REG - Vertu Motors PLC - Final results for the year ended 29 February 2016 <Origin Href="QuoteRef">VTU.L</Origin> - Part 2
11/05/2016 07:06
- Part 2: For the preceding part double click ID:nRSK8562Xa
balances for much of the year and these additional facilities are
utilised to fund significant peak working capital requirements following plate
change months. As at 29 February 2016, the Group had cash balances of £43.9m
(2015: £19.3m) and, as a consequence, net cash of £23.1m (2015: net cash of
£15.7m). The cash position at 29 February 2016 reflects the seasonal reduction
in working capital, typical of the industry, which arises at the month end
prior to a plate change month. Consequently, the year-end cash position is
higher than the normalised cash balances throughout the remainder of the year
by approximately £20m. On 31 March 2016 the Group completed an equity placing
raising £35m before expenses. These funds, in addition to its acquisition
loan facility and on-going cash generation, will be used to fund the Group's
on-going acquisition strategy.
Having utilised a portion of the Group's acquisition debt facilities in order
to finance in particular the Greenoaks Mercedes-Benz acquisition in March
2016, it is the Group's intention to refinance these borrowings by raising a
long term debt facility. It is envisaged that this refinancing will amount to
some £50m and will take place during the first half of the current financial
year.
Pensions
The Bristol Street defined benefit pension scheme, which is accounted for on
the basis of IAS 19 (revised), showed a surplus as at 29 February 2016 of
£4.4m (2015: £3.0m). During the year, and in line with the funding programme
agreed with the Trustees in 2013, the Group made cash contributions to the
scheme of £0.4m (2015: £0.4m). This scheme is closed to future membership and
accrual.
On 1 October 2015, the Group acquired the entire share capital of SHG Holdings
Limited which included the SHG Pension Scheme, also a defined benefit pension
scheme closed to future membership and accrual. On the basis of IAS19
(revised), this scheme showed a surplus as at 29 February 2016 of £1.7m and
SHG Holdings Limited made no cash contributions during the year on the basis
that it is fully funded under the technical provisions.
Dividends
The Group's strategy is to continue to grow by acquiring further dealerships,
and establishing and maintaining sufficient financial resources to deploy in
the pursuit of this strategy is a key element of the Board's consideration of
and its approach to capital management. In addition, in common with the whole
UK automotive retail sector, the Group is currently in the process of a major
dealership investment and refurbishment programme required by the Group's
Manufacturer partners, which will run until 2018. This in turn is a further
element of the Board's consideration of capital management. Taking account of
acquisition opportunities and capital investment plans, the Board also
recognises the vital role of dividends in delivering total shareholder
return.
The Group paid its first dividend of 0.5 pence per share in 2011 and this has
been progressively increased each year to 1.05 pence per share in 2015. Last
year, the Board indicated its intention to adopt an earnings dividend cover
moving closer to four times and this pay-out ratio was arrived at taking into
account the competing requirements of acquisitions, capital investment and
short term shareholder returns. The Board has proposed an increase in the
final dividend for 2016, payable on 26 July 2016, to 0.85 pence per share
(2015: 0.7p), which, when taken together with the interim dividend paid in
January 2016 of 0.45 pence per share (2015: 0.35p), provides a total dividend
for the year of 1.30 pence per share (2015: 1.05p), representing an increase
of 23.8% and a dividend cover of 4.9 times (2015: 4.9 times) based upon
adjusted earnings per share. The ex-dividend date will be 23 June 2016 and
the associated record date 24 June 2016. It is the Board's intention that the
dividend cover will reduce to closer to four times over the next three years.
The proposed full year dividend of 1.30 pence represents an annualised cash
dividend of £5.2m (2015: £3.9m). The distributable reserves in the parent
company balance sheet as at 29 February 2016 were £43.8m (2015: £25.4m).
At this level of pay-out the Board does not consider there to be any
significant risks to the Group's ability to continue to pay dividends in
accordance with this pay-out strategy other than those listed in the Strategy
Report in the annual report and financial statements.
Post balance sheet events
On 1 March 2016, the Group refinanced its borrowing facilities, converting the
£20m acquisition facility into a £40m facility available until September 2017,
after which it reverts to £20m available until March 2019. In addition a
further £10m facility was established which is available until November 2016.
The overdraft and money market facilities of £45m were increased to £58m at
the same time. The interest rates and other terms on these refinanced
facilities are all similar to those on the former facilities as set out
above.
Also on 1 March 2016, the Group acquired the entire issued share capital of
Sigma Holdings Limited for a total cash consideration of £21.9m (of which
£3.5m was deferred for 12 months) and in addition £9m of vendor loans were
settled in cash on completion. The acquired business, trading as Greenoaks
Mercedes-Benz, operates three Mercedes-Benz dealerships in Reading, Ascot and
Slough, with the Reading and Ascot outlets also representing the smart
franchise, and Ascot being an AMG performance centre. Each of the three
dealerships operates from freehold premises and the transaction included
goodwill and other intangibles of £13.0m.
On 31 March 2016, the Group undertook an equity placing of 56,000,000 new
ordinary shares at a price of 62.5p per share to raise £35.0m (gross) to fund
further acquisitions.
On 2 May 2016, the Group acquired the business and certain assets of Leeds
Jaguar from a subsidiary of Inchcape PLC. The estimated consideration for
this leasehold acquisition is £0.65m including goodwill of £0.5m.
Michael Sherwin
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT (AUDITED)
For the year ended 29 February 2016
2016 2015
Note £'000 £'000
Revenue
Continuing operations 2,328,332 2,074,912
Acquisitions 94,947 -
2,423,279 2,074,912
Cost of sales
Continuing operations (2,074,925) (1,846,843)
Acquisitions (85,075) -
(2,160,000) (1,846,843)
Gross profit
Continuing operations 253,407 228,069
Acquisitions 9,872 -
263,279 228,069
Operating expenses
Continuing operations (224,165) (205,334)
Acquisitions (10,466) -
(234,631) (205,334)
Operating profit before amortisation and share based payments charge
Continuing operations 29,242 22,735
Acquisitions (594) -
28,648 22,735
Amortisation of intangible assets (558) (405)
Share based payments charge (911) (645)
Operating profit 27,179 21,685
Finance income 2 173 353
Finance costs 2 (1,390) (1,040)
Profit before tax, amortisation and share based payments charge 27,431 22,048
Amortisation of intangible assets (558) (405)
Share based payments charge (911) (645)
Profit before tax 25,962 20,998
Taxation 3 (5,282) (4,459)
Profit for the year attributable to equity holders 20,680 16,539
Basic earnings per share (p) 4 6.06 4.87
Diluted earnings per share (p) 4 5.92 4.78
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (AUDITED)
For the year ended 29 February 2016
2016 2015
Note £'000 £'000
Profit for the year 20,680 16,539
Other comprehensive income / (expense)
Items that will not be reclassified to profit or loss:
Actuarial gains / (losses) on retirement benefit obligations 680 (461)
Deferred tax relating to actuarial (gains) / losses on retirement benefit obligations (137) 97
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges 6 23 49
Deferred tax relating to cash flow hedges 6 (6) (10)
Other comprehensive income / (expense) for the year, net of tax 560 (325)
Total comprehensive income for the year attributable to equity holders 21,240 16,214
CONSOLIDATED BALANCE SHEET (AUDITED)
As at 29 February 2016
2016 2015
Note £'000 £'000
Non-current assets
Goodwill and other indefinite life assets 69,209 50,867
Other intangible assets 1,672 1,905
Retirement benefit asset 6,097 3,003
Property, plant and equipment 150,361 135,153
227,339 190,928
Current assets
Inventories 530,406 394,287
Trade and other receivables 63,416 53,500
Property assets held for sale 537 1,866
Cash and cash equivalents 43,915 19,254
Total current assets 638,274 468,907
Total assets 865,613 659,835
Current liabilities
Trade and other payables (630,912) (459,250)
Deferred consideration (241) (1,518)
Current tax liabilities (3,647) (6,028)
Derivative financial instruments - (25)
Borrowings (6,756) (3,423)
Total current liabilities (641,556) (470,244)
Non-current liabilities
Borrowings (14,011) (161)
Deferred consideration (1,659) (291)
Deferred income tax liabilities (4,450) (3,699)
Deferred Income (6,078) (5,806)
(26,198) (9,957)
Total liabilities (667,754) (480,201)
Net assets 197,859 179,634
Capital and reserves attributable to equity holders of the Group
Ordinary shares 34,127 34,091
Share premium 96,901 96,810
Other reserve 10,645 10,645
Hedging reserve 6 - (17)
Retained earnings 56,186 38,105
Shareholders' equity 197,859 179,634
CONSOLIDATED CASH FLOW STATEMENT (AUDITED)
For the year ended 29 February 2016
2016 2015
Note £'000 £'000
Cash flows from operating activities
Operating profit 27,179 21,685
(Profit)/loss on sale of property, plant and equipment (26) 186
Amortisation of other intangible assets 558 405
Depreciation of property, plant and equipment 6,803 5,915
Impairment of preference shares receivable - 192
Movement in working capital 30,515 (2,887)
Share based payments charge 781 617
Cash generated from operations 65,810 26,113
Tax received 4 182
Tax paid (7,704) (4,653)
Finance income received 36 219
Finance costs paid (1,451) (933)
Net cash generated from operating activities 56,695 20,928
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and borrowings acquired (24,565) (17,437)
Acquisition of freehold and long leasehold land and buildings (6,475) (8,929)
Purchases of intangible assets (325) (347)
Purchases of other property, plant and equipment (13,977) (9,849)
Proceeds from disposal of business (net of cash, overdraft and borrowings) 2,137 752
Proceeds from disposal of property, plant and equipment 1,120 1,964
Net cash outflow from investing activities (42,085) (33,846)
Cash flows from financing activities
Net proceeds from issuance of ordinary shares 127 119
Proceeds from borrowings 7 18,288 -
Repayment of borrowings 7 (4,441) (2,000)
Dividends paid to equity holders (3,923) (2,895)
Net cash inflow/(outflow)from financingactivities 10,051 (4,776)
Net increase/(decrease) in cash and cash equivalents 7 24,661 (17,694)
Cash and cash equivalents at beginning of year 19,254 36,948
Cash and cash equivalents at end of year 43,915 19,254
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (AUDITED)
For the year ended 29 February 2016
Ordinaryshare capital Sharepremium Otherreserve Hedgingreserve Retainedearnings Totalequity
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 March 2015 34,091 96,810 10,645 (17) 38,105 179,634
Profit for the year - - - - 20,680 20,680
Actuarial gains on retirement benefit obligations - - - - 680 680
Tax on items taken directly to equity - - - (6) (137) (143)
Fair value gains - - - 23 - 23
Total comprehensive income for the year - - - 17 21,223 21,240
New ordinary shares issued 36 91 - - - 127
Dividend paid - - - - (3,923) (3,923)
Share based payments charge - - - - 781 781
As at 29 February 2016 34,127 96,901 10,645 - 56,186 197,859
The other reserve is a merger reserve, arising from shares issued for shares
as consideration, to the former shareholders of acquired companies.
For the year ended 28 February 2015
Ordinaryshare capital Sharepremium Otherreserve Hedgingreserve Retainedearnings TotalEquity
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 March 2014 33,678 96,729 8,820 (56) 24,208 163,379
Profit for the year - - - - 16,539 16,539
Actuarial losses on retirement benefit obligations - - - - (461) (461)
Tax on items taken directly to equity - - - (10) 97 87
Fair value gains - - - 49 - 49
Total comprehensive income for the year - - - 39 16,175 16,214
New ordinary shares issued 413 81 1,825 - - 2,319
Dividend paid - - - - (2,895) (2,895)
Share based payments charge - - - - 617 617
As at 28 February 2015 34,091 96,810 10,645 (17) 38,105 179,634
NOTES
For the year ended 29 February 2016
1. Basis of Preparation
Vertu Motors plc is a Public Limited Company which is listed on the AiM market
and is incorporated and domiciled in the United Kingdom. The address of the
registered office is Vertu House, Fifth Avenue Business Park, Team Valley,
Gateshead, Tyne and Wear, NE11 0XA. The registered number of the Company is
05984855.
The Group prepares financial information under International Financial
Reporting Standards (IFRS) issued by the IASB and as adopted by the European
Union (EU) and on the same basis as in 2015. Further information in relation
to the Standards adopted by the Group is available on the Group's website
www.vertumotors.com.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRS's), this announcement does not itself contain sufficient information to
comply with IFRS's. The Group published full financial statements that comply
with IFRS's today and these are available on the Group's website,
www.vertumotors.com.
The financial information presented for the years ended 29 February 2016 and
28 February 2015 does not constitute the Company's statutory accounts as
defined in Section 434 of the Companies Act 2006, but is derived from those
financial statements. The auditors' reports on the 2016 and 2015 financial
statements were unqualified. A copy of the statutory accounts for 2015 has
been delivered to the Registrar of Companies. Those for 2016 will be
delivered following the Company's annual general meeting, which will be
convened on 20 July 2016.
Accounting policies
The annual consolidated financial statements of Vertu Motors plc are prepared
in accordance with IFRS's as adopted by the European Union. The annual report
has been prepared on the going concern basis under the historical cost
convention, as modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) at fair value through profit or
loss.
The accounting policies adopted in this annual report can be found on our
website, www.vertumotors.com, and are consistent with those of the Group's
financial statements for the year ended 28 February 2015.
Segmental information
The Group adopts IFRS 8 "Operating Segments" which determines and presents
operating segments based on information provided to the Group's Chief
Operating Decision Maker ("CODM"), Robert Forrester, Chief Executive. There
has been no change in the Group's one reportable business segment.
Dealerships operate a number of different business streams such as new vehicle
sales, used vehicle sales and after-sales operations. Management is organised
based on the dealership operations as a whole rather than the specific
business streams.
Dealerships are considered to have similar economic characteristics and offer
similar products and services which appeal to a similar customer base. As
such, the results of each dealership have been aggregated to form one
reportable business segment.
The CODM assesses the performance of the operating segment based on a measure
of both revenue and gross margin. Therefore, to increase transparency, the
Group has included below an additional voluntary disclosure analysing revenue
and gross margin within the reportable segment.
Year ended 29 February 2016
Revenue RevenueMix GrossMargin GrossMarginMix Gross Margin
£'m % £'m % %
Aftersales* 189.0 7.8 102.9 39.1 44.8
New car retail and Motability 796.5 32.9 59.3 22.5 7.4
New fleet and commercial 587.6 24.2 17.6 6.7 3.0
Total new vehicles 1,384.1 57.1 76.9 29.2 5.6
Used cars 850.2 35.1 83.5 31.7 9.8
2,423.3 100.0 263.3 100.0 10.9
Year ended 28 February 2015
Revenue RevenueMix GrossMargin GrossMarginMix Gross Margin
£'m % £'m % %
Aftersales* 168.1 8.1 89.4 39.2 43.5
New car retail and Motability 679.4 32.7 50.9 22.3 7.5
New fleet and commercial 498.5 24.0 12.3 5.4 2.5
Total new vehicles 1,177.9 56.7 63.2 27.7 5.4
Used cars 728.9 35.2 75.5 33.1 10.4
2,074.9 100.0 228.1 100.0 11.0
*margin in after-sales expressed on internal and external turnover
2. Finance income and costs
2016 2015
£'000 £'000
Interest on short term bank deposits 36 50
Vehicle stocking interest - 163
Net finance income relating to defined benefit pension schemes 137 140
Finance income 173 353
Bank loans and overdrafts (619) (642)
Vehicle stocking interest (572) -
Other finance costs (199) (398)
Finance costs (1,390) (1,040)
3. Taxation
2016 2015
£'000 £'000
Current tax
Current tax charge 5,598 5,214
Adjustment in respect of prior years (258) (96)
Total current tax 5,340 5,118
Deferred tax
Origination and reversal of temporary differences 395 (469)
Adjustment in respect of prior years (145) (203)
Rate differences (308) 13
Total deferred tax (58) (659)
Income tax expense 5,282 4,459
Factors affecting taxation expense in the year:
Profit before taxation from continuing operations 25,962 20,998
Profit before taxation multiplied by the rate of corporation tax in the UK of 20.08% (2015: 21.17%) 5,213 4,445
Non-qualifying depreciation 245 325
Non-deductible expenses 412 109
Effect on deferred tax balances due to rate change (308) 13
Property adjustment 153 (76)
Permanent benefits (30) (58)
Adjustments in respect of prior years (403) (299)
Total tax expense included in the income statement 5,282 4,459
The standard rate of Corporation Tax in the UK changed from 21% to 20% with
effect from 1 April 2015, and from 20% to 19% with effect from 1 April 2016.
Accordingly, the Group's profits for this accounting period are taxed at a
rate of 20.08%.
4. Earnings per share
Basic and diluted earnings per share are calculated by dividing the earnings
attributable to equity shareholders by the weighted average number of ordinary
shares during the year or the diluted weighted average number of ordinary
shares in issue in the year.
The Group only has one category of potentially dilutive ordinary shares, which
are share options. A calculation has been undertaken to determine the number
of shares that could have been acquired at fair value (determined as the
average annual market price of the Group's shares) based on the monetary value
of the subscription rights attached to the outstanding share options. The
number of shares calculated, as set out above, is compared with the number of
shares that would have been issued assuming the exercise of the share
options.
Adjusted earnings per share is calculated by dividing the adjusted earnings
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the year.
2016 2015
£'000 £'000
Profit attributable to equity shareholders 20,680 16,539
Amortisation of intangible assets 558 405
Share based payments charge 911 645
Tax effect of adjustments (112) (86)
Adjusted earnings attributable to equity shareholders 22,037 17,503
Weighted average number of shares in issue ('000s) 341,080 339,797
Potentially dilutive shares ('000s) 8,388 6,410
Diluted weighted average number of shares in issue ('000s) 349,468 346,207
Basic earnings per share 6.06p 4.87p
Diluted earnings per share 5.92p 4.78p
Basic adjusted earnings per share 6.46p 5.15p
Diluted adjusted earnings per share 6.31p 5.06p
5. Dividends per share
Dividends of £3,923,000 were paid in the year to 29 February 2016 (2015:
£2,895,000), 1.15p per share (2015: 0.85p). A final dividend in respect of
the year ended 29 February 2016 of 0.85p per share is to be proposed at the
annual general meeting on 20 July 2016. The ex-dividend date will be 23 June
2016, and the associated record date 24 June 2016. This dividend will be paid,
subject to shareholder approval, on 26 July 2016 and the financial statements
do not reflect this dividend payable.
The last date for shareholders to elect for the Dividend Re-Investment Plan
(DRIP) will be 1 July 2016 (or such other date as the Group may specify). A
facility is provided by Capita IRG Trustees Limited in conjunction with the
Group's registrars, Capita Asset Services, for any Group shareholders who wish
to re-invest dividend payments in the Group. Under this facility, cash
dividends may be used to purchase additional ordinary shares.
Any shareholder requiring further information should call Capita on 0871 664
0300 (Calls cost 12p per minute plus your phone company's access charge. Calls
outside the United Kingdom will be charged at the applicable international
rate. Lines are open between 09:00 - 17:30, Monday to Friday excluding public
holidays in England and Wales. Overseas shareholders are best to use: +44 371
664 0300 Calls outside the United Kingdom will be charged at the applicable
international rate)or visit www.capitaassetservices.com.
6. Hedging reserve
The hedging reserve comprises cash flow hedges in relation to interest rate
swap derivatives. The movements on the hedging reserve are as follows:
2016 2015
£'000 £'000
At beginning of year (17) (56)
Fair value gains on derivative financial instruments during the year 23 49
Deferred taxation on fair value gains during year (6) (10)
At end of year - (17)
The cash flow hedge during the current and previous year relates to an
interest rate swap used to fix the interest rate on an outstanding term loan.
The interest rate swap expired during the year on final repayment of the
underlying term loan.
7. Reconciliation of net cash flow to movement in net cash
2016 2015
£'000 £'000
Net increase / (decrease) in cash and cash equivalents 24,661 (17,694)
Cash inflow from proceeds of borrowings (18,288) -
Cash outflow from repayment of borrowings 4,441 2,000
Cash movement in net cash 10,814 (15,694)
Borrowings acquired (3,409) -
Capitalisation of loan arrangement fees 201 48
Amortisation of loan arrangement fees (128) (120)
Non-cash movement in net cash (3,336) (72)
Movement in net cash 7,478 (15,766)
Opening net cash 15,670 31,436
Closing net cash 23,148 15,670
8. Acquisitions
On 1 May 2015, the Group acquired the business and assets of Bury Land Rover
in Lancashire from a subsidiary of Pendragon PLC. Total consideration
amounted to £7,011,000 and was settled in cash from the Group's existing
resources.
On 12 May 2015, the Group acquired the business and assets of Bradford Jaguar
in West Yorkshire from a subsidiary of Lancaster plc. Total consideration
amounted to £825,000 and was settled in cash from the Group's existing
resources.
On 5 June 2015, the Group acquired the entire issued share capital of Blacks
Autos Limited, which operated a Skoda dealership in Darlington. Total
consideration amounted to £1,576,000 including retention payable of £250,000.
The remaining balance was settled in cash from the Group's existing
resources.
On 1 October 2015, the Group acquired the entire issued share capital of SHG
Holdings Limited which operates three outlets representing Audi, Volkswagen
passenger cars and Volkswagen commercials in Hereford, two Volkswagen Group
parts distribution operations in Gloucester and Hereford and a used car and
aftersales facility in South Herefordshire. Consideration for the acquisition
of £12,933,000 was met from the Group's existing cash resources. A further
£1,500,000 is payable after 2 years dependent on certain performance
criteria.
On 1 December 2015, the Group acquired the entire issued share capital of
Who's Ace Holdings Limited which operates a well-established on-line vehicle
parts business headquartered in Sittingbourne, Kent. Total consideration for
the acquisition was nil.
On 25 January 2016, the Group acquired the trade and certain assets of three
Honda dealerships in Stockton, Nottingham and Derby from Lookers plc for total
consideration of £2,054,000 met from the Group's existing cash resources.
9. Post balance sheet events
On 1 March 2016, the Group refinanced its borrowing facilities, converting the
£20,000,000 acquisition facility into a £40,000,000 facility available until
September 2017, after which it reverts to £20,000,000 available until March
2019. In addition a further £10,000,000 facility was established which is
available until November 2016. The overdraft and money market facilities of
£45,000,000 were increased to £58,000,000 at the same time. The interest
rates and other terms on these refinanced facilities are all similar to those
on the former facilities.
Also on 1 March 2016, the Group acquired the entire issued share capital of
Sigma Holdings Limited for a total cash consideration of £21,900,000 (of which
£3,500,000 was deferred for 12 months) and in addition £9,000,000 of vendor
loans were settled in cash on completion. The acquired business, trading as
Greenoaks Mercedes-Benz, operates three Mercedes-Benz dealerships in Reading,
Ascot and Slough, with the Reading and Ascot outlets also representing the
smart franchise, and Ascot being an AMG performance centre. Each of the three
dealerships operates from freehold premises and the transaction included
goodwill and other intangibles of £13,000,000.
On 31 March 2016, the Group undertook an equity placing of 56,000,000 new
ordinary shares at a price of 62.5p per share to raise £35,000,000 (gross) to
fund further acquisitions.
On 2 May 2016, the Group acquired the business and certain assets of Leeds
Jaguar from a subsidiary of Inchcape PLC. The estimated consideration for
this leasehold acquisition is £650,000 including goodwill of £500,000.
This information is provided by RNS
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