REG - Inchcape PLC - Final Results <Origin Href="QuoteRef">INCH.L</Origin> - Part 3
27/02/2018 07:05
- Part 3: For the preceding part double click ID:nRSa9883Fb
53.7 (139.9)
Opening net funds 26.5 166.4
Closing net funds 80.2 26.5
Net funds is analysed as follows:
2017 £m 2016 £m
Cash and cash equivalents as per the statement of financial position 926.9 645.2
Borrowings - disclosed as current liabilities (534.5) (481.7)
Add back: amounts treated as debt financing (see below) 24.2 252.5
Cash and cash equivalents as per the statement of cash flows 416.6 416.0
Debt financing
Borrowings - disclosed as current liabilities and treated as debt financing (24.2) (252.5)
(see above)
Borrowings - disclosed as non-current liabilities (361.9) (292.0)
Fair value of cross currency interest rate swaps 49.7 155.0
Debt financing (336.4) (389.5)
Net funds 80.2 26.5
10 ACQUISITIONS AND DISPOSALS
a. Acquisitions
On 22 December 2016, the Group acquired a multi-country scale Distribution
business in South America, focused on Subaru and Hino and operating in the
growth markets of Chile, Colombia, Peru and Argentina. Given the proximity of
the acquisition prior to the 2016 year end, the assets and liabilities
acquired were presented at provisional fair values largely based on book
values at the acquisition date.
During the year, adjustments have been made to the assets and liabilities
acquired as permitted by IFRS 3 'Business Combinations'. These fair value
adjustments, presented below, were not material and therefore prior periods
have not been restated. These changes, together with the finalisation of the
purchase consideration, have resulted in an increase in the amount of goodwill
recognised on acquisition of £3.8m.
Provisional fair values Fair value adjustments Final fair values
£m £m £m
Assets and liabilities acquired
Intangible assets 3.6 (1.3) 2.3
Property, plant and equipment 29.6 (0.6) 29.0
Tax assets 9.7 0.2 9.9
Inventory 73.0 (3.2) 69.8
Trade and other receivables 67.4 (4.3) 63.1
Other assets 2.2 4.4 6.6
Cash and cash equivalents 29.9 - 29.9
Trade and other payables (91.5) - (91.5)
Provisions (4.4) (0.2) (4.6)
Borrowings (48.7) - (48.7)
Tax liabilities (7.2) 5.6 (1.6)
Other liabilities (0.3) - (0.3)
Net assets acquired 63.3 0.6 63.9
Distribution agreements recognised on acquisition (net of deferred tax) 112.2 - 112.2
Goodwill 51.2 3.8 55.0
Purchase consideration 226.7 4.4 231.1
During the year, the Group also acquired premium automotive operations in
Estonia, focused on exclusive distribution for BMW Group, from United Motors
AS; Nortstar Motor Group and Bayford City Peugeot in the Australasia Retail
segments; and entered into a distribution contract with Groupe PSA to
distribute the Peugeot and Citroen brands in Australia. The total cost of
these acquisitions was £19.3m with total goodwill and other indefinite life
intangible assets arising on the transactions of £13.4m.
b. Proforma full year information
The businesses acquired in the year contributed £64.0m revenue and £1.1m
operating profit before exceptional items to the Group's reported figures
between the dates of acquisition and 31 December 2017.
If the acquisitions had occurred on 1 January 2017, the approximate revenue
and operating profit before exceptional items for the period ended 31 December
2017 of the Group would have been £9,022.7m and £408.3m respectively.
c. Disposals
In 2017, the Group disposed of its Lexus operations in Shanghai generating
disposal proceeds of £5.6m.
11 fOREIGN CURRENCY TRANSLATION
The main exchange rates used for translation purposes are as follows:
Average rates Year end rates
2017 2016 2017 2016
Australian dollar 1.69 1.82 1.73 1.71
Chilean peso 843.40 915.94 832.35 826.59
Euro 1.15 1.23 1.13 1.17
Hong Kong dollar 10.11 10.51 10.57 9.57
Singapore dollar 1.79 1.87 1.81 1.78
Russian rouble 75.56 90.72 77.88 75.97
12 EVENTS AFTER THE REPORTING PERIOD
There have been no events subsequent to the year end that require additional
disclosure.
Managing our risks in a professional and consistent way allows us to operate with 'peace of mind'.
Inchcape Peace of Mind (iPOM) is our Group-wide risk management and governance
framework which focuses on empowering each and every one of our colleagues to
consider the risks associated with the decisions they take.
As a Group, we continue to experience an ever-changing, dynamic risk
environment where economic, political, environmental, social, legal and
technological changes present a complex risk landscape which threatens our
ability to achieve our strategic objectives. However, we believe that our
diversity of brand portfolio and geographic spread, combined with our strong
balance sheet, cost control and risk-aware decision-making processes, make us
resilient to all but the most significant and persistent risks.
Principal risks
The principal risks to achievement of our strategy are:
Key risks
1. Loss of distribution contract with major brand partner
2. Significant retrenchment of credit available to customers, dealer network or
Inchcape plc negatively impacts vehicle sales and/or operational capability
3. Brand failure or major interruption to OEM operations or product supply
negatively impacts vehicle sales
4. Major loss of confidential or sensitive data results in financial penalty
and/or reputational damage
5. Failure to extract value from acquisitions
6. Impact of disruptive technologies and/or new entrants to the industry
threatens our position in the value chain
7. Failure to engage the next generation of (connected) customers impacts on
revenues and/or OEM relations
8. Fluctuations in exchange rates with negative impact on financial performance
Other principal risks
9. Interruption to iPower or major systems failure impacts on ability to service
customers and/or operational efficiency
10. Failure to safeguard our customers and employees by not consistently applying
EH&S standards across the Group
11. Internal controls failure of sufficient scale to materially affect financial
performance or reputation
12. Individual governments increasing restrictions on cross-border currency
movements leading to higher incidents of trapped cash across the Group
13. Dynamic changes in local or international tax rules (e.g. domestic tax reform
in markets in which we operate or changes to transfer pricing rules as a
result of the OECD's Base Erosion and Profit Sharing initiative)
14. Social, political and regulatory instability leads to market interruption
and/or threat to safety
15. Changes in legislation directly affecting customer demand
16. Failure to comply with changes in laws and regulations leads to sanctions,
financial penalty and/or reputational damage
17. Failure to attract, retain and develop our people leads to knowledge drain and
operational inefficiency
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
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. Under company law the Directors must
not approve the Group financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and of the
profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable IFRSs as adopted by the European Union
have been followed, subject to any material departures disclosed and explained
in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of 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.
The Directors are also responsible for safeguarding the assets of 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 parent
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's performance, business model and
strategy.
Each of the Directors, whose names and functions are listed in the Inchcape
Plc Annual Report and Accounts confirm 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 and Financial Review in this announcement 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.
This information is provided by RNS
The company news service from the London Stock Exchange
alculated 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 Inchcape Employee Trust and
repurchased as part of the share buyback 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.
Basic 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 Inchcape Employee Trust
and repurchased as part of the share buyback 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:
2017 2016
£m £m
Interim dividend for the six months ended 30 June 2017 of 7.9p per share 32.7 29.9
(30 June 2016 - 7.0p per share)
Final dividend for the year ended 31 December 2016 of 16.8p per share 70.0 60.3
(31 December 2015 - 14.1p per share)
102.7 90.2
A final proposed dividend for the year ended 31 December 2017 of 18.9p per
share amounting to £78.4m is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability as at 31 December
2017.
9 NOTES TO THE CONSOSOLIDATED STATEMENT OF CASH FLOWS
a. Reconciliation of cash generated from operations
2017 2016
£m £m
Cash flows from operating activities
Operating profit 394.9 277.5
Exceptional items (see note 3) 12.6 81.6
Amortisation including non-exceptional impairment of intangible assets 13.8 14.9
Depreciation of property, plant and equipment 43.8 38.0
Profit on disposal of property, plant and equipment (10.6) (12.7)
Share-based payments charge 10.2 12.1
Increase in inventories (239.6) (110.7)
Increase in trade and other receivables (31.7) (10.2)
Increase in trade and other payables 343.2 99.0
Decrease in provisions (4.2) (9.4)
Pension contributions less than the pension charge for the year* 3.1 1.9
(Increase) / decrease in interest in leased vehicles (1.0) 2.9
Payments in respect of operating exceptional items (32.1) (3.2)
Other non-cash items (2.0) 1.1
Cash generated from operations 500.4 382.8
* Includes additional payments of £2.7m (2016 - £2.1m).
b. Reconciliation of net cash flow to movement in net funds
2017 2016
£m £m
Net increase / (decrease) in cash and cash equivalents 50.5 (89.8)
Net cash outflow / (inflow) from borrowings and finance leases 49.2 (132.1)
Change in net cash and debt resulting from cash flows 99.7 (221.9)
Effect of foreign exchange rate changes on net cash and debt (47.2) 129.7
Net movement in fair value 1.2 1.0
Net loans and finance leases relating to acquisitions and disposals - (48.7)
Movement in net funds 53.7 (139.9)
Opening net funds 26.5 166.4
Closing net funds 80.2 26.5
Net funds is analysed as follows:
2017 2016
£m £m
Cash and cash equivalents as per the statement of financial position 926.9 645.2
Borrowings - disclosed as current liabilities (534.5) (481.7)
Add back: amounts treated as debt financing (see below) 24.2 252.5
Cash and cash equivalents as per the statement of cash flows 416.6 416.0
Debt financing
Borrowings - disclosed as current liabilities and treated as debt financing (see above) (24.2) (252.5)
Borrowings - disclosed as non-current liabilities (361.9) (292.0)
Fair value of cross currency interest rate swaps 49.7 155.0
Debt financing (336.4) (389.5)
Net funds 80.2 26.5
10 ACQUISITIONS AND DISPOSALS
a. Acquisitions
On 22 December 2016, the Group acquired a multi-country scale Distribution
business in South America, focused on Subaru and Hino and operating in the
growth markets of Chile, Colombia, Peru and Argentina. Given the proximity of
the acquisition prior to the 2016 year end, the assets and liabilities
acquired were presented at provisional fair values largely based on book
values at the acquisition date.
During the year, adjustments have been made to the assets and liabilities
acquired as permitted by IFRS 3 'Business Combinations'. These fair value
adjustments, presented below, were not material and therefore prior periods
have not been restated. These changes, together with the finalisation of the
purchase consideration, have resulted in an increase in the amount of goodwill
recognised on acquisition of £3.8m.
Provisional fair values£m Fair value adjustments£m Final fair values
£m
Assets and liabilities acquired
Intangible assets 3.6 (1.3) 2.3
Property, plant and equipment 29.6 (0.6) 29.0
Tax assets 9.7 0.2 9.9
Inventory 73.0 (3.2) 69.8
Trade and other receivables 67.4 (4.3) 63.1
Other assets 2.2 4.4 6.6
Cash and cash equivalents 29.9 - 29.9
Trade and other payables (91.5) - (91.5)
Provisions (4.4) (0.2) (4.6)
Borrowings (48.7) - (48.7)
Tax liabilities (7.2) 5.6 (1.6)
Other liabilities (0.3) - (0.3)
Net assets acquired 63.3 0.6 63.9
Distribution agreements recognised on acquisition (net of deferred tax) 112.2 - 112.2
Goodwill 51.2 3.8 55.0
Purchase consideration 226.7 4.4 231.1
During the year, the Group also acquired premium automotive operations in
Estonia, focused on exclusive distribution for BMW Group, from United Motors
AS; Nortstar Motor Group and Bayford City Peugeot in the Australasia Retail
segments; and entered into a distribution contract with Groupe PSA to
distribute the Peugeot and Citroen brands in Australia. The total cost of
these acquisitions was £19.3m with total goodwill and other indefinite life
intangible assets arising on the transactions of £13.4m.
b. Proforma full year information
The businesses acquired in the year contributed £64.0m revenue and £1.1m
operating profit before exceptional items to the Group's reported figures
between the dates of acquisition and 31 December 2017.
If the acquisitions had occurred on 1 January 2017, the approximate revenue
and operating profit before exceptional items for the period ended 31 December
2017 of the Group would have been £9,022.7m and £408.3m respectively.
c. Disposals
In 2017, the Group disposed of its Lexus operations in Shanghai generating
disposal proceeds of £5.6m.
11 fOREIGN CURRENCY TRANSLATION
The main exchange rates used for translation purposes are as follows:
Average rates Year end rates
2017 2016 2017 2016
Australian dollar 1.69 1.82 1.73 1.71
Chilean peso 843.40 915.94 832.35 826.59
Euro 1.15 1.23 1.13 1.17
Hong Kong dollar 10.11 10.51 10.57 9.57
Singapore dollar 1.79 1.87 1.81 1.78
Russian rouble 75.56 90.72 77.88 75.97
12 EVENTS AFTER THE REPORTING PERIOD
There have been no events subsequent to the year end that require additional
disclosure.
Managing our risks in a professional and consistent way allows us to operate
with 'peace of mind'.
Inchcape Peace of Mind (iPOM) is our Group-wide risk management and governance
framework which focuses on empowering each and every one of our colleagues to
consider the risks associated with the decisions they take.
As a Group, we continue to experience an ever-changing, dynamic risk
environment where economic, political, environmental, social, legal and
technological changes present a complex risk landscape which threatens our
ability to achieve our strategic objectives. However, we believe that our
diversity of brand portfolio and geographic spread, combined with our strong
balance sheet, cost control and risk-aware decision-making processes, make us
resilient to all but the most significant and persistent risks.
Principal risks
The principal risks to achievement of our strategy are:
Key risks
1. Loss of distribution contract with major brand partner
2. Significant retrenchment of credit available to customers, dealer network or Inchcape plc negatively impacts vehicle sales and/or operational capability
3. Brand failure or major interruption to OEM operations or product supply negatively impacts vehicle sales
4. Major loss of confidential or sensitive data results in financial penalty and/or reputational damage
5. Failure to extract value from acquisitions
6. Impact of disruptive technologies and/or new entrants to the industry threatens our position in the value chain
7. Failure to engage the next generation of (connected) customers impacts on revenues and/or OEM relations
8. Fluctuations in exchange rates with negative impact on financial performance
Other principal risks
9. Interruption to iPower or major systems failure impacts on ability to service customers and/or operational efficiency
10. Failure to safeguard our customers and employees by not consistently applying EH&S standards across the Group
11. Internal controls failure of sufficient scale to materially affect financial performance or reputation
12. Individual governments increasing restrictions on cross-border currency movements leading to higher incidents of trapped cash across the Group
13. Dynamic changes in local or international tax rules (e.g. domestic tax reform in markets in which we operate or changes to transfer pricing rules as a result of the OECD's Base Erosion and Profit Sharing initiative)
14. Social, political and regulatory instability leads to market interruption and/or threat to safety
15. Changes in legislation directly affecting customer demand
16. Failure to comply with changes in laws and regulations leads to sanctions, financial penalty and/or reputational damage
17. Failure to attract, retain and develop our people leads to knowledge drain and operational inefficiency
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
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. Under company law the Directors must
not approve the Group financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and of the
profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· state whether applicable IFRSs as adopted by the European Union have
been followed, subject to any material departures disclosed and explained in
the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of 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.
The Directors are also responsible for safeguarding the assets of 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 parent
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's performance, business model and
strategy.
Each of the Directors, whose names and functions are listed in the Inchcape
Plc Annual Report and Accounts confirm 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 and Financial Review in this announcement 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.
This information is provided by RNS
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