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TIDMPDG
RNS Number : 8309M
Pendragon PLC
23 August 2011
FOR IMMEDIATE RELEASE 23 August 2011
INTERIM RESULTS TO 30 JUNE 2011
Pendragon PLC, the UK's leading automotive retailer group, today reports interim results for the six months to 30 June 2011.
Financial Highlights
Unaudited - 6 months
to 30 June UNDERLYING TOTAL
GBPm 2011 2010 2011 2010
---------------------- -------- -------- -------- --------
Revenue 1,773.2 1,817.4 1,773.2 1,833.0
---------------------- -------- -------- -------- --------
Operating profit 42.5 40.1 42.5 39.0
---------------------- -------- -------- -------- --------
Profit before tax 17.7 15.7 18.2 13.3
---------------------- -------- -------- -------- --------
Earnings per share 2.0p 1.6p 2.0p 1.3p
---------------------- -------- -------- -------- --------
Operating margin 2.4% 2.2% 2.4% 2.1%
---------------------- -------- -------- -------- --------
Net borrowings - - 294.9 346.7
---------------------- -------- -------- -------- --------
Executive Summary
-- Underlying profit before tax of GBP17.7 million, an increase of 12.7% from GBP15.7 million in 2010.
-- Underlying operating margin of 2.4%, an increase of 20 basis points from 2.2% in 2010.
-- Net borrowings of GBP294.9 million, a reduction of GBP51.8 million compared to 30 June 2010.
-- Successful recapitalisation of the Group through a GBP75.2 million gross Rights Issue subsequent to 30 June 2011.
-- Revised facilities extend the maturity profile of the Group's borrowing facilities to 30 June 2014.
-- Current pension deficit will be eliminated via a property-backed transaction that reduces cash outflow by an estimated GBP46 million to December 2014.
Trevor Finn, Chief Executive, commented:
"The first half of 2011 has been an exciting period for the Group. Pendragon has successfully completed the raising of GBP75 million from a Rights Issue, extended the maturity of its banking facilities on better terms and implemented a Pension Deficit Reduction Plan. The recapitalisation of the Group and the revised banking facilities provide greater strength and flexibility for the future. Pendragon has continued to show strong operational and financial performance. The success of our operational initiatives has again helped the Group's performance in its aftersales and used businesses despite a challenging macro-economic environment. Overall, Pendragon continues to perform in line with the Board's expectations for the full year."
Enquiries:
Pendragon PLC Trevor Finn, Chief Executive Tel: 01623 725114
Tim Holden, Finance Director
Finsbury Gordon Simpson Tel: 0207 2513801
Philip Walters
CHIEF EXECUTIVE'S OPERATIONAL REVIEW
Introduction and markets
Pendragon is the largest independent operator of franchised motor vehicle dealerships in the UK. The Group operates 237 franchise points, of which 9 are in California. Pendragon sells and services a broad range of new and used motor cars and commercial vehicles and has a substantial presence in the UK vehicle leasing, wholesale parts and dealership management system markets.
Pendragon's motor car business operates under the brands of Stratstone (for prestige vehicles) and Evans Halshaw (for the volume brands). Chatfields is Pendragon's commercial van and truck business, selling and servicing vehicles within a range of commercial vehicle brands.
The improved financial results for the first six months to 30 June 2011 reflect the Group's continued success of key operational initiatives in the aftersales and used car activities, strong cost control and operating efficiencies and a well-managed balance sheet. Underlying profit before tax has increased by 12.7% in the period to GBP17.7 million with a strong recovery in the Evans Halshaw division and continued outperformance in the California business. The performance of the Stratstone division was below 2010's strong first half. However, new product roll-outs of Range Rover Evoque and Jaguar XF in the second half of 2011 are expected to have a positive impact on the second half performance within the Stratstone division.
Aftersales remain a key area of focus, being the most profitable activity for the Group. The performance of the aftersales department has been impacted by a reduction in warranty work and the less than 3 year old car parc, following a reduction in new car registrations since 2008. However, despite these conditions, Pendragon's aftersales gross profit remained broadly flat, down just 0.9% on a like for like basis.
The used vehicle market represents a significant opportunity for growth for Pendragon, with a national used car market of around 6.9 million units currently. The UK used car market has shown further signs of recovery during the first quarter of 2011. According to the latest available data from Experian plc, sales in the used car market increased year on year by 3.8% during the first quarter of 2011. The Group continues to significantly outperform the market with like for like used car volumes rising by 13.2% compared to the prior year. Whilst used margins have fallen slightly, prices in the UK used car market are showing the normal seasonal trends. Overall the combined effect of volume and margin has resulted in used retail gross profit increasing by 4.1% on a like for like basis.
During the period to June 2011 total UK new car registrations fell by 7.1%. Retail car registrations decreased by 18.1% with fleet and business registrations increased by 3.1%. However, excluding the additional volume generated by the scrappage scheme in 2010, retail registrations increased by 2.4%. For the brands we represent, retail registrations excluding the scrappage scheme decreased by 2.9%. Our new retail sales volumes have outperformed the market increasing by 0.7% on a like for like basis excluding scrappage.
Overall the business has achieved an underlying operating profit of GBP42.5 million (2010: GBP40.1 million), underlying profit before tax of GBP17.7 million (2010: GBP15.7 million) and a profit before tax of GBP18.2 million (2010: GBP13.3 million). We are reporting underlying basic earnings per share of 2.0pence for the period compared to 1.6 pence in 2010. The Group is pleased to report that as a result of improved cash generation it has reduced net borrowings by GBP51.8 million since June 2010 to GBP294.9 million.
Results continue to improve and subsequent to 30 June 2011 the recapitalisation will be a key step forward for the Group with a lower debt profile. The recapitalisation of the Group has been achieved via a GBP75.2 million gross Rights Issue, which has led to a lower debt facility of GBP360 million secured to 30 June 2014 on more favourable terms. Furthermore the Group has a new Pension Deficit Reduction Plan that will enable the current pension deficit to be eliminated through a property-backed transaction that reduces cash outflow by GBP46 million over the period to December 2014.
Subsequent to 30 June 2011 the net proceeds of the rights issue have been received, the Pension Deficit Reduction Plan has been implemented and the improved terms of the revised debt facilities have become effective.
Results
The results for the six months ended 30 June are summarised as follows:
GBPm 2011 2010
------------------------------------------ -------- --------
Revenue 1,773.2 1,833.0
------------------------------------------ -------- --------
Underlying operating profit 42.5 40.1
------------------------------------------ -------- --------
Non-underlying operating expense - (1.4)
------------------------------------------ -------- --------
Operating profit before other income 42.5 38.7
------------------------------------------ -------- --------
Other income - (losses) / gains on sales
of businesses and property (0.2) 0.3
------------------------------------------ -------- --------
Operating profit 42.3 39.0
------------------------------------------ -------- --------
Net finance costs (24.1) (25.7)
------------------------------------------ -------- --------
Profit before tax 18.2 13.3
------------------------------------------ -------- --------
Tax (4.9) (4.9)
------------------------------------------ -------- --------
Profit after tax 13.3 8.4
------------------------------------------ -------- --------
Underlying profit before tax 17.7 15.7
------------------------------------------ -------- --------
Earnings per share - basic 2.0p 1.3p
------------------------------------------ -------- --------
Earnings per share - underlying 2.0p 1.6p
------------------------------------------ -------- --------
Dividend per share - -
------------------------------------------ -------- --------
Revenue is down GBP59.8 million for the six months to 30 June 2011 compared to 2010. Group like for like turnover has increased by GBP3.5 million reflecting improvements in used volume performance. The Group continues to move away from lower margin fleet activity. Of the total GBP3.5 million increase in like for like turnover, used retail turnover is up 14.5% on a like for like basis with new turnover down by 8.6% on a like for like basis due mainly to reduced fleet activity.
Underlying operating profit was GBP42.5 million compared to GBP40.1 million in the first half of last year. The underlying operating margin was 2.4% (2010: 2.2%). The improvement in operating margin of 8.6% is due to further improvements in our aftersales gross margin and operating cost leverage. Aftersales margin improvements ensured that despite reduced turnover as a result of the car parc decline and reduced warranty work, overall aftersales gross profit was only 0.9% behind the prior year on a like for like basis. Aftersales gross margin has increased from 57.3% to 59.9% on a like for like basis over the period. Used retail gross profit has increased by 4.1% on a like for like basis over the prior year due to significant outperformance of used volume. In the new department, gross profit has decreased by 7.2% on a like for like basis.
Non-underlying items relate to property disposals and pension costs. In the prior year we recognised closure costs of GBP1.4 million, whereas in 2011 any closure costs are shown within the underlying results for the business. Property and business losses on the sale of property were GBP(0.2) million in 2011 (2010: GBP0.3 million profit). Additionally, within the non-underlying results, income relating to net financing on pension obligations was GBP0.7 million in 2011 (2010: GBP(1.3) million cost).
Underlying financing costs were GBP24.8 million which compares to GBP24.4 million in the prior year. The first six months do not reflect any of the benefit from the revised facility level or terms which became effective on 22 August 2011.
Operational review
The Group is divided operationally into eight distinct trading segments. The core vehicle retail businesses consist of two segments, Stratstone and Evans Halshaw, together with our Chatfields truck business and California. Support businesses consist of the following four segments: Leasing, Quickco, Pinewood and Central.
Underlying revenue and underlying operating profit by segment for the six months ended 30 June are shown below:
GBPm 2011 2010
Underlying
Underlying operating
Revenue operating profit Revenue profit
------------------- -------- ------------------ -------- -----------------
Stratstone 634.8 15.5 672.4 17.1
Evans Halshaw 974.6 14.4 984.0 12.1
------------------- -------- ------------------ -------- -----------------
Chatfields 36.1 1.1 40.5 1.1
California 83.5 2.5 79.7 2.1
------------------- -------- ------------------ -------- -----------------
Support businesses 44.2 9.0 40.8 7.7
------------------- -------- ------------------ -------- -----------------
Underlying revenue, gross profit and gross margin by segment for the six months ended 30 June are shown below:
2011 2010
Gross Gross Gross
Revenue profit margin Revenue profit Gross
GBPm GBPm % GBPm GBPm margin %
------------ -------- --------- --------- -------- ---------- ----------
Stratstone 634.8 81.9 12.9 672.4 93.9 14.0
Evans
Halshaw 974.6 123.9 12.7 984.0 123.3 12.5
------------ -------- --------- --------- -------- ---------- ----------
Chatfields 36.1 6.8 18.8 40.5 7.3 18.0
California 83.5 14.1 16.9 79.7 14.2 17.8
------------ -------- --------- --------- -------- ---------- ----------
Support
businesses 44.2 15.5 35.0 40.8 14.5 35.5
------------ -------- --------- --------- -------- ---------- ----------
The underlying motor retail business is analysed by department as follows:
2011 2010
Gross Gross Gross Gross
Revenue profit margin Revenue profit margin
GBPm GBPm % GBPm GBPm %
----------------- -------- -------- -------- -------- -------- ---------
Aftersales 170.8 102.2 59.8 188.0 107.2 57.0
Used 679.5 65.1 9.6 608.6 63.9 10.5
----------------- -------- -------- -------- -------- -------- ---------
New 764.7 59.4 7.8 864.9 66.6 7.7
----------------- -------- -------- -------- -------- -------- ---------
Trade/wholesale 113.8 (0.1) (0.1%) 115.1 1.0 0.9
----------------- -------- -------- -------- -------- -------- ---------
Motor retail business
Pendragon's motor car business operate under the brands of Stratstone (for prestige vehicles) and Evans Halshaw (for the volume brands). Chatfields is Pendragon's commercial van and truck business, selling and servicing vehicles within a range of commercial vehicle brands. The results of the motor retail business are summarised in the following sections by each segment:
Stratstone is the UK's leading prestige motor car retailer with 95 franchise points. Stratstone holds franchises to retail and service Aston Martin, BMW, Ferrari, Honda, Jaguar, Land Rover, Lotus, Maserati, Mercedes-Benz, Mini, Porsche, SAAB and Smart as well as four motorcycle franchises. The results for the six months ended 30 June are as follows:
Gross
Underlying Underlying Total profit
Gross Gross operating operating units per
Revenue profit margin profit margin sold unit
---------- -------- ------- ------- ----------- ----------- ------ -------
GBPm GBPm % GBPm % '000 GBP
---------- -------- ------- ------- ----------- ----------- ------ -------
Existing 630.3 81.8 13.0 16.1 2.6 21.9 2,132
---------- -------- ------- ------- ----------- ----------- ------ -------
Disposed 4.5 0.1 3.2 (0.6) (13.9) 0.3 (361)
---------- -------- ------- ------- ----------- ----------- ------ -------
H1 2011 634.8 81.9 12.9 15.5 2.4 22.2 2,107
---------- -------- ------- ------- ----------- ----------- ------ -------
H1 2010 672.4 93.9 14.0 17.1 2.5 24.8 2,158
---------- -------- ------- ------- ----------- ----------- ------ -------
Revenues were up by 2.7% year on year on a like for like basis. Like for like aftersales gross margins are strong at 60.1%, in line with the prior year. The aftersales sector gross profit decreased on a like for like basis by 5.5%, with retail activity flat but warranty work falling significantly by 15.6%. Used volume increased by 4.0% on a like for like basis in Stratstone, with used retail gross profit falling by 4.8%.
For the brands that Stratstone represents, total new vehicles registrations nationally were up by 1.3% on the prior year. However retail registrations decreased by 12.9% whereas fleet activity grew by 19.4%. Underlying retail registrations excluding scrappage decreased by 5.7% for the brands we represent, whereas Stratstone like for like retail registrations decreased by 6.5%. Overall new gross profit only decreased by 2.6% on a like for like basis.
Evans Halshaw is the UK's leading volume motor car retailer, with 125 franchise points. Evans Halshaw holds franchises to sell and service Chevrolet, Citroen, Ford, Hyundai, Kia, Nissan, Peugeot, Renault and Vauxhall. The results for the six months ended 30 June are as follows:
Gross
Underlying Underlying Total profit
Gross Gross operating operating units per
Revenue profit margin profit margin sold unit
---------- -------- ------- ------- ----------- ----------- ------ -------
GBPm GBPm % GBPm % '000 GBP
---------- -------- ------- ------- ----------- ----------- ------ -------
Existing 956.2 121.9 13.3 14.6 1.6 88.4 805
---------- -------- ------- ------- ----------- ----------- ------ -------
Disposed 18.4 2.0 10.9 (0.2) (1.1) 1.8 672
---------- -------- ------- ------- ----------- ----------- ------ -------
H1 2011 974.6 123.9 12.7 14.4 1.5 90.2 764
---------- -------- ------- ------- ----------- ----------- ------ -------
H1 2010 984.0 123.3 12.5 12.1 1.2 88.2 785
---------- -------- ------- ------- ----------- ----------- ------ -------
Total revenues fell by 1.8% on a like for like basis over the prior year largely driven by fleet activity reductions. Like for like aftersales gross profit increased by 2.4% with aftersales margin at 64.4% which is an increase from 58.6% in the prior year. Used retail gross profit increased by 9.0% on a like for like basis with used volume increasing by a significant 15.9% year on year.
The new car market for the brands we represent decreased by 10.2% with retail volume down 24.0% and fleet volume flat. Excluding scrappage, underlying like for like retail volume decreased by 1.4%, whereas our retail sales volume on a like for like basis increased by 2.6%. Overall new gross profits have declined by 12.7% year on year, mainly due to the inclusion of scrappage in the prior year. Underlying operating profits have increased by GBP2.3 million which reflects our continued focus on managing our cost base.
Chatfields is Pendragon's commercial vans and trucks retailer with eight franchise points. Chatfields holds franchises to retail and/or service DAF, LDV, Nissan and Renault. Revenues were down 8.6% year on year on a like for like basis largely due to reductions in new retail volume. Importantly, gross profit on a like for like basis in aftersales increased by 1.6% with aftersales margins compared to the prior year at just over 38%. Encouragingly used volume increased by 31.3% as an early indicator of recovery within the sector. However, new vehicle sales in truck and commercial vehicle sector is behind the prior year by 14.9% reflecting current economic conditions.
California consists of nine franchise points in Southern California which operate Aston Martin, Jaguar and Land Rover brands. Turnover increased by 4.7% over the 2010 period largely owing to new vehicle sales resulting from strong Land Rover and Jaguar performance. New unit volume has increased by 14.8% and used volume has increased by 4.4% in the period to 30 June 2011 versus the prior year.
Support businesses
Our Support businesses provide a broad range of services both to the Pendragon Group and to external customers. The services are provided by a number of specialist businesses which consist of contract hire and leasing, dealership management systems and wholesale parts distribution.
The results for the six months ended 30 June are summarised as follows:
Underlying Underlying
Gross operating operating
Revenue profit Gross margin profit margin
GBPm GBPm % GBPm %
--------- -------- -------- ------------- ----------- -----------
H1 2011 44.2 15.5 35.0 9.0 20.3
H1 2010 40.8 14.5 35.5 7.7 19.0
--------- -------- -------- ------------- ----------- -----------
The contract hire and leasing business generated an operating profit of GBP3.7 million from GBP2.9 million in the prior period. The fleet size has reduced to 10,000 at 30 June 2011 from 11,800 at 30 June 2010.
Pinewood Technologies, one of three main dealer management systems suppliers in the UK, continues to grow year on year. Operating profit for the period is up at GBP4.4 million versus the prior year of GBP4.2 million.
Quickco, our independent genuine parts wholesale business, improved with operating profit increasing to GBP0.9m from GBP0.6m in the prior year.
Balance sheet and cash flow
During the period, the Group has undertaken the refinancing of the Group which has three elements. Firstly, the Group has completed a Rights Issue that has raised gross proceeds of GBP75.2 million (approximately GBP70.8 million net of expenses). The Rights Issue was on a 9 for 8 ratio at an issue price of 10 pence per share - representing a 35.6 per cent discount to the theoretical ex-right price based on the closing price of the existing shares of 21.8 pence on 13 July 2011 (the day before the Rights Issue announcement). Secondly, the Group has secured revised debt facilities of GBP360 million on more favourable terms with a maturity date of 30 June 2014. The Group's expectation is that the costs associated with setting up the revised facility will be treated as a non-underlying item in the second half of 2011. Thirdly, the Group has implemented a new Pension Deficit Reduction Plan that will unlock aggregate cash flow savings of an estimated GBP46 million in the period to December 2014. Under the Pensions Deficit Reduction Plan the Group will provide the Pension schemes with an investment which will generate a predictable property asset-backed income for the schemes. The new arrangements will enable the Group to benefit from lower annual cash contributions than the present arrangements.
The proceeds of the Rights Issue will allow the Group to improve its level of financial indebtedness towards the previously stated long-term Debt:Underlying EBITDA ratio target of 2:1, which the Directors believe will constitute an immediate and long-term benefit to Pendragon. As a result of the acceleration in the achievement of this ratio, the Group has set a new Debt:Underlying EBITDA target of below 1.5:1. It is the Board's current intention for the Company to resume paying dividends in relation to its 2012 financial year onwards, subject to a review of the Group's position at that time.
The Group is also pleased to report a significant reduction in net borrowings over the prior year. Net borrowings were GBP294.9 million at 30 June 2011 which is a GBP51.8 million reduction versus the 30 June 2010 and a reduction of GBP30.6 million on the 31 December 2010. The Group's balance sheet remains a key strategic priority and area of focus.
Operating cash inflow during the period was GBP87.4 million, which compares with GBP2.9 million in the prior year. The operating cash flow includes an improvement in working capital of GBP26.3 million (2010: GBP57.6 million adverse outflow). This improved performance has largely been achieved by an improvement in vehicle creditors during the period.
Net replacement capital expenditure for the six months was GBP31.9 million (2010: GBP11.8 million). This includes refurbishments, movements in loan vehicles provided to aftersales service customers and in the contract hire fleet, the latter accounting for GBP13.9m of this net investment as a result of an increase in fleet additions during the first half of 2011 (2010: GBP2.3 million of net proceeds from fleet reduction). In addition net proceeds from property disposals were GBP1.0 million (2010: GBP1.7 million) and business disposals GBP0.9 million (2010: GBP0.1 million).
The Group continues to operate comfortably within the existing facility covenants. A scheduled repayment of term loan amounting to GBP20.0 million was made in June 2011.
Risks and uncertainties
We set out in our 2010 annual report the risk factors we believed could cause our actual future Group results to differ materially from expected results. The risks identified were: business conditions and adverse economic conditions, the level of new vehicle production, vehicle manufacturer dependencies, changes to manufacturers' incentive programmes, used vehicle prices, franchise agreements, liquidity and financing, regulatory compliance, competition, reliance on certain members of management staff, failure of information systems, reliance on the use of significant estimates and legislative changes in relation to the distribution and sales of vehicles. These were set out on pages 16-17 and page 25 of the 2010 annual report. The Board has recently reviewed the risk factors and confirms that they should remain valid for the rest of the year. For the remainder of the year the Board considers the main areas of risk and uncertainty that could impact profitability to be the general economy, used car prices and consumer demand.
Current trading and prospects
The recapitalisation marks a turning point for the Group with the securing of borrowing facilities to 30 June 2014 on better terms and the completion of a GBP75 million Rights Issue. The Group's cashflow will be further enhanced by GBP46 million to December 2014 by a reduction in contributions to the Group's pension schemes. Pendragon's encouraging performance in 2010 has continued into 2011, despite a challenging economic environment. The Group has outperformed the market across its used car and new car businesses and demonstrated continuing resilience in its aftersales business. Underlying profit before tax for the six months to 30 June 2011 was GBP17.7 million, GBP2.0 million ahead of the same period in the prior year, reflecting the benefits of further increases in used vehicle volumes, a strategy of focusing on higher margin business at the expense of, in particular, low margin fleet activity, and the positive impact of operational gearing as management continues to focus on controlling the Group's cost base. Whilst recently the markets and global economic conditions have been turbulent, overall Pendragon is performing in line with the Board's expectations for the full year.
TREVOR FINN
Chief Executive
23 August 2011
Condensed Consolidated Income Statement
Interim
Results For
the six
months
ended 30
June 2011
6 Months to
6 Months to 30.06.11 30.06.10 Year to 31.12.10
Underlying Non-underlying Total Underlying Total Underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Revenue 1,773.2 - 1,773.2 1,817.4 1,833.0 3,534.3 3,575.0
Cost of
sales (1,531.0) - (1,531.0) (1,564.2) (1,577.9) (3,037.8) (3,075.6)
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Gross
profit 242.2 - 242.2 253.2 255.1 496.5 499.4
Operating
expenses (199.7) - (199.7) (213.1) (216.4) (421.4) (436.5)
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Operating
profit
before
other
income 42.5 - 42.5 40.1 38.7 75.1 62.9
Other
income -
(losses) /
gains on
sale of
businesses
and
property - (0.2) (0.2) - 0.3 - 0.3
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Operating
profit 42.5 (0.2) 42.3 40.1 39.0 75.1 63.2
Finance
expense
(note 8) (25.1) (10.3) (35.4) (24.8) (35.4) (50.8) (72.0)
Finance
income
(note 9) 0.3 11.0 11.3 0.4 9.7 0.9 19.8
------------ ---------- ----------- ---------- ----------- ----------
Net finance
costs (24.8) 0.7 (24.1) (24.4) (25.7) (49.9) (52.2)
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Profit
before
taxation 17.7 0.5 18.2 15.7 13.3 25.2 11.0
Income tax
expense
(note 10) (4.7) (0.2) (4.9) (5.6) (4.9) (9.1) (5.4)
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Profit for
the
period 13.0 0.3 13.3 10.1 8.4 16.1 5.6
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
Earnings
per share
Basic 2.0p 1.3p 0.9p
earnings
per share
(note 12)
Diluted 1.9p 1.2p 0.9p
earnings
per share
(note 12)
Non GAAP
measure
Underlying 2.0p 1.6p 2.5p
basic
earnings
per share
(note 12)
Underlying 1.9p 1.5p 2.4p
diluted
earnings
per share
(note 12)
------------ ----------- --------------- ---------- ----------- ---------- ----------- ----------
All amounts
are
unaudited
Condensed Consolidated Statement of Comprehensive Income
6 Months 6 Months 12 Months
to to to
30.06.11 30.06.10 31.12.10
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ----------
Profit for the period 13.3 8.4 5.6
------------------------------------------ ---------- ---------- ----------
Other comprehensive income:
Foreign currency translation differences
of foreign operations (0.2) 0.3 0.1
Defined benefit plan actuarial gains and
losses 21.8 (3.8) 19.9
Income tax relating to defined benefit
plan actuarial gains and losses (5.7) 1.1 (5.6)
Adjustment in respect of minimum funding
requirement on defined benefit plans (24.4) (8.3) (21.3)
Income tax relating to adjustment in
respect of minimum funding requirement
on defined benefit plans 6.4 2.3 6.0
------------------------------------------ ---------- ---------- ----------
Other comprehensive income for the
period, net of tax (2.1) (8.4) (0.9)
------------------------------------------ ---------- ---------- ----------
Total comprehensive income for the period 11.2 - 4.7
------------------------------------------ ---------- ---------- ----------
Statement of Changes in Equity
Share Share Other Translation Accumulated
capital premium reserves differences profit Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------- --------- ------------ ------------ ------
Balance at 1
January 2010 33.1 56.8 15.1 (0.6) 1.5 105.9
Total
comprehensive
income for
2010
Profit for the
period - - - - 8.4 8.4
Other
comprehensive
income for
the period,
net of tax - - - 0.3 (8.7) (8.4)
--------------- -------- -------- --------- ------------ ------------ ------
Total
comprehensive
income for
the period - - - 0.3 (0.3) -
Issue of
ordinary
shares 0.1 - - - (0.1) -
Share based
payments - - - - 0.7 0.7
--------------- -------- -------- --------- ------------ ------------ ------
Balance at 30
June 2010 33.2 56.8 15.1 (0.3) 1.8 106.6
--------------- -------- -------- --------- ------------ ------------ ------
Balance at 1
January 2011 33.4 56.8 15.1 (0.5) 6.4 111.2
Total
comprehensive
income for
2011
Profit for the
period - - - - 13.3 13.3
Other
comprehensive
income for
the period,
net of tax - - - (0.2) (1.9) (2.1)
--------------- -------- -------- --------- ------------ ------------ ------
Total
comprehensive
income for
the period - - - (0.2) 11.4 11.2
Share based
payments - - - - 0.4 0.4
--------------- -------- -------- --------- ------------ ------------ ------
Balance at 30
June 2011 33.4 56.8 15.1 (0.7) 18.2 122.8
--------------- -------- -------- --------- ------------ ------------ ------
Condensed Consolidated Balance Sheet
30.06.11 30.06.10 31.12.10
GBPm GBPm GBPm
------------------- ---------- ---------- ----------
Non-current assets
Property, plant and
equipment 292.6 300.0 284.5
Goodwill 367.7 371.4 367.7
Other intangible
assets 3.7 3.3 3.5
Derivative
financial
instruments 11.7 33.1 27.0
Deferred tax assets - 1.9 0.1
-------------------- ---------- ---------- ----------
Total non-current
assets 675.7 709.7 682.8
-------------------- ---------- ---------- ----------
Current assets
Inventories 558.5 518.1 492.8
Trade and other
receivables 118.9 131.9 110.2
Derivative
financial
instruments 10.4 - -
Cash and cash
equivalents 95.4 63.7 91.2
Non-current assets
classified as held
for sale 28.5 25.1 25.1
-------------------- ---------- ---------- ----------
Total current
assets 811.7 738.8 719.3
-------------------- ---------- ---------- ----------
Total assets 1,487.4 1,448.5 1,402.1
-------------------- ---------- ---------- ----------
Current
Current liabilities liabilities
Interest bearing
loans and
borrowings (347.5) (67.0) (67.4)
Trade and other
payables (825.9) (741.2) (714.4)
Deferred income (0.1) - (0.1)
Current tax payable (24.7) (24.2) (25.0)
Provisions (10.2) (17.3) (10.9)
Total current
liabilities (1,208.4) (849.7) (817.8)
-------------------- ---------- ---------- ----------
Non-current
liabilities
Interest bearing
loans and
borrowings (64.9) (376.5) (376.3)
Deferred income (18.9) (19.8) (18.9)
Deferred tax
liabilities (3.2) - -
Retirement benefit
obligations (62.1) (88.9) (69.7)
Provisions (7.1) (7.0) (8.2)
-------------------- ---------- ---------- ----------
Total non-current
liabilities (156.2) (492.2) (473.1)
-------------------- ---------- ---------- ----------
Total liabilities (1,364.6) (1,341.9) (1,290.9)
-------------------- ---------- ---------- ----------
Net assets 122.8 106.6 111.2
-------------------- ---------- ---------- ----------
Capital and
reserves
Called up share
capital 33.4 33.2 33.4
Share premium
account 56.8 56.8 56.8
Capital redemption
reserve 2.5 2.5 2.5
Other reserves 12.6 12.6 12.6
Translation reserve (0.7) (0.3) (0.5)
Retained earnings 18.2 1.8 6.4
-------------------- ---------- ---------- ----------
Total equity
attributable to
equity
shareholders of
the Company 122.8 106.6 111.2
-------------------- ---------- ---------- ----------
All amounts are
unaudited
Condensed Consolidated Cash Flow Statement
6 Months 6 Months 12 Months
to to to
30.06.11 30.06.10 31.12.10
GBPm GBPm GBPm
--------------------------------------- ---------- ---------- ----------
Cash flows from operating activities
Profit for the period 13.3 8.4 5.6
Adjustment for net financing expense 24.1 25.7 52.2
Adjustment for taxation 4.9 4.9 5.4
---------------------------------------- ---------- ---------- ----------
42.3 39.0 63.2
Loss / (profit) on sale of businesses
and property 0.2 (0.3) (0.3)
Depreciation and amortisation 18.2 21.1 40.0
Share based payments 0.4 0.7 0.6
Impairment of assets held for sale - - 0.9
Decrease / (increase) in working
capital 26.3 (57.6) (59.6)
---------------------------------------- ---------- ---------- ----------
Cash generated from operations 87.4 2.9 44.8
Interest paid (22.8) (21.2) (37.8)
Interest received 0.3 0.3 0.9
Taxation paid (1.2) (0.7) (1.4)
---------------------------------------- ---------- ---------- ----------
Net cash from / (used in) operating
activities 63.7 (18.7) 6.5
---------------------------------------- ---------- ---------- ----------
Cash flows from investing activities
Proceeds from sale of businesses 0.9 0.1 4.9
Purchase of property, plant and
equipment (60.2) (46.1) (99.3)
Proceeds from sale of property, plant
and equipment 29.3 36.0 83.6
Net cash used in investing activities (30.0) (10.0) (10.8)
---------------------------------------- ---------- ---------- ----------
Cash flows from financing activities
Payment of capital element of finance
lease rentals (0.5) (1.2) (2.3)
Repayment of bank loans (30.0) (20.0) (40.0)
Proceeds from bank loans - 25.0 50.0
Net cash (used in) / from financing
activities (30.5) 3.8 7.7
Effects of exchange rate changes on
cash held 1.0 1.8 1.0
---------------------------------------- ---------- ---------- ----------
Net increase / (decrease) in cash and
cash equivalents 4.2 (23.1) 4.4
Opening cash and cash equivalents 91.2 86.8 86.8
---------------------------------------- ---------- ---------- ----------
Closing cash and cash equivalents (note
15) 95.4 63.7 91.2
---------------------------------------- ---------- ---------- ----------
Notes
1 Basis of preparation
Pendragon PLC is a company domiciled in the United Kingdom. The
condensed consolidated financial interim financial statements of the
Company as at and for the six months ended 30 June 2011 comprise the
Company and its subsidiaries (together referred to as the 'Group') and
the Group's interest in jointly controlled entities.
The directors consider that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the interim
financial statements.
The condensed set of financial statements for the six months ended
30 June 2011 are unaudited but have been reviewed by the auditors.
The independent review report is set out below.
2 Statement of compliance
These condensed consolidated interim financial statements have been
prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' as adopted by the European Union. They do
not include all the information required for full annual financial
statements, and should be read in conjunction with the consolidated
financial statements of the Group as at and for the year ended 31
December 2010, which are prepared in accordance with International
Financial Reporting Standards as adopted by the EU.
These condensed consolidated interim financial statements were approved
by the board of directors on 23 August 2011.
3 Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial
Services Authority, the condensed set of financial statements has been
prepared applying the accounting policies and presentation that were
applied in the preparation of the Company's published consolidated
financial statements for the year ended 31 December 2010.
Adoption of new and revised standards
The following standards and interpretations are applicable to the Group
and have been adopted in 2011 as they are mandatory for the year ended
31 December 2011, however, the adoption of these standard has had no
significant impact.
-- Amendments to IAS 32 'Classification of Rights Issues' - requires
that rights, options or warrants to acquire a fixed number of the
entity's own equity instruments for a fixed amount of any currency are
equity instruments if the entity offers the rights options or warrants
pro rata to all of its existing owners of the same class of its own
non-derivative equity instruments.
-- IFRIC 19 'Extinguishing Financial Liabilities with Equity
Instruments' - deals with how entities should measure equity instruments
issued in a debt for equity swap. It addresses the accounting for such a
transaction by the debtor only.
-- IAS 24 'Related Party Disclosures (revised 2009)' - The changes
introduced by IAS 24 (2009) relate mainly to the definition of a related
party.
-- Amendments to IFRIC 14 'Prepayments of a Minimum Funding Requirement'
- The amendment to IFRIC 14 removes unintended consequences arising from
the treatment of prepayments when there is a minimum funding requirement
(MFR). The amendment results in prepayments of contributions in certain
circumstances being recognised as an asset rather than an expense.
There are no other new standards, amendments to standards or
interpretations mandatory for the first time for the year ending 31
December 2011.
4 Estimates
The preparation of interim financial statements requires management to
make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
Except as described below, in preparing these condensed consolidated
interim financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that applied to
the consolidated financial statements for the year ended 31 December
2010.
During the six months ended 30 June 2011 management reassessed its
estimates and assumptions in respect of employee post retirement benefit
obligations. The obligations under these plans are recognised in the
balance sheet and represent the present value of the obligation
calculated by independent actuaries, with input from management. These
actuarial valuations include assumptions such as discount rates and
return on assets, details of which are provided in note 18 below.
The comparative figures for the financial year ended 31 December 2010
are extracted from the Group's statutory accounts for that financial
year. Those accounts have been reported on by the company's auditor and
delivered to the registrar of companies. The report of the auditor was
(i) unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying
their report, and (iii) did not contain a statement under section
5 498(2)or(3) of the Companies Act 2006.
Non-underlying items Expenses and income incurred or received during the
year, which due to their size and nature of being items that are
typically non-recurring, are drawn out for separate disclosure as
6 non-recurring items.
6 Months 6 Months 12 Months
to 30.06.11 to 30.06.10 to 31.12.10
GBPm GBPm GBPm
---------------------------- ------------- ------------- -------------
Within turnover:
Turnover from closed businesses - 15.6 26.0
Turnover from start-up
businesses - - 14.7
- 15.6 40.7
Within cost of sales:
Cost of sales of closed
businesses - (13.7) (23.7)
Cost of sales of start-up
businesses - - (14.1)
- (13.7) (37.8)
Within operating expenses:
Operating expenses and closure
costs incurred on closed
businesses - (3.3) (8.9)
Operating expenses incurred in
start-up businesses - - (3.4)
Impairment of assets held for
sale - - (0.9)
Redundancy costs - - (1.9)
- (3.3) (15.1)
-------------------------------- ------------- ------------- -------------
Within other income - gains
on the sale of businesses
and property:
Losses on the sale of
businesses (0.1) - -
(Losses) / gains on the sale of
property (0.1) 0.3 0.3
-------------------------------- ------------- ------------- -------------
(0.2) 0.3 0.3
-------------------------------- ------------- ------------- -------------
Within finance expense:
Interest on pension scheme
obligations (10.3) (10.6) (21.2)
-------------------------------- ------------- ------------- -------------
Within finance income:
Interest on pension scheme
assets 11.0 9.3 18.9
-------------------------------- ------------- ------------- -------------
Total non-recurring items 0.5 (2.4) (14.2)
-------------------------------- ------------- ------------- -------------
During the previous three years the group has undertaken a programme
of business closures incurring losses in the process which were deemed
non-underlying. The closure programme was fundamentally completed in
2010, therefore any subsequent closure activity going forward will
be deemed to be part of the on-going underlying business and as such
no non-underlying losses are reported in 2011. During the prior period
the Group recognised losses of GBP1.4m which included wind down expenses,
losses on assets, redundancy and vacant property occupancy costs on
businesses closed in that period.
Other income, being the (loss) / profit on disposal of businesses and
property comprises GBP0.1m loss on sale of properties (2010 : profit
GBP0.3m) and GBP0.1m loss on the disposal of motor vehicle dealerships
during the period (2010 : GBPnil).
The net financing return on pension obligations in respect of the defined
benefit schemes closed to future accrual is shown as a non-underlying
item due to the volatility of this amount. A net credit of GBP0.7m
has been recognised during the period (2010 : cost GBP1.3m).
Segmental
7 analysis
6 month period Evans
to 30 June Stratstone Halshaw Chatfields California Leasing Quickco Pinewood Central Total
2011 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Total gross segment
turnover 634.8 974.5 36.1 83.5 28.2 31.4 15.0 - 1,803.5
Inter-segment
turnover - - - - (8.7) (11.1) (10.5) - (30.3)
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Revenue from
external customers 634.8 974.5 36.1 83.5 19.5 20.3 4.5 - 1,773.2
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Operating profit
before
non-underlying
items 17.2 16.2 1.3 2.5 3.9 1.1 4.5 (4.2) 42.5
Other income
and non-underlying
items - - - - - - - (0.2) (0.2)
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Operating profit 17.2 16.2 1.3 2.5 3.9 1.1 4.5 (4.4) 42.3
Finance expense (1.6) (2.3) - (0.5) - - - (31.0) (35.4)
Finance income - - - - - - 0.2 11.1 11.3
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Profit before
tax 15.6 13.9 1.3 2.0 3.9 1.1 4.7 (24.3) 18.2
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Reconciliation to tables in Chief Executive's operational review
Operating profit
as above 17.2 16.2 1.3 2.5 3.9 1.1 4.5 (4.2) 42.5
Allocation of
central costs (1.7) (1.8) (0.2) - (0.2) (0.2) (0.1) 4.2 -
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Segment result
as presented
in CEO tables 15.5 14.4 1.1 2.5 3.7 0.9 4.4 - 42.5
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
6 month period Evans
to 30 June Stratstone Halshaw Chatfields California Leasing Quickco Pinewood Central Total
2010 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Total gross segment
turnover 672.4 984.0 40.5 79.7 21.7 33.3 15.5 - 1,847.1
Inter-segment
turnover - - - - (8.6) (9.7) (11.4) - (29.7)
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
672.4 984.0 40.5 79.7 13.1 23.6 4.1 - 1,817.4
Revenue from
non-underlying
activities 15.3 0.3 - - - - - - 15.6
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Revenue from
external customers 687.7 984.3 40.5 79.7 13.1 23.6 4.1 - 1,833.0
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Operating profit
before
non-underlying
items 20.3 15.3 1.3 2.1 3.1 0.8 4.3 (7.1) 40.1
Other income
and non-underlying
items (1.3) (0.1) - - - - - 0.3 (1.1)
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Operating profit 19.0 15.2 1.3 2.1 3.1 0.8 4.3 (6.8) 39.0
Finance expense - (1.6) (0.1) (0.5) - - - (33.2) (35.4)
Finance income 0.3 - - - - - 0.1 9.3 9.7
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Profit before
tax 19.3 13.6 1.2 1.6 3.1 0.8 4.4 (30.7) 13.3
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Reconciliation to tables in Chief Executive's operational review
Operating profit
as above 20.3 15.3 1.3 2.1 3.1 0.8 4.3 (7.1) 40.1
Allocation of
central costs (3.2) (3.2) (0.2) - (0.2) (0.2) (0.1) 7.1 -
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Segment result
as presented
in CEO tables 17.1 12.1 1.1 2.1 2.9 0.6 4.2 - 40.1
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Evans
Year ended 31 Stratstone Halshaw Chatfields California Leasing Quickco Pinewood Central Total
December 2010 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Total gross segment
turnover 1,317.7 1,902.9 75.0 159.5 44.9 61.9 23.8 - 3,585.7
Inter-segment
turnover - - - - (17.3) (19.3) (14.8) - (51.4)
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
1,317.7 1,902.9 75.0 159.5 27.6 42.6 9.0 - 3,534.3
Revenue from
non-underlying
activities 21.5 15.0 4.2 - - - - - 40.7
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Revenue from
external customers 1,339.2 1,917.9 79.2 159.5 27.6 42.6 9.0 - 3,575.0
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Operating profit
before
non-underlying
items 31.9 24.1 1.8 5.8 7.8 1.8 9.4 (7.5) 75.1
Other income
and non-underlying
items (2.7) (0.2) (1.5) - - - - (7.2) (11.9)
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Operating profit 28.9 23.9 0.3 5.8 7.8 1.8 9.4 (14.7) 63.2
Finance expense (0.5) (3.7) - (1.8) - - - (66.0) (72.0)
Finance income - - - - 0.1 - 0.1 19.6 19.8
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Profit before
tax 28.4 20.2 0.3 4.0 7.9 1.8 9.5 (61.1) 11.0
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Reconciliation to tables in Chief Executive's operational review
Operating profit
as above 31.9 24.1 1.8 5.8 7.8 1.8 9.4 (7.5) 75.1
Allocation of
central costs (2.7) (3.5) (0.4) - (0.3) (0.3) (0.3) 7.5 -
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Segment result
as presented
in CEO tables 29.2 20.6 1.4 5.8 7.5 1.5 9.1 - 75.1
-------------------- ----------- -------- ----------- ----------- -------- -------- --------- -------- --------
Finance costs 6 Months 6 Months 12 Months
Recognised in profit to 30.06.11 to 30.06.10 to 31.12.10
8 and loss GBPm GBPm GBPm
----------------------- ------------- ------------- -------------
Interest payable on bank
borrowings and loan notes 17.3 20.0 39.0
Vehicle stocking plan
interest 6.4 3.8 9.6
Interest payable on finance
leases - 0.2 0.3
Interest on pension scheme
obligations
(non-underlying - see note
6) 10.3 10.6 21.2
Less: interest capitalised - - (0.1)
Total interest expense 34.0 34.6 70.0
Net fair value expense in
respect of hedging
relationships 0.4 - 0.4
Unwinding of discounts in
contract hire residual
values 1.0 0.8 1.6
---------------------------- ------------- ------------- -------------
Total finance expense 35.4 35.4 72.0
---------------------------- ------------- ------------- -------------
Finance income 6 Months 6 Months 12 Months
Recognised in profit to 30.06.11 to 30.06.10 to 31.12.10
9 and loss GBPm GBPm GBPm
----------------------- ------------- ------------- -------------
Net fair value gain in
respect of hedging
relationships - 0.1 - -
Interest receivable on bank
deposits 0.3 0.3 0.9
Interest on pension scheme
assets (non-underlying -
see note 6) 11.0 9.3 18.9
Total finance income 11.3 9.7 19.8
---------------------------- ------------- ------------- -------------
10 Taxation
Based upon the anticipated profit on ordinary activities before taxation
for the full year, the effective tax rate for 2011 is estimated at
27.1% (2010 : 33.4%). The effective rate for 2011 is higher than the
current UK tax rate due to the relatively high value of expenses
recognised in the income statement that are not tax deductible (namely
goodwill impairment and depreciation on showrooms).
The Emergency Budget on 22 June 2010 announced that the UK corporation
tax rate will reduce from 28% to 24% over a period of 4 years from
2011. This will reduce the company's future current tax charge
accordingly. The rate reduction to 26% effective from 1 April 2011 was
substantively enacted on 29 March 2011. The further reduction to 25%
effective from 1 April 2012 was substantively enacted on 5 July 2011.
Had the rate reduction from 26% to 25% been substantively enacted by
the balance sheet date it would have the effect of reducing the
deferred tax liability at that date by GBP0.3m. Proposed further
changes to reduce the rate of corporation tax to 23% by 2014 were also
included in the Budget but these changes have not been substantively
enacted to date. It has not yet been possible to quantify the full
anticipated effect of the announced further rate reductions to 23%,
although this will further reduce the company's future current tax
charge and reduce the company's deferred tax liabilities / assets
accordingly.
11 Dividends
No dividends have been paid or proposed during this and the prior
period.
6 Months 6 Months 12 Months
to to to
30.06.11 30.06.10 31.12.10
12 Earnings per share pence pence pence
------------------------------------------------------- --------- --------- ----------
Basic earnings per share 2.0 1.3 0.9
Effect of adjusting items - 0.3 1.6
------------------------------------------------------- --------- --------- ----------
Underlying basic earnings per share (Non GAAP
measure) 2.0 1.6 2.5
Diluted earnings per ordinary share 1.9 1.2 0.8
Effect of adjusting items - 0.3 1.6
------------------------------------------------------- --------- --------- ----------
Underlying diluted earnings per share (Non
GAAP measure) 1.9 1.5 2.4
------------------------------------------------------- --------- --------- ----------
The calculation of basic, diluted and adjusted earnings
per share is based on:
30.06.11 30.06.10 31.12.10
Number of shares (millions) Number number number
------------------------------------------------------- --------- --------- ----------
Weighted average number of shares used in
basic and adjusted earnings per share calculation 649.7 642.7 644.4
Weighted average number of dilutive shares
under option 30.2 36.9 30.2
------------------------------------------------------- --------- --------- ----------
Diluted weighted average number of shares
used in diluted earnings per share calculation 679.9 679.6 674.6
------------------------------------------------------- --------- --------- ----------
6 Months 6 Months 12 Months
to to to
30.06.11 30.06.10 31.12.10
Earnings GBPm GBPm GBPm
------------------------------------------------------- --------- --------- ----------
Earnings for basic and diluted earnings per
share calculation 13.3 8.4 5.6
Adjusting items:
Impairment of assets held for sale - - 0.9
Losses incurred on closed businesses - 1.4 6.6
Start-up costs and losses incurred on start-up
of businesses - - 2.8
Redundancy costs - - 1.9
Loss / (profit) on business and property disposals 0.2 (0.3) (0.3)
Net interest on pension schemes (0.7) 1.3 2.3
Tax effect of adjusting items 0.2 (0.7) (3.7)
------------------------------------------------------- --------- --------- ----------
Earnings for adjusted earnings per share calculation 13.0 10.1 16.1
------------------------------------------------------- --------- --------- ----------
The directors consider that the adjusted earnings per share figures
provide a better measure of comparative performance.
13 Business disposals
During the period the Group has disposed of certain assets of two motor
vehicle dealerships generating net proceeds of GBP0.9m and a loss on
disposal of GBP0.1m. In addition the Group sold property generating
net proceeds of GBP1.0m and a loss on disposal of GBP0.1m.
14 Assets held for sale
The Group holds a number of freehold properties that are currently being
marketed for sale which are expected to be disposed of during the next
12 months. No impairment losses have been recognised in the income statement
for the six months to 30 June 2011 on re-measurement of these properties
to the lower of their carrying amount and their fair value less costs
to sell (2010 : GBPnil).
During the period to 30 June 2011 non-current assets classified as held
for sale disposed of realised a loss of GBP0.1m.
The major classes of assets comprising the assets held for sale are:
30.06.11 30.06.10 31.12.10
GBPm GBPm GBPm
------------------------------------------------------- --------- --------- ----------
Property, plant and equipment 28.5 25.1 25.1
------------------------------------------------------- --------- --------- ----------
30.06.11 30.06.10 31.12.10
15 Cash and cash equivalents GBPm GBPm GBPm
------------------------------------------------------- --------- --------- ----------
Bank balances and cash equivalents 95.4 63.7 91.2
------------------------------------------------------- --------- --------- ----------
30.06.11 30.06.10 31.12.10
16 Net borrowings GBPm GBPm GBPm
------------------------------------------------------- --------- --------- ----------
Cash and cash equivalents (note 15) 95.4 63.7 91.2
Current interest bearing loans and borrowings (347.5) (67.0) (67.4)
Non-current interest bearing loans and borrowings (64.9) (376.5) (376.3)
Derivative financial instruments 22.1 33.1 27.0
------------------------------------------------------- --------- --------- ----------
(294.9) (346.7) (325.5)
------------------------------------------------------- --------- --------- ----------
30.06.11 30.06.10 31.12.10
17 Provisions GBPm GBPm GBPm
------------------------------------------------------- --------- --------- ----------
Warranty service provision 4.3 6.6 5.3
Vacant property 7.5 7.1 8.3
VAT Assessment 5.5 10.6 5.5
------------------------------------------------------- --------- --------- ----------
17.3 24.3 19.1
------------------------------------------------------- --------- --------- ----------
Non-current 7.1 7.0 8.2
Current 10.2 17.3 10.9
------------------------------------------------------- --------- --------- ----------
17.3 24.3 19.1
------------------------------------------------------- --------- --------- ----------
18 Pension scheme obligations
The net liability for defined benefit obligations has decreased from
GBP69.7m at 31 December 2010 to GBP62.1m at 30 June 2011. The decrease
of GBP7.6m comprises contributions of GBP9.5m, a credit to the income
statement of GBP0.7m, a net actuarial gain of GBP21.8m and minimum funding
adjustments of GBP24.4m. The net actuarial gain has arisen in part to
changes in the principal assumptions used in the valuation of the scheme's
assets and liabilities over those used at 31 December 2010. The assumptions
subject to change are the discount rate of 5.7% (2010 : 5.5%), the inflation
rate (RPI) of 3.6% (2010 : 3.5%), the inflation rate (CPI) of 2.8% (2010
: 3.0%) the rate of increase of pensions in payment of 3.13% (2010 :
3.15%).
19 Related party transactions
There have been no new related party transactions that have taken place
in the first six months of the current financial year that have materially
affected the financial position or performance of the Group during that
period and there have been no changes in the related party transactions
described in the last annual report that could do so.
20 Post balance sheet events
On 14 July 2011 the Company announced a proposed, fully underwritten
rights issue to raise gross proceeds of approximately GBP75.2m (approximately
GBP70.8m net of expenses) by the issue of 751.6m new ordinary shares
at 10 pence per share. This was approved by the Company's shareholders
in the General Meeting on 1 August 2011. The new shares were issued
and admitted to trading on The London Stock Exchange on 17 August 2011
and proceeds from the issue of the new ordinary shares have now been
received by the Company. The net proceeds of approximately GBP70.8 million
have allowed the Group to improve its level of financial indebtedness
towards the previously stated long-term Debt : Underlying EBITDA ratio
target of 2 : 1. As a result of this acceleration in the achieving of
the target ratio the Group has set a new debt : Underlying EBITDA target
of below 1.5 : 1.
The Group has also announced confirmation of the extension of the maturity
profile of its borrowing facilities to 30 June 2014, on improved terms.
Further to this the Group has also agreed a pension transaction which
will eliminate the current pension deficit and significantly reduce
cash outflow over the next three years. Under this transaction the Group
will provide the pension schemes with an investment which generates
a predictable property asset-backed income and will consequently unlock
aggregate cash flow savings for the Group of an estimated GBP46m in
the period to December 2014. The Group's current expectation is that
the costs associated with setting up the revised facility will be treated
as a non-underlying item in the second half of 2011.
21 Risks and uncertainties
The risk factors which could cause the Group's results to differ materially
from expected results and the result of the Board's review of those
risks are set out in the Chief Executive's operational review.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the European
Union;
(b) The interim management report includes a fair review of the information
required by:
(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of
the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes
in the related party transactions described in the last annual report
that could do so.
By order of the Board,
TG Finn
Chief Executive,
TP Holden
Finance Director
23 August 2011
Independent Review Report to Pendragon PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, statement of changes in equity, condensed consolidated balance sheet, condensed consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
M Steventon
for and on behalf of KPMG Audit Plc
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
23 August 2011
This information is provided by RNS
The company news service from the London Stock Exchange
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