26th Apr 2006 07:01
European Motor Hldgs PLC26 April 2006 EUROPEAN MOTOR HOLDINGS plc ("EMH") Preliminary results for the year ended 28 February 2006 EMH, consistently one of the UK's most profitable quoted motor retail groups,announces its results for the year ended 28 February 2006. Highlights: • Profit before exceptional items and tax up by 15% to £18.0 million (2005, £15.7 million) • Profit before tax £18.5 million (2005, £30.5 million) • Earnings per share before exceptional items up by 18% to 23.4 pence (2005, 19.8 pence) • Net assets per share 168.5 pence (2005, 150.3 pence) • Significant expansion through acquisition with the Group's chosen key manufacturer partners, adding fifteen franchised dealerships to the Group in the year • Acquisitions performing well and slightly ahead of expectations • Dividends per share for the year up by 13% to 10.75 pence (2005, 9.5 pence) • Record start to new financial year Commenting on these results, chief executive Richard Palmer said: "We have produced record trading profits (before exceptional items) in a periodin which the new car market fell by 5% - an outstanding achievement. Ourestablished businesses increased their profits by 10% on a like for like basis,our recent acquisitions are performing well and we expect to make furtherprogress in the next twelve months." Enquiries: Richard Palmer Chief ExecutiveAnn Wilson Finance Director Morning: Biddick Associates 020 7448 1000Afternoon: European Motor Holdings plc 01491 413 399 EUROPEAN MOTOR HOLDINGS plc Preliminary results for the year ended 28 February 2006 Chief Executive's statement We are delighted to report another year of substantial progress and recordtrading profits as set out below. Year ended Year ended 28 February 28 February 2006 2005 £'000 £'000 £'000 £'000 Profit before taxation, exceptionalitems and the effect of Smith KnightFay ("SKF") 16,775 15,660 Trading profit before taxation of SKFsince acquisition 2,283 - Additional Group interest on SKFconsideration (1,048) - ------- ------- Profit before taxation andexceptional items 18,010 15,660Exceptional items VAT refund - 6,272 Interest on VAT refund - 6,279 Profit on disposal of businesses 1,545 2,580 Profit on disposal of properties - 277 MG Rover writedowns and losses (1,102) (588) ------- ------- 443 14,820 ------- ------- Profit before taxation 18,453 30,480 ------- ------- Earnings per share includingexceptional items 24.8p 39.6p ------- ------- Earnings per share excludingexceptional items 23.4p 19.8p ------- ------- Dividend per share 10.75p 9.5p ------- ------- These results represent an outstanding achievement in a period in which the newcar market fell by 5%. The result from SKF is slightly ahead of expectations forthe eight months since acquisition on 1 July 2005, a period which excluded ourtraditionally strong trading months of March to June. Following the collapse of MG Rover in April 2005 we subsequently closed our twoMG Rover businesses and have now surrendered the lease on one site and subletthe other. This resulted in an exceptional cost in the financial year of£1,102,000. We do not envisage any significant further costs in respect of thesebusinesses in subsequent trading periods. Overall our earnings per share excluding exceptional items rose by 18% from 19.8pence to 23.4 pence. Our net assets per share increased by 12% to 168.5 pence.As a result of this excellent performance we have decided to increase our finaldividend to 6.75 pence from 5.8 pence, representing an increase of 13% in ourtotal dividend payable for the financial year. These results continue to demonstrate that our strategy, brands and managementdeliver the highest returns in the quoted motor retail sector. Acquisitions and Disposals In July 2005 we acquired the SKF group in the North West of England for aconsideration of £30.5 million through which the Group gained eight Volkswagencar franchises representing the whole of the Greater Manchester market area, oneVolkswagen commercial vehicle franchise and four Audi franchises. We also gained three Toyota, one Lexus and one Mazda franchise as part of theacquisition but subsequently disposed of these businesses to Toyota's existingManchester partner in January 2006 for a consideration of £13.2m. In addition,we retained the freehold interest in the Mazda and Lexus dealerships and willreceive an annual rent of £0.3 million for these facilities. Interest savingsresulting from the consideration received together with this rental income areestimated to amount to £1.1 million per annum for the Group. During the periodof our ownership the businesses disposed of made a contribution to the Group'sprofit from operations of £0.5 million. We are delighted with the acquisition of SKF and are confident that improvedincome streams will be generated by these businesses in the future as theybecome fully integrated into the Group. We also acquired the Michael Powles Bentley businesses on 1 March 2005. Duringthe financial year these operations in Leicester and Norwich made a contributionto Group profit before tax of £0.9 million. We are confident that we can developthese two businesses alongside our existing Bentley business in Newcastle andcan look forward to higher levels of profitability in the future. Franchise Partners As a result of the acquisitions and disposals made in the last year, the Groupnow holds the following franchises: BMW group BMW 5 Mini 5 BMW motor cycles 1Premier Automotive group Jaguar 5 Land Rover 2 Volvo 6Volkswagen group Audi 6 Bentley 3 Volkswagen 16 Volkswagen LCVs 2 ------Total 51 ------ Trading New car volumes in the UK suffered a 5% decrease in the calendar year 2005. We,however, managed to move our Motor Retail Division profit from operationsforward by 27% to £22.8 million. Whilst acquisitions made a significantcontribution to this increase, the profit from operations of our core businessesincreased by 10% on a like for like basis. We have, over many years, refined our brand portfolio and believe that ourstrength in the premium sector of the market is one of the major reasons for ourcontinued success in a market which has declined. Notwithstanding the fall inregistrations for the new car market as a whole referred to above, the brandsthat we held for the entire period under review increased their market share by8% in the calendar year 2005. The trend of our premium brands capturing salesfrom their 'volume' competitors has continued with our established brandsincreasing their market share by 38% over the last five years. New products have undoubtedly stimulated the premium sector of the market butthe fundamental reason for the migration from volume to premium remains thelower cost of ownership of the premium cars that we retail. Our manufacturers'products retain higher residual values than their competitors in practicallyevery sector of the market into which they sell. The performance of our BMW and Mini businesses in the year was outstanding. BMW(UK) awarded our Stockton dealership, Preston Hall, the highest possibleaccolade when it was named BMW Dealer of the Year for 2005. This award, togetherwith Preston Hall also being named BMW's Aftersales Dealer of the Year and itsassociated Mini dealership being runner up in Mini Dealer of the Year,represents an excellent performance and our thanks go to all the staff inStockton and our BMW management team who achieved this remarkable result. Our existing BMW dealerships moved forward with profit before taxation rising by6%. Our BMW businesses benefited from the introduction of the new '3' serieswhich, together with various niche products, has continued to place BMW at thetop of the premium sector. BMW registrations increased nationally by 9% in 2005and our BMW registrations increased by 17% in the same period. The expandingaftersales parc has further enhanced our profitability. We opened new BMW and Mini facilities at a greenfield site in Durham in Julyand, whilst the business made a small loss in the period under review, we areextremely confident of its future worth to the Group. BMW expects to increaseits sales and market share in 2006 and we look forward to sharing in thatsuccess. We now have three separated Mini operations and are working towards ensuringthat all our Mini franchises are 'stand alone' as soon as possible. The Minibrand justifies this investment in facilities and people as it approaches a 2%market share which will grow further with the next generation of Mini productswhich we will start to see later this year. Mini registrations for 2005increased nationally by 3% and our Mini registrations moved forward by 5% in thesame period. For our Premier Automotive Group businesses, the year was one primarily ofconsolidation. All our businesses performed well above national return on salesaverages as is detailed below. EMH return on sales National return on sales (financial year) (calendar year 2005)Jaguar 2.8% 0.2%Land Rover 3.1% 1.8%Volvo 2.4% 0.6% As shown above, our Jaguar businesses had an excellent year in what was, forthem, a period of relative product inactivity. Our businesses in the North ofEngland have become established as very successful in both sales and aftersales,again a testament to our stable management and their individual teams. The XKcoupe and convertible which were launched in March 2006 have been an outstandingsuccess and have unquestionably generated new enquiry and interest levels in thebrand. We have a very strong order book for the XK. In the calendar year 2005Jaguar's national registrations fell by 19% whereas our Jaguar sales onlysuffered a minor fall of 3%. In March 2006 Jaguar's UK sales were at the samelevel as last year which represents a considerable change in its fortunes. Our Land Rover businesses in the North West had another very good year withdemand outstripping supply for the Range Rover Sport which was launched in May2005. We are working towards expanding our presence with Land Rover in thecoming months and are confident of the franchise's continued success. The newFreelander is expected to be launched towards the end of this year and we willthen have a complete range of new 4x4 products. Whilst our Land Rover sales forthe financial year increased by 2%, the profit before taxation of our businessesrose by 22% in the period, principally as a result of a strong contribution fromRange Rover Sport. Our Volvo businesses in the North East increased their sales and would have hada better year but for the extreme levels of competitive pricing on the flagshipXC90 range in the second half of the year. Volvo is in the middle of a productcycle change which will be completed in the next twelve months when it willlaunch the new S80 and a new smaller Volvo, the C30. These cars, together withthe recently launched C70, put Volvo in a strong position as it will haveexcellent products in almost every segment of the premium market. Volvo'snational registrations were down 4% in 2005 but we managed to improve ourregistrations in that period by 4%. The acquisitions that we have made in the last year have further enhanced ourrepresentation with the Volkswagen group. Our Audi centres had a good year and we expect to continue this progress in thecoming months. In the UK Audi has achieved outstanding results in the last threeyears and has overtaken Mercedes-Benz as the second largest brand by volume inthe upper premium sector. Audi will introduce a new range of 4x4 vehicles in midyear when it brings the Q7 to the UK market. We have pre-sold nearly all our2006 Q7 allocations and this product will further enhance our profitability. Weare also expecting the new Audi TT to arrive during the next 12 months and arevery optimistic about its prospects. Bentley had another good year with its national registrations increasing by over5% in 2005. The introduction of the Flying Spur has generated new salesopportunities and the Continental range will be completed later in 2006 when theContinental GT convertible is introduced. This latter car will open another'niche' for Bentley which we are eager to capitalise upon. We have an excellentopportunity to develop our three Bentley businesses in the North and East of thecountry where we are responsible for 13% of the sales for the brand in the UK. Volkswagen had a good year and, whilst some of its direct volume competitorssuffered major market share setbacks, it moved forward by 2% in 2005. Ourperformance in the financial year was positively affected by the acquisition ofSKF and the consequent increase in our Volkswagen registrations of 39%. Whilsttrading continues to be competitive, we are extremely optimistic about theprospects with our Volkswagen businesses going forward, particularly as we nowhave a significant market territory in the North West. The new Passat waslaunched mid 2005 and is a class leading vehicle which has clearly established anew benchmark for its sector. The most recent addition to the Volkswagen range,the Jetta, is an extremely competitively priced saloon which will, in our view,considerably outperform its predecessor, the Bora. Polo and Golf remain as iconsin their respective sectors and we also have the launches of Fox and Eos to lookforward to in the next few months. In the period under review we increased our return on sales by 40% from 1.5% to2.1%. Whilst our Volkswagen businesses do not currently generate the same levelsof returns that we achieve elsewhere in the Motor Retail Division, theirperformance has improved over prior periods and the other benefits that theirvolumes give to the Group in our relationships with suppliers is extremelyvaluable. Our vehicle auction businesses performed exceptionally well once again withvehicle sales rising 8%. Profit before taxation increased by 17% and thesebusinesses remain a vital part of the Group's operations. Our vehicle washing equipment subsidiary, Wilcomatic, had an excellent year withoperating profits increasing by 43% to £1.5 million. The business moved forwardfor a variety of reasons; improved operational efficiency was achieved in itsservice activities and sales benefited from the capture of the Morrisonssupermarket account where we installed 80 machines in the year. Wilcomaticremains a leading supplier of vehicle washing equipment and service in the UKfor petrol retailers, supermarkets, motor dealers and commercial vehicle users.We have recently expanded our product offerings and look forward to anotherexcellent year. Financial review As stated above, the Group's profit on ordinary activities before tax for theyear ended 28 February 2006 was £18.5 million compared to £30.5 million in theprevious year. This year's result includes exceptional profits of £1.5 millionfrom the disposal of businesses and exceptional losses of £1.1 million resultingfrom the closure of our former MG Rover dealerships. Last year's result includesa number of exceptional items, totalling a net £14.8 million, mainly relating toa VAT refund and associated interest of £12.6 million. Excluding the exceptional items referred to above, the profit for the year was£18.0 million, compared to £15.7 million last year, an increase of 15%. The Group's effective tax rate in the year ended 28 February 2006 was 27.4%.This is distorted by the low tax charge on the exceptional items referred toabove due to the availability of capital losses; after adjusting for this, theeffective tax rate was 29.8%, compared to an adjusted rate of 32.4% last year.The reduction is largely due to the tax relief available to the Group inrelation to share options exercised by Directors and employees in the year. Earnings per share for the year were 24.8p compared to 39.6p last year.Excluding exceptional items, the figure for this year is 23.4p compared to 19.8plast year, an increase of 18%. The Board is recommending a final dividend of6.75p per share, bringing the full year's dividend to 10.75p. This represents a13% increase on last year's total dividend of 9.5p per share. Dividend cover,excluding exceptional items, for the year is 2.2 times, compared to 2.1 timeslast year. The net effect of branches acquired, sold or closed since last year is anincrease in turnover of £201 million. Within our continuing Motor Retailbusinesses, higher vehicle sales volumes of both new and used vehicles and anincrease in average prices of new vehicles sold have increased turnover by afurther £22 million. There have also been increases in the turnover of MotorRetail aftersales and Motor Services. As a result of all these factors, therehas been a net increase of £226 million in overall Group turnover compared tolast year. Profit from operations excluding exceptional items fell to 2.7% of turnovercompared to 3.0% last year. This year's ratio is distorted by the acquisition ofSKF as the Group's period of ownership of those businesses excluded the veryimportant month of March with its peak level of sales and profitability. If theresults of SKF are excluded, the ratio has remained at 3.0%, showing that theGroup continues to be one of the most profitable in the industry. The acquisition of SKF and the subsequent disposal of the Toyota, Lexus andMazda businesses have had a significant effect on the Group's gearing position.In addition to the purchase consideration paid of £30.5 million, the Groupinherited SKF's net borrowings of £37.5 million as at the completion date of 1July. The disposal of the Toyota, Lexus and Mazda businesses resulted in cashconsideration received of £13.2 million and the disposal of net borrowings of£1.2 million. The net borrowings acquired with SKF less those disposed of amountto £36.3 million and these had been reduced to £14.7 million at 28 February. Thenet interest charge of the SKF businesses during the Group's period of ownershipamounted to £1.6 million and EMH incurred interest costs of a further £1.0million on the purchase consideration. Excluding the effects of the SKFacquisition and the exceptional interest received last year, the underlyinginterest charge, including vehicle stocking interest, is a small credit comparedto a cost of £0.1 million last year. As evidenced by the balance sheet, the Group continues to be in a very strongfinancial position. Shareholders' funds have increased by £11.6 million in theyear to £91.7 million as a result of retained profits, share issues and animprovement in the Group's pension scheme deficit to £1.1 million net ofdeferred tax. During the year we have invested £10.9 million in capitalexpenditure and received £0.3 million in respect of the disposal of fixedassets. The total net cash outflow in the year in respect of the acquisitions ofSKF and the Michael Powles Bentley businesses, including the net overdraftsacquired and net of £1.5 million in respect of shares subscribed for by thevendor of SKF, amounted to £47.9 million. The net proceeds of the businessesdisposed of during the year amounted to £13.3 million. During the year, the Company also issued 545,000 shares in respect of theexercise of options, which resulted in a cash inflow of £0.5 million. We have continued to manage our working capital efficiently and have achieved areduction of £1.5 million. During the year, the Group paid tax of £8.0 millionand dividends of £5.3 million and there has been a net repayment of £6.5 millionin respect of loans and finance leases. The net effect of these cash flows andof the £23.9 million profit from operations before other income (after addingback depreciation and other non cash items) and the net interest paid in theyear of £2.8 million is a net cash outflow of £41.9 million. The Group had netborrowings of £23.6 million at 28 February 2006, giving a gearing ratio of 26%at that date. The Group's net borrowings position at the year end is not representative of theyear as a whole because, immediately prior to a month with a registration platechange, used vehicle stocks and vehicle debtors are lower than at other times ofthe year and the Group is in receipt of deposits on cars being prepared for salein March. The highest net borrowings level of £60.7 million occurred in earlyJanuary, prior to the disposal of SKF's Toyota, Lexus and Mazda businesses. The principal elements of our borrowings are loans from banks and finance housesand leasing obligations in respect of demonstrator vehicles and certaindealership refurbishments. The bank loans are repayable over terms of five andten years from inception whilst most other utilised borrowings are repayableeither on demand or within the current calendar year, although some leases inrespect of fixed assets have five or ten year terms. The Group has substantialbanking facilities which were largely unutilised at the balance sheet date andis well placed to expand as acquisition and other opportunities arise. International Financial Reporting Standards Prior to 2005 the Group reported its results under UK Generally AcceptedAccounting Practice. All listed companies in the European Union now have toreport their consolidated financial statements for accounting periods commencingon or after 1 January 2005 under International Financial Reporting Standards asendorsed by the European Union. The financial statements for the year ended 28February 2006 are the Group's first annual financial statements prepared inaccordance with such endorsed standards and the comparatives have been restatedin accordance with the new policies. The effects on the Group's profits and netassets are not significant. A full report detailing the changes to the Group'saccounting policies and their financial effect was published on 18 October 2005and is available on the Company's website at www.emhplc.com/IFRS.pdf. Outlook As is evidenced by the results, we have had an excellent year. The next twelvemonths will benefit from the full year impact of profits from our recentacquisitions and from an anticipated continuing expansion of the premium vehiclesales sector. In confirmation of this, our March performance was exceptionally good giving usour best ever start to a new financial year. Naturally, acquisitions made up alarge part of the increase but we are very pleased to report that ourperformance for the first full month is also better than last year on a like forlike basis. Our gearing levels are relatively modest and we continue to focus on identifyingopportunities to expand with our chosen manufacturer partners. We would particularly like to thank our staff, our suppliers and our advisersfor their part in the last year's success. Richard PalmerChief Executive26 April 2006 CONSOLIDATED INCOME STATEMENT Notes Year Year ended ended 28 February 28 February 2006 2005 £'000 £'000 Revenue 2 754,914 528,838--------------------------- --------- --------- ---------Exceptional VAT refund - 6,272Exceptional MG Rover writedowns - (588)Other cost of sales (646,147) (452,328)--------------------------- --------- --------- --------- Cost of sales (646,147) (446,644) --------- --------- Gross profit 108,767 82,194Distribution costs (52,041) (35,553)Administrative expenses (37,178) (25,186) --------- --------- Profit from operations before otherincome 19,548 21,455--------------------------- --------- --------- --------- Profit from operations before otherincome analysed as:Before exceptional items 20,598 15,771Exceptional MG Rover writedowns and losses (1,050) (588)Exceptional VAT refund - 6,272 --------- --------- 19,548 21,455--------------------------- --------- --------- --------- Profit on disposal of businesses 4 1,545 2,580Profit on disposal of properties - 277 --------- --------- Profit from operations 3 21,093 24,312Investment income 525 1,242Finance costs (3,165) (1,353)Exceptional interest on VAT refund - 6,279 --------- --------- Profit before tax 18,453 30,480--------------------------- --------- --------- --------- Profit before tax analysed as:Before exceptional items 18,010 15,660Exceptional MG Rover writedowns and losses (1,102) (588)Exceptional VAT refund and interest - 12,551Profit on disposal of businesses andproperties 1,545 2,857 --------- --------- 18,453 30,480--------------------------- --------- --------- --------- Tax (5,053) (9,320) --------- --------- Profit for the year 13,400 21,160 --------- --------- Earnings per share (basic) 6 24.8p 39.6p --------- --------- Earnings per share (diluted) 6 24.3p 38.8p --------- --------- Dividend per share for financial year 5 10.75p 9.5p --------- --------- CONSOLIDATED BALANCE SHEET 28 February 28 February 2006 2005 £'000 £'000 Non-current assetsGoodwill 25,501 4,662Property, plant and equipment 59,730 31,914Trade and other receivables 2,448 1,300 --------- -------- 87,679 37,876 --------- --------Current assetsInventories 140,930 88,893Trade and other receivables 21,743 15,545Cash at bank and in hand 2,558 43,977 --------- -------- 165,231 148,415 --------- -------- Total assets 252,910 186,291 --------- -------- Current liabilitiesTrade and other payables (151,543) (96,137)Tax liabilities (163) (4,289) --------- -------- (151,706) (100,426) --------- -------- Non-current liabilitiesTrade and other payables (5,402) (309)Retirement benefit obligation (1,576) (2,739)Deferred tax liabilities (2,357) (2,605)Long-term provisions (133) (97) --------- -------- (9,468) (5,750) --------- -------- Total liabilities (161,174) (106,176) --------- -------- Net assets 91,736 80,115 --------- -------- Share capital 21,779 21,319Share premium account 28,889 27,392Capital redemption reserve 926 926Retained earnings 40,142 30,478 --------- -------- Total shareholders' equity 91,736 80,115 --------- -------- Net (debt)/funds (23,587) 36,573 --------- -------- Net assets per share 168.5p 150.3p --------- -------- CONSOLIDATED CASH FLOW STATEMENT Year Year ended ended 28 February 28 February 2006 2005 £'000 £'000Operating activitiesProfit from operations 21,093 24,312Adjustments for: Depreciation of property, plant and equipment 4,167 3,350 Share option expense 122 94 Expense for defined benefit retirement obligations 227 148 Payments made for defined benefit retirement obligations (138) (55) (Profit) on disposal of property, plant and equipment (15) (23) (Profit) on disposal of businesses (1,545) (2,580) (Profit) on disposal of properties - (277) --------- -------- Operating cash flows before movements in workingcapital 23,911 24,969(Increase) in inventories (7,903) (1,517)Decrease in receivables 9,598 2,992(Decrease)/increase in payables (134) 123Increase/(decrease) in demonstrator funding 1,637 (2,781) --------- --------Cash generated by operations 27,109 23,786Income taxes paid (8,033) (6,669)Interest paid (3,165) (1,353) --------- --------Net cash from operating activities 15,911 15,764 --------- -------- Investing activitiesInterest received 334 1,162Exceptional interest received - 6,279Disposal of businesses 13,285 7,985Proceeds on disposal of property, plant andequipment 329 430Purchases of property, plant and equipment (10,907) (2,487)Acquisition of businesses (47,855) (1,380) --------- -------- Net cash (used in)/generated by investingactivities (44,814) 11,989 --------- -------- Financing activitiesDividends paid (5,321) (4,705)Repayments of borrowings (7,527) (643)Repayments of obligations under finance leases (608) (259)Proceeds on issue of share capital 457 155Purchase of own shares - (877) --------- -------- Net cash (used in) financing activities (12,999) (6,329) --------- -------- Net (decrease)/increase in cash and cashequivalents (41,902) 21,424 Cash and cash equivalents at beginning of year 43,977 22,553 --------- -------- Cash and cash equivalents at end of year 2,075 43,977 --------- -------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year Year ended ended 28 February 28 February 2006 2005 £'000 £'000 Actuarial gain/(loss) on defined benefitpension scheme 1,061 (180)Tax on items recognised directly in equity 402 455Profit for the year 13,400 21,160 --------- -------- Total recognised income and expense for the year 14,863 21,435 --------- -------- NOTES TO THE STATEMENT OF PRELIMINARY RESULTS 1. Basis of preparation Prior to 2005 the Group has reported its results under UK Generally AcceptedAccounting Practice ("UK GAAP"). All listed companies in the European Union nowhave to report their consolidated financial statements under InternationalFinancial Reporting Standards ("IFRS") for accounting periods commencing on orafter 1 January 2005. The results in this preliminary results statement havebeen abridged from the full Group accounts for the year ended 28 February 2006which have been prepared in accordance with IFRS for the first time. There is arequirement to include at least one year of comparative information in thefinancial statements for the year ended 28 February 2006 and therefore thetransition date to IFRS for the Group is 1 March 2004. The results for the yearended 28 February 2005 in this preliminary results statement have been restatedin accordance with IFRS. On 18 October 2005 the Group published a report explaining the impact of IFRSand this is available on the company's website at www.emhplc.com/IFRS.pdf. Thisdocument details the key differences between UK GAAP and IFRS that impact theGroup. The document also includes reconciliations of the balance sheet as at 1March 2004, 31 August 2004 and 28 February 2005, and of the income statement forthe six months ended 31 August 2004 and the year ended 28 February 2005. Thereport referred to above sets out the Group's principal accounting policies asthey have been modified to comply with IFRS. The principal differences whichimpact the Group are summarised below: i Goodwill - amortisation of goodwill is no longer permitted, it is insteadtested at least annually for impairment. Goodwill previously written off toreserves is no longer required to be adjusted through the income statement ondisposal of a business. ii Share options - the fair value of share options granted is charged to theincome statement over the vesting period of the options. iii Pensions - the deficit in the pension scheme is incorporated in the balancesheet, operating and financing costs are charged to the income statement andactuarial gains and losses are taken directly to equity. iv Deferred tax - deferred tax is recognised on revaluations of property, ongains on assets rolled over, and on employee share options where tax relief isavailable on exercise. v Leases - leased land and buildings are considered as separate assets for thepurpose of classification. Where capitalised long leasehold land is consideredto be an operating lease under IFRS, the premium paid is treated as a long termprepayment and amortised over the period of the lease. vi Dividends - the recognition of dividends is on a declared rather than aproposed basis. The application of IFRS also changes the terminology and presentation of thefinancial statements as reflected in this preliminary results statement. This preliminary results statement has been prepared on the basis of theaccounting policies which the Group has adopted in its financial statements forthe year ended 28 February 2006. IFRS comprise a significant amount of accounting and financial reportingregulation, much of which has been originated or revised very recently.Interpretation of this regulation is expected to be refined throughout thefinancial community, both in the UK and the rest of the European Union, as IFRSare implemented for the first time by many listed companies. 2. Analysis of revenue Year Year ended ended 28 February 28 February 2006 2005 £'000 £'000 Motor Retail Division 734,989 510,041Motor Services Division 16,044 14,765Other Businesses 3,881 4,032 --------- -------- 754,914 528,838 --------- -------- 3. Analysis of profit from operations Year Year ended ended 28 February 28 February 2006 2005 £'000 £'000 Motor Retail Division 22,797 17,941Motor Services Division 1,549 1,085Other Businesses 7 65Central costs (3,755) (3,320)Exceptional VAT refund - 6,272Exceptional MG Rover writedowns and losses (1,050) (588)Profit from disposal of businesses 1,545 2,580Profit from disposal of properties - 277 --------- --------- 21,093 24,312 --------- --------- 4. During the year, the Group disposed of its Toyota, Lexus and Mazdabusinesses in the Manchester area that were acquired as part of the Smith KnightFay acquisition during the year. The Group also disposed of a Volkswagenaftersales business in Walton on Thames. In 2005, the Group disposed of its DAFand LDV trucks business in Taunton, its Audi dealerships in Sunderland andChester, its Volkswagen dealership in Darlington and the assets of its retailcar washing venture. 5. The Directors recommend a final dividend of 6.75p (2005, 5.8p) per share,to be paid on 5 September 2006 to shareholders on the register at 11 August2006. An interim dividend of 4.0p (2005, 3.7p) per share was paid during theyear, making a total for the year of 10.75p (2005, 9.5p). 6. The calculation of earnings per share for the year ended 28 February 2006is based on the profit for the financial year of £13,400,000 (2005, £21,160,000)and on 53,975,534 (2005, 53,390,052) ordinary shares, being the weighted averagenumber of shares in issue during the year. The number of dilutive potentialordinary shares arising from share options, as calculated in accordance with IAS33: Earnings per Share, is 1,138,266 (2005, 1,195,969). Therefore, thecalculation of diluted earnings per share is based on the profit for thefinancial year of £13,400,000 (2005, £21,160,000) and on 55,113,800 (2005,54,586,021) ordinary shares. Earnings per share before exceptional items hasbeen calculated on profits for the year of £12,642,000 (2005, £10,588,000) asdetailed below: Year Year ended ended 28 February 28 February 2006 2005 £'000 £'000 Profit after taxation 13,400 21,160(Profit) on disposal of businesses (net of tax) (1,529) (1,939)(Profit) on disposal of properties (net of tax) - (259)Exceptional VAT refund and associated interest(net of tax) - (8,786)Exceptional MG Rover writedowns (net of tax) 771 412 --------- -------- 12,642 10,588 ========= ======== 7. This preliminary results statement was approved by the Board of Directorson 26 April 2006. The above results for the year ended 28 February 2006 havebeen abridged from the full Group accounts for that year, which received anunqualified auditors' report, and which will be delivered to the Registrar ofCompanies shortly. 8. The statutory accounts for the year ended 28 February 2005, which receivedan unqualified auditors' report, have been delivered to the Registrar ofCompanies. 9. The Annual Report and Financial Statements will be posted to shareholdersas soon as practicable. Further copies will be available from the company'sregistered office at Craigmore House, Remenham Hill, Henley-on-Thames, Oxon RG93EP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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