5 April 2023                                                                         

Lookers plc ("Lookers" or the "Group")

 

2022 Full Year results

 

Excellent performance against strong headwinds

 

Strong growth momentum leading to higher profit expectations for 2023

 

Lookers plc, one of the UK's leading integrated automotive retail and service groups, announces its preliminary results for the year ended 31 December 2022 (the "Year").

Mark Raban, Chief Executive Officer, said:

"I am delighted to report another excellent performance achieved against a backdrop of material supply disruption, inflation and rising interest rates. It makes me immensely proud of the Lookers team and the progress we are making together.

 

"We have strong momentum in the execution of our strategic priorities. Our operational optimisation agenda remains the cornerstone of our strategy and we have made demonstrable progress on our self-help initiatives. In addition, I am particularly pleased to see the expansion of our offerings through partnerships with a number of exciting new brands and the addition of incremental revenue streams including cosmetic repairs.

 

"We remain mindful of pressures faced by the consumer and on discretionary spending. However, we are confident in our proposition, our balance sheet and strategic focus, with significant opportunities ahead. With good momentum across the business, we have continued to trade strongly in Q1 2023, and the Board's outlook for underlying PBT for the current financial year is now ahead of its previous expectations."

 

Financial summary

Year ending 31 December	2022	2021
Revenue	£4,300.9m	£4,050.7m
Underlying profit before tax*	£82.7m	£90.1m
Underlying basic earnings per share*	18.21p	20.07p
Statutory profit before tax	£84.4m	£90.0m
Basic earnings per share	18.87p	15.65p
Dividend per share	3.0p	2.5p
Net funds**	£66.5m	£3.0m

 

* Underlying profit before tax is profit before tax and non-underlying items. Underlying basic earnings per share is earnings per share before the impact of non-underlying items and the impact of tax rate changes.

** Cash and cash equivalents less bank loans and overdrafts, excluding stocking loans, vehicle rental finance liabilities and lease liabilities under IFRS 16.

 

2022 Highlights

 

·      Group revenue of £4,300.9m (2021: £4,050.7m) reflecting strong trading across all divisions despite supply restrictions and logistics disruption

·      Basic earnings per share of 18.87p (2021: 15.65p), up 20.6% versus 2021

·    Underlying profit before tax of £82.7m (2021: £90.1m, £80.3m excluding £9.8m of COVID support), primarily driven by new and used vehicle market outperformance and cost control

·      Robust balance sheet with net cash of £66.5m (2021: £3.0m) and a property portfolio with a net book value of £290.5m, equivalent to a combined 92p per share

·      Final dividend of 2.0 pence per share proposed, full year dividend up 20.0% versus 2021

 

 

Significant progress and momentum across all six strategic priorities

 

1)  Operational optimisation: Delivered significantly increased penetration of finance and ancillary products generating an additional £15.7m income in the year. 31k used warranties sold (2021: 12k) with 163k live service plans in operation. Strong working capital cashflow management generating £32.1m of cashflow benefit.

 

2)  Leveraging technology and digitisation: Further progress on dealer management system simplification with approximately three quarters of the portfolio now on a standard platform. Sales transformation programme on track for rollout, commencing Q4 2023 across all channels.

 

3)  Expanding OEM relationships: New partnerships delivered with BYD, ORA, Lotus and MG. Successful launch, in partnership with Mercedes-Benz, of the new agency model. Headroom for further acquisitive growth with all existing brand partners.

 

4)  Increasing used vehicle penetration: Expect the first new, standalone multi franchise site to be operational from existing premises Q4 2023.

 

5)  Developing aftersales revenues: 29 cosmetic repair sites and 20 mobile units now in operation, with further sites and units planned for rollout in 2023.

 

6)  Leveraging corporate leasing and fleet capabilities: Lookers Vehicle Solutions platform and operational consolidation now complete, with the acquisition of Fourways in Q1 2023 adding further to our capabilities.

 

Current trading and outlook

 

·      Excellent start to Q1 with underlying profit before tax ahead of 2022 driven by used vehicle and aftersales revenue growth, stable margins and ongoing working capital and cost disciplines.

·      Continued robust order bank with c.18k new retail units and c.24k fleet units as at end of Q1.

·      Continued cash generation with net cash* at 31 March 2023 of c. £93m.

·      Board remains mindful of continued trading headwinds including economic uncertainty, inflationary pressure and both supply and logistics disruption.

·      The Board's expectations for underlying PBT for the year ended 31 December 2023 are now ahead of its previous expectations.

 

* Net cash is before taking into account period end accounting adjustments including cash in transit.

 

Details of results presentation and webcast

There will be an in-person meeting on 5 April 2023 at the Numis offices, 45 Gresham St, London, EC2V 7BF, at 9:30am UK time for analysts and institutional investors. The event will also be webcast for those unable to participate in person. To register for details please contact MHP by email on  lookers@mhpgroup.com.

 

Enquiries:

 

Lookers

Mark Raban, Chief Executive Officer                                                                 0161 291 0043

Oliver Laird, Chief Financial Officer

 

MHP

Tim Rowntree / Simon Hockridge / Charles Hirst                                            020 3128 8193

                                                                                                                                Lookers@mhpgroup.com

  

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person responsible for making this announcement is the Company Secretary.

The Company is registered in England at Lookers House, 3 Etchells Road, West Timperley, Altrincham WA14 5XS.  Company registration number 00111876.  LEI number 213800TSB8PJEACDAV33

 

Chair's statement

Another excellent performance

This, my first Chair's statement, looks back on another year of excellent financial results and operational progress. The trading performance was impressive and ahead of the Board's expectations at the start of the year, despite the well-documented headwinds in our sector. We have had to deal with supply chain disruption limiting new car availability and an increasingly uncertain outlook for the UK consumer. We have built on the extensive work completed during 2021 to refocus the Group on our strategic priorities and laid good foundations to make further strides in the year ahead.

Revenues increased to £4.30 billion (2021: £4.05 billion) and profit before tax decreased to £84.4 million (2021: £90.0m, including £9.8m of COVID support), reflecting extremely strong comparatives from our record performance in 2021. Last year we benefited from an unprecedented environment in which supply issues strongly drove up margins across both new and used vehicles.

Although we are still operating in a far-from-normal environment, the strong performance in 2022 is a result of Lookers' outperformance of the new and used car markets in the UK, despite a backdrop of increasing inflationary pressures, including both employment and utility costs. Our financial position was considerably improved by the sale and leaseback of the freehold dealership property in Battersea, London. The sale generated £28.0m in cash with the proceeds used to invest in the Group's strategic priorities and further strengthen the balance sheet. The Group now holds property assets with a net book value of approximately £290.5m and net funds of £66.5m, representing 92p per share as at 31 December 2022.

The strength of our financial and operational performance leaves Lookers in a strong position to pursue and progress our strategic growth strategy as we invest in new avenues for growth.

Significant strategic progress

This trading outperformance demonstrates the positive progress made against our six strategic priorities to grow the business, the most important being our focus on operational optimisation. We've also made significant inroads in expanding our proposition through new OEM partnerships, particularly in the EV market, new offerings for customers, such as cosmetic repairs, and further progress with our omnichannel experience. Ultimately, we are adapting at pace to an evolving industry landscape, ensuring that we are best placed with our OEM brand partners, suppliers, and customers, to provide the best experience.

Together, the Board believes the strategy will maintain Lookers' position as a leading player in the industry. We want the business to capture growth opportunities and to create a sustainable model which delivers long-term value for all stakeholders. We are excited by the considerable progress we made during 2022 and the platform this gives us to develop these projects into 2023.

A focus on all our stakeholders

We are proud to be a business that cares about the various communities we deal with. It is because of our incredible people across the business, that we are in the position of strength that we are in today. We have spent time over the last 12 months looking at how we can be an industry leader in investing in and retaining our people.

In the summer, we introduced the Lookers Living Wage, a scheme that ensures all full-time employees earn more than the National Living Wage. We also recognised the importance of rewarding our apprentices and now offer pay packages at around 35% more than the minimum level required in year one of their training.

We are also investing in training and learning & development programmes across all areas and levels of the business so that we ensure Lookers is a place where our people can grow their skills during their career.

We remain focused on driving great customer outcomes through our regulated activities and we continued to invest in new systems, controls, and processes to ensure we have strong regulatory compliance. We have seen an improvement in our customer review ratings showing tangible reputational gains with our customers. I am also delighted that Robin Churchouse took up the position as Chair of the Board of our FCA regulated entity, Lookers Motor Group Limited, in September. Under his guidance, we will continue to make significant progress in this field.

We encourage our colleagues to volunteer in our communities and support this by offering all employees paid volunteering days. During the year the Group's flagship charitable initiative was a 400-mile cycle challenge from Birmingham to Belfast, which raised almost £160,000.

While we are delighted with the progress we have made in 2022, we know that there is still much to do in 2023 and we will continue to build a strong and sustainable business that delivers value for all stakeholders. Next year, our focus will be on continuing our progress on operational optimisation, and further embedding technology and digitisation across the Group. We have also introduced a formal strategy regarding the utilisation of our expansive property portfolio which will principally focus on operational usage; we hope that this will lead to further value generation for our stakeholders.

Shareholder returns

The Board is proposing a final dividend for 2022 of 2.0p per share (2021: 2.5p) to be paid in June 2023. This, combined with the interim dividend of 1.0p (2021: nil p) per share, brings the total dividend for the year to 3.0p (2021: 2.5p). We will continue to operate under our progressive dividend policy, underpinned by a capital structure aimed at providing long-term sustainable returns to shareholders.

On 18 October 2022, we announced the commencement of a share buyback programme of up to £15m. The Board concluded that repurchasing the Company's shares at the current discount to our cash and property portfolio was an attractive investment opportunity and the decision remains in line with our capital allocation framework. The purpose of the Share Buyback Programme is to reduce the capital of the Company and increase earnings per share. At the year end, we have bought back 5.7m shares at an average of 78p per share at a total cost of £4.5m.

The basic earnings per ordinary share increased by 20.6% to 18.87p (2021: 15.65p).

Board composition

In a year of significant progress for the business, we have taken further steps to optimise the Board to ensure Lookers has the right mix of skills and experience.

On 1 September 2022, Sue Farr, a highly experienced professional with experience in marketing, branding and consumer issues, joined as a Non-Executive Director and chair of the Remuneration Committee, as well as joining the Audit and Risk and Nomination Committees. Sue is also now the Interim Senior Independent Director.

Robin Churchouse was appointed Chair of the Board of Lookers Motor Group Limited, the Group's FCA regulated entity on 13 September 2022.

On 31 December 2022, Ian Bull stepped down from his role of Independent Non-Executive Chair. Ian was instrumental in helping us develop and implement our strategic priorities.

On 31 December 2022, Victoria Mitchell and Deborah Sherry stepped down from the Board. The Board thanks them both for their valuable contributions to Lookers and wishes them the best for the future.

Outlook

The Company continues to make rapid progress in the delivery of its strategic priorities and the hard work that has already been completed leaves the business in a position of strength.

We are optimistic and excited for the future with a robust order bank, and encouraging early trading results in Q1 2023.

Against this backdrop, we are confident in the future success of Lookers, but we must be mindful of the impact of upward inflationary pressures and interest rate rises on both consumer confidence and the Group's operating costs.

The war in Ukraine continues to be deeply concerning and the new car supply challenges are only just beginning to ease after 12 months of serious disruption. Taken together, this means there is a degree of uncertainty for the business and our customers in the coming months.

Lookers has strong relationships with its manufacturers and the past 12 months has seen the business undergo an extensive improvement programme to its operations meaning the business is in a strong position despite the concerns raised by the macroeconomic backdrop.

To conclude, the Group has a strong balance sheet, supported by £290.5m of property assets and robust cash flows which will enable further execution of the strategy that will support the Group as it navigates the current challenges, drives future expansion and delivers value for all our stakeholders. I would like to thank our colleagues, OEM brand partners, suppliers, and banking club for their support and collaboration throughout 2022.

Paul Van der Burgh

Interim Non-Executive Chair

 

Operating review

Market overview

New vehicle sales

In 2022 there were 1.9m (2021: 2.0m) new car and van registrations, which was a 5.3% decrease against the prior year; this was 0.8m registrations behind 2019, being the most recent comparative year prior to the market disruption caused by COVID-19. When looked at in isolation the new car market (retail and fleet) fell by 2.0%; this compares to the Group's equivalent volumes decreasing by 1.1%, meaning that we have outperformed the market by 0.9 percentage points.

Supply challenges remained during 2022 due to continued semiconductor shortages and a lack of logistics resource. This meant that manufacturers prioritised the more profitable retail channel which then impacted supply in the motability, fleet, leasing, and rental channels. New vehicle supply improved slightly in H2 2022 and we remain cautiously optimistic in terms of improved supply for 2023. The latest market outlook is forecasting 2.1m new car and van registrations in 2023, compared to 1.9m in 2022.

New car retail performance was relatively consistent with the market as the Group saw a 1.5% increase in volume. Despite new fleet volumes declining by 4.1% the Group outperformed the market by 1.7 percentage points. Overall, the Group achieved a new car market share of 4.3% which is consistent with the prior year.

Across the market, Battery Electric Vehicles (BEVs) accounted for 16.6% of new car registrations, a 5.0 percentage point increase against 2021. In 2022 Lookers sold 70,116 new retail and fleet units of which 19.8% were BEVs. The additional volume of electric vehicles is attributed to the key strategic partnerships the Group has developed to help support the customer proposition as they look to transition away from petrol and diesel.

The sale of diesel powertrains continued to decline with market share reducing by 4.6 percentage points when compared to 2021. Petrol powertrains retain the largest portion of the market share at 55.9%, although this is down by 2.4 percentage points year on year. Fleet accounted for 67.7% of all BEV registrations due to favourable benefit in kind tax rates for company car drivers and the ESG initiatives of many companies.

The Group recently announced its appointment as official retailer for two new Chinese Electric Vehicle (EV) entrants to the UK market, being Great Wall Motors under the ORA brand, and Build Your Dreams (BYD). ORA launched the "Funky Cat" in Q4 and BYD will commence trading in Q2 2023. This is further to the important additions of Lotus and MG as brand partners.

The Group is optimistic going into 2023 and carries with it a strong vehicle order bank across both retail (17,321) and fleet (23,393) channels.

Looking to the future, we are excited to continue to work with our existing OEM brand partners, and we look forward to welcoming new partners to the Group. We also remain committed to traditional franchise operating models and equally we will embrace new models. Mercedes-Benz introduced agency in January 2023, an operating model that creates new commercial opportunities and ways of working that we look forward to developing throughout 2023.

Used vehicle sales

The volume of used vehicle sales declined by 4.9% in 2022 compared to the prior year, however we outperformed the market which saw a decline of 8.5% (7.5m in 2021 to 6.9m in 2022). The used vehicle market continues to be dominated by petrol and diesel vehicles which accounted for 95.7% of transactions in 2022.

The Group saw a sharper decline in used vehicle sales in H1 2022 of 8.3% due to ongoing supply issues for new vehicles; in H2 performance recovered and was broadly flat when compared to the prior year.

Despite a challenging macroeconomic outlook the Group expects strong margins on used vehicle sales to continue into 2023, and that a slight softening of consumer demand will be countered by the continuation of a limited supply of vehicles in the market.

Aftersales

Overall aftersales revenues were ahead of 2021 by 6.8% which was pleasing despite a reduction in new and used vehicle sales impacting internal aftersales revenues. This was driven in the main by increased parts sales through our trade parts centres and an increase in cosmetic repair revenues.

During 2022 the Group has focused on improving performance of retention product sales (used warranty and service plan), and has worked hard to improve employee retention through a blend of enhancements to remuneration packages and investment in tooling.

In line with the strategic priorities the Group has expanded its cosmetic repair capabilities, preventing leakage of work to third parties and building a service to be offered to other motor retailers and service centres. At the end of 2022 we had established 29 fixed cosmetic repair facilities and have 20 mobile cosmetic repair vans on the road. In 2023 the Group plans to introduce a further 20 cosmetic repair facilities supported by an additional 10 vans.

Leasing

During 2022 we have continued to consolidate our Leasing businesses under our Lookers Vehicle solutions umbrella. Our contract hire, and vehicle rental businesses have been adversely impacted by both the lack of vehicle supply in 2022 resulting in a 7.5% reduction in revenue, as well as the increased cost of financing on the back of interest rate rises.

Operations summary

Total revenue for the year was £4,300.9m (2021: £4,050.7m), which was 6.2% higher than 2021. All revenue streams, apart from leasing and other, increased. This was despite a 5.8% overall reduction in new and used vehicle volumes sold. The revenue increase is attributable to three main factors being: 1) the average selling price of a new vehicle increasing by 12.9% compared to 2021; 2) the supply to the new retail sales channel being prioritised by OEMs in 2022; and 3) the Group increasing its used vehicle finance penetration performance.

Analysis of revenue

Revenue	2022 £m	2021 £m	Variance	2022 LFL £m	2021 LFL £m	LFL Variance
New vehicles	1,965.5	1,866.2	5.3%	1,955.1	1,852.2	5.6%
Used vehicles	2,255.2	2,038.7	10.6%	2,240.6	2,018.7	11.0%
Aftersales	458.4	429.2	6.8%	444.9	406.5	9.4%
Leasing and other	126.6	136.9	(7.5%)	126.6	136.8	(7.5%)
Less: intercompany	(504.8)	(420.3)		(498.1)	(411.3)
Total	4,300.9	4,050.7	6.2%	4,269.1	4,002.9	6.7%

 

Analysis of gross profit

Gross profit	2022 £m	2021 £m	Variance	2022 LFL £m	2021 LFL £m	LFL Variance
New vehicles	163.6	131.3	24.6%	163.1	128.2	27.2%
Used vehicles	170.1	180.3	(5.7%)	168.8	178.6	(5.5%)
Aftersales	192.7	182.2	5.8%	189.9	176.2	7.8%
Leasing and other	23.8	22.8	4.4%	23.8	22.8	4.4%
Total	550.2	516.6	6.5%	545.6	505.8	7.9%
Gross margin %	12.8%	12.8%		12.8%	12.6%

 

Gross profit increased by £33.6m to £550.2m (2021: £516.6m), with gross margin percentage consistent with the prior year at 12.8%. Of the total gross profit increase, £32.3m is attributable to new vehicles where consumer demand continued to exceed supply levels, which in turn has allowed the group to focus on minimising the levels of discount offered. The historic impact of COVID-19 and the contraction within the new car market over recent years has continued to impact on our ability to source used vehicle stock. As a direct consequence used volumes reduced by 4.9%, however margins per unit remained strong.

New vehicles

	2022	2021	Variance	2022 LFL	2021 LFL	LFL Variance
Car retail unit sales	38,750	38,187	1.5%	38,503	37,731	2.0%
Car fleet unit sales	30,916	32,230	(4.1%)	30,842	32,171	(4.1%)
Total car unit sales	69,666	70,417	(1.1%)	69,345	69,902	(0.8%)
Motorbike retail	450	470	(4.3%)	450	470	(4.3%)
Commercial vehicles	13,830	19,080	(27.5%)	13,830	19,080	(27.5%)
Total unit sales	83,946	89,967	(6.7%)	83,625	89,452	(6.5%)
Gross margin %	8.3%	7.0%		8.3%	6.9%
Finance penetration (retail) %	74.5%	78.0%

 

The sale of new vehicles represented 29.7% (2021: 25.4%) of total gross profit.

The new vehicle market in H1 was down by 14.1% year on year; however, there were some encouraging signs in H2 as new vehicle supply constraints showed indications of easing, as the market grew by 5.4% when compared to the same period in 2021. The combination of limited vehicle supply and continued strong consumer demand across the full year allowed the business to exercise strong control over both retail and fleet trading terms whilst exercising discount control. This resulted in new vehicle margins improving by 1.3 percentage points to 8.3%.

The increase in gross margin percentage also included the impact of growth in finance and supplementary products, and the continued simplification of our sales process and customer product offerings, whilst still ensuring regulatory compliance.

In 2022 the OEMs continued to prioritise supply to the more profitable retail channel which resulted in an overall volume reduction within both our fleet and commercial vehicle sales activities. The reduction in our commercial vehicle sales is primarily attributable to OEMs restricting new vehicle supply to the vehicle rental market.

Used vehicles

	2022	2021	Variance	2022 LFL	2021 LFL	LFL Variance
Retail unit sales	79,101	83,141	(4.9%)	78,549	82,324	(4.6%)
Gross margin %	7.5%	8.8%		7.5%	8.8%
Finance penetration %	50.5%	39.2%

 

The sale of used vehicles represented 30.9% (2021: 34.9%) of the total gross profit. The Group's sales volumes have outperformed the market by 3.9 percentage points (like-for-like).

The shortage of supply in the new vehicle market continues to directly impact used vehicle supply and has restricted our ability to source stock throughout the year. Our outperformance of the market was driven by optimising basic principles incorporating:

·      Improved speed to market by driving down time taken to prepare used vehicles to retail standards.

·      Our Group-wide repatriation scheme which sees us retain as many part exchange vehicles within the Group as possible.

·      Improved used vehicle finance penetration.

·      Retailing increased volumes of segment 2 & 3 vehicles.

·      Enhanced online imagery through the use of new technology and inclusion of video content.

Used vehicle margin per unit in 2022 was broadly flat with the prior year at £2,151 (2021: £2,168). However, the gross margin was 1.3 percentage points behind 2021 at 7.5% (2021: 8.8%), as costs increased more rapidly than sales price. The business achieved exceptional margins in 2021, whereas in 2022 we saw the market start to soften.

Aftersales

	2022	2021	Variance	2022 LFL	2021 LFL	LFL Variance
Revenue £m	458.4	429.2	6.8%	444.9	406.5	9.4%
Gross margin %	42.0%	42.5%		42.7%	43.3%

 

Aftersales represented 35.0% (2021: 35.3%) of total gross profit. On a like-for-like basis aftersales revenues increased by 9.4% versus 2021.

Within aftersales, service labour sales increased by 6.2%, part sales increased by 6.7%, and bodyshop sales, driven by the introduction of cosmetic repair facilities and mobile vans, increased by 21.0%. Costs in the year increased due to our investment in technicians, with gross margins down by 0.5 percentage points as a result.

The growth within service sales has been driven by a number of factors including:

·      Improved staff retention and increased productive headcount. This has helped reduce customer lead times but there is still opportunity to improve this further.

·      During the year we commenced a project to consolidate and simplify our customer contact strategy. This project is now delivering improved customer conversion rates across both inbound and outbound enquiries.

·      Simplified and improved our aftersales IT platforms which have allowed us to focus on retention of older vehicles and improving our essential maintenance work conversion rates.

·      Continued to improve our customer propositions specific to both service plans and the sales of extended warranties, both of which are now contributing towards improved customer retention rates.

·      Continued focus on simplifying the customer experience by further digitalising the customer aftersales journey.

One of our key strategic objectives is to increase our aftersales revenues by investing further to grow our cosmetic repair facilities, both mobile and fixed. We have made this investment in order to undertake all cosmetic and alloy wheel repairs internally, serve our customers needing cosmetic works through insurance and aftersales, and to offer cosmetic repair services to other local motor retail and service centres.

Leasing and other

	2022	2021	Variance	2022 LFL	2021 LFL	LFL Variance
Revenue £m	126.6	136.9	(7.5%)	126.6	136.8	(7.5%)
Gross margin %	18.8%	16.7%		18.8%	16.7%

 

The leasing and other segment represented 4.3% (2021: 4.4%) of total gross profit.

Leasing and other revenue decreased by 7.5% to £126.6m in 2022. The fall in revenue is due to supply constraints limiting access to new vehicles.

Contrary to the fall in revenue, gross profit increased by 4.4% to £23.8m. Rental margins have improved significantly due to increased rental prices (at lower volumes) combined with lower depreciation expenditure because of increased vehicle residual value. Increased vehicle values also led to improved margins on vehicle de-fleeting. Increases in the base rate in H2 saw increased finance costs in the second half of the year, however the full impact will not be seen until 2023.

Duncan McPhee

Chief Operating Officer

 

Financial review

The Group's income statement is set out in the table below. Profit before tax in the year is reported as £84.4m (2021: £90.0m, including £9.8m of COVID support). The key elements of this strong financial performance are contained within the operating review of the report.

	2022 £m	2021 £m
Revenue	4,300.9	4,050.7
Cost of sales	(3,750.7)	(3,534.1)
Gross profit	550.2	516.6
Net operating expenses	(441.3)	(402.5)
Operating profit	108.9	114.1
Underlying operating profit*	107.2	114.2
Non-underlying items*	1.7	(0.1)
Finance costs	(24.5)	(24.1)
Profit before taxation	84.4	90.0

 

*Alternative performance measures - see Note 12

Operating expenses

Net operating expenses, which include central administrative and operating costs, have increased by £38.8m in 2022. However, £9.8m of rates reductions were received in 2021 under the business rates holiday scheme. The remaining increase was the result of the Group facing significant cost pressures including staff costs, utilities, and maintenance costs. The increase in staff costs represents the Group's commitment to its people following a review of rewards and incentives during the year. The increasing cost of utilities relates primarily to energy prices increasing significantly during the year (the rates reductions net off in the comparative line item in the table). The increased maintenance costs stem from our focus of ensuring the property portfolio is well maintained following a period of post COVID-19 cost consolidation for the Group.

	2022 £m	2021 £m
Staff costs	241.6	227.8
Vehicle and valeting costs	45.1	43.4
IT	18.7	19.3
Insurance, legal and professional	15.6	13.3
Utilities and maintenance	48.7	30.4
Depreciation and amortisation	35.6	34.9
Other	37.7	33.3
Net operating expenses before non-underlying items	443.0	402.4
Non-underlying items:
Gain on sale and leaseback and property disposals	(7.7)	(2.4)
Sales transformation	2.1	-
Other	3.9	2.5
Net operating expenses	441.3	402.5

 

Non-underlying items

Non-underlying items are items that are not incurred in the core operations of the business and are sufficiently significant and/or irregular to impact the underlying trends in the business. During the year the Group has recognised a net credit of £1.7m of pre-tax non-underlying items against a charge of £0.1m in 2021. The Group recorded net gains of £7.7m (2021: £2.4m) on the sale of a number of properties during the current year, with the largest being the sale and leaseback of a freehold dealership property in Battersea, London. The significant associated cash inflow from the sale and leaseback is already being reinvested, with £2.1m of non-underlying expenditure on the sales transformation project. In addition, the current year credit includes non-cash net impairments (principally property, plant & equipment and right of use assets) amounting to £0.9m (2021: £1.9m), as well as restructuring costs totalling £3.0m (2021: £0.6m).

Cash flow (reconciliation to net funds)

	2022 £m	2021 £m
Profit for the year before tax	84.4	90.0
Depreciation and amortisation	54.6	53.9
Other non-cash items	(4.0)	2.8
Contribution to defined benefit pension scheme	(14.5)	(13.2)
Rental fleet and leasing purchases	(75.7)	(58.9)
Working capital changes	32.1	6.3
Tax paid	(19.8)	(16.3)
Cash inflow from operating activities	57.1	64.6
Capital expenditure	(19.3)	(17.4)
Finance lease rentals collected	1.5	2.9
Business and property disposals	32.9	11.8
Net investing activities	15.1	(2.7)
Funding movements for vehicle leasing	29.5	(3.8)
Payment of loan arrangement fees	(1.1)	-
Repayment of lease liabilities	(16.3)	(16.4)
Returns to shareholders	(18.3)	-
Net financing activities	(6.2)	(20.2)
Non-cash movement in prepaid finance costs	(2.5)	2.0
Total movement in net funds	63.5	43.7
Net funds/(debt) at 1 January	3.0	(40.7)
Net funds at 31 December	66.5	3.0

 

The Group continued to generate cash inflows from operations during the financial year following another pleasing trading performance. Net funds (excluding lease liabilities, vehicle rental liabilities and stocking loans) at 31 December 2022 were £66.5m (2021: £3.0m). The Group remains committed to controlling working capital tightly, which alongside capital expenditure remaining at comfortable levels during the year, and the cash inflow of £28.0m from the sale and leaseback of the freehold dealership property in Battersea, has resulted in an increase in net funds. Inventory levels actually increased by £152.7m, however the impact on working capital was offset by an increase in consignment vehicle creditors of £150.4m. At the balance sheet date stocking loans totalled £247.2m (2021: £248.1m), equivalent to 79.4% of goods for resale (2021: 79.9%). The cash inflow relating to vehicle leasing is the result of a net increase in funding sourced in the year for vehicles leased out by the Group.

Total capital expenditure during the year amounted to £71.9m, of which £52.8m relates to vehicles purchased for long-term leasing, £15.7m relates to improvements to our property portfolio and new equipment, £2.3m investment in IT development, and £1.1m on own-use vehicles. As the Group continues to work towards achieving its strategic priorities, capital expenditure will be focussed on the rollout of our cosmetic repair centres, the development of the Group's first supercentre (Lookers Car Hub), the continued development of our IT infrastructure, and the continuous improvement to our property portfolio which is critical to maintaining our position of strength in the market.

Additionally, the Group showed its commitment to delivering returns to shareholders with £18.2m (£18.3m in the reconciliation to net funds includes commission, PTM levy, and stamp duty) distributed in the form of dividends and a share buyback programme (further details provided below).

Bank funding

The Board remains focussed on maintaining the Group's liquidity, whilst retaining flexibility to implement strategic priorities. The Group's revolving credit facility (RCF) was undrawn as at 31 December 2022, leaving the Group ideally placed to utilise the available capital when the appropriate opportunities arise. As at 31 December 2022 the Group had net funds of £66.5m (2021: £3.0m). This increase has been delivered through the continuation of the Group's exceptional trading performance, working capital focus, and pragmatic approach to capital allocation.

In June 2022, the Group was pleased to renegotiate and extend its RCF, including a refreshment of our banking club (The Bank of Ireland, HSBC, NatWest, and ABN Amro). The updated RCF provides £100.0m of credit with the agreement running until at least 30 September 2025. The new facility offers improved interest rates which are now charged at a margin of 2.5% (above SONIA) (2021: margin between 3.25% and 3.75% (above SONIA)). The facility is subject to less stringent quarterly covenant tests on leverage and interest cover, which is representative of the Group's much improved financial position and outlook.

We would like to take this opportunity to thank our banking club for all their support throughout 2022.

Taxation

The Group's taxation charge for the year is £10.5m (2021: £28.8m), which is a composite of a current year corporation tax charge of £16.6m (2021: £12.2m) and a deferred tax credit of £6.1m (2021: deferred tax charge of £16.6m). The overall reduction in taxation charge is driven by the reflection of the rise in substantially enacted future UK tax rates 19% to 25% in 2021. This increased the prior year taxation charge by £16.9m. The current year effective rate (12.4%) is lower than the standard rate of corporation tax (19%) due to adjustments in respect of prior years, which result from the finalisation of prior year tax positions during the year.

Pension schemes

The Group has two defined benefit pension schemes, the Lookers Pension Plan and the Benfield Motors Group Pension Plan. Both schemes are closed to entry for new members and closed to future accrual.

The Lookers Pension Plan received deficit contributions of £12.9m in 2022, plus expenses and PPF Levy of £1.3m. The deficit contributions are subject to increases linked to CPI, which will result in a £13.6m contribution in 2023 (plus expenses and PPF levy). Further, the Group pays additional contributions of 10p for every £1 of returns to shareholders (ordinary dividends and share buyback) in excess of £5.0m. This will result in an additional payment being made in May 2023 relating to 2022 financial year. The triennial valuation date was 31 March 2022, with the deadline for agreement being 15 months after the valuation date. The Trustee of the Lookers Pension Plan and the Group are in the process of agreeing the triennial review valuation prior to the deadline, including the preferred funding strategy.

The Group's most recent triennial valuation of the Benfield Pension Plan as at 31 December 2019 was concluded in February 2021, with the agreed annual deficit contributions of £0.3m plus expenses and PPF levy being paid by the Group during 2022. The next triennial review has now commenced for the valuation date of 31 December 2022.

At 31 December 2022, the aggregate IAS19 pension deficit is £23.5m (2021: £43.2m). The year-on-year decrease arises due to the continued deficit contributions made by the Group and significantly increased discount rate assumptions, which have been driven by increased corporate bond yields. The increase in discount rates has not been offset by increases in inflation, rather the inflation assumption has decreased year on year. The extreme volatility in the long-dated gilt markets following the Government's "mini-budget" in September 2022 resulted in some pension schemes suffering liquidity shortfalls; however, neither of the Lookers defined benefit pension schemes was materially affected, as a reasonable collateral buffer had been maintained.

Relatively small changes in the basis of valuation can have a significant effect on the calculated deficit, hence the movement in the calculated deficit can be subject to high levels of volatility.

Capital allocation policy

Capital allocation is a critical consideration when the Board is making decisions. This remains a priority as we believe that the Group needs to continue to invest in the business to grow revenues and profit. This investment is expected to include capital expenditure within existing operations and the capital expenditure required to pursue the strategic priorities of the Group. The Group aims to maintain a strong balance sheet with low levels of gearing, with long-term debt utilised to ensure the business can withstand the cyclical nature of the retail sector. The Group's objective is to maximise long-term shareholder returns through the disciplined deployment of cash generated, and it continues to adopt the following capital allocation policy:

Capital expenditure

The Board will continue to invest in capital assets to support operations in our chosen markets. Capital expenditure will include maintenance capital expenditure in the range of £10.0m to £15.0m per annum (excluding OEM brand partner requirements for refurbishments and EV capital expenditure). During the year the Group has invested in capital expenditure to begin the implementation of our strategic priorities such as the cosmetic repairs business in aftersales, and the development of our IT infrastructure.

Leverage

The Board is committed to maintaining an efficient balance sheet. To support this, the Group will target net debt in the range of +/- 0.5 times EBITDA depending on working capital requirements throughout the year (although it is prepared to operate outside this if circumstances warrant). At 31 December 2022 the net debt was - 0.41 times EBITDA, and therefore within the target range.

Shareholder returns

The Board will continue to review the Group's balance sheet in light of the capital allocation policy, and medium-term investment requirements, and will return excess capital to shareholders if and when appropriate.

The Board intends to pay a regular dividend to shareholders, with a policy of progressively growing dividends through the business cycle. A final dividend relating to 2021 of 2.5 pence per share and an interim dividend relating to 2022 of 1.0 penny per share were paid in June 2022 and November 2022 respectively. The total dividend paid to shareholders during 2022 was £13.7m.

The Group commenced a share buyback programme of up to £15.0m in October 2022. As at 31 December 2022 the Group had purchased 5.7m shares at a cost of £4.5m, equivalent to an average price of 78p per share.

Property strategy

During 2022 the Group has developed a strategy on how its substantial property portfolio can be utilised to generate the maximum return for our shareholders. The vision is for the Group property portfolio to be strategically asset managed, with properties being fully utilised, primarily to facilitate Group operations, and secondly to provide complementary revenue streams. A holistic view of the portfolio is taken, consolidating assets where appropriate and identifying the Group's key locations and locations for growth, enabling strategic acquisitions and disposals when market conditions prevail.

Properties shall be compliant, meeting the required regulatory, and health and safety requirements, whilst also providing operational teams with facilities which support the Group's strategy. Properties shall be well maintained providing a high-quality environment for employees and customers, whilst also being energy efficient and sustainable, supporting the Group's Net Zero strategy.

Dividends

The Board has adopted a progressive Dividend Policy. The Board is pleased to be proposing a final dividend of 2.0 pence per share (2021: 2.5 pence per share). This dividend will be paid on 16 June 2023 to shareholders on the register at close of business on 10 May 2023. The Board intends to maintain a capital structure that is conservative, yet efficient in terms of providing long-term sustainable returns to shareholders.

Oliver Laird

Chief Financial Officer

 

Risk overview and management

Enterprise risk management framework

As part of the normal course of business the Group is exposed to a wide range of risks, both internal and external. The identification and management of those risks is integral to achieving our strategic priorities which rely on our ability to identify and control those things that can hurt us and exploit opportunities that arise, both within our business and the wider market.

Management identify risks and assess the effectiveness of our control environment on an ongoing basis through robust risk management processes and reporting.

To assist, we have an established Enterprise Risk Management Framework (ERMF). It is designed to deliver a common language that helps us define and categorise the risks that we face. It sets the high-level principles and underpinning minimum requirements for the identification, assessment, management and monitoring of each of those risk categories in line with Lookers' defined risk appetite.

The Risk Management Framework Policy is reviewed annually. This 2022 Annual Report sets out how we categorise our risks. The risks are set in a hierarchy with 6 Level 1 risks that are then sub-divided into an additional 16 Level 2 risks. For example, Operational Risk is a level 1 risk, and it has a further 12 Level 2 risks beneath it, including, inter alia, Health & Safety, Information Technology, and Business Continuity. This enables us to record our risks at a more granular level that can be aggregated to an Enterprise view of the risk profile. Each of these Level 1 risks and the Level 2 risks has their own risk policy that we use to define what they mean to us, set our appetite for that particular risk, and help the business understand how we expect the risk to be managed and reported on.

Day to day management of risk

The Board expects the management team to own the risk management process, identify emerging risks, maintain ongoing dialogue with the business and our other stakeholders, provide management information to the Executive Committee and the Board, and provide updates on developments in the automotive sector and wider economy.

Three lines of defence

Lookers applies a "three lines of defence" governance model across the Group. The principal aim of this model is to ensure that Lookers exercises ownership of risk in the first line business functions, and independent oversight and challenge of those risks and their management by its second line departments (Risk and Compliance). Internal Audit (the third line) are in place to provide independent assurance to the Board of the effectiveness of our controls. In summary the accountabilities between lines are split as follows:

·      The first line of defence - Line management and the wider business own the risks and are responsible for the identification, assessment, management, and reporting of those risks

·      The second line of defence - Risk and Compliance operate independently of the first line. They do not own the risk but instead independently oversee, advise, and challenge the first line activity

·      The third line of defence - Internal Audit provide independent assurance to the Board on the effectiveness of our controls

In addition to these three internal lines of defence, our external auditors play an important role through their consideration of the governance and control structure where this is relevant to financial reporting.

Risk appetite framework

Our risk appetite framework defines the level of risk we are willing to take across the Lookers Level 1 Risk categories. This allows us to track mitigating action when our tolerance metrics suggest that we are moving away from where we want to be. Aligned to our strategic planning, risk appetite is key for our decision-making process, including ongoing business planning, new product approvals and business change initiatives.

In setting the risk appetite, the Board outlines the "tone from the top" and provides a basis for ongoing dialogue between management and Board with respect to our current and evolving risk profile, allowing strategic and financial decisions to be made on an informed basis. Lookers' risk appetite for its Level 1 Risks in 2022 was as follows:

·      Strategic Risk: we had appetite to accept risks in pursuing our strategic aims, but implemented controls to minimise the risks around planning and implementation, whilst looking to achieve our strategy without threatening our financial strength and sustainability. In doing so we continuously monitored and reacted to risks associated with our OEM and supplier relationships, competition and product/service developments, and broader economic developments.

·      Financial Risk: we had no appetite for risks relating to financial control, including financial reporting, funding and liquidity management, banking undertakings and covenants, financial forecasting and planning, general financial control, and tax compliance. We maintained robust controls across these areas, with no appetite for activities being undertaken outside of this control. We will only take financial risks to deliver our strategy and generate returns when suitably assessed, governed and controlled.

·      Regulatory Risk: we had no appetite for knowingly breaching or failing to adhere to regulatory rules and standards for all our regulators, this includes the Listing Obligations. We operated robust internal processes to ensure that all regulatory expectations were met, whilst maintaining an open and transparent dialogue with all our regulators. We were proactive and performed horizon scanning to react to changing regulation.

·      Conduct Risk: we have no appetite for knowingly behaving inappropriately in ways that could result in adverse outcomes for our retail customers. Where unintended adverse outcomes arose, we rectified these fairly and promptly, ensuring that the customer was no worse off.

·      Financial Crime Risk: we managed our financial crime risks in a controlled manner, reducing our risk exposure to all aspects of financial crime, which in turn reduced our net risk exposure to an extreme financial, or other, impact (equivalent of a rare probability). We have no appetite to knowingly breach financial crime regulatory guidance or requirements.

·      Operational Risk: we accept that, as a part of our day-to-day activity, operational risk will crystallise but we sought to reduce it to a net exposure equivalent of a rare probability of a critical impact. We prioritised the management of our most material operational risks through a robust and proportionate level of control. We focused our monitoring and analysis on the key categories of: Information Technology; Information Security & Cyber; Third Party and Operational Resilience; Change Management; People; Health & Safety; and general operational risk.

The Board keeps the Group's risk appetite under periodic review in light of changing market conditions and the Group's performance and strategic focus.

Financial reporting

The Executive Directors oversee the preparation of the Group's annual corporate plan; the Board reviews and approves it and monitors actual performance against it on a monthly basis.

We also produce, and the Board reviews and approves, a three year plan and updates to the annual corporate plan. To ensure that information consolidated into the Group's financial statements is in compliance with relevant accounting standards and the Group's own accounting policies, internal reporting data is reviewed regularly.

The Audit and Risk Committee (ARC) reviews the appropriateness of the Group's accounting policies each reporting period, the application of IFRS, and the reliability of the Group's system of control over financial reporting. The ARC considers reports from the Executive Committee, Internal Audit, the Risk and Compliance teams, and the Group's external auditor.

The drive to improve the Group's financial reporting controls has continued through 2022 with oversight from the ARC. Work will continue to further enhance those controls and ensure that the Group's financial reporting presents a true and fair reflection of the Group's financial performance and position.

Overview of the risks and uncertainties

Whilst demand and performance remained strong over the reporting period, we continue to be mindful of potential headwinds as we pursue our strategic objectives in FY23.

The upward inflationary pressure, and in particular a significant rise in energy costs, has the potential to impact consumer confidence and the Group's operating costs.

In addition, the strain on supply chains continues with a particular impact on new car and parts supply as a result of the semiconductor shortage, the conflict in Ukraine, and COVID restrictions in China. These disruptions to supply have also seen an impact on used car valuations which will have to be closely managed across the year.

More information on these risks and their impact on the Group will be included in the 2022 Annual Report.

Directors' responsibilities statement

The Directors confirm to the best of their knowledge:

·      The Financial Statements have been prepared in accordance with the applicable set of accounting standards and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and Company.

·      The Operating and Financial Review in this announcement includes a fair review of the development and performance of the business and the financial position of the Group, together with a description of the principal risks and uncertainties that they face.

This responsibility statement was approved by the Board of Directors and is signed on its behalf by:

 

Mark Raban

Chief Executive Officer

 

Basis of preparation

The financial information presented in this preliminary announcement is extracted from, and is consistent with, the Group's audited financial statements for the year ended 31 December 2022. The financial information set out below does not constitute the Company's statutory financial statements for the periods ended 31 December 2022 or 31 December 2021 but is derived from those financial statements. Statutory financial statements for 2022 will be delivered following the Company's annual general meeting. The auditors have reported on those financial statements; their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The financial information in this announcement has been extracted from the Group's Annual Report and Accounts for the year ended 31 December 2022 and is prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK Adopted International Accounting Standards. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS and the financial information set out does not constitute the Company's statutory accounts for the current or prior year.

Going concern

At the time of approving the Financial Statements, the Board of Directors is required to formally assess that the business has adequate resources to continue in operational existence for a period of at least 12 months from the date of the approval of the 2022 financial statements and as such can adopt the 'Going Concern' basis of accounting. The Group's Base Case financial model has been subjected to sensitivity analysis, in which a number of the main underlying assumptions have been adjusted and tested to consider several 'severe but plausible' downside scenarios which are detailed below.

Following this review, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and continues to adopt the going concern basis of accounting in preparing the annual financial statements. The Board has reached this conclusion based on the following considerations.

Key judgements and mitigating actions

In assessing whether the Group is a going concern the Board have considered the potential impact on future revenues, profits, and cashflows of worsening macroeconomic conditions reducing consumer demand alongside rising inflation and interest rates, a supply shortage of vehicle components (e.g. semiconductors), a potential steep decline in gross profit margins, and the impact of a targeted cyber-attack.

In forming their conclusions, the Board have also considered potential mitigating actions the Group could take to preserve liquidity and ensure compliance with the Group's financial covenants. In doing so, judgement has been applied in determining whether such actions would be plausible to execute as well as the financial impact of taking such actions. In terms of mitigating actions, the Board would take immediate decisive actions should the need arise.

Modelling potential downside scenarios

In their consideration of the going concern of the Group, the Board have reviewed the future profit forecasts and cash projections, and debt and other key financial ratios over the period including compliance with existing covenant arrangements. These metrics are subject to sensitivity analysis, in which a number of the main underlying assumptions are adjusted and tested to consider alternative risk-based scenarios.

As detailed in the Risk Overview and Management section, the Group identifies risks on an ongoing basis through a robust risk management process. We have stress tested our detailed plan, considering several severe but plausible scenarios which are aligned to the Group's risk appetite and principal risks. The Board has also considered compliance with covenants associated with the Group's banking facility, which runs until 30 September 2025.

The Board have used their experience to model four different downside scenarios to ascertain the Group's ability to continue as a going concern. The scenarios modelled are as follows:

Macroeconomic - As the economy recovers from the COVID-19 pandemic the domestic market has seen elevated inflation due to global supply issues and other global events, such as the war in Ukraine, these factors may contribute to a contraction in consumer demand. Management have modelled a potential scenario whereby retail volumes fall by 2% compared to the Base Case and continue to reduce by an additional 2% each year. This scenario assumed that aftersales margins remain at the same levels achieved in FY22. All costs have been increased by a further 2% compared to the Base Case and an additional percentage point has been added to the Group's interest rate assumption.

Supply constraints - Management have modelled a volume reduction scenario, where potential stock restrictions reduce Base Case new (including agency), fleet, and motability volumes by 50% between February and September 2023, gradually building back to Base Case levels by March 2024. In this scenario, all non-variable direct and indirect expenditure has remained in line with Base Case.

Margin reduction - This scenario models a decline in new, motability, and used margins by 15% compared to the Base Case in FY23 and an additional 15% in FY24. All costs have remained in line with Base Case.

Cyber security - The increasing sophistication and occurrence of cyber-attacks could result in a significant disruption to the Group's business activities. The final scenario modelled assumes that a cyber incident occurs significantly reducing the Group's ability to trade, whilst retaining the existing cost base.

Under all of the scenarios tested, the Group would not breach any of its financial covenants and no additional financing is required.

Reverse stress testing

To provide additional assurance around the Group's going concern reverse stress tests have been modelled. These reverse stress tests are designed to breach financial covenants or exceed liquidity. We have looked at what point we would breach each financial covenant and subsequently assessed the likelihood of this occurring. The following scenarios have been run:

·      Rise in interest rates required to breach interest cover;

·      Increase in stock levels, and the associated financing, needed to breach interest cover; and

·      Reduction in EBITDA to breach interest cover.

For the Group to breach interest cover over the going concern period as a direct consequence of rising interest rates an additional 5.2 percentage points is required in order to generate an additional £21m interest charge expenditure. Alternatively, if interest rates remain in line with the Base Case, average stock levels would need to increase by c. £260m for interest cover to be breached. In respect of EBITDA, a reduction of 55% is required to breach Interest Cover, this equates to a 15% reduction in all retail and aftersales volumes over a 12-month period.

In each of the reverse stress test scenarios, the Board believes the events that would lead to a covenant breach are remote and that there is appropriate headroom in each covenant and material headroom in liquidity to assess going concern of the Group, before any material and demonstratable mitigating actions would be required.

Financing

The Group's banking agreements and associated covenants are set out in the Financial Review and include a £100.0m RCF (maturing in September 2025). The Group ended the year with net funds of £66.5m (2021: £3.0m). The financial covenants are tested quarterly in line with December year-end reporting. The covenants throughout 2022 have been met with headroom to spare. In all of the downside scenarios discussed above, the Group continues to forecast compliance with all financial covenants for the next 12 months. In addition to the RCF, the Group has stocking funding lines which were utilised at £247.2m at 31 December 2022 (2021: £248.1m).

Going concern

In all the scenarios, the Group has sufficient liquidity to continue trading, including payment of dividends. The reverse stress test modelling demonstrated that a prolonged period of volume and sales decline is required to breach covenants, however we would maintain material liquidity headroom. If the Group was at risk of breaching one or more of its financial covenants, management would take mitigating actions, which include but are not limited to:

·      Dealership closures and headcount reductions;

·      A reduction in capital investment and pausing new strategic initiatives;

·      Reduction in stock levels to meet demand; and

·      Suspension of dividends.

Considering the various sensitivities and additional stress testing, the Board has concluded that preparing the accounts on a Going Concern basis is appropriate.

Statement of Total Consolidated Comprehensive Income

For the year ended 31 December 2022 and 31 December 2021

	Note	2022 £m	2021 £m
Revenue	1	4,300.9	4,050.7
Cost of sales		(3,750.7)	(3,534.1)
Gross profit		550.2	516.6
Net operating expenses		(441.3)	(402.5)
Operating profit		108.9	114.1
Underlying operating profit		107.2	114.2
Non-underlying items	2	1.7	(0.1)
Finance costs	3	(24.5)	(24.1)
Profit before taxation		84.4	90.0
Underlying profit before taxation	2	82.7	90.1
Non-underlying items		1.7	(0.1)
Tax charge	4	(10.5)	(28.8)
Profit for the year (attributable to shareholders of the Company)		73.9	61.2
Exchange differences on translation of foreign operation (may be recycled to profit and loss)		0.8	(0.5)
Actuarial gains on pension scheme obligations (not recycled to profit and loss)		6.9	24.9
Deferred tax on pension scheme obligations (not recycled to profit and loss)		(1.7)	0.4
Total other comprehensive income for the year		6.0	24.8
Total comprehensive income for the year (attributable to shareholders of the Company)		79.9	86.0
Earnings per share:
Basic earnings per share (p)	6	18.87	15.65
Diluted earnings per share (p)	6	18.64	15.55

 

Consolidated Statement of Financial Position

As at 31 December 2022 and 31 December 2021

	Note	Group 2022 £m	2021 £m
Non-current assets
Goodwill	7	79.3	79.3
Intangible assets	8	105.2	107.9
Property, plant and equipment	9	404.4	399.3
Right of use assets	10	114.9	115.7
		703.8	702.2
Current assets
Inventories	11	664.6	511.9
Trade and other receivables		125.4	108.5
Current tax receivable		8.8	5.6
Rental fleet vehicles		51.9	27.5
Cash and cash equivalents		111.8	103.9
Assets held for sale		2.6	5.0
		965.1	762.4
Total assets		1,668.9	1,464.6
Current liabilities
Bank loans and overdrafts		45.3	83.6
Trade and other payables		905.9	729.6
Lease liabilities		22.3	20.7
		973.5	833.9
Net current liabilities		(8.4)	(71.5)
Non-current liabilities
Bank loans		-	17.3
Trade and other payables		74.3	35.1
Lease liabilities		120.7	116.1
Pension scheme obligations		23.5	43.2
Deferred tax liabilities		45.0	49.4
		263.5	261.1
Total liabilities		1,237.0	1,095.0
Net assets		431.9	369.6
Shareholders' equity
Ordinary share capital		19.3	19.6
Share premium		78.4	78.4
Capital redemption reserve		15.4	15.1
Retained earnings		318.8	256.5
Total equity		431.9	369.6

 

Mark Raban

4 April 2023

Consolidated Statement of Changes in Equity

As at 1 January 2021, 31 December 2021 and 31 December 2022

Year ended 31 December 2021	Share capital £m	Share premium £m	Capital redemption reserve £m	Retained earnings £m	Total equity £m
As at 1 January 2021	19.5	78.4	15.1	169.9	282.9
Profit for the year	-	-	-	61.2	61.2
Total other comprehensive income for the year	-	-	-	24.8	24.8
Total comprehensive income for the year	-	-	-	86.0	86.0
New shares issued	0.1	-	-	-	0.1
Share based compensation	-	-	-	0.6	0.6
As at 31 December 2021	19.6	78.4	15.1	256.5	369.6
Year ended 31 December 2022
As at 1 January 2022	19.6	78.4	15.1	256.5	369.6
Profit for the year	-	-	-	73.9	73.9
Total other comprehensive income for the year	-	-	-	6.0	6.0
Total comprehensive income for the year	-	-	-	79.9	79.9
Share based compensation	-	-	-	0.7	0.7
Own shares purchased for cancellation	(0.3)	-	0.3	(4.6)	(4.6)
Dividends paid to shareholders	-	-	-	(13.7)	(13.7)
As at 31 December 2022	19.3	78.4	15.4	318.8	431.9

Retained earnings include £16.5m (2021: £16.5m) of non-distributable reserves relating to properties which had been revalued under UK GAAP, but treated as deemed cost under IFRS.

Consolidated Statement of Cash Flows

For the year ended 31 December 2022 and 31 December 2021

	Note	2022 £m	2021 £m
Cash flows from operating activities
Profit for the year		73.9	61.2
Tax charge	4	10.5	28.8
Depreciation of property, plant and equipment, rental fleet and right of use assets		49.9	48.9
Gain on disposal of property, plant and equipment		(6.4)	(2.4)
Gain on disposal of leases		(1.9)	-
Gain on modification of leases		(0.1)	-
Gain on disposal of right of use asset associated with rental fleet assets		(0.4)	(0.4)
Amortisation of intangible assets	8	4.7	5.0
Loss on disposal of intangibles		0.3	-
Share-based compensation		0.7	0.6
(Impairment reversal)/impairment of property, plant and equipment		(0.2)	0.7
Impairment of right of use assets	10	1.1	1.2
Finance costs excluding pension related finance costs and debt issue costs	3	22.7	22.1
Amortisation of debt issue costs	3	1.2	1.1
Difference between pension charge and cash contributions		(12.8)	(11.2)
Purchase of rental fleet vehicles		(22.6)	(23.6)
Purchase of right of use assets associated with rental fleet assets		(0.3)	(0.4)
Purchase of vehicles for long-term leasing		(52.8)	(34.9)
Changes in inventories		(139.7)	183.5
Changes in receivables		(14.1)	11.7
Changes in payables		185.9	(188.9)
Cash generated from operations		99.6	103.0
Finance costs paid		(16.5)	(16.1)
Finance costs paid - lease liabilities		(6.2)	(6.0)
Tax paid		(19.8)	(16.3)
Net cash inflow from operating activities		57.1	64.6
Cash flows from investing activities
Purchase of property, plant and equipment and own use vehicles		(16.8)	(14.1)
Purchase of intangibles		(2.3)	(3.3)
Amounts paid to surrender leases		(0.2)	-
Finance lease rentals collected		1.5	2.9
Proceeds from disposal of property, plant and equipment		32.9	11.8
Net cash inflow/(outflow) from investing activities		15.1	(2.7)
Cash flows from financing activities
Receipt of funding advanced for vehicle leasing arrangements		75.4	58.5
Repayment of funding advanced for vehicle leasing arrangements		(45.9)	(62.3)
Payment of loan arrangement fees		(1.1)	-
Repayment of loans		(8.3)	(1.2)
Drawdown on revolving credit facility		-	35.1
Repayment on revolving credit facility		(12.5)	(181.5)
Repayment of lease liabilities		(16.3)	(16.4)
Purchase of own shares		(4.6)	-
Dividends paid		(13.7)	-
Net cash outflow from financing activities		(27.0)	(167.8)
Increase/(decrease) in cash and cash equivalents		45.2	(105.9)
Cash and cash equivalents at 1 January		21.3	127.2
Cash and cash equivalents at 31 December		66.5	21.3
Analysis of cash and cash equivalents
Cash and cash equivalents		111.8	103.9
Bank overdraft		(45.3)	(82.6)
Cash and cash equivalents at 31 December		66.5	21.3

 

Notes to the financial information

For the year ended 31 December 2022

1. Segmental reporting

The Group presents segmental information to better reflect the Group's revenue streams and the single-segment trading nature of the business' operations. No further disclosures have been made given the single-segment trading nature of the business' operations which are predominantly transacted in the United Kingdom. All channels have been shown as gross totals prior to the elimination of intercompany trading activity so as to provide more granular detail around the Group's internal trading activities.

	2022 £m	Mix*	2021 £m	Mix*
New cars	1,965.5	40.9%	1,866.2	41.7%
Used cars	2,255.2	46.9%	2,038.7	45.6%
Aftersales	458.4	9.6%	429.2	9.6%
Leasing and other	126.6	2.6%	136.9	3.1%
Less: intercompany	(504.8)	-	(420.3)	-
Revenue	4,300.9	100%	4,050.7	100%

*Mix calculation excludes the effect of intercompany revenues.

2. Non-underlying items

The following details items of income and expenditure that the Group has classified as non-underlying in its statement of total comprehensive income.

		2022 £m	2021 £m
Non-underlying items at operating profit
1 - Gain on sale and leaseback		6.0	-
2 - Gain on property disposals		1.7	2.4
3 - Impairment of property, plant and equipment		(1.8)	(0.7)
3 - Impairment of right of use assets		(1.1)	(1.2)
3 - Other property exit and restructuring costs		(3.0)	(0.6)
4 - Impairment reversal of property, plant and equipment		2.0	-
5 - Sales transformation project		(2.1)	-
Non-underlying items at operating profit		1.7	(0.1)

 

1 - In March 2022 the Group completed the sale and leaseback of the VW dealership in Battersea. The net gain on sale has been deemed non-underlying by its size and nature.

2 - Property disposals relate to the net gains on the sale of a number of freehold and leasehold properties during the current and prior year. These items have been deemed non-underlying by nature.

3 - During the prior year a number of sites were exited as part of Group-wide restructuring. This has continued into the current year where we have closed or announced our intention to close six sites (2021: three sites). Items include site closure costs, restructuring costs, and impairment losses. These items have been deemed non-underlying by nature and irregularity.

4 - In 2020 we classified a site as an asset held for sale and at this point it was impaired in line with IAS 36. In the current year we have secured a new franchise for this site and it is due to re-open in 2023, therefore the value in use has significantly increased and we have reversed the impairment. Both the original impairment and subsequent reversal have been included within non-underlying items.

5 - In the current year we have commenced a Sales transformation project. Costs incurred include external and internal incremental resource required to implement the new sales system. These items are considered non-underlying due to their irregularity.

The net cash inflow from activities associated with non-underlying items is £25.1m (2021: inflow £11.0m).

3. Finance costs

Finance costs:	2022 £m	2021 £m
On revolving credit facility	(0.9)	(2.9)
On other bank borrowings	(0.4)	(0.4)
On consignment, repurchase vehicle liabilities and stocking loans	(12.7)	(10.7)
On vehicle rental finance liabilities	(2.5)	(2.1)
On lease liabilities	(6.2)	(6.0)
Debt issue costs	(1.2)	(1.1)
	(23.9)	(23.2)
Net pension costs:
On defined benefit pension obligation	(5.6)	(4.3)
On pension scheme assets	5.0	3.4
	(0.6)	(0.9)
Finance costs	(24.5)	(24.1)

 

4. Taxation

	2022 £m	2021 £m
Current tax charge:
Current year	14.9	11.3
Adjustment in respect of prior years	1.7	0.9
	16.6	12.2
Deferred tax (credit)/charge:
Deferred tax - origination and reversal of temporary differences	0.6	4.8
Change in UK tax rate	-	16.9
Adjustment in respect of prior years	(6.7)	(5.1)
	(6.1)	16.6
Total tax charge	10.5	28.8
Tax on items charged/(credited) to other comprehensive income:
Tax on pension scheme obligations excluding change in UK tax rate	1.7	4.7
Change in UK tax rate	-	(5.1)
	1.7	(0.4)

 

	2022			2021
	Underlying £m	Non-underlying £m	Reported £m	Underlying £m	Non-underlying £m	Reported £m
Reconciliation of total tax
Profit before tax	82.7	1.7	84.4	90.1	(0.1)	90.0
Standard rate of corporation tax at 19% (2021: 19%)	15.7	0.3	16.0	17.1	-	17.1
(Non taxable income)/disallowable items	(0.2)	(0.1)	(0.3)	(0.9)	0.3	(0.6)
Share-based compensation	(0.2)	-	(0.2)	(0.3)	-	(0.3)
Adjustment in respect of prior years	(5.0)	-	(5.0)	(4.2)	-	(4.2)
Difference between current and deferred tax rates	1.2	(1.1)	0.1	-	-	-
Change in UK tax rate	-	-	-	16.9	-	16.9
Difference on overseas tax rate	(0.1)	-	(0.1)	(0.1)	-	(0.1)
Total tax charge	11.4	(0.9)	10.5	28.5	0.3	28.8

 

5. Dividends

Group	2022 £m	2021 £m
Interim dividend for the year ended 31 December 2022 1.0p (2021: nil p)	3.9	-
Final dividend for the year ended 31 December 2021 2.5p (2020: nil p)	9.8	-
	13.7	-

 

The Directors propose a final dividend of 2.0p per share in respect of the financial year ended 31 December 2022 (2021: 2.5p). The proposed final dividend is subject to shareholder approval at the Annual General Meeting and has therefore not been included as a liability in these financial statements.

6. Earnings per share

	2022	2021
Profit attributable to ordinary shareholders (£m)	73.9	61.2
Weighted average number of shares in issue	391,627,955	391,073,686
Basic earnings per share (p)	18.87	15.65
Profit attributable to ordinary shareholders (£m)	73.9	61.2
Dilutive effect of share-based compensation options and weighted average number of shares in issue	396,385,849	393,466,275
Diluted earnings per share (p)	18.64	15.55
Profit before tax (£m)	84.4	90.0
Add: Non-underlying items (£m)	(1.7)	0.1
Underlying profit before tax (£m)	82.7	90.1
Underlying tax (£m)	(11.4)	(28.5)
Change in UK tax rate (£m)	-	16.9
Underlying earnings attributable to ordinary shareholders (£m)	71.3	78.5
Weighted average number of shares in issue	391,627,955	391,073,686
Underlying basic earnings per share (p)	18.21	20.07

 

7. Goodwill

Cost	2022 £m	2021 £m
At 1 January and 31 December	122.4	122.4
Aggregate impairment
At 1 January and 31 December	43.1	43.1
Carrying amount at 31 December	79.3	79.3

 

Following the Group's annual impairment review an impairment charge of £nil has been recognised during the year (2021: £nil).

The following table summarises goodwill and intangibles with an indefinite useful economic life allocated by CGU:

CGU	2022 Goodwill	2022 Licences & brands	2022 Total	2021 Goodwill	2021 Licences & brands	2021 Total
	£m	£m	£m	£m	£m	£m
Jaguar Land Rover	9.0	-	9.0	9.0	-	9.0
Audi	22.1	27.9	50.0	22.1	27.9	50.0
Charles Hurst	9.4	-	9.4	9.4	-	9.4
Ford	4.8	2.9	7.7	4.8	2.9	7.7
Mercedes-Benz	15.2	28.2	43.4	15.2	28.2	43.4
Volkswagen	6.9	15.9	22.8	6.9	15.9	22.8
BMW	-	21.7	21.7	-	21.7	21.7
Vauxhall Renault Nissan Dacia	2.8	2.9	5.7	2.8	2.9	5.7
Fleet & Leasing	9.1	-	9.1	9.1	-	9.1
	79.3	99.5	178.8	79.3	99.5	178.8

 

Goodwill and licences are tested for impairment at least annually through assessment of carrying value against value-in-use.

The value-in-use of each CGU is calculated using cash flow projections for a five-year period; from 1 January 2023 to 31 December 2027. These projections are based on the Board approved strategic plan to 31 December 2025 and extrapolated to 31 December 2027 based on management's expectations. The Board's strategic plan considers the Group's profit and loss, cashflows, debt and other key financial ratios over the period. The key assumptions in the strategic plan on which the cash flow projections are based relate to expectations of sales volumes and margins and expectations around changes in the operating cost base. The assumptions made are based on the Board's understanding of the current macroeconomic context and outlook, past experience adjusted for expected changes, and external sources of information.

The key assumptions that have been used in determining the value in use of each cash generating unit in the impairment model are set out in the table below:

Assumption	2022	2021	2020
Three to five year revenue growth	0.0%	0.0% to 1.4%	0.0% to 1.4%
Three to five year operating expenses growth	1.0%	0.0% to 2.0%	0.0% to 2.0%
Post year five growth rate	2.5%	0.0%	0.0%
Discount rate	14.0%	12.4%	9.9%

 

The pre-tax adjusted discount rate used has been calculated using the Group's estimated cost of capital and benchmarked against externally available data.

Sensitivity

The Group has carried out sensitivity analyses on the possible changes in key assumptions in the impairment testing. Neither a 1.0 percentage point increase in discount rate nor a reduction to nil of the post 5 year growth rate would indicate impairment in any CGU. The lowest headroom in any CGU is £5.3m; for this headroom to be extinguished the discount rate would need to increase by 1.8 percentage points above that used in the impairment testing.

8. Intangible assets

Group	Licences and brands £m	IT development   £m	Total   £m
Cost
At 1 January 2021	102.6	42.0	144.6
Additions	-	3.3	3.3
Disposals	-	(23.3)	(23.3)
Reclassifications to property, plant and equipment	-	(1.2)	(1.2)
At 31 December 2021	102.6	20.8	123.4
At 1 January 2022	102.6	20.8	123.4
Additions	-	2.3	2.3
Disposals	-	(0.3)	(0.3)
At 31 December 2022	102.6	22.8	125.4
Accumulated amortisation and impairment
At 1 January 2021	3.1	30.7	33.8
Charge for the year	-	5.0	5.0
Disposals	-	(23.3)	(23.3)
At 31 December 2021	3.1	12.4	15.5
At 1 January 2022	3.1	12.4	15.5
Charge for the year	-	4.7	4.7
At 31 December 2022	3.1	17.1	20.2
Carrying amount
As at 1 January 2021	99.5	11.3	110.8
As at 31 December 2021 and 1 January 2022	99.5	8.4	107.9
As at 31 December 2022	99.5	5.7	105.2

 

At 31 December 2022 there is an amount of £2.2m (2021: £0.7m) committed for future capital expenditure. Included within IT development are IT assets in the course of construction totalling £0.1m (2021: £0.3m).

9. Property, plant and equipment

Group	Land and buildings	Motor vehicles	Other	Total
	£m	£m	£m	£m
Cost At 1 January 2021	341.8	96.8	75.3	513.9
Movements in foreign exchange	(1.2)	-	(0.1)	(1.3)
Additions	4.7	35.2	9.1	49.0
Disposals	(1.6)	(0.4)	(10.7)	(12.7)
Transfers	4.5	-	(4.5)	-
Transfers from intangible assets	-	-	1.2	1.2
Transfers to inventories	-	(32.3)	-	(32.3)
Net transfers from assets held for sale	1.4	-	-	1.4
At 31 December 2021	349.6	99.3	70.3	519.2
At 1 January 2022	349.6	99.3	70.3	519.2
Movements in foreign exchange	0.8	-	0.1	0.9
Additions	4.6	53.9	11.1	69.6
Disposals	(11.1)	(0.2)	(7.0)	(18.3)
Transfers	1.9	-	(1.9)	-
Transfers to inventories	-	(32.6)	-	(32.6)
Net transfers to assets held for sale	(2.5)	-	-	(2.5)
Transfers to right of use assets	(5.9)	-	-	(5.9)
At 31 December 2022	337.4	120.4	72.6	530.4
Accumulated depreciation and impairment At 1 January 2021	41.1	28.8	44.1	114.0
Movements in foreign exchange	(0.1)	-	(0.1)	(0.2)
Charge for the year	5.3	16.9	8.4	30.6
Impairment charge	-	-	0.6	0.6
Disposals	(0.3)	(0.2)	(9.2)	(9.7)
Transfers	0.2	-	(0.2)	-
Transfers to inventories	-	(15.3)	-	(15.3)
Net transfers from assets held for sale	(0.1)	-	-	(0.1)
At 31 December 2021	46.1	30.2	43.6	119.9
At 1 January 2022	46.1	30.2	43.6	119.9
Movements in foreign exchange	-	-	0.1	0.1
Charge for the year	8.1	17.0	8.4	33.5
Impairment (reversal)/charge	(0.6)	-	0.4	(0.2)
Disposals	(2.1)	(0.2)	(6.2)	(8.5)
Transfers	(0.6)	-	0.6	-
Transfers to inventories	-	(14.8)	-	(14.8)
Net transfers to assets held for sale	(1.4)	-	-	(1.4)
Transfers to right of use assets	(2.6)	-	-	(2.6)
At 31 December 2022	46.9	32.2	46.9	126.0
Carrying amount As at 1 January 2021	300.7	68.0	31.2	399.9
As at 31 December 2021 and 1 January 2021	303.5	69.1	26.7	399.3
As at 31 December 2022	290.5	88.2	25.7	404.4

 

Assets in the course of construction relate to build costs that have been incurred but the property is not yet in use and are included in Other. The total of these assets held at 31 December 2022 is £4.5m (2021: £4.7m). These assets will be transferred to land and buildings when complete. Other includes plant and machinery, fixtures, fittings and tools and equipment.

Included within land and buildings is freehold land at a cost of £83.4m (2021: £94.8m) which is not depreciated. At 31 December 2022 there is an amount of £8.5m (2021: £15.4m) committed for future capital expenditure.

Included within additions to motor vehicles of £53.9m (2021: £35.2m) are additions of £1.1m (2021: £0.3m) relating to own use vehicles. At 31 December 2022 there is a net book value amount of £1.8m (2021: £1.1m) of own-use vehicles included within the total net book value for motor vehicles.

During the year ended 31 December 2022 the total net book value of disposals from property and other amounted to £9.8m (2021: £2.8m) including £8.7m (2021: £nil) attributed to a sale and leaseback transaction. Total proceeds received were £28.1m (2021: £3.0m) resulting in a gain on disposals of £5.6m (2021: £0.2m) after applying the sale and leaseback treatment prescribed under IFRS 16.

During the year ended 31 December 2022 the total net book value of disposals from motor vehicles relating to own-use vehicles amounted to £nil (2021: £0.2m). Total proceeds received were £nil (2021: £0.2m) resulting in a gain on disposals of £nil (2021: £nil).

An impairment charge reversal of £0.2m (2021: charge of £0.6m) has been recorded representing an adjustment to the expected recoverable values of assets. During the year £1.1m (2021: £1.5m) of properties have been transferred to assets held for sale from property, plant and equipment, and £nil (2021: £3.0m) of properties have been transferred from assets held for sale to property, plant and equipment.

10. Right of use assets

Group	Property	Other	Total
	£m	£m	£m
At 1 January 2021	122.9	1.5	124.4
Additions	4.7	3.7	8.4
Modifications	1.0	-	1.0
Depreciation charge	(12.7)	(2.6)	(15.3)
Impairment	(1.2)	-	(1.2)
Disposals	(1.6)	-	(1.6)
At 31 December 2021	113.1	2.6	115.7
At 1 January 2022	113.1	2.6	115.7
Additions	9.7	6.5	16.2
Modifications	(1.4)	-	(1.4)
Depreciation charge	(10.7)	(3.1)	(13.8)
Impairment	(1.1)	-	(1.1)
Transfer from property, plant and equipment	3.3	-	3.3
Disposals	(4.0)	-	(4.0)
As at 31 December 2022	108.9	6.0	114.9

 

Included within the Other category are leases for motor vehicles and IT equipment.

A charge of £1.1m (2021: £1.2m) has been recognised following the cessation of trade from certain dealerships during the year thereby giving rise to an impairment charge which has been treated as a non-underlying item (see Note 2).

11. Inventories

Group	2022	2021
	£m	£m
Goods for resale	311.4	310.7
Vehicle spare parts for resale	20.3	18.7
Consignment vehicles	332.9	182.5
	664.6	511.9

 

Total write-offs of £nil (2021: £nil) have been incurred during the year and there have been no reversals of past write-downs (2021: none). Stocking loans provided by third party finance houses are secured over the vehicles used for the provision of such finance.

Included within goods for resale are vehicles leased out to staff employees on short-term lease arrangements via a third party but are still actively marketed for immediate sale to third parties by the Group as the Group has not relinquished control of these vehicles. As at 31 December 2022 these total £31.2m (2021: £27.6m).

At 31 December 2022 the Group had entered into a number of future purchase commitments amounting to £0.2m (2021: £0.8m) which are not recognised in the financial statements.

12. Reconciliation of Alternative Performance Measures

The Group uses a number of Alternative Performance Measures (APM) which are non-IFRS measures in establishing their financial performance. Like-for-like is the collection of dealerships and other trading businesses that have both a full year of trading activity in the current year and prior year. The Group believes the APM provide useful, historical financial information to assist investors and other stakeholders to evaluate the performance of the business and are measures commonly used by certain investors for evaluating the performance of the Group.

In particular, the Group uses APM which reflect the underlying performance on the basis that this provides users of the financial statements with additional useful information to better assess the core business performance of the Group. Details of the definitions of APM are made within the Glossary in Note 13. A reconciliation of the statutory measures to the APM is set out below:

Like-for-like revenue	2022	2021
Revenue (£m)	4,300.9	4,050.7
Less: Non like-for-like revenue	(31.8)	(47.8)
Like-for-like revenue (£m)	4,269.1	4,002.9
Gross profit margin
Revenue (£m)	4,300.9	4,050.7
Gross profit (£m)	550.2	516.6
Gross profit margin (%)	12.8%	12.8%
EBITDA and underlying EBITDA (£m)
Operating profit (£m)	108.9	114.1
Add: Depreciation (£m)	49.9	48.9
Add: Amortisation (£m)	4.7	5.0
EBITDA (£m)	163.5	168.0
Add: Non-underlying items (£m)	(1.7)	0.1
Underlying EBITDA (£m)	161.8	168.1
Underlying operating profit (£m)
Operating profit (£m)	108.9	114.1
Add: Non-underlying items (£m)	(1.7)	0.1
Underlying operating profit (£m)	107.2	114.2
Underlying profit before tax and underlying basic EPS
Profit before tax (£m)	84.4	90.0
Add: Non-underlying items (£m)	(1.7)	0.1
Underlying profit before tax (£m)	82.7	90.1
Underlying tax (£m)	(11.4)	(28.5)
Change in UK tax rate (£m)	-	16.9
Underlying profit after tax (£m)	71.3	78.5
Weighted average number of shares in issue	391,627,955	391,073,686
Underlying basic EPS (p)	18.21	20.07
Property portfolio and property portfolio by share
Property, plant and equipment (£m)	404.4	399.3
Less: Other property, plant and equipment (£m)	(25.7)	(26.7)
Less: Motor vehicles (£m)	(88.2)	(69.1)
Property portfolio (£m)	290.5	303.5
Share capital at 31 December	386,694,274	391,887,909
Property portfolio per share (p)	75.1	77.4
Net funds excluding lease liabilities and rental vehicle finance liabilities
Cash and cash equivalents (£m)	111.8	103.9
Less: Bank loans and overdrafts (£m)	(45.3)	(100.9)
Net funds (£m)	66.5	3.0

 

13. Glossary of terms

Performance measure	Definition	Why we measure it
Like-for-like (LFL)	These are calculated where dealerships have contributed twelve months of revenue and profit contribution in both the current and comparative periods presented.	To provide a consistent overview of comparative trading performance.
Gross profit margin	Gross profit as a percentage of revenue.	A measure of the significant revenue channels' operational performance.
Non-underlying items	Relate to costs or incomes which are not incurred in the core operations of the business or due to their size, nature and irregularity are not included in the assessment of financial performance in order to reflect management's view of the core-trading performance of the Group (see Note 2).	A key metric of the Group's non- underlying business performance.
Earnings before interest, tax, depreciation, and amortisation (EBITDA)	Operating profit before deducting depreciation and amortisation.	A key metric of the Group's underlying business performance
Underlying operating profit	Operating profit before the impact of non-underlying items as defined above.	A key metric of the Group's underlying business performance.
Underlying profit before tax	Profit before tax before the impact of non-underlying items as defined above.	A key metric of the Group's underlying business performance.
Underlying basic earnings per share (EPS)	Earnings per share before the impact of non-underlying items as defined above, and the impact of tax rate changes.	A key metric of the Group's underlying business performance.
Net funds	Cash and cash equivalents less bank loans and overdrafts. Lease liabilities, vehicle rental liabilities and stocking loans are not included in net funds.	A measure of the Group's net funds that provides an indicator of the overall balance sheet strength.
Property portfolio	The net book value of freehold and leasehold properties as at the balance sheet date.	A key metric of the Group's statement of financial position.
New car unit sale	A new car sale which has generated revenue for the Group.	A measure of statistical volumes and indicator of operational performance.
Used car unit sale	Any car sold that isn't a new car unit sale.	A measure of statistical volumes and indicator of operational performance.
Car parc	The approximate number of vehicles on the UK road network.	A measure of the UK market size and indicator for growth opportunities.
New car market	Total number of annual new car unit registrations made in the UK as defined by the Society of Motor Manufacturers and Traders (SMMT).	A measure of the UK market size and indicator for growth opportunities.
New car market share	The Group's annual share of the new car market calculated as a percentage of the Group's new car unit sales to the new car market size.	Our relative performance against the UK market.

 

Details of the reconciliations of APMs to statutory measures are made in Note 12.