Final Results

26th Feb 2008 07:01

Inchcape PLC26 February 2008 2007 Preliminary Results Investments in Emerging Markets and a robust business model deliver record results in 2007 Inchcape plc, the world's leading car retailer, announces its preliminaryresults for the year ended 31 December 2007. Operational & strategic highlights: • Strategy delivery on track achieving record profits for the Group o Like for like sales* +3.4%; like for like operating profit* +6.6% o Sales* from new investments: £1.2bn; operating profit* from new investments: £47.9m • Emerging Markets: continuing progress with acquisitions in Russia and the Baltics, expansion in the Balkans and successful entry into China • UK: successful integration of recent acquisitions contribute to UK trading profit* of £69.6m (+52%) • International operations: sales* of £3.4bn and trading profit* growth of 16%. Represents 76% of Group trading profit* • Group well placed to deliver further growth in 2008 and beyond * At constant currency, before exceptional items Financial highlights: • Sales up 25% at £6.1bn; 26% in constant currency (2006: £4.8bn) • Headline PBT** up 9.9% to £235.1m, 12.9% in constant currency (2006: £213.9m) • Reported PBT up 12.2% to £240.0m (2006: £213.9m) • Headline EPS** up 3.6% to 37.0p • Reported EPS up 1.3% to 38.0p (2006: 37.5p) • Proposed final dividend up 5.0% at 10.5p per share (2006: 10.0p) giving 15.75p for the full year (2006: 15.0p) ** Before exceptional items Andre Lacroix, Group Chief Executive of Inchcape plc, commented: "In 2006 we laid out a clear strategic plan to build on the past successes ofthe Group. Our twin-track growth strategy is about strengthening our existingbusiness and expanding in Emerging Markets. We have made significant progress inexecuting our strategy and have delivered record results in 2007 for the sixthconsecutive year. This has been driven by investment in the high growth Emerging Markets and arobust business model providing the Group with a unique diversity of geography,brand, channel to market and value driver. This excellent portfoliodiversification gives us the flexibility to react quickly to changing marketconditions and maintain our focus on the most productive sources of valuerelevant to each market. The fundamentals of our Group are strong and our strategic direction is clear.Our focus on superior Customer service and our track record of operationalexcellence makes us well placed to deliver continued organic growth this year.Further, the launch of a number of new models in 2008 and the associatedinvestment will enable us to build momentum as the year progresses.Additionally, we expect to benefit from our increased investment in the highgrowth Emerging Markets. We therefore look forward to 2008 with confidence." For further information, please contact: Group Communications, Inchcape plc+44 (0) 20 7546 0022 Investor Relations, Inchcape plc+44 (0) 20 7546 8432 Financial Dynamics (Jonathon Brill/Billy Clegg)+44 (0) 20 7831 3113 Notes to editors About Inchcape Inchcape plc is the leading independent, international automotive retailer, withscale operations in Australia, Belgium, Greece, Hong Kong, Singapore and the UK.The Group also has operations in a number of other markets, including EasternEurope, the Baltics, China, Russia and South America. In addition to growingits core businesses, Inchcape is looking to develop scale operations in new andemerging regions. It represents leading automotive brands and operates either aretail, or a vertically integrated retail model (i.e. exclusive distribution andretail), depending on the market. Inchcape's current key manufacturer partnersare Toyota/Lexus, Subaru, BMW, Mazda, Mercedes-Benz, Volkswagen, Audi and Honda. For further information, visit us at www.inchcape.com Chairman's statement £m 2007 2006 Profit before tax 240.0 213.9Exceptional items (4.9) -Headline profit before tax 235.1 213.9 Inchcape has delivered record results for the sixth consecutive year, reflectingthe progress we are making against our growth strategy and the benefits of anexcellent portfolio diversification. Performance Group sales have increased by 25% to £6.1bn for the full year to 31 December2007, benefiting from both strategic and focused acquisitions, and fromencouraging organic growth in sales in most of our markets. On a like for likebasis, sales grew by 2.5% (3.4% on a constant currency basis). Headline profit before tax and exceptional items of £235.1m was 9.9% higher than2006 and headline earnings per share rose 3.6% to 37.0p. On a statutory basis,which includes exceptional items, profit before tax of £240.0m was 12.2% above2006 and earnings per share rose 1.3% to 38.0p. When reviewing the performance of our business units, trading profit is a keymeasure and is defined as operating profit excluding the impact of exceptionalitems and central costs. In our Distribution businesses we have delivered record results in Europe,strengthening our market leadership in Greece and delivering good growth inBelgium and Finland. In Australia, the launch of the new Subaru Impreza modelhelped grow operating margins and delivered a 24.1% growth in trading profits.The markets in Asia were very competitive but we performed well in Hong Kongwith trading profits up 17.9% in a market which grew by 16.5%. In Singapore, themarket declined by 9.6% while parallel imports increased their share. In thatcontext our Singapore trading profits fell 21.5% but we maintained our marketleadership position and strong margin of 9.6%. Sales from our Retail businesses grew by 53%, benefiting from both acquisitionsand organic growth. In the UK, we outperformed a very challenging market anddelivered like for like sales growth of 5.2%. Across Europe, our focus on the Customer showed solid results with growth in like for like sales of 4.8%. In theEmerging Markets, growth was outstanding, with like for like sales up 57% andoverall sales up 247%. Acquisition and disposal summary We acquired European Motor Holdings plc (EMH) in the UK at the beginning ofFebruary 2007. At the same time we announced the restructuring of our UKbusiness to focus on a limited number of premium brands. As a consequence wehave disposed of a number of non-core businesses, including Bentley, Ferrari andMaserati, together with the EMH auction businesses, Wilcomatic and the InchcapeAutomotive vehicle refurbishment business, for a total consideration of £38m,realising a loss of £7.1m. We also announced the sale of the non-core Vauxhallbusinesses. In January 2007, we sold our shares in the non-core Hong Kong joint venturefinance company, Inchroy, for £46m, realising a profit of £12m. We have invested, and will continue to invest, the proceeds from thesedisposals, as well as our ongoing cash generation, in the Emerging Markets wheregrowth rates are good and market opportunities continue to develop. We have made good progress in executing our Emerging Markets expansion strategy.In January 2007 we opened our first retail centre in China, retailing Toyota inShaoxing, near Shanghai. This has performed ahead of our expectations. InJanuary 2008 we also opened a Lexus centre in Shaoxing and plan to open a secondLexus retail centre in Shanghai in the third quarter of 2008. In July we completed a major acquisition in Latvia. As a result Inchcape has amarket leading position with Distribution and Retail of Ford, Land Rover, Jaguarand Mazda, as well as Retail of BMW, giving Inchcape over 10% market share. Wealso acquired 67% of UAB Vitvela in Lithuania in July, giving us scalerepresentation of Ford and Mazda in that country and a leading share ofMitsubishi and Hyundai Retail. This gives Inchcape close to 20% share of amarket which grew by 68% in 2007. In December we strengthened our position in the high growth Russia market withthe acquisition of Audi and Peugeot retail centres in St Petersburg, bringingour total number of retail centres operating in the second largest market inRussia to five. Dividend The Board is recommending the payment of a final ordinary dividend for the yearof 10.5p (2006 - 10.0p). This gives a total dividend for 2007 of 15.75p, whichis 5% above the 2006 dividend of 15.0p. The increase reflects our continuing confidence in the business and isconsistent with our stated aim of maintaining a progressive dividend policy toour shareholders. The full year dividend is covered 2.3 times by headlineearnings per share (2006 - 2.4 times). Share buy back The Group successfully purchased £18.5m of its shares in 2007, through thepurchase of 4.5m shares, now held as Treasury shares, at an average price of£4.07 per share. Approach to governance and management Good governance and management remains high on our agenda. We focus oncompliance with the Combined Code and other relevant guidance for listedcompanies in all of our global operations. In 2007 we increased our focus on ourCorporate Social Responsibility (CSR) programme, engaging an externalconsultancy to help us redefine, benchmark and progress implementation, ensuringthat it provides benefits to both our employees and to our shareholders. People We are making very good progress towards the goal of becoming the world's most Customer centric automotive retailer, a goal which continues to motivate andenergise everyone in the Group. I would like, on behalf of the Board, to expressour thanks to our colleagues across the Group for their commitment and pride inthe delivery of outstanding results for 2007. Outlook The fundamentals of our Group are strong and our strategic direction is clear.Our focus on superior Customer service and our track record of operationalexcellence makes us well placed to deliver continued organic growth this year.Further, the launch of a number of new models in 2008 and the associatedinvestment will enable us to build momentum as the year progresses.Additionally, we expect to benefit from our increased investment in the highgrowth Emerging Markets. We therefore look forward to 2008 with confidence. Peter Johnson Chairman 26 February 2008 Chief executives review In 2006 we laid out a clear strategic plan to build on the past successes of theGroup. Our twin-track growth strategy is about strengthening our existingbusiness and expanding in Emerging Markets. We have made significant progress inexecuting our strategy and have delivered record results in 2007 for the sixthconsecutive year. We are successfully rebalancing our portfolio, growing significantly outside ofAsia, thanks to strong performances in the UK, Europe, Australia and Emerging Markets. We operated in favourable market conditions, all major markets achieving growth in 2007, excluding Singapore. The average market growth in 2007for all countries in which we operate was 4.2% and the expected weighted averageGDP growth for all of our markets is 2.9% in 2008. The implementation of our transformational strategy in the UK is well underway.The successful integration of acquisitions and focus on the premium sector hashelped us to yet again outperform the market. In Europe, our Distribution businesses have performed ahead of our expectationsand the turnaround in Retail is delivering excellent results. In Australia wehave seen a significant improvement in our performance. We are also building scale in the high growth, higher margin Emerging Markets.By doubling sales and tripling profits we have established powerful platformsfor further growth. We believe we have a successful formula for profitable growth; one that hasproduced another year of record results in 2007 and gives us confidence for thecoming years. It is a focused growth strategy applied to a robust businessmodel. Our business model is quite unlike any of our competitors: we operate bothDistribution and Retail businesses, with multiple revenue streams (includingsales of new and used vehicles, parts, service, finance and insurance), formultiple, successful brands in twenty six countries around the world. We have developed a highly effective management structure - co-ordinatedglobally but locally delivered - to enable consistent quality and control and afast, flexible response to specific market conditions. We share a Vision across every level of the organisation: to be the world's mostCustomer-centric automotive retail group deploying world class retail standards. And we are delivering our Vision through a strategy of strengthening our corebusiness in parallel with significant expansion within existing and Emerging Markets. It is a strategy that works - in 2007 our core business achieved growth of 2.5%in like for like sales and 4.8% in like for like trading profits. Total saleshave grown by 25% and total trading profits by 22%. To reinforce the emphasis we put on achieving our vision and on creatingshareholder value, management at every level is incentivised on economic profitand Customer service levels. Economic profit is defined as trading profit lesstax less a notional charge for capital. During 2007 we have also worked hard starting to put in place the policies andpractices that will help us meet our CSR obligations. Our people create and deliver the Ultimate Customer Experience for our BrandPartners, supported by a clear People strategy that focuses on engaged employeesin winning teams. To assist our people in the delivery of our Customer focusedVision we are making significant investment in technology with a Group-wideimplementation of SAP and in several training initiatives. With our people's support within our resilient business model, we aim tocontinue to attract Customers by offering the most appealing brands in eachmarket and delivering them via leading service levels. I am certain that the Inchcape formula for profitable growth will drive ourperformance further in 2008 and beyond as the world's leading car retailer. A clear strategy for growth Our Vision Fulfilling our Vision, to be the world's most Customer-centric automotive retailgroup, demands a commitment across the business to achieving outstanding servicelevels at every point of our relationship with our Customers for all of ourbrand partners. An important element of our Customer journey is therefore a long term programmeof behavioural change, which will help us differentiate Inchcape from ourcompetitors through measurably better service quality. Our Core Purpose - Creating the Ultimate Customer Experience for our BrandPartners - and our Values: Respect for Each Other, Winning Together, TreatingEvery £ as Our Own, Integrity Without Compromise, Pioneering New Ideas,Passionate about Customers and Caring for our Environment, were newly launchedthis year. These beliefs are at the very heart of our business and guide ourbehaviour and our strategy. They are inextricably linked with our two strategic priorities - to strengthenour existing business and expand in existing and Emerging Markets. Strengthening our business The ability to manage our information better and focus more closely on achievingvalue is central to creating a stronger business. From January 2007 we introduced a global management accounts system reportingmonthly statistics on all value drivers (vehicle sales, parts, service andfinance and insurance (F&I)). In every operation, in every market, we aim todrive margin performance by focusing on these key factors that drive thegreatest value for our business. We believe 'you are what you measure': takingthis approach will enable us to improve in our strongest markets as well asthose operations where performance is not yet Gold Standard. We have also made progress with the roll-out of our Inchcape Advantageprogramme, unique in our industry thanks to the use of cutting edge retailmetrics that enable us to measure and enhance our service levels to ultimatelyincrease sales. It uses global research to ensure that we are doing both the simple things inthe way that Customers appreciate, and applying the emotional intelligence thatensures we treat every Customer as a valued individual. We measure hard Customer data such as traffic, sales leads, and the number oftest drives, conversion and retention rates to ensure we have the best availablesales information at all times. Moreover, we believe that we can increase the productivity of our organisationby maximising the focus on value added activities. That is why we have announceda global partnership with SAP and have started the implementation of a global ITinfrastructure upgrade. This is a five year plan and means Inchcape will operateunder a unified worldwide IT delivery model, reducing complexity and enablinggreater local market flexibility through automated and streamlined salesprocesses, freeing up our people's time to enable delivery of our Customerfocused Vision. Equally important is our engagement programme, designed to ensure we havecommitted people working together in winning teams to deliver the Ultimate Customer Experience. It is based on a simple premise - that by initiallyselecting and attracting the right people, then providing the right learning andrewards, aspiring to a common Core Purpose and set of Values, we will create theright culture. Expanding our scope and scale It has been the results of our expansion that have contributed most to making2007 a record year for Inchcape. In the UK, recent acquisitions are integratingwell and, despite experiencing some pressure on used car margins, we continue tooutperform the market. We are strengthening our focus on the growing premium sector, reducing ournumber of franchise relationships and disposing of non-core sites andbusinesses. Growth in Emerging Markets has been significant and represents exciting furtherexpansion for the Group. Our operations are performing well in these markets,due both to strong local management and our regional brand strategy that focuseson the most appropriate marques in each market. We have a long track record of successfully operating in multiple markets andare confident that we can apply the Inchcape model to achieve sustainablemargins as these car markets mature. In 2007 we have committed £423m of expansion investment and we have significantresources remaining. This, together with a strong pipeline of opportunities,will enable us to deliver our expansion strategy. Looking ahead to 2008 and through to 2010, Emerging Markets remain a majorexpansion opportunity. Expansion will be underpinned by a disciplined allocation of capital to ensurewe identify those markets that will deliver the greatest return. We ensure theright strategic features of sector, location, scale opportunity and brandpartner. We then look in detail at elements including Internal Rate of Return(IRR) and economic profit generated to guide our decisions. Such activities have underpinned our excellent performance in 2007 and willcontinue to support our profitable growth in the future. A robust business model based on excellent portfolio diversification Inchcape operates a four dimensional business model giving the Group excellentportfolio diversification. This diversity gives us the flexibility to reactquickly to changing market conditions and maintain our focus on the mostproductive sources of value relevant to each market. It has enabled us to postanother set of record results in 2007 and gives us confidence that this highperformance formula for success will continue through 2008 and beyond. Geographic diversity Inchcape has a diverse geographic portfolio made up of seventeen mature and nineemerging markets. We enjoy strong scale positions in all of our mature markets:a strong base from which to expand into the high growth Emerging Markets. Thisportfolio approach has proven resilient during 2007, overcoming anticipatedweakness in Singapore to achieve record results at Group level. Multiple brand relationships We have strong, long established global relationships with over twenty brandpartners. Our brand strategy is market specific, enabling us to fit the rightbrand with the right market, Creating the Ultimate Customer Experience for ourBrand Partners whilst aiming to maximise market share. Multi-channels - Distribution Distribution is the historic core of Inchcape. It currently represents 41% ofGroup sales and 70% of Group trading profits. As a distributor we manage everyaspect of our partners' brands in a particular market from importing vehiclesand parts and appointing the dealer network to setting sales and pricingstrategies, national marketing and dealership delivery. We employ limited capital within the Distribution segment and generate highreturns, 8.2% in total for the Group. Although we have been successful inacquiring Distribution contracts this year in the Baltics, there are limitedopportunities to grow this segment through further acquisitions. We willtherefore be predominantly using the strong cash flows generated by theDistribution businesses to invest in the Retail segment in the high margin, highgrowth Emerging Markets. In large markets where we distribute, we aim to own and manage up to 30% of theRetail network. However, in smaller markets, we are able to vertically integratethe two channels and have both exclusive Distribution and exclusive Retail. Wecall this Vertically Integrated Retail (VIR). Where we operate VIR, we are able to deliver important operational efficienciesgenerating a good margin for our shareholders. Following acquisitions this yearwe now operate VIR in the Baltics, Hong Kong and Singapore, as well as othersmaller Asian markets. This is included as Distribution within the accounts. Multi- channels - Retail Retail is a growing segment within the Group. It currently represents 59% ofGroup sales and 30% of trading profits and is the main area of expansion for theGroup. Where we retail, we aim to build scale, both within a region and with ourbrand partners. We build scale regionally in our markets by channellinginvestment into specific geographic areas to provide economic and operationaladvantage. We build scale with our core brand partners to provide marketingefficiencies and we operate a dedicated brand management structure to ensure abetter understanding of our partners' brand values. Our approach to retailing is totally Customer-centric. By building on our brandpartners' Customer programmes, we aim to Create the Ultimate Customer Experienceand deliver a real competitive advantage. Growth and defensive revenue streams We benefit from multiple revenue streams enabling us to perform well in bothgrowing and more challenging markets. In a growth market, vehicles and F&I driveperformance. However, when vehicle sales and therefore F&I are slower, our moredefensive value drivers are the sale of parts and service, which are also highermargin segments. In Distribution, our value drivers are the sales of vehicles and parts. We havefour main priorities in maximising our returns from them, comprising improvedquality of revenues, operational excellence with positive sales to tradingprofit flow through, excellent working capital management and a continuous focuson the quality of our network, including our Customer service standards. Our Retail value drivers are vehicles, parts, service and F&I. For each one, wehave a specific set of continuous improvement targets which are drivingperformance in the three key areas of revenue quality, sales flow and workingcapital. Performance measurement This business model has proven a robust formula for success in 2007 and gives usconfidence in continued strong performance in 2008 and beyond. Details of our key performance indicators are shown within the Operating Review,along with sales and trading profit results for each region. 2008 and beyond From six to ten core markets In 2005 we said we would increase our six core markets to ten over the next fiveyears. In 2007 we named Russia and China as two additional core markets for theGroup. We are committed to integrating these markets into the Group and aretaking a measured approach to new market entry. At the same time we continue toevaluate additional markets with a view to selecting two further core markets. Anew market is selected for both its scale and its potential. The strongrelationships we have developed with our brand partners globally, and oursignificant financial capacity, are key enablers of this strategy. We have aproven track record of successfully entering new markets and are, as a result,very excited by this growth opportunity. Significant future growth The unique business model we follow allows for significant future growth.Inchcape's growth strategy takes advantage of the strong cash flow generatedfrom our robust base of existing businesses to expand in exciting new marketswhilst also continually strengthening the base. Strengthening the base In mature markets the continuous focus on process improvements and operationalexcellence has helped the Group to post record results in 2007. In 2008 we willaim to drive like for like growth ahead of the market in order to gain marketshare, taking advantage of new model launches in our markets and employingeffective marketing strategies to drive traffic. We will continue to improve theCustomer experience through our Inchcape Advantage programme and will extend ourfocus to accelerate growth in the highly profitable aftersales segment. We willalso aim for margin improvements in growth markets whilst protecting margins inmore challenging markets through tight mix and cost management. The Group-wide SAP implementation will also provide key operational support. Itwill strengthen our existing businesses around the world through greaterproductivity, freeing up our people to spend more time with Customers. It willalso be a platform for the fast and efficient integration of new businesses aswe execute our expansion strategy in developed and Emerging Markets around theworld. Expansion strategy The expansion of our business into Emerging Markets is the major growthopportunity for the Group. By our definition, these markets are those where thetotal new vehicle volume sales by international brands are growing at, or above,10% a year. For us, these are Russia, China, the Balkans, the Baltics and Poland. In 2007 our growth strategy saw us gain market leadership through acquisition inthe Baltics, continue the process of building scale in Russia and enter the vastChinese market for the first time. We are expanding our presence with ourmulti-brand Retail or Vertically Integrated Retail (VIR) strategy as appropriatein each market. In 2008 we will continue our expansion in these markets, focusing on buildingscale operations with several brands in Russia and China and maximisingeconomies of scale with our multi-country operations in the Baltics and Balkans. We are confident that our Emerging Markets model gives us a sound strategic basefor expansion. This is based on four core factors - rapid market growth, theability to sustain a strong retail margin, a capital-efficient footprintenabling us to reach the greatest number of Customers through the most effectiveinvestment selection, and attractive unit economics that drive higher revenuesper square metre. Car penetration in these markets was sixteen times lower than developed marketsin 2006, with car sales expected to grow at a compound annual growth rate (CAGR)of 15% to 2011. We have identified the markets we believe have the strongestgrowth potential over the coming years. Under our market entry strategy we have a different approach between the largestcountries, such as China and Russia, and smaller nations like Latvia andLithuania. For larger markets, we aim to retail 30,000 to 50,000 units within five years ofentry, building scale in targeted regions through acquisition or greenfielddevelopment. In smaller nations, we target a market leading position throughDistribution and Retail. In Emerging Markets, as each market matures, the development of higher marginvalue drivers, such as used car sales, service, parts, and F&I, enables asustainability of margins. With this focused twin-track growth strategy, allied to our robust businessmodel, we are confident that we have a winning formula for success. We aretherefore committed to growing Inchcape's scale and profitability throughout2008 and beyond. Operational and financial review Regional Analysis 2007 2007 2007 2006 2006 2006 Operating Exceptional Trading Operating Exceptional Trading profit £m items £m profit profit £m items £m profit £m £mAustralia 43.8 - 43.8 38.5 - 38.5Europe 50.1 - 50.1 39.3 - 39.3Hong Kong 40.3 (12.0) 28.3 24.0 - 24.0Singapore 46.0 - 46.0 58.6 - 58.6United 62.5 7.1 69.6 45.9 - 45.9KingdomEmerging 29.6 - 29.6 10.6 - 10.6Markets Rest of 25.1 - 25.1 21.9 - 21.9WorldCentral (27.5) - - (24.9) - -CostsOperating 269.9 - - 213.9 - -profit Key Performance Indicators (KPIs) The Inchcape plc Board of Directors and the Executive Management monitor theGroup's progress against its strategic objectives and the financial performanceof the Group's operations on a regular basis. Performance is assessed againstthe strategy, budgets and forecasts. To enhance comparability, we review the results in a form that isolates theimpact of currency movements from period to period by applying a constantcurrency. Unless otherwise stated, all sales and trading profit figures quotedin the Operating Review are provided in constant currency. We also measure the quality of revenues through the mix of revenue streams, andthe flow through of value from sales revenue to trading profit. Financial KPIs Vehicle market sizeDefined as total new vehicle registrations by international brands. Vehicle market shareDerived from Inchcape's registrations as a percentage of the overall marketsize. SalesThe consideration receivable from the sale of goods and services. It is statednet of rebates and any discounts and excludes sales related taxes. Trading profitDefined as operating profit excluding the impact of exceptional items andcentral costs. Trading margins (return on sales)Calculated by dividing trading profit by sales. Like for like sales and like for like trading profit growthExcludes the impact of acquisitions from the date of acquisition until thethirteenth month of ownership and businesses that are sold or closed. It furtherremoves the impact of retail centres that are relocated. This is from the dateof opening until the thirteenth month of trading in the new location. Profit before taxThe profit made after operating and interest expense but before tax is paid. Working capitalDefined as inventory, debtors, creditors, and supplier related credit. Economic profitDefined as trading profit less tax less a notional charge for capital. Non-financial KPIs We are establishing several non-financial KPIs, particularly relating to Customer service. For example, net promoter score is a measure being used tomeasure Customer satisfaction across the Group, in line with the Company'sVision to be the most Customer-centric automotive retailer. Group 2007 has been an outstanding year for Inchcape, delivering a record performance,with operating profit before exceptional items up 27% to £270.7m, from saleswhich grew by 26% to £6.1bn. All of Inchcape's core businesses contributed tothis growth, with the exception of Singapore. We saw significant growth in theEuropean Emerging Markets, Hong Kong was boosted by strong market growth fromchanges in the tax regime around engine emissions, and our European Retail andDistribution businesses continued to post strong growth. Our continued focus on improving Customer service and operational excellence hasunderpinned like for like sales growth of 3.4% and like for like trading profitgrowth of 7.0%. The strength of performance in 2007 once again demonstrates the strategicstrength of our broad geographical base. We continue to reflect our management structure in our reporting by separatelyproviding an analysis of the two segments of our business, Retail andDistribution, by geographical region. We have also clearly articulated ourexpansion into Emerging Markets and so report results in Emerging Marketsseparately to give shareholders specific information on our growth in thesemarkets. We define Emerging Markets as those in which we operate and where thetotal new vehicle volume sales by international brands are growing by 10% ormore per annum. For the first time we are including Poland as an Emerging Market. Emerging Markets We continue to enjoy outstanding growth in the Emerging Markets in both Retailand Distribution. The car market in the Baltics grew by 34%, the Romanian marketby 25%, Bulgaria by 12.1%, Russia by 65% and China by 24%. Growth in the Polishmarket reached 18.5% in 2007. Our sales in these markets grew by 145% in total and 49% on a like for likebasis. Trading profits were up 181% in total and 77% on a like for like basis. The performance of our first full year of trading at our Russia business in StPetersburg has been excellent, contributing £149m to sales and generating £9.8mof trading profit from trading margins of 6.6%. This performance will be furtherenhanced in 2008 following the purchase of the Audi and Peugeot retail centresin December 2007. We have expanded further in China, opening a second retail centre in Shaoxing inJanuary 2008, and our business in the Baltics continues to grow with theacquisition of Baltic Motors Corporation and SIA BM Auto in Latvia and UABVitvela in Lithuania in July 2007. Retail business The performance in our Retail businesses was very strong with sales up 53% intotal, primarily benefiting from eleven months of trading from European MotorHoldings plc (EMH) in the UK, but also from the relentless drive onimplementation of our Customer-centric operational excellence programmes. In the UK we delivered total sales growth of 64%. Our like for like sales growthof 5.2% delivered like for like trading margins which declined by 0.3 ppts to2.5% but outperformed the market. Across Europe our Retail turnaround strategyis delivering results with like for like sales growth of 4.8% delivering a likefor like trading profit of £0.8m versus a loss of £0.8m in 2006. Distribution business Overall our Distribution businesses posted a solid performance. Like for likesales were in line with last year but, with gross margins and good costmanagement, like for like trading profit grew by 8.4% to £200.4m. The markets in Asia continued to be very competitive with the market in HongKong growing 16.5%, boosted by new Government tax incentives for low emissionvehicles. In Singapore market conditions were challenging, as expected, with significantgrowth of the parallel imports segment in an overall market which declined by9.6%. This resulted in some market share erosion although we retained our marketleadership and improved our trading margin to 9.6% from 8.9%. Across Europe, we delivered good results in competitive markets. The GreekToyota/Lexus business strengthened its market leadership position to delivertrading profit growth of 26%. The Belgian market grew just 1.3% in the absenceof the biennial motor show. Despite this, we grew like for like sales by 4.2%and delivered trading profit growth of 17.0%. In Finland we saw a significant change in the market with the announcement ofnew tax rules around engine emissions timed for January 2008, which caused aslowdown of the market from November. Despite this, we were able to grow tradingprofit by 6.6%. Australia 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 657.5 616.6 +6.6 +4.4Trading 43.8 38.5 +13.8 +11.3profit Strategy In our Subaru Distribution business we aim to be Australia's premium Japaneseautomotive brand and to leverage that position in our Retail business to becomeAustralia's most Customer-centric automotive retail group. We focus on buildingscale both with our brand partners and geographically in major markets along theEast coast. Market The Australian vehicle market grew by 9.1% in 2007, reaching an all time recordvolume for the industry. Market conditions were however very competitive,fuelled by record levels of sales support and marketing expenditure withconsumers particularly sensitive to fuel consumption. Performance Our Distribution business achieved sales growth of 2.1%, delivering a marketshare of 3.7%. During the first half of the year we saw the run out of the oldImpreza model, with the launch of the new model in the third quarter. We alsosaw the run out of the current Forester model in the second half of the year,ready for a new launch in 2008. As a result, our share was slightly below 2006but our trading margin grew to 8.4% (2006 - 7.1%). Our Retail business saw lower trading profits (down 16.9%) on higher sales dueto competitive market conditions, particularly on used cars. As we were in a runout year for the Impreza and Forester, we also experienced lower margins onSubaru new cars. We did, however, continue to build scale through theacquisition of a new Subaru site. Our AutoNexus business had another successful year, winning several newcontracts. Outlook We expect the competitive nature of the market to continue into 2008. However,with the marketing investment behind the new Impreza model in the first quarterof the year and the launch of the new Forester model and Tribeca facelift in thefirst half, we will be well placed to compete strongly. Europe 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 1,203.9 1,191.1 +1.1 +1.1Trading 50.1 39.3 +27.5 +27.5profit Strategy In Europe, we aim to drive organic growth in our Distribution business and topursue our turnaround plan for Retail. In Distribution, growth will continue tobe driven by new model launches and a focus on operational excellence, supportedby tight overhead cost control. In Retail, the turnaround plan continues tofocus on operational excellence and improvements in capture rate (the proportionof Customer traffic converted to orders), through our Inchcape Advantageprogramme, and the disposal of loss-making sites where required. Market In Greece, the market continues to perform well, growing by 4.2% in 2007 withthe 4x4 segment growing at the expense of small and medium sized cars. In Belgium, the overall new car market was up 1.3%. This exceeded ourexpectations following the record year for registrations in 2006 resulting fromthe biennial motor show. In November, the Finnish government announced changes in the tax system relatingto engine emissions, effectively reducing new car tax from January 2008. Themarket faced a significant slowdown in the fourth quarter as consumers waitedfor better pricing. As a result, the full year Finnish market was down by 13.8%. Performance Our Distribution business delivered record results in 2007, with trading profitsup £8.2m (20%) on sales which were 5.9% up, to £824m. The Retail businessperformed well, delivering trading profit of £0.8m compared to losses last yearof £1.8m. In Greece, our Distribution business continues to lead the market with a 0.9percentage point increase in share to 10.7%. Like for like sales grew by 10.4%and with tight control on overheads, like for like trading profits were up by26%. In the Retail business, our focus on implementation of Inchcape Advantageand restructuring of the business, as outlined in the turnaround plan, isdelivering results. Like for like sales grew by 20% compared to 2006 and likefor like losses have been reduced by 1.8% year on year. In Belgium, our Distribution business maintained our share in a market which was1.3% up. Like for like sales grew by 4.2% compared to 2006 and with goodoverhead control trading profits were improved 17.0%. The Retail business wasimpacted by the flat market with like for like sales down 2.9%, however a 1.0%growth in gross margins and good overhead controls resulted in trading profitsgrowing by 18.5%. In Finland, despite the impact of car tax changes announced in the fourthquarter, trading profits in our Distribution business grew by 6.6%. The taxchanges affected the Retail business significantly in the fourth quarter,resulting in like for like sales being down for the full year by 7.7%. However,as a result of good overhead controls, the launch of the Mazda6 and the sale oftwo loss-making sites outside Helsinki, trading losses were only 3.8% down on2006. Outlook We expect a good year from our Distribution and Retail businesses in 2008. InGreece, the market is expected to continue to grow and, with Toyota's marketleadership position, we expect growth in trading profits from Distribution andto continue to drive sales and reduce losses from Retail. In Belgium, thebiennial motor show is expected to stimulate growth in the market and in Finlandthe car tax changes will provide a good boost to the new car segment throughoutthe year. Given our model range in both markets we are well placed to benefitfrom the market growth. Hong Kong 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 241.5 224.8 +7.4 +17.6Trading 28.3 24.0 +17.9 +29.2profit Strategy We continue to progress in Hong Kong with a particular focus on the luxurysegment through our Lexus range. We will also look to expand in the growingmulti-passenger vehicle (MPV) segment with the launch of new models in 2008.Aftersales will be a key element of growth and we will target operationalefficiencies in this area. Market As a result of the new car tax system the Hong Kong vehicle market grewstrongly, by 16.5%, in 2007. The MPV segment was the largest contributor togrowth, increasing by 22% compared to 2006, and now represents the largestsegment of the passenger car market with 28% share. Performance We saw an excellent recovery in Hong Kong with like for like sales up by 18.9%.We benefited from the new government tax regime which incentivised sales of lowemission vehicles and, as a result, sales of Toyota and Lexus hybrid cars grewsignificantly. The launch of the Lexus LS600h, in June 2007, was well receivedand we further benefited from the launch of the new Corolla in the fourthquarter. Trading profits were up 29% which included a one off profit of £2.9mrelated to property. Outlook We expect positive market momentum to continue based on the strength of the HongKong economy and on the tax incentives for low emission vehicles. We do notexpect significant taxi volume until 2009, the beginning of the replacementcycle. The opportunity for hybrid engine cars will continue to grow and we willexploit this with the Toyota/Lexus range. Singapore 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 480.3 659.5 -27.2 -24.7Trading 46.0 58.6 -21.5 -18.6profit Strategy The strategy focuses on retaining market leadership with healthy margins in anoverall declining and highly competitive market. Revenue generation is focusedon stabilising new vehicle sales by new model launches where possible anddeveloping special editions of existing models to drive differentiation andmargin. We continue to further develop other revenue streams, specifically inaftersales and finance penetration, and will support these initiatives throughcost and organisational structure reorganisation. Market The pace of deregistrations continued to slow as expected and led to an overallmarket decline of 9.6% compared to 2006. Competition from parallel importsincreased significantly in 2007, driven by importers selling new models fromJapan and the aggressive pricing from local distributors buying in Yen. Performance Sales in Singapore were down by 25% but this was partly mitigated by bettertrading margins, which grew by 0.7ppts, resulting in trading profits down by18.6%. A number of factors contributed to the results. A very competitiveenvironment, together with a significant increase in parallel imports, led to adecline in our market share of 6.3ppts to 18.2%, in a market which overalldeclined by 9.6% compared to 2006. Our share of the taxi market was also significantly impacted by changes in thegovernment requirements for Euro IV engines. We achieved strong growth incommercial vehicles with sales up 45%, in part due to the lack of new modelsfrom our competitors. Suzuki sales were up 19.3% with a strong performance inSuzuki service and body shop with an increase in sales of 35%. Overhead andworking capital were also tightly managed, which led to a return on sales growthof 0.7ppts compared to 2006. Outlook We expect the market to continue to decline in 2008 driven overall by lower Certificate of Entitlement (COE) quotas and, with the Yen / S$ rate unlikely toimprove significantly, parallel imports will continue to be a major competitor.We will benefit from two significant launches in the passenger car segment andwe are actively working with Toyota in the development of a new taxi model. UK 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 2,713.5 1,711.9 +58.5 +58.5Trading 69.6 45.9 +51.6 +51.6profit Strategy The strategy in the UK will continue to focus efforts on the premium car segmentwith a smaller number of key brand partners. We will improve Customer servicethrough Inchcape Advantage and will drive growth in aftersales and financepenetration. Market We saw some recovery in the UK market which grew by 2.5% in 2007. The new carpremium segment grew much faster with Inchcape's premium brands increasing 5.5%year on year. There has also been significant growth in Diesel engines as fuelprices and car tax increase. Market pricing was more competitive and, inparticular, used car margins declined overall. Performance Inchcape delivered total sales growth in the Retail business of 64% in 2007 andon a like for like basis outperformed the market with growth of 5.2%. However,due to pressure on used car volumes and margins, the like for like margindeclined from 2.8% to 2.5%. Total trading profits were up 54%, driven by theintegration of the Lind and EMH businesses, which is progressing well. In totalour return on sales declined from 2.6% to 2.4% in 2007 as the benefits of theacquisitions of Lind and EMH helped offset the margin pressure on used cars. Our UK Distribution segment, comprising Inchcape Fleet Solutions, saw like forlike trading profits decline £0.8m due to investment in new contract hirebusiness, the benefit of which will be seen in future years. Outlook The overall market is expected to decline by 2.5% based on the official Societyof Motor Manufacturers and Traders (SMMT) data, but we expect the premium sectorto outperform the market based on the strong pipeline of new products. We expectthe pressure on margins to continue into 2008 as there will be a need tostimulate demand with strong promotional activity based on decreasing consumerconfidence. Emerging Markets 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 518.6 212.8 +143.7 +144.5Trading 29.6 10.6 +179.2 +180.8profit Strategy In Russia, the key objectives are to build scale Retail operations in StPetersburg and Moscow and to exploit regional opportunities. In China, we willbuild scale within the three biggest regional markets, Shanghai (which includesShaoxing), Beijing and Guangzhou, and exploit greenfield and acquisitionopportunities. In the Balkans, we will accelerate growth and increase share inRomania and increase our Retail presence in Bulgaria. In the Baltics, we willbuild scale with Retail and VIR and capitalise on our market leading positionwith our multi-brand model. Market We continue to see outstanding growth in the Emerging Markets. The car market inthe Baltics grew by 34% versus last year, whilst in the Balkans, Romania grew by25% and Bulgaria by 12.1%. In Russia, the market grew by 65% and in China grewby 24%. Performance In China, the performance of our first Toyota site in Shaoxing has exceededexpectations and we are continuing the momentum with the opening of a Lexussite, also in Shaoxing, in January 2008. Trading in Russia in the first fullyear has delivered a return on sales of 6.6%, the highest in the Group forRetail, which contributed £9.8m of trading profit on sales of £149m. In theBaltics, performance was in line with expectations, with our new acquisitions inLithuania and Latvia performing well. Our businesses in the Balkans deliveredsales growth of 57% with trading margins which have grown by 0.1ppts compared to2006. Outlook We continue to see the Emerging Markets as a key source of growth for the Groupand expect them to represent an increasing proportion of the Group's earnings.In 2008 we will also have a full year contribution from the recently acquiredAudi and Peugeot retail centres in Russia and the two acquisitions made in theBaltics. In China, growth will continue in our current sites and will be addedto with new site openings. In the Balkans we will leverage our market leadershipposition and we expect to see continued growth in Romania and Bulgaria withthree sites under construction. Rest of World 2007 £m 2006 £m % change on % change on 2006 2006 (constant currency)Sales 241.5 225.4 +7.1 +14.2Trading 25.1 21.9 +14.6 +24.8profit Strategy We will continue to focus on operational excellence and will driveorganisational efficiencies through tight cost controls. We will developdifferentiation in our brand portfolio and will seek to develop scale throughacquisition where opportunities arise. Market We saw good market growth across most markets in which we trade. In SouthAmerica, the market in Chile was up 13.3% and in Peru was up by 49%. In Brunei,Guam and New Zealand, markets recorded more modest growth, up 1.5%, 6.4% and0.8% respectively. The only exception was Saipan, where the market contracted by37%, due to a slowdown in the economy. Performance We continue to maintain a market leadership position in Guam, Saipan and Bruneiand in 2007 these markets delivered like for like trading profit growth of15.7%. Our business in Ethiopia delivered record results in 2007, with trading profitgrowth of 36% on sales which grew by 43%. We delivered a strong performance in South America, which was boosted by growthin the market and better than expected returns from the acquisition of our newHonda retail site. Trading profits were up 46% compared to 2006 in total and 43%on a like for like basis. In New Zealand, pressure on used car margins and a reduction in the used carmarket contributed to a decline in trading profits. Outlook We remain confident of a good performance from these markets in 2008. Themarkets in Chile and Peru are expected to continue to grow, but at a slower paceand will be led by the luxury car segment. We will look to develop the scale ofthe business there through additional acquisitions. The business in Ethiopia is expected to continue to perform ahead of the marketand will benefit from capital investment projects undertaken in 2007. Financial review Inchcape has produced another year of record results. This has been achievedwithin a robust structure. The following Financial Review details the financialimplications of our operational activity and the risks which we monitor and takesteps to mitigate. Central costsCentral costs for the full year are £27.5m, £2.6m (10.4%) higher than 2006. Thisincrease is a reflection of the continued investment in new management,processes and systems to support our growth. Joint ventures and associatesThe share of profit after tax of joint ventures has decreased by £2.4m to £3.5min 2007. This is mainly as a result of the sale of our 50% stake in Inchroy Credit Corporation Ltd in January 2007. Exceptional itemsThe exceptional items represent the net profits on the sale of a number ofnon-core businesses. Included within this is the sale of Inchroy (£12.0mprofit), Inchcape Automotive and non-core retail centres in the UK (£7.1m loss). Net financing costsThe net finance charge of £33.4m was £27.5m higher than in 2006 and is areflection of our expansion strategy in 2007. The majority of the cost relatesto the financing of the EMH acquisition, but also includes the acquisition ofPorsche in the UK, Audi and Peugeot in Russia and our acquisitions in theBaltics. TaxThe subsidiaries headline tax rate for the year is 25%, as expected at the halfyear compared to 21.7% in 2006. This increase arises due to the fact that the2006 tax rate was low following the resolution of prior year issues andfollowing the recognition of deferred tax on certain accumulated allowances. Therate is expected to continue at this level into 2008. Following the 2007 Finance Bill, changes to the treatment of industrialbuildings allowances and the reduction in the UK standard rate of corporationtax from 30% to 28%, both of which are effective in 2008, we have had tore-assess our deferred tax position on our property portfolio. As a result, weexpect to recognise a £6m exceptional tax charge in 2008. There has been recent court progress regarding VAT and interest claims affectingthe motor retail sector. There remains insufficient certainty about the outcomeof these cases to recognise the amounts we have filed claims for, so we continueto not recognise these. Minority InterestsProfits attributable to minority interests increased to £5.7m in 2007 from £2.9min 2006 and were the result of the 25% minority shareholding by the Olimp Groupin the Toyota/Lexus operation in St Petersburg, acquired in December 2006, andthe 33% minority holding by UAB Vitvela resulting from the July acquisition inLithuania. Cash FlowThe Group continues to be strongly cash generative with cash flow from operatingactivities of £293m, representing 111% of operating profit before exceptionalitems. Once again, the tight management of working capital has been a keysuccess factor in the delivery of this result. During the year, the Group returned nearly £90m to shareholders with £71.1mthrough dividend payments and £18.5m through a programme of buying shares in themarket. In addition, the Group invested £408m in acquisitions and net capitalexpenditure, funded by additional borrowing facilities, and realised £86m fromthe disposal of businesses. Overall, the Group had net debt of £221.5m at 31December 2007 compared to £19.0m at 31 December 2006. PensionsDuring the year, and in line with the funding programme agreed with the Trusteesin 2006, the Group made additional cash contributions to the UK defined benefitscheme amounting to £13.2m. These payments, together with changes in the longterm interest rates since the end of 2006, have resulted in a net pensionsurplus at 31 December 2007 of £28.5m, compared to a net deficit at the end of2006 of £22.7m. Acquisitions and disposalsThe Group announced and completed significant expansion in 2007 and invested atotal of £329.6m in acquisitions, offset by total proceeds from disposals of£86m. The completion of the acquisition of EMH in February 2007 for £234m has beenfollowed up through the year with disposals of non-core EMH and base businessesplus the Inchcape Automotive business, for a total consideration of £38m. In January we completed the acquisition of a Honda dealership in the fastgrowing Chilean markets for a total consideration of £1.3m. In the Baltics we acquired Baltic Motors Corporation and SIA BM Auto in Latvia,a retail group including five retail centres primarily in Riga, giving usrepresentation for Ford and Land Rover as well as 70% of BMW in the country fora consideration of £48m. In Lithuania we acquired 67% of UAB Vitvela giving usrepresentation of Ford and Mazda and a leading share of Mitsubishi and HyundaiRetail for a consideration of £14.9m. We further developed our business in Russia with the completion in December ofthe acquisition of an Audi retail centre and a Peugeot retail centre from theOlimp Group for £19.1m. Capital expenditureThe Group maintained its policy of investing to improve operating standards ofits retail centres and to develop new greenfield retail centres. We alsoannounced the long term implementation plan for a global SAP operational systemplatform, and agreed terms with SAP at the beginning of quarter four 2007. Capital expenditure related to this in 2007 was £6.4m. Total capital expenditure of £80.1m was made in 2007, principally in the UK andthe Emerging Markets. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total 2007 2007 2007 2006 2006 2006 £m £m £m £m £m £mRevenue 6,056.8 - 6,056.8 4,842.1 - 4,842.1Cost of sales (5,174.3) - (5,174.3) (4,132.3) - (4,132.3)Gross profit 882.5 - 882.5 709.8 - 709.8Net operating (617.5) 4.9 (612.6) (495.9) - (495.9)expensesOperating profit 265.0 4.9 269.9 213.9 - 213.9Share of profitafter tax ofjoint ventures andassociates 3.5 - 3.5 5.9 - 5.9Profit before 268.5 4.9 273.4 219.8 - 219.8finance and taxFinance income 57.3 - 57.3 49.0 - 49.0Finance costs (90.7) - (90.7) (54.9) - (54.9)Profit before tax 235.1 4.9 240.0 213.9 - 213.9Tax (57.9) - (57.9) (45.1) 8.0 (37.1)Profit for the 177.2 4.9 182.1 168.8 8.0 176.8year Attributable to:- Equity holders 176.4 173.9of the parent - Minority 5.7 2.9interests 182.1 176.8 Basic earnings pershare (pence) 38.0p 37.5p Diluted earningsper share (pence) 37.8p 37.1p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £m £m Cash flow hedges 33.0 (21.8)Fair value losses on available for sale financial assets (0.2) (1.9)Effect of foreign exchange rate changes 30.3 (34.2)Actuarial gains on defined benefit pension schemes 32.1 5.3Tax recognised directly in shareholders' equity (22.2) 18.7Net gains (losses) recognised directly in shareholders' 73.0 (33.9)equityProfit for the year 182.1 176.8Total recognised income and expense for the year 255.1 142.9Attributable to:- Equity holders of the parent 248.4 140.5- Minority interests 6.7 2.4 255.1 142.9 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 2007 2006 £m £mNon-current assetsIntangible assets 400.5 147.9Property, plant and equipment 519.3 427.0Investments in joint ventures and associates 15.3 15.1Available for sale financial assets 15.6 12.2Trade and other receivables 24.2 23.2Deferred tax assets 10.2 40.6Retirement benefit asset 51.9 - 1,037.0 666.0Current assetsInventories 797.5 704.6Trade and other receivables 262.6 211.4Available for sale financial assets 1.1 52.8Derivative financial instruments 12.9 0.6Current tax assets 2.9 2.2Cash and cash equivalents 343.4 335.2 1,420.4 1,306.8Assets held for sale and disposal group 168.6 30.8 1,589.0 1,337.6Total assets 2,626.0 2,003.6 Current liabilitiesTrade and other payables (940.2) (791.5)Derivative financial instruments (8.3) (40.2)Current tax liabilities (42.2) (33.7)Provisions (31.3) (20.7)Borrowings (155.3) (183.5) (1,177.3) (1,069.6)Non-current liabilitiesTrade and other payables (41.4) (39.4)Provisions (39.4) (35.5)Deferred tax liabilities (18.5) (14.7)Borrowings (409.6) (170.7)Retirement benefit liability (23.4) (22.7) (532.3) (283.0)Liabilities directly associated with the disposal (78.6) -groupTotal liabilities (1,788.2) (1,352.6) Net assets 837.8 651.0 Shareholders' equityShare capital 121.6 120.6Share premium 123.4 115.9Capital redemption reserve 16.4 16.4Other reserves 12.7 (37.7)Retained earnings 539.5 428.6Equity attributable to equity holders of the parent 813.6 643.8Minority interests 24.2 7.2 Total shareholders' equity 837.8 651.0 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £m £m Cash flows from operating activitiesCash generated from operations 293.0 236.8Tax paid (49.8) (50.2)Interest received 12.4 10.7Interest paid (49.5) (18.2)Net cash generated from operating activities 206.1 179.1 Cash flows from investing activitiesAcquisition of businesses, net of cash and overdrafts (329.6) (147.9)requiredNet cash inflow from sale of businesses 85.5 5.4Purchase of property, plant and equipment (72.0) (50.7)Purchase of intangible assets (8.1) (3.1)Proceeds from disposal of property, plant and equipment 47.3 11.4Net purchase of available for sale financial assets - (49.9)Dividends received from joint ventures and associates 2.6 0.4Net cash used in investing activities (274.3) (234.4) Cash flows from financing activitiesProceeds from issue of ordinary shares 8.5 3.9Share buy back programme (18.5) (34.0)Net purchase of own shares by ESOP Trust (2.0) (0.2)Cash inflow from Private Placement 277.1 -Net cash (outflow) inflow from borrowings other than (95.5) 158.7Private PlacementPayment of capital element of finance leases (0.6) (0.3)Settlements of derivatives (4.3) (6.8)Equity dividends paid (71.1) (52.6)Minority dividends paid (1.8) (3.9)Net cash from financing activities 91.8 64.8 Net increase in cash and cash equivalents 23.6 9.5Cash and cash equivalents at beginning of the year 166.2 165.9Effect of foreign exchange rate changes 8.8 (9.2)Cash and cash equivalents at end of the year 198.6 166.2 Cash and cash equivalents consist of:- Cash at bank and in hand 273.0 262.8- Short term bank deposits 70.4 72.4- Bank overdrafts (144.8) (169.0) 198.6 166.2 NOTES TO THE ACCOUNTS BASIS OF PREPARATION The financial statements have been prepared on the basis of the accountingpolicies set out in the Annual report and accounts 2006, which were prepared inaccordance with International Financial Reporting Standards (IFRS) and IFRICInterpretations as adopted by the European Union and implemented in the UK, andthe Listing Rules of the Financial Services Authority. The Group has adoptedIFRS 7 Financial Instruments: Disclosures with effect from 1 January 2007. Thisstandard has no effect on the results or financial position of the Group The financial statements presented for the years ended 31 December 2006 and 2007do not constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The Group's published financial statements for the yearended 31 December 2006 have been reported on by the Group's auditors and filedwith the Registrar of Companies. The report of the auditors was unqualified anddid not contain a statement under Section 237 (2) or (3) of the Companies Act1985. The financial information for the year ended 31 December 2007 and thecomparative information have been extracted from the audited financialstatements for the year ended 31 December 2007 prepared under IFRS, which havenot yet been approved by shareholders and have not yet been delivered to theRegistrar. 1 SEGMENTAL ANALYSIS Primary reporting format - geographical segments The Group's primary reporting format is by geographical segments. The geographical segments disclosed align them with the risks and returnsassociated with different territories. Emerging Markets, which is defined asthose markets where the total new vehicle volume sales by international brandsare growing by 10.0% or more per annum has been changed to include the resultsfrom Poland. The segment now comprises Russia, the Balkans, the Baltics, Chinaand Poland. Comparative information has been reclassified accordingly. The Group's geographical segments are based on the location of the Group'sassets. Revenue earned from sales is disclosed by origin and is not materiallydifferent from revenue by destination. Transfer prices between geographical segments are set on an arm's length basis. Hong United Australia Europe Kong Singapore Kingdom2007 £m £m £m £m £m Revenue Total revenue 657.5 1,436.5 241.5 480.3 2,713.5Inter-segment revenue - (232.6) - - -Revenue from third parties 657.5 1,203.9 241.5 480.3 2,713.5 ResultsOperating profit before 43.8 50.1 28.3 46.0 69.6exceptional itemsExceptional items - - 12.0 - (7.1)Segment result 43.8 50.1 40.3 46.0 62.5Share of profit after tax of - 1.8 0.2 - 0.9joint ventures and associatesProfit before finance and tax 43.8 51.9 40.5 46.0 63.4Finance incomeFinance costsProfit before taxTaxProfit for the year Emerging Rest of Total pre Markets World Central Central Total2007 £m £m £m £m £m Revenue Total revenue 518.6 241.5 6,289.4 - 6,289.4Inter-segment revenue - (232.6) - (232.6)Revenue from third parties 518.6 241.5 6,056.8 - 6,056.8 ResultsOperating profit before 29.6 25.1 292.5 (27.5) 265.0exceptional itemsExceptional items - - 4.9 - 4.9Segment result 29.6 25.1 297.4 (27.5) 269.9Share of profit after tax of - 0.6 3.5 - 3.5joint ventures and associatesProfit before finance and tax 29.6 25.7 300.9 (27.5) 273.4Finance income 57.3Finance costs (90.7)Profit before tax 240.0Tax (57.9)Profit for the year 182.1 Hong United Australia Europe Kong Singapore Kingdom £m £m £m £m £mSegment assets and liabilities Segment assets 189.1 361.6 61.2 80.9 948.3Investment in joint ventures and - 7.6 - - 4.0associatesAssets held for sale 1.1 4.0 - - 163.5Cash and equivalents - - - - -Other unallocated assets * - - - - -Total assets 190.2 373.2 61.2 80.9 1,115.8 Segment liabilities (178.2) (310.4) (18.4) (25.8) (334.7)External borrowings - - - - -Liabilities directly associatedwith theDisposal group - - - - (78.6)Other unallocated liabilities* - - - - -Total liabilities (178.2) (310.4) (18.4) (25.8) (413.3) Emerging Rest of Total pre Markets World unallocated Unallocated Total2007 £m £m £m £m £m Segment assets and liabilities Segment assets 311.8 70.8 2,023.7 - 2,023.7Investment in joint ventures 3.0 0.7 15.3 - 15.3and associatesAssets held for sale - - 168.6 - 168.6Cash and cash equivalents - - - 343.4 343.4Other unallocated assets* - - - 75.0 75.0Total assets 314.8 71.5 2,207.6 418.4 2,626.0 Segment liabilities (64.8) (32.9) (965.2) - (965.2)External borrowings - - - (564.9) (564.9)Liabilities directly associatedwith theDisposal group - - (78.6) - (78.6)Other unallocated liabilities* - - - (179.5) (179.5)Total liabilities (64.8) (32.9) (1,043.8) (744.4) (1,788.2) * Other unallocated assets and liabilities include central provisions, tax,dividends and assets and liabilities not directly related to operatingactivities. Primary reporting format - geographical segments Hong United Australia Europe Kong Singapore Kingdom2006 (Reclassified) £m £m £m £m £m Revenue Total revenue 616.6 1,335.7 224.8 659.5 1,711.9Inter-segment revenue - (144.6) - - -Revenue from third parties 616.6 1,191.1 224.8 659.5 1,711.9 ResultsOperating profit before 38.5 39.3 24.0 58.6 45.9exceptional itemsExceptional items - - - - -Segment result 38.5 39.3 24.0 58.6 45.9Share of profit after tax of - 1.8 2.8 - 0.9joint ventures and associatesProfit before finance and tax 38.5 41.1 26.8 58.6 46.8Finance incomeFinance costsProfit before taxTaxProfit for the year Emerging Rest of Total pre Markets World Central Central Total2006 (Reclassfied) £m £m £m £m £m Revenue Total revenue 212.8 225.4 4,986.7 - 4,986.7Inter-segment revenue - - (144.6) - (144.6)Revenue from third parties 212.8 225.4 4,842.1 - 4,842.1 ResultsOperating profit before 10.6 21.9 238.8 (24.9) 213.9exceptional itemsExceptional items - - - - -Segment result 10.6 21.9 238.8 (24.9) 213.9Share of profit after tax of - 0.4 5.9 - 5.9joint ventures and associatesProfit before finance and tax 10.6 22.3 244.7 (24.9) 219.8Finance income 49.0Finance costs (54.9)Profit before tax 213.9Tax (37.1)Profit for the year 176.8 Hong United Australia Europe Kong Singapore Kingdom2006 (Reclassified) £m £m £m £m £m Segment assets and liabilities Segment assets 154.3 335.8 55.4 104.5 719.5Investment in joint ventures and - 8.6 - - 5.5associatesAssets held for sale - - 30.8 - -Cash and cash equivalents - - - - -Other unallocated assets* - - - - -Total assets 154.3 344.4 86.2 104.5 725.0 Segment liabilities (196.7) (281.3) (18.6) (47.2) (303.7)External borrowings - - - - -Other unallocated liabilities* - - - - -Total liabilities (196.7) (281.3) (18.6) (47.2) (303.7) Emerging Rest of Total pre Markets World Unallocated Unallocated Total2006 (Reclassified) £m £m £m £m £m Segment assets and liabilities Segment assets 88.4 60.3 1,518.2 - 1,518.2Investment in joint ventures 0.6 0.4 15.1 - 15.1and associatesAssets held for sale - - 30.8 - 30.8Cash and cash equivalents - - - 335.2 335.2Other unallocated assets* - - - 104.3 104.3Total assets 89.0 60.7 1,564.1 439.5 2,003.6 Segment liabilities (19.2) (31.7) (898.4) - (898.4)External borrowings - - - (354.2) (354.2)Other unallocated liabilities* - - - (100.0) (100.0)Total liabilities (19.2) (31.7) (898.4) (454.2) (1,352.6) * Other unallocated assets and liabilities include central provisions, tax,dividends and assets and liabilities not directly related to operatingactivities. 1 Segmental analysis (continued) Secondary reporting format - business segments The Group's secondary reporting format is by business segments. The disclosures comprise two key business segments - Distribution and Retail.Distribution comprises Vertically integrated import, distribution and retail aswell as Import and distribution. In addition, Distribution includes FinancialServices and Other businesses. The secondary disclosures below analyse Distribution and Retail by geographicalregion. Additional disclosure has also been provided on the segmentation ofprofitability and operating assets and liabilities. Transfer prices between business segments are set on an arm's length basis. Hong United Australia Europe Kong Singapore KIngdom2007 £m £m £m £m £m Revenue Total revenue 538.7 1,018.8 241.5 480.3 67.5Inter-segment revenue (122.1) (194.7)Revenue from third parties 416.6 824.1 241.5 480.3 67.5 Results 35.0 49.3 28.3 46.0 4.9Operating profit before 12.0 (8.8)exceptional itemsExceptional itemsSegment result 35.0 49.3 40.3 46.0 (3.9)Share of profit after tax of 1.8 0.2 0.9joint ventures and associatesProfit before finance and tax 35.0 51.1 40.5 46.0 (3.0)Finance incomeFinance costsProfit before taxTaxProfit for the year Emerging Rest of Total Markets World Distribution2007 £m £m £m Revenue Total revenue 319.3 237.5 2,903.6Inter-segment revenue (77.3) (394.1)Revenue from third parties 242.0 237.5 2,509.5 ResultsOperating profit before 16.4 25.0 204.9exceptional itemsExceptional items 3.2Segment result 16.4 25.0 208.1Share of profit after tax of 0.6 3.5joint ventures and associatesProfit before finance and tax 16.4 25.6 211.6Finance incomeFinance costsProfit before taxTaxProfit for the year United Emerging Rest of Australia Europe Kingdom Markets World2007 £m £m £m £m £m Revenue Total revenue 240.9 379.8 2,646.0 276.6 4.0Inter-segment revenue - - - - -Revenue from third parties 240.9 379.8 2,646.0 276.6 4.0 Results Operating profit before 8.8 0.8 64.7 13.2 0.1exceptional itemsExceptional items - - 1.7 - -Segment result 8.8 0.8 66.4 13.2 0.1Share of profit after tax of - - - - -joint ventures and associatesProfit before finance and tax 8.8 0.8 66.4 13.2 0.1Finance incomeFinance costsProfit before taxTaxProfit for the year Total Total pre Retail Central Central Total2007 £m £m £m £m Revenue Total revenue 3,547.3 6,450.9 - 6,450.9Inter-segment revenue - (394.1) - (394.1)Revenue from third parties 3,547.3 6,056.8 - 6,056.8 Results Operating profit before 87.6 292.5 (27.5) 265.0exceptional itemsExceptional items 1.7 4.9 - 4.9Segment result 89.3 297.4 (27.5) 269.9Share of profit after tax of - 3.5 - 3.5joint ventures and associatesProfit before finance and tax 89.3 300.9 (27.5) 273.4Finance income 57.3Finance costs (90.7)Profit before tax 240.0Tax (57.9)Profit for the year 182.1 Hong United Australia Europe Kong Singapore Kingdom2007 £m £m £m £m £m Segment assets and liabilities Segment assets 102.5 272.7 61.2 80.9 67.7Investment in joint ventures and - 7.6 - - 1.9associatesAssets held for sale 1.1 4.0 - - -Cash and cash equivalents - - - - -Other unallocated assets* - - - - -Total assets 103.6 284.3 61.2 80.9 69.6 Segment liabilities (146.8) (276.2) (18.4) (25.8) (49.0)External borrowings - - - - -Other unallocated liabilities* - - - - -Total liabilities (146.8) (276.2) (18.4) (25.8) (49.0) Emerging Rest of Total Markets World Distribution2007 £m £m £m Segment assets and liabilities Segment assets 180.4 68.6 834.0Investment in joint ventures - 0.7 10.2and associatesAssets held for sale - - 5.1Cash and cash equivalents - - -Other unallocated assets* - - -Total assets 180.4 69.3 849.3 Segment liabilities (48.5) (32.5) (597.2)External borrowings - - -Other unallocated liabilities* - - -Total liabilities (48.5) (32.5) (597.2) Hong United Australia Europe Kong Singapore Kingdom2007 £m £m £m £m £mSegment assets and liabilities Segment assets 86.6 88.9 880.6 131.4 2.2Investment in joint ventures and - - 2.1 3.0 -associatesAssets held for sale - - 163.5 - -Cash and cash equivalents - - - - -Other unallocated assets* - - - - -Total assets 86.6 88.9 1,046.2 134.4 2.2Segment liabilities Segment liabilities (31.4) (34.2) (285.7) (16.3) (0.4)External borrowings - - - - -Liabilities associated with the - - (78.6) - -Disposal groupOther unallocated liabilities* - - - - -Total liabilities (31.4) (34.2) (364.3) (16.3) (0.4) Total Total pre Retail Unallocated Unallocated Total2007 £m £m £m £m Segment assets and liabilities Segment assets 1,189.7 2,023.7 - 2,023.7Investment in joint ventures and 5.1 15.3 - 15.3associatesAssets held for sale 163.5 168.6 - 168.6Cash and cash equivalents - - 343.4 343.4Other unallocated assets* - - 75.0 75.0Total assets 1,358.3 2,207.6 418.4 2,626.0 Segment liabilities (368.0) (965.2) - (965.2)External borrowings - (564.9) (564.9) (78.6) (78.6) - (78.6)Other unallocated liabilities* - - (179.5) (179.5)Total liabilities (446.6) (1,043.8) (744.4) (1,788.2) United Australia Europe Hong Kong Singapore Kingdom2006 (Reclassified) £m £m £m £m £m Revenue Total revenue 511.2 944.0 224.8 659.5 100.3Inter-segment revenue (111.5) (165.7) - - (2.5)Revenue from third parties 399.7 778.3 224.8 659.5 97.8 ResultsOperating profit before 28.2 41.1 24.0 58.6 3.8exceptional itemsExceptional items - - - - -Segment result 28.2 41.1 24.0 58.6 3.8Share of profit after tax of - 1.8 2.8 - 0.9joint ventures and associatesProfit before finance and tax 28.2 42.9 26.8 58.6 4.7Finance incomeFinance costsProfit before taxTaxProfit for the year Emerging Rest of Total Markets World Distribution2006 (Reclassified) £m £m £m Revenue Total revenue 185.4 225.4 2,850.6Inter-segment revenue (52.4) - (332.1)Revenue from third parties 133.0 225.4 2,518.5 ResultsOperating profit before 9.5 21.9 187.1exceptional itemsExceptional items - - -Segment result 9.5 21.9 187.1Share of profit after tax of - 0.4 5.9joint ventures and associatesProfit before finance and tax 9.5 22.3 193.0Finance incomeFinance costsProfit before taxTaxProfit for the year United Emerging Rest of Australia Europe Kingdom Markets World2006 (Reclassified) £m £m £m £m £m Revenue Total revenue 216.9 412.8 1,614.1 79.8 -Inter-segment revenue - - - - -Revenue from third parties 216.9 412.8 1,614.1 79.8 - Results Operating profit before 10.3 (1.8) 42.1 1.1 -exceptional itemsExceptional items - - - - -Segment result 10.3 (1.8) 42.1 1.1 -Share of profit after tax - - - - -of joint ventures andassociatesProfit before finance and 10.3 (1.8) 42.1 1.1 -taxFinance income -Finance costs -Profit before taxTaxProfit for the year Total Total pre Retail Central Central Total2006 (Reclassified) £m £m £m £m Revenue Total revenue 2,323.6 5,174.2 - 5,174.2Inter-segment revenue - (332.1) - (332.1)Revenue from third parties 2,323.6 4,842.1 - 4,842.1 Results Operating profit before 51.7 238.8 (24.9) 213.9exceptional itemsExceptional items - - - -Segment result 51.7 238.8 (24.9) 213.9Share of profit after tax of 5.9 - 5.9joint ventures and associatesProfit before finance and tax 51.7 244.7 (24.9) 219.8Finance income 49.0Finance costs (54.9)Profit before tax 213.9Tax (37.1)Profit for the year 176.8 United Australia Europe Hong Kong Singapore Kingdom2006 (Reclassified) £m £m £m £m £m Segment assets and liabilities Segment assets 90.7 255.3 55.4 104.5 85.7Investment in joint ventures and - 8.6 - - 5.5associatesAssets held for sale - - 30.8 - -Cash and cash equivalents - - - - -Other unallocated assets* - - - - -Total assets 90.7 263.9 86.2 104.5 91.2 Segment liabilities (173.0) (252.9) (18.6) (47.2) (44.5)External borrowings - - - - -Other unallocated liabilities* - - - - -Total liabilities (173.0) (252.9) (18.6) (47.2) (44.5) Emerging Rest of Total Markets World Distribution2006 (Reclassified) £m £m £m Segment assets and liabilities Segment assets 28.2 60.3 680.1Investment in joint ventures - 0.4 14.5and associatesAssets held for sale - - 30.8Cash and cash equivalents - - -Other unallocated assets* - - -Total assets 28.2 60.7 725.4 Segment liabilities (11.3) (31.7) (579.2)External borrowings - - -Other unallocated liabilities* - - -Total liabilities (11.3) (31.7) (579.2) United Emerging Rest of Australia Europe Kingdom Markets World £m £m £m £m £mSegment assets Segment assets 63.6 80.5 633.8 60.2 -Investment in joint ventures and - - - 0.6 -associatesAssets held for sale - - - - -Cash and cash equivalents - - - - -Other unallocated assets* - - - - -Total assets 63.6 80.5 633.8 60.8 - Segment liabilities Segment liabilities (23.7) (28.4) (259.2) (7.9) -External borrowings - - - - -Other unallocated liabilities* - - - - -Total liabilities (23.7) (28.4) (259.2) (7.9) - Total Total pre- Retail Unallocated Unallocated TotalSegment assets £m £m £m £m Segment assets 838.1 1,518.2 - 1,518.2Investment in joint ventures 0.6 15.1 - 15.1and associatesAssets held for sale - 30.8 - 30.8Cash and cash equivalents - - 335.2 335.2Other unallocated assets* - - 104.3 104.3Total assets 838.7 1,564.1 439.5 2,003.6 Segment liabilities Segment liabilities (319.2) (898.4) - (898.4)External borrowings - - (354.2) (354.2)Other unallocated liabilities* - - (100.0) (100.0)Total liabilities (319.2) (898.4) (454.2) (1,352.6) * Other unallocated assets and liabilities include central provisions, tax,dividends and assets and liabilities not directly related to operatingactivities. 2 EXCEPTIONAL ITEMS 2007 2006 £m £mProfit on disposal of Inchroy joint venture 12.0 -Loss on disposal of Inchcape Automotive Limited (5.8) -Loss on disposal of other UK businesses (1.3) - Operating exceptional items 4.9 -Exceptional tax - 8.0Total exceptional items 4.9 8.0 Exceptional tax in the prior year relates to the release of tax provided againstthe VAT recoveries in 2003 and 2004 following the favourable settlement of thecorporation tax treatment in 2006. 3 FINANCE INCOME 2007 2006 £m £mBank interest receivable 11.6 8.8Expected return on post-retirement plan assets 43.8 37.7Other interest receivable 1.9 2.5Total finance income 57.3 49.0 4 FINANCE COSTS 2007 2006 £m £mBank interest payable 8.9 3.8Private Placement interest payable 11.3 -Fair value loss on cross currency interest rate swaps (8.0) -Fair value adjustment on Private Placement 8.3 -Stock holding interest 18.2 11.2Interest expense on post-retirement plan liabilities 39.1 35.3Other interest payable 12.9 4.6Total finance costs 90.7 54.9 5 TAX 2007 2006 £m £mCurrent tax:- UK corporation tax 36.9 18.1- Double tax relief (30.1) (11.2) 6.8 6.9Overseas tax 54.6 49.4 61.4 56.3Adjustments to prior year liabilities:- UK 2.1 (1.4)- Overseas (0.9) (1.8)Current tax 62.6 53.1Deferred tax (4.7) (8.0)Tax before exceptional tax 57.9 45.1Exceptional tax (note 2) - (8.0)Total tax charge 57.9 37.1 6 EARNINGS PER SHARE 2007 2006 £m £mProfit for the year 182.1 176.8Minority interests (5.7) (2.9)Basic earnings 176.4 173.9Exceptional items (4.9) (8.0)Headline earnings 171.5 165.9Basic earnings per share 38.0p 37.5pDiluted earnings per share 37.8p 37.1pBasic Headline earnings per share 37.0p 35.7pDiluted Headline earnings per share 36.8p 35.4p 2007 2006 number numberWeighted average number of fully paid ordinary shares in 484,498,889 481,212,798issue during the yearWeighted average number of fully paid ordinary shares inissue during the year:- Held by the ESOP Trust (1,760,001) (2,127,884)- Repurchased as part of the share buy back programme (18,625,305) (15,031,175)Weighted average number of fully paid ordinary sharesfor the purposes ofbasic earnings per share 464,113,583 464,053,739Dilutive effect of potential ordinary shares 2,285,346 4,076,256Adjusted weighted average number of fully paid ordinary 466,398,929 468,129,995shares in issue during the year for the purposes ofdiluted earnings per share Basic earnings per share is calculated by dividing the basic earnings for theyear by the weighted average number of fully paid ordinary shares in issueduring the year, less those shares held by the ESOP Trust and those repurchasedas part of the Diluted earnings per share is calculated on the same basis as thebasic earnings per share with a further adjustment to the weighted averagenumber of fully paid ordinary shares to reflect the effect of all dilutivepotential ordinary shares. Dilutive potential ordinary shares comprise shareoptions and deferred bonus plan awards. Diluted earnings per share is calculated on the same basis as the basic earningsper share with a further adjustment to the weighted average number of fully paidordinary shares to reflect the effect of all dilutive potential ordinary shares.Dilutive potential ordinary shares comprise share options and deferred bonusplan awards. Headline earnings (which excludes exceptional items) is adopted to assist thereader in understanding the underlying performance of the Group. Headlineearnings per share is calculated by dividing the Headline earnings for the yearby the weighted average number of fully paid ordinary shares in issue during theyear, less those shares held by the ESOP Trust and those repurchased as part ofthe share buy back programme. Diluted Headline earnings per share is calculated on the same basis as the basicHeadline earnings per share with a further adjustment to the weighted averagenumber of fully paid ordinary shares to reflect the effect of all dilutivepotential ordinary shares. Dilutive potential ordinary shares comprise shareoptions and deferred bonus plan awards. 7 DIVIDENDS The following dividends were paid by the Group: 2007 2006 £m £mInterim dividend for the six months ended 30 June 2007 of5.25p per share (2006 - 5.0p per share) 24.5 23.0Final dividend for the year ended 31 December 2006 of10.0p per share (2005 - 6.3p per share) 46.6 29.6 71.1 52.6 The final proposed dividend for the year ended 31 December 2007 of 10.5p pershare (£48.5m) is subject to approval by shareholders at the Annual GeneralMeeting and has not been included as a liability as at 31 December 2007. The record date for the final dividend is 23 May 2008, and the payment date 17June 2008. 8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Capital Share Share redemption Other Retained capital premium reserves reserves earnings £m £m £m £m £mAt 1 January 2006 120.1 112.5 16.4 13.1 319.6 Total recognised income - - (50.8) 191.3and expense for the year - Share-based payments - - - - 4.5chargeNet disposal of own - - - (0.2)shares by ESOP Trust -Share buy back programme - - - - (34.0)Dividends:- Equity holders of the - - - - (52.6)parent- Minority interests - - - - -Issue of ordinary share 0.5 3.4 - - -capitalAcquisition of minority - - - - -interestAt 1 January 2007 120.6 115.9 16.4 (37.7) 428.6 Total recognised income - - 50.4 198.0and expense for the year - Share-based payments - - - - 4.5chargeNet disposal of own - - - (2.0)shares by ESOP Trust -Share buy back programme - - - - (18.5)Dividends:- Equity holders of the - - - - (71.1)parent- Minority interests - - - - -Issue of ordinary share 1.0 7.5 - - -capitalAcquisition of business - - - - -At 31 December 2007 121.6 123.4 16.4 12.7 539.5 Equity attributable to equity holders Capital total of the Minority shareholders' parent interest equity £m £m £mAt 1 January 2006 581.7 9.5 591.2 Total recognised income 140.5 2.4and expense for the year 142.9 Share-based payments 4.5 - 4.5chargeNet disposal of own (0.2) - (0.2)shares by ESOP Trust Share buy back programme (34.0) - (34.0)Dividends:- Equity holders of the (52.6) - (52.6)parent- Minority interests - (3.9) (3.9)Issue of ordinary share 3.9 - 3.9capitalAcquisition of minority - (0.8) (0.8)interest At 1 January 2007 643.8 7.2 651.0 Total recognised income 248.4 6.7 255.1and expense for the year Share-based payments 4.5 - 4.5chargeNet disposal of own (2.0) -shares by ESOP Trust (2.0)Share buy back programme (18.5) - (18.5)Dividends:- Equity holders of the (71.1) - (71.1)parent- Minority interests - (1.8) (1.8)Issue of ordinary share 8.5 - 8.5capitalAcquisition of business - 12.1 12.1At 31 December 2007 813.6 24.2 837.8 9 NOTES TO THE CASH FLOW STATEMENT a Reconciliation of cash generated from operations 2007 2006 £m £mCash flows from operating activitiesOperating profit 269.9 213.9Exceptional items (4.9) -Amortisation 6.5 4.0Depreciation 27.2 23.3Profit on disposal of property, plant and (9.0) (0.6)equipmentShare-based payments charge 4.5 4.5Increase in inventories (13.9) (58.9)(Increase) decrease in trade and other (2.3) 29.4receivablesIncrease in trade and other payables 30.8 56.1Increase (decrease) in provisions 8.1 (0.6)Decrease in post retirement defined benefits* (15.4) (38.8)Movement in vehicles subject to residual value (7.0) 5.3commitmentsOther items (1.5) (0.8)Cash generated from operations 293.0 236.8 * The decrease in post retirement defined benefits includes additional paymentsof £14.7m (2006 - £37.6m). b Reconciliation of net cash flow to movement in net debt 2007 2006 £m £mNet increase in cash and cash equivalents 23.6 9.5Net cash inflow from borrowings and finance (181.0) (158.4)leasesChange in net cash and debt resulting from cash (157.4) (148.9)flowsEffect of foreign exchange rate changes on net 8.0 (8.8)cash and debtLoan notes issued on acquisition (4.5) -Movement in fair value (7.5) -Net loans and finance leases relating to (41.1) (19.3)acquisitionsMovement in net debt (202.5) (177.0)Opening net (debt) funds (19.0) 158.0Closing net debt (221.5) (19.0) 10 FOREIGN CURRENCY TRANSLATION The main exchange rates used for translation purposes are as follows: Average rates Year end rates 2007 2006 2007 2006Australian dollar 2.39 2.44 2.27 2.48Euro 1.46 1.46 1.36 1.48Hong Kong dollar 15.63 14.28 15.52 15.22Singapore dollar 3.02 2.92 2.87 3.00 11 EVENTS AFTER THE BALANCE SHEET DATE On 10 January 2008 the Group announced that in line with it's stated strategy todispose of certain non-core UK assets, it had sold all of its UK Vauxhall retailoutlets to Eden (GM) Limited for a total consideration of £14.3m. This information is provided by RNS The company news service from the London Stock Exchange

---

Related Shares:

Inchcape