
Interest income
Bank interest	0.1	0.3
Interest received from Group companies	-	-
Total interest receivable	0.1	0.3
Finance costs - net	(13.3)	(16.8)

3. Exceptional items                                                         

	2010	2009
	£m	£m
Refinance costs	-	(6.6)
Loss on terminated businesses	-	(6.2)
Other	-	(0.5)
Reorganisation costs	-	(0.8)
	-	(14.1)
Interest on closed businesses	-	(0.1)
Total exceptional items	-	(14.2)

4. Earnings per share

The calculation of earnings per ordinary share is based on the profit on ordinary activities after taxation amounting to £22.9m (2009: £8.0m) and a weighted average number of ordinary shares in issue during the year of 383,549,291 (2009: 286,417,558).

The diluted earnings per share is based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 7,619,782 (2009: 7,337,396).

Adjusted earnings per share is stated before amortisation of intangible assets, impairment of goodwill, debt issue costs and exceptional items and is calculated on profits of £25.4m (2009: £21.0m) for the year.

Continuing operations	2010 Earnings £m	2010 Earnings per share p	2009 Earnings £m	2009 Earnings per share p
Basic EPS
Earnings attributable to ordinary shareholders	22.9	5.97	8.0	2.79
Effect of dilutive securities	-	(0.12)	-	(0.07)
Diluted EPS	22.9	5.85	8.0	2.72
Adjusted EPS
Earnings attributable to ordinary shareholders	22.9	5.97	8.0	2.79
Amortisation of intangible assets	1.3	0.34	1.7	0.59
Debt issue costs	1.2	0.32	0.9	0.31
Exceptional items (net)	-	-	14.2	4.96
Tax on exceptional items (net)	-	-	(3.8)	(1.33)
Adjusted EPS	25.4	6.63	21.0	7.32

5. Dividends

	2010	2009
	£m	£m
Interim dividend of 0.6p per ordinary share (2009: nil)	2.3	-

The Directors propose a final dividend of 1.2p per share in respect of the financial year ending 31 December 2010 (2009:£nil). The final dividend will be paid on 31 May 2011 to shareholders on the register on 26 April 2011.  The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in this financial information.

6. Principal risks and uncertainties

The Group's business activities, financial condition, results of operations or the Company's share price could be affected by any or all of the following risks or uncertainties:

Global Economy

The new and used car markets are influenced by general economic conditions, including changes in interest rates, fuel prices, indirect taxation, the cost and availability of credit and other factors which affect levels of consumer confidence. The demand for new cars is cyclical, which in some years will lead to reduced margins caused by oversupply. This could have an adverse impact on the earnings of the Group, although it is likely that this would be mitigated by potential increases in both the used car market and the aftersales market as customers substitute nearly new for new cars, or spend more keeping their old vehicles roadworthy. Despite the lack of available credit, together with a general feeling of uncertainty in the economy, the Group's business has proved to be resilient against this background.

Manufacturers' Financial Stability

The Group relies on its manufacturer partners for a significant proportion of its revenues and profits. The failure of a manufacturer could have a significant impact on the short-term profitability of a retailer partner. The Group has attempted to mitigate this risk by having trading relationships with a large number of manufacturers, so that the impact of any one manufacturer failing would be lessened.

Liquidity and Financing

The Group uses a number of methods to fund its day to day business.  These methods are (i) bank borrowings by way of committed borrowing facilities (Banking facilities of £134 million agreed, maturing 2012); (ii) from manufacturer and third party finance houses through uncommitted stocking facilities to fund the purchase of stock; and (iii) from suppliers by way of trade credit. A withdrawal of any of these financing facilities or a failure to renew them as they expire could lead to a significant reduction in the trading ability of the Group. However the share issue in 2009 significantly strengthened the Group's balance sheet and provided a substantial source of additional funding.

Exchange Rates

The Group is affected by currency fluctuations to the extent that a large proportion of our manufacturer partners either source parts or manufacture vehicles overseas. The fluctuation of the Euro against Sterling has meant that most manufacturers have had to adjust prices despite the current market conditions. The Board is aware of the uncertainties and seeks to mitigate this by ensuring the Group retains a broad mix of the major manufacturers, both UK and overseas, to limit the effect.

Legal and Regulatory

In 2010 the updated Block Exemption Regulation for aftersales was implemented and the regulation for sales was extended to 2013 pending a revision to a general exemption status by ensuring that our franchise businesses continue concentrating on customer service, the Board believes that the Group will minimise the impact of these, and any future changes to Block Exemption rules.

Competitive Nature of the Market

The motor vehicle distribution market is highly competitive and comprises a small number of large dealer networks, similar to Lookers, down to a large number of much smaller operators. In addition, the market includes internet-based dealers and private individuals. The franchised businesses also compete in the aftersales market which comprises similar franchised businesses, supply and fit chains, and a large number of small independent garages and bodyshops.  The market therefore offers customers different options depending upon price and quality of service they wish to take, with owners of new and nearly new vehicles tending to use the franchised businesses and owners of older vehicles tending towards the small independent provider. The Group's franchised businesses rely on the quality of their customer service and the ability to adjust pricing, enabling them to react to local competitive conditions.

The parts distribution business operates in a very competitive market place, dominated by a few large players. The differentiator in this market is the quality of customer service offered by the Group's businesses, which continues to give the competitive edge where price differences would not be enough.

Government Legislation

In addition to Block Exemption rules noted above, changes to the government's transport policy could adversely affect the Group's profitability if, as a result, customers choose to use alternative forms of transport.

Information Systems

The Group is dependent upon a number of business critical systems which, if interrupted for any length of time, could have a material effect on the efficient running of the Group's businesses. The Board has implemented a series of contingency plans which would enable the Group to resume operations within a short space of time, thus mitigating the likelihood of material loss.

Manufacturers' Influence

The Group's activities are also influenced by manufacturers in other ways. The timing, frequency and efficiency of new model roll-outs and changes in consumers' perception of these models and brands could materially affect the Group's business. Similarly, manufacturers use a series of incentive schemes to support new car sales, warranty programmes etc. and changes or discontinuation of these schemes could also affect the Group's business. By representing over thirty marques, the Group believes that this diversity reduces the impact to the Group that manufacturers' influence could cause.

 

END

 

 

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