Wednesday, March 04, 2015
Lookers PLC (UK) Annual Results & Reports
LOOKERS plc
ANNUAL
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Lookers
plc, ("Lookers", "the company" or "the group"),
one of the leading UK motor retail and aftersales service groups, announces its
annual results for the year ended 31 December 2014.
Financial Highlights
·
Revenue increased
23% to £3.04 billion (2013: £2.46 billion)
·
*Operating profit
increased 31% to £76.6 million (2013: £58.4 million)
·
*Adjusted profit
before tax increased 35% to £65.0 million (2013: £48.1 million)
·
Profit before tax
increased to £59.2 million (2013: £43.9 million)
·
Earnings per share
up 30% at 12.03p (2013: 9.28p)
·
Proposed final
dividend of 1.87p per share - total dividend per share up 10% at 2.84p (2013:
2.58p)
(*Adjusted
operating profit is operating profit before amortisation of intangibles and share
based payments. Adjusted profit is profit before amortisation of intangible
assets, debt issue costs, pension costs and share based payments)
Operational
Highlights
·
Record performance
from the motor division
·
Strong growth in
used car volumes and margins
·
Revenue and margin
improved in aftersales
·
Good progress from
our market leading independent aftermarket parts division
·
Good
contribution from acquisitions
Andy
Bruce, Chief Executive said: "We have delivered another
strong trading performance in 2014, our sixth year of successive profit growth.
The motor division has produced an excellent result and the parts division has
made good progress, delivering a strong performance in improving but competitive
market conditions. Lookers is well placed to take advantage of future growth in
the new and used car markets as well as increased demand for aftersales and
parts. This gives us further confidence that we can continue to grow the
business in 2015."
Enquiries:
|
Lookers
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Today: 020 7920
3150
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|
Andy Bruce, Chief
Executive
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Thereafter: 0161
291 0043
|
|
Robin Gregson,
Finance Director
|
|
|
Tavistock
Communications
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Tel: 020 7920
3150
|
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Keeley Clarke
Emma Blinkhorn
Matt Ridsdale
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CHAIRMAN'S
REVIEW
I am delighted to
report that this is our sixth consecutive year of profit growth and that
Lookers has achieved an *adjusted profit before tax of £65.0 million (2013:
£48.1 million). This result has been achieved against the background of strong
growth in the UK new car market which reached its highest level for ten years.
Total registrations
for the UK new car market in the year were 2.47 million, an increase of 9.3%.
Our motor division, once again delivered an excellent performance producing
strong growth in volumes of both new and used cars, with an increase in new car
volumes of 9.7%.
I am very pleased to
report that our independent parts distribution business also made good progress
in the year in an improving but competitive market with increases in both
turnover and profits compared to the previous year.
The group generates
significant levels of operational cash flow and continues to have a strong
balance sheet. We also renewed and extended our banking facilities in February
2014 which has provided the group with additional funding until 2018. Further
details of our progress in both the motor division and the parts division are
provided in the Strategic and Operational Review. A more detailed consideration
of the improvement in financial performance during the year together with the
cash flow and financial position of the group are given in the Financial
Review.
(*Adjusted
profit is profit before amortisation of intangible assets, debt issue costs,
pension costs and share based payments)
DIVIDEND
I am pleased to
announce that with another positive result for the year and improved financial
position of the company, the board is again intending to increase the dividend.
We are proposing to pay a final dividend for the year ended 31 December 2014 of
1.87p per share, giving a total dividend for the year ended 31 December 2014 of
2.84p per share (2013: 2.58p). This represents an increase in the total
dividend for the year of 10%. Payment of the final dividend is subject to
approval by shareholders at the Annual General Meeting and will be payable on 5
June 2015.
BOARD CHANGES
John Brown retired
from his position as a non-executive director of the company on 31 December
2014, having been in that position since May 2005 and serving as both a
non-executive director and the senior independent director in this period.
Together with all my colleagues on the board, I would like to thank him
personally for his exceptional contribution to the group during the past ten
years and wish him all the very best for the future.
As I mentioned in my
previous report I am also pleased to report that Richard Walker joined the
board on 4 February 2014 as a non-executive director. He brings significant
operational expertise in the retail environment, which is already proving to be
a great benefit. Richard has also been appointed as Chairman of the
Remuneration Committee taking over this position from Bill Holmes, who was
appointed Chairman of the Audit Committee.
OUTLOOK
The UK new car market
has now benefitted from three years of strong growth which we now expect to
stabilise. Our motor division has produced an excellent result during 2014 and
we believe there are still further opportunities to develop our existing
business in addition to benefiting from acquisitions made in 2014. The parts
division has made good progress and has further potential for future growth and
development.
The new financial
year has started well with group results to date being in line with
expectations. We are therefore confident of delivering further growth in 2015.
I would like to
conclude by thanking all our people at Lookers for their hard work and
dedication and without whom we would not have been able to yet again deliver
another excellent result for the sixth successive year.
Phil White
Chairman
4 March 2015
STRATEGIC
AND OPERATIONAL REVIEW
BUSINESS
MODEL AND STRATEGY
Business model
With a group turnover
of £3.0 billion in 2014, Lookers is one of the leading motor retail and
aftersales groups in the UK. Our operations are carried out across all four UK
countries and Ireland, with a presence in most of the major population centres.
We sell approximately 135,000 new and used cars per year and in addition, we
have a very significant independent parts distribution business, which is the
leader in its sector of the market.
As noted above, the
group operates through two distinct divisions, the motor division and the parts
division and details of each division are explained in further detail below.
However, operating in two distinctly separate sectors within the UK motor
retail market gives us a unique and diverse business structure. This
differentiates Lookers in the motor retail sector with the parts business
providing a high quality, higher margin earnings stream that has greater
stability than the new and used car markets, which can sometimes be subject to
cyclical market forces. The group's business activities, financial condition,
results of operations or the company's share price could be affected by certain
principal risks or uncertainties which are included in the directors' report
section of the 2014 annual report and accounts.
Motor division
The motor division
consists of 123 franchised dealerships representing 32 marques from 77
locations. The business generates revenue from the sale of new and used
cars and aftersales activities. Aftersales represents the servicing, repair and
sale of franchised parts to customers' vehicles. The new car market in the UK
has varied between 1.9 million and 2.47 million new cars sold per annum during
the past five years and our share of the retail sector of this market is just
over 3%. The used car market in the UK has annual transactions of approximately
7.0 million vehicles and continues to represent a major opportunity for us to
increase volumes in this part of the market. The aftersales market applies to
the overall number of cars in use on UK roads, which is referred to as the UK
car parc. This consists of approximately 32 million vehicles where
approximately 20% or 6.7 million vehicles are under three years old and these
vehicles are primarily the market which is catered for by the franchised motor
dealers, including our motor division. The importance of the internet continues
and is the primary means for our customers to research and determine which new
or used car they are interested in buying. Our website and associated digital
marketing channels are a very important part of the business.
Parts division
Our parts division
operates in the independent aftermarket sector of the UK motor retail market,
where we operate through three distinct operating companies. FPS is a national
warehouse distributor of quality branded automotive parts and is the largest
company in the parts division, representing almost 75% of divisional turnover.
Apec Braking is the aftermarket leader in the UK for 'dry' braking (pads and
discs) and BTN Turbo is the UK's leading distributor of turbochargers and
supplier of related value added services. These businesses supply automotive
parts to the independent automotive aftermarket, where we operate from 22
locations serving the whole of the UK. This means that our customers are
predominantly motor factors who are the final part of the distribution chain
and who distribute parts to the independent non franchised repairers. The parts
division typically supplies parts to 80% of the UK vehicle parc where the
vehicles are over three years old, although the primary focus is on the four to
nine year old aftermarket and therefore operates in a different part of the
market to the franchised dealerships. This represents a market of approximately
25 million cars in the UK and each of the three companies in our parts division
are market leaders in their segment of the market.
Business strategy
The company's
strategy is to operate a diverse business in the UK motor sector. This includes
operating with a broad range of manufacturer partners across a wide
geographical area, both of which help to reduce exposure to anomalies or
fluctuations in demand, which may affect specific manufacturers or locations.
The independent parts distribution business also provides further diversity as
the revenue and profitability of this business are less subject to cyclical
market forces that sometimes affects the demand for new and used cars.
We aim to grow the
business by a combination of organic growth in the existing business, where
there are many opportunities for increasing revenue, as well as from targeted
and selective acquisitions in both the motor and parts divisions. We aim to be
recognised as the UK's most professional and successful motor retail and
aftersales service group by our customers, employees, business partners and
shareholders. We strive to deliver sector leading value whilst providing our
customers with market leading customer service, optimising customer retention
and being an outstanding company that achieves our mission of customers for
life.
Business review
Summary of financial
and non financial KPIs:
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Financial
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2014
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2013
|
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Turnover
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£3,043m
|
£2,464m
|
|
Gross Profit
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£396.1m
|
£335.8m
|
|
Gross margin
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13.0%
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13.6%
|
|
Operating profit
|
£76.6m
|
£58.4m
|
|
Operating margin
|
2.5%
|
2.4%
|
|
*Adjusted profit
before tax
|
£65.0m
|
£48.1m
|
|
* Adjusted net
margin
|
2.14%
|
1.95%
|
|
Earnings per share
|
12.03p
|
9.28p
|
|
Net debt
|
£51.9m
|
£43.1m
|
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Gearing
|
20%
|
19%
|
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Net debt to EBITDA
|
0.59
|
0.61
|
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Non financial
|
||
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UK new car market
|
2.47m
|
2.26m
|
|
Group new car sales
|
74,488
|
63,608
|
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Share of UK market
|
3.0%
|
2.8%
|
|
Group used car
sales
|
60,852
|
53,713
|
|
Group employees
|
6,226
|
5,772
|
Performance
I am very pleased to
report that the group delivered record results for a sixth year with *adjusted
profit before tax of £65.0 million (2013: £48.1million). I am delighted with
this result which I believe is a significant achievement even against the background
of the increased new car market in the UK. The motor division delivered another
excellent trading performance during the year with an increase in profit before
tax of 37% to £58.3 million, compared to £42.6 million last year. The parts
division made good progress and produced a strong result for the year with an
increase in profit before tax to £12.2 million compared to £11.8 million last
year.
The key elements of
this creditable achievement were:
·
a
significant increase in new car retail sales at improved margins;
·
further
growth in used car volumes and margins;
·
improvement
in both aftersales turnover and margin;
·
growth
in both turnover and profit in the parts division against improving but
competitive market conditions.
We have now had six
successive years of increased profits, the majority of which were delivered in
restrained market circumstances and it is only during 2014 that the UK new car
market returned to what can be considered to be a normal level of activity.
This growth has been encouraging and gives us further confidence in our ability
to grow the business again in 2015. We are well placed to take advantage of the
recent growth opportunities in the new and used car markets, which will in turn
increase demand for aftersales and parts, as the number of cars under three
years old continues to rise.
(*Adjusted
profit is profit before amortisation of intangible assets, debt issue costs,
pension costs and share based payments)
OPERATING
REVIEW
MOTOR DIVISION
I am pleased to
report that the motor division increased its profit before tax by 37% to £58.3
million, a record for the business and a significant increase over the prior
year's result of £42.6 million. It is particularly pleasing that the majority
of this was organic growth from the existing business rather than from
acquisitions, although the acquired businesses performed well in the year.
We have continued to
improve the balance of our portfolio of franchise representation and on 10
March 2014 we acquired Colborne, which consists of three Audi, one Skoda, two
Volkswagen passenger car and one Volkswagen commercial vehicle dealerships, all
in the South East. This was acquired for a cash consideration of £27.4 million
and has been successfully integrated during the year so that it will make a
good contribution in 2015.
New Cars
The UK new car market
increased by 9.3% to 2.47 million cars in the year, with the new car retail
market increasing by 9.8% and the fleet market increasing by 8.9%. Lookers core
retail new car sales increased by 9.2% compared to 2013 levels, on a like for like
basis. In the fleet sector, our volumes increased by 14.1%, as we have put more
focus and investment into this sector. It was therefore a creditable result for
our volume growth to be so far ahead of the market, even though we have
continued to target quality fleet sales and avoid very low margin business. We
will continue to invest in the fleet sector which is a significant and growing
part of the market. This provides scope for organic growth given our current
share of the market and represents a major opportunity for additional profit
generation. To facilitate this we are making the necessary investment in people
with the specialist skills, relationships and reputation in the sector as well
as investing in systems and facilities to process higher volumes.
Gross profit per unit
on new retail cars increased by 4.6% compared to the prior year, whilst gross
profit per unit on fleet business was stable compared to the previous year. The
new retail market continues to be healthy and our order take for the important
month of March is tracking in line with our plan. Industry forecasts suggest
that the new car market will continue to benefit from these conditions with the
2015 new car market estimated to increase to 2.51 million units.
Used Cars
Group sales volumes
of used cars increased by 4.4%, when compared on a like for like basis to 2013
and have increased by over 36% in the last three years. Gross profit increased
by 18.1% or 13.0%, on a like for like basis, with profit per unit increasing by
2.7%. We continue to follow a robust stocking policy which delivers increased
stock turn as well as increasing our resource for sourcing good quality used
cars and these policies help to improve volumes and margins. A further factor,
which is helping to improve used car volumes, is the increasing number of leads
being generated from the group's website, which were up 33% compared to last
year. This is an area in which we shall continue to invest so that our website
is one of the best in the industry.
We believe that the
used car market represents a significant opportunity for the group. By
continuing to follow our policies which have resulted in this success, we
expect to take advantage of the stable market conditions in the used car sector
to continue to improve volumes and margins.
Aftersales
Turnover in the
important area of aftersales increased by 5.3% on a like for like basis
compared to the prior year benefiting from an increase in the vehicle parc of
cars under three years old, a trend which will continue following the increase
in the new car market in the last three years. Turnover has also increased due
to the various initiatives that we have taken to develop this business in
recent years, with an increased emphasis on performance and specific targets being
introduced to improve overhead absorption and therefore overall profitability.
It is therefore a creditable result to see that the aftersales margin has
increased again from 42.5% to 42.7%, on a like for like basis. This is a
positive result which demonstrates the success of our continued investment in
technology and procedures to further improve customer retention and average
sales value per customer visit. We continue to develop and have
significantly
improved our electronic vehicle health check system across the motor division,
where we now send a video link to the customer which shows the inspection of
their vehicle taking place. We have also renewed our focus on the significant
opportunity that tyre sales represent. Sales of service plans, where customers
commit to longer term contracts for vehicle servicing, which improves customer
loyalty and retention, have continued to increase. We have maintained our
commitment to enhance customer experience with the objective of improving
retention and delivering our "customers for life" strategy, to
strengthen the business and further improve profitability.
Developing the retail
environment
The group is
committed to continuing with a significant programme of further capital
investment over the next three years. When this is complete it will ensure that
our entire dealership estate represents the best in class in modern motor
retailing. This will be complemented by further significant investment in our
multi channel customer experience concept and in particular, how to optimise
the digital and physical customer journey. We believe this will enable us to
provide our customers with an industry leading customer experience which will
give us a significant competitive advantage in the sector.
The internet continues
to play an ever increasing role in the customer journey and now dominates
consumers' research. During the year we established an in house digital
marketing team to cover all digital marketing activities which had previously
been outsourced. This has resulted in more effective and efficient marketing.
Our visitor and enquiry levels continue to show significant increases, not only
as more consumers research their purchases online, but as a result of our
ongoing investment in our website. The launch of a new, significantly improved
and fully responsive website is due to take place in the first half of this
year.
Customer satisfaction
We launched our
Customers for Life strategy two years ago to improve our level of customer
experience, retention and referral and we conduct extensive customer research
to continually refine our offering. Much of our focus has been on ensuring our
staff satisfaction is enhanced as well as conducting extensive customer
research to continually refine our offering to them. We appreciate that
customers now have increased expectations as well as access to higher levels of
product information. To meet these changing needs we have introduced franchise
specific business development centres as well as longer opening hours that are
more convenient for our customers.
Employee development
We recognise that our
people are a key asset that allows us to deliver our strategy and play a
critical role in providing a first class customer experience. We have continued
to invest in an enhanced training and development programme, including induction
training for all new recruits as well as further improvements to our structured
and formal management development programme. This has been aligned with our
customer experience strategy to ensure our staff develop the skills needed to
deliver enhanced levels of customer satisfaction. We are also improving the
range of benefits that are available to our staff and significantly enhancing
awards for long service to recognise and reward staff loyalty. It was
particularly pleasing to see 395 of our staff benefit from the success of our
employee sharesave scheme where they shared an overall profit of £3.8 million,
with the average profit being just under £10,000.
PARTS DIVISION
As referred to
earlier in the Chairman's review, our parts division continued to make good
progress with improvements in both turnover and profit before tax compared to
the prior year. This result was achieved in an improving but competitive
market.
Turnover for the
division increased by £8.4m, up 4% on the prior year as we continued to expand
the business by investing in existing and new product lines. The increased
turnover at FPS was the result of investment in the core proposition as well as
in new product development and range extensions. Demand for core products at
Apec braking improved and the second tier braking product introduced last year
has successfully established itself in the market. BTN Turbo made further
progress in core aftermarket turbo sales and has also had some encouraging wins
in developing its higher value added specialist segment.
Sales volumes
increased, margins were maintained at the same level as the previous year,
overheads were closely controlled and the business continued to benefit from
efficiency improvements. Profit before tax increased by 3.4% to £12.2 million
compared to £11.8 million in the prior year. This represents a good result from
our parts division which continues to make a significant contribution to group
earnings where it represents 19% of group profit before tax with a consistent
and relatively high net margin of 6%.
GROUP OUTLOOK
The group has made a
good start to the current financial year, we have a healthy order book for the
delivery of new cars in the important month of March and aftersales continues
to perform well. We therefore expect the result for the first quarter to be in
line with expectations.
The new car market is
expected to show modest growth in 2015 and the used car market is stable. This,
together with the group's strong performance in 2014 and the previous five years,
provide a firm foundation on which to deliver further growth in the current
year. The continuing increase in the vehicle parc of cars less than three years
old provides further opportunities for increasing revenue in the high margin
aftersales sector of the motor division. These factors, together with the broad
base of our franchise representation leave us very well positioned for future
growth. The acquisition of Colborne should make a greater contribution this
year and we continue to focus on the areas in which we can improve the
performance of the group's franchised outlets, such as used car sales. As in
previous years we continue to target selective acquisitions to further improve
our franchise representation.
The company has
achieved outstanding growth in recent years and we believe the significant
investment we are making in our facilities and multi channel customer
experience will give us a competitive advantage and further improve our
position of leadership in the motor retail sector.
The parts division
has made good progress with increased profits, which together with continued
investment in new product lines, improved facilities and systems, leaves the
business in a stronger position for further growth and development. We also
continue to seek appropriate acquisition targets in the parts aftermarket.
The group balance
sheet continues to be strengthened by strong operational cash flow. We have
substantial headroom in our bank facilities with net debt continuing to be
closely controlled and net debt to EBITDA being at a lower level than last
year. This provides secure funding capacity for several years and financial
security to grow the business through further strategic acquisitions in both
the motor and parts divisions.
Andy Bruce
Chief Executive
4 March 2015
FINANCIAL REVIEW
GROUP RESULTS
Turnover increased by
23% to £3.04 billion (2013: £2.46 billion), with strong growth from new and
used cars and £222m represented by the acquisition of Colborne. Gross profit of
£396 million increased by £60.2 million compared to the previous year, with the
growth coming from new and used cars as well as acquisitions. The gross margin
of 13.0% was slightly lower compared to the prior year of 13.6%, this is due to
a greater proportion of gross profit coming from cars, which have a lower
margin than parts and aftersales. The operating margin improved to 2.5% from
2.4% last year and overheads increased by £43.1 million in the year, primarily
due to the higher turnover and acquisitions.*Adjusted profit from operations
increased by 31% to £76.6 million (2013: £58.4 million).
Net interest costs
increased by 12.6% to £11.6 million (2013: £10.3 million) due to the
acquisition of Colborne and higher levels of working capital, a large
proportion of which was due to the acquisition. Interest on group borrowings is
based on floating interest rates together with interest rate hedges, where we
have £30 million of hedges which were established in 2007, when interest rates
were significantly higher than current levels. These increase the interest
charge so that we do not get the full benefit of the low UK base rate which has
been applicable for several years.
The pension charge
for the year of £3.1 million has been calculated in accordance with the
accounting standard IAS 19 (Revised) and compares to a charge of £2.7 million
in the prior year. Further comments in relation to the pension schemes are
provided in a separate paragraph of this review.
Key financial
highlights are summarised below:
·
*adjusted profit
before tax for the year increased by 35% to £65.0 million, from £48.1 million
last year, which is the highest trading result to date for the company;
·
profit before tax
was £59.2 million compared to a profit before tax in the previous year of £43.9
million, an increase of 35%;
·
profit after tax
was £46.8 million, an increase of 29% compared to £36.2 million in 2013;
·
earnings per share
increased by 30% to 12.03p compared to 9.28p in the prior year and *adjusted
earnings per share of 13.52p compared to 10.36p in the prior year, an increase
of 30%.
(*Adjusted
profit is profit before amortisation of intangible assets, debt issue costs,
pension costs and share based payments)
TAXATION
The tax charge for
the year of £12.4 million compares to a tax charge of £7.7 million in the prior
year and reflects a charge of 21% of profit before tax. This is similar to the
standard rate of Corporation Tax of 22% whereas the lower charge in 2013, of
17.5%, reflected a reduction in the rate at which deferred tax is calculated
from 23% to 20% in line with the reduction in UK Corporation Tax to this rate
by April 2015.
CASH FLOW
Cash generated from
operations for the year was £66.1 million (2013: £76.5 million), slightly below
last year due to increased working capital which increased by £12.5 million.
Stock and debtors increased by £127.7 million which was mainly offset by an
increase in creditors of £115.2 million. Capital expenditure was £16.5 million,
the same as the previous year and proceeds from the sale of properties and
dealership businesses was £7.2 million (2013: £12.7 million), so net capital
expenditure was £9.3 million (2013: £3.8 million). The majority of capital
expenditure was on new or improved premises for dealerships. As referred to in
the Strategic and Operational Review, expenditure on acquisitions during the
year relates to the acquisition of Colborne on 10 March 2015 for a total cash
consideration of £27.4 million.
The strong
operational cash flow allowed us to make further reductions in bank loans where
repayments of £7.5 million were made during the year, the same amount as repaid
in 2013. Net debt increased by £8.8 million in the year, compared to a decrease
of £5.1 million in the previous year. The increase being a result of higher net
capital expenditure and the higher cost of acquisitions compared to the prior
year. This increase in net debt resulted in net borrowings of £51.9 million at
31 December 2014 compared to £43.1 million at the start of the year, net debt
being calculated as gross bank borrowings less cash balances.
BANK FUNDING
Our bank facilities
were renewed and increased on 7 February 2014 and remain in place until March
2018. The facilities are with a group of five banks being Barclays, HSBC, Lloyds,
RBS and Yorkshire Bank and consisted initially of a term loan of £50 million,
which has since reduced to £42.5 million and a revolving credit facility of £90
million. There is also the potential to increase the term loan by up to an
additional £30 million to fund future acquisitions. Interest is charged on both
loans at a margin of between 1.4% and 2.35% above LIBOR, depending on the ratio
of net bank debt to EBITDA. These facilities are subject to half yearly
covenant tests on interest cover and net bank debt to EBITDA. The covenant
tests are set at levels that provide sufficient headroom and flexibility for
the group until maturity of the facilities in March 2018.
At 31 December 2014,
total facilities were £132.5 million (2013: £96.25 million) of which £51.9
million, net of cash balances, was being utilised. These bank facilities,
together with the group's strong operational cash flow, indicate that the group
has sufficient facilities available to fund its operations and allow for future
expansion. At 31 December 2014, gearing was 20% compared to 19% at 31 December
2013 and net debt to EBITDA was 0.59 compared to 0.61 last year. The group's
underlying profitability and strong cash flow should result in further
reductions in borrowing in the future and help ensure that the level of
borrowing remains under control and is at a reasonable level in relation to net
assets.
PROPERTY PORTFOLIO
The group has a
policy of investing in freehold and long leasehold property as the preferred
means of providing premises for our car dealerships, where possible. As a
result, we have a significant and valuable portfolio of freehold and long
leasehold properties, where the net book value at 31 December 2014 was £193.1
million compared to £185.4 million last year. Short leasehold properties had a
value of £6.0 million (2013: £6.5 million).
DIVIDENDS
In our interim
report, we indicated that due to the encouraging results and strong financial
position of the group, the interim dividend would be increased by 10% to 0.97p
per ordinary share and this was paid on 28 November 2014. We are now proposing
a 10% increase in the final dividend to 1.87p per share, giving a total
dividend for the year ended 31 December 2014 of 2.84p per share (2013: 2.58p),
representing an increase in the total dividend for the year of 10%. This
follows the 43% increase in the dividend paid over the previous three years to
December 2013 and continues our policy of increasing the dividend provided
there is satisfactory growth in profitability. The final dividend is subject to
shareholder approval at the Annual General Meeting and will be payable on 5
June 2015. This will represent a cash outflow of £7.3 million, which gives a
total dividend for the year of £11.1 million.
PENSION SCHEMES
The group operates
two defined benefit pension schemes both of which are closed to entry for new
members and also closed to future accrual. Whilst the asset values of the
schemes have increased during the year, the valuation of the liabilities
increased by a higher amount so the net deficit included in the balance sheet
increased by £10.8m, after deferred tax. The assessment of valuation of the
pension schemes is based on several key assumptions prescribed by accounting
standards and over which the directors have very little control. As a result,
the calculation which estimates the potential liabilities of the schemes can
increase or decrease the liabilities due to factors that have no relation or
relevance to the trading results of the group.
The impact of these
factors is that the combined value of the deficits of both schemes increased in
the year and the total deficit after deferred tax is now £46.0 million (2013:
£35.3 million). Relatively small changes in the bases of valuation can have a
significant effect on the calculated deficit, hence the movement in the
calculated deficit can be subject to high levels of volatility. The board
continues to look at its options to reduce both the annual cost of operating
both schemes and what actions can be taken to reduce the deficit on the
schemes, thereby reducing exposure to movements in these liabilities and
reducing the deficit over the medium and longer term.
Robin Gregson
Finance Director
4 March 2015
Consolidated Income
Statement
For the year ended 31 December 2014
For the year ended 31 December 2014
|
2014
|
2013
|
||
|
Note
|
£m
|
£m
|
|
|
Continuing operations
|
|||
|
Revenue
|
3,042.9
|
2,464.5
|
|
|
Cost of sales
|
(2,646.8)
|
(2,128.7)
|
|
|
Gross profit
|
396.1
|
335.8
|
|
|
Distribution costs
|
(212.6)
|
(184.8)
|
|
|
Administrative expenses
|
(109.3)
|
(94.0)
|
|
|
Other operating income
|
0.1
|
0.3
|
|
|
Profit from operations
|
|||
|
Profit from
operations before amortisation
and share based payments
|
76.6
|
58.4
|
|
|
Amortisation of intangible assets
|
(1.2)
|
(1.1)
|
|
|
Share based payments
|
(1.1)
|
-
|
|
|
Profit from operations
|
74.3
|
57.3
|
|
|
Interest payable
|
3
|
(11.9)
|
(10.5)
|
|
Interest receivable
|
3
|
0.3
|
0.2
|
|
Net interest
|
(11.6)
|
(10.3)
|
|
|
Net interest on pension scheme obligation
|
(3.1)
|
(2.7)
|
|
|
Debt issue costs
|
(0.4)
|
(0.4)
|
|
|
Profit on ordinary activities before taxation
|
59.2
|
43.9
|
|
|
Profit before tax, amortisation, debt issue costs,
pension costs
|
|||
|
and share based payments
|
65.0
|
48.1
|
|
|
Amortisation of intangible assets
|
(1.2)
|
(1.1)
|
|
|
Share based payments
|
(1.1)
|
-
|
|
|
Net interest and costs on pension scheme obligation
|
(3.1)
|
(2.7)
|
|
|
Debt issue costs
|
(0.4)
|
(0.4)
|
|
|
Profit on ordinary activities before taxation
|
59.2
|
43.9
|
|
|
Tax charge
|
(12.4)
|
(7.7)
|
|
|
Profit for the year
|
46.8
|
36.2
|
|
|
Attributable to:
|
|||
|
Shareholders of the company
|
46.8
|
36.0
|
|
|
Non-controlling interests
|
-
|
0.2
|
|
|
Continuing operations
|
|||
|
Earnings per share
|
|||
|
Basic earnings per share
|
4
|
12.03p
|
9.28p
|
|
Diluted earnings per share
|
4
|
11.75p
|
9.10p
|
Consolidated
Statement of Comprehensive Income
|
Note
|
2014
|
2013
|
|
|
£m
|
£m
|
||
|
Profit for the financial year
|
46.8
|
36.2
|
|
|
Items that will never be reclassified to profit and
loss:
|
|||
|
Actuarial losses recognised in post-
|
|||
|
retirement benefit schemes
|
(16.1)
|
(3.3)
|
|
|
Movement in deferred taxation on pension
liability
|
3.3
|
0.6
|
|
|
Tax rate adjustment
|
-
|
(1.3)
|
|
|
Items that are or may be reclassified to profit and
loss:
|
|||
|
Fair value on derivative instruments
|
2.2
|
1.5
|
|
|
Movement in deferred taxation on derivative
instruments
|
(0.5)
|
(0.3)
|
|
|
Other comprehensive expense for the year
|
(11.1)
|
(2.8)
|
|
|
Total comprehensive income for the year
|
35.7
|
33.4
|
|
|
Attributable to:
|
|||
|
Shareholders of the company
|
35.7
|
33.2
|
|
|
Non-controlling interests
|
-
|
0.2
|
Consolidated
Statement of Financial Position
As at
31 December 2014
|
2014
|
2013
|
|
|
£m
|
£m
|
|
|
Non-current assets
|
||
|
Goodwill
|
80.6
|
73.7
|
|
Intangible assets
|
33.6
|
13.8
|
|
Property, plant and equipment
|
215.6
|
204.6
|
|
329.8
|
292.1
|
|
|
Current assets
|
||
|
Inventories
|
548.8
|
446.7
|
|
Trade and other receivables
|
179.4
|
154.0
|
|
Rental fleet vehicles
|
57.1
|
52.9
|
|
Cash and cash equivalents
|
5.9
|
5.2
|
|
Assets held for sale
|
-
|
0.5
|
|
791.2
|
659.3
|
|
|
Total assets
|
1,121.0
|
951.4
|
|
Current liabilities
|
||
|
Bank loans and overdrafts
|
20.2
|
14.5
|
|
Trade and other payables
|
688.2
|
578.9
|
|
Current tax liabilities
|
11.3
|
8.9
|
|
Short-term provisions
|
0.6
|
1.0
|
|
Derivative financial instruments
|
4.9
|
7.0
|
|
725.2
|
610.3
|
|
|
NET CURRENT ASSETS
|
66.0
|
49.0
|
|
NON-CURRENT LIABILITIES
|
||
|
Bank loans
|
37.6
|
33.8
|
|
Trade and other payables
|
30.8
|
24.2
|
|
Retirement benefit obligations
|
57.6
|
44.1
|
|
Deferred tax liabilities
|
12.3
|
10.2
|
|
Long-term provisions
|
0.6
|
0.8
|
|
138.9
|
113.1
|
|
|
Total liabilities
|
864.1
|
723.4
|
|
Net assets
|
256.9
|
228.0
|
|
Shareholders' equity
|
||
|
Ordinary share capital
|
19.7
|
19.4
|
|
Share premium
|
76.9
|
75.6
|
|
Capital redemption reserve
|
14.6
|
14.6
|
|
Other reserve
|
-
|
(1.1)
|
|
Retained earnings
|
145.7
|
118.8
|
|
Equity attributable to shareholders of the company
|
256.9
|
227.3
|
|
Non-controlling interests
|
-
|
0.7
|
|
TOTAL EQUITY
|
256.9
|
228.0
|
Consolidated
Cash Flow Statement
For
the year ended 31 December 2014
|
2014
|
2013
|
|
|
£m
|
£m
|
|
|
Cash flows from operating activities
|
||
|
Profit for the year
|
46.8
|
36.2
|
|
Adjustments for:
|
||
|
Tax
|
12.4
|
7.7
|
|
Depreciation
|
13.5
|
12.5
|
|
Profit on disposal of plant and equipment
|
(0.1)
|
(0.1)
|
|
Profit on disposal of rental fleet vehicles
|
(0.7)
|
(0.4)
|
|
Amortisation of intangible assets
|
1.2
|
1.1
|
|
Share based payments
|
1.1
|
-
|
|
Interest income
|
(0.3)
|
(0.2)
|
|
Interest payable
|
11.9
|
10.5
|
|
Debt issue costs
|
0.4
|
0.4
|
|
Changes in working capital
|
||
|
Increase in inventories
|
(102.2)
|
(62.6)
|
|
Increase in receivables
|
(25.5)
|
(30.2)
|
|
Increase in payables
|
115.2
|
102.6
|
|
Impact of net working capital of acquisitions
|
(7.6)
|
(1.0)
|
|
Cash generated from operations
|
66.1
|
76.5
|
|
Difference between pension charge and cash
contributions
|
(5.8)
|
(5.4)
|
|
Net interest and costs on pension scheme obligation
|
3.1
|
2.7
|
|
Purchase of rental fleet vehicles
|
(80.5)
|
(67.4)
|
|
Proceeds from sale of rental fleet vehicles
|
72.2
|
49.5
|
|
Interest paid
|
(11.9)
|
(10.5)
|
|
Interest received
|
0.3
|
0.2
|
|
Tax paid
|
(8.9)
|
(8.1)
|
|
Net cash inflow from operating activities
|
34.6
|
37.5
|
|
Cash flows from investing activities
|
||
|
Acquisition of subsidiary companies (net cash
outflow)
|
(24.3)
|
(19.4)
|
|
Purchase of property, plant and equipment
|
(16.5)
|
(16.5)
|
|
Purchase of intangibles
|
(0.7)
|
0.1
|
|
Purchase of goodwill
|
(0.2)
|
-
|
|
Proceeds from sale of property, plant and equipment
|
7.2
|
12.6
|
|
Proceeds from sale of business
|
-
|
0.1
|
|
Net cash used by investing activities
|
(34.5)
|
(23.1)
|
|
Cash flows from financing activities
|
||
|
Proceeds from issue of ordinary shares
|
1.6
|
0.3
|
|
Repayment of loans
|
(7.8)
|
(7.5)
|
|
New loans
|
14.6
|
-
|
|
Dividends paid to group shareholders
|
(10.4)
|
(9.5)
|
|
Net cash outflow from financing activities
|
(2.0)
|
(16.7)
|
|
Decrease in cash and cash equivalents
|
(1.9)
|
(2.3)
|
|
Cash and cash equivalents at 1 January
|
(1.8)
|
0.5
|
|
Cash and cash equivalents at 31 December
|
(3.7)
|
(1.8)
|
Consolidated
Statement of Changes in Equity
|
Share
capital
£m
|
Share
premium
£m
|
Capital
redemption
reserve
£m
|
Other
reserve
£m
|
Retained
earnings
£m
|
Equity distributable
to shareholders of company
£m
|
Non
controlling
interest
£m
|
Total
equity
£m
|
|
|
As at 1 January 2014
|
19.4
|
75.6
|
14.6
|
(1.1)
|
118.8
|
227.3
|
0.7
|
228.0
|
|
New shares issued
|
0.3
|
1.3
|
-
|
-
|
-
|
1.6
|
-
|
1.6
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
46.8
|
46.8
|
-
|
46.8
|
|
Actuarial losses on defined benefit pension schemes
|
-
|
-
|
-
|
-
|
(16.2)
|
(16.2)
|
-
|
(16.2)
|
|
Deferred taxation on pension liability
|
-
|
-
|
-
|
-
|
3.3
|
3.3
|
-
|
3.3
|
|
Share based payments
|
-
|
-
|
-
|
-
|
1.1
|
1.1
|
-
|
1.1
|
|
Deferred taxation on share based payments
|
-
|
-
|
-
|
-
|
1.1
|
1.1
|
-
|
1.1
|
|
Transfer to retained earnings
|
-
|
-
|
-
|
1.1
|
(1.1)
|
-
|
-
|
-
|
|
Fair value on derivative earnings
|
-
|
-
|
-
|
-
|
2.1
|
2.1
|
-
|
2.1
|
|
Transfer of share in minority interest
|
-
|
-
|
-
|
-
|
0.7
|
0.7
|
(0.7)
|
-
|
|
Deferred taxation on derivative instruments
|
-
|
-
|
-
|
-
|
(0.5)
|
(0.5)
|
-
|
(0.5)
|
|
Dividends to shareholders
|
-
|
-
|
-
|
-
|
(10.4)
|
(10.4)
|
-
|
(10.4)
|
|
As at 31 December 2014
|
19.7
|
76.9
|
14.6
|
-
|
145.7
|
256.9
|
-
|
256.9
|
|
As at 1 January 2013
|
19.4
|
75.3
|
14.6
|
(1.4)
|
95.4
|
203.3
|
0.5
|
203.8
|
|
New shares issued
|
-
|
0.3
|
-
|
-
|
-
|
0.3
|
-
|
0.3
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
36.0
|
36.0
|
0.2
|
36.2
|
|
Actuarial losses on defined benefit pension schemes
|
-
|
-
|
-
|
-
|
(3.3)
|
(3.3)
|
-
|
(3.3)
|
|
Deferred taxation on pension liability
|
-
|
-
|
-
|
-
|
0.6
|
0.6
|
-
|
0.6
|
|
Rate adjustment
|
-
|
-
|
-
|
-
|
(1.3)
|
(1.3)
|
-
|
(1.3)
|
|
Foreign exchange adjustment
|
-
|
-
|
-
|
0.3
|
(0.3)
|
-
|
-
|
-
|
|
Fair value on derivate instruments
|
-
|
-
|
-
|
-
|
1.5
|
1.5
|
-
|
1.5
|
|
Deferred taxation on derivative instruments
|
-
|
-
|
-
|
-
|
(0.3)
|
(0.3)
|
-
|
(0.3)
|
|
Dividends to shareholders
|
-
|
-
|
-
|
-
|
(9.5)
|
(9.5)
|
-
|
(9.5)
|
|
As at 31 December 2013
|
19.4
|
75.6
|
14.6
|
(1.1)
|
118.8
|
227.3
|
0.7
|
228.0
|
Explanatory
Notes to the Financial Information
1.
Basis of preparation
The
financial information has been prepared under International Financial Reporting
Standards (IFRS) issued by the IASB and as adopted by the European Union (EU). This financial
information has been prepared on the same basis as in 2013. Further information
in relation to the Standards adopted by the group is available on the group's
website, www.lookersplc.co.uk.
Whilst
the financial information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS's), this announcement does
not itself contain sufficient information to comply with IFRS's.
The
financial information set out above does not constitute the company's statutory
accounts for the years ended 31 December 2014 or 2013, but is derived from
those accounts. Statutory accounts for 2013 have been delivered to the
Registrar of Companies and those for 2014 will be delivered following the
company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified, did not draw attention to any matters by way of
emphasis and did not contain statements under section 498(2) or (3) Companies
Act 2006.
A
copy of the full group accounts that comply with IFRS's for the period ended 31
December 2014 can be found at www.lookersplc.co.uk and will be posted to
shareholders this month.
Going
Concern
This
financial information has been prepared on a going concern basis which the
directors believe to be appropriate for the reasons set out below.
The
company and the group continue to meet their day to day working capital
requirements through short term stocking loans, the revolving credit facility
and medium term funding requirements through a term loan. At the year end, the
medium term banking facilities included a revolving credit facility of up to
£55.0 million and a term loan of £41.25 million, providing total facilities of
£96.25 million until March 2016.
The
financial position of the group, its cash flows, liquidity position and
borrowing facilities are described earlier. The group's forecasts and
projections, taking account of reasonably possible changes in trading
performance, show that the group should be able to operate within the level of
its current facility. Therefore the directors have a reasonable expectation
that the company and the group have adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the annual financial statements.
2.
SEGMENTAL REPORTING
At
31 December 2014 the group is organised into two main business segments (2013:
same), motor distribution and parts distribution. All revenue and profits
originate in the United Kingdom and the Republic of Ireland.
|
Year ended
ended 31 December
2014
|
Motor
Division
£m
|
Parts
Distribution
£m
|
Unallocated
£m
|
Group
£m
|
|
|
Continuing
operations
|
|||||
|
New Cars
|
1,476.5
|
-
|
-
|
1,476.5
|
|
|
Used Cars
|
1,008.5
|
-
|
-
|
1,008.5
|
|
|
Aftersales
|
352.4
|
205.5
|
-
|
557.9
|
|
|
Revenue
|
2,837.4
|
205.5
|
-
|
3,042.9
|
|
|
Segmental result
before amortisation
|
|||||
|
of intangible assets
|
67.0
|
12.2
|
(2.6)
|
76.6
|
|
|
Amortisation of
intangible assets
|
-
|
-
|
(1.2)
|
(1.2)
|
|
|
Interest expense
|
(8.7)
|
-
|
(3.2)
|
(11.9)
|
|
|
Interest income
|
-
|
-
|
0.3
|
0.3
|
|
|
Share based payments
|
-
|
-
|
(1.1)
|
(1.1)
|
|
|
Net interest and
costs on pension scheme obligation
|
-
|
-
|
(3.1)
|
(3.1)
|
|
|
Debt issue costs
|
-
|
-
|
(0.4)
|
(0.4)
|
|
|
Profit before
taxation
|
58.3
|
12.2
|
(11.3)
|
59.2
|
|
|
Taxation
|
-
|
-
|
-
|
(12.4)
|
|
|
Profit for the
financial period from continuing
|
|||||
|
operations
attributable to shareholders
|
46.8
|
||||
|
Year ended
ended 31 December
2014 (Continued)
|
Motor
Division
£m
|
Parts
Distribution
£m
|
Unallocated
£m
|
Group
£m
|
|
|
Segmental assets
|
980.2
|
136.7
|
-
|
1,116.9
|
|
|
Total assets
|
980.2
|
136.7
|
-
|
1,116.9
|
|
|
Segmental
liabilities
|
735.7
|
66.5
|
-
|
802.2
|
|
|
Unallocated
liabilities
- Corporate
borrowings
|
-
|
-
|
57.8
|
57.8
|
|
|
Total liabilities
|
735.7
|
66.5
|
57.8
|
860.0
|
|
|
Year ended
31 December 2013
|
Motor
Division
£m
|
Parts
Distribution
£m
|
Unallocated
£m
|
Group
£m
|
|
Continuing
operations
|
||||
|
New Cars
|
1,130.2
|
-
|
-
|
1,130.2
|
|
Used Cars
|
794.4
|
-
|
-
|
794.4
|
|
Aftersales
|
342.8
|
197.1
|
-
|
539.9
|
|
Revenue
|
2,267.4
|
197.1
|
-
|
2,464.5
|
|
Segmental result
before amortisation
of intangible assets
|
49.6
|
11.8
|
(3.0)
|
58.4
|
|
Amortisation of
intangible assets
|
-
|
-
|
(1.1)
|
(1.1)
|
|
Interest expense
|
(7.0)
|
-
|
(3.5)
|
(10.5)
|
|
Interest income
|
-
|
-
|
0.2
|
0.2
|
|
Net interest and
costs on pension scheme obligations
|
-
|
-
|
(2.7)
|
(2.7)
|
|
Debt issue costs
|
-
|
-
|
(0.4)
|
(0.4)
|
|
Profit before
taxation
|
42.6
|
11.8
|
(10.5)
|
43.9
|
|
Taxation
|
-
|
-
|
(7.7)
|
(7.7)
|
|
Profit for the
financial year from continuing operations attributable to shareholders
|
36.2
|
|||
|
Segmental assets
|
814.3
|
137.1
|
-
|
951.4
|
|
Total assets
|
814.3
|
137.1
|
-
|
951.4
|
|
Segmental
liabilities
|
603.2
|
71.9
|
-
|
675.1
|
|
Unallocated
liabilities
- Corporate
borrowings
|
-
|
-
|
48.3
|
48.3
|
|
Total liabilities
|
603.2
|
71.9
|
48.3
|
723.4
|
3.
Finance costs - net
|
2014
|
2013
|
|
|
£m
|
£m
|
|
|
Interest
expense
|
||
|
On
amounts wholly repayable within 5 years:
|
||
|
Interest payable on
bank borrowings
|
(5.0)
|
(4.7)
|
|
Interest
on consignment vehicle liabilities
|
(6.9)
|
(5.8)
|
|
Interest
and similar charges payable
|
(11.9)
|
(10.5)
|
|
Interest
income
|
||
|
Bank interest
|
0.3
|
0.2
|
|
Total interest
receivable
|
0.3
|
0.2
|
|
Finance costs - net
|
(11.6)
|
(10.3)
|
4.
Earnings per share
The
calculation of earnings per ordinary share is based on the profit on ordinary
activities after taxation attributable to shareholders of the company amounting
to £46.8 million (2013: £36.0 million) and a weighted average number of
ordinary shares in issue during the year of 389,158,672 (2013: 388,089,402)
The
diluted earnings per share is based on the weighted average number of shares,
after taking account of the dilutive impact of shares under option of 9,062,088
(2013: 7,590,189).
Adjusted
earnings per share is stated before amortisation of intangible assets,
impairment of goodwill, debt issue costs, pension costs and share based
payments and is calculated on profits of £52.6 million (2013: £40.2 million)
for the year.
|
Continuing
operations
|
2014
Earnings
£m
|
2014
Earnings
per share
p
|
2013
Earnings
£m
|
2013
Earnings
per share
p
|
|
Basic
EPS
|
||||
|
Earnings
attributable to ordinary shareholders
|
46.8
|
12.03
|
36.0
|
9.28
|
|
Effect
of dilutive securities
|
-
|
(0.28)
|
-
|
(0.18)
|
|
Diluted
EPS
|
46.8
|
11.75
|
36.0
|
9.10
|
|
Adjusted
EPS
|
||||
|
Earnings
attributable to ordinary shareholders
|
46.8
|
12.03
|
36.0
|
9.28
|
|
Amortisation
of intangible assets
|
1.2
|
0.30
|
1.1
|
0.3
|
|
Net
interest and costs on pension scheme obligation
|
3.1
|
0.79
|
2.7
|
0.69
|
|
Share
based payments
|
1.1
|
0.30
|
-
|
-
|
|
Debt
issue costs
|
0.4
|
0.10
|
0.4
|
0.09
|
|
Adjusted
EPS
|
52.6
|
13.52
|
40.2
|
10.36
|
5.
Dividends
|
2014
|
2013
|
|
|
£m
|
£m
|
|
|
Interim
dividend of 0.97p per ordinary share (2013: 0.88p)
|
3.8
|
3.5
|
|
Final
dividend paid during the year relating to the financial year ended 31
December 2013 of 1.70p per ordinary share (2013: 1.55p)
|
6.6
|
6.0
|
|
Total
dividends paid in the year of 2.67p per ordinary share (2013: 2.43p)
|
10.4
|
9.5
|
The
directors propose a final dividend of 1.87p per ordinary share in respect of
the financial year ended 31 December 2014 (2013: 1.70p). The final dividend
will be paid on 5 June 2015 to shareholders on the register on 8 May
2015. The proposed final dividend is subject to approval by the
shareholders at the Annual General Meeting and has not been included as a
liability in this financial information.
6.
Principal risks and uncertainties
There
are a number of potential risks and uncertainties which could have a material
impact on the group's performance, business activities, financial condition,
results of operations or the company's share price and could cause actual
results to differ materially from expected and historical results. The Board
maintains a policy of continuous identification and review of risks and
uncertainty and the principal risks identified are the adverse impact of the
global economy, manufacturers' financial stability, adverse movements in
exchange rates, changes in the Block Exemption regulations which govern
franchise agreements in the UK retail motor industry, liquidity and financing
issues for the company, legislative changes in relation to vehicle taxation and
transport policy, failure of group information systems and the relative
strength and influence of the vehicle manufacturers on the UK market. The
Board has recently reviewed the risk factors and confirms that they should
remain valid for the rest of this year.
This information is provided by RNS
The company news
service from the London Stock Exchange
DATED: 04.03.15
FEED: LOOKERS/RNS
