BDO Motor 150 Report 2012

MOTOR 150 REPORTConsolidated accounts of the top 150 companies in the UK motor retail sector

BDO Motor 150 ReportWELCOME TOTHE MOTOR 150 REPORTprepared by BDO LLPMotor retail is the shop floor of the UK automotive industry. It hasbecome an established and interdependent network of businesses thatcontributes £10bn added value to the national economy and employsmore than 700,000 in associated motor retail businesses of supply andservicing.*In this light, the Motor 150 report – revealing the aggregatedperformance of a study group comprising the top 150 companies in theUK motor retail sector – is an important business barometer.Our aim in producing this report is to provide a considered insight intorecent economic events and sector activity, the current and futuredynamics of motor retailing, and to offer our professional views andadvice for the future.As such, this report, which covers performance in the latest auditedaccounts and looks forward into the current and future accountingperiods, does not specify or comment upon the individual performanceof companies, except where it is relevant to explain a variance from themarket norm or to highlight a fresh sector trend.CONTENTS01 KPIs02 Operational and financial review06 Market activity, strategic moves and industry insights08 The changing nature of today’s retail sector12 Motor retail outlook – BDO opinions and advice13 Compilation of the report14 Review of the Top 150 accounts22 The Motor 150 companies24 The BDO team*Source: SMMT

KEY PERFORMANCEINDICATORS2011 2010 2009 2008Turnover £40.7bn £39.9bn £34.6bn £36.1bnChange in turnover 2.0% 15% (4.2%) (2.1%)Gross profit £4.7bn £4.8bn £4.6bn £4.4bnOperating profit £549m £643m £538m £184mProfit before tax £399m £483m £360m (£198m)Return on sales 0.98% 1.21% 1.04% (0.55%)It is important that dealerships focus less on“getting back to normal” and more on adapting tothe current economyMALCOLM THIXTON, HEAD OF MOTOR RETAIL, BDO

BDO Motor 150 Report 5VOLUME V PRESTIGE2011 Market share 2010 Market share Increase/registrations (%) registrations (%) (decrease)Luxury 2,061 0.11 2,079 0.10 (0.87)Sports 12,259 0.63 13,756 0.68 (10.88)Prestige 652,117 33.58 617,068 30.39 5.68Volume 1,130,471 58.21 1,246,604 61.39 (9.32)Economy 143,040 7.37 148,941 7.33 (3.96)Other 2,087 0.11 2,303 0.11 (9.38)1,942,035 100 2,030,751 100 (4.37)THE FRANCHISE MODEL – IS IT BROKEN?As profits come under pressure, manufacturers continue to look athow they go to market, with a number either operating or takingstrategic interests in retailing. As the internet plays an increasing rolein the way consumers source and buy new and used cars, here toomanufacturers are taking a greater interest in how dealers representtheir franchises.The imminent changes in block exemption, which we discuss later,are also widely anticipated to move the balance of power largelyback to the manufacturers. As a result of these developments it isbecoming much more critical that retail groups work very closelywith their manufacturers to understand their strategies and ensurethat their business is “right-sized” and financed to secure their longterm future.Renault and Peugeot have both recently begun to consolidate thenumber of dealerships they have in their networks. In addition, BMWand Mercedes are both stretching their model ranges which willrequire appropriate market approaches to consumers. The recentannouncement that US car brand Chevrolet will be the shirt sponsorfor Manchester United from the 2014-5 season is an interestingdevelopment by General Motors in the UK. Chevrolet is also thefootball club's car sponsor and recently signed a similar car deal withPremier League rivals Liverpool.Manufacturer demands are changing, indeed generally increasing,including showroom requirements in terms of size, location anddesign. Location and tenure of property are particularly important inthe balance of power equation.

MARKET ACTIVITY, STRATEGIC MOVES ANDINDUSTRY INSIGHTSCONTINUED SURVIVALOF THE FITTESTIn last year’s report we predictedthere would be tears of bothjoy and sadness. Looking backover the past 12 months thishas certainly been the case.There have been a number ofadministrations in the periodwhilst at the same time we haveseen a number of successfulacquisitions.A number of potentially large new entrants into the market such asTesco have not been as successful as they would have liked and thedealer model has to some extent seen off these new competitors.This is not to say that the year was a good one for everyone in theindustry. Some manufacturers have fared better than others, but theyall have continuing aspirations to grow and take market share fromtheir competitors.Profits have remained but dealers have had to work harder to achievethese and to maintain their margins. They have also had to investtime and effort in improving the customer experience beyond that ofa transactional event.Companies have continued to review their cost base and we believethat these measures are, in a lot of cases, taking the cost bases backto 2008 levels.Companies have continuedto review their cost baseand we believe that thesemeasures are, in a lot ofcases, taking the cost basesback to 2008 levels.We have identified below the following factors as key to dealersuccess:n Good relationships with the manufacturersn Manufacturers developing and bringing out new cars at regularintervalsn Improving the overall customer experiencen Good controls and processes.If dealers continue to work hard on the controllable points they willcontinue to reap the rewards.

BDO Motor 150 Report 7ON THE ACQUISITION TRAILAlthough the economic outlook has remainedchallenging for the dealer network, those withstrong balances sheets have taken theopportunity to invest further to strengthentheir position in the market, with the majorityof deals being completed by the top 20dealerships.The year saw deals worth in excess of £89mrepresenting 21 individual transactions in theperiod. This is half the number of dealscompleted in the previous period, but some ofthe transactions were significant, indicatingthere is still cash available for the largestgroups to invest when the opportunity is right.This is supported by cheap bank rates that arecurrently still available.The largest acquisition was Jardine MotorGroup’s share acquisition of the Wayside Groupfor a consideration of £30m, with underlyinggoodwill totalling £21.5m. This is the largestacquisition seen for four years andcomplements the current market offering withthe acquisition of a top 30 dealer group withturnover in the region of £300m.Also, at the start of 2012, Sytner Groupcompleted a share acquisition of Irish Top 25dealer Isaac Agnew Group. Both dealsdemonstrate the willingness of the largestgroups to expand if the right strategic purchasepresents itself.The year saw deals worthin excess of £89mrepresenting 21 individualtransactions in the period.WHAT’S IT WORTH?Levels of up to four times operating profit havebeen paid. The best example of this is theprestige marques which have continued tohold up sales in the challenging market place,as they continue to diversify their rangesuccessfully. This is evident by Audi,Volkswagen and BMW all breaking into the topfive manufacturers and holding over 5% shareof the new car market.Other brands attracting attention are thosewhich prospered from scrappage a number ofyears ago and have continued to be popularwith consumers, namely Kia and Hyundai.Many transactions have been predominantlytrade and asset deals, reflecting the cautiousapproach adopted by most dealer groups andin some cases have included the acquisition offreehold property, which is still considered agood long-term investment.One further significant acquisition related toAddison Motors, a top 20 dealer group shareacquisition of Colebrook and Burgess for aconsideration of £13m, with goodwill totalling£7m. This increases the groups’ Audi presence.TOP FIVE TRANSACTIONS IN 2011n Jardine Motor Group acquires Wayside Groupn Addison Motors acquires Colebrook & Burgess Holdingsn Listers Group acquires Droitwich Limitedn Listers Group acquires Sport Motor Holdingsn Clare James Automotive acquires certain assets of Lookers Motor Group

THE CHANGING NATURE OF THE MOTOR SECTORWHAT FOR THEFUTURE?We forecast 2013 to be a yearof continued opportunity forthose dealers who continueto take on the challenge andkeep their eyes open to newopportunities which presentthemselves to their business.For growth to be sustained,dealers need to continue toadapt and remain open tochange.Registrations look set to increase further and we believe there is stillsome pent up demand in the market. However, it still requires theindustry as a whole to continue to work together and ‘talk up’the sector – be it at government, industry or local community level.We have identified the following issues that will continue to affectthe industry going forward:BLOCK EXEMPTIONAs reported in the prior year, the changes to Block ExemptionRegulation (BER) are moving closer – they will come into effect on1 June 2013.The rules in the current BER that specifically benefit the motorretailer will disappear – they are not part of the new legislation whichwill come into force on in June.We have identified four clauses which we believe could potentiallyhave the most impact on the sector:1. The non-compete clauseCurrent legislation encourages multi-franchising, allowing consumersto view rival brands in the same showroom, whereas under the newlegislation manufacturers will, in theory at least, be allowed torestrict multi-franchising or even insist on standalone sites. However,this is thought to be unlikely to be enforced by manufacturers, as thebusiness model of the dealership would be affected.

BDO Motor 150 Report 92. The termination clauseRules regarding the length of terminationperiod and requiring manufacturers to providereasons for termination will cease with the newlegislation. However, most manufacturers arenegotiating new contract terms withcorrespondence from the dealers, which is likelyto result in more regulated and agreeableperiods.ACEA’s short code of conduct suggests bestpractice is a notice period for both parties of noless than six months for a fixed contract andtwo years on a rolling contract. Not allmanufacturers have subscribed to the code, butour view is that complying with standards isbeneficial to manufacturers in the long-term.We are of the opinion that underperformingdealerships will come under more pressure toreach targets and comply with standards, andmay be in a weaker position if themanufacturer believes they have no future inthe network.3. The veto clauseUnder the current legislation, if you represent abrand in one area you are free to acquireanother dealer representing the same brandanywhere in Europe. However, this can berefused under the new ruling.Whilst this may on the face of it appear adramatic change, the reality is that hostiledeals in this sector are non–existent, and theact of buying and selling has historically beendone with the approval of the relevantmanufacturers. Nevertheless, some acquisitionscould be seen as more desirable in the view ofthe manufacturers than others, possiblyinfluencing acquisition prices as franchises arenot sold to the highest bidder.4. The location clauseThe new location clause removes the ability toopen an unauthorised dealership in anylocation. Again this is unlikely to have muchimpact, as there have been few cases wheredealers took advantage of this under thecurrent legislation.Certain manufacturershave been issued a newdealer agreement whichthey have used as a way toreduce or rationalise thedealer network.In addition, manufacturers will no longer beable to make the warranty conditional onhaving the oil changed, or other car servicescarried out, in authorised garages only.However, they may request that repairscovered by the warranty, and paid for by themanufacturer, are carried out within itsauthorised network. The European Commissionsaid this was an important issue as it estimatedrepair bills account for an around 40 per cent ofthe total cost of owning a car.As a result of this new law change, certainmanufacturers have been issued a new dealeragreement which they have used as a way toreduce or rationalise the dealer network. At thesame time some operators have used it as anopportunity to dispose of their businesswhilst they were still able to decide who theywanted to sell to. However, in practice themanufacturers have still had a large say in whoit should be disposed to.Our thoughts on the changes are that althoughsome power is being passed back to themanufacturer under the new legislation, it canbe argued that although legally they did notpreviously have this power it was oftenexercised anyway.THE APPLICATION OF BERFAQsWhilst consumers won’t notice muchchange, dealers and franchiseesundoubtedly will. On 27 August 2012, theEuropean Commission published guidance,in the form of a set of frequently askedquestions (FAQs), on the application of EUcompetition rules in the motor vehiclesector. The FAQs deal in depth with thefollowing six topics:1. Warranties – Manufacturers can onlyrequire customers to use authorisedrepairers or own branded parts for warrantywork, free services or product recalls. Nonwarrantyrepairs and maintenance can becarried out by other service centers withoutimpacting on manufacturer warranty.2. Leasing – As long as there is no certaintythat the lessee will retain the car at the endof the term then the leasing company caninsist that servicing is carried out at anauthorized repairer.3. Spare parts – The Commissionacknowledges that in most cases bonus andrebate schemes are a legitimate means ofmotivating a repairer to sell more parts fortheir manufacturer. However, makingbonuses or rebates on parts conditional onthe repairer having to buy competitiveparts of the vehicle supplier's brand couldimply that the vehicle supplier is leveraginga dominant position in the market. Inaddition captive and competitive parts canboth be stored close to workshop bays(albeit separately).4. Electronic tools – Manufacturers will beable to insist that authorised repairers usespecific electronic tools, even if availableelsewhere.5. Technical information – Vehiclemanufacturers are in principle required torelease technical information, for whichthey are the only source, to independentoperators. Only in exceptionalcircumstances will a failure to provide suchinformation be justified for safety orsecurity reasons.6. Authorised networks – These mustgenerally be open to all that meet relevantquality criteria.* BER covering aftersales will run in their current form until May 2023.

10 BDO Motor 150 ReportTHE DIGITAL CONSUMERThe digital age is changing the way consumerslook at and buy cars – in the UK there are over30 million active users on Facebook, 4 millionregistered users on LinkedIn and 10 million onTwitter. The majority of the top 150 dealers arecurrently using social media, with many usingTwitter and Facebook as a means to enticecustomers into their showrooms, both actualand virtual.With people increasingly looking to these socialnetworks for opinion and information, cardealers are well advised to ensure that theymaximise their presence and use social mediato engage with existing and potentialcustomers. General consensus in the marketplace is that social media is more effective formotor dealers as a way of promoting theirbusiness as opposed to selling cars – 70% ofLinkedIn members now follow companies aswell as individuals. However, it isn’t just enoughto have followers on your Facebook page –dealers need to think about how they cantranslate social media activity into salesrevenue or customer loyalty.In Western Europe, 90% of mobile phone usershave an internet enabled phone making mobilephones increasingly important – 28% ofconsumer research is now done online viamobile phones. This means consumers are farmore informed about the product they arelooking to buy and the price that they arewilling to pay for it. In December 2011, HendyGroup launched the Hendy App for iPhone andiPad. The app allows users to search for a usedvehicle by make, model, price and dealershiplocation. The vehicle’s details and images canthen be selected so users can see the vehicleand find out all of its relevant information.Hendy Group Managing Director Paul Hendysays, “It’s another great way for us to interactwith our customers in a professional andsuccinct manner.”The end of the road for showrooms?It seems that the traditional dealership modelis now out of step with modern consumerbehaviour. A survey conducted in the UShighlighted the growing importance of socialmedia for car dealers. The 2012 Automotivedealership social media and online reputationstudy survey carried out by Digital Air Strikefound that the majority of car buyers (69%)use social media in their dealership selectionprocess. Speaking at the 2012 SMMTInternational Automotive Summit Google’sHead of Automotive, Hugh Dickerson, said thatdeals are no longer done in the showroom andthat a dealer visit is only affirmation of onlineresearch. Google statistics show that desktopsearches of cars on Google have increased byfour times the amount in five years, 18 sourcesof information are used and 51% of buyersdon’t buy their original choice of car. At thesame summit Joe Doyle from HR Owen plc saidcustomers are more informed than ever anddealers need to work hard to retain their‘expert’ status.Reputation, reputation, reputationSocial media can also be used as a reputationmanagement tool and to help boost customersatisfaction. The Digital Air Strike survey founddealers need to increase engagement with carshoppers on social networks and review sitesduring the car buying process. The study,measuring usage trends on Facebook, Twitterand Google+, surveyed 275 car buyers whopurchased a vehicle in the last six months.HIGHLIGHTS INCLUDEn 69% of consumers said social media siteshelped their vehicle purchase decisionn 68% of car shoppers said that dealershipreviews impacted which dealership theyvisited when shopping for a vehiclen 50% of consumers said that readingreviews affirmed their original choice ofdealershipn 18% of consumers said they eitherselected a dealership based on thereviews they read or changed theirchoice of dealership after readingreviews on multiple dealerships“This study highlights the importance of socialnetworks and review sites in the car buyingprocess,” said Alexi Venneri, co-founder ofDigital Air Strike.According to recent research by socialcommerce provider Reevoo, 66% of car buyersread owner reviews prior to making theirpurchase decision before visiting a dealership.Consumers are also more likely to buy from asite that offers customer reviews, with 60%reporting being ‘much more’ or ‘more’ likely tomake a purchase if the retailer’s web presenceincludes customer reviews.**Source: AM Online

BDO Motor 150 Report 11A warningWhilst there is a real opportunity for cardealers to leverage and benefit from the wealthof customer opinion available to them onlinethey also need to monitor blogs and forums fornegative customer feedback so it can be actedupon quickly before it has chance to do somedamage to the business. There have even beeninstances where an individual has posted anegative comment on a social media site whichhas been picked up by a rival dealer who hasthen entered into dialogue with this customerand has directed them to their dealership.All of this makes it more surprising that arecent online poll conducted by AutomotiveManagement (AM) found that anoverwhelming 85.2% of respondents receiveno guidance or inspiration from manufacturersregarding social media. They instead have totake the lead and adopt a proactive approach informing their own digital strategies. Many ofthe dealers commented that the industry isbehind many other areas of the serviceindustry when it comes to social media andonline sales.Buying onlineThe online marketplace continues to present achallenge to those that are prepared to makethe considerable investment required to havean effective online presence. eBay Motors, thepioneer of online car auctions, is probably themost successful in terms of sales, although itsfocus on lower value vehicles has led to apreoccupation with the sale of cheaper, usedvehicles. Others who have had less successinclude Autoquake, who went intoadministration in early 2011, despite theirclaim to being the UK’s biggest online used carretailer, and more recently Tesco Cars, whoafter purchasing the carsite.co.uk name in early2011, also folded in 2012. AutoeBid seem to behaving more success by operating in a differentway to traditional auction sites – their ‘reverseauction’ site asks purchasers to set a maximumprice for the vehicle they wish to purchase andthen sellers in AutoeBid’s network bid downfrom this figure competing against each otherto try to secure the sale.As consumers get increasingly used toperforming more complex purchases and tasksonline it seems inevitable we will see furthergrowth in the online car buying market.HP OR PCP?To further stimulate current sales,manufacturers and dealers have started to offerpersonal contract purchase (PCP) schemes toease the burden of buying a vehicle.According to the FLA (Finance and LeasingAssociation), 62.9% of all new cars bought in2011 by consumers used dealer finance, andapproximately 20-25% of used cars also reliedon dealer finance. Of those cars financedthrough dealerships, the total percentage ofconsumer car finance for new cars providedthrough PCP contracts grew in 2011 to 61.1%,compared with 58.7% in 2010. By contrast,hire-purchase (HP) fell from 34% of the marketin 2010 to 30% in 2011.Customers are moreinformed than ever anddealers need to work hardto retain their ‘expert’statusJOE DOYLE, CEO, HR OWEN PLCTHE GREEN AGENDASince the recession started, environmental concerns have pretty wellslipped off the agenda of the average motorist. However, a number ofdealers over the last 18 months have continued to use the greenagenda to their advantage. Companies such as Blackshaws andJCT600 have invested in solar panels in some of their dealerships.JCT600 have invested £400,000 in the installation of 600 solar panelswhich are predicted to save around £60,000 a year. This project ispart of a wider company initiative looking at improving the energyusage and efficiency across all of JCT600’s dealerships. This is a resultof increasing fuel costs and highlights that innovative dealers areworking to reduce their cost base of their businesses.

MOTOR RETAIL OUTLOOK –BDO OPINIONS AND ADVICEFOCUS PREDICTIONS FOR 2013These are the three areas we think dealers should continueto focus on:n Embrace technology – Use all avenues available to the businessto reach out to your customers and potential customers. Themore times you can enter dialogue with them, the more you willbe at the front of their mind when they require a service, want tochange their car or want to visit a dealership.n Processes and controls – As margins are so tight, a dealer’scontrols and processes are key to ensure every opportunity ismaximised and costs controlled.n Plan for today and tomorrow – It is very difficult to accuratelyreflect what will happen in the future and therefore difficult toprepare a well rounded strategy.In our latest ‘BDO Retail Forecasts2013’ report, we make tenpredictions. Below are the onesthat we think will have the mostimpact on the motor sector.BETTER GROWTH PROSPECTS?Trading conditions will remain far from easy with sales growth ofaround 2–3%.COMPETITION FOR THE BEST LOCATIONSWith limited supply of new space becoming available, competitionfor the best locations will increase, which should be good for thosewith surplus but not so good where rent reviews are due.4GThe introduction of 4G will further embed the use of online channelswith mobile sales of cars likely to increase further.SUNDAY TRADINGAlthough opinions regarding extending Sunday opening hours aremixed, expect to see a broad consensus emerging favouring longerhours.CORPORATE OPPORTUNITIESWe should see increased levels of M&A activity as confidenceincreases with further sales to overseas buyers and distressedopportunities. However, activity is likely to remain subdued byhistorical standards.To download the full reportplease visit www.bdo.co.uk

BDO Motor 150 Report 13COMPILATIONOF THE REPORTSOURCES OF INFORMATIONThe 150 companies included in this reportwere selected from the "Top 200 FranchisedDealership Survey" published in Motor Tradermagazine and copies of most recent financialstatements were obtained from CompaniesHouse filings. The published accounts (seebelow for year ends), obtained from CompaniesHouse filings, were used to provide thefinancial information included in this report.YEAR ENDSThe year ends included in the ‘current period’financial information in this report range from30 April 2011 to 31 March 2012 being themost recent accounts filed at CompaniesHouse at the time of the compilation of thisreport. For companies with December yearends (116 in the population) the ‘currentperiod’ will be the year ended 31 December2011. For January to March year ends (13) thecurrent period is that ending in 2012. For Aprilto November year-end companies (21), due tothe restrictions of the filing deadlines atCompanies House and the timescale ofcompilation of this report the current periodsare predominantly those ending in 2011.AGGREGATIONThe published accounts of the 150 companiesidentified by the above processes have beencombined by a simple aggregation to producethe financial information in this report. Noconsolidation adjustments have been madeand in particular no adjustments have beenmade to reflect the non-coterminous year-endsof the companies.IFRS AND UK GAAPOf the 150 companies, seven have preparedtheir accounts under IFRS and the remainderunder UK GAAP. However, as those companiesrepresent 19% of total revenue and as theimplementation of IFRS will increase in futurewe have decided to present the financialinformation in a format more consistent withIFRS than UK GAAP. We have made no attemptto adjust UK GAAP numbers to comply withIFRS, we have merely represented the UK GAAPnumbers in a format similar to IFRS.Consequently a number of allocationjudgements were required that may impact thecomparability of the financial information.DISCONTINUEDOPERATIONS/NON OPERATINGITEMSNo distinction has been made betweencontinuing and discontinued operations due tothe variety of judgements and presentationalapproaches taken by relevant companies.Where it has been possible to identify suchitems, all ‘exceptional’ or similar items reflectedoutside operating profit have been aggregated,although we have produced a brief analysis ofthe main items in the notes to the accounts.CASH FLOW STATEMENTWhilst some of the individual line items on thecash flow statement have been obtained fromthe aggregation of cash flows, the cash flowstatement has been largely derived from thesimplistic approach of reconciling themovements between the balance sheets. Thiswas to ensure that the changes in cash andcash equivalents in the cash flow statementreconciled with the balance sheets which theydo not in the aggregation due to thedifferences in starting points, definitions ofcash and cash equivalents and the treatment ofdebt in all the companies.DISCLAIMERThe financial information in this report hasbeen compiled exclusively from publiclyavailable information under the keyassumptions and limitations outlined above.It has been designed solely for illustrativepurposes to highlight trends in the financialperformance of a representative sample ofcompanies in the sector. BDO has made anumber of judgments in aggregating theinformation into a consistent format BDO doesnot, and cannot, warrant the completeness oraccuracy of such adjustments. Furthermore inadjusting the presentation adopted inpublished accounts to meet the specificrequirements of this report, BDO is not makingany judgement nor giving any opinion on thepresentation adopted in those publishedaccounts. BDO has not carried out anyverification work on the financial informationin this report and gives no opinion on thefinancial information. The financial informationwas not compiled with the intention that itshould be used for any purpose save for thatdescribed above. We do not acceptresponsibility for the financial information toany person or for any purpose other than thatfor which it was prepared.

MOTOR UK LIMITEDREVIEW OF TOP 150ACCOUNTS

BDO Motor 150 Report 15CONSOLIDATED PROFIT AND LOSS ACCOUNTNote 2011 2010 2009 2008£'m £'m £'m £'mTurnover 40,672 39,869 34,581 36,099Cost of sales (35,945) (35,084) (30,027) (31,675)Gross profit 4,727 4,785 4,554 4,424Gross profit % 11.62% 12.00% 13.17% 12.26%Operating expenses (4,295) (4,267) (4,129) (4,350)Other operating income 117 126 111 114Income from investments – 1 1 –Share of associate and JV profit – – 1 (4)Operating profit 1 549 645 538 184Exceptional items 2 16 5 11 (125)Interest paid 5 (213) (202) (222) (336)Interest received 47 35 33 79Profit / (loss) before tax 399 483 360 (198)Taxation 6 (81) (135) (107) 22Profit / (loss) after tax 318 348 253 (176)Minority interest (1) – (1) –Net profit / (loss) 317 348 252 (176)Consolidated Statement of Total RecognisedGains and LossesProfit / (loss) for the financial year 317 348 252 (176)Unrealised surplus on revaluation 10 (3) (5) (13)Actuarial gains and losses on pension scheme (59) 39 (72) (60)Taxation in respect of gain/(loss) onpension scheme 6 (5) 18 15Other comprehensive income 9 2 (20) 1283 381 173 (233)Exchange differences – (1) (1) –Total recognised gains and losses 283 380 172 (233)

16 BDO Motor 150 ReportCONSOLIDATED BALANCE SHEETNote 2011 2010 2009 2008£'m £'m £'m £'mFixed assetsIntangible 8 706 702 701 710Tangible 9 3,755 3,676 3,460 3,432Investments 213 201 182 1984,674 4,579 4,343 4,340Current assetsStock 5,864 5,360 4,754 5,420Debtors 10 2,156 2,154 2,258 2,195Deferred tax asset 24 26 38 30Cash 831 1,042 719 449Other 110 49 46 698,985 8,631 7,816 8,163Debtors due after more than one year 39 19 18 19Total assets 13,698 13,229 12,176 12,522Current liabilitiesLoans and bank overdrafts 11 2,369 2,213 2,290 2,420Trade and other payables 12 5,774 5,634 4,905 5,263Current tax liabilities 99 135 129 868,242 7,981 7,324 7,769Non-current liabilitiesLoans and bank overdrafts 13 1,150 1,268 1,209 1,411Trade and other payables 14 397 374 339 339Pension liabilities 140 178 246 190Provisions 15 67 73 93 115Deferred tax 74 74 68 77Derivatives 1 1 3 31,829 1,969 1,957 2,135Total net assets 3,627 3,279 2,895 2,618Capital and reservesShare capital 727 663 611 565Share premium 287 286 303 214Profit and loss account 2,298 2,076 1,719 1,574Other reserves 73 63 53 52Capital redemption reserve 40 38 39 38Revaluation reserve 155 140 159 1643,580 3,266 2,883 2,607Minority interest 47 13 12 11Total equity 3,627 3,279 2,895 2,618

BDO Motor 150 Report 17NOTES TO THE ACCOUNTS2011 2010 2009 2008£'m £'m £'m £'m1. Operating profitDepreciation of tangible fixed assets 363 353 328 336Amortisation of intangible fixed assets 29 21 31 29Audit fees 8 8 8 7Non audit fees 4 4 6 5Operating leases - land & buildings 262 236 208 210Operating leases - other 13 13 15 142. Exceptional itemsWaiver of intercompany debt (32) (4) (10) 5Loss/(profit) on sale of fixed assets 4 (11) (7) (20)VAT refund – (2) (6) (10)(Profit)/loss on sale of operations – – 3 21Refinance costs 1 3 7 –Impairment of goodwill – – 2 68Impairment of fixed assets and other assets 7 6 6 41Gain on early surrender of property lease – – (7) –Restructure and closure costs 2 2 3 12Other 2 1 (1) 8(16) (5) (11) 1253. Staff costsWages and salaries 2,629 2,524 2,452 2,527Social security costs 266 252 246 255Share based payments 11 2 1 1Pension costs 47 64 57 552,953 2,842 2,756 2,838Total number of employees 100,302 98,082 98,368 105,624Average pay per employee (£000) 29 29 28 274. Directors emolumentsSalaries and fees 86 95 105 82Bonuses 1 2 3 –Compensation for loss of office – 1 1 –Pension contributions 5 5 5 492 103 114 86Number of executive directors 634 597 666 646Number of non-executive directors 33 32 23 24667 629 689 670Average emoluments per highest paid director (£000) 237 311 383 2825. Interest payableBank loans and overdrafts 65 79 86 124Other interest payable 152 121 130 210Other finance expense (4) 2 6 2213 202 222 336

18 BDO Motor 150 ReportNOTES TO THE ACCOUNTS CONTINUED2011 2010 2009 2008£'m £'m £'m £'m6. TaxationCorporation tax and income tax on overseas operations 95 134 107 32Prior year (11) (16) (2) (16)84 118 105 16Deferred tax current year (4) 13 1 (38)Prior year 1 4 1 –81 135 107 (22)7. DividendsDividends paid in the period 80 143 35 698. Intangible fixed assetsCost b/fwd 979 964 966 916Additions 49 25 15 23Reclassifications (11) 6 6 –Acquisitions 3 – – 20Adjustments – – – 5Transfers – – 5 5Disposals (3) (4) (6) (3)Cost c/fwd 1,017 991 986 966Amortisation b/fwd 280 259 256 160Charge 31 21 31 29Transfer – – – –Impairments 1 9 2 68Disposals (1) – (4) (1)Amortisation c/fwd 311 289 285 256Net book value at year-end 706 702 701 710

BDO Motor 150 Report 19NOTES TO THE ACCOUNTS CONTINUEDFreehold Leasehold Motor Plant and Totalproperty property vehicles fixtures9. Tangible fixed assetsCost b/fwd 2,491 386 1,068 1,087 5,032Additions 139 37 650 138 964Disposals (63) (31) (576) (86) (756)Acquisitions 20 8 (1) 11 38Revaluations 4 – – – 4Transfers – 1 – (7) (6)Reclassifications 8 – – – 8Exchange movements (3) – – – (3)Cost c/fwd 2,596 401 1,141 1,143 5,281Depreciation b/fwd 238 83 319 747 1,387Charge 37 16 204 106 363Disposals (10) (8) (189) (62) (269)Acquisitions – 1 – 5 6Revaluations (2) (1) – – (3)Impairments 9 – – 1 10Transfers – – – – –Reclassifications – – – – –Exchange movements – – 32 – 32Depreciation c/fwd 272 91 366 797 1,526Net book value at year-end 2,324 310 775 346 3,755

20 BDO Motor 150 ReportNOTES TO THE ACCOUNTS CONTINUED2011 2010 2009 2008£'m £'m £'m £'m10. Debtors - currentTrade debtors 912 983 883 854Group and related party loans 682 638 875 871Directors' current accounts 2 2 1 1Corporation tax 7 10 3 11Other debtors 242 243 225 213Other tax and social security 31 17 39 11Prepayments 280 262 232 2342,156 2,154 2,258 2,19511. Loans and overdrafts - currentBank loans and overdrafts 485 437 579 772Stocking loans 1,274 736 659 684Pension fund loans 1 1 1 1Directors' loans 19 29 22 23Group loans 579 1,000 1,022 940Shares classified as debt 2 1 1 –Derivative financial instruments 9 9 6 –2,369 2,213 2,290 2,42012. Trade and other payables - currentPayments received on account 41 66 46 29Trade creditors 3,236 3,153 2,778 2,796Obligations under vehicle repurchase 185 163 152 190Other taxation and social security 157 182 159 159Finance leases 328 297 284 274Consignment creditor 716 690 524 905Other creditors 325 289 247 260Dividends payable 1 1 2 –Accruals 785 793 713 6505,774 5,634 4,905 5,26313. Loans and bank overdrafts - non currentBank loans 574 666 626 814Other loans 212 253 219 237Shares classified as debt 5 3 4 4Directors' loans 4 5 14 12Group loans 355 341 347 3441,150 1,268 1,209 1,411

THE 150 GROUPCOMPANIES

BDO Motor 150 Report 23Addison Motors LimitedAllen Ford (UK) LimitedAprite (GB) LimitedArnold Clark Automobiles LimitedBarretts of Canterbury LimitedBaylis (Gloucester) LimitedBeadles Group LimitedBedfordia Automotive LimitedBestodeck LimitedBlade Motor Group LimitedBlue Bell Wimslow LimitedBugle Inn Motor Company (Holdings) LimitedBurrows Motor Company LimitedC.E.M Day LimitedCaffyns plcCambria Automobiles plcCathedral Motor Company LimitedCentral Garage (Uppingham) LimitedCitroen UK LimitedCity Motor Holdings LimitedCity West Country LimitedCitygate Automotive LimitedClare James Automotive LimitedColborne Garages LimitedColebrook & Burgess LimitedCollier Motor Group LimitedColt Cars Mid-West LimitedCo-operative Group Motors LimitedCotswold Motor Group LimitedCurrie Motors LimitedD J Cox LimitedDecidebloom LimitedDick Lovett Companies LimitedDonnelly Bros Garages (Dungannon) LimitedDrift Bridge Garage LimitedDrive Motor Retail LimitedEastern Holdings LimitedEssex Auto Group LimitedFish Brothers LimitedForay Motor Group LimitedFord Retail LimitedFurrows Holdings LimitedG K Group LimitedGates Group LimitedGilder Group LimitedGlyn Hopkin LimitedGordon Lamb Holdings LimitedGordons (Bolton) LimitedGreenhous Group (Holdings) LimitedGreenoaks (Maidenhead) LimitedGrevan Cars LimitedGroup 1 Automotive UK LimitedGuildford Portfolios LimitedHalliwell Jones GroupHanif Automotive LimitedHartwell plcHarwoods LimitedHelston Garages Group LimitedHendy Group LimitedHeritage Automotive LimitedHodgson Automotive LimitedHoward Garages (Weston) LimitedHR Owen plcHughes of Beaconsfield LimitedHylton Group LimitedInchcape Retail LimitedIsaac Agnew (Holdings) LimitedJacksons Bournemouth LimitedJardine Motors Group UK LimitedJCT600 LimitedJohn Clark (Holdings) LimitedJohn Grose Group LimitedJohn Martin Group LimitedJohn R Weir LimitedJohnsons Cars LimitedL & L Inc LimitedLaindon Holdings LimitedLifestyle Europe Holdings LimitedLindsay Cars LimitedListers Group LimitedLloyd Motors LimitedLoders Motor Group LimitedLomond Motors LimitedLookers plcMacrae & Dick LimitedMagna Motor Company LimitedMarriott Motor Group LimitedMarsh Wall LimitedMarshall Motor Group LimitedMarubeni Auto Investment (UK) LimitedMclean & Appleton (Holdings) LimitedMercedes-Benz Retail Group UK LimitedMeridian Motor Group LimitedMeteor Group plcMill Garages North East LimitedMon Motors LimitedMotorline Holdings LimitedPark's of Hamilton (Holdings) LimitedParkway Derby LimitedPendragon plcPentagon Motor Holdings LimitedPeoples LimitedPerrys Group LimitedPeter Vardy Holdings LimitedPorsche Retail Group LimitedR. Robinson & Co. (Motor Services) LimitedRenault Retail Group UK LimitedRenrod Holdings LimitedRidgeway Group LimitedRobins & Day LimitedRybrook Holdings LimitedS G Petch LimitedS G Smith Motors Insurance & ManagementServices LimitedS Jennings LimitedSaftdwin LimitedSandicliffe Motor Holdings LimitedSilver Street Motors LimitedSinclair Motor Holdings LimitedSnows Motor Group LimitedSpecialist Cars Holdings LimitedSpire Automotive LimitedSpringfield Cars LimitedStephen James Group Trading LLPSutton Park Motor Company LimitedSwansway Garages LimitedSytner Group LimitedT C Harrison Group LimitedT G Holdcroft (Holdings) LimitedTanner Automotive LimitedThe Harratts Group LimitedThe Phoenix Car Company LimitedThe Verve LimitedThompson Motor Company (Preston) LimitedThurlow Nunn (Holdings) LimitedToyota Tsusho Automobile North London LimitedUnderwoods Garage (Tiptree) LimitedVertu Motors plcVindis Group LimitedVospers Motor House LimitedW J King (Garages) LimitedW R Davies (Motors) LimitedW. Brindley (Garages) LimitedWalter E Sturgess & Sons LimitedWessex Garages Holdings LimitedWestover Group LimitedWH Bowker LimitedWilliams Motor Co. (Holdings) LimitedWilson & Co (Motor Sales) LimitedWood Group LimitedYeomans Limited

24 BDO Motor 150 ReportTHIS REPORTHAS BEENPRODUCED BYMEMBERS OFTHE BDOMOTOR RETAILTEAMMALCOLM THIXTONHead of Motor Retailmalcolm.thixton@bdo.co.uk023 8088 1895STEVE LE BASDirector of Motor Retailsteve.lebas@bdo.co.uk023 8088 1906WESLEY BIRDBusiness Assurancewesley.bird@bdo.co.uk023 8088 1933JAMES WEBBBusiness Assurancejames.webb@bdo.co.uk023 8088 1708EMMA WAREHAMMarketing Communicationsemma.wareham@bdo.co.uk023 8088 1753

HOW CAN WE HELP?To discuss how we can help your business, please contacta member of the BDO Motor Retail team:Malcolm ThixtonHead of Motor Retailmalcolm.thixton@bdo.co.uk023 8088 1895Steve Le BasDirector of Motor Retailsteve.lebas@bdo.co.uk023 8088 1906Steve WardPartnersteve.ward@bdo.co.uk0121 352 6392Steve CuttsDirectorsteve.cutts@bdo.co.uk0113 204 1281www.bdo.co.ukThis publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and youshould not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of yourparticular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance onthe information in this publication or for any decision based on it.BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of theinternational BDO network of independent member firms. A list of members’ names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated bythe Financial Services Authority to conduct investment business.BDO is the brand name of the BDO network and for each of the BDO Member Firms.BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms.Copyright ©2013 BDO LLP. All rights reserved.This document is printed on 9lives 80, a paper containing 80 per cent recycled fibre and 20 per cent virgin Totally Chlorine Free (TCF) fibre sourced from sustainable forests. 9lives 80 is produced by anISO 14001 accredited supplier.