2nd Aug 2007 07:01
Inchcape PLC02 August 2007 2007 Interim results Record financial performance Growth strategy delivering results Inchcape plc, the leading independent, international automotive retailer,announces its interim results for the half year ended 30 June 2007. Operational & strategic highlights: • Record profit for the Group and in Australia, Greece, Belgium, UK and Emerging Markets • Emerging Markets sales doubled and profits tripled • Existing businesses strengthened: share gain in 16 markets and like for like profit up 5.9% • Successful portfolio rebalancing: 44% profit growth outside Asia Financial highlights: • Sales up 28.5% at £3.1bn; 31% in constant currency (2006: £2.4bn)• Headline PBT* up 7.1% to £120.0m, 12.2% in constant currency (2006:112.0m)• Reported PBT up 11.4% to £124.8m (2006: £112.0m)• Headline EPS* up 2.2% to 18.9p, 6.5% in constant currency (2006: 18.5p)• Reported EPS down 1.5% to 19.9p (2006: 20.2p)• Proposed interim dividend up 5.0% at 5.25p per share (2006: 5.0p) * Before exceptional items Peter Johnson, Chairman of Inchcape plc, said: "The Group has again delivered record results in the first half of the year,reflecting the progress we are making in executing our strategy and the benefitsof a broad geographical spread of businesses. Australia, Greece, Belgium, UK andEmerging Markets all achieved record profits in the first six months. "In the second half we expect to benefit from the continued improvement incustomer service, our focus on the value drivers of the business and from therecent acquisitions in the UK and Emerging Markets. We remain confident in ourprospects for 2007." 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 Inchcape plc is the leading independent, international automotive retailer, withscale operations in Australia, Belgium, Greece, Hong Kong, Singapore and theUK. The Group also has operations in a number of other markets, includingEastern Europe, the Baltics, 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 core brand partners are Audi, BMW,Honda, Mazda, Mercedes-Benz, PAG, Subaru, Toyota/Lexus and Volkswagen. Ex Dividend Date 8 August 2007Record Date 10 August 2007Payment Date 10 September 2007 For further information, visit us at www.inchcape.com Chairman's Statement Results Overview The Group has again delivered record results in the first half of the year,reflecting the progress we are making in executing our strategy and the benefitsof a broad geographical spread of businesses. Australia, Greece, Belgium, UK andEmerging Markets all achieved record profits in the first six months. Overall, sales rose 28.5% to £3.1bn and profit before tax and exceptional itemsincreased 7.1% to a record £120m (£124.8m after exceptional items of £4.8mrelating to the disposal of businesses). As a consequence of the abnormally lowtax rate last year, earnings per share (EPS) before exceptional items rose by2.2%. Basic EPS, which includes exceptional items, declined by 1.5%. As a resultof our continued strong performance in earnings quality, the Board has declaredan interim dividend of 5.25 pence per share, an increase of 5.0% on 2006, inline with our commitment to a progressive dividend policy. The Retail segment achieved trading profit growth of £20.5m (81%) in constantcurrency terms and £20.1m (80%) at actual exchange rates. In particular, ourRetail businesses in the UK, Europe and the Emerging Markets had a strong firsthalf. The Distribution segment achieved trading profit growth of £8.7m (9.2%) inconstant currency terms in the first half (3.8% at actual rates). As expected,our business in Singapore suffered a fall in profits due to a reduction in thenew car market of 7.1%, together with continued competition from parallelimports and the absence of taxi sales by ourselves in the country following thechange in regulations in October 2006. However, this was more than offset byrecord performances in most of our other distribution businesses. Total sales were up £760m (31%) in constant currency and like for like saleswere up 3.1% in constant currency. Retail sales rose 67% in total and 6.4% on alike for like basis. Distribution sales were in line with last year in constantcurrency terms and at actual exchange rates were down 3.7%. Strategy update As we have previously stated, our strategy is to strengthen our existingbusinesses and to expand in developed and emerging markets. The ongoing improvement in most of our existing businesses is reflected in thesetrading results. In the UK we acquired European Motor Holdings plc (EMH) at the beginning ofFebruary 2007, and announced the restructuring of our UK business to focus on alimited number of premium brands. As a consequence we have subsequentlyannounced a number of disposals in the UK, including the EMH Bentley retailcentres, the two EMH auction businesses, and the EMH Head Office buildingtogether with Inchcape Automotive, the vehicle refurbishment business, for atotal consideration of £28m. In addition, we have continued to execute our overseas expansion strategy withthe opening of our first retail centre in China at Shaoxing, near to Shanghai,in January 2007. We also announced the acquisition of 100% of Baltic MotorsCorporation and SIA BM Auto in Latvia, a retail group comprising five retailcentres primarily in Riga, giving us exclusive representation for Ford and LandRover as well as 70% of BMW in the country. The new car market in Latvia grew by55% in the first half of 2007 to 17,320 vehicles. As a result of thisacquisition, Inchcape will have a market leading position with distribution andretail of Ford, Land Rover, Jaguar and Mazda, and retail of BMW, giving Inchcapeover 10.0% market share. We also announced the acquisition of 67% of UAB Vitvela in Lithuania giving usexclusive representation for Ford and Mazda in that country and a leading shareof Mitsubishi and Hyundai retail. Inchcape now has an integrated distributionand retail business for Mazda, Ford and Mitsubishi and a leading share ofHyundai retail in Lithuania, giving Inchcape close to 20% share of the totalmarket which grew by 46% in the first half of 2007 to 9,844. We also sold our shares in the non-core Hong Kong joint venture finance company,Inchroy, in January 2007 for £46m, realising a profit of £12.0m. We expect to invest our ongoing cash generation and proceeds of disposalspredominantly in emerging markets where growth levels are high and marketopportunities continue to develop. Operational review Inchcape reports its results in the Financial statements on a statutory basisusing actual rates of exchange. To enhance comparability, the Operational reviewreports results in a form that isolates the impact of currency movements fromperiod to period by applying the June 2006 exchange rates to both period'sresults (constant currency). It also adjusts for the impact of exceptionalitems. Where exceptional items and central costs are excluded from operatingprofit the results are referred to as trading profit. Unless otherwise statedall sales and trading profit figures in the Operational review are provided inconstant currency. Like for like sales and trading profit excludes the impact of acquisitions fromthe date of acquisition until the thirteenth month of ownership, and businessesthat are sold or closed. It further removes the impact of retail centres thatare relocated. This is from the date of opening until the thirteenth month oftrading in the new location. Australia 2007 2006 % change % change £m £m constant currencySales 326.9 335.3 -2.5 -0.5Trading profit 20.5 18.8 +9.0 +11.7 The Australian vehicle market grew strongly by 8.5% in the first half to 524,736vehicles. Market conditions, however, remained competitive with consumerssensitive particularly to fuel consumption. The Distribution business achieved sales volumes up 2.5% giving a market shareof 3.7% (2006: 3.9%), although the impact of mix change resulted in sales beingslightly down. The slight erosion in market share is due to the absence of newSubaru models, awaiting the launch of the new Impreza in September 2007 and theForester in the first quarter of 2008. Margins did, however, improve due tosales of special editions during the period and focus on cost controls. Thelogistics business, AutoNexus also had another successful first half winningseveral new contracts. The Retail business saw lower trading profits on higher sales due to competitivemarket conditions, particularly on used cars, for the brands we represent, withthe exception of Volkswagen. Europe 2007 2006 % change % change £m £m constant currencySales 662.2 657.5 +0.7 +2.8Trading profit 24.3 19.8 +22.7 +25.3 Our European Distribution businesses continue to strengthen across the regiondue to recent model introductions in most countries and focus on operationalexcellence. Distribution trading profits increased by 16.8% to £23.9m on sales9.0% higher. Our European Retail businesses performed particularly well following the sale ofa number of loss making retail centres and successful turnaround actions andoperational improvements in a number of countries. As a consequence we returnedtrading profits of £0.8m compared to losses last year of £0.7m on sales whichwere £20.3m lower. In Belgium the new car market was down 3.1%. This was expected following therecord year for registrations in 2006 as a result of the biennial motor show. Inthe Distribution business our market share increased 0.1 percentage points to5.3%. Like for like sales were up 7.4% which, with good overhead control, led toan improvement in like for like trading profit of 18.7%. The Retail business also performed well with like for like sales up 1.9% andtrading profits up 4.3% as we benefit from the expansion we undertook in 2005and early 2006. In Greece the market continues to perform strongly with registrations up 14.1%on 2006. Our Distribution business continues to lead the market, with 10.9%share achieved in the first half compared to 9.9% the previous year. With thisimprovement, like for like sales were up 12.9% year on year. With continued goodcontrol of overheads, trading profit was up 27% on a like for like basis. The Retail turnaround we started last year in Greece is proving very successful.Like for like sales are up 16.5% and losses have been reduced by 48%. Therestructuring of the business and the implementation of our Inchcape Advantageinitiatives continue to drive this business towards profitability. In Finland the market has fallen 10.3% in the first half to 77,416 vehicles.However our combined market share has grown from 3.7% to 4.1% with strongperformances across all three brands. As a consequence, in our Distributionbusiness like for like sales rose 8.9% and trading profits by 28% in the firsthalf. Our Retail business has reduced its losses by 76% as a consequence of theturnaround programme we put in place at the beginning of the year and the saleof two loss making retail centres located outside of Helsinki in June 2007. Our Retail business in France made a small trading profit in the first halfcompared to a loss last year. Hong Kong 2007 2006 % change % change £m £m constant currencySales 110.3 106.0 +4.1 +16.0Trading profit 13.2 10.1 +30.7 +45.5 The Hong Kong vehicle market grew 5.4% in the first half. Following therelocation of our Lexus showroom and the launch of two new Lexus models at theend of 2006 our sales in this market grew by 16.0%. We also benefited from theintroduction in April 2007 of a tax incentive by the Hong Kong Government on lowemission vehicles which increased our sales of Toyota and Lexus hybrid cars. Ona like for like basis sales were 12.8% up. As a consequence of this strongperformance our market share rose from 36.1% in the first half of 2006 to 37.4%in 2007. In June 2007 we launched the Lexus LS600h which should facilitatemomentum in the second half. Trading profits in Hong Kong increased by 45.5%. In addition to the positivetrading performance, this increase includes a £2.9m profit on the sale of afreehold property. Singapore 2007 2006 % change % change £m £m constant currencySales 269.1 358.2 -24.9 -20.9Trading profit 25.6 33.8 -24.3 -20.2 Due to the young age of the car parc we expected the Singapore new vehiclemarket to reduce this year and in the first half it has fallen 7.1%. Inaddition, sales of parallel imports of vehicles continue to grow. Also in 2007we will have no taxi sales following the change in regulations relating to taxisin October 2006. As a consequence of these factors our sales in Singapore were20.9% lower in the first half than the prior year and our market share sixpercentage points lower. As a result of good cost control and improved mix, thedecline in trading profit was in line with the fall in sales, and margins weremaintained. We expect the market situation in the first half in Singapore tocontinue for the remainder of the year. We are however undertaking a number ofinitiatives to increase our aftersales business. United Kingdom 2007 2006 % change % change £m £m constant currencySales 1,440.8 783.0 +84.0 +84.0Trading profit 35.8 23.2 +54.3 +54.3 The UK vehicle market rose 2.0% in the first half of 2007, following severalyears of decline. Total sales of our UK Retail business rose 92% with 33% due to the Lindacquisition in July 2006 and 54% due to the acquisition of EMH in February 2007. Like for like sales in our Retail business rose by 5.1%, over twice the growthin the market. Like for like new car volumes were up 3.5%. However, due topressure on used car volumes and margins, the trading margin on our basebusiness declined slightly from 2.8% to 2.7%. The overall margin in UK Retail,including the effect of the Lind and EMH acquisitions, was 2.4%. Total tradingprofits however were up 65% due to the contribution from the two acquisitions. Our UK Distribution segment comprising Inchcape Fleet Solutions, and InchcapeAutomotive until the date of disposal, saw trading profits decline £0.7m due toinvestment in new contract hire business, the benefits of which will be seen infuture years. Emerging Markets 2007 2006 % change % change £m £m constant currencySales 209.0 90.6 +130.7 +137.2Trading profit 12.4 4.1 +202.4 +210.6 Growth in the Emerging Markets continues to be very strong. The Romanian marketgrew 24%, the Bulgarian market 29%, the Baltics by 43%, and Russia by 70% in thefirst half. Our sales in these markets were up by 137% in total and 54% on a like for likebasis. Trading profits were up 211% in total and 84% on a like for like basis. Our Balkans Distribution business grew market share to 4.0% from 3.2% a yearearlier assisted by the strong Toyota product line up. We entered the Russian retail market in December 2006 with the acquisition ofthree retail centres in St Petersburg. These centres have performed extremelywell, contributing £75.6m to sales and £5.2m of trading profit in the firsthalf. We opened our first retail centre in Shaoxing, China in January 2007. Asexpected we are incurring small losses in China as this business is in the startup phase. Our Polish retail business, which has made a small trading profit in the firsthalf of 2007 compared to a small loss in 2006, has been reclassified to EmergingMarkets because of the growth in the Polish car market in 2007. The 2006comparatives have also been reclassified. Rest of the World 2007 2006 % change % change £m £m constant currencySales 118.2 110.0 +7.5 +17.4Trading profit 12.3 10.6 +16.0 +28.3 Our businesses in Guam, Saipan and Brunei have had another successful half yearwith like for like profits up 22%. Our business in Ethiopia also continues to perform well with two new servicecentres being planned in the second half of the current year. The business in South America has also achieved profit progression of 37% and weacquired a further retail centre in Santiago, Chile in the second quarter of2007 at a cost of £1.2m. Central Costs Central costs are up 4.6% on last year following the investment made during thefirst half of 2007 on new management, systems and processes to facilitate thegrowth of the Group. Financial Review The Group generated £141.7m of cash from operating activities for the firsthalf. Funding for capital expenditure amounted to £22.4m and for net acquisitions was£191.2m. The 2006 final dividend of £46.6m (2006: £29.6m) was paid in June. The 2007interim dividend will be paid on 10 September 2007 to shareholders on theregister at 10 August 2007. In April 2007 the Group increased and extended its syndicated revolving creditfacility. This facility now amounts to £500m and expires in 2012. In addition US$550m was raised in May in a Private Placement. Of the totalUS$475m was swapped into sterling. The remainder is denominated in US dollars asa hedge against our US dollar related net assets. Of the total, US$350m isrepayable in ten years and US$200m is repayable in twelve years. Of the total swapped into sterling, £200m was used to repay the bridging financeon the EMH acquisition. Pensions During the first half, in line with the funding programme agreed with theTrustees, the Group made additional cash contributions to the UK defined benefitschemes amounting to £9.5m. These payments, together with an increase in longterm interest rates since year end have resulted in the net pension deficit of£22.7m at 31 December 2006 moving to a surplus of £19.9m at 30 June 2007. Tax The subsidiaries headline tax rate for the first half of 2007 is 25.0% comparedto 21.7% in 2006. The 2006 tax rate was abnormally low due to a number of oneoff items. Exceptional items The exceptional items represent the net profits on the sale of a number ofnon-core businesses, primarily our joint venture finance company, Inchroy(£12.0m profit) and Inchcape Automotive (£6.9m loss). Exchange rates The first half pre-tax profit (excluding exceptional items) was £120.0m. Atconstant 2006 currency the pre-tax profit (excluding exceptional items) wouldhave been £125.7m. The £5.7m difference arose due to the impact of the weakeningof the Hong Kong, Singapore and Australian dollars relative to sterling. People The success of Inchcape is above all else due to the commitment, passion anddedication of our people. My sincere thanks go to all our employees. I hopethat, like me, they feel proud of what we have been able to achieve together. Outlook In the second half we expect to benefit from the continued improvement incustomer service, our focus on the value drivers of the business and from therecent acquisitions in the UK and Emerging Markets. We remain confident in ourprospects for 2007. Peter JohnsonChairman1 August 2007 CONSOLIDATED INCOME STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months Six months Year to To 30.6.07 To 30.6.06 31.12.06 £m £m £m Revenue (note 2) 3,136.5 2,440.6 4,842.1Cost of sales (2,696.5) (2,086.2) (4,132.3)Gross profit 440.0 354.4 709.8Net operating expenses beforeexceptional items (306.8) (244.4) (495.9)Exceptional items (note 3) 4.8 - -Total net operating expenses (302.0) (244.4) (495.9)Operating profit (note 2) 138.0 110.0 213.9Share of profit after tax of jointventures and associates 1.7 2.6 5.9Profit before finance and tax 139.7 112.6 219.8Finance income (note 4) 26.7 25.3 49.0Finance costs (note 5) (41.6) (25.9) (54.9)Profit before tax 124.8 112.0 213.9 Tax before exceptional tax - UK (note 6) (1.1) 1.1 5.5- Overseas (note 6) (28.4) (24.8) (50.6)Exceptional tax - UK (notes 3 & 6) - 8.0 8.0Total tax (29.5) (15.7) (37.1)Profit for the period 95.3 96.3 176.8 Attributable to: - Equity holders of the parent 92.3 94.4 173.9 - Minority interests 3.0 1.9 2.9 95.3 96.3 176.8 Basic earnings per share (pence) (note 7) 19.9p 20.2p 37.5pDiluted earnings per share (pence)(note 7) 19.8p 20.1p 37.1pProposed dividend per share (pence)(note 8) 5.25p 5.0p 10.0pPaid dividend per share (pence) (note 8) 10.0p 6.3p 11.3p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mCash flow hedges (19.6) 7.3 (21.8)Net investment hedge 0.5 - -Fair value losses on available for salefinancial assets (0.3) (1.4) (1.9)Effect of foreign exchange rate changes (6.3) (20.8) (34.2)Actuarial gains on defined benefitpension schemes 31.2 23.4 5.3Tax recognised directly in shareholders'equity (7.0) 7.4 18.7Net (losses) gains recognised directly inshareholders' equity (1.5) 15.9 (33.9)Profit for the period 95.3 96.3 176.8 Total recognised income and expense forthe period 93.8 112.2 142.9Attributable to: - Equity holders of the parent 90.8 110.6 140.5 - Minority interests 3.0 1.6 2.4 93.8 112.2 142.9 CONSOLIDATED BALANCE SHEET (UNAUDITED) AS AT 30 JUNE 2007 As at As at As at 30.6.07 30.6.06 31.12.06 £m £m £mNon-current assetsIntangible assets 324.5 74.2 147.9Property, plant and equipment 444.7 354.4 427.0Investments in joint ventures andassociates 14.1 44.4 15.1Available for sale financial assets 14.1 12.5 12.2Trade and other receivables 22.7 21.5 23.2Deferred tax assets 17.8 35.4 40.6Retirement benefit asset 51.6 - - 889.5 542.4 666.0 Current assetsInventories 663.2 536.1 704.6Trade and other receivables 264.9 222.0 211.4Available for sale financial assets 1.1 2.8 52.8Derivative financial instruments - - 0.6Current tax assets 1.3 3.2 2.2Cash and cash equivalents 367.7 348.7 335.2 1,298.2 1,112.8 1,306.8Assets held for sale and disposal group 203.6 - 30.8 1,501.8 1,112.8 1,337.6Total Assets 2,391.3 1,655.2 2,003.6 Current liabilitiesTrade and other payables (841.3) (696.0) (791.5)Derivative financial instruments (70.5) (2.3) (40.2)Current tax liabilities (43.6) (39.0) (33.7)Provisions (24.0) (22.3) (20.7)Borrowings (205.2) (152.9) (183.5) (1,184.6) (912.5) (1,069.6)Non-current liabilitiesTrade and other payables (36.6) (38.6) (39.4)Derivative financial instruments (13.4) - -Provisions (36.8) (35.1) (35.5)Deferred tax liabilities (2.8) (13.4) (14.7)Borrowings (279.0) (6.6) (170.7)Retirement benefit liability (31.7) (11.0) (22.7) (400.3) (104.7) (283.0)Liabilities directly associated with thedisposal group (97.4) - - Total liabilities (1,682.3) (1,017.2) (1,352.6) Net assets 709.0 638.0 651.0 Shareholders' equityShare capital 121.2 120.3 120.6Share premium 121.6 113.4 115.9Capital redemption reserve 16.4 16.4 16.4Other reserves (54.7) (3.8) (37.7)Retained earnings 493.2 385.1 428.6Equity attributable to equity holders ofthe parent 697.7 631.4 643.8Minority interests 11.3 6.6 7.2 Total shareholders' equity 709.0 638.0 651.0 CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mCash generated from operating activitiesCash generated from operations (note 9a) 176.7 169.8 236.8Tax paid (22.2) (26.5) (50.2)Interest received 5.9 6.2 10.7Interest paid (18.8) (7.2) (18.2)Net cash generated from operatingactivities 141.6 142.3 179.1 Cash flows from investing activitiesAcquisition of businesses, net ofcash and overdrafts required (256.6) (17.7) (147.9)Net cash inflow from saleof businesses 70.6 0.2 5.4Purchase of property, plant andequipment (33.1) (18.6) (50.7)Purchase of intangible assets (0.6) (0.7) (3.1)Proceeds from disposal of property,plant and equipment 11.3 3.0 11.4Net disposal (purchase) of availablefor sale financial assets - 1.1 (49.9)Dividends received from jointventures and associates 1.5 0.8 0.4Net cash used in investing activities (206.9) (31.9) (234.4) Cash flows from financing activitiesProceeds from issue of ordinaryshares 6.3 1.1 3.9Share buy back programme - (34.0) (34.0)Net purchase of own shares by ESOP Trust (2.1) (0.5) (0.2)Cash inflow from Private Placement 277.1 - - Net cash (outflow) inflow from borrowingsother than Private Placement (174.5) (2.2) 158.7Payment of capital element of financeleases (0.1) (0.2) (0.3)Settlement of derivatives 1.0 (6.0) (6.8)Equity dividends paid (46.6) (29.6) (52.6)Minority dividends paid (1.6) (3.7) (3.9)Net cash from (used in) financing activities 59.5 (75.1) 64.8 Net (decrease)increase in cash andcash equivalents (note 9b) (5.8) 35.3 9.5Cash and cash equivalents atbeginning of the period 166.2 165.9 165.9Effect of foreign exchange ratechanges 2.1 (4.5) (9.2)Cash and cash equivalents at end ofthe period 162.5 196.7 166.2 Cash and cash equivalents consist of: - Cash and cash equivalents 270.8 215.7 262.8 - Short term bank deposits 96.9 133.0 72.4 - Bank overdrafts (205.2) (152.0) (169.0) 162.5 196.7 166.2 NOTES TO THE ACCOUNTS (UNAUDITED) 1 BASIS OF PREPARATION The results for the periods to 30 June have been prepared on the basis of theaccounting policies set out in the Annual report and accounts 2006, which wereprepared in accordance with International Financial Reporting Standards (IFRS)and IFRIC Interpretations as adopted by the European Union and implemented inthe UK, the Listing Rules of the Financial Services Authority and with the parts of the Companies Act 1985 applicable to companies reporting under IFRS. The Group has adopted IFRS 7 Financial Instruments: Disclosures with effect from 1 January 2007. This standard has no effect on the results or financial position of the Group but will have some impact on the disclosures made in the Group's Financial Statements for the year ending 31 December 2007. In additionIFRIC interpretations 7 to 10 are effective, but have not had a material impact on the results of the Group. IFRIC's 11 to 13 are in issue but not yet effective and are not anticipated to have a material impact for the Group. These interim financial statements are unaudited but have been reviewed by theexternal auditors. They do not constitute statutory accounts within the meaningof Section 240 of the Companies Act 1985. The Group's published financialstatements for the year ended 31 December 2006 have been reported on by theGroup's auditors and filed with the Registrar of Companies. The report of theauditors was unqualified and did not contain a statement under Section 237 (2)or (3) of the Companies Act 1985. The principal exchange rates used for translation purposes are as follows: Average rates Period end rates 30.6.07 30.6.06 31.12.06 30.6.07 30.6.06 31.12.06Australiandollar 2.45 2.40 2.44 2.36 2.49 2.48Euro 1.48 1.45 1.46 1.49 1.45 1.48Hong Kong dollar 15.43 13.84 14.28 15.69 14.37 15.22Singapore dollar 3.02 2.87 2.92 3.07 2.92 3.00 2 SEGMENTAL ANALYSIS Primary reporting format - geographical segments The Group amended its segments disclosed in its Financial statements for theyear ended 31 December 2006 to further align them with the risks and returnsfaced in its markets. During 2007, growth in total new vehicle volume sales byinternational brands in Poland have exceeded 10.0% and it has therefore beenreclassified from Europe to Emerging Markets. Comparative information has beenrestated accordingly. 2007 Australia Europe Hong KongSix months to 30.6.07 £m £m £mRevenueRevenue from third parties 326.9 662.2 110.3ResultsOperating profit before exceptional items 20.5 24.3 13.2Exceptional items - - 12.0Segment result 20.5 24.3 25.2Share of profit after tax of joint venturesand associates - 0.8 0.2Profit before finance and tax 20.5 25.1 25.4 United Emerging2007 Singapore Kingdom MarketsSix months to 30.6.07 £m £m £mRevenue Revenue from third parties 269.1 1,440.8 209.0ResultsOperating profit before exceptional items 25.6 35.8 12.4Exceptional items - (7.2) -Segment result 25.6 28.6 12.4Share of profit after tax of joint venturesand associates - 0.6 -Profit before finance and tax 25.6 29.2 12.4 Rest of Total2007 World pre Central Central TotalSix months to 30.6.07 £m £m £m £mRevenueRevenue from third parties 118.2 3,136.5 - 3,136.5ResultsOperating profit before exceptionalitems 12.3 144.1 (10.9) 133.2Exceptional items - 4.8 - 4.8Segment result 12.3 148.9 (10.9) 138.0Share of profit after tax of jointventures and associates 0.1 1.7 - 1.7Profit before finance and tax 12.4 150.6 (10.9) 139.7 2006 Australia Europe Hong KongSix months to 30.6.06 £m £m £mRevenueRevenue from third parties 335.3 657.6 106.0ResultsOperating profit before exceptional items 18.8 19.8 10.1Exceptional items - - -Segment result 18.8 19.8 10.1Share of profit after tax of joint venturesand associates - 0.8 1.3Profit before finance and tax 18.8 20.6 11.4 United Emerging2006 Singapore Kingdom MarketsSix months to 30.6.06 £m £m £mRevenueRevenue from third parties 358.2 783.0 90.5ResultsOperating profit before exceptional items 33.8 23.2 4.1Exceptional items - - -Segment result 33.8 23.2 4.1Share of profit after tax of joint venturesand associates - 0.4 -Profit before finance and tax 33.8 23.6 4.1 Rest of Total2006 World pre Central Central TotalSix months to 30.6.06 £m £m £m £mRevenueRevenue from third parties 110.0 2,440.6 - 2,440.6ResultsOperating profit before exceptionalitems 10.6 120.4 (10.4) 110.0Exceptional items - - - -Segment result 10.6 120.4 (10.4) 110.0Share of profit after tax of jointventures and associates 0.1 2.6 - 2.6Profit before finance and tax 10.7 123.0 (10.4) 112.6 2006 Australia Europe Hong KongYear to 31.12.06 £m £m £mRevenueRevenue from third parties 616.6 1,191.2 224.8ResultsOperating profit before exceptional items 38.5 39.3 24.0Exceptional items - - -Segment result 38.5 39.3 24.0Share of profit after tax of joint venturesand associates - 1.8 2.8Profit before finance and tax 38.5 41.1 26.8 2006 United EmergingYear to 31.12.06 Singapore Kingdom Markets £m £m £mRevenueRevenue from third parties 659.5 1,711.9 212.7ResultsOperating profit before exceptional items 58.6 45.9 11.1Exceptional items - - -Segment result 58.6 45.9 11.1Share of profit after tax of joint venturesand associates - 0.9 -Profit before finance and tax 58.6 46.8 11.1 2006 Rest of TotalYear to 31.12.06 World pre Central Central Total £m £m £m £mRevenueRevenue from third parties 225.4 4,842.1 - 4,842.1ResultsOperating profit before exceptionalitems 21.4 238.8 (24.9) 213.9Exceptional items - - - -Segment result 21.4 238.8 (24.9) 213.9Share of profit after tax of jointventures and associates 0.4 5.9 - 5.9Profit before finance and tax 21.8 244.7 (24.9) 219.8 Secondary reporting format - business segments Distribution2007 Australia Europe Hong Kong SingaporeSix months to 30.6.07 £m £m £m £mRevenue from third parties 206.8 458.7 110.3 269.1ResultsOperating profit before exceptional items 17.0 23.5 13.2 25.6Exceptional items - - 12.0 -Segment result 17.0 23.5 25.2 25.6Share of profit after tax ofjoint ventures and associates - 0.8 0.2 -Profit before finance and tax 17.0 24.3 25.4 25.6 Distribution United Emerging Rest of Total2007 Kingdom Markets World DistributionSix months to 30.6.07 £m £m £m £mRevenue from third parties 43.0 58.5 116.9 1,263.3ResultsOperating profit beforeexceptional items 1.8 5.5 12.3 98.9Exceptional items (6.9) - - 5.1Segment result (5.1) 5.5 12.3 104.0Share of profit after tax of jointventures and associates 0.5 - 0.1 1.6Profit before finance and tax (4.6) 5.5 12.4 105.6 Distribution2006 Australia Europe Hong Kong SingaporeSix months to 30.6.06 £m £m £m £mRevenue from third parties 219.5 429.4 106.0 358.2ResultsOperating profit 14.4 20.5 10.1 33.8Exceptional items - - - -Segment result 14.4 20.5 10.1 33.8Share of profit after tax ofjoint ventures and associates - 0.8 1.3 -Profit before finance and tax 14.4 21.3 11.4 33.8 Distribution United Emerging Rest of Total2006 Kingdom Markets World DistributionSix months to 30.6.06 £m £m £m £mRevenue from third parties 53.6 35.8 110.0 1,312.5ResultsOperating profit 2.6 3.3 10.6 95.3Exceptional items - - - -Segment result 2.6 3.3 10.6 95.3Share of profit after tax of jointventures and associates 0.4 - 0.1 2.6Profit before finance and tax 3.0 3.3 10.7 97.9 Distribution2006 Australia Europe Hong Kong SingaporeYear to 31.12.06 £m £m £m £mRevenue from third parties 399.7 778.3 224.8 659.5ResultsOperating profit 28.2 41.1 24.0 58.6Exceptional items - - - -Segment result 28.2 41.1 24.0 58.6Share of profit after tax ofjoint ventures and associates - 1.8 2.8 -Profit before finance and tax 28.2 42.9 26.8 58.6 Distribution United Emerging Rest of Total2006 Kingdom Markets World DistributionYear to 31.12.06 £m £m £m £mRevenue from third parties 97.8 85.0 225.4 2,470.5ResultsOperating profit beforeexceptional items 3.8 8.5 21.4 185.6Exceptional items - - - -Segment result 3.8 8.5 21.4 185.6Share of profit after tax of jointventures and associates 0.9 - 0.4 5.9Profit before finance and tax 4.7 8.5 21.8 191.5 Retail United 2007 Australia Europe Kingdom Six months to 30.6.07 £m £m £m Revenue from third parties 120.1 203.5 1,397.8 ResultsOperating profit before exceptionalitems 3.5 0.8 34.0 Exceptional items - - (0.3) Segment result 3.5 0.8 33.7 Share of profit after tax of joint ventures and associates - - 0.1 Profit before finance and tax 3.5 0.8 33.8 Retail Emerging Rest of Total2007 Markets World RetailSix months to 30.6.07 £m £m £mRevenue from third parties 150.5 1.3 1,873.2ResultsOperating profit before exceptionalitems 6.9 - 45.2Exceptional items - - (0.3)Segment result 6.9 - 44.9Share of profit after tax of joint ventures and associates - - 0.1Profit before finance and tax 6.9 - 45.0 Total pre2007 Central Central TotalSix months to 30.6.07 £m £m £mRevenue from third parties 3,136.5 - 3,136.5ResultsOperating profit before exceptionalitems 144.1 (10.9) 133.2Exceptional items 4.8 - 4.8Segment result 148.9 (10.9) 138.0Share of profit after tax of jointventures and associates 1.7 - 1.7Profit before finance and tax 150.6 (10.9) 139.7 Retail United 2006 Australia Europe Kingdom Six months to 30.6.06 £m £m £m Revenue from third parties 115.8 228.1 729.4 ResultsOperating profit 4.4 (0.7) 20.6 Exceptional items - - - Segment result 4.4 (0.7) 20.6 Share of profit after tax of joint ventures and associates - - -Profit before finance and tax 4.4 (0.7) 20.6 Retail Emerging Rest of Total2006 Markets World RetailSix months to 30.6.06 £m £m £mRevenue from third parties 54.8 - 1,128.1ResultsOperating profit 0.8 - 25.1Exceptional items - - -Segment result 0.8 - 25.1Share of profit after tax of joint ventures and associates - - - Profit before finance and tax 0.8 - 25.1 Total pre2006 Central Central TotalSix months to 30.6.06 £m £m £mRevenue from third parties 2,440.6 - 2,440.6ResultsOperating profit before exceptionalitems 120.4 (10.4) 110.0Exceptional items - - -Segment result 120.4 (10.4) 110.0Share of profit after tax of jointventures and associates 2.6 - 2.6Profit before finance and tax 123.0 (10.4) 112.6 Retail United 2006 Australia Europe Kingdom Year to 31.12.06 £m £m £m Revenue from third parties 216.9 412.8 1,614.1 ResultsOperating profit 10.3 (1.8) 42.1 Exceptional items - - - Segment result 10.3 (1.8) 42.1 Share of profit after tax of joint - - - ventures and associatesProfit before finance and tax 10.3 (1.8) 42.1 Retail Emerging Rest of Total 2006 Markets World Retail Year to 31.12.06 £m £m £mRevenue from third parties 127.8 - 2,371.6 ResultsOperating profit before exceptionalitems 2.6 - 53.2 Exceptional items - - -Segment result 2.6 - 53.2 Share of profit after tax of jointventures and associates - - - Profit before finance and tax 2.6 - 53.2 Total pre2006 Central Central TotalYear to 31.12.06 £m £m £mRevenue from third parties 4,842.1 - 4,842.1ResultsOperating profit before exceptionalitems 238.8 (24.9) 213.9Exceptional items - - -Segment result 238.8 (24.9) 213.9Share of profit after tax of jointventures and associates 5.9 - 5.9Profit before finance and tax 244.7 (24.9) 219.8 3 EXCEPTIONAL ITEMS Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mProfit on disposal of Inchroy jointventure 12.0 - -Loss on disposal of Inchcape AutomotiveLimited (6.9) - -Loss on disposal of other UK businesses (0.3) - -Operating exceptional items 4.8 - -Exceptional tax - 8.0 8.0Total exceptional items 4.8 8.0 8.0 Exceptional tax in the prior year relates to the release of tax providedagainst the VAT recoveries in 2003 and 2004 following the favourable settlementof the corporation tax treatment. 4 FINANCE INCOME Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mBank and loan interest receivable 5.2 4.9 8.8Expected return on post-retirementplan assets 20.6 19.0 37.7Other interest receivable 0.9 1.4 2.5Total finance income 26.7 25.3 49.0 5 FINANCE COSTS Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mBank and loan interest payable 12.7 1.9 3.8Fair value gains on cross currencyinterest rate swaps 13.4 - -Fair value adjustment on PrivatePlacement (13.1) - -Stock holding interest 8.1 4.8 11.2Interest expense on post-retirement plan liabilities 18.7 17.8 35.3Other interest payable 1.8 1.4 4.6Total finance costs 41.6 25.9 54.9 6 TAX Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mCurrent tax - UK 0.6 6.1 5.5 - Overseas 28.3 24.9 47.6 28.9 31.0 53.1Deferred tax - UK 0.5 (7.2) (11.0) - Overseas 0.1 (0.1) 3.0Tax before exceptional tax 29.5 23.7 45.1Exceptional tax - (8.0) (8.0)Total tax 29.5 15.7 37.1 7 EARNINGS PER SHARE Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mProfit for the period 95.3 96.3 176.8Minority interests (3.0) (1.9) (2.9)Basic earnings 92.3 94.4 173.9Exceptional items (including taxexceptional) (4.8) (8.0) (8.0)Headline earnings 87.5 86.4 165.9Basic earnings per share 19.9p 20.2p 37.5pDiluted earnings per share 19.8p 20.1p 37.1pBasic Headline earnings per share 18.9p 18.5p 35.7pDiluted Headline earnings per share 18.8p 18.4p 35.4p Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 number number numberWeighted average number of fullypaid ordinary shares in issueduring the period 483,371,751 480,326,644 481,212,798Weighted average number of fullypaid ordinary shares in issueduring the period: - Held by the ESOP Trust (1,734,109) (2,631,921) (2,127,884) - Repurchased as part of the share buy back programme (17,880,606) (11,102,862) (15,031,175)Weighted average number of fullypaid ordinary shares for thepurposes of basic EPS 463,757,036 466,591,861 464,053,739Dilutive effect of potentialordinary shares 2,689,766 4,001,925 4,076,256Adjusted weighted average numberof fully paid ordinary shares inissue during the period for thepurposes of diluted EPS 466,446,882 470,593,786 468,129,995 Basic earnings per share is calculated by dividing the basic earnings for theperiod by the weighted average number of fully paid ordinary shares in issueduring the period, less those shares held by the ESOP Trust and thoserepurchased as part of the share buy back programme. Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise share options and deferred bonus plan 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 theperiod by the weighted average number of fully paid ordinary shares in issueduring the period, less those shares held by the ESOP Trust and thoserepurchased as part of the share buy back programme. Diluted Headline earnings per share is calculated on the same basis as the basic Headline earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares. Dilutive potential ordinary shares compriseshare options and deferred bonus plan awards. The share buy back programme completed in 2006, and no further shares werebought back into Treasury during the period. 8 SHAREHOLDERS' EQUITY Issue of ordinary shares Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mShare capital 0.6 0.2 0.5Share premium 5.7 0.9 3.4 6.3 1.1 3.9 The increase in shareholders' equity during the period relates to share optionsexercised. Dividends The following dividends were paid by the Group: Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mInterim dividend for the six months ended30 June 2006 of 5.0p per share - - 23.0Final dividend for the year ended 31December 2006 of 10.0p per share (2005 -6.3p per share) 46.6 29.6 29.6 46.6 29.6 52.6 The interim dividend for the six months ended 30 June 2007 of 5.25p per share(£24.4m) was approved by the Board on 25 July 2007 and has not been included asa liability as at 30 June 2007. 9 NOTES TO THE CASH FLOW STATEMENT a Reconciliation of cash generated from operations Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mCash flows from operating activitiesOperating profit 138.0 110.0 213.9Exceptional items (4.8) - -Amortisation 3.0 1.5 4.0Depreciation 14.7 11.0 23.3(Profit)loss on disposal of property,plant and equipment (3.2) 0.1 (0.6)Share-based payments charge 2.1 1.7 4.5Decrease (increase) in inventories 66.5 79.0 (58.9)(Increase) decrease in trade and other receivables (46.8) (1.6) 29.4Increase (decrease) in trade and otherpayables 18.0 (0.5) 56.1Increase (decrease) in provisions 4.2 0.2 (0.6)Decrease in post-retirement definedbenefits (10.4) (33.7) (38.8)Movement in vehicles subject to residualvalue commitments (2.8) 2.9 5.3Other items (1.8) (0.8) (0.8)Cash generated from operations 176.7 169.8 236.8 b Reconciliation of net cash flow to movement in net (debt) funds Six months Six months Year to to 30.6.07 to 30.6.06 31.12.06 £m £m £mNet (decrease) increase in cash and cashequivalents (5.8) 35.3 9.5Net cash (outflow) inflow from borrowings and lease financing (102.5) 2.4 (158.4)Change in net cash and debt resultingfrom cash flows (108.3) 37.7 (148.9)Effect of foreign exchange rate changeson net cash and debt 2.6 (4.5) (8.8)Loans raised on acquisition (4.5) - -Net loans and finance leases relating toacquisitions (0.7) (2.0) (19.3)Movement in net (debt) funds (110.9) 31.2 (177.0)Opening net (debt) funds (19.0) 158.0 158.0Closing net (debt) funds (129.9) 189.2 (19.0) Net (debt) funds incorporate the Group's cash and cash equivalents, externalborrowings and the interest rate and cross currency swaps that hedge thoseborrowings. 10 ACQUISITIONS AND DISPOSALS Acquisitions On 15 December 2006 the Group acquired 18.55% of the share capital of EuropeanMotor Holdings for a cash consideration of £49.2m. The Group acquired theremaining share capital of the company during January 2007. This acquisitionextended the Group's retail presence in the UK. The total consideration paid(including net debt acquired of £9.6m) was £289.3m for 100% of the sharecapital. The provisional fair value of the net assets acquired was £99.9m(after fair value adjustments of c. £30.0m relating primarily to an uplift of the property values), with goodwill arising on the acquisition of £179.8m. In addition to the acquisitions noted above, the Group acquired a number ofother businesses during the year, none of which were individually material. Theconsideration for these businesses was £20.9m (including net debt acquired of£7.1m). The fair value of the net assets acquired was £9.5m, with goodwillarising on these acquisitions of £10.8m. Disposals The Group disposed of a number of businesses during the period, with netdisposal proceeds of £70.6m, and a profit on disposal of businesses of £4.8m,which has been disclosed as an exceptional item. These disposals include thedisposal of the Group's 50% share in Inchroy Credit Corporation Limited for£45.8m for a profit on disposal of £12.0m (after £3.0m adjustment for historical foreign currency differences recycled to the Income statement on disposal), and the disposal of Inchcape Automotive UK for £18.6m (loss on disposal £6.9m). Following the Group's announcement on 6 March 2007 of it's intention to disposeof certain non-core franchises, it is actively marketing these with a view tosale. The assets and liabilities of these businesses have therefore beendisclosed on the balance sheet as a disposal group. 11 POST BALANCE SHEET EVENTS On 11 June 2007, the Group announced its intention to acquire 100% of the issued share capital of Baltic Motors Corporation and SIA BM Auto (Baltic Motors)from MVC Capital Incorporated for a total cash consideration of £62.0m(including goodwill, property and related assets). Baltic Motors representFord, BMW and Land Rover in Latvia, the Baltic's largest and fastest growing market. This acquisition was completed on 24 July 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Inchcape