RNS Number:4493K
European Motor Hldgs PLC
29 April 2003
EUROPEAN MOTOR HOLDINGS plc ("EMH")
Preliminary results for the year ended 28 February 2003
EMH, consistently one of the UK's most profitable quoted motor retail groups,
announces record results for the year ended 28 February 2003 which are ahead of
market expectations.
Highlights:
*Profit before tax up 28% to #13.2 million
*Trading profit up 8% to #11.2 million
*Earnings per share up 39% to 18.2p
*Dividends up 7% to 7.5 pence per share for year
*Net cash of #5.6 million as at 28 February 2003
*All Mercedes-Benz businesses successfully sold in the year
*One BMW/Mini and two Volkswagen businesses acquired since February 2002
*Growing representation with core partners
*New financial year started well
Commenting on these results, chief executive Richard Palmer said:
"Everyone at EMH can take great pride in these industry leading results. Our
excellent customer service and premium franchise portfolio mean that we can face
the challenges of the new financial year with great confidence."
Enquiries:
Richard Palmer Chief Executive
European Motor Holdings plc
Ann Wilson Finance Director
European Motor Holdings plc
Morning: Biddick Associates 020 7448 1000
Afternoon: European Motor Holdings plc 01491 413399
EUROPEAN MOTOR HOLDINGS plc ("EMH")
Preliminary results for the year ended 28 February 2003
Chief Executive's statement
Introduction
In the calendar year 2002, the UK's motor retail industry had a record year,
with more new cars sold than ever before. Our performance during the financial
year ended 28 February 2003 was also a record for the Group.
Our profit before tax increased by 28% to #13.2 million, earnings per share
increased by 39% to 18.2p and our net assets per share rose from 91.1p at the
beginning of the period to 107.4p at 28 February 2003. Profit before tax and
exceptional items increased from #10.4 million to #11.2 million.
These results are all the more remarkable following the disposal of our
Mercedes-Benz car businesses in London in early July 2002 and our Mercedes-Benz
truck business in August 2002. The new businesses that we opened and acquired
did not make a contribution in the period, but they have already made a profit
in the new financial year and we believe that they will make a significant
contribution in years to come.
Our exceptional performance over the last five years is detailed below:
Year ended 28 February
1999 2000 2001 2002 2003
(11 months)
Profit before tax #6.0m #7.7m #8.5m #10.4m #13.2m
Profit before tax and exceptional items #5.3m #7.7m #8.5m #10.4m #11.2m
Earnings per share 7.7p 9.6p 10.5p 13.1p 18.2p
Dividend per share 6.1p 6.1p 6.5p 7.0p 7.5p
Net assets #41.7m #43.6m #45.7m #48.5m #56.8m
We are, once again, the most profitable UK quoted motor retail group using
return on sales as a benchmark. We believe that this excellent performance has
been achieved as a result of our emphasis on strong management, customer service
and premium products and we intend to continue with this strategy in the future.
Wilcomatic, our vehicle wash equipment operation, has also performed well and
real progress has been achieved in sales, service and retail washing.
We are continuing our practice of increasing the dividend year on year and are
recommending a final dividend of 4.3p per share, making a total for the year of
7.5p per share, compared with 7.0p per share last year, an increase of 7.1%. The
final dividend is expected to be paid on 4 September 2003 to shareholders on the
register at 8 August 2003.
Trading
Motor Retail Division
Over the last two years new car sales in the UK have risen by 15%. Sales for the
key manufacturer partners that we represent, namely Audi, BMW, Jaguar, Land
Rover, Mini, Volkswagen and Volvo, have risen by 35% over the same period. These
statistics confirm not only the wisdom of our decision to concentrate on these
brands, but also the continuing upward migration of customers into the premium
sectors of the market in which we operate. This has been aided by more
competitive pricing by motor manufacturers and also by continuing low interest
rates.
Our Audi businesses moved forward in profitability terms by 36% with an
excellent contribution from our maturing aftersales operations. Audi
registrations rose by 16% nationally, whilst sales at our Audi centres rose by
19%. These factors, together with a good customer service performance, ensured a
very satisfactory outcome for these businesses for the year. We look forward to
the introduction of the new A8 and A3 models in the first half of the current
financial year.
Our BMW and Mini businesses had an outstanding year, with operating profits on
existing businesses increasing by 38%. In March 2003, our Malton dealership
achieved the third best BMW customer service score in the UK. The further
development of our motor cycle business in Sunderland and our finance operations
aided outstanding sales and after sales performances. BMW sales increased
nationally by 2%, whilst registrations within our BMW businesses increased by
4%.
Our three existing Mini businesses sold 735 new Minis in the year, which was the
first full year of sales for this exciting new brand, an increase in volume of
136% over last year, which was slightly ahead of the national increase in
registrations.
Our increase in Jaguar registrations of 20% was slightly behind the national
figure of 23%. However, our Jaguar businesses moved forward considerably in the
year, with profitability increasing by 42%. Our customer service scores
continued to rise and we were the joint top performing group in Jaguar's most
recent survey with one of our dealerships, York, being the second best
performing Jaguar dealer in the UK. These businesses are well set to continue
with sales and profit growth, particularly following the recent launch of the
new XJ saloon.
Whilst we currently have only one Land Rover dealership, this business, based in
Chester, was the third largest Land Rover business in the UK in terms of new
vehicle sales for the year ended 31 December 2002. Our registrations increased
by 7% compared to a national rise of 3% and profitability improved by 29% during
the year under review.
Overall the profitability of our Volkswagen businesses fell in the year as a
result of the opening and acquisition of new branches. These new businesses
further extend two market areas, in South West London and the North West, and
will assist us in future years in achieving profitable growth with this
franchise. Our established businesses performed well, with profitability
increasing by 28% and registrations increasing by 3% in line with the national
increase in registrations for Volkswagen. The first half of this financial year
sees the arrival of the new Volkswagen luxury products, the Phaeton and the
Touareg, which we believe will have an important impact on the market in the
months to come.
Our like for like Volvo registrations were marginally down on last year in a
period when national registrations increased by 1%. Our profitability increased
by 4%, reflecting an improvement in our new areas of operation, where start up
costs continue to affect our performance. We continue to maintain our excellent
customer service programme with Volvo. The new financial year has started well,
with exceptional demand for the XC90 off road vehicle which is already creating
a 'halo' effect for the rest of the Volvo range.
Our auction business performed very well, increasing its profits by 40%. This
business is an extremely valuable part of the Division, not only generating
healthy profits, but providing all our motor retail businesses with valuable
intelligence which helps us to trade more profitably and effectively.
Perodua, our vehicle import operation, had its first full year of the Kelisa
model. Wholesales for the year were 5% higher than last year, but margins were
reduced as a result of strong competition in the segment. The Kelisa is judged
by CAP Monitor to be the most cost effective new car in the UK to run and is
also one of the most environmentally friendly. Whilst legislation concerning End
of Life Vehicles has yet to be concluded, in anticipation of future scrapping
requirements, we have made provision to cover potential costs on past sales and
will continue to do this on all future sales.
Motor Services Division
Wilcomatic had a good year, with operating profits rising by 24% to #1.0
million. We have increased the number of service contracts in place in the year
and, following investment in new technology, have become even more efficient in
the way we carry out our service work. Additionally, we have sold more high
value wash systems than ever before. Success in these areas has more than offset
the results of the retail washing operation.
The market for vehicle washing in the UK is changing. Whilst a robust market for
conventional 'rollover' car washes will remain, large conveyor systems, which
have dominated the market for many years in the USA, are starting to become
established in the UK. These systems can wash cars more quickly and, in the case
of the systems we supply, use cloth rather than brushes to clean cars. The
Division has been pioneering this change with its investment in the 'Ocean' wash
systems that we operate on five Asda superstore sites. Whilst we believe that
these sites will take at least two years to reach maturity, substantial progress
has been made in increasing wash volumes, particularly in the second half of the
year under review, and four of the sites had achieved above break even monthly
results by the year end. We therefore expect a significant turnaround in the
results of this operation in the next year.
Business development
The changes in the 'Block Exemption' regulations within the European Union that
I referred to in my statement last year have prompted extensive actions from our
motor manufacturer partners. Partly as a result of these changes, we have so far
benefited by increasing our representation with BMW/Mini and Volkswagen and
expect that we will further benefit in the coming year with additions to our
Premier Automotive Group businesses.
In February 2003, we acquired for #7.5 million a BMW and Mini dealership in
Stockton. This business fits perfectly with our BMW businesses in North
Yorkshire and Sunderland, forming a contiguous territory with existing
operations. Included within the consideration was a goodwill payment of #2.0
million, representing less than two years' historical profits based on statutory
accounts for the year ended 31 December 2002. We anticipate a strong performance
from this business following the introduction of the standards and controls
currently operating so effectively in our existing BMW businesses. We are also
currently finalising our plans for a new operation with BMW and Mini which we
hope will be trading within the next 12 to 18 months. We continue to be
extremely optimistic about both the BMW and Mini brands going forward,
particularly when their product plans over the next three years are taken into
consideration. In the current financial year, we have the launch of the new '5'
series, the Z4, the new '6' series, very important additions to the '7' series
range, plus upgrades to other models.
We have completed a market area for Volkswagen in the North West with the
addition of Dane Wirral in Bebington to our established operations in Chester
and Wrexham. In the South, we have added businesses in Chiswick, Twickenham and,
more recently, Walton-on-Thames to our South West London territory. In the years
ahead, we have significant potential to exploit this market area, which also
includes a sales operation in Chiswick and a dealership in Heathrow which was
acquired last year. Further growth is anticipated in the current financial year
to complete this key strategic territory. The new luxury products that I
referred to earlier will be sold through both our Chester and Twickenham
operations. I am sure that those cars, together with the Touran, the new people
carrier, will help us towards further progress with Volkswagen in the new
financial year.
Our future representation position with Audi is still not finally resolved;
however, we remain hopeful, as strong performers in all three of our Audi
centres, that we will move forward with the brand in the coming year.
We have been in talks with Premier Automotive Group for some time about
expanding our representation with their franchises and we hope to be able to
announce a major new area of operation for those franchises during the first
half of this financial year. The new Jaguar and Land Rover products that have
been launched in the last year continue to capture market share and additions to
their established ranges of cars will continue to help to consolidate Premier
Automotive Group's market position.
Financial review
As stated above, the Group's profit on ordinary activities before tax for the
year ended 28 February 2003 was #13.2 million compared to #10.4 million in the
previous year. This year's result includes exceptional profits of #0.3 million
relating to the disposal of a number of businesses, principally those operating
Mercedes-Benz franchises following Mercedes-Benz's decision to acquire all
retail operations in London. As reported in the Interim Statement, this figure
comprises profits on disposal of businesses of #4.0 million (the main element of
which was the Territory Release Payment received in respect of the termination
of our Mercedes-Benz passenger car franchises), less goodwill of #3.7 million
originally written off to reserves on the acquisition of the dealerships now
sold. The goodwill write off is matched by a corresponding release from
reserves, so there is no effect on shareholders' funds in the period, and the
disposals have therefore made a significant contribution to our #8.3 million
increase in net assets.
The Group's profit before tax also includes exceptional net profits of #1.7
million arising on the disposal of a leasehold property in Newcastle-upon-Tyne
and a freehold property in Gateshead for a combined consideration of #2.6
million. Whilst the latter of these two properties was surplus to Group
requirements, we intend to replace the former in order to improve our Volvo
representation by consolidating our two former operations onto one site. We are
well advanced in securing a property for this purpose.
Excluding all of these exceptional items, the Group's underlying trading profit
was #11.2 million, compared to #10.4 million last year. Thus, notwithstanding
the reduction in contribution from our Mercedes-Benz operations following
disposal of the businesses, we have not only succeeded in replacing those
earnings but have also achieved an 8% increase in underlying profits in the
period. This is particularly gratifying in a period when we have also made
substantial investments in new businesses which will only make a contribution in
years to come.
The Group's effective tax rate in the year ended 28 February 2003 was 28%.
However, this is distorted by the tax treatment of the exceptional profits, for
which rollover relief is available. When these items are excluded, the effective
tax rate for the year is 33%, slightly higher than last year's rate of 32%.
Earnings per share for the year were 18.2p compared to 13.1p last year.
Excluding exceptional items, the figure for this year is 14.3p, an increase of
9.2%. The Board is recommending a final dividend of 4.3p per share, bringing the
full year's dividend to 7.5p. This represents a 7.1% increase on last year's
total dividend of 7.0p per share. Dividend cover, excluding exceptional items,
for the year is 1.9 times, the same as last year.
The net effect on turnover of branches opened and closed in the year is a
reduction of #43 million. Against this, higher new and used car volumes and
increases in the average prices of cars sold within our continuing businesses,
together with a higher turnover on machine sales within the Motor Services
Division, have resulted in increased turnover for those businesses of #32
million. The net result of all of the above is a decrease in Group turnover of
#11 million.
Operating profit has increased to 2.5% of turnover, compared to 2.4% last year
and the Group continues to be one of the most profitable in the industry.
Increased profits and higher average net cash balances, offset by lower interest
rates, have resulted in net interest receivable (excluding new vehicle stocking
interest) for the year of #0.3 million, compared with a small interest charge
last year.
As evidenced by the balance sheet, the Group continues to be in a very strong
financial position. Shareholders' funds have increased by #8.3 million to #56.8
million at 28 February 2003. During the year, we have invested #6.8 million in
capital expenditure, principally represented by new sites for our Volkswagen
franchises in Chiswick and Twickenham and our Volvo franchise in Harrogate, the
purchase of the freehold of our Jaguar site in Doncaster, further investment in
the retail washing sites at Asda supermarkets and the relocation of the Group's
head office following the disposal of our Mercedes-Benz businesses. The proceeds
of the disposal of fixed assets amounted to #2.8 million, relating primarily to
the property disposals referred to above. The net proceeds of the businesses
disposed of during the year amounted to #6.8 million and we have invested #7.8
million in the acquisition of new businesses in the same period.
During the year, the Company purchased 1,365,000 of its own shares in the market
for cancellation, whilst 959,000 shares were issued in respect of the exercise
of options. The net cash outflow from these transactions amounted to #1.1
million.
The growth of our existing businesses required an increase of #2.9 million in
working capital during the period. Payments in respect of taxation and dividends
in the year amounted to #7.5 million and there has been a net repayment of #1.1
million in respect of finance leases and letters of credit during the year. The
net effect of these cash flows and of the #13.6 million operating profit (after
adding back depreciation and amortisation) in the year is a net cash outflow of
#3.7 million. This leaves the Group with a healthy net cash balance of #5.6
million at 28 February 2003, compared with #8.2 million at the previous year
end.
The Group's net cash position at the year end is not representative of the year
as a whole because, immediately prior to a month with a registration plate
change, used vehicle stocks and vehicle debtors are lower than at other times of
the year and we are in receipt of deposits on cars being prepared for sale in
March. Nevertheless, we remain extremely well placed to expand the Group whilst
retaining low borrowing levels.
The principal elements of our borrowings are a loan from a finance house and
leasing obligations in respect of demonstrator vehicles and certain dealership
refurbishments. Most utilised borrowings are repayable either on demand or
within the current calendar year, although some leases in respect of fixed
assets have five or ten year terms. In addition, the Group has substantial
banking facilities which were unutilised at the balance sheet date.
The transitional arrangements for FRS 17: Retirement Benefits continue to apply
and full implementation will not be mandatory in the Group's financial
statements until the year ending 28 February 2006. However, FRS 17 requires
certain disclosures in respect of pension schemes to be made in a note to the
financial statements. Pension schemes are designed to operate over a long
period, but the valuation rules of FRS 17 mean that short term fluctuations in
the stock market will have significant effects on the valuation of pension
schemes for the purposes of these disclosures. The next actuarial valuation of
the Group's defined benefit scheme (which was closed to new members many years
ago) is due as at 5 April 2003 and is currently being progressed. In view of the
FRS 17 valuation of the scheme, there is a likelihood that the Group will have
to recommence contributions to the scheme. Provision is being made for this with
effect from 1 March 2003 pending finalisation of the actuarial valuation.
Conclusion
We have had an outstanding year, with all parts of our core businesses moving
forward. The new year has started well, interest rates look set to remain at low
levels and, as demand for the brands that we represent continues to grow, we
remain confident of further progress this year.
Richard Palmer
Chief Executive
29 April 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Turnover 1 430,005 441,081
Cost of sales (365,934) (376,745)
--------- ---------
Gross profit 64,071 64,336
Distribution costs (29,315) (29,362)
Administrative expenses (23,857) (24,541)
--------- ---------
Operating profit 2 10,899 10,433
Profit/(loss) on disposal of 3 298 (36)
businesses
Profit on disposal of properties 1,746 -
Interest receivable 516 467
Interest payable (228) (496)
--------- ---------
Profit on ordinary activities before 13,231 10,368
taxation
Tax on profit on ordinary (3,689) (3,320)
activities --------- ---------
Profit for the financial year 9,542 7,048
Dividends 4 (3,965) (3,745)
--------- ---------
Retained profit for the financial 5,577 3,303
year ========= =========
======== =========
Earnings per share (basic) 5 18.2p 13.1p
========= =========
========= =========
Earnings per share (diluted) 5 17.9p 13.1p
========= =========
========= =========
Dividend per share 4 7.5p 7.0p
========= =========
There are no recognised gains or losses other than the profit for the financial
year as reported above.
CONSOLIDATED BALANCE SHEET
28 February 28 February
2003 2002
#'000 #'000
Fixed assets
Tangible assets 35,178 29,701
Intangible assets 2,332 140
--------- ---------
37,510 29,841
--------- ---------
Current assets
Stocks 78,379 68,408
Debtors 17,657 15,774
Cash at bank and in hand 13,543 17,261
--------- ---------
109,579 101,443
--------- ---------
Creditors: amounts falling due within one
year (89,029) (81,336)
--------- ---------
Net current assets 20,550 20,107
--------- ---------
Total assets less current liabilities 58,060 49,948
Creditors: amounts falling due after more than
one year (273) (338)
Provisions for liabilities and charges (969) (774)
Deferred income - (294)
--------- ---------
56,818 48,542
========= =========
Capital and reserves
Called up share capital 21,151 21,313
Share premium account 27,001 26,476
Capital redemption reserve 746 200
Profit and loss account 7,920 553
========= =========
56,818 48,542
Equity shareholders' funds ========= =========
============================
Net cash 5,562 8,219
========= =========
Net assets per share 107.4p 91.1p
========= =========
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Net cash inflow from operating 9,967 16,483
activities
Returns on investments and 288 (29)
servicing of finance
Tax paid (3,717) (3,352)
Capital expenditure and (4,008) (2,088)
financial investment
Acquisitions and disposals (1,003) 460
Equity dividends paid (3,767) (3,631)
--------- ---------
Net cash inflow before (2,240) 7,843
financing
Financing (1,478) (4,117)
--------- ---------
(Decrease)/increase in cash in (3,718) 3,726
the year ========= =========
Reconciliation of operating profit to net cash flow from operating
activities
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Operating profit 10,899 10,433
Depreciation and 2,802 2,731
amortisation
Profit on sale of tangible (63) (51)
fixed assets
(Increase) in stocks (9,698) (2,900)
(Increase)/decrease in (1,908) 2,252
debtors
Increase in creditors 8,675 2,471
Net movement in demonstrator (740) 1,547
funding --------- ---------
Net cash inflow from operating 9,967 16,483
activities ========= =========
Analysis of
changes in net
cash
At 1 March Cash flow Other non- At 28 Feb 2003
2002 cash changes
#'000 #'000 #'000 #'000
--------
Cash at bank 17,261 (3,718) - 13,543
and in hand
Bank - - - -
overdraft -------- -------- ---------
17,261 (3,718) 13,543
--------
Debt due within (3,480) 275 - (3,205)
one year
Finance leases (5,094) 14,974 (14,234) (4,354)
(demonstrators)
Finance leases (468) 126 (80) (422)
(other) --------
15,375
-------- -------- --------- ---------
Total 8,219 11,657 (14,314) 5,562
======== ======== ========= =========
NOTES TO THE STATEMENT OF PRELIMINARY RESULTS
1. *Analysis of turnover
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Motor Retail Division 410,566 424,107
Motor Services Division 15,494 12,872
Other Businesses 3,945 4,102
--------- ---------
430,005 441,081
========= =========
2 Analysis of operating profit
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Motor Retail Division 11,879 11,332
Motor Services Division 1,034 836
Other Businesses 90 130
Central costs (2,104) (1,865)
--------- ---------
10,899 10,433
========= =========
3. During the year, the Group disposed of its Mercedes-Benz car and truck
businesses and its Vauxhall dealership in Dartford. The net profit
represents a net gain of #4,019,000 offset by attributable goodwill
originally written off to reserves of #3,721,000.
4. The Directors recommend a final dividend of 4.3p (2002, 4.0p) per share,
to be paid on 4 September 2003 to shareholders on the register at 8 August
2003. An interim dividend of 3.2p (2002, 3.0p) per share was paid during the
year, making a total for the year of 7.5p (2002, 7.0p).
5. The calculation of earnings per share for the year ended 28 February 2003
is based on the profit for the financial year of #9,542,000 (2002,
#7,048,000) and on 52,533,688 (2002, 53,621,696) ordinary shares, being the
weighted average number of shares in issue during the year. The number of
dilutive potential ordinary shares arising from share options, as calculated
in accordance with FRS 14: Earnings per Share, is 875,340 (2002, 321,541).
Therefore, the calculation of diluted earnings per share is based on the
profit for the financial year of #9,542,000 (2002, #7,048,000) and on
53,409,028 (2002, 53,943,237) ordinary shares. Earnings per share excluding
exceptional items have been calculated by subtracting the profit on disposal
of businesses of #298,000 and the profit on disposal of properties of
#1,746,000 from the profit for the financial year of #9,542,000 to give a
profit figure of #7,498,000 and using the weighted average number of shares
of 52,533,688.
6. *This preliminary results statement has been prepared on the basis of the
same accounting policies as those set out in the financial statements for
the year ended 28 February 2002.
7. This preliminary results statement was approved by the Board of Directors
on 29 April 2003. The above results for the year ended 28 February 2003 have
been abridged from the full Group accounts for that year, which received an
unqualified auditors' report and which will be delivered to the Registrar of
Companies shortly.
8. *The above results for the year ended 28 February 2002 have been abridged
from the full Group accounts for that year, which received an unqualified
auditors' report and which have been delivered to the Registrar of
Companies.
9. *The Annual Report and Financial Statements will be posted to shareholders as
soon as practicable. Further copies will be available from the company's
registered office at Craigmore House, Remenham Hill, Henley-on-Thames, Oxon
RG9 3EP.
This information is provided by RNS
The company news service from the London Stock Exchange
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