Unaudited interim results for the six months ended 31st August 2018
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Robust half year profits
- Revenues of £1.56bn (2017 H1: £1.45bn) representing growth of 7.9% (8.0% on like-for-like basis)
- Group gross margin of 10.7% (2017 H1: 11.0%)
- Adjusted1 operating profit of £19.4m (2017 H1: £21.4m)
- Adjusted profit before tax of £18.1m (2017 H1: £20.9m)
- Profit before tax of £17.3m (2017 H1: £24.2m) with no exceptional items (2017 H1: exceptional profit of £4.1m on disposal of freehold property)
- Adjusted1 earnings per share of 3.90p (2017 H1: 4.24p)
- Period end net debt of £8.7m (2017 H1: net cash £20.8m)
- Hughes Acquisition completed for consideration of £21.8m in the Period
- Freehold and long leasehold property portfolio: £202.9m (2017 H1: £175.0m)
- Tangible net assets per share 45.9p (2017 H1: 44.5p)
- Focus on returns to shareholders and capital allocation:
- �Free cashflow of £10.9m (21017 H1: £4.6m)
- �5.6m shares repurchased at an average of 43.6 pence per share deploying £2.5m of cash
- �Interim dividend held at 0.55p per share (2017 H1: 0.55p)
(1) Adjusted for exceptional charges, amortisation of intangible assets and share based payments charge.
(2) Core: Dealerships that have traded for two full consecutive financial years.
Current trading and outlook
- September like-for-like new retail volumes down 13.8% (UK retail market down 20.1%) with weaker new car and fleet margins
- New vehicle supply side issues:
- September new vehicle supply impacted by EU wide WLTP emissions regulations
- Continued depressed Sterling levels reducing supply to the UK and margins - Used car margins strengthened in September on back of reduction in supply: likely to continue
- Aftersales continues to exhibit positive growth trends
- Cost pressures continue and remain a crucial focus for management
- Planned capex programme coming to an end with improving free cashflows anticipated
- Political uncertainty may undermine consumer demand for the remainder of FY2019
Aftersales: Recurring high margin income
- Continued like-for-like revenue and gross profit growth across all aftersales streams
- Core Group aftersales gross profit up £3.4m
- Increase in mix of warranty work: revenues up 12.0%
- Service margins reduced due to higher technicians� pay levels and increased warranty sales (less efficient channel)
- Continued focus on:
- Recruiting and training of technicians to increase capacity
- Enhancing customer experience through training and resourcing of customer facing colleagues and increased use of technology
- Growing average invoice value per customer visit through focus on vehicle health check process (including video technology)
Movement in net cash: Tight management of working capital
- Stability in overall working capital position: lower new vehicle inventories and trade receivables offset by higher used vehicle inventory values
- Completion of Hughes acquisition with cash consideration (including borrowings acquired) of £23.7m (30th June 2018)
- Purchased freehold of Newcastle Vauxhall, previously leased with fixed rental increases over remaining 14 year lease term
Operational Highlights
- Like-for-like service revenues up 7.4% continuing the long term growth trend in aftersales
- Rise in like-for-like aftersales gross profits of £3.4m year on year
- Strong growth in like-for-like used vehicle volumes of 5.8%, representing 12.4% revenue growth
- Increase in like-for-like used car gross profits due to volume growth and higher gross profit per unit; lower margins of 8.8% (2017 H1 : 9.2%) due to higher average prices
- Group like-for-like new car retail volumes up 5.7%, gaining market share as UK private registrations declined by 2.4%
- Average new car sales prices continue to rise; gross profit per unit stable; new car margins of 7.4% (2017 H1: 7.6%)
- Operating expenses as a % of revenue lower at 9.4% (2017 H1: 9.5%) reflecting strong cost control despite on-going cost pressures
- Surplus property realisations of £3.3m during the Period with more anticipated
- New Board and management appointments
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