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JUST CAR CLINICS GROUP PLC

By Darrell Rogers,2014-05-16 21:31
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JUST CAR CLINICS GROUP PLC

FOR RELEASE 29 APRIL 2004 29 April 2004

    Just Car Clinics Group plc

    Preliminary Results

    Just Car Clinics Group plc (―Just Car Clinics‖ or ―the Group‖), the independent collision repair chain with thirteen vehicle collision repair centres, today announces it preliminary results for the

    fifteen months ended 31 December 2003*. In January 2003, the Just Car Clinics business was

    acquired and the Group’s business changed from internet-based motorcycle retail to motor vehicle collision damage repair. The overall reported results reflect a combination of these activities. The

    results relating to the continuing activities, which are shown separately, reflect the performance of

    the Just Car Clinics business for the twelve months since its acquisition.

    Financial highlights (continuing activities before exceptional costs):

    ?21,625,000 ? Turnover of

    ?9,014,000 ? Gross profit of

    41.7% ? Gross margin of

    ?914,000 ? EBITDA of

    ?125,000 ? Profit before goodwill amortisation and taxation of

    ?6,000 ? Profit before taxation

    0.7p ? Underlying earnings per share of

    Commenting on the results, Barry Whittles, Chief Executive of Just Car Clinics, said:

    “2003 has been a year of change for the Group. Much has been achieved despite a number of challenges which arose during the first year of the new business. The discovery of the

    overstatement of historic results, announced in March, was a set back for the Group; however

    the underlying issues at the three affected sites have been addressed, and they each have

    improved margins and traded profitably during the first quarter of 2004.

    Trading for the Group for the first quarter of 2004 is in line with expectations and the quality of

    our team, infrastructure and support functions means that Just Car Clinics is in an excellent

    position to develop further mutually beneficial relationships with our insurer partners.”

    For further information, please contact:

     Just Car Clinics:

    Barry Whittles, Chief Executive 07850 268369 David Hickey, Chairman 07712 880902

     Buchanan Communications:

    Tim Thompson/Tom Carroll 020 7466 5000

    In January 2003 Just Car Clinics changed its year-end from 30 September to 31 December. The *

    current financial period has therefore been extended to fifteen months ending 31 December 2003.

CHAIRMAN’S AND CHIEF EXECUTIVE’S REPORT

    OVERVIEW

    2003 was a year of much change for the Group, during which a lot was achieved despite a number of challenges during the first year of the new business.

    In January 2003 the Group acquired the business and assets of Just Car Clinics and as a result the Group’s principal trading activity now comprises a chain of thirteen motor vehicle collision repair centres. During the current period the focus of the Group has therefore changed from internet-based retailing, under the name of BikeNet, to collision damage repair.

    The new business undertakes collision damage repairs to all makes of cars, vans and motorcycles and has established successful trading relationships with most of the UK’s leading insurance companies. It is key to the future strategy that the business continues to develop closer partnerships with insurance companies and other work providers so as to provide an exceptional service to customers by investment in technology and the training and development of the employee team.

    The accounting reference period of the Company has been changed from 30 September to 31 December and, as a result, the current report covers the fifteen months ended 31 December 2003. The ongoing collision repair business of the Group is best reflected by the results relating to continuing activities, these are in respect of the twelve month period following the acquisition in January 2003 and discussion of trading results in this report relates to this period. TRADING RESULTS

    Profits from continuing activities before exceptional costs, goodwill amortisation and taxation for the period of ?125,000 were disappointing, the largest negative factor being the overstatement of historic results, referred to below. This resulted in inefficiencies in the operation of the three sites affected being masked by false reporting and therefore going uncorrected for a period. These inefficiencies have resulted in gross margins at these sites being significantly below the Group average.

    The underlying market conditions were also difficult with exceptionally dry spring and autumn periods resulting in a significant fall in accidents and repair volumes across the sector. Major insurers reported decreases in underlying claims of in excess of 20%.

    Despite these adverse market conditions the Group’s turnover at ?21.6 million was 1% higher

    than that achieved by the business in 2002. New insurance approvals have been achieved at a number of sites during the period and turnover growth at less mature sites in Lincoln, York and Bradford was in excess of 9%. However, the underlying fall in the market resulted in the overall growth being below expectations for the period.

    After excluding the three sites affected by the reporting issue, the overall gross margin was 42.7% which was in line with expectations; the three affected sites reduced the overall margin to 41.7%. OVERSTATEMENT OF HISTORIC RESULTS

    As announced on 16 March 2004 the historic results of three of the Group’s thirteen trading

    locations were adversely affected by the deception of one of its management accountants, who it was discovered, had been falsifying management information for these locations during both 2003 and 2002 (in the period before the business was acquired). The deceit was identified by the Group’s Finance Director and has been extensively investigated by the Group’s auditors, Ernst & Young LLP, in conjunction with management. Subsequently the Board has reviewed its system of internal controls and increased the frequency and extent of review and checking by the central management team.

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    These investigations have confirmed that the issue was limited to three locations and have not identified any theft. The Group’s bankers, Yorkshire Bank plc, have confirmed their willingness to re-set the loan covenants breached as a result of this deception and revised loan agreements are now in place.

    The results reported for 2003 have been restated to correct for the falsified accounting entries, the Auditors’ Report is unqualified and the Board is confident that they accurately reflect the

    performance of the Group.

    Having taken legal advice the Group is pursuing a substantial claim against the vendors of the business, Dixon Motor Holdings Limited, for breach of warranties included in the business purchase agreement relating primarily to the accuracy of the profit and loss account for 2002. WORKING CAPITAL

    The working capital of the Group has been well controlled and net borrowings throughout the period have been below that estimated in the cash flow forecasts produced at the time of the acquisition.

    As a result of this tight control the Group has generated ?0.6 million of cash from operating activities and at the period end has an unutilised debtor finance facility of ?2.5 million. ACHIEVEMENTS

    The first year of operation since the acquisition of Just Car Clinics has seen much activity as the new business has formalised its independence and established human resource and payroll functions, IT systems and communications infrastructure.

    During the period Just Car Clinics has also established its own distinct brand identity and team culture based on strong two-way internal communications and a goal of exceptional customer service.

    The quality of the team and facilities was recognised by the wider industry during the period with the following national awards:

    ? Wakefield Just Car Clinic came top in AXA’s annual assessment of more than 260 repair

    centres.

    ? Five of the team and the Leeds Just Car Clinic were nominated in the finals of the annual

    Bodyshop Awards, with two eventual category winners.

EMPLOYEES

    The performance of the Group’s employees is central to the quality of repair and customer service. In a period that has seen a lot of change the Board would especially like to thank all employees for their loyalty and support.

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CURRENT TRADING AND PROSPECTS

    The three sites affected by the reporting issue have each traded profitably during the first three

    months of 2004 and the gross margins at these sites have improved significantly. Trading for the

    Group for the first quarter of 2004 is in line with the Board’s expectations and the Board remains

    confident that the business will perform satisfactorily for 2004.

The Board believes that the motor insurers will increasingly choose to work with repair partners

    which can offer a high level of professionalism and quality of service, and will seek to reduce

    administration costs by the selection of fewer such partners. The quality of the Just Car Clinics

    team, together with the strong infrastructure and support functions, will ensure that Just Car

    Clinics will remain well positioned to develop closer relationships with these insurers

David Hickey Barry Whittles

    Chairman Chief Executive

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GROUP PROFIT AND LOSS ACCOUNT

    for the 15 month period ended 31 December 2003

     2003 2003 2003 2002

     Continuing Discontinued Total

     15 months 15 months 15 months 12 months

     ? ? ? ?

     TURNOVER

     Acquisitions 21,624,735 - 21,624,735 -

     Discontinued - - - 139,804

     –––––––––– ––––––––––– –––––––––– –––––––––

     21,624,735 - 21,624,735 139,804 Cost of sales (12,610,755) - (12,610,755) (127,245)

     –––––––––– ––––––––––– –––––––––– ––––––––– Gross profit 9,013,980 - 9,013,980 12,559

     –––––––––– ––––––––––– –––––––––– –––––––––

    - Selling and distribution costs (4,964,308) - (4,964,308)

     Goodwill amortisation (118,305) - (118,305)

     Costs of investigation (82,500) - (82,500) -

     Other administration expenses (3,669,346) (130,626) (3,799,972) (194,111)

     ––––––––– –––––––––– ––––––––– ––––––––– Administrative expenses (3,870,151) (130,626) (4,000,777) (194,111)

     ––––––––– –––––––––– ––––––––– ––––––––– Total operating expenses (8,834,459) (130,626) (8,965,085) (194,111)

     ––––––––– –––––––––– ––––––––– –––––––––

     OPERATING PROFIT / (LOSS)

     Acquisitions 179,521 - 179,521 -

     Discontinued - (130,626) (130,626) (181,552)

     ––––––––– –––––––––– ––––––––– –––––––––

    GROUP OPERATING PROFIT / (LOSS) 179,521 (130,626) 48,895 (181,552) Share of operating profit in joint ventures - - - 30,882

     ––––––––– –––––––––– ––––––––– –––––––––

    TOTAL OPERATING PROFIT / (LOSS) 179,521 (130,626) 48,895 (150,670) Interest receivable - 6,854 6,854 29,486 Interest payable and similar charges (255,570) - (255,570) -

     ––––––––– –––––––––– ––––––––– –––––––––

    LOSS BEFORE TAXATION (76,049) (123,772) (199,821) (121,184) Taxation credit 23,245 - 23,245 -

     –––––––––– –––––––––– ––––––––– –––––––––

    RETAINED LOSS FOR THE PERIOD (52,804) (123,772) (176,576) (121,184)

     ––––––––– ––––––––– ––––––––– ––––––––– EARNINGS PER SHARE (NOTE 2)

    Basic loss per share (1.4)p (1.1)p Diluted loss per share (1.4)p (1.1)p Underlying earnings / (loss) per share 0.7p (1.1)p

There are no recognised gains or losses other than the loss for the period.

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     GROUP BALANCE SHEET

    at 31 December 2003

     2003 2002

     ? ?

     FIXED ASSETS

    Intangible assets - goodwill 2,372,171 - Tangible assets 2,604,935 -

     ———— ————

     - 4,977,106

     ———— ————

     CURRENT ASSETS

    Stocks 438,035 500 Debtors 3,203,180 9,338 Cash at bank and in hand 1,584 748,170

     ———— ————

     3,642,799 758,008

    4,173,766 44,993 CREDITORS: amounts falling due within one year

     ———— ————

    NET CURRENT (LIABILITIES) / ASSETS (530,967) 713,015

     ———— ————

    TOTAL ASSETS LESS CURRENT LIABILITIES 4,446,139 713,015

    3,750,385 - CREDITORS: amounts falling due after more than one year

     ———— ————

     695,754 713,015

     ———— ————

     CAPITAL AND RESERVES

    Called up share capital 128,639 112,556 Share premium account 2,371,146 2,284,816 Other reserves (89,398) (89,398) Profit and loss account (1,714,633) (1,594,959)

     ———— ———— EQUITY SHAREHOLDERS’ FUNDS (NOTE 3) 695,754 713,015

     ———— ————

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GROUP STATEMENT OF CASH FLOWS

    for the 15 month period ended 31 December 2003

     2003 2002

     15 months 12 months

     ? ? NET CASH FLOW FROM OPERATING ACTIVITIES (NOTE 4) 597,440 (206,454)

     RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

    Interest received 6,854 29,486 Bank interest paid (120,176) - Interest element of finance lease rental payments (9,540) - Interest paid on deferred consideration (53,507) - Loan issue costs (78,000) -

     ———— ————

     (254,369) 29,486

     ———— ————

     CAPITAL EXPENDITURE AND INVESTMENTS

    Purchase of tangible fixed assets (138,904) - Proceeds from disposal of tangible fixed assets - 3,613

     ———— ————

     (138,904) 3,613

     ———— ————

     ACQUISITIONS AND DISPOSALS

    Acquisition of businesses (including expenses) (3,580,437) - Cash balance acquired 303 -

     ———— ————

     (3,580,134) -

     ———— ————

    CASH OUTFLOW BEFORE FINANCING (3,375,967) (173,355)

     FINANCING

    Issue of ordinary share capital 102,413 - Receipts from new bank loans 2,900,000 - Repayments of loans (435,000) - Capital element of finance lease repayments (90,125) -

     ———— ————

     2,477,288 -

     ———— ———— DECREASE IN CASH IN PERIOD (898,679) (173,355)

     ———— ————

     RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET

    DEBT

    Decrease in cash in the period (898,679) (173,355) Changes in bank loans (2,387,000) - Repayments finance leases 90,125 - Amortisation of finance issue costs (15,600) - Finance leases acquired (200,886) -

    ———— ————

    INCREASE IN NET DEBT IN THE PERIOD (3,412,040) (173,355)

    748,170 921,525 NET CASH AT 1 OCTOBER 2002

    ———— ————

    NET (DEBT) / CASH AT 31 DECEMBER 2003 (2,663,870) 748,170

     ———— ————

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NOTES TO THE PRELIMINARY STATEMENT

    1. BASIS OF PREPARATION OF THE ACCOUNTS

    The results comprise those of Just Car Clinics Group plc and its subsidiaries for the period ended 31 December

    2003 and prepared on the basis of applicable accounting standards set out in the accounts for the year ended 30

    September 2002 together with those adopted for the new business acquired in the period. This preliminary

    announcement does not constitute the Company’s statutory accounts within the meaning of Section 240 of the

    Companies Act 1985. Statutory accounts for 2002 have been delivered to the Registrar of Companies, whereas

    those for 2003 will be delivered following the Company’s Annual General Meeting on 23 June 2004. The auditors have reported on these accounts; their reports were unqualified and did not contain a statement under

    section 237 (2) or (3) of the Companies Act 1985.

    The financial statements for the 15 months ended 31 December 2003 were approved by the Board on 28 April

    2004.

    2. EARNINGS PER SHARE

    The calculation of earnings per share and diluted earnings per share are based on the loss for the financial

    period of ?176,576 (2002 - ?121,184) and on 12,525,163 ordinary shares (2002 - 11,118,140), being the

    weighted average number of shares in issue during the period.

    The calculation of diluted earnings per share for the period is the same as basic earnings per share because the

    outstanding share options would have the effect of reducing the loss per share and would therefore not be

    dilutive.

    In order to reflect more clearly the trading performance of the Group, underlying earnings per share has been

    presented in addition to the earnings per share figures required by accounting standards. This has been based

    on the underlying profit for the period of ?87,760, being the loss for the period from continuing operations of

    ?52,804 adjusted by ?140,564 for the post tax effect of exceptional costs and goodwill amortisation.

    3. RECONCILIATION OF SHAREHOLDERS’ FUNDS

     2003 2002

     ? ? Loss for the financial period (176,576) (121,184) Ordinary shares issued 102,413 - Share option discount charged in period 56,902 -

     ––––––––––––– ––––––––––––– Net decrease in equity shareholders’ funds (17,261) (121,184) Opening equity shareholders’ funds 713,015 834,199

     ––––––––––––– ––––––––––––– Closing equity shareholders’ funds 695,754 713,015

     ———— ————

4. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM

    OPERATING ACTIVITIES

     2003 2002

     (15 months) (12 months)

     ? ? Operating profit / (loss) 48,895 (181,552) Depreciation 533,548 13,041 Amortisation of goodwill 118,305 - Profit on disposals of tangible fixed assets - (2,214) Share options issued at a discount 56,902 - Changes in stocks 51,119 67,634 Changes in debtors (2,948,245) 51,685 Changes in creditors 2,736,916 (155,048)

     ———— ———— Net cash flow from operating activities 597,440 (206,454)

     ———— ————

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5. INTERIM REPORT

    The Report and Accounts will be posted to shareholders on 26 May 2004 and will be available from the

    registered office of the Company at York Trading Park, Kettlestring Lane, Clifton Moorgate, York YO30

    4XF.

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