28th Feb 2005 07:00
Inchcape PLC28 February 2005 28 February 2005 Inchcape plc preliminary results Strong operating performance underpins another set of excellent results Inchcape plc, the international automotive services group, announces its resultsfor the full year to 31 December 2004. Financial highlights: • Operating profit, before goodwill amortisation and exceptional items, up by 25.1% at £176.2m • Headline profit before tax* up 26.7% at £172.0m • Operating profit up 8.3% at £163.1m • Profit before tax down £13.0m at £155.3m mainly due to the £37.5m exceptional VAT recovery in 2003 • Proposed final dividend up 34.6% at 35.0p per share, resulting in a total dividend of 50.0p per share up 31.6% • dividend has more than doubled since 2000 • Strong operating cash flow at £177.2m • Share buy back of £65.0m announced * Before goodwill amortisation and exceptional items Operational highlights: • Encouraging progress made with UK Retail margins, operating profit up 32.0% at £16.9m • Toyota market leadership maintained in Greece, Hong Kong and Singapore • Subaru Australia achieves year on year volume growth for ninth successive year • Eastern Europe offers further exciting growth prospects • exclusive Importer and Retailer for Mazda in Estonia • two BMW dealerships opened in Poland • further developments to come Peter Johnson, Group Chief Executive of Inchcape plc, commented: "The Group has again performed at a very high level in 2004, with continuedprofit growth and further strong cash generation. "Our strategic growth plans remain broadly based and encompass UK Retail as wellas further developments in Eastern Europe. We also have expansion programmes inplace for Greece and Australia, and we will continue our research into emergingmarkets such as China. "As a result of the consistent strong operational performance in recent years,and the receipt of significant one off cash contributions, the strength of ourbalance sheet is such that we have capital surplus to that required to fund ourstrategic growth plans. We therefore intend to return £65m to our shareholdersthrough an on market share buy back programme. "Even after this we will still have substantial financial capacity, which willenable us to deliver our strategy in 2005 and beyond." Financial summary: £m 2004 2003 Turnover 4,170.3 3,855.2 Operating profit, before goodwill amortisation andexceptional items 176.2 140.8Goodwill amortisation (5.5) (5.5)Goodwill impairment (9.4) -VAT exceptional income 1.8 15.3 -------------- --------------Operating profit 163.1 150.6Interest** - 17.2Other exceptional items (7.8) 0.5 -------------- --------------Profit before tax 155.3 168.3 -------------- -------------- Headline profit before tax* 172.0 135.8 Headline earnings per share* 161.4p 132.4pBasic earnings per share 139.4p 164.8p * Before goodwill amortisation and exceptional items** Includes income of £4.2m in 2004 and £22.2m in 2003 relating to the VAT exceptional Planned Board changes: The Board has announced today that Sir John Egan, Non-executive Chairman,intends to step down from that role by the AGM in May 2006 and it is planned that, at that time, Peter Johnson will succeed Sir John as Non-executive Chairman. A full explanation of these planned Board changes is contained in a separate statement issued today. Notes to editors A copy of the preliminary results, for the full year to 31 December 2004,follows this release. High resolution photographs are available for the media to view and download free of charge at www.vismedia.co.uk For further information, please contact: Group Communications, Inchcape plc 020 7546 0022 Hogarth Partnership Limited (John Olsen/Barnaby Fry) 020 7357 9477 Inchcape, an international automotive services group, provides qualityrepresentation for its manufacturer partners, a choice of channels to market andproducts for its retail customers and a range of business services for itscorporate customers. Operations are focused on the UK, Greece, Belgium,Australia, Hong Kong and Singapore. Inchcape's activities include exclusiveImport, Distribution and Retail, Business Services, automotive E-commerce andFinancial Services. Our key manufacturer partners are Toyota/Lexus, Subaru, BMW,the Premier Automotive Group of Ford, Mazda, Mercedes-Benz and Volkswagen. For further information, visit us at www.inchcape.com Inchcape plc Preliminary results for the full year to 31 December 2004 Results overview A strong operating performance from all of our key markets underpins yet anotherset of excellent results. Operating profit before goodwill amortisation andexceptional items (see note 1b) rose 25.1% in the year, and has risen by anaverage 23.4% per annum since 2000, our first full year as a purelyinternational automotive services group. Operating cash flow in the year was £177.2m representing some 105.2% ofsubsidiaries' operating profit before goodwill amortisation and exceptionalitems. Cash generation is a key performance indicator for the Group andoperating cash flow has averaged over £150.0m per year in the period 2000 to2004. Operationally we have again performed very well retaining market leadership inHong Kong, Singapore and Greece with Toyota. In Australia, Subaru achieved yearon year growth in volumes for the ninth consecutive year. In the UK our Retailbusiness has significantly increased its operating margin in what was a moredifficult market than 2003. Acquisitions and disposals In the UK, dealer consolidation is continuing and there are many qualitybusinesses that would fit well within our portfolio. We continue to balancestrategic fit, price, value and timing in our discussions with vendors. In 2004we acquired five Mercedes-Benz dealerships in the East Midlands, which adjoinour existing Mercedes-Benz market area. This combination has created the largestindependent Mercedes-Benz territory in the country. We have also increased ourToyota and Volkswagen representation in the year. Outside the UK we are expanding our footprint in the fast growing markets ofEastern Europe. In Estonia we acquired two Mazda dealerships and as a result weare now the exclusive Importer and Retailer for Mazda in this 'city state'market. Over 1,260 Mazda vehicles were sold in Estonia in 2004 and the brandachieved a market share of 7.7%. We are also investing in new start upbusinesses and during the year entered the Polish market, where we set up BMW/MINI dealerships in Warsaw and Wroclaw. Total spend on acquisitions was £25.1m of which £20.5m related to UK Retail.Cash inflow in relation to disposals totalled £23.7m of which £19.3m related tothe sale of two 40.0% associates: MCL Group Limited (MCL) and Automotive GroupLimited (AGL). These associates were not core businesses. Financial performance Turnover of £4.2bn was up by 8.2% over 2003. Operating profit before goodwillamortisation and exceptional items was £176.2m, which is 25.1% higher than 2003.After adjusting for the VAT recovery, which was £13.5m higher in 2003 than 2004,and goodwill, including the £9.4m impairment charge relating to InchcapeAutomotive, total operating profit was £163.1m. This is 8.3% ahead of 2003. Headline profit before tax was up 26.7% on 2003 at £172.0m despite an adversecurrency effect of c. £9.0m. The increase on 2003 would have been 33.3% atconstant exchange rates. Headline earnings per share rose by 21.9% to 161.4p. Profit before tax of £155.3m was impacted by: the VAT exceptional income of £6.0m, the £9.4m goodwill impairment charge and other net exceptional losses of£7.8m. These exceptional losses mainly related to the sale of our MCL and AGLshareholdings and the exit from the Ferrari/Maserati Distribution businesses inthe UK and Belgium. These were partially offset by the release of litigationprovisions relating to non-motors disposals. Net cash movement in the year was £74.7m including £37.0m in relation to the VATrecovery. As a result the year end net cash position improved to £153.8m. Balance sheet strength Our businesses have consistently generated high levels of free cash flowsenabling us to continue the investment in our core markets. This has helpeddrive the strong earnings growth, which has been delivered in recent years. Ithas also enabled increasing returns to be given to shareholders. Dividends havemore than doubled over the last five years and with a £45.0m share buy backbeing completed in 2001, over £160.0m has been returned to shareholders sincemid 1999. A large amount of cash is generated in our international markets. This hasresulted in a mismatch between cash held in those markets and debt in the UK,due to the difficulty of repatriating the cash in a fiscally efficient manner.This had an adverse effect on the Group's interest charge due to interest ratedifferentials. During late 2004 we permanently repatriated cash of c. £135.0m tothe UK and created the ability to repatriate further amounts over the comingyears. The associated tax cost is not material but the impact on the interestcharge is positive and significant. The cash position has also been strengthened this year by the sale of two UKassociates and the VAT recovery of some £37.0m. In 2005 our cash flow has alsobenefited from the £6.0m VAT claim recognised in 2004. As a result of all of this, we are extremely well placed to fund our strategicgrowth plans. These remain broadly based and encompass further expansion in UKRetail as we aim to represent between 5.0% to 10.0% of our chosen partners'national sales volumes. Eastern Europe is also a major area of focus as we look to take advantage offast growth rates in these developing markets. Discussions continue with severalmanufacturers regarding further investments in a number of countries in theregion. Our experience in the Balkans illustrates the benefits of establishingan early footprint in those markets where we can invest in retail in the keycapital cities. We also have plans for further expansion of our Retail activities in Greece andAustralia and remain committed to keeping a watching brief on markets such asChina. Given the strength of our cash position, which has benefited from the VATrecoveries and the disposal of UK associates, we have identified that we havefunds available, which are not required for investment purposes. We thereforeintend to return the approximate value of these one offs, £65.0m, to ourshareholders through a share buy back programme, which may include buying sharesinto treasury. The Board has the powers to purchase up to 10.0% of the Company'scapital and we intend to renew that authority at the forthcoming Annual GeneralMeeting (AGM). This return of surplus capital will still leave us with substantial financialcapacity, which will enable us to deliver our stated strategy. Any additionalreturn of capital would only arise if further funds became available, which arenot required for investment purposes. Dividend The Board recommends the payment of a final ordinary dividend for the year of35.0p (2003 - 26.0p). This gives a total dividend for the year of 50.0p, whichis some 31.6% above the 2003 dividend of 38.0p. This substantial increase meansthat the dividend has risen by 127.3% since 2000, a clear demonstration of theBoard's progressive dividend policy. However, our record of significant dividend growth has not resulted in lowlevels of dividend cover. This year's cover is 3.2 times Headline earnings pershare (2003 - 3.5 times), a more than comfortable level, which leaves us wellplaced to continue our progressive policy. Subject to approval at the AGM on 12 May 2005, the final dividend will be paidon 16 June 2005 to shareholders on the register on 20 May 2005. Board changes I am delighted to welcome Will Samuel and David Scotland to the Board. Will, who joined the Board on 26 January 2005, having worked for Schroders for over twenty years, brings a wealth of city experience with him. David, who is Excetuive Director and President - World Wines of Allied Domecq PLC, has broad international experience, which includes managing operations in Eastern Europe.David joined the Board on 24 February 2005. Trevor Taylor retired from the Board at the end of 2004. Trevor has made anenormous contribution to Inchcape since he joined the Group in 1987 as DeputyManaging Director of Toyota (GB). Simon Robertson will be retiring from theBoard at our AGM in May 2005. Simon has added immense value to the Group sincejoining the Board in May 1996. During his time on the Board the Group hasundergone significant change and Simon's wise counsel during that process hasbeen invaluable. Both Trevor and Simon will be missed. However I am very pleased that they havebeen replaced by people of the quality of Will and David. We also announced today that I intend to step down from the Inchcape Board bythe AGM in May 2006 and it is planned that Peter Johnson will succeed me asNon-executive Chairman. The Board believes that this is the right decision for all our stakeholders and,indeed as part of our planning process, we consulted with a number of ourlargest institutional shareholders and manufacturer partners, and they were allsupportive. The search for Peter's successor has now commenced and we willannounce the appointment at the appropriate time. Operational review Operating profit before goodwill amortisation and exceptional items has beendefined as trading profit throughout the Operational review including thesummary below. £m 2004 2003 Operating Goodwill Trading Operating Goodwill Trading profit amortisation profit profit amortisation profit United Kingdom 23.1 4.0 27.1 17.1 3.8 20.9Greece/Belgium 34.2 0.1 34.3 32.3 0.4 32.7Australia/ New Zealand 27.1 0.5 27.6 21.2 0.5 21.7Hong Kong 29.8 - 29.8 22.6 - 22.6Singapore/Brunei 55.4 0.7 56.1 46.9 0.8 47.7Other 18.7 0.2 18.9 12.8 - 12.8Central costs (17.6) - (17.6) (17.6) - (17.6) ________________________________________________________________Total Group 170.7 5.5 176.2 135.3 5.5 140.8 ___________ ___________Operating exceptional items (7.6) - 15.3 - ___________ _________________ _______Operating profit 163.1 176.2 150.6 140.8 ___________ _________________ _______ United Kingdom The new car market ended the year slightly below the record achieved in 2003.Manufacturer registrations for the franchises represented by our UK Retailoperations fell by 2.4% in the year. However our UK Retail dealerships achieveda 7.4% increase in new unit sales on a like for like basis. This was due tostrong performances in particular from BMW/MINI, Jaguar and Vauxhall. UK Retail trading profits and related Financial Services profits (included within Financial Services), before stock holding interest, rose by 31.2% to£22.7m. The resultant trading profit margin of 2.1% is significantly higher thanthe 1.8% achieved in 2003, and moves us closer to our initial target of 2.5%.This reflects our success at integrating new dealerships and achieving organicgrowth from existing dealerships through improved business processes. On a likefor like basis dealership trading profits increased by 14.6%, mainly due tostrong performances from BMW/MINI, Volkswagen and Toyota/Lexus. The growth wasachieved through improved performances across all areas of the business. New carsales were up and there was also a 4.7% increase in used units, a 4.0% rise inservice hours sold, increased finance and insurance income per unit, andimproved finance penetration. The integration of the BMW/MINI dealerships acquired in 2003 is going well andthe benefits of the new larger contiguous territory and improved processes arebeing seen. Brooklands, the new pre-delivery inspection centre serving ourdealerships to the south of London, opened in the year and will start to have apositive impact in 2005. The Mercedes-Benz dealerships acquired in June 2004 areperforming well, in what has proven to be a difficult year for this marque, andhave contributed positively in their first six months. Inchcape Automotive has experienced a further difficult year. The car rentalcompanies, which provide a substantial portion of our volumes, have experiencedsignificant operational volatility causing inefficiencies within our business.This, allied to £2.1m of one off costs, has produced a disappointing result forthe year. New management, business processes, a broadened customer base andrevised contracts with our major customers augur well for the futureprofitability of this business. At Inchcape Fleet Solutions the number of fleet management vehicles undercontract has grown by over 37.0% during the year. This, coupled with improveddisposal margins from contract hire vehicles, has resulted in a significantgrowth in profitability during the year. On 1 October 2004, the Ferrari/Maserati UK import and distribution business wastransferred to Ferrari Maserati UK Ltd, a Ferrari Maserati Group company. We arecontinuing to manage the spare parts and classic parts businesses, and retailFerrari/Maserati from our three dealerships in the south east of England.Increased distribution volumes and reduced expenses resulted in an increase intrading profits prior to disposal. New and used vehicle sales in our Retailbusiness increased in 2004 by 44.5%, mainly due to the acquisition of the St Albans and Sevenoaks dealerships during 2003. Greece/Belgium In Greece we achieved a 20.6% increase in trading profit after adjusting for the£2.5m profit realised on the sale of our Greek Financial Services loan book in2003. Overall the market grew 13.6% on the prior year stimulated in part by theOlympics. The supply constraints experienced by our Toyota Distribution businessin the first half of the year were also felt in the second half although theyhad eased by year end. As a result market share fell slightly to 9.6%. Howevervolumes rose 7.1% and we retained overall market leadership. Increased volumes,a richer sales mix, coupled with a lower marketing cost per unit drove anincrease in trading margins and profits. We continue to invest in our Athens and Salonica Retail operations and openedtwo new Toyota dealerships in Athens during the year. Our operations in the Balkans continue to progress in the high growth markets inwhich they operate. Volumes grew by over 48.5% and trading profits rose by over£2.0m. In Romania the market increased by 39.1%, whilst we achieved growth of64.9% in unit sales, with Toyota's market share increasing to 3.5%. In Bulgaria,where Toyota leads the passenger car market, we achieved a market share of 8.6%in a market up 44.7%. We continue to invest in these markets, particularlyRomania where we plan to open two additional dealerships in Bucharest within thenext couple of years. In Belgium trading profits fell slightly in a market which grew by 6.4% on theprior year, primarily as a result of the biennial Brussels Motor Show. Toyotasupply constraints, which were more severe for diesel products, affected ourmarket share, which fell to 4.9% from 5.1% last year. Lexus, whilst still anemerging brand in market share terms, increased unit sales by over 44.0% and thefuture product developments are very encouraging. Australia/New Zealand Our Subaru business in Australia benefited from the successful launch of the newLiberty and Outback models in October 2003 and the business established a newannual sales record of over 33,600 units in 2004. Subaru achieved year on yeargrowth in volumes for the ninth consecutive year with an increase of 12.7% on2003. Sales records were achieved for the Forester, Impreza and Outback modelshelping the marque to achieve a record full year market share of over 3.5%. Thisgrowth in units coupled with improved margins drove a significant year on yearincrease in trading profits. Our Melbourne Retail business continued to perform well and retailed over 6,000new and used vehicles, a growth of 23.0% on the prior year. We also opened a newsatellite facility in 2004, which increased our sales and service capacity. Thegrowth in volumes, associated finance income and increased aftersales activities, resulted in a 28.6% increase in trading profit, and a trading marginof almost 4.0%. Our Sydney Retail business experienced a year of change in 2004. As a result ofthe continuing weak national sales volumes for Jaguar, Volvo and Volkswagen were-engineered our network strategy and exited two underperforming dealerships.We also extended our Retail presence with Subaru, investing in two newdealerships. Whilst Sydney Retail was loss making in 2004, the restructuringsignificantly improved performance and in the last quarter it broke even. Towards the end of the year our Business Services operation, AutoNexus, won athree year parts warehousing and logistics contract for Volkswagen and Audi. Hong Kong Our businesses in Hong Kong reported a 31.9% growth in trading profit, despite acurrency translation loss of £3.4m arising from the weakening Hong Kong dollar.Excluding this, underlying trading profits increased by 46.9%. Trading profitmargins grew to 12.1%. Consumer confidence is now returning after the recent weak economic conditionsand the impact of SARS in 2003. The automotive market is starting to recover,with the luxury segment improving at a faster rate than the total market. Themarket, excluding taxis, grew by 23.3% over last year but remains 3.9% down on2002. Crown Motors, our Toyota/Lexus business, increased its total market share to35.5% and once again retained market leadership in a highly competitive market.The success of the newly launched Alphard model and a strong performance fromLexus led to a richer mix of sales. This, together with the higher volumes,increased aftersales activity and lower than expected warranty costs, drove animprovement in trading margins and profits. The launch of the new Mazda3 in January 2004 helped our Mazda business toachieve an encouraging increase in units sold and a 3.6% market share. Inchroy, our Financial Services joint venture, achieved a 6.5% increase intrading profit at constant exchange rates, driven by the recovery in the economywhich more than compensated for the effects of a lower interest rate spread. Singapore/Brunei Trading profits from our Singapore and Brunei businesses increased by 17.6%.However, after adjusting for the currency translation loss of £4.5m arising fromthe weakening Singapore dollar, underlying trading profits increased by 27.0%. Once again our Toyota/Lexus business in Singapore drove the increased tradingprofits in this region. Unit sales rose by 28.5%, helped by a market whichincreased 24.9%. The market continues to benefit from the fiscal incentiveencouraging people to scrap or export their cars before the expiry of theCertificate of Entitlement, which lasts for ten years. Market share for Toyota/Lexus increased to 30.9% in 2004. We retained marketleadership for the third consecutive year, and were once again awarded theToyota Triple Crown. Recognising the recent growth in the Toyota vehicle parc we invested in ouraftersales activities, either relocating or renovating our existing facilitiesto increase capacity and improve efficiency. Further investments are planned for2005. Unit sales, associated finance income and aftersales profits all rose resultingin an increase in trading profits despite pressure on new vehicle margins. Thetrading profit margin increased to 8.2%. In Brunei, a 10.8% rise in unit sales plus increased income from aftersalesdrove a 14.1% increase in trading profits. Other The improvement in trading profit was mainly driven by our French and LatinAmerican operations. Improved management and business processes coupled with thelaunch of new diesel product have supported a return to profitability in ourFrench Retail business, which represents Jaguar, Land Rover, Volkswagen andAudi. New vehicle volumes in BMW Chile increased 73.9%, helped by a higher market as aresult of a reduction in the luxury car tax. This led to a significantimprovement in trading margins and profits. Our operations in Finland continued to perform well, despite a softening in themarket after the strong start to the year. Mazda market share rose to 3.6%. In Guam we increased trading profits and market share. Central costs In 2004 we recovered a net £0.6m relating to the settlement of various litigation issues. Excluding this recovery the underlying costs of £18.2m are£1.1m higher than the equivalent underlying figure of £17.1m for 2003. Thisincrease is due to higher staff, pension and recruitment costs. Current trading prospects The UK market is forecast to be slightly lower than 2004 but still a healthy 2.4million units. In UK Retail, however, the focus is as much on margin as volumes. Whilst therewas margin pressure in mid to late 2004, due to over supply, UK Retail stillmanaged to improve margins over 2003. In 2005 we are targeting furtherimprovements in both margins and volumes. Inchcape Fleet Solutions shouldcontinue to grow its profitability whilst Inchcape Automotive will recover fromits poor year in 2004. In Greece and Belgium the markets are expected to be similar to last year.Better product availability and a slightly broader product range should help ourperformance in both markets. The Balkans is expected to continue showing stronggrowth. In Australia the car market is expected to be similar in size to 2004, as isSubaru's market share. Retail operations in Melbourne should see continuedgrowth and there will be a significant profit recovery in Sydney Retail. The Hong Kong market is again expected to grow as it recovers from 2003, whichwas the worst car market in over twenty years. This should result in improvedprofitability. In Singapore it is expected that the market will be strong again in 2005, albeitsome 10.0% lower than the exceptional 2004. Aftersales revenues and profits willcontinue to benefit from the expanding Toyota car parc. The interest charge will reflect the cash repatriation that took place in 2004and the fact that more funds should be remitted during 2005. The effect on thecharge will be positive and significant, and will only be partially offset bythe impact of the share buy back programme. The 2005 results will be reported under International Financial ReportingStandards. Whilst work is still continuing on some aspects of how the standardswill be interpreted, we currently expect that the effect on earnings will bebroadly neutral provided we achieve hedge effectiveness for our foreign exchangetransactions. If we do not, IAS 39 will introduce some volatility into ourprofit and loss account. However the underlying economics of the business andthe cash flows will not change. Net assets, however, will be reduced mainly dueto the inclusion of the net pension deficit on the balance sheet. The Group has again performed at a very high level in 2004. Our underlyingperformance will be strengthened as we invest further by taking advantage of thesignificant opportunities available to us. In 2005 we are well placed tocontinue with our record of profit growth and strong cash generation. CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2004 Before exceptional Exceptional items items Total 2004 2004 2004 £m £m £mTurnover including share of jointventures and associates 4,170.3 - 4,170.3Less:- share of joint ventures (16.9) - (16.9)- share of associates (30.7) - (30.7)Group turnover 4,122.7 - 4,122.7Cost of sales (3,542.8) - (3,542.8)Gross profit 579.9 - 579.9Net operating expenses (417.0) (7.6) (424.6)Operating profit 162.9 (7.6) 155.3Share of profits of joint ventures 7.1 - 7.1Share of profits of associates 0.7 - 0.7Total operating profit 170.7 (7.6) 163.1Net profit on sale of propertiesand investments - 1.2 1.2Net loss on sale and terminationof operations - (9.0) (9.0)Profit on ordinary activities beforeinterest and taxation 170.7 (15.4) 155.3Net interest (4.2) 4.2 -Profit on ordinaryactivities before taxation 166.5 (11.2) 155.3Tax on profit on ordinary activities (42.3) (0.5) (42.8)Profit on ordinary activities aftertaxation 124.2 (11.7) 112.5Minority interests (3.2) - (3.2)Profit for the financial year 121.0 (11.7) 109.3Dividends (39.5) - (39.5)Retained profit for the financial year 81.5 (11.7) 69.8 Profit before tax (£m) 155.3Basic earnings per share (pence) 139.4pDiluted earnings per share (pence) 137.6pHeadline (before goodwill amortisation£5.5m (2003 - £5.5m) and exceptionalitems):- profit before tax (£m) 172.0- earnings per share (pence) 161.4p Before exceptional Exceptional items items Total 2003 2003 2003 £m £m £mTurnover including share of jointventures and associates 3,855.2 - 3,855.2Less:- share of joint ventures (20.0) - (20.0)- share of associates (42.0) - (42.0)Group turnover 3,793.2 - 3,793.2Cost of sales (3,223.3) - (3,223.3)Gross profit 569.9 - 569.9Net operating expenses (445.5) 15.3 (430.2)Operating profit 124.4 15.3 139.7Share of profits of joint ventures 10.0 - 10.0Share of profits of associates 0.9 - 0.9Total operating profit 135.3 15.3 150.6Net profit on sale of propertiesand investments - 0.9 0.9Net loss on sale and terminationof operations - (0.4) (0.4)Profit on ordinary activities beforeinterest and taxation 135.3 15.8 151.1Net interest (5.0) 22.2 17.2Profit on ordinary activities beforetaxation 130.3 38.0 168.3Tax on profit on ordinary activities (31.8) (7.5) (39.3)Profit on ordinary activities aftertaxation 98.5 30.5 129.0Minority interests (2.0) - (2.0)Profit for the financial year 96.5 30.5 127.0Dividends (29.6) - (29.6)Retained profit for the financial year 66.9 30.5 97.4 Profit before tax (£m) 168.3Basic earnings per share (pence) 164.8pDiluted earnings per share (pence) 162.1pHeadline (before goodwill amortisation£5.5m (2003 - £5.5m) and exceptionalitems):- profit before tax (£m) 135.8- earnings per share (pence) 132.4p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £m £mProfit for the financial year 109.3 127.0Effect of foreign exchange rate changes:- results for the year (0.7) (2.9)- foreign currency net investments: subsidiaries (12.3) (4.6) joint ventures and associates (2.3) (2.9)Total recognised gains for the financial year 94.0 116.6 NOTE OF HISTORICAL COST PROFITS AND LOSSESFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £m £mReported profit on ordinary activities before taxation 155.3 168.3Difference between the historical cost and the actualdepreciation charge 0.1 0.6Historical cost profit on ordinary activities beforetaxation 155.4 168.9Historical cost profit after taxation, minority interestsand dividends 69.9 98.0 CONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2004 2004 2003 restated £m £mFixed assets:Intangible assets 67.6 60.9Tangible assets 281.7 272.9Investments:- joint ventures: share of gross assets 294.0 257.1 share of gross liabilities (256.2) (216.7) share of net assets 37.8 40.4- associates 3.2 26.2- other investments 1.5 0.8 391.8 401.2Current assets:Stocks 643.6 597.8Debtors:- amounts due within one year 197.3 235.0- amounts due after more than one year 18.2 11.3Investments 13.1 13.8Cash at bank and in hand 171.2 102.9 1,043.4 960.8Creditors - amounts falling due within one year:Borrowings (15.6) (23.2)Other (739.3) (709.1) (754.9) (732.3)Net current assets 288.5 228.5Total assets less current liabilities 680.3 629.7Creditors - amounts falling due after more than oneyear:Borrowings (1.8) (0.6)Other (45.0) (56.5) (46.8) (57.1)Provisions for liabilities and charges (82.3) (87.0)Net assets 551.2 485.6 Capital and reserves:Called-up share capital 119.5 118.4Share premium account 110.8 109.1Revaluation reserve 28.0 29.1Capital redemption reserve 16.4 16.4Profit and loss account 268.8 206.0Equity shareholders' funds 543.5 479.0Minority interests 7.7 6.6 551.2 485.6CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2004 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASHFLOWS 2004 2003 restated £m £mOperating profit 155.3 139.7Amortisation 5.5 5.2Impairment of goodwill 9.4 -Depreciation 27.3 26.6(Profit) loss on sale of tangible fixed assets otherthan property (0.6) 1.7Increase in stocks (28.9) (75.2)Decrease (increase) in trade debtors 10.1 (4.0)(Decrease) increase in trade creditors (12.7) 78.9Payments in respect of termination of operations (1.5) (3.1)Other items* 13.3 (18.1)Net cash inflow from operating activities 177.2 151.7 CONSOLIDATED CASH FLOW STATEMENT Net cash inflow from operating activities 177.2 151.7Dividends from joint ventures 4.6 4.3Dividends from associates 0.3 1.9Returns on investments and servicing of finance* 15.5 (1.6)Taxation (36.9) (28.5)Capital expenditure and financial investment (34.8) (33.6) 125.9 94.2Net cash outflow from acquisitions and disposals (1.4) (0.5)Equity dividends paid (32.2) (25.4)Net cash inflow before management of liquid resourcesand financing 92.3 68.3Net cash (outflow) inflow from the management ofliquid resources (44.1) 6.7Net cash outflow from financing (15.4) (64.7)Increase in net cash 32.8 10.3 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NETFUNDS Increase in net cash 32.8 10.3Net cash outflow from decrease in debt and leasefinancing 18.3 67.2Net cash outflow (inflow)from the management ofliquid resources 44.1 (6.7)Change in net cash resulting from cash flows 95.2 70.8Effect of foreign exchange rate changes on cash anddebt (13.1) (8.3)Net loans and finance leases relating to acquisitions (7.4) -Movement in net funds 74.7 62.5Opening net funds 79.1 16.6Closing net funds 153.8 79.1 * Net cash inflows include £37.0m for the VAT receipt (note 3), of which £15.5mis reported within Other items and £21.5m (2003 - £1.4m) within Returns oninvestments and servicing of finance. In addition £(1.8)m (2003 - £(14.3)m) ofnon-cash is reported within Other items in respect of the VAT recovery. NOTES 1 SEGMENTAL ANALYSIS Group subsidiaries Share of joint ventures 2004 2003 2004 2003a Turnover £m £m £m £m(i) By geographical market:UK 1,331.6 1,244.8 5.2 7.7Greece/Belgium 879.3 820.5 1.9 2.9Australia/New Zealand 597.6 529.3 - -Hong Kong 237.2 224.3 9.8 9.4Singapore/Brunei 689.0 614.3 - -Other 388.0 360.0 - - 4,122.7 3,793.2 16.9 20.0 Share of associates Total 2004 2003 2004 2003a Turnover £m £m £m £m(i) By geographical market:UK 28.6 40.0 1,365.4 1,292.5Greece/Belgium 2.1 2.0 883.3 825.4Australia/New Zealand - - 597.6 529.3Hong Kong - - 247.0 233.7Singapore/Brunei - - 689.0 614.3Other - - 388.0 360.0 30.7 42.0 4,170.3 3,855.2 Group subsidiaries Share of joint ventures 2004 2003 2004 2003a Turnover £m £m £m £m(ii) By activity:Import, Distribution andRetail 2,964.3 2,753.5 0.8 1.1UK Retail 1,104.9 989.5 - -Financial Services 53.4 50.0 16.1 18.9E-commerce 0.1 0.2 - - 4,122.7 3,793.2 16.9 20.0 Share of associates Total 2004 2003 2004 2003a Turnover £m £m £m £m(ii) By activity:Import, Distribution and Retail 26.1 38.0 2,991.2 2,792.6UK Retail - - 1,104.9 989.5Financial Services 4.6 4.0 74.1 72.9E-commerce - - 0.1 0.2 30.7 42.0 4,170.3 3,855.2 Geographical analysis of turnover is by origin and is not significantlydifferent from turnover by destination. Turnover between segments is notmaterial. Group subsidiaries Share of joint ventures 2004 2003 2004 2003b Total operating profit £m £m £m £m(i) By geographical market:UK before exceptional item 21.2 15.5 1.8 1.2Goodwill impairment (note 3) (9.4) - - -UK 11.8 15.5 1.8 1.2Greece/Belgium 32.7 27.6 0.9 4.2Australia/New Zealand 27.1 21.2 - -Hong Kong 25.4 18.0 4.4 4.6Singapore/Brunei 55.4 46.9 - -Other 18.7 12.8 - - 171.1 142.0 7.1 10.0Central costs (17.6) (17.6) - -VAT recovery, Central(note 3) 1.8 15.3 - - 155.3 139.7 7.1 10.0 Share of associates Total 2004 2003 2004 2003b Total operating profit £m £m £m £m(i) By geographical market:UK before exceptional item 0.1 0.4 23.1 17.1Goodwill impairment (note 3) - - (9.4) -UK 0.1 0.4 13.7 17.1Greece/Belgium 0.6 0.5 34.2 32.3Australia/New Zealand - - 27.1 21.2Hong Kong - - 29.8 22.6Singapore/Brunei - - 55.4 46.9Other - - 18.7 12.8 0.7 0.9 178.9 152.9Central costs - - (17.6) (17.6)VAT recovery, Central(note 3) - - 1.8 15.3 0.7 0.9 163.1 150.6 Group subsidiaries Share of joint ventures 2004 2003 2004 2003b Total operating profit £m £m £m £m(ii) By activity:Import, Distribution andRetail before exceptional item 155.6 125.0 0.1 (0.7)Goodwill impairment (note 3) (9.4) - - -Import, Distribution andRetail 146.2 125.0 0.1 (0.7)UK Retail 16.9 12.8 - -Financial Services 7.8 4.9 7.0 10.7E-commerce 0.2 (0.7) - - 171.1 142.0 7.1 10.0Central costs (17.6) (17.6) - -VAT recovery, Central(note 3) 1.8 15.3 - - 155.3 139.7 7.1 10.0 Share of associates Total 2004 2003 2004 2003b Total operating profit £m £m £m £m(ii) By activity:Import, Distributionand Retail before exceptionalitem (0.8) (0.9) 154.9 123.4Goodwill impairment (note 3) - - (9.4) -Import, Distribution andRetail (0.8) (0.9) 145.5 123.4UK Retail - - 16.9 12.8Financial Services 1.5 1.8 16.3 17.4E-commerce - - 0.2 (0.7) 0.7 0.9 178.9 152.9Central costs - - (17.6) (17.6)VAT recovery, Central(note 3) - - 1.8 15.3 0.7 0.9 163.1 150.6 Group subsidiaries Share of joint ventures 2004 2003 2004 2003b Total operating profit £m £m £m £m(iii) Operating profitbefore exceptional itemsand goodwill amortisation:Operating profit 155.3 139.7 7.1 10.0VAT recovery (note 3) (1.8) (15.3) - -Goodwill impairment(note 3) 9.4 - - -Goodwill amortisation 5.5 5.2 - 0.3 168.4 129.6 7.1 10.3 Share of associates Total 2004 2003 2004 2003b Total operating profit £m £m £m £m(iii) Operating profitbefore exceptionalitems and goodwillamortisation:Operating profit 0.7 0.9 163.1 150.6VAT recovery (note 3) - - (1.8) (15.3)Goodwill impairment(note 3) - - 9.4 -Goodwill amortisation - - 5.5 5.5 0.7 0.9 176.2 140.8 Of the £5.5m (2003 - £5.2m) subsidiaries' goodwill amortisation, £4.0m (2003 -£3.5m) relates to the UK, £0.1m (2003 - £0.4m) to Greece/Belgium, £0.5m (2003- £0.5m) to Australia/New Zealand, £0.7m (2003 - £0.8m) to Singapore/Bruneiand £0.2m (2003 - £nil) to Other. The £nil (2003 - £0.3m) joint ventures' goodwill amortisation is includedwithin the UK segment. Goodwill amortisation with the exception of £1.6m (2003 - £1.1m) in UK Retail,relates entirely to Import, Distribution and Retail. Note 4 provides a split of the exceptional profit (loss) by geographicalmarket. Interest is not split by segment as this would not provide meaningfulinformation. Group subsidiaries Share of joint ventures 2004 2003 2004 2003 restatedc Net assets (liabilities) £m £m £m £m(i) By geographical market:UK 279.7 241.1 2.2 4.2Greece/Belgium 4.5 4.8 2.4 2.7Australia/New Zealand (8.7) (0.7) - -Hong Kong 27.2 27.6 33.2 33.5Singapore/Brunei 68.8 58.3 - -Other 77.1 69.8 - - 448.6 400.9 37.8 40.4Net cash 153.8 79.1 - -Other unallocated assetsand liabilities* (92.2) (61.0) - - 510.2 419.0 37.8 40.4 Share of associates Total 2004 2003 2004 2003 restatedc Net assets (liabilities) £m £m £m £m(i) By geographical market:UK 0.8 23.9 282.7 269.2Greece/Belgium 2.4 2.3 9.3 9.8Australia/New Zealand - - (8.7) (0.7)Hong Kong - - 60.4 61.1Singapore/Brunei - - 68.8 58.3Other - - 77.1 69.8 3.2 26.2 489.6 467.5Net cash - - 153.8 79.1Other unallocated assetsand liabilities* - - (92.2) (61.0) 3.2 26.2 551.2 485.6 Group subsidiaries Share of joint ventures 2004 2003 2004 2003 restatedc Net assets (liabilities) £m £m £m £m(ii) By activity:Import, Distribution andRetail 238.3 240.8 0.3 0.3UK Retail 196.3 149.7 - -Financial Services 14.1 10.3 37.5 40.1E-commerce (0.1) 0.1 - - 448.6 400.9 37.8 40.4Net cash 153.8 79.1 - -Other unallocated assetsand liabilities* (92.2) (61.0) - - 510.2 419.0 37.8 40.4 Share of associates Total 2004 2003 2004 2003 restatedc Net assets (liabilities) £m £m £m £m(ii) By activity:Import, Distributionand Retail - 18.4 238.6 259.5UK Retail - - 196.3 149.7Financial Services 3.2 7.8 54.8 58.2E-commerce - - (0.1) 0.1 3.2 26.2 489.6 467.5Net cash - - 153.8 79.1Other unallocated assetsand liabilities* - - (92.2) (61.0) 3.2 26.2 551.2 485.6 * Other unallocated assets and liabilities include central provisions, VATrecovery, taxation, dividends and assets not directly related to operatingactivities. 2 PRIOR YEAR ADJUSTMENT The adoption of UITF Abstract 38 Accounting for ESOP Trusts (and the consequentamendment to UITF Abstract 17 Employee Share Schemes) has resulted in areclassification of own shares of £5.5m at 1 January 2003 and £6.4m at 31December 2003 from investments to equity shareholders' funds. The associatedshare scheme creditor of £1.7m at 1 January 2003 and £2.3m at 31 December 2003has been reclassified from creditors to equity shareholders' funds. Thisadjustment has no impact on profit in the current or prior year. The cashoutflow of £0.9m for the year ended 31 December 2003 for the net purchase of ownshares has been reclassified from other items to net cash outflow fromfinancing. 3 EXCEPTIONAL ITEMS CHARGED BEFORE OPERATINGPROFIT 2004 2003 £m £mVAT recovery, Central 1.8 15.3Goodwill impairment, UK (9.4) - (7.6) 15.3 HM Customs and Excise has agreed a further element of the claims submitted inmid 2003 for the recovery of overpaid VAT for the period 1973 to 1994. Thisresulted in a further recovery of £1.8m (2003 - £15.3m) and £4.2m (2003 -£22.2m) of associated interest income. A charge for corporation tax of £0.5m(2003 - £7.5m) has been made in respect of this income. The goodwill impairment relates to Inchcape Automotive Limited, reflecting themore difficult trading conditions experienced by that business. In accordancewith FRS 11 Impairment of Fixed Assets and Goodwill, the carrying value ofInchcape Automotive Limited's fixed assets have been compared to theirestimated recoverable amount, represented by their value in use to the Group.This has been derived using cash flow projections discounted at a pre-tax rateof 11.5%. 4 EXCEPTIONAL ITEMS CHARGED AFTER OPERATINGPROFIT 2004 2003 £m £mNet profit on sale of properties and investments:- subsidiaries - 0.6- associates, UK 1.2 0.3Total net profit on sale of properties andinvestments 1.2 0.9Net loss on sale and termination of operations:- Ferrari, Belgium(includes capitalised goodwill written off £1.4m) (2.1) -- Ferrari, UK (includes goodwill in reserveswritten off £5.0m) (8.2) -- MCL and AGL, UK (includes goodwill in reserveswritten off £1.0m) (6.8) -- UK Retail dealerships (0.9) (4.6)- Provision releases arising from non-motorsbusiness exits, Central 8.6 4.0- Other 0.4 0.2Total net loss on sale and termination of operations (9.0) (0.4)Total exceptional items charged after operatingprofit (7.8) 0.5Related Shares:
Inchcape