Interim Results
Pendragon PLC
07 August 2006
FOR IMMEDIATE RELEASE 7 August 2006
INTERIM RESULTS TO 30 JUNE 2006
Pendragon PLC, the UK's largest motor car retailer, today reports interim
results for the six months to 30 June 2006.
Highlights:
• Revenue of £2,646 million (2005: £1,751 million)
• Profit before tax & exceptionals £42.3 million (2005: £36.8 million)
• Profit before tax £50.8 million (2005: £35.3 million)
• Underlying operating margin 2.8% (2005: 3.2%)
• Adjusted earnings per share up 14% to 23.6 pence (2005: 20.7 pence)
• Interim dividend up 10% to 7.25 pence (2005: 6.60 pence)
• Strong operating cash inflow of £157.7 million (2005: £80.9 million)
Trevor Finn, Chief Executive, commented:
'The first half of 2006 has been a very exciting time for Pendragon. In February
we acquired Reg Vardy plc for £500 million. The acquisition has made a
significant contribution to the group's first half results and its integration
continues to progress well. The underlying performance of the group has been
solid despite a falling UK car market.
While we expect the UK car market to remain tough for the remainder of 2006, we
are confident of further progress within the group as we continue to grow the
business and integrate Reg Vardy.'
Enquiries:
Pendragon PLC Trevor Finn, Chief Executive Tel: 01623 725 114
David Forsyth, Finance Director
Finsbury Rupert Younger Tel: 0207 251 3801
Gordon Simpson
CHIEF EXECUTIVE'S OPERATIONAL REVIEW
Introduction
Trading performance across the Group has been good in the first six months of
the year against the backdrop of a weaker UK new car market. We are reporting
growth of 14 per cent in adjusted earnings per share and an increase in the
interim dividend of ten per cent. We bought Reg Vardy in February this year
which has contributed £19.9 million of operating profits in the four and a half
months of our ownership.
The focus in the first half has been on the Pendragon/Vardy integration and
putting in place a new UK operational structure whilst maintaining
profitability. We have also rolled out our new in house dealer management system
to a further 47 locations so far this year. Our drive to increase efficiency
through further centralisation of certain dealership functions into our customer
services centre in Nottingham has continued.
Group revenues have increased by £894.3 million to £2,645.5 million. The impact
of acquisitions and disposals we made in 2005 and 2006 have added £856.3 million
to revenues. The core businesses on a like for like basis grew revenues by
£13.3 million which was achieved despite a fall of 4.2% in new car registrations
in the UK market with a further £24.5 million contributed from recent greenfield
start ups.
Operating profits, before one off exceptional items, were £73.3 million compared
to £56.7 million last year. The underlying operating profit margin was 2.8 per
cent against 3.2 per cent for the same period in 2005. The acquisitions made
this year and in the second half last year have had a dilutive effect on the
margin. The property sale and leaseback joint venture completed at the end of
2005, whilst having little impact on profit before tax, has reduced operating
margins which now include the additional rents. Excluding the impact of the
acquisitions and property joint venture, operating margins achieved this period
were in line with last year at 3.1 per cent.
The interim dividend is 7.25 pence per share compared to 6.60 pence last year,
an increase of ten per cent.
Results and Dividend
The results for the six months to 30 June 2006 are summarised as follows:
£m 2006 2005
----------------------------------------------------------------------------
Revenue 2,645.5 1,751.2
----------------------------------------------------------------------------
Underlying operating profit 73.3 56.7
----------------------------------------------------------------------------
Exceptional operating costs (3.4) (2.9)
----------------------------------------------------------------------------
Operating profit before other income 69.9 53.8
----------------------------------------------------------------------------
Other income - gain on sale of fixed assets 11.9 1.4
----------------------------------------------------------------------------
Operating profit 81.8 55.2
----------------------------------------------------------------------------
Finance costs / share of joint venture (31.0) (19.9)
----------------------------------------------------------------------------
Profit before tax 50.8 35.3
----------------------------------------------------------------------------
Earnings per share - basic 28.1p 19.7p
----------------------------------------------------------------------------
Earnings per share - adjusted 23.6p 20.7p
----------------------------------------------------------------------------
Dividend per share 7.25p 6.60p
----------------------------------------------------------------------------
Revenue has increased to £2,645.5 million from £1,751.2 million. Reg Vardy was
acquired on 14 February 2006 and contributed four and a half months trading to
this year's numbers which accounts for 90 per cent of the increase in revenues.
Sales of new cars account for just over half of the revenue of the group and
used cars a third. Aftersales activities account for the balance of revenues and
contributed 40.0 per cent of gross profits.
Operating profit, excluding exceptional costs and disposal profits, increased by
£16.6 million to £73.3 million from £56.7 million in 2005. Acquisitions
contributed underlying operating profits of £20.3 million. Operating profits
from the existing businesses have reduced by £3.7 million, principally due to
the increase in rental costs as a result of the sale and leaseback we did at the
end of last year.
Exceptional operating costs of £3.4 million relate to integration and
reorganisation costs arising following the acquisition of Reg Vardy plus the
professional fees incurred in respect of the unsuccessful bid we made to acquire
Lookers Plc. The Reg Vardy integration costs consist of redundancy payments made
to the former directors plus a write down of redundant assets and provision for
onerous contracts. We expect integration costs relating to Reg Vardy to be
around £5.0 million for the full year which would be in line with previous major
acquisitions we have made.
Other income includes business and property disposal profits. We completed the
disposal of three surplus properties which generated profit of £11.9 million. Of
this, £10.0 million was in respect of the Solihull site that we sold for
alternative retail use. In the period we also sold five Volkswagon dealerships
that were acquired as part of the Vardy acquisition. The profit on the disposal
of these dealerships, £6.3 million, has been credited against the goodwill
arising on the acquisition and is not taken to profit in the income statement.
Financing costs increased by £11.1 million to £31.0 million. The main component
of the increase in interest costs is on borrowings associated with the
acquisition of Reg Vardy which, in the first half, were approximately £12.0
million.
Underlying operating profit of £73.3 million (2005: £56.7 million) less interest
cost of £31.0 million (2005: £19.9 million) resulted in an adjusted profit
before tax and exceptionals of £42.3 million (2005: £36.8 million). Adjusted
earnings per share increased by 14.0 per cent to 23.6p from 20.7p last year.
Basic earnings increased by 42.6 per cent which includes the impact of the
higher property disposal profits.
Acquisition of Reg Vardy and Group operational structure
We increased our borrowings substantially in February this year to acquire the
entire share capital of Reg Vardy plc for a consideration of £500.1 million. Reg
Vardy, one of the UK's largest motor vehicle retailers with 98 outlets mainly in
Scotland and the Northeast of England, represents a broad range of manufacturers
including BMW, Citroen, Ford, Jaguar, Land Rover, Mercedes-Benz, Nissan, Renault
and Vauxhall. The acquisition is in line with our ongoing strategy to grow the
business in order to generate further economies of scale and cost efficiencies.
The acquisition of Reg Vardy increases the revenues of the group by around 50
per cent. In terms of integration, the main achievements in the first few months
have been to eliminate the duplicate costs of Reg Vardy as a separate listed
company and to put in place a new UK operational structure.
Since the beginning of the year we have been in the process of rebranding the
group's dealerships in the UK as Stratstone, for premium brands, and Evans
Halshaw, for volume brands. We have divided Stratstone into two divisions each
organised on a national basis by franchise. Evans Halshaw has been structured
into three divisions which reflect the different dynamics of volume dealership
businesses. The divisions, North, East and West each cover all volume
franchises. Under this new structure both the premium and volume brands continue
to enjoy franchise focus whilst the volume brands will benefit in specific areas
such as advertising and used car sales.
Motor Retail Business
Our franchised motor retail activities are principally in the UK with a small
but growing business in the USA. We currently operate 406 franchised sale
points, of which 22 are overseas. We continue to represent a broad portfolio of
brands each with sufficient scale to enable efficient operations within each
franchise group or geographic region. We also operate a number of franchised
commercial truck businesses.
UK
In the UK, national new car registrations reduced by 4.2 per cent this year
compared to the first six months of 2005. This continues the trend seen over the
last two years with a falling number of registrations, first mainly in the more
profitable private retail market but now also within the fleet and business
sectors. The latest industry forecast for 2006 is for an annual new car market
at 2.33 million, down 4.5 per cent on 2005. A decline of around five per cent
continues to be our view.
The commercial vehicle market is up 0.6 per cent this year. This may not be
representative of the true market as changes in legal requirements have resulted
in customers buying before the changes to avoid increases in prices. Similarly
the second half market may also be distorted by the introduction of new emission
regulations from October.
In the UK we operate 384 franchised points of which 174 are premium, 189 are
volume and 21 are trucks. The results of the UK business can be summarised as
follows:
£m Revenue Gross profit Gross margin Underlying Underlying
% operating operating
profit margin %
---------------------------------------------------------------------------------
Existing 1,647.5 218.9 13.3 40.1 2.4
---------------------------------------------------------------------------------
Acquired 816.6 108.0 13.2 19.3 2.4
---------------------------------------------------------------------------------
Total 2006 2,464.1 326.9 13.3 59.4 2.4
---------------------------------------------------------------------------------
Total 2005 1,585.8 215.8 13.6 49.4 3.1
---------------------------------------------------------------------------------
Revenues are up by £878.3 million, of which £816.6 million arises with
acquisitions, principally being Reg Vardy. The balance of the increase in
revenue of £61.7 million is a combination of the impact of acquisitions,
disposals and greenfields completed last year and includes £6.4 million organic
growth in the existing business.
Gross margins in aftersales have been maintained whilst most of our car
franchises have seen a weakening in new car margins in light of the more
difficult trading conditions. Our gross margins have fallen to 13.3 per cent
which has had the effect of reducing underlying operating profit by £4.9 million
in the existing businesses. The gross margin achieved by the acquired businesses
is slightly lower at 13.2 per cent.
Operating margins in the existing dealerships have reduced from from 3.1 per
cent to 2.4 per cent. The reduction in gross margin accounts for approximately
half of the reduction in operating margin with the balance arising with the
increase in rents of £3.4 million and an increase in employment costs,
principally in respect of funding pension liabilities. The reduction in margin
is compensated in part by an improvement in the profits of our customer service
centre, the results of which are shown within our Support Services segment.
Included in the results of the UK business is a loss of £1.6 million in respect
of our start up Cadillac retail operation. We now operate 12 sites as sole
distributor in the UK. The acquired businesses operating margin is in line with
our existing dealerships.
As part of the Reg Vardy acquisition we acquired five Volkswagon dealerships
which were sold at the end of February shortly after completion. Given the
relatively short period of ownership the results of these dealerships are
insignificant to the group.
USA
The market for new cars in the USA in the first half of 2006 was down by 2.4% to
8.4 million registrations. We continue to represent only a few brands in
California being Jaguar, Land Rover, Lincoln Mercury, Aston Martin and SAAB.
Nationally Land Rover continues to grow in the USA mainly due to the success of
the Range Rover Sport. Lincoln also showed growth in national sales. Jaguar
volumes were helped by the new XK model but overall are down principally due to
much lower X type sales. The results for the first half of 2006 are summarised
as follows:
£m Revenue Gross profit Gross margin Underlying Underlying
% operating operating
profit margin %
--------------------------------------------------------------------------------
Total 2006 108.1 17.6 16.2 3.2 3.0
--------------------------------------------------------------------------------
Total 2005 100.5 15.3 15.2 2.5 2.5
--------------------------------------------------------------------------------
Revenues increased on last year with higher unit sales of Land Rover and Aston
Martin product being the main reason plus a full six months trading from the two
SAAB dealerships that we acquired at the beginning of February 2005. Last year's
results included a number of large low margin fleet deals for Lincoln Mercury
which we have not repeated this year. The affect of this plus improved
performance in all areas of the business has increased the gross margin by 1.0
per cent and the operating margin by 0.5 per cent.
Germany
Our German operation remains a relatively small part of the group with a
contribution to revenue of £20.4 million. The level of our investment in Germany
is £7.3 million. We represent Jaguar, Land Rover and Aston Martin in Frankfurt
and Munich. Operating losses for the six months have been significantly reduced
to £0.2 million from £0.9 million last year. This was achieved through a
combination of higher sales with new models, AMV8, Jaguar XK and Range Rover
Sport, improved margin retention and a lower cost base.
Support Services
We provide a broad range of support services to both the Pendragon group and to
external customers. The services are provided by a number of specialist
businesses which consist of contract hire and leasing, computer software
solutions, wholesale parts distribution and our customer services centre. The
results for the first half of 2006 are summarised as follows:
£m Revenue Gross profit Gross margin Underlying Underlying
% operating operating
profit margin %
---------------------------------------------------------------------------------
Existing 73.3 24.2 33.0 9.9 13.5
---------------------------------------------------------------------------------
Acquired 8.7 2.2 25.6 1.0 11.7
---------------------------------------------------------------------------------
Total 2006 82.0 26.4 32.3 10.9 13.3
---------------------------------------------------------------------------------
Total 2005 76.1 20.9 27.5 5.7 7.5
---------------------------------------------------------------------------------
We are pleased with the contribution made by our Support Services businesses.
Revenues have fallen slightly within the existing businesses, principally due to
lower disposals of contract hire vehicles, and yet the underlying operating
profit has improved by £4.2 million. Each business has contributed to the
improvement in both gross and operating margins.
The Contract hire businesses have achieved improved margins on the disposal of
vehicles that have been defleeted and overheads have been reduced, the
combination of which, has increased operating profit by almost £1.0 million. We
currently have a fleet of 18,400 compared to 11,000 at the beginning of the
year. The fleet now includes 7,600 operated by Vardy Contract Motoring.
Pinewood Technologies, our computer software company, has seen increased demand
for its products from external customers as well as rolling out the new in house
dealer management system to our own sites. Operating profits have been improved
by £0.7 million. We have progressed well with the implementation of our new
dealer management system, Pinnacle, within the group. So far we have installed
systems at 47 sites this year and plan a further 55 by this year end. We expect
that the roll out will continue to accelerate across the enlarged group and with
it the benefits that this technology brings in terms of operational efficiency.
Wholesale parts distribution has managed to grow its revenues in a tough market
and also at the same time increased the retail element. This has helped
strengthen margins and improved the returns from this business. Our customer
services centre, which covers call centre, data processing and warranty
management, continues to expand and cover more of the group. Its revenues have
grown almost £2.0 million, most of which has been retained as additional profit
with minimal increase in cost base due to the efficiencies and cost savings we
have achieved within this operation.
Finance
The level of borrowings at 30 June 2006 was £581.7 up by £404.7 million since
the beginning of the year. The acquisitions increased borrowings by £507.9
million which has been offset in part by strong operating cash inflows. The
balance sheet gearing at 30 June 2006 was 208 per cent compared to 70 per cent
at 31 December 2005. We expect the level of borrowings to reduce in line with
the plan we put in place when acquiring Reg Vardy which was to reduce borrowings
to more normal levels by the end of 2007.
Operating cash inflow for the first six months was £157.7 million, which
compares with £80.9 million generated in 2005. The operating cash inflow
includes a reduction in working capital investment of £52.7 million.
Net investment in property, plant and equipment for the six months was £8.1
million (2005: £24.2 million). This includes investment in new properties and
refurbishments plus a net increase in the contract hire fleet and service loan
cars. Proceeds from property disposals were £32.4 million (2005: £5.9 million).
In addition to this £22.2 million was raised from business disposals (2005:
£14.0 million).
Current Trading and Prospects
The new car market continues to suffer from retail consumer weakness whereas
aftersales and used cars have been relatively unaffected. The integration of the
Reg Vardy business is continuing successfully and the new operational structure
for the UK is now in place. Current trading remains in line with expectations.
Looking ahead to the remainder of the year we do not expect trading conditions
to change significantly. We are confident that our performance expectations for
the year will be met and that our borrowings will continue to reduce in line
with our plan.
TREVOR FINN
Chief Executive
7 August 2006
Consolidated Income Statement
Interim Results
for the six months ended 30 June 2006
6 Months to 30.06.06 6 Months 12 Months
Existing Acquisitions Total to 30.06.05 to 31.12.05
£m £m £m £m £m
----------------------------------------------------------------------------------------------------
Revenue 1,820.2 825.3 2,645.5 1,751.2 3,284.5
Cost of sales (1,561.3) (715.0) (2,276.3) (1,499.8) (2,816.8)
----------------------------------------------------------------------------------------------------
Gross profit 258.9 110.3 369.2 251.4 467.7
Operating expenses (206.8) (92.5) (299.3) (197.6) (371.8)
----------------------------------------------------------------------------------------------------
Operating profit before other income 52.1 17.8 69.9 53.8 95.9
----------------------------------------------------------------------------------------------------
Operating profit before other income,
analysed as:
Before exceptional items 53.0 20.3 73.3 56.7 98.8
Goodwill impairment - - - (1.1) (1.1)
Abortive acquisition costs (0.9) - (0.9) - -
Integration and closure costs - (2.5) (2.5) (1.8) (1.8)
----------------------------------------------------------------------------------------------------
Operating profit before other income 52.1 17.8 69.9 53.8 95.9
----------------------------------------------------------------------------------------------------
Other income - gain on sale of 11.9 - 11.9 1.4 7.4
businesses and property
----------------------------------------------------------------------------------------------------
Operating profit 64.0 17.8 81.8 55.2 103.3
----------------------------------------------------------------------------------------------------
Finance costs (note 5) (39.3) (27.5) (54.9)
Finance income (note 6) 8.0 7.6 15.3
----------------------------------------------------------------------------------------------------
Net finance costs (31.3) (19.9) (39.6)
Share of post tax profit from joint venture 0.3 - 0.1
----------------------------------------------------------------------------------------------------
Profit before taxation 50.8 35.3 63.8
Income tax expense (note 7) (15.7) (11.0) (20.7)
----------------------------------------------------------------------------------------------------
Profit attributable to equity shareholders 35.1 24.3 43.1
----------------------------------------------------------------------------------------------------
Earnings per ordinary share (note 9) 28.1p 19.7p 34.8p
Diluted earnings per ordinary share (note 9) 27.4p 19.1p 33.9p
Dividend per share - interim (note 8) 7.25p 6.6p 6.6p
Dividend per share - final 6.6p
All amounts are unaudited
Consolidated Balance Sheet
30.06.06 30.06.05 31.12.05
£m £m £m
----------------------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 581.1 474.0 394.0
Goodwill 471.4 164.6 166.3
Other intangible assets 2.3 1.4 1.2
Derivative financial instruments - 5.7 6.5
Investment in joint venture 2.2 - 1.4
----------------------------------------------------------------------------------------
Total non-current assets 1,057.0 645.7 569.4
----------------------------------------------------------------------------------------
Current assets
Inventories 859.7 639.9 641.8
Trade and other receivables 310.3 191.8 161.6
Cash and cash equivalents 36.2 92.9 82.1
Non-current assets classified as held for sale 22.5 - 18.9
----------------------------------------------------------------------------------------
Total current assets 1,228.7 924.6 904.4
----------------------------------------------------------------------------------------
Total assets 2,285.7 1,570.3 1,473.8
----------------------------------------------------------------------------------------
Current liabilities
Bank overdrafts - (22.3) (4.7)
Interest bearing loans and borrowings (210.0) (54.4) (4.9)
Trade and other payables (1,264.1) (902.3) (855.5)
Current tax payable (24.6) (21.2) (19.1)
Provisions (0.8) - (0.7)
----------------------------------------------------------------------------------------
Total current liabilities (1,499.5) (1,000.2) (884.9)
----------------------------------------------------------------------------------------
Non-current liabilities
Interest bearing loans and borrowings (403.1) (248.2) (256.0)
Deferred tax (14.4) (5.5) (7.7)
Derivative financial instruments (4.8) - -
Retirement benefit obligation (82.5) (76.2) (71.4)
Long term provisions (1.2) (2.1) (1.2)
----------------------------------------------------------------------------------------
Total non-current liabilities (506.0) (332.0) (336.3)
----------------------------------------------------------------------------------------
Total liabilities (2,005.5) (1,332.2) (1,221.2)
----------------------------------------------------------------------------------------
Net assets 280.2 238.1 252.6
----------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 32.8 32.8 32.8
Share premium account 56.8 56.8 56.8
Capital redemption reserve 2.5 2.5 2.5
Other reserves 12.6 12.6 12.6
Translation reserve (0.2) (0.1) (0.1)
Retained earnings 175.7 133.5 148.0
----------------------------------------------------------------------------------------
Total equity 280.2 238.1 252.6
----------------------------------------------------------------------------------------
All amounts are unaudited
Consolidated Cash Flow Statement
6 Months to 6 Months to 12 Months to
30.06.06 30.06.05 31.12.05
£m £m £m
--------------------------------------------------------------------------------------
Cash flows from operating activities
Operating profit 81.8 55.2 103.3
Profit on sale of businesses and property (11.9) (1.4) (7.4)
Depreciation and amortisation 34.8 23.0 47.5
Share based payments 0.3 0.2 0.4
Goodwill impairment - 1.1 1.1
Decrease / (increase) in working capital 52.7 2.8 (14.5)
--------------------------------------------------------------------------------------
Cash generated from operations 157.7 80.9 130.4
Net interest paid (29.7) (20.1) (43.2)
Taxation paid (15.6) (10.2) (16.6)
--------------------------------------------------------------------------------------
Net cash from operating activities 112.4 50.6 70.6
--------------------------------------------------------------------------------------
Cash flows from investing activities
Business acquisitions (net of cash acquired) (458.8) (13.0) (35.1)
Proceeds from sale of businesses 22.2 14.0 16.2
Investment in joint venture (1.3) - (6.5)
Purchase of property, plant and equipment (85.4) (69.0) (154.4)
Proceeds from sale of property, plant and 77.3 44.8 193.5
equipment
Receipts from sales of own shares 0.5 - 0.3
--------------------------------------------------------------------------------------
Net cash (used in) / from investing activities (445.5) (23.2) 14.0
--------------------------------------------------------------------------------------
Cash flows from financing activities
Payment of capital element of finance lease rentals (2.6) (0.5) (1.0)
Repayment of unsecured bank loans (52.2) (0.3) (73.2)
Repayment of loan notes (114.5) (62.8) (32.7)
Proceeds from issue of unsecured loans 470.0 - -
Dividends paid to shareholders (8.2) (7.4) (15.6)
--------------------------------------------------------------------------------------
Net cash from / (used in) financing activities 292.5 (71.0) (122.5)
--------------------------------------------------------------------------------------
Effects of exchange rate changes on cash held (0.6) (0.1) 1.0
--------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (41.2) (43.7) (36.9)
Opening cash and cash equivalents 77.4 114.3 114.3
--------------------------------------------------------------------------------------
Closing cash and cash equivalents (note 10) 36.2 70.6 77.4
--------------------------------------------------------------------------------------
Consolidated Statement of Changes in Equity
Share Share Other Translation Accumulated Total
Capital Premium Reserves Differences Profit
£m £m £m £m £m £m
--------------------------------------------------------------------------------------------------
Balance at 1 January 2005 32.8 56.8 15.1 (0.3) 116.4 220.8
Currency translation differences - - - 0.2 - 0.2
--------------------------------------------------------------------------------------------------
Net expense recognised directly in equity - - - 0.2 - 0.2
Profit attributable to equity shareholders - - - - 43.1 43.1
--------------------------------------------------------------------------------------------------
Total recognised income and expense for 2005 - - - 0.2 43.1 43.3
--------------------------------------------------------------------------------------------------
Dividends - - - - (15.6) (15.6)
Share based payments - - - - 3.8 3.8
Disposal of own shares in share trusts - - - - 0.3 0.3
--------------------------------------------------------------------------------------------------
- - - - (11.5) (11.5)
--------------------------------------------------------------------------------------------------
Balance at 31 December 2005 32.8 56.8 15.1 (0.1) 148.0 252.6
--------------------------------------------------------------------------------------------------
Balance at 1 January 2006 32.8 56.8 15.1 (0.1) 148.0 252.6
Currency translation differences - - - (0.1) - (0.1)
--------------------------------------------------------------------------------------------------
Net expense recognised directly in equity - - - (0.1) - (0.1)
Profit attributable to equity shareholders - - - - 35.1 35.1
--------------------------------------------------------------------------------------------------
Total recognised income and expense for 2006 - - - (0.1) 35.1 35.0
--------------------------------------------------------------------------------------------------
Dividends - - - - (8.2) (8.2)
Share based payments - - - - 0.3 0.3
Disposal of own shares in share trusts - - - - 0.5 0.5
--------------------------------------------------------------------------------------------------
- - - - (7.4) (7.4)
--------------------------------------------------------------------------------------------------
Balance at 30 June 2006 32.8 56.8 15.1 (0.2) 175.7 280.2
--------------------------------------------------------------------------------------------------
Notes
1. This interim financial information has been prepared applying the accounting
policies and presentation that were applied in the preparation of the company's
published consolidated financial statements for the year ended 31 December
2005, except for the following changes.
As required by the Listing Rules of the Financial Services Authority, as a
result of the endorsement by the EU of new or changed IFRSs that are applicable
or available for early adoption in the preparation of the company's next
consolidated financial statements for the year ending 31 December 2006, the
directors have changed their accounting policies in respect of the amendment to
IAS 39.
Where Pendragon PLC, the company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its group, the company
considers these to be insurance arrangements, and accounts for them as such.
In this respect, the company treats the guarantee contract as a contingent
liability until such time as it becomes probable that the company will be
required to make a payment under the guarantee.
The company does not expect the amendments to have any impact on the financial
statements for the period commencing 1 January 2006.
2. The comparative figures for the financial year ended 31 December 2005 are not
the company's statutory accounts for that financial year. Those accounts have
been reported on by the company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
3. The interim report was approved by the board of directors on 7 August 2006 and
is unaudited.
4. Exceptional items
Exceptional items incurred during the first half of 2006 total £3.4 million.
£2.5 million is in respect of integration costs arising on the acquisition of
Reg Vardy plc and £0.9 million is in respect of the abortive acquisition
costs incurred in the unsuccessful bid for Lookers PLC. Exceptional costs
incurred during the first half of 2005 of £2.9 million was in respect of our
Rover Franchise Group, and consists of £1.1 million impairment of goodwill and
£1.8 million for redundancy costs and non payment of manufacturer bonus and
warranty debtors.
5. Finance costs
6 Months 6 Months 12 Months
to 30.06.06 to 30.06.05 to 31.12.05
£m £m £m
-------------------------------------------------------------------------------
Interest payable on bank borrowings 14.5 5.9 11.1
Interest payable on loan notes 3.8 5.0 8.9
Vehicle stocking plan interest 11.5 8.3 18.6
Interest payable on finance leases 0.1 0.1 0.1
Fair value loss - interest rate swaps 1.0 - -
Unwinding of discounts in contract hire 1.2 1.3 2.5
residual values
Interest on pension scheme obligations 7.2 6.9 13.8
-------------------------------------------------------------------------------
39.3 27.5 55.0
Less interest capitalised - - (0.1)
-------------------------------------------------------------------------------
Total finance costs 39.3 27.5 54.9
-------------------------------------------------------------------------------
6. Finance income 6 Months 6 Months 12 Months
to 30.06.06 to 30.06.05 to 31.12.05
£m £m £m
-------------------------------------------------------------------------------
Fair value gains - interest rate swaps - 0.2 0.4
Interest receivable on bank deposits 0.4 0.2 0.8
Interest on pension scheme assets 7.4 6.7 13.6
Other interest receivable 0.2 0.5 0.5
-------------------------------------------------------------------------------
Total finance income 8.0 7.6 15.3
-------------------------------------------------------------------------------
7. The effective tax rate for 2006 of 30.9% (2005 : 31.2%) is an estimate based
upon the anticipated charge for the full year on profit on ordinary activities
before taxation.
8. A dividend of 7.25p (2005 : 6.6p) net per ordinary share will be paid on 3
October 2006 to shareholders appearing on the register at the close of business
on 15 September 2006.
9. Earnings per share 30.06.06 30.06.05 31.12.05
pence pence pence
-------------------------------------------------------------------------------
Basic earnings per share 28.1 19.7 34.8
Effect of adjusting items (4.5) 1.0 (1.4)
-------------------------------------------------------------------------------
Adjusted earnings per share 23.6 20.7 33.4
-------------------------------------------------------------------------------
Diluted earnings per ordinary share 27.4 19.1 33.9
-------------------------------------------------------------------------------
The calculation of basic, diluted and adjusted earnings
per share is based on:
-------------------------------------------------------------------------------
Number of shares (millions) 30.06.06 30.06.05 31.12.05
number number number
-------------------------------------------------------------------------------
Weighted average number of shares used in 124.8 123.5 123.9
basic and adjusted earnings per share
calculation
Weighted average number of dilutive shares 3.3 3.8 3.4
under option
-------------------------------------------------------------------------------
Diluted weighted average number of shares 128.1 127.3 127.3
used in diluted earnings per share
calculation
-------------------------------------------------------------------------------
Earnings 30.06.06 30.06.05 31.12.05
£m £m £m
-------------------------------------------------------------------------------
Earnings for basic and diluted earnings per 35.1 24.3 43.1
share calculation
Adjusting items:
Profit on business and property (11.9) (1.4) (7.4)
disposals
Goodwill impairment - 1.1 1.1
Abortive acquisition costs 0.9 - -
Operating exceptional costs 2.5 1.8 1.8
Tax effect of adjusting items 2.8 (0.2) 2.8
-------------------------------------------------------------------------------
Earnings for adjusted earnings per share 29.4 25.6 41.4
calculation
-------------------------------------------------------------------------------
The directors consider that the adjusted earnings per share figures provide a
better measure of comparative performance.
10. Cash and cash equivalents 30.06.06 30.06.05 31.12.05
£m £m £m
-------------------------------------------------------------------------------
Bank balances and cash equivalents 36.2 92.9 82.1
Bank overdrafts - (22.3) (4.7)
-------------------------------------------------------------------------------
36.2 70.6 77.4
-------------------------------------------------------------------------------
11. Net borrowings 30.06.06 30.06.05 31.12.05
£m £m £m
-------------------------------------------------------------------------------
Cash and cash equivalents (see note 10) 36.2 70.6 77.4
Current interest bearing loans and (210.0) (54.4) (4.9)
borrowings
Non-current interest bearing loans and (403.1) (248.2) (256.0)
borrowings
Derivative financial instruments (4.8) 5.7 6.5
-------------------------------------------------------------------------------
(581.7) (226.3) (177.0)
-------------------------------------------------------------------------------
12. Acquisition of Reg Vardy plc
On 14 February 2006 the group acquired the entire share capital of Reg Vardy
plc for a total consideration, including costs, of £500 million. In accounting
for this acquisition we are required to review the book value of assets
acquired and make adjustments as appropriate to align accounting policies and
restate assets and liabilities to their fair value. This review under
International Accounting Standards has to be completed within 12 months of
acquisition.
Fair value adjustments made during the first half of the year have increased
the value of assets acquired by £3.2 million giving total goodwill on
acquisition of £304.2 million, which represents the excess of consideration
over the fair value of both tangible and intangible assets that are able to be
quantified. We have not as yet finalised our review of all the assets and
liabilities and further adjustments will be required in the second half of 2006.
This review will include the valuation of the acquired property portfolio which is
anticipated to result in a further increase to the value of assets acquired. We
will conclude the review prior to the preparation of the 2006 financial statements.
This information is provided by RNS
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