Full year results for the 12 months ended 28th February 2017
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Pre-close Trading Update
- Trading in line with trends set out in AGM statement
- Sale and leaseback of Jaguar Land Rover property in Leeds
- Prominent dealership property in prime city centre location
- Attractive lease yield and conditions
- 15 year term
- Profit on sale of circa £4m
- Generates cash of £14m to fund ongoing investment in future growth
- Selective approach
- Focus on capital allocation
- Share buy-back programme in progress
(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.
Record profitability, excellent cash conversion and robust balance sheet to drive future growth
- Revenues increased by 16.5% to £2,822.6m (2016 : £2,423.3m)
- Like-for-like service revenues up 5.8% long-term growth trend continues
- Like-for-like used vehicle volumes increased 7.1%: over 5 years of continuous growth
- Softening of new private retail market: Group like-for-like new car retail volumes down 6.4%
- Record Group trading performance driven by improvement in recently acquired businesses, a strong used car performance and growth in higher margin service area
- Growth strategy progressed with greater premium mix, including the addition of the Mercedes-Benz and Toyota franchises to the Group
Strengthening Margins
- Group gross profit margins increased from 10.9% to 11.1%
- Group like-for-like service gross profit margins strengthened from 76.8% to 77.7%
- Like-for-like used car margins strengthened from 10.1% to 10.6%
Managing Operating Expenses and Tax Payments
- Operating expenses as a percentage of revenue up to 10.0% (2016: 9.7%) due to increased numbers of customer facing colleagues and higher used car marketing spend
- Growth in expenses as a percentage of revenue stabilised in H2
- Effective rate of taxation 19.5% (2016: 20.3%)
Generating Cash Profits and Managing Working Capital
- EBITDA up 20% to £41.4m (2016: £34.5m)
- Cash generated from operations of £58.1m (2016: £65.8m) representing cash conversion of operating profits of 181%
- Record profit before tax up to 14.6% to £29.8m (2016 : £26.0m)
- Cash of £16.0m generated from working capital (2016 : £30.5m)
Investing to Support Future Cash Growth
- £54.4m invested in acquiring land and dealerships (2016: £31.0m)
- £25.1m of capital expenditure, primarily on new dealership developments and increasing capacity in sales and aftersales areas (2016: £14.0m)
- Year one of a two year period of major capital investment: spend levels expected to substantially reduce thereafter
Operational Highlights
- Record Group trading performance driven by improvement in recently acquired businesses, a strong used car performance and growth in higher margin service area
- Growth strategy progressed with greater premium mix, including the addition of the Mercedes-Benz franchise to the Group
- Strong balance sheet to fund future growth with net cash of £21.0m (2016 : £23.1m) and new five year acquisition banking facility signed in February of £40m, with the potential to add a further £30m
- Encouraging outlook with robust trading in March and April 2017 - Board remains confident about the Group's prospects for the year ahead
Focus on Shareholder Returns
- Dividend up 7.7% to 1.4p per share (2016 : 1.3p per share)
- 280% dividend growth since dividends commenced in 2011:
- Return on equity fell to 10.8% (2016 : 11.4%) following the equity raise during the year
- Long term (10 years) free cashflow to equity as a percentage of equity 12.1% (2016 : 9 years, 12.7%)
Very Strong Balance Sheet to Fund Growth
- Period end net cash of £21.0m (2016 : £23.1m)
- New five year acquisition banking facility signed in February of £40m, with the potential to add a further £30m
- Raised £35m in March 2016 to finance further acquisitions: this capital has been deployed as planned
- Used car inventory largely unencumbered from short-term stocking loans
- Freehold and long leasehold property of £182.0m (2016 : £137.7m)
Current Trading and Outlook
- In March and April 2017 ("the post year-end period") the Group has continued to trade strongly, with profits ahead of the prior year on a like-for-like and total basis. Margins strengthened and operating expenses on a like-for-like basis were reduced as the cost base was flexed for lower new vehicle sales volumes and cost efficiency programmes delivered.
- Used cars continued to see like-for-like volume growth and margin improvement. Service also witnessed growing revenues and stable margins on a like-for-like basis.
- The March plate change month saw a record number of new vehicle registrations in the UK according to the SMMT. The 4.4% growth in March new retail UK registrations was aided by an element of pull forward of demand due to increasing vehicle excise duty from 1 April 2017 and the timing of Easter. April, as anticipated, saw a decline in SMMT new retail registrations of 28.4%. In the post year-end period SMMT new retail registrations declined by 3.5%. The Group saw significant growth in new retail vehicle profit contribution in the post year-end period despite a 9.7% decline in like-for-like new retail volumes. Pricing disciplines and cost control delivered higher margins and profits year on year in new vehicle sales.
- The Board is also pleased to report an excellent contribution in the post year-end period from dealerships acquired in the previous financial year.
- While the Board is aware of the wider reporting of the UK entering a more cautious consumer environment, trading in the post year-end period has been strong. The Board remains confident about the Group's prospects for the current financial year and in delivering further progress in enlarging the scale of the Group.
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