4th Sep 2006 07:01
Lookers PLC04 September 2006 4 September 2006 LOOKERS plc UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2006 Commenting on another record set of results for Lookers in the half-year ended30 June 2006, Ken Surgenor, Chief Executive said: I am delighted to announce an excellent set of results. They demonstrate theeffectiveness of our business model and approach which continue to deliver astrong performance. It also reflects the high quality of our management teamand the commitment and hard work of our people, the strong relationships we havedeveloped with our manufacturer partners, our de-centralised operating model andour development into complementary automotive markets. As a result, we aremaking good progress in meeting our expectations for the year and the forecastwe made at the time of the defence. The consistent application of our provenstrategy will, I am confident, continue to deliver value to our shareholders." Key Financials Half year to 30 June 2006 2005 ChangeTurnover £726.6M £648.1M +12%Operating profit £17.8M £15.3M +16%Adjusted operating profit* £22.0M £15.0M +47%Adjusted profit before tax* £17.0M £11.0M +55%Adjusted earnings per share* 6.69p 4.46p +50%Adjusted operating margin 3.0% 2.3% +30%Interim dividend 1.3p 0.95p +37% * Adjusted pre exceptional items, goodwill impairment and amortisation ofintangible assets Highlights • New car retail sales up 5% on a like for like basis against a market that is down over 4% • Used car retail sales up 22% with like for like sales up 9% • Particularly good performances from PAG, Lexus and Vauxhall • FPS Distribution operating profit up 24% • Acquired 6 outlets from HR Owen in the South East strengthening our PAG prestige offering • Since the half-year, acquired a further 10 prestige outlets from HR Owen in the South East • Awarded Mercedes Benz market area • Arranged new loan facilities of £200million on competitive terms An analysts' briefing will be held at the offices of Hudson Sandler at 29 ClothFair, London EC1A 7NN at 9.30 a.m. on 4 September 2006. Enquiries: Lookers Telephone: 020 7796 4133Ken Surgenor, Chief Executive (on Monday 4 September only, and on 0161 291 0043 thereafter)David Dyson, Finance Director Hudson Sandler Telephone: 020 7796 4133Andrew Hayes/Nick Lyon/Kate Hough High resolution photographs will be available to media at www.vismedia.co.uk from 12.30pm. CHIEF EXECUTIVE'S REVIEW The first six months of this year have been eventful for Lookers. The Boardfelt it was in shareholders' interests to make an offer for Reg Vardy inJanuary. Having done so, we concluded that it would be wrong and expensive tomatch the price paid by Pendragon for the business. In March, Pendragon made awholly unattractive all share offer for Lookers which shareholders firmlyrejected in line with the Board's recommendation. I would like to take thisopportunity to again thank our shareholders for their support of our strategy. These results, once again, demonstrate the outperformance that Lookers is ableto deliver across its complementary business streams. We continue to develop our business through investment in our existingoperations and through selected acquisitions including most recently theacquisition of a further 10 dealerships from HR Owen on 31 August 2006. The impressive turnover, adjusted profit and earnings growth of 12%, 55% and 50%respectively, once again demonstrates the effectiveness of our business model.We now have one of the broadest revenue streams in the industry and this enablesus to continue to perform well even in a more subdued new car retail market.Lookers' success owes a great deal to the strong management team and thededicated support they receive from the team across the business. ACQUISITIONS The motor retail and parts distribution industry remains highly fragmented,offering us significant opportunities to develop the business. At the beginningof the first half we acquired six Premier Automotive Group ("PAG") dealershipsfrom HR Owen including two Jaguar, two Land Rover and two Volvo dealershipslocated in Colchester, Ipswich and Bury St Edmunds adjacent to our existing PAGterritory. This business has been successfully integrated and has performedstrongly in terms of volume and profit growth, benefiting from Lookers'de-centralised dealer enfranchised operating model. The success of thisstrategy was recognised and rewarded by Land Rover at the beginning of the yearwhen they awarded us the franchise in North Glasgow. On 24 August, we acquired a Chrysler, Jeep and Dodge outlet in Liverpool for aconsideration of £1.3 million including the freehold property. On 31 August, we acquired a further 10 dealerships from HR Owen for a totalconsideration of less than £21 million. This acquisition, which includes fourMercedes Benz, two Land Rover, two Lexus and two Chrysler, Jeep and Dodgeoutlets in the South East, significantly improves our mix of prestige brands andre-introduces Mercedes Benz into our franchise portfolio. These dealershipscomplement our existing market areas in the South East and we are confidentthat, like the previously acquired HR Owen businesses, they will prosper underLookers' ownership. The acquisition is expected to be earnings enhancing in itsfirst full year under our ownership and add approximately £175 million toLookers' annual turnover. FINANCIAL COMMENTARY AND DIVIDEND Turnover for the first half increased 12% to £726 million (2005: £648 million),of which approximately half was organic growth. As a result of our continuingfocus on operational efficiency, adjusted operating margin increased by 30% to3.0%. Adjusted operating profit was £22 million, an increase of 47% on the sameperiod last year. Profit before exceptionals, impairment of goodwill andamortisation of intangible assets increased by an impressive 55% to £17 million(2005: £11.0 million), generating a 50% increase in adjusted earnings per shareof 6.69 pence (2005: 4.46 pence). Total exceptional items amount to a charge of£3.8 million, most of which relates to the costs of the successful defence ofthe hostile offer from Pendragon plc. Our focus on working capital management again resulted in strong operating cashflow of £15 million for the period. The Group invested over £5 million onacquisitions and £7 million on developing the franchise network. Despite thissignificant investment in our future development, gearing at the period end fellto 75% compared with 80% at the last year end. Dividend In light of these results and our continued confidence in the Group's prospects,the Board is proposing an interim dividend of 1.30 pence (2005: 0.95 pence).This will be paid on 30 November 2006 to shareholders on the register at 22September 2006. The 37% increase in dividend reflects the Group's commitment to a moreprogressive dividend policy as previously set out at the preliminary results on20 March 2006, and also reflects our previously stated policy to increase theproportion of the dividend proposed in the first half of the year. REFINANCING Competitive terms have recently been agreed to provide up to £200 million offunds to replace existing debt and provide the finance for future expansion. Weintend to use those funds to invest in the business by improving our facilitiesand pursuing further acquisitions. BOARD Further to Hamilton Finance Limited, a subsidiary of GE Corporation, selling itsshareholding to Tony Bramall, Neil Clyne, Vice President of the European AutoDivision of GE Consumer Finance, resigned from the Board of Lookers as aNon-Executive Director in April 2006. He was replaced as a Non-ExecutiveDirector on the Board by Tony Bramall at an EGM on 30 June 2006. Neil's valuedcontribution to the Group's success over the last six years is much appreciatedby the Board. I would like to take this opportunity to formally welcome Tony to the Board. Heis one of the most respected and successful operators in the UK motor industryand I am confident his experience will prove invaluable to the continueddevelopment of Lookers. Today, Fred Maguire will be stepping down as Chairman and from the Board havingbeen with the Company for over twenty years, the last six years as Chairman.During his Chairmanship, Lookers has developed beyond all recognition into oneof the most dynamic and best performing motor retailers in the country. I knowthat Fred would like to take this opportunity to say thank you to colleaguesacross the Group for their support over this period. The Board and I wish himwell for the future. From today Phil White will be taking over as Chairman in what will be anexciting period in Lookers' development and I have no doubt he will have thefull support of the Board, management and staff to continue to deliver excellentvalue to shareholders. Phil has been Chief Executive of National Express GroupPLC since 1997. I would also like to say thank you on behalf of the Board to all our colleaguesfor their loyalty, commitment and hard work during the first half, despite thedistractions and uncertainty of Pendragon's unwelcome offer. We give highpriority to attracting and retaining the best people and they are undoubtedlythe major reason why Lookers continues to make excellent progress. OPERATING REVIEW Franchise network Lookers now operates 101 franchise outlets and represents 26 brands. Our broadbase of manufacturing partners and wide geographic coverage across the UnitedKingdom is a key strength of our business. We pride ourselves on providing afirst class service to our partners and customers and are able to do so becauseof our decentralised management structure. Empowering key franchise directorsand local management has been instrumental in generating a healthyentrepreneurial spirit across the business. Trading in the first half, which includes the key registration month of March,has been good. The first quarter performance in particular was very strong andahead of management expectations. In the second quarter we continued tooutperform the market although, as expected, trading has moderated after astrong March registration performance. Our Charles Hurst business in NorthernIreland also performed well in the first half following excellent sales inJanuary, a key sales month for the region. Turning to our volume franchises, Vauxhall achieved a creditable performance inthe first half as we continued to invest in its refurbishment programme. We arein the process of improving a number of our Vauxhall outlets. A complete rebuildof our St Helens facility is currently underway and is expected to be completedby early autumn. The showroom has been completed and once the other work iscomplete it will enable us to display more used cars and increase the site'sservice capacity. Further to the refurbishment work carried out last year, weare updating our remaining three Vauxhall outlets to Vauxhall's currentcorporate standards. We are confident these refurbished sites will prove to beequally popular with customers as our brand centre in Birmingham and our newretail concept Vauxhall outlet in Boucher Road, Belfast. Toyota and Lexus also performed well during the first half, the formercontinuing to benefit from the refurbishment of six of its outlets last yearwhich has generated higher customer footfall and the latter from theintroduction of several new models such as the GS300, the IS200 and the GXHybrid. Of the prestige brands, PAG continues to go from strength to strength. We nowoperate 25 of its franchises across the UK in three major market areas - theSouth East, West of Scotland and Northern Ireland. The performance of our PAGbusiness in the South East has been very encouraging including the outletsacquired from HR Owen. We are confident that our recent acquisition of a furtherten dealerships from HR Owen will prove to be equally successful. Other significant developments taking place with PAG are in Scotland where weare in the process of bringing together Land Rover, Volvo (relocation from itsexisting Glasgow site) and Jaguar onto one excellent facility in Glasgow. Theshowrooms are already complete with the aftersales and under-cover used cardisplay due to be available on 1 October 2006. In addition, we are alsoredeveloping our multi-franchise site in Motherwell to accommodate Volvo,Jaguar, Mazda and Hyundai. This site is expected to be completed in the finalquarter. A key strength of the business continues to be the development and retention ofhigh quality management teams across our dealership network. In particular, wehave been highly successful in retaining management of businesses we acquire.They respond well to our de-centralised operating structure, which gives themthe opportunity to trade more independently and profitably within a strong Groupcontrolled environment. Used cars Used car retail sales increased by 22%, with like for like sales up 9% againststrong prior year comparatives. We now have three used car supermarkets in theUK - BTC in the South West, ISC in the Midlands and ETC in the South East. Thelatter commenced trading 1 January 2006 and has performed in line with ourexpectations. We retailed 5,000 cars during the first half and we believe wewill retail in excess of 12,000 cars a year from these sites. Our expansion inused cars is in line with our strategy of broadening our revenue streams andthis area of our business now contributes strongly to both turnover and profits. Finally, we continue to make solid progress in driving higher levels of sales offinance and insurance products within both the new and used car businesses. Thisis a result of our ongoing investment in this area of our business whereparticular focus was brought to bear in 2004. Parts Distribution FPS Distribution ("FPS") achieved an excellent performance in the first half,with operating profit up 24% on last year. As stated in the past, there aresignificant opportunities to expand the distribution side of the Group. Ourcurrent parts distribution warehouse in Sheffield trades from 55,000 sq ft whichis constraining more rapid growth. Accordingly, we are in the process ofdeveloping an 80,000 sq ft footprint purpose built facility which is capable ofbeing expanded internally, by way of mezzanine, to over 200,000 sq ft of storagecapacity. Our aim is to relocate in December 2006 and be fully operational fromJanuary 2007. APEC, our dry braking parts specialist, also had a good first half ahead ofexpectations. A warehouse reorganisation is underway in the third quarter tosupport further sales growth planned for the next financial year. Following expansion across all our business streams, Group aftersales nowaccounts for 22% of turnover and 54% of gross profit, both ahead of last year. OUTLOOK These results demonstrate that we are firmly on track to deliver the profitforecast we issued at the time of our defence against Pendragon's unwelcomeoffer. Trading since the end of June has been in line with the Board'sexpectations and our order book for September, historically a strong retailmonth, is encouraging. We are achieving this progress despite a weakeningmarket in new car sales that has persisted since the end of the first quarter. We continue to outperform across all our business streams and are confident thatthe improvements we are making now to our franchise network, used car operationsand parts distribution business will enable us to build on this excellentprogress. We will also continue to seek value enhancing acquisitions whilstensuring that our organic growth is sustained. Overall, the Group is well placedto continue its successful development. Ken Surgenor Chief Executive 4 September 2006 The Directors announce the following unaudited results of the Group for thehalf-year ended 30 June 2006 Consolidated Income Statement (Summarised) Half-year Half-year Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 £M £M £MRevenue 726.6 648.1 1,231.6Operating profit before amortisation and exceptional items 22.0 15.0 27.1Amortisation of intangible assets and impairment of goodwill (0.4) (0.3) (0.9) Exceptional items (3.8) 0.6 (2.5)Profit from operations 17.8 15.3 23.7Interest costs - net (5.0) (4.0) (9.1)Exceptional interest income on VAT refund - 1.8 1.8 Profit before tax, amortisation, impairment and exceptional items 17.0 11.0 18.0Amortisation of intangible assets and impairment of Goodwill (0.4) (0.3) (0.9)Exceptional items including interest income on VAT Refund (3.8) 2.4 (0.7)Profit on ordinary activities before taxation 12.8 13.1 16.4Taxation (4.7) (3.8) (4.8) ____ _____ _____Profit for the period 8.1 9.3 11.6 ==== ===== =====Basic earnings per ordinary share 4.52p 5.25p 6.53p ==== ===== =====Diluted earnings per ordinary share 4.52p 5.22p 6.52p ==== ===== =====Adjusted earnings per ordinary share 6.69p 4.46p 7.54p ==== ===== ===== Consolidated Statement of Recognised Income and Expense Half-year Half-year Year ended ended ended 31 December 2005 30 June 2006 30 June 2005 £M £M £MActuarial gains/(losses) recognised in post retirement benefit scheme 8.0 - (3.1)Taxation thereon (2.4) - 0.9 ______ ______ _______Net gains/(losses) recognised directly in equity 5.6 - (2.2)Profit for the financial period 8.1 9.3 11.6 ______ ______ _______Total recognised income and expense for the period 13.7 9.3 9.4 ===== ===== ====== Consolidated Balance Sheet (Summarised) 30 June 30 June 31 December 2006 2005 2005 £M £M £MFIXED ASSETSGoodwill 22.5 18.4 20.3Other intangible fixed assets 16.4 14.7 16.8Property, plant and equipment 142.3 122.7 137.2 _______ ______ ______ 181.2 155.8 174.3 _______ ______ ______CURRENT ASSETSInventories 209.0 166.2 190.8Trade and other receivables 97.4 82.2 66.8Cash and cash equivalents 0.8 2.7 2.4 ______ ______ ______ 307.2 251.1 260.0 ______ ______ ______ TOTAL ASSETS 488.4 406.9 434.3 ===== ===== ===== CURRENT LIABILITIESFinancial liabilities 22.2 19.7 21.7Trade and other payables 283.6 209.2 239.8Tax liabilities and short term provisions 11.0 10.3 8.5 ______ ______ ______ 316.8 239.2 270.0 ===== ===== =====NET CURRENT (LIABILITIES)/ASSETS (9.6) 11.9 (10.0) ______ _____ _______ NON CURRENT LIABILITIESFinancial liabilities 54.8 56.2 52.7Retirement benefit obligation 10.5 18.1 19.2Deferred taxation and long term provisions 4.5 1.9 2.2 ______ _____ _____ 69.8 76.2 74.1 ===== ===== =====TOTAL LIABILITIES 386.6 315.4 344.1 ===== ===== =====NET ASSETS 101.8 91.5 90.2 ===== ===== =====Total Borrowings 76.2 73.2 72.0 ===== ===== =====Gearing 75% 80% 80% ===== ===== ===== Consolidated Cashflow Statement (Summarised) Half-year ended Half-year ended Year ended 30 June 2006 30 June 2005 31 December 2005 £M £M £MCash generated from operations Profit for the period 8.1 9.3 11.6Adjustments for tax 4.7 3.9 4.8Adjustments for depreciation 2.7 2.4 4.7Profit on disposal of property, plant and equipment (0.5) (0.4) (0.4)Cost of aborted Reg Vardy bid - - 1.2Cost of bid defence/strategic review 4.0 - -Amortisation of intangibles 0.4 0.3 0.7Impairment of goodwill - - 0.2Interest on VAT - (1.8) (1.8)Interest expense - net 5.0 4.0 9.1 Changes in working capital (excluding effects ofacquisitions and disposal of subsidiaries)Increase in inventories (16.7) (19.6) (40.1)Increase in trade and other receivables (30.1) (30.0) (8.5)Increase in payables 38.7 52.8 73.0Movement in pensions (0.7) - (2.5)Movement in provisions (0.8) (1.0) (1.8) _____ _____ _____Cash generated from operations 14.8 19.9 50.2 Tax paid (1.5) (3.6) (4.0)Interest paid (5.2) (4.3) (8.4)Interest received - 1.8 1.9 ______ _____ ____Net cash from operating activities 8.1 13.8 39.7 ______ _____ ____ Cashflows from investing activities Acquisition of businesses/subsidiaries (net of cash acquired) (5.5) (21.6) (34.6)Purchase of property, plant and equipment (7.1) (8.4) (19.9)Proceeds from sale of property, plant and equipment 1.3 2.8 2.6Proceeds from sale of business 1.5 - 1.9 ____ _____ _____Net cash used by investing activities (9.8) (27.2) (50.0) Cashflows from financing activities Proceeds from issue of ordinary shares 0.7 - 0.1Repayment of loans (8.3) (4.4) (13.5)New loans 5.0 20.0 24.0Principal payments under HP agreements (0.1) - (0.2)Dividends paid to group shareholders (2.9) (2.0) (3.5) _____ ____ ___Net cash (for)/from financing activities (5.6) 13.6 6.9 ==== ==== ===(Decrease)/Increase in cash and cash equivalents (7.3) 0.2 (3.4)Cash and cash equivalents at the beginning of the period (0.9) 2.5 2.5 ____ ____ _____Cash and cash equivalents at the end of the period (8.2) 2.7 (0.9) ==== ==== ==== Notes 1. Basis of Preparation The unaudited information has been prepared in accordance with the Listing Rulesof the Financial Services Authority and on the basis of International FinancialReporting Standards (IFRS) issued by the IASB and as adopted by the EuropeanCommission (EC) with the exception of IAS 34 which is not yet required by UKCompany Law. The information for the year ended 31 December 2005 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for that year have been delivered to the Register ofCompanies. The auditors' report on those accounts was unqualified. 2. Dividends Ordinary shares of 5p each The interim dividend proposed at the rate of 1.30p per share (2005 - 0.95p pershare) is payable on 30 November 2006 to shareholders on the register at closeof business on 22 September 2006. Half-year Half-year Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 Pence Pence PenceOrdinary dividend per share - paid in period 2.10 1.62 2.57 ==== ==== ====- proposed 1.30 0.95 2.10 ==== ==== ==== 3. Exceptional items Half-year Half-year Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 £M £M £MLoss on termination of businesses (0.3) - (1.9)Profit on disposal of properties 0.5 0.4 0.4Bid defence costs/strategic review (4.0) - -Exceptional item - VAT - 0.2 0.2Aborted acquisition costs - - (1.2) ____ ___ ____ (3.8) 0.6 (2.5) === === === 4. Interest costs - net Half-year Half-year Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 £M £M £M Bank interest payable 3.2 2.7 5.7Fair value losses on interest rate swaps and collars - - 0.4Bank interest receivable - - (0.1)Hire purchase agreements - - 0.1Interest on consignment vehicles 1.5 1.3 2.4Net interest on pension scheme 0.3 - 0.6 ____ ____ ____ 5.0 4.0 9.1 ==== ==== ==== 5. Earnings per share The calculation of earnings per ordinary share is based on profits on ordinaryactivities after taxation amounting to £8.1M (2005: £9.3M) and a weightedaverage of 179,140,033 ordinary shares in issue during the period (2005:177,069,250). The diluted earnings per share is based on the weighted average number ofshares, after taking account of the dilutive impact of shares under option of125,089 (2005: 235,670). The diluted earnings per share is 4.52p (2005: 5.22p). Adjusted earnings per share is stated before amortisation of intangible assets,loss on disposal/termination of businesses and the profit on disposal ofproperties and exceptional VAT credits and is calculated on profits of £12.0Mfor the period (2005: £7.9M) Half-year ended Half-year ended Year ended 30 June 2006 30 June 2005 31 December 2005 Earnings Earnings Earnings Earnings Earnings Earnings per share per share per share p p p £M £M £MEarnings attributable toordinary shareholders 8.1 4.52 9.3 5.25 11.6 6.53 Amortisation ofintangible assets andimpairment of goodwill 0.4 0.22 0.3 0.17 0.9 0.51 Exceptional items (net) 3.8 2.12 (2.4) (1.36) 0.7 0.39 Tax (credit)/debitexceptional items (0.3) (0.17) 0.7 0.40 0.2 0.11 Adjusted 12.0 6.69 7.9 4.46 13.4 7.54 The net exceptional items are comprised of £3.8 million charge (2005: £0.6million credit) included in operating profit and £ nil (2005: £1.8 million) ofinterest income on the VAT refund. 6. Taxation The tax charge for the period has been provided at the rate of 36.7% (2005:29.5%). 7. Interim Statement The interim announcement was approved by the Board and will be posted toshareholders on 8 September 2006. Copies are also available to the public at theregistered office of the company at 776 Chester Road, Stretford, Manchester M32OQH. Executive Directors H K Surgenor - Chief ExecutiveD V Dyson, BSc F.C.A - Finance DirectorD J Blakeman, LL.B - Company SecretaryB Schumacker, MSc - Operations DirectorA C Bruce, BA - Operations DirectorT Wainwright - Operations Director Non-Executive Directors F S Maguire, MSc - ChairmanP M White, C.B.E. F.C.A - Chairman (from 4 September 2006)D C Mace, BScJ E Brown, FCCA ATIID C A Bramall, F.C.A Registered Office 776 Chester RoadStretfordManchesterM32 OQHTelephone : 0161 291 0043Website: www.lookers.co.uk Registrars and Transfer Office Capita RegistrarsWoodsome ParkPenistone RoadFenay BridgeHuddersfieldHD8 OLATelephone : 01484 600900 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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