REG - Inchcape PLC - Interim Results <Origin Href="QuoteRef">INCH.L</Origin> - Part 2
27/07/2017 07:06
- Part 2: For the preceding part double click ID:nRSa2187Ma
140.9 122.8 263.7 6.2 269.9
for the period ended 30 June 2016
Share-based payments, net of tax - - - - 4.6 4.6 - 4.6
Share buy back programme (0.8) - 0.8 - (59.3) (59.3) - (59.3)
Net purchase of own shares - - - - (9.3) (9.3) - (9.3)
by the Inchcape Employee Trust
Dividends:
- Owners of the parent 8b - - - - (60.3) (60.3) - (60.3)
- Non-controlling interests - - - - - - (6.5) (6.5)
At 30 June 2016 43.0 146.7 137.6 (74.2) 1,105.3 1,358.4 22.6 1,381.0
At 1 January 2016 43.8 146.7 136.8 (215.1) 1,106.8 1,219.0 22.9 1,241.9
Profit for the year - - - - 184.4 184.4 6.9 191.3
Other comprehensive income / (loss) - - - 189.5 (49.4) 140.1 1.0 141.1
for the year
Total comprehensive income - - - 189.5 135.0 324.5 7.9 332.4
for the year
Share-based payments, net of tax - - - - 11.3 11.3 - 11.3
Share buy back programme (1.6) - 1.6 - (109.8) (109.8) - (109.8)
Net purchase of own shares - - - - (10.9) (10.9) - (10.9)
by the Inchcape Employee Trust
Dividends:
- Owners of the parent 8b - - - - (90.2) (90.2) - (90.2)
- Non-controlling interests - - - - - - (12.2) (12.2)
At 1 January 2017 42.2 146.7 138.4 (25.6) 1,042.2 1,343.9 18.6 1,362.5
Profit for the period ended 30 June 2017 - - - - 138.2 138.2 4.0 142.2
Other comprehensive income - - - (28.7) (3.2) (31.9) 1.0 (30.9)
for the period ended 30 June 2017
Total comprehensive income - - - (28.7) 135.0 106.3 5.0 111.3
for the period ended 30 June 2017
Share-based payments, net of tax - - - - 5.1 5.1 - 5.1
Share buy back programme (0.6) - 0.6 - (50.2) (50.2) - (50.2)
Net purchase of own shares - - - - (13.1) (13.1) - (13.1)
by the Inchcape Employee Trust
Dividends:
- Owners of the parent 8b - - - - (70.0) (70.0) - (70.0)
- Non-controlling interests - - - - - - (6.5) (6.5)
At 30 June 2017 41.6 146.7 139.0 (54.3) 1,049.0 1,322.0 17.1 1,339.1
The notes below are an integral part of these condensed consolidated interim
financial statements.
Consolidated Statement of Cash Flows (unaudited)
For the six months ended 30 June 2017
Notes Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Cash generated from operating activities
Cash generated from operations 9a 230.1 134.8 382.8
Tax paid (51.1) (52.5) (99.5)
Interest received 8.6 6.0 12.4
Interest paid (19.8) (11.2) (24.1)
Net cash generated from operating activities 167.8 77.1 271.6
Cash flows from investing activities
Acquisition of businesses, net of cash and overdrafts acquired 10 (15.6) (4.6) (201.1)
Net cash inflow from sale of businesses 10 5.6 2.0 2.8
Purchase of property, plant and equipment (32.4) (24.2) (71.1)
Purchase of intangible assets (13.6) (8.4) (22.7)
Proceeds from disposal of property, plant and equipment 12.6 5.2 21.7
Net cash used in investing activities (43.4) (30.0) (270.4)
Cash flows from financing activities
Share buy back programme 8a (50.2) (59.3) (109.8)
Net purchase of own shares by the Inchcape Employee Trust (13.1) (9.3) (10.9)
Cash inflow from Private Placement loan notes 9b 210.0 - -
Repayment of Private Placement loan notes 9b (138.5) - -
Net cash (outflow) / inflow from other borrowings 9b (60.2) 26.6 133.3
Payment of capital element of finance leases 9b (1.4) (0.8) (1.2)
Equity dividends paid 8b (70.0) (60.3) (90.2)
Dividends paid to non-controlling interests (6.5) (6.5) (12.2)
Net cash used in financing activities (129.9) (109.6) (91.0)
Net decrease in cash and cash equivalents 9b (5.5) (62.5) (89.8)
Cash and cash equivalents at beginning of the period 416.0 375.3 375.3
Effect of foreign exchange rate changes (14.2) 58.2 130.5
Cash and cash equivalents at end of the period 396.3 371.0 416.0
Cash and cash equivalents consist of:
- Cash at bank and cash equivalents 656.0 359.4 473.7
- Short-term deposits 112.2 98.7 171.5
- Bank overdrafts (371.9) (87.1) (229.2)
396.3 371.0 416.0
The notes below are an integral part of these condensed consolidated interim
financial statements.
Notes (unaudited)
1 Basis of preparation and accounting policies
Basis of preparation
The condensed consolidated interim financial statements for the period ended
30 June 2017 have been prepared on a going concern basis in accordance with
International Accounting Standard 34 'Interim Financial Reporting' as adopted
by the European Union and the Disclosure and Transparency Rules of the
Financial Conduct Authority. These condensed consolidated interim financial
statements should be read in conjunction with the Annual Report and Accounts
2016, which have been prepared in accordance with IFRSs 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.
These condensed consolidated interim financial statements are unaudited, but
have been reviewed by the external auditors.
The condensed consolidated interim financial statements in the Interim Report
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 2016 were approved by the Board of Directors on
28 February 2017 and delivered to the Registrar of Companies. The report of
the auditors on those accounts was unqualified and did not contain an emphasis
of matter paragraph or a statement under section 498 of the Companies Act
2006. These condensed consolidated interim financial statements were approved
by the Board of Directors on 26 July 2017.
Significant accounting policies
The accounting policies adopted in the preparation of the condensed
consolidated interim financial statements are consistent with those of the
Group's Annual Report and Accounts 2016 other than taxes on income which are
accrued using the tax rate that is expected to be applicable for the full
financial year.
The following standards were in issue but were not yet effective at the
balance sheet date. These standards have not yet been early adopted by the
Group, and will be applied for the Group's financial years commencing on or
after 1 January 2018:
• IAS 7, 'Amendment to IAS 7, Cash flow statements'
• IAS 12, 'Amendment to IAS 12, Income taxes'
• IAS 27, 'Amendment to IAS 27, Separate financial statements'
• IFRS 2, 'Amendment to IFRS 2, Share-based payment'
• IFRS 9, 'Financial instruments'
• IFRS 15, 'Revenue from contracts with customers'
• IFRS 16, 'Leases'.
Management are currently reviewing the new standards to assess the impact that
they may have on the Group's reported performance and financial position.
The principal exchange rates used for translation purposes are as follows:
Average rates Period end rates
30 Jun 2017 30 Jun 2016 31 Dec 2016 30 Jun 2017 30 Jun 2016 31 Dec 2016
Australian dollar 1.68 1.94 1.82 1.70 1.79 1.71
Euro 1.17 1.29 1.23 1.14 1.20 1.17
Hong Kong dollar 9.85 11.08 10.51 10.16 10.33 9.57
Singapore dollar 1.77 1.97 1.87 1.79 1.79 1.78
Russian rouble 73.62 99.28 90.72 76.71 85.19 75.97
2 Segmental analysis
The Group has eight reportable segments which have been identified based on
the operating segments of the Group that are regularly reviewed by the chief
operating decision maker, which has been determined to be the Executive
Committee, in order to assess performance and allocate resources. Operating
segments are then aggregated into reporting segments to combine those with
similar economic characteristics. The following summary describes the
operations of each of the Group's reportable segments:
Distribution Australasia Distribution of new vehicles and parts in Australia and New Zealand together with associated marketing and logistics operations.
UK and Europe Distribution of new vehicles and parts, together with associated marketing activities, in mature European markets.
Asia Exclusive distribution and sale of new vehicles and parts, in Asian markets, together with associated aftersales activities of service and bodyshop repairs.
Emerging Markets Distribution of new vehicles and parts, in growing markets, together with associated aftersales activities of service and bodyshop repairs.
Retail Australasia Sale of new and used vehicles in Australia together with associated aftersales activities of service, bodyshop repairs and parts sales.
UK and Europe Sale of primarily new and used premium vehicles in mature markets, together with associated aftersales activities of service, bodyshop repairs and parts sales.
Emerging Markets Sale of new and used vehicles in growing markets together with associated aftersales activities of service, bodyshop repairs and parts sales.
Central Comprises the Group's head office function and includes all central activities including the Board, finance, human resources, marketing, governance and global information services.
Following the acquisition of the BMW Distribution operations in Estonia,
operations with similar economic characteristics in UK and Europe have been
reclassified from Retail to Distribution in the prior period comparatives for
consistency.
Distribution
Six months to 30 June 2017 Australasia UK and Asia Emerging Markets Total
£m Europe £m £m Distribution
£m £m
Revenue from third parties 389.9 442.0 810.2 385.1 2,027.2
Results
Trading profit / (loss) 28.1 15.0 75.6 42.4 161.1
Operating exceptional items - (1.8) - (0.6) (2.4)
Operating profit / (loss) after exceptional items 28.1 13.2 75.6 41.8 158.7
Distribution
Six months to 30 June 2016 Australasia UK and Asia Emerging Markets Total
£m Europe £m £m Distribution
£m £m
Revenue from third parties 328.7 348.6 720.4 152.2 1,549.9
Results
Trading profit / (loss) 34.1 12.1 61.4 22.7 130.3
Operating exceptional items - - - - -
Operating profit / (loss) after exceptional items 34.1 12.1 61.4 22.7 130.3
Distribution
Year to 31 December 2016 Australasia UK and Asia Emerging Markets Total
£m Europe £m £m Distribution
£m £m
Revenue from third parties 727.8 771.6 1,591.6 333.4 3,424.4
Results
Trading profit / (loss) 67.8 26.8 136.7 52.0 283.3
Operating exceptional items (0.5) (32.1) (11.6) (0.5) (44.7)
Operating profit / (loss) after exceptional items 67.3 (5.3) 125.1 51.5 238.6
Retail
Six months to 30 June 2017 Australasia UK and Emerging Markets Total Total pre Central Total
£m Europe £m Retail Central £m £m
£m £m £m
Revenue from third parties 409.0 1,751.5 270.8 2,431.3 4,458.5 - 4,458.5
Results
Trading profit / (loss) 21.9 39.6 (1.2) 60.3 221.4 (13.4) 208.0
Operating exceptional items - (0.7) (0.5) (1.2) (3.6) (1.5) (5.1)
Operating profit / (loss) after 21.9 38.9 (1.7) 59.1 217.8 (14.9) 202.9
exceptional items
Share of profit after tax of joint ventures and associates -
Profit before finance and tax 202.9
Net finance costs of £11.2m are not allocated to individual segments.
Retail
Six months to 30 June 2016 Australasia UK and Emerging Total Total pre Central Total
£m Europe Markets Retail Central £m £m
£m £m £m £m
Revenue from third parties 339.2 1,686.3 180.8 2,206.3 3,756.2 - 3,756.2
Results
Trading profit / (loss) 14.1 39.9 (0.6) 53.4 183.7 (14.2) 169.5
Operating exceptional items - - - - - - -
Operating profit / (loss) after 14.1 39.9 (0.6) 53.4 183.7 (14.2) 169.5
exceptional items
Share of profit after tax of joint ventures and associates -
Profit before finance and tax 169.5
Net finance costs of £4.5m are not allocated to individual segments.
Retail
Year to 31 December 2016 Australasia UK and Emerging Total Total pre Central Total
£m Europe Markets Retail Central £m £m
£m £m £m £m
Revenue from third parties 701.3 3,291.3 421.4 4,414.0 7,838.4 - 7,838.4
Results
Trading profit / (loss) 34.6 70.3 0.4 105.3 388.6 (29.5) 359.1
Operating exceptional items (4.7) (4.6) (0.4) (9.7) (54.4) (27.2) (81.6)
Operating profit / (loss) after 29.9 65.7 - 95.6 334.2 (56.7) 277.5
exceptional items
Share of loss after tax of joint ventures and associates (0.1)
Profit before finance and tax 277.4
Net finance costs of £9.6m are not allocated to individual segments.
Gross profit for Distribution and Retail activities is analysed as follows:
Six months to 30 June 2017 Vehicles Aftersales Total
£m £m £m
Distribution 214.4 139.7 354.1
Retail 171.9 89.0 260.9
Group 386.3 228.7 615.0
Six months to 30 June 2016 Vehicles Aftersales Total
£m £m £m
Distribution 171.1 107.3 278.4
Retail 168.4 78.5 246.9
Group 339.5 185.8 525.3
Year to 31 December 2016 Vehicles Aftersales Total
£m £m £m
Distribution 341.9 242.4 584.3
Retail 336.8 158.0 494.8
Group 678.7 400.4 1,079.1
3 Exceptional items
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Restructuring costs (3.8) - (24.8)
Acquisition of businesses (1.3) - (8.8)
Goodwill impairment - - (24.9)
Impairment of software and associated assets - - (23.1)
Total exceptional items before tax (5.1) - (81.6)
Exceptional tax 0.6 - 11.5
Total exceptional items (4.5) - (70.1)
During the period, the Group has incurred restructuring costs of £3.8m (year
to 31 December 2016: £24.8m) as part of a Group-wide programme, commenced in
2016, to better align the organisation with the Ignite strategy. The costs
incurred comprise headcount reduction and costs associated with the
redevelopment of the third party Retail network in certain markets.
Exceptional costs of £1.3m (year to 31 December 2016: £8.8m) have been
incurred relating to the 2016 acquisition of the Subaru, Hino and associated
Distribution businesses in South America.
In 2016, the Group made configuration changes to the iPower system to better
reflect the Ignite strategy, resulting in an non-cash impairment charge of
£23.1m and impaired the carrying value of goodwill relating to businesses in
Lithuania and Estonia.
4 Finance income
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Bank and other interest receivable 3.9 2.4 5.0
Net interest income on post-retirement plan assets and liabilities 0.7 2.2 4.2
Other finance income 3.7 4.0 7.8
Total finance income 8.3 8.6 17.0
5 Finance costs
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Interest payable on bank borrowings 5.0 1.3 2.6
Interest payable on Private Placement 2.7 1.5 3.3
Interest payable on other borrowings 0.1 0.1 0.3
Fair value adjustment on Private Placement (25.4) (31.8) 46.6
Fair value loss / (gain) on cross-currency interest rate swaps 24.7 31.7 (47.6)
Stock holding interest 12.4 9.0 20.1
Other finance costs - 1.3 1.3
Total finance costs 19.5 13.1 26.6
6 Income tax
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Current tax - UK corporation tax 4.5 5.8 6.0
- Overseas tax 47.6 35.9 79.2
Adjustments to prior year liabilities - UK - (0.1) (1.5)
- Overseas (0.1) (0.7) (1.2)
Current tax 52.0 40.9 82.5
Deferred tax (2.5) 1.7 (6.0)
Total tax charge 49.5 42.6 76.5
The total tax charge is analysed as follows:
- Tax charge on profit before exceptional items 50.1 42.6 88.0
- Tax credit on exceptional items (0.6) - (11.5)
Total tax charge 49.5 42.6 76.5
The effective tax rate for the half year, before exceptional items, is 25.5%
compared to 25.8% for the same period last year. The effective rate for the
first half of 2016 included the impact of the Foreign Income Dividend claim
receipt (on which tax at 45% was withheld). Excluding this, the underlying
effective tax rate was 25.0%.
Franked Investment Income Group Litigation Order
The Group is a participant in an action in the United Kingdom against HM
Revenue and Customs (HMRC) in the Franked Investment Income Group Litigation
Order (FII GLO). There are 25 corporate groups in the FII GLO. The action
concerns the treatment for UK corporate tax purposes of profits earned
overseas and distributed to the UK.
As reported previously, HMRC has applied to the Supreme Court for permission
to appeal the Court of Appeal's judgment of November 2016. However, the
Supreme Court has deferred making a decision on HMRC's permission appeal
pending the judgment in Littlewoods versus HMRC which is yet to be delivered.
Therefore, resolution of the test case in the FII GLO remains incomplete.
As a consequence, no further receipts have been recognised in the period to 30
June 2017 in relation to the balance of the Group's claim in the FII GLO due
to the uncertainty of the amounts and eventual outcome given the test case has
not yet completed nor has the Group's specific claim been heard by the
Courts.
7 Earnings per share
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Profit for the period 142.2 122.4 191.3
Non-controlling interests (4.0) (3.7) (6.9)
Basic earnings 138.2 118.7 184.4
Exceptional items 4.5 - 70.1
Adjusted earnings 142.7 118.7 254.5
Basic earnings per share 33.1p 27.6p 43.2p
Diluted earnings per share 32.6p 27.2p 42.6p
Basic Adjusted earnings per share 34.1p 27.6p 59.6p
Diluted Adjusted earnings per share 33.6p 27.2p 58.9p
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
number number number
Weighted average number of fully paid ordinary shares in issue during the period 419,438,037 431,767,646 428,090,784
Weighted average number of fully paid ordinary shares in issue during the period:
- Held by the Inchcape Employee Trust (1,420,227) (1,306,439) (1,182,428)
Weighted average number of fully paid ordinary shares for the purposes of basic EPS 418,017,810 430,461,207 426,908,356
Dilutive effect of potential ordinary shares 6,158,971 5,604,600 5,534,805
Adjusted weighted average number of fully paid ordinary shares in issue during the 424,176,781 436,065,807 432,443,161
period for the purposes of diluted EPS
Basic earnings per share is calculated by dividing the Basic earnings for the
period by the weighted average number of fully paid ordinary shares in issue
during the period, less those shares held by the Inchcape Employee Trust and
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.
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 period by the weighted average number of fully paid ordinary shares in
issue during the period, less those shares held by the Inchcape Employee Trust
and 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 Shareholders' equity
A. Issue of ordinary shares
During the period, the Group issued £nil (June 2016 - £nil, Dec 2016 - £nil)
of ordinary shares exercised under the Group's share option schemes.
Share buy back programme
During the six months ended 30 June 2017, the Group repurchased 6,129,028 of
its own shares (June 2016 - 8,393,550, Dec 2016 - 15,805,287) through
purchases on the London Stock Exchange, at a cost of £49.8m (June 2016 -
£58.4m, Dec 2016 - £108.2m). The shares repurchased during the period were
cancelled, with none held as treasury shares at the end of the reporting
period. An amount of £0.6m (June 2016 - £0.8m, Dec 2016 - £1.6m), equivalent
to the nominal value of the cancelled shares, has been transferred to the
capital redemption reserve. Costs of £0.4m (June 2016 - £0.9m, Dec 2016 -
£1.6m) associated with the transfer to the Group of the repurchased shares and
their subsequent cancellation have been charged to the profit and loss
reserve.
B. Dividends
The following dividends were paid by the Group:
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Final dividend for the year ended 31 December 2016 of 16.8p per share 70.0 60.3 60.3
(2015 - 14.1p per share)
Interim dividend for the six months ended 30 June 2016 of 7.0p per share - - 29.9
(2015 - 6.8p per share)
70.0 60.3 90.2
An interim dividend of 7.9p per share (£32.8m) for the period ending 30 June
2017 was approved by the Board on 26 July 2017 and will be paid on Wednesday 6
September 2017 to shareholders who are on the register at close of business on
Friday 4 August 2017. The Dividend Reinvestment Plan (DRIP) is available to
ordinary shareholders and the final date for receipt of elections to
participate in the DRIP is 15 August 2017.
9 Notes to the statement of cash flows
A. Reconciliation of cash generated from operations
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Cash flows from operating activities
Operating profit 202.9 169.5 277.5
Exceptional items 5.1 - 81.6
Amortisation including non-exceptional impairment of intangible assets 9.0 7.5 14.9
Depreciation of property, plant and equipment 22.1 18.7 38.0
Profit on disposal of property, plant and equipment (9.0) (0.1) (12.7)
Share-based payments charge 5.0 5.4 12.1
(Increase) / decrease in inventories (99.6) 36.1 (110.7)
Increase in trade and other receivables (13.3) (31.5) (10.2)
Increase / (decrease) in trade and other payables 132.5 (67.4) 99.0
Decrease in provisions (4.5) (7.5) (9.4)
Pension contributions less than the pension charge for the period* 1.2 0.6 1.9
Decrease in interest in leased vehicles 1.3 3.0 2.9
Payments in respect of operating exceptional items (21.9) - (3.2)
Other non-cash items (0.7) 0.5 1.1
Cash generated from operations 230.1 134.8 382.8
* Includes additional payments of £1.5m (June 2016 - £1.2m, Dec 2016 -
£2.1m).
B. Reconciliation of net cash flow to movement in net funds
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Net decrease in cash and cash equivalents (5.5) (62.5) (89.8)
Net cash inflow from borrowings and finance leases (9.9) (25.8) (132.1)
Change in net cash and debt resulting from cash flows (15.4) (88.3) (221.9)
Effect of foreign exchange rate changes on net cash and debt (11.9) 57.4 129.7
Net movement in fair value 0.7 0.1 1.0
Net loans and finance leases relating to acquisitions and disposals - - (48.7)
Movement in net funds (26.6) (30.8) (139.9)
Opening net funds 26.5 166.4 166.4
Closing net (debt) / funds (0.1) 135.6 26.5
Net (debt) / funds is analysed as follows:
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Cash and cash equivalents as per the balance sheet 768.2 458.1 645.2
Borrowings - disclosed as current liabilities (411.5) (310.3) (481.7)
Add back: amounts treated as debt financing (see below) 39.6 223.2 252.5
Cash and cash equivalents as per the statement of cash flows 396.3 371.0 416.0
Debt financing
Borrowings - disclosed as current liabilities and treated as debt financing (see above) (39.6) (223.2) (252.5)
Borrowings - disclosed as non-current liabilities (414.1) (151.4) (292.0)
Fair value of related cross-currency interest rate swaps 57.3 139.2 155.0
Debt financing (396.4) (235.4) (389.5)
Net (debt) / funds (0.1) 135.6 26.5
10 Acquisitions and disposals
During the period ended 30 June 2017, the Group acquired premium automotive
operations in Estonia, focused on exclusive distribution for BMW Group, from
United Motors AS 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 £15.6m. The Group also disposed of its Lexus operations
in Shanghai generating disposal proceeds of £5.6m.
In the year ended 31 December 2016, the Group acquired a multi-country scale
Distribution business in South America focused on Subaru and Hino in the
growth markets of Chile, Colombia, Peru and Argentina. The cost of the
acquisition, net of cash acquired, was £196.8m.
In 2016 the Group also acquired and disposed of sites in the UK in relation to
the optimisation of our Jaguar Land Rover footprint ahead of the new combined
site format being launched in the UK. The Group also disposed of a site in
Australia and finalised the liquidation of a joint venture in Greece.
Consideration for the acquisitions was £4.3m and disposal proceeds were
£2.8m.
11 Financial risk management
A. Financial risk factors
Exposure to financial risks comprising market risks (currency risk and
interest rate risk), funding and liquidity risk and counterparty risk arises
in the normal course of the Group's business.
During the six months to 30 June 2017, the Group has continued to apply the
financial risk management process and policies as detailed in the Group's
principal risks and risk management process included in the Annual Report and
Accounts 2016.
The condensed consolidated interim financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements and further details can be found in the Annual Report and
Accounts 2016.
B. Liquidity risk
The Group has refinanced its US$275m private placement loan note borrowings
that matured in May 2017 by issuing £210m in new private placement loan notes.
The notes were issued in four tranches paying a semi-annual coupon at an
average interest rate of 3% and maturing in 2024 to 2029.
Other than the refinancing mentioned above, there have been no material
changes to the contractual undiscounted cash flows of the Group's liabilities
during the six months to June 2017.
C. Fair value measurements
In accordance with IFRS 13, disclosure is required for financial instruments
that are measured in the consolidated statement of financial position at fair
value. This requires disclosure of fair value measurements by level for the
following fair value measurement hierarchy:
· quoted prices in active markets (level 1);
· inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly (level 2); or
· inputs for the asset or liability that are not based on observable market
data (level 3).
The following table presents the Group's assets and liabilities that are
measured at fair value:
Six months to 30 June 2017 Six months to 30 June 2016 Year to 31 December 2016
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m £m £m £m £m
Assets
Derivatives used for hedging - 60.7 - 60.7 - 211.2 - 211.2 - 160.1 - 160.1
Available for sale financial assets 1.3 - 2.3 3.6 1.6 - - 1.6 1.6 - 2.2 3.8
1.3 60.7 2.3 64.3 1.6 211.2 - 212.8 1.6 160.1 2.2 163.9
Liabilities
Derivatives used for hedging - (35.3) - (35.3) - (16.1) - (16.1) - (53.6) - (53.6)
Level 1 represents the fair value of financial instruments that are traded in
active markets and is based on quoted market prices at the end of the
reporting period.
The fair value of financial instruments that are not traded in an active
market (level 2) is determined by using valuation techniques which include the
present value of estimated future cash flows. These valuation techniques
maximise the use of observable market data where it is available and rely as
little as possible on entity specific estimates.
Derivative financial instruments are carried at their fair values. The fair
value of forward foreign exchange contracts and foreign exchange swaps
represents the difference between the value of the outstanding contracts at
their contracted rates and a valuation calculated using the spot rates of
exchange and prevailing forward interest rates at 30 June 2017.
The Group's derivative financial instruments comprise the following:
Assets Liabilities
Six months to Six months to Year to Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016 30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m £m £m £m
Cross currency interest rate swap 57.3 139.2 155.0 - - -
Forward foreign exchange contracts 3.4 72.0 5.1 (35.3) (16.1) (53.6)
60.7 211.2 160.1 (35.3) (16.1) (53.6)
12 Assets held for sale
Six months to Six months to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
£m £m £m
Assets held for sale 6.4 1.2 3.2
As at 30 June 2017, assets held for sale relate to surplus properties within
the UK, which are actively marketed with a view to sale.
13 Related party disclosures
There have been no material changes to the principal subsidiaries and joint
ventures as listed in the Annual Report and Accounts for the year ended 31
December 2016.
All related party transactions arise during the ordinary course of business
and are on an arm's length basis.
There were no material transactions or balances between the Group and its key
management personnel during the six months to 30 June 2017.
Independent Review Report to Inchcape plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Inchcape plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim Report of
Inchcape plc for the 6 month period ended 30 June 2017. Based on our review,
nothing has come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in accordance
with International Accounting Standard 34, 'Interim Financial Reporting', as
adopted by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
• the consolidated statement of financial position as at 30 June 2017;
• the consolidated income statement and consolidated statement of
comprehensive income for the period then ended;
• the consolidated statement of cash flows for the period then ended;
• the consolidated statement of changes in equity for the period then ended;
and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Report have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Report, including the interim financial statements, is the
responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the Interim Report in accordance
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Report based on our review. This report, including
the conclusion, has been prepared for and
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