TIDMPDG
RNS Number : 7770T
Pendragon PLC
22 March 2023
22 March 2023
Pendragon PLC
Full year results for the financial year ended 31 December
2022
-- Strong financial performance in challenging environment
-- Continued investment in strategic initiatives driving growth in gross profit
-- Strengthened balance sheet with further reduction in adjusted net debt
-- Positive start to FY23; well-positioned to make further progress against strategy
Bill Berman, Chief Executive Officer, said:
"We delivered a resilient trading performance against a
challenging backdrop last year. These results clearly demonstrate
the strength of our operations, and it is all underpinned by the
great strides we are making against our strategy which ensures we
are well placed to meet the needs of our customers and OEM
partners, and to create value for all of our stakeholders.
"During the year we have continued to invest in strategic
initiatives across the business that drive growth. We launched
CarStore.com, which is now our primary marketplace for all our used
car inventory. The platform lists approximately 12,000 cars across
our brands, more than any of the new platforms that have entered
the market since 2019 and the market outperformance of our used car
division in the second half showed the benefits of our investment
in CarStore.com. We also invested more than ever before in Pinewood
to further maximise the benefit that our DMS technology brings both
to our external customers and to our business, where it is powering
improvements made across our portfolio. We further expanded our new
car representation after being selected by BYD, the world's largest
new energy vehicle manufacturer, to be a UK launch partner in
2023."
"We finished FY22 with good momentum, and trading has been
positive in the first two months of FY23. We remain mindful of the
potential headwinds from challenging macro-economic conditions.
However, we continue to expect our ongoing operational initiatives
and growth opportunities to more than offset operating cost
inflation within the business this year and the Board remains
confident in the prospects for the Group in 2023."
Group Financial Highlights
FY21 Total change %
GBPm FY22 Like-for-like(1) change %
------------------------------ -------- -------- ---------------- ---------------------------
Group Revenue 3,620.0 3,449.9 4.9% 6.7%
Underlying profit before tax 57.6 83.0 -30.6%
Non-underlying charge (0.4) (9.7) -95.9%
Profit after tax 45.5 61.5 -26.0%
Operating profit 101.0 107.6 -6.1%
Underlying net finance costs (40.9) (33.3) 22.8%
Adjusted net debt(2) (23.3) (49.7) -53.1%
(1) Like for like (LFL) results only include trading businesses
which have comparative trading periods in two consecutive financial
years. Reconciliations of the like for like figures to the total
reported figures can see seen in Note 1 - Alternative Performance
Measures.
(2) Adjusted Net Debt - All loans and borrowings less cash and
cash equivalents less IFRS 16 lease liabilities less vehicle
stocking loans.
Operational highlights
-- Strong financial performance
o Group Revenue up by 4.9% to GBP3,620.0m (FY21: GBP3,449.9m).
Revenue up 6.7% on a like-for-like basis.
o Gross profit value 3.6% higher at GBP457.2m, with investment
in strategic initiatives delivering increases in both new and
aftersales gross profit.
o Underlying cost increases of 10.4% (GBP33.7m), driven by
higher levels of cost inflation, c.GBP10m of additional marketing
costs to support the used car proposition and the non-recurrence of
c.GBP12m of rates relief received in FY21.
o Underlying profit before tax of GBP57.6m (FY21: GBP83.0m) was
ahead of the Board's expectations at the start of the year.
Outperformance delivered despite c.GBP10m headwind from
approximately GBP4m higher operating expenses, driven by higher
levels of inflation, and approximately GBP6m of higher interest
costs driven by rate changes, against original expectations for
FY22.
o After non-underlying items the Group reported profit before
tax of GBP57.2m (FY21: GBP73.3m).
o Strengthened balance sheet, with adjusted net debt reduced by
GBP26.4m from GBP49.7m in FY21 to GBP23.3m in FY22.
-- Further strategic progress delivered
o Technology releases in Pinewood including integrated used car
valuation tools and open banking tools are key enablers for UK
Motor performance.
o New processes and products for UK Motor, including enhanced
customer journey management and improvements to aftersales diary
management, are driving improved productivity and supporting strong
margins.
o New omni channel used car platform, CarStore.com has increased
digital traffic by 61% year on year post-launch in May 2022.
o CarStore.com now lists approximately 12,000 used cars, more
than any of the new automotive retail platforms that have entered
the market since 2019.
o Investment into numerous franchise locations, including
Porsche, BMW, Mercedes-Benz and Land Rover, completed in FY22 as
well as development of a new Car Store in Warrington.
o Pendragon selected as UK launch partner for BYD, the world's
largest new energy vehicle manufacturer.
Outlook
-- The Group is pleased with trading in the first two months of
FY23, with underlying operating profit to February ahead of 2022 as
volumes in both new and used cars have shown good year-on-year
growth. The important registration month of March has also started
with continued good momentum. Reduced levels of supply in both new
and used vehicles are expected during 2023, though there are
encouraging signs of improvement in both production and supply of
new vehicles. The Group's new vehicle order bank remains strong
with over 22,000 orders across the Group as at the end of December.
Used car supply is anticipated to remain tight, following the prior
three years of registration shortfalls of new vehicles.
-- Although the Group remains mindful of the macro-economic
headwinds including the potential for further interest rate rises
and continued inflationary cost pressures it continues to expect
ongoing operational initiatives and strategic growth opportunities
to more than offset operating cost inflation before interest costs
within the business during FY23. Accordingly, the Board remains
confident in the prospects for the Group in the year ahead.
Conference call and presentation
A presentation for sell-side analysts will be held at 9.00am
today and this will be followed by a Q&A session with the
management team. Please use the following link to register and to
join the livestream of the presentation:
https://stream.brrmedia.co.uk/broadcast/63d258e7777efd4a8b516262
A webcast replay of the presentation will be made available on
Pendragon's website later in the day. The webcast will be published
on:
https://www.pendragonplc.com/financial-information/announcements/
Capital markets day
Pendragon will host an analyst & investor event in Summer
2023, which will include an update on Pinewood.
For further enquiries please contact:
Pendragon PLC Tel: 01623 725200
Bill Berman, Chief Executive Officer Tel: 01623 725200
Mark Willis, Chief Financial Officer
Headland Tel: 07876 562436
Henry Wallers Tel: 07799 089357
Jack Gault
Divisional Operating Highlights
-- UK Motor
o Revenue up 6.1% to GBP3,536.2m (FY21: GBP3,332.7m). Revenue up
7.0% on a like-for-like basis.
o Underlying operating profit down 20.9% to GBP69.1m (FY21:
GBP87.4m).
o Reported operating profit after non-underlying items of
GBP71.6m (FY21: GBP82.6m).
o Gross margin of 11.8% (FY21: 11.9%).
-- Used gross margin of 7.9% (FY21: 9.6%) as margins rebased
from exceptional levels of H2 FY21.
-- New gross margin of 9.1% (FY21: 7.3%) with constrained supply
supporting higher margins.
-- Aftersales gross margin of 50.5% (FY21: 50.5%).
o Used vehicle gross profit per unit remained strong,
underpinned by strategic initiatives at GBP1,607 (FY21:
GBP1,670).
o New vehicle gross profit per unit rose by GBP808 to a record
high of GBP2,719 (FY21: GBP1,911).
o New volumes down 6.1% on a like-for-like basis, compared to a
market decline of 2%, with supply constraints the driving
factor.
o Used volumes down 8.7% on a like-for-like basis as supply
constraints also impacted used vehicles. Overall performance
broadly in line with market down 8.5%. Strong H2 performance post
launch of new CarStore.com proposition, with sales down just 2.2%
compared to a market decline of 8.7%.
o Total operating costs up by GBP36.7m, or 11.8%, driven by
non-repeat of government support measures, increased used car brand
marketing and higher levels of cost inflation, partially offset by
an ongoing focus on cost saving opportunities and utility
hedging.
-- Software - Pinewood
o Revenue up 4.1% to GBP25.4m (FY21: GBP24.4m).
o Gross profit up 0.9% to GBP22.7m (FY21: GBP22.5m).
o Operating profit down 12.0% to GBP11.0m (FY21: GBP12.5m), with
the reduction driven by increased costs, principally driven by
investment in developer resource to support product development and
implementation.
o Strong global expansion continuing:
-- Record high international users at 6,400, up 13%.
-- International users now represent 24% of external users.
-- New market entries to Singapore and Middle East.
o System development has both supported Pendragon's strategic
agenda as well as opened opportunities to sell developments to
external customers:
-- Pinewood technology powering CarStore.com.
-- Enhancement to used car valuation tools.
-- Development of Finance & Insurance tools.
o Continued high levels of customer retention with net user
churn of sub 1% in FY22, supported by frequent system updates.
-- Leasing - Pendragon Vehicle Management
o Revenue down 6.9% to GBP83.7m (FY21: GBP89.9m).
o Gross profit up 10.9% to GBP24.4m (FY21: GBP22.0m), the
decline in overall revenue was more than offset by higher residual
values achieved on disposal.
o Operating profit up 13.7% to GBP19.9m (FY21: GBP17.5m), with
operating costs flat at GBP4.5m.
o Growth opportunity in EV - c.40% of current order bank for
electric and hybrid vehicles
Financial performance summary
2022 2021
GBPm GBPm Change
------------------------------------ --------- --------- ------
Revenue 3,620.0 3,449.9 4.9%
------------------------------------- --------- --------- ------
Cost of Sales (3,162.8) (3,008.6) 5.1%
------------------------------------- --------- --------- ------
Gross Profit 457.2 441.3 3.6%
Underlying operating expenses (358.7) (325.0) 10.4%
------------------------------------- --------- --------- ------
Underlying operating profit 98.5 116.3 -15.3%
Underlying net finance costs (40.9) (33.3) 22.8%
------------------------------------- --------- --------- ------
Underlying profit before taxation 57.6 83.0 -30.6%
------------------------------------- --------- --------- ------
Non-underlying loss before taxation (0.4) (9.7) -95.9%
Total income tax expense (11.7) (11.8) -0.8%
------------------------------------- --------- --------- ------
Total profit for the period 45.5 61.5 -26.0%
------------------------------------- --------- --------- ------
Earnings per share
Basic earning per share 3.3p 4.4p
Diluted earning per share 3.1p 4.3p
Segmental Performance
Units Sold FY22 FY21 Change LFL Change
% %
---------------- ------ -------- ------- ------------
Used Units
UK Motor 89,355 98,326 -9.1% -8.7%
US Motor - 51 -100.0% -
89,355 98,377 -9.2% -8.7%
---------------- ------ -------- ------- ------------
New Units
UK Motor 48,773 52,285 -6.7% -6.1%
US Motor - 397 -100.0% -
---------------- ------ -------- ------- ------------
48,773 52,682 -7.4% -6.1%
---------------- ------ -------- ------- ------------
Change LFL Change
FY22 FY21 % %
---------------------------- ------- ------- ------- ----------
Revenue
UK Motor 3,536.2 3,332.7 6.1% 7.0%
Software 25.4 24.4 4.1% 4.1%
Leasing 83.7 89.9 -6.9% -6.9%
US Motor - 28.6 -100.0% -
Inter-segment revenue (25.3) (25.7) -1.6% -1.6%
---------------------------- ------- ------- ------- ----------
3,620.0 3,449.9 4.9% 6.7%
Gross Profit
UK Motor 415.7 397.3 4.6% 5.6%
Software 22.7 22.5 0.9% 0.9%
Leasing 24.4 22.0 10.9% 10.9%
US Motor - 4.0 -100.0% -
Inter-segment gross profit (5.6) (4.5) 24.4% 24.4%
---------------------------- ------- ------- ------- ----------
457.2 441.3 3.6% 5.5%
Underlying operating profit
UK Motor 69.1 87.4 -20.9% -20.8%
Software 11.0 12.5 -12.0% -12.0%
Leasing 19.9 17.5 13.7% 13.7%
US Motor (1.5) (1.1) 36.4% -
---------------------------- ------- ------- ------- ----------
98.5 116.3 -15.3% -14.8%
Chief Executive's Review
We have made further progress with our strategy to "Transform
automotive retail through digital innovation and operational
excellence" during an extremely busy year of delivery in 2022, the
second full-year of our strategy since its launch in 2020. During
the year we completed the relaunch of Car Store, with a market
leading omni-channel proposition, developed new relationships with
the world's largest new-energy manufacturer in BYD, delivered 13%
user growth in International markets with Pinewood, and also
delivered numerous strategic initiatives to drive the performance
of our UK Motor division. We are already seeing the benefits of
these significant changes, which underpinned a strong financial
performance in a year of challenging conditions shaped by supply
shortages in both new and used vehicles, inflationary cost
pressures and rising interest rates.
The Group also navigated an intense period of corporate activity
after disclosing two offers for the Group. This demonstrates belief
in the strength of our strategy and the prospects for the Group
overall. We remain confident in our market-leading proposition and
are well positioned to capitalise on the long-term growth
opportunities while managing the short-term challenges that
consumer-facing businesses are experiencing. We remain focussed on
further opportunities for strategic expansion in order to create
stakeholder value.
The Group delivered an underlying profit before tax of GBP57.6m
in FY22 (FY21: GBP83.0m), which, although behind FY21, was ahead of
expectations at the start of the year. This performance was
delivered through higher-than-expected gross profits as a result of
both strategic self-help initiatives and strong new car margins,
which together outpaced the higher than expected levels of cost
inflation and increases to base interest rates, which together
added approximately GBP10m of additional cost and interest charges.
We also further improved the strength of our balance sheet,
reducing adjusted net debt by a further GBP26.4m in the year, and
closing the year with net assets of GBP281m, an improvement of
GBP55m compared to FY21.
During 2022 we invested more than ever before in Pinewood, with
development capex of almost GBP6m being deployed in order to
further maximise the benefit that our DMS technology can bring both
to our business, and that of our external customers. Many of the
developments we have made have powered the performance in our UK
Motor Division, with multiple software changes being implemented to
support the digitisation and presentation of finance and insurance
options to our customers, improvements to the way we value part
exchanges online, and also to the "sell-your-car" customer journey.
Pinewood's technology also powers the capability and functionality
of our fully transactional CarStore.com web platform. Last year saw
significant international expansion too, with Pinewood growing its
international user base by 13% to a record of approximately 6,400
users. International users now represent 24% of Pinewood's total
external user base. There continues to be a strong pipeline of
opportunities in new markets, with new customers added in Singapore
and the Middle East during 2022.
The used car market has evolved rapidly since 2020 presenting
permanent changes to the way that consumers search and shop for
used cars. In this time, we have successfully adapted our model,
and evolved our strategy to respond to these changes. The Group's
focus has evolved from a standalone used car proposition, to our
'new-used car strategy'. At its core is a focus on an omni-channel
business model across our entire used car business, including those
cars in our existing franchise locations, ensuring we fully utilise
our wider used car inventory. The development of our technological
capability, enhanced website functionality and the emergence of a
truly omni-channel business model has put us in a strong position
to respond to these developments in the used car market.
During 2022 we relaunched Car Store, centred around
CarStore.com, which is our primary market-place for all of our used
car inventory. This platform now lists approximately 12,000 cars
across our brands on one single platform, more than any of the
other new automotive retail platforms that have entered the market
since 2019. To further support CarStore.com, we launched a new
cross-channel marketing campaign during May, including prime-time
TV advertising, which aims to raise brand awareness and to
highlight the omni-channel credentials of our offer, focussing on
'car buying that revolves around you'. Physical space remains a
good opportunity to grow our used car proposition, and we completed
the first of our new model Car Store sites in Chesterfield in
April, with a second opened in Warrington in December 2022. I am
pleased with the new concept of these stores and early performance
has been encouraging. Against a backdrop of constrained used car
supply, we delivered a strong used car performance in the second
half as we saw the benefits of our investment in CarStore.com. This
meant we outperformed the used car market by around 600bps in
H2.
As well as investing in our used car business during 2022, we
have invested heavily into our new car business, which remains a
fundamental part of the Group. We have completed a number of major
building projects during 2022, including completely remodelled BMW
showrooms in Derby and Hull, investment into the Mercedes showroom
in Huddersfield, and a new concept investment into the Mayfair Land
Rover showroom. Finally, we are well on the way to completing the
development of a new build freehold development of our Porsche
showroom in Nottingham in 2023, reflecting the latest design of
Destination Porsche, as we exit a leased location. We continue to
work alongside our manufacturer partners to maximise performance in
this important part of the Group. We are also looking at the
potential to increase our new car representation and are delighted
to be a UK launch partner for BYD, with our first stores opened in
March, as well as exploring other potential strategic
opportunities.
We also invested significant time and resources into the
development of Pendragon's culture during 2022. Led by our Chief
People Officer, we completed a comprehensive review of our purpose
and values to support our vision of 'Transforming automotive retail
through digital innovation and operational excellence', with input
from a wide range of teams across the business. The resulting set
of values, formed by our teams, are all aimed to support our newly
defined Group purpose - 'Driving beyond the possible'. I am
confident that this new purpose will further enable the changes we
continue to make at pace, throughout the organisation.
Given the mixed economic backdrop and market conditions, I am
proud of our progress during the year and believe we are well
positioned to move the business forward in 2023. As always, our
success depends on the contribution from our associates, and I
would again like to thank them for their performance in challenging
conditions during 2022.
Outlook
We finished FY22 with good momentum, and trading has been
positive in the first two months of FY23, but we remain mindful of
the potential headwinds from challenging macro-economic conditions
and the potential for further interest rate rises. We expect the
levels of supply in both new and used vehicles to remain below
historical levels during FY23, but there are some encouraging signs
of improvement in both production and supply of new vehicles. We
continue to expect our ongoing initiatives and growth opportunities
to more than offset operating cost inflation within the business
during FY23. Accordingly, the Board remains confident in the
prospects for the Group in the year ahead.
Bill Berman
Chief Executive
22 March 2023
Operating and Financial Review by Segment
The business is organised into 3 segments, analysed as
follows:
o UK Motor - Sale and servicing of vehicles in the UK
o Software -Software as a Service provision to global automotive
business users
o Leasing - Fleet and contract hire provider and also a source
of used vehicle supply.
UK Motor
Change
GBPm H1 2022 H2 2022 FY22 H1 2021 H2 2021 FY21 %
--------------------------------- --------- --------- --------- --------- --------- --------- ------
Used Revenue 948.9 859.7 1,808.6 846.1 860.5 1,706.6 6.0%
Aftersales Revenue 137.2 138.9 276.1 132.0 131.7 263.7 4.7%
New Revenue 716.8 734.7 1,451.5 761.7 600.7 1,362.4 6.5%
Total Revenue 1,802.9 1,733.3 3,536.2 1,739.8 1,592.9 3,332.7 6.1%
--------------------------------- --------- --------- --------- --------- --------- --------- ------
Used Gross Profit 77.1 66.5 143.6 73.6 90.6 164.2 -12.5%
Aftersales Gross Profit 70.4 69.1 139.5 65.3 67.9 133.2 4.7%
New Gross Profit 63.6 69.0 132.6 48.7 51.2 99.9 32.7%
--------------------------------- --------- --------- --------- --------- --------- --------- ------
Total Gross Profit 211.1 204.6 415.7 187.6 209.7 397.3 4.6%
--------------------------------- --------- --------- --------- --------- --------- --------- ------
Gross margin rate 11.7% 11.8% 11.8% 10.8% 13.2% 11.9% -0.1%
Underlying Operating Expenses (173.9) (172.7) (346.6) (149.7) (160.2) (309.9) 11.8%
--------------------------------- --------- --------- --------- --------- --------- --------- ------
Underlying Operating Profit 37.2 31.9 69.1 37.9 49.5 87.4 -20.9%
--------------------------------- --------- --------- --------- --------- --------- --------- ------
Underlying Operating margin rate 2.1% 1.8% 2.0% 2.2% 3.1% 2.6% -0.6%
Stocking interest (1) (5.7) (9.0) (14.7) (4.8) (5.0) (9.8) 50.0%
Profit after stocking interest 31.5 22.9 54.4 33.1 44.5 77.6 -29.9%
Operating Profit 39.4 32.2 71.6 37.8 44.8 82.6 -13.3%
Total Revenue Change 3.6% 8.8% 6.1%
Like-for-like Revenue Change 4.2% 10.1% 7.0%
Used Units Sold 46,016 43,339 89,355 53,894 44,432 98,326 (9.1%)
New Units Sold 24,686 24,087 48,773 30,067 22,218 52,285 (6.7%)
Used GPU (2) 1,676 1,534 1,607 1,366 2,039 1,670 (3.8%)
New GPU (2) 2,576 2,865 2,719 1,620 2,304 1,911 42.3%
Number of Locations 148 145 145 150 149 149 -2.7%
Average Used Selling Price (3) GBP18,900 GBP18,421 GBP18,667 GBP14,341 GBP17,453 GBP15,753 18.5%
Average New Selling Price (3) GBP28,552 GBP30,535 GBP29,529 GBP25,064 GBP26,386 GBP25,647 15.1%
(1) Stocking interest. Whilst stocking interest is an interest
expense and not part of operating profit, it is a cost directly
related to the trading performance of both new and used cars. It is
included as an alternative performance measure in the table above
for information.
(2) GPU = Gross Profit per Unit. It is calculated as total
New/Used GP divided by total New/Used retail units sold.
(3) Trading dealerships only. The used selling price is retail
vehicles only and excludes any trade vehicles. The new selling
price excludes vehicles sold by our fleet business (National Fleet
Solutions).
The UK Motor business operated from 133 franchise points and 12
used cars only retail points which represent a range of volume and
premium products offering both sales and service functions.
-- Further progress in respect of strategy to improve
performance and unlock significant value in the UK Motor
division.
-- Introduced a number of new digital initiatives, underpinned
by Pinewood, to differentiate our omni-channel model.
-- CarStore.com - our single market place for all of the Group's used cars.
Strategy delivery - Unlock value in the UK Motor division
The Group has made meaningful progress with its strategy to
improve performance and unlock significant value in the UK Motor
division through actions to:
1. Accelerate digital innovation
2. Drive operational excellence and embed consistent best practice
3. Operate from a lean and efficient cost base.
These initiatives have been designed to drive improvements in
used car margins, aftersales profitability and operating cost
efficiency.
Accelerate digital innovation
We made further good progress with accelerating digital
innovation during 2022, introducing a number of new initiatives, as
well as seeing the full-year benefit from the improvements made
during 2021. Sales+, a layered DMS application embedded within the
Pinewood system, has had further releases during FY22 which have
enabled the automated inclusion of insurance products, subject to
customer qualification, in all customer offers. This addition will
support improved sales penetrations with better product
presentation to the customer, as well as leaving us well positioned
to meet all current and future regulatory requirements. Releases
have also enabled real-time modification of the customer Finance
& Insurance ("F&I") offer, allowing our teams to amend all
aspects of the offer, such as finance type, deposit amount, term of
loan, annual mileage and additional insurance products, all of
which improve customer flexibility and transparency.
We have also improved the content of our digital Finance and
Insurance offering, by introducing the ability to present variable
APR's dependant on the balance being financed, together with
dynamic lender comparisons to offer the best rate to consumers.
Further to this, we have improved our ability to perform used
equity mining, to determine the optimal time to approach customers
to maximise the equity in their current vehicle to facilitate a
replacement vehicle sale. Since the launch of our initiatives to
drive F&I, we have seen an improvement of c.700bps in the
penetration rate, driving approximately GBP10m of incremental gross
profit. We expect F&I penetration to be more challenging in
FY23 as interest rate changes have resulted in higher APR's being
passed through to consumers. However, we continue to develop our
digital initiatives, utilising Pinewood Technologies, to be able to
offer a menu-based approach to customers offering packages
representing 'good', 'better' and 'best' options and a range of
stand-alone insurance product sales to help mitigate the more
challenging market conditions.
We continued to develop our Group-wide vehicle acquisition,
management and pricing platform during the second half of FY22,
which is focussed on optimising the speed at which we are able to
turn vehicle inventory and maximising the margin we can achieve on
used vehicles. New functionality allowed us to respond quicker to
market-based pricing changes, augmented with our internal
indicators utilising our data management tools. We have improved
our online and in-store part-exchange and sell-your-car ("SYC")
journey to include guaranteed customer valuations. During the year,
the Group acquired the 'Sellyourcar.com' domain name and developed
a new website and proposition, using our pricing and part-exchange
management tools, in order to maximise the volume of cars acquired
directly from customers. Typically, SYC and part exchange cars,
directly sourced from the customer, allow us to achieve higher
margins of c.GBP500 per unit, when compared to cars sourced from
auction. During FY23 we will further develop this proposition with
the ambition to double the number of cars we acquire through the
SYC channel from c.7% of sales in 2022 to c.15% in 2023.
Drive operational excellence and best practice
We continue to develop new processes and products to support our
used car margin performance. Our programme to target vehicle
preparation efficiency progressed well in FY22 with the
introduction of process automation to reduce reliance on vehicles
being brought into stock manually and speed up the availability to
customers. We also improved the allocation of stock across the
Group network to get the right cars, to the right location,
quicker.
We also delivered improvements in our Aftersales performance
with revenue increasing by 4.7% in the year, 7.5% on a
like-for-like basis. A number of operational improvements such as a
revised technician incentive structure and revised local reporting
have underpinned this. In addition, we introduced new functionality
offering customers interest-free finance on aftersales work which
is performing well, and driving higher penetration into the older
vehicle car parc. Our revised guarantee product suite introduced in
2021 which introduced new product options, differential pricing and
operational procedures has seen our penetration of extended
guarantee sales on eligible vehicles rising from 38% pre-pandemic
to 43% in FY22, driving approximately GBP2m of incremental profit
in FY22. During FY23, we will refine the product offering further
to present a dynamic pricing model which will adapt the price of
the product by make, model and derivative.
Operate from a lean and efficient cost base
Costs increased materially during FY22 (see financial review
below), driven by the combination of the withdrawal of government
support, our planned investment into marketing and the
well-publicised levels of inflation which impacted across the
cost-base, and in particular in labour and utility costs. However,
the Group continued to seek opportunities to mitigate cash costs
where possible in FY22. We completed a major property negotiation
with our largest landlord (c.70 properties in total) that resulted
in lease extensions at current rent levels at c.30 locations and
the return of 12 vacant properties to the landlord, with the
remaining sites to be reassessed as their leases expire. This deal
will deliver an annual cash saving in excess of GBP3.5m across rent
and rates at the returned sites. Over the past three years the
Group has significantly reduced its vacant leased property exposure
through a combination of surrenders, assignments, sublets and
expiries, delivering over GBP7.0m in annualised rent savings and a
further GBP3.0m in rates savings.
Enhance new car representation - New partnership with BYD
With our HY results in September we announced that Pendragon
would be a launch partner for BYD, the world's largest new energy
vehicle manufacturer. We continued to develop our dialogue with BYD
during the second-half of FY22 ahead of their launch in 2023. At
launch in March, Pendragon initially opened two locations in Milton
Keynes and Birmingham, with plans for up to a further six locations
to be opened during the remainder of FY23. We will continue to
explore strategic options for expansion.
Strategy delivery - Disrupt used cars
We believe the UK is the most attractive used vehicle market
globally, with a ratio of over three used vehicles sold for every
new one. The overall market for used cars is around seven million
cars sold per annum. Based on the desired age and mileage profile
for our target market, we believe there is an addressable market
for Pendragon of around three million cars per annum, which is
larger than the total new car market.
To capitalise on this opportunity, we will deliver:
1. Brand relaunch of the used car proposition
2. Differentiated value proposition
3. Build flexible acquisition & fulfilment capability and scale physical estate
Brand relaunch & Differentiate value proposition
Following the significant changes in the used car market in the
last few years, we have transformed our used car strategy away from
a standalone proposition to a Group-wide omni-channel hybrid
proposition. During 2022 we made significant developments to our
digital capabilities, enabling us to develop a new-look website on
CarStore.com displaying the majority of all group used vehicle
stock. This capability has enabled us to list approximately 12,000
used vehicles on a single transactional website. This proposition
allows us to take a market-place approach to our Group used
inventory, with consistent presentation with revised image
standards. CarStore.com is the market leading digital proposition,
supported by our extensive store network providing us with a truly
omni-channel advantage, and with greater scale than pureplay
digital competitors. Our acquisition of the Sellyourcar.com website
will provide us with greater opportunities to source used car stock
to support our proposition in a market that we anticipate will
continue to be constrained for supply during 2023.
In addition, we delivered a full launch of this new proposition
supported by a cross-channel marketing campaign. This campaign
included new content advertising across prime-time TV slots in
order to drive awareness of the repositioned brand. We have seen a
strong increase in digital traffic to CarStore.com since the launch
of these campaigns, with traffic up 53% year on year, supporting
new customer acquisition. We have also seen very strong customer
scores on Trustpilot and reputation.com, with Car Store scoring
4.6/5.0 on Trustpilot and 4.7/5.0 on reputation.com. Following the
successful launch of the new proposition and advertising campaigns,
we saw our used car volumes outperform the wider market by
approximately 6%, or approximately 2,750 units in the second half
of FY22.
Build flexible acquisition & fulfilment capability and scale
physical estate
The first concept store to launch our physical proposition was
formally launched in Chesterfield during April and the new store
format has been very well received by customers and now acts as a
blueprint for further expansion. During November we opened our
second new format store in Warrington which holds approximately 400
vehicles on site and will further support the digital proposition.
In addition, we are scaling our small-format locations, CarStore
Direct, with a further 10 new locations introduced during FY22
across the UK. These new format stores facilitate our Sell-your-car
proposition and offer greater choice for click and collect
fulfilment by providing convenient, small footprint locations,
unlocking potential new local markets for Car Store to enter. We
will continue to look for opportunities to expand our physical
estate, and are in advanced discussions about a number of locations
for full-scale new format stores: we expect to complete at least
one addition during FY23.
Operating Review
The UK Motor division performed well during the year despite the
backdrop of ongoing supply chain issues impacting new and used
vehicle supply as well as there being various inflationary cost
pressures, particularly payroll costs. The overall new car market
was down 2.0% in the year, with the new market down 11.9% in H1 but
up 10.1% in H2, showing some early signs of new car supply issues
easing. The Group has built a strong order bank across its brands,
with a strong order bank of over 20,000 orders as at the end of
December, which it expects to deliver when supply eases, and in the
short-term is focussed on achieving higher margins on the vehicles
that are supplied. The shortage in new car supply since 2020 is now
also impacting the used car market, with a significant reduction in
new vehicles manufactured in this period that would ordinarily flow
into the important 'nearly new' sector now not being available.
New Car volumes were down 6.1% on a like-for-like basis (total
reported down 6.7%), slightly below the total market decrease of
2.0%, driven by a combination of brand representation and product
mix. Our focus on maximising margins through reduced levels of
vehicle discounting combined with OEMs focussing on production of
higher margin models resulted in new GPUs of GBP2,719, up 42.3% or
GBP808 compared to 2021.
Used Car volumes were down 8.7% on a like-for-like basis (total
reported down 9.1%), with the total market down 8.5%. This
performance was driven by a number of different dynamics through
the year. During the first-half we were comparing against a strong
H1 in 2021, where our online capabilities allowed us to outperform
the market during the lock-downs of 2021, resulting in a reduction
in sales of 14% against a market down 8.3%. In the second-half, we
relaunched the Car Store website as described above, which together
with our revised marketing activity resulted in H2 performance of a
sales reduction of just 2.2% against the market down 8.7%. Used
margins were at record levels during parts of 2021, with used GPUs
of GBP1,670, and margins over GBP2,000 in H2 2021. As anticipated,
margins declined from these unprecedented levels in 2022, but
through the operational initiatives detailed above, used margins
were maintained at strong levels, with a used GPU of GBP1,607 in
2022, still significantly higher than the GBP1,169 and GBP712 in
2020 and 2019 respectively, and over GBP600 higher than the average
between 2011 and 2018.
Aftersales revenue also grew in the period, up by 7.5% on a
like-for-like basis (total reported up 4.7%), which was driven by
the operational improvements detailed above. The aftersales gross
margin of 50.5% is in line with 2021 despite the impact of
technician pay inflation on cost of sales, resulting in an
additional GBP6.3m of gross profit year on year.
Financial Review
Revenue increased by 6.1% to GBP3,536.2m in FY22 (7.0% on a
like-for-like basis), as although new and used car volumes were
down, the average selling price of vehicles increased.
Gross profit grew by 4.6% to GBP415.7m in FY22 (5.6% on a
like-for-like basis). The increase in gross profit was principally
driven by improvements in new cars, with volume declines more than
offset by significantly stronger GPUs of GBP2,719 (FY21: GBP1,911),
together with higher levels of aftersales gross margin. These
increases were partially offset by the anticipated reduction in
used car GPUs and as well as lower volumes as described above.
Underlying operating costs have increased by 11.8% (13.3% on a
like-for-like basis). GBP12.2m of the GBP36.7m increase in
operating expenses was as a result of the non-repeat of government
support received in FY21 and c.GBP10m of the increase was as a
result of increased marketing expenditure, primarily on the Car
Store re-brand. Other inflationary cost increases, particularly in
labour costs and utilities, which combined account for
approximately 65% of the Group's total cost base, were also
impacted by a higher-than-expected impact of inflation during 2022.
These increases have been partially mitigated by a continued focus
on cost-saving initiatives.
The division recorded an underlying operating profit of GBP69.1m
(FY21: GBP87.4m) and a reported operating profit after
non-underlying items of GBP71.6m (FY21: GBP82.6m).
Software - Pinewood
Change
GBPm H1 2022 H2 2022 FY22 H1 2021 H2 2021 FY21 %
---------------------- ------- ------- ------ ------- ------- ------ ------
Revenue 12.4 13.0 25.4 12.1 12.3 24.4 4.1%
Gross Profit 11.1 11.6 22.7 11.2 11.3 22.5 0.9%
Gross margin rate 89.5% 89.2% 89.4% 92.6% 91.9% 92.2% -2.8%
Operating Expenses (5.6) (6.1) (11.7) (4.5) (5.5) (10.0) 17.0%
---------------------- ------- ------- ------ ------- ------- ------ ------
Operating Profit 5.5 5.5 11.0 6.7 5.8 12.5 -12.0%
---------------------- ------- ------- ------ ------- ------- ------ ------
Operating margin rate 44.4% 42.3% 43.3% 55.4% 47.2% 51.2% -7.9%
Revenue Change 2.5% 5.7% 4.1%
A more detailed breakdown of the Pinewood financials for FY22
can be seen below:
Pinewood segment
as a reported in
Contribution from Contribution from Pinewood PLC Share of Pendragon Pendragon Group
GBPm Pendragon external customers standalone result Group Overheads accounts
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Revenue 6.3 19.1 25.4 - 25.4
Gross Profit 5.6 17.1 22.7 - 22.7
Operating Expenses (2.1) (9.3) (11.4) (0.3) (11.7)
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Operating Profit 3.5 7.8 11.3 (0.3) 11.0
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
-- Approximately 90% of DMS revenues are recurring.
-- Strong international growth driven by expansion of the direct
sales model and new market launches.
-- Strong partnerships with strategic OEMs.
Strategy delivery - Grow and diversify Pinewood
As part of its Group strategy presentation, Pendragon announced
its plan to 'grow and diversify Pinewood'. This included the key
objectives of:
-- Growing the international user base by 80% and the total user base by 10%; and,
-- Further product extension enabling turn-key digital automotive retail solutions.
In FY22 Pinewood continued to focus on both elements of the
'grow and diversify' strategy.
Grow: international growth accelerated in H2 FY22 with an
expansion of the direct sales model in the Asia Pacific region and
new market launches in Singapore and the Middle East. The UK and
Ireland market returned to growth in H2 FY22 with net user
additions over the year.
Diversify: development of the core DMS product continues. New
products designed to support digital automotive retail are being
developed to initially benefit Pendragon and, in the longer term,
the external customer base. These developments included further
releases in the Sales+ module, functionality to allow real time
modification of the customer F&I offer and the integration of
open banking to improve payment options. Pinewood launched a
valuation tool in H2 FY22 to help power Car Store's web
capabilities and the overall valuation and pricing platform for
Pendragon used cars. In FY23, Pinewood will continue to be a key
enabler in the further functionality development of vehicle
acquisition, management and pricing platforms. In order to
facilitate this development the investment in new functionality of
the DMS platform saw development capital rise to GBP5.7m (FY21:
GBP5.0m), with c.80% of these development costs being capitalised.
In addition to the development of the DMS, investments have also
been made in platform architecture and security with greatly
expanded use of the Microsoft Azure platform.
Operating Review
Pinewood is a software business that provides Software as a
Service ("SaaS") in the UK and in a number of countries
worldwide.
The UK Dealer Management Systems (DMS) market for Franchised
Motor Dealers is estimated to be worth over GBP100 million in the
UK. Three DMS providers dominate the UK market, of which Pinewood
is one. The global DMS market which is highly fragmented, is
estimated to be worth approximately GBP2.5bn, with over 50
different DMS providers within Europe alone.
Pinewood's unique approach to the DMS market is characterised
by:
-- a single product capable of global deployment, which
simplifies future developments to the system and reduces operating
costs;
-- a feature-rich cloud-based solution, with no need for costly third-party add-ons;
-- focus on strong manufacturer partnerships and supporting dealer profitability; and
-- commitment to using the latest technology to reshape motor retail.
Pinewood was an early adopter of the SaaS business model and has
focused on developing recurring revenue streams. Around 90% of
Pinewood's DMS revenues are on a recurring basis. Whilst Pendragon
remains an important customer to Pinewood, as Pinewood has grown,
Pendragon's proportion of the Pinewood total user base has been
diluted to c.17% with intra-group charging maintained at a
competitive market rate.
During FY22, overall net user numbers increased by 4% to
c.31,700 with the expansion delivered primarily in H2 FY22. Across
Pinewood's international markets there was a 13% net increase in
user numbers to a record high of c.6,400 users. All international
markets grew user numbers in FY22 with Pinewood benefiting from
both the expansion of existing customers and new sales. Growth was
further supported by successful launches in Singapore and the
Middle Eastern market. Pinewood systems now operate in a total of
19 different countries.
In the UK & Ireland market (excluding Pendragon) there was
an increase in user numbers in FY22 to c.20,000. At H1 FY22 user
numbers had declined slightly, this trend was reversed in the
second half of the year. In H2 FY22 the number of new system
implementations accelerated, and churn fell from the elevated rates
seen during FY21. The full benefit of these user additions will be
seen on an annualised basis in the FY23 result.
Pinewood's growth benefits not just from sales to new customers
but also from the expansion of its existing customer base. In FY22
external net user churn was less than 1% and in international
markets (excluding UK & Ireland) it was negative, as the rate
at which existing customers grew users more than offset user
reductions.
There has also been good further progress in terms of OEM
support at an international level. Pinewood continues to build a
strong partnership with Volkswagen AG and Porsche, which has
enabled constructive dialogue and, in some cases, initial user
implementations with large international dealer groups in both the
European and the Asia Pacific market.
Financial Review
Total revenues increased by 4.1% to GBP25.4m compared to FY21.
International DMS recurring revenues increased by 27%, reflecting
the underlying user growth and expansion of the direct sales model
in the European and Asia Pacific markets.
UK & Ireland DMS recurring revenues fell slightly in the
period, driven by the annualised impact of two exceptional customer
exits at the end of the prior year and reduced user numbers in H1
FY22. User growth returned by the end of FY22 leaving Pinewood well
placed for growth in its home market heading into FY23.
In addition to recurring revenues, there was a 9% increase in
external DMS transactional charges, system training and
implementation revenues. This was driven by an increase in system
implementations in the UK and Ireland in H2 FY22.
Gross profit increased by 0.9% to GBP22.7m. There was a
reduction in gross margins driven by the expanded use of the
Microsoft Azure platform. This transition is a one-off event, and
the related cost increase will not recur in future periods.
Operating costs increased by GBP1.7m or 17.0% compared to FY21.
In FY22 the amortisation charge of GBP4.2m (FY21: GBP3.7m) made up
over a third of operating costs. Alongside rising personnel costs,
the higher amortisation charge drove the operating cost increase,
both reflecting increased investment in the development of the DMS
platform and Pinewood's operational capabilities. Further cost
increases arose from higher travel expenditure following the
reduction in Covid-19 restrictions, as well as higher energy
costs.
As a result of these movements, underlying operating profit was
GBP11.0m, a reduction of 12% compared to FY21.
Leasing - Pendragon Vehicle Management
Change
GBPm H1 2022 H2 2022 FY22 H1 2021 H2 2021 FY21 %
---------------------- ------- ------- ------ ------- ------- ----- ------
Revenue 42.9 40.8 83.7 49.0 40.9 89.9 -6.9%
Gross Profit 12.5 11.9 24.4 10.5 11.5 22.0 10.9%
Gross margin rate 29.1% 29.2% 29.2% 21.4% 28.1% 24.5% 4.7%
Operating Expenses (2.3) (2.2) (4.5) (2.4) (2.1) (4.5) -
---------------------- ------- ------- ------ ------- ------- ----- ------
Operating Profit 10.2 9.7 19.9 8.1 9.4 17.5 13.7%
---------------------- ------- ------- ------ ------- ------- ----- ------
Operating margin rate 23.8% 23.8% 23.8% 16.5% 23.0% 19.5% 4.3%
Revenue Change (12.4%) (0.2%) (6.9%)
Operating Review
Pendragon Vehicle Management ("PVM"), a vehicle leasing
business, offers a complete range of fleet leasing and contract
hire solutions. Its customers represent all business sectors with
varied fleet sizes. The fleet of vehicles is financed through third
party asset funders which results in a high return on capital.
The overall decrease in revenue compared to FY21 was due to a
reduction in the exceptionally high level of disposals of
de-fleeted vehicles in H1 2022. However, increased demand for used
vehicles due to continued supply shortages of new vehicles resulted
in higher residual values being achieved on disposal, which led to
the increase in gross profit. Total revenue in H2 2022 was 0.2%
lower than H2 2021.
PVM's fleet continues to experience a rapid change in the
powertrains demanded by customers in the corporate car sector as
employers improve their green footprint whilst providing their
associates with low CO2 vehicles. This, coupled with manufacturer
supply constraints, has resulted in new vehicle delivery lead times
increasing significantly compared to lead times prior to the
pandemic. PVM has a strong order bank, with over 2,100 customer
vehicles on order as at the end of December, which will support
growth in the fleet when supply constraints ease.
Financial Review
Revenue decreased by 6.9%, due to the slightly reduced turnover
on disposals. Gross profit increased by 10.9% due to the strong
residual values as described above. Operating expenses were in line
with last year at GBP4.5m and operating profit increased by 13.7%
to GBP19.9m (FY21: GBP17.5m).
Industry Insight
New Car Market
The UK new car market was 1,614k vehicles in FY22 which was a
decrease of 2.0% over the prior year, reflecting the continued
shortfall in supply as a result of global microchip shortages. The
UK new car market is divided into two markets, retail and fleet.
The retail market is the direct selling of vehicle units to
individual customers and operates at a higher margin than the fleet
market. The retail market is the key market opportunity for the
Group and represents 51% of the total market in the year. The fleet
market represents the sale of multiple vehicles to businesses, and
is predominately transacted at a lower margin and consumes higher
levels of working capital than retail, and represents 49% of the
market in the year.
Used Car Market
In FY22, there were 6.6m used cars sold in the UK, a decrease of
8.3% on the prior year. This represents a market opportunity that
is more than four times the size by volume of the new car market.
The used market is more stable than the new vehicle sector, being
less affected by fluctuations in the UK economy and providing a
more reliable supply chain than the new market.
Aftersales Market
The main determinant of the aftersales market is the number of
vehicles on the road, known as the 'car parc'. The car parc in the
UK has risen slightly to 35.5m vehicles at the end of FY22, a rise
of 0.6% from the end of FY21. The car parc can also be segmented
into markets representing different age groups. At the end of FY22,
around 13% of the car parc was represented by less than
three-year-old cars, around 19% by four to six-year-old cars and
68% is greater than seven-year-old cars. The demand for servicing
and repair activity is less affected than other sectors by economic
conditions, as motor vehicles require regular maintenance and
repair for safety, economy and performance reasons.
Change
UK New Car Registrations '000 2022 2021 %
--------------------------------- ------- ------- ------
Total UK Registrations 1,614.1 1,647.2 -2.0%
Group Represented* Registrations 920.2 925.1 -0.5%
* Group Represented - defined as national registrations for the
franchised brands that the Group represents as a franchised
dealer.
Underlying Net Financing Costs
Change
GBPm 2022 2021 (%)
---------------------------------------------------------------- ---- ---- ------
Interest payable on bank borrowings, senior note and loan notes 10.1 9.1 11.0%
Vehicle stocking plan interest 14.7 9.8 50.0%
Net lease interest 13.6 11.7 16.2%
Unwinding of discounts in contract hire residual values 2.5 2.7 -7.4%
Total Underlying Net Financing Costs 40.9 33.3 22.8%
---------------------------------------------------------------- ---- ---- ------
Underlying net financing costs increased by GBP7.6m to GBP40.9m.
Interest payable on bank borrowings increased from GBP9.1m to
GBP10.1m, largely driven by increases in the base interest rate.
The increase in vehicle stocking plan interest from GBP9.8m to
GBP14.7m was driven by a combination of higher bank base rates and
higher average values per unit in used cars.
The net lease interest increased from GBP11.7m to GBP13.6m,
principally due to the accounting impact of a lease regear with our
largest property partner in which 30 prime leaseholds were extended
until 2042 with the Group benefitting from reductions in rent
payable from the agreement to hand-back 12 vacant properties to the
landlord in exchange for the lease extensions. The transaction has
resulted in an increase in the net lease liability and consequently
the net interest charge has risen by GBP3.0m year on year (though
this has been offset by a reduction in the depreciation charge on
these properties of GBP2.7m due to the amortisation period being
extended). This increase in the lease interest has been partially
offset by a reduction in the lease interest charge as a result of
lease terminations made in the previous year and the natural wind
down of lease liabilities as they are paid off.
Non-underlying Items
GBPm 2022 2021
--------------------------------------------- ----- -----
Impairment of goodwill (3.6) -
Impairment of property, plant and equipment (1.0) -
Impairment of right of use assets (0.2) (9.6)
Termination and severance costs (0.2) (1.8)
Aborted transaction related expenses (0.4) -
Gains on the sale of businesses and property 7.9 2.7
Pension costs (0.3) (1.0)
Refinancing costs (2.6) -
Total non-underlying items before tax (0.4) (9.7)
--------------------------------------------- ----- -----
Non-underlying items in tax 1.4 2.2
--------------------------------------------- ----- -----
Total non-underlying items after tax 1.0 (7.5)
--------------------------------------------- ----- -----
Non-underlying income and expenses are items that are not
incurred in the normal course of business and are sufficiently
significant and/or irregular to impact the underlying trends in the
business. During the year the Group has recognised a net charge of
GBP0.4m of pre-tax non-underlying items compared to a charge of
GBP9.7m in 2021.
An impairment of goodwill charge of GBP3.6m relates to the
impairment of acquisition goodwill on the disposal of the truck
brand, DAF, as a part of a sale to a specialist truck operator.
During the year, approaches and subsequent bids were made by two
separate external parties to purchase the Company. As a
consequence, aborted transaction costs in respect of professional
and advisory fees of GBP0.4m were incurred, in the management of
these processes.
Gains of GBP7.9m on the sale of business and property, plant and
equipment mainly arise from the disposal of certain UK freehold
properties.
Pension costs of GBP0.3m represent the interest charge on
pension scheme obligations (FY21: GBP1.0m).
Refinancing costs of GBP2.6m relate to the costs of the 2022
Group refinancing exercise, and principally comprised of early
repayment charges on the previous private placement loan notes.
Capital Allocation and dividend
Adjusted Net Debt* has improved by GBP26.4m from an adjusted net
debt of GBP49.7m at 31 December 2021 to adjusted net debt of
GBP23.3m at 31 December 2022. The adjusted net debt to underlying
EBITDA ratio* was 0.1x for the rolling 12 months to FY22. The
adjusted net debt to underlying EBITDA ratio has moved from 0.3x at
FY 2021, principally as a result of the strong trading performance
in the year, combined with the disposal proceeds from the sale of
property received.
Whilst the Group is not proposing a final dividend for 2022,
following the successful reduction of debt in line with the Group's
stated strategy, the Board is reviewing its capital allocation
priorities including the potential for return of capital to
shareholders either through dividend or share buybacks in due
course.
* These are Alternative Performance Measures (APMs), see page 31
below for more detail.
Cash Flow
The following table summarises the cash flows and adjusted net
debt of the Group for the twelve-month periods ended 31 December
2022 and 31 December 2021 as follows:
2022 2021
GBPm GBPm
-------------------------------------------------------- ------ -------
Underlying Operating Profit 98.5 116.3
Depreciation and Amortisation 33.5 36.1
Share Based Payments 3.3 2.9
Non-underlying Items (0.4) (1.8)
Contribution into defined benefit pension scheme (13.1) (12.8)
Working Capital and Contract Hire Vehicle Movements (1) (5.1) (41.2)
Cash Generated from Operations 116.7 99.5
Capital Expenditure (43.7) (17.7)
Business and Property Disposals 16.6 31.7
-------------------------------------------------------- ------ -------
Net Capital (Expenditure) / Income (2) (27.1) 14.0
Tax Paid (1.4) (7.1)
Interest Paid excluding lease interest (3) (22.9) (17.5)
Lease Payments & Receipts (4) (33.9) (36.7)
Non underlying finance cost (2.6) -
Other (2.4) (1.5)
-------------------------------------------------------- ------ -------
Decrease in Adjusted Net Debt 26.4 50.7
Opening Adjusted Net Debt (49.7) (100.4)
Closing Adjusted Net Debt (23.3) (49.7)
-------------------------------------------------------- ------ -------
(1) being the change in trade and other receivables, change in
trade and other payables, change in stocking loans and movement in
contract hire vehicle balances.
(2) being the proceeds from sale of businesses, purchase of
property, plant, equipment and intangible assets and proceeds from
sale of property, plant, equipment and intangible assets.
(3) being bank and stocking interest paid.
(4) being receipts of lease receivables and payment of lease
liabilities including lease interest paid and received.
Reconciliation to Consolidated Cash Flow Statement
2022 2021
GBPm GBPm
------------------------------------------------------------------------------ ------ ------
Net cash from operating activities 76.1 63.2
Net capital (expenditure) / income (27.1) 14.0
Receipt of lease receivables 2.0 2.2
Net cash (outflow) / inflow from investing activities (25.1) 16.2
Financing cash flows as included above:
Payment of lease liabilities (22.2) (27.2)
Payment to Employee Benefit Trust (EBT) (0.4) -
Financing cash flows not included above relating to loans:
Repayment of loans (90.5) (88.8)
Proceeds from issue of loans (net of directly attributable transaction costs) 93.8 18.7
Net cash outflow from financing activities (19.3) (97.3)
Cash generated from operations was an inflow of GBP116.7m
compared to an inflow of GBP99.5m in 2021. Although underlying
operating profit decreased from GBP116.3m in 2021 to GBP98.5m in
2022, the working capital cash outflow of GBP5.1m was lower than
the 2021 working capital cash outflow of GBP41.2m, resulting in an
increase in cash generated from operations. The working capital
outflow of GBP5.1m was driven primarily by the non-funded element
of the increase in used inventory.
The net capital expenditure of GBP27.1m (2021: inflow of
GBP14.0m) comprised capital expenditure of GBP43.7m partially
offset by business and property disposals of GBP16.6m. Capital
expenditure of GBP43.7m (2021: GBP17.7m) increased year on year,
driven by investments into improved dealership facilities at a
number of brands including BMW, Mercedes, Porsche and Jaguar Land
Rover as well as investment into our new Car Store developments in
Warrington and Chesterfield, together with increased investment
into Pinewood's software development. Business and property
disposals were principally driven by disposal of the DAF trucks
dealerships for GBP2.9m and the disposal of a vacant property in St
Albans for GBP10.5m.
Lease payments and receipts reduced by GBP2.8m to GBP33.9m, with
the decrease primarily resulting from a reduction in the number of
leasehold properties as a result of the full-year impact of
previously announced lease exits and a further benefit resulting
from the impact of a lease regear as explained previously on page
16 and which delivered a c.GBP2.0m cash benefit in rent and rate
savings in 2022 and will deliver a saving in excess of GBP3.5m on a
full-year basis. This was partially offset by the impact of
inflationary rent increases.
Non underlying finance costs of GBP2.6m are the cash costs of
the 2022 Group refinancing exercise, and are principally comprised
of early repayment charges on the previous private placement loan
notes.
Balance Sheet
The following table summarises the balance sheet of the Group at
31 December 2022 and 31 December 2021.
Balance Sheet (GBPm) Dec-22 Dec-21
Property 233.7 217.6
Plant & Equipment 26.8 24.2
Goodwill 144.6 150.3
Intangible Assets 12.4 11.1
Right of Use Assets - property 130.5 126.5
Contract hire vehicle assets 124.9 131.2
Inventories 620.3 512.8
Receivables(1) 132.9 118.9
Net Assets Held as for Sale(2) 6.1 10.4
Net Tax Balance(4) 14.9 26.6
---------------------------------- ---------- ----------
Total Assets 1,447.1 1,329.6
---------------------------------- ---------- ----------
Payables(3) (810.7) (689.1)
Lease Liabilities (217.9) (222.1)
Contract hire vehicle liabilities (111.6) (119.5)
Retirement Benefit Obligations (2.6) (23.6)
Adjusted Net Debt(5) (23.3) (49.7)
---------------------------------- ---------- ----------
Total Liabilities (1,166.1) (1,104.0)
---------------------------------- ---------- ----------
Shareholders' Funds 281.0 225.6
---------------------------------- ---------- ----------
(1 being trade and other receivables and finance lease
receivables 2 being assets classified as held for sale and
liabilities directly associated with assets held for sale 3 being
trade and other payables less contract hire vehicle liabilities 4
being deferred tax assets, current tax assets and current tax
payable 5 being cash and cash equivalents and interest bearing
loans and borrowings)
Net assets have increased from GBP225.6m at 31 December 2021 to
GBP281.0m at 31 December 2022.
At 31 December 2022, the Group had GBP233.7m (GBP364.2m
including IFRS16 right of use assets) of land and property assets
(31 December 2021: GBP217.6m (GBP344.1m including IFRS16 right of
use assets)). The increase in property principally reflects capital
investments in a number of dealership improvement programmes in
both OEM and Car Store locations as explained with the cash flow
statement, partially offset by disposal of excess property,
together with depreciation.
Stock has increased by GBP107.5m to GBP620.3m (31 December 2021:
GBP512.8m), which is a result of an increase of c.GBP44m in the
level of new car inventory held at 31 December 2021 prior to
delivery, and an increase of c.GBP63m in used car inventory. The
increase in used car inventory is driven by a combination of an
increase in the number of cars in stock (c.GBP22m) and an increase
in average value of cars in stock (c.GBP41m). New car inventory
remains significantly below historic records as a result of the
ongoing supply shortages, with new car inventory approximately
GBP170m lower than as at 31 December 2020.
The increase in payables of GBP121.6m to GBP810.7m (31 December
2021: GBP689.1m) principally relates to the higher vehicle
creditors as a result of the increase in new and used vehicle
inventory.
Pension
The net liability for defined benefit pension scheme obligations
has improved from a GBP23.6m liability at FY21 to a GBP2.6m
liability at FY22. The improvement of GBP21.0m comprises of
contributions of GBP13.1m, a net interest expense recognised in the
income statement of GBP0.3m and a net actuarial gain of GBP8.2m.
The net actuarial gain has arisen due in part to changes in the
principal assumptions used in the valuation of the scheme's assets
and liabilities and also the change in value of the assets held
over the year. The Group contributed GBP13.1m to the Pension Scheme
in the period in line with the Group's funding commitment.
The triennial valuation of the company's pension scheme as at 31
December 2021 was completed during 2022. The valuation concluded
that the actuarial funding deficit had reduced from GBP117m as at
31 December 2018 to GBP33m as at 31 December 2021. The company and
trustees agreed to continue the current level of contributions into
the pension scheme (FY22: GBP13.1m) until the end of 2023, at which
point the actuarial deficit is expected to be met. Following this,
the company and trustees agreed to move towards a long-term funding
target and continue contributions at a reduced level of
contribution of GBP3.5m p.a. until 31 December 2026, at which point
the scheme is expected to be fully funded on a long-term funding
target basis.
Revolving Credit Facility (RCF)
In March 2022 the Group refinanced its GBP175m RCF and GBP60m
Private Placement, both of which were due to mature in March 2023.
The new facilities comprise a 5-year, amortising, GBP100m Term
Loan, maturing March 2027, with the Group's existing Private
Placement lender plus a new lender, and a GBP75m 3+1+1 RCF with the
Group's existing bankers, maturing March 2025, with extensions
available at the election of lenders to March 2026 and then March
2027.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Continuing operations Discontinued operations *
Note GBPm GBPm GBPm GBPm
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Revenue 3,620.0 3,421.3 28.6 3,449.9
Cost of sales (3,162.8) (2,984.0) (24.6) (3,008.6)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Gross profit 457.2 437.3 4.0 441.3
Operating expenses (363.9) (326.5) (9.9) (336.4)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Operating profit/(loss) before
other income 93.3 110.8 (5.9) 104.9
Other income - gains on the sale
of businesses and property,
plant and equipment 7.7 1.8 0.9 2.7
Operating profit/(loss) 101.0 112.6 (5.0) 107.6
Analysed as:
-------------------------------- ---- --------- --------------------- ------------------------- ----------
Underlying operating
profit/(loss) 98.5 117.4 (1.1) 116.3
Non-underlying operating
profit/(loss) 2 2.5 (4.8) (3.9) (8.7)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Finance expense (44.8) (34.9) (0.3) (35.2)
Finance income 1.0 0.9 - 0.9
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Net finance costs (43.8) (34.0) (0.3) (34.3)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Analysed as:
-------------------------------- ---- --------- --------------------- ------------------------- ----------
Underlying net finance costs (40.9) (33.0) (0.3) (33.3)
Non-underlying net finance costs 2 (2.9) (1.0) - (1.0)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Profit/(loss) before taxation 57.2 78.6 (5.3) 73.3
Analysed as:
-------------------------------- ---- --------- --------------------- ------------------------- ----------
Underlying profit before taxation 57.6 84.4 (1.4) 83.0
Non-underlying (loss) before
taxation 2 (0.4) (5.8) (3.9) (9.7)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Income tax (expense)/credit (11.7) (13.1) 1.3 (11.8)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Profit/(loss) for the year 45.5 65.5 (4.0) 61.5
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Analysed as:
-------------------------------- ---- --------- --------------------- ------------------------- ----------
Underlying profit/(loss) after
taxation 44.5 70.0 (1.0) 69.0
Non-underlying profit/(loss)
after taxation 2 1.0 (4.5) (3.0) (7.5)
--------------------------------- ---- --------- --------------------- ------------------------- ----------
Earnings per share
Basic earnings per share ** 3.3p 4.7p (0.3p) 4.4p
Diluted earnings per share ** 3.1p 4.6p (0.3p) 4.3p
* The discontinued operations in 2021 are in respect of the Group's US business.
** The Basic earnings per share and diluted earnings per share measure for the current year
apply to continuing and total operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
2022 2021
GBPm GBPm
------------------------------------------------------------------------------------------- ----- -----
Profit for the year 45.5 61.5
-------------------------------------------------------------------------------------------- ----- -----
Other comprehensive income
Items that will never be reclassified to profit and loss:
Defined benefit plan remeasurement gains 8.2 40.1
Income tax relating to defined benefit plan remeasurement gains (1.6) (6.9)
-------------------------------------------------------------------------------------------- ----- -----
6.6 33.2
Items that are or may be reclassified to profit and loss:
Foreign currency translation differences of foreign operations 0.5 -
0.5 -
------------------------------------------------------------------------------------------- ----- -----
Other comprehensive income for the year, net of tax 7.1 33.2
-------------------------------------------------------------------------------------------- ----- -----
Total comprehensive income for the year 52.6 94.7
-------------------------------------------------------------------------------------------- ----- -----
Total comprehensive income for the period attributable to equity shareholders of the Group
arises from:
Continuing operations 52.6 98.7
Discontinued operations - (4.0)
-------------------------------------------------------------------------------------------- ----- -----
52.6 94.7
------------------------------------------------------------------------------------------- ----- -----
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Share Share Capital redemption Other Translation
capital premium reserve reserves reserve Retained earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- ------------------ --------- ------------------ ----------------- -----
Balance at 1
January 2022 69.9 56.8 5.6 12.6 - 80.7 225.6
Total
comprehensive
income for 2022
Profit for the year - - - - - 45.5 45.5
Other comprehensive
income for the
year, net of tax - - - - 0.5 6.6 7.1
------------------- -------- -------- ------------------ --------- ------------------ ----------------- -----
Total comprehensive
income for the
year - - - - 0.5 52.1 52.6
Share based
payments - - - - - 3.3 3.3
Income tax relating
to share based
payments - - - - - (0.1) (0.1)
Own shares issued
by EBT - - - - - 0.1 0.1
Own shares
purchased by EBT - - - - - (0.5) (0.5)
------------------- -------- -------- ------------------ --------- ------------------ ----------------- -----
Balance at 31
December 2022 69.9 56.8 5.6 12.6 0.5 135.6 281.0
------------------- -------- -------- ------------------ --------- ------------------ ----------------- -----
Balance at 1
January 2021 69.9 56.8 5.6 12.6 (1.0) (17.2) 126.7
------------------- -------- -------- ------------------ --------- ------------------ ----------------- -----
Total
comprehensive
income for 2021
Profit for the year - - - - - 61.5 61.5
Translation
differences taken
to profit and loss
on termination of
operation - - - - 1.0 - 1.0
Other comprehensive
income for the
year, net of tax - - - - - 33.2 33.2
------------------- -------- -------- ------------------ --------- ------------------ ----------------- -----
Total comprehensive
income for the
year - - - - 1.0 94.7 95.7
Share based
payments - - - - - 2.9 2.9
Income tax relating
to share based
payments - - - - - 0.3 0.3
Balance at 31
December 2021 69.9 56.8 5.6 12.6 - 80.7 225.6
------------------- -------- -------- ------------------ --------- ------------------ ----------------- -----
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2022
Restated see note 1
2022 2021
GBPm GBPm
---------------------------------------------------------------- ------------ -------------------
Non-current assets
Property, plant and equipment 515.9 499.5
Goodwill 144.6 150.3
Other intangible assets 12.4 11.1
Finance lease receivables 14.8 15.5
Deferred tax assets 11.6 22.1
-------------------------------------------------------------------- ------------ -------------------
Total non-current assets 699.3 698.5
-------------------------------------------------------------------- ------------ -------------------
Current assets
Inventories 620.3 512.8
Trade and other receivables 115.7 101.3
Finance lease receivables 2.4 2.1
Current tax assets 3.3 4.5
Cash and cash equivalents 171.9 200.1
Assets classified as held for sale 6.1 10.4
-------------------------------------------------------------------- ------------ -------------------
Total current assets 919.7 831.2
Total assets 1,619.0 1,529.7
-------------------------------------------------------------------- ------------ -------------------
Current liabilities
Bank overdraft ( 102.5) (162.5)
Interest bearing loans and borrowings ( 1.7) -
Lease liabilities ( 20.0) (26.7)
Trade and other payables ( 8 12.0 ) (692.7)
Deferred income (38.2) (37.2)
Total current liabilities (9 74.4 ) (919.1)
-------------------------------------------------------------------- ------------ -------------------
Non-current liabilities
Interest bearing loans and borrowings (9 1.0 ) (87.3)
Lease liabilities (197.9) (195.4)
Trade and other payables (35.7) (41.9)
Deferred income (36.4) (36.8)
Retirement benefit obligations (2.6) (23.6)
Total non-current liabilities (363.6) (385.0)
-------------------------------------------------------------------- ------------ -------------------
Total liabilities ( 1,3 38.0 ) (1,304.1)
-------------------------------------------------------------------- ------------ -------------------
Net assets 281.0 225.6
-------------------------------------------------------------------- ------------ -------------------
Capital and reserves
Called up share capital 6 9.9 69.9
Share premium account 5 6.8 56.8
Capital redemption reserve 5 .6 5.6
Other reserves 1 2.6 12.6
Translation reserve 0 .5 -
Retained earnings 135.6 80.7
Total equity attributable to equity shareholders of the Company 281.0 225.6
-------------------------------------------------------------------- ------------ -------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
2022 2021
GBPm GBPm
------------------------------------------------------------------------------ ------- -------
Cash flows from operating activities
Profit for the year 45.5 61.5
Adjustment for taxation 11.7 11.8
Adjustment for net financing expense 43.8 34.3
------------------------------------------------------------------------------- ------- -------
101.0 107.6
Depreciation and amortisation 33.5 36.1
Share based payments 3.3 2.9
Profit on sale of business and property, plant and equipment (7.7) (2.7)
Impairment of goodwill 3.6 -
Impairment of property, plant and equipment 1.2 9.6
Contribution into defined benefit pension scheme (13.1) (12.8)
Changes in inventories (119.8) 107.8
Changes in trade and other receivables (15.2) (1.1)
Changes in trade and other payables 150.8 (111.1)
Movement in contract hire vehicle balances (20.9) (36.8)
------------------------------------------------------------------------------- ------- -------
Cash generated from operations 116.7 99.5
Taxation paid (1.4) (7.1)
Bank and stocking interest paid (25.5) (17.5)
Lease interest paid (14.7) (12.6)
Finance lease interest received 1.0 0.9
Net cash from operating activities 76.1 63.2
------------------------------------------------------------------------------- ------- -------
Cash flows from investing activities
Proceeds from sale of business 3.9 27.2
Purchase of property, plant, equipment and intangible assets (44.3) (18.6)
Proceeds from sale of property, plant, equipment and intangible assets 13.3 5.4
Receipt of lease receivables 2.0 2.2
Net cash (used in)/from investing activities (25.1) 16.2
------------------------------------------------------------------------------- ------- -------
Cash flows from financing activities
Payment of lease liabilities (22.2) (27.2)
Repayment of loans (90.5) (88.8)
Proceeds from issue of loans (net of directly attributable transaction costs) 93.8 18.7
Disposal of shares by EBT 0.1 -
Purchase of shares by EBT (0.5) -
Net cash outflow from financing activities (19.3) (97.3)
------------------------------------------------------------------------------- ------- -------
Net increase/(decrease) in cash and cash equivalents 31.7 (17.9)
Cash and cash equivalents at 1 January 37.6 56.0
Effects of exchange rate changes on cash held 0.1 (0.5)
Cash and cash equivalents at 31 December 69.4 37.6
------------------------------------------------------------------------------- ------- -------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN ADJUSTED NET
DEBT
2022 2021
GBPm GBPm
------------------------------------------------------------------------------- ------ -------
Net increase/(decrease) in cash and cash equivalents 31.7 (17.9)
Repayment of loans 90.5 88.8
Proceeds from issue of loans (net of directly attributable transaction costs) (93.8) (18.7)
Non-cash movements (2.0) (1.5)
-------------------------------------------------------------------------------- ------ -------
Decrease in adjusted net debt in the year 26.4 50.7
Opening adjusted net debt (49.7) (100.4)
-------------------------------------------------------------------------------- ------ -------
Closing adjusted net debt (23.3) (49.7)
-------------------------------------------------------------------------------- ------ -------
Note: The reconciliation of net cash flow to movement in adjusted net debt is not a primary
statement and does not form part of the consolidated cash flow statement but forms part of
the notes to the financial statements. Adjusted net debt is defined in note 6.
NOTES
1. Basis of Preparation
The Group summary financial statements have been prepared and
approved by the directors in accordance with international
accounting standards being the International Financial Reporting
Standards as adopted by the UK ("adopted IFRS").
The summary financial statements are presented in millions of UK
pounds, rounded to the nearest GBP0.1m. They have been prepared
under the historical cost convention except for certain financial
instruments which are stated at their fair value. In addition,
non-current assets classified as held for sale are measured at the
lower of their carrying amount and fair value less costs to
sell.
The preparation of summary financial statements in conformity
with adopted IFRSs requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the
date of the summary financial statements and the reported amounts
of revenues and expenses during the reporting year. Although these
estimates are based on management's best knowledge of the amount,
events or actions, actual results ultimately may differ from those
estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
Going concern
Notwithstanding net current liabilities of GBP54.7m as at 31
December 2022 for the Group, the Directors are, at the time of
approving the financial statements, satisfied that the Group and
Company has adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue to adopt the going
concern basis of accounting in preparing the financial statements.
The Directors have considered the potential impact of a
macro-economic downturn, a market correction in used pricing and
shortfalls in both new and used car supply resulting from shortages
in microchips impacting manufacturing.
The Group meets its day-to-day working capital requirements from
a revolving credit facility of GBP75m and senior note of GBP97m
together with cash balances and a requirement for ongoing access to
rolling vehicle credit stocking facilities amounting to GBP582.7m
at 31 December 2022. The senior note is due for renewal in March
2027 and the revolving credit facility is due for renewal in March
2025, with a further two, one-year options available at the
election of lenders to March 2026 and then March 2027. The senior
note and revolving credit facility have quarterly leverage and
fixed charge covenants, as well as an absolute EBITDA covenant, a
breach of which would result in the amounts drawn becoming
repayable on demand. The Group remained compliant with its banking
covenants throughout the year to 31 December 2022.
In the context of the above, the directors have prepared cash
flow forecasts for the period to 31 March 2024 which indicate that,
taking account of reasonably possible downsides, the Group will
have sufficient funds to meet its liabilities as they fall due for
that period. The Directors have modelled scenarios as follows:
1. A base cash flow forecast. The 2023 figures in this forecast
are based on the Group's 2023 budget, which reflect current
run-rates and expected strategic improvements. The 2024 figures in
the base cash flow forecast are based on the 2023 budget with a
modest growth rate applied to gross profit and operating costs.
2. A severe, but plausible downside scenario. The directors have
also prepared a sensitised forecast which considers the impact of
certain severe but plausible downside events, when compared to the
base case. This scenario reflects a severe downturn to vehicle
volumes and margins. This considers both a worsening in economic
conditions and restricted new car supply due to manufacturing
constraints. In this scenario, capital expenditure has been reduced
to run-rate expenditure and projects committed to and the directors
have assessed that the business would operate with lower staffing
levels through the non-replacement leavers. This scenario
demonstrates that the Group would remain within its facility limits
and would retain significant headroom of liquidity covenants. This
scenario shows that the Group would also remain within its minimum
EBITDA covenant although this is dependant upon mitigating actions
referred to above.
Based on the above, the directors are confident that the Group
and Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements, and therefore the
directors believe it remains appropriate to prepare the financial
statements on a going concern basis.
Prior year adjustment
The Group has made adjustments to the presentation of the
comparative Balance Sheet. The directors have considered that the
overdraft balances of Group entities should be separately presented
gross on the Consolidated Balance Sheet, rather than netted off
against cash and cash equivalents held either by the same entity,
or other Group entities, with the same bank. As a result, the
Consolidated Balance Sheet as at 31 December 2021 has been restated
as follows.
2021 2021
as reported restatement restated
GBPm GBPm GBPm
-------------------------- ----------- ----------- --------
Current Assets
Cash and cash equivalents 37.6 162.5 200.1
Current liabilities
Bank overdraft - (162.5) (162.5)
--------------------------- ----------- ----------- --------
37.6 - 37.6
-------------------------- ----------- ----------- --------
The restatement did not result in any change to reported profit,
earnings per share, net assets or cash flows reported in the 2021
financial year.
The impact on the opening Consolidated Balance Sheet as at 31
December 2020 is as follows:
2020 2020
as reported restatement restated
GBPm GBPm GBPm
-------------------------- ----------- ----------- --------
Current Assets
Cash and cash equivalents 56.0 187.6 243.6
Current liabilities
Bank overdraft - (187.6) (187.6)
--------------------------- ----------- ----------- --------
56.0 - 56.0
-------------------------- ----------- ----------- --------
The restatement did not result in any change to reported profit,
earnings per share, net assets or cash flows reported in the 2020
financial year.
As these individual overdraft accounts are an integral part of
the Group's cash management they are still classified as cash and
cash equivalents (see note 7) in the Consolidated Cash Flow
Statement and therefore this reclassification has no effect on
total cash flows in the comparative period.
Adoption of new and revised standards
No new or amended standards and interpretations have been
adopted during the year.
IFRS 17 Insurance Contracts is effective for annual periods
beginning after 1 January 2023 and is not expected to have a
significant impact on the Group's consolidated financial
statements.
2. Non-underlying Items
Non-underlying income and expenses are items that are not
incurred in the normal course of business and are sufficiently
significant and/or irregular to impact the underlying trends in the
business.
2022 2021
GBPm GBPm
-------------------------------------------------------------------------------------- ----- ------
Within operating expenses:
Impairment of goodwill (3.6) -
Impairment of property, plant and equipment (1.0) -
Impairment of right of use assets (0.2) (9.6)
Termination of severance costs (0.2) (1.8)
Aborted transaction related expenses (0.4) -
Business closure income 0.2 -
(5.2) (11.4)
-------------------------------------------------------------------------------------- ----- ------
Within other income - gains on the sale of businesses, property, plant and equipment:
Gains on the sale of businesses 0.3 0.7
Gains on the sale of property 7.4 2.0
7.7 2.7
-------------------------------------------------------------------------------------- ----- ------
Within net finance expense:
Costs incurred on refinancing (2.6) -
Net interest on pension scheme obligations (0.3) (1.0)
--------------------------------------------------------------------------------------- ----- ------
(2.9) (1.0)
-------------------------------------------------------------------------------------- ----- ------
Total non-underlying items before tax (0.4) (9.7)
Non-underlying items in tax 1.4 2.2
--------------------------------------------------------------------------------------- ----- ------
Total non-underlying items after tax 1.0 (7.5)
--------------------------------------------------------------------------------------- ----- ------
The following amounts have been presented as non-underlying
items in these summary financial statements:
Goodwill has been reviewed for any possible impairment and as a
result of this review there was an impairment charge of GBP3.6m
made during the year (2021: GBPnil). The GBP3.6m impairment related
to the goodwill in respect of the DAF business which was classified
for sale when the Group presented its interim results at 30 June
2022, prior to its eventual sale in October 2022.
Group property, plant and equipment and assets held for sale
have been reviewed for possible impairments. As a result of this
review there was no impairment charge against assets held for sale
made during the year (2021: GBPnil) and property, plant and
equipment of GBP1.2m (of which GBP0.2m was in respect of right of
use assets) (2021: GBP9.6m all right of use assets). There were no
reversals of previous impairment charges in respect of assets held
for sale where anticipated proceeds less costs to sell have
increased over their impaired carrying values (2021: GBPnil).
There were termination and severance costs of GBP0.2m in FY22
(2021: GBP1.8m of which GBP1.3m related to the transfer of Finance
process from dealerships to a centralised shared service centre as
part of the Finance Transformation in the UK). This cost is driven
by a combination of a small number of redundancy payments and
relocation costs.
During the year approaches and subsequent bids were made by
external parties to the purchase the Company. As a consequence
professional and advisory fees of GBP0.4m were incurred in
assisting with the due diligence process undertaken by the parties.
No internal costs have been allocated against this process as
non-underlying in respect of time and resource of Group
management.
Following the disposal of the US business in 2021 a release of
an over accrued settlement resulted in a credit of GBP0.2m being
recognised in the year.
Other income consists of the profit or loss on disposal of
businesses and property, plant and equipment. This comprises a
GBP0.3m gain (2021: GBP0.7m gain in respect of discontinued
operations ) on disposals of motor vehicle dealerships during the
year, a GBP7.4m profit on sale of properties (2021: GBP2.0m). These
do not include routine transactions in relation to the disposal of
individual assets, and only relates to the disposal or closure of
motor vehicle dealerships and associated properties.
During the year, upon the successful completion of the
refinancing of the Group in March 2022, a net loss of GBP2.6m was
recorded which comprised of settlement of obligations under the
previous arrangement.
The net financing return on pension obligations in respect of
the defined benefit schemes closed to future accrual is shown as a
non-underlying item due to the irregularity of this amount
historically and it is not incurred in the normal course of
business. A net expense of GBP0.3m has been recognised during the
year (2021: GBP1.0m).
3. Earnings per share
2022 2022 2021 2021
Earnings per share Earnings total Earnings per share Earnings total
Pence GBPm Pence GBPm
---------------------------------------------- ------------------ -------------- ------------------ --------------
Basic earnings per share from continuing
operations 3.3 45.5 4.7 65.5
Basic earnings per share from discontinued
operations - - (0.3) (4.0)
---------------------------------------------- ------------------ -------------- ------------------ --------------
Basic earnings per share 3.3 45.5 4.4 61.5
---------------------------------------------- ------------------ -------------- ------------------ --------------
Adjusting items:
Non-underlying items attributable to the
parent from continuing operations - 0.4 0.4 5.8
Non-underlying items attributable to the
parent from discontinued operations - - 0.3 3.9
---------------------------------------------- ------------------ -------------- ------------------ --------------
Non-underlying items attributable to the
parent (see note 2) - 0.4 0.7 9.7
---------------------------------------------- ------------------ -------------- ------------------ --------------
Tax effect of non-underlying items from
continuing operations (0.1) (1.4) (0.3) (3.1)
Tax effect of non-underlying items from
discontinued operations - - 0.1 0.9
---------------------------------------------- ------------------ -------------- ------------------ --------------
Tax effect of non-underlying items (0.1) (1.4) (0.2) (2.2)
---------------------------------------------- ------------------ -------------- ------------------ --------------
Underlying earnings per share from continuing
operations (Non-GAAP measure) 3.2 44.5 4.9 68.2
Underlying earnings per share from
discontinued operations (Non-GAAP measure) - - 0.1 0.8
---------------------------------------------- ------------------ -------------- ------------------ --------------
Underlying earnings per share (Non-GAAP
measure) 3.2 44.5 5.0 69.0
---------------------------------------------- ------------------ -------------- ------------------ --------------
Diluted earnings per share from continuing
operations 3.1 45.5 4.6 65.5
Diluted earnings per share from discontinued
operations - - (0.3) (4.0)
---------------------------------------------- ------------------ -------------- ------------------ --------------
Diluted earnings per share 3.1 45.5 4.3 61.5
---------------------------------------------- ------------------ -------------- ------------------ --------------
Diluted earnings per share - underlying from
continuing operations (Non-GAAP measure) 3.1 44.5 4.8 68.2
Diluted earnings per share - underlying from
discontinued operations (Non-GAAP measure) - - 0.1 0.8
---------------------------------------------- ------------------ -------------- ------------------ --------------
Diluted earnings per share - underlying
(Non-GAAP measure) 3.1 44.5 4.9 69.0
---------------------------------------------- ------------------ -------------- ------------------ --------------
The calculation of basic, adjusted and diluted earnings per
share is based on the following number of shares in issue
(millions):
2022 2021
Number Number
Weighted average number of ordinary shares in issue 1,392.9 1,390.7
Weighted average number of dilutive shares under option 51.8 25.1
------------------------------------------------------------------------------------------- ------- -------
Weighted average number of shares in issue taking account of applicable outstanding share
options 1,444.7 1,415.8
------------------------------------------------------------------------------------------- ------- -------
Non-dilutive shares under option 20.7 28.7
------------------------------------------------------------------------------------------- ------- -------
The directors consider that the underlying earnings per share
figure provides a better measure of comparative performance.
4. Finance expense
Recognised in profit and loss
2022 2021
Note GBPm GBPm
------------------------------------------------------------------------------------------ ---- ----- -----
Interest payable on bank borrowings, SFA, Senior note and loan notes 10.8 9.4
Vehicle stocking plan interest 14.7 9.8
Interest payable on leases 14.7 12.6
Costs incurred on refinancing 2 2.6 -
Net interest on pension scheme obligations 2 0.3 1.0
Less: interest capitalised (0.8) (0.3)
------------------------------------------------------------------------------------------ ---- ----- -----
Total interest expense being interest expense in respect of financial liabilities held at
amortised cost 42.3 32.5
Unwinding of discounts in contract hire residual values 2.5 2.7
------------------------------------------------------------------------------------------ ---- ----- -----
Total finance expense 44.8 35.2
------------------------------------------------------------------------------------------ ---- ----- -----
Interest of GBP0.8m has been capitalised during the year on
assets under construction at an average rate of 7.47% (2021:
GBP0.3m).
5. Finance income
Recognised in profit and loss
2022 2021
GBPm GBPm
-------------------------------------- ----- -----
Interest receivable on finance leases 1.0 0.9
--------------------------------------- ----- -----
Total finance income 1.0 0.9
--------------------------------------- ----- -----
6. Adjusted net debt
2022 2021
GBPm GBPm
-------------------------------------------------- ------ ------
Cash and cash equivalents (see note 7) 69.4 37.6
Current interest bearing loans and borrowings (1.7) -
Non-current interest bearing loans and borrowings (91.0) (87.3)
--------------------------------------------------- ------ ------
(23.3) (49.7)
-------------------------------------------------- ------ ------
The Group has on adoption of IFRS 16 Leases excluded Lease
liabilities from its measure of Net Debt. The Group also exclude
Vehicle stocking loans from its measure of Adjusted Net Debt which
are presented as current liabilities.
7. Cash and cash equivalents
Restated see note 1
2022 2021
GBPm GBPm
------------------------------------------------------------------------------------ ------- -------------------
Cash and cash equivalents 69.4 37.6
---------------------------------------------------------------------------------------- ------- -------------------
Cash and cash equivalents in the Balance Sheet 171.9 200.1
Bank overdrafts repayable on demand and used for cash management in the Balance Sheet (102.5) (162.5)
---------------------------------------------------------------------------------------- ------- -------------------
Cash and cash equivalents in the statement of cash flows 69.4 37.6
---------------------------------------------------------------------------------------- ------- -------------------
Bank overdrafts reflect the aggregated overdrawn balances of
Group companies (even if those companies have other positive cash
balances).
8. Movement in contract hire vehicle balances
2022 2021
GBPm GBPm
-------------------------------------------------------- ------ ------
Depreciation 36.1 38.5
Changes in trade and other payables and deferred income (7.9) (30.2)
Purchases of contract hire vehicles (46.6) (42.4)
Unwinding of discounts in contract hire residual values (2.5) (2.7)
--------------------------------------------------------- ------ ------
(20.9) (36.8)
-------------------------------------------------------- ------ ------
9. Pension funds
The net liability for defined benefit pension scheme obligations
has improved from a GBP23.6m liability at FY21 to a GBP2.6m
liability at FY22. The improvement of GBP21.0m comprises of
contributions of GBP13.1m, a net interest expense recognised in the
income statement of GBP0.3m and a net actuarial gain of GBP8.2m.
The net actuarial gain has arisen due in part to changes in the
principal assumptions used in the valuation of the scheme's assets
and liabilities and also the change in value of the assets held
over the year. The main assumptions subject to change are the
discount rate of 5.00% (2021: 1.80%), inflation rate (RPI) of 3.25%
(2021: 3.50%) and inflation rate (CPI) of 2.85% (2021: 3.00%).
10. Alternative performance measures
The Group uses a number of key performance measures ('KPI's')
which are non-IFRS measures to monitor the performance of its
operations. The Group believes these KPIs provide useful historical
financial information to help investors and other stakeholders
evaluate the performance of the business and are measures commonly
used by certain investors for evaluating the performance of the
Group. In particular, the Group uses KPIs which reflect the
underlying performance on the basis that this provides a more
relevant focus on the core business performance of the Group. The
Group has been using the following KPIs on a consistent basis and
they are defined and reconciled as follows:
Dividend per share - dividend per share is defined as the
interim dividend per share plus the proposed final year dividend
for a given period.
Gross margin % - gross margin is defined as gross profit as a
percentage of revenue.
Operating margin % - operating margin is defined as operating
profit as a percentage of revenue.
Underlying operating profit/profit before tax - results on an
underlying basis exclude items that have non-trading attributes due
to their size, nature or incidence. The detail of the
non-underlying results is shown in note 2 and this is also shown on
the face of the consolidated income statement to reconcile from the
underlying to total results.
Operating profit reconciliation
2022 2021
Note GBPm GBPm
------------------------------------------------------------------ ---- ----- -----
Underlying operating profit 98.5 116.3
Gains on the sale of businesses and property, plant and equipment 2 7.7 2.7
Impairment of goodwill 2 (3.6) -
Impairment of property, plant and equipment 2 (1.0) -
Impairment of right of use assets 2 (0.2) (9.6)
Aborted transaction related expenses 2 (0.4) -
Termination and severance payments 2 (0.2) (1.8)
Business closure income 2 0.2 -
------------------------------------------------------------------ ---- ----- -----
Non-underlying operating profit/(loss) items 2.5 (8.7)
------------------------------------------------------------------ ---- ----- -----
Operating profit 101.0 107.6
------------------------------------------------------------------ ---- ----- -----
Profit before tax reconciliation
2022 2021
Note GBPm GBPm
------------------------------------------------------------------------ ---- ----- -----
Underlying profit before tax 57.6 83.0
Non-underlying operating profit/(loss) items (see reconciliation above) 2.5 (8.7)
Non-underlying net finance (costs) 2 (2.9) (1.0)
Non-underlying operating profit/(loss) and finance costs items (0.4) (9.7)
------------------------------------------------------------------------ ---- ----- -----
Profit before tax 57.2 73.3
------------------------------------------------------------------------ ---- ----- -----
Profit after tax reconciliation
2022 2021
Note GBPm GBPm
------------------------------------------------------------------------------------------ ---- ----- -----
Underlying profit after tax 44.5 69.0
Non-underlying operating profit/(loss) and finance costs items (see reconciliation above) (0.4) (9.7)
Non-underlying tax 2 1.4 2.2
Non-underlying operating profit/(loss), finance costs and tax items 1.0 (7.5)
------------------------------------------------------------------------------------------ ---- ----- -----
Profit after tax 45.5 61.5
------------------------------------------------------------------------------------------ ---- ----- -----
Underlying basic earnings per share ('underlying earnings per
share') - the Group presents underlying basic earnings per share as
the directors consider that this is a better measure of comparative
performance. Underlying basic earnings per share is calculated by
dividing the underlying profit or loss attributable to ordinary
shareholders by the weighted average number of ordinary shares in
issue during the period. A full reconciliation of how this is
derived is found in note 3.
Underlying diluted earnings per share - the Group presents
underlying diluted earnings per share as the directors consider
that this is a better measure of comparative performance.
Underlying diluted earnings per share is calculated by dividing the
underlying profit and loss attributable to ordinary shareholders by
the weighted average number of ordinary shares in issue taking
account of the effects of all dilutive potential ordinary shares,
which comprise of share options granted to employees, LTIPs and
share warrants. A full reconciliation of how this is derived is
found in note 3.
Adjusted net debt - All loans and borrowings less cash and cash
equivalents less IFRS 16 lease liabilities less vehicle stocking
loans.
Leverage ratio - the Group uses the ratio of net debt to
underlying EBITDA to assess the use of the Group's financial
resources. The reconciliation of this and the composition of
underlying EBITDA is shown below.
2022 2021
GBPm GBPm
-------------------------------------------- ----- -----
Underlying operating profit 98.5 116.3
Depreciation 64.7 70.4
Amortisation 4.9 4.2
--------------------------------------------- ----- -----
Underlying EBITDA 168.1 190.9
Adjusted net debt 23.3 49.7
--------------------------------------------- ----- -----
Adjusted net debt : underlying EBITDA ratio 0.1 0.3
--------------------------------------------- ----- -----
Like for Like reconciliations
Like for like (LFL) results only include trading businesses
which have comparative trading periods in two consecutive financial
years. We use like-for-like results to aid in the understanding of
the like-for-like movement in revenue, gross profit and operating
profit in the business. The difference to underlying results are
those businesses which are not like-for-like which have recently
commenced operation and therefore do not have a full current year
and prior year history plus any retail points closed during the
current or previous period. The like-for-like adjustments are split
between those in relation to businesses disposed and those other
adjustments which relate to the elimination of results for a period
in a year which does not have a corresponding amount in the
comparative year.
Revenues by Department - UK Motor
2022 2022 2022 2022
Group revenue Disposals revenue Other non like for like revenue Like for like revenue
GBPm GBPm GBPm GBPm
--------------------- ------------- ----------------- ------------------------------- ---------------------
Aftersales revenue 276.1 - - 276.1
Used vehicle revenue 1,808.6 (0.2) (0.7) 1,807.7
New vehicle revenue 1,451.5 - - 1,451.5
--------------------- ------------- ----------------- ------------------------------- ---------------------
Total Revenue 3,536.2 (0.2) (0.7) 3,535.3
--------------------- ------------- ----------------- ------------------------------- ---------------------
2021 2021 2021 2021
Group revenue Disposals revenue Other non like for like revenue Like for like revenue
GBPm GBPm GBPm GBPm
--------------------- ------------- ----------------- ------------------------------- ---------------------
Aftersales revenue 261.9 (5.1) - 256.8
Used vehicle revenue 1,708.4 (10.8) - 1,697.6
New vehicle revenue 1,362.4 (12.2) - 1,350.2
--------------------- ------------- ----------------- ------------------------------- ---------------------
Total Revenue 3,332.7 (28.1) - 3,304.6
--------------------- ------------- ----------------- ------------------------------- ---------------------
Revenues by Department - US Motor
2022 2022 2022 2022
Group revenue Disposals revenue Other non like for like revenue Like for like revenue
GBPm GBPm GBPm GBPm
-------------------- ------------- ----------------- ------------------------------- ---------------------
Aftersales revenue - - - -
Used vehicle revenue - - - -
New vehicle revenue - - - -
-------------------- ------------- ----------------- ------------------------------- ---------------------
Total Revenue - - - -
-------------------- ------------- ----------------- ------------------------------- ---------------------
2021 2021 2021 2021
Group revenue Disposals revenue Other non like for like revenue Like for like revenue
GBPm GBPm GBPm GBPm
--------------------- ------------- ----------------- ------------------------------- ---------------------
Aftersales revenue 2.8 (2.8) - -
Used vehicle revenue 3.0 (3.0) - -
New vehicle revenue 22.8 (22.8) - -
--------------------- ------------- ----------------- ------------------------------- ---------------------
Total Revenue 28.6 (28.6) - -
--------------------- ------------- ----------------- ------------------------------- ---------------------
Gross Profit by Department - UK Motor
2022 2022 2022 2022
Other non like for like Like for like gross
Group gross profit Disposals gross profit gross profit profit
GBPm GBPm GBPm GBPm
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Aftersales gross profit 139.5 0.3 - 139.8
Used vehicle gross
profit 143.6 - - 143.6
New vehicle gross profit 132.6 - - 132.6
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Total Gross profit 415.7 0.3 - 416.0
------------------------ ------------------ ---------------------- ----------------------- -----------------------
2021 2021 2021 2021
Other non like for like Like for like gross
Group gross profit Disposals gross profit gross profit profit
GBPm GBPm GBPm GBPm
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Aftersales gross profit 133.2 (2.4) - 130.8
Used vehicle gross
profit 164.2 (0.2) - 164.0
New vehicle gross profit 99.9 (0.9) - 99.0
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Total Gross profit 397.3 (3.5) - 393.8
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Gross Profit by Department - US Motor
2022 2022 2022 2022
Other non like for like Like for like gross
Group gross profit Disposals gross profit gross profit profit
GBPm GBPm GBPm GBPm
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Aftersales gross profit - - - -
Used vehicle gross
profit - - - -
New vehicle gross profit - - - -
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Total Gross profit - - - -
------------------------ ------------------ ---------------------- ----------------------- -----------------------
2021 2021 2021 2021
Other non like for like Like for like gross
Group gross profit Disposals gross profit gross profit profit
GBPm GBPm GBPm GBPm
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Aftersales gross profit 1.6 (1.6) - -
Used vehicle gross
profit 0.2 (0.2) - -
New vehicle gross profit 2.2 (2.2) - -
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Total Gross profit 4.0 (4.0) - -
------------------------ ------------------ ---------------------- ----------------------- -----------------------
Underlying operating profit
2022 2022 2022 2022
Group Underlying Other non like for Like for like
operating Disposals Underlying like Underlying Underlying operating
profit/(loss) operating profit operating profit profit
GBPm GBPm GBPm GBPm
----------------------- ---------------------- ---------------------- --------------------- ----------------------
UK motor 69.1 1.0 0.2 70.3
Software 11.0 - - 11.0
Leasing 19.9 - - 19.9
US Motor (1.5) 1.5 - -
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Total underlying
operating profit 98.5 2.5 0.2 101.2
----------------------- ---------------------- ---------------------- --------------------- ----------------------
2021 2021 2021 2021
Group Underlying Other non like for Like for like
operating Disposals Underlying like Underlying Underlying operating
profit/(loss) operating profit operating profit profit
GBPm GBPm GBPm GBPm
----------------------- ---------------------- ---------------------- --------------------- ----------------------
UK motor 87.4 1.1 - 88.5
Software 12.5 - - 12.5
Leasing 17.5 - - 17.5
US Motor (1.1) 1.1 - -
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Total underlying
operating profit 116.3 2.2 - 118.5
----------------------- ---------------------- ---------------------- --------------------- ----------------------
11. Annual Report
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2022
or 2021 but is derived from those accounts. Statutory accounts for
2021 have been delivered to the registrar of companies, and those
for 2022 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
Full financial statements for the year ended 31 December 2022
will be published on the Group's website at www.pendragonplc.com
and will be posted to shareholders and after adoption at the Annual
General Meeting they will be delivered to the registrar.
Copies of this announcement are available from Pendragon PLC,
Loxley House, 2 Oakwood Court, Little Oak Drive, Annesley,
Nottinghamshire, NG15 0DR.
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END
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