3rd Aug 2006 07:00
Inchcape PLC03 August 2006 Interim results Strong financial, operational and strategic progress Inchcape plc, the international automotive retail group, announces its interimresults for the six months to 30 June 2006. Financial highlights: • Sales up 8.1% to £2.44bn; 6.4% in constant currency • Headline PBT* up 11.1% to £112.0m, 7.2% in constant currency • Reported PBT up 6.9% to £112.0m • Headline EPS* up 17.8% to 18.5p, 13.3% in constant currency • Reported EPS up 22.4% to 20.2p • Interim dividend up 56.3% to 5.0p per share * Before exceptional items Operational & strategic highlights: • Record profits in UK, Australia, Greece and Belgium. • Outstanding performance in UK with strong like-for-like sales growth and margin progression. • Market leadership maintained in Hong Kong and Singapore in the face of more challenging trading conditions. • £110.4m Lind Automotive acquisition agreed in May, completed on 4 July 2006. • Pipeline of investment opportunities remains strong. Peter Johnson, Chairman of Inchcape plc, said: "Inchcape has delivered strong progress in the first half of 2006. This reflectsthe success of our strategy and the benefits of a broad geographic spread." "UK, Australia, Greece and Belgium all achieved record profits in the first sixmonths of 2006. In the face of easing consumer demand and a decline in thepassenger car market, our UK Retail business grew trading profits by 49.1%,achieving a record trading margin of 2.8%. The Group regained market leadershipfor Toyota in Greece in the period." "Hong Kong and Singapore suffered challenging trading conditions and the run outof several core models. Nonetheless we retained substantial market leadershipfor Toyota in both these markets. In Australia, Subaru's market share continuedto grow, achieving a record 3.9%." "Inchcape's strong operating cash flow qualities and the strength of our balancesheet leave us well placed to play a leading role in the industry consolidationhappening around the world. Also, it enables us to expand where we can achievescale operations in fast growing markets. Our strategy is to increase our scalegeographical spread from six to ten core markets over the next five years. Weare building a strong pipeline of investment opportunities to achieve this." "In the second half we will benefit from our continued focus on customerservice, the introduction of new models, improved vehicle supply and the Lindacquisition. As a result, although market conditions remain challenging, we arewell placed to deliver another year of growth in 2006." For further information, please contact: Group Communications, Inchcape plc020 7546 0022 Hogarth Partnership Limited (John Olsen/Barnaby Fry)020 7357 9477 Ex Dividend Date 9 August 2006Record Date 11 August 2006Payment Date 11 September 2006Strategy Presentation Day 10 October 2006 Notes to editors Inchcape is a scale automotive retail group operating in Australia, Belgium,Greece, Hong Kong, Singapore and the UK. The Group also has operations in anumber of other global markets. In addition to growing our core businesses, weare looking to develop scale operations in new and emerging regions. Werepresent leading automotive brands and operate either a retail, or a verticallyintegrated retail model (i.e. exclusive distribution and retail), depending onthe market. Our current key manufacturer partners are Toyota/Lexus, Subaru, BMW,the Premier Automotive Group of Ford, Mazda, Mercedes-Benz, Volkswagen, Audi andHonda. For further information, visit us at www.inchcape.com Inchcape plc Interim results for the half year ending 30 June 2006 Results overview Inchcape has delivered strong progress in the first half of 2006. This reflectsthe success of our strategy and the benefits of a broad geographic spread. UK, Australia, Greece and Belgium all achieved record profits in the first sixmonths of 2006. In the face of easing consumer demand and a decline in thepassenger car market, our UK Retail business grew trading profits by 49.1%,achieving a record trading margin of 2.8%. The Group regained market leadershipfor Toyota in Greece in the period. Hong Kong and Singapore suffered challenging trading conditions and the run outof several core models. Nonetheless we retained substantial market leadershipfor Toyota in both these markets. In Australia, Subaru's market share continuedto grow, achieving a record 3.9%. Overall sales increased by 8.1% to £2,440.6m, a 6.4% increase at constantcurrency. Headline profit before tax increased by 11.1% to £112.0m, representing7.2% growth at constant currency. Headline earnings per share rose 17.8% to18.5p, some 13.3% at constant currency. Strong cash generation is a keyattribute of our business model as demonstrated by the operating cash flow of£142.3m in the first six months of 2006, 129.4% of operating profit. The Group has successfully concluded its £65.0m share buy back programme throughthe purchase of 17.9m shares, now held in treasury, at an average price of £3.64per share. As a result of this continued strong performance, the Board has declared aninterim dividend of 5.0p per share, an increase of 56.3% on 2005. This upliftreflects our continuing confidence in the business and its future and isconsistent with our aim of maintaining a progressive approach to dividends andcapital returns to shareholders. The interim dividend will be paid on 11 September 2006 to shareholders on theregister at 11 August 2006. Strategy update Our key strategic goals are to strengthen our core businesses and to developexpansion opportunities in existing and new markets. We are developing initiatives in a number of areas to increase both our like forlike sales and productivity in order to strengthen the existing businesses. Inchcape's strong operating cash flow qualities and the strength of our balancesheet leave us well placed to play a leading role in the industry consolidationhappening around the world. Also, it enables us to expand where we can achievescale operations in fast growing markets. Our strategy is to increase our scalegeographical spread from six to ten core markets over the next five years. Weare building a strong pipeline of investment opportunities to achieve this. Initially the strategic expansion in our core markets is focused on the UK,Australia and Eastern Europe. The pace of consolidation in the UK and Australia,and expansion in Eastern Europe, should provide significant opportunities forus. In February 2006 the Group acquired Keystar Motors Pty Limited (Keystar) inAustralia for £9.1m. It represents Subaru, Hyundai, Kia and Mitsubishi in theBrisbane area across two multi-franchise retail centres. The acquisitioncomplements our existing retail operations in Melbourne and Sydney, and providesa platform to build a larger business in Queensland. In March we announced our intention to enter the Russian market by developing apartnership with the Independence Group of Companies, one of Moscow's leadingindependent car retailers. This partnership will establish two Toyota retail andservice centres in Moscow. These will be newly constructed and are due to beopen towards the end of 2007. The joint venture will initially invest US$35.0min the construction and fit out of the new facilities. The purchase of the Lind Automotive Group Holdings Limited (Lind) in the UK for£110.4m was completed on 4 July 2006. It is a significant step in our strategicdevelopment. This sizeable acquisition enhances our geographic coverage in thesouth and east of England. It develops further our partnership with BMW/MINI,Volkswagen and Land Rover. It also renews our partnership in the UK with Audiand establishes an important new partnership with Honda. We continue to invest in our operations in the high growth Eastern Europeanmarkets. In June 2006 we opened a new flagship Toyota retail centre in Bucharest, Romania. In addition, we invested in the Lexus brand in Europe and in March 2006 weopened a new Lexus showroom in the Greater Brussels area. 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 2005 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. Australia %change on 2005 % change (constant 2006 2005 on 2005 currency)Sales £335.3m £312.4m +7.3% +6.5%Trading Profit £18.8m £16.1m +16.8% +15.5% In Australia the vehicle market in the first half of 2006 remained fundamentallystrong at 483,160 units, albeit slightly down on the record 2005. This slowdownwas in line with our expectations following the softening of the market in thesecond half of 2005. Higher petrol prices continue to shift consumer preferencetowards the light and small vehicle segments which is benefiting Subaru,particularly the Impreza model. Subaru outperformed the market and achieved a record market share of 3.9%. Thiswas assisted by special edition variants across all models and record Imprezasales. Our Subaru Distribution business enjoyed very good trading profitprogression in the face of a competitive market. Like for like sales growth in the Retail business was up 2.6% over the firsthalf of 2005, despite a softening market. The continuous focus on improvingoperational performance and customer service in Melbourne and Sydney Retail hasgenerated like for like trading profit growth of 27.2% and has improved tradingmargins. This, coupled with the benefit from the exit of the underperforming retail centres in Sydney during 2005, and with the acquisition of Keystar in Brisbane, has resulted in overall trading profits increasing by 60.2% in our Australian Retail business during the first half of 2006. We continued to invest in AutoNexus, our parts and logistics operation, inresponse to increased consumer demand. This expansion, together with the benefitof securing several new refurbishment contracts, increased sales by 13.5% in thefirst half of 2006. Overall, Australia enjoyed an outstanding first half in 2006. Sales were up by6.5% and trading profit increased by 15.5%. Trading margins progressed well inthe period to 5.6%. Belgium %change on 2005 % change (constant 2006 2005 on 2005 currency)Sales £300.3m £257.5m +16.6% +16.6%Trading Profit £9.2m £8.3m +10.8% +10.8% Consumer confidence and demand in Belgium strengthened in the first half of2006, with the vehicle market stimulated by the biennial Brussels Motor Show.Overall passenger car registrations were 325,611 units in the period, some 13.7%up on June 2005. Demand was stimulated by the launch of several new Toyota/Lexusmodels in Europe in the first quarter of 2006, together with the broadening ofthe Toyota model range with the Aygo, and Corolla special edition variants.Customer orders for over 9,000 units were secured in January, assisted by theBrussels Motor Show. However, constrained supply has held back sales and marketshare growth in the period. Despite this, our passenger car market share at 5.6%showed an improvement of 0.2ppts compared to June 2005. Sales and trading profit were up by 16.6% and 10.8% respectively in the firsthalf of 2006. An increase in vehicle sales by the Distribution business morethan compensated for a slightly weaker vehicle margin due to a shift in mixtowards sales of smaller models. In Belgium, where we are the dominant Lexusretailer, the new generation of Lexus cars, including the IS220 diesel,contributed to a strong performance in Belgium Retail in the first half of 2006. Greece %change on 2005 % change (constant 2006 2005 n 2005 currency)Sales £187.6m £156.8m +19.6% +19.6%Trading Profit £9.2m £7.8m +17.9% +17.9% In the first half of 2006 the Greece passenger car market was almost in linewith last year at 152,658 units. The recent release of several new Toyota/Lexusmodels has been well received. This, allied with the benefits of an investmentprogramme by the dealer network upgrading operational facilities, has stimulateddemand. Toyota regained market leadership in the first half of 2006. In June,the passenger car market share reached 9.7%, an improvement of 1.6ppts over lastyear. Distribution in Greece experienced strong sales progression due toincreased vehicle and parts sales. The performances of our Athens and Salonica Retail businesses are improving.Like for like sales were up 24.6% benefiting from strong vehicle and servicesales. We expect to build on this in the second half and continue theimprovement of these businesses. Overall in Greece, the trading profit was 17.9% up on 2005. Hong Kong %change on 2005 % change (constant 2006 2005 on 2005 currency)Sales £106.0m £114.4m -7.3% -12.2%Trading Profit £10.1m £13.0m -22.3% -26.2% This year is Crown Motors' fortieth anniversary of selling Toyota vehicles inHong Kong. Our outstanding customer experience, retail excellence and innovationhas led to it securing the Toyota Triple Crown Award for fourteen consecutiveyears. It is the only distributor worldwide to have achieved this. The Hong Kong vehicle market overall remained soft in the first six months of2006, declining by 4.0% year on year. In the face of a challenging market Crown Motors, our Toyota/Lexus business,maintained its strong market leadership with a 32.2% market share at June 2006.This was 2.2ppts down from 2005. Consumer demand in the period was affected bythe run out of several core models whilst competitors launched new products,initial supply constraints for the new models, and lower public bus sales. Overall, sales and trading profit in Hong Kong were 12.2% and 26.2% lowerrespectively in the first half of 2006. Singapore %change on 2005 % change (constant 2006 2005 on 2005 currency)Sales £358.2m £366.3m -2.2% -9.2%Trading Profit £33.8m £34.6m -2.3% -9.2% Between 2001 and 2005 the Singapore market enjoyed an annual average growth of12.4% per annum. This was stimulated by a change in fiscal policy in May 2002which, coupled with the declining price of the Certificate of Entitlement (COE),encouraged consumers to replace their cars before the expiry of the ten year COEterm. The vehicle population entitled to the attractive rebates under the oldpolicy is now depleted substantially. We expect, therefore, the annual vehiclessales to slow down over the next few years. Toyota/Lexus retained a dominant market leadership in the period. Borneo Motorssales were down 11.2% in the period impacted by the discontinuance of theLiteace commercial vehicle, the run out of the Camry, lower taxi sales andhigher parallel imports. Lower sales volumes, together with continued margin pressure in a competitivemarket, have affected our profitability. We continue to broaden the base of ourToyota/Lexus sales in Singapore with like for like aftersales growth up 19.7%year on year. Our Suzuki franchise enjoyed an excellent performance in the first half of theyear benefiting from the new Swift model. Overall, strong Suzuki trading profit progression partly mitigated a softerToyota/Lexus performance. In aggregate Singapore generated a trading profit 9.2%lower than the first half of last year. Looking forward to 2007, new emission regulations will result in the absence ofSingapore taxi sales and impact profit by around £3.0m in 2007. United Kingdom %change on 2005 % change (constant 2006 2005 on 2005 currency)Sales £783.0m £744.1m +5.2% +5.2%Trading Profit £23.2m £15.0m +54.7% +54.7% The UK vehicle market continued to soften in the first half of 2006.Manufacturer new retail vehicle sales for the franchises represented by UKRetail fell by 4.7%. However, in the face of these challenging marketconditions, UK Retail's like for like sales increased by 3.4% in the first halfof 2006 to £663.4m. This was due to improved used car and aftersales performanceand new car sales declining at a lesser rate than the market. Like for liketrading profit increased by 37.3%. These performances were achieved through the success of our focus on processimprovements, operational excellence and customer initiatives. The strengtheningof the core business, together with the full year impact of the acquisition ofMercedes-Benz retail centres in the north west of England, generated sales up by6.1% to £727.8m for the first half of 2006. UK Retail's trading profit rose by49.1% to £20.6m. This was due to strong performances, in particular from BMW,Mercedes-Benz, Lexus and Volkswagen. Trading margin improved an outstanding0.8ppts to 2.8% in the first half of 2006. Inchcape Automotive has benefited from the actions taken in 2005 to improveproduction efficiency. The business broke even for the first half of 2006, whichrepresents a £2.2m improvement in profitability over the first half of 2005. Inchcape Fleet Solutions achieved a growth of 12.9% in trading profit assistedby increased rental and fleet management income together with tight overheadcontrol. Overall, our UK businesses achieved an excellent 5.2% growth in sales to £783.0min the first six months of 2006. Furthermore, outstanding trading marginprogression in the period, led by an impressive UK Retail performance and aturnaround in the Inchcape Automotive business, has delivered UK trading profitimprovements of 54.7% to £23.2m at June 2006. Other %change on 2005 % change (constant 2006 2005 on 2005 currency)Sales £370.2m £305.5m +21.2% +19.2%Trading Profit £16.1m £14.3m +12.6% +8.4% Market conditions in Finland are in line with prior year. Focused marketingactivity enabled our Mazda Distribution business to increase its market share to3.3% in the period. Overall the trading profit delivered by Finland increased byc.70.0% in the period to £2.3m. The Baltic markets of Estonia, Latvia and Lithuania continue to experience asignificant period of growth, with a combined year to date market increase of34.5%. Our businesses in these countries outperformed the markets, improvingmarket share from 5.4% in the first half of 2005 to 6.0% in 2006. This resultedin trading profits increasing by 97.0%. Our Balkans businesses in Bulgaria and Romania continue to thrive in the highgrowth markets experienced in these countries. The business should benefit inthe second half of the year from the opening in June of our new flagshipfacility in Bucharest. In Bulgaria our business improved market share to 9.3%,and increased vehicle volumes by 28.0%. Overall Balkans trading profit grew by21.6%. Our business in Ethiopia continues to achieve strong results. An increase invehicle sales and an improvement in spare parts sales generated trading profitsup by 26.9% to £4.1m. In France, we have decided to focus our operations on the south west region inthe market areas of Bordeaux, Toulouse and Montpellier. We are undertaking arestructuring programme to exit from non-core businesses. In Poland the start up of our BMW/MINI operations is slower than anticipated.This, together with challenging market conditions, has resulted in a tradingloss in the period. Central costs are £10.4m for the period, £1.4m higher than June 2005. Thisincrease is primarily due to our investment in new management, systems andprocesses to facilitate the next phase of growth for the Group. Financial review Cash flow, interest and finance The Group's tight control of working capital has resulted in a reduction in theperiod of £76.9m. This, together with strong operating profits, generated netcash from operating activities of £142.3m for the first half of 2006. Thisrepresents 129.4% of operating profit and demonstrates the Group's excellentcash generating capabilities. During the period the Group returned £63.6m to shareholders, £34.0m by way ofthe share buy back programme and £29.6m in respect of the final 2005 dividend. The Group maintained its policy of investing to improve the quality andoperating standards of its retail centres. Net capital expenditure of £16.3m wasmade in the period principally in UK Retail and Romania. The impressive operating cash flow more than funded the capital expenditure andacquisitions during the period with the Group strengthening its net cashposition to £189.2m at 30 June 2006. Adjusting for the Lind acquisition whichcompleted on 4 July 2006 the pro-forma cash position at 30 June was £78.8m. The net finance charge of £0.6m in the first half of 2006 is £1.8m lower thanJune 2005. This improvement has been generated by the strong cash balances heldby the Group during the period. The finance charge also has benefited from animprovement in notional pension interest income. In July 2006, the Group extended its syndicated five year revolving creditfacility of £275.0m for a further year. The facility expires on 13 July 2011. Pensions In March 2006, in advance of the triennial valuation for two of the Group's UKdefined benefit pension schemes, the Group agreed a funding programme to addressthe deficits associated with these schemes. This programme included making a oneoff contribution totalling £32.0m to the schemes in March 2006. It isanticipated that additional contributions of c.£55.0m will be made over thefollowing five years. These payments together with an increase in long terminterest rates since year end, have significantly reduced the net pensiondeficit from £69.4m at 31 December 2005 to £11.0m at 30 June 2006. Tax The subsidiaries Headline tax rate for the first half of 2006 is 21.7% comparedto 25.5% for the full year 2005. The reduction benefits from a number of one offitems. These include the satisfactory outcome of a tax audit in Greece,settlements of UK prior year tax computations and tax allowances exceedingdepreciation in the UK. In 2006 we have determined that it is now appropriate to recognise a netdeferred tax asset of £11.6m in the UK. This mainly relates to the futurecorporate tax deductions associated with payments to the UK defined benefitpension schemes. Exceptional items The exceptional tax credit of £8.0m reflects the favourable settlement in 2006of the corporation tax treatment of the VAT recovery and associated interestincome received by the Group in 2003 and 2004. Exchange rates The first half 2006 operating profit at June 2006 average exchange rates was£110.0m. If June 2005 exchange rates had prevailed operating profit would havebeen £106.2m. The £3.8m exchange difference primarily arose due to the impact ofthe weaker Hong Kong and Singapore dollar. Share split In May 2006 we carried out a six for one share split. Our equity was trading atmore than £29.00 per share, which is a comparatively high price for sharestraded on the London Stock Exchange. We felt that many shareholders would preferto deal at a lower price per share and therefore sub-divided each existingordinary share into six new ordinary shares. This further increased liquidity inthe stock. 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 will benefit from our continued focus on customer service,the introduction of new models, improved vehicle supply and the Lindacquisition. As a result, although market conditions remain challenging, we arewell placed to deliver another year of growth in 2006. Peter JohnsonChairman 2 August 2006 CONSOLDIATED INCOME STATEMENT (UNAUDITED)FOR THE SIX MONTHS ENDED 30 JUNE 2006 Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Revenue (note 2) 2,440.6 2,257.0 4,488.1Cost of sales (2,086.2) (1,937.4) (3,847.4)Gross profit 354.4 319.6 640.7Operating expenses before exceptionalitems (244.4) (219.5) (451.3)Exceptional items (note 3) - 4.0 (13.0)Total operating expenses (244.4) (215.5) (464.3)Operating profit (note 2) 110.0 104.1 176.4Share of profit after tax of jointventures and associates 2.6 3.1 6.2Profit before finance and tax 112.6 107.2 182.6Finance income (note 4) 25.3 21.5 44.7Finance costs (note 5) (25.9) (23.9) (50.0)Profit before tax 112.0 104.8 177.3Tax before exceptional tax - UK 1.1 (0.4) (0.3) - Overseas (24.8) (24.5) (46.6)Exceptional tax - UK (note 3) 8.0 - -Total tax (note 6) (15.7) (24.9) (46.9)Profit for the period 96.3 79.9 130.4 Attributable to:- Equity holders of the parent 94.4 77.8 126.6- Minority interests 1.9 2.1 3.8 96.3 79.9 130.4 Basic earnings per share (pence) (note 7) 20.2p 16.5p 27.0pDiluted earnings per share (pence) (note 7) 20.1p 16.3p 26.8pProposed dividend per share (pence) (note 8) 5.0p 3.2p 6.3pPaid dividend per share (pence) (note 8) 6.3p 5.8p 9.0p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)FOR THE SIX MONTHS ENDED 30 JUNE 2006 Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Cash flow hedges (net of tax) 5.1 0.8 0.6Fair value (losses) gains on available forsale financial assets (1.4) 0.5 2.3Effect of foreign exchange rate changes (20.8) 13.6 30.4Actuarial gains (losses) on defined benefitpension schemes (net of tax) 13.8 (3.6) (15.3)Net (losses) gains recognised directly inshareholders' equity (3.3) 11.3 18.0Profit for the period 96.3 79.9 130.4Total recognised income and expense for theperiod 93.0 91.2 148.4 Attributable to:- Equity holders of the parent 91.4 89.0 144.2- Minority interests 1.6 2.2 4.2 93.0 91.2 148.4Adoption of IAS 32 and IAS 39 - (4.5) (4.5) CONSOLIDATED BALANCE SHEET (UNAUDITED)AS AT 30 JUNE 2006 As at As at As at 30.6.06 30.6.05 31.12.05 £m £m £m Non-current assetsIntangible assets 74.2 88.4 69.5Property, plant and equipment 354.4 337.0 346.7Investments in joint ventures andassociates 44.4 47.6 44.7Available for sale financial assets 12.5 11.9 15.0Trade and other receivables 21.5 22.8 22.4Deferred tax assets 35.4 21.4 23.4 542.4 529.1 521.7 Current assetsInventories 536.1 541.5 615.8Trade and other receivables 222.0 226.3 221.1Available for sale financial assets 2.8 2.3 2.4Derivative financial instruments - - 2.1Current tax assets 3.2 1.6 1.0Cash and cash equivalents 348.7 262.3 309.0 1,112.8 1,034.0 1,151.4Total assets 1,655.2 1,563.1 1,673.1 Current liabilitiesTrade and other payables (696.0) (645.4) (688.2)Derivative financial instruments (2.3) (12.7) (12.6)Current tax liabilities (39.0) (41.9) (43.8)Provisions (22.3) (27.2) (22.5)Borrowings (152.9) (137.1) (145.4) (912.5) (864.3) (912.5)Non-current liabilitiesTrade and other payables (38.6) (36.2) (45.3)Provisions (35.1) (33.7) (35.6)Deferred tax liabilities (13.4) (17.2) (13.5)Borrowings (6.6) (5.4) (5.6)Retirement benefit liability (11.0) (60.6) (69.4) (104.7) (153.1) (169.4) Total liabilities (1,017.2) (1,017.4) (1,081.9) Net assets 638.0 545.7 591.2 Shareholders' equityShare capital 120.3 119.8 120.1Share premium 113.4 111.6 112.5Capital redemption reserve 16.4 16.4 16.4Other reserves (3.8) (5.0) 13.1Retained earnings 385.1 293.8 319.6Equity attributable to equity holders ofthe parent 631.4 536.6 581.7Minority interests 6.6 9.1 9.5 Total shareholders' equity 638.0 545.7 591.2 CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)FOR THE SIX MONTHS ENDED 30 JUNE 2006 Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Cash generated from operating activitiesCash generated from operations (note 9a) 169.8 114.8 195.4Tax paid (26.5) (30.9) (51.4)Interest received 6.2 8.5 13.9Interest paid (7.2) (7.4) (16.8)Net cash generated from operatingactivities 142.3 85.0 141.1 Cash flows from investing activitiesAcquisition of businesses, net of cash andoverdrafts acquired (17.7) (28.5) (29.9)Net cash inflow (outflow) from sale ofbusinesses 0.2 (5.5) (5.5)Purchase of property, plant and equipment (18.6) (39.3) (63.5)Purchase of intangible assets (0.7) (0.8) (2.2)Proceeds from disposal of property, plantand equipment 3.0 5.0 17.6Net disposal (purchase) of available forsale financial assets 1.1 0.9 (0.5)Dividends received from joint ventures andassociates 0.8 1.2 9.7Net cash used in investing activities (31.9) (67.0) (74.3) Cash flows from financing activitiesProceeds from issue of ordinary shares 1.1 1.2 2.4Share buy back programme (34.0) (31.0) (31.0)Net (purchase) disposal of own shares byESOP Trust (0.5) 1.0 0.1Net cash outflow from borrowings (2.2) (2.7) (2.3)Payment of capital element of finance leases (0.2) (0.2) (0.2)Equity dividends paid (29.6) (27.2) (42.0)Minority dividends paid (3.7) (1.8) (3.0)Net cash used in financing activities (69.1) (60.7) (76.0) Net increase (decrease) in cash and cash 41.3 (42.7) (9.2)equivalents (note 9b)Cash and cash equivalents at beginning ofthe period 165.9 158.8 158.8Effect of foreign exchange rate changes (10.5) 10.8 16.3Cash and cash equivalents at end of theperiod 196.7 126.9 165.9 Cash and cash equivalents consist of:- Cash and cash equivalents 348.7 262.3 309.0- Bank overdrafts (152.0) (135.4) (143.1) 196.7 126.9 165.9 NOTES TO THE ACCOUNTS (UNAUDITED) 1 BASIS OF PREPARATION The results for the periods to 30 June have been prepared on the basis of the accounting policies set out in the Annual report and accounts 2005, which were prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and implemented in the UK and with the parts of the Companies Act 1985 applicable to companies reporting underIFRS. The Group adopted IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement with effect from 1 January 2005. This decreased shareholders' equity by £4.5m at 1 January 2005. These interim financial statements are unaudited but have been reviewed by the external auditors. They do not constitute statutory accounts within the meaningof Section 240 of the Companies Act 1985. The Group's published financial statements for the year ended 31 December 2005 have been reported on by the Group's auditors and filed with the Registrar of Companies. The report of the auditors 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 30.6.06 30.6.05 31.12.05 30.6.06 30.6.05 31.12.05Australiandollar 2.40 2.42 2.38 2.49 2.35 2.34Euro 1.45 1.45 1.46 1.45 1.48 1.46Hong Kongdollar 13.84 14.62 14.16 14.37 13.93 13.31Singaporedollar 2.87 3.09 3.02 2.92 3.02 2.85 2 SEGMENTAL ANALYSIS The Group's primary reporting format is by geographical segments. Revenue Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Australia 335.3 312.4 612.7Belgium 300.3 257.5 450.8Greece 187.6 156.8 300.4Hong Kong 106.0 114.4 242.3Singapore 358.2 366.3 719.6UK 783.0 744.1 1,530.3Other 370.2 305.5 632.0 2,440.6 2,257.0 4,488.1 Operating profit before exceptional items Exceptional items Six months Six months Year to Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 to 30.6.06 to 30.6.05 31.12.05 £m £m £m £m £m £mAustralia 18.8 16.1 31.9 - - -Belgium 9.2 8.3 14.0 - - -Greece 9.2 7.8 13.8 - - -Hong Kong 10.1 13.0 28.8 - - -Singapore 33.8 34.6 62.1 - - -UK 23.2 15.0 29.2 - - (19.5)Other 16.1 14.3 28.4 - - - 120.4 109.1 208.2 - - (19.5)Central costs (10.4) (9.0) (18.8) - 4.0 6.5 110.0 100.1 189.4 - 4.0 (13.0) Operating profit after exceptional items Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Australia 18.8 16.1 31.9Belgium 9.2 8.3 14.0Greece 9.2 7.8 13.8Hong Kong 10.1 13.0 28.8Singapore 33.8 34.6 62.1UK 23.2 15.0 9.7Other 16.1 14.3 28.4 120.4 109.1 188.7Central costs (10.4) (5.0) (12.3) 110.0 104.1 176.4 Share of results of joint ventures and associates The Group's share of the results of joint ventures and associates of £2.6m for the six months ended 30 June 2006 (£3.1m for the six months ended 30 June 2005;£6.2m for the year ended 31 December 2005) arises in Hong Kong (£1.3m), the UK (£0.4m), Greece (£0.4m), Belgium (£0.4m) and Other (£0.1m). 3 EXCEPTIONAL ITEMS Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Provision release arising from non-motorsbusiness exits - 4.0 6.5Goodwill impairment - - (19.5)Operating exceptional items - 4.0 (13.0)Exceptional tax (note 6) 8.0 - -Total exceptional items 8.0 4.0 (13.0) Exceptional tax relates to the release of tax provided against the VAT recoveries in 2003 and 2004 following the favourable settlement of the corporation tax treatment. 4 FINANCE INCOME Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Bank interest receivable 4.9 2.8 6.5Expected return on post retirement planassets 19.0 16.6 33.8Other interest receivable 1.4 2.1 4.4Total finance income 25.3 21.5 44.7 5 FINANCE COSTS Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Bank interest payable 1.9 0.8 2.8Stock holding interest 4.8 4.4 8.7Interest expense on post retirement planliabilities 17.8 16.7 33.4Other interest payable 1.4 2.0 5.1Total finance costs 25.9 23.9 50.0 6 TAX Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Current tax - UK 6.1 0.9 1.3 - Overseas 24.9 24.6 46.2 31.0 25.5 47.5Deferred tax - UK (7.2) (0.5) (1.0) - Overseas (0.1) (0.1) 0.4Tax before exceptional tax 23.7 24.9 46.9Exceptional tax (note 3) (8.0) - -Total tax 15.7 24.9 46.9 7 EARNINGS PER SHARE Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Profit for the period 96.3 79.9 130.4Minority interests (1.9) (2.1) (3.8)Basic earnings 94.4 77.8 126.6Exceptional items (including taxexceptional) (8.0) (4.0) 13.0Headline earnings 86.4 73.8 139.6Basic earnings per share 20.2p 16.5p 27.0pDiluted earnings per share 20.1p 16.3p 26.8pBasic Headline earnings per share 18.5p 15.7p 29.8pDiluted Headline earnings per share 18.4p 15.5p 29.5p Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 number number number Weighted average number of fullypaid ordinary shares in issue during the period 480,326,644 478,355,682 479,060,496Weighted average number of fullypaid ordinary shares in issue during the period:- Held by the ESOP Trust (2,631,921) (3,759,366) (3,115,806)- Repurchased as part of the sharebuy back programme (11,102,862) (3,224,358) (6,684,408)Weighted average number of fullypaid ordinary shares for the purposesof basic EPS 466,591,861 471,371,958 469,260,282Dilutive effect of potentialordinary shares 4,001,925 5,596,692 3,624,888Adjusted weighted average number offully paid ordinary shares in issueduring the period for the purposesof diluted EPS 470,593,786 476,968,650 472,885,170 Following the six for one share split on 15 May 2006, the comparative number ofshares have been restated and the earnings per share recalculated accordingly. Basic earnings per share is calculated by dividing the basic earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period, less those shares held by the ESOP Trust and those repurchased as part of the share buy back programme. Diluted earnings per share is calculated on the same basis as the basic earningsper share with a further adjustment to the weighted average number of fully paidordinary shares to reflect the effect of all dilutive potential ordinary shares.Dilutive potential ordinary shares comprise share options and deferred bonus plan awards. Headline earnings (which excludes exceptional items) is adopted to assist the reader in understanding the underlying performance of the Group. Headline earnings per share is calculated by dividing the Headline earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period, less those shares held by the ESOP Trust and those repurchased as part of the share buy back programme. Diluted Headline earnings per share is calculated on the same basis as the basicHeadline earnings per share with a further adjustment to the weighted 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. 8 SHAREHOLDERS' EQUITY Share buy back programme The Group repurchased 7,792,578 of shares for £34.0m during the six months ended30 June 2006 (10,088,028 for £31.0m for the six months ended 30 June 2005 and the year ended 31 December 2005) in relation to its share buy back programme. Issue of ordinary shares Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Share capital 0.2 0.3 0.6Share premium 0.9 0.9 1.8 1.1 1.2 2.4 Share split On 15 May 2006, the Group effected a six for one share split reducing the nominal value of the Group's ordinary share capital from 150.0p per share to 25.0p per share and increasing the number of authorised ordinary shares from 131,000,000 to 786,000,000. Dividends The following dividends were paid by the Group: Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Interim dividend for the six monthsended 30 June 2005 of 3.2p per share - - 14.8Final dividend for the year ended 31December 2005 of 6.3p per share (2004 - 5.8p per share) 29.6 27.2 27.2 29.6 27.2 42.0 The interim dividend for the six months ended 30 June 2006 of 5.0p per share (£23.0m) was approved by the Board on 2 August 2006 and has not been included as a liability as at 30 June 2006. Following the six for one share split carried out during the period, comparativedividends per share have been restated accordingly. 9 NOTES TO THE CASH FLOW STATEMENT a Reconciliation of cash generated from operations Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Cash flows from operating activitiesOperating profit 110.0 104.1 176.4Exceptional items - (4.0) 13.0Amortisation 1.5 1.6 3.2Depreciation 11.0 11.7 22.8Loss (profit) on disposal of property,plant and equipment 0.1 (1.1) (2.1)Share-based payments charge 1.7 1.9 2.9Decrease (increase) in inventories 79.0 51.2 (15.7)Increase in trade and other receivables (1.6) (24.9) (15.2)(Decrease) increase in trade and otherpayables (0.5) (24.8) 13.6Increase (decrease) in provisions 0.2 (2.4) (3.8)Decrease in post retirement definedbenefits* (33.7) (2.1) (4.8)Increase in vehicles subject to residualvalue commitments 2.9 4.3 4.5Other items (0.8) (0.7) 0.6Cash generated from operations 169.8 114.8 195.4 * The decrease in post retirement defined benefits in 2006 includes one-off payments of £32.0m. A number of minor amendments have been made to the presentation of cash flows from operating activities, the principal changes being the separate disclosure of movements in provisions and post retirement defined benefits. Comparative information has been restated accordingly for the period ended 30 June 2005 and the year ended 31 December 2005. b Reconciliation of net cash flow to movement in net funds Six months Six months Year to to 30.6.06 to 30.6.05 31.12.05 £m £m £m Net increase (decrease) in cash and cashequivalents 41.3 (42.7) (9.2)Net cash outflow from borrowings and leasefinancing 2.4 2.9 2.5Change in net cash and debt resulting fromcash flows 43.7 (39.8) (6.7)Effect of foreign exchange rate changes onnet cash and debt (10.5) 10.8 16.3Net loans and finance leases relating toacquisitions (2.0) (4.0) (4.4)Movement in net funds 31.2 (33.0) 5.2Opening net funds 158.0 151.9 151.9Adoption of IAS 32 and IAS 39 - 0.9 0.9Closing net funds 189.2 119.8 158.0 10 POST BALANCE SHEET EVENTS On 4 July 2006, the Group completed its acquisition of 100.0% of the equity of Lind Automotive Group Holdings and associated UK properties for a total consideration (including debt assumed) of £110.4m. INDEPENDENT REVIEW REPORT TO INCHCAPE PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2006 which comprises the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash flow statement and the related notes to the accounts. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. The interim report has been prepared in accordance with the basis set out in Note 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2006. PricewaterhouseCoopers LLPChartered AccountantsLondon2 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Inchcape