Vertu Regulatory News (VTU)

7 Nov 2007 07:01

Vertu Motors PLC07 November 2007 7th November 2007 Vertu Motors plc ("Vertu") Unaudited interim results for the period ended 31st August 2007 Vertu Motors plc, the 10th largest UK motor retailer, announces interim resultsfor the period from incorporation on 1st November 2006 to 31st August 2007. Theresults reflect the commencement of trade on 27th March with the acquisition ofthe Bristol Street Motors Group and subsequent acquisitions. Financial Highlights Period from 1st November 2006 to 31st August 2007: Revenue £290.3mAdjusted operating profit* £0.9mAdjusted profit before tax* £0.7mAdjusted earnings per share* 0.94pOperating loss (£0.1m)Operating cash inflow £21.0m * adjusted for exceptional costs, amortisation of intangible assets and sharebased payments charge • Operating profit before exceptionals delivered in a period excluding peak trading months of March and September • Strong cash flow generation in the period with operating cash inflow of £21.0m • Gearing of 20.5% as at 31st August 2007 Operational Highlights • 42 franchised and 5 non-franchised operations acquired in the period • Creation of 10th largest motor retailer in the United Kingdom • Talented management team integrated and incentivised • New retail car volumes up 8.4% on a like for like basis against a total new car market up 1.7% since acquisition • Used retail car volumes for Bristol Street Motors dealerships up by 12.4% on a like for like basis in a flat market • New internet sites launched with centralised contact centre to maximise conversion rates Commenting on the results, Robert Forrester, Chief Executive, said: "I am delighted to report that within less than twelve months of the Companybeing incorporated we have made good progress towards our stated strategicobjectives set out at the time of our flotation in December 2006. We have concluded four acquisitions in the period, creating the UK's tenthlargest motor retailing group by turnover in the process. The integration ofthe businesses has progressed well and we are seeing performance improvementsacross the operations. The new management structure of the Group is now in place and coupled with ourstrong balance sheet, we believe we are well placed to take advantage ofperformance improvements in our existing businesses and additional acquisitionopportunities in 2008." An analysts' briefing will be held at the offices of Financial Dynamics atHolborn Gate, 26 Southampton Buildings, London, WC2A 1PB at 9.30am on 7thNovember 2007. For further information please contact: Robert Forrester, CEO, Vertu Motors plc 0191 206 4617Andrew Kitchingman, Brewin Dolphin Investment Banking 0845 270 8613Jonathon Brill/Edward Westropp, Financial Dynamics 020 7831 3113 Chief Executive's Review I am delighted to report that since flotation last December, through a series ofacquisitions, Vertu Motors plc has become one of the largest motor retailers inthe United Kingdom. The Group now operates 42 franchised and 5 non-franchisedoperations across England and is the tenth largest motor retailer in thecountry. The Company set out a strategy on flotation to seek to acquire motor retailbusinesses with the potential for performance improvements and which may containfreehold property portfolios. We envisaged that performance improvementopportunities would arise in acquired dealerships from increasing sales in newand used cars and after-sales services through improving efficiency of thebusiness processes and providing exceptional customer service. We consideredthat this process would be aided through the development of high performingmotor retail professionals throughout the business as a result of training andselective recruitment. Further profit enhancements are sought through thepossible development and maximisation of channels to market, such as internetand fleet operations. The Board remains committed to following this strategy and considers thatsubstantial progress has been made in developing a strong business model byworking on each aspect of the strategy. Our aim is to deliver value to ourshareholders as a result. Acquisitions A platform deal was concluded on 27th March 2007 with the acquisition of theBristol Street Motors Group. This acquisition of 35 operations delivered theGroup a scaled business with annualised turnover in excess of £570m and ageographic reach across England under the operating brands of Bristol StreetMotors for franchised operations and Motor Nation for used car supermarkets.These two brands will be the core brands of the enlarged Group going forward. In May 2007 the Blakes Group was acquired comprising Vauxhall and Peugeotdealerships in the North Midlands with annualised turnover of £60m. Thesedealerships have now been re-branded Bristol Street Motors and are fullyintegrated into the Group. At the end of June 2007, the Group acquired Grantham Motor Company Limitedcomprising four Honda dealerships and a Honda motorcycle franchise in the Eastof England. These businesses have annualised turnover of £47m and are among thestrongest performing dealerships within the Honda franchise. In July 2007 a Ford dealership in Morpeth, Northumberland was acquired and hasbeen re-branded as Bristol Street Motors. Management The future success of the Group will be largely reliant on its ability to hire,train and retain talented motor retail professionals in order to maximise thebusiness opportunities of the operations. Through combining the managementexpertise existing within the acquired businesses and a number of very importantappointments, the Board believes that the management team now includesindividuals with significant industry experience in areas vital to deliveringoperational improvements. In particular, experience in the used car arena,after-sales and the internet - all key drivers of the future profitabilitygrowth of the Group - has been augmented. In order to ensure that the management structure of the Group meets the futureneeds of the business, a number of significant reorganisations have beencompleted. The Group is managed on a divisional basis with franchises andbusiness units (such as Motor Nation) reporting to specific operationaldirectors. In a number of cases regional management structures have beenreplaced with dedicated general managers in dealerships to drive delivery ofoperational improvements. In addition, head office functions have beenrationalised. The Bristol Street Motors' head office at Droitwich has beenclosed with functions moved either into dealerships or a compact head office inNewcastle. Internet A key element of the Group's strategy is to leverage off the Group's brands andnational geographic coverage to ensure that market share of vehicle sales fromthe internet is maximised. The Group has made substantial progress in thisregard with the launch in early October of a new website offering for theBristol Street Motors brand. This has been followed up with the launch of a newMotor Nation website and a plan is in place for further website launches in thecoming months. Enquiries are directed to an experienced team located inSunderland in order to maximise conversion rates. We are pleased to report thatthis investment is now being rewarded by significant increases in web trafficlevels and early resultant sales levels are encouraging. Operating review Continuing the trends we reported in our AGM statement in August, the Group hasseen strong rises in like for like volumes of both new and used retail vehiclesin the period to 31st August. New retail vehicle volumes for the Bristol Street Motors' dealerships rose on alike for like basis 8.4% in the April to August period against a market in termsof private retail registrations that rose by 0.9%. This growth is reflective ofthe potential for performance improvement within the particular dealerships butalso new model launches and strong manufacturer backed consumer offers. These volume increases ensured that the relevant volume targets and manufacturervolume bonuses were achieved without the need for any pre-registration ofvehicles. These earnings were offset by lower pre-bonus margins on the sale ofnew vehicles where discounting occurred to stimulate demand. The growth of used cars sales is a major priority for the Group not only toboost immediate profitability but also to build a customer database for futuresales and after-sales marketing activity. On a like for like basis, BristolStreet Motors' dealerships' grew used car volumes by 12.4% between April andAugust in a flat used car market. As a consequence the Group has improved theused to new car ratio in the period. Margins were, however, lower in the periodreflecting a weakening in used car values from April 2007 which did not reverseuntil August. The Motor Nation used car supermarket businesses saw lower like for like volumeincreases of only 2.2% in the period. These businesses have not performed inrecent years and, following acquisition, a number of changes were made includingsignificant management changes, reduction in stock levels and the implementationof a cost reduction programme. These changes are now bearing fruit and thebusinesses are now profitable. The after-sales operations of the business represented 47% of the gross profitgenerated by the Group. The operations performed well in the period, althoughthe level of warranty service work is decreasing in a number of franchises. Inorder to maintain and grow service revenues, our strategy has been to increasethe number of telemarketers in our businesses and to centralise after-salesdirect mail marketing to maximise the retention of customers. Financial commentary The results for the period reflect two distinct periods since incorporation;from 1st November 2006 to 27th March 2007 (the date of the acquisition ofBristol Street Motors), the Group had no trading operations. In this period theGroup incurred management expenses of £252,000 and had interest income frommonies held on deposit of £241,000. Following 27th March 2007 the trading results of the acquisitions made have beenreported from the date of acquisition and therefore do not include the peaktrading months of March and September that contribute a significant proportionof annual profits. In this context the Board are pleased to have delivered anoperating profit before exceptional items, amortisation and share based chargefor the reported period of £0.9m. Exceptional items arose in the period. The restructuring of head officefunctions resulted in reorganisation costs of £0.4m in respect of redundanciesand £0.2m relating to provisions for future lease and property relatedcommitments. Dealership management reorganisations resulted in £0.2m ofredundancy costs. In August 2007, a Ford van dealership at Fenton,Staffordshire was closed and relocated to the main Ford dealership inStoke-on-Trent. Provisions of £0.1m have been made in respect of this closureprimarily related to ongoing lease commitments. Cash flow generation was excellent in the period with an operating cash inflowof £21.0m. This reflected a combination of seasonal working capital reductionsfrom the date of the purchase of Bristol Street Motors at the end of March tothe end of August and tighter management of working capital. Stock decreasesgenerated £9.9m of cash in the period and reduction in debtors a further £27.4mof cash. This was partly offset by a £17.4m reduction in trade creditors. The 31st August working capital position represents a low point preceding aplate change month. The net debt of £11.9m at 31st August 2007 and the gearinglevel of 20.5% reflects the underlying strength of the balance sheet butunderstates the average level of debt in the period by around £10m as a resultof working capital movements. Currently the Group has surplus properties with estimated sale proceeds and bookvalue of £12 million. These properties are conditionally contracted for sale.The Board envisages that a number of these disposals will be completed in thefirst half of 2008. These anticipated funds will be used initially to furtherreduce Group debt but they will also add to our capacity to make acquisitions inthe future. Current Trading and Outlook The second half of the financial period has started well. September was acrucial month for the Group's trading performance in the period ending 29thFebruary 2008 since it represents the only plate change month in that period. The new car market in September remained strong in terms of registrations withtotal registrations up 1.3% year on year and private car volumes up 1.5%.Bristol Street Motors' dealerships saw retail volumes of new vehicles rise on alike for like basis in September by 13.6% and all relevant volume bonus targetswere achieved. We anticipate that the demand for new cars will continue to bestimulated by strong consumer offers in the final months of the year. The strong consumer offers on new cars have impacted certain sectors of the usedcar market since buyers of late plate vehicles are tempted into new vehicles.The used car market has been more challenging as a result both in terms ofvolume and margin. Despite this market backdrop, September saw like for likevolumes in the Bristol Street Motors' and Motor Nation dealerships rise by 7.8%in the month continuing previous trends. In light of the operational progress made to date, the Board is confident aboutthe Group's prospects for the current financial period. Ends CONSOLIDATED INCOME STATEMENT (UNAUDITED) For the period from 1st November 2006 to 31st August 2007* Period ended 31st August 2007 Note £'000Continuing operationsRevenue 290,262Cost of Sales (255,126)Gross profit 35,136Operating Expenses (34,272) Operating profit before amortisation, share based payments charge 864and exceptional costsAmortisation of intangible assets (24)Share based payments charge (72)Exceptional costs 4 (910)Operating loss (142) Finance income 568Finance costs (782)Net finance costs 3 (214) Loss before tax (356)Taxation 48 Loss for the period (308) Attributable to:Equity holders of the Group (308) Basic loss per share (p) 5 (0.42)Diluted loss per share (p) 5 (0.42)Adjusted earnings per share (p) 5 0.94 * The Group began trading on 27th March 2007 on the acquisition of BristolStreet Group Limited. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) For the period from 1st November 2006 to 31st August 2007 Period ended 31st August 2007 £'000 Actuarial gains on retirement benefit obligations 1,597Taxation thereon (479)Net gains recognised directly in equity 1,118Loss for the period (308) Total recognised income and expense for the period 810 Attributable to:Equity holders of the Group 810 CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 31st August 2007 As at 31st August 2007 Note £'000Non-current assetsGoodwill 9 16,631Other intangible assets 9 898Retirement benefit asset 1,157Property, plant and equipment 46,022 64,708 Current assetsInventories 109,010Property assets held for sale 12,044Trade and other receivables 19,715Cash and cash equivalents 12,300 Total current assets 153,069 Total assets 217,777 Current liabilitiesTrade and other payables (120,362)Current tax liabilities (6,029) Total current liabilities (126,391) Non-current liabilitiesBorrowings (24,216)Deferred income tax liabilities (7,093)Deferred consideration 9 (1,250)Provisions for other liabilities and charges (675) (33,234) Total liabilities (159,625) Net assets 58,152 Capital and reserves attributable to equity holders of the GroupOrdinary shares 6 9,083Share premium 6 48,126Hedging reserve 7 61Retained earnings 7 882 Shareholders' equity 7 58,152 CASH FLOW STATEMENT (UNAUDITED) For the period from 1st November 2006 to 31st August 2007 Period ended 31st August 2007 Note £'000 Operating loss (142)Loss on sale of tangible fixed assets 37Amortisation of intangible assets 24Depreciation of property, plant and equipment 880Decrease in inventories 9,940Decrease in trade and other receivables 27,432Decrease in payables (17,390)Increase in provisions 160Movement in share based payments charge 72Cash generated from operations 21,013Tax paid (2,155)Net finance income 21Net cash generated from operating activities 18,879 Cash flows from investing activitiesAcquisition of businesses, net of cash, overdrafts and borrowingsacquired (78,071)Purchases of property, plant and equipment (2,879)Proceeds from disposal of property, plant and equipment 596Net cash outflow from investing activities (80,354) Cash flows from financing activitiesProceeds from issuance of ordinary shares 49,209Proceeds from borrowings 8 24,566Net cash inflow from financing activities 73,775 Net increase in cash and cash equivalents 12,300Cash and cash equivalents at beginning of period -Cash and cash equivalents at end of period 8 12,300 NOTES For the period from 1st November 2006 to 31st August 2007 1. Basis of preparation This unaudited interim financial report has been prepared in accordance with theaccounting policies described below. The International Financial ReportingStandards ("IFRS") and International Financial Reporting InterpretationsCommittee ("IFRIC") interpretations that will be applicable as at 29th February2008, including those that will be applicable on an optional basis, are not yetknown with certainty at the time of preparing this report, however, nosignificant changes are expected between the accounting policies adopted inpreparing this report and those that will be adopted in the 2008 auditedfinancial statements. This interim financial report has been prepared under the historical costconvention, as modified by the accounting for derivative financial instrumentsat fair value through profit or loss. In addition, this unaudited interimfinancial report does not comply with IAS 34 'Interim Financial Reporting',which is not currently required to be applied under the AIM Rules. The financial information set out above does not constitute the Group'sstatutory financial statements for the period 1st November 2006 to 31st August2007, within the meaning of section 240 of the Companies Act 1985. Thefinancial information set out above is unaudited. Standards and interpretations not yet effective The following IFRS and IFRIC interpretations have been issued but have not beenearly adopted by the Group; the adoption of these standards is not expected tohave a material impact on the Group's financial statements: - IFRS 7 - Financial instruments: Disclosures (effective from 1st June 2007) - IFRS 8 - Operating segments (effective from 1st June 2009) - IFRIC 10 - Interim financial reporting and impairment (effective from 1st June 2007) - IFRIC 11 - Group and treasury share transactions (effective from 1st June 2007) - IFRIC 12 - Service concession arrangements (effective from 1st June 2008) The financial information has been prepared on a going concern basis. The financial information has been prepared on the historical costs basis. Theprincipal accounting policies adopted are set out below. 2. Accounting Policies Basis of consolidation The consolidated financial statements comprise the financial statements of VertuMotors plc and its subsidiary undertakings. Subsidiaries are all entities overwhich the Group has the power to govern the financial and operating policies,generally accompanying a shareholding of more than 50 per cent of the votingrights. Subsidiaries are consolidated from the date at which control istransferred to the Group using the purchase method of accounting, whereby therecognised identifiable assets, liabilities and contingent liabilities aremeasured at their fair value at the date of acquisition. They are excluded fromthe consolidated financial statements from the date that control ceases. Business combinations and goodwill Business combinations are accounted for using the purchase method of accounting.This involves recognising identifiable assets (including intangible assets notpreviously recognised by the acquiree) and liabilities (including contingentliabilities) of acquired businesses at fair value. Goodwill acquired in abusiness combination is initially measured at cost being the excess of the costof the consideration over the Group's interest in the net fair value of theacquiree's identifiable assets, liabilities and contingent liabilities. Wherethe net fair value of the acquired identifiable assets, liabilities andcontingent liabilities exceeds the consideration, the excess or "negativegoodwill" is recognised immediately in the income statement. Following initialrecognition, goodwill is measured at cost less any accumulated impairmentlosses. For the purpose of impairment testing, goodwill acquired in a businesscombination is, from the acquisition date, allocated to each of the Group's cashgenerating units. Each cash generating unit or group of cash generating units to which thegoodwill is allocated represents the lowest level within the Group at which thegoodwill is monitored for internal management purposes and is not larger than asegment based on either the Group's primary or secondary reporting formatdetermined in accordance with IAS 14 Segment Reporting. Gains and losses on thedisposal of a business component are calculated on a basis which incorporatesthe carrying amount of goodwill relating to the business sold. Other intangible assets Intangible assets, when acquired separately from a business combination,including computer software, are carried at cost less accumulated amortisationand any impairment losses. Amortisation is provided on a straight-line basis toallocate the cost of the asset over its estimated useful life, which in the caseof computer software is three to four years. Intangible assets, for example, customer relationships as part of a businesscombination, are capitalised separately from goodwill if the fair value can bemeasured reliably on initial recognition. Such assets are amortised over theirexpected useful lives. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciationand any impairment in value. Cost includes expenditure that is directlyattributable to the acquisition of the asset. Assets' residual values, usefullives and methods of depreciation are reviewed, and adjusted if appropriate, ateach financial period end. Depreciation is provided at rates calculated towrite off the cost of property, plant and equipment less their estimatedresidual values, on a straight line basis over their estimated useful lives atthe following rates: Freehold and long leasehold buildings 2%Short leasehold properties Lease termPlant and machinery 10%-25% Inventories Inventories are stated at the lower of cost and net realisable value. Costsincurred in bringing each product to its present location and condition areincluded and cost is based on price including delivery costs less tradediscounts. Net realisable value is based on estimated selling price lessfurther costs to be incurred to disposal. Provision is made for obsolete,slow-moving or defective items where appropriate. Trade receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. A provision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of the receivables. Significantfinancial difficulties of the debtor, probability that the debtor will enterbankruptcy or financial reorganisation, and default or delinquency in payments(more than 30 days overdue) are considered indicators that the trade receivableis impaired. The amount of the provision is the difference between the asset'scarrying amount and the present value of estimated future cash flows, discountedat the original effective interest rate. The carrying amount of the asset isreduced through the use of an allowance account, and the amount of the loss isrecognised in the income statement within operating expenses. When a tradereceivable is uncollectible, it is written off against the allowance account fortrade receivables. Subsequent recoveries of amounts previously written off arecredited against operating expenses in the income statement. Property assets held for sale Property assets are classified as assets held for sale and stated at the lowerof carrying amount and fair value less costs to sell if their carrying amount isrecovered principally through a sale transaction rather than through continuinguse. Trade payables Trade payables are recognised at fair value initially and subsequently measuredat amortised cost using the effective interest method. Provisions Provisions for liabilities and charges are recognised when the Group has apresent legal or constructive obligation as a result of past events and it ismore likely than not that an outflow of resources will be required to settle theobligation and the amount can be reliably measured. If the effect is material,provisions are discounted using a pre-tax discount rate. Impairment of financial assets The Group assesses at each balance sheet date whether a financial asset or groupof financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivablesat amortised cost has been incurred, the amount of the loss is measured as thedifference between the asset's carrying amount and the present value ofestimated future cash flows discounted at the financial asset's originaleffective interest rates. The amount of the loss is recognised in the incomestatement. Impairment of non-financial assets At each reporting date, the Group assesses whether there is an indication thatan asset may be impaired. If any such indication exists, or when annualimpairment testing for an asset is required, the Group makes an estimate of theasset's recoverable amount. An asset's recoverable amount is the higher of anasset's fair value less costs to sell and it's value in use. Where fair valuecannot be determined then the recoverable amount will be determined by referenceto value in use. Value in use is determined for an individual asset, unless theasset does not generate cash flows that are largely independent of those fromother assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the assetis considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted totheir present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. Indetermining fair value less costs to sell, an appropriate valuation model isused. Impairment losses of continuing operations are recognised in the incomestatement in that expense category consistent with the function of the impairedasset. For assets excluding goodwill, an assessment is made at each reporting date asto whether there is any indication that previously recognised impairment lossesmay no longer exist or may have decreased. If such indication exists, the Groupmakes an estimate of any amount recoverable. A previously recognised impairmentloss is only reversed if there has been a change in the estimates used todetermine the asset's recoverable amount since the impairment loss wasrecognised. Taxation Current tax Current income tax assets and liabilities are measured at amounts expected to bepaid (or recovered) using the tax rates and laws that have been enacted orsubstantially enacted at the balance sheet date. On 21st March 2007, the Chancellor of the Exchequer presented the 2007 Budget,which announced a reduction in the rate of UK corporation tax from 30% to 28%,effective 1st April 2008. Deferred tax Deferred tax is provided using the liability method on temporary differences atthe balance sheet date between the tax bases of assets and liabilities and theircarrying amounts at the balance sheet date for financial reporting purposes.Deferred tax liabilities are recognised for all temporary differences, except: - where the deferred tax liability arises from the initialrecognition of goodwill or of an asset or liability in a transaction that is nota business combination and, at the time of the transaction, affects neither theaccounting profit nor taxable profit or loss; and - in respect of taxable temporary differences associated withinvestments in subsidiaries or joint ventures, where the timing of the reversalof the temporary difference can be controlled and it is probable that thetemporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for all temporary differences, carry forwardof unused tax credits and unused tax losses, to the extent that it is probablethat taxable profit will be available against which the temporary differences,and the carry forward of unused tax credits and unused tax losses can beutilised except: - where the deferred tax asset relating to the deductibletemporary differences arises from the initial recognition of an asset orliability in a transaction that is not a business combination and, at the timeof the transaction, affects neither the accounting profit nor taxable profit orloss; and - in respect of deductible temporary differences associated withinvestments in subsidiaries and joint ventures, deferred tax assets are onlyrecognised to the extent that it is probable that the temporary difference willreverse in the foreseeable future and taxable profits will be available againstwhich the temporary differences can be utilised. Deferred tax is calculated using the enacted or substantively enacted rates thatare expected to apply when the asset or liability is settled. Deferred tax ischarged or credited to the income statement, except when it relates to itemscredited or charged direct to equity in which case the deferred tax is alsocredited or charged to equity. Revenue Revenue for the sale of goods and services is measured at the fair value ofconsideration receivable, net of rebates and any discounts. It excludes salesrelated taxes and intra Group transactions. Revenue is recognised to the extent that it is probable that the economicbenefits will flow to the Group and the revenue can be reliably measured. Inpractice this means that revenue is recognised when vehicles or parts areinvoiced and physically despatched or when a service has been undertaken. Pension costs The Group operates a number of pension schemes, including defined contributionschemes and a defined benefit scheme (which was closed to new entrants andfuture accrual in May 2003). The assets of the defined benefit scheme are held separately from the assets ofthe Group. The cost of providing benefits under this scheme are determinedusing the projected unit credit actuarial valuation method. The current service cost and gains and losses on settlements and curtailmentsare included in operating costs in the consolidated income statement. Pastservice costs are similarly included where benefits have vested otherwise theyare amortised on a straight-line basis over the vesting period. The expectedreturn on assets of funded defined benefit pension schemes and the imputedinterest on pension plan liabilities comprise the pension element of the netfinance cost/income in the income statement. Differences between the actual and expected return on assets, changes in theretirement benefit obligation due to experience and changes in actuarialassumptions are included in the statement of recognised income and expense infull for the period in which they arise. Share based payments The Group allows employees to acquire shares of the Company through share optionschemes. The fair value of share options granted is recognised as an employeeexpense with a corresponding increase in equity. The fair value is measured atgrant date, using an appropriate model, taking into account the terms andconditions upon which the share options were granted, and is spread over theperiod during which the employees become unconditionally entitled to theoptions. The amount recognised as an expense is adjusted to reflect the actualnumber of share options that vest except where forfeiture is only due to shareprices not achieving the threshold for vesting. Leases Assets held under finance leases in the balance sheet, which confer rights andobligations, similar to those attached to owned assets, are capitalised at theinception of the lease at the fair value of the leased asset, or, if lower, atthe present value of the minimum lease payments. Lease payments are apportionedbetween the finance charges and reduction of the lease liability so as toachieve a constant rate of interest on the remaining balance of the liability.Finance charges are charged directly against income. Capitalised assets aredepreciated over the shorter of the estimated useful economic life of the assetor the lease term. Leases in which a significant portion of the risks and rewards of ownership areretained by the lessor are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessor) are charged tothe income statement on a straight-line basis over the period of the lease. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprises cash in hand, depositsheld at call with banks and other short-term highly liquid investments withoriginal maturities of three months or less. Derivative financial instruments The Group uses derivative financial instruments to reduce the exposure tointerest rate movements. The Group does not hold or issue derivative financialinstruments for speculative purposes. Such derivative financial instruments are measured at fair value. The gains andlosses on re-measurement are taken to the income statement except where thederivative is designated as a cash flow hedge. The fair value of a derivativefinancial instrument represents the difference between the value of theoutstanding contracts at their contracted rates and a valuation calculated usingthe rates prevailing at the balance sheet date. Segmental reporting A business segment is a group of assets and operations engaged in providinggoods and services that is subject to risks and returns that are different fromthose of other business segments. A geographical segment is engaged in providing goods and services within aparticular economic environment that is subject to risks and returns that aredifferent from those of segments operating in other economic environments. Share capital Authorised share capital represents 125,000,000 Ordinary shares of 10 penceeach. Ordinary shares are classed as equity. Incremental costs directly attributable to the issue of new shares are shown inequity as a deduction, net of tax, from the proceeds. 3. Net finance costs Period ended 31st August 2007 £'000 Bank loans and overdrafts (708)Fair value losses - interest rate swaps (69)Other finance costs (5)Finance costs (782) Fair value gains - interest rate swaps 8Other finance income relating to Group pension scheme 171Vehicle stocking interest 9Interest on short term bank deposits 380Finance income 568 Net finance costs (214) 4. Exceptional costs Period ended 31st August 2007 £'000 Redundancy costs 606Onerous lease costs 304 910 Exceptional costs comprise of items of expenditure that are material in amountand unlikely to recur and therefore they merit separate disclosure in order toprovide an understanding of the Group's underlying financial performance. 5. (Loss) earnings per share Basic and diluted loss per share is calculated by dividing the loss attributableto equity shareholders by the weighted average number of ordinary shares duringthe period / diluted weighted average number of ordinary shares in issue in theperiod. Adjusted earnings per share is calculated by dividing the adjusted earningsattributable to equity shareholders by the weighted average number of ordinaryshares in issue during the period. Period ended 31st August 2007 £'000 Loss attributable to equity shareholders (308)Amortisation of intangible assets 24Share based payments charge 72Exceptional costs 910Adjusted earnings attributable to equity shareholders 698 Weighted average number of shares in issue ('000s) 73,955Potentially dilutive shares ('000s) 11Diluted weighted average number of shares in issue ('000s) 73,966 Basic loss per share (0.42)pDiluted loss per share (0.42)pAdjusted earnings per share 0.94 p 6. Share capital and premium Share capital Share Share Total Number of Capital Premium Shares (thousands) £'000 £'000 £'000 At incorporation - - - -Shares issued during the period 90,828 9,083 48,126 57,209 At 31st August 2007 90,828 9,083 48,126 57,209 The total authorised number of ordinary shares is 125,000,000 shares with a parvalue of 10p per share. All issued shares are fully paid up. 7. Consolidated statement of changes in shareholders' equity Period ended 31st August 2007 £'000 Shares issued on incorporation -Shares issued during the period net of issue expenses 57,209Fair value gains - interest rate swaps (8)Fair value losses - interest rate swaps 69Net actuarial gains on retirement benefit obligations 1,118Share based payments charge 72Loss for the period (308) Balance at end of period 58,152 8. Reconciliation of net cash flow to movement in net debt Period ended 31st August 2007 £'000 Net increase in cash and cash equivalents 12,300Cash inflow from increase in borrowings (24,566)Non-cash movement in net debt 350Movement in net debt (11,916)Opening net debt -Closing net debt (11,916) 9. Acquisitions On 27th March 2007, the Group acquired 100% of the share capital of BristolStreet Group Limited for total consideration of £42.7m, consisting of cash(£33.7m), equity (£8.0m) and deferred consideration (£1.0m). The deferredconsideration is subject to finalisation of completion accounts and will besettled through a further equity issue at a price of 87.5p per share. Theprovisional fair value of the net assets acquired was £30.3m, with intangibleassets arising on acquisition of £12.4m. On 2nd May 2007, the Group acquired 100% of the share capital of Blakes HoldingsLimited for a total consideration of £5.1m, comprising cash of £4.9m anddeferred consideration in the form of equity shares yet to be issued of £0.2m ata price of 85.5p per share. The provisional fair value of the net assetsacquired was £3.5m, with intangible assets arising on acquisition of £1.6m. On 29th June 2007, the Group acquired 100% of the share capital of GranthamMotor Company Limited for total cash consideration of £4.3m. The fair value ofthe net assets acquired was £1.3m, with intangible assets arising on acquisitionof £3.0m. On 2nd July 2007, the Group acquired the trade and assets of a Ford dealershipin Morpeth, Northumberland, from S Jennings Limited, for total cashconsideration of £2.7m. The fair value of the net assets acquired was £2.5m,with intangible assets arising on acquisition of £0.2m. This information is provided by RNS The company news service from the London Stock Exchange