Save Group PLC - Final Results Part 1
April 07 2000 - 3:01AM
UK Regulatory
RNS Number:6791I
Save Group PLC
7 April 2000
PART I
SAVE GROUP PLC
Preliminary Results for the 52 weeks ended 23 December
1999
Save Group PLC ("Save"), the UK s largest independent
petrol retailer, which operates the Save brand of
petrol filling stations, announces its Preliminary
Results for the 52 weeks ended 23 December 1999.
Highlights
* Extensive restructuring of UK petrol retailing
industry largely completed
* 200% increase in the price of crude oil
* Turnover of #420.6m (1998: #422.8m)
* Profit before tax and exceptionals of #2.055m (1998:
#5.50m), in line with the trading update made in
November 1999
* Earnings per share 2.0p (1998: 5.0p)
* Group borrowings decreased by 2.52% to #52.6m (1998:
#53.96m )
* Save has 6.81% market share by company owned sites
Chairman, James Frost, commented:
"The immediate impact on current trading of the
restructuring of the UK petrol industry in the year
to date is that sales, profits and cash flow are all
ahead of last year, with profits in particular,
excluding Budget stock movements, up for each of the
13 trading weeks of the new trading year. We need to
be cautious, but we may for the first time since 1995
be able to look at this industry as one where profits
can grow significantly."
For further information please contact:
James Frost, Chairman, Save Group Plc 01296 436 661
John Murgatroyd, Finance Director,
Save Group Plc 01296 395 951
Charles Ryland/Catherine Miles,
Buchanan Communications 020 7 466 5000
Chairman's Statement
I present my Report, for the 52 weeks ended 23 December
1999, showing results that are in line with both the
Board's expectations, announced on 12 November 1999, and
market expectations amid a period of continued
unprecedented change in the oil industry worldwide.
Preliminary 1995 1996 1997 1998 1999
results
#'000 #'000 #'000 #'000 #'000
Turnover
excluding VAT 451,495 429,692 420,571 422,841 420,640
Profit before
exceptionals
and tax 15,114 10,370 9,008 5,503 2,055
Profit before
tax 11,114 10,370 7,321 4,620 1,907
Profit after
tax 8,502 12,096 9,056 4,756 1,907
Earnings per
share 10.2p 12.9p 9.7p 5.0p 2.0p
Dividend per
share 7.0p 7.1p 7.1p 3.3p -
-
1999 was the year that marked the climax to the
restructuring of the petrol retailing industry in the UK.
The key events marking this climax were three major
changes of ownership, a 200 per cent. increase in the
price of crude oil and an innovative sale and leaseback
by Shell of 180 petrol filling stations for a sum of #300
million. These events shaped the industry for 1999 and
have set the basis for the industry for 2000 and
thereafter.
The three major changes of ownership were the takeovers
of Asda, Fina and Elf, each of which produced long
successive periods during which the targets had good
reason to chase market share at the expense of profits.
1999 started with the end of Esso's 2p per litre off
campaign on 15 January and this was rapidly followed by
Asda's announcement that it was in negotiations firstly
with Kingfisher and then with Walmart. In April, Total
agreed to acquire Fina. The acquisition and integration
did not, however, start until after EU approval in the
summer. In turn this was quickly followed by the fight
between Total and Elf. Again, while shareholders agreed
in October, EU approval only came in February this year
and Total's control of the operations only occurred then.
Coupling these events with the rapidly escalating price
of crude oil meant that pump price rises did not keep up
and margins or volumes were squeezed for all players in
the industry as the following chart on industry margins
shows.
The number of players in the industry has contracted and
the following chart shows the emergence of, in football
terms, a Premier Division, a First division and a Third
Division with the supermarkets forming a substantial but
not overpowering (and possible weakening) force in the
middle.
Market Share by Company
Owned sites
Sites %
Total/Fina/Elf 945 15.72
Shell 880 14.64
Esso 878 14.61
BP 827 13.76
58.74
Texaco 511 8.50
Save 409 6.81
15.31
Tesco 326 5.42
Sainsbury 219 3.64
Safeway 175 2.91
Asda 141 2.35
Morrisons 73 1.21
15.54
Jet 192 3.19
Murco 100 1.66
Q8 95 1.58
Repsol 42 0.70
7.14
5813 96.72
Others 197 3.28
Total 6010 100.00
The Institute of Petroleum conducts an annual survey of
sites, which is produced in March of each year. As usual,
I have used those figures to assemble a picture of the
industry over the years. The following chart expands on
those figures.
Petrol retailing sites in the UK - movements
Year Small
rural
sites Total Super-
first on markets Private
Revised introd. previous Supplier inc.big indepen-
Total 1997 basis Owned five dents
1964 38500 38500 5435 33065
1985 21140 21140 6642 190 14308
1990 19465 19465 6490 357 12618
1995 16244 16244 5870 823 9551
1997 14824 871 13953 5383 934 7636
1998 13758 601 13157 5179 977 7001
1999 13716 867 12849 4997 1013 6839
Change
%
1999/
1998 -0.3 44.3 -2.3 -3.5 3.7 -2.3
Despite being the best available data, I would caution
use of these figures for the following reason.
The "small rural sites", first introduced in 1997, have
always been supplied by someone and therefore could be
duplicated in the independents' figure. In any event, the
numbers distort the whole picture because their total
market share is most unlikely to exceed 0.5% of total
volume compared with nearly 6.5% in site numbers. How
they can increase by more than 44% in one year when there
are numerous complaints of rural sites closing I do not
know. I think that for any meaningful comparison they
should be left out.
Apart from believing that more sites have closed than
have been shown, there is one figure to draw attention to
and that is the 3.5% closures under Company Owned sites.
You will see more closures as a result of the mergers and
therefore average volumes will continue to rise.
Total Retail Motor Fuel Sales in 1999 amounted to 28.65m
tonnes compared with 28.04m tonnes for 1998 an increase
of 2.2%. As the following chart shows this is a positive
result and there is no reason, given the economic
conditions currently prevailing, the fact that demand for
road fuel is inelastic and the ongoing increase in motor
vehicles, why this should not continue.
Average road fuel volumes per site
and total volume
Av.
Sales
Volume per
Number in site
of % tonnes % litres %
Year sites Decrease (m) Change (m) Increase
1990 19465 -1.3 26.7 2.3 1.82 3.8
1991 19247 -1.5 26.5 -0.6 1.83 0.6
1992 18549 -1.1 26.9 1.3 1.92 5.1
1993 17969 -3.6 27.0 0.5 1.99 3.7
1994 16971 -3.1 26.7 -1.1 2.09 4.7
1995 16244 -5.5 26.3 -1.6 2.15 2.8
1996 14748 -4.3 27.3 4.0 2.46 14.6
1997 13953 -9.2 28.0 2.6 2.65 7.9
1998 13157 -5.7 28.0 0.4 2.83 6.8
1999 12849 -2.3 28.7 2.2 2.96 4.6
10 year bil. per
movement Litres site
-34% 38 69%
As mentioned in the half year statement to members, as a
result of the conditions prevailing in 1999 as described
above, Save once again had to premium price for a
significant part of the year, particularly in the early
and middle months. This was necessary to protect its
position overall as thought best under the circumstances.
As a result, the overall sales volume for 1999 was 5.2
per cent below 1998 (compared with a 7.7 per cent
increase in 1998) and this has lead to the lower level of
profits which are being reported for 1999.
In view of these results and as the changes in the
industry have yet to fully work their way through, and
with the prospect of more change to come, your Board has
decided not to declare a dividend for 1999 but to review
the position in the light of circumstances when the
interim results are considered.
I am pleased to say that, from the closing weeks of last
year, margins in the market have generally been firmer
and this has enabled Save to be competitive on nearly all
sites while earning adequate gross margins. In the
current year the indications continue to suggest that the
restructuring is beginning to take effect, bearing in
mind that EU approval for the integration of Elf into
Total did not come through until February 2000. Sales
volumes for the first quarter were as follows: January
3%, February +0.4% and March +5% making for a cumulative
increase of 1.2% in the first 13 trading weeks. As the
benefits of the restructuring continue to come through I
would expect this sales growth to follow on, both this
year and in future years.
Two further matters of interest to members which we would
expect to impact positively on future trading:
1 We have started to change the gantry sign tops
from Save to Blue Chip, to better reflect that the
company's sales are higher quality sales than before
because they are being achieved at less discounted prices
than those prior to Price Watch in 1995.
2 We have agreed an advertising contract for poster
advertising on our forecourts and this will gradually
bring in increased revenue.
The group's balance sheet remains strong with borrowings
down by #1.35m to #52.6m. There is a continuing reduction
in the underlying figures and I would expect to report
further progress in the 53 weeks of this year ending 28
December 2000. At the above level, gearing is equal to
44.6% of net assets or 26.9% of fixed assets.
Finally, I want to refer to a new reporting standard FRS
15 which comes into operation from next year. We have
reviewed the impact of this on the Group with the
auditors and have concluded that, viewed as a Group, no
impairment has been incurred over the carrying value of
the Group's freehold and long leasehold petrol filling
stations and accordingly no provision will be required. I
can confirm to members that this is the way your Company
has been reporting in the past and will continue to
report in the future.
Prospects
There are two matters I want to refer to before
summarising our immediate prospects:
1 I am constantly asked why Save has not, at this
stage, featured in any restructuring. I cannot of course
comment. I believe, however, that the restructuring,
until recently, has focused on reduction of site numbers
and international consolidation. As a result, it has only
just started to deal with isolated national
consolidation. If the Texaco report referred to below is
true, this is now starting. In addition, I and my Board
believe that there may be a new market place for sites on
sale and leaseback deals such as the one Shell announced
on the 24 December 1999. This deal has created new
securitisation opportunities that simply were not there
before.
2 Internet shopping this has started and it does
seem to me that it is going to take off in a very big way
over the next year or two. The competition will force the
supermarkets to deliver the weekly shop free of charge
and there will be no need to even visit the store. This
could provide a very big switch for motorists to buy
their petrol away from the supermarket and back to the
petrol filling station. Similarly, that forgotten item is
increasingly likely to be picked up from the petrol
station shop rather than go all the way back to a
supermarket. Petrol stations could become even more in
demand.
So far as the immediate future is concerned, I am pleased
to say that in my speech to the Institute of Petroleum
European Conference on the 4 June 1996 I indicated that
the restructuring of the UK downstream market would bring
about fewer suppliers, fewer sites, higher prices,
profits and site values.
The table above shows that there are fewer sites selling
more petrol on average. The table below shows the
reduction in supplier numbers since 1995.
In my half year statement to members I listed the changes
that had already taken place since 1995 and repeat those
here:
Major refining suppliers 1995 2000
in the UK Esso Esso
Shell Shell
BP BP
Mobil
Total Total
Elf
Fina
Texaco Texaco
Conoco Conoco?
Gulf
Burmah/
ICI
In the Sunday Times, January 16 issue, there was an
article under the headline "Texaco poised to snap up
petrol stations" and which went on to refer to Conoco.
This, of course, may or may not be true. For reasons
mentioned earlier, if true, this might have a short term
impact on margins as market share became the priority but
would end up by reducing the market place to just 5 major
players. This should, as mentioned above, bring about
even fewer sites and enable higher prices, profits and
site values to continue to emerge and should therefore be
viewed as positive.
The immediate impact on current trading of the
restructuring in the year to date is that sales, profits
and cash flow are all ahead of last year, with profits in
particular, excluding Budget stock movements, up for each
of the 13 trading weeks of the new trading year. We need
to be cautious, but we may for the first time since 1995
be able to look at this industry as one where profits can
grow significantly.
R James Frost
Chairman
7 April 2000
(MORE TO FOLLOW)
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