12 March 2013
Inchcape plc
(The "Group" or the "Company")
2012 Annual Results Announcement
Results for the year ended 31 December 2012
Inchcape delivers record PBT and 12% EPS growth
Inchcape plc, the global premium automotive group, announces its annual results for the year ended 31 December 2012.
Operational and strategic highlights:
· 12% adjusted EPS* growth in 2012 (3 year CAGR of 14%)
· Over 70% of Group trading profit now derived from Asia Pacific and Emerging Markets
· Record profit in Australasia and North Asia, and a record trading margin in the UK
· Post period end, acquired Trivett Automotive Group, Australia's largest premium automotive group
Financial highlights:
· Reported sales up 4.4% to £6.1bn (2011: £5.8bn)
· Pre-exceptional PBT up 10% to a record £250.3m (2011: £227.7m)
· Reported PBT up 24% to £251.5m (2011: £203.4m)
· Operating cash flow of £249.2m (2011: £244.7m)
· Final dividend payout ratio increased to 40%, Board recommends final dividend of 10.5p per share giving a total dividend for the year of 14.5p per share (2011: 11.0p), up 32%
André Lacroix, Group CEO of Inchcape plc, commented:
"2012 was another strong year for Inchcape with market share gains in many regions and further progress on customer service. Our broad international portfolio of 26 markets combined with diversified profit streams and tight cost controls enabled us to deliver a record PBT* and adjusted EPS growth of 12% in 2012, against a sector backdrop of increased pressure on vehicle margins.
The Group's performance in the last three years, delivering EPS CAGR of +14%, demonstrates the strength of our differentiated business model. We operate in the right markets, with the right brand partners, trade in the right categories and deliver the right financials. Moreover, we have the right growth strategy focused on an unwavering commitment to delivering superior customer service, with a strong operational discipline on both commercial and cash initiatives.
We have recently announced the acquisition of Trivett Automotive Group, the leading luxury and premium automotive group in Australia. This transaction represents an important step in the further development of our Asia Pacific presence expanding our existing brand footprint in Australia with high quality operations in the luxury and premium segments.
The Group is extremely well positioned to take advantage of the exciting growth prospects in Asia Pacific and Emerging Markets which are underpinned by population growth, wealth creation, increasing car penetration and industry premiumisation.
We expect the Group will deliver a robust performance in 2013, notwithstanding the increased competitive pressure on vehicle margins."
* Pre exceptional items
Ends
There will be a presentation for analysts and investors at 09:30am GMT on Tuesday 12th March, the details of which can be obtained from FTI Consulting.
Group Communications, Inchcape plc
+44 (0) 20 7546 0022
Investor Relations, Inchcape plc
+44 (0) 20 7546 8359
FTI Consulting (Jonathon Brill/Edward Westropp)
+44 (0) 20 7831 3113
Notes to editors
About Inchcape:
1. Inchcape is a leading, global premium automotive group operating in 26 markets as a distributor and retailer for the world's leading premium and luxury car brands. Inchcape has diversified multi-channel revenue streams including sale of new and used vehicles, parts, service, finance and insurance.
Inchcape's core purpose is to create an incredible customer experience for the best car brands in the world. Inchcape has six leading premium vehicle manufacture groups as core brand partners - Volkswagen/Audi/Porsche; BMW/MINI/Rolls-Royce; Subaru; Mercedes-Benz; Toyota/Lexus; and Jaguar/Land Rover.
Inchcape, which has been listed on the London Stock Exchange since 1958, is headquartered in London and employs around 14,400 people.
www.inchcape.com
2. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are 'forward-looking statements' within the meaning of the United States federal securities laws. These forward-looking statements reflect the Group's current expectations concerning future events and actual results may differ materially from current expectations or historical results.
Chairman's statement
Inchcape has delivered a record profit in 2012
I am delighted to report that the strength of Inchcape's differentiated business model, together with our global portfolio, a clear strategy and passionate colleagues, enabled the Group to deliver record results in 2012.
The Group also benefited from normalised supply conditions in Australia and Singapore in 2012, following the disruption caused by the Japanese earthquake and tsunami in March 2011.
In Australia, our Subaru distribution business achieved an excellent performance, selling 18.2% more vehicles than in 2011. In Singapore, where the new vehicle market declined 5.4% in 2012, our South Asia business significantly outperformed with sales up 31.6%. Overall, year on year profit growth in four of our six geographic segments more than offset challenging trading conditions in Europe and the pressure on new vehicle margins in our Russia and Emerging Markets segment.
The Group retains a strong balance sheet, ending the year with net cash of £276.2m. The Group follows a disciplined approach to capital allocation which ensures that the cash which we generate is deployed to drive long-term shareholder value creation. In February 2013, we announced the acquisition of Trivett Automotive Group, Australia's leading premium automotive group.
Performance
Group sales increased by 4.4% to £6.1bn for the full year to 31 December 2012. Sales growth was achieved in all of the geographic segments, other than Europe which experienced a decline of 23.5% as trading conditions, particularly those in Greece, continued to be challenging. Many of the markets delivered results ahead of our expectations, including the UK which saw sales grow by 3.6%.
Our 4.6% Group trading margin is a 0.1ppt improvement on last year. The highly focused approach by the Group to managing the cost base has resulted in a reduction in overheads before exceptional items as a percentage of sales to 10.1%, 0.4ppt lower than 2011.
Profit before tax and exceptional items of £250.3m was 10% higher than 2011 and a record for the business. On a statutory basis, profit before tax was £251.5m, 24% above 2011. Adjusted earnings per share rose by 12% to 39.7p, representing a three year compound annual growth rate of 14%.
The three year earnings performance is best viewed in the context of the corresponding three year compound annual sales growth rate of 2.9%, which demonstrates the potential for the Group to deliver significant operational leverage as we continue to grow the top line. We are set to benefit from structural growth in many of our markets and over the medium term will start to see recovery in markets that have remained difficult over the past three years.
Cash generated from operations during the year was £249.2m which represents a 95% conversion of statutory operating profit.
Capital expenditure
The Group continued to be selective on capital expenditure in 2012, ensuring that cash was allocated to the right growth prospects that meet our high return requirements. We are expanding our capacity in Chile, Peru, Poland, Australia and Russia. We have also made further strategic greenfield investments in China, with our new Porsche site in Nanchang set to open in 2013 and a Mercedes-Benz site in Jiujiang that will be completed later in the year.
Board
Following seven years' service, David Scotland retired from the Board on 10 May 2012. Vicky Bindra has taken over the role of Chairman of the Corporate Responsibility Committee from David, who we thank for his tireless commitment to the Group.
Dividend
The Board has decided to increase the dividend payout ratio from 30% to 40% at this year's final dividend and is recommending a final dividend of 10.5p per share giving a total dividend for the year of 14.5p per share (2011: 11.0p), up 32%. The increase on 2011 and in the payout ratio is a reflection of the confidence the Board has in the business and is consistent with our progressive dividend policy. Subject to approval at the Company's Annual General Meeting (AGM) on 16 May 2013, the final dividend will be paid on 19 June 2013 to shareholders of the Company on the register of members at the close of business on 24 May 2013.
Approach to governance and Corporate Responsibility (CR)
We view governance as a continually evolving set of principles and the Annual Report gives the Board an opportunity to communicate to our stakeholders how we have incorporated these principles in order to underpin the delivery of the Group's strategy. In 2012 the CR Board Committee, responsible for the strategic direction of the Group's CR programme, continued to develop a global approach to making responsible economic, environmental and social behaviour fundamental to the way we work.
People
On behalf of the Board, I wish to express my sincere thanks to all our colleagues across the Group for their outstanding commitment and support in 2012.
Outlook
As a leading global premium automotive group, we are set to benefit from the forecast growth in both the global new car market and the global car parc, as we operate in the right markets, represent the right brands, trade in the right categories, deliver the right financials and we are pursuing the right growth strategy. We therefore expect the Group to deliver a robust performance in 2013, notwithstanding the increased competitive pressure on vehicle margin.
Moreover, the Group is extremely well positioned to take advantage of the exciting growth prospects in Asia Pacific and Emerging Markets which are underpinned by population growth, wealth creation, increasing car penetration and industry premiumisation. We are confident that Inchcape will continue to produce sustainable earnings growth and strong returns for our shareholders.
Group Chief Executive's strategic review
Delivering sustainable earnings with a high return on capital
The premium choice in the automotive industry
Inchcape is a leading global premium automotive group. Operating in 26 markets worldwide with a portfolio of the world's leading car brands in the fast-growing luxury and premium segments, our differentiated Customer 1st strategy is creating sustainable growth for our people, our brand partners and our shareholders.
Amidst challenging trading conditions, we have delivered robust earnings growth over the last three years and outperformed the industry by growing share in most of our markets.
I am delighted to report that our 2012 profit before tax and exceptional items of £250.3m was a record and up 10% on last year.
Given that many Inchcape new car markets remain below their previous peaks, this is a strong performance and I thank all my colleagues across the Group for their incredible efforts that have helped us achieve this outcome.
Our 2012 results demonstrate the value of our disciplined approach to performance management and re-emphasise that we operate in the right markets, representing the right brands, trading in the right categories which deliver the right financials.
Importantly, our distinct business model is driven by the right growth strategy, our differentiated Customer 1st strategy. Our five differentiators of right markets, right brands, right categories, right financials and right growth strategy make us the premium choice in the automotive industry for our customers, our manufacturer brand partners, our people and our shareholders. So, as I reflect on the year, it is inevitable that I will describe those five strengths that are unique to Inchcape - the strengths that continue to give us a distinct and attractive business model in the global automotive industry.
Our strategic role in the global automotive industry
As the global industry leader, Inchcape provides a trusted, highly professional and well financed route to market for the world's leading car brands, fulfilling an important role as vehicle manufacturers' strategic partner in the automotive value chain: importing, distributing, marketing and retailing premium and luxury vehicles and providing motorists with high-quality, dedicated aftersales services.
We operate as a distributor for our manufacturer brand partners in 22 of our 26 markets across the world. This involves the effective fulfilment of a wide range of critical functions, including many activities that in larger markets would be carried out by the manufacturer themselves. Under a distribution contract, we have the exclusive responsibility for every aspect of marketing and selling their vehicles and spare parts in a particular country. This ranges from specifying market-appropriate vehicles, ordering and distributing vehicle and parts stock and setting prices, to advertising and brand management, public relations and customer database management across the entire national market place.
Critically, it also includes managing the complete retail network, covering all back-office functions and the appointment and management of independent franchised dealerships (although typically, we would also own some 10-20% of the dealer network ourselves).
In city-state markets such as Hong Kong and Singapore, we operate as both the exclusive distributor and the exclusive retailer for our brand partners. Known as vertically integrated retailing (VIR), this enables us to capitalise on important margin opportunities.
In our four retail only markets - the UK, Russia, China and Poland - our manufacturer partners operate as the national sales and marketing company. Our role here is to provide quality brand representation through our large-scale retail facilities. Our competitive differentiation is that we provide exceptional standards of customer service through the deployment of the proprietary operating processes of our unique Inchcape Advantage programme.
Therefore, our role as a strategic partner in the automotive value chain across five continents makes us unique within the global industry. We believe there are five key differentiators that enable us to deliver sustainable growth for our shareholders.
The right markets
The first of those five differentiators that set us apart is that we operate with a scale presence in the right markets - in fact, 21 of the 26 markets where we operate are in the fast-growing economies of the Asia Pacific region and Emerging Markets. It is fundamental to Inchcape's success that we operate in so many of the world's most dynamic growth markets. Asia Pacific and Emerging Markets together represent 94% of the forecast global population growth and 69% of GDP growth over the next five years. So it is not surprising that these markets, with their increasingly wealthy and urbanised populations, also represent 80% of projected global car industry growth from 2012 to 2017 - a period during which these regions will also account for two-thirds of global car sales. When you consider that global car sales are set to grow by 26% over the same period and the global car parc (the key driver of aftersales and used car revenue) by 20%, these are clearly significant figures.
We derive around half of Group revenue from these high growth, high margin Asia Pacific and Emerging Market regions, which deliver more than 70% of our profits. This means we are well positioned to continue achieving margin and profit improvement moving forward. The importance of our established presence in these markets cannot be overemphasised and, as such, we continue to make disciplined capital investments to enhance our presence in these regions. In 2012 this included:
· Winning three new distribution contracts - Land Rover in Hong Kong, Ford in Hong Kong and Rolls Royce in Chile. All are now fully operational, and in Hong Kong we have increased Land Rover volume by 95% after taking responsibility for the brand at the end of 2011;
· Opening a new BMW facility in Wroclaw, south western Poland, which has increased our capacity in the market;
· Commencing construction work to increase car retail capacity in Moscow, Lima and Santiago; and
· Starting to build two new sites in China with Porsche and Mercedes-Benz.
Our access to new distribution, VIR and retail opportunities in high-growth, high-margin territories is the reward for our reputation for professionalism, performance and integrity without compromise. Manufacturers require well-financed and highly experienced partners whom they can trust to represent them effectively and profitably.
The right brand partners
We focus on six leading premium vehicle manufacturer groups as our core brand partners, which between them deliver around 90% of our profit. These valued partnerships that form our portfolio of the world's leading premium automotive brands are with Volkswagen/Audi/Porsche; BMW/MINI/Rolls-Royce; Subaru; Mercedes-Benz; Toyota/Lexus; and Jaguar/Land Rover. This focused core allows for a consistently robust product line-up across the Group.
In short, rather than spread our focus, we choose to truly understand the brands we work with and to deliver them in an exceptional way. This is an important strategic decision, which enables us to benefit from ever-deeper relationships and to build best-in-class market share and superior customer service. These are key metrics used to judge an independent distributor and retailer; increasingly, therefore, vehicle manufacturers turn to us to provide a well-financed and trusted route to market.
There are also sound business reasons for our chosen brand focus. First, these are the premium brands that are growing ahead of the global automotive market as a whole, due to their luxury appeal to the burgeoning middle classes in emerging markets. Second, these same manufacturers have the strength to win share by investing ahead of their competition in fuel efficient automotive technology that appeals to customers in more developed markets. And third, the pricing power of these brands helps us to secure and grow our margins, which enable us to achieve strong returns.
In those markets where we are the appointed distributor, an important point of differentiation is our ability to have the appropriate brand positioning in every country - it is our marketing expertise that positions each brand to build a strong pricing power and to grow market share.
We have worked with our core brand partners for many years - in some cases across multiple continents - and have consistently delivered for them. This is how we have retained and built upon these deep and long-standing relationships, enabling manufacturers to trust Inchcape with their brand stewardship on which we build to create superior customer value and outstanding levels of customer service.
A leading example of a key brand relationship is that with Toyota, with whom we have now partnered for 45 years - on multiple levels and across several continents. Of these, our Hong Kong-based distribution business, Crown Motors, was the first company in the world to be appointed distributor of all the Toyota Group's main brands. This is building on a performance that is exceptional by any measurement, and which includes 21 consecutive years of market-leadership. In 2012, we yet again increased Toyota's market share in the territory.
This contributed to Crown Motors being presented with the Toyota Triple Crown Award for the 21st year in a row, which rewards being number one in passenger cars, in commercial vehicles and in the market as a whole.
The right categories
The range of categories in which we operate gives us a healthy diversity of profit streams, which we classify into what we call 'growth' and 'defensive' value drivers. This approach means that, no matter the state of health of an individual market place, we have an appropriate balance of offerings to meet its needs and generate profits.
Our two growth streams - which represent some 40% of our gross profit - are new vehicle sales and finance and insurance products (F&I). Clearly, new vehicle sales are the heart of our business, but it is fundamental to our business model that these make up just one of the five important automotive segments that we address. In fact, for the average UK consumer for example, vehicle purchase only represents around a third of lifetime motoring costs, while repairs, servicing, spare parts, accessories, insurance and taxation combined add up to another third (with fuel taking the balance).
Our three defensive value drivers, representing approximately 60% of our gross profit, are used vehicle sales, aftersales servicing and the sale of spare parts.
Illustrating the role of defensive value drivers, demand for used vehicles during the economic downturn proved more resilient in the UK than for new vehicles. In addition, smaller new vehicle volumes have meant that fewer cars have been reaching the used vehicle market, which has driven up our margins in this key category.
This is not to say that used vehicles are exclusively part of a defensive strategy. The evolutionary stage of many of the emerging states where we operate means that there is not yet a scale market for used vehicles. Clearly, such markets will develop and this presents us with a significant future growth opportunity, which we intend to seize.
Another key defensive profit stream is aftersales servicing, which delivers approximately half of the Group's profits. The margins in this area are very attractive, which makes territories where we have built market share over a number of years particularly profitable for us. In Hong Kong, for example, 33% of the existing vehicles on the road are brands we distribute, amounting to close to 140,000 units. This illustrates how a flourishing aftersales business enables even relatively small markets to deliver large profits for us.
It is for such reasons that our distribution marketing teams continue to focus on customer contact and retention programmes, both up to and beyond warranty expiry. And in our retail operations, rigorous sales processes are constantly enhancing our performance through the daily capture of customer metrics including aftersales bookings, hours sold and workshop productivity. In addition, we run innovative aftersales initiatives and call centre programmes to capture share of the servicing market that is ahead of our competitors, consistently measuring their effectiveness so that we can focus increasingly on the best means of maximising customer retention. Such initiatives contribute strongly to the success of our aftersales activities.
The right financials
Inchcape's strong financial success, which has seen consistent and sustainable growth in all key metrics in the last three years, owes much to the agility we gain thanks to our relatively low fixed costs.
I have already referred to the record level of profit before tax we achieved in 2012. This was partially due to several years of strong discipline on costs, which has seen Inchcape maximise the benefits of its flexible cost structure to strip out £124 million in operating costs before inflation since 2008, which represents a reduction of 18%. We have also built on our defensive profit streams since 2007 to deliver a consistently strong operating profit margin that at 4.3% in 2012 is 1.2ppt ahead of 2009, marking yet another year of improvement.
Taking tough decisions early regarding under-performing sites and headcount, along with a strong ongoing focus on day-to-day cash discipline, has been an important part of the Inchcape productivity strategy of recent years. These decisive actions have enabled us to maintain our investment programme in strategic initiatives, which ensures we are well placed to take advantage of future opportunities.
We have also achieved a strong return on capital employed, standing at more than 22%. This is largely due to the comparatively low level of fixed capital tied up in our distribution activities, which deliver around two-thirds of Group profits.
We have delivered strong earnings growth over the last three years, a commendable performance during a time of enormous challenge and turbulence in our market place. In 2012, our basic adjusted earnings per share rose to 39.7p, up 12% on last year.
Importantly, our business model is highly cash-generative. Our balance sheet is therefore very strong, with net cash of £276.2m. At the end of 2012, our net cash position was better than expected as we deferred some capital expenditure to 2013, benefited from favourable phasing in our working capital and maintained our strong controls on cash. Our strong financial position gives us the opportunity to continue our investments to support organic growth as well as consider opportunities to maximise shareholder value creation.
The right growth strategy
None of the various initiatives and successes I have outlined here would have been possible without the underpinning strength of our Group-wide Customer 1st strategy, which places the customer right at the heart of our business worldwide, as we both strengthen our existing operations and expand our Group selectively in high margin, high growth areas.
The automotive industry is not widely recognised for the quality of its customer service, so the fact that we are single-mindedly focused on being the world's most customer-centric automotive group is our number one source of competitive advantage. The key tool that we use to ensure that every customer receives consistently superior customer service is our proprietary Inchcape Advantage programme, first launched in 2007 and consistently refined and enhanced every year since then.
In each of our sites worldwide, Inchcape Advantage continues to drive all the performance management disciplines that are vital to the constant year on year improvement that we continue to deliver - unique insights into customer behaviour and trends, for example, that enable us to carry the optimum amount of the right stock at all times.
Inchcape Advantage is a core enabler of our Customer 1st strategy. First, to strengthen the performance of our existing assets by delivering a superior value proposition that helps us constantly to improve market share in both vehicle sales and aftersales. And second, to help us seize expansion opportunities in the premium and luxury segments by leveraging our brand partner relationships based on outstanding service and satisfied customers.
Naturally, the implementation of this strategy is rigorously controlled. To do so, we use the strong operational discipline that results from our focus on what we call Inchcape's Top Five Priorities. We ensure that at all times we have a balanced focus between commercial and cash initiatives.
Our two key commercial priorities are to increase market share and aftersales, enabling us to grow our revenues at a rate that is ahead of our competitors. Responsibility for these areas resides chiefly at a local level, where our empowered teams use innovative marketing to drive customers into our showrooms and service centres and once there, to delight them with an outstanding customer experience.
And our three cash initiatives, which aim to grow our profit and operating cash faster than our revenue, are to improve our margins, to control our working capital and to be highly selective on our capital expenditure investments. Our Top Five Priorities are fully integrated in our Group-wide performance management processes.
Our decentralised organisation plays an important role as our managers across the world have high levels of empowerment that they can wield at a local level. Under this model, a clear set of policies are provided centrally and implemented locally, in a way that takes advantage of high levels of local market understanding paired with our deep knowledge of our manufacturer partners' brands. Our glo-cal operating model provides global scale and local agility.
Our glo-cal organisational model is enabled on a daily basis by one Group-wide focus on performance management with rigorous monitoring across a range of operational and customer metrics. This performance management discipline is deeply ingrained both centrally and locally, in breadth and in depth, and we consider this to be fundamental to the Group's operational efficiency.
We drive performance management with industry leading processes. This gives us the opportunity to make well informed decisions quickly as we leverage both a comprehensive set of performance management processes and the accuracy of our performance management tools.
Against a challenging backdrop, the Group has delivered profitable growth in the last three years, growing revenue ahead of our competitors and growing profit ahead of revenue. During this period, our Group revenue has grown on average by c.3% and operating profit has grown on average by c.14% per annum. Margins are up 1.2ppt over this same three year period. I believe that this consistent performance demonstrates the strength of our business model, the effectiveness of our Customer 1st strategy and our operational discipline just described. We are confident moving forward in the Group's earnings growth potential as Inchcape is uniquely positioned to take advantage of the exciting growth prospects in the global automotive market.
The right future
Inchcape is a company that is focused on profitable growth for its brand partners and shareholders.
We are uniquely placed to fully leverage the opportunities ahead of us as a highly professional and well-financed route to market for the world's best car brands in what I consider to be the world's most exciting and dynamic industry.
We operate with a distinctive and attractive business model in an industry with considerable growth prospects. We have scale operations in the right markets, with more than 70% of our trading profit coming from Asia-Pacific and the Emerging Markets. We operate in the right categories, with a healthy balance of five growth and defensive value drivers. We distribute and retail the right brands in the premium and luxury sector, which continues to outperform the industry. We have the right financials with strong cash generation, a robust balance sheet and high returns on capital employed. We are convinced that we pursue the right growth strategy based on a differentiated Customer 1st approach combined with a strong operational discipline.
We therefore believe that Inchcape is indeed the premium choice in the automotive industry - for our people for whom we offer an exciting work environment; for our brand partners for whom we provide trusted brand stewardship and growth; for our customers for whom we provide a superior customer experience; and for our shareholders for whom we provide sustainable earnings growth.
Key performance indicators (KPIs)
These KPIs are how we measure our business performance
The Inchcape plc Board of Directors and the Group Executive Committee monitor the Group's progress against its strategic objectives and the financial performance of the Group's operations on a regular basis. Performance is assessed against the strategy, budgets and forecasts. We also measure the quality of revenues through the mix of revenue streams, and the flow through of value from sales revenue to trading profit.
Sales
Definition
Consideration receivable from the sale of goods and services. It is stated net of rebates and any discounts, and excludes sales related taxes.
Achievements in 2012
Sales grew by a robust 4.4% with strong growth reported in the entire Group with the exception of Europe, which has continued to experience challenging trading conditions, most notably in Greece.
Trading profit
Definition
Operating profit excluding the impact of exceptional items and unallocated central costs.
Achievements in 2012
A continued focus on cost control and accretive margin growth has meant that trading profit has grown by 7.0% year on year.
Trading margin
Definition
Calculated by dividing trading profit by sales.
Achievements in 2012
The Group's trading margin grew to 4.6% (+0.1ppt).
Profit before tax and exceptional items
Definition
Represents the profit made after operating and interest expense excluding the impact of exceptional items and before tax is charged.
Achievements in 2012
Profit before tax and exceptional items increased by 9.9%, to a record £250.3m.
Working capital
Definition
Inventory, receivables, payables, and supplier related credit.
Achievements in 2012
Stock cover is 1.4 months and working capital ended at £25.9m.
Cash generated from operations
Definition
Trading profit adjusted for depreciation, amortisation and other non-cash items plus the change in working capital, provisions and pension contributions.
Achievements in 2012
The Group has generated an operating cash flow of £249.2m.
Like for like sales and trading profit
Definition
Excludes the impact of acquisitions from the date of acquisition until the 13th month of ownership and businesses that are sold or closed. It further removes the impact of retail centres that are relocated from the date of opening until the 13th month of trading in the new location. These numbers are presented in constant currency.
Achievements in 2012
Like for like sales increased by 6.0% while like for like trading profit grew by 7.1% as the focus on cost management continued unabated.
Operating review
Our results are stated at actual rates of exchange. However to enhance comparability we also present year on year changes in sales and trading profit in constant currency, thereby isolating the impact of exchange. Unless otherwise stated, changes in sales and trading profit in the operating review are at constant currency.
The Group has delivered record results, as we continue to benefit from our broad geographic spread and our partnership with the leading OEMs in the premium and luxury segment. The Group strengthened its profitability, its balance sheet and its return on capital employed while continuing to make progress on customer service and market share around the world.
2012 saw a strong rebound in performance in South Asia and Australasia following a challenging 2011. Europe remained weak, with the Greek economy in particular facing continuing challenging conditions while we saw improved customer confidence in the UK. After a strong first quarter, we saw a weakening of consumer demand in Russia and Emerging Markets which, when combined with volume push activities from manufacturers to offset trading weaknesses in Europe, resulted in an over-supply and margin pressure on vehicles.
Group sales at £6.1bn were up 5.8% on last year - driven by strong growth in key markets such as Singapore, Hong Kong and Australia. The UK car market grew by over 5% on last year's levels with our luxury and premium brand partners continuing to outperform the market as a whole.
Continued focus on growth, margins and disciplined cost control enabled the Group to achieve an increase of 7.7% in trading profit to £280.1m. Overheads as a percentage of sales have decreased by 0.4ppt compared to 2011.
Working capital was tightly managed throughout the year and resulted in a year end position of £25.9m, which was better than expected as we benefited from favourable working capital phasing. We had another year of strong cash generation from our operations of £249.2m.
Net capital expenditure of £87.3m was slightly lower than expected as some expenditure was deferred into 2013. We continued to invest in capacity expansion and greenfield sites, mainly in Asia Pacific, Russia and Emerging Markets.
Net cash at the end of the year was £276.2m, up by £32.7m compared to the end of 2011.
Performance indicators - Results |
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
6,085.4 |
5,826.3 |
4.4 |
5.8 |
Trading profit |
280.1 |
261.8 |
7.0 |
7.7 |
Trading margin % |
4.6 |
4.5 |
0.1ppt |
0.1ppt |
Like for like sales |
5,951.5 |
5,690.4 |
4.6 |
6.0 |
Like for like trading profit |
277.2 |
260.5 |
6.4 |
7.1 |
Like for like sales growth % |
4.6 |
0.1 |
4.5ppt |
|
Like for like trading profit growth % |
6.4 |
5.3 |
1.1ppt |
|
Profit before tax before exceptional items |
250.3 |
227.7 |
9.9 |
10.5 |
Working capital |
25.9 |
12.2 |
112.3 |
|
Cash generated from operations |
249.2 |
244.7 |
1.8 |
|
Net cash |
276.2 |
243.5 |
13.4 |
|
|
2012
Operating profit
£m |
2012
Exceptional items
£m |
2012
Trading profit
£m |
2011
Operating profit
£m |
2011
Exceptional items
£m |
2011
Trading profit
£m |
Australasia |
65.0 |
(2.2) |
67.2 |
54.6 |
(0.7) |
55.3 |
Europe |
12.1 |
(4.7) |
16.8 |
21.3 |
(2.7) |
24.0 |
North Asia |
52.7 |
(0.1) |
52.8 |
41.9 |
(0.1) |
42.0 |
South Asia |
35.1 |
|
35.1 |
26.0 |
|
26.0 |
United Kingdom |
62.3 |
(2.9) |
65.2 |
52.5 |
(7.9) |
60.4 |
Russia and Emerging Markets |
34.9 |
(8.1) |
43.0 |
53.7 |
(0.4) |
54.1 |
Central Costs |
1.0 |
19.2 |
|
(19.0) |
(1.6) |
|
Operating Profit |
263.1 |
1.2 |
|
231.0 |
(13.4) |
|
Business analysis
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
|
|
|
|
Retail |
3,573.9 |
3,468.9 |
3.0 |
4.3 |
Distribution |
2,511.5 |
2,357.4 |
6.5 |
8.1 |
Like for like sales |
|
|
|
|
Retail |
3,514.8 |
3,384.3 |
3.9 |
5.1 |
Distribution |
2,436.7 |
2,306.1 |
5.7 |
7.3 |
Trading profit |
|
|
|
|
Retail |
86.1 |
89.8 |
(4.1) |
(3.1) |
Distribution |
194.0 |
172.0 |
12.8 |
13.2 |
Like for like trading profit |
|
|
|
|
Retail |
88.6 |
90.4 |
(2.0) |
(0.9) |
Distribution |
188.6 |
170.1 |
10.9 |
11.3 |
Retail business
Retail sales saw a 4.3% growth year on year at £3.6bn. Trading profit saw a decline of 3.1% mainly due to challenging trading conditions in Europe, Russia and Emerging Markets which were partially offset by strong results in the UK and Australia.
The Group's UK retail business grew sales by 3.6%. The UK new car market reached a four year high and we increased our overall market share. Continued focus on margins and overheads has resulted in a year on year growth in trading profit of 8.4% and a record return on sales of 2.8%.
The Australian retail business benefited from growth in the car market as supply constraints following the 2011 Japanese earthquake and flooding in Thailand were resolved. Year on year sales grew by 7.3% and trading profit by 25.8% resulting in a return on sales of 3.8%.
The European region experienced a decline in sales in 2012 but at a slower rate than 2011. Sales declined by 6.0% compared to a decline of 14.5% in 2011. This was primarily due to the continued market contraction in Greece which declined 40% in the year.
The Russia and Emerging Markets region continued to grow in 2012 with sales up by 6.0% to £926.9m. Trading profit was down 45% year on year as we faced challenging trading conditions in a number of markets with a slowing of market growth and volume push activities from OEMs which impacted new car margins.
Distribution business
Our distribution business grew year on year by 8.1% to £2.5bn and 13.2% to £194.0m in terms of sales and trading profit respectively. The Distribution business has continued to perform well in all regions except Europe where we were impacted by the challenging market conditions in Belgium and Greece.
The Australasian business grew sales and trading profit by 19.4%, delivering trading profit of £51.3m. We grew market share by 0.2ppt as we benefited from better supply and the launch of new models.
In South Asia year on year sales grew by 27.4% and trading profit by 32.4%. This was due to a number of successful product launches and improved supply following the 2011 Japanese earthquake and flooding in Thailand.
In North Asia sales grew by 17.9% and trading profit by 23.6%, which was a record. This was driven by increased market share in all markets in the North Asia region and a strong aftersales performance.
Russia and Emerging Markets continued to grow in 2012 with sales up by 10.4% and trading profit up by 2.3%. Our Ethiopian business delivered another strong year while trading conditions in Eastern Europe and South America were challenging.
Our European region saw a decline in sales of 20.9% mainly due to Greece where challenging economic conditions remain. In Belgium we saw an expected sales decline due to the end of the Government CO2 incentives in December 2011.
Regional analysis
The Group reports its regional analysis in line with IFRS 8 'Operating Segments'. This standard requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to assess their performance and to allocate resources to the segments. These operating segments are then aggregated into reporting segments to combine those with similar characteristics.
Distribution |
Retail |
Australasia |
Australasia |
Europe |
Europe |
North Asia |
United Kingdom |
South Asia |
Russia and Emerging Markets |
United Kingdom |
|
Russia and Emerging Markets |
|
Included within the Russia and Emerging Markets segment are Russia, China, South America, Africa, the Balkans, the Baltics, and Poland on the basis that these markets have started to grow but have yet to reach a mature stage of development and accordingly are in, or are expected to return to, the growth phase of the development cycle.
Australasia
Key financial highlights
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
1,168.7 |
1,011.0 |
15.6 |
14.8 |
Retail |
420.9 |
389.6 |
8.0 |
7.3 |
Distribution |
747.8 |
621.4 |
20.3 |
19.4 |
Like for like sales |
1,168.5 |
1,005.9 |
16.2 |
15.3 |
Retail |
420.7 |
384.5 |
9.4 |
8.7 |
Distribution |
747.8 |
621.4 |
20.3 |
19.4 |
Trading profit |
67.2 |
55.3 |
21.5 |
20.8 |
Retail |
15.9 |
12.6 |
26.2 |
25.8 |
Distribution |
51.3 |
42.7 |
20.1 |
19.4 |
Like for like trading profit |
67.4 |
55.9 |
20.6 |
19.9 |
Retail |
16.1 |
13.2 |
22.0 |
21.7 |
Distribution |
51.3 |
42.7 |
20.1 |
19.4 |
Trading margin % |
5.7 |
5.5 |
0.2ppt |
0.3ppt |
Retail |
3.8 |
3.2 |
0.6ppt |
0.6ppt |
Distribution |
6.9 |
6.9 |
-ppt |
-ppt |
The market
The Australian economy has performed well in 2012, and the car market continued to grow and was up by 10.3% to 1.1 million units reflecting an improvement of the supply situation and the underlying strengths of the Australian economy.
Business model & strategy
We are the distributor for Subaru in both Australia and New Zealand. In addition we have multi-franchise retail operations based in Sydney, Melbourne and Brisbane. These operations hold franchises for Subaru, Volkswagen, Mitsubishi, Isuzu and Kia. At the end of 2012, we owned 21 retail centres and manage a network of 101 independently owned Subaru centres throughout Australasia.
Supporting these operations, our logistics business Autonexus is responsible for managing vehicle and parts inventory, distribution and vehicle preparation on behalf of Subaru Australia, our retail business, as well as other independent dealers.
Our strategy for our distribution operations is to continue to grow market share through our superior Customer 1st operational processes. Our retail operations are focused on delivering an outstanding customer experience for our brand partners and driving revenue from sales of new and used cars, service and vehicle parts.
Our operating performance
We have delivered a strong revenue and operating profit performance in Australasia. In a growing market, we were able to gain share as we benefited from improved supply and the successful launches of the new Subaru XV and Impreza.
Our gross margin in our distribution business was impacted, as expected, by the unfavourable Yen exchange rate which was partly mitigated by a strong performance of our parts business. Nevertheless, our distribution trading profit of £51.3m was 19.4% up on the previous year.
The retail business delivered a record trading profit of £15.9m, up 25.8% on 2011. This was driven by increases in both new and used car margins as well as a strong penetration of finance and insurance sales.
Acquisition
In February 2013 we announced an important step in the further development of our Asia Pacific presence, having acquired Trivett Automotive Group, the leading premium automotive group in Australia.
Outlook for 2013
The Australian car market is expected to continue to grow over 2012 levels and in 2013 we will launch the new Subaru Forester to capitalise on the growing SUV sector. VW is also expected to continue its growth and we will leverage the new VW North Shore showroom.
Our operational focus on our Top Five Priorities of growing market share, improving margins, growing aftersales, controlling working capital and selective capital expenditure remains firmly in place and will further strengthen our business. We continue to expect to deliver a strong performance in 2013.
Europe
Key financial highlights
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
616.6 |
806.0 |
(23.5) |
(18.2) |
Retail |
129.7 |
147.5 |
(12.1) |
(6.0) |
Distribution |
486.9 |
658.5 |
(26.1) |
(20.9) |
Like for like sales |
614.4 |
802.4 |
(23.4) |
(18.1) |
Retail |
127.5 |
143.9 |
(11.4) |
(5.2) |
Distribution |
486.9 |
658.5 |
(26.1) |
(20.9) |
Trading profit |
16.8 |
24.0 |
(30.0) |
(25.2) |
Retail |
(0.5) |
(0.3) |
(66.7) |
(79.5) |
Distribution |
17.3 |
24.3 |
(28.8) |
(23.9) |
Like for like trading profit |
17.0 |
24.2 |
(29.8) |
(24.7) |
Retail |
(0.3) |
(0.1) |
(200.0) |
(170.8) |
Distribution |
17.3 |
24.3 |
(28.8) |
(23.9) |
Trading margin % |
2.7 |
3.0 |
(0.3)ppt |
(0.3)ppt |
Retail |
(0.4) |
(0.2) |
(0.2)ppt |
(0.2)ppt |
Distribution |
3.6 |
3.7 |
(0.1)ppt |
(0.1)ppt |
The market
The Belgian private car market contracted by 14.9% in 2012 and this was primarily driven by the end of the Government's CO2 incentive scheme.
The Greek market declined by 40.2% year on year reflecting the continued deep economic recession affecting the country.
Business model & strategy
In Belgium and Luxembourg we distribute Toyota and Lexus and own 10 retail centres with a network of 100 retail centres operated by independent third party retailers and 31 repair outlets. In Luxembourg we also have a retail centre for Jaguar.
In Greece we are the distributor for Toyota and Lexus, owning five retail centres and overseeing a further 43 which are independently owned.
In Finland we are the distributor for Jaguar, Land Rover and Mazda, owning four retail centres and managing a network of 48 independent retailers.
In distribution, growth will be driven by strong marketing programmes increasing traffic into the dealer network with new model launches supported by tight overhead control.
In retail, we focus on customer-centric operational excellence and improving footfall conversion.
Our operating performance
In challenging trading conditions we remained focused on protecting the pricing power of our brands and on leveraging our aftersales activities while reducing our cost base. Our European businesses have delivered a resilient trading profit of £16.8m.
We saw a significant decline of new car volume in both Greece and Belgium which triggered, as expected, an increase of promotional activities from our competitors, affecting new car margin.
Outlook for 2013
We expect the trading conditions in Europe to remain challenging in 2013 with a further industry decline given the low level of consumer confidence and the uncertainties in the Euro zone.
Our teams will continue to protect the pricing power of our brands by not pushing volume at the expense of profitability and by making sure we successfully launch the new Toyota Auris, the new RAV4 and the new Lexus IS. We will continue to leverage the strength of our profitable aftersales segments and our control on costs will remain firmly in place.
While our European business will continue to face a challenging trading environment in 2013, we continue to expect to deliver a resilient financial performance.
North Asia
Key financial highlights
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
|
|
|
|
Distribution |
518.7 |
433.3 |
19.7 |
17.9 |
Like for like sales |
|
|
|
|
Distribution |
445.7 |
384.9 |
15.8 |
14.0 |
Trading profit |
|
|
|
|
Distribution |
52.8 |
42.0 |
25.7 |
23.6 |
Like for like trading profit |
|
|
|
|
Distribution |
47.5 |
39.8 |
19.3 |
17.3 |
Trading margin % |
|
|
|
|
Distribution |
10.2 |
9.7 |
0.5ppt |
0.5ppt |
The market
The Hong Kong market grew by 3.7% compared to 2011, reflecting the underlying strengths of the Hong Kong economy.
Business model & strategy
In Hong Kong and Macau we are the exclusive distributor for Toyota, Lexus, Land Rover, Jaguar, Ford, Daihatsu and Hino Trucks. We also own and operate all 19 retail centres for these brand partners in this market.
In Guam we are the exclusive distributor and retailer for Toyota, Lexus, Chevrolet and Scion, owning all three retail centres. In Saipan we are distributor and retailer for Toyota with one further retail centre.
Our operating performance
We have delivered another strong performance, gaining market share in all our North Asian markets having successfully leveraged a number of new products such as the new Prius C, new Camry and new Lexus GS.
Sales revenue and trading profit for North Asia grew by 17.9% and 23.6% respectively and we have delivered a trading profit of £52.8m, which was a record.
At the end of 2011, we won the distribution contract for Land Rover in Hong Kong and in our first year, performance was ahead of expectations as we increased Land Rover volume by 95%.
Trading margin increased 0.5ppt to 10.2% due to a stronger product mix, the pricing power of our brands and a strong aftersales performance.
In Hong Kong, we have been market leader in the overall market, the passenger car market and the commercial vehicle market for 21 years in a row. Hong Kong is the only Toyota distributor in the world to have received a Triple Crown award for 21 years.
Outlook for 2013
We expect the Hong Kong economy to remain strong and the new car market to continue to grow in 2013.
There are a number of product launches planned for in 2013 which we intend to fully leverage, including the Toyota Corolla, RAV4 and Previa Hybrid, the Lexus LS 600h and IS, ES, GS 300h and CT200h.
We continue to expect to deliver a strong performance in North Asia in 2013.
South Asia
Key financial highlights
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
|
|
|
|
Distribution |
385.1 |
296.2 |
30.0 |
27.4 |
Like for like sales |
|
|
|
|
Distribution |
385.0 |
293.2 |
31.3 |
28.7 |
Trading profit |
|
|
|
|
Distribution |
35.1 |
26.0 |
35.0 |
32.4 |
Like for like trading profit |
|
|
|
|
Distribution |
35.2 |
26.3 |
33.8 |
31.3 |
Trading margin % |
|
|
|
|
Distribution |
9.1 |
8.8 |
0.3ppt |
0.3ppt |
The market
The car market in Singapore continued to decline in 2012, as expected, and ended the year 5.4% lower than 2011 due to a reduction in the number of government-issued Certificates of Entitlement ("COEs") available.
Business model & strategy
In Singapore we are the distributor for Toyota, Lexus, Hino Trucks and Suzuki. We have represented Toyota in Singapore since 1967. We have held the Suzuki distribution franchise since 1977. We own and operate all five retail centres in the market.
In Brunei we are the distributor for both Toyota and Lexus, owning and operating all four retail centres there.
Our operating performance
Our businesses in South Asia delivered a strong performance in 2012, where our sales have increased 27.4% to £385.1m as we gained share with a number of successful product launches and benefited from a return to our normal stock supplies following the earthquake in Japan and the floods in Thailand.
South Asia delivered £35.1m trading profit, an increase of 32.4% on 2011 with a higher trading margin of 9.1% up by 0.3ppt on 2011, as we continued to protect the pricing power of our brands despite strong price competition.
Our aftersales operations also continued to perform well through efficient customer contact programmes and high levels of customer service.
Outlook for 2013
Trading conditions will remain challenging in 2013 as we expect the industry to decline further due to the reduction of de-registrations in 2012. We will continue to protect the pricing power of our brands by not pushing volume at the expense of profitability and by continuing to leverage our strong aftersales operation with innovative loyalty programmes. We will also successfully launch exciting new models from Toyota, Lexus and Suzuki.
We will continue to have tight control on costs and cash in 2013 and we continue to expect our South Asia business to deliver a resilient performance in 2013.
United Kingdom
Key financial highlights
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
2,133.8 |
2,059.3 |
3.6 |
3.6 |
Retail |
2,096.4 |
2,023.2 |
3.6 |
3.6 |
Distribution |
37.4 |
36.1 |
3.6 |
3.6 |
Like for like sales |
2,084.8 |
1,984.7 |
5.0 |
5.0 |
Retail |
2,047.4 |
1,948.6 |
5.1 |
5.1 |
Distribution |
37.4 |
36.1 |
3.6 |
3.6 |
Trading profit |
65.2 |
60.4 |
7.9 |
7.9 |
Retail |
58.0 |
53.5 |
8.4 |
8.4 |
Distribution |
7.2 |
6.9 |
4.3 |
4.3 |
Like for like trading profit |
66.1 |
60.0 |
10.2 |
10.2 |
Retail |
58.9 |
53.1 |
10.9 |
10.9 |
Distribution |
7.2 |
6.9 |
4.3 |
4.3 |
Trading margin % |
3.1 |
2.9 |
0.2ppt |
0.2ppt |
Retail |
2.8 |
2.6 |
0.2ppt |
0.2ppt |
Distribution |
19.3 |
19.1 |
0.2ppt |
0.2ppt |
The market
The UK new car market reached a four year high of 2.045 million units in 2012, some 5.3% up on 2011's level. The recovery in the retail market was the key driver of growth, rising by some 13% year on year. Strong consumer demand was driven by increased promotional activities as well as competitive financing.
Business model & strategy
We have scale operations in the core regions of the South East, Midlands, North and North East of England with a streamlined portfolio of 117 retail centres focused on luxury and premium brands. We aim to create significant differentiation by delivering a superior level of customer service through the bespoke operating processes of our Inchcape Advantage programme and to drive growth in aftersales and car finance penetration.
The distribution element of our results is made up of our fleet management and leasing business, Inchcape Fleet Solutions (IFS) which offers services to corporate and government customers. With over 50 years' experience in the automotive industry, IFS has a combined fleet size of approximately 41,000 vehicles.
Our operating performance
Our Customer 1st strategy and portfolio of leading luxury and premium brands continued to provide strong results. Our share of the total UK market increased and retail sales were up 3.6% compared to 2011 with trading profit increasing by 8.4% to £58.0m. Through a rigorous focus on costs, our retail trading margin increased by 0.2ppt to reach a record 2.8% in 2012.
Our IFS business delivered a strong £7.2m trading profit, up 4.3% on 2011. The IFS trading margin increased to 19.3%, 0.2ppt ahead of last year.
Outlook for 2013
In 2013, we believe the UK car industry will continue its gradual recovery driven by affordable consumer finance and increased level of promotional activities.
We are well positioned to outperform the industry as we stay focused on delivering a superior customer service. We will leverage the exciting pipeline of new models launched by our brand partners, including the new Range Rover, Range Rover Sport, Jaguar F Type, MINI Paceman, Mercedes Benz A-Class and S-Class relaunches and the Porsche Cayman.
We continue to expect to deliver a solid performance in the UK in 2013.
-Russia and Emerging Markets
Key financial highlights
|
Year ended
31.12.2012
£m |
Year ended
31.12.2011
£m |
% change |
% change in constant currency |
Sales |
1,262.5 |
1,220.5 |
3.4 |
7.1 |
Retail |
926.9 |
908.6 |
2.0 |
6.0 |
Distribution |
335.6 |
311.9 |
7.6 |
10.4 |
Like for like sales |
1,253.1 |
1,219.3 |
2.8 |
6.5 |
Retail |
919.2 |
907.4 |
1.3 |
5.3 |
Distribution |
333.9 |
312.0 |
7.0 |
9.9 |
Trading profit |
43.0 |
54.1 |
(20.5) |
(18.2) |
Retail |
12.7 |
24.0 |
(47.1) |
(44.6) |
Distribution |
30.3 |
30.1 |
0.7 |
2.3 |
Like for like trading profit |
44.0 |
54.3 |
(19.0) |
(16.6) |
Retail |
13.9 |
24.2 |
(42.6) |
(40.1) |
Distribution |
30.1 |
30.1 |
- |
1.7 |
Trading margin % |
3.4 |
4.4 |
(1.0)ppt |
(1.1)ppt |
Retail |
1.4 |
2.6 |
(1.2)ppt |
(1.3)ppt |
Distribution |
9.0 |
9.7 |
(0.7)ppt |
(0.7)ppt |
The market
Since the second quarter of 2012, there has been a temporary slowdown in demand for premium and luxury cars in all Emerging Markets except Africa, as affluent buyers have been increasingly concerned about the impact on their economies of the Euro crisis and uncertainties in China and North America.
There has been an increased level of promotional activities from manufacturers throughout 2012 as they try to offset weak demand for their vehicles in Europe. This has created significant pressure on margins as the level of supply has been greater than the underlying level of demand.
Business model & strategy
In Russia we operate 22 scale retail centres in St Petersburg and Moscow representing 12 brands. In November 2012 we completed the buyout of the Independence Toyota joint venture at Vnukovo in Eastern Moscow for a final payment of £17.3m.
In the Balkans we are the distributor for Toyota and Lexus, operating five retail centres, and in Poland we own four retail centres for BMW and MINI.
We operate VIR for Mazda, Jaguar and Land Rover across the Baltic region and we operate VIR for Mitsubishi in Lithuania. Additionally we retail BMW, Ford and MINI in Latvia and Ford and Hyundai in Lithuania. We operate a total of 23 centres across the region.
In Ethiopia we operate VIR for Toyota and in South America as distributor and retailer for BMW. We also distribute Rolls-Royce in Chile.
In China we have four scale retail centres for Toyota, Lexus, Jaguar Land Rover in Shanghai and Shaoxing and we will be opening a new Porsche centre in Nanchang in early 2013.
Our operating performance
Russia and the Emerging Markets managed to grow sales by 7.1% over 2011, and trading profit declined by 18.2% to £43.0m.
Our Russian business delivered £678.8m of revenue in 2012, and a trading profit of £13.3m, resulting in a return on sales of 2.0%.
Ethiopia performed well as we continued to benefit from a strong aftersales market in an economy that remains robust.
Demand for new cars weakened in Eastern Europe, impacting margins.
Demand for luxury vehicles was lower than expected in South America where we saw an increase of competitive activities.
Our Chinese operations were adversely impacted as of the second quarter by a general weakening in demand and pressure on new car margins and by an anti-Japanese sentiment in the fourth quarter.
Outlook for 2013
We expect moderate industry growth in our Russia and Emerging Markets segment in 2013, weighted towards the second half of the year as it will take time for consumer confidence among affluent buyers to return. We see these challenging trading conditions in emerging markets as temporary, with attractive structural growth prospects in the medium and long term given the strong fundamentals of these economies.
Our businesses will remain focussed on our Top 5 Priorities with firm controls on cost and cash. We plan to continue to grow our aftersales business with our proven marketing initiatives and we will focus on profitable market share growth. We will benefit from several new product launches from our brand partners and we will continue to protect the pricing power of our brands despite price competition due to over-supply in the market. Our control on costs will remain firmly in place.
Overall, we continue to expect our Russia and Emerging Markets segment to deliver a solid performance in 2013.
Finance Review
The Group has delivered a robust performance in 2012. In addition to the segmental results, detailed below are the financial implications of our operating activities.
Central costs
Unallocated central costs for the full year are £18.2m before exceptional items (2011: £17.4m).
Joint ventures and associates
The share of profit after tax from joint ventures was a gain of £0.2m (2011: loss of £3.0m) driven by an improvement in the profitability of our operations in Greece and Russia.
Operating exceptional items
We have reported an exceptional operating income of £1.2m for 2012 (2011: a cost of £13.4m). Included within this is a gain of £19.7m arising from the closure to future accrual of some of the Group's UK final salary pension schemes and restructuring costs of £17.3m (2011: £13.4m), which primarily relate to restructuring initiatives conducted in the fourth quarter of 2012. We also incurred a loss on the deemed disposal of our Russian joint venture of £1.2m.
Net financing costs
Net financing costs before exceptional items have decreased from £13.7m in 2011 to £11.8m in 2012. Included within this is a gain of £4.8m (2011: a loss of £2.4m) in our mark to market reporting of the hedges for the US loan notes and interest receivable on tax refunds.
Exceptional finance costs in 2011 of £10.9m represented an impairment charge on Greek Government Bonds held by our insurance business in Greece to back warranty liabilities.
Tax
The effective tax rate before exceptional items for the year is 25% compared to 26% in 2011. This is due to the impact of reducing tax rates in a number of our markets and the successful conclusion of overseas territories audits. The rate is expected to be similar for 2013.
Non controlling interests
Profits attributable to our non controlling interests were £5.9m, compared to £5.6m in 2011. At the year end the Group's non controlling interests principally comprise a 33% minority holding in UAB Vitvela in Lithuania, a 30% share in NBT Brunei and a 10% share of Subaru Australia.
Foreign currency
During 2012, the Group derived no benefit (2011 benefit: £1.2m) from the translation of its overseas profits before tax into sterling at the 2012 average exchange rate.
Dividend
The Board recommends a final ordinary dividend of 10.5p per ordinary share which is subject to the approval of shareholders at the 2013 Annual General Meeting. This gives a total dividend for the year of 14.5p per ordinary share (2011: 11.0p).
Pensions
During the year, and in line with the funding programme agreed with the Trustees, the Group made cash contributions to the UK defined benefit scheme amounting to £27.7m (2011: £24.1m). In addition, the Group commenced a consultation process with members and trustees of two of the UK defined benefit pension schemes on a proposal that both schemes be closed to future accrual with effect from 31 December 2012. The proposal was confirmed by the Group on 21 December 2012 and active members ceased to accrue benefits under the schemes with effect from 31 December 2012. A revision of market and actuarial assumptions for the UK defined benefit schemes, combined with the closure of two schemes to future accrual and amendments to scheme rules, has resulted in a closing surplus on Group schemes of £72.7m, compared to a deficit of £14.9m in 2011.
Acquisitions and disposals
In November, the Group acquired the remaining 49% interest which it did not already own in the Inchcape Independence group, a retail business in Moscow, from Independence Holdings Limited for a cash consideration of £17.3m.
During the year, the Group disposed of its interest in a retail centre in Russia at book value, generating disposal proceeds of £2.9m.
Post the period end, we have announced an important step in the further development of our Asia Pacific presence, having acquired Trivett Automotive Group, a scale premium and luxury automotive group in Australia, for a total expected cash consideration of £78m. This transaction adds further scale to our Australian business in the premium and luxury segments.
Capital expenditure
During the year, the Group invested £87.3m (2011: £88.5m) of net capital expenditure in the development of greenfield sites and the enlargement of existing facilities, primarily in Asia Pacific and the Emerging Markets.
Cashflow and net funds
The Group's operations have generated strong cashflow in 2012. Working capital ended the year at £25.9m (2011: £12.2m) primarily due to favourable phasing. At the end of 2012, the Group had net funds of £276.2m (2011: £243.5m).
Consolidated income statement
For the year ended 31 December 2012
|
Notes |
Before exceptional items
2012
£m |
Exceptional items
(note 3)
2012
£m |
Total
2012
£m |
Before exceptional items
2011
£m |
Exceptional items
(note 3)
2011
£m |
Total
2011
£m |
Revenue |
2 |
6,085.4 |
- |
6,085.4 |
5,826.3 |
- |
5,826.3 |
Cost of sales |
|
(5,210.7) |
(0.4) |
(5,211.1) |
(4,970.2) |
- |
(4,970.2) |
Gross profit |
|
874.7 |
(0.4) |
874.3 |
856.1 |
- |
856.1 |
Net operating expenses |
|
(612.8) |
1.6 |
(611.2) |
(611.7) |
(13.4) |
(625.1) |
Operating profit |
|
261.9 |
1.2 |
263.1 |
244.4 |
(13.4) |
231.0 |
Share of profit / (loss) after tax of joint ventures and associates |
|
0.2 |
- |
0.2 |
(3.0) |
- |
(3.0) |
Profit before finance and tax |
|
262.1 |
1.2 |
263.3 |
241.4 |
(13.4) |
228.0 |
Finance income |
4 |
56.8 |
- |
56.8 |
57.3 |
- |
57.3 |
Finance costs |
5 |
(68.6) |
- |
(68.6) |
(71.0) |
(10.9) |
(81.9) |
Profit before tax |
|
250.3 |
1.2 |
251.5 |
227.7 |
(24.3) |
203.4 |
Tax |
6 |
(61.5) |
0.4 |
(61.1) |
(59.2) |
3.6 |
(55.6) |
Profit for the year |
|
188.8 |
1.6 |
190.4 |
168.5 |
(20.7) |
147.8 |
|
|
|
|
|
|
|
|
Profit attributable to: |
|
|
|
|
|
|
|
- Owners of the parent |
|
|
|
184.5 |
|
|
142.2 |
- Non controlling interests |
|
|
|
5.9 |
|
|
5.6 |
|
|
|
|
190.4 |
|
|
147.8 |
Basic earnings per share (pence) |
7 |
|
|
40.0p |
|
|
31.0p |
Diluted earnings per share (pence) |
7 |
|
|
39.4p |
|
|
30.5p |
Consolidated statement of comprehensive income
For the year ended 31 December 2012
|
2012
£m |
2011
£m |
Profit for the year |
190.4 |
147.8 |
|
|
|
Other comprehensive income: |
|
|
Cash flow hedges |
(46.1) |
5.7 |
Fair value gains / (losses) on available for sale financial assets |
0.1 |
(6.5) |
Impairment losses on available for sale financial assets transferred to consolidated income statement |
1.0 |
10.9 |
Effect of foreign exchange rate changes |
(12.3) |
(26.5) |
Net actuarial (losses) / gains on defined benefit pension schemes |
(39.3) |
18.0 |
Recoverable / (irrecoverable) element of pension surplus |
72.9 |
(36.7) |
Current tax recognised directly in shareholders' equity |
- |
7.0 |
Deferred tax recognised directly in shareholders' equity |
22.6 |
(8.4) |
Other comprehensive income for the year, net of tax |
(1.1) |
(36.5) |
Total comprehensive income for the year |
189.3 |
111.3 |
|
|
|
Total comprehensive income attributable to: |
|
|
- Owners of the parent |
186.8 |
105.7 |
- Non controlling interests |
2.5 |
5.6 |
Total comprehensive income for the year |
189.3 |
111.3 |
Consolidated statement of financial position
As at 31 December 2012
|
Notes |
2012
£m |
2011
£m |
Non-current assets |
|
|
|
Intangible assets |
|
559.5 |
542.6 |
Property, plant and equipment |
|
693.1 |
647.6 |
Investments in joint ventures and associates |
|
13.8 |
29.5 |
Available for sale financial assets |
|
4.0 |
5.6 |
Trade and other receivables |
|
31.2 |
34.4 |
Deferred tax assets |
|
40.4 |
43.0 |
Retirement benefit asset |
|
100.6 |
47.3 |
|
|
1,442.6 |
1,350.0 |
Current assets |
|
|
|
Inventories |
|
928.9 |
905.5 |
Trade and other receivables |
|
258.4 |
251.5 |
Available for sale financial assets |
|
2.7 |
0.5 |
Derivative financial instruments |
|
116.1 |
139.7 |
Current tax assets |
|
3.0 |
2.2 |
Cash and cash equivalents |
|
597.9 |
558.9 |
|
|
1,907.0 |
1,858.3 |
Assets held for sale and disposal group |
11 |
31.3 |
5.7 |
|
|
1,938.3 |
1,864.0 |
Total assets |
|
3,380.9 |
3,214.0 |
Current liabilities |
|
|
|
Trade and other payables |
|
(1,150.7) |
(1,140.6) |
Derivative financial instruments |
|
(62.6) |
(7.4) |
Current tax liabilities |
|
(47.5) |
(45.1) |
Provisions |
|
(41.9) |
(36.8) |
Borrowings |
|
(113.5) |
(101.9) |
|
|
(1,416.2) |
(1,331.8) |
Non-current liabilities |
|
|
|
Trade and other payables |
|
(22.4) |
(29.6) |
Provisions |
|
(43.0) |
(54.1) |
Deferred tax liabilities |
|
(24.9) |
(40.2) |
Borrowings |
|
(320.0) |
(338.6) |
Retirement benefit liability |
|
(27.9) |
(62.2) |
|
|
(438.2) |
(524.7) |
Liabilities directly associated with the disposal group |
11 |
(19.1) |
- |
Total liabilities |
|
(1,873.5) |
(1,856.5) |
Net assets |
|
1,507.4 |
1,357.5 |
Shareholders' equity |
|
|
|
Share capital |
|
46.9 |
46.4 |
Share premium |
|
136.5 |
126.9 |
Capital redemption reserve |
|
133.3 |
133.3 |
Other reserves |
|
86.7 |
126.8 |
Retained earnings |
|
1,078.2 |
895.7 |
Equity attributable to owners of the parent |
|
1,481.6 |
1,329.1 |
Non controlling interests |
|
25.8 |
28.4 |
Total shareholders' equity |
|
1,507.4 |
1,357.5 |
Consolidated statement of changes in equity
For the year ended 31 December 2012
|
Notes |
Share capital
£m |
Share premium
£m |
Capital redemption reserve
£m |
Other reserves
£m |
Retained earnings
£m |
Equity attributable to owners of the parent
£m |
Non controlling interests
£m |
Total
shareholders'
equity
£m |
At 1 January 2011 |
|
46.4 |
126.3 |
133.3 |
145.2 |
811.9 |
1,263.1 |
26.2 |
1,289.3 |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
- |
- |
- |
- |
142.2 |
142.2 |
5.6 |
147.8 |
Other comprehensive income for the year |
|
- |
- |
- |
(18.4) |
(18.1) |
(36.5) |
- |
(36.5) |
Total comprehensive income for the year |
|
- |
- |
- |
(18.4) |
124.1 |
105.7 |
5.6 |
111.3 |
|
|
|
|
|
|
|
|
|
|
Share-based payments, net of tax |
|
- |
- |
- |
- |
6.7 |
6.7 |
- |
6.7 |
Net purchase of own shares by ESOP Trust |
|
- |
- |
- |
- |
(0.2) |
(0.2) |
- |
(0.2) |
Issue of ordinary share capital |
|
- |
0.6 |
- |
- |
- |
0.6 |
- |
0.6 |
Dividends: |
|
|
|
|
|
|
|
|
|
- Owners of the parent |
8 |
- |
- |
- |
- |
(46.8) |
(46.8) |
- |
(46.8) |
- Non controlling interests |
|
- |
- |
- |
- |
- |
- |
(3.4) |
(3.4) |
At 1 January 2012 |
|
46.4 |
126.9 |
133.3 |
126.8 |
895.7 |
1,329.1 |
28.4 |
1,357.5 |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
- |
- |
- |
- |
184.5 |
184.5 |
5.9 |
190.4 |
Other comprehensive income for the year |
|
- |
- |
- |
(40.1) |
42.4 |
2.3 |
(3.4) |
(1.1) |
Total comprehensive income for the year |
|
- |
- |
- |
(40.1) |
226.9 |
186.8 |
2.5 |
189.3 |
|
|
|
|
|
|
|
|
|
|
Share-based payments, net of tax |
|
- |
- |
- |
- |
10.4 |
10.4 |
- |
10.4 |
Net purchase of own shares by ESOP Trust |
|
- |
- |
- |
- |
(2.3) |
(2.3) |
- |
(2.3) |
Issue of ordinary share capital |
|
0.5 |
9.6 |
- |
- |
- |
10.1 |
- |
10.1 |
Dividends: |
|
|
|
|
|
|
|
|
|
- Owners of the parent |
8 |
- |
- |
- |
- |
(52.5) |
(52.5) |
- |
(52.5) |
- Non controlling interests |
|
- |
- |
- |
- |
- |
- |
(3.3) |
(3.3) |
Disposal of businesses |
|
- |
- |
- |
- |
- |
- |
(1.8) |
(1.8) |
At 31 December 2012 |
|
46.9 |
136.5 |
133.3 |
86.7 |
1,078.2 |
1,481.6 |
25.8 |
1,507.4 |
Share-based payments have been stated net of a tax credit of £3.6m (2011 - charge of £0.6m).
Cumulative goodwill of £108.1m (2011 - £108.1m) has been written off against the retained earnings reserve.
Consolidated statement of cash flows
For the year ended 31 December 2012
|
Notes |
2012
£m |
2011
£m |
Cash flows from operating activities |
|
|
|
Cash generated from operations |
9a |
249.2 |
244.7 |
Tax paid |
|
(47.2) |
(45.2) |
Interest received |
|
14.7 |
10.9 |
Interest paid |
|
(32.3) |
(20.4) |
Net cash generated from operating activities |
|
184.4 |
190.0 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Acquisition of businesses, net of cash and overdrafts acquired |
10a |
(15.8) |
(20.2) |
Net cash inflow from sale of businesses |
10b |
2.9 |
5.5 |
Purchase of property, plant and equipment |
|
(83.8) |
(80.7) |
Purchase of intangible assets |
|
(13.9) |
(14.3) |
Proceeds from disposal of property, plant and equipment |
|
10.4 |
6.5 |
Net (purchase) / disposal of available for sale financial assets |
|
(0.8) |
2.4 |
Net cash used in investing activities |
|
(101.0) |
(100.8) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from issue of ordinary shares |
|
10.1 |
0.6 |
Net purchase of own shares by ESOP Trust |
|
(2.3) |
(0.2) |
Net cash (outflow) / inflow from borrowings |
|
(3.5) |
1.5 |
Payment of capital element of finance leases |
|
(0.4) |
(0.8) |
Loans (granted to) / received from joint ventures |
|
(3.2) |
0.3 |
Settlement of derivatives |
|
(0.8) |
4.7 |
Equity dividends paid |
8 |
(52.5) |
(46.8) |
Dividends paid to non controlling interests |
|
(3.3) |
(3.4) |
Net cash used in financing activities |
|
(55.9) |
(44.1) |
|
|
|
|
Net increase in cash and cash equivalents |
9b |
27.5 |
45.1 |
Cash and cash equivalents at the beginning of the year |
|
461.3 |
419.6 |
Effect of foreign exchange rate changes |
|
(3.9) |
(3.4) |
Cash and cash equivalents at the end of the year |
|
484.9 |
461.3 |
|
|
|
|
Cash and cash equivalents consist of: |
|
|
|
- Cash at bank and cash equivalents |
|
324.4 |
385.6 |
- Short-term deposits |
|
273.5 |
173.3 |
- Bank overdrafts |
|
(113.0) |
(97.6) |
|
|
484.9 |
461.3 |
Notes
1 Basis of preparation and accounting policies
The consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and International Financial Reporting Interpretation Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The accounting policies adopted in the preparation of the condensed set of consolidated financial information are consistent with those of the Group's Annual Report and Accounts 2011.
The condensed set of consolidated financial information presented for the years ended 31 December 2011 and 2012 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group's published consolidated Financial Statements for the year ended 31 December 2011 have been reported on by the Group's auditors and filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain an emphasis of matter paragraph or a statement under Section 498 of the Companies Act 2006. The financial information for the year ended 31 December 2012 and the comparative information have been extracted from the audited consolidated Financial Statements for the year ended 31 December 2012 prepared under IFRS, which have not yet been approved by the shareholders and have not yet been delivered to the Registrar. The report of the auditors on the consolidated Financial Statements for 2012 was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
Going concern
The Group has significant financial resources and the Directors, having reviewed the Group's operating budgets, investment plans and financing arrangements, have assessed the future funding requirements of the Group and compared this to the level of committed facilities and cash resources.
The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. Accordingly, the Directors are satisfied that it is appropriate to adopt the going concern basis in preparing the Annual Report and Accounts.
2 Segmental analysis
The Group has determined that the chief operating decision maker is the Executive Committee.
Emerging markets are those countries in which the Group operates that have started to grow but have yet to reach a mature stage of development and accordingly are in or are expected to return to the growth phase of their development cycle. These currently comprise China, the Balkans, the Baltics, Poland, South America and Africa.
The Group's reported segments are based on the location of the Group's assets. Revenue earned from sales is disclosed by origin and is not materially different from revenue by destination.
Transfer prices between segments are set on an arm's length basis.
Distribution comprises Vertically Integrated Retail businesses as well as Financial Services and other businesses.
|
|
|
|
|
|
|
Distribution |
2012 |
Australasia
£m |
Europe
£m |
North Asia
£m |
South Asia
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total Distribution
£m |
Revenue |
|
|
|
|
|
|
|
Total revenue |
978.4 |
617.3 |
518.9 |
385.1 |
37.4 |
364.3 |
2,901.4 |
Inter-segment revenue |
(230.6) |
(130.4) |
(0.2) |
- |
- |
(28.7) |
(389.9) |
Revenue from third parties |
747.8 |
486.9 |
518.7 |
385.1 |
37.4 |
335.6 |
2,511.5 |
Results |
|
|
|
|
|
|
|
Segment result |
51.3 |
17.3 |
52.8 |
35.1 |
7.2 |
30.3 |
194.0 |
Operating exceptional items |
(0.8) |
(3.6) |
(0.1) |
- |
- |
(0.2) |
(4.7) |
Operating profit after exceptional items |
50.5 |
13.7 |
52.7 |
35.1 |
7.2 |
30.1 |
189.3 |
Share of profit / (loss) after tax of joint
ventures and associates |
- |
(0.1) |
- |
- |
- |
- |
(0.1) |
Profit before finance and tax |
50.5 |
13.6 |
52.7 |
35.1 |
7.2 |
30.1 |
189.2 |
Finance income |
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
|
2012 |
Australasia
£m |
Europe
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total
Retail
£m |
Total pre Central
£m |
Central
£m |
Total
£m |
Revenue |
|
|
|
|
|
|
|
|
Total revenue |
420.9 |
129.7 |
2,096.4 |
926.9 |
3,573.9 |
6,475.3 |
- |
6,475.3 |
Inter-segment revenue |
- |
- |
- |
- |
- |
(389.9) |
- |
(389.9) |
Revenue from third parties |
420.9 |
129.7 |
2,096.4 |
926.9 |
3,573.9 |
6,085.4 |
- |
6,085.4 |
Results |
|
|
|
|
|
|
|
|
Segment result |
15.9 |
(0.5) |
58.0 |
12.7 |
86.1 |
280.1 |
(18.2) |
261.9 |
Operating exceptional items |
(1.4) |
(1.1) |
(2.9) |
(7.9) |
(13.3) |
(18.0) |
19.2 |
1.2 |
Operating profit after exceptional items |
14.5 |
(1.6) |
55.1 |
4.8 |
72.8 |
262.1 |
1.0 |
263.1 |
Share of profit / (loss) after tax of joint ventures and associates |
- |
- |
- |
0.3 |
0.3 |
0.2 |
- |
0.2 |
Profit before finance and tax |
14.5 |
(1.6) |
55.1 |
5.1 |
73.1 |
262.3 |
1.0 |
263.3 |
Finance income |
|
|
|
|
|
|
|
56.8 |
Finance costs |
|
|
|
|
|
|
|
(68.6) |
Profit before tax |
|
|
|
|
|
|
|
251.5 |
Tax |
|
|
|
|
|
|
|
(61.1) |
Profit for the year |
|
|
|
|
|
|
|
190.4 |
Net finance costs of £11.8m are not allocated to individual segments
|
|
|
|
|
|
|
Distribution |
2012 |
Australasia
£m |
Europe
£m |
North Asia
£m |
South Asia
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total Distribution
£m |
Segment assets and liabilities |
|
|
|
|
|
|
|
Segment assets |
84.5 |
104.8 |
87.5 |
76.7 |
33.1 |
117.0 |
503.6 |
Other current assets |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Segment liabilities |
(250.5) |
(117.8) |
(76.7) |
(57.0) |
(54.3) |
(94.9) |
(651.2) |
Other liabilities |
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
|
Segment assets include net inventory, trade receivables and derivative assets. Segment liabilities include payables, provisions and derivative liabilities.
|
|
|
|
|
|
|
Distribution |
2012 |
Australasia
£m |
Europe
£m |
North Asia
£m |
South Asia
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total Distribution
£m |
Other segment items |
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
|
- Property, plant and equipment |
5.3 |
1.7 |
2.8 |
6.7 |
0.2 |
13.7 |
30.4 |
- Interest in leased vehicles |
11.2 |
0.2 |
2.9 |
- |
25.2 |
2.1 |
41.6 |
- Intangible assets |
0.5 |
0.4 |
0.4 |
1.6 |
0.2 |
0.3 |
3.4 |
Depreciation: |
|
|
|
|
|
|
|
- Property, plant and equipment |
3.0 |
1.0 |
2.0 |
2.0 |
0.1 |
2.5 |
10.6 |
- Interest in leased vehicles |
1.7 |
1.4 |
1.6 |
- |
7.4 |
1.5 |
13.6 |
Amortisation of intangible assets |
0.5 |
0.2 |
- |
0.1 |
0.1 |
0.1 |
1.0 |
Impairment of goodwill |
- |
- |
- |
- |
- |
- |
- |
Impairment of intangible assets |
- |
- |
- |
- |
- |
- |
- |
Impairment of property, plant and equipment |
- |
- |
- |
- |
- |
- |
- |
Net provisions charged / (released) to the consolidated income statement |
3.9 |
6.4 |
2.5 |
2.3 |
(1.2) |
4.7 |
18.6 |
Net provisions include inventory, trade receivables impairment and other liability provisions.
|
|
|
|
|
Retail |
|
2012 |
Australasia
£m |
Europe
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total
Retail
£m |
Total
£m |
Segment assets and liabilities |
|
|
|
|
|
|
Segment assets |
85.0 |
18.5 |
389.2 |
218.0 |
710.7 |
1,214.3 |
Other current assets |
|
|
|
|
|
755.4 |
Non-current assets |
|
|
|
|
|
1,411.2 |
Segment liabilities |
(87.8) |
(11.3) |
(391.3) |
(138.2) |
(628.6) |
(1,279.8) |
Other liabilities |
|
|
|
|
|
(593.7) |
Net assets |
|
|
|
|
|
1,507.4 |
Segment assets include net inventory, trade receivables and derivative assets. Segment liabilities include payables, provisions and derivative liabilities.
|
|
|
|
|
Retail |
|
|
|
2012 |
Australasia
£m |
Europe
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total
Retail
£m |
Total pre Central
£m |
Central
£m |
Total
£m |
Other segment items |
|
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
1.3 |
0.4 |
22.3 |
30.9 |
54.9 |
85.3 |
0.7 |
86.0 |
- Interest in leased vehicles |
- |
0.9 |
- |
0.1 |
1.0 |
42.6 |
- |
42.6 |
- Intangible assets |
- |
- |
2.1 |
1.7 |
3.8 |
7.2 |
7.9 |
15.1 |
Depreciation: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
0.7 |
0.9 |
10.0 |
7.3 |
18.9 |
29.5 |
0.2 |
29.7 |
- Interest in leased vehicles |
- |
- |
- |
0.1 |
0.1 |
13.7 |
- |
13.7 |
Amortisation of intangible assets |
- |
- |
1.2 |
1.5 |
2.7 |
3.7 |
- |
3.7 |
Impairment of goodwill |
- |
- |
0.2 |
- |
0.2 |
0.2 |
- |
0.2 |
Impairment of intangible assets |
- |
- |
0.8 |
1.1 |
1.9 |
1.9 |
- |
1.9 |
Impairment of property, plant and equipment |
- |
- |
- |
0.8 |
0.8 |
0.8 |
- |
0.8 |
Net provisions charged / (released) to the consolidated income statement |
4.0 |
2.3 |
21.5 |
0.5 |
28.3 |
46.9 |
5.9 |
52.8 |
Net provisions include inventory, trade receivables impairment and other liability provisions.
|
|
|
|
|
|
|
Distribution |
2011 |
Australasia
£m |
Europe
£m |
North Asia
£m |
South Asia
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total Distribution
£m |
Revenue |
|
|
|
|
|
|
|
Total revenue |
801.6 |
766.7 |
433.4 |
296.2 |
36.1 |
336.0 |
2,670.0 |
Inter-segment revenue |
(180.2) |
(108.2) |
(0.1) |
- |
- |
(24.1) |
(312.6) |
Revenue from third parties |
621.4 |
658.5 |
433.3 |
296.2 |
36.1 |
311.9 |
2,357.4 |
Results |
|
|
|
|
|
|
|
Segment result |
42.7 |
24.3 |
42.0 |
26.0 |
6.9 |
30.1 |
172.0 |
Operating exceptional items |
(0.3) |
(2.7) |
(0.1) |
- |
- |
(0.3) |
(3.4) |
Operating profit after exceptional items |
42.4 |
21.6 |
41.9 |
26.0 |
6.9 |
29.8 |
168.6 |
Share of (loss) / profit after tax of joint
ventures and associates |
- |
(1.3) |
- |
- |
0.1 |
- |
(1.2) |
Profit before finance and tax |
42.4 |
20.3 |
41.9 |
26.0 |
7.0 |
29.8 |
167.4 |
Finance income |
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
|
2011 |
Australasia
£m |
Europe
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total
Retail
£m |
Total pre Central
£m |
Central
£m |
Total
£m |
Revenue |
|
|
|
|
|
|
|
|
Total revenue |
389.6 |
147.5 |
2,023.2 |
908.6 |
3,468.9 |
6,138.9 |
- |
6,138.9 |
Inter-segment revenue |
- |
- |
- |
- |
- |
(312.6) |
- |
(312.6) |
Revenue from third parties |
389.6 |
147.5 |
2,023.2 |
908.6 |
3,468.9 |
5,826.3 |
- |
5,826.3 |
Results |
|
|
|
|
|
|
|
|
Segment result |
12.6 |
(0.3) |
53.5 |
24.0 |
89.8 |
261.8 |
(17.4) |
244.4 |
Operating exceptional items |
(0.4) |
- |
(7.9) |
(0.1) |
(8.4) |
(11.8) |
(1.6) |
(13.4) |
Operating profit after exceptional items |
12.2 |
(0.3) |
45.6 |
23.9 |
81.4 |
250.0 |
(19.0) |
231.0 |
Share of (loss) / profit after tax of joint ventures and associates |
- |
- |
(0.4) |
(1.4) |
(1.8) |
(3.0) |
- |
(3.0) |
Profit before finance and tax |
12.2 |
(0.3) |
45.2 |
22.5 |
79.6 |
247.0 |
(19.0) |
228.0 |
Finance income |
|
|
|
|
|
|
|
57.3 |
Finance costs |
|
|
|
|
|
|
|
(81.9) |
Profit before tax |
|
|
|
|
|
|
|
203.4 |
Tax |
|
|
|
|
|
|
|
(55.6) |
Profit for the year |
|
|
|
|
|
|
|
147.8 |
Central costs include a post-retirement settlement gain of £6.1m.
Net finance costs of £24.6m are not allocated to individual segments and include an exceptional charge of £10.9m relating to the impairment losses on Greek Government Bonds (see note 3).
|
|
|
|
|
|
|
Distribution |
2011 |
Australasia
£m |
Europe
£m |
North Asia
£m |
South Asia
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total Distribution
£m |
Segment assets and liabilities |
|
|
|
|
|
|
|
Segment assets |
110.4 |
142.5 |
94.6 |
50.1 |
27.1 |
103.7 |
528.4 |
Other current assets |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Segment liabilities |
(237.8) |
(182.8) |
(67.0) |
(37.6) |
(48.4) |
(78.3) |
(651.9) |
Other liabilities |
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
|
Segment assets include net inventory, trade receivables and derivative assets. Segment liabilities include payables, provisions and derivative liabilities.
|
|
|
|
|
|
|
Distribution |
2011 |
Australasia
£m |
Europe
£m |
North Asia
£m |
South Asia
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total Distribution
£m |
Other segment items |
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
|
- Property, plant and equipment |
1.4 |
0.7 |
3.1 |
2.6 |
0.3 |
6.4 |
14.5 |
- Interest in leased vehicles |
7.3 |
3.5 |
2.8 |
- |
23.7 |
0.9 |
38.2 |
- Intangible assets |
1.1 |
0.4 |
0.2 |
0.9 |
0.1 |
- |
2.7 |
Depreciation: |
|
|
|
|
|
|
|
- Property, plant and equipment |
3.0 |
1.2 |
1.5 |
2.2 |
0.1 |
2.2 |
10.2 |
- Interest in leased vehicles |
1.6 |
3.2 |
1.6 |
- |
8.6 |
1.1 |
16.1 |
Amortisation of intangible assets |
0.3 |
0.1 |
- |
- |
0.2 |
0.1 |
0.7 |
Impairment of intangible assets |
- |
- |
- |
- |
- |
- |
- |
Net provisions charged / (released) to the consolidated income statement |
7.2 |
17.9 |
1.6 |
4.2 |
(1.1) |
1.1 |
30.9 |
Net provisions include inventory, trade receivables impairment and other liability provisions.
|
|
|
|
|
Retail |
|
2011 |
Australasia
£m |
Europe
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total
Retail
£m |
Total
£m |
Segment assets and liabilities |
|
|
|
|
|
|
Segment assets |
61.3 |
23.9 |
394.8 |
184.7 |
664.7 |
1,193.1 |
Other current assets |
|
|
|
|
|
705.1 |
Non-current assets |
|
|
|
|
|
1,315.8 |
Segment liabilities |
(62.7) |
(9.5) |
(405.7) |
(101.2) |
(579.1) |
(1,231.0) |
Other liabilities |
|
|
|
|
|
(625.5) |
Net assets |
|
|
|
|
|
1,357.5 |
Segment assets include net inventory, trade receivables and derivative assets. Segment liabilities include payables, provisions and derivative liabilities.
|
|
|
|
|
Retail |
|
|
|
2011 |
Australasia
£m |
Europe
£m |
United Kingdom
£m |
Russia and Emerging Markets
£m |
Total
Retail
£m |
Total pre Central
£m |
Central
£m |
Total
£m |
Other segment items |
|
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
1.2 |
0.4 |
22.0 |
42.6 |
66.2 |
80.7 |
0.5 |
81.2 |
- Interest in leased vehicles |
- |
0.4 |
- |
0.3 |
0.7 |
38.9 |
- |
38.9 |
- Intangible assets |
- |
- |
3.3 |
1.8 |
5.1 |
7.8 |
5.3 |
13.1 |
Depreciation: |
|
|
|
|
|
|
|
|
- Property, plant and equipment |
0.6 |
1.0 |
9.4 |
7.3 |
18.3 |
28.5 |
0.5 |
29.0 |
- Interest in leased vehicles |
- |
0.1 |
- |
0.1 |
0.2 |
16.3 |
- |
16.3 |
Amortisation of intangible assets |
- |
- |
2.3 |
1.3 |
3.6 |
4.3 |
0.2 |
4.5 |
Impairment of intangible assets |
- |
- |
7.1 |
- |
7.1 |
7.1 |
- |
7.1 |
Net provisions charged / (released) to the consolidated income statement |
3.9 |
1.0 |
21.6 |
0.8 |
27.3 |
58.2 |
- |
58.2 |
Net provisions include inventory, trade receivables impairment and other liability provisions.
3 Exceptional items
|
2012
£m |
2011
£m |
Restructuring costs |
(17.3) |
(13.4) |
Closure of defined benefit pension schemes to future accrual |
19.7 |
- |
Loss on deemed disposal of joint venture (note 10) |
(1.2) |
- |
Operating exceptional items |
1.2 |
(13.4) |
Impairment of available for sale financial assets (note 5) |
- |
(10.9) |
Finance exceptional items |
- |
(10.9) |
Total exceptional items before tax |
1.2 |
(24.3) |
Exceptional tax credit |
0.4 |
3.6 |
Total exceptional items |
1.6 |
(20.7) |
The restructuring costs of £17.3m represent the cost of headcount reduction across the Group together with the closure of less profitable sites. The restructuring was carried out to ensure that the Group maintains an organisational structure and efficient cost base across the Group. Included within this is an impairment charge of £0.8m in respect of property, plant and equipment and £2.1m in respect of goodwill and other intangible assets.
During the year, the Group closed two of its UK defined benefit pension schemes to future accrual. The net gain to the Group of £19.7m comprises a curtailment gain of £26.0m net of costs of £6.3m associated with implementing the changes including the harmonisation of pension arrangements.
The Group has recognised a loss of £1.2m as a result of measuring at fair value its 51% equity interest in the Inchcape Independence group prior to the acquisition of the remaining 49%.
The exceptional tax credit of £0.4m represents relief on restructuring and property costs (£3.1m credit), the use of brought forward unprovided tax losses and other reliefs (£1.7m credit), offset by a charge arising on pension scheme curtailment gains (£4.4m charge).
In 2011, the restructuring costs of £13.4m represented the cost of a global restructuring exercise to improve the efficiency of the Group's operations as well as improving the cost effectiveness of the Group's global IT strategy. Included within the restructuring costs was a £7.1m impairment of computer software costs in the UK.
The £10.9m charge on the impairment of available for sale financial assets related to the impairment losses on Greek Government Bonds to reflect the difficult market conditions.
The exceptional tax credit of £3.6m represented relief on restructuring costs and impairment of software costs. No relief was available for the impairment of available for sale financial assets.
4 Finance income
|
2012
£m |
2011
£m |
Bank and other interest receivable |
3.7 |
5.6 |
Expected return on post-retirement plan assets |
41.2 |
45.1 |
Other finance income |
11.9 |
6.6 |
Total finance income |
56.8 |
57.3 |
During the period, the Group recognised £3.7m of interest relating to tax refunds which is included within Other finance income (2011 - £nil).
5 Finance costs
|
2012
£m |
2011
£m |
Interest payable on bank borrowings |
0.6 |
2.0 |
Interest payable on Private Placement |
4.4 |
3.9 |
Interest payable on other borrowings |
0.2 |
0.3 |
Fair value adjustment on Private Placement |
(18.0) |
18.5 |
Fair value loss / (gain) on cross currency interest rate swaps |
13.2 |
(16.1) |
Stock holding interest |
18.0 |
13.6 |
Interest expense on post-retirement plan liabilities |
39.1 |
43.7 |
Other finance costs |
11.7 |
5.8 |
Capitalised borrowing costs |
(0.6) |
(0.7) |
Total finance costs before exceptional items |
68.6 |
71.0 |
Exceptional items: |
|
|
- Impairment of available for sale financial assets (note 3) |
- |
10.9 |
Total finance costs |
68.6 |
81.9 |
The Group capitalisation rate used for general borrowing costs in accordance with IAS 23 was a weighted average rate for the year of 2.0% (2011 - 2.0%).
6 Income Tax
|
2012
£m |
2011
£m |
Current tax: |
|
|
- UK corporation tax |
2.4 |
7.0 |
|
2.4 |
7.0 |
Overseas tax |
54.0 |
49.0 |
|
56.4 |
56.0 |
Adjustments to prior year liabilities: |
|
|
- UK |
- |
(0.3) |
- Overseas |
(0.9) |
(0.9) |
Current tax |
55.5 |
54.8 |
Deferred tax |
6.0 |
4.4 |
Tax before exceptional tax |
61.5 |
59.2 |
Exceptional tax - current tax |
(4.6) |
(1.0) |
Exceptional tax - deferred tax |
4.2 |
(2.6) |
Exceptional tax (note 3) |
(0.4) |
(3.6) |
Total tax charge |
61.1 |
55.6 |
The UK corporation tax charge is calculated upon net UK profit and after taking account of all relevant prior year losses and other deductions including pension contributions and capital allowances on plant and buildings.
The effective tax rate for the year, before exceptional items, of 24.6% (2011 - 26%) is higher than the standard blended rate of tax of 23.4% (2011 - 23.8%) as explained below. The standard rate comprises the average statutory rates across the Group, weighted in proportion to accounting profits.
|
2012
£m |
2011
£m |
Profit before tax |
251.5 |
203.4 |
Profit before tax multiplied by the standard rate of tax of 23.4% (2011 - 23.8%) |
58.9 |
48.4 |
Effects of: |
|
|
- Amortisation and impairment |
0.1 |
2.9 |
- Non-tax deductible items |
4.9 |
4.5 |
- Unrecognised tax losses |
(0.3) |
(0.8) |
- Overseas tax levies and austerity taxes |
1.7 |
2.1 |
- Prior year items |
(6.1) |
(2.0) |
- Withholding tax on overseas dividends |
2.7 |
- |
- Profit on disposal of joint ventures |
0.4 |
- |
- Other items |
(1.2) |
0.5 |
Total tax charge |
61.1 |
55.6 |
7 Earnings per share
|
2012
£m |
2011
£m |
Profit for the year |
190.4 |
147.8 |
Non controlling interests |
(5.9) |
(5.6) |
Basic earnings |
184.5 |
142.2 |
Exceptional items |
(1.6) |
20.7 |
Adjusted earnings |
182.9 |
162.9 |
Basic earnings per share |
40.0p |
31.0p |
Diluted earnings per share |
39.4p |
30.5p |
Basic Adjusted earnings per share |
39.7p |
35.5p |
Diluted Adjusted earnings per share |
39.1p |
34.9p |
|
2012
number |
2011
number |
Weighted average number of fully paid ordinary shares in issue during the year |
465,120,309 |
463,324,543 |
Weighted average number of fully paid ordinary shares in issue during the year: |
|
|
- Held by the ESOP Trust |
(1,552,107) |
(1,372,654) |
- Repurchased as part of the share buy back programme |
(2,687,560) |
(2,687,560) |
Weighted average number of fully paid ordinary shares for the purposes of basic EPS |
460,880,642 |
459,264,329 |
Dilutive effect of potential ordinary shares |
7,318,204 |
7,193,499 |
Adjusted weighted average number of fully paid ordinary shares in issue during the
year for the purposes of diluted EPS |
468,198,846 |
466,457,828 |
Basic earnings per share is calculated by dividing the basic earnings for the year by the weighted average number of fully paid ordinary shares in issue during the year, less those shares held by the ESOP Trust and those repurchased as part of the share buy back programme.
Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise share options and other share-based awards.
Adjusted earnings (which excludes exceptional items) is adopted to assist the reader in understanding the underlying performance of the Group. Adjusted earnings per share is calculated by dividing the Adjusted earnings for the year by the weighted average number of fully paid ordinary shares in issue during the year, less those shares held by the ESOP Trust and those repurchased as part of the share buy back programme.
Diluted Adjusted earnings per share is calculated on the same basis as the basic Adjusted earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise share options and other share-based awards.
8 Dividends
The following dividends were paid by the Group:
|
2012
£m |
2011
£m |
Interim dividend for the six months ended 30 June 2012 of 4.0p per share (2011 - 3.6p per share) |
18.5 |
16.5 |
Final dividend for the year ended 31 December 2011 of 7.4p per share (2010 - 6.6p per share) |
34.0 |
30.3 |
|
52.5 |
46.8 |
A final proposed dividend for the year ended 31 December 2012 of 10.5p per share amounting to £48.9m is subject to approval by shareholders at the Annual General Meeting (AGM) on 16 May 2013 and has not been included as a liability as at 31 December 2012.
If approved at the AGM, the dividend will be paid on 19 June 2013 to shareholders registered in the books of the Company at the close of business on 24 May 2013. Together with the interim dividend of 4.0p per share paid on 4 September 2012, this will make a total ordinary dividend for the year of 14.5p per share. The Dividend Reinvestment Plan (DRIP) continues to be available.
9 Notes to the consolidated statement of cash flows
a. Reconciliation of cash generated from operations
|
2012
£m |
2011
£m |
Cash flows from operating activities |
|
|
Operating profit |
263.1 |
231.0 |
Operating exceptional items |
(1.2) |
13.4 |
Amortisation of intangible assets |
3.7 |
4.5 |
Depreciation of property, plant and equipment |
29.7 |
29.0 |
Profit on disposal of property, plant and equipment |
(0.2) |
(0.1) |
Share-based payments charge |
6.8 |
7.3 |
Increase in inventories |
(42.5) |
(61.0) |
Increase in trade and other receivables |
(9.5) |
(24.0) |
Increase in trade and other payables |
47.3 |
79.0 |
Decrease in provisions |
(16.5) |
(1.1) |
Pension contributions in excess of the pension charge for the year* |
(25.4) |
(24.8) |
Increase / (decrease) in interest in leased vehicles |
2.1 |
(1.1) |
Payment in respect of operating exceptional items |
(8.2) |
(6.5) |
Other items |
- |
(0.9) |
Cash generated from operations |
249.2 |
244.7 |
* Includes additional payments of £23.3m (2011 - £19.2m).
b. Reconciliation of net cash flow to movement in net funds
|
2012
£m |
2011
£m |
Net increase in cash and cash equivalents |
27.5 |
45.1 |
Net cash outflow / (inflow) from borrowings and finance leases |
3.9 |
(0.7) |
Change in net cash and debt resulting from cash flows |
31.4 |
44.4 |
Effect of foreign exchange rate changes on net cash and debt |
(3.8) |
(3.5) |
New finance leases |
- |
(0.8) |
Net movement in fair value |
4.8 |
(2.4) |
Net loans and finance leases relating to acquisitions and disposals |
0.3 |
- |
Movement in net funds |
32.7 |
37.7 |
Opening net funds |
243.5 |
205.8 |
Closing net funds |
276.2 |
243.5 |
Net funds is analysed as follows:
|
2012
£m |
2011
£m |
Cash at bank and cash equivalents |
324.4 |
385.6 |
Short-term deposits |
273.5 |
173.3 |
Bank overdrafts |
(113.0) |
(97.6) |
Cash and cash equivalents |
484.9 |
461.3 |
Bank loans |
(317.6) |
(339.1) |
Other loans |
- |
(0.3) |
Finance leases |
(2.9) |
(3.5) |
|
164.4 |
118.4 |
Fair value of cross currency interest rate swap |
111.8 |
125.1 |
Net funds |
276.2 |
243.5 |
10 Acquisitions and disposals
a. Acquisitions
On 21 November 2012, the Group acquired the remaining 49% interest which it did not already own in the Inchcape Independence group, a retail business in Moscow, from Independence Holdings Limited for a cash consideration of US$27m. Prior to this date, the Group owned a 51% share in Inchcape Independence but did not have overall control and had therefore equity accounted for its interest in the Inchcape Independence group. The acquisition took the Group's interest in the Inchcape Independence group to 100% and the acquisition has been accounted for as a business combination following the change in control.
Details of the provisional fair values of the identifiable assets and liabilities as at the date of acquisition are set out below:
|
2012
£m |
Assets and liabilities acquired, at fair value |
|
Intangible assets |
0.1 |
Property, plant and equipment |
22.2 |
Tax assets |
0.2 |
Inventory |
5.1 |
Trade and other receivables |
2.2 |
Cash and cash equivalents |
1.5 |
Trade and other payables |
(3.1) |
Tax liabilities |
(1.4) |
Net assets acquired |
26.8 |
Provisional goodwill |
8.3 |
Consideration |
35.1 |
Satisfied by
Cash paid |
17.3 |
Fair value of existing interest in the Inchcape Independence group |
17.8 |
Total purchase consideration |
35.1 |
The provisional values of assets and liabilities recognised on acquisition are their estimated fair values at the date of acquisition. The Group is in the process of finalising its review of the fair value of assets and liabilities recognised at the date of acquisition and such reviews may include third party valuations where appropriate. Accounting standards permit up to 12 months for provisional accounting to be finalised following the acquisition date if any subsequent information provides better evidence of the item's fair value at the acquisition date.
Goodwill of £8.3m represents, amongst other things, property, plant and equipment and intangible assets yet to be recognised separately from goodwill as the fair value valuations are still in progress.
The Group has recognised a loss of £1.2m as a result of measuring at fair value its 51% equity interest in the Inchcape Independence group held before the business combination. The loss is included within 'Other operating expenses' in the Group's consolidated income statement for the year ended 31 December 2012 and has been reported as an exceptional item (see note 3).
In 2011, the Group completed the purchase of the Musa Motors group. Under the terms of the original acquisition agreement, contingent deferred consideration dependent on 2010 EBITA was due in respect of 24.9% of the group. In the first half of 2011, the amount of the deferred consideration was determined and a payment of US$32m (£19.6m) was made to the vendor.
b. Disposals
During the year, the Group disposed of its interest in a dealership in Russia at book value, generating disposal proceeds of £2.9m.
In 2011, the Group disposed of a small number of dealerships and operations at book value, generating disposal proceeds of £5.5m.
11 Assets held for sale and disposal group
|
2012
£m |
2011
£m |
Assets directly associated with the disposal group |
22.7 |
2.8 |
Assets held for sale |
8.6 |
2.9 |
Assets held for sale and disposal group |
31.3 |
5.7 |
Liabilities directly associated with the disposal group |
(19.1) |
- |
The assets and liabilities in the disposal group comprise the following:
|
2012
£m |
2011
£m |
Property, plant and equipment |
3.6 |
2.8 |
Inventories |
17.1 |
- |
Trade and other receivables |
2.0 |
- |
Assets directly associated with the disposal group |
22.7 |
2.8 |
Trade and other payables |
(19.1) |
- |
Liabilities directly associated with the disposal group |
(19.1) |
- |
Assets held for sale relate to surplus properties within the UK being actively marketed with a view to sale.
The disposal group corresponds to assets and liabilities of the Group's Ford retail centres in the UK, which were disposed of in February 2013.
12 Foreign currency translation
The main exchange rates used for translation purposes are as follows:
|
Average rates |
|
Year end rates |
|
2012 |
2011 |
|
2012 |
2011 |
Australian Dollar |
1.53 |
1.54 |
|
1.56 |
1.52 |
Euro |
1.23 |
1.15 |
|
1.23 |
1.20 |
Hong Kong Dollar |
12.33 |
12.53 |
|
12.59 |
12.07 |
Singapore Dollar |
1.98 |
2.02 |
|
1.98 |
2.01 |
Russian Ruble |
49.43 |
47.11 |
|
49.53 |
49.88 |
13 Related party disclosures
Intra-group transactions have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below:
|
Transactions |
|
Amounts outstanding |
|
2012
£m |
2011
£m |
|
2012
£m |
2011
£m |
Vehicles purchased from joint ventures and associates |
0.1 |
0.1 |
|
- |
- |
Vehicles sold to joint ventures and associates |
61.2 |
315.2 |
|
0.1 |
- |
Other income paid to joint ventures and associates |
0.9 |
1.3 |
|
0.2 |
0.2 |
Other income received from joint ventures and associates |
0.1 |
0.4 |
|
- |
0.4 |
All of the transactions arise in the ordinary course of business and are on an arm's length basis. The amounts outstanding are unsecured and will be settled in cash. There have been no guarantees provided or received for any related party receivables. The Group has not raised any provision for doubtful debts relating to amounts owed by related parties (2011 - £nil).
14 Events after the reporting period
The Group acquired the Trivett Automotive Group on 1st March 2013, to extend its presence in Australia. The total cash consideration for the business is expected to be c.£78m.
Principal risks
The Group applies an effective system of risk management which identifies, monitors and mitigates risks
Risk is a part of doing business: the risk management system aims to provide assurance to all stakeholders of the effectiveness of our control framework in managing risk against a background of highly diverse and competitive markets.
The key benefits of the system include maximised resource efficiency through controlled prioritisation of issues, benchmarking between business units, sharing best practice and effective crisis management. The following provides an overview of the principal business risk areas facing the Group:
· Strategy, including customer and consumer
· Brand partners, key relationships and reputation
· Systems and Technology
· People, including EH&S
· Economic, political and environmental
· Legal and regulatory
· Tax, pensions and insurance
· Finance and Treasury.
Directors' responsibilities
The Directors are responsible for preparing the Annual Report, the Directors' report on remuneration and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent Company Financial Statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing these Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether IFRSs as adopted by the European Union and applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent Company Financial statements respectively;
· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the Financial Statements and the Directors' report on remuneration comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Each of the Directors confirms that, to the best of their knowledge:
· the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
· the Operating Review includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
